ABN : 42 127 042 773
ANNUAL REPORT 2021
“Building Scotland’s first commercial gold mine”
a
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
3
5
12
37
38
39
40
41
42
93
94
99
100
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
Peter Hetherington
Nathaniel le Roux
Phillip Day
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
William (Bill) Styslinger
Ian Proctor
Non-Executive Chairman
Non-Executive Director (former Non-Executive Chairman)
Chief Executive Officer and Managing Director
Non-Executive Director (former Managing Director)
Non-Executive Director (resigned 26 February 2021)
Non-Executive Director
Company Secretary and Non-Executive Director
Non-Executive Director
Non-Executive Director
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
Computershare Investor Services Pty Ltd
Level 11
172 St Georges Terrace
Perth, WA 6000
Telephone:
+61 8 9323 2000
Auditor
Bankers
BDO Audit (WA) Pty Ltd
Level 9
Mia Yellagonga Tower 2
5 Spring Street
Perth, WA 6000
Telephone:
+61 8 6382 4600
Westpac Banking Corporation
1257 Hay Street
West Perth
WA 6005
Securities Exchange
Listing
AIM board of the London Stock Exchange.
AIM Code:
“SGZ”
Bank of Scotland
The Mound,
Edinburgh
Scotland EH1 1YZ
Scotgold Resources Limited
Page 3
COMPANY INFORMATION
AND CONTROLLED ENTITIES
Nominated Adviser
and Broker
SP Angel Corporate Finance LLP
Prince Frederick House,
35-39 Maddox Street,
London, W1S 2PP
Lawyers
Australian Law -
Steinepreis Paganin
Level 4, The Read Buildings,
16 Milligan Street,
Perth WA 6000
English Law -
Fox Williams LLP
10 Finsbury Square
London
EC2A 1AF
Scots Law -
Reul Advisory LLP
PO Box 13766
North Berwick
East Lothian
EH39 9AW
Website
www.scotgoldresources.com
Scotgold Resources Limited
Page 4
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
OPERATIONS REVIEW
BACKGROUND
Scotgold Resources Limited (“the Company”) was established in 2007 and is listed on the AIM market of the London
Stock Exchange (AIM:SGZ). The Company delisted from the Australian Securities Exchange on 21 October 2016.
The Company’s principal objectives have continued to be:
a) the development and operation 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:
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.
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 PROJECT
Gold production commenced in November 2020 and progress continued throughout 2021. As at end of June 2021
ramp up had not been fully completed.
On 26th February 2021, the Company provided an update to shareholders in respect of the Cononish schedule
indicating that design capacity of 3,000 tonnes per month was going to be achieved from April 2021.
On the 31st March, the company provided an update, confirming a production guidance between 25,700t and 28,500t
processed through the process plant.
By Late March 2021 concentrate shipments had not been achieved and ramp up of the mine and process plant were
hindering.
COVID-19 had a significant impact on the Cononish Mine's overall development during 2020 which ultimately reduced
access areas of the mine higher grade zones.
In April 2021 a new CEO was appointed, and a new leadership team was formed. The ramp up of the mine and
process plant facilities accelerated ultimately achieving several 25 tonne lot shipments of gold bearing concentrate
to its offtake provider post year end.
Scotgold Resources Limited
Page 5
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
On the 27th April, the Company announced that after conducting a review of the Company mine plan, the Company
expects production for calendar year 2021 to be materially less than the guidance range previously announced on
31 March 2021.
A redesign of the 2021 mine schedule/design was completed in May 2021 which allowed for faster access to higher
grade zones within the ore body. In combination with the mine plan change other very important aspects to the
process plant operation were planned and executed such as:
Completion of modifications and upgrades identified on the process plant;
Identification and purchasing of critical and required spares;
Implementation of maintenance planning practices; and
Forming strategic alliances with suppliers and engineering/fabrication shops within Scotland and the UK.
GRAMPIAN GOLD PROJECT
On 29 January 2021, the Company announced that recent exploration work undertaken across the Company’s option
areas over the Dalradian Belt had resulted in:
The identification of additional targets and provided persuasive evidence for the presence of mineralised
veins structures; and
Three prospective areas, close to Cononish Mine, being identified as high priority target areas and data
modelling is in progress to establish the best sites to test these targets in any potential future exploration
drill programmes.
PORTUGUESE AND FRENCH PROJECTS
The Pomar licence held by Scotgold Resources Portugal Ltd was terminated during the year.
CORPORATE ACTIVITIES
Mr Richard Gray retired as Managing Director and was appointed as a Non-Executive Director on 1 April 2021. On
the same day, Mr Phillip Day was appointed as Chief Executive Officer and Managing Director.
Mr Christopher Sangster resigned as Non-Executive Director on 26 February 2021.
Equity funding was raised during the year as follows:
$5,136,633 (net of expenses of $331,833) was raised from the issuing of 2,727,273 ordinary shares in
October 2020; and
$2,525,053 (net of expenses of £153,983) was raised from the issuing of 2,142,857 ordinary shares in April
2021.
Drawdowns totalling £3,500,000 ($6,343,675) were made on the secured loan facility during the year, with the full
£7,500,000 facility amount being fully utilised as at 30 June 2021. A short term unsecured interest free loan facility
of £2,000,000 million was made available to SGZ Cononish Limited by four Directors and a shareholder in May 2021
and £1,000,000 ($1,810,938) of that facility was drawn down in May 2021.
Scotgold Resources Limited
Page 6
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
Subsequent to 30 June 2021, the remaining £1,000,000 available under the short term unsecured loan facility was
drawn down in August 2021 and in September 2021 the short term unsecured loan was settled by the issuing of
3,301,420 ordinary shares.
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: 2021 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.
Approximately 1.6Kt was processed during commissioning during the reporting period and is not a material effect on
the Mineral Resources as reported previously.
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.
Scotgold Resources Limited
Page 7
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
CONONISH ORE RESERVES
As part of initial work towards developing the 2015 BFS, Bara Consulting Ltd (“Bara Consulting”) completed a
thorough review of the 2013 Cononish Development plan in order to identify opportunities to not only improve on the
plan but to also improve the confidence in the plan. As a result of this review, further work was undertaken on the
mining methodology, access design, geotechnical evaluation and overall mine design.
The outcome of this work was that an Ore Reserve Estimate was completed on 25 May 2015, in accordance with the
JORC code (2012 Edition) based on the Mineral Resource Estimate (MRE) issued in January 2015. The subsequent
addendum to the Bankable Feasibility Study resulted in no change to the Ore Reserve. Hence there is no change to
the Ore Reserves reported previously for the Project as at 30/06/2021. 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: 2021 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 2021, approximately 6.5kt had been removed from the stockpile and the reserves will be adjusted on full
depletion of the stockpile. Approximately 1.6Kt was processed during commissioning during the reporting period and
is not a material effect on the Mineral Reserve as reported previously.
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. During the year, regional stream
sediment sampling was completed across 10 of Scotgold’s 13 Crown Option areas.
Scotgold Resources Limited
Page 8
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
Very little fieldwork was completed during the year due to the coronavirus pandemic and nationwide lockdown
restrictions. This time was principally used for data analysis, procedure review and database work.
PORTUGUESE AND FRENCH PROJECTS
The Pomar licence held by Scotgold Resources Portugal Ltda was terminated during the year.
TENEMENT DETAILS
United Kingdom
The Company holds a lease (100%) from the Crown Estate Scotland over Cononish Farm, county of Perth, Scotland
UK.
The Company holds a lease (100%) from the landowner over Cononish Farm, county of Perth, Scotland UK.
The Company holds thirteen Mines Royal Option Agreements (100%) with the Crown Estate Scotland as detailed
below:
No.
1
2
3
4
5
6
7
8
9
10
11
12
Name
Knapdale South
Knapdale North
Inverliever West
Inverliever East
Glen Orchy West
Glen Orchy Central
Glen Orchy East
Glen Lyon West
Glen Lyon North
Glen Lyon South
Glen Lyon East
Ochills West
Area
250 km2
250 km2
250 km2
233 km2
103 km2
242 km2
241 km2
246 km2
244 km2
243 km2
247 km2
189 km2
13
Ochills East
150 km2
Location
county of Argyll, Scotland UK
county of Argyll, Scotland UK
counties of Dunbarton, Argyll and Perth, Scotland UK
counties of Dunbarton, Argyll and Perth, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
county of Clackmannan, Perth, Kinross and Stirling,
Scotland UK
county of Clackmannan, Perth, Kinross and Stirling,
Scotland UK
Portugal
During the year, Scotgold Resources Portugal Ltda terminated its 100% interest in the Pomar Licence in eastern
central Portugal.
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.
Scotgold Resources Limited
Page 9
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
The information in this report that relates to the 2015 Mineral Resources for Cononish Gold Project (refer ASX release
- Resource Estimate Update – 22/01/2015) is based on information compiled by Malcolm Titley, a Competent Person
who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Titley is employed by CSA Global (UK)
Limited, an independent consulting company. Mr Titley has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a
Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves’. Mr Titley consents to the inclusion in the report of the matters based on his
information in the form and context in which it appears.
The information in this report that relates to the 2015 Ore Reserves for Cononish Gold Project (refer ASX
announcement dated 26/05/2015) is based on information compiled by Pat Willis, a Competent Person who is
registered as a Professional Engineer (Pr.Eng.) with the Engineering Council for South Africa (ECSA) and a Fellow
in good standing and Past President of the Southern Africa Institute of Mining and Metallurgy (FSAIMM). Mr Willis is
employed by Bara Consulting Limited, an independent consulting company. Mr Willis has sufficient experience which
is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is
undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves’. Mr Willis consents to the inclusion in the report of the
matters based on his information in the form and context in which it appears. Further, the Company confirms it is not
aware of any new information or data that materially affects the information contained in the original announcements
and that all material assumptions and technical parameters underpinning the estimate of Resources and Reserves
continue to apply and have not materially changed.
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.
Operationally, the Company’s immediate focus remains the development and operation of the Cononish Gold and
Silver Mine, which commenced construction in January 2019 and was completed at the end of November 2020. In
2021 all efforts were focused on achieving a successful ramp up of the Cononish Mine.
Additionally, to achieving a staged focus developing growth from the Cononish Mine a review of the strategic goals
of the Company was conducted post period in 2021. The focus was modified to incorporate the following objectives
and built on the following six principles:
Upon successful ramp up of the Cononish Mine, further increase production through step wise optimisation
until Phase 2 production has been achieved, this is aimed for completion Q1 2023;
Optimise the current Cononish Reserve;
Expand Resources and Reserves within the Cononish vein;
Explore and develop within “The shadow of the head frame”;
Explore and develop near mine drill ready targets to develop network of satellite deposits for processing at
Cononish; and
Continue to explore in a more focused manner within the most prospective portion of leaseholding.
The work completed on advancing our future pipeline of projects during the current reporting period has 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
Scotgold Resources Limited
Page 10
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
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.
Scotgold Resources Limited
Page 11
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
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 2021. 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
Peter Hetherington
Nathaniel le Roux
Phillip Day
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
William Styslinger
Ian Proctor
Non-Executive Chairman
Non-Executive Director
Chief Executive Officer and Managing
Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Company Secretary/ Non-Exec Director
Non-Executive Director
Non-Executive Director
18/06/2018
18/03/2015
01/04/2021
10/10/2014
10/10/2014
14/08/2007
09/10/2017
18/06/2018
14/08/2019
present
present
present
present
26/02/2021
present
present
present
present
PARTICULARS OF CURRENT DIRECTORS AND COMPANY SECRETARY
Peter Hetherington
Non-Executive Chairman
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.
Mr Hetherington was appointed as Non-Executive Chairman on 2 November 2021.
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
Held directly
Held by a trust of which Mr Hetherington is a trustee
2,466,974
2,000,000
Special Responsibilities
Mr Hetherington is a member of the Corporate and Social Responsibility Committee.
Scotgold Resources Limited
Page 12
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
Mr Hetherington made a short-term, interest-free, unsecured loan of £114,500 to SGZ Cononish Limited on 12 May
2021, which was outstanding at 30 June 2021 and was settled by the issuing of ordinary shares on 27 September
2021.
Nathaniel le Roux
Non-Executive Director
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.
