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Waste ConnectionsFOR THE YEAR ENDED 30 JUNE 2019
CORPORATE DIRECTORY
D I R E C T O R S
D AV I D Q U I N L I VA N
Non-executive Chairman
LU K E T O N K I N
Managing Director
P E T E R A L E X A N D E R
Non-executive Director
L E S D AV I S
Non-executive Director
K E LV I N F LY N N
Non-executive Director
C O M PA N Y S E C R E TA RY
David Berg
P R I N C I PA L O F F I C E
Suite 4, Level 3, South Shore Centre
85 South Perth Esplanade
South Perth WA 6151
Tel:
Fax:
+61 8 6313 3800
+61 8 6313 3888
Email:
contact@silverlakeresources.com.au
R E G I S T E R E D O F F I C E
Suite 4, Level 3, South Shore Centre
85 South Perth Esplanade
South Perth WA 6151
S H A R E R E G I S T RY
Computershare Investor Services Pty Ltd
Level 11, 172 St Georges Terrace
Perth WA 6000
Telephone: 1300 850 505 (within Australia)
Telephone: +613 8 9415 400 (outside Australia)
A U D I T O R S
KPMG
235 St George’s Terrace
Perth WA 6000
I N T E R N E T A D D R E S S
www.silverlakeresources.com.au
A B N
38 108 779 782
A S X C O D E
SLR
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
2
3
8
14
20
40
41
42
48
49
50
51
52
81
D E A R F E L LO W S H A R E H O L D E R,
The FY19 financial year was another year in which Silver Lake continued to
execute our strategy of maximising the value of our established asset base
through investment in exploration and the creation of new opportunities to
compete for capital.
In addition to our organic exploration opportunities at our
established and wholly owned operations we broadened our
exposure to greenfield exploration opportunities through
investments in Encounter Resources and Sarama Resources.
Both companies have significant landholdings in established
mining provinces with proven mineral endowments. Silver Lake
looks forward to working with both companies as their respective
exploration programs advance.
Following on from the acquisition of Doray Minerals and
subsequent to year end we announced a recommended takeover
offer for Egan Street Resources Limited (“EganStreet”). The
acquisition of EganStreet will allow Silver Lake to consolidate an
additional JORC Resource of 454,000 ounces and JORC Reserve
of 200,000 ounces at the Rothsay Gold Project and provide a
near term development opportunity to introduce a new high-
grade ore source to an upgraded Deflector processing facility,
whilst simultaneously benefiting EganStreet shareholders by de-
risking the technical, development, construction, production and
financing challenges this project presents.
FY20 sales guidance is 215,000 to 230,000 ounces with the AISC
expected to average A$1,375-A$1,450 per ounce for the full year.
FY20 sales guidance is 215,000 to 230,000 ounces with the AISC expected to average A$1,375-A$1,450 per ounce
The company will continue to invest in exploration with
$18 million budgeted across the group and will focus on
for the full year. The company will continue to invest in exploration with $18 million budgeted across the group
advancing high priority targets at Mount Monger through to
and will focus on advancing high priority targets at Mount Monger through to an investment decision and
an investment decision and defining Resource extensions and
defining Resource extensions and additional near mine Resources at Deflector.
additional near mine Resources at Deflector.
FY20 sales guidance is 215,000 to 230,000 ounces with the AISC expected to average A$1,375-A$1,450 per ounce
for the full year. The company will continue to invest in exploration with $18 million budgeted across the group
and will focus on advancing high priority targets at Mount Monger through to an investment decision and
defining Resource extensions and additional near mine Resources at Deflector.
Our strong balance sheet and cash flow generation positions the
Our strong balance sheet and cash flow generation positions the Company to rapidly progress the pipeline of
Company to rapidly progress the pipeline of advanced exploration
advanced exploration targets and continue to refresh the pipeline of opportunities to compete for capital at
targets and continue to refresh the pipeline of opportunities to
compete for capital at Mount Monger, Deflector and externally
Mount Monger, Deflector and externally as we continue to build on the success and momentum generated in
as we continue to build on the success and momentum
FY19.
generated in FY19.
Our strong balance sheet and cash flow generation positions the Company to rapidly progress the pipeline of
advanced exploration targets and continue to refresh the pipeline of opportunities to compete for capital at
Mount Monger, Deflector and externally as we continue to build on the success and momentum generated in
FY19.
On behalf of the Board we would like to thank the Company’s employees for their hard work and commitment
over the past 12 months, and without whom, the achievements of the past year would not have been possible.
On behalf of the Board we would like to thank the Company’s employees for their hard work and commitment
On behalf of the Board we would like to thank the Company’s
employees for their hard work and commitment over the past
over the past 12 months, and without whom, the achievements of the past year would not have been possible.
12 months, and without whom, the achievements of the past
We would also like to acknowledge our suppliers, contractors and shareholders who continue to support our
year would not have been possible.
strategy of delivering today, developing for tomorrow and discovering for the future.
We would also like to acknowledge our suppliers, contractors and
shareholders who continue to support our strategy of delivering
today, developing for tomorrow and discovering for the future.
We would also like to acknowledge our suppliers, contractors and shareholders who continue to support our
strategy of delivering today, developing for tomorrow and discovering for the future.
David Quinlivan
Non-Executive Chairman
David Quinlivan
David Quinlivan
Non-Executive Chairman
Non-Executive Chairman
Luke Tonkin
Luke Tonkin
Managing Director
Managing Director
Luke Tonkin
Managing Director
In September 2018, we announced the nil-premium
acquisition of Doray Minerals and the Scheme of Arrangement
was implemented in April 2019. The immediate impact of
the acquisition was clear in the fourth quarter of FY19 with
a production rate in excess of 200,000 ounces per annum
established and subsequent FY20 sales guidance of 215,000 to
230,000 ounces gold equivalent, a 30% increase on FY19 sales.
In addition to the growth and diversification of Silver Lake’s
production base, we have also experienced a rerating
of our securities throughout FY19 which lends market support
to the successful deployment of the Company’s strategy.
Silver Lake’s gold production increased 6% to 166,695 ounces
gold equivalent with gold sales of 171,322 ounces up 13% on
FY18 at an AISC of A$1,367 per ounce. FY19 production and
sales include a 3 month contribution from Deflector, following
completion of the acquisition of Doray Minerals in April 2019.
For FY19 Silver Lake reported underlying NPAT of A$16.7 million,
operating cash flow A$80 million and pleasingly after capital
investment and exploration we were able to continue to build on
our enviable record of cash generation with our year end cash
and bullion balance increasing A$25 million to A$131.7 million
whilst maintaining our debt free balance sheet.
Our investment in exploration continued to deliver results
translating in Ore Reserves increasing after accounting for FY19
mine production at both operations.
At Mount Monger, Ore Reserves increased 24% after FY19 mine
production to 492,000 ounces and pleasingly, the impact of our
significant investment in exploration over the past three years
has become evident with a maiden Ore Reserve declared at
Santa and initial Mineral Resources declared at Tank South and
the inclusion of the Easter Hollows lodes in Inferred Mineral
Resources at the Daisy Complex for the first time. These new
Resources provide the opportunity to upgrade Inferred Mineral
Resources to Indicated Resources and ultimately Reserves.
Importantly, these targets are located on granted Mining Leases
and will benefit from Mount Monger’s established mine, services
and processing infrastructure.
At Deflector, Ore Reserves increased 75% net of FY19 mine
production to 343,000 ounces, with the entire Ore Reserve within
the current 600m strike footprint. Beyond the Ore Reserve and
Mineral Resource drilling has extended mineralisation 300m
immediately to the south of the 30 June 2019 Mineral Resource
limits and mineralisation remains open. Deflector Ore Reserves
and Mineral Resources have grown to the highest level in
Deflector’s history which has significantly de-risked Silver Lake’s
investment in acquiring Deflector and increased confidence in
the potential to add further value and returns to our shareholders
over the years to come.
2 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
CHAIRMAN & MANAGING DIRECTOR’S REPORT
M O U N T M O N G E R O P E R AT I O N
Figure 1: Location of Mount Monger Mining Centres and the centralised Randalls Mill.
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Located 50km southeast of Kalgoorlie, Western Australia
Established gold camp with a 10 year history with >1.2 million ounces produced and an enviable track record of cash generation
Silver Lake has invested to establish larger, longer life Mining Centres with increased production transparency and multiple
high-grade ore sources
Three independent Mining Centres now feed the central 1.3Mtpa Randall’s mill
FY19 gold sales of 141koz and FY20 gold sales guidance of 120 -130koz
History of Reserve replacement and discovery
Proven mineralised corridors present significant potential for extensions and new discoveries to further leverage our
established infrastructure
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 3
PROJECT REPORT1. D A I S Y M I N I N G C E N T R E
Figure 2: Schematic view of Daisy Complex
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Located 19km from the Randalls mill
2019 Ore Resource of 1.2 Moz including Ore Reserve of 87koz
Proven operating model of progressive infill and extensional drilling program to complement mine development schedule
and Reserve replacement year on year
Daisy Complex positioned to develop new, shallow mining areas adjacent to existing mine infrastructure
»
»
Down plunge drilling at Haoma West demonstrates extensions of mineralisation beyond Ore Reserves
Continued exploration success at Easter Hollows has created competing areas for FY20 underground drilling resources
and allocation of capital, relative to down plunge drilling of current mining areas
4 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
PROJECT REPORT2. M O U N T B E L C H E S M I N I N G C E N T R E
Figure 3: Mount Belches Mining Centre
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Located 18km from the Randalls mill
2019 Ore Resource of 1.2 Moz including Ore Reserve of 190koz
The Mount Belches Mining Centre is a fully serviced, independent Mining Centre currently comprising the shallow,
high-grade Maxwells and Cock-eyed Bob underground mines
Maxwells, building output and bottom line contribution
»
»
Established as a consistent high-grade production source
Down plunge and strike extensions to multiple lodes identified and being progressively tested
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Cock-eyed Bob, delivering our strategy to maximise cashflow
»
»
Resource model has typically under called mined grade
Drilling has intersected mineralisation below the current mine plan presenting the opportunity to extend the Life of Mine
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Santa provides potential for third shallow underground mine
»
Surface drilling program in progress to validate preliminary mine evaluation work and allow for a production decision to
be made in FY20
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 5
PROJECT REPORT3. A L D I S S M I N I N G C E N T R E
Figure 4: Oblique plan view highlighting SAT Trend deposits, Harry’s Hill and Karonie pits and area of recent ground magnetics survey
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Located 55km from the Randalls mill
Resources of 578koz including Reserve of 146koz
Three proximal open pits, Harry’s Hill, French Kiss and Karonie South, currently included in the mine plan
Discovery of any additional Mineral Resources will leverage from newly established infrastructure
Spice, Atriedes and Tank have resources of 48koz, with drilling restricted to ~60m below surface
New high-grade discovery at Tank South with infill exploration drilling expected to commence in early FY20
6 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
PROJECT REPORTD E F L E C T O R O P E R AT I O N
Figure 5: Deflector Operation
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Shallow, narrow vein, high-grade gold and copper underground mine located 350km north of Perth, Western Australia
Production at the mine commenced in May 2016 and became a Silver Lake operation following the completion of the merger with
Doray on 5 April 2019
FY19 gold sales of 85koz and FY20 gold sales guidance of 95 - 100Koz gold equivalent
FY19 Ore Reserves of 343,000 ounces gold and Mineral Resources of 826,000 ounces are the highest in Deflector’s history and all
located within the 600m mine strike footprint
ROM build in FY20 has the project mill constrained for the first time allowing for assessment of value creation opportunities to
optimise the mill
Mineralisation remains open in multiple directions and drilling will continue to target extension and repetitions as drill platform
access is improved
Opportunity to upgrade milling infrastructure to include a CIL circuit to broaden available ore sources through regional exploration
success and acquisition to both extend LOM options and enhance recoveries
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 7
PROJECT REPORTE X P LO R AT I O N
F Y19 H I G H L I G H T S
The FY19 exploration work programs completed by Silver Lake focused on established operations Mount Monger and Deflector. Work
programs successfully targeted Reserve conversion, extensions to Mineral Resources and discovered new mineralisation within our
proven mineralised corridors and outstanding results were reported at both operations.
Key exploration highlights (previously reported) included:
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75% increase in Deflector Ore Reserve net of FY19 mine production to 343,000 ounces
»
Drilling extended mineralisation 300m immediately to the south of the 30 June 2019 Mineral Resource limits
Mount Monger Ore Reserves increased 24% net of FY19 mine production
Maiden Ore Reserve at Santa
Maiden Mineral Resource estimate at Tank South
Inclusion of the Easter Hollows lodes in the Daisy Complex Mineral Resource for the first time
Drilling in the shadow of Daisy
8 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
EXPLORATION REPORTDaisy Complex – high-grade drilling results confirm the potential of Easter Hollows
Diamond drilling was completed during FY19 to assess the continuity of mineralisation within the Easter Hollows lodes which
culminated in the inclusion of the Easter Hollows lodes in the Daisy Complex Mineral Resource Estimate for the first time.
The Easter Hollows target zone comprises multiple “Daisy style” lodes located up to 450m to the west of existing workings at the Daisy
Complex. Mineralisation along the Easter Hollows area has been intersected over a 1,000m plunge from surface and has the potential
to provide a new mining front for the Daisy Complex, higher in the mine elevation and accessible by lateral development from existing
underground infrastructure.
These Easter Hollows lodes are parallel to the most productive areas of the mine. Host rocks and mineralisation are consistent with
the highest grade lodes in the Daisy Complex including, quartz veining, galena and visible gold.
Figure 6: Easter Hollows target relative to major Daisy structures
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 9
EXPLORATION REPORTSanta – a third, shallow, high-grade underground mine in the making1
A maiden Ore Reserve of 29,000 ounces has been declared for the Santa underground. Santa is located ~4km from Maxwells
and will leverage the established Mining Centre infrastructure with study work approaching completion for an investment decision
to be considered in 1H FY20. The maiden Ore Reserve is focused on the levels beneath the open pit floor, with drilling ongoing and
subsequent conversion to Reserves and life extensions considered likely given the broader Santa Mineral Resource base and the
experience with the existing BIF hosted mines at Mount Belches.
Figure 7: Santa West Lode long section showing assay results highlight and historical drilling intersections >5.0 g/t Au
1.
This information is extracted from the ASX release “Reserve growth reshapes Silver Lake’s portfolio” released to the ASX on 27 August 2019 and available to
view on www.silverlakeresources.com.au
10 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
EXPLORATION REPORTAldiss – Thick, high-grade intersections at Tank South herald a new discovery
A maiden Inferred Mineral Resource was declared at Tank South on the SAT trend at the Aldiss Mining Centre in August 20192.
Drilling discovered high-grade mineralisation in December 2018, follow up drilling intersected further high-grade mineralisation
over a strike length of 120m and supported the outline of an initial Inferred Mineral Resource of 71,000 ounces (662kt @ 3.6 g/t).
Work in FY20 will focus on testing for extensions of the high-grade structures (incorporating updated geological information of post
mineralisation faults) and infilling the Inferred Resource to evaluate the potential of Tank South to provide an additional near term
high-grade ore source to the Randalls mill.
Figure 8: Tank South vertical long section
The SAT trend, which contains some small Mineral Resources, is open for 2km to the south of Tank and for 1km to the north of Spice.
The mineralised strike of the Aldiss Mining Centre extends for 7km and is located within Silver Lake’s Mining Lease. The spectacular
high-grade discovery at Tank South highlights a significant exploration opportunity for Silver Lake at the Aldiss Mining Centre given
historical reconnaissance drilling along the SAT Trend is sporadic and relatively shallow.
Figure 9: Regional vertical long section looking west, highlighting the limited, shallow drilling between deposits along the SAT Trend from Karonie to Tank South
2.
This information is extracted from the ASX release “Reserve growth reshapes Silver Lake’s portfolio” released to the ASX on 27 August 2019 and available to
view on www.silverlakeresources.com.au
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 11
EXPLORATION REPORTDeflector – In-mine drilling has delivered Ore Reserve conversion
Drilling during FY19 confirmed the presence of Deflector style mineralisation at established mining widths and grade immediately to
the west and south of the 2019 Mineral Resource envelope, extending for 300m south and remains open. This area will be the subject
of further RC and diamond drilling throughout FY20 to infill the identified 300m zone and extend mineralisation beyond known limits
which has excellent potential for further Mineral Resource growth.
Figure 10: Deflector 2019 Mineral Resource Estimate by lode, highlighting southern extension target
12 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
EXPLORATION REPORTKnown mineralisation at Spanish Galleon and King Solomon (historical mine) are priority regional targets with work programs
included in the FY20 exploration budget. These targets have potential to emerge as near mine competing high-grade ore sources
for the Deflector plant to further enhance and extend the Deflector LOM outside of the immediate Deflector mine corridor.
Figure 11: Deflector regional exploration targets
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 13
EXPLORATION REPORTC O M PA N Y S U M M A RY A S AT 30 J U N E 2019
Group Mineral Resources are estimated at:
39.3 Mt @ 4.2 g/t Au for 5.3 Moz of contained gold; and
2.3 Mt @ 0.6% Cu for 14,100 tonnes of copper
Group Ore Reserves are estimated at:
7.1 Mt @ 3.7 g/t Au for 0.84 Moz of contained gold; and
2.0 Mt @ 0.3% Cu for 5,500 tonnes of copper
M I N E R A L R E S O U R C E S TAT E M E N T A S AT 30 J U N E 2019
The Company’s total Measured, Indicated and Inferred Mineral Resources at 30 June 2019 are 39.3 million tonnes (Mt) @ 4.2 grams
per tonne of gold (g/t Au) containing 5.29 million ounces of gold (Moz Au), including 2.3 Mt @ 0.6 percent copper (% Cu) containing
14,100 tonnes of copper (CuT). The Mineral Resources as at 30 June 2019 are estimated after allowing for depletion during FY2019.
