WESTGOLD RESOURCES LIMITED Annual Report 2020 Corporate Directory Directors Peter G Cook (Executive Chairman) Peter B Schwann (Independent Non-Executive Director) Fiona J Van Maanen (Independent Non-Executive Director) Wayne C Bramwell (Independent Non-Executive Director) (appointed 3 February 2020) Company Secretary Lisa Smith (appointed 19 December 2019) Key Management Debra A Fullarton (Chief Executive Officer) (appointed 1 July 2020) Anthony Buckingham (Chief Operating Officer - Gold Operations) Peter M Storey (General Manager - Meekatharra Gold Operations) Phillip W Wilding (General Manager - Cue Gold Operations) Registered Office Level 6, 197 St Georges Terrace Perth WA 6000 Phone: +61 8 9462 3400 +61 8 9462 3499 Fax: reception@westgold.com.au Email: Website: www.westgold.com.au Postal Address PO Box 7068 Cloisters Square WA 6850 Securities Exchange Listed on the Australian Securities Exchange ASX Code: WGX Share Registry Computershare Investors Services Pty Ltd Level 11, 172 St Georges Terrace PERTH WA 6000 Phone: 61-3-9415,4000 61-3-6473 2500 Fax: Website: www.computershare.com Domicile and Country of Incorporation Australia b Westgold Resources Limited Annual Report 2020 Emerging as a leading Australian Gold Miner Westgold is a Western Australian focussed explorer, developer and miner of gold and the dominant miner in the Central Murchison region. Westgold has re-established this region to become a thriving hub of gold production with long term sustainable output. Westgold operates several open pits and multiple underground mines which service three process plants over 250km of regional strike in the Central Murchison goldfields. Westgold employs over 900 people and plays a critical role in the economic growth and sustainability of the regional towns and communities in which it operates. Westgold owns vast infrastructure and a procession of growth projects that provides jobs, prosperity and hope for all its stakeholders. Contents 2 4 7 Our Purpose & Values Chairman’s Letter Financial Results 8 Our Annual Outputs 10 The Measure of Our Sustainability Footprint 12 Our Operations 18 Mineral Resources & Ore Reserves 24 Director’s Report 36 Remuneration Report (Audited) 52 Auditors Independence Declaration 53 Consolidated Statement of Comprehensive Income 54 Consolidated Statement of Financial Position 55 Consolidated Statement of Cash Flows 56 Consolidated Statement of Changes in Equity 57 Notes to the Consolidated Financial Statements 106 Directors’ Declaration 107 Independent Auditor’s Report 113 Shareholder Information Westgold Resources Limited Annual Report 2020 1 Our Purpose & Values Our core values define our culture, our behaviour, our actions and the demeanour we are expected to portray in every activity our employees and stakeholders perform under our company name. DO THE RIGHT THING Be honest, dependable and loyal. Accept responsibility for our actions. Make and support business decisions through experience and good judgement. BE PASSIONATE Show pride, enthusiasm and dedication in everything we do. TAKE ACTION Be proactive, be bold and decisive. Act before there is a problem, and if you find one, run to it – do not try and solve it from a distance. GET RESULTS Deliver on our commitments, demonstrate leadership and have the courage to speak up and challenge the status quo. NO HARM Home without harm, everyone, every day. The health, safety and wellbeing of our people, the community and the environment is paramount. Take ownership of preserving and promoting a safe and productive workplace. 2 Westgold Resources Limited Annual Report 2020 Westgold Resources Limited Annual Report 2020 3 Chairman’s Letter Dedicated explorer and developer of gold Peter Cook Chairman Dear Shareholders, It is with pleasure that I present you the Westgold Resources Limited (Westgold or the Group) Annual Report for the year ended 30 June 2020. It has been a pleasing year as it is whenever Westgold can create wealth for our shareholders. For the 12 months ended 30 June 2020 the share price has risen a modest 13% which at the time of writing this report has increased to 34%. Share price appreciation, I believe is the key performance indicator of the Board and management whom as custodians of the Company’s funds and assets, the shareholders entrust to build wealth. I am also immensely proud of our physical achievements in regards to establishing Westgold as a long-term sustainable gold producer in the Central Murchison and doing so in a manner that has no material adverse impact on the regions, environment and communities in which we operate. Westgold’s market capitalisation increased by 22% to $878 million over the year and has now joined the All Australian ASX200. Commensurate with this elevation and in line with the expectations of our investors and stakeholders we have re-organised our Board to now be comprised of predominantly independent and non- executive directors with an aggregate skill-set aligned with our specialist industry. Westgold’s commitment to our workforce and communities is significant. We are pleased to issue our inaugural sustainability report on ESG (Environmental, Social and Governance) matters which measures our footprint and impacts on the regions in which we operate. During the year Westgold has continued to focus on its core Central Murchison gold assets where it is in the business of exploring, developing and mining of gold. The Group is unique in the Australian gold sector in being the owner operator of all our underground and open pit mines through our internally owned mining service division. This makes Westgold a vertically integrated company with an extensive mining fleet and a direct payroll of over 900 people. With this scale comes great responsibility knowing that directly and indirectly we have an estimated employment multiplier of 7-8x, seeing Westgold contributing to the livelihoods of over 6,000 people. The realities of the scale of our operations and size of our workforce was bought into clear focus with the COVID-19 pandemic potentially threatening our staff, contractors and operations. Proactive management and rigidly complying with health advice to lessen the risk of spread ensured Westgold could maintain operations during early 2020. To date we have been successful and we will continue to do our best with a balanced level of control to ensure we protect and manage the assets, health and wealth of our shareholders, our employees and all stakeholders involved in our business. COVID-19 crystallised the Board to further focus on our fiscal strength and increasing resilience to potential economic shocks triggered by the crisis. To build resilience the Group continued to divest its non-core assets and topped up its cash reserves to ensure Westgold could continue to advance its business objectives during a period of economic uncertainty, without eroding our shareholders wealth. 4 Westgold Resources Limited Annual Report 2020 Westgold is fortunate, that it is in gold, as it is “in gold we trust” in times of economic calamity. We are operating in times of rising gold prices, which augurs well for the Group’s future. We live in uncertain times and the coming economic hit to global economies and forecast period of low or negative real interest rates is expected to be positive for gold prices into the future. Westgold has a large resource of 8.8 million ounces and a reserve base of 2.5 million ounces, which collectively underwrite long mine lives from our three key mining hubs in the Murchison region. We fully repaid our gold-loan debt and significantly improved our gold book, lifting its average price from $1,827/oz to $2,062/oz and reducing our hedge position to a modest 8% of its ore reserves, granting us great leverage to higher gold prices in the long term. Operationally it has been a building year for Westgold. Our Fortnum Gold Operations and Meekatharra Gold Operations delivered gold output just short of expectations but within their cost guidance. Our Cue Gold Operations failed to meet expectations in terms of output and cost guidance but those results must be tempered by delays associated with the mammoth task in re-establishing cave mining at Big Bell. The development expectations for a re-start of sub-level cave mining at Big Bell have proven to be ambitious and consequently it has taken longer to commence ore stoping/caving. These delays significantly impacted gold output and combined with a much slower ramp- up planned in the last quarter of FY2020, had a large negative impact on expected Group outputs. As much as this is disappointing to our operating teams and shareholders there has been no place for complacency and the Company is not prepared to compromise the safety of its employees nor the long-term efficacy of the Big Bell mine to achieve targets. I am pleased that these latent conditions are now vastly behind us and the ramp-up to full scale production for the initial 10-year profile is underway. From a fiscal perspective Westgold had a solid close to the year. The Group’s cash balance increased by 105% to $138 million whilst at the same time the gold pre-pay (unearned income) debt was repaid in full. Net Assets grew by 18% to $522 million and net profit after tax grew by 145% to $35 million leaving the Company in a very strong position going into the 2021 financial year. Peter Cook Executive Chairman Westgold Resources Limited Annual Report 2020 5 Sound long-term growth projects in prolific mining regions FGO FORTNUM GOLD OPERATIONS (FGO) – A centralised processing hub of 900,000tpa. – The Starlight Underground mine. – Multiple surface and open pit mines. – 7-10 year visible mine life. – 150 person village. All of our operations are steeped in the mining history that built Western Australia. The towns that have survived 125 years on are testament to the sustainability that gold mining creates Purely Western Australian WA FGO MGO CGO Kalgoorlie Perth NT SA QLD NSW VIC MGO CGO CENTRAL MURCHISON PROJECTS – Combining the Meekatharra and Cue Gold Operations – Two process plants – 2.8 million tonnes per annum. – 6 Underground mines, multiple open pits. – 10 year + visible mine life. – 3 villages 600-person capacity. 6 Westgold Resources Limited Annual Report 2020 Financial Results Y/E 30 June 2020 Y/E 30 June 2019 Change Gold sales Revenue 235,196 220,705 $492.3m $418.3m Net cash flow from operations $155.7m $81.2m 7% 18% 92% Net profit before tax $43.9m $12.7m 246% Net profit after tax $34.6m $14.1m 145% Closing cash & cash equivalents $137.6m $67.2m 105% Profit per share 8.65c 3.74c 131% Dividends paid (Demerger of Castile) $13.1m $0 100% Gold loan debt at year end $0.0m $25.5m repaid Net assets $521.9m $443.5m Hedges ounces 200,000oz 183,500oz Average hedge price $2,062/oz $1,827/oz 18% 9% 13% Westgold Resources Limited Annual Report 2020 7 The Measure of Our Footprint Our Annual Outputs GOLD SALES Meekatharra Gold Operations 103,095oz Cue Gold Operations 70,893oz Fortnum Gold Operations 61,208oz CASH COST (C1) Meekatharra Gold Operations A$1,171/oz Cue Gold Operations A$1,549/oz Fortnum Gold Operations A$1,077/oz ALL IN SUSTAINING COSTS Meekatharra Gold Operations A$1,496/oz Cue Gold Operations A$1,729/oz Fortnum Gold Operations A$1,308/oz Total Gold Sales 235,196oz Group A$1,260/oz Group A$1,518/oz Total Revenue $492.3 million Net Cash Flow From Operating Activities $155.7 million Net Profit Before Tax From Operations $43.9 million 8 Westgold Resources Limited Annual Report 2020 Westgold Resources Limited Annual Report 2020 9 The Measure of Our Footprint The Measure of Our Sustainability Footprint OPERATING RESPONSIBLY CREATING ECONOMIC BENEFIT A SAFE & DIVERSE WORKPLACE Co2 Emissions Scope 1 – 126Kt kt Scope 2 – 16 kt Energy Used Diesel – 2,354 Tj Gas 2 – 65 Tj Water Usage 9.99GL Progressive Rehabilitation 108 Ha Material Environ Incidents 0 Regulatory Non-compliances 0 Gross Regional Product $490 million State Govt Royalties $13.37 million Payroll Tax $8.48 million Mining Tenement Rents & Rates $3.93 million Mineral Resource Fund $0.72 million Mine Safety Levy $0.57 million Local Procurement ~ 95% Native Title Payments $2.1 million Mine Fatalities 0 Lost Time Injury Frequency Rate 6.3 Medically Treated Injury Frequency Rate 20.9 Total Women in Workforce 13.6% Total Women in Senior Management 63% Total Women Job Applicants 3.9% New Employees who are Women 10.7% Total Employees ~900 10 Westgold Resources Limited Annual Report 2020 Our major investment and activity in regional Western Australia creates prosperity for all. Westgold Resources Limited Annual Report 2020 11 Our Operations Fortnum Gold Operations 7,200,000 mN FORTNUM MINING AREA Fortnum Processing Plant - 0.9Mtpa 7,180,000 mN Starlight Mine Yarlarweelor Mine HORSESHOE MINING AREA 0 6 12 kilometres Horseshoe - Cassidy Mine Peak Hill Mine 7,160,000 mN E m 0 0 0 , 0 2 6 E m 0 0 0 , 0 4 6 Great Northern Highway 32km PEAK HILL MINING AREA E m 0 0 0 , 0 8 6 The Fortnum Gold Operations (FGO) are located in the proterozoic age Bryah Basin stratigraphy approximately 150 km northwest of Meekatharra. FGO is the Group’s northernmost mining hub of its Murchison Projects. FGO encapsulates the historic mining centres of Labouchere, Fortnum, Horseshoe and Peak Hill where aggregated gold production of approximately 2 million ounces has occurred. FGO has been a solid low cost performer for Westgold with expected annual output of 60-75,000oz per annum over the longer term. FGO has a number of exploration targets in addition to its current ore resource and reserves which should underwrite sustainable gold production at the operations. These include: The core of the FGO is a 0.9 million tonne-per-annum carbon-in-leach (CIL) plant, a 175-person village and all the typical plant and infrastructure required to operate a remote FIFO site. FGO mining output is currently dominated by the Starlight underground mine which produces at a rate of approximately 600,000 tonnes per annum. This ore is blended with low grade stocks sitting free on surface to make up a blended plant feedstock. A procession of open pit mines sit ready to replace the low grade feedstock with the site having a visible mine life expectation in excess of 6 years. For the FY 2020 year FGO sold 61,208 oz at a cash cost (C1) of A$1,077/oz and an AISC of A$1,308/oz and generated an overall segment profit of $33 million. 1. 2. 3. Extensions to the Starlight underground mine where a structural geology study undertaken by industry- leading structural geology experts are defining the keys controls driving Starlight mineralisation and a number of new targets with it. Resource development work in the Fortnum Mining Centre to support the return of open pit mining in the area in subsequent years. This will include final definition works on extensions to the major past producers of Yarlarweelor, Nathan’s and Labouchere, as well as pre-grade control works on the new Regent and Messiah deposits. Conceptual exploration at Peak Hill with a view to proving an alternative ore sources that can be trucked to either the Fortnum or Bluebird (MGO) processing plants. 12 Westgold Resources Limited Annual Report 2020 Fortnum Processing Plant FGO Gold Production & A$ Cost of Sales 20,000 15,000 10,000 5,000 0 ’ I S Z O N O T C U D O R P D L O G R T Q Gold Sales Cash Cost/oz AISC/oz 1,800 1,500 1,200 900 600 300 0 C O S T P E R O Z Sep Q 2019 13,242 1,139 1,354 Dec Q 2019 17,307 805 935 Mar Q 2020 15,146 1,321 1,607 Jun Q 2020 15,513 1,171 1,499 Gold Sales Cash Cost/oz ASIC/oz Westgold Resources Limited Annual Report 2020 13 Our Operations Meekatharra Gold Operations The Meekatharra Gold Operations (MGO) are located around the regional towns of Meekatharra. MGO have consolidated the considerable historic gold mining centres of Meekatharra North, Paddy’s Flat, Yaloginda, Nannine and Reedy’s. MGO comprises the Bluebird CIP processing plant (approx. 1.6 million tpa on blended feedstock) and associated infrastructure including a 350 person workers village. Bluebird is located in the centre of the Group’s Murchison holdings, is the largest and lowest cost of the Group’s processing facilities and can take ore feed from any of the region’s mines. At the core of the MGO output is the Paddy’s Flat underground mine which the company has now been operating for four years. Two other underground mines operate at MGO being the South Emu- Triton underground mine at the Reedy’s gold mining centre and the Bluebird underground mine at Yaloginda just 1km south of the Bluebird Plant. South Emu is now in a steady state of production, the Triton underground lodes are just being developed and the Bluebird underground mine has just hit its first ore and continues to be in a development phase. These three underground mines will combine to deliver more than 105,000oz per annum to the Bluebird processing plant over the long term. Underground ores are supplemented by a procession of smaller open pits, primarily cut-backs which have become economically viable as the gold price has risen. In the FY 2021 open pit mining will occur at the Five Mile Well, Maid Marion, Albury Heath and Aladdin open pits. Westgold’s strategy at MGO is focussed on the higher grade underground ore sources. As such Westgold’s primary exploration focus in the Meekatharra area is the continual definition of extensions to these mines, as well as the testing of the next round of underground projects to be developed such as E m 0 0 0 , 5 2 6 7,075,000 mN 0 5 10 kilometres E m 0 0 0 , 0 5 6 MEEKATHARRA NORTH MINING AREA 7,050,000 mN YALOGINDA MINING AREA Bluebird Mine Paddy's Flat Mine MEEKATHARRA Wiluna PADDY'S FLAT MINING AREA Bluebird Processing Plant 1.6 - 1.8Mtpa GABANINTHA MINING AREA NANNINE MINING AREA 7,025,000 mN Great Northern Highway 7,000,000 mN REEDY MINING AREA Triton-Sth Emu Mine Aladdin (at Nannine), Boomerang and Rand mines (at Reedy’s) which could add another 3 modest underground mines to the Group’s output. All of these additions are high-quality underground exploration targets proximal to existing historic mining centres and provide the options of leveraging the benefits of existing infrastructure. Westgold has been blessed with defined targets to date and has until now focussed its efforts to their development. Westgold is now beginning to re-visit conceptual exploration over the significant land package associated with the Meekatharra Gold Project. Focus in the coming year in this sphere will rest upon the newly acquire Banjo 14 Westgold Resources Limited Annual Report 2020 Bore Project north of Meekatharra as well as the Nannine Project proximal to Lake Annean, where a trial pit at Aladdin in 2019 produced encouraging results, prompting a plan for returning to full-scale surface mining in the area in 2021. During the FY2020 there was a consistent performance at MGO with gold sales totalling 103,95oz at an average cash cost (C1) of A$1,171/ oz .and an all in sustaining cost of A$1,496/oz . An overall segment profit of $8.38 million. MGO has been the base-load gold output for Westgold over the past 4 years averaging about 105,000oz per annum. Going forward expected long-term output of 105 – 120,000oz per annum is planned. Bluebird Processing Plant MGO Gold Production & A$ Cost of Sales 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 ’ I S Z O N O T C U D O R P D L O G R T Q Gold Sales Cash Cost/oz AISC/oz 1,800 1,500 1,200 900 600 300 0 C O S T P E R O Z Sep Q 2019 23,360 1,037 1,360 Dec Q 2019 26,677 1,202 1,551 Mar Q 2020 22,740 1,208 1,500 Jun Q 2020 30,318 1,249 1,587 Gold Sales Cash Cost/oz ASIC/oz Westgold Resources Limited Annual Report 2020 15 Our Operations Cue Gold Operations The Cue Gold Operations (CGO) are located around the regional town of Cue and is the groups southernmost group of assets in the Central Murchison region. The processing hub in this region is the 1.2 – 1.4 mtpa Tuckabianna Plant. CGO as a regional project covers the historic mining centres of Big Bell, Cuddingwarra, DayDawn, Tuckabianna and Pinnacles and includes two of Australia’s most prolific past producers in the Big Bell mine (2.6 million oz) and the Great Fingall mine (1.2 million oz). Westgold’s strategy in this region has been heavily focussed on the re-start of the long-life Big Bell mine. After 3 years of de-watering, mine rehabilitation and refurbishment, ore has begun to flow from Big Bell. Over FY20-21 this will build to steady state output and dominate ore feed for the Tuckabianna plant. Whilst Big Bell builds to full production, the Tuckabianna plant has been filled with various minor ore sources from small open pits at Day Dawn, low grade stockpiles and the small Comet underground mine at Pinnacles. During FY2020, the majority of output has come mainly from smaller open pits and the small Comet underground which have served as stepping stones awaiting the ramp of the dominating Big Bell mine. Total gold sales from CGO have been 70,893 ounces at a cash cost (C1) of A$1,549/oz and an AISC of A$1,729/ oz and generated a segment loss of $13 million which reflects the phase of heavy capital investment in the establishment of the Big Bell mine during the year. CGO is expected to produce 100-110,000oz per annum for Westgold over the long-term which is essentially underwritten by output from the Big Bell mine. Exploration and resource development work at Cue has two separate thrusts; 1. 