Annual Report
For the year ended 30 June 2019
CONTENTS
ABOUT US
PERFORMANCE HIGHLIGHTS
CHAIRMAN’S STATEMENT
STRATEGIC REPORT
OPERATIONS REVIEW
FINANCIAL REVIEW
PRINCIPAL RISKS & UNCERTAINTIES
OUR SUSTAINABLE APPROACH
GOVERNANCE
DIRECTORS’ REPORT
ANNUAL REMUNERATION REPORT
INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
COMPANY STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
3
3
4
7
7
50
53
56
59
69
74
80
86
86
87
88
89
90
91
92
SolGold plc annual report for the year ended 30 June 2019
2
ABOUT US
SolGold is a leading exploration company focussed on the discovery and definition of world-class copper and gold deposits.
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 Alpala discovery at the Company’s flagship majority-owned Cascabel project with its continuing 1km-plus copper-gold
intersections, is the first of many. SolGold has already identified 12 priority projects which are now scheduled for exploration fast-
track.
SolGold is building a new copper company, and it has the team, track record and resources to succeed.
PERFORMANCE HIGHLIGHTS
•
Publication of Preliminary Economic Assessment which highlighted an NPV range from US$4.1Bn to US$4.5Bn
• Updated Alpala Mineral Resource Estimate of 2,050 Mt @ 0.60% CuEq (at 0.2% CuEq cut-off) in the Indicated category, and
900 Mt @ 0.35% CuEq (at 0.2% CuEq cut-off) in the Inferred category
•
•
•
•
BHP Billiton Holdings Limited (“BHP”) subscribed for 100 million shares at 45p
Proposed offer to acquire all of the share capital of Cornerstone Capital Resources Inc to be formalised
91,255 metres drilled (2018: 84,423 metres) at Cascabel
Progression of the 12 priority regional projects identified to date
• US$41.7M cash balance (2018: US$60.6M)
•
Appointment of 3 new Directors to the Board
SolGold plc annual report for the year ended 30 June 2019
3
CHAIRMAN’S STATEMENT
Dear Shareholders,
On behalf of the Board and Management, I am pleased to present the annual report for the 2019 financial year, a period in which
SolGold has continued to deliver significant growth, and value to all its shareholders and stakeholders from its core project, Cascabel
in Northern Ecuador by delivering an increase in the resource at the Alpala deposit, release of the Preliminary Economic Assessment
and completing an investment from BHP at a strong premium.
This year has seen SolGold make substantial progress at both operational and corporate levels. Through the dedicated efforts of
SolGold’s management team, and important support we have received within Ecuador across the national, regional and local levels,
the Company has been able to make significant progress during 2019 towards its objective of creating a new copper-gold mining
major. SolGold is committed to undertaking that journey not only in the best interests of its shareholders, but in the best interests
of the communities and Ecuador, the nation in which the Company and its subsidiaries operate, in order to help establish a platform
from which Ecuador’s mining industry and all its stakeholders can flourish.
Operations
Operations during the last year have continued to focus on increasing the resource at the Alpala deposit where, in 2014, SolGold
initiated in a focused and effective drilling campaign now totalling 203,555metres. I would like to thank the world-class management
and exploration teams for their tireless work in order to successfully meet the two key milestones set during the 12-month period,
namely delivering the updated Mineral Resource Estimate (“MRE#2”) and the Preliminary Economic Assessment (“PEA”).
The delivery of the updated Mineral Resource Estimate first announced in November 2018, (full report filed in January 2019),
successfully built on the previous resource, approximately doubling its overall size and increasing the size of the high-grade core.
MRE#2 was estimated from 133,576m of diamond drilling, and 2,743m of rock-saw samples from 262 surface rock exposure trenches.
The highlights include:
An overall resource, using a 0.2% CuEq cut-off grade, of::
•
•
2,050 Mt @ 0.60% CuEq in the Indicated category (8.4 Mt Cu and 19.4 Moz Au), and
900 Mt @ 0.35% CuEq in the Inferred category (2.5 Mt Cu and 3.8 Moz Au)
Within the deposit a medium-grade core exists, using a 0.45% CuEq cut-off grade, comprising:
810 Mt @ 1.03% CuEq in the Indicated category (5.4 Mt Cu,15 Moz Au), and
150 Mt @ 0.65% CuEq in the Inferred category (0.7 Mt Cu and 1.2 Moz Au).
•
•
Using a 0.7% CuEq cut-off grade, MRE#2 comprises:
•
•
490 Mt @ 1.37% CuEq in the Indicated category (4.1 Mt Cu and 13.0 Moz Au), and
50 Mt @ 0.93% CuEq in the Inferred category (0.4 Mt Cu and 0.7 Moz gold Au).
High-grade core forming the lower centre of the deposit, using a 0.9% CuEq cut-off grade, comprises:
400 Mt @ 1.49% CuEq in the Indicated category (3.6 Mt Cu and 11.9 Moz Au), and
20 Mt @ 1.05% CuEq in the Inferred category (0.2 Mt Cu and 0.4 Moz gold Au).
•
•
The full 43-101 technical report entitled “A Technical Report on an Updated Mineral Resource Estimate for the Alpala Deposit,
Cascabel Project, Northern Ecuador” can be found on the Company’s website.
SolGold plc annual report for the year ended 30 June 2019
4
The Board was pleased to publish the results of the PEA in May 2019, delivering a set of strong positive economic results to the
market that had always been expected from the Alpala project. The low operating costs and outstanding internal rates of return set
out in the PEA have served to emphasise the significant opportunity for SolGold and the Ecuadorean stakeholders in Alpala and
Ecuador generally. The Board believes the relatively soft and fractured nature of the ore makes the project ideally suited for block
caving, our preferred mining method to ensure minimal environmental impact. The vertically extensive nature of the cave
configurations, the high modelled resource tonnages and production rates also contribute to the high capital efficiency and returns,
low mining costs, and low overall costs of the project. Highlights of the PEA include:
• Net Present Value ("NPV") estimates range from US$4.1Bn to US$4.5Bn (Real, post-tax, @ 8% discount rate, US$3.3/lb
copper price, US$1,300/oz gold price and US$16/oz silver price) depending on production rate scenario.
•
•
Internal Rate of Return ("IRR") estimates range from 24.8% to 26.5% (Real, post-tax, US$3.3/lb copper price, US$1,300/oz
gold price and US$16/oz silver price) depending on production rate scenario.
Annual Metal Production (average for the first 25 years) - Estimated at 207,000t of copper; 438,000oz of gold and 1.4Moz
of silver in concentrate per year (based on the 50Mtpa mining scenario).
Despite the focus on Alpala during 2019, the Company has remained committed to the wider pan-Ecuadorean strategy over the past
year through a targeted exploration campaign at its 12 priority projects. Board and management have been highly encouraged by
the initial results across the portfolio, and intend to replicate the successful drilling and development strategy currently being
adopted at Alpala across the rest of the portfolio in time.
Ecuador
The last 12 months has seen important questions raised in Ecuador around how, and in what manner, the mining industry should
progress in Ecuador. It is important to remember that when an industry starts to grow and prosper within a jurisdiction in its infancy,
as is currently the case in Ecuador with the exploration and mining industries, questions should, and always will be, asked in order
to ensure that all the correct standards are followed. At SolGold, staff and management are committed to ensuring that the Company
is seen by all stakeholders in country as a leader in setting these standards, providing the Ecuadorean authorities with a best-in-class
template for corporate environmental, social and operational responsibility.
Whilst the recent petition to the Constitutional Court regarding the future of mining in the Imbabura province in which the Cascabel
project is based was unexpected, it was ultimately unanimously and definitively rejected as being unconstitutional. The helpful
approach taken by the Constitutional Court in identifying formal test criteria that needs to be met as part of any petition raises
significantly the standard that future consultation requests will have to pass if they are to be considered by the Constitutional Court
on its substance and gives confidence that any future petitions to request popular consultations on this matter are extremely likely
to face a much more challenging route to success.
The emphatic opposition from all levels of government to the request for a popular consultation, in addition to the introduction of a
pro-investment mining policy this year are each further examples of its continued commitment to the professionalisation and
enhancement of the mining industry in Ecuador. SolGold is confident that the increased discussion around the direction of mining in
Ecuador over the last year has only strengthened the resolve of all its stakeholders, including local communities and national
government, in ensuring the successful growth of this industry in order that it can benefit Ecuador in the long-term.
Sustainability and Community Engagement
Engendering a sustainable and socially inclusive agenda is fundamentally important to SolGold as the Company helps build a strong
mining industry in Ecuador. SolGold has strong relations with the local communities in the provinces within which it operates,
applying the best industry practices in education, social and environmental care. Strong community relations are key to creating a
safe and sustainable environment in which to operate, and SolGold continues to hold regular consultation meetings and educational
sessions within its licensed areas with all stakeholders.
Board
In addition to its efforts in country, the Company has worked hard to strengthen the independence and diversity of the Board over
the last 12 months, as evidenced by the recent appointment of three new Directors. I would like to welcome independent Director,
Liam Twigger who brings strategic and financial skills and will Chair the Audit and Risk Committee and executive Directors Jason Ward
and Anna Legge whose respective skills across the technical, project management, strategic and investor relation aspects of the
business will be invaluable in assisting SolGold to achieve its stated strategy of becoming a copper-gold major.
SolGold plc annual report for the year ended 30 June 2019
5
Cornerstone Bid
Following SolGold’s announcement dated 31 January 2019 stating its intent to make an offer to acquire all outstanding common
shares of Cornerstone Capital Resources Ltd on the basis of 0.55 of one SolGold share for each one Cornerstone share, and effective
15 June 2019 Cornerstone executed a Share Consolidation of its issued and outstanding common shares on the basis of one post-
consolidation Common Share for every twenty pre-consolidation Common Shares.
After the share consolidation by Cornerstone, the adjusted offer of 11 SolGold shares for each Cornerstone share at today’s date
represents a premium of some 30 per cent with finalisation and issue of the PEA, the Company will be able to proceed with its formal
offer.
SolGold’s offer to acquire all of the share capital of Cornerstone presents Cornerstone shareholders with a unique opportunity to
avoid financing risks, minority dilution and discount for its minority stake and take advantage of the outstanding premium being
offered, SolGold’s award winning management team and its unique portfolio of outstanding 100% owned, exploration areas
throughout Ecuador which defines one of the most complete coverages of a new copper province globally.
SolGold will update the market in due course on this matter.
Shareholders
I would like to thank all of the Company’s shareholders for their support over the past year. It has been a busy but exciting period
for the Company, in which SolGold has demonstrated to both the market and its stakeholders in Cascabel and in Ecuador the
significant value that this business is set to deliver to Ecuador.
I would also like on behalf of the Board to welcome the investment from BHP, whose original investment in SolGold at a strong
premium in October 2018, has been a significant endorsement of not only the Alpala project and its status as one of the top five
undeveloped copper projects in world but also SolGold’s extensive portfolio of potential world-class projects in a highly prospective
new copper gold province and mining district. We welcome the support that BHP brings to our already strong shareholder base. We
also thank Newcrest Mining Limited for its continued strong endorsement of the SolGold projects, Management and Board.
Outlook
I would like to thank my fellow directors and the Company’s CEO, Nicholas Mather, for another successful year of value creation and
significant progress.
As we enter the 2020 financial year, whilst our exploration programmes continue across our 12 priority projects, SolGold’s primary
focus is on ultimately developing the Alpala Project. As such SolGold will update the market with a Mineral Resource Estimate
(MRE#3) in due course. Following the release of the PEA, permitting and fiscal discussions with the Ecuadorean Government, in
addition to financial discussions with third party financiers continue to progress.
SolGold now looks forward to the completion of the Pre-Feasibility Study (“PFS”) which is targeted to be completed by end Q1 2020.
The Pre-Feasibility Study will focus on the new Alpala resource statement (MRE#3), improved metallurgy to maximise copper and
gold recoveries, definition around geotechnical and hydrology studies, more detailed mine plans, further definition around the
materials handling of water, concentrate, tailings and waste, as well as transport and infrastructure requirements. A Definitive
Feasibility Study is then expected to be scheduled for completion at the end of 2020.
Pleasingly, I note a strong and sustained rerating of the gold price and the continued decline in the cost of development capital, both
of which phenomena are to have a very substantial positive impact on the Alpala economics.
I look forward to updating you all on these exciting developments as the year progresses.
Yours faithfully,
Brian Moller
Chairman
SolGold plc annual report for the year ended 30 June 2019
6
STRATEGIC REPORT
SolGold is a leading exploration company focussed on the discovery and definition of world-class copper and gold deposits. SolGold’s
management team strives to deliver objectives efficiently and in the interest of shareholders. SolGold is the largest and most active
concession holder in Ecuador and is aggressively exploring the length and breadth of this highly prospective and gold-rich section of
the Andean Copper Belt. The Company also has exploration assets in Australia and the Solomon Islands.
OPERATIONS REVIEW
During the financial year ended 30 June 2019, SolGold continued to actively explore its concessions in Ecuador and Australia, whilst
expanding its exploration license portfolio across Ecuador, and pursuing key prospecting licences in the Solomon Islands.
The Alpala deposit is the main target in the Cascabel concession, located on the northern gold rich section of the heavily endowed
Andean Copper Belt, the entirety of which is renowned as the base for nearly half of the world's copper production. The project 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. The project base is located at Rocafuerte within the Cascabel concession in northern Ecuador, an approximately three-hour
drive on sealed highway north of Quito, close to water, power supply and Pacific ports.
During the financial year ended 30 June 2019, up to twelve drill rigs were operational at the Cascabel project, completing a total of
91,255m of drilling, comprising 83,997m at the Alpala Deposit and 7,258m at Aguinaga prospect. A total of 203,555m of drilling has
been completed on the Cascabel project to 30 June 2019.
The size of the Alpala deposit continues to expand with the completion of the second updated MRE released in November 2018. The
November 2018 Alpala MRE update, dated 15 November 2018, was estimated from 68,173 assays. Drill core samples were obtained
from total of 133,576m of drilling comprising 128 diamond drill holes, including 75 drill holes comprising, 34 daughter holes, 8 redrills,
and 11 over-runs, and represents full assay data from holes 1-67 and partial assay data received from holes 68 to 75. In contrast,
the Dec 2017 Maiden MRE was estimated from 26,814 assays obtained from 53,616m of drilling comprising 45 drill holes, including
10 daughter holes and 5 redrills.
The November 2018 Alpala updated MRE totals a current:
•
•
•
2,050 Mt @ 0.60% CuEq (at 0.2% CuEq cut-off) in the Indicated category, and 900 Mt @ 0.35% CuEq (at 0.2% CuEq cut-off)
in the Inferred category.
Contained metal content of 8.4 Mt Cu and 19.4 Moz Au in the Indicated category.
Contained metal content of 2.5 Mt Cu and 3.8 Moz Au in the Inferred category.
A major milestone for the Cascabel project was the release of the Preliminary Economic Assessment (PEA) in May this year. The full
text of the report was filed on SEDAR in Canada under the profile of SolGold on 27 June 2019. Readers are referred to the full text
of such report. The results of the PEA highlighted the following key aspects:
• Net Present Value* (“NPV”) estimates range from US$4.1Bn to US$4.5Bn (Real, post-tax, @ 8% discount rate, US$3.3/lb
•
•
•
•
copper price, US$1,300/oz gold price and US$16/oz silver price) depending on production rate scenario.
Internal Rate of Return (“IRR”) estimates range from 24.8% to 26.5% (Real, post-tax, US$3.3/lb copper price, US$1,300/oz
gold price and US$16/oz silver price) depending on production rate scenario.
Pre-production Capex estimated at approx. US$2.4B to US$2.8B, and total Capex including life of mine sustaining Capex of
US$10.1B to US$10.5B depending on production rate scenario.
Payback Period on initial start-up capital – Range from 3.5 to 3.8 years after commencement of production depending on
production rate scenario.
Preferred Mining Method – Underground low-cost mass mining using Block Cave methods applied over several caves
designed on two vertically extensive Lifts.
* Net Present Value (“NPV”) is not an IFRS term or measure.
SolGold plc annual report for the year ended 30 June 2019
7
Following the release of the detailed PEA SolGold is now working towards completing the Pre-Feasibility Study by end Q1 2020, and
Definitive Feasibility-Study by the end of 2020.
The Cascabel drill program expanded late in the fiscal year with a total of 15 drill rigs expected to be active on the project by
September 2019. The Company is bolstering its fleet, expediting the planned Alpala Deposit Pre-Feasibility Study (PFS) on extending
and upgrading the status of the Alpala Resource, as well as further drill testing of the rapidly evolving Aguinaga prospect. Drill testing
of the Trivinio target has commenced, whilst the numerous other untested targets, namely at Moran, Cristal, Tandayama-America
and Chinambicito, are flagged for drill testing as overall program demands allow.
SolGold has broadened its current focus to include the collection of additional metallurgical, geotechnical, hydrological and
hydrogeological data and the delivery of a third mineral resource estimate which will aim to deliver conversion of the bulk of the
current inferred resource into indicated status as the central basis for the PFS.
SolGold will be remodelling the Alpala economics on the basis of a significantly higher gold price, more detail on costs and considering
substantial opportunities for recovery of numerous by products.
SolGold has continued the acquisition of landholdings in the Cascabel project area for the anticipated infrastructure requirements
for development of the project. This has resulted in the acquisition of a total of 1,126 hectares of land up to the end of the financial
year ended 30 June 2019.
SolGold is intent on the application of its strategy to its 12 other wholly owned and highly prospective priority targets throughout
Ecuador. The Company is focussed on the creation of a major copper gold mining company in Ecuador, substantially covering one of
the world’s most under explored and prolifically mineralised porphyry copper gold provinces in the norther Andean Copper Belt.
SolGold employs a staff of over 650 and at least 98% are Ecuadorean. The staff mix comprises of both permanent and
temporary/contractor employees. The average number of employees over the 12 month period ended 30 June 2019 was less than
500 employees. This headcount is expected to grow as the operations at Alpala, and in Ecuador generally, expand. SolGold ensures
its operations are safe, environmentally responsible and maintains close relationships with its local communities. SolGold has
engaged an increasingly skilled refined and experienced team of geoscientists using state of the art geophysical and geochemical
modelling applied to an extensive data base to enable the delivery of ore grade intersections from nearly every drill hole at Alpala.
SolGold has 86 geologists, of which 11% are female, on the ground in Ecuador looking for copper and gold.
In the Solomon Islands SolGold has commenced preliminary exploration activities on the Kuma prospecting licences which is
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.
ECUADOR
Cascabel
During the twelve months ended 30 June 2019, the Company spent US$59.8 million on the Cascabel project.
The Alpala Deposit is located in Northern Ecuador, lying upon the gold rich section of the northern section of the prolific Andean
Copper belt, renowned as the base for nearly half of the world’s copper production. The project 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. The project is a three-
hour drive north of Quito, close to water, power supply and Pacific ports (Figure 1).
The Cascabel drill program continues to extend and upgrade the status of the Alpala Resource, delineating the geometry and
geological character of the Alpala deposit, providing additional information on the high-grade core (increasing the confidence of
geological interpretations, and the grade model) to convert Inferred Mineral Resources to higher confidence Indicated Mineral
Resources, and stepping out exploration away from the known mineralisation. SolGold has also commenced geotechnical drilling to
allow geotechnical characterisation of the ore body, and hydrogeological drilling to allow characterisation of the quantity and quality
of ground water and contribute to catchment scale water balance studies.
SolGold plc annual report for the year ended 30 June 2019
8
Figure 1 - Location of Cascabel project in Imbabura Province, northern Ecuador, highlighting the significant capital advantages held
by the project, with proximity to ports, road infrastructure, hydro-electric power stations and the trans-continental power grid.
The November 2018 Alpala MRE update, dated 15 November 2018, was estimated from 68,173 assays, with 66,739 assays
representing diamond drill core samples, and 1,434 assays representing rock-saw channel samples cut from surface rock exposures.
Drill core samples were obtained from a total of 133,576m of drilling comprising 128 diamond drill holes, including 75 drill holes, 34
daughter holes, 8 redrills, and 11 over-runs, and represents full assay data from holes 1-67 and partial assay data received from holes
68 to 75. Rock-saw samples were obtained from 2743m of rock-saw cuts from 262 surface rock exposure trenches. In contrast, the
December 2017 Maiden MRE was estimated from 26,814 assays obtained from 53,616m of drilling comprising 45 drill holes including
10 daughter holes and 5 redrills.
Mineral Resource Estimate (MRE#2)
The November 2018 Alpala updated Mineral Resource Estimate (MRE) highlights include:
•
•
•
2,050 Mt @ 0.60% CuEq (at 0.2% CuEq cut-off) in the Indicated category, and 900 Mt @ 0.35% CuEq (at 0.2% CuEq cut-off)
in the Inferred category.
Contained metal content of 8.4 Mt Cu and 19.4 Moz Au in the Indicated category.
Contained metal content of 2.5 Mt Cu and 3.8 Moz Au in the Inferred category.
Alpala updated MRE across both Indicated and Inferred classifications equates to 2.95 Bt @ 0.52% CuEq (15.4 Mt CuEq) containing
10.9 Mt Cu and 23.2 Moz Au at 0.2% CuEq cut-off, 79% of which is in the Indicated category (by metal content) (Tables 1 and 2).
SolGold plc annual report for the year ended 30 June 2019
9
The Alpala deposit includes a 420 Mt High Grade Core @1.47% CuEq (6.1 Mt CuEq) containing 3.8 Mt Cu and 12.3 Moz Au at a 0.9%
CuEq cut-off, 97% of which is in the Indicated category (by metal content).
The November 2018 MRE update is reported using a cut-off grade of 0.2% copper-equivalent (CuEq) which SolGold and SRK
Consulting consider to be reasonable, reflecting the potential for economic extraction by high production rate mass mining methods
such as block caving. The central portions of the deposit present an opportunity for early extraction of higher grade material.
The updated MRE is presented on a 100% basis and has an effective date of 7 November 2018. It represents an overall
reported resource increase of 108% (by metal content) from 7.4Mt CuEq in December 2017 Maiden MRE (at a cut-off of 0.3% CuEq)
to the current 15.4 Mt CuEq (at a cut-off of 0.2% CuEq).
Table 1 : Overall Mineral Resource Statement for the Alpala Copper-Gold Deposit.*
Grade
Category
Resource
Category
Tonnage
(Mt)
Total >0.2% CuEq
Indicated
Inferred
2,050
900
Cu
(%)
0.41
0.27
Grade
Au
(g/t)
0.29
0.13
CuEq
(%)
0.60
0.35
Contained Metal
Au
(Moz)
19.4
3.8
CuEq
(Mt)
12.2
3.2
Cu
(Mt)
8.4
2.5
•
•
•
*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 N1 43-101
The Mineral Resource is reported using a cut-off grade of 0.2% copper equivalent calculated using [copper grade (%)] +
[gold grade (g/t)x0.63]
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 terminology, definitions and guidelines given in the CIM Standards on Mineral Resources and Mineral
Reserves (May 2014)
The MRE is reported on 100 percent ownership 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 is 7th November 2018
The date of completion of the Mineral Resource statement is 16th November 2018
•
•
•
•
Table 2 : Mineral Resource Statement for the Alpala Copper-Gold Deposit expressed by a range in copper-equivalent cut-off
grades.*
Cut-off
Grade
(%
CuEQ)
0.10
0.15
0.20
0.30
0.45
0.70
0.90
1.10
1.50
0.10
0.15
0.20
0.30
0.45
0.70
0.90
1.10
1.50
Resource
Category
Tonnage
(Mt)
Cu
(%)
Grade
Au
(g/t)
CuEq
(%)
Contained Metal
Au
(Moz)
CuEq
(Mt)
Cu
(Mt)
2,460
2,290
2,050
1,500
810
490
400
200
120
1,380
1,140
900
490
150
50
20
10
-
*Refer to the explanation for Table 1 for description and qualifications that pertain to the resource statement.
Indicated
Indicated
Indicated
Indicated
Indicated
Indicated
Indicated
Indicated
Indicated
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
0.36
0.38
0.41
0.49
0.66
0.84
0.90
1.13
1.35
0.22
0.24
0.27
0.34
0.49
0.67
0.72
0.76
-
0.26
0.27
0.29
0.37
0.57
0.83
0.93
1.36
1.77
0.11
0.12
0.13
0.16
0.26
0.41
0.52
0.70
-
0.52
0.55
0.60
0.73
1.03
1.37
1.49
1.99
2.47
0.28
0.32
0.35
0.45
0.65
0.93
1.05
1.20
-
8.9
8.8
8.4
7.4
5.4
4.1
3.6
2.2
1.7
3.0
2.8
2.5
1.7
0.7
0.4
0.2
0.1
-
20.2
19.9
19.4
17.8
15.0
13.0
11.9
8.7
7.0
4.7
4.3
3.8
2.5
1.2
0.7
0.4
0.1
-
12.9
12.7
12.2
10.9
8.3
6.7
5.9
3.9
3.0
3.9
3.6
3.2
2.2
1.0
0.5
0.2
0.1
-
SolGold plc annual report for the year ended 30 June 2019
10
The Mineral Resource Statement is supported by a full 43-101 Technical Report filed on 4 January 2019 and is accompanied by grade
tonnage curves for overall resource (Indicated + Inferred) as well as individual charts for the Indicated and Inferred categories (Figures
2 and 3).
