Solaria Energía y Medio Ambiente
Annual Report 2023

Plain-text annual report

S I L V E R L A K E R E S O U R C E S A N N U A L R E P O R T 2 0 2 3 ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2023 Directors David Quinlivan Non-executive Chairman Luke Tonkin Managing Director Kelvin Flynn Non-executive Director Rebecca Prain Non-executive Director Registered Office Suite 4, Level 3, South Shore Centre 85 South Perth Esplanade South Perth WA 6151 Share Register Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth WA 6000 Telephone +61 3 9415 4000 Company Secretary David Berg Internet Address www.silverlakeresources.com.au Principal Office ABN Suite 4, Level 3, South Shore Centre 38 108 779 782 ASX Code: SLR 85 South Perth Esplanade South Perth WA 6151 Tel: Fax: +61 8 6313 3800 +61 8 6313 3888 Email: contact@slrltd.com Auditors KPMG 235 St George’s Terrace Perth WA 6000 Contents Chairman & Managing Director's Report Resources & Reserves Report Directors’ Report Directors’ Declaration Auditor’s Independence Declaration Independent Auditor's Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements ASX Additional Information 2 3 8 26 27 28 33 34 35 36 37 64 1 Chairman & Managing Director's Report Dear Fellow Shareholder, We are pleased to present the 2023 Annual Report. The 2023 financial year marked the ninth consecutive year Silver Lake delivered annual sales guidance, this is particularly pleasing and a credit to our team considering the continuation of a challenging operating climate across the mining industry. In FY23 Silver Lake delivered gold sales of 260,478 ounces and copper sales of 1,325 tonnes copper at an AISC of A$1,941 per ounce. FY23 sales were underpinned by the Western Australian operations with a second consecutive year of record production and sales from the high margin Deflector operation and Mount Monger delivering another year of free cash flow with strong performance from the underground operations. At the newly acquired Sugar Zone operation, the first phase of investment to upgrade core site infrastructure to provide the foundations to improve operating performance commenced. FY24 will see the next phase of the plan to improve operating performance through the investment in a 93,000 metre drill program to cover grade control, resource definition and advanced exploration prospects on the large, prospective land package. Silver Lake believes there is a significant opportunity at Sugar Zone through the application of more efficient operating practices and further discovery, to reset the operation. For FY23 Silver Lake reported a statutory Net Profit after Tax (NPAT) of $31 million, which included a non-cash tax expense of $28 million. FY23 Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) was $248 million at an EBITDA margin of 35%, with the established Australian operations delivering an EBITDA margin of 46%. Silver Lake ended FY23 with cash and bullion of $333 million with no debt. Silver Lake’s Mineral Resources at 30 June 2023 were 6.2 million ounces with Ore Reserves of 1.4 million ounces. All of Silver Lake’s Mineral Resources and Ore Reserves are located within established mining centres and provide a strong platform for further Ore Reserve conversion and Mineral Resource growth at all operations. Silver Lake will make a significant investment in exploration through FY24, with $43 million to be invested across the operations, demonstrating Silver Lake’s confidence in the continued low capital intensity organic growth potential to leverage the significant installed infrastructure across all its operations. acquisition of a strategic ~11% shareholding in Red 5 Limited, which owns the King of Hills operation and an established broader footprint in the Leonora district in Western Australia. Our FY24 sales guidance of between 210,000 to 230,000 ounces represents consistent year on year output from the Australian operations at an AISC of A$1,850 to A$2,050 per ounce. Silver Lake’s strong organically generated financial position and disciplined capital allocation framework enables the Company to pursue its margin over ounces operating strategy, with the flexibility to pursue medium to long term value maximisation of its assets to deliver growth. All exploration and capital expenditure will continue to be internally funded through operating cashflow and the continued free cash flow generation through FY24 has Silver Lake well positioned to prudently execute a “through the cycle” growth strategy for the benefit of shareholders. On behalf of the Board we would like to thank the Company’s employees for their dedicated service and resilience over the past 12 months, and without whom the achievements of the past year would not have been possible. 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. 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. 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. 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. Luke Tonkin Managing Director Luke Tonkin Managing Director Staying true to our strategy to deliver a larger, longer life and lower cost business Silver Lake made an ultimately unsuccessful offer to acquire the Gwalia operations of St Barbara Limited in FY23. Our continued commitment to create a “larger, longer life and lower cost” business has been demonstrated with Silver Lake’s David Quinlivan David Quinlivan Non-Executive Chairman Non-Executive Chairman 2 Silver Lake Resources Limited Annual Report 2023 Resources & Reserves Report Mineral Resource Statement as at 30 June 2023 The Company’s total Measured, Indicated and Inferred Mineral Resources at 30 June 2023 are 43.1 million tonnes at 4.5 grams per tonne of gold containing 6.2 million ounces of gold, including 2.4 million tonnes at 0.6 percent copper containing 14,400 tonnes of copper. The Mineral Resources as at 30 June 2023 are estimated after allowing for depletion during FY2023. Measured Mineral Resources Indicated Mineral Resources Inferred Mineral Resources Total Mineral Resources 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) June 2023 Mount Monger Daisy Mining Centre 608 16.3 319 885 19.0 540 1,576 18.1 Daisy Complex 83 22.5 Mirror/Magic 493 2.5 60 39 - - 1,003 1,501 37 - - - - Lorna Doone Costello Sub Total 576 5.3 99 3,149 Mount Belches Mining Centre Maxwells Cock-eyed Bob Santa Rumbles Anomaly A 154 295 - - - 5.3 5.5 - - - 26 52 - - - 1,443 1,560 7,015 1,722 - 2.3 2.0 1.7 4.9 4.0 4.0 2.8 1.9 - 74 98 2 682 785 237 493 2,589 185 1,752 199 724 629 1,096 104 298 - - 2.5 2.0 2.0 7.9 3.4 4.6 3.6 2.2 - 55 2,178 51 2,286 15 274 2.4 2.0 1.9 919 168 149 17 661 6,314 6.2 1,253 194 3,349 108 2,579 127 8,111 21 2,020 - - 3.8 4.3 2.9 1.9 - 405 359 756 125 - Sub Total 449 5.4 78 11,740 3.0 1,117 3,870 3.6 450 16,059 3.2 1,645 Aldiss Mining Centre Karonie Tank/Atreides French Kiss Harrys Hill Italia/Argonaut Spice Aspen Sub Total Randalls Mining Centre Lucky Bay Randalls Dam Sub Total Mount Monger Stockpile Sub Total - - - - - - - - 13 - 13 2,384 2,384 Mount Monger Total 3,422 - - - - - - - - 4.8 - 4.8 1.2 1.2 2.4 - - - - - - - - 2 - 2 90 90 2,493 1,107 1,112 479 531 136 112 5,970 34 95 129 - - 1.9 2.3 2.2 2.2 1.6 1.6 1.7 2.0 4.6 2.0 2.7 - - 150 1,150 82 80 34 27 7 6 234 189 415 19 296 139 386 2,442 5 6 11 - - 8 24 32 - - 1.6 1.6 2.0 2.3 1.6 1.4 1.6 1.7 7.8 1.3 2.9 - - 60 3,643 12 1,341 12 1,301 31 1 13 7 894 550 432 251 136 8,412 2 1 3 - - 55 119 174 2,384 2,384 1.8 2.2 2.2 2.3 1.6 1.4 1.6 1.9 5.1 1.8 2.9 1.2 1.2 210 94 92 65 28 20 13 522 9 7 16 90 90 269 20,988 3.0 2,007 8,933 4.4 1,250 33,343 3.3 3,526 3 Resources & Reserves Report Measured Mineral Resources Indicated Mineral Resources Inferred Mineral Resources Total Mineral Resources 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) 352 278 630 - 130 130 760 - 2 2 14.2 161 1,095 11.9 420 707 9.0 204 2,154 11.3 785 3.0 9.3 - 2.1 2.1 8.0 - 5.8 5.8 27 - - - - - - 278 3.0 188 1,095 11.9 420 707 9.0 204 2,432 10.4 27 812 - 9 9 579 9.9 184 408 10.1 133 987 10.0 317 - 579 - 9.9 - - - - 130 184 408 10.1 133 1,117 197 1,674 11.2 604 1,115 9.4 337 3,549 2.1 9.1 9.9 9 326 1,138 - 0 0 4,391 7.8 1,105 1,856 7.1 423 6,247 7.6 1,528 - - - - 4,391 7.8 1,105 1,856 - 7.1 - 2 5.8 0 423 6,249 7.6 1,528 June 2023 Deflector Deflector Stockpile Sub Total Rothsay Rothsay Stockpile Sub Total Deflector Total Sugar Zone Sugar Zone Stockpile Sugar Zone Total Total Gold Mineral Resources 4,184 3.5 466 27,053 4.3 3,716 11,904 5.3 2,010 43,141 4.5 6,192 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) 352 278 1.0% 0.2% 3,600 1,095 0.6% 6,900 707 0.5% 3,300 2,154 0.6% 13,800 600 - - - - - - 278 0.2% 600 630 0.7% 4,200 1,095 0.6% 6,900 707 0.5% 3,300 2,432 0.6% 14,400 June 2023 Deflector Deflector Stockpile Sub Total Total Copper Mineral Resources 630 0.7% 4,200 1,095 0.6% 6,900 707 0.5% 3,300 2,432 0.6% 14,400 4 Silver Lake Resources Limited Annual Report 2023 Resources & Reserves Report Ore Reserve Statement as at 30 June 2023 The total Proved and Probable Ore Reserves at 30 June 2023 are 14.9 million tonnes at 3.0 grams per tonne gold containing 1.44 million ounces of gold, including 1.6 million tonnes at 0.2 percent Cu containing 2,800 tonnes of copper. The Ore Reserves at 30 June 2023 are estimated after allowing for depletion over FY2023. Mount Monger Ore Reserves were estimated using a gold price of A$2,200/oz for Tank South, Santa Underground and Flora Dora, A$2,300/oz for Maxwells, A$2,400/oz for Daisy Complex and Cock-eyed Bob, A$2,600/ oz for Santa Open Pit and A$2,800/oz for Rumbles. Sugar Zone Ore Reserves were estimated using C$2,300/oz. Deflector Ore Reserve NSR was estimated using A$2,400/oz gold price and A$11,900/t copper price. Proved 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) June 2023 Mount Monger Aldiss Mining Centre Tank French Kiss Total Aldiss Mining Centre Daisy Complex Daisy Complex Total Daisy Mining Centre Mount Belches Mining Centre Cock-eyed Bob Rumbles Santa Maxwells Total Mount Belches Mount Monger Stockpiles Total Mount Monger Deflector Deflector OP Deflector UG Stockpile Total Deflector Rothsay Rothsay Stockpile Total Rothsay Total Deflector Region Sugar Zone Sugar Zone Stockpile Sub Total - - - 100 100 25 - - 20 45 2,384 2,530 - 255 278 533 - 130 130 663 - 2 2 Total Gold Ore Reserves 3,193 - - - 6.9 6.9 3.6 - - 3.2 3.5 1.2 1.4 - 5.4 3.0 4.1 - 2.1 2.1 3.7 - 5.8 5.8 1.9 - - - 22 22 3 - - 2 5 90 118 - 44 27 71 - 9 9 80 - 0 0 419 489 909 378 378 194 316 5,538 154 6,202 - 7,489 140 918 - 1,058 353 - 353 1,411 2,872 - 2,872 197 11,772 3.0 1.9 2.4 7.7 7.7 3.9 1.3 1.7 3.5 1.8 - 2.2 3.1 4.3 - 4.2 6.5 - 6.5 4.7 5.5 - 5.5 3.3 41 30 71 94 94 24 13 419 489 909 478 478 219 316 303 5,538 17 174 358 6,247 - 2,384 522 10,018 14 140 128 1,174 - 278 142 1,592 74 - 74 353 130 483 216 2,075 506 2,872 - 2 506 2,874 1,244 14,965 3.0 1.9 2.4 7.5 7.5 3.8 1.3 1.7 3.5 1.8 1.2 2.0 3.1 4.6 3.0 4.2 6.5 2.1 5.3 4.4 5.5 5.8 5.5 3.0 41 30 71 116 116 27 13 303 19 363 90 640 14 172 27 213 74 9 82 295 506 0 506 1,441 5 Resources & Reserves Report June 2023 Deflector Deflector OP Deflector UG Stockpile Total Deflector 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) - 255 278 533 533 0.0% 0.1% 0.2% 0.2% 0.2% - 400 600 900 900 140 918 - 1,058 1,058 0.3% 0.2% 0.0% 0.2% 0.2% 400 140 1,400 1,174 - 278 1,800 1,592 1,800 1,592 0.3% 0.1% 0.2% 0.2% 0.2% 400 1,800 600 2,800 2,800 NOTES TO MINERAL RESOURCE AND ORE RESERVE TABLES: 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. All 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). 4. The Table 1 Checklists of Assessment and Reporting Criteria relating to the updated 2012 JORC Code Mineral Resources and Ore Reserves estimates for significant projects that are reported for the first time or when those estimates have materially changed are contained in the Appendix to this announcement. MINERAL RESOURCE AND ORE RESERVE GOVERNANCE AND INTERNAL CONTROLS 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. 6 Silver Lake Resources Limited Annual Report 2023 Resources & Reserves Report COMPETENT PERSON’S STATEMENT The information in this Annual Report that relates to the Mineral Resources for the Harrys Hill, Santa, Cock-eyed Bob, Maxwells, Daisy Combined, Mirror/Magic, Tank/Atreides, Spice, Aspen, French Kiss, Italia/Argonaut, Lorna Doone, Rumbles, Costello, Randalls Dam 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 Annual Report of matters based on his information in the form and context in which it appears. The information in this Annual Report that relates to the Mineral Resources for the Deflector deposit is based upon information compiled by David Buckley, a Competent Person who is a member of The Australasian Institute of Mining and Metallurgy. Mr Buckley is a full-time employee of the Company. Mr Buckley 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 Buckley consents to the inclusion in the Annual Report of matters based on his information in the form and context in which it appears. The information in this Annual Report that relates to the Mineral Resources for the Rothsay and Sugar Zone deposits is based upon information compiled by Kane Hutchinson, a Competent Person who is a member of The Australasian Institute of Mining and Metallurgy. Mr Hutchinson is a full-time employee of the Company. Mr Hutchinson 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 Hutchinson consents to the inclusion in the Annual Report of matters based on his information in the form and context in which it appears. The information in this Annual Report that relates to Ore Reserves for Deflector, Daisy, Maxwells, Cock-eyed Bob, Santa, Rumbles, Tank and French Kiss 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 Annual Report of matters based on his information in the form and context in which it appears. The information in this Annual Report that relates to Ore Reserves for Rothsay and Sugar Zone is based upon information compiled by Jigar Patel, a Competent Person who is a member of The Australasian Institute of Mining and Metallurgy. Mr Patel is a full-time employee of the Company. Mr Patel 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 Patel consents to the inclusion in the Annual Report of matters based on his information in the form and context in which it appears. All other information in this Annual Report relating to 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 employed by Silver Lake Resources. 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 Annual Report of matters based on his information in the form and context in which it appears. FORWARD LOOKING STATEMENTS This Annual 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. 