TIDMSGZ
RNS Number : 0305T
Scotgold Resources Ltd
11 November 2019
Scotgold Resources Limited (AIM:SGZ)
("Scotgold" or the "Company")
Annual Results for the Year Ended 30 June 2019
Scotgold Resources Limited (AIM:SGZ) which is focused on the
development of its advanced stage Cononish gold and silver project
in Scotland (Cononish Project) announces its final results for the
year ended 30 June 2019.
The full results will be available shortly via the Company's
website, www.scotgoldresources.com
and can also be viewed via the following link:
http://www.rns-pdf.londonstockexchange.com/rns/0305T_1-2019-11-11.pdf
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 advancement of the Cononish Gold and Silver 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 held its first meeting on 10th May 2019, noting its
purpose as 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. The CSR Committee may investigate any concerns regarding
activities of the Company that relate to sustainable development
and community development.
Peter Hetherington chaired the first meeting in May 2019 and
subsequent to adopting the Charter, three broad areas of focus were
proposed and agreed:
- Health, Safety and Welfare of the Community, Employees,
Consultants and Visitors
- Stewardship of the Environment
- Corporate Citizenship and Societal Interaction
These areas are presented on the Scotgold website alongside
details of how complaints will be handled.
Through the year to August 2019, our activities with regard to
CSR have included the following:
- Compliance with all relevant health & safety, employment
and data protection legislation
- Revision of the Employee Handbook to ensure clear information
on policies and procedures is provided to every employee
- An Occupational Health Scheme has been put in place,
recognising the importance of monitoring and securing the health of
the workforce
- An ongoing training and development programme for SGZ Cononish
staff, plus provision of training as required for all Scotgold
employees
- Working with the statutory agencies, including the Health and
Safety Executive, Scottish Environmental Protection Agency and Loch
Lomond and the Trossachs National Park, to build a professional
relationship through a proactive approach to achieving short and
long term compliance.
- Provision of accommodation for staff living over 25 miles away
and working on shifts.
- Meetings with local housing and planning authorities with
regard to increasing the supply of social housing in the area
- Continuing to support young people by working with
universities to provide opportunities for research and work
experience
- Complying with equality and data protection legislation in
recruitment whilst having a particular focus on employing local
people
- Instigation of quarterly Community Meetings to enable local
people to understand developments and to present their views
- Working with the Scottish Business Pledge, delivering on all
nine elements.
Cononish Gold and Silver Project -
On 15th 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.
Grampian Gold Project -
The Grampian Gold Project comprises 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. 4M
oz of gold).
The Company has historically undertaken regional stream sediment
sampling programs over the wider Grampian gold project area and
identified a number of high grade outcrops in the vicinity of the
Cononish project. In the current reporting period work has focused
on orientation surveys over the known Cononish deposit in order to
better understand the significance of these anomalies and improve
our exploration methodology going forward.
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. In March
2018 the Company announced the entering of an "earn in" agreement
for Pomar. However, during the year, PanEx Resources Limited, the
counterparty to that agreement, resolved to withdraw from the
agreement.
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.
Accordingly, deferred exploration expenditure of $118,402
attributable to the Pomar licence was written off during the
year.
The Company withdrew its interest in the Vendrennes licence and
placed SGZ France SAS into voluntary liquidation during the year.
The liquidation process 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 GBP6.0 million at a nominal
interest rate of 9% per annum, to be drawn down in tranches which
are repayable with accumulated interest 24 months after the date of
drawdown. By the end of the reporting period, GBP2.0 million of
that facility had been drawn down by SGZ Cononish Limited.
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.
Under the then assumed start date of November 2018, the phases
were scheduled as follows:
-> Phase 1 (December 2019 - February 2022): 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 (March 2022 - End of Life of Mine): 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 is intended to be organically funded by Phase 1 and the
Company anticipates being in a position where profits generated by
Phase 1 can be invested into the development requirements of Phase
2 within 2.5 years of first production.
Following the submission of a new planning application to
accommodate the revised phased project and a successful fund
raising in May 2018, the Company took the decision to proceed with
Phase 1 and work during the current reporting period has focussed
on the preparation for and initiation of project development
activities.
Whilst progressing the planning application process, the Company
committed funds to the ordering of the owner operated mining fleet,
which was received in late 2018. The Company also advanced the
processing plant tendering process and selected a preferred
bidder.
