ABN: 38 108 779 7 82
A N N UA L R E P O R T
F O R T H E Y E A R E N D E D 30 J U N E 20 17
20
17
Key Financial Points
» Revenue of $227.5 million
» Net profit after tax of $2.0 million
» EBITDA (excluding significant items1) of $70.0 million
» Fourth straight year of EBITDA margin growth
» Cash flow from operations of $64.0 million
» Cash and bullion at 30 June 2017 of $69.1 million
» No bank debt
1 EBITDA (excluding significant items) is an unaudited, non IFRS measure
Key Operational Points
» Full year gold sales of 137,000 ounces at an average
sale price of A$1,654/oz and an AISC of A$1,359/oz
» Production focussed on core Mount Monger
ore sources including Daisy Complex, Maxwells,
Cock-eyed Bob, Majestic and stockpiles
» Investment in exploration of $13.2 million
» Successful exploration and development program
is delivering significant returns and transitioning
Mount Monger to longer life operations with increased
production visibility
» Operations commencing in FY2018 include:
» Cock-eyed Bob Underground (re-commencing
Q1 FY2018)
» Harry’s Hill Open Pit (commencing Q4 FY2018)
YEAR IN REVIEW
F Y
20
17
Imperial/Majestic
Randalls Mill
Harry’s Hill
Daisy Complex
Maxwells
Cock-eyed Bob
2
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
ANNUAL REPORT DELIVERING TODAY, DEVELOPING FOR TOMORROW AND DISCOVERING FOR THE FUTURE
Produced
≈ 1 million ounces
from Mount Monger
over 10 years
DELIVERING
DEVELOPING
DISCOVERING
Providing
production visibility
from longer life
mining centres
Cash, bullion and
listed investments
≈A$81 million
FY2018 guidance
135koz - 145koz
Successful
sustain & growth
exploration
programs
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
3
ANNUAL REPORT CORPORATE DIRECTORY
Directors
David Quinlivan
Non-executive Chairman
Luke Tonkin
Managing Director
Les Davis
Non-executive Director
Kelvin Flynn
Non-executive Director
Brian Kennedy
Non-executive Director
Company Secretary
David Berg
Principal Office
Suite 4, Level 3, South Shore Centre
85 South Perth Esplanade
South Perth WA 6151
+61 8 6313 3800
+61 8 6313 3888
Tel:
Fax:
Email: contact@silverlakeresources.com.au
Registered Office
Suite 4, Level 3, South Shore Centre
85 South Perth Esplanade
South Perth WA 6151
Share Register
Security Transfer Australia Pty Ltd
770 Canning Highway
Applecross WA 6153
Auditors
KPMG
235 St George’s Terrace
Perth WA 6000
Internet Address
www.silverlakeresources.com.au
ABN: 38 108 779 782
ASX Code: SLR
4
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
ANNUAL REPORT TABLE OF CONTENTS
Chairman & Managing Director’s Report
Project Report
Exploration Report
Resources & Reserves Report
Directors’ Report
Directors’ Declaration
Auditor’s Independence Declaration
Independent Audit Report
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
ASX Additional Information
PAGE
6
8
13
18
24
43
44
45
50
51
52
53
54
81
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
5
ANNUAL REPORT DEAR FELLOW SHAREHOLDER,
This year Silver Lake celebrates its 10-year anniversary,
having produced more than 1 million ounces of gold.
The journey over this time has included both highlights
and challenges. One constant during this period
however has been production from the Company’s
core Mount Monger asset, which has repeatedly
demonstrated its position as a highly endowed gold
camp with numerous opportunities for growth and
demonstrable cash generation.
The industry is experiencing a better Australian dollar gold price
with improving investor sentiment however the Company remains
focused on its stated strategy, which has resulted in a financial
turnaround driven by strong cashflow generation. Given the
volatility of the A$ gold price the Company hedged an additional
80,000 ounces of gold for FY2019 and FY2020 production at an
average forward price of A$1,720/oz, taking the total hedge book
to 142,000 ounces at an average forward price of A$1,700/oz.
The Board believes that it is prudent to capitalise on high and rarely
sustained A$ gold prices to safeguard returns from capital investment
in future projects such as those in the Aldiss area.
improved production
The strong balance sheet position and
visibility places Silver Lake in a stronger operating and financial
position. To build on this momentum, the Company has renewed
its external
focus, comparing organic growth potential and
external opportunities.
Operating and Financial Highlights
Returning to the Company’s performance for the last year, we would
like to highlight the following:
» Gold refined and sold 137,000 ounces (up 3%)
» Average realised gold price A$1,654/oz (up 5%)
» All in sustaining cost of A$1,359/oz (up 6%)
» Profit for the year of $2.0 million (down 54%)
» EBITDA before significant items of $70.0 million (up 23%)
» Cash flow from operations of $64.0 million (up 16%)
» Year-end cash, bullion and investments
of $81.5 million (up 72%)
» No bank debt
» 20% increase in Ore Reserves
focused on shareholder
In FY2017 the Company continued to deliver on
its
strategy of focusing its human and investment capital
on the Mount Monger Camp to develop and mine lower
cost production sources and undertake a significant
exploration program
return.
Measures implemented to deliver consistent cash generative
ounces, together with the restructuring of the cost base to
match the mine profile, have proved successful and generated
FY2017 gold sales of 137,000 ounces. This, together with
a relatively strong gold price and proceeds from the sale of
non-core assets boosted the cash and bullion position by
62% to $69.1 million. This strong operating position allows the
Company to internally fund low capital intensity projects that
will transition Mount Monger to longer life operations with
increased production visibility.
The significant investment in exploration over the last 2 years has
allowed the Company to develop an aspirational production profile
for the next 4 years. Along with the Majestic and Maxwells mines
brought into production in FY2017, a further two mines will be
brought into production in the coming year (Cock-eyed Bob and
Harry’s Hill). Development of these mines is consistent with our
strategy of introducing new, lower cost sources into the mine plan
that have rapid development and production profiles given their
proximity to existing infrastructure.
The Mount Belches area will become an increasingly important
part of the Mount Monger Camp with the two shallow, high grade
underground Maxwells and Cock-eyed Bob mines remaining open
along strike and at depth. The Aldiss centre will comprise multiple
open pit mines, providing feed to the Randalls mill in FY2019,
FY2020 and FY2021. The development of the Aldiss mining centre
will diversify production across 4 geological centres within the
Mount Monger Camp.
In FY2017 the Company maintained its Mineral Resource balance
at Mount Monger of 3.3 million ounces of gold and increased its
Ore Reserve by 20% to 466,000 ounces, despite having mined
148,000 ounces during the year. It is important to note that
Mount Monger has produced ≈ 1,000,000 ounces of gold over
the last 10 years whilst never having more than a 3-4 year Reserve
backed mine life, demonstrating the Company’s strong track
record of replacing Reserve life.
6
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
CHAIRMAN & MANAGING DIRECTORS REPORT Core Asset Strategy
The Company successfully executed key transactions as part of its
strategy to crystallise value from its non-core assets, including:
» Sale of the Tuckabianna processing facility and the
Company’s interest in the Cue Project Joint Venture
for a combined consideration of $10 million; and
» Sale of the Great Southern Project for $5 million.
Not only have these transactions strengthened the balance sheet,
they also reduce the Company’s financial commitment in the
Murchison and Great Southern, allowing Silver Lake to focus on its
core operations.
Outlook
In FY2018, Silver Lake will take the next steps of transitioning the
Mount Monger Camp towards longer life ore sources with higher
operating margins. Accordingly, the Company has set the following
key objectives for the next twelve months:
» Achieve production of 135,000 to 145,000 ounces of gold
» Pursue increased productivity and reduction in costs
» Finalise development of the Cock-eyed Bob, Imperial and
Maxwells mines within time and budget
» Complete infrastructure required for the Company’s
fourth mining centre - Aldiss
» Target both sustaining and growth prospects within
the Daisy Complex, Mount Belches and Aldiss areas to
leverage off existing mine development and infrastructure
On behalf of the Board we would like to thank the Company’s
employees for their hard work and commitment over the past
12 months. It is through their commitment that we have achieved
this financial turnaround.
We would also like to acknowledge our suppliers, contractors and
shareholders who continue to support our strategy of delivering
today, developing for tomorrow and discovering for the future.
David Quinlivan
Non-executive Chairman
Luke Tonkin
Managing Director
Balance Sheet
The Mount Monger Camp generated operating cash flows of
$64 million in FY2017. This strong result, together with prudent
cost and cash flow management and an appropriate gold hedging
strategy has further strengthened the Company’s Balance Sheet.
At 30 June 2017, the Company had no bank debt, held $69.1 million
in cash and bullion and had liquid investments in ASX listed entities
with a market value of $12.4 million.
The increase in cash flow generation from Mount Monger allowed
the Company to fund:
» The FY2017 exploration program of $13.2 million; and
» Development expenditure relating to the Imperial/Majestic
and Maxwells projects totalling $18.5 million
The strong cash position will allow the Company to internally fund
the recommencement of the Cock-eyed Bob underground mine
(maximum cash drawdown of $11 million) and development of
the Aldiss mining centre (drawdown of $10.7 million) in FY2018.
This drawdown will result in a slight decrease in the cash balance
over the first half of FY2018, after which the Cock-eyed Bob mine is
forecast to be cash-flow positive.
Exploration
The FY2017 exploration work programs completed by Silver Lake
successfully extended and upgraded the gold Reserves at the current
mining operations and advanced development projects with near-
term open pit and underground mining potential. The exploration
programs also confirmed the strong potential for new resource
growth along the mineralised trends in the Daisy Complex and
Mount Belches mining centres.
Key exploration highlights included:
» Resource upgrade and decision to recommence mining
at Cock-eyed Bob
» Significant extensions and upgrades to existing gold
lodes in the Daisy Complex underground mine
» Discovery of two new lodes at the Daisy Complex
(Lode 56 and Lode 57)
» New lodes identified north of the North Fault at the
Daisy Complex, demonstrating the discovery potential
of this large, inadequately tested area proximal to the
current underground development
» Step-out drilling from surface at Daisy North intersected
a high-grade structure, confirming significant extensions
to Daisy Complex lodes along one of the strong
geochemical trends identified by the regional aircore
drilling programs
» Drilling at Santa supported the potential for a new
underground mine.
The successful exploration and development program has
resulted in bringing new ore sources into the FY2017 production
schedule including the Imperial/Majestic and Maxwells projects,
both of which are expected to increase the Company’s margins
over their life.
Following on from this exploration success, a FY2018 exploration
budget of $11.8 million has been approved by the Board.
The exploration focus for FY2018 remains on gold within the three
major mining centres (Daisy Complex, Mount Belches and Aldiss)
with greater than two thirds of the total budget amount allocated to
direct “in ground” drilling and assaying costs in these areas.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
7
CHAIRMAN & MANAGING DIRECTORS REPORT
MOUNT MONGER – A FOCUSSED OPERATING STRATEGY
Mining Centre
Objective
Target
Daisy Complex
Extension of defined and new lodes along strike to
leverage off extensive underground infrastructure,
step out drilling at Daisy North
S
E
H
C
L
E
B
T
N
U
O
M
Maxwells
Resource conversion, depth and strike extension
of multiple lodes
Cock-eyed Bob
Increase drill intensity below 1218 (260m BGL) mining
level to enhance ore body knowledge and long term
potential at depth
Maintain 3 year visibility
+ game-changing
repeat systems
Maintain 3 year reserve
+ production & increase
life extension
Maintain 3 year visibility
+ long term mine plan
Imperial/Majestic
Resource conversion and assessment of strike
and underground potential
Maintain 3 year visibility
Aldiss
Establish new mining centre, convert Resources
and add to existing Resources
Maintain 3 year visibility
“Looking forward to FY2018,
Silver Lake will take the next
steps of transitioning the
Mount Monger Camp towards
longer life ore sources with
increased visibility”
8
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
PROJECT REPORT
MOUNT MONGER GOLD CAMP
Kanowna Belle
THE GOLDEN MILE
Kalgoorlie
Imperial Majestic
Gold Reserves (koz):
Gold Resources (koz):
Reserve Grade (Au g/t):
FY17A Au production (koz):
FY18G Au production (koz):
57
218
3.2
54.6
56.8
40km
I
0
20
Aldiss
Gold Reserves (koz):
Gold Resources (koz):
Reserve Grade (Au g/t):
FY17A
Au production (koz):
FY18G
Au production (koz):
115
494
2.4
0
1.5
R
A
I
L
W
A
Y
!
Imperial Majestic
RAILWAY
! Fingals
Daisy Milano
!
Randalls Mill
!
!
!
Santa
!
Rumbles
Maxwells
Cock-eyed Bob
!
!
Karonie
!
Harrys Hill
Randalls Mill
Capacity (Mtpa): 1.3
FY17A
1.3 Mt 135.8 koz @ 93% recovery
:
:
FY18G
1.3Mt 135koz - 145koz @ 92% recovery
!
French Kiss
Mount Belches
Gold Reserves (koz):
Gold Resources (koz):
Reserve Grade (Au g/t):
FY17A
Au production (koz):
FY18G
Au production (koz):
152
1,149
5.3
26.4
41.3
Kambalda
Daisy Complex
Gold Reserves (koz):
Gold Resources (koz):
Reserve Grade (Au g/t):
FY17A
Au production (koz):
FY18G
Au production (koz):
R
A
I
L
W
A
Y
LOC_RegDiggersDealers_A4_201707_12_01.mxd
87
735
7.3
67.0
56.0
Figure 1: Mount Monger Gold Camp.
» Located 50km southeast of Kalgoorlie, Western Australia
» Mount Monger is a highly endowed gold camp with multiple mines and a history of replacing reserve life
» Silver Lake has produced ≈1 million ounces from Mount Monger since FY2008 whilst never having more than a 3 - 4 year
Reserve backed life of mine
» Currently three established mining centres feeding the central 1.3Mtpa Randall’s mill
» FY2017 gold sales 137koz
» FY2018 guidance 135-145koz with increased contribution from high grade shallow underground mines
(Maxwells, Cock-eyed Bob)
» Four distinct geological districts host our mines
» Interpretation of geological data and mine planning that honours the geology across the varying mining centres
» Installed infrastructure provides significant leverage for exploration success
» Continue to invest at Mount Monger to provide production visibility – FY2018 exploration expenditure ≈$12 million
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
9
PROJECT REPORT 1. Daisy Complex Mining Centre
Christmas Flats
Dinnie Riggio
Stanley
Haoma
Spinifex
t
f
a
h
S
n
o
i
t
a
l
i
t
n
e
V
Western Make
Rosemary
Daisy Milano
Costello
Lorna Doone
Haoma West
Lower Prospect
Current depth of mine development ~ 900 metres
0
500m
Figure 2: Schematic view of Daisy Complex.
» Located 19km from the Randalls Mill
» Daisy Complex remains an asset of significant scale in its peer group
» Reliable base load asset of the Mount Monger Camp
» Life to date >800,000 ounces mined
» Average annual production of 70koz at AISC of ≈A$1,050/oz since Silver Lake’s acquisition in FY2008
» 1,500 ounces per vertical metre mined since FY2009
» Proven mine planning and exploration methodology
» Nature of the geology will limit “JORC” Reserves
» Replace Reserve year on year
» Exploration program has sustained profitable gold feed to the mill
» Lode 56 discovered Q1 FY2017
» Multiple lodes located north of the North Fault
» Highly prospective northern corridor near surface
» Majority of strike exploration focused on shallow <200m drilling
10
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
PROJECT REPORT
2. Mount Belches Mining Centre
Maxwells Underground Mine
0
100m
N
Maxwells Open Pit
1400 Elev
1400 Elev
N
0
0
6
0
1
N
0
0
8
0
1
N
0
0
0
1
1
N
0
0
2
1
1
1200 Elev
Lsec_Maxwells_A4_201704_25_01
LEGEND
Actual Underground Development
to June 2017
Planned Development and Stoping
(July 2017 to June 2018)
Planned Development and Stoping
(July 2018 to June 2019)
Current Pit Outline
N
N
0
Cartography : H.Tran
0
0
0
4
4
1
1
1
1
N
0
0
6
1
1
1200 Elev
Figure 3: Maxwells Underground Mine showing development to date and planned areas of development and stoping.
CEB Long Section
0
LEGEND
June Quarter Drilling Results
Previously Reported
Drill Hole Intersection
Current Underground
Development
CEB Lode Area
1.25m @ 2.58 g/t Au
O
P
E
N
O
P
E
N
200m N
Surface
2.15m @ 11.82 g/t Au
0.75m @ 15.08 g/t Au
OPEN
0.49m @ 10.20 g/t Au
1.0m @ 10.95 g/t Au
0.85m @ 4.89 g/t Au
4.2m @ 15.37 g/t Au
3.7m @ 7.90 g/t Au
1.15m @ 17.48 g/t Au
LSec_CEB_A4_201707_05_01
2.35m @ 4.26 g/t Au
10.35m @ 11.17 g/t Au
0.75m @ 25.98 g/t Au
Figure 4: Long section showing the Cock-eyed Bob underground project and drilling highlights.
» The Mount Belches mining centre is located 18km from the Randalls Mill and currently comprises the Maxwells and
Cock-eyed Bob underground mines
» Targeting three underground mines producing >70,000 oz per annum
» Maxwells - building output and bottom line contribution
» Excellent discovery cost of A$13/oz
» First underground production in Q2 FY2017 and 3-year Reserve backed outlook
» Multiple high-grade gold lodes which remain open at depth and along strike
» Cock-eyed Bob - delivering our strategy to maximise cashflow
» Exploration program delivered a 30% increase in ounces and 38% grade uplift between the 1330 and 1218 levels following
cessation of mining at the 1330 level in Q2 2017
» First development ore Q1 FY2018 with stoping to commence in Q3 FY2018
» Drilling intersected mineralisation below current mine plan potentially extends the life of mine
» Santa Area - open pit mining activities completed in Q1 FY2017 with exploration drilling supporting the potential for a new
underground mine
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
11
PROJECT REPORT
3.