7 Directors’ Report Directors’ Report The 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 2023. DIRECTORS The directors of the Company at any time during or since the end of the financial year were: DAVID QUINLIVAN BApp Sci, Min Eng, Grad Dip Fin Serv, FAusImm, FFINSA, MMICA Non-executive Chairman Appointed Non-executive Director on 25 June 2015 and Chairman on 30 September 2015 Mr Quinlivan is a Mining Engineer with significant mining and executive leadership experience having 11 years of service at WMC Resources Ltd, followed by a number of high-profile mining development positions. Since 1989, Mr Quinlivan has served as Principal of Borden Mining Services, a mining consulting services firm, where he has worked on multiple mining projects in various capacities. He has previously served as Chief Executive Officer of Sons of Gwalia Ltd (post appointment of administrators), as Chief Operating Officer of Mount Gibson Iron Ltd and President and Chief Executive Officer of Alacer Gold Corporation. Mr Quinlivan is currently non-executive Chairman of Dalaroo Metals and served as a Non-Executive Director of Ora Banda Mining Limited until 28 September 2022. Mr Quinlivan has held no other directorships in public listed companies in the last three years. LUKE TONKIN BEng, Min Eng, MAusImm Managing Director Appointed 14 October 2013 Mr Tonkin is a Mining Engineering graduate of the Western Australian School of Mines and his extensive operations and management career spans over 35 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. KELVIN FLYNN B.Com, CA Non-executive Director Appointed 24 February 2016 Mr Flynn is a qualified Chartered Accountant with over 30 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. Mr Flynn was previously a director of privately held Global Advanced Metals Pty Ltd. Mr Flynn is a Non-Executive Director of Mineral Resources Limited and is Managing Director of the specialist alternative funds manager Harvis, which focuses on investments and financing in the real estate and real assets sectors. Mr Flynn has held no other directorships in public listed companies in the last three years. REBECCA PRAIN BSc (Geology) Non-executive Director Appointed 17 August 2021 Ms Prain has 30 years’ experience in the mining industry as a geologist and mining services provider. She has held a variety of technical and management roles throughout her career and is currently the Managing Director of Cube Consulting, a specialist resource estimation and mining engineering services group that provides geological and mining engineering expertise and systems. Ms Prain’s experience includes technical and advisory roles to multiple Australian, North American and Southeast Asian mining companies, with a particular focus on the implementation and use of specialist resource estimation and mining software. Ms Prain has held no other Directorships in public listed companies in the last three years. 8 Silver Lake Resources Limited Annual Report 2023 Directors’ Report COMPANY SECRETARY David Berg LLB BComm (General Management) Appointed 4 September 2014 Mr Berg has worked both in the resources industry and as a lawyer in private practice, advising on corporate governance, M&A, capital raisings, commercial contracts and litigation. Mr Berg has previously held company secretarial and senior legal positions with Mount Gibson Iron Limited and Ascot Resources Limited and legal roles with Atlas Iron Limited and the Griffin Group. Prior to this Mr Berg worked in the corporate and resources groups of Herbert Smith Freehills and King & Wood Mallesons. COMMITTEE MEMBERSHIP As at the date of this report, the Board has an Audit Committee and a Nomination & Remuneration Committee. Those members acting on the committees of the Board during the year were: Audit Committee Kelvin Flynn (Chair) Rebecca Prain David Quinlivan Term Full Year Full Year Full Year Nomination & Remuneration Committee (NRC) Kelvin Flynn Rebecca Prain (Chair) David Quinlivan Term Full Year Full Year Full Year DIRECTORS’ MEETINGS 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 David Quinlivan Luke Tonkin Kelvin Flynn Rebecca Prain 11 11 11 11 11 11 11 11 2 2 2 2 2 2 2 2 2 2 2 2 DIRECTORS’ INTERESTS The relevant interest of each Director in the share capital at the date of this report is as follows: Name of Director David Quinlivan Luke Tonkin Kelvin Flynn Rebecca Prain Fully Paid Ordinary Shares Unlisted Performance Rights - 764,186 - - - 1,346,374 - - PRINCIPAL ACTIVITIES 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 and Canada. 9 Directors’ Report OPERATING OVERVIEW Silver Lake is a multi-asset gold company operating in the Eastern Goldfields and Midwest regions of Western Australia and in Northern Ontario, Canada. The Group’s three operations, Deflector, Mount Monger and Sugar Zone, offer significant potential for organic growth from their portfolios of highly endowed and prospective tenement holdings. The Group achieved production of 261,604 ounces gold and 1,483 tonnes copper for the year, driven by record performance from Deflector, strong operational performance at Mount Monger and inclusion of Sugar Zone for a full financial year. The production result was underpinned by record production results from the Deflector Region and development of a new underground mine at Mount Monger, Tank South, consistent with Silver Lake’s proven invest and yield strategy. GROUP FINANCIAL OVERVIEW The Group recorded a net profit after tax for the year of $30.8 million (FY22: $77.7 million) and an EBITDA (before significant items) of $248.4 million (FY22: $267.6 million). This resulted in an EBITDA margin for the year of 35% (FY22: 42%). The Board considers that EBITDA, a non-IFRS measure, is an important metric in assessing the underlying operating performance of the Group. A reconciliation between the statutory profit after tax and the Group’s EBITDA is tabled below. Revenue for the year totalled $719.6 million from the sale of 260,372 ounces of gold and 1,325 tonnes copper at an average realised gold sale price of A$2,694/oz and A$12,812/t of copper, compared with revenue of $634.6 million from 251,735 ounces of gold and 907 tonnes copper in FY22. The increase in revenue was driven by record sales at Deflector, strong operational performance from Mount Monger, a full year of contribution from Sugar Zone and improved commodity prices over the past year. Cost of sales increased to $639.0 million in the year (FY22: $518.5 million) reflecting a $22.2 million increase in depreciation and amortisation charge, increased operating costs associated with the inclusion of Sugar Zone for a full year and increases in input costs due to impact of supply chains and general inflationary pressures driving operating costs higher. The Group All-in Sustaining Cost (AISC) for the year increased to A$1,941/oz (FY22: A$1,756/oz). A non-cash tax expense of $28.5 million has been recorded in FY23 (FY22: $37.7 million). The current year taxable expense will be offset against available tax losses and hence no tax is payable. 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 Income tax expense Net finance (income)/costs (includes change in value of listed investments) Business development adjustments (FY22 includes gain on bargain purchase) Exploration expensed Other EBITDA (excluding significant items)1 1 Non-IFRS measure 30 June 2023 30 June 2022 $’000 30,836 190,089 28,489 (6,876) 1,229 5,044 (412) 248,399 $’000 77,681 167,880 37,654 8,075 (27,924) 3,187 1,007 267,560 Cash and bullion at 30 June 2023 was $332.8 million (30 June 2022: $313.8 million). In addition, the Group had $11.5 million of gold in circuit and concentrate on hand measured at cost and listed investments of $12.8 million at year end. Key cash flow movements for FY23 included: · Net cash inflow from operating activities of $241.4 million · Acquisition of plant and equipment of $34.4 million · · $130.3 million on mine development and $24.8 million on exploration $27.6 million on repayment of finance leases primarily attributed to right of use assets · Cash outflow associated with the share buy-back of $3.0 million, and · Interest inflows of $6.4 million. During the year the Company reduced its stockpile ore inventory balance by 0.5 million tonnes, supplementing underground ROM ore with stockpile feed at Mount Monger. At 30 June 2023, the Group held 2.9 million ore tonnes containing 130,000 ounces of gold valued at a cost of $107.7 million on the Company’s balance sheet (FY22: $104.5 million). 10 Silver Lake Resources Limited Annual Report 2023 Directors’ Report The value of property, plant and equipment decreased by $12.0 million in FY23 to a balance of $235.7 million. The movement included capital additions of $46.6 million, which included the new mining fleet at Sugar Zone and right-of-use assets recognised as leases under AASB16 Leases of $12.7 million. Depreciation recognised during the year amounted to $71.6 million. Deferred tax assets increased by $12.7 million to $77.8 million at 30 June 2023, with the increase due to the recognition of temporary differences between accounting and tax treatment of assets and liabilities and partially offset by the utilisation of tax losses. At 30 June 2023 the Company has $240,326,000 (FY22: $303,846,000) of tax losses remaining for offset against future taxable profits in Australia and $209,434,000 (FY22: $130,255,000) of Canadian tax losses that are available for offset against future taxable profits in Canada. As at 30 June 2023, Silver Lake’s forward gold hedging program totalled 110,000 ounces, to be delivered over the next 30 months at an average forward price of A$3,007/oz. OVERVIEW OF THE MOUNT MONGER OPERATION 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 Mount Monger has transitioned to larger, longer life Mining Centres which have delivered multiple high-grade ore sources and increased production transparency. The three independent and self-sufficient Mining Centres at Mount Monger are the Daisy Complex, Mount Belches and Aldiss Mining Centres. These Mining Centres feed the 1.3Mtpa Randalls mill. Mount Monger Mining Ore mined during the year totalled 497,688 tonnes at a grade of 4.3 g/t Au for 69,431 contained ounces (FY22: 1,701,915 tonnes at a grade of 2.4 g/t Au for 131,328 contained ounces), all sourced from the Daisy Complex and Tank South underground mines. The Daisy Complex produced 268,955 tonnes at 4.8 g/t for 41,503 contained ounces, with production primarily sourced from Haoma West and Easter Hollows, which accounted for 80% of tonnes mined for the year. In FY24, ore from the Daisy Complex will be predominantly sourced from the Haoma West, Lower Prospect and the Easter Hollows lodes. The Mount Belches underground mines Maxwells and Cock-eyed Bob (“CEB”), produced 18,826 tonnes at 2.8 g/t for 1,622 contained ounces, with mining suspended in early FY23 to allow Silver Lake to preserve the value of the Maxwells and CEB Mineral Resources and Ore Reserves and complete infill and extensional drilling beyond Mineral Resource limits in anticipation of a return to more normalised operating and supply chain conditions in Western Australia. Development of the Tank South underground mine at the Aldiss Mining Centre commenced in July 2022, with all LOM development completed during the year. The Tank South mine produced 209,907 tonnes at 3.9 g/t for 26,306 contained ounces, with stoping scheduled to continue throughout FY24. The commencement of open pit mining at Santa within the Mount Belches Mining Centre in January 2024 will represent the first open pit mining at Mount Belches since 2016 and will add to the enviable stockpile position, providing further baseload feed to the Randalls mill from FY25. Mount Monger Processing Ore milled for the period totalled 1,275,326 tonnes at 2.6 g/t for 95,559 recovered ounces (FY22: 1,256,338 tonnes at 3.0 g/t for 112,384 recovered ounces). Mill grade was 14% lower than the prior year following suspension of production from Maxwells and CEB in early FY23, resulting in a greater portion of lower grade stockpile feed in the current year mill blend. Mount Monger stockpiles at 30 June 2023 decreased to ~2.4 million tonnes containing ~90,500 ounces (30 June 2022: ~3.1 million tonnes containing ~123,000 ounces). Silver Lake will continue to maintain an iterative approach to mine and mill feed scheduling beyond FY24, continuing to prioritise highest returning and cash generative operations to preserve ore body optionality and margin in the prevailing operating climate. Exploration success has created a pipeline of projects at Mount Monger to further leverage on the established infrastructure and enhance mine life visibility. Re-optimisation of pit shells of existing Mineral Resources has identified potential open pits proximal to the Santa open pit, including the Rumbles and Flora Dora prospects. Further opportunities for inclusion in the medium term mining schedule include the recommencement of underground mining at Mount Belches. Mining and production statistics for the Mount Monger Operation for the year ended 30 June 2023 are detailed in Table 1 and Table 2. OVERVIEW OF THE DEFLECTOR REGION The Deflector Region Operation is in the Midwest region of Western Australia and comprises the Deflector and Rothsay underground mines and the Deflector mill. FY23 mine production delivered a 23% year on year increase, generating a stockpile of 30,000 ounces gold by year end with strong contributions from both underground ore sources. Deflector Mining Deflector Region mine production for the year totalled 1,065,446 tonnes at 4.6 g/t gold and 0.2% copper for 159,109 contained ounces gold (FY22: 799,524 tonnes at 5.0 g/t gold and 0.1% copper for 129,403 contained ounces gold). Production was sourced from the Deflector Main and Deflector South West underground lodes and the secondary high grade ore source at Rothsay underground. Approximately 80% and 82% of mined ore tonnes and ounces respectively were sourced from Deflector underground. 11 Directors’ Report Deflector Processing Deflector mill throughput was 731,574 tonnes at 5.6 g/t gold and 0.3% copper (FY22: 751,021 tonnes at 5.4 g/t gold and 0.2% copper). Total gold recovery was 96.7% with copper recovery of 82.5%. FY23 production set an annual record of 127,069 ounces gold and 1,483 tonnes copper (FY22:124,602 ounces gold and 991 tonnes copper) which underpinned annual record gold sales of 124,553 ounces and 1,325 tonnes copper (FY22: gold sales 123,099 ounces and 907 tonnes copper). Lower year-on-year mill throughput was offset by higher feed grade with gold recovery consistent at 96.7%. Concentrate production for FY23 totalled 9,414 tonnes at an average gold grade of 91 g/t gold and 16% copper. At 30 June 2023, Deflector regional ore stocks totalled ~490,000 tonnes at 2.5 g/t gold (30 June 2022: 153,000 tonnes at 1.9 g/t gold). Mining and production statistics for the Deflector Region for the year ended 30 June 2023 are detailed in Table 1 and Table 2. OVERVIEW OF THE SUGAR ZONE OPERATION The Sugar Zone Operation is in an established mining province of Northern Ontario, Canada, approximately 30km north of White River or midway between Thunder Bay and Sault St. Marie. Mining at Sugar Zone commenced in 2019, with Silver Lake acquiring the operation in February 2022 following the acquisition of Harte Gold Corp (“Harte Gold”). Following completion of the acquisition in February 2022, Silver Lake commenced a review of operations at the Sugar Zone mine with the objective of delivering material operational improvements and a low capital intensity growth strategy to leverage the installed infrastructure and current Mineral Resource. Following the completion of essential site based capital projects in FY23, operational activities in FY24 will focus on exploration and include the development of three dedicated exploration drives. Sugar Zone's site logistics network will also be enhanced throughout FY24, with mining and processing to be idled. Silver Lake’s investment in exploration is designed to deliver a step change in ore body knowledge and begin unlocking the potential of the extensive resource base and underexplored land package. The enhancement in site logistics will include the relocation of the White River camp to Sugar Zone, effectively increasing available shift duration and mitigating the risks associated with personnel transport to and from site. Sugar Zone Mining Sugar Zone mine production for the period totalled 234,671 tonnes at 5.1 g/t gold for 38,659 contained ounces gold (FY22: 91,519 tonnes at 5.4 g/t gold for 15,812 contained ounces gold). Mine production for the year was impacted by a shortfall in development metres, predominantly driven by manning shortages, equipment availability of the aged fleet and a prioritisation of site resources to capital projects. The idling of mining activities in FY24 will provide Silver Lake with the opportunity to “reset” the mine and complete the necessary grade control and extensional drilling programs. The step change in data will allow Silver Lake to effectively plan and resource the Sugar Zone operation and establish the foundations for a higher margin, long life operation utilising the recently acquired new underground mining fleet to implement a mechanised system of work with enhanced site logistics upon recommencement of mining activities. Sugar Zone Processing Sugar Zone mill throughput for the period was 259,478 tonnes at 4.9 g/t gold for 38,976 recovered ounces (FY22: 89,741 tonnes at 5.5 g/t gold for 14,901 recovered ounces). Mining and production statistics for the Sugar Zone Operation for the period ended 30 June 2023 are detailed in Table 1 and Table 2. 