Preliminary Economic Assessment
The Cascabel Project, Northern Ecuador Alpala Copper-Gold-Silver Deposit Preliminary Economic Assessment (PEA) was filed on
SEDAR in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects on the 27th of June 2019. It relies
on geological information and Mineral Resource Estimate published in MRE#2 with an effective date of 7 November 2018, and on
metallurgical test work data received prior to 25th March 2019.
Key aspects and findings from this study are summarised below:
• Net Present Value ("NPV") estimates range from US$4.1Bn to US$4.5Bn (Real, post-tax, @ 8% discount rate, US$3.3/lb
•
•
•
•
•
•
•
•
•
copper price, US$1,300/oz gold price and US$16/oz silver price) depending on the production rate scenario (see below).
Internal Rate of Return ("IRR") estimates range from 24.8% to 26.5% (Real, post-tax, US$3.3/lb copper price, US$1,300/oz
gold price and US$16/oz silver price) depending on the production rate scenario (see below).
Pre-production Capex estimated at approx. US$2.4B to US$2.8B, and total Capex including life of mine sustaining Capex of
US$10.1B to US$10.5B depending on the production rate scenario.
Payback Period on initial start-up capital - Range from 3.5 to 3.8 years after commencement of production depending on
the production rate scenario.
Preferred Mining Method - Underground low-cost mass mining using Block Cave methods applied over several caves
designed on two vertically extensive Lifts.
Four mine production cases have been pre-selected and assessed as part of the PEA:
Mine Production Cases
Case
Life of Mine
(years)
Case 1: 40 Mt/a
Case 2a: 50 Mt/a - Staged ramp-up
Case 2b: 50 Mt/a Fast ramp-up
Case 3: 60 Mt/a
66
57
55
49
Resources scheduled in the PEA block cave designs that account for 2.4Bt @ 0.54% CuEq ROM grade(0.36% Cu, 0.27g/t Au
and 1.1g/t Ag), including:
o
o
89% of the MRE#2 Indicated Mineral Resources: 1.83Bt @ 0.61% CuEq ROM (0.41% Cu, 0.31g/t Au and 1.2 g/t
Ag)
1% of the MRE#2 Inferred Mineral Resources: 0.55Bt @ 0.36% CuEq (0.27%Cu, 0.13g/t Au and 0.8g/t Ag)
Annual Metal Production (average for the first 25 years) - Estimated at 207,000t of copper; 438,000oz of gold and 1.4Moz
of silver in concentrate per year (based on the 50Mtpa mining scenario).
High copper (28.2%), gold (22.1 g/t) and silver (65.7g/t) contents in sales concentrates.
The high quality of the concentrates and the relatively low arsenic contents in comparison to a number of other major
producers are expected to deliver a sales premium for SolGold's concentrates.
SolGold plc annual report for the year ended 30 June 2019
11
Drilling and exploration at Cascabel
Alpala Drilling Campaign
During the financial year ended 30 June 2019, up to twelve drill rigs were operational at the Cascabel project, completing a total of
91,255m of drilling. A total 83,997m of drilling was completed at the Alpala Deposit during the fiscal year deposit (Figure 2). With a
total of 203,555m of drilling completed on the Cascabel Project to 30 June 2019.
SolGold is encouraged by recent resource upgrade drilling which was targeted to include the vast majority of medium (>0.7%CuEq)
and high grade (>1.5%CuEq) tonnage within the criteria for Indicated Resources for the upcoming third Mineral Resource update
(MRE#3) this year. Large additional tonnage is expected to be brought into the Indicated category at Alpala Deposit due to additional
drilling now completed since the release of MRE#2.
The Company is also pleased with the progress of new drilling taking place at Alpala Northwest, Trivinio, and Alpala Southeast, as
well as drilling at the newly identified Alpala Southwest area, all of which target further growth to the existing Alpala Deposit. Large
additional tonnage is targeted to be brought into the Indicated category at Alpala Deposit on the basis of additional drilling now
completed since the release of MRE#2.
Resource extension drilling at Alpala Deposit continues targeting extensions to high-grade outliers peripheral to the main deposit
(Figure 3). High grade outliers that remain open, occurring at Alpala Northwest, Alpala East, and Alpala SE, indicate potential for
further growth of existing high-grade resource tonnage. Follow up drilling is likely to further enrich the existing resource base as
areas previously modelled at lower grades are enriched by assay data afforded by new drilling.
Greater geological and structural understanding is identifying targets adjacent to the main orebody, with drilling now targeting
mineralisation at the newly identified Alpala Southwest area.
Recent discoveries of previously unknown high grade (>1.5%CuEq) and medium grade (>0.7% CuEq) mineralisation intersected within
existing low grade Inferred Resource areas at Alpala highlight potential for upgrades to the existing resource base at Trivinio (Hole
93), Alpala North (Hole 75), Alpala Northwest (Hole 86), and Alpala South (Hole 89).
The potential for resource expansion at Trivinio is supported by the Hole 93 intersection (862m @ 0.43% CuEq), 520m of which lies
outside the existing Inferred Resource area.
Alpala North targets are open to the north, as shown by Hole 75 intersection (1918m @ 0.53% CuEq), 288m of which lies outside the
existing Inferred Resource area.
Discovery of previously unknown QD10 (Quartz Diorite) source intrusion at Alpala Northwest, intersected in Hole 86 (318m @ 0.67%
CuEq incl. 100m @ 1.34% CuEq), highlights potential for further resource extension as the 2019 drilling campaign continues.
Alpala South mineralisation is open to the south and towards surface, as revealed by the Hole 89 intersection (420m @ 0.61% CuEq).
Geotechnical, hydrogeological and sterilisation drill testing commenced at Cascabel, prior to the release of the Preliminary Economic
Assessment report.
SolGold plc annual report for the year ended 30 June 2019
12
Figure 2 - Drill Hole Location Plan. Plan view of the greater Alpala area showing current and planned hole paths and highlighting
the positions of recent significant intercepts achieved in holes 93, 75, 86, and 89, over current in-house block model showing
blocks with estimated grades of >0.7%CuEq.
SolGold plc annual report for the year ended 30 June 2019
13
SE
Figure 3 - High Grade Outliers peripheral to the main high grade core of the deposit are being targeted for extension by current
drilling.
SolGold plc annual report for the year ended 30 June 2019
14
Figure 4 – High grade core samples from Alpala
2019 Pre-Feasibility (PFS) Work Program
The 2019 drilling campaign at Cascabel is presently utilising 10 drilling rigs, comprising 9 man-portable machines and 1 large track-
mounted machine. The drilling fleet is currently expanding, from 9 man-portable machines to a total of 15 rigs expected to be active
on the project by September 2019, expanding the drilling fleet as the company expedites data collection ahead of the planned Alpala
Deposit Pre-Feasibility Study (PFS) deadline by end Q1 2020.
Drilling is focussed on continued resource extension and infill drilling along the Alpala trend as well as extensive geotechnical,
hydrological, hydrogeological, metallurgical and petrophysical work.
Supplementary work underway at the Alpala Deposit includes geotechnical mining studies using downhole optical and acoustic
Televiewer imaging, and rock-mechanics investigations using in-situ over-coring (3D stress testing), as well as in-situ measurement
of rock mass permeability by hydraulic packer testing.
The current drilling fleet of 10 is deployed as seven rigs focused on resource extension and infill drilling (Rigs 2, 3, 5, 6, 7, 8 and 13),
with and three rigs focussed on geotechnical, hydrogeological and sterilisation drilling (Rigs 1, 4 and 9).
A further four man-portable rigs (Rigs 14-17) currently under construction at HP Drilling workshops in Cuenca, Southern Ecuador.
Rig 14 is scheduled for arrival in August, with Rigs 15, 16 and 17 scheduled for arrival in September and October.
SolGold plc annual report for the year ended 30 June 2019
15
A specialised Hydrological drilling contractor has been signed to supply a further 2 drilling rigs (Rigs 18, and 19), scheduled to
commence groundwater drilling and water testing in late July 2019, bolstering the drilling fleet to a planned total of 15 machines.
Large track mounted Rigs 9, 10, 11 and 12 have been demobilised from site following swap-out with man-portable machines due to
difficulties in accessing off-road drill sites with the larger machines.
Assays of the remaining 6 holes at Aguinaga prospect have been received and a review of the Aguinaga drilling program is currently
underway. Assaying of Aguinaga samples was temporarily suspended during 2018 in order to reduce back-log of assays pertaining to
Alpala Deposit resource estimation work. Further drilling at the Aguinaga prospect was similarly been delayed due to high demand
along the Alpala trend, and future requirements are under assessment as part of the current review.
Table 3: Significant intercepts
Hole
Hole 41 D1-D2
Location
Alpala Central Infill
Intercept
582m @ 1.18% CuEq (0.64% Cu, 0.85g/t Au), incl.
Hole 55R
Alpala Central
NW Extension
Hole 55R-D1
Hole 57
Alpala Extension,
NW margin
Alpala Central Infill
Hole 58-D1
Hole 64
Alpala Extension,
NW margin
Alpala NW-Trivinio
Hole 66
Alpala NW
Hole 67
Alpala Central
Hole 68
Alpala Central
Hole 69
Alpala Western Limb
340m @ 1.54% CuEq (0.78% Cu, 1.21g/t Au).
1062m @ 1.02% CuEq (0.69% Cu, 0.52g/t Au),
incl.
548m @ 1.36% CuEq (0.86% Cu, 0.80g/t Au), incl.
220m @ 2.07% CuEq (1.22%Cu, 1.34g/tAu)
869m @ 0.72% CuEq, including
378m @ 1.17% CuEq
832m @ 1.41% CuEq (0.72% Cu, 1.10g/t Au), incl.
562m @ 1.72% CuEq (0.85% Cu, 1.37g/t Au), incl.
304m @ 2.52% CuEq (1.15% Cu, 2.18g/t Au), incl.
182m @ 3.46% CuEq (1.49% Cu, 3.14g/t Au)
983m @ 1.08% CuEq, including
456m @ 1.71% CuEq
402m @ 0.65% CuEq, including
162m @ 0.95% CuEq
634m @ 1.25% CuEq, including
301m @ 1.88% CuEq
174m @ 2.46% CuEq open at depth
1028m @ 1.29% including
544m @ 2.17% CuEq including:
146m @ 4.07% CuEq, (1.96%Cu, 3.36g/t Au)
664m @ 1.53% CuEq (open at depth) including
348m @ 2.25% CuEq, (1.26%Cu, 1.57g/t Au)
852m @ 1.14% CuEq including:
502m @ 1.55% CuEq
152m @ 2.49%CuEq
SolGold plc annual report for the year ended 30 June 2019
16
Regional Projects
A comprehensive, desktop study of the full 700km length of Ecuador has been undertaken by the Company'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 mineralization on a regional scale. The Company has delineated
and ranked regional exploration targets for the potential to contain significant copper-gold deposits, many of which are believed
to exhibit the potential to become Tier 1 copper gold projects. As a result of this study, the Company formed and has 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. These subsidiaries currently hold 72 granted mineral concessions over approximately 3,200 km2.
These four subsidiaries also hold 26 ungranted applications.
Based on the results of this initial exploration, 12 priority targets have been identified for second phase exploration in Ecuador.
Ongoing exploration will focus on advancing these priority projects, through geophysical surveys and detailed soil geochemistry,
with a view to progress to drill testing as soon as permissions are in place. The 12 priority projects are as follows:
•
•
•
•
•
•
•
•
•
•
•
•
Blanca – epithermal gold
La Hueca – copper gold porphyry
Porvenir – copper gold porphyry
Cisne Loja – epithermal gold
Timbara – copper gold porphyry
Rio Amarillo – copper gold porphyry
Chillanes – copper gold porphyry
Salinas – epithermal gold
Sharug – copper gold porphyry
Cisne Victoria – copper gold porphyry
Coangos – copper gold porphyry and epithermal gold
Chical – epithermal gold
The ongoing exploration program on these projects will focus on:
•
•
•
Drill Testing targets
Collection of geophysical data
Continued mapping and geochemical sampling of new areas
Outstandingly, the reconnaissance programs have demonstrated the presence of porphyry copper gold or epithermal gold style
mineralisation in all 12 of the 100% owned granted SolGold priority regional project areas throughout the length of Ecuador.
Panned gold, magnetite and outcropping mineralisation are testament to the world class potential of all the SolGold project
areas.
Activities conducted on the priority projects are described in further detail below.
Figure 5 - Gold and magnetite panned in creeks at La Hueca (left); Abundant outcropping porphyry mineralisation like Alpala
porphyries (right).
SolGold plc annual report for the year ended 30 June 2019
17
Figure 6 - Copper readily evident at surface at La Hueca (13.82% Copper)
Figure 7 - Northern Ecuador, Eocene, Miocene and Jurassic belts under explored, weakly defined
SolGold plc annual report for the year ended 30 June 2019
18
Figure 8 – Location of Ecuador concessions.
SolGold plc annual report for the year ended 30 June 2019
19
Blanca
Project Overview
Location: Carchi province, Northern Ecuador
Ownership: 100%
Subsidiary: Carnegie Ridge Resources S.A
Tenement area: 2 concessions (Blanca 1 and Nieves 1) over 73 km2
Primary Targets: epithermal gold
The rich epithermal gold mineralisation has been identified within the Blanca concession is thought to be associated with large
copper gold porphyry systems in the area including the Alpala deposit, some 8km to the south-southeast (SSE).
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.
The ridge and spur and gridded auger soil program traversing the projected trend of the epithermal structural corridor identified
several zones of multielement anomalism. Logging of lithic chips from the auger soil program also mapped out zones of chlorite
and sericite alteration around the Cielito vein and Cerro Quiroz prospects.
High grade epithermal style gold mineralisation has been identified over an interpreted 5km long NW trending structural corridor.
The Blanca epithermal gold veins are situated in a previously unrecognised corridor of gold mineralisation highlighting once again
the under explored potential of the gold rich Ecuadorean section of the Andean copper-gold belt.
Cielito Vein Prospect
Hosted in volcanics and volcanic breccias showing weak quartz-pyrite-illite and chlorite-sericite alteration. Sampling of the
intermediate sulphidation Cielito vein returned very high grade gold mineralisation. The results include:
•
•
R01000562: 617 g/t Au, 317g/t Ag, 0.59% Cu, 0.74% Zn
R01000564: 542g/t Au, 254g/t Ag, 0.54% Cu, 0.50% Zn
A drilling program has been designed that awaits permitting.
Figure 9 - Blanca – soil geochemistry with alteration mapping
SolGold plc annual report for the year ended 30 June 2019
20
R01000562
R01000564
Crystalline Quartz
Crystalline
Figure 10 - Sample: R01000562 – 617 g/t Au, 317g/t Ag, 0.59% Cu and Sample: R01000564 – 542g/t Au, 254g/t Ag, 0.54% Cu
Figure 11 - The Cielito Vein represents bonanza epithermal Au mineralisation has been identified over a 400m by 200m zone.
SolGold plc annual report for the year ended 30 June 2019
21
La Hueca
Project Overview
Location: Zamora Chinchipe province, Southern Ecuador
Ownership: 100%
Subsidiary: Cruz del Sol S.A.
Tenement area: 3 concessions, 160 km2
Primary Targets: Copper-gold porphyry
The project lies within the eastern Jurassic Belt, which contains the Fruta del Norte epithermal gold deposit (14 million ounces Au),
the Mirador copper porphyry deposit (3 million tonnes Cu) and the Santa Barbara gold-(copper) porphyry deposit (8 million ounces
Au).
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.
Best rock chip results from Targets 1 to 4 include:
•
•
•
•
R02000263: 13.82% Cu
R02000310: 8.37% Cu
R02000259: 4.08% Cu
R02000307: 2.50% Cu
Figure 12 - La Hueca targets with rock chip samples
SolGold plc annual report for the year ended 30 June 2019
22
Figure 13 – La Hueca rock samples
Target 6
Target 6 has returned strong copper, gold and molybdenum anomalism over a large area 1.25 km 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, and they are dispersed over an extensive area. Best rock chip results from Target 6 include:
•
•
•
•
R02000802: 6.27% Cu, 0.29 g/t Au, 22.9 g/t Ag, >1% Mo;
R02000785: 4.58% Cu, 0.13 g/t Au, 14.6 g/t Ag, 0.16% Mo;
R02000768: 4.15% Cu, 0.24 g/t Au, 16.1 g/t Ag, 0.28% Mo; and
R02000784: 2.19% Cu, 0.12 g/t Au, 9.11 g/t Ag, 0.02% Mo.
A program of gridded auger soil sampling was completed at Target 6 to further delineate drilling targets. Fathom Geophysics were
commissioned to carryout 3D geochemical porphyry footprint modelling of soil data over Target 6. Fathom Geophysics also re-
interpreted the existing aeromagnetic data covering Targets 1 – 5. The results of this work have been used to help design drill holes
to test for porphyry mineralisation.
A drilling program has been designed that awaits permitting.
Figure 14 - La Hueca - mineralised outcrop
SolGold plc annual report for the year ended 30 June 2019
23
Porvenir
Project Overview
Location: Zamora Chinchipe province, Southern Ecuador
Ownership: 100%
Subsidiary: Green Rock Resources S.A.
Tenement area: 244km2
Primary Targets: Copper-gold porphyry
The project is located in Southern Ecuador and is hosted in Ecuador’s eastern Jurassic Belt, hosting the Fruta del Norte epithermal
gold deposit (14 million ounces Au), the Mirador copper porphyry deposit (3 million tonnes Cu) and the Santa Barbara gold-(copper)
porphyry deposit (8 million ounces Au).
The geology is characterised by a sequence of prospective intrusive porphyry bodies and regional geochemical sampling and detailed
geological mapping has identified a north easterly zone over 6 km long and 1km wide in the northern part of the project area, hosting
at last two significant mineralised porphyry centres believed to be the same age as the 85% SolGold owned Alpala deposit in Northern
Ecuador.
A stream sediment sampling program at the Porvenir project delineated two geochemical anomalies within the larger 6 km by 5.5
km stream anomaly at the Derrumbo and Bartolo prospects. Mineralised outcrops have been identified which extend over some 1.5
km by 1 km 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).
This zone is interpreted to be genetically related to the intersection of deep-seated northwest and northeast trending deep crustal
faults which have focused mineralising events.
Initial auger soil results having identified a 2.5 km by 2 km 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. Follow up mapping has confirmed
mineralisation in outcrop, with best rock chip results including:
R03000875: 8.65% Cu, 0.19g/t Au, 38.1g/t Ag
R03000696: 6.64% Cu, 0.09g/t Au, 33.1g/t Ag
R03000699: 5.10% Cu, 0.05g/t Au, 22.3g/t Ag
R03000588: 4.27% Cu, 0.09g/t Au, 14.6g/t Ag
•
•
•
•
SolGold plc annual report for the year ended 30 June 2019
24
Figure 15 -Porvenir Project highlighting copper in soil samples.
Figure 16 – Porvenir rock samples
Target 15
Target 15 is located within Porvenir #2 concession, north of the town of La Canel in southern Ecuador.
The exposed outcrops along La Cacharposa Creek in Target 15 lie within soil copper, gold, molybdenum, Cu/Zn and Mo/Mn
geochemical anomalies in a diorite, manga diorite and quartz diorite porphyry complex that cover an area approximately 1200m long
and 800m wide open ended. The presence of potassic alteration (K-feldspar – magnetite) overprinted by intermediate argillic
alteration (chlorite – sericite – clay) is associated with higher gold grades and surrounded by phyllic (quartz – sericite – pyrite) and
extensive epidote-propylitic alteration. The size and strength of the geochemical anomalies and the zoning of the hydrothermal
alteration assemblages are consistent with the presence of a porphyry copper-gold system.
The Target 15 mineralised corridor is characterised by surface exposure of porphyry-style sheeted and stockwork B-type quartz-
chalcopyrite-magnetite veining. Veining occurs as three steeply-dipping vein sets orientated northwest, east-northeast, and west-
northwest.
SolGold plc annual report for the year ended 30 June 2019
25
Target 15 returned very high coincident gold results in rock chips taken from a 400m wide NE-SW trending corridor with B veining
and alteration. Results for the area include:
•
•
•
•
•
•
R03000986
R03002510
R03002519
R03002518
R03002526
R03002527
2.35% Cu, 1.67 g/t Au, 7.87 g/t Ag
2.17% Cu, 0.73 g/t Au, 53.8 g/t Ag
1.91% Cu, 3.59 g/t Au, 8.96 g/t Ag
1.52% Cu, 0.85 g/t Au, 10.6 g/t Ag
1.27% Cu, 1.04 g/t Au, 3.09 g/t Ag
1.04% Cu, 0.97 g/t Au, 2.08 g/t Ag
Rock saw channel sampling across the exposed mineralisation along La Cacharposa Creek returned an open-ended intersection of:
•
•
62.4m @ 0.71 % Cu and 0.71 g/t Au (open-ended), including
o 29.5m @ 1.01 % Cu and 0.89 g/t Au from 12.1 to 41.6m
147.83m @ 0.64% CuEq (0.43 g/t Au, 0.37% Cu) - open ended.
o
including 82.63m @ 0.96% CuEq (0.71 g/t Au, 0.55% Cu).
Figure 17 - Porvenir - Target 15 samples and rock saw channel
The assay results from this work shows highly consistent copper and gold grades throughout the intersection and exhibit a consistent
copper ̶ gold ratio of approximately 1% Cu : 1g/t Au.
Field studies of the porphyry-related vein types and paragenesis at Target 15 are ongoing, and initial work indicates a sequential vein
development typical of many significant porphyry deposits such as Alpala. Detailed mapping within Target 15 has identified new
mineralised outcrops in other streams. These outcrops display strong alteration and mineralization with B-veins present, at least 15-
20 metres of 1.2% quartz vein density.
Field studies of the porphyry-related vein types sequencing and genetic relationships at Target 15 are ongoing, and initial work
indicates a sequential vein development typical of many significant porphyry deposits, such as SolGold's Alpala porphyry copper-gold
deposit in Northern Ecuador (10.9Mt Cu, 23.2Moz Au).
An extended rock-saw channel sampling program continues to further expose mineralisation and determine the surface extent of
mineralisation at Target 15.
Continued detailed Anaconda style mapping (as applied at Alpala) within Target 15 continues to identify new mineralised outcrops
along nearby streams, displaying porphyry style B-type quartz veining and associated strong hydrothermal alteration assemblages.
A program of detailed ground magnetics was completed during the year covering the entire Target 15 area, along with an airborne-
magnetic survey covering the entire Porvenir Project.
A drilling program has been designed that awaits permitting.
SolGold plc annual report for the year ended 30 June 2019
26
Figure 18 - Planned drill holes Target 15 with 3D geochemical modelling
SolGold plc annual report for the year ended 30 June 2019
27
Figure 19 - Cross-section planned drill holes with 3D magnetic inversion & 3D geochemical models
Mula Muerta Creek
The Mula Muerta Creek located on the opposing side of the ridge from the Carchaposa creek displays similar style mineralisation.
Both areas are believed to be part of the same mineralised system within the 800m wide northeast trending mineralised corridor
approximately 1200m long and open-ended, interpreted to be genetically related to the intersection of deep-seated northwest and
northeast trending crustal faults.
The lithology of along the Mula Muerta creek comprises greenstone with fine veinlets of albite and magnetite in some areas. The
other unit is monzodiorite with weak magnetism.
The Mula Muerta creek contains two alteration types;
•
•
Argillic intermediate with moderate chlorite and sericite present in monzodiorite.
Phyllic (quartz-sericite-pyrite) that is moderate to strong at the top of the Mula Muerta creek system.
The two areas of hydrothermal alteration have been mapped and sampled. The first area is characterised by pyrite (2.5%) - chalcocite
(0.8%) ± chalcopyrite (0.3%). The other area exhibits pyrite (3%) - chalcocite (0.7 %) - chalcopyrite (0.1)± molybdenum (tr-0.1%).
Fathom geophysics carried out 3D geochemical modelling at Porvenir using the auger soil data collected to date. Both the Target 15
and the Bartolo targets were identified as excellent targets with Target 15 representing shallow and deeper drill targets and the
Bartolo prospect representing a deep target. Two additional targets were identified from the Porvenir dataset. Further delineation
of the two new target areas was performed through extending the Anaconda mapping over anomalous areas and in-filling auger soils
over the 3D geochemical targets.
SolGold plc annual report for the year ended 30 June 2019
28
Cisne Loja Project
Project Overview
Location: Loja province, Southern Ecuador
Ownership: 100%
Subsidiary: Green Rock Resources S.A.
