2020 ANNUAL REPORT TABLE OF CONTENTS CORPORATE INFORMATION ......................................................................................................................................... 1 CHAIRMAN’S LETTER .................................................................................................................................................... 2 2020 IN BRIEF ............................................................................................................................................................... 3 DIRECTORS’ REPORT ..................................................................................................................................................... 4 REMUNERATION REPORT (AUDITED) ......................................................................................................................... 24 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ..................................... 35 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................................................. 36 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .............................................................................................. 37 CONSOLIDATED STATEMENT OF CASH FLOWS .......................................................................................................... 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ......................................................................................... 39 DIRECTORS’ DECLARATION ......................................................................................................................................... 75 AUDITOR’S INDEPENDENCE DECLARATION ................................................................................................................ 76 INDEPENDENT AUDITOR’S REPORT ............................................................................................................................ 77 ASX ADDITIONAL INFORMATION................................................................................................................................ 81 SUMMARY OF TENEMENTS ........................................................................................................................................ 83 West African Resources Limited CORPORATE INFORMATION Company West African Resources Limited ABN 70 121 539 375 Directors Richard Hyde (Executive Chairman and CEO) Lyndon Hopkins (Executive Director and COO) Rod Leonard (Non-Executive Director) Libby Mounsey (Non-Executive Director) Nigel Spicer (Non-Executive Director) Stewart Findlay (Non-Executive Director) Company Secretary Padraig O’Donoghue Principal place of business Level 1, 1 Alvan Street Subiaco WA 6008 Australia Registered office Level 1, 1 Alvan Street Subiaco WA 6008 Australia T: +61 (8) 9481 7344 Burkina Faso office Secteur 27, Quartier Ouayalghin, Parcelles 07, Lot 22, Section SL, Ouagadougou, Burkina Faso T: +226 25 36 73 84 Website www.westafricanresources.com Share registry Computershare Investor Services Pty Ltd Level 11, 172 St George’s Terrace Perth WA 6000 Australia T: +61 (8) 9323 2000 Auditors HLB Mann Judd (WA Partnership) Level 4, 130 Stirling Street Perth WA 6000 Australia Security exchange Australian Securities Exchange Ltd (ASX) Level 40, Central Park 152-158 St George’s Terrace Perth WA 6000 West African Resources Limited|1 CHAIRMAN’S LETTER Dear Fellow Shareholders, I am pleased to present the 2020 Annual Report for West African Resources Limited (ASX: WAF). 2020 was a tremendously successful year for WAF and its shareholders considering the challenges we faced while ramping up during the global pandemic. The consolidated group generated strong financial results during the first year of gold production with A$148 million of operating cash flow, A$99 million profit, and a healthy A$95 million cash balance at year end after making an early debt repayment of US$25 million. Additionally, investments in the acquisition of the Toega gold deposit and deep exploration drill holes at M1 South Deeps were well rewarded with a 65% increase in Sanbrado’s Mineral Resources to 5.1 million ounces at 2 grams per tonne gold. The Company’s 2020 achievements also included completing the construction of Sanbrado ahead of schedule and under budget, pouring first gold on 18 March 2020, declaring commencement of commercial production on 1 May 2020 and producing 136,476 ounces of gold at an AISC of US$1,021 per ounce. These achievements strongly demonstrate the commercial and technical capabilities of West African’s team and our determination to deliver on our promises, in a safe, efficient, considered and cost-effective manner. This Annual Report includes a sustainability summary highlighting the Company’s commitment to delivering on its environmental and social responsibility programs using is internationally committed to Burkina Faso and to operating Sanbrado in a manner that will provide widespread economic benefits for the Burkina Faso Government, local and regional communities, and our other stakeholders. standards. Our Company recognised WAF updated its Board in 2020 as the Company repositioned for the production-phase of Sanbrado. Two new independent Non-executive Directors, Libby Mounsey and Stewart Findlay, joined the board while Simon Storm and Mark Connelly retired as Non-executive Directors on 29 May 2020. Ms Mounsey chairs the Remuneration Committee and has brought valuable HR and industrial relations skills to the Board. Mr Findlay has an extensive background in financial markets and chairs the Audit Committee. Our other two Non-executive independent Directors, Rod Leonard and Nigel Spicer have world-class mineral processing and mining backgrounds, respectively including significant experience in Africa. The Board recently appointed Mr Leonard as Lead Independent Director to enhance the Company’s governance framework. Whilst I am proud of the Company’s achievements in 2020 our focus continues to be on the future of the Company. We recently set West African’s maiden guidance at 250,000 to 280,000 ounces of gold for 2021 at an AISC of US$720 to US$800 per ounce. We also released the 10-year production outlook with Sanbrado set to average over 200,000 ounces of gold per annum from 2021 to 2030. These metrics provide an incredibly strong base upon which the Company can continue to grow through targeted drilling and exploration creating further value for our shareholders and stakeholders. I would like to congratulate West African’s dedicated team who have worked safely to achieve our goals and thank my fellow Board members for their support. RICHARD HYDE Executive Chairman & CEO 2|West African Resources Limited 2020 IN BRIEF 18 Mar First gold poured at Sanbrado 29 Apr Definitive agreement to acquire Toega gold deposit 1 May Sanbrado commences commercial production 30 Sep High-grade gold mineralisation intercepted beneath ore reserves at M1 South 6 Nov Early US$25 million debt repayment 136,476 ounces US$1,021 AISC/oz GOLD PRODUCTION A$98.9 million NET PROFIT 5.1 million ounces YEAR-END RESOURCES 1.5 million ounces YEAR-END RESERVES West African Resources Limited|3 DIRECTORS’ REPORT The Directors present their report together with the consolidated financial report of West African Resources Limited (the “Company”) and its controlled subsidiaries (the “Group”, “West African” or “WAF”) for the-year ended 31 December 2020. ABOUT WEST AFRICAN RESOURCES LIMITED West African Resources Limited (the “Company”) and its subsidiaries (the “Group”, “WAF”, or “West African”) is the operator and 90% owner of the Sanbrado Gold Project (Sanbrado) in Burkina Faso. The government of Burkina Faso retains a 10% equity interest in Sanbrado. The Group’s mineral portfolio also includes gold and copper-gold exploration permits in Burkina Faso. OPERATING REVIEW LOCATION Sanbrado is located in central Burkina Faso, 90 kilometres east-southeast of the capital city of Ouagadougou. 4|West African Resources Limited SANBRADO CONSTRUCTION COMPLETED IN FIRST HALF OF 2020 Construction of Sanbrado was completed in early 2020 ahead of schedule and under-budget, with first gold pour occurring in March 2020 and commercial production declared on 1 May 2020. figure 1 - Sanbrado processing plant SANBRADO PRODUCTION STATISTICS West African Resources completed its maiden year of operations at Sanbrado with 136,476 ounces of gold produced. The key 2020 production statistics for Sanbrado used by management are contained in the following table. As 2020 is the first year of operation for Sanbrado, prior year comparatives are not available. OP mining Total movement Total movement Strip ratio Ore mined Mined grade Contained gold UG mining Ore mined Mined grade Contained gold Processing Ore milled Head grade Recovery Gold produced Gold poured Unit Year 2020 BCM '000 kt w:o kt g/t oz kt g/t oz kt g/t % oz oz 8,909 21,415 5.1 3,494 1.3 145,803 119 10.0 38,232 2,616 1.7 93.4 136,476 133,534 West African Resources Limited|5 SAFETY The Company is pleased to report Sanbrado’s safety performance for 2020: • • there were no significant health or safety incidents during the year; and the annual TRIFR rate was 2.6 1. OPEN PIT MINING After initial mobilisation by the open pit mining contractor in December 2019, open pit mining ramped up to full production capacity during the first quarter of 2020. The mining plan for 2020 was to initially develop the higher-grade M5 South Stage 1 and M1 South pits with the M1 North pit being developed towards the end of the year. Due to the early completion of construction, subsequent performance of the process plant (processing softer oxide and transition ores at a rate 30% above the nameplate design capacity) the mining of the M5 North Stage 1 pit was brought forward by 12 months to provide a low strip ratio ore source to meet the process plant demand. Site layout of the project is shown below in figure 2 and a long section through M5 is show in figure 3. figure 2 - Sanbrado layout 1 Western Australian Total Mining Average TRIFR of 6.2. Department of Mines, Industry Regulation and Safety, 2020, Safety performance in the Western Australian mineral industry — accident and injury statistics 2019-20: Department of Mines, Industry Regulation and Safety, Western Australia. https://www.dmp.wa.gov.au/Documents/Safety/MSH_Stats_Reports_SafetyPerfWA_2019-20.pdf 6|West African Resources Limited During 2020 the total material movement from the open pits was 21 Mt at a strip ratio of 5:1 to provide 3.5 Mt of ore at an average grade of 1.3 g/t Au. Lower grade ore was stockpiled with preferential treatment of higher-grade material. Total stockpiles at the end of 2020 were 1.0 Mt at a grade of 1.2 g/t Au. UNDERGROUND MINING figure 3 – Long section through the M5 Pit During 2020 some 2.6 km of development for the decline and stope access was completed. At the end of 2020 the decline was 297 m below surface (vertically) providing access to the base of the second mining panel. Ore mined from the underground during 2020 was comprised of 60 kt of stoping ore at 9.0 g/t Au and 60 kt of ore from development drives at 11.0 g/t Au. Development and stoping completed to 31 December 2020 is illustrated in Figure 5 below. PROCESSING Commissioning of the process plant commenced in March 2020 with commercial production achieved in May. During 2020 a total of 2.6 Mt was milled at a grade of 1.7 g/t Au producing 136,476 ounces of gold. figure 4 – Sanbrado process plant West African Resources Limited|7 figure 5 – Isometric diagram of M1 South 8|West African Resources Limited GROWTH Toega acquisition On 29 April 2020 WAF announced it had signed a definitive agreement to acquire 100% of the Toega gold deposit from B2Gold and their partner GAMS-Mining F&I Ltd with the aim of upgrading the Toega resource for future processing though the Sanbrado process plant. The Toega deposit is located 14km southwest of the Sanbrado. On 9 March 2021 WAF announced on ASX that it had completed work to report an Inferred Mineral Resource for the Toega deposit of 22 million tonnes at a grade of 2.1 g/t for 1.3 million contained ounces of gold. M1 South Deeps During 2020 WAF returned positive results from extension drilling beneath the currently defined M1 South Ore Reserve (“M1 South Deeps”). On 9 March 2021 WAF announced on ASX that it had completed a technical evaluation including resource estimation and mine planning to determine the development requirements to extend the M1 South underground mine. It also reported an Inferred Mineral Resource for M1 South Deeps of 2.1 million tonnes at a grade of 12.4 g/t for 820,000 contained ounces of gold. Long term production targets In the above-noted 9 March 2021 ASX announcement WAF outlined its long-term production targets for Sanbrado which include both M1 South Deeps and Toega material in the life-of-mine plan to extend the life of the Sanbrado project by 5 years from 2028 to 2033 with: • Toega open pit mining to commence with the pre-strip in 2023 and Toega material being included in the processing schedule from 2024; and • M1 South Deeps underground material being included in the processing schedule from 2025. Inferred Mineral Resources have lower confidence levels than an Indicated Mineral Resources and there is no certainty that further resource definition work will result in the conversion of Inferred Mineral Resources to the Indicated category. figure 6 – Sanbrado accommodation camp West African Resources Limited|9 SUSTAINABILITY REVIEW This sustainability summary report highlights the Group’s activities in three interrelated areas for the period of January to December 2020, including: • • • governance, community engagement and socio-economic contribution and environmental performance. Development of West African’s sustainability reporting is ongoing as the Group aligns with reporting frameworks. For 2020 the reporting focuses on Sanbrado and includes references to the recently acquired Toega gold deposit situated 14km south west of Sanbrado. In 2019 West African engaged independent international experts to undertake a comprehensive review of the Sanbrado operations, including the Group’s environmental and social management programs, stakeholder engagement, socio-economic contribution, and governance practices. “By undertaking a rigorous review of our environmental, social and governance practices, we have an understanding of where our key environmental and social risks are and what we need to do to eliminate, reduce and manage them.” This extensive review was structured using leading global industry practices and sustainability frameworks, including the Equator Principles and the International Finance Corporation’s Performance Standards for management of environmental and social risks. The result of the review was an Environmental and Social Action Plan (ESAP) that has guided the environmental and social activities being undertaken at Sanbrado in conjunction with compliance requirements and industry practices. Additional focus and training in areas such as the United Nations Voluntary Principles on Security and Human Rights has placed matters of significance in doing business internationally at the forefront of Sanbrado operations. Despite the challenges presented by the COVID-19 pandemic in 2020, WAF continued to meet or exceed its sustainability targets. By the end of December 2020, a majority of the actions and improvements identified in the ESAP had been completed or were in advanced stages of completion across areas of environment, social and health and safety. OUR PEOPLE Health and safety Although 2020 was a challenging year for businesses and communities around the world, West African maintained its health and safety standards and practices. The Company’s management team responded to the COVID-19 situation by ensuring staff and contractors were aware of the current health guidelines set out by the World Health Organisation and the Government of Burkina Faso. Actions such as social distancing, maintaining personal hygiene, and wearing appropriate personal protective equipment were made mandatory. The Sanbrado on-site clinic became equipped to administer COVID-19 tests and a policy for managing the pandemic was issued. National and international staff were kept informed of the quickly changing conditions around the world. Employee engagement The Group’s renumeration and employment policies are non- discriminatory and are based on experience and skill set. West African recognises its responsibility to seek local and national talent. Local employment at the Sanbrado project accounted for 45% of total staff while regional employment accounted for 49%. These figures are similar to 2019 but with a slight increase in regional employment in 2020. Employees are encouraged to share regular feedback with senior management and the rest of the Group. Sanbrado transitioned from exploration into construction in 2019, and 2020 marked the first year of operations. Rest of Burkina Faso 42% Ganzourgou Province (regional) 4% Employee origin International employees 9% Commune of Boudry (local) 45% 10|West African Resources Limited Diversity West African is committed to its Diversity Policy and to providing an inclusive workplace for all staff and contractors and this includes being an equal opportunity employer that embraces diversity. The Group recognises that the benefits of diversity are many, including creating a friendly and supportive work environment and improved communication and collaboration. An overview of WAF’s diversity performance for the reporting period is presented below. For each indicator presented our performance has remained the same or improved from 2019. In 2020 West African provided 42 internship positions in a range of technical areas to national personnel. Twelve of these positions were held by females. The majority of interns (31) were from the local communities and 16 of them went on to be employed by Sanbrado following the completion of their internships. Number of interns in technical areas Human Resources Social Relations Process Industrial Maintenance Finance Medical Metallurgy Mine Engineering Logistics Geology Electrical Surveying Industrial Engineering 0 5 10 15 20 25 Male Female West African Resources Limited|11 OUR COMMUNITY WAF is committed to having a positive impact on its communities. This is driven by the Code of Conduct and Community Relations policy. Stakeholder engagement From its early exploration days to current Sanbrado operations diversity in our communities has dictated how we engage with our stakeholders. Updated stakeholder mapping in 2020 provided an insight into changes to the Group’s stakeholders and what that means to the way we communicate with them. The Group shares information through its website, press releases, annual reports and subject-specific reports. In Burkina Faso, the Stakeholder Engagement Plans (“SEPs”) set out how the Group engages with the community, civil society and government stakeholders. The SEPs are living documents. Through the pandemic the management team responded in keeping with national health advice and that of the World Health Organisation. When restrictions on gatherings were in effect public gatherings such as townhall meetings and visits from Community Relations Officers were temporarily replaced with regular telephone calls and an increase in the number of community notice board news bulletins. When restrictions for gatherings were lifted WAF resumed face-to-face community engagement activities, including the CCCPAS meetings. The CCCPAS is the Communal Consultative Framework of the Sanbrado Gold Project (Cadre Consultatif Communal du Projet Aurifiere de Sanbrado), established to oversee engagement between Sanbrado operations and its stakeholders. The committee meets regularly to discuss progress with resettlement and community development activities and information management. The committee has representatives from local and regional government departments, male and female representatives of Sanbrado’s communities and mine management staff. A grievance redress mechanism is utilised to receive community feedback and complaints. Grievances can be submitted by different means to ensure the process is accessible to all and is considerate of literacy, gender and cultural practices. The mechanism has proven to work well. Economic contribution WAF recognises its role in local and national economic development. In 2020, the Group contributed more than A$21 million in royalties and taxes to the Burkina Faso economy. Of this, more than A$3.4 million was contributed to the Local Development Fund. Local employment and procurement policies also played an important role in ensuring WAF contributed to the local economy. Other contributions included construction of 14 new water wells including arsenic filtration units to ensure the wells produce potable water, and one livestock vaccination park. Social programs and understanding our neighbourhood In 2020 WAF aimed at strengthening its social management programs and planning for an updated socio-economic baseline survey for the first quarter of 2021. One of the key plans finalised in 2020 was the Social Monitoring and Evaluation Plan (SMEP) designed to track and report implementation of WAF’s social management programming. The SMEP integrates management of specific areas such as community development, livelihood restoration, influx management, local employment and procurement, among others. In keeping with industry good practice, the socio-economic baseline data update is planned to take place approximately every 3 years to provide an understanding into how our “neighbourhood” is evolving and to keep informed of the positive and negative impacts of the Group’s operations and how it can improve its support to local development. 