Mr le Roux stepped down as Non-Executive Chairman on 2 November 2021.
Other Directorships in past three years: None
Interest in Shares and Options
Fully Paid Shares
Special Responsibilities
Overall strategic guidance and UK Capital markets.
24,712,974
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.
Mr le Roux made a short-term, interest-free, unsecured loan of £634,500 to SGZ Cononish Limited on 12 May 2021,
which was outstanding at 30 June 2021 and was settled by the issuing of ordinary shares on 27 September 2021.
Phillip Day
Chief Executive Officer and
Managing Director
BSc (Hons)
Qualifications and experience
Mr Day is a highly experienced senior mining executive with a career spanning over 25 years in the mining sector.
Mr Day most recently held the position Head of Technical and Operations at Pala Investments, whilst concurrently
holding executive and nonexecutive positions of several of Pala’s portfolio companies, namely CEO and Non-
Executive Director at Sierra Rutile Limited and Nevada Copper Corp. Prior to Pala, Mr Day held the position of Vice
President for Process Engineering at AMEC Americas, and has also previously held operational, managerial and
technical roles for BHP Billiton, WMC Resources, Minara Resources and Wiluna Gold.
Mr Day was appointed as Chief Executive Officer and Managing Director with effect from 1 April 2021.
Scotgold Resources Limited
Page 13
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
Other Directorships in past three years:
Nevada Copper
Melior Resources
Interest in Shares and Options
Options
AND CONTROLLED ENTITIES
840,000
The options were granted as share-based payment on 10 May 2021.
Richard Gray
Non-Executive 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.
Mr Gray retired as Managing Director with effect from 1 April 2021 and was appointed as a Non-Executive Director.
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.
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.
Scotgold Resources Limited
Page 14
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
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.
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
Mr Styslinger is a member of the Audit Committee.
6,481,086
Mr Styslinger made a short-term, interest-free, unsecured loan of £166,500 to SGZ Cononish Limited on 12 May
2021, which was outstanding at 30 June 2021 and was settled by the issuing of ordinary shares on 27 September
2021.
Scotgold Resources Limited
Page 15
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
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
1,261,489
Mr Proctor made a short-term, interest-free, unsecured loan of £32,000 to SGZ Cononish Limited on 12 May 2021,
which was outstanding at 30 June 2021 and was settled by the issuing of ordinary shares on 27 September 2021.
SHARES UNDER OPTION
At the date of this report unissued shares of the Company under option are:
Number of shares under option
Exercise price Expiry date
Vested and exercisable
30,000
1,000,000
535,000
Granted but not vested
90,000
840,000
OPERATING AND FINANCIAL REVIEW
$8.00
£0.30
£0.71
£0.71
£0.60
31 March 2022
1 May 2028
1 July 2025
1 July 2025
10 May 2026
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 a state of full commercial 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 and bringing to a state of
production of the Cononish gold and silver mine and mineral exploration.
Operating Results
The consolidated loss after income tax for the financial year was $4,980,942 (2020 - $2,504,134).
Scotgold Resources Limited
Page 16
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
Financial Position
At 30 June 2021 the Company had cash reserves of $2,624,342 (2020 - $1,109,979) and £7,500,000 ($13,814,698)
of the £7,500,000 million secured loan facility had been drawn down, compared to a cumulative amount drawn down
of £4,000,000 ($7,160,759) at 30 June 2020. In addition, £1,000,000 ($1,841,960) of the short term unsecured loan
facility of £2,000,000 made available on 4 May 2021 had been drawn down at 30 June 2021.
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 bring the Cononish silver and gold mine to a state of full and sustainable commercial
production and to continue its exploration activities.
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 Peter Hetherington, 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 bringing the Cononish gold and silver mine (“Cononish Mine”) to a state of
sustainable full commercial production with the objective of delivering sustainable value for shareholders.
The progress achieved in meeting that objective 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, October 2020 and again in April 2021, 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
Scotgold Resources Limited
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DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
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.
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.
Scotgold Resources Limited
Page 18
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
As set out in Note 23 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 achievement of a rate of production of 3,000 tonnes per month at the Cononish Mine and 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, details of which are set out in Note 22
of this Financial Report.
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 18 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 22 of this Financial Report).
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 9 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 31 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. All contractors engaged to carry out work at the Cononish Mine are required to adhere to and observe
Scotgold Resources Limited
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DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
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.
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 bringing of the Cononish Mine to a state of sustainable production is dependent on a number of factors including,
but not limited to:
unanticipated technical and operational difficulties encountered in extraction and production activities;
mechanical failure of operating plant and equipment;
shortages or increases in the price of consumables, spare parts and plant and equipment;
cost overruns;
Scotgold Resources Limited
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DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
access to the required level of funding; and
contracting risk from third parties providing essential services.
In addition to the above risks traditionally associated with mine development activities, the Covid-19 pandemic
continues to be a feature of daily life and the risk associated therewith affects all facets of risk management and
operational activities.
The unique risks posed by the Covid-19 pandemic are being addressed by adherence to a comprehensive set of
operating procedures formulated at and implemented since the start of the pandemic. Regular assessments of the
risks posed by Covid-19 are carried out, with the aforementioned operating procedures being adjusted in response
thereto.
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.
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, which could lead to the incurring of operating losses. These losses would
be required to be funded by the shareholders in addition to other sources of finance.
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.
Scotgold Resources Limited
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DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
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.
Operating cost risks
Forecasts of operating costs are based on a combination of historical information on actual costs incurred, estimates
by the Directors having reference to similar operations and the Company’s financial modelling. Actual costs may be
higher or lower than forecast costs.
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 from the forecasted 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.
Previously, a large proportion of the corporate overhead costs of the Group has been denominated in Australian
Dollars. However, now that production is underway, 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 has increase the overall exposure of the Group to movements in the Australian Dollar : GBP Pound
Sterling exchange rate.
Scotgold Resources Limited
Page 22
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
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.
Force Majeure
The current and future operations and 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.
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
Scotgold Resources Limited
Page 23
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
terrorism or other hostilities.
The market price of its quoted securities may affect the ability of the Company to raise equity.
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 Chief Executive Officer and 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 le Roux, 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 2021 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 2021 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.
Scotgold Resources Limited
Page 24
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
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.
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 25
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
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 Peter Hetherington 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 26
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
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
2021, and the number of meetings attended by each Director. These meetings included matters relating to the
Remuneration and Nomination Committees of the Company.
Peter Hetherington
Nathaniel le Roux
Richard Gray
Phillip Day
Phillip Jackson
Richard Barker
William Styslinger
Ian Proctor
Christopher Sangster
AUDIT COMMITTEE
Number eligible
to attend
Number
attended
6
6
6
2
6
6
6
5
3
6
6
6
2
6
6
6
6
3
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 2021.
The Audit Committee Report for the year ended 30 June 2021 can be found in the QCA Corporate Governance
Statement
at
https://www.scotgoldresources.com/docs/QCA-2021.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 Hetherington (Chairman) 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. The
CSR Committee did not meet during the year ended 30 June 2021.
Scotgold Resources Limited
Page 27
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
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 2021.
This report details the nature and amount of remuneration for each director and executive of Scotgold Resources
Limited.
Appointment of Director
Phillip Day was appointed as a Chief Executive and Managing Director of the Company on 1 April 2021, pursuant to
Richard Gray retiring from the role of Managing Director with effect from that date. Mr Gray became a Non-Executive
Director of the Company on 1 April 2021.
Resignation of Director
Chris Sangster retired as a Non-Executive Director on 26 February 2021.
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.
In addition, the Company has put in place a Non-Employee Share Option Scheme which provides for the granting by
the Board of options under that scheme to non-executive directors of the Company and to other persons who provide
Scotgold Resources Limited
Page 28
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
consultancy services to the Company and its controlled entities at such exercise prices and in such numbers as the
Board considers appropriate and to attach such performance conditions to the vesting of such options as it considers
appropriate, subject to compliance with 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.
Details of remuneration for year ended 30 June 2021
Directors’ Remuneration
No salaries, commissions, bonuses or superannuation were paid or payable to Directors during the year except for
Richard Gray and Phillip Day, who were 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 Directors
Phillip Day (Chief Executive Officer and Managing Director with effect from 1 April 2021) is remunerated in terms of
a contract of employment dated 1 April 2021 which provides for a fixed salary of £161,250 per annum, as well as an
annual leave entitlement of 18.75 days plus a pro rata number of public holidays in Scotland and eligibility to join the
Group pension fund. The contract of employment further provides that Mr Day shall be reimbursed for the reasonable
cost of necessary travel incurred in connection with visits to the operations of the Group in Scotland, including flights
to and from Switzerland and car hire in the United Kingdom, and that the Group shall provide accommodation to Mr
Day while he is visiting the operations.
For the year ended 30 June 2021, the amount paid to Mr Day as salary amounted to $80,370, comprising $72,557
of annual remuneration in terms of his employment contract and an increase in leave pay balance of $7,813.
PAW Consulting Services GmbH, a company controlled by Mr Day, renders consulting services to SGZ Grampian
Limited and charges a monthly consulting fee of £4,479 per month for those services, plus reimbursement of
reasonable costs incurred in rendering those services. The total fees charged by Paw Consulting Services GmbH in
respect of those services during the year ended 30 June 2021 amounted to $40,088, of which $15,902 related to the
period prior to the appointment of Mr Day as Chief Executive Officer and Managing Director.
On 10 May 2021, Mr Day was granted 840,000 options to acquire shares in the Company at an exercise price of 60p
per share under the Enterprise Management Incentive Scheme of the Company. The options vest 3 years from the
date of the grant, subject to Mr Day being an employee in good standing of the Company or an entity controlled by
the Company on that day and expire on 10 May 2026. An amount of $20,700 has been recognised as an expense
during the year in respect of these options.
Scotgold Resources Limited
Page 29
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
Richard Gray (former Managing Director and now Non-Executive Director) was remunerated in terms of a contract
dated 22 September 2017 which provided for a fixed salary and benefits, with a termination period of three months.
For the year ended 30 June 2021, the amount paid to Mr Gray as salary amounted to $261,676, comprising $243,419
of annual remuneration in terms of his employment contract and an increase in leave pay balance of $18,257.
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. All of these options had vested at 30 June 2021.
A charge of $313,697 has been recognised as an expense for the period from the date of grant of the options to 30
June 2021.
On 1 July 2020, Mr Gray was granted 400,000 options to acquire shares in the Company at an exercise price of 71p
per share. 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, expire on 30 June 2025 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. None of these options had vested at 30 June 2021, but they vested at the end of
August 2021.
A charge of $203,264 has been recognised as an expense for the year ended 30 June 2021 in respect of these
options.
Non-Executive Directors
i) Chris Sangster earned fees from the Company as a consultant on technical issues. In addition to his director’s fees,
Mr Sangster earned fees of $45,917 in the year ended 30 June 2021 (2020 - $69,087).
ii) Through his service company, Barston Corporation Pty Ltd, Richard Barker also acts as Company Secretary. In
addition to his director’s fees, Mr Barker earned fees related to Company Secretary services of $39,996 in the year
ended 30 June 2021 (2020 - $37,328).
iii) Mr le Roux made available to SGZ Cononish Limited a secured loan facility in May 2018. During the year, an
amount of £3.5 million of the facility was drawn down, bringing the cumulative amount drawn down under the facility
to an amount of £7.5 million at 30 June 2021. Details of the secured loan facility are set out in Note 17.
iv.) Mr le Roux, Mr Hetherington, Mr Styslinger and Mr Proctor respectively made short term, interest-free, unsecured
loans of £634,500, £114,500, £166,500 and £32,000 to SGZ Cononish Limited on 12 May 2021, which amounts were
all outstanding at 30 June 2021.
Loans due from/to Directors
There are no loans due from Company Directors.
As set out in Note 17, 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 2021 the amount owing by
the consolidated entity in respect of drawdowns made on that secured loan was $15,412,129 (2020 - $7,681,847).
Scotgold Resources Limited
Page 30
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
Mr le Roux, Mr Hetherington, Mr Styslinger and Mr Proctor respectively made short term, interest-free, unsecured
loans of £634,500, £114,500, £166,500 and £32,000 to SGZ Cononish Limited on 12 May 2021, which amounts were
all outstanding at 30 June 2021.
