Siltronic
Annual Report 2021

Plain-text annual report

WEST AFRICAN RESOURCES LIMITED 1 2 0 2 Annual Report Corporate Directory Company West African Resources Limited ABN 70 121 539 375 ASX ASX trading code: WAF Directors Richard Hyde Executive Chairman and CEO Lyndon Hopkins Executive Director and COO Rod Leonard Lead Independent Director Libby Mounsey Non-Executive Director Nigel Spicer Non-Executive Director Stewart Findlay Non-Executive Director Company Secretary Padraig O’Donoghue Share Registry Computershare Investor Services Pty Ltd Level 11, 172 St George’s Terrace Perth WA 6000 Australia T: +61 (8) 9323 2000 Website www.westafricanresources.com Principal place of business Level 1, 1 Alvan Street Subiaco WA 6008 Australia SOMISA office Secteur 27, Quartier Ouayalghin, Parcelle 07, Lot 22, Section SL, Ouagadougou, Burkina Faso T: +226 25 39 58 45 Kiaka SA office Secteur 53, Parcelle 06, Lot 12, Section 480, Zone A7 Ouagadougou, Burkina Faso T: +226 25 37 49 74/75/76 Auditors HLB Mann Judd (WA Partnership) Level 4, 130 Stirling Street Perth WA 6000 Australia Contents L E T T E R I C H A R M A N S ’ Chairman’s Letter 2021 In Brief Directors’ Report Remuneration Report (Audited) Financial Report Consolidated Statement of Profit or Loss and Other Comprehensive Income 2 4 6 34 48 49 Consolidated Statement of Financial Position 50 Consolidated Statement of Changes In Equity 51 Consolidated Statement of Cash Flows 52 Notes to the Consolidated Financial Statements Directors’ Declaration Auditor’s Independence Declaration Independent Auditor’s Report ASX Additional Information Summary of Tenements 53 90 91 92 97 99 O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I 01 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTS and a A$214 million after tax profit. We ended the year with A$183 million cash and nil senior secured debt, after repaying US$175 million of the Taurus debt facility during the year and buying back the Taurus offtake agreement in November 2021. The standout growth achievement in 2021 was acquiring the Kiaka Gold Project in Burkina Faso from B2Gold and their partner GAMS for US$100 million in staged cash and share payments plus a future 3% NSR royalty on the first 2.5 million ounces produced from Kiaka and 0.5% NSR royalty on the next 1.5 million ounces. Kiaka is a fully licenced gold project located just 45 km south of Sanbrado. B2Gold completed extensive unpublished feasibility study work on Kiaka that has been provided to WAF as part of the purchase. Kiaka currently contains a Mineral Resource of 6.8 million ounces of gold. WAF’s updated feasibility study for Kiaka is on track to be published in June 2022 and is expected to result in a substantial increase in the Company’s Ore Reserves. During 2021 WAF completed the acquisition of the Toega gold deposit from B2Gold and GAMS and completed Toega’s maiden Ore Reserve estimate of 580,000 ounces of gold at 1.9 g/t gold. Toega is located 14 km trucking distance from Sanbrado and ore from Toega is a significant component of mill feed in Sanbrado’s 10-year mine plan. Dear Fellow Shareholders, I am pleased to present the 2021 Annual Report for West African Resources Limited (ASX: WAF). WAF had another successful year in 2021 operationally, financially and in terms of strategic positioning for future growth. Operationally, our team safely achieved the Company’s 2021 annual guidance targets during the global pandemic. Sanbrado produced 288,719 ounces of gold at an average AISC of US$796/oz, which were 112% and 22% improvements, respectively, on the prior year. Sanbrado remained LTI free with 9.8 million hours worked since April 2019 and had an outstanding 12-month total reportable injury frequency rate of 0.78 for 2021. Financially, WAF generated very strong results during its second year as a gold producer with A$350 million of operating cash flow, A$189 million of free cash flow, The acquisitions of Kiaka and Teoga have consolidated an exciting 2,000 km2 exploration land package over the prospective Markoyé fault region in central and southern Burkina Faso. In addition to completing the feasibility work on Kiaka and Toega, exploration work in 2022 will focus on targets within the Sanbrado mining area (including M1 South main shoot extensions) and surrounding areas that can provide high-grade oxide feed. The cash consideration paid for Kiaka and Toega, and the repayment of the Taurus debt facility were partially funded by a A$126 million share placement to sophisticated investors, and a A$10 million share purchase plan that allowed WAF shareholders to purchase up to A$30,000 each at the same $1.25 per share price that the sophisticated shareholders paid under the placement. The placement and SPP, which were both well over-subscribed, were completed in November 2021. I am pleased to advise that West African Resources has published its inaugural 2021 Sustainability Report at the same time as this Annual Report. While this Annual Report contains key sustainability highlights, I encourage interested parties to obtain a copy of the full 2021 Sustainability Report, which is available electronically from the Company’s website. West African Resources Limited is committed to Burkina Faso and to operating in a manner that will provide widespread economic benefits for the Burkina Faso Government, local and regional communities, and our other stakeholders. Looking forward, as announced on 22 February 2022, Sanbrado’s strong performance is set to continue in 2022 with unhedged production guidance of 220,000 to 240,000 ounces of gold at an AISC of US$1,040 to US$1,100 per ounce. The updated 10-year production outlook for Sanbrado is set to average 198,000 ounces of gold per annum. Sanbrado is set to deliver strong employment and other benefits to the region as well as sustained significant tax and royalty revenues to the government’s treasury past the year 2033. Meanwhile, we are excited to commence construction at Kiaka and this operation will also make a significant contribution to the regional economy and national treasury. We are targeting +400,000 ounces of gold production per annum from 2025, with the addition of Kiaka to existing operations at Sanbrado. WAF’s strong and experienced board remained stable in 2021. The only change occurred in February 2021, with the elevation of Mr Rod Leonard to the role of Lead Independent Director to enhance the Company’s governance structure. I would like to thank my fellow directors for their keen interest and active participation in overseeing the development of our Company. We look forward to another successful year in 2022. Richard Hyde Executive Chairman & CEO 02 03 West African Resources is 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. L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Second underground ore panel brought on-line at M1 South for delivering continuous stoping production 8,000,000 hours worked LTI free at Sanbrado Resources grew to 11.8Moz gold with acquisition of 6.8Moz Kiaka Gold Project L E T T E R First scheduled mandatory debt repayment to Taurus Inaugural production guidance set at 250,000- 280,000 ounces gold at AISC of US$720 – US$800/oz I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I A$126 million raised with issue of 101 million shares at $1.25 per share Taurus US$200 million debt facility repaid in full 400,000 ounces of gold produced since commissioning Sanbrado in March 2020 Production guidance exceeded with 287,700oz gold produced at US$796/ oz AISC 2021 2020 % Change Gold production 288,719 ounces 136,476 ounces AISC per ounce Net profit US$796 US$1,024 A$214.4 million A$98.9 million 112% improvement 22% improvement 117% improvement Year-end gold Resources 11.6 million ounces 5.1 million ounces 127% improvement Year-end gold Reserves 1.7 million ounces 1.5 million ounces 13% improvement 04 05 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSWEST AFRICAN RESOURCES ANNUAL REPORT 2021 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 2021. About West African Resources Limited West African Resources Limited is an international mining company actively undertaking exploration, project development, mining, mineral processing, community & social sustainability, and rehabilitation within the West African country of Burkina Faso. Headquartered in Perth, Western Australia, West African Resources Limited is listed on the Australian Securities Exchange (ASX:WAF). BURKINA FASO SANBRADO GOLD PROJECT KIAKA GOLD PROJECT EXPLORATION » Mineral Resources: » WESTERN AUSTRALIA PERTH OFFICE » WAF Group headquarters » Business support centre Tenement portfolio comprising 2,000 km2 over the prospective Markoyé fault region in central and southern Burkina Faso » Gold exploration » Mineral Resources: 6.8Moz gold 4.8Moz gold » Mineral Reserves: 1.7Moz gold » Commercial production 1H 2020 » Open pit mining » Underground mining » Ore processing » Gold smelting » Acquired Q4 2021 » » » Large-scale development project Fully permitted Feasibility study update » Construction early works » Gold exploration » Toega feasibility study » Community & social programs » Environmental programs » Gold exploration » Community & social programs » Environmental programs » Progressive rehabilitation The Sanbrado Gold Project (‘Sanbrado’) and the Kiaka Gold Project (‘Kiaka’) are held under mining licences and are 90%-owned by WAF, with the government of Burkina Faso owning the remaining 10%. All exploration licences in WAF’s portfolio are 100%-owned by WAF. The Toega gold deposit (‘Toega’) is currently held under a 100%-owned exploration licence, with the application for a mining licence in progress. Sanbrado is located in central Burkina Faso, 90 km east-southeast of the capital city of Ouagadougou. Kiaka is located 110 km southeast of Ouagadougou and 45 km south of Sanbrado (refer to figure 7). Toega is located within trucking distance (14 km southwest) of the Sanbrado processing plant. WAF has an approximately 2,000 km2 exploration land package over the prospective Markoyé fault region where Sanabrado, Toega, and Kiaka are situated, as well as an exploration tenement package in the southwest of the country. Operating Review Safety The Company is pleased to report Sanbrado’s outstanding safety performance for 2021: » » There were no significant health or safety incidents during the year (2020: nil). The 2021 annual TRIFR (Total Recordable Injury Frequency Rate) was 0.78 (2020: 2.6) versus Western Australian average RWI was 7.1 in 202011. Burkina Faso 3-year transitionary government Post year end, on 24 January 2022, a military group called the Patriotic Movement for Safeguard and Restoration, led by Lieutenant-Colonel Paul- Henri Sandaogo Damiba, assumed control of the government, deposed Mr Roch Marc Christian Kaboré from his position as president of Burkina Faso, and subsequently dissolved the parliament, government and constitution. Shortly after these events, on 31 January, the group restored the constitution and appointed Paul-Henri Sandaogo Damiba as interim president. On 1 March 2022, Interim President Damiba signed a charter setting out the structure and objectives of a 36-month transition government which he will lead as President of the Transition. The charter specifies the missions of the transition government, summarised as follows: » » to fight against terrorism and restore the integrity of the national territory; to provide an effective and urgent response to the humanitarian and socio-economic crisis caused by the insecurity; L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I » » » to enact reforms to strengthen governance and fight against corruption; to ensure a return to a democratic government; and to work towards national reconciliation and social cohesion. The charter also stipulates that the President of the Transition and other senior members of the transition government are not eligible for the presidential, legislative, and municipal elections that will be held to end the transition period. On 25 January 2022, WAF released a statement on the ASX that its staff and contractors were safe and the Company’s Sanbrado Gold Operations in Burkina Faso were continuing to operate as usual. The directors are pleased to advise no change from that situation and the Company’s observation is that government bureaus continue to operate normally and no controversial legislative changes have been proposed. COVID-19 Continuous mining and milling operations were maintained at Sanbrado during 2021, with management having implemented measures to manage COVID-19 risks for the foreseeable future. The COVID-19 situation remained stable in Burkina Faso during 2021 with low numbers of daily infections in the country. The Company maintained its vigilance in following health guidelines related to hygiene, masks, testing, monitoring, and isolation for staff, contractors, and site visitors. 1 Department of Mines, Industry Regulation and Safety, 2021, Safety performance in the Western Australian mineral industry — accident and injury statistics 2020-21: Department of Mines, Industry Regulation and Safety, Western Australia. https://www.dmp.wa.gov.au/Documents/Safety/Safety%20performance%20in%20the%20 Western%20Australian%20mineral%20industry%202020-21%20-%20report.pdf 06 07 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTS Sanbrado production statistics A year-on-year comparison of the key production statistics for Sanbrado are shown in the following table. Unit Year 2021 Year 2020 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 Gold sold BCM ‘000 kt w:o kt g/t oz kt g/t oz kt g/t % oz oz oz 9,426 24,138 5.9 3,518 1.9 8,909 21,415 5.1 3,494 1.3 210,132 145,803 372 9.5 119 10.0 113,259 38,232 3,155 3.0 94.5 288,719 287,619 295,215 2,616 1.7 93.4 136,476 133,534 118,093 A site layout of the Sanbrado project is shown below in figure 1. Open pit mining Gold ounces mined from open pit mining increased 44% from 145,803 ounces in 2020 to 210,132 ounces in 2021, mainly due to a 43% increase in mined grade from 1.3 to 1.9 g/t gold. Open pit mined ore tonnes of 3.5 million was consistent with the prior year. Mining occurred at the M1 South, M1 North, M5 South and M5 North open pits during 2021. The increase in open pit mined grade reflects a greater proportion of ore from the higher-grade M1 deposits in 2021. Consistent with the prior year, construction of the tailings storage facility for the processing plant utilised waste material from the M5 pit during 2021. A long section through M5 is show below in figure 2. FIGURE 2 – LONG SECTION THROUGH THE M5 PIT Underground mining Gold ounces mined from the M1 South underground increased 196% from 38,232 ounces in 2020 to 113,259 ounces in 2021, with tonnes mined increasing 213% from 119,000 to 372,000 tonnes. The underground mined grade was relatively stable at 9.5 g/t gold compared to 10 g/t gold in 2020. For most of 2020, underground ore was sourced from development headings with first underground stoping ore mined from panel-1 in late September 2020. Mining from panel-2 commenced in late Q2 2021, which enabled more continuous stope production from two ore panels for the remainder of 2021. Some 3.2 km of development was completed in 2021 (2020: 2.6 km). At the end of 2021 the decline was 385 metres vertically below surface (2020: 297 metres). FIGURE 1 – SANBRADO LAYOUT FIGURE 3 – INSTALLING MESH AT M1 SOUTH 08 09 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSCHAIRMAN’S LETTERHIGHLIGHTSOF THE YEARFINANCIALREPORTDIRECTORS ’REPORT                    Processing Gold ounces produced at Sanbrado increased 112% from 136,476 ounces in 2020 to 288,719 ounces in 2021. The increase reflects a 76% higher head grade, a 21% increase in ore tonnes milled, and a 1.2% improvement in recovery. The head grade improved from 1.7 g/t gold in 2020 to 3.0 g/t gold in 2021 mainly due to a greater proportion of ore feed from the higher-grade M1 deposits. The quantity of ore milled improved from 2,616,000 tonnes in 2020 to 3,155,000 tonnes in 2021, mainly due to a shorter production period in the prior year, with commissioning of the process plant commencing in March of the prior year. Photographs of the Sanbrado process plant and accommodation camp are provided below in figures 4 and 5. FIGURE 4 – SANBRADO PROCESS PLANT Growth KIAKA AND TOEGA ACQUISITIONS On 30 November 2021 closing occurred under the share purchase agreements (SPAs) for WAF’s acquisitions of: » 90% of Kiaka from B2Gold Corp (‘B2Gold’) and their partner, GAMS-Mining F&I Ltd (‘GAMS’), with the remaining 10% held by the Government of Burkina Faso; and » 100% interest in Kiaka Gold SARL, an exploration company incorporated in Burkina Faso that holds the Nakomgo Exploration Permit in which the Toega deposit is located. Further explanation of the Kiaka and Toega acquisition transactions are contained in the “Financial Review” section of this report. KIAKA GOLD PROJECT Kiaka is a fully permitted gold mining project located 110 km southeast of the Burkina Faso capital, Ouagadougou, and approximately 45 km south of WAF’s Sanbrado Gold Operations. It is accessed from Ouagadougou via 100 km of sealed road, and then by 30 km of all-weather dirt road to site. B2Gold completed extensive unpublished feasibility study work on Kiaka between 2015 and 2020. WAF has commenced work programs for an updated feasibility study and updates to the ESIA (Environmental and Social Impact Assessment) and RAP (Relocation Action Plan), leveraging