12|West African Resources Limited Health and education Health and Education are key pillars of WAF’s community development and for its own staff. In addition to building a new community health centre in the village of Pousghin, WAF launched an education campaign on communicable diseases and family planning. The campaign saw almost 100,000 participants with a near even split of males to females (51% and 49%, respectively). local communities In response to the pandemic, the Group donated personal to administrative authorities and protective equipment impacted including face masks, hand sanitiser, soap and hand washing stations. Medications and medical consumables were also provided to national and local health centres, and health associations working to support HIV/AIDS programs. For youth specifically, WAF has supported training of 20 young people from the Commune of Boudry in trades including electrical, construction, welding and metal construction, mechanical, and masonry. Other support programs focused on providing driving lessons to 25 youth. The Group also continued with donations of school supplies and equipment. Livelihood Restoration and Relocation The Sanbrado Mine was designed to minimise physical displacement without compromising the safe and efficient operation of the mine. This meant that some residents needed to be relocated to a safe distance from the mine’s operations. Extensive consultation and negotiation were undertaken with affected landowners who lost access to their land. Support from the local authorities was also sought in order to determine compensation and entitlement agreements. As of September 2020, construction was completed on 290 new homes, and 127 latrines, shower and cooking facilities for project affected people. Land titles have also been acquired for physically displaced persons and 100% of first year compensation payments have been made and 90% of second year payments. An intensive livelihood restoration program was also kicked off which focused on enhancing the local agricultural sector and helping families affected by Sanbrado. Various projects were undertaken including distribution of 75 tonnes of agricultural inputs to 310 recipients, preparation of more than 300 hectares of fields for cultivation and education programs centred on improving crop yields of maize, cowpea, millet, and sesame seed. A pilot irrigation project was commenced with input from the communities. Other livelihood restoration activities included alternative livelihood training for artisanal miners, personal finance training for affected families, weaving, fabric dying workshops and provision of microcredit facilities to women in the local communities. West African Resources Limited|13 ENVIRONMENT Environmental Management Systems A major Company milestone in 2020 included the development of a comprehensive Environmental and Social Management System (ESMS) following ISO 14001 & ISO 45001 guidelines. Each department received training on how to implement the ESMS, and on the development and use of performance measurement tools. Underpinning the system are departmental risk registers and associated action plans which help ensure that each risk has been characterised and an approach, timeline and a point of responsibility assigned. Our internal and external progress reports have been adjusted to allow for close tracking of our progress in completing the action plans, undertaking audits and identifying where additional resources may be required to continue the positive momentum this process has started. The Group had no major environmental incidents in 2020. Where possible West African looks for ways of improving water management. In 2020, Sanbrado reused approximately 583,583 kilolitres of water in its operation. Here are some of the main ways this was accomplished: Water source Grey water Re-used for Re-usage (kilolitres) Re-used for watering vegetable gardens, plants and lawns in camp, and for general gardening 2,433 581,100 50 Water from tailings storage facility (TSF) Re-used for process plant operation Water from machinery wash bays Re-used for dust suppression Monitoring and Emergency Readiness Emergency response readiness and competency were assessed in the last quarter of 2020 and demonstrated to be reflective of our operating needs. WAF continuously monitors environmental parameters such as air quality and water quality in and surrounding its areas of operations to make sure the Group’s activities are compliant with national regulatory requirements for pollution management and follow international guidelines such as the World Bank Environmental, Health and Safety Guidelines (2007) and specific guidelines developed by the World Health Organisation. Climate Change Like other mining operations, Sanbrado uses large amounts of fuel and energy to power the operation. Recognising this, WAF completed an initial inventory of its scope-1 greenhouse gas emissions (GHG) as part of an environmental review prior to Sanbrado commencing operations. The key sources of projected emissions from Sanbrado were power generation and vehicle exhaust. The projected total CO2 emissions for Sanbrado during operations was approximately 45,864 tpa, of which the power station accounted for 81%. As part of its approach for climate change mitigation WAF will be undertaking an updated GHG emissions inventory in 2021 to characterise actual emissions from Sanbrado. Results from the inventory will shape WAF’s efforts in mitigating its emissions. During 2021 WAF will also complete a study investigating the potential addition of solar power to the energy matrix used to generate power on site with the aim of reducing carbon emissions and reliance on fossil fuels. In addition to understanding its contributions to climate change, WAF celebrated National Tree Day with the local communities by launching a reforestation campaign consisting of planting more than 3,300 trees of local ecological, nutritional and economic value. WAF recognises the value of trees as carbon sinks and their economic value to the local communities. Mine rehabilitation Progressive rehabilitation was another area of focus during the reporting period. An updated Mine Reclamation and Closure Plan and a Reclamation and Revegetation Management Plan were developed. Early seed trials have commenced. The Sanbrado Mine is designed in such a way that allows the Group to undertake progressive rehabilitation from the start of our operations and continue as the project evolves. Following industry good practice and updated guidelines such as the ICMM Integrated Mine Closure: Good Practice Guide (2019), WAF understands its responsibility to plan for closure early on and to leave a positive legacy. In the coming year WAF will shift its focus to furthering its knowledge in the natural resources surrounding the Sanbrado operation. Although the existing habitat was highly degraded from decades of over grazing and clearing, with the help of subject matter experts and traditional local knowledge, the team will conduct further biodiversity studies to find opportunities for improving biodiversity values where it can. Progressive rehabilitation projects of impacted areas, revegetation and building a vegetation propagation nursery and local seed bank will form part of WAF’s ongoing environmental management programs. 14|West African Resources Limited FINANCIAL REVIEW COST PER OUNCE PERFORMANCE The ‘Adjusted operating cost’, ‘all-in sustaining cost’ (AISC), and ‘all-in cost’ are per-ounce cost performance metrics recommended by the World Gold Council for use in the gold mining industry, but they are not defined by Australian Accounting Standards Board rules (i.e. they are non-AASB measures). WAF follows the World Gold Council’s guidelines in the calculation of these metrics. The below table presents these non-AASB per ounce performance metrics for the Group including the underlying costs from which they are calculated. As 2020 is the first year of operation for Sanbrado, prior year comparatives are not available. Underlying measure Gold sold Gold revenue OP mining cost UG mining cost Processing cost Site administration cost Change in inventory Royalties & production taxes Refining and by-product Adjusted operating cost Rehabilitation Capital development Sustaining capital Sustaining leases Corporate & share-based payments All-in sustaining cost Exploration non-sustaining All-in cost Performance metrics per gold ounce sold Adjusted operating cost All-in sustaining cost All-in cost Average sales price Unit oz A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$/oz A$/oz A$/oz A$/oz Year 2020 118,093 309,856 55,517 12,213 32,668 20,490 (15,350) 20,483 430 126,451 667 25,582 11,527 2,949 7,422 174,597 17,791 192,387 1,071 1,478 1,629 2,624 Average FX rate used for USD unit costs AUD/USD 0.6907 Adjusted operating cost All-in sustaining cost (AISC) All-in cost Average sales price US$/oz US$/oz US$/oz US$/oz 740 1,021 1,125 1,812 WAF’s AISC and all-in cost of US$1,021 and US$1,125 per ounce, respectively, compare favourably to the average gold sales price per ounce of US$1,812 for 2020. West African Resources Limited|15 RECONCILIATION OF NON-AASB MEASURES TO FINANCIAL STATEMENTS A reconciliation of ‘Adjusted Operating Cost per ounce and AISC per ounce is presented below: Description Cost of sales (Less)/plus items: Depreciation Non-cash inventory movements By-product credits Adjusted operating costs plus items: Reclamation & remediation (accretion & amortisation) Corporate and technical services Share-based payments Capital development Sustaining capital Sustaining leases Total All-in sustaining cost (AISC) Gold sold (ounces) Adjusted operating cost per ounce ($A/oz) AISC per ounce (A$/oz) * Financial Statement reference* P/L Note 4 Note 4 N/A N/A P/L P/L Note 10 Note 10 CF 2020 $'000 145,148 (23,985) 5,746 (458) 126,451 667 5,079 2,343 25,582 11,527 2,949 174,597 118,093 740 1,478 The financial Statement references in above table are abbreviated as follows: P/L = Consolidated Statement of Profit or Loss and Other Comprehensive Income CF = Consolidated Statement Of Cash Flows N/A= a direct cross reference to the Financial Statements is not available GROUP FINANCIAL RESULTS All amounts are in Australian dollars, unless otherwise stated. Net profit after tax of $98,900,000 for the year compares favourably to the $4,334,000 net loss of the comparative year reflecting that Sanbrado commenced commercial production on 1 May 2020. Finance expenses of $26,139,000 were recorded in the year versus nil in the comparative period due to the accounting treatment to capitalise the Sanbrado project financing costs to mines under construction during whole of the prior year while Sanbrado was in the construction phase and to commence expensing them from the start of commercial production. Corporate and technical services cost of $5,079,000 in the year were higher than the $3,994,000 of the comparative year mainly due to higher salaries expenses. The $194,755,000 increase in total assets during the year was partly offset by the $96,721,000 increase in total liabilities resulting in a $98,034,000 increase in net assets over the period. The increase in total assets mainly reflects the construction and operation of Sanbrado with a $86,886,000 increase in property, plant and equipment (“PPE”), a $15,255,000 increase in exploration and evaluation (“E&E”) assets, a $33,983,000 increase working capital (cash, plus trade and other receivables, plus inventories less trade and other payables less deferred revenue), and a $8,753,000 decrease in loans and borrowings, partially offset by a $42,468,000 increase in tax liabilities (current plus deferred tax liabilities). The PPE increase reflects construction of Sanbrado in the year. The increase in E&E assets mainly reflects acquisition costs for the Toega gold deposit. The working capital increase reflects the commencement of commercial gold production at Sanbrado in the year and the build-up of $19,275,000 of value-added tax receivables due from the Burkina Faso government. The decrease in loans and borrowings reflects US$25 million of drawings of the Taurus syndicated debt facility fully offset by US$25 million of facility repayments with the decrease being due to foreign exchange gains recorded on the USD loan balance. The increase in tax liabilities reflects the Group’s profit result for the year. 16|West African Resources Limited RESOURCES AND RESERVES STATEMENT SANBRADO MINERAL RESOURCES The following two tables provide a year-on-year Mineral Resources comparison for Sanbrado, showing a 64.5% increase in Total Resources to 5.1 million ounces of gold. Sanbrado 31 December 2020 Resources Deposit M1 South M1 South UG M1 South Deeps M5 M1 North M3 Stockpile Toega Total* Cutoff g/t 0.5 1.5 1.5 0.5 0.5 0.5 0.5 Measured Resource Grade g/t Contained Au oz Tonnes Indicated Resource Grade g/t Contained Au oz Tonnes Inferred Resource Grade g/t Contained Au oz Tonnes Total Resource* Tonnes Grade g/t Contained Au oz 260,000 410,000 2.7 15.1 23,000 510,000 200,000 1,200,000 6.3 14.1 100,000 540,000 10,000 140,000 3.5 4.4 1,000 20,000 780,000 1,700,000 - 110,000 140,000 - 1.8 1.6 1,000,000 1.2 - - - 6,000 35,000,000 7,000 - 38,000 - 640,000 170,000 - - 1.2 2.1 2.0 - 2,100,000 12.4 820,000 2,100,000 1,400,000 17,000,000 42,000 11,000 - 400,000 190,000 - - 22,000,000 1.1 2.0 1.5 1.9 2.1 580,000 52,000,000 26,000 1,200,000 9,000 360,000 - 1,000,000 1,300,000 22,000,000 2,800,000 81,000,000 1,900,000 4.4 270,000 37,000,000 1.7 2,100,000 41,000,000 Sanbrado 31 December 2019 Resources 5.1 13.6 12.4 1.2 2.0 1.7 1.2 1.9 2.0 130,000 760,000 820,000 2,000,000 75,000 20,000 38,000 1,300,000 5,100,000 Deposit M1 South M1 South UG M5 M1 North M3 Total* Measured Resource Indicated Resource Inferred Resource Total Resource* Cutoff g/t Tonnes Grade g/t Contained Au oz Tonnes Grade g/t Contained Au oz Tonnes Grade g/t Contained Au oz Tonnes Grade g/t Contained Au oz 0.5 3 0.5 0.5 0.5 - - - - - - - - - - - - 850,000 6.4 178,000 50,000 5.2 5,000 900,000 6.3 1,000,000 21.9 697,000 300,000 11.2 117,000 1,300,000 19.5 36,650,000 750,000 150,000 39,400,000 1.2 2.0 2.0 1.9 1,470,000 14,600,000 49,000 500,000 11,000 200,000 2,405,000 15,650,000 1.1 2.0 1.5 1.3 520,000 51,000,000 32,000 1,250,000 9,000 350,000 683,000 55,000,000 1.2 2.0 1.8 1.7 183,000 810,000 2,000,000 81,000 20,000 3,100,000 *Due to rounding the totals in the above two tables may not precisely add up to, and ounces may not precisely calculate to, the amounts provided. 