TIDMSGZ
RNS Number : 8347G
Scotgold Resources Ltd
30 November 2020
Scotgold Resources Limited
("Scotgold" or the "Company)
Final Results
Scotgold Resources Limited (AIM: SGZ), the gold exploration and
production company focused on Scotland, is pleased to announce its
Annual Results for the year ended 30 June 2020. A copy of the
Company's Annual Report and Accounts for the year Ended 30 June
2020 will be available on the Company's website shortly.
OPERATIONS REVIEW HIGHLIGHTS
Developing Scotland's first commercial gold mine
-- Phase 1 production at Cononish Gold and Silver Mine on course to commence on 30 November 2020
o Phase 1 targeting average annual gold equivalent production of
9,910oz
-- Phase 2 expansion of production at Cononish, targeting 100%
increase in annual production to 72,000 tonnes of ore and average
annual gold equivalent production of 23,500oz, brought forward by
11 months to May 2022
o Follows post period GBP3m fund raise, the proceeds of which
will also fund systematic exploration work across the Company's
Scottish licences which cover 2,900km2 of the Dalradian Belt
-- Recalculated model using the accelerated Phase 2 development
strategy and gold and silver prices of GBP1,400/oz and GBP19.23/oz
respectively deliver highly attractive Life of Mine ('LOM')
economics:
o GBP178 million EBITDA;
o GBP156 million pre-tax Cash Flow;
o GBP127 million Net Cash Flow; and
o GBP96 million Pre-tax NPV (discount rate of 8%)
-- Encouraging results from ongoing exploration programme
include the identification of gold and silver anomalies to the
north east of the Cononish mine and from the Beinn Udlaidh and
Inverchorachan prospects
o Results in line with strategy to increase mineable ounces at
the Cononish mine and also identify potential new mines of Cononish
scale or larger
CEO, Richard Gray, commented: "To be on the brink of first pour
at the Cononish Gold and Silver Mine, despite the unprecedented
challenge of navigating COVID-19 and associated lockdowns, is
testament to the professionalism and hard work of both the team at
Scotgold and all those connected with the project over the course
of the year under review and beyond.
"The commencement of Phase 1 production at Cononish, which will
become Scotland's first commercial gold mine, will transform
Scotgold into a production as well as a development and exploration
company, one with a defined path to future growth. We have the
funds in place to accelerate the Phase 2 development of the mine,
which is targeting average annual gold equivalent production of
23,500oz compared to 9,910oz during Phase 1, and also to embark on
a systematic exploration programme across our licence base, which
covers an area of 2,900km2 of the Dalradian Belt. As a result,
Scotgold is ideally positioned to be at the heart of gold mining in
Scotland for many years to come and, with this in mind, I look
forward to providing further updates on our progress."
OPERATIONS REVIEW
BACKGROUND -
Scotgold Resources Limited ("the Company") was established in
2007 and is listed on the AIM market of the London Stock Exchange
(AIM: SGZ). The Company delisted from the Australian Securities
Exchange on 21 October 2016.
The Company's principal objectives have continued to be:
a) the development of the Cononish Gold and Silver Mine
("Cononish" or the "Project") in Scotland's Grampian Highlands;
and
b) the ongoing exploration of the highly prospective tenements
comprising the Grampian Gold Project with the view to identifying
further project opportunities.
Corporate Social Responsibility ("CSR")
The Company recognises its responsibilities to the Community,
the Environment, its Employees and the Workplace with respect to
sustainable development, safety and community development. The CSR
Committee, which held its inaugural meeting on 10th May 2019,
continued throughout the year to pursue its purpose of reviewing
and monitoring relevant policies, programmes and activities of the
Scotgold Resources Group on behalf of the Board of Directors of the
Company to ensure these responsibilities are met.
In doing so, it continued to focus on the three broad areas
of:
-- Health, Safety and Welfare of the Community, Employees, Consultants and Visitors;
-- Stewardship of the Environment; and
-- Corporate Citizenship and Societal Interaction
These areas are presented on the Scotgold website alongside
details of how complaints will be handled.
During the latter part of the year, the CSR Committee had to
deal with the unique threat to health and safety and employee
well-being posed by the Covid-19 pandemic. The Committee oversaw
the performance of a detailed risk assessment in respect of the
effects of Covid-19 on the operations of the Company and the
formulation and implementation of a comprehensive set of operating
procedures to deal with the pandemic based on that risk assessment
prior to resumption of mining operations at the beginning of July
2020. The CSR Committee continues to oversee the carrying out of
regular assessments of the risks posed by Covid-19 and the
adjustment of the aforementioned operating procedures in response
thereto.
Cononish Gold and Silver Mine
On 15 February 2012, the Board of the Loch Lomond and the
Trossachs National Parks ("NPA") issued the Decision Notice
granting planning permission for the development of the Project.
The Crown Estate Commissioners unconditional grant of the Crown
Lease was confirmed in May 2012.
During 2014, the Company made an application to vary this
planning permission (relating to hours of operation of the
processing plant and work on site) and on 24 January 2015, the
Board of the Loch Lomond and the Trossachs National Park again
voted unanimously to approve the Company's application. As a
variation to a condition of the existing consent, this approval
also had the effect of extending the date by which development
should commence to January 2018.
In January 2015 the Company completed a Mineral Resource
Estimate and subsequently, in August 2015 completed a Bankable
Feasibility Study for the Cononish Project. On 24 February 2016 the
Company announced its intention to conduct a Bulk Processing Trial
("BPT") and on 27 August 2016 the first official gold pour from the
BPT was announced.
Experience from the BPT led to a radical rethink of the tailings
disposal methodology and a study was conducted to determine the
suitability of dry stack tailings disposal for the Project. The
benefits of the dry stack system include substantially reduced
upfront capital costs, scalability and the potential for
significant environmental benefits. The study determined that dry
stacking was feasible and a number of options using this
methodology were then modelled in the Update to the Bankable
Feasibility Study, announced in March 2017. The 'phased' approach
was determined as the Company's preferred option to take the
Project forward.
Subsequently, the Company submitted a revised application for
planning permission to incorporate the new tailings disposal
methodology. The application was unanimously approved in February
2018 by the National Parks Authority ("NPA") Board and a Decision
Notice was received in October 2018. Concurrently with the
permitting process, the Company secured funding for the Project in
May 2018 consisting of approximately GBP4m of equity and GBP5m of
debt. With the permitting pre-commencement conditions satisfied and
funding secured, Project development activities commenced in
January 2019.
In August 2019 the Company raised a further GBP2.65m (GBP1.15M
equity and an increase of GBP1.5m in secured debt facilities) to
ensure the Project remained fully funded to completion.
Record high rainfall in February and more latterly Covid 19
restrictions in March 2020 led to delays in the development
schedule being experienced, most notably in relation to the bulk
earthworks element of the Project.
In October 2020 the Company announced that first gold production
from the development of Phase 1 was expected by 30 November 2020.
Given the more recent progress made on the development of Phase 1
and the improved gold price outlook, the Company also elected to
raise a further GBP3m before costs to accelerate the development of
Phase 2 and provide for an expansion of the Company's exploration
programmes.
Grampian Gold Project
The Grampian Gold Project comprises 13 Crown Option agreements
covering approximately 2,900 km(2) in the south west Grampians of
Scotland and covers some of the most prospective areas of the
Dalradian Series in the UK. This is a sequence of highly folded and
metamorphosed sedimentary and volcanic rocks of late Precambrian to
Early Cambrian age, which extends into regions that were contiguous
at the time of its formation. This includes the western extension
to the eastern seaboard of Canada and the Appalachian belt in the
US, and the eastern extension into Norway and Sweden. The British
Geological Survey has identified the Dalradian sequence as highly
prospective for both significant gold and base metal deposits. On a
more local scale, the Dalradian sequence extends to the south west
from Scotland into Northern Ireland where it hosts other gold
resources at Cavancaw (c. 0.8Moz of gold) and Curraghinalt (c. 4Moz
of gold).
Following on from the success of the previously completed
orientation surveys, Scotgold has continued to use the ionic leach
technique for regional stream sediment sampling across 6 of its 13
Crown Option areas, identifying several drainage catchments with
encouraging values that require detailed follow up work. Subsequent
to the reporting period, regional stream sediment sampling has been
completed across 10 of Scotgold's 13 Crown Option areas.
Portuguese and French projects
In May 2016, the Company announced the acquisition of the Pomar
licence area in eastern central Portugal by its wholly owned
Portuguese subsidiary, Scotgold Resources Portugal Ltda. In May
2017, the Company was granted the Vendrennes PER (Permit Exclusif
de Recherche / exclusive exploration licence) in France.
On 18 July 2019, the Company announced its decision not to
extend the Pomar licence and the intention to apply to the Director
General of Energy and Geology to terminate the licence and the
process of termination is in the final stages.
The process of voluntary liquidation of SGZ France SAS,
initiated pursuant to the Company withdrawing its interest in the
Vendrennes PER, was concluded on 1 October 2019.
Corporate Activities-
The terms of the secured loan facility made available to SGZ
Cononish Limited were amended during the year so that by the end of
the year, the facility totalled GBP7.5 million at a nominal
interest rate of 9% per annum, to be drawn down in tranches and/or
sub-tranches which are repayable with accumulated interest 36
months after the date of drawdown. By the end of the reporting
period, GBP4.0 million of that facility had been drawn down by SGZ
Cononish Limited and a further GBP2.5 million was drawn down after
30 June 2020.
Subsequent to the reporting period, net equity funding of GBP2.8
million was raised in October 2020.
CONONISH GOLD AND SILVER PROJECT
The Bankable Feasibility Study (BFS) for "The Cononish Gold and
Silver Project" was conducted by Bara Consulting Ltd and published
in August 2015. An update was published in March 2017 following
input from the Bulk Processing Trial in 2017, particularly with
regard to tailings storage options.
The report highlighted that the Phased Project approach using a
Dry Stack tailings storage system produced improved economic
returns and reduced the development peak funding requirements.
The phases were scheduled as follows:
-> Phase 1 (28 Months): After a 4 month ramp up and
commissioning period, the mine is intended to operate at a
production level of 3,000 tonnes per month (36,000 tonnes per
annum).
-> Phase 2 (7 years): The mining is intended to reach a
steady state level of production at 6,000 tonnes per month (72,000
tonnes of ore per annum).
Phase 2 was intended to be purely organically funded by Phase 1,
and the Company anticipated sufficient cashflow generated by Phase
1 to meet the development requirements of Phase 2 within 2.5 years
of first production.
Subsequent to the reporting period, in October 2020 the Company
reviewed this timing of Phase 2 and elected to accelerate the
development of Phase 2, such that it is now expected to be
completed in May 2022 and will be funded by a combination of
GBP2.5M of the new equity raised in October 2020 and funds
generated internally over the shortened Phase 1 operating
period.
At the same time in October 2020 the Company provided a Project
update indicating first production was expected by 30 November
2020, revised cost estimates and re-evaluating the Project
economics using a GBP1,400/oz gold price. Based on these
assumptions, the key Project parameters are given below:
Cononish Key Parameters:
Estimated Reserves 550,000t
Head Grade Au Equiv 11.7g/t
Life of Mine 9 years
Total Capital GBP34.0M
Ave. Annual Production 23,500oz
Ave. Operating Cost GBP439/oz
Ave. Capital Cost GBP184/oz
All In Sustaining Cost (AISC) GBP461/oz
The above key parameters were derived by Scotgold management
using revised cost and gold price estimates and using the BFS
Update production schedule.
Details of the material assumptions considered in the derivation
of the production target and forecast financial information above
and the BFS Study Update Executive Summary are provided on
Scotgold's website at www.scotgoldresources.com .
Cononish Mineral Resources
The Mineral Resource Estimate ("MRE") is classified as Measured,
Indicated and Inferred Mineral Resources, (adhering to guidelines
set out in the JORC Code (2012 Edition)), and is reported at a
cut-off grade of 3.5 g/t gold as is presented in the Table below.
The Table also serves as the Company's Annual Mineral Resource
Statement.
Table: 2020 Annual Mineral Resource Statement
Cononish Main Vein Gold and Silver Mineral Resources, estimated
in accordance with the JORC code (2012 Edition) and reported at a
3.5 g/t Au cut-off as at 12/01/2015, which remain current subject
to the depletion of approximately 6.5kt from the Indicated
Resources - Mined Stockpile. Mine development during the reporting
period has predominantly been in waste, with a non-material volume
of Mineral Resource placed on surface stockpiles.
Scotgold Resources Limited - Cononish Gold Project
Mineral Resource Estimate as at 12 January 2015
Reported at a cut-off grade of 3.5 g/t gold
Classification K Tonnes Grade Metal Grade Metal In-situ
Au g/t Au Koz Ag g/t Ag Koz Dry BD
--------- -------- -------- -------- -------- --------
Measured -In-situ 60 15.0 29 71.5 139 2.72
--------- -------- -------- -------- -------- --------
Indicated -
In-situ 474 14.3 217 58.7 89.5 2.72
--------- -------- -------- -------- -------- --------
Indicated -
Mined Stockpile 7 7.9 2 39.0 9 2.72
--------- -------- -------- -------- -------- --------
Sub-total M&I 541 14.3 248 59.9 1,043 2.72
--------- -------- -------- -------- -------- --------
Inferred - In-situ 75 7.4 18 21.9 53 2.72
--------- -------- -------- -------- -------- --------
Total MRE 617 13.4 266 55.3 1,096 2.72
--------- -------- -------- -------- -------- --------
Reported from 3D block model with grades estimated by ordinary
Kriging with 15 m x 15 m SMU Local Uniform Conditioning
adjustment. Minimum vein width is 1.2m. Totals may not appear
to add up due to appropriate rounding.
Note: Mineral Resources presented above include Ore Reserves
stated below.
There has been no change in the Mineral Resources reported
previously as at 30/06/2019.
An internal review of the Mineral Resource Estimate concluded
that the estimation techniques and parameters employed remained
appropriate.
The Cononish mineralisation remains open at depth down plunge
and to the west along strike. There is therefore potential to add
to the resource by further extensional drilling.
In addition to the currently defined Mineral Resources, Scotgold
believes that there is additional resource development potential
close to Cononish, subject to appropriate and successful further
work. Extensive gold-in-soil anomalies, mineralisation associated
with outcrops and trenches, and geophysical anomalies close to the
current resource clearly warrant further follow up. In addition,
there are indications that other reefs are present in the area. At
this stage, such indications are highly conceptual and there is no
guarantee that further exploration will define additional Mineral
Resources.
Cononish Ore Reserves
As part of initial work towards developing the 2015 BFS, Bara
Consulting Ltd ("Bara Consulting") completed a thorough review of
the 2013 Cononish Development plan in order to identify
opportunities to not only improve on the plan but to also improve
the confidence in the plan. As a result of this review, further
work was undertaken on the mining methodology, access design,
geotechnical evaluation and overall mine design.
The outcome of this work was that an Ore Reserve Estimate was
completed on 25 May 2015, in accordance with the JORC code (2012
Edition) based on the Mineral Resource Estimate (MRE) issued in
January 2015. The subsequent addendum to the Bankable Feasibility
Study resulted in no change to the Ore Reserve. Hence there is no
change to the Ore Reserves reported previously for the Project as
at 30/06/2019. Mine development during the reporting period has
predominantly been in waste, with a non-material volume of Ore
Reserve placed on surface stockpiles.
An internal review of the Ore Reserve Statement concluded that
the modifying factors used in determining the Ore Reserve remained
appropriate.
Table: 2020 Annual Ore Reserve Statement
As at 25 May 2015 (JORC 2012 Code)
Classification Proven Probable Total
---------- ------------- ---------
Tonnes ('000) 65 490 555
---------- ------------- ---------
Au Grade (g/t) 11.5 11.1 11.1
---------- ------------- ---------
Au Metal (k oz) 24 174 198
---------- ------------- ---------
Ag Grade (g/t) 51.5 47.2 47.7
---------- ------------- ---------
Ag Metal (k oz) 108 743 851
---------- ------------- ---------
(Bara Consulting Limited Ore Reserve Statement dated May
2015)
For greater detail on the parameters derived from this work and
used for the Ore Reserve estimation process, please refer to the
Company's announcement on 26/05/2015 - Cononish Gold Project Study
Update and Reserve Estimate; and to the subsequent announcement on
16/03/2017 - Update to Cononish Bankable feasibility study on the
Company's website.
The Ore Reserve statement above does not take account of the
depletion of the surface stockpile through the BPT. At 30 June
2020, approximately 6.5kt had been removed from the stockpile and
the reserves will be adjusted on full depletion of the
stockpile.
Both the Mineral Resource Estimate and Ore Reserve statement
were compiled by suitably qualified Independent Competent Persons
as identified at the time of their release.
GRAMPIAN GOLD PROJECT
The Company continues to actively pursue exploration activities
on its substantial land position (approx. 2,900 km2) in the
Dalradian Belt of the south west Grampians, a terrain highly
prospective for both precious and base metal occurrences. The
majority (85%) of the area currently under option to Scotgold is
located outside the Loch Lomond and the Trossachs National
Park.
Following on from the success of the previously completed
orientation surveys, Scotgold has continued to use the ionic leach
technique for regional stream sediment sampling across 6 of its 13
Crown Option areas, identifying several drainage catchments with
encouraging values that require detailed follow up work. Subsequent
to the reporting period, regional stream sediment sampling has been
completed across 10 of Scotgold's 13 Crown Option areas.
