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8
LEADING
EXPLORERS OF
WORLD-CLASS
COPPER-GOLD
DEPOSITS
ANNUAL REPORT 2018
SolGold plc
BRISBANE HEAD OFFICE:
LONDON CORPORATE OFFICE:
QUITO CORPORATE OFFICE:
Level 27,
111 Eagle Street,
Brisbane,
Queensland,
Australia 4000
Octagon Point,
5 Cheapside,
St Paul’s,
London,
EC2V 6AA
Avenida Coruña E25-58 y San Ignacio,
Edificio Altana Plaza,
piso 4 oficina 406,
Quito
SOLGOLD IS
A LEADING
EXPLORATION
COMPANY
FOCUSSED ON
THE DISCOVERY
AND DEFINITION
OF WORLD-CLASS
COPPER AND
GOLD DEPOSITS
CONTENTS
OVERVIEW
02 About Us
04 At a Glance
06 Chairman’s Statement
STRATEGIC REPORT
08 Our Market
12 A Road Map for Development
12
Investment Case
14 Our Business Model
16 Delivering on our Strategy
16 Our Successful Blueprint
18 Q&A with the Chief Executive Director
20 Operations Review
22 Ecuador
32 Australia
36 Solomon Islands
38 Financial Review
42 Principal Risks & Uncertainties
46 Our Sustainable Approach
GOVERNANCE
50 Board of Directors and Company Secretary
52 Corporate Governance
57 Directors’ Report
60
Statement of the Chairman
of the Remuneration Committee
60 Remuneration Report
66
Independent Auditor’s Report
FINANCIAL STATEMENTS
70
71
Consolidated Statement of Profit or Loss
and Comprehensive Income
Consolidated and Company Statements
of Financial Position
72 Consolidated Statement of Changes in Equity
74 Company Statement of Changes in Equity
76 Consolidated and Company Statements
of Cash Flows
77 Notes to the Financial Statements
OVERVIEW
OVERVIEW /01/01
ABOUT US
Having utilised its first mover advantage SolGold is
the largest and most active concession holder in
Ecuador and is aggressively exploring the length
and breadth of this highly prospective section of
the Andean Copper Belt, home of multiple Tier 1
copper and gold projects and half of the world’s
copper resources
The (cid:36)lpala disco(cid:89)er(cid:92) at the co(cid:80)pan(cid:92)(cid:183)s (cid:193)a(cid:74)ship (cid:80)a(cid:77)orit(cid:92)(cid:16)o(cid:90)ned (cid:38)asca(cid:69)el
pro(cid:77)ect (cid:90)ith its continuin(cid:74) (cid:20)(cid:78)(cid:80)(cid:16)plus copper(cid:16)(cid:74)old intersections(cid:15) is the first
o(cid:73) (cid:80)an(cid:92)(cid:17) (cid:54)ol(cid:42)old has alread(cid:92) identified (cid:20)(cid:19) priorit(cid:92) pro(cid:77)ects (cid:90)hich are no(cid:90)
scheduled (cid:73)or e(cid:91)ploration (cid:73)ast(cid:16)trac(cid:78)(cid:17)
(cid:54)ol(cid:42)old is (cid:69)uildin(cid:74) a ne(cid:90) copper co(cid:80)pan(cid:92)(cid:15) and it has the tea(cid:80)(cid:15) trac(cid:78)
record and resources to succeed(cid:17)
PERFORMANCE HIGHLIGHTS
METRES DRILLED
(cid:27)(cid:23)(cid:15)(cid:23)(cid:21)(cid:22)M
(cid:11)(cid:21)(cid:19)(cid:20)(cid:26)(cid:29) (cid:23)(cid:23)(cid:15)(cid:24)(cid:19)(cid:19)(cid:48)(cid:12)
CASH BALANCE
A$(cid:27)(cid:20)(cid:17)(cid:27)
MILLION
(cid:11)(cid:21)(cid:19)(cid:20)(cid:26)(cid:29) (cid:36)(cid:7)(cid:27)(cid:28)(cid:17)(cid:22)(cid:48)(cid:12)
(cid:24)
INTERNATIONAL
INDUSTRY AWARDS
(cid:11)(cid:21)(cid:19)(cid:20)(cid:26)(cid:29) (cid:19)(cid:12)
TSX & LSE
MAIN MARKET
LISTING
ALPALA
MRE
(cid:20)(cid:19)
PRIORITY
REGIONAL
PROJECTS
IDENTIFIED
02/ SOLGOLD ANNUAL REPORT 2018
SOLGOLD
HAS THE
TEAM, TRACK
RECORD AND
RESOURCES
TO SUCCEED
OVERVIEW
OVERVIEW /03/03
AT A GLANCE
Headquartered in Brisbane, Australia SolGold
has offices in London, England and Quito, Ecuador.
The Company is listed on the London Main Board
and Toronto Stock Exchange under the code ’SOLG’.
(cid:54)ol(cid:42)old has a lar(cid:74)e port(cid:73)olio o(cid:73) copper and (cid:74)old pro(cid:77)ects in (cid:40)cuador(cid:15)
(cid:36)ustralia and the (cid:54)olo(cid:80)on (cid:44)slands(cid:17)
The (cid:38)o(cid:80)pan(cid:92)(cid:183)s (cid:73)ocus(cid:15) since (cid:21)(cid:19)(cid:20)(cid:21)(cid:15) has (cid:69)een on the riches o(cid:73) the (cid:36)ndean
(cid:38)opper (cid:37)elt in (cid:40)cuador(cid:17) This (cid:92)ear the (cid:38)o(cid:80)pan(cid:92) announced its (cid:80)aiden
(cid:80)ineral resource esti(cid:80)ate (cid:73)ro(cid:80) the (cid:36)pala prospect on the (cid:38)asca(cid:69)el
pro(cid:77)ect in (cid:49)orthern (cid:40)cuador(cid:17) (cid:54)ol(cid:42)old has also identified (cid:20)(cid:19) ne(cid:90) priorit(cid:92)
pro(cid:77)ects (cid:73)ro(cid:80) the (cid:26)(cid:21) re(cid:74)ional concessions(cid:17)
(cid:54)ol(cid:42)old has a hi(cid:74)hl(cid:92) e(cid:91)perienced and si(cid:74)nificantl(cid:92) in(cid:89)ested (cid:37)oard and
throu(cid:74)hout (cid:21)(cid:19)(cid:20)(cid:26) (cid:54)ol(cid:42)old(cid:183)s (cid:80)ana(cid:74)e(cid:80)ent tea(cid:80) (cid:90)as reco(cid:74)nised as an
e(cid:91)a(cid:80)ple o(cid:73) e(cid:91)cellence in the industr(cid:92) and continues to stri(cid:89)e to deli(cid:89)er
o(cid:69)(cid:77)ecti(cid:89)es e(cid:73)ficientl(cid:92) and in the interests o(cid:73) shareholders(cid:17)
SOLGOLD CORPORATE STRUCTURE
SolGold plc is the overall corporate entity of the business, listed on
the London Stock Exchange and Toronto Stock Exchange
SolGold subsidiary companies
EXPLORACIONES
NOVOMINING S.A*
GREEN ROCK
RESOURCES S.A
VALLE RICO
RESOURCES S.A
CARNEGIE RIDGE
RESOURCES S.A
CRUZ DEL SOL S.A
SOLOMON
OPERATION
LTD
ARM P/L
HONIARA
HOLDINGS P/L
GUADALCANAL
EXPLORATION P/L
ACAPULCO
MINING P/L
CENTRAL
MINERALS P/L
* 85% SolGold owned, All other subsidiaries 100% SolGold owned.
04/ SOLGOLD ANNUAL REPORT 2018
OUR BUSINESS
ECUADOR
Projects
Offices
Listings
Headquarters
(cid:22)(cid:15)(cid:21)(cid:19)(cid:19)KM(cid:21)
EXPLORATION
GROUND IN
ECUADOR
SOLOMON
ISLANDS
AUSTRALIA
(cid:23)(cid:24)(cid:19)
EMPLOYEES
(cid:28)(cid:26)%
ECUADORIAN
84
GEOLOGISTS
(cid:22)(cid:19)%
WOMEN
OVERVIEW /05
CHAIRMAN’S
STATEMENT
DEAR SHAREHOLDERS
It has been a very busy year for SolGold.
The past year has seen a significant
acceleration of drilling at the Cascabel
project, publication of our Maiden Mineral
Resource Estimate for the Alpala prospect
and the commencement of the Preliminary
Economic Assessment. In addition to this we
have started to see exciting results from our
pan-Ecuadorian strategy. Our experienced
regional teams have been able to rapidly
review our multiple concessions and identify
ten priority projects for SolGold to progress.
With its move to the London Stock Exchange
Main List in October 2017 and new Toronto
Stock Exchange listing completed in July 2017,
SolGold now has exposure to a wider variety
of investors and access to strong capital
markets in the UK and North America.
During the year SolGold was delighted to
strengthen its board and management,
welcoming James Clare, a well-known
Canadian corporate and resources lawyer to
its board and appointing Eduardo Valenzuela
to oversee the preparation of the Preliminary
Economic Assessment for Alpala.
SolGold published its maiden Mineral
Reserve Estimate for Alpala in January 2018.
The highlights include:
• estimate across both Indicated and
Inferred classifications totals a current
1.08 Bt @ 0.68% CuEq (7.4 Mt CuEq) at
0.3% CuEq cut off, some 40% of which is
in the Indicated category (by tonnage);
• contained metal content totals a current
5.2 Mt Cu and 12.3 Moz Au, some 45% of
which is within the Indicated category (by
contained metal);
• higher grade core has a current 120 Mt @
1.8% CuEq (2.0 Mt CuEq) at a 1.1% CuEq
cut off, some 60% of which is in
the Indicated category (by tonnage); and
• a further 100 Mt @ 1.0% CuEq (1.0 Mt
CuEq) is added to the high grade core
if a 0.9% CuEq cut off is used, some
50% of which is in the Indicated
category (by tonnage).
With further drilling of some 70,000m since
then, SolGold has focussed on growing
both the core resource and the high-grade
zone at Alpala. It is well placed to provide a
significant update to the maiden resource in
Q4 2018. SolGold has also progressed work
on an independent Preliminary Economic
Assessment expected in Q1 2019. SolGold
is investigating both high tonnage open cut
and underground block caving operations,
as well as a high grade / low tonnage initial
underground development towards the
economic development of the copper-gold
deposit/s at Cascabel.
The last financial year has seen SolGold
focus on its Pan Ecuadorean strategy.
Work undertaken by SolGold’s team has
delineated and ranked regional exploration
targets for the potential to contain world
class copper-gold deposits. Through its
four 100% owned subsidiary companies in
Ecuador; Carnegie Ridge Resources S.A.,
Green Rock Resources S.A., Cruz del Sol
S.A. and Valle Rico Resources S.A, some
72 mineral concessions over approximately
3,200km2 have been secured giving SolGold
the largest land holding in Ecuador.
Ten major targets have been identified,
including Blanca, Cisne Loja, La Hueca,
Porvenir and Timbarra.
The past year has seen significant
improvements to the mining industry
and environment in Ecuador. SolGold is
delighted to see significant reform, including
overhauling the mining tax regime and
removing a prohibitive windfall tax on
foreign investment.
In 2017 these changes, efforts and
improvements were recognised on an
international stage with Ecuador winning
Latin America Country Award for 2017
at Mines & Money Americas in Toronto
and Most Innovative Country at Mines &
Money London. President Lenin Moreno
announced an economic plan in April
2018 which promotes private enterprise
in infrastructure, oil, energy, mining and
telecommunication sectors to generate
US$7B of investment by 2021.
BRIAN MOLLER
Non-Executive Chairman
WITH A STRONG
SHAREHOLDER
BASE, DEDICATED
AND FOCUSSED
MANAGEMENT
AND TECHNICAL
TEAM, SOLGOLD IS
WELL PLACED TO
BOTH ADVANCE ITS
ALPALA PROJECT
ON A PATH TO
DEVELOPMENT
AND PROGRESS ITS
PAN ECUADOREAN
STRATEGY IN 2019.”
4 X (cid:20)(cid:19)(cid:19)%
OWNED
SUBSIDIARIES
ESTABLISHED IN
ECUADOR
06/ SOLGOLD ANNUAL REPORT 2018
SolGold enjoys a strong financial position
with some AUD$81.8 million in its treasury
at the start of the new financial year.
With a strong shareholder base, dedicated
and focussed management and technical
team, SolGold is well placed to both
advance its Alpala project on a path
to development and progress its Pan
Ecuadorean strategy in 2019.
I would like to extend my thanks to the
Company’s CEO Mr Nicholas Mather, my
fellow Directors and the management team
for their ongoing efforts in advancing the
Company’s projects in this past year and I
look forward to delivering further news on
the Company’s continued progress.
Yours faithfully
OUR AWARDS
MINES AND MONEY TORONTO 2017
Ecuador
Country of the
Year (Latin
America)
Nick Mather
CEO of the Year
SolGold (Latin
America)
SolGold
Exploration
Award (Latin
America)
MINES AND MONEY AWARDS LONDON 2017
BRIAN MOLLER
Chairman
SolGold
Exploration
Award
Nick Mather
CEO of the
Year SolGold
Ecuador
Country of
the Year
MINES AND MONEY ASIA 2018
Nick Mather
Exploration Mining
Executive of the Year
SolGold
OVERVIEW
/07/07
OVERVIEW OUR
MARKET
(cid:42)(cid:47)(cid:50)(cid:37)(cid:36)(cid:47) (cid:54)(cid:56)(cid:51)(cid:51)(cid:47)(cid:60) (cid:36)(cid:49)D D(cid:40)(cid:48)(cid:36)(cid:49)D (cid:11)(cid:182)(cid:19)(cid:19)(cid:19) T(cid:50)(cid:49)(cid:49)(cid:40)(cid:54)(cid:12)
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
1996
2001
2006
2011
2016
2021
2026
Base case production capability
Probable projects
Possible projects
Primary Demand
Source: Wood Mackenzie Q4 – 2017.
Copper outlook – December 2017.
COPPER DEMAND BY SECTOR
Construction
Electric Network
Consumer and general
Transport
Industrial machinery
Source: Wood Mackenzie Q4 – 2017.
Copper outlook – December 2017.
08/ SOLGOLD ANNUAL REPORT 2018
COPPER
SUPPLY IS FORECAST TO STRUGGLE
TO MEET GROWING DEMAND OVER
THE LONG TERM
Global demand for copper is the highest
it has ever been, driven by urbanisation,
infrastructure development and technology,
and steady growth is anticipated to continue.
Conversely, the limited project pipeline,
declining grades, and more challenging
mining conditions point to supply constraints.
DEMAND
FUNDAMENTAL TO MANY INDUSTRIES
The properties of copper – high electrical
and thermal conductivity, malleability,
ductility and corrosion resistance – make
the metal a vital element in applications
such as power generation and transmission,
electric motors, consumer electronics, air
conditioning systems and refrigerators.
Consequently the metal is used in diverse
applications, with construction, electrical
networks and domestic appliances key
sectors for the metal. Transport currently
accounts for more than 10% of demand.
DEMAND UNDERPINNED BY
GLOBAL MEGATRENDS AND
TECHNOLOGY SHIFTS
Global trends of urbanisation and economic
development have been core drivers of
copper consumption, with the associated
construction of new buildings, electricity and
telecommunications infrastructure, and rising
demand for vehicles, electronic devices and
other consumer durables. While it is difficult
to isolate the contribution of urbanisation
to demand for copper, there is a correlation
between GDP per capita and demand for
metals used in infrastructure and consumer
goods. China alone accounted for almost half
of refined copper demand in 2017, although an
estimated 15–25% of Chinese consumption is
re-exported as finished products.
The shift to renewable energy sources and
more sustainable transportation solutions
has opened up new opportunities for
copper, whose characteristics are valuable
to solar power systems, wind turbines,
electric vehicles and battery storage.
ECUADOR HAS
ATTRACTED
$1.3 BILLION IN
INVESTMENT
COMMITMENTS
FOR NEW
EXPLORATION
STRATEGIC REPORT
STRATEGIC REPORT /09/09
OUR MARKET CONTINUED
Used in the vehicles and well as in the
charging networks, up to 80–85kg of copper
is used per electric vehicle, four times as
much as in a vehicle powered with an
internal combustion engine. Annual copper
consumption from electric vehicles is forecast
to be c. 1.7 million tonnes by 2027. In 2017
demand from the sector was 185,000 tonnes.
The ease of recycling copper – with metal
produced from scrap requiring as little as 10%
of the energy needed to produce it from ore
– makes the material all the more attractive
to users.
SUPPLY
TIGHTENING MARKET
There is an urgent need for more copper
discoveries, since there could be a
supply deficit of around three quarters
of current supply by 2035, according to
mining consultancy CRU. Having reduced
exploration budgets to cut costs in the
down-cycle, major mining companies now
have sizeable exploration budgets and
are more willing to back promising junior
exploration projects. Despite exploration
budgets reaching record highs, however, the
number of significant copper discoveries
has dwindled.
FUNDAMENTAL FACTORS
(cid:56)(cid:49)D(cid:40)(cid:53)(cid:51)(cid:44)(cid:49)(cid:49)(cid:44)(cid:49)(cid:42) (cid:47)(cid:50)(cid:49)(cid:42)(cid:40)(cid:53)(cid:16)T(cid:40)(cid:53)(cid:48)
PRICE FORECASTS
Notwithstanding short-term fluctuations,
in the longer-term, analysts predict that
copper prices will be buoyed by the fact that
the metal is becoming more difficult and
expensive to mine. Consumption continues
to increase, and, since the easy to access
deposits have been mined, production must
shift to the more difficult, large, low-grade
deposits to meet demand.
Although Chinese demand is expected to
grow by 3.3% in 2018, there are indications
of softening in the country’s infrastructure
and property sectors, with an escalation
of the trade war with the US another
important influence. Nevertheless, analysts
forecast that China will remain the primary
contributor to growth in copper demand
through 2030.
GOLD
GOLD CONTINUES TO PLAY A
(cid:46)(cid:40)(cid:60) (cid:53)(cid:50)(cid:47)(cid:40) (cid:36)(cid:54) (cid:36) (cid:53)(cid:44)(cid:54)(cid:46)(cid:16)D(cid:44)(cid:57)(cid:40)(cid:53)(cid:54)(cid:44)(cid:41)(cid:44)(cid:40)D
INVESTMENT ASSET
Considered a safe haven investment, the price
of gold has traditionally been impacted by
geopolitical and macroeconomic events and
their associated effect on currency markets.
This era of elevated geopolitical and
economic risk – including a US/China trade
war, populism in the Eurozone and currency
issues in several emerging markets - would
tend to support demand for gold, yet
pricing activity over the past year indicates
that the traditional ‘geopolitical risk hedge’
relationship has broken, since the global
economy remains in a cyclical upturn and
there has been a dollar rally. However,
according to the World Gold Council’s report,
Gold 2048, as the use of gold across energy,
healthcare and technology continues to
change rapidly, gold’s position as the material
of choice is expected to continue and
evolve over the coming decades. This shift,
combined with the expanding middle class in
China and India will have a significant impact
on gold demand.
ECUADOR
Attractive investment conditions,
underpinned by its geology and a
government that is keen to support
the mining sector.
RICH GEOLOGY
Ecuador lies on the northern section of the
Andean Copper Belt which stretches from
Chile through Peru, Ecuador, Colombia and
north-west to Panama, and which yields
approximately half of the world’s annual
copper production. The Andean Copper
Belt hosts many of the world’s largest
porphyry copper and gold mines, including
Escondida, Chuquicamata and Collahuasi
in Chile. Less than 10% of the territory
has been explored, but, over the last four
years, Ecuador has attracted $1.3 billion
in investment commitments for new
exploration from mining companies, and
there have been world-class discoveries of
both copper and gold.
AS ECUADOR
LOOKS TO RAPIDLY
ESTABLISH A
LARGE-SCALE
MINING INDUSTRY
THE MINISTRY HAS
ALSO REFORMED
THE EXPLORATION
PROCESS.”
COPPER SUPPLY
DEFICIT OF
(cid:22)(cid:18)(cid:23)
OF CURRENT
(cid:54)(cid:56)(cid:51)(cid:51)(cid:47)(cid:60) (cid:37)(cid:60) (cid:21)(cid:19)(cid:22)(cid:24)
LESS THAN
(cid:20)(cid:19)%
OF ECUADOR’S
TERRITORY HAS
BEEN EXPLORED
10/ SOLGOLD ANNUAL REPORT 2018
OUR
SUSTAINABLE
APPROACH
(cid:20)(cid:19) (cid:51)(cid:40)(cid:53)(cid:54)(cid:50)(cid:49)
COMMUNITY
RELATIONS TEAM
SolGold places the
highest importance in
creating and maintaining
open, respectful,
proactive and productive
relations within all the
community in which we
operate.
FAVOURABLE INVESTMENT CONDITIONS
Politically stable, Ecuador’s economy has
hitherto been dependent on oil revenues,
resulting in growing GDP per capita as well
as investment in infrastructure. The decline
in oil reserves coupled with falling oil prices
led to a greater focus on the mining industry
as part of a push to diversify the economy,
however. Mining is on track to become the
second pillar of Ecuador’s economy, and the
goal is that the sector will account for more
than 4% of GDP by 2021.
The government is committed to the
development of a best practice, responsible
mining sector by providing attractive and
fair investment conditions to encourage
the world’s best mining companies to the
country. Since the Mines Ministry (now
the Ministry of Oil, Mining and Energy)
was established in 2015, there have been
significant improvements to the regulatory
landscape through tax reform and
incentives. A major milestone was achieved
this year with the removal of the windfall
tax. The windfall tax was levied at 70%
based upon the difference between the
sale price of the metal extracted from the
ground and best price established in the
Mining Exploitation Contracts and applied
only to large mines in full-scale production.
The well documented biodiversity of
Ecuador means that this consideration
must sit at the heart of any mining
activity. Holders of mining concessions
are required to obtain environmental
licenses, and to compile impact assessments
and environmental management plans,
adhering to associated guarantees and audit
requirements. The government plans to
reform environmental legislation to better
reflect the realities of industrial-scale mining,
however, with the aim of streamlining the
permitting process, enabling more efficient
and optimised control, and developing
voluntary environmental certifications for
companies conforming to best practice.
As Ecuador looks to rapidly establish a large-
scale mining industry the Ministry has also
reformed the exploration process, allowing
mining companies to more quickly identify
prospective concessions by the allowance of
reconnaissance, or “scout”, drilling during the
four-year initial exploration phase.
The industry will be supported by
plans for on-going investment in the
infrastructure (roads, ports, energy) and
skills required by the mining industry, as
well as a commitment to engage with local
communities and to reinvest royalties in
social projects.
(cid:48)(cid:36)(cid:45)(cid:50)(cid:53) (cid:38)(cid:50)(cid:51)(cid:51)(cid:40)(cid:53) D(cid:44)(cid:54)(cid:38)(cid:50)(cid:57)(cid:40)(cid:53)(cid:44)(cid:40)(cid:54) (cid:178) (cid:38)(cid:56) (cid:44)(cid:49) (cid:53)(cid:40)(cid:54)(cid:40)(cid:53)(cid:57)(cid:40)(cid:54) (cid:9) (cid:53)(cid:40)(cid:54)(cid:50)(cid:56)(cid:53)(cid:38)(cid:40)(cid:54) (cid:11)(cid:48)T(cid:12)(cid:20)
120
100
80
60
40
20
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Chile
Peru
Other
1.
A major discovery is defined as a deposit with at least 500kt of copper in combined reserves, resources and past production
2. Year when discovery hole was drilled.
Source: S&P Global Market Intelligence, BCG analysis.
STRATEGIC REPORT /11
A ROAD MAP
FOR DEVELOPMENT
2006
Solomon Gold
lists on LSE AIM
2007
High grade gold discovery
in Solomon Islands
2009
Acquisition of Mount
Perry & Rannes projects
in Queensland
2012
Company name
changed to SolGold
and agreement signed
with TSX-V listed
Cornerstone Capital
Resources for
Cascabel project,
Northern Ecuador
May 2017
SolGold unveils
Pan Ecuadorian
strategy, creating
four 100%
subsidiaries
2016
Newcrest Mining makes
initial US$23M investment
for 10% of SolGold and
SolGold enters the FTSE
AIM 50
2015
Ownership of
ENSA increased
from 50% to 85%
2013
Ownership of ENSA
increased from 30% to 50%
and drilling commenced
at Alpala prospect at the
Cascabel project
July 2017
SolGold lists on
the Toronto Stock
Exchange
October 2017
SolGold
graduates to the
London Stock
Exchange Main
Board
January 2018
Maiden Mineral
Resource
Estimate for
Alpala prospect
published
March 2018
Drilling
commences
at Aguinaga
prospect at the
Cascabel project
September 2018
BHP invests
US$35M for 6.1%
of SolGold
July 2018
10 priority
projects identified
across Ecuador
in regional
exploration
program
INVESTMENT
CASE
EXPERIENCED TEAM
ECUADOR’S OPPORTUNITY
Strongly invested Board and
management team, and award-
winning exploration team with
unrivalled experience in the region.
A four year first mover advantage in
Ecuador has allowed SolGold to build
a substantial and unrivalled portfolio
across the country.
SolGold presents a unique investment
opportunity that offers a clear path to
cash flow in addition to considerable
long-term exploration upside.
6%
BOARD SHAREHOLDING
3,200KM2
OF EXPLORATION UPSIDE
12/
SOLGOLD ANNUAL REPORT 2018 FUTURE PLANS
2018
Updated Mineral
Resource
Estimate for
Alpala prospect,
Cascabel project
2019
Preliminary
Economic
Assessment for
the Cascabel
project
2019
Drilling to
commence on
selected projects
for the 10 priority
projects identified
A WORLD-CLASS PROJECT
PAN-ECUADORIAN STRATEGY
Cascabel, our flagship project, has
delivered world-class intersections
of continuous copper and gold
mineralisation. Its location and
infrastructure deliver CAPEX
advantages and a proposal to block
cave mine to deliver OPEX savings.
72 carefully selected concessions
which are perceived (by SolGold) to
be the most prospective areas granted
across Ecuador 100% owned in four
subsidiaries: Carnegie Ridge Resources,
Green Rock Resources, Cruz Del Sol
S.A. and Valle Rico Resources.
FUNDED FOR
THE FUTURE
Strong cash balance to deliver
significant resource expansion at
Cascabel and advance regional
exploration strategy.
(cid:51)(cid:36)(cid:42)(cid:40) (cid:21)(cid:21)
(cid:20)(cid:19) PRIORITY
PROJECTS IDENTIFIED
A$(cid:27)(cid:20)(cid:17)(cid:27)MILLION
CASH IN BANK
STRATEGIC REPORT /13
STRATEGIC REPORT /13
OUR BUSINESS
MODEL
The e(cid:91)ploration o(cid:73) copper and (cid:74)old is core to our (cid:69)usiness (cid:80)odel(cid:17)
(cid:58)e (cid:74)enerate (cid:89)alue (cid:69)(cid:92) disco(cid:89)erin(cid:74) and definin(cid:74) (cid:90)orld(cid:16)class pro(cid:77)ects(cid:17)
(cid:58)e (cid:80)a(cid:91)i(cid:80)ise (cid:73)unds usin(cid:74) an esta(cid:69)lished s(cid:92)ste(cid:80)atic and disciplined
approach to e(cid:91)ploration tar(cid:74)etin(cid:74) (cid:74)rass roots opportunities to ensure lo(cid:90)
cost entr(cid:92) in to pro(cid:77)ects(cid:17) (cid:50)ur (cid:89)ision is to (cid:69)eco(cid:80)e a leadin(cid:74) copper and
(cid:74)old (cid:80)iner underpinned (cid:69)(cid:92) our e(cid:91)ceptional port(cid:73)olio o(cid:73) pro(cid:77)ect options(cid:17)
EXPLORATION
Utilise our highly experienced team and our first mover
advantage in Ecuador to identity multiple potential
world-class copper and/or gold projects.
(cid:22)(cid:15)(cid:21)(cid:19)(cid:19)KM(cid:21)
OF EXPLORATION UPSIDE
(cid:51)(cid:36)(cid:42)(cid:40) (cid:21)(cid:21)
INNOVATION TECHNIQUES
Utilise technology to limit environmental
footprint, maximise funds and minimise costs.
OPERATION
Maximise value by returning a portion of profits to develop
a pipeline of projects to form a unique portfolio.
(cid:20)(cid:19) PRIORITY
PROJECTS IDENTIFIED
(cid:51)(cid:36)(cid:42)(cid:40) (cid:20)(cid:25)
FINANCIAL STRENGTH
Secure control and longevity through shareholder support.
A$(cid:27)(cid:20)(cid:17)(cid:27)MILLION
CASH BALANCE
(cid:51)(cid:36)(cid:42)(cid:40) (cid:22)(cid:27)
14/ SOLGOLD ANNUAL REPORT 2018
STAKEHOLDER SUPPORT
Invest in and safeguard relationships with communities,
employees, governments and shareholders.
(cid:23)(cid:24)(cid:19)
EMPLOYEES
DEVELOPMENT
Deliver growth by initially developing low capex,
high value projects.
4 X (cid:20)(cid:19)(cid:19)%
OWNED SUBSIDARIES ESTABLISHED IN ECUADOR
(cid:51)(cid:36)(cid:42)(cid:40) (cid:19)(cid:25)
EXPERIENCED TEAM
Create a culture of creativity and productivity through
ownership and transparency.
6%
BOARD SHAREHOLDING
(cid:51)(cid:36)(cid:42)(cid:40) (cid:24)(cid:19)
OUR SUSTAINABLE APPROACH
Ensuring and protecting our social licence to operate
completes our sustainable business model.
(cid:23)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)
PLANTS GROWN EACH YEAR
PAGE 46
STRATEGIC REPORT /15
DELIVERING ON
OUR STRATEGY
Following the early success at Cascabel a
comprehensive, nation-wide desktop study
was undertaken by SolGold’s independent
experts to analyse the available regional
topographic, geological, geochemical
and gravity data over the prospective
magmatic belts of Ecuador, with the aim
of understanding the controls to copper-
gold mineralisation on a regional scale.
SolGold has delineated and ranked regional
exploration targets for the potential to
contain world class copper-gold deposits.
As a result of this study, SolGold has formed
and funded four new 100% owned subsidiary
companies in Ecuador; Carnegie Ridge
Resources S.A., Green Rock Resources S.A.,
Cruz del Sol S.A. and Valle Rico Resources
S.A. The objective of these subsidiaries was
to apply the exploration blueprint developed
at Cascabel to discover more porphyry
copper-gold deposits in Ecuador. Each
subsidiary deals with a geographic region of
Ecuador and the four subsidiaries combined
currently hold 72 mineral concessions over
approximately 3,200km2.
First pass exploration work across these
concessions has been very successful and
resulted in the discovery of several targets
which SolGold believes have the potential to
become world class porphyry Copper-Gold
or epithermal Gold Silver projects. SolGold
has applied a ranking on these projects
which identified the 10 highest priority
projects as:
• Blanca
• Rio Amarillo
• La Hueca
• Cisne Victoria
• Porvenir
• Cisne Loja
• Chillanes
• Salinas
• Timbara
• Sharug
SolGold have applied for drilling permits
on five of these concessions and is currently
focussed on defining robust drill targets.
JASON WARD
Exploration Manager
WHEN I FIRST
ARRIVED IN
ECUADOR, I WAS
IMMEDIATELY
IMPRESSED BY THE
INFRASTRUCTURE
AND THE
LANDSCAPE.”
OUR SUCCESSFUL BLUEPRINT
SolGold is an emerging copper-gold major. The Company has created a
blueprint to rapidly discover and develop a new mining district in Ecuador.
LOCATION
EXPERTISE
EFFICIENCY
• The Andean Copper belt is
• Dr Steve Garwin, Chief Technical
• Man-portable drill rigs allow drilling
renowned as the base for nearly half
of the world’s copper production.
• Ecuador is underexplored.
• The area hosts mineralisation
of Eocene age, the same age as
numerous Tier 1 deposits along the
Andean Copper Belt in Chile and
Peru to the south.
Advisor – porphyry expert.
where access is constrained.
• Jason Ward, Exploration Manager
– Remote operations specialist
with significant community and
government engagement experience.
• Benn Whistler, Technical Services
Manager – Data collection
management and modelling expert.
• Combination of man-portable rigs
and track mounted rigs significantly
reduces drill costs.
16/
SOLGOLD ANNUAL REPORT 2018 When I first arrived in Ecuador, I
was immediately impressed by the
infrastructure and the landscape.
At Cascabel I was impressed by
the large alteration footprint and
widespread veining and mineralisation
and the Gold credits associated with
copper mineralisation.
Speaking to Ecuadorian geologists
and prospectors I was struck by just
how little work had been done right
across Ecuador.
We started generating projects
in anticipation of the cadastre re
opening in 2014 and got Steve Garwin
involved to do a multi-dataset study
to generate the areas with the best
chance of finding a porphyry. We
combined this with local expertise
from our outstanding Ecuador
geology team and came up with
over 100 areas. Of these we currently
hold 72 and are awaiting granting of
some others.
I credit our rapid success in defining
10 key projects to two things. Firstly,
our field teams, comprising geologists,
social and community experts and
environmental technicians, talent and
hard work. Secondly, to the incredibly
rich geology of Ecuador.
We have learnt a lot from Cascabel and
having 72 other concessions situated
on the most unexplored segment of the
world’s best porphyry copper belt is like
going back in time 50 years and pegging
northern Chile. In our first year we have
identified ten high priority targets and
already we have identified drill targets at
five of these and applied for permits.