2. An emphasis on developing high grade ore sources which can offset a small volume of Big Bell production whilst materially improving the grade profile through the Tuckabianna mill. In particular there is a focus on high-grade quartz reef-hosted mineralisation in the Day Dawn region, which has hosted the significant past producers of Great Fingall and Golden Crown (head grades of 19.5g/t and 14g/t respectively). Great Fingall is expected to become Westgold’s latest underground mine adding to the regions overall gold output A focus on the Tuckabianna and Cuddingwarra mining centres which are dominated by more recent shallow open pit mining. These areas can support a renewed open pit mining phase and eventual underground extraction. Whilst spatially these areas are adjacent to the Tuckabianna mill, the inherent flexibility offered by the owner - operator mining model and multiple processing hubs in the district means that futures mines in either of these centres can be directed to the most commercially attractive of either the Tuckabianna or Bluebird processing plants. 16 Westgold Resources Limited Annual Report 2020 Great Fingall Mine Great Fingall – Golden Crown Mining Centre Schematic CGO Gold Production & A$ Cost of Sales 25,000 20,000 15,000 10,000 5,000 0 ’ I S Z O N O T C U D O R P D L O G R T Q Gold Sales Cash Cost/oz AISC/oz 2,500 2,000 1,500 1,000 500 0 C O S T P E R O Z Sep Q 2019 17,063 1,397 1,524 Dec Q 2019 18,048 1,965 2,207 Mar Q 2020 15,379 1,345 1,501 Jun Q 2020 20,403 1,477 1,825 Gold Sales Cash Cost/oz ASIC/oz Westgold Resources Limited Annual Report 2020 17 Our Operations Mineral Resources & Ore Reserves Westgold released its annual update of Mineral Resource and Ore Reserve Estimates on the ASX on 13 August 2020. Shareholders should refer to that announcement for full detail including JORC 2012 appendices. The tables below summarise them by Operational area and Mining Centre location: Mineral Resource Statement – 30/06/2020 by Project Area 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 Tonnes (‘000s) Grade (g/t) Ounces Au (‘000s) 5,545 740 6,285 59,317 15,155 74,472 41,472 5,400 46,872 106,335 21,295 127,629 3.27 3.57 3.31 2.22 1.82 2.14 1.99 1.98 1.99 2.19 1.92 2.14 583 85 668 4,243 889 5,132 2,656 343 2,999 7,482 1,317 8,799 Ore Reserve Statement – 30/06/2020 by Project Area 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 (g/t) Ounces Au (‘000s) 3,467 655 4,122 22,147 5,817 27,964 25,615 6,471 32,086 2.64 2.59 2.64 2.62 1.83 2.45 2.62 1.91 2.48 295 55 349 1,863 343 2,206 2,158 398 2,555 Glossary: CMGP is the Central Murchison Gold Project (MGO + CGO consolidated); MGO is the Meekatharra Gold Operations; CGO is the Cue Gold Operations; and FGO is the Fortnum Gold Operations. 18 Westgold Resources Limited Annual Report 2020 The Mineral Resources by mining project are tabulated below: Mineral Resource Statement – 30/06/2020 by Mining Centre Measured Indicated Inferred Total Tonnes (‘000s) Grade (g/t) Ounces Au (‘000s) Tonnes (‘000s) Grade (g/t) Ounces Au (‘000s) Tonnes (‘000s) Grade (g/t) Ounces Au (‘000s) Tonnes (‘000s) Grade (g/t) Project Big Bell Cuddingwarra Day Dawn Tuckabianna Stockpiles CGO Total Meekatharra North Nannine Paddy’s Flat Reedy’s Yaloginda Stockpiles MGO Total Fortnum Horseshoe Peak Hill Stockpiles FGO Total 2,018 0 81 275 67 2,441 0 48 1,737 275 15 1,029 3,104 520 0 0 220 740 3.48 0.00 1.85 5.88 3.04 3.68 0.00 3.09 3.79 4.07 2.26 1.23 2.95 4.63 0.00 0.00 1.06 3.57 Ounces Au (‘000s) 2,352 229 767 759 92 226 20,136 0 5 52 7 2,913 3,812 3,212 3,756 2.63 1.84 4.19 2.71 0.71 1,701 5,444 173 514 280 85 1,137 2,891 5,753 10 2.43 1.53 2.67 2.31 0.76 425 56 248 427 0 27,598 4,050 6,784 9,240 3,833 2.65 1.76 3.52 2.56 0.75 289 33,829 2.53 2,753 15,236 2.36 1,157 51,506 2.54 4,199 0 5 419 906 212 12,749 36 1 41 3,052 8,363 0 294 25,488 77 0 0 7 5,217 1,266 7,547 1,124 85 15,155 1.78 2.32 1.63 2.54 1.79 0.00 1.82 2.36 2.09 1.55 0.87 1.82 24 68 668 249 481 0 154 299 10,015 8,775 6,993 0 1,490 26,236 396 85 376 32 889 3,363 183 1,838 16 5,400 1.74 2.75 1.43 2.40 1.45 0.00 1.78 2.12 1.43 1.78 0.54 1.98 9 26 461 677 325 0 573 1,253 24,501 12,101 15,371 1,029 1.77 2.45 1.70 2.47 1.63 1.23 33 99 1,340 963 808 41 1,499 54,829 1.86 3,283 229 8 105 0 9,100 1,449 9,385 1,360 343 21,295 2.40 2.01 1.60 0.90 1.92 703 93 481 39 1,317 Grand Total 6,285 3.31 668 74,472 2.14 5,132 46,872 1.99 2,999 127,629 2.14 8,799 Westgold Resources Limited Annual Report 2020 19 Our Operations Mineral Resources & Ore Reserves (continued) The Ore Reserves by mining project are tabulated below: Ore Reserve Statement – 30/06/2020 by Mining Centre Proven Probable Grade (g/t) Ounces Au (‘000s) Grade (g/t) Ounces Au (‘000s) Tonnes (‘000s) Total Grade (g/t) Ounces Au (‘000s) Project Big Bell Cuddingwarra Day Dawn Tuckabianna Stockpiles CGO Total Meekatharra North Nannine Paddy's Flat Reedy's Yaloginda Stockpiles MGO Total Fortnum Horseshoe Peak Hill Stockpiles FGO Total Tonnes (‘000s) 1,874 0 0 23 67 1,963 0 0 426 49 0 1,029 1,504 435 0 0 220 655 3.06 0.00 0.00 4.12 3.04 3.07 0.00 0.00 3.60 6.92 0.00 1.23 2.08 3.37 0.00 0.00 1.06 2.59 Tonnes (‘000s) 11,846 814 1,398 863 3,756 184 0 0 3 7 194 18,677 0 0 49 11 0 41 263 550 1,199 740 718 0 101 3,471 47 0 0 7 55 2,991 579 1,122 1,124 5,817 2.71 1.92 6.55 2.39 0.71 2.55 1.66 1.99 3.30 3.73 2.98 0.00 3.00 2.11 2.06 1.95 0.87 1.83 1,032 13,719 50 294 66 85 814 1,398 886 3,823 1,529 20,640 14 35 127 89 69 0 334 203 38 70 32 343 263 550 1,625 789 718 1,029 4,975 3,426 579 1,122 1,344 6,471 2.76 1.92 6.55 2.43 0.75 2.60 1.66 1.99 3.38 3.93 2.98 1.23 2.72 2.27 2.06 1.95 0.91 1.91 1,217 50 294 69 92 1,722 14 35 177 100 69 41 435 250 38 70 39 398 Grand Total 4,122 2.64 349 27,964 2.45 2,206 32,086 2.48 2,555 20 Westgold Resources Limited Annual Report 2020 The movement in Mineral Resource estimates over the past year are tabulated below: Mineral Resource Statement – Comparison to Previous Year 30/06/2020 2019 Mineral Resource 2020 Mineral Resource Change Project Big Bell Cuddingwarra Day Dawn Tuckabianna Stockpiles CGO Total Meekatharra North Nannine Paddy's Flat Reedy's Yaloginda Stockpiles MGO Total Fortnum Horseshoe Peak Hill Stockpiles FGO Total Tonnes (‘000s) 23,861 8,490 7,790 9,928 3,768 53,838 653 1,247 24,582 12,448 15,304 719 54,953 10,271 612 6,496 1,749 19,129 Grade (g/t) Ounces Au (‘000s) Tonnes (‘000s) Grade (g/t) Ounces Au (‘000s) Tonnes (‘000s) Grade (g/t) Ounces Au (‘000s) 2.75 2.17 3.26 2.63 0.75 2.57 1.94 2.17 1.69 2.48 1.62 1.15 1.85 2.47 2.09 1.77 1.01 2.08 2,108 27,598 591 817 840 91 4,050 6,784 9,240 3,833 4,447 51,506 41 87 1,335 992 797 27 573 1,253 24,501 12,101 15,371 1,029 3,277 54,829 814 41 369 57 9,100 1,449 9,385 1,360 1,282 21,295 2.65 1.76 3.52 2.56 0.75 2.54 1.77 2.45 1.70 2.47 1.63 1.23 1.86 2.40 2.01 1.60 0.90 1.92 2,352 229 767 759 92 3,737 -4,440 -1,006 -688 65 4,199 -2,332 33 99 1,340 963 808 41 3,283 703 93 481 39 1,317 -80 6 -81 -347 67 310 -125 -1,171 837 2,889 -389 2,165 -0.10 -0.41 0.25 -0.08 -0.01 -0.03 -0.17 0.28 0.01 0.00 0.02 0.08 0.01 -0.06 -0.08 -0.17 -0.11 -0.16 245 -362 -50 -81 1 -248 -8 12 6 -29 11 14 6 -112 52 112 -18 35 Grand Total 127,920 2.19 9,006 127,629 2.14 8,799 -291 -0.05 -207 Westgold Resources Limited Annual Report 2020 21 Our Operations Mineral Resources & Ore Reserves (continued) The movement in Ore Reserves over the past year are tabulated below: Ore Reserve Statement – Comparison to Previous Year 30/06/2020 2019 Ore Reserve 2020 Ore Reserve Change Project Big Bell Cuddingwarra Day Dawn Tuckabianna Stockpiles CGO Total Meekatharra North Nannine Paddy's Flat Reedy's Yaloginda Stockpiles MGO Total Fortnum Horseshoe Peak Hill Stockpiles FGO Total Tonnes (‘000s) 11,829 865 1,947 1,774 3,768 20,183 346 389 1,762 1,170 624 719 5,010 2,929 579 1,122 1,733 6,364 Grade (g/t) Ounces Au (‘000s) Tonnes (‘000s) Grade (g/t) Ounces Au (‘000s) Tonnes (‘000s) Grade (g/t) Ounces Au (‘000s) 2.88 2.21 5.61 2.49 0.75 2.68 1.87 2.30 3.33 3.31 3.20 1.19 2.82 2.74 2.06 1.95 1.02 2.07 1,096 13,719 61 351 142 91 814 1,398 886 3,823 1,742 20,640 21 29 189 125 64 27 454 258 38 70 57 423 263 550 1,625 789 718 1,029 4,975 3,426 579 1,122 1,344 6,471 2.76 1.92 6.55 2.43 0.75 2.60 1.66 1.99 3.38 3.93 2.98 1.23 2.72 2.27 2.06 1.95 0.91 1.91 1,217 50 294 69 92 1,722 14 35 177 100 69 41 435 250 38 70 39 398 1,890 -51 -549 -888 55 457 -84 161 -137 -381 94 310 -35 497 0 0 -389 107 -0.12 -0.28 0.94 -0.06 -0.01 -0.09 -0.21 -0.32 0.05 0.62 -0.22 0.04 -0.10 -0.47 0.00 0.00 -0.11 -0.16 121 -11 -57 -73 1 -19 -7 6 -12 -25 5 13 -19 -8 0 0 -18 -26 Grand Total 31,558 2.58 2,620 32,086 2.48 2,555 529 -0.10 -64 22 Westgold Resources Limited Annual Report 2020 Competent Person Statements Mineral Resources Estimates The information in this report that relates to Mineral Resource Estimates is compiled by Westgold technical employees and contractors under the supervision of Mr. Jake Russell B.Sc. (Hons), who is a member of the Australian Institute of Geoscientists. Mr Russell is a full time employee to the company, and has sufficient experience which is relevant to the styles of mineralisation and types of deposit under consideration and to the activities which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr 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 eligible to participate in short and long term incentive plans of the company. Ore Reserve Estimates The information in this report that relates to Ore Reserve Estimates 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. Forward Looking Statements Certain statements in this report relate to the future, including forward looking statements relating to Westgold’s financial position and strategy. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual results, performance or achievements of Westgold to be materially different from future results, performance or achievements expressed or implied by such statements. Actual events or results may differ materially from the events or results expressed or implied in any forward-looking statement and deviations are both normal and to be expected. Other than required by law, neither Westgold, their officers nor any other person gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements will actually occur. You are cautioned not to place undue reliance on those statements. Westgold Resources Limited Annual Report 2020 23 Financial Report Director’s 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 2020. 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 - Non-Executive Chairman (Retired 25 November 2019) Mr Newton was a highly successful stockbroker for 25 years before shifting his hand to corporate management of resource companies, participating in the Australian resource industry as an investor, non-executive director, Chairman and mentor in a number of listed and successful companies. During the past three years, he had served as a director of the following public listed company: – Metals X Limited (Appointed 14 December 2012 - Resigned 24 October 2019) Peter Cook - Executive Chairman (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: Peter 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, Risk & Compliance Committee and Remuneration & Nomination Committee. During the past three years, he has served as a director of the following public listed company: – Aruma Resources Limited.* Suresh Shet - Non-Executive Director (Appointed 18 December 2017, Resigned 26 February 2020) Mr Shet was a nominee director of Golden and Energy Resources Ltd (GEAR) who is a significant shareholder in the Company. Mr Shet held no public company directorships in the past three years. 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 over 25 years’ experience in accounting and financial management in the mining and resources industry. Mrs Van Maanen serves on the Company’s Audit, Risk & Compliance Committee and Remuneration & Nomination Committee. During the past three years, she has served as a director of the following public listed company: – Pantoro Limited (Appointed 4 August 2020).* – Nelson Resources Limited (Appointed 4 June 2013 - Resigned 1 February 2019); and Wayne Bramwell - Non-Executive Director (Appointed 3 February 2020) – Castile Resources Limited (Appointed 7 June 2011).* Johannes Norregaard - Executive Director (Appointed 29 December 2016, Resigned 22 June 2020) 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. Mr Bramwell (BSc (Extractive Metallurgy), Grad Dip Bus, MSc (Min.Econ.) has over 26 years of international and Australian project evaluation and development expertise across the base metals, precious metals and bulk commodity sectors. Mr Bramwell serves on the Company’s Audit, Risk & Compliance Committee and Remuneration & Nomination Committee. During the past three years, he has served as a director of the following public listed company: – Ardea Resources Limited (Resigned 3 July 2020). * Denotes current directorship 24 Westgold Resources Limited Annual Report 2020 for the year ended 30 June 2020 COMPANY SECRETARY Lisa Smith (Appointed 19 December 2019) Ms Smith holds a Bachelor of Laws and a Bachelor of Commerce and brings over 15 years legal experience across a broad range of practice areas including commercial and corporate, regulation and compliance as well as experience with secretarial duties. Ms Smith has previously acted as principal lawyer for a private resources industry services firm and has substantial policy and advocacy experience. David Okeby (Appointed 1 December 2016, Resigned 30 December 2019) Mr Okeby has significant compliance, contractual, administrative and corporate experience in the mining industry. Mr Okeby brought skills in governance, stakeholder relations and corporate activities including mergers, acquisitions and disposals. INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY As at the date of this report, the interests of the Directors in the shares and options of the Company were: Director PG Cook PB Schwann FJ Van Maanen WC Bramwell Total Fully Paid Ordinary Shares Options 10,762,922 1,639,682 – 435,521 – – – – 11,198,443 1,639,682 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 934 employees at 30 June 2020 (2019: 808). CORPORATE OVERVIEW Westgold is a top-10 Australian gold producer with gold operations in the Central Murchison region of Western Australia. Western Australia is a low sovereign risk, premier destination for gold production and gold exploration prospectivity. Westgold’s operations encapsulate the vast majority of historic and proven gold mining centres in the Central Murchison region which to date has already produced more than 10 million ounces of gold. The gold inventory of Westgold has a total mineral resource (JORC 2012) of more than 9 million ounces (refer to resource and reserves estimates tab for detail) aggregating to give Westgold control over substantial gold mining province. Over the past four years Westgold has invested heavily and has commenced or recommenced gold production from seven underground mines and numerous open pits to produce between 250,000 and 300,000oz per annum. The Company has three processing plants spread across its tenure with an aggregate milling capacity of approximately 3.5 million tonnes per annum. Westgold’s operations are split into three regional operating hubs: – The northernmost operating hub is referred to as the Fortnum Gold Operations (FGO) – The central operating hub is referred to as the Meekatharra Gold Operations (MGO) – The southernmost operating hub is referred to as the Cue Gold Operations (CGO) Westgold Resources Limited Annual Report 2020 25 CORPORATE STRUCTURE Westgold operates a corporate structure that places its operations with wholly owned subsidiaries as depicted in the following corporate organisational structure: Westgold Resources Limited ACN 009 260 306 100% 100% Minterra Pty Ltd ACN 080 756 172 Contract Mining Services (MPL) 100% 100% 100% 100% 100% 100% Aragon Resources Pty Ltd ACN 114 714 662 Big Bell Gold Operations Pty Ltd ACN 090 642 809 Location 53 Pty Ltd ACN 618 320 773 Fortnum Gold Fortnum Gold Operations Operations (FGO) (FGO) Cue Gold Cue Gold Operations Operations (CGO) (CGO) Meekatharra Gold Meekatharra Gold Operations Operations (MGO) (MGO) OPERATING AND FINANCIAL REVIEW IMPACT OF COVID-19 The onset of the COVID-19 pandemic was rapid and dramatic both on a corporate and personal level for employees, the Company, our stakeholders and the communities within which we operate and live. Westgold took immediate action to protect the integrity of the Company’s business interests and the safety and well- being of its employees and stakeholders. Prompt implementation and affirmative compliance with government and health bodies forced quick change to operating processes. Westgold operates a number of isolated and remote mining operations and fortunately with the positive protection measures and support of governments and employees all our operations continued to function close to normal levels though travel restrictions, social distancing and isolation practices had some impacts on the Group. For instance, the demographic of our direct mining workforce operations was such that approximately 18% of our workforce commuted from outside of the state and 8% from overseas. The closure of borders required immediate action to manage these impacts on our labour force. Roster changes, changed travel and commuting schedules, changed camp operations including dining and enhanced hygiene practices created potential social and mental health impacts. The Company has taken a considerate approach to the hidden consequences of such changes and continues to work with its employees to lessen the impact. The over- arching objective of the Group has been to keep all its employees and stakeholders safe and free from infection and/or spread, and importantly to keep people employed during these uncertain times. Though difficult to isolate, the net impact of the pandemic was estimated to be minor on the Group’s operating outputs. 26 Westgold Resources Limited Annual Report 2020 Financial Report Director’s Report for the year ended 30 June 2020 OPERATING RESULTS The Group’s operating results improved substantially over the previous year with increased profitability resulting in a net profit after income tax of $34,607,315 (2019: $14,130,064). The results also reflect the continued rationalisation of non-core assets and expansion of the Group’s activities in the Murchison Region. These actions over the year are reflected in the following key measures: – Consolidated revenue increased by 18% over the prior year to $492,268,271 (2019: $418,317,447); – Consolidated total cost of sales increased by 13% over the prior year to $462,752,732 (2019: $408,078,123); – The Group repaid the gold loan repayment facility $25,938,399 (2019: $16,011,946); and – Profit after income tax increased to $34,607,315 (2019: $14,130,064). REVIEW OF FINANCIAL CONDITION The Consolidated Statement of Cash Flows reflects a closing cash and cash equivalents of $137,564,914 (2019: $67,196,289). OPERATING ACTIVITIES Group cash flow generated by operating activities increased on that of the previous year with a total inflow of $155,731,640 (2019: $81,231,882). Investing Activities Cash flows used in investing activities across the Group increased on that of the previous year with a total outflow of $122,278,247 (2019: $109,806,561). Cash flow applied to investing activities in the current year relate to key growth capital at the Big Bell underground mine (CGO) and the South Emu underground mine (MGO) as well as major capital works on plant and equipment such as the new airstrip and village upgrade at Fortnum (FGO), a new village at Big Bell (CGO) and a new secondary crushing circuit at the Bluebird Plant (MGO). 