More targeted soil sampling using the ionic leach technique has
been completed over prospects in the Glen Orchy Central and
Inverliever East option areas. The three main prospects covered
during this reporting period are as follows:
1. Kilbridge - This area had been identified as prospective by
previous programmes; however, this latest work indicates an anomaly
that is relatively limited in extent. This area is now considered a
lower priority.
2. Beinn Udlaidh - This area has been the focus of several
exploration programmes in the past, with conventional stream
sediment and soil sampling as well as limited drilling completed
over the prospect. The orientation drainage survey confirmed the
prospectivity of the area, and soil sampling using the ionic leach
method was completed during this reporting period with the
objective of improving the understanding of the target area and
highlighting previously undetected anomalies. The sampling detected
a linear anomaly in the centre of the sampled area, associated with
a prominent quartz vein exposed at the summit of Beinn Udlaidh as
well as a linear anomaly in the southwest of the area sampled,
where there is limited rock outcrop visible at surface. Further
sampling, subsequent to the reporting period, has identified a
highly anomalous area on the southern slope of Beinn Udlaidh,
further sampling is required to constrain these positive
anomalies.
3. Inverchorachan - This area had previously been sampled and
mapped by students as part of their Masters research projects. The
limited study had returned highly anomalous gold and silver values
across the Inverchorachan gorge associated with the Tyndrum fault
and an altered intrusive body. This initial survey area was
expanded, and results indicate that the highly anomalous area
continues to the southwest along strike of the Tyndrum fault.
Subsequent to the reporting period, sampling has been completed
further to the southwest which has identified several discrete but
coherent anomalies.
In addition to the above mentioned geochemistry the Company
embarked on a geophysical programme to evaluate more modern
equipment to that historically trialled; including ground
magnetics, Very Low Frequency ("VLF") / magnetics and Induced
Polarisation ("IP") Gradient Array. Subsequent to the reporting
period, the ground geophysics data reprocessing is currently in
progress with promising initial results, this data will be the
subject of a future regulatory announcement.
No fieldwork was completed between 16/03/2020 and 05/06/2020 due
to the coronavirus pandemic and nationwide lockdown restrictions.
This time was principally used for data analysis, procedure review
and database work.
The Company is pleased to report the identification of several
new anomalies across its prospects as well as development of the
understanding of areas previously identified as prospective and
continues to employ a systematic and targeted approach to
exploration.
PORTUGUESE AND FRENCH PROJECTS
In May 2016, the Company announced the acquisition of the Pomar
licence area in eastern central Portugal by its wholly owned
Portuguese subsidiary, Scotgold Resources Portugal Ltda.
On 18 July 2019, the Company announced its decision not to
extend the Pomar licence and the intention to apply to the Director
General of Energy and Geology to terminate the licence. The
termination process is currently in its final stages.
In May 2017, the Company was granted the 'Vendrennes' Permit
Exclusif de Recherche ("PER") / exclusive exploration licence in
France, applied for in 2015.
The Company withdrew its interest in the Vendrennes licence and
placed SGZ France SAS into voluntary liquidation during the prior
year. The liquidation process was concluded on 1 October 2019.
.
TENEMENT DETAILS
United Kingdom -
The Company holds a lease (100%) from the Crown Estate Scotland
over Cononish Farm, county of Perth, Scotland UK.
The Company holds a lease (100%) from the landowner over
Cononish Farm, county of Perth, Scotland UK.
The Company holds thirteen Mines Royal Option Agreements (100%)
with the Crown Estate Scotland as detailed below:
No. Name Area Location
1 Knapdale South 250 km(2) county of Argyll, Scotland UK
------------------- ---------- ---------------------------------------
2 Knapdale North 250 km(2) county of Argyll, Scotland UK
------------------- ---------- ---------------------------------------
Inverliever counties of Dunbarton, Argyll and
3 West 250 km(2) Perth, Scotland UK
------------------- ---------- ---------------------------------------
Inverliever counties of Dunbarton, Argyll and
4 East 233 km(2) Perth, Scotland UK
------------------- ---------- ---------------------------------------
counties of Perth and Argyll, Scotland
5 Glen Orchy West 103 km(2) UK
------------------- ---------- ---------------------------------------
counties of Perth and Argyll, Scotland
6 Glen Orchy Central 242 km(2) UK
------------------- ---------- ---------------------------------------
counties of Perth and Argyll, Scotland
7 Glen Orchy East 241 km(2) UK
------------------- ---------- ---------------------------------------
counties of Perth and Argyll, Scotland
8 Glen Lyon West 246 km(2) UK
------------------- ---------- ---------------------------------------
counties of Perth and Argyll, Scotland
9 Glen Lyon North 244 km(2) UK
------------------- ---------- ---------------------------------------
counties of Perth and Argyll, Scotland
10 Glen Lyon South 243 km(2) UK
------------------- ---------- ---------------------------------------
counties of Perth and Argyll, Scotland
11 Glen Lyon East 247 km(2) UK
------------------- ---------- ---------------------------------------
county of Clackmannan, Perth, Kinross
12 Ochills West 189 km(2) and Stirling, Scotland UK
------------------- ---------- ---------------------------------------
county of Clackmannan, Perth, Kinross
13 Ochills East 150 km(2) and Stirling, Scotland UK
------------------- ---------- ---------------------------------------
Portugal -
As at 30 June 2020, the Company was in the process of
terminating its 100% interest in the Pomar Licence in eastern
central Portugal, near Castelo Branco held through its subsidiary
Scotgold Resources Portugal Ltda, pursuant to the Company
announcing on 18 July 2019 its intention not to extend the Pomar
Licence.
No other beneficial interests are held in any farm-in or
farm-out agreements and no other beneficial interests in farm-in or
farm out agreements were acquired or disposed of during the
period.
Competent Persons Statement:
No new exploration results are presented in this report. All
results have been previously notified under JORC 2004 and are
contained in Scotgold Annual reports 2008 - 2019 and various
corresponding market releases.
The information in this report that relates to the 2015 Mineral
Resources for Cononish Gold Project (refer ASX release - Resource
Estimate Update - 22/01/2015) is based on information compiled by
Malcolm Titley, a Competent Person who is a Member of The
Australasian Institute of Mining and Metallurgy. Mr Titley is
employed by CSA Global (UK) Limited, an independent consulting
company. Mr Titley has sufficient experience which is relevant to
the style of mineralisation and type of deposit under consideration
and to the activity 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 Titley consents to the inclusion in
the report of the matters based on his information in the form and
context in which it appears.
The information in this report that relates to the 2015 Ore
Reserves for Cononish Gold Project (refer ASX announcement dated
26/05/2015) is based on information compiled by Pat Willis, a
Competent Person who is registered as a Professional Engineer
(Pr.Eng.) with the Engineering Council for South Africa (ECSA) and
a Fellow in good standing and Past President of the Southern Africa
Institute of Mining and Metallurgy (FSAIMM). Mr Willis is employed
by Bara Consulting Limited, an independent consulting company. Mr
Willis has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity 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 Willis consents to the inclusion in the report of the
matters based on his information in the form and context in which
it appears. Further, the Company confirms it is not aware of any
new information or data that materially affects the information
contained in the original announcements and that all material
assumptions and technical parameters underpinning the estimate of
Resources and Reserves continue to apply and have not materially
changed.
STRATEGIC REVIEW
The Company continues to review its corporate governance,
structure, policies and practices with a view to maintaining and
enhancing shareholder value.
The Company adopted the QCA code of corporate governance in 2018
and subsequently appointed an advisory service to assist with UK
regulatory compliance issues as an AIM listed company.
The Company predominantly operates in remote areas of Scotland,
much of which face socio-economic challenges and are designated as
"deprived". As such the Company works with Scottish Enterprise and
other agencies to ascertain what governmental aid may be available
and in October 2018 the Company was awarded a grant of up to
GBP430,000, under the "Regional Selective Assistance" (RSA) scheme,
This award is subject to certain conditions relating to capital
expenditure and job creation at the Cononish Project. The first and
second tranches of GBP50,000 and GBP150,000 payable under the
scheme were received in August 2019 and June 2020 respectively.
With effect from 1 January 2018, the Company established a new
100% owned subsidiary, SGZ Cononish Ltd to develop its flagship
asset, the Cononish Gold and Silver Project. Its existing 100%
owned subsidiary, Scotgold Resources Ltd (Scotland) was renamed SGZ
Grampian Limited and continues to hold and operate the Scottish
exploration licence.
Operationally, the Company's immediate focus remains the
development of the Cononish Gold and Silver Project, which
commenced in January 2019 and is expected to be complete at the end
of November 2020. However, to provide longevity beyond Cononish,
and potentially growth in overall production, the Company is
developing a pipeline of additional projects that we anticipate
will meet our criteria. During the period the Company chose to
focus on our Grampian Project which now consists of 13 Option
Agreements ("Exploration Licences") covering some 2,900 km(2) in
Scotland and includes the highly prospective ground in the vicinity
of Cononish.
The fundamental technical work completed on Cononish in 2015,
with the revised Mineral Resource Estimate and Ore Reserve
Estimate, underpinned the Updated Bankable Feasibility Study (BFS)
completed in March 2017. This study amply demonstrated the
Project's technical and financial viability and funding was raised
in May 2018. The key remaining impediment to commencement of
development remained planning consent and in October 2018 the
Decision Notice was issued by the NPA relating to the planning
application (approved by the NPA Board in February 2018). Once the
pre-commencement conditions had been satisfied in late December
2018, the Company commenced development activities. In August 2019
the Company announced that an additional GBP2.65m of funding had
been secured to address an increased capital cost estimate and a
two month delay to first gold production, then scheduled for the
end of February 2020.
The Company then encountered further schedule delays relating to
the management of excavated materials (peat in particular) and
endured record high rainfall in February. Progress continued to be
made however until the end of March 2020 when all non-essential
construction in Scotland was placed under lockdown due to the Covid
19 pandemic. A skeleton staff was then maintained on site to
undertake environmental monitoring and other essential maintenance
activities, until June 2020 when the restrictions were lifted in
stages and development activities could recommence.
In October 2020 the Company announced that it expected to
achieve first gold production at Cononish by 30 November 2020 and
that it had raised a further GBP3m (before costs) principally to
accelerate the development of Phase 2 in order that the Phase 2
production levels of 72,000tpa could be achieved as soon as
practicable thereafter (expected by May 2022).
In August 2019 the Company also provided an updated estimate of
the expected financial returns, based on the increased capital
estimates, revised construction schedule and a gold price
assumption of GBP1,200/oz and then again in October 2020 the
Company provided revised expected financial returns based on a gold
price assumption of GBP1,400/oz. These estimates demonstrate the
increased value of Cononish given the steady improvement in the
gold market, particularly in GB Pound terms, as the gold price has
climbed from GBP1,100/oz to GBP1,437/oz over this reporting period
and subsequently reached GBP1,569/oz in August 2020.
Notwithstanding the recent retreat of the spot gold price from
record highs, the Company currently expects Project returns in line
with these estimates.
As discussed above, the Covid 19 pandemic has already had a
modest impact on the Project development schedule and associated
capital costs, however these are not considered material to the
overall expected Project returns. As mining operations fall within
the classification of manufacturing and/or construction from the
Scottish Government's restrictions perspective, it is expected that
operations will continue even under the current Tier 4 level of
restrictions currently prevailing in the area. There remains the
risk of a more severe total lockdown, however it is anticipated
that any such event would be relatively short and Government
financial support similar to the earlier Job Retention Scheme would
be available.
It is also expected that the Covid-19 pandemic will have a
longer-term impact on global macro-economics but it is considered
that this is unlikely to be negative for the long-term outlook for
the gold price.
The work completed on advancing our future pipeline of projects
has during the current reporting period been modest due to the need
to focus cash and management resources on the advancement of
Cononish. Notwithstanding this, the Company has identified the
analysis of soil and stream samples using ionic leach as providing
a cost effective and efficient method of identifying anomalous
zones. Using this new methodology the Company has to date
identified potential extensions to the Cononish orebody and a
potentially new prospect at Inverchorachan. In September 2020 the
Company announced key appointments to its geoscience team, and
these will be key to expanding our exploration programmes in the
coming period.
Annual General Meeting
The Company is intending to hold its annual general meeting
('AGM') in January 2021, which will be a virtual meeting, and
formal notice of AGM will be posted to shareholders in due course.
A further announcement in respect of the Company's AGM will be made
to shareholders accordingly.
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
**S**
For further information please contact:
Scotgold Resources Limited Tel: +44 (0)1838 400
Richard Gray 306
SP Angel Corporate Finance Tel +44 (0) 20 3470
LLP 0470
Nomad and Broker
Ewan Leggat / Charlie
Bouverat
Tel +44 (0) 20 7236
St Brides Partners 1177
Financial PR
Susie Geliher / Frank
Buhagiar
CONSOLIDATED STATEMENT OF PROFIT OR LOSS Notes 2020 2019
AND OTHER COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2020
$ $
Interest income 2 38,989 6,314
Other income 3 381,708 -
Gain on loan renegotiation 15 38,383 -
Administration costs (462,151) (527,619)
Interest expense 4 (669,912) (101,943)
Depreciation and loss on disposal of
non-current assets 5 (732,359) (208,608)
Pre-development costs expensed as incurred - (1,253,211)
Exploration expensed as incurred - (28,194)
Deferred mineral exploration and evaluation
costs written - (118,402)
Employee and consultant costs, excluding
share-based payments (736,371) (615,809)
Share-based payments 19 (66,194) (200,954)
Listing and share registry costs (188,178) (164,991)
Legal fees (36,677) (50,282)
Office and communication costs (68,174) (96,587)
Other expenses (3,198) (158,169)
LOSS BEFORE INCOME TAX (2,504,134) (3,518,455)
Income tax benefit 6 - -
LOSS FOR THE YEAR (2,504,134) (3,518,455)
Other Comprehensive Income
Items that may be reclassified to Profit
or Loss
Exchange difference on translation of
foreign subsidiaries (226,738) (726,967)
Total comprehensive result for the year (2,730,872) (4,245,422)
============ ============
Basic (loss) per share (cents per share) 28 (5.04) (7.84)
Loss per share for the year attributable
to the members of Scotgold Resources
Ltd (cents per share) (5.04) (7.84)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEARED 30 JUNE 2020
Notes 2020 2019
$ $
CURRENT ASSETS
Cash and cash equivalents 1,019,979 3,917,920
Trade and other receivables 7 226,134 57,970
Inventory 8 62,291 29,724
Other current assets 9 129,253 93,273
Total Current Assets 1,437,657 4,098,887
------------- ---------------
NON-CURRENT ASSETS
Trade and other receivables 7 1,527,306 1,511,493
Plant and equipment 10 469,115 996,562
Right-of-use assets 11 1,738,238 -
Mineral exploration and evaluation 12 2,441,728 2,034,815
Mine development expenditure 13 28,805,352 20,293,754
------------- ---------------
Total Non-Current Assets 34,981,739 24,836,624
TOTAL ASSETS 36,419,396 28,935,511
------------- ---------------
CURRENT LIABILITIES
Trade and other payables 14 1,127,113 581,947
Other current liabilities 14 461,999 63,123
Borrowings 15 542,761 174,838
Total Current Liabilities 2,131,873 819,908
------------- ---------------
NON-CURRENT LIABILITIES
Borrowings 15 8,740,965 4,212,914
Provisions 16 657,934 238,690
Total Non-Current Liabilities 9,398,899 4,451,604
TOTAL LIABILITIES 11,530,772 5,271,512
============= ===============
NET ASSETS 24,888,624 23,663,999
============= ===============
EQUITY
Issued capital 17 44,978,659 41,098,558
Reserves 18 (596,589) (448,311)
Accumulated losses 18 (19,493,446) (16,986,248)
TOTAL EQUITY 24,888,624 23,663,999
============= ===============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2020
Issued Accumulated Options Share-based Foreign Total
Capital Losses Reserve payment Currency Equity
reserve Translation
Reserve
YEARED 30 JUNE $ $ $ $ $ $
2019
------------- ------------- --------- ------------ -------------- ------------
Balances at 1 July
2018 39,706,967 (13,467,793) 134,769 - (61,295) 26,312,648
------------- ------------- --------- ------------ -------------- ------------
Total
comprehensive
result for the
year - (3,518,455) - - (726,967) (4,245,422)
------------- ------------- --------- ------------ -------------- ------------
Transactions with owners in their capacity as owners:
Issue of shares 1,390,854 - - - - 1,390,854
------------- ------------- --------- ------------ -------------- ------------
Options exercised 737 - - - - 737
------------- ------------- --------- ------------ -------------- ------------
Share-based
payments - - - 205,182 - 205,182
------------- ------------- --------- ------------ -------------- ------------
Balances at 30
June 2019 41,098,558 (16,986,248) 134,769 205,182 (788,262) 23,663,999
------------- ------------- --------- ------------ -------------- ------------
YEARED 30 JUNE
2020
------------- ------------- --------- ------------ -------------- ------------
Balances at 1 July
2019 41,098,558 (16,986,248) 134,769 205,182 (788,262) 23,663,999
------------- ------------- --------- ------------ -------------- ------------
Adjustment on
initial
application
of AASB 16 - (3,064) - - - (3,064)
------------- ------------- --------- ------------ -------------- ------------
Total
comprehensive
result for the
year - (2,504,134) - - (226,738) (2,730,872)
------------- ------------- --------- ------------ -------------- ------------
Transactions with owners in their capacity as
owners:
--------- ------------ -------------- ------------
Issue of shares 2,075,997 - - - - 2,075,997
------------- ------------- --------- ------------ -------------- ------------
Options exercised 1,839,556 - - - - 1,839,556
------------- ------------- --------- ------------ -------------- ------------
Share-based
payments - - - 78,460 - 78,460
------------- ------------- --------- ------------ -------------- ------------
Share issue
expenses (35,452) - - - - (35,452)
------------- ------------- --------- ------------ -------------- ------------
Balances at 30
June 2020 44,978,659 (19,493,446) 134,769 283,642 (1,015,000) 24,888,624
------------- ------------- --------- ------------ -------------- ------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2020
Notes 2020 2019
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Payment to suppliers (1,031,667) (3,057,998)
Interest income received 38,989 6,314
------------ ------------
Net Cash Outflow from Operating Activities 24 (992,678) (3,051,684)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration expenditure (507,795) (487,024)
Payments for mine development activities (7,957,393) (5,263,745)
Purchase of plant and equipment (428,733) (1,072,636)
Expenditure on right-of-use assets (47,710) -
Lodging of deposits as security for
obligations - (1,409,024)
------------ ------------
Net Cash Outflow from Investing Activities (8,941,631) (8,232,429)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares and
options, net of costs 2,040,545 1,391,591
Proceeds from exercise of options 1,839,556 -
Repayment of current borrowings - (1,815,521)
Proceeds on draw-down of first tranche
of secured loan - 3,729,952
Proceeds on draw-down of second tranche 3,762,227 -
of secured loan
Net proceeds from Hire Purchase borrowings - 731,122
Repayment of right-of-use leases (698,243) -
------------ ------------
Net Cash Inflow from Financing Activities 6,944,085 4,037,144
------------ ------------
Net decrease in cash held (2,990,224) (7,246,969)
Effect of exchange rate fluctuations
on cash and cash equivalents 92,283 (42,147)
Cash and cash equivalents at beginning
of year 3,917,920 11,207,036
Cash and cash equivalents at end of
year 1,019,979 3,917,920
============ ============
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 30 JUNE 2020
NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
These financial statements are general purpose financial
statements, which have been prepared in accordance with the
requirements of the Corporations Act 2001, Accounting Standards and
Interpretations and comply with other requirements of the law. Cost
is based on the fair value of the consideration given in exchange
for assets.