17|West African Resources Limited SANBRADO ORE RESERVES The below two tables provide a year-on-year Ore Reserves comparison for Sanbrado. Mining Category Open Pit Underground Total Proved and Probable Ore Reserve* Mining Category Open Pit Underground Total Proved and Probable Ore Reserve* Sanbrado 31 December 2020 Ore Reserve by Category Proved Provable Proved Provable Tonne Mt 1.4 16.0 0.046 1.6 20.0 Gold Grade g/t 1.5 Contained Gold koz* 68 1.6 8.6 9.2 2.3 800 130 480 1,500 Sanbrado 31 December 2019 Ore Reserve by Category Proved Provable Proved Provable Tonne Mt 0.0 19.5 0.0 2.0 21.6 Gold Grade g/t 0.0 Contained Gold koz* 0 1.6 0.0 10.2 2.4 1,004 0 646 1,650 *Due to rounding the totals in the above two tables may not precisely add up to, and ounces may not precisely calculate to, the amounts provided. The changes to the Ore Reserve from December 2019 to December 2020 are comprised of: • Depletion due to mining is 146,000 oz. • Re-estimation of the M1 South Mineral Resources and changes to cut-off grade led to a decrease in open pit Ore Reserves of 46,000 oz. Redesign of the M5 final pit has increased Ore Reserves by 42,000 oz. • COMPETENT PERSONS STATEMENT All information on the Sanbrado Gold Project Mineral Resources and Ore Reserves has been extracted from the ASX announcement related by West African on 9th March 2021 entitled “West African set for +1- years of +200,000oz average gold production”. West African confirms that it is not aware of any new information or data that materially affects the information included in the original ASX announcement and that all material assumptions and technical parameters underpinning the estimates in the ASX announcement continue to apply and have not materially changed. West African confirms that the form and context in which the Competent Persons findings are presented have not been materially modified form the original ASX announcement. Information in this report that relates to Mineral Resources and Ore Reserves is based on information complied by Brian Wolfe (Mineral Resources with the exclusion of M1 South Deeps), Neil Silvio (M1 South Deeps Mineral Resources), Andrew Fox (M1 South underground Ore Reserves) and Stuart Cruickshanks (open pit Ore Reserves) who are Competent Persons. Mr Wolfe is an independent consultant and a Member of the Australian Institute of Geoscientists. Mr Silvio is a full-time employee of the company and a Member of the Australian Institute of Mining and Metallurgy. Mr Fox is an independent consultant and a Member of the Australian Institute of Mining and Metallurgy. Mr Cruickshanks is a full-time employee of the company and a Fellow of the Australian Institute of Mining and Metallurgy. West African Resources Limited|18 INFORMATION ON DIRECTORS AND COMPANY SECRETARY The names of Directors who held office during or since the end of the year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. CURRENT DIRECTORS RICHARD HYDE BSc (Geology and Geophysics), MAusIMM, MAIG LYNDON HOPKINS BSc (Geology), MAusIMM, MAIG ROD LEONARD BSc and MSc (Metallurgical Engineering), MAusIMM, MSME Executive Chairman and Chief Executive Officer Executive Director and Chief Operating Officer Lead Independent Director and Non-Executive Director Richard Hyde is a geologist with 25 years’ experience in the mining industry and more than 19 years of experience in West Africa. Richard has managed large exploration and development projects for gold and base metals in Australia, Africa and Eastern Europe. He led the Company from incorporation in 2006, IPO in 2010, and through the discovery, development, and operation of the Sanbrado Gold Project. Mr Hyde is a founding shareholder and commenced as a Director in 2006. Lyndon Hopkins is a geologist with more than 30 years’ experience in gold exploration, development and production in Australia and Africa. He was Chief Operating Officer of Equigold NL’s Ivory Coast operations and managed the in- country aspects of the project development and feasibility study for the Bonikro Gold Mine. More recently, he was Mine Manager for the construction of Regis Resources Ltd’s Rosemont Gold Mr Hopkins has been West African’s Chief Operating Officer since 2015 and joined the Board on 6 September 2019. Rod Leonard is one of the founding Directors of Lycopodium (ASX: LYL) and served as an Executive Director of Lycopodium Limited from 2004 to 2019. He has more than 30 years’ experience in the operation and project development of major projects in North and South America, Africa, Asia and Australia. He has been involved in many aspects of the mineral processing industry from process development, feasibility studies, and design assignments as well as commissioning of projects. Mr Leonard joined the Board on 6 September 2019 and was appointed as Lead Independent Director on 2 February 2021. Committee memberships: Technical Committee memberships: Technical Committee memberships: Remuneration, Technical and Audit Other ASX listed directorship: Nil Other ASX listed directorship: Nil Other ASX listed directorship: Lycopodium Limited Previous ASX listed directorship in the last 3 years: Nil Previous ASX listed directorship in the last 3 years: Nil Previous ASX listed directorship in the last 3 years: Nil West African Resources Limited|19 ELIZABETH (LIBBY) MOUNSEY BBus (Human Resources and Industrial Relations), MAICD NIGEL SPICER BSc (Mining), CEng, MAusIMM STEWART FINDLAY BCom (Accounting and Finance), MAICD Non-Executive Director Non-Executive Director Non-Executive Director Libby Mounsey has over 30 years’ experience in human resources and industrial relations across the mining, construction, health, fisheries, and aviation industries. Over the last 15 years she has held senior positions with resource companies in various stages of development through feasibility, construction and operations. Libby holds a Bachelor of Business (Human Resources & Industrial Relations) from Edith Cowan University and is a Member of the Australian Institute of Company Directors. Nigel Spicer is a Mining Engineer with more than 40 years’ experience in mining and has held operational and executive management positions with mining companies in Africa, UK, Australia, Indonesia, PNG, Brazil and Philippines. He has extensive open pit and underground (narrow vein and bulk tonnage) mining experience across a range of commodities, including gold and copper. He has significant experience managing both owner and contract mining fleets and has been involved in the successful commissioning of a number of gold mines in Australia and Africa. Stewart Findlay has over 25 years financial markets experience and has provided project finance (senior secured debt and corporate facilities), equity investments, commodity hedging arrangements and corporate advice to a large number of resource companies. He has held senior positions in the metals and mining divisions of Macquarie Bank and National Australia Bank. Stewart holds a Bachelor of Commerce (Accounting & Finance) from the University of New South Wales and is a Member of the Australian Institute of Company Directors. Ms Mounsey joined the Board on 29 May 2020. Mr Spicer joined the Board on 6 September 2019. Mr Leonard joined the Board on 6 September 2019. Committee memberships: Remuneration (Chair) Committee memberships: Audit, Technical (Chair) Committee memberships: Audit (Chair), Remuneration Other ASX listed directorship: Nil Other ASX listed directorship: Nil Other ASX listed directorship: Nil Previous ASX listed directorship in the last 3 years: Nil Previous ASX listed directorship in the last 3 years: Nil Previous ASX listed directorship in the last 3 years: Nil PAST DIRECTORS WHO RETIRED DURING THE YEAR MARK CONNELLY SIMON STORM retired 29 May 2020 retired 29 May 2020 COMPANY SECRETARY PADRAIG O’DONOGHUE appointed as CFO on 4 June 2018 and as Company Secretary on 29 May 2020 West African Resources Limited|20 PRINCIPAL ACTIVITIES The principal activities of the Group during the year were development and operation of the Group’s key asset, the Sanbrado Gold Project (“Sanbrado”), located in Burkina Faso; and mineral exploration in Burkina Faso. West African Resources Limited owns a 90% beneficial interest in Société des Mines de Sanbrado SA (“SOMISA”), which owns 100% of Sanbrado. The government of Burkina Faso retains a 10% equity interest in SOMISA. DIVIDENDS No dividends have been paid or declared since the start of the year and the Directors do not recommend the payment of a dividend in respect of the year. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS The Group completed construction and commenced commercial production at the Sanbrado gold project during the year. SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE There has not arisen in the interval between the end of the reporting period and the date of this report, any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years. LIKELY DEVELOPMENTS AND EXPECTED RESULTS In the opinion of the Directors, likely developments in and expected results of the operations of the Group have been disclosed in the “Operating and Financial Review” and “Significant Events After Balance Sheet Date” sections of this Annual Report. Disclosure of any further information regarding likely developments in the operations of the Group in future years and the expected results of those operations is likely to result in unreasonable prejudice to the Company. West African Resources Limited|21 SHARE OPTIONS AND PERFORMANCE RIGHTS1 At the date of this report the unissued ordinary shares of the Company under option are: Issue date Exercise price Expiry date Number issued Options 29-Mar-18 26-Sep-18 28-Dec-18 28-Dec-18 20-Jan-20 29-Apr-20 11-Jun-20 Performance Rights 20-Jan-20 20-Jan-20 11-Jun-20 11-Jun-20 8-Jul-20 8-Jul-20 22-Sep-20 8-Dec-20 17-Dec-20 17-Dec-20 22-Jan-21 22-Jan-21 $0.4100 $0.3100 $0.3200 $0.4300 $0.6061 $0.7346 $0.6061 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 29-Mar-21 26-Sep-21 28-Dec-21 28-Dec-22 20-Jan-24 29-Apr-24 11-Jun-25 20-Jan-23 20-Jan-25 11-Jun-23 11-Jun-25 8-Jul-22 8-Jul-23 22-Sep-23 8-Dec-24 17-Dec-22 17-Dec-24 22-Jan-23 22-Jan-24 Total options and performance rights on issue 1Performance rights are granted subject to various performance hurdles. NON-AUDIT SERVICES 250,000 500,000 500,000 1,223,828 131,578 250,000 657,894 3,513,300 459,406 131,578 867,041 657,894 137,822 249,827 86,758 3,295,000 57,172 2,500,000 89,108 82,942 8,614,548 12,127,848 The Group may decide to employ the external auditor, HLB Mann Judd, on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Group are important. Fees that were paid or payable for non-audit services provided by the auditor of the parent entity during the year are outlined in Note 26 of the accompanying financial statements. The Directors are satisfied that the provision of non-audit services during the year by the auditor are compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: • • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professionals and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. 22|West African Resources Limited DIRECTORS’ MEETINGS The number of Directors’ meetings held during the year and the number of meetings attended by each director were as follows: Directors’ Meetings Audit Committee Meetings Remuneration Committee Meetings Technical Committee Meetings Director Richard Hyde Lyndon Hopkins Rod Leonard Nigel Spicer Stewart Findlay Libby Mounsey Mark Connelly Simon Storm A – the number of meetings held whilst a Director or a committee member B – the number of meetings the Director or committee member attended A - - 2 2 1 - 1 1 A 7 7 7 7 5 5 3 3 B 7 7 7 7 5 5 3 3 B - - 2 2 1 - 1 1 A - - 2 - 2 2 - - B - - 2 - 2 2 - - A 4 4 4 4 - - - - B 4 4 4 4 - - - - ROUNDING OF AMOUNTS The Company is of a kind referred to in “ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument 2016/191”, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the Directors’ Report and accompanying financial statements. Amounts in the Directors’ Report and accompanying financial statements have been rounded off in accordance with that Rounding Instrument to the nearest thousand dollars, or in certain noted cases, to the nearest dollar. All amounts are in Australian dollars, unless otherwise stated. West African Resources Limited|23 REMUNERATION REPORT (AUDITED) The Directors of West African Resources Limited present the Remuneration Report for the Group for the year ended 31 December 2020. This Remuneration Report forms part of the Directors’ Report and has been prepared in accordance with the Corporations Act 2001. 1 REMUNERATION REPORT OVERVIEW This Remuneration Report details the remuneration arrangements for West African’s Key Management Personnel (“KMP”), being: • • the Executive Directors and the other senior executives with authority for planning, directing and controlling the major activities of the Group (together the “Executives”). the Non-Executive Directors (“NEDs”); and The KMP during the year are set out below: Name Position Non-Executive Directors Appointed Retired Nigel Spicer Rod Leonard Stewart Findlay Libby Mounsey Mark Connelly Simon Storm Executive Directors Richard Hyde Lyndon Hopkins Senior Executives Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director September 2019 September 2019 May 2020 May 2020 June 2015 Non-Executive Director & Company Secretary November 2007 Executive Chairman and Chief Executive Officer September 2006 Executive Director and Chief Operating Officer September 2019 Padraig O’Donoghue Chief Financial Officer and Company Secretary Matthew Wilcox Chief Development Officer June 2018 May 2020 September 2018 - - - - May 2020 May 2020 - - - - - 2 GROUP PERFORMANCE AND ITS LINK TO SHAREHOLDER RETURNS The following table provides the earnings per share, dividends per share, net profit (loss) and share price of West African Resources at 31 December 2020 compared to the 4 previous reporting periods. Period ending December 2020 December 2019 December 2018 June 2018 Reporting period length 12 months 12 months 6 months 12 months EPS (cents) Dividends (cents per share) Net profit / loss ($’000) Share price ($) 11.3 Nil 98,900 1.050 (0.5) Nil (4,334) 0.430 (0.5) Nil (3,551) 0.250 (4.3) Nil (25,300) 0.380 June 2017 12 months (3.0) Nil (14,324) 0.355 West African Resources Limited|24 3 REMUNERATION GOVERNANCE A. REMUNERATION COMMITTEE RESPONSIBILITY The Remuneration Committee is a subcommittee of the Board. It is primarily responsible for making recommendations to the Board on: • Non-Executive Director (“NED”) remuneration; • Executive remuneration, including the executive incentive scheme framework and associated policies, targets, and awards; and • matters related to Executive and NED recruitment, retention, performance measurement and termination. The Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of NEDs and Executives by reference to relevant employment market conditions with the overall objective of maximising stakeholder benefit from the retention and incentivization of a high performing director and executive team. Further information on the duties and responsibilities of the Remuneration Committee is contained in the Remuneration Committee Charter which is available on the Company’s website. B. USE OF REMUNERATION ADVISORS In 2018 the Remuneration Committee engaged BDO Remuneration and Reward Pty Ltd (“BDO”) to review and provide recommendations on the design of Group’s overall executive remuneration and incentive framework and policies. BDO was consulted again by the Remuneration Committee in 2020 to advise on the overall executive incentive framework and a special remuneration initiative by the Company to address identified retention risks of Executives and other key senior employees related to mining industry employment market conditions, COVID-19-related travel restriction, and the transition of Sanbrado from construction phase to operations phase. BDO’s recommendations were provided to the Remuneration Committee as an input into decision making and were used to assist the Committee and the Board in setting out remuneration packages suitable for the Company. The Board considered BDO’s recommendations along with other factors in making its remuneration decisions. Both BDO and the Board were satisfied the advice received from BDO was free from undue influence from the KMP to whom the recommendations applied. The amount paid to BDO for remuneration advice in 2020 was $15,750 (2019: $Nil), excluding GST. C. EXECUTIVE REMUNERATION POLICY In determining executive remuneration, the Board aims to ensure that remuneration practices are: • competitive and reasonable, enabling the Company to attract and retain high calibre talent; • aligned to the Company’s performance, strategic and business objectives and the creation of shareholder value; • • acceptable to shareholders. transparent and easily understood; and The Company’s approach to remuneration ensures that remuneration is competitive, performance focused, clearly links appropriate reward with desired business performance, and is simple to administer and understand by Executives and shareholders. In line with the remuneration policy, remuneration levels are reviewed annually to ensure alignment to the market and the Company’s stated objectives. West African Resources Limited|25 D. REMUNERATION FRAMEWORK After considering the 2018 executive remuneration recommendations from BDO, the following executive remuneration framework was recommended by the Remuneration Committee and adopted by the Board. Type Category Definition of category Purpose summary Fixed remuneration Total fixed remuneration Pay which is linked to the present value and market rate of the role. Pay for fulfilling the requirements of the role At-risk remuneration Short term incentive At-risk remuneration Long term incentive value create Pay for delivering the plan and growth agenda for WAF which for must shareholders. Incentive pay will be linked to the achievement of ‘line-of-sight’ performance goals. It reflects ‘pay for performance’. for Pay shareholders. Reward pay is linked to shareholder returns. It reflects ‘pay for results’. creating value for Incentive for the achievement of annual objectives and sustained business value Incentive for performance over the long term An important governance and legal component of the remuneration framework is the Company’s Incentive Option & Performance Rights Plan (“Plan”). All equity incentives issued to Executives and other employees, including options and Performance Rights, are issued by the Company under the terms and conditions of the Plan. The Plan was most recently approved by shareholders at the Company’s Annual General Meeting on 30 November 2018. The purpose of the Plan is to: assist in the reward, retention and motivation of participants; link the reward of participants to performance and the creation of shareholder value; align the interests of participants more closely with the interests of shareholders; and a. b. c. d. provide greater incentive for participants to focus on the Company's longer-term goals. E. FIXED REMUNERATION Total fixed remuneration (“TFR”) consists of the base salary, superannuation, and other non-monetary benefits such as employee leave. TFR is intended to compensate the Executives for: • Competently and professionally fulfilling the scope of the Executive’s roles and responsibilities; and • the Executive’s skills, experience, and qualifications. F. AT-RISK REMUNERATION In order to ensure that executive remuneration is aligned to Company performance, a portion of Executives’ remuneration is placed “at risk”. The STI and LTI categories comprise the at-risk component of Executive remuneration. Short-term incentive (“STI”): • The primary purpose of the STI is to incentivise Executives to achieve the annual STI performance targets set by the Board at the beginning of the year. The STI performance targets clearly set out the annual performance targets the Board requires from management and achievement of the targets is determined by the Board at the end of the year. • The STI also enables the Executives to accumulate equity in the business which provides alignment with the shareholders for sustained strong business results. • The STI also provides an employee-retention benefit to the Company from the STI equity incentive, which contains a vesting condition that requires a period of continuous service before the STI equity awards vest. This service condition is typically two years. 