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 201 6
ABN: 38 108 779 782
ASX: SLR
www.silverlakeresources.com.au
DELIVERING
TODAY
» Focus on Mount Monger
Gold Camp
» FY16 gold sales up 7%
to 132,400 oz
» Revenue up 13% to A$209.5M
» Profit after tax of A$4.4M
» EBITDA (excluding significant
items1) up 49% to A$56.7M
» Cash flow from operations up
68% to A$55.0M
» Cash and Bullion A$42.6M2
» Nil bank debt2
1 As defined on page 29
2 As at 30 June 2016
Majestic Open Pit
Randalls
Processing Facility
DEVELOPING FOR
TOMORROW
DISCOVERING FOR
THE FUTURE
» Building a higher quality pipeline
» Targeting ‘Daisy Style’ deposits
» Introducing new, lower cost
ore sources
» Daisy Complex – Infill and extend
» Imperial/Majestic Open Pits –
Commenced July 2016
» Maxwells Underground –
Commenced August 2016
» Harry’s Hill Open Pit –
Targeting 2018 Commencement
» Highly successful FY16 drilling
campaign in Northwest Corridor
» Multiple Mount Belches
targets identified
» Self funded A$14M FY17
exploration campaign
Santa Area
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 Registrars 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 2016
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
14
17
24
44
45
46
48
49
50
51
52
80
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
5
ANNUAL REPORT DEAR FELLOW SHAREHOLDER,
The strategy to focus on increasing cash flow from
our core Mount Monger Operation to both strengthen
our balance sheet and self-fund future projects has
delivered tangible success and significant returns for
our shareholders in FY2016.
Just over a year ago, Silver Lake communicated a very
clear strategic objective for the Company which focussed
primarily on enhancing margin from our core asset, the
Mount Monger Operation. Silver Lake has made significant
progress towards this strategic objective.
The Mount Monger Operation generated gold sales in FY2016 of
132,400 ounces, a 7% increase on the prior period. This, together
with a strong gold price and reducing cost base resulted in a
68% increase in operating cash flows of $55.0 million. This strong
operating performance allowed the Company to internally fund a
significant exploration and development campaign, repay all bank
debt and places Silver Lake in a very strong operating and financial
position going into FY2017.
The significant investment in exploration in FY2016 has allowed the
Company to develop an aspirational production profile for the next
4 years. Two new mines, Imperial/Majestic and Maxwells, have been
brought into production in FY2017 as a result of this investment and
Silver Lake will continue this exploration focus on targets that provide
rapid production opportunities with the objective of introducing new,
lower cost sources into the mine plan.
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 132,400 oz (up 7%)
Average realised gold price A$1,580/oz (up 6%)
All in sustaining cost of A$1,281/oz (down 4%)
Profit for the year of $4.4 million
EBITDA before significant items of $56.7 million (up 49%)
Cash flow from operations of $55.0 million (up 68%)
Year end cash and bullion of $42.6 million with nil bank debt
The successful exploration and development program
has resulted in bringing new, lower cost ore sources into
the FY2017 production schedule, including the Imperial/
Majestic and Maxwells projects.
Balance Sheet
The Mount Monger operation generated operating cash flows of
$55 million in FY2016. 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 2016 the Company has no bank debt, holds $42 million
in cash and bullion and has liquid investments in ASX listed entities
with a market value of $4.8 million.
The increase in cash flow generation from Mount Monger allowed
the Company to fund:
»
»
»
the FY2016 exploration program of $15.0 million;
all bank debt repayments of $6.7 million; and
development expenditure relating to the Imperial/
Majestic and Maxwells projects totalling $5.9 million.
The strong cash position will continue to fund the development
of the Imperial/Majestic and Maxwells projects which combined
are forecast to have a maximum cash drawdown of ≈$15 million in
FY2017. This drawdown is expected to result in a decreasing cash
balance over the remainder of the 2016 calendar year, after which
both projects commence generating strong cash flows.
Exploration
Over the past year Silver Lake invested approximately $15 million in
a gated and phased exploration program which yielded significant
results across all stages of the exploration pipeline. Exploration
highlights included a 400% resource increase at Maxwells,
resource extensions at Cock-eyed Bob, high grade Dinnie Reggio
intersections, and spectacular high grade gold intersections and
extensions to the Daisy Complex gold lodes.
The successful exploration and development program has resulted
in bringing new, lower cost 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.
The success of the FY2016 exploration program warranted Board
6
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
CHAIRMAN & MANAGING DIRECTOR’S REPORT approval of a further $14 million exploration budget for FY2017.
Exploration will focus on highly prospective, gold targets at Mount
Monger, proximal to existing mine and processing infrastructure.
Of the FY2017 budget, 50% will be directed to resource definition to
sustain current operations and is concentrated at Daisy Complex,
Cock-eyed Bob and Maxwells. The remaining 50% will be directed
to multiple growth exploration targets in the Mount Belches BIF
units, Salt Creek area and structural corridor to the north and west
of Daisy Complex.
Core Asset Strategy
The Company successfully executed a number of key transactions
as part of its strategy to crystalise value from its non-core assets.
The Comet tenement package was sold for $3 million and a Farm-
in and Joint Venture arrangement was entered into with Musgrave
Minerals Limited covering the Moyagee Gold and Hollandaire
Copper projects in the Murchison. In August 2016 the Company
also completed the sale of the Great Southern Project, realising
$5 million in cash.
Importantly, these transactions also reduce the Company’s financial
commitment in the Murchison and Great Southern by $3.0 million
per annum allowing Silver Lake to focus on its core Mount Monger
asset. The most significant non-core asset still held by the Company
is the 1.2 Mtpa Tuckabianna Processing Facility in the Murchison.
The Company continues to explore, and remains open to, all
opportunities to crystallise inherent value from this asset.
Board Renewal
The past year saw further changes to the Company’s Board with the
retirement of founding director David Griffiths and the addition of
Kelvin Flynn to the Board. The Board now comprises one executive
and four non-executive directors.
Outlook
Silver Lake will maintain operational discipline in FY2017 with a
strong focus on increasing cash margins at a time of strength in
the Australian Dollar gold price. This will enable the Company to
make further significant investment in exploration over the next 12
months to bring lower cost ounces into our development pipeline,
and continue to deliver strong returns for all our shareholders.
Accordingly, the Company has set the following key objectives for
the next twelve months:
»
»
»
»
Achieve gold production of 135,000 to 145,000 oz Au
from the Mount Monger Operation;
Relentlessly pursue increased productivity and reduction
in costs;
Finalise development of the Imperial/Majestic and
Maxwells mines within time and budget;
Execute the exploration strategy by directing expenditure
to highly prospective priority targets in the Mount Monger
area; and
»
Crystalise value from remaining non-core assets.
On behalf of the Board we would like to thank all employees and
contractors for their efforts and achievements over the past year.
The strong results achieved across the business in the past 12
months have been extremely satisfying and are a credit to them.
We would also like to acknowledge our shareholders who continue
to support our strategy of delivering today, developing for tomorrow
and discovering for the future.
David Quinlivan
Luke Tonkin
Non-Executive Chairman
Managing Director
Santa Area
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
7
CHAIRMAN & MANAGING DIRECTOR’S REPORT
MOUNT MONGER – A FOCUSSED OPERATING STRATEGY
Delivering today
Developing for tomorrow
Discovering for the future
Building a higher quality
project pipeline
Introducing new, lower cost
ore sources with targeted AISC
1,000 ounces per
vertical metre)
Development of the underground mine commenced in early FY2017 and has the potential to become a long life, low cost
gold producer
Strong FY2016 drilling results resulted in a substantial 400% increase in Mineral Resource ounces
Multiple stacked and parallel lodes plunging to south
Potential repeat lode system down dip, east & west
2016 JORC Resource of 1.7Mt @ 5.7 g/t Au for 307koz (refer to Table 2)
2016 JORC Reserve of 350kt @ 5.3 g/t Au for 59koz (refer to Table 6)
Figure 5: Maxwells cross section
12
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
PROJECT REPORT
MAJESTIC/IMPERIAL (OPERATING OPEN PIT MINE)
»
»
»
»
»
»
Located 33km north north-west of the Randalls Processing Facility
Mining commenced July 2016 with first ore processed in September 2016
Lower cost open pit ore source until the end of FY18
≈2 year Reserve backed Life of Mine (LOM) with Resource conversion providing opportunity for LOM extension
2016 JORC Resource of 3.8Mt @ 2.2 g/t Au for 270koz (refer to Table 2)
2016 JORC Reserve of 1.1Mt @ 3.0 g/t Au for 107koz (refer to Table 6)
Commencement of Majestic Open Pit
MURCHISON OPERATION
»
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»
»
»
Located south east of the town of Cue, 600 km north east of Perth
The Murchison Operation was placed on care and maintenance in June 2014
In November 2015, the Company announced that it had entered into two transactions in respect of its non-core tenure in the
Murchison area:
»
»
Sale of the Comet tenement package
Cue Project Farm-In and Joint Venture
Under the Farm-in and Joint Venture Agreement with Musgrave Minerals Limited (ASX:MGV), MGV may earn up to an 80% joint
venture interest in tenements comprising the Moyagee Gold and Hollandaire Copper Projects (‘Cue Project’). Furthermore, MGV
must now spend a minimum of $900,000 on exploration on the Cue Project tenure over the next 12 months
The 1.2Mtpa Murchison processing facility and associated core tenements do not form part of either transaction above and
continue to be retained by the Company
The Murchison Operation reported a 2016 JORC Resource of 10.6Mt @ 2.0 g/t Au for 685koz (refer to Table 3)
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
13
PROJECT REPORT
EXPLORATION STRATEGY FY2017
Background
Silver Lake’s FY2016 exploration activities continued to advance development projects with near-term open pit and underground mining
potential, and completed regional scale exploration drilling targeting major extensions to known deposits. Positive exploration results
were received from the infill and extensional resource definition drilling at Daisy Complex and Maxwells deposits, and highly prospective
gold trends north west of the Daisy Complex deposits were discovered. Underground development commenced at Maxwells following a
substantial 400% increase to the Mineral Resources to 307,000 oz Au. Open pit mining commenced at Santa North, Fly Camp, Rumbles and
Imperial/Majestic, demonstrating the success from Silver Lake’s continuing exploration and development drilling campaigns.