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 investment in mine properties and development, exploration and evaluation expenditure and property, plant and equipment during the year was $210,949,085 (2019: $157,065,263), broken into key operations as follows: – MGO $82,842,250 (2019: $52,958,698); – CGO $99,721,650 (2019: $81,401,015); – FGO $27,391,009 (2019: $21,699,381); and – Other $994,176 (2019: $1,006,168). Capital commitments of $10,098,601 (2019: $8,996,852) existed at the reporting date, principally relating to the purchase of plant and equipment. Exploration activities continued at all operations during the year with $14,049,293 (2019: $16,411,426) expended. A review of accumulated land titles was completed resulting in a write-off of $356,317 (2019: $5,471,706) of carrying values. Financing Activities External financing requirements increased to $36,915,232 (2019: $22,324,215) reflecting an increase in external sourced financing of growth activities. – The Group received $66,542,506 from the placement of 20,000,000 ordinary shares at $2.25per share, the conversion of 10,315,603 listed options at $2.02 and the conversion of 230,000 listed options at $2.31; – The Group repaid the gold prepay facility in full (2019: drew on $20,853,550); and – The Group’s interest bearing loans and borrowings increased to $37,826,450 (2019: $36,736,877) with marginal additions to the mobile mining fleet with the expanded growth activities. Westgold Resources Limited Annual Report 2020 27 SHARE ISSUES DURING THE YEAR The following share issues have been undertaken during the year: Date 4 July 2019 4 September 2019 17 September 2019 18 September 2019 25 September 2019 5 December 2019 24 February 2020 8 May 2020 25 May 2020 Total Number of shares Purpose 15,603 Issued on conversion of options 9,700,000 Issued on conversion of options 300,000 216,450 83,550 200,000 230,000 330,313 20,000,000 31,075,916 Issued on conversion of options Issued on conversion of options Issued on conversion of options Purchase consideration for Peak Hill Royalty Issued on conversion of options Purchase consideration for Albury Heath Prospect Placement to supplement working capital DIVIDENDS The Company’s dividend policy is to deliver superior shareholder value through the return of capital in the form of a reasonable dividend. Premised upon this objective, the Directors have set a discretionary target of 30% of net profit after tax as the maximum annual dividend with this target to be reviewed on an annual basis. During FY2020, the Directors acknowledge that the operations were transitioning from a development phase towards steady state operations and in combination with the uncertainties created by the COVD-19 pandemic, believed it was prudent to maintain balance sheet strength and elected not to distribute a dividend for this period. The Directors note however that during the year shareholders have received a demerger dividend of $13,051,549 in respect of the in specie distribution of shares in Castile Resources Limited, which held the Northern Territory polymetallic assets (Refer to Note 38). By coincidence, this demerger dividend was approximately equivalent to the expected yield under the dividend policy, supporting the bona fide intent of the Directors to reward shareholders. No dividends were paid to members for the 30 June 2019 financial year. REVIEW OF OPERATIONS Westgold remained the dominant gold company in the Central Murchison region and has aggregated approximately 350 mining titles covering 124,000 hectares in the region. Westgold demerged Castile Resources Ltd from the Group via a 1:4 in-specie distribution to its shareholders on 3 December 2019. Castile was a subsidiary that had held the Northern Territory exploration assets. Westgold owned numerous shareholding in unrelated entities which were liquidated during the year as a proactive measure to ensure fiscal strength as the uncertainty of the impacts of COVID-19 unraveled. As a result, Westgold now has substantial funds at its disposal to facilitate the expansion and integration of its Murchison assets. This will include future investment in both existing internal growth opportunities and further asset acquisitions. Fortnum Gold Operations (FGO) FGO is located in the Proterozoic age Bryah Basin stratigraphy approximately 150 km northwest of Meekatharra and and represents the northernmost group of assets in the Central Murchison region. These encapsulate the historic mining centres of Labouchere, Fortnum, Horseshoe and Peak Hill where aggregated gold production of approximately 2 million ounces has occurred. FGO comprises the Fortnum Plant, a 0.9 million tonne-per-annum carbon-in-leach (CIL) plant, a 175-person village and all the typical plant and infrastructure required to operate a remote FIFO site. 28 Westgold Resources Limited Annual Report 2020 Financial Report Director’s Report for the year ended 30 June 2020 Mining output is currently dominated by the Starlight underground mine which produces at a rate of approximately 600,000 tonnes per annum. This ore is blended with low grade stocks sitting free on surface to make up a blended plant feedstock. A procession of open pit mines sit ready to replace the low grade feedstock with the site having a visible mine life expectation in excess of 6 years. The increase in the gold output and associated increase in the gold price resulted in an increase in revenue to $130,688,889 (2019: $103,989,696). Segment profits also increased to $33,236,970 (2019: $15,722,413). Gold output for the year was 60,839 oz at a C1 Cash Cost of $1,077 per ounce and an all-in sustaining cost (AISC) of $1,308 per ounce as disclosed in the table on page 31. FGO has a number of exploration targets in addition to its current ore resource and reserves which should underwrite sustainable gold production at the operations, including: – Extensions to the Starlight underground mine where a structural geology study undertaken by industry-leading structural geology experts are defining the keys controls driving Starlight mineralisation and associated targets. – Resource development work to support the return of open pit mining in the area in subsequent years. This will include final definition works on extensions to the major past producers of Yarlarweelor, Nathan’s and Labouchere, as well as pre-grade control works on the new Regent and Messiah deposits. – Conceptual exploration at Peak Hill with a view to proving an alternative ore sources that can be trucked to either the Fortnum or Bluebird (MGO) processing plants. Meekatharra Gold Operations (MGO) MGO is located around the regional towns of Meekatharra and represents the central group of assets in the Central Murchison region. These consolidate the considerable historic gold mining centres of Meekatharra North, Paddy’s Flat, Yaloginda, Nannine and Reedy’s. MGO hosts the Bluebird CIP processing hub (approx. 1.6 million tpa on blended feedstock) and associated infrastructure including a 350 person workers village. Bluebird is located at the center of the Group’s overall Murchison tenure and is the largest and lowest cost of the Group’s processing plants and consequently can accommodate ore feed from any of the region’s mines. The main mine within the MGO output is the Paddy’s Flat underground mine which the Company has now been operating for four years. The smaller South Emu-Triton underground mine at the Reedy’s gold mining center and the newly started Bluebird underground mine at Yaloginda just 1km south of the Bluebird Plant provide supplementary mill feed. These three underground mines combine to deliver more than 100,000oz per annum to the Bluebird processing plant over the long term. Underground ores are supplemented by a procession of smaller open pits, primarily cut-backs which have become economically viable as the gold price has risen. In FY2021 open pit mining will occur at the Five Mile Well, Maid Marion, Albury Heath and Aladdin open pits. Gold output increased and revenue improved to $211,570,622 (2019: $167,960,218). Segment profits increased to $8,379,385 (2019: Loss of $20,392,555). Gold output from the operation for the year was 104,088 ounces at a C1 Cash Cost of $1,171 per ounce and an all-in sustaining cost of $1,496 per ounce as disclosed in the table on page 31. The primary exploration focus in the region is the continual definition of extensions to these mines, as well as the progression of the next round of underground projects to be developed including the Aladdin mine (at Nannine), and Boomerang and Rand mines (at Reedy’s) which could add significantly to the Group’s output. They are high-quality underground exploration targets proximal to existing historic mining centers and provide the option of leveraging the benefits of existing infrastructure. Westgold Resources Limited Annual Report 2020 29 Cue Gold Operations (CGO) CGO is located around the regional town of Cue and, represents the southern-most group of assets in the Central Murchison region. Regionally the project covers the historic mining centres of Big Bell, Cuddingwarra, Day Dawn, Tuckabianna and Pinnacles and include two of Australia’s most prolific past producers in the Big Bell mine (2.6 million oz) and the Great Fingall mine (1.2 million oz). CGO has been heavily focused on the re-start of the long-life Big Bell mine. After 3 years of de-watering, mine rehabilitation and refurbishment ore has begun to flow from Big Bell. Over FY2021 this will build to steady state output and dominate ore feed for the Tuckabianna plant, a 1.2 - 1.4 mtpa processing plant. Whilst Big Bell builds to full production, the plant has been filled with various ore sources from small open pits at Day Dawn, low grade stockpiles and the small Comet underground mine at Pinnacles. CGO is expected to produce 100,000 - 110,000oz per annum for Westgold over the long-term which is essentially underwritten by output from the Big Bell mine. During the year gold output remained stable and revenue increased to $148,830,137 (2019: $120,694,689). Gold output was focused on minor short-term open pit mines to build capacity, whilst the major Big Bell mine rehabilitation and development works were completed, resulting in a segment loss of $12,641,721 (2019: $1,047,700). Gold output for CGO was 70,223 ounces at a C1 Cash Cost of $1,549 per ounce and an all-in sustaining cost of $1,729 per ounce as disclosed in the table on page 31. Exploration and resource development work at Cue has two separate thrusts; – An emphasis on developing high grade ore sources which can offset a small volume of Big Bell production whilst materially improving the grade profile through the Tuckabianna mill. In particular there is a focus on high-grade quartz reef-hosted mineralisation in the Day Dawn region, which have hosted the significant past producers of Great Fingall and Golden Crown (head grades of 19.5g/t and 14g/t respectively). Great Fingall is expected to become Westgold’s latest underground mine adding to the regions overall gold output – A focus on the Tuckabianna and Cuddingwarra mining centers which are dominated by more recent shallow open pit mining. These area can support a renewed open pit mining phase and eventual underground extraction. Whilst spatially these areas are adjacent to the Tuckabianna mill, the inherent flexibility offered by the owner - operator mining model and multiple processing hubs in the district means that futures mines in either of these centers can be directed to the most commercially attractive of either the Tuckabianna or Bluebird processing plants. 30 Westgold Resources Limited Annual Report 2020 Financial Report Director’s Report for the year ended 30 June 2020 Westgold Operating Performance by Operation Year Ended 30 June 2020 MGO CGO FGO Group Achieved Gold Price $/oz 2,052 Physical Summary UG Ore Mined UG Grade Mined OP Ore Mined OP Grade Mined Ore Processed Head Grade Recovery Gold Produced Gold Sold Units t g/t t g/t t g/t % oz oz Cost Summary Mining Processing Admin Stockpile Adjustments C1 Cash Cost (produced) oz)1 Royalties Sustaining Capital Corporate Costs All-in Sustaining Costs2 Project Startup Capital Exploration Holding Cost All-in Cost3 $/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz 898,911 462,479 497,578 1,858,968 3.60 2.99 3.18 3.34 379,909 563,329 1.55 1.34 – – 943,238 1.42 1,508,812 1,270,953 865,254 3,645,019 2.62 81.90 104,088 103,095 746 344 61 20 1.89 90.75 70,223 70,893 2,099 985 480 78 6 2.29 95.56 60,839 61,208 2,135 568 360 63 86 2.29 88.23 235,150 235,196 2,088 771 389 67 33 1,171 1,549 1,077 1,260 122 193 10 1,496 412 64 1,972 58 107 15 1,729 988 63 2,780 67 142 22 1,308 164 52 1,524 89 154 15 1,518 520 60 2,098 Westgold Resources Limited Annual Report 2020 31 Year Ended 30 June 2019 MGO CGO FGO Group Physical Summary UG Ore Mined UG Grade 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) oz) Royalties Sustaining Capital Corporate Costs All-in Sustaining Costs Project Startup Capital Exploration Holding Cost All-in Cost Units t g/t t g/t t g/t % oz oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz 669,201 256,446 398,810 1,324,457 3.82 3.94 2.90 3.57 452,734 535,036 469,335 1,457,105 1.49 1.77 1.68 1.65 1,310,499 1,169,527 849,853 3,329,879 2.64 84.8 94,280 94,544 1,758 744 385 77 58 1.99 90.4 68,255 67,576 1,776 750 537 69 (18) 2.23 95.7 58,308 58,585 1,775 2.31 89.55 220,843 220,705 1,768 688 390 75 (88) 731 433 74 (4) 1,264 1,338 1,065 1,234 94 85 8 1,451 241 91 1,783 44 60 6 53 89 19 68 78 10 1,448 1,226 1,390 855 44 2,347 155 29 408 60 1,410 1,858 1. 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. 2. 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. 3. 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. Mining and Services Division (MPL) Westgold is unique in the WA Australian mining sector in that it is dominantly an owner-operator of its mines. The contracting and underground mining services division was rebadged as Minterra Pty Ltd in April 2020, to focus on fulfilling Westgold’s internal contracting requirements. These services were provided on a cost re-imbursement basis. The refocus on internal services resulted in a significant reduction in external revenue of $1,178,623 (2019: $25,672,844). 32 Westgold Resources Limited Annual Report 2020 Financial Report Director’s Report for the year ended 30 June 2020 CORPORATE Lithium Royalties Westgold still retains the Mount Marion Lithium Royalty which is likely to provide an income stream in future financial years. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Total equity increased to $521,860,827 (2019: $443,485,911), representing 20,530,313 shares issued at $46,102,000 less capital raising costs of $2,270,000; the conversion of 10,545,603 listed options at $21,542,506 less costs of $171,700 and a reduction in share capital of $8,803,840 upon the demerger of Castile Resources Pty Ltd. Castile Resources Ltd (Castile) demerged from the Westgold Group on 3 December 2019 with the in-specie distribution of Castile shares to Westgold shareholders on a one for four basis, post approval from shareholders at the Annual General Meeting on 25 November 2019. Castile successfully listed on the ASX on 14 February 2020 and is now an independent company trading under ASX code: CST. 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. SHARE OPTIONS Employee options On 7 May 2020, the Company granted 684,141 unlisted employee options (WGXO) to senior management under the Employee Share Option Plan. Included in this issue are 153,810 options granted to the Executive Chairman which are subject to shareholder approval. 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 2022) 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. – Employee Options that vest will expire if not exercised on 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. Westgold Resources Limited Annual Report 2020 33 Unissued shares As at the date of this report, unissued ordinary shares under option relating to unlisted options are: Premium Exercise Price Options (PEPOs) / Zero Exercise Price Options (ZEPOs) Number of shares Exercise Price Expiry Date PEPOs - Directors and Employees ZEPOs - Tranche 2 - Directors ZEPOs - Tranche 2 - Employees ZEPOs - Tranche 3 - Directors ZEPOs - Tranche 3 - Employees Total 3,625,000 $2.31 24 November 2020 230,307 568,250 153,810 530,331 5,107,698 Zero Zero Zero Zero 30 June 2021 30 June 2023 30 June 2022 30 June 2022 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 10,545,603 listed options were converted to acquire fully paid ordinary shares in the Company, refer to Note 26 for further details. 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. 34 Westgold Resources Limited Annual Report 2020 Financial Report Director’s Report for the year ended 30 June 2020 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: PG Cook PJ Newton JS Norregaard PB Schwann SV Shet FJ Van Maanen WC Bramwell Directors Audit, Risk & Compliance Committee Remuneration & Nomination Committee Eligible to attend Attended Eligible to attend Attended Eligible to attend Attended 17 4 17 17 8 17 10 17 4 17 17 8 17 10 – 1 – 2 – 2 2 – 1 – 2 – 2 2 – – – 1 – 1 1 – – – 1 – 1 1 Committee Membership As at the date of this report, the Company had an Audit, Risk & Compliance Committee and a Remuneration and Nomination Committee of the Board of Directors. Members acting on these committees during the year were: Audit, Risk & Compliance Committee Remuneration and Nomination Committee PJ Newton * (resigned) PJ Newton * (resigned) FJ Van Maanen * PB Schwann WC Bramwell * Designates the Chairperson of the Committee. WC Bramwell * PB Schwann FJ Van Maanen Westgold Resources Limited Annual Report 2020 35 Financial Report Remuneration Report (Audited) CONTENTS 1. Remuneration report overview 2. Remuneration and Nomination Committee responsibilities 3. Remuneration governance 4. Non-Executive Director remuneration 5. Executive remuneration 6. Performance and executive remuneration outcomes 7. Executive employment arrangements 8. 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 2020 (FY2020). 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 Key Management Personnel (KMP) being the: – Non-Executive Directors (NEDs); and – Executive Chairman, 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 (i) Non-Executive Directors PJ Newton PB Schwann Position Appointed Resigned Non-Executive Chairman 6 October 2016 25 November 2019 Independent Non-Executive Director 2 February 2017 FJ Van Maanen Independent Non-Executive Director 6 October 2016 WC Bramwell Independent Non-Executive Director 3 February 2020 SV Shet Non-Executive Director 18 December 2017 26 February 2020 (ii) Executive Directors PG Cook Executive Chairman 19 March 2007 – JS Norregaard Executive Director 29 December 2016 22 June 2020 (iii) Senior Executives DA Fullarton JS Norregaard A Buckingham PM Storey PW Wilding DP Stuart L Smith Chief Financial Officer1 21 May 2018 – Chief Executive Officer (MPL) 22 June 2020 14 August 2020 Chief Operating Officer 1 October 2019 General Manager (MGO) General Manager (CGO) General Manager (FGO) 23 July 2018 1 July 2018 7 October 2019 14 August 2020 Company Secretary & General Counsel 19 December 2019 – – – – – – – RB Armstrong General Manager (FGO) 1 July 2018 31 August 2019 DJ Noort DW Okeby General Manager (MPL) 20 August 2018 3 January 2020 Company Secretary & Legal Manager 1 December 2016 19 December 2019 1. DA Fullarton was promoted to Chief Executive Officer with effect from 1 July 2020. 36 Westgold Resources Limited Annual Report 2020 2. REMUNERATION AND NOMINATION COMMITTEE RESPONSIBILITY Remuneration and nomination committee duties The remuneration and nomination committee is a subcommittee of the Board and are chartered to: – Oversee formulation and review of the Company’s organisational development, succession planning for the Group’s Executive Directors and senior executives; – Approve, review and refer to the Board matters relating to the appointment and the removal of executives who report directly to the Managing Director and or Executive Directors to ensure that an appropriate Board succession plan is in place; – Ensure that the performance of the Board and its members is regularly reviewed; and – Assist the Chairman in advising Directors about their performance and possible retirement. Remuneration report at FY2019 AGM The FY2019 remuneration report received positive shareholder support at the FY2019 AGM with a vote of 99% in favour. Director succession planning The Remuneration and Nomination Committee continually considers the changing needs of the Group with the aim to maintain consistent governance over all activities. During the financial year Westgold flagged pending changes to its Board structure at its AGM in November, 2019 following the retirement of the Chairman, Mr Peter Newton with short notice. Further, the Board noted advice from proxy advisors voting at the AGM on the balance of executive and non-executive directors as well as independence. This set-forth a number of changes within the Group to align the corporate and executive management structure whilst maintaining the consistency and integrity of the Group’s operating performance. The immediate move by the Board to replace the retiring Chairman at the 2019 AGM was to appoint the existing Managing Director, Peter Cook to the interim position of Executive Chairman. Mr Cook accepted this position as an interim solution to overall restructuring of the Board to fulfil corporate governance objectives as well as to facilitate management and organisational succession planning. Mr Cook also advised of his intention to transition to a non- executive role during the ensuring year. The Company has further re-aligned the structure of the Board with the addition of another independent non- executive director and the resignation of a nominee director. Further, the Board executives were reduced from two to one with the resignation of Mr Norregaard from the Board and Mr Cook standing back from day to day operational responsibilities. Due to the instability caused by COVID-19, Mr Cook has however agreed to defer his transition to a non-executive role until the new management structure at Westgold is fully embedded. The current Board structure is as follows: Name PG Cook PB Schwann FJ Van Maanen WC Bramwell Position Executive Chairman Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Westgold Resources Limited Annual Report 2020 37 3. REMUNERATION GOVERNANCE The Remuneration and Nomination Committee makes 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 35 of this financial report. Use of remuneration advisors The Remuneration and Nomination Committee did not engage with any remuneration advisors during the current year but continued to apply the previous recommendations provided by BDO Remuneration and Reward Pty Ltd in FY2018 on the Group’s executive remuneration framework and policies. Recommendations applied A 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). A long-term incentive (LTI) policy focussing on 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 Executive Chairman 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. Options are granted with a three-year performance period. Any options that do not vest will lapse after testing. 