The financial statements have also been prepared on a historical
cost basis. The financial statements are presented in Australian
dollars.
The company is a listed public company, incorporated in
Australia and operating in Australia, Scotland, France and
Portugal. The entity's principal activity is mine development and
mineral exploration.
The accounting policies detailed below have been consistently
applied to all of the years presented unless otherwise stated. The
financial statements are for the consolidated entity consisting of
Scotgold Resources Limited and its subsidiaries.
Reporting Basis and Conventions
The financial statements have been prepared on the basis of
accounting principles applicable to a going concern, which assumes
the commercial realisation of the future potential of the
consolidated entity's assets and the discharge of their liabilities
in the normal course of business. At balance date, the consolidated
entity had current assets of $1,437,657 (2019 - $4,098,887),
including available cash and cash equivalents of $1,019,979 (2019 -
$3,917,920) , and current liabilities of $2,131,873 (2019 -
$819,908).
The Board reviews cash flows covering a period of 12 to 18
months and while the Board considers that the consolidated entity
is a going concern it also recognises that significant funds will
be required in the development of the Cononish mine, regional
exploration activities and general working capital. In addition to
existing cash reserves at 30 June 2020, the consolidated entity had
further available funds by way of a secured GBP3.5m ($6.27m) loan
facility not yet drawn down at that date.
Going Concern
The financial report has been prepared on the going concern
basis, which contemplates the continuity of normal business
activities and the realisation of assets and the settlement of
liabilities in the normal course of business.
As at 30 June 2020, the consolidated entity had cash balances of
$1,019,979 (30 June 2019 - $3,917,920) and for the financial year
then ending, incurred net cash outflows from operating and
investing activities of $9,934,309 (2019 - $11,284,113). The
consolidated entity is nearing completion of the processing plant
installation and tailings management facility at the Cononish Mine
with the proceeds of the sale of the first gold produced expected
to be received in December 2020. The ability of the consolidated
entity to continue as a going concern is dependent on the
successful commissioning of the Cononish mine, including the timing
of the project generating positive cash flows and the construction
costs being in line with budget, or in the case where there is a
delay in commissioning, the ability of the consolidated entity to
put in place additional financing to address any adverse effects of
that delay.
These conditions indicate a material uncertainty that may cast
significant doubt over the ability of the consolidated entity to
continue as a going concern and therefore its ability to realise
its assets and discharge its liabilities in the normal course of
business.
The Directors believe that the consolidated entity has
sufficient financing available to continue as a going concern for
the following reasons:
-- The consolidated entity is nearing completion of the
processing plant installation and tailings management facility at
the Cononish Mine with the proceeds of the sale of the first gold
produced expected to be received in December 2020;
-- Subsequent to 30 June 2020, drawdowns in a total amount of
GBP2,500,000 were made on the Bridge Barn secured loan facility and
an amount of GBP1,000,000 of that loan facility remains undrawn and
is available to be drawn down until 31 December 2021;
-- As set out in Note 30, equity funding, net of attributable
costs, in the amount of GBP2,839,650 ($5,190,125) was raised in
October 2020 pursuant to a successful placement exercise, with
these funds intended to be deployed in bringing forward the Phase 2
expansion of the Cononish Mine (thereby increasing monthly
production levels from 3,000 tonnes of ore per month to 6,000
tonnes of ore per month) and conducting a comprehensive exploration
campaign; and
-- The extent and timing of the aforementioned exploration
campaign lies solely within the discretion of management and can be
varied to respond to the effects on group cash flows of
uncertainties in the operating environment caused by the Covid-19
pandemic, which is still having a major global impact.
Should the consolidated entity not be able to continue as a
going concern it may be required to realise its assets and
discharge its liabilities other than in the ordinary course of
business, and at amounts that differ from those in the financial
statements. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset
amounts or liabilities that might be necessary should the
consolidated entity be unable to continue as a going concern.
Statement of Compliance
The financial report was authorised for issue on 27 November
2020.
The financial report complies with Australian Accounting
Standards as issued by the Australian Accounting Standards Board
and International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board.
Adoption of new and revised standards
Changes in accounting policies on initial application of
Accounting Standards
In the year ended 30 June 2020, the Directors have reviewed all
of the new and revised Accounting Standards and Interpretations
issued by the AASB that are relevant to the consolidated entity's
operations and effective for the current annual reporting
period.
It has been determined by the Directors that there is no impact,
material or otherwise, of the new and revised Standards and
Interpretations on its business and, therefore, no change is
necessary to amounts recognised in the financial statements other
than as noted below.
The following new or amended standards have been adopted during
the year ended 30 June 2020:
AASB 16 Leases
The consolidated entity has adopted AASB 16 with effect from 1
July 2019. The Standard replaces AASB 117 'Leases' and for lessees
it eliminates the classifications of finance leases and operating
leases. Except for short-term leases and leases of low value
assets, right-of-use assets and corresponding lease liabilities are
recognised in the statement of financial position.
Straight line operating lease expense recognition is replaced
with a depreciation charge for the right-of-use assets and an
interest expense on the recognised lease liabilities.
For lessors, the standard does not substantially change how a
lessor accounts for leases.
Impact of adoption
AASB 16 has been adopted using the modified retrospective
approach, in terms of which comparatives have not been
restated.
The effect of adoption on opening accumulated losses is as
follows:
Recognition of right-of-use assets previously recognised
as operating leases under AASB 117:
1 July 2019
$
Operating lease commitments as at 1 July 2019 (AASB 117) 503,351
Reassessment of non-cancellable periods of leases 294,821
Variations in lease payments due to anticipated escalation 127,217
------------
Adjusted operating lease commitments as at 1 July 2019
(AASB 117) 925,389
Operating lease commitments discount based on the weighted
average incremental borrowing rate of 7.44% (AASB 16) (165,938)
Low-value assets leases not recognised as a right-of-use
asset (9)
Operating lease payments between commencement date and
date of initial application 195,310
Operating lease payments between commencement date and
date of initial application discount based on the weighted
average incremental borrowing rate of 7.44% (AASB 16 Paragraph
C8(B)(i)) (18,794)
Accumulated depreciation as at 1 July 2019 (AASB 16 Paragraph
C8(B)(i)) (179,580)
------------
Right-of-use assets previously accounted for as operating
leases 756,378
Net carrying value at 1 July 2019 of assets financed by
hire purchase agreements reclassified as right-of-use assets
at date of initial application 842,517
------------
Right-of-use assets (AASB 16) 1,598,895
------------
Lease liabilities - current (AASB 16) (889,832)
Lease liabilities - non-current (AASB 16) (602,141)
Reclassification of hire purchase agreements and assets
financed thereby:
Net carrying value of assets at 1 July 2019 (842,517)
Outstanding balance on hire purchase agreements as at
1 July 2019 732,531
----------
Net increase in opening accumulated loss at 1 July 2019 (3,064)
==========
When adopting AASB 16, the consolidated entity has applied the
following practical expedients:
-- applying a single discount rate to the portfolio of leases
with reasonably similar characteristics;
-- accounting for leases with a remaining term of 12 months at 1
July 2019 as short-term leases; and
-- Using hindsight in determining the lease term when the
contract contains options to extend or terminate the lease.
The weighted average incremental borrowing rate used to measure
the right-of-use assets and lease liabilities at 1 July 2019 was
7.44% per annum in respect of leases previously classified as
operating leases. In the case of hire purchase facility balances
reclassified as leases on 1 July 2019, the respective interest
rates implicit in those agreements were retained (see Note 15).
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a
lease. The right-of-use asset is measured at cost, which comprises
the initial amount of the lease liability, adjusted for, as
applicable, any lease payments made at or before the commencement
date net of any lease incentives received, any initial direct costs
incurred, and, except where included in the cost of inventories, an
estimate of costs expected to be incurred for dismantling and
removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis
over the unexpired period of the lease or the estimated useful life
of the asset, whichever is the shorter. Where the consolidated
entity expects to obtain ownership of the leased asset at the end
of the lease term, the asset is depreciated over its estimated
useful life. Right-of-use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a
right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low value
assets. Lease payments on these assets are charged to mine
development costs or expensed to profit or loss as incurred, as
appropriate.
During the year, an aggregate amount of $276,732 (2019 - $Nil)
paid in respect of short-term leases and leases of low value assets
was charged to mine development expenditure, with the major
component of this amount being payments in respect of mobile plant
used in the construction of the Cononish Mine processing plant
building and tailings management facility hired on a weekly basis
for consecutive periods of more than one month, which are all
expected to be off-hired by 31 December 2020.
Lease liabilities
A lease liability is recognised at the commencement date of a
lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the incremental borrowing
rate of the consolidated entity.
Lease payments comprise:
-- fixed payments less any lease incentives receivable;
-- variable lease payments that depend on an index or a rate;
-- amounts expected to be paid under residual value guarantees ;
-- exercise price of a purchase option when the exercise of the
option is reasonably certain to occur ; and
-- any anticipated termination penalties .
The variable lease payments that do not depend on an index or a
rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the
effective interest method. The carrying amounts are remeasured if
there is a change in the following:
-- future lease payments arising from a change in an index or a rate used;
-- residual guarantee;
-- lease term;
-- certainty of a purchase option; and
-- termination penalties.
When a lease liability is remeasured, an adjustment is made to
the corresponding right-of-use asset, or to profit or loss if the
carrying amount of the right of use asset is fully written
down.
The consolidated entity has applied the provisions of AASB
2020-4 - Covid-19 Related Rent Concessions during the year. AASB
2020-4 introduced a practical expedient that permits lessees not to
assess whether a rent concession that occurs as a direct
consequence of the COVID-19 pandemic is a lease modification. The
lessor of the Boomer S1D drill rig and Scoop Tram used by the
consolidated entity in its mining operations halved the monthly
payments on these items of mobile plant during the months of April
2020 to June 2020 during which mining operations were suspended as
a result of the Covid-19 pandemic. The resultant aggregate
reduction in payments of $26,835 (GBP14,000) has been recognised as
a reduction of capitalised mine development expenditure.
AASB 2017-4 Amendments to Australian Accounting Standards -
Uncertainty over income tax treatments
The adoption of this standard has had no effect on the
consolidated entity.
AASB 2017-6 Amendments to Australian Accounting Standards -
Prepayment features with negative compensation
The adoption of this standard has had no effect on the
consolidated entity.
AASB 2018-1 Amendments to Australian Accounting Standards -
Annual improvements 2015-2017 Cycle (covering issues in AASB 3
Business Combinations, AASB 11 Joint Arrangements, AASB 112 Income
Taxes and AASB 123 Borrowing Costs)
The adoption of this standard has had no effect on the
consolidated entity.
Interpretation 23 Uncertainty over income tax treatments
The adoption of this standard has had no effect on the
consolidated entity.
New Accounting Standards and Interpretations
The following new/amended accounting standards and
interpretations have been issued but are not mandatory for
financial years ended 30 June 2020. They have not been adopted in
preparing the financial statements for the year ended 30 June
2020.
AASB 2018-6 Amendments to Australian Accounting Standards -
Definition of a Business
This standard was issued in December 2018 and clarifies the
definition of a business' in AASB 3 to assist in determining
whether a transaction should be accounted for as a business
combination or as an asset acquisition.
The standard is effective for annual reporting periods beginning
on or after 1 January 2020 and applies to acquisitions occurring on
or after the beginning of the first annual period beginning on or
after 1 January 2020. No impact on the financial statements is
expected when these amendments are first adopted because they apply
prospectively to acquisitions occurring on or after the beginning
of the first annual reporting period beginning on or after 1
January 2020, i.e. on or after 1 July 2020.
AASB 2018-7 Amendments to Australian Accounting Standards -
Definition of Material
This standard was issued in December 2018 and c larifies the
definition of what is 'material' to the financial statements,
including adding guidance and explanations to accompany the
definition. The standard primarily affects AASB 101 and AASB
108.
The standard is effective for annual reporting periods beginning
on or after 1 January 2020 and is to be applied prospectively.
Initial application is not expected to have an effect on the
consolidated entity.
AASB 2019-1 Amendments to Australian Accounting Standards -
References to the Conceptual Framework
This Standard was issued in May 2019 and sets out amendments to
Australian Accounting Standards, Interpretations and other
pronouncements to reflect the issuance of the Conceptual Framework
for Financial Reporting (Conceptual Framework) by the AASB.
The standard is effective for annual reporting periods beginning
on or after 1 January 2020. Initial application is not expected to
have an effect on the consolidated entity.
AASB 2019-3 Amendments to Australian Accounting Standards -
Interest Rate Benchmark Reform
This Standard was issued in October 2019 and amends AASB 7, AASB
9 and AASB 139 to modify some specific hedge accounting
requirements to provide relief from the potential effects of the
uncertainty caused by the interest rate benchmark reform. In
addition, the amendments require entities to provide additional
information about their hedging relationships that are directly
affected by these uncertainties.
The standard is effective for annual reporting periods beginning
on or after 1 January 2020. Initial application is not expected to
have an effect on the consolidated entity as the consolidated
entity does not engage in hedging activities.
AASB 2019-5 Amendments to Australian Accounting Standards -
Disclosure of the Effect of New IFRS Standards Not Yet Issued in
Australia
This Standard was issued in November 2019 and clarifies that, in
complying with paragraph 30 of AASB 108 Accounting Policies,
Changes in Accounting Estimates and Errors, entities intending to
assert compliance with IFRS must also disclose the potential effect
of IFRS standards that are yet to be issued by the AASB.
The standard is effective for annual reporting periods beginning
on or after 1 January 2020. The effect on the entity is expected to
be limited to additional disclosure in respect of IFRS standards
which are in effect before the equivalent AASB standard has been
issued to show the effect of application of such IFRS
standards.
AASB 2020-1 Amendments to Australian Accounting Standards -
Classification of Liabilities as Current or Non-current
This standard was issued in March 2020 and contains four main
changes to the requirements for classification of liabilities as
current or non-current and specifically, the unconditional right to
defer settlement, the effect of bank covenants, the right to defer
settlement vs intention to do so and early settlement by conversion
to equity.
The standard is effective for annual reporting periods beginning
on or after 1 January 2022. As these amendments only apply for the
first time to the 30 June 2023 Statement of Financial Position (and
30 June 2022 comparative Statement of Financial Position), the
entity is not yet able to make an assessment of the impacts
regarding the right to defer settlement, compliance with bank
covenants, and intention to settle set out therein.
AASB 2020-3 Amendments to Australian Accounting Standards -
Annual improvements 2018-2020 and Other Amendments
This standard was issued in June 2020 and effects amendments to
AASB 1, AASB 3, AASB 9, AASB 116, AASB 137 and AASB 141. The
standard is effective for annual reporting periods beginning on or
after 1 January 2022.
The amendments to AASB 1 apply only to entities that apply AASB
1 for the first time for the year ended 30 June 2023 and are not
expected to have any impact on the consolidated entity.
There will be no impact on the financial statements of the
consolidated entity when the amendments to AASB 3 are first adopted
because they apply prospectively to business combinations for which
the acquisition date is on or after the beginning of the first
annual reporting period to which this amendments applies, i.e.
annual periods beginning on or after 1 July 2022.
The amendment to AASB 9 clarifies which fees an entity includes
when it applies the '10 percent' test to assess whether there has
been a modification or substantial modification to a financial
liability. There will be no impact on the financial statements of
the consolidated entity when these amendments are first adopted
because they apply prospectively to financial liabilities that are
modified or exchanged on or after the beginning of the first annual
reporting period to which this amendment applies, i.e. annual
periods beginning on or after 1 July 2022.