Current Exploration Strategy
Mount Monger is a fertile gold field with a large portfolio of exploration targets, which demands that exploration expenditure is 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. The success of this program in FY2016 warranted Board approval of a A$14M
exploration budget for FY2017. Exploration continues to focus on the highest ranked gold targets at the Mount Monger Operations,
proximal to existing mine and processing infrastructure (Figure 1).
The two core components of the FY2017 exploration strategy comprises:
»
Definition of new, high value resource ounces from near-mine exploration drilling
»
»
»
»
targeting shallow, high tenor "Daisy repeats" with similar ounces per vertical metre from highly prospective and
untested horizons
these structures provide for cost effective exploration and low capital intensity of development
continued focus on BIF hosted targets in the Randalls Area
target zones are hosted by extensions to existing mineralised structures and within preferential stratigraphic units, supported
by broad spaced drilling results, surface geochemical anomalies and magnetic trends.
»
Resource development drilling – extending and converting ounces into the Mount Monger mine plan to replace depletion
»
»
upgrade from Inferred to Indicated Resources and conversion to Reserves
leveraging above and below ground infrastructure via extensional ounces with short development timeframes
An experienced exploration team is in place with surface and underground drilling contractors mobilising to commence the planned
exploration programme in Q1 FY2017.
14
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
EXPLORATION REPORT Key Exploration Targets
Daisy Complex Target Area (Figure 6)
»
»
»
»
Highly prospective gold trends north west of Daisy Complex deposits were identified in FY2016 by the Company’s
exploration programs
Target zones are hosted by extensions to existing mineralised structured within preferential stratigraphic units and are supported
by historical broad spaced drilling, surface geochemical anomalies and magnetic trends
The FY2016 program of extensive top to tail aircore testing to fresh bedrock was designed to intersect quartz vein structures,
bedrock alteration and geochemical traces of Daisy-style lodes. Exploration aircore results returned highly encouraging assays
including more than 50 gold intersections of greater than 200 ppb Au (0.2 g/t Au), which is significantly elevated relative to
background gold <10 ppb Au in the Mount Monger district
The FY2017 exploration program comprises staged RC and diamond drilling to follow up the gold trends, targeting high grade,
Daisy-style deposits located in the bedrock along the strong near surface geochemical trends.
Figure 6: Surface exploration – Daisy Complex targets
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
15
EXPLORATION REPORT
Randalls Banded Iron Formation Exploration Targets (Figure 7)
»
»
Targeting the Banded Iron Formation (BIF) units that host significant deposits within the Mount Monger Operation, including the
Maxwells, Cock-eyed Bob, Santa, and Rumbles gold deposits
The prospective BIF host rock within the Randalls area extends over 30 km on Silver Lake tenements. The distribution of high
grade gold deposits along the BIF highlights the potential for discovery of additional gold deposits in similar structural settings to
the current deposits
»
»
The FY2017 exploration focus is on high value BIF hosted targets associated with the Isoclinal fold hinge and limbs within
the Maxwells BIF, and the Western limb of Santa/Craze BIF to south of Santa Area
Multiple near surface BIF hosted targets include:
»
»
»
»
Flora Dora
Golden Cliffs
Anomalies A-E
Z Fold
»
At Flora Dora, the best historical intersections include:
»
»
»
6m @ 16g/t Au
2m @ 20g/t Au
3m @ 14g/t Au
»
»
The Western limb of Santa BIF is untested by drilling for greater than 500m strike between Santa and Flora Dora, as is the eastern
limb of Maxwells BIF
As demonstrated by the successful discovery, definition and development of the Maxwells underground mine in FY2016,
successful targets have rapid development timeframes and low capital expenditure.
Figure 7: Randalls BIF targets
16
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
EXPLORATION REPORT
COMPANY SUMMARY AT 30 JUNE 2016
Total Mineral Resources are estimated at: 54.8 Mt @ 2.8 g/t Au for 4.92 Moz of contained gold, comprising:
»
»
»
Mount Monger Operation:
28.2 Mt @ 3.56 g/t Au for 3.23 Moz of contained gold
Murchison Operation:
10.6 Mt @ 2.01 g/t Au for 0.69 Moz of contained gold
Great Southern Project:
16.0 Mt @ 1.95 g/t Au for 1.00 Moz of contained gold
Total Ore Reserves are estimated at: 11.2 Mt @ 2.3 g/t Au for 0.83 Moz of contained gold, comprising:
»
»
Mount Monger Operation:
3.73 Mt @ 3.24 g/t Au for 0.39 Moz of contained gold
Great Southern Project:
7.44 Mt @ 1.85 g/t Au for 0.44 Moz of contained gold
MINERAL RESOURCE STATEMENT AS AT 30 JUNE 2016
The Company’s total Measured, Indicated and Inferred Mineral Resources as at 30 June 2016 are 54.8 million tonnes (Mt) @ 2.8 grams
per tonne of gold (g/t Au) containing 4.92 million ounces of gold (Moz) (refer Tables 1, 2, 3, 4). The previous publicly reported estimate of
Mineral Resources was 58.0 Mt @ 2.7 g/t Au containing 5.03 Moz of gold as at 30 June 2015, announced on 28th August 2015. The Mineral
Resources as at 30 June 2016 are estimated after allowing for mining depletion from the Mount Monger Operation and the sale of the
Comet mining tenements during the 2016 financial year.
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
June 2015
June 2016
Ore
tonnes
Grade
g/t
Total
Oz Au
Ore
tonnes
Grade
g/t
Total
Oz Au
939,000
31,749,000
25,356,000
58,044,000
4.8
2.4
3.0
2.7
146,000
1,068,000
2,407,000
29,724,000
2,477,000
23,993,000
3.9
2.4
3.2
135,000
2,301,000
2,482,000
5,031,000
54,785,000
2.8
4,919,000
Table 1: Total Silver Lake Gold Mineral Resource as of June 2016
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
17
RESOURCES & RESERVES REPORT
June 2016
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
Deposit
Ownership
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
Total Mount Monger
222
11.2
80
4,429
3.6
510
5,857
5.8
1,101
10,509
5.01
1,692
Daisy Complex
Majestic
Imperial
Fingals
Costello
Lorna Doone
Magic/Mirror
Wombola Pit
Wombola Dam
Hammer & Tap
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Stockpiles
Maxwells
Santa Area
Cock-eyed Bob
Lucky Bay
Rumbles
Anomaly A
Randalls Dam
Total Randalls
Main Zone
Harry's Hill
French Kiss
Spice
Tank/Atriedes
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Italia/Argonaut
100%
Total Aldiss
Total Mount Monger
Operation
38
52.5
64
349
16.3
183
1,092
18.2
638
1,479
18.62
885
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,301
439
131
-
2.3
3.8
2.7
-
168
712
54
340
11
1,043
-
111
686
2.0
44
641
171
2.7
15
313
-
-
13
3.2
-
-
-
1
-
3.1
3.1
47
164
2.6
32
1,428
5
14
20
120
-
-
-
350
2.4
1.4
1.5
2.3
4.0
3.5
4.6
4.0
3.0
32
3,013
2.06
200
16
77
14
779
2.79
1,174
2.33
111
4.01
72
1,327
2.72
210
1,913
4.18
3
12
27
67
3.32
297
2.81
350
2.43
70
88
14
116
257
7
27
27
410
1.4
18
-
-
-
-
-
-
-
891
3,185
-
6.0
2.3
-
-
-
-
410
1.38
18
172
794
233
1,696
5.3
2.5
3.8
135
1,685
5.67
307
136
4,882
2.35
369
160
2,021
3.46
225
112
3.1
11
606
2.8
54
1,302
13
4.6
-
-
-
-
-
-
2
-
-
-
34
4.8
351
2.2
158
107
2.7
2.1
5
24
14
7
8
7.2
2
55
5.10
851
2.2
59
1,202
2.16
73
6
1.7
1.2
4
231
2.40
0.2
113
2.05
9
83
18
7
535
1.8
31
5,333
3.0
509
4,730
3.3
496
10,598
3.04
1,037
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,888
1,690
1,906
-
622
409
2.4
2.5
1.9
-
1.9
1.4
145
136
116
-
37
19
26
2.1
2
1,914
2.39
147
367
2.4
29
2,057
2.49
165
39
2.1
3
1,945
1.89
118
104
4.0
14
104
4.05
60
1.9
-
-
4
-
682
1.86
409
1.43
14
41
19
6,515
2.2
453
596
2.6
50
7,111
2.20
503
758
4.6
111
16,277
2.8
1,472
11,183
4.6
1,648
28,218
3.56
3,231
Table 2: Mount Monger Operation Gold Mineral Resource as at 30 June 2016
18
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
RESOURCES & RESERVES REPORT June 2016
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
Deposit
Ownership
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
100%
100%
100%
100%
100%
100%
100%
0%
0%
0%
100%
100%
100%
100%
100%
100%
Caustons
Tuckabianna
TMC/Katies
Jasper Queen
Gilt Edge
Sherwood
Little John
Total
Tuckabianna
Comet
Lunar/Solar
Pinnacles
Total Comet
Lena
Leviticus
Numbers
Break of Day
Total Moyagee
Hollandaire
Rapier South
Total Eelya
Total Murchison
Operation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
886
2.2
63
1,765
2.2
123
2,651
2.18
186
1,215
1.9
76
1,487
1.8
85
2,703
1.85
161
299
2.5
24
316
2.5
-
-
-
-
-
-
-
-
-
-
-
-
175
2.6
96
527
1,201
3.1
2.1
1.8
25
15
9
35
615
2.48
175
2.60
96
3.06
527
2.07
69
1,201
1.78
49
15
9
35
69
-
2,400
2.1
162
5,567
2.0
361
7,967
2.04
524
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
433
2.0
28
839
-
-
-
-
-
-
-
-
-
42
278
336
433
2.0
28
1,495
-
-
-
-
1.8
6.0
2.5
1.9
2.1
1.1
473
1.4
-
-
473
1.4
21
-
21
45
171
2.2
216
1.9
-
-
-
-
-
-
-
-
-
-
-
-
49
1,273
1.86
8
22
21
42
6.00
278
2.46
336
1.91
-
-
-
-
76
8
22
21
99
1,928
2.05
127
2
12
13
518
1.35
171
2.15
689
1.55
22
12
34
-
3,307
2.0
211
7,278
2.0
474
10,585
2.01
685
Table 3: Murchison Operation Gold Mineral Resources as at 30 June 2016
June 2016
Measured Resources
Indicated Resources
Inferred Resources
Total Resources
Deposit
Ownership
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
Kundip
Trilogy
100%
100%
-
-
-
4,390
310
2.4
24
5,750
Queen Sheba
100%
-
-
-
-
3.4
0.7
-
481
4,550
2.1
307
8,940
2.74
789
136
180
0.8
4
6,240
0.82
165
-
802
1.9
49
802
1.90
49
Total Great
Southern
Project
310
2.4
24
10,140
1.9
618
5,532
2.0
361
15,982
1.95
1,002
Table 4: Great Southern Project Gold Mineral Resources as at 30 June 2016
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
19
RESOURCES & RESERVES REPORT
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20
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
RESOURCES & RESERVES REPORT
ORE RESERVES STATEMENT AS AT 30 JUNE 2016
The Company’s total Proved and Probable Gold Ore Reserve as at 30 June 2016 are 11.2 million tonnes (Mt) @ 2.3 grams per tonne of gold
(g/t Au) containing 0.8 million ounces of gold (Moz) (refer Tables 6 and 7). The previous publicly reported estimate of Gold Ore Reserves
was 11.6 Mt @ 2.2 g/t Au containing 0.8 Moz of gold as at 30 June 2015, announced on 28 August 2015. The Ore Reserves as at 30 June
2016 are estimated after allowing for mining depletion from the Mount Monger Operation over the 2016 financial year. All Ore Reserves
were estimated using a gold price of A$ 1,500/oz, apart from the Harry’s Hill Ore Reserve using A$1,700/oz.
