2019 ANNUAL REPORT CORPORATE DIRECTORY DIRECTORS Peter J Newton (Non-Executive Chairman) Peter G Cook (Managing Director) Johannes S Norregaard (Executive Director) Peter B Schwann (Non-Executive Director) Fiona J Van Maanen (Non-Executive Director) Suresh V Shet (Non-Executive Director) COMPANY SECRETARY David W Okeby REGISTERED OFFICE Level 6, 197 St Georges Tce Perth WA 6000 Phone: +61 8 9462 3400 Fax: +61 8 9462 3499 E-mail: reception@westgold.com.au Website: www.westgold.com.au POSTAL ADDRESS PO Box 7068 Cloisters Square Perth WA 6850 SECURITIES EXCHANGE Listed on the Australian Securities Exchange ASX Code: WGX SHARE REGISTRY Computershare Investor Services Pty Ltd Level 11, 172 St Georges Tce Perth WA 6000 GPO Box 2975 Melbourne Vic 3001 Telephone: (within Australia) 1300 850 505 Telephone: (outside Australia) +61 3 9415 4000 Facsimile: +61 3 9473 2500 DOMICILE AND COUNTRY OF INCORPORATION Australia TABLE OF CONTENTS CHAIRMAN’S LETTER MANAGING DIRECTOR’S COMMENT OPERATIONS OVERVIEW DIRECTORS REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019 CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2019 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ DECLARATION INDEPENDENT AUDIT REPORT SECURITY HOLDER INFORMATION AS AT 8 OCTOBER 2019 TABLES OF MINERAL RESOURCES AND ORE RESERVES 1 2 4 12 42 43 44 45 46 106 107 113 115 CHAIRMAN’S LETTER Dear Shareholders It is with pleasure that I present you Westgold’s Annual Report for the period ending 30 June 2019. The year past has been yet another busy one with significant structural changes for the group. After several years of heavy investment in the Murchison Region our development strategy is coming to fruition. Our Murchison strategy has aggregated a massive control position in this region of prolific past production and with a gold resource base nearly as large. We now control the majority of this region with a plant in the north, a plant in the middle and a plant in the south. All plants are now operating at full capacity and our output is rising and capital investment primarily sunk. In future years we reduce to sustainable capital levels significantly lower than the past three years. Our team has restructured our business and strategy. We have divested our outlying asset and under- performing assets and although we have shrunk in size our output keeps rising and is concentrated on the Murchison Region. Our financial results reflect the robustness of our corporate team in the management of our affairs and focus on wealth creation for shareholders with the divestment of assets without loss. Our gold operations showing a massive $45.88 million turn-around in profits but most importantly our balance sheet strengthened and we continued to achieve great progress and large capital re-investment in our core operations without the stress of debt funding and with minimal shareholder dilution. It’s an exciting year forward as our biggest single mine, Big Bell transitions to production as a low- cost sub-level cave mine with a long life. The magnitude of the task involved in de-watering and re- establishing this mine should not be underestimated and I am sure it will again rise to become one of more prolific single mines in our sector. Westgold has been ahead of the industry taking control of its own destiny as owner-operator in our underground mines and most of our open pits. In doing so, insuring us from the potential agony of labour and equipment tightness and escalating margins. Our team has been resolute and unwavering in their focus in the Murchison and some small recognition and acknowledgement has started to be reflected in our share price. Mining is a long game and those with the fortitude to stick it out usually get rewarded in spades. On a personal note, 2019 will be my last AGM as Chairman of Westgold as I retire from the industry. I leave the Company in a sound financial position and with a clear strategy and pathway for success. I hand the reigns over to my long-standing partner and the architect and driving force of our strategy, Peter Cook. Peter J Newton Chairman 1 CHAIRMAN’S LETTER MANAGING DIRECTOR’S COMMENT In the past year Westgold continued with its growth plan in the Murchison and our focus on increasing our gold output. The year also marked a tipping point where after three years of heavy investment and money walking out the door, our revenue began to start to exceed our expenditure. The regional aggregation we have put together is now 350 titles and over 124,000 hectares containing a total mineral resource of 9.1 million ounces. In the year past we completed the refurbishment and re- commissioning of the Tuckabianna Plant, bringing it back into production and setting up our Murchison infrastructure base with three plants strategically placed to enable the exploitation of our ore reserves and resources. Our focus on re-establishing production from the prolific underground mines within our portfolio also advanced. We now operate six underground mines with building output and true value that is yet to be revealed. Hidden away by the slog of daily, weekly, monthly and quarterly production is perhaps the most significant strategic advantage we have over our peers. Our mines are shallow with an average depth of only about 450 vertical metres. The average depth of our peer group gold mines is approximately 950 vertical metres and given that you would typically mine 50 vertical metres per annum, we have potentially 10 years of mining to come before we get to the average depth. The building of a regional production centre such as we have achieved in the Murchison is somewhat of thankless task as is the renovation of the previously closed mines and plants. There are two choices to achieve these outcomes: 1. Build faster with debt, or 2. Build progressively by re-investing cash flow. The first choice may enable a quicker achievement of outcomes and be more trader friendly, however it comes with significant risk if things don’t go to plan. It lacks the glamour and excitement of a brand new build but the consequences if not seamlessly executed can be catastrophic for shareholders as the focus to achieving the best outcome for the mine turns to the best outcome to limit the risk and exposure of the bankers and financiers. Unashamedly, Westgold under my stewardship has taken the alternative route, building and growing within its internal means with equity, trading its assets and by re-investing the cash flow our mines make in their early years to set them up for a brighter future. I firmly believe this is a more genuine and rigorous process to create wealth for our shareholders in the long term. During the past year we undertook a thorough review of our portfolio and reflected upon where we have come from and where we are going. This resulted in a strategy to simplify our asset portfolio and concentrate our focus on the Murchison Region as our core operations and future. As a result we have purged the complex and de-focussing parts of our business to focus on the main game. As we have done with the acquisition of the mining services division, our objective is always to manage downside risk and protect ourselves from outliers that can derail our strategy. We do this also with the short term hedging of our gold output. Here the strategy is about managing our stay-in-business risk and locking in margins above our costs for a portion of our gold output correlated or somewhat linked to the size of our capital investment and capitally developed ores in our mines. MANAGING DIRECTOR’S COMMENT 2 Our staff and operating teams have worked hard this year with a resolute focus on our plans with the success and progress reflecting in the improvements in our outputs as the year has progressed. Annual gold output for the Westgold Group operations totalled 255,221 ounces at a cash cost (C1) of A$1,253 per ounce and an all-in-sustaining cost (AISC) of $1,408 per ounce. 2019 Gold Production & Costs 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Q1 Q2 Q3 Q4 Gold Production Cash Cost AISC The sections following provide detail on each of our operating sub-sets during the year. $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 3 MANAGING DIRECTOR’S COMMENT Bluebird Processing Plant Meekatharra Gold Operations THE MURCHISON GOLD STRATEGY Westgold’s Murchison gold strategy has been four years in the making. Simply put it is a large scale aggregation aimed at consolidating ownership of all the major historic gold mining centres in the Central Murchison Region. This plan has seen the company collate 350 titles and over 124,000 hectares in area covering the vast majority of the gold production centres in the Central Murchison region. We now have three process plants operating at full capacity. One in the north, one in the middle and one in the south. They have a combined total capacity of four million tonnes per annum. They are divided into three hubs referred to as: 1. MGO – Meekatharra Gold Operations 2. CGO – Cue Gold Operations. 3. FGO – Fortnum Gold Operations. At the MGO we control the whole of the historic Paddy’s Flat, Yaloginda, Nannine and Reedy’s gold production centres which have produced more than 4.7 million ounces. Our development strategy has us aiming to produce 110 - 140,000 ounces per annum. At the CGO we control the whole of the historic Big Bell, Cuddingwarra, Day Dawn, Pinnacles and Tuckabianna gold production centres which have produced more than 5.9 million ounces. Our development strategy has us aiming to produce 100 - 110,000 ounces per annum. The MGO and CGO have a combined mineral resource totalling 7.7 million ounces and a mining reserve of 2.2 million ounces. These are reported together as individual deposits and are capable of being delivered to either processing hub in full or in part. At the FGO we control the prolific and historic gold production centres of Labouchere, Fortnum, Peak Hill and Horseshoe where output has exceeded 1.5 million ounces. The FGO total resource base currently stands at 1.39 million ounces with mining reserves of 423,000 ounces. Our development strategy has us aiming to produce 60-70,000 ounces per annum from the existing 0.9 – 1.0 million tonne per annum Fortnum process plant. Starlight Pit and Underground Mine Fortnum Gold Operations OPERATIONS OVERVIEW 4 MEEKATHARRA GOLD OPERATIONS (MGO) MGO covers the central part of Murchison portfolio and the historic gold mining centres of Paddy’s Flat, Yaloginda, Nannine and Reedys. Production from these areas has been from various open pits, which are progressively being replaced by underground mining as the historic mines are brought back into production. Over the past year the South Emu – Triton underground was developed and now produces ore to supplement the underground mine at Paddy’s Flat, increasing the proportion of higher-grade underground ore in the plant feed. The Bluebird processing hub comprising a nominal 1.4 - 1.6 million tonne per annum CIP plant and associated infrastructure anchors the production sources. The harder ore feeds from both open pit and underground sources impacted plant throughput dramatically during the year with a 19.5% reduction (or 317,000 tonnes) in throughput to 1.31 million tonnes achieved. This was the primary reason for a 16.1% reduction in gold output to 94,280 ounces for the full year. A new secondary crushing circuit was added to plant during the year resurrect throughput. It was constructed and commenced commissioning before year end. It is expected that this addition will enable MGO to maintain nominal plant capacity despite a greater proportion of hard ore coming from underground sources and deeper open pits as the project progresses. Gold output from the operation for the year was 94,280 ounces with C1 Cash Cost of A$1,264 per ounce. All-in sustaining costs reduced by 2.75% over the previous year to A$1,451 per ounce. Gold output and cost on a quarterly basis are graphed below: MGO Gold Production & A$ Costs ' Z O N D O R P D L O G R T Q 30,000 25,000 20,000 15,000 10,000 5,000 0 MGO Gold Prod'n MGO Cash Cost/oz MGO AISC/oz Sep Q 2018 25,298 1,188 1,389 Dec Q 2018 23,416 1,288 1,461 Mar Q 2019 23,333 1,346 1,483 Jun Q 2019 22,233 1,263 1,474 1,600 1,400 1,200 1,000 800 600 400 200 - Z O R E P T S O C MGO Gold Prod'n MGO Cash Cost/oz MGO AISC/oz Sustaining capital was invested to maintain developed tonnages in the underground mines so that production rates can be sustained. Additional growth capital was invested in start-up projects at the South Emu underground mine to establish long-term mine services and infrastructure. The main capital works program was the new secondary crushing circuit addition to the Bluebird Plant. 5 OPERATIONS OVERVIEW Bluebird Processing Plant Meekatharra Gold Operations CUE GOLD OPERATIONS (CGO) CGO covers the southern part of Murchison portfolio and the historic gold mining centres of Big Bell, Cuddingwarra, Day Dawn, Pinnacles and Tuckabianna. The Tuckabianna processing hub, a nominal 1.2 - 1.4 million tonne per annum CIP plant and associated infrastructure anchors the gold output from the region. The Tuckabianna Plant had its first full year of operation completing a series of phases of capacity building and increasing gold output. Starting initially on low-grade and tailings stocks with a small amount of Comet underground ore, feedstock moved to open pit ores with a small amount of the Big Bell ore hitting the plant late in the year. Open pit mining commenced at Day Dawn with these open pit ores beginning to dominate plant feed by mid- year. These open pits are a transitional phase of production whilst the Big Bell mine builds to full capacity of the ensuing year. The Big Bell mine will dominate long-term mill feed for CGO for the ensuing 10 years as the sub-level cave mine builds to full capacity over the year forward. Big Bell produced a minor amount of ore during the capital development phase from remnants of the previous mining phase. Gold output for CGO in its first year of ramp-up was 68,255 ounces at a C1 Cash Cost of A$1,338 per ounce and an all-in sustaining cost of A$1,449 per ounce. Gold output and cost on a quarterly basis show a steady ramp in output and a commensurate reduction in costs which are graphed below: CGO Gold Prod'n & A$ Costs ' Z O n d o r P d l o G R T Q 25,000 20,000 15,000 10,000 5,000 0 Gold Prod'n Cash Cost/oz AISC/oz Sep Q 2018 12,557 1,661 1,730 Dec Q 2018 14,676 1,695 1,766 Mar Q 2019 20,108 1,076 1,250 Jun Q 2019 20,914 1,141 1,275 Gold Prod'n Cash Cost/oz AISC/oz 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 z o r e P T S O C The Big Bell mine was the main capital works program with significant growth capital expended to re- establish the mine and its network of infrastructure and services to enable a long-term sub-level cave mining operation. In addition a new workers village was constructed at Big Bell. Other growth capital was expended at the Comet Mine and the Great Fingall mine with the in-wall ramp for the pit cut-back and longer-term decline integration. Tuckabianna Processing Plant Cue Gold Operations OPERATIONS OVERVIEW 6 FORTNUM GOLD OPERATIONS (FGO) FGO covers the northern extremities of the Group’s Central Murchison tenure. Specifically, FGO aggregates the historic mining centres of Labouchere, Fortnum, Horseshoe and Peak Hill with gold processing anchored by the 0.9 – 1.0 million tonne per annum Fortnum processing hub. Mining operations at FGO during the year were focused on three main ore sources, namely the Yarlaweelor open pits, the Starlight Underground Mine and residual low-grade stocks in the region. During the year excellent progress was made at the Starlight underground mine with the mine fully refurbished and moving toward the exploitation of virgin lodes beneath the historic workings. Development into the sub- parallel Trev’s lodes commenced with plans to bring this forward as a second production area in the year forward. Open pit mining of the Stage 1 - Yarlaweelor Open Pits was completed toward the end of the year. Available low-grade stocks on surface are sufficient for three years of blending with underground feeds through the plant. Gold output for the year 58,308 ounces at a C1 Cash Cost of A$1,064 per ounce and an all-in sustaining cost of A$1,224 per ounce. Gold output and cost on a quarterly basis show a steady ramp in output and a commensurate reduction in costs as operations mature: FGO Gold Production & A$ Costs ' s ' z O N D O R P D L O G R T Q 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Gold Prod'n Cash Cost/oz AISC/oz Sep Q 2018 13,394 1,312 1,444 Dec Q 2018 13,673 1,100 1,244 Mar Q 2019 17,019 781 937 Jun Q 2019 14,222 1,123 1,329 Gold Prod'n Cash Cost/oz AISC/oz e Z O R E P T S O C 1,600 1,400 1,200 1,000 800 600 400 200 - Growth capital at Fortnum was expended on a new airstrip for fly-in fly-out operations to reduce the 150 km commute to Meekatharra and for an upgrade to the village. Growth capital was also expended for the establishment of a second mine portal access to enable exploitation of the Trev’s Lode system at the Starlight underground mine. 7 OPERATIONS OVERVIEW Fortnum Processing Plant Fortnum Gold Operations HIGGINSVILLE GOLD OPERATIONS (HGO) HGO continued to operate until their complete divestment on 10 June 2019. Consequently, HGO is considered a discontinued operation for financial reporting purposes. HGO had a difficult year for the Westgold Group. Gold output under achieved its plans and costs, and margins. Gold output was 38.5% lower than the previous year at 34,378 ounces. C1 Cash costs averaged A$1,375 per ounce and AISC’s averaged A$1,520 per ounce for the year. A quasi sale/merger agreement was agreed in the second half of the year that resulted in the operating subsidiaries being divested to RNC Minerals for a total consideration of A$50 million to be received as approximately 42% in cash and remainder in shares, moving Westgold to become the largest shareholder in RNC minerals with a holding of just above 10%. The merger aspect of the divestment was about the aggregation of assets of both groups into one entity in the region. The addition of the exciting Beta Hunt mine and its output to HGO provided a catalyst for a longer life and brighter future for the operations. OPERATIONS OVERVIEW 8 OTHER ASSETS Rover Project (Northern Territory) – 100% Westgold, through its wholly owned subsidiary, Castile Resources Pty Ltd continues to hold substantial polymetallic assets in the Rover Field near Tennant Creek, Northern Territory. These assets include: • The Rover 1 deposit; a polymetallic Iron-Oxide-Copper-Gold (IOCG) prospect with a significant copper-gold-bismuth-cobalt resource which is close to development ready. • The Explorer 142 prospect where initial drilling has defined high grade copper results from with another IOCG system. • The Explorer 108 prospect where a significant lead-zinc-silver resource has been defined. • A series of other coincident magnetic and gravity anomalies through the cover sequence. • The Warumpi Prospect which is a grass roots exploration play where initial works have discovered a highly mineralised gossan containing copper and zinc. Subsequent to the end of the reporting period, the Board of Westgold announced its intent to demerge Castile Resources Pty Ltd with full proportional participation by all its shareholders. This is aimed giving the projects independent and focussed exploration budgets to advance their exploration and development. Lithium Interests – 100% Westgold holds a significant package of Lithium royalties, exploration and mining rights covering the freehold lands of Hampton Gold Mining Areas near Kalgoorlie. As part of its strategy to shift its focus to its core gold projects in the Murchison a decision was made to divest its royalty interests: • The Lithium royalty on the northern part of the Mt Marion was sold to international royalty company, SilverStream for A$13 million and remains subject to completion. • The Lithium royalty on the Buldania Project was also sold to Silverstream, but the deal was pre- empted by the developer, Liontown Resources. Liontown paid a $250,000 deposit and settled the remaining $1.75 million just after the financial year end. MINING SERVICES DIVISION Westgold’s wholly-owned mining services division, Australian Contract Mining Pty Ltd (ACM) continued to offer a full mining service to the Westgold Groups expanding gold operations during the year. ACM is now operating six underground mining contracts for Westgold in its Murchison operations as well as a number of open pit operations, crusher feed and ore cartage services for Westgold. These contracts are internalised within the cost reporting of Westgold on an individual work area basis. ACM also completed some minor works for external parties during the year with external revenue of $25 million. Westgold continues to operate ACM with a balance between servicing its internal needs and preparing it for separation as an independent services provider. 9 OPERATIONS OVERVIEW MINERAL RESOURCES & ORE RESERVES WESTGOLD RESOURCES LIMITED Gold Division (WA Operating Mines) Mineral Resource Statement - Rounded for Reporting 30/6/19 Tonnes (‘000s) Grade Ounces Au (‘000s) 3,328 753 4,081 60,854 15,436 76,290 44,641 5,829 50,470 108,823 22,018 130,841 3.11 2.76 3.04 2.26 1.89 2.18 2.08 2.07 2.07 2.21 1.97 2.17 333 67 399 4,416 938 5,355 2,978 389 3,367 7,727 1,394 9,121 Project Measured CMGP (MGO + CGO) FGO Sub-Total Indicated CMGP (MGO + CGO) FGO Sub-Total Inferred CMGP (MGO + CGO) FGO Sub-Total Total CMGP (MGO + CGO) FGO Grand Total Full Mineral Resource Statements including for the Northern Territory Projects can be found on page 115. Glossary CGO – Cue Gold Operations. CMGP – Central Murchison Gold Project (aggregate of CGO and MGO to reflect processing optionality). FGO - Fortnum Gold Operations. MGO – Murchison Gold Operations. OPERATIONS OVERVIEW 10 WESTGOLD RESOURCES LIMITED Gold Division (WA Operating Mines) Ore Reserve Statement - Rounded for Reporting 30/6/18 Tonnes (‘000s) Grade Ounces Au (‘000s) 1,814 891 2,705 23,379 5,473 28,852 25,193 6,364 31,558 2.43 2.55 2.47 2.73 1.99 2.59 2.71 2.07 2.58 142 73 215 2,054 350 2,404 2,196 423 2,620 Project Proven CMGP (MGO + CGO) FGO Sub-Total Probable CMGP (MGO + CGO) FGO Sub-Total Total CMGP (MGO + CGO) FGO Grand Total Full Ore Reserve Statements can be found on page 115. 11 OPERATIONS OVERVIEW DIRECTORS’ REPORT The Directors submit their report together with the financial report of Westgold Resources Limited (“Westgold” or “the Company”) and of the Consolidated Entity, being the Company and its controlled entities (“the Group”), for the year ended 30 June 2019. DIRECTORS The names and details of the Company’s Directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Names, qualifications, experience and special responsibilities Peter Newton – Independent Non-Executive Chairman (Appointed 6 October 2016) Mr Newton was a highly successful stockbroker for 25 years before shifting his hand to corporate management of resource companies where he has been a significant participant in the Australian resource industry as an investor, non-executive director, Chairman and mentor in a number of listed and successful companies. Mr Newton is also the Chairman of the Company’s Remuneration & Nomination Committee and Audit Committee. During the past three years, he has served as a director of the following public listed companies: • Metals X Limited *. Peter Cook – Managing Director (Appointed 19 March 2007) Mr Cook (BSc (Applied Geology), MSc (Min.Econ.) WASM MAusIMM) has over 35 years of experience in the fields of exploration, project, operational and corporate management of mining companies. During the past three years, he has also served as a director of the following public listed companies: • Metals X Limited (Appointed 23 July 2004 – Resigned 2 February 2017); • Pantoro Limited (Appointed 31 August 2009 – Resigned 5 October 2016); and • Nelson Resources Limited (Appointed 4 June 2013 – Resigned 1 February 2019). Johannes Norregaard – Director of Operations (Appointed 29 December 2016) Mr Norregaard (B.Eng (Mining) WASM, MAusIMM) has over 30 years of corporate and mine management experience in base metal and gold operations across Australia, Canada and South East Asia. Mr Norregaard has held no public company directorships in the past three years. Peter B Schwann – Independent Non-Executive Director (Appointed 2 February 2017) Mr Schwann (Assoc. in Applied Geology, FAusIMM, FAIG, MSEG) is a highly experienced, internationally recognised geologist and mining executive. Mr Schwann has broad experience across multiple commodities with extensive geological capability as well as significant operational management. Mr Schwann serves on the Company’s Audit Committee and Remuneration & Nomination Committee. During the past three years, he has served as a director of the following public listed companies: • Aruma Resources Limited *. Suresh Shet – Non-Executive Director (Appointed 18 December 2017) Mr Shet (MSc Geol), MAusIMM) has over 22 years of experience in various mineral commodities in fields ranging from exploration to feasibility studies, new mine development, mergers and acquisitions, and project evaluation. Mr Shet is a nominee director of Golden and Energy Resources Ltd (GEAR) who is a significant shareholder in the Company. He is also an Associate Member of the Singapore Institute of Directors (SID). Mr Shet has held no public company directorships in the past three years. DIRECTORS’ REPORT 12 DIRECTORS’ REPORT Fiona Van Maanen – Non-Executive Director (Appointed 6 October 2016) Mrs Van Maanen is a CPA, holds a Bachelor of Business (Accounting) degree and a Graduate Diploma in Company Secretarial Practice. Mrs Van Maanen has more than 25 years’ experience in accounting and financial management in the mining and resources industry. Mrs Van Maanen also served as Company secretary of Westgold until December 1, 2016, prior to its demerger from Metals X Limited. Mrs Van Maanen serves on the Company’s Audit Committee and Remuneration & Nomination Committee. Mrs Van Maanen has held no public company directorships in the past three years. * Denotes current directorship. INTERESTS IN THE SHARES OF THE COMPANY As at the date of this report, the interests of the Directors in the shares and options of Westgold Resources Limited were: Director PG Cook JS Norregaard PJ Newton PB Schwann FJ Van Maanen SV Shet Total Fully Paid Ordinary Shares 10,779,066 - 6,941,656 - 435,521 - 18,156,243 Options 3,929,744 1,180,869 - - - - 5,110,613 COMPANY SECRETARY David Okeby (Appointed 1 December 2016) Mr Okeby has significant legal, contractual, administrative and corporate experience in the mining industry. Mr Okeby brings skills in governance, stakeholder relations and corporate activities including mergers, acquisitions and disposals. PRINCIPAL ACTIVITIES The principal activities during the year of the Group were the exploration, development and operation of gold mines, primarily in Western Australia. EMPLOYEES The Group had 808 employees at 30 June 2019 (2018: 829). 13 DIRECTORS’ REPORT CORPORATE STRUCTURE 100% AUSTRALIAN CONTRACT MINING PTY LTD ACN 080 756 172 CONTRACT MINING SERVICES ACN 009 260 306 100% BIG BELL GOLD OPERATIONS PTY LTD 100% ACN 090 642 809 100% 100% ARAGON RESOURCES PTY LTD ACN 114 714 662 CASTILE RESOURCES PTY LTD ACN 124 314 085 100% LOCATION 53 PTY LTD ACN 618 320 773 MEEKATHARRA GOLD OPERATIONS CUE GOLD OPERATIONS FORTNUM GOLD OPERATIONS ROVER PROJECT (NT) LITHIUM INTERESTS OPERATING AND FINANCIAL REVIEW OPERATING RESULTS The Group’s operating results improved substantially over the previous year witnessed by a shift to profitability with an increase in net profit after income tax to $14,130,064 (2018: loss $1,171,059). The result also reflects the continued expansion of the Group’s activities in the Murchison Region and the rationalisation of group assets to focus on the core Murchison assets. These actions over the year reflect the following key measures: • Consolidated revenue from continuing operations increased by 51% over the prior year to $418,317,447 (2018: $276,829,283); • Consolidated total cost of sales from continuing operations increased by 35% over the prior year to $408,078,123 (2018: $302,289,538); • Following the rationalisation of mining tenements, an impairment on the carrying value of mining tenements of $5,471,706 (2018: $635,040) was taken; • The Group repaid $16,011,946 (2018: $23,887,875) of the gold prepayment facility; • The Group’s profit after income tax from continuing operations increased by 142% to $13,487,139 (2018: loss $31,906,035). On a segment basis, the three operating centres that made up the continuing operations of the Group showed varied outcomes reflecting the phase that each operation was in during the year. The Cue Gold Operations (“CGO”) continued their ramp up to full capacity with the plant having its first full year of operation. The increased gold output from four consecutive quarters of improved performance was reflected in an increase in Revenue to $120,694,689 (2018: $14,387,830). Gold output was focused on minor short-term operations and capacity building, whilst the major Big Bell mine rehabilitation and development works were completed, resulting in a minor segment loss of $1,047,700 (2018: $5,084,013). The Fortnum Gold Operations (“FGO”) continued their ramp in gold output reflected by an increase in revenue to $103,989,696 (2018: $69,808,741). Segment profits also increased to $15,724,413 (2018: $447,893). DIRECTORS’ REPORT 14 DIRECTORS’ REPORT The Meekatharra Gold Operations (“MGO”) endured some issues with limited process plant capacity and the delay in the installation of its new secondary crushing circuit. These were exacerbated by some one-off dilutionary issues with bulk mining of ultramafic hosted orebodies in the Paddy’s Flat mine. Consequently, gold output was lower and revenue dropped to $167,960,218 (2018: $181,334,613). In addition, an impairment of the carrying value of accumulated mill scats of $11,491,150 was taken as no certain route to reprocessing could be defined. The resultant outcome for MGO was a segment loss of $ 20,392,554 (2018: $21,670,374). Exploration activities continued at all operations during the year with $16,411,426 (2018: $25,521,635) expended. A thorough review of accumulated land titles was completed resulting in a write-off of $5,471,706 (2018: $635,040) of carrying values. The contract mining and services division, Australian Contract Mining Pty Ltd (“ACM”) internalised most of its contracts within the Group on a cost re-imbursement basis. However, external revenue of $25,672,844 (2018: $11,298,099) was also generated during the year. Westgold divested the Higginsville Gold Operations (“HGO”) to RNC Minerals (“RNC”) on 10 June 2019. HGO had sustained a gross loss of $18,044,670 as its operations underperformed. A gain on sale of $16,435,747 was recognised, with an after tax profit of $642,925 from the discontinued operations. REVIEW OF FINANCIAL CONDITION The Consolidated Statement of Cash Flows reflects a closing cash and cash equivalents of $67,196,289 (2018: $73,446,753). Operating Activities Group cash flow generated by operating activities increased on that of the previous corresponding year with a total inflow of $81,231,882 (2018: $14,710,955). Investing Activities Cash flows used in investing activities across the Group increased on that of the previous corresponding period with a total outflow of $109,806,561 (2018: $96,762,714). Cash flow applied to investing activities in the current year relate to the key growth capital at the Big Bell and South Emu underground mines, major capital works on plant and equipment such as the new airstrip and village upgrade at Fortnum, a new village at Big Bell and a new secondary crushing circuit at the Bluebird Plant. Other capital investment was sustaining capital in all of the operating underground mines to maintain developed tonnes and production output at similar levels. Total capital re-investment in mine properties and development, exploration and evaluation expenditure and property, plant and equipment during the year was $157,065,262, broken into key operations as follows: • MGO $52,958,699 (2018: $58,757,047); • CGO $81,401,015 (2018: $50,568,806); • FGO $21,699,381 (2018: $34,749,449); and • Other $1,006,168 (2018: 6,526,789). Capital commitments of $8,996,852 (2018: $20,902,157) existed at the reporting date, principally relating to the purchase of plant and equipment. 