The amendments to AASB 116 provide that where samples are
produced as a result of testing whether an asset is functioning
properly, then the revenue resulting from the sale of those samples
produced while bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended
by management must be recognised in profit or loss (as opposed to
being credited to the cost of that asset).
The amendments to AASB 116 apply retrospectively, but only to
items of property, plant and equipment that are brought to the
location and condition necessary to be capable of operating in the
manner intended by management, on or after the beginning of the
earliest period presented in the financial statements to which the
amendment first applies (i.e. 1 July 2021). However, it is intended
to apply these amendments to all revenues from the sale of gold and
silver resulting produced as a result of the testing and
commissioning of the Cononish Mine processing plant in the year
ended 30 June 2021.
The amendments to AASB 137 provide that the costs of fulfilling
a contract need to be considered when assessing whether a contract
is onerous and sets out examples of such costs. These amendments
only apply to contracts with unfulfilled obligations at the
beginning of the first annual reporting period to which the
amendments apply, i.e. annual periods beginning on or after 1 July
2022. The cumulative effect of initially applying the amendments
will be recognised as an adjustment to opening balances of retained
earnings on 1 July 2022.
The amendments to AASB 141 deal with biological assets in the
agriculture industry and application thereof is not expected to
have any effect on the consolidated entity.
Accounting Policies
(a) Basis of Consolidation
A controlled entity is any entity controlled by Scotgold
Resources Limited. Control exists where Scotgold Resources Limited
has the capacity to dominate the decision-making in relation to the
financial and operating policies of another entity so that the
other entity operates with Scotgold Resources Limited to achieve
the objectives of Scotgold Resources Limited. All controlled
entities have a 30 June financial year-end.
All intercompany balances and transactions between entities in
the consolidated entity, including any unrealised profit or losses,
have been eliminated on consolidation. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with those policies applied by the parent entity.
Where controlled entities have entered or left the consolidated
entity during the year, their operating results have been included
from the date control was obtained or until the date control
ceased.
(b) Income Tax
The charge for current income tax expenses is based on the
profit for the year adjusted for any non-assessable or disallowable
items. It is calculated using tax rates that have been enacted or
are substantively enacted by the reporting date.
Deferred tax is accounted for using the liability method in
respect of temporary differences arising between the tax bases of
assets and liabilities and their carrying amount in the financial
statements. No deferred income tax will be recognised from the
initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable
profit or loss.
Deferred tax is calculated at the tax rates that are expected to
apply to the period when the asset is realised or liability is
settled. Deferred tax is credited in the statement of comprehensive
income except where it relates to items that may be credited
directly to equity, in which case the deferred tax is adjusted
directly against equity.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profits will be available against
which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be
realised in the future is based on the assumption that no adverse
change will occur in income taxation legislation and the
anticipation that the consolidated entity will derive sufficient
future assessable income to enable the benefit to be realised and
comply with the conditions of deductibility imposed by the law.
(c) Plant and Equipment
Each class of plant and equipment is carried at cost less, where
applicable, any accumulated depreciation.
Plant and equipment are measured on the cost basis less
depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually
by the Directors to ensure it is not in excess of the recoverable
amount from these assets. The recoverable amount is assessed on the
basis of the expected net cash flows which will be received from
the employment and subsequent disposal of the assets. The expected
net cash flows have been discounted to their present values in
determining recoverable amounts.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future benefits associated with the item will flow to
the consolidated entity and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the
statement of comprehensive income during the financial period in
which they are incurred.
The present value of decommissioning liabilities attributable to
items of plant and equipment, as well as any changes in the present
value of such liabilities arising due to changes in the cash flows
used to determine such liabilities or the discount rate applied to
cash flows used to determine such liabilities, is included in the
cost of that item of plant and equipment.
(d) Depreciation
The depreciable amount of all fixed assets, excluding computers,
is depreciated on a reducing balance basis commencing from the time
the asset is held ready for use. Computers are depreciated on a
straight-line basis over their useful lives to the consolidated
entity commencing from the time the asset is held ready for
use.
The depreciation rates used for each class of depreciable assets
are:
Class of Fixed Asset: Depreciation Rate:
Plant and equipment 15 - 50%
Motor vehicles 25%
Office furniture and equipment 15 - 50%
The assets residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting date.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount. These gains and losses are
included in the statement of comprehensive income. When revalued
assets are sold, amounts included in the revaluation reserve
relating to that asset are transferred to retained earnings /
accumulated losses.
(e) Exploration and Evaluation Expenditure
The consolidated entity held thirteen exploration licences in
Scotland at 30 June 2020. The commencement date of each of these
licences is 5 November 2018, with a term of five years and an
option to extend for a further period of four years, subject to the
Crown Estate Scotland being satisfied with the progress made in
conducting exploration activities in the area covered by that
licence. No minimum capital expenditure figure is stipulated in any
of the thirteen licences.
Exploration and evaluation expenditure incurred is either
written off as incurred or accumulated in respect of each
identifiable area of interest. Tenement acquisition costs are
initially capitalised. Costs are only carried forward in the case
of areas of interest in respect of which tenure is current and to
the extent that they are expected to be recouped through the
successful development of the areas, sale of the respective areas
of interest or where activities in the area have not yet reached a
stage which permits reasonable assessment of the existence of
economically recoverable reserves. Revenues earned from the sale of
materials produced in connection with exploration activities are
applied against the accumulated deferred expenditure with the
result of reducing those expenditures.
Accumulated costs in relation to an abandoned area are written
off in full against profit in the year in which the decision to
abandon the areas is made.
Mineral exploration and evaluation expenditure, of which the
Bulk Processing Trial is an integral part, is reclassified to mine
development expenditure once the technical feasibility and
commercial viability of extracting the related mineral reserve is
demonstrable.
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.
Restoration, rehabilitation and environmental costs necessitated
by exploration and evaluation activities are expensed as incurred
and treated as exploration and evaluation expenditure. Likewise,
fixed asset depreciation is charged directly to profit and loss in
the period in which it is charged.
(f) Mine development expenditure
When an exploration area of interest meets certain criteria,
including the determination of technical feasibility and commercial
viability and the obtaining of all planning consents and approvals,
the deferred exploration and evaluation costs attributable to that
area of interest are reclassified as mine development
expenditure.
All subsequent expenditure on mine development activities is
capitalised. When production commences, mine development
expenditure is amortised over the life of the mine to which the
development expenditure relates according to the rate of depletion
of the economically recoverable reserves of that mine.
The present value of restoration, decommissioning and
environmental monitoring liabilities attributable to mine
development activities, as well as any changes in the present value
of such liabilities arising due to changes in the cash flows used
to determine such liabilities or the discount rate applied to cash
flows used to determine such liabilities, is included in mine
development expenditure.
(g) Impairment of Assets
At each reporting date, the Directors review the carrying values
of tangible and intangible assets to determine whether there is any
indication that those assets have been impaired. If such an
indication exists, the recoverable amount of the assets, being the
higher of the asset's fair value less costs to sell and
value-in-use, is compared to the asset's carrying value. Any excess
of the asset's carrying value over its recoverable amount is
expensed to the statement of comprehensive income.
Where it is not possible to estimate the recoverable amount of
an individual asset, the consolidated entity estimates the
recoverable amount of the cash-generating unit to which the asset
belongs.
(h) Provisions
Provisions are recognised where there is a legal or constructive
obligation, as a result of past events, for which it is probable
that an outflow of economic benefits will result and that outflow
can be reliably measured.
The consolidated entity has specific obligations in respect of
restoration, decommissioning and environmental monitoring arising
as a result of the undertaking of mine development activities. The
extent of the liability arising in respect of these obligations is
determined for each reporting period based on the extent of mine
development activities undertaken by the end of that reporting
period and the timing and amount of cash flows expected to be
expended in future to meet such obligations. These expected cash
flows are discounted to net present value at a current pre-tax rate
and provided for, with a corresponding addition to mine development
expenditure or specific items of property, plant and equipment
required to be decommissioned in future.
The unwinding of the discount is expensed as incurred and
recognised in profit or loss as a finance cost. The estimated
future costs of restoration, decommissioning and environmental
monitoring are reviewed annually and adjusted as appropriate,
Changes in the estimated expected future costs, or in the discount
rate applied to determine the net present value of those expected
future costs are added to or deducted from mine development
expenses, or items of property, plant and equipment required to be
decommissioned in future.
(i) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at
call with banks, other short-term highly liquid investments that
are readily convertible to known amounts of cash and which are
subject to an insignificant risk of change in value.
(j) Inventory
Inventory is valued at the lower of cost and net realisable
value
(k) Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one party to the contract and a financial
liability or equity instrument of the counterparty to that
contract.
(l) Financial assets
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value through other
comprehensive income (OCI) or fair value through profit or
loss.
The classification of financial assets at initial recognition
depends on the contractual cash flow characteristics of the
financial asset and the business model adopted by the consolidated
entity for managing them. With the exception of trade receivables
that do not contain a significant financing component, the
consolidated entity 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. Trade receivables that
do not contain a significant financing component are measured at
the transaction price determined under AASB 15.
In order for a financial asset to be classified and measured at
amortised cost or fair value through OCI, 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.
For purposes of subsequent measurement, financial assets are
classified in four categories:
- Financial assets at amortised cost;
- Financial assets at fair value through OCI with recycling of cumulative gains and losses;
- Financial assets at fair value through OCI with no recycling
of cumulative gains and losses on derecognition; and
- Financial assets at fair value through profit or loss.
All of the financial assets of the consolidated entity have been
classified within the category of financial assets at amortised
cost.
Financial assets are measured at amortised cost if both of the
following conditions are met:
- The financial asset is held in a business model with the
objective to hold financial assets 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;
As the consolidated entity is engaged in the principal
activities of mine development and mineral exploration, the holding
of financial assets is effected with the objective of collecting
the contractual cash flows applicable to those financial assets for
deployment in the mine development or mineral exploration and
evaluation activities of the consolidated entity.
Financial assets at amortised cost are subsequently measured
using the effective interest rate method and are subject to
impairment. Gains and losses are recognised in profit or loss when
the asset is derecognised, modified or impaired.
When the consolidated entity has transferred its rights to
receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if, and to what extent, it has retained
the risks and rewards of ownership. When it has neither transferred
nor retained substantially all of the risks and rewards of the
asset, nor transferred control of the asset, the consolidated
entity continues to recognise the transferred asset to the extent
of its continuing involvement. In that case, the consolidated
entity also recognises an associated liability. The transferred
asset and the associated liability are measured on a basis that
reflects the rights and obligations that the consolidated entity
has retained.
The consolidated entity recognises an allowance for expected
credit losses (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 consolidated entity
expects to receive, discounted at an approximation of the original
effective interest rate. 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 and contract assets, the consolidated
entity applies a simplified approach in calculating ECLs.
Therefore, the consolidated entity does not track changes in credit
risk, but instead recognises a loss allowance based on lifetime
ECLs at each reporting date.
(m) Financial liabilities
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at the fair
value of consideration received and, in the case of loans and
borrowings and payables, net of directly attributable transaction
costs. The financial liabilities of the consolidated entity include
trade and other payables and borrowings.
Subsequent to initial recognition, the measurement of financial
liabilities depends on their classification, with the
classification categories being:
- Financial liabilities at fair value through profit or loss; or
- Loans and borrowings.
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.
As at 30 June 2020, no financial liabilities are held for
trading or have been designated upon initial recognition as at fair
value through profit or loss.
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the effective
interest rate method. Gains and losses are recognised in profit or
loss when the liabilities are derecognised as well as through the
effective interest rate amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the effective interest rate. The effective interest rate
amortisation is included as finance costs in the statement of
comprehensive income.
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the statement of
comprehensive income.
Loans and borrowings are classified as current liabilities
unless the consolidated entity has an unconditional right to defer
settlement of the liability for at least 12 months after the
reporting date.
(n) Revenue
No revenue from the sale of goods or services is currently
recognised by the consolidated entity. Revenues earned from the
sale of materials produced in connection with BPT activities are
viewed as an integral part of mineral exploration and evaluation
activities and are applied against the accumulated deferred mineral
exploration and expenditures with the result of reducing those
expenditures.
Interest revenue is recognised on a proportional basis taking
into account the interest rates applicable to the financial
assets.
(o) Government grants
Grants from the government are recognised only when there is
both a reasonable assurance that the entity will comply with any
conditions attached to the grant and the grant will be
received.
Government grants relating to costs are deferred and recognised
in profit or loss over the period necessary to match them with the
costs that they are intended to compensate.
Government grants are receivable in the form of Regional
Selective Assistance provided by Scottish Enterprise in respect of
the Cononish Mine project. The Regional Selective Assistance grant
is receivable in four instalments with conditions as to capital
expenditure, project funding and creation of new jobs being
attached to each claim instalment. Claims in respect of each
instalment are submitted to Scottish Enterprise together with proof
that the specific conditions attached to that claim instalment have
been met. Claims received are recognised as other income.
(p) Goods and Services Tax (GST) and Value Added Tax (VAT)
Revenues, expenses and assets are recognised net of the amount
of GST or VAT, except where the amount of GST or VAT incurred is
not recoverable from the relevant authority. In these circumstances
the GST or VAT is recognised as part of the cost of acquisition of
the asset or as part of an item in expenses. Receivables and
payables in the statement of financial position are shown inclusive
of GST or VAT.
(q) Issued Capital
Issued and paid up capital is recognised at the fair value of
the consideration received by the Company. Any transaction costs
arising on the issue of ordinary shares are recognised directly in
equity as a reduction of the share proceeds received.
(r) Comparative Figures
When required by Accounting Standards, comparative figures have
been adjusted to conform to changes in presentation for the current
financial year.
(s) Segment Reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors of Scotgold
Resources Limited.
(t) Share based payments - shares and options
The fair value of shares and share options granted is recognised
as an expense or as an addition to mine development expenditure
depending on the services rendered in respect of which the shares
or share options are granted, with a corresponding increase in
equity. Fair value is measured at grant date and recognised over
the period during which the grantees become unconditionally
entitled to the shares or share options.
The fair value of share grants at grant date is determined by
reference to the share price at that time.
The fair value of share options at grant date is determined
using a Black-Scholes option pricing model that takes into account
the exercise price, the term of the option, any vesting and
performance criteria, the share price at grant date, the expected
price volatility of the underlying share, the expected dividend
yield and the risk free rate for the term of the option.
Upon the exercise of the option, the balance of the share-based
payments reserve relating to the option is transferred to share
capital.
(u) Foreign currency translation
The presentation currency of the consolidated financial
statements is Australian dollars. In addition, functional currency
is determined for each entity in the Group and items included in
the financial statements of each entity are measured using that
functional currency.
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 retranslated at the rate of
exchange ruling at the reporting date.
All exchange differences in the consolidated financial report
are taken to profit or loss with the exception of differences on
foreign currency borrowings that provide a hedge against a net
investment in a foreign entity. These are taken directly to equity
until the disposal of the net investment, at which time they are
recognised in profit or loss.
Tax charges and credits attributable to exchange differences on
those borrowings are also recognised in equity.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rate as at
the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair
value was determined. Translation differences on assets and
liabilities carried at fair value are reported as part of the fair
value gain or loss.
The functional currency of the foreign operations SGZ Grampian
Limited and SGZ Cononish Limited is Pounds Sterling (GBP). The
functional currency of SGZ France SAS and Scotgold Resources
Portugal is the Euro ( EUR ).
As at the reporting date the assets and liabilities of these
subsidiaries are translated into the presentation currency of the
consolidated financial statements at the rate of exchange ruling at
the reporting date and income and expense items are translated at
the average exchange rate for the period, unless exchange rates
fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used.
The exchange differences arising on the translation are taken
directly to a separate component of equity, being recognised in the
foreign currency translation reserve.
On disposal of a foreign entity, the deferred cumulative amount
recognised in equity relating to that particular foreign operation
is recognised in profit or loss.
In addition, in relation to the partial disposal of a subsidiary
that does not result in the consolidated entity losing control over
the subsidiary, the proportionate share of accumulated exchange
differences is re-attributed to non-controlling interests and is
not recognised in profit or loss. For all other partial disposals
(i.e. partial disposals of associates or jointly controlled
entities that do not result in the consolidated entity losing
significant influence or joint control), the proportionate share of
the accumulated exchange differences is reclassified to profit or
loss.
(v) Critical accounting estimates and judgements
The application of accounting policies requires the use of
judgements, estimates and assumptions about carrying values of
assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
(v)(i) Critical accounting estimates and associated
assumptions
Estimation of useful lives of assets
The determination by the consolidated entity of the estimated
useful lives and related depreciation and amortisation charges for
its plant and equipment and finite life intangible assets involves
a significant amount of judgement, based on historical experience
with similar assets, available industry information with regard to
similar assets and anticipation of future events.
The useful lives determined could change significantly as a
result of technical innovations or some other event. The
depreciation and amortisation charge will increase where the useful
lives are less than previously estimated lives, or technically
obsolete or non-strategic assets that have been abandoned or sold
will be written off or written down.
Lease term
The lease term is a significant component in the measurement of
both the right-of-use asset and lease liability. Judgement is
exercised in determining whether there is reasonable certainty that
an option to extend the lease or purchase the underlying asset will
be exercised, or an option to terminate the lease will not be
exercised, when ascertaining the periods to be included in the
lease term. In determining the lease term, all facts and
circumstances that create an economical incentive to exercise an
extension option, or not to exercise a termination option, are
considered at the lease commencement date. Factors considered may
include the importance of the asset to the consolidated entity's
operations; comparison of terms and conditions to prevailing market
rates, incurrence of significant penalties, existence of
significant leasehold improvements and the costs and disruption to
replace the asset. The consolidated entity reassesses whether it is
reasonably certain to exercise an extension option, or not exercise
a termination option, if there is a significant event or
significant change in circumstances.