Tenement area: 3 concessions, 146 km2
Primary Targets: Epithermal gold and silver, Porphyry copper gold
The Cisne Loja project is located in the southern central region of Ecuador at the southern end of the Miocene Belt. It is very close
to the Loma Largo deposit owned by INVmetals. The Loma Largo is a high sulphidation epithermal deposit containing 3Moz Au and
125 Mlbs of Cu.
The southern end of the Miocene Belt is defined by the northeast trending fault systems thought responsible for introducing the
hydrothermal fluids responsible for mineralisation in this area.
Cuenca Loma
Recent follow up of gold anomalies has led to the discovery of outcropping epithermal style alteration and mineralisation over an
area of 2.5 km by 1.5 km with several episodes of quartz veining, which shows similarities to the epithermal gold system at Fruta
del Norte in Southern Ecuador. This northern epithermal prospect is called Cuenca Loma.
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.
Streams over a 6 km by 4 km 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 2.5 km by 1.5 km. 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:
•
R03000453: 15.25 g/t Au and 23.6g/t Ag
Figure 20 - Cuenca Loma outcrops
SolGold plc annual report for the year ended 30 June 2019
29
Celen Prospect
Celen Prospect is located 7km south of the Cuenca Loma in the El Cisne 2C concession.
Rock chip results just in from Cisne 2C concession in the Cisne Loja project have returned highly anomalous Cu-Au-Mo. The copper
mineralization is developed within the granodiorite mainly along fractures with minerals malachite, azurite, chalcopyrite and
Neotocite, occasionally accompanied by traces of Pyrite. Mineralisation has been identified over an area 1.5km by 1km. Significant
results from rock chips include:
Hector Stream
R03001218
R03001221
R03001204
R03001206
R03001207
R03001217
•
•
•
•
•
•
El Tio Stream
•
•
R03001215
R03001214
5.28% Cu, 0.66 g/t Au, 91.4 g/t Ag
5.08% Cu, 1.10 g/t Au, 25.8 g/t Ag
4.92% Cu, 3.90 g/t Au, 55.7 g/t Ag
2.06% Cu, 0.24 g/t Au, 28.7 g/t Ag
1.39% Cu, 0.15 g/t Au, 24.6 g/t Ag
1.33% Cu, 0.08 g/t Au, 27.6 g/t Ag
3.65% Cu, 0.02 g/t Au, 95.5 g/t Ag
3.43% Cu, 0.09 g/t Au, 73.8 g/t Ag
Mandarina Stream
•
•
R03001211
R03001213
1.63% Cu, 0.30 g/t Au, 39.8 g/t Ag
1.45% Cu, 0.02 g/t Au, 36.6 g/t Ag
Activities planned for Cisne Loja project include:
•
•
•
Auger soil programs in Cisne 2A and Cisne 2B
Additional mapping and sampling of the streams in Cisne2B and Cisne 2C
Planning drill holes for testing the epithermal veins in Cisne 2A
Figure 21 – Rock samples from Cisne Loja area
SolGold plc annual report for the year ended 30 June 2019
30
Timbara Project
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 4 concessions (Timbara 1, Timbara 2, Timbara 3 and Timbara 4), 152 km2
Primary Targets: Copper-gold porphyry
Zamora Chinchipe province, Southern Ecuador
100%
Green Rock Resources S.A.
The Timbara Project is located in Ecuador's eastern Jurassic Belt which hosts the Fruta del Norte epithermal gold deposit (14 million
ounces Au), the Mirador copper porphyry deposit (3 million tonnes Cu) and the Santa Barbara copper-gold porphyry deposit (8 million
ounces Au). The concessions cover 151km2 and is owned by the Company's 100% owned subsidiary, Green Rock Resources.
Results from rock chip samples collected during stream reconnaissance programs at Timbara include:
•
•
•
•
R03000252: 28.89% Cu, >100g/t Ag
R03000260: 4.00% Cu, >100g/t Ag
R03000219: 2.94% Cu
R03000236: 2.32% Cu
The location and orientation of mineralised veins may represent a continuation of the highly prospective porphyry corridor identified
at SolGold's La Hueca Project.
Teams have carried out detailed infill of stream sediment, panned concentrate and rock chip sampling in areas identified as
anomalous from earlier regional geochemistry.
To date, a total of 430 stream sediment samples and 406 panned concentrate samples have been collected in the Timbara Project.
Results highlight the potential for epithermal mineralisation in Timbara 1 & 2 concessions and porphyry style mineralisation in
Timbara 4 concession. Teams have continued detailed Anaconda mapping and rock chip sampling of the anomalous areas.
Timbara 1 Prospect
Outcropping porphyry style mineralisation occurs as northeast trending narrow quartz veins containing pyrite, chalcopyrite, covellite
and bornite hosted within granodiorite intrusive.
Timbara 2 Prospect
Fine-grained diorite contains abundant stock works 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.
Timbara 3 Prospect
Reconnaissance mapping has located a 25 m wide zone of quartz-hematite veining including localised bornite rich veining. Other
outcrops identified show significant exposed 5 m 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.
Rio Amarillo Project
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 3 concessions (Rio Amarillo 1, 2 & 3), 123 km2
Primary Targets: Copper porphyry
Imbabura province, Northern Ecuador
100%
Carnegie Ridge Resources S.A.
Located in northern Ecuador Miocene Belt near SolGold’s Cascabel Project. Two main prospects have been identified in both Rio
Amarillo 1 & 2; Chilanes and the Pugaran prospects. The main geological feature of the Rio Amarillo project is the extensive lithocap
extending 2km by 2.4km in area.
SolGold plc annual report for the year ended 30 June 2019
31
Chilanes Prospect
Chilanes located in Rio Amarillo 2, consists of an extensive lithocap with surrounding strong stream sediment anomalies. The lithocap
measures approximately 2.4 km by 2.4 km. It consists of crackle and hydrothermal breccias, with silica-clay and advanced argillic
alteration, typical of the upper levels of a porphyry system. At the Chilanes prospect, located proximal to the lithocap, B type veins
have been mapped and sampled. An outcrop of stockwork B type veins has been identified hosted in a dark micro diorite - quartz
diorite with the matrix altered to magnetite and chlorite, with best rock chip results including:
•
•
•
R01000025 0.93 g/t Au, 0.18% Cu, 11.85ppm Mo
R01000026 0.90 g/t Au, 0.01% Cu, 13.75 ppm Mo
R01000029 0.51 g/t Au, 0.13% Cu, 10.35 ppm Mo
Pugaran Prospect
Located in Rio Amarillo 1, Pugaran hosts abundant B-type veins and zones of strong copper mineralisation. It represents a 250 m long
outcrop of copper mineralisation consisting of B type veins with pyrite, chalcopyrite, chalcocite and bornite. K-alteration overprinted
by phyllic alteration.
•
140m @ 0.24% Cu
o
o
Including 13m @ 0.65% Cu
Including 12m @ 0.38% Cu
Figure 22 - Pugarán Sector - 250m outcrop at Palomar Creek, Zone covered in Quaternary ash tuff - gold traces observed in pan
concentrate
Cuambo Prospect
Located in Rio Amarillo 2, Cuambo prospect is located distal to the lithocap with epithermal vein mineralisation identified.
•
•
R01001018 11.3 g/t Au
R01001019 1.85 g/t Au
Pasquel Prospect
Located in Rio Amarillo 2, Cuambo prospect is located distal to the lithocap with epithermal vein mineralisation identified.
•
•
•
R01001290 13.35 g/t Au
R01001294 3.00 g/t Au
R01001295 2.45 g/t Au
The epithermal veining at Cuambo and Pasquel prospects are possibly associated with a deeper porphyry system that is responsible
for the advanced argillic alteration forming the lithocap.
Auger soil programs were completed during the year at the Chilanes lithocap that is returning anomalous results. Along with rock
chip sampling the northern lithocap zone is starting to define significant anomalism. Several intrusive stocks and hydrothermal
breccias have been located in this zone that exhibit significant alteration and mineralisation that support the results received from
the auger soils.
An airborne magnetic program is scheduled to commence in July/August 2019.
A drilling program has been designed that awaits permitting.
SolGold plc annual report for the year ended 30 June 2019
32
Chillanes Project
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 48 km2
Primary Targets: Copper-gold porphyry
Bolivar/Chimborazo province, Central Ecuador
100%
Green Rock Resources S.A.
The Chillanes project is located in the central Miocene belt that is host to several large epithermal and porphyry deposits including
Quimsacocha and Junin. Stream sediment geochemical sampling has returned the highest copper results from any SolGold project
in Ecuador with best results including 1,140 ppm Cu and 1,110 ppm 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. Following the completion of initial anaconda mapping, a program of auger soil geochemistry will be carried out
to delineate priority drill targets.
Social teams have been working with government to ensure ongoing access to this project which is progressing well. Negotiations
for access is ongoing.
Salinas Project
Project Overview
Bolivar province, Southwest Ecuador
Location:
100%
Ownership:
Subsidiary:
Valle Rico Resources S.A.
Tenement Area: 4 concessions (Salinas 1, 2, 3 and 4), 189 km2
Primary Targets: Gold-silver-copper epithermal
The Salinas project represents a high sulphidation epithermal Ag-Au-Cu with indications of a nearby Cu-Au porphyry system.
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.
An airborne magnetic program is scheduled to commence in July/August 2019.
Access to Salinas 3 and 4 concessions has now been granted and work is continuing on gaining field access to Salinas 1 and 2
concessions. Initial exploration work will commence at Salinas 3 and 4 and access should be granted shortly for Salinas 1 and 2
concessions.
Sharug Project
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 2 concessions, 52 km2
Primary Targets: Copper-gold porphyry
Azuy province, Southwest Ecuador
100%
Green Rock Resources S.A.
The Sharug project is located in the southern end of the Miocene Belt. It is located south of known mineral deposits; Tres Chorreras
and the Cerro Negro mining areas. New diorite outcrops were identified in the Sharug project, in the Sharug 2 concession. Two
prospects have been identified, the Quillosisa epithermal prospect and the Santa Martha porphyry prospect.
A gridded soil program at Sharug was completed that covered both the Quillosisa and Santa Marta prospects that confirmed
anomalous mineralisation at both prospects.
SolGold plc annual report for the year ended 30 June 2019
33
Figure 23 - Sharug Epithermal Zone rock chip samples showing gold assays.
Figure 24 – Sharug Project rock samples from the epithermal target
SolGold plc annual report for the year ended 30 June 2019
34
Figure 25 - Sharug project epithermal target outcrop
Figure 26 - Sharug Project: Stockwork veining – porphyry target
SolGold plc annual report for the year ended 30 June 2019
35
Quillosisa Prospect
The Quillosisa epithermal target (northern target) returned anomalous results for Au, Ag, Pb, Zn, Sb, Bi coincident with mineralized
outcrops occurring in an area 500 x 150 meters.
Table 4: Significant Results from the Quillosisa Prospect
Sample ID
easting
northing
elevation
Au_gt
Ag_ppm
Cu_ppm
Pb_ppm
Zn_ppm
R03001156
664409
9638870
R03000159
663958
9638913
R03001157
664416
9638903
R03001169
664688
9639219
R03001194
664403
9638958
R03001195
664643
9639167
R03001171
664635
9639259
R03001203
664558
9638269
1815
1576
1823
1879
1851
1879
1905
1421
39.6
7.4
2.93
2.52
2.15
1.865
1.775
1.125
>100
7.12
>100
6.41
98.3
17.25
17.6
>100
81
154
189
156
372
432
368
1130
159.5
731
1745
3470
298
845
93
353
141
90
164
395
408
22960
>10000
3310
Santa Martha Prospect
Continued field mapping along the identified structural corridor has now discovered a significant copper gold molybdenum porphyry
target called Santa Martha. Highly anomalous rock values followed by strong auger soil anomalies show this target covers an area
1.2km by 0.5km and remains open to the east. Auger soils were unable to test the eastern flank of the anomaly due to a drainage
system comprising colluvial material.
The Santa Martha prospect consists of diorite, quartz diorite and small zones of tourmaline breccia. Hydrothermal alteration
comprises zones of biotite-sericite, quartz-sericite, chlorite, chlorite-epidote and sericite alteration.
The Santa Martha porphyry returned results high in Cu and Mo coincident with the mineralised outcrop displaying strong stockwork
quartz and feldspar veinlets, with disseminated chalcopyrite and secondary biotite in an area of 1200 x 600 meters.
Table 5 Significant results from rock chip sampling at Santa Martha
Sample ID
easting
northing
elevation
Cu %
Au g/t
Mo_ppm
R03001043
663071
9636625
R03001045
662921
9636654
R03001044
662950
9636668
R03001052
662932
9636671
R03000168
662908
9636607
R03001046
662829
9636695
1087
1126
115
1122
1149
1150
2.52
0.78
0.73
0.60
0.56
0.33
0.15
0.51
0.33
0.56
0.20
0.01
491.00
6.35
53.70
84.20
13.80
2.42
A ground magnetics geophysical program was completed covering both the Quillosisa and Santa Martha prospects. This program has
highlighted an area of magnetite destruction over the Santa Martha prospect.
A drilling program has been designed at both the Quillosisa and Santa Martha prospects that awaits permitting.
SolGold plc annual report for the year ended 30 June 2019
36
Cisne Victoria Project
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 170 km2
Primary Targets: Copper-gold porphyry
Morana Santiago province, South-eastern Ecuador
100%
Cruz del Sol S.A.
The project lies in south-eastern Ecuador within the eastern Jurassic Belt, which contains the Fruta del Norte epithermal gold deposit
(14 million ounces Au), the Mirador copper porphyry deposit (3 million tonnes Cu) and the Santa Barbara gold-(copper) porphyry
deposit (8 million ounces Au).
Numerous prospects have been discovered during SolGold’s initial geochemical stream sampling. Significant alteration and
mineralisation were identified that is indicative of a large porphyry system. Best results include a 7 metre continuous channel chip
sample that returned: 7m @ 2.28% Cu, 0.73 g/t Au, 8.83 g/t Ag.
Figure 27 – El Cisne – Victoria Located in southeastern Ecuador on the prolific Andean Copper Belt
SolGold plc annual report for the year ended 30 June 2019
37
Coangos Project
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 7 tenements (Coangos 1, Coangos 2, Chimius 1, Chimius 2, Chimius 3, Cisneros, Tsapa) 259 km2
Primary Targets: Porphyry & Epithermal Copper-gold
Morana Santiago province, south-eastern Ecuador
100%
Cruz Del Sol S.A.
The Coangos Project is located on the Southern Jurassic aged belt in Ecuador, which hosts the Fruta del Norte, Mirador and other
projects in Ecuador.
Cruz del Sol teams have discovered two areas of mineralised outcrops in the Coangos project, characterised by strong copper-
carbonates and copper-oxides exposed mainly in fractures.
Figure 28 – Coangos Project showing 4 geochemical anomalies investigated to date.
SolGold plc annual report for the year ended 30 June 2019
38
Figure 29 – mineralised outcrops in the Coangos project
Anomaly 1
Anomaly 1 contains mineralization hosted in volcanoclastic rocks. The copper-silver zones contain primary chalcocite and
chalcopyrite, and secondary chrysocolla, malachite, and tenorite. Near-source stream boulders with chrysocolla have returned very
high copper and silver grades. Stream outcrops are up to 120m in length.
The main vein-joint orientation is 20°/70°E. A second area of concentrated copper-silver occurrences is associated with regional
faults oriented 128°/62°W and 240°/85°W. Chrysocolla – tenorite occurs together with k-feldspar, plagioclase, and carbonates in
micro-fractures. The following significant results have been obtained from in situ outcrops:
•
•
•
•
•
•
R02001026
R02001027
R02001031
R02001019
R02001021
R02001017
9.27% Cu, 91.5g/t Ag
8.31% Cu, 99.8g/t Ag
6.12% Cu, 60.1g/t Ag
4.13% Cu, 23.0g/t Ag
3.19% Cu, 28.3g/t Ag
2.23% Cu, 17.3g/t Ag
Results from rock float samples include:
•
•
•
R02001010
R02001011
R02001012
23.2% Cu, 122g/t Ag, 0.98% Zn
20.6% Cu, 114g/t Ag
13.5% Cu, 90.4 g/t Ag
Teams have located likely sources of the high-grade results returned from transported boulders located in streams. The majority of
outcrops correspond to a repetitive sequence of sandstones and volcanic- breccias. The breccias present subangular clasts of volcanic
rocks with ferruginous interstitial matrix. Several mineralised structures that have corresponding high grades.
Anomaly 2
Anomaly 2 is located at the head of the Numpaim River where a breccia structure has been mapped. Mineralisation is associated
with a fault breccia 1.5m wide containing quartz veins up to 8mm thick, sugary quartz clasts, rhodochrosite, barite and calcite in a
zone of chlorite-sericite alteration.
SolGold plc annual report for the year ended 30 June 2019
39
The breccia outcrop contains up to 7% bornite, 3% chalcocite, 1% chalcopyrite 1% and 5% enargite. The breccia is exposed along
strike in two separate streams, located 200m apart. The structure has not been closed off and mapping continues in streams along
strike.
Rock chip samples from the breccia return:
•
•
•
R02001034 27.98% Cu, 227 g/t Ag, 0.98% Zn
R02001035 8.37% Cu
R02001036 6.45% Cu
Anomaly 2 mapping delineated an 8m wide mineralised breccia mapped over 200m in the southwestern edge of Anomaly 2. The
structure has quartz-sericite-chlorite alteration, containing abundant bornite, chalcopyrite, chalcocite and enargite.
Auger soil sampling over Anomalies 1 & 2 helped further delineate the Anomaly 1 & 2 prospects.
Chical Project
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 4 tenements (Chical 1, 2,3 and 4) 1835) km2
Primary Targets: Epithermal Copper-gold
Carchi province, Northern Ecuador
100%
Carnegie Ridge Resources S.A.
Follow up of anomalous stream sediment geochemistry has identified 5.8km² area of mineralised epithermal veining comprising 3
prospect areas; Pascal, La Esperanza and Espinoza prospects.
Mineralisation is associated with an extensive contact zone between intrusive granodiorite and gabbro with volcano-sedimentary
units. Mineralised is related to epithermal stockwork quartz veining with density of 10 to 15 per metre with associated strong
chlorite-sericite-epidote hydrothermal alteration.
SolGold plc annual report for the year ended 30 June 2019
40
Figure 30 - Located immediately northeast of the Cascabel concession
Pascal and Espinoza Prospects
Follow up mapping and rock chip sampling of a stream sediment geochemical gold anomaly, known as the Pascal and Espinoza
prospects returned rock results of up to 45.5 g/t Au in granodiorite and andesite rocks. Samples were taken from epithermal quartz
stockwork outcrops associated with the mineralisation. Significant rock chip results from the Pascal prospect include:
•
•
•
•
•
R01003083
R01003217
R01003148
R01003134
R01003064
45.5g/t Au (float)
7.05 g/t Au
3.27g/t Au
2.57g/t Au
2.41g/t Au
SolGold plc annual report for the year ended 30 June 2019
41
Figure 31 - Chical Project - sample R01003083 and R01003089
La Esperanza Prospect
A stream sediment geochemical copper anomaly was also identified in the La Esperanza prospect dominated by diorite and
granodiorites with veinlets of quartz – chalcopyrite associated with potassic alteration. This copper anomaly has coincident
molybdenum and copper - zinc ratio (Cu/Zn) geochemical anomalies. Best geochemical rock chip results include:
•
•
•
•
•
R01003071
R01003095
R01003156
R01003226
R01003157
1.04% Cu, 0.42 g/t Au, 886 ppm Mo
0.94% Cu, 0.18 g/t Au, 5.84 ppm Mo
0.9% Cu, 0.44 g/t Au, 348 ppm Mo
0.63% Cu, 0.59 g/t Au, 50.8 ppm Mo (float)
0.42% Cu, 0.1 g/t Au, 459 ppm Mo
SolGold plc annual report for the year ended 30 June 2019
42
AUSTRALIA
In Queensland, Australia, the Company has identified the following 4 major project areas:
(i) Rannes;
(ii) Mount Perry;
(iii) Normanby; and
(iv) Cracow West
SolGold continues to hold tenements across central and southeast Queensland, through its wholly owned subsidiaries, Central
Minerals Pty Ltd and Acapulco Mining Pty Ltd. Central Minerals Pty Ltd currently holds 5 exploration permits as follows: EPM 25300
(Cooper Consolidated, Rannes Project), EPM 18760 (Westwood), EPM 18032 (Cracow West), EPM 27211 (Mt Pring) and EPM 19639
(Goovigen Consolidated). Acapulco Mining Pty Ltd. currently holds exploration permits at EPM 25245 (Mount Perry) and EPM 19410
(Normanby).
Exploration during the reporting period included a single diamond hole at Cracow West (374.43m), 8 RC/Diamond holes at Westwood
(617.1m), 100 line-km’s / 126km2 Airborne EM (VTEM) and 3D inversion modelling at Rannes, tenement-wide photo-structural
interpretation at Normanby and the granting of a new EPM at Mt Pring.
Rannes Project (EPM 25300)
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 126 granted sub-blocks (circa 403km²)
Primary Targets: Disseminated and vein-hosted low sulphidation gold-silver deposits
140 km west of Gladstone, Queensland, Australia
100%
Central Minerals Pty Ltd
Located, 140 km west of Gladstone (Queensland, Australia), SolGold's principal targets at the Rannes project are 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 zones. Exploration has included tenement wide
stream sediment, soil and rock chip sampling surveys. A detailed airborne magnetic survey was recently re-interpreted to enhance
the development of the structural model of the belt. Exploration methods have included a 3D IP survey, detailed airborne magnetics,
geological mapping, and trenching all contributing to definition of additional drill targets at several prospects.
During the year ended 30 June 2019, a variable time airborne electromagnetic survey (VTEM) was completed during the reporting
period (100 line km’s, 126km2) and identified several conductive anomalies located both below the depth of drilling at the Crunchie
and Kauffman’s prospects as well as larger anomalies along strike in areas that have no historic drilling. Preliminary 3DEM inversion
modelling has resolved conductivities/resistivities down to 10 Ohm-m’s and are considered prospective. Targets will be ranked and
prioritized ahead of drill-testing in the 2019/2020 reporting period.
Mineral resource estimates completed by Hellman & Schofield Pty Ltd. and by H&S Consulting Pty. Ltd. includes resources in both
Indicated and Inferred categories for reporting under the Australasian Joint Ore Reserves Committee's "Code for Reporting of Mineral
Resources and Ore Reserves". The table below lists the current mineral resource estimates at the Kauffman’s, Crunchie, Cracklin'
Rosie, Porcupine and Brother prospects as of May 23, 2012. These estimates are based on gold to silver ratio of 1:50 and a 0.5 g/t
Au equivalent cut-off. The resource at 0.3 g/t Au cut-off was announced on May 23, 2012.
Prospect
Cut-Off
(Au.Eq)
Kauffman’s
0.5
Crunchie
Cracklin' Rosie
Porcupine
Brother
1.5
0.5
0.5
0.5
Total (All Prospects)
Resource
Category
Indicated
Inferred
Indicated
Inferred
Inferred
Inferred
Inferred
M.Tonnes
1.58
3.49
2.40
3.20
0.43
0.57
0.57
12.24
Au
(g/t)
0.79
0.74
0.46
0.49
0.59
0.50
0.60
0.63
Ag
(g/t)
10.30
8.90
42.40
39.80
5.60
7.50
1.10
Ounces
(Au)
Ounces
(Ag)
40,304
522,074
Ounces
(Au.Eq)
50,729
83,060
999,278
103,092
35,833
3,310,000
102,100
49,797
4,040,000
130,676
8,023
9,202
76,145
137,085
11,021
20,490
9,544
11,941
11,434
23.18
237,240
9,105,072
419,516
SolGold plc annual report for the year ended 30 June 2019
43
Figure 32 – Plan view of Rannes Project VTEM 3D inversion data. Warm colours represent lower resistivity / higher conductivity
where magenta equals 13 Ohm Resistor. Ranked conductors were modelled from late-time channels only. Note the relative
paucity of drilling proximal to modelled conductors. The three clustered 1st priority conductor targets in the southwest of the
survey area are coincident with gold-silver surface geochemistry and a strong magnetic feature, probably relating to an intrusive
complex coeval with mineralization.
Mount Perry Project (EPM 25245)
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 64 granted sub-blocks (circa 205km²)
Primary Targets: High grade, lode gold deposits and possible gold porphyry deposits
130 km northwest of Gympie, Queensland, Australia
100%
Acapulco Mining Pty Ltd.
The Mount Perry mineral field is located approximately 100 km southwest of Bundaberg (Queensland, Australia) and comprises
epithermal to mesothermal veins that cluster around mineralized porphyry intrusions and associated breccia bodies. The project is
located approximately 25km northwest of Evolution Mining’s 2Moz Mt Rawdon breccia-hosted epithermal gold deposit.
Assays were received for two RC water bores (NMN016, NMN017, total 59m) and two diamond holes (NMN018, NMN019, total
567.4 m). Drilling identified mineralization consistent with and indicative of a porphyry system, however, assay results were
disappointing and lacked gold within the system core assemblage (best intercept 76m @ 0.09% Cu, 0.97 g/t Ag from 110m, NMN018).