12 Silver Lake Resources Limited Annual Report 2023 Directors’ Report GROUP MINING AND PRODUCTION STATISTICS 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 Rothsay Mining Underground Ore mined Mined grade Contained gold Sugar Zone Mining1 Underground Ore mined Mined grade Contained gold Group Mining Total ore mined Mined grade Contained gold Copper grade Contained copper Units Tonnes g/t Au Oz Tonnes g/t Au Oz Tonnes g/t Au Oz % Tonnes Tonnes g/t Au Oz Tonnes g/t Au Oz Tonnes g/t Au Oz % Tonnes FY23 497,688 4.3 69,431 - - - 846,311 4.8 130,055 0.2% 2,046 219,135 4.1 29,054 234,671 5.1 38,659 1,797,805 4.6 267,199 0.2% 2,046 1Sugar Zone physicals for FY22 are from the date of acquisition, 18 February 2022 Table 1 FY22 669,349 3.9 83,265 1,032,566 1.4 48,063 586,867 5.3 99,697 0.2% 1,114 212,657 4.3 29,706 91,519 5.4 15,812 2,592,958 3.3 276,543 0.2% 1,114 13 Directors’ Report Mount 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 Sugar Zone Processing1 Ore milled Head grade Recovery Gold produced Gold sold Group Processing Ore milled Gold grade Copper grade Gold produced Gold sold Copper recovered Copper sold Units Tonnes g/t Au % Oz Oz Tonnes g/t Au % % % Oz Oz Tonnes Tonnes Tonnes g/t Au % Oz Oz Tonnes g/t Au % Oz Oz Tonnes Tonnes FY23 1,275,326 2.6 88% 95,559 97,181 731,574 5.6 0.3% 96.7% 82.5% 127,069 124,553 1,483 1,325 259,478 4.9 94.8% 38,976 38,639 FY22 1,256,338 3.0 92% 112,384 113,875 751,021 5.4 0.2% 96.1% 77.8% 124,602 123,099 991 907 89,741 5.5 94.6% 14,901 17,762 2,266,378 2,097,100 3.9 0.3% 261,604 260,372 1,483 1,325 4.0 0.2% 251,887 251,735 991 907 1 Sugar Zone physicals for FY22 are from the date of acquisition, 18 February 2022 Table 2 EXPLORATION Silver Lake invested $24.8 million (FY22: $20.8 million) in exploration activities during the year to advance high-grade projects within established and proven mineralised corridors proximal to established infrastructure. The Group has committed to exploration spend of $42.5 million in FY24, with a significant investment in exploration at Sugar Zone with grade control, resource definition and advanced exploration drilling amounting to approximately 93,000 metres planned, including development of three dedicated exploration drives. Mount Monger Drilling during the year focused on Mineral Resource definition and extensions at established underground mines targeting lode infill and extensions proximal to current underground development. At the Daisy Complex, underground resource definition drilling targeted direct extensions and splays to the Easter Hollows and Haoma West lodes. At Tank South, drilling beyond the Tank Mineral Resource boundary intersected high grade mineralisation which will be followed up in FY24 with surface and underground diamond drilling to determine potential for a new mining zone. Regional discovery exploration activity was focused on the Mount Belches and Aldiss Mining Centres. Drilling success and the re- optimisation of open pit shells of existing Mineral Resources, given the prevailing Australian Dollar gold price, has identified potential open pits proximal to Santa at the Mount Belches Mining Centre. Recent infill and the extensional drilling at Rumbles has demonstrated the potential to grow the current Mineral Resource. Silver Lake has also recommenced resource definition drilling at the Flora Dora deposit to infill and extend lodes for open pit optimisation. 14 Silver Lake Resources Limited Annual Report 2023 Directors’ Report Deflector Deflector underground drilling in FY23 was focused on grade control drilling of the South West production areas, and targeted direct extensions to the southern and lower margins of the South West lode system. High grade Deflector style mineralisation was confirmed by surface diamond drilling at the Spanish Galleon prospect located 300m west from the Deflector South West underground mining front, within mafic and ultramafic host rocks similar to the main Deflector host stratigraphy. The Spanish Galleon area had been historically defined by shallow oxide mineralisation with limited drilling beneath oxide mineralisation and presents a new exploration front at Deflector. FY24 in-mine resource definition drilling will target further extensions to the South West lodes to the south where mineralisation remains open in multiple directions. Follow up drilling from underground will be continued at the Spanish Galleon target zone to define the strike length, geometry and widths of the Deflector style high grade copper and gold mineralisation discovered. Deflector regional exploration activity focused on both the Gullewa and Brandy Hill greenstone belt corridors targeting highly prospective geology and structural features which are underexplored. Aircore, RC and diamond drilling programs were completed in FY23 to update geological models, confirm geochemical targets and build on the exploration databases. A program of deep stratigraphic diamond drillholes, supported by a state government grant, and designed to significantly advance and enhance target generation at Brandy Hill, commenced at the start of FY24. Further exploration at Brandy Hill in FY24 will test new targets generated from the revised geological and mineralisation models. Sugar Zone The work completed in FY23 has identified large areas of new greenstone stratigraphy within the broader regional land package, primarily to the west of Sugar Zone which has not seen any exploration work and are interpreted to be prospective for multiple styles of mineralisation. Silver Lake undertook a comprehensive data review to deliver a pipeline of exploration targets, ranked for systematic testing, and has also commenced relogging and resampling of historical drill core leveraging from an improved understanding of the characteristics of the multiple styles of mineralisation on the extensive land package. In FY24, Sugar Zone accounts for the largest portion of the Group exploration program, with Silver Lake’s investment in exploration designed to deliver a step change in ore body knowledge to unlock the potential of the extensive resource base and underexplored land package. Within the Sugar Zone mine corridor, resource definition drilling from surface will target below planned grade control drilling and the newly defined Sugar Zone South area. Advanced exploration will predominantly target brownfield prospects within the Sugar Zone mine corridor which presently extends for 3.6 kilometres. Drilling will follow up historical intersections to determine the extent and continuity of mineralisation along strike from the active mining areas, and the drilling coverage will be progressively expanded along the mine corridor to target discovery of new mineralisation and grow the Resource base. STRATEGY The Group’s short to medium term strategy is to deliver superior returns for shareholders by positioning Silver Lake as a leading gold stock on the ASX with a balanced portfolio of operations and growth projects. To achieve this strategic objective, the Company must become larger, longer life and lower cost. This will be achieved by: · Pursuing and unlocking the full potential of existing operations; · Attracting and retaining an experienced team to enable Silver Lake to be an effective operator and developer of mining assets; · Developing a balanced growth profile through exploration and targeted M&A programs; · Maintaining the appropriate balance sheet strength and scale to achieve long term growth through the cycle; and · A returns driven capital management strategy. Key risks associated with delivering on the Group’s strategy include: · Gold price and FX currency: The Company is exposed to fluctuations in the Australian dollar gold price which can impact on revenue streams from operations. To mitigate downside in the gold price, the Board has implemented a hedging program to assist in offsetting variations in the Australian dollar gold price. Hedging is an agenda item at each Board meeting to ensure it continues to fit within the Company’s hedging strategy and is deemed appropriate; · 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; · Government charges: The gold mining industry is subject to a number of Government taxes, royalties and charges. Changes to the rates of taxes, royalties and charges can impact on the profitability of the Company. The Company maintains communications with relevant parties to mitigate potential increases; · Operating risk: The Group’s gold mining operations are subject to operating risks that could result in decreased production, increased costs and reduced revenues. To manage this risk the Company seeks to attract and retain high calibre employees and implement suitable systems and processes to ensure production targets are achieved; · · · · Exploration success: No assurance can be given that exploration expenditure will result in future profitable operating mines; Environmental: The Company has environmental liabilities associated with its tenements which arise as a consequence of mining operations, including waste management, tailings management, chemical management, water management and energy efficiency. The Company monitors its ongoing environmental obligations and risks, and implements rehabilitation and corrective actions as appropriate, through compliance with its environmental management system; People risks: The Company seeks to ensure that it provides a safe workplace to minimise risk of harm to its employees and contractors. It achieves this through an appropriate safety culture, safety systems, training and emergency preparedness; and Supply chain constraints: The Group’s operations continue to be impacted by ongoing supply chain constraints that have arisen as a consequence of the pandemic and it is not known what impact this will have on FY24 performance. 15 Directors’ Report DIVIDENDS No dividend has been paid or declared by the Company up to the date of this report. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS 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. LIKELY DEVELOPMENTS The Company will continue to pursue maximising free cashflow and increasing margins from its operations. There are no likely developments of which the directors are aware which could be expected to significantly affect the results of the Group’s operations in subsequent financial years not otherwise disclosed in this Report. ENVIRONMENTAL REGULATIONS AND PERFORMANCE The Company’s operations hold licences issued by the relevant regulatory authorities. These licences specify limits and regulate the management associated with the operations of the Company. At the date of this report the Company is not aware of any significant breach of those environmental requirements. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The Company has agreed to indemnify the current Directors and Officers against any liability that may arise from their position as Directors and Officers of the Company except where the liability arises out of 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. PROCEEDINGS ON BEHALF OF THE COMPANY At the date of this report there are no leave applications or proceedings brought on behalf of the Group under section 237 of the Corporations Act 2001. CORPORATE GOVERNANCE In recognising the need for appropriate standards of corporate 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. SUBSEQUENT EVENTS No 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 significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. 16 Silver Lake Resources Limited Annual Report 2023 Directors’ Report REMUNERATION REPORT - AUDITED This report outlines the remuneration arrangements in place for both Executives and Non-executive Directors. Contents: 1. Basis of preparation 2. Key management personnel (KMP) 3. Remuneration snapshot 4. Remuneration governance 5. FY23 Executive remuneration 6. FY23 Non-executive director (NED) remuneration 7. KMP Shareholdings 1. BASIS OF PREPARATION This remuneration report has been prepared and audited in accordance with the requirements of the Corporations Act 2001 and the applicable accounting standards. All references to dollars in this remuneration report are to Australian Dollars unless otherwise specified. 2. KEY MANAGEMENT PERSONNEL Key management personnel (KMP) comprise those persons with authority and responsibility for planning, directing and controlling the activities of the Company. This includes the Executives and Non-executive directors (NEDs) of the Company. In this report, ‘Executives’ refers to individuals identified as KMP, excluding NEDs. A list of all NEDs and Executives for FY23 is set out below: Name Position David Quinlivan Non-executive Chairman Luke Tonkin Kelvin Flynn Rebecca Prain David Berg Diniz Cardoso1 Len Eldridge Managing Director Non-executive Director Non-executive Director General Counsel & Company Secretary Chief Financial Officer Corporate Development Officer Antony Shepherd Exploration & Geology Manager 1 Diniz Cardoso will retire as CFO on 25 August 2023 and will be replaced by Struan Richards 3. REMUNERATION SNAPSHOT FY23 Remuneration in review Term as KMP Full year Full year Full year Full 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: · · · · · Silver Lake finished FY23 delivering annual guidance for the ninth consecutive year, despite the continuation of a challenging operating climate across the mining industry; cash & bullion increased 6% to $332.8 million at year end with no bank debt, after investing $190 million in plant and equipment, underground mine development and exploration; the Deflector Region Operation delivered record results with Deflector mine production increasing 30% to 130,000 ounces gold and recovered gold increasing to 127,000 ounces. During the year the operation generated stockpiles that at year end totalled 490,000 tonnes at 2.5 g/t for 39,000 contained ounces; created operating flexibility at Mount Monger through the development of the Tank South underground mine which together with Daisy underground provided high grade baseload feed to the Randalls mill, supplemented by ore stockpiles which at year end totalled 2.4 million tonnes at 1.2 g/t for 90,000 contained ounces; and exploration success has created a pipeline of projects at Mount Monger to further leverage on the established infrastructure and enhance mine life visibility. Development of the stage 1 Santa open pit will commence in January 2024 and the re-optimisation of pit shells of existing Mineral Resources has identified potential open pits proximal to Santa including the Rumbles and Flora Dora prospects. Further information on the link between company performance and KMP remuneration can be found in section 5(g). The Board believes that the Company’s remuneration framework is aligned with market practice and that Executive remuneration in FY23 reflects the performance of the Company, the platform established for ongoing performance improvement and the experience of the Executives. 17 Directors’ Report Key remuneration outcomes for FY23 are summarised in the table below: Remuneration element Details Fixed remuneration No change to fixed remuneration structure. Short-term incentive (STI) STI payments were made to Executives during the period in line with their performance against set targets. Further information on STI payments is included in section 5(c) of this report. Long-term incentive (LTI) In FY23, 840,555 performance rights were granted to the Managing Director on the terms approved by shareholders at the 2021 AGM and a further 1,398,760 performance rights were granted to other Executives as described further in this report. 