Proved Reserve
Probable Reserve
Total Reserves
June 2015
Grade
g/t
Total
Oz Au
Ore
tonnes
2.6
2.2
2.2
65,000
764,000
765,000
10,401,000
830,000
11,165,000
June 2016
Grade
g/t
2.1
2.3
2.3
Total
Oz Au
52,000
779,000
830,000
Ore
tonnes
775,000
10,807,000
11,581,000
Table 6: Total Silver Lake Gold Ore Reserves as at 30 June 2016
June 2016
Proved Reserves
Probable Reserves
Total Reserves
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 Complex
Majestic
Imperial
Mirror/Magic
44
8.3
12
235
-
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-
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875
247
417
9.5
2.7
4.0
2.9
72
75
32
39
279
875
247
417
Mount Monger Total
44
8.3
12
1,774
3.8
218
1,818
Maxwells
Santa Area
Rumbles
Cock-eyed Bob
Lucky Bay
Stockpiles
Randalls Total
Harry's Hill
Aldiss Total
-
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-
410
410
-
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-
-
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-
1.4
1.4
-
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350
98
-
-
-
-
448
1,049
1,049
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18
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5.3
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4.6
2.2
2.2
59
350
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2.2
2.2
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75
Total Mount Monger Operation
454
2.0
30
3,271
3.4
358
3,725
3.2
388
Kundip
Trilogy
Total Great Southern Project
Total Silver Lake
-
310
310
764
-
2.2
2.2
2.1
Table 7: Silver Lake Gold Ore Reserves as of 30 June 2016
-
2,810
22
4,320
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113
4,630
307
2,810
3.4
307
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1.8
135
442
22
7,130
1.8
420
7,440
52
10,401
2.3
779
11,165
2.3
830
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
21
RESOURCES & RESERVES REPORT
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5
RESOURCES & RESERVES REPORT
COMPETENT PERSON’S STATEMENT
The Mineral Resource and Ore Reserves estimates for the Daisy Complex, Lorna Doone, Wombola Dam, Maxwells, Santa Area, Cock-eyed
Bob, Lucky Bay, Rumbles, Harry’s Hill, Caustons, Tuckabianna, TMC/Katies and Lena are produced in accordance with the 2012 Edition of the
Australian Code for Reporting of Mineral Resources and Ore Reserves (the 2012 JORC Code).
All other Mineral Resource and Ore Reserves estimates were first prepared and disclosed under the 2004 edition of the JORC Code and have not
been updated since to comply with the 2012 JORC Code on the basis that the information has not materially changed since it was last reported.
The information in this report that relates to Mineral Resources and Ore Reserves has been extracted from the ASX Announcement entitled
"Mineral Resources and Ore Reserves Update" dated 26 August 2016 which is available to view at www.silverlakeresources.com.au. The Company
confirms that it is not aware of any new information or data that materially affects the information included in the original ASX announcements and
that all material assumptions and technical parameters underpinning the estimates in the ASX announcement continue to apply and have not
materially changed.
The information in this report that relates to Exploration Results is based on information compiled by Mr 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 Silver Lake Resources Ltd and 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 presentation of the 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.
Randalls Processing Facility
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
23
RESOURCES & RESERVES REPORT The directors submit their report for the year ended 30 June 2016.
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 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 is a past director of Mount Gibson Iron
Ltd (resigned December 2011) and Reed Resources Ltd (resigned
September 2013).
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 was previously a Director of Phillips River Mining Ltd
(until March 2014) and a past Director of Paringa Resources Limited
(resigned September 2012).
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 25 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 and Head of Private
Equity of investment banking and corporate advisory firm Sirona
Capital, which is focused in the real estate, metals and mining and
agriculture 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 was previously a Director of Phillips River Mining Ltd
(until March 2014).
Mr Kennedy has held no other Directorships in public listed
companies in the last three years.
Paul Chapman
BCom, ACA, Grad Dip Tax, MAICD, AAusIMM
Non-executive Chairman
Appointed 20 April 2004/Resigned 30 September 2015
Mr Chapman is a Chartered Accountant with over 20 years’
experience in the resources sector gained in Australia and the
United States. Mr Chapman has experience across a range
of commodity businesses including gold, nickel, uranium,
manganese, bauxite/alumina and oil/gas.
Mr Chapman has held Managing Director and other senior
management roles in various public companies and is currently
Chairman of West Australian based copper explorer Encounter
Resources Ltd (since October 2005). Mr Chapman was previously
Chairman of Rex Minerals Ltd (until December 2013) and was also
a Director of Phillips River Mining Ltd (until March 2014).
Mr Chapman has held no other Directorships in public listed
companies in the last three years.
24
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORT DIRECTORS (CONT.)
David Griffiths
BBus
Non-executive Director
Appointed 25 May 2007/Resigned 20 November 2015
Mr Griffiths has more than 30 years’ management and strategic
communications experience developing from an initial focus on
human resources and employee relations to broader, group-wide
strategic roles. Previously Mr Griffiths was employed by WMC
Resources Ltd and held the roles of Group Manager – Employee
Relations and more recently, General Manager Corporate Affairs
and Community Relations.
Mr Griffiths was previously a Director of Phillips River Mining Ltd
(until March 2014). Mr Griffiths is a director (since January 2014)
and past Chairman of Paringa Resources Limited (from September
2012 to January 2014).
Mr Griffiths has held no other Directorships in public listed
companies in the last three years.
COMPANY SECRETARIES
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.
Peter Armstrong
ACIS, B Bus(Acct)
Appointed 16 January 2009/Resigned 8 April 2016
Mr Armstrong has over 30 years of accounting experience,
including the last 25 years in the resources sector. He has
extensive experience in senior commercial management roles
with Normandy Mining, WMC Resources Ltd and Newcrest. This
experience involved working across a wide range of commodity
businesses including gold, nickel, copper, coal and iron ore.
Developing Majestic
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
25
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
Term
Nomination & Remuneration
Term
Kelvin Flynn (Chairman)
Appointed 26 May 2016
Les Davis (Chairman)
Les Davis
Appointed 22 December 2015
Brian Kennedy
Full Year
Full Year
David Quinlivan
Appointed 21 July 2015
David Quinlivan
Appointed 21 July 2015
Brian Kennedy
David Griffiths
Paul Chapman
DIRECTORS’ MEETINGS
Resigned 26 May 2016
David Griffiths
Resigned 20 November 2015
Resigned 20 November 2015
Resigned 30 September 2015
The number of meetings of Directors (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
Paul Chapman
David Griffiths
Directors’ Meetings
Audit Committee
Nomination & Remuneration
Committee
A
12
12
11
4
12
3
3
B
12
12
12
4
12
3
5
A
3
-
1
-
1
2
1
B
3
-
1
-
1
2
2
A
1
-
2
-
2
-
1
B
1
-
2
-
2
-
1
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
Paul Chapman
David Griffiths
* Resigned during the year
Fully Paid Ordinary Shares
Unlisted Options
Unlisted Performance Rights
-
-
4,525,294
-
4,790,746
*
*
-
2,000,000
-
3,408,932
-
-
-
-
-
-
-
-
-
-
26
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
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
Operation, 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, silver and copper.
Group Financial Overview
In FY2016 Silver Lake achieved its gold sales guidance and delivered on its strategy of refocusing its human and investment capital on the
Mount Monger Operation to develop lower cost ore sources and deploy 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 FY2016 gold sales of 132,400 ounces (FY2015: 124,209 ounces).
Lower priority, non-core exploration projects at the Murchison and Great Southern were leased, divested or joint ventured to third parties,
allowing Silver Lake to focus on high value exploration and development in the highly endowed Mount Monger gold camp.
The Group recorded a net profit after tax for the period of $4,413,000 (2015: loss of $94,024,000) and generated operating cash flow of
$54,992,000 (2015: $32,696,000).
A reconciliation between the statutory profit after tax and the Group’s underlying operating results is tabled on page 29. 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 $56,749,000 for the period (2015: $38,004,000).
The increase in EBITDA (excluding significant items) compared with the previous corresponding period is primarily due to:
»
»
»
an 8% increase in gold production from the Mount Monger Operation (131,109 ounces recovered compared with 121,780 ounces
in FY2015) primarily due to an increase in open pit production following commencement of the Lucky Bay and Santa Area open pit
mines in FY2016 which together contributed 54,907 ounces of gold in the period. Production from these mines replaced lower grade
stockpiles milled in FY2015, resulting in a 6% increase in recovered head grade (3.5 g/t compared with 3.3 g/t);
a 6% increase in the average realised gold price (A$1,580/oz compared with A$1,497/oz);
a 4% decrease in the all in sustaining cost (A$1,281/oz compared with A$1,331/oz). This was primarily as a result of introduction of
ore from the Lucky Bay and Santa Area open pits replacing lower grade stockpiled ore in the mill feed.