To make successful discoveries you
have search in the right place, know
what to look, collaborate with the
local communities and operate safely
and responsibly.
We will make further discoveries
in Ecuador.”
JASON WARD
Exploration Manger
TECHNOLOGY
• State of the art magnetic modelling
used to identify porphyry targets.
• Coincident geochemical signatures
used to identify which porphyries
are mineralised, fertile and pregnant
with copper
• Rock chip sampling and structural
measurements of quartz veins
to provide geological context for
diamond drill programmes.
• Anaconda geological mapping
• Strong and cooperative government
SOCIAL
relations to ensure permits are progressed.
• Strong and collaborative community
engagement to secure local support and
social licence to operate.
and drill core logging to facilitate
the identification of intrusion
stages and a vein para-genesis
that allows for the prediction of
copper-gold grades. The most
important indicators of high-grade
mineralisation include the presence
of the early-stage causal intrusion(s),
elevated porphyry-style vein
abundance and an increased ratio
of chalcopyrite to pyrite.
STRATEGIC REPORT
/17
Q&A
WITH THE CHIEF EXECUTIVE DIRECTOR
Q: How do you view SolGold’s progress
in the past 12 months?
A: As a number of aggressive value
additions across Ecuador.
SolGold’s progress over the last 12 months
has focussed on making the resource at
Alpala, particularly the high grade portion,
larger and higher in grade. This has involved
focus with the drilling rigs – of which ten
have been on Alpala and two recently
at Aguinaga. We have been receiving
and announcing some very encouraging
extensions and infills to the high grade model
and the overall resource at Alpala. Ultimately
this will add significant value to the project
and we expect with the early outcomes from
the Preliminary Economic Assessment (PEA)
that the share price will appreciate to close
the value price gap. This could be further
enhanced by delivery of conditional funding
arrangements to see the project reach
bankable feasibility within two years and
hopefully a development decision at the
end of that period soon after.
Q: What is your vision for SolGold and
how do you plan to achieve this?
A: To become an integrated miner,
developer and explorer.
The vision for SolGold is to add to our
already demonstrated strengths as an
explorer at Cascabel, discoveries on the
other projects all through the spine of
Ecuador along the gold rich Northern
Andean Copper Belt. In addition, we aim
to add a development and production leg
to SolGold’s project inventory by moving
Alpala into feasibility and development
stages. This will involve further capital
raisings and the addition of personnel
at operative and management levels
with the necessary familiarity with mine
development in porphyries and in South
America. We are planning these personnel
additions along the way.
Q: How much do you think your
personality has shaped SolGold’s strategy?
A: A culture of dedication and
determination.
The culture of a company is very important.
We enlist those with resilience and a
willingness to tackle challenges on a large
scale. All of the personnel at SolGold are
driven and invested in the company both
professionally and financially. As CEO I have
led this ethos and established a culture of
increasing value and retaining the upside for
shareholders rather than farming the project
out to opportunistic majors.
There is so much value in the Alpala project
to be realised and we have a reasonable
target of 10million tonnes of copper and 25
million ounces of gold in the next mineral
resource estimate and a valuation which
I believe can deliver a NPV over $4 billion
and IRR over 25% for a 40 million tonne per
year block cave mine at reasonable gold and
copper prices and reasonable discount rates.
From the very beginning of this project, we
knew that it was big and ambitious, but
management input into a large project is
much more efficient than management input
into a small project and for the market to see
value drivers to increase the SolGold share
price, we needed to be focussed on the big
target and not give away the upside.
Q: What is the roadmap for Cascabel?
A: MRE December 2018, PEA 2019,
Pre-Feasibility December 2019, permitting,
fiscal framework and financing and final
feasibility 2020.
The roadmap for Cascabel is to deliver a
new Mineral Resource Estimate by early
December with a 43-101 compliant report
within a month, along with the Maiden
PEA in January 2019. From there, continued
increasingly detailed feasibility studies in the
resource evaluation, mine planning, process
design and plant design, capital and operating
cost estimates, and environmental and
Community and Social Responsibility areas
will deliver an increasingly robust project by
calendar end of 2019. We expect to spend
2020 on permitting, final feasibility, financing
and fiscal negotiations with a plan to get to a
development decision by calendar end 2020.
Q: Does the arrival of BHP into the
register concern you?
A: No, they’re very welcome.
We are obviously happy to have Alpala,
Ecuador, the copper market and our
management team endorsed by BHP buying
6%. I’m assuming that’s just for starters.
NICHOLAS MATHER
Chief Executive Director
OUR CHALLENGE
IS TO PROVIDE
THE NECESSARY
FUNDING TO
SEE ALPALA
PROGRESS TOWARD
DEVELOPMENT AND
THE OPPORTUNITY
IS TO CREATE
AN INTEGRATED
PIPELINE OF
EXPLORATION,
DEVELOPMENT AND
MINING PROJECTS.”
18/
SOLGOLD ANNUAL REPORT 2018 ALPALA MRE
UPDATE TARGETING
(cid:20)(cid:19) MILLION
TONNES
OF COPPER
(cid:21)(cid:24)
MILLION
OUNCES
OF GOLD
Q: Is Alpala a copper or gold project?
A: There’s more value (approximately 2/3)
in the copper, but the gold grades in the core
are very rich and disproportionately high. As
a gold project with early cash flows and high
grades, I expect it to be very valuable and
very financeable.
Q: How do you respond to those who say
SolGold is too small to fund a project the
size of Cascabel, let alone your significant
portfolio across Ecuador?
A: High copper and gold grades at Alpala
deliver independence.
The extraordinary high grades evident in
the core of Alpala and, the high grades we
expect in the nearby Blanca gold project will
enable a low capital, quick, highly profitable
development, to provide much of the capital
that is required to develop Cascabel. So
we see an operation starting in very high
grades and gradually ramping up into a
40 million tonne a year block cave at the
high grade core grades of 1.5% Cu.Eq. We
are working on a conditional total funding
package which involves agreement of the
funding parameters with financiers and off-
takers now, at pre-arranged prices related
to the NPV rather than the share price and
conditional only on the delivery of firstly,
a feasibility study, secondly, appropriate
permits, and thirdly, the necessary fiscal
arrangements with the Ecuadorian
Government. That way the market and the
industry will be able to see that the project is
substantially de-risked from an early stage.
The logistic advantages are compelling. We
have ports nearby, rail easements, sealed
highways, low elevation and an international
hydro power grid to save us billions,
compared to a high and dry project in the
Chilean Andes. On top of that, the block
cavable configuration for this large orebody
makes it cheaper to develop and operate,
and more environmentally acceptable than
a big open cut mine.
Q: SolGold is in a very unique position in
the market, do you view this as a challenge
or opportunity?
A: Independence is the challenge.
Diversity is the opportunity.
Our unique position is both a challenge
and an opportunity. Our challenge is
to provide the necessary funding to see
Aplala progress toward development and
the opportunity is to create an integrated
pipeline of exploration, development and
mining projects largely 100% owned under
the SolGold roof. This will present SolGold’s
shareholders with a unique opportunity to
take part in ownership of one of the world’s
largest emerging copper-gold porphyry
explorers, developers and miners.
Q: SolGold is perceived as being a very
technical story, as an experienced geologist
how do you explain it to the person on
the street?
A: Mineral systems repeating on all scales,
which allows SolGold to create and deliver a
blueprint quickly, effectively and successfully
apply it all across Ecuador.
SolGold is of course at a project scale a very
technical story at the moment and the scale
of the project at every level is replicable at
higher levels. The mineralisation style that
we see in an outcrop or piece of core, persists
across very large mineral systems and has the
potential to deliver very, very large orebodies,
not just at Alpala but at all the projects
throughout Ecuador.
SolGold’s project is really Ecuador.
The country is extremely underexplored
and fortunately, the Government is
very committed to the development of
an exploration and mining industry to
supplement the nation’s GDP with income
to replace oil and gas revenues. The Andean
Copper Belt, the northern section of which is
very gold rich, yields repeatably recognisable
geological and mineral systems in Ecuador,
and this means that our exploration
programmes can be blueprinted and
executed at low costs and with low discovery
risk. The experiences at Alpala and Cascabel
equip SolGold like no other in the country,
with abundant access to the best prospects,
a familiarity with the operating environment
and an understanding of the predictability
of these systems – all of which lead to high
discovery rates of large mineral inventories
on time and at low cost.
So yes, it’s technical on a prospect scale,
but on the corporate scale it’s simple and
clear – big, rich orebodies, extensive title
and capable endorsed teams of dedicated
professionals, working in a theatre abundant
with opportunity.
We aim to retain each project ourselves to
best benefit our shareholders.
STRATEGIC REPORT /19
OPERATIONS
REVIEW
(cid:20)(cid:21)(cid:24)(cid:15)(cid:22)(cid:21)(cid:22)M
OF DRILLING
COMPLETED
AT CASCABEL
THUS FAR
OUR
SUSTAINABLE
APPROACH
(cid:23)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)
PLANTS GROWN
EACH YEAR
SolGold’s plant nursery
established at the
Cascabel project
produces multiple plant
species for reforestation
and agriculture.
During the financial year ended 30 June 2018,
SolGold actively explored its concessions in
Ecuador and Australia, whilst expanding its
exploration license portfolio across Ecuador,
and pursuing key prospecting licences in the
Solomon Islands.
SEE MAP ON (cid:51)(cid:36)(cid:42)(cid:40) (cid:19)(cid:24)
The Company developed a detailed
understanding of the Alpala deposit at
Cascabel through surface geological
mapping, spectral alteration mapping,
drilling, geophysics, sample analysis, and
modelling and is applying this knowledge
in the development of other targets
throughout Ecuador.
During the financial year ended 30 June
2018, twelve drill rigs were operational
on the Alpala and Aguinaga prospects,
completing approximately 81,700m at the
Alpala Deposit and approximately 3,600m
at Aguinaga prospect. A total 125,323m of
drilling has been completed on the Cascabel
project thus far.
A major milestone for the Cascabel project
was the release of the Alpala maiden Mineral
Resource Estimate (MRE) in February this
year. The maiden MRE was estimated from
the initial 53,616m of drilling comprised:
• 430 Mt @ 0.8% CuEq (at 0.3% CuEq cut
off) in the Indicated category, and 650 Mt
@ 0.6% CuEq (at 0.3% CuEq cut off) in
the Inferred category;
• contained metal content of 2.3 Mt Cu in
the Indicated category and 2.9 Mt Cu in
the Inferred category; and
• contained metal content of 6.0Moz Au in
the Indicated category, and 6.3Moz Au in
the Inferred category.
The size of the Alpala deposit continues to
expand with the completion of nearly every
drill-hole. Recent drilling, now updated into
3D geological and grade models confirms
the core of the deposit to have uninterrupted
true dimension of up to 750m vertically,
700m long, and 300m wide, at a cut-off grade
of 1.5% CuEq. The actual grade of this gold
rich internal core (to the larger deposit) will
of course be significantly higher grade than
the cut-off grade. The gold rich internal core
is very encouraging towards the definition of
high grade tonnage for early access.
From a mining perspective, upon release, a
second updated MRE could provide not only
a far stronger resource base but also a larger
and more cohesive high-grade core, and
additional, high grade tonnage being defined
along the western lobe, which lies in a raised
position, adjacent to the high grade core of
the deposit. It is envisaged that such options
could be mined at a higher production rate
in the early years thus enhancing the project
NPV significantly.
The Company is currently planning further
metallurgical testing and completion of
an independent Preliminary Economic
Assessment at Cascabel. SolGold is
investigating underground block caving
operations, with high grade / low tonnage
initial underground development towards
the economic development of the copper-
gold deposit/s at Cascabel.
SolGold has commenced acquisition of
landholdings in the Cascabel project area in
anticipation of infrastructure requirements
for the project development. This has
resulted in the acquisition of 281 hectares
of land during the financial year ended
30 June 2018.
SolGold have improved the site facilities
to increase throughput of core processing
and sampling – allowing it to process on
average over 300m of drill core per day.
Storage facilities have also been increased
to accommodate projected requirements
to the end of calendar year 2018. Camp
infrastructure has also been extended
and improved to accommodate up to 88
personnel at Rocafuerte and 217 at the
Alpala camps.
The Regional Exploration team have
identified areas prospective for porphyry
and epithermal style mineralisation areas
throughout Ecuador. During the year over
100 hundred concessions were applied for,
with a total of 72 concessions representing
306,543 hectares granted. SolGold is the
largest concession holder in Ecuador.
20/ SOLGOLD ANNUAL REPORT 2018
22 ECUADOR
32 AUSTRALIA
36 SOLOMON ISLANDS
In these regional concessions, social teams
are engaging with communities and
government organisations to gain access
to tenements, and to keep them informed
of the SolGold activities in their areas.
Geologists have been involved in various
programs of reconnaissance mapping and
rock chip and stream sediment sampling and
progressed many of these with follow up
gridded sampling.
First pass exploration has rapidly covered
most of the 72 concessions during the past
year. From this early stage work, a total of 10
priority projects have been identified. These
projects represent the core regional focus for
exploration activities for the next 12 months.
SolGold continues to employ locally and
support local business. Our permanent
Ecuadorian work force is currently
over 300 people at Cascabel with 84
exploration geologists.
In the Solomon Islands SolGold is actively
pursuing the application of the Kuma and
Mbetilonga prospecting licences which are
considered prospective for porphyry copper
and gold mineralisation.
SolGold maintains its interest in Australia
through its Queensland tenements. SolGold
remains optimistic about the potential of
these holdings with encouraging drilling
results and geophysics supporting further
exploration, and target prioritisation.
OPERATIONS REVIEW /21
/21
ECUADOR
CASCABEL
PROJECT
PROJECT OVERVIEW
Location
Ownership
Subsidiary
Imbabura province, Northern Ecuador
85%
Exploraciones Novomining SA (ENSA)
Tenement area
50km2
Deposit type
Infrastructure
Copper-gold porphyry
3 hour drive from Quito (Ecuador’s capital) along sealed
highway, 180km from deep water port, Esmeraldas, 30km
from hydropower network, adjacent fresh water supply
Elevation
600 – 1,800m
ALPALA
The Alpala maiden Mineral Resource Estimate (MRE announced on 3 January 2018
was a major milestone (Table 1). The MRE was based on 53,616m of results from drilled
between 2013 and October 2017. A further 71,000m of drilling was completed by the end
of June 2018. This new information not yet considered in the MRE, is expected to result
in significant resource growth for a revised MRE planned for release at the end of calendar
year 2018.
Table 1 Alpala maiden Mineral Resource Estimate statement.
RESOURCE
CATEGORY
TONNAGE
(MT)
>1.1% CuEq
0.9 – 1.1% CuEq
0.3 – 0.9% CuEq
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
Total >0.3% CuEq
Indicated
Inferred
Notes:
70
50
50
50
310
550
430
650
GRADE
CONTAINED METAL
AU
(G/T)
CUEQ
(%)
CU
(MT)
AU
(MOZ)
CUEQ
(MT)
1.3
1.3
0.5
0.5
0.2
0.2
0.4
0.3
1.8
1.8
1.0
1.0
0.5
0.5
0.8
0.6
0.7
0.5
0.3
0.4
1.2
2.0
2.3
2.9
2.8
1.9
0.9
0.9
2.3
3.5
6.0
6.3
1.2
0.8
0.5
0.5
1.6
2.6
3.4
4.0
CU
(%)
1.1
1.1
0.7
0.7
0.4
0.4
0.5
0.4
• Mr. Martin Pittuck, MSc, CEng, MIMMM, is responsible for this Mineral Resource estimate and is an “independent qualified person” as such
term is defined in NI 43-101.
• The Mineral Resource is reported using a cut-off grade of 0.3% copper equivalent calculated using [copper grade (%)] + [gold grade (g/t) x 0.6]
based on copper price of US$2.8/lb and gold price of US$1,160/oz.
• The Mineral Resource is considered to have reasonable potential for eventual economic extraction by underground mass mining such as
block caving.
• Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
• The statement uses the terminology, definitions and guidelines given in the CIM Standards on Mineral Resources and Mineral Reserved
(May 2014).
• The MRE is reported on 100 percent basis.
• Values given in the table have been rounded, apparent calculation errors resulting from this are not considered to be material.
• The effective date for the Mineral Resource statement in the 18th December 2017.
22/
SOLGOLD ANNUAL REPORT 2018 The drilling program has focussed on delineating the geometry and geological
character of the Alpala deposit. Understanding of the Alpala system and global
porphyry systems has provided additional knowledge that the Company is applying
in the exploration of other targets within the Cascabel project as well as targets at
regional projects.
The drilling program was accelerated during the year with the mobilisation of an
additional 8 drill rigs, increasing the drill fleet from 4 to 12 rigs on site. The bolstered
drilling fleet numbers along with custom drilling fluid programs, the use of sediment
removal and directional drilling techniques has resulted in the average cost per metre
being reduced by over 40% during the year.
Drilling assay results from Holes 28 to 55R were received during the year ended 30 June
2018, with assay results from infill drilling at Alpala revealing a far more robust high-grade
core than previously modelled, as exemplified (for example) by resource extension drill
holes 33, 37, 42 and 49, and by infill drill Holes 41-D1, 41-D1-D2, 43, 55R and 57 (Figure 1).
Table 2 Highlights from drilling results at Alpala during 2017/18.
ASSAYS COPPER EQUIVALENT (CUEQ)
DESCRIPTION
HOLE
Hole 33
Hole 37
Hole 42
Hole 49
824m @ 0.80%, including
576m @ 0.93%, and 170m @ 1.48%
842m @ 0.44%, including
198m @ 0.74%
728m @ 1.06%, including
388m @ 1.44%, and 254m @ 1.78%
850m @ 0.66%, including
444m @ 0.83%, 268m @ 1.12%,
and 120m @ 1.57%
Hole 41-D1
756m @ 0.82%, including
386m @ 1.19%, and 252m @ 1.53%
Hole 41-D1-D2
853m @ 0.91%, including
582m @ 1.18%, 340m @ 1.54%,
146m @ 2.32%
Resource extension –
Western Lobe
Resource extension –
Alpala NW
Resource extension –
Western Lobe
Resource extension –
Alpala NW and Trivinio
Resource infill – Alpala
Central
Resource infill – Alpala
Central
Hole 43
Hole 55R
Hole 57
898m @ 0.76%, including
478m @ 1.02%, and 160m @ 1.56%
Resource infill and
Extension – Alpala Central
1062m @ 1.02%, including
548m @ 1.36%, and 220m @ 2.07%
832m of visible copper sulphide
mineralisation, including 304m of intense
visible copper sulphide mineralisation
Resource infill – Alpala
Central
Assay results pending
Drill hole intercepts have been updated to reflect current commodity prices, using a data
aggregation method, defined by copper equivalent cut-off grades and reported with up to
10m internal dilution, excluding bridging to a single sample. Copper equivalent grades are
calculated using a gold conversion factor of 0.63, determined using an updated copper price
of USD3.00/pound and an updated gold price of USD1300/ounce. True widths of down hole
intersections are estimated to be approximately 25-50%.
The SolGold geologists expect a significant increase in the grade, extent and continuity of
the resources in the planned updated MRE including a significant increase in the high-grade
core tonnage and grade (Figure 2). This expectation is based on better understanding of the
deposit through observations achieved from higher density drilling. Drilling continues to
demonstrate strong mineralisation in drill holes outside the current inferred and indicated
resource blocks along with strong assay results from infill drilling within the existing core of
the deposit.
(cid:20)(cid:20)
PROJECTS IN
ECUADOR
AVERAGE
COST PER
METRE REDUCED
BY OVER
(cid:23)(cid:19)%
OPERATIONS REVIEW
/23
ECUADOR CONTINUED
Figure 1
Cross-section looking northwest through
the high-grade core of the Alpala deposit
(window of + 40m), showing Cu-equivalent
values in drill-hole, the outlines of the high-
grade zone (>1.5% CuEq, black polygon) and
indicated / inferred resources determined in
the January 2018 Mineral Resource Estimate
(MRE). Those important drill holes included
in the MRE are labelled with black text.
Those drill-holes completed subsequent to
the MRE calculation are indicated by red text
(holes 41-D1, 41-D1-D2 and 57). Preliminary
in-house calculations, based on these recent
holes, suggests that the central high-grade
core is significantly larger than announced in
the MRE. This can be seen by comparing the
size and shape of Jan 18 MRE polygon (black)
to the current in-house model polygon (grey).
Other geological activities completed during
the year ended 30 June 2018 include:
• Mapping – to improve understanding of
the geometry of the mineralised systems
and assist with drill planning:
– Anaconda style geological mapping.
–
–
Spectral alteration mapping.
Soil gridding.
– Auger mapping.
• Geophysics – to assist with drill targeting:
–
Spartan Orion 3D Magnetotelluric
survey (3d IP).
• Analyses – to understand the
characteristics of ore minerals:
– Petrographic –provides geological
context to exploration.
– Terraspec – spectral mapping of
hydrothermal alteration minerals.
– Mineragraphy (scanning electron
microscope) – location of gold and
grainsize characteristics of ore
minerals.
– Petrophysics – to provide better
geological context to better interpret
geophysical results.
• Modelling – the basis for resource
calculation and addition:
–
3D geochemical modelling of
porphyry geochemical signatures
in soil and auger data.
– Re-modelling of constrained heli-
magnetic, Orion 3DIP and magneto-
telluric (MT) surveys.
– Development of 3D geological, grade,
geochemical and alteration models
at Alpala.
• Target generation – to feed the pipeline
for future discovery:
– Geophysics modelling - Identification
and drill testing of northwest trending
magnetic bodies (Alpala Southeast,
Alpala East, Alpala Northwest,
Trivinio, Moran, Tandayama-America,
Aguinaga, Chinambicito, Carmen
and Parambas).
24/ SOLGOLD ANNUAL REPORT 2018
(cid:24)
HOLES
COMPLETED
AGUINAGA
SolGold continues to drill test the 5 targets
identified at Aguinaga. The drilling program
is in its initial stages with 5 holes completed,
totalling approximately 3,600m. To date,
drilling has intersected zones of strongly
mineralised host rock (Figure 2), intra-
mineral dykes, and late dykes and breccias.
The mineralisation source intrusion is yet
to be encountered.
Mineralisation intersected in drilling at
Aguinaga thus far, has similarities to that
being drilled at Alpala and to that discovered
at surface in rock saw channel samples that
returned an open-ended, rock-saw channel
sample result of 9.0m @ 1.51% CuEq (1.01%
Cu, 0.79 g/t Au).
SolGold geologists deem that the initial
drilling at Aguinaga confirms the potential for
a second large porphyry deposit at Cascabel,
thus far demonstrating a vertical column to
the mineralising system of more than 600m,
and a width of approximately 320m.
Table 3 Highlights of Aguinaga drilling program
HOLE
Hole 01
Hole 02
ASSAYS COPPER
EQUIVALENT (CUEQ)
218m @ 0.45%,
including 122m @ 0.52%
172m @ 0.42%,
including 46m @ 0.63%
DESCRIPTION
Mineralisation intersected
validating geological target.
Mineralisation intersected with
similar characteristics as Hole 1.
Figure 2
Selected examples of
mineralisation encountered
in Hole 1 at Aguinaga.
OPERATIONS REVIEW
/25
ECUADOR CONTINUED
THE(cid:20)(cid:19)
PRIORITY
(cid:51)(cid:53)(cid:50)(cid:45)(cid:40)(cid:38)T(cid:54) (cid:36)(cid:53)(cid:40)(cid:29)
• Blanca
• Rio Amarillo
• Cisne Loja
• Porvenir
• Timbara
• Chillanes
• Salinas
• Sharug
• La Hueca
• Cisne Victoria
REGIONAL PROJECTS
SolGold’s strategy to become a tier 1 copper
and gold producing company through
aggressive exploration is continuing to yield
exciting results. SolGold has applied for over
100 carefully selected concessions perceived
(by SolGold) to be the most prospective
areas in Ecuador. During the last 12 months
applications were granted for 72 concessions
(Figure 3). These applications are held in
four SolGold subsidiaries, Carnegie Ridge
Resources, Green Rock Resources, Cruz Del
Sol S.A. and Valle Rico Resources.
With the granting of the regional
concessions in Ecuador, social teams were
employed to liaise and engage with local
communities; establish and maintain field
access for the technical teams; and to ensure
local labour was identified and employed
whenever positions were available. Multiple
technical field teams were formed for each
subsidiary, consisting primarily of national
geologists and technicians. A total of 42
national geologists are now employed in
regional exploration along with many more
technicians and local workers.
Over the past year, first pass reconnaissance
mapping, stream sediment geochemistry,
and detailed geological mapping over target
areas has rapidly covered most of the 72
concessions. Based on the results of this initial
exploration, a list of 10 priority targets has
been prioritised for second phase exploration.
Ongoing exploration will focus on advancing
these priority projects, through detailed
geological mapping, soil geochemistry and
geophysical surveys (where necessary), with a
view to progressing to drill testing as soon as
permissions are in place.
Figure 3
SolGold granted concessions
in Ecuador (including
Cascabel) highlighting the
priority projects.
26/ SOLGOLD ANNUAL REPORT 2018
PROJECT OVERVIEW
Location
Ownership
Subsidiary
Charchi province, Northern Ecuador
100%
Carnegie Ridge Resources S.A
Tenement area
1 concession (Blanca) over 97km2
Deposit type
Epithermal gold
BLANCA
The rich epithermal gold mineralisation has
been identified within the Blanca concession
and is thought to be associated with large
copper-gold porphyry systems in the area.
A ridge and spur auger soil program is
underway traversing the projected trend of
the epithermal structural corridor. Following
the results of the geochemical sampling
program, a targeted geophysical survey will
be planned, and priority targets refined to
drill ready status.
In the Blanca concession, sampling of the
intermediate sulphidation “Cielito” vein and
outcropping veins in surrounding drainages
are hosted in volcanics and volcanic breccias
showing weak quartz-pyrite-illite and
chlorite-sericite alteration (Figure 4).
The results include:
• 0.00% Cu, 72.3g/t Au, 13.3g/t Ag.
• 0.01% Cu, 18.75g/t Au, 0.35g/t Ag.
• 0.03% Cu, 17.05g/t Au, 7.14g/t Ag.
• 0.00% Cu, 4.93g/t Au, 1.63g/t Ag.
Figure 4
Example of the ‘Bonanza’ style epithermal silica
mineralisation occurring at “Cielito” vein.
OPERATIONS REVIEW
/27
ECUADOR CONTINUED
CISNE LOJA
PROJECT OVERVIEW
Location
Ownership
Subsidiary
Loja province, Southern Ecuador
100%
Green Rock Resources S.A.
Tenement area
3 concessions, 146km2
Deposit type
Epithermal gold and silver
First pass stream sediment surveys have
identified several large areas of strong gold
mineralisation across the tenement. Recent
follow up of gold anomalies has led to the
discovery of outcropping epithermal style
alteration and mineralisation over an area
of 2.5km by 1.5km with several episodes of
quartz veining, which shows similarities
to the epithermal gold system at Fruta del
Norte in Southern Ecuador.
Numerous areas of epithermal quartz veins
with alteration exhibiting silica-kaolinite-
quartz clay assemblages together with vuggy
quartz, indicate an intermediate to low
sulphidation epithermal environment.
SolGold has had field teams on the ground
conducting reconnaissance stream and rock
chip sampling, mapping and prospecting
at the three Cisne Loja concessions since
December 2017. Streams over a 6km x 4km
zone draining the area of interest were
ubiquitously rich in gold and magnetite
indicating the prevalence of the copper-gold
mineralised porphyries in the area.
Geological mapping of these anomalies
defined alteration and quartz veining over
an area of 2.5km by 1.5km. These were
outcropping, epithermal style alteration and
mineralisation with multiple episodes of
quartz veining evident. Rock chip samples
have returned gold and silver results greater
than 1 g/t Au with a best rock chip sample of
15.25g/t Au and 23.6g/t Ag.
Further detailed mapping, sampling
and trenching is planned along with a
geophysical survey, prior to drill testing.
ROCK CHIP
SAMPLES HAVE
RETURNED GOLD
AND SILVER
RESULTS
(cid:33)(cid:20)(cid:42)(cid:18)T (cid:36)(cid:56)
TIMBARA
PROJECT OVERVIEW
Location
Ownership
Subsidiary
Tenement area
Zamora Chinchipe province, Southern Ecuador
100%
Greenrock Resources
4 concessions (Timbara 1, Timbara 2,
Timbara 3 and Timbara 4), 152 km2
Deposit type
Copper-gold porphyry
(cid:24)M
THICK QUARTZ
VEINS EXPOSED
IN OTHER
OUTCROPS
At Timbara 1 prospect, outcropping porphyry
style mineralisation occurs as north-east
trending narrow quartz veins containing
Pyrite, Chalcopyrite, Covellite and Bornite
hosted within granodiorite intrusive.
At Timbara 2 prospect fine-grained diorite
contains abundant stockworks of porphyry
style quartz-chalcopyrite veins and
magnetite veinlets characterised by intense
propylitic chlorite alteration. Mineralisation
is represented by up to 3% chalcopyrite, 2%
bornite, and 1% chalcocite, with traces of
malachite and native Cu.
At Timbara 3 prospect, reconnaissance
mapping has located a 25m wide zone
of quartz - hematite veining including
localised bornite rich veining. Other outcrops
identified show significant exposed 5m thick
quartz veins containing pyrite, chalcopyrite,
bornite, and minor chalcocite. Peripheral to
these mineralised zones, host rocks contain
abundant magnetite veinlets cut by quartz
veins containing chalcopyrite, magnetite,
pyrite and minor chalcocite.
28/ SOLGOLD ANNUAL REPORT 2018
PROJECT OVERVIEW
Location
Ownership
Subsidiary
Zamora Chinchipe province, Southern Ecuador
100%
Green Rock Resources S.A.
Tenement area
244km2
Deposit type
Copper-gold porphyry
PORVENIR
A stream sediment sampling program
at the Porvenir Project delineated two
geochemical anomalies within the larger
6km x 5.5km stream anomaly at the
Derrumbo and Bartolo prospects.
SolGold geologists have identified
mineralised outcrops which extend over
some 1.5km x 1km with chalcopyrite up to
7% and lesser covellite up to 1%, chalcocite
up to 2%, bornite up to 1%, malachite up
to 3% and pyrite. New mineralised outcrops
identified in the Porvenir Project that are
rich in chalcopyrite, chalcocite, covellite,
bornite (copper sulphide minerals) and
malachite (copper carbonate mineral).
A program of ridge and spur auger soil
sampling is currently underway with initial
auger soil results having identified a 2.5km
by 2km zone of strong copper anomalism.
Initial multi element soil geochemistry
is delineating a strongly zoned porphyry
copper target with copper in soil values of
up to 0.42% Cu.
Auger soil programs are continuing and
infill programs are planned to delineate drill
targets. Geopysical surveys are also planned
over the Bartolo and Derrumbo prospects.
Follow up mapping
has confirmed
mineralisation in
outcrop, with best rock
chip results including:
• 8.65% Cu, 0.19g/t Au,
38.1g/t Ag.
• 6.64% Cu, 0.09g/t Au,
33.1g/t Ag.
• 5.10% Cu, 0.05g/t Au,
22.3g/t Ag.
• 4.27% Cu, 0.09g/t Au,
14.6g/t Ag.
PROJECT OVERVIEW
Location
Ownership
Subsidiary
Zamora Chinchipe province, Southern Ecuador
100%
Cruz del Sol
Tenement area
3 concessions, 150km2
Deposit type
Copper-gold porphyry
LA HUECA
Teams conducted extensive stream
sediment and panned concentrate sampling
throughout the La Hueca project. The
geochemical results of this work delineated
5 porphyry copper targets situated along the
contact between the Zamora batholith and
volcanic units. The results delineate a copper
rich porphyry corridor running through the
La Hueca project.
Target 6 has returned strong copper, gold
and molybdenum anomalism over a large
area 1.25km by 1.0 km.The discovery is
significant due to k-feldspar, secondary
biotite, and chlorite-sericite hydrothermal
alteration intensity, and the presence of
chalcopyrite, molybdenite and bornite. A-
and B-type quartz veins are also present at
variable density. Geochemical high Cu-Mo
results are significant (Table 2), and they are
dispersed over an extensive area.
A program of gridded auger soil sampling
is underway at Target 6 to further delineate
drilling targets. Further reconnaissance,
detailed mapping, and sampling and
trenching is planned, prior to refining
targets for drill testing.
Best rock chip results
from Target 6 include:
• 6.27% Cu, 0.29g/t Au,
22.9 g/t Ag, >1% Mo.
• 4.58% Cu, 0.13g/t Au,
14.6g/t Ag, 0.16% Mo.
• 4.15% Cu, 0.24g/t Au,
16.1g/t Ag, 0.28% Mo.
• 2.19% Cu, 0.12g/t Au,
9.11g/t Ag, 0.02% Mo.
OPERATIONS REVIEW
/29
ECUADOR CONTINUED
CHILLANES
PROJECT OVERVIEW
Location
Ownership
Subsidiary
Bolivar/Chimborazo province, Central Ecuador
100%
Green Rock Resources S.A.
Tenement area
48km2
Deposit type
Copper-gold Porphyry
Following the completion of initial
anaconda mapping, a program of auger
soil geochemistry will be carried out to
delineate priority drill targets.
Stream sediment geochemical sampling has
returned the highest copper results from any
SolGold project in Ecuador with best results
including 1140ppm Cu and 1110ppm Cu.
Detailed follow up mapping and rock chip
sampling is continuing with the best rock
chip assay returned to date of 1.42% Cu.
Hydrothermal alteration consists of phyllic
alteration with abundant chalcopyrite and
pyrite with lesser chalcocite and bornite
mapped in outcrop.