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 2020
Peter Hetherington *
Nat le Roux *
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
William Styslinger *
Ian Proctor *
Holihox Pty Ltd
Barston Corp. Pty Ltd
Director/Executive
Associated Company
Year ended 30 June 2021
Peter Hetherington *
Nat le Roux *
Richard Gray
Phillip Day1
Chris Sangster2
Phillip Jackson
Richard Barker
William Styslinger *
Ian Proctor *
Holihox Pty Ltd
Barston Corp. Pty Ltd
$
-
-
-
18,818
18,000
17,568
-
-
54,386
$
-
-
-
40,088
12,239
18,000
18,080
-
-
88,407
-
-
259,760
69,087
-
37,328
-
-
366,175
Retirement
Benefits
$
-
-
10,140
-
-
-
-
-
10,140
Share -
based
payments
$
-
-
66,194
-
-
-
-
-
66,194
Retirement
Benefits
$
Share-
Based
payments
$
-
-
261,676
80,370
45,917
-
39,996
-
-
427,959
-
-
9,737
-
-
-
-
-
-
9,737
-
-
249,813
20,700
-
-
-
-
-
270,513
Total
$
-
-
336,094
87,905
18,000
54.896
-
-
496,895
Total
$
-
-
521,226
141,158
58,156
18,000
58,076
-
-
786,616
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 1 April 2021
2 Resigned on 26 February 2021
Scotgold Resources Limited
Page 31
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
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 2021
Peter Hetherington
Nat le Roux
Phillip Day
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
William Styslinger
Ian Proctor
Holihox Pty Ltd
Barston Corp. Pty Ltd
Share-based payments
Fixed proportion
2020
$
2021
$
Linked to performance
2021
$
2020
$
100%
100%
100%
52%
100%
100%
100%
100%
100%
100%
100%
-
80%
100%
100%
100%
100%
100%
-
-
-
48%
-
-
-
-
-
-
-
-
20%
-
-
-
-
-
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
Fair value
Per option
at grant
date
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
£0.172
Richard Gray
400,000
1 July 2020 Date that cumulative
30 June 2025
£0.71
£0.331
gold production at
the Cononish mine
(excluding any gold
produced prior to 1
July 2020) exceeds a
level of 500 gold
equivalent ounces
Phillip Day
840,000 10 May 2021 10 May 2024
10 May 2026
£0.60
£0.2903
Each of the options granted to Richard Gray on 1 May 2018 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. The vesting condition was satisfied in December 2020.
Each of the options granted to Richard Gray on 1 July 2020 entitles the holder to one ordinary unissued share at a
strike price of £0.71. The vesting of the options is dependent upon satisfaction of the non-market vesting condition
of cumulative gold production at the Cononish mine (excluding any gold produced prior to 1 July 2020) exceeding a
Scotgold Resources Limited
Page 32
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
level of 500 gold equivalent ounces. 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. Of these 400,000
options, 352,112 were granted under the Enterprise Management Incentive Scheme of the Company. The vesting
condition was satisfied at the end of August 2021.
Each of the options granted to Phillip Day on 10 May 2021 entitles the holder to one ordinary unissued share at a
strike price of £0.60. The options vest on 10 May 2024, provided that Mr Day is an employee in good standing of the
Company or an entity controlled by the Company on that date, All of the options granted to Mr Day were granted
under the Enterprise Management Incentive Scheme of the Company.
Options carry no dividend or voting rights.
Additional information
The earnings of the consolidated entity for the five years to 30 June 2021 are as follows:
Sales revenue
EBITDA
EBIT
(Loss) after income tax
Basic (loss) per share (cents per share)
Voting at the 2020 Annual General Meeting
2021
$
299,807
(2,406,611)
(3,721,458)
(4,980,942)
(9.28)
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)
The Remuneration Report for the year ended 30 June 2020 was adopted unanimously at the 2020 Annual General
Meeting on a show of hands.
Key management personnel share holdings
Year ended 30 June 2021
Balance 30
June 2020
Exercise of
options
Subscription
At date of
resignation/
appointment
Disposal of
shares
Balance 30
June 2021
Peter Hetherington
Nat le Roux
Phillip Day
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
William Styslinger
Ian Proctor
4,088,961
22,618,223
-
105,677
206,045
43,313
-
5,931,400
1,155,844
34,149,463
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(206,045)
-
-
-
-
(206,045)
-
-
-
-
-
-
-
-
-
4,088,961
22,618,223
-
105,677
-
43,313
-
5,931,400
1,155,844
33,943,418
Scotgold Resources Limited
Page 33
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
Key management personnel option holdings
Year ended 30 June 2021
Richard Gray
Phillip Day
Balance 30
June 2020
1,000,000
-
1,000,000
Granting of
options
Disposal of
options
Balance 30
June 2021
400,000
840,000
1,240,000
-
-
-
1,400,000
840,000
2,240,000
Aggregate amounts payable to Directors and their related entities:
Consolidated Entity
2021
$
Consolidated Entity
2020
$
Accounts payable
Current borrowings
Non-current borrowings owing to Bridge Barn Limited
Principal
Accumulated interest
Total
55,030
1,745,257
13,814,698
1,597,431
17,212,416
25,318
-
7,160,759
521,088
7,707,165
There were no performance related payments made during the year. The vesting of the 400,000 share options
granted to Mr Gray on 1 July 2020 is dependent on the performance-related 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.
Approval
This report was approved by the Board on 21 December 2021 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.
Scotgold Resources Limited
Page 34
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
EVENTS OCCURRING AFTER THE REPORTING PERIOD
Mr Nat le Roux stepped down as Non-Executive Chairman on 2 November 2021 and Mr Peter Hetherington was
appointed as Non-Executive Chairman on that date. Mr Nat le Roux continues to serve as a Non-Executive Director
of the Company.
The second tranche of £1,000,000 was drawn down on the short term unsecured loan facility on 6 August 2021. On
27 September 2021, 3,301,420 ordinary shares were issued to the providers of the short term unsecured loan in full
and final settlement of the loan prior to the settlement date thereof of 4 November 2021, with Mr Nat le Roux, Mr
Peter Hetherington, Mr William Styslinger and Mr Ian Proctor respectively being issued with 2,094,751, 378,013,
549,686 and 105,645 ordinary shares at an issue price of £0.6058 ($1.138) per share. The shareholder who provided
part of the short term unsecured loan facility received 173,325 ordinary shares in settlement, at the same issue price.
The 400,000 options granted to Mr Richard Gray on 1 July 2020 and 270,000 of the options granted to senior
management on that date vested at the end of August 2021.
The recipient of 225,000 of the 750,000 options granted to senior management on 1 July 2020 resigned on 30
November 2021, resulting in the 135,000 options granted to him which had vested at the end of August 2021 (which
had not been exercised as at the date of resignation) as well as the 90,000 unvested options granted to him lapsing
on that date.
Saint Consulting (UK) Limited ceased to provide consulting services to the Group on 5 October 2021 and as a result,
the 200,000 options granted to that company on 29 July 2020, which had vested but had not been exercised by 5
October 2021, lapsed.
The final payment of USD256,715 ($472,858) was made in respect of the haultruck on 2 August 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 by various offices in the
United Kingdom 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 35
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
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 – 2021: $7,001
(2020 - $14,879). In addition, income tax services were provided to the Company by various offices in the United
Kingdom of BDO LLP – 2021: $55,014 (2020 - $6,434).
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration has been received for the year ended 30 June 2021 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.
..............................................................
PHILLIP DAY – Chief Executive Officer and Managing Director
Dated at Tyndrum, this 21st day of December 2021
Scotgold Resources Limited
Page 36
AUDITOR’S INDEPENDENCE DECLARATION
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 37
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
Revenue
Cost of sales
Profit (loss) from production operations
Interest income
Other income
Gain on loan renegotiation
Administration costs
Interest expense
Depreciation and loss on disposal of non-current assets
Employee and consultant costs, excluding share-based payments
Share-based payments
Listing and share registry costs
Legal fees
Office and communication costs
Currency exchange variances
Other expenses
Notes
2
3
4
5
6
7
21
2021
$
299,807
(299,807)
-
8,285
416,007
-
(888,176)
(1,259,484)
(1,314,847)
(1,095,882)
(364,725)
(193,023)
(103,530)
(101,913)
(57,580)
(26,074)
2020
$
-
-
-
38,989
381,708
38,383
(462,151)
(669,912)
(732,359)
(736,371)
(66,194)
(188,178)
(36,677)
(68,174)
19,470
(22,668)
LOSS BEFORE INCOME TAX
(4,980,942)
(2,504,134)
Income tax benefit
LOSS FOR THE YEAR
Other Comprehensive Income
8
-
-
(4,980,942)
(2,504,134)
Items that may be reclassified to Profit or Loss
Exchange difference on translation of foreign subsidiaries
Total comprehensive result for the year
765,392
(226,738)
(4,215,550)
(2,730,872)
Basic (loss) per share (cents per share)
30
(9.28)
(5.04)
Loss per share for the year attributable to the members of Scotgold
Resources Ltd (cents per share)
(9.28)
(5.04)
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 38
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AT 30 JUNE 2021
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 asset
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
2021
$
2020
$
9
10
11
9
12
13
14
15
16
16
17
17
18
19
20
20
2,624,342
448,336
187,276
296,657
3,556,611
1,579,820
16,280,930
2,777,962
2,990,000
25,770,548
49,399,260
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
52,955,871
36,419,396
2,306,453
873,977
7,927,888
11,108,318
1,127,113
461,999
542,761
2,131,873
11,986,714
908,915
12,895,629
8,740,965
657,934
9,398,899
24,003,947
11,530,772
28,951,924
24,888,624
52,640,345
785,967
(24,474,388)
44,978,659
(596,589)
(19,493,446)
28,951,924
24,888,624
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 39
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
Issued
Capital
Accumulated
Losses
Options
Reserve
Share-
based
payment
reserve
Foreign
Currency
Translation
Reserve
Total Equity
YEAR ENDED 30 JUNE 2020
$
$
$
$
$
$
Balances at 1 July 2019
Adjustment on initial application of AASB 16
Total comprehensive result for the year
41,098,558
-
-
Transactions with owners in their capacity as owners:
2,075,997
1,839,556
-
(35,452)
44,978,659
Issue of shares
Options exercised
Share-based payments
Share issue expenses
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)
-
-
-
-
(1,015,000)
23,663,999
(3,064)
(2,730,872)
2,075,997
1,839,556
78,460
(35,452)
24,888,624
YEAR ENDED 30 JUNE 2021
44,978,659
Balances at 1 July 2020
Total comprehensive result for the year
-
Transactions with owners in their capacity as owners:
8,147,502
Issue of shares
Share-based payments
-
(485,816)
Share issue expenses
52,640,345
Balances at 30 June 2021
(19,493,446)
(4,980,942)
-
-
-
(24,474,388)
134,769
-
-
-
-
134,769
283,642
-
-
617,164
-
900,806
(1,015,000)
765,392
24,888,624
(4,215,550)
-
-
-
(249,608)
8,147,502
617,164
(485,816)
28.951,924
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 40
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
Notes
2021
$
2020
$
CASH FLOWS FROM OPERATING ACTIVITIES
Payment to suppliers
Interest income received
(1,443,368)
8,285
(1,031,667)
38,989
Net Cash Outflow from Operating Activities
26
(1,435,083)
(992,678)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration expenditure
Payments for mine development activities
Purchase of plant and equipment
Proceeds on disposal of plant and equipment
Expenditure on right-of-use assets
(428,794)
(10,249,942)
(803,791)
400
-
(507,795)
(7,957,393)
(428,733)
-
(47,710)
Net Cash Outflow from Investing Activities
(11,482,127)
(8,941,631)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares and options, net of costs
Proceeds from exercise of options
Proceeds on draw-down of first tranche of unsecured loan
Proceeds on draw-down of secured loan
Repayment of right-of-use leases
Net Cash Inflow from Financing Activities
Net increase (decrease) in cash held
7,661,686
-
1,810,938
6,343,675
(1,297,746)
2,040,545
1,839,556
-
3,762,227
(698,243)
14,518,553
6,944,085
1,601,343
(2,990,224)
Effect of exchange rate fluctuations on cash and cash equivalents
3,020
92,283
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
1,019,979
3,917,920
2,624,342
1,019,979
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 41
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
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
$3,556,611 (2020 - $1,437,657), including available cash and cash equivalents of $2,624,342 (2020 - $1,019,979),
and current liabilities of $11,108,318 (2020 - $2,131,873).