Gold sold for the year totalled 132,400 oz compared with 124,209 oz recorded in FY2015 (previous period included 2,209 oz recovered
from the Murchison Operation which was placed on care and maintenance in FY2015).
Overview of Operations
Mount Monger Operation
A number of new ore sources were introduced at Mount Monger in FY2016 including the Lucky Bay and Santa open pits, with mining
activities also occurring at the Daisy Complex and Cock-eyed Bob (CEB) underground mines. Stockpiles from the Salt Creek mine were
also processed during the period, primarily in the first half of the financial year. All processing occurred at the centralised Randalls Gold
Processing Facility, which has capacity of approximately 1.2 million tonnes per annum.
In FY2016 approximately $15 million was invested in a gated and phased exploration program which yielded significant results across all
stages of the exploration pipeline, from early stage target delineation through to advanced resource definition drilling. Exploration highlights
included a substantial resource increase at Maxwells, resource extensions at CEB, high-grade Dinnie Reggio intersections, strong gold
trends identified from air-core drilling of structural targets to the north and west of Daisy, spectacular high-grade gold intersections and
extensions to the Daisy Complex gold lodes, and very encouraging high-grade gold intersections from underground positions at Daisy
Complex targeting gold veining north of the North Fault.
Mining and production statistics for the Mount Monger Operation for the year ended 30 June 2016 are detailed in Table 1 and Table 2.
Murchison Gold Operation
In October 2015, the Company terminated its dry hire lease arrangement with a private consortium for the Murchison processing facility.
A total of $1,494,000 of lease income was received from the lessee since the commencement of the lease in January 2015, which fully
covered associated care and maintenance costs over the same period of $250,000.
As at 30 June 2016, lease income of $6,087,000 remains unpaid and due to the uncertainty in recovering this balance, a provision for
doubtful debt for the entire amount has been recorded (of which $2,929,000 was recorded during FY2016). The processing facility has
been placed on care and maintenance and a process to crystalise value from this asset is underway.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
27
DIRECTORS’ REPORT Divestment of non-core assets
On 25 November 2015, the Company announced that it had entered into two transactions in respect of its non-core tenure in the Murchison
area of Western Australia. These transactions are consistent with Silver Lake’s stated objective of delivering embedded value from its non-
core assets. Further detail in respect of the transactions is provided below:
Comet
The Comet tenements (and associated infrastructure) were sold to a wholly owned subsidiary of Metals X Limited for a cash consideration
of $3,000,000, resulting in a gain on disposal of $2,930,000. Settlement of this transaction occurred on 4 February 2016.
Cue Project Farm-In and Joint Venture
Silver Lake entered into a Farm-in and Joint Venture Agreement with Musgrave Minerals Limited (ASX:MGV) under which MGV may earn up
to an 80% joint venture interest in tenements comprising the Moyagee Gold and Hollandaire Copper Projects (‘Cue Project’). In December
2015 all conditions precedent relating to the transaction were satisfied, with MGV issuing Silver Lake with $75,000 in ordinary shares.
Furthermore, MGV must now spend a minimum of $900,000 on exploration on the Cue Project tenure over the next 12 months.
The Murchison processing facility and associated core tenements do not form part of either transaction and have been retained by the Company.
Great Southern Project
In December 2015 Silver Lake entered into a conditional Farm-in and Joint Venture Agreement with ACH Minerals Pty Ltd ("ACH") in respect
of the Company’s Great Southern Project ("Project"). The agreement substantially covers Silver Lake’s 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.
Under the agreement, ACH may earn a 51% joint venture interest in the Project by spending a minimum of $3 million on exploration within
three years from the Agreement becoming unconditional ("Stage 1"). Upon earning a 51% joint venture interest, ACH may elect to increase
its joint venture interest in the Project to 80% by spending a further $3 million within a further three year period ("Stage 2"). As part of the
agreement Silver Lake also granted ACH an option to acquire the Project on an outright basis at any time during the Stage 1 or Stage 2 earn
in periods, for a cash consideration of $5 million in excess of any expenditure incurred to that point.
In July 2016 the Company was formally notified by ACH that it had exercised its option to purchase the Project for a cash consideration of
$5 million. Completion of the sale of the Project and receipt of the consideration is expected to occur in Q1 FY2017.
Gold Mining and Production Statistics
Mount Monger - Mining
Units
FY2016
FY2015
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
Group Operations - Processing
Ore Milled
Head grade
Contained gold in ore
Recovery
Gold produced
Table 2
28
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
Tonnes
g/t Au
Oz
Tonnes
g/t Au
Oz
Tonnes
g/t Au
Oz
Units
Tonnes
g/t Au
Oz
%
Oz
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
431,670
6.2
86,093
256,415
2.4
19,384
688,085
4.8
105,477
FY2015
1,215,308
3.3
127,773
95
121,780
DIRECTORS’ REPORT
Exploration
During the year a total of $15 million was spent on exploration primarily on, or in close proximity to the Daisy Complex, Cock-eyed Bob and
Maxwells 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 that 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.
The success of this program in FY2016 has warranted approval of a $14 million exploration budget for FY2017. Of this budget, 50% will
be directed to resource definition to sustain current operations and is concentrated at Daisy Complex, Cock-eyed Bob and Maxwells. The
remaining 50% will be directed to multiple growth exploration targets in the Mount Belches BIF units, Salt Creek area and structural corridor
to the north and west of the Daisy Complex.
STRATEGY
The Group’s short to medium term strategy is to maximise cash flow and increase operating margins from its core Mount Monger Operation.
This will be achieved by:
»
»
»
»
relentless drive to reduce costs and increase productivity;
introduction of new, lower cost ore sources into the production schedule, including the Imperial/Majestic open pits and the
Maxwells underground in FY2017;
executing the exploration strategy by directing expenditure to highly prospective priority targets in the Mount Monger area; and
continue to crystalise value from non-core assets.
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 demand and 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 $4,413,000 (2015: loss of $94,024,000). 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/(Loss) after Tax to EBITDA
(excluding significant items) - unaudited
Statutory profit /(loss) after tax for the year:
30 June 2016
$’000
30 June 2015
$’000
4,413
(94,024)
Adjustments for:
Depreciation and amortisation
Non-current asset impairments
Other
EBITDA (excluding significant items) *
* Non-IFRS measure
45,386
2,825
4,125
56,749
38,409
86,994
6,625
38,004
At the end of the financial year the Group had $38,643,000 in cash (2015: $22,538,000), $3,836,000 in gold bullion (2015: $6,387,000) and bonds
receivable of $146,000 (2015: $146,000). In addition, the Group had $4,806,000 in ASX listed investments at year end (2015: $7,561,000).
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
29
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 Operation.
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 159 employees as at 30 June 2016 (2015: 144). 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.
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
Maxwells Underground Mine ("Maxwells")
In July 2016 the Company announced that development of Maxwells would commence in July 2016. Maxwells will contribute
approximately 15,000 ounces towards total production in FY2017, increasing to 30,000 to 40,000 ounces in FY2018 and reinforces the
Company’s strategy of delivering higher margin ore sources proximal to existing mines and mine infrastructure.
Great Southern
In July 2016 the Company was formally notified by ACH Minerals Pty Ltd that it had exercised its option to purchase the Great Southern
project (Project) for cash consideration of A$5 million as per the Farm-in and Joint Venture Agreement. Completion of the sale of the Project
and receipt of the consideration is expected to occur in Q1 FY2017.
Other than the matters discussed above, 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.
30
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
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.
2.
3.
4.
5.
6.
Basis of preparation
Key management personnel (KMP)
Remuneration snapshot
Remuneration governance
FY2016 Executive remuneration
FY2016 Non-executive director (NED) remuneration
Basis of preparation
1.
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.
Key Management Personnel
2.
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 FY2016 is set out below:
Name
Position
David Quinlivan
Chairman (previously Non-executive Director)
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
Term as KMP
Full year
Full year
Full year
Appointed 24 February 2016
Full year
Full year
Diniz Cardoso
Chief Financial Officer
Appointed 8 April 2016
Matthew O’Hara
General Manager Mount Monger Operations
Antony Shepherd
Exploration & Geology Manager
Peter Armstrong
Chief Financial Officer & Joint Company Secretary
Paul Chapman
Non-executive Chairman
David Griffiths
Non-executive Director
Full year
Full year
Resigned 8 April 2016
Resigned 30 September 2015
Resigned 20 November 2015
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.
3.
a.
Remuneration snapshot
FY2016 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. To do this Silver Lake directed operational and financial resources to the Mount Monger area where it is possible to generate a
superior financial return from substantially less gold production. Highlights for the year from this strategy included the commencement of
mining at the Lucky Bay and Santa Area open pit mines, strong results from the expanded exploration campaign and commencement of
development of the Imperial/Majestic open pits and Maxwells underground mine (in the latter part of the year). Further information on the
link between company performance and KMP remuneration can be found in section 5 (g).
A number of Board and Executive changes also occurred during the financial year. In September 2015 David Quinlivan (previously Non-
executive Director) succeeded Paul Chapman as Chairman of the Company. David Griffiths resigned as Non-executive Director on 20
November 2015 and Kelvin Flynn was appointed as Non-executive Director on 24 February 2016.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
31
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
On 8 April 2016 Peter Armstrong resigned as Joint Company Secretary and Chief Financial Officer and was replaced by Diniz Cardoso (as
Chief Financial Officer). David Berg remains as General Counsel and is now sole Company Secretary.
The Board believes that the Company’s remuneration framework is aligned with market practice and that Executive remuneration in FY2016
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 2016, Non-executive Director fees increased by 15% whilst the Non-executive Chairman’s
fee increased by 5%.
On an aggregate basis, fixed remuneration for Executives decreased by 4% compared with FY2015, with a
number of changes to the roles and personnel comprising the Executive team, as part of the overall Board
and Management renewal.
Short-term incentive (STI)
STI payments were made to Executives during the period in line with their performance against set targets.
Detailed information on STI payments is included in Section 5(c) of this report.
Long-term incentive (LTI)
In FY2016, 2,538,329 performance rights were granted to Mr Luke Tonkin and a further 1,708,970 performance
rights were granted to other Executives on the terms approved by shareholders at the 2015 AGM and
described further in this report.
b.