A comprehensive assessment of the project has identified the Upper Chinaman’s Creek prospects as the highest priority high-grade
opportunity. Work in the upcoming reporting period will include 3DEM inversion modelling and potentially a 3D IP survey (3.7 x
1.5km) that will help define key mineralized structures and allow prioritization of drill hole targets.
SolGold plc annual report for the year ended 30 June 2019
44
Figure 33 – 2018 VTEM survey conductivity image of the Chinaman’s Creek area within the far southern limits of EPM 25245.
Recent geological interpretation indicates a potentially linked mineralizing system between the southern Chinaman’s Creek
copper porphyry / intrusive breccia complex and the low sulphidation epithermal vein gold lodes of the Upper Chinaman’s Creek
and Spring Pig prospects. This epithermal system represents the best opportunity within the EPM for a +500koz, high-grade gold
deposit. The proposed 3DIP survey has been designed to test the limits of gold soil anomalism and covers the entire porphyry –
epithermal environment.
Normanby Project (EPM 19410)
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 60 granted sub-blocks (circa 192 km²)
Primary Targets:
120 km northwest of Mackay, Queensland, Australia
100%
Acapulco Mining Pty Ltd.
Intrusion-related epithermal gold veins and potential porphyry Cu-Au deposits
The Normanby Goldfield comprises over 300 historic pits and shafts located within 14 prospects along an 8km structural zone. Gold-
bearing quartz veins are hosted almost exclusively in the Shannon Vale Gabbro within a complex left-lateral dilation zone.
Work completed during the reporting period included completion of a tenement-wide photo-structural interpretation that resulted
in review and prioritization of key higher-grade targets. The Mt Flat Top prospect potentially sits at the transition between the
epithermal and porphyry Cu-Au environment and represents the best opportunity to define a bulk tonnage within the goldfield.
Mineralization at Mt Flat Top has been identified over a strike length of at least 500m and comprises 10-20m wide silica-pyrite zones
hosted within a broader <80m-wide sericite-pyrite alteration envelope. A 3D IP survey has been planned to define the mineralized
corridor and to assess the potential for bulk-tonnage, porphyry-type targets at depth.
SolGold plc annual report for the year ended 30 June 2019
45
Figure 34 - Airborne RTP magnetic image of the Normanby Goldfield showing historic workings, gold-in-soil geochemistry, key
structural elements and proposed 3DIP survey over the Mt Flat Top prospect and soil survey extensions of the Rosebud – Black
Snake system. The 3DIP survey has been planned to test the potential for the Mt Flat Top system to transition into a more
extensive porphyry system at depth. Resistivity can potentially map silicified mineralized structures and Induced Polarization
may indicate the presence of a broader phyllic alteration system surrounding a deeper porphyry environment.
Westwood Project (EPM 18760)
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 16 granted sub-blocks (circa 45km²)
Primary Targets: Ultramafic layered intrusion Pd-Au-Cu-Pt deposits
45 km west-southwest of Rockhampton, Queensland, Australia
100%
Central Minerals Pty Ltd.
Palladium-Gold-Copper ± Platinum mineralization at the Westwood project is associated with the Late Permian – Early Jurassic aged
Bucknall mafic-ultramafic layered gabbro intrusive complex.
The Company’s exploration has included stream sediment, soil and rock chip sampling and RC / Diamond drilling. Metal anomalism
is focused in the southeast part of the gabbro and is defined by a 2km strike of sporadic soil anomalism (+125ppb Pd, +46ppb Au,
+490ppm Cu, +27ppb Pt).
Reverse circulation and diamond drilling in 2018 (WWD001 – WWD004, 713.7m) focused in the far southeast of the complex and
identified a number of highly anomalous zones of magmatic sulphide concentration including 44m @ 1g/t combined PGE, 0.11% Cu
from 8m (WWD001) and 38m @ 0.27ppm combined PGE, 0.1% Cu from 22m (WWD004). Exploration during the reporting period
(WWD005 – WWD012, 617.1m, including 373.1m diamond) targeted lateral extension to known mineralization and untested
magnetic and electromagnetic anomalies in the northern limits of the complex. RC pre-collar assays available at time of reporting
include 46m @ 0.217 g/t Au, 0.157 g/t Pd, 0.13% Cu from 0m (WWD008) and 28m @ 0.176 g/t Pd from 2m (WWD010). Disseminated
sulphide mineralization (up to 5%) was identified in two drill holes adjacent to 2018 intercepts (WWD009, WWD010), however, assay
results were not available at time of reporting.
SolGold plc annual report for the year ended 30 June 2019
46
Mt Pring (EPM 27211)
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 40 granted sub-blocks (circa 120km²)
Primary Targets: Magmatic Ni-Cu-PGE sulphide deposits
65 km northwest of Proserpine, Queensland, Australia
100%
Central Minerals Pty Ltd.
The Mt Pring Project is located within the east-northeast trending Mt Carlton structural zone, approximately 60km east of Evolution
Mining’s Mt Carlton high-sulphidation Au-Ag deposit. The project hosts several, poorly-explored ultramafic intrusive complexes that
historically have never been assayed for gold or platinum group elements. Historical exploration is limited to Ni-Cu stream sediment
sampling by WMC in the late 1970’s and limited Ni-Cu soil sampling in the late 1980’s. Soil sampling at Mt Pring defined a 700 x
350m, +1,000ppm Ni anomaly that has not been followed up with more advanced exploration.
Exploration within the first reporting period will include tenement-wide photo-structural interpretation, stream sediment sampling
followed by mapping and soil sampling of identified targets.
Cracow West Project (EPM 18032)
Project Overview
Location:
Ownership:
Subsidiary:
Tenement Area: 12 granted sub-blocks (circa 38km²)
Primary Targets: Low-sulphidation epithermal Au-Ag deposits
260 km west-northwest of Gympie, Queensland, Australia
100%
Central Minerals Pty Ltd.
Gold mineralization at the Cracow mine is associated with Permian-aged, low-sulphidation, epithermal quartz veins which have been
emplaced along northwest and north-northwest trending fault zones. The Company's initial exploration concept was to explore for
a similar deposit to Cracow gold mine, but a recent review of the regional geology suggests that the anomalism seen at Cracow West
may be associated with a later phase of Triassic intrusions, suggesting a later mineralization event.
The Company's exploration at Cracow West has included stream sediment, soil and rock chip sampling. This has identified three
significant prospects: Dawson Park, Kambrook and Theodore Bends. A sub-audio magnetotellurics survey was completed over the
Kambrook and Dawson Park prospect which identified a potential buried target at the Dawson Park prospect, which coincides with
a distinct soil tellurium anomaly at surface.
EPM 18032 was renewed for a further 3 years (to 10th December 2020) and future work will include a re-interpretation of the
geophysical and structural dataset with specific focus on identifying high-priority targets within the Dawson park, Kambrook and
Theodore Bends prospects.
SolGold plc annual report for the year ended 30 June 2019
47
SOLOMON ISLANDS
The Kuma tenement in the Solomon Islands (South West Pacific) is considered by SolGold to be highly prospective for porphyry
copper gold and epithermal gold deposits.
Kuma Project
Project Overview
Location:
Ownership:
Tenement Area: 43 km2
Primary Targets: Copper-gold porphyry
37km South-east of Honiara on the island of Guadalcanal
100% ownership
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.
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 CuAu 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.
Geological reconnaissance surveys and mapping was conducted at Kuma in June. Activities focused on the Kuma and Alimuno Rivers
where large red boulders were discovered in the 1990s. Low temperature quartz veins with comb textures were observed in outcrop.
Surface alteration, geochemistry, and Terraspec results have been encouraging. Further work is planned to test the high sulfidation
Kuma prospect that focuses on the upper part of Kuma ridges and a drilling program is planned for 2019.
SolGold plc annual report for the year ended 30 June 2019
48
Figure 35 - Boulders at the Kuma River confirm the presence of high sulfidation system.
Mbetilonga Project
SolGold surrendered the Mbetilonga lease in December 2018.
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.
SolGold plc annual report for the year ended 30 June 2019
49
FINANCIAL REVIEW
The Group achieved several milestones during the financial year ended 30 June 2019. These included:
•
•
•
The raising of £45 million via the issue of 100,000,000 shares at 45p to BHP Billiton Ltd.
Exploration and evaluation expenditure of US$73 million for the year including the filing of the Preliminary Economic
Assessment for its Alpala Copper-Gold Silver Deposit and the release of the updated Alpala Mineral Resource Estimate.
Continued acquisition of US$6 million in landholdings in the Cascabel project area in anticipation of infrastructure
requirements for project development.
•
• Operating loss of US$33.4 million representing an increase of US$21.0 million over the prior year. The increase in loss is
largely attributable to a share-based payments expense of US $23.9 million recognised on the fair value of share options
granted to Directors, employee and contractors. This represents an increase of US$15.8 million over the prior year charge.
There was a reduction of US$2.6m in the unrealised foreign exchange gains recognised in the current year from US$3.2
million in the prior year to US$0.6 million in the current year. The reduction in unrealised foreign exchange gains is largely
attributable to the change in the Group’s reporting currency and the Company’s functional currency to the US dollar.
A gain of US$1.4 million recognised on the Company’s mark to market adjustment on its investment in Cornerstone Capital
Resources Inc.
Corporate and exploration costs have been predominantly in line with budgets with an average cash burn of approximately
US$6 million per month resulting from stringent cost and cash flow management.
The average cost per metre of drilling was $408/m in 2019 compared to $391/m in 2018.
•
•
•
Results
The Group incurred a loss before tax of US$32,684,699 for the year (2018: US$11,844,645). The increase in the loss before tax is
largely due to US$23,883,159 (2018: US$8,124,305) recognised as a share-based payments expense. This represents the Black-
Scholes fair value of share options granted to Directors, employees and contractors expensed due to the options vesting immediately
in the current year. Additionally, the Group experienced an increase in employee benefit expenses and insurance costs. The increase
in employee benefit expenses of US$1,129,388 from US$999,637 in 2018 to US$2,129,025 in 2019 was due to the fair value
adjustment of US$921,448 recognised on the interest free loan granted to employees to exercise options facilitated via the Company
Funded Loan Plan and payment of staff bonuses of US$800,081. Insurance costs increased from US$377,079 in 2018 to US$1,446,261
in 2019 largely attributable to increases in the political risk insurance premiums as a result of the increase in value of the Group’s
exploration assets.
An income tax benefit of US$614,906 (2018: tax expense of US$3,309,802) was recognised based primarily on the mark to market
adjustment of the Company’s investment in Cornerstone Capital Resources Inc.
A gain of US$1,441,319 (2018: loss of US$4,800,472) 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 loss of US$2,037,944 for the
financial year ended 30 June 2019 (2018: loss of US$4,176,439) recognised on exchange differences on translation of foreign
operations. The average exchange rate used to translate the Group’s Australian subsidiary financial statements for the year ended
30 June 2019 from Australian dollars to United States dollars was 0.7136 compared to 0.73852 for the financial year ended 30 June
2018.
Statement of Financial Position
As at 30 June 2019, the Group had net assets of approximately US$238.2 million, an increase of approximately US$67.6 million over
the previous financial year. This increase was largely associated with the completion of US$76.4 million in share placements, net of
costs which were largely expended on the Group’s exploration projects in Ecuador.
Cash Flow
Cash expenditure (before financing activities) for the year ended 30 June 2019 was US$88.2 million (2018 US$67,7 million). During
the financial year ended 30 June 2019, cash of US$68,984,676 (2018: US$58,630,346) was received from the issue of shares via
private placements and the exercise of share options. Accordingly, the net cash outflow of the Group for the year ended 30 June
2019 was US$19,237,376 (2018: outflow of US$9,027,849).
Cash of approximately US$74.0 million (2017: US$56.0 million) was invested by the Group on exploration expenditure during the
year.
SolGold plc annual report for the year ended 30 June 2019
50
Closing Cash
As at 30 June 2019, the Group held cash balances of US41.7 million (2018: US$60.5 million).
Post Reporting Date Events
On 5 August 2019, tenements wholly within an area of mutual interest extending 5 kms from the boundary of the Cascabel licence
which were granted to SolGold's 100% owned subsidiary Carnegie Ridge Resources SA (CRRSA) were transferred to Exploraciones
Novomining SA (ENSA) in which SolGold has a registered and beneficial 85% interest. The tenements which have been transferred
from CRRSA to ENSA are: Blanca 2, Nieves 2 and Rio Mira 2.
In 2017, Major Drilling Group International Ecuador (hereinafter “Major”) filed an arbitration claim before the Arbitration Center of
the Quito Chamber of Commerce against ENSA for the amount of US$350,000. Major alleged a breach of the drilling contract signed
by the parties on 22 September 2016 (hereinafter “Agreement”). On 1 September 2017 ENSA filed a counterclaim against Major for
the amount of US$ 360,000 for compensation for damages caused by Major. On 5 August 2019 Major and ENSA agreed to settle their
dealings out of court by way of a USD$200,000 payment to Major for outstanding invoices. No additional penalties of payments will
be paid by either company in excess of this USD$200,000.
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.
Outlook
The focus of the Group during the financial year ending 30 June 2020 will be on the collection of additional metallurgical and
geotechnical data and the delivery of a third mineral resource estimate which will aim to deliver conversion of the bulk of the current
inferred resource into indicated status as the central basis for the PFS. The PFS is targeted to be completed by end Q1 2020 with a
Definitive Feasibility Study expected to be scheduled for completion at the end of 2020.
Furthermore, the Group is intent on the application of its strategy to its 12 other wholly owned and highly prospective targets
throughout Ecuador. The Company is focussed on the creation of a copper gold major production company in Ecuador, substantially
covering one of the world’s most under explored and prolifically mineralised porphyry copper gold provinces in the norther Andean
Copper Belt.
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:
Total cost per metre drilled
Cost management and performance against budget
• Drilling efficiency and the associated metres drilled;
•
•
• Health and safety management
•
•
Compliance with the Environmental Management Plan
Staffing mix and engagement of communities
While the above key performance indicators are the main drivers of the Group’s continuing exploration program, the primary
objectives for 2020 would be the update of the Mineral Resource Estimate (MRE#3) at the Alpala deposit, completion of a Pre-
Feasibility Study by end Q1 2020, progression and drill permitting of the 12 priority regional targets and commencement of fiscal
discussions with the Ecuadorean Government.
The review of the business with reference to key performance indicators is set out in the Operations Report and Financial Review on
pages 7 to 58.
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.
SolGold plc annual report for the year ended 30 June 2019
51
Equity
Since the date of the last Annual Report, the Company has issued the following equities:
On 4 October 2018, the Company issued an additional 550,000 shares at £0.28 as a result of the exercise of options previously issued
to contractors of the Company in 2016.
On 11 October 2018, the Company issued an additional 9,795,884 shares at £0.14 to raise US$1.79 million (£1.37 million) in cash as
a result of the exercise of Maxit Capital LP’s options.
On 11 October 2018, the Company issued an additional 9,795,884 shares at £0.28 to raise US$3.59 million (£2.74 million) in cash as
a result of the exercise of Maxit Capital LP’s options.
On 17 October, the Company issued an additional 100,000,000 shares at £0.45 to raise US$59.03 million (£45 million) in cash to BHP
Billiton Holdings Limited (“BHP”).
On 29 October 2018, the Company issued an additional 20,624,553 shares at £0.28 as a result of the exercise of options previously
issued to employees of the Company in 2016. Of this total 19,950,000 were funded through the Company Funded Loan Plan and
674,553 were paid for in cash.
On 6 November 2018, the Company issued a total of 82,875,000 unlisted options to Employees and Contractors. The options have a
strike price of £0.60 each and are exercisable through to 5 November 2021.
On 8 November 2018, the Company issued an additional 2,596,826 shares at £0.3888 to BHP pursuant to “top-up-rights” held by
BHP pursuant to its Share Subscription Agreement. The allotment price was based on the 10-day VWAP, in accordance with the terms
of the Share Subscription Agreement.
On 26 November 2018, the Company issued an additional 6,712,200 shares at £0.3714 to Newcrest International Pty Ltd (“Newcrest
International”), a wholly owned subsidiary of Newcrest Mining Ltd pursuant to “top-up-rights” held by Newcrest International
pursuant to the Newcrest Subscription Agreement (as varied). The allotment price was based on the 10-day VWAP, in accordance
with the terms of the Newcrest Subscription Agreement.
On 20 December 2018, the Company issued a total of 11,375,000 unlisted options to Directors. The options have a strike price of
£0.60 each and are exercisable through to 20 December 2021.
At year end and as at the date of this report the Company had a total of 1,846,321,033 shares and 160,262,000 options on issue.
SolGold plc annual report for the year ended 30 June 2019
52
PRINCIPAL RISKS & UNCERTAINTIES
Risk
Funding Risks
Description
The exploration and development of the Group’s
projects will require substantial additional financing
above and beyond the Group’s current treasury.
General
Exploration
Extraction Risks
and
Title Risk
Current global financial conditions have been subject
to significant volatility, and access to public financing,
for resource companies, has been
particularly
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
through drilling and
Reserves and Resources
determine
other
metallurgical
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.
testing,
and
Key Mitigators
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.
is management’s view that high quality
It
exploration projects should always be capable of
being financed.
and
exploration
The Group uses modern geophysical and
geochemical
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.
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.
SolGold plc annual report for the year ended 30 June 2019
53
Principal Risks & Uncertainties (continued)
Risk
Geopolitical, Regulatory
and Sovereign Risk
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
in the countries
local authorities
with
where the Group operates.
Description
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.
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.
to
Under Ecuadorean
citizens have a
law,
constitutional right pursuant to a judicial process,
to seek to have a referendum held on a specific
subject matter. Recently, an application was
made by applicants
the Ecuadorean
Constitutional Court to request to have a
referendum held, the effect of which was to seek
to stop mining activities at Cascabel. The
Constitutional Court unanimously rejected the
application. However, despite the Constitutional
Court ruling, no assurance can be given that at
some
similar application
designed to seek to stop mining at Cascabel, will
not be made.
future
time
a
The Group is required to obtain governmental
permits for it to conduct initial exploration and
scout drilling on its regional Ecuador concessions.
Obtaining the necessary permits can be a complex
and time-consuming process, which at times may
involve several different government agencies
that may not have the necessary expertise,
resources or political disposition needed for
efficient and timely processing. The duration and
success of the Group’s efforts to obtain permits
are contingent upon many variables not within its
control, including the interpretation of applicable
by permitting
requirements
authorities, the expertise and diligence of civil
servants, and
for agency
decisions. The Group may not be able to obtain
permits that are necessary to its operations. Any
unexpected delays or costs associated with the
permitting process could slow exploration and
could adversely impact the Group’s operations.
implemented
timeframes
the
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.
SolGold plc annual report for the year ended 30 June 2019
54
Principal Risks & Uncertainties (continued)
Risk
Land Access Risk
Environmental Risk
Description
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
in real property
interest
groups with an
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.
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
its
the Group’s ability
exploration rights in Ecuador.
to explore under
Currency Risk
The Group’s operations are sensitive to currency
movements, especially
the
Australian Dollar, US Dollar and British Pound.
These movements can have a negative impact on
the Group’s earnings.
those between
Key Mitigators
Attention is focused on maintaining sound
local communities and
relations with
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
the Board.
issues and
Furthermore, there is regular dialogue with
the affected communities by
senior
executives.
reports
to
on
the
compliance with
compliance with
line with all Ecuadorian mining
In
companies, the management of this risk is
based
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
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.
SolGold plc annual report for the year ended 30 June 2019
55
OUR SUSTAINABLE APPROACH
We are committed to a sustainable approach to exploration and mining. Transparent and responsible practices are critical to our
long-term success.
SolGold is committed to engaging openly and frequently with all our stakeholder groups
•
•
•
•
•
•
•
Employees, workers
Local communities
Local authorities
Indigenous groups
Suppliers
Government agencies, ministries, representatives
Shareholders, investors
Our priorities are :
• Our people
• Our community
• Our environment
Our goals are:
•
•
•
•
•
•
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
Our people
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 2019, employed over 650 people, of which 98% were Ecuadorian and of these 11% are women. 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.
During the year the Company strengthened the diversity of the Board consisting of 8 members, by appointing its first female director,
Anna Legge in June 2019.
SolGold plc annual report for the year ended 30 June 2019
56
Health & Safety
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.
Community Relations
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, 8 employees in the Cascabel team and 19 employees across the 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
27 experienced professionals in our Social Team with backgrounds in human development, economics, agronomy and project
management
SolGold’s long-term ambition is to help develop diverse and thriving economies that are sustainable beyond the life of each project.
In order to achieve its ambition, some of the key community activities carried out during the year included:
•
•
•
•
Creation of several small business initiatives in the community to promote farming of agricultural products and livestock
as additional sources of income.
Improvement of the educational infrastructure at the townships of Lita and La Carolina to contribute to the physical and
organisational improvement of formal education.
Establishment of a health and sanitisation program for the surrounding townships to improve the care, promotion and
prevention of disease, especially for children, pregnant women and seniors.
Art for Kids initiative to promote environmental awareness and preservation of nature through the development of artistic
abilities of children.
SolGold plc annual report for the year ended 30 June 2019
57
Environmental stewardship
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 minimizing 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
Regularly monitoring our environmental impact and adapting procedures and practices where required
During the financial year ended 30 June 2019, SolGold conducted the following key environmental activities to minimise its
environmental footprint at the Cascabel project:
•
•
•
Rehabilitation and the revegetation of a total of 1423m2 of intervened drilling platforms and 1214m2 of pits for drilling
sediments.
Implementation of the Million Plants Program, which aims to revegetate areas that have been historically damaged by the
inhabitants of the project area.
Training workshops for members of the community on environmental issues related to: Legislation, Environmental License
and Environmental Management Plans.
Construction of the second stage of the hazardous and non-hazardous waste storage area at the Alpala camp.
Construction of five hydrological stations at the Parambas, Chinambicito, Collapi, Cachaco and Cristal rivers.
Installation of two weather stations in the Rocafuerte and Alpala camps.
Installation of a new Wastewater Treatment Plant at the Alpala camp.
•
•
•
•
• Monthly monitoring campaigns for water and sediments
•
Construction of a new composting organic waste area at the Rocafuerte Camp.
The strategic report was authorised for issue and signed on behalf of the directors by,
Nicholas Mather
Chief Executive Officer and Managing Director
15 August 2019
SolGold plc annual report for the year ended 30 June 2019
58
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, the Company 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 (available on the Company’s website) 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 Board 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 the leadership of
the Board, 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 of 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 Directors’ Board and Strategy Meetings;
attend all shareholders' Meetings;
attend any special Board or other meeting that may be convened (including committee meetings of which the Director is
a member); and
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 three Executive Directors and five Non-Executive Directors. Dr. Robert Weinberg,
Mr Liam Twigger, and Mr Craig Jones are considered to be independent by the Board. Mr Nicholas Mather is not independent as he
is the Chief Executive Officer of the Company. Ms Anna Legge and Mr Jason Ward are not considered independent as they are both
employed by the Company in an executive capacity. Mr 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. Mr James Clare is not considered independent as
he is a partner in the Canadian law firm Bennett Jones LLP 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.
SolGold plc annual report for the year ended 30 June 2019
59
The Board has delegated to the Chief Executive Officer (CEO) the day-to-day management of the Company under clearly defined
terms of reference. The CEO is supported by experienced management team including the Global Exploration Manager, the UK
Markets and Investor Relations Executive, the Chief Financial Officer and the 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.
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 OF DIRECTORS AND COMPANY SECRETARY
C H A I R M A N
Brian Moller
Mr Moller was appointed Non-Executive Director on 11 May 2005 and assumed the role of Non-Executive Chairman on 28 February
2013. Mr Moller 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.
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.
Committee member: Audit and Risk Management Committee and HSEC Committee
C H I E F E X E C U T I V E O F F I C E R
Nicholas Mather
Mr Mather, Chief Executive Officer and Executive Director, was appointed on 11 May 2005. Mr Mather graduated in 1979 from the
University of Queensland with a B.Sc. (Hons, Geology), and has a special area of experience and expertise in the generation of, and
entry into undervalued or unrecognised resource exploration opportunities. He has been involved in the junior resource sector at all
levels for more than 30 years. In that time, he has been instrumental in the delivery of major resource projects that resulted in nine
corporate takeovers and over 5 billion dollars to shareholders.
Mr Mather was co-founder of Arrow Energy NL (an ASX-listed company) and was responsible for the generation of its Surat Basin
Coal Bed Methane project and served as an Executive Director until 2004. He was also founder and Chairman of Waratah Coal Inc.
until it was acquired in December 2008 and co-founder and Non-Executive Director of Bow Energy Limited until its recent takeover
by Arrow Energy Pty Ltd in January 2012. Mr Mather and the DGR Global team founded Orbis Gold in 2006 and continued to hold a
significant equity stake and board position through to its takeover in February of 2015. Previously as CEO of BeMax Resources NL (an
ASX-listed company), Mr Mather headed the discovery of the company's Pooncarie mineral sands project in 1998. He has also been
a Non-Executive Director of Ballarat Goldfields, having assisted with the recapitalisation of the company in 2002.