off the in-depth work already completed by B2Gold. Kiaka currently contains a Mineral Resource of 6.8 million ounces of gold (refer to Resource and Reserves Statement on pages 25 to 26). WAF’s updated feasibility study for Kiaka is on track to be published in June 2022 and is expected to result in a substantial increase in the Company’s Ore Reserves. Site work at Kiaka in 2022 will include early construction works aimed at the upgrade of site access roads, construction of camp facilities, and commencement of community projects. A schematic diagram of Kiaka’s block model is provided below in figure 6. FIGURE 6: KIAKA BLOCK MODEL +0.5 G/T AU GRADE SHELL FIGURE 5 – SANBRADO ACCOMMODATION CAMP WITH PROCESS PLANT IN BACKGROUND 10 11 L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 TOEGA DEPOSIT The Toega gold deposit is located within trucking distance (14 km southwest) of the Sanbrado gold processing plant. On 22 February 2022 WAF announced on the ASX that it had completed work to report a maiden Ore Reserve for Toega of 9.7 million tonnes at a grade of 1.9 g/t gold for 580,000 contained ounces with a strip ratio (waste : ore) of 5.4:1. Work completed to enable the Ore Reserve estimate for the Toega deposit included: » Infill drilling program in the area identified as economically extractable by open-pit mining methods. » Mineral Resource estimate completed by independent resource consultants, International Resource Solutions Pty Ltd (IRS). The estimate included Mineral Resources of the Indicated category. » Additional metallurgical test work conducted on representative samples to confirm historic test work results and process throughput through the Sanbrado process plant. » A geotechnical drilling program, test work and evaluation were conducted to feasibility study level. » Hydrological and hydrogeological studies. » Updated environmental and social studies. » Mine plan and pit design completed. M1 GOLD DEPOSITS Strike extensions to the north and south of the currently defined M1 deposits are planned to be tested in 2022 as part of the resource definition drill program. A mineralised zone continuing under the northern portion of the open pit will also be drilled to enable resources estimation and evaluation for potential mining in the future. STRATEGIC EXPLORATION POSITION With the acquisition of Kiaka and Toega in 2021, WAF has consolidated an exciting 2,000 km2 exploration land package over the prospective Markoyé fault region in central and southern Burkina Faso. Sustainability Review In conjunction with this Annual Report, WAF has published its inaugural 2021 Annual Sustainability Report, which was prepared following the Global Reporting Initiative (GRI) 2021 Universal Standards for sustainability reporting. This Annual Report presents some of the key highlights from our 2021 Annual Sustainability Report, however interested parties are encouraged obtain a copy of our full 2021 Annual Sustainability Report from the Company’s website. FIGURE 7: MAP SHOWING LOCATION OF WAF’S MINERAL INTERESTS IN BURKINA FASO 12 13 L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTS Our community SUSTAINABLE DEVELOPMENT GOALS In 2021, WAF invested $3.8 million in community development initiatives, resettlement and livelihood restoration, and community relations activities. Our community development programs and environmental initiatives considered and were guided by: » » » » » the overarching goal of creating a positive legacy in the communities where we operate; supporting the Sustainable Development Goals (SDGs) that were developed as a key part of the 2030 Agenda for Sustainable Development, adopted by UN Member States (including Burkina Faso) in 2015; socio-economic baseline study updates of the surrounding communities to understand the changes, developments, and trends in the demographics, standard of living, livelihoods and population movements; our own community and environmental monitoring programs; and the Burkina Faso National Development Plans. Education, job creation, and health are the three key areas where WAF has identified it can make the most positive contribution to our local communities. STAKEHOLDER ENGAGEMENT Stakeholder engagement is a core part of our business that happens daily at multiple points within the organisation and for a multitude of reasons, including building and maintaining relationships, and exchanging information and opinions. WAF is committed to an active process of engagement with stakeholders and to building successful and mutually beneficial relationships. WAF aims to meet international practice and takes guidance from the Equator Principles, the International Finance Corporation and the International Council on Mining and Metals in planning for and conducting stakeholder engagement activities. The community relations department at Sanbrado leads WAF’s stakeholder engagement activities and maintains a regular schedule of meetings with government, local leaders and communities. LIVELIHOOD RESTORATION AND TRAINING WAF is undertaking livelihood restoration programs to support communities affected by the Sanbrado mine and provide them with adequate opportunity to restore their livelihoods to pre-project levels or above. The programs were developed based on extensive consultation with communities to design programs that meet their needs and enable sustainable development. The goal is for the programs to transition from the development stage to ownership and autonomous management by the beneficiary communities within a five-year timeframe. EDUCATION A key focus in WAF’s social investment program is improving the quality and accessibility of education for the communities surrounding our project sites and more broadly with a goal to improve rates of literacy and numeracy. Surveys undertaken for Sanbrado and Toega identified that school attendance in the area is very low, with distance to school and financial difficulties both contributing factors. Literacy in the adult population is also low. In 2021 construction of the third school funded by WAF in the Boudry Commune, which encompasses Sanbrado, was completed and we also donated furniture and learning materials. In addition, WAF funded the installation of solar power generation systems at the three schools to improve the learning environment and enable students to study at night. Evening classes are also offered for adults who have not previously had the chance to attend school or learn French. L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I HEALTH WAF is supporting access to health care for local communities. In 2021, we donated equipment to the Centre de Santé et de Promotion Sociale (CSPS) at Pousghin, a village close to the Sanbrado Mine. This equipment has enabled the opening and effective operation of the community health centre and reduced the distance to a health centre for villages surrounding the mine. This will enable better health outcomes for the local population, directly benefiting 6,288 people. Our support also included investments in local health awareness programs, providing information to school children and communities around malaria, HIV/AIDs, Hepatitis B, women’s health and family planning, road safety and COVID-19. LOCAL EMPLOYMENT A key way that WAF supports the local economy is through prioritising people from local communities for employment, both direct employment by the company and employment by contractors. WAF directly employs approximately 550 at Sanbrado, and Sanbrado has a total workforce of around 1,300 people including contractors. 90% of WAF’s Sanbrado employees are of Burkina Faso nationality and 45% are from the local Commune of Boudry. As the Toega and Kiaka projects transition into construction and operations, we anticipate further growth in employment opportunities in the region, as well as supporting continued employment at Sanbrado. WAF is also committed to the training of local workers hired for the projects. The experience and skills gained will increase the skills base in the local area and create a lasting benefit for local residents improving their prospects for future employment. LOCAL PROCUREMENT AND TRAINING WAF aims to source necessary goods and services within the local area or nationally wherever possible. In 2021, 62% of all suppliers were registered in Burkina Faso (a total of 637 vendors) and 88.6% of total expenditure on goods and services was spent within Burkina Faso. WAF has supplied facilities, equipment, and training to enable local communities to pursue new economic activities related to the production of goods which are increasing in demand due to the Sanbrado project (e.g. establishing a poultry farm, soap making, production of sample bags for the geology department). 14 15 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 all stages. Each project is subject to a comprehensive environmental and social impact assessment (‘ESIA’) during the permitting process. This enables us to avoid, minimise and mitigate negative environmental impacts, as well as identifying opportunities to improve environmental outcomes. In operations, environmental management and monitoring continues throughout the life of the project, guided by a project-specific Environmental and Social Management Plan (ESMP) developed in accordance with international industry practice and standards. In addition, environmental rehabilitation takes place on a continuous basis to ensure that the planned post-closure outcomes for the environment and the community are achieved. WATER STEWARDSHIP Water is a scarce resource for much of the year in Burkina Faso. The bulk of the year’s rainfall falls over a three to four month period in the wet season, outside of which many streams and watercourses cease to flow. Understanding the existing water environment and the needs of other water users forms a core part of the ESIA, providing the opportunity to maximise water efficiency through project design, minimising water extraction and reducing impacts on the environment and other users. For example, all water storage facilities were designed to minimise losses through seepage and evaporation. EMISSIONS WAF is keenly aware of its corporate responsibility to minimise greenhouse gas (‘GHG’) emissions. WAF calculates direct (Scope 1) greenhouse gas emissions on an annual basis for operations at Sanbrado. This will be expanded to include Toega and Kiaka once construction and operations commence at these sites. Scope 1 emissions are those that occur from sources that are controlled or owned by an organisation, and for Sanbrado the key sources are fuel used in mining activities and power generation. No electricity is drawn from the national grid, as such Scope 2 emissions do not apply. The emissions intensity per ounce of gold produced at Sanbrado decreased from 0.56t CO2 -e/oz in 2020 to 0.37t CO2 -e/oz in 2021. BIODIVERSITY Management of biodiversity features around the Sanbrado and Toega sites is focused on protecting rare trees, improving diversity through revegetation of disturbed areas within the mine perimeter and development of management strategies for key fauna species, such as the hooded vulture. At Sanbrado, a plant nursery has been developed and our environmental team propagates plants for progressive rehabilitation and revegetation of disturbed areas. Critical Habitat Screening was conducted in 2021 at Sanbrado and in 2022 WAF aims to develop a biodiversity strategy across our three projects. WASTE AND TAILINGS MANAGEMENT WAF is committed to the responsible management of waste. A variety of waste is created during mining operations, with the largest by volume being tailings and waste rock which is managed by the mining department. While volumetrically less, significant amounts of hazardous and non-hazardous waste are still produced which are managed by the environment department. All of these are managed according to international standards to appropriately handle the waste, minimise the amount of waste sent for disposal and minimise the environmental impact of waste disposal. CYANIDE AND REAGENT MANAGEMENT Gold extraction requires the use of different reagents. WAF has strict protocols for the handling and storage of these reagents according to their chemical properties to ensure that any hazard to human health or the environment is minimised. Cyanide is a key reagent in gold and silver processing. WAF uses the international Cyanide Code as a key guideline for managing cyanide transport, handling and storage at Sanbrado and will apply the same at Kiaka in the future. Our people ENGAGEMENT West African Resources strives to create a work environment where people feel valued, where they are provided with opportunities and where they feel safe. We are pleased to report a low rate of staff turnover of 6% in 2021. WAF operates in compliance with the labour code of Burkina Faso and in alignment with the IFC Performance Standards on Environmental and Social Sustainability and the International Labour Organisation (ILO), which require that companies recruit without discrimination by giving equal opportunity to all applicants and develop measures to allow equal access to benefits for both women and men. DIVERSITY In Burkina Faso, we prioritise the hiring of employees from local communities as much as possible. WAF recognises the value of a gender-balanced workforce and the positive impact female employment has on the community. Women make up 20% of WAF’s employee workforce and 19% of management positions at Sanbrado. The Sanbrado departments of health and safety, open pit mining, commercial and logistics, camp management, and human resources are headed by women. TRAINING AND ADVANCEMENT WAF operates a number of programs to identify training needs and to support employees in learning new skills and advancing their careers. During 2021 a total of 2,132 training sessions ranging from 1-hour to 7-days were delivered to employees, 17 employees participated in the Company’s Leadership Development Training, and 34 university students were provided with internships. Our environmental footprint WAF is committed to responsible environmental management through the integration of environmental considerations into business decisions at 16 17 L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTS Profit after tax in 2021 increased 117% over the prior year primarily due to an increase in margin due to the $400,409,000 increase in gold revenue versus $161,657,000 increase in cost of sales. Cost of sales increased over the prior year due to higher physical quantities mined and processed at Sanbrado in 2021 compared to the prior year, whereas revenue benefited from both the higher underground ore tonnes processed and the higher average ore grade. Refer to the “Operating Review” section of this report for explanation of the year-on-year increase in physical quantities and ore grade processed. Finance expenses increased $32,591,000 over the prior year due to a combination of the following factors related to the Taurus syndicated debt facility: 1) interest expense on the debt facility was capitalised to Sanbrado development costs during the first four months of the prior year until commercial production was declared for Sanbrado on 1 May 2020; 2) product fee expenses increased in 2021 with the higher quantity of gold ounces sold combined with the buy- back of the Taurus product fee in November 2021; and 3) accelerated repayments of the Taurus facility in 2021 resulted in the difference between the actual principal repayment amounts and the remaining unamortised costs capitalised to the syndicated loan liability account being expensed in the year. Realised foreign exchange loss of $5,924,000 in 2021 resulted from exchange losses on foreign currency denominated payments. Income tax expense of $107,109,000 in 2021 mainly relates to Burkina Faso corporate income taxes on SOMISA’s 2021 tax profit at a rate of 27.5% (SOMISA is WAF’s Burkina Faso subsidiary that owns 100% of Sanbrado). Financial Review Summary Revenue Profit after tax Operating cash flow Free cash flow Net asset/(debt) position Gold ounces sold Average sales price per ounce All-in sustaining cost (‘AISC’) per ounce sold Unit oz US$/oz US$/oz 2021 $’000 2020 $’000 712,140 311,167 214,438 98,900 349,660 147,921 188,953 5,190 170,256 (131,306) 295,215 118,093 1,808 796 1,812 1,021 Revenue, earnings, and unit cost performance Gold revenue in 2021 was $400,409,000 higher than the prior year due to a 150% increase in gold ounces sold, from 118,093 ounces in 2020 to 295,215 ounces in 2021, partially offset by a A$218 per ounce lower average AUD gold sales price realised in 2021. Refer to the “Operating Review” section of this report for explanation of the year- on-year increase in gold ounces produced. Gold revenue Gold ounces sold Average sales price per ounce AUD Average sales price per ounce USD Unit 2021 $’000 2020 $’000 A$’000 710,265 309,856 oz 295,215 118,093 A$/oz US$/oz 2,406 1,808 2,624 1,812 Average FX rate used for USD conversion AUD/USD 0.7513 0.6907 18 19 L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTS 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 a year-on-year comparison of these non-AASB per ounce performance metrics for the Group including the underlying costs from which they are calculated. 