Key changes to remuneration for FY2017
No significant changes are anticipated to the Executive remuneration framework for FY2017.
4.
a.
Remuneration governance
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)
b)
c)
the remuneration arrangements (including base pay, performance targets, bonuses, equity awards, superannuation, retirement
rights, termination payments) for senior Executives;
the remuneration of Non-executive Directors; and
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 in 2015 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 using external independent industry reports and
data to ensure that remuneration levels are competitive and meet the objectives of the Company.
d.
2015 AGM voting outcome and comments
The Company received more than 90% "yes" votes on its Remuneration Report for the 2015 financial year.
32
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
FY2016 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 FY2016 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, sets KPI targets for Executives. Ordinarily, the KPIs
would include measures relating to the Group and the individual, and include financial, production, people, safety and risk measures.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
33
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
For FY2016 the KPIs chosen aligned remuneration with performance and the overall objectives of the Company and included:
»
»
»
»
achievement of the FY2016 budget with particular emphasis on safety, cost management, production and cashflow;
undertaking a comprehensive review of the Company’s exploration portfolio and development of a strategic exploration plan with
prioritised targets and milestones;
development of base case and contingency business plans under different assumptions; and
implementation and execution of specified commercial strategies, including crystallising value from non-core assets.
Not all of the above KPIs were assigned to all Executives.
FY2016 STI 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)
Peter Armstrong (Chief Financial Officer & Joint Company Secretary)*
* Resigned 8 April 2016
** Appointed 8 April 2016
# 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
30% of base salary
% STI paid#
93
93
93
93
93
Nil
The Board has established the Employee Incentive Plan (Incentive Plan), which replaced the previous 2012 LTI 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.
FY2016 LTI outcomes
Executive
Luke Tonkin
(Managing Director)
David Berg
(General Counsel & Joint Company Secretary)
Diniz Cardoso
(Chief Financial Officer)***
Antony Shepherd
(Exploration & Geology Manager)
Peter Armstrong
(Chief Financial Officer & Joint Company Secretary)**
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 FY2016
2,538,329
(75% of base salary)
423,055
(25% of base salary)
351,982
(25% of base salary)
406,133
(25% of base salary)
527,800
(25% of base salary)
Fair value per
Performance Right *
$0.11
$0.07
$0.07
$0.07
$0.07
* Independently valued using a hybrid share option pricing model
** Resigned 8 April 2016
*** Appointed 8 April 2016
34
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
At the 2015 AGM, the Company sought and obtained shareholder approval to issue 2,538,329 Performance Rights to Mr Tonkin in respect
of the LTI component of his remuneration for FY2016. These Performance Rights were subsequently issued in February 2016.
The Performance Rights 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.
The Company and comparator TSR performances are measured using the 20 day VWAP calculation up to and including the last business
day of the financial period immediately preceding the period that the performance rights relate to, and in determining the closing TSR
performances at the end of the three year period. Relative TSR performance is calculated at a single point in time and is not subject
to re-testing.
The Performance Rights will vest based on the Company’s relative TSR ranking 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
The comparator group of companies for the Performance Rights 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.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
35
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
e.
Service agreements
A summary of the key terms of service agreements for Executives in FY2016 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
David Berg
(General Counsel &
Joint Company Secretary)
Open
Diniz Cardoso
(Chief Financial Officer)
– appointed 8 April 2016
Open
Matthew O’Hara
(General Manager
Mount Monger Operations)
Open
Antony Shepherd
(Exploration &
Geology Manager)
Peter Armstrong (Chief
Financial Officer & Joint
Company Secretary) –
resigned 8 April 2016
Open
Open
6 months
6 months
6 months
6 months
6 months
6 months
12 months
Total Fixed
Remuneration
6 month
Total Fixed
Remuneration
6 months
Total Fixed
Remuneration
2 months
2 months
As per Legislation
3 months
3 months
6 months
6 months
6 months
Total Fixed
Remuneration
6 months
Total Fixed
Remuneration
$562,500 plus
12% superannuation
STI equivalent to
50% of base salary
LTI equivalent to
75% of base salary
$280,000 plus
9.5% superannuation
STI equivalent to
30% of base salary
LTI equivalent to
30% of base salary
$300,000 plus
9.5% superannuation
STI equivalent to
30% of base salary
LTI equivalent to
30% of base salary
$283,000 plus
9.5% superannuation
STI equivalent to
30% of base salary
LTI equivalent to
30% of base salary
$240,000 plus
9.5% superannuation
STI equivalent to
30% of base salary
LTI equivalent to
30% of base salary
$320,811 plus
12% superannuation
STI equivalent to
30% of base salary
LTI equivalent to
30% of base salary
36
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORT
REMUNERATION REPORT - AUDITED
f.
Executive remuneration paid
Short Term
Post-
employment
Other
(A)
Base
Emolument
$
STI/Bonus
Payments
$
Total
Benefits
$
Superannuation
Benefits
$
Options/
Performance
Right
$
(B)
Other
Benefits
$
Total
$
Proportion of
remuneration
performance
related
%
Luke Tonkin (C)
Managing Director
David Berg (D)
General Counsel &
Company Secretary
Diniz Cardoso (E)
Chief Financial Officer
Matthew O’Hara (F)
GM Mount Monger
Operations
Antony Shepherd (G)
Exploration &
Geology Manager
Peter Armstrong (H)
Chief Financial
Officer & Joint
Company Secretary
Les Davis (I)
Managing Director
Chris Banasik (J)
Director
Exploration & Geology
Total
Total
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
552,971
262,688
815,659
480,210
297,753
777,963
282,153
218,788
78,120
360,273
62,500
281,288
52,952
15,131
68,033
-
-
-
283,000
78,957
361,957
-
-
-
240,000
66,960
306,960
189,231
60,000
249,231
250,204
308,863
-
250,204
31,190
340,053
-
-
-
211,760
61,624
273,384
-
119,942
-
-
-
119,942
1,661,280
501,856 2,163,136
1,528,794
513,067
2,041,861
35,282
34,990
21,539
20,785
6,154
-
30,685
-
28,500
17,977
28,968
37,064
-
10,000
-
14,393
151,128
135,209
256,406
41,144
1,148,491
289,363
10,267
1,112,583
10,435
1,063
393,310
-
12,012
314,085
449
5,322
80,008
-
-
-
-
-
(2,053)
390,589
-
-
10,018
6,450
351,928
-
13,625
280,833
33,199
191,253
503,624
-
-
-
-
-
29,822
406,939
-
-
287,447
570,831
-
-
172,035
306,370
310,507
243,179
2,867,950
289,363
525,208
2,991,641
45
53
23
20
19
-
20
-
22
21
7
8
-
11
-
-
28
27
(A) Base emoluments may not agree with annual remuneration figures quoted as the amounts depend on the number of
fortnightly pay periods during the year.
(B) Represents contractual entitlements (including termination and retirement benefits), annual leave and long service leave
entitlements, measured on an accrual basis.
(C) Mr Tonkin commenced employment on 14 October 2013 as Director of Operations.
On 20 November 2014 Mr Tonkin was appointed as Managing Director.
(D) Mr Berg commenced employment on 4 August 2014.
(E) 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.
(F) Mr O’Hara met the definition of Key Management Personnel from 1 July 2015.
(G) Mr Shepherd commenced employment on 8 September 2014.
(H) 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.
(I) Mr Davis ceased employment as Managing Director on 20 November 2014 and was subsequently appointed Non-executive Director.
The amounts disclosed in this table relate only to payments made to Mr Davis in his capacity as an Executive, NED fee
payments are disclosed separately in Section 6(c).
(J) Mr Banasik ceased employment on 14 November 2014.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
37
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 on Hand ($m)
Profit/(Loss) after tax attributable to shareholders ($m)
Cash from operating activities
Closing share price at 30 June
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
2012
72.1
31.2
62.9
$2.81
* Includes impairments on inventories and other non-current assets
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 Operation and crystalise
value from its non-core assets.
In assessing KMP performance during the year, the Committee considered the following achievements:
»
»
»
»
»
»
»
»
6.
a.
meeting FY2016 sales guidance (132,400 oz sold compared with guidance of 125,000 – 135,000 oz);
the successful operating strategy has improved cash flow from operations by 68% and reduced All in Sustaining Costs by 4%;
successful targeted and phased exploration strategy;
both the Maxwells underground mine and the Imperial/Majestic open pits are expected to make a significant contribution to Silver
Lake’s key objective of delivering new ore sources that sustain and enhance margins to drive shareholder returns;
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;
substantial rationalisation of the Company’s tenement base; and
crystalising value from the non-core Murchison and Great Southern assets.
FY2016 Non-executive Director (NED) remuneration
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)
b)
c)
d)
fees paid to NEDs are within the aggregate amount approved by shareholders at the Company’s Annual General Meeting;
NEDs are remunerated by way of fees (in the form of cash and superannuation benefits);
NEDs are not provided with retirement benefits other than statutory superannuation entitlements; and
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.
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.
38
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
FY2016 NED fees
»
»
Chairman
$151,950 plus 9.5% superannuation
NED
$84,400 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 2016, NED fees were increased by 15% to $84,400 per annum, with Chairman fees increasing by 5% to
$151,950 per annum.
c.