Mr Mather is Managing Director and Chief Executive Officer of DGR Global, Executive Chairman of Armour Energy Limited (an ASX-
listed company) and Non-Executive Director of IronRidge Resources Limited (an AIM-listed company), Dark Horse Resources Limited
(an ASX-listed company), Aus Tin Mining Limited (an ASX-listed company) and Lakes Oil NL (an ASX-listed company).
Committee member: HSEC Committee
SolGold plc annual report for the year ended 30 June 2019
60
S E N I O R I N D E P E N D E N T D I R E C T O R
Dr Robert Weinberg
Dr Weinberg was appointed 22 November 2005 as a Non-Executive Director and is considered to be the Company’s Senior
Independent Director. Dr Weinberg gained his doctorate in geology from Oxford University in 1973, 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 of 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.
Committee member: Audit and Risk Management Committee and HSEC Committee
N O N- E X E C U T I V E D I R E C T O R
Craig Jones
Mr Jones was appointed on 3 March 2017. Mr Jones 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.
Committee member: Remuneration Committee and HSEC Committee
N O N- E X E C U T I V E D I R E C T O R
James Clare
Mr Clare was appointed on 26 April 2018 and 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 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.
Committee member: Remuneration Committee and HSEC Committee
SolGold plc annual report for the year ended 30 June 2019
61
N O N- E X E C U T I V E D I R E C T O R
Liam Twigger
Mr Twigger was appointed on 17 June 2019 and is the Managing Director and Principal of PCF Capital Group, a licensed and
independent investment banking and corporate advisory business based in Perth, Western Australia. Under Liam’s stewardship,
PCF Capital Group has grown to become one of Australia’s leading resource sector corporate advisory firms. The firm has
completed over 130 transactions for in excess of AUD3.5 billion in value and is Australia’s leading advisor on mine sales.
Liam is the Principal of mine brokerage business MinesOnline.com and gold royalty and streaming business FutureGold, which
plans to issue Digital Securities via blockchain on a regulated Digital Exchange. He is also a Non-Executive Director of the Western
Australian Government owned Gold Corporation (trading as the Perth Mint), a gold refining and marketing business that refines
300 tonnes of gold per annum and has an annual turnover of AUD18 billion.
Liam holds a Graduate Diploma in Business, a Bachelor of Economics and is a Certified Practicing Accountant.
Committee member: Audit and Risk Management Committee, Remuneration Committee, and HSEC Committee
E X E C U T I V E D I R E C T O R
Jason Ward
Mr Ward was appointed on 17 June 2019 and is Head of Exploration at SolGold. Mr Ward has been instrumental in the Company’s
success to date. Having been involved in the Company since its inception in 2006, Jason has played a critical role in developing
SolGold’s outstanding presence in Ecuador. Alongside developing the Cascabel project, in which capacity he is President of the
Ecuadorean holding company Exploraciones Novomining S.A. (ENSA), and managing SolGold’s four 100% owned subsidiaries,
which have produced an unrivalled exploration portfolio across the rest of Ecuador, Jason has created a fully comprehensive
corporate infrastructure for SolGold in Ecuador, run via the Company’s office in Quito. In addition to Jason’s technical role he
oversees all local labour force development, community relations, landholder relations and government relations.
Jason is an exploration geologist with 25 years’ experience. He has an extensive track record of successfully managing exploration
teams working with a wide variety of cultures in challenging social, physical and geological terrains and remote locations around
the world.
Jason holds a Bachelor of Applied Science (Geology) and is a Fellow of the Australasian Institute of Mining and Metallurgy. Jason
is also fluent in Spanish.
Committee member: HSEC Committee
E X E C U T I V E D I R E C T O R
Anna Legge
Ms Legge was appointed on 17 June 2019. Ms Legge has worked with SolGold since 2013, initially as a consultant before moving
in house with SolGold and establishing the Company’s London office in early 2017. As Head of Communications, Anna manages
media relations, investor and capital market relations, in-country public relations and sustainability reporting. Anna is closely
involved in SolGold’s strategic decision-making and the development of SolGold’s communications strategy in Ecuador and with
Government.
Ms Legge has over 10 years’ experience working in financial and corporate communications and has advised AIM, FTSE100, ASX,
JSE and TSX- listed mining companies operating in multiple jurisdictions around the world. Her experience spans crisis
communications, M&A transactions, internal communications, and corporate reputation management.
Anna holds a Bachelor of Politics and Economics Degree from Loughborough University in the UK.
Committee member: HSEC Committee
SolGold plc annual report for the year ended 30 June 2019
62
C O M P A N Y S E C R E T A R Y
Karl Schlobohm
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.
B O A R D C H A N G E S D U R I N G F Y 2 0 1 9
Mr John Bovard retired as a Non-Executive Director from the SolGold Board of Directors on 20 December 2018.
On 17 June 2019, Mr Liam Twigger (independent Non-Executive), Mr Jason Ward (Executive), and Ms Anna Legge (Executive) were
appointed as Directors of the Company.
A T T E N D A N C E R E C O R D
Directors’ attendance at Board and Committee meetings which they were eligible to attend the meetings during 2019 was as follows:
Full Board
Audit & Risk
Committee
Remuneration
Committee
HSEC
Committee
Total Meetings Held
Attendance:
Brian Moller
Nicholas Mather
John Bovard (retired 20 Dec 2018)
Robert Weinberg
Craig Jones
James Clare
Liam Twigger (appointed 17 June 2019)
Anna Legge (appointed 17 June 2019)
Jason Ward (appointed 17 June 2019)
7
7
7
3
7
7
7
1
1
1
3
3
-
-
3
-
-
-
-
-
1
1
1
1
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
SolGold plc annual report for the year ended 30 June 2019
63
N O M I N A T I O N O F D I R E C T O R S
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 adopted a nominee director policy (as part of the Corporate Governance Charter) setting out the principles to be
followed by the Board in respect of those Directors that are nominated by a Shareholder and the nominating shareholders. The
Corporate Governance Charter is available on the Company’s website.
B O A R D E V A L U A T I O N
During 2019 and as part of the ongoing compliance requirements for the Company’s LSE and TSX listings, the Board reviewed its
performance from the point of view of its composition, mix of skills, committee composition and roles. Based on this review, the
composition of the Board was increased to 9 members to strengthen its independence and diversity. 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.
O R I E N T A T I O N A N D C O N T I N U I N G E D U C A T I O N
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.
R E L A T I O N S W I T H S H A R E H O L D E R S
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 (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.
R I S K M A N A G E M E N T A N D I N T E R N A L C O N T R O L
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.
SolGold plc annual report for the year ended 30 June 2019
64
The principal risks and uncertainties identified by the Company are shown on pages 53 to 55. 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 be 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 Directors’ responsibilities in light of the financial statements is on page 71.
C o m m i t t e e R e v i e w s
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 Management Committee
C o m p o s i t i o n
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 currently comprised of three members, all of whom are Non-Executive Directors of
the Company. The members of the Committee are Mr Liam Twigger, Mr Brian Moller, and Dr Robert Weinberg. Mr Twigger is the
Chair of the Audit and Risk Management Committee.
The members of the Committee 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 60 to 62.
SolGold plc annual report for the year ended 30 June 2019
65
R o l e a n d R e s p o n s i b i l i t i e s
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.
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;
monitoring corporate conduct and business ethics, including auditor independence and ongoing compliance with laws and
reviewing the scope and results of both external and internal audits;
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;
reviewing matters of significance affecting the financial 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;
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;
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.
M a i n A c t i v i t i e s C o v e r e d D u r i n g F Y 2 0 1 9
The Committee’s activities focused on the following matters during the financial year ended 30 June 2019:
reviewing the change in presentational and functional currency
reviewing the impairment assessment of exploration and evaluation assets;
reviewing the asset carrying values and other material accounting matters;
discussing equity transactions and share based payments;
MD&A report preparation to comply with TSX regulatory requirements; and
reviewing all documents within the Annual Report and half-yearly financial input.
SolGold plc annual report for the year ended 30 June 2019
66
R e m u n e r a t i o n C o m m i t t e e
C o m p o s i t i o n
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.
At 30 June 2019, the members of the Remuneration Committee are Mr James Clare (as Chair), Mr Craig Jones, and Mr Liam Twigger.
Details of the experience and qualifications of Committee members are set out on pages 60 to 62.
Prior to the retirement of Mr John Bovard and appointment of new Directors to the Board, the Remuneration Committee was
comprised of Mr John Bovard (as Chair), Mr Nicholas Mather, Mr Robert Weinberg and Mr Brian Moller.
R o l e a n d R e s p o n s i b i l i t i e s
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’s and Non-Executive Directors’
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.
M a i n a c t i v i t i e s c o v e r e d d u r i n g F Y 2 0 1 9
The Committee had one meeting during the financial year ended 30 June 2019 and the main item discussed was executive and staff
bonuses.
H S E C C o m m i t t e e
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.
C o m p o s i t i o n
Currently the entire Board fulfils this role.
SolGold plc annual report for the year ended 30 June 2019
67
R o l e a n d R e s p o n s i b i l i t i e s
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.
SolGold plc annual report for the year ended 30 June 2019
68
DIRECTORS’ REPORT
The Directors present their annual report and audited financial statements for the year ended 30 June 2019.
Results
The Group’s consolidated loss for the year was US$32,069,793 (2018: US$15,154,446).
Changes in Share Capital During 2019
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 (2018: 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 and employees under the Company
Loan Funded Plan. 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 (2018: nil).
Going Concern
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 US$41,746,200 in cash and
cash equivalents at 30 June 2019 and has sufficient working capital levels to operate as a going concern for the next 12 months and
meet its exploration commitments.
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.
Global greenhouse gas emissions
Under the Companies Act 2006 (Strategic and Directors’ Reports) Regulations 2013, SI 2013/1970 (the Regulations), quoted
companies are required to report their annual greenhouse gas (GHG) emissions in their directors’ report.
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.
SolGold plc annual report for the year ended 30 June 2019
69
Scope of reported emissions
Emissions data from sources within Scope 1 and Scope 2 of the Company’s operational boundaries is detailed below. 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.
In the reporting year (1 July 2018 to 30 June 2019), the intensity ratio for “Cascabel” operations was 0.05mtCO2e/metre drilled (1
July 2017 to 30 June 2018: 0.05mtCO2e/metre drilled).
Total greenhouse gas emissions data for the year from 1 July 2018 to 30 June 2019
Year chosen as base year (Financial Year)
1 July 2018 - 30 June 2019
Base year emissions
EMISSIONS
Scope 1
Scope 2
TOTAL
Currency
TOTAL
(mtCO2e)
4,767
44
4,811
CO2
(mtCO2e)
4,714
44
4,758
CH4
(mtCO2e)
37
0
37
N2O
(mtCO2e)
16
0
16
HFCs
(mtCO2e)
PFCs
(mtCO2e)
SF6
(mtCO2e)
-
-
-
-
-
-
-
-
-
The functional currency of SolGold plc changed from the Australian Dollar to the United States Dollar during the financial year ended
30 June 2019. The functional currency of the 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 United States
dollars and all amounts presented in the Directors’ Report and financial statements are presented in United States dollars unless
otherwise indicated.
Directors
The Directors who held office during the year were as follows:
Nicholas Mather
Brian Moller
Robert Weinberg
John Bovard
Craig Jones
James Clare
Jason Ward
Anna Legge
Liam Twigger
Executive Director
Non-Executive Chairman
Non-Executive Director
Non-Executive Director – retired 20 December 2018
Non-Executive Director
Non-Executive Director
Executive Director – appointed 17 June 2019
Executive Director – appointed 17 June 2019
Non-Executive Director – appointed 17 June 2019
The Company has a Directors’ and Officers’ Liability insurance policy for all its Directors.
Related Party Transactions
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.
SolGold plc annual report for the year ended 30 June 2019
70
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.
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 August 2019, tenements wholly within an area of mutual interest extending 5 kms from the boundary of the Cascabel licence
which were granted to SolGold's 100% owned subsidiary Carnegie Ridge Resources SA (CRRSA) were transferred to Exploraciones
Novomining SA (ENSA) in which SolGold has a registered and beneficial 85% interest. The tenements which have been transferred
from CRRSA to ENSA are: Blanca 2, Nieves 2 and Rio Mira 2.
In 2017, Major Drilling Group International Ecuador (hereinafter “Major”) filed an arbitration claim before the Arbitration Center of
the Quito Chamber of Commerce against ENSA for the amount of US$350,000. Major alleged a breach of the drilling contract signed
by the parties on 22 September 2016 (hereinafter “Agreement”). On 1 September 2017 ENSA filed a counterclaim against Major for
the amount of US$ 360,000 for compensation for damages caused by Major. On 5 August 2019 Major and ENSA agreed to settle their
dealings out of court by way of a USD$200,000 payment to Major for outstanding invoices. No additional penalties of payments will
be paid by either company in excess of this USD$200,000.
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.
Directors’ Responsibility Statement
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; and
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.
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 accuracy at any time the financial position of the Company and enable them to ensure
that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website Publication
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.
SolGold plc annual report for the year ended 30 June 2019
71
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
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.
This report was approved by the board on 15 August 2019 and signed on its behalf.
Karl Schlobohm
Company Secretary
Lvl 27, 111 Eagle St
Brisbane QLD 4000
Australia
SolGold plc annual report for the year ended 30 June 2019
72
Statement of the Chairman of the Remuneration Committee
The remuneration committee presents its report for the year ended 30 June 2019.
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 September 2019.
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 December 2018.
The remuneration committee reviewed the existing policy and deemed no changes necessary to the current arrangements.
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.
Mr James Clare
Chairman – Remuneration Committee
Brisbane QLD 4000
Australia
Signed on 15 August 2019
SolGold plc annual report for the year ended 30 June 2019
73
ANNUAL REMUNERATION REPORT
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 three members: Mr. James Clare (the Chair of the Remuneration
Committee), Mr. Liam Twigger and Mr. Craig Jones, all of whom are independent directors with the exception of Mr. James Clare.
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 fulfil the Remuneration
Committee's duties and responsibilities.
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$600,000. From time to time, the Board, in its discretion, may also compensate
directors with fees for their services on Board projects. The Company has agreed to reimburse directors for all reasonable expenses
incurred in order to attend meetings and any other business they may conduct on behalf of the Company.
SolGold plc annual report for the year ended 30 June 2019
74
Remuneration Details
Single total figure of remuneration for the years ended 30 June 2019 and 2018:
Brian Moller
2019
2018
Nicholas Mather
2019
2018
Robert Weinberg
2019
2018
John Bovard1
2019
2018
Craig Jones
2019
2018
James Clare
2019
2018
Jason Ward2
2019
2018
Liam Twigger3
2019
2018
Anna Legge2
2019
2018
Total remuneration
2019
2018
Salaries
and Fees
US$
Bonuses
Benefits
US$
US$
Total before
share options
US$
Share
options
US$
Total
US$
78,015
84,557
425,386
307,480
49,671
53,809
24,945
53,809
49,678
53,809
49,678
8,968
-
-
114,036
-
-
-
-
-
-
-
-
-
260,125
-
205,264
-
1,914
-
113,546
-
1,052,958
562,432
-
-
70,919
-
390,219
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,022
-
3,022
-
78,015
84,557
540,182
486,865
618,197
571,422
539,422
307,480
2,875,779
3,408,053
3,415,201
3,715,533
49,671
53,809
24,945
53,809
49,678
53,809
49,678
8,968
332,299
292,119
168,492
292,119
332,299
292,119
573,327
-
381,970
345,928
193,437
345,928
381,977
345,928
623,005
8,968
465,389
-
1,421,592
-
1,886,981
-
1,914
-
187,487
-
-
-
1,914
-
809,947
-
997,434
-
1,446,199
562,432
7,053,917
4,771,275
8,500,116
5,333,707
1 John Bovard retired as a Non-Executive Director on 20 December 2018.
2 Jason Ward and Anna Legge were appointed as Executive Directors effective 17 June 2019. Salaries and Fees above includes total
remuneration paid for the year, including payments prior to being appointed as Executive Directors. Jason Ward was paid $11,473
and Anna Legge was paid $7,329 during the period 17 June 2019 to 30 June 2019.
3 Liam Twigger was appointed as Non-Executive Director effective 17 June 2019.
SolGold plc annual report for the year ended 30 June 2019
75
Summary of Directors’ terms
Brian Moller
Date of contract
12 December 2005
Nicholas Mather
Robert Weinberg
23 June 2017
12 December 2005
Craig Jones
27 February 2017
James Clare
26 April 2018
Jason Ward
Liam Twigger
17 June 2019
17 June 2019
Anna Legge
17 June 2019
Share option schemes
Unexpired term
Retire by rotation
under the Articles of
Association of the
Company
3 years
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
2 years
Retire by rotation
under the Articles of
Association of the
Company
2 years
Notice period
3 months
12 months
3 months
3 months
3 months
12 months
3 months
2 months
The Employee Share Option Plan (the "ESOP") 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 2019, the following options have been issued
under the ESOP (no performance conditions) which are fully vested:
Balance at
30 June
2018
Granted as
remuneration
Exercised
Forfeited
Balance at
30 June
2019
Exercise
price
Exercise period
Directors
Brian Moller
Nicholas Mather
Robert Weinberg
John Bovard
Craig Jones
James Clare
Jason Ward
Liam Twigger
Anna Legge
Total
3,750,000
26,250,000
2,250,000
2,250,000
2,250,000
-
10,000,000
-
-
46,750,000
1,425,000
5,000,000
900,000
-
900,000
3,150,000
5,000,000
-
6,000,000
22,375,000
-
-
-
-
-
-
(5,000,000)
-
-
(5,000,000)
-
-
-
(2,250,000)
-
-
-
-
-
(2,250,000)
5,175,000
31,250,000
3,150,000
-
3,150,000
3,150,000
10,000,000
-
6,000,000
61,875,000
60p
60p
60p
-
60p
60p
60p
-
40p/60p
28/01/19 – 20/12/21
28/01/19 – 20/12/21
28/01/19 – 20/12/21
-
28/01/19 – 20/12/21
20/12/18 – 20/12/21
08/08/20 – 06/11/21
-
04/07/20 – 06/11/21
No consideration is payable for the grant of options under the Share Incentive Plan. The options at 30 June 2019 were fully vested.
Refer Note 19 for the terms and conditions attaching to the options granted under the ESOP as well as the assumptions used to
calculate the fair value of the options.
SolGold plc annual report for the year ended 30 June 2019
76
Payments to past directors
No payments were made to past directors in the year ended 30 June 2019.
Payments for loss of office
No payments for loss of office were made in the year ended 30 June 2019.
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
Craig Jones
James Clare
Jason Ward
Liam Twigger
Anna Legge
Beneficial
Non Beneficial
30 June 2019
5,189,121
82,186,957
4,296,091
-
-
9,978,581
-
-
101,650,750
30 June 2018
5,189,121
82,186,957
4,296,091
-
-
-
-
-
91,672,169
30 June 2019
-
7,331,318
-
-
-
-
-
-
7,331,318
30 June 2018
-
7,731,318
-
-
-
-
-
-
7,731,318
There are no requirements or restrictions on Directors to hold shares in the Company.
Relationship between remuneration and Company performance (Unaudited)
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 2015
30 June 2016
30 June 2017
30 June 2018
30 June 2019
Share price at year
end
Loss per share
(cents)
£0.0225
£0.03075
£0.3925
£0.2280
(0.6)
(0.7)
(0.3)
(0.9)
£0.3200
(1.8)
There were no dividends paid during the year ended 30 June 2019 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
2019
425,386
-
114,046
Chief Executive
2018
307,480
-
-
% change
38.43%
-
100%
Other key management personnel
2018
2019
853,021
617,434
38,193
31,484
-
324,774
% change
-27.6%
-17.6%
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
2019
40,697,849
72,995,493
2018
19,618,874
60,681,617
The increase in remuneration from the prior year is a result of the share-based payments expense recognised in relation to the
options granted during the year under the employee share option plan which vested immediately.
SolGold plc annual report for the year ended 30 June 2019
77
Statement of implementation of new remuneration policy
The remuneration policy formed part of the meeting materials at the AGM in December 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 2019. Non executive director salary and fees remained unchanged at A$70,000
per annum and the Chairman’s salary and fee remained unchanged at A$110,000 for the year ended 30 June 2019.
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
Opportunity and Performance
Condition
Executive Director
Base salary
To recognise:
Skills
Responsibility
Accountability
Experience
Value
Benefits
To provide a
competitive
benefits package
Bonuses
To reward and
incentivise
Reviewed annually Paid
monthly in cash
Specific performance conditions are
attached to base salaries.
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 remuneration
committee determines
the level of bonus on an
annual basis applying
such performance
conditions and
performance measures
as it considers
appropriate.
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
2019 is shown in the table on page
75.
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.
Considered by
remuneration committee
on appointment.
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
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.
SolGold plc annual report for the year ended 30 June 2019
78
Element
Purpose
Policy
Operation
Executive Director
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.
Opportunity and Performance
Condition
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.
Non-Executive Directors
Base salary
To recognise:
Skills
Experience
Value
Considered by
remuneration committee
on appointment.
Set at a level considered
appropriate to attract,
retain motivate and
reward the right
individuals.
Reviewed annually.
Paid monthly in cash.
No specific performance conditions
are attached to base salaries.
Benefits
Share
options
No benefits
offered.
To align interest
with shareholders.
Granted under the
Employee Share Option
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.
The remuneration committee consider the performance measures outlined in the table above to be appropriate measures of
performance and that the KPI’s chosen to 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.
SolGold plc annual report for the year ended 30 June 2019
79
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 2019, which comprise the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated
Statement of Financial Position, Company Statement of Financial Position, Consolidated Statement of Changes in Equity, 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 2019 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 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 including 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.
SolGold plc annual report for the year ended 30 June 2019
80
KEY AUDIT MATTER
Carrying value of Exploration and Evaluation assets
(see note 1 and 12)
The Group’s intangible exploration and evaluation
assets (‘E&E assets’) represent the most significant
asset on its statement of financial position as at 30
June 2019.
HOW THE KEY AUDIT MATTER WAS ADDRESSED IN
OUR AUDIT
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
an
understanding
• Obtaining
• 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
of
Management’s expectation of commercial
viability, reviewing any available technical
documentation and discussing results and
operations. In relation to Cascabel E&E assets
we reviewed the result of the preliminary
economic assessment (“PEA”) released in
May 2019, discussed the planned operations
with the operational site team and conducted
a site visit to the Cascabel license area.
Reviewed and assessed the adequacy of the
disclosures in the financial statements to
ensure
in
accordance with the requirements of the
accounting standards.
they were prepared
that
•
Management and the Board are required to assess
whether there are any potential impairment triggers
which would indicate that the carrying value of an
asset at 30 June 2019 may not be recoverable.
Given the materiality of the E&E assets in the context
of the Group’s statement of financial position and the
significant judgement involved in making the
assessment of whether any indicators of impairment
exist we consider this to be a key audit matter.
Key observations
We found the key assumptions made by management to be reasonable and the disclosures in the financial
statements to be in line with the accounting standards.
Our application of materiality
Materiality
Materiality for financial
statements as a whole
Materiality for parent
company financial
statements
30 June 2019
US$3.1m
30 June 2018
Basis of materiality
US$2.2m
1.3% of total assets
US$2.4m
US$1.1m
Capped at 75% of
group materiality
(2018: 50%)
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.
SolGold plc annual report for the year ended 30 June 2019
81
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.
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% (2018: 75%) of the above materiality
levels.
Whilst materiality for the financial statements as whole was US$3.1m, each significant component was audited to a lower level of
materiality of US$2.4m (2018: ranging from US$1m to US$1.1m). 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 US$100,000 (2018: US$ 100,000). We also agreed to report differences below that threshold that, in
our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment and assessing the risks of material
misstatement in the financial statements at the group level.
We identified two significant components for the purpose of our audit, being the Group’s principal mining entity, Exploraciones
Novomining S.A (“ENSA”), which holds the Cascabel exploration project, and the parent company. Both significant components were
subject to a full scope audit along with the Group consolidation.
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, as group auditors we undertook the following:
•
•
Detailed group reporting instructions were sent to the component auditor, which included the significant areas to be
covered by the audit (including areas that were considered to be key audit matters as detailed above), and set out the
information required to be reported to the group audit team.
The group audit partner and senior members of the group audit team visited Ecuador to meet with component
management during the audit.
• We performed a review of the component audit files in the Ecuador and held calls and meetings with the component audit
•
team during the planning and completion phases of their audit.
The group audit team was actively involved in the direction of the audits performed by the component auditors for group
reporting purposes, along with the consideration of findings and determination of conclusions drawn. We performed our
own additional procedures in respect of certain of the significant risk areas that represented Key Audit Matters in addition
to the procedures performed by the component auditor.
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.
SolGold plc annual report for the year ended 30 June 2019
82
The extent to which the audit is capable of detecting irregularities is affected by the inherent difficulty in detecting irregularities, the
effectiveness of the entity’s controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result
from fraud might be inherently more difficult to detect than irregularities that result from error.