4. REMUNERATION GOVERNANCE a. Board and Nomination & Remuneration Committee (NRC) responsibility The NRC 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 the nature, size and standing of the Company. The NRC 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 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 NRC 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, the NRC has benchmarked KMP remuneration using external independent industry reports and data to ensure that remuneration levels are competitive and meet the objectives of the Company. d. 2022 AGM voting outcome and comments The Company received 98.7% of votes in favour of the adoption of its Remuneration Report for the 2022 financial year. 5. FY23 EXECUTIVE REMUNERATION 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 · · Base salary Superannuation · Other benefits VARIABLE REMUNERATION · · STI (Cash Bonuses) LTI (Performance Rights) 18 Silver Lake Resources Limited Annual Report 2023 Directors’ Report 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 FY23 total remuneration packages split between the fixed and variable remuneration is shown below: TARGET LTI 40% FIXED REMUNERATION 30% TARGET STI 30% 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 62.5 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 gold mining sector. Executives’ base salaries for the 2023 financial year were: Executive Luke Tonkin David Berg Diniz Cardoso Len Eldridge Antony Shepherd Base Salary FY231 Base Salary FY221 Movement $826,000 $357,800 $381,800 $351,800 $301,800 $780,000 $337,500 $363,600 Note 2 $287,400 6% 6% 5% n/a 5% 1 Base Salary as at 30 June of each respective year 2 Classified as a KMP from 1 July 2022 c. Short-term incentive (STI) arrangements The purpose of the STI plan is to link the achievement of key short term 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 and non-financial 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 in FY23 was 100% of total fixed remuneration (TFR). Each year the NRC, in conjunction with the Board, sets KPI targets for Executives. For FY23 the KPIs included non-discretionary targets for safety and environment, production and processing and costs, each of which was measured relative to budget, and a relative TSR target versus a comparator peer group of companies. The NRC also considered and evaluated the Executives’ ongoing review, response and modification of safety, environment, production and cost plans during the year, and the execution and success of the operating, business development and growth strategies. 19 Directors’ Report FY23 Performance against STI measures A summary of the KPI targets set for FY23 and their respective weightings are as follows: KPI Weighting Measure 1. Safety/Environment 2. Mine production & processing 3. Costs 4. Operating strategy & execution 5. Business development & growth 6. Company performance 9% 45% 18% 9% 9% 10% · · · Lagging EH&S indicators Environmental management effectiveness Safety management effectiveness Production and processing from each operating site relative to FY23 budget Costs for each cost centre relative to FY23 budget Execution and success of Operating Strategy Implementation and execution of Corporate Strategy TSR performance against comparator group % of KPI achieved 56% 58% 80% 100% 50% 10% In assessing discretionary components of the KPI, the NRC considered the following achievements against objectives set at the start of the year: · achieving OH&S objectives; · achieving environmental objectives; · achieving FY23 sales and cost guidance despite the challenges presented by labour and supply chain constraints; · · execution and success of operating strategy; exceeding the targeted end of year cash and bullion balance; and · delivery of positive exploration results from infill and extensional resource definition drilling to allow further mines to enter production in future periods. Based on the above assessment, STI payments for FY23 to Executives were as follows: Executive Luke Tonkin David Berg Diniz Cardoso Len Eldridge Antony Shepherd Maximum STI opportunity % STI awarded STI awarded 100% of TFR 100% of TFR 100% of TFR 100% of TFR 100% of TFR 60% 60% 60% 60% 60% $555,000 $237,000 $253,000 $233,000 $200,000 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 most recently approved by shareholders at the 2021 AGM. Key features of the Incentive Plan Under the terms of the Incentive Plan, the Board may determine which employees are eligible to participate. In FY23, all Executives were eligible and were invited to participate. The number of Performance Rights awarded to each Executive was determined by dividing the Executives’ maximum LTI opportunity by the 20 day VWAP of the Company shares as traded on the ASX up to 30 June 2022. Performance Rights which were 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 22. At the discretion of the Board, the composition of the comparator group may change from time to time. 20 Silver Lake Resources Limited Annual Report 2023 Directors’ Report Performance rights granted under the Incentive Plan will have no exercise price. Unless the Bord in its absolute discretion determines otherwise, all unvested performance rights will lapse 30 days following the cessation of employment. The Board will consider the circumstances surrounding the cessation of employment before deciding whether to make any such determination. FY23 LTI outcomes During the year the Company issued 2,239,315 Performance Rights to Executives in respect of the LTI component of their FY23 remuneration. The quantum of Performance Rights issued was determined by reference to the 20 day VWAP to 30 June 2022 of $1.46 per share. Executive Luke Tonkin David Berg Diniz Cardoso Len Eldridge Antony Shepherd Maximum LTI opportunity 20 Day VWAP Number of Performance Rights granted during FY23 Fair value per Performance Right* 133% of TFR 133% of TFR 133% of TFR 133% of TFR 133% of TFR $1.46 $1.46 $1.46 $1.46 $1.46 840,555 359,228 383,324 353,204 303,004 $0.778 $0.778 $0.778 $0.778 $0.778 * Independently valued using a hybrid share option pricing model Performance Rights During the year the Company issued 10,949,024 Performance Rights to employees (including 2,239,315 Performance Rights to Executives) in respect of the LTI component of their FY23 remuneration. Executive Balance at 1 July 2022 Granted in FY23 Converted Luke Tonkin David Berg Diniz Cardoso Len Eldridge Antony Shepherd Total 1,541,965 674,323 718,572 626,267 576,972 4,138,099 840,555 359,228 383,324 353,204 303,004 2,239,315 (612,525) (280,172) (293,938) (281,163) (241,349) (1,709,147) Balance at 30 June 2023 Vested & exercisable at 30 June 2023 1,346,374 574,183 614,902 698,308 486,049 3,719,816 - - - 157,217 - 157,217 Lapsed (423,621) (179,196) (193,056) - (152,578) (948,451) During the year, 948,451 Performance Rights lapsed due to performance hurdles not being satisfied. The total expense recognised in the Statement of Profit or Loss for all KMP Performance Rights for the period ended 30 June 2023 was $1,450,214. Details of the performance rights on issue at 30 June 2023 are summarised in the following table: Number of performance rights Exercise price Grant date Vesting period Expiry period ASX Comparator Group Valuation at grant date Underlying 20 day VWAP Volatility Risk free rate Expected dividends FY21 Award1 FY22 Award FY23 Award 1,798,937 $0.00 1 July 2020 4,598,672 $0.00 1 July 2021 10,949,024 $0.00 1 July 2022 1 July 2020 – 30 June 2023 1 July 2021 – 30 June 2024 1 July 2022 – 30 June 2025 15 years 15 years 15 years DCN; EVN; GOR; NCM; NST; OGC; PRU; RMS; RRL; RSG; SBM; WGX; X64 DCN; EVN; GOR; NCM; NST; OGC; PRU; RMS; RRL; RSG; SBM; WGX; X64 CMM; EVN; GOR; NCM; NST; OGC; PRU; RMS; RRL; SBM; WAF; WGX $0.917 $1.98 65% 0.13% - $1.205 $1.73 60% 0.20% - $0.778 $1.46 50% 3.01% - Note 1: On completion of the vesting period, only 157,217 of the FY21 Performance Rights had vested, with the balance lapsing due to performance hurdles not being satisfied. 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. 21 Directors’ Report e. Service agreements A summary of the key terms of service agreements for Executives in FY23 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. Term of Agreement Notice Period by Executive Notice Period by Silver Lake Name Luke Tonkin David Berg Diniz Cardoso Len Eldridge Open Open Open Open Antony Shepherd Open f. Executive remuneration paid 6 months 6 months 6 months 6 months 6 months 6 months 6 months 6 months 6 months 6 months Fixed Remuneration Termination Payment 12 months TFR 6 months TFR 6 months TFR 6 months TFR 6 months TFR Executive Year Salary & Fees Other Benefits1 Superannuation STI Cash Payments $ $ $ 897,620 109,523 846,100 367,869 343,750 394,389 372,460 361,239 - - 87,672 27,523 25,962 29,369 27,969 27,062 - - 27,500 27,500 27,500 27,500 27,500 27,500 27,500 - - $ 555,000 577,000 237,000 245,000 253,000 264,000 233,000 - - Rights2 $ 550,641 522,216 234,274 227,819 251,437 242,993 215,122 - - Total $ 2,140,284 2,060,488 894,166 870,031 955,695 934,922 863,923 - - 337,370 25,515 27,500 198,000 223,887 812,272 - - 330,110 25,008 305,989 288,640 23,215 22,108 - 27,500 27,500 27,500 - 233,000 200,000 209,000 - 219,465 198,741 194,852 - 835,083 755,445 742,100 2,327,106 216,693 137,500 1,478,000 1,450,215 5,609,514 2,518,430 214,234 165,000 1,726,000 1,631,232 6,254,896 Performance Related Remuneration % 52 53 53 54 53 54 52 - - 52 - 54 54 54 52 54 Luke Tonkin David Berg Diniz Cardoso Len Eldridge3 Steve Harvey4 David Vemer4 Antony Shepherd Total 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 1 Represents contractual entitlements (including termination and retirement benefits), annual leave and long service leave entitlements, measured on an accrual basis 2 These are valuations required under accounting standards and have not actually been paid during the year 3 Classified as KMP from 1 July 2022 4 Ceased as KMP from 1 July 2022 22 Silver Lake Resources Limited Annual Report 2023 Directors’ Report g. Link between company performance, shareholder wealth generation and remuneration The NRC considers a number of criteria to assess the performance of the Company. Criteria used in this assessment include maximising cashflows, 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. EBITDA ($m) Profit after tax ($m) Cash and bullion ($m) Cash from operating activities ($m) Closing share price at 30 June 2023 248.4 30.8 332.8 241.4 $0.97 2022 267.6 77.7 313.8 249.2 $1.21 2021 290.8 98.2 330.2 268.8 $1.66 2020 260.1 256.9 269.4 252.3 $2.13 2019 80.2 6.5 130.7 71.8 $1.26 The Company’s remuneration practices reflect the achievement of certain of the Company’s and Executive’s performance objectives. The Company’s overall objective has been to maximise cash flow, increase operating margins and create new opportunities that compete for capital. 6. FY23 NON-EXECUTIVE DIRECTOR (NED) REMUNERATION a. NED remuneration policy The Company’s policy is to remunerate NEDs at market rates (for comparable ASX listed companies) for time, commitment and responsibilities. Fees for NEDs are not linked to the performance of the Company. It is ensured that: · fees paid to NEDs are within the aggregate amount approved by shareholders at the Company’s Annual General Meeting; · NEDs are remunerated by way of fees (in the form of cash and superannuation benefits); · NEDs are not provided with retirement benefits other than statutory superannuation entitlements; and · NEDs are not entitled to participate in equity-based remuneration schemes designed for executives without due consideration and appropriate disclosure to the Company’s shareholders. Fees paid to NEDs cover all activities associated with their role on the Board and any sub-committees. No additional fees are paid to NEDs for being a Chair or Member of a sub-committee. However, NEDs are entitled to fees or other amounts as the Board determines where they perform special duties or otherwise perform extra services on behalf of the Company. They may also be reimbursed for out of pocket expenses incurred as a result of their Directorships. b. NED fee pool and fees The Company’s Constitution provides that the NEDs may collectively be paid, as remuneration for their services, a fixed sum not exceeding the aggregate maximum from time to time determined by the Company in a general meeting. Directors’ fees payable in aggregate to the NEDs of the Company is currently capped at $1,000,000 per annum. FY23 NED fees NED David Quinlivan Kelvin Flynn Rebecca Prain Peter Alexander Fees FY231 Fees FY221 Movement $262,000 $151,000 $151,000 - $247,300 $142,800 $123,193 $20,127 6% 6% Note 2 Note 3 1 Fees excluding superannuation as at 30 June of each respective year 2 Appointed 17 August 2021 3 Resigned 17 August 2021 23 Directors’ Report c. NED fees paid Details of the remuneration of each NED for the year ended 30 June 2023 is set out in the following table: Non executive Director Year Short Term Base Fee Superannuation benefits David Quinlivan Kelvin Flynn Rebecca Prain1 Peter Alexander2 Total 1 Appointed 17 August 2021 2 Resigned 17 August 2021 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 7. KMP SHAREHOLDINGS $ 262,000 247,300 151,000 142,800 151,000 123,193 - 20,127 564,000 533,420 $ 27,510 24,730 15,855 14,280 15,855 12,319 - 2,013 59,220 53,342 Total $ 289,510 272,030 166,855 157,080 166,855 135,512 - 22,140 623,220 586,762 KMP David Quinlivan Luke Tonkin Kelvin Flynn Rebecca Prain David Berg Diniz Cardoso Len Eldridge Antony Shepherd Total Balance at 1 July 2022 Acquired Conversion of Performance Rights - 1,181,661 - - 270,000 200,000 - - 1,651,661 - - - - - - - - - - 612,525 - - 280,172 293,938 281,163 241,349 1,709,147 Sold - (1,030,000) - - (13,221) (493,938) (281,163) (241,349) (2,059,671) Balance at 30 June 2023 - 764,186 - - 536,951 - - - 1,301,137 There has been no change to KMP shareholdings between 30 June 2023 and the date of this report. AUDITOR’S INDEPENDENCE 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 2023. This Independence Declaration is attached to the Directors’ Report and forms a part of the Directors’ Report. NON-AUDIT SERVICES During the year the Group’s auditor, KPMG, has performed certain other services in addition to the audit and review of the financial statements. The Board is satisfied that the provision of non-audit services is compatible with, and did not compromise the general standard of independence for auditors imposed by the Corporations Act 2001 for the following reasons: · all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the Audit Committee to ensure they do not impact the integrity and objectivity of the auditor; and · the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they do not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Group, acting as an advocate for the Group or jointly sharing risk and rewards. Details of the amounts paid to the auditor of the Group, KPMG, for audit and non-audit services provided during the year are set out below: Audit services Audit and review of financial statements – KPMG Australia Audit and review of financial statements – KPMG Canada Non-audit services Taxation services Total paid 24 Silver Lake Resources Limited Annual Report 2023 2023 2022 303,000 110,000 137,000 550,000 328,000 163,000 155,000 646,000 Directors’ Report ROUNDING OFF The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with that Instrument, all financial information has been rounded off to the nearest thousand dollars, unless otherwise stated. The Directors’ Report is signed in accordance with a resolution of the Directors. Luke Tonkin Managing Director 23 August 2023 25 Directors’ Declaration Directors’ Declaration 1. In the opinion of the Directors: (a). the consolidated financial statements and notes of the Group and the Remuneration Report in the Directors’ Report are in accordance with the Corporations Act 2001 including: (i). Giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its performance for the year then ended; and (ii). Complying with Australian Accounting Standards and Corporations Regulations 2001; (b). the financial statements also comply with International Financial Reporting Standards as disclosed in Note 1; (c). there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and (d). there are reasonable grounds to believe that the Company and the Group entity identified in Note 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 2023. The declaration is signed in accordance with a resolution of the Board of Directors. Luke Tonkin Managing Director 23 August 2023 26 Silver Lake Resources Limited Annual Report 2023 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 2023 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 Graham Hogg Partner Perth 23 August 2023 28 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 27 Independent Auditor's Report 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 2023 and of its financial performance for the year ended on that date; and The Financial Report comprises: • Consolidated Balance Sheet as at 30 June 2023; • 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 • Complying with Australian Accounting accounting policies; and Standards and the Corporations Regulations 2001. • 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. Basis for opinion 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 (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements. Key Audit Matters The Key Audit Matters we identified are: • Valuation of goodwill and non-current assets; and • Recoverability of Deferred Tax Assets in relation to Tax Losses in Australia. 