NED fees paid
Details of the remuneration of each NED for the year ended 30 June 2016 is set out in the following table:
David Quinlivan (A)
Non-executive Chairman
Les Davis (B)
Non-executive Director
Kelvin Flynn (C)
Non-executive Director
Brian Kennedy
Non-executive Director
Paul Chapman (D)
Non-executive Chairman
David Griffiths (E)
Non-executive Director
Peter Johnston (F)
Non-executive Director
Total
Total
Short Term
Post-employment
Base Emolument
$
Superannuation
benefits
$
Total
$
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
129,111
-
77,877
45,555
29,656
-
77,877
77,955
42,299
172,624
29,383
77,955
-
66,371
386,203
440,460
12,266
141,377
-
7,398
4,328
2,817
-
7,398
7,406
4,018
16,399
2,791
7,406
-
6,305
36,688
41,844
-
85,275
49,883
32,473
-
85,275
85,361
46,317
189,023
32,174
85,361
-
72,676
422,891
482,304
(A) Mr Quinlivan appointed as NED on 25 June 2015 and Chairman on 30 September 2015
(B) Mr Davis appointed a NED on 20 November 2014
(C) Mr Flynn appointed as NED on 24 February 2016
(D) Mr Chapman resigned as Chairman on 30 September 2015
(E) Mr Griffiths resigned as NED on 20 November 2015
(F) Mr Johnston resigned as NED on 30 April 2015
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
39
DIRECTORS’ REPORT
REMUNERATION REPORT - AUDITED
Movement in Options
There were no options granted to KMP during FY2016. 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)
Total
Held at
1 July 2015
2,000,000
2,000,000
(i) Employee options (equity-settled)
Granted
Exercised
Held at
30 June 2016
Vested
During
The Year
Vested &
Exercisable at
30 June 2016
-
-
-
-
2,000,000
600,000
1,000,000
2,000,000
600,000
1,000,000
On 14 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 2016 was $150,275 (included
within the total $256,406 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
Tranche B
600,000
$1.03
Tranche C
1,000,000
$1.14
18 November 2013
18 November 2013
18 November 2013
15 January 2015
15 January 2016
15 January 2017
18 November 2017
18 November 2017
18 November 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.
40
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
Movement in Performance Rights
Key Management
Person
Issued in
FY2015
Issued in
FY2016
Rights
Exercised
Rights Lapsed
Held at
30 June 2016
Vested during
the year
Luke Tonkin
870,603
2,538,329
-
-
3,408,932
-
Peter Armstrong*
David Berg
Diniz Cardoso*
Matthew O’Hara**
Antony Shepherd
-
-
-
-
-
527,800
(448,630)#
(79,170)
-
448,630
423,055
351,982
-
406,133
-
-
-
-
-
-
-
-
423,055
351,982
-
406,133
-
-
-
-
Total
870,603
4,247,299
(448,630)
(79,170)
4,590,102
448,630
Vested &
exercisable at
30 June 2016
-
-
-
-
-
-
-
* Diniz Cardoso appointed and Peter Armstrong resigned - 8 April 2016
** Mr O’Hara met the definition of KMP from 1 July 2015
# Vested and exercised at discretion of the Board
The total expense recognised in the Statement of Profit or Loss for all Performance Rights for the period ended 30 June 2016 was $197,556
(included within the total $310,507 value reflected in the remuneration table in Section 5(f)).
Details of the performance rights are summarised in the following table:
Number of performance rights
Exercise price
Issue date
Vesting date
Expiry date
Tranche 1
870,603
$0.00
20 November 2014
30 June 2017
1 July 2017
Tranche 2
1,708,970
$0.00
1 July 2015
30 June 2018
1 July 2018
Tranche 3
2,538,329
$0.00
20 November 2015
30 June 2018
1 July 2018
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
Tranche 1
Tranche 2
Tranche 3
$0.045
$0.274
20%
2.56%
-
$0.074
$0.151
22%
2.14%
-
$0.110
$0.217
22%
2.14%
-
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.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
41
DIRECTORS’ REPORT REMUNERATION REPORT - AUDITED
Movement in Shares
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*
Matthew O’Hara*
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(499,959)
(5,334,294)
(4,393,671)
-
-
4,525,294
-
4,790,746
10,416
-
-
-
-
-
-
(10,227,924)
9,326,456
* Met the definition of KMP during the respective period
** Balance reported is the shareholding on the date of resignation
Held at
1 July 2014
Shares Acquired
Shares
Exercised
Shares
Sold
Other**
Held at
30 June 2015
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,250,294)
-
-
(4,621,194)
-
-
4,525,294
4,790,746
499,959
10,416
-
-
5,334,294
4,393,671
-
(8,871,488)
19,554,380
Key Management
Person
David Quinlivan*
Luke Tonkin
Les Davis
Brian Kennedy
Peter Armstrong
David Berg*
Antony Shepherd*
Chris Banasik
Paul Chapman
David Griffiths
Peter Johnston
-
-
4,525,294
4,790,746
499,959
-
-
4,250,294
5,334,294
4,393,671
4,621,194
-
-
-
-
-
10,416
-
-
-
-
-
Total
28,415,452
10,416
* Met the definition of KMP during the respective period
** Balance reported is the shareholding on the date of resignation
42
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
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 2016. 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
2016
$
56,760
161,500
218,260
2015
$
119,755
225,190
344,945
The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 dated 1 April 2016 and in accordance with that
Corporations 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
23 August 2016
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
43
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 2016 and of its performance for the year then
ended; and
b)
c)
d)
ii)
Complying with Australian Accounting Standards and Corporations Regulations 2001;
the financial statements also comply with International Financial Reporting Standards as disclosed in Note 1;
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
There are reasonable grounds to believe that the Company and the Group entity identified in Note 35 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 2016.
The declaration is signed in accordance with a resolution of the Board of Directors.
Luke Tonkin
Managing Director
23 August 2016
44
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
DIRECTORS’ DECLARATION SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
45
AUDITOR’S INDEPENDENCE DECLARATION 46
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
INDEPENDENT AUDIT REPORT SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
47
INDEPENDENT AUDIT REPORT FOR THE YEAR ENDED 30 JUNE 2016
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/(loss) before income tax
Income tax expense
Profit/(loss) for the year
Total comprehensive profit/(loss) for the year
Basic profit/(loss) per share
Diluted profit/(loss) per share
Notes
3
4
30 June
2016
$’000
209,497
30 June
2015
$’000
185,956
(192,396)
(176,994)
17,101
8,962
3,146
3,118
(3,193)
(2,825)
(8,878)
8,469
482
(4,538)
(4,056)
4,413
-
4,413
4,874
(4,549)
-
(86,994)
(11,282)
(88,989)
201
(5,236)
(5,035)
(94,024)
-
(94,024)
4,413
(94,024)
Cents
Per Share
0.88
0.87
Cents
Per Share
(18.68)
(18.68)
14
18
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.
48
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
AS AT 30 JUNE 2016
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
2016
$’000
30 June
2015
$’000
Notes
10
12
13
17
13
14
15
16
19
20
17
23
21
20
23
24
25
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
22,538
4,966
18,831
-
62
46,397
-
143,479
58,394
7,561
209,434
255,831
25,172
10,320
-
786
1,613
37,891
6,062
29,272
35,334
73,225
182,606
699,564
830
(513,050)
187,344
699,564
505
(517,463)
182,606
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 2016
49
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2016
Share
Capital
$’000
Option
Reserve
$’000
Accumulated
Losses
$’000
Total
Equity
$’000
Notes
Balance at 1 July 2014
699,564
216
(423,439)
276,341
Total comprehensive loss for the year
Transactions with owners, recorded directly in equity
Equity settled share based payment
25
Total transactions with owners of the Company
Balance at 30 June 2015
-
-
-
699,564
Share
Capital
$’000
-
(94,024)
(94,024)
289
289
505
-
-
289
289
(517,463)
182,606
Option
Reserve
$’000
Accumulated
Losses
$’000
Total
Equity
$’000
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
25
Total transactions with owners of the Company
-
-
-
Balance at 30 June 2016
699,564
-
325
325
830
4,413
4,413
-
-
325
325
(513,050)
187,344
The Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes to these consolidated
financial statements.
50
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2016
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 sale of assets
Exploration, evaluation and development expenditure
Net cash used in investing activities
Cash flows from financing activities
Refund of bonds
Proceeds from gold prepayment facility
Stamp duty paid
Repayment of borrowings
Interest paid
Net cash (used in)/from financing activities
30 June
2016
$’000
30 June
2015
$’000
Notes
205,837
189,249
(150,845)
(156,553)
11
54,992
32,696
482
(2,562)
3,388
(35,575)
(34,267)
-
-
(3,553)
-
(1,067)
(4,620)
16,105
22,538
38,643
201
(7,041)
1,500
(32,557)
(37,897)
1,996
10,000
(3,207)
(3,120)
(1,867)
3,802
(1,399)
23,937
22,538
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
10
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 2016
51
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 2016 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 23 August 2016.
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.
Functional and Presentation Currency
(a)
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 Instrument 2016/191 dated 1 April 2016 and in accordance with
that Corporations 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 14
Exploration and evaluation expenditure carried forward
Note 14
Amortisation of development expenditure
Note 14
Reserves and Resources
Note 18
Impairment of assets
Note 23
Closure and rehabilitation
(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 30.
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.
52
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
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 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.
Impairment of Non-Financial Assets
(e)
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 profit and 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 at balance date 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 2016
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. REVENUE
Gold sales
Silver sales
Total
30 June
2016
$’000
209,124
373
209,497
30 June
2015
$’000
185,632
324
185,956
Included in current year gold sales is 103,986 ounces of gold sold (at an average price of A$1,566/ounce) under various hedge programs.
At 30 June 2016, the Company has a total of 76,327 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 Profit and 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
Adjustment to rehabilitation provision
Accounting Policies
Mining and processing costs
Notes
14
15
30 June
2016
$’000
124,297
36,063
9,323
15,740
6,973
-
192,396
30 June
2015
$’000
122,918
28,063
10,346
12,846
5,703
(2,882)
176,994
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 profit and 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.
54
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
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:
Land
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
Not depreciated
10 Years
5 Years
3-10 Years
3-15 Years
3-5 Years
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
55
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
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
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)
30 June
2015
$’000
5,799
378
351
197
495
3,184
878
11,282
30 June
2015
$’000
18,187
2,123
1,699
22,009
30 June
2015
$’000
201
201
(2,209)
(1,868)
(1,159)
(5,236)
(5,035)
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 profit and 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.
56
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.
(a)
TAXES
Income tax
Current tax expense
Current income tax
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/(loss)
Profit/(loss) before tax
Income tax using the corporation tax rate of 30% (2015: 30%)
Increase in income tax expense 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
Interest bearing liabilities
Tax losses
Less deferred tax asset not recognised
Net deferred tax assets
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
2015
$’000
(7,611)
723
(6,888)
6,888
-
30 June
2015
$’000
(94,024)
(28,207)
810
723
26,674
-
30 June
2016
$’000
30 June
2015
$’000
1,929
(1,606)
15,535
22,884
575
6,372
921
-
96,529
143,139
990
(1,500)
23,516
24,914
503
9,171
1,700
2,030
83,964
145,288
(143,139)
(145,288)
-
-
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
57
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 2016 the Company has $321,763,000 (2015: $282,286,000 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 2016 of $96,529,000 (2015: $84,686,000).