As part of the audit gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which
it operates, and considered the risk of acts by the Group that were contrary to applicable laws and regulations, including fraud. We
designed audit procedures at Group and significant component level to respond to the risk, recognising that the risk of not detecting
a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations, or through collusion. We focused on laws and regulations
where non-compliance might have a material effect on the financial statements, including, but not limited to, the Companies Act
2006, the UK Listing Rules and tax legislation. We also considered the risks of non-compliance with laws and regulations related to
environmental and social matters.
Our audit approach included;
•
•
•
•
agreeing the financial statement disclosures to underlying supporting documentation to assess compliance with relevant
laws and regulations,
enquiring with management, the Board and the audit committee concerning actual and potential legal claims
enquiring of the group’s external legal team regarding compliance with Ecuadorian laws and regulations and receiving
direct confirmation regarding the nature of any current legal claims
addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and
other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential
bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of
business.
There are inherent limitations in the audit procedures described above and, the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
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.
SolGold plc annual report for the year ended 30 June 2019
83
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 the 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, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with 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.
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.
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 by the Parent Company, 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 71, 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.
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.
SolGold plc annual report for the year ended 30 June 2019
84
Other matters which we are required to address
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. The company was admitted to the London Stock Exchange Main Market on 6 October
2017. In respect of the year ended 30 June 2019 we were reappointed as auditor by the members of the Company at the annual
general meeting held on 20 December 2018. The period of total uninterrupted engagement, including previous renewals and
reappointments of the firm, is 14 years, covering the years ending 30 June 2006 to 30 June 2019.
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 Parent 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 Parent 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 Parent Company and the Parent Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Matt Crane (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
15 August 2019
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
SolGold plc annual report for the year ended 30 June 2019
85
FINANCIAL STATEMENTS
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2019
Expenses
Exploration costs written-off
Administrative expenses
Share based payments expenses
Operating loss
Finance income
Loss before tax
Tax benefit (expense)
Loss for the year
Other comprehensive loss
Items that may be reclassified to profit or loss
Change in fair value of available-for-sale
financial assets net of tax
Exchange differences on translation of
foreign operations
Items that will not be reclassified to profit or
loss
Change in Ecuador pension
Change in fair value of financial assets, net of
tax
Total comprehensive loss for the year
Loss for the year attributable to:
Owners of the parent company
Non-controlling interest
Total comprehensive loss for the year
attributable to:
Owners of the parent company
Non-controlling interest
Notes
12
19
3
6
7
Group
2019
US$
(228,251)
(9,248,699)
(23,883,159)
(33,360,109)
675,410
(32,684,699)
614,906
(32,069,793)
Group
2018
US$
(restated)
(282,686)
(3,955,190)
(8,124,305)
(12,362,181)
517,537
(11,844,645)
(3,309,802)
(15,154,446)
10a / 14
-
(4,800,472)
(2,037,944)
(4,176,439)
-
(53,727)
10a / 14
1,441,319
(32,666,418)
-
(24,185,084)
(31,941,715)
(128,078)
(32,069,793)
(15,026,902)
(127,544)
(15,154,446)
(32,538,340)
(128,078)
(32,666,418)
(24,057,540)
(127,544)
(24,185,084)
Loss per share
Basic loss per share
Diluted loss per share
8
8
Cents per share
(1.8)
(1.8)
Cents per share
(0.9)
(0.9)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
SolGold plc annual report for the year ended 30 June 2019
86
Consolidated Statement of Financial Position
As at 30 June 2019
Registered Number 5449516
Assets
Property, plant and equipment
Intangible assets
Investment in available-for-sale securities
Financial assets held at fair value through OCI
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
Foreign Currency Translation Reserve
Equity attributable to owners of the parent company
Non-controlling interest
Total equity
Liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
Group
2019
US$
Group
2018
US$
(restated)
Group
1 July 2017
US$
(restated)
11
12
10(a)
10(a)
13
15
16
17
17
8,847,785
177,481,872
-
5,952,439
7,796,541
200,078,637
2,891,326
41,746,200
44,637,526
244,716,163
26,402,424
297,375,959
40,084,833
(120,342,688)
(4,876,593)
238,643,935
(442,364)
3,167,032
105,776,186
4,031,236
-
894,093
113,868,547
3,131,509
60,575,504
63,707,013
177,575,560
24,443,853
222,941,518
15,219,049
(88,859,667)
(2,838,649)
170,906,104
(314,286)
1,366,682
45,908,537
11,043,230
-
173,859
58,492,308
1,004,942
68,653,788
69,658,730
128,151,038
21,987,050
164,792,271
11,990,315
(73,876,759)
1,337,790
126,230,667
(186,742)
238,201,571
170,591,818
126,043,925
18
6,514,592
6,983,742
2,107,113
6,514,592
6,514,592
244,716,163
6,983,742
6,983,742
177,575,560
2,107,113
2,107,113
128,151,038
The above consolidated statements of financial position should be read in conjunction with the accompanying notes.
SolGold plc annual report for the year ended 30 June 2019
87
Company Statement of Financial Position
As at 30 June 2019
Registered Number 5449516
Assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Investment in available-for-sale securities
Financial assets held at fair value through OCI
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
Foreign Currency Translation Reserve
Equity attributable to owners of the parent company
Non-controlling interest
Total equity
Liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
Company
2019
US$
Company
2018
US$
(restated)
Company
1 July 2017
US$
(restated)
11
12
9
10(a)
10(a)
13
15
16
17
17
18
83,910
-
200,507,458
-
5,946,815
7,260,213
213,798,396
544,338
38,290,929
38,835,267
252,633,663
26,402,424
297,375,959
40,190,726
(107,624,653)
(5,006,473)
251,337,983
-
117,057
-
108,381,978
4,025,313
-
683,947
113,208,295
404,860
58,948,814
59,353,674
172,561,969
24,443,853
222,941,518
15,324,942
(85,290,520)
(6,245,182)
171,174,611
-
145,545
-
49,390,058
11,038,942
-
69,287
60,643,832
599,707
68,159,431
68,759,138
129,402,970
21,987,050
164,792,271
12,042,482
(71,432,450)
1,429,125
128,818,478
-
251,337,983
171,174,611
128,818,478
1,295,680
1,295,680
1,295,680
252,633,663
1,387,358
1,387,358
1,387,358
172,561,969
584,492
584,492
584,492
129,402,970
The above 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 US$22,792,827 (2018: US$13,911,798).
The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 15 August 2019.
Nicholas Mather
Director
SolGold plc annual report for the year ended 30 June 2019
88
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
Share
capital
Share
premium
US$
US$
21,987,050 164,792,271
-
-
-
-
Financial assets
held at fair
value through
other
comprehensive
income
US$
6,733,566
-
(4,800,472)
Share based
payment
reserve
Foreign
Currency
Translation
Reserve
Other
Reserves
Accumulated
loss
Total
Total Equity
Non-
controlling
interests
US$
US$
US$
US$
US$
US$
US$
5,308,915
-
-
1,337,790
-
(4,176,439)
(52,166)
-
(53,727)
(73,876,759)
(15,026,902)
-
126,230,667
(15,026,902)
(9,030,638)
(186,742)
(127,544)
-
126,043,925
(15,154,446)
(9,030,638)
-
2,423,392
33,411
-
58,279,359
668,208
(4,800,472)
-
-
-
-
-
(4,176,439)
-
-
(53,727)
-
-
(15,026,902)
-
-
-
-
-
(798,320)
-
-
24,443,853 222,941,518
-
-
-
-
-
1,431,377
527,194
-
62,098,668
12,441,354
-
-
-
1,933,094
-
1,441,319
1,441,319
-
-
2,622
(43,994)
8,124,305
13,391,848
-
-
-
-
-
(2,037,944)
-
-
-
-
-
-
-
-
-
-
(105,581)
-
-
(458,694)
-
-
23,883,159
-
-
-
(24,057,540)
60,702,751
701,619
(795,698)
-
-
43,994
-
8,124,305
(127,544)
-
-
-
-
(24,185,084)
60,702,751
701,619
(795,698)
-
8,124,305
170,591,818
(32,069,793)
(596,625)
-
-
-
-
-
-
(31,941,715)
-
-
(32,538,340)
63,530,045
12,968,548
(128,078)
-
-
(32,666,418)
63,530,045
12,968,548
-
458,694
(105,581)
-
-
23,883,159
-
-
-
(105,581)
-
23,883,159
(2,838,649)
-
(2,037,944)
(105,893)
-
-
(88,859,667)
(31,941,715)
-
170,906,104
(31,941,715)
(596,625)
(314,286)
(128,078)
-
Balance at 1 July 2017
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)
Options forfeited
Value of shares and options
issued to Directors, employees
and consultants
Balance at 30 June 2018
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)
Options forfeited
Value of share and options
issued to Directors, employees
and consultants
Balance at 30 June 2019
26,402,424 297,375,959
3,374,413
36,816,313
(4,876,593)
(105,893)
(120,342,688)
238,643,935
(442,364)
238,201,571
The above statement of changes in equity should be read in conjunction with the accompanying notes.
SolGold plc annual report for the year ended 30 June 2019
89
Company Statement of Changes in Equity
For the year ended 30 June 2019
Balance at 1 July 2017
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 2018
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
Options expired
Value of shares and options issued to Directors,
employees and consultants
Share
capital
Share
premium
US$
21,987,050
-
-
-
2,423,392
33,411
-
-
-
24,443,853
-
-
-
1,431,377
527,194
-
-
US$
164,792,271
-
-
-
58,279,359
668,208
(798,320)
-
-
222,941,518
-
-
-
62,098,668
12,441,354
(105,581)
-
Assets held at
fair value
through other
comprehensive
income
US$
6,733,566
-
(4,800,472)
(4,800,472)
-
-
-
-
-
1,933,094
-
1,441,319
1,441,319
-
-
-
-
Share-based
payment
reserve
US$
5,308,915
-
-
-
-
-
2,622
(43,994)
8,124,305
13,391,848
-
-
-
-
-
-
(458,694)
Foreign
Currency
Translation
Reserve
US$
1,429,125
(7,674,307)
(7,674,307)
(6,245,182)
-
1,238,709
1,238,709
-
-
-
-
Accumulated
loss
Total
US$
(71,432,449)
(13,902,065)
-
(13,902,065)
-
-
-
43,994
US$
128,818,478
(13,902,065)
(12,474,779)
(26,376,844)
60,702,751
701,619
(795,698)
-
-
8,124,305
(85,290,520)
(22,792,827)
-
(22,792,827)
-
-
-
458,694
171,174,611
(22,792,827)
2,680,028
(20,112,799)
63,530,045
12,968,548
(105,581)
-
-
-
-
23,883,159
-
-
23,883,159
Balance at 30 June 2019
26,402,424
297,375,959
3,374,413
36,816,313
(5,006,473)
(107,624,653)
251,337,983
The above statement of changes in equity should be read in conjunction with the accompanying notes.
SolGold plc annual report for the year ended 30 June 2019
90
Consolidated and Company Statements of Cash Flows
For the year ended 30 June 2019
Notes
Group
2019
US$
Group
2018
US$
(restated)
Company
2019
US$
Cash flows from operating activities
Loss for the year
Depreciation
Share based payment expense
Write-off of exploration expenditure
Foreign exchange (gain) / loss
Deferred taxes
Company funded loan plan
employee benefit
Company funded loan plan accretion
of interest
Decrease (increase) in other
receivables and prepayments
(Decrease) / increase in trade and
other payables
Net cash outflow from operating
activities
Cash flows from investing activities
Security deposit (payments) /
refunds
Acquisition of property, plant and
equipment
Acquisition of exploration and
evaluation assets
Investment in subsidiaries
Loans advanced to subsidiaries
Net cash outflow from investing
activities
Cash flows from financing activities
Proceeds from the issue of ordinary
share capital
Payment of issue costs
Net cash inflow from financing
activities
Net (decrease) / increase in cash
and cash equivalents
Cash and cash equivalents at the
beginning of year
Effect of foreign exchange on cash
and cash equivalents
Cash and cash equivalents at end of
year
11
5 / 19
12
14
(32,069,793)
67,604
23,883,159
228,251
(629,207)
(614,906)
921,448
(299,319)
679,597
(805,535)
(15,154,446)
61,845
8,124,305
282,686
(3,156,940)
1,981,335
-
-
977,985
290,709
Company
2018
US$
(restated)
(13,911,798)
37,069
8,124,305
-
(3,156,940)
1,981,335
-
-
(22,792,827)
40,532
16,183,483
-
(639,633)
(614,906)
921,448
(299,319)
(122,322)
1,030,787
402,896
244,729
(8,638,701)
(6,592,521)
(6,920,648)
(5,650,513)
(433,780)
(3,123,531)
(78,434)
(640,898)
(5,622,644)
(1,983,673)
(7,385)
(13,069)
(73,526,926)
-
-
(55,958,470)
-
-
-
-
(83,042,767)
-
-
(62,517,225)
11
12
9
(79,583,350)
(61,065,674)
(83,128,586)
(63,171,192)
17
69,104,952
(120,276)
60,747,856
(2,117,510)
69,104,952
(120,276)
60,747,856
(2,117,510)
68,984,676
58,630,346
68,984,676
58,630,346
(19,237,375)
(9,027,849)
(21,064,558)
(10,191,359)
60,575,504
68,653,788
58,948,814
68,159,431
408,071
949,565
406,673
980,742
16
41,746,200
60,575,504
38,290,929
58,948,814
The above statements of cash flows should be read in conjunction with the accompanying notes.
SolGold plc annual report for the year ended 30 June 2019
91
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies
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 United States dollars (“US$”), rounded to the nearest dollar. Prior years
consolidated financials have been previously presented in Australian dollars (“A$”) refer to note 1 (d) for further details on the change
of presentational currency.
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 operate as a going concern for the next 12 months and meet its exploration
commitments 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.
(c) Basis of consolidation
(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.
SolGold plc annual report for the year ended 30 June 2019
92
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(c) Basis of consolidation (continued)
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 in 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.
(d) Foreign currency
Translation into the functional currency
Transactions entered into by Group entities in a currency other than the currencies of the primary economic environment in which they
operate (the “functional currency”) 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 the functional currency at the foreign exchange rate
ruling as that date. Non-monetary assets and liabilities denominated in foreign currencies are translated at the historical foreign exchange
rate. Any resultant foreign exchange currency translation amount is taken to the profit and loss.
Management reconsiders the functional currency where there is a change in events or conditions used in initial determination. Where
the assessment indicates that a change in functional is required, the change is applied prospectively from the date it is deemed to have
occurred.
The functional currency of the Company has historically been considered to be Australian Dollars (A$). The functional currency of the
Company has been changed with effect from 1 April 2019 from A$ to US$. At this date the statement of financial position, the statement
of profit or loss and comprehensive income and the statement of cash flows of the Company have been translated into US$ by using the
foreign exchange rate ruling as at 1 April 2019. The primary triggers to change the functional currency were the release of the Preliminary
Economic Analysis, the Company’s progression towards a Pre-Feasibility Study and the fact that majority of future transactions and funds
will be held in US dollars. The functional currency of the parent entity and subsidiaries of the group are detailed in the table below:
SolGold plc annual report for the year ended 30 June 2019
93
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(d) Foreign currency (continued)
Functional
Currency
Functional
Currency
Exchange rate at 30 June 2019
used in preparation of
Financials
SolGold Plc
Australian Resources Management
(ARM) Pty Ltd
Acapulco Mining Pty Ltd
Central Minerals Pty Ltd
Solomon Operations Ltd
Honiara Holdings Pty Ltd
Guadalcanal Exploration Pty Ltd
Exploraciones Novomining S.A.
Carnegie Ridge Resources S.A.
Green Rock Resources S.A.
Valle Rico Resources S.A.
Cruz Del Sol S.A.
SolGold Ecuador S.A
Translation into presentation currency
2019
US$
A$
A$
A$
SBD$
A$
A$
US$
US$
US$
US$
US$
US$
2018
A$
A$
A$
A$
SBD$
A$
A$
US$
US$
US$
US$
US$
US$
n/a
0.7032
0.7032
0.7032
0.1178
0.7032
0.7032
n/a
n/a
n/a
n/a
n/a
n/a
The presentation currency of the Group has historically been considered to be Australian Dollars (A$). Due to the announcement of the
Preliminary Economic Analysis and the fact that majority of future transactions and funds will be held in US dollars, the presentation
currency of the Group has also been changed to United States Dollars (US$) to align with the functional currency of the parent entity and
applied this change retrospectively resulting in restatement of prior periods.
The assets and liabilities of the entities are translated to the Group presentation currency being the US$ at rates of exchange ruling at
the reporting date. Income and expense items are translated at average rates for the period. Any resultant foreign exchange currency
translation amount is taken to other comprehensive income. On disposal of an entity, cumulative exchange difference are recognised in
the income statement as part of the profit or loss on sale. Exchange differences recognised in profit or loss in Group entities' separate
financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation
concerned are reclassified to other comprehensive income and accumulated in the foreign exchange reserve on consolidation.
Further details in regards to the change in the presentation currency are outlined in section (w) Changes in Accounting Policies.
SolGold plc annual report for the year ended 30 June 2019
94
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(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.
(iii) Depreciation
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.
Once the work completed to date on an area of interest is sufficient such that the technical feasibility and commercial viability of
extracting the mineral resource has been determined, the property is considered to be an evaluated mineral property.
Following determination of the technical feasibility and commercial viability of a mineral resource, the relevant expenditure is transferred
from exploration and evaluation assets to evaluated mineral property.
Further development costs are capitalised to evaluated mineral properties, if and only if, it is probable that future economic benefits
associated with the item will flow to the entity; and the cost can be measured reliably. Cost is defined as the purchase price and directly
attributable costs. Once the asset is considered to be capable of operating in a manner intended by management, commercial production
is declared, and the relevant costs are depreciated. Evaluated mineral property is carried at cost less accumulated depreciation and
accumulated impairment losses.
(g) 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.
SolGold plc annual report for the year ended 30 June 2019
95
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(h) Impairment of non-financial assets
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. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If
no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded companies or other available fair value indicators.
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.
(i) 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.
(j) 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. Non-vesting conditions and market vesting conditions are factored into the fair value of the options
granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are
satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is
not satisfied. 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.
SolGold plc annual report for the year ended 30 June 2019
96
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(j) Employee benefits (continued)
(ii) Retirement benefits
The Group operates a defined contribution pension scheme. Contributions payable for the year are charged to the statement of
comprehensive income.
(iii) Company Funded Loan Plan
The Group has put in place a Company Funded Loan Plan (“CFLP”) for its employees to provide financial assistance to employees in
exercising share options. The financial assistance provided to employees is by way of a full recourse interest free loan. The CFLP is secured
by the SolGold shares issued upon the exercise of share options under the CFLP to that employee. The maximum CFLP loan term is 2
years.
CFLP loans to employees are initially recognised at fair value, which is determined by discounting loans to their net present value using
the risk-free interest rate at the time the loan is granted and an estimated repayment schedule. Following initial recognition, they are
carried at amortised cost using the effective interest rate method. Changes in the carrying value of the CFLP loans are recognised within
interest income in the profit or loss. The cost of providing the benefit to employees is recognised as an employee expense in the profit
or loss on a straight-line basis over the expected life of the CFLP loan.
(k) 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.
(l) Trade and other payables
Trade and other payables are not interest bearing and are stated at amortised cost, unless settled with shares as per (J) (ii) above. The
effect of discounting is immaterial.
(m) Revenue
During the exploration phase, any revenue generated from incidental sales is treated as a contribution towards previously incurred costs
and offset accordingly.
(n) 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.
SolGold plc annual report for the year ended 30 June 2019
97
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(o) 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.
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 US$58,756,909 (2018: US$49,212,350) 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.
(p) Segment reporting
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.
(q) 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.
SolGold plc annual report for the year ended 30 June 2019
98
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(q) Business Combinations (continued)
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.
(r) 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.
(s) Leases
Leased assets accounted for under a finance lease 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.
SolGold plc annual report for the year ended 30 June 2019
99
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(t)
Financial Instruments
Recognition and Initial Measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of
another entity.
Financial assets and financial liabilities are recognised in the Group statement of financial position when the Group becomes a party to
the contractual provisions of the instrument. Financial assets and financial liabilities are only offset and the net amount reported in the
consolidated statement of financial position and statement of comprehensive income when there is a currently enforceable legal right to
offset the recognised amounts and the Group intends to settle on a net basis or realise the asset and liability simultaneously.
Financial instruments are generally measured at initial recognition fair value and adjusted for 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 assets
(i)
Financial assets at amortised cost
Financial assets are measured at amortised cost if both of the following conditions are met:
o
o
The financial asset is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows: and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principle amount outstanding.
Financial assets at amortised costs are subsequently measured using the effective interest (EIR) method and are subject to an
impairment assessment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
(ii)
Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity
instruments)
Upon initial recognition SolGold can elect to classify irrevocably its equity investments as equity instruments designated a fair
value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held
for trading. The classification is determined on an instrument-by-instrument basis. Gains and losses on these financial assets
are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right
of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the
financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not
subject to impairment assessment. This is a new policy in the current year. Further details in regards to the change are outlined
in section (w) Changes in Accounting Policies.
SolGold elected to classify irrevocably ‘Investment in available for sale securities’ under this category.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are measured at amortised cost or fair value
through other comprehensive income. The measurement of the loss allowance depends upon the Group’s assessment at the end of each
reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition, based on
reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a twelve-month expected credit loss
allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event that
is possible within the next twelve months. Where a financial asset has become credit impaired or where it is determined that credit risk
has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss
recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument
discounted at the original effective interest rate.
SolGold plc annual report for the year ended 30 June 2019
100
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(t)
Financial Instruments (continued)
Comparative figures for the year ended 30 June 2018 have not been restated and are still accounted for in accordance with IAS 39 Financial
Instruments Recognition and Measurement.
Financial liabilities
The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its
characteristics. All purchases of financial liabilities are recorded on trade date, being the date on which the Group becomes party to the
contractual requirements of the financial liability. Unless otherwise indicated the carrying amounts of the Group’s financial liabilities
approximate to their fair values.
Financial liabilities measured subsequently at amortised cost
Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held-for-trading, or (iii)
designated at FVTPL, are measured subsequently at amortised cost. The Group’s financial liabilities comprise of trade and other payables
which are measured at amortised cost.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised
when:
•
•
The rights to receive cash flows form the asset have expired: or
SolGold has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a “pass-through’ arrangement; and either (a) SolGold has transferred
substantially all the risks and rewards of the asset, or (b) SolGold has neither transferred nor retained substantially all the risks
and rewards of the asset; but has transferred control of the asset.
A financial liability (in whole or in part) is derecognised when the Group has extinguished its contractual obligations, it expires or is
cancelled. Any gain or loss on derecognition is taken to the statement of comprehensive income.
(u) 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:
(i) Subsidiary investments
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. Where investments are passed down into the underlying operating subsidiaries where
no reimbursement is expected this is recorded as investment in subsidiary undertakings.
SolGold plc annual report for the year ended 30 June 2019
101
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(v) Nature and purpose of reserves
(i) Financial assets at fair value through other comprehensive reserve
Changes in the fair value and exchange differences arising on translation of investments, such as equities, classified as financial assets,
are recognised in other comprehensive income and accumulated in a separate reserve within equity.
(ii) Share option reserve
The share-based payment reserve is used to recognise:
•
•
the grant date fair value of options issued to employees that have vested but not been exercised.
the grant date fair value of shares issued to employees.
(iii) 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.
(iv) Other reserves
This reserve is used to both adjust the pension liability to fair value for the defined benefit pension plan maintained for the Group’s
employees in Ecuador and 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.
(w) Changes in accounting policies
Presentation Currency
The Group has changed the presentation currency from Australian Dollars (A$) to United States Dollars (US$) for the year ended 30 June
2019. This change reduces the foreign currency movements in the consolidated financial statements and is, therefore, providing the user
of the consolidated financial statements with more reliable and relevant information in the currency which is most relevant to the Group’s
operating environment.
The change has been applied retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
by using the US$ as if it had always been the Group’s presentation currency. Consequently, all assets and liabilities not denominated in
US$ were translated into US$ by using the closing rate on the relevant balance sheet date. The equity components were translated at
the historical exchange rate applicable at the date of the transaction. Non-US expenses and income were translated at the average rate
of the relevant period.
The Group presents the opening balance sheet of the preceding period as a consequence of the retrospective change in the presentation
currency.
The Company’s presentation currency has also been changed form A$ to US$ for the year ended 30 June 2019. The same methodology
as for the Group was applied to implement this accounting policy change.
Further details in regards to the foreign currency treatment are also outlined in section (d) Foreign Currency.
New standards and amendments in the year
New standards impacting the Group that have been adopted in the financial statements for the 12 months ended 30 June 2019, and
which have given rise to changes in the Group’s accounting policies are:
•
IFRS 9 Financial Instruments
Details of the impact that this standard had is detailed below. Other new and amended standards and Interpretations issued by the IASB
do not impact the Group as they are either not relevant to the Group’s activities or require accounting which is consistent with the
Group’s current accounting policies.