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. The LTI structure will be revisited in FY2021. 4. NON-EXECUTIVE DIRECTOR REMUNERATION NED Remuneration Policy The 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 was approved at the Extraordinary General Meeting of shareholders on 24 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. 38 Westgold Resources Limited Annual Report 2020 Financial Report Remuneration Report (Audited)continued 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. Additional fees will be paid to NEDs in FY2021 for being a Chair of a sub-committee. 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. 5. 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 FY2020 potential total remuneration packages split between the fixed and variable remuneration is shown below: Executive Executive Chairman Other Executives Elements of remuneration Fixed remuneration 50% 65% STI 25% 19% LTI 25% 16% 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. Westgold Resources Limited Annual Report 2020 39 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? Any STI award is paid in cash after the assessment of annual performance. How much can executives earn? How is performance measured? In FY2020, the STI dollar values that executives are entitled to receive as a percentage of their fixed remuneration would not exceed 50% for the Executive Chairman 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. 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. What KPIs were chosen? The following KPIs were chosen for the 2020 financial year: When is it paid? What happens if an executive leaves? – 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 reviewed by the Remuneration Committee (25%). 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). 40 Westgold Resources Limited Annual Report 2020 Financial Report Remuneration Report (Audited)continued 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 Safety - Medically Treated Injury Frequency Rate (MTIFR) Safety - Lost Time Injury Frequency Rate (LTIFR) 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 10 Annual LTIFR stays within ±25% Annual LTIFR increases by 25% or more Exceptional environmental management performance Score 10 5 0 10 5 0 5 Environmental 5 No serious breaches of environmental management 2.5 AISC relative to budget 25 Gold Production 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% Actual production above budget by less than 5% Actual production equals to budget Actual production below budget by less than 5% Underperforms budget by between 5% & 10% Exceptional Effort and Exceptional Achievement Exceptional Effort and Good Achievement Personal performance 25 Good Effort and Good Achievement Good Effort and Average Achievement Average Effort and Average Achievement Total 100 0 25 20 15 10 5 0 25 20 15 10 5 0 25 20 15 10 5 Westgold Resources Limited Annual Report 2020 41 STI outcomes Performance against those measure is as follows for FY2020: Name PG Cook Position Executive Chairman DA Fullarton Chief Financial Officer A Buckingham Chief Operating Officer PM Storey PW Wilding L Smith Total General Manager (MGO)(i) General Manager (CGO)(i) Company Secretary & General Counsel Achieved STI % STI Awarded(ii) $ Maximum potential award $ 33 28 28 43 28 28 94,250 290,000 20,625 75,000 30,921 112,438 38,250 90,000 24,750 90,000 11,132 219,928 40,479 697,917 (i) (ii) Performance is measured based on a combination of the operational segment performance as well as overall Group performance. The FY2020 STI awards were paid in August 2020. 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. The following structures will be reviewed during FY2021. How is it paid? Executives are eligible to receive options. In FY2020 Zero Exercise Price Options (ZEPOs) were issued, being an option to acquire an ordinary share in Westgold for a zero exercise price. Are options eligible for dividends? Executives are not eligible to receive dividends on unvested options. How much can executives earn? The LTI dollar values that executives are entitled to receive as a percentage of their fixed remuneration would not exceed 50% (FY2019: 100%) for the Executive Chairman and 40% (FY2019: 80%) for the other executives. The number of options granted were determined using the fair value at the date of grant using a Black and Scholes or Monte Carlo valuation model as appropriate, taking into account the terms and conditions upon which the options were granted. How is performance measured? Tranche 3 options will vest and become exercisable subject to the following conditions: A service condition which requires: – Continued employment for the three-year period from 1 July 2019 to 30 June 2022. A performance condition which comprises the following: – Relative Total Shareholder Returns (50%); and – Return on Capital Employed (50%). 42 Westgold Resources Limited Annual Report 2020 Financial Report Remuneration Report (Audited)continued How is performance measured? 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 Below Index Equal to the Index % Contribution to the Number of Employee Options to Vest 0% 50% Above Index and below 15% above the Index Pro-rata from 50% to 100% 15% above the Index 100% 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% 0% 50% WACC (calculated as above) + between 3% and 6% Pro-rata from 50% to 100% WACC (calculated as above) + 6% 100% When is performance measured? Tranche 3 What happens if an executive leaves? The measurement date is 31 March 2022 unless otherwise determined by the Board. Executives must exercise the options on the vesting date. 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. What happens if there is a change of control? 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). Westgold Resources Limited Annual Report 2020 43 6. PERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES Remuneration earned by executives in 2020 The actual remuneration earned by executives in the year ended 30 June 2020 is set out in the Table on page 46. This provides shareholders with a view of the remuneration paid to executives for performance in FY2020 year. Use of board discretion over remuneration outcomes During the year the Remuneration and Nomination Committee – Considered the appropriateness of awarding STI in relation to performance outcomes and market conditions; – Reviewed the personal KPIs for all senior executives in line with the short term incentive arrangements; and – Determined the appropriate total remuneration packages for new appointments of senior executives to ensure alignment to the market and the Company’s stated objectives. 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 FY2020 as disclosed in the Table on page 42, were paid in August 2020. LTI performance and outcomes ZEPO’s have been granted in Tranches during FY2019 (Tranche 1 and 2) and FY2020 (Tranche 3) and are subject to performance hurdles. – Tranche 1 did not meet the required vesting conditions and have therefore lapsed. – Tranche 2 has a three-year vesting period ending in June 2021. – Tranche 3 has a three-year vesting period ending in June 2022. The 153,810 Tranche 3 ZEPO’s granted to the Executive Chairman in May 2020 are still subject to shareholder approval at the upcoming AGM. Other Executive were granted a total 530,331 Tranche 3 ZEPO’s in May 2020 under the ESOP. For further details of options granted and vested refer to Table 3 below. 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. Closing share price Profit (loss) per share (cents) Net tangible assets per share Dividend paid per shares (cents) 30 June 16 * 30 June 17 * 30 June 18 * 30 June 19 * 30 June 20 N/A (6.75) $0.34 – $1.84 5.18 $0.98 – $1.85 (0.34) $1.12 – $1.88 3.74 $1.14 – $2.09 8.65 $1.24 – * The comparatives have not been adjusted for changes due to the adoption of AASB 15, AASB 16 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. 44 Westgold Resources Limited Annual Report 2020 Financial Report Remuneration Report (Audited)continued 7. 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. Name PG Cook (Executive Chairman) DA Fullarton (Chief Financial Officer)1 JS Norregaard (Chief Executive Officer - MPL)2 A Buckingham (Chief Operating Officer) PM Storey (General Manager MGO) PW Wilding (General Manager CGO) DP Stuart (General Manager FGO)2 Base Salary $ Superannuation Notice Period Termination Payment 580,000 250,000 500,000 400,000 300,000 300,000 300,000 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 3 months 6 months base salary 3 months Per NES3 3 months 6 months base salary 3 months 3 months 3 months 3 months 3 months Per NES3 Per NES3 Per NES3 Per NES3 Per NES3 L Smith (Company Secretary & General Counsel) 250,000 1. 2. 3. DA Fullarton was promoted to the position of Chief Executive Officer with effect from 1 July 2020. JS Norregaard and DP Stuart departed on 14 August 2020. NES are 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. Westgold Resources Limited Annual Report 2020 45 % d e t a l e r e c n a m r o f r e P l a t o T - n o N s n o i t p O e v a e l n o i t a u n n a r e p u S s t i f e n e b t i f e n e b s u n o b h s a C s e e f e c i v r e s g n o L y r a t e n o m e v a e l l a u n n A d n a y r a l a S d e s a b - e r a h S t n e m y a p m r e t g n o L s t i f e n e b - t s o P t n e m y o p m e l m r e t t r o h S S T N E M E G N A R R A L A U T C A R T N O C E V I T U C E X E . 8 – – – – – 2 1 6 – 6 0 1 6 – 6 – – – 0 0 5 6 3 , 0 0 6 7 8 , 0 0 6 7 8 , 0 0 5 6 3 , 0 0 0 0 4 , 0 0 2 8 8 2 , – – – – – – – – – – – – – – 7 6 1 , 3 0 0 6 7 , 0 0 6 7 , 7 6 3 8 1 , – – – – – – – – – – – – – – – – – – 3 3 3 , 3 3 0 0 0 0 8 , 0 0 0 0 8 , 0 0 5 6 3 , 0 0 0 0 4 , 3 3 8 9 6 2 , , 7 7 9 3 1 8 1 5 6 4 1 , 0 0 5 4 1 , 9 9 9 4 2 , 1 6 8 0 1 , 5 1 6 4 4 , 0 5 2 4 9 , 1 0 1 , 0 1 6 7 9 3 , 2 4 3 8 7 0 6 1 6 , 6 3 1 , 1 5 5 6 0 3 , 5 1 4 6 0 8 , 1 0 4 1 7 5 , 3 3 2 9 4 5 6 7 1 , 2 8 9 4 1 , 7 5 0 0 1 , 2 2 4 , 1 2 9 7 9 7 1 , 9 7 9 7 1 , – – 9 0 7 9 6 , 3 7 7 3 1 , 8 0 8 3 2 3 , ) 7 1 3 0 1 ( , , 4 1 8 8 4 1 ) 8 7 8 6 ( , 1 5 1 , 3 9 0 4 , 8 4 6 3 9 , 1 5 3 , 1 8 3 4 , 8 4 6 3 9 , 0 5 2 , 6 0 0 5 , 2 1 0 0 0 0 1 , 0 0 5 7 , 0 0 5 7 , 2 9 4 5 , 1 8 3 , 3 6 8 1 , 1 0 9 7 4 , 2 4 1 , 3 1 4 2 , 6 7 1 4 2 , 6 7 . ) r e c ffi O l 0 0 0 5 2 , 8 9 9 4 2 , 9 9 9 4 2 , 0 0 0 5 2 , 2 9 9 4 2 , 0 3 0 2 1 , 1 7 9 2 1 , 3 4 1 , 4 7 1 8 , 1 2 6 1 5 , 2 1 5 6 4 3 1 2 , 2 3 8 , 1 3 2 9 5 5 7 , 9 5 5 7 , 1 3 2 9 1 , 2 6 4 8 3 , 5 9 4 9 , 9 6 7 0 3 , – – – 7 7 0 3 2 , 7 7 0 3 2 , 8 9 8 6 1 , 5 2 6 0 2 , , 0 5 7 8 4 2 – – 1 2 9 0 3 , 0 5 2 8 3 , 0 5 7 4 2 , 2 0 5 , 2 2 5 0 3 5 , 3 2 4 0 0 5 , 3 0 3 8 0 5 , 3 0 3 1 5 1 , 9 9 1 2 2 1 , 2 4 0 4 0 1 , 2 3 1 , 1 1 9 3 5 6 3 1 , – 0 9 8 , 1 0 5 2 9 , 9 4 6 3 , 8 3 7 4 1 , 8 6 6 9 , – – – 8 5 9 6 4 , 0 9 8 0 9 2 , 6 1 1 , 1 2 1 6 3 7 8 4 , 8 8 5 4 3 2 , 8 2 9 9 1 2 , , 5 4 5 6 0 2 , 3 . ’ l n o i t c e e s e e y o p m e e h t l t a y r a l a s s a i t u o d a p s a w m u m x a m e h t i f o s s e c x e n i r e p u s d e m e e d f o t n u o m a e h t , e s a b n o i t u b i r t n o c r e p u s i m u m x a m e h t d e h c a e r e v a h s e e y o p m e e r e h W l . l y e v i t c e p s e r 0 2 0 2 y r a u r b e F 6 2 d n a 0 2 0 2 y r a u n a J 3 , 9 1 0 2 r e b m e c e D 9 1 , 9 1 0 2 t s u g u A 1 3 n o d e t r a p e d t e h S V S d n a t r o o N J D , y b e k O W D , g n o r t s m r A B R . 0 2 0 2 t s u g u A 4 1 n o d n e r a e y e h t o t t n e u q e s b u s d e t r a p e d t r a u t S P D d n a d r a a g e r r o N S J . l y e v i t c e p s e r 0 2 0 2 y r a u r b e F 3 d n a 9 1 0 2 r e b m e c e D 9 1 , 9 1 0 2 r e b o t c O 7 n o d e t n o p p a e r e w i l l e w m a r B C W d n a h t i m S L , t r a u t S P D i a c n a n F i i f e h C f o n o i t i s o p e h t d e h y l i l s u o v e r p e h s ( 0 2 0 2 y u J l 1 n o r e c ffi O e v i i t u c e x E f e h C o t d e t o m o r p s a w n o t r a l l u F A D . 9 1 0 2 r e b o t c O 1 n o r e c ffi O g n i t a r e p O i f e h C s a d e t n o p p a i s a w m a h g n k c u B A i . 1 . 2 . 3 . 4 . 5 . 6 6 3 7 8 4 , 8 8 5 4 3 2 , 8 2 9 9 1 2 , 8 7 3 , 6 7 4 3 , s l a t o T s r o t c e r i D e v i t u c e x e - n o N 0 2 0 2 ) 6 , 3 ( l l e w m a r B C W n e n a a M n a V J F ) 4 ( t e h S V S n n a w h c S B P n o t w e N J P r o t c e r i D e v i t u c e x E ) ( 4 k o o C G P l e n n o s r e p t n e m e g a n a m y e k r e h t O ) 6 , 5 ( d r a a g e r r o N S J ) 6 , 2 ( m a h g n k c u B A i 1 n o t r a l l u F A D ) 5 ( g n d i l i W W P ) 5 , 3 ( t r a u t S P D ) 5 ( y e r o t S M P ) 3 ( h t i m S L ) ( 4 g n o r t s m r A B R ) ( 4 y b e k O W D ) 4 ( t r o o N J D 46 Westgold Resources Limited Annual Report 2020 Financial Report Remuneration Report (Audited)continued % d e t a l e r e c n a m r o f r e P l a t o T s n o i t p O e v a e l n o i t a u n n a r e p u S s t i f e n e b e c i v r e s g n o L - n o N y r a t e n o m t i f e n e b e v a e l l a u n n A s u n o b h s a C s e e f d n a y r a l a S d e s a b - e r a h S t n e m y a p m r e t g n o L s t i f e n e b - t s o P t n e m y o p m e l m r e t t r o h S – – – – 4 1 1 1 2 1 1 1 9 – 0 1 2 1 0 0 6 7 8 , 0 0 6 7 8 , 0 0 6 7 8 , 0 0 0 0 8 , 0 0 8 2 4 3 , – – – – – – – – – – 0 0 6 7 , 0 0 6 7 , 0 0 6 7 , – 0 0 8 2 2 , – – – – – – – – – – – – – – – 0 0 0 0 8 , 0 0 0 0 8 , 0 0 0 0 8 , 0 0 0 0 8 , 0 0 0 0 2 3 , , 0 2 2 0 0 1 , 1 , 1 7 5 2 8 2 9 9 3 9 6 8 , 3 7 4 9 9 1 , 4 1 2 8 1 , 3 9 7 5 , 5 1 5 , 5 2 1 4 9 5 2 , 0 4 9 5 , 1 4 4 6 , 5 9 6 4 , 2 9 1 , 4 1 0 0 7 3 5 1 , , 5 8 5 9 0 6 0 0 0 6 9 , 9 5 5 , 1 2 5 6 0 8 9 8 3 , , 0 2 9 0 0 4 7 8 4 4 , 7 8 4 4 , 2 0 3 , 1 9 3 2 5 4 5 3 , 4 0 1 , 1 9 3 9 0 6 5 , 9 4 8 9 7 3 , 1 2 8 6 5 , 8 4 9 3 3 3 , 9 3 7 3 , , 8 4 5 6 5 2 4 , , 8 4 3 9 9 5 4 , 9 3 6 2 9 5 , 9 3 6 2 9 5 , 7 4 5 , 1 8 3 5 9 1 , 1 5 4 3 , 1 6 1 , 1 1 5 8 7 , 4 0 8 , 1 9 5 3 9 5 , 9 5 3 9 5 , 8 5 1 , 7 2 8 1 0 5 2 , 0 0 6 6 2 , 5 4 0 , 1 2 3 9 2 , 3 2 0 5 7 3 2 , 0 2 3 8 9 1 , 0 2 1 , 1 2 2 – – – 0 7 8 2 , 2 4 3 7 , 9 0 8 7 , 2 0 4 0 3 , 2 0 4 0 3 , 5 4 0 3 2 , 0 7 3 9 1 , 9 9 0 0 1 , 3 8 4 3 2 , ) 0 0 4 ( 6 9 0 7 , 0 8 5 , 1 0 1 0 8 5 , 1 0 1 0 0 7 7 4 , 0 5 4 5 4 , 0 0 7 5 3 , – 0 5 7 9 3 , 0 5 7 9 3 , 9 6 8 5 8 2 , 7 5 0 7 8 2 , 0 0 0 0 8 2 , , 6 3 9 6 3 3 2 9 1 , 5 4 2 0 0 0 0 5 2 , 0 5 0 8 5 4 , 8 9 1 , 6 1 8 2 , 0 5 0 8 5 4 , 8 9 1 , 6 3 1 , 3 s r o t c e r i D e v i t u c e x e - n o N 9 1 0 2 n n a w h c S B P n o t w e N J P n e n a a M n a V J F t e h S V S t n e m e g a n a m y e k r e h t O s r o t c e r i D e v i t u c e x E ) ( 4 d r a a g e r r o N S J ) ( 4 k o o C G P ) 4 , 1 ( y e r o t S M P l e n n o s r e p ) 4 , 2 ( g n d i l i W W P ) 4 , 2 ( g n o r t s m r A B R ) 4 , 1 ( t r o o N J D ) 3 ( y b e k O W D n o t r a l l u F A D s l a t o T . ’ l n o i t c e e s e e y o p m e e h t l t a y r a l a s s a i t u o d a p s a w m u m x a m e h t i f o s s e c x e n i r e p u s d e m e e d f o t n u o m a e h t , e s a b n o i t u b i r t n o c r e p u s i m u m x a m e h t d e h c a e r e v a h s e e y o p m e e r e h W l . , 3 3 7 6 6 $ f o d e d v o r p s e c v r e s i i r o f n o i t a r e n u m e r f o t c e p s e r n i d e t i i m L o r o t n a P m o r f d e r e v o c e r s t n u o m a s e d u c n l I . 8 1 0 2 y u J l i 1 n o d e t n o p p a e r e w g n o r t s m r A B R d n a g n d i l i W W P . l y e v i t c e p s e r 8 1 0 2 t s u g u A 0 2 d n a 8 1 0 2 y u J 3 2 n o d e t n o p p a e r e w l i t r o o N J D d n a y e r o t S M P . 1 . 2 . 3 . 4 Westgold Resources Limited Annual Report 2020 47 d e s p a L d e t s e V e t a d y r i p x E e t a d g n i t s e V e t a d t n a r g t a e u l a v l a t o T n o i t p o r e p e u l a v r i a F e t a d t n a r G d e t n a r G e h c n a r T e v i t u c e x E I 1 0 0 2 T C A S N O I T A R O P R O C E H T R E D N U D E R U Q E R S E R U S O L C S I D Y R O T U T A T S L A N O I T I D D A . 9 d o i r e p e h t g n i r u d g n i s p a l r o d e t s e v , d e t n a r g ) s ’ O P E Z ( s n o i t p o e c i r p e s i c r e x e o r e z d o g t s e W l : 1 e l b a T 6 3 9 9 6 , 6 3 9 9 6 , – – – – 1 1 6 2 2 , 2 1 6 2 2 , – – – – 8 1 2 , 5 4 7 1 2 , 5 4 – – – – – – – – – – 4 3 1 , 7 2 4 3 1 , 7 2 – – – – – – – – – – – – – – – – – – – – – – – – – – 0 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 5 4 9 5 1 $ , 0 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 3 4 4 4 3 $ , 1 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 , 9 3 9 2 2 $ 1 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 3 4 4 4 3 $ , 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 3 4 7 0 1 1 , 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 3 7 6 2 8 , 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 5 6 0 5 , 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 7 0 2 , 5 1 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 9 1 9 6 , 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 7 0 2 , 5 1 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 0 4 6 8 2 , 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 1 8 3 , 1 2 0 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 0 1 3 0 1 , 0 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 9 6 2 , 2 2 1 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 1 3 8 4 1 , 1 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 9 6 2 , 2 2 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 5 7 3 , 6 7 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 6 1 0 7 5 , 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 8 6 3 4 3 , 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 7 5 6 5 2 , 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 8 7 0 6 , 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 8 4 2 8 1 , 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 3 0 3 8 , 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 8 4 2 8 1 , 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 8 6 3 4 3 , 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 7 5 6 5 2 , . 3 2 0 $ 8 9 0 $ . . 3 3 0 $ 8 9 0 $ . 4 4 . 1 $ 5 1 . 2 $ . 2 2 0 $ 4 3 . 1 $ . 1 3 0 $ 4 3 . 1 $ 4 4 . 1 $ 5 1 . 2 $ . 3 2 0 $ 8 9 0 $ . . 3 3 0 $ 8 9 0 $ . 4 4 . 1 $ 5 1 . 2 $ 4 4 . 1 $ 5 1 . 2 $ . 2 2 0 $ 4 3 . 1 $ . 1 3 0 $ 4 3 . 1 $ 4 4 . 1 $ 5 1 . 2 $ 8 1 0 2 / 1 1 / 8 2 6 3 9 9 6 , 8 1 0 2 / 1 1 / 8 2 6 3 9 9 6 , 8 1 0 2 / 1 1 / 8 2 6 3 9 9 6 , 8 1 0 2 / 1 1 / 8 2 6 3 9 9 6 , 0 2 0 2 / 5 0 / 7 0 5 0 9 6 7 , 0 2 0 2 / 5 0 / 7 0 5 0 9 6 7 , 9 1 0 2 / 5 0 / 3 2 1 1 6 2 2 , 9 1 0 2 / 5 0 / 3 2 2 1 6 2 2 , 9 1 0 2 / 5 0 / 3 2 1 1 6 2 2 , 9 1 0 2 / 5 0 / 3 2 2 1 6 2 2 , 0 2 0 2 / 5 0 / 7 0 9 8 8 9 1 , 0 2 0 2 / 5 0 / 7 0 9 8 8 9 1 , 8 1 0 2 / 1 1 / 8 2 8 1 2 , 5 4 8 1 0 2 / 1 1 / 8 2 7 1 2 , 5 4 8 1 0 2 / 1 1 / 8 2 8 1 2 , 5 4 8 1 0 2 / 1 1 / 8 2 7 1 2 , 5 4 0 2 0 2 / 5 0 / 7 0 8 3 0 3 5 , 0 2 0 2 / 5 0 / 7 0 8 3 0 3 5 , 0 2 0 2 / 5 0 / 7 0 7 6 8 3 2 , 0 2 0 2 / 5 0 / 7 0 7 6 8 3 2 , 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 0 2 0 2 / 5 0 / 7 0 7 6 8 3 2 , 0 2 0 2 / 5 0 / 7 0 7 6 8 3 2 , 1 1 2 2 3 3 1 1 2 2 3 3 1 1 2 2 3 3 3 3 1 1 2 2 3 3 k o o C G P n o t r a l l u F A D d r a a g e r r o N S J m a h g n k c u B A i y e r o t S M P 48 Westgold Resources Limited Annual Report 2020 Financial Report Remuneration Report (Audited)continued t a e u l a v l a t o T r e p e u l a v r i a F d e s p a L d e t s e V e t a d y r i p x E e t a d g n i t s e V e t a d t n a r g n o i t p o e t a d t n a r G d e t n a r G e h c n a r T e v i t u c e x E – – – – 4 3 1 , 7 2 4 3 1 , 7 2 – – 4 3 1 , 7 2 4 3 1 , 7 2 7 1 9 3 3 , 8 1 9 3 3 , 7 1 9 3 3 , 8 1 9 3 3 , 1 1 6 2 2 , 2 1 6 2 2 , 1 1 6 2 2 , 2 1 6 2 2 , – – – – – – – – – – – – – – – – – – 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 8 7 0 6 , 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 8 4 2 8 1 , 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 3 0 3 8 , 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 8 4 2 8 1 , 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 8 6 3 4 3 , 2 2 0 2 / 6 0 / 0 3 2 2 0 2 / 6 0 / 0 3 7 5 6 5 2 , 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 8 7 0 6 , 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 8 4 2 8 1 , 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 3 0 3 8 , 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 8 4 2 8 1 , 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 7 9 5 7 , 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 0 1 8 2 2 , 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 9 7 3 0 1 , 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 0 1 8 2 2 , 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 5 6 0 5 , 2 2 0 2 / 6 0 / 0 3 0 2 0 2 / 6 0 / 0 3 7 0 2 , 5 1 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 9 1 9 6 , 3 2 0 2 / 6 0 / 0 3 1 2 0 2 / 6 0 / 0 3 7 0 2 , 5 1 . 2 2 0 $ 4 3 . 1 $ . 1 3 0 $ 4 3 . 1 $ 4 4 . 1 $ 5 1 . 2 $ . 2 2 0 $ 4 3 . 