The total Group Mineral Resource is a 43% increase on 30 June 2018. The step change reflects the addition of Mineral Resources
from Deflector and the Andy Well and Gnaweeda projects following the completion of the acquisition of Doray Minerals in April 2019.
2019 Gold Mineral Resource Estimate
Measured & Indicated
Inferred
Total
Tonnes
Grade
Ounces
Tonnes
Grade
Ounces
Tonnes
Grade
Ounces
(000’s)
g/t
(000’s)
(000’s)
(g/t)
(000’s)
(000’s)
(g/t)
(000’s)
Deflector
Daisy Complex
Mount Belches
Aldiss
Mount Monger other
1,602
1,202
7,082
5,430
5,555
Total Mount Monger
19,269
Andy Well
Gnaweeda
Group total
1,190
2,043
24,103
12.4
15.1
3.5
2.1
2.4
3.5
9.7
2.2
4.3
636
584
789
368
412
662
1,036
3,466
3,285
3,968
2,153
11,755
371
146
628
2,196
3,308
15,241
9.0
18.0
3.3
2.0
2.8
4.1
6.6
1.8
4.0
191
599
368
211
356
2,264
2,238
10,548
8,715
9,523
1,534
31,024
134
124
1,818
4,239
1,983
39,345
11.4
16.4
3.4
2.1
2.5
3.7
8.6
2.0
4.2
828
1,183
1,157
578
768
3,688
505
271
5,291
2019 Copper Mineral Resource Estimate
Measured & Indicated
Inferred
Total
Tonnes
Grade
Tonnes
Tonnes
Grade
Tonnes
Tonnes
Grade
Tonnes
(000’s)
1,602
1,602
%
0.8
0.8
(t’s)
(000’s)
12,073
12,073
662
662
(%)
0.3
0.3
(t’s)
(000’s)
2,065
2,065
2,264
2,264
(%)
0.6
0.6
(t’s)
14,138
14,138
Deflector
Group total
14 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
RESOURCES & RESERVES REPORT
Measured Mineral
Resources
Indicated Mineral
Resources
Inferred Mineral
Resources
Total Mineral Resources
June 2019
Tonnes
(‘000s)
Grade
(g/t Au)
Ounces
(Au
‘000s)
Tonnes
(‘000s)
Grade
(g/t Au)
Ounces
(Au
‘000s)
Tonnes
(‘000s)
Grade
(g/t Au)
Ounces
(Au
‘000s)
Tonnes
(‘000s)
Grade
(g/t Au)
Ounces
(Au
‘000s)
Aldiss Mining Centre
French Kiss
Harrys Hill
Italia/Argonaut
Karonie
Spice
Tank South
Tank/Atriedes
Sub Total
Andy Well
Andy Well
Sub Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
127
127
13.7
13.7
Daisy Mining Centre
Costello
-
-
Daisy Complex
103
27.8
Fingals
Hammer & Tap
Lorna Doone
Mirror/Magic
Wombola Dam
Wombola Pit
Sub Total
Deflector
Deflector
Sub Total
Gnaweeda
Turnberry
Sub Total
-
-
-
507
13
-
623
452
452
-
-
Imperial/Majestic Mining Centre
Imperial
Majestic
Sub Total
-
-
-
Mount Belches Mining Centre
-
-
-
2.6
3.2
-
6.8
-
-
-
-
-
-
4.9
5.1
-
-
-
798
307
-
-
Randalls Mining Centre
Anomaly A
Cock-eyed Bob
Maxwells
Rumbles
Santa
Sub Total
Lucky Bay
Randalls Dam
Sub Total
Stockpile
Total Gold
Mineral
Resources
1,105
4.9
175
13
-
13
1,145
4.6
-
4.6
1.4
2
-
2
51
-
-
-
-
-
-
-
646
1,094
409
2,967
78
-
236
-
5,430
56
56
-
92
-
-
-
43
1
-
1,063
1,063
-
1,099
131
-
686
549
164
47
136
2,676
2.7
2.6
1.4
2.0
2.4
-
1.4
2.1
9.2
9.2
-
13.9
2.7
-
2.0
2.5
2.6
3.1
7.1
-
-
-
-
-
-
125
2,043
2,043
504
1,673
2,177
232
485
50
1,239
-
-
351
3,670
5,977
34
107
141
2.2
2.2
2.7
2.6
2.7
1.9
4.6
4.9
2.2
2.6
3.2
4.8
2.1
2.8
55
90
19
188
6
-
11
368
315
315
808
417
-
770
64
622
604
3,285
628
628
1.7
2.4
-
1.3
1.3
3.6
1.5
2.0
6.6
6.6
45
32
-
31
3
71
29
1,454
1,511
409
3,737
142
622
840
211
8,715
134
134
1,818
1,818
2.1
2.5
1.4
1.8
1.9
3.6
1.5
2.1
8.6
8.6
100
122
19
219
9
71
39
579
505
505
-
111
492
1,036
4.0
18.0
14
111
4.0
14
599
2,238
16.4
1,183
11
-
44
45
14
5
1,043
350
641
663
120
20
611
3,984
440
440
146
146
44
142
186
14
72
197
24
307
614
5
7
13
662
662
2,196
2,196
216
790
1,006
44
490
745
851
1,336
3,466
8
6
14
2.3
2.4
3.5
3.6
3.0
4.0
6.9
9.0
9.0
1.8
1.8
2.0
2.3
2.2
1.4
3.4
4.5
2.2
3.4
3.3
7.2
1.2
4.6
77
27
72
77
12
3
1,174
350
1,327
1,719
297
67
881
7,283
2.3
2.4
2.7
3.0
2.8
3.3
7.0
88
27
116
165
27
7
1,628
191
191
124
124
14
58
72
2
53
4,239
4,239
720
2,463
3,183
276
1,773
107
2,291
59
1,202
147
368
5,006
10,548
2
0
2
55
113
168
1,145
826
826
271
271
58
200
258
16
250
354
83
454
1,157
9
7
16
51
2.0
2.0
2.5
2.5
2.5
1.8
4.4
4.8
2.2
2.8
3.4
5.1
2.1
3.0
1.4
13.4
13.4
195
195
1,132
1,132
12.1
12.1
2,246
2,246
11.4
11.4
3,464
5.5
615
20,639
4.1
2,693
15,241
4.0
1,983
39,345
4.2
5,291
Table 1: Gold Mineral Resources at 30 June 2019
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 15
RESOURCES & RESERVES REPORT Measured Mineral
Resources
Indicated Mineral
Resources
Inferred Mineral
Resources
Total Mineral
Resources
Tonnes
(‘000s)
Grade
(% Cu)
Copper
(Tonnes)
Tonnes
(‘000s)
Grade
(% Cu)
Copper
(Tonnes)
Tonnes
(‘000s)
Grade
(% Cu)
Copper
(Tonnes)
Tonnes
(‘000s)
Grade
(% Cu)
Copper
(Tonnes)
452
452
1.3%
5,900
1,132
0.5%
6,100
1.3%
5,900
1,132
0.5%
6,100
662
662
0.3%
2,100
2,246
0.6% 14,100
0.3%
2,100
2,246
0.6% 14,100
June 2019
Deflector
Deflector
Sub Total
Stockpile
17
0.3%
100
-
0.0%
-
-
0.0%
-
17
0.3%
100
Total Copper
Mineral
Resources
469
1.3%
6,000
1,132
0.5%
6,100
662
0.3%
2,100
2,264
0.6% 14,100
Table 1a: Copper Mineral Resources at 30 June 2019
O R E R E S E R V E S TAT E M E N T A S AT 30 J U N E 2019
The total Proved and Probable Gold Ore Reserves at 30 June 2019 are 7.08 Mt @ 3.7 g/t Au containing 0.84 Moz Au, including
2.0 Mt @ 0.3 % Cu containing 5,500 CuT. The Ore Reserves at 30 June 2019 are estimated after allowing for depletion over FY2019.
Ore Reserves were estimated using a gold price of A$ 1,800 / oz, apart from the Daisy Complex Ore Reserve and Majestic Ore Reserve
using A$1,650 / oz, Harrys Hill Ore Reserve using A$1,700 / oz, French Kiss Ore Reserve using A$1,600 / oz and Karonie Ore Reserve
using A$2,000 / oz. The total 2019 Group Ore Reserve is a 58% increase on 30 June 2018. The step change reflects the addition of Ore
Reserves from the Deflector following the completion of the acquisition of Doray Minerals in April 2019.
Deflector
Daisy Complex (UG)
Mount Belches (UG)
Aldiss (OP)
Imperial/Majestic
Stockpiles
Total Mount Monger
Group total
2019 Group Gold Ore Reserves
Proved
Probable
Total
Tonnes
(000’s)
Grade
g/t
Ounces
(000’s)
Tonnes
(000’s)
Grade
(g/t)
Ounces
(000’s)
Tonnes
Grade Ounces
778
41
349
-
-
1,127
1,517
2,295
6.1
6.7
5.8
-
-
1.4
2.6
3.8
151
1,211
9
65
-
-
49
123
274
277
754
2,369
169
-
3,569
4,780
4.9
8.8
5.2
1.9
3.8
-
3.2
3.7
191
78
125
146
21
-
370
561
1,989
318
1,103
2,369
169
1,127
5,086
5.4
8.5
5.3
1.9
3.8
1.4
3.0
7,075
3.7
343
87
190
146
21
49
492
835
2019 Group Copper Ore Reserves
Proved
Probable
Total
Deflector
Group total
Tonnes
(000’s)
778
778
Grade
Tonnes
Tonnes
Grade
Tonnes
Tonnes
Grade
Tonnes
%
0.4
0.4
(000’s)
3,396
3,396
1,211
1,211
(%)
0.2
0.2
(000’s)
2,110
2,110
1,989
1,989
(%)
0.3
0.3
5,506
5,506
16 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
RESOURCES & RESERVES REPORTProved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Tonnes
(‘000s)
Grade
(g/t Au)
Ounces
(Au
‘000s)
Tonnes
(‘000s)
Grade
(g/t Au)
Ounces
(Au
‘000s)
Tonnes
(‘000s)
Grade
(g/t Au)
Ounces
(Au
‘000s)
-
-
-
-
41
41
-
761
761
-
-
242
107
-
349
1,145
2,295
-
-
-
-
6.7
6.7
-
6.1
6.1
-
-
5.7
5.9
-
5.8
1.4
3.7
-
-
-
-
9
9
-
150
150
-
-
44
20
-
65
51
177
568
1,620
2,366
277
277
140
1,071
1,211
169
169
143
354
257
754
-
274
4,776
3.6
2.4
1.6
1.9
8.8
8.8
3.1
5.2
4.9
3.8
3.8
6.2
6.0
3.5
5.2
-
3.7
21
43
82
177
568
1,620
146
2,366
78
78
14
177
191
21
21
28
68
29
318
318
140
1,831
1,971
169
169
385
462
257
125
1,103
-
1,145
561
7,072
3.6
2.4
1.6
1.9
8.5
8.5
3.1
5.6
5.4
3.8
3.8
5.9
6.0
3.5
5.3
1.4
3.7
21
43
82
146
87
87
14
327
341
21
21
73
88
29
190
51
835
June 2019
Aldiss Mining Centre
French Kiss
Harrys Hill
Karonie
Sub Total
Daisy Mining Centre
Daisy Complex
Sub Total
Deflector
Deflector OP
Deflector UG
Sub Total
Imperial/Majestic Mining Centre
Majestic
Sub Total
Mount Belches Mining Centre
Cock-eyed Bob
Maxwells
Santa
Sub Total
Stockpile
Total Gold Ore Reserves
Table 2: Gold Ore Reserves at 30 June 2019
June 2019
Deflector
Deflector OP
Deflector UG
Sub Total
Stockpile
Total Copper Ore Reserves
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Tonnes
(‘000s)
Grade
(% Cu)
Copper
(Tonnes)
Tonnes
(‘000s)
Grade
(% Cu)
Copper
(Tonnes)
Tonnes
(‘000s)
Grade
(% Cu)
Copper
(Tonnes)
-
761
761
17
778
0.0%
0.4%
0.4%
0.3%
0.4%
-
140
3,300
1,071
3,300
1,211
100
-
3,400
1,211
0.3%
0.2%
0.2%
0.0%
0.2%
400
140
1,700
1,831
2,100
1,971
-
17
2,100
1,989
0.3%
0.3%
0.3%
0.3%
0.3%
400
5,000
5,500
100
5,500
Table 2a: Copper Ore Reserves at 30 June 2019
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 17
RESOURCES & RESERVES REPORTNotes to Tables 1, 1a, 2 and 2a:
1. Mineral Resources are reported inclusive of Ore Reserves.
2. Data is rounded to thousands of tonnes, thousands of ounces gold, and hundreds of tonnes copper. Discrepancies in totals
may occur due to rounding.
3. The “Daisy Complex” comprises the following zones: Daisy Milano, Haoma, Haoma West, Lower Prospect, Easter Hollows,
Daisy North, Dinnie Reggio and Christmas Flats.
4. The following Mineral Resource and Ore Reserve estimates are produced in accordance with the 2012 Edition of the Australian
Code for Reporting of Mineral Resources and Ore Reserves (the 2012 JORC Code): Deflector, Andy Well, Turnberry, Daisy Complex,
Lorna Doone, Wombola Dam, Majestic, Imperial, Maxwells, Santa, Cock-eyed Bob/Anomaly A, Lucky Bay, Mirror/Magic, Rumbles,
Karonie, Harrys Hill, French Kiss, Spice, Tank/Artredies, and Tank South. The remaining Mineral Resource and Ore Reserve
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.
M I N E R A L R E S O U R C E A N D O R E R E S E R V E G O V E R N A N C E A N D
I N T E R N A L C O N T R O L S
Silver Lake ensures that the Mineral Resource and Ore Reserve estimates quoted are subject to governance arrangements and
internal controls activated at a site level and at the corporate level. Internal reviews of Mineral Resource and Ore Reserve estimation
procedures and results are carried out through a technical review team which is comprised of highly competent and qualified
professionals. These reviews have not identified any material issues. The Company has finalised its governance framework in
relation to the Mineral Resource and Ore Reserve estimates in line with the conduct of its business.
Silver Lake reports its Mineral Resources and Ore Reserves on an annual basis in accordance with the ‘Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves’ (the JORC Code) 2012 Edition (except where stated). Mineral Resources
are quoted inclusive of Ore Reserves. Competent Persons named by Silver Lake are Members or Fellows of the Australasian Institute of
Mining and Metallurgy and/or the Australian Institute of Geoscientists and qualify as Competent Persons as defined in the JORC Code.
The Mineral Resources and Ore Reserves statements are based upon, and fairly represent, information and supporting documentation
prepared by the Competent Persons named below. The Mineral Resources statement as a whole, as presented in this Annual Report,
has been approved by Antony Shepherd a Competent Person who is a member of The Australasian Institute of Mining and Metallurgy.
The Ore Reserves statement as a whole, as presented in this Annual Report, has been approved by Sam Larritt a Competent
Person who is a member of The Australasian Institute of Mining and Metallurgy.
C O M P E T E N T P E R S O N’S S TAT E M E N T
The information in the Annual Report to which this statement is attached that relates to the Mineral Resources for the Daisy Complex,
Majestic, Imperial, Maxwells, Cock-eyed Bob, Anomaly A, Mirror/Magic, Tank South and Karonie deposits is based upon information
compiled by Aslam Awan, a Competent Person who is a member of The Australasian Institute of Mining and Metallurgy. Mr Awan is
a full-time employee of the Company. Mr Awan 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 Awan consents to the inclusion
in the report of matters based on his information in the form and context in which it appears.
The information in the Annual Report to which this statement is attached that relates to the Mineral Resources for the Deflector, Andy
Well and Turnberry deposits is based upon information compiled by Karen Wellman, a Competent Person who is a member of The
Australasian Institute of Mining and Metallurgy. Mrs Wellman is a full-time employee of the Company. Mrs Wellman 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’. Mrs Wellman consents to the inclusion in the report of matters based on her information in the form
and context in which it appears.
The information in the Annual Report to which this statement is attached that relates to the Mineral Resources for the Santa and Harrys
Hill deposits is based upon information compiled by Matthew Karl, a Competent Person who is a member of The Australasian Institute
of Mining and Metallurgy. Mr Karl is an employee of Mining Plus Pty Ltd. Mr Karl has sufficient experience that is relevant to the style
of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as
defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Karl
consents to the inclusion in the report of matters based on his information in the form and context in which it appears.
The information in the Annual Report to which this statement is attached that relates to Ore Reserves is based upon information
compiled by Sam Larritt, a Competent Person who is a member of The Australasian Institute of Mining and Metallurgy. Mr Larritt is
a full-time employee of the Company. Mr Larritt has sufficient experience that is relevant to the style of mineralisation and type of
deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of
the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Larritt consents to the inclusion
in the report of matters based on his information in the form and context in which it appears.
18 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
RESOURCES & RESERVES REPORTAll other information in the Annual Report to which this statement is attached relating to Exploration Results and Mineral Resources is
based on information compiled by Antony Shepherd, a Competent Person who is a member of The Australasian Institute of Mining and
Metallurgy. Mr Shepherd is a full-time employee of the Company. Mr Shepherd has sufficient experience that is relevant to the style
of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as
defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’.