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 Growth and development Exploration non-sustaining Capex 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$ ‘000 A$ ‘000 A$/oz A$/oz A$/oz A$/oz Year 2021 Year 2020 295,215 710,265 82,451 34,408 61,291 31,009 (3,408) 42,015 (13) 247,752 2,530 34,523 14,590 5,331 8,233 118,093 309,856 55,517 12,213 32,668 20,490 (15,350) 20,483 430 126,451 667 25,582 11,527 2,949 7,422 312,958 174,597 1,218 10,049 2,871 - 17,791 - 327,096 192,387 839 1,060 1,108 2,406 1,071 1,478 1,629 2,624 Average FX rate used for USD unit costs AUD/USD 0.7513 0.6907 Adjusted operating cost All-in sustaining cost (AISC) All-in cost Average sales price US$/oz US$/oz US$/oz US$/oz 631 796 832 1,808 740 1,021 1,125 1,812 The all-in sustaining cost per ounce (‘AISC/oz’) in AUD decreased 28% from A$1,478 in 2020 to A$1,060 in 2021 (and in USD it decreased 22% from US$1,021 in 2020 to US$796 in 2021). This year-on-year improvement in the AISC/oz was mainly driven by a higher grade of ore mined and processed at Sanbrado in 2021 compared to the prior year, which resulted in a 150% increase in the quantity of gold ounces sold (from 118,093 ounces in 2020 to 295,215 ounces in 2021), versus a comparatively lower 79% increase in the underlying all-in sustaining costs from A$175 million in 2020 to A$313 million in 2021. The higher underlying all-in sustaining costs in 2021 mainly results from increased physical quantities mined and processed in 2021 compared to the prior year. Refer to the “Operating Review” section of this report on pages 7 to 12 for explanation of the year-on-year increase in ore grades and physical quantities. Reconciliation of non-AASB measures to consolidated financial statements A reconciliation of the ‘Adjusted operating cost per ounce’ and AISC per ounce presented in the previous section of this report to the Group’s Consolidated Financial Statements is presented below: Description Cost of sales (Less)/plus items: Depreciation Non-cash inventory movements By-product credits Adjusted operating cost (Less)/plus items: Reclamation & remediation (accretion & amortisation) Corporate and technical services Share-based payments Capital development Sustaining capital Sustaining leases Total All-in sustaining cost (AISC) Gold sold (ounces) Adjusted operating cost per ounce ($A/oz) AISC per ounce (A$/oz) Financial Statement reference* 2021 $’000 2020 $’000 P/L 306,805 145,148 Note 4 Note 4 N/A N/A P/L P/L (57,241) (23,985) (541) (1,271) 5, 746 (458) 247,752 126,451 2,529 5,741 2,492 667 5,079 2,343 Note 10 34,523 25,582 N/A CF 14,590 5,331 11,527 2,949 312,958 174,597 295,215 118,093 839 1,060 740 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. Sustaining capital excludes growth-related capital. 20 21 L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021                      Balance sheet and cash flow The $382,141,000 increase in net assets during the year reflects a $273,534,000 increase in total assets and a $108,607,000 decrease in total liabilities. Exploration and evaluation (E&E) assets increased by $160,200,000 mainly due to the acquisitions of Kiaka and Toega. Loans and borrowings (current and non-current) decreased by $213,215,000 due to the repayment of the Taurus syndicated debt facility. Trade and other receivables increased by $19,872,000 mainly due to an increase in the amount of value added tax recoverable from the Burkina Faso government. Trade and other payables increased by $65,593,000 primarily due to the US$45 million convertible note issued to B2Gold as part consideration for the purchase of Kiaka. Current tax payable increased by $64,599,000 due to Burkina Faso income tax on SOMISA’s higher profit in 2021. The net debt position improved by $301,562,000 over the year to a $170,256,000 net asset position at the end of 2021 and the Group’s free cash flow improved from $5,190,000 in the prior year to $188,953,000 in 2021. CALCULATION OF NET ASSET (DEBT) POSITION Cash and cash equivalents Loans and borrowings Net asset (debt) CALCULATION OF FREE CASH FLOW Net increase in cash held in the period Add / (subtract): Proceeds of borrowings Repayments of borrowings Proceeds from issue of shares Proceeds from exercise of share options Payments for share issue costs Free cash flow 31 December 2021 $’000 31 December 2020 $’000 183,374 95,027 (13,118) (226,333) 170,256 (131,306) 2021 $’000 87,141 2020 $’000 9,906 - (37,832) 235,064 35,463 (136,250) - (1,042) (2,369) 4,040 188,953 22 5,190 Acquisition of Kiaka and Toega On 30 November 2021 closing occurred under the share purchase agreements (SPAs) for WAF’s acquisitions of: » 90% of Kiaka from B2Gold and their partner, GAMS with the remaining 10% held by the State of Burkina Faso; and » 100% interest in Kiaka Gold SARL, an exploration company incorporated in Burkina Faso that holds the Nakomgo Exploration Permit on which the Toega Project is located. The following consideration was delivered in relation to the above acquisitions: » US$38 million cash consideration was paid (US$31.95m to B2Gold and US$6.05m to GAMS); » US$27.5 million in WAF ordinary shares were issued (22,190,508 to B2Gold and 4,931,224 to GAMS); » US$45 million promissory note was issued to B2Gold for payment in cash or shares at the election of B2Gold; and » Royalty agreements were provided in respect of Kiaka comprising: » » a 3% net smelter return (‘NSR’) royalty on first 2.5 million ounces of gold produced from Kiaka; a 0.5% NSR royalty on next 1.5 million ounces of gold produced from Kiaka » Royalty agreements on the first 1.5 million ounces of gold produced from the Nakomgo exploration permit area were provided in respect of Toega comprising: » » a 3% NSR royalty to a value of US$25 million; and thereafter a 0.5% NSR WAF held an Extraordinary General Meeting on 1 February 2022 at which shareholder approval was obtained for the issue of shares to B2Gold in relation to settlement of the US$45 million promissory note. Repayment of Taurus debt and buy-back of Taurus product fee During the year WAF fully repaid the Taurus syndicated debt facility and the Taurus product fee arrangement that were part of the 2019 funding package for the construction of Sanbrado. Debt repayment WAF made scheduled and early debt repayments during the year against the Taurus syndicated USD debt facility which resulted in the debt facility liability being reduced from US$175 million at the beginning of the year to nil by 31 December 2021 (refer to financial statement note 14A). Buyback of product fee Under the syndicated debt facility with Taurus, the Group had a separate contractual commitment to pay a fee on ounces of gold refined from the Sanbrado Gold Project (the ‘Product Fee’). The Product Fee for each ounce of gold refined was 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. In November 2021 WAF exercised its option to buy back the Product Fee which reduced the ounces remaining under the product fee commitment from 1,131,907 ounces at the beginning of the year to nil by 31 December 2021. 22 23 L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 u A d e n i a t n o C e d a r G u A d e n a t n o C i e d a r G u A d e n a t n o C i e d a r G u A d e n a t n o C i e d a r G * e c r u o s e R l a t o T e c r u o s e R d e r r e f n I e c r u o s e R d e t a c i d n I e c r u o s e R d e r u s a e M Capital raisings WAF undertook the below-described capital raisings in 2021. Funds raised were used for the acquisition of Kiaka and Toega, repayment of the Taurus syndicated debt facility, and for general working capital purposes. » Tranche 1 Placement (completed in November 2021): An unconditional institutional placement of 101.0 million ordinary shares at $1.25 per share under the Company’s 15% available Placement capacity under ASX Listing Rule 7.1 raising $126.25 million (before costs). » Share Purchase Plan (‘SPP’) (completed in November 2021): The SPP complemented the above-noted Tranche 1 Placement. Under the SPP eligible shareholders could apply for up to $30,000 of ordinary shares at the same share price as the Tranche 1 Placement without paying brokerage fees. 8,000,000 ordinary shares were issued under the SPP at an issue price of $1.25 per share raising $10 million (before costs). The Tranche 2 Placement, being a placement of 96,000 ordinary shares to Non-Executive Directors of the Company at $1.25 per share raising $120,000, subject to shareholder approval, was completed subsequent to year end (in February 2022) after shareholder approval was received at the 1 February 2022 Extraordinary General Meeting of West African shareholders. t n e m e t a t S s e v r e s e R d n a s e c r u o s e R 24 . l d o g f o s e c n u o n o i l l i m 6 . 1 1 o t s e c r u o s e R l a t o T n i e s a e r c n i % 7 2 1 a g n w o h s , i F A W r o f n o s i r a p m o c s e c r u o s e R t i s o p e D y b s e c r u o s e R 1 2 0 2 r e b m e c e D 1 3 l a r e n M i r a e y - n o - r a e y a e d i v o r p s e b a t o w l t g n w o i l l o f e h T S E C R U O S E R L A R E N M I z o 0 0 0 , 1 1 0 0 0 0 6 7 , t / g . 2 4 9 0 0 0 0 2 8 , . 4 2 1 s e n n o T 0 0 0 0 8 , z o 0 , 0 0 0 0 2 6 2 , , 0 0 0 0 6 0 2 , 0 0 0 8 4 , 0 0 0 0 2 8 , , 0 0 0 0 0 9 , 1 0 0 0 2 6 , 0 0 0 , 1 1 0 0 0 3 5 , , 0 0 0 0 0 3 , 1 , 0 0 0 5 7 7 6 , , 0 0 0 0 0 6 , 1 1 1 . 1 0 2 . 7 . 1 0 . 1 8 . 1 0 . 1 2 . 1 , 0 0 0 0 6 5 , 1 5 0 0 0 0 7 5 , 0 0 0 0 4 9 , 0 0 0 6 2 , , 0 0 0 0 1 7 , 1 0 0 0 0 9 1 , 0 , 0 0 0 0 0 0 , 1 2 0 0 0 9 6 5 , , 0 0 0 0 7 8 0 2 2 , , 0 0 0 9 3 5 , 1 , 0 0 0 0 0 0 2 0 3 , , 0 0 0 0 0 6 3 , t / g . 5 0 9 5 . . 4 2 1 1 . 1 0 2 . 0 1 . 2 . 9 0 4 . 1 , 0 0 0 0 6 0 2 , s e n n o T z o 0 0 0 0 7 , 0 0 0 0 5 2 , 0 0 0 0 7 3 , 0 0 0 0 0 4 , 0 0 0 2 3 , 0 0 0 0 2 , , 0 0 0 0 0 0 7 1 , , 0 0 0 0 0 2 , 1 , 0 0 0 0 5 3 8 , 0 0 0 8 9 6 , , 0 0 0 0 7 5 , 1 5 , 0 0 0 0 0 0 9 7 , , 0 0 0 6 3 2 5 , , 0 0 0 0 4 5 7 , t / g . 6 3 3 7 . 2 . 1 1 . 2 1 . 2 7 . 1 0 . 1 1 . 1 , 0 0 0 0 0 3 9 6 1 , , 0 0 0 0 0 6 , 1 0 0 0 6 4 3 , . 4 3 1 0 0 0 0 0 8 , , 0 0 0 0 0 0 2 3 , 0 0 0 4 1 1 , , 0 0 0 0 3 1 , 3 1 0 0 0 0 8 4 , 0 0 0 4 , 0 0 0 0 3 , 0 0 0 8 , 0 0 0 6 5 , 2 . 1 0 2 . 7 . 1 0 . 1 , 0 0 0 0 1 9 2 , 0 0 0 0 6 , 0 0 0 0 6 1 , , 0 0 0 0 3 7 , 1 , 0 0 0 0 0 0 7 1 2 , 0 0 0 2 3 5 , 9 2 . , 0 0 0 0 0 7 5 , s e n n o T z o 0 0 0 0 6 , 0 0 0 4 , t / g 5 5 . 0 0 0 0 2 , s e n n o T t / g f f o t u C t i s o p e D u A d e n i a t n o C e d a r G u A d e n a t n o C i e d a r G u A d e n a t n o C i e d a r G u A d e n a t n o C i e d a r G * e c r u o s e R l a t o T e c r u o s e R d e r r e f n I e c r u o s e R d e t a c i d n I e c r u o s e R d e r u s a e M t i s o p e D y b s e c r u o s e R 0 2 0 2 r e b m e c e D 1 3 s e n n o T t / g f f o t u C t i s o p e D 0 0 0 0 2 8 , . 4 2 1 , 0 0 0 0 0 1 , 2 0 0 0 0 2 8 , . 4 2 1 , 0 0 0 0 0 1 , 2 - z o 0 0 0 0 3 1 , 0 0 0 0 6 7 , t / g 1 . 5 s e n n o T z o 0 0 0 0 8 7 , 0 0 0 , 1 . 6 3 1 , 0 0 0 0 0 7 , 1 0 0 0 0 2 , t / g . 5 3 . 4 4 s e n n o T z o 0 0 0 0 1 , 0 0 0 0 0 1 , 0 0 0 0 4 1 , 0 0 0 0 4 5 , , 0 0 0 0 0 0 2 , 0 0 0 5 7 , 0 0 0 0 2 , 0 0 0 8 3 , , 0 0 0 0 0 3 , 1 , 0 0 0 0 0 1 , 5 2 . 1 0 2 . 7 . 1 2 . 1 9 . 1 0 2 . , 0 0 0 0 0 0 2 5 , 0 0 0 0 8 5 , , 0 0 0 0 0 0 , 1 - , 0 0 0 0 0 2 , 1 0 0 0 6 2 , 0 0 0 0 6 3 , 0 0 0 9 , , 0 0 0 0 0 0 2 2 , , 0 0 0 0 0 3 , 1 , 0 0 0 0 0 0 , 1 8 , 0 0 0 0 0 8 2 , 1 . 1 0 2 . 5 . 1 9 . 1 1 . 2 0 0 0 0 0 4 , 0 0 0 2 4 , 0 0 0 0 9 1 , 0 0 0 , 1 1 , 0 0 0 0 0 0 7 1 , , 0 0 0 0 0 4 , 1 t / g 3 6 . 1 . 4 1 2 . 1 1 . 2 0 2 . s e n n o T z o 0 0 0 0 1 5 , 0 0 0 3 2 , , 0 0 0 0 0 2 , 1 0 0 0 0 0 2 , 0 0 0 0 7 1 , - - 0 0 0 0 4 6 , , 0 0 0 0 0 0 5 3 , - 0 0 0 6 , 0 0 0 7 , t / g . 7 2 1 . 5 1 8 . 1 6 . 1 0 0 0 0 6 2 , 0 0 0 0 1 4 , - - 0 0 0 0 1 1 , 0 0 0 0 4 1 , - , 0 0 0 0 0 0 2 2 , - - - - - - 0 0 0 8 3 , 2 . 1 , 0 0 0 0 0 0 , 1 , 0 0 0 0 0 0 , 1 4 , 0 0 0 0 0 1 , 2 7 . 1 . i d e d v o r p s t n u o m a e h t , 0 0 0 0 0 0 7 3 , 0 0 0 0 7 2 , 4 4 . , 0 0 0 0 0 9 , 1 , l l l i o t e t a u c a c y e s c e r p t o n y a m s e c n u o d n a , l i o t p u d d a y e s c e r p t o n y a m s e b a t o w l t e v o b a e h t n i l i s a t o t e h t g n d n u o r o t e u D * 25 . 5 0 5 . 1 5 . 1 . 5 0 . 5 0 . 5 0 . 5 0 . 5 0 G U h t u o S 1 M h t u o S 1 M h t u o S 1 M s p e e D h t r o N 1 M e l i p k c o t S 3 M 5 M a g e o T a k a i K * l a t o T . 5 0 5 . 1 5 . 1 . 5 0 . 5 0 . 5 0 . 5 0 G U h t u o S 1 M h t u o S 1 M h t u o S 1 M s p e e D h t r o N 1 M e l i p k c o t S 3 M 5 M a g e o T l * a t o T L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 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 from the original ASX announcement. Information in this report that relates to Mineral Resources and Ore Reserves is based on information compiled by Brian Wolfe (Mineral Resources with the exclusion of M1 South Deeps), Niel 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 a specialist mineral resource consultant employed by International Resource Solutions Pty Ltd 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 a specialist mining consultant employed by Kenmore Mine Consulting Pty Ltd 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. ORE RESERVES The below two tables provide a year-on-year comparison of WAF Ore Reserves, showing a 13% increase to 1.7 million ounces of gold. 31 December 2021 Ore Reserve by Deposit Proved Probable Proved + Probable Deposit Tonnes t Grade g/t Contained Au oz Tonnes Grade g/t Contained Au oz Tonnes Grade g/t Contained Au oz M1 South UG 1,000,000 8.5 290,000 1,100,000 5.9 200,000 2,100,000 M1 South M1 North M5 M3 Toega 50,000 53,000 2,500,000 140,000 ROM Stockpile 1,700,000 Total* 5,600,000 5.1 1.9 1.3 1.2 1.0 2.6 9,000 0 0.0 0 50,000 3,000 320,000 100,000 10,000,000 5,300 30,000 9,700,000 2.1 1.4 1.1 1.9 56,000 21,000 370,000 420,000 12,000,000 1,000 170,000 580,000 9,700,000 1,700,000 460,000 21,000,000 1.9 1,200,000 26,000,000 7.1 5.1 2.0 1.4 1.2 1.9 1.0 2.0 490,000 10,000 24,000 530,000 6,300 580,000 56,000 1,700,000 31 December 2020 Ore Reserve by Deposit Proved Probable Proved + Probable Deposit Tonnes t Grade g/t Contained Au oz Tonnes Grade g/t Contained Au oz Tonnes Grade g/t Contained Au oz M1 South UG 460,000 M1 South M1 North M5 M3 250,000 69,000 81,000 ROM Stockpile 1,000,000 Total* 1,900,000 8.6 2.9 1.6 1.6 1.2 3.3 130,000 1,600,000 23,000 400,000 4,000 430,000 4,000 15,000,000 150,000 38,000 9.2 7.3 2.3 1.4 1.7 480,000 2,100,000 94,000 650,000 31,000 500,000 670,000 15,000,000 8,000 150,000 1,000,000 9.1 5.6 2.2 1.4 1.7 1.2 610,000 120,000 35,000 670,000 8,000 38,000 200,000 18,000,000 2.2 1,300,000 20,000,000 2.3 1,500,000 * 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. The changes to the Ore Reserve from December 2020 to December 2021 are comprised of: inclusion of the Toega Ore Reserve of 580,000 oz; open-pit mining depletion of 210,000 oz; underground mining depletion of 113,000 oz; stockpile balance increased by 18,000 oz from 2020 closing stocks; and optimisation and redesign of the M5 final pit decreased Ore Reserves by 53,500 oz. » » » » » 26 L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I 27 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 ROD LEONARD BSc and MSc (Metallurgical Engineering), MAusIMM, MSME, GAICD Lead Independent Director and Non-Executive Director 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: Remuneration, Technical and Audit Other ASX listed directorship: Lycopodium Limited Previous ASX listed directorship in the last 3 years: Nil ELIZABETH (LIBBY) MOUNSEY BBus (Human Resources and Industrial Relations), MAICD 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. She holds a Bachelor of Business (Human Resources & Industrial Relations) from Edith Cowan University and is a Member of the Australian Institute of Company Directors. Ms Mounsey joined the Board on 29 May 2020. Committee memberships: Remuneration (Chair) Other ASX listed directorship: Nil Previous ASX listed directorship in the last 3 years: Nil 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. RICHARD HYDE BSc (Geology and Geophysics), MAusIMM, MAIG Executive Chairman and Chief Executive Officer Richard Hyde is a geologist with over 25 years’ experience in the mining industry and more than 19 years of experience in West Africa. He 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. Committee memberships: Technical Other ASX listed directorship: Nil Previous ASX listed directorship in the last 3 years: Nil LYNDON HOPKINS BSc (Geology), MAusIMM, MAIG Executive Director and Chief Operating Officer 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. He was also Mine Manager for the construction of Regis Resources Ltd’s Rosemont Gold Mine. Mr Hopkins has been West African’s Chief Operating Officer since 2015 and commenced as a Director on 6 September 2019. Committee memberships: Technical Other ASX listed directorship: Nil Previous ASX listed directorship in the last 3 years: Nil 28 29 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSCHAIRMAN’S LETTERHIGHLIGHTSOF THE YEARFINANCIALREPORTDIRECTORS ’REPORTWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021NIGEL SPICER BSc (Mining), CEng, MAusIMM Non-Executive Director 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. Mr Spicer joined the Board on 6 September 2019. Committee memberships: Audit, Technical (Chair) Other ASX listed directorship: Nil Previous ASX listed directorship in the last 3 years: Nil STEWART FINDLAY BCom (Accounting and Finance), MAICD Non-Executive Director 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. He 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. Mr Findlay joined the Board on 29 May 2020. Committee memberships: Audit (Chair), Remuneration Other ASX listed directorship: Nil Previous ASX listed directorship in the last 3 years: Nil Company Secretary PADRAIG O’DONOGHUE Chief Financial Officer since June 2018 and Company Secretary since May 2020 Principal activities During the year, the principal activities of the Group were comprised of: » operation of the Sanbrado Gold Project (‘Sanbrado’); » work activities to advance the feasibility study of the Toega gold deposit (‘Toega’); and » mineral exploration on the Group’s exploration tenements located in Burkina Faso. 