26|West African Resources Limited Long-term Incentive (“LTI”): • The LTI is designed to incentivise Executives in the creation of long-term shareholder value as evidenced by market and non- market measures, by rewarding the Executives for the achievement of long-term performance targets set by the board at the beginning of the long-term performance period. The long-term targets are set out by the Board to provide clear and measurable direction as to what the Board and shareholders require from management by the end of the long-term performance period, which is typically a minimum of 3 years. • The LTI also enables the Executives to accumulate equity in the business which provides alignment with the shareholders for sustained strong business results. • The LTI also provides an employee-retention benefit to the Company from the LTI equity awards that contain a vesting condition that requires the Executive to remain in continuous service to the Company until the equity awards vest. 4 NON-EXECUTIVE DIRECTOR REMUNERATION West African Resources Limited’s NED fee policy is designed to attract and retain high calibre Directors who can discharge the roles and responsibilities required in terms of good governance, strong oversight, independence and objectivity. The Company’s constitution and the ASX listing rules specify that the NED fee pool limit shall be approved periodically by shareholders. The last determination at an AGM was an aggregate fee pool of $900,000 per year to ensure the Company can continue to attract and retain a high-performing Board of Directors with the appropriate overall skillset and composition. The Remuneration Committee considered advice from BDO regarding the remuneration paid to NEDs. This advice was largely based on a review against comparable companies. NED remuneration consists solely of their director fees. There is no scheme to provide retirement benefits to NEDs other than statutory superannuation. Aside from being offered the option of receiving 30% of their director fees in the form of Performance Rights, NEDs do not participate in any performance related incentive programs. Whilst WAF has no minimum shareholding policy for NEDs, the Board is of the view that it is beneficial for NEDs to hold an equity interest because it is an alignment with the Company’s shareholders. The NED fee structure for 2020 was either one of the following, at the election of each individual NED. 100% of NED fees, being $75,000 annually, paid in cash; or i) ii) 70% of the above NED fees paid in cash and 30% paid in Performance Rights (30% equity component). The 30% equity component of the structure has been approved, in respect of each participating Director, at a General Meeting of Shareholders of the Company. All of the Company’s NEDs elected to participate in the 30% equity component respect of their 2020 NED fees. During 2020, the NED fees covered all activities associated with the Directors’ role on the Board and no additional fees were paid to NEDs for being a chairperson or member of a committee. NEDs are entitled to be paid, as the Board determines, for additional services provided to the Group outside of their Director responsibilities. They may also be reimbursed for out-of-pocket expenses they incur as a result of their directorships. West African Resources Limited|27 5 EXECUTIVE REMUNERATION A. EXECUTIVE REMUNERATION STRUCTURE The remuneration framework provides for total remuneration for each Executive to be split between the fixed and at-risk components in the following portions: Executive Executive Chairman & CEO Chief Operating Officer Other Executives Fixed remuneration 42% 45% 50% At-risk remuneration (STI and LTI) 58% 55% 50% The ‘at-risk’ apportionment for each Executive is comprised as follows, which shows a significant weighting towards the long- term (LTI) component, which in the Board’s view provides a balance of Executive incentivization that aligns with shareholders for both short-term results and long-term sustainable returns. Executive Executive Chairman & CEO Chief Operating Officer Other Executives STI cash incentive 14% 17% 20% STI equity incentive 25% 25% 40% LTI equity incentive 61% 58% 40% The proportions in the above tables are used as a guide by the Remuneration Committee to recommend to the Board the maximum of each component of at-risk remuneration that can be earned by the Executives each year. The equity incentives are awarded by the Board early in the year, with the number awarded calculated based on the 7-day VWAP of WAF shares at the beginning of the incentive performance period. The number of equity incentives that will ultimately vest and be available to be exercised by the Executives is determined by the Board based on the assessment and achievement of the vesting conditions set out when the equity incentives were awarded. The vesting conditions of the equity awards represent both market and non-market performance targets that the Board needs management to achieve in order to earn that portion of their at-risk remuneration. The equity incentives also provide an employee-retention benefit to the Company, in addition to the performance target incentives. For example, the STI equity incentives include a 2-year continuous service vesting condition and the LTI equity incentives include a condition that the incentive will lapse if the Executive’s employment terminates before the board determines that the performance hurdle vesting conditions have been satisfied. B. EXECUTIVE SERVICE AGREEMENTS Commensurate with construction of the Sanbrado Gold Project and its transition to commercial production, the Remuneration Committee undertook a review of the Executives’ Service Agreements (“ESAs”) and TFRs. The review included external independent legal advice on the ESAs and comparisons of TFRs to similar peer companies. As 2020 was the first year of mining operations for WAF, the comparative peer group changed from being other exploration and development companies to WAF’s new mining-company peers. The review resulted in the Company entering into new ESAs with each of the Executives that included adjustments to their TFRs. The TRF changes took effect from 1 May 2020, being the date that Sanbrado commenced commercial production. The other provisions of the new ESAs took effect from 1 March 2020 for Richard Hyde and 1 April 2020 for the other Executives. Key changes to the Executives ESAs are shown in the following table. 28|West African Resources Limited Executive Salary change^ Richard Hyde Lyndon Hopkins Padraig O’Donoghue Increased from $400,000 to $585,000 Increased from $300,000 to $450,000 Increased from $275,000 to $350,000 Contract term change Changed from 3-year term to ongoing (until terminated by either party) No change from ongoing (until terminated by either party) Company notice-period change Changed from 1-month’s notice to 6-months Employee notice-period change No change from 3-months’ notice Changed from 2-month’s notice to 6-months Changed from 2-months’ notice to 3-months Termination benefit change* Change from termination payment of 6-months’ salary to nil No change from nil termination benefit Same as above Same as above Same as above Same as above Same as above Matthew Wilcox Increased from $300,000 to $375,000 ^ Amount shown includes annual salary plus superannuation. * Termination benefits shown assume that termination was not due to a change of control of the Company. Shareholder approval was obtained at the 31 May Annual General Meeting for purposes of sections 200B and 200E of the Corporations Act in relation to termination benefits each individual Executive may become entitled to if their employment under the ESA is terminated. Same as above Same as above Same as above C. AT-RISK REMUNERATION At the beginning of 2020 the Board set out STI and LTI performance targets for Executives to earn their at-risk remuneration. The following table summarises the Executive’s 2020 STI targets and their level of achievement as determined by the Board at the end of the year. These targets were the same for all of the Executives and the same targets applied to both the cash incentive portion of the STI and the equity incentive portion (as set out in section 4A of this report). STI Target Sanbrado reaches commercial production in 2020 Sanbrado construction completed within board-approved budget and schedule A minimum of 150,000 oz's of gold is poured in 2020 There is no default of the project loan facility agreement There are no significant social or environmental incidents The Sanbrado TIFR is less than the industry standard for Western Australia Weighted average level of achievement Weighting Gateway hurdle which determines if any STI will be paid for 2020 Level of achievement Gateway achieved 30% 30% 20% 10% 10% 100% 89% 100% 100% 100% 96.7% For 2020 the Executives earned 96.7% of the cash portion of their 2020 STI. The 2020 STI equity incentive portion was comprised of Performance Rights with an expiry period of 3 years and an additional vesting condition that the Executive must remain an employee of the Company for two years from the date the Performance Rights were issued. Subject to Executives satisfying this 2-year service period, the Board has determined that 96.7 % of their 2020 STI Performance Rights will vest. West African Resources Limited|29 The following table sets out the vesting conditions of the 2020 LTI equity instruments issued to Executives at the beginning of 2020 along with their vesting status. LTI equity instrument Vesting conditions Performance Rights with a 5-year expiry period At least 500,000 ounces of gold is poured within three years of the date the Performance Rights were issued (being 20 January 2023). Vesting status Unvested Options with 4-year expiry period and an exercise price of 145% of the share price on 31 December 2019 (being $0.616) Recipient is an employee of the Company when the market price first equals the exercise price Vested The 2020 STI and LTI equity awards issued to the Executive Directors were approved by shareholders at the Company’s 29 May 2020 Annual General Meeting and additional details of these awards are contained in the notice of meeting. D. SPECIAL ISSUE OF RETENTION AND SHARE-PRICE GROWTH PERFORMANCE RIGHTS IN 2020 The Board considered that the Group had assembled a skilled and experienced Executive and senior operational management team that had taken the Company and Sanbrado from construction to successful operations during 2020 during a global pandemic and in a challenging African jurisdiction. However, during 2020 the Remuneration Committee identified employee- retention risks related to: • • • Increasingly competitive mining industry employment market conditions, COVID-19-related travel restriction, and the transition of Sanbrado from construction to operations phase. It also identified the risk that it would be difficult to replace the current Executives and senior operational management team in the current labour market. In response to the above risks and to align the Executives and other senior employees with shareholders to continue strong share price growth the Board approved a special grant of Performance Rights which was in addition to the Company’s normal annual incentive scheme. In December 2020, the Company undertook a special issue of Performance Rights to the Executives and other key senior employees that was outside the Company’s normal remuneration framework explained in section 2 of this Remuneration Report. The Performance Rights were issued pursuant to the Plan in two categories with the following key terms and conditions. Category Retention (50%) Share price growth (50%) Vesting conditions The recipient holds continuous office as a Director of the Company or an employee of the Group for three consecutive years from the date of issue. WAF shares trade at $2.00 or higher for a 20- day VWAP period within 3 years of issue, and the recipient remains an employee of the Group or Director of the Company. Expiry dates 4 years from date of issue. 4 years from date of issue. The Retention and Share-price growth Performance Rights issued to the Executive Directors were approved by shareholders at the Company’s 17 December 2020 General Meeting and additional details of these awards are contained in the notice of meeting. 30|West African Resources Limited 6 KMP REMUNERATION OUTCOMES The remuneration disclosures of the KMP for the year ended 31 December 2020 in accordance with Australian Accounting Standards are detailed in the following table. Fixed remuneration Annual and Long Service Leave $ Super $ Cash salary and fees $ 489,814 400,000 372,842 273,973 45,993 20,358 52,500 60,292 31,049 - 73,311 - 21,593 100,000 25,340 80,850 - 70,445 299,276 251,142 366,692 273,973 40,199 - 31,491 26,027 6,507 1,934 - - - - 3,814 - - - - - - 6,507 28,431 23,858 34,836 26,027 40,527 - 46,327 52,588 - - - - - - - - - - - - - - 31,742 32,132 33,735 24,631 1,778,410 1,531,033 145,278 84,353 152,331 109,351 Total $ 570,540 400,000 450,660 352,588 52,500 22,292 52,500 60,292 31,049 - 77,125 - 21,593 100,000 25,340 80,850 - 76,952 359,449 307,132 435,263 324,631 2,076,019 1,724,737 Variable remuneration Performance based % of remuneration Cash bonus $ - - - - - - - - - - - - - - - - - - - - 51,778 - 51,778 - Options $ 282,750 122,881 159,998 39,979 - - - - - 72,528 175,068 20,837 55,951 - 58,940 161,113 48,540 58,970 86,938 756,196 588,297 Performance Rights $ Fixed remuneration % Total $ Remuneration linked to performance % 374,866 158,147 247,206 97,188 32,526 - 32,526 - 1,118 - 1,118 - 9,254 - 9,254 - - - 85,598 29,131 173,647 - 967,113 284,466 657,616 281,028 407,204 137,167 32,526 - 32,526 - 1,118 - 1,118 - 81,782 175,068 30,091 55,951 - 58,940 246,711 77,672 284,395 86,938 1,775,087 872,764 46% 59% 53% 72% 62% 100% 62% 100% 97% - 99% - 21% 36% 46% 59% 0% 57% 59% 80% 60% 79% 54% 66% 54% 41% 47% 28% 38% 0% 38% 0% 3% - 1% - 79% 64% 54% 41% 0% 43% 41% 20% 40% 21% 46% 34% 31 Dec 20 31 Dec 19 31 Dec 20 31 Dec 19 Executive Directors Richard Hyde Lyndon Hopkins Non-Executive Directors Rod Leonard Nigel Spicer Stewart Findlay 31 Dec 20 31 Dec 19 31 Dec 20 31 Dec 19 31 Dec 20 31 Dec 19 Libby Mounsey* Mark Connelly Simon Storm Ian Kerr Executives Padraig O’Donoghue Matthew Wilcox Total 31 Dec 20 31 Dec 19 31 Dec 20 31 Dec 19 31 Dec 20 31 Dec 19 31 Dec 20 31 Dec 19 31 Dec 20 31 Dec 19 31 Dec 20 31 Dec 19 31 Dec 20 31 Dec 19 *Cash salary and fees includes $46,076 paid to Just HR Pty Ltd, for whom Ms Mounsey is a director and shareholder, for HR consulting services on normal commercial terms whilst she was a Director of the Company 31|West African Resources Limited 7 DETAILS OF SHARE-BASED COMPENSATION Options held by Key Management Personnel Balance 1 Jan 2020 Granted as remuneration Number exercised Net change other Balance 31 Dec 2020 Total Vested Unvested At 31 December 2020 Directors Richard Hyde Lyndon Hopkins Simon Storm# Mark Connelly# Executives Padraig O'Donoghue Matthew Wilcox 2,588,235 855,932 750,000 2,000,000 779,661 1,000,000 406,698 251,196 - - 131,578 78,419 Total # For retired Directors the amounts are reported for the period they were a Director. 7,973,828 867,891 (2,000,000) (500,000) - - - - (2,500,000) - - - - - - - 994,933 607,128 750,000 2,000,000 911,239 1,078,419 6,341,719 994,933 607,128 750,000 2,000,000 911,239 1,000,000 6,341,719 994,933 607,128 750,000 2,000,000 911,239 1,000,000 6,263,300 - - - - - 78,419 78,419 Performance Rights held by Key Management Personnel Balance 1 Jan 2020 Granted as remuneration Number exercised Net change other Balance 31 Dec 2020 Total Vested Unvested At 31 December 2020 1,072,664 661,017 - - - - Directors Richard Hyde Lyndon Hopkins Rod Leonard Nigel Spicer Stewart Findlay Libby Mounsey Simon Storm# Mark Connelly# Executives Padraig O'Donoghue Matthew Wilcox Total * Performance Rights held by Ms Mounsey prior to her appointment as a Director. ^ Performance Rights that lapsed during the year. # For retired Directors the amounts are reported for the period they were a director of the Company. 2,433,013 1,610,047 68,911 68,911 28,586 28,586 22,139 22,139 233,051 - 2,148,393 1,210,524 1,489,865 6,982,721 77,855 103,806 - - - - - - - - - - - (11,033)^ (7,092)^ - - - 23,923* - - (8,668)^ (6,027)^ (8,897) 3,494,644 2,263,972 68,911 68,911 28,586 52,509 99,994 125,945 1,434,907 1,562,257 9,122,217 3,494,644 2,263,972 68,911 68,911 28,586 52,509 99,994 125,945 1,434,907 1,562,257 9,122,217 1,072,664 661,017 - - - - 99,994 125,945 233,051 78,419 2,271,090 2,421,980 1,602,955 68,911 68,911 28,586 52,509 - - 1,201,856 1,405,419 6,851,127 West African Resources Limited|32 Total value $19,908 $336,842 $39,672 $396,422 Total value $408,462 Other A = in lieu of STI cash incentive $18,508 Other B = in lieu of 30% of Directors fees $743,539 $552,631 $121,972 $161,936 $69,401 $58,315 $678,750 Other C = Retention and Share-price growth Performance Rights $172,500 $1,275,000 $287,500 $4,548,514 Options granted during the year as remuneration to KMP Grant date 20-Jan-20 29-May-20 02-Jul-20 Total Type LTI LTI LTI Number granted 131,578 Value each $0.151 657,894 78,419 867,891 $0.512 $0.506 Performance Rights granted during the year as remuneration to KMP Grant date 09-Jan-20 29-May-20 29-May-20 29-May-20 Type Other A Other B STI LTI 29-May-20 Other B 02-Jul-20 02-Jul-20 17-Dec-20 08-Dec-20 08-Dec-20 17-Dec-20 17-Dec-20 Total STI LTI Other B Other C Other C Other C Other C Number granted 938,992 Value each $0.435 44,278 885,166 657,894 137,822 182,978 78,419 57,172 750,000 750,000 1,250,000 1,250,000 6,982,721 $0.418 $0.840 $0.840 $0.885 $0.885 $0.885 $1.020 $0.905 $0.230 $1.020 $0.230 Options and Performance Rights exercised during the year by KMP Exercise date 16-Oct-20 Number 500,000 09-Nov-20 2,500,000 Total 2,500,000 Value each on exercise date $1.101 $1.040 Options and Performance Rights forfeited / lapsed during the year by KMP Lapse date 31-Dec-20 Total Number 32,820 32,820 Financial year in which options were granted 2020 Share holdings of Key Management Personnel Balance 1 Jan 2020 Issued as remuneration Issued on exercise of options Net change other Balance 31 Dec 2020 Directors Richard Hyde Lyndon Hopkins Nigel Spicer Rod Leonard Stewart Findlay Libby Mounsey Simon Storm Mark Connelly Executives 18,280,769 3,032,250 - - - - 2,590,769 60,000 Padraig O'Donoghue Matthew Wilcox Total 112,995 981,395 25,058,178 33|West African Resources Limited - - - - - - - - - - - 2,000,000 500,000 - - - - 849,994 2,125,945 (2,000,000) - - - - 16,000 (1,450,000) (2,185,945) - - - (400,000) 18,280,769 3,532,250 - - - 16,000 1,990,763 - 112,995 581,395 5,475,939 (5,619,945) 24,514,172 8 LOAN TO KMP A loan was provided to Richard Hyde in a prior year to exercise 2,000,000 options at 14.5 cents. The loan carried interest at 5.5% per annum with a maturity date of 30 June 2021. Mr Hyde fully repaid the loan during the year and the balance outstanding at year end was nil (2019: $319,673). End of Audited Remuneration Report. AUDITOR INDEPENDENCE Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the Directors of the Company with an Independence