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily
determined, an incremental borrowing rate is estimated to discount
future lease payments to measure the present value of the lease
liability at the lease commencement date. Such a rate is based on
what the consolidated entity estimates it would have to pay a third
party to borrow the funds necessary to obtain an asset of a similar
value to the right-of-use asset, with similar terms, security and
economic environment.
Provision for restoration and decommissioning
A provision has been made for the present value of anticipated
costs of restoration and decommissioning at the Cononish mine at
the end of mining operations there as well as to carry out
after-care and monitoring for an agreed period subsequent to such
cessation. As at each reporting date, the consolidated entity
recognises the best estimate of the Directors in respect of the
liability for restoration and decommissioning which has been
incurred up to and including that reporting date, which best
estimate is determined by reference to the extent of mine
development activity (or when production is underway, mining
activity) undertaken up to that date as well as the obligations set
out in the applicable legislation and agreements to which the
consolidated entity is a party. Key assumptions employed in
determining the best estimate in respect of liability for
restoration and decommissioning include discount rates, the
life-of-mine and the extent of obligations undertaken, all or any
of which may change in the future and accordingly affect the
carrying amount of the provision for restoration and
decommissioning.
Based on the extent of mine development activities carried out
up to and including that date, the provision for restoration and
decommissioning at 30 June 2020 was $657,934 (2019 - $238,690).
Mineral reserves and resources
There are numerous risks inherent in estimating ore reserves and
resources and the associated life-of-mine plan. A number of
assumptions must be made when estimating ore reserves and
resources, including assumptions as to exchange rates, gold and
silver prices and any premium over market spot prices which may be
obtained, extraction costs and recovery and production rates. Any
such assumptions and estimates may change as new information
becomes available. Apart from possibly resulting in changes to
judgements as to the economic viability of the orebody, these
changes may further change the estimate of life-of-mine, thereby
changing the timing and amount to be recognised as a provision in
respect of restoration and decommissioning and changing the basis
of amortisation of mine development expenditure once production
commences.
Share-based payments
In determining the amount to be recognised in respect of
share-based payments during each reporting period, it is necessary
to perform a valuation of instruments such as share options or
warrants granted as share-based payments for services received.
The consolidated entity determines such valuation using the
"Black Scholes" model. Inputs into that model include assumptions
which require judgement on the part of the Directors. In addition,
once such value has been determined, in accounting for these
options the Directors must exercise judgement as to number of
share-based payment instruments granted which are likely to vest
and the likelihood that any non-market vesting conditions will be
met.
(v)(ii) Critical judgements in applying the consolidated
entity's accounting policies
Determination of date of reclassification to mine development
expenditure
During the prior year, exploration and evaluation expenditure
attributable to the Cononish area of interest was reclassified to
mine development expenditure pursuant to the making of a judgement
by the Directors that the criteria to be met to make such
reclassification had been met on 19 December 2018. In making that
judgement, the Directors took into account the requirements set out
in the provisions of various agreements entered into by SGZ
Cononish Limited dealing with the rights of SGZ Cononish Limited to
conduct mining activities at the Cononish mine, the conditions to
be met by that company prior to being permitted to conduct mining
activities and whether all of these conditions had been met.
The same judgement process will be applied in future in
evaluating whether other areas of interest have met the criteria
for reclassification to mine development expenditure.
Impairment
The Directors assess impairment at each reporting date by
evaluating conditions specific to the consolidated entity that may
lead to impairment of assets. Where an impairment trigger exists,
the recoverable amount of the asset is determined. Value-in-use
calculations performed in assessing recoverable amounts incorporate
a number of key estimates.
In particular, pursuant to the making of a judgement that
exploration and evaluation expenditure attributable to the Cononish
area of interest met the criteria for reclassification to mine
development expenditure on 19 December 2018, the attributable
balance of exploration and evaluation expenditure proposed to be so
reclassified was tested for impairment at the date of
reclassification by reference to value-in-use calculations
performed using a life-of-mine model of the Cononish mine
incorporating key assumptions such as gold and silver market
prices, any premium obtainable over spot market prices, mining
rates, ore grades, plant processing recoveries and efficiencies,
exchange rates, staffing levels and equipment operating
efficiencies, among others. The formulation of these key
assumptions involved the use by the Directors of judgements as to
current and expected general macro-economic conditions and expected
conditions in the gold mining industry as well as factors specific
to the Cononish mine such as mineral resources and reserves
estimates and ore grades.
Where the Directors adjudge that it is necessary to make
material changes to key assumptions employed in the life-of-mine
model, then these new key assumptions are incorporated into the
life-of-mine model and the resultant value-in-use valuation
produced by the life-of-mine model is then used as the basis for
determining the necessity for and amount of any impairment.
As at 30 June 2020, the gross asset base of the consolidated
entity directly attributable to the Cononish mine amounted to
$33,502,849 (2019 - $23,953,258). The Directors have not identified
any impairment indicators necessitating impairment of the carrying
value of that asset base at 30 June 2020.
In the case of impairment of mineral exploration and evaluation,
AASB 6 Exploration for and Evaluation of Mineral Resources requires
an assessment of recoverable amount to be completed whenever facts
and circumstance suggest that the carrying amount of an exploration
asset may exceed its recoverable amount. Recoverable amount is
defined within AASB 136 Impairment of Assets as the higher of fair
value less costs to sell and value-in-use. Value-in-use is
determined on a pre-tax basis and is the present value of the
future cash flows expected to be derived from the asset or
cash-generating unit.
At 30 June 2020, the consolidated entity had capitalised mineral
exploration and evaluation expenditure of $2,441,728 (2019 -
$2,034,815). The Directors do not believe any indications of
impairment are present.
NOTE 2 - INTEREST INCOME
Interest income 2020 2019
$ $
Interest received on non-current receivables 36,219 -
Interest received on bank deposits 2,770 6,314
Total interest income 38,989 6,314
======= ======
NOTE 3 - OTHER INCOME
Other income 2020 2019
$ $
Regional Selective Assistance grant payments from 379,468 -
Scottish Enterprise
Sale of scrap metal 2,240 -
Total other income 381,708 -
======== =====
NOTE 4 - INTEREST EXPENSE
Interest expense 2020 2019
$ $
Secured loan 546,747 41,626
Shareholder loan - 43,384
Hire Purchase facilities - 16,933
Right-of-use lease liability 98,956 -
Unwinding of discount on provision for restoration 24,209 -
and decommissioning
Total interest expense 669,912 101,943
======== ========
NOTE 5 - DEPRECIATION AND LOSS ON DISPOSAL OF NON-CURRENT
ASSETS
2020 2019
$ $
Depreciation of non-current assets
Plant and equipment 75,253 121,381
Motor vehicles 8,755 9,140
Office furniture and equipment 5,589 955
Right of Use assets 638,842 -
---------- -----------
Total depreciation of non-current assets 728,439 131,476
---------- -----------
Loss on disposal of non-current assets
Plant and equipment - 72,078
Motor vehicles 3,920 2,727
Office furniture and equipment - 2,327
---------- -----------
Total loss on disposal of non-current assets 3,920 77,132
---------- -----------
Total depreciation and loss on disposal of non-current
assets 732,359 208,608
========== ===========
NOTE 6 - INCOME TAX
The prima facie tax benefit at 27.5% (2019 - 27.5%) on loss from
ordinary activities is reconciled to the income tax benefit in the
financial statements as follows:
2020 2019
$ $
Loss from ordinary activities (2,504,134) (3,518,455)
Prima facie income tax benefit at 27.5% (2019
- 27.5%) 688,637 967,575
Difference in tax rate between jurisdictions (318,180) (294,507)
Net taxable temporary timing differences 92,172 167,024
Net deductible temporary timing differences (14) (877)
Tax effect of permanent differences
Share issue costs amortised 211 16,827
Other non-deductible expenses (46,546) (123,500)
Increase in assessable losses 416,280 732,542
Deferred tax asset not brought to account (416,280) (732,542)
Income tax benefit - -
============ ============
The difference in tax rate between jurisdictions arises due to
the difference in corporation tax rate between Australia (27.5%)
and the United Kingdom (19.0%). It is considered that there are
sufficient assessable losses as at 30 June 2020 to offset the
effect of taxable temporary differences in future.
INCOME TAX BENEFIT
The directors estimate the cumulative unrecognised deferred tax
asset attributable to the Company and its controlled entities at
the tax rates applicable in the respective applicable jurisdictions
is as follows:
UNRECOGNISED DEFERRED TAX ASSETS
2020 2019
$ $
Revenue losses after permanent differences 4,187,263 3,894,605
Capital raising costs yet to be claimed 634 845
---------- ----------
4,187,897 3,895,450
========== ==========
The potential deferred tax asset has not been brought to account
in the financial report at 30 June 2020 as the Directors do not
believe it is appropriate to regard the realisation of the asset as
probable. This asset will only be obtained if:
(a) The Company and its controlled entities derive future
assessable income of an amount and type sufficient to enable the
benefit from the deductions for the tax losses and the un-recouped
exploration expenditure to be realised;
(b) The Company and its controlled entities continue to comply
with the conditions for deductibility imposed by tax legislation;
and
(c) No changes in tax legislation adversely affect the Company
and its controlled entities in realising the benefit from the
deductions for the tax losses and un-recouped exploration
expenditure.
Franking Credits
No franking credits are available at the reporting date for the
subsequent financial year.
NOTE 7 - TRADE AND OTHER RECEIVABLES
Current 2020 2019
$ $
GST / VAT receivable 191,134 47,940
Other receivables 35,000 10,030
---------- ----------
226,134 57,970
========== ==========
Non-current
Rehabilitation, restoration and land management
Bond deposits 1,473,600 1,457,292
Performance Bond deposits 53,706 54,201
---------- ----------
1,527,306 1,511,493
========== ==========
During the prior year SGZ Cononish Limited entered into a
Section 75 Agreement with the owner of the land on which the
Cononish mine is situated, the Loch Lomond and the Trossachs
National Park Authority and the Crown Estate Scotland in respect of
the development of the Cononish gold and silver mine. That
agreement sets out obligations on the part of SGZ Cononish Limited
to undertake restoration, decommissioning and environmental
aftercare and monitoring on cessation of operations at the end of
the life of the Cononish mine as well as obligations to implement a
plan for the management of the Greater Cononish Glen in which the
Cononish mine is situated (the "Greater Cononish Glen Management
Plan").
The following amounts were lodged as security during the prior
year for the performance by SGZ Cononish of its obligations in
terms of the Section 75 Agreement
- GBP537,918 ($962,975) in respect of obligations to undertake restoration, decommissioning and environmental aftercare and monitoring on cessation of operations at the Cononish mine; and
- GBP268,693 ($481,011) in respect of obligations in terms of
the Greater Cononish Glen Management Plan.
The cumulative amount of interest earned on the amounts lodged
is $30,818 (2019 - $Nil).
As part of the agreement with Roads Scotland in respect of the
upgrading of the Dalrigh junction on the A82 road between Tyndrum
and Crianlarich to ensure safe access from that road to the
Cononish Mine, during the prior year SGZ Cononish Limited lodged a
deposit of GBP30,000 ($53,706) as security for the performance by
SGZ Cononish Limited of its obligations to maintain the Dalrigh
junction for a period of five years from the completion of the
upgrade.
NOTE 8 - INVENTORY
2020 2019
$ $
Inventory of mining consumables 62,291 29,724
------- -------
62,291 29,724
======= =======
NOTE 9 - OTHER CURRENT ASSETS
2020 2019
$ $
--------
Prepayments 129,253 93,273
======== =======
NOTE 10 - PLANT AND EQUIPMENT
2020 2019
$ $
Cost 791,625 1,304,305
Accumulated Depreciation (322,510) (307,743)
---------- ----------
469,115 996,562
========== ==========
On initial application of AASB 16, mobile plant and motor
vehicles with a net carrying value of $842,517 on 1 July 2019 were
reclassified as right-of-use assets on that date. These assets are
financed by hire purchase facilities which were classified as
leases on initial application of AASB 16.
Movement for the year ended 30 June
2019
Plant and Motor vehicles Furniture Total
equipment and office
Cost equipment
Opening balance 560,212 90,027 11,163 661,402
Additions 1,018,612 46,827 7,197 1,072,636
Disposals (289,640) (54,442) (6,746) (350,828)
Foreign exchange movement (67,593) (11,064) (248) (78,905)
----------- --------------- ------------ ----------
Closing balance 1,221,591 71,348 11,366 1,304,305
----------- --------------- ------------ ----------
Accumulated depreciation
Opening balance 364,953 65,926 4,481 435,360
Depreciation expensed 121,381 9,140 955 131,476
Disposals (217,562) (51,715) (4,419) (273,696)
Foreign exchange movement 13,504 1,088 11 14,603
----------- --------------- ------------ ----------
Closing balance 282,276 24,439 1,028 307,743
----------- --------------- ------------ ----------
Movement for the year ended 30 June
2020
Plant and Motor vehicles Furniture Total
equipment and office
Cost equipment
Opening balance 1,221,591 71,348 11,366 1,304,305
Reclassification as right-of-use
assets (865,168) (42,620) - (907,788)
Additions 376,007 34,509 18,217 428,733
Disposals - (6,709) - (6,709)
Foreign exchange movement (25,679) (322) (915) (26,916)
----------- --------------- ------------ ----------
Closing balance 706,751 56,206 28,668 791,625
----------- --------------- ------------ ----------
Accumulated depreciation
Opening balance 282,276 24,439 1,028 307,743
Reclassification as right-of-use
assets (59,257) (6,014) - (65,271)
Depreciation expensed 75,253 8,755 5,589 89,597
Disposals - (2,789) - (2,789)
Foreign exchange movement (6,068) (396) (306) (6,770)
----------- --------------- ------------ ----------
Closing balance 292,204 23,995 6,311 322,510
----------- --------------- ------------ ----------
Net carrying value
----------- --------------- ------------ ----------
At 30 June 2020 414,547 32,211 22,357 469,115
----------- --------------- ------------ ----------
At 30 June 2019 939,315 46,909 10,338 996,562
----------- --------------- ------------ ----------
NOTE 11 - RIGHT-OF-USE ASSETS
2020 2019
$ $
Cost 2,411,627 -
Accumulated Depreciation (673,389) -
---------- -----
1,738,238 -
========== =====
The movement in Right-of-use assets for the year
is as follows:
2020 2019
$ $
Cost
Recognition at date of initial application 756,378 -
Reclassification from plant and equipment on initial
application 907,788
Additions after date of initial application during 552,323 -
year
Modifications of rights during year 257,641 -
Foreign exchange movement (62,503) -
---------- -----
Balance at end of year 2,411,627 -
---------- -----
Accumulated Depreciation
Reclassification from plant and equipment on initial 65,271 -
application
Depreciation expensed 638,842 -
Foreign exchange movement (30,724) -
---------- -----
Balance at end of year 673,389 -
---------- -----
Pursuant to the classification of hire purchase facilities as
leases on the initial application of AASB 16, mobile plant and
motor vehicles financed by such facilities, with a net carrying
value of $842,517 on 1 July 2019, were reclassified as right-of-use
assets on that date.
Included in the additions after date of initial application
during year figure of $552,323 is an amount of $47,710 (2019 -
$Nil) paid in respect of costs necessary to bring certain
right-of-use assets to a condition in which they are ready for
their intended use and a provision for decommissioning and
restoration of $27,476 (2019 - $Nil), which costs did not form part
of the cash flows of the related lease liability.
During the year, an amount of $276,732 (2019 - $Nil) paid in
respect of short-term leases and leases of low value assets was
charged to mine development expenditure, being primarily payments
in respect of mobile plant used in the construction of the
processing plant building and tailings management facility hired on
a weekly basis for consecutive periods of more than one month,
which are all expected to be off-hired by 31 December 2020.
NOTE 12 - MINERAL EXPLORATION AND EVALUATION
2020 2019
$ $
Opening balance 2,034,815 16,685,135
Net (gain)/loss from the BPT - (5,360)
Additional expenditure deferred during the year 440,126 641,623
Reclassification to mine development expenditure - (15,180,832)
Write-off of deferred expenditure attributable
to Pomar licence - (118,402)
Foreign exchange movement (33,213) 12,651
---------- -------------
Closing balance 2,441,728 2,034,815
========== =============
The ultimate recoupment of exploration expenditure carried
forward is dependent upon successful development and commercial
exploitation, or sale of the respective areas.
NOTE 13 - MINE DEVELOPMENT EXPITURE
2020 2019
$ $
Opening balance 20,293,754 -
Reclassification from mineral exploration and
evaluation expenditure - 15,180,832
Expenditure incurred 8,680,503 5,606,392
Share-based payment costs capitalised (see Note
19) 12,266 4,228
Provision for restoration and decommissioning
(see Note 16) 381,727 238,690
Foreign exchange movement (562,898) (736,388)
-----------
Closing balance 28,805,352 20,293,754
=========== ===========
Share-based payment costs capitalised as mine development
expenditure relate to options granted to senior management to
incentivise the meeting of the corporate target of producing first
gold at the Cononish mine.
Mine development expenditure includes $276,732 (2019 - $Nil) of
amounts paid during the year in respect of short-term leases and
leases of low value assets, with the major component of this amount
being payments in respect of mobile plant used in the construction
of the processing plant building and tailings management facility
hired on a weekly basis for consecutive periods of more than one
month.