1 $ . 1 3 0 $ 4 3 . 1 $ . 2 2 0 $ 4 3 . 1 $ . 1 3 0 $ 4 3 . 1 $ . 2 2 0 $ 4 3 . 1 $ . 1 3 0 $ 4 3 . 1 $ 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 0 2 0 2 / 5 0 / 7 0 7 6 8 3 2 , 0 2 0 2 / 5 0 / 7 0 7 6 8 3 2 , 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 9 1 0 2 / 5 0 / 3 2 4 3 1 , 7 2 9 1 0 2 / 5 0 / 3 2 7 1 9 3 3 , 9 1 0 2 / 5 0 / 3 2 8 1 9 3 3 , 9 1 0 2 / 5 0 / 3 2 7 1 9 3 3 , 9 1 0 2 / 5 0 / 3 2 8 1 9 3 3 , 9 1 0 2 / 5 0 / 3 2 1 1 6 2 2 , 9 1 0 2 / 5 0 / 3 2 2 1 6 2 2 , 9 1 0 2 / 5 0 / 3 2 1 1 6 2 2 , 9 1 0 2 / 5 0 / 3 2 2 1 6 2 2 , 1 1 2 2 3 3 1 1 2 2 1 1 2 2 1 1 2 2 g n d i l i W W P g n o r t s m r A B R t r o o N J D y b e k O W D . l a v o r p p a l r e d o h e r a h s o t j t c e b u s e r a n a m r i a h C e v i t u c e x E e h t o t d e t n a r g s n o i t p o 3 e h c n a r T ; 0 2 0 2 Y F n i d e t n a r g s a w 3 e h c n a r T – . 9 1 0 2 Y F n i d e t n a r g e r e w 2 d n a 1 e h c n a r T – . 0 2 0 2 Y F n i d e s p a l 1 e h c n a r T – s e t o N . n o i t a n g i s e r n o y e t a d e m m l i i e s p a l s O P E Z – e h t n o s l i a t e d r o F . t n a r g e h t f o d o i r e p g n i t s e v e h t r e v o n o i t a s n e p m o c n i d e s i n g o c e r s i d o i r e p e h t g n i r u d d e t n a r g s t n e m y a p d e s a b - e r a h s e h t l f o e u a v e h T . 9 2 e t o N o t r e f e r e s a e p l , d e s u s n o i t p m u s s a d n a s l e d o m g n d u c n l i i , s n o i t p o e h t f o n o i t a u a v l Westgold Resources Limited Annual Report 2020 49 Table 2: Shareholdings of key management personnel (including nominees) Directors PG Cook PB Schwann FJ Van Maanen WC Bramwell Executives DA Fullarton JS Norregaard A Buckingham PM Storey PW Wilding DP Stuart L Smith Total Balance held at 1 July 2019 On exercise of options Net change other1 Balance held at 30 June 2020 10,779,066 2,250,000 (2,266,144) 10,762,922 – 435,521 – – – – – – – – – – – – – – – – – – – – – – 435,521 – 5,000 5,000 – – – – – – – – – – – – 11,214,587 2,250,000 (2,261,144) 11,203,443 1. Represents acquisition or disposal of shares on market. Table 3: Option holdings of key management personnel (including nominees) Options Directors PG Cook PB Schwann FJ Van Maanen WC Bramwell Executives DA Fullarton JS Norregaard A Buckingham PM Storey PW Wilding DP Stuart L Smith Total Balance at beginning of year 1 July 2019 Granted as remuneration Exercised Lapsed Balance at end of year 30 June 2020 Not vested and not exercisable Vested and exercisable 3,929,744 153,810 (2,250,000) (139,872) 1,693,682 293,682 1,400,000 – – – – – – 90,446 39,778 1,180,869 106,076 – – – – – – – – – – – – – – (45,223) 85,001 85,001 – – – – (90,435) 1,196,510 196,510 1,000,000 885,670 47,734 (650,000) (67,835) 215,569 115,569 100,000 108,536 108,536 – – 47,734 47,734 – – – – – – (54,268) 102,002 102,002 (54,268) 102,002 102,002 – – – – – – – – – – 6,303,801 442,866 (2,900,000) (451,901) 3,394,766 894,766 2,500,000 50 Westgold Resources Limited Annual Report 2020 Financial Report Remuneration Report (Audited)continued Loans to key management personnel and their related parties There were no loans to key management personnel during the years ended 30 June 2020 and 30 June 2019. 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 2020 and 30 June 2019. 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 key statements, frameworks, policies and charters are all available on the Company’s website at: www.westgold.com.au/site/about-us/corporate-governance ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORTING The Company released an inaugural ESG report outlining the impacts, footprint and achievements of the Group on 19 August 2020. Westgold has made significant corporate governance changes during the year to address perceived deficiencies in its disclosure and transparency of its activity in regard to ESG. Apart from actively addressing matters which lead to previous low ratings there have been no discussion of any ESG controversies or criticisms in the public domain. AUDITOR’S INDEPENDENCE AND NON-AUDIT SERVICES Auditor’s independence declaration The Directors received the Auditor’s Independence Declaration, as set out on page 52, 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 32): Tax compliance services $ 208,409 Signed in accordance with a resolution of the Directors. PG Cook Executive Chairman Perth, 28 August 2020 Westgold Resources Limited Annual Report 2020 51 Financial Report Auditors 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 2020, 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 28 August 2020 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:DA:WGX:047 52 Westgold Resources Limited Annual Report 2020 Financial Report Consolidated Statement of Comprehensive Income Continuing operations Revenue Cost of sales Gross profit Other income Gain on demerger of subsidiary Finance costs Other expenses Accumulated mill scats written off Net gain on fair value changes of financial assets Exploration and evaluation expenditure written off Profit before income tax from continuing operations Income tax (expense) benefit Profit for the year from continuing operations Discontinued operations Profit from discontinued operations after tax Net profit for the year Other comprehensive profit for the year, net of tax Total comprehensive profit for the year Total comprehensive profit attributable to: members of the parent entity Earnings per share attributable to the ordinary equity holders of the parent (cents per share) Basic profit per share Continuing operations Discontinued operations Total operations Diluted profit per share Continuing operations Discontinued operations Total operations Notes 2020 2019 5 7(a) 6 38 7(b) 7(c) 15 18 8 39 9 9 9 9 492,268,271 418,317,447 (462,752,732) (408,078,123) 29,515,539 10,239,324 5,921,274 8,727,618 5,519,887 – (918,881) (1,325,025) (7,915,557) (9,129,172) – (11,628,184) 8,888,756 24,474,899 (356,317) (5,471,706) 43,862,432 12,680,023 (9,255,117) 807,116 34,607,315 13,487,139 – 642,925 34,607,315 14,130,064 – – 34,607,315 14,130,064 34,607,315 14,130,064 34,607,315 14,130,064 8.65 – 8.65 8.65 – 8.65 3.57 0.17 3.74 3.57 0.17 3.74 Westgold Resources Limited Annual Report 2020 53 for the year ended 30 June 2020 Financial Report Consolidated Statement of Financial Position Notes 2020 2019 10 11 12 13 14 15 16 17 18 19 20 21 23 25 22 24 8 26 27 28 28 137,564,914 67,196,289 7,231,137 6,992,121 43,948,165 45,502,914 3,369,998 1,336,486 1,149,449 1,427,836 193,263,663 122,455,646 13,000,000 56,210,813 161,893,032 175,572,503 298,513,129 218,207,334 78,874,701 104,276,449 11,942,577 – 564,223,439 554,267,099 757,487,102 676,722,745 69,664,918 57,741,966 9,786,926 7,963,523 23,734,814 18,271,020 198,841 25,470,487 103,385,499 109,446,996 78,490,073 70,323,565 14,091,636 18,465,857 39,659,067 35,000,416 132,240,776 123,789,838 235,626,275 233,236,834 521,860,827 443,485,911 356,130,055 299,494,861 (30,229,223) (51,784,989) 14,466,364 14,282,408 181,493,631 181,493,631 521,860,827 443,485,911 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 Property, plant and equipment Mine properties and development Exploration and evaluation expenditure Right-of-use assets 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 54 Westgold Resources Limited Annual Report 2020 as at 30 June 2020 Financial Report Consolidated Statement of Cash Flows OPERATING ACTIVITIES Receipts from customers Interest received Receipts from other income Payments to suppliers and employees Interest paid Income tax (paid) refunded Notes 2020 2019 466,596,319 478,864,463 691,995 4,387,876 2,603,081 5,940,455 (311,533,581) (406,035,568) (2,293,877) (2,038,023) (332,297) 112,679 Net cash flows from operating activities 10 155,731,640 81,231,882 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 Proceeds from disposal of a subsidiary (31,486,090) (34,096,282) (132,909,127) (89,329,478) (14,049,293) (16,411,426) (2,057,789) (138,153) 15 56,113,502 5,798,098 1,939,129 2,197,033 – 22,314,937 (86,966) 258,387 – (141,290) (122,278,247) (109,806,561) Cash relinquished on disposal of a subsidiary 38 Proceeds from (payments for) performance bond facility Net cash flows used in investing activities FINANCING ACTIVITIES Payment of hire purchase arrangements 4(g) (19,331,761) (20,848,905) Payment for lease liabilities Proceeds from gold prepayment Proceeds from share issue Payments for share issue costs Net cash flows from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year 25 26(b) (7,753,813) – – 20,853,550 66,542,506 23,489,570 (2,541,700) (1,170,000) 36,915,232 22,324,215 70,368,625 (6,250,464) 67,196,289 73,446,753 Cash and cash equivalents at the end of the year 10 137,564,914 67,196,289 Westgold Resources Limited Annual Report 2020 55 for the year ended 30 June 2020 Financial Report Consolidated Statement of Changes in Equity 2019 At 1 July 2019 Profit for the year Other comprehensive income, net of tax Total comprehensive profit for the year net of tax Transactions with owners in their capacity as owners Share-based payments Capital reduction via share distribution Issue of share capital Share issue costs, net of tax Demerger dividend (Note 38) At 30 June 2020 2019 At 1 July 2018 Profit for the year Other comprehensive income, net of tax Total comprehensive profit for the year net of tax Transactions with owners in their capacity as owners Issued capital Accumulated losses Share-based payments reserve Equity reserve Total Equity 299,494,861 (51,784,989) 14,282,408 181,493,631 443,485,911 – – 34,607,315 – – 34,607,315 – – – – – 34,607,315 – – 34,607,315 – (8,803,840) 67,644,506 (2,205,472) – – – – (13,051,549) 183,956 – 183,956 – – – – (8,803,840) – 67,644,506 – (2,205,472) (13,051,549) 355,103,055 (30,229,223) 14,466,364 181,493,631 521,860,827 276,976,897 (65,915,053) 13,260,686 181,493,631 405,816,161 – 14,130,064 – – – 14,130,064 – – – – 14,130,064 – – – 14,130,064 Share-based payments Issue of share capital Share issue costs, net of tax At 30 June 2019 – 23,489,570 (971,606) – – – 1,021,722 – – – 1,021,722 – 23,489,570 – (971,606) 299,494,861 (51,784,989) 14,282,408 181,493,631 443,485,911 56 Westgold Resources Limited Annual Report 2020 for the year ended 30 June 2020 Financial Report Notes to the Consolidated Financial Statements 1. CORPORATE INFORMATION The financial report of Westgold Resources Limited for the year ended 30 June 2020 was authorised for issue in accordance with a resolution of the Directors on 28 August 2020. 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 2019. Other than the changes described in Note 40, 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. 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 Group 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. Westgold Resources Limited Annual Report 2020 57 for the year ended 30 June 2020 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) Operating segments (continued) 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”. (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 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). 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. 58 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (g) Financial Instruments (continued) 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. 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. Westgold Resources Limited Annual Report 2020 59 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (g) Financial Instruments (continued) 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. 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) 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. 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(o) 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. (l) 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 60 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 2. (l) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Exploration and evaluation expenditure (continued) – 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. (m) 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(o) 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. 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. Westgold Resources Limited Annual Report 2020 61 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (m) Mine properties and development (continued) 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. 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. 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. (n) 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 of disposal 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. 62 Westgold Resources Limited Annual Report 2020 (o) 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. Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (o) Impairment of non-financial assets (continued) 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. (p) 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. (q) Lease liabilities The Group has lease contracts for various items of mining equipment, motor vehicles and buildings used in its operations. Upon adoption of AASB 16, all leases with the exception of short term (under 12 months) and low value leases, are recognised on the balance sheet as a right-of-use asset and a corresponding interest bearing liability. Lease costs are recognized in the income statement over the lease term in the form of depreciation on the right-of-use asset and finance charges representing the unwinding of the discount on the lease liability. The Group recognises leases entered into after 1 July 2019 using the interest rate implicit in the lease (refer to Note 40 for the accounting policy). Interest revenue (r) 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. Revenue from contracts with customers (s) 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. Westgold Resources Limited Annual Report 2020 63 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (t) 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. (u) 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. (v) 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 29. 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. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of dilutive earnings per share. (w) 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. 64 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (w) Employee benefits (continued) 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. (x) 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. (y) 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. Westgold Resources Limited Annual Report 2020 65 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (y) Income tax (continued) 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. 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 judgements – 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. 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. 66 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED) Significant judgements (continued) 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 Australian 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 2.2% (2019: 1.6%), and changes in discount rates. The applicable discount rates are based on the expected life of mine for each operation. 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. 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. Changes in estimates are accounted for prospectively. Westgold Resources Limited Annual Report 2020 67 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. 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(o) for further discussion on the impairment assessment process undertaken by the Group. 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. 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. 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED) Significant accounting estimates and assumptions (continued) 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 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. 68 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED) Significant accounting estimates and assumptions (continued) 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. 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 29. 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. Estimating the incremental borrowing rate Where the Group cannot readily determine the interest rate implicit in its leases, it uses the relevant incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Significant judgement in determining the lease term of contracts with renewal options The Group determines the lease term as the non- cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. Significant judgement in relation to future cash flow The Group has several lease contracts relating to premises and power stations that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised. For renewal options that were reasonably certain to be exercised, these have been included in the calculation of right-of-use assets and lease liabilities. 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. (a) Interest rate risk 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 23 and 24. 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. Westgold Resources Limited Annual Report 2020 69 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Risk exposures and responses (continued) At the reporting date the Group’s exposure to interest rate risk for classes of financial assets and financial liabilities is set out below. 2020 Financial assets Cash and cash equivalents Trade and other receivables Royalties receivable Other financial assets Financial liabilities Trade and other payables Lease liabilities Interest-bearing liabilities Net financial assets 2019 Financial assets Cash and cash equivalents Trade and other receivables Royalties receivable Other financial assets Financial liabilities Trade and other payables Interest-bearing liabilities Net financial liabilities Interest rate risk exposure Judgements of reasonably possible movements: + 0.5% (50 basis points) - 0.5% (50 basis points) 70 Westgold Resources Limited Annual Report 2020 Floating interest rate Fixed interest Non-interest bearing Total carrying amount 137,218,827 346,087 – 137,564,914 – – – – 7,231,137 7,231,137 – 13,000,000 13,000,000 1,149,449 – 1,149,449 137,218,827 1,495,536 7,231,137 158,945,500 – – (69,664,918) (69,664,918) – (12,222,659) – (12,222,659) – (25,603,791) – (25,603,791) – (37,826,450) (69,024,918) (107,491,368) – 67,196,289 – – – – – – – 51,454,132 – 67,196,289 6,992,121 6,992,121 – 15,000,000 15,000,000 1,427,836 – 1,427,836 67,196,289 1,427,836 6,992,121 90,616,246 – – (57,741,966) (57,741,966) – (36,736,877) – (36,736,877) – (36,736,877) (57,491,966) (94,478,843) (3,862,597) Post tax profit higher (lower) Other Comprehensive Income higher (lower) 30 June 2020 30 June 2019 30 June 2020 30 June 2019 481,477 235,187 (481,477) (235,187) – – – – Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Interest rate risk exposure (continued) (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 The Group’s operations were exposed to equity security price fluctuations arising from investments in equity securities. The Group however disposed of all security holdings at 30 June 2020. Refer to Note 15 for details of equity investments at fair value through profit or loss held at 30 June 2020. (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 200,000 ounces at an average price of $2,062 per ounce ending in February 2022, which the Group will deliver physical gold to settle. There was therefore no exposure on recognised financial instruments at the balance sheet date other than the lithium royalty that has been valued by reference to the expected commodity price (refer to Note 4(f)). (e) Liquidity risk 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 hire purchase arrangements. The table below reflects all contractually fixed payables for settlement, repayment and interest resulting from recognised financial liabilities as of 30 June 2020. 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 2020 2019 (83,348,476) (67,993,428) (11,222,942) (9,104,584) (14,542,416) (19,562,452) – – (109,113,834) (96,660,464) Westgold Resources Limited Annual Report 2020 71 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Risk exposures and responses (continued) 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. <6 months 6-12 months 1-5 years >5 years Total 2020 Financial assets Cash and equivalents Trade and other receivables Royalties receivable Other financial assets Financial liabilities Trade and other payables Lease liabilities Interest-bearing loans 138,486,771 7,231,137 – 1,149,449 146,867,357 (69,664,918) – – – – – – – – – 138,486,771 – 7,231,137 3,795,334 9,204,666 13,000,000 – – 1,149,449 3,795,334 9,204,666 159,867,357 – – (69,664,918) (4,448,934) (3,306,613) (4,982,152) – (12,737,699) (9,234,624) (7,916,329) (9,560,264) – (26,711,217) (83,348,476) (11,222,942) (14,542,416) – (109,113,834) Net inflow/(outflow) 63,518,881 (11,222,942) (10,747,082) 9,204,666 50,753,523 2019 Financial assets Cash and equivalents Trade and other receivables Royalties receivable Other financial assets Financial liabilities Trade and other payables Interest-bearing loans 67,982,985 6,992,121 – – – – – – 67,982,985 6,992,121 – – 15,000,000 – 15,000,000 1,427,836 76,402,942 – – – 15,000,000 – 1,427,836 – 91,402,942 (57,741,966) – – – (57,741,966) (10,251,462) (9,104,584) (19,562,452) – (38,918,498) (67,993,428) (9,104,584) (19,562,452) – (96,660,464) Net inflow/(outflow) 8,409,514 (9,104,584) (4,562,452) – (5,257,522) (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. 