Declaration in relation to the audit of the financial report. This written Auditor’s Independence Declaration is set out on page 76 and forms part of this Directors’ Report. Signed in accordance with a resolution of the Directors. RICHARD HYDE Executive Chairman & CEO Perth, 26 March 2021 West African Resources Limited|34 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020 Revenue from continuing operations Cost of sales Exploration and evaluation expenses Corporate and technical services Share-based payments Other expenses Finance expenses Forex realised loss Forex unrealised gain Profit (Loss) before tax Income tax expense Profit (Loss) after tax OTHER COMPREHENSIVE INCOME: Items that may be reclassified subsequently to profit or loss: Foreign currency translation differences for foreign operations Other comprehensive loss, net of income tax Total comprehensive profit (loss) for the year Profit (loss) attributable to: Owners of the parent Non-controlling interest Total comprehensive profit (loss) attributable to: Owners of the parent Non-controlling interest Basic profit (loss) per share (cents per share) Diluted profit (loss) per share (cents per share) Note 3 4(a) 4(b) 5 24 24 6 6 2020 $'000 311,167 (145,148) (2,517) (5,079) (2,343) (2,769) (26,139) (806) 15,002 141,368 (42,468) 98,900 (5,553) (5,553) 93,347 89,362 9,538 98,900 83,809 9,538 93,347 11.3 11.2 2019 $'000 1,239 (179) (2,236) (3,994) (533) - (5) (986) 2,362 (4,334) - (4,334) (1,213) (1,213) (5,547) (4,275) (59) (4,334) (5,488) (59) (5,547) (0.5) (0.5) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. West African Resources Limited|35 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020 Note 7 8 9 10 11 13 14 15 16 15 16 17 18 19 20 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Financial assets Total current assets NON-CURRENT ASSETS Property, plant and equipment Right-of-use assets Exploration and evaluation assets Total non-current assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Deferred revenue Loans and borrowings Lease liabilities Current tax payable Total current liabilities NON-CURRENT LIABILITIES Loans and borrowings Lease liabilities Provisions Deferred tax liabilities Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses Equity attributable to owners of the parent Non-controlling interest TOTAL EQUITY 2020 $'000 95,027 22,635 51,950 39 169,651 329,587 16,220 15,255 361,062 530,713 40,479 23,957 132,664 4,581 20,819 222,500 93,669 11,225 9,406 21,648 135,948 358,448 172,265 165,263 3,851 (3,885) 165,229 7,036 172,265 2019 $'000 83,584 1,501 - 38 85,123 242,701 8,135 - 250,836 335,959 13,890 - 22 1,866 - 15,778 235,063 6,609 4,278 - 245,950 261,728 74,231 162,919 7,373 (93,940) 76,352 (2,121) 74,231 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. West African Resources Limited|36 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 Balance at 1 January 2019 Loss after tax Other comprehensive income for the period Total comprehensive profit (loss) for the period Shares issued during the year net of transaction costs Transfer to non-controlling interest Share-based payments Balance at 31 December 2019 Balance at 1 January 2020 Profit after tax Other comprehensive profit (loss) for the period Total comprehensive profit (loss) for the period Shares issued during the period net of transaction costs Transfer to non-controlling interest Share-based payments Reclassification of expired options Balance at 31 December 2020 Issued capital $'000 Accumulated losses $'000 Foreign currency translation reserve $'000 Share-based payments reserve $'000 Non-controlling interest $'000 161,947 - - - 972 - - 162,919 162,919 - - - 2,344 - - - 165,263 (89,640) (4,275) - (4,275) - (26) - (93,940) (93,940) 89,362 - 89,362 - 381 - 312 (3,885) 670 - (1,213) (1,213) - - - (543) (543) - (5,553) (5,553) - - - - (6,096) 6,874 - - - - - 1,043 7,916 7,916 - - - - - 2,343 (312) 9,947 (2,088) (59) - (59) - 26 - (2,121) (2,121) 9,538 - 9,538 - (381) - - 7,036 Total $'000 77,763 (4.334) (1,213) (5,547) 972 - 1,042 74,231 74,231 98,900 (5,553) 93,347 2,344 - 2,343 - 172,265 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. West African Resources Limited|37 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020 Note 21(a) OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Interest paid Other income Net cash inflow (outflow) from operating activities INVESTING ACTIVITIES Payments for property, plant and equipment Development expenditure Capitalised exploration and evaluation expenditure Capitalised interest paid during construction Repayment of loan by related party Net cash outflow from investing activities FINANCING ACTIVITIES Proceeds from issue of shares Proceeds from exercise of share options Proceeds from borrowings Repayment of borrowings Payments for share issue costs Payments for lease liabilities Interest paid on borrowings Financing costs Transaction costs related to loans and borrowings Net cash inflow (outflow) from financing activities Net increase in cash held Cash at the beginning of the financial period Effect of exchange rate changes on the balance of cash held in foreign currencies Cash at the end of the financial period 7 2020 $'000 334,271 (186,702) 681 (576) 247 147,921 (93,052) - (16,404) (7,738) 290 (116,904) - 2,369 37,832 (35,463) (22) (2,949) (15,020) (7,369) (489) (21,111) 9,906 83,584 1,537 95,027 2019 $'000 - (7,850) 1,266 (5) 2 (6,587) (54) (200,027) - (8,887) - (208,968) 219 770 251,799 (17) (1,130) - - (19,077) 232,564 17,009 66,355 220 83,584 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. West African Resources Limited|38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020 1 BASIS OF PREPARATION A. BASIS OF ACCOUNTING These financial statements are presented in Australian dollars and are general purpose financial statements which have been prepared in accordance with applicable accounting standards, the Corporations Act 2001 and mandatory professional reporting requirements in Australia (including the Australian equivalents of International Financial Reporting Standards). They have also been prepared on the basis of historical cost and do not take into account changing money values. The accounting policies are consistent with those of the previous financial period, unless otherwise stated. Information for West African Resources Limited as an individual parent entity is provided in Note 31. B. ROUNDING OF AMOUNTS The Company is of a kind referred to in Rounding Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Rounding Instrument to the nearest thousand dollars ($000’s), unless otherwise stated. C. PRINCIPLES OF CONSOLIDATION The consolidated financial statements comprise the financial statements of the Group. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which West African Resources Limited has control. D. CHANGE IN PRESENTATION OF COMPARATIVES New expense classification components have been introduced into the Consolidated Statement of Profit and Loss and Other Comprehensive Income to improve understanding of the profit and loss results of the Sanbrado mining operation that commenced commercial production in the reporting period. Accordingly, certain expenses in the comparative period have been reclassified from the presentation component used in the 31 December 2019 financial statements as follows: Prior to change in presentation New classification component 31 December 2019 $'000 Personnel costs Consultants Contractors Occupancy costs Legal costs Travel and accommodation Listed entity costs Overheads Interest expense - lease Depreciation expense 2,918 Cost of sales 628 Cost of sales 16 Cost of sales 71 Cost of sales 22 Cost of sales 318 Corporate and technical services 194 Corporate and technical services 370 Corporate and technical services 5 Finance expenses 184 Cost of sales Also, prior to the change in presentation $1,452,000 of ‘exploration and evaluation expenditure’ was shown as a separate line in the Consolidated Statement of Cash Flows. These exploration and evaluation expenditures are now included in the line item for ‘payments to suppliers and employees’ in the comparative period of the Consolidated Statement of Cash Flows. West African Resources Limited|39 1 BASIS OF PREPARATION (CONTINUED) E. ADOPTION OF NEW AND REVISED STANDARDS The Directors have reviewed all of the new and revised Standards and Interpretations on issue not yet adopted by the Group for the period ended 31 December 2020. The Group has adopted all the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standard’s Board that are mandatory to the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. F. SIGNIFICANT ACCOUNTING JUDGEMENTS AND KEY ESTIMATES The preparation of this financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. In preparing this financial report, the following key judgements, estimates and assumptions were made by management in applying the Group’s accounting policies: Date of commencement of commercial production Setting the pre-determined levels of operating capacity intended by management for deciding when development of the Sanbrado gold project was completed and production started. This date is known as the ‘date of commencement of commercial production’ and is used for establishing when project costs of an operating nature are no longer capitalised to mines under construction and when depreciation and amortisation of the associated assets commences. Accounting for leases • Assessing contracts to determine whether they contain a lease and if so, whether they also contain non-lease components. • Estimating the useful lives and depreciation rates of right-of-use assets. • Setting the discount rate of the lease contracts, which is used in the calculation of lease liabilities. Exploration and evaluation costs On a case-by-case basis, assessing whether the acquisition costs of particular mineral properties will be expensed or whether it is appropriate to capitalised them as exploration and evaluation (E&E) assets. Valuation of rehabilitation provision • Estimating the future cash flows to settle mine restoration obligations. • Setting the discount rate used in the calculation of the rehabilitation provision. Property, plant and equipment • Setting the useful lives and depreciation rates for plant and equipment. • Assessing assets for impairment of their carrying value. Group consolidation Setting the functional currency used for each entity in the Group. Income tax • • Estimating future tax outcomes. Interpreting tax legislation in a number of countries. Classification of borrowings Estimating future cash flows which impact on the classification of the syndicated debt facility as current versus non-current borrowings. Share-based payments • • Estimating the fair value of the share-based payments at the date at which they are granted. Estimating number of share-based payment awards to employees that will ultimately vest at each reporting date. Value added tax receivable Estimating the amount recoverable and timing of recovery of VAT receivable from the Burkina Faso government. 40|West African Resources Ltd 1 BASIS OF PREPARATION (CONTINUED) G. REVENUE The Group primarily generates revenue from the sale of gold bullion. This sales revenue is recognised when ownership of the metal is transferred to the buyer. This typically occurs when physical bullion, from a contracted sale, is transferred from the Group’s metal account to the metal account of the buyer. Where the Group receives provisional payments from buyers in advance of transfer of ownership, the Group classifies the provisional payment as a deferred revenue liability until ownership is transferred and the associated revenue is recognised. H. INCOME TAXES The income tax expense or benefit for the period is based on the profit or loss for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantially enacted as at balance date. Deferred tax is provided on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts 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 taxation profit or loss. Deferred income tax assets are recognised to the extent that it is probable that the future tax profits will be available against which deductible temporary differences will be utilised. The amount of the benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in the income taxation legislation and the anticipation that the economic unit will derive sufficient future assessable income to enable the benefits to be realised and comply with the conditions of deductibility imposed by law. I. OTHER TAXES Revenues, expenses and assets are recognised net of the amount of value added taxes (“VAT”) except: • when the VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of VAT included. • Australian goods and services tax (“GST”) is a type of VAT. The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the VAT component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of VAT recoverable from, or payable to, the taxation authority. J. CASH AND CASH EQUIVALENTS Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above. K. INVENTORIES Ore stockpiles, gold in circuit and finished goods (being gold doré and gold bullion) inventories are valued at the lower of weighted average cost and net realisable value. Costs include direct production costs and an appropriate allocation of attributable overheads. Depreciation and amortisation attributable to production of the inventory are also included in the cost of inventory. Inventories of consumable supplies and spare parts are valued at the lower of weighted average cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less estimated cost of completion, and the estimated costs necessary to make the sale. West African Resources Limited|41 1 BASIS OF PREPARATION (CONTINUED) L. PROPERTY, PLANT AND EQUIPMENT Each class of property, plant and equipment (“PP&E”) is carried at cost or fair value, less where applicable, any accumulated depreciation and impairment losses. The cost of an item of PP&E consists of the purchase price, applicable borrowing costs, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use, and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. The carrying amount of the PP&E is reviewed at each balance sheet date to assess whether there is any indication that the assets may be impaired. If any such indication exists, then the recoverable amount of the assets is estimated. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than the estimated recoverable amount. Gains and losses on disposal of PP&E are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of profit or loss and other comprehensive income. Mines under construction Expenditure on the construction, installation, and completion of infrastructure facilities for mining properties is capitalised to mines under construction. The expenditure includes direct costs of construction, drilling costs and removal of overburden to gain access to the ore, borrowing costs capitalised during construction and an appropriate allocation of attributable overheads. The capitalised amount is net of proceeds from the sale of ore extracted during the construction phase to the extent that it is considered integral to the development of the mine. Any costs incurred in testing the assets to determine if they are functioning as intended, are capitalised, net of any proceeds received from selling any product produced while testing. Where these proceeds exceed the cost of testing, any excess is recognised in the statement of profit or loss and other comprehensive income. After reaching pre-determined levels of operating capacity intended by management, known as ‘commencement of commercial production’, the assets included in mines under construction are transferred out of mines under construction to their appropriate PP&E category and depreciation and amortisation commence. Mine development assets Mine development represents expenditure incurred in relation to overburden removal based on underlying mining activities and related mining data and construction costs and underground development incurred by, or on behalf of, the Group previously accumulated and carried forward in relation to mineral properties in which mining has now commenced. Such expenditure comprises direct costs and an allocation of directly related overhead expenditure. All expenditure incurred prior to the commencement of production from each development property is carried forward to the extent to which recoupment out of future revenue from the sale of production, or from the sale of the property, is reasonably assured. When further development expenditure is incurred in respect of a mine property after the commencement of commercial production, such expenditure is carried forward as part of the cost of the mine property only when future economic benefits are reasonably assured, otherwise the expenditure is classified as part of the cost of production and expensed as incurred. Such capitalised development expenditure is added to the total carrying value of the mine development being amortised. Mine development costs (as transferred from exploration and evaluation and/or mines under construction) are amortised on a units- of-production basis over the life of mine to which they relate. In applying the units of production method, amortisation is calculated using the expected total contained ounces as determined by the life of mine plan specific to that mine property. For development expenditure undertaken during production, the amortisation rate is based on the ratio of total development expenditure (incurred and anticipated) over the expected total contained ounces as estimated by the relevant life of mine plan to achieve a consistent amortisation rate per ounce. The rate per ounce is typically updated annually as the life of mine plans are revised. 42|West African Resources Ltd 1 BASIS OF PREPARATION (CONTINUED) L. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Depreciation Depreciation of non-mine specific PP&E is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives determined as follows: Land and buildings Office equipment Plant and equipment Light vehicles 3 to 10 years 3 to 10 years 3 to 10 years 3 years The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each balance sheet date. M. EXPLORATION AND EVALUATION Mineral exploration and evaluation (“E&E”) costs are expensed as incurred. Acquisition costs related to mineral properties will normally be expensed but will be assessed on a case by case basis and if appropriate may be capitalised. These acquisition costs are only carried forward as an E&E asset to the extent that they are expected to be recouped through the successful development or sale of the mineral property. Accumulated acquisition costs in relation to abandoned mineral properties are written off in full against profit or loss in the year in which the decision to abandon is made. Where a decision has been made to proceed with development in respect of a particular area of interest, the associated E&E assets are transferred to PP&E and all future E&E costs for the area of interest are classified as PP&E within either mines under construction or mine development assets, as appropriate. N. RECOVERABLE AMOUNT OF NON-CURRENT ASSETS The carrying amounts of non-current assets are reviewed annually to ensure they are not in excess of the recoverable amounts from those assets. The recoverable amount is assessed on the basis of the expected net cash flows, which will be received from the assets employed and subsequent disposal. The expected net cash flows have been or will be discounted to present values in determining recoverable amounts. O. TRADE AND OTHER ACCOUNTS PAYABLE Trade and other accounts payable represent the principal amounts outstanding at balance date, plus, where applicable, any accrued interest. P. BORROWINGS Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. West African Resources Limited|43 1 BASIS OF PREPARATION (CONTINUED) Q. LEASE LIABILITIES 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 consolidated entity's incremental borrowing rate. Lease payments comprise of 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. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. Right-of-use assets 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 depreciation is 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 expensed to profit or loss as incurred. R. ISSUED CAPITAL Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration. S. EMPLOYEE BENEFITS Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within 12 months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used. 44|West African Resources Ltd T. SHARE-BASED PAYMENTS The Group provides benefits to employees (including Directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (“equity-settled transactions”). The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by a valuation using Black-Scholes or Binomial option pricing models. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“vesting date”). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the estimated number of awards that will ultimately vest. This estimate is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award. U. FOREIGN CURRENCY TRANSLATION Both the functional and presentation currency of West African Resources Limited and its Australian subsidiary are Australian dollars. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance date. All exchange differences in the consolidated financial report are taken to profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss. Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The functional currency of the foreign subsidiaries, Wura Resources Pty Ltd SARL, West African Resources Development SARL, Tanlouka SARL and Société des Mines de Sanbrado SARL, is the Communaute Financière Africaine Franc (CFA). The functional currency of the foreign subsidiary, Channel Resources Ltd is the Canadian Dollar (CAD). The functional currency of the foreign subsidiaries, Channel Resources (Cayman I) Ltd and Channel Resources (Cayman II) Ltd is the United States Dollar (USD). As at the reporting date the assets and liabilities of the subsidiaries are translated into the presentation currency of West African Resources Limited at the rate of exchange ruling at the balance date and their income and expenses are translated at the average exchange rate for the year. 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. West African Resources Limited|45 1 BASIS OF PREPARATION (CONTINUED) V. FINANCIAL ASSETS Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, at fair value through other comprehensive income (OCI), or fair value through profit or loss (FVTPL). The classification of financial assets at initial recognition that are debt instruments depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group 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 financial component or for which the Group has applied the practical expedient for contracts that have a maturity of one year or less, are measured at the transaction price determined under AASB 15. In order for a financial asset to be classified and measured at amortised cost of 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. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset. Subsequent measurement For the purposes of subsequent measurement, financial assets are classified in four categories: i. Financial assets at amortised cost (debt instruments) ii. Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments) iii. Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) iv. Financial assets at fair value through profit or loss Financial assets at amortised cost (debt instruments) This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met: • The financial asset is held within a business model with the objectives to hold financial assets in order 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. Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Interest received is recognised as part of finance income in the statement of profit or loss and other comprehensive income. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. Financial assets at fair value through profit or loss Financial assets that do not meet the criteria for amortised cost are measured at fair value through profit or loss. 46|West African Resources Ltd 1 BASIS OF PREPARATION (CONTINUED) W. PARENT ENTITY FINANCIAL INFORMATION The financial information for the parent entity, West African Resources Limited, disclosed in Note 31 has been prepared on the same basis as the Group. 2 SEGMENT REPORTING A. DESCRIPTION OF SEGMENTS The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board and the executive management team in assessing performance and in determining the allocation of resources. As there were no operating mines in previous reporting periods the Group considered its business operations to be one reporting segment in mineral exploration and development. During the current reporting period, the Group changed the internal reporting basis of its operations to match changes in the operational structure of the business, with the resultant operating segments being as follows: (a) Mining Operations: in the current period comprise the Sanbrado Gold Project operations located in Burkina Faso. (b) Exploration: in the current period comprises exploration and evaluation activities in locations other than Sanbrado. B. SEGMENT INFORMATION 31 December 2020 Total segment revenue Total segment expenses Total segment results Segment assets at 31 December 2020 Segment liabilities at 31 December 2020 Mining operations $'000 310,667 145,148 165,519 471,222 137,036 Exploration $'000 129 2,516 (2,388) 17,339 232 Other $'000 371 5,079 (4,708) 42,152 221,180 Segment result is reconciled to the profit before income tax as follows: Total segment results Share-based payments Finance expenses Other expenses Net foreign exchange losses Profit before income tax All metal sales in the year were made to MKS (Switzerland) SA. Total $'000 311,167 152,743 158,423 530,713 358,448 2020 $’000 158,423 (2,343) (26,139) (2,769) 14,196 141,368 West African Resources Limited|47 3 REVENUE Metal sales Interest received Other income 4 EXPENSES (a) Cost of sales Production expenses Royalties and other selling costs Depreciation and amortisation Changes in inventory (cash) Changes in inventory (non-cash) (b) Other expenses Accretion of rehabilitation provision Depreciation and amortisation Withholding tax expense 5 INCOME TAX A. INCOME TAX RECOGNISED IN PROFIT OR LOSS Current tax Deferred tax (Under) Over provided in prior years 2020 $'000 310,315 605 247 311,167 2020 $'000 120,888 21,371 23,985 (15,350) (5,746) 145,148 125 76 2,568 2,769 2020 $'000 20,819 21,649 - 42,468 2019 $'000 - 1,237 2 1,239 2019 $'000 - - - - - - - - - - 2019 $'000 - - - - 48|West African Resources Ltd 5 INCOME TAX (CONTINUED) B. NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE Accounting profit (loss) before tax Income tax benefit (expense) at 30% (31 December 2019: 27.5%) Add (Deduct): Non-deductible expenses Effect of differences in foreign tax rates Effect of differences in foreign exchange Deferred tax movement re borrowing costs Other permanent adjustment Movement in unrecognised deferred tax assets Temporary differences not recognised Tax losses utilised not previously brought to account Income tax expense (benefit) C. UNRECOGNISED DEFERRED TAX BALANCES (a) Unrecognised deferred tax assets Annual leave provision Accrued expenses Employee provisions Long service leave provision Borrowings Leases Share issue costs Tax losses Section 40-880 undeducted losses (b) Unrecognised deferred tax liabilities Prepayments Accrued interest Right-of-use assets Borrowing costs Net unrecognised deferred tax asset 2020 $’000 141,368 42,410 4,302 (3,657) (904) 2,361 (3,769) 1,725 - - 42,468 2020 $’000 75 46 59 13 16,961 93 - 14,496 82 (2) - (90) (1,032) 30,701 2019 $’000 (4,334) 1,192 (4) - (601) - - - (1,456) 601 - 2019 $’000 - 1,503 1,841 - - - 1,191 23,946 - (100) (13) - - 28,368 West African Resources Limited|49 6 EARNINGS PER SHARE Basic profit (loss) per share (cents per share) Diluted profit (loss) per share (cents per share) The profit (loss) and weighted average number of ordinary shares used in the calculation of basic earnings per share is as follows: 2020 $ 11.3 11.2 2019 $ (0.5) (0.5) Profit (Loss) for the year 98,900,509 (4,333,608) Weighted average number of shares outstanding during the period used in calculations of basic profit (loss) per share Weighted average number of diluted shares outstanding during the period used in calculations of diluted profit (loss) per share 873,899,037 868,631,331 880,451,906 876,071,746 7 CASH AND CASH EQUIVALENTS Cash at bank Cash in hand 2020 $'000 94,944 83 95,027 2019 $'000 83,567 17 83,584 50|West African Resources Ltd 8 TRADE AND OTHER RECEIVABLES Current Interest receivable Prepayments Other receivables Loan to Director Allowance for impairment 2020 $'000 - 2,945 19,690 - - 22,635 2019 $'000 45 362 2,858 320 (2,084) 1,501 Other receivables include value added tax receivable from the Burkina Faso government of $19,275,000 (2019: $2,084,000). Movement in the allowance for doubtful debts Balance at the beginning of the year Impairment losses and reversals recognised on receivables Balance at the end of the year Ageing of past due but not impaired 30 - 60 days 60 - 90 days 90 - 120 days Total 9 INVENTORIES Ore stockpiles – cost Finished goods – cost Gold in circuit – cost Consumable supplies and spares – cost 2020 $'000 (2,084) 2,084 - 19,690 - - 19,690 2020 $'000 24,895 14,131 2,278 10,646 51,950 2019 $'000 (2,166) 82 (2,084) 819 - 320 1,139 2019 $'000 - - - - - West African Resources Limited|51 10 PROPERTY, PLANT AND EQUIPMENT Cost and accumulated depreciation 31 December 2019 Gross carrying amount at cost Accumulated depreciation Net carrying amount 31 December 2020 Gross carrying amount at cost Accumulated depreciation Net carrying amount Carrying value 31 December 2019 At the beginning of the period Additions Depreciation expensed for the period Depreciation capitalised for the period Change in rehabilitation provision Effects of movement in foreign exchange Net of accumulated depreciation 31 December 2020 At the beginning of the period Transfers from mine under construction Transfers to inventory Additions Depreciation expensed for the period Depreciation capitalised for the period Change in rehabilitation provision Effects of movement in foreign exchange Net of accumulated depreciation 52|West African Resources Ltd Mine development assets $’000 Mines under construction $’000 Capital in progress $’000 Land and buildings $’000 Office equipment $’000 Plant and equipment $’000 Light vehicles $’000 - - - 242,477 - 242,477 - - - 100,427 (6,601) 93,826 - - - 11,527 - 11,527 - - - - - - - - 69,783 - 25,582 (6,885) - 5,062 284 93,826 18,830 223,675 - - 2,098 (2,126) 242,477 242,477 (308,014) (28,669) 100,719 - 41 - (6,554) - - - - - - - - - - 11,527 - - - - 188 (137) 51 31,137 (2,074) 29,063 102 - (4) (47) - (1) 51 51 30,951 - - (2,005) (16) - 82 302 (246) 56 298 (273) 25 50 40 (12) (22) - - 56 56 - - - (24) (8) - 1 25 1,665 (1,580) 85 205,828 (13,183) 192,645 188 - (51) (51) - (2) 85 85 204,178 - - (12,100) (17) - 499 - 11,527 29,063 192,645 2,501 4,021 (1,520) 2,501 353,238 (23,651) 329,587 Total $’000 245,560 (2,859) 242,701 19,218 223,723 (89) (120) 2,098 (2,129) 242,701 242,701 - (28,669) 137,828 (21,674) - 5,062 (5,661) 329,587 928 (895) 32 48 8 (23) - - - 32 32 3,102 - - (660) - - 27 11 RIGHT-OF-USE ASSETS Balance at 1 January 2019 Additions Depreciation charge for the year Effects of movement in foreign exchange Balance at 31 December 2019 Balance at 1 January 2020 Additions Depreciation charge for the year Effects of movement in foreign exchange Balance at 31 December 2020 12 MINE PROPERTIES Mines under construction Balance at 1 January Additions Change in rehabilitation provision Transfers to property, plant and equipment Transfers to other assets Depreciation capitalised for the year Effects of movement in foreign exchange Balance at 31 December 13 EXPLORATION AND EVALUATION ASSETS Balance at 1 January Additions Balance at 31 December Property $'000 Equipment $'000 - 127 (95) - 32 32 359 (92) - 299 - 9,479 (1,391) 15 8,103 8,103 10,838 (3,073) 53 15,921 2020 $'000 242,477 100,719 - (308,014) (28,669) 41 (6,554) - 2020 $'000 - 15,255 15,255 Total $'000 - 9,606 (1,486) 15 8,135 8,135 11,197 (3,165) 53 16,220 2019 $'000 18,830 222,878 2,098 - - - (1,329) 242,477 2019 $'000 - - - During the year, the Group recognised $15,255,000 of exploration and evaluation asset additions relating to acquisition costs for the Toega gold deposit (2019: nil). The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phase is dependent on the successful development and commercial exploitation or sale of the respective areas. West African Resources Limited|53 14 TRADE AND OTHER PAYABLES Current Trade payables Accruals Other payables 15 LOANS AND BORROWINGS Current Non-current A. SYNDICATED DEBT FACILITY Current Non-current 2020 $'000 24,418 15,366 695 40,479 2020 $'000 132,664 93,669 226,333 2020 $'000 132,455 81,488 213,943 2019 $'000 8,091 5,465 334 13,890 2019 $'000 22 235,063 235,085 2019 $'000 - 230,325 230,325 Syndicated debt facility denominated in USD arranged by Taurus Mining Finance for the development of the Sanbrado gold project, which is secured against the assets of the Group. Interest is charged at 7.75% per annum and scheduled monthly repayments commence on 31 March 2021. As at 31 December 2020 the balance due was US$175 million and no additional drawings are available (2019: balance due was $175 million and US$25 million was available to be drawn). The Group is also obligated to pay a product fee under the facility (refer to note 23C(i)). Estimates of future cash flows used for classification of the debt facility between current and non-current may differ from the actual outcomes in the next financial year. B. SUPPLIER LOAN FACILITIES Current Non-current 2020 $'000 209 12,181 12,390 2019 $'000 22 4,738 4,760 In 2019 a loan facility was entered into with Byrnecut Burkina Faso SARL as a component of the Sanbrado underground mining services contract. The facility has a limit of US$10 million and interest is charged at a rate of 9.75% per annum. Interest is payable half-yearly and the principal is due 6 months before termination of the 5-year services contract. The balance outstanding under the facility at 31 December 2020 was US$9.6 million inclusive of accrued interest. 54|West African Resources Ltd 16 LEASES Current Non-current Amounts recognised in profit or loss Interest on lease liabilities Expenses relating to short-term leases Amounts recognised in the statement of cash flows Total cash outflow for leases 17 PROVISIONS Non-current Long service leave provision Rehabilitation provision Reconciliation of movements in rehabilitation provision: Balance at the start of the period Increase in rehabilitation provision during the year Effects of movement in foreign exchange Balance at the end of the period 2020 $'000 4,581 11,225 15,806 576 41 617 2,949 2020 $'000 44 9,362 9,406 4,218 5,182 (38) 9,362 2019 $'000 1,866 6,609 8,475 5 70 75 784 2019 $'000 60 4,218 4,278 2,121 2,097 - 4,218 The Group’s rehabilitation provision is the best estimate of the present value of the future cash flows required to settle the Sanbrado mine site restoration obligations at the reporting date, based on current legal requirements and technology. The amount provided each period is also capitalised as an asset under mine development assets in property, plant and equipment. 18 DEFERRED TAX LIABILITIES Deferred tax liabilities Trade and other receivables Property, plant and equipment Trade and other payables Borrowings Borrowing costs Net deferred tax liabilities 2020 $'000 7 6,911 175 7,070 7,485 21,648 2019 $'000 - - - - West African Resources Limited|55 2020 $'000 165,263 No. 870,478,852 - 8,203,794 878,682,646 $'000 162,919 - 2,369 (25) 165,263 2020 $'000 3,851 (543) (5,553) (6,096) 7,916 2,251 92 (312) 9,947 2019 $'000 162,919 No. 863,524,727 876,000 6,078,125 870,478,852 $'000 161,947 219 770 (17) 162,919 2019 $'000 7,373 670 (1,213) (543) 6,874 974 68 - 7,916 19 ISSUED CAPITAL Fully paid ordinary shares (a) Number of shares At start of period Issue of shares 30 January 2019 Issue of shares on exercise of options Balance at end of period (b) Value of shares At start of period Issue of shares 30 January 2019 Issue of shares on exercise of options Share issue costs Balance at end of period 20 RESERVES Reserves Reserves comprise the following: (a) Foreign currency translation reserve At start of period Currency translation differences Balance at end of period (b) Share-based payments reserve At start of period Options issued – share-based payment expense Options issued in lieu of directors fees Reclassification of expired options Balance at end of period 56|West African Resources Ltd 20 RESERVES (CONTINUED) Nature and purpose of reserves (a) Foreign currency translation reserve The foreign currency translation reserve is used to record the Group’s exchange differences arising from the translation of loans to foreign subsidiaries that are expected to be repaid in the long term and the translation of the financial statements of foreign subsidiaries. (b) Shared-based payments reserve The shared-based payments reserve is used to recognise the fair value of options issued by the Company to Directors, employees and other suppliers or consultants that are not exercised or expired. 