SolGold plc annual report for the year ended 30 June 2019
102
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(w) Changes in accounting policies (continued)
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments has replaced IAS 39 Financial Instruments: Recognition and Measurement. The new Standard brings together
all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting. The
Group has applied IFRS 9 retrospectively, with the initial application date of 1 July 2018, but availing the transition option not to restate
comparative information.
IFRS 9 considerations
Classification and measurement
Upon adopting IFRS 9 the Groups ‘Investment in available for sale securities’ have been designated as financial assets recognised at fair
value through OCI. The Group have made an irrevocable election to classify this investment as a financial asset held at fair value through
other comprehensive income.
Impairment
The adoption of IFRS 9 has changed the Group’s accounting for impairment losses for financial assets by replacing IAS 39’s incurred loss
approach with a forward-looking expected credit loss approach.
IFRS 9 requires the Group to measure and recognise expected credit losses on all applicable financial assets. .
Refer to Note 13 for the impairment assessment in relation to the Company Funded Loan Plan.
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. The list below
includes only standards and interpretations that could have an impact on the Consolidated Financial Statements of the Group. Other new
and amended standards and Interpretations issued by the IASB that will apply for the first time in the next annual financial statements
are not expected to impact the Group as they are either not relevant to the Group’s activities or require accounting which is consistent
with the Group’s current accounting policies.
Effective period commencing on or after
IFRS 16
Leases
1 January 2019
IFRS 16 Leases
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 the adjustments to assets and liabilities are expected to be immaterial.
SolGold plc annual report for the year ended 30 June 2019
103
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(x) Critical Accounting Estimates and Judgements
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.
Accounting Estimates
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 the 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.
Company funded loan plan
The Company Funded Loan Plan provides interest free loans to employees for employees to be able to exercise share options. Loan to
employees are recorded at fair value on initial recognition. A key estimate for deriving Fair value of loans provided under the Company
Funded Loan Plan is determining the market interest rates for similar loans.
Accounting Judgements
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 2019. 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.
Functional currency
The functional currency for the Company is the currency of the primary economic environment in which the entity operates. The
Company changed its functional currency from the Australian dollar to the US dollar in the current financial year. Determination of
functional currency may involve certain judgments to determine the primary economic environment. Expenditure at a company level will
continue to be incurred in a number of currencies but given the future activities driven by the release of the PEA in funding a prefeasibility
and bankable feasibility Management have judged that USD faithfully represents the currency that impacts the primary economic
environment. Management will continue to make this judgement at each reporting period.
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.
SolGold plc annual report for the year ended 30 June 2019
104
Notes to the Financial Statements
For the year ended 30 June 2019
Note 1 Accounting Policies (continued)
(x) Critical Accounting Estimates and Judgements (continued)
Company funded loan plan
The Company Funded Loan Plan provides interest free loans to employees for employees to be able to exercise share options. Loan to
employees are recorded at fair value on initial recognition. Key judgement is required in determining the fair value of the loans at
inception based on market interest rates and timing of cash flows. Furthermore, judgement is required to ascertain the likelihood of
any expected credit losses on the loans provided under the Company Funded Loan Plan.
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 discretely, 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.
30 June 2019
Cascabel project *
Other Ecuadorian
projects
Other projects
Corporate
Total
30 June 2018
Cascabel project *
Other Ecuadorian
projects
Other projects
Corporate
Total
Finance
Income
US$
6,373
-
630
668,408
675,411
Finance
Income
US$
-
174
51
517,311
517,536
Depreciation
Impairment
of E&E
Loss for the year
Assets
Liabilities
US$
26,617
442
13
40,532
67,604
US$
-
208,914
19,337
-
228,251
US$
(8,553,393)
US$
152,074,758
US$
3,684,895
(647,753)
30,775,886
1,526,728
-
12,762,403
(75,820)
(22,792,827)
9,739,313
52,126,206
7,435
1,295,534
-
16,183,483
(32,069,793)
244,716,163
6,514,592
23,883,159
(60,147)
10,982,295
83,022,522
Share
Based
Payments
US$
7,699,676
Non-current
asset additions
US$
59,337,971
Depreciation
Impairment
of E&E
Loss for the
year
Assets
Liabilities
Share Based
Payments
US$
24,508
US$
-
US$
(867,403)
US$
89,537,439
US$
5,041,776
US$
-
282,005
(309,987)
13,979,032
471,335
268
37,069
61,845
681
-
(64,258)
(13,911,798)
9,875,043
64,184,046
282,686
(15,154,446)
177,575,560
83,272
1,387,359
6,983,742
Non-current
asset
additions
US$
52,507,789
10,439,160
595,543
(6,005,978)
-
-
-
8,124,305
8,124,305
57,536,514
* 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.
Geographical information
Non-current assets
UK
Australia
Solomon Islands
Ecuador
The Group had no revenue during the current and prior year.
2019
US$
-
15,832,185
60,355
184,186,097
200,078,637
2018
US$
-
12,894,731
-
100,973,816
113,868,547
SolGold plc annual report for the year ended 30 June 2019
105
Notes to the Financial Statements
For the year ended 30 June 2019
Note 3 Operating Loss
The operating loss is stated after charging (crediting)
Auditors’ remuneration:
Amounts received or due and receivable by BDO (UK) for audit of the Company
and Group’s annual accounts
Amounts received or due and receivable by BDO (Ecuador) for the audit of the
subsidiaries
Other non-audit services
Group
2019
US$
Group
2018
US$
196,238
62,237
139,081
67,604
(629,207)
23,883,159
195,300
47,345
43,531
61,845
(3,163,593)
8,124,305
Depreciation
Foreign exchange (gains)/losses
Share based payments (Note 19)
Note 4 Staff Numbers and Costs
Corporate finance and administration
Technical – permanent
Technical - temporary
The aggregate payroll costs of employees were:
Wages and salaries
Contributions to superannuation
Share based payments
Total staff costs
Group
2019
Group
2018
Company
2019
Company
2018
30
415
225
670
22
250
183
455
18
6
-
24
12
6
-
18
Group
2019
US$
16,772,817
41,874
23,883,159
40,697,850
Group
2018
US$
11,454,185
40,384
8,124,305
19,618,874
Company
2019
US$
2,992,048
41,874
16,183,483
19,217,405
Company
2018
US$
1,853,302
40,384
8,124,305
10,017,991
Included within total staff costs is US$14,992,821 (2018: US$10,000,122) which has been capitalised as part of deferred exploration
costs.
SolGold plc annual report for the year ended 30 June 2019
106
Notes to the Financial Statements
For the year ended 30 June 2019
Note 5 Remuneration of Key Management Personnel
2019
Directors
Nicholas Mather (highest paid director)
Brian Moller
Robert Weinberg
John Bovard2
Craig Jones
James Clare
Jason Ward3
Liam Twigger4
Anna Legge3
Other Key Management Personnel5
Total paid to Key Management Personnel
Other staff and contractors
Total
Basic Annual
Salary
US$
Bonus
US$
Other Benefits1
US$
Pensions
US$
Total
Remuneration
US$
425,386
78,015
49,671
24,945
49,678
49,678
260,125
1,914
113,546
617,434
1,670,392
14,313,747
15,984,139
114,036
-
-
-
-
-
205,264
-
70,919
324,774
714,993
73,685
788,678
2,875,779
540,182
332,299
168,492
332,299
573,327
1,421,592
-
809,947
3,447,823
10,501,740
13,381,419
23,883,159
-
-
-
-
-
-
-
-
3,022
31,484
34,506
7,368
41,874
3,415,201
618,197
381,970
193,437
381,977
623,005
1,886,981
1,914
997,434
4,421,515
12,921,631
27,776,219
40,697,850
1 Other Benefits represents the fair value of the share options granted during the year based on the Black-Scholes model considering the
effects of the vesting conditions.
2. John Bovard retired as a Director effective 20 December 2018.
3 Jason Ward and Anna Legge were appointed as Executive Directors effective 17 June 2019. Basic Annual Salary includes total
remuneration paid for the year including payments prior to Director appointment.
4 Liam Twigger was appointed as Non-Executive Director effective 17 June 2019.
5 Other Key Management Personnel consist of the aggregated remuneration of Karl Schlobohm (Company Secretary), Priy Jayasuriya
(Chief Financial Officer), Benn Whistler (Technical Services Manager), Chris Connell (Regional Exploration Manager), and Eduardo
Valenzuela (Study Manager).
Basic Annual
Salary
US$
Bonus
US$
Other Benefits1
US$
Pensions
US$
Total
Remuneration
US$
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
307,480
84,557
53,809
53,809
53,809
8,968
853,021
1,415,453
10,038,732
11,454,185
-
-
-
-
-
-
-
-
-
-
3,408,053
486,865
292,119
292,119
292,119
-
2,607,950
7,379,225
745,080
8,124,305
-
-
-
-
-
-
38,193
38,193
2,191
40,384
3,715,533
571,422
345,928
345,928
345,928
8,968
3,499,164
8,832,871
10,786,003
19,618,874
1 Other Benefits represents the fair value of the share options granted during the year based on the Black-Scholes model.
2 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 US$573,150.
3 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 Services Manager), Eduardo Valenzuela (Study Manager)
and Lazaro Roque-Albelo (Latin Affairs Manager).
During the year, US$34,506 employer’s social security costs (2018: US$38,193) were paid in respect of remuneration for key management
personnel.
SolGold plc annual report for the year ended 30 June 2019
107
Notes to the Financial Statements
For the year ended 30 June 2019
Note 6
Finance Income and Costs
Interest income
Accretion of Interest on Company Funded Loan Plan (note 13)
Finance income
Note 7 Tax Expense
Factors affecting the tax charge for the current year
Group
2019
US$
369,718
305,692
675,410
Group
2018
US$
517,536
-
517,536
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% (2018: 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% (2018: 30%)
Add (less) tax effect of:
Permanent differences
Derecognise (Recognise) prior year losses
Prior period adjustments to true-up tax return
Other
Impact of tax rate differences
Impact of exchange rate differences
Income tax (benefit) expense on loss
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
Amounts recognised directly in equity
Net deferred tax credited directly to equity
Income tax benefit recognised directly in equity
Group
2019
US$
Group
2018
US$
(32,684,699)
(9,805,410)
(11,844,645)
(3,553,393)
7,353,124
1,793,556
-
(23,709)
120,128
(52,595)
(614,906)
(629,818)
(629,818)
14,912
14,912
2,455,664
4,803,092
(516,599)
92,176
-
28,862
3,309,802
1,981,335
1,981,335
1,287,403
1,287,403
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 US$58.8 million (2018: US$49.2 million). These losses may be
deductible against future taxable income dependent upon the on-going satisfaction by the relevant Group Company of various tax
integrity measures applicable in the jurisdiction where the tax loss has been incurred. The jurisdictions in which tax losses have been
incurred include Australia, Ecuador and the Solomon Islands. Tax losses in Australia can be carried forward indefinitely while in
Ecuador, tax losses may be carried forward and offset against profits in the following five years, provided that the amount offset does
not exceed 25% of the year’s profits.
SolGold plc annual report for the year ended 30 June 2019
108
Notes to the Financial Statements
For the year ended 30 June 2019
Note 8
Loss Per Share
Basic loss per share
Diluted loss per share
(a) Loss
Loss used to calculate basic and diluted loss per share
(b) Weighted average number of shares
Used in calculating basic LPS
Weighted average number of dilutive options
Weighted average number of ordinary shares and potential ordinary shares
used in calculating dilutive LPS
2019
Cents per share
(1.8)
(1.8)
2018
Cents per share
(0.9)
(0.9)
2019
US$
2018
US$
(31,941,715)
(15,026,902)
Number of
shares
Number of
shares
1,800,361,098
-
1,620,664,370
3,780,868
1,800,361,098
1,624,445,238
The 160,262,000 options on issue at 30 June 2019 are out of the money and are considered non-dilutive. These out of the money
options may become dilutive in the future.
SolGold plc annual report for the year ended 30 June 2019
109
Notes to the Financial Statements
For the year ended 30 June 2019
Note 9
Investments in Subsidiary Undertakings
Country of
incorporation
and operation
Australia
Australia
Australia
Australian Resources
Management (ARM)
Pty Ltd
Acapulco Mining Pty
Ltd
Central Minerals Pty
Ltd
Solomon Operations
Ltd
Solomon
Islands
Honiara Holdings Pty
Ltd
Guadalcanal
Exploration Pty Ltd
Exploraciones
Novomining S.A.
Australia
Australia
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
SolGold Ecuador S.A
Ecuador
Registered Address
Principal
activity
SolGold plc’s
effective interest
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
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
Avenida La Coruña E25-58 y San Ignacio,
Edificio Altana Plaza
piso 4, oficina 406
Quito
Ecuador
2019
2018
Exploration
100%
100%
Exploration
100%
100%
Exploration
100%
100%
Exploration
100%
100%
Exploration
100%
100%
Exploration
100%
100%
Exploration
85%
85%
Exploration
100%
100%
Exploration
100%
100%
Exploration
100%
100%
Exploration
100%
100%
Services
Management
Company
100%
-
SolGold plc annual report for the year ended 30 June 2019
110
Notes to the Financial Statements
For the year ended 30 June 2019
Note 9
Investments in Subsidiary Undertakings (continued)
Investment in
subsidiary
undertakings
US$
87,330,540
60,818,433
(3,218,183)
144,930,790
88,725,265
2,029,513
235,685,568
(37,940,482)
-
1,391,670
(36,548,812)
-
1,370,702
(35,178,110)
49,390,058
108,381,978
200,507,458
Cost
Balance at 30 June 2017
Acquisitions and advances in the year
Change in currency variance
Balance at 30 June 2018
Acquisitions and advances in the year
Change in currency variance
Balance at 30 June 2019
Amortisation and impairment losses
Balance at 30 June 2017
Provision for impairment
Change in currency variance
Balance at 30 June 2018
Provision for impairment
Change in currency variance
Balance at 30 June 2019
Carrying amounts
Balance at 30 June 2017
Balance at 30 June 2018
Balance at 30 June 2019
Note 10 Investments
(a) Investments accounted for as available-for-sale assets / Financial assets held at fair value through OCI
Movements in financial assets
Opening balance at 1 July
Additions
Fair Value adjustment through other comprehensive
income
Balance at 30 June
Group
2019
US$
2018
US$
Company
2019
US$
2018
US$
4,031,236
-
1,921,203
5,952,439
11,043,230
-
4,025,313
-
11,038,942
-
(7,011,994)
4,031,236
1,921,502
5,946,815
(7,013,629)
4,025,313
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.
SolGold plc annual report for the year ended 30 June 2019
111
Notes to the Financial Statements
For the year ended 30 June 2019
Note 10 Investments (continued)
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.
2019
Financial assets held at fair value
through OCI
2018
Available for sale financial assets
US$
Level 1
5,952,439
4,031,236
US$
Level 2
US$
Level 3
-
-
-
-
US$
Total
5,952,439
4,031,236
The financial assets are measured based on the quoted market prices at 30 June. On the adoption of IFRS 9 the Financial Assets previously
classified as Available for Sale have been reclassified as Financial Assets held at fair value through OCI.
Note 11 Property, Plant and Equipment
Cost
Balance 30 June 2017
Effect of foreign exchange on opening balance
Additions
Disposals
Balance 30 June 2018
Effect of foreign exchange on opening balance
Additions
Balance 30 June 2019
Depreciation and impairment losses
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
Effect of foreign exchange on opening balance
Depreciation charge for the year
Depreciation capitalised to exploration
Balance 30 June 2019
Carrying amounts
At 30 June 2017
At 30 June 2018
At 30 June 2019
Land and
Buildings
US$
Plant and
Equipment
US$
Motor
Vehicles
US$
Office
Equipment
US$
Furniture
& Fittings
US$
Total
US$
Group
149,464
-
1,052,358
-
1,201,822
-
6,043,221
7,245,043
-
-
-
-
-
-
-
-
-
565,859
(17,439)
404,139
-
952,559
(1,840)
106,170
1,056,889
(191,464)
13,594
(31,527)
(86,385)
-
(295,782)
5,020
(32,471)
(98,834)
(422,065)
655,958
(2,189)
484,021
(35,155)
1,102,635
(2,860)
5,490
1,105,265
(134,541)
2,189
-
(199,682)
20,507
(311,527)
2,863
-
(210,025)
(518,690)
284,437
(2,864)
295,854
-
577,427
(2,743)
71,429
646,113
(122,476)
3,509
(28,634)
(96,057)
-
(243,658)
4,327
(29,074)
(129,614)
(398,020)
200,489
(1,082)
65,423
-
264,830
(2,470)
-
262,360
1,856,207
(23,574)
2,301,795
(35,155)
4,099,273
(9,913)
6,226,310
10,315,670
(41,043)
1,178
(1,684)
(39,725)
-
(81,274)
840
(6,059)
(42,616)
(129,110)
(489,524)
20,470
(61,845)
(421,849)
20,507
(932,241)
13,050
(67,604)
(481,089)
(1,467,885)
Company
Total
US$
215,441
(7,957)
12,584
-
220,068
(370)
4,239
223,937
(69,894)
3,951
(37,068)
-
-
(103,011)
3,516
(40,532)
-
(140,027)
149,464
1,201,822
7,245,043
374,395
656,777
634,824
521,417
791,108
586,575
161,961
333,769
248,093
159,446
183,556
133,250
1,366,683
3,167,032
8,847,785
145,547
117,057
83,910
SolGold plc annual report for the year ended 30 June 2019
112
Notes to the Financial Statements
For the year ended 30 June 2019
Note 12 Intangible Assets
Cost
Balance 30 June 2017
Effect of foreign exchange on opening balances
Additions – expenditure
Balance 30 June 2018
Effect of foreign exchange on opening balances
Additions - expenditure
Balance 30 June 2019
Impairment losses
Balance 30 June 2017
Impairment charge
Effect of foreign exchange on restatement
Balance 30 June 2018
Effect of foreign exchange on opening balances
Impairment Charge
Balance 30 June 2019
Carrying amounts
At 30 June 2017
At 30 June 2018
At 30 June 2019
Group deferred
exploration costs
US$
85,686,322
(2,003,944)
60,681,617
144,363,995
(2,498,995)
72,995,493
214,860,493
(39,777,784)
(282,686)
1,472,661
(38,587,809)
1,437,439
(228,251)
(37,378,621)
45,908,538
105,776,186
177,481,872
Impairment loss
A decision was made to expense US$228,251 (2018: US$282,686) for exploration expenditure associated with other tenements that were
surrendered or lapsed during the year. An assessment of the carrying values of deferred exploration costs is provided below.
Cascabel Project (85% Ownership)
The Cascabel Project is SolGold’s flagship project. In November 2018, an updated Mineral Resource Estimate was released which
demonstrated a resource of 2.95 Bt @ 0.52% CuEq (15.4 Mt CuEq) containing 10.9 Mt Cu and 23.2 Moz Au at 0.2% CuEq cut-off.
Furthermore, in May 2019, a Preliminary Economic Assessment ("PEA") for the Alpala Copper-Gold-Silver Deposit, Cascabel Project
Northern Ecuador was released.
Based on the above management have assessed that there are no indicators of impairment for the aggregate carrying value of US$142.63
million.
SolGold plc annual report for the year ended 30 June 2019
113
Notes to the Financial Statements
For the year ended 30 June 2019
Note 12 Intangible Assets (continued)
SolGold 100% owned Projects
Regional Concessions Granted for 100% SolGold Ecuador Subsidiaries
The 100% owned SolGold Ecuador Subsidiaries house the 72 mining concessions in Ecuador that the companies were successful in bidding
as part of the auction process in 2016 and 2017. Post this release of mining concessions by the Government of Ecuador, no more mining
concessions are planned to be released.
The Company has carried out initial exploration work programs on these concessions and delineated 12 priority projects.
Based on the above management have assessed that there are no indicators of impairment for the aggregate carrying value of US$25.19
million.
Acapulco Mining Projects
The main exploration project of Acapulco Mining Pty Ltd is the Mt Perry project. Initial exploration has targeted the previously 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 indicative of a porphyry system. Both holes
intersected a copper/molybdenum mineralised monzonite porphyry and were terminated in mineralisation.
Based on the above management have assessed that there are no indicators of impairment for the aggregate carrying value of US$6.48
million.
Central Minerals Projects
Central Minerals hold the Rannes project which has a JORC certified resource of 550,000 ounces of gold equivalents. Recent transactions
have valued in ground gold resources between US$10-US$15 per ounce. Based on recent transactions, this values the Rannes project
between US$5.5 million and US$8.25 million.
Based on the above management have assessed that there are no indicators of impairment for the aggregate carrying value of US$3.11
million.
SolGold plc annual report for the year ended 30 June 2019
114
Notes to the Financial Statements
For the year ended 30 June 2019
Note 13 Loan Receivables and Other Non-Current Assets
Group
2019
US$
Group
2018
US$
Company
2019
US$
Company
2018
US$
Movements in loan receivable and other non-
current assets
Security bonds
Company Funded Loan Plan Receivable
Closing balance at the end of the reporting period
Company Funded Loan Plan Receivable
Balance at beginning of reporting period
Additions – funds loaned under the plan
Fair value adjustment recognised as an employee
benefit expense
Accretion of interest
Effect of foreign exchange
Balance at end of reporting period
1,298,710
6,496,407
7,796,541
-
7,220,950
(921,448)
299,319
(102,414)
6,496,407
894,093
-
894,093
-
-
-
-
-
763,806
6,496,407
7,260,213
-
7,220,950
(921,448)
299,319
(102,414)
6,496,407
683,947
-
683,947
-
-
-
-
-
-
The Company Funded Loan Plan (the “Plan”) is a plan established by the Company to assist employees in exercising share options. On 29
October 2018, the Company assisted employees to exercise 19,950,000 options previously issued to employees of the Company in 2019
via the Plan. As at 30 June 2019 there have been no repayments against the loans provided.
The key terms of this Plan are as follows:
The employee may only use a loan under the Plan to pay for the exercise of Employee Options granted by the Company.
The loan will be granted for a maximum period of 2 years.
•
•
• No interest will be charged on the loan.
•
•
The loan is secured by the shares granted on the exercise of the Employee Options.
The loans provided are full recourse.
As the loan provided by the Company was at a favourable rate of interest for the employees, the loan receivable under the Plan was fair
valued. The fair value of the loan was estimated based on the future cash flow and a market rate of 7%. In future reporting periods, the
loan will be measured at amortised cost. The loans provided are full recourse loans. If the sale of shares does not cover full repayment
the balance will be recovered from employees. This transaction was a non cash transaction with employees. Management have
considered the likelihood of default is low and the expected credit losses under the loans will be immaterial and accordingly, no
impairment has been recognised at 30 June 2019. The loan is a non-cash transaction.
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.
SolGold plc annual report for the year ended 30 June 2019
115
Notes to the Financial Statements
For the year ended 30 June 2019
Note 14 Deferred Taxation
Recognised deferred tax assets and liabilities
Group
Opening
balance
Net charged
to income
2019
Recognised deferred tax assets
Carried forward tax losses
Accruals / provisions
Potential benefit
US$
US$
20,961,290
1,462,888
22,424,178
(10,931,868)
(521,043)
(11,452,911)
Net charged to
other
comprehensive
income
US$
-
-
-
Net charged
to equity
US$
-
14,912
14,912
Recognised deferred tax liabilities
Financial assets held at fair value
through other comprehensive
income
Exploration and evaluation assets
Foreign exchange gains/losses
Potential benefit
(848,889)
(20,892,396)
(682,893)
(22,424,178)
254,646
18,668,777
(6,855,606)
12,067,817
(629,818)
-
-
(629,818)
-
-
-
-
Net deferred taxes
-
614,906
(629,818)
14,912
Deferred tax assets not
recognised
Unused tax losses
Unused capital losses
Temporary differences1
Tax benefit
10,766,262
-
8,962,905
19,729,167
(5,396,915)
-
-
(5,396,915)
-
-
-
-
-
-
-
-
Net
movement on
unwind /
transfer
US$
-
-
-
-
-
-
-
-
-
-
-
-
Closing
balance
US$
10,029,422
956,757
10,986,179
(1,224,062)
(2,223,619)
(7,538,499)
(10,986,179)
-
5,369,347
-
8,962,905
14,332,252
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
Opening
balance
Net charged
to income
2018
Recognised deferred tax assets
Carried forward tax losses
Accruals / provisions
Potential benefit
US$
US$
12,013,315
233,085
12,246,400
8,947,975
(57,600)
8,890,375
Net charged to
other
comprehensive
income
US$
-
-
-
Net charged
to equity
US$
-
1,287,403
1,287,403
Recognised deferred tax liabilities
Available for sale financial assets
Exploration and evaluation assets
Foreign exchange gains/losses
Potential benefit
(2,830,224)
(9,413,176)
-
(12,243,400)
-
(11,476,220)
(682,893)
(12,159,113)
1,981,335
-
-
1,981,335
-
-
-
-
Net deferred taxes
-
(3,268,738)
1,981,335
1,287,403
Net
movement on
unwind /
transfer
US$
-
-
-
-
-
-
-
-
Closing
balance
US$
20,961,290
1,462,888
22,424,178
(848,889)
(20,892,396)
(682,893)
(22,424,178)
-
Deferred tax assets not
recognised
Unused tax losses
Unused capital losses
Temporary differences1
Tax benefit
5,805,208
-
-
5,805,208
1 Exploration expenditure incurred in the Solomon Islands that has been expensed. This expenditure is deductible over 5 years from
when production commences.