RIO
AMARILLO
PROJECT OVERVIEW
Location
Ownership
Subsidiary
Imbabura province, Northern Ecuador
100%
Carnegie Ridge Resources S.A.
Tenement area
3 concessions, 123 km2
Deposit type
Copper porphyry
(cid:21)(cid:24)(cid:19)M
LONG OUTCROP
OF COPPER
MINERALISATION
Two main prospects have been identified in
both Rio Armarillo 1 & 2; Chilanes and the
Pugaran Prospects.
Chilanes consists of an extensive lithocap
with surrounding strong stream sediment
anomalies. The lithocap measures
approximately 2.4km by 2.4km. It consists
of crackle and hydrothermal breccias,
with silca-clay and advanced argillic
alteration, typical of the upper levels of
a porphyry system.
Pugaran hosts abundant B-type veins and
zones of strong copper mineralisation. It
represents a 250m long outcrop of copper
mineralisation consisting of B type veins with
pyrite, chalcopyrite, chalcocite and bornite.
K-alteration overprinted by phyllic alteration.
The next stage of exploration at Rio
Armarillo project will start with detailed
auger soil program over the Chilanes
lithocap in Rio Armarillo 2 concession and
geophysical surveys covering the entire
project, to enable drill target selection.
30/ SOLGOLD ANNUAL REPORT 2018
PROJECT OVERVIEW
Location
Ownership
Subsidiary
Morana Santiago province, Southeastern Ecuador
100%
Cruz del Sol S.A.
Tenement area
170km2
Deposit type
Copper-gold Porphyry
CISNE
VICTORIA
Numerous prospects have been discovered
during SolGold’s initial geochemical
stream sampling. Significant alteration and
mineralisation has been identified that is
indicative of a large porphyry system.
Best results include a 7m continuous channel
chip sample that returned:
• 7m @ 2.28% Cu, 0.73 g/t Au, 8.83 g/t Ag.
Initial first pass exploration is continuing
to define the extent of the copper
mineralisation and locate new prospects.
SHARUG
SALINAS
PROJECT OVERVIEW
Location
Ownership
Subsidiary
Azuy province, Southwest Ecuador
100%
Greenrock Resources S.A.
Tenement area
2 conessions, 52 km2
Deposit type
Copper-gold Porphyry
New diorite outcrops located in the Sharug
project, in the Sharug 2 concession. The
alteration and mineralisation observed is
indicative of a potential porphyry copper-gold
system. Hydrothermal alteration consists of
chlorite, sericite and secondary biotite.
The quartz vein stockwork has a preferential
direction NE – SW. The fine stockwork
veinlets comprise magnetite, pyrite and
disseminated chalcopyrite.
Mineralisation is observed with up to 1.5%
pyrite, 0.2% chalcopyrite, traces bornite,
native copper traces, with chalcopyrite up
to 1% in mafics with abundant secondary
biotite. Tourmaline veins with chalcopyrite
have also been identified. Assays are pending.
PROJECT OVERVIEW
Location
Ownership
Subsidiary
Bolivar province, Southwest Ecuador
100%
Valle Rico Resources S.A.
Tenement area
4 concessions, 189 km2
Deposit type
Gold-silver-copper epithermal
The Salinas Project represents a high
sulphidation epithermal Ag-Au-Cu with
indications of a nearby Cu-Au porphyry system.
Previous diamond drilling conducted by Rio
Tinto returned a best intersection:
• 74.5m @ 2.0 g/t Au and 137 g/t Ag.
•
incl. 39.5m 3.3 g/t Au and 168 g/t Ag.
Mineralisation is hosted in structurally
controlled hydrothermal volcanic breccias.
A hypogene covellite-enargite-chalcocite-
arsenopyrite paragenesis of phases in the
hydrothermal breccia suggests a nearby larger
Cu-Au porphyry system.
Valle Rico will focus on exploring for both
epithermal and porphyry systems at the
Salinas project. Along with continuing to drill
test the mineralised epithermal breccias,
Valle Rico will carry out regional prospecting
to identify porphyry targets.
OPERATIONS REVIEW
/31
AUSTRALIA
(cid:54)ol(cid:42)old continues to hold tene(cid:80)ents across
central and southeast (cid:52)ueensland(cid:15) throu(cid:74)h
its (cid:90)holl(cid:92) o(cid:90)ned su(cid:69)sidiaries(cid:15) (cid:38)entral (cid:48)inerals
and (cid:36)capulco (cid:48)inin(cid:74)(cid:17)
CENTRAL MINERALS
• EPM 25300 Cooper Consolidated.
• EPM 19639 Goovigen
Consolidated.
• EPM 19243 Lonesome.
• EPM 18760 Westwood.
• EPM 18032 Cracow West.
ACAPULCO MINING
• EPM 19410 Normanby.
• EPM 25245 Mount Perry.
Located, 140km west of Gladstone
(Queensland Australia), the Rannes
project hosts structurally-controlled, low-
sulphidation epithermal gold-silver deposits.
Thirteen prospects have been identified
within the Permian-aged Camboon
Volcanics, with the majority lying along
north-northwest trending fault lines.
Exploration activities during the year included
the drilling of two holes (RC pre-collar with
diamond tail) totalling 589.8m of drilling.
A VTEM (Versatile Time Domain
Electromagnetic) airborne geophysics survey
was completed over the main tenement areas
in June 2018. The VTEM survey tested for
conductive and/or resistive bodies that may
indicate mineralisation lying underneath
adjacent extensive cover sequences.
Preliminary analysis of the VTEM data
show conductors offset to the south-west
of the surface mineralisation, suggesting
the potential for sulphide zones down
south-westerly dipping thrust faults. A
large conductor lying untested in the far
south-west portion of the survey area was
marked for follow up, where gold and silver
soil geochemical anomalies occur in a poorly
exposed area.
The two diamond holes were drilled under
the thickest part of the Crunchie deposit to
test for depth extensions to mineralisation
under soil geochemical anomalies, however
drilling returned no significant results.
Further analysis of the VTEM with existing data
will form the basis of further work in 2018/2019
and refinement of follow up drill testing.
Located near Goovigen, approximately
140km west of Gladstone (Queensland
Australia), exploration activities at the
consolidated concessions around Woolein
included the drilling of 10 reverse circulation
drill holes in February 2018 totalling 946m.
The holes were designed to test gold
geochemical anomalies in soil where linear
structural features are interpreted from
topographic and regional magnetic imagery.
(cid:26)
ONGOING
PROJECTS
IN AUSTRALIA
COOPER
(cid:24)(cid:27)(cid:28)(cid:17)(cid:27)M
OF DRILLING
DURING THE
PAST YEAR
GOOVIGEN
32/ SOLGOLD ANNUAL REPORT 2018
LONESOME
EPM 19243 is located 40 km south-west
of Biloela in Central Queensland. Central
Minerals Pty Ltd is exploring for gold and
silver about the stratigraphic level of the basal
sediments of the Bowen basin. The Rannes
area 40 km to the north contains several
of these deposits, and to date Central has
defined resources of about 10 million ounces
of silver, and about 270,000 ounces of gold.
are mineralised with zoned silver – gold and
then copper just to the west at Mt Tam.
In 2017–2018, work has consisted of office-
based reporting. No field work has been
carried out. The proposed programs have
been postponed. Central Minerals is now in
a position where postponed programs can
be resumed.
(cid:20)(cid:19) MILLION
OUNCES OF
SILVER DEFINED
BY CENTRAL
The tenement area contains structures that
are visible on satellite images. They appear to
be repetitions of chalcedonic breccia’s that
WESTWOOD
Located approximately 50km south-west
of Rockhampton (Queensland Australia),
exploration activities at Westwood included
the drilling of 5 RC percussion and diamond
drill holes totaling 713.7m, comprising 2 RC
drill holes with Diamond tails totaling 527m
and 2 RC percussion holes totaling 186m.
Drilling verifies that the Westwood deposits
are steeply dipping.
The most easterly hole WWD001 intersected
potentially ore grade palladium with
anomalous gold and copper with the best
intersection 44m @ 1.0 g/t Au+Pd+Pt and
0.11% Cu.Samples have been sent to Canada
for full analysis including Platinum, Palladium,
Ruthenium, Osmium and Iridium. Drilling
verified that the deposits are steeply dipping.
The remainder of drill holes returned poor
results, however, the Westwood prospect is
very large and offers potential for porphyry
and layered intrusion style Cu-Au-PGE
mineralisation, especially in low lying areas
north and east of drill hole WWD001, which are
marked for follow up work in the coming year.
At the Westwood Prospect, the objective
of the drilling was to test weak conductors
identified from previous Electromagnetic
survey imagery.
CRACOW WEST
Located approximately 10km west of
Cracow (Queensland Australia), the Cracow
West tenement holds targets anomalous
in tellurium over a Subaudio Magnetics
(SAM) resistor anomaly. The target area
holds several similar characteristics to the
now mined ‘Klondyke’ at Cracow deposit,
which led to the recent revival of Evolution
Mining’s Cracow mine.
SolGold did not undertake exploration
activities in the current financial year and
a renewal application has been lodged to
the Queensland Department of Natural
Resources with an immediate commitment
to drill two diamond holes prior to October
2018. SolGold is optimistic of a favorable
decision on the renewal application and
expects the proposed program to be
underway during Q4 2018.
Initial drilling will test a resistive feature
at Dawson Park identified by the recent
VTEM survey at a prognosed depth of
300m. Drilling will target potential for
resistive gold-bearing epithermal silica, and
follow up drill holes will be drilled in order
to more accurately determine the dip and
geometry of potential epithermal quartz
adularia telluride-gold mineralisation.
OPERATIONS REVIEW
/33
AUSTRALIA CONTINUED
NORMANBY
Assay results returned
the following highlights:
• 14m @ 5.3 g/t Au from
58m depth (MFT019).
• 28m @ 1.1 g/t Au,
from 40m depth,
including 10m @ 2.3
g/t Au (MFT020).
• 28m @ 1.2 g/t
Au from surface
(MFT022).
The Normanby Project is located at the
southern margin of eastern Australia’s
densest cluster of million ounce gold
deposits, the nearest of which is the Mt.
Carlton Au-Ag mine, located 40km to the
north-west of Normanby.
The quartz vein gold copper systems at
Normanby occur in shear zones along a
diorite – granite contact. The field extends
for several kilometres to the west beyond
the current sampling, into flatter areas with
a partial gravelly cover. Exploration activities
included drilling of 6 RC percussion holes
totalling 607m (including a diamond tail).
Drilling focussed on targets identified by
a prospecting program conducted in early
2017. A significant vertical mineralised
structure was intersected in holes MFT19,
and MFT17, and a separate shallow dipping
zone of mineralisation was also discovered in
holes MFT24 and MFT014.
Regional-scale stream sediment and rock
chip sampling has identified numerous
anomalous areas, including the Mt
Crompton breccia pipe that require follow
up work over the coming year. Further
work is planned at Mount Flat Top and
Normanby including more detailed soil
and rock sampling to guide future drilling
more accurately.
MOUNT PERRY
The Mount Perry mineral field located
approximately 100km south-west of
Bundaberg (Queensland, Australia) and
comprises epithermal to mesothermal veins
that cluster around mineralized porphyry
intrusions and associated breccia bodies.
Two diamond holes (total 567.4m) and two
shallow RC percussion holes (59m) were
drilled to test a potential porphyry target
postulated as the feeder for now abandoned
high grade underground mines in the New
Moonta area. The drilling was completed
early July 2018.
Drilling has identified chalcopyrite and
molybdenum mineralisation consistent with
and is indicative of a porphyry system. Both
holes intersected a copper/molybdenum
mineralised monzonite porphyry, and were
terminated in mineralisation. Assay results
remain pending.
Should assays results offer encouragement,
deeper drilling is planned to continue in
this area, including the vicinity of the Red
Hill breccia pipe where very shallow drilling
completed in 2008 intersected good gold
copper grades (4m@5.7 g/t Au and 0.28%
Cu for the interval 0 to 4m).
Figure 5
Project locations,
Queensland.
34/ SOLGOLD ANNUAL REPORT 2018
SOLGOLD
REMAINS
OPTIMISTIC
ABOUT THE
POTENTIAL
OF THESE
HOLDINGS,
STRATEGIC REPORT
/35
SOLOMON ISLANDS
The (cid:46)u(cid:80)a and (cid:48)(cid:69)etilon(cid:74)a tene(cid:80)ents in the (cid:54)olo(cid:80)on (cid:44)slands (cid:11)(cid:54)outh (cid:58)est (cid:51)acific(cid:12)
are considered (cid:69)(cid:92) (cid:54)ol(cid:42)old to (cid:69)e hi(cid:74)hl(cid:92) prospecti(cid:89)e (cid:73)or porph(cid:92)r(cid:92) copper(cid:16)(cid:74)old
and epither(cid:80)al (cid:74)old deposits(cid:17)
SolGold has applied for two prospecting licences in the Solomon Islands –
both on the island of Guadalcanal:
• Mbetilonga prospecting licence (Mbetilonga Application).
• Kuma prospecting licence (Kuma Application).
The Mbetilonga Application covers an area
of approximately 46 km2 and is located
approximately 8km south of Honiara (the
capital of the Solomon Islands).
The prospect is located over an inferred
collapsed caldera with widespread supergene
copper mineralisation and intermediate
sulphidation epithermal veins bearing
gold, silver, lead, zinc and copper. No field
activities were completed at Mbetilonga in
the current financial year. SolGold awaits the
grant of the Mbetilonga Prospecting Licence
which was submitted on 10 February 2017.
(cid:21)
PROSPECTING
LICENSES
APPLIED FOR IN
THE SOLOMON
ISLANDS
MBETILONGA
Figure 6
Discovery of classical
porphyry style leached
cap and lithocap rocks at
Kololevu and Alemba creeks.
36/ SOLGOLD ANNUAL REPORT 2018
KUMA
COVERS AN
AREA OF
APPROXIMATELY
(cid:24)(cid:19)KM(cid:21)
The Kuma Application covers an area of
approximately 50km2 and is located 37km
south-east Honiara. The Kuma prospect on
the island of Guadalcanal exhibits surface
lithocap characteristics which are traditionally
indicative of a large metal rich copper-gold
intrusive porphyry system.
SolGold is awaiting the grant of an
application submitted on 13 April 2017 to
explore the Kuma prospect, and has not
completed any exploration activities in the
current financial year.
The Kuma project lies just to the south-west
of a series of major NW-SE-trending arc-
parallel faults, associated with numerous Cu
and Au anomalies in streams and soils. The
project area overlies a 3.5‐kilometre wide,
annular, caldera‐like topographic feature.
Annular and nested topographic anomalies in
the region suggest the presence of extensive
batholiths of the Koloula Diorite beneath
the volcanic cover of the Suta Volcanics. The
prospect geology is dominated by a 4km by
1km lithocap. This extensive zone of argillic
and advanced argillic alteration is caused by
hydrothermal fluids that emanate from the
top of porphyry copper-gold mineralising
systems, and thus provides a buried porphyry
copper-gold target.
The geochemically anomalous portion of the
Kuma lithocap (north-west end) lies within
the annular topographic anomaly. Kuma
has a spectacular oxidised float boulder trail
along the Kuma River and was traced to
Alemba and Kolovelo creeks which lead to
discovery of broad hydrothermal alteration
zones and lithocap (Figure 6).
Previous exploration completed at Kuma
under the Guadalcanal Joint Venture
between SolGold and Newmont included
extensive geochemical sampling (BLEG,
rock chip and channel samples), geological
mapping, a magnetic survey and an
electromagnetic survey. Geochemical
results define a central zone of manganese
depletion (Mn < 200 ppm) inferred
to indicate the destruction of mafic
minerals by hydrothermal alteration.
Zinc > 75 ppm forms an annulus to this
zone, and Molybdenum > 4 ppm lies
along the margins of the manganese low
indicating potential for porphyry Cu-
Au mineralisation at depth. TerraSpec
spectral analysis of sieved coarse fraction
soil samples covering the Kuma lithocap
in integration with known geology in the
prospect area has highlighted a primary
porphyry target centre in the northern
portion of the lithocap that SolGold plans
to drill test upon granting of tenure.
QUALIFIED PERSON:
Information in this report relating to the exploration results is based on data reviewed by Mr Jason Ward ((CP) B.Sc.
Geol.), Exploration Manager Global of the Company. Mr Ward is a Fellow of the Australasian Institute of Mining and
Metallurgy, holds the designation MAusIMM (CP), and has in excess of 20 years’ experience in mineral exploration and
is a Qualified Person for the purposes of the relevant LSE and TSX Rules. Mr Ward consents to the inclusion of the
information in the form and context in which it appears.
OPERATIONS REVIEW
/37
FINANCIAL
REVIEW
The (cid:42)roup achie(cid:89)ed se(cid:89)eral (cid:80)ilestones durin(cid:74) the financial (cid:92)ear ended (cid:22)(cid:19) (cid:45)une (cid:21)(cid:19)(cid:20)(cid:27)(cid:17)
A$(cid:27)(cid:20)(cid:17)(cid:27)
MILLION
CASH BALANCE
(cid:36)T (cid:22)(cid:19) (cid:45)(cid:56)(cid:49)(cid:40) (cid:21)(cid:19)(cid:20)(cid:27)
APPROXIMATELY
A$(cid:26)(cid:25)(cid:17)(cid:27)
MILLION
INVESTED BY
THE GROUP ON
EXPLORATION
EXPENDITURE
OUR
SUSTAINABLE
APPROACH
IMPLEMENTATION
OF BOREALIS
A state of the art online
reporting tool for our
CSR initiatives.
These included:
• The completion of successful fund
raisings (including exercise of share
options) totalling approximately A$78.4
million from institutional and professional
investors. This has resulted in a cash
balance of approximately A$81.8 million
at 30 June 2018.
• Exploration and evaluation expenditure
of A$83.5 million for the year including
the release of the Alpala Maiden
Resource Estimate.
• Operating loss of A$15.9 million
representing an increase of A$7.7 million
over the prior year. The increase in loss
is largely attributable to a share-based
payments expense of A$10.6 million
recognised on the fair value of share
options granted to Directors, employee
and contractors. This represents an
increase of A$8.3 million over the prior
year charge. This was offset by an
unrealised foreign exchange gain during
the year of $4.1 million due to the Group’s
cash reserves primarily being held in USD.
• A loss of $6.2 million recognised on the
Company’s mark to market adjustment
on its investment in Cornerstone Capital
Resources Inc.
RESULTS
The Group incurred a loss before tax of
A$15,267,636 for the year (2017: A$8,323,050),
inclusive of the decision to expense
A$376,031 (2017: A$17,310) for exploration
expenditure associated with tenements
that were surrendered or which had expired
during the year. A detailed assessment of the
carrying values of deferred exploration costs
is provided in note 12. The increase in the
loss before tax is largely due to A$10,568,889
(2017: A$2,239,533) recognised as a share-
based payments expense. This represents a
proportion of the Black-Scholes fair value
of share options granted to Directors,
employees and contractors expensed over
the vesting period in the year. Additionally,
the Group experienced increased regulatory
and compliance costs due to its London
Stock Exchange main board listing and
Toronto Stock Exchange listing of $1,137,106
(2017: $116,051). This was offset by an
unrealised foreign exchange gain during the
year of $4,115,511 million due to the Group’s
cash reserves primarily being held in USD.
An income tax expense of $4,415,424 (2017:
tax benefit of $3,823,078) was recognised
based primarily on the mark to market
adjustment of the Company’s investment in
Cornerstone Capital Resources Inc.
A loss of A$6,244,922 (2017: gain
of A$8,920,515) was recognised in
comprehensive income representing
the mark to market adjustment on the
Company’s investment in Cornerstone
Capital Resources Inc. This was offset by
a gain of A$4,500,418 for the financial
year ended 30 June 2018 (2017: loss of
A$2,089,272) recognised on exchange
differences on translation of foreign
operations. The average exchange rate
used to translate the Group’s Ecuadorian
subsidiary financial statements for the year
ended 30 June 2018 from United States
dollars to Australian dollars was 1.3009
compared to 1.3254 for the financial year
ended 30 June 2017.
STATEMENT OF FINANCIAL POSITION
As at 30 June 2018, the Group had net
assets of approximately A$230.4 million,
an increase of approximately
A$66.5 million over the previous financial
year. This increase was largely associated
with the completion of A$76.5 million
in share placements, net of costs, offset
by the exploration write off of A$376,031
recognised in respect of the Groups’
exploration assets, the decrease in the value
of available for sale financial assets of
A$6.2 million and annual corporate
operating expenses of approximately
A$15.9 million.
38/ SOLGOLD ANNUAL REPORT 2018
GROUP HAS
NET ASSESTS OF
APPROXIMATELY
A$(cid:21)(cid:22)(cid:19)(cid:17)(cid:23)
MILLION
(cid:26)(cid:21)
TENEMENTS
GRANTED TO
SOLGOLD’S FOUR
ECUADORIAN
SUBSIDIARIES
CASH FLOW
OUTLOOK
Cash expenditure (before financing activities)
for the year ended 30 June 2018 was
A$87.2 million (2017 A$28.3 million). During
the financial year ended 30 June 2018, cash
of A$78,406,209 (2017: A$117,862,952) was
received from the issue of shares via private
placements and the exercise of share options.
During the prior year A$852,736 received
as unsecured short-term borrowings from
DGR Global Ltd. No such borrowings were
received during the current financial year.
Accordingly, the net cash outflow of the
Group for the year ended 30 June 2018 was
A$11,593,982 (2017: inflow of A$90,249,820).
Cash of approximately A$76.8 million (2017:
A$21.7 million) was invested by the Group on
exploration expenditure during the year.
The focus of the Group during the financial
year ending 30 June 2019 will be to continue
exploration as well as furthering the
economic evaluation of its Cascabel project
in Ecuador through the completion of a
Preliminary Economic Assessment (PEA) and
continue carrying out further exploration
over the 72 tenements granted to SolGold’s
four Ecuadorian subsidiaries, including
scout drilling on priority targets subject to
environmental approvals.
KEY PERFORMANCE INDICATORS
Given the stage of the Group’s operations,
the Board monitors the following key
performance indicators in measuring the
Group’s success:
CLOSING CASH
As at 30 June 2018, the Group held
cash balances of A$81.8 million
(2017: A$89.3 million).
POST REPORTING DATE EVENTS
On 5 July 2018, the Company issued an
additional 21,250,000 unlisted options to
employees and contractors. The options
have a strike price of £0.40 each and are
exercisable through to 4 July 2020.
On 5 July 2018, the Company issued an
additional 250,000 unlisted options to a
contractor. The options have a strike price
of £0.60 each and are exercisable through
to 4 July 2021.
The Directors are not aware of any other
significant changes in the state of affairs
of the Group or events after the reporting
date that would have a material impact
on the consolidated or Company
financial statements.
• Drilling efficiency and the associated
metres drilled.
• Total cost per metre drilled.
• Cost management and performance
against budget.
• Health and safety management.
• Compliance with the Environmental
Management Plan.
• Staffing mix and engagement of
communities.
The review of the business with reference to
key performance indicators is set out in the
Operations Report and Financial Review on
pages 20 to 40.
FINANCIAL CONTROLS AND
RISK MANAGEMENT
The Board regularly reviews the risks to
which the Group is exposed and ensures
through Board Committees and regular
reporting that these risks are managed
and minimised as far as possible. The
Audit Committee is responsible for the
implementation and review of the Group’s
internal financial controls and financial risk
management systems.
STRATEGIC REPORT /39
FINANCIAL
REVIEW CONTINUED
EQUITY
POST YEAR END EQUITIES ISSUED
On 5 July 2018, the Company issued an additional
21,250,000 unlisted options to employees and
contractors. The options have a strike price of
£0.40 each and are exercisable through to
4 July 2020.
On 5 July 2018, the Company issued an additional
250,000 unlisted options to a contractor. The
options have a strike price of £0.60 each and
are exercisable through to 4 July 2021.
As at the date of this report, the Company had
a total of 1,696,245,686 shares and 109,553,768
options on issue.
Since the date of the last Annual Report,
the Company has issued the following equities:
On 7 July 2017, the Company issued an additional
1,300,000 shares at £0.14 to raise A$0.31 million
(£0.18 million) in cash as a result of the exercise
of employment options.
On 7 July 2017, the Company issued an additional
1,300,000 shares at £0.28 to raise A$0.62 million
(£0.36 million) in cash as a result of the exercise
of employment options.
On 28 July 2017, the Company issued an
additional 36,750,000 unlisted options to
Directors. The options have a strike price
of £0.60 each and are exercisable through
to 8 August 2020.
On 9 August 2017, the Company issued an
additional 10,012,000 unlisted options to
employees and contractors. The options have
a strike price of £0.60 each and are exercisable
through to 8 August 2020.
On 11 August 2017, the Company issued an
additional 690,000 shares at £0.38 to raise
A$0.43 million (£0.26 million) in cash to Newcrest
International pursuant to “top-up rights” held
by Newcrest International pursuant to the
Newcrest Subscription Agreement. The
allotment price was based on the 10 day VWAP,
in accordance with the terms of the Newcrest
Subscription Agreement.
On 30 November, the Company issued
180,000,000 ordinary shares at £0.25 to raise
A$77.0 million in cash pursuant to a private
placement to continue to fund the continued
exploration of the Cascabel Project, general
working capital and SolGold’s pan Ecuadorean
exploration strategy.
At year end the Company had a total of
1,696,245,686 shares and 88,353,768 options
on issue.
40/ SOLGOLD ANNUAL REPORT 2018
OUR
FOCUS IS TO
FURTHER THE
ECONOMIC
EVALUATION
OF OUR
CASCABEL
PROJECT
STRATEGIC REPORT
/41
PRINCIPAL RISKS
& UNCERTAINTIES
RISK
DESCRIPTION
KEY MITIGATORS
FUNDING RISKS
The exploration and development of the Group’s
projects will require substantial additional financing
above and beyond the Group’s current treasury.
It is management’s view that high quality
exploration projects should always be
capable of being financed.
The executive management team
regularly meet with advisors, shareholders
and financiers to discuss the types of
financing the Group are looking at to
gauge their support.
The Group uses modern geophysical and
geochemical exploration and surveying
techniques. The Group employs a world
class team of geologists with considerable
regional expertise and experience. They are
supported by a network of fully accredited
laboratories capable of performing a
range of assay work to high standards.
Group Mineral Resource and Ore Reserve
estimates are prepared by a team of qualified
specialists following guidelines of NI 43-
101, which is one of the most recognised
reporting codes. Mineral Resource and
Ore Reserve estimates are prepared by
independent consultants.
Successful relationships with governments,
senior in-country officials and other
key external stakeholders are built and
maintained. This includes delivering on
and adhering to the conditions attached to
the tenement grant documents. SolGold
currently knows of no reason to believe that
current applications will not be approved,
granted or renewed.
Current global financial conditions have been
subject to significant volatility, and access to public
financing, particularly for resource companies, has
been negatively impacted in recent years. These
factors may impact the Group’s ability to obtain
equity or debt financing in the future and additional
financing may not be available, or if available, the
terms of such financing may be unfavourable. Failure
to obtain sufficient financing may result in the delay
or indefinite postponement of exploration and
development on any or all of the Group’s projects.
Exploration activities are speculative, time-consuming
and can be unproductive. In addition, these activities
often require substantial expenditure to establish
Reserves and Resources through drilling and
metallurgical and other testing, determine appropriate
recovery processes to extract copper and gold from
the ore and construct mining and processing facilities.
Once deposits are discovered it can take several years
to determine whether Reserves and Resources exist.
During this time, the economic viability of production
may change. As a result of these uncertainties, the
exploration programmes in which the Group is
engaged in may not result in new Reserves.
SolGold’s tenements and interest in tenements are
subject to the various conditions, obligations and
regulations which apply in the relevant jurisdictions
including Ecuador in South America, Queensland,
Australia and the Solomon Islands. If applications
for title or renewal are required this can be at the
discretion of the relevant government minister or
officials. If approval is refused, SolGold will suffer
a loss of the opportunity to undertake further
exploration, or development, of the tenement. Some
of the properties may be subject to prior unregistered
agreements or transfers or native or indigenous
peoples’ land claims and title may be affected by
undetected defects or governmental actions. No
assurance can be given that title defects do not exist.
If a title defect does exist, it is possible that SolGold
may lose all or a portion of the property to which the
title defects relates.
GENERAL
EXPLORATION
AND EXTRACTION
RISKS
TITLE RISK
42/
SOLGOLD ANNUAL REPORT 2018 RISK
DESCRIPTION
KEY MITIGATORS
SolGold has a successful track record
of operating in Ecuador, Australia and
the Solomon Islands and the Group
actively monitors political developments
on an ongoing basis. The management
team aims to maintain open working
relationships with local authorities in the
countries where the Group operates.
Attention is focussed on maintaining
sound relations with local communities and
working with these groups to enhance
these relationships. The Group’s social
team, under the supervision of the
country manager, continues to address
any such issues and reports to the Board.
Furthermore, there is regular dialogue
with the affected communities by
senior executives.
GEOPOLITICAL,
REGULATORY AND
SOVEREIGN RISK
SolGold’s exploration tenements are located in
Ecuador, the Solomon Islands and Australia and are
subject to the risks associated with operating both in
domestic and foreign jurisdictions.
LAND
ACCESS RISK
Operating in Ecuador and the Solomon Islands
involves some risk of political instability, which may
include changes in government, negative policy shifts
and civil unrest.
In addition, there is a risk that due to the deterioration
of the macroeconomic situation, governments in
Ecuador and the Solomon Islands may consider
imposing currency controls and limitations on
capital flows.
These factors may have a negative impact on the
ability of the Group to secure external financing and
an adverse effect on the Group’s market value.
Land access is critical for exploration and evaluation
to succeed. In all cases the acquisition of prospective
tenements is a competitive business, in which
proprietary knowledge or information is critical
and the ability to negotiate satisfactory commercial
arrangements with other parties is often essential.
Access to land for exploration purposes can be affected
by land ownership, including private (freehold) land,
pastoral lease and native title land or indigenous claims.
Immediate access to land in the areas of activities
cannot in all cases be guaranteed. SolGold may be
required to seek consent of land holders or other
persons or groups with an interest in real property
encompassed by, or adjacent to, SolGold’s tenements.
Compensation may be required to be paid by SolGold
to land holders so that SolGold may carry out
exploration and/or mining activities. Where applicable,
agreements with indigenous groups have to be in place
before a mineral tenement can be granted.
/43
STRATEGIC REPORT PRINCIPAL RISKS &
UNCERTAINTIES CONTINUED
RISK
DESCRIPTION
KEY MITIGATORS
In line with all Ecuadorian mining
companies, the management of this
risk is based on compliance with the
Environmental Management Plan. In
order to ensure compliance, the Group
provides adequate resources to this area
including the employment of personal and
the utilisation of third party consultants
to audit the compliance with the
Environmental Management Plan. To date,
the Group has been fully compliant.
The Group attempts to mitigate these
risks by managing its US dollar inflows and
outflows and maintaining a significant
portion of it cash and cash deposits in US
dollars. No hedging instruments have been
used by the Group, however, depending
upon the nature and level of future foreign
exchange transactions, consideration may
be given to the use of hedging instruments.
ENVIRONMENTAL
RISK
The Group’s Ecuadorian exploration activities are
required to adhere to local environmental regulations.
Any failure to adhere to local environmental
regulations could adversely affect the Group’s ability
to explore under its exploration rights in Ecuador.
CURRENCY RISK
The Group’s operations are sensitive to currency
movements, especially those between the Australian
Dollar, US Dollar and British Pound. These
movements can have a negative impact on the
Group’s earnings.
The parent company and the Ecuadorian subsidiaries
are exposed to currency risk in regard to the US
Dollar value of inter-company loan balances with
its Ecuadorian operations. It arises as a result of
the retranslation of US Dollar denominated inter-
company loan balances into Australian Dollars that
are held within Australia and which are payable by US
Dollar functional currency subsidiaries.
The Group is exposed to currency risk in regard to the
retranslation of the Group’s Ecuadorian functional
currency net assets to the Australian Dollar reporting
functional currency of the Group. A weakening of
the US Dollar against the Australian Dollar can have
a negative impact on the financial position and net
asset values reported by the Group.
44/
SOLGOLD ANNUAL REPORT 2018 SOLGOLD HAS
A SUCCESSFUL
TRACK RECORD
OF OPERATING
(cid:44)(cid:49) (cid:40)(cid:38)(cid:56)(cid:36)D(cid:50)(cid:53)(cid:15)
THE SOLOMON
ISLANDS AND
AUSTRALIA
STRATEGIC REPORT
/45
OUR SUSTAINABLE
APPROACH
(cid:58)e are co(cid:80)(cid:80)itted to a sustaina(cid:69)le approach to e(cid:91)ploration and (cid:80)inin(cid:74)(cid:17)
Transparent and responsi(cid:69)le practices are critical to our lon(cid:74)(cid:16)ter(cid:80) success(cid:17)
R PEOPLE
U
O
O
U
R
C
O
M
M
U
N
IT
Y
H
E
A
L
T
H
&
S
A
F
E
T
Y
OUR PRIORITIES
P
HI
S
D
L
A
T
N
ME
V IR O N
S TE W AR
N
E
OUR GOALS
Injury and
incident free
workplace
Equal
opportunities for
all employees
Proactive
contribution
to local
communities
Positive
understanding
of benefits of
responsible
mining
Rehabilitation
and
reforestation
of land
Responsible
use of energy,
water and other
resources
A key priority during the year has been the development of a reporting system for corporate responsibility performance
data to effectively measure, and report on, our performance across these CSR priorities. We look forward to sharing this
performance next year.