72 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Risk exposures and responses (continued) 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. 2020 Financial assets Instruments carried at fair value Royalties receivable 2019 Financial assets Instruments carried at fair value Listed investments Royalties receivable Sensitivity Analysis Significant unobservable input Ore Processing Lithium price Discount rate Valuation technique market observable inputs (Level 2) Valuation technique non-market observable inputs (Level 3) Quoted market price (Level 1) Total – – – 13,000,000 13,000,000 – 13,000,000 13,000,000 41,210,813 – – 41,210,813 – – 15,000,000 15,000,000 41,210,813 – 15,000,000 56,210,813 Estimated increase / (decrease) in fair value Estimated fair value Estimated fair value 699,572 13,699,572 12,300,428 1,665,314 14,665,314 11,334,686 Variance +/- 5% +/- 20% 100 basis points (846,516) 12,153,484 13,846,516 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. Westgold Resources Limited Annual Report 2020 73 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Risk exposures and responses (continued) (g) Changes in liabilities arising from financing activities Lease liability 2020 Current obligations Non-current obligations Total liabilities Interest bearing liability 2020 Current obligations Non-current obligations Total liabilities 2019 Current obligations Non-current obligations Total liabilities 5. REVENUE Transitional adjustment Cash flows New leases Reclassi- fication adjustment Closing 6,031,093 (7,753,813) 1,722,720 7,425,093 7,425,093 6,935,551 – 5,287,108 (7,425,093) 4,797,566 12,966,644 (7,753,813) 7,009,828 – 12,222,659 Opening Cash flows Additions Reclassi- fication adjustment Closing 18,271,020 (19,331,761) 1,060,741 16,309,721 16,309,721 18,465,857 – 7,137,934 (16,309,721) 9,294,070 36,736,877 (19,331,761) 8,198,675 – 25,603,791 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 Sale of gold at spot Sale of gold under forward contracts Sale of gold under a prepay facility (refer Note 25) Mining and contracting services Total revenue from contracts with customers 2020 2019 264,025,099 160,727,868 201,126,150 215,904,789 25,938,399 16,011,946 1,178,623 25,672,844 492,268,271 418,317,447 Disaggregated revenue per segment has been disclosed in Note 33. No revenue was recognised during the year 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 2020 is as follows: Gold forward contracts - Within 1 year - 1 to 2 years The amounts due are for delivery of gold which will be paid within 3 days of delivery. 74 Westgold Resources Limited Annual Report 2020 2020 2019 247,470,000 247,844,578 164,980,000 113,322,000 412,450,000 361,166,578 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 6. OTHER INCOME Interest income calculated using the effective interest rate method Net gain on sale of assets Other income Total other income 7. EXPENSES (a) Cost of sales Gold production Salaries, wages expense and other employee benefits Operating lease rentals Other production costs Write down in value of inventories to estimated net realisable value Royalty expense 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 Right-of-use assets 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 2020 2019 286,620 308,101 3,031,573 139,435 2,603,081 5,072,351 5,921,274 5,519,887 2020 2019 133,259,379 118,157,970 – 5,065,998 167,889,923 148,191,774 1,005,487 – 20,901,094 14,982,184 632,015 7,787,879 – 739,849 308,958 13,754,669 43,275,574 38,488,019 1,827,771 1,351,598 7,531,333 – 86,121,198 59,558,183 462,752,732 408,078,123 2,694,183 4,579,327 (2,694,183) (4,579,327) 918,881 1,325,025 918,881 1,325,025 The development of the Big Bell Underground Mine is deemed to be a qualifying asset and interest expenses of $2,694,183(2019: $4,579,327) have therefore been capitalised to the underlying qualifying asset. The rate used to determine the amount of borrowing costs eligible for capitalisation was 4.60% (2019: 6.22%). Westgold Resources Limited Annual Report 2020 75 7. EXPENSES (CONTINUED) (c) Other expenses Administration expenses Employee benefits expense Salaries and wages expense Directors' fees and other benefits Other employee benefits Share-based payments expense Other administration expenses Consulting expenses Travel and accommodation expenses Other costs Operating lease rentals Depreciation expense Property plant and equipment Right-of-use assets Total administration expenses Total other expenses 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 Relating to origination and reversal of temporary differences Relating to temporary difference recognised Adjustment in respect of prior year tax losses / DTA Income tax for continuing and discontinuing operations (b) Amounts charged or credited directly to equity Share issue costs 76 Westgold Resources Limited Annual Report 2020 2020 2019 4,343,331 4,379,074 288,200 320,000 95,295 76,046 183,956 1,021,722 4,910,782 5,796,842 1,359,535 1,112,868 191,333 185,768 606,845 1,357,964 – 367,526 2,157,713 3,024,126 344,501 308,204 502,561 – 847,062 308,204 7,915,557 9,129,172 7,915,557 9,129,172 2020 2019 7,140,285 (2,984,035) 332,296 – 3,040,207 (4,137,750) – 3,857,859 (1,257,671) – 9,255,117 (3,263,926) (336,228) (198,394) (336,228) (198,394) Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 8. INCOME TAX (CONTINUED) (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 Accounting profit (loss) before tax from discontinuing operations Total accounting profit before income tax At statutory income tax rate of 30% (2019: 30%) Non-deductible (non-assessable) items Under/over in respect of prior years Income tax expense (benefit) reported in the income statement Tax expense from continuing operations Tax (benefit) expense from discontinued operations Income tax expense (benefit) reported in the income statement (d) Deferred income tax at 30 June relates to the following: 2020 2019 43,862,432 12,680,022 – (1,813,885) 43,862,432 10,866,137 13,158,730 3,259,841 (2,978,238) (3,820,162) (925,375) (2,703,605) 9,255,117 (3,263,926) 9,255,117 (807,116) – (2,456,810) 9,255,117 (3,263,926) Deferred tax liabilities Exploration Consolidated Statement of Financial Position Consolidated Statement of Comprehensive Income 2020 2019 2020 2019 (7,823,986) (20,510,089) (12,686,103) (19,034,322) Trade and other receivables (608,739) (658,745) (50,006) 127,935 Net gain on financial assets AFVTP (3,900,000) (6,414,195) (2,514,195) 6,414,195 Prepayments Deferred mining Inventories (18,830) (13,510) 5,320 13,510 (60,595,582) (32,846,809) 27,748,773 (9,297,893) (5,691,339) (4,384,707) 1,306,632 692,722 Property plant and equipment 291,063 (1,857,819) (2,148,882) (3,941,116) Gross deferred tax liabilities (78,347,413) (66,685,874) Deferred tax assets Financial assets at FVTPL Accrued expenses – – – 742,758 534,117 524,056 (10,061) (211,596) Provision for employee entitlements 3,487,834 2,780,744 (707,090) (738,524) Provision for rehabilitation Business related costs Capital raising costs Recognised tax losses Gross deferred tax assets Net deferred tax liabilities Deferred tax expense (income) (e) Unrecognised losses 16,643,909 8,996,764 (7,647,145) 20,688,073 83,205 46,920 (36,285) (46,920) 1,227,768 891,540 – (198,394) 16,711,513 18,445,434 1,733,921 (2,530,605) 38,688,346 31,685,458 (39,659,067) (35,000,416) 4,994,879 (7,320,177) At 30 June 2020, there are no unrecognised losses for the Group (2019: nil). Westgold Resources Limited Annual Report 2020 77 9. EARNINGS PER SHARE The following reflects the data used in the basic and diluted earnings per share computations. (a) Earnings used in calculating earnings per share Net profit attributable to ordinary equity holders of the parent Profit attributable to discontinued operations Net profit attributable to ordinary equity holders of the parent Basic earnings per share (cents) Continuing operations Discontinued operations Earnings used in calculating earnings per share For diluted earnings per share: Net profit attributable to ordinary equity holders of the parent (from basic EPS) Profit attributable to discontinued operations Net profit attributable to ordinary equity holders of the parent Diluted profit per share (cents) Continuing operations Discontinued operations (b) Weighted average number of shares 2020 2019 34,607,315 13,487,139 – 642,925 34,607,315 14,130,064 8.65 – 8.65 3.57 0.17 3.74 34,607,315 13,487,139 – 642,925 34,607,315 14,130,064 8.65 – 8.65 3.57 0.17 3.74 Weighted average number of ordinary shares for basic earnings per share 399,990,790 377,428,117 Effect of dilution: Share options – – Weighted average number of ordinary shares adjusted for the effect of dilution 399,990,790 377,428,117 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 5,107,698 (2019: 16,999,600) 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. 78 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 10. CASH AND CASH EQUIVALENTS Cash at bank and in hand Short-term deposits Cash at bank and in hand CASH FLOW RECONCILIATION Reconciliation of net profit after income tax to net cash flows from operating activities Profit (loss) after income tax Amortisation and depreciation Gold prepayment physical deliveries (refer to Note 25) Income tax expense (benefit) Share based payments Unwinding of rehabilitation provision discount Accumulated mill scats written off Net profit on disposal of property, plant and equipment Re-measurement of lithium rights (refer to Note 15) Fair value change in financial instruments (refer to Note 15) Mining rights received in financial instruments Exploration and evaluation expenditure written off (refer to Note 18) Profit on demerger of a subsidiary (refer to Note 38) Profit on disposal of a subsidiary (refer to Note 39) Changes in assets and liabilities Decrease (increase) in inventories (Increase) decrease in trade and other receivables and prepayments Increase (decrease) in trade and other creditors Increase in provisions Net cash flows from operating activities 11. TRADE AND OTHER RECEIVABLES (current) Statutory receivables Other debtors Total trade and other receivables 2020 2019 137,218,827 67,196,289 346,087 – 137,564,914 67,196,289 34,607,315 14,130,064 139,602,938 123,059,758 (25,470,487) (13,458,438) 9,255,117 (3,263,926) 183,956 1,021,722 918,881 1,809,538 – 11,628,184 (3,031,573) (104,568) – (15,000,000) (8,888,756) (9,384,589) – (238,000) 356,317 6,165,134 (8,727,618) – – (16,435,747) 138,806,090 99,929,132 1,554,748 (11,546,974) (2,272,566) 12,319,400 15,617,527 (21,343,789) 2,025,841 1,874,113 155,731,640 81,231,882 2020 2019 5,364,679 4,299,560 1,866,458 2,692,561 7,231,137 6,992,121 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. Westgold Resources Limited Annual Report 2020 79 12. INVENTORIES (current) Ore stocks at net realisable value Gold in circuit at cost Gold metal at cost Stores and spares at cost Provision for obsolete stores and spares Total inventories at lower of cost and net realisable value 2020 2019 9,421,255 17,081,112 15,326,412 13,773,228 197,885 – 22,561,112 17,099,860 (3,558,469) (2,451,286) 43,948,165 45,502,914 During the year there were write-downs in inventories of $1,005,487 (2019: nil) from continuing operations for the Group. This is included in cost of sales refer to Note 7(a). 13. PREPAYMENTS (current) Prepayments 14. OTHER FINANCIAL ASSETS (current) Cash on deposit The cash on deposit is interest bearing and is used as security for bank guarantees. 15. FINANCIAL ASSETS Listed shares - Australian and Canadian Royalties receivable - Lithium rights Movement in Listed Shares At 1 July Additions of listed shares Proceeds on disposal of financial assets Net gain on fair value changes of financial assets Loss on sale of financial assets - discontinued operations (Note 39) At 30 June Movement in Royalties Receivable At 1 July Re-measurement of receivable Settlement of Buldania royalty At 30 June 80 Westgold Resources Limited Annual Report 2020 2020 2019 3,369,998 1,336,486 3,369,998 1,336,486 2020 2019 1,149,449 1,427,836 1,149,449 1,427,836 2020 2019 – 41,210,813 13,000,000 15,000,000 13,000,000 56,210,813 41,210,813 6,267,158 4,263,933 31,357,163 (54,363,502) (5,798,098) 8,888,756 9,474,899 – – (90,309) 41,210,813 15,000,000 – – 15,000,000 (2,000,000) – 13,000,000 15,000,000 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 15. FINANCIAL ASSETS (CONTINUED) Listed shares 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. Movement in investments during the year ended 30 June 2020 are as follows: – disposed of its total investment in Aruma Resources Limited, Auris Minerals Limited and Royal Nickel Corporation; – acquired shares in Galena Mining Limited on the disposal of the paste plant and subsequently disposed of its total investment; and – acquired additional shares in Musgrave Minerals Limited by participating in a placement and subsequently disposed of its total investment. 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 with final settlement occurring on 29 July 2019. (b) The Mount Marion Lithium Royalty Rights Westgold had previously reached agreement to divest its Mt Marion Royalty to Silverstream SZ for a gross amount of $13 million in cash. They failed to complete the deal in a timely fashion and Westgold has therefore decided to retain the rights for the expected future income stream. 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 Location 53 which it held for a 20 year period from 2016. There was no production from area during the year but production is expected for the ensuing years. 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 Disposal of subsidiary Depreciation charge for the year At 30 June net of accumulated depreciation 2020 2019 306,397,153 287,780,355 (170,981,154) (150,613,499) 135,415,999 137,166,856 23,053,950 19,158,851 (5,142,462) (3,503,451) 17,911,488 15,655,400 8,565,545 22,750,247 161,893,032 175,572,503 137,166,856 120,764,353 43,117,946 70,509,158 (1,157,556) (2,219,062) (91,173) (9,428,372) (43,620,074) (42,459,221) 135,415,999 137,166,856 Westgold Resources Limited Annual Report 2020 81 16. PROPERTY, PLANT & EQUIPMENT (CONTINUED) Land and buildings At 1 July net of accumulated depreciation Transfer from capital works in progress Disposal of subsidiary Depreciation charge for the year At 30 June net of accumulated depreciation Capital work in progress At 1 July Additions 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 2020 2019 15,655,400 13,200,044 4,257,657 3,840,684 (173,797) 102,764 (1,827,772) (1,488,092) 17,911,488 15,655,400 22,750,247 47,445,443 36,684,765 60,352,877 (2,179,429) (7,740,341) (1,314,436) (2,957,890) (43,117,945) (70,509,158) (4,257,657) (3,840,684) 8,565,545 22,750,247 The carrying value of plant and equipment purchase under financing arrangements at 30 June 2020 is $40,034,638 (2019: $42,714,688). Assets under hire purchase contracts are pledged as security for the related interest bearing liabilities (refer to Notes 23 and 24). 17. MINE PROPERTIES AND DEVELOPMENT Development areas Gross carrying amount at cost Net carrying amount Mine properties Gross carrying amount at cost Accumulated amortisation and impairment Net carrying amount Mine capital development Gross carrying amount at cost Accumulated amortisation Net carrying amount Total mine properties and development costs Movement in mine properties and development Development areas At 1 July Disposal of subsidiary At 30 June 82 Westgold Resources Limited Annual Report 2020 2020 2019 – – 756,919 756,919 219,555,904 133,131,950 (30,605,966) (15,291,812) 188,949,938 117,840,138 303,343,786 222,583,827 (193,780,595) (122,973,550) 109,563,191 99,610,277 298,513,129 218,207,334 756,919 756,919 (756,919) – 756,919 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 17. MINE PROPERTIES AND DEVELOPMENT (CONTINUED) Mine properties At 1 July net of accumulated amortisation Additions Transfer from capital work in progress (refer to Note 16) Transfer from mine capital development Transfer from exploration (refer to Note 18) Increase in rehabilitation provision Disposal of subsidiary Amortisation charge for the year At 30 June net of accumulated amortisation Mine capital development At 1 July net of accumulated amortisation Additions Disposal of subsidiary 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 18. EXPLORATION AND EVALUATION 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 Disposal of subsidiary Transferred to mine properties (refer to Note 17) Transferred to mine capital development (refer to Note 17) Expenditure written off - continuing operations: Expenditure written off - discontinued operations At 30 June net of accumulated impairment 2020 2019 117,840,138 19,678,627 58,293,797 8,497,402 2,179,429 7,740,340 726,071 88,445,597 18,510,592 4,067,124 6,714,063 – – (732,928) (15,314,152) (9,856,024) 188,949,938 117,840,138 99,610,277 155,208,641 74,615,330 80,832,077 – (9,874,531) 1,314,436 2,957,890 – 12,527,922 5,556,265 15,660,293 (726,071) (88,445,597) (70,807,046) (69,256,418) 109,563,191 99,610,277 2020 2019 78,874,701 104,276,449 78,874,701 104,276,449 104,276,449 147,262,738 15,151,294 16,411,424 (16,129,868) (33,505,161) (18,510,592) (4,067,125) (5,556,265) (15,660,293) (356,317) (5,471,706) – (693,428) 78,874,701 104,276,449 Westgold Resources Limited Annual Report 2020 83 18. EXPLORATION AND EVALUATION EXPENDITURE (CONTINUED) 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 $356,317 (2019: $6,165,134) 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. RIGHT-OF-USE ASSETS Group as a lessee (applicable from 1 July 2019) AASB 16 Leases requires the recognition of right-of-use assets for the remaining term of the current leases for office premises and the warehouse facility, as well as the power stations at the various mine sites as from 1 July 2019. Refer to Note 40 for right-of-use assets first recognised. The Group has lease contracts for various items of mining equipment, motor vehicles and buildings used in its operations. Leases of mining equipment generally have lease terms between three and seven years, while motor vehicles and buildings generally have lease terms between three and five years. The Group also has certain leases of assets with lease terms of 12 months or less and leases of office equipment with low value. The Group applies the short-term lease and lease of low-value assets recognition exemptions for these leases. Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period: As at 1 July 2019 Additions Depreciation expense As at 30 June 2020 Power Stations Premises Mining Equipment Total 9,154,480 3,812,164 – 12,966,644 6,009,296 67,335 933,196 7,009,827 (6,685,437) (916,407) (432,050) (8,033,894) 8,478,339 2,963,092 501,146 11,942,577 Set out below are the carrying amounts of lease liabilities (included under interest-bearing loans and borrowings) and the movements during the period: As at 1 July Additions Accretion of interest Payments As at 30 June The following are the amounts recognised in profit or loss: Depreciation expense for right-of-use assets Included in cost of sales Included in admin expenses (Note 6) Interest expense on lease liabilities Less interest expense capitalised to qualifying asset Total amount recognised in profit or loss 2020 2019 12,966,644 7,009,827 593,956 (8,627,850) 11,942,577 7,531,333 502,561 593,956 (593,956) 8,033,894 – – – – – – – – – – The interest expense of these lease liabilities has been capitalised to the qualifying assets. 84 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 20. TRADE AND OTHER PAYABLES Trade creditors (a) Sundry creditors and accruals (b) The carrying value of trade and other payables approximates the fair value. (a) (b) Trade creditors are non-interest bearing and generally on 30-day terms. Sundry creditors and accruals are non-interest bearing and generally on 30-day terms. 21. PROVISIONS (current) Provision for annual leave Provision for long service leave 22. PROVISIONS (non-current) Provision for long service leave Provision for rehabilitation (a) 2020 2019 34,521,626 27,915,244 35,143,292 29,826,722 69,664,918 57,741,966 2020 2019 7,884,585 6,201,679 1,902,341 1,761,844 9,786,926 7,963,523 2020 2019 1,839,187 1,305,623 76,650,886 69,017,942 78,490,073 70,323,565 (a) Provision for rehabilitation 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 2030, 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 believe is 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 2020 range from 0.58% to 0.87% (2019: range from 1.09% to 1.40%). Refer to Note 3) for further detail. (b) Current and non-current movements in provision for rehabilitation At 1 July Disposal of subsidiary Adjustment due to revised conditions Unwind of discount At 30 June 2020 2019 69,017,942 76,945,945 – (22,265,463) 6,714,063 12,527,922 918,881 1,809,538 76,650,886 69,017,942 Westgold Resources Limited Annual Report 2020 85 23. INTEREST-BEARING LOANS AND BORROWINGS (current) Lease liabilities Hire purchase arrangements At 30 June 2020 7,425,093 2019 – 16,309,721 18,271,020 23,734,814 18,271,020 Represents current portion of hire purchase arrangements which have repayment terms of 36 months from inception. 