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 following significant changes in the state of affairs of the Group occurred in the year: » Acquisitions of the Kiaka Gold Project and the Toega Gold Deposit were completed which improve the future growth prospects of the Group; and » The Syndicated Debt Facility with Taurus Mining Finance was fully repaid, which substantially de- leveraged the Group’s balance sheet. Significant events after balance sheet date As explained in the “Operations Review” section of this report, on 24 January 2022 a military group led by Lieutenant-Colonel Paul-Henri Sandaogo Damiba, assumed control of the Burkina Faso government and on 1 March 2022 established a transitionary government with a signed charter committing to return to a democratically elected government within three years in which senior members of the transitionary government are ineligible to be elected. The Directors are pleased to advise that the Group’s Sanbrado Gold Operations in Burkina Faso are continuing to operate as usual, and the Company’s observation is that the government bureaus are continuing to function, and no controversial legislative changes have been proposed. Aside from the above event, 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 Review”, “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. 30 31 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSCHAIRMAN’S LETTERHIGHLIGHTSOF THE YEARFINANCIALREPORTDIRECTORS ’REPORTWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021Share options and performance rights 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 28-Dec-18 20-Jan-20 11-Jun-20 Performance Rights* 20-Jan-20 20-Jan-20 11-Jun-20 11-Jun-20 8-Jul-20 8-Dec-20 17-Dec-20 17-Dec-20 22-Jan-21 22-Jan-21 9-Apr-21 9-Apr-21 9-Apr-21 20-May-21 20-May-21 20-May-21 11-Jun-21 10-Feb-22 $0.4300 $0.6061 $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 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 Total options and performance rights on issue * Performance rights are granted subject to various performance hurdles. 28-Dec-22 20-Jan-24 11-Jun-24 20-Jan-23 20-Jan-25 11-Jun-23 11-Jun-25 8-Jul-23 8-Dec-24 17-Dec-22 17-Dec-24 22-Jan-23 22-Jan-24 9-Apr-24 9-Apr-26 9-Apr-25 20-May-24 20-May-26 20-May-25 11-Jun-24 10-Feb-24 1,223,828 131,578 657,894 2,013,300 315,866 131,578 867,041 657,894 176,951 2,995,000 28,586 2,500,000 44,554 82,942 174,478 69,306 69,306 626,496 402,103 402,102 10,148 89,092 9,643,443 11,656,743 Non-audit services 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 25 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 Professional 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. 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 A 6 6 6 6 6 6 B 6 6 6 6 6 6 A - - 3 3 3 - B - - 3 3 3 - A - - 2 - 2 2 B - - 2 - 2 2 A 4 4 4 4 - - B 4 4 4 4 - - Director Richard Hyde Lyndon Hopkins Rod Leonard Nigel Spicer Stewart Findlay Libby Mounsey A – the number of meetings held whilst a Director or a committee member B – the number of meetings the Director or committee member attended 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. 32 33 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSCHAIRMAN’S LETTERHIGHLIGHTSOF THE YEARFINANCIALREPORTDIRECTORS ’REPORTWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021Remuneration Report (Audited) The Directors of West African Resources Limited present the Remuneration Report for the Group for the year ended 31 December 2021. 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 Non-Executive Directors (‘NEDs’); and the Executive Directors and the other senior executives with authority for planning, directing and controlling the major activities of the Group (together the ‘Executives’). 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 2021 compared to the 4 previous reporting periods. Period ending December 2021 December 2020 December 2019 December 2018 June 2018 Reporting period length 12 months 12 months 12 months 6 months 12 months EPS (cents) 20.9 Dividends (cents per share) Nil 10.2 Nil (0.5) Nil (0.5) Nil (4.3) Nil Net profit / loss ($’000) 214,438 98,900 (4,334) (3,551) (25,300) Share price ($) 1.320 1.050 0.430 0.250 0.380 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: » Executive remuneration, including the executive incentive scheme framework and associated policies, targets, and awards; The KMP during the year are set out below: » matters related to Executive and Non-Executive Director (‘NED’) recruitment, retention, performance measurement Name Position Appointed Resigned and termination; and » NED remuneration. Non-Executive Directors Nigel Spicer Rod Leonard Non-Executive Director September 2019 Non-Executive Director Lead Independent Director September 2019 February 2021 Stewart Findlay Non-Executive Director Libby Mounsey Non-Executive Director May 2020 May 2020 Executive Directors Richard Hyde Lyndon Hopkins Senior Executives Padraig O’Donoghue Executive Chairman and Chief Executive Officer Executive Director and Chief Operating Officer September 2006 September 2019 Chief Financial Officer and Company Secretary June 2018 May 2020 - - - - - - - - Matthew Wilcox Chief Development Officer September 2018 January 2021 The Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of Executives and NEDs by reference to relevant employment market conditions in comparative peer companies both locally and internationally with the overall objective of maximising stakeholder benefit from the retention and incentivisation of a high performing Board 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 External remuneration consultants may be engaged directly by the Board or the Remuneration Committee to provide information or advice. Where a remuneration recommendation is made relating to Board, Executive and KMP, the advice will be provided directly to an Independent Non-Executive Director and shall be free of influence from management. In 2021 there was no engagement with remuneration specialists for advice relating to Board, Executive or KMP remuneration, and therefore, no fees were paid to remuneration consultants during this period. In 2018 the Remuneration Committee engaged BDO Remuneration and Reward Pty Ltd (‘BDO’) to review and provide recommendations on the design of the 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. 34 35 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSCHAIRMAN’S LETTERHIGHLIGHTSOF THE YEARFINANCIALREPORTDIRECTORS ’REPORTWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021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; transparent and easily understood; and acceptable to shareholders. 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. D. REMUNERATION FRAMEWORK The following executive remuneration framework was recommended by the Remuneration Committee and adopted by the Board in 2018. Type Category Definition of category Purpose summary Fixed remuneration Total fixed remuneration At-risk remuneration Short term incentive At-risk remuneration Long term incentive Pay which is linked to the present value and market rate of the role. Pay for delivering the plan and growth agenda for WAF which must create value for shareholders. Incentive pay will be linked to the achievement of ‘line-of- sight’ performance goals. It reflects ‘pay for performance’. Pay for creating value for shareholders. Reward pay is linked to shareholder returns. It reflects ‘pay for results’. Pay for fulfilling the requirements of the role. 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 14 May 2021. The purpose of the Plan is to: a. assist in the reward, retention and motivation of participants; b. link the reward of participants to performance and the creation of shareholder value; c. align the interests of participants more closely with the interests of shareholders; and 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. 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 incentive, which contains a vesting condition that requires the Executive to remain in continuous service to the Company until the LTI equity awards vest. 36 37 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSCHAIRMAN’S LETTERHIGHLIGHTSOF THE YEARFINANCIALREPORTDIRECTORS ’REPORT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. During the year the annual fee levels paid to NEDs were increased as follows: Annual fee level  Title Before change After change Date of change Lead Independent Director* Not applicable $112,500 1 February 2021 Other NEDs $75,000 $90,000 1 April 2021 * The Lead Independent Director is a new WAF board position that commenced on 1 February 2021. 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 2021 was either one of the following, at the election of each individual NED: i) 100% of NED fees, paid in cash; or ii) 70% of 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 in respect of their 2021 NED fees. During 2021, 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. 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 At-risk remuneration (STI and LTI) 42% 45% 50% 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. In the Board’s view this provides a balance of Executive incentivisation 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 STI equity incentive LTI equity incentive 14% 17% 20% 25% 25% 40% 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. 38 39 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSCHAIRMAN’S LETTERHIGHLIGHTSOF THE YEARFINANCIALREPORTDIRECTORS ’REPORT  B. EXECUTIVE SERVICE AGREEMENTS The terms and conditions of employment of Executives are set out in their Executives’ Service Agreements (‘ESAs’). A summary of Executive’s ESAs is shown in the following table. Executive Salary change^ Contract term Company notice-period Employee notice-period Termination benefit* Richard Hyde Increased from $585,000 to $587,671 Until terminated by either party 6-months’ notice 3-months’ notice Nil termination benefit Lyndon Hopkins Padraig O’Donoghue Increased from $450,000 to $452,055 Increased from $350,000 to $351,598 Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above ^ Amount shown includes annual salary plus superannuation. The Executives’ salary change fully relates to the Australian statutory superannuation rate increase from 9.5% to 10% on 1 July 2021. * 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 2020 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. C. AT-RISK REMUNERATION At the beginning of 2021 the Board set out STI and LTI performance targets for Executives to earn their at-risk remuneration. The following table summarises the Executives’ 2021 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 portions (as set out in section 4A of this report). STI Target Weighting Level of achievement At least 210,000 ounces of gold is produced from Sanbrado in 2021 2021 production guidance is achieved, being 250,000 to 280,000 ounces of gold 2021 cost guidance is achieved, being AISC of US$720 to US$800 per ounce There are no significant social or environmental incidents recorded The Sanbrado 12-month rolling TRIFR is below the gold industry standard for Western Australia Weighted average level of achievement Gateway hurdle which determines if any STI will be paid for 2021 Gateway achieved 40% 20% 20% 20% 100% 100% 100% 100% 100% For 2021 the Executives earned 100% of the cash portion of their 2021 STI. The 2021 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 100% of their 2021 STI Performance Rights will vest. The following table sets out the vesting conditions of the 2021 LTI equity instruments issued to Executives at the beginning of 2021 along with their proportion of each Executive’s overall 2021 equity LTI and end-of-year vesting status. LTI equity instrument Proportion of 2021 equity LTI Vesting conditions Vesting status 2021 Production LTI Performance Rights (expire 5 years from issue date) At least 600,000 ounces of gold is poured within the 3-year period from 1 January 2021 to 31 December 2023. 50% Unvested L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I The proportion of Performance Rights that vest will be determined by the board based on the average annual total shareholder return (‘TSR’) over the three-year performance period (1 January 2021 to 31 December 2023). TSR will be measured by the difference in the WAF share price from the 7-day VWAP prior to, and at the end of, the performance period: The Board will make its determination based on the following guidelines: TSR 0% to 5% Vesting proportion nil to 33% 5% to 10% 33% to 100% 25% > 10% 100% Unvested The proportion of Performance Rights that vest will be determined by the board based on replacement of Ore Reserves1 due to depletion over the three-year period from 1 January 2021 to 31 December 2023 using the following guidelines: Ore Reserve change Ore reserve is depleted Ore reserve is maintained Vesting proportion nil 50% Ore reserve is maintained or grown up to 20% 50% to 100% (straight line basis) 25% Unvested 2021 Shareholder Return LTI Performance Rights (expire 4 years from issue date) 2021 Reserve Replacement LTI Performance Rights (expire 4 years from issue date) The 2021 STI and LTI equity awards issued to the Executive Directors were approved by shareholders at the Company’s 14 May 2021 Annual General Meeting and additional details of these awards are contained in the notice of meeting. 1 Refer to ASX announcement of 9 March 2021: “WAF Resource, Reserve and production guidance update 2021” 40 41 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021  f o % d e s a b e c n a m r o f r e P n o i t a r e n u m e r n o i t a r e n u m e r e l b a i r a V n o i t a r e n u m e r d e x i F o t d e k n i l e % c n a m r o f r e p n o i t a r e n u m e R n % o i t a r e n u m e r n $ o i t a r e n u m e r l $ a t o T s $ t h g R i d e x i F l a t o T e c n a m r o f r e P s $ n o i t p O h s a C s $ u n o b l $ a t o T e $ v a e L l a u n n A e c i v r e S g n o L d n a r $ e p u S s $ e e f h s a C d n a y r a l a s s r o t c e r i D e v i t u c e x E % 9 5 % 4 5 % 5 5 % 7 4 % 4 4 % 1 4 % 8 4 % 0 4 % 4 5 % 7 4 % 1 4 % 6 4 % 5 4 % 3 5 % 6 5 % 9 5 % 2 5 % 0 6 % 6 4 % 3 5 , 6 4 7 3 4 5 , 1 , 2 6 8 4 0 9 0 3 8 , 1 9 8 2 3 0 3 1 , 6 5 1 , 8 2 2 , 1 , 6 1 6 7 5 6 6 6 8 4 7 3 , , 0 5 7 2 8 2 , 8 0 3 8 9 0 , 1 , 5 5 5 2 0 6 9 6 6 4 9 5 , 6 8 8 7 , 4 6 8 7 5 8 , 4 0 2 7 0 4 , 6 0 2 7 4 2 , 8 9 9 9 5 1 , , 0 9 3 6 8 6 , 1 3 0 3 0 3 , 5 3 8 6 9 2 6 9 1 , 6 0 6 1 , 6 0 6 , 1 1 7 6 4 2 8 9 5 5 8 , 3 1 1 , 1 6 1 - - - - - - 4 8 8 8 3 6 , 9 4 5 0 5 , 1 7 1 , 5 3 4 6 1 , 1 5 5 1 2 c e D 1 3 0 4 5 0 7 5 , 7 2 5 0 4 , 9 9 1 , 0 4 , 4 1 8 9 8 4 0 2 c e D 1 3 , 3 5 7 5 9 4 5 2 7 4 4 , 5 5 0 7 2 , , 3 7 9 3 2 4 1 2 c e D 1 3 , 0 6 6 0 5 4 7 2 3 6 4 , 1 9 4 , 1 3 2 4 8 2 7 3 , 0 2 c e D 1 3 9 5 3 3 8 3 , 9 5 5 2 3 , 4 0 1 , 6 2 6 9 6 4 2 3 , 1 2 c e D 1 3 , 9 4 4 9 5 3 2 4 7 , 1 3 1 3 4 8 2 , , 6 7 2 9 9 2 0 2 c e D 1 3 1 5 6 8 9 , 6 8 2 7 4 , - - 6 8 2 7 4 , 5 6 3 , 1 5 - 9 5 5 8 , 6 0 8 2 4 , 1 2 c e D 1 3 8 5 6 9 1 7 , 5 9 3 4 8 2 , 7 4 6 3 7 1 , 0 7 9 8 5 , 8 7 7 , 1 5 , 3 6 2 5 3 4 5 3 7 3 3 , 6 3 8 4 3 , 2 9 6 6 6 3 , 0 2 c e D 1 3 , 5 9 0 7 2 4 3 , , 4 3 7 7 5 8 , 1 , 4 3 3 8 7 , 1 4 1 1 , 7 2 6 8 2 7 4 , , 1 6 3 9 6 5 , 1 3 3 8 7 2 1 , 9 8 8 6 9 , , 9 3 6 2 4 3 , 1 1 2 c e D 1 3 d r a h c i R e d y H n o d n y L s n i k p o H s e v i t u c e x E e u h g o n o D O ’ i g a r d a P w e h t t a M * x o c l i W l a t o T 8 3 8 , 1 1 4 3 , , 6 2 9 5 9 5 , 1 7 1 3 , 1 8 8 , 1 3 8 2 6 6 8 7 7 , 1 5 , 2 1 9 5 1 8 , 1 1 3 3 2 5 1 , 7 5 9 4 3 1 , , 4 2 6 8 2 5 , 1 0 2 c e D 1 3 . 1 2 0 2 y r a u n a J 1 3 n o d e n g s e r i l i x o c W w e h t t a M * ) d e u n i t n o c ( s e m o c t u o n o i t a r e n u m e r P M K . 6 1 2 0 2 N I I I P M K E V T U C E X E - N O N O T D A P N O T A R E N U M E R F O Y R A M M U S I . B d n a ) h t C ( 1 0 0 2 t c A s n o i t a r o p r o C e h t f o s t n e m e r i u q e r e h t h t i w e c n a d r o c c a n i d e r a p e r p , 1 2 0 2 r e b m e c e D 1 3 d e d n e r a e y e h t r o f P M K e v i t u c e x e - n o n e h t f o s e r u s o l c s i d n o i t a r e n u m e r e h T e h t d n a ) h t C ( 1 0 0 2 t c A s n o i t a r o p r o C e h t f o s t n e m e r i u q e r e h t h t i w e c n a d r o c c a n i d e r a p e r p , 1 2 0 2 r e b m e c e D 1 3 d e d n e r a e y e h t r o f P M K e v i t u c e x e e h t f o s e r u s o l c s i d n o i t a r e n u m e r e h T 1 2 0 2 N I I I P M K E V T U C E X E O T D A P N O T A R E N U M E R F O Y R A M M U S I . A s e m o c t u o n o i t a r e n u m e r P M K . 