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 funds will be required for general working capital
requirements as production levels ramp up at the Cononish mine. In addition to existing cash reserves at 30 June
2021, the consolidated entity had further available funds by way of a short term unsecured loan facility of £1.0m
($1.84m) 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 2021, the consolidated entity had cash balances of $2,624,342 (30 June 2020 - $1,019,979) and for
the financial year then ending, incurred net cash outflows from operating and investing activities of $12,917,210
(2020 – $9,934,309). The consolidated entity had net current liabilities of $7,551,707 at 30 June 2021 (30 June 2020
- $694,216). The movement in the net current liability position of the consolidated entity was largely due to the first
tranche of the secured loan facility falling due for repayment on 13 May 2022, being $4,356,866 at 30 June 2021,
and the drawing down of £1,000,000 ($1,841,960) of the short term unsecured loan facility on 12 May 2021, which
was due to be repaid on 4 November 2021.
The consolidated entity completed the construction of the plant building, the installation of the processing plant and
the construction of the tailings management facility at the Cononish Mine during the year and made one shipment of
gold concentrate in May 2021.
Scotgold Resources Limited
Page 42
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The ability of the consolidated entity to continue as a going concern is dependent on the achievement of the status
of commercial production (which has been defined by the Board as the point at which positive net cash flow has been
generated by production operations for a period of three consecutive months), the ability of the consolidated entity
to put in place additional financing to address any adverse effects of any delays in achieving that status and the
continued support of its major shareholder and Directors. The status of commercial production had not been achieved
by 30 June 2021.
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.
The Directors believe that the consolidated entity has sufficient financing available to continue as a going concern
for the following reasons:
Although the status of commercial production had not been reached by 30 June 2021, the consolidated entity
has subsequently made steady progress in working towards that target, with production levels reaching the
designed capacity level of the processing plant and a further ten shipments of gold concentrate having been
made after 30 June 2021;
Bridge Barn Limited has stated that it is willing to defer repayment of the principal debt components of
Tranches 1 and 2 of the secured loan facility and require payment of only the accumulated interest amounts
on these tranches on the respective original principal repayment dates;
As set out in Note 32, the short term unsecured loan was settled by the issuing of ordinary shares on 27
September 2021; and
Discussions are underway with the off-take partner of the consolidated entity to put in place the prepayment
facility referred to in clause 6.3.A of the off-take agreement in order to fully fund the ongoing working capital
requirements of SGZ Cononish Limited.
The settlement of the short term unsecured loan by the issuing of ordinary shares together with the deferral of the
repayment of the principal debt components of the secured loan facility and the putting in place of the prepayment
facility with the off-take partner are expected to effectively address the net current liability position of the consolidated
entity.
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 21 December 2021.
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.
Scotgold Resources Limited
Page 43
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Adoption of new and revised standards
Changes in accounting policies on initial application of Accounting Standards
In the year ended 30 June 2021, 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.
The following new or amended standards have been adopted during the year ended 30 June 2021:
AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business
The adoption of this standard has had no effect on the consolidated entity as no business has been acquired during
the year.
AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material
The adoption of this standard has had no effect on the consolidated entity.
AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework
The adoption of this standard has had no effect on the consolidated entity.
AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform
The adoption of this standard has had no effect on the consolidated entity.
AASB 2019-5 Amendments to Australian Accounting Standards - Disclosure of the Effect of New IFRS
Standards Not Yet Issued in Australia
The adoption of this standard has had no effect on the consolidated entity.
AASB 2020-3 Amendments to Australian Accounting Standards – Annual improvements 2018-2020 and Other
Amendments
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).
Scotgold Resources Limited
Page 44
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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, these amendments have been applied for the year ended 30 June 2021. The
revenue from the gold concentrate produced during the process of commissioning the processing plant at the
Cononish mine which was sold during the year ended 30 June 2021 has been accounted for as revenue in profit or
loss and that portion of the gold concentrate produced during the commissioning process which had not been sold
by 30 June 2021 has been included in gold concentrate inventory at that date.
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 2021. They have not been adopted in preparing the financial statements for the year
ended 30 June 2021.
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.
The standard is effective for annual reporting periods beginning on or after 1 January 2023, having been deferred by
one year pursuant to AASB issuing AASB 2020-6. As these amendments only apply for the first time to the 30 June
2024 Statement of Financial Position (and 30 June 2023 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 amendment 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.
Scotgold Resources Limited
Page 45
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and
Definition of Accounting Estimates
This amendment introduces a definition of ‘accounting estimate’, i.e. monetary amounts in financial statements that
are subject to estimation uncertainty, such as estimating expected credit losses for receivables, or estimating the fair
value of an item recognised in the financial statements at fair value.
Accounting estimates are developed using measurement techniques and inputs. Measurement techniques comprise
estimation techniques (such as used to determine expected credit losses or value in use) and valuation techniques
(such as the income approach to determine fair value).
The amendments clarify that a change in an estimate occurs when there is either a change in a measurement
technique or a change in an input.
These amendments apply to annual reporting periods beginning on or after 1 January 2023.
There will be no impact on the financial statements of the consolidated entity when these amendments are first
adopted because they apply prospectively to changes in accounting estimates that occur on or after the beginning
of the first annual reporting period to which these amendments apply, i.e. annual periods beginning on or after 1 July
2023.
AASB 2021-3 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions
beyond 30 June 2021
AASB 2020-4 introduced a practical expedient that permitted lessees not to have to assess whether a rent concession
that occurs as a direct consequence of the COVID-19 pandemic is a lease modification in respect of lease payments
originally due on or before 30 June 2021. AASB2021-3 extends the practical expedient to cover COVID-19 rent
concessions where the reduction in lease payments affects lease payments up to and including 30 June 2022.
These amendments apply to annual reporting periods beginning on or after 1 April 2021.
The practical expedient afforded by AASB 2020-4 was utilised during the year ended 30 June 2020, but no Covid-19
related lease payment concessions were received during the year ended 30 June 2021 and no such concessions
are expected in future, so AASB 2021-3 is not expected to have an impact on the financial statements of the
consolidated entity when this amendment is first adopted.
Scotgold Resources Limited
Page 46
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
The amendments clarify that the ‘initial recognition exemption’ does not apply to transactions where an entity
recognises an asset and a liability which give rise to equal taxable and deductible temporary differences. This could
occur, for example, where lessees recognise a right-of-use asset and lease liability for lease transactions, or where
an entity recognises decommissioning, restoration and other similar obligations, which form part of a related asset.
These amendments apply to annual reporting periods beginning on or after 1 January 2023.
These amendments will first be adopted for the year ended 30 June 2024 and will apply prospectively to all
transactions that occur on or after the beginning of the earliest comparative period, i.e. all transaction that occur on
or after 1 July 2022.
In addition, at the beginning of the earliest comparative period, i.e. 1 July 2022, deferred tax assets (to the extent it
is probable that taxable profits will be available against which the deductible temporary differences can be utilised)
and deferred tax liabilities will be recognised for all deductible and temporary differences associated with right-of-use
assets and lease liabilities as well as decommissioning, restoration and other similar liabilities and the corresponding
amounts recognised as part of the cost of the related assets.
The cumulative effect of initially applying these amendments will be recognised in opening balances of retained
earnings on 1 July 2022. As a large number of the leases in effect at 30 June 2021 are expected to end on or before
30 June 2022, the effect of adoption of these amendments on 1 July 2022 is not expected to be material, but this is
dependent on whether material leases are entered into during the year ending 30 June 2022, so it is not possible to
make an assessment of the extent of the impact on the consolidated entity at this stage.
Accounting Policies
(a) Basis of Consolidation
A controlled entity is any entity controlled by Scotgold Resources Limited. Scotgold Resources Limited controls an
entity when it is exposed, or has rights, to variable returns from its involvement with that entity and has the ability to
affect those returns through its power over the entity. Scotgold Resources Limited has power over an entity when it
has existing rights that give it the current ability to direct the activities that significantly affect the returns of that entity.
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.
Scotgold Resources Limited
Page 47
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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. Assets under
construction or being prepared for use are accounted for as part of the mine development asset and are transferred
to plant and equipment on completion of construction of those assets or completion of preparation of those assets
for use.
The carrying amount of plant and equipment is reviewed annually by the Directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash
flows which will be received from the employment and subsequent disposal of the assets. The expected net cash
flows have been discounted to their present values in determining recoverable amounts.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future benefits associated with the item will flow to the consolidated entity and the cost
of the item can be measured reliably. All other repairs and maintenance are charged to the statement of
comprehensive income during the financial period in which they are incurred.
The present value of decommissioning liabilities attributable to items of plant and equipment, as well as any changes
in the present value of such liabilities arising due to changes in the cash flows used to determine such liabilities or
the discount rate applied to cash flows used to determine such liabilities, is included in the cost of that item of plant
and equipment.
(d) Depreciation
The depreciable amount of all fixed assets, excluding computer hardware, ore processing plants and tailings
management facilities, are 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.
Scotgold Resources Limited
Page 48
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Ore processing plants are depreciated on the basis of the estimated production units to be produced over the life of
the plants from the date of commencement of commercial production by the plants. Tailings management facilities
are depreciated on the basis of the estimated total tonnage of tailings to be deposited at the facilities from the date
that tailings are first deposited.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset:
Plant and equipment
Motor vehicles
Office furniture and equipment
Ore processing plants
Tailings management facilities
Depreciation Rate:
15 – 50%
25%
15 – 50%
Number of units of production as a % of total useful life production units
Tonnage of tailings as % of total useful life tonnage
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) 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 asset or expensed to profit or loss as incurred, as appropriate.
During the year, an aggregate amount of $175,323 (2020 - $276,732) paid in respect of short-term leases and leases
of low value assets was charged to mine development asset, being primarily payments in respect of mobile plant
hired on a weekly basis with no minimum hire period, of which $37,298 relates to mobile plant used in the construction
of the processing plant building and tailings management facility.
Scotgold Resources Limited
Page 49
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f)
Exploration and Evaluation Expenditure
The consolidated entity held thirteen exploration licences in Scotland at 30 June 2021. 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.
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 is reclassified as a mine development asset once the technical
feasibility and commercial viability of extracting the related mineral reserve is demonstrable.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward
costs in relation to that area of interest.
The present value of restoration, decommissioning and environmental monitoring liabilities attributable to exploration
and evaluation 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 exploration and evaluation expenditure. Fixed asset depreciation is charged directly to profit
and loss in the period in which it is charged.
(g) Mine development asset
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 tested for impairment, with any impairment being recognised in profit or
loss, and then reclassified as a mine development asset.
All subsequent expenditure on mine development activities is capitalised. Assets under construction or being
prepared for use are accounted for as part of the mine development asset and are transferred to plant and equipment
on completion of construction of those assets or completion of preparation of those assets for use.
Revenue generated from gold concentrate produced during the process of commissioning is accounted for as
revenue in profit or loss and any portion of the gold concentrate produced during the commissioning process which
has not been sold by the end of a reporting period is included in inventory at the reporting date.
Scotgold Resources Limited
Page 50
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Commercial production has been defined by the Board as the point at which positive net cash flow has been
generated by production operations for a period of three consecutive months. Production costs incurred prior to the
consolidated entity reaching the stage of commercial production are charged to the mine development asset. These
costs are not amortised during the mine development phase, but the carrying value thereof is assessed for
impairment whenever facts and circumstances suggest that the carrying amount may exceed the recoverable amount
thereof by taking into account discount rates, gold and silver prices and ore reserve estimates.
Once the stage of commercial production has been achieved, the mine development asset is amortised over the life
of the mine to which the development asset relates according to the rate of depletion of the economically recoverable
reserves of that mine or amortised on the basis of production-related metrics, as appropriate. The stage of
commercial production had not been achieved by 30 June 2021. During the year ended 30 June 2021, a portion of
the mine development asset in an amount of $404,734 (2020 - $Nil) was charged to profit or loss as production costs.
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 the mine development asset.