15 DIRECTORS’ REPORT Financing Activities External financing requirements reduced to $22,324,215 (2018: $88,361,144) reflecting the internal sourced financing of growth activities. • The Group received $23,489,570 from on the placement of 26,000,000 ordinary shares and the conversion of 44,785 listed options; • The Group drew on $20,853,550 (2018: $36,150,750) from a gold prepay facility; and • The Group’s lease liabilities increased to $36,736,877 (2018: $30,648,318) over the year due to the acquisition of additional mobile equipment within the contract mining services division. SHARE ISSUES DURING THE YEAR Date Number of shares Purpose 7 December 2018 26,000,000 Placement to supplement working capital 10 June 2019 18 June 2019 28 June 2019 Total 508 12,686 31,591 26,044,785 Issued on conversion of options Issued on conversion of options Issued on conversion of options DIVIDENDS No dividends were paid to Members during the 2019 financial year. The Directors do not propose to pay any dividend for financial year ended 30 June 2019. REVIEW OF OPERATIONS Westgold narrowed its focus during the year to its regional dominance in the Central Murchison region where the project aggregation matured to see all three of its processing hubs operating at full capacity. Westgold completed the divestment of its Higginsville Gold Operations (HGO) on 10 June 2019. This ended the Groups’ operational scattering in Western Australia and focused gold output on the Murchison region. Westgold also commenced the divestment of its Lithium Royalty portfolio with contracts of sale agreed by year-end. Further, Westgold announced the proposed demerger of the Northern Territory polymetallic assets consistent with becoming a pure-play West Australian gold producer. The proposed demerger is subject to shareholder approval and remains contingent to satisfactory tax guidance being received from the Australian Taxation Office. Westgold has now aggregated approximately 350 mining titles covering 124,000 hectares in the Central Murchison region. This tenure holds historic gold production from numerous gold mining centers of more than 10 million ounces with enduring output from a regional total mineral resource of approximately 9 million ounces anchored by three processing plants with a combined capacity of 3.5 - 4.0 million tonnes per annum. The Central Murchison strategy is broken into three regional subsets with a processing hub (plant) at the core of each one. These are collectively referred to as: 1. Meekatharra Gold Operations (“MGO”); 2. Cue Gold Operations (“CGO”); and 3. Fortnum Gold Operations (“FGO”). Over the past year, MGO continued as a steady state operation with a progressive transition toward a dominance of underground mining feeds. Whilst MGO output was slightly lower this year, with a few operational issues impacting its outputs, a secondary crushing circuit has been constructed and commission at the Bluebird process plant which will enable higher plant throughput from the progressively harder mill feeds in the forward years. DIRECTORS’ REPORT 16 DIRECTORS’ REPORT REVIEW OF OPERATIONS (CONTINUED) CGO has its first full year in operation with output ramping up on a quarter on quarter basis from the small Comet underground mine and open pit sources, in anticipation of the build-up of ore from the large Big Bell mine which will dominate long-term mill feed. Big Bell will start to progress to higher output from the sub-level caving operation in the ensuing year. FGO had a further year of progressive increases of output as the main Starlight underground mine begins to build from virgin production areas. The wholly owned mining services division of Westgold, Australian Contract Mining (ACM) continued to provide mining services to all underground mines and most of its open pit operations during the year. The re-build of capacity and capability within ACM enabled it to recommence tendering on external works with one additional external job added during the year. Meekatharra Gold Operations MGO covers the central part of Murchison portfolio and the historic gold mining centres of Paddy’s Flat, Yaloginda, Nannine and Reedys. Production from these areas has been from various open pits, which are progressively being replaced by underground mining as the historic mines are brought back into production. Over the past year the South Emu – Triton underground was developed and now produces ore to supplement the underground mine at Paddy’s Flat, increasing the proportion of higher-grade underground ore in the plant feed. The Bluebird processing hub comprising a 1.4 - 1.6 million tonne per annum CIP plant and associated infrastructure anchors the production sources. A new secondary crushing circuit was added to plant during the year, this being commissioned in June 2019. It is expected to maintain plant capacity despite a greater proportion of hard ore coming from underground sources and deeper open pits. Gold output from the operation for the year was 94,280 ounces at a C1 Cash Cost of A$ 1,264 per ounce and an all-in sustaining cost of A$ 1,451 per ounce as disclosed in the table on page 19. Sustaining capital was invested to maintain developed tonnages in the underground mines so that production rates can be sustained. Additional growth capital was invested in start-up projects at the South Emu underground mine to establish long-term mine services and infrastructure. The main capital works program was the construction of a new secondary crushing circuit to enable the plant to achieve higher throughput from the increasingly harder ore sources. Cue Gold Operations CGO covers the southern part of Murchison portfolio and the historic gold mining centers of Big Bell, Cuddingwarra, Day Dawn, Pinnacles and Tuckabianna. The Tuckabianna processing hub, a 1.2 - 1.4 million tonne per annum CIP plant and associated infrastructure anchors the gold output from the region. The Tuckabianna Plant had its first full year of operation completing a series of phases of capacity building and increasing gold output. Starting initially on low-grade and tailings stocks with a small amount of Comet underground ore. Open pit mining commenced at Day Dawn with open pit ore beginning to dominate plant feed by mid-year. These will continue until the end of CY 2019 when ore feeds will begin to be dominated by ore from the Big Bell mine. The Big Bell mine will dominate long-term mill feed for CGO for the ensuing 10 years as the sub-level cave mine builds to full capacity over the year forward. Big Bell produced a minor amount of ore during the capital development phase from remnants of the previous mining phase. Gold output for CGO in its first year of ramp-up was 68,255 ounces at a C1 Cash Cost of A$ 1,338 per ounce and an all-in sustaining cost of A$ 1,449 per ounce as disclosed in the table on page 19. 17 DIRECTORS’ REPORT The Big Bell mine was the main capital works program with significant growth capital expended to re- establish the mine and its network of infrastructure and services to enable a long-term sub-level cave mining operation. In addition a new workers village was constructed. Other growth capital was expended at the Comet Mine and the Great Fingall mine with the in-wall ramp and longer-term decline integration. Fortnum Gold Operations FGO covers the northern extremities of the Group’s Central Murchison tenure. Specifically, FGO aggregates the historic mining centres of Labouchere, Fortnum, Horseshoe and Peak Hill with gold processing anchored by the 0.9 – 1.0 million tonne per annum Fortnum processing hub. Mining operations at FGO during the year were focused on three main ore sources, namely the Yarlaweelor open pits, the Starlight Underground Mine and residual low-grade stocks in the region. During the year excellent progress was made at the Starlight underground mine with the mine fully refurbished and moving toward the exploitation of virgin lodes beneath the historic workings. Development into the sub- parallel Trev’s lodes commenced with plans to bring this forward as a second production area in the year forward. Open pit mining of the Stage 1 - Yarlaweelor Open Pits was completed toward the end of the year. Available low-grade stocks on surface are sufficient for 3 years of blending with underground feeds through the plant. Gold output for the year 58,308 oz at a C1 Cash Cost of A$ 1,064 per ounce and an all-in sustaining cost of A$ 1,224 per ounce as disclosed in the table on page 19. Growth capital at Fortnum was expended on a new airstrip for fly-in fly-out operations to reduce the 150km commute to Meekatharra and for an upgrade to the village. Growth capital was also expended for the establishment of a second mine portal access to enable exploitation of the Trev’s Lode system at the Starlight underground mine. Mining and Services Division Westgold continued to expand its wholly owned mining and services division, ACM in line with the groups expanding mining operations. ACM expanded its diamond drilling division during the year and began to tender on external works, successfully winning a third party contract. Westgold continues to build capacity and capability in the ACM business and will transition it toward being and independent contractor over the ensuing year. Rover Project The Company holds significant gold and base metal assets in the Tennant Creek and the West Arunta region. The Rover Project is a postulated undercover repetition of the rich Tennant Creek goldfield 80km to the north-east. Exploration to date has fully tested a small number of anomalies and significant mineralised Iron Oxide Copper Gold (“IOCG”) systems have been discovered at the Rover 1 and Explorer 142 prospects. In addition, significant lead-zinc-silver discoveries have been made at Explorer 108 and recently at the Curiosity Prospect to its south. The Company is planning the divestment of these assets as it continues the focus on its Western Australian gold mines. DIRECTORS’ REPORT 18 DIRECTORS’ REPORT REVIEW OF OPERATIONS (CONTINUED) Westgold Operating Performance by Operation Year ended 30 June 2019 Physical Summary UG Ore Mined UG Grade Mined OP BCM Mined OP Ore Mined OP Grade Mined Ore Processed Head Grade Recovery Gold Produced Gold Sold Achieved Gold Price Cost Summary Mining Processing Admin Stockpile Adjustments C1 Cash Cost (produced) Royalties Marketing/Cost of sales Sustaining Capital Corporate Costs All-in Sustaining Costs ** Project Startup Capital Exploration Holding Cost All-in Cost *** t g/t t g/t % oz oz A$/oz A$/oz A$/oz A$/oz A$/oz A$/oz A$/oz A$/oz A$/oz A$/oz A$/oz A$/oz A$/oz A$/oz Units HGO^ MGO CGO FGO Group t g/t 0 0.00 BCM 1,639,163 718,161 1.78 669,201 256,446 398,810 1,324,457 3.82 434,780 452,734 1.49 3.94 2.90 3.57 1,878,920 1,518,884 535,036 469,335 5,471,748 2,175,266 1.77 1.68 1.70 709,002 1,310,499 1,169,527 849,853 4,038,881 1.74 80.4% 34,378 33,168 1,762 742 674 116 (157) 1,375 52 2 56 35 1,520 143 82 1,745 2.64 84.8% 94,280 94,544 1,758 744 385 77 58 1,264 94 1 85 7 1,451 241 91 1,783 1.99 90.4% 68,255 67,576 1,776 750 537 69 (18) 1,338 44 0 60 6 1,449 855 44 2,347 2.23 95.7% 58,308 58,585 1,775 688 390 75 (88) 1,064 53 1 89 18 1,224 155 29 1,408 2.21 87.9% 255,221 253,874 1,768 732 466 80 (25) 1,253 66 1 75 13 1,408 372 63 1,843 19 DIRECTORS’ REPORT Year ended 30 June 2018 Units HGO^ SKO^^ MGO CGO FGO Group Physical Summary UG Ore Mined UG Grade Mined OP BCM Mined OP Ore Mined OP Grade Mined Ore Processed Head Grade Recovery Gold Produced Gold Sold t g/t t g/t % oz oz 1.73 84.79 55,958 56,071 Achieved Gold Price A$/oz 1,662 Cost Summary Mining Processing Admin Stockpile Adjustments A$/oz A$/oz A$/oz A$/oz 590 732 159 (83) t g/t - - 286,006 707,268 32,745 126,401 1,152,420 2.83 3.81 3.60 2.77 3.45 BCM 3,191,374 867,097 3,191,519 784,004 241,480 921,014 1.74 1.70 1.58 - - - 3,158,074 10,408,064 480,048 2,426,546 1.63 1.65 1,189,400 499,078 1,627,141 204,269 845,180 4,365,068 2.31 90.14 34,086 36,107 1,665 868 208 54 (54) 2.56 84.07 112,430 109,871 1,651 750 353 163 (6) 1.71 79.17 8,917 8,572 1,668 583 794 156 (88) 1.66 92.14 41,820 41,840 1,668 578 482 227 (20) 2.09 86.29 253,210 252,460 1,659 696 454 158 (35) C1 Cash Cost (produced) A$/oz 1,398 1,075 1,260 1,445 1,266 1,273 Royalties Marketing/Cost of sales Sustaining Capital Corporate Costs A$/oz A$/oz A$/oz A$/oz 72 2 72 21 31 2 114 20 82 1 140 8 27 1 140 10 43 1 54 23 64 2 107 15 All-in Sustaining Costs ** A$/oz 1,565 1,241 1,492 1,623 1,387 1,462 Project Startup Capital Exploration Holding Cost A$/oz A$/oz 287 88 163 55 542 97 848 54 673 27 467 76 All-in Cost *** A$/oz 1,940 1,459 2,131 2,525 2,087 2,005 ^ HGO was sold to RNC in June 2019 and is therefore treated as a discontinued operation. ^^ South Kalgoorlie Operations (“SKO”) was sold to Northern Star Resources Limited (“NST”) in Mar 2018 as is therefore treated as a discontinued operation. * C1 Cash Cost (“C1”): represents the cost for mining, processing and administration after accounting for movements in inventory (predominantly ore stockpiles). It includes net proceeds from by-product credits, but excludes the cost of royalties and capital costs for exploration, mine development and plant and equipment. ** All-in Sustaining Cost (“AISC”): is made up of the C1 cash cost plus royalty expense, sustaining capital expense and general corporate and administration expenses. *** All-in Cost (“AIC”): is made up of the AISC plus growth (major project) capital and discovery expenditure. C1, AISC and AIC are non-IFRS measures and have not been audited. DIRECTORS’ REPORT 20 DIRECTORS’ REPORT REVIEW OF OPERATIONS (CONTINUED) Lithium Royalties Westgold is in the process of divesting its Mount Marion Lithium Royalty for a gross $13 million in cash. Agreement was reached to sell the Buldania Lithium Royalty for $2 million in cash with a $250,000 prepayment being received during June 2019 and final settlement occurring on 29 July 2019. Investments Westgold held the following equity investments as at 30 June 2019: • Musgrave Minerals Limited (ASX:MGV) 13.31% (2018: 14.68%); • RNC Minerals (TSX:RNX) 10.29% (2018: 6.46%); • Aruma Resources Limited (ASX:AAJ) 1.17% (2018: 1.17%); and • Auris Minerals Limited (ASX:AUR) 0.73% (2018: 0.74%). SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Total equity increased to $443,485,911 (2018: $405,816,161), representing 26,000,000 shares issued at $23,400,000 and the conversion of 44,785 listed options at $89,750. The sale of the Higginsville Gold Operations to RNC Minerals was completed on 10 June 2019. Consideration for the sale was approximately $24m in cash and $31m in RNC shares. Escrow restrictions prevail over the RNC shareholding with approximately 50% of the holdings escrowed for six months and the remainder for twelve months. SIGNIFICANT EVENTS AFTER THE BALANCE DATE There have been no significant events after the balance date. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The Group is expected to continue exploration, mining, processing, production and marketing of gold bullion in Australia, and will continue the development of its gold exploration projects. ENVIRONMENTAL REGULATION AND PERFORMANCE The Group’s operations are subject to the relevant environmental protection legislation (Commonwealth and State legislation). The Group holds various environmental licenses issued under these laws, to regulate its mining and exploration activities in Australia. These licenses include conditions and regulations in relation to specifying limits on discharges into the air, surface water and groundwater, rehabilitation of areas disturbed during the course of mining and exploration activities and the storage of hazardous substances. The board of directors monitors all environmental performance obligations. The operations are subjected to Government agency audits and site inspections from time to time. There have been no material breaches of the Group’s licenses and all mining and exploration activities have been undertaken in compliance with the relevant environmental regulations. 21 DIRECTORS’ REPORT SHARE OPTIONS Employee options On 23 May 2019, the Company issued 1,999,600 unlisted employee options (WGXO) to senior management under the Employee Share Option Plan, the principle terms being: • The Employee Options have been issued for nil consideration; • Each Employee Option carries an entitlement to one fully paid ordinary share in the Company for each Employee Option vested; • Vesting only occurs after the end of the Performance Periods (30 June 2020 and 30 June 2021) and the number of Employee Options that vest (if any) will depend on: - - Growth in Return on Capital Employed over the Performance Periods; and Total shareholder return relative to the S&P/All Ordinaries Gold Index over the Performance Periods. • 460,614 of the Employee Options that vest will expire if not exercised on the vesting date; • 1,538,986 of the Employee Options that vest will expire two years after the vesting date; • Unvested Employee Options lapse on cessation of a holder’s employment with Westgold; • Any Employee Options that do not vest after the end of the Performance Periods will automatically lapse; and • No amount is payable by a holder of Employee Options in respect of the shares allocated upon vesting of the Employee Option. Unissued shares As at the date of this report, there were 16,999,600 unissued ordinary shares under option relating to unlisted options. Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate. Shares issued as a result of exercising options During the financial year 44,785 listed options were converted to acquire fully paid ordinary shares in the Company, refer to note 25 for further details. Subsequent to the year-end a further 15,603 fully paid ordinary shares were issued as a result of the conversion of listed options. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the financial year, the Company paid a premium in respect of a contract of insurance to insure Directors and Officers of the Company and related bodies corporate against those liabilities for which insurance is permitted under section 199B of the Corporations Act 2001. Disclosure of the nature of the liabilities and the amount of the premium is prohibited under the conditions of the contract of insurance. INDEMNIFICATION OF AUDITORS To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. DIRECTORS’ REPORT 22 DIRECTORS’ REPORT DIRECTORS’ MEETINGS The number of meetings of Directors (including meetings of committees of Directors held during the year and the number of meetings attended by each Director was as follows: Directors Meetings Audit Committee Remuneration & Nomination Committee Eligible to attend Attended Eligible to attend Attended Eligible to attend Attended 10 10 10 10 10 10 10 10 10 10 9 10 - 2 - 2 - 2 - 2 - 2 - 2 - 1 - 1 - 1 - 1 - 1 - 1 PG Cook PJ Newton JS Norregaard PB Schwann SV Shet FJ Van Maanen Committee Membership As at the date of this report, the Company had an Audit Committee and a Remuneration and Nomination Committee of the Board of Directors. Members acting on the committees of the Board during the year were: Audit Committee PJ Newton * PB Schwann FJ Van Maanen Remuneration & Nomination Committee PJ Newton * PB Schwann FJ Van Maanen * Designates the Chairman of the Committee. 23 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) Contents 1. Remuneration report overview 2. Remuneration governance 3. Non-Executive Director remuneration 4. Executive remuneration 5. Performance and executive remuneration outcomes 6. Executive employment arrangements 7. Additional statutory disclosure 1. REMUNERATION REPORT OVERVIEW The Directors of Westgold Resources Limited present the Remuneration Report (“the Report”) for the Group for the year ended 30 June 2019 (FY2019). This Report forms part of the Directors Report and has been audited in accordance with section 300A of the Corporations Act 2001 and its regulations. The Report details the remuneration arrangements for Westgold’s Key Management Personnel (“KMP”) being the: • Non-Executive Directors (“NEDs”); and • Managing Director (“MD”), executive directors and senior executives (collectively “the executives”). KMP are those who directly, or indirectly, have authority and responsibility for planning, directing and controlling the major activities of the Group. Details of KMP of the Group are set out below: Name Position Appointed Resigned (i) Non-Executive Directors (NEDs) PJ Newton Non-Executive Chairman PB Schwann Non-Executive Director SV Shet Non-Executive Director FJ Van Maanen Non-Executive Director (ii) Executive Directors PG Cook Managing Director JS Norregaard Director of Operations (iii) Senior Executives PM Storey General Manager (MGO) PW Wilding General Manager (CGO) RB Armstrong General Manager (FGO) 6 October 2016 2 February 2017 18 December 2017 6 October 2016 19 March 2007 29 December 2016 23 July 2018 1 July 2018 1 July 2018 DJ Noort DW Okeby General Manager (ACM) 20 August 2018 Company Secretary & Legal Manager 1 December 2016 DA Fullarton Chief Financial Officer 21 May 2018 - - - - - - - - - - - - DIRECTORS’ REPORT 24 DIRECTORS’ REPORT 2. REMUNERATION GOVERNANCE Remuneration and Nomination Committee Responsibility The remuneration and nomination committee is a subcommittee of the Board. It is primarily responsible for making recommendations to the Board on: • Non-Executive Director fees; • Executive remuneration (Directors and senior executives); and • The executive remuneration framework and incentive plan policies. The remuneration and nomination committee assess the appropriateness of the nature and amount of remuneration of non-executive directors and executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high performing directors and executive team. The composition of the remuneration and nomination committee is set out on page 23 of this annual report. Use of remuneration advisors During the prior year, the Remuneration and Nomination Committee approved the engagement of BDO Remuneration and Reward Pty Ltd (“BDO”) to review and provide recommendations on the Group’s executive remuneration framework and policies. Both BDO and the Committee are satisfied the advice received from BDO is free from undue influence from the KMP to whom the remuneration recommendations apply. The remuneration recommendations were provided to the Committee as an input into decision making only. The Remuneration Committee considered the recommendations, along with other factors, in making its remuneration decisions. The fees paid to BDO for the remuneration recommendations were Nil (2018: $27,250). No other fees were paid to BDO during the year. Outcome of BDO Remuneration Review Following the BDO remuneration review the following changes to the remuneration structure were made during FY2018: The introduction of a formal short-term incentive (“STI”) policy that has the objective of linking executive remuneration with the achievement of the Group’s key operational and financial targets. The STI will be an annual “at risk” component of remuneration for executives that is payable in cash based on performance against key performance indicators (refer to section 4). Following the BDO remuneration review the following changes to the remuneration structure were made in FY2019: The long-term incentive (“LTI”) policy was amended to focus the efforts of executives on long-term value creation to further align management’s interests with those of the shareholders. The LTI is considered to be an “at risk” component of remuneration for executives that is payable in zero exercise price options (“ZEPOs”) (being an option to acquire an ordinary share in Westgold for nil consideration). The Managing Director has a maximum LTI opportunity of 80% of fixed remuneration and other executives have a maximum LTI opportunity of 60% of fixed remuneration. The number of options granted is determined by dividing the LTI remuneration dollar amount by the volume weighted average price of Westgold shares traded on the ASX during the 5-day trading period prior to the day of the grant. 25 DIRECTORS’ REPORT As a transitional arrangement, for the options granted in FY2019, the LTI performance period was treated as two tranches: • 50% of the options will be performance tested against the LTI performance measures for the period 1 July 2018 to 30 June 2020; and • 50% of the options will be performance tested against the LTI performance measures for the period 1 July 2018 to 30 June 2021. All subsequent grants of options will have a three-year performance period. There will be no opportunity for re-testing. Any options that do not vest will lapse after testing. Executives are able to exercise any options that vest for up to two years after the vesting date before the vested options lapse. Options will be subject to the following performance conditions: • Relative Total Shareholder Return (“RTSR”) (50%); and • Return on Capital Employed (“ROCE”) (50%). The Board considers that RTSR is an appropriate performance hurdle because it ensures that a proportion of each participant’s remuneration is explicitly linked to shareholder value and ensures that participants only receive a benefit where there is a corresponding direct benefit to shareholders. The Board considers ROCE as an appropriate measure as it focuses executives on generating earnings that efficiently use shareholder capital as the reinvestment of earnings. Remuneration report at FY2018 AGM The FY2018 remuneration report received positive shareholder support at the FY2018 AGM with a vote of 79% in favour. 3. NON-EXECUTIVE DIRECTOR REMUNERATION NED Remuneration Policy Westgold’s NED fee policy is designed to attract and retain high calibre directors who can discharge the roles and responsibilities required in terms of good governance, strong oversight, independence and objectivity. The Company’s constitution and the ASX listing rules specify that the NED fee pool limit, shall be approved periodically by shareholders. The last determination was on listing of the Company and included in the notice of meeting for demerger from Metals X Limited and approved at the Extraordinary General Meeting of shareholders on 24th November 2016 with an aggregate fee pool of $500,000 per year. The amount of the aggregate remuneration sought to be approved by shareholders and the manner in which it is paid to NEDs is reviewed annually against comparable companies. The Board also considers advice from external advisors when undertaking the review. Non-executive directors are encouraged to hold shares in the Company and align their interests with the Company’s shareholders. The shares are purchased by the directors at the prevailing market share price. NED Remuneration Structure The remuneration of NEDs consists of director’s fees. There is no scheme to provide retirement benefits to NEDs other than statutory superannuation. NEDs do not participate in any performance- related incentive programs. Fees paid to NEDs cover all activities associated with their role on the Board and any sub-committees. No additional fees are paid to NEDs for being a Chair or Member of a sub-committee. However, NEDs are entitled to fees or other amounts as the Board determines where they perform special duties or otherwise perform extra services on behalf of the Company. They may also be reimbursed for out- of- pocket expenses incurred as a result of their directorships. DIRECTORS’ REPORT 26 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED) 4. EXECUTIVE REMUNERATION Executive Remuneration Policy In determining executive remuneration, the Board aims to ensure that remuneration practices are: • competitive and reasonable, enabling the Company to attract and retain high calibre talent; • aligned to the Company’s strategic and business objectives and the creation of shareholder value; • transparent and easily understood; and • acceptable to shareholders. The Company’s approach to remuneration ensures that remuneration is competitive, performance- focused, clearly links appropriate reward with desired business performance and is simple to administer and understand by executives and shareholders. In line with the remuneration policy, remuneration levels are reviewed annually to ensure alignment to the market and the Company’s stated objectives to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Executive Remuneration Structure The Company’s remuneration structure provides for a combination of fixed and variable pay with the following components: • fixed remuneration; • short-term incentives (“STI”); and • long-term incentives (“LTI”). In accordance with the Company’s objective to ensure that executive remuneration is aligned to Company performance, a portion of executives’ remuneration is placed “at risk”. The relative proportion of FY2019 potential total remuneration packages split between the fixed and variable remuneration is shown below: Executive Fixed remuneration Managing Director Other Executives 71% 78% STI 17% 10% LTI 12% 12% Elements of remuneration Fixed remuneration Fixed remuneration consists of base salary, superannuation and other non-monetary benefits and is designed to reward for: • the scope of the executive’s role; • the executive’s skills, experience and qualifications; and • individual performance. 