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. 29 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 28 Silver Lake Resources Limited Annual Report 2023 Independent Auditor's Report Independent Auditor's Report Valuation of goodwill and non-current assets ($762.3 million) Refer to Note 15,16 &18 to the Financial Report The key audit matter How the matter was addressed in our audit A key audit matter was impairment testing of goodwill and non-current asset given the significance of the balances in the Group’s consolidated balance sheet. Impairment testing was performed on the following Cash generating units (CGU): 1) Mount Monger and Deflector operations due to the presence of goodwill; and 2) The Sugar zone operation for which the presence of an impairment indicator was identified. Our procedures included: • We examined documentation prepared by management including consideration of the appropriateness of adopting fair value less costs of disposal methodology in developing models for Deflector and Mount Monger CGUs; • We evaluated the sensitivity of the valuation of goodwill by considering reasonably possible changes to the key assumptions in the valuation models; We focused on the significant and judgemental forward-looking assumptions the Group applied in their fair value less costs of disposal (FVLCOD) calculation, including: • We assessed the reasonableness of key assumptions used in the models, using our knowledge of the Group, their past performance, and our industry experience; • Forecast cashflows including forecast sales, production output, production costs and capital expenditure; • We compared the forecast cash flows and capital expenditure in the models to Board approved forecasts; • Forecast gold prices and AUD/USD exchange rate - fluctuating gold prices and exchange rates increases the risk of future fluctuations and inaccurate forecasting; • Discount rate - these are complicated in nature and vary according to the conditions and environment the specific CGU is subject to from time to time; • Life of mineral reserves and resources - inherent estimation uncertainty related to life of mine reserves and resources increases the range of forecasting outcomes to consider; and • Resources multiples. We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. • We compared expected commodity prices and foreign exchange rates to published views of the market commentator on future trends; • For resources outside of the CGU models, where value is determined using a resource multiple basis (to comparable companies) we compared resource multiples to publicly available market data for the comparable entities; • We compared the life of mineral reserves and resources in the models to the reserves and resources statements commissioned by the Group for consistency with the cash flow forecasts; and • Working with our valuation specialists, we independently developed a discount rate considered comparable, using publicly available market data for comparable entities. Specifically for the Sugar Zone CGU: • We have involved our valuation specialists and assessed the reasonableness of the methodology adopted by the Group; • We assessed the Group’s external expert report and considered their objectivity, competence and scope of their work; 30 29 Independent Auditor's Report • We assessed the companies used in the multiples analysis to determine if they are comparable to Sugar Zone; and • We recalculated the valuation range based on the range of multiples. We also assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standards. Recoverability of Deferred Tax Assets in relation to Tax Losses in Australia ($60.8 million) Refer to Note 9 to the Financial Report The key audit matter How the matter was addressed in our audit The Group has recognised deferred tax assets arising from tax losses carried forward. Working with our tax specialists, our procedures included: The Group has recognised a net deferred tax asset balance of $17.3 million as at 30 June 2023 in Australia. This includes gross carry forward losses of $202.7 million (not tax effected) which are partially offset by deferred tax liabilities for temporary differences. Our focus on recoverability of the deferred tax assets is associated with the Australia tax losses as the losses are booked in excess of the deferred tax liabilities. The recoverability of deferred tax assets in relation to tax losses was a key audit matter due to: • The significance of these assets recognised by the Group; • The significant judgement required by us to evaluate the Group’s assessment of their probability of generating sufficient taxable profits, in light of the tax losses recorded in previous financial years; and • The risk of the Group incorrectly applying the requirements of the accounting standards and Australian tax law to recognise deferred tax assets for tax losses, which could result in a substantial effect on the Group’s statement of profit or loss and other comprehensive income. We involved tax specialists to supplement our senior team members in assessing this key audit matter. • Examining the documentation prepared by the Group underlying the availability of tax losses and annual utilisation allowances for consistency with Australian tax law as applicable; • Comparing the forecasts included in the Group’s estimate of future taxable profits used in their deferred tax asset recoverability assessment to those used in the Group’s assessment of the valuation goodwill. Our approach to testing these forecasts was consistent with the approach detailed in relation to the valuation of goodwill; • We evaluated the differences between forecast cash flows and taxable profits by evaluating the adjustment of cash flows, for differences between accounting profits, as presented in the Group’s forecasts, to taxable profits, against Australian tax law; • Understanding the timing of future taxable profits and considering the consistency of the timeframes of expected recovery to our knowledge of the business and its plans; and • Recalculating the amount of previously recognised tax losses utilised against the recorded amount disclosed by the Group in accordance with Australian tax law and the accounting standards. We assessed the disclosures in the financial report using the results from our testing and against the requirements of the accounting standards. 31 30 Silver Lake Resources Limited Annual Report 2023 Independent Auditor's Report Other Information Other Information is financial and non-financial information in Silver Lake Resources Limited’s 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 and will 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; and • 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. Auditor’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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. 32 31 Independent 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 2023, 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 pages 15 to 25 of the Directors’ Report for the 17 to 26 year ended 30 June 2023. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Graham Hogg Partner Perth 23 August 2023 33 32 Silver Lake Resources Limited Annual Report 2023 Directors’ Report Consolidated Statement of Profit or Loss and Other Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2023 30 June 2023 30 June 2022 Notes $’000 $’000 Revenue Cost of sales Gross profit Other income Exploration expensed/impaired Profit/(loss) on sale of assets Gain on bargain purchase Administration expenses Results from operating activities Finance income Finance expenses Net finance income/(costs) Profit before income tax Income tax expense Profit for the year Net income for the year Other comprehensive income Items that will not be reclassified subsequently to profit or loss - exchange differences arising on translating foreign operations Total comprehensive income for the year attributable to Owners of the Company 4 5 3 6 8 9 719,628 (639,031) 80,597 228 (5,044) 412 - (23,744) 52,449 13,516 (6,640) 6,876 59,325 (28,489) 30,836 634,566 (518,525) 116,041 252 (3,187) (1,008) 28,827 (17,515) 123,410 676 (8,751) (8,075) 115,335 (37,654) 77,681 30,836 77,681 1,963 7,690 32,799 85,371 Basic earnings per share Diluted earnings per share 10 10 Cents Per Share Cents Per Share 3.31 3.26 8.60 8.52 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. 33 Consolidated Balance Sheet Consolidated Balance Sheet AS AT 30 JUNE 2023 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 Deferred tax assets Goodwill Total non-current assets Total assets Current liabilities Trade and other payables Lease liabilities Employee benefits Deferred revenue Rehabilitation and restoration provision Total current liabilities Non-current liabilities Lease liabilities Rehabilitation and restoration provision Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Accumulated losses Total equity 30 June 2023 30 June 2022 Notes $’000 $’000 11 13 14 14 15 16 17 9 18 19 21 22 20 24 21 24 9 25 26 328,285 304,298 14,136 92,473 875 15,078 83,887 1,230 435,769 404,493 53,711 435,967 235,651 12,838 77,786 90,695 906,648 1,342,417 90,672 23,479 7,243 - - 121,394 21,134 48,093 63,385 132,612 254,006 1,088,411 63,356 402,146 247,604 7,968 65,112 90,695 876,881 1,281,374 83,317 22,382 7,617 20,467 90 133,873 24,465 46,833 22,020 93,318 227,191 1,054,183 1,095,436 1,096,268 17,710 (24,735) 1,088,411 13,486 (55,571) 1,054,183 The Consolidated Balance Sheet should be read in conjunction with the accompanying notes to these consolidated financial statements. 34 Silver Lake Resources Limited Annual Report 2023 Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2023 Balance at 1 July 2021 Total comprehensive income for the period Transactions with owners, recorded directly in equity Equity settled share based payment Transfer from reserves to share capital (Note 25) Share buyback (Note 25) Issue of shares Exchange differences on translation of foreign operations Share Capital $’000 1,023,106 - - 3,323 (1,064) 70,903 - Balance at 30 June 2022 1,096,268 5,796 Share Based Payment Reserve Foreign Currency Translation Reserve Retained Earnings / (Accumulated Losses) $’000 $’000 $’000 Total Equity $’000 5,924 - 3,195 (3,323) - - - - - - - - - 7,690 7,690 (133,252) 895,778 77,681 77,681 - - - - - 3,195 - (1,064) 70,903 7,690 (55,571) 1,054,183 Balance at 1 July 2022 Total comprehensive income for the period Transactions with owners, recorded directly in equity Equity settled share based payment Transfer from reserves to share capital (Note 25) Share buyback (Note 25) Exchange differences on translation of foreign operations 1,096,268 - - 2,205 (3,037) - 5,796 - 4,466 (2,205) - - Balance at 30 June 2023 1,095,436 8,057 7,690 (55,571) 1,054,183 - - - - 1,963 9,653 30,836 30,836 - - - - 4,466 - (3,037) 1,963 (24,735) 1,088,411 The Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes to these consolidated financial statements. 35 Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows FOR THE YEAR ENDED 30 JUNE 2023 30 June 2023 30 June 2022 Notes $’000 $’000 Cash flows from operating activities Receipts from sales Payments to suppliers and employees Net cash from operating activities Cash flow from investing activities Interest received Acquisition of plant and equipment Proceeds from sale of plant and equipment Acquisition of investments Proceeds from divestments Payments for exploration, evaluation and development Cash acquired in a business combination Harte Gold transaction Net cash used in investing activities Cash flows from financing activities Share buy back Repayment of lease liabilities Payment of stamp duty Return of insurance bond Proceeds from gold pre-pay arrangement Repayment of gold pre-pay arrangement Finance costs paid Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 July Effects of fx rate changes on cash and cash equivalents Cash and cash equivalents at 30 June 700,254 (458,845) 241,409 6,353 (34,438) 300 (1,979) 3,487 (155,116) - - (181,393) (3,037) (27,561) - - - - (5,448) (36,046) 23,970 304,298 17 328,285 632,852 (383,769) 249,083 676 (14,904) - (1,722) 375 (112,084) 7,165 (134,720) (255,214) (1,064) (33,025) (3,316) 1,444 30,572 (10,223) (2,928) (18,540) (24,671) 328,890 79 304,298 12 17 3 25 20 11 The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes to the consolidated financial statements. 36 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2023 1. BASIS OF PREPARATION Silver Lake Resources Limited is a for-profit entity domiciled in Australia. 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 and Canada. The consolidated financial statements of the Company as at and for the year ended 30 June 2023 comprise the Company and its subsidiaries (together referred to as “the Group” and individually as “Group Entities”). The consolidated financial statements were approved by the Board of Directors on 23 August 2023. 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 balance sheet: · · · · 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 expenditure which have been measured at recoverable value where impairments have been recognised 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. 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). Foreign Currency Translation (i). Functional and Presentation Currency These consolidated financial statements are prepared in Australian dollars, which is the functional currency of the Company and its Australian subsidiaries. The functional currency for Canadian subsidiaries is Canadian dollars. (ii). Transactions and balances Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. The subsequent payment or receipt of funds related to a transaction is translated at the rate applicable on the date of payment or receipt. Monetary assets and liabilities which are denominated in foreign currencies are re-translated at the rate of exchange ruling at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. All exchange differences in the consolidated financial statements are taken to the Statement of Other Comprehensive Income and accumulated in a reserve. (iii). Translation The assets and liabilities of subsidiaries with functional currency other than Australian dollars (being the presentation currency of the Group) are translated into Australian dollars at the exchange rate at the reporting date and the Statement of Profit or Loss is translated at the average exchange rate for the period. On consolidation, exchange differences arising from the translation of these subsidiaries are recognised in Other Comprehensive Income and accumulated in the foreign currency translation reserve. (b). Use of Judgements and Estimates The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. 