Mr Shepherd consents to the inclusion in the report of matters based on his information in the form and context in which it appears.
F O R WA R D LO O K I N G S TAT E M E N T S
This report may contain forward looking statements that are subject to risk factors associated with gold exploration, mining and
production businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by
a variety of variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including
but not limited to price fluctuations, actual demand, currency fluctuations, drilling and production results, Reserve estimations, loss
of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory changes, economic and financial
market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates.
Forward-looking statements, including projections, forecasts and estimates, are provided as a general guide only and should not be relied
on as an indication or guarantee of future performance and involve known and unknown risks, uncertainties and other factors, many of
which are outside the control of Silver Lake. Past performance is not necessarily a guide to future performance and no representation or
warranty is made as to the likelihood of achievement or reasonableness of any forward looking statements or other forecast.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 19
RESOURCES & RESERVES REPORTThe directors submit their report, together with the
consolidated financial statements of the Group comprising
Silver Lake Resources Limited (the Company or Silver Lake)
and its subsidiaries for the year ended 30 June 2019.
P E T E R A L E X A N D E R
ASS APPL Geol
Non-executive Director
Appointed 5 April 2019
D I R E C T O R S
The directors of the Company at any time during or since the
end of the financial year were:
D AV I D Q U I N L I VA N
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 multiple
mining projects in various capacities. He is currently Managing
Director of Ora Banda Mining Limited and Chairman of Churchill
Mining PLC and previously served as Chief Executive Officer of
Sons of Gwalia Ltd (post appointment of administrators), Chief
Operating Officer of Mount Gibson Iron Ltd and President and
Chief Executive Officer of Alacer Gold Corporation.
Mr Quinlivan has held no other Directorships in public listed
companies in the last three years.
LU K E T O N K I N
BEng, Min Eng, MAusImm
Managing Director
Appointed 14 October 2013
Mr Tonkin is a Mining Engineering graduate of the Western
Australian School of Mines and his extensive operations and
management career spans over 30 years within the minerals
and mining industry. He is a past Chairman of the Western
Australian School of Mines Advisory Board. Mr Tonkin has
held senior management roles at WMC Resources Ltd, Sons of
Gwalia Ltd and was Managing Director of Mount Gibson Iron Ltd
for 7 years and Chief Executive Officer and Managing Director of
Reed Resources Ltd.
Mr Tonkin joined the Company in October 2013 as Director of
Operations and was appointed as Managing Director on 20
November 2014. Mr Tonkin has held no other Directorships in
public listed companies in the last three years.
20 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
Mr Alexander is a geologist and has over 30 years’ experience
in mineral exploration and mining in Australia and overseas. Mr
Alexander was Managing Director and Chief Executive Officer
of Dominion Mining Limited from 1997 until his retirement in
January 2008, at which time he continued as a Non-executive
Director until the takeover by Kingsgate Consolidated in
2010. Mr Alexander managed the start-up and operation of
Dominion’s Challenger gold mine in South Australia and, under
Mr Alexander’s management, Dominion won the Gold Mining
Journal’s “Gold Miner of the Year” three years in succession.
Mr Alexander was a Non-executive Director and former
Chairman of Doray Minerals Limited and was appointed to
the Silver Lake Board following the Company’s merger with
Doray Minerals Limited. He is currently a Non-executive
Director of Kingsgate Consolidated Limited and was previously
Non-executive Chairman of Caravel Minerals Limited
(resigned 23 May 2018).
L E S D AV I S
MSc (Min Econs)
Non-executive Director
Appointed 25 May 2007
Mr Davis has over 35 years’ industry experience including
17 years’ hands-on experience in mine development and
narrow vein mining. Mr Davis’ career incorporates 13 years’
senior management experience including roles as Mine
Manager, Technical Services Manager, Concentrator Manager,
Resident Manager and General Manager Expansion Projects
with organisations including WMC Resources Ltd, Reliance
Mining Ltd and Consolidated Minerals Ltd.
Mr Davis ceased as Managing Director on 20 November
2014 and was subsequently appointed as Non-executive
Director. Mr Davis is a Non-executive Director of Black Cat
Syndicate Limited.
Mr Davis has held no other Directorships in public listed
companies in the last three years.
K E LV I N F LY N N
B.Com, CA
Non-executive Director
Appointed 24 February 2016
Mr Flynn is a qualified Chartered Accountant with over 28 years’
experience in investment banking and corporate advisory roles
including private equity and special situations investments in
the mining and resources sector. He has held various leadership
positions in Australia and Asia, having previously held the
position of Executive Director/Vice President with Goldman
Sachs and Managing Director of Alvarez & Marsal in Asia. He
has worked in complex financial workouts, turnaround advisory
and interim management. He is the Managing Director of the
specialist alternative funds manager Harvis, which focuses on
investments in the real estate and real assets sectors.
Mr Flynn is currently a Director of privately held Global
Advanced Metals Pty Ltd and a Non-executive Director of
Mineral Resources Limited.
Mr Flynn has held no other Directorships in public listed
companies in the last three years.
DIRECTORS’ REPORTL E I G H J U N K
Dip Surv, Grad Dip Min Eng, MSc Min Econ
Non-executive Director
Appointed 5 April 2019; Resigned 12 July 2019
Mr Junk is a Mining Engineer with 25 years’ experience, and
held senior positions in several Western Australian mining
companies including WMC Resources, Pilbara Manganese and
Mincor Operations. In 2000 Mr Junk started the private mining
company Donegal Resources Pty Ltd, which was successful
in purchasing and recommissioning several Nickel operations
around Kambalda W.A. Donegal Resources was later sold to
Canadian company Brilliant Mining Corp during the Nickel boom
in late 2006. Over the next 10 years Mr Junk was a Director of
several public companies in the Mining and Financial sectors in
Australia and Canada.
Mr Junk was previously Managing Director of Doray Minerals
Limited and was appointed to the Silver Lake Board following
the Company’s merger with Doray Minerals Limited.
B R I A N K E N N E D Y
Cert Gen Eng
Non-executive Director
Appointed 20 April 2004; Resigned 23 October 2018
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 held no other Directorships in public listed
companies in the last three years.
C O M PA N Y S E C R E TA RY
D AV I D B E R G
LLB BComm (General Management), FGIS, FCIS
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.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 21
DIRECTORS’ REPORTC O M M I T T E E M E M B E R S H I P
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 Committee
Kelvin Flynn (Chairman)
Les Davis
David Quinlivan
Term
Full Year
Full Year
Full Year
Nomination & Remuneration
Committee (NRC)
Les Davis (Chairman)
Kelvin Flynn
David Quinlivan
Term
Full Year
Full Year
Full Year
D I R E C T O R S’ M E E T I N G S
The number of Directors meetings (including committee meetings) held during the year and the number of meetings attended by each
Director are as follows:
Directors’ Meetings
Audit Committee
Nomination & Remuneration
Committee
Held
Attended
Held
Attended
Held
Attended
11
11
4
11
11
4
4
11
11
4
10
9
4
3
2
-
-
2
2
-
-
2
-
-
2
2
-
-
3
-
-
3
3
-
-
3
-
-
3
3
-
-
David Quinlivan
Luke Tonkin
Peter Alexander2
Les Davis
Kelvin Flynn
Leigh Junk2
Brian Kennedy1
1Resigned 23 October 2018
2Appointed 5 April 2019
D I R E C T O R S’ I N T E R E S T S
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
Fully Paid Ordinary Shares
Unlisted Performance Rights
David Quinlivan
Luke Tonkin
Peter Alexander
Les Davis
Kelvin Flynn
-
1,458,117
18,165
1,000,000
-
-
3,017,389
-
-
-
22 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
DIRECTORS’ REPORTP R I N C I PA L A C T I V I T I E S
The principal activities of the Group during the year were exploration, mine development, mine operations and the sale of gold and
gold/copper concentrate in Australia.
O P E R AT I N G O V E R V I E W
On 5 April 2019, Silver Lake and Doray Minerals Limited (Doray) merged to create a multi-asset, mid-tier gold company operating in the
Eastern Goldfields and Murchison districts of Western Australia. Commentary and results in this report include Doray operations from
the merger date.
The Group currently has 5 mines and 2 processing facilities in operation across its Deflector and Mount Monger operations with
significant potential for organic growth from its portfolio of highly endowed and prospective tenement holdings.
G R O U P F I N A N C I A L O V E R V I E W
The Group recorded a net profit after tax for the year of $6.5 million (FY18: $16.2 million) and an EBITDA (before significant items) of
$80.2 million (FY18: $85.3 million). This resulted in an EBITDA margin for the year of 27% (FY18: 33%). A reconciliation between the
statutory profit after tax and the Group’s EBITDA is tabled below and in the opinion of the Board, provides useful information to assess
the underlying operating performance of the Group.
The lower profit result in FY19 is attributed to:
›
›
›
Expenditure associated with the Doray merger including business combination and stamp duty adjustments totalling $10.2 million
a 12% decrease in feed grade, largely driven by the processing of lower grade stockpiles in the first half of the year prior to the
introduction of higher grade open pit feed from Harrys Hill in the second half
An increase in ore stockpiles during the year, the profit margin on which will be recognised in future periods as the stockpiles
are processed.
Revenue for the year totalled $301.5 million from the sale of 171,322 ounces of gold equivalent1 at an average realised gold sale price
of A$1,754/oz compared with revenue of $255.6 million from 151,250 ounces (@ A$1,684/oz) in FY18. The increase in revenue reflects
the increase in realised gold price and the contribution of the Deflector Operation from its acquisition date.
Cost of sales increased to $272.1 million in the period (FY18: $225.9 million) reflecting the inclusion of costs associated with the
Deflector Operation from the acquisition date. The All-In Sustaining Cost (AISC) for the period of A$1,367/oz (FY18: A$1,289/oz) was
consistent with the Company’s forecast and reflected elevated costs in the first half of the financial year as a result of treatment of
lower grade stockpiles prior to the introduction of higher grade Harrys Hill material in the second half. The AISC reduced to A$1,216/oz
in 4Q FY19, following the acquisition of Doray and contribution from its Deflector Operation.
Operating cash flow for the period was $71.8 million resulting in a 30 June 2019 cash and bullion balance of $130.7 million. The cash
and bullion balance excludes $4.5 million of gold in circuit and concentrate on hand, and listed investments of $6.6 million. Key cash
flow movements for the year included:
›
›
›
Net cash inflow from operations of $71.8 million
Net cash acquired as part of the Doray transaction of $13.3 million
Exploration and capital spend of $57.7 million
1All gold equivalency calculations assume a gold price of A$1,800/oz, copper price of A$8,400/t and a 10% payability reduction for treatment and refining charges
E B I T D A (E X C LU D I N G S I G N I F I C A N T I T E M S)
The reconciliation between the statutory profit after tax and the Group’s EBITDA (excluding significant items) is outlined in the table below:
Reconciliation of Statutory Profit after Tax to EBITDA
(excluding significant items) - unaudited
Statutory profit after tax:
Adjustments for:
Depreciation and amortisation
Net finance costs (includes change in value of listed investments)
Business combination adjustments
Other
EBITDA (excluding significant items)*
*Non-IFRS measure
30 June 2019
30 June 2018
$’000
6,500
60,653
2,084
10,169
788
80,194
$’000
16,186
64,858
4,242
-
-
85,286
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 23
DIRECTORS’ REPORTO V E R V I E W O F T H E M O U N T M O N G E R O P E R AT I O N
Figure 1: Location of Mount Monger Mining Centres and the centralised Randalls Mill.
The Mount Monger Operation is located approximately 50km southeast of Kalgoorlie and is a highly endowed gold camp with an
established track record of gold production. Through exploration and development over the past three years Mount Monger has
transitioned to larger, longer life Mining Centres which has delivered multiple high-grade ore sources and increased production
transparency. The three independent and self-sufficient Mining Centres at Mount Monger are the Daisy, Mount Belches and Aldiss
Mining Centres. These Mining Centres feed the centrally located 1.3Mtpa Randall’s mill.
Mining
Ore mined from the Mount Monger Operation totalled 1,419,100 tonnes at a grade of 3.5 g/t Au for 158,549 contained ounces
(FY18: 1,269,722 tonnes at a grade of 4.2 g/t Au for 171,616 contained ounces). FY19 production was sourced from the Daisy
Complex, Cock-eyed Bob and Maxwells underground mines and the Harrys Hill open pit mine.
The Daisy Complex produced 298,357 tonnes at 5.7 g/t for 54,706 contained ounces, with production sourced from the Haoma West
and Lower Prospect areas. A significant exploration program will be conducted in 1H FY20 to follow up previous intersections of high-
grade “Daisy” style mineralisation at Easter Hollows which has the potential to introduce a new, shallow mining front higher in the Daisy
Complex mine elevation.
The Mount Belches Mining Centre produced 376,153 tonnes at 4.7 g/t for 57,170 ounces from the Maxwells and Cock-eyed Bob
underground mines. Both mines are now established as consistent production sources and have both infill and extensional exploration
potential. The Company will benefit from its installed services and infrastructure at Mount Belches as it targets a third shallow
underground mine at Santa, which is hosted within the BIF lodes seen at Maxwells and Cock-eyed Bob.
Open pit production during the year focused on Harrys Hill, the first mine in the newly established Aldiss Mining Centre. FY19
production at Harrys Hill totalled 744,590 tonnes at 2.0 g/t Au for 46,673 contained ounces (FY18: 670,605 tonnes at 2.7 g/t Au
for 58,787 contained ounces from the Imperial/Majestic open pits). Mining operations in 1H FY19 were focused on development
of Aldiss as a standalone Mining Centre with construction of a 36km haul road, administration offices, 80-man camp, power and
communications infrastructure. Operations in the second half of the year were focused on ramping up mining activity at Harrys Hill
as a higher grade ore source to replace lower grade stockpile feed. Open pit mining activities in FY20 will focus on completing
Harrys Hill whilst mining at French Kiss will also commence and progressively ramp up from 2Q FY20.
Processing
Gold ore from the Mount Monger Operation is transported to the Randalls Gold Processing Facility, located 65 km south east of
Kalgoorlie. Mill feed during the period was sourced from the Daisy Complex, Cock-eyed Bob and Maxwells underground mines,
the Harrys Hill open pit mine and open pit stockpiles. Ore milled for the period totalled 1,229,195 tonnes at a blended grade of
3.7 g/t Au for 136,767 recovered ounces.
The 13% reduction on FY18 production reflects a 12% decrease in feed grade, largely driven by the processing of lower grade
stockpiles in the first half of the year prior to the introduction of higher grade open pit feed from Harrys Hill in the second half.
Mining and production statistics for the Mount Monger Operation for the year are detailed in Table 1 and Table 2.
24 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
DIRECTORS’ REPORTO V E R V I E W O F T H E D E F L E C T O R O P E R AT I O N
Figure 2: Location of the Deflector Mining Operation.
The Deflector Operation is in the Southern Murchison region of Western Australia and is a shallow, narrow vein, high-grade gold
and copper underground mine. Production at the mine commenced in May 2016 and became a Silver Lake operation following the
completion of the merger with Doray on 5 April 2019.
Mining
Physical and financial results from Deflector have been included in the consolidated Group result from the acquisition date of 5 April
2019. Deflector mine production for the period from 5 April 2019 was 175,647 tonnes at 5.6 g/t gold and 0.49% copper. Production was
sourced from the Link, Central and Western Lodes, with ~54% of mined ore tonnes sourced from stoping.
Processing
Deflector mill throughput was 158,467 tonnes at an average gold grade of 5.9 g/t and copper grade of 0.4%. Gold recovery to bullion
was 67% with total gold recovery of 91.3% and copper recovery of 92.5%. Gold production for the period from 5 April 2019 was 27,514
ounces gold with copper production of 575 tonnes.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 25
DIRECTORS’ REPORTG R O U P M I N I N G A N D P R O D U C T I O N S TAT I S T I C S
Mount Monger Mining
Underground
Ore mined
Mined grade
Contained gold
Open Pit
Ore mined
Mined grade
Contained gold
Deflector Mining
Underground
Ore mined
Mined grade
Contained gold
Copper grade
Contained copper
Group Mining
Total ore mined
Mined grade
Contained gold
Copper grade
Contained copper
Table 1
Units
Tonnes
g/t Au
Oz
Tonnes
g/t Au
Oz
Tonnes
g/t Au
Oz
%
Tonnes
Tonnes
g/t Au
Oz
%
Tonnes
FY19
FY18
674,510
5.2
111,876
744,590
2.0
46,673
175,647
5.7
31,902
0.5%
864
1,594,747
3.7
190,451
0.5%
864
599,117
5.9
112,829
670,605
2.7
58,787
-
-
-
-
-
1,269,722
4.2
171,616
-
-
26 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
DIRECTORS’ REPORTMount Monger Processing
Ore milled
Head grade
Recovery
Gold produced
Gold sold
Deflector Processing
Ore milled
Gold grade
Copper grade
Gold recovery
Copper recovery
Gold produced
Gold sold
Copper recovered
Copper sold
Group Processing
Ore milled
Gold grade
Copper grade
Gold produced
Gold sold
Copper recovered
Copper sold
Table 2
Units
Tonnes
g/t Au
%
Oz
Oz
Tonnes
g/t Au
%
%
%
Oz
Oz
Tonnes
Tonnes
Tonnes
g/t Au
%
Oz
Oz
Tonnes
Tonnes
FY19
1,229,195
3.7
95
136,767
141,006
158,467
5.9
0.4%
91.3%
92.4%
27,514
27,837
575
590
FY19
1,387,662
3.9
0.4%
164,281
168,843
575
590
FY18
1,256,120
4.2
92
157,936
151,250
-
-
-
-
-
-
-
-
FY18
1,256,120
4.2
-
157,936
151,250
-
-
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 27
DIRECTORS’ REPORTE X P LO R AT I O N
Significant exploration success was reported at both the Mount Monger and Deflector operations during the year. The results continue
to enhance the Group’s embedded options to leverage proven mineralised corridors proximal to established mine and processing
infrastructure which have the potential to deliver production, cash margin growth and mine life extensions. Exploration expenditure
during the year totalled $14.9 million and included:
›
›
›
›
›
Underground resource definition diamond drilling at the Daisy Complex, Maxwells and Cock-eyed Bob
Underground exploration drilling targeting the new Easter Hollows lode at Daisy Complex
Surface exploration drilling at the Aldiss, Mount Belches and Daisy Mining Centres, targeting Cock-eyed Bob, Santa and SAT trend areas
Resource definition drilling at the Aldiss Mining Centre, targeting the Karonie South open pit deposit
Surface and underground exploration at Deflector which extended “Deflector” style mineralisation to the south and west beyond
the current Mineral Resource envelope.