Mine development expenditure includes the following amounts in
respect of the Cononish Mine which will be transferred to plant and
equipment when they have been completed and are in a condition
suitable for their intended use or in the case of capitalised
mining costs, once first ore is produced:
2020 2019
$ $
Processing plant 6,026,401 3,915,037
Processing plant building 2,841,013 166,049
Tailings management facility 429,080 17,007
Capitalised mining costs 3,650,350 1,303,785
Provision for restoration and decommissioning 610,013 238,690
----------- ----------
13,556,857 5,640,568
=========== ==========
NOTE 14 - TRADE AND OTHER PAYABLES
2020 2019
$ $
Trade payables 1,127,113 581,947
Other accruals 461,999 63,123
---------- --------
1,589,112 645,070
========== ========
Trade payables and accruals relating to exploration
expenditure 55,254 144,910
Trade payables and accruals relating to development
expenditure 1,348,477 385,770
Trade payables and accruals relating to administration 185,381 114,390
1,589,112 645,070
========== ========
Trade payables are non-interest bearing and are normally settled
on 30 days terms (2019 - 30 days).
NOTE 15 - BORROWINGS
2020 2019
Non-current $ $
Secured loan facility 7,681,847 3,655,221
Right-of-use lease liabilities 1,059,118 -
Hire purchase agreement facilities - 557,693
---------- ----------
8,740,965 4,212,914
========== ==========
2020 2019
Current $ $
Right-of-use lease liabilities 542,761 -
Hire purchase agreement facilities - 174,838
---------- ----------
542,761 174,838
---------- ----------
Total borrowings 9,283,726 4,387,752
---------- ----------
All of the borrowings are denominated in GBP (Pounds
sterling).
Loan from company controlled by shareholder
The terms of the secured loan facility agreement entered into on
18 May 2018 between SGZ Cononish Limited and Bridge Barn Limited, a
wholly owned and controlled company of Nat le Roux, the Company's
Non-Executive Chairman and major shareholder, were amended during
the year as follows:
(a) On 28 August 2019 the overall amount available under the
facility was increased from GBP6,000,000 to GBP7,500,000 and the
period of repayment of tranches already drawn and to be drawn on
the facility was extended from a period of 24 months after date of
drawdown of that specific tranche to a period of 36 months; and
(b) On 28 April 2020 the period of availability of the third
tranche of the secured loan facility was extended from a period of
six months after the date of drawdown of the second tranche of that
facility to a period of eighteen months, the period of availability
of the fourth tranche was extended to end on the earlier of 31
December 2021 and the date falling twelve months after the date of
drawdown of the third tranche and SGZ Cononish Limited was given
the right to draw down each of the third and fourth tranches in
sub-tranches of GBP500,000 each, with the sub-tranches of each
tranche to be drawn down within the amended period of availability
of that particular tranche.
The amendment effected on 28 August 2019 resulted in a gain on
renegotiation of repayment terms of GBP22,223 ($38,383) being
recognised in respect of the first tranche of the facility, which
had been drawn down on 13 May 2019. The amendment effected on 28
April 2020 did not give rise to a gain or loss.
The second tranche of the secured facility was received on 21
October 2019, with the reference drawdown date of the second
tranche for the purpose of calculation of interest and determining
the date of repayment thereof being 25 October 2019.
The terms of the secured loan facility at 30 June 2020 are
accordingly as follows:
i) An overall facility amount of GBP7,500,000 to be drawn down
in two tranches of GBP2,000,000 (both of which had been drawn down
by 30 June 2020 in their respective periods of availability)
followed by a third tranche of GBP2,000,000 and a fourth tranche of
GBP1,500,000 with the option to draw down each of the third and
fourth tranches in sub-tranches of GBP500,000 each;
ii) The period of availability of the third tranche (including
any sub-tranches of that third tranche) ends on 25 April 2021 and
the period of availability of the fourth tranche (including any
sub-tranches of that fourth tranche) ends on the earlier of 31
December 2021 and the date falling twelve months after the date of
drawdown of the last sub-tranche of the third tranche (or the date
of drawdown of the third tranche where it is drawn down in its
entirety as a single tranche);
iii) Nominal interest rate is 9.0% applied to all amounts drawn down;
iv) Each tranche or sub-tranche, as appropriate, together with
accumulated interest thereon, is repayable 36 months after the date
of drawdown of that tranche or sub-tranche; and
v) Security for repayment is provided by way of Debenture over
all of the assets and undertakings of the Company's wholly owned
subsidiaries, SGZ Grampian Limited and SGZ Cononish Limited,
including the transfer of security of the issued capital of each of
these subsidiaries.
Movements on the secured facility loan agreement for the year
ended 30 June 2020:
First tranche Second Total
Tranche
$ $ $
Balance at beginning of year 3,655,221 - 3,655,221
Drawdown on 25 October 2019 - 3,762,227 3,762,227
Gain on amendment of repayment terms (38,383) - (38,383)
Interest at effective rate 331,536 215,211 546,747
Foreign exchange movement (50,282) (193,683) (243,965)
-------------- ---------- ----------
Balance at end of year 3,898,092 3,783,755 7,681,847
============== ========== ==========
Movements on the secured facility loan agreement for the year
ended 30 June 2019:
First tranche
$
Balance at beginning of year -
Drawdown on 13 May 2019 3,729,952
Interest at effective rate 41,626
Foreign exchange movement (116,357)
--------------
Balance at end of year 3,655,221
==============
The effective interest rate on the secured loan facility is
8.46% (2019 - 8.63%). As set out in Note 30, after 30 June 2020 the
third tranche was fully drawn down and one sub-tranche of
GBP500,000 of the fourth tranche was drawn down.
Right-of-use lease liabilities
Pursuant to the implementation of AASB16 during the year, lease
liabilities have been raised in respect of right-of-use assets. In
addition, on initial application of AASB 16, hire purchase
facilities with an aggregate outstanding balance of $732,531 at 1
July 2019 were reclassified as lease liabilities on that date:
Movements for the year ended 30 June 2020:
$
Recognition at date of initial application 759,442
Reclassification of hire purchase facilities
as leases on initial application 732,531
Additions after date of initial application 477,137
Modifications to rights 257,641
Interest at effective rate 98,956
Repayments (698,243)
Foreign exchange movement (25,585)
-------------
Balance at end of year 1,601,879
=============
The effective interest rate on the right-to-use lease
liabilities is 9.88%. Right-of-use assets with an aggregate net
carrying value of $1,738,238 (2019 - $Nil) are financed by the
right-of-use lease liabilities.
Hire purchase facilities
Subsidiaries of the Company are parties to hire purchase
agreements with financial institutions to finance the purchase of
motor vehicles and mobile plant. On the initial application of AASB
16 on 1 July 2019, hire purchase facilities were reclassified as
leases.
On initial application of AASB 1 on 1 July 2019, the following
hire purchase facilities, with an aggregate outstanding balance of
$732,531 on that date, were reclassified as lease liabilities:
Subsidiary company SGZ Cononish Limited SGZ Grampian Limited Total
Assets financed Three items Dacia One item Dacia Duster
of mobile Duster of mobile vehicle
plant vehicle plant
$ $ $ $ $
Non-current portion of liability 346,296 18,876 174,636 17,885 557,693
Current portion of liability 75,965 4,606 89,706 4,561 174,838
------------ ----------- ----------- ------------- --------
Total liability as at 1 July
2019 422,261 23,482 264,342 22,446 732,531
============ =========== =========== ============= ========
Date of agreement 13/03/2019 10/01/2019 29/04/2019 01/11/2018
Period of agreement in months 60 60 36 60
Effective interest rate 9.92% 6.86% 4.39% 7.84%
Net carrying value of assets
at 1 July 2019 455,383 18,814 350,528 17,792 842,517
The movements on hire purchase facility borrowings for the year
ended 30 June 2019 were as follows:
Subsidiary company SGZ Cononish Limited SGZ Grampian Limited Total
Assets financed Three items Dacia One item Dacia Duster
of mobile Duster of mobile vehicle
plant vehicle plant
$ $ $ $ $
Net amount financed 449,462 24,804 283,245 24,667 782,178
Interest at effective rate 12,833 764 2,155 1,181 16,933
Repayments (28,257) (2,459) (16,884) (3,456) (51,056)
Foreign exchange movement (11,777) 373 (4,174) 54 (15,524)
------------ --------- ----------- ------------- ---------
Closing balance 422,261 23,482 264,342 22,446 732,531
------------ --------- ----------- ------------- ---------
NOTE 16 - PROVISIONS
2020 2019
Provision for restoration and decommissioning $ $
Balance at end of year 657,934 238,690
This provision represents the best estimate of the present value
of expenditures required to effect restoration of the Cononish mine
area at the end of mining operations at the mine as well as to
carry out aftercare and monitoring activities in terms of the
Decommissioning and Restoration Plan formulated in accordance with
the requirements set out in the Section 75 Agreement entered into
by SGZ Cononish Limited on 12 September 2018, based on the mine
development activities carried out up to and including 30 June
2020.
In arriving at the amount of the provision, an inflation rate of
2.0% has been applied to estimated future costs stated at current
levels and the resultant cashflows have been discounted back to 30
June 2020 using a discount rate of 0.87% (2019 - 1.32%).
Movements in the provision are as follows:
2020 2019
$ $
Opening balance 238,690 -
Initial provision raised - 238,690
Unwinding of discount 24,209 -
Adjustment for mine development progress and change 381,727 -
in discount rate
Restoration provision attributable to right-of-use 27,476 -
asset acquired
Foreign exchange movement (14,168) -
--------
Closing balance 657,934 238,690
========= ========
NOTE 17 - ISSUED CAPITAL
2020 2019 2020 2019
No. of shares No. of $ $
shares
Ordinary shares - fully
paid 51,351,741 45,639,546 44,978,659 41,098,558
-------------- ----------- ----------- -----------
(a) Voting and dividend rights
Ordinary shares entitle the holder to participate in dividends
and the proceeds on the winding up of the Company in proportion to
the number of shares held. The ordinary shares have no par value
and the company does not have a limited amount of authorised
capital.
Article 16 of the Constitution specifies that on a show of hands
every member present in person, by attorney or by proxy shall have
one vote for every fully paid share held or in the case of a share
which is not fully paid, a fraction of the vote equal to the amount
paid up on the share over the nominal value of the share.
(b) Movements in ordinary share capital of the Company were as follows:
During the year ended 30 June 2019:
Date Details Shares Value $
(cents)
Balance at 30 June 2018 42,911,254 39,706,967
19/09/2018 Options conversion 331 0.7251 240
09/10/2018 Share subscription 2,727,274 0.5100 1,390,854
09/01/2019 Options conversion 687 0.7234 497
Balance at 30 June 2019 45,639,546 41,098,558
=========== ===========
During the year ended 30 June 2020:
Date Details Shares Value $
(cents)
Balance at 30 June 2019 45,639,546 41,098,558
28/08/2019 Share subscription 3,285,783 0.6318 2,075,997
28/08/2019 Expenses related to share subscription (35,452)
28/08/2019 Options conversion 23,704 0.7169 16,994
22/10/2019 Options conversion 826 0.7203 595
20/11/2019 Options conversion 153,000 0.7550 115,523
03/12/2019 Options conversion 43,968 0.7639 33,589
09/12/2019 Options conversion 398,137 0.7639 304,157
23/12/2019 Options conversion 1,744,657 0.7577 1,321,962
07/01/2020 Options conversion 59,256 0.7524 44,582
05/02/2020 Options conversion 2,856 0.7525 2,148
11/03/2020 Options conversion 8 0.7500 6
Balance at 30 June 2020 51,351,741 44,978,659
----------- -----------
Shares issued for non-cash consideration amounted to Nil during
the year (2019 - Nil).
(c) Movements in options were as follows:
During the year ended 30 June 2019
Details Number $
Balance at 30 June 2018 2,514,699 134,769
Conversion of options during first (331) -
half of year
Conversion of options during second (687) -
half of year
Balance at 30 June 2019 2,513,681 134,769
========== ==========
During the year ended 30 June 2020
Details Number $
Balance at 30 June 2019 2,513,681 134,769
Options converted on 28 August 2019 (23,704) -
Options converted on 22 October 2019 (826) -
Options converted on 20 November 2019 (153,000) -
Options converted on 3 December 2019 (43,968) -
Options converted on 9 December 2019 (398,137) -
Options converted on 23 December 2019 (1,744,657) -
Options converted on 7 January 2020 (59,256) -
Options converted on 5 February 2020 (2,856) -
Options converted on 11 March 2020 (8) -
Options lapsed (57,269) -
------------ ----------
Balance at 30 June 2020 30,000 134,769
============ ==========
Option exercise dates and prices
Number Exercise Price Expiry Date Reserve $
30,000 $8.00 31 March 2022 134,769
Details of options issued to key management and senior managers
are set out in Note 19. The above tables of options do not reflect
movements in options issued to key management and senior managers.
Details of such movements are disclosed in Note 19.
NOTE 18 - RESERVES AND ACCUMULATED LOSSES
Accumulated Losses 2020 2019
$ $
Balance at beginning of the year (16,986,248) (13,467,793)
Increase in opening accumulated loss on initial (3,064) -
application of AASB16
Net loss from ordinary activities (2,504,134) (3,518,455)
------------- -------------
Balance at end of the year (19,493,446) (16,986,248)
============= =============
2020 2019
Foreign Currency Translation Reserve $ $
Balance at beginning of the year (788,262) (61,295)
Reserve arising on translation of foreign currency
subsidiaries (226,738) (726,967)
------------- -------------
Balance at end of the year (1,015,000) (788,262)
============= =============
Share Option Reserve
Balance at beginning of the year 134,769 134,769
Balance at end of the year 134,769 134,769
======== ========
Share-based payment Reserve
Balance at beginning of the year 205,182 -
Issue of options for services rendered (Note 19) 78,460 205,182
---------- ----------
Balance at end of the year 283,642 205,182
========== ==========
Total reserves (596,859) (448,311)
========== ==========
Nature and purpose of reserves
Foreign currency translation reserve
The foreign currency translation reserve is used to record
exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
Share Option Reserve
The share option reserve is used to record the assessed value of
options issued other than options issued as share based payment for
services received by the consolidated entity.
Share-based Payment Reserve
The share-based payment reserve arises on the granting of share
options or similar instruments to employees and other parties
providing similar services.
NOTE 19 - SHARE-BASED PAYMENTS
On 1 May 2018 an Incentive Option Agreement was announced by the
Company, whereby 1,240,000 options to acquire shares were agreed to
be granted to executive management upon the commencement of gold
production. The options will be exercisable at GBP0.30. The options
were subject to shareholder approval and will expire on 1 May 2028.
These options vest on the later of one year after the date of award
thereof and the date of commencement of gold production at Cononish
mine. As at 30 June 2020, only 1,000,000 (2019 - 1,000,000) of
these options are expected to vest in future due to an executive
manager leaving before 30 June 2019 and not meeting the service
conditions attached to the options. The granting of these 1,000,000
options was approved by the shareholders at the Annual General
Meeting of the Company on 26 November 2019.
In addition, on 16 April 2019, the Company granted 280,000
options to acquire shares to senior managers as part of a package
to incentivise management to meet the targeted date of first gold
production at the Cononish mine, at a strike price of GBP0.34 per
share. These options expire on 16 April 2024 and vest on the later
of 30 June 2020 and the date of achievement of agreed production
targets. As at 30 June 2020, only 120,000 (2019 - 120,000) of these
options are expected to vest in future due to a senior manager
leaving before 30 June 2019 and not meeting the service conditions
attached to the options.
As at 30 June 2020, the share options granted to management for
services rendered and expected to vest in future have the following
expiry dates and exercise prices:
Grant date Number Expiry date Exercise Fair value
of options price per per option
option
1 May 2018 1,000,000 1 May 2028 GBP0.30 GBP0.172
16 April 120,000 16 April GBP0.34 GBP0.137
2019 2024
The options were valued using the "Black-Scholes" model,
employing the following key inputs and assumptions:
Granted 1 May Granted 16 April
2018 2019
Expected volatility 55% 45%
Risk-free rate 1.39% 1.22%
Life of option 10 years 5 years
Valuation date 1 May 2018 16 April 2019
The average strike price at 30 June 2020 of the 1,120,000
options outstanding at that date and expected to vest in future is
GBP0.304.
The movement in number of options issued as share-based payment
is as follows:
2020 2019
Number Number
Balance at beginning of the year 1,120,000 1,000,000
Grant of options on 16 April 2019 - 120,000
---------- ----------
Balance at end of the year 1,120,000 1,120,000
========== ==========
Charges in respect of share-based payment have been recognised
as follows:
Options granted on
1 May 2018 16 April
2019
Charge to profit Charge to Increase in
or loss mine development share-based
payment reserve
$ $ $
During year ended 30 June
2019 200,954 4,228 205,182
----------------- ------------------ -----------------
Cumulative to 30 June 2019 200,954 4,228 205,182
During year ended 30 June
2020 66,194 12,266 78,460
Cumulative to 30 June 2020 267,148 16,494 283,642
================= ================== =================
An Enterprise Management Incentive Scheme was established
pursuant to Schedule 5 of the United Kingdom Income Tax (Earnings
and Pensions) Act 2003 and adopted by the Board on 30 June 2020. In
terms of the rules of the Enterprise Management Incentive Scheme,
the Board may at its discretion grant Enterprise Management
Incentive Scheme options to employees of the Company and its
controlled entities to acquire ordinary shares in the Company at
such exercise price and in such numbers as it considers appropriate
and to attach such performance conditions to the vesting of such
options as it considers appropriate, subject to compliance with the
provisions of the abovementioned Schedule 5 and other applicable
legislation.