Imperial/Majestic Mining Centre
» Located 33km north north-west of the Randalls Mill
» Mining from the Majestic open pit commenced July 2016 and will continue until Q2 FY2018
» Ore production from the Imperial open pit is scheduled from Q2 FY2018
» Resource conversion providing opportunity for life of mine extension
» FY2018 drilling below existing open pits to explore the potential for future underground mines
4. Aldiss Mining Centre
457543
461543
456139
457139
465543
458139
469543
459139
SEE INSET
M28/0043
INSET
Karonie South
M28/0043
Karonie South
Harry’s Hill
Harry’s Hill
L25/0046
L25/0055
M28/0208
0
2
8
6
6
5
6
0
2
8
5
6
5
6
0
2
8
4
6
5
6
0
2
8
3
6
5
6
Harry’s Hill
L 2 5/0 0 4 6
5
5
0
5/0
2
L
456139
M28/0208
457139
458139
459139
Figure 5: Proposed Aldiss Mining Centre.
» Located 57km from the Randalls Mill
» Aldiss camp is host to ≈500,000 ounces
L28/0055
» Multiple open pit ore sources and identified targets
» Harry’s Hill, French Kiss, Karonie South, Spice, Tank, Atriedes, Main Zone
» Targeting 130,000 – 150,000 ounces production over FY2019-FY2021
» Harry’s Hill construction scheduled to commence in December 2017
» Clearing and pre-strip Q4 FY2018
» Ore processing Q1 FY2019
» Mine ≈90,000 ounces @ 2.2g/t
» French Kiss commencing Q3 FY2020
» Further Resource to Reserve conversion over the next 2 years
French Kiss
0
4
9
7
6
5
6
0
4
9
3
6
5
6
0
4
9
9
5
5
6
0
4
9
5
5
5
6
0
4
9
1
5
5
6
0
4
9
7
4
5
6
12
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
ASX_LocHH_A4_201707_13_01
457543
461543
0
465543
2.5
5km
469543
M28/0171
M28/0289
0
4
9
7
6
5
6
0
4
9
3
6
5
6
0
2
8
6
6
5
6
0
2
8
5
6
5
6
0
2
8
4
6
5
6
0
4
9
9
5
5
6
0
2
8
3
6
5
6
0
2
8
2
6
5
6
0
4
9
5
5
5
6
0
4
9
1
5
5
6
0
4
9
7
4
5
6
0
4
9
3
4
5
6
PROJECT REPORT
EXPLORATION
Mount Monger Camp – FY2017 Highlights
The FY2017 exploration work programs completed by Silver Lake successfully extended and upgraded the gold Reserves at the current
mining operations, advanced development projects with near-term open pit and underground mining potential, and confirmed the strong
potential for new resource growth along the mineralised trends in the Mount Monger and Mount Belches mining centres. Key exploration
highlights (previously reported) included:
» Resource upgrade and decision to recommence mining at Cock-eyed Bob
» Significant extensions and upgrades to existing gold lodes in the Daisy Complex underground mine
» Discovery of two new lodes at Daisy: Lode 56 and Lode 57
» New lodes identified north of the North Fault at the Daisy Complex, demonstrating the discovery potential of this large,
inadequately tested area proximal to the current underground development
» Drilling at Santa supported the potential for a new underground mine
» Step-out drilling from surface at Daisy North intersected a high-grade structure, confirming extensions to Daisy Complex lodes
along one of the strong geochemical trends identified by the regional aircore drilling programs
360000
YA R RI
380000
400000
420000
440000
460000
0
10
20km
BULONG
KALGOORLIE
M
O
U
N
T
M
O
N
G
E
R
Wombola Dam
Croesus Pit
LEGEND
Daisy Area
S
Imperial Majestic
E
V
I
T
S
Randalls
Mount Belches
Aldiss
Imperial
Majestic
TRANS ACCESS
Daisy Complex
Lorna Doone
Spinifex
Santa
Rumbles
Maxwells
Salt Creek
Randalls Mill
Cockeyed Bob
Lucky Bay
Harrys Hill
Karonie
French Kiss
0
0
0
0
0
6
6
0
0
0
0
8
5
6
0
0
0
0
6
5
6
0
0
0
0
4
5
6
0
0
0
0
0
6
6
0
0
0
0
8
5
6
0
0
0
0
6
5
6
0
0
0
0
4
5
6
360000
380000
400000
420000
440000
460000
Figure 6: Mount Monger Camp regional location plan.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
13
EXPLORATION REPORT
Cock-eyed Bob - Resource Development Drilling1
The Cock-eyed Bob (CEB) underground mine is on target to recommence mining development and production in Q1 FY2018. A multi-
phase diamond drilling program was completed in FY2017, aiming to upgrade existing Inferred Resources to Indicated Resources, and
target resource extensions.
Diamond drilling targeted the high-grade shoots within the CEB lodes up to 200 metres below the current underground workings, aiming to
generate sufficient economic mining blocks to justify a long-term mining plan. Strongly mineralised footwall and hanging wall intersections
were characterised by abundant arsenopyrite, with multiple occurrences of visible gold in both lodes. Spectacular assays included
2.25 metres @ 30.06 g/t Au in CEBD068, and 10.85 metres @ 9.25 g/t Au in CEBD069.
The exploration drilling programs have resulted in a significant increase and upgrade to the CEB Mineral Resource estimate, detailed in the
ASX announcement released on 2 June 2017. CEB now hosts a Mineral Resource totalling 1.42 million tonnes at 5.8 g/t Au for a total of
266,000 ounces of gold, including 578,000 tonnes at 5.4 g/t Au for 100,000 ounces of gold in the Indicated category, representing 38% of
the Total Mineral Resource.
Category
Measured
Indicated
Inferred
Total
Tonnes
123,000
578,000
723,000
1,424,000
Table 1 - CEB Resource April 2017 (2.0g/t Au Cut-off).
Grade
Contained Ounces
4.3
5.4
6.4
5.8
17,000
100,000
149,000
266,000
The significant increase in Mineral Resources is attributed to the higher grades within the three main CEB mineralised BIF units intersected
by the recent drilling, which confirmed high-grade shoots extend at least 200 metres below the current underground workings.
Additional underground diamond drilling program was completed subsequent to the April 2017 Mineral Resource upgrade. Twelve drill
holes intersected the mineralised CEB banded iron formation units, demonstrating the potential for additional resource upgrades and
extensions. Assay highlights included (Figure 4):
» 4.2 metres at 15.37 g/t Au,
» 3.7 metres at 7.90 g/t Au,
» 10.4 metres at 11.17 g/t Au, and
» 2.2 metres at 11.82 g/t Au.
The CEB high-grade lodes remain open at depth and along strike to the north and south. These potential depth extensions and repetitions
to the CEB deposit will be the target of ongoing exploration drilling programs once development and mining recommences in FY2018.
1 This information is extracted from the report entitled “June 2017 Quarterly Activities Report” released to the ASX on 21 July 2017 and available to view on www.silverlakeresources.com.au
14
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
EXPLORATION REPORT Stanley (Lode 31) and Daisy North Exploration Target1
The Daisy North exploration target is located approximately 300 metres along strike to the north of the Daisy Complex mine workings, and
is the direct strike extension of the Stanley Lodes in the Daisy mining area. Previous exploration drilling had identified a strong anomalous
trend in the near surface aircore drilling, and the deeper down plunge mineralisation potential along this trend was confirmed by the surface
diamond drilling in early FY2017.
Diamond drilling confirmed the mineralised structures previously intersected in the target area, interpreted to be a significant step-out
extension to the north from the Haoma and Stanley lodes in the Daisy Complex. Visible gold was logged in drill holes 17DNRD009 and
17DNRD014. The visible gold was associated with the sheared porphyry contacts and quartz veining with similar mineralisation style to the
Daisy lodes. Assay highlights included (Figure 7):
» 2.0 metres at 31.0 g/t Au,
» 1.39 metres at 13.86 g/t Au, and
» 1.0 metres at 33.54 g/t Au.
These strong results demonstrate the strike continuity of high grade mineralisation between the Stanley lodes and the Caledonia
exploration prospect to the north.
In addition to the Daisy North surface drilling, a program of infill resource definition diamond drilling from underground was completed
in the Stanley lodes during FY2017. The drilling successfully intersected the mineralised lode in all eight drill holes, including high grade
mineralised quartz veins and visible gold in STA40037, STA40039 and STA40041, which intersected three separate veins with visible gold.
Assay highlights included (Figure 7):
» 2.0 metres at 21.95 g/t Au,
» 0.2 metres at 35.9 g/t Au,
» 0.29 metres at 98.5 g/t Au, and
» 1.18 metres at 68.34 g/t Au.
The success of the underground and surface diamond drilling into the Stanley and Daisy North lodes during FY2017 highlights the potential
for near-term underground development along this zone, located proximal to the current Daisy mine workings, and adding a new mining
front in the upper areas of the Daisy Complex mine. The FY2018 exploration budget includes infill and extensional drilling along the Stanley
and Daisy North target zone.
DAISY NORTH LONG SECTION
0 Elev
1
9
5
0
0
N
Underground Development
1
9
7
5
0
N
2
0
0
0
0
N
NSurface
0 Elev
0.87m @ 5.09 g/t Au
1.00m @ 4.59 g/t Au
2.0m @ 31.00 g/t Au
-250 Elev
DAISY NORTH
EXPLORATION TARGET
1.39m @ 13.86 g/t Au
-250 Elev
STANLEY LODE
1.0m @ 33.54 g/t Au
T
L
U
A
F H
T
R
O
N
1.0m @ 1.22 g/t Au
O
P
E
N
0.20m @ 1.19 g/t Au
N
E
P
O
Assays Pending
0.29m @ 98.50 g/t Au
and
1.18m @ 68.34 g/t Au
0 125m
-500 Elev
LSec_DaisyN_WM_201707_02_01
N
0
0
5
9
1
2.05m @ 5.13 g/t Au
2.0m @ 21.95 g/t Au
N
0
5
7
9
1
Figure 7: Long section showing Stanley Lode and Daisy North exploration drilling target area.
0.30m @ 3.03 g/t Au
0.25m @ 2.77 g/t Au
0.2m @ 35.90 g/t Au
Legend
! June Quarter Drilling Results
! Previously Reported
Drilling Intersection
Stanley Lode Area
N
0
0
0
0
2
-500 Elev
TRAN
1 This information is extracted from the report entitled “June 2017 Quarterly Activities Report” released to the ASX on 21 July 2017 and available to view on www.silverlakeresources.com.au
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
15
EXPLORATION REPORT
Mount Monger Regional Exploration - Aircore Drilling Program2
A core component of the FY2017 exploration strategy is surface exploration drilling in the Daisy Complex area, focussing on discovery of
new gold deposits and growth of the known resource zones. This exploration is drill testing highly prospective, near-term gold targets at
Mount Monger, proximal to existing mine and processing infrastructure. Exploration targets are within known gold deposit trends that were
identified by geological studies, and have been validated by the aircore and follow-up RC and diamond drilling exploration programs.
Target zones are hosted by extensions to existing mineralised structures within preferential stratigraphic units, supported by broad spaced
historical drilling results, surface geochemical anomalies and magnetic trends. The current surface exploration aircore drilling program
extends and infills the strong gold trends highlighted by the FY2016 and FY2017 program with close-spaced drill holes along drill lines
designed to intersect the quartz vein structures, bedrock alteration and geochemical traces of Daisy-style high grade lodes.
Aircore drill holes completed in FY2017 that intersected the gold trends have logged zones of broad haematite alteration in the oxide
horizon, and vein quartz with sericite–albite alteration in the fresh rock. Encouraging assay results have been returned, highlighted by
3.0 metres at 5,678 ppb Au in 17MMAC170 and 3.0 metres at 2,428 ppb Au in 17MMAC076.
The aircore drilling results have continued to demonstrate the success of the regional surface exploration targeting strategy implemented
by the Company in FY2017. Several highly anomalous gold trends have been identified.
Initial RC drilling along the Lorna North trend was completed in FY2017. The Lorna North gold trend is located immediately north of the
Lorna Doone and Spinifex deposits. RC drill holes tested the potential for oxide resources over 550 metres strike length along the gold trend.
15 significant gold intersections were returned with gold grades greater than 1 g/t, with best results highlighted by (Figure 8):
» 6 metres @ 2.66 g/t Au in 17LNRC015, and
» 2 metres @ 3.33g/t Au in 17LNRC005.
Compilation and analysis of the Lorna North RC results is continuing. Follow up RC and diamond drilling work programs will target the
Leslie West and other priority aircore drilling gold trends during FY2018.
Figure 8: Plan showing the Lorna North gold trend with RC drilling highlights.
2 This information is extracted from the report entitled “March 2017 Quarterly Activities Report” released to the ASX on 21 April 2017 and available to view on www.silverlakeresources.com.au
16
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
EXPLORATION REPORT Mount Monger Camp – FY2018 Exploration Strategy
Following the completion of the FY2017 exploration work programs, the Silver Lake exploration team has compiled and updated the
detailed geology and prospectivity of the Mount Monger Camp, building on the recent successful exploration results from the area.
This review has confirmed highly prospective exploration targets. A comprehensive exploration strategy has been adopted and the
Company has set the FY2018 exploration budget at A$12 million. Exploration continues to focus on the highest ranked gold targets
proximal to existing mine and processing infrastructure.
The FY2018 exploration strategy builds on the two core components of the successful FY2017 work programs:
» Definition of new, high value resource ounces from near-mine exploration drilling
» Resource development drilling – extending and converting ounces into the mine plan to replace depletion
The exploration focus for FY2018 remains on gold at the Mount Monger Camp, targeting the Mount Monger, Mount Belches and Aldiss
mining centres. The major components of the FY2018 Exploration budget include:
» Near-term Resource Definition drilling to sustain Daisy Complex, Maxwells, CEB and Aldiss production
» Strategic Project Development drilling to deliver potential new mining operations at Karonie, Karonie South and
Imperial/Majestic underground
» Exploration and resource growth work programs for longer-term production at Daisy Repeats and Daisy South, Mount Belches
and Aldiss
At least two thirds of the total exploration budget is allocated to direct “in ground” drilling and assaying costs. An experienced exploration
team is in place with surface and underground drilling contractors mobilising to commence the planned exploration programme in
Q1 FY2018.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
17
EXPLORATION REPORT COMPANY SUMMARY AT 30 JUNE 2017
Total Mineral Resources are estimated at: 29.2 Mt @ 3.5 g/t Au for 3.35 Moz of contained gold, comprising:
» Mount Monger Operation:
28.1 Mt @ 3.6 g/t Au for 3.29 Moz of contained gold
» Murchison Operation:
1.0 Mt @ 1.9 g/t Au for 0.06 Moz of contained gold
Total Ore Reserves are estimated at: 4.1 Mt @ 3.5 g/t Au for 0.47 Moz of contained gold, comprising:
» Mount Monger Operation:
4.15 Mt @ 3.5 g/t Au for 0.47 Moz of contained gold
MINERAL RESOURCE STATEMENT AS AT 30 JUNE 2017
The Company’s total Measured, Indicated and Inferred Mineral Resources as at 30 June 2017 are 29.2 million tonnes (Mt) @ 3.5 grams per
tonne of gold (g/t Au) containing 3.35 million ounces of gold (Moz) (refer Tables 1, 2). The previous publicly reported estimate of
Mineral Resources was 54.8 Mt @ 2.8 g/t Au containing 4.9 Moz of gold as at 30 June 2016. The Mineral Resources as at 30 June 2017 are
estimated after including Silver Lake’s exploration success and allowing for mining depletion from the Mount Monger Operation, and the
sale of the Great Southern and Tuckabianna mining tenements during the 2017 financial year.
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
June 2016
June 2017
Ore
tonnes
Grade
g/t
Total
Oz Au
Ore
tonnes
Grade
g/t
Total
Oz Au
1,068,000
3.9
135,000
1,398,000
29,724,000
2.4
2,301,000
13,194,000
23,993,000
3.2
2,482,000
14,579,000
4.8
3.3
3.5
215,000
1,439,000
1,702,000
54,785,000
2.8
4,919,000
29,171,000
3.5
3,357,000
Table 1: Total Silver Lake Gold Mineral Resource as of 30 June 2017.