Highlights from the exploration program included:
›
›
›
›
›
Spectacular gold intersections (including 17.0m @ 24.7 g/t Au) highlighted a new discovery at Tank South located along the SAT
trend at Aldiss
Drilling at Easter Hollows continued to intersect “Daisy Style” mineralisation including 0.45m @ 526 g/t Au and 1.64m @ 18.7 g/t Au
Surface diamond drilling at the Santa project returned a significant number of high grade drill results including 29.8m @ 5.44 g/t.
The ability to benefit from installed above-ground support services and maintenance infrastructure at Mount Belches provides
potential for a near-term and low capital mine
Drilling at Deflector extended the high-grade mineralisation footprint outside the current Mineral Resource areas (including 5.5m
@ 18.4 g/t Au & 0.1% Cu, 1.0m @ 89.4 g/t Au & 2.0% Cu, 0.3m @ 239 g/t & 2.4% Cu)
Deflector in-mine drilling increased the confidence in continuity of mineralisation within Inferred Mineral Resource blocks with the
potential to upgrade the confidence classification of these areas.
S T R AT E G Y
The Group’s short to medium term strategy is to maximise returns to shareholders. This will be achieved by:
›
›
›
Maximising the value of the established asset base;
Investing in exploration to target extensions to known resources and the discovery of new deposits within proven mineralised
corridors and proximal to existing infrastructure; and
Creating new opportunities to compete for capital.
Exploration success has embedded a pipeline of high value, near-term projects at Mount Monger including Easter Hollows, Santa and Tank,
all of which have the potential to produce sustainable higher margin ounces over the next 12-24 months. The ability to consider multiple
development options is the result of the deliberate operating and investment strategy over the past three years at Mount Monger.
This strategy has established three independent Mining Centres and diversified the sources of high-grade feed to the Randalls mill.
Mining activity at Deflector commenced in FY17 and FY20 will mark the first time the Deflector operation has been mill constrained
which allows for the assessment of value creation opportunities to optimise the flowsheet and minimise mine dilution to the mill. In
addition to in-mine exploration opportunities which are prevalent in an early stage underground mine, the FY20 exploration focus will
be on infilling and extending mineralisation identified by the successful FY19 exploration program which extended Deflector style
mineralisation to the south and west beyond the current Mineral Resource envelope. The southern extent of Deflector, which remains
open, has the potential to add to the current 4 year base case Deflector mining schedule which is supported by Measured
and Indicated Mineral Resources.
Key risks associated with delivering 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 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
›
exploration success – no assurance can be given that exploration expenditure will result in future profitable operating mines.
28 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
DIRECTORS’ REPORTD I V I D E N D S
No dividend has been paid or declared by the Company up to the date of this report.
S I G N I F I C A N T C H A N G E S I N T H E S TAT E O F A F FA I R S
Other than as disclosed elsewhere in this report, there have been no material events that have occurred between the reporting date
and the date of signing this report.
L I K E LY D E V E LO P M E N T S
The Company will continue to pursue maximising free cashflow and increasing operating margins from its Mount Monger and
Deflector operations. This will include directing exploration expenditure to high priority, cash generating projects.
E N V I R O N M E N TA L R E G U L AT I O N S A N D P E R F O R M A N C E
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 significant
breach of those environmental requirements.
I N D E M N I F I C AT I O N A N D I N S U R A N C E O F D I R E C T O R S A N D O F F I C E R S
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 the improper use of position, or committing of any
criminal, dishonest, fraudulent or malicious act.
During the financial year the Company has paid Directors’ & Officers’ insurance premiums in respect of liability of any current and
future Officers, and senior executives of the Company. The contract of insurance prohibits disclosure of the nature of the liability
and the amount of the premium.
Silver Lake has not provided any insurance or indemnity to the auditor of the Company.
P R O C E E D I N G S O N B E H A L F O F T H E C O M PA N Y
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.
C O R P O R AT E G O V E R N A N C E
In recognising the need for appropriate standards of corporate behaviour 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.
S U B S E Q U E N T E V E N T S
In July 2019 the Company announced that it had entered into an off market takeover bid for Egan Street Resources Limited (EGA)
pursuant to which Silver Lake will acquire all of the issued and outstanding ordinary shares of EGA.
Under the terms of the takeover bid, each EGA shareholder will receive 0.27 Silver Lake shares for every EGA share held, which on the
announcement date, implied a $52 million total transaction enterprise value. The EGA Board of Directors have recommended that their
shareholders accept the offer in the absence of a superior proposal.
The takeover bid is subject to a number of customary conditions including the acceptance by EGA shareholders. Full details of the
offer can be found in the ASX announcement “Silver Lake Recommended Takeover Offer for Egan” dated 30 July 2019.
No other events have arisen in the interval between the end of the financial year and the date of this report 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 2019 | 29
DIRECTORS’ REPORTR E M U N E R AT I O N R E P O RT – A U D I T E D
This report outlines the remuneration arrangements in place for both Executives and Non-executive Directors of Silver Lake Resources Limited.
C O N T E N T S:
1. Basis of preparation
2. Key management personnel (KMP)
3. Remuneration snapshot
4. Remuneration governance
5.
6.
FY19 Executive remuneration
FY19 Non-executive director (NED) remuneration
7. KMP Shareholdings
1. B A S I S O F P R E PA R AT I O N
This remuneration report has been prepared and audited in accordance with the requirements of the Corporations Act 2001 and the
applicable accounting standards. All references to dollars in this remuneration report are to Australian Dollars unless otherwise specified.
2. K E Y M A N A G E M E N T P E R S O N N E L
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.
A list of all NEDS and Executives for FY19 is set out below:
Name
Position
Term as KMP
David Quinlivan
Non-executive Chairman
Luke Tonkin
Managing Director
Peter Alexander1
Non-executive Director
Les Davis
Non-executive Director
Kelvin Flynn
Non-executive Director
Leigh Junk1,3
Non-executive Director
Brian Kennedy2
Non-executive Director
David Berg
General Counsel & Company Secretary
Diniz Cardoso
Chief Financial Officer
Steven Harvey
General Manager Mount Monger Operations
Antony Shepherd
Exploration & Geology Manager
1Appointed to the Board following the merger with Doray Minerals Limited
2Resigned on 23 October 2018
3Resigned on 12 July 2019
3. R E M U N E R AT I O N S N A P S H O T
FY19 Remuneration in review
Full year
Full year
Part year
Full year
Full year
Part year
Part year
Full year
Full year
Full year
Full year
During the year the Company continued its focus on delivering new ore sources that sustain and enhance margins to drive shareholder
returns. Highlights for the year from this strategy included:
›
›
›
›
›
production of 166,695 ounces gold equivalent, a 6% increase on FY18;
cash & bullion increased 24% to $130.7 million at 30 June with no debt;
commenced production at Harrys Hill - the first mine within the newly established Aldiss Mining Centre;
completed the acquisition of Doray Minerals Limited on 5 April 2019; and
strong results from the FY19 exploration campaign with near term targets that have the potential to enhance the production and
margin profile of the Group.
30 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
DIRECTORS’ REPORTFurther information on the link between company performance and KMP remuneration can be found in section 5(g).
The Board believes that the Company’s remuneration framework is aligned with market practice and that Executive remuneration
in FY19 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
No change to fixed remuneration structure.
Short-term incentive (STI)
During the year the NRC conducted a review of the variable components of KMP remuneration
to ensure these remain competitive against peer companies to assist with the retention and
attraction of key talent.
The review resulted in an amendment to the STI opportunity for Executives (other than the
Managing Director) with the revised STI opportunity increasing from a maximum 30% of base
salary to 50% of total fixed remuneration (TFR).
STI awards under this new policy will be paid to Executives in line with their performance against
set targets. Further information on STI payments is included in Section 5(c) of this report.
Long-term incentive (LTI)
As part of the above review, the NRC also adjusted the LTI opportunity for KMP as follows:
›
›
Managing Director - maximum LTI opportunity amended from 75% of base salary to 100% of TFR
Other Executives - maximum LTI opportunity amended from 30% of base salary to 100% of TFR
LTI awards under this new policy were made to Executives during FY19, with 1,233,645
performance rights granted to the Managing Director and a further 1,689,590 performance
rights granted to other KMP’s. These performance rights were granted on the terms approved by
shareholders at the 2018 AGM and described in Section 5(d) of this report.
4. R E M U N E R AT I O N G O V E R N A N C E
a. Board and Nomination & Remuneration Committee responsibility
The Nomination & Remuneration Committee is a subcommittee of the Board. It assists the Board to ensure that the Company
develops and implements remuneration policies and practices that are appropriate for a company of the nature, size and standing
of the Company.
The Nomination & Remuneration Committee is responsible for making recommendations to the Board on:
›
›
›
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 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 remuneration annually using external
independent industry reports and data to ensure that remuneration levels are competitive and meet the objectives of the Company.
d. 2018 AGM voting outcome and comments
The Company received more than 94% votes in favour of the adoption of its Remuneration Report for the 2018 financial year.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 31
DIRECTORS’ REPORT5. F Y19 E X E C U T I V E R E M U N E R AT I O N
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;
Variable remuneration in the form of short-term incentives (STI) and long-term incentives (LTI).
The table below provides a summary of the structure of executive remuneration:
Fixed Remuneration
Variable Remuneration
›
›
›
Base salary
Superannuation
Other benefits
›
›
STI (Cash Bonuses)
LTI (Performance Rights)
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 FY19 total remuneration packages split between the fixed
and variable remuneration is shown below:
Target remuneration mix
Target LTI
40%
Fixed
Remuneration
40%
Target STI
20%
b. Fixed remuneration
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 approximately the 50th percentile
of the industry benchmark AON McDonald Report (an independent, industry recognised report on the gold and mining industry). 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.
32 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
DIRECTORS’ REPORTIndividuals Executives’ base salaries for the 2019 financial year were:
Executive
Luke Tonkin
David Berg
Diniz Cardoso
Steven Harvey
Antony Shepherd
Base Salary
FY191
Base Salary
FY181
Movement
$665,600
$298,900
$317,200
$300,000
$260,400
$640,000
$291,300
$304,500
-
$253,750
4%
3%
4%
Note2
3%
1Base Salary as at 30 June of each respective year
2Steven Harvey classified as a KMP from 1 July 2018 following his appointment as General Manager Mount Monger Operations
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. The target opportunity
for KMP is 50% of TFR.
Each year the Nomination & Remuneration Committee, in conjunction with the Board, set KPI targets for Executives. Ordinarily, the
KPIs would include measures relating to the Group and the individual, and include environmental, health & safety, financial, production,
exploration, business development and company performance measures.
FY19 Performance against STI measures
A summary of the KPI targets set for FY19 and their respective weightings is as follows:
KPI*
Weighting Measure
1. Safety/Environment
2. Production
3. Costs
4. Cash generation
5. Exploration & Resource Development
6. Business Development
7. Company Performance
*Not all of the above KPIs were assigned to all Executives
13%
35%
16%
8%
8%
10%
10%
›
›
›
Lagging EH&S indicators
Environmental management effectiveness
Safety management effectiveness
Production from each operating site versus FY19 Stretch Target
Costs for each cost centre versus FY19 Stretch Target
Free cash flow from operations versus FY19 Stretch Target
Execution and success of FY19 Exploration Strategy
Execution and success of Business Development Strategy
TSR performance against comparator group
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 33
DIRECTORS’ REPORTIn assessing KMP performance against the KPI targets during the year, the Committee considered the following achievements against
objectives set at the start of the year:
›
›
›
›
›
›
›
›
›
›
achieving OH&S objectives;
achieving environmental objectives;
achieving FY19 sales guidance;
exceeding the targeted end of year cash and bullion balance;
successful completion of the Doray Minerals transaction;
commencement of production at Harrys Hill - the first mine within the newly established Aldiss Mining Centre;
successful targeted and phased exploration strategy resulting in an extension to the life of mine of the Mount Monger Operation;
managing a transparent, effective hedging strategy to secure future revenue streams;
delivery of positive exploration results from infill and extensional resource definition drilling to allow further mines to enter
production in future periods; and
Company TSR performance against the comparator group.
Based on the above assessment, STI payments for FY19 to Executives were as follows:
Executive
Luke Tonkin
David Berg
Diniz Cardoso
Steven Harvey
Antony Shepherd
Maximum STI
opportunity
50% of TFR
50% of TFR
50% of TFR
50% of TFR
50% of TFR
% STI awarded
STI awarded
80.5%
80.5%
80.5%
43.6%
80.5%
$300,000
$133,210
$139,772
$71,613
$114,748
d. Long-term incentive (LTI) arrangements
The Board has established the Employee Incentive Plan (Incentive Plan) as a means for motivating senior employees to pursue the
long term growth and success of the Company. The Incentive Plan provides the Company with the flexibility to issue incentives in
the form of either options or performance rights which may ultimately vest and be converted into shares on exercise, subject to
satisfaction of any relevant vesting conditions. The Incentive Plan was approved by shareholders at the 2018 AGM.
Key features of the Incentive Plan
Under the terms of the Incentive Plan, the Board may determine which employees are eligible to participate. The number of
Performance Rights awarded is calculated by dividing an employees’ maximum LTI opportunity by the 20 day VWAP of the Company
shares as traded on the ASX up to 30 June of each respective year. Performance Rights which are granted will not vest (and therefore
will lapse) 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 paid. The NRC believes that a single hurdle is appropriate as it is transparent, simple
to administer and directly links Executive remuneration to the Company’s share price relative to its peers.
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 TSR metric measures the share price movement and dividends over this period for both the Company
and the comparator group. The Performance Rights will vest based on the Company’s relative TSR ranking on the relevant vesting
date as follows:
Relative TSR Performance
Less than 50th percentile
Vesting Outcome
0% vesting
Between the 50th percentile and 75th percentile
Pro rata straight line from 50% to 100%
At or above the 75th percentile
100% vesting
Relative TSR performance is calculated at a single point in time and is not subject to re-testing. The comparator group of companies
for Performance Rights on issue is listed in the table on page 35.
At the discretion of the Board, the composition of the comparator group may change from time to time.
Performance rights granted under the Incentive Plan will have no exercise price.
Unless the Board in its absolute discretion determines otherwise, all unvested performance rights will lapse 30 days following the
cessation of employment. The Board will take into account the circumstances surrounding the cessation of employment before
deciding whether to make any such determination.
34 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
DIRECTORS’ REPORTFY19 LTI outcomes
During the year the Company issued 2,923,235 Performance Rights to KMP in respect of the LTI component of their FY19
remuneration. The quantum of Performance Rights issued was determined by reference to the 20 day VWAP to 30 June 2018 of $0.58.
Executive
Luke Tonkin
David Berg
Diniz Cardoso
Steven Harvey
Antony Shepherd
Maximum LTI opportunity
Number of Performance
Rights granted during FY19
Fair value per
Performance Right*
100% of TFR
100% of TFR
100% of TFR
100% of TFR
100% of TFR
1,233,645
548,968
573,844
88,574
478,204
$0.439
$0.439
$0.439
$0.439
$0.439
*Independently valued using a hybrid share option pricing model
Performance Rights
During the year the Company issued 4,059,807 Performance Rights to employees (including 2,923,235 Performance Rights to KMP) in
respect of the LTI component of their FY19 remuneration.
Key Management
Person
Balance at
1 July 2018
Granted in
FY19
Converted
Lapsed
Balance at
30 June
2019
Vested &
exercisable at
30 June 2019
Luke Tonkin
David Berg
Diniz Cardoso
Steven Harvey
4,322,073
1,233,645
(2,243,883)
(294,446)
3,017,389
773,225
722,484
548,968
(373,980)
573,844
(311,152)
-
88,574
-
(49,075)
(40,830)
-
899,138
944,346
88,574
859,899
171,079
183,299
-
Antony Shepherd
708,775
478,204
(359,021)
(47,112)
780,846
146,640
Total
6,526,557
2,923,235
(3,288,036)
(431,463)
5,730,293
1,360,917
The total expense recognised in the Statement of Profit or Loss for all Executives’ Performance Rights for the period ended 30 June
2019 was $825,523.