46/ SOLGOLD ANNUAL REPORT 2018
OUR PEOPLE
HEALTH & SAFETY
OUR COMMUNITY
Attracting and maintaining a skilled and
diverse workforce is central to SolGold’s
success. An engaged, safe and motivated
team maximises SolGold’s ability to generate
value for its stakeholders. The Group’s policy
is to attract staff and motivate employees by
offering competitive terms of employment.
The Group provides equal opportunities to
all employees and prospective employees
including those who are disabled. We are very
proud to have a large, and skilled Ecuadorian
workforce. SolGold, during the financial year
ended 30 June 2018, employed an average of
455 people, of which 96% were Ecuadorian
and 10% are women. Many of these women
are geologists. The Strategic Report gives
details of the Group’s activities and policies
concerning the employment, training,
health and safety and community support
concerning the Group’s employees in Ecuador.
Health and Safety is the responsibility
of everyone and SolGold recognises the
importance of leading and promoting
the highest principles and practices to
ensure the safety and good health of
all employees, contractors, community
members and visitors.
SolGold is committed to achieving an injury
and incident free workplace. We achieve this
through the following activities:
• Education of health and safety risks.
•
Implementation of health and
safety procedures.
• Training.
• Provision of health and safety equipment
and appropriately trained personnel.
• Prompt reporting of any injuries and
incidents to ensure lessons are learnt and
equipment and procedures are adapted
if required.
• Regular review of compliance to health
and safety policies to avoid complacency.
At Cascabel we have two medical facilities,
one at the Rocafuerte camp and one
at Alpala camp. The facilities have the
necessary equipment to handle emergencies
and medicine for outpatient treatment.
SAFEGUARDING
SolGold is committed to providing a
workplace in which everyone, regardless of
nationality, race, gender or religious belief
is treated with respect and without sexual,
physical or mental harassment.
TRAINING AND DEVELOPMENT
A comprehensive training and development
programme is paramount to ensure the
company has an appropriately skilled
workforce, as well as a pipeline of skilled
workers. SolGold implements a bespoke
programme for each employee dependant on
their abilities and personal development goals.
SolGold believes that strong community
relations are fundamental to creating a
safe, sustainable and successful operations.
Since arriving in Ecuador in 2012 SolGold has
always placed the highest importance on
creating and maintaining an open, respectful,
proactive and productive relationships with
all the communities within which SolGold
operates. SolGold wants to empower the
communities in which it operates and
therefore makes strong alliances with state
institutions and local governments to support
the fulfilment of the specific development
plans for the different communities.
We have multiple community relations
teams, 6 employees in the Cascabel team
and 2 employees in each of the other regional
subsidiaries, that achieve this through the
following activities:
• Hosting introductory meetings with
communities within licence areas prior
to the commencement of any
exploration activities.
• Hosting regular consultation meetings to
listen to and respond to concerns and to
generate community-led ideas on how
SolGold can actively help to overcome the
specific local issues the communities have.
• Providing educational sessions on
exploration and mining to help
communities understand the processes
and benefits.
•
Implementing a diverse range of social
initiatives.
There are 14 experienced professionals in our
Social Team with backgrounds in human
development, economics, agronomy and
project management.
/47
STRATEGIC REPORT OUR SUSTAINABLE APPROACH CONTINUED
Minimising our environmental footprint
is a key priority for SolGold. We strive
to go above and beyond the required
environmental guidelines. Our goal
is to undertake our operations in an
environmentally responsible manner
by integrating the protection of
the environment into our everyday
working practices.
We achieve this by:
• designing, developing and operating
company facilities with the goal of
minimising the environmental impact;
•
implementing procedures and practices
to ensure the efficient use of water, energy
and other resources;
• responsibly managing the Company’s waste;
• providing education and training of
best practices to foster a culture of
environmental stewardship; and
• regularly monitoring our environmental
impact and adapting procedures and
practices where required.
The strategic report was authorised for issue and signed on behalf of the Directors by
ENVIRONMENTAL
STEWARDSHIP
(cid:44)(cid:49) (cid:21)(cid:19)(cid:20)(cid:27)
SOLGOLD
JOINED
NICHOLAS MATHER
Executive Director
27 September 2018
CHICKEN FARM
INITIATIVE
This is a productive project
established this year with
the aim to provide women
in San Pedro with additional
household income by raising
and selling chickens. The
project is run in conjunction
with the Ministry of
Agriculture. The ministry
is responsible for training
the participants in rearing
chickens and animal welfare
while SolGold provides the
chickens, chicken coups,
food and vaccines.
48/
SOLGOLD ANNUAL REPORT 2018
RECYCLING
Organic waste generated on camp is used
as compost for the garden where plants
for the reforestation project are cultivated.
Inorganic wastes such as glass, plastic and
cardboard bottles that are generated in
the camps are sorted and recycling sent to
companies that treat these materials.
REFORESTATION
Established a plant nursery which grows fruit
and forest specimens for reforestation and
agriculture. Plants include citrus, cocoa, coffee,
cedar, mahogany and wax palm.
ON AVERAGE
(cid:23)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19) (cid:51)(cid:47)(cid:36)(cid:49)T(cid:54)
ARE GROWN
EVERY YEAR FOR
FARMING AND
REFORESTATION
THE NURSERY
BENEFITS
(cid:21)(cid:24)(cid:19)
LOCAL FAMILIES
ANNUALLY
(cid:24) (cid:47)(cid:50)(cid:38)(cid:36)(cid:47)
COMMUNITY
MEMBERS
ARE EMPLOYED
AT THE PLANT
NURSERY
THE TEAM HAS
REHABILITATED
(cid:26)(cid:24)(cid:8) OF THE
AREAS AFFECTED
BY ADVANCED
EXPLORATION
AT CASCABEL
BAKERY INITIATIVE
An enterprise that allows women in
the community to generate additional
household income. A project in
collaboration with the Mayor’s Office of
Ibarra. SolGold purchased the property
and all necessary equipment and helped
the community renovate the building
while the mayor’s office provided the
necessary training for the women.
STRATEGIC REPORT
/49
BOARD OF DIRECTORS
BRIAN MOLLER (59)
NICHOLAS MATHER (61)
DR. ROBERT WEINBERG (71)
JOHN BOVARD (73)
NON-EXECUTIVE CHAIRMAN
CHIEF EXECUTIVE OFFICER
& EXECUTIVE DIRECTOR
SENIOR INDEPENDENT
DIRECTOR
NON-EXECUTIVE DIRECTOR
DATE APPOINTED
DATE APPOINTED
11 May 2005
COMMITTEE
11 May 2005
COMMITTEE
DATE APPOINTED
22 November 2005
COMMITTEE
DATE APPOINTED
2 November 2009
COMMITTEE
(Chair)
(Chair)
EXPERIENCE
EXPERIENCE
EXPERIENCE
EXPERIENCE
Mr Moller, was appointed Non-
Executive Director on 11 May
2005 and assumed the role of
Non-Executive Chairman on
28 February 2013, is a corporate
partner in the Brisbane-based law
firm Hopgood Ganim Lawyers,
the Australian solicitors to the
Company. He was admitted as
a solicitor in 1981 and has been
a partner at Hopgood Ganim
since 1983. He practices almost
exclusively in the corporate area
with an emphasis on capital
raising, mergers and acquisitions.
Nicholas graduated from the
University of Queensland with
a B.Sc. (Hons, Geology) and
has 30 years’ experience across
all levels of the junior resource
sector. Mr. Mather has a special
area of experience and expertise
in the generation of, and entry
into unrecognised resource
exploration opportunities.
Nicholas has been instrumental
in the delivery of major resource
projects that resulted in nine
takeovers and 5 billion dollars
in shareholder return.
Mr Moller holds an LLB
Hons from the University of
Queensland and is a member
of the Australian Mining and
Petroleum Law Association.
Mr Moller acts for many publicly-
listed resource and industrial
companies and brings a wealth
of experience and expertise
to the Board, particularly in
the corporate regulatory and
governance areas. He is a Non-
Executive Director of ASX listed
DGR Global Limited, Dark Horse
Resources Limited, and TSX-V
listed, Aguia Resources Limited
and the non-executive Chairman
of ASX-listed Aus Tin Mining
Limited, Lithium Consolidated
Mineral Exploration Ltd and
Platina Resources Limited.
Nicholas was co-founder of Arrow
Energy and was responsible for
the generation of its Surat Basin
Coal project. He was founder and
Chairman of Waratah Coal and
co-founder and Non-Executive
Director of Bow Energy, from
inception to takeover. Nicholas
and the DGR Global team
founded Orbis Gold and continued
to hold a significant equity stake
and board position until its
takeover in 2015. As CEO of BeMax
Resources, Nicholas headed the
discovery of the Pooncarie mineral
sands project. He was also a Non-
Executive Director of
Ballarat Goldfields.
Nicholas is currently Managing
Director of DGR Global,
Executive Chairman of Armour
Energy, Non-Executive Director
of Dark Horse Resources, Aus Tin
Mining, Lakes Oil and IronRidge
Resources.
Dr Weinberg, was appointed
22 November 2005 as a Non-
Executive Director, and to
be considered as a Senior
Independent Director of the
Company, gained his doctorate in
geology from Oxford University
in 1973. Dr Weinberg has more
than 40 years’ experience of the
international mining industry
and is an independent mining
research analyst and consultant.
He is a Fellow of the Geological
Society of London and also
a Fellow of the Institute of
Materials, Minerals and Mining.
Dr Weinberg has been an
independent non-executive
director of a number of minerals
exploration, development and
mining companies.
Prior to his current activities Dr
Weinberg was Managing Director,
Institutional Investment at the
World Gold Council. Previously he
was a Director of the investment
banking division at Deutsche
Bank in London after having
been head of the global mining
research team at SG Warburg
Securities. Dr Weinberg has
also held senior positions within
Société Générale and was head of
the mining team at James Capel
& Co. Dr Weinberg was formerly
marketing manager of the gold
and uranium division of Anglo
American Corporation of
South Africa Ltd.
Mr Bovard, appointed 2
November 2009, is a civil engineer
with over 50 years experience
in mining, heavy construction,
project development and
corporate management.
Mining project activities have
ranged from feasibility studies
through project management of
construction, commissioning and
management of operating mines.
Corporate activities have
included establishing new
companies and turning around
others. He was the inaugural
CEO of St Barbara Mines (ASX),
inaugural Chairman of Orbis Gold
(ASX), Chairman of Greenwich
Resources (LSE), CEO of Asia-
Pacific Resources (TSX) and
CEO of the group of companies
that developed the Super Pit in
Kalgoorlie. He has also been a
non-executive director or CEO
of a number of other smaller
resource companies.
Other major projects include the
early construction stages of both
Ok Tedi (as GM) and Porgera (as
project manager and GM) and the
$800 M Queensland Phosphate
Project as project director.
Areas worked in outside of
Australia include PNG, Thailand,
Solomon Islands, several North
African countries, several Central
Asian countries together with
Mongolia and China.
He holds a Bachelors Degree in
Civil Engineering, is a fellow of the
Australasian Institute of Mining
and Metallurgy and a Fellow
of the Australian Institute of
Company Directors.
50/ SOLGOLD ANNUAL REPORT 2018
COMMITTEE
MEMBERSHIP KEY
Audit and Risk
Management
Committee
Remuneration Committee
HSEC Committee
CRAIG JONES (47)
JAMES CLARE (42)
KARL SCHLOBOHM (50)
NON-EXECUTIVE DIRECTOR
NON-EXECUTIVE DIRECTOR
COMPANY SECRETARY
DATE APPOINTED
DATE APPOINTED
DATE APPOINTED
3 March 2017
COMMITTEE
26 April 2018
COMMITTEE
EXPERIENCE
EXPERIENCE
Mr Jones, appointed 3 March
2017, holds a Bachelor of
Mechanical Engineering from
the University of Newcastle,
Australia, joined Newcrest Mining
in 2008 and has held various
senior management and executive
roles within the Newcrest group,
including General Manager
Projects, General Manager Cadia
Valley Operations, Executive
General Manager Projects and
Asset Management, Executive
General Manager Australian and
Indonesian Operations, Executive
General Manager Australian
Operations and Projects, and
Executive General Manager
Cadia and Morobe Mining
Joint Venture.
Mr Jones is currently the
Executive General Manager Wafi-
Golpu (Newcrest / Harmony).
Prior to joining Newcrest, Mr
Jones worked for Rio Tinto.
Mr Jones’ operational and block
cave mining expertise, particularly
relevant in the context of the
Company’s existing Alpala deposit
at Cascabel in Northern Ecuador.
Mr Clare, appointed 26 April
2018, is a partner at Bennett
Jones LLP, one of Canada’s
leading corporate law firms.
He is a corporate and securities
lawyer with extensive experience
in the mining sector both
domestically and internationally.
Mr Clare is recognised by Lexpert
as a leading mining lawyer
in Canada, and repeatedly
recommended for his experience
in mining, corporate finance and
securities law by the Canadian
Legal Lexpert Directory.
Mr Clare also currently acts
as a non-executive Director of
PJX Resources Inc, Riverside
Resources Inc and Spanish
Mountain Gold Ltd.
Mr Clare was extensively involved
with SolGold’s TSX listing
process and provides ongoing
legal and corporate advice to
the Company in relation to
its Canadian regulatory and
business matters.
.
n/a
COMMITTEE
n/a
EXPERIENCE
Mr Schlobohm, appointed 14
April 2009, has over twenty
five years’ experience across a
wide range of businesses and
industries. He has previously
been contracted into CFO
roles with ASX-listed resource
companies Discovery Metals
Limited and Meridian Minerals
Limited, and as Company
Secretary of ASX-listed Linc
Energy Limited, Agenix
Limited, Discovery Metals
Limited and Global Seafood
Australia Limited.
Mr Schlobohm is a Chartered
Accountant and holds Bachelor’s
Degrees in Commerce and in
Economics, and a Master’s
Degree in Taxation. He is also a
fellow of the Governance Institute
of Australia.
Mr Schlobohm is also contracted
to act as the Company Secretary
of the AIM listed IronRidge
Resources Limited and ASX-
listed DGR Global Limited, Dark
Horse Resources Limited, Aus
Tin Mining Limited and Armour
Energy Limited
GOVERNANCE /51
CORPORATE
GOVERNANCE
APPROACH TO CORPORATE GOVERNANCE
SolGold moved from the AIM Board to the Main Board of
the London Stock Exchange in October 2017 via a standard
listing. Accordingly, it is only required to comply with the
relevant Listing Rules, the Disclosure and Transparency Rules
of the UK Corporate Governance Code (the “Code”) and the
Prospectus Rules, but not the super-equivalent provisions of
the Listing Rules which apply to companies with a premium
listing. The Directors are, however, committed to maintaining
high standards of corporate governance as detailed in the
Company’s Corporate Governance Charter and continue to
voluntarily adopt and comply with the Quoted Company
Alliance Code (“QCA Code”).
Given the Company’s size, stage of development and
resources, the Directors acknowledge that adherence to
certain provisions of the QCA Code may be delayed until
such time as the Directors are able to fully adopt them. In
particular, the Company has not established a nominations
committee, as it is considered unnecessary at this stage of the
Company’s development. The Board as a whole will consider
potential Director appointments on a case by case basis.
The Company is also subject to various corporate laws
and regulations in Canada and Australia as a result of
being a reporting issuer in Canada and a registered foreign
corporation in Australia.
BOARD AND COMMITTEE STRUCTURE
The Board ordinarily meets on a monthly basis providing
effective leadership and overall control and direction of the
Company’s affairs through the schedule of matters reserved
for its determination. The Board is collectively responsible
for approving the long-term objectives and strategy of the
Company. This includes the approval of the budget and
business plan, major capital expenditure, acquisitions and
disposals, risk management policies and the approval of the
financial statements. Formal agendas, papers and reports
are sent to the Directors in a timely manner, prior to Board
meetings. The Board also receives summary financial and
operational reports before each Board meeting.
The Chair of the Board is Mr Brian Moller, who is a Non-
Executive Director. As Chair, Mr Moller is responsible for
leadership of the Board, for efficient organization and
conduct of the Board’s function and the briefing of all
Directors in relation to issues arising at Board Meetings.
The Chair is also responsible for shareholder communication,
arranging Board performance evaluation and setting the
tone for the Company’s approach to corporate governance.
The terms of appointment for each of the Company’s
Directors is set out under a Letter of Appointment,
which contains, amongst other things, the expected time
commitment for Directors to attend:
• all Director’s Board and Strategy Meetings;
• all shareholder’s Meetings;
• any special Board or other meeting that may be convened
(including committee meetings of which the Director is a
member); and
• time required to liaise with fellow Directors.
It is the Board’s policy to maintain independence by having
a number of its members as Non-Executive Directors who
are free from any material business or other relationship
with the Company. The structure of the Board ensures that
no one individual or group is able to dominate the decision
making process.
The Board of the Company is currently made up of one
Executive Director and five Non-Executive Directors.
Messrs John Bovard, Dr. Robert Weinberg, Craig Jones
and James Clare are considered to be independent by the
Board. Nicholas Mather is not independent as he is the
Chief Executive Officer of the Company. Brian Moller is not
considered independent as he is a partner in the Australian
firm Hopgood Ganim Lawyers for the provision of legal
services to the Company. These professional services are
based on normal commercial terms and conditions.
Dr Robert Weinberg is considered to be the Company’s
Senior Independent Director (SID). The role of the SID is to
be available to shareholders to discuss any concerns they
may have about the running of the Company where the
normal channels of communication are not appropriate.
The SID is usually expected to lead discussions at meetings
of Non-Executive Directors without the Chairman present
on an annual basis.
The Board has delegated the Chief Executive Officer (“CEO”)
for running the day-to-day management of the Company
under clearly defined terms of reference. The CEO is
supported by experienced management team including the
Exploration Manager, UK Markets and Investor Relations
Executive, the Chief Financial Officer and Company
Secretary of the Company.
All Directors have access to the advice and services of the
Company Secretary, who is responsible for ensuring that
all Board procedures are followed. Any Director may take
independent professional advice at the Company’s expense
in the furtherance of his or her duties.
52/ SOLGOLD ANNUAL REPORT 2018
Other responsibilities are devolved to the Audit and
Risk Management, Remuneration and Health, Safety,
Environment and Community (HSEC) Committees, which
are described more fully below. The terms of reference of
each Committee, and the matters reserved to the Board,
are available on the Company’s website.
BOARD CHANGES DURING FY2018
Mr James Clare was appointed as a Non-Executive Director
to the SolGold Board of Directors on 1 May 2018. The details
of his qualification and experience are shown on page 51.
The Company considers Dr Robert Weinberg to be a
Senior Independent Director. His experience and expertise
will continue to provide strong oversight on the Board
together with supporting the further development of the
Company’s strategy.
ATTENDANCE RECORD
Directors’ attendance at Board and Committee meetings
which they were eligible to attend the meetings during 2018
was as follows:
Total Meetings Held
Attendance:
Brian Moller
Nicholas Mather
John Bovard
Robert Weinberg
Craig Jones
James Clare
Committee key:
FULL
BOARD
8
8
8
7
7
8
3
2
2
–
2
2
–
–
–
1
–
1
1
–
–
–
–
–
–
–
–
–
Audit and Risk Management
Remuneration Committee
HSEC Committee
NOMINATION OF DIRECTORS
The Board does not currently have a formal Nomination
Committee. The Board as a whole is responsible for
identifying and recommending candidates for Directorial
appointment. The Board reviews and makes determinations
with respect to:
• the size and composition of the Board;
• the organization and responsibilities of the committees
of the Board;
• the evaluation process for the Board and committees of
the Board and the chairpersons of the Board and such
committees; and
• creating a desirable balance of expertise and
qualifications among members of the Board.
In any Director nomination process, the Board assesses its
current composition and requirements going forward in
light of the stage of the Company’s project and corporate
development and the skills required to ensure proper
oversight of the Company and its operations.
The Board has recently amended its corporate governance
charter to include a nominee director policy setting out
the principles to be followed by the Board, which is
available on the Company’s website, in respect of those
Directors that are nominated by a Shareholder and the
nominating shareholders.
BOARD EVALUATION
During 2018 and as part of the processes for its LSE and
TSX listings, the Board reviewed its performance from the
point of view of its composition, mix of skills, committee
composition and roles. As a result of this review, the
following matters were determined:
• separation of the roles of chairman and chief executive,
appointment of a Canadian based independent Non-
Executive in May 2018;
• amendment of Corporate Governance Charters and
policies in compliance with rules and regulations with the
admission to the LSE and or the TSX listing;
The Board will continue to regularly review and monitor its
composition and performance having regard to the evolving
complexity of the Company’s activities and operations, and
make changes as appropriate. The Company is in the process
of establishing the criteria against which its performance
and effectiveness will be measured and how frequently
evaluations of the Board and the Board Committees will
take place. These matters will be reported on in the future.
GOVERNANCE /53
CORPORATE GOVERNANCE CONTINUED
ORIENTATION AND CONTINUING EDUCATION
Incoming Directors are provided with access to the CEO and
the Company Secretary to gain a full understanding of the
Company, its projects, personnel and policies & procedures.
At all times Directors are encouraged to attend any
professional course or update relevant to the discharge of
their duties as a Director of the Company. Directors are also
encouraged to visit the Company’s project sites as practical,
and attend any international mining conferences at which
the Company may present.
One third of the Directors retire from office at every
Annual General Meeting of the Company. In general,
those Directors who have held office the longest since their
election are required to retire. A retiring Director may be
re-elected and a Director appointed by the Board may also
be elected, though in the latter case the Director’s period
of prior appointment by the Board will not be taken into
account for the purposes of rotation.
RELATIONS WITH SHAREHOLDERS
The Board attaches importance to maintaining good
relationships with all its shareholders and ensures that all
price sensitive information is released to all shareholders
at the same time in accordance with LSE and TSX Listing
Rules. The Company’s principal communication with its
investors is through the quarterly Management Discussion
and Analysis (the “MD&A”), the Annual General Meeting,
the annual report and accounts, the interim statement and
its website, twitter together with the e-mail news service.
RISK MANAGEMENT AND INTERNAL CONTROL
The Board has overall responsibility for the Company’s risk
management and internal control system and determine the
nature and extent of the principal risks and uncertainties of
the Company. The Board has delegated the Audit and Risk
Committee to monitor the effectiveness of the Company’s
risk management processes on behalf of the Board. The
Board, supported by executive management will also
enhance the review and closely monitoring the Company’s
principal risks and uncertainties.
The principal risks and uncertainties identified by the
Company are shown on pages 42 to 44. The Company is
diligent in minimising exposure to business risks, but by the
nature of its activities and size, will always have some risks.
These risks are not always quantifiable due to their uncertain
nature. Should one or more of these risks and uncertainties
materialise, or should underlying assumptions prove
incorrect, then actual results may vary materially from those
described in forward-looking statements.
The Company’s system of internal control is designed to
provide the Directors with reasonable, but not absolute,
assurance that the Company will not hindered in achieving
its business objectives, or in the orderly and legitimate
conduct of its business, by circumstances that may
reasonably be foreseen. However, no system of internal
control can eliminate the possibility of human error, fraud or
other unlawful behaviour, management overriding controls,
and the resulting potential for material misstatement or loss.
The process used by the Board to review the effectiveness
of the internal controls are through the Audit and Risk
Management Committee, and the executive management
reporting to the Board on a regular basis where business
plans and budgets, including investments are appraised
and agreed. The Board also seeks to ensure that there is
proper organisational and management structure with clear
responsibilities and accountability.
A statement of Director’s responsibilities in light of the
financial statement is on page 59.
COMMITTEE REVIEWS
As described above, one of the functions of the Board
is to form and monitor any special purpose Committee
established to review certain aspects of the operations of
the Company, having regard to these principles.
So far to date, the Board has established an Audit & Risk
Management Committee; a Remuneration Committee
and a Health, Safety, Environment and Community
(HSEC) Committee.
The Board has not yet formally established a Corporate
Governance Committee; or a Nomination Committee.
As the Board considers that the Company is not of a
size nor is its affair of such complexity as to justify the
formation of these Committees as at the date of this
report. Rather, the Board as a whole is able to address
the issues that would otherwise be addressed by such
Committees and is guided by the principles set out in the
Corporate Governance Charter that is available on the
Company’s website. The Company will review this position
annually and determine whether additional special purpose
Committee need to be established.
AUDIT AND RISK COMMITTEE
COMPOSITION
The Audit and Risk Management Committee meets not
less than twice a year and is responsible for ensuring that
the financial performance, position and prospects of the
Company are properly monitored as well as liaising with the
Company’s auditor to discuss financial statements and the
Company’s internal controls. The Executive Director attends
meetings by invitation, if appropriate.
The Audit and Risk Management Committee is comprised of
three members, all of whom are independent Non-Executive
Directors of the Company, namely: Brian Moller, John
Bovard and Dr. Robert Weinberg. John Bovard is the Chair
of the Audit and Risk Management Committee.
The Committee members have a wide range of financial
and commercial experience, which the Board considers
appropriate to fulfil the Committee’s duties. Details of the
experience and qualifications of Committee members are
set out on pages 50 and 51.
54/ SOLGOLD ANNUAL REPORT 2018
ROLE AND RESPONSIBILITIES
The objective of the Committee is to assist the Board in
discharging its responsibility to exercise due care, diligence
and skill in monitoring decisions and processes designed to
ensure the integrity of financial reporting, to establish
sound systems of internal control and to facilitate robust
risk management processes.
• defining and periodically reviewing risk management
as it applies to the Company and clearly identify
all stakeholders;
• ensuring the A&R Committee clearly communicates
the Company’s risk management philosophy, policies
and strategies to Directors, Management, employees,
contractors and appropriate stakeholders;
The Committee’s term of reference set out its main
responsibilities and are available on the Company’s website.
The Committee is responsible for:
Audit Related
• monitoring the integrity of the financial statements of
the Company and any formal announcements relating
to the Company’s financial performance and reviewing
significant financial reporting judgements contained in
them prior to their approval by the Board;
• reviewing the Company’s internal financial controls;
• monitoring and reviewing the effectiveness of the
Company’s internal audit function;
• reviewing the scope and results of both external and
internal audits;
• monitoring corporate conduct and business ethics,
including auditor independence and ongoing compliance
with laws and regulations;
• maintaining open lines of communication between the
Board, Management and the external auditors, thus
enabling information and points of view to be freely
exchanged;
• ensuring that Directors and Management establish a risk
aware culture which reflects the Company’s risk policies
and philosophies;
• reviewing methods of identifying broad areas of risk and
setting parameters or guidelines for business risk reviews;
• reviewing the Company’s internal control and risk
management systems and making informed decisions in
respect of the same;
• considering capital raising, treasury and market trading
activities with particular emphasis on risk treatment
strategies, products and levels of authorities; and
•
implementing and reviewing arrangements by which
Directors, Management, employees and contractors may,
in confidence, raise concerns about possible improprieties
in matters of financial reporting or other matters.
MAIN ACTIVITIES COVERED DURING FY2018
The Committee’s activities focussed on the following
matters during FY2018:
• reviewing the impairment assessment of exploration and
evaluation assets;
• reviewing the asset carrying values and other material
• reviewing matters of significance affecting the financial
accounting matters;
welfare of the Company;
• ensuring that systems of accounting and reporting of
financial information to shareholders, regulators and the
general public are adequate;
• reviewing the Company’s internal financial control
system;
• considering the appointment, re-appointment, removal,
remuneration and terms of engagement of the external
auditor and making recommendations to the Board in
respect of the same;
• monitoring and reviewing the external auditor’s
independence, objectivity and the effectiveness of
the audit process, taking into consideration relevant
professional and regulatory requirements; and
• developing and implementing policy on the engagement
of the external auditor to supply non audit services,
taking into account relevant ethical guidance regarding
the provisions of non-audit services by the external audit
firm and reporting to the Board in respect of the same.
Risk Related
• ensuring the development of an appropriate risk
management policy framework that will provide
guidance to Management in implementing appropriate
risk management practices throughout the Company’s
operations, practices and systems;
• discussing equity transactions and share based payments;
• MD&A report preparation to comply with TSX regulatory
requirements;
• reviewing all documents within the Annual Report and
half-yearly financial input.
REMUNERATION COMMITTEE
COMPOSITION
The Remuneration Committee meets at least once a year
and is responsible for making decisions on Directors’ and key
management’s remuneration packages.
Remuneration of any Executive Directors is established by
reference to the remuneration of Executives of equivalent
status both in terms of the level of responsibility of the
position and by reference to their qualifications and skills.
The Remuneration Committee will also have regard to
the terms which may be required to attract an executive
of equivalent experience to join the Board from another
company. Such packages include performance related
bonuses and the grant of share options.
The members of the Remuneration Committee are John
Bovard (as chair), Nicholas Mather, Robert Weinberg and
Brian Moller. Details of the experience and qualifications of
Committee members are set out on pages 50 and 51.
GOVERNANCE /55
CORPORATE GOVERNANCE CONTINUED
ROLE AND RESPONSIBILITIES
ROLE AND RESPONSIBILITIES
In discharging its responsibilities, the Committee is expected
to do the following:
• review, formulate and revise with management the
Company’s goals, policies and programs relative to
environmental, health and safety and social issues;
• make inquiries and recommendations to the Board in
respect of the Company’s compliance with applicable
environmental and occupational health and safety
laws, regulations, and internal operating procedures
and standards;
• review with management the Company’s risk assessment,
risk exposure and risk management in respect of
environmental, health and safety matters;
• review with management the Company’s record of
performance on environmental, health and safety
matters, along with any proposed actions based on
such record;
•
inform the Audit Committee of the Board in respect
of significant changes in financial risk or potential
disclosure issues related to environmental, health
and safety matters;
• perform such other duties and responsibilities as are
consistent with the purpose of the Committee and as
the Board or the Committee shall deem appropriate;
• review and reassess the adequacy of these Terms of
Reference on a regular basis and submit any proposed
revisions to the Board for consideration and approval; and
• on a regular basis, review and assess the adequacy
of the Company’s individual Policies relating to
sustainable development.
The Remuneration Committee is responsible for reviewing
the remuneration Policies and practices of the Company and
making recommendations to the Board in relation to:
• executive remuneration and executive incentive plans;
• the remuneration packages for management including
the Chief Executive Officer and Non- Executive Director
remuneration;
• the Company’s recruitment, retention and termination
policies and procedures for senior management; and
•
incentive plans and share allocation schemes and
superannuation arrangements.
The Committee’s term of reference set out its main
responsibilities and are available on the Company’s website.
MAIN ACTIVITIES COVERED DURING FY2018
The Committee’s activities focussed on the following matter
during FY2018:
• review and establish MD/CEO contract having
regard to advice obtained from an independent
remuneration consultant; and
• reviewed the remuneration arrangements for the
Company’s senior geological staff.
HSEC COMMITTEE
The main purpose of the Committee is to review, monitor
and make recommendations to the Board in respect of
the environmental, health, safety and community policies
and activities of the Company in order to ensure that such
policies and activities reflect and are in accordance with the
matters set out below.
The Committee may review or investigate any activities of
the Company relating to the health, safety and environment
and will have unrestricted access to any officers and
employees of the Company, independent consultants
and advisors, and such information and resources as the
Committee considers necessary in order to perform its
duties and responsibilities.
The Committee’s term of reference set out its main
responsibilities and are available on the Company’s website.
COMPOSITION
Currently the fully Board of the Group currently fulfils
this role.
56/ SOLGOLD ANNUAL REPORT 2018
DIRECTORS’
REPORT
The Directors present their annual report and audited financial
statements for the year ended 30 June 2018.
RESULTS
GLOBAL GREENHOUSE GAS EMISSIONS
The Group’s consolidated loss for the year was A$19,683,060
(2017: A$4,499,972).
CHANGES IN SHARE CAPITAL DURING 2018
A statement of changes in the share capital of the Company
is set out in Note 17 to the financial statements.
DIVIDENDS PAID OR RECOMMENDED
The Directors do not recommend the payment of a dividend
(2017: nil).
FINANCIAL INSTRUMENTS
The Company does not undertake financial instrument
transactions that are speculative or unrelated to the
Company’s or Group’s activities. The Group’s financial
instruments consist mainly of deposits with banks and
accounts payable. In addition to the Group’s financial
instruments, the Company’s financial instruments also
include its loans to subsidiaries. Further details of financial
risk management objectives and policies, and exposure of
the Group and Company to financial risks are provided in
note 20 to the financial statements.
DONATIONS
No political or charitable donations were made during the
year (2017: Nil).
This section contains information on green house gas (“GHG”)
emissions required by Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2013 (the “Regulations”).
METHODOLOGY
The methodology used for the calculation of emissions was the
GHG Protocol Corporate Accounting and Reporting Standard
(revised edition to 2015). The standard covers the accounting
and reporting of seven greenhouse gases mandatory –
carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O),
hydrofluorocarbons (HFCs), perfluorocarbons (PCFs), sulphur
hexafluoride (SF6) and nitrogen trifluoride (NF3), and it covers
the company’s operational boundaries.
The Company has reported on all of the emission sources
required under the Regulations.
The Company does not have responsibility for any emission
sources that are not included in its consolidated statements.
CONSOLIDATION APPROACH AND
ORGANISATION BOUNDARY
An operational control approach was used to define the
Company’s organisational boundary and responsibility for GHG
emissions. All material emission sources within this boundary
have been reported upon, in line with the requirements of the
Regulations.
GOING CONCERN
SCOPE OF REPORTED EMISSIONS
In common with many exploration companies, the Company
raises finance for its exploration and appraisal activities
in discrete tranches. The Group and the Company have
not generated revenues from operations. The Group has
$81,825,617 in cash and cash equivalents at 30 June 2018 and
has sufficient working capital levels to carry out its planned
exploration activities for the following 12 months.