18
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
RESOURCES & RESERVES REPORT
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
Deposit
Ore
tonnes
‘000s
Grade
g/t
Total
Oz Au
‘000s
Ore
tonnes
‘000s
Grade
g/t
Total
Oz Au
‘000s
Ore
tonnes
‘000s
Grade
g/t
Total
Oz Au
‘000s
Ore
tonnes
‘000s
Grade
g/t
Total
Oz Au
‘000s
Daisy Milano Complex
52
52.6
88
455
20.1
294
973
15.8
495
1,479
18.4
877
Fingals
Costello
Lorna Doone
Magic/Mirror
Wombola Pit
Wombola Dam
Hammer & Tap
-
-
-
-
-
-
-
-
-
171
2.7
15
-
13
-
-
3.2
-
-
1
-
131
2.7
11
1,043
-
44
32
5
14
-
111
641
1,428
20
120
350
2.3
4.0
3.5
4.6
4.0
3.0
2.4
77
14
1,174
111
72
1,327
210
1,913
3
12
27
67
297
350
2.3
4.0
2.7
4.2
3.3
2.8
2.4
88
14
116
257
7
27
27
Total Daisy Area
236
13.7
104
1,795
400
4,686
6.0
910
6,718
6.5
1,414
-
-
686
2.0
313
47
3.1
3.1
164
2.6
-
-
6.9
2.0
3.9
Majestic
Imperial
Total Imperial/Majestic
Maxwells
Santa Area
Cock-eyed Bob
Lucky Bay
Rumbles
Anomaly A
Randalls Dam
Main Zone (Karonie)
Harry's Hill
French Kiss
Spice
Tank/Atriedes
Italia/Argonaut
Total Aldiss
Total Stockpiles
377
2.9
35
1,263
-
377
99
-
254
13
-
-
-
2.9
6.6
4.5
4.6
-
-
-
-
436
35
1,699
2.5
21
995
-
3,095
37
706
2
-
-
-
34
351
158
107
5.6
2.2
6.2
4.8
2.2
2.7
2.1
560
340
1.7
1.5
30
2,200
16
776
900
1.6
46
2,976
778
222
2,510
142
515
8
5.4
2.5
5.8
7.2
134
1,872
203
5,605
95
1,474
2
55
851
2.2
59
1,202
73
6
1.7
1.2
4
0
231
113
83
54
137
178
5
24
14
7
2.1
2.8
2.3
5.5
2.4
5.8
5.1
2.2
2.4
2.1
147
70
218
333
425
274
9
83
18
7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
668
1,855
646
78
236
409
2.4
2.5
2.7
2.4
1.4
1.4
52
1,644
149
55
6
11
19
448
808
64
604
-
1.8
2.4
1.7
1.3
1.5
3,892
2.3
291
3,568
1.8
203
7,459
419
1.2
17
-
-
-
-
-
-
419
93
2,311
1.9
34
2,303
2.5
45
1,454
3
29
-
142
840
409
2.1
1.9
1.5
1.4
2.1
1.2
145
183
100
9
39
19
494
17
Total Mount Belches
366
5.1
60
5,445
3.4
592
4,742
3.3
497
10,552
3.4
1,149
Total Mount Monger
1,398
4.8
215
12,832
3.4
1,420
13,895
3.7
1,657
28,124
3.6
3,292
Lena
Leviticus
Numbers
Break of Day
Total Moyagee
Hollandaire
Rapier South
Total Eelya
Total Murchison
Total Silver Lake
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
173
2.0
11
336
-
-
-
-
-
-
-
-
-
17
111
134
173
2.0
11
598
189
1.4
-
189
363
-
1.4
1.7
8
-
8
18
69
86
1.8
6.0
2.5
1.9
2.1
1.1
2.2
1.9
19
509
3
9
8
40
1
5
5
17
111
134
771
207
69
276
1.9
6.0
2.5
1.9
2.0
1.3
2.2
1.5
1.9
30
3
9
8
51
9
5
14
64
19
684
2.0
45
1,047
1,398
4.8
215
13,194
3.3
1,439
14,579
3.5
1,702
29,171
3.5
3,357
Table 2: Mount Monger Operation Gold Mineral Resource as at 30 June 2017.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
19
RESOURCES & RESERVES REPORT e
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20
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
RESOURCES & RESERVES REPORT
ORE RESERVES STATEMENT AS AT 30 JUNE 2017
The Company’s total Proved and Probable Gold Ore Reserve as at 30 June 2017 are 4.1 million tonnes (Mt) @ 3.5 grams per tonne of
gold (g/t Au) containing 0.5 million ounces of gold (Moz) (refer tables 4, 5). The previous publicly reported estimate of Gold Ore Reserves
was 11.2 Mt @ 2.3 g/t Au containing 0.8 Moz of gold as at 30 June 2016. The Ore Reserves as at 30 June 2017 are estimated after
including Silver Lake’s exploration success and allowing for mining depletion from the Mount Monger Operation, and the sale of the
Great Southern and Tuckabianna mining tenements during the 2017 financial year. All Ore Reserves were estimated using a gold price of
A$ 1,500 / oz, apart from the French Kiss, Cock-eyed Bob and Maxwells Ore Reserves using A$1,600 / oz, and the Harry’s Hill Ore Reserve
using A$1,700 / oz.
Proved Reserve
Probable Reserve
Total Reserves
June 2016
Grade
g/t
Total
Oz Au
Ore
tonnes
June 2017
Grade
g/t
2.1
2.3
2.3
52,000
518,000
779,000
3,629,000
830,000
4,147,000
2.3
3.7
3.5
Ore
tonnes
764,000
10,401,000
11,165,000
Total
Oz Au
38,000
429,000
466,000
Table 4: Total Silver Lake Gold Mineral Reserve as of 30 June 2017.
June 2017
Proved Reserves
Probable Reserves
Total Reserves
Daisy Milano Complex (UG)
Mirror/Magic (UG)
Total Daisy
Majestic (OP)
Imperial (OP)
Total Imperial/Majestic
Maxwells (UG)
Santa Area (OP)
Cock-eyed Bob (UG)
Total Mount Belches
Harry's Hill (OP)
French Kiss (OP)
Total Aldiss
Total Stockpiles
Total Mount Monger Operation
Ore
tonnes
‘000s
Grade
g/t
Total
Oz Au
‘000s
Ore
tonnes
‘000s
Grade
g/t
Total
Oz Au
‘000s
Ore
tonnes
‘000s
Grade
g/t
Total
Oz Au
‘000s
49
-
8.0
-
49
8.0
-
-
-
-
-
-
47
5.2
-
2
50
-
-
-
419
518
-
4.5
5.1
-
-
-
1.2
2.3
13
-
13
-
-
-
8
-
-
8
-
-
-
322
417
739
314
247
562
458
-
379
7.1
2.9
4.7
2.5
4.0
3.2
4.7
-
6.1
74
39
372
417
113
788
25
32
57
69
-
314
247
562
506
-
75
381
837
5.3
143
887
1,263
228
2.2
3.5
90
1,263
26
228
1,491
2.4
115
1,491
17
-
-
-
419
7.3
2.9
5.0
2.5
4.0
3.2
4.7
-
6.1
5.3
2.2
3.5
2.4
1.2
87
39
125
25
32
57
76
-
75
152
90
26
115
17
38
3,629
3.7
429
4,147
3.5
466
Table 5: Silver Lake Gold Ore Reserves as of 30 June 2017.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
21
RESOURCES & RESERVES REPORT
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A
RESOURCES & RESERVES REPORT
COMPETENT PERSON’S STATEMENT
The information in the Annual Report to which this statement is attached that relates to the Mineral Resources for the Daisy Milano Complex, and
the Lorna Doone, Wombola Dam, Majestic, Imperial, Maxwells, Santa Area, Cock-eyed Bob, Lucky Bay, Rumbles, Main Zone (Karonie), Harry’s Hill,
French Kiss, Spice, and Tank/Artredies deposits is based upon, and fairly represents, information compiled by Matthew Karl, a Competent Person
who is a member of The Australasian Institute of Mining and Metallurgy. Mr Karl is a full-time employee of the Company. Mr Karl has sufficient
experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify
as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves’. Mr Karl consents to the inclusion in the report of matters based on his information in the form and context in which it appears.
The information in the Annual Report to which this statement is attached that relates to underground Ore Reserves at the Daisy Milano Complex
is based upon, and fairly represents, information compiled by Gavin Ward, a Competent Person who is a member of The Australasian Institute
of Mining and Metallurgy. Mr Ward is a full-time employee of the Company. Mr Ward has sufficient experience that is relevant to the style of
mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in
the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Ward consents to the
inclusion in the report of matters based on his information in the form and context in which it appears.
The information in the Annual Report to which this statement is attached that relates to Ore Reserves at Majestic, Imperial, Harry’s Hill, French Kiss,
Maxwells and Cock-eyed Bob is based upon, and fairly represents, information compiled by Sam Larritt, a Competent Person who is a member
of The Australasian Institute of Mining and Metallurgy. Mr Larritt is a full-time employee of the Company. Mr Larritt has sufficient experience that
is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent
Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’.
Mr Larritt consents to the inclusion in the report of matters based on his information in the form and context in which it appears.
All other information in the Annual Report to which this statement is attached relating to Exploration Results, Mineral Resources and Ore Reserves
is based on, and fairly represents information compiled by Antony Shepherd, a Competent Person who is a member of The Australasian Institute
of Mining and Metallurgy. Mr Shepherd is a full-time employee of the Company. Mr Shepherd has sufficient experience that is relevant to the style
of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the
2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Shepherd consents to the
inclusion in the report of matters based on his information in the form and context in which it appears.
FORWARD LOOKING STATEMENTS
This report may contain forward looking statements that are subject to risk factors associated with gold exploration, mining and production
businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of
variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including but not limited
to price fluctuations, actual demand, currency fluctuations, drilling and production results, Reserve estimations, loss of market, industry
competition, environmental risks, physical risks, legislative, fiscal and regulatory changes, economic and financial market conditions in
various countries and regions, political risks, project delay or advancement, approvals and cost estimates.
Forward-looking statements, including projections, forecasts and estimates, are provided as a general guide only and should not be relied
on as an indication or guarantee of future performance and involve known and unknown risks, uncertainties and other factors, many of
which are outside the control of Silver Lake. Past performance is not necessarily a guide to future performance and no representation or
warranty is made as to the likelihood of achievement or reasonableness of any forward looking statements or other forecast.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
23
RESOURCES & RESERVES REPORT The directors submit their report for the year ended 30 June 2017.
DIRECTORS
The directors of the Company at any time during or since the end of the financial year are:
David Quinlivan
BApp Sci, Min Eng, Grad Dip Fin Serv, FAusImm, FFINSA, MMICA
Non-executive Chairman
Appointed Non-executive Director on 25 June 2015 and
Chairman on 30 September 2015
Mr Quinlivan is a Mining Engineer with significant mining and
executive leadership experience having 11 years of service at
WMC Resources Ltd, followed by a number of high-profile mining
development positions. Since 1989, Mr Quinlivan has served as
Principal of Borden Mining Services, a mining consulting services
firm, where he has worked on a number of mining projects in
various capacities. He has served as Chief Executive Officer
of Sons of Gwalia Ltd (post appointment of administrators),
Chief Operating Officer of Mount Gibson Iron Ltd, President and
Chief Executive Officer of Alacer Gold Corporation and Chairman
of Churchill Mining PLC.
Mr Quinlivan has held no other Directorships in public listed
companies in the last three years.
Luke Tonkin
BEng, Min Eng, MAusImm
Managing Director
Appointed 14 October 2013
Mr Tonkin is a Mining Engineering graduate of the Western Australian
School of Mines and his extensive operations and management
career spans over 30 years within the minerals and mining industry.
He is a past Chairman of the Western Australian School of Mines
Advisory Board. Mr Tonkin has held senior management roles
at WMC Resources Ltd, Sons of Gwalia Ltd and was Managing
Director of Mount Gibson Iron Ltd for 7 years and more recently
Chief Executive Officer and Managing Director of Reed Resources Ltd.
Mr Tonkin joined the Company in October 2013 as Director
of Operations and was appointed as Managing Director on
20 November 2014.
Mr Tonkin has held no other Directorships in public listed companies in
the last three years.
Les Davis
MSc (Min Econs)
Non-executive Director
Appointed 25 May 2007
Mr Davis has over 35 years’ industry experience including 17 years’
hands-on experience in mine development and narrow
vein mining. Mr Davis’ career incorporates 13 years’ senior
management experience including roles as Mine Manager,
Technical Services Manager, Concentrator Manager,
Resident Manager and General Manager Expansion Projects with
organisations including WMC Resources Ltd, Reliance Mining Ltd
and Consolidated Minerals Ltd.
Mr Davis ceased as Managing Director on 20 November 2014 and
was subsequently appointed as Non-executive Director. Mr Davis
has held no other Directorships in public listed companies in the
last three years.
Kelvin Flynn
B.Com, CA
Non-executive Director
Appointed 24 February 2016
Mr Flynn is a qualified Chartered Accountant with 26 years’
experience in investment banking and corporate advisory roles
including private equity and special situations investments in
the mining and resources sector. He has held various leadership
positions in Australia and Asia, having previously held the position
of Executive Director/Vice President with Goldman Sachs and
Managing Director of Alvarez & Marsal in Asia. He has worked
in complex financial workouts, turnaround advisory and interim
management. He is the Managing Director of the specialist
alternative funds manager Sirona Capital, which focusses on
investments in the real estate and real assets sectors.
Mr Flynn is currently a Director of privately held Global Advanced Metals
Pty Ltd and a Non-executive Director of Mineral Resources Limited.
Mr Flynn was also a Non-executive Director of Mutiny Gold Ltd from
31 March 2014 to 31 January 2015 until its successful merger with
Doray Minerals Ltd.
Brian Kennedy
Cert Gen Eng
Non-executive Director
Appointed 20 April 2004
Mr Kennedy has operated a successful resource consultancy for
over 30 years and has worked in the coal, iron ore, nickel, gold
and fertiliser industries. During this time Mr Kennedy managed
large-scale mining operations such as Kambalda and Mount Keith
on behalf of WMC Resources Ltd. More recently Mr Kennedy was
Senior Vice President at Anglo Gold Ashanti Limited.
Mr Kennedy was a founding shareholder and Director of
Reliance Mining Ltd, before its takeover by Consolidated Minerals Ltd.
Mr Kennedy has held no other Directorships in public listed
companies in the last three years.
COMPANY SECRETARY
David Berg
LLB BComm (General Management)
Appointed 4 September 2014
Mr Berg has worked both in the resources industry and as a lawyer
in private practice, advising on corporate governance, M&A,
capital raisings, commercial contracts and litigation. Mr Berg has
previously held company secretarial and senior legal positions
with Mount Gibson Iron Limited and Ascot Resources Limited and
legal roles with Atlas Iron Limited and the Griffin Group. Prior to this
Mr Berg worked in the corporate and resources groups of Herbert
Smith Freehills and King & Wood Mallesons.
24
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT COMMITTEE MEMBERSHIP
As at the date of this report, the Board has an Audit Committee and a Nomination & Remuneration Committee. Those members acting on
the committees of the Board during the year were:
Audit
Kelvin Flynn (Chairman)
Les Davis
David Quinlivan
Term
Full Year
Full Year
Full Year
DIRECTORS’ MEETINGS
Nomination & Remuneration
Term
Les Davis (Chairman)
Brian Kennedy
David Quinlivan
Full Year
Full Year
Full Year
The number of Directors meetings (including committee meetings) held during the year and the number of meetings attended by each
Director are as follows:
David Quinlivan
Luke Tonkin
Les Davis
Kelvin Flynn
Brian Kennedy
Directors’ Meetings
Audit Committee
Nomination & Remuneration
Committee
A
10
10
10
10
9
B
10
10
10
10
10
A
2
-
2
2
-
B
2
-
2
2
-
A
2
-
2
-
2
B
2
-
2
-
2
A – Number of meetings attended
B – Number of meetings held during the time the Director held office or was a member of the committee during the year
DIRECTORS’ INTERESTS
The relevant interest of each Director in the share capital as notified by the Directors to the Australian Securities Exchange in accordance
with s205G(1) of the Corporations Act 2001, at the date of this report is as follows:
Name of Director
David Quinlivan
Luke Tonkin
Les Davis
Kelvin Flynn
Brian Kennedy
Fully Paid Ordinary Shares
Unlisted Options
Unlisted Performance Rights
-
-
1,000,000
-
4,790,746
-
2,000,000
-
-
-
-
3,398,228
-
-
-
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
25
DIRECTORS’ REPORT PRINCIPAL ACTIVITIES
The principal activities of the Group during the course of the financial year were gold mining and processing from the Mount Monger Camp,
gold exploration and evaluation of projects.
CORPORATE STRUCTURE
Silver Lake is a company limited by shares and is domiciled and registered in Australia.
OPERATING OVERVIEW
Silver Lake is an all-Australian, ASX listed gold producing and exploration company operating in the Eastern Goldfields district of Western Australia.
Silver Lake’s land position in Western Australia covers highly prospective, under explored tenements containing gold and silver.
Group Financial Overview
In FY2017 Silver Lake achieved its gold sales guidance and delivered on its strategy of focusing its human and investment capital
on the Mount Monger Camp to develop lower cost production sources and undertake a significant exploration program focused on
shareholder return.
Measures implemented at Mount Monger to deliver consistent cash generative ounces, together with the restructuring of the cost base to
match the mine profile, proved successful and generated FY2017 gold sales of 137,000 ounces (FY2016: 132,400 ounces).
Non-core assets in the Murchison and Great Southern were divested, allowing Silver Lake to focus on high value exploration and
development in the highly endowed Mount Monger Camp. A total of $18,527,000 was invested developing the Maxwells underground
mine and Imperial/Majestic open pits, with $13,150,000 spent on exploration, all internally funded by cash reserves.
The Group recorded a net profit after tax for the period of $2,032,000 (2016: profit of $4,413,000) and generated operating cash flow of
$63,995,000 (2016: $54,992,000).
A reconciliation between the statutory profit after tax and the Group’s underlying operating results is tabled on page 28. This reconciliation
is an unaudited non-IFRS measure that, in the opinion of the Board, provides useful information to assess the operating performance of
the Group. As noted in the table, the Group’s EBITDA (before significant items) was $70,008,000 for the period (2016: $56,749,000).
The increase in EBITDA (excluding significant items) compared with the previous corresponding period is primarily due to:
» a 3% increase in gold sales from the Mount Monger Camp (137,000 ounces compared with 132,400 ounces in FY2016) primarily
due to an increase in open pit production following commencement of the Majestic open pit mine in FY2017 which contributed
54,606 ounces of gold in the period;
» a 5% increase in throughput at the Randalls Mill (1.30mt processed compared with 1.24mt in FY2016);
» a 5% increase in the average realised gold price (A$1,654/oz compared with A$1,580/oz).