Details of the performance rights currently on issue are summarised in the following table:
Number of performance rights
Exercise price
Grant date
Vesting period
ASX Comparator Group
FY17 Award
FY18 Award
FY19 Award
1,627,8561
$0.00
1 July 2016
1,750,594
$0.00
1 July 2017
4,059,807
$0.00
1 July 2018
1 July 2016 –30 June 2019
1 July 2017 – 30 June 2020
1 July 2018 – 30 June 2021
EVN; GOR; IGO; KCN;
MML; NST; OGC; RMS;
RRL; SAR; SBM; TAM
AQG; BDR; EVN; MML;
MOY; NCM; NST; OGC;
PRU; RMS; RRL; RSG;
SAR; SBM; TRY; WGX
AQG; DCN; EVN; MML; MOY;
NCM; NST; OGC; PRU; RMS;
RRL; RSG; SAR; SBM; WGX
Valuation at grant date
Underlying 20 day VWAP
Volatility
Risk free rate
Expected dividends
FY17 Award
FY18 Award
FY19 Award
$0.247
$0.491
20%
1.52%
-
$0.257
$0.481
20%
1.94%
-
$0.439
$0.581
70%
2.07%
-
Note 1: On completion of the vesting period 83% of the FY17 Performance Rights (1,627,856 rights) had vested in accordance with the relative TSR hurdle attached to
them. This included 1,360,917 rights awarded to KMP’s
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 2019 | 35
DIRECTORS’ REPORTe. Service agreements
A summary of the key terms of service agreements for Executives in FY19 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
Luke Tonkin
David Berg
Diniz Cardoso
Steven Harvey
Antony Shepherd
Term of Agreement
Notice Period by
Executive
Notice Period by
Silver Lake Termination Payment
Open
Open
Open
Open
Open
6 months
6 months
6 months
9 weeks
3 months
6 months
6 months
6 months
12 months TFR
6 months TFR
6 months TFR
9 weeks
As per Legislation
3 months
6 months TFR
f. Executive remuneration paid
Fixed Remuneration
Variable Remuneration
Salary &
Fees
Other
Benefits1
Superannuation
STI Cash
Payments
Options/
Rights2
$
$
$
$
$
Performance
Related
Remuneration
%
Total
$
Executive
Luke Tonkin
Diniz Cardoso
Year
2019
2018
2019
2018
683,123
647,981
304,265
286,707
Antony Shepherd
2019
245,789
David Berg
Steve Harvey
2018
2019
2018
2019
2018
255,143
284,354
285,391
297,774
-
72,908
69,943
24,155
23,337
19,903
19,447
23,042
22,325
23,077
-
25,000
300,000
330,464
1,411,495
24,884
270,700
243,013
1,256,521
25,000
139,772
115,101
608,293
24,247
77,300
39,811
451,402
24,580
114,748
95,415
500,435
24,010
64,500
35,455
398,555
25,000
133,210
109,760
575,366
24,392
28,500
-
74,000
39,863
445,971
71,613
12,961
433,925
-
-
-
Total
2019
1,815,305
163,085
128,080
759,343
663,701
3,529,514
2018
1,475,222
135,052
97,533
486,500
358,142
2,552,449
1Represents contractual entitlements (including termination and retirement benefits), annual leave and long service leave entitlements, measured on an accrual basis
2These are accounting adjustments and have not actually been paid during the year
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 metrics in respect of the
current and previous financial years.
Cash and bullion ($m)
Profit/(loss) after tax ($m)
Cash from operating activities ($m)
Closing share price at 30 June
*Includes impairments on inventories and other non-current assets
2019
130.7
6.5
71.8
$1.26
2018
105.7
16.2
80.8
$0.60
2017
2016
69.1
2.0
64.0
42.6
4.4
55.0
$0.47
$0.52
2015
28.9
(94.0)*
29.5
$0.14
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 and crystallise value from its
non-core assets.
36 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
45
41
42
26
24
25
42
26
19
-
40
33
DIRECTORS’ REPORT6. F Y19 N O N-E X E C U T I V E D I R E C T O R (N E D) R E M U N E R AT I O N
a. NED remuneration policy
The Company’s policy is to remunerate NEDs at market rates (for comparable ASX listed companies) for time, commitment and
responsibilities. Fees for NEDs are not linked to the performance of the Company.
It is ensured that:
a.
fees paid to NEDs are within the aggregate amount approved by shareholders at the Company’s Annual General Meeting;
b. NEDs are remunerated by way of fees (in the form of cash and superannuation benefits);
c. NEDs are not provided with retirement benefits other than statutory superannuation entitlements; and
d. NEDs are not entitled to participate in equity-based remuneration schemes designed for executives without due consideration
and appropriate disclosure to the Company’s shareholders.
Fees paid to NEDs cover all activities associated with their role on the Board and any sub-committees. No additional fees are paid to
NEDs for being a Chair or Member of a sub-committee. However, NEDs are entitled to fees or other amounts as the Board determines
where they perform special duties or otherwise perform extra services on behalf of the Company. They may also be reimbursed for out
of pocket expenses incurred as a result of their Directorships.
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.
FY19 NED fees
NED
David Quinlivan
Peter Alexander
Les Davis
Kelvin Flynn
Leigh Junk3
Brian Kennedy4
Fees FY191
Fees FY181
Movement
$173,750
$26,538
$115,000
$115,000
$26,538
$38,480
$173,750
-
-
Refer Note2
$115,000
$115,000
-
-
-
Refer Note2
$115,000
-
1Fees excluding superannuation as at 30 June of each respective year
2Appointed to the Board on 5 April 2019 following the Company’s merger with Doray Minerals Limited
3Mr Junk resigned from the Board on 12 July 2019
4Mr Kennedy resigned from the Board on 23 October 2018
There were no changes to NED fees during the current financial year. Subsequent to year end, Mr Quinlivan’s fee increased to $200,000
per annum.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 37
DIRECTORS’ REPORTc. NED fees paid
Details of the remuneration of each NED for the year ended 30 June 2019 is set out in the following table:
Short Term
Base Emolument
$
Post-employment
Superannuation benefits
$
David Quinlivan
2019
Non-executive Chairman
2018
Peter Alexander
Non-executive Director
Les Davis
Non-executive Director
Kelvin Flynn
Non-executive Director
Leigh Junk
Non-executive Director
Brian Kennedy
Non-executive Director
Total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
7. K M P S H A R E H O L D I N G S
173,750
173,750
26,538
-
115,000
115,000
115,000
115,000
26,538
-
38,480
115,000
495,306
518,750
16,506
16,506
2,521
-
10,925
10,925
10,925
10,925
2,521
-
3,656
10,925
47,054
49,281
Total
$
190,256
190,256
29,059
-
125,925
125,925
125,925
125,925
29,059
-
42,136
125,925
542,360
568,031
Balance at
1 July 2018 Acquired
Other
Conversion of
Performance Rights
Key Management
Person
David Quinlivan
Luke Tonkin
Peter Alexander1
Les Davis
Kelvin Flynn
Leigh Junk1
Brian Kennedy2
David Berg
Diniz Cardoso
Steven Harvey
Antony Shepherd
Total
-
270,000
-
1,000,000
-
-
4,790,746
10,416
500,000
-
-
6,571,162
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,165
-
-
3,792,320
(4,790,746)
-
-
-
-
Balance at
30 June 2019
-
Sold
-
-
2,243,883
(1,055,766)
1,458,117
-
-
-
-
-
373,980
311,152
-
-
-
-
-
-
-
-
-
18,165
1,000,000
-
3,792,320
-
384,396
811,152
-
359,021
(168,000)
191,021
(980,261)
3,288,036
(1,223,766)
7,655,171
1Mr Alexander and Mr Junk were appointed to the Board on 5 April 2019 following the Company’s merger with Doray Minerals Limited. Shareholdings on the merger
date are disclosed as “Other” in the table
2Mr Kennedy resigned from the Board on 23 October 2018. The balance disclosed as “Other” represents his final interest in the Company on this date
A U D I T O R’S I N D E P E N D E N C E
Section 307C of the Corporations Act 2001 requires Silver Lake’s auditors, KPMG, to provide the Directors with an Independence
Declaration in relation to the audit of the financial report for the year ended 30 June 2019. This Independence Declaration is attached
to the Directors’ Report and forms a part of the Directors’ Report.
38 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
DIRECTORS’ REPORT
N O N-A U D I T S E R V I C E S
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
Directors’ Declaration
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.
1. In the opinion of the Directors:
a) the consolidated financial statements and notes of the Group and the Remuneration Report in the
Details of the amounts paid to the auditor of the Group, KPMG, for audit and non-audit services provided during the year are set out below:
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 2019 and of its
performance for the year then ended; and
Audit services
ii) Complying with Australian Accounting Standards and Corporations Regulations 2001;
Audit and review of financial statements
240,000
b) the financial statements also comply with International Financial Reporting Standards as disclosed
2019
$
2,500
Other audit services
in Note 1;
Non-audit services
c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when
Taxation services
they become due and payable; and
50,115
Accounting advisory services
Total paid
d) 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
Corporations (wholly owned companies) Instruments 2016/785.
307,615
15,000
2018
$
112,824
2,500
28,129
-
143,453
R O U N D I N G O F F
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 2019.
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in
accordance with that Instrument, all financial information has been rounded off to the nearest thousand dollars, unless otherwise
stated.
The declaration is signed in accordance with a resolution of the Board of Directors.
The Directors’ Report is signed in accordance with a resolution of the Directors.
Luke Tonkin
Luke Tonkin
Managing Director
Managing Director
27 August 2019
27 August 2019
28 | P a g e
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 39
DIRECTORS’ REPORT
Directors’ Declaration
1. In the opinion of the Directors:
DIRECTORS’ DECLARATION
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 2019 and of its
performance for the year then ended; and
ii) Complying with Australian Accounting Standards and Corporations Regulations 2001;
In the opinion of the Directors:
1.
a.
b) the financial statements also comply with International Financial Reporting Standards as disclosed
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:
in Note 1;
i.
c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when
Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the year
then ended; and
they become due and payable; and
ii. Complying with Australian Accounting Standards and Corporations Regulations 2001;
c.
d) there are reasonable grounds to believe that the Company and the Group entity identified in Note
the financial statements also comply with International Financial Reporting Standards as disclosed in Note 1;
b.
35 will be able to meet any obligations or liabilities to which they are or may become subject to by
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
virtue of the Deed of Cross Guarantee between the Company and that Group entity pursuant to ASIC
and payable; and
Corporations (wholly owned companies) Instruments 2016/785.
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 Corporations (wholly owned companies) Instruments 2016/785.
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 2019.
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 2019.
d.
The declaration is signed in accordance with a resolution of the Board of Directors.
The declaration is signed in accordance with a resolution of the Board of Directors.
Luke Tonkin
Luke Tonkin
Managing Director
Managing Director
27 August 2019
27 August 2019
28 | P a g e
40 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
AUDITOR’S INDEPENDENCE DECLARATION
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Silver Lake Resources Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Silver Lake Resources
Limited for the financial year ended 30 June 2019 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Derek Meates
Partner
Perth
27 August 2019
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 41
Independent Auditor’s Report
To the shareholders of Silver Lake Resources Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of Silver
Lake Resources Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance with the
Corporations Act 2001, including:
• Giving a true and fair view of the Group’s
financial position as at 30 June 2019 and of
its financial performance for the year ended
on that date; and
•
Complying with Australian Accounting
Standards and the Corporations Regulations
2001.
Basis for opinion
The Financial Report comprises:
• Consolidated statement of financial position as
at 30 June 2019
• Consolidated statement of profit or loss and
other comprehensive income, Consolidated
statement of changes in equity, and
Consolidated statement of cash flows for the
year then ended
• Notes including a summary of significant
accounting policies
• Directors’ Declaration.
The Group consists of the Company and the
entities it controlled at the year-end or from time to
time during the financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
•
•
Acquisition of Doray Minerals Limited; and
Value of Goodwill.
Key Audit Matters are those matters that, in our
professional judgement, were of most significance
in our audit of the Financial Report of the current
period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide
a separate opinion on these matters.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
42 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
INDEPENDENT AUDIT REPORT
Acquisition of Doray Minerals Limited ($260.615 million)
Refer to Note 3 to the financial report
The key audit matter
How the matter was addressed in our audit
The Group’s acquisition of Doray Minerals Limited
(Doray) on 5 April 2019 for total consideration of
$260.615 million represents a significant
transaction for the Group. This was a key audit
matter due to the:
•
•
Size of the acquisition having a pervasive
impact on the financial statements; and
Significant judgements made by the Group
relating to the purchase price allocation (PPA).
The Group engaged an external expert to
assist in performing a valuation report on the
identification and measurement of acquired
assets and liabilities. We focussed on the
significant assumptions the Group applied in
their assessment of the allocation of purchase
consideration to property, plant and
equipment, mineral interests, the rehabilitation
provision and goodwill.
For mineral interests significant assumptions
applied in the determination of fair value
included:
•
Forecast sales, production output,
production costs and capital expenditure
Forecast gold prices
•
• Discount rate
•
•
Life of mineral reserves
Resource multiples applied and resource
conversion factors.
For property, plant and equipment this included the
methodology applied to each class of assets and
the useful lives of assets acquired.
For rehabilitation this included the quantum and
expected timing of rehabilitation expenditure which
is planned to occur several years into the future,
and the associated inflation and discounting of
costs in the present value calculation of the
provision. The Group used external and internal
experts when assessing their obligations for
restoration and rehabilitation activities and
associated estimates of future costs.
Our procedures included:
• We read the Scheme of Arrangement related
to the acquisition to understand the structure,
key terms and conditions, and nature of
purchase consideration. Using this, we
evaluated the accounting treatment of the
purchase consideration and transaction costs
against the criteria in the accounting
standards.
• We assessed the scope, competence and
objectivity of the Group’s external expert
involved in estimating the PPA.
• We read the external valuation report and
worked with our valuation specialists to
assess and challenge the key assumptions
used in the PPA. We challenged the Group’s
approach and methodology to valuing the
identified property, plant and equipment,
mineral interest and goodwill by comparing to
accepted industry practice and the
requirements of the accounting standards.
Valuation of mineral interest
• We assessed key assumptions (including
forecast sales, production output, production
costs and capital expenditure) using Doray’s
past performance, their underlying mine plans
and our industry experience.
• We compared forecast commodity prices to
published views of market commentators on
future trends.
• Working with our valuation specialists, we
independently developed a discount rate range
considered comparable, using publicly
available market data for comparable entities.
• We assessed the scope, competence and
objectivity of the Group’s external expert
involved in the estimation process of mineral
reserves.
• We compared the life of mineral reserves in
the valuation to the Reserves statement for
consistency, in particular to application across
production assumptions.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 43
INDEPENDENT AUDIT REPORT
These conditions and associated complex
acquisition accounting required significant audit
effort and greater involvement by senior team
members and our valuation specialists.
• We assessed the reasonableness of resource
multiples applied by comparing them to recent
transactions. We compared the resource
conversion factors to historical resource
conversion.
Valuation of property, plant and equipment
• Working with our valuation specialists, we
assessed the valuation methodologies applied
to each class of property, plant and
equipment, and assessed the useful lives of a
sample of assets acquired, against Doray’s
underlying mine plan and using our industry
experience.
Rehabilitation provision
•
•
•
•
Assessed the scope, competence and
objectivity of the Group’s external and internal
experts involved in the estimation process.
Evaluated the Group’s determination of future
required activities, their timing and associated
cost estimates by obtaining the latest third
party expert reports as well as internal and
external underlying documentation and
comparing this to our understanding of
Doray’s operations.
Assessing the planned timing of restoration
and rehabilitation activities through
comparison to mine plans and reserve and
resource statements.
Compared inflation rate and discount rate
assumptions in the Group’s provision
determination to current market data,
including economic forecasts.
• We assessed the Group’s disclosures of the
quantitative and qualitative considerations in
relation to the business acquisition, by
comparing these disclosures to our
understanding of the acquisition and the
requirements of the accounting standards.
44 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
INDEPENDENT AUDIT REPORTValue of Goodwill ($90.695 million)
Refer to Note 3 and Note 18 to the financial report
The key audit matter
How the matter was addressed in our audit
As disclosed in Note 3 to the financial report, the
Group made a significant acquisition of Doray
Minerals Limited (Doray) during the year which
resulted in the recognition of $90.695 million of
goodwill.
Our procedures included:
• We considered the appropriateness of the
Group’s use of the fair value less costs of
disposal methodology against the
requirements in the accounting standards.
A key audit matter for us was the Group’s testing
of goodwill, given the size of the balance (being
16% of total assets). We focussed on the
significant forward-looking assumptions the Group
applied in their fair value less costs of disposal
models, including:
•
Forecast sales, production output, production
costs and capital expenditure
Forecast gold prices
•
• Discount rate, and
•
Life of mineral reserves.
The Doray acquisition also necessitated our
consideration of the Group’s allocation of goodwill
to the CGUs to which they belong based on the
management and monitoring of the business and
the requirements of the accounting standards.
We involved valuation specialists to supplement
our senior audit team members in assessing this
key audit matter.
• Using our valuation specialists, we assessed
the integrity of the fair value less costs of
disposal model used, including the accuracy of
the underlying calculation formulas.
• We evaluated the sensitivity of the valuation
of goodwill by considering reasonably possible
changes to the key assumptions, such as
forecast gold prices, forecast production costs
and the discount rate. We did this to identify
those assumptions at higher risk of bias or
inconsistency in application and to focus our
further procedures.
• We assessed the accuracy of previous Group
budgets by comparing to actual results to
determine the reasonability of forecasts
incorporated in the model. We noted previous
trends and evaluated their impact on current
forecasts including sensitivities.