(h)
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 profit or loss.
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.
(i)
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 the mine development asset 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
the net present value of those expected future costs are added to or deducted from the mine development asset, or
items of property, plant and equipment required to be decommissioned in future.
Scotgold Resources Limited
Page 51
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(j)
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks and 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.
(k)
Inventory
Inventory is valued at the lower of cost and net realisable value.
(l)
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.
(m) 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.
Scotgold Resources Limited
Page 52
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
As the consolidated entity is engaged in the principal activities of mine development, production of gold and silver
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 and gold and silver production
operations 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.
(n) 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.
Scotgold Resources Limited
Page 53
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
As at 30 June 2021, 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.
(o)
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.
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.
Scotgold Resources Limited
Page 54
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(p) Revenue
In terms of the agreement with the off-take partner of the consolidated entity, for each shipment of gold concentrate,
a provisional invoice representing 90% of the sales value of that shipment (net of smelting and refining costs), is
issued when the shipment is made. The sales value is determined by reference to the wet metric tonnage of the
shipment, the quoted gold and silver prices in effect for the period of two full weeks prior to the date of the shipment
and the moisture content and gold and silver grades of the gold concentrate in that shipment, as determined by an
independent firm of assayers, as well as the terms of the off-take agreement.
On reaching its destination, the material in the shipment is subjected to a final assay by a firm of independent
assayers, who additionally test for the presence of impurities. Based on the results produced by that final assay and
the quoted gold and silver prices in effect during the period of one full month following the date of making the
shipment, a final invoice is produced in respect of that shipment, with the off-take partner paying the difference
between the sales value (net of smelting and refining costs) of that final invoice and the amount paid in respect of
the provisional invoice.
Revenue in respect of sales of gold concentrate is recognised in profit or loss based on the final invoices for those
sales, with an estimate of final sales value being made in the case of shipments made prior to the end of a reporting
period in respect of which the final invoice has not been issued before the date of reporting. The gross sales value is
recognised as revenue and the costs of smelting and refining as well as any penalties for impurities are recognised
as part of smelting, refining, transport, marketing and assay costs.
Revenue generated from gold concentrate produced during the process of commissioning is accounted for as
revenue in profit or loss.
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial
assets.
(q) 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 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.
(r) Cost of sales
Smelting, refining, transport, marketing and assay costs are recognised in profit or loss when incurred.
Commercial production has been defined by the Board as the point at which positive net cash flow has been
generated by production operations for a period of three consecutive months. Production costs incurred prior to the
consolidated entity reaching the stage of commercial production are capitalised to the mine development asset.
Scotgold Resources Limited
Page 55
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Once the stage of commercial production has been achieved, production costs incurred during that stage are charged
to profit or loss and production costs incurred prior to that stage being achieved, which have been charged to the
mine development asset, are amortised on the basis of production-related metrics. The stage of commercial
production had not been achieved by 30 June 2021.
During the year ended 30 June 2021, a portion of the mine development asset in an amount of $404,734 (2020 -
$Nil) was charged to profit or loss as production costs.
(s) 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.
(t)
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.
(u) Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
(v) 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.
(w) 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 asset 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.
Scotgold Resources Limited
Page 56
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(x)
Foreign currency translation
The presentation currency of the consolidated financial statements is Australian dollars. In addition, functional
currency is determined for each entity in the Group and items included in the financial statements of each entity are
measured using that functional currency.
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated
at the rate of exchange ruling at the reporting date.
All exchange differences in the consolidated financial report are taken to profit or loss with the exception of differences
on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken
directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss.
Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported
as part of the fair value gain or loss.
The functional currency of the foreign operations SGZ Grampian Limited and SGZ Cononish Limited is Pounds
Sterling (£). The functional currency of SGZ France SAS and Scotgold Resources Portugal is the Euro (€).
As at the reporting date the assets and liabilities of these subsidiaries are translated into the presentation currency
of the consolidated financial statements at the rate of exchange ruling at the reporting date and income and expense
items are translated at the average exchange rate for the period, unless exchange rates fluctuated significantly during
that period, in which case the exchange rates at the dates of the transactions are used.
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.
(y) 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.
Scotgold Resources Limited
Page 57
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(y)(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
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 2021 was $908,915 (2020 - $657,934).
Scotgold Resources Limited
Page 58
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 the mine development asset once production commences.
Share-based payments
In determining the amount to be recognised in respect of share-based payments during each reporting period, it is
necessary to perform a valuation of instruments such as share options or warrants granted as share-based payments
for services received.
The consolidated entity determines such valuation using the “Black Scholes” model. Inputs into that model include
assumptions which require judgement on the part of the Directors. In addition, once such value has been determined,
in accounting for these options the Directors must exercise judgement as to number of share-based payment
instruments granted which are likely to vest and the likelihood that any non-market vesting conditions will be met.
(y)(ii) Critical judgements in applying the consolidated entity’s accounting policies
Determination of date of reclassification to mine development asset
In a prior year, exploration and evaluation expenditure attributable to the Cononish area of interest was reclassified
to mine development asset 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 asset.
Impairment
AASB 136 Impairment of Assets requires an entity to assess at the end of each reporting period whether there is any
indication that an asset may be impaired. If any such indication exists, the entity shall estimate the recoverable
amount of the asset. Recoverable amount is defined within AASB 136 as the higher of fair value less costs to sell
and value-in-use. Value-in-use is determined on a pre-tax basis and is the present value of the future cash flows
expected to be derived from the asset or cash-generating unit.
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.
Scotgold Resources Limited
Page 59
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 asset 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 2021, the gross asset base of the consolidated entity directly attributable to the Cononish mine
amounted to $47,623,151 (2020 - $33,502,849). The Directors have not identified any impairment indicators
necessitating impairment of the carrying value of that asset base at 30 June 2021.
In identifying the existence of any impairment indicators, the Directors have employed the following key judgements:
The market capitalisation of the consolidated entity was materially higher than its net asset value at 30 June
2021;
The gold price remains buoyant and global economic conditions remain conducive to increasing rates of
inflation (as stimulus measures remain in place to combat the effects of the Covid-19 pandemic) and thereby
sustained strong gold price levels; and
Good progress has been made after 30 June 2021 in achieving sustainable levels of production at or near
the designed capacity levels of the Cononish mine processing plant, with 10 gold concentrate shipments
having been made after 30 June 2021.
At 30 June 2021, the consolidated entity had capitalised mineral exploration and evaluation expenditure of
$2,990,000 (2020 - $2,441,728).
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 specific facts and
circumstance set out in that Standard suggest that the carrying amount of an exploration asset may exceed its
recoverable amount, being as follows:
The period for which the entity has the right to explore in a specific area of interest has expired during the
reporting period or will expire in the near future and is not expected to be renewed;
Substantive expenditure on further exploration for and evaluation of mineral resources in the specific area of
interest is neither budgeted nor planned;
Exploration for and evaluation of minerals in the specific area of interest have not led to the discovery of
commercially viable quantities of mineral resources and the entity has decided to discontinue such activities
in that specific area of interest; and
Sufficient data exists to indicate that although development in a specific area of interest is likely to proceed,
the carrying amount of the deferred exploration and evaluation expenditure in respect of that specific area of
interest is unlikely to be recovered in full from successful development of or by sale of that area of interest.
Scotgold Resources Limited
Page 60
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Directors do not believe any of these indications of impairment are present.
NOTE 2 – REVENUE
Revenue comprises sales of gold concentrate.
NOTE 3 – COST OF SALES
Cost of sales
Smelting, refining, transport, marketing and assay costs
Production costs
Total cost of sales
NOTE 4 – INTEREST INCOME
Interest income
Interest received on non-current receivables
Interest received on bank deposits
Total interest income
NOTE 5 – OTHER INCOME
Other income
Regional Selective Assistance grant payments from Scottish Enterprise
Sale of scrap metal
Total other income
NOTE 6 – INTEREST EXPENSE
Interest expense
Secured loan
Right-of-use lease liability
Unwinding of discount on provision for restoration and decommissioning
Total interest expense
2021
$
13,107
286,700
299,807
2021
$
8,171
114
8,285
2021
$
413,966
2,041
416,007
2021
$
1,038,714
213,635
7,135
1,259,484
2020
$
-
-
-
2020
$
36,219
2,770
38,989
2020
$
379,468
2,240
381,708
2020
$
546,747
98,956
24,209
669,912
Scotgold Resources Limited
Page 61
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 7 - 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
2021
$
2020
$
185,162
8,250
14,841
1,106,594
1,314,847
75,253
8,755
5,589
638,842
728,439
Motor vehicles
Total loss on disposal of non-current assets
-
-
3,920
3,920
Total depreciation and loss on disposal of non-current assets
1,314,847
732,359
NOTE 8 - INCOME TAX
The prima facie tax benefit at 27.5% (2020 - 27.5%) on loss from ordinary activities is reconciled to the income tax
benefit in the financial statements as follows:
Loss from ordinary activities
2021
$
(4,980,942)
2020
$
(2,504,134)
Prima facie income tax benefit at 27.5% (2020 - 27.5%)
1,369,759
688,637
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
(342,409)
600,184
(3,806)
29,008
(108,017)
(317,603)
631,851
(2,703)
2,288
(34,565)
1,544,719
967,905
(1,544,719)
-
(967,905)
-
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
2021 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 2021
AND CONTROLLED ENTITIES
NOTE 8 - INCOME TAX (continued)
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
2021
$
4,979,511
412,846
5,392,357
2020
$
3,310,133
32,514
3,342,647
The potential deferred tax asset has not been brought to account in the financial report at 30 June 2021 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 9 – TRADE AND OTHER RECEIVABLES
Current
Trade debtors
GST / VAT receivable
Other receivables
Non-current
Rehabilitation, restoration and land management Bond deposits
Performance Bond deposit
2021
$
20,011
414,455
13,870
448,336
2020
$
-
191,134
35,000
226,134
1,524,561
55,259
1,579,820
1,473,600
54,201
1,527,306
Scotgold Resources Limited
Page 63
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 9 – TRADE AND OTHER RECEIVABLES (continued)
The rehabilitation, restoration and land management Bond deposits constitute security for the performance by SGZ
Cononish of its obligations in terms of the Section 75 Agreement entered into in 2018 between that company, 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. The
deposits lodged comprise the following:
£537,918 ($990,823) in respect of obligations to undertake restoration, decommissioning and environmental
aftercare and monitoring on cessation of operations at the Cononish mine; and
£268,693 ($494,922) in respect of obligations in terms of implement a plan for the management of the Greater
Cononish Glen in which the Cononish mine is situated (the “Greater Cononish Glen Management Plan”).
The cumulative amount of interest earned on the amounts lodged is $38,989 (2020 - $30,818).
The Performance Bond deposit is an amount of £30,000 lodged by SGZ Cononish Limited as part of an agreement
with Roads Scotland in respect of the upgrading and maintenance by SGZ Cononish Limited of the Dalrigh junction
on the A82 road between Tyndrum and Crianlarich and serves 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 that upgrade.