Overview of Operations
Mount Monger Camp
A number of new ore sources were introduced at the Mount Monger Camp in FY2017 including the Maxwells underground mine and
Imperial/Majestic open pits, with mining activities also occurring at the Daisy Complex and Cock-eyed Bob (CEB) underground mines.
Mining at the Santa Area open pits concluded in Q1 FY2017. In total, the mines contributed 1,306,508 tonnes of ore at 3.5g/t for 148,244
contained ounces. All processing occurred at the centralised Randalls Gold Processing Facility with 1,300,152 tonnes processed at a
blended grade of 3.5g/t for 135,837 recovered ounces. Ore stockpiles at year end totalled 419,000 tonnes containing 17,000 ounces
of gold.
The FY2017 exploration work programs completed by Silver Lake successfully extended and upgraded the gold reserves at the current
mining operations, advanced development projects with near-term open pit and underground mining potential, and confirmed the strong
potential for new resource growth along the mineralised trends in the Daisy Complex and Mount Belches mining centres. Key exploration
highlights included:
» Resource upgrade and decision to recommence mining at Cock-eyed Bob
» Significant extensions and upgrades to existing gold lodes in the Daisy Complex underground mine
» Discovery of two new lodes at the Daisy Complex (Lode 56 and Lode 57)
» New lodes identified north of the North Fault at the Daisy Complex, demonstrating the discovery potential of this large,
inadequately tested area proximal to the current underground development
» Drilling at Santa supported the potential for a new underground mine.
Step-out drilling from surface at Daisy North intersected a high-grade structure, confirming significant extensions to Daisy Complex lodes
along one of the strong geochemical trends identified by the regional aircore drilling programs.
Mining and production statistics for the Mount Monger Camp for the year ended 30 June 2017 are detailed in Table 1 and Table 2.
26
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT Murchison Operation
In June 2017, the Company agreed to sell its Murchison assets to a wholly owned subsidiary of Westgold Resources Limited (ASX: WGX) for
a total consideration of approximately $10 million. The sale assets comprised:
» the Tuckabianna gold processing facility and underlying mining tenure (Tuckabianna Assets); and
» the Company’s 40% joint venture interest in the Cue Joint Venture (JV Interest).
The purchase price payable for the Tuckabianna Assets was a cash consideration of $6 million and 1,250,000 fully paid ordinary shares
in Westgold. Completion of this part of the transaction occurred on 30 June 2017.
The sale and purchase of the JV Interest was subject to the Company’s joint venture partner, Musgrave Minerals Limited (ASX:MGV), not
exercising its pre-emptive right to purchase the JV Interest on equivalent terms. Subsequent to year end, Musgrave exercised the pre-
emptive right and, as such, Silver Lake proceeded to complete the transaction with Musgrave on equivalent terms to those previously
agreed with Westgold for a cash consideration of $1.5 million, with completion occurring in August 2017. The Company has now divested
its entire interest in the Murchison region.
Great Southern Project
In July 2016 ACH Minerals Pty Ltd (“ACH”) exercised its option to purchase the Great Southern Project (“Project”) from Silver Lake for a cash
consideration of $5 million. The acquisition covers Silver Lake’s entire tenure in the Great Southern, as well as all mining information, the
Ravensthorpe Camp lease and freehold properties held by the Company in the region. Completion of the transaction and receipt of the
proceeds occurred in August 2016.
Gold Mining and Production Statistics
Mount Monger - Mining
Units
FY2017
FY2016
Underground
Ore mined
Mined grade
Contained gold in ore
Open Pit
Ore mined
Mined grade
Contained gold in ore
Total ore mined
Mined grade
Contained gold in ore
Table 1
Mount Monger - Processing
Ore Milled
Head grade
Contained gold in ore
Recovery
Gold produced
Gold sold
Table 2
Tonnes
g/t Au
Oz
Tonnes
g/t Au
Oz
Tonnes
g/t Au
Oz
Units
Tonnes
g/t Au
Oz
%
Oz
Oz
412,736
6.3
84,134
893,772
2.2
64,110
1,306,508
3.5
148,244
FY2017
1,300,152
3.5
145,661
93%
135,837
137,000
419,465
6.4
85,741
866,731
2.0
55,424
1,286,196
3.4
141,165
FY2016
1,236,600
3.5
137,605
95%
131,109
132,400
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
27
DIRECTORS’ REPORT
Exploration
During the year a total of $13.2 million was spent on exploration primarily on, or in close proximity to, the Daisy Complex and Mount Belches
areas. The exploration was focused on highly prospective, near-term gold targets at Mount Monger, proximal to existing mine and
processing infrastructure.
Mount Monger is a highly endowed gold field with a large portfolio of exploration targets, which requires exploration expenditure be
deployed efficiently and effectively. Accordingly, all exploration targets at Mount Monger are assessed and ranked according to their
technical strengths, potential economic return, the probability that the target will become a production source and the priority given to the
exploration target having regard to the Company’s operating strategy.
Following on from the Company’s successful FY2017 exploration program, a FY2018 exploration budget of $11.8 million has been
approved by the Board. The planned exploration continues the focus at the Mount Monger camp, including near-term resource definition
and project development opportunities at the Daisy Complex, Maxwells and Cock-eyed Bob underground mines and the Imperial/Majestic
and Aldiss mining centres, as well as regional exploration targets across the Daisy Complex and Mount Belches mining centres.
STRATEGY
The Group’s short to medium term strategy is to maximise cash flow and increase operating margins from its core Mount Monger Camp.
This will be achieved by:
» a relentless drive to reduce costs and increase productivity;
» the introduction of new, lower cost ore sources into the production schedule and subsequent ramp up of production from the
Cock-eyed Bob and Maxwells underground mines and the Imperial/Majestic and Aldiss open pits;
» executing the exploration strategy by directing expenditure to highly prospective priority targets in the Mount Monger area.
Key risks in being able to deliver on the Group’s strategy include:
» price and demand for gold - it is difficult to accurately predict future dem gold price movements and such movements may
adversely impact on the Group’s profit margins, future development and planned future production;
» exchange rates – the Group is exposed to the Australian dollar currency risk on gold sales, which are denominated in US dollars.
Therefore, revenue will be affected by movements in the US dollar gold price or movement in the Australian Dollar exchange rate
(against the US dollar);
» Reserves and Resources - the Mineral Resources and Ore Reserves for the Group’s assets are estimates only and no assurance
can be given that they will be realised;
» operations - the Group’s gold mining operations are subject to operating risks that could result in decreased production,
increased costs and reduced revenues. Operational difficulties may impact the amount of gold produced, delay deliveries or
increase the cost of mining for varying lengths of time; and
» exploration success – no assurance can be given that exploration expenditure will result in future profitable operating mines.
REVIEW OF FINANCIAL CONDITION
The Group recorded an after-tax profit for the financial period of $2,032,000 (2016: profit of $4,413,000). This profit includes a number of
significant items that, in the opinion of the directors, need adjustment to enable shareholders to obtain an understanding of the results from
operations. The Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) excluding these significant items are outlined
in the table below:
Reconciliation of Statutory Profit after Tax to EBITDA
(excluding significant items) - unaudited
Statutory profit after tax for the year:
Adjustments for:
Depreciation and amortisation
Non-current asset impairments
Other
EBITDA (excluding significant items) *
* Non-IFRS measure
30 June 2017
$’000
30 June 2016
$’000
2,032
4,413
65,874
4,661
(2,559)
70,008
45,386
2,825
4,125
56,749
At the end of the financial year the Group had $61,196,000 in cash (2016: $38,643,000), $7,807,000 in gold bullion (2016: $3,836,000) and bonds
receivable of $146,000 (2016: $146,000). In addition, the Group had $12,386,000 in ASX listed investments at year end (2016: $4,806,000).
28
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT
DIVIDENDS
No dividend has been paid or declared by the Company up to the date of this report.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There have been no material events that have occurred between the reporting date and the date of signing this report.
LIKELY DEVELOPMENTS
The Company will continue to pursue maximising free cashflow and increasing operating margins from its core Mount Monger Camp.
This will include directing exploration expenditure to high impact, cash generating projects.
ENVIRONMENTAL REGULATIONS AND PERFORMANCE
The Company’s operations hold licences issued by the relevant regulatory authorities. These licences specify limits and regulate the
management associated with the operations of the Company. At the date of this report the Company is not aware of any breach of those
environmental requirements.
EMPLOYEES
The consolidated entity had 152 employees as at 30 June 2017 (2016: 159). In addition, Silver Lake also engages contractors and
consultants as required.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has agreed to indemnify the current Directors and Officers against any liability that may arise from their position as Directors
and Officers of the Company except where the liability arises out of conduct involving a lack of good faith.
During the financial year the Company has paid Directors’ & Officers’ insurance premiums in respect of liability of any current and future
Officers, and senior executives of the Company. The contract of insurance prohibits disclosure of the nature of the liability and the amount
of the premium.
Silver Lake has not provided any insurance or indemnity to the auditor of the Company.
PROCEEDINGS ON BEHALF OF THE COMPANY
At the date of this report there are no leave applications or proceedings brought on behalf of the Group under section 237 of the
Corporations Act 2001.
CORPORATE GOVERNANCE
In recognising the need for appropriate standards of corporate behavior and accountability, the Directors of Silver Lake have adhered to the
principles of good corporate governance. The Company’s corporate governance policies are located on the Company’s website.
SUBSEQUENT EVENTS
There has not arisen in the interval between the end of the financial year 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 significantly the operations of the Group,
the results of those operations, or the state of affairs of the Group, in future financial years.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
29
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
This report outlines the remuneration arrangements in place for both Executives and Non-executive Directors of Silver Lake Resources Limited.
Contents:
1. Basis of preparation
2. Key management personnel (KMP)
3. Remuneration snapshot
4. Remuneration governance
5. FY2017 Executive remuneration
6. FY2017 Non-executive director (NED) remuneration
1. Basis of preparation
This remuneration report has been prepared and audited in accordance with the requirements of the Corporations Act 2001 and the
applicable accounting standards. All references to dollars in this remuneration report are to Australian Dollars unless otherwise specified.
2. Key Management Personnel
Key management personnel (KMP) comprise those persons with authority and responsibility for planning, directing and controlling the
activities of the Company. This includes the Executives and Non-executive directors (NEDs) of the Company. In this report, ‘Executives’
refers to individuals identified as KMP, excluding NEDs and the Chairman.
A list of all NEDS and Executives for FY2017 is set out below:
Name
Position
David Quinlivan
Chairman
Luke Tonkin
Managing Director
Les Davis
Non-executive Director
Kelvin Flynn
Non-executive Director
Brian Kennedy
Non-executive Director
David Berg
General Counsel & Company Secretary
Diniz Cardoso
Chief Financial Officer
Matthew O’Hara
General Manager Mount Monger Operations
Antony Shepherd
Exploration & Geology Manager
Term as KMP
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
There have been no changes to KMP since the end of the reporting period up to the date on which the financial report was authorised
for issue.
30
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
3. Remuneration snapshot
a.
FY2017 Remuneration in review
During the year the Company continued its focus on delivering new ore sources that sustain and enhance margins to drive
shareholder returns. Highlights for the year from this strategy included the commencement of mining at the Maxwells underground
and Majestic/Imperial open pit mines, strong results from the expanded exploration campaign and the inclusion of the Cock-eyed Bob,
Harry’s Hill and French Kiss projects in the Life of Mine plan. Further information on the link between company performance and KMP
remuneration can be found in section 5(g).
The Board believes that the Company’s remuneration framework is aligned with market practice and that Executive remuneration in FY2017
was reasonable, having regard to the performance of the Company, the platform established for ongoing performance improvement and
the experience of the Executives.
The following changes to the remuneration structure were made during the year:
Remuneration element
Details
Fixed remuneration
Effective 1 February 2017, Non-executive Director fees increased by 36% with the Non-executive
Chairman’s fee increasing 14% to bring annual fees in line with the 50th percentile of the industry
benchmarking report. This includes fees associated with roles on sub-committees (the Company does
not pay separate committee fees).
Short-term incentive (STI)
STI payments were made to Executives during the period in line with their performance against
set targets. Further information on STI payments is included in Section 5(c) of this report.
Long-term incentive (LTI)
In FY2017, 859,899 performance rights were granted to Mr Luke Tonkin and a further 673,930
performance rights were granted to KMP’s on the terms approved by shareholders at the 2015 AGM
and described further in this report.
b.
Key changes to remuneration for FY2018
No significant changes are anticipated to the Executive remuneration framework for FY2018.
4. Remuneration governance
a.
Board and Nomination & Remuneration Committee responsibility
The Nomination & Remuneration Committee is a subcommittee of the Board. It assists the Board to ensure that the Company develops and
implements remuneration policies and practices that are appropriate for a company of the nature, size and standing of the Company.
The Nomination & Remuneration Committee is responsible for making recommendations to the Board on:
a) the remuneration arrangements (including base pay, performance targets, bonuses, equity awards, superannuation, retirement
rights, termination payments) for senior Executives;
b) the remuneration of Non-executive Directors; and
c) the establishment of employee incentive and equity-based plans and the number and terms of any incentives proposed to be
issued to Executives pursuant to those plans, including any vesting criteria.
b.
Remuneration principles
The Company’s remuneration strategy and structure is reviewed by the Board and the Nomination & Remuneration Committee for business
appropriateness and market suitability on an ongoing basis.
KMP are remunerated and rewarded in accordance with the Company’s remuneration policies (outlined in further detail below).
c.
Engagement of remuneration consultants
During the period, the Company did not engage remuneration consultants to provide a “remuneration recommendation” (as that term
is defined in the Corporations Act 2001), however independent advice was received when the current remuneration framework was
established. This advice was in respect of remuneration reporting and general advice in respect of market practice for long term incentive
plans. In addition, the Nomination & Remuneration Committee benchmark KMP salaries annually using external independent industry
reports and data to ensure that remuneration levels are competitive and meet the objectives of the Company.
d.
2016 AGM voting outcome and comments
The Company received more than 95% “yes” votes from its shareholders on its Remuneration Report for the 2016 financial year.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
31
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
FY2017 Executive remuneration
5.
a.
Executive remuneration strategy and 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 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.
The Company’s reward structure provides for a combination of fixed and variable pay with the following components:
» fixed remuneration in the form of base salary, superannuation and benefits;
» short-term incentives (STI); and
» long-term incentives (LTI).
In accordance with the Company’s objective to ensure that executive remuneration is aligned to Company performance, a portion of
Executives’ remuneration is placed “at risk”. The relative proportion of target FY2017 total remuneration packages split between the fixed
and variable remuneration is shown below:
Target remuneration mix
Executive
Managing Director
Other Executives
b.
Fixed remuneration
Fixed
remuneration
Target STI
Target LTI
45%
62%
22%
19%
33%
19%
Fixed remuneration is set at a level that is aligned to market benchmarks and reflective of Executives’ skills, experience, responsibilities
and performance.
When positioning base pay, the Company presently aims to position aggregate fixed remuneration at the 50th percentile of the industry
benchmarking report. This is to ensure that the Company’s remuneration arrangements remain competitive against peer companies to
assist with the retention and attraction of key talent.
Executive remuneration is benchmarked annually to ASX-listed companies of similar size (by market capitalisation), revenue base, employee
numbers and complexity. Specific reference is also made to peer companies within the mining and exploration sectors.
c.
Short-term incentive (STI) arrangements
The purpose of the STI plan is to link the achievement of key Company targets with the remuneration received by those Executives charged
with meeting those targets.
The STI plan provides eligible employees with the opportunity to earn a cash bonus if certain financial hurdles and agreed key performance
indicators (KPIs) are achieved. The Board has determined that the Company must be cash-flow positive from normal operating and
sustaining capital activities (excluding enhancement activities) for the applicable performance period, for any STI to be paid.
All Executives are eligible to participate in the STI plan with awards capped at 100% of the target opportunity.
Each year the Nomination & Remuneration Committee, in conjunction with the Board, set KPI targets for Executives. Ordinarily, the KPIs
would include measures relating to the Group and the individual, and include financial, production, safety and risk measures.
32
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
For FY2017 the KPIs chosen aligned remuneration with performance and the overall objectives of the Company and included:
» achievement of the FY2017 budget with particular emphasis on safety, cost management, production and cashflow;
» development of a strategic exploration plan with prioritised targets and milestones;
» development of base case and contingency business plans under different assumptions; and
» execution of specified commercial strategies, including crystallising value from non-core assets.
Not all of the above KPIs were assigned to all Executives.
FY2017 STI outcomes
Executive
Luke Tonkin (Managing Director)
David Berg (General Counsel & Company Secretary)
Diniz Cardoso (Chief Financial Officer)
Matthew O’Hara (General Manager Mount Monger Operations)
Antony Shepherd (Exploration & Geology Manager)
# STI not paid is forfeited
d.
Long-term incentive (LTI) arrangements
Maximum STI
opportunity
50% of base salary
30% of base salary
30% of base salary
30% of base salary
30% of base salary
% STI paid#
STI paid
82%
82%
82%
55%
82%
$241,359
$70,182
$73,361
$47,468
$61,134
The Board has established the Employee Incentive Plan (Incentive Plan) as a means for motivating senior employees to pursue the long
term growth and success of the Company. The Incentive Plan provides the Company with the flexibility to issue Incentives in the form of
either options or performance rights which may ultimately vest and be converted into shares on exercise, subject to satisfaction of any
relevant vesting conditions. The Incentive Plan was approved by shareholders at the 2015 AGM.