6 42 . l e b a t g n w o i l l o f e h t n i d e l i a t e d e r a , s d r a d n a t S g n i t n u o c c A n a i l a r t s u A t n a v e l e r . l e b a t g n w o i l l o f e h t n i d e l i a t e d e r a , s d r a d n a t S g n i t n u o c c A n a i l a r t s u A t n a v e e r e h t l l a t o T n $ o i t a r e n u m e r l $ a t o T 9 0 4 2 3 1 , 6 2 0 5 8 , 4 8 2 9 0 1 , 6 2 0 5 8 , 5 6 2 3 1 1 , 7 6 1 , 2 3 4 3 5 5 4 , 6 2 5 2 3 , 4 3 5 5 4 , 6 2 5 2 3 , 5 1 5 9 4 , 8 1 1 , 1 s $ t h g R i 4 3 5 5 4 , 6 2 5 2 3 , 4 3 5 5 4 , 6 2 5 2 3 , 5 1 5 9 4 , 8 1 1 , 1 e c n a m r o f r e P , 5 6 7 3 2 2 5 1 5 9 4 , 5 1 5 9 4 , - 3 4 2 8 7 , - 8 1 1 , 1 - 8 1 1 , 1 5 7 3 3 0 1 , 2 8 7 , 1 8 4 5 2 9 , - 1 3 4 5 5 , , 3 2 7 8 7 5 , 8 6 2 9 3 4 - - 1 9 0 0 3 , 4 5 2 9 , 8 9 0 0 9 1 , 8 9 0 0 9 1 , - 1 6 1 , 9 7 1 6 9 7 5 8 , 5 6 3 3 9 , - - - - - - - 8 2 5 2 7 , 7 3 8 0 2 , - - - - - - - - - - - - - - s $ n o i t p O h s a C s $ u n o b l $ a t o T 5 7 8 6 8 , 0 0 5 2 5 , 0 5 7 3 6 , 0 0 5 2 5 , 0 5 7 3 6 , 9 4 0 , 1 3 - 5 2 1 , 7 7 0 5 2 4 7 1 , - 3 9 5 , 1 2 0 4 3 5 2 , , 5 2 6 8 8 3 7 0 1 , 0 6 2 - - - - - - - - - - - - - - e $ v a e L d n a l a u n n A e c i v r e S g n o L r $ e p u S 4 2 7 7 , 7 0 5 6 , - - - - - - - - 1 7 6 5 , 4 1 8 3 , 1 5 1 , 9 7 3 9 9 5 4 , 0 5 7 3 6 , 0 0 5 2 5 , 0 5 7 3 6 , 9 4 0 , 1 3 s $ e e f d n a y r a l a s h s a C 1 2 c e D 1 3 0 2 c e D 1 3 1 2 c e D 1 3 0 2 c e D 1 3 1 2 c e D 1 3 0 2 c e D 1 3 9 7 5 8 6 1 , 1 2 c e D 1 3 1 1 3 3 7 , 0 2 c e D 1 3 - 1 2 c e D 1 3 3 9 5 , 1 2 0 2 c e D 1 3 - 1 2 c e D 1 3 0 4 3 5 2 , 0 2 c e D 1 3 5 9 3 3 1 , 1 2 3 0 1 , 0 3 2 5 7 3 , 1 2 c e D 1 3 , 6 8 7 9 4 2 0 2 c e D 1 3 L E T T E R I C H A R M A N S ’ O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I . y n a p m o C e h t f o r o t c e r i D a s a w e h s t s l i h w s m r e t l i a c r e m m o c l i a m r o n n o s e c v r e s g n i t l u s n o c R H r o f l , r e d o h e r a h s d n a r o t c e r i d a s i y e s n u o M s M m o h w r o f , d t L y t P R H i t s u J o t d a p 0 0 5 0 1 1 $ s e d u c n , l d r a n o e L d o R r e c i p S l e g N i l i y a d n F t r a w e t S * y e s n u o M y b b i L y l l e n n o C k r a M m r o t S n o m S i i s e e f l d n a y r a a s h s a C * l a t o T 43 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTS 1 2 0 2 r e b m e c e D 1 3 t A d e t s e v n U d e t s e V l a t o T 1 2 0 2 c e D 1 3 r e h t o e c n a l a B e g n a h c t e N r e b m u N d e s i c r e x e s a d e t n a r G e c n a l a B n o i t a r e n u m e r 1 2 0 2 n a J 1 - - - - - 3 3 9 4 9 9 , 3 3 9 4 9 9 , 3 3 9 4 9 9 , 8 2 1 , 7 0 6 8 2 1 , 7 0 6 8 2 1 , 7 0 6 9 3 2 , 1 1 4 9 3 2 , 1 1 4 9 3 2 , 1 1 4 , 9 1 4 8 7 0 , 1 , 9 1 4 8 7 0 , 1 , 9 1 4 8 7 0 , 1 9 1 7 , 1 9 0 3 , 9 1 7 , 1 9 0 3 , 9 1 7 , 1 9 0 3 , - - - - - - ) 0 0 0 0 0 5 ( , ) 0 0 0 0 0 5 ( , - - - - - 3 3 9 4 9 9 , 8 2 1 , 7 0 6 9 3 2 , 1 1 9 , 9 1 4 8 7 0 , 1 9 1 7 , 1 9 5 3 , . 1 2 0 2 y r a u n a J 1 3 n o t n e m y o p m e f o y a d t s a l l e d y H d r a h c i R s r o t c e r i D s n i k p o H n o d n y L s e v i t u c e x E e u h g o n o D O g a r d a P ’ i * x o c l i W w e h t t a M i s h t a s a s i x o c W l i r M r o f e c n a a B * l l a t o T n o i t a s n e p m o c d e s a b - e r a h s f o s l i a t e D . 7 44 l P M K y b d e h s n o i t p O 1 2 0 2 r e b m e c e D 1 3 t A d e t s e v n U d e t s e V l a t o T 1 2 0 2 c e D 1 3 ^ r e h t o e c n a l a B e g n a h c t e N r e b m u N d e s i c r e x e s a d e t n a r G e c n a l a B n o i t a r e n u m e r 1 2 0 2 n a J 1 - - - - , 6 0 7 0 7 0 3 , , 5 7 8 2 1 0 2 , 7 8 3 , 1 9 1 0 4 5 3 4 1 , 7 7 2 2 2 , 7 7 2 2 2 , 3 6 8 0 5 , 3 6 8 0 5 , , 3 9 0 2 6 2 3 , , 3 9 0 2 6 2 3 , 7 7 2 2 2 , 7 7 2 2 2 , 3 6 8 0 5 , 3 6 8 0 5 , 7 7 2 2 2 , 7 7 2 2 2 , 3 6 8 0 5 , 3 6 8 0 5 , , 5 1 4 6 5 1 , 2 , 5 1 4 6 5 1 , 2 5 3 1 , 0 5 1 , 1 9 9 0 6 4 3 , , 4 3 2 6 9 4 , 1 , 4 3 2 6 9 4 , 1 - - - - - - - , ) 4 6 6 2 7 0 , 1 ( 3 1 1 , 0 4 8 ) 7 1 0 , 1 6 6 ( , 0 6 4 3 5 5 - ) 1 1 9 8 6 ( , ) 1 1 9 8 6 ( , ) 3 2 9 3 2 ( , 7 7 2 2 2 , 7 7 2 2 2 , 7 7 2 2 2 , 7 7 2 2 2 , , 4 4 6 4 9 4 3 , 1 1 9 8 6 , 1 1 9 8 6 , 6 8 5 8 2 , 9 0 5 2 5 , , 2 7 9 3 6 2 2 , P M K y b d l e h s t h g R e c n a m r o f r e P i e d y H d r a h c i R s r o t c e r i D s n i k p o H n o d n y L d r a n o e L d o R r e c i p S l e g N i l i y a d n F t r a w e t S y e s n u o M y b b i L s e v i t u c e x E 1 5 9 6 7 1 , - 1 5 9 6 7 1 , 1 5 9 6 7 1 , , ) 9 1 4 8 2 8 ( ) 8 6 4 8 7 4 ( , - , 8 3 8 3 8 4 , 1 * x o c l i W w e h t t a M , 7 6 6 0 1 4 6 , 6 0 3 7 2 8 , , 3 7 9 7 3 2 7 , , 3 7 9 7 3 2 7 , , ) 9 1 4 8 2 8 ( , ) 4 3 7 2 7 6 2 ( , , 8 4 8 2 4 8 , 1 , 8 7 2 6 9 8 8 , . 1 2 0 2 y r a u n a J 1 3 n o t n e m y o p m e f o y a d t s a l l i s h t a s a s i x o c W l i r M r o f e c n a a B * l l a t o T ) 0 4 8 8 9 2 ( , 7 6 1 , 0 6 3 , 7 0 9 4 3 4 , 1 e u h g o n o D O g a r d a P ’ i Options granted during the year as remuneration to KMP There were no options granted to KMP in 2021. Performance Rights granted during the year as remuneration to KMP Type Number granted Value each Total value 44,554 $0.7950 $35,420 Grant date 22-Jan-21 22-Jan-21 22-Jan-21 9-Apr-21 9-Apr-21 9-Apr-21 20-May-21 20-May-21 20-May-21 Total 21-Jan-21 23-Feb-21 2-Jul-21 9-Jul-21 9-Aug-21 16-Sep-21 Total Other B Other B Other A STI LTI LTI STI LTI LTI 44,554 82,942 138,613 103,959 34,653 589,368 603,154 201,051 1,842,848 $1.0200 $0.9750 $0.9650 $0.9650 $0.5000 $1.0350 $1.0350 $0.6300 $45,445 $80,868 $133,762 $100,320 $17,327 $609,996 $624,264 126,662 $1,774,064 Value each on exercise date $0.9750 $0.8250 $1.0100 $1.1100 $1.0450 777,308 1,733,681 23,923 68,911 68,911 - - - - - - 500,000 $1.0100 2,672,734 500,000 Other A = in lieu of STI cash incentives Other B = in lieu of 30% of Directors’ fees Options and Performance Rights exercised during the year by KMP Exercise date Rights No. of options No. of Performance Options and Performance Rights forfeited / lapsed during the year by KMP Lapse date 31-Jan-21 Total No. of Performance Rights 828,419 828,419 No. of options Financial year in which the options/ performance rights were granted - - 2020 . r a e y e h t g n i r u d d e s p a l i t a h t s t h g R e c n a m r o f r e P ^ 45 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSCHAIRMAN’S LETTERHIGHLIGHTSOF THE YEARFINANCIALREPORTDIRECTORS ’REPORTWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021                                                     Share holdings of KMP  Balance 1 Jan 2021  Issued as remuneration Issued on exercise of options/ performance rights Net change other Balance 31 Dec 2021 Directors Richard Hyde 18,280,769 Lyndon Hopkins 3,500,000 Rod Leonard Nigel Spicer Stewart Findlay - - - Libby Mounsey 16,000 Executives Padraig O’Donoghue - Matthew Wilcox* 581,395 Total 22,378,164 * Balance for Mr Wilcox is as at his last day of employment on 31 January 2021. - - - - - - - - - 1,072,664 (1,000,000) 18,353,433 661,017 (375,000) 3,786,017 68,911 68,911 - - - - 68,911 68,911 - 23,923 24,000 63,923 798,840 24,000 822,840 478,468 - 1,059,863 3,172,734 (1,327,000) 24,223,898 8. Loans to KMP There were no loans to KMP during the year. 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 91 and forms part of this Directors’ Report. Signed in accordance with a resolution of the Directors. L E T T E R I C H A R M A N S ’ Richard Hyde Executive Chairman & CEO Perth, 30 March 2022 O F T H E Y E A R I H G H L I G H T S R E P O R T I D R E C T O R S ’ R E P O R T F I N A N C A L I 46 47 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021CONTENTSWEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021     Contents Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes In Equity Consolidated Statement of Cash Flows 49 50 51 52 Notes to the Financial Statements Directors’ Declaration Auditor’s Independence Declaration Independent Auditor’s Report ASX Additional Information Summary of Tenements 53 90 91 92 97 99 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2021 Revenue from continuing operations Cost of sales Exploration and evaluation expenses Corporate and technical services Growth and development Share-based payments Other expenses Finance expenses Forex realised loss Forex unrealised gain (loss) Profit before tax Income tax expense Profit 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 for the year Profit attributable to: Owners of the parent Non-controlling interest Total comprehensive profit attributable to: Owners of the parent Non-controlling interest Basic profit per share (cents per share) Diluted profit per share (cents per share) Note 3 4(a) 4(b) 5 23 23 6 6 2021 $'000 712,140 (306,805) (2,284) (5,741) (1,218) (2,492) (6,176) (58,730) (5,924) (1,223) 321,547 (107,109) 214,438 (2,265) (2,265) 212,173 188,964 25,474 214,438 186,699 25,474 212,173 20.9 20.7 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 10.2 10.1 48 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|39 49 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 Consolidated Statement of Financial Position As at 31 December 2021 Note 7 8 9 10 11 12 13 14 15 14 15 16 17 18 19 CURRENT ASSETS Cash and cash equivalents Restricted cash 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 2021 $'000 183,374 1,626 42,507 58,977 39 286,523 329,556 12,713 175,455 517,724 804,247 106,072 - 214 5,591 85,418 197,295 12,904 7,096 12,579 19,967 52,546 249,841 554,406 335,334 4,173 185,540 525,047 29,359 554,406 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 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. West African Resources Limited|39 50 l a t o T 0 0 0 $ ' 1 3 2 4 7 , 0 0 9 8 9 , ) 3 5 5 5 ( , 7 4 3 3 9 , 4 4 3 2 , - 3 4 3 2 , - 0 0 0 $ ' t s e r e t n i 8 3 5 9 , ) 1 2 1 2 ( , - 8 3 5 9 , - ) 1 8 3 ( - - 5 6 2 2 7 1 , 6 3 0 7 , 5 6 2 , 2 7 1 8 3 4 , 4 1 2 ) 5 6 2 , 2 ( 3 7 1 , 2 1 2 1 7 0 , 0 7 1 - 7 8 5 , 2 ) 0 9 6 , 2 ( 6 0 4 , 4 5 5 - 6 3 0 , 7 5 7 4 5 2 , 5 7 4 5 2 , - - ) 2 6 4 ( ) 0 9 6 2 ( , 9 5 3 , 9 2 g n i l l o r t n o c - n o N d e s a b - e r a h S y c n e r r u c n g i e r o F l d e t a u m u c c A e v r e s e r s t n e m y a p e v r e s e r n o i t a l s n a r t ) s e s s o l ( / s t i f o r p l a t i p a c d e u s s I y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C 1 2 0 2 r e b m e c e D 1 3 d e d n e r a e y e h t r o F - - - - - 0 0 0 $ ' 6 1 9 7 , 3 4 3 2 , ) 2 1 3 ( 7 4 9 9 , 7 4 9 , 9 - - - - - - 7 8 5 2 , 4 3 5 , 2 1 0 0 0 $ ' - ) 3 4 5 ( ) 3 5 5 5 ( , ) 3 5 5 5 ( , - - - - ) 6 9 0 6 ( , - ) 6 9 0 , 6 ( ) 5 6 2 2 ( , ) 5 6 2 2 ( , - - - - 0 0 0 $ ' 2 6 3 9 8 , ) 0 4 9 3 9 ( , - 2 6 3 9 8 , - 1 8 3 - 2 1 3 ) 5 8 8 3 ( , - ) 5 8 8 , 3 ( 3 6 9 8 8 1 , 3 6 9 8 8 1 , - - - 2 6 4 - - - 0 0 0 $ ' 9 1 9 2 6 1 , - - - 4 4 3 2 , 3 6 2 5 6 1 , 3 6 2 , 5 6 1 - - - s t s o c n o i t c a s n a r t f o t e n d o i r e p e h t g n i r u d d e u s s i s e r a h S d o i r e p e h t r o f ) s s o l ( t i f o r p e v i s n e h e r p m o c r e h t O d o i r e p e h t r o f ) s s o l ( t i f o r p e v i s n e h e r p m o c l a t o T 0 2 0 2 y r a u n a J 1 t a e c n a a B l x a t r e t f a t i f o r P d o i r e p e h t r o f ) s s o l ( t i f o r p e v i s n e h e r p m o c r e h t O d o i r e p e h t r o f ) s s o l ( t i f o r p e v i s n e h e r p m o c l a t o T 1 2 0 2 y r a u n a J 1 t a e c n a a B l x a t r e t f a t i f o r P s n o i t p o d e r i p x e f o n o i t a c i f i s s a l c e R 0 2 0 2 r e b m e c e D 1 3 t a e c n a a B l s t n e m y a p d e s a b - e r a h S t s e r e t n i g n i l l o r t n o c - n o n o t r e f s n a r T 1 7 0 0 7 1 , s t s o c n o i t c a s n a r t f o t e n d o i r e p e h t g n i r u d d e u s s i s e r a h S - - - n o i t u b i r t s i d t i f o r p t s e r e t n i i y t i r o n m y r a d i s b u S i s t n e m y a p d e s a b - e r a h S t s e r e t n i g n i l l o r t n o c - n o n o t r e f s n a r T ) 1 6 3 , 8 ( 0 4 5 , 5 8 1 4 3 3 , 5 3 3 1 2 0 2 r e b m e c e D 1 3 t a e c n a a B l . s e t o n g n i y n a p m o c c a e h t h t i w n o i t c n u n o c n j i d a e r e b d u o h s l y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C e v o b a e h T d e t i m i L s e c r u o s e R n a c i r f A t s e W | 0 4 51 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 Consolidated Statement of Cash Flows For the year ended 31 December 2021 Notes to the Consolidated Financial Statements For the year ended 31 December 2021 OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Income tax paid Interest received Interest paid Other income Net cash inflow from operating activities INVESTING ACTIVITIES Payments for property, plant and equipment Capitalised exploration and evaluation expenditure Payment for acquisition of assets, net of cash acquired 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 Subsidiary minority interest profit distribution Payments for share issue costs Payments for lease liabilities Interest paid on borrowings Financing costs Transaction costs related to loans and borrowings Net cash outflow from financing activities Note 20(a) 18(b) 18(b) 20(b) 18(b) 20(b) 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 2021 $'000 687,597 (301,151) (36,538) 602 (850) - 349,660 (48,254) (7,003) (52,704) - - (107,961) 136,250 1,042 - (235,064) (2,690) (4,040) (5,331) (13,395) (31,330) - (154,558) 87,141 95,027 1,206 183,374 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 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. The financial information for the parent entity, West African Resources Limited, is disclosed in note 30 and has been prepared on the same basis as the Group. 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 had control. D. ADOPTION OF NEW AND REVISED STANDARDS There have been no new or amended accounting standards or interpretations issued by the Australian Accounting Standard’s Board (AASB) that have been applied for the first time in the current reporting period. There are no forthcoming standards and amendments that are expected to have a material impact on the Group in the current or future reporting periods, or on foreseeable future transactions. E. 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. The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 52 West African Resources Limited|41 42|West African Resources Ltd 53 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 1 BASIS OF PREPARATION (CONTINUED) 1 BASIS OF PREPARATION (CONTINUED) E. SIGNIFICANT ACCOUNTING JUDGEMENTS AND KEY ESTIMATES (CONTINUED) G. INCOME TAXES 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 and exploration and evaluation expenses 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 and inflation 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. F. 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. The income tax expense or benefit for the period is based on the profit or loss for the period 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. H. 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. I. 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. J. 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. 54 West African Resources Limited||4433 44|West African Resources Ltd 55 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 1 BASIS OF PREPARATION (CONTINUED) K. 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. 1 BASIS OF PREPARATION (CONTINUED) K. 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. Mines under construction L. EXPLORATION AND EVALUATION 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. Exploration and evaluation (‘E&E’) costs are captured separately for each area of interest. Such costs comprise direct costs and an appropriate portion of related overhead expenditure. E&E costs, including acquisition costs, are capitalised when incurred in areas limited to a size related to a known mineral resource capable of supporting a mining operation for which the Group has rights of (or is acquiring rights of) tenure and where activities have reached a stage which permits a reasonable assessment of the existence of economically recoverable ore reserves, and active and significant operations in relation to the area are continuing. Each capitalised area of interest is regularly reviewed. If the project is abandoned or if it is considered unlikely that capitalised costs will be recouped through development or sale of the project then accumulated costs to that point are written off immediately. 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. Mine development assets M. RECOVERABLE AMOUNT OF NON-CURRENT 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. 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. N. TRADE AND OTHER ACCOUNTS PAYABLE Trade and other accounts payable represent the principal amounts outstanding at balance date, plus, where applicable, any accrued interest. O. 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. 56 West African Resources Limited||4455 West African Resources Limited||4477 57 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 1 BASIS OF PREPARATION (CONTINUED) 1 BASIS OF PREPARATION (CONTINUED) P. 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. Q. 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. R. 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. S. 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. T. 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, Société des Mines de Sanbrado SA, Volta Properties SARL, Kiaka Gold SARL and Kiaka SA, 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, Channel Resources (Cayman II) Ltd, Volta Resources (Cayman) Inc., and Volta 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. 58 West African Resources Limited||4477 48|West African Resources Ltd 59 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 1 BASIS OF PREPARATION (CONTINUED) U. FINANCIAL ASSETS 2 SEGMENT REPORTING A. DESCRIPTION OF SEGMENTS 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. 