24. INTEREST-BEARING LOANS AND BORROWINGS (non-current) Lease liabilities Hire purchase arrangements At 30 June 2020 4,797,566 2019 – 9,294,070 18,465,857 14,091,636 18,465,857 Represents non-current portion of hire purchase arrangements which have repayment terms of 36 months from inception. The weighted average interest rate is 4.60% per annum (2019: 6.22%). Assets pledged as security: The carrying amounts of assets pledged as security for current and non-current interest-bearing liabilities: Non-current Hire purchase arrangements Plant and equipment Total non-current assets pledged as security 2020 2019 40,034,638 42,714,688 40,034,638 42,714,688 Plant and equipment assets are pledged against liabilities for the term of the arrangement. Future commitments in respect of interest bearing loans Hire purchase commitments The Company has hire purchase contracts for various items of plant and machinery. The contracts do have terms of renewal but no escalation clauses. Renewals are at the option of the specific entity that holds the asset. The hire purchase contracts have an average term of 36 months with the right to purchase the asset at the completion of the contract term. Interest bearing liabilities 2020 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 86 Westgold Resources Limited Annual Report 2020 Minimum lease payments Present value of lease payments 17,150,953 16,309,721 9,560,264 9,294,070 26,711,217 25,603,791 (1,107,426) – 25,603,791 25,603,791 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 24. INTEREST-BEARING LOANS AND BORROWINGS (non-current) (CONTINUED) Future commitments in respect of interest bearing loans (continued) Interest bearing liabilities 2019 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 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 (a) Lease liabilities AASB 16 Leases requires the recognition of right-of-use assets for the remaining term of the current leases for office premises and the warehouse facility, as well as the power stations and equipment at the various mine sites. Lease liabilities 2020 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 25. UNEARNED INCOME Gold prepayment Provisional gold sales Movement in gold prepayment At 1 July Revenue recognised during the year (refer Note 5) Fee for restructure Additional facility Deemed finance component At 30 June Minimum lease payments Present value of lease payments 7,755,547 7,425,093 4,982,152 4,797,566 12,737,699 12,222,659 (515,040) – 12,222,659 12,222,659 2020 2019 – 25,470,487 198,841 – 198,841 25,470,487 25,470,487 18,075,375 (25,938,399) (16,011,946) 67,606 145,614 – 20,853,550 400,306 2,407,894 – 25,470,487 Westgold Resources Limited Annual Report 2020 87 25. UNEARNED INCOME (CONTINUED) The gold pre-pay facility with Citibank N.A (Citi), was settled in full. The associated interest expense has been capitalised to the qualifying assets. Movement in provisional gold sales At 1 July Provisional gold sales at 30 June At 30 June This represents gold sold on provisional outturns on 30 June 2020. 26. ISSUED CAPITAL (a) Ordinary Shares Issued and fully paid (b) Movements in ordinary shares on issue At 1 July 2018 Issued share capital on conversion of options (f) Issued share capital Share issue costs, net of tax At 30 June 2019 Capital reduction via demerger Issued share capital (refer Note 29 (b)) Issued share capital on conversion of listed options Issued share capital Share issue costs, net of tax At 30 June 2020 2020 2019 – 198,841 198,841 – – – 2020 2019 356,130,055 299,494,861 Number $ 363,109,569 276,976,897 44,785 89,570 26,000,000 23,400,000 – (971,606) 389,154,354 299,494,861 – (8,803,840) 530,313 1,102,000 10,545,603 21,542,506 20,000,000 45,000,000 – (2,205,472) 420,230,270 356,130,055 (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. 88 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 26. ISSUED CAPITAL (CONTINUED) (e) Options on issue Unissued ordinary shares of the Company under option at the date of this report are as follows: Type Unlisted (i) Unlisted - Tranche 2 (ii) Unlisted - Tranche 2 (ii) Unlisted - Tranche 3 (ii) Unlisted - Tranche 3 (ii), (iii) Total Expiry Date 24 November 2020 30 June 2021 30 June 2023 30 June 2022 30 June 2022 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. (i) (ii) (iii) ZEPOs issued are still subject to shareholder approval. (f) Option conversions 10,545,603 listed options were exercised during the financial year (2019: 44,785). (g) Capital management - gearing ratio Gearing ratio Debt Capital Exercise Price Number of options $2.31 3,625,000 Nil Nil Nil Nil 230,307 568,250 530,331 153,810 5,107,698 2020 2019 7.25% 8.27% 37,826,450 36,736,877 521,860,827 443,968,663 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 2020 and 30 June 2019. The Group monitors capital using a gearing ratio, which is debt divided by the aggregate of equity. The Group includes in its net debt, interest bearing loans and borrowings. The Group’s policy is to keep the gearing ratio between 5% and 20%. 27. ACCUMULATED LOSSES At 1 July Net profit in current year attributable to members of the parent entity Dividend on demerger of Castile (refer to Note 38) At 30 June 2020 2019 (51,784,989) (65,915,053) 34,607,315 14,130,064 (13,051,549) – (30,229,223) (51,784,989) Westgold Resources Limited Annual Report 2020 89 28. RESERVES At 30 June 2018 Share-based payments At 30 June 2019 Share-based payments At 30 June 2020 Share-based payments reserve Equity reserve Total 13,260,686 181,493,631 194,754,317 1,021,722 – 1,021,722 14,282,408 181,493,631 195,776,039 183,956 – 183,956 14,466,364 181,493,631 195,959,995 Nature and purpose of reserves Equity reserve This reserve relates to the intercompany loans with Metals X Ltd written off on demerger of the Group and includes tax consolidated adjustments. Share-based payments reserve This reserve is used to recognise the fair value of options issued to employees in relation to equity-settled share-based payments. 29. 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 2020 2019 183,956 1,021,722 The share-based payment plan is described below. There have been no cancellations or modifications to the plan during 2020 and 2019. (b) Transactions settled using shares – On 23 April 2020, the Company announced that it had agreed to acquire the Albury Heath project from Cervantes Corporation Limited. Consideration for the acquisition included the issue of 303,313 fully paid ordinary shares to the value of $700,000. Contingent consideration includes $400,000 if future production from the project exceeds 25,000 ounces and an additional $200,000 if the quantity of gold produced exceeds 35,000 ounces. The contingent consideration is payable in cash and/or 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 measured at market value on 8 May 2020 (acquisition date) at $2.31 per share. – On 27 November 2019, the Company announced that it had agreed to acquire the 20% free carried interest owned by Fe Ltd in the Peak Hill JV agreement. Consideration for the acquisition included the issue of 200,000 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 measured at market value on 04 December 2019 (acquisition date) at $2.01 per share. There were no transactions settled using shares in the previous financial year. (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. 90 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 29. SHARE-BASED PAYMENTS (CONTINUED) (d) 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. 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 that vest will expire if not exercised on 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 Outstanding at the beginning of the year 16,999,600 1.87 15,000,000 2020 Number 2020 WAEP 2019 Number Granted during the year Exercised during the year Lapsed/cancelled during the year Outstanding at the year end Exercisable at the year end 684,141 0.00 1,999,600 (10,530,000) (2,046,043) 2.04 0.95 – – 5,107,698 1.64 16,999,600 3,625,000 2.31 15,000,000 2019 WAEP 2.12 0.00 – – 1.87 2.12 Westgold Resources Limited Annual Report 2020 91 – – – – – – 29. SHARE-BASED PAYMENTS (CONTINUED) (d) Share options (continued) The following table represents the outstanding balance as at 30 June 2020: Grant Date Vesting date Expiry date Exercise price Number of Options Options lapsed / cancelled Options Issued / (exercised) Number of options at end of the year On issue Vested ZEPO - Tranche 1 28/11/2018 30/06/2020 30/06/2020 10/05/2019 30/06/2020 30/06/2022 ZEPO - Tranche 2 28/11/2018 30/06/2021 30/06/2021 10/05/2019 30/06/2021 30/06/2023 ZEPO - Tranche 3 $0.00 $0.00 $0.00 $0.00 230,307 (230,307) 769,493 (769,493) 230,307 – 769,493 (201,243) – – – – – – 230,307 568,250 07/05/2020 30/06/2022 30/06/2022 07/05/2020 30/06/2022 30/06/2022 $0.00 $0.00 153,810 530,331 PEPOS 22/11/2017 22/11/2018 24/11/2020 $2.31 2,400,000 – – – 153,810 153,810 530,331 530,331 – 2,400,000 2,400,000 23/11/2017 24/11/2018 24/11/2020 $2.31 2,900,000 (845,000) (830,000) 1,225,000 1,225,000 24/11/2016 11/1/2018 11/1/2020 $2.02 2,250,000 – (2,250,000) 11/1/2017 11/1/2018 11/1/2020 $2.02 7,450,000 – (7,450,000) – – – – Total 16,999,600 (2,046,043) (9,845,859) 5,107,698 3,625,000 Weighted average remaining contractual life of share options The weighted average remaining contractual life for the share options outstanding as at 30 June 2020 is 0.93 years (2019: 1.06 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 (2019: $0.00 to $2.31). Weighted average fair value of share options The weighted average fair value of options granted during the year was $0.80 (2019: $0.57). Share option valuation The fair value of the equity-settled share options granted under the ESOP is estimated at the date of grant using either a Black & Scholes or a Monte Carlo model, which takes into account factors including the option’s exercise price, the volatility of the underlying share price, the risk-free interest rate, the market price of the underlying share at grant date, historical and expected dividends and the expected life of the option, and the probability of fulfilling the required hurdles. Tranche 1 options lapsed during the period. Tranche 2 options vest subject to performance hurdles, measured for the period 1 July 2018 to 30 June 2021. Tranche 3 options vest subject to performance hurdles, measured for the period 1 July 2019 to 30 June 2022. The two measures are: – Growth in Return on Capital Employed over the Performance Periods; and – Total shareholder return relative to the S&P/All Ordinaries Gold Index over the Performance Periods. 92 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 29. SHARE-BASED PAYMENTS (CONTINUED) (d) Share options (continued) The following table gives the assumptions made in determining the fair value of the options granted in Tranche 3: Grant date 7 May 2020 7 May 2020 Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) Options exercise price ($) Share price at grant date ($) Fair value at grant date ($) RTSR 60% 0.15% 2.0 $0.00 $2.15 $1.44 ROCE 60% 0.15% 2.0 $0.00 $2.15 $2.15 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 three-year 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. Tranche 3 Options issued to the Executive Chairman are subject to shareholder approval which will be sought at the upcoming Annual General Meeting. 30. COMMITMENTS (a) Capital commitments At 30 June 2020, 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 2020 2019 10,098,601 8,996,852 (b) Mineral tenement lease commitments The Company 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. Mineral tenement leases: - Within one year - After one year but not more than five years - After more than five years 2020 2019 3,921,796 3,898,504 15,431,391 15,319,776 27,470,108 30,556,302 46,823,295 49,774,582 (c) Operating leases Prior to the adoption of AASB16 Leases, minimum payments under lease agreements were as follows: Within one year After one year but not more than five years 2019 5,433,524 7,740,774 13,174,298 Westgold Resources Limited Annual Report 2020 93 30. COMMITMENTS (CONTINUED) (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 31. CONTINGENT ASSETS AND LIABILITIES 2020 2019 20,901,094 14,982,184 (i) Bank guarantees and rental deposits The Group has a number of bank guarantees and rental deposits in favour of various government authorities and service providers. These 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 $1,149,449 (2019: $1,427,836). The bank guarantees are fully secured by term deposits (refer to Note 14). 32. AUDITOR’S REMUNERATION Amounts received or due and receivable by Ernst & Young (Australia) for: Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities Fees for other services: - tax compliance Total auditor’s remuneration 2020 2019 245,577 312,467 208,409 116,000 453,986 428,467 33. 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 Reference Segment Nature FGO MGO CGO Fortnum Gold Operations Mining, treatment, exploration and development of gold assets Meekatharra Gold Operations Mining, treatment, exploration and development of gold assets Cue Gold Operations Mining, treatment, exploration and development of gold assets Other Other Exploration and development of other mineral assets and contract mining services General 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. 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. 94 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 33. OPERATING SEGMENTS (CONTINUED) 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 2020 and 30 June 2019. MGO CGO FGO Other Total Year ended 30 June 2020 External revenue Sale of gold at spot 94,889,987 85,345,963 83,789,150 – 264,025,100 Sale of gold under forward contracts 103,711,436 50,514,975 46,899,739 – 201,126,150 Sale of gold under a prepay facility 12,969,199 12,969,199 Financing component on gold sales under prepay facility Mining and contracting services – – – – – – – – 25,938,398 – – 1,178,623 1,178,623 Total segment revenue 211,570,622 148,830,137 130,688,889 1,178,623 492,268,271 Results Depreciation and amortisation (68,288,134) (45,259,226) (25,155,454) (900,123) (139,602,937) Exploration and evaluation expenditure written off (222,595) (98,152) (35,570) – (356,317) Segment (loss) profit 8,379,385 (12,641,721) 33,236,970 (734,293) 28,240,341 Total assets Total liabilities 189,724,542 301,119,381 113,175,719 13,077,793 617,097,435 (81,497,781) (72,469,552) (36,709,743) (62,890) (190,739,966) Capital expenditure (82,842,250) (99,721,650) (27,391,009) (994,176) (210,949,085) Year ended 30 June 2019 External revenue Sale of gold at spot 55,105,103 53,798,893 51,823,872 – 160,727,868 Sale of gold under forward contracts 98,997,256 64,741,709 52,165,824 – 215,904,789 Sale of gold under a prepayment facility 12,108,484 2,037,462 Financing component on gold sales under prepay facility 1,749,375 116,625 – – – 14,145,946 – 1,866,000 Mining and contracting services – – – 25,672,844 25,672,844 Total segment revenue 167,960,218 120,694,689 103,989,696 25,672,844 418,317,447 Results Depreciation and amortisation (51,704,059) (24,869,912) (20,720,491) (2,411,541) (99,706,003) Exploration and evaluation expenditure written off (2,393,064) (497,944) (150,864) (2,429,834) (5,471,706) Accumulated mill scats written off (11,491,150) (9,233) (127,801) – (11,628,184) Segment profit (loss) (20,392,555) (1,047,700) 15,722,413 (2,467,750) (8,185,592) Total assets Total liabilities Capital expenditure 178,125,218 243,187,048 112,187,209 31,216,018 564,715,493 (58,344,581) (80,098,686) (28,359,223) (874,484) (167,676,974) (52,958,699) (81,401,015) (21,699,381) (1,006,168) (157,065,263) Westgold Resources Limited Annual Report 2020 95 33. OPERATING SEGMENTS (CONTINUED) (a) Reconciliation of profit (loss) Segment profit (loss) Corporate administration expenses Corporate interest income Corporate other income Gain on demerger of subsidiary Net gain on fair value changes of financial assets Net gain on sale of financial assets Net gain on disposal of assets 2020 2019 28,240,341 (8,185,592) (7,915,557) (9,129,172) 286,620 308,101 2,603,081 5,072,352 8,727,618 – 8,888,756 21,353,650 – 3,121,249 3,031,573 139,435 Total consolidated profit from continuing operations before income tax 43,862,432 12,680,023 (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 Right-of-use assets Total consolidated assets (c) Reconciliation of liabilities Segment operating liabilities Unallocated corporate liabilities Trade and other payables Provision for employee benefits Interest-bearing loans and borrowings Deferred tax liability Total consolidated liabilities (d) Segment revenue from external customers Segment revenue Total revenue 96 Westgold Resources Limited Annual Report 2020 617,097,435 564,715,493 136,810,316 65,483,767 170,765 944,183 525,681 378,462 1,141,677 1,180,677 – 43,210,813 709,025 809,350 1,032,203 – 757,487,102 676,722,745 190,739,966 167,676,974 1,736,621 28,367,977 2,395,708 2,133,433 1,094,913 58,034 39,659,067 35,000,416 235,626,275 233,236,834 492,268,271 418,317,447 492,268,271 418,317,447 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 33. OPERATING SEGMENTS (CONTINUED) 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 2020 2019 492,268,271 418,317,447 492,268,271 418,317,447 The Group has three customers to which it sells gold and each account for 41%, 46% and 13% of this external revenue respectively (2019: Three customers 36%, 61% and 3%). (e) Segment non-current assets are all located in Australia. 34. KEY MANAGEMENT PERSONNEL (a) Details of Key Management Personnel (i) Non-Executive Directors (NEDs) Appointed Resigned Non-Executive Chairman 6 October 2016 25 November 2019 PJ Newton PB Schwann Non-Executive Director FJ Van Maanen Non-Executive Director WC Bramwell Non-Executive Director 2 February 2017 6 October 2016 3 February 2020 – – – SV Shet Non-Executive Director 18 December 2017 26 February 2020 (ii) Executive Directors PG Cook Executive Chairman 19 March 2007 – JS Norregaard Executive Director 29 December 2016 22 June 2020 (iii) Other Executives (KMPs) DA Fullarton JS Norregaard A Buckingham PM Storey PW Wilding DP Stuart L Smith Chief Financial Officer1 21 May 2018 – Chief Executive Officer (MPL)2 22 June 2020 14 August 2020 Chief Operating Officer 1 October 2019 General Manager (MGO) General Manager (CGO) 23 July 2018 1 July 2018 – – – General Manager (FGO)2 7 October 2019 14 August 2020 Company Secretary & General Counsel 19 December 2019 – RB Armstrong General Manager (FGO) 1 July 2018 31 August 2019 DJ Noort DW Okeby General Manager (MPL) 20 August 2018 3 January 2020 Company Secretary & Legal Manager 1 December 2016 19 December 2019 1. 2. 3. DA Fullarton was promoted to Chief Executive Officer with effect from 1 July 2020. JS Norregaard and DP Stuart departed on 14 August 2020. There are no other changes of the key management personnel after the reporting date and before the date the financial report was authorised for issue. Westgold Resources Limited Annual Report 2020 97 34. KEY MANAGEMENT PERSONNEL (CONTINUED) (b) Compensation of Key Management Personnel Short term benefits Post-employment benefits Other long-term benefits Share-based payment 2020 2019 3,979,630 3,726,230 231,832 221,120 76,241 59,359 93,648 592,639 4,381,351 4,599,348 (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 Share options held by key management personnel under the long-term incentive plan to purchase ordinary shares: Grant date 11/01/2020 22/11/2017 23/11/2017 28/11//2018 28/11/2018 10/05//2019 10/05//2019 07/05/2020 07/05/2020 Total Expiry date 11/01/2020 24/11/2020 24/11/2020 30/06/2020 30/06/2021 30/06/2022 30/06/2023 30/06/2022 30/06/2022 1. Subject to shareholder approval Exercise price $ 2020 2019 2.02 2.31 2.31 0.00 0.00 0.00 0.00 0.00 0.00 – 9,700,000 2,400,000 5,300,000 1,225,000 – – 230,307 230,307 230,307 – 769,493 568,250 769,493 153,8101 530,331 – – 5,107,698 16,999,600 98 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 35. RELATED PARTY DISCLOSURES (a) Subsidiaries The consolidated financial statements of the Group include Westgold Resources Limited and the subsidiaries listed in the following table: Name Castile Resources Pty Ltd1 Aragon Resources Pty Ltd Big Bell Gold Operations Pty Ltd Minterra Pty Ltd2 Location 53 Pty Ltd 1. 2. Entity disposed on demerger Formerly Australian Contract Mining Pty Ltd (b) Ultimate parent Westgold Resources Limited is the ultimate parent entity. Country of incorporation Australia Australia Australia Australia Australia Ownership interest 2020 0% 100% 100% 100% 100% 2019 100% 100% 100% 100% 100% (c) Key management personnel Details relating to key management personnel, including remuneration paid, are included in Note 34. (d) Transactions with related parties Services provided by Westgold Resources Ltd to Castile Resources Ltd Amount owing by Castile Resources Ltd at 30 June 2020 2019 395,355 7,348 – – PG Cook was the non-executive chairman of Castile Resources Ltd during the financial period. There were no other related party transaction for the year ending 30 June 2020. 