27 DIRECTORS’ REPORT Short Term Incentive (STI) arrangements Under the STI, all executives have the opportunity to earn an annual incentive award which is delivered in cash. The STI recognises and rewards annual performance. How is it paid? How much can executives earn? How is performance measured? When is it paid? What happens if an executive leaves? Any STI award is paid in cash after the assessment of annual performance. In FY2019, the STI dollar values that executives are entitled to receive as a percentage of their fixed remuneration would not exceed 50% for the Managing Director and 40% for the other executives. A combination of specific Company Key Performance Indicators (“KPIs”) are chosen to reflect the core drivers of short- term performance and provide a framework for delivering sustainable value to the Group and its shareholders. The following KPIs were chosen for the 2019 financial year: • KPI 1: Safety & Environmental Performance Targets (25%); • KPI 2: All-in Sustaining Cost (AISC) relative to budget (25%); • KPI 3: Gold production relative to budget (25%); and • KPI 4: Personal KPI as assessed by Remuneration Committee (25%). These measures have been selected as they can be reliably measured, are key drivers of value for shareholders and encourage behaviours in line with the Company’s core values. The STI award is determined after the end of the financial year following a review of performance over the year against the STI performance measures by the Remuneration and Nomination Committee. The Board approves the final STI award based on this assessment of performance and the award is paid in cash up to three months after the end of the performance period. Where executives cease to be an employee of the Group: • due to resignation or termination for cause, before the end of the financial year, no STI is awarded for that year; or • due to redundancy, ill health, death or other circumstances approved by the Board, the executive will be entitled to a pro-rata cash payment based on assessment of performance up to the date of ceasing employment for that year. unless the Board determines otherwise. What happens if there is a change of control? In the event of a change of control, a pro-rata cash payment will be made based on assessment of performance up to the date of the change of control (subject to Board discretion). DIRECTORS’ REPORT 28 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED) STI performance A combination of financial and non-financial measures were used to measure performance for STI rewards, with a score being calculated on the following measures: Metric Weighting Targets Score Safety – Medically Treated Injury Frequency Rate (“MTIFR”) Safety – Lost Time Annual MTIFR decreases by 25% or more 10 Annual MTIFR stays within ±25% Annual MTIFR increases by 25% or more Annual LTIFR decreases by 25% or more Injury Frequency Rate 10 Annual LTIFR stays within ±25% (“LTIFR”) Annual LTIFR increases by 25% or more Environmental 5 No serious breaches of environmental management Exceptional environmental management performance AISC relative to budget 25 Serious breach of environmental management Actual costs below budget by 10% Actual costs below budget by between 5% and 10% Actual costs below budget by less than 5% Actual costs above budget by less than 5% Actual costs above budget by between 5% & 10% Actual costs above budget by more than 10% Actual production above budget by 10% Actual production above budget by between 5% and 10% Gold Production relative to budget 25 Actual production above budget by less than 5% Actual production equals to budget Actual production below budget by less than 5% Actual production below budget by less than 5% Underperforms budget by between 5% & 10% Good Effort and Exceptional Achievement Personal performance 25 Good Effort and Good Achievement Average Effort and Good Achievement Average Effort and Average Achievement Total 100 10 5 0 10 5 0 5 2.5 0 25 20 15 10 5 0 25 20 15 10 5 0 25 20 15 10 5 29 DIRECTORS’ REPORT STI outcomes Performance against those measure is as follows for FY2019: Name Position Achieved STI % STI Awarded (ii) $ Maximum Potential award $ PG Cook Managing Director JS Norregaard Director of Operations PM Storey PW Wilding General Manager (MGO) (i) General Manager (CGO) (i) RB Armstrong General Manager (FGO) (i) DW Okeby Company Secretary & Legal Manager DA Fullarton Chief Financial Officer 53 48 53 51 43 53 53 153,700 96,000 47,700 45,450 35,700 39,750 39,750 290,000 200,000 90,000 89,117 83,023 75,000 75,000 Total 458,050 902,140 (i) Performance is measured based on a combination of the operational segment performance as well as overall Group performance. (ii) The FY2019 STI awards were paid in August 2019. Long Term Incentive (LTI) arrangements Under the LTI plan, annual grants of options are made to executives to align remuneration with the creation of shareholder value over the long-term. How is it paid? Executives are eligible to receive options. Are options eligible for dividends? In FY2019 Zero Exercise Price Options (“ZEPOs”) were issued, being an option to acquire an ordinary share in Westgold for a zero exercise price. How much can executives earn? In FY2018 Premium Exercise Price Options (“PEPOs”) were issued, being an option to acquire an ordinary share in Westgold for a pre-determined exercise price, calculated at 125% of the volume weighted average price (“VWAP”) of Westgold shares traded on the ASX during the 5 day trading period prior to the day of the grant. DIRECTORS’ REPORT 30 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED) ZEPOs How is performance measured? The options will vest and become exercisable subject to the service and performance conditions being met. The options have been issued in two tranches. Tranche 1 The service condition requires: Continued employment for the two-year period from 1 July 2018 to 30 June 2020. The performance condition comprises the following: • Relative Total Shareholder Returns (50%); and • Return on Capital Employed (50%). Tranche 2 The service condition requires: Continued employment for the three-year period from 1 July 2018 to 30 June 2021. The performance condition comprises the following: • Relative Total Shareholder Returns (50%); and • Return on Capital Employed (50%). Relative Total Shareholder Return Performance Condition Total Shareholder Return (TSR) is the percentage growth in shareholder value, which takes into account factors such as changes in share price and dividends paid. The Relative TSR performance condition measures Westgold’s ability to deliver superior shareholder returns relative to its peer companies by comparing the TSR performance of Westgold against the performance of the S&P/All Ordinaries Gold Index. The vesting schedule for the Relative TSR measure is as follows: Relative TSR Performance % Contribution to the Number of Employee Options to Vest Below Index Equal to the Index 0% 50% Above Index and below 15% above the Index Pro-rata from 50% to 100% 15% above the Index 100% 31 DIRECTORS’ REPORT How is performance measured? Return on Capital Employed Performance Condition Return on Capital Employed (ROCE) measures the efficiency with which management uses capital in seeking to increase shareholder value. The vesting schedule for the ROCE measure is as follows: ROCE Performance % Contribution to the Number of Employee Options to Vest Less than or equal to the average annual weighted average cost of capital (WACC) WACC (calculated as above) + 3% WACC (calculated as above) + between 3% and 6% WACC (calculated as above) + 6% PEPOs 0% 50% Pro-rata from 50% to 100% 100% Options are subject to a one-year service-period performance measure. There are no other performance conditions as it is designed as a retention plan. The options have an exercise price of 125% of the 5-day VWAP of Westgold shares traded on the ASX prior to the day of the grant. The long-term incentive policy has been amended for FY2019 to focus on long-term value creation and further align managements’ interest with those of the shareholders. When is performance measured? ZEPOs Tranche 1 The measurement date is 30 June 2020 unless otherwise determined by the Board. Tranche 2 The measurement date is 30 June 2021 unless otherwise determined by the Board. Executives may exercise the options for up to two years after the vesting date before the options lapse. DIRECTORS’ REPORT 32 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED) What happens if an executive leaves? What happens if there is a change of control? Where executives cease to be an employee of the Group: • due to resignation or termination for cause, then any unvested options will automatically lapse on the date of the cessation of employment; or • due to redundancy, ill health, death or other circumstances approved by the Board, the executive will generally be entitled to a pro-rata number of unvested options based on achievement of the performance measures over the performance period up to the date of cessation of employment; and • where an employee ceases employment after the vesting of their options, the options automatically lapse after three months of cessation of employment. unless the Board determines otherwise on compassionate grounds. In the event of a change of control, the performance-period end date will be brought forward to the date of the change of control and ZEPO’s will vest based on performance over the shortened period (subject to board discretion). 5. PERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES Remuneration earned by executives in 2019 The actual remuneration earned by executives in the year ended 30 June 2019 is set out in Table 1 on page 35. This provides shareholders with a view of the remuneration paid to executives for performance in FY2019 year. STI performance and outcomes A combination of financial and non-financial measures were used to measure performance for STI rewards. As a result of the Group’s performance against those measures STIs rewarded for the FY2019 were paid in August 2019, but have been disclosed in Table 1. LTI performance and outcomes PEPO’s granted in FY2018 vested in November 2018. ZEPO’s granted in FY2019 will be subject to performance hurdles and issued in two tranches. Tranche 1 has a two-year vesting period ending in June 2021 and Tranche 2 has a three-year vesting period ending in June 2022. Executive Directors (PG Cook and JS Norregaard) were granted a total 460,614 ZEPO’s in May 2019. These were approved by shareholders at the AGM in November 2018. Other Executive were granted a total 1,538,986 ZEPO’s in May 2019 under the ESOP. For further details of options granted and vested refer to Table 3 below. 33 DIRECTORS’ REPORT Overview of Company performance The table below sets out information about Westgold’s earnings and movements in shareholder wealth for the past five years up to and including the current financial year. 30 June 15 * 30 June 16 * 30 June 17 * 30 June 18 * 30 June 19 Closing share price Profit (loss) per share (cents) N/A 4.49 Net tangible assets per share $0.44 Dividend paid per shares (cents) - N/A (6.75) $0.34 - $1.84 5.18 $0.98 - $1.85 (0.34) $1.12 - $1.88 3.74 $1.14 - * The comparatives have not been adjusted for changes due to the adoption of AASB 15 and AASB 9. Clawback of remuneration In the event of serious misconduct or material misstatement in the Group’s financial statements, the board has the discretion to reduce, cancel or clawback any unvested short-term incentives or long-term incentives. Share trading policy The Westgold trading policy applies to all non-executive directors and executives. The policy prohibits employees from dealing in Westgold securities while in possession of material non-public information relevant to the Group. Executives must not enter into any hedging arrangements over unvested long- term incentives under the Group’s long-term incentive plan. The Group would consider a breach of this policy as gross misconduct, which may lead to disciplinary action and potentially dismissal. 6. EXECUTIVE EMPLOYMENT ARRANGEMENTS A summary of the key terms of employment agreements for executives is set out below. There is no fixed term for executive service agreements and all executives are entitled to participate in the Company’s STI and LTI plans. The Company may terminate employment agreements immediately for cause, in which the executive is not entitled to any payment other than the value of fixed remuneration and accrued leave entitlements up to the termination date. Base Salary $ Superannuation Notice Period Name PG Cook (Managing Director) JS Norregaard (Director of Operations) PM Storey (General Manager MGO) PW Wilding (General Manager CGO) RB Armstrong (General Manager FGO) DJ Noort (General Manager ACM) DW Okeby (Company Secretary & Legal Manager) DA Fullarton (Chief Financial Officer) 580,000 500,000 300,000 300,000 280,000 375,000 250,000 250,000 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% Termination Payment 6 months base salary 6 months base salary 3 months 3 months 3 months Per NES * 3 months Per NES * 3 months Per NES * 3 months Per NES * 3 months Per NES * 3 months Per NES * * NES are National Employment Standards as defined in the Fair Work Act 2009 (Cth), which outline the minimum termination benefits based on years of service. DIRECTORS’ REPORT 34 DIRECTORS’ REPORT 7. EXECUTIVE CONTRACTUAL ARRANGEMENTS 2019 Salary and Fees Cash Bonus Annual Leave Benefit Non monetary benefits Short Term Post employment Superannuation Long term benefits Long service leave Share-based payment Options Total % Performance related Non-executive Directors PJ Newton PB Schwann FJ Van Maanen SV Shet Executive Directors PG Cook (4) JS Norregaard (4) 80,000 80,000 80,000 80,000 320,000 609,585 521,559 Other key management personnel PM Storey (1, 4) PW Wilding (2, 4) RB Armstrong (2, 4) DJ Noort (1, 4) DW Okeby (3) DA Fullarton Totals 285,869 287,057 280,000 336,936 245,192 250,000 2,816,198 3,136,198 - - - - - 153,700 96,000 47,700 45,450 35,700 - 39,750 39,750 458,050 458,050 - - - - - 4,695 14,192 23,045 19,370 10,099 23,483 (400) 7,096 101,580 101,580 - - - - - 5,940 6,441 - - - 2,870 7,342 7,809 30,402 30,402 7,600 7,600 7,600 - 22,800 25,515 25,941 27,158 25,018 26,600 21,045 23,293 23,750 198,320 221,120 - - - - - 18,214 5,793 1,547 19,538 3,451 1,161 7,851 1,804 59,359 59,359 - - - - - 282,571 199,473 4,487 4,487 35,452 5,609 56,821 3,739 592,639 592,639 87,600 87,600 87,600 80,000 342,800 1,100,220 869,399 389,806 400,920 391,302 391,104 379,849 333,948 4,256,548 4,599,348 - - - - 14 11 12 11 9 - 10 12 1. PM Storey and DJ Noort were appointed on 23 July 2018 and 20 August 2018 respectively. 2. PW Wilding and RB Armstrong were appointed on 1 July 2018. 3. 4. Where employees have reached the maximum super contribution base, the amount of deemed super in excess of the maximum was paid out as salary at the employee’s election. Includes amounts recovered from Pantoro Limited in respect of remuneration for services provided of $66,733. 35 DIRECTORS’ REPORT 2018 Salary and Fees Cash Bonus Annual Leave Benefit Non monetary benefits Short Term Post employment Superannuation Long term benefits Long service leave Share-based payment Options Total % Performance related Non-executive Directors PJ Newton PB Schwann FJ Van Maanen (6) SV Shet (1) Executive Directors PG Cook (6) JS Norregaard (5, 6) 80,000 80,000 81,900 42,489 284,389 612,794 534,784 Other key management personnel PD Hucker (6) DW Okeby (3) DA Fullarton (1) SM Balloch (2, 3) JG Brock (2, 4, 6) Totals 324,498 225,000 29,487 354,238 341,298 2,422,099 2,706,488 - - - - - - 50,000 - - - - - 50,000 50,000 - - - - - 25,192 10,505 17,729 9,798 2,393 13,747 1,441 80,805 80,805 - - - - - 5,350 5,937 2,715 7,739 - 3,889 1,810 27,440 27,440 7,600 7,600 5,700 - 20,900 22,306 26,800 25,502 21,375 2,801 33,653 24,999 157,436 178,336 - - - - - (8,457) 3,877 15,226 29,079 141 9,798 (822) 48,842 48,842 - - - - - 87,600 87,600 87,600 42,489 305,289 1,050,352 1,707,537 271,517 903,420 348,630 348,630 - 437,994 348,630 734,300 641,621 34,822 853,319 717,356 2,805,753 5,592,375 2,805,753 5,897,664 - - - - - 6 - - - - - SV Shet and DA Fullarton were appointed 18 December 2017 and 21 May 2018 respectively. JG Brock and SM Balloch resigned 30 June 2018 and 13 July 2018 respectively. Includes amounts recovered from Pantoro Limited in respect of remuneration for services provided by DW Okeby and SM Balloch of $59,624 and $74,564 respectively. Includes annual leave paid out on termination. The cash bonus was paid in lieu of options. 1. 2. 3. 4. 5. 6. Where employees have reached the maximum super contribution base, the amount of deemed super in excess of the maximum was paid out as salary at the employee’s election. DIRECTORS’ REPORT 36 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED) 8. ADDITIONAL STATUTORY DISCLOSURES REQUIRED UNDER THE CORPORATIONS ACT 2001 Table 1: Westgold options granted, vested or lapsing during the period Executive Granted Grant date Fair value per option Total value at grant date Vesting date Exercise price Expiry date Vested Lapsed FY 2019 PG Cook JS Norregaard PM Storey PW Wilding 69,936 69,936 69,936 69,936 45,218 45,217 45,218 45,217 27,134 27,134 27,134 27,134 27,134 27,134 27,134 27,134 28/11/2018 28/11/2018 28/11/2018 28/11/2018 28/11/2018 28/11/2018 28/11/2018 28/11/2018 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 $0.23 $0.98 $0.33 $0.98 $0.23 $0.98 $0.33 $0.98 $0.22 $1.34 $0.31 $1.34 $0.22 $1.34 $0.31 $1.34 $15,945 $34,443 $22,939 $34,443 10,310 22,269 14,831 22,269 6,078 18,248 8,303 18,248 6,078 18,248 8,303 18,248 30/06/2020 30/06/2020 30/06/2021 30/06/2021 30/06/2020 30/06/2020 30/06/2021 30/06/2021 30/06/2020 30/06/2020 30/06/2021 30/06/2021 30/06/2020 30/06/2020 30/06/2021 30/06/2021 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 30/06/2020 30/06/2020 30/06/2021 30/06/2021 30/06/2020 30/06/2020 30/06/2021 30/06/2021 30/06/2022 30/06/2022 30/06/2023 30/06/2023 30/06/2022 30/06/2022 30/06/2023 30/06/2023 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 37 DIRECTORS’ REPORT Executive Granted Grant date Fair value per option Total value at grant date Vesting date Exercise price Expiry date Vested Lapsed RB Armstrong DJ Noort DW Okeby DA Fullarton FY 2018 PG Cook 27,134 27,134 27,134 27,134 33,917 33,918 33,917 33,918 22,611 22,612 22,611 22,612 22,611 22,612 22,611 22,612 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 23/05/2019 1,400,000 22/11/2017 JS Norregaard 1,000,000 23/11/2017 PD Hucker DW Okeby SM Balloch JG Brock RB Armstrong 300,000 300,000 300,000 300,000 175,000 23/11/2017 23/11/2017 23/11/2017 23/11/2017 23/11/2017 $0.22 $1.34 $0.31 $1.34 $0.22 $1.34 $0.31 $1.34 $0.22 $1.34 $0.31 $1.34 $0.22 $1.34 $0.31 $1.34 $0.45 $0.45 $0.45 $0.45 $.045 $0.45 $0.45 6,078 18,248 8,303 18,248 7,597 22,810 10,379 22,810 5,065 15,207 6,919 15,207 5,065 15,207 6,919 15,207 627,806 448,433 133,621 133,621 133,621 133,621 77,946 30/06/2020 30/06/2020 30/06/2021 30/06/2021 30/06/2020 30/06/2020 30/06/2021 30/06/2021 30/06/2020 30/06/2020 30/06/2021 30/06/2021 30/06/2020 30/06/2020 30/06/2021 30/06/2021 22/11/2018 22/11/2018 22/11/2018 22/11/2018 22/11/2018 22/11/2018 22/11/2018 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $2.31 $2.31 $2.31 $2.31 $2.31 $2.31 $2.31 30/06/2022 30/06/2022 30/06/2023 30/06/2023 30/06/2022 30/06/2022 30/06/2023 30/06/2023 30/06/2022 30/06/2022 30/06/2023 30/06/2023 30/06/2022 30/06/2022 30/06/2023 30/06/2023 24/11/2020 24/11/2020 24/11/2020 24/11/2020 24/11/2020 24/11/2020 24/11/2020 - - - - - - - - - - - - - - - - 1,400,000 1,000,000 300,000 300,000 300,000 300,000 175,000 - - - - - - - - - - - - - - - - - - - - - - - The value of the share-based payments granted during the period is recognised in compensation over the vesting period of the grant. For details on the valuation of the options, including models and assumptions used, please refer to note 28. DIRECTORS’ REPORT 38 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED) Table 2: Shareholdings of key management personnel (including nominees) Balance held at 1 July 2018 On exercise of options Net change other 1 Balance held at 30 June 2019 Directors PG Cook PJ Newton SJ Norregaard PB Schwann 10,029,066 6,941,656 - - FJ Van Maanen 435,521 SV Shet Executives PM Storey PW Wilding RB Armstrong DJ Noort DW Okeby DA Fullarton - - - - - 30,234 - Total 17,436,477 1. Represents acquisition of shares on market. - - - - - - - - - - - - - 750,000 - - - - - - - - - - - 10,779,066 6,941,656 - - 435,521 - - - - - 30,234 - 750,000 18,186,477 Table 3: Performance right and option holdings of key management personnel (including nominees) Options balance at beginning of year 1 July 2018 3,650,000 Directors PG Cook JS Norregaard 1,000,000 PJ Newton PB Schwann SV Shet FJ Van Maanen Executives PM Storey PW Wilding - - - - - - RB Armstrong 175,000 DJ Noort - Options granted as remuneration Other change Options balance at end of year 30 June 2019 Options not vested and not exercisable Options vested and exercisable 279,744 180,869 - - - - 135,669 135,669 135,669 135,669 - - - - - - - - - - 3,929,744 1,180,869 279,744 180,869 3,650,000 1,000,000 - - - - - - - - 135,669 135,669 310,669 135,669 135,669 135,669 135,669 135,669 - - - - - - 175,000 - 39 DIRECTORS’ REPORT Options balance at beginning of year 1 July 2018 Options granted as remuneration Other change Options balance at end of year 30 June 2019 Options not vested and not exercisable Options vested and exercisable DW Okeby 1,200,000 DA Fullarton - 90,446 90,446 Total 6,025,000 1,184,181 - - - 1,290,446 90,446 90,446 90,446 1,200,000 - 7,209,181 1,184,181 6,025,000 Loans to key management personnel and their related parties There are no loans to key management personnel during the years ended 30 June 2019 and 30 June 2018. Other transactions to key management personnel and their related parties There are no other transactions with key management personnel during the years ended 30 June 2019 and 30 June 2018. End of Audited Remuneration Report. CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of the Company support and have adhered to the principles of Corporate Governance. The Company’s corporate governance statement is available at the Company’s website at: www.westgold.com.au/about/corporate-governance/ AUDITOR’S INDEPENDENCE AND NON-AUDIT SERVICES AUDITOR INDEPENDENCE The Directors received the Auditor’s Independence Declaration, as set out on page 41, from Ernst & Young. NON-AUDIT SERVICES The following non-audit services were provided by the entity’s auditor, Ernst & Young. The Directors are satisfied that the provision of non-audit is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Ernst & Young received or are due to receive the following amounts for the provision of non-audit services (refer to note 31): Tax compliance services $ 116,000 Signed in accordance with a resolution of the Directors. PG Cook Managing Director Perth, 26 August 2019 DIRECTORS’ REPORT 40 AUDITOR’S INDEPENDENCE DECLARATION Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Auditor’s Independence Declaration to the Directors of Westgold Resources Limited As lead auditor for the audit of Westgold Resources Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been: a) No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Westgold Resources Limited and the entities it controlled during the financial year. Ernst & Young Philip Teale Partner Perth 26 August 2019 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:CT:WESTGOLD:038 41 AUDITOR’S INDEPENDENCE DECLARATION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019 Continuing operations Revenue Cost of sales Gross profit (loss) Other income Finance costs Other expenses Accumulated mill scats written off Fair value gain on financial assets Impairment loss on available-for-sale financial assets Exploration and evaluation expenditure written off Impairment of goodwill Profit (loss) before income tax from continuing operations Notes 2019 2018 5 7(a) 6 7(b) 7(c) 12 15 15 18 418,317,447 276,829,283 (408,078,123) (302,289,538) 10,239,324 (25,460,255) 5,519,887 5,148,437 (1,325,025) (2,576,830) (9,129,172) (12,361,832) (11,628,184) 24,474,899 - - - (2,475,760) (5,471,706) (635,040) - (2,553,772) 12,680,023 (40,915,052) Income tax benefit Profit (loss) for the year from continuing operations 8 807,116 9,009,017 13,487,139 (31,906,035) Discontinued operations Profit from discontinued operations after tax 36 642,925 30,734,976 Net profit (loss) for the year Other comprehensive profit for the year, net of tax Total comprehensive profit (loss) for the year Total comprehensive profit (loss) attributable to: members of the parent entity Earnings per share attributable to the ordinary equity holders of the parent (cents per share) 14,130,064 (1,171,059) - - 14,130,064 (1,171,059) 14,130,064 (1,171,059) 14,130,064 (1,171,059) Basic profit (loss) per share Continuing operations Discontinued operations Total operations Diluted profit (loss) per share Continuing operations Discontinued operations Total operations 9 9 9 9 3.57 0.17 3.74 3.57 0.17 3.74 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019 (9.36) 9.01 (0.35) (9.36) 9.01 (0.35) 42 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Prepayments Other financial assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit and loss Available-for-sale financial assets Property, plant and equipment Mine properties and development costs Exploration and evaluation expenditure Total non-current assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions Interest-bearing loans and borrowings Unearned income Total current liabilities NON-CURRENT LIABILITIES Provisions Interest-bearing loans and borrowings Deferred tax liabilities Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Accumulated losses Share-based payments reserve Other reserves TOTAL EQUITY Notes 2019 2018 10 11 12 13 14 15 15 16 17 18 19 20 22 24 21 23 8 25 26 27 27 67,196,289 73,446,753 6,992,121 19,905,830 45,502,914 60,693,057 1,336,486 1,427,836 1,366,359 1,286,546 122,455,646 156,698,545 56,210,813 - - 6,267,158 175,572,503 181,409,840 218,207,334 175,644,187 104,276,449 147,262,738 554,267,099 510,583,923 676,722,745 667,282,468 57,741,966 85,208,108 7,963,523 7,195,801 18,271,020 16,819,651 25,470,487 18,075,375 109,446,996 127,298,935 70,323,565 78,018,113 18,465,857 13,828,667 35,000,416 42,320,592 123,789,838 134,167,372 233,236,834 261,466,307 443,485,911 405,816,161 299,494,861 276,976,897 (51,784,989) (65,915,053) 14,282,408 13,260,686 181,493,631 181,493,631 443,485,911 405,816,161 CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2019 43 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 OPERATING ACTIVITIES Receipts from customers Interest received Other income Payments to suppliers and employees Interest paid Income tax refunded (paid) Net cash flows from operating activities INVESTING ACTIVITIES Payments for property, plant and equipment Payments for mine properties and development Payments for exploration and evaluation Payment for financial assets Proceeds from sale of financial assets Proceeds from sale of property, plant and equipment Cash acquired on acquisition of subsidiary Acquisition of subsidiary Proceeds from disposal of subsidiary Payments for performance bond facility Proceeds from performance bond facility Net cash flows used in investing activities FINANCING ACTIVITIES Payment of finance lease liabilities Repayment of related party borrowings Proceeds from gold prepayment Proceeds from share issue Payments for share issue costs Net cash flows from financing activities Notes 2019 2018 478,864,463 4,387,876 5,940,455 (406,035,568) (2,038,023) 112,679 81,231,882 408,791,905 566,207 821,046 (392,290,195) (1,416,560) (1,761,448) 14,710,955 (34,096,282) (89,329,478) (16,411,426) (138,153) 5,798,098 2,197,033 - - 22,314,937 (141,290) - (109,806,561) (47,359,009) (99,053,638) (25,521,635) (3,360,000) 61,540,372 79,848 2,357,406 (3,000,000) 17,461,016 - 92,926 (96,762,714) 10 15 36 4(g) 24 25(b) (20,848,905) - 20,853,550 23,489,570 (1,170,000) 22,324,215 (15,371,603) (2,500,000) 36,150,750 72,457,098 (2,375,100) 88,361,145 Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the year 10 (6,250,464) 73,446,753 67,196,289 6,309,386 67,137,367 73,446,753 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 44 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019 2019 At 1 July 2018 Profit for the year Other comprehensive income, net of tax Total comprehensive loss for the year net of tax Transactions with owners in their capacity as owners Share-based payments Issue of share capital Share issue costs, net of tax At 30 June 2019 2018 At 1 July 2017 Loss for the year Other comprehensive income, net of tax Total comprehensive loss for the year net of tax Transactions with owners in their capacity as owners Share-based payments Issue of share capital Share issue costs, net of tax At 30 June 2018 Issued capital Accumulated losses Share based payments reserve Equity reserve Total Equity 276,976,897 - - - - 23,489,570 (971,606) (65,915,053) 14,130,064 - 14,130,064 - - - 13,260,686 181,493,631 - - - 1,021,722 - - - - - - - - 405,816,161 14,130,064 - 14,130,064 1,021,722 23,489,570 (971,606) 299,494,861 (51,784,989) 14,282,408 181,493,631 443,485,911 173,944,902 - - - - 105,407,095 (2,375,100) 276,976,897 (64,743,994) (1,171,059) - (1,171,059) - - - 8,941,075 181,493,631 - - - 4,319,611 - - - - - - - - (65,915,053) 13,260,686 181,493,631 299,635,614 (1,171,059) - (1,171,059) 4,319,611 105,407,095 (2,375,100) 405,816,161 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 1. CORPORATE INFORMATION The financial report of Westgold Resources Limited for the year ended 30 June 2019 was authorised for issue in accordance with a resolution of the Directors on 26 August 2019. Westgold Resources Limited (“the Company” or “the Parent”) is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the Directors Report. The address of the registered office is Level 6, 197 St Georges Tce, Perth WA 6000. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) BASIS OF PREPARATION The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on a historical cost basis, except for certain financial assets, which have been measured at fair value through profit or loss. The financial report is presented in Australian dollars. (B) STATEMENT OF COMPLIANCE The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and also International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Adoption of new accounting standards In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for annual reporting periods beginning on 1 July 2018. Other than the changes described in note 38, the accounting policies adopted are consistent with those of the previous financial year. (C) BASIS OF CONSOLIDATION The consolidated financial statements comprise the financial statements of the parent entity and its subsidiaries (“the Group”) as at 30 June each year. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: • Power over the investee (existing rights that give it the current ability to direct the relevant activities of the investee); • Exposure, or rights, to variable returns from its involvement with the investee; and • The ability to use its power over the investee to affect its returns. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 46 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: • The contractual arrangement with the other vote holders of the investee; • Rights arising from other contractual arrangements; and • The Group’s voting rights and potential voting rights. The Group re-assesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the date the Group gains control until the date the Group ceases to control the subsidiary. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intercompany transactions between members of the Group are eliminated in full on consolidation. (D) FOREIGN CURRENCY TRANSLATION Functional and presentation currency Both the functional and presentation currency of the Company and its Australian subsidiaries is Australian dollars (A$). Transactions and balances Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange at the reporting date. All exchange differences are taken to the profit or loss. (E) OPERATING SEGMENTS An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by management to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This includes start-up operations which are yet to earn revenues. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the board of directors. Operating segments have been identified based on the information provided by management to the Board of Directors. The Group aggregates two or more operating segments when they have similar economic characteristics. Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements. Information about other business activities and operating segments that are below the quantitative criteria are combined and disclosed in a separate category for “all other segments”. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 47 (F) CASH AND CASH EQUIVALENTS Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and in hand and short-term deposits that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (G) FINANCIAL INSTRUMENTS Policy prior to 1 July 2018 (Before adoption of AASB 9) Trade and other receivables Trade and other receivables were recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less an allowance for impairment. Collectability of trade and other receivables was reviewed on an ongoing basis. Individual debts that were known to be uncollectible were written off when identified. An impairment allowance was recognised when there was objective evidence that the Group would not be able to collect the receivable. Financial difficulties of the debtor, default payments or debts more than 60 days overdue were considered objective evidence of impairment. The amount of the impairment loss was the receivables carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate. Available-for-sale financial assets All available-for-sale financial assets were initially recognised at fair value plus directly attributable transaction costs. Available-for-sale financial assets were those non-derivative financial assets, principally equity securities that were designated as available-for-sale. Investments were designated as available-for-sale if they did not have fixed maturities and fixed and determinable payments and management intended to hold them for the medium to long term. After initial recognition, available-for-sale financial assets were measured at fair value. Gains or losses were recognised in other comprehensive income and presented as a separate component of equity until the investment was sold, collected or otherwise disposed of, or until the investment was determined to be impaired, at which time the cumulative gain or loss previously reported in equity was included in profit or loss. Trade and other payables Trade payables and other payables were carried at amortised cost and due to their short-term nature, were not discounted. Interest-bearing loans and borrowings All loans and borrowings were initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings were subsequently measured at amortised cost using the effective interest rate method Policy applied from 1 July 2018 (Upon adoption of AASB 9) Financial instruments - initial recognition and subsequent 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. Certain commodity contracts are accounted for as executory contracts and not recognised as financial instruments as these contracts were entered into and continue to be held for the purpose of the delivery of gold bullion in accordance with the Group’s expected sale requirements (see note 5). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 48 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial assets Initial recognition and measurement Financial assets are classified at initial recognition, and subsequently measured at amortised cost, or fair value through profit or loss or fair value through OCI. The classification of financial assets at initial recognition that are debt instruments depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Trade receivable that do not contain a significant financing component or for which the Group has applied the practical expedient for contracts that have a maturity of one year or less, are measured at the transaction price determined under AASB 15. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Subsequent measurement For purposes of subsequent measurement, the Group’s financial assets are classified in these categories: • Financial assets at amortised cost (debt instruments) • Financial assets at fair value through profit or loss Financial assets at amortised cost (debt instruments) The Group’s financial assets at amortised cost include cash, short-term deposits, and trade and other receivables. The Group measures financial assets at amortised cost if both of the following conditions are met: • 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 principal amount outstanding Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Interest received is recognised as part of other income in the Consolidated Statement of Comprehensive Income. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value, i.e., where they fail the SPPI test. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that do not pass the SPPI test are required to be classified, and measured at fair value through profit or loss, irrespective of the business model. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 49 Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in profit or loss. Impairment of financial assets The Group recognises an allowance for ECLs for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For trade receivables, the Group applies the simplified approach in calculating ECLs, as permitted by AASB 9. Therefore, the Group does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset’s lifetime ECL at each reporting date (see note 3). For any other financial assets carried at amortised cost (which are due in more than 12 months), the ECL is based on the 12-month ECL. The 12-month ECL is the proportion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months after the reporting date. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment including forward-looking information. The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity. At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Financial Liabilities Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, and payables as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, loans and borrowings. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 50 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Subsequent measurement Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income. Loans, borrowings, and trade and other payables After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of comprehensive income. This category generally applies to interest-bearing loans and borrowings and trade and other payables. (H) INVENTORIES Inventories are valued at the lower of cost and net realisable value. Cost includes expenditure incurred in acquiring and bringing the inventories to their existing condition and location and is determined using the weighted average cost method. (I) BORROWING COSTS Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost of that asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. (J) REHABILITATION COSTS The Group is required to decommission and rehabilitate mines and processing sites at the end of their producing lives to a condition acceptable to the relevant authorities. The expected cost of any approved decommissioning or rehabilitation programme, discounted to its net present value, is provided when the related environmental disturbance occurs. The cost is capitalised when it gives rise to future benefits, whether the rehabilitation activity is expected to occur over the life of the operation or at the time of closure. The capitalised cost is amortised over the life of the operation and the increase in the net present value of the provision for the expected cost is included in financing expenses. Expected decommissioning and rehabilitation costs are based on the discounted value of the estimated future cost of detailed plans prepared for each site. Where there is a change in the expected decommissioning and restoration costs, the value of the provision and any related asset are adjusted and the effect is recognised in profit or loss on a prospective basis over the remaining life of the operation. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 51 The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. Cost estimates are not reduced by potential proceeds from the sale of assets or from plant clean up at closure. (K) BUSINESS COMBINATIONS Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the appropriate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in the host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 139 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured, and subsequent settlement is accounted for within equity. In instances, where the contingent consideration does not fall within the scope of AASB 139, it is measured in accordance with the appropriate AASB. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the fair value of the identifiable net assets acquired and liabilities assumed. If this consideration is lower than the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative value of the operation disposed of and the portion of the cash-generating unit retained. (L) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at historical cost less accumulated depreciation and any impairment in value. Capital work-in-progress is stated at cost and comprises all costs directly attributable to bringing the assets under construction ready to their intended use. Capital work-in-progress is transferred to property, plant and equipment at cost on completion. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 52 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Depreciation is calculated on a straight-line basis over the estimated useful life of the asset, or where appropriate, over the estimated life of the mine. Major depreciation periods are: • Mine specific plant and equipment is depreciated using – the shorter of life of mine and useful life. Useful life ranges from 2 to 25 years. • Buildings – the shorter of life of mine and useful life. Useful life ranges from 5 to 40 years. • Office plant and equipment is depreciated at 33% per annum for computers and office machines and 20% per annum for other office equipment and furniture. Impairment The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. Refer to note 2(p) for further discussion on impairment testing performed by the Group. Derecognition An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the profit and loss in the period the item is derecognised. (M) EXPLORATION AND EVALUATION EXPENDITURE Expenditure on acquisition, exploration and evaluation relating to an area of interest is carried forward at cost where rights to tenure of the area of interest are current and: • it is expected that expenditure will be recouped through successful development and exploitation of the area of interest or alternatively by its sale; and/or • exploration and evaluation activities are continuing in an area of interest but at reporting date have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Where uncertainty exists as to the future viability of certain areas, the value of the area of interest is written off to the profit and loss or provided against. Impairment The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment on a regular basis or whenever impairment indicators are present. When information becomes available suggesting that the recovery of expenditure which had previously been capitalised is unlikely or that the Group no longer holds tenure, the relevant capitalised amount is written off to the profit or loss in the period when the new information becomes available. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 53 (N) MINE PROPERTIES AND DEVELOPMENT Expenditure on the acquisition and development of mine properties within an area of interest are carried forward at cost separately for each area of interest. This includes the costs associated with waste removal (stripping costs) in the creation of improved access and mining flexibility in relation to the ore to be mined in the future. Accumulated expenditure is amortised over the life of the area of interest to which such costs relate on a production output basis. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Impairment The carrying value of capitalised mine properties and development expenditure is assessed for impairment whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Refer to note 2(p) for further discussion on impairment testing performed by the Group. Stripping (waste removal) costs As part of its mining operations, the Group incurs stripping (waste removal) costs both during the development phase and production phase of its operations. Stripping costs incurred in the development phase of a mine, before the production phase commences (development stripping), are capitalised as part of the cost of constructing the mine and subsequently amortised over its useful life using a unit of production (“UOP”) method. The capitalisation of development stripping costs ceases when the mine/component is commissioned and ready for use as intended by management. Stripping activities undertaken during the production phase of a surface mine (production stripping) are accounted for as set out below. After the commencement of production, further development of the mine may require a phase of unusually high stripping that is similar in nature to development phase stripping. The cost of such stripping is accounted for in the same way as development stripping (as outlined above). Production stripping is generally considered to create two benefits, being either the production of inventory or improved access to the ore to be mined in the future. Where the benefits are realised in the form of inventory produced in the period, the production stripping costs are accounted for as part of the cost of producing those inventories. Where the benefits are realised in the form of improved access to ore to be mined in the future, the costs are recognised as a non-current asset, referred to as a ‘stripping activity asset’, if the following criteria are met: • Future economic benefits (being improved access to the ore body) are probable • The component of the ore body for which access will be improved can be accurately identified • The costs associated with the improved access can be reliably measured If any of the criteria are not met, the production stripping costs are charged to profit or loss as operating costs as they are incurred. In identifying components of the ore body, the Group works closely with the mining operations personnel for each mining operation to analyse each of the mine plans. Generally, a component will be a subset of the total ore body, and a mine may have several components. The mine plans, and therefore the identification of components, can vary between mines for a number of reasons. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 54 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) These include, but are not limited to the type of commodity, the geological characteristics of the ore body, the geographical location, and/or financial considerations. Given the nature of the Group’s operations, components are generally either major pushbacks or phases and they generally form part of a larger investment decision which requires board approval. The stripping activity asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable overhead costs. If incidental operations are occurring at the same time as the production stripping activity, but are not necessary for the production stripping activity to continue as planned, these costs are not included in the cost of the stripping activity asset. If the costs of the inventory produced and the stripping activity asset are not separately identifiable, a relevant production measure is used to allocate the production stripping costs between the inventory produced and the stripping activity asset. This production measure is calculated for the identified component of the ore body and is used as a benchmark to identify the extent to which the additional activity of creating a future benefit has taken place. The Group uses the expected volume of waste extracted compared with the actual volume for a given volume of ore production of each component. The stripping activity asset is accounted for as an addition to, or an enhancement of, an existing asset, being the mine asset, and is presented as part of ’Mine properties’ in the statement of financial position. This forms part of the total investment in the relevant cash generating unit(s), which is reviewed for impairment if events or changes of circumstances indicate that the carrying value may not be recoverable. The stripping activity asset is subsequently depreciated using the UOP method over the life of the identified component of the ore body that became more accessible as a result of the stripping activity. Economically recoverable reserves, which comprise proven and probable reserves, are used to determine the expected useful life of the identified component of the ore body. The stripping activity asset is then carried at cost less depreciation and any impairment losses. (O) NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALE AND DISCONTINUED OPERATIONS Non-current assets and disposal groups are classified as held for sale and measured at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction. They are not depreciated or amortised. For an asset or disposal group to be classified as held for sale it must be available for immediate sale in its present condition and its sale must be highly probable. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but is not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised as the date of de-recognition. A discontinued operation is a component of the Group that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the Consolidated Statement of Comprehensive Income and the assets and liabilities are presented separately on the face of the Consolidated Statement of Financial Position. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 55 (P) IMPAIRMENT OF NON-FINANCIAL ASSETS The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs of disposal (“FVLCD”) and its value in use (“VIU”). Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing VIU, 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 or CGU. In determining FVLCD, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. The Group bases its impairment calculation on detailed budgets and forecasts, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated, based on the life-of-mine plans. The estimated cash flows are based on expected future production, metal selling prices, operating costs and forecast capital expenditure based on life-of-mine plans. VIU does not reflect future cash flows associated with improving or enhancing an asset’s performance, whereas anticipated enhancements to assets are included in FVLCD calculations. Impairment losses of continuing operations, including impairment on inventories, are recognised in the profit and loss. For such properties, the impairment is recognised in other comprehensive income up to the amount of any previous revaluation. For assets, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss. (Q) PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 56 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (R) LEASES Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating Leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense in profit and loss on a straight-line basis over the lease term. Contingent rentals are recognised as an expense in the financial year in which they are incurred. Finance Leases Leases which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item to the Group are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit and loss. Capitalised leased assets are depreciated over the estimated useful life of the asset or where appropriate, over the estimated life of the mine. The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements, and amortised over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is the shorter. (S) INTEREST REVENUE Revenue is recognised using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. (T) REVENUE FROM CONTRACTS WITH CUSTOMERS Policy prior to 1 July 2018 (before adoption of AASB 15) Revenue was measured at the fair value of the consideration received or receivable to the extent it was probable that the economic benefits would flow to the Group and the revenue could be reliably measured. The following specific recognition criteria had to be met before revenue was recognised: Gold bullion sales Revenue from gold production was recognised when the significant risks and rewards of ownership have passed to the buyer. Mining and contracting services Revenue from mining and contracting services was recognised in respect of the provision of contract mining services to third parties. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 57 Policy applied from 1 July 2018 (upon adoption of AASB 15) Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has concluded that it is the principal in its revenue contracts because it typically controls the goods or services before transferring them to the customer. Gold bullion sales For bullion sales, most of this is sold under a long-term sales contract with the refiner, forward sale agreements with various banks or a pre-pay facility with Citibank N.A.. The only performance obligation under the contract is the sale of gold bullion. Revenue from bullion sales is recognised at a point in time when control passes to the buyer. This generally occurs after the unrefined doré is outturned and the Group either instructs the refiner to purchase the outturned fine metal or advises the refiner to transfer the gold to the bank by crediting the metal account of the bank. As all performance obligations are satisfied at that time, there are no remaining performance obligations under the contract. The transaction price is determined at transaction date and there are no further adjustments to this price. A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract. The Group applies the practical expedient to not adjust the promised consideration for the effects of a significant financing component where the period between the transfer of the refined gold to a customer and the receipt of the advance is one year or less. For long-term advances from customers the transaction price is discounted, using the rate that would be reflected in a separate transaction between the Group and its customers at contract inception, to take into consideration the significant financing component. Mining and contracting services. Mining and contracting services is the provision of equipment and personnel to carry out mining activities on behalf of the customer. These contracts are assessed to have multiple performance obligation as each equipment and service are capable of being distinct and separately identifiable. Revenue is recognised over time as the customer simultaneously receives and consumes the benefits provided by the Group as the services are rendered. The transaction price for each contract is based on an agreed schedule of rates to which the Group is entitled. (U) EARNINGS PER SHARE Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit attributable to members of the parent adjusted for: • • cost of servicing equity (other than dividends) and preference share dividends; the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised; and • other non-discriminatory changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares divided by the weighted average number of ordinary shares and dilutive potential ordinary shares; adjusted for any bonus element. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 58 (V) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ISSUED CAPITAL Issued and paid up capital is recognised at the fair value of the consideration received by the Group. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction in the proceeds received. (W) SHARE-BASED PAYMENT TRANSACTIONS The Group provides benefits to employees (including Directors) in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The Group has one plan in place that provides these benefits. It is the Long-Term Incentive Plan (“LTIP”) which provides benefits to all employees including Directors. In valuing equity-settled transactions, no account is taken of any vesting conditions (such as service conditions), other than conditions linked to the price of the shares of Westgold Resources Limited (market conditions) if applicable. The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by using either a Black & Scholes or a Monte Carlo model as appropriate. Further details of which are given in note 28. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to the consolidated statement of comprehensive income is the product of (i) the grant date fair value of the award; (ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and (iii) the expired portion of the vesting period. The charge to profit and loss for the period is the cumulative amount as calculated above, less the amounts already charged in previous periods. There is a corresponding credit to equity. Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether or not the market condition is fulfilled, provided that all other conditions are satisfied. If a non-vesting condition is within the control of the Group, Company or the employee, the failure to satisfy the condition is treated as a cancellation. If a non-vesting condition within the control of neither the Group, Company nor employee is not satisfied during the vesting period, any expense for the award not previously recognised is recognised over the remaining vesting period, unless the award is forfeited. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 59 The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of dilutive earnings per share. (X) EMPLOYEE BENEFITS Wages, salaries, sick leave and other short-term benefits Liabilities for wages and salaries, including non-monetary benefits, accumulating sick leave and other short-term benefits expected to be settled wholly within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Long service leave The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to the expected future wage and salary levels, experience of employee departure and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. Superannuation Contributions made by the Group to employee superannuation funds, which are defined contribution plans, are charged as an expense when incurred. (Y) ONEROUS OPERATING LEASE PROVISION A provision for an onerous operating lease is recognised when the expected benefits to be derived from the lease are lower than the unavoidable cost of meeting the obligations under the lease. The provision is measured at the lessor of the present value of the expected net cost of continuing with the lease and the net cost to exit the lease. (Z) OTHER TAXES Revenues, expenses and assets are recognised net of the amount of GST except: • when the GST incurred on purchase of goods or services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Consolidated Statement of Financial Position. Cash flows are included in the Consolidated Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of amounts of GST recoverable from, or payable to, the taxation authority. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 60 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (AA) INCOME TAX Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid to, the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. Current income tax relating to items recognised directly in other comprehensive income or equity is recognised in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations where applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred tax is provided for using the full liability balance sheet approach. The tax rates and tax laws used to compute the amount of deferred tax assets and liabilities are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable profits. Deferred tax liabilities are recognised for all taxable temporary differences except to the extent that the deferred tax liability arises from: • • • the initial recognition of goodwill; the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit (or tax loss); and taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures when the timing of the reversal of the temporary differences can be controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, including carry- forward tax losses and tax credits, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised except when: • • the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit (or tax loss); and the deductible temporary difference is associated with investments in subsidiaries, associates and interests in joint ventures and it is not probable that the temporary difference will reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets and deferred tax liabilities are reassessed at each reporting date and are recognised to the extent that they satisfy the requirements for recognition. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity. Income taxes relating to transactions recognised outside profit and loss (for example, directly in other comprehensive income or directly in equity) are also recognised outside profit and loss. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 61 Tax consolidation Westgold Resources Limited and its wholly owned Australian resident subsidiaries formed a tax consolidated group (“the Tax Group”) with effect from 1 December 2016. Members of the Tax Group have entered into a tax sharing agreement, which provides for the allocation of income tax liabilities between members of the Tax Group should the parent, Westgold Resources Limited, default on its tax payments obligations. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group. The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the controlled entities intercompany accounts with the tax consolidated group head company, Westgold Resources Limited. The nature of the tax funding agreement is such that no tax consolidation adjustments are required. 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Management has identified the following critical accounting policies for which significant judgements have been made as well as the following key estimates and assumptions that have the most significant impact on the financial statements. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements. SIGNIFICANT JUDGMENTS Revenue from contracts with customers Judgement is required to determine the point at which the customer obtains control of gold. Factors including transfer of legal title, transfer of significant risks and rewards of ownership and the existence of a present right to payment for the gold typically result in control transferring upon allocation of the gold to the customers’ account. Financing component relating to unearned income In determining the finance component related to unearned income for a facility which extends beyond 12 months, the Group concluded that the interest rate implicit in the contract (i.e. the interest rate that discounts the cash selling price of the gold bullion, being the spot price at contract inception, to the amount paid in advance) is appropriate because it is commensurate with the rate that would be reflected in a separate financing transaction between the Group and its customer at contract inception. Mine properties and development - stripping costs Significant judgement is required to distinguish between development stripping and production stripping and to distinguish between the production stripping that relates to the extraction of inventory and that which relates to the creation of a stripping activity asset. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 62 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED) Once the Group has identified its production stripping for each surface mining operation, it identifies the separate components of the ore bodies for each of its mining operations. An identifiable component is a specific volume of the ore body that is made more accessible by the stripping activity. Significant judgement is required to identify and define these components, and also to determine the expected volumes (e.g., in tonnes) of waste to be stripped and ore to be mined in each of these components. These assessments are undertaken for each individual mining operation based on the information available in the mine plan. The mine plans and, therefore, the identification of components, will vary between mines for a number of reasons. These include, but are not limited to, the type of commodity, the geological characteristics of the ore body, the geographical location and/or financial considerations. Judgement is also required to identify a suitable production measure to be used to allocate production stripping costs between inventory and any stripping activity asset(s) for each component. The Group considers that the ratio of the expected volume (e.g., in tonnes) of waste to be stripped for an expected volume (e.g., in tonnes) of ore to be mined for a specific component of the ore body, is the most suitable production measure. Furthermore, judgements and estimates are also used to apply the UOP method in determining the depreciable lives of the stripping activity asset(s). There are a number of uncertainties inherent in estimating the carrying value of mine properties and development and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast price of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may ultimately, result in the requirement to restate the carrying value. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS Determination of mineral resources and ore reserves The determination of reserves impacts the accounting for asset carrying values, depreciation and amortisation rates and provisions for mine rehabilitation. The Group estimates its mineral resource and reserves in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2012 (the “JORC code”). The information on mineral resources and ore reserves were prepared by or under the supervision of Competent Persons as defined in the JORC code. The amounts presented are based on the mineral resources and ore reserves determined under the JORC code. There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may ultimately, result in the reserves being restated. Mine rehabilitation provision The Group assesses its mine rehabilitation provision on an annual basis in accordance with the accounting policy stated in note 2(j). In determining an appropriate level of provision consideration is given to the expected future costs to be incurred, the timing of those future costs (largely dependent on the life of mine) and the estimated level of inflation. The ultimate rehabilitation costs are uncertain, and cost estimates can vary in response to many factors, including estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes, timing, cost increases as compared to the inflation rate of 1.6% (2018: 2.1%), and changes in discount rates. The applicable discount rates are based on the expected life of mine for each operation. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 63 The expected timing of expenditure can also change, for example in response to changes in reserves or production rates. These uncertainties may result in future actual expenditure differing from the amounts currently provided. Therefore, significant estimates and assumptions are made in determining the provision for mine rehabilitation. As a result, there could be significant adjustments to the provisions established which would affect future financial result. The provision at reporting date represents management’s best estimate of the present value of the future rehabilitation costs required. Impairment of capitalised exploration and evaluation expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on various factors, including whether the Group decides to exploit the related area interest itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made. In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent it is determined in the future that this capitalised expenditure should be written off, profits and net assets will be reduced in the period in which this determination is made. Impairment of capitalised mine development expenditure, property, plant and equipment The future recoverability of capitalised mine development expenditure, property, plant and equipment is dependent on a number of factors, including the level of proved and probable reserves, and the likelihood of progressive upgrade of mineral resources in to reserves over time. In addition, consideration is given to future technological changes, which could impact the cost, future legal changes (including changes to environmental restoration obligations), and changes in commodity prices. Non-financial assets are reviewed for impairment if there is any indication that the carrying amount may not be recoverable. When applicable, FVLCD is estimated based on discounted cash flows using market based commodity prices and foreign exchange rate assumptions, estimated quantities of recoverable minerals, production levels, operating costs and capital requirements, based on the relevant CGU’s life-of-mine (LOM) plans. Consideration is also given to analysts’ valuations The fair value methodology adopted is categorised as Level 3 in the fair value hierarchy. In determining the VIU, future cash flows for each CGU (i.e. each mine site) are prepared utilising management’s latest estimates of: • • • • • the quantities of ore reserves and mineral resources for which there is a high degree of confidence of economic extraction; royalties and taxation; future production levels; future commodity prices; future cash costs of production and development expenditure; and • other relevant cash inflows and outflows. Cash flow scenarios for a range of commodity prices and foreign exchange rates are assessed using internal and external market forecasts, and the present value of the forecast cash flows is determined utilising a pre-tax discount rate. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 64 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED) The Group’s cash flows are most sensitive to movements in commodity price, expected quantities of ore reserves and mineral resources and key operating costs. In particular, CGO, MGO and FGO are most sensitive to expected quantities of ore reserves and mineral resources to be extracted and therefore the estimated future cash inflows resulting from the sale of product produced is dependent on these assumptions. Variations to the expected cash flows, and the timing thereof, could result in significant changes to any impairment losses recognised, if any, which in turn could impact future financial results. To the extent that capitalised mine development expenditure is determined not to be recoverable in the future, this will reduce profit in the period in which the Group makes this determination. Capitalised mine development expenditure is assessed for recoverability in a manner consistent with property, plant and equipment as described below. Refer to note 2(p) for further discussion on the impairment assessment process undertaken by the Group. Life of mine method of amortisation and depreciation Estimated economically recoverable reserves are used in determining the depreciation of mine-specific assets. This results in a depreciation charge proportional to the depletion of the anticipated remaining life-of-mine production. The life of each item, which is assessed at least annually, has regard to both its physical life limitations and present assessments of economically recoverable reserves of the mine property at which the asset is located. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves and estimates of future capital expenditure. The calculation of the UOP rate of depreciation could be impacted to the extent that actual production in the future is different from current forecast production based on economically recoverable reserves, or if future capital expenditure estimates change. Changes to economically recoverable reserves could arise due to changes in the factors or assumptions used in estimating reserves, including: • The effect on economically recoverable reserves for differences between actual commodity prices and commodity price assumptions • Unforeseen operational issues • Changes in estimates are accounted for prospectively. 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. The fair value is determined by using an appropriate valuation, using the assumptions as discussed in note 28. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities in the next annual reporting period but may impact expenses and equity. Provision for expected credit losses (ECLs) on trade receivables and other short-term receivables carried at amortised cost The Group uses a provision matrix to calculate ECLs for trade and other short-term receivables carried at amortised cost. The provision rates are based on days past due. The provision matrix is initially based on the Group’s historical observed default rates. The Group calibrates the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions are expected to deteriorate over the next year, which can lead to an increased number of defaults, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 65 The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a key estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group’s principal financial instruments comprise receivables, trade and other payables, finance lease and hire purchase contracts, cash and cash equivalents, deposits and equity investments. Risk exposures and responses The Group manages its exposure to key financial risks in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets while protecting future financial security. The main risks arising from the Group’s financial instruments are interest rate risk, credit risk, equity price risk and liquidity risk. The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate, foreign exchange risk and assessments of market forecasts for interest rate, foreign exchange and commodity prices. Ageing analysis and monitoring of receivables are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts. The board reviews and agrees policies for managing each of these risks as summarised below. Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for managing each of the risks identified below, including for interest rate risk, credit allowances and cash flow forecast projections. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 66 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Interest Rate Risk (a) The Group’s exposure to risks of changes in market interest rates relate primarily to the Group’s interest-bearing liabilities and cash balances. The level of debt is disclosed in notes 22 and 23. The Group’s policy is to manage its interest cost using fixed rate debt. Therefore, the Group does not have any variable interest rate risk on its debt. The Group constantly analyses its interest rate exposure. Within this analysis, consideration is given to potential renewals of existing positions, alternative financing positions and the mix of fixed and variable interest rates. There is no significant exposure to changes in market interest rates at the reporting date. At the reporting date the Group’s exposure to interest rate risk for classes of financial assets and financial liabilities is set out below. 2019 Financial Assets Floating interest rate Fixed interest Non-interest bearing Total carrying amount Cash and cash equivalents 67,196,289 Trade and other receivables Other financial assets - - - - 1,427,836 - 6,992,121 - 67,196,289 6,992,121 1,427,836 67,196,289 1,427,836 6,992,121 75,616,246 Financial Liabilities Trade and other payables Interest-bearing liabilities - - - - (57,741,966) (36,736,877) - (57,741,966) (36,736,877) (36,736,877) (57,491,966) (94,478,843) Net financial liabilities (18,862,597) 2018 Financial Assets Floating interest rate Fixed interest Non-Interest bearing Total carrying amount Cash and cash equivalents 73,446,753 Trade and other receivables Other financial assets - - - - 1,286,546 - 19,905,830 - 73,446,753 19,905,830 1,286,546 73,446,753 1,286,546 19,905,830 94,639,129 Financial Liabilities Trade and other payables Interest-bearing liabilities Net financial liabilities Interest rate risk exposure - - - - (85,208,108) (30,648,318) - (85,208,108) (30,648,318) (30,648,318) (85,208,108) (115,856,426) (21,217,297) Post tax profit higher (lower) Other Comprehensive Income higher (lower) 30 June 2019 30 June 2018 30 June 2019 30 June 2018 Judgements of reasonably possible movements: + 0.5% (50 basis points) - 0.5% (50 basis points) 235,187 (235,187) 257,064 (257,064) - - - - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 67 (b) Credit Risk Credit risk arises from the financial assets of the Group, which comprises cash and cash equivalents, trade and other receivables and other financial assets held as security and loans. Cash and cash equivalents are held with National Australia Bank, which is an Australian Bank with an AA- credit rating (Standard & Poor’s). The Group’s exposure to credit risk arises from potential default of the counter party, with the maximum exposure equal to the carrying amount of the financial assets (as outlined in each applicable note). The Group does not hold any credit derivatives to offset its credit exposure. The Group trades only with recognised, creditworthy third parties and as such collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables. Receivable balances are monitored on an ongoing basis with the result that the Group does not have a significant exposure to bad debts. Significant concentrations of credit risk are in relation to cash and cash equivalents with Australian banks. (c) Price Risk Equity Security Price Risk Group revenue is exposed to equity security price fluctuations arising from investments in equity securities. Refer to note 15 for details of equity investments at fair value through profit or loss held at 30 June 2019 (2018 – available-for-sale investments). The Group has a number of equity investments, which have shown volatility in price movements over the year. If security prices varied by 20%, with all other variables held constant, the impact on post tax profits and equity at 30 June, is reflected below: Post tax profit Other Comprehensive Income higher (lower) higher (lower) 2019 2018 2019 2018 Judgements of reasonably possible movements: Price + 20% Price - 20% 5,769,514 - (5,769,514) (877,402) - - 877,402 - The selected sensitivity of +20% or -20% is considered reasonable given recent fluctuations in equity prices and management’s expectations of future movements. The movements in other comprehensive income for 2018 are due to possible higher or lower equity security prices from investments in equity securities that were classified as available-for-sale financial assets in 2018. The overall sensitivity for post-tax profits in 2019 is higher due to the company owning financial assets at fair value through profit or loss (refer to note 15). (d) Commodity Price Risk The Group’s operations are exposed to commodity price fluctuations. The Group has a commodity risk management hedging policy that authorises management to enter into price protection contracts to ensure revenue streams up to 60% of gold sales for up to three years of forecast production. At the end of the financial year, the Group had unrecognised sales contracts for 183,500 ounces at an average price of $1,827.21 per ounce ending in December 2020, which the Group will deliver physical gold to settle. There was therefore no exposure on recognised financial instruments at the balance sheet date. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 68 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Liquidity Risk (e) Liquidity risk arises from the financial liabilities of the Group and the subsequent ability to meet the obligations to repay the financial liabilities as and when they fall due. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of finance and hire purchase leases. The table below reflects all contractually fixed payables for settlement, repayment and interest resulting from recognised financial liabilities as of 30 June 2019. Cash flows for financial liabilities without fixed amount or timing are based on the conditions existing as 30 June. The remaining contractual maturities of the Group’s financial liabilities are: 6 months or less 6 - 12 months 1 - 5 years Over 5 years 2019 2018 (67,993,428) (9,104,584) (19,562,452) - (96,660,464) (95,516,153) (7,425,843) (14,580,329) - (117,522,325) Maturity analysis of financial assets and liabilities based on management’s expectation. The risk implied from the values shown in the table below reflects a balanced view of cash inflows and outflows. Leasing obligations, trade payables and other financial liabilities mainly originate from the financing of assets used in our ongoing operations such as property, plant, equipment and investments of working capital e.g. inventories and trade receivables. To monitor existing financial assets and liabilities, as well as to enable effective controlling of future risks, management monitors its Group’s expected settlement of financial assets and liabilities on an ongoing basis. 2019 <6 months 6-12 months 1-5 years Total Financial assets Cash and equivalents Trade and other receivables Other financial assets Financial liabilities Trade and other payables Interest-bearing loans 67,982,985 6,992,121 1,427,836 76,402,942 (57,741,966) (10,251,462) (67,993,428) - - - - - - - - 67,982,985 6,992,121 1,427,836 76,402,942 (9,104,584) (19,562,452) (38,918,498) (9,104,584) (19,562,452) (96,660,464) (57,741,966) Net inflow (outflow) 8,409,514 (9,104,584) (19,562,452) (20,257,522) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 69 2018 <6 months 6-12 months 1-5 years Total Financial assets Cash and equivalents Trade and other receivables Other financial assets Financial liabilities Trade and other payables Interest-bearing loans 74,693,563 19,905,830 1,286,546 95,885,939 (85,208,108) (10,308,045) (95,516,153) - - - - - - - - - - 74,693,563 19,905,830 1,286,546 95,885,939 (85,208,108) (7,425,843) (14,580,329) (32,314,217) (7,425,843) (14,580,329) (117,522,325) Net inflow (outflow) 369,786 (7,425,843) (14,580,329) (21,636,386) (f) Fair Values For all financial assets and liabilities recognised in the Consolidated Statement of Financial Position, carrying amount approximates fair value unless otherwise stated in the applicable notes. The methods for estimating fair value are outlined in the relevant notes to the financial statements. The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise: Level 1 – the fair value is calculated using quoted prices in active markets. Level 2 - the fair value is estimated using inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from price). Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data. The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below. 2019 Quoted market price (Level 1) Financial Assets Instruments carried at fair value Listed investments Royalties receivable Financial liabilities Fair value disclosures Long-term borrowings 41,210,813 - - Valuation technique market observable inputs (Level 2) Valuation technique non market observable inputs (Level 3) Total - - - 15,000,000 41,210,813 15,000,000 (18,465,857) - (18,465,857) 41,210,813 (18,465,857) 15,000,000 37,744,956 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 70 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Fair Values (Continued) (f) 2018 Quoted market price (Level 1) Valuation technique market observable inputs (Level 2) Valuation technique non market observable inputs (Level 3) Total Financial Assets Instruments carried at fair value Listed investments Royalties receivable Financial liabilities Fair value disclosures Long-term borrowings 6,267,158 - - (13,828,667) 6,267,158 (13,828,667) - - - 6,267,158 (13,828,667) (7,561,509) Quoted market price represents the fair value of listed investments determined based on quoted prices on active markets as at the reporting date without any deduction for transaction costs. The fair value of royalties receivable is valued based on discounted cash flow model. The fair value of long-term borrowings is based on fixed lease interest rates. Transfer between categories There were no transfers between Level 1 and Level 2, and no transfers into and out of Level 3 fair value measurement. (g) Changes in liabilities arising from financing activities Current obligations under finance leases Non-current obligations under finance leases Total liabilities from financing activities Current obligations under finance leases Non-current obligations under finance leases Total liabilities from financing activities 1 July 2018 Cash flows New leases Reclassification adjustment 30 June 2019 16,819,651 (20,848,905) 4,029,254 18,271,020 18,271,020 13,828,667 - 22,908,210 (18,271,020) 18,465,857 30,648,318 (20,848,905) 26,937,464 - 36,736,877 1 July 2017 Cash flows New Reclassification 30 June leases adjustment 2018 5,259,259 (15,731,604) 10,112,345 16,809,651 16,819,651 5,194,528 - 25,453,790 (16,819,651) 13,828,667 10,453,787 (15,731,604) 35,566,135 - 30,648,318 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 71 5. REVENUE Sale of gold at spot Sale of gold under forward contracts Sale of gold under a prepay facility (refer note 24) Mining and contracting services Total revenue from contracts with customers 2019 2018 160,727,868 87,650,431 215,904,789 156,001,253 16,011,946 21,879,500 25,672,844 11,298,099 418,317,447 276,829,283 Disaggregated revenue per segment has been disclosed in note 32. The prior year comparatives have not been restated for the requirements of AASB 15 (see note 2 (b)). No revenue was recognised during the period for performance obligations satisfied in previous periods. The transaction price allocated to remaining performance obligations under forward contracts not recognised at the balance sheet date at 30 June 2019 is as follows: Gold forward contracts - Within 1 year - 1 to 2 years 247,844,578 246,923,675 113,322,000 105,768,000 361,166,578 352,691,675 The amounts due within one year include unearned income of $25,470,487 (refer note 24) which has been prepaid, the balance is for delivery of gold which will be paid within 3 days of delivery. 6. OTHER INCOME Interest income calculated using the effective interest rate method 308,101 571,184 Net gain on sale of available-for-sale financial assets Net gain on sale of assets Other income Total other income - 1,446,807 139,435 - 5,072,351 3,130,446 5,519,887 5,148,437 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 72 7. EXPENSES (a) Cost of sales Salaries, wages expense and other employee benefits Superannuation expense Operating lease rentals Other production costs 2019 2018 107,906,822 73,675,461 10,251,148 6,999,169 5,065,998 8,179,607 148,191,774 119,747,908 Write down in value of inventories to estimated net realisable value - 1,397,502 Royalty expense 14,982,184 11,270,110 Contract mining services Salaries, wages expense and other employee benefits Superannuation expense Mining and contracting service costs Depreciation and amortisation expense Depreciation of non-current assets: Property, plant and equipment Buildings Amortisation of non-current assets: Mine properties and development costs Total cost of sales (b) Finance costs Interest expense Capitalised borrowing costs to qualifying asset Unwinding of rehabilitation provision discount Total finance costs (c) Other expenses Administration expenses Employee benefits expense Salaries and wages expense Directors' fees and other benefits Superannuation expense Other employee benefits Share-based payments expense Other administration expenses Consulting expenses Travel and accommodation expenses Other costs Operating lease rentals NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 73 7,787,879 3,342,315 739,849 317,520 13,754,669 6,598,000 38,488,019 22,285,912 1,351,598 817,946 59,558,183 47,658,088 408,078,123 302,289,538 4,579,327 1,405,753 (4,579,327) - 1,325,025 1,171,077 1,325,025 2,576,830 3,932,662 2,771,849 320,000 446,412 76,046 284,389 320,821 53,723 1,021,722 4,319,611 5,796,842 7,750,393 1,112,868 1,015,392 185,768 247,150 1,357,964 1,677,900 367,526 350,353 3,024,126 3,290,795 Depreciation expense Depreciation of non-current assets: Property plant and equipment Total administration expenses Other Net loss on sale of assets 2019 2018 308,204 175,394 9,129,172 11,216,582 - - 1,145,250 1,145,250 Total other expenses 9,129,172 12,361,832 8. INCOME TAX (a) Major components of income tax expense: Income Statement Current income tax expense Current income tax benefit Adjustment in respect of current income tax of previous years Deferred income tax (2,984,035) (15,966,295) - (5,369,468) Relating to origination and reversal of temporary differences in current year (4,137,750) 21,646,708 Relating to temporary differences derecognised Adjustment in respect of current income tax of previous years 3,857,859 3,475,934 - 5,573,635 Income tax for continuing and discontinuing operations (3,263,926) 9,360,514 (b) Amounts charged or credited directly to equity Share issue costs (198,394) (1,017,901) (198,394) (1,017,901) (c) A reconciliation of income tax benefit and the product of accounting loss before income tax multiplied by the Group's applicable income tax rate is as follows: Accounting profit (loss) before tax from continuing operations 12,680,022 (40,915,053) Accounting profit (loss) before tax from discontinuing operations (1,813,885) 49,104,508 Total accounting profit before income tax 10,866,137 8,189,455 At statutory income tax rate of 30% (2018: 30%) Non-deductible (non-assessable) items Under/over in respect of prior years 3,259,841 2,456,837 (3,820,162) 3,306,360 (2,703,605) 3,597,317 Income tax (expense) benefit reported in the income statement (3,263,926) 9,360,514 Tax expense from continuing operations Tax (benefit) expense from discontinued operations (807,116) (9,009,017) (2,456,810) 18,369,531 Income tax (benefit) expense reported in the income statement (3,263,926) 9,360,514 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 74 8. INCOME TAX (CONTINUED) (d) Deferred income tax at 30 June relates to the following Statement of financial position Statement of comprehensive income 2019 2018 2019 2018 Deferred tax liabilities Exploration (20,510,088) (39,544,410) (19,034,322) 9,367,298 Trade and other receivables (658,745) (530,810) 127,935 154,185 Net gain on financial assets AFVTP Prepayments Deferred mining Inventories (6,414,195) (13,510) - - 6,414,195 13,510 - - (33,545,994) (42,144,702) (8,598,708) 17,464,667 (4,384,707) (3,691,985) 692,722 3,732,207 Property plant and equipment (1,857,819) (5,798,935) (3,941,116) (86,618) Gross deferred tax liabilities (67,385,058) (91,710,842) Deferred tax assets Available-for-sale financial assets Accrued expenses - 524,056 742,758 312,460 Provision for employee entitlements 2,780,744 2,042,220 Goodwill 699,185 - 742,758 (211,596) (738,524) (699,185) (742,758) (253,905) (335,739) - Provision for rehabilitation 8,996,764 29,684,837 20,688,073 (2,456,477) Business related costs Capital raising costs Recognised tax losses Gross deferred tax assets Net deferred tax liabilities 46,920 891,540 - (46,920) - 693,146 (198,394) (640,446) 18,445,434 15,914,829 (2,530,605) (15,914,829) 32,384,642 49,390,250 (35,000,416) (42,320,592) Deferred tax income (expense) (7,320,177) 10,287,585 (e) Unrecognised losses At 30 June 2019, there are no unrecognised losses for the Group (2018: nil). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 75 9. EARNINGS PER SHARE The following reflects the income used in the basic and diluted earnings per share computations. 2019 2018 (a) Earnings used in calculating earnings per share Net profit (loss) attributable to ordinary equity holders of the parent 13,487,139 (31,906,035) Profit attributable to discontinued operations 642,925 30,734,976 Net profit attributable to ordinary equity holders of the parent 14,130,064 1,171,059 Basic earnings per share (cents) Continuing operations Discontinued operations 3.57 0.17 3.74 (9.36) 9.01 (0.35) Earnings used in calculating earnings per share For diluted earnings per share: Net loss attributable to ordinary equity holders of the parent (from basic EPS) 13,487,139 (31,906,035) Profit attributable to discontinued operations 642,925 30,734,976 Net (loss) profit attributable to ordinary equity holders of the parent 14,130,064 1,171,059 Diluted (loss) profit per share (cents) Continuing operations Discontinued operations 3.57 0.17 3.74 (9.36) 9.01 (0.35) (b) Weighted average number of shares Weighted average number of ordinary shares for basic earnings per share 377,428,117 341,025,577 Effect of dilution: Share options Weighted average number of ordinary shares adjusted for the effect of dilution - - 377,428,117 341,025,577 Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The Company had 16,999,600 (2018: 76,800,884) share options on issue that are excluded from the calculation of diluted earnings per share for the current financial period because they are considered anti-dilutive or are contingently issuable. There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of authorisation of these financial statements. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 76 10. CASH AND CASH EQUIVALENTS 2019 2018 Cash at bank and in hand 67,196,289 73,446,753 CASH FLOW RECONCILIATION Reconciliation of net profit after income tax to net cash flows from operating activities Profit (loss) after income tax 14,130,064 (1,171,059) Amortisation and depreciation Gold prepayment physical deliveries (refer to note 24) Income tax (benefit) expense Share based payments Unwinding of rehabilitation provision discount Accumulated mill scats written off (refer to note 12) 123,059,758 98,843,975 (13,458,438) (23,887,876) (3,263,926) 1,021,722 1,809,538 11,628,184 9,360,514 4,319,611 1,853,965 - Net profit on sale of available-for-sale financial assets - (1,446,807) Net (profit) loss on disposal of property, plant and equipment (104,568) 1,145,250 Re-measurement of lithium rights (refer to note 15) (15,000,000) - Fair value change in financial instruments (refer to note 15) (9,384,589) 2,535,760 Option fee received in financial instruments Mining rights received in financial instruments Toll treatment fee received in financial instruments Impairment of goodwill - (3,076,890) (238,000) - - - (2,138,917) 2,553,772 6,381,974 Exploration and evaluation expenditure written off (refer to note 18) 6,165,134 Profit on disposal of subsidiaries (refer to note 36) Changes in assets and liabilities Increase in inventories (16,435,747) (61,759,658) 99,929,132 33,513,614 (11,546,974) (16,701,522) Decrease (increase) in trade and other receivables and prepayments 12,319,400 (7,057,850) (Decrease) Increase in trade and other creditors Increase in provisions Net cash flows from operating activities (21,343,789) 4,867,576 1,874,113 89,137 81,231,882 14,710,955 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 77 11. TRADE AND OTHER RECEIVABLES (CURRENT) Statutory receivables Other debtors Total trade and other receivables 2019 4,299,560 2,692,561 2018 6,977,117 12,928,713 6,992,121 19,905,830 Statutory receivables comprises of GST input tax credits and diesel fuel rebates. Other debtors are non-interest bearing and generally have a 30-60 day term. All trade and other receivables are classed as recoverable in full. The carrying amount of other debtors approximate their fair value. Refer note 4(b) for credit risk disclosures. 12. INVENTORIES (CURRENT) Ore stocks at net realisable value Gold in circuit at cost Stores and spares at cost Provision for obsolete stores and spares Total inventories at lower of cost and net realisable value 17,081,112 13,773,228 17,099,860 (2,451,286) 45,502,914 22,662,067 20,039,963 20,278,645 (2,287,618) 60,693,057 During the year there were no write-downs in ore or gold inventories value (2018: $1,397,502) from continuing operations for the Group as the cost of inventory was well below the current gold price. Residual mill scats accumulated at all operations totalling $11,628,184 (2018: nil) were written off as no effective route for their processing was available for gold recovery due to risk of contained steel balls damaging crushing circuits. 13. PREPAYMENTS (CURRENT) Prepayments 1,336,486 1,366,359 14. OTHER FINANCIAL ASSETS (CURRENT) Cash on deposit - bank guarantee facility 1,427,836 1,286,546 The cash on deposit is interest bearing and is used as security for bank guarantees NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 78 15. FINANCIAL ASSETS Listed shares – Australian and Canadian Royalties receivable - Lithium rights Movement in available-for-sale financial assets At 1 July Additions of listed shares Proceeds on disposal of financial assets Net gain on available-for-sale financial assets (refer note 6) Net gain on financial assets at FVTPL Loss on sale of financial assets – discontinued operations (refer note 36) Impairment – continuing operations Impairment – discontinued operations At 30 June Movement in Royalties Receivable At 1 July Re-measurement of receivable At 30 June Listed shares 2019 2018 41,210,813 15,000,000 56,210,813 6,267,158 - 6,267,158 6,267,158 31,357,163 (5,798,098) - 9,474,899 (90,309) - - 41,210,813 - 15,000,000 15,000,000 373,151 68,523,333 (61,540,373) 1,446,807 - (2,475,760) (60,000) 6,267,158 - - - These financial assets consist of investments in ordinary shares. The fair value of equity investments at fair value through profit or loss has been determined directly by reference to published price quotations in an active market. (a) The Group has a 0.73% (2018: 0.74%) interest in Auris Minerals Limited (Auris), which is involved in the mining and exploration of base metals in Australia. Auris is listed on the Australian Securities Exchange. At the end of the year, the fair value of the Company’s investment was $45,000 (2017: $204,000) which is based on the quoted share price. (b) During the year ended 30 June 2019, the Group sold its total investment holding in Rox Resources Limited. (c) The Group has a 0.91% (2018: 1.17%) interest in Aruma Resources Limited (Aruma), which is involved in the exploration of gold in Australia and listed on the Australian Securities Exchange. At the end of the year, the fair value of the Group’s investment was $18,000 (2018: 78,000) which is based on the quoted share price. (d) The Group has a 13.31% (2018: 14.68%) interest in Musgrave Minerals Limited (Musgrave), which is involved in the exploration of gold and base metals in Australia. Musgrave is listed on the Australian Securities Exchange. At the end of the year, the fair value of the Group’s investment was $2,729,500 (2018: 3,456,000) which is based on the quoted share price. (e) The Group has a 10.29% (2018: 6.46%) interest in RNC Minerals (RNC), which is a precious and base metal mining company. RNC is listed on the Toronto Stock Exchange. The Group acquired 56,916,019 additional shares during the year as a result of the sale of the Higginsville Gold Operations. At 30 June 2019, the fair value of the Group’s investment was $38,418,312 (2018: 2,364,158) which is based on the quoted share price. (f) During the year ending 30 June 2019, the Group acquired shares in Liontown Resources (LTR) in respect of mineral rights acquired of $238,000 and then subsequently sold its total investment. In the prior year, these financial assets were classified as available-for-sale financial instruments and have been reclassified as financial assets at fair value through profit and loss in accordance with AASB 9, refer to note 2 (c). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 79 Royalties Receivable These financial assets consist of Lithium royalty rights. The fair value of royalties receivable at fair value through profit or loss has been determined using a discounted cash flow model. (a) The Buldania Lithium Royalty Rights Agreement was reached to divest the Buldania Lithium Royalty to Liontown Resources Limited under a pre- emptive arrangement for $2 million in cash with a $250,000 prepayment being received during June 2019 and final settlement occurring on 29 July 2019. The royalties represented a 1.5% gross revenue royalty and a production royalty of $2 per tonne of ore mined and/or processed from three tenements (E63/686, P63/1977 and M63/647). There was no production from these titles with them being in an exploration and development phase. (b) The Mount Marion Lithium Royalty Rights Westgold also reached agreement to divest its Mt Marion Royalty to Silverstream SZ for a gross $13 million in cash. The royalties represented a 1.5% gross revenue royalty and a production royalty of $2 per tonne of ore mined and/or processed from a 30 hectare area of Hampton’s Location 53 which it held for a 20year period from 2016. There was no production from area during the year but production is planned for the ensuing years. The agreement remained in a documentation phase at year end and is expected to be settled in the first quarter of FY 2020. 16. PROPERTY, PLANT & EQUIPMENT Plant and equipment Gross carrying amount at cost Accumulated depreciation and impairment Net carrying amount Land and buildings Gross carrying amount at cost Accumulated depreciation and impairment Net carrying amount Capital work in progress at cost Total property, plant and equipment Movement in property, plant and equipment Plant and equipment At 1 July net of accumulated depreciation Transfer from capital work in progress Disposals Acquisition of subsidiary Disposal of subsidiary (refer to note 36) Depreciation charge for the year At 30 June net of accumulated depreciation 2019 2018 287,780,355 298,386,377 (150,613,499) (177,622,024) 137,166,856 120,764,353 19,158,851 29,895,813 (3,503,451) (16,695,769) 15,655,400 13,200,044 22,750,247 47,445,443 175,572,503 181,409,840 120,764,353 70,509,158 (2,219,062) - (9,428,372) 48,625,886 48,347,224 (1,633,574) 54,127,834 (1,507,829) (42,459,221) (27,195,188) 137,166,856 120,764,353 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 80 16. PROPERTY, PLANT & EQUIPMENT (CONTINUED) 2019 2018 Land and buildings At 1 July net of accumulated depreciation 13,200,044 13,016,401 Transfer from capital works in progress Disposal of subsidiary (refer to note 36) Depreciation charge for the year 3,840,684 102,764 (1,488,092) 1,281,683 (193,939) (904,101) At 30 June net of accumulated depreciation 15,655,400 13,200,044 Capital work in progress At 1 July Additions Disposal of subsidiary (refer to note 36) Acquisition of subsidiary Transfer to mine properties (refer to note 17) Transfer to mine capital development (refer to note 17) Transfer to plant and equipment Transfer to property At 30 June 47,445,443 60,352,877 - - (7,740,341) (2,957,890) 42,024,859 63,662,060 (3,450,866) 92,005 (1,590,250) (3,663,458) (70,509,158) (48,347,224) (3,840,684) (1,281,683) 22,750,247 47,445,443 The carrying value of plant and equipment held under finance leases and hire purchase contracts at 30 June 2019 is $42,714,688 (2018: $30,197,581). Leased assets and assets under hire purchase contracts are pledged as security for the related finance lease and hire purchase lease liabilities (refer to notes 22 and 23). 17. MINE PROPERTY AND DEVELOPMENT Movement in mine properties and development Development areas at cost At 1 July Transfer to mine properties At 30 June Mine properties 756,919 8,434,080 - (7,677,161) 756,919 756,919 At 1 July net of accumulated amortisation 19,678,627 14,891,415 Additions Transfer from capital work in progress (refer to note 16) Transfer from development areas Transfer from mine capital development Transfer from exploration (refer to note 18) Disposal of subsidiary (refer to note 36) Amortisation charge for the year At 30 June net of accumulated amortisation 8,497,402 7,740,340 - 88,445,597 4,067,124 (732,928) - 1,590,250 7,677,161 - - - (9,856,024) (4,480,199) 117,840,138 19,678,627 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 81 Mine capital development At 1 July net of accumulated amortisation Additions Disposal of subsidiary (refer to note 36) Transfer from capital work in progress (refer to note 16) Movement in rehabilitation liability (refer to note 21) Transfer from exploration (refer to note 18) Transfer to capital development Amortisation charge for the year At 30 June net of accumulated amortisation 2019 2018 155,208,641 101,997,767 80,832,077 99,176,579 (11,894,014) (20,929,586) 2,957,890 12,527,922 15,660,293 (88,445,597) 3,663,458 6,263,784 31,301,127 - (69,256,418) (66,264,488) 97,590,794 155,208,641 18. EXPLORATION EXPENDITURE Exploration and evaluation costs carried forward in respect of mining areas of interest Pre-production areas At cost less expenditure written off Net carrying amount Movement in deferred exploration and evaluation expenditure At 1 July net of accumulated impairment Additions Acquisition of subsidiary Disposal of subsidiary (refer to note 36) Transferred to mine properties (refer to note 17) 104,276,449 147,262,738 104,276,449 147,262,738 147,262,738 162,604,807 16,411,424 25,469,201 - 9,080,000 (33,505,161) (12,208,169) (4,067,125) - Transferred to mine capital development (refer to note 17) (15,660,293) (31,301,127) Expenditure written off – continuing operations: (5,471,706) (635,040) Expenditure written off - discontinued operations (refer note 36) (693,428) (5,746,934) At 30 June net of accumulated impairment 104,276,449 147,262,738 The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective mining areas. During the year, a review was undertaken for each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. In assessing the carrying value of all of the Group’s projects, certain expenditure on exploration and evaluation of mineral resources has not led to the discovery of commercially viable quantities of mineral resources. As a result, exploration and evaluation expenditure of $6,165,134 (2018: $6,381,974) was written off to the profit and loss. The amount relates to tenements which were written down to nil as the expenditure did not result in the discovery of commercially viable quantities of mineral resources and as a result no future benefits are expected. 19. TRADE AND OTHER PAYABLES Trade creditors (a) Sundry creditors and accruals (b) 27,915,244 29,826,722 38,335,418 46,872,690 57,741,966 85,208,108 (a) Trade creditors are non-interest bearing and generally on 30-day terms. (b) Sundry creditors and accruals are non-interest bearing and generally on 30-day terms. The carrying value of trade and other payables approximates the fair value thereof. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 82 20. PROVISIONS (CURRENT) Provision for annual leave Provision for long service leave Provision for fringe benefits tax payable 21. PROVISIONS (NON-CURRENT) Provision for long service leave Provision for rehabilitation (a) (a) Provision for rehabilitation 2019 2018 6,201,679 1,761,844 - 5,285,567 1,907,302 2,932 7,963,523 7,195,801 1,305,623 1,072,168 69,017,942 76,945,945 70,323,565 78,018,113 The Group makes full provision for the future cost of rehabilitating mine sites and related production facilities on a discounted basis at the time of developing the mines and installing and using those facilities. The rehabilitation provision represents the present value of rehabilitation costs relating to mine sites, which are expected to be incurred up to 2029, which is when the producing mine properties are expected to cease operations. These provisions have been created based on the Group’s internal estimates. Assumptions based on the current economic environment have been made, which management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately depend upon future market prices for the necessary rehabilitation works required that will reflect market conditions at the relevant time. Furthermore, the timing of rehabilitation is likely to depend on when the mines cease to produce at economically viable rates. This, in turn, will depend upon future gold prices, which are inherently uncertain. The discount rates used in the calculation of the provision as at 30 June 2019 range from 1.09% to 1.40% (2018: range from 2.12% to 2.64%). Refer to note 3) for further detail. (c) Current and non-current movements in provisions Onerous operating lease Rehabilitation Total At 1 July 2017 Utilised Disposal of subsidiary (refer to note 38) Adjustment due to revised conditions Unwind of discount At 30 June 2018 At 1 July 2018 Disposal of subsidiary (refer to note 38) Adjustment due to revised conditions Unwind of discount At 30 June 2019 119,874 (119,874) 90,761,202 90,881,076 - (119,874) - - - - - - - - - (22,003,513) (22,003,513) 6,334,291 1,853,965 6,334,291 1,853,965 76,945,945 76,945,945 76,945,945 76,945,945 (22,265,463) (22,265,463) 12,527,922 12,527,922 1,809,538 1,809,538 69,017,942 69,017,942 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 83 22. INTEREST BEARING LOANS AND BORROWINGS (CURRENT) Lease liability 2019 2018 18,271,020 16,819,651 Represents current portion of finance leases which have repayment terms of 36 months 23. INTEREST BEARING LOANS AND BORROWINGS (NON- CURRENT) Lease liability 18,465,857 13,828,667 Represents non-current portion of finance leases which have repayment terms of 36 months from inception. The carrying amount of the Group’s non-current loans and borrowings approximate their fair value. The weighted average interest rate is 6.22% per annum (2018: 5.44%). Assets pledged as security: The carrying amounts of assets pledged as security for current and non-current interest bearing liabilities are: Non-current Finance lease Plant and equipment Total non-current assets pledged as security 42,714,688 30,197,581 42,714,688 30,197,581 Plant and equipment assets are pledged against lease liabilities for the term of the lease period. 24. UNEARNED INCOME Gold prepayment Movement in unearned income At 1 July Revenue recognised during the year (refer note 5) Fee for extension Additional facility Deemed finance component At 30 June 25,470,487 18,075,375 25,470,487 18,075,375 18,075,375 5,812,500 (16,011,946) (23,887,875) 145,614 - 20,853,550 36,150,750 2,407,894 - 25,470,487 18,075,375 The Group has a gold pre-pay facility with Citibank N.A (“Citi”), classified as unearned income on the Consolidated Statement of Financial Position as Citi has prepaid the Group for a fixed quantity of gold ounces based on a pre-determined gold forward price. The Group has a legal obligation to deliver gold ounces, subsequently recognised as revenue upon the gold repayment. Delivery of ounces is spread across the ensuing year. As the original facility extended beyond 12 months, the Group has recognised an interest expense of $2,407,894 as at 30 June 2019, based on the interest rate determined by the timing of those future gold deliveries. Furthermore, as the Big Bell Underground Mine is considered a qualifying asset, all finance costs were capitalised to Mine Properties and Development. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 84 25. ISSUED CAPITAL (a) Ordinary Shares Issued and fully paid 2019 2018 299,494,861 276,976,897 (b) Movements in ordinary shares on issue Number $ At 1 July 2017 Acquisition of subsidiary Issued share capital (refer note 28 (b)) Issued share capital on conversion of options (f) Issued share capital Share issue costs, net of tax At 30 June 2018 Issued share capital Issued share capital on conversion of listed options Share issue costs, net of tax At 30 June 2019 305,921,487 173,944,902 18,000,000 31,420,000 889,533 2,298,549 36,000,000 - 1,529,997 4,597,098 67,860,000 (2,375,100) 363,109,569 276,976,897 26,000,000 23,400,000 44,785 - 89,570 (971,606) 389,154,354 299,494,861 (c) Terms and conditions of contributed equity Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholder meetings. In the event of winding up the Company the holders are entitled to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital and par share values. Accordingly, the Parent does not have authorised capital nor par value in respect of its issued shares. (d) Escrow Restrictions There are no current escrow restrictions on the issued capital of the Company. (e) Options on issue Unissued ordinary shares of the Company under option at the date of this report are as follows: Type Expiry Date Exercise Price Number of options Unlisted (i) Unlisted (i) Unlisted (ii) Unlisted (ii) Unlisted (ii) Unlisted (ii) Total 11 January 2020 24 November 2020 30 June 2020 30 June 2021 30 June 2022 30 June 2023 $2.02 $2.31 Nil Nil Nil Nil 9,700,000 5,300,000 230,307 230,307 769,490 769,490 16,999,594 (i) (ii) PEPOs issued pursuant to the Westgold Resources Limited Employee Share and Option Plan. ZEPOs issued pursuant to the Westgold Resources Limited Employee Share and Option Plan. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 85 (f) Option conversions 44,785 listed options were exercised during the financial year (2018: 2,298,549). (g) Capital management – gearing ratio Gearing ratio Net debt Capital 2019 2018 8.27% 7.55% 36,736,877 30,648,318 443,968,663 405,816,161 Capital includes issued capital and all other equity reserves attributable to the equity holders of the parent for the purpose of the Group’s capital management. The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise the shareholder’s value. The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Group may return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 30 June 2019 and 30 June 2018. The Group monitors capital using a gearing ratio, which is net debt divided by the aggregate of equity and net debt. The Group’s policy is to keep the gearing ratio between 5% and 20%. The Group includes in its net debt, interest-bearing loans and borrowings, trade and other payables, less cash and short-term deposits. 26. ACCUMULATED LOSSES At 1 July Net profit (loss) in current year attributable to members of the parent entity (65,915,053) (64,743,994) 14,130,064 (1,171,059) (51,784,989) (65,915,053) At 30 June 27. RESERVES At 30 June 2017 Share-based payments At 30 June 2018 Share-based payments At 30 June 2019 Nature and purpose of reserves Equity reserve Share based payments reserve 8,941,075 4,319,611 Equity reserve Total 181,493,631 190,434,706 - 4,319,611 13,260,686 181,493,631 194,754,317 1,021,722 - 1,021,722 14,282,408 181,493,631 195,776,039 This reserve relates to the intercompany loans with Metals X Ltd written off on demerger of the Consolidated Entity and includes tax consolidated adjustments. Share based payments reserve This reserve is used to recognise the fair value of rights and options issued to employees in relation to equity- settled share based payments. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 86 28. SHARE-BASED PAYMENTS (a) Recognised share-based payment expense The expense recognised for services received during the year is shown in the table below: Expense arising from equity-settled share-based payments 1,021,722 4,319,611 2019 2018 The share-based payment plan is described below. There have been no cancellations or modifications to the plan during 2019 and 2018. (b) Transactions settled using shares No transactions were settled in the current year however in the previous financial year the following transactions were settled using shares: • On 3 July 2017, the Company announced that it had completed the acquisition of Australian Contract Mining Pty Ltd (“ACM”). Consideration for the acquisition was the issue of 14,000,000 fully paid ordinary shares. The shares were measured at a fair value of $1.81 per share based on the agreed number of shares negotiated as consideration for the sale. • On 14 August 2017, the Company announced that it had completed the acquisition of accommodation facilities purchased from Mining and Civil Management Services Pty Ltd. Consideration for the acquisition (inclusive of GST) was the issue of 889,533 fully paid ordinary shares. The acquisition was accounted for by measuring the fair value of the assets acquired which were recognised as additions to property, plant and equipment. • On 13 February 2018, the Company announced that it had completed the acquisition of Polar Metals Pty Ltd. Consideration for the acquisition included the issue of 4,000,000 fully paid ordinary shares. The Company determined that it could not readily estimate the fair value of the assets acquired on the basis that this was an exploration asset. The purchase was measured by reference to the share issued which were measured at market value on 13 February 2018 (acquisition date) at $1.52 per share. (c) Employee Share and Option Plan Under the Employee Share and Option Plan (ESOP), grants are made to senior executives and other staff members who have made an impact on the Group’s performance. ESOP grants are delivered in the form of share options or performance rights which vest over periods as determined by the Board of Directors. (d) Performance Rights Performance rights are issued for nil consideration. Performance rights are subject to vesting conditions as determined by the Board of Directors. Any performance rights that do not vest by their expiry date will lapse. Upon vesting, these performance rights will be settled in ordinary fully paid shares of the Company. No performance rights have been issued under the ESOP. (e) Share options PEPOs Share options are issued for nil consideration. The exercise price, vesting conditions and expiry date are determined by the Board of Directors. The expiry date is not less than two years from issue date. Any options that are not exercised by the expiry date will lapse. Upon exercise, these options will be settled in ordinary fully paid shares of the Company. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 87 ZEPOs Unlisted employee options are issued to senior management under the Employee Share Option Plan, the principle terms being: • • • The Employee Options have been issued for nil consideration; Each Employee Option carries an entitlement to one fully paid ordinary share in the Company for each Employee Option vested; Vesting only occurs after the end of the Performance Periods (30 June 2020 and 30 June 2021) and the number of Employee Options that vest (if any) will depend on: - Growth in Return on Capital Employed over the Performance Periods; and - Total shareholder return relative to the S&P/All Ordinaries Gold Index over the Performance Periods. • Options issued to directors that vest will expire if not exercised on the vesting date; • Options issued to employees that vest will expire two years after the vesting date; • Unvested Employee Options lapse on cessation of a holder’s employment with Westgold; • Any Employee Options that do not vest after the end of the Performance Periods will automatically lapse; and • No amount is payable by a holder of Employee Options in respect of the shares allocated upon vesting of the Employee Option. Summary of options granted under the Employee Share and Option Plan 2019 Number 2019 WAEP 2018 Number 2018 WAEP Outstanding at the beginning of the year Granted during the year Exercised during the year Lapsed/cancelled during the year Outstanding at the year end Exercisable at the year end 15,000,000 1,999,600 - - 16,999,600 15,000,000 2.12 0.00 - - 1.87 2.12 11,000,000 5,475,000 - (1,475,000) 15,000,000 9,700,000 2.02 2.31 - 2.05 2.12 2.02 The outstanding balance as at 30 June 2019 is represented by the following table: Grant Date Vesting date Expiry date Exercise Price Options granted Options lapsed / cancelled Options exercised ZEPOs 28/11/2018 30/06/2020 30/06/2020 28/11/2018 30/06/2021 30/06/2021 10/05/2019 30/06/2020 30/06/2022 10/05/2019 30/06/2021 30/06/2023 PEPOs 22/11/2017 22/11/2018 24/11/2020 23/11/2017 24/11/2018 24/11/2020 24/11/2016 11/1/2018 11/1/2020 11/1/2017 11/1/2018 11/1/2020 Total $0.00 $0.00 $0.00 $0.00 $2.31 $2.31 $2.02 $2.02 230,307 230,307 769,490 769,490 2,400,000 - - - - - 3,075,000 (175,000) 2,250,000 - 8,750,000 (1,300,000) 18,474,594 (1,475,000) Number of options at end of period On issue Vested - - - - - - - - - 230,307 230,307 769,493 769,493 - - - - 2,400,000 2,400,000 2,900,000 2,900,000 2,250,000 2,250,000 7,450,000 7,450,000 16,999,600 15,000,000 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 88 28. SHARE-BASED PAYMENTS (CONTINUED) Weighted average remaining contractual life of share options The weighted average remaining contractual life for the share options outstanding as at 30 June 2019 is 1.06 years (2018: 2.12 years). Range of exercise price of share options The range of exercise price for options outstanding at the end of the year is $0.00 to $2.31 (2018: $2.02 to $2.31). Weighted average fair value of share options The weighted average fair value of options granted during the year was $0.57 (2018: $0.45). Share option valuation The fair value of the equity-settled share options granted under the ESOP is estimated at the date of grant using either a Black & Scholes or a Monte Carlo model , which takes into account factors including the option’s exercise price, the volatility of the underlying share price, the risk-free interest rate, the market price of the underlying share at grant date, historical and expected dividends and the expected life of the option, and the probability of fulfilling the required hurdles. Tranche 1 options vest subject to performance hurdles, measured for the period 1 July 2018 to 30 June 2020. The two measures are: • Growth in Return on Capital Employed over the Performance Periods; and • Total shareholder return relative to the S&P/All Ordinaries Gold Index over the Performance Periods. The following table gives the assumptions made in determining the fair value of the options granted in Tranche 1: Grant date Expected volatility (%) Risk-free interest rate (%) Expected life of options (yrs) Options exercise price ($) Share price at grant date ($) Fair value at grant date ($) 28/11/2018 50% 1.81% 1.58 $0.00 $0.985 $0.228 28/11/2018 50% 1.81% 1.58 $0.00 $0.985 $0.985 10/05/2019 50% 1.275% 3.14 $0.00 $1.345 $0.224 10/05/2019 50% 1.275% 3.14 $0.00 $1.345 $1.345 Tranche 2 options vest subject to performance hurdles, measured for the period 1 July 2018 to 30 June 2021. The two measures are: • Growth in Return on Capital Employed over the Performance Periods; and • Total shareholder return relative to the S&P/All Ordinaries Gold Index over the Performance Periods. The following table gives the assumptions made in determining the fair value of the options granted in Tranche 2: Grant date Expected volatility (%) Risk-free interest rate (%) Expected life of options (yrs) Options exercise price ($) Share price at grant date ($) Fair value at grant date ($) 28/11/2018 50% 2.06% 2.58 $0.00 $0.985 $0.328 28/11/2018 50% 2.06% 2.58 $0.00 $0.985 $0.985 10/05/2019 50% 1.285% 4.14 $0.00 $1.345 $0.306 10/05/2019 50% 1.285% 4.14 $0.00 $1.345 $1.345 The effects of early exercise have been incorporated into the calculations by using an expected life for the option that is shorter than the contractual life based on historical exercise behaviour, which is not necessarily indicative of exercise patterns that may occur in the future. The expected volatility was determined using a historical sample of the Company’s share price over a two-month period. The resulting expected volatility therefore reflects the assumptions that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 89 29. COMMITMENTS (a) Capital commitments At 30 June 2019, the Group has capital commitments that relate principally to the purchase and maintenance of plant and equipment for its mining operations. Capital expenditure commitments - Within one year 2019 2018 8,996,852 20,902,157 (b) Operating lease commitments and expenditure commitments on tenements The Company has entered into a commercial property lease on office rental. The Company has also entered into commercial leases on power generation facilities and office equipment. These operating leases have an average life of between one month and five years with renewal options included in the contracts. The Company also has commercial leases over the tenements in which the mining operations are located. These tenement leases have a life of between six months and twenty-one years. In order to maintain current rights to explore and mine the tenements, the Group is required to perform minimum exploration work to meet the expenditure requirements specified by the relevant state governing body. There are no restrictions placed on the lessee by entering into these contracts. Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows: (i) Operating leases – company as lessee - Within one year - After one year but not more than five years (ii) Mineral tenement leases: - Within one year - After one year but not more than five years - After more than five years 5,433,524 4,457,726 7,740,774 3,706,074 13,174,298 8,163,800 3,898,504 3,962,751 15,319,776 15,299,356 30,556,302 34,156,047 49,774,582 53,418,154 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 90 29. COMMITMENTS (CONTINUED) (c) Finance lease and hire purchase commitments The Company has finance leases and hire purchase contracts for various items of plant and machinery. The leases do have terms of renewal but no escalation clauses. Renewals are at the option of the specific entity that holds the lease. The finance and hire purchase contracts have an average term of 36 months with the right to purchase the asset at the completion of the lease term. Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the minimum lease payments are as follows: Within one year After one year but not more than five years Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments Within one year After one year but not more than five years Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments 2019 Minimum lease payments Present value of lease payments 19,741,650 18,271,020 19,205,342 18,465,857 38,946,992 36,736,877 (2,210,115) - 36,736,877 36,736,877 2018 Minimum lease payments Present value of lease payments 19,578,912 16,819,651 17,027,473 13,828,667 36,606,385 30,648,318 (5,958,067) - 30,648,318 30,648,318 The weighted average interest rate of leases for the Company is 6.22% (2018: 5.44%). (d) Other commitments The Group has obligations for various expenditures such as royalties, production-based payments and exploration expenditure. Such expenditures are predominantly related to the earning of revenue in the ordinary course of business. Royalties paid under contractual arrangements 2019 2018 14,982,184 11,270,111 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 91 30. CONTINGENT ASSETS AND LIABILITIES (i) Bank guarantees The Group has a number of bank guarantees in favour of various government authorities and service providers. The bank guarantees primarily relate to office leases and environmental and rehabilitation bonds at the various projects. The total amount of these guarantees at the reporting date is $1,427,836 (2018: $1,286,546). These bank guarantees are fully secured by term deposits (refer to note 14). (ii) Clawback agreement AngloGold Ashanti holds the right to earn back a 75% interest in any individual resource defined within the tenements acquired from AngloGold by Westgold (with the exception of Rover 1 and Explorer 108), under specific terms, conditions, specified payments and performance hurdles none of which have been met. The associated asset is included under Exploration and Evaluation Expenditure to the value of $8,684,857. 31. AUDITOR’S REMUNERATION Amounts received or due and receivable by Ernst & Young (Australia) for: 2019 2018 An audit or review of financial reports of the entity and any other entity within the Group 312,467 334,895 Other services in relation to the entity and any other entity in the Consolidated Entity: - tax compliance Total auditor remuneration 116,000 428,467 239,227 574,122 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 92 32. OPERATING SEGMENTS For management purposes, the Group is organised into operating segments determined by the location of the mineral being mined or explored, as these are the sources of the Group’s major risks and have the most effect on rates of return. Reportable segments The Group comprises the following reportable segments: Meekatharra Gold Operations (MGO): Mining, treatment, exploration and development of gold assets Cue Gold Operations (CGO): Mining, treatment, exploration and development of gold assets Fortnum Gold Operations (FGO) Mining, treatment, exploration and development of gold assets Other Exploration and development of other mineral assets and contract mining services Executive management monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, certain income and expenses (see below) are managed on a consolidated basis and are not allocated to operating segments. All other adjustments and eliminations are part of the detailed reconciliations presented further below. Changes from prior year The internal activities of the Contract Mining Services Division has been reported within the applicable Gold Operations in order to reflect the net cost for each of those operations which is consistent with internal management reporting. The key external mining contract has also been completed. The external Mining Services Division, which was previously reported as a separate segment has now been combined with the Northern Territory Exploration Projects and Lithium Rights under “Other”. Discontinued operations have been excluded in the segment reporting but details are disclosed in note 36. Comparative figures have been restated accordingly. Unallocated income and costs Finance income and fair value gains and losses on financial assets are not allocated to individual segments as the underlying instruments are managed on a Group basis. Current taxes, deferred taxes and certain financial assets and liabilities are not allocated to those segments as they are also managed on a Group basis. Corporate charges comprise non-segmental expenses such as head office expenses and interest costs. Corporate charges are not allocated to operating segments. Refer to reconciliation segment results to consolidated results. Other disclosures Capital expenditure consists of additions of property, plant and equipment, mine properties and development and exploration and evaluation expenditure including assets from the acquisition of subsidiaries. The following table presents revenue and profit information for reportable segments for the years ended 30 June 2019 and 30 June 2018. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 93 Year ended 30 June 2019 Exernal revenue Sale of gold at spot Sale of gold under forward contracts Sale of gold under a prepay facility Financing component on gold sales under prepay facility Mining and contracting services Total segment revenue Results Depreciation and amortisation Exploration and evaluation expenditure written off Accumulated mill scats written off MGO CGO FGO Other Total 55,105,103 53,798,893 51,823,872 98,997,256 64,741,709 52,165,824 12,108,484 2,037,462 1,749,375 116,625 - - - - - - 25,672,844 - 167,960,218 120,694,689 103,989,696 25,672,844 - - 160,727,868 215,904,789 14,145,946 1,866,000 25,672,844 418,317,447 (51,704,059) (24,869,912) (20,720,491) (2,411,541) (99,706,003) (2,393,064) (497,944) (150,864) (2,429,834) (5,471,706) (11,491,150) (9,233) (127,801) - (11,628,184) Segment (loss) profit (20,392,555) (1,047,700) 15,722,413 (2,467,750) (8,185,592) Total assets 178,125,218 243,187,048 112,187,209 31,216,018 564,715,493 Total liabilities (58,344,581) (80,098,686) (28,359,223) (874,484) (157,065,262) Other disclosures Capital expenditure Year ended 30 June 2018 External revenue Sale of gold at spot (52,958,699) (81,401,015) (21,699,381) (1,006,168) (157,065,262) MGO CGO FGO Other Total 44,736,050 6,686,870 36,227,511 Sale of gold on contract 114,719,063 7,700,960 33,581,230 Sale of gold on contract - prepayment 21,879,500 Mining and contracting services - - - - - - - - 87,650,431 156,001,253 21,879,500 11,298,099 11,298,099 Total segment revenue 181,334,613 14,387,830 69,808,741 11,298,099 276,829,283 Results Depreciation and amortisation (51,118,912) (3,225,004) (15,588,965) (1,004,459) (70,937,340) Exploration and evaluation expenditure written off (47,204) (72,960) (514,876) - (635,040) Segment profit (loss) (21,670,374) (5,084,013) 447,893 (2,365,631) (28,672,125) Total assets 180,294,757 170,281,486 105,101,958 44,822,333 500,500,534 Total liabilities (67,120,370) (40,992,760) (32,810,386) (14,360,223) (155,283,739) Other disclosures Capital expenditure (58,757,047) (50,568,806) (34,749,449) (6,526,789) (150,602,091) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 94 32. OPERATING SEGMENTS (CONTINUED) (a) Reconciliation of profit (loss) Segment loss Corporate administration expenses Corporate interest income Corporate other income Impairment loss on available-for-sale financial assets Net gain on sale of available-for-sale financial assets Net gain on fair value changes of financial assets Net gain on sale of financial assets at FVTPL Net gain (loss) on disposal of assets Impairment of goodwill Total consolidated profit (loss) from continuing operations before income tax (b) Reconciliation of assets Segment operating assets Unallocated corporate assets Cash and cash equivalents Trade and other receivables Prepayments Other financial assets Financial assets (equity investments) Property, plant and equipment Assets - discontinued operations Total consolidated assets (c) Reconciliation of liabilities Segment operating liabilities Unallocated corporate liabilities Trade and other payables Other provisions Provision for employee benefits Interest-bearing loans and borrowings Deferred tax liability Liabilities - discontinued operations Total consolidated liabilities (d) Segment revenue from external customers Segment revenue Total revenue 2019 2018 (8,185,592) (9,129,172) 308,101 5,072,352 - - 21,353,650 3,121,249 139,435 - (28,672,125) (11,216,582) 571,184 3,130,446 (2,475,760) 1,446,807 - - (1,145,250) (2,553,772) 12,680,023 (40,915,052) 564,715,493 500,500,534 65,483,767 944,183 378,462 1,180,677 43,210,813 809,350 - 676,722,745 70,706,859 245,683 499,573 940,677 6,102,158 690,069 87,596,915 667,282,468 167,676,974 155,283,739 28,367,977 - 2,133,433 58,034 35,000,416 - 233,236,834 19,540,611 2,283 1,858,796 46,367 42,320,592 42,413,919 261,466,307 418,317,447 418,317,447 276,829,283 276,829,283 Revenue from external customers by geographical locations is detailed below. Revenue is attributable to geographical location based on the location of the customers. The Company does not have external revenues from external customers that are attributable to any foreign country other than as shown. Australia Total revenue 418,317,447 418,317,447 276,829,283 276,829,283 The Group has three customers to which it sells gold and each account for 36%, 61% and 3% of this external revenue respectively (2018: Two customers 33% and 67%). (e) Segment non-current assets are all located in Australia. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 95 33. KEY MANAGEMENT PERSONNEL (a) Details of Key Management Personnel (i) Non-Executive Directors PJ Newton PB Schwann SV Shet FJ Van Maanen Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Appointed 6 October 2016 2 February 2017 18 December 2017 6 October 2016 (ii) Executive Directors PG Cook JS Norregaard Managing Director Executive Director 19 March 2007 29 December 2016 (iii) Other Executives (KMPs) PM Storey PW Wilding General Manager MGO General Manager CGO RB Armstrong General Manager FGO 23 May 2018 1 July 2018 1 July 218 DJ Noort DW Okeby DA Fullarton SM Balloch General Manager ACM 20 August 2019 Company Secretary & Legal Manager CFO CFO 1 December 2016 21 May 2018 Resigned - - - - - - - - - - - 1 December 2016 8 July 2018 There are no changes of the key management personnel after the reporting date and before the date the financial report was authorised for issue. (b) Compensation of Key Management Personnel Short term benefits Post-employment benefits Other long-term benefits Share-based payment 2019 2018 3,726,230 221,120 59,359 592,639 4,599,348 2,864,733 178,336 48,842 2,805,753 5,897,664 (c) Loans to Key Management Personnel There were no loans to key management personnel during the current or previous financial year. (d) Interest held by Key Management Personnel under the Long Term Incentive Plan Grant date 28/11//2018 28/11/2018 10/05//2019 10/05//2019 22/11/2017 23/11/2017 24/11/2016 11/1/2017 Total Expiry date 30/06/2020 30/06/2021 30/06/2022 30/06/2023 24/11/2020 24/11/2020 11/1/2020 11/1/2020 Exercise price $ 0.00 0.00 0.00 0.00 2.31 2.31 2.02 2.02 2018 2017 230,307 230,307 769,490 769,490 - - - - 1,999,594 - - - - 2,400,000 1,200,000 2,250,000 3,900,000 9,750,000 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 96 34. RELATED PARTY DISCLOSURES (a) Subsidiaries The consolidated financial statements of the Group include Westgold Resources Limited and the subsidiaries listed in the following table: Ownership Interest Name Country of incorporation Castile Resources Pty Ltd Aragon Resources Pty Ltd Big Bell Gold Operations Pty Ltd Australian Contact Mining Pty Ltd Location 53 Pty Ltd Hill 51 Pty Ltd * Avoca Resources Pty Ltd * Avoca Mining Pty Ltd * Polar Metals Pty Ltd * Australia Australia Australia Australia Australia Australia Australia Australia Australia 2018 100% 100% 100% 100% 100% 0% 0% 0% 0% 2017 100% 100% 100% 100% 100% 100% 100% 100% 100% * Entities disposed on sale (refer to note 36) (b) Ultimate Parent Westgold Resources Limited is the ultimate parent entity. (c) Key Management Personnel Details relating to key management personnel, including remuneration paid, are included in note 33. (d) Transactions with related parties There was no related party transaction for the year ending 30 June 2019. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 97 25. INFORMATION RELATING TO WESTGOLD RESOURCES LIMITED (“THE PARENT ENTITY”) Current assets Total assets Current liabilities Total liabilities Issued capital Retained earnings Share-based payments reserve Other reserves Total Equity 2019 2018 67,933,961 413,646,651 30,469,940 30,506,316 72,226,989 356,538,551 21,250,528 21,282,253 299,494,862 64,806,283 14,282,408 4,556,783 383,140,336 275,958,998 41,479,832 13,260,686 4,556,783 335,256,299 Profit of the parent entity Total comprehensive profit of the parent entity 34,116,826 34,116,826 25,660,747 25,660,747 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries. Pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785, Westgold and its wholly owned subsidiaries (except Location 53 Pty Ltd) entered into a deed of cross guarantee on 28 November 2016 (the Guarantee). The effect of the Guarantee is that Westgold has guaranteed to pay any deficiency in the event of winding up of any controlled entity which is a party to the Guarantee or if they do not meet their obligations under the terms of any debt subject to the Guarantee. The controlled entities which are parties to the Guarantee have given a similar guarantee in the event that Westgold is wound up or if it does not meet its obligations under the terms of any debt subject to the Guarantee. The Consolidated Statement of Financial Position and Consolidated Statement of Comprehensive Income for the closed group is not different to the Group’s Statement of Financial Position and Statement of Comprehensive Income. Contingent liabilities of the parent entity. Contractual commitments by the parent entity for the acquisition of property, plant or equipment. Nil Nil NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 98 36. DISCONTINUED OPERATIONS Higginsville Gold Operations In a strategy to focus efforts on the larger long-life Murchison gold assets, agreement was reached to sell the Higginsville Gold Operations (HGO) to RNC Minerals (RNC) on 10 June 2019. HGO operates the Higginsville Processing Plant as its mining hub. In recent years the Mount Henry Open Pit had operated as the core feed with the remainder of plant capacity filled by toll processing third party ores from the region. In FY2019 Westgold sold its wholly owned subsidiaries that collectively make up HGO; namely Hill 51 Pty Ltd, Avoca Resources Pty Ltd, Avoca Mining Pty Ltd and Polar Metals Pty Ltd. The consideration for the sale was $55 million (with working capital adjustments). The purchase consideration comprised of $24 million in cash; $27 million in 49,811,364 fully paid ordinary shares in RNC Minerals Limited and an option fee of $4 million in 7,104,655 fully paid ordinary shares in RNC Minerals Limited Results of the discontinued operations: Revenue Cost of sales Gross loss Other income Loss on sale of financial assets Other expenses Finance costs Exploration and evaluation expenditure written off Gain on disposal of controlled entities Loss before tax Income tax benefit Profit (loss) for the year from discontinued operations Cash flow information from discontinued operations: Operating activities Investing activities Financing activities Carrying value of net assets at date of disposal: Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Property, plant and equipment Mine properties and development costs Exploration and evaluation expenditure Liabilities Trade and other payables Provisions Deferred tax liabilities Net assets disposed of 2019 2018 76,963,348 (95,008,018) (18,044,670) 1,110,359 (90,309) (34,867) (496,717) (693,428) 16,435,747 (1,813,885) 2,456,810 642,925 94,802,011 (102,727,156) (7,925,145) 377,388 - (60,000) (335,175) (5,602,267) - (13,545,199) 4,063,559 (9,481,640) 2019 9,796,749 (9,082,668) (247,904) 466,177 614,991 461,278 15,108,933 50,226 10,137,250 10,607,459 33,505,161 70,485,298 (6,170,363) (23,025,720) (3,857,859) (33,053,942) 37,431,356 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 99 Gain on sale of subsidiary Consideration received in cash and cash equivalents Consideration received in shares Fees and working capital adjustments Less net assets disposed of Gain on disposal 2019 24,079,927 30,937,176 (1,150,000) (37,431,356) 16,435,747 South Kalgoorlie Operations In FY2018 Westgold sold its wholly owned subsidiaries that collectively make up the South Kalgoorlie Operations; Dioro Exploration Pty Ltd, HBJ Minerals Pty Ltd and Hampton Gold Mining Areas Ltd to Northern Star Resources Limited. The consideration for the sale was $80 million (with working capital adjustments). Westgold retained its lithium royalties over the Mt Marion Lithium Mine and the rights to lithium exploration and mining over Location 53 and 59. 2019 2018 Results of the discontinued operations: Revenue Cost of sales Gross profit Other income Finance costs Exploration and evaluation expenditure written off Gain on disposal of controlled entities Profit before tax Income tax expense Profit for the year from discontinued operations Cash flow information from discontinued operations: Operating activities Investing activities Financing activities Carrying value of net assets at date of disposal: Assets Trade and other receivables Inventories Prepayments Property, plant and equipment Mine properties and development costs Exploration and evaluation expenditure Deferred tax asset Liabilities Trade and other payables Provisions Deferred tax liabilities Net assets disposed of - - - - - - - - - - 67,260,297 (66,256,596) 1,003,701 390,548 (359,534) (144,667) 61,759,658 62,649,706 (22,433,090) 40,216,616 2018 13,297,796 (12,509,364) (902,589) (114,157) 141,483 11,970,075 195,329 5,152,635 20,929,587 12,208,169 982,231 51,579,509 (7,454,795) (23,155,680) (4,458,165) (35,068,640) 16,510,869 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 100 36. DISCONTINUED OPERATIONS (CONTINUED) Gain on sale of subsidiary Consideration received in cash and cash equivalents Deferred sale proceeds on sale of subsidiary Consideration received in shares Working capital adjustments Less net assets disposed of Gain on disposal 2018 19,000,000 1,000,000 59,809,527 (1,539,000) (16,510,869) 61,759,658 Entities disposed were Dioro Exploration Pty Ltd, HBJ Minerals Pty Ltd and Hampton Gold Mining Areas Limited. 37. EVENTS AFTER THE BALANCE SHEET DATE There are no significant events after the balance sheet date. 38. ACCOUNTING STANDARDS New and amended standards and interpretations The Group applied AASB 9 Financial Instruments (“AASB 9”) and AASB 15 Revenue from Contracts with Customers (“AASB 15”) for the first time from 1 July 2018. The nature and effect of the adoption of these new standards are described below. Several other new and amended Accounting Standards and Interpretations applied for the first time from 1 July 2018 but did not have an impact on the consolidated financial statements of the Group and, hence, have not been disclosed. AASB 9 AASB 9 which contains accounting requirements for financial instruments, replaces parts of AASB 139 Financial Instruments: Recognition and Measurement (“AASB 139”) for annual periods beginning on or after 1 January 2018. AASB 9 contains requirements in the areas of classification and measurement, impairment, hedge accounting and de-recognition of financial instruments. The Group has applied AASB 9 retrospectively, with the initial application date being 1 July 2018 and has elected not to restate comparative information which continued to be reported under AASB 139. The adoption of AASB 9 did not result in any adjustment to the opening balance of retained earnings as at 1 July 2018. Classification and measurement AASB 9 introduced new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, which arise on specified dates and are solely payments of principal and interest (“SPPI”). All other financial instrument assets are classified and measured at fair value through profit or loss (“FVTPL”) unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for trading) in other comprehensive income (“OCI”). For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity’s own credit risk to be presented in OCI (unless it would create an accounting mismatch). Existing financial assets and liabilities of the Group were assessed in terms of the requirements of AASB 9. In this regard the adoption of AASB 9 will impact on the classification of financial assets and liabilities: NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 101 Financial instrument Original measurement category under AASB 139 (i.e. prior to 1 July 2018) 1 July 2018 Cash and cash equivalents Loans and receivables Trade receivables, deposit and other receivables Loans and receivables Equity investments Available-for-sale financial assets Trade and other payables Financial liability at amortised cost Financial liability at amortised cost Interest bearing loans and borrowings Financial instrument 73,446,753 19,905,830 6,267,158 85,208,108 30,648,318 New measurement category under AASB 9 (i.e. from 1 July 2018) 1 July 2018 Cash and cash equivalents Financial assets at amortised cost Trade receivables, deposit and other receivables Equity investments Financial assets at amortised cost Financial assets at fair value through profit and loss (FVTPL) Trade and other payables Financial liability at amortised cost Interest bearing loans and borrowings Financial liability at amortised cost 73,446,753 19,905,830 6,267,158 85,208,108 30,648,318 The changes in classification did not resulted in any re-measurement adjustments at 1 July 2018. As available for sale equity instruments had previously been impaired, there was no equity reserve to reclassify to accumulated losses on adoption of AASB 9. Impairment In relation to the financial assets carried at amortised cost, AASB 9 requires an expected credit loss model to be applied as opposed to an incurred credit loss model under AASB 139. The expected credit loss model requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial asset. In particular, AASB 9 requires the Group to measure the loss allowance at an amount equal to lifetime expected credit loss (“ECL”) if the credit risk on the instrument has increased significantly since initial recognition. On the other hand, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group is required to measure the loss allowance for that financial instrument at an amount equal to the ECL within the next 12 months. At 1 July 2018, upon adoption of AASB 9, the Group reviewed and assessed the existing financial assets for impairment using reasonable and supportable information. Given the nature of the Group’s business and the nature of its financial assets subject to impairment assessment, there was no material impact arising from the application of the new impairment requirements of AASB 9. As all of the Group’s trade receivables, deposits and other current receivables which the Group measured at amortised cost are short term (i.e., less than 12 months), and the Group has credit rating and risk management policies in place, the change to a forward-looking expected credit loss approach did not have a material impact on the amounts recognised in the financial statements. The accounting policy of the Group on financial instruments is disclosed in more detail in note 2(g). AASB 15 AASB 15 supersedes AASB 118 Revenue (“AASB 118”) and related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. AASB 15 establishes a five-step model to account for revenue arising from contracts with customers. Under AASB 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. Under AASB 15, the revenue recognition model will change from one based on the transfer of risk and reward of ownership to the transfer of control of ownership. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 102 38. ACCOUNTING STANDARDS (CONTINUED) AASB 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires enhanced and extensive disclosures about revenue to help investors better understand the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. The Group has adopted AASB 15 using the modified retrospective approach with the date of initial application being 1 July 2018 with the cumulative effect of initially applying AASB 15 recognised as an adjustment to the opening balance of retained earnings. The Group elected to apply the standard only to contracts that were not completed contracts at the initial date of application. The comparative information has not been restated and continues to be reported under AASB 118 and related interpretations. Overall impact The Group’s revenue from contracts with customers comprises two main streams being the sale of gold bullion and revenue generated from mining and contracting services. The Group undertook a comprehensive analysis of the impact of the new revenue standard based on a review of the contractual terms of its principal revenue streams with the primary focus being to understand whether the timing and amount of revenue recognised could differ under AASB 15. For all of the Group’s revenue streams, the nature and timing of satisfaction of the performance obligations, and, hence, the amount and timing of revenue recognised under AASB 15, is the same as that under AASB 118 except for the impact of significant financing component on gold sales. The accounting policy of the Group on revenue from contracts with customers is disclosed in more detail in note 2(t). Impact on Consolidated Statement of Comprehensive Income upon adoption Gold bullion Gold bullion sales are either directly to the Perth Mint at spot under a long-term sales contract, to various banks under forward sales contracts or to Citibank N.A. under a prepaid facility. The only performance obligation under the contracts is the sale of gold bullion. As there are no other performance obligations the transaction price is allocated to the one performance obligation. There were no changes identified with respect to the timing or amount of revenue recognition in relation to sales at spot or the forward sales as the transaction price is determined at the transaction date, being the date control of the gold bullion passes. For sales under the gold pre-pay facility, the Group receives advances from the customer for the sale of refined gold. The amount received in advance of the sale is recognised as unearned income (contract liability) and is released to revenue when the sale is recognised. The unearned income on the gold pre-pay facility is disclosed in note 24 of the financial report. At the date of initial application of AASB 15, the Group assessed existing contracts and concluded that the financing component was not significant. Prior to the adoption of AASB 15 no interest was accrued on long term advances received. Mining and contracting services Revenue generated from mining and contracting services include the provision of equipment and personnel to carry out the mining activities. This is consistent with how these have been recognised previously under AASB 18, and no adjustment to the opening balance of retained earnings is required. Accordingly, upon adoption of AASB 15 on 1 July 2018, there was no significant impact on the financial statement related to mining and contracting services. Impact of the adoption of AASB 15 on the current period financial statements The adoption of AASB 15 has resulted to an increase in assets from the capitalisation of interest expense ($2,407,894), unearned income ($541,594), and revenues ($1,866,000) as on the Consolidated Statement of Financial Position and the Consolidated Statement of Cash Flows during the year. As an eligible borrowing cost, the interest expense was capitalised to qualifying assets during the year in accordance with the Group’s policy for borrowing costs disclosed in note 2(i). The impact on earnings per share resulting from the increase in revenues is not material. New and amended Accounting Standards and Interpretations issued but not yet effective Australian Accounting Standards and Interpretations that are issued, but are not yet effective, up to the date of issuance of the Groups financial statements are disclosed below. The Group intends to adopt these standards and interpretations, if applicable, when they become effective. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 103 AASB 16 Leases AASB 16 was issued in January 2016 and it replaces AASB 117 Leases, AASB interpretation 4 Determining whether an Arrangements contains a lease, AASB Interpretation-115 Operating Lease-Incentives and AASB Interpretation 127 Evaluating the Substance of Transactions involving the Legal form of a Lease. AASB 16 sets out the principles for the recognition on-balance sheet model similar to the accounting for finance leases under AASB 117. The standards include two recognition exemptions for lessees – leases of ‘low-value’ assets and short-term leases. At the commencement date of a lease, a lessee will recognise a liability to make lease payments and an asset represent the right to use the underlying asset during the lease term. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to re-measure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the re-measurement of the lease liability as an adjustment to the right-of-use asset. AASB 16, which is effective for annual periods being on or after 1 January 2019, required lessees to make more extensive disclosures than under AASB 117. Transition to AASB 16 The Group plans to adopt AASB 16 using the modified retrospective approach at the date of initial application, which means it will apply the standard from 1 July 2019, the cumulative impact of adoption will be recognised as at 1 July 2019 and comparatives will not be restated. The Group will elect to use the exemptions proposed by the standard on lease contracts for which the lease terms ends within 12 months as of the date of initial application, and lease contracts for which the underlying asset is of low-value. The Group has leases of certain office equipment (printing and photocopying machines) that are considered of low-value. As of 30 June 2019, the Group continued to progress its detailed impact assessment and implementation project of AASB 16. Much of the early part of the year was spent focusing on reviewing contracts, aggregating data to support the evaluation of the accounting impacts and identifying where key policy decisions were required. The Group’s existing operating leases will be the main source of leases under the new standard. Information on the Group’s operating lease commitments under AASB 117 Leases (undiscounted) is disclosed in Note 29. Work completed by the Group to date indicates the new leases standard is expected to have a material effect on the Group’s financial statements as it will significantly increase the Group’s recognised assets and liabilities. In summary the impact of AASB 16 is to create a Right-of-use asset and a Lease liability of at least $12,500,000. As a result of the creation of a right-of-use asset and lease liability, depreciation expense and interest expense are expected to increase and operating lease expense will be reduced. In addition, the classification between cash flow from operating activities and cash flow from financing activities will also change. Many commonly used financial ratios and performance metrics for the Group, using existing definitions, will also be impacted including net debt, gearing, EBITDA, unit costs and operating cash flows. AASB 2018-1 Annual Improvements 2015-2017 Cycle AASB2018-1 is effective for annual periods being on or after 1 January 2019. The amendments clarify certain requirements in: • AASB 3 Business Combinations and AASB 11 Joint Arrangements - previously held interest in a joint operation • AASB 112 Income Taxes - income tax consequences of payments on financial instruments classified as equity • AASB 123 Borrowing Costs - borrowing costs eligible for capitalisation. The Group is in the process of assessing the impact of the amendment. AASB Interpretation 23 Uncertainty over Income Tax Treatments AASB Interpretation 23 is effective for annual periods being on or after 1 January 2019. The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of AASB 112 and does not apply to taxes or levies outside the scope of AASB 112, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. • Whether an entity considers uncertain tax treatments separately • The assumptions an entity makes about the examination of tax treatments by taxation authorities • How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates • How an entity considers changes in facts and circumstances. The Group is in the process of assessing the impact of the new interpretation. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 104 38. ACCOUNTING STANDARDS (CONTINUED) AASB 2019-1 Conceptual Framework for Financial Reporting AASB 2019-1 is effective for annual periods being on or after 1 January 2020. The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. It is arranged in eight chapters, as follows: • Chapter 1 – The objective of financial reporting • Chapter 2 – Qualitative characteristics of useful financial information • Chapter 3 – Financial statements and the reporting entity • Chapter 4 – The elements of financial statements • Chapter 5 – Recognition and derecognition • Chapter 6 – Measurement • Chapter 7 – Presentation and disclosure • Chapter 8 – Concepts of capital and capital maintenance AASB 2019-1 has also been issued, which sets out the amendments to Australian Accounting Standards, Interpretations and other pronouncements in order to update references to the revised Conceptual Framework. The changes to the Conceptual Framework may affect the application of accounting standards in situations where no standard applies to a particular transaction or event. In addition, relief has been provided in applying AASB 3 and developing accounting policies for regulatory account balances using AASB 108, such that entities must continue to apply the definitions of an asset and a liability (and supporting concepts) in the Framework for the Preparation and Presentation of Financial Statements (July 2004), and not the definitions in the revised Conceptual Framework. The Group is in the process of assessing the impact of the new Conceptual Framework. AASB 2018-6 Definition of a Business AASB 2018-6 is effective for annual periods being on or after 1 January 2020. The Standard amends the definition of a business in AASB 3 Business Combinations. The amendments clarify the minimum requirements for a business, remove the assessment of whether market participants are capable of replacing missing elements, add guidance to help entities assess whether an acquired process is substantive, narrow the definitions of a business and of outputs, and introduce an optional fair value concentration test. The Group is in the process of assessing the impact of the new amendment. AASB 2018-7 Definition of Material AASB 2018-7 is effective for annual periods being on or after 1 January 2020. This Standard amends AASB 101 Presentation of Financial Statements and AAS 108 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. The amendments clarify that materiality will depend on the nature or magnitude of information. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. The Group is in the process of assessing the impact of the new amendment. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 105 DIRECTORS’ DECLARATION In accordance with a resolution of the Directors of Westgold Resources Limited, I state that: In the opinion of the Directors: (a) the financial statements and notes of the Company and of the Group are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2019 and of their performance for the year ended on that date; and (ii) complying with the Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001; and (b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2(b) and; (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and (d) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2019. As at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in Note 34 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee. On behalf of the Board. PG Cook Managing Director Perth, 26 August 2019 DIRECTORS’ DECLARATION 106 INDEPENDENT AUDIT REPORT Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Independent auditor's report to the members of Westgold Resources Limited Report on the audit of the financial report Opinion We have audited the financial report of Westgold Resources Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a) b) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2019 and of its consolidated financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:CT:WESTGOLD:036 107 INDEPENDENT AUDIT REPORT INDEPENDENT AUDIT REPORT 1. Recoverability of non-current assets Why significant How our audit addressed the key audit matter As at 30 June 2019, the Group had capitalised mine properties and development costs, property, plant and equipment, capitalised exploration and evaluation expenditure totaling $498.06 million (refer to Notes 17, 16 and 18 of the financial report). At the end of each reporting period, the Group exercises judgment in determining whether there is any indication of impairment on its cash-generating units (CGUs) or indication that an impairment loss recognised in prior periods should be reversed. If any such indicators exist, the Group estimates the recoverable amount of that CGU. No indicators of impairment or indicators of reversal of prior period impairment were identified in the current period. Changes to key factors and assumptions or a failure to identify impairment indicators could lead the Group incorrectly fail to test the recoverable amount of the CGUs at balance date. Accordingly, this was considered to be a key audit matter. We assessed how the Group sought to identify indicators of impairment on its CGUs and the evaluated the completeness of factors it considered in the assessment. Our audit procedures included the following: • Comparison of the Group’s market capitalisation relative to its net assets • We considered the Group’s process for identifying and considering external and internal information which may be an indicator of impairment • Considered the forecast results used by the Group in their last impairment test and the key assumptions used by comparing these to current operating results of the CGUs. This includes gold prices, production levels, operating and capital costs, and reserves and resources estimates • Our valuation specialists were involved to provide data relating to future metals prices and market trading and transaction multiples to assess whether there are negative changes in the market that may suggest indicators of impairment • Understood the changes in reserves and resources estimates during the year and assessed whether the changes provided any evidence of impairment • Assessed the qualifications, competence and objectivity of the Group’s internal experts whose work formed the basis of the Group’s estimation of mineral reserves and resources quantities • Considered the Group’s assessment of indicators of impairment of exploration and evaluation assets in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources. This included testing of material areas of interest with capitalised costs as at 30 June 2019 to assess whether rights to tenure are current and whether there are active and significant continuing exploration and evaluation activities in the area. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:CT:WESTGOLD:036 INDEPENDENT AUDIT REPORT 108 INDEPENDENT AUDIT REPORT 2. Rehabilitation and restoration provisions Why significant How our audit addressed the key audit matter As a consequence of its operations, the Group incurs obligations to restore and rehabilitate the environment. Rehabilitation activities are governed by a combination of legislative requirements and Group policies. As at 30 June 2019, the Group’s consolidated statement of financial position includes provisions of $69.02 million in respect of such obligations. Estimating the costs associated with these future activities requires considerable judgment in relation to factors such as timing of the rehabilitation, the costs associated with the rehabilitation activities and economic assumptions such as discount rates and inflation rates. Accordingly, this was considered to be a key audit matter. We evaluated the assumptions and methodologies used by the Group in determining their rehabilitation obligations. Our audit procedures included the following: • Our rehabilitation specialists considered the rehabilitation plans and assessed whether the Group’s cost estimates were reasonable considering industry benchmarks and relevant legislative requirements. Our rehabilitation specialists also compared the data used in calculating the provision to the mine closure plans submitted to Department of Mines and Petroleum and the reasonableness of year-on-year changes to the obligation • Evaluated the Group’s treatment of changes in the rehabilitation provision from the prior year • Assessed the qualifications, competence and objectivity of the Group’s internal and external experts, the work of whom, formed the basis of the Group’s rehabilitation cost estimates • Assessed the adequacy of the Group's disclosures relating to rehabilitation obligations. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:CT:WESTGOLD:036 109 INDEPENDENT AUDIT REPORT INDEPENDENT AUDIT REPORT Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2019 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report and the Corporate Governance Statement that are to be included in the Annual Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s report. Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards 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 this financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:CT:WESTGOLD:036 INDEPENDENT AUDIT REPORT 110 INDEPENDENT AUDIT REPORT As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ► ► ► ► ► ► Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:CT:WESTGOLD:036 111 INDEPENDENT AUDIT REPORT INDEPENDENT AUDIT REPORT Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Westgold Resources Limited for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Philip Teale Partner Perth 26 August 2019 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:CT:WESTGOLD:036 INDEPENDENT AUDIT REPORT 112 SECURITY HOLDER INFORMATION AS AT 8 OCTOBER 2019 (a) Top 20 Quoted Shareholders HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED SUN HUNG KAI INVESTMENT SERVICES LIMITEDALL-STATES FINANCE PTY LIMITED CS THIRD NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED UBS NOMINEES PTY LTD AJAVA HOLDINGS PTY LTD BNP PARIBAS NOMINEES PTY LTD BRISPOT NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA WARBONT NOMINEES PTY LTD MR PETER GERARD COOK BUTTONWOOD NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD WESTERN BRIDGE PTY LTD BNP PARIBAS NOMINEES PTY LTD DEBORTOLI WINES PTY LIMITED Total (b) Distribution of quoted ordinary shares Size of parcel 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,000 + Total % 39.35 15.18 8.39 5.92 3.61 1.74 1.56 1.53 1.34 1.17 0.93 0.91 0.83 0.77 0.67 0.49 0.41 0.41 0.39 0.29 85.88 Number of shares 157,172,840 60,638,888 33,499,706 23,659,104 14,418,261 6,941,656 6,233,100 6,101,505 5,353,086 4,662,727 3,696,323 3,642,251 3,318,792 3,081,370 2,693,750 1,940,175 1,644,333 1,636,735 1,563,108 1,158,631 343,056,341 Number of share holders Number of shares 2,122 2,515 767 778 100 6,282 1,060,453 6,313,878 5,616,901 20,035,124 366,443,601 399,469,957 (c) Number of holders with less than a marketable parcel of ordinary shares Total Unmarketable parcel $500 basis price $2.40 350 19,055 113 SECURITY HOLDER INFORMATION SECURITY HOLDER INFORMATION (d) Substantial Shareholders Ruffer LLP Golden Energy & Resources Limited Paradice Investment Management Pty Ltd (e) Voting Rights % 9.33% 9.01% 5.76% Number of shares 37,276,412 36,000,000 23,019,599 The voting rights for each class of security on issue are: Ordinary fully paid shares Each ordinary shareholder is entitled to one vote for each share held. Unquoted Employee Options The holders of options have no rights to vote at a general meeting of the company. (f) Unquoted Equity Securities Number of Employee Options Exercise Price Expiry Date Number holders 4,250,000 230,307 230,307 769,493 769,493 $2.31 Nil Nil Nil Nil 24/11/2020 30/06/2020 30/06/2021 30/06/2022 30/06/2022 14 2 2 17 17 Unquoted employee options are issued under an employee incentive scheme. SECURITY HOLDER INFORMATION 114 MINERAL RESOURCES & ORE RESERVES WESTGOLD RESOURCES LIMITED Gold Operations Consolidate Mineral Resource Statement - Rounded for Reporting Project Measured CMGP (MGO + CGO) FGO Sub-Total Indicated CMGP (MGO + CGO) FGO Sub-Total Inferred CMGP (MGO + CGO) FGO Sub-Total Total CMGP (MGO + CGO) FGO Grand Total 30/6/19 Tonnes (‘000s) Grade Ounces Au (‘000s) 3,328 753 4,081 60,854 15,436 76,290 44,641 5,829 50,470 108,823 22,018 130,841 3.11 2.76 3.04 2.26 1.89 2.18 2.08 2.07 2.07 2.21 1.97 2.17 333 67 399 4,416 938 5,355 2,978 389 3,367 7,727 1,394 9,121 Glossary CGO – Cue Gold Operations. CMGP – Central Murchison Gold Project (aggregate of CGO and MGO to reflect processing optionality). FGO - Fortnum Gold Operations. MGO – Murchison Gold Operations. 115 TABLES OF MINERAL RESOURCES & ORE RESERVES WESTGOLD RESOURCES LIMITED Gold Operations Consolidated Ore Reserve Statement - Rounded for Reporting 30/6/19 Project Proven CMGP (MGO + CGO) FGO Sub-Total Probable CMGP (MGO + CGO) FGO Sub-Total Total CMGP (MGO + CGO) FGO Grand Total Tonnes (‘000s) Grade Ounces Au (‘000s) 1,814 891 2,705 23,379 5,473 28,852 25,193 6,364 31,558 2.43 2.55 2.47 2.73 1.99 2.59 2.71 2.07 2.58 142 73 215 2,054 350 2,404 2,196 423 2,620 TABLES OF MINERAL RESOURCES & ORE RESERVES 116 Central Murchison Gold Project (CMGP) (CGO + MGO) Mineral Resource Statement - Rounded for Reporting 30/6/19 Project Big Bell Cuddingwarra Day Dawn Tuckabianna Tuckabianna Stockpiles Meekatharra North Nannine Paddy's Flat Reedy's Yaloginda Bluebird Stockpiles Measured Grade Tonnes (‘000s) Ounces Au (‘000s) Tonnes (‘000s) Indicated Grade Ounces Au (‘000s) Tonnes (‘000s) Inferred Grade Ounces Au (‘000s) Tonnes (‘000s) Total Grade Ounces Au (‘000s) 115 - 263 247 37 - - 1,820 113 15 719 3.35 - 2.15 6.49 4.91 - - 3.60 1.71 2.26 1.15 12 - 18 51 6 - - 211 6 1 27 16,250 6,441 4,296 4,340 3,731 481 925 12,579 3,485 8,324 - 2.79 2.06 3.89 2.87 0.71 2.01 2.14 1.59 2.66 1.77 - 1,457 427 537 401 85 31 64 643 299 473 - 7,496 2,048 3,263 5,341 - 172 321 10,183 8,850 6,965 - 2.65 2.50 2.52 2.26 - 1.72 2.26 1.47 2.41 1.44 - 639 164 264 388 - 10 23 481 687 322 - 23,861 8,490 7,822 9,928 3,768 653 1,247 24,582 12,448 15,304 719 2.75 2.17 3.26 2.63 0.75 1.94 2.17 1.69 2.48 1.62 1.15 2,108 591 819 840 91 41 87 1,335 992 797 27 Total 3,328 3.11 333 60,854 2.26 4,416 44,641 2.08 2,978 108,823 2.21 7,727 117 TABLES OF MINERAL RESOURCES & ORE RESERVES Central Murchison Gold Project (CMGP) (CGO + MGO) Mineral Resource Statement - Comparison to Previous Year 30/6/19 Project Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) 2018 Mineral Resource 2019 Mineral Resource Change Grade Ounces Au (‘000s) Big Bell Cuddingwarra Day Dawn Tuckabianna Tuckabianna Stockpiles Meekatharra North Nannine Paddy's Flat Reedy's Yaloginda Bluebird Stockpiles 23,977 9,381 8,238 9,963 4,155 1,679 1,139 28,805 12,725 15,347 610 2.75 2.15 3.19 2.58 0.76 1.59 1.68 1.65 2.45 1.62 1.32 2,119 23,861 648 844 826 102 86 61 1,526 1,003 798 26 8,490 7,822 9,928 3,768 653 1,247 24,582 12,448 15,304 719 2.75 2.17 3.26 2.63 0.75 1.94 2.17 1.69 2.48 1.62 1.15 2,108 591 819 840 91 41 87 1,335 992 797 27 -116 -891 -416 -35 -387 -1,025 108 -4,223 -276 -43 109 Total 116,019 2.16 8,039 108,823 2.21 7,727 -7,196 0.00 0.02 0.07 0.05 -0.01 0.35 0.49 0.04 0.03 0.00 -0.17 1.35 -12 -57 -24 14 -10 -45 26 -191 -11 -2 1 -312 TABLES OF MINERAL RESOURCES & ORE RESERVES 118 Project Tonnes (‘000s) Big Bell Cuddingwarra Day Dawn Tuckabianna Tuckabianna Stockpiles Meekatharra North Nannine Paddy's Flat Reedy's Yaloginda Bluebird Stockpiles - - 120 66 37 - 1 871 - - 719 Total 1,814 Proven Grade - - 2.29 5.90 4.91 - 3.94 3.11 - - 1.19 2.43 Central Murchison Gold Project (CMGP) (CGO + MGO) Ore Reserve Statement - Rounded for Reporting 30/6/19 Probable Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) - - 9 13 6 - 0 87 - - 27 11,829 865 1,827 1,708 3,731 346 388 892 1,170 624 - 2.88 2.21 5.83 2.36 0.71 1.87 2.30 3.54 3.31 3.20 - 1,096 11,829 61 342 130 85 21 29 101 125 64 - 865 1,947 1,774 3,768 346 389 1,762 1,170 624 719 Total Grade 2.88 2.21 5.61 2.49 0.75 1.87 2.30 3.33 3.31 3.20 1.19 Ounces Au (‘000s) 1,096 61 351 142 91 21 29 189 125 64 27 142 23,379 2.73 2,054 25,193 2.71 2,196 119 TABLES OF MINERAL RESOURCES & ORE RESERVES Central Murchison Gold Project (CMGP) (CGO + MGO) Ore Reserve Statement - Comparison to Previous Year 30/6/19 Project Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) 2018 Ore Reserve 2019 Ore Reserve Change Grade Ounces Au (‘000s) Big Bell Cuddingwarra Day Dawn Tuckabianna Tuckabianna Stockpiles Meekatharra North Nannine Paddy's Flat Reedy's Yaloginda Bluebird Stockpiles 11,829 1,289 2,112 2,423 4,155 421 244 3,115 713 564 610 Total 27,474 2.89 2.08 3.93 3.18 0.76 1.74 1.86 2.82 2.94 2.52 1.32 2.56 1,098 11,829 86 267 248 102 24 15 282 67 46 26 865 1,947 1,774 3,768 346 389 1,762 1,170 624 719 2,259 25,193 2.88 2.21 5.61 2.49 0.75 1.87 2.30 3.33 3.31 3.20 1.19 2.71 1,096 61 351 142 91 21 29 189 125 64 27 0 -424 -165 -649 -387 -74 145 -1,352 456 60 109 2,196 -2,281 -0.01 0.13 1.68 -0.68 -0.01 0.12 0.44 0.51 0.37 0.69 -0.14 0.86 -2 -25 84 -105 -10 -3 14 -93 57 19 1 -63 TABLES OF MINERAL RESOURCES & ORE RESERVES 120 Cue Gold Operations (CGO) Mineral Resource Statement - Rounded for Reporting 30/6/19 Measured Grade Tonnes (‘000s) Ounces Au (‘000s) Tonnes (‘000s) Indicated Grade Ounces Au (‘000s) Tonnes (‘000s) Inferred Grade Ounces Au (‘000s) Tonnes (‘000s) Project Big Bell Cuddingwarra Day Dawn Tuckabianna Stockpiles Total 115 - 263 247 37 662 3.35 - 2.15 6.49 4.91 4.13 12 - 18 51 6 88 Project Tonnes (‘000s) Big Bell Cuddingwarra Day Dawn Tuckabianna Stockpiles Total - - 120 66 37 224 Proven Grade - - 2.29 5.90 4.91 3.79 Total Grade 2.75 2.17 3.26 2.63 0.75 Ounces Au (‘000s) 2,108 591 819 840 91 16,250 6,441 4,296 4,340 3,731 2.79 2.06 3.89 2.87 0.71 1,457 427 537 401 85 7,496 2,048 3,263 5,341 - 2.65 2.50 2.52 2.26 - 639 164 264 388 - 23,861 8,490 7,822 9,928 3,768 35,059 2.58 2,907 18,149 2.49 1,455 53,870 2.57 4,450 Cue Gold Operations (CGO) Ore Reserve Statement - Rounded for Reporting 30/6/19 Probable Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) - - 9 13 6 27 11,829 865 1,827 1,708 3,731 19,959 2.88 2.21 5.83 2.36 0.71 2.67 1,096 61 342 130 85 11,829 865 1,947 1,774 3,768 1,714 20,183 Total Grade 2.88 2.21 5.61 2.49 0.75 2.68 Ounces Au (‘000s) 1,096 61 351 142 91 1,742 121 TABLES OF MINERAL RESOURCES & ORE RESERVES Cue Gold Operations (CGO) Mineral Resource Statement - Comparison to Previous Year 30/6/19 Project Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) 2018 Mineral Resource 2019 Mineral Resource Big Bell Cuddingwarra Day Dawn Tuckabianna Stockpiles Total 23,977 9,381 8,238 9,963 4,155 55,714 2.75 2.15 3.19 2.58 0.76 2.53 2,119 648 844 826 102 23,861 8,490 7,822 9,928 3,768 4,539 53,870 2.75 2.17 3.26 2.63 0.75 2.57 2,108 591 819 840 91 -116 -891 -416 -35 -387 4,450 -1,845 Cue Gold Operations (CGO) Ore Reserve Statement - Comparison to Previous Year 30/6/19 Project Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) 2018 Ore Reserve 2019 Ore Reserve Big Bell Cuddingwarra Day Dawn Tuckabianna Stockpiles Total 11,829 1,289 2,112 2,423 4,155 21,807 2.89 2.08 3.93 3.18 0.76 2.57 1,098 86 267 248 102 11,829 865 1,947 1,774 3,768 1,800 20,183 2.88 2.21 5.61 2.49 0.75 2.68 1,096 61 351 142 91 0 -424 -165 -649 -387 1,742 -1,624 Change Grade 0.00 0.02 0.07 0.05 -0.01 1.51 Change Grade -0.01 0.13 1.68 -0.68 -0.01 1.12 Ounces Au (‘000s) -12 -57 -24 14 -10 -89 Ounces Au (‘000s) -2 -25 84 -105 -10 -58 TABLES OF MINERAL RESOURCES & ORE RESERVES 122 Meekatharra Gold Operations (MGO) Mineral Resource Statement - Rounded for Reporting 30/6/19 Project Meekatharra North Nannine Paddy's Flat Reedy's Yaloginda Stockpiles Tonnes (‘000s) - - 1,820 113 15 719 Measured Grade Ounces Au (‘000s) Tonnes (‘000s) Indicated Grade Ounces Au (‘000s) Tonnes (‘000s) - - 3.60 1.71 2.26 1.15 - - 211 6 1 27 481 925 12,579 3,485 8,324 - 2.01 2.14 1.59 2.66 1.77 - 31 64 643 299 473 - 172 321 10,183 8,850 6,965 - Inferred Grade 1.72 2.26 1.47 2.41 1.44 - Ounces Au (‘000s) Tonnes (‘000s) 10 23 481 687 322 - 653 1,247 24,582 12,448 15,304 719 Total Grade 1.94 2.17 1.69 2.48 1.62 1.15 Ounces Au (‘000s) 41 87 1,335 992 797 27 Total 2,666 2.86 245 25,795 1.82 1,509 26,492 1.79 1,523 54,953 1.85 3,277 Project Tonnes (‘000s) Meekatharra North Nannine Paddy's Flat Reedy's Yaloginda Stockpiles Total - 1 871 - - 719 1,590 Proven Grade - 3.94 3.11 - - 1.19 2.24 Meekatharra Gold Operations (MGO) Ore Reserve Statement - Rounded for Reporting 30/6/19 Probable Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) - 0 87 - - 27 346 388 892 1,170 624 - 115 3,420 1.87 2.30 3.54 3.31 3.20 - 3.09 21 29 101 125 64 - 340 346 389 1,762 1,170 624 719 5,010 Total Grade 1.87 2.30 3.33 3.31 3.20 1.19 2.82 Ounces Au (‘000s) 21 29 189 125 64 27 454 123 TABLES OF MINERAL RESOURCES & ORE RESERVES Meekatharra Gold Operations (MGO) Mineral Resource Statement - Comparison to Previous Year 30/6/19 Project Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) 2018 Mineral Resource 2019 Mineral Resource Meekatharra North Nannine Paddy's Flat Reedy's Yaloginda Stockpiles Total 1,679 1,139 28,805 12,725 15,347 610 60,305 1.59 1.68 1.65 2.45 1.62 1.32 1.81 86 61 1,526 1,003 798 26 653 1,247 24,582 12,448 15,304 719 3,500 54,953 1.94 2.17 1.69 2.48 1.62 1.15 1.85 41 87 1,335 992 797 27 -1,025 108 -4,223 -276 -43 109 3,277 -5,351 Meekatharra Gold Operations (MGO) Ore Reserve Statement - Comparison to Previous Year 30/6/19 Project Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) 2018 Ore Reserve 2019 Ore Reserve Meekatharra North Nannine Paddy's Flat Reedy's Yaloginda Stockpiles Total 421 244 3,115 713 564 610 5,667 1.74 1.86 2.82 2.94 2.52 1.32 2.52 24 15 282 67 46 26 459 346 389 1,762 1,170 624 719 5,010 1.87 2.30 3.33 3.31 3.20 1.19 2.82 21 29 189 125 64 27 454 -74 145 -1,352 456 60 109 -657 Change Grade 0.35 0.49 0.04 0.03 0.00 -0.17 1.29 Change Grade 0.12 0.44 0.51 0.37 0.69 -0.14 0.23 Ounces Au (‘000s) -45 26 -191 -11 -2 1 -223 Ounces Au (‘000s) -3 14 -93 57 19 1 -5 TABLES OF MINERAL RESOURCES & ORE RESERVES 124 Fortnum Gold Operations (FGO) Mineral Resource Statement - Rounded for Reporting 30/6/19 Measured Grade Tonnes (‘000s) Ounces Au (‘000s) Tonnes (‘000s) Indicated Grade Ounces Au (‘000s) Tonnes (‘000s) 332 - - 421 753 4.56 - - 1.34 2.76 49 - - 18 67 6,012 565 5,239 1,312 2.51 2.16 1.70 0.91 13,127 2.01 485 39 287 38 849 3,927 48 1,258 16 Inferred Grade 2.23 1.23 2.04 0.54 Ounces Au (‘000s) Tonnes (‘000s) 281 2 82 0 10,271 612 6,496 1,749 Total Grade 2.47 2.09 1.77 1.01 Ounces Au (‘000s) 814 41 369 57 5,249 2.17 366 19,129 2.08 1,282 Project Fortnum Horseshoe Peak Hill Stockpiles Total Project Tonnes (‘000s) Fortnum Horseshoe Peak Hill Stockpiles Total 470 - - 421 891 Proven Grade 3.63 - - 1.34 2.55 Fortnum Gold Operations (FGO) Ore Reserve Statement - Rounded for Reporting 30/6/19 Probable Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) 55 - - 18 73 2,460 579 1,122 1,312 5,473 2.57 2.06 1.95 0.91 1.99 203 38 70 38 350 2,929 579 1,122 1,733 6,364 Total Grade 2.74 2.06 1.95 1.02 2.07 Ounces Au (‘000s) 258 38 70 57 423 125 TABLES OF MINERAL RESOURCES & ORE RESERVES Fortnum Gold Operations (FGO) Mineral Resource Statement - Comparison to Previous Year 30/6/19 Project Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) 2018 Mineral Resource 2019 Mineral Resource Fortnum Horseshoe Peak Hill Stockpiles 9,448 1,449 6,518 1,515 Total 18,930 2.26 2.01 1.77 0.90 1.96 685 93 371 44 10,271 612 6,496 1,749 1,193 19,129 2.47 2.09 1.77 1.01 2.08 814 41 369 57 1,282 823 -837 -21 234 199 Fortnum Gold Operations (FGO) Ore Reserve Statement - Comparison to Previous Year 30/6/19 Project Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) Grade Ounces Au (‘000s) Tonnes (‘000s) 2018 Ore Reserve 2019 Ore Reserve Fortnum Horseshoe Peak Hill Stockpiles Total 3,859 549 328 1,154 5,890 2.40 1.98 1.85 1.02 2.06 298 35 20 38 390 2,929 579 1,122 1,733 6,364 2.74 2.06 1.95 1.02 2.07 258 38 70 57 423 -929 30 794 579 474 Change Grade 0.21 0.08 0.00 0.12 13.80 Change Grade 0.34 0.08 0.10 0.00 2.19 Ounces Au (‘000s) 129 -52 -2 13 88 Ounces Au (‘000s) -40 3 51 19 33 TABLES OF MINERAL RESOURCES & ORE RESERVES 126 WESTGOLD RESOURCES LIMITED Northern Territory – Undeveloped Polymetallic Deposits Mineral Resource Statement - Rounded for Reporting Gold Project k tonnes Grade g/t k oz k tonnes Silver Grade g/t Copper Bismuth Cobalt Lead Zinc k oz k tonnes Grade % k t metal k tonnes Grade % k t metal k tonnes Grade % k t metal k tonnes Grade % k t metal k tonnes Grade % k t metal Indicated Explorer 108 Explorer 142 - - - - - - 8,438 14.32 3,886 5,689 0.36 20.3 - - - - - - - - - - Rover 1 2,741 2.42 213 2,741 2.33 205 2,741 1.42 38.9 2,741 0.18 Sub-Total 2,741 2.42 213 11,179 11.38 4,091 8,430 0.70 59.2 2,741 0.18 Inferred Explorer 108 - - Explorer 142 176 0.21 - 1 3,430 3.32 366 - - - - 176 Rover 1 4,073 1.27 166 4,073 1.90 249 4,073 - 5.21 1.06 - 9.2 - - - - 43.2 4,073 0.11 Sub-Total 4,249 1.23 168 7,503 2.55 614 4,249 1.23 52 4,073 0.11 - - 4.9 4.9 - - 4.5 4 - - - - - - 2,741 0.04 2,741 0.04 - - - - 4,073 0.08 4,073 0.08 - - - - - - 1.1 1.1 - - 3.3 3 - - 8,438 2.05 172.8 8,438 3.41 288.1 - - - - - - - - - - - - 8,438 2.05 172.8 8,438 3.41 288.1 3,430 1.88 64.3 3,430 2.81 96.5 - - - - - - - - - - - 3,430 1.78 64 3,430 2.81 96 11,868 1.88 237.2 11,868 2.81 384.6 - - - - - - - - - - Total Explorer 108 - - Explorer 142 176 0.21 - 1 11,868 3.32 4,252 5,689 - - - - 176 20.3 9.2 - - - - 5.21 1.06 Rover 1 6,814 1.27 380 6,814 1.90 454 6,814 82.1 6,814 0.11 9.4 6,814 0.08 4.4 - Grand Total 6,990 1.69 381 18,682 7.83 4,706 12,679 0.88 111.6 6,814 0.14 9.4 6,814 0.06 4.4 11,868 2.00% 237.2 11,868 3.24 384.6 FURTHER INFORMATION Refer to the Westgold Resources Limited ASX Announcement dated 4 October 2019 for detailed infomation relating to Mineral Resources & Reserves Estimates. 127 TABLES OF MINERAL RESOURCES & ORE RESERVES STATEMENT OF GOVERNANCE ARRANGEMENTS AND INTERNAL CONTROLS Governance of Westgold’s mineral resources and ore reserves development and management activities is a key responsibility of the Executive Management of the Company. The Group Chief Geologist and Group Chief Mining Engineer of Westgold oversee reviews and technical evaluations of the estimates and evaluate these with reference to actual physical and cost and performance measures. The evaluation process also draws upon internal skill sets in operational and project management, ore processing and commercial/financial areas of the business. The Group Chief Geologist is responsible for monitoring the planning, prioritisation and progress of exploratory and resource definition drilling programs across the company and the estimation and reporting of resources and reserves. These definition activities are conducted within a framework of quality assurance and quality control protocols covering aspects including drill hole siting, sample collection, sample preparation and analysis as well as sample and data security. A three-level compliance process guides the control and assurance activities: • Provision of internal policies, standards, procedures and guidelines; • Resources and reserves reporting based on well-founded assumptions and compliance with external standards such as the Australasian Joint Ore Reserves Committee (JORC) Codes; • Internal assessment of compliance and data veracity. The objectives of the estimation process are to promote the maximum conversion of identified mineralisation into JORC compliant Mineral Resources and Ore Reserves. Westgold reports its Mineral Resources and Ore Reserves on an annual basis, in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC code) 2012 Edition. Mineral Resources are quoted inclusive of Ore Reserves. Competent Persons named by Westgold are members of the Australasian Institute of Mining and Metallurgy and/or the Australian Institute of Geoscientists, and qualify as Competent Persons as defined in the JORC Code. COMPETENT PERSONS STATEMENTS The information in this report that relates to Exploration Targets, Exploration Results and Mineral Resources is based on information compiled Mr Jake Russell B.Sc. (Hons) MAIG. Mr Russell has sufficient experience which is relevant to the styles of mineralisation and types of deposit under consideration and to the activities which they are undertaking to qualify as a Competent Person as defined in the 2012 Editions of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC 2012)”. Mr Russell consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. Mr Russell is a full time senior executive of the Company and is eligible to, and may participate in short-term and long-term incentive plans of the Company as disclosed in its annual reports and disclosure documents. The information in this report that relates to Ore Reserves is based on information compiled by Mr Anthony Buckingham B.Eng (Mining Engineering) MAusIMM. Mr Buckingham has sufficient experience which is relevant to the styles of mineralisation and types of deposit under consideration and to the activities which they are undertaking to qualify as a Competent Person as defined in the 2012 Editions of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC 2012)”. Mr Buckingham consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. Mr Buckingham is a full time senior executive of the Company and is eligible to, and may participate in short-term and long-term incentive plans of the Company as disclosed in its annual reports and disclosure documents. The information is extracted from the report entitled ‘2019 Annual Update of Mineral Resources & Ore Reserves’ created on 4 October 2018 and is available to view on Westgold’s website (www.westgold.com.au) and the ASX (www. asx.com.au). The company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources or Ore Reserves, that all material assumptions and technical parameters underpin-ning the estimates in the relevant market announcement continue to apply and have not materially changed. The company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modifed from the original market announcement. TABLES OF MINERAL RESOURCES & ORE RESERVES 128