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.
ii.
the provisions of deductibility imposed by law are complied with; and
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.
58
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 9.
EARNINGS PER SHARE
Profit/(loss) used in calculating basic and diluted EPS
30 June
2016
$’000
4,413
30 June
2015
$’000
(94,024)
Number of
Shares
Number of
shares
Weighted average number of ordinary shares used in calculating basic earnings/(loss) per share
503,234,000
503,234,000
Effect of dilution
4,707,000
-
Weighted average number of ordinary shares used in calculating diluted earnings/(loss) per share
507,941,000
503,234,000
Accounting Policies
Basic EPS is calculated as profit/loss attributable to ordinary shareholders of the Company divided by the weighted average number of
ordinary shares.
Diluted EPS is determined by adjusting the profit or loss 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
Total
30 June
2016
$’000
38,643
38,643
30 June
2015
$’000
22,538
22,538
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 27.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from operating activities
Profit/(loss) 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
Other receivables
Provision for doubtful debts (Note 27 (b)(ii))
Total
30 June
2016
$’000
30 June
2015
$’000
4,413
(94,024)
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
10,346
28,063
86,994
289
3,369
4,549
39,586
7,197
9,519
93
(19,998)
(3,701)
32,696
30 June
2015
$’000
6,883
1,197
388
(3,502)
4,966
The Group’s exposure to interest rate risk and a sensitivity analysis of financial assets and liabilities are disclosed in Note 27.
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 and loss statement.
60
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
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
2016
$’000
30 June
2015
$’000
5,354
9,103
2,415
3,836
20,708
2,052
22,760
4,999
6,902
3,924
3,006
18,831
-
18,831
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, gold bullion and work in progress 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 2016
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE
During the year ended 30 June 2016 the Group incurred and capitalised the following on exploration, evaluation and
development expenditure:
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
30 June
2015
$’000
63,067
13,276
(3,093)
-
(32,158)
(4,014)
-
-
37,078
30 June
2015
$’000
76,296
4,014
1,610
(33,975)
(6,100)
41,845
30 June
2015
$’000
94,184
6,100
18,272
(5,116)
40
(28,063)
(20,861)
64,556
143,479
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
Impairment
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)/increase in rehabilitation provision
Amortisation expense
Impairment
Balance at 30 June
Total
62
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
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 license 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.
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.
Mine properties and mining assets
Mine properties represents 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.
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.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 profit and loss statement 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.
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.
64
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
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 2014
13,989
202,852
3,561
2,557
1,945
Additions
Transfers
Disposals
-
18
-
9,322
(99)
(20,532)
-
-
-
Balance 30 June 2015
13,908
191,642
3,561
Additions
-
Reclassified as held for sale
17
(900)
Transfers
Disposals
94
-
-
-
2,147
-
-
-
-
-
Balance 30 June 2016
13,102
193,789
3,561
Depreciation
Balance at 1 July 2014
Depreciation expense
Disposal
Balance 30 June 2015
Depreciation expense
Disposal
4
4
10,013
146,045
1,068
487
(30)
8,098
(14,414)
712
-
10,470
139,729
1,780
444
-
7,594
-
712
-
Balance 30 June 2016
10,914
147,323
2,492
Carrying Amount
At 30 June 2014
At 30 June 2015
At 30 June 2016
3,976
3,438
2,188
56,807
51,913
46,466
2,493
1,781
1,069
-
-
(53)
2,504
-
-
231
(385)
2,350
1,502
603
(47)
2,058
320
(327)
2,051
1,055
446
299
38
-
1,983
-
-
209
-
2,192
1,246
447
-
1,693
253
-
1,946
699
290
246
2,888
7,065
(9,378)
(51)
524
2,564
-
(2,681)
-
407
-
-
-
-
-
-
2,888
526
407
227,792
7,065
-
(20,735)
214,122
2,564
(900)
-
(385)
215,401
159,874
10,347
(14,491)
155,730
9,323
(327)
164,726
67,918
58,394
50,675
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 2016
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16.
INVESTMENTS
Investments in listed entities – at fair value
Movements as follows:
Balance at 1 July
Acquisitions for nil consideration
Disposals
Change in fair value
Balance at 30 June
Accounting Policies
Financial assets at fair value through profit or loss
30 June
2016
$’000
4,806
7,561
75
(135)
(2,695)
4,806
30 June
2015
$’000
7,561
9,770
-
-
(2,209)
7,561
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. ASSETS HELD FOR SALE
In July 2016 the Company was formally notified by ACH Minerals Pty Ltd that it had exercised its option to purchase the Great Southern
project (Project) for cash consideration of $5,000,000 as per the Farm-in and Joint Venture Agreement. Completion of the sale of the Project
and receipt of the consideration is expected to occur during Q1 FY2017.
As a result of this, the net carrying value of the Project at 30 June 2016 was reduced to $5,000,000, resulting in a $2,825,000 impairment
recorded in the profit and loss statement. The net carrying value comprises $10,056,000 of assets and $5,056,000 of liabilities.
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.
66
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IMPAIRMENT TESTING FOR NON–CURRENT ASSETS
18.
Results of impairment testing
Mount Monger CGU
Long term development and mine assets
Exploration assets
Total impairment
Notes
14
30 June
2016
$’000
-
-
2,825
2,825
30 June
2015
$’000
32,445
22,391
32,158
86,994
At 30 June 2016, the Group has performed a test for impairment indicators and reversal in accordance with AASB 136 and determined that
no factors existed which would require an impairment test. The impairment of exploration assets in 2016 relates to a specific sale transaction
(refer Note 17). Impairments in relation to 30 June 2015 were as follows:
Mount Monger CGU
In FY2015 a number of factors represented indicators of impairment, including a reduction in the gold price outlook, the Company’s market
capitalisation relative to its book value at the time and a reduction in the Mount Monger CGU resource base. As a result, the Company
assessed the recoverable amount of the Mount Monger CGU in 2015. There were no indicators of impairment as at 30 June 2016 and
therefore no impairment assessment was required in the current year.
Commentary on the FY2015 impairment review is provided below:
»
»
»
»
The key assumptions in addition to the life of mine plans used in the discounted cash flow valuation were the gold price, the
Australian dollar exchange rate against the US dollar and the discount rate;
Gold price and AUD:USD exchange rate assumptions were estimated by management, with reference to external market
forecasts. For the review, the forecast gold price was estimated at US$1,183–US$1,250/oz and the forecast exchange rate of
US$0.74 to US$0.78 per A$1.00, based on a forward curve over the life of the mines.
A discount rate of 11% was applied to the post tax cash flows expressed in nominal terms. The discount rate was derived from
the Group’s post tax weighted average cost of capital (WACC), with appropriate adjustments made to reflect the risks specific to
the CGU.
The impairment testing carried out at 30 June 2015 resulted in a total impairment charge to the Profit or Loss Statement of
$32,445,000.
Long term development and mine assets
As a result of changes to operating and capital cost assumptions, long term development assets were impaired by $22,391,000 in FY2015.
Exploration assets
At 30 June 2015, the recoverable amount of certain assets was assessed as lower than the carrying amount which resulted in an
impairment charge of $32,158,000 on exploration and evaluation assets. This was due to the reduction in the gold price outlook at the time
and an assessment of future exploration spend on the respective areas of interest.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. TRADE AND OTHER PAYABLES
Trade payables
Other payables
Total
30 June
2016
$’000
26,949
3,965
30,914
30 June
2015
$’000
21,828
3,344
25,172
The Group’s exposure to liquidity risk and a sensitivity analysis of financial assets and liabilities are disclosed in Note 27.
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.
20. INTEREST BEARING LIABILITIES
Current liability
Gold prepay facility
Stamp duty
Non-current liability
Stamp duty
Total
30 June
2016
$’000
30 June
2015
$’000
-
3,937
3,937
2,125
6,062
6,767
3,553
10,320
6,062
16,382
The stamp duty liability is payable over the next 18 months and incurs interest at the rate of 10.7% per annum.
On 29 December 2014 the Company entered into a secured Gold Prepay Facility ("Facility") with the Commonwealth Bank of Australia
("CBA"), raising $10,000,000. Under the Facility, Silver Lake was contracted to deliver a total of 7,056 ounces of gold to CBA between
January 2015 and June 2016 (392 ounces per month). As at 30 June 2016, the Facility has been repaid in full.
The Group’s exposure to interest rate and liquidity risk arising from these interest bearing liabilities is disclosed in Note 27.
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.
68
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21. EMPLOYEE BENEFITS
Current
Liability for annual leave
Liability for long service leave
Total
Accounting Policies
(i)
Defined Contribution Superannuation Funds
30 June
2016
$’000
1,327
370
1,697
30 June
2015
$’000
1,101
512
1,613
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.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22. SHARE BASED PAYMENTS
Employee options (equity-settled)
On 14 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 2013 AGM. The total expense recognised in the
Statement of Profit or Loss for these options for the period ended 30 June 2016 was $150,275 (2015: $253,087).
Details of the options are as follows:
Number of options
Exercise price
Issue date
Vesting date
Expiry date
Tranche A
Tranche B
400,000
$0.94
600,000
$1.03
Tranche C
1,000,000
$1.14
14 October 2013
14 October 2013
14 October 2013
15 January 2015
15 January 2016
15 January 2017
14 October 2017
14 October 2017
14 October 2017
The inputs used in the measurement of the fair values at grant date were as follows:
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 have been set at a premium (between 40%-70%) to the prevailing share price at
date of grant.
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
2016
Number of
Options
2016
Weighted
Average
Exercise Price
2015
Number of
Options
2015
$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
400,000
70
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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:
FY2015
Rights
Granted
FY2016
Rights
Granted
Rights
Exercised
Rights
Lapsed
Held at
30 June
2016
Vested
during
the year
Vested &
exercisable at
30 June 2016
Total
870,603
5,476,750
(473,675)
(179,349)
5,694,329
473,675
-
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 these rights for the period ended 30 June 2016 was $197,556 (2015
$13,059).
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.
23. 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
2016
$’000
30 June
2015
$’000
30,058
(2,718)
(264)
776
(5,056)
(628)
22,168
1,158
21,010
22,168
40,667
(5,936)
(5,285)
1,161
-
(549)
30,058
786
29,272
30,058
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 reduced by $2,718,000 (2015: $5,936,000).
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.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 profit and loss.
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.