36. 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 Profit of the parent entity Total comprehensive profit of the parent entity 2020 2019 138,595,311 67,933,961 389,667,260 369,646,651 4,611,826 30,469,940 5,174,113 30,506,316 356,130,056 299,494,862 9,339,943 20,806,282 14,466,365 14,282,408 4,556,783 4,556,783 384,493,147 383,140,336 1,585,208 34,116,826 1,585,208 34,116,826 Westgold Resources Limited Annual Report 2020 99 36. INFORMATION RELATING TO WESTGOLD RESOURCES LIMITED (THE PARENT ENTITY) (CONTINUED) 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. Other contingent liabilities of the parent entity Contractual commitments by the parent entity for the acquisition of property, plant or equipment Nil Nil 37. EVENTS AFTER THE BALANCE SHEET DATE There are no significant events after the balance sheet date. 38. GAIN ON DEMERGER OF SUBSIDIARY On 3 December 2019, Castile Resources Pty Ltd was demerged from the Westgold Consolidated Group, following approval by Westgold Shareholders at the Annual General Meeting held on 25 November 2019. Existing Westgold shareholders received shares in Castile on a 1 Castile share for every 4 Westgold shares held (in specie distribution). The fair value of Castile at demerger was determined to be $21,855,388 being distributed as a demerger dividend of $13,051,549 with an associated reduction in share capital of $8,803,840. The number of Castile shares on issue was 99,844,305 resulting in a market value of $0.2189 per share. Carrying value of net assets of demerged entity Assets Cash and cash equivalents Bonds Trade and other receivables Property, plant and equipment Mine properties and development Exploration and evaluation expenditure Liabilities Trade and other payables Provisions Deferred tax liabilities Net assets and liabilities disposed of Reduction in share capital Demerger dividend Gain on demerger of entity 100 Westgold Resources Limited Annual Report 2020 2020 86,966 20,000 38 264,969 756,919 16,129,868 17,258,760 (201,877) (1,172) (3,927,940) (4,130,989) 13,127,771 (8,803,840) (13,051,549) (8,727,618) Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 39. DISCONTINUED OPERATIONS Higginsville Gold Operations 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 to RNC Minerals Limited. 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 Proceeds on disposal Consideration received in cash and cash equivalents Consideration received in shares Fees and working capital adjustments Less net assets disposed of Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Property, plant and equipment Mine properties and development costs Exploration and evaluation expenditure 2020 2019 – 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 9,796,749 (9,082,668) (247,904) 466,177 24,079,927 30,937,176 (1,150,000) 53,867,103 614,991 461,278 15,108,933 50,226 10,137,250 10,607,459 33,505,161 – 70,485,298 Westgold Resources Limited Annual Report 2020 101 39. DISCONTINUED OPERATIONS (CONTINUED) Higginsville Gold Operations (continued) Liabilities Trade and other payables Provisions Deferred tax liabilities Gain on disposal 40. ACCOUNTING STANDARDS 2020 2019 – (6,170,363) – (23,025,720) – (3,857,859) – (33,053,942) – 16,435,747 New and amended standards and interpretations The Group has adopted all Accounting Standards and Interpretations effective from 1 July 2019. Other than the changes described below, the accounting policies adopted are consistent with those of the previous financial year. The Group applied AASB 16 Leases and Interpretation 23 Uncertainty over Income Tax Treatments for the first time from 1 July 2019. 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 2019 but did not have an impact on the consolidated financial statements of the Group and, hence, have not been disclosed. AASB 16 Leases Overview AASB 16 supersedes AASB 117 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the balance sheet under a single on-balance sheet model. AASB 16 also requires lessees and lessors to make more extensive disclosures than under AASB 117. Impact The Group has lease contracts for various items of mining equipment, motor vehicles and buildings. It does not have any sub-leases. Before the adoption of AASB 16, the Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease. The Group adopted AASB 16 using the modified retrospective method of adoption, with the date of initial application of 1 July 2019. On the date of initial application, the right-of-use assets were recognised based on the amount equal to the lease liabilities. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application. Upon adoption of AASB 16, the Group applied a single recognition and measurement approach for all leases except for short-term leases and leases of low-value assets. Refer to Note 19. The standard provides specific transition requirements and practical expedients, which have been applied by the Group, as set out below: Leases previously accounted for as operating leases The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term leases with lease terms that end within 12 months of the date of initial application and leases of low-value assets. The right-of-use assets for all leases were recognised based on the amount equal to the lease liabilities. No adjustments were needed for any previously recognised prepaid or accrued lease expenses as there were none. Lease liabilities were recognised based on the present value of the remaining lease, discounted using the incremental borrowing rate at the date of initial application. 102 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 40. ACCOUNTING STANDARDS (CONTINUED) AASB 16 Leases (continued) The Group also applied the available practical expedients wherein it: – Relied on its assessment of whether leases are onerous immediately before the date of initial application, – Included non-lease components for all classes of assets, and – Applied the short-term leases exemptions to leases with lease terms that end within 12 months of the date of initial application. The Group also applied the available practical expedients wherein it: – Relied on its assessment of whether leases are onerous immediately before the date of initial application, – Included non-lease components for all classes of assets, and Applied the short-term leases exemptions to leases with lease terms that end within 12 months of the date of initial application. The effective increase (decrease) of adoption AASB 16 at 1 July 2019 is set out below: Assets Right-of-use assets Total assets Liabilities Interest-bearing loans and borrowing Current Non-current Total liabilities As at 1 July 2019 12,966,644 12,966,644 6,031,093 6,935,551 12,966,644 – ‘Right-of-use assets’ were recognised and presented separately in the statement of financial position, – Additional lease liabilities were recognised and included under ‘Interest-bearing loans and borrowings’, – Additional ‘Deferred tax assets’ and ‘Deferred tax liabilities’ were recognised because of the deferred tax impact of the changes in recognised lease-related assets and liabilities, and – Payment of principal for operating leases previously classified as operating activities will be classified as financing activities in the cash flow statement. Lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as of 30 June 2019, as follows: Lease commitments as at 30 June 2019 (undiscounted) Add (deduct) Commitments relating to unrecognised leases of low-value assets Adjustment for fixed outgoings associated with rental of premises Effect of discounting Discounted recognised lease liabilities as at 1 July 2019 13,174,298 (131,637) 697,041 (773,058) 12,966,644 Westgold Resources Limited Annual Report 2020 103 40. ACCOUNTING STANDARDS (CONTINUED) (a) As permitted by AASB 16, the Group has elected not to recognise right-of-use assets and lease liabilities relating to short-term leases and leases of low-value assets. The lease commitments disclosed as at 30 June 2019 included amounts in relation to such leases, (b) An adjustment was required in order to take into account fixed outgoings associated with the rental of premises, which had not been included as at 30 June 2019, and (c) The lease liabilities recognised under AASB 16 are measured on a discounted basis, whereas the lease commitments disclosed as at 30 June 2019 were disclosed on an undiscounted basis. The discount rate used to discount the lease payments for each lease is the incremental borrowing rate appropriate for each lease at the date of initial application, i.e., the rate as at 1 July 2019. The discount rate used was the Group’s incremental borrowing rate at the initial date of application. The weighted average incremental borrowing rate at transition was 3.95% per annum. AASB 112 Income Taxes The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognises the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where it originally recognised those past transactions or events. An entity applies the amendments for annual reporting periods beginning on or after 1 July 2019, with early application permitted. When the entity first applies those amendments, it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period. Since the Group’s current practice is in line with these amendments, they had no impact on the consolidated financial statements of the Group. IFRIC 23 Uncertainty over Income Tax The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of AASB 112 Income Taxes. It 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. The Interpretation specifically addresses the following: – 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 (loss), tax bases, unused tax losses, unused tax credits and tax rates. The Group determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty. Upon adoption of the Interpretation, the Group has assessed whether the Interpretation had an impact on its consolidated financial statements and considered whether it has any uncertain tax positions. The Group determined, based on a review of its tax compliance that it is probable that its tax treatments (including those for its subsidiaries) will be accepted by the taxation authorities. Therefore, the Interpretation did not have an impact on the consolidated financial statements of the Group. AASB 123 Borrowing Costs The amendments clarify that an entity treats, as part of general borrowings, any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. The entity applies the amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which it first applies those amendments. The entity applies those amendments for annual reporting periods beginning on or after 1 July 2019, with early application permitted. The amendment had no impact on the consolidated financial statements however may increase the capitalisation of borrowings going forward. 104 Westgold Resources Limited Annual Report 2020 Financial Report Notes to the Consolidated Financial Statements for the year ended 30 June 2020 40. ACCOUNTING STANDARDS (CONTINUED) New and amended Accounting Standards and Interpretations issued but not yet effective 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 New and amended Accounting Standards and Interpretations issued but not yet effective AASB 2019-1 Conceptual Framework for Financial Reporting (continued) 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. AASB 2019-5 Disclosure if the Effect of New IFRS Standards Not Yet Issued in Australia AASB 2019-5 is effective for annual periods being on or after 1 January 2020. This standard amends AASB 1054 by adding a disclosure requirement for an entity intend to comply with IFRS Standards to disclose the information specified in paragraphs 30 and 31 of AASB 108 on the potential effect of an IFRS Standard that has not yet been issued by the AASB so that such entity complying with Australian Accounting Standards can asset compliance with IFRS standards. The Group is in the process of assessing the impact of the new amendment. Westgold Resources Limited Annual Report 2020 105 Financial Report 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 2020 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 2020. As at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group 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 identified in Note 36. On behalf of the Board. PG Cook Executive Chairman Perth, 28 August 2020 106 Westgold Resources Limited Annual Report 2020 for the year ended 30 June 2020 Financial Report Independent Auditor’s 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 2020, 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) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2020 and of its consolidated financial performance for the year ended on that date; and b) 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 (including Independence Standards) (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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:DA:WGX:046 Westgold Resources Limited Annual Report 2020 107 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. 1. Depreciation and amortisation of assets Why significant How our audit addressed the key audit matter As at 30 June 2020, the Group had capitalised mine properties and development costs, property, plant and equipment, capitalised exploration and evaluation expenditure and right-of-use assets totaling $551.2 million (refer to Notes 16, 17, 18 and 19 of the financial report). Calculating depreciation and amortisation requires considerable judgement and estimation in relation to reserves and resources (used as the denominator in a “units-of-production” calculation) of the mines and the assessment of future costs (included in the numerator in a “units-of-production calculation) required to extract these reserves and resources for each underground mine. Accordingly, this creates a risk the depreciation and amortisation rates are inappropriate, resulting in the expense profile that does not reflect the pattern of consumption of the assets’ future economic benefits. This was considered to be a key audit matter due to the judgment and estimation involved. We evaluated the assumptions and methodologies used by the Group in their calculation of the depreciation and amortisation. Our audit procedures included the following: • Assessed the qualifications, competence and objectivity of the Group’s internal experts, the work of whom, formed the basis of the Group’s estimates on the reserves and resources and the future costs used in the amortisation calculation. • Assessed the application of reserves and resources in the amortisation and depreciation model ensuring that these are consistent with the latest published statement. • Assessed the reasonableness of the future costs included in the calculation with reference to historical costs incurred and mine plans approved by the Group’s internal experts. • • • Evaluated the classification of costs to ensure that they are capitalised under the correct asset class and subsequently assigned to the appropriate amortisation profile. Evaluated the consistency of application of the Group’s amortisation and depreciation methodology on its mine properties and capital development assets across the mine sites. Tested the mathematical accuracy of the depreciation and amortisation models. • Assessed the adequacy of the Group's disclosures relating to depreciation and amortisation. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:DA:WGX:046 108 Westgold Resources Limited Annual Report 2020 Financial Report Independent Auditor’s Report continued 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 2020, the Group’s consolidated statement of financial position includes provisions of $76.7 million in respect of such obligations (refer to Note 22). 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: • Assessed the qualifications, competence and objectivity of the Group’s internal experts, the work of whom, formed the basis of the Group’s rehabilitation cost estimates. • Our rehabilitation specialists have 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, Industry Regulation and Safety and the reasonableness of year-on-year changes of the obligation. • Tested the Group’s calculation of the present values of the liabilities considering the estimated timing of when the cash flows will be incurred by reference to the most appropriate inflation and discount rates. • Assessed the adequacy of the Group's disclosures relating to rehabilitation obligations. 3. Castile demerger Why significant How our audit addressed the key audit matter Castile Resources Pty Ltd (“Castile”) held the Group’s polymetallic assets in the Northern Territory and during the period the Group distributed 100% (“the demerger”) of its shareholding in Castile via an initial public offering. Demergers of this nature are not common transactions for the Group, the accounting is complex and resulted in a net gain within the profit and loss of $8.7 million and a reduction in contributed equity of $8.8 million. Accordingly, this was considered to be a key audit matter. Our audit procedures included the following: • • Reviewed the Implementation Deed of the Castile Demerger (“the Deed”). Reviewed and agreed the key conditions of the Deed to the underlying supporting documents. • Assessed the determination of fair value of the shares distributed. • • Tested the mathematical accuracy of the calculation of the net gain on demerger and the split between profit or loss and contributed equity. Involved our tax specialists to assess the tax implications of the demerger. • Assessed the adequacy of the Group’s disclosure relating to the transaction. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:DA:WGX:046 Westgold Resources Limited Annual Report 2020 109 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 2020 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report that is 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. 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: A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:DA:WGX:046 110 Westgold Resources Limited Annual Report 2020 Financial Report Independent Auditor’s Report continued 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 opinion on the effectiveness of the Group’s internal control. 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, actions taken to eliminate threats or safeguards applied. 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:DA:WGX:046 Westgold Resources Limited Annual Report 2020 111 continued 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 2020. In our opinion, the Remuneration Report of Westgold Resources Limited for the year ended 30 June, 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 28 August 2020 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:DA:WGX:046 112 Westgold Resources Limited Annual Report 2020 Financial Report Independent Auditor’s Report Financial Report Shareholder Information As at 30 September 2020 (A) TOP 20 QUOTED SHAREHOLDERS Name 1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 2 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 3 CITICORP NOMINEES PTY LIMITED 4 CS THIRD NOMINEES PTY LIMITED5 AJAVA HOLDINGS PTY LTD 6 NATIONAL NOMINEES LIMITED 7 BNP PARIBAS NOMINEES PTY LTD 8 ALL-STATES FINANCE PTY LIMITED 9 MR RICHARD FARLEIGH 10 BNP PARIBAS NOMS PTY LTD 11 SUN HUNG KAI INVESTMENT SERVICES LIMITED 12 BNP PARIBAS NOMINEES PTY LTD 13 MR PETER GERARD COOK 14 WARBONT NOMINEES PTY LTD 15 BRISPOT NOMINEES PTY LTD 16 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA 17 WESTERN BRIDGE PTY LTD 18 DEBORTOLI WINES PTY LIMITED 19 CITICORP NOMINEES PTY LIMITED 20 OAKSOUTH PTY LTD TOTAL (B) DISTRIBUTION OF QUOTED ORDINARY SHARES Range (size of parcel) 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 Over TOTAL No. Shares 169,276,299 75,060,118 45,937,786 23,222,116 6,945,201 5,647,014 5,545,020 5,246,656 4,578,597 4,081,969 3,513,357 3,453,107 2,693,750 2,237,468 1,788,153 1,775,283 1,466,735 1,158,631 1,094,650 1,033,125 % 40.28 17.86 10.93 5.53 1.65 1.34 1.32 1.25 1.09 0.97 0.84 0.82 0.64 0.53 0.43 0.42 0.35 0.28 0.26 0.25 365,755,035 87.04 Number of Shareholders Number of Shares 2,546 1,291,333 2,773 7,130,573 825 6,296,924 810 20,460,731 93 385,050,709 6,282 399,469,957 (C) NUMBER OF HOLDERS WITH LESS THAN A MARKETABLE PARCEL OF ORDINARY SHARES Total unmarketable parcels at $500 parcel at $2.4400 per unit 367 18,804 Westgold Resources Limited Annual Report 2020 113 (D) SUBSTANTIAL SHAREHOLDERS RUFFER LLP FIL LIMITED BLACKROCK GROUP No. Shares 37,276,412 29,806,384 19,665,671 % 9.33 7.09 5.05 (E) VOTING RIGHTS 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 ASX Code WGXAA WGXAB WGXAC WGXAD TOTAL Security Description Number of Securities Options Expiring 24 November 2020, exercise price $2.31 3,625,000 Options Expiring 20 June 2023, zero exercise price 568,250 Options Expiring 20 June 2022, zero exercise price 578,065 Options Expiring 20 June 2021, zero exercise price 139,872 4,911,187 114 Westgold Resources Limited Annual Report 2020 Financial Report Shareholder Information continued Notes Westgold Resources Limited Annual Report 2020 115 Notes 116 Westgold Resources Limited Annual Report 2020 www.westgold.com.au