It should be noted that the current working capital levels
will not be sufficient to bring the Group’s projects into full
development and production and, in due course, further
funding will be required. In the event that the Company is
unable to secure further finance either through third parties or
capital raising, it may not be able to fully develop its projects.
Emissions data from sources within Scope 1 and Scope 2 of
the Company’s operational boundaries is detailed on page 58.
This includes emissions from direct activities of the operation,
this include: the use of vehicles owned by the company for
transportation of machinery, material and personnel, operation
of machinery for perforation, the use of generator for electricity
in the camps, LPG is camps and composting activities (Scope 1),
as well as Emissions from activities of the operation associated
with the consumption and purchase of electricity from the grid
for the camps (Scope 2).
INTENSITY RATIO
In order to express, the GHG emissions in relation to a
quantifiable factor associated with the Company’s activities,
drilling metres were chosen as a normalisation factor. This will
allow comparison of the Company’s performance over time, as
well as with other companies in the sector.
The intensity ratio for “Cascabel” operations is of 0.05CO2e/
metre drilled in the reporting year (1 July 2017 to 30 June 2018).
/57
GOVERNANCE DIRECTORS’REPORT CONTINUED
TOTAL GREENHOUSE GAS EMISSIONS DATA FOR THE YEAR FROM 1 JULY 2017 TO 30 JUNE 2018
YEAR CHOSEN AS BASE YEAR (FINANCIAL YEAR) 1 JULY 2017–30 JUNE 2018
BASE YEAR EMISSIONS
EMISSIONS
Scope 1
Scope 2
TOTAL
TOTAL
(mtCO2e)
CO2
(mtCO2e)
CH4
(mtCO2e)
N2O
(mtCO2e)
HFCS
(mtCO2e)
PFCS
(mtCO2e)
SF6
(mtCO2e)
4569
25
4594
4548
25
4573
8
0
8
13
0
13
–
–
–
–
–
–
–
–
–
CURRENCY
RELATED PARTY TRANSACTIONS
The functional currency of SolGold plc and its subsidiaries
in Australia is considered to be Australian Dollars (A$).
The functional currency of the subsidiaries in Solomon
Islands is considered to be Solomon Islands Dollars (SBD$).
The functional currency of the subsidiaries in Ecuador
is considered to be United States Dollars (US$). The
presentational currency of the Group is Australian dollars
(“A$”) and all amounts presented in the Directors’ Report
and financial statements are presented in Australian dollars
unless otherwise indicated.
Details of related party transactions for the Group and
Company are given in note 22. Key management personnel
remuneration disclosures are given in note 5.
DIRECTORS’ INDEMNITY
The Company has arranged appropriate directors’ and
officers’ insurance to indemnify the Directors against liability
in respect of proceedings brought by third parties. Such
provisions remain in force at the date of this report.
DIRECTORS
The Directors who held office during the year were as follows:
Nicholas Mather
Executive Director
Brian Moller
Non-Executive Chairman
Robert Weinberg
Non-Executive Director
John Bovard
Non-Executive Director
Craig Jones
Non-Executive Director
James Clare
Non-Executive Director –
appointed 1 May 2018
The Company has a Directors’ and Officers’ Liability
insurance policy for all its Directors.
AUDITOR
A resolution for the re-appointment of the Company’s
auditor will be proposed at the forthcoming Annual
General Meeting.
SUBSEQUENT EVENTS
On 5 July 2018, the Company issued an additional 21,250,000
unlisted options to employees and contractors. The options
have a strike price of £0.40 each and are exercisable through
to 4 July 2020.
On 5 July 2018, the Company issued an additional 250,000
unlisted options to a contractor. The options have a strike
price of £0.60 each and are exercisable through to 4 July 2021.
The Directors are not aware of any other significant changes
in the state of affairs of the Group or events after the
reporting date that is not covered in this report and would
have a material impact on the consolidated or Company
financial statements.
58/ SOLGOLD ANNUAL REPORT 2018
DIRECTORS’ RESPONSIBILITY STATEMENT
WEBSITE PUBLICATION
The Directors are responsible for preparing the directors’
report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have elected to prepare the Group financial
statements and have elected to prepare the Company
financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union. Under company law the Directors must
not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of
the Group and Company and of the profit or loss of the
Group for that period.
In preparing these financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether they have been prepared in accordance
with IFRSs as adopted by the European Union, subject to
any material departures disclosed and explained in the
financial statements;
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
and the Company will continue in business; and
• prepare a director’s report, a strategic report and
director’s remuneration report which comply with the
requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
and enable them to ensure that the financial statements
comply with the requirements of the Companies Act 2006.
comply with the requirements of the Companies Act 2006.
They are also responsible for safeguarding the assets of the
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring the annual report
and the financial statements are made available on a website.
Financial statements are published on the Company’s
website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial
statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company’s
website is the responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity of the
financial statements contained therein.
DIRECTORS’ RESPONSIBILITIES PURSUANT TO DTR4
The Directors confirm to the best of their knowledge:
• the Group financial statements have been prepared
in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and
Article 4 of the IAS Regulation and give a true and fair
view of the assets, liabilities, financial position and profit
and loss of the Group; and
• the annual report includes a fair review of the
development and performance of the business and the
financial position of the Group and the parent company,
together with a description of the principal risks and
uncertainties that they face.
DISCLOSURE OF AUDIT INFORMATION
In the case of each person who are Directors of the
Company at the date when this report is approved:
• so far as they are individually aware, there is no relevant
audit information of which the Company’s auditor is
unaware; and
• each of the Directors has taken all the steps that they
ought to have taken as a Director to make themselves
aware of any relevant audit information and to establish
that the Company’s auditor is aware of the information.
that the Company’s auditor is aware of the information.
This report was approved by the Board on 27 September
This report was approved by the Board on 27 September
2018 and signed on its behalf.
2018 and signed on its behalf.
KARL SCHLOBOHM
KARL SCHLOBOHM
Company Secretary
Company Secretary
Level 27, 111 Eagle St
Level 27, 111 Eagle St
Brisbane QLD 4000
Australia
GOVERNANCE /59
REMUNERATION
REPORT
STATEMENT OF THE CHAIRMAN
OF THE REMUNERATION COMMITTEE
JOHN BOVARD
Non-Executive Director
CHAIRMAN’S STATEMENT
The remuneration committee presents its
report for the year ended 30 June 2018.
The Annual Remuneration Report details
remuneration awarded to Directors and
Non-Executive Directors during the year.
The shareholders will be asked to approve
the Annual Remuneration Report as
an ordinary resolution at the AGM in
December 2018.
Both of the above reports have been
prepared in accordance with The
Large and Medium-sized Companies
and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The Company’s auditors, BDO LLP
are required by law to audit certain
disclosures and where disclosures have
been audited they are indicated as such.
A copy of the remuneration policy, which
details the remuneration policy for
Directors, can be found at www.solgold.
com.au. The current remuneration policy
was part of the meeting materials at the
AGM in January 2018.
The remuneration committee reviewed
the existing policy and deemed no changes
necessary to the current arrangements.
JOHN BOVARD
Chairman – Remuneration Committee
Level 27, 111 Eagle St
Brisbane QLD 4000
Australia
REMUNERATION GOVERNANCE
The Remuneration Committee is a standing committee of the Board that meets periodically and is responsible for making
decisions on Directors’ and key management executive’s remuneration packages. The Remuneration Committee has among
other duties the responsibility to recommend to the Board the compensation of the CEO and that of key management.
The remuneration of key management executives is determined by the Executive Director who considers it essential,
notwithstanding the small size of the Company and the fact that it is not yet revenue earning, to recruit and retain individuals
of the highest calibre for that role. Consequently, the Company believes that it is in the interests of Shareholders that key
management executives should be provided with options in addition to the level of fees and salaries considered affordable.
The Remuneration Committee is currently comprised of four members: Mr. John Bovard (the Chair of the Remuneration
Committee), Mr. Nicholas Mather, Dr. Robert Weinberg and Mr. Brian Moller, all of whom are independent Directors, other
than Mr. Nicholas Mather.
The Board recognises the significance of appointing independent, knowledgeable and experienced individuals to the
Remuneration Committee who have the necessary background in executive compensation and risk management to fulfill
the Remuneration Committee’s duties and responsibilities.
60/ SOLGOLD ANNUAL REPORT 2018
DIRECTOR COMPENSATION
A function of the Remuneration Committee is to assist the Board in fulfilling its responsibilities relating to the
compensation of the Directors of the Company. The Remuneration Committee is empowered to review the compensation
levels and components of the Company’s Directors and to report and make recommendations thereon to the Board
and to consider any other matters which, in the Remuneration Committee’s judgment, should be taken into account
in reaching any recommendation to the Board concerning the compensation levels of the Company’s Directors.
The Company’s Directors’ compensation program is designed to attract and retain qualified individuals to serve on the
Board. Each Non-Executive Director receives base annual salary of A$70,000, all of which is payable in cash and none of
which is payable in security based compensation. As Chairman of the Company, Mr. Brian Moller receives a base annual
salary of A$110,000. The Executive Director receives a base annual salary of A$400,000. From time to time, the Board, in
its discretion, may also compensate Directors with fees for their services on Board projects. The Company has agreed to
reimburse Directors for all reasonable expenses incurred in order to attend meetings.
REMUNERATION DETAILS
Single total figure of remuneration for the years ended 30 June 2018 and 2017:
SALARIES
AND FEES
A$
BONUSES
A$
BENEFITS
A$
TOTAL BEFORE
SHARE OPTIONS
A$
Brian Moller
Nicholas Mather
Robert Weinberg
John Bovard
Craig Jones
James Clare
Total remuneration
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
110,000
50,000
400,000
316,667
70,000
50,000
70,000
50,000
70,000
16,667
11,667
–
731,667
483,334
–
–
–
100,000
–
–
–
–
–
–
–
–
–
100,000
SUMMARY OF DIRECTORS’ TERMS
–
–
–
–
–
–
–
–
–
–
–
–
–
–
SHARE
OPTIONS
A$
633,361
–
TOTAL
A$
743,361
50,000
4,433,528
4,833,528
–
380,017
–
380,017
–
380,017
–
–
–
416,667
450,017
50,000
450,017
50,000
450,017
16,667
11,667
–
110,000
50,000
400,000
416,667
70,000
50,000
70,000
50,000
70,000
16,667
11,667
–
731,667
6,206,940
6,938,607
583,334
–
583,334
DATE OF CONTRACT
UNEXPIRED TERM
Brian Moller
12 December 2005
Retire by rotation under the Articles
of Association of the Company
Nicholas Mather
23 June 2017
3 years
Robert Weinberg
12 December 2005
John Bovard
2 November 2009
Craig Jones
27 February 2017
James Clare
26 April 2018
Retire by rotation under the Articles
of Association of the Company
Retire by rotation under the Articles
of Association of the Company
Retire by rotation under the Articles
of Association of the Company
Retire by rotation under the Articles
of Association of the Company
NOTICE PERIOD
3 months
12 months
3 months
3 months
3 months
3 months
/61
GOVERNANCE REMUNERATION REPORT CONTINUED
SHARE OPTION SCHEMES
The share incentive plan (the “Share Incentive Plan”) of the Company was adopted by the Board in July 2017 and approved
by shareholders at the annual general meeting held on July 28, 2017. The Company understands that the establishment of
a balance between short and long-term compensation is essential for the Company’s sustained performance, including its
ability to attract, motivate and retain a pool of talented executives and directors in a very competitive employment market
as well as to ensure a proper alignment of the executives and directors interests with those of shareholders. As of 30 June
2018, the following options have been issued under the Share Incentive Plan:
BALANCE AT
30 JUNE 2017
GRANTED AS
REMUNERATION EXERCISED
BALANCE
AT 30 JUNE
2018
OPTION
PRICE
Directors
Brian Moller
Nicholas Mather
Robert Weinberg
John Bovard
Craig Jones
James Clare
Total
1,100,000
1,500,000
26,250,000
(1,100,000)
26,250,000
3,750,000
(1,500,000)
3,750,000
–
–
–
–
2,250,000
2,250,000
2,250,000
–
–
–
–
–
2,250,000
2,250,000
2,250,000
–
2,600,000
36,750,000
(2,600,000) 36,750,000
60p
60p
60p
60p
60p
–
EXERCISE PERIOD
28/01/19 – 08/08/20
28/01/19 – 08/08/20
28/01/19 – 08/08/20
28/01/19 – 08/08/20
28/01/19 – 08/08/20
–
No consideration is payable for the grant of options under the Share Incentive Plan.
The options at 30 June 2018 were unvested.
PAYMENTS TO PAST DIRECTORS
No payments were made to past directors in the year ended 30 June 2018.
PAYMENTS FOR LOSS OF OFFICE
No payments for loss of office were made in the year ended 30 June 2018.
.STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTEREST
DIRECTORS’ INTERESTS
The interests of the Directors in the shares of the Company, including family and trustee holdings where appropriate,
were as follows:
Brian Moller
Nicholas Mather
Robert Weinberg
John Bovard
Craig Jones
James Clare
BENEFICIAL
NON BENEFICIAL
30 JUNE 2018
30 JUNE 2017
30 JUNE 2018
30 JUNE 2017
5,189,121
89,918,275
4,296,091
3,858,813
–
–
4,089,121
89,268,275
4,296,091
3,858,813
–
–
103,262,300
101,512,300
–
–
–
–
–
–
–
–
–
–
–
–
–
–
62/ SOLGOLD ANNUAL REPORT 2018
RELATIONSHIP BETWEEN REMUNERATION AND COMPANY PERFORMANCE
During the financial year, the Company has generated losses as its principal activity was mineral exploration.
The following table show the share price at the end of the financial year for the Company for the past five years:
30 JUNE 2014
30 JUNE 2015
30 JUNE 2016
30 JUNE 2017
30 JUNE 2018
Share price at year end
Loss per share (cents)
£0.08
(0.8)
£0.0225
(0.6)
£0.03075
(0.7)
£0.3925
(0.3)
£0.2280
(1.1)
There were no dividends paid during the year ended 30 June 2018 and the previous four years.
As the Company is still in the exploration and development stage, the link between remuneration, Company performance
and shareholder wealth is tenuous. Share prices are subject to the influence of metals prices and market sentiment toward
the sector, and as such increases or decreases may occur quite independent of Executive performance or remuneration.
PERCENTAGE CHANGE IN REMUNERATION OF DIRECTOR UNDERTAKING ROLE OF CHIEF EXECUTIVE
Base salary
Pension
Bonuses
CHIEF EXECUTIVE
OTHER KEY MANAGEMENT PERSONNEL
2018
400,000
–
–
2017
% CHANGE
316,667
–
100,000
26%
–
-100%
2018
1,109,693
49,685
-
2017
% CHANGE
775,052
52,144
181,472
43%
-5%
-100%
The comparator group chosen is key management employees as the remuneration committee believe this provides the most
accurate comparison of underlying increases based on similar annual bonus performances utilised by the Group.
RELATIVE IMPORTANCE OF SPEND ON PAY
The total expenditure of the Group on remuneration to all employees and Directors (see Notes 4 and 5 to the financial
statements) is shown below:
Employee remuneration
Expenditure of exploration and evaluation
2018
25,522,146
81,968,954
2017
8,371,040
19,549,202
STATEMENT OF IMPLEMENTATION OF NEW REMUNERATION POLICY
The remuneration policy formed part of the meeting materials at the AGM in January 2018. The policy took effect from
1 July 2017 and will remain in place indefinitely unless changes are deemed necessary by the Remuneration committee.
The Company may not make a remuneration payment or payment for loss of office to a person who is, is to be, or has been
a Director of the Company unless that payment is consistent with the approved remuneration policy, or has otherwise been
approved by a resolution of members.
CONSIDERATION BY THE DIRECTORS OF MATTERS RELATING TO DIRECTORS’ REMUNERATION
The remuneration committee considered the executive Directors’ remuneration and the Board considered the Non-
Executive Directors’ remuneration in the year ended 30 June 2018. Non-Executive Director salary and fees were increased
from $50,000 to $70,000 per annum and the Chairman’s salary and fee was increased from $50,000 to $110,000 for the year
ended 30 June 2018. External advice was taken in reaching this decision.
GOVERNANCE /63
REMUNERATION REPORT CONTINUED
REMUNERATION POLICY TABLE
The remuneration policy table below is an extract of the Group’s current remuneration policy on Directors’ remuneration,
which formed part of the meeting materials at the AGM in January 2018. The approved policy took effect from 1 July 2017.
ELEMENT
PURPOSE
POLICY
OPERATION
Executive Director
BASE
SALARY
To recognise:
• Skills
Considered by remuneration
committee on appointment.
Reviewed annually.
Paid monthly in cash.
OPPORTUNITY AND
PERFORMANCE CONDITION
Specific performance
conditions are attached to
base salaries.
BENEFITS
• Responsibility
• Accountability
• Experience
• Value
To provide a
competitive
benefits package
Set at a level considered
appropriate to attract, retain
motivate and reward the right
individuals.
Contractual benefits can
include but are not limited to:
• Travel allowance
• Car parking
• Mobile phone
The committee retains
the discretion to
approve changes in
contractual benefits
in exceptional
circumstances
or where factors
outside the control
of the Group lead to
increased costs.
The costs associated with
benefits offered are closely
controlled and reviewed on
an annual basis.
No specific performance
conditions are attached to
contractual benefits.
The value of benefits for each
Director for the year ended
30 June 2018 is shown in the
table on page 61.
BONUSES
To reward and
incentivise
In assessing the performance
of the executive team, and
in particular to determine
whether bonuses are merited
the remuneration committee
takes into account the overall
performance of the business.
Bonuses are generally offered
in cash or shares.
The remuneration
committee determines
the level of bonus
on an annual basis
applying such
performance
conditions and
performance measures
as it considers
appropriate.
Performance conditions
will be assessed on
an annual basis. The
performance measures
applied may be financial,
non-financial, corporate,
divisional or individual and
in such proportion as the
remuneration committee
considers appropriate.
SHARE
OPTIONS
To provide
Executive
Directors with a
long-term interest
in the Company
Granted under the Share
Incentive Plan.
Offered at
appropriate times
by the remuneration
committee.
Entitlement to share options
is not subject to any specific
performance conditions.
Share options will be
offered by the remuneration
committee as appropriate.
The aggregate number of
shares over which options
may be granted under all
of the Company’s option
schemes (including any
options and awards granted
under the Company’s
employee share plans) in any
period, will not exceed, at
the time of grant, 10% of the
ordinary share capital of the
Company from time to time.
64/ SOLGOLD ANNUAL REPORT 2018
ELEMENT
PURPOSE
POLICY
OPERATION
Non-Executive Director
BASE
SALARY
To recognise:
• Skills
• Experience
• Value
BENEFITS
No benefits
offered.
Considered by remuneration
committee on appointment.
Reviewed annually.
Paid monthly in cash.
Set at a level considered
appropriate to attract, retain
motivate and reward the
right individuals.
SHARE
OPTIONS
To align interest
with shareholders.
Granted under the Share
Incentive Plan.
Offered at
appropriate times
by the remuneration
committee.
OPPORTUNITY AND
PERFORMANCE CONDITION
No specific performance
conditions are attached to
base salaries.
Entitlement to share options
is not subject to any specific
performance conditions.
Share options will be
offered by the remuneration
committee as appropriate.
The aggregate number of
shares over which options
may be granted under all
of the Company’s option
schemes (including any
options and awards granted
under the Company’s
employee share plans) in any
period, will not exceed, at
the time of grant, 10% of the
ordinary share capital of the
Company from time to time.
The remuneration committee consider the performance measures outlined in the table above to be appropriate measures of
performance and that the KPI’s chosen align the interests of the Directors and shareholders.
For details of remuneration of other company employees can be found in Note 5 to the financial statements.
/65
GOVERNANCE INDEPENDENT
AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SOLGOLD PLC
OPINION
We have audited the financial statements of SolGold plc (the
‘parent company’) and its subsidiaries (the ‘Group’) for the
year ended 30 June 2018, which comprise the Consolidated
Statement of Profit or Loss and Comprehensive Income,
Consolidated and Company Statements of Financial
Position, Consolidated and Company Statement of Changes
in Equity, Consolidated and Company Statements of Cash
Flows and notes to the financial statements including a
summary of significant accounting policies. The financial
reporting framework that has been applied in their
preparation is applicable law and International Financial
Reporting Standards (IFRSs as adopted by the European
Union) and, as regards the parent company financial
statements, as applied in accordance with the provisions of
the Companies Act 2006.
In our opinion the financial statements:
• give a true and fair view of the state of the Group’s and of
the parent company’s affairs as at 30 June 2018 and of the
Group’s loss for the year then ended;
• the Group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
• the parent company financial statements have been
properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance with
the provisions of the Companies Act 2006; and
• the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006; and, as regards the Group financial statements,
Article 4 of the IAS Regulation.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are
independent of the Group and the parent company in
accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us to
report to you where:
• the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is not appropriate; or
• the Directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the Group’s or the
parent company’s ability to continue to adopt the going
concern basis of accounting for a period of at least twelve
months from the date when the financial statements are
authorised for issue.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on:
the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion
on these matters.
66/ SOLGOLD ANNUAL REPORT 2018
KEY AUDIT MATTER
HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Carrying value of Exploration and Evaluation assets
The Group’s intangible exploration and evaluation assets
(‘E&E assets’) represent the most significant asset on its
statement of financial position totalling AU$ 142.9m as at
30 June 2018.
Total Assets
Intangible E&E assets
Other non-current assets
Other receivables and prepayments
Cash
Management are required to assess the carrying value of
E&E assets and consider whether there is any indication
that the E&E assets may be impaired at 30 June 2018.
Given the significance of the E&E assets on the Group’s
statement of financial position and the significant
management judgement which is required to be applied in
the assessment of whether any indicators of impairment
exist there is considered to be an increased risk of material
misstatement of the financial statements in this regard.
OUR APPLICATION OF MATERIALITY
We evaluated Management’s and the Board’s assessment
of potential indicators of impairment of the E&E assets.
Our specific audit testing in this regard included:
• The verification of license status, in order to confirm
legal title
• Reviewing exploration activity to assess whether there
was any evidence from exploration results to date which
would indicate a potential impairment
• Obtaining approved budget forecasts and minutes of
Management and Board meetings to confirm whether
or not the Group intended to continue to explore project
area, and
• In order to obtain an understanding of Management’s
expectation of commercial viability reviewed any
available technical documentation, discussed results and
operations with the operational site teams and conducted
a site visit to the Cascabel license area.
• We also assessed the disclosures included in the financial
statements.
MATERIALITY
30 JUNE 2018
30 JUNE 2017
BASIS OF MATERIALITY
Materiality for the financial
statements as a whole
Materiality for the parent
company financial statements
AU$3.0m
AU$2.5m
1.3% of total assets
(2017:1.5% of total assets)
AU$1.5m
AU$1.13m
Capped at 50% of Group materiality
We consider total assets to be the financial metric of the most interest to shareholders and other users of the financial
statements, given the Company’s current focus on the exploration of its assets. Total assets was therefore considered to be
the most appropriate basis for materiality.
We apply the concept of materiality both in planning and performing our audit and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements. Importantly,
misstatements below these levels will not necessarily be evaluated as immaterial as we also take account the nature of
identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.
GOVERNANCE /67
INDEPENDENT AUDITOR’S REPORT CONTINUED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SOLGOLD PLC CONTINUED
The audit of ENSA was performed in Ecuador by a BDO
member firm. All audit work (full scope audit or review work)
was conducted by BDO LLP and BDO member firms.
As part of our audit strategy the Group audit team were
present onsite in Ecuador during the planning, execution
and completion of the Ecuadorian audit work by the
Ecuadorian audit team. BDO LLP had full access to all audit
working papers of the significant component audited by the
BDO member firm.
OTHER INFORMATION
The Directors are responsible for the other information. The
other information comprises the information included in
the annual report, other than the financial statements and
our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to
determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report in this regard.
OPINIONS ON OTHER MATTERS PRESCRIBED
BY THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the
course of the audit:
• the information given in the Strategic Report and the
Directors’ report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
• the Strategic Report and the Directors’ report have
been prepared in accordance with applicable legal
requirements; and
• the part of the Directors’ remuneration report to be
audited has been properly prepared in accordance
with the Companies Act 2006.
Performance materiality is the application of materiality
at the individual account or balance level and is set at
an amount which reduces to an appropriately low level
the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality for the
financial statements as a whole. Performance materiality
was set at 75% (2017: 75%) of the above materiality levels.
Whilst materiality for the financial statements as whole
was AU$3m, each significant component was audited to a
lower level of materiality ranging from AU$0.3m to AU$1.5m
(2017: AU$0.3m to AU$1.3m). Such materialities are used to
determine the financial statement areas that are included
within the scope of our audit and the extent of sample sizes
tested during the audit.
We agreed with the Audit Committee that we would report
to the Committee all individual audit differences identified
during the course of our audit in excess of AU$150,000
(2017: AU$ 125,000). There were no misstatements identified
during the course of our audit that were individually, or
in aggregate, considered to be material in terms of their
absolute monetary value or on qualitative grounds.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our Group audit scope focussed on the Group’s principal
mining entity, Exploraciones Novomining S.A (“ENSA”).
ENSA holds the Cascabel exploration project. ENSA was
subject to a full scope audit. The two other significant
components were determined to be the parent company and
the Group consolidation which were also both subject to a
full scope audit.
The remaining components of the Group were considered
non-significant and such components were subject to
analytical review procedures together with substantive
testing on Group audit risk areas determined to be
applicable to a particular component (‘review work’).
We set out below the extent to which the Group’s total
assets were subject to full scope audit procedure versus
analytical review procedures.
AUDIT SCOPE
100
80
60
40
20
0
2017
2018
Full scope
Review work
68/ SOLGOLD ANNUAL REPORT 2018
MATTERS ON WHICH WE ARE REQUIRED
TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the
Group and the Parent Company and its environment
obtained in the course of the audit, we have not identified
material misstatements in the Strategic report or the
Directors’ report.
A further description of our responsibilities for the
audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
OTHER MATTERS WHICH WE ARE REQUIRED
TO ADDRESS
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements and the part of
the Directors’ remuneration report to be audited are not
in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ responsibilities
statement set out on [page 59], the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Parent Company or to
cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF
THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are 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 ISAs (UK) will always detect a material misstatement
when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of
these financial statements.
Following the recommendation of the Audit Committee, we
were appointed to audit the financial statements for the year
ended 30 June 2006 and subsequent financial periods. In
respect of the year ended 30 June 2018 we were reappointed
as auditor by the members of the Company at the annual
general meeting held on 30 January 2018. The period of total
uninterrupted engagement is 13 years, covering the years
ended 30 June 2006 to 30 June 2018.
The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group or the Parent
Company and we remain independent of the Group and
the Parent Company in conducting our audit.
Our audit opinion is consistent with the additional report
to the Audit Committee.
USE OF OUR REPORT
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report,
or for the opinions we have formed.
ANNE SAYERS
(SENIOR STATUTORY AUDITOR)
For and on behalf of BDO LLP,
Statutory Auditor
London
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
GOVERNANCE /69
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Expenses
Exploration costs written-off
Administrative expenses
Operating loss
Finance income
Finance costs
Loss before tax
Tax (expense) benefit
Loss for the year
Other comprehensive (loss) / profit
Items that may be reclassified into profit or loss
NOTES
GROUP 2018
A$
GROUP 2017
A$
12
3
6
6
7
(377,038)
(15,568,490)
(15,945,528)
677,892
–
(15,267,636)
(4,415,424)
(19,683,060)
(17,310)
(8,232,307)
(8,249,617)
69
(73,502)
(8,323,050)
3,823,078
(4,499,972)
Change in fair value of available-for-sale financial assets net of tax
10a / 14
Exchange differences on translation of foreign operations
(6,244,922)
4,500,418
8,920,515
(2,089,272)
Items that will not be reclassified
Change in Ecuador pension
Total comprehensive (loss) / profit for the year
Loss for the year attributable to:
Owners of the parent company
Non-controlling interest
Total comprehensive (loss) / profit for the year attributable to:
Owners of the parent company
Non-controlling interest
(68,268)
–
(21,495,832)
2,331,271
(19,517,402)
(165,658)
(4,418,025)
(81,947)
(19,683,060)
(4,499,972)
(21,676,760)
180,928
(21,495,832)
2,697,343
(366,072)
2,331,271
CENTS
PER SHARE
CENTS
PER SHARE
Loss per share
Basic loss per share
Diluted loss per share
8
8
(1.2)
(1.2)
(0.7)
(0.7)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
70/
SOLGOLD ANNUAL REPORT 2018 CONSOLIDATED AND COMPANY
STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE 2018
Registered Number 5449516
NOTES
GROUP
2018
A$
COMPANY
2017
A$
2018
A$
2017
A$
Assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
11
12
9
4,278,038
1,777,937
158,121
189,342
142,882,867
59,723,105
–
–
–
–
146,415,708
64,289,892
Investment in available-for-sale securities
10(a)
5,445,408
14,366,304
5,437,408
14,360,725
Loans receivable and other non-current assets
Total non-current assets
Other receivables and prepayments
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Share premium
Other reserves
Accumulated loss
13
15
16
17
17
1,207,745
226,175
923,879
90,137
153,814,058
76,093,521
152,935,116
78,930,096
4,230,054
1,307,344
546,886
780,168
81,825,617
89,312,743
79,628,278
88,669,626
86,055,671
90,620,087
80,175,164
89,449,794
239,869,729
166,713,608
233,110,280
168,379,890
29,513,563
26,376,265
29,513,563
26,376,265
273,572,301
199,322,436
273,572,301
199,322,436
23,741,415
15,385,705
19,579,998
15,309,852
(96,329,208)
(76,869,038)
(91,429,630)
(73,389,037)
Equity attributable to owners of the parent company
230,498,071
164,215,368
231,236,232
167,619,516
Non-controlling interest
(62,007)
(242,935)
–
–
Total equity
Liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
230,436,064
163,972,433
231,236,232
167,619,516
18
9,433,665
9,433,665
9,433,665
2,741,175
2,741,175
2,741,175
1,874,048
1,874,048
1,874,048
760,374
760,374
760,374
239,869,729
166,713,608
233,110,280
168,379,890
The above consolidated and Company statements of financial position should be read in conjunction with the
accompanying notes.
A separate statement of comprehensive income for the parent company has not been presented as permitted by
section 408 of the Companies Act 2006. The Company’s loss for the year was A$18,097,825 (2017: A$3,912,536).
The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 27 September 2018.
The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 27 September 2018.
NICHOLAS MATHER
NICHOLAS MATHER
Director
FINANCIAL STATEMENTS /71
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
Balance at 30 June 2016
17,015,019
87,488,507
(141,299)
1,104,337
SHARE
CAPITAL
A$
SHARE
PREMIUM
A$
AVAILABLE-FOR-
SALE FINANCIAL
ASSETS RESERVE
A$
SHARE OPTION
RESERVE
A$
Loss for the year
Other comprehensive income
Total comprehensive income for the year
New share capital subscribed
Options exercised
Share issue costs
Options expired
Value of shares and options issued to
Directors, employees and consultants
–
–
–
9,282,812
78,434
–
–
–
–
–
–
–
8,920,515
8,920,515
117,092,097
1,216,906
(6,475,074)
–
–
–
–
–
–
–
Balance at 30 June 2017
26,376,265
199,322,436
8,779,216
Loss for the year
Other comprehensive income
Total comprehensive income for the year
New share capital subscribed
Options exercised
Share issue costs
(net of deferred tax of A$1,739,029)
Options expired
Value of share and options issued to
Directors, employees and consultants
–
–
–
3,093,343
43,955
–
–
–
–
–
–
–
(6,244,922)
(6,244,922)
74,389,805
879,106
(1,019,046)
–
–
–
–
–
–
–
Balance at 30 June 2018
29,513,563
273,572,301
2,534,294
The above statement of changes in equity should be read in conjunction with the accompanying notes.