NOTE 10 – INVENTORY
Inventory of gold concentrate
Inventory of mining consumables
NOTE 11 – OTHER CURRENT ASSETS
Prepayments
NOTE 12 – PLANT AND EQUIPMENT
Cost
Accumulated Depreciation
2021
$
120,796
66,480
187,276
2021
$
296,657
2021
$
16,825,605
(544,675)
16,280,930
2020
$
-
62,291
62,291
2020
$
129,253
2020
$
791,625
(322,510)
469,115
Scotgold Resources Limited
Page 64
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 12 – PLANT AND EQUIPMENT (continued)
Movement for the year ended 30 June 2020
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
Movement for the year ended 30 June 2021
Cost
Opening balance
Additions
Transfer from mine development asset
(see Note 14)
Disposals
Foreign exchange movement
Closing balance
Accumulated depreciation
Opening balance
Depreciation expensed
Disposals
Foreign exchange movement
Closing balance
Net carrying value
At 30 June 2021
At 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
Plant and
equipment
Motor
vehicles
Furniture and
office
equipment
706,751
752,330
15,192,588
-
34,568
16,686,237
292,204
185,162
-
12,534
489,900
56,206
679
-
-
1,637
58,522
23,995
8,250
-
872
33,117
28,668
50,782
-
(403)
1,799
80,846
6,311
14,841
(3)
509
21,658
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
Total
791,625
803,791
15,192,588
(403)
38,004
16,825,605
322,510
208,253
(3)
13,915
544,675
16,196,337
25,405
59,188
16,280,930
414,547
32,211
22,357
469,115
Scotgold Resources Limited
Page 65
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 12 – PLANT AND EQUIPMENT (continued)
The transfer from mine development asset comprises the following components:
Processing plant
Processing plant building, including decommissioning and rehabilitation
Concrete apron adjacent to processing plant building
Bridge from ore stockpile area to processing plant building
Tailings management facility, including decommissioning and rehabilitation
NOTE 13 – RIGHT-OF-USE ASSETS
Cost
Accumulated Depreciation
The movement in right-of-use assets for the year is as follows:
Cost
Balance at beginning of year
Recognition at date of initial application
Reclassification from plant and equipment on initial application
Additions during the year
Modifications of rights during year
Foreign exchange movement
Balance at end of year
Accumulated Depreciation
Balance at beginning of year
Reclassification from plant and equipment on initial application
Depreciation expensed
Foreign exchange movement
Balance at end of year
$
8,508,030
4,874,680
209,550
80,827
1,519,501
15,192,588
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
2021
$
4,601,501
(1,823,539)
2,777,962
2021
$
2,411,627
-
-
1,840,777
243,692
105,405
4,601,501
673,389
-
1,106,594
43,556
1,823,539
During the year, an amount of $175,323 (2020 - $276,732) paid in respect of short-term leases and leases of low
value assets was charged to mine development asset, being primarily payments in respect of mobile plant hired on
a weekly basis with no minimum hire period, of which $37,298 relates to mobile plant used in the construction of the
processing plant building and tailings management facility.
Scotgold Resources Limited
Page 66
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 14 – MINERAL EXPLORATION AND EVALUATION
Opening balance
Additional expenditure deferred during the year
Foreign exchange movement
Closing balance
2021
$
2,441,728
467,948
80,324
2,990,000
2020
$
2,034,815
440,126
(33,213)
2,441,728
The ultimate recoupment of exploration expenditure carried forward is dependent upon successful development and
commercial exploitation, or sale of the respective areas.
NOTE 15 – MINE DEVELOPMENT ASSET
Opening balance
Expenditure incurred
Share-based payment costs capitalised (see Note 21)
Provision for restoration and decommissioning (see Note 18)
Transfer to plant and equipment
Transfer to production costs
Foreign exchange movement
Closing balance
2021
$
28,805,352
11,029,274
252,439
220,447
(15,192,588)
(404,734)
1,060,358
25,770,548
2020
$
20,293,754
8,680,503
12,266
381,727
-
-
(562,898)
28,805,352
Share-based payment costs capitalised to mine development asset relate to options granted to senior management
to incentivise the meeting of the corporate target of gold at the Cononish mine.
The transfer to plant and equipment has been made pursuant to the completion during the year of the processing
plant, processing plant building and tailings management facility. The respective amounts attributable to these assets
is set out under Note 12 - Plant and equipment.
As noted above, the stage of commercial production had not been attained at the Cononish Mine by 30 June 2021.
Once commercial production has been achieved, the components of the balance at 30 June 2021 will be amortised
to production costs and expense on appropriate bases.
Mine development asset includes an amount of $175,232 (2019 - $276,732) of amounts paid in respect of short-term
leases and leases of low value assets during the year, being primarily payments in respect of mobile plant hired on
a weekly basis with no minimum hire period, of which $37,298 relates to mobile plant used in the construction of the
processing plant building and tailings management facility.
NOTE 16 – TRADE AND OTHER PAYABLES
Trade payables
Other accruals
2021
$
2,306,453
873,977
3,180,430
2020
$
1,127,113
461,999
1,589,112
Scotgold Resources Limited
Page 67
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 16 – TRADE AND OTHER PAYABLES (continued)
Trade payables and accruals relating to exploration expenditure
Trade payables and accruals relating to development expenditure
Trade payables and accruals relating to administration
2021
$
96,165
2,679,815
404,450
3,180,430
Trade payables are non-interest bearing and are normally settled on 30 days terms (2020 - 30 days).
NOTE 17 – BORROWINGS
Non-current
Secured loan facility
Right-of-use lease liabilities
Current
Secured loan facility
Short term unsecured loan
Right-of-use lease liabilities
2021
$
11,055,263
931,451
11,986,714
2021
$
4,356,866
1,841,960
1,729,062
7,927,888
2020
$
55,254
1,348,477
185,381
1,589,112
2020
$
7,681,847
1,059,118
8,740,965
2020
$
-
-
542,761
542,761
Total borrowings
19,914,602
9,283,726
All of the borrowings are denominated in £ (Pounds sterling).
Loan from company controlled by shareholder
There have been no material variations or changes to the terms of the secured loan facility during the year.
All remaining funds available under the facility were drawn down during the year, as follows:
Tranche 3
Tranche 4
Tranche 5
Tranche 6
Tranche 7
Total drawdowns during the year
Date of
drawdown
9 July 2020
12 August 2020
1 September 2020
5 February 2021
17 March 2021
Amount of
drawdown
£
500,000
1,000,000
1,000,000
500,000
500,000
3,500,000
Amount of
drawdown
$
904,159
1,830,831
1,810,282
900,576
897,827
6,343,675
Scotgold Resources Limited
Page 68
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 17 – BORROWINGS (continued)
The terms of the secured loan facility at 30 June 2021 are as follows:
i)
ii)
iii)
iv)
An overall facility amount of £7,500,000, all of which had been drawn down by 30 June 2021;
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 for the year ended 30 June 2021:
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Tranche 6
Tranche 7
Balance at
beginning
of year
$
3,898,092
3,783,755
-
-
-
-
-
7,681,847
Drawdowns
$
-
-
904,159
1,830,831
1,810,282
900,576
897,827
6,343,675
Interest at
effective
rate
$
338,745
318,717
73,332
132,300
124,091
29,853
21,676
1,038,714
Foreign
exchange
movements
$
120,029
116,294
18,403
14,009
34,397
21,102
23,659
347,893
Balance at
end of year
Date of
repayment
$
4,356,866
4,218,766
995,894
1,977,140
1,968,770
951,531
943,162
15,412,129
13/05/2022
25/10/2022
09/07/2023
12/08/2023
01/09/2023
05/02/2024
17/03/2024
Movements on the secured facility loan for the year ended 30 June 2020:
Drawdowns
Balance at
beginning
of year
$
3,655,221
-
3,655,221
$
-
3,762,227
3,762,227
Gain on
amendment
of
repayment
terms
$
(38,383)
-
(38,383)
Interest at
effective
rate
Foreign
exchange
movements
Balance
at end of
year
$
331,536
215,211
546,747
$
(50,282)
(193,683)
(243,965)
$
3,898,092
3,783,755
7,681,847
Tranche 1
Tranche 2
The effective interest rate on the secured loan facility is 8.38% (2019 – 8.46%).
Short term unsecured loan
Mr Nat le Roux, Mr William Styslinger, Mr Peter Hetherington and Mr Ian Proctor (all directors of the Company) and
a shareholder of the Company entered into an agreement with SGZ Cononish Limited on 4 May 2021 to provide a
short term, interest free, unsecured loan in an aggregate amount of £2,000,000 to that company in two tranches of
£1,000,000 each.
Scotgold Resources Limited
Page 69
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 17 – BORROWINGS (continued)
The first tranche of £1,000,000 ($1,810,938) was drawn down on 12 May 2021 and was owing at 30 June 2021.
The movement on the loan for the year ended 30 June 2021 was as follows:
Drawdown on 12 May 2021
Foreign exchange movement
Balance at end of year
$
1,810,938
31,022
1,841,960
The date of repayment of the loan was 4 November 2021 at 30 June 2021, but, as set out in Note 32 – Matters
subsequent to the end of financial year, the second tranche of £1,000,000 was drawn down on 6 August 2021 and
on 27 September 2021, 3,301,420 ordinary shares were issued to the providers of the short term unsecured loan in
full and final settlement of the loan.
Lease liabilities
The movements in lease liabilities are as follows:
Balance at beginning of year
Recognition at date of initial application
Reclassification of hire purchase facilities on initial application
Additional rights acquired
Modifications to rights
Interest expense
Repayments
Foreign exchange movement
Balance at end of year
Non-current portion
Current portion
2021
$
1,601,879
-
-
1,840,777
243,692
213,635
(1,297,746)
58,276
2,660,513
931,451
1,729,062
2020
$
-
759,442
732,531
477,137
257,641
98,956
(698,243)
(25,585)
1,601,879
1,059,118
542,761
The effective interest rate on the lease liabilities is 9.13% (2020 – 9.88%). Right-of-use assets with an aggregate net
carrying value of $2,777,962 (2020 - $1,738,238) are financed by the lease liabilities.
Scotgold Resources Limited
Page 70
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 18 – PROVISIONS
Provision for restoration and decommissioning
Balance at end of year
2021
$
2020
$
908,915
657,934
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 2021.
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 2021 using a discount rate of
1.54% (2020 – 0.87%).
Movements in the provision are as follows:
Opening balance
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
2021
$
657,934
7,135
220,447
-
23,399
908,915
2020
$
238,690
24,209
381,727
27,476
(14,168)
657,934
NOTE 19 – ISSUED CAPITAL
Ordinary shares – fully paid
(a)
Voting and dividend rights
2021
No. of
shares
56,221,871
2020
No. of
shares
51,351,741
2021
$
2020
$
52,640,345
44,978,659
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.
Scotgold Resources Limited
Page 71
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 19 – ISSUED CAPITAL (continued)
(b)
Movements in ordinary share capital of the Company were as follows:
During the year ended 30 June 2020:
Date
Details
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
During the year ended 30 June 2021:
Date
Details
16/10/2020
26/10/2020
26/10/2020
09/04/2021
16/04/2021
16/04/2021
Balance at 30 June 2020
Share subscription
Share subscription
Expenses related to share subscription
Share subscription
Share subscription
Expenses related to share subscription
Balance at 30 June 2021
Shares
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
Shares
51,351,741
999,545
1,727,728
819,286
1,323,571
56,221,871
Value
(cents)
0.6318
0.7169
0.7203
0.7550
0.7639
0.7639
0.7577
0.7524
0.7525
0.7500
Value
(cents)
2.005
2.005
1.2599
1.2442
$
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
$
44,978,659
2,004,192
3,464,274
(331,833)
1,032,218
1,646,818
(153,983)
52,640,345
Shares issued for non-cash consideration amounted to Nil during the year (2020 - Nil).
(c)
Movements in options were as follows:
During the year ended 30 June 2020
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
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
Scotgold Resources Limited
Page 72
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 19 – ISSUED CAPITAL (continued)
There were no movements in options during the year, other than the share-based payment changes disclosed in
Note 21.
The options outstanding at 30 June 2021, excluding options issued to key management and senior managers as
share-based payments, are as follows:
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 21. 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 21.
NOTE 20 – RESERVES AND ACCUMULATED LOSSES
Accumulated Losses
2021
$
2020
$
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
(19,493,446)
-
(4,980,942)
(24,474,388)
(16,986,248)
(3,064)
(2,504,134)
(19,493,446)
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 21)
Balance at end of the year
Total reserves
2021
$
2020
$
(1,015,000)
765,392
(249,608)
(788,262)
(226,738)
(1,015,000)
134,769
134,769
134,769
134,769
283,642
617,164
900,806
205,182
78,460
283,642
785,967
(596,859)
Scotgold Resources Limited
Page 73
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 20 – RESERVES AND ACCUMULATED LOSSES (continued)
Nature and purpose of reserves
Foreign currency translation reserve
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 21 – SHARE-BASED PAYMENTS
The rules of the Enterprise Management Incentive Scheme of the Company provide that 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 Schedule 5 of the United Kingdom Income Tax (Earnings and Pensions)
Act 2003 and other applicable legislation.
In addition, the Company has put in place a Non-Employee Share Option Scheme which provides for the granting by
the Board of options under that scheme to non-executive directors of the Company and to other persons who provide
consultancy services to the Company and its controlled entities at such exercise prices and in such numbers as the
Board considers appropriate and to attach such performance conditions to the vesting of such options as it considers
appropriate, subject to compliance with applicable legislation.