• We compared the forecast cash flows
contained in the fair value less costs of
disposal models to Board approved forecasts.
• We assessed key assumptions underlying the
discounted cash flows in the fair value less
costs of disposal methodology (including
forecast sales, production output, production
costs and capital expenditure) using our
knowledge of the Group, their past
performance, and our industry experience.
• We compared forecast commodity prices to
published views of market commentators on
future trends.
• We assessed the scope, competence and
objectivity of the Group’s external expert
involved in the estimation process of mineral
reserves.
• We compared the life of mineral reserves in
the model to the Reserves statement for
consistency, in particular to application across
production assumptions.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 45
INDEPENDENT AUDIT REPORT• Working with our valuation specialists, we
independently developed a discount rate range
considered comparable, using publicly
available market data for comparable entities.
• We analysed the impact of the acquisition of
Doray during the year on the Group’s internal
reporting to assess the Group’s monitoring
and management of activities, and the
allocation of goodwill to CGUs. We also
assessed the basis and methodology of
allocating goodwill against the requirements of
the accounting standards.
• We assessed the disclosures in the financial
report and against the requirements of the
accounting standards.
Other Information
Other Information is financial and non-financial information in Silver Lake Resources Limited annual
reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Director’s Report.
The Chairman and Managing Director’s Report, Project Report, Exploration Report, Reserves &
Resources report and ASX additional information are expected to be made available to us after the date
of the Auditor’s Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report
or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date
of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
•
•
•
Preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001.
Implementing necessary internal control to enable the preparation of a Financial Report that gives a
true and fair view and is free from material misstatement, whether due to fraud or error.
Assessing the Group and Company’s ability to continue as a going concern and whether the use of
the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless they either intend
to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do
so.
46 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
INDEPENDENT AUDIT REPORTAuditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
To obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
To issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of Silver
Lake Resources Limited for the year ended 30
June 2019, complies with Section 300A of the
Corporations Act 2001.
The Directors of the Company are responsible for
the preparation and presentation of the
Remuneration Report in accordance with Section
300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included
in Directors’ report for the year ended 30 June 2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
KPMG
Derek Meates
Partner
Perth
27 August 2019
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 47
INDEPENDENT AUDIT REPORT
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
Revenue
Cost of sales
Gross profit
Other income
Profit on sale of assets
Exploration expensed
Administrative expenses
Results from operating activities
Finance income
Finance expenses
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
Total comprehensive profit for the year
Basic profit per share
Diluted profit per share
30 June
2019
$’000
301,514
(272,085)
29,429
-
153
(2,355)
(18,643)
8,584
1,221
(3,305)
(2,084)
6,500
-
6,500
30 June
2018
$’000
255,573
(225,863)
29,710
186
30
(2,663)
(6,835)
20,428
580
(4,822)
(4,242)
16,186
-
16,186
6,500
16,186
Cents Per
Share
Cents Per
Share
1.12
1.11
3.21
3.16
Notes
4
5
15
6
8
9
10
10
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 2019
FOR THE YEAR ENDED 30 JUNE 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
A S AT 30 J U N E 2019
30 June
2019
$’000
125,073
4,497
49,661
630
30 June
2018
$’000
97,959
2,067
27,740
150
179,861
127,916
1,868
217,600
75,950
6,591
90,695
392,704
572,565
53,650
284
3,722
57,656
431
40,260
40,691
98,347
1,868
79,588
37,366
8,140
-
126,962
254,878
30,033
-
2,013
32,046
-
16,450
16,450
48,496
474,218
206,382
960,075
2,475
(488,332)
474,218
699,564
1,650
(494,832)
206,382
Notes
11
13
14
14
15
16
17
3,18
19
20
21
20
23
24
25
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Total current assets
Non-current assets
Inventories
Exploration evaluation and development expenditure
Property, plant and equipment
Investments
Goodwill
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Finance lease
Employee benefits
Total current liabilities
Non-current liabilities
Finance lease
Rehabilitation and restoration provision
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
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 2019 | 49
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share Capital
Share Based
Payment Reserve
Accumulated
Losses
Balance at 1 July 2017
Notes
$’000
699,564
$’000
1,220
$’000
(511,018)
189,766
Total
Equity
$’000
Total comprehensive profit for the year
Transactions with owners, recorded directly
in equity
Equity settled share based payments
25
Balance at 30 June 2018
-
-
699,564
-
16,186
16,186
430
1,650
-
430
(494,832)
206,382
Share Capital
Share Based
Payment Reserve
Accumulated
Losses
Balance at 1 July 2018
Total comprehensive profit for the year
Transactions with owners, recorded directly
in equity
Issue of securities (net of costs)
Equity settled share based payments
Balance at 30 June 2019
Notes
24
25
$’000
699,564
-
260,511
-
960,075
$’000
1,650
-
-
825
2,475
Total
Equity
$’000
$’000
(494,832)
206,382
6,500
6,500
-
-
260,511
825
(488,332)
474,218
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 2019
FOR THE YEAR ENDED 30 JUNE 2019CONSOLIDATED STATEMENT OF CASH FLOWS
30 June
2019
$’000
302,148
(230,318)
71,830
1,221
(8,084)
13,333
47
(2,906)
1,314
(49,605)
(44,680)
-
(36)
(36)
27,114
97,959
125,073
30 June
2018
$’000
262,950
(182,147)
80,803
580
(10,009)
-
30
(498)
1,500
(33,440)
(41,837)
(2,125)
(78)
(2,203)
36,763
61,196
97,959
Notes
12
8
16
3
17
11
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
Cash from acquisition of subsidiary
Proceeds from sale of plant and equipment
Acquisition of investments
Proceeds from divestments
Payments for exploration, evaluation and development
Net cash used in investing activities
Cash flows from financing activities
Stamp duty paid
Interest paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
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 2019 | 51
FOR THE YEAR ENDED 30 JUNE 20191.
B A S I S O F P R E PA R AT I O N
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 2019 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 27 August 2019. 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
assets and liabilities acquired as part of the merger with Doray Minerals Limited, which have been measured at fair value
(refer Note 3).
The Group has adopted AASB 9 Financial Instruments and AASB 15 Revenue from contracts with customers from 1 July 2018 with
neither standard having a material effect on the Group’s financial statements. Due to the transition methods chosen by the Group in
applying these standards, comparative information has not been restated to reflect the requirements of the new standards.
Other than the adoption of new standards, 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.
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in
accordance with that Instrument, all financial information has been rounded off to the nearest thousand dollars, unless otherwise stated.
A. F U N C T I O N A L A N D P R E S E N TAT I O N C U R R E N C Y
These consolidated financial statements are prepared in Australian dollars, which is the functional currency of the Company
and its subsidiaries.
B. U S E O F J U D G E M E N T S A N D E S T I M AT E S
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 3 Acquisition of Subsidiary – fair value of the consideration transferred, and fair value of the assets acquired and liabilities
assumed, measured on a provisional basis
Note 9 Income Tax – recognition of deferred tax assets
Note 15 Exploration, evaluation and development expenditure carried forward – consideration of impairment triggers and
recognition of impairment losses
Note 15 Amortisation of development expenditure – estimation of future mineable inventory and future development expenditure
when calculating units of production amortisation
Note 15 Reserves and Resources – estimating reserves and resources
Note 18 Impairment testing of goodwill – key assumptions underlying recoverable amounts
Note 23 Closure and rehabilitation – measurement of provision based on key assumptions
52 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019C. B A S I S F O R C O N S O L I D AT I O N
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.
D. M E A S U R E M E N T O F FA I R VA LU E
A number of the Group’s accounting policies and disclosures require the determination of fair value for both financial and non-financial
assets and liabilities. Fair Value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which
the Group has access at that date. The fair value of a liability reflects its non-performance risk. Fair values have been determined
for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the
assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are
categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
›
›
›
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data.
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value
measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the
entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during
which the change has occurred.
2.
S E G M E N T R E P O RT I N G
The accounting policies used by the Company in reporting segments are in accordance with the measurement principles of the
Australian Accounting Standards. Subsequent to the Company’s merger with Doray Minerals Limited on 5 April 2019, management has
determined that the Group has the following reportable segments, namely:
i. Mount Monger Operation
ii. Deflector Operation
The Group’s segments are both located in Western Australia, with the Mount Monger Operation producing gold bullion and Deflector
producing gold bullion and gold-copper concentrate.
Financial information for the reportable segments for the year ended 30 June 2019 is as follows:
Revenues
EBITDA (excluding significant items)1
Mount Monger
Deflector3
Unallocated2
$’000
246,929
67,968
$’000
54,585
22,013
$’000
-
(9,787)
Total
$’000
301,514
80,194
Capital expenditure
42,761
2,714
14,948
60,423
1A reconciliation between the statutory profit after tax and the Group’s EBITDA (excluding significant items) is tabled on page 23
2Unallocated items comprise exploration expenditure and corporate costs
3Deflector information reported is from the merger date of 5 April 2019
Comparative information for FY18 is not disclosed as the Group only had one reportable segment, the Mount Monger Operation.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 53
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS3.
A C Q U I S I T I O N O F S U B S I D I A RY
On 5 April 2019 the Group obtained control of Doray Minerals Limited (“Doray”) by acquiring 100 percent of the shares and voting
interests in that company. The merger created a new multi-asset, mid-tier gold producer with the financial strength to become a
leading growth focused gold company.
Since acquisition date, Doray contributed revenue of $54.585 million and profit after transaction costs of $1.359 million to the
Group’s results. If the acquisition had occurred on 1 July 2018, management estimates that Doray would have contributed revenue of
$170.114 million and profit after tax of $9.98 million to the Group’s annual results. In determining these amounts, management has
assumed that the fair value adjustments, determined provisionally, that arose on the date of acquisition would have been the same if
the acquisition had occurred on 1 July 2018.
The Group incurred acquisition-related costs of $8.675 million on fees associated with the merger, including legal fees, estimated
stamp duty and due diligence costs. These costs have been included in the Statement of Profit and Loss under administrative expenses.
The following summarises the consideration transferred, and the fair value of assets and liabilities acquired at the acquisition date:
Consideration transferred
Equity Instruments Issued (310,209,934 fully paid ordinary shares)
$’000
260,615
The fair value of the fully paid ordinary shares issued was based on the share price of the Company at 5 April 2019 of $0.84 per share,
being the date of acquisition.
Identifiable assets acquired and liabilities assumed
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventories
Property plant and equipment
Exploration, evaluation and development expenditure
Other assets
Trade and other payables
Employee provisions
Interest bearing liabilities
Rehabilitation provision
Total net identifiable assets
Goodwill recognised
Total consideration transferred
Fair value of identifiable net assets
Goodwill
Notes
16
15
23
$’000
13,333
2,677
763
15,629
42,205
136,359
357
(16,683)
(1,004)
(1,294)
(22,422)
169,920
$’000
260,615
(169,920)
90,695
The value of assets acquired and liabilities assumed has been measured on a provisional basis. If new information is obtained within
one year of the date of acquisition about facts and circumstances that existed at the date of acquisition, then the accounting for the
acquisition will be revised.
54 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019A C C O U N T I N G P O L I C I E S
Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired.
Any goodwill that arises is tested annually for impairment. Transaction costs are expensed as incurred, except if related to the issue of
debt or equity securities.
4.
R E V E N U E
Revenue from contracts with customers
Gold sales
Copper
Silver sales
Total
30 June
2019
$’000
296,112
4,762
640
301,514
30 June
2018
$’000
254,662
-
911
255,573
Included in current year gold sales is 98,692 ounces of gold sold (at an average price of A$1,715/ounce) under various hedge programs.
At 30 June 2019, the Company has a total of 141,350 ounces of gold left to be delivered under these programs over the next 2 years at
an average price of A$1,768/ounce.
A C C O U N T I N G P O L I C I E S
Gold bullion sales
The Group has applied AASB 15 Revenue from contracts with customers from 1 July 2018 with adoption of the standard not having
a material effect on the Group’s financial statements. Due to the transition methods chosen by the Group in applying these standards,
comparative information has not been restated to reflect the requirements of the new standards.
Under AASB 15, revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the
transfer of control requires judgement. With the sale of gold bullion, this occurs when physical bullion, from a contracted sale,
is transferred from the Company’s account into the account of the buyer.
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.
Concentrate sales
Under AASB 15, revenue is recognised upon receipt of the bill of lading when the concentrate is delivered for shipment. Contract terms
for concentrate sales allow for a final price adjustment after the date of sale, based on average market prices and final assays in the
period after the concentrate is sold. Average market prices are derived from independently published data with material adjustments
between the provisional and final price separately disclosed as other revenue. This typically occurs between 60-80 days after the initial
date of sale.
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 9 Financial Instruments
and as such all hedge revenue is recognised in the Statement of Profit or Loss and no fair value adjustments are subsequently made
to sales yet to be delivered under the hedging program.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 55
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS5.
C O S T O F S A L E S
Mining and processing costs
Amortisation
Depreciation
Salaries and on-costs
Royalties
A C C O U N T I N G P O L I C I E S
Mining and processing costs
Notes
15
16
30 June
30 June
2019
$’000
169,590
48,996
11,657
31,169
10,673
272,085
2018
$’000
133,787
53,964
10,894
18,591
8,627
225,863
This includes all costs related to mining, milling and site administration, net of costs capitalised to mine development and production
stripping. This category also includes movements in the cost of inventory and any net realisable value write downs.
Amortisation
The Group applies the units of production method for amortisation of its mine properties, which results in an amortisation charge
proportional to the depletion of the anticipated remaining life of mine production. These calculations require the use of estimates and
assumptions in relation to reserves and resources, metallurgy and the complexity of future capital development requirements. These
estimates and assumptions are reviewed annually and changes to these estimates and assumptions may impact the amortisation
charge in the Statement of Profit or Loss and asset carrying values.
The Group uses ounces mined over mineable inventory as its basis for depletion of mine properties. In the absence of reserves, the
Group believes this is the best measure as evidenced by historical conversion of resources to reserves. The Group applies applicable
factoring rates when adopting the units of production method to reflect the risk of conversion from the inferred and indicated
categories to mineable inventory.
Depreciation
Depreciation is calculated on either a reducing balance basis or on a straight-line basis over the estimated useful life of each part of
an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful life while
processing plants are depreciated on the life of the mine basis. Capital work in progress is not depreciated until it is ready for use.
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
The estimated useful lives for the current and comparative period are as follows:
Buildings
Haul roads
Plant and equipment
Office furniture and equipment
Motor vehicles
Capital work in progress is not depreciated until it is ready for use.
Period
7-10 Years
3-5 Years
3-10 Years
3-15 Years
3-5 Years
56 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 20196.
A D M I N I S T R AT I O N E X P E N S E S
Salaries and on-costs
Consultants and contractors
Professional fees
Travel and accommodation
Rental expense
Business combination expense (Note 3)
Share based payments
Other corporate costs
Total
7.
P E R S O N N E L E X P E N S E S
Wages and salaries
Other associated personnel expenses
Superannuation contributions
Total
8.
F I N A N C E I N C O M E A N D E X P E N S E S
Interest income
Finance income
Change in fair value of listed investments (Note 17)
Interest expense on interest bearing liabilities
Finance costs
Net finance costs
A C C O U N T I N G P O L I C I E S
30 June
30 June
2019
$’000
5,695
1,389
612
99
371
8,676
825
976
18,643
2018
$’000
4,823
1,102
190
138
122
-
430
30
6,835
30 June
30 June
2019
$’000
33,497
1,466
2,924
37,887
2018
$’000
21,932
1,118
1,909
24,959
30 June
30 June
2019
$’000
1,221
1,221
(3,269)
(36)
(3,305)
(2,084)
2018
$’000
580
580
(4,744)
(78)
(4,822)
(4,242)
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, unwinding of the discount on provisions and change in the value of
investments measured at fair value through the profit and loss. All borrowing costs are recognised in the Statement of Profit or Loss
using the effective interest method in the period in which they are incurred except borrowing costs that are directly attributable to the
acquisition, construction and production of a qualifying asset that necessarily takes a substantial period to get ready for its intended
use or sale. In this case, borrowing costs are capitalised as part of the qualifying asset.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 57
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS9.
TA X E S
A.
I N C O M E TA X
Current tax expense
Current income tax loss
Adjustment for prior years
Deferred income tax expense
Origination and reversal of temporary differences
Income tax expense reported in profit or loss
Numerical reconciliation between tax expenses and pre-tax profit
Profit before tax
Income tax using the corporation tax rate of 30%
Movement due to non-deductible items
Adjustment for prior years
Changes in unrecognised temporary differences
Income tax expense reported in profit or loss
B. D E F E R R E D TA X A S S E T S A N D L I A B I L I T I E S
Deferred tax assets and liabilities are attributable to the following:
Deferred tax assets/(liabilities)
Receivables
Inventories
Exploration, evaluation and mining assets
Property, plant and equipment
Accrued expenses
Provisions
Share issue costs
Tax losses
Less deferred tax asset not recognised
Net deferred tax assets
58 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
30 June
2019
$’000
-
(50)
(50)
50
-
30 June
2019
$’000
6,500
1,950
(4,221)
(50)
2,321
-
30 June
2019
$’000
2,017
(3,419)
(11,643)
4,819
975
12,291
3
162,235
167,278
(167,278)
-
30 June
2018
$’000
(359)
(5,504)
(5,863)
5,863
-
30 June
2018
$’000
16,186
4,856
(1,141)
(5,504)
1,789
-
30 June
2018
$’000
2,017
(1,732)
6,521
4,735
481
5,077
6
129,156
146,261
(146,261)
-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019A C C O U N T I N G P O L I C I E S
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 2019 the Company has $540,784,000 (2018: $430,521,000 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 2019 of $162,000,000 (2018: $129,156,000).