FY2017 LTI outcomes
Executive
Luke Tonkin
(Managing Director)
David Berg
(General Counsel & Joint Company Secretary)
Diniz Cardoso
(Chief Financial Officer)
Matthew O’Hara
(General Manager Mount Monger Operations)
Antony Shepherd
(Exploration & Geology Manager)
* Independently valued using a hybrid share option pricing model
Maximum LTI
opportunity
75% of base salary
30% of base salary
30% of base salary
30% of base salary
30% of base salary
Number of
Performance Rights
granted during FY2017
Fair value per
Performance Right *
859,899
(75% of base salary)
171,079
(30% of base salary)
183,299
(30% of base salary)
172,912
(30% of base salary)
146,640
(30% of base salary)
$0.247
$0.247
$0.247
$0.247
$0.247
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
33
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
During the year the Company issued 1,533,829 Performance Rights to Executives (including 859,899 Performance Rights to Mr Tonkin) in
respect of the LTI component of their FY2017 remuneration. These Performance Rights were approved at the 2015 AGM and were issued in
September 2016. The number of Performance Rights awarded to each Executive was calculated by dividing the maximum LTI opportunity
by the 20 day VWAP of the Company shares as traded on the ASX up to 30 June 2016.
The Performance Rights for all Executives will not vest (and the underlying shares will not be issued) unless a hurdle, based on relative total
shareholder return (TSR), has been satisfied. TSR measures the growth for a financial year in the price of shares plus dividends notionally
reinvested in shares.
Relative TSR will be measured by comparing the Company’s TSR with that of a comparator group of companies over the respective 3 year
vesting period, which for the current award is the period 1 July 2016 to 30 June 2019. The TSR metric measures the share price movement
and dividends over this period for both the Company and the comparator group. The Performance Rights will vest based on the Company’s
relative TSR ranking on the vesting date (30 June 2019) as follows:
Relative TSR Performance
Less than 50th percentile
Vesting Outcome
0% vesting
Between the 50th percentile and 75th percentile
Pro rata straight line from 50% to 100%
At or above the 75th percentile
100% vesting
Relative TSR performance is calculated at a single point in time and is not subject to re-testing.
The comparator group of companies for all Performance Rights on issue are as follows:
Evolution Mining Ltd; Medusa Mining Ltd; OceanaGold Corporation; Doray Minerals Ltd; Northern Star Resources Ltd;
Ramelius Resources Ltd; Kingsgate Consolidated Ltd; Gold Road Resources Ltd; Regis Resources Ltd; Independence Group NL;
St Barbara Ltd; Saracen Mineral Holdings Ltd and Tanami Gold NL.
At the discretion of the Board, the composition of the comparator group may change from time to time.
34
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
e.
Service agreements
A summary of the key terms of service agreements for Executives in FY2017 is set out below. There is no fixed term for Executive service
agreements and all Executives are entitled to participate in the Company’s STI and LTI plans. The Company may terminate service
agreements immediately for cause, in which case the Executive is not entitled to any payment other than the value of fixed remuneration
and accrued leave entitlements up to the termination date.
Name
Term of Agreement
Total Fixed
Remuneration
Notice Period
by Executive
Notice Period
by Silver Lake
Termination
Payment
Luke Tonkin
(Managing Director)
Open
Diniz Cardoso
(Chief Financial Officer)
Open
Antony Shepherd
(Exploration
& Geology Manager)
Open
David Berg
(General Counsel
& Company Secretary)
Open
Matthew O’Hara
(General Manager
Mount Monger Operations)
Open
6 months
6 months
6 months
6 months
3 months
3 months
6 months
6 months
12 months
Total Fixed
Remuneration
6 months
Total Fixed
Remuneration
6 months
Total Fixed
Remuneration
6 month
Total Fixed
Remuneration
2 months
2 months
As per Legislation
$592,200 plus
12% superannuation
STI equivalent to
50% of base salary
LTI equivalent to
75% of base salary
$300,000 plus
9.5% superannuation
STI equivalent to
30% of base salary
LTI equivalent to
30% of base salary
$250,000 plus
9.5% superannuation
STI equivalent to
30% of base salary
LTI equivalent to
30% of base salary
$287,000 plus
9.5% superannuation
STI equivalent to
30% of base salary
LTI equivalent to
30% of base salary
$290,000 plus
9.5% superannuation
STI equivalent to
30% of base salary
LTI equivalent to
30% of base salary
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
35
DIRECTORS’ REPORT
REMUNERATION REPORT - AUDITED
f.
Executive remuneration paid
Short Term
Post-
employment
Other
Base
Emolument
$
STI/Bonus
Payments
$
Total
Benefits
$
Superannuation
Benefits
$
Options/
Performance
Right
$
(A)
Other
Benefits
$
Total
$
Proportion of
remuneration
performance
related
%
Luke Tonkin
Managing Director
2017
607,895
241,359
849,254
2016
552,971
262,688
815,659
35,282
35,282
176,929
32,405
1,093,870
256,406
41,144
1,148,491
38
45
22
19
23
22
23
23
16
20
-
7
28
28
2017
300,000
73,361
373,361
28,500
23,774
8,062
433,697
2016
52,952
15,131
68,083
6,154
449
5,322
80,008
2017
247,307
61,134
308,441
23,494
22,091
8,294
362,320
2016
240,000
66,960
306,960
28,500
10,018
6,450
351,928
2017
289,284
70,182
359,466
24,065
24,521
3,660
411,712
2016
282,153
78,120
360,273
21,539
10,435
1,063
393,310
Diniz Cardoso (B)
Chief Financial
Officer
Antony Shepherd
Exploration
& Geology Manager
David Berg
General Counsel
& Company Secretary
Matthew O’Hara
General Manager
Mount Monger Camp
2017
288,115
47,468
335,583
2016
283,000
78,957
361,957
27,371
30,685
14,236
10,157
387,347
-
-
(2,053)
390,589
-
-
Peter Armstrong (C)
Chief Financial Officer
2017
-
2016
250,204
-
-
-
-
250,204
28,968
33,199
191,253
503,624
Total
Total
2017
1,732,601
493,504
2,226,105
138,712
261,551
62,578
2,688,946
2016
1,661,280
501,856
2,163,136
151,128
310,507
243,179
2,867,950
(A) Represents contractual entitlements (including termination and retirement benefits), annual leave and long service leave
entitlements, measured on an accrual basis.
(B) Mr Cardoso met the definition of Key Management Personnel from 8 April 2016 following his appointment as
Chief Financial Officer. Remuneration in the table above is from the date of his appointment.
(C) Mr Armstrong ceased to meet the definition of Key Management Personnel on 8 April 2016 following his resignation from
the Company. Remuneration in the table above is up to the date of resignation.
36
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT
REMUNERATION REPORT - AUDITED
g.
Link between company performance, shareholder wealth generation and remuneration
The Nomination & Remuneration Committee considers a number of criteria to assess the performance of the Company. Criteria used in this
assessment include maximising of cash flows, managing risk, using a stronger balance sheet to undertake cash accretive investments in
core assets, execution of development projects, exploration success as well as the following indices in respect of the current and previous
financial years.
Cash and bullion ($m)
Profit/(loss) after tax attributable to shareholders ($m)
Cash from operating activities ($m)
Closing share price at 30 June
* Includes impairments on inventories and other non-current assets
2017
69.1
2.0
64.0
$0.47
2016
42.6
4.4
55.0
$0.52
2015
28.9
2014
32.2
2013
19.2
(94.0)*
(170.4)*
(319.3)*
29.5
$0.14
24.5
$0.51
53.9
$0.59
The Company’s remuneration practices reflect the achievement of certain of the Company’s and KMP’s performance objectives.
The Company’s overall objective has been to maximise cash flow, increase operating margins at its core Mount Monger Camp and
crystalise value from its non-core assets.
In assessing KMP performance during the year, the Committee considered the following achievements against objectives set at the start of
the year:
» achieving OH&S objectives;
» achieving environmental objectives;
» meeting FY2017 sales guidance;
» 16% increase in cash flow from operations;
» exceeding the targeted end of year cash and bullion balance;
» successful targeted and phased exploration strategy;
» successful development of both the Maxwells underground mine and the Imperial/Majestic open pits;
» implementing and managing a transparent, effective hedging strategy to secure future revenue streams;
» delivery of positive exploration results from infill and extensional resource definition drilling to allow further mines to enter
production in future periods; and
» crystallising value from non-core assets including the sale of the Murchison and Great Southern projects.
6.
FY2017 NON-EXECUTIVE DIRECTOR (NED) REMUNERATION
a.
NED remuneration policy
The Company’s policy is to remunerate NEDs at market rates (for comparable ASX listed companies) for time, commitment and
responsibilities. Fees for NEDs are not linked to the performance of the Company.
It is ensured that:
a) fees paid to NEDs are within the aggregate amount approved by shareholders at the Company’s Annual General Meeting;
b) NEDs are remunerated by way of fees (in the form of cash and superannuation benefits);
c) NEDs are not provided with retirement benefits other than statutory superannuation entitlements; and
d) NEDs are not entitled to participate in equity-based remuneration schemes designed for executives without due
consideration and appropriate disclosure to the Company’s shareholders.
Fees paid to NEDs cover all activities associated with their role on the Board and any sub-committees. No additional fees are paid to NEDs
for being a Chair or Member of a sub-committee. However, NEDs are entitled to fees or other amounts as the Board determines where
they perform special duties or otherwise perform extra services on behalf of the Company. They may also be reimbursed for out of pocket
expenses incurred as a result of their Directorships.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
37
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
b.
NED fee pool and fees
The Company’s Constitution provides that the NEDs may collectively be paid, as remuneration for their services, a fixed sum not
exceeding the aggregate maximum from time to time determined by the Company in a general meeting. Directors’ fees payable in
aggregate to the NEDs of the Company is currently capped at $1,000,000 per annum.
FY2017 NED fees
» Chairman
$173,750 plus 9.5% superannuation
» NED
$115,000 plus 9.5% superannuation
When positioning base pay for NEDs, the Company presently aims to position fees at the 50th percentile of the industry benchmarking
report. Effective 1 February 2017, NED fees were increased by 36% to $115,000 per annum, with Chairman fees increasing by 14% to
$173,750 per annum.
c.
NED fees paid
Details of the remuneration of each NED for the year ended 30 June 2017 is set out in the following table:
David Quinlivan (A)
Non-executive Chairman
Les Davis
Non-executive Director
Kelvin Flynn (B)
Non-executive Director
Brian Kennedy
Non-executive Director
Paul Chapman (C)
Non-executive Chairman
David Griffiths (D)
Non-executive Director
Total
Total
Short Term
Post-employment
Base
Emolument
$
160,586
129,111
96,522
77,877
96,522
29,656
96,522
77,877
-
42,299
-
29,383
450,152
386,203
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Superannuation
benefits
$
15,256
12,266
9,170
7,398
9,170
2,817
9,170
7,398
-
4,018
-
2,791
42,766
36,688
Total
$
175,842
141,377
105,692
85,275
105,692
32,473
105,692
85,275
-
46,317
-
32,174
492,918
422,891
(A) Mr Quinlivan appointed as NED on 25 June 2015 and Chairman on 30 September 2015
(B) Mr Flynn appointed as NED on 24 February 2016
(C) Mr Chapman resigned as Chairman on 30 September 2015
(D) Mr Griffiths resigned as NED on 20 November 2015
38
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT
REMUNERATION REPORT - AUDITED
Movement in Options
There were no options granted to KMP during FY2017. The movement, during the reporting period, in the number of options over ordinary
shares in the Company held, directly, indirectly or beneficially by KMP, including their related parties, is outlined below:
Key Management
Personal
Luke Tonkin (i)
Held at
1 July 2016
2,000,000
(i) Employee options (equity-settled)
Granted
Exercised
Held at
30 June 2017
Vested
During
The Year
Vested &
Exercisable at
30 June 2017
-
-
2,000,000
1,000,000
2,000,000
On 18 October 2013 the Group granted Mr Luke Tonkin, (at the time Executive Director of Operations), a total of 2,000,000 employee
options as part of his employment agreement which were approved by shareholders at the Annual General Meeting on 15 November 2013.
The total expense recognised in the Statement of Profit or Loss for these options for the year ended 30 June 2017 was $54,729 (included
within the total $176,929 value reflected in the remuneration table in Section 5(f)).
Details of the options are summarised in the following table:
Number of options
Exercise price
Issue date
Vesting date
Expiry date
Tranche A
400,000
$0.94
18 October 2013
15 January 2015
18 October 2017
Tranche B
600,000
$1.03
18 October 2013
15 January 2016
18 October 2017
Tranche C
1,000,000
$1.14
18 October 2013
15 January 2017
18 October 2017
The inputs used in the measurement of the fair values at grant date were as follow:
Valuation at grant date
Share price at grant date
Volatility
Risk free rate
Expected dividends
Tranche A
Tranche B
Tranche C
$0.36
$0.67
80%
3.03%
-
$0.34
$0.67
80%
3.03%
-
$0.33
$0.67
80%
3.03%
-
The fair value of the options was measured using a binomial option pricing model. A Black Scholes option pricing model was used to
validate the valuation prices calculated by the binomial option pricing model. Whilst there are no performance conditions attached to the
exercise of these options, the exercise price of the options was set at a premium (between 40%-70%) to the prevailing share price at date
of grant.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
39
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
Movement in Performance Rights
Key Management
Person
Held at
1 July 2016
Issued in
FY2017
Rights
Exercised
Rights
Lapsed
Held at
30 June 2017
Vested during
the year
Vested &
exercisable at
30 June 2017
Luke Tonkin
David Berg
Diniz Cardoso
Matthew O’Hara
3,408,932
423,055
351,982
-
Antony Shepherd
406,133
859,899
171,079
183,299
172,912
146,640
Total
4,590,102
1,533,829
-
-
-
-
-
-
(870,603)
3,398,228
-
-
-
-
594,134
535,281
172,912
552,773
(870,603)
5,253,328
-
-
-
-
-
-
-
-
-
-
-
-
The total expense recognised in the Statement of Profit or Loss for all Executives’ Performance Rights for the period ended 30 June 2017
was $261,551.
Details of the performance rights are summarised in the following table:
Number of performance rights*
Exercise price
Grant date
Vesting date
Expiry date
FY2015 Award
FY2016 Award
FY2017 Award
870,603**
$0.00
2,161,296
$0.00
2,538,329
$0.00
20 Nov 2014
1 July 2015
20 Nov 2015
2,058,334
$0.00
1 July 2016
1 July 2014 –
30 June 2017
1 July 2015 –
30 June 2018
1 July 2015 –
30 June 2018
1 July 2016 –
30 June 2019
1 July 2017
1 July 2018
1 July 2018
1 July 2019
* Represents total performance rights issued, inclusive of awards to other members of management not considered KMP’s.
** Lapsed at 30 June 2017
The inputs used in the measurement of the fair values at grant date were as follow:
Valuation at grant date
Underlying 20 day VWAP
Volatility
Risk free rate
Expected dividends
FY2015 Award
FY2016 Award
FY2017 Award
$0.045
$0.431
20%
2.56%
-
$0.074
$0.148
22%
2.14%
-
$0.110
$0.148
22%
2.14%
-
$0.247
$0.491
20%
1.52%
-
The fair value of the performance rights was measured using a hybrid employee share option pricing model (correlation simulation and
Monte Carlo model) and was calculated by independent consultants.
40
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
Movement in Shares
Key Management Person
Held at
1 July 2016
Shares Acquired
Shares
Exercised
Shares
Sold
Held at
30 June 2017
David Quinlivan
Luke Tonkin
Les Davis
Kelvin Flynn
Brian Kennedy
David Berg
Diniz Cardoso
Matthew O’Hara
Antony Shepherd
Total
-
-
4,525,294
-
4,790,746
10,416
-
-
-
9,326,456
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,525,294)
1,000,000
-
-
-
-
-
-
-
4,790,746
10,416
-
-
-
(3,525,294)
5,801,162
Key Management
Person
Held at
1 July 2015
Shares Acquired
Shares
Exercised
Shares
Sold
Other *
Held at
30 June 2016
David Quinlivan
Luke Tonkin
Les Davis
Kelvin Flynn
Brian Kennedy
David Berg
Diniz Cardoso
Antony Shepherd
Peter Armstrong
Paul Chapman
David Griffiths
Total
-
-
4,525,294
-
4,790,746
10,416
-
-
499,959
5,334,294
4,393,671
19,554,380
* Balance reported is the shareholding on the date of resignation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(499,959)
(5,334,294)
(4,393,671)
-
-
4,525,294
-
4,790,746
10,416
-
-
-
-
-
(10,227,924)
9,326,456
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
41
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE
Section 307C of the Corporations Act 2001 requires Silver Lake’s auditors, KPMG, to provide the Directors of Silver Lake with an
Independence Declaration in relation to the audit of the financial report for the year ended 30 June 2017. This Independence Declaration is
attached to the Directors’ Report and forms a part of the Directors’ Report.
NON-AUDIT SERVICES
During the year KPMG, the Group’s auditor, has performed certain other services in addition to the audit and review of the
financial statements.
The Board is satisfied that the provision of non-audit services is compatible with, and did not compromise the general standard of
independence for auditors imposed by the Corporations Act 2001 for the following reasons:
» all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by
the Audit Committee to ensure they do not impact the integrity and objectivity of the auditor; and
» the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants, as they do not involve reviewing or auditing the auditor’s own work, acting in a
management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risk and rewards.
Details of the amounts paid to the auditor of the Group, KPMG, and its network firms for audit and non-audit services provided during the
year are set out below:
Taxation services
Audit and review of financial statements
Total paid
ROUNDING OFF
2017
$
20,744
167,708
188,452
2016
$
56,760
161,500
218,260
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in
accordance with that Instrument, all financial information has been rounded off to the nearest thousand dollars, unless otherwise stated.
The Directors’ Report is signed in accordance with a resolution of the Directors.