On 1 July 2020, 400,000 options were granted to Mr Richard Gray, the then Managing Director of the Company.
Each option entitles the holder to one ordinary unissued share at an exercise 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, expire on 30 June 2025 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.
None of the 400,000 options had vested at 30 June 2021, but all of the options vested at the end of August 2021.
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 an exercise
price of £0.71. Of the 750,000 options, 450,000 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 300,000 vest
when 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, expire on 30 June 2025 and carry no dividend or
voting rights.
Scotgold Resources Limited
Page 74
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 21 – SHARE-BASED PAYMENTS (continued)
On the granting of the 750,000 options to senior management, 120,000 of the options with an exercise price of £0.34
per share granted to senior managers on 16 April 2019 were cancelled.
The recipient of 300,000 of the 750,000 options granted to senior management on 1 July 2020 ceased to be an
employee before 30 June 2021, resulting in the lapsing of all of the options issued to him. The remaining 450,000
options had not vested at 30 June 2021, but 270,000 of these options vested at the end of August 2021. The recipient
of 225,000 of the 750,000 options granted to senior management on 1 July 2020 resigned on 30 November 2021,
resulting in the 135,000 options granted to him which had vested at the end of August 2021 as well as the 90,000
unvested options granted to him lapsing on that date.
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 an exercise 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, expire on 28 July 2023 and carry no
dividend or voting rights. All of these options had vested by 31 December 2020. When Saint Consulting (UK) Limited
ceased to provide consulting services to the Group on 5 October 2021, these 200,000 options had not been exercised
and lapsed.
On 10 May 2021, 840,000 options were granted to Mr Phillip Day, the Managing Director of the Company. Each
option entitles the holder to one ordinary unissued share at an exercise price of £0.60. The options vest on 10 May
2024, provided that Mr Day is an employee in good standing of the Company or an entity controlled by the Company
on that date, The options are exercisable by the holder with effect from the vesting date, expire on 10 May 2026 and
carry no dividend or voting rights. All of the options granted to Mr Day were granted under the Enterprise Management
Incentive Scheme of the Company.
At 30 June 2021, 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 July 2020
10 May 2021
Number of
options
850,000
840,000
Expiry date
30 June 2025
10 May 2026
Exercise price
per option
£0.71
£0.60
Fair value
per option
£0.331
£0.290
The average exercise price of these unvested options as at 30 June 2021 is £0.65 (30 June 2020 - £0.304).
At 30 June 2021, the share options granted to management and consultants for services rendered which had vested
have the following expiry dates and exercise prices:
Grant date
1 May 2018
1 July 2020
Number of
options
1,000,000
200,000
Expiry date
1 May 2028
30 June 2025
Exercise price
per option
£0.30
£0.71
Fair value
per option
£0.172
£0.439
The average exercise price of these vested options as at 30 June 2021 is £0.368 (30 June 2020 - £Nil).
Scotgold Resources Limited
Page 75
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 21 – SHARE-BASED PAYMENTS (continued)
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
1 July 2020
55%
0.30%
5 years
1 July 2020
Granted on
29 July 2020
55%
0.20%
3 years
29 July 2020
10 May 2021
55%
1.67%
5 years
10 May 2021
The movement in number of options issued as share-based payment is as follows:
Balance at beginning of the year
Grant of options on 1 July 2020
Cancellation of options on 1 July 2020
Grant of options on 29 July 2020
Grant of options on 10 May 2021
Lapsing of options in April 2021
Balance at end of the year
2021
Number
1,120,000
1,150,000
(120,000)
200,000
840,000
(300,000)
2,890,000
2020
Number
1,120,000
-
-
-
-
-
1,120,000
Charges in respect of share-based payment have been recognised as follows:
1 May
2018
16 April
2019
Options granted on
1 July
2020
29 July
2020
10 May
2021
Cumulative to 30 June 2019
During year ended 30 June 2020
Charged to profit or loss
Charged to mine development
Cumulative to 30 June 2020
During year ended 30 June 2021
Charged to profit or loss
Charged to mine development
Cumulative to 30 June 2021
Cumulative to 30 June 2020
Charged to profit or loss
Charged to mine development
Cumulative to 30 June 2021
Charged to profit or loss
Charged to mine development
$
200,954
66,194
-
267,148
46,549
-
313,697
267,148
-
267,148
313,697
-
313,697
$
4,228
-
12,266
16,494
-
-
16,494
-
16,494
16,494
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
297,476
94,212
391,688
158,227
158,227
20,700
20,700
Increase
in share-
based
payment
reserve
$
205,182
66,194
12,266
283,642
364,725
252,439
900,806
-
-
-
-
-
-
-
-
-
267,148
16,494
283,642
-
16,494
16,494
297,476
94,212
391,688
-
158,227
158,227
20,700
-
20,700
631,873
268,933
900,806
Scotgold Resources Limited
Page 76
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 22 - COMMITMENTS FOR EXPENDITURE
Mineral Tenement Leases
As at 30 June 2021, 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 2020 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
Initial five year
term only
Extension for
further four
years
$
119,727
119,727
-
-
239,454
$
119,727
119,727
597,279
207,109
1,043,842
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
The amounts expected to be paid on the extension of the Crown Option leases has increased due to a change made
by Crown Estates Scotland in the basis of pricing of the extension of Crown Option leases.
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.
Scotgold Resources Limited
Page 77
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 22 - COMMITMENTS FOR EXPENDITURE (continued)
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
2021
$
36,983
9,659
13,464
122,195
182,301
2020
$
122,418
8,684
17,379
81,671
230,152
In terms of the mining lease agreement between SGZ Cononish Limited and the owners of the land on which the
Cononish mine is situated, an annual certain rent, indexed to the United Kingdom Retail Price Index (“RPI”), is
payable annually up to 23 July 2039. The term of the mining lease was extended for a period of 9 years on 11 March
2021.
Assuming a 2.0% per annum increase in the RPI in future, the amounts payable in respect of the annual mining lease
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
Minimum royalty payments
As at 30 June
2021
$
37,182
37,925
118,388
655,756
849,251
2020
$
34,793
35,489
110,784
242,325
423,391
The mining lease agreement 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. The obligation to pay the minimum royalty commenced with effect from the date of commencement of
production at the Cononish mine and the amounts are payable as follows:
Not later than one year
Later than 1 year but not later than 2 years
Later than 2 years but not later than 5 years
Later than 5 years
2021
$
70,668
72,449
226,158
1,252,700
1,621,975
Scotgold Resources Limited
Page 78
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 22 - COMMITMENTS FOR EXPENDITURE (continued)
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 with effect from 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
2021:
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
2021
$
138,147
870,917
2,611,109
2,988,386
6,608,559
2020
$
223,774
441,294
2,897,434
3,183,998
6,746,500
Amounts payable to Loch Lomond and the Trossachs Countryside Trust
The following amounts are payable to the Loch Lomond and the Trossachs Countryside Trust in terms of 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:
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
Contract for purchase of haultruck
2021
$
46,049
46,049
276,294
276,294
644,686
On 6 November 2020, SGZ Cononish Limited entered into a contract for the purchase of a dump truck for use in
underground mining operations. As at 30 June 2021, an amount of $472,858 (USD256,715) is payable after that date
when the dump truck is ready to be shipped from the plant in Canada.
Scotgold Resources Limited
Page 79
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 22 - COMMITMENTS FOR EXPENDITURE (continued)
Assets not recognised as right-of-use assets
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 30 June 2021 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
NOTE 23 - CONTINGENT LIABILITIES
As at 30 June
2021
$
2020
$
2,581
665
834
5
4,085
72,292
646
1,455
6
74,399
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 and/or attainment of certain levels of production
at the Cononish Mine, as follows:
(a)
(b)
(c)
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. The
donations agreement further provides for the payment of two lump sum payments of £125,000, the first being
payable on the first anniversary of commencement of commercial production at the Cononish mine at a rate
of at least 3,000 tonnes per month, and the second lump sum being payable on the earlier of the date falling
four years after the payment of the first lump sum of £125,000 and the date of commencement of production
at an ore processing rate of 6,000tpm, whichever is the earlier. The ore processing rate of 3,000 tonnes per
month had not been attained by 30 June 2021;
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 UK RPI
(described more fully in Note 22), with effect from the date of commencement of production at the Cononish
mine; and
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 22).
Scotgold Resources Limited
Page 80
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 23 - CONTINGENT LIABILITIES (continued)
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 2021, the full grant amount of £430,000
($792,043) had been received by SGZ Cononish Limited from Scottish Enterprise.
Scotgold Resources Limited and its controlled entities have no other known material contingent liabilities as at 30
June 2021.
NOTE 24 - 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 81
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 25 - 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 2020
Segment other income
Segment loss
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
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
Included in segment result
and segment assets:
Interest expense
Depreciation
Capitalised exploration
Mine development costs
Acquisition of fixed assets
Right-of-use assets acquired
Year ended 30 June 2021
Segment other income
Segment loss
668,345
714,163
-
8,680,503
428,733
552,323
Scotland
Production
$
723,985
4,004,886
Segment assets
Segment non-current assets
Segment liabilities
Segment non-current liabilities
47,623,151
46,105,614
23,777,823
12,887,495
Included in segment result
and segment assets:
1,567
14,276
440,126
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
669,912
728,439
440,126
8,680,503
428,733
552,323
Scotland
Australia
Other
Total
Exploration
$
$
114
23,440
4,947,052
3,020,977
114,560
8,134
-
948,101
383,856
272,669
101,102
-
$
-
4,515
1,812
-
10,462
-
$
724,099
4,980,942
52,955,871
49,399,260
24,003,947
12,895,629
Interest expense
Depreciation
Capitalised exploration
Mine development costs
Acquisition of fixed assets
Right-of-use assets acquired
1,258,326
1,305,303
-
11,029,274
801,453
1,840,777
1,158
9,544
467,948
-
2,338
-
-
-
-
-
-
-
Scotgold Resources Limited
-
-
-
-
-
-
1,259,484
1,314,847
467,948
11,029,274
803,791
1,840,777
Page 82
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 26 - NOTES TO THE STATEMENT OF CASH FLOWS
(a) Reconciliation of loss after income tax to net operating cash flows
Loss from ordinary activities
(4,980,942)
(2,504,134)
2021
$
2020
$
Depreciation
Loss on disposal of non-current assets
Interest expense
Share-based payments
Transfer from mine development asset to production overheads
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 17)
New leases (see Note 17)
Options granted to management for no cash consideration (see Note 21)
(c) Net debt reconciliation
Cash and cash equivalents
Borrowings
Lease liabilities
Net debt
1,314,847
-
1,259,484
364,725
404,734
-
(1,637,152)
(15,039)
5,026
212,082
(1,435,083)
728,439
3,920
669,912
66,194
(38,383)
(1,074,052)
25,555
(19,642)
75,461
(992,678)
2021
$
2020
$
243,692
1,840,777
617,164
2,701,633
2021
$
2,624,342
(17,254,089)
(2,660,513)
(17,290,260)
257,641
477,137
78,460
813,238
2020
$
1,019,979
(7,681,847)
(1,601,879)
(8,263,747)
Scotgold Resources Limited
Page 83
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 26 - NOTES TO THE STATEMENT OF CASH FLOWS (continued)
The movements in net debt are as follows:
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
(3,762,227)
(546,747)
38,383
-
-
243,965
(7,681,847)
(8,154,613)
(1,038,714)
-
-
(378,915)
(17,254,089)
698,243
(98,956)
-
(257,641)
(477,137)
25,585
(1,601,879)
1,297,746
(213,635)
(243,692)
(1,840,777)
(58,276)
(2,660,513)
(3,063,984)
(645,703)
38,383
(257,641)
(477,137)
269,550
(9,283,726)
(6,856,867)
(1,252,349)
(243,692)
(1,840,777)
(437,191)
(19,914,602)
(2,990,224)
-
-
-
-
92,283
1,019,979
1,604,363
2,624,342
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)
(5,252,504)
(1,252,349)
(243,692)
(1,840,777)
(437,191)
(17,290,260)
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
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
Cash flows
Accrual of interest
Modification of existing leases
New leases
Foreign exchange movements
Net debt as at 30 June 2021
Scotgold Resources Limited
Page 84
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 27 - KEY MANAGEMENT PERSONNEL
(a) Directors
The names and positions of Directors in office at any time during the financial year are:
In office from
In office to
Peter Hetherington
Nathaniel le Roux
Richard Gray
Phillip Day
Chris Sangster
Phillip Jackson
Richard Barker
William Styslinger
Ian Proctor
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Chief Executive Officer
and Managing Director
Non-Executive Director
Non-Executive Director
Company Secretary and
Non- Executive Director
Non-Executive Director
Non-Executive Director
18/06/2018
18/03/2015
10/10/2014
01/04/2021
10/10/2014
14/08/2007
09/10/2017
18/06/2018
14/08/2019
Chris Sangster resigned on 26 February 2021.
present
present
present
present
26/02/2021
present
present
present
present
Richard Gray retired with effect from 1 April 2021 and was appointed as a Non-Executive Director with effect from
that date.