37 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 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 – 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 24 Closure and rehabilitation – measurement of provision based on key assumptions (c). Basis for Consolidation The consolidated financial statements comprise the financial statements of the Group. A list of controlled entities (subsidiaries) at year end is disclosed in Note 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). Measurement of Fair Value A number of the Group’s accounting policies and disclosures require the determination of fair value for both financial and non-financial assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: · · · Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. 2. SIGNIFICANT ACCOUNTING POLICIES The accounting policies applied in these financial statements are the same as those applied in the Group’s consolidated financial statements as at and for the year ended 30 June 2022. Any new, revised or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted and are not expected to have a significant impact on the Group. 3. ACQUISITION OF SUBSIDIARY IN FY22 (SILVER LAKE ONTARIO INC – FORMERLY HARTE GOLD CORP.) On 28 January 2022, the Ontario Superior Court of Justice approved Silver Lake’s bid to acquire Harte Gold Corp. (‘Harte Gold’) under Canada’s Companies’ Creditors Arrangement Act (‘CCAA proceedings’). Harte Gold was a TSX-listed gold mining company which owned and operated the Sugar Zone mine in Ontario, Canada. Closing of the transaction occurred on 18 February 2022 (‘Closing Date’) which was the acquisition date for accounting purposes. The acquisition of Harte Gold involved the execution of multiple transactions including: Transactions through the CCAA Process (i). Acquisition of BNP Paribas (BNP) credit facilities On 19 November 2021, Silver Lake acquired credit facilities provided by BNP to Harte Gold. Total cash consideration paid to BNP amounted to US$65.3 million. At Closing Date, the balance became an intercompany amount between Harte Gold and Silver Lake. 38 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 (ii). Debtor in possession (DIP) loan During the CCAA proceedings, Silver Lake entered into a DIP Loan agreement to provide Harte Gold a non-revolving multiple draw credit facility of up to C$10.8 million. The loan allowed Harte Gold to maintain the liquidity required to continue operations until closing of the transaction. At Closing Date, Harte Gold had drawn down C$1.9 million of the facility, with the balance subsequently transferred to Harte Gold to fund ongoing working capital. (iii). Settlement of Appian debt facilities In January and February 2022, Silver Lake settled all debt facility obligations owed by Harte Gold to Appian Capital Advisory LLP (‘Appian’) through the issuance of 27.0 million Silver Lake shares to Appian (at a fair value of $39.4 million) and payment of $8.0 million in cash. Other transactions (iv). Settlement of hedge book At Closing Date, Silver Lake elected to settle Harte Gold’s out of the money hedge book with BNP. Total consideration amounted to US$24.8 million which was settled in cash. (v). Acquisition of royalty At Closing Date, Silver Lake elected to acquire a net smelter royalty (“NSR”) from Appian. The 2.0% NSR was payable on production from the Sugar Zone mine and on the entire Sugar Zone property. The consideration for the acquisition totalled US$22.0 million and was settled through the issuance of 17.66 million Silver Lake shares to Appian at a fair value of A$31.5 million. At the Closing Date, the settlement value across all transactions related to the CCAA process amounted to A$139.5 million (Table 1): CCAA Transactions Transaction Amount Basis of settlement i. ii. Acquisition of BNP credit facilities Debtor in Possession Loan US$65,328,290 C$1,900,000 iii. Settlement of Appian debt facilities C$43,134,100 Cash Cash Equity Cash Total Table 1 The settlement value across the other transactions amounted to A$66.1 million (Table 2): Other Transactions Settlement of hedge book Acquisition of royalty iv. v. Transaction Amount Basis of settlement US$24,849,204 US$22,000,000 Cash Equity Total Table 2 A$'000 89,844 2,196 39,378 8,030 139,448 A$'000 34,531 31,525 66,056 Note: balances in tables are converted to Australian Dollars using the applicable foreign currency rate at the date of the transaction Following completion of the above transactions and final court approval, all previous equity in Harte Gold was written off and new equity issued to Silver Lake as sole shareholder. 39 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 Accounting treatment As the acquisition of Harte Gold occurred through a Court approved CCAA process and resulted in no payments to previous equity holders, the consideration amount for accounts purposes under AASB 3 Business Combinations, was deemed to be nil. Instead, each individual transaction tabled above was treated separately for accounts purposes. Net identifiable assets at fair value as at the date of acquisition are tabled below: Cash and cash equivalents Trade and other receivables Inventory Prepayments Property, plant and equipment Right-of-use lease assets Exploration, evaluation and development expenditure Deferred tax assets Trade and other payables Employee provisions Interest bearing liabilities Rehabilitation provision Deferred tax liabilities Total net identifiable assets $’000 7,165 7,069 11,113 3,150 104,468 9,469 95,928 16,986 (21,289) (1,580) (180,888) (5,778) (16,986) 28,827 As the consideration for accounting purposes was deemed to be nil, to initially recognise the net assets tabled above, a gain on bargain purchase of $28.8 million was recognised in the statement of profit or loss as the excess of fair value of net assets acquired over consideration paid. Accounting Policies 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. REVENUE Gold sales Copper sales Silver sales Total 30 June 30 June 2023 $’000 701,386 16,976 1,266 719,628 2022 $’000 621,264 12,116 1,186 634,566 Included in current year gold sales is 89,952 ounces of gold sold (at an average price of A$2,601/ounce) under various hedge programs. At 30 June 2023, the Company has a total of 110,000 ounces of gold left to be delivered under these programs over the next 30 months at an average price of A$3,007/ounce (FY22: 40,000 ounces at A$2,505/ounce). Included in gold and copper sales is $3.3 million of revenue attributable to provisionally priced contracts (FY22: $0.3 million). Accounting Policies Gold bullion sales Under AASB 15 Revenue, 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 metals account into the account of the buyer. 40 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 Concentrate Sales Under AASB 15 Revenue, 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 in Note 4. 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. 5. COST OF SALES Mining and processing costs Impairment of carrying value of inventories Amortisation Depreciation Salaries and on-costs Royalties Total Accounting Policies Mining and processing costs Notes 15 16 30 June 2023 30 June 2022 $’000 336,697 68 118,511 71,578 89,103 23,074 639,031 $’000 266,119 - 100,062 67,818 63,528 20,998 518,525 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. 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 Period 7-10 Years 3-5 Years 3-10 Years 3-15 Years 3-5 Years 41 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 6. ADMINISTRATION EXPENSES Salaries and on-costs Consultants and contractors Rental expenses Business development expenses Share based payments Other corporate costs Total 7. GROUP PERSONNEL EXPENSES Wages and salaries Other associated personnel expenses Superannuation and pension contributions Total 8. FINANCE INCOME AND EXPENSES Interest income Change in fair value of listed investments (Note 17) Finance income Interest expense Change in fair value of listed investments (Note 17) Interest expense on lease liabilities Rehabilitation accretion and gold prepay Borrowing costs Foreign exchange Finance costs Net finance costs Accounting Policies 30 June 2023 30 June 2022 $’000 12,507 1,925 557 1,229 4,466 3,060 23,744 $’000 9,458 1,299 595 299 3,195 2,669 17,515 30 June 2023 30 June 2022 $’000 87,677 8,827 6,214 102,718 $’000 62,424 6,206 5,267 73,897 30 June 2023 30 June 2022 $’000 7,639 5,877 13,516 (714) - (1,739) (1,075) (3,112) - (6,640) 6,876 $’000 676 - 676 (13) (4,741) (2,735) (1,244) - (18) (8,751) (8,075) 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, leases, unwinding of the discount on provisions and change in the value of investments measured at fair value through the profit or 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. 42 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 9. TAXES (a). Income tax Current tax expense Current income tax Adjustment for prior years Deferred income tax expense Derecognition of previously recognised DTA Movement in 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 Australian corporation tax rate of 30% Adjustment for prior years Movement due to non-deductible items Derecognition of previously recognised DTA Deferred taxes not brought to account Non-assessable gain on bargain purchase Adjustment for difference between (AUD/CAD) tax rates Other movements Income tax expense reported in profit or loss (b). Deferred tax assets and liabilities Inventories Investments Exploration, evaluation and mining assets Property, plant and equipment Accrued expenses Provisions Share issue costs Plant, equipment and mine assets - Ontario Tax losses Derecognition of previously recognised DTA Net deferred tax assets Australian entities: Deferred tax assets Deferred tax liabilities Canadian entities: Deferred tax assets Deferred tax liabilities Net deferred tax assets 30 June 2023 30 June 2022 $’000 $’000 18,537 519 19,056 - 9,433 28,489 59,325 17,798 519 1,444 - 10,933 - (1,851) (354) 28,489 5,701 146 5,847 11,296 20,511 37,654 115,335 34,601 146 2,466 11,296 - (8,648) (1,376) (831) 37,654 30 June 2023 30 June 2022 $’000 (5,172) (1,371) (97,695) 18,384 1,522 14,540 1,042 (2,828) 85,979 14,401 - 14,401 60,800 (43,468) 16,986 (19,917) 14,401 $’000 (4,722) - (71,088) 9,538 1,626 14,131 1,797 (5,034) 108,140 54,388 (11,296) 43,092 79,857 (31,731) 16,986 (22,020) 43,092 43 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 Accounting Policies Income tax Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Tax consolidation The Company and its Australian wholly owned entities are part of a tax-consolidated group. As a consequence, all members of the Australian 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 The Group utilised $61,790,000 of tax losses in Australia during the current year by offsetting them against taxable income. At 30 June 2023 the Company has $240,326,000 (FY22: $303,846,000) of tax losses remaining that are available for offset against future taxable profits in Australia. The Company has not recognised $37,654,000 of these losses on the balance sheet which would equate to a deferred tax asset of $11,296,000. At 30 June 2023, the Group’s Canadian subsidiaries have $209,434,000 (FY22: $130,255,000) of tax losses remaining that are available for offset against future taxable profits in Canada. The Canadian subsidiary has not recognised $108,307,000 of these losses on the balance sheet which would equate to a deferred tax asset of $27,077,000. The potential benefit of carried forward tax losses will only be obtained if taxable profits are derived of a nature, and of an amount sufficient, to enable the benefit from the deductions to be realised or the benefit can be utilised by the Group provided that: (i). the provisions of deductibility imposed by law are complied with; and (ii). no change in tax legislation adversely affects the realisation of the benefit from the deductions. In accordance with the Group’s accounting policies for deferred taxes, a deferred tax asset is recognised for 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. 44 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 10. EARNINGS PER SHARE Profit used in calculating basic and diluted EPS Weighted average number of ordinary shares used in calculating basic earnings per share Effect of dilution in respect of unvested performance rights granted to employees Weighted average number of ordinary shares used in calculating diluted earnings per share 30 June 2023 30 June 2022 $’000 30,836 $’000 77,681 Number of Shares Number of shares 930,296,458 902,770,152 14,320,124 9,361,404 944,616,582 912,131,556 Accounting Policies Basic EPS is calculated as profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares. Diluted EPS is determined by adjusting the profit attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, including performance rights granted to employees. 11. CASH AND CASH EQUIVALENTS Cash at bank Accounting Policies 30 June 2023 30 June 2022 $’000 328,285 $’000 304,298 Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less. The Group ensures that as far as possible it maintains excess cash and cash equivalents in short-term high interest bearing deposits. The Group’s exposure to interest rate risk and a sensitivity analysis of financial assets and liabilities are disclosed in Note 27. 12. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES 30 June 2023 30 June 2022 Cash flow from operating activities Profit after tax Adjustments for: Depreciation Amortisation Exploration expenditure & impairment Share based payments Change in fair value of investments Non cash finance costs Profit/(loss) from the sale of non-current assets Gain on bargain purchase 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 net deferred tax assets Change in trade and other payables Change in other liabilities Total $’000 30,836 71,578 118,511 901 4,466 (5,877) 2,814 (500) - 222,729 942 1,059 354 28,691 7,305 (19,671) 241,409 $’000 77,681 67,818 100,062 3,187 3,195 4,741 1,257 5 (28,827) 229,119 (1,242) (13,983) 2,155 37,653 (11,803) 7,184 249,083 45 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 13. TRADE AND OTHER RECEIVABLES Current Trade and other receivables Sales tax receivables Total 30 June 2023 30 June 2022 $’000 $’000 7,617 6,519 14,136 6,961 8,117 15,078 The Group’s exposure to interest rate risk and a sensitivity analysis of financial assets and liabilities are disclosed in Note 27. Accounting Policies Trade receivables are recognised initially at the value of the invoice sent to the counterparty and subsequently at the amounts considered recoverable (amortised cost). Where there is evidence that the receivable is not recoverable, it is impaired with a corresponding change to the profit or loss statement. The Group’s exposure to credit risk in relation to its receivables is not material. 14. INVENTORIES Current Materials and supplies Ore stocks Gold in circuit Concentrate Bullion Non-Current Ore stocks Total 30 June 2023 30 June 2022 $’000 22,569 53,953 8,155 3,304 4,492 92,473 53,711 146,184 $’000 20,329 41,188 8,260 4,593 9,517 83,887 63,356 147,243 Stockpiles that are not forecast to be processed over the next 12 months are classified as non-current inventory. 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. Accounting Policies Inventory Ore stockpiles, concentrate, 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 Bullion comprises gold that has been delivered to an independent gold refinery prior to period end but which has not yet been delivered into a sale contract. 