Tax losses carried forward include $62,320,000 of losses transferred into Silver Lake following the merger with Doray Minerals Limited.
The rate at which these losses can be utilised by the Group is restricted by an available fraction, which is calculated by reference to the
relevant market value of the Silver Lake and Doray tax consolidated groups.
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 unrecognised 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.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 59
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS10. E A R N I N G S P E R S H A R E
Profit used in calculating basic and diluted EPS
Weighted average number of ordinary shares used in calculating
basic earnings per share
Effect of dilution
Weighted average number of ordinary shares used in calculating
diluted earnings per share
30 June
30 June
2019
$’000
6,500
2018
$’000
16,186
Number of Shares
Number of shares
580,836,639
503,827,000
5,388,008
8,379,000
586,224,647
512,206,000
A C C O U N T I N G P O L I C I E S
Basic EPS is calculated as profit attributable to ordinary shareholders of the Company divided by the weighted average number of
ordinary shares.
Diluted EPS is determined by adjusting the profit attributable to ordinary shareholders and the weighted average number of ordinary
shares outstanding for the effects of all dilutive potential ordinary shares, including performance rights granted to employees.
11. C A S H A N D C A S H E Q U I VA L E N T S
Cash at bank
A C C O U N T I N G P O L I C I E S
30 June
2019
$’000
125,073
30 June
2018
$’000
97,959
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 26.
60 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 201912. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from operating activities
Profit after tax
Adjustments for:
Depreciation
Amortisation
Share based payments
Write off of investment
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 and other assets
Change in trade and other payables
Change in other liabilities
Total
13. T R A D E A N D O T H E R R E C E I VA B L E S
Current
Trade receivables
GST receivable
Provision for doubtful debts
Total
30 June
2019
$’000
30 June
2018
$’000
6,500
16,186
11,657
48,996
825
38
2,084
(153)
69,947
247
(6,292)
284
7,433
211
71,830
30 June
2019
$’000
9,122
2,098
(6,723)
4,497
10,894
53,964
430
-
4,242
(30)
85,686
7,464
(8,803)
(38)
(2,922)
(584)
80,803
30 June
2018
$’000
7,367
1,423
(6,723)
2,067
The Group’s exposure to interest rate risk and a sensitivity analysis of financial assets and liabilities are disclosed in Note 26.
A C C O U N T I N G P O L I C I E S
Trade receivables are recognised initially at the value of the invoice sent to the counterparty and subsequently at the amounts
considered recoverable (amortised cost). Where there is evidence that the receivable is not recoverable, it is impaired with a
corresponding change to the profit or loss statement.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 61
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS14.
I N V E N T O R I E S
Current
Materials and supplies
Ore stocks
Gold in circuit
Concentrate on hand
Bullion on hand
Non-Current
Ore stocks
Total
30 June
2019
$’000
30 June
2018
$’000
11,398
28,115
3,192
1,302
5,654
49,661
1,868
51,529
5,780
9,214
5,114
-
7,632
27,740
1,868
29,608
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.
A C C O U N T I N G P O L I C I E S
Inventory
Ore stockpiles, concentrate on hand, gold in circuit and gold bullion are physically measured or estimated and valued at the lower of
cost and net realisable value. The cost comprises direct materials, labour and transportation expenditure in bringing such inventories
to their existing location and condition, together with an appropriate portion of fixed and variable overhead expenditure based on
weighted cost incurred during the period in which such inventories were produced.
Net realisable value is the estimated selling price in the ordinary course of business less estimated cost of completion and the
estimated cost necessary to perform the sale. Inventories of consumable supplies and spare parts that are expected to be used in
production are valued at cost. Obsolete or damaged inventories of such items are valued at net realisable value.
Consumables and spare parts are valued at the lower of cost and net realisable value. Any provision for obsolescence is determined by
reference to specific stock items identified.
Bullion on hand
Bullion on hand comprises gold that has been delivered to the Perth Mint prior to period end but which has not yet been delivered into
a sale contract.
62 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 201915. E X P LO R AT I O N, E VA LU AT I O N A N D D E V E LO P M E N T E X P E N D I T U R E
During the year ended 30 June 2019 the Group incurred and capitalised the following on exploration, evaluation and
development expenditure:
Exploration and evaluation phase
Cost brought forward
Acquired in a business combination (Note 3)
Expenditure during the year
Transferred to development phase
Expensed during period
Balance at 30 June
Development phase
Cost brought forward
Transfer from exploration and evaluation phase
Expenditure during the year
Transferred to production phase
Balance at 30 June
Production phase
Cost brought forward
Transfer from development phase
Acquired in a business combination (Note 3)
Expenditure during the year
Rehabilitation provision adjustment
Amortisation expense
Balance at 30 June
Total
A C C O U N T I N G P O L I C I E S
Exploration and evaluation expenditure
30 June
30 June
2019
$’000
17,263
24,687
11,476
-
(2,355)
51,071
2018
$’000
15,018
-
7,642
(2,734)
(2,663)
17,263
30 June
30 June
2019
$’000
10,004
-
-
(4,814)
5,190
2018
$’000
8,886
2,734
1,118
(2,734)
10,004
30 June
30 June
2019
$’000
52,321
4,814
111,672
40,863
665
(48,996)
161,339
217,600
2018
$’000
75,158
2,734
-
27,343
1,050
(53,964)
52,321
79,588
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.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 63
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSA regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation
to the area of interest. If costs do not meet the criteria noted above, they are written off in full against the profit and loss statement.
Exploration and evaluation assets are transferred to Development Phase assets once technical feasibility and commercial viability of an
area of interest is demonstrable. Exploration and evaluation assets are tested for impairment, and any impairment loss is recognised,
prior to being reclassified.
Impairment testing of exploration and evaluation assets
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and
commercial viability or facts and circumstances suggest that the carrying amount exceeds the recoverable amount.
Exploration and evaluation assets are tested for impairment when any of the following facts and circumstances exist:
›
›
›
›
the term of exploration licence in the specific area of interest has expired during the reporting period or will expire in the near
future, and is not expected to be renewed;
substantive expenditure on further exploration 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 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 cash generating unit which is no larger than the
area of interest.
Impairment testing of assets in the development or production phase
The carrying amounts of assets in the development or production phase are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal
(FVLCD). In assessing FVLCD, the estimated future cash flows are discounted to their present value using a discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing,
assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in the Statement of Profit or Loss. Impairment losses recognised in respect of cash-generating units
are allocated first to reduce the carrying amount of any goodwill and then to reduce the carrying amount of the other assets in the unit
(group of units) on a pro-rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased
or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. An impairment loss in
respect of goodwill is not reversed.
Long term development and production phase assets that relate to unmined resources are assessed in light of current economic
conditions. Assumptions on the economic returns on and timing of specific production options may impact on the timing of
development of these assets. The carrying values of these assets are assessed where an indicator of impairment exists using a fair
value less cost to sell technique. This is done based on implied market values against their existing resource and reserve base and an
assessment on the likelihood of recoverability from the successful development or sale of the asset. The implied market values are
calculated based on recent comparable transactions within Australia converted to a value per ounce. This is considered to be a Level 3
valuation technique.
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 represent the acquisition cost and/or accumulated exploration, evaluation and development expenditure in respect of
areas of interest in which mining has commenced.
Mine development costs are deferred until commercial production commences. When commercial production is achieved mine
development is transferred to mine properties, at which time it is amortised on a unit of production basis based on ounces mined over
the total estimated resources related to this area of interest.
Significant factors considered in determining the technical feasibility and commercial viability of the project are the completion of a
feasibility study, the existence of sufficient resources to proceed with development and approval by the board of Directors to proceed
with development of the project.
Underground development expenditure incurred in respect of 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.
64 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019Deferred 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 ounces of gold mined. Stripping costs capitalised at year end are included in the Production phase
in Note 15.
Reserves and Resources
Resources are estimates of the amount of gold product that can be economically extracted from the Group’s mine properties. In
order to calculate resources, estimates and assumptions are required about a range of geological, technical and economic factors,
including quantities, grades, production techniques, recovery rates, production costs, future capital requirements, short and long term
commodity prices and exchange rates.
Estimating the quantity and/or grade of resources requires the size, shape and depth of ore bodies to be determined by analysing
geological data. This process may require complex and difficult geological judgments and calculations to interpret the data.
The Group determines and reports ore resources under the Australian Code of Reporting for Mineral Resource and Ore Reserves (2004
and 2012), known as the JORC Code. The JORC Code requires the use of reasonable assumptions to calculate resources. Due to the
fact that economic assumptions used to estimate resources change from period to period, and geological data is generated during the
course of operations, estimates of resources may change from period to period. Changes in reported resources may affect the Group’s
financial results and financial position in a number of ways, including:
›
›
›
›
asset carrying values may be impacted due to changes in estimates of future cash flows
amortisation charged in the Statement of Profit or Loss may change where such charges are calculated using the units of
production basis
decommissioning, site restoration and environmental provisions may change due to changes in estimated resources after
expectations about the timing or costs of these activities change
recognition of deferred tax assets, including tax losses.
16. P R O P E RT Y, P L A N T A N D E Q U I P M E N T
Balance 1 July 2017
Additions
Transfers
Depreciation expense
Balance 30 June 2018
Balance 1 July 2018
Additions
Acquisition of subsidiary
Transfers
Depreciation expense
Disposals
At 30 June 2019
Note
5
3
5
Land &
Building
Plant &
Equipment
Capital Work In
Total
Progress
$’000
1,512
-
1,524
(302)
2,734
2,734
-
8,013
2,124
(1,255)
(23)
11,593
$’000
35,736
-
5,281
(10,592)
30,425
30,425
119
32,028
7,687
(10,402)
(25)
59,832
$’000
1,003
10,009
(6,805)
-
4,207
4,207
7,965
2,164
(9,811)
-
-
4,525
$’000
38,251
10,009
-
(10,894)
37,366
37,366
8,084
42,205
-
(11,657)
(48)
75,950
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 65
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSA C C O U N T I N G P O L I C I E S
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.
17.
I N V E S T M E N T S
Investments in listed entities – at fair value
Movements as follows:
Balance at 1 July
Acquisitions
Disposals
Change in fair value
Balance at 30 June
A C C O U N T I N G P O L I C I E S
30 June
30 June
2019
$’000
6,591
8,140
2,906
(1,186)
(3,269)
6,591
2018
$’000
8,140
12,386
498
-
(4,744)
8,140
Financial assets at fair value through profit or loss
Financial assets designated at fair value through profit or loss comprise investments in equity securities.
A financial asset is classified at fair value through profit or loss if it is classified as held-for-trading or is designated as 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 are measured at fair value and
changes 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.
66 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 201918. G O O D W I L L
Goodwill of $90.695 million was recorded following the Company’s merger with Doray Minerals Limited on 5 April 2019 (refer
Note 3). The goodwill was attributable to both financial synergies (as a result of the creation of a mid-tier gold company with two
complementary gold camps increasing market presence and liquidity) and operating synergies (expected to be achieved from
integrating Doray into the Group’s existing mining operations).
Impairment testing
As goodwill does not generate cash flows independently of other assets, its carrying value was apportioned to the Group’s two
operating CGUs as part of the 30 June impairment testing review. The allocation was made based on the relative market values of the
Silver Lake and Doray entities at the date of the merger as follows:
›
›
Mount Monger Operation
68% ($61.673 m)
Deflector Operation
32% ($29.022 m)
In assessing whether each CGU (including its share of goodwill) has been impaired, its carrying amount is compared with its
recoverable amount. In accordance with the Group’s accounting policy, recoverable amount is assessed as the higher of fair value less
costs of disposal (FVLCD) and value in use. The Group has adopted FVLCD in its assessment, using discounted cash flows.
The key assumptions in addition to the life of mine plans used in the discounted cash flow valuation are the gold price, the Australian
dollar exchange rate against the US dollar and the discount rate.
Gold price and AUD:USD exchange rate assumptions are estimated by management, with reference to external market forecasts, and
updated at least annually. For this review, the forecast gold price was estimated at US$1,326–US$1,428/oz. and the forecast exchange
rate of US$0.69 to US$0.75 per A$1.00, based on a forward curve over the life of the mines. Significant changes to either the forecast
gold price or the forecast exchange rate may have an impact on the carrying value of the CGU in future periods.
A discount rate of 8% was applied to the post tax cash flows expressed in nominal terms. The discount rate was derived from the
Group’s post tax weighted average cost of capital (WACC), with appropriate adjustments made to reflect the risks specific to the CGU.
The impairment testing carried out at 30 June 2019 using these assumptions resulted in a nil impairment charge. An impairment
would be recognised against the Deflector Operation CGU if the consensus A$ Gold price decreased by 5% or life of mine costs
increased by 5%.
A C C O U N T I N G P O L I C I E S
Goodwill arising on acquisition of subsidiaries is measured at cost less accumulated impairment losses. At each reporting date, the
Group tests goodwill for impairment. Where the asset does not generate cash inflows independent from other assets and its value in
use cannot be estimated to be close to its fair value, the asset is tested for impairment as part of the cash generating unit (CGU) to
which it belongs.
The Group considers each of its two segments (Mount Monger and Deflector) to be a separate CGU. If the carrying amount of an asset
or CGU exceeds its recoverable amount, the carrying amount is reduced to the recoverable amount and an impairment loss recognised
in the Statement of Profit or Loss. The recoverable amount of an asset or CGU is determined as the higher of its fair value less costs of
disposal or value in use.
19. T R A D E A N D O T H E R PAYA B L E S
Trade payables
Other payables
Total
30 June
30 June
2019
$’000
39,053
14,597
53,650
2018
$’000
26,426
3,607
30,033
The Group’s exposure to liquidity risk and a sensitivity analysis of financial assets and liabilities are disclosed in Note 26.
A C C O U N T I N G P O L I C I E S
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.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 67
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. F I N A N C E L E A S E S
Current
Finance leases
Non-current
Finance leases
Total
30 June
2019
$’000
30 June
2018
$’000
284
431
715
-
-
-
A C C O U N T I N G P O L I C I E S
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal
ownership that is transferred to the Company, are classified as finance leases. Finance leases are capitalised by recording an asset
and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease
payments, including any guaranteed residual values.
Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease
payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the
periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight-
line basis over the life of the lease term.
21. E M P LOY E E B E N E F I T S
Current
Liability for annual leave
Liability for long service leave
Total
A C C O U N T I N G P O L I C I E S
i.
Defined Contribution Superannuation Funds
30 June
2019
$’000
2,872
850
3,722
30 June
2018
$’000
1,540
473
2,013
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.
68 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 201922. S H A R E B A S E D PAY M E N T S
P E R F O R M A N C E R I G H T S (E Q U I T Y S E T T L E D)
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:
Balance at 1
July 2018
Granted in
FY19
Converted
Lapsed
Balance at
30 June 2019
Vested &
exercisable at
30 June 2019
Total
8,379,331
4,059,807
(4,014,708)
(986,173)
7,438,257
1,627,856
Details of the performance rights currently on issue are summarised in the following table:
Number of performance rights
Exercise price
Grant date
Vesting period
ASX Comparator Group
FY17 Award
FY18 Award
FY19 Award
1,627,8561
$0.00
1 July 2016
1,750,594
$0.00
1 July 2017
4,059,807
$0.00
1 July 2018
1 July 2016 – 30 June 2019
1 July 2017 – 30 June 2020
1 July 2018 – 30 June 2021
EVN; GOR; IGO; KCN;
MML; NST; OGC; RMS;
RRL; SAR; SBM; TAM
AQG; BDR; EVN; MML;
MOY; NCM; NST; OGC;
PRU; RMS; RRL; RSG;
SAR; SBM; TRY; WGX
AQG; DCN; EVN; MML; MOY;
NCM; NST; OGC; PRU; RMS;
RRL; RSG; SAR; SBM; WGX
Valuation at grant date
Underlying 20 day VWAP
Volatility
Risk free rate
Expected dividends
FY17 Award
FY18 Award
FY19 Award
$0.247
$0.491
20%
1.52%
-
$0.257
$0.481
20%
1.94%
-
$0.439
$0.581
70%
2.07%
-
Note 1: On completion of the vesting period 83% of the FY17 Performance Rights (1,627,856 rights) had vested in accordance with the relative TSR hurdle attached to
them. This included 1,360,917 rights awarded to KMP’s.
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.
The total expense recognised in the Statement of Profit or Loss for all performance rights for the period ended 30 June 2019 was
$825,000 (2018: $430,000).
A C C O U N T I N G P O L I C I E S
Share-based payment transactions
The grant-date fair value of equity-settled share based payment awards granted to employees is generally recognised as an expense,
with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted
to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such
that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance
conditions at the vesting date. For share based payment awards with non-vesting conditions, the grant-date fair value of the share-
based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 69
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS23. P R O V I S I O N S
Closure and rehabilitation
Opening balance at 1 July
Provision acquired on acquisition of subsidiary (Note 3)
Adjustment to provisions during the year
Rehabilitation spend
Closing balance at 30 June
Current provision
Non-current provision
Closing balance at 30 June
30 June
2019
$’000
30 June
2018
$’000
16,450
22,422
1,388
-
40,260
-
40,260
40,260
16,122
-
1,050
(722)
16,450
-
16,450
16,450
At year end a review of the Group’s closure and rehabilitation provision was undertaken using updated cost assumptions and life of
mine plans. As a result of this review the provision was increased by $1,388,000 (2018: $1,050,000).