Luke Tonkin
Managing Director
22 August 2017
42
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
DIRECTORS’ REPORT 1. In the opinion of the Directors:
a) the consolidated financial statements and notes of the Group and the Remuneration Report in the Directors’ Report are in
accordance with the Corporations Act 2001 including:
i) Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the year then
ended; and
ii) Complying with Australian Accounting Standards and Corporations Regulations 2001;
b) the financial statements also comply with International Financial Reporting Standards as disclosed in Note 1;
c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
d) there are reasonable grounds to believe that the Company and the Group entity identified in Note 34 will be able to meet any
obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the
Company and that Group entity pursuant to ASIC Class Order 98/1418.
2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with s295A of
the Corporations Act 2001 from the Managing Director and Chief Financial Officer for the financial year ended 30 June 2017.
The declaration is signed in accordance with a resolution of the Board of Directors.
Luke Tonkin
Managing Director
22 August 2017
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
43
DIRECTORS’ DECLARATION 44
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
AUDITOR’S INDEPENDENCE DECLARATION SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
45
INDEPENDENT AUDIT REPORT 46
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
INDEPENDENT AUDIT REPORT SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
47
INDEPENDENT AUDIT REPORT 48
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
INDEPENDENT AUDIT REPORT SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
49
INDEPENDENT AUDIT REPORT FOR THE YEAR ENDED 30 JUNE 2017
Revenue
Cost of sales
Gross profit
Other income
Profit/(loss) on sale of assets
Exploration expenditure
Impairment losses
Administrative expenses
Results from operating activities
Finance income
Finance expenses
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
Total comprehensive profit for the year
Basic profit per share
Diluted profit per share
Notes
3
4
30 June
2017
$’000
227,491
30 June
2016
$’000
209,497
(216,355)
(192,396)
11,136
17,101
-
(960)
(2,557)
(4,661)
(7,002)
(4,044)
6,550
(474)
6,076
2,032
-
2,032
2,032
3,146
3,118
(3,193)
(2,825)
(8,878)
8,469
482
(4,538)
(4,056)
4,413
-
4,413
4,413
Cents
Per Share
Cents
Per Share
0.40
0.40
0.88
0.87
14
17
5
7
8
9
9
The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes
to these consolidated financial statements.
50
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
AS AT 30 JUNE 2017
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Assets held for sale
Prepayments
Total current assets
Non-current assets
Inventories
Exploration evaluation and development expenditure
Property, plant and equipment
Investments
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Liabilities held for sale
Rehabilitation and restoration provision
Employee benefits
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Rehabilitation and restoration provision
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
30 June
2017
$’000
30 June
2016
$’000
Notes
10
12
13
17
13
14
15
16
18
19
17
22
20
19
22
23
24
61,196
9,531
18,937
1,500
112
91,276
1,868
99,062
38,251
12,386
151,567
242,843
32,956
2,125
-
-
1,874
36,955
-
16,122
16,122
53,077
189,766
38,643
2,317
20,708
10,056
91
71,815
2,052
123,893
50,675
4,806
181,426
253,241
30,914
3,937
5,056
1,158
1,697
42,762
2,125
21,010
23,135
65,897
187,344
699,564
1,220
(511,018)
189,766
699,564
830
(513,050)
187,344
The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes to these consolidated
financial statements.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
51
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2017
Share
Capital
$’000
Option
Reserve
$’000
Accumulated
Losses
$’000
Total
Equity
$’000
Notes
Balance at 1 July 2015
699,564
505
(517,463)
182,606
Total comprehensive profit for the year
Transactions with owners, recorded directly in equity
Equity settled share based payment
24
Total transactions with owners of the Company
Balance at 30 June 2016
-
-
-
699,564
Share
Capital
$’000
-
325
325
830
4,413
4,413
-
-
325
325
(513,050)
187,344
Option
Reserve
$’000
Accumulated
Losses
$’000
Total
Equity
$’000
Balance at 1 July 2016
699,564
830
(513,050)
187,344
Total comprehensive profit for the year
Transactions with owners, recorded directly in equity
Equity settled share based payment
24
Total transactions with owners of the Company
-
-
-
Balance at 30 June 2017
699,564
-
2,032
2,032
390
390
1,220
-
-
390
390
(511,018)
189,766
The Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes to these consolidated
financial statements.
52
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
Cash flows from operating activities
Receipts from sales
Payments to suppliers and employees
Net cash from operating activities
Cash flow from investing activities
Interest received
Acquisition of plant and equipment
Proceeds from divestments
Exploration, evaluation and development expenditure
Net cash used in investing activities
Cash flows from financing activities
Stamp duty paid
Interest paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
30 June
2017
$’000
220,319
(156,324)
63,995
662
(6,315)
11,928
(43,306)
(37,031)
(3,937)
(474)
(4,411)
22,553
38,643
61,196
Notes
11
7
17
10
30 June
2016
$’000
205,837
(150,845)
54,992
482
(2,562)
3,388
(35,575)
(34,267)
(3,553)
(1,067)
(4,620)
16,105
22,538
38,643
The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes to the consolidated
financial statements.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
53
CONSOLIDATED STATEMENT OF CASH FLOWS
1. BASIS OF PREPARATION
Silver Lake Resources Limited (“Silver Lake” or “the Company”) is a for profit entity domiciled in Australia. The consolidated financial
statements of the Company as at and for the year ended 30 June 2017 comprise the Company and its subsidiaries (together referred to as
“the Group” and individually as “Group Entities”).
The consolidated financial statements were approved by the Board of Directors on 22 August 2017. The financial report is a general
purpose financial report which:
» has been prepared in accordance with Australian Accounting Standards (“AASBs”) (including Australian Accounting
interpretations) adopted by the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001;
» complies with International Financial Reporting Standards (“IFRSs”) and interpretations adopted by the International Accounting
Standards Board (“IASB”);
» has been presented on the historical cost basis except for the following items in the statement of financial position:
» investments which have been measured at fair value.
» equity settled share based payment arrangements have been measured at fair value.
» inventories which have been measured at the lower of cost and net realisable value.
» exploration, evaluation and development assets which have been measured at recoverable value where impairments have
been recognised.
There have been no material changes to accounting policies for the periods presented in these consolidated financial statements.
Significant accounting policies specific to one note are included in that note. Accounting policies determined non-significant are not
included in the financial statements.
The accounting policies have been applied consistently to all periods presented and by all Group entities. Certain comparative disclosures
have been reclassified to conform to the current year’s presentation.
(a) Functional and Presentation Currency
These consolidated financial statements are prepared in Australian dollars, which is the functional currency of the Company and its
subsidiaries. The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and
in accordance with that Instrument, all financial information has been rounded off to the nearest thousand dollars, unless otherwise stated.
(b) Use of Judgements and Estimates
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application
of accounting policies and reported amounts of assets and liabilities, income and expenses.
Judgements and estimates which are material to the financial report are found in the following notes:
» Note 8 Income Tax – recognition of deferred tax assets
» Note 14 Exploration, evaluation and development expenditure carried forward – consideration of impairment triggers and
recognition of impairment losses
» Note 14 Amortisation of development expenditure – estimation of future mineable inventory and future development expenditure
when calculating units of production amortisation
» Note 14 Reserves and Resources- estimating reserves and resources
» Note 22 Closure and rehabilitation – measurement of provision based on key assumptions
(c) Basis for Consolidation
The consolidated financial statements comprise the financial statements of the Group. A list of controlled entities (subsidiaries) at year end is
disclosed in Note 29.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent
accounting policies.
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
54
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (d) Determination of Fair Value
A number of the Group’s accounting policies and disclosures require the determination of fair value for both financial and non-financial
assets and liabilities. Fair Value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group
has access at that date. The fair value of a liability reflects its non-performance risk. Fair values have been determined for measurement
and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in
determining fair values is disclosed in the notes specific to that asset or liability.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised
into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
» Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
» Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices)
» Level 3: inputs for the asset or liability that are not based on observable market data.
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value
measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire
measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the
change has occurred.
(e) Impairment of Non-Financial Assets
The carrying amounts of the Group’s non-financial assets, other than inventories, exploration and evaluation expenditure and deferred tax
assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the
asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be
tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in the Statement of Profit or Loss. Impairment losses recognised in respect of cash-generating units are
allocated first to reduce the carrying amount of any goodwill and then to reduce the carrying amount of the other assets in the unit (group of
units) on a pro-rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or
no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no impairment loss had been recognised. An impairment loss in respect of goodwill
is not reversed.
Long term development and production phase assets that relate to unmined resources are assessed in light of current economic conditions.
Assumptions on the economic returns on and timing of specific production options may impact on the timing of development of these assets.
The carrying values of these assets are assessed where an indicator of impairment exists using a fair value less cost to sell technique. This is done
based on implied market values against their existing resource and reserve base and an assessment on the likelihood of recoverability from the
successful development or sale of the asset. The implied market values are calculated based on recent comparable transactions within Australia
converted to a value per ounce. This is considered to be a Level 3 valuation technique.
2. SEGMENT REPORTING
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The Group does not
have any operating segments with discrete financial information. The Group does not have any customers, other than the Perth Mint and
its bankers, and all the group assets and liabilities are located within Western Australia. The Board of Directors review internal management
reports on a monthly basis that are consistent with the information provided in the Statement of Profit or Loss and Other Comprehensive
Income, Statement of Financial Position and Statement of Cash Flows. As a result, no reconciliation is required because the information as
presented is used by the Board to make strategic decisions.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. REVENUE
Gold sales
Silver sales
Total
30 June
2017
$’000
226,568
923
227,491
30 June
2016
$’000
209,124
373
209,497
Included in current year gold sales is 97,019 ounces of gold sold (at an average price of A$1,654/ounce) under various hedge programs.
At 30 June 2017, the Company has a total of 142,291 ounces of gold left to be delivered under these programs.
Accounting Policies
Gold sales
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable. Revenue is recognised when the
significant risk and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs
and possible return of goods can be estimated reliably and the amount of revenue can be measured reliably.
Gold forward contracts
The Group uses derivative financial instruments such as gold forward contracts to manage the risks associated with commodity price.
The sale of gold under such hedge instruments is accounted for using the ‘own use exemption’ under AASB 139 Financial Instruments and
as such all hedge revenue is recognised in the Statement of Profit or Loss and no fair value adjustments are subsequently made to sales yet
to be delivered under the hedging program.
4. COST OF SALES
Mining and processing costs
Amortisation
Depreciation
Salaries and on-costs
Royalties
Accounting Policies
Mining and processing costs
Notes
14
15
30 June
2017
$’000
125,872
55,824
10,050
17,207
7,402
30 June
2016
$’000
124,297
36,063
9,323
15,740
6,973
216,355
192,396
This includes all costs related to mining, milling and site administration, net of costs capitalised to mine development and
production stripping. This category also includes movements in the cost of inventory and any net realisable value write downs.
Amortisation
The Group applies the units of production method for amortisation of its mine properties, which results in an amortisation charge
proportional to the depletion of the anticipated remaining life of mine production. These calculations require the use of estimates
and assumptions in relation to reserves and resources, metallurgy and the complexity of future capital development requirements.
These estimates and assumptions are reviewed annually and changes to these estimates and assumptions may impact the amortisation
charge in the Statement of Profit or Loss and asset carrying values.
The Group uses ounces mined over mineable inventory as its basis for depletion of mine properties. In the absence of reserves, the
Group believes this is the best measure as evidenced by historical conversion of resources to reserves. The Group applies applicable
factoring rates when adopting the units of production method to reflect the risk of conversion from the inferred and indicated categories to
mineable inventory.
56
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Depreciation
Depreciation is calculated on either a reducing balance basis or on a straight-line basis over the estimated useful life of each part of an item
of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful life while processing
plants are depreciated on the life of the mine basis. Capital work in progress is not depreciated until it is ready for use. Depreciation methods,
useful lives and residual values are reassessed at each reporting date. The estimated useful lives for the current and comparative period are
as follows:
Buildings
Haul roads
Plant and equipment
Office furniture and equipment
Motor vehicles
Capital work in progress is not depreciated until it is ready for use.
Period
10 Years
5 Years
3-10 Years
3-15 Years
3-5 Years
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. ADMINISTRATION EXPENSES
Salaries and on-costs
Consultants and contractors
Professional fees
Travel and accommodation
Rental expense
Provision for doubtful debts (Note 12)
Other corporate costs
Total
6. PERSONNEL EXPENSES
Wages and salaries
Other associated personnel expenses
Superannuation contributions
Total
7. FINANCE INCOME AND EXPENSES
Interest income
Change in fair value of listed investment
Finance income
Change in fair value of listed investment
Interest expense on interest bearing liabilities
Unwind of discount on provision
Finance costs
Net finance costs
30 June
2017
$’000
4,675
665
189
109
653
-
711
7,002
30 June
2017
$’000
20,705
1,315
1,935
23,955
30 June
2017
$’000
662
5,888
6,550
-
(474)
-
(474)
6,076
30 June
2016
$’000
4,574
294
203
121
619
2,929
138
8,878
30 June
2016
$’000
19,945
1,280
1,849
23,074
30 June
2016
$’000
482
-
482
(2,695)
(1,067)
(776)
(4,538)
(4,056)
Accounting Policies
Interest income comprises bank interest on funds invested and is recognised as it accrues, using the effective interest method.
Finance expenses comprise interest expense on borrowings and unwinding of the discount on provisions. All borrowing costs are
recognised in the Statement of Profit or Loss using the effective interest method in the period in which they are incurred except borrowing
costs that are directly attributable to the acquisition, construction and production of a qualifying asset that necessarily takes a substantial
period to get ready for its intended use or sale. In this case, borrowing costs are capitalised as part of the qualifying asset.
58
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. TAXES
(a) Income tax
Current tax expense
Current income tax loss
Adjustment for prior years
Deferred income tax expense
Origination and reversal of temporary differences
Income tax expense reported in profit or loss
Numerical reconciliation between tax expenses and pre-tax profit
Profit before tax
Income tax using the corporation tax rate of 30%
Movement due to non-deductible items
Adjustment for prior years
Changes in unrecognised temporary differences
Income tax expense reported in profit or loss
(b) Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Deferred tax assets/(liabilities)
Receivables
Inventories
Exploration, evaluation and mining assets
Property, plant and equipment
Accrued expenses
Provisions
Share issue costs
Tax losses
Less deferred tax asset not recognised
Net deferred tax assets
30 June
2017
$’000
(26,752)
(12)
(26,764)
26,764
-
30 June
2017
$’000
2,032
610
(1,931)
(12)
1,333
-
30 June
2016
$’000
(10,089)
(2,476)
(12,565)
12,565
-
30 June
2016
$’000
4,413
1,323
3,302
(2,476)
(2,149)
-
30 June
2017
$’000
30 June
2016
$’000
2,017
(1,463)
13,046
1,897
475
4,952
255
123,293
144,472
1,929
(1,606)
15,535
22,884
575
6,372
921
96,529
143,139
(144,472)
(143,139)
-
-
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates
to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are
expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted
by the reporting date.
Tax consolidation
The Company and its wholly-owned entities are part of a tax-consolidated group. As a consequence, all members of the tax-consolidated
group are taxed as a single entity (Silver Lake Resources Limited is the head entity within the tax-consolidation group).
Current tax expense/benefit, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-
consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate
taxpayer within the group’ approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of
each entity and the tax values applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the head
entity in the tax-consolidated group and are recognised by the Company as amounts payable/(receivable) to/(from) other entities in the tax-
consolidated group. Any differences between these amounts are recognised by the Company as an equity contribution or distribution.
The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable
that the future taxable profits of the tax-consolidated group will be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the
probability of recoverability is recognised by the head entity only.
Tax losses
At 30 June 2017 the Company has $410,976,000 (2016: $321,763,000 loss) of tax losses that are available for offset against future taxable
profits of the Company. The Group has not recorded these carry forward tax losses that equate to an unrecognised deferred tax asset at
30 June 2017 of $123,293,000 (2016: $96,529,000).
The potential benefit of carried forward tax losses will only be obtained if taxable profits are derived of a nature and, of an amount sufficient
to enable the benefit from the deductions to be realised or the benefit can be utilised by the Group provided that:
i.
the provisions of deductibility imposed by law are complied with; and
ii. no change in tax legislation adversely affects the realisation of the benefit from the deductions.
In accordance with the Group’s accounting policies for deferred taxes, a deferred tax asset is recognised for unused tax losses only if it is
probable that future taxable profits will be available to utilise those losses.
Determination of future taxable profits requires estimates and assumptions as to future events and circumstances, in particular, whether
successful development and commercial exploitation, or alternatively sale, of the respective areas of interest will be achieved. This includes
estimates and judgments about commodity prices, ore resources, exchange rates, future capital requirements, future operational
performance and the timing of estimated cash flows. Changes in these estimates and assumptions could impact on the amount and
probability of estimated taxable profits and accordingly the recoverability of deferred tax assets.
60
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 9. EARNINGS PER SHARE
Profit used in calculating basic and diluted EPS
30 June
2017
$’000
2,032
30 June
2016
$’000
4,413
Number of
Shares
Number of
shares
Weighted average number of ordinary shares used in calculating basic earnings per share
503,708,000
503,234,000
Effect of dilution
6,758,000
4,707,000
Weighted average number of ordinary shares used in calculating diluted earnings per share
510,466,000
507,941,000
Accounting Policies
Basic EPS is calculated as profit attributable to ordinary shareholders of the Company divided by the weighted average number of
ordinary shares.
Diluted EPS is determined by adjusting the profit attributable to ordinary shareholders and the weighted average number of ordinary shares
outstanding for the effects of all dilutive potential ordinary shares, including share options granted to employees.