Phillip Day was appointed as Chief Executive Officer and Managing Director on 1 April 2021.
On 2 November 2021, Nat le Roux retired as Non-Executive Chairman and continues to serve as a Non-Executive
Director. On the same day, Peter Hetherington was appointed as Non-Executive Chairman.
(b) 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
2021
$
516,366
9,737
270,513
796,616
2020
$
420,561
10,140
66,194
496,895
Scotgold Resources Limited
Page 85
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 27 - KEY MANAGEMENT PERSONNEL (continued)
(c) Aggregate amounts payable to Directors and their personally related entities for remuneration.
Accounts payable
NOTE 28 - RELATED PARTY INFORMATION
Transactions with Directors
Consolidated Entity
2021
$
2020
$
55,030
25,318
Each of the Directors is a related party. The following directors have entered into transactions with group companies.
i)
ii)
iii)
iv)
Chris Sangster has provided technical consulting services to the Company. Fees have been charged at
commercial, arm’s length rates in accordance with time incurred. Details of fees earned are provided in
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.
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 17. That company also
paid an amount of £22,800 ($40,304) in respect of recruitment fees on behalf of the Group during the
period, which was reimbursed by the Group on 18 January 2021. The recruitment fees were paid on
normal commercial terms by Mr Nat le Roux’s company and were reimbursed on normal commercial
terms.
Mr Nat le Roux, Mr Peter Hetherington, Mr William Styslinger and Mr Ian Proctor together with a
shareholder of the Company entered into an agreement with SGZ Cononish Limited on 4 May 2021 to
provide a short term, interest free, unsecured loan in an aggregate amount of £2,000,000 to that
company in two tranches of £1,000,000 each and respectively made short term, interest-free, unsecured
loans of £634,500, £114,500, £166,500 and £32,000 in terms of that agreement on 12 May 2021, which
amounts were all outstanding at 30 June 2021. The date of repayment of the loan was 4 November 2021
at 30 June 2021, but, as set out in Note 32 – Matters subsequent to the end of financial year, the second
tranche of £1,000,000 was drawn down on 6 August 2021 and on 27 September 2021, 3,301,420
ordinary shares were issued to the providers of the short term unsecured loan in full and final settlement
of the loan.
Scotgold Resources Limited
Page 86
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 28 - RELATED PARTY INFORMATION (continued)
v)
Mr Phillip Day was appointed as Chief Executive Officer and Managing Director on 1 April 2021. The
Company and SGZ Grampian Limited have respectively entered into a service agreement with Mr Phillip
Day and an agreement for the rendering of consultancy services with PAW Consulting Services GmbH,
a company controlled by Mr Day. The details of the service agreement are set out in the Remuneration
Report. The agreement for the rendering of consultancy services with PAW Consulting Services GmbH
provides for a consultancy service fee of £4,479 per month, excluding VAT, to be payable net of any
amounts in respect of income tax and national insurance contributions required to be deducted by law.
In addition, the Group shall reimburse all reasonable expenses incurred by PAW Consulting Services
GmbH in rendering the consultancy services. The total fees charged by Paw Consulting Services GmbH
in respect of those services during the year ended 30 June 2021 amounted to $40,088, of which $15,902
related to the period prior to the appointment of Mr Day as Chief Executive Officer and Managing
Director. All fees charged under the consulting agreement have been charged at commercial, arm’s
length rates.
Aggregate amounts payable to Directors and their personally related entities:
Accounts payable
Short term unsecured loan
Non-current borrowings owing to Bridge Barn Limited
Principal
Accumulated interest
NOTE 29 - 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
2021
$
55,030
1,745,257
13,814,698
1,597,431
17,212,416
2020
$
25,318
-
7,160,759
521,088
7,707,165
Consolidated
2021
$
2020
$
57,063
62,015
-
119,078
48,964
18,783
2,530
70,277
The remuneration paid for the year ended 30 June 2021 includes $55,014 (2020 - $6,434) paid to BDO LLP in the
United Kingdom in respect of tax advisory services.
Scotgold Resources Limited
Page 87
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 30 - LOSS PER SHARE
Consolidated
2021
$
2020
$
Earnings used in calculation of loss per share
(4,980,924)
(2,504,134)
Weighted average number of ordinary shares outstanding
during the year used in the calculation of basic loss per share
Number
Number
53,680,730
49,702,739
There are 2,920,000 potential ordinary shares as at 30 June 2021 (30 June 2020 – 1,150,000). The issuing of
these potential ordinary shares would be anti-dilutive.
NOTE 31 - 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, a short-term loan facility 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 2021
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 for use in mine development and production operations and for exploration and evaluation activities
and is not dependent upon interest received on the account as a source of income.
Fair value interest risk is the risk that movements in market interest rates will affect the fair value of fixed interest
financial instruments of the consolidated entity.
Scotgold Resources Limited
Page 88
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 31 - FINANCIAL INSTRUMENTS (continued)
The interest rate profile of the financial assets and liabilities of the consolidated entity is as follows:
Weighted Average
Effective Interest Rate
2021
2020
Financial Assets
Cash at Bank
Trade and other receivables
Non-current Bond obligation deposits
Total Financial Assets
0.01%
-
0.40%
0.05%
-
1.25%
Financial Liabilities
Trade and other payables
Short term unsecured loan
Right-of-use lease liabilities
Secured loan facility
Total Financial Liabilities
-
-
9.13%
8.38%
-
-
9.88%
8.46%
2021
$
2,624,342
448,336
1,579,820
4,652,498
2,306,453
1,841,960
2,660,513
15,412,129
22,221,055
2020
$
1,019,979
226,134
1,527,306
2,773,419
1,127,113
-
1,601,879
7,681,847
10,410,839
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 2021 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 $109,304 to $1,148,018 and there would have been a net decrease in equity of $111,673 after
taking into account the effect on the foreign currency translation reserve and a corresponding increase in the secured
loan facility balance of $111,673.
Foreign Currency Risk
The consolidated entity undertakes certain transactions denominated in foreign currencies, hence exposures to
exchange rate fluctuations arise. In order to partially mitigate the impact of fluctuations in foreign exchange rates
related to this exposure, management have a policy of holding sufficient cash in various currencies to settle firm
commitments and other anticipated cash outflows. Aside from this, the group does not engage in any hedging
transactions.
.
Scotgold Resources Limited
Page 89
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 31 - FINANCIAL INSTRUMENTS (continued)
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
2021
$
23,832,909
88,649
4,594
-
23,926,152
Assets
2021
$
4,551,946
1,812
32,982
-
4,586,740
Liabilities
2020
$
11,449,509
72,969
-
-
11,522,478
Assets
2020
$
2,371,394
3,584
350,497
43,792
2,769,267
A 10% depreciation in the Australian Dollar : Pound Sterling exchange rate would result in an increase in net monetary
liabilities of $2,142,574 (2020 - $1,008,680). The Company has traditionally raised equity funding in Pound Sterling
and holds the funds arising from such equity funding in Pounds Sterling, which mitigates currency risk.
Other than translational risk, the consolidated entity has no other significant exposure to foreign currency risk at the
reporting date.
Liquidity Risk
The group manages liquidity risk by monitoring forecast cash flows.
As at 30 June 2021 the consolidated entity had an amount of £ Nil (30 June 2020 - £3,500,000) available to be drawn
down on the secured loan facility from Bridge Barn Limited and £ 1,000,000 (30 June 2020 - £Nil) to be drawn down
under the short term unsecured loan facility.
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 terms of the off-take agreement in respect of sales of gold concentrate provide for ownership of shipments of
gold concentrate to only pass to the off-take partner on payment of 90% of the sales value of each shipment, so the
exposure to credit risk in respect of each shipment of gold concentrate is limited to 10% of the sales value, net of
smelting and refining costs.
The consolidated entity is primarily exposed to credit risk in the case of its gold concentrate off-take partner, but this
is mitigated by the payment terms in the off-take agreement described above.
Scotgold Resources Limited
Page 90
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 31 - FINANCIAL INSTRUMENTS (continued)
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 32 - MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR
Mr Nat le Roux stepped down as Non-Executive Chairman on 2 November 2021 and Mr Peter Hetherington was
appointed as Non-Executive Chairman on that date. Mr Nat le Roux continues to serve as a Non-Executive Director
of the Company.
The second tranche of £1,000,000 was drawn down on the short term unsecured loan facility on 6 August 2021. On
27 September 2021, 3,301,420 ordinary shares were issued to the providers of the short term unsecured loan in full
and final settlement of the loan prior to the settlement date thereof of 4 November 2021, with Mr Nat le Roux, Mr
Peter Hetherington, Mr William Styslinger and Mr Ian Proctor respectively being issued with 2,094,751, 378,013,
549,686 and 105,645 ordinary shares at an issue price of £0.6058 ($1.138) per share. The shareholder who provided
part of the short term unsecured loan facility received 173,325 ordinary shares in settlement, at the same issue price.
The 400,000 options granted to Mr Richard Gray on 1 July 2020 and 270,000 of the options granted to senior
management on that date vested at the end of August 2021.
The recipient of 225,000 of the 750,000 options granted to senior management on 1 July 2020 resigned on 30
November 2021, resulting in the 135,000 options granted to him which had vested at the end of August 2021 (which
had not been exercised as at the date of resignation) as well as the 90,000 unvested options granted to him lapsing
on that date.
Saint Consulting (UK) Limited ceased to provide consulting services to the Group on 5 October 2021 and as a result,
the 200,000 options granted to that company on 29 July 2020, which had vested but had not been exercised by 5
October 2021, lapsed.
The final payment of USD256,715 ($472,858) was made in respect of the haultruck on 2 August 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 91
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2021
AND CONTROLLED ENTITIES
NOTE 33 - 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 and loans 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
2021
$
2020
$
36,848
74,339
111,187
37,086
47,129
84,215
272,669
28,668,919
28,941,588
20,230
24,831,795
24,852,025
29,052,775
24,936,240
100,851
100.851
47,616
47,616
100,851
47,616
28,951,924
24,888,624
56,717,836
1,035,575
(28,801,487)
28,951,924
49,056,150
418,411
(24,585,937)
24,888,624
Loss for the year attributable to the parent
Total comprehensive loss
4,215,550
4,125,550
2,733,936
2,733,936
The loss attributable to the parent entity includes write down of loans to subsidiaries caused by subsidiary losses of
$3,267,449 (2020: $4,018,048). 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
23). Grants in a total amount of £430,000 ($792,043) had been received by SGZ Cononish Limited as at 30 June
2021. The parent entity has no other contingent liabilities or commitments for acquisition of plant and equipment.
Scotgold Resources Limited
Page 92
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 2021
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 2021.
This declaration is made in accordance with a resolution of the Board of Directors.
..............................................................
PHILLIP DAY – Chief Executive Officer and Managing Director
Dated at Tyndrum, this 21st day of December 2021
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
INDEPENDENT AUDITOR’S REPORT
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 97
INDEPENDENT AUDITOR’S REPORT
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 98
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
The Holywell Alpaca Settlement
Directors’ Shareholding
24,712,974
6,481,086
2,466,974
2,056,440
2,000,000
41.52%
10.89%
4.14%
3.45%
3.36%
The interest of each director in the share capital of the Company is detailed in the Directors’ Report.
Scotgold Resources Limited
Page 99
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-2021.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 100