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. The operating segments of the Group are: Mining Operations: in the current period comprise the Sanbrado Gold Project operations located in Burkina Faso. Exploration & Evaluation: in the current period comprises exploration and evaluation activities in locations other than Sanbrado. B. SEGMENT INFORMATION 2020 Total segment revenue Total segment expenses Total segment results Segment assets at 31 December 2020 Segment liabilities at 31 December 2020 2021 Total segment revenue Total segment expenses Total segment results Segment assets at 31 December 2021 Segment liabilities at 31 December 2021 Mining operations $'000 Exploration & Evaluation $'000 310,667 145,148 165,519 471,222 137,036 712,130 305,626 406,504 584,190 179,541 129 2,516 (2,388) 17,339 232 - 3,463 (3,463) 131,165 554 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 gains (losses) Profit before income tax All metal sales in the year were made to MKS PAMP SA. Other $'000 371 5,079 (4,708) 42,152 221,180 10 6,959 (6,949) 88,892 69,746 2021 $’000 396,092 (2,492) (58,730) (6,176) (7,147) 321,547 Total $'000 311,167 152,743 158,423 530,713 358,448 712,140 316,048 396,092 807,247 248,841 2020 $’000 158,423 (2,343) (26,139) (2,769) 14,196 141,368 60 West African Resources Limited||4499 West African Resources Limited||5511 61 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 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 2021 $'000 711,536 603 1 712,140 2021 $'000 209,157 43,273 57,241 (3,407) 541 306,805 255 53 5,868 6,176 2021 $'000 103,819 (692) 3,982 107,109 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 5 INCOME TAX (CONTINUED) B. NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE Accounting profit before tax Income tax expense at 30% 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 Income tax expense C. UNRECOGNISED DEFERRED TAX BALANCES (a) Unrecognised deferred tax assets Annual leave provision Accrued expenses Employee provisions Long service leave provision Borrowings Leases Tax losses Section 40-880 undeducted losses (b) Unrecognised deferred tax liabilities Prepayments Right-of-use assets Borrowing costs Net unrecognised deferred tax asset 2021 $’000 321,547 96,464 7,184 (8,266) (241) (793) 4,629 8,132 107,109 2021 $’000 73 107 - 20 14,406 68 23,590 634 (2) (63) - 38,833 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 62 West African Resources Limited||5511 52|West African Resources Ltd 63 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 6 EARNINGS PER SHARE 9 INVENTORIES Basic profit per share (cents per share) Diluted profit per share (cents per share) The profit and weighted average number of ordinary shares used in the calculation of basic earnings per share is as follows: 2021 $ 20.9 20.7 2020 $ 10.2 10.1 Ore stockpiles – cost Finished goods – cost Gold in circuit – cost Consumable supplies and spares – cost 2021 $'000 34,646 6,086 2,913 15,332 58,977 2020 $'000 24,895 14,131 2,278 10,646 51,950 Attributable profit for the year 188,963,472 89,362,219 Weighted average number of shares outstanding during the period used in calculations of basic profit per share Weighted average number of diluted shares outstanding during the period used in calculations of diluted profit per share 901,991,086 873,899,037 912,120,649 880,451,906 7 CASH AND CASH EQUIVALENTS Cash at bank Cash in hand 8 TRADE AND OTHER RECEIVABLES Current Prepayments Other receivables 2021 $'000 183,277 97 183,374 2021 $'000 6,294 36,213 42,507 2020 $'000 94,944 83 95,027 2020 $'000 2,945 19,690 22,635 Other receivables include value added tax receivable from the Burkina Faso government of $35,668,000 (2020: $19,275,000). 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 2021 $'000 - - - 2020 $'000 (2,084) 2,084 - 64 54|West African Resources Ltd 54|West African Resources Ltd 65 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 l a t o T 0 0 0 ’ $ 8 3 2 3 5 3 , ) 1 5 6 3 2 ( , 7 8 5 9 2 3 , 0 6 4 , 0 1 4 ) 4 0 9 , 0 8 ( 6 5 5 , 9 2 3 - 1 0 7 2 4 2 , ) 9 6 6 8 2 ( , 8 2 8 7 3 1 , ) 4 7 6 1 2 ( , - 2 6 0 5 , ) 1 6 6 5 ( , 7 8 5 9 2 3 , 1 2 0 4 , ) 0 2 5 1 ( , 1 0 5 2 , 6 0 6 , 5 ) 4 4 5 , 3 ( 2 6 0 , 2 - - 2 3 2 0 1 3 , 8 2 8 5 0 2 , ) 3 8 1 3 1 ( , 5 4 6 2 9 1 , 7 1 8 , 2 3 2 ) 4 2 5 , 4 3 ( 3 9 2 , 8 9 1 - - 5 8 8 7 1 4 0 2 , - - 7 2 ) 7 1 ( - 9 9 4 ) 0 6 6 ( ) 0 0 1 2 1 ( , 1 0 5 2 , 5 4 6 2 9 1 , 7 8 5 , 9 2 3 1 0 5 , 2 - 4 9 8 1 8 4 , 2 5 ) 9 8 5 , 2 5 ( 1 1 0 , 3 ) 8 2 8 , 3 ( 6 5 5 , 9 2 3 - 3 8 3 3 6 - ) 5 2 ( 2 6 0 , 2 ) 0 3 1 , 1 ( 7 8 7 9 4 1 0 6 5 , 6 2 5 4 6 , 2 9 1 ) 8 5 5 , 9 1 ( - ) 0 9 2 , 2 ( 3 9 2 , 8 9 1 5 2 8 9 2 ) 3 7 2 ( 0 5 9 5 6 ) 9 0 6 ( - - - 6 5 ) 8 ( ) 4 2 ( - 1 5 2 5 2 6 5 - - - ) 1 ( 0 5 ) 0 3 ( 11 RIGHT-OF-USE ASSETS Balance at 1 January 2020 Additions Depreciation charge for the year Effects of movement in foreign exchange Balance at 31 December 2020 Balance at 1 January 2021 Additions Depreciation charge for the year Effects of movement in foreign exchange Balance at 31 December 2021 d n a d n a L s g n d i l i u b 0 0 0 ’ $ 7 3 1 1 3 , ) 4 7 0 2 ( , 3 6 0 9 2 , 3 9 3 , 3 3 ) 4 9 8 , 6 ( 9 9 4 , 6 2 - - 1 5 1 5 9 0 3 , - 2 8 ) 6 1 ( ) 5 0 0 2 ( , - 7 2 5 1 1 , 7 2 5 1 1 , - 8 3 2 , 1 8 3 2 , 1 - - - 7 2 5 1 1 , - - - - 3 6 0 9 2 , 7 2 5 1 1 , - 6 1 5 5 8 1 3 6 0 , 9 2 ) 0 2 9 , 2 ( - ) 5 4 3 ( 9 9 4 , 6 2 0 9 7 2 5 , 1 1 5 2 3 , 6 1 ) 0 6 5 , 6 2 ( - - ) 4 4 1 ( 8 3 2 , 1 12 EXPLORATION AND EVALUATION ASSETS Balance at 1 January Additions Effects of movement in foreign exchange Balance at 31 December Property $'000 Equipment $'000 32 359 (92) - 299 299 - (90) - 209 8,103 10,838 (3,073) 53 15,921 15,921 1,462 (4,705) (174) 12,504 2021 $'000 15,255 163,101 (2,901) 175,455 Total $'000 8,135 11,197 (3,165) 53 16,220 16,220 1,462 (4,795) (174) 12,713 2020 $'000 - 15,255 - 15,255 - - - - 8 2 8 2 7 7 4 2 4 2 , ) 4 1 0 8 0 3 ( , ) 9 6 6 8 2 ( , 9 1 7 0 0 1 , - 1 4 - ) 4 5 5 6 ( , - - - - - - - 8 2 8 2 Exploration and evaluation additions in 2021 include $155,161,000 of purchase consideration paid for the Kiaka Gold Project and the Toega Gold Project. 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. s t e s s a 0 0 0 ’ $ 7 2 4 0 0 1 , ) 1 0 6 6 ( , 6 2 8 3 9 , 9 1 7 , 6 3 1 ) 3 3 3 , 5 3 ( 6 8 3 , 1 0 1 - - 3 8 7 9 6 , 2 8 5 5 2 , ) 5 8 8 6 ( , - 4 8 2 2 6 0 5 , 6 2 8 3 9 , - - 6 2 8 , 3 9 3 2 5 , 4 3 ) 1 5 9 , 8 2 ( 1 1 0 , 3 ) 3 2 0 , 1 ( 6 8 3 , 1 0 1 13 TRADE AND OTHER PAYABLES n o i t a i c e r p e d d e t a u m u c c a d n a t s o C l t s o c t a t n u o m a g n i y r r a c s s o r G n o i t a i c e r p e d d e t a u m u c c A l 0 2 0 2 r e b m e c e D 1 3 t n u o m a g n i y r r a c t e N t s o c t a t n u o m a g n i y r r a c s s o r G n o i t a i c e r p e d d e t a u m u c c A l 1 2 0 2 r e b m e c e D 1 3 t n u o m a g n i y r r a c t e N 0 2 0 2 r e b m e c e D 1 3 l e u a v g n i y r r a C d o i r e p e h t i f o g n n n g e b e h t i t A n o i t c u r t s n o c r e d n u e n m m o r f i s r e f s n a r T d o i r e p e h t r o f d e s n e p x e n o i t a i c e r p e D d o i r e p e h t r o f d e s i l a t i p a c n o i t a i c e r p e D y r o t n e v n i o t s r e f s n a r T s n o i t i d d A n o i s i v o r p n o i t a t i l i b a h e r n i e g n a h C e g n a h c x e n g e r o f n i i t n e m e v o m f o s t c e f f E n o i t a i c e r p e d d e t a u m u c c a f o t e N l 1 2 0 2 r e b m e c e D 1 3 d o i r e p e h t i f o g n n n g e b e h t i t A i t n e m p u q e d n a t n a p l , y t r e p o r p o t s r e f s n a r T s n o i t i d d A d o i r e p e h t r o f d e s n e p x e n o i t a i c e r p e D n o i t i s i u q c a r e d n u d e r i u q c a s t e s s A n o i s i v o r p n o i t a t i l i b a h e r n i e g n a h C e g n a h c x e n g e r o f n i i t n e m e v o m f o s t c e f f E n o i t a i c e r p e d d e t a u m u c c a f o t e N l d t L s e c r u o s e R n a c i r f A t s e W | 6 5 Current Trade payables Accruals Other payables Convertible note 2021 $'000 21,570 21,580 1,007 61,915 106,072 2020 $'000 24,418 15,366 695 - 40,479 The Company issued a US$45 million convertible note to B2Gold Corp as part consideration for the purchase of the Kiaka Gold Project (‘Kiaka’) that is payable in cash unless B2Gold elects to be paid in shares. The note is secured against WAF’s ownership interest in Kiaka and is due for payment by the earlier of: a) 10 business days following issue of a positive feasibility study for the Kiaka Project; b) the later of the date of commencement of construction of Kiaka and 31 May 2022; and c) 25 October 2022. 56|West African Resources Ltd 67 0 0 0 ’ $ s e l c i h e v t h g i L 0 0 0 ’ $ d n a t n a P l t n e m p u q e i 0 0 0 ’ $ e c i f f O t n e m p u q e i 0 0 0 ’ $ n i l a t i p a C s s e r g o r p 0 0 0 ’ $ r e d n u s e n M i n o i t c u r t s n o c e n M i t n e m p o e v e d l T N E M P I U Q E D N A T N A L P , Y T R E P O R P 0 1 66 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 14 LOANS AND BORROWINGS 16 PROVISIONS Current Non-current A. SYNDICATED DEBT FACILITY Current Non-current 2021 $'000 214 12,904 13,118 2021 $'000 - - - 2020 $'000 132,664 93,669 226,333 2020 $'000 132,455 81,488 213,943 During the year the Group made early debt repayments on the USD syndicated debt facility arranged by Taurus Mining Finance for the development of the Sanbrado Gold Project, which resulted in the facility being fully repaid. As at 31 December 2021 the remaining balance due under the facility was nil (2020: US$175 million). B. SUPPLIER LOAN FACILITIES Current Non-current 2021 $’000 214 12,904 13,118 2020 $’000 209 12,181 12,390 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 2021 was US$9.6 million inclusive of accrued interest (2020: US$9.6 million). 15 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 2021 $’000 5,591 7,096 12,687 850 22 872 2020 $’000 4,581 11,225 15,806 576 41 617 Total cash outflow for leases 5,331 2,949 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 2021 $’000 67 12,512 12,579 9,362 3,266 (116) 12,512 2020 $'000 44 9,362 9,406 4,218 5,182 (38) 9,362 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. It has been calculated with an inflation rate of 2.5% (2020: 2.5%) and by discounting the cash flows at a rate of 2.75% (2020: 2.75%). The amount provided each period is also capitalised as an asset under mine development assets in property, plant and equipment. 17 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 Movements: Opening balance Charged (Credited) to profit and loss Over provision in prior years Closing balance 2021 $'000 507 10,311 - 3,695 5,454 19,967 21,648 (692) (989) 19,967 2020 $'000 7 6,911 175 7,070 7,485 21,648 - 21,648 - 21,648 68 West African Resources Limited||5577 58|West African Resources Ltd 69 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 18 ISSUED CAPITAL Fully paid ordinary shares (a) Number of shares At start of period Issue of shares on exercise of options Issue of shares from capital raising Issue of shares as consideration for acquisition Balance at end of period (b) Value of shares At start of period Issue of shares on exercise of options Issue of shares from capital raising Issue of shares as consideration for acquisition Share issue costs Balance at end of period 19 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 Reclassification of expired options and rights Balance at end of period 2021 $'000 335,334 No. 878,682,646 5,969,467 109,000,000 27,121,732 2020 $'000 165,263 No. 870,478,852 8,203,794 - - 1,020,773,845 878,682,646 $'000 165,263 1,042 136,250 36,819 (4,040) 335,334 2021 $'000 4,173 (6,096) (2,265) (8,361) 9,947 2,587 - 12,534 $'000 162,919 2,369 - - (25) 165,263 2020 $'000 3,851 (543) (5,553) (6,096) 7,916 2,343 (312) 9,947 19 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 and rights issued by the Company to Directors, employees and other suppliers or consultants that are not exercised or expired. 20 CASH FLOW INFORMATION A. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASHFLOWS FROM OPERATING ACTIVITIES Profit 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 2021 $'000 214,438 57,294 2,492 255 57,880 1,223 333,582 (19,818) (7,607) (27,068) 72,252 (1,681) 349,660 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 70 West African Resources Limited||5599 60|West African Resources Ltd 71 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 20 CASH FLOW INFORMATION (CONTINUED) B. RECONCILIATION OF LOANS AND BORROWINGS AND LEASES TO NET CASH FLOWS FROM FINANCING ACTIVITIES Balance at 1 January 2020 Cash outflow from financing activities Cash inflow from financing activities Leases entered into during the year Other balance movements Effect of changes in foreign exchange rates Balance at 31 December 2020 Balance at 1 January 2021 Cash outflow from financing activities Leases entered into during the year Other balance movements Effect of changes in foreign exchange rates Balance at 31 December 2021 Loans and borrowings* Lease liabilities $’000 235,086 (35,463) 37,832 - 6,212 (17,334) 226,333 226,333 (235,064) - 21,719 130 13,118 $’000 8,475 (2,949) - 10,838 - (558) 15,806 15,806 (5,331) 1,462 - 750 12,687 Total $’000 243,561 (38,412) 37,832 10,838 6,212 (17,892) 242,139 242,139 (240,395) 1,462 21,719 880 25,805 22 COMMITMENTS AND OTHER CONTINGENCIES A. EXPLORATION AND MINING LEASE COMMITMENTS 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 B. CAPITAL COMMITMENTS 2021 $'000 1,378 2,756 - 4,134 2020 $'000 775 1,549 - 2,324 Capital expenditure contracted for and payable, but not recognised as liabilities is $1,831,000 (2020: $832,000). All of the commitments relate to the purchase of property, plant and equipment. The total amount is expected to be paid within one year of the reporting period. * Certain prior year reconciliation components have been reclassified to align with the categories presented in the current year. C. CONTINGENT LIABILITIES (i) Burkina Faso Income Tax 21 DIVIDENDS No dividends have been paid or declared payable during the year (2020: nil). Société des Mines de Sanbrado SA (‘SOMISA’) is in discussions with the Burkina Faso tax authority in relation to a reassessment resulting from an audit of its 2020 corporate income taxes. No amount in relation to this has been provided in the Group’s financial statements as the parties have not yet come to a common understanding of the underlying transactions being reassessed and the correct tax treatment under the tax code. (ii) Royalty agreements During 2021, the Group entered into royalty agreements with third parties in respect of the acquisition of the Kiaka Gold Project (‘Kiaka’) and the Toega Gold Project (‘Toega’). Royalties will become payable under the agreements when refined gold is produced from ore extracted from the physical areas covered by the agreements. • • Royalty agreements in respect of the Kiaka comprise: o o a 3% net smelter return (‘NSR’) royalty on first 2.5 million ounces of gold produced from Kiaka; a 0.5% NSR royalty on next 1.5 million ounces of gold produced from Kiaka. Royalty agreements on the first 1.5 million gold ounces produced from the Nakomgo exploration permit area were provided in respect of Toega comprising: o o a 3% NSR royalty to a value of US$25 million; and thereafter a 0.5% NSR. (iii) Other contingent liabilities There were no other material contingent liabilities at the end of the year. During the current year the Group exercised its option to buy back the ‘Product Fee’ contractual commitment under the syndicated debt facility with Taurus, which was reported as a contingent liability in the prior year. 72 62|West African Resources Ltd West African Resources Limited||6633 73 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 23 INTEREST IN SUBSIDIARIES 23 INTEREST IN SUBSIDIARIES (CONTINUED) The consolidated financial statements include the financial statements of West African Resources Limited and the subsidiaries listed in the following table: A. SUMMARISED FINANCIAL INFORMATION FOR SOCIETE DES MINES DE SANBRADO BEFORE INTRAGROUP ELIMINATIONS Ownership interest STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Revenue 2021 $'000 2020 $'000 710,265 309,856 Profit 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 operating activities Net cash used in investing activities Net cash used in financing activities 229,276 25,475 254,751 230,868 342,293 573,161 213,091 65,461 278,552 265,148 29,461 294,609 367,332 (50,782) (234,249) 82,301 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 Entities Parent company West African Resources Limited Direct subsidiaries WAF Finance Pty Ltd Wura Resources Pty Ltd SARL West African Resources Development SARL Channel Resources Ltd Volta II Ltd1 Indirect subsidiaries Channel Resources (Cayman I) Ltd Channel Resources (Cayman II) Ltd Tanlouka SARL Société des Mines de Sanbrado SA2 Volta Resources (Cayman) Inc.3 Volta Properties SARL3 Kiaka Gold SARL3 Kiaka SA2,3 Country of incorporation Australia Australia Burkina Faso Burkina Faso Canada Cayman Islands Cayman Islands Cayman Islands Burkina Faso Burkina Faso Cayman Islands Burkina Faso Burkina Faso Burkina Faso 2021 % 100 100 100 100 100 100 100 100 90 100 100 100 90 2020 % 100 100 100 100 - 100 100 100 90 - - - - 1 Incorporated on 23 September 2021. 2 The remaining 10% is held by the government of Burkina Faso which is entitled to a free carried 10% interest in the project. 3 Acquired on 30 November 2021. 