46 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 15. EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE During the year ended 30 June 2023 the Group incurred and capitalised the following on exploration, evaluation and development expenditure: Exploration and evaluation phase Cost brought forward Expenditure during the year Impaired during the year Transferred to development phase Expensed during year Balance at 30 June Development phase Cost brought forward Transfer from exploration and evaluation phase Transferred to production phase Balance at 30 June Production phase Cost brought forward Acquired in a business combination (Note 3) Transfer from development phase Expensed during the year Expenditure during the year Foreign currency translation adjustment Rehabilitation asset adjustment Amortisation expense Balance at 30 June Total Impairment testing - Sugar Zone 30 June 2023 30 June 2022 $’000 16,850 14,429 (901) (5,758) (2,717) 21,903 - 5,758 (5,758) - 385,296 - 5,758 (1,426) 141,307 1,322 318 (118,511) 414,064 435,967 $’000 11,772 8,307 - (1,026) (2,203) 16,850 96,452 1,026 (97,478) - 159,936 95,928 97,478 - 131,565 3,872 (3,421) (100,062) 385,296 402,146 At year end, a review of the recoverable amount of the Sugar Zone CGU was undertaken. The assessment of the fair value for Sugar Zone was determined based on a market approach using Enterprise Value resource multiples for comparable listed ASX and TSX mining companies. Using this method, which was supported by a third-party expert, it was determined that the range of comparable multiples was A$138 – A$225/resource ounce. Given the carrying value of the Sugar Zone CGU was at the bottom end of this range, nil impairment was required at 30 June 2023. Accounting Policies Exploration and evaluation expenditure Exploration and evaluation expenditures are those expenditures incurred in connection with the exploration for and evaluation of minerals resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. Expenditure incurred on activities that precede exploration and evaluation of mineral resources, including all expenditure incurred prior to securing legal rights to explore an area, is expensed as incurred. Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. An ‘area of interest’ is an individual geological area which is considered to constitute a favourable environment for the presence of a mineral deposit or has been proved to contain such a deposit. These costs are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which: · · such costs are expected to be recouped through successful development and exploitation or from sale of the area; and exploration and evaluation activities in the area have not, at balance date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable resources, and active and significant operations in, or relating to, this area are continuing. 47 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to the area of interest. If costs do not meet the criteria noted above, they are written off in full against the profit or 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 units 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. 48 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 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. Deferred Stripping Costs Stripping is the process of removing overburden and waste materials from surface mining operations to access the ore. Stripping costs are capitalised during the development of a mine and are subsequently amortised over the life of mine on a units of production basis, where the unit of account is 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. PROPERTY, PLANT AND EQUIPMENT Land & Buildings $’000 Note Plant & Equipment Capital Work In Progress Total $’000 $’000 $’000 Balance 1 July 2021 Additions Acquired in a business combination 3 Transfers Leased assets Depreciation Foreign currency translation adjustment Disposals At 30 June 2022 Balance 1 July 2022 Additions Transfers Leased assets Depreciation Foreign currency translation adjustment Disposals At 30 June 2023 16(a) 5 16(a) 5 7,409 - 54,550 6,716 - (5,884) 805 - 63,596 63,596 - 3,328 - (9,266) 355 - 58,013 114,440 38 45,617 60,099 18,197 (61,934) 804 (5,331) 171,930 171,930 - 28,482 12,728 (62,312) 273 (338) 150,763 59,982 15,074 4,301 (66,815) - - 276 (740) 12,078 12,078 46,580 (31,810) - - 27 - 26,875 181,831 15,112 104,468 - 18,197 (67,818) 1,885 (6,071) 247,604 247,604 46,580 - 12,728 (71,578) 655 (338) 235,651 49 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 16(a). RIGHT-OF-USE ASSETS The Group leases mining equipment for the purposes of production and exploration activities. These leases run for a period of approximately 1-3 years and may contain an option to renew the lease after that date. Leases that contain extension options are exercisable by the Group and not the lessor. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The Group has estimated that exercising of the extension options would result in an increase in lease liabilities and right-of-use assets of $1.1 million. Some leases provide for additional rent payments that are based on changes in local price indices. These are factored into the calculation of minimum lease payments in determining the value of the right-of-use assets only when these changes become effective. Information about leases for which the Group is a lessee is presented below: Property, plant and equipment Balance 1 July Additions to right-of-use assets Derecognition of right-of-use assets Depreciation charge for the year Balance 30 June Accounting Policies 30 June 2023 30 June 2022 $’000 50,118 12,728 (85) (24,767) 37,994 $’000 68,278 18,197 (5,331) (31,026) 50,118 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. INVESTMENTS Investments in listed entities – at fair value Movements as follows: Balance at 1 July Acquisitions Disposals Change in fair value Balance at 30 June Accounting Policies 30 June 2023 30 June 2022 $’000 12,838 7,968 1,979 (2,986) 5,877 12,838 $’000 7,968 11,391 1,722 (404) (4,741) 7,968 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 (considered a Level 1 fair value measurement). 50 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 18. GOODWILL Goodwill of $90.7 million was recorded following the Company’s merger with Doray Minerals Limited on 5 April 2019. 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 Mount Monger and Deflector Operation As goodwill does not generate cash flows independently of other assets, its carrying value was apportioned to two of the Group’s 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 (MMO) 67% ($60.8 million) · Deflector Operation 33% ($29.9 million) 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$1,780–US$1,900/oz. with a forecast exchange rate of US$0.68 to US$0.70 per A$1.00, based on broker consensus forecasts over the life of the mines. A discount rate of 6% 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). The impairment testing carried out at 30 June 2023 using these assumptions resulted in a nil impairment charge. Changes to the forecast Australian dollar gold price may have an impact on the carrying value of a CGU in future periods. For example, a A$400/ounce decrease in forecast AUD gold prices would result in a $10 million impairment to each of the MMO and Deflector CGUs, assuming all other factors remain constant. The application of a 10% discount rate would not result in an impairment to either CGU. Accounting Policies 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 operating segments 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. TRADE AND OTHER PAYABLES Trade payables Other accruals Total 30 June 2023 30 June 2022 $’000 43,815 46,857 90,672 $’000 65,972 17,345 83,317 The Group’s exposure to liquidity risk and a sensitivity analysis of financial assets and liabilities are disclosed in Note 27. Accounting Policies Trade payables are recognised at the value of the invoice received from a supplier. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and generally paid between 30-45 days of recognition. 51 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 20. DEFERRED REVENUE Gold prepay facility 30 June 2023 30 June 2022 $’000 - $’000 20,467 On 15 February 2022 the Company entered into a secured Gold Prepay Facility (“Facility”) with the Commonwealth Bank of Australia (“CBA”), raising $30,572,000. Under the Facility, Silver Lake delivered a total of 11,928 ounces of gold to CBA between March 2022 and February 2023 (994 ounces per month). The Facility was secured by way of mining mortgages over the Mount Monger Operation and a general security interest over all assets of Silver Lake and its wholly owned subsidiary Silver Lake (Integra) Pty Ltd. The facility was settled in full by February 2023. Accounting Policies Deferred revenue is recorded as a liability when the Company has received payment for goods (in this case bullion) not yet delivered to the buyer. The upfront payment received is initially recognised as a liability and is then transferred to profit or loss as revenue in line with the physical delivery of bullion to the customer. 21. LEASE LIABILITIES Current Lease liabilities Non-current Lease liabilities Total 30 June 2023 30 June 2022 $’000 23,479 21,134 44,613 $’000 22,382 24,465 46,847 Payments made during the year under lease arrangements qualifying under AASB 16 Leases but were variable by nature and therefore not included in the minimum lease payments used to calculate lease liabilities, totalled $169.9 million (FY22: $152.3 million). These include payments for services, including labour charges, under those contracts that contained payments for the right-of-use of assets. For the period ended 30 June 2023, the Group recognised $27.7 million (2022: $32.8 million) of lease liability repayments, $24.8 million (2022: $31.0 million) of depreciation charges and $2.1 million (2022: $2.7 million) of interest costs in relation to these leases. Total cash outflows for leases recognised under AASB 16 Leases totalled $27.6 million for the year (2022: $33.0 million). Accounting Policies The Group leases assets including properties and equipment. As a lessee, the Group previously classified leases as operating or financial leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under AASB 16 Leases, the Group recognises right of use assets and lease liabilities for some of these leases – i.e. they are on-Balance Sheet. The Group presents right-of-use assets in ‘Property, plant and equipment’ together with assets that it owns. The Group presents lease liabilities separately in the Balance Sheet. In accordance with AASB 16 Leases, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period in exchange for consideration. At inception or on reassessment of a contract that contains a lease component, the Group has elected not to separate non-lease components and will instead account for the lease and non-lease components as a single lease component. The Group recognises right-of-use assets at the commencement date of the lease and is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses and adjusted for any changes to lease liabilities. The cost of right- of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. The carrying amount of lease liabilities is remeasured if there is a modification to an index or rate, a change in the residual value guarantee, or changes in the assessment of whether a purchase, extension or termination option will be exercised. 52 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 The lease payments include fixed monthly payments, variable lease payments and amounts expected to be paid under residual value guarantees less any incentives received. Variable lease payments that do not depend on an index or rate are recognised as an expense in the period it was incurred. The lease payment also includes the exercise price, or termination price, of a purchase option in the event the lease is likely to be extended, or terminated, by the Group. The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of these options will impact the lease term and therefore affects the amount of lease liabilities and right-of-use assets recognised. 22. EMPLOYEE BENEFITS Current Liability for annual leave Liability for long service leave Total Accounting Policies (i). Defined Contribution Superannuation Funds 30 June 2023 30 June 2022 $’000 $’000 5,266 1,977 7,243 5,825 1,792 7,617 Obligations for contributions to defined contribution superannuation funds and pension plans 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. 23. SHARE BASED PAYMENTS Performance rights (equity settled) Performance rights have been issued to the Managing Director and other eligible employees in accordance with long term incentive plans approved by shareholders. Movements in Performance Rights are summarised as follows: Balance at1 July 2022 Granted in FY23 Converted Lapsed Balance at 30 June 2023 Vested & exercisable at 30 June 2023 Total 8,932,251 10,949,024 (2,764,606) (2,796,545) 14,320,124 245,427 These performance rights are subject to vesting conditions as outlined in section 5.3(c) of the Remuneration Report. Details of the performance rights currently on issue are summarised in the following table: Number of performance rights Exercise price Grant date Vesting period Expiry period ASX Comparator Group Valuation at grant date Underlying 20 day VWAP Volatility Risk free rate Expected dividends FY21 Award1 FY22 Award FY23 Award 1,798,937 $0.00 1 July 2020 4,598,672 $0.00 1 July 2021 10,949,024 $0.00 1 July 2022 1 July 2020 – 30 June 2023 1 July 2021 – 30 June 2024 1 July 2022 – 30 June 2025 15 years 15 years 15 years DCN; EVN; GOR; NCM; NST; OGC; PRU; RMS; RRL; RSG; SBM; WGX; X64 DCN; EVN; GOR; NCM; NST; OGC; PRU; RMS; RRL; RSG; SBM; WGX; X64 CMM; EVN; GOR; NCM; NST; OGC; PRU; RMS; RRL; SBM; WAF; WGX $0.917 $1.98 65% 0.13% - $1.205 $1.73 60% 0.20% - $0.778 $1.46 50% 3.01% - Note 1: On completion of the vesting period, only 157,217 of the FY21 Performance Rights had vested, with the balance lapsing due to performance hurdles not being satisfied. 53 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 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 2023 was $4,466,000 (FY22: $3,195,000). Accounting Policies Share-Based Payment Transactions The grant-date fair value of equity-settled share-based payment awards granted to employees is generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share based payment awards with non-vesting conditions, the grant-date fair value of the share- based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. 24. PROVISIONS Closure and rehabilitation Opening balance at 1 July Acquired through a business combination Accretion expense 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 2023 30 June 2022 $’000 $’000 46,923 - 1,075 254 (159) 48,093 - 48,093 48,093 44,929 5,778 1,016 (3,243) (1,557) 46,923 90 46,833 46,923 At year end a review of the Group’s closure and rehabilitation provision was undertaken using updated cost assumptions and updated rehabilitation plans. As a result of this review the provision was increased by $254,000 (FY22: $3,243,000 decrease). Accounting Policies 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. 54 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 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. 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 closure and rehabilitation provision is remeasured to reflect any of these changes. 25. SHARE CAPITAL Movements in issued capital Balance as at 1 July 2021 Issue of shares – long term incentive plan Transfer from reserves Issues of shares – Harte Gold transaction (Note 3) Buy back of share capital Balance as at 30 June 2022 Transfer from reserves Buy back of share capital Balance as at 30 June 2023 All ordinary share rank equally and have no par value. Accounting Policy Issued Capital Number $’000 881,575,315 6,875,764 - 44,681,667 (778,164) 932,354,582 - (2,610,249) 929,744,333 1,023,106 - 3,323 70,903 (1,064) 1,096,268 2,205 (3,037) 1,095,436 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. 