–
–
–
–
–
–
(38,351)
5,464,650
6,530,636
–
–
–
–
–
3,411
(57,232)
10,568,889
17,045,704
72/
FOREIGN
CURRENCY
TRANSLATION
RESERVE
A$
1,948,864
(1,805,147)
(1,805,147)
OTHER
ACCUMULATED
RESERVES
A$
LOSS
A$
TOTAL
A$
(67,864)
(72,489,364)
34,858,200
(4,418,025)
(4,418,025)
(4,418,025)
NON-
CONTROLLING
INTERESTS
A$
123,137
(81,947)
(284,125)
(366,072)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
38,351
–
–
–
–
–
–
–
–
–
–
–
57,232
7,115,368
2,697,343
126,374,909
1,295,340
(6,475,074)
5,464,650
(19,517,402)
(2,159,358)
77,483,148
923,061
(1,015,635)
–
10,568,889
TOTAL
EQUITY
A$
34,981,337
(4,499,972)
6,831,244
2,331,271
126,374,909
1,295,340
(6,475,074)
–
5,464,650
(1,812,772)
(21,495,832)
77,483,148
923,061
(1,015,635)
–
10,568,889
–
–
–
–
–
–
–
–
–
–
143,717
(67,864)
(76,869,038)
164,215,368
(242,935)
163,972,433
4,153,832
4,153,832
(68,268)
(68,268)
(19,517,402)
(21,676,760)
346,586
180,928
(19,517,402)
(165,658)
(19,683,060)
4,297,549
(136,132)
(96,329,208)
230,498,071
(62,007)
230,436,064
SOLGOLD ANNUAL REPORT 2018 Loss for the year
Other comprehensive income
Total comprehensive income for the year
New share capital subscribed
Options exercised
Share issue costs
Options expired
Value of shares and options issued to
Directors, employees and consultants
Loss for the year
Other comprehensive income
Total comprehensive income for the year
New share capital subscribed
Options exercised
Share issue costs
Options expired
(net of deferred tax of A$1,739,029)
Value of share and options issued to
Directors, employees and consultants
SHARE
CAPITAL
A$
AVAILABLE-FOR-
SHARE
SALE FINANCIAL
SHARE OPTION
PREMIUM
ASSETS RESERVE
A$
A$
(141,299)
RESERVE
A$
1,104,337
9,282,812
78,434
117,092,097
1,216,906
(6,475,074)
3,093,343
43,955
74,389,805
879,106
(1,019,046)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,920,515
8,920,515
(6,244,922)
(6,244,922)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(38,351)
5,464,650
6,530,636
3,411
(57,232)
10,568,889
17,045,704
Balance at 30 June 2016
17,015,019
87,488,507
1,948,864
(67,864)
(72,489,364)
34,858,200
123,137
34,981,337
FOREIGN
CURRENCY
TRANSLATION
RESERVE
A$
OTHER
RESERVES
A$
ACCUMULATED
LOSS
A$
NON-
CONTROLLING
INTERESTS
A$
TOTAL
A$
TOTAL
EQUITY
A$
Balance at 30 June 2017
26,376,265
199,322,436
8,779,216
143,717
(67,864)
(76,869,038)
164,215,368
(242,935)
163,972,433
–
(1,805,147)
(1,805,147)
–
–
–
–
–
–
–
–
–
–
–
–
–
(4,418,025)
(4,418,025)
–
(4,418,025)
–
–
–
7,115,368
2,697,343
126,374,909
1,295,340
(6,475,074)
38,351
–
–
5,464,650
(81,947)
(284,125)
(366,072)
–
–
–
–
–
(4,499,972)
6,831,244
2,331,271
126,374,909
1,295,340
(6,475,074)
–
5,464,650
Balance at 30 June 2018
29,513,563
273,572,301
2,534,294
4,297,549
(136,132)
(96,329,208)
230,498,071
(62,007)
230,436,064
The above statement of changes in equity should be read in conjunction with the accompanying notes.
–
4,153,832
4,153,832
(68,268)
(68,268)
(19,517,402)
–
(19,517,402)
(2,159,358)
(19,517,402)
(21,676,760)
–
–
–
–
–
–
–
–
–
–
–
–
–
57,232
77,483,148
923,061
(1,015,635)
–
–
10,568,889
(165,658)
(19,683,060)
346,586
180,928
–
–
–
–
–
(1,812,772)
(21,495,832)
77,483,148
923,061
(1,015,635)
–
10,568,889
/73
FINANCIAL STATEMENTS COMPANY STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
Balance at 30 June 2016
Loss for the year
Other comprehensive income
Total comprehensive income for the year
New share capital subscribed
Options exercised
Share issue costs
Options expired
Value of shares and options issued to
Directors, employees and consultants
Balance at 30 June 2017
Loss for the year
Other comprehensive income for the year
Total comprehensive income for the year
New share capital subscribed
Options exercised
Share issue costs (net of deferred tax of A$ 1,739,029)
Options expired
Value of shares and options issued to
Directors, employees and consultants
Balance at 30 June 2018
SHARE
CAPITAL
A$
SHARE
PREMIUM
A$
17,015,019
87,488,507
–
–
–
9,282,812
78,434
–
–
–
–
–
–
117,092,097
1,216,906
(6,475,074)
–
–
AVAILABLE-FOR-
SALE FINANCIAL
ASSETS
A$
(141,299)
–
8,920,515
8,920,515
–
–
–
–
–
26,376,265
199,322,436
8,779,216
–
–
–
3,093,343
43,955
–
–
–
–
–
–
–
(6,244,922)
(6,244,922)
74,389,805
879,106
(1,019,046)
–
–
–
–
–
–
–
29,513,563
273,572,301
2,534,294
The above statement of changes in equity should be read in conjunction with the accompanying notes.
SHARE OPTION
ACCUMULATED
RESERVE
A$
1,104,337
LOSS
A$
TOTAL
A$
(69,514,852)
35,951,712
(3,912,536)
(3,912,538)
(3,912,536)
(38,351)
38,351
–
–
–
–
–
–
–
–
–
–
–
(73,389,037)
(18,097,825)
(18,097,825)
57,232
(91,429,630)
8,920,515
5,007,979
126,374,909
1,295,340
(6,475,074)
5,464,650
167,619,516
(18,097,825)
(6,244,922)
(24,342,747)
77,483,148
923,061
(1,015,635)
–
10,568,889
231,236,232
–
–
–
–
–
–
–
–
–
–
–
5,464,650
6,530,636
3,411
(57,232)
10,568,889
17,045,704
74/
SOLGOLD ANNUAL REPORT 2018 Balance at 30 June 2016
Loss for the year
Other comprehensive income
Total comprehensive income for the year
New share capital subscribed
Options exercised
Share issue costs
Options expired
Value of shares and options issued to
Directors, employees and consultants
Balance at 30 June 2017
Loss for the year
Other comprehensive income for the year
Total comprehensive income for the year
New share capital subscribed
Options exercised
Share issue costs (net of deferred tax of A$ 1,739,029)
Options expired
Value of shares and options issued to
Directors, employees and consultants
Balance at 30 June 2018
AVAILABLE-FOR-
SHARE
SALE FINANCIAL
SHARE
CAPITAL
A$
PREMIUM
A$
17,015,019
87,488,507
9,282,812
78,434
117,092,097
1,216,906
(6,475,074)
26,376,265
199,322,436
8,779,216
ASSETS
A$
(141,299)
8,920,515
8,920,515
(6,244,922)
(6,244,922)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,093,343
43,955
74,389,805
879,106
(1,019,046)
–
–
–
–
–
–
–
–
–
–
–
–
The above statement of changes in equity should be read in conjunction with the accompanying notes.
29,513,563
273,572,301
2,534,294
SHARE OPTION
RESERVE
A$
ACCUMULATED
LOSS
A$
TOTAL
A$
1,104,337
(69,514,852)
35,951,712
–
–
–
–
–
–
(3,912,536)
(3,912,538)
–
(3,912,536)
–
–
–
8,920,515
5,007,979
126,374,909
1,295,340
(6,475,074)
(38,351)
38,351
–
5,464,650
6,530,636
–
–
–
–
–
3,411
(57,232)
10,568,889
17,045,704
–
(73,389,037)
(18,097,825)
–
(18,097,825)
–
–
–
57,232
–
(91,429,630)
5,464,650
167,619,516
(18,097,825)
(6,244,922)
(24,342,747)
77,483,148
923,061
(1,015,635)
–
10,568,889
231,236,232
/75
FINANCIAL STATEMENTS CONSOLIDATED AND COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
GROUP
2018
A$
2017
A$
COMPANY
2018
A$
2017
A$
NOTES
Cash flows from operating activities
Loss for the year
Depreciation
(19,683,060)
(4,499,972)
(18,097,825)
(3,912,536)
11
80,454
36,713
48,223
35,855
Share based payment expense
5 / 19
10,568,889
2,239,533
10,568,889
2,239,533
Write-off of exploration expenditure
Foreign exchange (gain) / loss
Deferred taxes
(Increase) / decrease in other receivables and
prepayments
12
14
377,038
17,310
–
–
(4,106,856)
1,032,010
(4,106,856)
1,032,010
4,415,424
(3,823,078)
4,415,424
(3,823,078)
(Decrease) / increase in trade and other payables
378,182
454,139
(455,941)
(353,550)
(387,251)
318,367
8,718
(214,060)
Net cash outflow from operating activities
(8,425,870)
(4,896,895)
(7,241,029)
(4,633,558)
Cash flows from investing activities
Security deposit (payments) / refunds
(4,063,394)
(102,201)
(833,742)
(90,137)
(215,748)
–
(4,207)
–
–
Acquisition of property, plant and equipment
Acquisition of exploration and evaluation assets
Investment in subsidiaries
Loans advanced to subsidiaries
11
12
9
(72,796,241)
(21,739,184)
–
–
–
–
(2,580,555)
(1,439,250)
(17,002)
(81,328,509)
(23,799,262)
Net cash outflow from investing activities
(79,440,190)
(23,280,635)
(82,179,253)
(24,109,354)
Cash flows from financing activities
Proceeds from the issue of ordinary share capital
17
79,026,742
117,862,952
79,026,742
117,862,952
Payment of issue costs
Proceeds from borrowing
(2,754,664)
(288,339)
(2,754,664)
(288,339)
–
852,736
–
852,736
Net cash inflow from financing activities
76,272,078
118,427,349
76,272,078
118,427,349
Net (decrease) / increase in cash and cash equivalents
(11,593,982)
90,249,820
(13,148,204)
89,684,437
Cash and cash equivalents at the beginning of year
89,312,743
94,933
88,669,626
17,199
Effect of foreign exchange on cash
4,106,856
(1,032,010)
4,106,856
(1,032,010)
Cash and cash equivalents at end of year
16
81,825,617
89,312,743
79,628,278
88,669,626
The above statements of cash flows should be read in conjunction with the accompanying notes.
76/
SOLGOLD ANNUAL REPORT 2018 NOTES TO THE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 1 ACCOUNTING POLICIES
(C) BASIS OF CONSOLIDATION
SolGold plc (‘the Company or ‘SolGold’) is domiciled in
London, United Kingdom and was incorporated on 11 May
2015, with company registration number 5449516. SolGold
is a public limited company which is dual listed on the
London Stock Exchange and the Toronto Stock Exchange.
The address of the Company’s registered office is 201
Bishopsgate, London EC2M 3AB, United Kingdom.
(A) STATEMENT OF COMPLIANCE
The consolidated financial statements and Company
financial statements have been prepared in accordance
with International Financial Reporting Standards and their
interpretations issued by the International Accounting
Standards Board (IASB), as adopted by the European
Union (‘IFRS’). They have also been prepared in accordance
with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS. The consolidated
financial statements also comply with IFRS as issued by
the IASB, as is required as a result of the Company’s listing
on TSX in Canada.
The accounting policies set out below have been
applied consistently throughout these consolidated
financial statements.
(B) BASIS OF PREPARATION OF FINANCIAL
STATEMENTS AND GOING CONCERN
The consolidated financial statements are presented in
Australian dollars (“A$”), rounded to the nearest dollar.
The Company was incorporated on 11 May 2005.
From incorporation the Group has prepared the annual
consolidated financial statements in accordance with IFRS.
The financial statements have been prepared on a going
concern basis which contemplates the continuity of
normal business activities and the realisation of assets
and discharge of liabilities in the ordinary course of
business. The Company has not generated revenues from
operations. In common with many exploration companies,
the Company raises finance for its exploration and
appraisal activities in discrete tranches.
The Company currently has sufficient working capital
levels to carry out its planned exploration activities for the
following 12 months however, it should be noted that the
current working capital levels will not be sufficient to bring
the Group’s projects into full development and production
and, in due course, further funding will be required. In the
event that the Company is unable to secure further finance
either through other finance arrangements or capital
raisings, it may not be able to fully develop its projects and
this may have a consequential impact on the carrying value
of the related exploration assets and the investment of the
parent company in its subsidiaries.
(I) SUBSIDIARIES
The consolidated financial statements incorporate
the financial statements of the Company and entities
controlled by the Company (its subsidiaries) made up to
30 June each year.
Where the Company has control over an investee, it is
classified as a subsidiary. The Company controls an investee
if all three of the following elements are present: power over
the investee, exposure to variable returns from the investee,
and the ability of the investor to use its power to affect those
variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any
of these elements of control.
The consolidated financial statements present the results
of the Company and its subsidiaries (“the Group”) as if
they formed a single entity. Intercompany transactions
and balances between group companies are therefore
eliminated in full.
The consolidated financial statements incorporate the
results of business combinations using the acquisition
method. In the statement of financial position, the acquiree’s
identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the
consolidated statement of comprehensive income from the
date on which control is obtained. They are deconsolidated
from the date on which control ceases.
The results of subsidiaries acquired or disposed of during
the year are included in the consolidated statement of
comprehensive income from the effective date of acquisition
or up to the effective date of disposal, as appropriate. Where
necessary, adjustments are made to the financial statements
of subsidiaries to bring the accounting policies into line with
those used by the Group.
Non-controlling interests are allocated their share of net
profit after tax and share of other comprehensive income in
the statement of profit or loss and comprehensive income
and presented within equity in the consolidated statement
of financial position, separately from the equity of the
owners of the parent.
(II) TRANSACTIONS ELIMINATED ON CONSOLIDATION
Intra-group balances and any unrealised gains and losses or
income and expenses arising from intra-group transactions,
are eliminated in preparing the consolidated financial
statements.
FINANCIAL STATEMENTS /77
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 1 ACCOUNTING POLICIES CONTINUED
(III) DEPRECIATION
(D) FOREIGN CURRENCY
Transactions in foreign currencies are translated at the
foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies at the year-end are translated into Australian
dollars at the foreign exchange rate ruling at that date. Any
resultant foreign exchange currency translation amount is
taken to the profit and loss.
The functional currency of the subsidiaries in Australia is
considered to be Australian Dollars (A$). The functional
currency of the subsidiaries in the Solomon Islands is
considered to be Solomon Islands Dollars (SBD$). The
functional currency of the subsidiaries in Ecuador is
considered to be United States Dollars (US$). The assets
and liabilities of the entities are translated to the Group
presentation currency at rates of exchange ruling at the
reporting date. Income and expense items are translated
at average rates for the period.
Transactions in foreign currencies are translated at the
exchange rate ruling on transaction date.
Intercompany loans between the parent and subsidiaries are
translated at the rate the loan was made to the subsidiary.
Any exchange differences are taken to other comprehensive
income. On disposal of an entity, cumulative exchange
differences are recognised in the income statement as
part of the profit or loss on sale.
The Company’s functional and presentation currency
is Australian dollars (A$). The exchange rates applied
in preparation of these financial statements at 30 June
2018 were £0.5606/A$1.0, US$0.7433/A$1.0 and SBD$6.05/
A$1.0 (30 June 2017: £0.5951/A$1.0, US$0.7692/A$1.0 and
SBD$5.9401/A$1.0). The average exchange rate applied for
the year ended 30 June 2018 was US$0.7687/A$1.0 (2017:
US$0.7545/A$1.0).
(E) PROPERTY, PLANT AND EQUIPMENT
(I) OWNED ASSETS
Items of property, plant and equipment are stated at cost
less accumulated depreciation (see below) and impairment
losses (see accounting policy i below).
(II) SUBSEQUENT COSTS
The Group recognises in the carrying amount of property,
plant and equipment the cost of replacing part of such an
item when that cost is incurred if it is probable that the
future economic benefits associated with the item will flow
to the Group and the cost of the item can be measured
reliably. All other costs are recognised in the statement of
comprehensive income as an expense as incurred.
78/ SOLGOLD ANNUAL REPORT 2018
Depreciation is charged to the statement of comprehensive
income on a straight-line basis over the estimated useful
lives of each item of property, plant and equipment used
in corporate and administrative operations. Depreciation is
capitalised to exploration on a straight-line basis over the
estimated useful lives of each item of property, plant and
equipment used in exploration operations. The estimated
useful lives of all categories of assets are:
Office Equipment
Furniture and Fittings
Motor Vehicles
Plant and Equipment
Buildings
Land
3 years
5 years
5 years
5 years
12 years
Not depreciated
The residual values and useful lives are assessed annually.
Gains and losses on disposal are determined by comparing
proceeds with carrying amounts and are included in the
statement of comprehensive income.
(F) INTANGIBLE ASSETS
DEFERRED EXPLORATION COSTS
Costs incurred in relation to the acquisition of, or application
for, a tenement area are capitalised where there is a
reasonable expectation that the tenement will be acquired
or granted. Where the Group is unsuccessful in acquiring
or being granted a tenement area, any such costs are
immediately expensed.
All other costs incurred prior to obtaining the legal right to
undertake exploration and evaluation activities on a project
are written-off as incurred.
Exploration and evaluation costs arising following the
acquisition of an exploration licence are capitalised on
a project-by-project basis, pending determination of
the technical feasibility and commercial viability of the
project. Costs incurred include appropriate technical
and administrative overheads. Deferred exploration
costs are carried at historical cost less any impairment
losses recognised.
If an exploration project is successful, the related
expenditures will be transferred to mining assets and
amortised over the estimated life of the ore reserves on
a unit of production basis.
The recoverability of deferred exploration and evaluation
costs is dependent upon the discovery of economically
recoverable ore reserves, the ability of the Group to obtain
the necessary financing to complete the development of ore
reserves and future profitable production or proceeds from
the disposal thereof.
(G) LOANS RECEIVABLES, OTHER RECEIVABLES
AND PREPAYMENTS
Other receivables and prepayments are not interest
bearing and are stated at their nominal amount less
provision for impairment.
(H) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand, deposits
held at call with banks, other short-term highly liquid
investments with original maturities of three months or
less, and bank overdrafts. Bank overdrafts are shown
within borrowings in current liabilities on the statement
of financial position.
(I) IMPAIRMENT
Whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable the
asset is reviewed for impairment. An asset’s carrying value
is written down to its estimated recoverable amount (being
the higher of the fair value less costs to sell and value in use)
if that is less than the asset’s carrying amount.
Impairment reviews for deferred exploration costs are
carried out on a project-by-project basis, with each project
representing a potential single cash generating unit. An
impairment review is undertaken when indicators of
impairment arise, typically when one of the following
circumstances apply:
• the period for which the entity has the right to explore
in the specific area has expired during the period or
will expire in the near future, and is not expected to
be renewed;
• substantive expenditure on further exploration for
and evaluation of mineral resources in the specific
area is neither budgeted nor planned;
• exploration for and evaluation of mineral resources in
the specific area have not led to the discovery of
commercially viable quantities of mineral resources and
the entity has decided to discontinue such activities in
the specific area; and
• sufficient data exists to indicate that, although a
development in the specific area 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.
(J) SHARE CAPITAL
(I) ORDINARY SHARE CAPITAL
The Company’s ordinary shares are classified as equity.
(II) SHARES ISSUED TO SETTLE LIABILITIES
The Group from time to time settles financial liabilities
by issuing shares. The Group considers these equity
instruments as ‘consideration paid’ and accordingly
derecognises the financial liability.
The equity instruments issued are measured at fair value,
with the difference being taken to the income statement,
unless the creditor is also a direct or indirect shareholder
and is acting in its capacity as direct or indirect shareholder.
When the creditor is acting in capacity as a direct or indirect
shareholder the value of shares issued is deemed to be the
carrying value of the liability.
(K) EMPLOYEE BENEFITS
(I) SHARE BASED PAYMENT TRANSACTIONS
The Group measures the cost of equity-settled transactions
with employees by reference to the fair value of the equity
instruments at the date at which they are granted and
amortised over the vesting periods. Share based payments
to non-employees are measured at the fair value of goods or
services rendered or the fair value of the equity instrument
issued, if it is determined the fair value of the goods or
services cannot be reliably measured. Estimating fair value
for share based payment transactions requires determining
the most appropriate valuation model, which is dependent
on the terms and conditions of the grant. This estimate
also requires determining the most appropriate inputs to
the valuation model including the expected life of the share
option, volatility and dividend yield and making assumptions
about them. The assumptions and model used for
estimating fair value for share based payment transactions
are disclosed in Note 19.
(II) RETIREMENT BENEFITS
The Group operates a defined contribution pension scheme.
Contributions payable for the year are charged to the
statement of comprehensive income.
FINANCIAL STATEMENTS /79
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 1 ACCOUNTING POLICIES CONTINUED
(R) SEGMENT REPORTING
(L) PROVISIONS
Provisions are recognised when the Group has a legal
or constructive obligation as a result of past events, it is
more likely than not that an outflow of resources will be
required to settle the obligation, and the amount can be
reliably estimated.
A contingent asset or liability is disclosed in the notes to
the financial statements when an uncertainty exists and the
amount of the asset or liability cannot be reliably measured.
(M) TRADE AND OTHER PAYABLES
Trade and other payables are not interest bearing and are
stated at their nominal value, unless settled with shares as
per (J) (ii) above. The effect of discounting is immaterial.
(N) REVENUE
During the exploration phase, any revenue generated
from incidental sales is treated as a contribution towards
previously incurred costs and offset accordingly.
(O) OTHER INCOME
Other income is recognised in the statement of
comprehensive income as it accrues.
(P) FINANCING COSTS AND INCOME
(I) FINANCING COSTS
Financing costs comprise interest payable on borrowings
calculated using the effective interest rate method.
(II) FINANCE INCOME
Interest income is recognised in the statement of
comprehensive income as it accrues, using the effective
interest method.
(Q) TAXATION
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation
purposes. The following temporary differences are not
provided for: goodwill not deductible for tax purposes, the
initial recognition of assets or liabilities that affect neither
accounting nor taxable profit, and differences relating to
investments in subsidiaries to the extent that they will
probably not reverse in the foreseeable future. The amount
of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the reporting date. A deferred tax asset is recognised only to
the extent that it is probable that future taxable profits will be
available against which the asset can be utilised. Deferred tax
assets are reduced to the extent that it is no longer probable
that the related tax benefit will be realised.
80/ SOLGOLD ANNUAL REPORT 2018
The Group determines and presents operating segments
based on information that is internally provided to the
Board of Directors, who are the Group’s chief operating
decision makers.
An operating segment is a component of the Group
that engages in business activities from which it may
earn revenues and incur expenses, including revenues
and expenses that relate to transactions with any of
the Group’s other components. An operating segment’s
operating results and asset position are reviewed regularly
by the Board to make decisions about resources to be
allocated to the segment and assess its performance,
for which discrete financial information is available.
Segment results that are reported to the Board include
items directly attributable to a segment, as well as those
that can be allocated on a reasonable basis. Unallocated
items comprise mainly corporate office assets, head office
expenses, and income tax assets and liabilities.
(S) BUSINESS COMBINATIONS
Business combinations occur where an acquirer obtains
control over one or more businesses and results in the
consolidation of its assets and liabilities.
Business combinations are accounted for by applying
the acquisition method, unless it is a combination
involving entities or businesses under common control.
The acquisition method requires that for each business
combination one of the combining entities must be
identified as the acquirer (i.e. parent entity). The business
combination will be accounted for as at the acquisition date,
which is the date that control over the acquiree is obtained
by the parent entity. At this date, the parent shall recognise,
in the consolidated accounts, and subject to certain limited
exceptions, the fair value of the identifiable assets acquired
and liabilities assumed. In addition, contingent liabilities of
the acquiree will be recognised where a present obligation
has been incurred and its fair value can be reliably measured.
The acquisition may result in the recognition of goodwill or
a gain from a bargain purchase. The method adopted for the
measurement of goodwill will impact on the measurement
of any non-controlling interest to be recognised in the
acquiree where less than 100% ownership interest is held in
the acquiree.
The acquisition date fair value of the consideration
transferred for a business combination plus the acquisition
date fair value of any previously held equity interest shall
form the cost of the investment in the separate financial
statements. Consideration may comprise the sum of the
assets transferred by the acquirer, liabilities incurred by the
acquirer to the former owners of the acquiree and the equity
interests issued by the acquirer.
Fair value uplifts in the value of pre-existing equity holdings
on acquisition are taken to the statement of comprehensive
income. Where changes in the value of such equity holdings
had previously been recognised in other comprehensive
income, such amounts are recycled to profit or loss on
disposal of the interest.
Included in the measurement of consideration transferred
is any asset or liability resulting from a contingent
consideration arrangement. Any obligation incurred relating
to contingent consideration is classified as either a financial
liability or equity instrument, depending upon the nature
of the arrangement. Rights to refunds of consideration
previously paid are recognised as a receivable. Subsequent
to initial recognition, contingent consideration classified
as equity is not remeasured and its subsequent settlement
is accounted for within equity. Contingent consideration
classified as an asset or a liability is remeasured at each
reporting period to fair value through the statement of
comprehensive income unless the change in value can be
identified as existing at acquisition date.
All transaction costs incurred in relation to the
business combination are expensed to the statement
of comprehensive income.
(T) PROJECT FINANCING / FARM-OUTS
The Group, from time to time, enters into funding
arrangements with third parties in order to progress specific
projects. The Group accounts for the related exploration
costs in line with the terms of the specific agreement. Costs
incurred by SolGold plc are recognised as intangible assets
within the financial statements. Costs incurred by third
parties are not recognised by SolGold plc.
(U) LEASES
Leased assets are depreciated on a straight-line basis over
the shorter of their estimated useful lives or the lease term.
Lease payments for operating leases, where substantially all
the risks and benefits remain with the lessor, are charged as
expenses on a straight-line basis over the period of the lease.
CLASSIFICATION AND SUBSEQUENT MEASUREMENT
(i) Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market and are subsequently measured at
amortised cost using the effective interest rate method.
(ii) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are
financial assets held for trading. A financial asset is classified
in this category if acquired principally for the purpose of
selling in the short term. Derivatives are classified as held
for trading unless they are designated as hedges. Assets in
this category are classified as current assets. These assets are
measured at fair value with gains or losses recognised in the
profit or loss.
(iii) Available-for-sale financial assets
Available-for-sale financial assets comprise investments
in listed and unlisted entities and non-derivatives that are
either designated in this category or not classified in any
other categories. After initial recognition, these investments
are measured at fair value with gains or losses recognised in
other comprehensive income.
(iv) Financial liabilities
Non-derivative financial liabilities (excluding financial
guarantees) are subsequently measured at amortised
cost using the effective interest rate method.
(v) Derivatives
Derivative financial instruments, consisting of embedded
conversion options in convertible loan notes, are initially
measured at fair value on the contract date and are re-
measured to fair value at subsequent reporting dates.
Changes in the fair value of derivative financial instruments
are recognised in profit or loss as they arise.
FAIR VALUE
(V) FINANCIAL INSTRUMENTS
RECOGNITION AND INITIAL MEASUREMENT
Financial instruments, incorporating financial assets and
financial liabilities, are recognised when the entity becomes
a party to the contractual provisions of the instrument.
Fair value is determined based on current bid prices for all
quoted investments. Valuation techniques are applied to
determine the fair value of all other financial assets and
liabilities, where appropriate, including recent arm’s length
transactions, reference to similar instruments and option
pricing models.
Financial instruments are initially measured at fair value plus
transactions costs where the instrument is not classified as
at fair value through profit or loss. Transaction costs related
to instruments classified as at fair value through profit or
loss are expensed to profit or loss immediately. Financial
instruments are classified and measured as set out below.
FINANCIAL STATEMENTS /81
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 1 ACCOUNTING POLICIES CONTINUED
(I) SUBSIDIARY INVESTMENTS
(V) FINANCIAL INSTRUMENTS CONTINUED
DERECOGNITION
Financial assets are derecognised where the contractual
rights to receipt of cash flows expires or the asset is
transferred to another party whereby the entity no longer
has any significant continuing involvement in the risks
and benefits associated with the asset. Financial liabilities
are derecognised where the related obligations are either
discharged, cancelled or expire. The difference between
the carrying value of the financial liability extinguished
or transferred to another party and the fair value of
consideration paid, including the transfer of non-cash
assets or liabilities assumed, is recognised in profit or loss.
IMPAIRMENT OF FINANCIAL ASSETS
An assessment is made at each reporting date to determine
whether there is objective evidence that a specific financial
asset or a group of financial assets may be impaired. If such
evidence exists, the estimated recoverable amount of that
asset is determined from available information such as
quoted market prices or by calculating the net present value
of future anticipated cash flows. In estimating these cash
flows, management makes judgements about a counter-
party’s financial situation and the net realisable value of any
underlying collateral. Impairment losses are recognised in
the profit or loss.
Impairment losses on assets measured at amortised cost
using the effective interest rate method are calculated by
comparing the carrying value of the asset with the present
value of estimated future cash flows at the original effective
interest rate.
Where there is objective evidence that an available for sale
financial asset is impaired (such as a significant or prolonged
decline in the fair value of an available for sale financial
asset) the cumulative loss that has been recognised in other
comprehensive income is reclassified from equity to profit
or loss as a reclassification adjustment. When a subsequent
event reduces the impairment of an available for sale debt
security the impairment loss is reversed through profit or
loss. When a subsequent event reduces the impairment
of an available for sale equity instrument the fair value
increased is recognised in other comprehensive income.
(W) ACCOUNTING POLICIES FOR THE COMPANY
The accounting policies applied to the Company are
consistent with those adopted by the Group with the
exception of the following:
82/ SOLGOLD ANNUAL REPORT 2018
Investments in subsidiary undertakings are stated at cost
less impairment losses. Expenditure incurred by plc on
behalf of a subsidiary, and where the subsidiary does not
reimburse the Company for assets that could be capitalised
in accordance with IFRS 6, is recorded within investments in
subsidiary undertakings.
(X) NATURE AND PURPOSE OF RESERVES
(I) AVAILABLE FOR SALE FINANCIAL ASSETS RESERVE
Changes in the fair value and exchange differences arising
on translation of investments, such as equities, classified as
available for sale financial assets, are recognised in other
comprehensive income and accumulated in a separate
reserve within equity. Amounts are reclassified to profit or
loss when the associated assets are sold or impaired.
(II) SHARE OPTION RESERVE
The share based payments reserve is used to recognise:
• the grant date fair value of options issued to employees
but not exercised; and
• the grant date fair value of shares issued to employees.
(III) CHANGE IN PROPORTIONATE INTEREST RESERVE
This reserve is used to record the differences which may arise
as a result of transactions with non controlling interests that
do not result in a loss of control.
(IV) FOREIGN CURRENCY TRANSLATION RESERVE
Exchange differences arising on translation of foreign
controlled entities are recognised in other comprehensive
income and accumulated in a separate reserve within equity.
The cumulative amount is reclassified to profit or loss when
the net investment is disposed of.
(V) OTHER RESERVES
This reserve is used to adjust the pension liability to fair
value for the defined benefit pension plan maintained for
the Group’s employees in Ecuador.
(Y) CHANGES IN ACCOUNTING POLICIES
NEW STANDARDS AND AMENDMENTS IN THE YEAR
The following were amendments to published standards
and interpretations to existing standards effective in the
year and adopted by the Group. These new standards and
interpretations had no effect on reported results, financial
position or disclosure in the financial statements:
• Amendment to IAS 12, ‘Income taxes’, regarding
recognition of deferred tax assets for unrealised losses’.
• Amendment to IAS 7, ‘Cash flow statements’, regarding
the Disclosure initiative.
• Annual improvements 2014-2016 IFRS 12, ‘Disclosure of
interests in other entities’.
1 January 2018
1 January 2018
1 January 2018
1 January 2019
1 January 2021
NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
The Group has elected not to early adopt the following revised and amended standards, which are not yet mandatory in the
EU. They are also not yet mandatory in accordance with IFRSs as issued by the IASB. The list below includes only standards
and interpretations that could have an impact on the Consolidated Financial Statements of the Group.
EFFECTIVE PERIOD COMMENCING ON OR AFTER
Share based payments – classification and measurement of share based payment transactions
1 January 2018
IFRS 2
IFRS 9
Financial instruments
IFRS 15
Revenue from contracts with customers
IFRIC 221 Foreign currency transactions and advance considerations
IFRS 16
Leases
IFRS 171
Insurance contracts
1 Not yet adopted by the European Union
IFRS 9 Financial instruments
IFRS 16 Leases
The complete standard was issued in July 2014 including
the requirements previously issued and additional
amendments. The new standard replaces IAS 39 and
includes a new expected loss impairment model, changes to
the classification and measurement requirements of financial
assets as well as to hedge accounting. The new standard
becomes effective for financial years beginning on or after 1
January 2018. The Group does not expect a material impact
on its Consolidated Financial Statements by adopting this
standard during the financial year ending 30 June 2019.
IFRS 15 Revenue from contracts with customers
The new standard was issued in May 2014. IFRS 15
provides a single, principles-based model to be applied to
all contracts with customers. Generally, revenue will be
recognised when control of a good or service transfers to a
customer. Guidance is provided on topics such as the point
at which revenue is recognised, accounting for variable
consideration, costs of fulfilling and obtaining a contract
and various related matters. New disclosures regarding
revenue are also introduced.
The Group will apply the new standard from its application
date, 1 July 2018. Management has assessed the effects of
applying IFRS 15 on the Group’s financial statements and
has determined that, apart from providing more extensive
disclosures on the Group’s revenue transactions, the
application of IFRS 15 will not have an impact on the Group’s
financial statements. No cumulative impact is expected from
the initial implementation of IFRS 15 as the Group is still
currently in the exploration phase and has not generated
any revenues.
The new standard was issued in January 2016 replacing
the previous leases standard, IAS 17 Leases, and related
Interpretations. IFRS 16 establishes the principles for the
recognition, measurement, presentation and disclosure of
leases for the customer (‘lessee’) and the supplier (‘lessor’).
IFRS 16 eliminates the classification of leases as either
operating or finance as is required by IAS 17 and, instead,
introduces a single lessee accounting model requiring a
lessee to recognise assets and liabilities for all leases unless
the underlying asset has a low value or the lease term is
twelve months or less. This new standard applies to annual
reporting periods beginning on or after 1 January 2019.
Management has made a preliminary assessment of
the effects of applying IFRS 16 on the Group’s financial
statements and has determined that it is likely to have an
immaterial impact in the future periods.
IFRS 17 Insurance contracts
The new standard was issued in May 2017. IFRS 17 requires
a current measurement model, where estimates are
remeasured in each reporting period. The measurement
is based on the building blocks of discounted, probability-
weighted cash flows, a risk adjustment and a contractual
service margin. Management has made a preliminary
assessment of the effects of applying IFRS 17 on the Group’s
financial statements and has determined that it is likely to
have an immaterial impact in the future periods.