A C C O U N T I N G P O L I C I E S
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event,
and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a discount rate that reflects current market assessments of the time
value of money and, when appropriate, the risks specific to the liability.
Closure and rehabilitation
The mining, extraction and processing activities of the Group normally give rise to obligations for site closure or rehabilitation.
The extent of work required, and the associated costs are dependent on the requirements of relevant authorities and the Group’s
environmental policies.
Provisions for the cost of each closure and rehabilitation program are recognised when the Group has a present obligation and it is
probable that rehabilitation/restoration costs will be incurred at a future date, which generally arises at the time that environmental
disturbance occurs. When the extent of disturbance increases over the life of an operation, the provision is increased accordingly.
Costs included in the provision encompass all closure and rehabilitation activity expected to occur progressively over the life of the
operation and at the time of closure, in connection with disturbances, as at the reporting date.
The timing of the actual closure and rehabilitation expenditure is dependent upon a number of factors such as the life and nature of
the asset, the operating licence conditions and the environment in which the mine operates. Expenditure may occur before and after
closure and can continue for an extended period of time dependent on closure and rehabilitation requirements.
Closure and rehabilitation provisions are measured at the expected value of future cash flows, discounted to their present value.
Significant judgements and estimates are involved in forming expectations of future activities and the amount and timing of the
associated cash flows.
When provisions for closure and rehabilitation are initially recognised, to the extent that it is probable that future economic benefits
associated with the rehabilitation, decommissioning and restoration expenditure will flow in the entity, the corresponding cost is
capitalised as an asset. The capitalised cost of closure and rehabilitation activities is recognised in exploration evaluation and mine
properties and is amortised accordingly. The value of the provision is progressively increased over time as the effect of discounting
unwinds, creating an expense recognised in finance expenses.
Closure and rehabilitation provisions are also adjusted for changes in estimates. Those adjustments are accounted for as a change in
the corresponding capitalised cost, except where a reduction in the provision is greater than the unamortised capitalised cost of the
related assets, where it is probable that future economic benefits will flow to the entity, in which case the capitalised cost is reduced to
nil and the remaining adjustment is recognised in the Statement of Profit or Loss.
70 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019
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. S H A R E C A P I TA L
Movements in issued capital
Balance as at 1 July 2017
Movement in the period*
Balance as at 30 June 2018
Movement in the period*
Issue of share capital (note 3)
Costs associated with issue of shares
Balance as at 30 June 2019
Number
$’000
503,707,646
239,868
503,947,514
4,014,708
310,209,934
-
818,172,156
699,564
-
699,564
-
260,615
(104)
960,075
*Movement relates to the vesting of performance rights issued for nil consideration.
A C C O U N T I N G P O L I C Y
Issued capital
Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising
on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
25. R E S E R V E S
Movement in share based payment reserve
Balance as at 1 July
Equity settled share based payment expense
Balance as at 30 June
30 June
2019
$’000
1,650
825
2,475
30 June
2018
$’000
1,220
430
1,650
26. F I N A N C I A L R I S K M A N A G E M E N T
A. O V E R V I E W
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.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 71
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSB. C R E D I T R I S K
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 and concentrate sales, GST refunds and rental income.
At 30 June 2019, a provision for doubtful debts of $6,723,000 (2018: $6,723,000) has been recorded against rental income receivable
as a result of a debtor being placed in liquidation in a prior year. This receivable is therefore not reflected in the trade and other
receivables balance in Note 26(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.
iii. Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to
credit risk at the reporting date was:
Trade and other receivables
Cash and cash equivalents
Total
C. L I Q U I D I T Y R I S K
Carrying Amount
2019
$’000
4,497
125,073
129,570
2018
$’000
2,067
97,959
100,026
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 2019, the Company has
a total of 141,350 ounces to be delivered under these hedges over the next 24 months at an average of A$1,758/oz. The sale of gold
under these hedges is accounted for using the ‘own use exemption’ under AASB 9 Financial Instruments and as such all hedge revenue
is recognised in the Statement of Profit or Loss and no mark to market valuation is performed on undelivered ounces.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements:
Carrying
Amount
$’000
Contractual
Cash Flows
$’000
12 Months
or Less
$’000
> 12 Months
$’000
53,650
715
54,365
30,033
30,033
53,650
759
54,409
30,033
30,033
53,650
355
54,005
30,033
30,033
-
404
404
-
-
30 June 2019
Trade and other payables
Finance leases
Total
Trade and other payables
Total
*The carrying value at balance date approximates fair value
72 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019D. M A R K E T R I S K
Market risk is the risk that changes in market prices, such as commodity prices, 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.
i. Commodity risk
The Group’s exposure to commodity price risk arises largely from Australian dollar gold price fluctuations. The Group’s exposure to
movements in the gold price is managed through the use of Australian dollar gold forward contracts. The gold forward sale contracts
do not meet the criteria of financial instruments for accounting purposes on the basis that they meet the normal purchase/sale
exemption because physical gold will be delivered into the contract. Further information relating to these forward sale contracts
is included in note 4. No sensitivity analysis is provided for these contracts as they are outside the scope of AASB 9 Financial
Instruments.
ii.
Interest rate risk
The Group is exposed to interest rate risk (primarily on its cash and cash equivalents and its interest-bearing liabilities), which is the
risk that a financial instrument’s value will fluctuate as a result of changes in the market interest rates on interest-bearing financial
instruments. The Group does not use derivatives to mitigate these exposures.
Profile
At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments was:
Fixed rate instruments
Finance leases
Variable rate instruments
Cash and cash equivalents
Carrying Amount
2019
$’000
2018
$’000
715
-
125,073
97,959
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in
interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss after tax
by $1,250,000 (2018: $980,000). This analysis assumes that all other variables remain constant.
iii. Equity price risk
Equity investments are long-term investments that have been classified as financial assets at fair value through profit or loss.
E. FA I R VA LU E S
The carrying value of cash and cash equivalents, trade and other receivables, trade and other payables and interest-bearing liabilities
is considered to be a fair approximation of their fair values. The carrying amounts of equity investments are valued at year end at their
quoted market price.
F. C A P I TA L M A N A G E M E N T
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.
27. C O M M I T M E N T S
The Group has $5,137,000 (2018: $2,608,000) of commitments relating to minimum exploration expenditure on its various tenements
and $5,440,000 (2018: $3,665,000) of capital commitments at 30 June 2019.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 73
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS28. O P E R AT I N G L E A S E S
The Company leases assets for operations including plant and office premises. The leases have an average life of 1 to 4 years. At 30
June 2019, the future minimum lease payments under non-cancellable leases were payable as follows.
Less than one year
Between one and five years
29. R E L AT E D PA RT I E S
A. K E Y M A N A G E M E N T P E R S O N N E L C O M P E N S AT I O N
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Total
30 June
2019
$’000
12,390
20,902
33,292
30 June
2019
$
3,233,039
175,134
663,701
4,071,874
30 June
2018
$’000
8,570
6,500
15,070
30 June
2018
$
2,615,524
146,814
358,142
3,120,480
B.
I N D I V I D U A L D I R E C T O R S A N D E X E C U T I V E S’ C O M P E N S AT I O N D I S C LO S U R E S
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 2,923,235 performance rights were awarded to key management personnel. See Note 22 and the
Remuneration Report for further details of these related party transactions.
74 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 201930. G R O U P E N T I T I E S
The Company controlled the following subsidiaries:
Subsidiaries
Silver Lake (Integra) Pty Ltd
Backlode Pty Ltd
Loded Pty Ltd
Paylode Pty Ltd
Cue Minerals Pty Ltd
Great Southern Minerals Pty Ltd
Silver Lake (Doray) Pty Ltd
Doray Gold Operations Pty Ltd
Andy Well Mining Pty Ltd
Murchison Resources Pty Ltd
Meehan Minerals Pty Ltd
Silver Lake (Deflector) Pty Ltd
MYG Tenement Holdings SPV Pty Ltd
MYG Tenement Holdings Pty Ltd
Brandy Hill Iron SPV Pty Ltd
Brandy Hill Iron Pty Ltd
Central Infrastructure SPV Pty Ltd
Central Infrastructure Pty Ltd
Deflector Gold SPV Pty Ltd
Deflector Gold Pty Ltd
Gullewa Gold Project SPV Pty Ltd
Gullewa Gold Project Pty Ltd
A C C O U N T I N G P O L I C I E S
Subsidiaries
Country of
Incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Ownership Interest
2018
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.
31. J O I N T O P E R AT I O N S
As at 30 June, the Group has the following interests in unincorporated joint operations:
Principal
Group Interest
Joint Operation
Activities
Joint Operation Parties
Peter’s Dam
Horse Well JV
Exploration
SLR/Rubicon
Exploration
SLR/Alloy Resources
2019
71.8%
49.0%
2018
71.3%
-
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 75
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSA C C O U N T I N G P O L I C I E S
Joint Operation Arrangements
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 15.
32. A U D I T O R’S R E M U N E R AT I O N
Audit services
Audit and review of financial statements
Other audit services
Non-audit Services
Taxation services
Accounting advisory services
Total
30 June
2019
$
240,000
2,500
50,115
15,000
307,615
30 June
2018
$
112,824
2,500
28,129
-
143,453
33. S U B S E Q U E N T E V E N T S
In July 2019 the Company announced that it had entered into an off market takeover bid for Egan Street Resources Limited (EGA)
pursuant to which Silver Lake will acquire all of the issued and outstanding ordinary shares of EGA.
Under the terms of the takeover bid, each EGA shareholder will receive 0.27 Silver Lake shares for every EGA share held which on the
announcement date implied a $52 million total transaction enterprise value. The EGA Board of Directors have recommended that their
shareholders accept the offer in the absence of a superior proposal. Full details of the offer can be found in the ASX announcement
“Silver Lake Recommended Takeover Offer for Egan” dated 30 July 2019.
No other events have arisen in the interval between the end of the financial year and the date of this report 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.
76 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 201934. PA R E N T E N T I T Y
As at, and throughout the financial year ended 30 June 2019, 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
2019
$’000
1,309
1,309
101,347
486,975
40,900
46,073
960,075
2,475
(521,648)
440,902
30 June
2018
$’000
(1,430)
(1,430)
100,721
214,214
31,921
35,957
699,564
1,650
(522,957)
178,257
The parent entity has $2,569,000 (2018: $2,608,000) of commitments relating to minimum exploration expenditure on its various
tenements and $4,800,000 (2018: $3,665,000) of capital commitments at financial year end.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 77
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS35. D E E D O F C R O S S G U A R A N T E E
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 ASIC
Corporations (wholly owned companies) Instrument 2016/785.
The summarised Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2019 along
with the Consolidated Statement of Financial Position at 30 June 2019 for the members of the Deed of Cross Guarantee are disclosed
in the tables below:
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Total current assets
Non-current assets
Inventories
Exploration evaluation and development expenditure
Property, plant and equipment
Intercompany receivables
Investments
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Total current liabilities
Non-current liabilities
Rehabilitation and restoration provision
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
78 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
30 June 2019
$’000
97,813
2,317
34,567
87
134,784
1,868
86,875
34,258
6,850
267,042
396,893
531,677
38,602
2,698
41,300
17,586
17,586
58,886
472,791
960,075
2,475
(489,759)
472,791
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019Revenue
Cost of sales
Gross profit
Profit on sale of assets
Exploration expensed
Administrative expenses
Results from operating activities
Finance income
Finance expenses
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
30 June 2019
$’000
246,929
(223,594)
23,335
153
(2,355)
(13,945)
7,188
1,168
(3,286)
(2,118)
5,070
-
5,070
The Consolidated Statement of Profit or Loss and Other Comprehensive Income and Consolidated Statement of Changes in Equity
for the year ended 30 June 2018 along with the Consolidated Statement of Financial Position at 30 June 2018 for the members of the
Deed of Cross Guarantee are the same as that of the Group.
36. N E W A C C O U N T I N G S TA N D A R D S
The Group has for the first time applied AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers with
effect from 1 July 2018. Please refer to Note 4 in relation to the impact of adopting AASB 15 Revenue from Contracts with Customers.
A A S B 9 F I N A N C I A L I N S T R U M E N T S
AASB 9 Financial Instruments, replaces the existing guidance in AASB 139 Financial Instruments: Recognition and Measurement.
AASB 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model
for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance
on recognition and derecognition of financial instruments from AASB 139. The Group has assessed that the implementation of this
standard does not have a material impact on the financial statements.
The financial assets held by the group are detailed as follows:
›
›
›
Cash and cash equivalents
Trade receivables currently held at cost, to be measured at amortised cost under the classification conditions for AASB 9
Investments in equity securities held at fair value through profit and loss
The Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for
all trade receivables and contract assets. There are no expected lifetime credit losses based on zero historical customer default.
Therefore, there is no impact on transition to IFRS 9 for trade receivables.
There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for
financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities.
The new hedge accounting rules under AASB 9 have no impact as the Group is not currently hedge accounting.
In accordance with the transition provisions in AASB 9, comparative figures have not been restated.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 79
FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSA A S B 16 L E A S E S (N O T Y E T A D O P T E D)
AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a
contract, i.e. the customer (“lessee”) and the supplier (“lessor”). AASB 16 replaces the previous leases Standard, AASB 117 Leases,
and related Interpretations. AASB 16 has one model for lessees which will result in almost all leases being included on the Statement
of Financial Position.
The lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its
obligation to make lease payments. No significant changes have been included for lessors. The Group is not a lessor.
The Group has assessed the estimated impact that initial application of AASB 16 will have on its consolidated financial statements
which is described in more detail below. The actual impact of adopting the standard on 1 July 2019 may change because the new
accounting policies are subject to change until the Group presents its first consolidated financial statements that include the date of
initial application of AASB 16.
Management has compiled a list of all potential leases across the Group and reviewed all related contracts in order to identify and
account for all leases in terms of AASB 16 across the Group. The nature of expenses related to these leases will now change because
the Group will recognise an amortisation and depreciation charge for the right-of-use assets and finance expense in respect of the
lease liabilities once the standard is implemented. Previously, the Group recognised operating lease expenses on a straight-line basis
over the term of the lease, and recognised assets and liabilities only to the extent that there was a timing difference between actual
lease payments and the expense recognised.
Based on the information currently available, the Group estimates that it will recognise right-of-use assets and additional lease
liabilities in the range of $27 - $32 million at 1 July 2019. The Group plans to apply AASB 16 initially on 1 July 2019, using the
modified retrospective approach. Therefore, the cumulative effect of adopting AASB 16 will be recognised as an adjustment to
the opening balance of retained earnings at 1 July 2019, with no restatement of comparative information. The Group will elect to
recognise the right-of-use assets at an amount equal to the lease liability at 1 July 2019 and plans to apply the following practical
expedients for AASB 16:
›
›
›
Leases for which the underlying asset is of low value;
Arrangements (including mining services contracts) that are subject to grandfathering provisions; and
Short term leases.
80 | SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2019C O R P O R AT E G O V E R N A N C E S TAT E M E N T
The Company’s Corporate Governance Statement can be located on its website www.silverlakeresources.com.au
S E C U R I T I E S
At 11 September 2019 the Company had 818,940,113 fully paid ordinary shares and 6,374,172 performance rights on issue.
D I S T R I B U T I O N O F H O L D E R S
1
1,001
5,001
10,001
100,001
-
-
-
-
-
Total Holders
1,000
5,000
10,000
100,000
and over
Fully Paid
Options
Rights
Ordinary Shares
Performance
2,249
5,096
2,276
3,466
388
13,475
-
-
-
-
-
-
-
-
-
3
8
11
900 holders held less than a marketable parcel (<$500) of fully paid shares.
V O T I N G R I G H T S O F S E C U R I T I E S
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 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, in respect of each
Share held by him or in respect of which he is appointed a proxy, attorney or representative, has one vote for the Share, but in
respect of partly paid Shares, shall have such number of votes as bears the same proportion which the amount paid (not credited)
is of the total amounts paid and payable (excluding amounts credited).
Options and performance rights do not carry any voting rights.
SILVER LAKE RESOURCES LIMITED ANNUAL REPORT 2019 | 81
ASX ADDITIONAL INFORMATIONS U B S TA N T I A L S H A R E H O L D E R S
As at 11 September 2019 the substantial holders disclosed to the company were:
Registered
Holder
Bank of New York Mellon SA/NV
Beneficial
Owner
Number of
Percentage of
Shares
Issued Shares
Ruffer LLP (on behalf of CF
Ruffer Gold Fund)
77,555,876
9.48%
HSBC Nominees Aus Ltd; Citicorp Nominees Ltd;
National Nominees Ltd; JP Morgan Nominees Aust Ltd
Paradice Investment
Management
56,538,472
6.91%
HSBC Custody Nominees (Australia) Limited;
Morgan Stanley Australia Securities (Nominee) Pty Limited;
Citibank N A Hong Kong; JP Morgan Chase Bank NA;
JPMorgan (UK); National Custodian Services
Bank of New York Mellon as custodian for Van Eck Vectors
Junior Gold Miners ETF
Mitsubishi UFJ Financial
Group
53,655,861
6.56%
Van Eck Vectors Junior Gold
Miners ETF (GDXJ) and
Van Eck Vectors UCITS ETF
(UCTGDXJ)
47,804,665
5.84%
T O P 20 H O L D E R S O F Q U O T E D S E C U R I T I E S
Holder Name
Number Held
Percentage
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
199,935,874
189,131,674
88,089,638
42,192,889
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
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