10. CASH AND CASH EQUIVALENTS
Cash at bank
30 June
2017
$’000
61,196
30 June
2016
$’000
38,643
Accounting Policies
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less. The Group ensures that as far
as possible it maintains excess cash and cash equivalents in short-term high interest bearing deposits.
The Group’s exposure to interest rate risk and a sensitivity analysis of financial assets and liabilities are disclosed in Note 25.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from operating activities
Profit after tax
Adjustments for:
Depreciation
Amortisation
Impairment of exploration and development expenditure
Share based payments
Net finance cost
(Profit)/loss from the sale of non-current assets
Operating profit before changes in working capital and provisions
Change in trade and other receivables
Change in inventories
Change in prepayments
Change in trade and other payables
Change in provisions
Total
12. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
GST receivable
Provision for doubtful debts (Note 25 (b)(ii))
Total
30 June
2017
$’000
30 June
2016
$’000
2,032
4,413
10,050
55,824
4,661
390
(5,888)
960
68,029
(7,401)
1,344
(22)
2,041
4
63,995
30 June
2017
$’000
14,557
1,697
(6,723)
9,531
9,323
36,063
2,825
325
3,471
(3,118)
53,302
2,649
(3,929)
(29)
2,915
84
54,992
30 June
2016
$’000
7,386
1,654
(6,723)
2,317
The Group’s exposure to interest rate risk and a sensitivity analysis of financial assets and liabilities are disclosed in Note 25.
Accounting Policies
Trade receivables are recognised initially at the value of the invoice sent to the counterparty and subsequently at the amounts considered
recoverable (amortised cost). Where there is evidence that the receivable is not recoverable, it is impaired with a corresponding change to
the profit or loss statement.
62
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. INVENTORIES
Current
Materials and supplies
Ore stocks
Gold in circuit
Bullion on hand
Non-Current
Ore stocks
Total
30 June
2017
$’000
30 June
2016
$’000
4,882
9,814
3,535
706
18,937
1,868
20,805
5,354
9,103
2,415
3,836
20,708
2,052
22,760
At the reporting date the Group carried out an impairment review of inventory and assessed that all inventory was carried at the lower of cost
and net realisable value and that no impairment was required.
Accounting Policies
Inventory
Inventories of ore, gold in circuit and gold bullion are physically measured or estimated and valued at the lower of cost and net
realisable value.
The cost comprises direct materials, labour and transportation expenditure in bringing such inventories to their existing location and
condition, together with an appropriate portion of fixed and variable overhead expenditure based on weighted cost incurred during the
period in which such inventories were produced.
Net realisable value is the estimated selling price in the ordinary course of business less estimated cost of completion and the estimated
cost necessary to perform the sale. Inventories of consumable supplies and spare parts that are expected to be used in production are
valued at cost. Obsolete or damaged inventories of such items are valued at net realisable value.
Consumables and spare parts are valued at the lower of cost and net realisable value. Any provision for obsolescence is determined by
reference to specific stock items identified.
Bullion on hand
Bullion on hand comprises gold that has been delivered to the Perth Mint prior to period end but which has not yet been delivered into a
sale contract.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE
During the year ended 30 June 2017 the Group incurred and capitalised the following on exploration, evaluation and development expenditure:
30 June
2017
$’000
14,198
9,538
-
-
(4,661)
-
(1,500)
(2,557)
15,018
30 June
2017
$’000
45,897
-
1,315
(38,326)
8,886
30 June
2017
$’000
63,798
38,326
33,584
(4,726)
-
(55,824)
75,158
99,062
30 June
2016
$’000
37,078
10,620
(1,851)
(92)
(2,825)
(16,383)
(9,156)
(3,193)
14,198
30 June
2016
$’000
41,845
16,383
9,914
(22,245)
45,897
30 June
2016
$’000
64,556
22,245
14,776
(221)
(1,495)
(36,063)
63,798
123,893
Exploration and evaluation phase
Cost brought forward
Capitalised during the year
Decrease in rehabilitation provision
Disposed during the year
Impairment
Transferred to development phase
Transferred to asset held for sale
Expensed during period
Balance at 30 June
Development phase
Cost brought forward
Transfer from exploration and evaluation phase
Expenditure during the year
Transferred to production phase
Balance at 30 June
Production phase
Cost brought forward
Transfer from development phase
Expenditure during the year
Disposed during the year
Decrease in rehabilitation provision
Amortisation expense
Balance at 30 June
Total
64
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
Exploration and evaluation expenditure
Exploration and evaluation expenditures are those expenditures incurred in connection with the exploration for and evaluation of minerals
resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. Expenditure incurred
on activities that precede exploration and evaluation of mineral resources, including all expenditure incurred prior to securing legal rights to
explore an area, is expensed as incurred.
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. An ‘area of interest’ is an
individual geological area which is considered to constitute a favourable environment for the presence of a mineral deposit or has been
proved to contain such a deposit. These costs are carried forward only if they relate to an area of interest for which rights of tenure are
current and in respect of which:
» such costs are expected to be recouped through successful development and exploitation or from sale of the area; and
» exploration and evaluation activities in the area have not, at balance date, reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable resources, and active and significant operations in,
or relating to, this area are continuing.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to
the area of interest. If costs do not meet the criteria noted above, they are written off in full against the profit and loss statement.
Exploration and evaluation assets are transferred to Development Phase assets once technical feasibility and commercial viability of an
area of interest is demonstrable. Exploration and evaluation assets are tested for impairment, and any impairment loss is recognised, prior to
being reclassified.
Impairment testing of exploration and evaluation assets
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial
viability or facts and circumstances suggest that the carrying amount exceeds the recoverable amount.
Exploration and evaluation assets are tested for impairment when any of the following facts and circumstances exist:
» the term of exploration licence in the specific area of interest has expired during the reporting period or will expire in the near
future, and is not expected to be renewed;
» substantive expenditure on further exploration for and evaluation of mineral resources in the specific area are not
budgeted or planned;
» exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable
quantities of mineral resource and the decision was made to discontinue such activities in the specific area; or
» sufficient data exists to indicate that, although a development in the specific area of interest is likely to proceed, the carrying
amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.
When a potential impairment is indicated, an assessment is performed for each CGU which is no larger than the area of interest.
Impairment testing of assets in the development or production phase
The carrying amounts of assets in the development or production phase are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be
tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment
losses are recognised in the Statement of Profit or Loss. Impairment losses recognised in respect of cash-generating units are allocated first
to reduce the carrying amount of any goodwill and then to reduce the carrying amount of the other assets in the unit (group of units) on a
pro-rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or
no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no impairment loss had been recognised. An impairment loss in respect of goodwill
is not reversed.
Exploration expenditure commitments
Exploration expenditure commitments represent tenement rentals and minimum spend requirements that are required to be met under the
relevant legislation should the Group wish to retain tenure on all its current tenements.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Mine properties and mining assets
Mine properties represent the acquisition cost and/or accumulated exploration, evaluation and development expenditure in respect of
areas of interest in which mining has commenced.
Mine development costs are deferred until commercial production commences. When commercial production is achieved mine
development is transferred to mine properties, at which time it is amortised on a unit of production basis based on ounces mined over the
total estimated resources related to this area of interest.
Significant factors considered in determining the technical feasibility and commercial viability of the project are the completion of a
feasibility study, the existence of sufficient resources to proceed with development and approval by the board of Directors to proceed with
development of the project.
Underground development expenditure incurred in respect of a mine development after the commencement of production is carried
forward as part of mine development only when substantial future economic benefits are expected. Otherwise, this expenditure is expensed
as incurred.
Deferred Stripping Costs
Stripping is the process of removing overburden and waste materials from surface mining operations to access the ore. Stripping costs are
capitalised during the development of a mine and are subsequently amortised over the life of mine on a units of production basis, where the
unit of account is tonnes of ore milled. Stripping costs capitalised at year end are included in the Production phase in Note 14.
Reserves and Resources
Resources are estimates of the amount of gold product that can be economically extracted from the Group’s mine properties. In order
to calculate resources, estimates and assumptions are required about a range of geological, technical and economic factors, including
quantities, grades, production techniques, recovery rates, production costs, future capital requirements, short and long term commodity
prices and exchange rates.
Estimating the quantity and/or grade of resources requires the size, shape and depth of ore bodies to be determined by analysing
geological data. This process may require complex and difficult geological judgments and calculations to interpret the data.
The Group determines and reports ore resources under the Australian Code of Reporting for Mineral Resource and Ore Reserves (2004
and 2012), known as the JORC Code. The JORC Code requires the use of reasonable assumptions to calculate resources. Due to the fact
that economic assumptions used to estimate resources change from period to period, and geological data is generated during the course
of operations, estimates of resources may change from period to period. Changes in reported resources may affect the Group’s financial
results and financial position in a number of ways, including:
» asset carrying values may be impacted due to changes in estimates of future cash flows;
» amortisation charged in the Statement of Profit or Loss may change where such charges are calculated using the units of
production basis;
» decommissioning, site restoration and environmental provisions may change due to changes in estimated resources after
expectations about the timing or costs of these activities change; and
» recognition of deferred tax assets, including tax losses.
66
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15. PROPERTY, PLANT AND EQUIPMENT
Land &
Building
Plant &
Equipment
Haul
Roads
Motor
Vehicles
Note
$’000
$’000
$’000
$’000
Office
Furniture &
Equipment
$’000
Capital
Work In
Progress
$’000
Total
$’000
Cost
Balance 1 July 2015
13,908
191,642
3,561
2,504
1,983
524
214,122
Additions
Reclassified as held for sale
Transfers
Disposals
-
(900)
94
-
-
-
2,147
-
-
-
-
-
Balance 30 June 2016
13,102
193,789
3,561
Additions
Reclassification of assets
Transfers
Disposals
-
-
-
-
-
5,952
(366)
(11,421)
-
-
326
-
Balance 30 June 2017
12,736
188,320
3,887
Depreciation
Balance at 1 July 2015
Depreciation expense
Disposal
Balance 30 June 2016
Depreciation expense
Disposal
4
4
10,470
139,729
1,780
444
-
7,594
-
712
-
10,914
147,323
2,492
363
(53)
8,531
(1,675)
811
-
Balance 30 June 2017
11,224
154,179
3,303
Carrying Amount
At 30 June 2015
At 30 June 2016
At 30 June 2017
3,438
2,188
1,512
51,913
46,466
34,141
1,781
1,069
584
-
-
231
(385)
2,350
-
-
153
(234)
2,269
2,058
320
(327)
2,051
144
(203)
1,991
446
299
278
2,564
-
(2,681)
-
407
6,315
1,405
(7,124)
2,564
(900)
-
(385)
215,401
6,315
1,405
-
-
(12,026)
-
209
-
2,192
-
-
693
(5)
2,880
1,003
211,094
1,693
253
-
1,946
202
(1)
2,147
290
246
733
-
-
-
-
-
-
-
526
407
1,003
155,730
9,323
(327)
164,726
10,050
(1,932)
172,843
58,394
50,675
38,251
Accounting Policies
Items of plant and equipment are stated at their cost less accumulated depreciation and impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost
of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the
costs of dismantling and removing the items and restoring the site on which they are located.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major
components) of property, plant and equipment. The cost of replacing part of an item of property, plant and equipment is recognised in the
carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can
be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. INVESTMENTS
Investments in listed entities – at fair value
Movements as follows:
Balance at 1 July
Acquisitions
Disposals
Change in fair value
Balance at 30 June
Accounting Policies
Financial assets at fair value through profit or loss
30 June
2017
$’000
12,386
4,806
2,300
(608)
5,888
12,386
30 June
2016
$’000
4,806
7,561
75
(135)
(2,695)
4,806
Financial assets designated at fair value through profit or loss comprise investments in equity securities.
A financial asset is classified as at fair value through profit or loss if it is classified as held-for-trading or is designated at such on
initial recognition. Financial assets are designated at fair value through profit or loss if the Group manages such investments and makes
purchase and sale decisions based on their fair value in accordance with the Group’s documented risk management or investment strategy.
Attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at
fair value and changes therein are recognised in the profit or loss.
The fair values of investments in equity securities are determined with reference to their quoted ASX closing price at balance date.
17. DISPOSAL OF ASSETS
Great Southern Project
In August 2016, the Company completed the sale of the Great Southern Project for cash consideration of $5 million. The carrying value of
the project comprised $10,401,000 of assets and $5,056,000 of liabilities and resulted in a loss on disposal of $345,000 being included in
the current year Statement of Profit or Loss.
Murchison Operation
In June 2017, the Company agreed to sell its Murchison assets to a wholly owned subsidiary of Westgold Resources Limited (ASX: WGX) for
a total consideration of approximately $10 million. The sale assets comprised:
» the Tuckabianna gold processing facility and underlying mining tenure (Tuckabianna Assets); and
» the Company’s 40% joint venture interest in the Cue Joint Venture (JV Interest).
The purchase price payable for the Tuckabianna Assets was a cash consideration of $6 million and 1,250,000 fully paid ordinary shares in
Westgold. Completion of this part of the transaction occurred on 30 June 2017.
Assets held for sale of $1,500,000 represents the sale of the Cue Project Joint Venture. Completion of this transaction occurred in
August 2017 and resulted in an impairment of $4,661,000 being included in the current year Statement of Profit or Loss.
Accounting Policies
Non-current assets and associated liabilities are classified as held for sale when their carrying amount will be recovered principally through a
sale transaction rather than continuing use and a sale is highly probable. Assets designated as held for sale are held at the lower of carrying
amount at designation and fair value less costs to sell.
68
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. TRADE AND OTHER PAYABLES
Trade payables
Other payables
Total
30 June
2017
$’000
29,354
3,602
32,956
30 June
2016
$’000
26,949
3,965
30,914
The Group’s exposure to liquidity risk and a sensitivity analysis of financial assets and liabilities are disclosed in Note 25.
Accounting Policies
Trade payables are recognised at the value of the invoice received from a supplier. They represent liabilities for goods and services provided
to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in
respect of the purchase of these goods and services. The amounts are unsecured and generally paid between 30-45 days of recognition.
19. INTEREST BEARING LIABILITIES
Current liability
Stamp duty
Non-current liability
Stamp duty
Total
30 June
2017
$’000
30 June
2016
$’000
2,125
2,125
-
2,125
3,937
3,937
2,125
6,062
The stamp duty liability is payable over the next 6 months and incurs interest at the rate of 10.7% per annum.
The Group’s exposure to interest rate and liquidity risk arising from these interest-bearing liabilities is disclosed in Note 25.
Accounting Policies
All borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial
recognition, interest-bearing borrowings are subsequently measured at amortised cost using the effective interest method. Fees paid on the
establishment of loan facilities that are yield related are included as part of the carrying amount of the borrowings.
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 date.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. EMPLOYEE BENEFITS
Current
Liability for annual leave
Liability for long service leave
Total
Accounting Policies
(i)
Defined Contribution Superannuation Funds
30 June
2017
$’000
1,484
390
1,874
30 June
2016
$’000
1,327
370
1,697
Obligations for contributions to defined contribution superannuation funds are recognised as an expense in profit or loss when they
are incurred.
(ii)
Other Long-Term Employee Benefits
The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return
for their service in the current and prior periods plus related on costs. The benefit is discounted to determine its present value using a
discount rate that equals the yield at the reporting date on Australian corporate bonds that have maturity dates approximating the terms of
the Group’s obligations.
(iii) Short-Term Benefits
Liabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting from employees’
services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the
Group expects to pay as at reporting date including related on-costs.
70
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21. SHARE BASED PAYMENTS
Employee options (equity-settled)
The number of and weighted average exercise prices of share options are as follows:
Outstanding at 1 July
Forfeited during period
Granted during the period
Exercised during the period
Outstanding at 30 June
Exercisable at 30 June
Weighted
Average
Exercise Price
2017
Number of
Options
2017
Weighted
Average
Exercise Price
2016
Number of
Options
2016
$1.07
2,000,000
$1.07
2,000,000
-
-
-
-
-
-
-
-
-
-
-
-
$1.07
$0.99
2,000,000
1,000,000
$1.07
$0.94
2,000,000
1,000,000
The total expense recognised in the Statement of Profit or Loss for these options for the year ended 30 June 2017 was $54,729 (2016: $150,275).
These options expire on 18 October 2017 if unexcercised.
Performance rights (equity settled)
Performance rights have been issued to the Managing Director and other eligible employees in accordance with long term incentive plans
approved by shareholders. Movements in Performance Rights are summarised as follows:
Held at
30 June
2016
FY2017
Rights
Granted
Rights
Exercised
Rights
Lapsed
Held at
30 June
2017
Vested
during
the year
Vested &
exercisable at
30 June 2017
Total
5,694,329
2,058,334
-
(994,704)
6,757,959
-
-
The fair value of the performance rights was measured using a hybrid employee share option pricing model (correlation simulation and
Monte Carlo model) and was calculated by independent consultants. Details of the valuation and vesting conditions are included in the
Remuneration Report.
The total expense recognised in the Statement of Profit or Loss for all performance rights for the period ended 30 June 2017 was $390,000
(2016: $325,000).
Accounting Policies
Share-based payment transactions
The grant-date fair value of equity-settled share based payment awards granted to employees is generally recognised as an expense,
with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to
reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the
amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions
at the vesting date. For share based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is
measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22. PROVISIONS
Closure and rehabilitation
Opening balance at 1 July
Adjustment to provisions during the year
Disposal of asset
Unwind of discount
Transferred to liabilities held for sale
Rehabilitation spend
Closing balance at 30 June
Current provision
Non-current provision
Closing balance at 30 June
30 June
2017
$’000
30 June
2016
$’000
22,168
343
(5,873)
-
-
(516)
16,122
-
16,122
16,122
30,058
(2,718)
(264)
776
(5,056)
(628)
22,168
1,158
21,010
22,168
At year end a review of the Group’s closure and rehabilitation provision was undertaken using updated cost assumptions and life of
mine plans. As a result of this review the provision was increased by $343,000 (2016: decreased by $2,718,000).