FINANCIAL STATEMENTS /83
NOTE 2 SEGMENT REPORTING
The Group determines and separately reports operating segments based on information that is internally provided to the
Board of Directors, who are the Group’s chief operating decision makers.
The Group has outlined below the separately reportable operating segments, having regard to the quantitative threshold
tests provided in IFRS 8, namely that the relative revenue, asset or profit / (loss) position of the operating segment equates
to 10% or more of the Group’s respective total. The Group reports information to the Board of Directors along company
lines. That is, the financial position of SolGold and each of its subsidiary companies is reported discreetly, together with an
aggregated Group total. Accordingly, each company within the Group that meets or exceeds the threshold tests outlined
above is separately disclosed below. The financial information of the subsidiaries that do not exceed the thresholds outlined
above, and is therefore not reported separately, is aggregated as Other Subsidiaries.
SHARE
BASED
PAYMENTS
A$
NON-
CURRENT
ASSET
ADDITIONS
A$
–
–
–
70,927,717
14,101,256
804,462
FINANCE
INCOME
A$
DEPRECIATION
A$
IMPAIRMENT
OF E&E
A$
LOSS FOR
THE YEAR
A$
ASSETS
A$
LIABILITIES
A$
31,882
–
(1,106,535) 120,947,506
6,810,450
30 JUNE 2018
Cascabel
project *
Other
Ecuadorian
projects
Other projects
–
211
66
Corporate
Total
677,615
677,892
– (18,097,829) 86,700,049
1,874,050 10,568,889
(8,112,898)
377,038 (19,683,060) 239,869,729
9,433,665 10,568,889
77,720,537
376,148
(395,447)
18,882,929
890
(83,249)
13,339,245
636,681
112,484
–
349
48,223
80,454
FINANCE
INCOME
A$
DEPRECIATION
A$
IMPAIRMENT
OF E&E
A$
LOSS FOR
THE YEAR
A$
ASSETS
A$
LIABILITIES
A$
SHARE
BASED
PAYMENTS
A$
NON-
CURRENT
ASSET
ADDITIONS
A$
30 JUNE 2017
Cascabel
project *
Other
Ecuadorian
projects
Other projects
Corporate
Total
–
–
69
–
69
–
–
858
35,855
36,713
–
–
(546,315)
49,132,923
1,783,879
–
16,590,892
(6,487)
3,355,760
17,310
(34,634)
12,495,730
186,211
8,408
–
–
3,355,760
484
–
(3,912,536)
101,729,194
762,677
2,239,533
12,944,385
17,310
(4,499,972) 166,713,607
2,741,175
2,239,533
32,891,521
*
The Cascabel project is held the subsidiary Exploraciones Novomining S.A. which is 15% owned by a non-controlling interest.
See further details of the subsidiary in note 9.
84/
FOR THE YEAR ENDED 30 JUNE 2018NOTES TO THE FINANCIAL STATEMENTS CONTINUEDSOLGOLD ANNUAL REPORT 2018 GEOGRAPHICAL INFORMATION
NON-CURRENT ASSETS
UK
Australia
Solomon Islands
Ecuador
The Group had no revenue during the current and prior year.
NOTE 3 OPERATING LOSS
The operating loss is stated after charging (crediting)
Auditors’ remuneration:
Amounts received or due and receivable by BDO (UK) for:
The audit of the Company’s annual accounts
The review of the Company’s interim accounts
Amounts received or due and receivable by related practices of BDO (UK) for:
The audit of subsidiary undertakings
Depreciation
Foreign exchange (gains)/losses
Share based payments
NOTE 4 STAFF NUMBERS AND COSTS
Corporate finance and administration
Technical
GROUP
2018
22
433
455
2017
17
238
255
The aggregate payroll costs of the average number of employees was:
Wages and salaries
Contributions to superannuation
Share based payments
Total staff costs
GROUP
2018
A$
14,900,722
52,535
10,568,889
25,522,146
2017
A$
5,454,825
54,320
2,239,533
7,748,678
2018
A$
–
2017
A$
–
17,418,251
24,726,686
–
136,395,807
153,814,058
–
51,366,835
76,093,521
GROUP
2018
A$
GROUP
2017
A$
257,945
55,584
117,627
–
62,532
79,714
80,454
(4,115,511)
10,568,889
36,713
1,032,010
2,239,533
COMPANY
2018
12
6
18
COMPANY
2018
A$
2,410,956
52,535
10,568,889
13,032,380
2017
12
3
15
2017
A$
1,240,536
54,320
2,239,533
3,534,389
Included within total staff costs is A$13,009,135 (2017: A$5,002,689) which has been capitalised as part of deferred
exploration costs.
FINANCIAL STATEMENTS /85
NOTE 5 REMUNERATION OF KEY MANAGEMENT PERSONNEL
BASIC ANNUAL
SALARY
A$
OTHER
BENEFITS1
A$
PENSIONS
A$
TOTAL
REMUNERATION
A$
2018
Directors
Nicholas Mather2 (highest paid Director)
Brian Moller2
Robert Weinberg
John Bovard
Craig Jones
James Clare
Other Key Management Personnel3
Total paid to Key Management Personnel
Other staff and contractors
Total
400,000
110,000
70,000
70,000
70,000
11,667
1,109,693
1,841,360
13,059,362
14,900,722
4,433,528
633,361
380,017
380,017
380,017
–
3,392,676
9,599,616
969,273
10,568,889
–
–
–
–
–
–
49,685
49,685
2,850
52,535
4,833,528
743,361
450,017
450,017
450,017
11,667
4,552,054
11,490,661
14,031,485
25,522,146
1
2.
3
Other Benefits represents the fair value of the share options granted during the year based on either the Black-Scholes model or Monte Carlo
Simulation considering the effects of the vesting conditions.
During the year Mr Mather and Mr Moller exercised a total of 2,600,000 options granted under the employee share option plan (2017: nil). The
nominal gain on the date of exercise of the share options was A$754,910.
Other Key Management Personnel consist of the aggregated remuneration of Karl Schlobohm (Company Secretary), Priy Jayasuriya (Chief
Financial Officer), Jason Ward (Chief Geologist), Benn Whistler (Technical Geologist), Eduardo Valenzuela (Study Manager) and Lazaro Roque-
Albelo (Latin Affairs Manager).
BASIC ANNUAL
SALARY
A$
OTHER
BENEFITS1
A$
PENSIONS
A$
TOTAL
REMUNERATION
A$
2017
Directors
Nicholas Mather (highest paid Director)
Brian Moller
Robert Weinberg2
John Bovard2
Scott A Caldwell
Craig Jones
Other Key Management Personnel3
Total paid to Key Management Personnel
Other staff and contractors
Total
416,667
50,000
50,000
50,000
39,028
16,667
956,524
1,578,886
4,040,645
5,619,531
–
–
–
–
–
–
181,473
181,473
2,058,061
2,239,534
–
–
–
–
–
–
52,144
52,144
459,832
511,976
416,667
50,000
50,000
50,000
39,028
16,667
1,190,141
1,812,503
6,558,537
8,371,040
1
2.
3
Other Benefits represents the fair value of the share options granted during the year based on either the Black-Scholes model or Monte Carlo
Simulation considering the effects of the vesting conditions.
During the year Mr Robert Weinberg and Mr John Bovard exercised a total of 1,760,000 options granted under the employee share option plan
(2016: nil). The nominal gain on the date of exercise of the share options was A$465,399.
Other Key Management Personnel consist of the aggregated remuneration of Karl Schlobohm (Company Secretary), Priy Jayasuriya (Chief
Financial Officer), Jason Ward (Chief Geologist), Benn Whistler (Technical Geologist) and Lazaro Roque-Albelo (Latin Affairs Manager).
During the year, A$49,685 employer’s social security costs (2017: A$52,144) were paid in respect of remuneration for key
management personnel.
86/
FOR THE YEAR ENDED 30 JUNE 2018NOTES TO THE FINANCIAL STATEMENTS CONTINUEDSOLGOLD ANNUAL REPORT 2018 NOTE 6 FINANCE INCOME AND COSTS
Interest income
Finance income
Interest cost
Finance costs
NOTE 7 TAX EXPENSE
GROUP
2018
A$
677,892
677,892
–
–
GROUP
2017
A$
69
69
(73,502)
(73,502)
FACTORS AFFECTING THE TAX CHARGE FOR THE CURRENT YEAR
The tax credit for the period is lower than the credit resulting from the application of the standard rate of corporation tax in
Australia of 30% (2017: 30%) being applied to the loss before tax arising during the year. The differences are explained below.
Tax reconciliation
Loss before tax
Tax at 30% (2017: 30%)
Add (less) tax effect of:
Permanent differences
Derecognise (Recognise) prior year losses
Prior period adjustments to true-up tax return
Other
GROUP
2018
A$
GROUP
2017
A$
(15,267,636)
(4,580,291)
(8,323,050)
(2,496,915)
3,194,567
6,365,927
(684,691)
119,912
670,818
(1,983,330)
–
(13,651)
Income tax (expense) benefit on loss
(4,415,424)
3,823,078
Components of tax (expense) / benefit on
other comprehensive income comprise of:
Valuation gains on available for sale investments (see note 14)
Income tax (expense) benefit on other comprehensive income
2,676,395
2,676,395
(3,823,078)
(3,823,078)
Amounts recognised directly in equity
Net deferred tax credited directly to equity
Income tax (expense) benefit recognised directly in equity
1,739,029
1,739,029
–
–
Deferred tax assets are recognised only to the extent of deferred tax liabilities. Where deferred tax assets exceed deferred
tax liabilities, deferred tax assets on carried forward tax losses are derecognised in the first instance.
FACTORS THAT MAY AFFECT FUTURE TAX CHARGES
The Group has carried forward gross tax losses of approximately A$173.1 million (2017: A$86.2 million). These losses may
be deductible against future taxable income dependent upon the on-going satisfaction by the relevant Group Company of
various tax integrity measures applicable in the jurisdiction where the tax loss has been incurred. The jurisdictions in which
tax losses have been incurred include Australia, Ecuador and the Solomon Islands. Tax losses in Australia can be carried
forward indefinitely while in Ecuador, tax losses may be carried forward and offset against profits in the following five years,
provided that the amount offset does not exceed 25% of the year’s profits.
FINANCIAL STATEMENTS /87
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 8 LOSS PER SHARE
Basic loss per share
Diluted loss per share
(A) LOSS
2018
2017
CENTS PER SHARE
CENTS PER SHARE
(1.2)
(1.2)
2018
A$
(0.3)
(0.3)
2017
A$
Loss used to calculate basic and diluted loss per share
(19,517,402)
(4,418,025)
(B) WEIGHTED AVERAGE NUMBER OF SHARES
Used in calculating basic LPS
Weighted average number of dilutive options
Weighted average number of ordinary shares and potential
ordinary shares used in calculating dilutive LPS
NOTE 9 INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
COUNTRY OF
INCORPORATION
AND OPERATION REGISTERED ADDRESS
Australian Resources
Management (ARM)
Pty Ltd
Acapulco
Mining Pty Ltd
Central
Minerals Pty Ltd
Solomon
Operations Ltd
Australia
Australia
Australia
Solomon Islands
Honiara Holdings
Pty Ltd
Australia
Guadalcanal
Exploration Pty Ltd
Australia
Level 27, 111 Eagle Street
Brisbane, QLD, 4000
Australia
Level 27, 111 Eagle Street
Brisbane, QLD, 4000
Australia
Level 27, 111 Eagle Street
Brisbane, QLD, 4000
Australia
c/- Morris & Sojnocki
Chartered Accountants
1st Floor
City Centre Building,
Mendana Avenue, Honiara
Solomon Islands
Level 27, 111 Eagle Street
Brisbane, QLD, 4000
Australia
Level 27, 111 Eagle Street
Brisbane, QLD, 4000
Australia
NUMBER OF
SHARES
NUMBER OF
SHARES
1,620,664,371
1,330,798,371
3,780,868
15,415,281
1,624,445,239
1,346,213,652
PRINCIPAL ACTIVITY
Exploration
SOLGOLD PLC’S
EFFECTIVE INTEREST
2018
100%
2017
100%
Exploration
100%
100%
Exploration
100%
100%
Exploration
100%
100%
Exploration
100%
100%
Exploration
100%
100%
88/ SOLGOLD ANNUAL REPORT 2018
COUNTRY OF
INCORPORATION
AND OPERATION REGISTERED ADDRESS
Exploraciones
Novomining S.A.
Ecuador
Carnegie Ridge
Resources S.A.
Ecuador
Green Rock
Resources S.A.
Ecuador
Valle Rico
Resources S.A.
Ecuador
Cruz Del Sol S.A.
Ecuador
Avenida La Coruña E25-58 y
San Ignacio, Edificio Altana
Plaza piso 4, oficina 406 Quito
Ecuador
Avenida La Coruña
E25-58 y San Ignacio,
Edificio Altana Plaza piso 4,
oficina 406 Quito Ecuador
Avenida La Coruña
E25-58 y San Ignacio,
Edificio Altana Plaza piso 4,
oficina 406 Quito Ecuador
Avenida La Coruña
E25-58 y San Ignacio,
Edificio Altana Plaza piso 4,
oficina 406 Quito Ecuador
Avenida La Coruña
E25-58 y San Ignacio,
Edificio Altana Plaza piso 4,
oficina 406 Quito Ecuador
SOLGOLD PLC’S
EFFECTIVE INTEREST
PRINCIPAL ACTIVITY
Exploration
2018
85%
2017
85%
Exploration
100%
100%
Exploration
100%
100%
Exploration
100%
100%
Exploration
100%
100%
Cost
Balance at 30 June 2016
Acquisitions and advances in the year
Balance at 30 June 2017
Acquisitions and advances in the year
Balance at 30 June 2018
Amortisation and impairment losses
Balance at 30 June 2016
Provision for impairment
Balance at 30 June 2017
Provision for impairment
Balance at 30 June 2018
Carrying amounts
Balance at 30 June 2016
Balance at 30 June 2017
Balance at 30 June 2018
INVESTMENT IN SUBSIDIARY UNDERTAKINGS
SHARES
A$
LOANS
A$
TOTAL
A$
14,004,879
4,208
14,009,087
512,372
14,521,459
75,485,290
24,152,857
99,638,147
81,613,444
181,251,591
89,490,169
24,157,065
113,647,234
82,125,816
195,773,050
(5,016,948)
(44,340,394)
(49,357,342)
–
–
–
(5,016,948)
(44,340,394)
(49,357,342)
–
–
–
(5,016,948)
(44,340,394)
(49,357,342)
8,987,931
8,992,139
9,504,511
31,144,896
55,297,753
136,911,197
40,132,827
64,289,892
146,415,708
/89
FINANCIAL STATEMENTS NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 10 INVESTMENTS
(A) INVESTMENTS ACCOUNTED FOR AS AVAILABLE-FOR-SALE ASSETS
GROUP
2018
A$
2017
A$
COMPANY
2018
A$
2017
A$
Movements in available-for-sale assets
Opening balance at 1 July
14,366,304
1,622,712
14,360,725
1,617,132
Additions
Fair Value adjustment through other
comprehensive income
–
–
–
–
(8,920,896)
12,743,593
(8,920,896)
12,743,593
Balance at 30 June
5,445,408
14,366,304
5,439,829
14,360,725
Available for sale financial assets comprise an investment in the ordinary issued capital of Cornerstone Capital Resources
Inc., listed on the Toronto Venture Exchange (“TSXV”) and an investment in the ordinary issued capital of Aus Tin Mining
Ltd, a company listed on the Australian Securities Exchange.
(B) FAIR VALUE
FAIR VALUE HIERARCHY
The following table details the consolidated entity’s assets and liabilities, measured or disclosed at fair value, using a three-
level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly.
Level 3: Unobservable inputs for the asset or liability.
The fair values of financial assets and financial liabilities approximate their carrying amounts principally due to their short-
term nature or the fact that they are measured and recognised at fair value.
The following table represents the Group’s financial assets and liabilities measured and recognised at fair value.
LEVEL 1
A$
LEVEL 2
A$
LEVEL 3
A$
TOTAL
A$
2018
Available for sale financial assets
5,445,408
2017
Available for sale financial assets
14,360,725
–
–
–
–
5,445,408
14,360,725
The available for sale financial assets are measured based on the quoted market prices at 30 June.
90/ SOLGOLD ANNUAL REPORT 2018
NOTE 11 PROPERTY, PLANT AND EQUIPMENT
GROUP
COMPANY
LAND AND
BUILDINGS
A$
PLANT AND
EQUIPMENT
A$
MOTOR
VEHICLES
A$
OFFICE
EQUIPMENT
A$
FURNITURE
& FITTINGS
A$
TOTAL
A$
TOTAL
A$
Cost
Balance 30 June 2016
Effect of foreign exchange
on opening balance
Additions
Disposals
–
–
–
–
315,684
272,103
171,389
84,262
843,438
64,522
–
(6,311)
(5,984)
(2,545)
(1,857)
(16,697)
194,440
426,762
587,227
201,184
178,414
1,588,027
–
–
–
–
–
–
Balance 30 June 2017
194,440
736,135
853,346
370,028
260,819
2,414,768
280,270
Effect of foreign exchange
on opening balance
Additions
Disposals
7,457
4,674
29,768
10,322
8,540
60,761
–
1,421,529
545,912
653,818
399,641
88,374
3,109,274
16,999
–
–
(47,488)
–
–
(47,488)
–
Balance 30 June 2018
1,623,426
1,286,721
1,489,444
779,991
357,733
5,537,315
297,269
Depreciation and impairment losses
Balance 30 June 2016
Effect of foreign exchange
on opening balance
Depreciation charge for the year
Depreciation capitalised to
exploration
Disposals
Balance 30 June 2017
Effect of foreign exchange
on opening balance
Depreciation charge for the year
Depreciation capitalised
to exploration
Disposals
Balance 30 June 2018
Carrying amounts
At 30 June 2016
At 30 June 2017
At 30 June 2018
–
–
–
–
–
–
–
–
–
–
–
(173,904)
(135,729)
(129,067)
(29,338)
(468,038)
(55,073)
1,764
(29,625)
1,908
(397)
1,579
(5,544)
262
5,513
–
(1,147)
(36,713)
(35,855)
(47,314)
(40,809)
(26,299)
(23,171)
(137,593)
–
–
–
–
–
–
–
(249,079)
(175,027)
(159,331)
(53,394)
(636,831)
(90,926)
7,237
(3,755)
(41,013)
–
(2,799)
(37,250)
(541)
142
–
(2,191)
(80,454)
(48,222)
(116,689)
(269,731)
(129,754)
(53,661)
(569,835)
–
27,701
–
–
27,701
(399,544)
(420,812)
(329,134)
(109,787)
(1,259,277)
(139,148)
141,780
136,374
42,322
54,924
375,400
9,449
194,440
487,056
678,319
1,623,426
887,177
1,068,632
210,697
450,857
207,425
1,777,937
189,342
247,946
4,278,038
158,121
/91
FINANCIAL STATEMENTS NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 12 INTANGIBLE ASSETS
Cost
Balance 30 June 2016
Effect of foreign exchange on opening balances
Additions – expenditure
Balance 30 June 2017
Effect of foreign exchange on opening balances
Additions – expenditure
Balance 30 June 2018
Impairment losses
Balance 30 June 2016
Impairment charge
Balance 30 June 2017
Impairment Charge
Balance 30 June 2018
Carrying amounts
At 30 June 2016
At 30 June 2017
At 30 June 2018
IMPAIRMENT LOSS
GROUP DEFERRED
EXPLORATION
COSTS
A$
COMPANY
DEFERRED
EXPLORATION
COSTS
A$
92,810,120
(888,701)
19,549,202
111,470,621
1,567,846
81,968,954
195,007,421
(51,730,206)
(17,310)
(51,747,516)
(377,038)
(52,124,554)
41,079,914
59,723,105
142,882,867
–
–
–
–
–
–
–
–
–
–
–
–
–
–
A decision was made to expense A$376,031 (2017: A$17,310) for exploration expenditure associated with other tenements
that were surrendered or lapsed during the year. A detailed assessment of the carrying values of deferred exploration costs is
provided below.
CASCABEL PROJECT (85% OWNERSHIP)
In Ecuador, the Group is advancing the Cascabel project, whilst continuing to pursue its strategy to become a globally
important copper company by expanding the Company’s copper-gold exploration portfolio in Ecuador.
At Cascabel, drilling continues to expand the growing world class deposit at Alpala and drilling to date has not yet
constrained the rich Alpala copper-gold deposit. Approximately 125,323m of diamond drilling has been completed on the
project to date.
Currently, 12 drill rigs are active on site, with 10 rigs drilling on the Alpala cluster, and two drilling at the Aguinaga prospect.
The Cascabel drill program for calendar 2018 comprises over 120,000m of planned drilling focussing on extending and
infilling the Alpala Resource, as well as further drill testing of the Aguinaga prospect. Numerous other untested targets
remain, namely at Trivinio, Moran, Cristal, Tandayama-America and Chinambicito, some of which will also be drilled by the
end of calendar 2018.
In January 2018, SolGold announced a maiden Mineral Resource Estimate (MRE) at Alpala, completed from 53,616m of
drilling reported in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards
for Mineral Resources and Mineral Reserves (May 2014).
92/ SOLGOLD ANNUAL REPORT 2018
The Alpala maiden mineral resource estimate totals a current 430 Mt @ 0.8% CuEq (at 0.3% CuEq cut off) in the Indicated
category, and 650 Mt @ 0.6% CuEq (at 0.3% CuEq cut off) in the Inferred category; contained metal content of 2.3 Mt Cu in
the Indicated category and 2.9 Mt Cu in the Inferred category; and contained metal content of 6.0 Moz Au in the Indicated
category and 6.3 Moz Au in the Inferred category.
Assay results from the initial 53,616m of drilling at Alpala were incorporated into the Alpala maiden Mineral Resource
Estimate (MRE) completed in December 2017 and announced on 3 January 2018. That meterage represents approximately
43% of the 125,323m currently drilled on the project at 30 June 2018. There remains strong potential for further growth from
the more recent drilling results and continued rapid growth of the deposit.
There are no indicators of impairment for the aggregate carrying value of A$112.79 million.
SOLGOLD 100% OWNED PROJECTS
NEW CONCESSIONS GRANTED FOR 100% SOLGOLD ECUADOR SUBSIDIARIES
As at 30 June 2018 SolGold holds a 100% interest in 72 concessions through its Ecuadorian subsidiary companies, Carnegie
Ridge Resources S.A., Cruz del Sol S.A., Green Rock Resources S.A. and Valle Rico Resources S.A. These concessions are
located on the gold-rich northern section of the prolific Andean Copper belt which is renowned as the production base for
nearly half of the world’s copper.
During the financial year ended 30 June 2018, exploration activity has continued at a rapid pace with 39 national geologists
operating in ten field teams. Exploration activities have continued the initial evaluation of the SolGold regional concessions.
Activities included stream sediment sampling, heavy panned concentrate collection and Anaconda-style mapping and rock
chip sampling of all streams within each concession. Led by highly experienced senior geologists, field teams have made
initial evaluation of 71% of all granted concessions.
During the year, exploration activities have been transitioning to detailed follow-up mapping and rock chip sampling of
priority areas. From the detailed follow-up work conducted, SolGold has currently identified a total of 10 priority projects
will progress these to the next phase of exploration. SolGold has established experienced teams of social and environmental
personnel focussed on obtaining government and community permissions to conduct advanced exploration activities for the
priority exploration prospects.
The new Ecuadorean projects have a carrying value of A$16.87 million at 30 June 2018 and are considered to be unimpaired.
ACAPULCO MINING PROJECTS
Acapulco has three granted tenements across Queensland. The granted tenements comprise of 232 sub-blocks (circa 718km2).
Extensive airborne magnetic and electromagnetic surveys have been conducted over some of the tenements, together with
detailed stream sediment sampling, soil sampling, rock chip sampling and geological mapping programs. Furthermore, since
May 2006 a total of 288 holes, equivalent to 24,895.8m have been drilled on the tenements.
Drill testing of porphyry style copper-gold mineralisation at the Normanby Project, in northern Queensland was completed.
A total of 518m of RC drilling from 7 RC drill holes and 89.2m of diamond coring from 1 drill holes was completed. A
significant vertical mineralised structure was intersected in holes MFT19, and MFT17, and a separate shallow dipping zone of
mineralisation was also discovered in holes MFT24 and MFT014. Assay results returned the following highlights:
• 14m @ 5.3 g/t Au from 58m depth (MFT019);
• 28m @ 1.1 g/t Au, from 40m depth, including 10m @ 2.3 g/t Au (MFT020); and
• 28m @ 1.2 g/t Au from surface (MFT022).
There are no indicators of impairment for the aggregate carrying value of A$9.01 million.
FINANCIAL STATEMENTS /93
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 12 INTANGIBLE ASSETS CONTINUED
SOLGOLD 100% OWNED PROJECTS CONTINUED
CENTRAL MINERALS PROJECTS
Central Minerals comprises of seven granted tenements which is comprised of 280 sub-blocks (circa 886km2).
Extensive airborne magnetic surveys have been conducted over the area, together with detailed soil and rock chip sampling,
trenching, mapping programs and an induced polarisation geophysical survey. Since October 2007, a total of 473 holes,
equivalent to 58,886.6m, have been drilled on the tenements.
On 23 May 2012, SolGold announced an updated indicated and inferred combined resource at Rannes at an 0.3 g/t Au cut-
off of 18.7 million tonnes at 0.92 g/t gold equivalent (gold + silver) for 550,000 ounces of gold equivalent (296,700 ounces of
gold and 10,139,000 ounces of silver; values rounded). The resource at a 0.5 g/t Au cut-off is 12.23 million tonnes at 0.60g/t
gold and 23.18g/t silver; for 237,240 ounces Au and 9,105,072 ounces Ag (using a gold to silver ratio of 1:50). Several other
prospects exist that contain known gold mineralisation that has not yet been included in the resource estimate.
Exploration activities for the year ended 30 June 2018 included the drilling of two holes (RC pre-collar with diamond tail)
totalling 589.8m of drilling and VTEM (Versatile Time Domain Electromagnetic) airborne geophysics survey
The two diamond holes were drilled under the thickest part of the Crunchie deposit to:
• test for mineralisation under magnetic anomalies;
•
•
identify mineralisation associated with soil anomalies; and
identify electromagnetic targets for further exploration.
Preliminary analysis of the VTEM (flown in mid-June) show conductors offset to the south-west of the surface
mineralisation, suggesting the potential for sulphide zones down the south-westerly dipping thrust faults. Also, a large
conductor lies under an undrilled gold silver soil anomaly in a poorly exposed area in the far south-west of the survey.
Further analysis of the VTEM with existing data will form the basis of further work in 2018/2019.
There are no indicators of impairment for the aggregate carrying value of A$4.21 million.
NOTE 13 LOAN RECEIVABLES AND OTHER NON-CURRENT ASSETS
Security bonds
GROUP
COMPANY
2018
A$
1,207,745
1,207,745
2017
A$
226,175
226,175
2018
A$
923,879
923,879
2017
A$
90,137
90,137
Security bonds relate to cash security held against office premises, Level 27, 111 Eagle St, Brisbane, Queensland Australia,
cash security held by Queensland Department of Natural Resources and Mines against Queensland exploration tenements
held by the Group and on cash backed bank guarantees held by the Ecuadorian Ministry of Environment against Ecuadorian
exploration tenements held by the Group.
94/ SOLGOLD ANNUAL REPORT 2018
NOTE 14 DEFERRED TAXATION
RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
GROUP
2018
OPENING
BALANCE
A$
NET
CHARGED
TO INCOME
A$
NET CHARGED
TO OTHER
COMPREHENSIVE
INCOME
A$
NET
CHARGED
TO EQUITY
A$
NET
MOVEMENT
ON UNWIND
/ TRANSFER
A$
CLOSING
BALANCE
A$
Recognised deferred tax assets
Carried forward tax losses
Accruals / provisions
Potential benefit
16,227,631
314,852
16,542,483
12,086,958
(77,806)
12,009,152
Recognised deferred tax liabilities
Available for sale financial assets
Exploration and evaluation assets
Foreign exchange gains/losses
Potential benefit
(3,823,078)
(12,719,405)
–
(16,542,483)
–
(15,502,122)
(922,454)
(16,424,576)
–
–
–
–
1,739,029
1,739,029
2,676,395
–
–
2,676,395
–
–
–
–
Net deferred taxes
–
(4,415,424)
2,676,395
1,739,029
Deferred tax assets not recognised
Unused tax losses
Unused capital losses
Temporary differences1
Tax benefit
6,701,410
–
12,107,126
18,808,536
7,841,697
–
–
7,841,697
–
–
–
–
–
–
–
–
–
–
–
28,214,589
1,976,015
30,290,664
(1,146,683)
–
(28,221,527)
–
–
(922,454)
– (30,290,664)
–
–
–
–
–
–
14,543,107
–
12,107,126
26,650,233
1
Exploration expenditure incurred in the Solomon Islands that has been expensed. This is expenditure is deductible over 5 years from when
production commences.
GROUP
2017
OPENING
BALANCE
A$
NET
CHARGED
TO INCOME
A$
NET CHARGED
TO OTHER
COMPREHENSIVE
INCOME
A$
NET
CHARGED
TO EQUITY
A$
NET
MOVEMENT
ON UNWIND
/ TRANSFER
A$
CLOSING
BALANCE
A$
Recognised deferred tax assets
Carried forward tax losses
Accruals / provisions
Potential benefit
9,341,373
–
9,341,373
6,886,258
314,852
7,201,110
–
–
–
Recognised deferred tax liabilities
Available for sale financial assets
Exploration and evaluation assets
Potential benefit
–
(9,341,373)
(9,341,373)
–
(3,378,032)
(3,378,032)
(3,823,078)
–
(3,823,078)
Net deferred taxes
–
3,823,078
(3,823,078)
Deferred tax assets not recognised
Unused tax losses
Unused capital losses
Temporary differences1
Tax benefit
11,655,562
–
12,107,126
7,128,806
(4,954,152)
–
–
(1,486,246)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16,227,631
314,852
16,542,483
(3,823,078)
–
–
(12,719,405)
– (16,542,483)
–
–
–
–
–
–
6,701,410
–
12,107,126
5,642,561
1
Exploration expenditure incurred in the Solomon Islands that has been expensed. This expenditure is deductible over 5 years from when
production commences.
FINANCIAL STATEMENTS /95
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 14 DEFERRED TAXATION CONTINUED
RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES CONTINUED
COMPANY
2018
Recognised deferred tax assets
Carried forward tax losses
Accruals / provisions
Potential benefit
Recognised deferred tax liabilities
Available for sale financial assets
Exploration and evaluation assets
Potential benefit
Net deferred taxes
Deferred tax assets not recognised
Unused tax losses
Unused capital losses
Temporary differences
Tax benefit
COMPANY
2017
Recognised deferred tax assets
Carried forward tax losses
Accruals / provisions
Potential benefit
Recognised deferred tax liabilities
Available for sale financial assets
Exploration and evaluation assets
Potential benefit
Net deferred taxes
Deferred tax assets not recognised
Unused tax losses
Unused capital losses
Temporary differences
Tax benefit
OPENING
BALANCE
A$
NET CHARGED
TO INCOME
A$
3,823,078
(2,676,395)
3,823,078
(2,676,395)
NET CHARGED
TO OTHER
COMPREHENSIVE
INCOME
A$
–
–
CLOSING
BALANCE
A$
1,146,683
1,146,683
(3,823,078)
–
(3,823,078)
–
–
–
2,676,395
(1,146,683)
–
–
2,676,395
(1,146,683)
–
(2,676,395)
2,676,395
–
10,624,572
7,601,417
–
–
–
–
3,187,372
2,280,425
–
–
–
–
OPENING
BALANCE
A$
NET CHARGED
TO INCOME
A$
NET CHARGED
TO OTHER
COMPREHENSIVE
INCOME
A$
3,823,078
–
3,823,078
–
–
–
18,225,989
–
–
5,467,797
CLOSING
BALANCE
A$
3,823,078
–
3,823,078
–
–
–
–
(3,823,078)
(3,823,078)
–
–
(3,823,078)
(3,823,078)
–
–
–
–
–
–
10,624,572
–
–
3,187,372
11,525,379
(900,807)
–
–
–
–
3,457,614
(270,242)
–
–
–
–
–
–
–
The deferred tax asset in respect of these items has not been recognised as future taxable profit is not anticipated within the
foreseeable future.
96/ SOLGOLD ANNUAL REPORT 2018
NOTE 15 OTHER RECEIVABLES AND PREPAYMENTS
Other receivables
Prepayments
Other current assets
GROUP
COMPANY
2018
A$
3,912,807
317,247
–
4,230,054
2017
A$
1,086,332
90,920
130,092
1,307,344
2018
A$
229,954
316,932
–
546,886
2017
A$
689,248
90,920
–
780,168
SolGold elected to undertake the Optional Subscription under the terms of the Term Sheet (Term Sheet) signed between
SolGold plc and Cornerstone Capital Resources Inc. (CGP), CGP’s subsidiary Cornerstone Ecuador S.A.,(CESA) and
Exploraciones Novomining S.A., (ENSA) and holds an aggregate registered and beneficial equity position in ENSA of 85%
under the terms of the Term Sheet . CGP and CESA elected to obtain the benefit of the Financing Option whereby SolGold
will solely fund all operations and activities of ENSA until the completion of a Feasibility Study, including CESA’s contribution
as the registered and beneficial holder of an aggregate equity position in ENSA of 15%. After completion and delivery of
the Feasibility Study, SolGold and CESA shall jointly fund the operations and activities of ENSA based on their respective
equity positions in ENSA’s on a proportionate basis. Furthermore, the Term Sheet allows for SolGold to be fully repaid for the
financing provided, including interest at LIBOR plus 2% for the expenditures incurred by SolGold from the time CGP and
CESA elected the Financing Option and the completion of the First Phase Drill Program (FPDP). SolGold is to be repaid out of
90% of CESA’s distribution of earnings or dividends from ENSA or the Cascabel Tenement to which CESA would otherwise be
entitled. If CESA does not elect to contribute and its equity stake in ENSA is diluted to below 10%, its equity stake in ENSA will
be converted to a 0.5% interest in the Net Smelter Return and SolGold may acquire this interest for US$3.5 million at any time.