Following receipt of the positive Planning Decision Notice in
October 2018 and subsequent satisfaction of certain
pre-commencement conditions in December 2018, mine development
activities commenced in January 2019. With the limited mining
expertise available locally, the Company focussed on local
recruitment and training programs and is now successfully operating
24hr/day with a two-shift system.
Work also continued with the preferred bidder for the process
plant to conduct confirmatory metallurgical testwork, and complete
final design and equipment selection, culminating in a fixed price
order being placed.
The process plant design facilitated the detailed design of the
plant building and associated infrastructure. This highlighted the
challenges of the plant's location in terms of topography, ground
and weather conditions. As a result, together with certain
engineering practicalities, a decision was taken to complete the
full Phase 2 design for the building, associated infrastructure and
significant elements of the processing plant, including the
crushing and dewatering circuits.
The execution of the earthworks required for the building
platform, together with the preparations for the tailings dry
stacks and associated drainage and settlement systems, have been
carefully considered to ensure compliance with stringent planning
conditions appropriate for an environmentally sensitive area of the
National Park.
Subsequent to the reporting period, in August 2019 the Company
provided a project update indicating first production was expected
at end February 2020, revised cost estimates and re-evaluating the
project economics using a GBP1,200/oz gold price. Based on these
assumptions, the key project parameters are given below:
Cononish Key Parameters:
Estimated Reserves 550,000t
Head Grade Au 11.8g/t
Life of Mine 9 years
Total Capital GBP26.8m
Ave. Annual Production 23,370oz
Ave. Operating Cost GBP398/oz
Ave. Capital Cost GBP146/oz
Total Cost GBP544/oz
Employees @ full production 63
The above key parameters were derived by Scotgold management
using revised cost and gold price estimates and using 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: Latest 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
Scotgold Resources Limited - Cononish Gold Project
Mineral Resource Estimate as at 12 January, 2015
Reported at a cut-off grade of 3.5g/t gold
Classification K tonnes Grade Metal Grade Metal In-situ
AU AU Ag AU Dry BD
g/t Koz g/t Koz
-------------------- ----------- -------- -------- -------- -------- ----------
Measured -
In-situ 60 15.0 29 71.5 139 2.72
-------------------- ----------- -------- -------- -------- -------- ----------
Indicated -
In-situ 474 14.3 217 58.7 895 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 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 30/06/2018.
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 the Cononish mine, 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 30/06/2018. .
An internal review of the Ore Reserve Statement concluded that
the modifying factors used in determining the Ore Reserve remained
appropriate.
Table: Latest 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
2019, 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 km(2) ) in the
Dalradian Belt of the south west Grampians, a terrain highly
prospective for both gold 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.
Scotgold has historically used various traditional exploration
techniques to identify anomalies with a view to generating drill
targets and, potentially, future mineral resources. Principal
amongst these has been soil and stream sediment sampling to
identify gold-bearing zones. It is recognised however that the
history of glaciation over the last 30,000 years has spread
anomalous sediment particles across the region, making
interpretation difficult.
In addition to the above, geochemical techniques that rely on a
full digest of the sample are known to be susceptible to very fine
gold "nuggets", such that very large samples are required to
produce representative results. The sample sizes required are much
larger than those typically collected during exploration
programmes.
Scotgold recognised that a different survey technique was
required in order to counter the above challenges and generate
geochemical anomalies representative of the geology and
mineralisation in the bedrock (for soils) and catchment area (for
streams). Scotgold worked with Dr Russell Birrell of Glob-ex
Solutions, a leading exploration geochemist, to apply modern
partial leach techniques that analyse for mobile metal ions on the
surface of sediment particles. This technique is known as "ionic
leach geochemistry".
Ionic Leach(TM) is a static sodium cyanide leach using the
chelating agents of ammonium chloride, citric acid and EDTA with
the leachant buffered at an alkaline pH (pH 8.5). Samples are
digested as collected so there is very little opportunity to lose
or introduce elements during the partial leach process. This
innovative leach technique is designed for near surface soil
samples. It is designed to improve geochemical mapping and enhance
the potential to detect and resolve geochemical anomalies for a
range of commodity elements.
Separately, the Company historically evaluated Very Low
Frequency ("VLF") / magnetics and Induced Polarisation ("IP")
Gradient Array geophysical surveys with limited success. The
techniques worked well to map the bedrock geology but failed to
"see" deep enough to help define the geology in three
dimensions.
Orientation surveys have been conducted over the known Cononish
Project Orebody, in order to evaluate the efficacy of the new
exploration techniques in identifying bedrock mineralisation and to
establish optimum parameter settings, such as sample spacing, as
well as data processing methods.