As set out in the note on matters subsequent to the end of the
financial year (Note 30), 1,150,000 options to acquire ordinary
shares in the Company at an exercise price of GBP0.71 per share
were granted to management as share-based payments on 1 July 2020,
including 1,102,112 options granted under the Enterprise Management
Incentive Scheme. Of the 1,150,000 options issued on 1 July 2020,
225,000 of those options replaced the 120,000 options issued on 16
April 2019, with those 120,000 options being cancelled.
On 29 July 2020, 200,000 options to acquire ordinary shares in
the Company at an exercise price of GBP0.71 per share were granted
to Saint Consulting (UK) Limited, the company providing project
management services in respect of the construction of the Cononish
Mine processing plant building and tailings management facility
(see Note 30).
NOTE 20 - COMMITMENTS FOR EXPITURE
Mineral Tenement Leases
As at 30 June 2020, the consolidated entity held thirteen exploration
licences in Scotland. The commencement date of each of these licences
is 5 November 2018, with a term of five years and an option to extend
for a further period of four years, subject to the Crown Estate Scotland
being satisfied with the progress made in conducting exploration activities
in the area covered by that licence. No minimum capital expenditure
figure is stipulated in any of the thirteen licences.
The licence payments to be made in respect of the thirteen licences,
under the respective assumptions that (a) all of the licences are
only held for the five year term and (b) all of the licences are extended
for the further period of four years are as follows:
Initial Extension
five year for further
term only four years
$ $
Not later than one year 116,362 116,362
Later than 1 year but not later
than 2 years 116,362 116,362
Later than 2 years but not later
than 5 years 116,362 349,086
Later than 5 years - 232,724
------------------- -------------
349,086 814,534
=================== =============
The licence payments to be made at 30 June 2019 were as
follows:
Initial Extension
five year for further
term only four years
$ $
Not later than one year 117,435 117,435
Later than 1 year but not later
than 2 years 117,435 117,435
Later than 2 years but not later
than 5 years 234,870 352,305
Later than 5 years - 352,305
----------- -------------
469,740 939,480
=========== =============
Contract for purchase of processing plant
On 14 February 2019, SGZ Cononish Limited entered into a
contract with Appropriate Process Technologies Pty Limited for the
fabrication of the processing plant to be used for processing ore
at the Cononish mine.
The total contract value is 3,862,667 US Dollars ("USD"), with
regular milestone payments and a final retention payment being
provided for in the terms of the contract. As at 30 June 2020, an
amount of $450,259 (USD309,013) in respect of contracted milestone
payments and final retention payments was payable after 30 June
2020, with all payments expected to be made by the end of February
2021. As at 30 June 2019, an amount of $1,487,122 (USD1,042,919) in
respect of contracted milestone payments and final retention
payments was payable after 30 June 2019, with all payments then
expected to be made by the end of March 2020.
Greater Cononish Glen Management Plan
As part of the Section 75 Agreement entered into between SGZ
Cononish Limited, the owner of the land on which the Cononish mine
is situated, the Loch Lomond and the Trossachs National Park
Authority and the Crown Estate Scotland in respect of the
development of the Cononish mine, SGZ Cononish Limited has assumed
obligations to implement a plan for the management of the greater
Cononish glen in which the Cononish mine is situated.
The costs of meeting these obligations are expected to be
incurred as follows:
As at 30 June
2020 2019
$ $
Not later than one year 122,418 269,864
Later than 1 year but not later
than 2 years 8,684 123,546
Later than 2 years but not later
than 5 years 17,379 23,375
Later than 5 years 81,671 85,351
-------- --------
230,152 502,136
======== ========
Minimum certain rent payments
In terms of the lease agreement between SGZ Cononish Limited and
the owners of the land on which the Cononish mine is situated, an
annual rental, indexed to the United Kingdom Retail Price Index
("RPI") is payable annually up to 23 July 2030.
Assuming a 2.0% per annum increase in the RPI in future, the
amounts payable in respect of the annual rental shall be as
follows:
As at 30 June
2020 2019
$ $
Not later than one year 34,793 34,694
Later than 1 year but not later
than 2 years 35,489 35,388
Later than 2 years but not later
than 5 years 110,784 110,467
Later than 5 years 242,325 241,632
-------- --------
423,391 422,181
======== ========
Certain Rent payments
The lease agreement between SGZ Cononish Limited and the Crown
Estate Commissioners in respect of the Cononish mine provides for
the payment of a minimum amount of Certain Rent at a rate of
GBP150,000 per annum, payable half-yearly on 1 January and 1 July
of each year, with Certain Rent being adjusted to a level of 30% of
the average annual anticipated Royalty Rent on the second
anniversary of the signing of the Section 75 Agreement entered into
with the owner of the land on which the Cononish Mine is situated,
the Loch Lomond and the Trossachs National Park Authority and the
Crown Estate Scotland and indexed in accordance with the United
Kingdom RPI with effect from the third anniversary of such
signing.
Using the expected levels of annual Royalty Rent levels set out
in the latest life-of-mine model, and assuming an annual increase
in the RPI of 2%, the following amounts are estimated to be payable
as Certain Rent after 30 June 2020:
As at 30 June
2020 2019
$ $
Not later than one year 223,774 271,003
Later than 1 year but not later
than 2 years 441,294 397,563
Later than 2 years but not later
than 5 years 2,897,434 1,978,673
Later than 5 years 3,183,998 3,695,284
---------- ----------
6,746,500 6,342,523
========== ==========
Assets not recognised as right-of-use assets
The following amounts are payable in respect of the use of
assets which have not been accounted for as right-of-use assets due
to the expected period of use ending before 31 December 2020 or the
underlying assets being low value assets:
As at 30 June
2020 2019
$ $
Not later than one year 72,292 219,189
Later than 1 year but not later
than 2 years 646 101,392
Later than 2 years but not later
than 5 years 1,455 182,770
Later than 5 years 6 -
------- --------
74,399 503,351
======= ========
The main component of the commitment in respect of year 1 is the
committed amount at 30 June 2020 in respect of items of mobile
plant hired on a weekly basis over periods of more than one month
used in the construction of the Cononish Mine processing plant
building and tailings management facility.
Contract for construction of processing plant building and
tailings management facility
On 19 September 2019, SGZ Cononish Limited signed a contract
with Robinsons Scotland Limited for the construction of a dedicated
plant building to house the processing plant as well as the
construction of the infrastructure for the tailings management
facility at the Cononish mine. The initial contract sum was
GBP2,307,147.
On 1 April 2020 a supplementary agreement was entered into in
terms of which an amount of GBP195,236 was added to the contract
sum and works with a contract sum amount of GBP751,004 were removed
from the scope of the contract, resulting in a revised contract sum
of GBP1,751,379.
By 30 June 2020, GBP934,492 of the revised contract sum had been
invoiced by Robinsons Scotland Limited, with the future payments in
respect of the contract at 30 June 2020, all being subject to
satisfactory performance by Robinsons Scotland Limited and all
expected to be made by 31 December 2020, amounting to GBP816,887
($1,462,383).
Contract for installation of processing plant
On 5 November 2019, SGZ Cononish Limited signed a contract with
Dan Herrick Construction Limited for the installation of the
processing plant purchased from Appropriate Process Technologies
Pty Limited. The initial contract amount was GBP552,279 and was
increased to a revised contract amount of GBP637,199 on 10 June
2020.
By 30 June 2020, GBP92,565 of the revised contract sum had been
invoiced by Dan Herrick Construction Limited, with the future
payments in respect of the contract at 30 June 2020, all being
subject to satisfactory performance by Dan Herrick Construction
Limited and all expected to be made by 31 December 2020, amounting
to GBP 544,634 ($974,998).
NOTE 21 - CONTINGENT LIABILITIES
SGZ Cononish Limited has entered into certain agreements which
provide for the making of future payments contingent upon
commencement of production at the Cononish mine as follows:
(a) A donations agreement with the Strathfillan Community
Development Trust ("SCDT") was concluded on 7 September 2018
pursuant to which GBP240,000 is payable to SCDT in annual
instalments of GBP15,000 per annum upon the Cononish mine reaching
an ore processing rate of 3,000 tonnes per month ("tpm"),
increasing to GBP30,000 per annum in any year upon reaching an ore
processing rate of 6,000tpm, plus two lump sum payments of
GBP125,000, the first being payable on the first anniversary of
commencement of production at the Cononish mine, and the second
lump sum being payable on the fifth anniversary of commencement of
commercial production at the Cononish mine or on the commencement
of an ore processing rate of 6,000tpm, whichever is the
earlier.
(b) Clause 18 of the Section 75 Agreement entered into with the
owner of the land on which the Cononish mine is situated, the Loch
Lomond and the Trossachs National Park Authority and the Crown
Estate Scotland in respect of the development of the Cononish mine
provides for the payment of up to GBP425,000 to Loch Lomond and the
Trossachs Countryside Trust, with an amount of GBP25,000 payable on
the first anniversary of the date of commencement of the
development of the Cononish Mine and the remainder payable in
annual instalments of GBP25,000 per annum upon the commencement of
production at the Cononish mine, increasing proportionately up to
GBP50,000 per annum as processing of ore increases from 3,000 to
6,000 tpm. The amount of GBP 25,000 payable on the first
anniversary of the date of commencement of the development of the
Cononish Mine was paid on 23 January 2020.
An amount of GBP25,000 becomes payable two years after date of
commencement of development if production has not commenced by that
time and, in the event of cessation of mining operations, the
minimum amount payable shall be GBP250,000.
(c) The agreement of lease between SGZ Cononish Limited and the
owner of the land on which the Cononish mine is located provides
that royalties at rates of between 3.5% and 10% shall be payable to
the landowner on the net realisable value of any minerals produced
at the Cononish Mine other than gold, silver or other precious
metals, subject to the payment of a minimum royalty of GBP26,505
per annum, indexed to the United Kingdom Retail Price Index, with
effect from the date of commencement of production at the Cononish
mine.
(d) In terms of the lease between SGZ Cononish Limited and the
Crown Estate Commissioners, Royalty Rent at a rate of 4% of the net
realisable value arising on the sale of gold and silver from the
Cononish mine shall be payable half yearly in arrears, subject to
the payment of a minimum amount in the form of Certain Rent
(described more fully in Note 20).
In consideration of Scottish Enterprise being willing to offer
SGZ Cononish Limited up to GBP430,000 in the form of Regional
Selective Assistance grants under the terms and conditions of the
offer letter issued by Scottish Enterprise dated 14 November 2018,
the Company has provided a guarantee to Scottish Enterprise as
security for any amounts of such grants received by SGZ Cononish
Limited which may become repayable by that company to Scottish
Enterprise under the terms and conditions of that offer letter. As
at 30 June 2020, the total amount of grants which had been received
by SGZ Cononish Limited from Scottish Enterprise amounted to
GBP200,000 ($379,468).
Scotgold Resources Limited and its controlled entities have no
other known material contingent liabilities as at 30 June 2020.
NOTE 22 - INVESTMENT IN CONTROLLED ENTITIES
Registered Country Interest
Number of Incorporation Held
Parent
42 127 042
Scotgold Resources Limited 773 Australia 100%
Subsidiary
SGZ Grampian Limited SC 309525 Scotland 100%
SGZ France SAS 804 686 582 France 100%
Scotgold Resources Portugal Ltda 513 303 057 Portugal 100%
SGZ Cononish Limited SC 569264 Scotland 100%
Fynegold Exploration Limited SC 084497 Scotland 100%
NOTE 23 - SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors of Scotgold
Resources Limited.
.
Year ended 30 June Scotland Scotland Australia Other Total
2019
Mining Exploration
$ $ $ $ $
Segment other income 24 6,289 1 - 6,314
Segment loss 2,636,589 24,503 670,480 186,883 3,518,455
Segment assets 23,953,258 4,901,504 74,334 6,415 28,935,511
Segment non-current
assets 22,738,799 2,089,861 7,964 - 24,836,624
Segment liabilities 5,072,767 165,446 23,127 10,172 5,271,512
Segment non-current
liabilities 4,433,719 17,885 - - 4,451,604
Included in segment
result and segment
assets:
Interest expense 57,378 1,181 43,384 - 101,943
Depreciation 120,156 10,909 411 - 131,476
Capitalised exploration - 636,263 - - 636,263
Mine development costs 5,606,392 - - - 5,606,392
Acquisition of fixed
assets 1,013,260 59,376 - - 1,072,636
Year ended 30 June Scotland Scotland Australia Other Total
2020
Mining Exploration
$ $ $ $ $
Segment other income 456,310 2,767 3 - 459,080
Segment loss 1,929,931 28,497 493,966 51,740 2,504,134
Segment assets 33,502,849 2,808,519 104,445 3,583 36,419,396
Segment non-current
assets 32,482,513 2,478,996 20,230 - 34,981,739
Segment liabilities 11,384,404 73,087 62,003 11,278 11,530,772
Segment non-current
liabilities 9,385,903 12,996 - - 9,398,899
Included in segment
result and segment
assets:
Interest expense 668,345 1,567 - - 669,912
Depreciation 714,163 14,276 - - 728,439
Capitalised exploration - 440,126 - - 440,126
Mine development costs 8,680,503 - - - 8,680,503
Acquisition of fixed
assets 428,733 - - - 428,733
Right-of-use assets
acquired 552,323 - - - 552,323
The allocation of figures between the Scotland Mining and
Scotland Exploration segments for the year ended 30 June 2019 has
been restated to reflect the usage of mobile plant owned by SGZ
Grampian Limited in mining operations, in line with the basis of
allocation employed in the year ended 30 June 2020.
The following material agreements were in place at 30 June 2020
in each segment:
Scotland - Mining
Location Agreement Agreement Date Area
Cononish Glen Orchy Landholder Lease 23 July 2009 20 sq km
--------------------- ------------------ ---------
Cononish Glen Orchy Crown Lease 31 May 2012
--------------------- ------------------ ---------
Cononish Glen Orchy Section 75 Agreement 12 September 2018
--------------------- ------------------ ---------
Scotland - Exploration
Location Agreement Grant date Area
Glen Orchy Central Crown option agreement 5 November 2018 242 sq km
----------------------- ---------------- ----------
Glen Orchy East Crown option agreement 5 November 2018 241 sq km
----------------------- ---------------- ----------
Glen Orchy West Crown option agreement 5 November 2018 103 sq km
----------------------- ---------------- ----------
Glen Lyon North Crown option agreement 5 November 2018 244 sq km
----------------------- ---------------- ----------
Glen Lyon East Crown option agreement 5 November 2018 247 sq km
----------------------- ---------------- ----------
Glen Lyon South Crown option agreement 5 November 2018 243 sq km
----------------------- ---------------- ----------
Glen Lyon West Crown option agreement 5 November 2018 246 sq km
----------------------- ---------------- ----------
Inverliever West Crown option agreement 5 November 2018 250 sq km
----------------------- ---------------- ----------
Inverliever East Crown option agreement 5 November 2018 233 sq km
----------------------- ---------------- ----------
Knapdale South Crown option agreement 5 November 2018 250 sq km
----------------------- ---------------- ----------
Knapdale North Crown option agreement 5 November 2018 250 sq km
----------------------- ---------------- ----------
Ochills East Crown option agreement 5 November 2018 150 sq km
----------------------- ---------------- ----------
Ochills West Crown option agreement 5 November 2018 189 sq km
----------------------- ---------------- ----------
Mining Leases in Scotland - general information
The mineral rights to gold and silver in most of Britain,
including Scotland, are generally held by the Crown, In order to
explore for gold and silver, an option agreement is required to be
concluded with the Crown which entitles the holder to explore for
gold and silver and on the grant of planning permission (and other
conditions), to take out a lease for exploitation of these
metals.
Additionally, surface rights (and other minerals rights) are
generally held by the landowner with whom access and lease
agreements must separately be obtained. The Company holds a 21 year
lease, dated 2009 with the Cononish landowner. At the option of the
Company, the lease may be extended for a further 21 years.
Mineral developments in Scotland are governed by the Town and
Country Planning (Scotland) Act, with responsibility for planning
control exercised by the local Authority. Statutory designations
inform as to the appropriate levels of environmental assessment to
be carried out.