The amount receivable from CESA at 30 June 2018 was $16,827,186 (2017: $6,500,420). As there is uncertainty as to whether
ENSA will be able to distribute earnings or dividends, a provision for doubtful debts has been recognised on the entire
amount receivable from CESA.
Other receivables represent Australian Goods and Services Tax receivable, advances made to landowners in Ecuador for
land purchases and in the prior year funds receivable from the exercise of share options. A provision for impairment loss is
recognised when there is objective evidence that an individual receivable is impaired. No impairment loss has been recorded
for the current and previous financial year.
NOTE 16 CASH AND CASH EQUIVALENTS
GROUP
2018
A$
2017
A$
COMPANY
2018
A$
2017
A$
Cash at bank
81,825,617
89,312,743
79,628,278
88,669,626
Cash and cash equivalents
in the statement of cash flows
81,825,617
89,312,743
79,628,278
88,669,626
The Group and Company do not have any loans or borrowings and therefore there are no changes in liabilities arising from
financing activities to be disclosed in the cash flow statement.
/97
FINANCIAL STATEMENTS NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 17 ALLOTTED, CALLED-UP AND FULLY PAID SHARE CAPITAL AND RESERVES
(A) AUTHORISED SHARE CAPITAL
At 1 July 2016 – Ordinary shares
Increase in authorised share capital of £0.01 each on 13 October 2016
At 30 June 2017 – Ordinary shares
At 1 July 2017 – Ordinary shares
Increase in authorised share capital of £0.01 each on 30 January 2018
At 30 June 2018 – Ordinary shares
2017
NO. OF SHARES
2017
NOMINAL VALUE £
1,420,000,000
600,000,000
2,020,000,000
14,200,000
6,000,000
20,200,000
2018
NO. OF SHARES
2018
NOMINAL VALUE £
2,020,000,000
735,024,500
2,755,024,500
20,200,000
7,350,245
27,550,245
Ordinary shares participate in dividends and the proceeds on winding up the Company in proportion to the number of
shares held. At shareholder meetings each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on show of hands.
(B) CHANGES IN ALLOTTED, CALLED-UP AND FULLY PAID SHARE CAPITAL AND SHARE PREMIUM
Ordinary shares of 1p each at 30 June 16
Shares issued at £0.06 – Placement 28 August 20161
Share issue costs charged to share premium account
Shares issued at £0.13 – Placement 17 October 20162
Share issue costs charged to share premium account
Shares issued at £0.14 – Exercise of options 17 January 2017
Shares issued at £0.30 – Newcrest share issue 31 January 2017
Shares issued at £0.14 – Exercise of options 3 February 2017
Shares issued at £0.14 – Exercise of options 21 February 2017
Shares issued at £0.38 – Newcrest share issue 1 March 2017
Shares issued at £0.41 – Placement 16 June 2017
Share issue costs charged to share premium account
Shares issued at £0.14 – Exercise of options 26 June 2017
Shares issued at £0.28 – Exercise of options 26 June 2017
Ordinary shares of 1p at 30 June 2017
NO. OF
SHARES
953,897,601
268,819,004
–
206,250,000
–
900,000
100,000
1,200,000
900,000
240,000
78,889,081
–
880,000
880,000
1,512,955,686
NOMINAL
VALUE
A$
17,015,019
4,654,961
–
3,298,144
–
14,499
1,660
19,804
14,582
3,885
1,324,161
–
14,775
14,775
26,376,265
SHARE
PREMIUM
A$
87,488,507
23,274,286
(4,696,253)
40,426,856
(1,706,552)
178,820
47,949
257,457
189,646
145,201
53,197,804
(72,269)
192,070
398,914
199,322,436
TOTAL
A$
104,503,526
27,929,248
(4,696,253)
43,725,000
(1,706,552)
193,319
49,609
277,261
204,228
149,086
54,521,966
(72,269)
206,844
413,688
225,698,701
1
Includes the conversion of the DGR Global Ltd loan of A$5,700,000, conversion of capital raising costs of A$1,221,614, other debt conversions of
A$86,359 and bonus shares issued to certain staff of A$519,481 as part of the share placement.
2
Includes conversion of capital raising costs of A$1,660,751 as part of the share placement.
Ordinary shares of 1p each at 1 July 2017
Shares issued at £0.14 – Exercise of options 7 July 2017
Shares issued at £0.28 – Exercise of options 7 July 2017
Shares issued at £0.38 – Newcrest share issue 11 August 2017
Shares issued at £0.25 – Placement 30 November 2017
Share issue costs charged to share premium account
Ordinary shares of 1p at 30 June 2018
98/ SOLGOLD ANNUAL REPORT 2018
NO. OF
SHARES
1,512,955,686
1,300,000
1,300,000
690,000
180,000,000
–
1,696,245,686
NOMINAL
VALUE
A$
26,376,265
21,978
21,978
11,366
3,081,976
–
29,513,563
SHARE
PREMIUM
A$
199,322,436
285,709
593,396
422,377
73,967,429
(1,957,490)
272,633,857
TOTAL
A$
225,698,701
307,687
615,374
433,743
77,049,405
(1,957,490)
302,147,420
CAPITAL MANAGEMENT
Management controls the capital of the Group in order to generate long-term shareholder value and ensure that the Group
can fund operations and continue as a going concern. Management effectively manages the Group’s capital by assessing
the Group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These
responses include share issues and debt considerations. Given the nature of the Group’s current activities the entity will
remain dependant on equity funding in the short to medium term until such time as the Group becomes self-financing from
the commercial production of mineral resources.
NOTE 18 TRADE AND OTHER CURRENT PAYABLES
Current
Trade payables
Other payables
Accrued expenses
GROUP
2018
A$
3,023,403
1,999,965
4,410,297
9,433,665
2017
A$
569,569
1,950,716
220,890
2,741,175
COMPANY
2018
A$
1,453,696
112,372
307,980
1,874,048
2017
A$
437,409
228,603
94,362
760,374
Increase in trade payable is due to the increased exploration activity on the Cascabel project as well as initial exploration
carried out on the 72 regional exploration projects.
Increase in accrued expenses for the Group represents amounts recognised for metres drilled but not invoiced. The Group
had 12 drill rigs on the Cascabel project in 2018 compared to 2 drill rigs in 2017.
NOTE 19 SHARE OPTIONS
At 30 June 2018 the Company had 88,353,768 options outstanding for the issue of ordinary shares (2017: 44,191,768).
OPTIONS
Share options are granted to employees under the Company’s Employee Share Option Plan (“ESOP”). The employee share
option plan is designed to align participants’ interests with those of shareholders.
Unless otherwise documented with the Company, when a participant ceases employment prior to the vesting of their
share options, the share options are forfeited after 90 days unless cessation of employment is due to termination for
cause, whereupon they are forfeited immediately. The Company prohibits key management personnel from entering into
arrangements to protect the value of unvested ESOP awards.
The contractual life of each option granted is generally two (2) to three (3) years. There are no cash settlement alternatives.
Each option can be exercised from vesting date to expiry date for one share with the exercise price payable in cash.
SHARE OPTIONS ISSUED
There were 46,762,000 options granted during the year ended 30 June 2018 (2017: 41,591,768).
On 9 August 2017, the Company issued a total of 10,012,000 unlisted options to certain employees and contractors. The
options have a strike price of £0.60 each and are exercisable once vested through to 8 August 2020.
On 28 July 2017, the Company issued a total of 36,750,000 unlisted options to Directors. The options have a strike price of
£0.60 each and are exercisable once vested through to 8 August 2020.
On 28 October 2016, the Company issued a total of 22,000,000 unlisted options to employees and contractors. The options
have a strike price of £0.28 each and are exercisable once vested through to 28 October 2018.
On 17 October 2016, the Company issued an additional 19,591,768 unlisted options to Maxit Capital LP. The options consist
of two tranches of 9,795,884 options each exercisable at £0.14 and £0.28.
FINANCIAL STATEMENTS /99
NOTE 19 SHARE OPTIONS CONTINUED
DATE OF GRANT
EXERCISABLE FROM
EXERCISABLE TO
17 October 2016 The options vested immediately,
17 October 2018
through to 17 October 2018
EXERCISE
PRICES
NUMBER
GRANTED
NUMBER AT
30 JUNE
2018
£0.14
£0.28
9,795,884
9,795,884
9,795,884
9,795,884
28 October 2016 The options vest on the earlier of:
28 October 2018
£0.28
22,000,000
22,000,000
28 July 2017
9 August 2017
(a) the expiry of 75% of the Term, or (b) a
Change of Control Transaction, as defined
under the Company’s ESOP Rules.
The options vest on the earlier of:
(a) 18 months after the issue date, or (b) a
Change of Control Transaction, as defined
under the Company’s ESOP Rules.
The options vest on the earlier of:
(a) 18 months after the issue date, or (b) a
Change of Control Transaction, as defined
under the Company’s ESOP Rules.
8 August 2020
£0.60
36,750,000
36,750,000
8 August 2020
£0.60
10,012,000
10,012,000
DATE OF GRANT
EXERCISABLE FROM
EXERCISABLE TO
88,353,768
88,353,768
EXERCISE
PRICES
NUMBER
GRANTED
NUMBER AT
30 JUNE
2017
10 May 2013*
When the Company’s share price
has traded at a minimum of £0.20
on a 30 day VWAP basis
8 July 2014
8 July 2014
When the Company’s share price
has traded at a minimum of £0.20
on a 30 day VWAP basis
When the Company’s share price
has traded at a minimum of £0.40
on a 30 day VWAP basis
6 September 2017
£0.14
3,000,000
–
8 July 2017
£0.14
2,180,000
1,300,000
8 July 2017
£0.28
2,180,000
1,300,000
17 October 2016 The options vested immediately,
17 October 2018
£0.14
9,795,884
9,795,884
through to 17 October 2018
17 November
2016
The options vest on the earlier of:
(a) the expiry of 75% of the Term, or (b) a
Change of Control Transaction, as defined
under the Company’s ESOP Rules
£0.28
9,795,884
9,795,884
28 October 2018
£0.28
22,000,000
22,000,000
48,951,688
44,191,768
*
The options were granted for accounting purposes on 10 May 2013, approved at the Annual General Meeting held on 19 August 2013 and
formally allotted on 6 September 2013.
100/
FOR THE YEAR ENDED 30 JUNE 2018NOTES TO THE FINANCIAL STATEMENTS CONTINUEDSOLGOLD ANNUAL REPORT 2018 SHARE-BASED PAYMENTS
The number and weighted average exercise price of share options are as follows:
Outstanding at the beginning of the year
Exercised during the year
Lapsed during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year
2018
2017
WEIGHTED
AVERAGE
EXERCISE PRICE
£0.25
£0.21
–
£0.60
£0.45
£0.28
NUMBER OF
OPTIONS
44,191,768
(2,600,000)
–
46,762,000
88,353,768
41,603,768
WEIGHTED
AVERAGE
EXERCISE PRICE
£0.27
£0.17
£0.31
£0.25
£0.25
£0.21
NUMBER OF
OPTIONS
21,380,000
(4,760,000)
(14,020,000)
41,591,768
44,191,768
22,191,768
The options outstanding at 30 June 2018 have an exercise price of £0.14 and £0.60 (2017: £0.14 and £0.28) and a weighted
average contractual life of 1.26 years (2017: 1.24 years).
Share options held by Directors are as follows:
SHARE OPTIONS HELD
AT 30 JUNE 2018
AT 30 JUNE 2017 OPTION PRICE
EXERCISE PERIOD
Nicholas Mather
Brian Moller
Robert Weinberg
John Bovard
Craig Jones
–
–
26,250,000
–
–
3,750,000
–
–
2,250,000
–
–
2,250,000
2,250,000
750,000
750,000
–
550,000
550,000
–
–
–
–
–
–
–
–
14p
28p
60p
14p
28p
60p
14p
28p
60p
14p
28p
60p
60p
08/07/14 – 08/07/17
08/07/14 – 08/07/17
28/01/19 – 08/08/20
08/07/14 – 08/07/17
08/07/14 – 08/07/17
28/01/19 – 08/08/20
08/07/14 – 08/07/17
08/07/14 – 08/07/17
28/01/19 – 08/08/20
08/07/14 – 08/07/17
08/07/14 – 08/07/17
28/01/19 – 08/08/20
28/01/19 – 08/08/20
FINANCIAL STATEMENTS/101
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 19 SHARE OPTIONS CONTINUED
SHARE-BASED PAYMENTS CONTINUED
The total number of options outstanding at year end is as follows:
SHARE
OPTIONS HELD
SHARE
OPTIONS HELD
AT 30 JUNE 2018
AT 30 JUNE 2017
OPTION PRICE
EXERCISE PERIODS
–
–
9,795,884
9,795,884
1,300,000
1,300,000
9,795,884
9,795,884
£0.14 Vesting from 30 Day VWAP of 20p to 08/07/2017
£0.28 Vesting from 30 Day VWAP of 40p to 08/07/2017
£0.14 Exercisable through to 17/10/2018
£0.28 Exercisable through to 17/10/2018
22,000,000
22,000,000
£0.28 Vests on the earlier of the expiry of 75% of the term of
36,750,000
10,012,000
–
–
88,353,768
44,191,768
the option or a Change of Control Transaction, as defined
under the Company’s ESOP Rules
£0.60 Vests on the earlier of 18 months from date of grant or
a Change of Control Transaction, as defined under the
Company’s ESOP Rules.
£0.60 Vests on the earlier of 18 months from date of grant or
a Change of Control Transaction, as defined under the
Company’s ESOP Rules.
The fair value of services received in return for share options granted is measured by reference to the fair value of share
options granted. This estimate is based on either a Black-Scholes model or Monte Carlo Simulation considering the effects
of the vesting conditions, expected exercise period and the dividend policy of the Company.
FAIR VALUE OF SHARE OPTIONS AND ASSUMPTIONS
Number of options
Fair value at issue date
Exercise price
Expected volatility
Option life
Expected dividends
Risk-free interest rate (short-term)
Valuation methodology
2018
£0.60 OPTIONS
28 JULY
2017
£0.60 OPTIONS
9 AUGUST
2017
£0.60 OPTIONS
9 AUGUST
2017
36,750,000
10,000,000
£0.167
£0.60
£0.173
£0.60
12,000
£0.173
£0.60
89.714%
89.714%
89.714%
3.03 years
3.00 years
3.00 years
0.00%
0.461%
0.00%
0.461%
0.00%
0.461%
Black–Scholes
Black–Scholes
Black–Scholes
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
A$
A$
Share based payments expense recognised in statement
of comprehensive income
6,206,939
1,696,441
Share based payments expense recognised as share issue costs
–
–
Share based payments expense to be recognised in future periods
3,861,293
1,146,244
A$
–
3,411
–
The calculation of the volatility of the share price on the above options was based on the Company’s daily closing share price
over the three-year period prior to the date the options were issued.
102/ SOLGOLD ANNUAL REPORT 2018
FAIR VALUE OF SHARE OPTIONS AND ASSUMPTIONS
Number of options
Fair value at issue date
Exercise price
Expected volatility
Option life
Expected dividends
Risk-free interest rate (short-term)
Valuation methodology
2017
£0.14 OPTIONS
17 OCTOBER
2016
£0.28 OPTIONS
17 OCTOBER
2016
£0.28 OPTIONS
28 OCTOBER
2016
9,795,884
9,795,884
22,000,000
£0.12
£0.14
£0.09
£0.28
£0.14
£0.28
99.744%
99.744%
99.744%
2.00 years
2.00 years
2.00 years
0.00%
0.53%
0.00%
0.53%
0.00%
0.66%
Black–Scholes
Black–Scholes
Black–Scholes
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Share based payments expense recognised in statement
of comprehensive income
Share based payments expense recognised as share issue costs
Share based payments expense to be recognised in future periods
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Share based payments expense recognised in statement
of comprehensive income
A$
–
–
–
A$
–
A$
–
–
–
A$
–
Share based payments expense recognised as share issue costs
1,912,810
1,393,000
A$
2,665,506
–
–
A$
2,158,840
–
Share based payments expense to be recognised in future periods
–
–
2,062,000
The calculation of the volatility of the share price on the above options was based on the Company’s daily closing share price
over the two-year period prior to the date the options were issued.
NOTE 20 FINANCIAL INSTRUMENTS (GROUP AND COMPANY)
FINANCIAL INSTRUMENTS BY CATEGORY (GROUP)
FINANCIAL ASSETS
Cash and cash equivalents
Other receivables
Loans receivable and other non-current assets
Equity investments
Total financial assets
FINANCIAL LIABILITIES
Trade and other payables
Total financial liabilities
LOANS AND RECEIVABLES
AVAILABLE-FOR-SALE
2018
2017
2018
2017
–
–
–
–
–
–
5,445,408
5,445,408
14,366,304
14,366,304
81,825,617
89,312,743
3,912,826
1,207,745
–
1,086,331
226,175
–
86,946,188
90,625,249
FINANCIAL LIABILITIES
AT AMORTISED COST
2018
9,433,662
9,433,662
2017
2,741,175
2,741,175
FINANCIAL STATEMENTS/103
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 20 FINANCIAL INSTRUMENTS (GROUP AND COMPANY) CONTINUED
FINANCIAL INSTRUMENTS BY CATEGORY (COMPANY)
FINANCIAL ASSETS
Cash and cash equivalents
Other receivables
Loans receivable and other non-current assets
Equity investments
Total financial assets
FINANCIAL LIABILITIES
Trade and other payables
Borrowings
Total financial liabilities
LOANS AND RECEIVABLES
AVAILABLE-FOR-SALE
2018
2017
2018
2017
–
–
–
–
–
–
5,437,408
5,437,408
14,360,725
14,360,725
79,628,278
88,669,626
229,954
923,879
–
689,248
90,137
–
80,782,111
89,449,011
FINANCIAL LIABILITIES
AT AMORTISED COST
2018
1,874,048
–
2017
760,374
–
1,874,048
760,374
If required, the Board of Directors determines the degree to which it is appropriate to use financial instruments, commodity
contracts or other hedging contracts or techniques to mitigate risks. The main risks for which such instruments may be
appropriate are foreign currency risk and liquidity risk, each of which is discussed below. The main credit risk is the non-
collection of loans and other receivables which include refunds and tenement security deposits. There were no overdue
receivables at year end.
For the Company, the main credit risk is the non-collection of loans made to its subsidiaries. The Directors expect to collect
the loans through the successful exploration and subsequent exploitation of the subsidiaries’ tenements.
There have been no changes in financial risks from the previous year.
During the year ended 30 June 2018 and 2017 no trading in commodity contracts was undertaken.
MARKET RISK
INTEREST RATE RISKS
The Group’s and Company’s policy is to retain its surplus funds on the most advantageous term of deposit available up to
twelve month’s maximum duration. The increase/decrease of 2% in interest rates will impact the Group’s income statement
by a gain/loss of A$1,632,512 and the Company’s income statement by A$1,592,566. The Group considers that a 2% +/-
movement interest rates represent reasonable possible changes.
FOREIGN CURRENCY RISK
The Group has potential currency exposures in respect of items denominated in foreign currencies comprising:
• transactional exposure in respect of operating costs, capital expenditures and, to a lesser extent, sales incurred in
currencies other than the functional currency of operations which require funds to be maintained in currencies other than
the functional currency of operation; and
• translation exposures in respect of investments in overseas operations which have functional currencies other than
Australian dollars.
Currency risk in respect of non-functional currency expenditure is reviewed by the Board.
104/ SOLGOLD ANNUAL REPORT 2018
The table below shows the extent to which Group companies have monetary assets and liabilities in different currencies.
Foreign exchange differences on retranslation of such assets and liabilities are taken to the statement of comprehensive income.
NET FINANCIAL ASSETS (LIABILITIES)
2018
Australian dollar
United States dollar (USD)
Solomon Island dollar (SBD)
Canadian dollar (CAD)
Great British Pound (GBP)
NET FINANCIAL ASSETS (LIABILITIES)
2017
Australian dollar
United States dollar (USD)
Solomon Island dollar (SBD)
Great British Pound (GBP)
AUD
–
61,475,087
5,282
2,387,781
15,582,256
79,450,406
AUD
–
86,554,253
14,746
173,926
86,742,925
FUNCTIONAL CURRENCY OF ENTITY
USD
SBD
TOTAL
–
–
–
–
–
–
–
–
–
–
–
–
–
61,475,087
5,282
2,387,781
15,582,256
79,450,406
FUNCTIONAL CURRENCY OF ENTITY
USD
SBD
TOTAL
–
–
–
–
–
–
–
–
–
–
–
86,554,253
14,746
173,926
86,742,925
The main currency exposure relates to the effect of re-translation of the Group’s assets and liabilities in Solomon Island
dollar (SBD), United States dollar (USD) and the Great British Pound (GBP). A 10% increase in the SBD/A$, USD/A$ and
GBP/A$ exchange rates would give rise to a change of approximately A$9,067,200 (2017: A$9,638,103) in the Group net assets
and reported earnings. A 10% decrease in the SBD/A$, USD/A$ and GBP/A$ exchange rates would give rise to a change
of approximately A$7,418,618 (2017: A$7,885,720), The Group does not hedge foreign currency exposures and manages net
exposures by buying and selling foreign currencies at spot rates where necessary. In respect of other monetary assets and
liabilities held in currencies other than Australian dollars, the Group ensures that the net exposure is kept to an acceptable
level, by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances.
CREDIT RISK
The Group is exposed to credit risk primarily from the financial institutions with which it holds cash and cash deposits.
The banks and their credit ratings the Group had cash accounts with at 30 June 2018 were A$180,096 in cash accounts
with Macquarie Bank Limited (BBB) in Australia, A$5,111 in cash accounts with the ANZ Bank (AA-) in Australia,
A$79,465,958 in cash accounts with Westpac Bank (AA-) in Australia, A$5,282 in cash accounts with the ANZ Bank
(AA-) in Honiara, Solomon Islands, A$1,230,342 in cash accounts with Banco Guayaquil (AAA-) in Ecuador, A$919,409 in
cash accounts with Produbanco (B) in Ecuador and A$19,419 in petty cash. Including other receivables, the maximum
exposure to credit risk at the reporting date was A$85,738,424 (2017: A$90,388,769).
The company is also exposed to credit risk due to the cash balances it holds directly. It is also exposed to credit risk on the
loan balances it holds with its subsidiaries. At 30 June 2018, the company had A$79,628,278 in cash and cash equivalents
(2017: A$88,669,626) and A$136,911,197 of intercompany loan balances receivable (2017: A$55,302,853). The maximum
exposure to credit risk at the reporting date was A$216,239,475 (2017: A$143,973,144).
Credit risk is managed by dealing with banks with high credit ratings assigned by international credit rating agencies.
Furthermore, funds are deposited with banks of high standing in order to obtain market interest rates.
FINANCIAL STATEMENTS/105
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 20 FINANCIAL INSTRUMENTS (GROUP AND COMPANY) CONTINUED
LIQUIDITY RISKS
The Group and Company raises funds as required on the basis of budgeted expenditure for the next 12 to 24 months,
dependent on a number of prevailing factors. Funds are generally raised in capital markets from a variety of eligible private,
corporate and fund investors, or from interested third parties (including other exploration and mining companies) which may
be interested in earning an interest in the project. The success or otherwise of such capital raisings is dependent upon a variety
of factors including general equities and metals market sentiment, macro-economic outlook, project prospectivity, operational
risks and other factors from time to time. When funds are sought, the Group balances the costs and benefits of equity financing
versus alternate financing options. Funds are provided to local sites bi-monthly, based on the sites’ forecast expenditure.
All liabilities held by the Group and Company are contractually due and payable within 1 year.
FAIR VALUES
In the Directors’ opinion, there is no material difference between the book value and fair value of any of the Group’s and
Company’s financial instruments. The classes of financial instruments are the same as the line items included on the face of
the statement of financial position and have been analysed in more detail in notes to the accounts.
All the Group’s financial assets, with the exception of available for sale assets are categorised as loans and receivables and all
financial liabilities are measured at amortised cost.
NOTE 21 COMMITMENTS
The Group also has certain obligations to expend minimum amounts on exploration in tenement areas. These obligations
may be varied from time to time and are expected to be fulfilled in the normal course of operations of the Group.
The combined commitments of the Group related to its granted tenement interests are as follows:
LOCATION
Ecuador
Solomon Islands
Queensland
UP TO
12 MONTHS
13 MONTHS
TO 5 YEARS
LATER THAN
5 YEARS
2,184,959
8,739,836
–
252,167
2,437,126
–
299,833
9,039,669
–
–
–
–
To keep tenements in good standing, work programs should meet certain minimum expenditure requirements. If the
minimum expenditure requirements are not met, the Group has the option to negotiate new terms or relinquish the
tenements. The Group also has the ability to meet expenditure requirements by joint venture or farm in agreements.
106/ SOLGOLD ANNUAL REPORT 2018
NOTE 22 RELATED PARTIES
(A) GROUP
Transactions between related parties are on normal commercial terms and conditions and are no more favourable than
those available to other parties unless otherwise stated.
A) TRANSACTIONS WITH DIRECTORS AND DIRECTOR-RELATED ENTITIES
(i)
(ii)
The Company had a commercial agreement with Samuel Capital Ltd (“Samuel”) for the engagement of Nicholas
Mather as Director of the Company. For the year ended 30 June 2018 A$400,000 was paid or payable to Samuel (2017:
A$416,667). These amounts are included in Note 5 (Remuneration of Key Management Personnel). The total amount
outstanding at year end is A$16,667 (2017: A$26,725).
The Company has a long-standing commercial arrangement with DGR Global Ltd, an entity associated with Nicholas
Mather (Director) and Brian Moller (Director), for the provision of various services, whereby DGR Global provides
resources and services including the provision of its administration and exploration staff, its premises (for the purposes
of conducting the Company’s business operations), use of existing office furniture, equipment and certain stationery,
together with general telephone, reception and other office facilities (‘‘Services’’). In consideration for the provision
of the Services, the Company shall reimburse DGR Global for any expenses incurred by it in providing the Services.
For the year ended 30 June 2018 A$360,000 was paid or payable to DGR Global (2017: A$360,000) for the provision of
administration, management and office facilities to the Company during the year. The total amount outstanding at year
end was A$94,844 (2017: A$22,011).
(iii) Mr Brian Moller (a Director), is a partner in the Australian firm HopgoodGanim lawyers. For the year ended 30 June
2018, HopgoodGanim were paid A$220,457 (2017: A$459,325) for the provision of legal services to the Company. The
services were based on normal commercial terms and conditions. The total amount outstanding at year end was A$nil
(2017: A$92,350).
(iv) Mr James Clare (a Director), is a partner in the Canadian firm Bennett Jones lawyers. For the year ended 30 June 2018,
Bennett Jones were paid A$565,982 for the provision of legal services to the Company. The services were based on
normal commercial terms and conditions. The total amount outstanding at year end was A$nil.
(v)
On 20 November 2015, DGR Global Ltd agreed to provide short term funding to SolGold plc to provide working capital.
Interest on the facility was charged at the rate of 9.5% per annum. The loan was repayable by SolGold plc on the earlier
of any capital raising event, or 31 December 2016. DGR Global Ltd could, at its sole election, convert all or part of the
loan, including accrued interest, into further equity as part of a SolGold plc capital raising, and at the same price as third
party participants, subject to DGR Global Ltd and SolGold plc obtaining all necessary regulatory approvals. A new loan
agreement was signed on 30 June 2016 revising the limit on the facility to A$7 million, all other conditions remained the
same. On 29 August 2016, DGR Global Ltd converted A$5,700,000 of the debt funding provided to SolGold into SolGold
shares in accordance with the terms of the loan arrangements announced to the market on 1 July 2016.
Share and Option transactions of Directors are shown under Notes 5 and 19.
(B) COMPANY
The Company has related party relationships with its subsidiaries (see Note 9), Directors and other key personnel (see
Notes 5 and 19).
All related party transactions are conducted at arm’s length.
SUBSIDIARIES
The Company has an investment in subsidiaries balance of A$146,415,708 (2017: A$64,289,892). The transactions during the
year have been included in note 9. As the Company does not expect repayment of this amount and will not call payment
until the subsidiary can adequately pay it out of working capital, this amount has been included in the carrying amount of
the investment in the Parent Entity’s statement of financial position.
(C) CONTROLLING PARTY
In the Directors’ opinion there is no ultimate controlling party.
FINANCIAL STATEMENTS/107
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
NOTE 23 ACCOUNTING ESTIMATES AND JUDGEMENTS
KEY SOURCES OF ESTIMATION UNCERTAINTY
The Directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge
and best available current information. Estimates assume a reasonable expectation of future events and are based on
current trends and economic data, obtained both externally and within the Group.
EXPLORATION AND EVALUATION EXPENDITURE
The Group capitalises expenditure relating to exploration and evaluation where it is considered likely to be recoverable or
where the activities have not reached a stage that permits a reasonable assessment of the existence of reserves.
The carrying values of exploration and evaluation expenditure were assessed for indicators of impairment based on an
estimation of the recoverability from expected future development and production. In forming this assessment, the Group
considered the external Maiden Resources Estimate, the status of its permits and internal economic models and financing
which supported the carrying value of the project. No triggers of impairment were identified at 30 June 2018. The Directors
have carried out an assessment of the carrying values of deferred exploration and evaluation expenditure and any required
impairment and is included in note 12.
SHARE BASED PAYMENTS
Share based payments relate primarily to share options issued by the Company, in relation to employee share benefit
schemes. The grant date fair value of such options are calculated using a Black-Scholes model whose input assumptions
are derived from market and other internal estimates. The key estimates include volatility rates and the expected life of the
options, together with the likelihood of non-market performance conditions being achieved.
TAXES
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred
tax that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax
planning strategies.
The Group has A$173,136,523 (2017: A$86,232,512) of tax losses carried forward. These losses relate to subsidiaries that have
a history of losses and may not be used to offset taxable income elsewhere in the Group. The subsidiaries neither have any
taxable temporary difference nor any tax planning opportunities available that could partly support the recognition of these
losses as deferred tax assets. On this basis, the Group has determined that it cannot recognise deferred tax assets on the tax
losses carried forward. Further details on taxes are disclosed in note 7.
NET SMELTER ROYALTY PAYABLE
A 2% net smelter royalty is payable to Santa Barbara Resources Limited, who were the previous owners of the Cascabel
tenements. These royalties can be bought out by paying a total of US$4 million. Fifty percent (50%) of the royalty can be
purchased for US$1 million 90 days following the completion of a feasibility study and the remaining 50% of the royalty can
be purchased for US$3 million 90 days following a production decision. Significant management judgement is required in
determining whether a liability should be recognised in respect of the net smelter royalty payable. Given that the project
is still in early stages and there is uncertainty surrounding timing of cashflows, the Group has determined that it cannot
recognise a liability since the amount of the present obligation cannot be reliably measured. This is therefore considered to
be a contingent liability
108/ SOLGOLD ANNUAL REPORT 2018
NOTE 24 CONTINGENT ASSETS AND LIABILITIES
A 2% net smelter royalty is payable to Santa Barbara Resources Limited, who were the previous owners of the Cascabel
tenements. These royalties can be bought out by paying a total of US$4 million. Fifty percent (50%) of the royalty can be
purchased for US$1 million 90 days following the completion of a feasibility study and the remaining 50% of the royalty can
be purchased for US$3 million 90 days following a production decision. The smelter royalty is considered to be a contingent
liability as the Group has not yet completed a pre-feasibility study at 30 June 2018 as such there is significant uncertainty
over the timing of any payments that may fall due.
In the event Cornerstone Capital Resources Inc.’s (Cornerstone) equity interest in ENSA is diluted below 10%, Cornerstone’s
equity interest will be converted to a half of one percent (0.5%) interest in a Net Smelter Return and SolGold will have right
to purchase the Net Smelter Return for US$3.5 million at any time. At 30 June 2018, Cornerstone’s equity interest in ENSA
had not diluted below 10%.
On 21 August 2017, Major Drilling Group International Ecuador (hereinafter “Major”) filed an arbitration claim before
the Arbitration Center of the Quito Chamber of Commerce against Exploraciones Novomining S.A. (“the Company”) for
the amount of US$350,000. Major alleged a breach of the drilling contract signed by the parties on 22 September 2016
(hereinafter “Agreement”). On 1 September 2017 the Company filed a counterclaim against Major for the amount of US$
360,000 for compensation for damages caused by Major. No provision for any liability has been made in these financial
statements beyond the existing trade payable and no receivable has been recognised in connection with the Company’s
counter claim.
There are no other contingent assets and liabilities at 30 June 2018 (2017: nil).
NOTE 25 SUBSEQUENT EVENTS
On 5 July 2018, the Company issued an additional 21,250,000 unlisted options to employees and contractors. The options
have a strike price of £0.40 each and are exercisable through to 4 July 2020.
On 5 July 2018, the Company issued an additional 250,000 unlisted options to a contractor. The options have a strike price
of £0.60 each and are exercisable through to 4 July 2021.
The Directors are not aware of any other significant changes in the state of affairs of the Group or events after the reporting
date that would have a material impact on the consolidated or Company financial statements.
FINANCIAL STATEMENTS/109