The results of the initial orientation drainage survey were a
success in both proving the application of the new technique, and
in providing higher resolution anomalies over the wider Cononish
area. The technique produces a strong positive anomaly in the area
bounded by the drainages to the north east and south west of the
estimated Cononish Project Orebody. The same techniques and
parameters were then applied in the Beinn Udlaidh area to the north
of Cononish. The Company is particularly encouraged by the scale of
the Beinn Udlaidh anomaly produced. Previous drainage surveys did
not produce such clear cut and unambiguous results.
Having established an anomalous area through stream sediment
sampling, the next level of detail was obtained by conducting a
systematic soil sampling campaign over the area. Not only has this
new technique been able to map mineralised sections of the Cononish
Vein, it has identified further anomalies associated with
off-setting faults and structures in the immediate vicinity. These
new anomalies are associated with the Mother Vein and so-called
Barren Vein structures interpreted from the extrapolation of mapped
veins.
Following these encouraging results from orientation surveys
conducted over the Cononish orebody and within the wider Glen Orchy
Central license block, the methods were applied over additional
areas of interest within the company's licenses, with 3 main areas
covered during the reporting period:
1. North East Strike extension of Cononish. This has indicated a
strong previously unidentified anomaly around 1Km north east of the
Cononish orebody associated with the Mother Vein. This anomaly
appears to have a NW-SE orientation and further work will be
conducted to verify its significance.
2. Coire nan Sionnach. This area had been identified as
prospective by previous programs, however, this latest work
indicates the anomaly is relatively limited in extent. This area is
now considered a lower priority.
3. Inverchorachan. This area was known to contain isolated
anomalous gold grades from historical work. As a result, it was
selected as a project for two masters students to conduct a field
work project to support their studies, which included the use of
the "Ionic Leach" sampling techniques. The relatively small area
covered by soil sampling has returned strongly anomalous values and
the stream sediment sampling undertaken indicates the anomalous
zone could be extensive. Of note, are the highest gold and silver
values of 124.5 ppb and 420 ppb respectively which were detected as
part of this most recent sampling. For comparison, the highest
values for gold and silver detected within the Cononish area to
date using Ionic Leach are 39.9 ppb Au and 240 ppb Ag. This area
will now be considered a high priority for further soil sampling to
the south west of the newly identified anomaly, in addition to
infill stream sediment sampling.
Scotgold is pleased to report on the successful identification
of new exploration techniques. The application of these techniques
will ensure a more efficient, systematic and targeted approach to
future exploration. Ionic leach stream sediment sampling can be
used to define prospective catchment areas at the district and
regional scale that will allow focus on the best areas. Ionic leach
soil sampling can then be used, together with geological mapping,
to identify the prospective areas at the prospect scale. The
identified ground geophysics techniques can be used to map the
bedrock geology in three dimensions and allow for optimal drill
hole planning.
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.
The Pomar licence area includes the historic antimony mines of
das Gatas, Pomar and Casalinho, in addition to numerous small scale
trials and occurrences.
Evaluation of styles of mineralization during initial site
visits indicated the potential for undiscovered gold prospects in
zones with quartz-only mineralization in addition to the known gold
bearing felsic dykes traversing the area and potential extensions
to the known antimony occurrences.
In March 2018 the Company announced the entering of an "earn in"
agreement for Pomar. However, during the year, PanEx Resources
Limited, the counterparty to that agreement, resolved to withdraw
from the agreement.
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.
Accordingly, deferred exploration expenditure of $118,402
attributable to the Pomar licence was written off during the
year.
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 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 2019, the Company held a 100% interest in the
Pomar Licence with a period of validity of 3 years from May 2016
(and an option to extend) in eastern central Portugal, near Castelo
Branco though its subsidiary Scotgold Resources Portugal Ltda.
Subsequent to 30 June 2019, the Company announced its intention
not to extend the Pomar Licence.
France -
The Company held a 100% interest in the Vendrennes PER (Permit
Exclusif de Recherche or Exploration Licence) through its
subsidiary SGZ France SAS.
The Company withdrew its interest in the Vendrennes Licence
during the year.
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 - 2018 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 has adopted the QCA code of corporate governance and
appointed an advisory service to assist with UK regulatory
compliance issues as an AIM listed company. During the period the
Company formally established a Corporate Social Responsibility
Committee and is pleased to include its maiden report.
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 and the first
GBP50,000 tranche was disbursed in August 2019.