NOTE 24 - NOTES TO THE STATEMENT OF CASH FLOWS
2020 2019
$ $
(a) Reconciliation of loss after income tax to
net operating cash flows
Loss from ordinary activities (2,504,134) (3,518,455)
Depreciation 728,439 131,476
Loss on disposal of non-current assets 3,920 77,132
Interest expense 669,912 101,943
Exchange loss on repayment of loan - 31,270
Share-based payments 66,194 200,954
Deferred mineral exploration and evaluation costs
written off - 118,402
Gain on loan renegotiation (38,383) -
------------ ------------
(1,074,052) (2,857,278)
Movement in assets and liabilities
Receivables 25,555 1,355
Other current assets (19,642) (12,593)
Payables 75,461 (183,168)
Net cash used in operating activities (992,678) (3,051,684)
============ ============
2020 2019
(b) Non-cash investing and financing activities $ $
Acquisition of right-of-use assets
Modification of existing leases (see Note 15) 257,641 -
New leases (see Note 15) 477,137 -
Options granted to management for no cash consideration
(see Note 19) 78,460 205,182
-------- --------
813,238 205,182
======== ========
2020 2019
(c) Net debt reconciliation $ $
Cash and cash equivalents 1,019,979 3,917,920
Borrowings (7,681,847) (3,655,221)
Lease liabilities (1,601,879) (1,491,973)
Net debt (8,263,747) (1,229,274)
============ ============
The movements in net debt are as follows :
Liabilities from financing Other assets
activities
Borrowings Leases Sub-total Cash and Total
cash equivalents
$ $ $ $ $
Net debt as at 1 July
2018 (1,740,867) - (1,740,867) 11,207,036 9,466,169
Cash flows (2,645,553) - (2,645,553) (7,246,969) (9,892,522)
Accrual of interest (101,943) - (101,943) - (101,943)
Foreign exchange movements 100,611 - 100,611 (42,147) 58,464
-------------- ------------ ------------- ------------------ ------------
Net debt as at 30 June
2019 (4,387,752) - (4,387,752) 3,917,920 (469,832)
On adoption of AASB
16:
Recognition - (759,442) (759,442) - (759,442)
Reclassification 732,531 (732,531) - - -
-------------- ------------ ------------- ------------------ ------------
(3,655,221) (1,491,973) (5,147,194) 3,917,920 (1,229,274)
-------------- ------------ ------------- ------------------ ------------
Cash flows (3,762,227) 698,243 (3,063,984) (2,990,224) (6,054,208)
Accrual of interest (546,747) (98,956) (645,703) - (645,703)
Gain on loan renegotiation 38,383 - 38,383 - 38,383
Modification of existing
leases - (257,641) (257,641) - (257,641)
New leases - (477,137) (477,137) - (477,137)
Foreign exchange movements 243,965 25,585 269,550 92,283 361,833
-------------- ------------ ------------- ------------------ ------------
Net debt as at 30 June
2020 (7,681,847) (1,601,879) (9,283,726) 1,019,979 (8,263,747)
============== ============ ============= ================== ============
The figures in respect of borrowings for the year ended 30 June
2019 include movements on the shareholder loan which was repaid on
26 September 2018 and hire purchase facilities.
The reclassification on adoption of AASB 16 represents the
reclassification of hire purchase facility balances on 1 July 2019
pursuant to the reclassification of those hire purchase facilities
as leases on that date.
NOTE 25 - KEY MANAGEMENT PERSONNEL
(a) Directors
The names and positions of Directors in office at any time
during the financial year are:
In office from In office to
Nathaniel le Roux Non-Executive Chairman 18/03/2015 present
Richard Gray Managing Director 10/10/2014 present
Chris Sangster Non-Executive Director 10/10/2014 present
Phillip Jackson Non-Executive Director 14/08/2007 present
Richard Barker Company Secretary 09/10/2017 present
and Non- Executive
Director
Peter Hetherington Non-Executive Director 18/06/2018 present
William Styslinger Non-Executive Director 18/06/2018 present
Ian Proctor Non-Executive Director Appointed on 14/08/2019 present
(b) Remuneration Polices
Remuneration policies are disclosed in the Remuneration Report
which is contained in the Directors' Report.
(c) Key management personnel remuneration
Remuneration was by way of fees paid monthly in respect of
invoices issued to the Company by the Directors or Companies
associated with the Directors in accordance with agreements between
the Company and those entities.
The Directors are entitled to reimbursement of out-of-pocket
expenses incurred whilst on company business.
The aggregate compensation made to key management personnel of
the group is set out below.
Consolidated
2020 2019
$ $
Short-term employee benefits 420,561 451,310
Post-employment benefits 10,140 8,491
Share-based payments 66,194 148,084
-------- --------
496,895 607,885
======== ========
(d) Aggregate amounts payable to Directors and their personally
related entities for remuneration.
Consolidated Entity
2020 2019
$ $
Accounts payable 25,318 14,393
========== ==========
NOTE 26 - RELATED PARTY INFORMATION
Transactions with Directors
Each of the Directors is a related party. The following
directors have entered into transactions with group companies.
i) Chris Sangster provides technical consulting services to the
Company. Fees are charged at commercial, arm's length rates in
accordance with time incurred. Details of fees earned are provided
in the Remuneration Report. Refer also the Remuneration Report.
ii) Richard Barker provides services of Company Secretary
through his service company Barston Corporation Pty Ltd. Services
are charged at commercial, arm's length rates. Details of fees
earned are provided in the Remuneration Report. Refer also to the
Remuneration Report.
iii) A company controlled by Nat le Roux provided loan funds to
the consolidated entity on commercial terms throughout the year.
The details of the loan funds provided are shown in Note 15.
Aggregate amounts payable to Directors and their personally
related entities:
Consolidated Entity
2020 2019
$ $
Accounts payable 25,318 14,393
Non-current borrowings owing to Bridge
Barn Limited
Principal 7,160,759 3,613,369
Accumulated interest 521,088 41,852
---------- ----------
7,707,165 3,669,614
========== ==========
NOTE 27 - REMUNERATION OF AUDITORS
Consolidated
2020 2019
$ $
BDO Audit (WA) Pty Ltd and BDO Corporate
Tax (WA) Pty Ltd:
Auditing and reviewing of the financial
statements of Scotgold Resources Limited
and of its controlled entities. 48,964 35,560
Other services - provision of tax services 18,783 8,488
Other services - provision of corporate
finance services 2,530 -
70,277 44,048
======= =======
The remuneration paid for the year ended 30 June 2020 includes
$6,434 (2019 - $Nil) paid to the Edinburgh, Scotland office of BDO
LLP in respect of tax advisory services.
NOTE 28 - LOSS PER SHARE
Consolidated
2020 2019
$ $
Earnings used in calculation of loss
per share (2,504,134) (3,518,455)
============ ============
Number Number
Weighted average number of ordinary shares
outstanding during the year used in the
calculation of basic loss per share 49,702,739 44,891,914
============ ============
There are 1,150,000 potential ordinary shares as at 30 June 2020
(30 June 2019 - 3,633,681). The issuing of these potential ordinary
shares would be anti-dilutive.
NOTE 29 - FINANCIAL INSTRUMENTS
(a) Financial Risk Management Policies
The consolidated entity's financial instruments consist mainly
of deposits with banks, accounts receivable, accounts payable,
lease liabilities and a secured loan facility provided by a major
shareholder.
The Board's overall risk management strategy seeks to assist the
consolidated entity in meeting its financial targets, whilst
minimising potential adverse effects on financial performance. The
consolidated entity has developed a framework for a risk management
policy and internal compliance and control systems that covers the
organisational, financial and operational aspects of the affairs of
the consolidated entity. The Chairman is responsible for ensuring
the maintenance of, and compliance with, appropriate systems.
(b) Financial Risk Exposures and Management
The main risks the consolidated entity is exposed to through its
financial instruments are interest rate risk, foreign currency risk
and liquidity risk.
Interest Rate Risk
Interest rate risk comprises cash flow interest rate risk and
fair value interest rate risk.
Cash flow interest rate risk is the risk that movements in
interest rates will result in increased cash outflows on floating
rate financial liabilities of the consolidated entity. As all of
the interest-bearing financial liabilities of the consolidated
entity are fixed rate liabilities, the consolidated entity has no
exposure to cash flow interest rate risk at 30 June 2020 in respect
of its financial liabilities. Interest rates applicable to the
commercial call account held by the consolidated entity vary with
market rates, but the consolidated entity currently holds funds on
that account pending deployment of these funds in mine development
or exploration and evaluation activities and is not dependent upon
interest received on the account as a source of income.
Fair value interest risk is the risk that movements in market
interest rates will affect the fair value of fixed interest
financial instruments of the consolidated entity.
The interest rate profile of the financial assets and
liabilities of the consolidated entity is as follows:
Weighted Average
Effective Interest
Rate
2020 2019 2020 2019
$ $
Financial Assets
Cash at Bank 0.05% 0.05% 1,019,979 3,917,920
Trade and other receivables - - 226,134 57,970
Non-current Bond obligation
deposits 1.25% 1.25% 1,527,306 1,511,493
----------- ----------
Total Financial Assets 2,773,419 5,487,383
=========== ==========
Financial Liabilities
Trade and other payables - - 1,127,113 581,947
Right-of-use lease liabilities 9.88% - 1,601,879 -
Hire purchase agreements - 7.77% - 732,531
Secured loan facility 8.46% 8.63% 7,681,847 3,655,221
Total Financial Liabilities 10,410,839 4,969,699
=========== ==========
The aggregate net fair values and carrying amounts of financial
assets and financial liabilities are disclosed in the statement of
financial position and in the notes to and forming part of the
consolidated financial statements.
Interest Rate Sensitivity Analysis
The consolidated entity has performed a sensitivity analysis
relating to its exposure to interest rate risk. This sensitivity
analysis demonstrates the effect on the current year results and
equity which could result in a change in these risks.
At 30 June 2020 the effect on the loss and equity as a result of
a change in the interest rate of 1% with all other variables
remaining constant is not material. Had there been an increase of
100 basis points in the nominal interest rate applicable to the
secured loan facility at the beginning of the year, then the
interest charge for the year would have increased by $61,480 to
$731,392, the gain on loan renegotiation would have been $46,612
and there would have been a net decrease in equity of $54,687 after
taking into account the effect on the foreign currency translation
reserve and a corresponding increase in the secured loan facility
balance of $54,687.
Foreign Currency Risk
The consolidated entity undertakes certain transactions
denominated in foreign currencies, hence exposures to exchange rate
fluctuations arise. In order to partially mitigate the impact of
fluctuations in foreign exchange rates related to this exposure,
management have a policy of holding sufficient cash in various
currencies to settle firm commitments and other anticipated cash
outflows. Aside from this, the group does not engage in any hedging
transactions.
.
The carrying amounts of the foreign currency denominated
monetary assets and monetary liabilities of the consolidated entity
at the reporting date are as follows:
Currency Liabilities Assets Liabilities Assets
2020 2020 2019 2019
$ $ $ $
GBP Sterling 11,449,509 2,371,394 5,163,200 4,527,250
EUR Euro 72,969 3,584 75,153 6,415
USD US Dollars - 350,497 - 921,142
SEK Swedish Krone - 43,792 - -
------------ ---------- ------------ ----------
11,522,478 2,769,267 5,238,353 5,454,807
============ ========== ============ ==========
Foreign currency
The consolidated entity is exposed to risk in the form of
variability of future payments in terms of the contract for the
purchase of the processing plant for the Cononish mine, which is
denominated in US Dollars.
Movements in the Australian Dollar : US Dollar exchange rate
could result in an increase in the amounts payable after 30 June
2020 in terms of this contract, details of which are set out in
Note 20. A 10% depreciation of the Australian Dollar against the US
Dollar would result in an increase in the aggregate amount to be
paid after the reporting date in terms of that contract of
$45,026.
A 10% depreciation in the Australian Dollar : Pound Sterling
exchange rate would result in an increase in net monetary
liabilities of $1,008,680.
Other than translational risk, the consolidated entity has no
other significant exposure to foreign currency risk at the
reporting date.
Liquidity Risk
The group manages liquidity risk by monitoring forecast cash
flows.
As at 30 June 2020 the consolidated entity had an amount of
GBP3,500,000 (30 June 2019 - GBP4,000,000) available to be drawn
down on the secured loan facility from Bridge Barn Limited.
Credit Risk
The maximum exposure to credit risk, excluding the value of any
collateral or other security, at the reporting date, is the
carrying amount net of any provisions for doubtful debts, as
disclosed in the statement of financial position and notes to the
financial statement.
In the case of cash deposited, credit risk is minimised by
depositing with recognised financial intermediaries such as banks,
subject to Australian Prudential Regulation Authority or United
Kingdom Financial Conduct Authority supervision.
The consolidated entity does not have any material risk exposure
to any single debtor or group of debtors under financial
instruments entered into by it.
Capital Management Risk
Management controls the capital of the consolidated entity in
order to maximise the return to shareholders and ensure that the
consolidated entity can fund its operations and continue as a going
concern.
Management effectively manages the capital of the consolidated
entity by assessing the financial risks of the consolidated entity
and adjusting its capital structure in response to changes in these
risks and in the market. These responses include the management of
expenditure and debt levels and share and option issues.
There have been no changes in the strategy adopted by management
to control capital of the consolidated entity since the prior
year.
Net Fair Values
For financial assets and liabilities, the net fair value
approximates their carrying value. The consolidated entity has no
financial assets or liabilities that are readily traded on
organised markets at the reporting date and has no financial assets
where the carrying amount exceeds net fair values at the reporting
date.
NOTE 30 - MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR
On 1 July 2020, 400,000 options were granted to Mr Richard Gray,
the Managing Director of the Company. Each option entitles the
holder to one ordinary unissued share at a strike price of
GBP0.71.The vesting of these options is subject to the non-market
vesting condition of cumulative gold production at the Cononish
mine (excluding any gold produced prior to 1 July 2020) exceeding a
level of 500 gold equivalent ounces. The options are exercisable by
the holder with effect from the vesting date and carry no dividend
or voting rights. Of these 400,000 options, 352,112 were granted
under the Enterprise Management Incentive Scheme of the
Company.
On 1 July 2020, 750,000 options were granted to senior managers
of the Company under the Enterprise Management Incentive Scheme of
the Company. Each option entitles the holder to one ordinary
unissued share at a strike price of GBP0.71. Of the 750,000
options, 400,000 vest when cumulative gold production at the
Cononish mine (excluding any gold produced prior to 1 July 2020)
exceeds a level of 500 gold equivalent ounces and 350,000 vest when
cumulative gold production at the Cononish mine (excluding any gold
produced prior to 1 July 2020) exceeds a level of 10,000 gold
equivalent ounces, these vesting conditions being non-market
vesting conditions. The options are exercisable by the holder with
effect from the vesting date and carry no dividend or voting
rights. On the granting of these options, the 120,000 options with
an exercise price of GBP0.34 per share granted to senior managers
on 16 April 2019 and expected to vest in future were cancelled.
On 29 July 2020, 200,000 options were granted to Saint
Consulting (UK) Limited, the company providing project management
services in respect of the construction of the Cononish mine
processing plant building and tailings management facility. Each
option entitles the holder to one ordinary unissued share at a
strike price of GBP0.71. The vesting of these options is subject to
the non-market vesting condition of successful completion of hot
commissioning of the Cononish mine processing plant on or before 31
December 2020, as determined by the Board. The options are
exercisable by the holder with effect from the vesting date and
carry no dividend or voting rights.
Subsequent to the grant of the above options, the average
weighted exercise price of the 2,350,000 options granted as
share-based payments outstanding and expected to vest in future is
GBP0.536 (30 June 2020 - GBP0.304).
A drawdown of GBP500,000 was made on the secured loan facility
on 8 July 2020 and further drawdowns of GBP1,000,000 each were made
on 12 August 2020 and 1 September 2020.
Net equity funding of GBP2,839,650 ($5,190,125), being
GBP3,000,000 ($5,482,414) net of costs of GBP160,350 ($292,289) was
raised through the placement of 2,727,273 Ordinary shares at
GBP1.10 per share on 12 October 2020 in order to fund the
acceleration of the Phase 2 expansion of the Cononish mine to
increase the rate of production from 3,000 tpm to 6,000 tpm as well
as to increase the scale of exploration activities.
On 27 October 2020, Scottish Enterprise agreed to amend the
terms of the Regional Selective Assistance grant to extend the
cut-off date for submission by SGZ Cononish Limited of claims for
the third and fourth tranches of that grant from 31 October 2020 to
31 May 2021.
There are no matters or circumstances that have arisen after the
reporting date that have significantly affected, or may
significantly affect, the operations of the consolidated entity,
the results of those operations, or the state of affairs of the
consolidated entity in future periods.
NOTE 31 - PARENT ENTITY DISCLOSURES
Financial Position 2020 2019
$ $
CURRENT ASSETS
Cash and cash equivalents 37,086 34,988
Trade and other receivables 47,129 31,382
------------- -------------
Total Current Assets 84,215 66,370
------------- -------------
NON-CURRENT ASSETS
Plant and equipment 20,230 7,964
Investment in subsidiaries 5,781,978 5,781,978
Loan to subsidiaries 19,049,817 17,830,815
------------- -------------
Total Non-Current assets 24,852,025 23,620,757
------------- -------------
TOTAL ASSETS 24,936,240 23,687,127
------------- -------------
CURRENT LIABILITIES
Trade and other payables 47,616 23,128
Total Current Liabilities 47,616 23,128
------------- -------------
TOTAL LIABILITIES 47,616 23,128
------------- -------------
NET ASSETS 24,888,624 23,663,999
============= =============
EQUITY
Issued capital 49,056,150 45,176,049
Reserves 418,411 339,951
Accumulated losses (24,585,937) (21,852,001)
TOTAL EQUITY 24,888,624 23,663,999
============= =============
Financial Performance
Loss for the year attributable to
the parent 2,733,936 4,245,423
---------- ----------
Total comprehensive loss 2,733,936 4,245,423
========== ==========
The loss attributable to the parent entity includes write down
of loans to subsidiaries caused by subsidiary losses of $4,018,048
(2019: $4,368,164). In the prior year, the parent entity issued a
guarantee to Scottish Enterprise in respect of any amounts of
grants received by SGZ Cononish Limited from that entity which may
become repayable (see Note 21). Grants in a total amount of
GBP200,000 ($379,468) had been received by SGZ Cononish Limited as
at 30 June 2020. The parent entity has no other contingent
liabilities or commitments for acquisition of plant and
equipment.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FIFVALSLTFII
(END) Dow Jones Newswires
November 30, 2020 02:00 ET (07:00 GMT)
Scotgold Resources (LSE:SGZ)
Historical Stock Chart
From Mar 2024 to Apr 2024
Scotgold Resources (LSE:SGZ)
Historical Stock Chart
From Apr 2023 to Apr 2024