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 Volta II Ltd Kiaka Gold SARL Total Provision for impairment Consolidated 2021 $'000 2020 $'000 Parent Entity 2021 $'000 2020 $'000 - - - - - - - - - - - - - - - - - - - - - - 105,788 25,647 12,784 9,451 3,956 (101) 15 (161) 104,595 180 262,154 (50,950) 211,204 40,496 23,926 12,784 16,950 3,457 56 59 1 - - 97,729 (56,230) 41,499 Further information with respect to related party transactions are included in note 26. 74 West African Resources Limited||6633 64|West African Resources Ltd 75 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 23 INTEREST IN SUBSIDIARIES (CONTINUED) 25 AUDITORS’ REMUNERATION B. SUMMARISED FINANCIAL INFORMATION FOR KIAKA SA BEFORE INTRAGROUP ELIMINATIONS STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Revenue Profit 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 operating activities Net cash used in investing activities Net cash used in financing activities 2021 $'000 - (5) (1) (6) 5 84,191 84,196 4 85,212 85,216 (918) (102) (1,020) (1) - - (1) This is the first year that Kiaka SA was consolidated into the Group and therefore no comparative amounts are provided. 24 SUBSEQUENT EVENTS AFTER THE BALANCE DATE On 24 January 2022 a military group led by Lieutenant-Colonel Paul-Henri Sandaogo Damiba, assumed control of the Burkina Faso government and on 1 March 2022 established a transitionary government with a signed charter committing to return to a democratically elected government within three years in which senior members of the transitionary government are ineligible to be elected. The Directors are pleased to advise that the Group’s Sanbrado Gold Operations in Burkina Faso are continuing to operate as usual, and the Company’s observation is that the government bureaus are continuing to function, and no controversial legislative changes have been proposed. Aside from the above event, 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. The auditor of West African Resources Limited is HLB Mann Judd Audit or review of the financial statements Amounts received or due and receivable by non HLB Mann Judd audit firms Audit or review of the Burkina Faso financial reports 26 DIRECTORS AND EXECUTIVE DISCLOSURES A. DETAILS OF KEY MANAGEMENT PERSONNEL 2021 $'000 80 80 17 17 2020 $'000 53 53 19 19 Non-Executive Directors Rod Leonard Nigel Spicer Stewart Findlay Libby Mounsey Executive Directors Richard Hyde Lyndon Hopkins Other Executives (KMPs) Non-Executive Director and Lead Independent Director Non-Executive Director Non-Executive Director Non-Executive Director Executive Chairman and CEO Executive Director and COO Appointed September 20191 September 2019 29 May 2020 29 May 2020 September 2006 September 20192 Resigned - - - - - - Padraig O’Donoghue Matthew Wilcox Chief Financial Officer and Company Secretary Chief Development Officer June 20183 September 2018 - January 2021 1 Date appointed as Lead Independent Director was February 2021 (NED since September 2019). 2 Date appointed a Director (employed since January 2017). 3 Date appointed as Company Secretary was May 2020 (employed since June 2018). B. COMPENSATION OF KEY MANAGEMENT PERSONNEL Short-term employee benefits Post-employment benefits Share-based payments 2021 $'000 1,893 110 2,001 4,004 2020 $'000 1,938 145 1,723 3,806 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. 76 West African Resources Limited||6655 West African Resources Limited||6677 77 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 26 DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) 28 FINANCIAL RISK MANAGEMENT (CONTINUED) D. LOANS TO KEY MANAGEMENT PERSONNEL There were no loans provided to Key Management Personnel during the year (2020: nil). 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 2021 that are not already included in the Remuneration Report in the Directors’ Report. 27 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 13) Loans and borrowings (note 14) Lease liabilities (note 15) 2021 $'000 183,374 42,507 39 225,920 (106,072) (13,118) (12,687) (131,877) 2020 $'000 95,027 22,635 39 117,701 (40,479) (239,781) (15,807) (296,066) 28 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 (‘EUR’), and Communaute Financière Africaine Francs (‘CFA’), being the currency of Burkina Faso. 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 0.7% 0.0% 1.0% 0.00% 7.62% 6.50% 0.4% 0.0% 0.5% 0.00% 9.75% 6.50% 63,464 - - 63,464 - - 39 39 - - - - - - - - - 133,672 4,581 - 108,253 11,225 138,253 119,478 159,512 - - 159,512 - - 39 39 - - - - - - - - - 1,289 5,591 6,880 - 13,641 7,096 20,737 - - - - - - - - - - - - - - - - 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 23,862 42,507 - 183,374 42,507 39 66,369 225,920 106,072 - 106,072 14,930 - 12,687 106,072 133,689 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 31 December 2021 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 78 West African Resources Limited||6677 68|West African Resources Ltd 79 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 28 FINANCIAL RISK MANAGEMENT (CONTINUED) 28 FINANCIAL RISK MANAGEMENT (CONTINUED) A. MARKET RISK (CONTINUED) (ii) Interest rate sensitivity A. MARKET RISK (CONTINUED) (iv) Exchange rate sensitivity At 31 December 2021, 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. 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 2020. +0.5% -0.5% 2021 $'000 707 (707) 2020 $'000 447 (447) The sensitivity is calculated using the average cash position for the year ended 31 December 2021. The interest income in note 3 of $602,635 (31 December 2020: $605,024) reflects cash balances in the year that ranged between $39,759,579 and $133,134,574 (31 December 2020: $40,878,483 and $73,476,229). (iii) Foreign currency risk USD CFA EUR (v) Price risk +10% 2021 $'000 2,968 (49,123) (2) 2020 $'000 19,019 (34,862) 1,958 -10% 2021 $'000 (3,627) 60,040 2 2020 $'000 (23,245) 42,609 (2,394) 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 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 2021 (2020: nil). The Group also has transactional currency exposures. Such exposure arises from purchases by an operating entity in currencies other than the functional currency. B. CREDIT RISK 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, EUR, 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 2021 $'000 162,974 37,876 200,850 195,053 13,002 12,460 19,967 240,482 2020 $'000 82,172 21,456 103,628 72,362 236,848 15,491 41,590 366,291 Credit risk arises mainly 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 institution); receivables related to gold sales (all gold sales have been carried out with MKS PAMP SA); and value added tax receivable from the government of Burkina Faso. • • 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 ($183,374,000 as at 31 December 2021) 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. 80 West African Resources Limited||6699 West African Resources Limited||7711 81 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 28 FINANCIAL RISK MANAGEMENT (CONTINUED) Maturity analysis of financial assets and liabilities based on management's expectation 29 SHARE-BASED PAYMENTS A. RECOGNISED SHARE-BASED PAYMENTS Consolidated The expenses recognised for services received during the year are shown in the table below: 31 December 2020 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 2021 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 1-5 years $'000 >5 years $'000 Total $'000 95,027 22,635 39 117,701 (40,479) (58,600) (2,524) (101,603) 16,098 183,374 42,507 39 225,920 (106,072) (639) (3,206) (109,917) 116,003 - - - - - - - - - (89,151) (2,524) (91,675) (91,675) - (116,252) (12,101) (128,353) (128,353) - - - - - - - - - (650) (3,206) (3,856) (3,856) - (13,641) (7,932) (21,573) (21,573) - - - - - - - - - - - - - - - - - - 95,027 22,635 39 117,701 (40,479) (264,003) (17,149) (321,631) (203,930) 183,374 42,507 39 225,920 (106,072) (14,930) (14,344) (135,346) 90,574 Share-based payments to Directors Share-based payments to employees Share-based payments to third party 2021 $'000 1,603 818 71 2,492 2020 $'000 1,254 955 133 2,343 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 2021 Number 2021 WAEP* 2020 Number 2020 WAEP* 12,557,727 1,925,989 (3,141,048) (1,628,419) 9,714,249 540,234 - - - - - - 2,287,295 10,636,406 (303,794) (62,180) 12,557,727 2,027,779 - - - - - - The performance rights outstanding at the end of the year had a weighted average remaining contractual life of 1,003 days (31 December 2020: 1,200 days) 82 West African Resources Limited||7711 West African Resources Limited||7733 83 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 29 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 44,554 44,554 82,942 174,478 69,306 69,306 626,496 402,103 402,102 10,148 Grant date 22-Jan-21 22-Jan-21 22-Jan-21 9-Apr-21 9-Apr-21 9-Apr-21 20-May-21 20-May-21 20-May-21 11-Jun-21 Original expiry period 2 years 2 years 3 years 3 years 5 years 4 years 3 years 5 years 4 years 3 years Dividend yield 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Expected volatility 64% 61% 61% 63% 67% 60% 63% 65% 59% 63% Risk-free interest rate 0.08% 0.08% 0.10% 0.10% 0.69% 0.39% 0.10% 0.70% 0.40% 0.14% Exercise price $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 $0.7950 $1.0200 $0.9750 $0.9650 $0.9650 $0.9650 $1.0350 $1.0350 $1.0350 $1.0950 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 2021 Number 2021 WAEP* 2020 Number 2020 WAEP* Outstanding at the beginning of the year 4,841,719 $0.4228 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 - (2,828,419) - 2,013,300 2,013,300 - $0.3685 - $0.4991 $0.4991 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 The share options outstanding at the end of the year had a weighted average remaining contractual life of 116 days (31 December 2020: 374 days). (b) Fair value of options granted There were no options granted during the period (31 December 2020: 867,891). 84 74|West African Resources Ltd ) D E U N I T N O C ( S T N E M Y A P D E S A B - E R A H S 9 2 I S E C N A L A B S T H G R E C N A M R O F R E P D N A S N O I T P O . F l . e b a t g n w o i l l o f e h t n i d e t n e s e r p s i 1 2 0 2 r e b m e c e D 1 3 t a s a s t h g i r e c n a m r o f r e p f o e c n a a b g n d n a t s t u o e h T i l - - 9 8 4 4 5 2 , 8 7 5 1 3 1 , 7 2 9 4 3 3 , 7 2 9 4 3 3 , - - - - - - - 4 1 1 2 3 5 , 4 9 8 7 5 6 , 1 5 9 6 7 1 , - - - - - - - d e t s e V e u s s i n O d e s i c r e x E - - - - - - ) 7 4 0 1 6 ( , ) 7 6 1 4 4 9 ( , , ) 5 6 5 2 2 0 1 ( , 7 7 3 1 6 , 7 7 3 1 6 , ) 1 7 5 2 0 9 ( , s t h g i r e c n a m r o f r e p f o r e b m u N / d e s p a L - - - - - - - - - - d e l l e c n a C d e t n a r G e c i r p e s i c r e x E e t a d y r i p x E o t n o i t a e r l n i s e n o t s e l i i m n a t r e c e h t s e v e h c a i y n a p m o C e h t n e h W e t a d g n i t s e V e t a d t n a r G 7 4 0 1 6 , 7 6 1 4 4 9 , , 5 6 5 2 2 0 1 , 0 0 0 0 0 $ . 0 0 0 0 0 $ . 0 0 0 0 0 $ . 1 2 - c e D - 8 2 3 2 - c e D - 8 2 2 2 - n u J - 1 0 n o i t c u d o r p s t h g i r e h t e t a d e h t f o s h t n o m 2 1 i n h t i w l a i c r e m m o c d n a r u o p d o g t s r i F l 8 1 - c e D - 8 2 i d e v e h c a e r a s I P K n e h W 9 1 - l u J - 7 0 j t c e o r P l d o G o d a r b n a S s t i d e u s s i e r e w 8 1 - c e D - 8 2 8 4 9 3 6 9 , 0 0 0 0 0 $ . 3 2 - n a J - 0 2 d e u s s i e r e w s t h g i r e h t e t a d e h t m o r f r a e y 1 r o f 0 2 - n a J - 9 y n a p m o C e h t f o r o t c e r i d a r o e e y o p m e n a s a e c i f f o s u o u n i t n o c d o H l l 9 8 4 4 5 2 , 0 0 0 0 0 $ . 3 2 - n a J - 0 2 d e u s s i e r e w s t h g i r e h t e t a d e h t m o r f s r a e y 2 r o f y n a p m o C e h t f o 0 2 - n a J - 9 8 7 5 1 3 1 , 0 0 0 0 0 $ . 3 2 - n a J - 0 2 d e u s s i 0 2 - n a J - 9 7 2 9 4 3 3 , 0 0 0 0 0 $ . 3 2 - n u J - 1 1 d e u s s i e r e w s t h g i r e h t e t a d e h t m o r f 0 2 - y a M - 9 2 r a e y 1 r o f y n a p m o C e h t f o e e y o p m e l n a s a e c i f f o s u o u n i t n o c l d o H e r e w s t h g i r e h t e t a d e h t m o r f s r a e y 3 n h t i i l w d e r u o p d o g z o 0 0 0 0 0 5 , 4 1 1 2 3 5 , 0 0 0 0 0 $ . 3 2 - n u J - 1 1 d e u s s i e r e w s t h g i r e h t e t a d e h t m o r f s r a e y 2 r o f y n a p m o C e h t f o 0 2 - y a M - 9 2 1 5 9 6 7 1 , 0 0 0 0 0 $ . 3 2 - l u J - 8 d e u s s i e r e w s t h g i r e h t e t a d e h t m o r f s r a e y 2 r o f y n a p m o C e h t f o 0 2 - l u J - 2 l e e y o p m e n a s a e c i f f o s u o u n i t n o c d o h d n a d e v e h c a e r a s I P K n e h W i l 4 9 8 7 5 6 , 0 0 0 0 0 $ . 5 2 - n u J - 1 1 d e u s s i 0 2 - y a M - 9 2 e r e w s t h g i r e h t e t a d e h t m o r f s r a e y 3 n h t i i l w d e r u o p d o g z o 0 0 0 0 0 5 , e r e w s t h g i r e h t e t a d e h t m o r f s r a e y 3 n h t i i l w d e r u o p d o g z o 0 0 0 0 0 5 , l e e y o p m e n a s a e c i f f o s u o u n i t n o c d o h d n a d e v e h c a e r a s I P K n e h W i l l e e y o p m e n a s a e c i f f o s u o u n i t n o c d o h d n a d e v e h c a e r a s I P K n e h W i l ) 9 1 4 8 7 ( , 9 1 4 8 7 , 0 0 0 0 0 $ . 5 2 - l u J - 8 d e u s s i 0 2 - l u J - 2 m o r f r a e y 1 r o f y n a p m o C e h t f o r o t c e r i d a s a e c i f f o s u o u n i t n o c d o H l ) 2 2 8 7 3 1 ( , - 2 2 8 7 3 1 , 0 0 0 0 0 $ . 2 2 - l u J - 8 d e u s s i e r e w s t h g i r e h t e t a d e h t 0 2 - y a M - 9 2 d t L s e c r u o s e R n a c i r f A t s e W | 4 7 85 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 8 5 7 6 8 , 8 5 7 6 8 , - - , 0 0 5 7 9 4 1 , , 0 0 5 7 9 4 1 , 2 7 1 7 5 , 2 7 1 7 5 , - - - - - - , 0 0 0 0 5 2 1 , , 0 0 0 0 5 2 1 , 8 0 1 9 8 , 2 4 9 2 8 , 8 7 4 4 7 1 , 6 0 3 9 6 , - - - - - - - - - - d e t s e V e u s s i n O d e s i c r e x E - - ) 6 7 8 2 7 ( , d e l l e c n a C - - ) 0 0 0 5 7 7 ( , ) 0 0 0 5 7 7 ( , - - - - - - - s t h g i r e c n a m r o f r e p f o r e b m u N / d e s p a L 55 77 || d e t i m i L s e c r u o s e R n a c i r f A t s e W s t h g i r e c n a m r o f r e p f o r e b m u N / d e s p a L - - - - - - - - 3 5 6 4 3 , 3 5 6 4 3 , 3 1 5 3 7 3 , 3 8 9 2 5 2 , 3 0 1 2 0 4 , 1 5 0 1 0 2 , 1 5 0 1 0 2 , 8 4 1 0 1 , - - - - - - - - d e t s e V e u s s i n O d e s i c r e x E - - - - - - - - d e l l e c n a C d e t n a r G 6 7 8 2 7 , 8 5 7 6 8 , , 0 0 5 2 7 2 2 , 2 7 1 7 5 , , 0 0 5 2 7 2 2 , , 0 0 0 0 5 2 1 , 8 0 1 9 8 , 2 4 9 2 8 , , 0 0 0 0 5 2 1 , 0 0 0 0 0 $ . 3 2 - l u J - 8 d e u s s i e r e w s t h g i r e h t e t a d e h t m o r f s r a e y 2 r o f y n a p m o C e h t f o 0 2 - l u J - 8 0 0 0 0 0 $ . 0 0 0 0 0 $ . 3 2 - p e S - 9 2 4 2 - c e D - 8 d e u s s i e r e w s t h g i r e h t e t a d e h t m o r f s r a e y 2 r o f y n a p m o C e h t f o 0 2 - p e S - 2 2 3 2 - c e D - 8 0 2 - v o N - 7 2 e h t e m i t t s r i f e h t l i t n u p u o r G e h t f o e e y o p m e l n a s a e c i f f o l d o H l e e y o p m e n a s a e c i f f o s u o u n i t n o c d o h d n a d e v e h c a e r a s I P K n e h W l i l e e y o p m e n a s a e c i f f o s u o u n i t n o c d o h d n a d e v e h c a e r a s I P K n e h W i l e c i r p e s i c r e x E e t a d y r i p x E e t a d g n i t s e V e t a d t n a r G . e g a p s u o i v e r p m o r f e b a t l f o n o i t a u n i t n o C ) I D E U N I T N O C ( S E C N A L A B S T H G R E C N A M R O F R E P D N A S N O I T P O . F ) D E U N I T N O C ( S T N E M Y A P D E S A B - E R A H S 9 2 86 0 0 0 0 0 $ . 4 2 - c e D - 8 0 0 0 0 0 $ . 0 0 0 0 0 $ . 2 2 - c e D - 7 1 4 2 - c e D - 7 1 0 0 0 0 0 $ . 4 2 - c e D - 7 1 0 0 0 0 0 $ . 3 2 - n a J - 2 2 0 0 0 0 0 $ . 4 2 - n a J - 2 2 y n a p m o C e h t l f o r o t c e r i D r o e e y o p m e n a s a e c i f f o s u o u n i t n o c d o H l F A W f o e c i r p e g a r e v a d e t h g e w i e m u o v l e h t e m i t t s r i f e h t l i t n u e h t f o e u s s i f o e t a d e h t m o r f s r a e y 3 n h t i i w i r e h g h r o 0 0 2 $ s i . d o i r e p s t h g i r 0 2 - v o N - 7 2 m o r f r a e y 1 r o f y n a p m o C e h t f o r o t c e r i d a s a e c i f f o s u o u n i t n o c d o H l d e u s s i e r e w s t h g i r e h t e t a d e h t 0 2 - c e D - 7 1 3 2 - c e D - 7 1 0 2 - c e D - 7 1 s r a e y 3 n h t i i w i r e h g h r o 0 0 2 $ s i . d o i r e p y a d g n d a r t 0 2 a r o f i s e r a h S m o r f r a e y 1 r o f p u o r G e h t l f o e e y o p m e n a s a e c i f f o s u o u n i t n o c d o H l m o r f r a e y 1 r o f y n a p m o C e h t f o r o t c e r i D a s a e c i f f o s u o u n i t n o c d o H l s t h g i r e h t f o e u s s i f o e t a d e h t m o r f 0 2 - c e D - 7 1 d e u s s i e r e w s t h g i r e h t e t a d e h t 1 2 - n a J - 8 1 d e u s s i e r e w s t h g i r e h t e t a d e h t 1 2 - n a J - 1 2 i y a d g n d a r t 0 2 a r o f s e r a h S F A W f o e c i r p e g a r e v a d e t h g e w e m u o v i l 8 7 4 4 7 1 , 0 0 0 0 0 $ . 4 2 - r p A - 9 d e u s s i e r e w s t h g i r e h t e t a d e h t m o r f s r a e y 2 r o f p u o r G e h t f o 1 2 - r p A - 4 r a e y - e e r h t e h t i n h t i w d e r u o p s i l d o g f o s e c n u o 0 0 0 0 0 6 , t s a e l t A 6 0 3 9 6 , 0 0 0 0 0 $ . 6 2 - r p A - 9 . 3 2 0 2 r e b m e c e D 1 3 o t 1 2 0 2 y r a u n a J 1 m o r f d o i r e p 1 2 - r p A - 4 ) D E U N I T N O C ( S T N E M Y A P D E S A B - E R A H S 9 2 d e t n a r G 3 5 6 4 3 , 3 5 6 4 3 , e c i r p e s i c r e x E e t a d y r i p x E 0 0 0 0 0 $ . 5 2 - r p A - 4 e c n a m r o f r e p r a e y - 3 e h t r e v o s n r u t e r l r e d o h e r a h s r o f s t e g r a t n e h W i d e v e h c a e r a d o i r e p 1 2 - r p A - 4 e t a d g n i t s e V e t a d t n a r G 0 0 0 0 0 $ . 