26. RESERVES Equity settled share-based payment reserve Foreign currency translation reserve Balance as at 30 June Accounting Policy Equity settled share-based payment reserve 30 June 2023 30 June 2022 $’000 8,057 9,653 17,710 $’000 5,796 7,690 13,486 The equity settled share-based payment reserve is used to record the value of share-based payments and performance rights provided to employees (including KMP) as part of their remuneration. Foreign currency translation reserve The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial information of foreign operations. 55 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 27. FINANCIAL RISK MANAGEMENT (a). Overview This note presents information about the Group’s exposure to credit, liquidity and market risks, the objectives, policies and processes for measuring and managing risk, and the management of capital. The Board regularly reviews the use of derivatives and opportunities for their use within the Group. Exposure limits are reviewed by management on a continuous basis. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Board has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the Group through regular reviews of the risks. (b). Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers. Presently, the Group undertakes gold mining, exploration and evaluation activities in Australia and Canada. 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 with major Australian and Canadian 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. 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). Liquidity risk Carrying Amount 2023 $’000 14,136 328,285 342,421 2022 $’000 15,078 304,298 319,376 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 Group has entered into hedging programmes whereby future bullion sales are hedged at a predetermined AUD gold price. At 30 June 2023, the Company has a total of 110,000 ounces of gold left to be delivered under these programs over the next 30 months at an average price of A$3,007/ounce. 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. 56 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: 30 June 2023 Trade and other payables* Lease liabilities Total 30 June 2022 Trade and other payables* Gold prepay facility** Lease liabilities Total Carrying Amount $’000 Contractual Cash Flows $’000 12 Months or Less $’000 1-2 years 2-5 years $’000 $’000 90,672 44,613 135,285 83,317 20,467 46,847 150,631 90,672 45,912 136,584 83,317 - 54,646 137,963 90,672 34,937 125,609 83,317 - 20,654 103,971 - 8,135 8,135 - - 23,397 23,397 - 2,840 2,840 - - 10,595 10,595 * The carrying value at balance date approximates fair value **The gold prepay facility was settled through the physical delivery of bullion (d). Market risk 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 and Canadian 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 Lease liabilities Variable rate instruments Cash and cash equivalents 2023 $’000 44,613 2022 $’000 46,847 328,285 304,298 57 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 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 $3,283,000 (FY22: $3,043,000). 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. (iv). Foreign exchange risk Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Group's functional currency. The Group generally does not hedge foreign exchange risks. As at 30 June 2023, the Group held US$0.4 million in US dollar currency bank accounts (FY22: US$1.6 million), C$2.7 million in Canadian dollar currency bank accounts (FY22: C$1.1 million) and had outstanding receivables of C$2.2 million relating to Sugar Zone (FY22: C$4.6 million). An increase/decrease in AUD:USD and AUD:CAD foreign exchange rates of 10% will result in a $0.5 million impact to net assets and pre-tax profit. The Group is exposed to translation-related risks arising from the Sugar Zone Operation having a functional currency (CAD) different from the Group’s presentation currency (AUD). An increase/decrease in AUD:CAD foreign exchange rates of 10% will result in $11.1 million impact to net assets and equity reserves. (e). Fair values 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). Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business through future exploration and development of its projects. There were no changes in the Group’s approach to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting. 28. COMMITMENTS The Group has $3,458,000 (FY22: $3,291,000) of commitments relating to minimum exploration expenditure on its various tenements and $2,002,000 (FY22: $6,701,000) of capital commitments at 30 June 2023. 29. RELATED PARTIES (a). Key Management Personnel compensation Short-term employee benefits Post-employment benefits Other long-term benefits Total 30 June 2023 30 June 2022 $ 4,585,799 196,720 1,450,215 6,232,734 $ 4,992,084 218,342 1,631,232 6,841,658 (b). Individual directors and executives’ compensation disclosures Information regarding individual Directors and Executive’s compensation and some equity instruments disclosures as permitted by Corporations Regulations 2M.3.03 is provided in the Remuneration Report section of the Directors’ Report. During the current period 2,239,315 performance rights were awarded to key management personnel. See Note 23 and the Remuneration Report for further details of these related party transactions. 58 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 30. GROUP ENTITIES The Company controlled the following subsidiaries: Subsidiaries Country of Incorporation Ownership Interest 2023 2022 Backlode Pty Ltd Brandy Hill Iron Pty Ltd Brandy Hill Iron SPV Pty Ltd Central Infrastructure Pty Ltd Central Infrastructure SPV Pty Ltd Cue Minerals Pty Ltd Deflector Gold Pty Ltd Deflector Gold SPV Pty Ltd Doray Gold Operations Pty Ltd Egan Street Victoria Bore Pty Ltd Gullewa Gold Project Pty Ltd Gullewa Gold Project SPV Pty Ltd Loded Pty Ltd Meehan Minerals Pty Ltd Murchison Resources Pty Ltd MYG Tenement Holdings Pty Ltd MYG Tenement Holdings SPV Pty Ltd Paylode Pty Ltd Silver Lake (Deflector) Pty Ltd Silver Lake (Doray) Pty Ltd Silver Lake (Egan Street) Pty Ltd Silver Lake (Integra) Pty Ltd Silver Lake (Rothsay) Pty Ltd Roonela Pty Ltd Silver Lake (SPV) Pty Ltd Silver Lake Canada Inc Silver Lake Ontario Inc Accounting Policies Subsidiaries Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Canada Canada 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 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. JOINT OPERATIONS As at 30 June 2023, the Group had no interest in any joint venture. 59 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 32. AUDITOR’S REMUNERATION Audit services Audit and review of financial statements – KPMG Australia Audit and review of financial statements – KPMG Canada Non-audit Services Taxation services Total 30 June 2023 30 June 2022 $ 303,000 110,000 137,000 550,000 $ 328,000 163,000 155,000 646,000 33. PARENT ENTITY As at, and throughout the financial year ended 30 June 2023, the parent company of the Group was Silver Lake Resources Limited. 30 June 2023 30 June 2022 Results of the parent entity Loss for the year Total comprehensive loss for the year Balance Sheet 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 $’000 (35,126) (35,126) 59,533 635,839 52,948 59,144 1,095,436 14,182 (532,923) 576,695 $’000 (58,503) (58,503) 33,644 679,117 68,802 74,851 1,096,268 5,795 (497,797) 604,266 The parent entity has $1,772,000 (FY22: $1,716,000) of commitments relating to minimum exploration expenditure on its various tenements and $492,000 (FY22: $778,000) capital commitments at financial year end. 34. SEGMENT REPORTING The accounting policies used by the Company in reporting segments are in accordance with the measurement principles of applicable accounting standards. The Group has the following reportable segments: (i). Mount Monger Operation (ii). Deflector Operation (including the Rothsay Project) (iii). Sugar Zone Operation 60 Silver Lake Resources Limited Annual Report 2023 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 The Mount Monger and Deflector operations are both located in Western Australia, with the Sugar Zone Operation located in Ontario, Canada. The Mount Monger Operation produces gold bullion, the Deflector Operation produces gold bullion and gold-copper concentrate, and the Sugar Zone Operation produces gold bullion and gold concentrate. Financial information for the reportable segments for the years ended 30 June 2023 and 30 June 2022 is as follows: 30 June 2023 Revenues EBITDA (excluding significant items)1 Mount Monger $’000 258,985 81,694 Deflector Sugar Zone Unallocated2 $’000 355,757 196,806 $’000 104,886 (3,594) $’000 - Total $’000 719,628 (26,507) 248,399 PP&E & mine assets 128,840 272,472 270,306 Capital expenditure3 64,238 82,542 43,830 - - 30 June 2022 Revenues EBITDA (excluding significant items)1 Mount Monger $’000 269,204 93,209 Deflector Sugar Zone Unallocated2 $’000 326,733 189,757 $’000 38,629 2,109 $’000 - (17,515) PP&E & mine assets 107,145 296,865 245,740 671,618 190,610 Total $’000 634,566 267,560 649,750 Capital expenditure3 47,816 77,864 21,456 - 147,136 1 A reconciliation between the statutory profit after tax and the Group’s EBITDA (excluding significant items) is tabled below 2 Unallocated items primarily comprise administration expenses 3 Capital expenditure includes $12.7 million of Right of Use asset additions as required under AASB 16 Leases (2022: $18.2 million) Reconciliation of Statutory Profit after Tax to EBITDA (excluding significant items) - unaudited Statutory profit after tax: Adjustments for: Depreciation and amortisation Income tax expense Net finance costs (includes change in value of listed investments) Business development adjustments (including gain on bargain Purchase in FY22) Exploration expensed Other EBITDA (excluding significant items) 30 June 2023 30 June 2022 $’000 30,836 190,089 28,489 (6,876) 1,229 5,044 (412) 248,399 $’000 77,681 167,880 37,654 8,075 (27,924) 3,187 1,007 267,560 61 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 35. DEED OF CROSS GUARANTEE The Company and its wholly owned subsidiary Silver Lake (Integra) Pty Ltd have entered into a Deed of Cross Guarantee under which each company guarantees the debts of the other. By entering into the Deed of Cross Guarantee, Silver Lake (Integra) Pty Ltd has been relieved from the Corporations Act 2001 requirement to prepare, audit and lodge a financial report and Directors’ report under ASIC Corporations (wholly owned companies) Instrument 2016/785. The Consolidated Balance Sheet at 30 June for the members of the Deed of Cross Guarantee is disclosed in the table below: 30 June 2023 30 June 2022 $’000 $’000 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 Intercompany receivables Deferred tax asset Total non-current assets Total assets Current liabilities Trade and other payables Lease liabilities Interest bearing liability Employee benefits Closure and rehabilitation provision Total current liabilities Non-current liabilities Lease liabilities Closure and rehabilitation provision Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Accumulated losses Total equity 62 Silver Lake Resources Limited Annual Report 2023 56,858 2,186 30,079 275 89,398 44,200 102,172 26,668 456,789 46,810 60,801 737,440 826,838 40,115 9,474 - 4,552 - 54,141 - 17,688 43,468 61,156 115,297 711,541 30,947 2,060 44,066 306 77,379 63,157 77,791 29,355 406,166 123,186 48,126 747,781 825,160 36,918 6,700 20,467 4,187 90 68,362 1,131 17,492 - 18,623 86,985 738,175 1,095,436 14,183 (398,078) 711,541 1,096,268 10,717 (368,810) 738,175 Notes to the Consolidated Financial Statements For the year ended 30 June 2023 The Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2023 for the members of the Deed of Cross Guarantee is disclosed in the table below: 30 June 2023 30 June 2022 Revenue Cost of sales Gross profit Other income Business combinations expenses Exploration expensed Administration expenses Results from operating activities Finance income Finance expenses Net finance income/(costs) Profit/(loss) before income tax Income tax expense Loss profit for the year $’000 258,985 (228,663) 30,322 545 - (2,652) (31,350) (3,135) 6,271 (1,609) 4,662 1,527 (30,795) (29,268) $’000 269,204 (252,130) 17,074 247 (7,866) (1,809) (16,994) (9,348) 77 (6,769) (6,692) (16,040) (32,621) (48,661) 36. SUBSEQUENT EVENTS No 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 significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. 63 ASX Additional Information CORPORATE GOVERNANCE STATEMENT The Company’s Corporate Governance Statement can be located on its website www.silverlakeresources.com.au. SECURITIES At 18 September 2023 the Company had on issue: · · 934,744,333 fully paid ordinary shares (16,876 holders); and 12,902,295 performance rights (352 holders). DISTRIBUTION OF HOLDERS Number of Ordinary Shares Number of Holders Percentage of Ordinary Shares 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Total Holders 3,885 6,186 2,648 3,736 421 16,876 0.23 1.79 2.22 12.05 83.71 100.00 2,029 holders held less than a marketable parcel (<$500) of fully paid shares. VOTING RIGHTS OF SECURITIES Subject to any rights or restrictions for the time being attached to any class or classes of Shares (at present there is only one class of Shares), at meetings of Shareholders of Silver Lake: (a). each Shareholder is entitled to vote in person or by proxy, attorney or representative; (b). on a show of hands, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder has one vote; and (c). on a poll, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder, in respect of each Share held by that person or in respect of which that person 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. 64 Silver Lake Resources Limited Annual Report 2023 ASX Additional Information SUBSTANTIAL SHAREHOLDERS As at 18 September 2023 the substantial holders disclosed to the Company were: Registered Holder Beneficial Owner Number of Shares Percentage of Issued Shares Bank of New York Mellon Van Eck Vectors Gold Miners ETF (GDX) 98,625,834 10.58% Various entities as set out in Annexure D to a Notice of Substantial Holder given to ASX on 28 September 2022 Van Eck Vectors Junior Gold Miners ETF (GDXJ) Van Eck Vectors Global Mining UCITS ETF (UCTGDIG) Van Eck Vectors Gold Miners UCITS ETF (UCTGDX) Van Eck Vectors Junior Gold Miners UCITS ETF (UCTGDXJ) DFA Australia Limited 52,313,574 5.00% Dimensional Fund Advisors LP Dimensional Fund Advisors Ltd. Dimensional Ireland Limited Dimensional Fund Advisors Canada ULC DFA Canada LLC Dimensional Fund Advisors Pte. Ltd Dimensional Advisors Ltd. Dimensional Holdings Inc. Dimensional Holdings LLC David Booth Rex Sinquefield 65 ASX Additional Information ASX Additional Information TOP 20 HOLDERS OF QUOTED SECURITIES Holder Name Number Held Percentage 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED BNP PARIBAS NOMS PTY LTD BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM NATIONAL NOMINEES LIMITED BNP PARIBAS NOMINEES PTY LTD JETOSEA PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CPU SHARE PLANS PTY LTD BRIKEN NOMINEES PTY LTD SANDHURST TRUSTEES LTD GARRETT SMYTHE LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED MR RAYMOND JAMES ALLAN PERTH SELECT SEAFOODS PTY LTD MS AVRIL LOUISE JACKSON 20. BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD ON-MARKET BUY-BACK There is no current on-market buy-back at the date of this report. 313,500,661 105,128,181 96,488,862 48,293,799 35,417,104 23,494,661 8,254,617 5,000,316 4,551,498 4,325,035 4,000,000 3,888,295 3,164,500 2,780,101 2,422,120 2,401,942 2,121,828 2,000,000 1,645,704 1,571,516 670,450,740 33.54 11.25 10.32 5.17 3.79 2.51 0.88 0.53 0.49 0.46 0.43 0.42 0.34 0.30 0.26 0.26 0.23 0.21 0.18 0.17 71.73 66 Silver Lake Resources Limited Annual Report 2023 S I L V E R L A K E R E S O U R C E S A N N U A L R E P O R T 2 0 2 3 Suite 4, Level 3 South Shore Centre 85 South Perth Esplanade South Perth WA 6151 www.slrltd.com 

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