4,961,054
-
8,962,905
13,923,959
-
-
-
-
-
-
-
-
-
-
-
-
10,766,262
-
8,962,905
19,729,167
SolGold plc annual report for the year ended 30 June 2019
116
Notes to the Financial Statements
For the year ended 30 June 2019
Note 14 Deferred Taxation (continued)
Recognised deferred tax assets and liabilities (continued)
Company
Opening
balance
Net charged
to income
2019
Recognised deferred tax assets
Carried forward tax losses
Accruals / provisions
Capital raising costs
Other temporary differences
Potential benefit
Recognised deferred tax liabilities
Available for sale financial assets
Foreign exchange gains/losses
Potential benefit
Net charged to
other
comprehensive
income
US$
Net charged
to equity
Closing
balance
-
-
-
-
-
-
-
14,912
-
14,912
US$
7,805,802
30,994
894,532
31,232
8,762,560
US$
US$
848,890
-
-
-
848,890
6,956,912
30,994
879,620
31,232
7,898,758
(848,890)
(848,890)
254,646
(7,538,499)
(7,283,853)
(629,818)
-
(629,818)
-
-
-
(1,224,062)
(7,538,499)
(8,762,561)
Net deferred taxes
-
614,906
(629,818)
14,912
-
Deferred tax assets not
recognised
Unused tax losses
Unused capital losses
Temporary differences
Tax benefit
Company
4,047,810
-
-
4,047,810
1,299,685
-
-
1,299,685
Opening
balance
Net charged
to income
2018
Recognised deferred tax assets
Carried forward tax losses
Accruals / provisions
Potential benefit
US$
US$
2,830,225
-
2,830,225
(1,981,335)
-
(1,981,335)
Net charged to
other
comprehensive
income
US$
-
-
-
Recognised deferred tax liabilities
Available for sale financial assets
Exploration and evaluation assets
Potential benefit
(2,830,225)
-
(2,830,225)
-
-
-
1,981,335
-
1,981,335
Net deferred taxes
-
(1,981,335)
1,981,335
Deferred tax assets not
recognised
Unused tax losses
Unused capital losses
Temporary differences
Tax benefit
2,359,611
-
-
2,359,611
1,688,199
-
-
1,688,199
-
-
-
-
-
-
-
-
-
-
-
-
5,347,495
-
-
5,347,495
Net charged
to equity
Closing
balance
US$
US$
-
-
-
-
-
-
-
-
-
-
-
848,890
-
848,890
(848,890)
-
(848,890)
-
4,047,810
-
-
4,047,810
The deferred tax asset in respect of these items has not been recognised as future taxable profit is not anticipated within the foreseeable
future.
SolGold plc annual report for the year ended 30 June 2019
117
Notes to the Financial Statements
For the year ended 30 June 2019
Note 15 Other Receivables and Prepayments
Other receivables
Prepayments
Group
2019
US$
2,534,160
357,166
2,891,326
Group
2018
US$
2,896,651
234,858
3,131,509
Company
2019
US$
187,172
357,166
544,338
Company
2018
US$
170,235
234,625
404,860
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
Cash at bank
Cash and cash equivalents in the statement of
cash flows
Group
2019
US$
41,746,200
Group
2018
US$
60,575,504
Company
2019
US$
38,290,929
Company
2018
US$
58,948,814
41,746,200
60,575,504
38,290,929
58,948,814
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.
Note 17 Allotted, Called-up and Fully Paid Share Capital and Reserves
(a) Authorised Share Capital
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
At 1 July 2018 – Ordinary shares
Increase in authorised share capital of £0.01 each on 17 December 2018
At 30 June 2019 – Ordinary shares
2018
No. of Shares
2,020,000,000
735,024,500
2,755,024,500
2019
No. of Shares
2,755,024,500
613,203,900
3,368,228,400
2018
Nominal Value £
20,200,000
7,350,245
27,550,245
2019
Nominal Value £
27,550,245
6,132,039
33,682,284
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.
SolGold plc annual report for the year ended 30 June 2019
118
Notes to the Financial Statements
For the year ended 30 June 2019
Note 17 Allotted, Called-up and Fully Paid Share Capital and Reserves (continued)
(b) Changes in Allotted, Called-up and Fully Paid Share Capital and Share Premium
Ordinary shares of 1p each at 30 June 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
No. of Shares
1,512,955,686
1,300,000
1,300,000
690,000
180,000,000
-
1,696,245,686
No. of Shares
Ordinary shares of 1p each at 1 July 2018
Shares issued at £0.28 – Exercise of options 4 October 2018
Shares issued at £0.14 – Exercise of options 11 October 2018
Shares issued at £0.28 – Exercise of options 11 October 2018
Shares issued at £0.45 – BHP placement 17 October 2018
Shares issued at £0.28 – Exercise of options 29 October 2018
Shares issued at £0.3888 – BHP share issue 8 November 2018*
Shares issued at £0.3714 – Newcrest share issue 26 November 2018*
Share issue costs charge to share premium account
Ordinary shares of 1p at 30 June 2019
1,696,245,686
550,000
9,795,884
9,795,884
100,000,000
20,624,553
2,596,826
6,712,000
-
1,846,321,033
Nominal
Value
US$
21,987,050
16,705
16,705
8,973
2,414,420
-
24,443,853
Nominal
Value
US$
24,443,853
7,008
128,064
128,064
1,311,687
264,059
33,828
85,861
-
26,402,424
Share
Premium
US$
164,792,271
217,168
451,041
333,424
57,945,935
(798,321)
222,941,518
Share
Premium
US$
222,941,518
189,222
1,664,829
3,457,721
57,714,208
7,129,583
1,281,416
3,103,043
(105,581)
297,375,959
Total
US$
186,779,321
233,873
467,746
342,397
60,360,355
(798,321)
247,385,371
Total
US$
247,385,371
196,230
1,792,893
3,585,785
59,025,895
7,393,642
1,315,244
3,188,904
(105,581)
323,778,383
*Both Newcrest and BHP have anti-dilution rights under their respective share subscription agreements to subscribe for further shares
to maintain their relevant interests of the share capital of SolGold.
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
2019
US$
1,461,582
2,264,538
2,788,472
6,514,592
Group
2018
US$
2,238,225
1,480,574
3,264,943
6,983,742
Company
2019
US$
481,732
148,617
665,331
1,295,680
Company
2018
US$
1,076,171
83,189
227,998
1,387,358
Trade and other payables are measured at amortised cost. The decrease in trade payables is due to the decrease in the number of drill
rigs on site at Cascabel. The number of drill rigs have progressively decreased over the 12-month period from 12 to 9.
Decrease in accrued expenses for the Group represents amounts recognised for metres drilled but not invoiced. The Group finished with
9 drill rigs on the Cascabel project in 2019 compared to 12 drill rigs in 2018.
SolGold plc annual report for the year ended 30 June 2019
119
Notes to the Financial Statements
For the year ended 30 June 2019
Note 19 Share Options
At 30 June 2019 the Company had 160,262,000 options outstanding for the issue of ordinary shares (2018: 88,353,768).
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 115,750,000 options granted during the year ended 30 June 2019 (2018: 46,762,000).
On 5 July 2018, the Company issued a combined total of 21,500,000 unlisted share options over ordinary shares of the Company,
including:
•
•
21,250,000 share options to employees and contractors. The options are exercisable at £0.40 and expire on 4 July 2020; and
250,000 share options to a contractor. The options are exercisable at £0.60 and expire on 4 July 2021.
On 6 November 2018, the Company issued a combined total of 82,875,000 unlisted share options over ordinary shares of the Company
to employees. The options are exercisable at £0.60 and expire on 6 November 2021.
On 20 December 2018, the Company issued a combined total 11,375,000 unlisted share options over ordinary shares of the Company to
Directors following approval granted by shareholders at the Company’s AGM on 20 December 2018. The options are exercisable at £0.60
and expire on 20 December 2021.
Date of grant
Exercisable from
Exercisable to
8 August 2020
Exercise
prices
£0.60
Number
granted
46,750,000
Number at 30
June 2019
44,500,000*
9 August 2017
9 August 2017
5 July 2018
5 July 2018
6 November 2018
20 December 2018
The options vest on the earlier
of:
(a) 18 months, or (b) a Change of
Control Transaction
The options vested immediately
and exercisable through to 8
August 2020
The options vested immediately,
and exercisable through to 4 July
2020
The options vested immediately,
and exercisable through to 4 July
2021
The options vested immediately,
and exercisable through to 6
November 2021
The options vested immediately,
and exercisable through to 20
December 2021
8 August 2020
£0.60
12,000
12,000
4 July 2020
£0.40
21,250,000
21,250,000
4 July 2021
£0.60
250,000
250,000
6 November 2021
£0.60
82,875,000
82,875,000
20 December 2021
£0.60
11,375,000
11,375,000
162,512,000
160,262,000
*2,250,000 options previously issued to John Bovard were forfeited during the year as a result of his retirement.
SolGold plc annual report for the year ended 30 June 2019
120
Notes to the Financial Statements
For the year ended 30 June 2019
Note 19 Share Options (continued)
Date of grant
Exercisable from
Exercisable to
17 October 2016
28 October 2016
28 July 2014
9 August 2017
The options vested immediately,
through to 17 October 2018
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
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
17 October 2018
28 October 2018
Exercise
prices
£0.14
£0.28
£0.28
Number
granted
9,795,884
9,795,884
22,000,000
Number at
30 June 2018
9,795,884
9,795,884
22,000,000
8 August 2020
£0.60
36,750,000
36,750,000
8 August 2020
£0.60
10,012,000
10,012,000
88,353,768
88,353,768
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
Forfeited during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year
Weighted
average
exercise price
2019
£0.45
£0.25
£0.28
£0.60
£0.56
£0.57
£0.57
Number of
options
2019
88,353,768
(40,766,321)
(825,447)
(2,250,000)
115,750,000
160,262,000
160,262,000
Weighted
average
exercise price
2018
£0.25
£0.21
-
-
£0.60
£0.45
£0.28
Number of
options
2018
44,191,768
(2,600,000)
-
-
46,762,000
88,353,768
41,603,768
The options outstanding at 30 June 2019 have an exercise price of £0.40 and £0.60 (2018: £0.14 and £0.60) and a weighted average
contractual life of 1.84 years (2018: 1.26 years).
SolGold plc annual report for the year ended 30 June 2019
121
Notes to the Financial Statements
For the year ended 30 June 2019
Note 19 Share Options (continued)
Share-based payments (continued)
Share options held by Directors are as follows:
Share options held
Nicholas Mather
Brian Moller
Robert Weinberg
John Bovard
Craig Jones
James Clare
Jason Ward
Anna Legge
At 30 June 2019
At 30 June 2018
Option Price
Exercise Period
26,250,000
5,000,000
3,750,000
1,425,000
2,250,000
900,000
-
2,250,000
900,000
3,150,000
-
5,000,000
5,000,000
3,000,000
3,000,000
26,250,000
-
3,750,000
-
2,250,000
-
2,250,000
2,250,000
-
-
5,000,000
5,000,000
-
-
-
60p
60p
60p
60p
60p
60p
60p
60p
60p
60p
28p
60p
60p
40p
60p
28/01/19 – 08/08/20
20/12/18 – 20/12/21
28/01/19 – 08/08/20
20/12/18 – 20/12/21
28/01/19 – 08/08/20
20/12/18 – 20/12/21
28/01/19 – 08/08/20
28/01/19 – 08/08/20
20/12/18 – 20/12/21
20/12/18 – 20/12/21
30/10/16 – 28/10/18
28/07/17 – 08/08/20
06/11/18 – 06/11/21
05/07/18 – 04/07/20
06/11/18 – 06/11/21
The total number of options outstanding at year end is as follows:
Share options held
at 30 June 2019
Share options held
at 30 June 2018
Option price
Exercise periods
-
-
-
9,795,884
9,795,884
£0.14
£0.28
Exercisable through to 17/10/2018
Exercisable through to 17/10/2018
22,000,000
£0.28
34,500,000
36,750,000
£0.60
10,012,000
10,012,000
£0.60
Vests on the earlier of the expiry of 75% of the term of the
option or a Change of Control Transaction, as defined
under the Company’s ESOP Rules
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.
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.
21,250,000
250,000
82,875,000
11,375,000
-
-
-
-
£0.40
£0.60
£0.60
£0.60
Exercisable through to 04/04/2020
Exercisable through to 04/04/2021
Exercisable through to 06/11/2021
Exercisable through to 20/12/2021
160,262,000
88,353,768
SolGold plc annual report for the year ended 30 June 2019
122
Notes to the Financial Statements
For the year ended 30 June 2019
Note 19 Share Options (continued)
Share-based payments (continued)
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 the Black-Scholes model 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
Share price at issue date
Exercise price
Expected volatility
Option life
Expected dividends
Risk-free interest rate (short-term)
Fair value
Valuation methodology
£0.60 Options
9 August 2017
44,512,000
£0.365 - £0.375
£0.60
89.714%
3.00 years
0.00%
0.461%
£0.167-£0.174
Black-Scholes
For the financial year ended 30 June 2019
Share based payments expense recognised
in statement of comprehensive income
US$
3,568,987
2019
£0.60 Options
5 July 2018
250,000
£0.22
£0.60
80.475%
3.00 years
0.00%
0.96%
£0.063
Black-Scholes
US$
20,053
2019
£0.40 Options
5 July 2018
21,250,000
£0.22
£0.40
74.187%
2.00 years
0.00%
0.96%
£0.053
Black-Scholes
US$
1,431,389
Fair value of share options and assumptions
£0.60 Options
6 November 2018
£0.60 Options
20 December 2018
Number of options
Share price at issue date
Exercise price
Expected volatility
Option life
Expected dividends
Risk-free interest rate (short-term)
Fair value
Valuation methodology
For the financial year ended 30 June 2019
Share based payments expense recognised in
statement of comprehensive income
82,875,000
£0.385
£0.60
79.538%
3.00 years
0.00%
1.19%
£0.1573
Black-Scholes
US$
16,792,384
11,375,000
£0.3685
£0.60
78.436%
3.00 years
0.00%
0.97%
£0.1434
Black-Scholes
US$
2,070,346
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 or three-year period, dependant on the exercise period attributable to the tranche of options, prior to the date the options were
issued.
SolGold plc annual report for the year ended 30 June 2019
123
Notes to the Financial Statements
For the year ended 30 June 2019
Note 19 Share Options (continued)
Share-based payments (continued)
Fair value of share options and
assumptions
Number of options
Share price at issue date
Exercise price
Expected volatility
Option life
Expected dividends
Risk-free interest rate (short-term)
Fair value
Valuation methodology
£0.60 Options
28 July 2017
36,750,000
£0.365
£0.60
89.714%
3.03 years
0.00%
0.461%
£0.167
Black-Scholes
2018
£0.60 Options
9 August 2017
10,000,000
£0.375
£0.60
89.714%
3.00 years
0.00%
0.461%
£0.173
Black-Scholes
£0.60 Options
9 August 2017
12,000
£0.375
£0.60
89.714%
3.00 years
0.00%
0.461%
£0.173
Black-Scholes
2017
£0.28 Options
28 October 2016
22,000,000
£0.2675
£0.28
99.744%
2.00 years
0.00%
0.66%
£0.14
Black-Scholes
in
For the financial year ended 30 June
2018
Share based payments expense
recognised
of
comprehensive income
Share based payments expense
recognised as share issue costs
Share based payments expense to be
recognised in future periods
statement
US$
US$
US$
US$
4,771,274
1,304,054
-
2,048,974
-
-
2,968,176
881,118
2,622
-
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 or three-year period, dependant on the exercise period attributable to the tranche of options, prior to the date the options were
issued.
SolGold plc annual report for the year ended 30 June 2019
124
Notes to the Financial Statements
For the year ended 30 June 2019
Note 20 Financial Instruments (Group and Company)
Financial instruments by category (Group)
Financial assets
Loans and receivables
Financial assets held at fair
value through OCI /
Available-for-sale
2019
2018
2019
2018
Cash and cash equivalents
41,746,200
60,575,504
Loans receivable and other non-current
assets
7,796,541
894,094
-
-
-
-
Equity investments
Total financial assets
-
-
5,952,439
4,031,236
49,542,741
61,469,598
5,952,439
4,031,236
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables
Total financial liabilities
2019
6,514,592
6,514,592
2018
6,983,742
6,983,742
Financial instruments by category (Company)
Financial assets
Loans and receivables
Financial assets held at fair value
through OCI / Available-for-sale
2019
2018
2019
2018
Cash and cash equivalents
Other receivables
Loans receivable and other non-
current assets
38,290,929
58,948,814
187,172
170,235
762,382
683,948
Investment in subsidiaries
200,507,458
108,381,978
-
-
-
-
-
-
-
-
Equity investments
Total financial assets
-
-
239,747,941
168,184,975
5,946,815
5,946,815
4,025,313
4,025,313
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables
Total financial liabilities
2019
1,295,680
1,295,680
2018
1,387,358
1,387,358
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 2019 and 2018 no trading in commodity contracts was undertaken.
SolGold plc annual report for the year ended 30 June 2019
125
Notes to the Financial Statements
For the year ended 30 June 2019
Note 20 Financial Instruments (Group and Company) (continued)
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 US$834,924
and the company’s income statement by US$765,819 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 United States
dollars.
Currency risk in respect of non-functional currency expenditure is reviewed by the Board.
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.
Group
Functional currency of entity
Net Financial Assets (Liabilities)
AUD
USD
SBD
TOTAL
2019
Australian dollar
Solomon Island dollar (SBD)
Canadian dollar (CAD)
Great British Pound (GBP)
62,019
3,771
-
-
65,790
306,032
-
21,467
22,950,969
23,278,468
-
-
-
-
-
368,051
3,771
21,467
22,950,969
23,344,258
Group
Functional currency of entity
Net Financial Assets (Liabilities)
AUD
USD
SBD
TOTAL
2018
Australian dollar
Solomon Island dollar (SBD)
Canadian dollar (CAD)
Great British Pound (GBP)
23,975
3,910
-
-
27,885
135,588
-
1,767,674
11,535,544
13,438,806
-
-
-
-
-
159,563
3,910
1,767,674
11,535,544
13,466,691
SolGold plc annual report for the year ended 30 June 2019
126
Notes to the Financial Statements
For the year ended 30 June 2019
Note 20 Financial Instruments (Group and Company) (continued)
Company
Functional currency of entity
Net Financial Assets (Liabilities)
AUD
USD
SBD
TOTAL
2019
Australian dollar
Canadian dollar (CAD)
Great British Pound (GBP)
-
-
-
-
306,032
21,467
22,950,969
23,278,468
-
-
-
-
306,032
21,467
22,950,969
23,278,468
Company
Functional currency of entity
Net Financial Assets (Liabilities)
AUD
USD
SBD
TOTAL
2018
Australian dollar
Canadian dollar (CAD)
Great British Pound (GBP)
-
-
-
-
135,588
1,767,674
11,535,544
13,438,806
-
-
-
-
135,588
1,767,674
11,535,544
13,438,806
The main currency exposure relates to the effect of re-translation of the Group’s assets and liabilities in, Australian dollar (AUD) and the
Great British Pound (GBP). A 10% increase in the A$/US$ and GBP/US$ exchange rates would give rise to a change of approximately
US$1,869,180 (2018: US$1,296,792) in the Group net assets and reported earnings. A 10% decrease in the A$/US$ and GBP/US$ exchange
rates would give rise to a change of approximately US$1,529,329 (2018: US$1,061,012), 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 United States 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.
SolGold plc annual report for the year ended 30 June 2019
127
Notes to the Financial Statements
For the year ended 30 June 2019
Note 20 Financial Instruments (Group and Company) (continued)
Credit Risk
The Group is exposed to credit risk primarily from the financial institutions with which it holds cash and cash deposits and loans receivable
under the Company Funded Loan Plan. The banks and their credit ratings the Group had cash accounts with at 30 June 2019 were
US341,764 in cash accounts with Macquarie Bank Limited (BBB) in Australia, US$13,044 in cash accounts with the ANZ Bank (AA-) in
Australia, US$37,984,064 in cash accounts with Westpac Bank (AA-) in Australia, US$3,771 in cash accounts with ANZ Bank (AA-) in
Honiara, Solomon Islands, US$2,650,436 in cash accounts with Banco Guayaquil (AAA-) in Ecuador, US$733,978 in cash accounts with
Produbanco (B) in Ecuador, US$12,693 in cash accounts with Lloyds of London (A+), and US$6,450 in petty cash. Including other
receivables, the maximum exposure to credit risk at the reporting date is the carrying value of these assets and was US$44,280,360 (2018:
US$63,472,169).
The Company is also exposed to credit risk due to the cash balance it holds directly. It is also exposed to credit risk on the Company Loan
Funded Plan receivable. At 30 June 2019, the company had US$41,746,200 in cash and cash equivalents (2018:US$60,575,504) and
US$6,496,407 of Company Loan Funded Plan receivable (2018: US$nil). The maximum exposure to credit risk at the reporting date was
US$48,242,607 (2018: US$60,575,504).
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.
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 investments held at fair value through other comprehensive income are
categorised as other financial assets 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
3,248,160
3,141,333
226,362
6,615,855
6,496,320
6,282,667
211,636
12,990,623
-
-
-
-
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.
SolGold plc annual report for the year ended 30 June 2019
128
Notes to the Financial Statements
For the year ended 30 June 2019
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)
(iii)
(iv)
(v)
The Company had a commercial agreement with Samuel Capital Pty Ltd (“Samuel”) for the engagement of Nicholas
Mather as director of the Company. For the year ended 30 June 2019 US$539,422 was paid or payable to Samuel
(2018: US$296,120). These amounts are included in Note 5 (Remuneration of Key Management Personnel). The
total amount outstanding at year end is US$925 (2018: US$12,388).
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 2019 US$255,700 was paid or payable to DGR Global (2018: US$266,508)
for the provision of administration, management and office facilities to the Company during the year. The total
amount outstanding at year end was US$15,788 (2018: US$70,213).
Mr Brian Moller (a Director), is a partner in the Australian firm HopgoodGanim lawyers. For the year ended 30 June
2019, HopgoodGanim were paid US$201,306 (2018: US$163,204) for the provision of legal services to the Company.
The services were based on normal commercial terms and conditions. The total amount outstanding at year end was
US$nil (2018: US$nil).
Mr James Clare (a Director), is a partner in the Canadian firm Bennett Jones lawyers. For the year ended 30 June
2019, Bennett Jones were paid US$152,559 (2018: US$418,996) for the provision of legal services to the Company.
The services were based on normal commercial terms and conditions. The total amount outstanding at year end was
US$nil (2018: USSnil)
On 2 July 2018 and 13 June 2019, The Mather Foundation Limited, a Philanthropic Auxiliary Foundation Trust Fund
of which Nicholas Mather is a Director, sold 850,000 and 400,000 shares in SolGold.
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).
Subsidiaries
The Company has an investment in subsidiaries balance of US$192,807,783 (2018: US$108,381,978). 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, 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.
SolGold plc annual report for the year ended 30 June 2019
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Notes to the Financial Statements
For the year ended 30 June 2019
Note 23 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 2019 as such there is significant uncertainty over the timing of any payments that may fall due.
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. At 30 June 2019, Cornerstone’s
equity interest in ENSA had not been diluted below 10%.
The amount receivable from CESA at 30 June 2019 was $23,516,425 (2018: $12,951,215). As there is uncertainty as to whether ENSA will
be able to distribute earnings or dividends, a provision for impairment has been recognised on the entire amount receivable from CESA.
There are no other contingent assets and liabilities at 30 June 2019 (2018: nil).
Note 24 Subsequent Events
On 5 August 2019, tenements wholly within an area of mutual interest extending 5 kms from the boundary of the Cascabel licence which
were granted to SolGold's 100% owned subsidiary Carnegie Ridge Resources SA (CRRSA) were transferred to Exploraciones Novomining
SA (ENSA) in which SolGold has a registered and beneficial 85% interest. The tenements which have been transferred from CRRSA to
ENSA are: Blanca 2, Nieves 2 and Rio Mira 2.
In 2017, Major Drilling Group International Ecuador (hereinafter “Major”) filed an arbitration claim before the Arbitration Center of the
Quito Chamber of Commerce against ENSA for the amount of US$350,000. Major alleged a breach of the drilling contract signed by the
parties on 22 September 2016 (hereinafter “Agreement”). On 1 September 2017 ENSA filed a counterclaim against Major for the amount
of US$ 360,000 for compensation for damages caused by Major. On 5 August 2019 Major and ENSA agreed to settle their dealings out of
court by way of a USD$200,000 payment to Major for outstanding invoices. No additional penalties of payments will be paid by either
company in excess of this USD$200,000.
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.
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