With effect from 1(st) 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. However, to provide longevity beyond
Cononish, and potentially growth in overall production, the Company
is developing a pipeline of 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, now scheduled for the end
of February 2020. Construction delays, particularly due to
inclement weather, remain a risk factor.
The Updated BFS also demonstrated the increased value of
Cononish given the improved gold market, particularly in GB Pound
terms. The gold price has climbed from GBP948.87/oz to
GBP1,114.87/oz over this reporting period and reached
GBP1,278.06/oz in September 2019. 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. The Company
currently expects project returns in line with these estimates.
The work completed on advancing our future pipeline of projects
has again 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.
These programs will continue to be expanded and are expected to
provide the Company with significant number of prospective drill
targets in due course.
The coming period will be dominated by the Cononish development
activities and we look forward to reporting the production of first
gold.
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2019
Notes 2019 2018
$ $
Interest income 2 6,314 969
Other income 2 - 1,666
Gain on loan renegotiation - 263,707
Administration costs (527,619) (514,758)
Interest expense (101,943) (172,144)
Depreciation and loss on disposal of
plant and equipment 3 (208,608) (69,907)
Pre-development costs expensed as incurred (1,253,211) -
Exploration expensed as incurred (28,194) (68,009)
Deferred mineral exploration and evaluation (118,402) -
costs written
Employee and consultant costs, excluding
share-based payments (615,809) (438,955)
Share-based payments 16 (200,954) -
Listing and share registry costs (164,991) (313,221)
Legal fees (50,282) (226,734)
Office and communication costs (96,587) (112,727)
Other expenses (158,169) (249,554)
LOSS BEFORE INCOME TAX (3,518,455) (1,899,667)
Income tax benefit 4 - -
LOSS FOR THE YEAR (3,518,455) (1,899,667)
Other Comprehensive Income
Items that may be reclassified to Profit
or Loss
Exchange difference on translation of
foreign subsidiaries (726,967) 109,191
Total comprehensive result for the year (4,245,422) (1,790,476)
============ ============
Basic (loss) per share (cents per share) 25 (7.84) (7.92)
These consolidated financial statements should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
FOR THE YEARED 30 JUNE 2019
Notes 2019 2018
$ $
CURRENT ASSETS
Cash and cash equivalents 3,917,920 11,207,036
Trade and other receivables 5 57,970 59,267
Inventory 6 29,724 62,850
Other current assets 7 93,273 53,082
Total Current Assets 4,098,887 11,382,235
------------- ---------------
NON-CURRENT ASSETS
Trade and other receivables 5 1,511,493 97,894
Plant and equipment 8 996,562 226,042
Mineral exploration and evaluation 9 2,034,815 16,685,135
Mine development expenditure 10 20,293,754 -
------------- ---------------
Total Non-Current Assets 24,836,624 17,009,071
TOTAL ASSETS 28,935,511 28,391,306
------------- ---------------
CURRENT LIABILITIES
Trade and other payables 11 581,947 294,262
Other current liabilities 11 63,123 43,529
Borrowings 12 174,838 1,740,867
Total Current Liabilities 819,908 2,078,658
------------- ---------------
NON-CURRENT LIABILITIES
Borrowings 12 4,212,914 -
Provisions 13 238,690 -
Total Non-Current Liabilities 4,451,604 -
TOTAL LIABILITIES 5,271,512 2,078,658
============= ===============
NET ASSETS 23,663,999 26,312,648
============= ===============
EQUITY
Issued capital 14 41,098,558 39,706,967
Reserves 15 (448,311) 73,474
Accumulated losses 15 (16,986,248) (13,467,793)
TOTAL EQUITY 23,663,999 26,312,648
============= ===============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2019
Issued Accumulated Options Share-based Foreign Total
Capital Losses Reserve payment Currency Equity
reserve Translation
Reserve
YEARED 30 JUNE $ $ $ $ $ $
2018
Balances at 1 July
2017 27,216,549 (11,658,126) 224,769 - (170,486) 15,612,706
Total comprehensive
result for the
year - (1,899,667) - - 109,191 (1,790,476)
Transactions with owners in their capacity as owners:
Issue of shares 4,612,375 - - - - 4,612,375
Placements 7,971,620 - - - - 7,971,620
Options exercised 12,187 - - - - 12,187
Options expired - 90,000 (90,000) - - -
Share issue expenses (105,764) - - - - (105,764)
Balances at 30
June 2018 39,706,967 (13,467,793) 134,769 - (61,295) 26,312,648
=========== ============= ========= ============ ============= ============
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
=========== ============= ======== ======== ========== ============
These consolidated financial statements should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEARED 30 JUNE 2019
Notes 2019 2018
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Payment to suppliers (3,057,998) (1,744,357)
Interest income received 6,314 969
------------ ------------
Net Cash Outflow from Operating Activities 21 (3,051,684) (1,743,388)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration expenditure (487,024) (247,268)