21 CASH FLOW INFORMATION A. RECONCILIATION OF PROFIT (LOSS) AFTER INCOME TAX TO NET CASHFLOWS FROM OPERATING ACTIVITIES Profit (Loss) after income tax Adjustment for: Depreciation and amortisation Share-based payments Accretion of rehabilitation provision Financing costs Net foreign exchange (gain) loss Changes in assets and liabilities (Increase) Decrease in trade and other receivables (Increase) Decrease in inventories (Decrease) Increase in trade and other payables (Decrease) Increase in current tax payable (Decrease) Increase in deferred tax liabilities Net cash flows from operating activities 2020 $'000 98,900 24,061 2,343 125 25,563 (15,002) 135,990 (18,260) (26,461) 14,185 20,819 21,648 147,921 2019 $'000 (4,334) 184 1,043 - - (2,363) (5,470) 173 - (1,290) - - (6,587) West African Resources Limited|57 21 CASH FLOW INFORMATION (CONTINUED) B. RECONCILIATION OF LOANS AND BORROWINGS AND LEASES TO NET CASH FLOWS FROM FINANCING ACTIVITIES Balance at 1 January 2019 Net cash from (used in) financing activities Transfer of prior year capitalised borrowing costs Amortisation of borrowing costs Effects of movement in foreign exchange Other changes Supplier facility utilised Leases entered into during the year Balance at 31 December 2019 Balance at 1 January 2020 Net cash from (used in) financing activities Amortisation of borrowing costs Effects of movement in foreign exchange Supplier facility utilised Leases entered into during the year Balance at 31 December 2020 Loans and borrowings Lease liabilities $’000 - 232,722 (1,066) 1,208 (2,511) (28) 4,760 - 235,086 235,086 (13,140) 5,054 (8,626) 7,959 - 226,333 $’000 127 (1,130) - - - - - 9,478 8,475 8,475 (2,949) - (558) - 10,838 15,806 Total $’000 127 231,592 (1,066) 1,208 (2,511) (28) 4,760 9,478 243,561 243,561 (16,089) 5,054 (9,184) 7,959 10,838 242,139 22 DIVIDENDS No dividends have been paid or declared payable during the year (2019: nil). 58|West African Resources Ltd 23 COMMITMENTS AND OTHER CONTINGENCIES A. COMMITMENTS IN RELATION TO EXPLORATION AND MINING LEASE In order to maintain current rights of tenure to exploration tenements, the Group is required to outlay rental fees and to meet the minimum expenditure requirements. These discretionary costs are not provided for in the financial statements and will be payable as follows: Due within 1 year Due after 1 year but not more than 5 years Due after 5 years 2020 $'000 10,635 14,340 - 24,975 2019 $'000 424 33 - 457 B. COMMITMENTS IN RELATION TO OPERATIONS Commitments of the Group in relation to the operations of the Sanbrado Gold Project mine site will be payable as follows: Due within 1 year Due after 1 year but not more than 5 years Due after 5 years C. CONTINGENT LIABILITIES (i) Product fee 2020 $'000 5,528 - - 5,528 2019 $'000 21,626 - - 21,626 Under the syndicated debt facility the Group has a contractual commitment to pay a fee on the first 1,250,000 ounces of gold refined from the Sanbrado Gold project (the “Product Fee”). The Product Fee for each ounce of gold refined is calculated as the spread between the LBMA quoted am fix price on the date the refined gold is credited to the Group’s metals account and the lowest LBMA quoted gold price (am fix or pm fix) during the preceding 8 business day period. The Group has the option to buy back the Product Fee commitment at any time by paying cash consideration equal to the net present value (applying a 5% annual discount rate, and assuming the timing of gold production as set out in the mine production schedule) of the pre-agreed price per ounce for the remaining committed ounces. During the year the Group incurred US$4,324,519 (A$6,261,000) of Product Fees in relation to 118,093 ounces of refined gold (2019: nil) that are recorded under ‘finance expenses’ in the ‘statement of profit or loss and other comprehensive income’. This represents an average payment per ounce of US$36.62. The Group had 1,131,907 ounces remaining under the Product Fee commitment at 31 December 2020 (31 December 2019: 1,250,000). (ii) Other contingent liabilities There were no other material contingent liabilities at the end of the year (31 December 2019: nil). West African Resources Limited|59 24 INTEREST IN SUBSIDIARIES The consolidated financial statements include the financial statements of West African Resources Limited and the subsidiaries listed in the following table: Ownership interest Controlled entities Parent Entity: West African Resources Limited Subsidiaries of West African Resources Limited: WAF Finance Pty Ltd Wura Resources Pty Ltd SARL West African Resources Development SARL Channel Resources Ltd which owns Channel Resources (Cayman I) Ltd which owns Channel Resources (Cayman II) Ltd which owns Tanlouka SARL Société des Mines de Sanbrado SA 1 Country of incorporation Australia Australia Burkina Faso Burkina Faso Canada Cayman Islands Cayman Islands Burkina Faso Burkina Faso 2020 % 100 100 100 100 100 100 100 90 2019 % 100 100 100 100 100 100 100 90 1The remaining 10% of Société des Mines de Sanbrado SA is held by the government of Burkina Faso which is entitled to a free carried 10% interest in the project. Intercompany transactions between the parent entity and its subsidiaries are eliminated on consolidation. Amounts owed by (to) related parties Subsidiaries WAF Finance Pty Ltd Wura Resources Pty Ltd SARL Société des Mines de Sanbrado SA West African Resources Development SARL Tanlouka SARL Channel Resources (Cayman I) Ltd Channel Resources (Cayman II) Ltd Channel Resources Ltd Total Provision for impairment Consolidated 2020 $'000 2019 $'000 Parent Entity 2020 $'000 2019 $'000 - - - - - - - - - - - - - - - - - - - - - - 40,496 23,926 12,784 16,950 3,457 56 59 1 97,729 (56,230) 41,499 14,212 22,788 44,150 560 18,717 43 44 (8) 100,506 (54,806) 45,700 Further information with respect to related party transactions are included in Note 27. 60|West African Resources Ltd 24 INTEREST IN SUBSIDIARIES (CONTINUED) Summarised financial information for Société des Mines de Sanbrado SA before intragroup eliminations is set out below. STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Revenue Profit (Loss) for the year: Attributable to owners of the parent Attributable to non-controlling interest STATEMENT OF FINANCIAL POSITION Assets Current assets Non-current assets Liabilities Current liabilities Non-current liabilities Equity Attributable to owners of the parent Attributable to non-controlling interest STATEMENT OF CASH FLOWS Net cash from (used in) operating activities Net cash from (used in) investing activities Net cash from (used in) financing activities 2020 $'000 309,856 85,845 9,538 95,383 123,601 345,489 469,090 329,052 69,671 398,723 63,330 7,037 70,367 165,477 (92,532) (18,701) 54,244 2019 $'000 - (621) (59) (680) 1,860 214,887 216,747 225,354 12,600 237,954 (19,086) (2,121) (21,207) (1,436) (164,211) 165,571 (76) 25 SUBSEQUENT EVENTS AFTER THE BALANCE DATE There has not arisen in the interval between the end of the reporting period and the date of this report, any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years. West African Resources Limited|61 26 AUDITORS’ REMUNERATION The auditor of West African Resources Limited is HLB Mann Judd Audit or review of the financial statements All other services Amounts received or due and receivable by non HLB Mann Judd audit firms Audit or review of the Burkina Faso financial reports 2020 $'000 53 - 53 19 19 27 DIRECTORS AND EXECUTIVE DISCLOSURES A. DETAILS OF KEY MANAGEMENT PERSONNEL Non-Executive Directors Rod Leonard Nigel Spicer Stewart Findlay Libby Mounsey Mark Connelly Simon Storm Executive Directors Richard Hyde Lyndon Hopkins1 Other Executives (KMPs) Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director and Company Secretary Executive Chairman and CEO Executive Director and COO Padraig O’Donoghue Chief Financial Officer and Company Secretary Matthew Wilcox Chief Development Officer 1Date appointed a Director (employed since January 2017). 2Date appointed as Company Secretary was May 2020 (employed since June 2018). Appointed September 2019 September 2019 29 May 2020 29 May 2020 June 2015 November 2007 September 2006 September 2019 June 20182 September 2018 B. COMPENSATION OF KEY MANAGEMENT PERSONNEL Short-term employee benefits Post-employment benefits Share-based payments 2020 $'000 1,938 145 1,723 3,806 2019 $'000 46 - 46 18 18 Resigned - - - - 29 May 2020 29 May 2020 - - - - 2019 $'000 1,640 84 873 2,597 C. COMPENSATION BY CATEGORY OF KEY MANAGEMENT PERSONNEL FOR THE YEAR Consulting fees were paid to Directors, details of which are included in the Remuneration Report in the Directors’ Report. Salaries were paid to the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Chief Development Officer, details of which are included in the Remuneration Report in the Directors’ Report. 62|West African Resources Ltd 27 DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) D. LOANS TO KEY MANAGEMENT PERSONNEL A loan was provided to Richard Hyde in a prior year to exercise 2,000,000 options at 14.5 cents. The loan carried interest at 5.5% per annum with a maturity date of 30 June 2021. Mr Hyde fully repaid the loan during the year and the balance outstanding at year end was nil (2019: $319,673). E. OTHER TRANSACTIONS AND BALANCES WITH KEY MANAGEMENT PERSONNEL There were no other transactions and outstanding balances with key management personnel for the year ended 31 December 2020 that are not already included in the Remuneration Report in the Directors’ Report. 28 FINANCIAL INSTRUMENTS Financial assets Cash and cash equivalents (Note 7) Trade and other receivables (Note 8) Financial assets Financial liabilities Trade and other payables (Note 14) Loans and borrowings* (Note 15) Lease liabilities (Note 16) 2020 $'000 95,027 22,635 39 117,701 (40,479) (239,781) (15,807) (296,066) 2019 $'000 83,584 1,501 38 85,123 (13,890) (256,559) (8,475) (278,924) *Loans and borrowings amount as disclosed in Note 15 includes capitalised transaction costs of $13,448,000. 29 FINANCIAL RISK MANAGEMENT The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk, and price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. A. MARKET RISK (i) Interest rate risk The Group’s main interest rate risk arises from its cash balances. Cash held at variable rates expose the Group to cash flow interest rate risk while cash deposits at fixed rates expose the Group to fair value interest rate risk. During the year, the Group’s cash deposits at variable rates were denominated in Australian Dollars (“AUD”), United States Dollars (“USD”), Euros, and Communaute Financière Africaine Francs (“CFA”). West African Resources Limited|63 29 FINANCIAL RISK MANAGEMENT (CONTINUED) A. MARKET RISK (CONTINUED) (i) Interest rate risk (continued) The tables below analyse the Group's financial assets and financial liabilities into maturity groupings based on the remaining period at the reporting date to the contractual maturity date. Consolidated Fixed Interest Rate Maturing Weighted Average Effective Interest Rate Floating Interest Rate $’000 Within Year $’000 1 to 5 Years $’000 Over 5 Years $’000 Non- interest bearing $’000 Total $’000 1.7% 5.5% 2.7% 76,366 - - 76,366 - 320 38 358 - - - - - - - - - 21,315 1,866 23,181 - 235,244 6,609 241,853 0.7% 0.0% 1.0% 0.00% 7.62% 6.50% 63,464 - - 63,464 - - 39 39 - - - - - - - - - 133,672 - 108,253 4,581 11,225 138,253 119,478 - - - - - - - - - - - - - - - - 7,218 1,181 - 8,399 83,584 1,501 38 85,123 13,890 - - 13,890 256,559 8,475 13,890 278,924 31,563 22,635 - 95,027 22,635 39 54,198 117,701 40,479 - 40,479 241,925 - 15,806 40,479 298,210 31 December 2019 Financial assets Cash and cash equivalents Trade and other receivables Financial assets Total financial assets Financial liabilities Trade and other payables Loans and borrowings Lease liabilities Total financial liabilities 31 December 2020 Financial assets Cash and cash equivalents Trade and other receivables Financial assets Total financial assets Financial liabilities Trade and other payables Loans and borrowings Lease liabilities Total financial liabilities 64|West African Resources Ltd 29 FINANCIAL RISK MANAGEMENT (CONTINUED) A. MARKET RISK (CONTINUED) (ii) Interest rate sensitivity At 31 December 2020, if variable interest rates for the full year were -/+ 0.5% from the year-end rate with all other variables held constant, pre-tax profit for the year would have moved as per the table below. +0.5% -0.5% 2020 $'000 447 (447) 2019 $'000 374 (374) The sensitivity is calculated using the average cash position for the year ended 31 December 2020. The interest income in Note 4 of $605,024 (31 December 2019: $1,239,000) reflects cash balances in the year that ranged between $40,878,483 and $73,476,229 (31 December 2019: $30,480,000 and $83,584,000). (iii) Foreign currency risk The Group operates internationally and is exposed to foreign exchange risk primarily arising from costs denominated in CFA and USD, and loans and borrowings denominated in USD. The Group also has transactional currency exposures. Such exposure arises from purchases by an operating entity in currencies other than the functional currency. The Group does not have a policy to enter into forward contracts or other hedge derivatives. At 31 December, the Group had the following exposure to CFA, Euro, and USD foreign currencies expressed in AUD equivalents: Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities Trade and other payables Loans and borrowings Lease liabilities Tax liabilities 2020 $'000 82,172 21,456 103,628 72,362 236,848 15,491 41,590 366,291 2019 $'000 76,484 2,272 78,756 16,134 258,946 8,442 - 283,522 West African Resources Limited|65 29 FINANCIAL RISK MANAGEMENT (CONTINUED) A. MARKET RISK (CONTINUED) (iv) Exchange rate sensitivity A 10 per cent strengthening or weakening of the AUD against the following currencies at 31 December would have increased (decreased) net assets by the amounts shown in the below table. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for the year ended 31 December 2019. +10% 2020 $'000 19,019 (34,862) 1,958 2019 $'000 17,413 1,854 (651) -10% 2020 $'000 (23,245) 42,609 (2,394) 2019 $'000 (21,282) (2,266) 796 USD CFA EUR (v) Price risk The Group is exposed to commodity price risk on its future gold production. This risk is estimated by management using forecasts of the quantity and cost of future gold production. While the Group’s price risk could be partially managed using a range of different types of hedging instruments, the Group did not have any open hedge instruments at 31 December 2020 (2019: nil). B. CREDIT RISK Credit risk arises primarily from the Group’s cash and cash equivalents held with financial institutions. The banks the Group uses for cash deposits and transactions are limited to high credit quality financial institutions. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised at the beginning of this note. C. LIQUIDITY RISK Liquidity risk is the risk the Group will not be able to meet its financial obligations as they fall due. Liquidity risk management involves maintaining sufficient cash on hand or undrawn credit facilities to meet the operating requirements of the business. This is currently managed through cash and cash equivalents ($95,027,000 as at 31 December 2020) and prudent cash flow and financial commitment management. The tables below analyse the Group's financial assets and liabilities into maturity groupings based on the remaining period at the reporting date to the contractual maturity date. 66|West African Resources Ltd 29 FINANCIAL RISK MANAGEMENT (CONTINUED) Maturity analysis of financial assets and liabilities based on management's expectation 31 December 2019 Financial assets Cash and cash equivalents Trade and other receivables Financial assets Total financial assets Financial liabilities Trade and other payables Loan and borrowings Lease liabilities Total financial liabilities Net maturity 31 December 2020 Financial assets Cash and cash equivalents Trade and other receivables Financial assets Total financial assets Financial liabilities Trade and other payables Loans and borrowing Lease liabilities Total financial liabilities Net maturity <6 months $'000 6-12 months $'000 Consolidated 1-5 years $'000 >5 years $'000 Total $'000 83,584 1,501 38 85,123 (13,890) (8,058) (915) (22,863) 62,260 95,027 22,635 39 117,701 (40,479) (58,600) (2,524) (101,603) 16,098 - - - - - - - - - (13,257) (951) (14,208) (14,208) - (235,244) (6,609) (241,853) (241,853) - - - - - - - - - (89,151) (2,524) (91,675) (91,675) - (116,252) (12,101) (128,353) (128,353) - - - - - - - - - - - - - - - - - - 83,584 1,501 38 85,123 (13,890) (256,559) (8,475) (278,924) (193,801) 95,027 22,635 39 117,701 (40,479) (264,003) (17,149) (321,631) (203,930) West African Resources Limited|67 30 SHARE-BASED PAYMENTS A. RECOGNISED SHARE-BASED PAYMENTS The expenses recognised for services received during the year are shown in the table below: Share-based payments to Directors Share-based payments to employees Share-based payments to third party 2020 $'000 1,254 955 133 2,343 2019 $'000 708 330 5 1,043 The share-based payment plans are described below. There have been no cancellations or modifications to the plan during the year. B. TRANSACTIONS SETTLED USING SHARES No transactions were settled in the current year using shares. C. EMPLOYEE SHARE AND OPTION PLAN Under the Incentive Options and Performance Rights Plan (“Incentive Plan”), grants are made to senior executives and other staff members who have made an impact on the Group’s performance. Grants are delivered in the form of options or performance rights which vest over periods as determined by the Board of Directors. D. PERFORMANCE RIGHTS Performance rights are granted under the Incentive Plan for nil consideration and are subject to vesting conditions as determined by the Board of Directors. Any performance rights that do not vest by their expiry date will lapse. Upon vesting, these performance rights will be settled in ordinary fully paid shares of the Company. (a) Summary of performance rights granted under the Incentive Plan Outstanding at the beginning of the year Granted during the year Exercised during the year Lapsed/cancelled during the year Outstanding at the end of the year Exercisable at the end of the year *WAEP = weighted average exercise price 2020 Number 2020 WAEP* 2019 Number 2019 WAEP* 2,287,295 10,636,406 (303,794) (62,180) 12,557,727 2,027,779 - - - - - - 1,966,732a 320,563b - - 2,287,295 - - - - - - - The performance rights outstanding at the end of the year had a weighted average remaining contractual life of 1,200 days (31 December 2019: 1,027 days) a1,223,828 opening performance rights from 2019 have been reclassified as options. They are now included in Note 31E(a) below. b259,516 options granted in 2019 have now been reclassified as performance rights. 