24. SHARE CAPITAL
Movements in issued capital
Balance as at 1 July 2014
Movement in the period
Balance as at 30 June 2015
Movement in the period
Balance as at 30 June 2016
Accounting Policy
Issued capital
Number
$’000
503,233,971
699,564
-
-
503,233,971
699,564
473,675
-
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.
72
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. RESERVES
Movement in options reserve
Balance as at 1 July
Equity settled share based payment expense
Balance as at June
26. OPERATING LEASES
2016
$’000
505
325
830
2015
$’000
216
289
505
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
2016, the future minimum lease payments under non-cancellable leases were payable as follows.
Less than one year
Between one and five years
2016
$’000
3,955
4,399
8,354
2015
$’000
4,744
9,750
14,494
27. 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 2016, a provision for doubtful debts of $6,723,000 has been recorded against rental income receivable as a result of a debtor
being place in liquidation. This receivable is therefore not reflected in the trade and other receivables balance in Note 27(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.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Exposure to credit risk
(c)
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
2016
$’000
2,317
38,643
40,960
2015
$’000
4,966
22,538
27,504
Liquidity risk
(d)
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 2016, the Company has a
total of 76,327 ounces to be delivered under these hedges over the next 12 months at an average of A$1,655/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 Profit and 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 2016
Trade and other payables
Stamp duty
Total
30 June 2015
Trade and other payables
Stamp duty
Gold prepay facility
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
Carrying
Amount
$’000
Contractual
Cash Flows
$’000
6 Months
or Less
$’000
25,172
9,615
6,767*
25,172
10,946
-
25,172
2,189
-
Total
41,554**
36,118
27,361
* The gold prepay facility is settled through the physical delivery of bullion
** The carrying value at balance date approximates fair value
6-12
Months
$’000
-
2,189
2,189
6-12
Months
$’000
-
2,189
-
2,189
1-2
Years
$’000
-
2,190
2,190
1-2
Years
$’000
-
4,378
-
4,378
2-5
Years
$’000
More than
5 years
$’000
-
-
-
2-5
Years
$’000
-
2,190
-
2,190
-
-
-
More than
5 years
$’000
-
-
-
-
(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 only has exposure to interest rate risk and equity price risk.
74
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Interest rate risk
(f)
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.
(i)
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
Gold prepay facility
Total
Variable rate instruments
Financial assets
Cash and cash equivalents
Carrying Amount
30 June
2016
$’000
30 June
2015
$’000
(6,062)
-
(9,615)
(6,767)
(6,062)
(16,382)
38,643
22,538
(ii)
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.
(iii)
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
$386,000 (2015: $225,000). This analysis assumes that all other variables remain constant.
Equity price risk
(g)
Equity investments are long-term investments that have been classified as financial assets at fair value through profit or loss. The Group is
exposed to insignificant equity price risk arising from its equity investments.
Fair values
(h)
The carrying amounts of financial assets are valued at year end at their quoted market price.
Capital management
(i)
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.
28. COMMITMENTS
The Group has $2,488,000 of capital commitments in the next financial year relating to the acquisition of property plant and equipment
(2015: nil) and $4,670,000 (2015: $7,174,000) of commitments relating to minimum exploration expenditure on its various tenements.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29. RELATED PARTIES
(a) Key Management Personnel compensation
Short-term employee benefits
Post-employment benefits
Other long term benefits
Total
30 June
2016
$’000
2,549
188
554
3,291
30 June
2015
$’000
3,194
177
103
3,474
Individual directors and executives compensation disclosures
(b)
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 4,247,299 performance rights were awarded to key management personnel. See Note 22 for further details of
these related party transactions.
30. GROUP ENTITIES
The Company controlled the following subsidiaries:
Subsidiaries
Cue Minerals Pty Ltd
Great Southern Minerals Pty Ltd
Silver Lake (Integra) Pty Ltd
Backlode Pty Ltd
Loded Pty Ltd
Paylode Pty Ltd
Accounting Policies
Subsidiaries
Country of
Incorporation
Australia
Australia
Australia
Australia
Australia
Australia
2016
100%
100%
100%
100%
100%
100%
Ownership Interest
2015
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.
76
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31. JOINT OPERATIONS
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
Exploration
SLR/Rubicon
Glandore
Erayinia
Exploration
SLR/Avoca Minerals Pty Ltd
Exploration
SLR/Image Resources
Queen Lapage
Exploration
SLR/Rubicon
* Terminated during the period
Accounting Policies
Joint operation arrangements
Group Interest
2016
80.0%
90.0%
69.2%
-*
-*
-*
2015
80.0%
90.0%
69.2%
20.0%
81.7%
58.0%
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.
32. AUDITOR’S REMUNERATION
KPMG:
Audit and review of the Company’s financial statements
Taxation services
Other Audit and Assurance Firms:
Other assurance related services
Total
30 June
2016
$’000
161,500
56,760
10,970
229,230
30 June
2015
$’000
225,190
119,755
15,769
360,714
33. SUBSEQUENT EVENTS
Maxwells Underground Mine ("Maxwells")
In July 2016 the Company announced that development of Maxwells would commence in July 2016.
Great Southern
In July 2016 the Company was formally notified by ACH Minerals Pty Ltd that it had exercised its option to purchase the Great Southern
project (Project) for cash consideration of A$5 million as per the Farm-in and Joint Venture Agreement. Completion of the sale of the Project
and receipt of the consideration is expected to occur in Q1 FY2017.
Other than the matters discussed above, 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 2016
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
34. PARENT ENTITY
As at, and throughout the financial year ended 30 June 2016, the parent company of the Group was Silver Lake Resources Limited.
Results of the parent entity
Profit/(loss) for the year
Total comprehensive profit/(loss) 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
2016
$’000
1,817
1,817
42,249
231,078
36,548
53,055
699,564
830
(522,372)
178,022
30 June
2015
$’000
(140,510)
(140,510)
28,669
241,666
42,507
65,785
699,564
505
(524,189)
175,881
The parent entity has $4,670,000 (2015: $7,174,000) of commitments relating to minimum exploration expenditure on its various
tenements.
35. 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).
78
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36. 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.
This standard includes requirements for the classification and measurement of financial assets resulting from the first part of Phase 1 of
the project to replace AASB 139 Financial Instruments: Recognition and Measurement. An assessment of the Group’s financial assets
and liabilities was performed to determine whether the change in standard would affect the classification and measurement of financial
instruments currently held. The new standard is not expected to impact the measurement of the Company’s financial assets and liabilities.
Additional disclosure requirements will be incorporated on adoption of the standard.
(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)
b)
c)
d)
e)
identify the contract(s) with a customer
identify the performance obligations in the contract
determine the transaction price
allocate the transaction price to the performance obligations in the contract
recognise revenue when (or as) the entity satisfies a performance obligation
This new standard is not expected to have an impact on the Group’s Financial Statements.
(iii)
AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations:
applicable to annual reporting periods beginning on or after 1 July 2016.
AASB 2014-3 amends AASB 11 Joint Arrangements to provide guidance on the accounting for acquisitions of interests in joint operations in
which the activity constitutes a business. The amendments require:
»
»
the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in AASB 3 Business
Combinations, to apply all of the principles on business combinations accounting in AASB 3 and other Australian
Accounting Standards except for those principles that conflict with the guidance in AASB 11 Joint Arrangements; and;
the acquirer to disclose the information required by AASB 3 and other Australian Accounting Standards for
business combinations.
Adoption of this amendment will not result in a material impact on the Group’s financial statements.
(iv)
AASB 2014-4 Clarification of Acceptable Methods of Depreciation and Amortisation: applicable to annual reporting periods
beginning on or after 1 July 2016.
AASB 116 Property Plant and Equipment and AASB 138 Intangible Assets both establish the principle for the basis of depreciation and
amortisation as being the expected pattern of consumption of the future economic benefits of an asset. The IASB has clarified that the
use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that
includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset.
The amendment also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of
the economic benefits embodied in an intangible asset. Currently the Group does not have a revenue-based policy to calculate the
depreciation of an asset and adoption of this standard is therefore not expected to impact the financial statements of the Company.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
79
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 30 June 2016 the Company had 503,707,646 fully paid ordinary shares, 2,000,000 outstanding options and 5,694,329 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
VOTING RIGHTS OF SECURITIES
Fully Paid
Ordinary Shares
Options
Performance
Rights
1,698
5,124
2,373
4,069
558
13,822
-
-
-
-
1
1
-
-
-
4
10
14
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)
b)
c)
each Shareholder entitled to vote may vote in person or by proxy, attorney or representative;
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
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.
80
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
ASX ADDITIONAL INFORMATION
SUBSTANTIAL SHAREHOLDERS
As at 28 September 2016 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
6.05%
TOP 20 HOLDERS OF QUOTED SECURITIES
As at 28 September 2016, the top 20 holders of quoted securities of the Company were:
Holder Name
J P MORGAN NOMINEES AUSTRALIA
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES
BRIKEN NOMINEES PTY LTD
STONE PONEYS NOMINEES PTY LTD
HOLT SUPER FUND A/C
JOHNSTON SUPER FUND A/C
PORTLEY PTY LTD
1
2
3
4
5
6
7
8
9
10
CS FOURTH NOMINEES PTY LIMITED
11 MS NOLA VERONICA BANASIK
12
13
14
15
16
17
18
19
ABN AMRO CLEARING SYDNEY
BRISPOT NOMINEES PTY LTD
HSBC CUSTODY NOMINEES
LANNLIE INVESTMENTS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
GARY B BRANCH PTY LIMITED
BRAMOR SUPERANNUATION PTY LTD
DR KELVIN LO
20 MR JIHAD MALAEB
Number Held
Percentage
67,019,702
36,279,520
26,765,640
26,378,792
4,715,294
4,683,294
4,036,172
4,000,000
4,000,000
3,984,064
3,500,000
3,075,022
2,864,420
2,066,256
2,000,000
1,944,492
1,649,500
1,600,000
1,550,000
1,546,322
13.31%
7.20%
5.31%
5.24%
0.94%
0.93%
0.80%
0.79%
0.79%
0.79%
0.69%
0.61%
0.57%
0.41%
0.40%
0.39%
0.33%
0.32%
0.31%
0.31%
203,993,763
40.51%
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
81
ASX ADDITIONAL INFORMATION
82
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2016
NOTES 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
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