Accounting Policies
Provisions
A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation as a result of a past
event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a discount rate that reflects current market assessments of the time value of
money and, when appropriate, the risks specific to the liability.
Closure and rehabilitation
The mining, extraction and processing activities of the Group normally give rise to obligations for site closure or rehabilitation. The extent of
work required and the associated costs are dependent on the requirements of relevant authorities and the Group’s environmental policies.
Provisions for the cost of each closure and rehabilitation program are recognised when the Group has a present obligation and it is
probable that rehabilitation/restoration costs will be incurred at a future date, which generally arises at the time that environmental
disturbance occurs. When the extent of disturbance increases over the life of an operation, the provision is increased accordingly.
Costs included in the provision encompass all closure and rehabilitation activity expected to occur progressively over the life of the
operation and at the time of closure, in connection with disturbances, as at the reporting date.
The timing of the actual closure and rehabilitation expenditure is dependent upon a number of factors such as the life and nature of the
asset, the operating licence conditions and the environment in which the mine operates. Expenditure may occur before and after closure
and can continue for an extended period of time dependent on closure and rehabilitation requirements.
Closure and rehabilitation provisions are measured at the expected value of future cash flows, discounted to their present value. Significant
judgements and estimates are involved in forming expectations of future activities and the amount and timing of the associated cash flows.
When provisions for closure and rehabilitation are initially recognised, to the extent that it is probable that future economic benefits
associated with the rehabilitation, decommissioning and restoration expenditure will flow in the entity, the corresponding cost is capitalised
as an asset. The capitalised cost of closure and rehabilitation activities is recognised in exploration evaluation and mine properties and is
amortised accordingly. The value of the provision is progressively increased over time as the effect of discounting unwinds, creating an
expense recognised in finance expenses.
Closure and rehabilitation provisions are also adjusted for changes in estimates. Those adjustments are accounted for as a change in the
corresponding capitalised cost, except where a reduction in the provision is greater than the unamortised capitalised cost of the related
assets, where it is probable that future economic benefits will flow to the entity, in which case the capitalised cost is reduced to nil and the
remaining adjustment is recognised in the Statement of Profit or Loss.
72
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Adjustments to the estimated amount and timing of future closure and rehabilitation cash flows are a normal occurrence in light of the
significant judgements and estimates involved. Factors influencing those changes include:
» revisions to estimated reserves, resources and lives of operations;
» regulatory requirements and environmental management strategies;
» changes in the estimated costs of anticipated activities, including the effects of inflation and movements in foreign
exchange rates;
» movements in interest rates affecting the discount rate applied; and
» the timing of cash flows.
At each reporting date, the rehabilitation and restoration provision is remeasured to reflect any of these changes.
23. SHARE CAPITAL
Movements in issued capital
Balance as at 1 July 2015
Movement in the period *
Balance as at 30 June 2016
Movement in the period
Balance as at 30 June 2017
* Movement relates to the vesting of performance rights issued for nil consideration.
Accounting Policy
Issued capital
Number
$’000
503,233,971
699,564
473,675
-
503,707,646
699,564
-
-
503,707,646
699,564
Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the
issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
24. RESERVES
Movement in options reserve
Balance as at 1 July
Equity settled share based payment expense
Balance as at June
2017
$’000
830
390
1,220
2016
$’000
505
325
830
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. FINANCIAL RISK MANAGEMENT
(a) Overview
This note presents information about the Group’s exposure to credit, liquidity and market risks, the objectives, policies and processes for
measuring and managing risk, and the management of capital.
The Board regularly reviews the use of derivatives and opportunities for their use within the Group. Exposure limits are reviewed by
management on a continuous basis. The Group does not enter into or trade financial instruments, including derivative financial instruments,
for speculative purposes.
The Board has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and
manages the financial risks relating to the operations of the Group through regular reviews of the risks.
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers.
Presently, the Group undertakes gold mining, exploration and evaluation activities exclusively in Australia. At the balance sheet date, there
were no significant concentrations of credit risk.
(i)
Cash and cash equivalents
The Group limits its exposure to credit risk by only investing in liquid securities and only with major Australian financial institutions.
(ii)
Trade and other receivables
The Group’s trade and other receivables relate to gold sales, GST refunds and rental income.
At 30 June 2017, a provision for doubtful debts of $6,723,000 (2016: $6,723,000) has been recorded against rental income receivable
as a result of a debtor being place in liquidation in a prior year. This receivable is therefore not reflected in the trade and other receivables
balance in Note 25(c).
The Group has determined that its credit risk exposure on all other trade receivables is low, as customers are considered to be reliable and
have short contractual payment terms. Management does not expect any of these counterparties to fail to meet their obligations.
(c) Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk
at the reporting date was:
Trade and other receivables
Cash and cash equivalents
Total
Carrying Amount
2017
$’000
9,546
61,196
70,742
2016
$’000
2,317
38,643
40,960
74
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(d) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages liquidity
risk by maintaining adequate cash reserves from funds generated from operations and by continuously monitoring forecast and actual
cash flows.
To mitigate large fluctuations in the USD:AUD exchange rate as well as the USD denominated gold price, the Company has entered into
hedging programmes whereby future bullion sales are hedged at a predetermined AUD gold price. At 30 June 2017, the Company has a
total of 142,291 ounces to be delivered under these hedges over the next 36 months at an average of A$1,700/oz. The sale of gold under
these hedges is accounted for using the ‘own use exemption’ under AASB 139 Financial Instruments and as such all hedge revenue is
recognised in the Statement of Profit or Loss and no mark to market valuation is performed on undelivered ounces.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements:
30 June 2017
Trade and other payables
Stamp duty
Total
30 June 2016
Trade and other payables
Stamp duty
Total
Carrying
Amount
$’000
Contractual
Cash Flows
$’000
6 Months
or Less
$’000
32,955
2,125
35,080*
32,955
2,189
35,144
32,955
2,189
35,144
Carrying
Amount
$’000
Contractual
Cash Flows
$’000
6 Months
or Less
$’000
30,914
6,062
36,976*
30,914
6,568
37,482
30,914
2,189
33,103
6-12
Months
$’000
-
2,189
2,189
1-2
Years
$’000
-
2,190
2,190
* The carrying value at balance date approximates fair value
(e) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, whilst optimising the return. The Group has exposure to foreign exchange risk on US denominated
sales, refer to Note 25(d) for the Group’s strategy for managing this risk. In addition, the Group has exposure to interest rate and equity
price risks.
(i)
Interest rate risk
The Group is exposed to interest rate risk (primarily on its cash and cash equivalents and its interest-bearing liabilities), which is the risk
that a financial instrument’s value will fluctuate as a result of changes in the market interest rates on interest-bearing financial instruments.
The Group does not use derivatives to mitigate these exposures.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Profile
At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments was:
Fixed rate instruments
Financial liabilities
Stamp duty liability
Variable rate instruments
Financial assets
Cash and cash equivalents
Carrying Amount
2017
$’000
2016
$’000
(2,125)
(6,062)
61,196
38,643
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest
rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss after tax by
$612,000 (2016: $386,000). This analysis assumes that all other variables remain constant.
(ii)
Equity price risk
Equity investments are long-term investments that have been classified as financial assets at fair value through profit or loss.
(f) Fair values
The carrying value of cash and cash equivalents, trade and other receivable, trade and other payables and interest-bearing liabilities is
considered to be a fair approximation of their fair values.
The carrying amounts of equity investments are valued at year end at their quoted market price.
(g) Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business through future exploration and development of its projects. There were no changes in the Group’s approach
to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting.
26. COMMITMENTS
The Group has $4,048,000 (2016: $4,670,000) of commitments relating to minimum exploration expenditure on its various tenements.
27. OPERATING LEASES
The Company leases assets for operations including plant and office premises. The leases have an average life of 1 to 3 years.
At 30 June 2017, the future minimum lease payments under non-cancellable leases were payable as follows:
Less than one year
Between one and five years
2017
$’000
3,527
1,634
5,161
2016
$’000
3,955
4,399
8,354
76
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28. RELATED PARTIES
(a) Key Management Personnel compensation
Short-term employee benefits
Post-employment benefits
Other long term benefits
Total
30 June
2017
$’000
2,676
182
324
3,182
30 June
2016
$’000
2,549
188
554
3,291
(b) Individual directors and executives’ compensation disclosures
Information regarding individual Directors and Executive’s compensation and some equity instruments disclosures as permitted by
Corporations Regulations 2M.3.03 is provided in the Remuneration Report section of the Directors’ Report.
During the current period 1,533,829 performance rights were awarded to key management personnel. See Note 21 for further details of
these related party transactions.
29. GROUP ENTITIES
The Company controlled the following subsidiaries:
Subsidiaries
Silver Lake (Integra) Pty Ltd
Backlode Pty Ltd
Loded Pty Ltd
Paylode Pty Ltd
Cue Minerals Pty Ltd
Great Southern Minerals Pty Ltd
Accounting Policies
Subsidiaries
Country of
Incorporation
Australia
Australia
Australia
Australia
Australia
Australia
2017
100%
100%
100%
100%
100%
100%
Ownership Interest
2016
100%
100%
100%
100%
100%
100%
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30. JOINT OPERATIONS
As at 30 June, the Group has the following interests in unincorporated joint operations:
Joint Operation
Principal Activities
Joint Operation Parties
Bandalup Gossan
Exploration
SLR/Traka Resources Ltd
West Tuckabianna
Exploration
SLR/George Petersons
Peter’s Dam
Cue Project
Exploration
SLR/Rubicon
Exploration
SLR/Musgrave Minerals Ltd
Accounting Policies
Joint operation arrangements
Group Interest
2017
-
90.0%
69.2%
60.0%
2016
80.0%
90.0%
69.2%
-
The Group has investments in joint operations but they are not separate legal entities. They are contractual arrangements between
participants for the sharing of costs and outputs and do not in themselves generate revenue and profit. The joint operations are of the
type where initially one party contributes tenements with the other party earning a specified percentage by funding exploration activities;
thereafter the parties often share exploration and development costs and output in proportion to their ownership of joint operation assets.
The joint operations do not hold any assets and accordingly the Group’s share of exploration evaluation and development expenditure is
accounted for in accordance with the policy set out in Note 14.
31. AUDITOR’S REMUNERATION
KPMG:
Audit and review of the Company’s financial statements
Taxation services
Total
32. SUBSEQUENT EVENTS
30 June
2017
$’000
30 June
2016
$’000
168
21
189
162
57
219
There has not arisen in the interval between the end of the financial year 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 significantly the operations of the Group, the
results of those operations, or the state of affairs of the Group, in future financial years.
78
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33. PARENT ENTITY
As at, and throughout the financial year ended 30 June 2017, the parent company of the Group was Silver Lake Resources Limited.
Results of the parent entity
Profit for the year
Total comprehensive profit for the year
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Reserves
Accumulated losses
Total equity
30 June
2017
$’000
844
844
72,770
219,504
36,793
40,247
699,564
1,220
(521,527)
179,257
30 June
2016
$’000
1,817
1,817
42,249
231,078
36,548
53,055
699,564
830
(522,372)
178,022
The parent entity has $4,048,000 (2016: $4,670,000) of commitments relating to minimum exploration expenditure on its various tenements.
34. DEED OF CROSS GUARANTEE
The Company and its wholly owned subsidiary Silver Lake (Integra) Pty Ltd have entered into a Deed of Cross Guarantee under which each
company guarantees the debts of the other. By entering into the Deed of Cross Guarantee, Silver Lake (Integra) Pty Ltd has been relieved
from the Corporations Act 2001 requirement to prepare, audit and lodge a financial report and Directors’ report under Class Order 98/1418
(as amended).
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
35. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
The standards and interpretations relevant to the Company that have not been early adopted are:
(i)
AASB 9 Financial Instruments: applicable to annual reporting periods beginning on or after 1 July 2018.
AASB 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment
and hedge accounting. The standard includes a single approach for the classification and measurement of financial assets, based on cash
flow characteristics and the business model used for the management of the financial instruments. It introduces the expected credit loss
model for impairment of financial assets which replaces the incurred loss model under AASB 139. Lastly, the standard amends the rules on
hedge accounting to align the accounting treatment with the risk management practices of the Company.
The Group’s assessment of the impacts of AASB 9 are set out below:
» Classification and measurement: The Group does not expect a material impact to its financial statements on applying the
classification and measurement requirements of AASB 9 based on the Group’s current financial assets and liabilities.
» Impairment: AASB 9 requires the Group to use an expected credit loss model for its trade and other receivables measured at
amortised cost, either on a 12-month or lifetime basis. Given the short-term nature of the Group’s receivables, the Group does not
expect these changes to have a material impact.
» Hedge accounting: The Group is currently in the process of assessing the impact of this component of the new standard.
» Disclosure: The adoption of AASB 9 will require extensive new disclosure, in particular about credit risk and the Group’s plans to
implement controls necessary to capture required data.
The Group will continue to perform its assessment and monitor further developments.
(ii)
AASB15 Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, which replaced IAS 11 Construction Contracts, IAS 18
Revenue and related interpretations. The AASB issued the Australian equivalent of IFRS 15, being AASB 15, in December 2014.
Currently, these standards are effective for annual reporting periods commencing on or after 1 January 2017. Early application is permitted
however the IASB and the AASB have proposed a one year deferral to IFRS 15/AASB 15, which if approved, would move the effective date
to annual reporting periods commencing on or after 1 July 2018.
The core principle of IFRS 15 Revenue from Contracts with Customers is that an entity recognises revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:
a) identify the contract(s) with a customer
b) identify the performance obligations in the contract
c) determine the transaction price
d) allocate the transaction price to the performance obligations in the contract
e) recognise revenue when (or as) the entity satisfies a performance obligation
The Group is currently in the process of assessing the impact of the new standard but expects there may be changes to the timing of
revenue recognition. This will continue to be assessed in light of the contracts in place at the time the standard is implemented.
80
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CORPORATE GOVERNANCE STATEMENT
The Company’s Corporate Governance Statement can be located on its website www.silverlakeresources.com.au
SECURITIES
At 21 September 2017 the Company had 503,771,434 fully paid ordinary shares, 2,000,000 outstanding options and 8,681,234 performance
rights on issue.
DISTRIBUTION OF HOLDERS
1
1,001
5,001
10,001
100,001
Total Holders
-
-
-
-
-
1,000
5,000
10,000
100,000
and over
Fully Paid
Ordinary Shares
Options
Performance
Rights
1,585
4,438
2,087
3,519
478
12,107
-
-
-
-
1
1
-
-
-
3
14
17
1,878 holders held less than a marketable parcel (<$500) of fully paid ordinary shares.
VOTING RIGHTS OF SECURITIES
Subject to any rights or restrictions for the time being attached to any class or classes of Shares (at present there is only one class of Shares),
at meetings of Shareholders of Silver Lake:
a) each Shareholder entitled to vote may vote in person or by proxy, attorney or representative;
b) on a show of hands, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder has one
vote; and
c) on a poll, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder shall, in respect of
each Share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for the Share,
but in respect of partly paid Shares, shall have such number of votes as bears the same proportion which the amount paid
(not credited) is of the total amounts paid and payable (excluding amounts credited).
Options and performance rights do not carry any voting rights.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
81
ASX ADDITIONAL INFORMATION
SUBSTANTIAL SHAREHOLDERS
As at 21 September 2017 the substantial holders disclosed to the Company were:
Registered
Holder
Beneficial
Owner
Number of
Shares
Percentage of
Issued Shares
Bank of New York Mellon SA/NV
Ruffer LLP (on behalf of CF Ruffer Gold Fund)
30,463,675
Bank of New York Mellon as custodian for
Van Eck Vectors Junior Gold Miners ETF
Van Eck Associates Corporation
(and its associates)
28,244,639
6.05%
5.61%
TOP 20 HOLDERS OF QUOTED SECURITIES
As at 21 September 2017, the top 20 holders of quoted securities of the Company were:
Number Held
Percentage
90,960,174
71,258,032
35,016,256
4,858,697
4,715,294
4,412,000
4,000,000
4,000,000
3,854,109
3,045,954
2,675,000
2,660,354
2,131,378
2,082,621
1,682,390
1,500,000
1,500,000
1,400,000
1,346,322
1,346,159
18.06%
14.14%
6.95%
0.96%
0.94%
0.88%
0.79%
0.79%
0.77%
0.60%
0.53%
0.53%
0.42%
0.41%
0.33%
0.30%
0.30%
0.28%
0.27%
0.27%
244,444,740
48.52%
Holder Name
HSBC CUSTODY NOM AUST LTD
J P MORGAN NOM AUST LTD
CITICORP NOM PL
BNP PARIBAS NOMS PL
BRIKEN NOM PL
STONE PONEYS NOM PL
HATHOR INV PL
PORTLEY PL
BRISPOT NOM PL
HOLT CARL ERIC + L
ABN AMRO CLRG SYD NOM PL
NATIONAL NOM LTD
BNP PARIBAS NOM PL
ECAPITAL NOM PL
BNP PARIBAS NOM PL
GARY B BRANCH PL
BANASIK NOLA VERONICA
BRAMOR SUPER PL
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19 MALAEB JIHAD
20 HSBC CUSTODY NOM AUST LTD
82
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2017
ASX ADDITIONAL INFORMATION
SUITE 4, LEVEL 3, SOUTH SHORE CENTRE
85 SOUTH PERTH ESPLANADE
SOUTH PERTH WA 6151
PH: +61 8 6313 3800
FAX: +61 8 6313 3888
WWW.SILVERLAKERESOURCES.COM.AU