68|West African Resources Ltd 30 SHARE-BASED PAYMENTS (CONTINUED) D. PERFORMANCE RIGHTS (CONTINUED) (b) Fair value of performance rights granted The fair value of the performance rights granted during the year was determined using the Black-Scholes, Monte Carlo Simulation and Binomial pricing methods. Number issued 963,948 263,157 131,578 44,278 885,166 657,894 182,978 78,419 137,822 75,358 113,636 2,275,500 2,275,500 57,172 1,250,000 1,250,000 Grant date 9-Jan-20 9-Jan-20 9-Jan-20 29-May-20 29-May-20 29-May-20 2-Jul-20 2-Jul-20 29-May-20 8-Jul-20 22-Sep-20 27-Nov-20 27-Nov-20 17-Dec-20 17-Dec-20 17-Dec-20 Original expiry period 3 years 5 years 4 years 2 years 3 years 5 years 3 years 5 years 2 years 3 years 3 years 4 years 4 years 2 years 4 years 4 years Dividend yield 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Expected volatility 54% 54% 54% 60% 60% 74% 64% 72% 64% 59% 67% 62% 62% 67% 62% 61% Risk-free interest rate 2.75% 2.75% 2.75% 5.75% 5.75% 3.25% 5.75% 3.25% 5.75% 5.75% 2.25% 0.25% 0.25% 2.25% 0.25% 0.25% Exercise price $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 Share price on grant date $0.4350 $0.4350 $0.4350 $0.8400 $0.8400 $0.8400 $0.8850 $0.8850 $0.8400 $0.9600 $1.0500 $0.9050 $0.9050 $1.0200 $1.0200 $1.0200 E. OPTIONS Options are issued for nil consideration. The exercise price, vesting conditions and expiry date are determined by the Board of Directors. Any options that are not exercised by the expiry date will lapse. Upon vesting, these options will be settled in ordinary fully paid shares of the Company. (a) Summary of options granted by the Group Outstanding at the beginning of the year Granted during the year Exercised during the year Lapsed/cancelled during the year Outstanding at the end of the year Exercisable at the end of the year *WAEP = weighted average exercise price 2020 Number 2020 WAEP* 2019 Number 2019 WAEP* 11,873,828 1,117,891 (7,900,000) (250,000) 4,841,719 4,841,719 $0.3163 $0.6486 $0.2998 $0.2400 $0.4228 $0.4228 18,692,437a 1,000,000b (6,078,125) (2,000,000) 11,873,828 1,223,828 $0.2364 $0.2594 $0.1267 $0.1250 $0.3163 $0.4300 The share options outstanding at the end of the year had a weighted average remaining contractual life of 374 days (31 December 2019: 469 days). a1,223,828 opening performance rights from 2019 have been reclassified as options. b259,516 options granted in 2019 have now been reclassified as performance rights. They are now included in Note 31D(a) above. West African Resources Limited|69 30 SHARE-BASED PAYMENTS (CONTINUED) E. SHARE OPTIONS (CONTINUED) (b) Fair value of options granted The fair value of the options granted during the period was determined using the Black-Scholes and Monte Carlo Simulation pricing methods. Further details of the basis of valuation appear below. During the year the company granted 867,891 options, with a fair value of $396,422, to Directors and employees under the Incentive Plan (31 December 2019: 1,259,516) in addition to 250,000 options, with a fair value of $98,350, to a third party. Number issued 131,578 250,000 657,894 78,419 Grant date 9-Jan-20 29-Apr-20 29-May-20 2-Jul-20 Original expiry period 4 years 4 years 4 years 4 years Dividend yield 0% 0% 0% 0% Expected volatility 54% 67% 67% 66% Risk-free interest rate 2.75% 3.25% 3.25% 3.25% Exercise price $0.6061 $0.7346 $0.6061 $0.7309 Share price on grant date $0.4350 $0.7400 $0.8400 $0.8850 70|West African Resources Ltd 30 SHARE-BASED PAYMENTS (CONTINUED) E. OPTIONS AND PERFORMANCE RIGHTS BALANCES The outstanding balance of performance rights as at 31 December 2020 is presented in the following table. Grant date Vesting date Expiry date Exercise price Granted Lapsed / Cancelled Exercised On issue Vested Number of performance rights 28-Dec-18 28-Dec-18 When the Company achieves the certain milestones in relation to its Sanbrado Gold Project within 12 months of the date the rights were issued First gold pour and commercial production Hold continuous office as a director of the Company for 1 year from the date the rights were issued 14-Feb-19 07-Jul-19 When KPIs are achieved 9-Jan-20 9-Jan-20 9-Jan-20 29-May-20 29-May-20 29-May-20 29-May-20 2-Jul-20 2-Jul-20 Hold continuous office as an employee or a director of the Company for 1 year from the date the rights were issued When KPIs are achieved and hold continuous office as an employee of the Company for 2 years from the date the rights were issued 500,000oz gold poured within 3 years from the date the rights were issued Hold continuous office as a director of the Company for 1 year from the date the rights were issued Hold continuous office as an employee of the Company for 1 year from the date the rights were issued When KPIs are achieved and hold continuous office as an employee of the Company for 2 years from the date the rights were issued 500,000oz gold poured within 3 years from the date the rights were issued When KPIs are achieved and hold continuous office as an employee of the Company for 2 years from the date the rights were issued 500,000oz gold poured within 3 years from the date the rights were issued 28-Dec-21 28-Dec-23 $0.0000 $0.0000 1,022,565 944,167 14-Feb-21 01-Jun-22 $0.0000 $0.0000 259,516 61,047 20-Jan-23 $0.0000 963,948 - - - - - 20-Jan-23 $0.0000 263,157 (8,668) 20-Jan-23 $0.0000 131,578 11-Jun-22 $0.0000 44,278 11-Jun-23 $0.0000 334,927 - - - 11-Jun-23 $0.0000 550,239 (18,125) 11-Jun-25 $0.0000 657,894 - 8-Jul-23 $0.0000 182,978 (6,027) 8-Jul-25 $0.0000 78,419 - - - 1,022,565 944,167 1,022,565 944,167 (259,516) - - - - - 61,047 963,948 254,489 131,578 (44,278) - - - - - - 334,927 532,114 657,894 176,951 78,419 - 61,047 - - - - - - - - - West African Resources Limited|71 30 SHARE-BASED PAYMENTS (CONTINUED) E. OPTIONS AND PERFORMANCE RIGHTS BALANCES (CONTINUED) Continuation of table from previous page. Grant date Vesting date Expiry date Exercise price Granted Lapsed / Cancelled Exercised On issue Vested Number of performance rights 29-May-20 8-Jul-20 Hold continuous office as a director of the Company for 1 year from the date the rights were issued When KPIs are achieved and hold continuous office as an employee of the Company for 2 years from the date the rights were issued When KPIs are achieved and hold continuous office as an employee of the Company for 2 years from the date the rights were issued 22-Sep-20 27-Nov-20 8-Dec-23 Hold office as an employee of the Group until the first time the volume weighted average price of WAF Shares for a 20 trading day period is $2.00 or higher within 3 years from the date of issue of the rights Hold continuous office as a director of the Company for 1 year from the date the rights were issued 27-Nov-20 17-Dec-20 17-Dec-20 17-Dec-23 Hold continuous office as an employee or Director of the Company until the first time the volume weighted average price of WAF Shares for a 20 trading day period is $2.00 or higher within 3 years from the date of issue of the rights 17-Dec-20 8-Jul-22 $0.0000 137,822 - 8-Jul-23 $0.0000 75,358 (2,482) 29-Sep-23 8-Dec-24 $0.0000 $0.0000 113,636 2,272,500 (26,878) - 8-Dec-24 $0.0000 2,272,500 17-Dec-22 17-Dec-24 $0.0000 $0.0000 57,172 1,250,000 17-Dec-24 $0.0000 1,250,000 - - - - - - - - - - - 137,822 72,876 86,758 2,272,500 2,272,500 57,172 1,250,000 - 1,250,000 - - - - - - - - Total Performance Rights 12,923,701 (62,180) (303,794) 12,557,727 2,027,779 72|West African Resources Ltd 30 SHARE-BASED PAYMENTS (CONTINUED) E. SHARE OPTIONS (CONTINUED) The outstanding balance of options as at 31 December 2020 is presented in the following table: Grant date Vesting date 21-Mar-17 12-May-17 First gold production First gold production 18-Oct-17 03-Nov-17 First gold production First gold production 29-Mar-18 26-Sep-18 First gold production First gold production 28-Nov-18 28-Dec-18 28-Dec-18 05-Mar-19 20-Jan-20 First gold production and first concrete pour for the plant First gold pour and commercial production When the company’s share price first equals the option exercise price ($0.4300) First gold pour and commercial production When the company’s share price first equals the option exercise price ($0.6061) 29-Apr-20 29 April 2020 11-Jun-20 2-Jul-20 When the company’s share price first equals the option exercise price ($0.6061) When the company’s share price first equals the option exercise price ($0.7309) Total options Number of options Expiry date 21-Mar-20 12-May-20 18-Oct-20 09-Nov-20 29-Mar-21 26-Sep-21 28-Nov-21 28-Dec-21 Exercise price $0.2400 $0.2400 $0.3750 $0.2400 $0.4100 $0.3100 $0.3100 $0.3200 Granted 400,000 500,000 750,000 2,750,000 1,250,000 500,000 1,000,000 2,500,000 28-Dec-22 05-Mar-22 $0.4300 $0.2950 1,223,828 1,000,000 20-Jan-24 29-Apr-24 $0.6061 $0.7346 131,578 250,000 11-Jun-24 $0.6061 657,894 Lapsed / Cancelled (250,000) - - - - - - - - - - - - Exercised On issue Vested (150,000) (500,000) (750,000) (2,750,000) (1,000,000) - - (2,000,000) - - - - - - - - 250,000 500,000 1,000,000 500,000 250,000 500,000 1,000,000 500,000 - 1,223,828 1,223,828 (750,000) 250,000 250,000 - - - 131,578 250,000 131,578 250,000 657,894 657,894 8-Jul-24 $0.7309 78,419 12,991,719 - (250,000) - (7,900,000) 78,419 4,841,719 78,419 4,841,719 West African Resources Limited|73 31 PARENT ENTITY FINANCIAL INFORMATION The individual financial statements for the parent entity show the following aggregate amounts: STATEMENT OF FINANCIAL POSITION Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity PROFIT FOR THE REPORTING PERIOD Income tax benefit Total comprehensive profit Guarantees, commitments and contingencies Parent 2020 $'000 16,579 82,620 99,199 990 272 1,262 97,937 165,263 9,948 (77,274) 97,937 37 - 37 2019 $'000 18,258 77,011 95,269 1,998 57 2,056 93,213 162,919 7,917 (77,623) 93,213 23,219 - 23,219 There are no guarantees, commitments or contingencies in the parent entity other than $194,507 of rental property lease commitments due within one year (31 December 2019: $187,006). 74|West African Resources Ltd DIRECTORS’ DECLARATION In the opinion of the Directors: a. The financial statements, notes and the additional disclosures included in the Directors’ Report, designated as audited, of the consolidated entity are in accordance with the Corporations Act 2001 including: (i) (ii) giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its performance for the year then ended; and complying with Australian Accounting Standards and Corporations Regulations 2001. b. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. c. The financial statements also comply with International Financial Reporting Standards as disclosed in note 1A. 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 year ended 31 December 2020. This declaration is signed in accordance with a resolution of the Board of Directors. RICHARD HYDE Executive Chairman & CEO 26 March 2021 West African Resources Limited|75 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of West African Resources Limited for the year ended 31 December 2020, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) any applicable code of professional conduct in relation to the audit. Perth, Western Australia 26 March 2021 B G McVeigh Partner 76|West African Resources Limited INDEPENDENT AUDITOR’S REPORT To the members of West African Resources Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of West African Resources Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 31 December 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its financial performance for the year then ended; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report. West African Resources Ltd|77 Key Audit Matter Property, plant and equipment Note 10 to the financial report How our audit addressed the key audit matter The Sanbrado Gold Project transitioned from the development phase to the production phase during the year. The existence, accuracy and completeness of capitalised the expenditure incurred as part of the development and construction of Sanbrado Gold Project was considered a key audit matter. This is due to the size of the capitalised expenditure of $329,587,000. Our audit procedures included but were not limited to the following: • We evaluated the Group’s processes and controls in place with respect to purchasing. • Assessment of the allocation of costs between operating expenditure and capital expenditure by inspecting documentation on a sample basis and assessing the nature of the underlying activity. judgement the The Group used identification and allocation of cost between operating capitalised expenditure. The risks we focussed on included: expenditure and in • The existence of capital expenditure; and • The capital nature of expenditure particularly the determination of when the Sambrado Gold Project was considered capable of operating at commercial production and in a manner intended by the Group. Revenue recognition Notes 3 to the financial report • Challenging the Group’s determination of commercial production declaration from 1 May 2020 by evaluating the criteria by which the declaration was made against the underlying documentation and industry practice. • Assessing the disclosures in the financial report the accounting the requirements of against standards. • Consideration of any Impairment indicators The Group generates revenue predominantly from the sale of gold. The Group recognised sales revenue of $311,167,000 for the year (2019: $1,239,000). Our audit procedures included but were not limited to the following: • Understanding the Group’s process for revenue and controls in place around gold sales. Revenue recognition is considered to be a key audit matter given the significance of revenue to the Group’s results as well as the fraud risk around cut-off including: • An overstatement of revenues through or revenue premature recording of fictious revenues. recognition • Testing all gold sales transactions during the year to invoice and receipt of cash. • Assessing the Group’s policies for recognition of revenue against the the accounting standards and checked these were adequately disclosed in the financial statements. requirements of • Sales cut-off procedures focussing on sales in December 2020 and January 2021, testing a sample underlying documentation and assessing the period in which they were recognised. transactions of to • Revenue not being recognised when control is transferred to the customer, resulting in revenue not being recognised in the correct accounting period. Revenue is recognised when control is transferred to the buyer and the amount of revenue can be reliably determined. This occurs for the Group when the refining process is completed and ownership is transferred. 78|West African Resources Ltd Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 31 December 2020, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - - - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. West African Resources Ltd|79 - Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the directors’ report for the year ended 31 December 2020. In our opinion, the Remuneration Report of West African Resources Limited for the year ended 31 December 2020 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. HLB Mann Judd Chartered Accountants Perth, Western Australia 26 March 2021 B G McVeigh Partner 80|West African Resources Ltd ASX ADDITIONAL INFORMATION Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 12 March 2021. DISTRIBUTION OF SHARES Distribution 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,000 – 100,000 100,001 – and over Total Number of holders 534 1,270 764 1,479 372 4,419 Securities held 288,849 3,594,282 6,278,189 52,065,028 820,571,527 882,797,875 The number of shareholdings held in less than marketable parcels is 262. SUBSTANTIAL SHAREHOLDERS An extract of the Company’s Register of Substantial Shareholders (who hold 5% or more of the issued capital) is set out below. Shareholder Name VANECK ASSOCIATES CORPORATION L1 CAPITAL PTY LTD SPROTT INC. VANGUARD GROUP 1 2 3 4 Total TWENTY LARGEST SHAREHOLDERS Shareholder Name 1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 2 CITICORP NOMINEES PTY LIMITED 3 CS THIRD NOMINEES PTY LIMITED4 5 BNP PARIBAS NOMS PTY LTD 6 MR PHILLIP RICHARD PERRY 7 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA 8 MR RICHARD HYDE 9 NATIONAL NOMINEES LIMITED 10 BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD 11 AIGLE ROYAL CAPITAL PTY LTD 12 STICHTING LICHFIELD US\C 13 ZERO NOMINEES PTY LTD 14 BNP PARIBAS NOMINEES PTY LTD 15 AIGLE ROYAL CAPITAL PTY LTD 16 UBS NOMINEES PTY LTD 17 BNP PARIBAS NOMINEES PTY LTD 18 MR GRAEME JOHN HAINES + MRS SHARNI GAY HAINES + MR MALCOLM ARNOLD HAINES LUJETA PTY LTD 19 20 MAJI INVESTMENTS PTY LTD No. of shares held 96,355,007 66,733,887 45,648,659 44,624,433 % Holding 10.9% 7.6% 5.2% 5.1% 253,361,986 28.7% No. of shares held 259,299,708 122,933,748 54,678,863 41,337,178 32,833,202 28,235,834 23,317,629 19,353,433 18,730,825 16,201,750 14,100,000 13,250,000 12,500,000 12,444,461 8,900,000 5,064,934 4,883,292 4,760,700 3,846,154 2,001,717 % Holding 29.37% 13.93% 6.19% 4.68% 3.72% 3.20% 2.64% 2.19% 2.12% 1.84% 1.60% 1.50% 1.42% 1.41% 1.01% 0.57% 0.55% 0.54% 0.44% 0.23% Total 698,673,428 79.14% West African Resources Limited|81 STOCK EXCHANGE LISTING Listing has been granted for the ordinary shares (ASX code: WAF) of the Company on the Australian Securities Exchange Limited "ASX") with 882,797,875 ordinary shares on the Company’s register. VOTING RIGHTS All shares carry one vote per unit without restriction. UNLISTED OPTIONS 12,127,848 options and performance rights are held by 33 option holders. Neither options nor performance rights carry a right to vote. 82|West African Resources Ltd SUMMARY OF TENEMENTS AT 11 MARCH 2021 Tenement name Registered holder % held Tenement number Grant date Expiry date Tenement type Area ( km2) Geographical location Damongto4 Wura Resources Pty Ltd SARL 100% No 2018-184/MMC/SG/DGCM 5-Sep-18 1-Mar-21 Goudré1 Wura Resources Pty Ltd SARL 100% No 2018-186/MMC/SG/DGCM 5-Sep-18 23-Mar-21 Manessé II Tanlouka SARL 100% N2020-254/MMC/SG/DGCM 13-Nov-20 12-Nov-23 Bollé2 Wura Resources Pty Ltd SARL 100% No 17 – 223//MMC/SG/DGCM 21-Nov-20 20-Nov-20 Zam Sud4 Wura Resources Pty Ltd SARL 100% No 2018-183/MMC/SG/DGCM 5-Sep-18 1-Mar-21 Diakora2 Jean Donessoune 100% No 2017-140/MMC/SG/DGCM 7-Sep-17 6-Sep-20 Dounougou2 Jean Donessoune 100% No 2017-139/MMC/SG/DGCM 7-Sep-17 6-Sep-20 Tieradeni I2 Jean Donessoune 100% No 2017-138/MMC/SG/DGCM 7-Sep-17 6-Sep-20 Nakomgo3 Kiaka Gold SARL 100% No 2017-179/ MMC/SG/DGCM 24-Oct-17 23-Oct-20 Mankarga V3 Jacques Teegawêndé Zongo 100% No 2020-170/ MMC/SG/DGCM 16-Jul-20 15-Jul-23 EL EL EL EL EL EL EL EL EL EL 26 Ganzourgou Province 175 Ganzourgou Province 86.67 Ganzourgou Province 205.5 Ganzourgou Province 17.46 Ganzourgou Province 58.66 Comoe Province 132.57 Comoe Province 141.5 Comoe Province 249.19 Bazega and Ganzourgou Provinces 52.595 Ganzourgou Province Sanbrado Société des Mines de Sanbrado SA 90% Décret No 2017 – 104/PRES/PM/MEMC/MINEFID/MEEVCC Arrêté No 2018-139/MMC/SG/DGMG 13-Mar-17 12-Mar-24 ML 25.9 Ganzourgou Province 1 Exceptional renewal application in progress. 2 Permit renewal has been approved. Waiting for the new permit order to be issued. 3 Permit renewal approval pending. 4 Permit renouncement in progress. West African Resources Limited 83 ASX: WAF West African Resources Limited ACN 121 539 375 ABN 70 121 539 375 T: + 61 8 9481 7344 E: info@westafricanresources.com W: westafricanresources.com PO Box: PO Box 1412, Subiaco WA 6904 Principal Office: Level 1, 1 Alvan Street, Subiaco WA 6008