5 2 - r p A - 4 i d e v e h c a e r a 3 2 0 2 c e D 1 3 o t 1 2 0 2 n a J 1 m o r f d o i r e p r a e y - 3 e h t r e v o 1 2 - r p A - 4 n o i t e p e d l o t e u d s e v r e s e R e r O f o t n e m e c a p e r l r o f s t e g r a t n e h W . e g a p s u o i v e r p m o r f e b a t l f o n o i t a u n i t n o C ) I D E U N I T N O C ( S E C N A L A B S T H G R E C N A M R O F R E P D N A S N O I T P O . F l e e y o p m e n a s a e c i f f o s u o u n i t n o c d o h d n a d e v e h c a e r a s I P K n e h W l i 3 1 5 3 7 3 , 0 0 0 0 0 $ . 4 2 - y a M - 0 2 d e u s s i e r e w s t h g i r e h t e t a d e h t m o r f s r a e y 2 r o f p u o r G e h t f o 1 2 - y a M - 7 1 3 8 9 2 5 2 , 0 0 0 0 0 $ . 4 2 - y a M - 0 2 d e u s s i e r e w s t h g i r e h t e t a d e h t 1 2 - y a M - 7 1 m o r f r a e y 1 r o f p u o r G e h t l f o e e y o p m e n a s a e c i f f o s u o u n i t n o c d o H l 3 0 1 2 0 4 , 0 0 0 0 0 $ . 6 2 - y a M - 0 2 3 2 0 2 r e b m e c e D 1 3 o t 1 2 0 2 y r a u n a J 1 m o r f d o i r e p 1 2 - y a M - 7 1 1 5 0 1 0 2 , 0 0 0 0 0 $ . 5 2 - y a M - 0 2 i d e v e h c a e r a d o i r e p 1 2 - y a M - 7 1 1 5 0 1 0 2 , 0 0 0 0 0 $ . 5 2 - y a M - 0 2 i d e v e h c a e r a 3 2 0 2 c e D 1 3 o t 1 2 0 2 n a J 1 m o r f d o i r e p r a e y - 3 e h t r e v o 1 2 - y a M - 7 1 n o i t e p e d l o t e u d s e v r e s e R e r O f o t n e m e c a p e r l r o f s t e g r a t n e h W e c n a m r o f r e p r a e y - 3 e h t r e v o s n r u t e r l r e d o h e r a h s r o f s t e g r a t n e h W r a e y - e e r h t e h t i n h t i w d e r u o p s i l d o g f o s e c n u o 0 0 0 0 0 6 , t s a e l t A 8 4 1 0 1 , 0 0 0 0 0 $ . 4 2 - n u J - 1 1 d e u s s i e r e w s t h g i r e h t e t a d e h t m o r f s r a e y 2 r o f p u o r G e h t f o 1 2 - n u J - 3 l e e y o p m e n a s a e c i f f o s u o u n i t n o c d o h d n a d e v e h c a e r a s I P K n e h W l i l e e y o p m e n a s a e c i f f o s u o u n i t n o c d o h d n a d e v e h c a e r a s I P K n e h W l i 4 3 2 , 0 4 5 9 4 2 , 4 1 7 , 9 ) 8 4 0 , 1 4 1 , 3 ( ) 9 1 4 , 8 2 6 , 1 ( 6 1 7 , 3 8 4 , 4 1 s t h g i R e c n a m r o f r e P l a t o T d t L s e c r u o s e R n a c i r f A t s e W | 6 7 87 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 30 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 Parent 2021 $'000 46,921 248,450 295,371 1,157 203 1,360 294,011 335,334 12,535 (53,858) 294,011 23,415 - 23,415 2020 $'000 16,579 82,620 99,199 990 272 1,262 97,937 165,263 9,948 (77,274) 97,937 37 - 37 Contingent liabilities of the parent entity As at 31 December 2021, the parent entity had contingent liabilities as guarantor under each of the royalty agreements detailed in note 22(c)(ii) and as guarantor under the US$45 million convertible note detailed in note 13 (2020: nil). Commitments of the parent entity for the acquisition of property, plant and equipment As at December 2021, the parent entity had nil contractual commitments for the acquisition of property, plant and equipment (2020: nil). - - - - - - - - d e t s e V e u s s i n O - - , 8 2 8 3 2 2 1 , , 8 2 8 3 2 2 1 , d e s i c r e x E ) 0 0 0 0 5 2 ( , ) 0 0 0 0 0 5 ( , , ) 0 0 0 0 0 0 1 ( , ) 0 0 0 0 0 5 ( , - ) 0 0 0 0 5 2 ( , 4 9 8 7 5 6 , 4 9 8 7 5 6 , - 8 7 5 1 3 1 , 8 7 5 1 3 1 , - - - ) 0 0 0 0 5 2 ( , - - ) 9 1 4 8 7 ( , 0 0 3 , 3 1 0 , 2 0 0 3 , 3 1 0 , 2 ) 9 1 4 , 8 2 8 , 2 ( 77 77 || d e t i m i L s e c r u o s e R n a c i r f A t s e W - - - - - - - - - - - d e l l e c n a C s n o i t p o f o r e b m u N / d e s p a L d e t n a r G 0 0 0 0 5 2 , 0 0 0 0 0 5 , 0 0 0 0 0 5 , , 0 0 0 0 0 0 1 , 0 0 0 0 5 2 , 8 7 5 1 3 1 , 0 0 0 0 5 2 , , 8 2 8 3 2 2 1 , e c i r p e s i c r e x E 0 0 1 4 0 $ . 0 0 1 3 0 $ . 0 0 1 3 0 $ . 0 0 2 3 0 $ . 0 0 3 4 0 $ . 0 5 9 2 0 $ . 1 6 0 6 0 $ . 6 4 3 7 0 $ . e t a d y r i p x E 1 2 - r a M - 9 2 1 2 - p e S - 6 2 1 2 - v o N - 8 2 1 2 - c e D - 8 2 2 2 - c e D - 8 2 2 2 - r a M - 5 0 4 2 - n a J - 0 2 4 2 - r p A - 9 2 4 9 8 7 5 6 , 1 6 0 6 0 $ . 4 2 - n u J - 1 1 9 1 4 8 7 , 9 1 7 , 1 4 8 , 4 9 0 3 7 0 $ . 4 2 - l u J - 8 l : e b a t g n w o i l l o f e h t n i ) I D E U N I T N O C ( S E C N A L A B S T H G R E C N A M R O F R E P D N A S N O I T P O . F ) D E U N I T N O C ( S T N E M Y A P D E S A B - E R A H S 9 2 e c i r p e s i c r e x e n o i t p o e h t s l a u q e t s r i f e c i r p e r a h s s ’ y n a p m o c e h t n e h W ) 0 0 3 4 0 $ ( . 8 1 - c e D - 8 2 e c i r p e s i c r e x e n o i t p o e h t s l a u q e t s r i f e c i r p e r a h s s ’ y n a p m o c e h t n e h W e c i r p e s i c r e x e n o i t p o e h t s l a u q e t s r i f e c i r p e r a h s s ’ y n a p m o c e h t n e h W e c i r p e s i c r e x e n o i t p o e h t s l a u q e t s r i f e c i r p e r a h s s ’ y n a p m o c e h t n e h W ) 1 6 0 6 0 $ ( . 0 2 - n u J - 1 1 0 2 0 2 l i r p A 9 2 0 2 - r p A - 9 2 ) 1 6 0 6 0 $ ( . 0 2 - n a J - 0 2 s n o i t p o l a t o T ) 9 0 3 7 0 $ ( . 0 2 - l u J - 2 n o i t c u d o r p l a i c r e m m o c d n a r u o p d o g t s r i F l 9 1 - r a M - 5 0 n o i t c u d o r p l a i c r e m m o c d n a r u o p d o g t s r i F l 8 1 - c e D - 8 2 d e t n e s e r p s i 1 2 0 2 r e b m e c e D 1 3 t a s a s n o i t p o f o e c n a a b g n d n a t s t u o e h T l i l t n a p e h t r o f r u o p e t e r c n o c t s r i f d n a n o i t c u d o r p d o g t s r i F l 8 1 - v o N - 8 2 n o i t c u d o r p d o g t s r i F l 8 1 - r a M - 9 2 n o i t c u d o r p d o g t s r i F l 8 1 - p e S - 6 2 e t a d g n i t s e V e t a d t n a r G 88 78|West African Resources Ltd 89 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 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 2021 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. AUDITOR’S INDEPENDENCE DECLARATION 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 2021, I declare that to the best of my knowledge and belief, there have been no contraventions of: 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 2021. a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and This declaration is signed in accordance with a resolution of the Board of Directors. b) any applicable code of professional conduct in relation to the audit. RICHARD HYDE Executive Chairman & CEO 30 March 2022 Perth, Western Australia 30 March 2022 B G McVeigh Partner 90 80|West African Resources Ltd 91 Auditor’s Independence Declaration |80 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 INDEPENDENT AUDITOR’S REPORT 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 2021, 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 2021 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. Key Audit Matter How our audit addressed the key audit matter Acquisition of Kiaka Tenements Note 12 to the financial report On 30 November 2021, completed Tenements. the acquisition of the Group the Kiaka This acquisition was accounted for as an asset acquisition as the activities of the entity did not constitute a business. We considered this to be a key audit matter due to the size of the impact on the financial statements and its important to users of the financial statements. Our audit procedures included but were not limited to the following: • Considering the transaction under the requirements of AASB 3 Business Combinations. the possible application of • Reviewing the sale and purchase agreement to understand key terms and conditions. • Agreeing the fair value of the consideration paid to supporting information. • Obtaining audit evidence that the acquisition date assets and liabilities of acquiree were fairly stated. • Considering the allocation of the excess of the value of the consideration over the net assets acquired evaluation expenditure. exploration and to • Ensuring appropriateness the resultant exploration and evaluation asset at balance date. recognise to • Assessing the adequacy of the Group’s disclosures in the financial report with respect to this asset acquisition. Revenue recognition Note 3 to the financial report The Group generates revenue predominantly from the sale of gold. The Group recognised sales revenue of $712.1 million for the year (2020: $311.2 million). 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 • Revenue not being recognised when control is transferred to the customer, resulting in it not being recognised in the correct accounting period. is recognised when control Revenue is transferred to the buyer and the amount of revenue can be reliably determined. This occurs for the Group when the refining process is transferred. is completed and ownership • Testing all gold sales transactions during the year to invoice and receipt of cash. requirements of • Assessing the Group’s policies for recognition of the the revenue against accounting standards and checked these were adequately disclosed in the financial statements. • Sales cut-off procedures focussing on sales in December 2021 and January 2022, testing a sample underlying documentation and assessing the period in which they were recognised. transactions of to • Matching gold produced against gold sold for the year. 92 West African Resources Limited||8811 82|West African Resources Ltd 93 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 Recoverability of mine assets Note 10 to the financial report As at 31 December 2021 the Group had mine development assets of $100.3 million. Assessing the recoverability and carrying value of this balance was considered to be a key audit matter due to the judgements and estimations involved. These estimations and judgements surround two areas being impairment indicators and the amortisation and depreciation associated with this asset. Impairment future recoverability of the asset. Amortisation and depreciation involves using estimated reserves and resources (used as the denominator in a “units-of-production”” calculation) of the mines. involve assessing judgement around indicators forecasts and Our audit procedures included but were not limited to the following: • Testing impairment indicators to ensure that no is indicators exist at amortisation such progressing at an appropriate rate. • Reviewing future plans for the mine assets and the support plans ensuring that recoverability of the mine. such • Assessing the current carrying value of the mine development assets and ensuring items capitalised during the period were appropriate to capitalise. • Assessing resources comparing statement and underlying mining records. the application of reserves and the amortisation models by in latest published them the to • Testing the mathematical accuracy of the amortisation models. • Assessing the adequacy of the Group’s disclosures relating to amortisation. 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 2021, 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. 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. 94 West African Resources Limited||8833 84|West African Resources Ltd 95 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 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 2021. In our opinion, the Remuneration Report of West African Resources Limited for the year ended 31 December 2021 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 30 March 2022 B G McVeigh Partner 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 10 March 2022. 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 766 1,421 753 1,316 335 4,591 Securities held 421,696 3,989,120 5,980,407 43,584,598 967,053,922 1,021,029,743 The number of shareholdings held in less than marketable parcels is 226. 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. 1 Shareholder Name VANECK GLOBAL (NEW YORK) 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 4 CS THIRD NOMINEES PTY LIMITED 5 BNP PARIBAS NOMS PTY LTD 6 AIGLE ROYAL CAPITAL PTY LTD 7 NATIONAL NOMINEES LIMITED 8 BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM 9 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 10 B2GOLD CORP 11 ZERO NOMINEES PTY LTD 12 MR RICHARD HYDE 13 STICHTING LICHFIELD US\C 14 BNP PARIBAS NOMINEES PTY LTD 15 BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD 16 MR PHILLIP RICHARD PERRY 17 UBS NOMINEES PTY LTD 18 GAMS-MINING F&I LTD 19 MR GRAEME JOHN HAINES + MRS SHARNI GAY HAINES + MR MALCOLM ARNOLD HAINES 20 LUJETA PTY LTD Total No. of shares held 120,703,684 120,703,684 % Holding 11.82% 11.82% No. of shares held 319,397,545 123,401,105 75,086,485 57,840,762 39,959,550 30,800,000 28,221,427 23,747,883 23,092,352 22,190,508 19,350,000 17,003,433 13,250,000 12,781,605 10,880,605 10,130,834 6,297,564 4,931,224 % Holding 31.28% 12.09% 7.35% 5.66% 3.91% 3.02% 2.76% 2.33% 2.26% 2.17% 1.90% 1.67% 1.30% 1.25% 1.07% 0.99% 0.62% 0.48% 4,739,700 0.46% 3,846,154 846,948,736 0.38% 82.95% 96 West African Resources Limited||8855 97 West African Resources Limited||8877 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 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 1,021,029,743 ordinary shares on the Company’s register. VOTING RIGHTS All shares carry one vote per unit without restriction. UNLISTED OPTIONS 11,656,743 options and performance rights are held by 29 option holders. Neither options nor performance rights carry a right to vote. 98 West African Resources Limited||8877 n o i t a c o l l a c i h p a r g o e G ) 2 m k ( a e r A t n e m e n e T e p y t y r i p x E e t a d t n a r G e t a d r e b m u n t n e m e n e T l d e h % r e d o h l d e r e t s i g e R t n e m e n e T e m a n S T N E M E N E T F O Y R A M M U S 2 2 0 2 H C R A M 0 1 T A e c n i v o r P u o g r u o z n a G 5 7 1 e c n i v o r P u o g r u o z n a G 7 6 6 8 . e c n i v o r P u o g r u o z n a G . 5 5 0 2 e c n i v o r P e o m o C 6 6 8 5 . e c n i v o r P e o m o C . 7 5 2 3 1 s e c n i v o r P u o g r u o z n a G d n a a g e z a B . 9 1 9 4 2 e c n i v o r P u o g r u o z n a G 5 9 5 2 5 . e c n i v o r P e o m o C . 5 1 4 1 s e c n i v o r P u o g u o B l d n a o g o e w d n u o Z s e c n i v o r P u o g u o B l d n a o g o e w d n u o Z . 1 8 7 3 2 7 2 0 2 0 2 . e c n i v o r P o g o e w d n u o Z 6 4 0 1 9 . L E L E L E L E L E L E L E L E L E L E L E 1 2 - r a M - 3 2 8 1 - p e S - 5 M C G D / G S / C M M / 6 8 1 - 8 1 0 2 o N % 0 0 1 L R A S d t L y t P s e c r u o s e R a r u W 1 é r d u o G 3 2 - v o N - 2 1 0 2 - v o N - 3 1 M C G D / G S / C M M / 4 5 2 - 0 2 0 2 o N % 0 0 1 L R A S a k u o n a T l I I é s s e n a M 0 2 - v o N - 0 2 7 1 - v o N - 1 2 M C G D / G S / C M M / / 3 2 2 – 7 1 o N % 0 0 1 d t L y t P s e c r u o s e R a r u W L R A S 2 é l l o B 0 2 - p e S - 6 7 1 - p e S - 7 M C G D / G S / C M M / 0 4 1 - 7 1 0 2 o N % 0 0 1 e n u o s s e n o D n a e J 2 a r o k a D i 0 2 - p e S - 6 7 1 - p e S - 7 M C G D / G S / C M M / 9 3 1 - 7 1 0 2 o N % 0 0 1 e n u o s s e n o D n a e J 2 u o g u o n u o D 0 2 - p e S - 6 7 1 - p e S - 7 M C G D / G S / C M M / 8 3 1 - 7 1 0 2 o N % 0 0 1 e n u o s s e n o D n a e J 2 I i n e d a r e T i 3 2 - t c O - 3 2 0 2 - t c O - 4 2 M C G D / G S / C M E M / 7 8 1 - 1 2 0 2 o N % 0 0 1 l L R A S d o G a k a K i o g m o k a N 3 2 - l u J - 5 1 0 2 - l u J - 6 1 M C G D / G S / C M M / 0 7 1 - 0 2 0 2 o N % 0 0 1 o g n o Z é d n ê w a g e e T s e u q c a J 3 V a g r a k n a M 2 2 - y a M - 8 2 9 1 - y a M - 9 2 M C G D / G S / C M M / 1 0 1 - 9 1 0 2 o N % 0 0 1 2 2 - y a M - 4 1 9 1 - y a M - 5 1 M C G D / G S / C M M / 5 5 - 9 1 0 2 o N % 0 0 1 e s s i c r a N e r g e d a m n D - d n e W i i e d n e w g n P s i w e L n e v e t S a d n K i e r o b a K 2 2 - v o N - 3 9 1 - v o N - 4 M C G D / G S / C M M / 7 8 1 - 9 1 0 2 o N % 0 0 1 i i o s s a D n a l s i h G u o l i l a K a r u o W l a o B I I e r d u o K . d e u s s i e b o t r e d r o t i m r e p w e n e h t r o f g n i t i a W . d e v o r p p a n e e b s a h l a w e n e r t i m r e P 2 . s s e r g o r p n i n o i t a c i l p p a l a w e n e r l a n o i t p e c x E 1 d t L s e c r u o s e R n a c i r f A t s e W | 8 8 99 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 n o i t a c o l l a c i h p a r g o e G ) 2 m k ( a e r A t n e m e n e T e p y t y r i p x E e t a d t n a r G e t a d r e b m u n t n e m e n e T l d e h % r e d o h l d e r e t s i g e R e d s e n M i s e d é t é i c o S A S o d a r b n a S t n e m e n e T e m a n o d a r b n a S I ) D E U N T N O C ( S T N E M E N E T F O Y R A M M U S 2 2 0 2 H C R A M 0 1 T A 100 e c n i v o r P u o g r u o z n a G . 9 5 2 L M 4 2 - r a M - 2 1 7 1 - r a M - 3 1 e c n i v o r P o g o e w d n u o Z 2 0 4 5 . L M 6 3 - l u J - 7 6 1 - l u J - 9 I C C V E E M / D I F E N M / C M E M M P / S E R P / 4 0 1 / G M G D / G S / C M M / 9 3 1 - 8 1 0 2 o N é t ê r r A – 6 1 0 2 o N t e r c é D I C C V E E M / D I F E N M / C M E M M P / S E R P / 0 9 5 / – 7 1 0 2 o N t e r c é D % 0 9 % 0 9 99 88 || d e t i m i L s e c r u o s e R n a c i r f A t s e W This page has deliberately been left blank l u o g u o B d n a o g o e w d n u o Z s e c n i v o r P s e c n i v o r P u o g r u o z n a G d n a o g o e w d n u o Z . 3 4 3 4 1 . 9 9 7 1 L E L E 3 2 - t c O - 3 2 0 2 - t c O - 4 2 M C G D / G S / C M E M / 6 8 1 - 1 2 0 2 o N % 0 0 1 3 2 - t c O - 3 2 0 2 - t c O - 4 2 M C G D / G S / C M M / 3 1 3 - 0 2 0 2 o N % 0 0 1 A S a k a K i a k a K i l L R A S d o G a k a K i l L R A S d o G a k a K i I I a k a K i a n a S 101 WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021WEST AFRICAN RESOURCES LIMITED ANNUAL REPORT 2021 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