Payments for mine development activities (5,263,745) -
Purchase of plant and equipment (1,072,636) (6,172)
Lodging of deposits as security for (1,409,024) -
obligations
------------ ------------
Net Cash Outflow from Investing Activities (8,232,429) (253,440)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares and options 1,391,591 12,596,182
Share and option issue transaction costs - (105,764)
Repayment of current borrowings (1,815,521) -
Proceeds on draw-down of first tranche 3,729,952 -
of non-current borrowings
Net proceeds from Hire Purchase borrowings 731,122 -
------------ ------------
Net Cash Inflow from Financing Activities 4,037,144 12,490,418
------------ ------------
Net (decrease)/increase in cash held (7,246,969) 10,493,590
Effect of exchange rate fluctuations
on cash and cash equivalents (42,147) 141,114
Cash and cash equivalents at the beginning
of this financial year 11,207,036 572,332
Cash and cash equivalents at the end
of this financial year 3,917,920 11,207,036
============ ============
These consolidated financial statements should be read in
conjunction with the accompanying notes.
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 JUNE 2019
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.
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 sheet date, the
consolidated entity had current assets of $4,098,887 (2018 :
$11,382,235), including available cash and cash equivalents of
$3,917,920 (2018 : $11,207,036), and current liabilities of
$819,908 (2018 : $2,078,658).
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 the consolidated entity has further
available funds by way of a secured GBP5.5m ($9.94m) loan facility
not yet drawn down.
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 2019, the consolidated entity had cash balances of
$3,917,920 (30 June 2018 : $11,207,036) and for the financial year
then ending, incurred net cash outflows from operating and
investing activities of $11,284,113 (2018 : $1,996,828). The
consolidated entity is currently commencing construction of the
Cononish gold mine, and first cash inflows are expected in the
first quarter of calendar year 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:
-- As announced on 28 August 2019, the secured loan facility
available from Bridge Barn Limited increased by GBP1,500,000,
bringing the total available facility to GBP7,500,000. Of that
amount, GBP2,000,000 had been drawn down at 30 June 2019;
-- As also announced on the same date, the consolidated entity
has been successful in raising further capital in an equity raising
exercise subsequent to the reporting date, in an amount of
GBP1,150,000;
-- The amount of any additional cost which may be incurred as a
result of a delay in commissioning is mitigated by the fact that
the contract between SGZ Cononish Limited and the supplier of the
processing plant to be commissioned provides that of the total
contract value of USD3,862,668, USD115,880 ($165,245) will only be
payable on successful completion of commissioning of the processing
plant and USD193,133 ($275,408) will only be payable on the
subsequent issuing by SGZ Cononish Limited of a certificate of
completion in respect of the installation and commissioning of the
processing plant; and
-- As at the date of signing of this report, there are 2,459,151
outstanding options with an exercise price of GBP0.40 per option.
Each option entitles the holder thereof to acquire one ordinary
share in the Company and is exercisable on or before 31 December
2019. The number of options outstanding includes 1,744,657 options
acquired by an institutional investor from Nat le Roux in terms of
an agreement concluded on 14 May 2019, in respect of which transfer
was completed on 18 July 2019. These options are all "in-the-money"
at the date of signing of this report. Should all the outstanding
options be exercised, the expected inflow of cash will be
GBP983,660 ($1,777,164).
The expiry date of the options precedes the commencement date of
the period during which the Directors estimate that the peak
funding requirement in respect of the development of the Cononish
mine will be reached.
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 8 November
2019.
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 2019, 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.
The following new or amended standards have been adopted during
the year ended 30 June 2019:
AASB 9 Financial Instruments (which became effective for
financial years commencing after 1 January 2018)
AASB 9 replaced AASB 139 Financial Instruments: Recognition and
Measurement and, in particular, the provisions of AASB 139 relating
to the recognition, classification and measurement of financial
assets and financial liabilities, derecognition of financial
instruments, impairment of financial assets and hedge
accounting.
The accounting policies implemented on adoption of the
provisions of AASB 9 are set out in the Accounting Polices section
below.
Adoption of AASB 9 has not resulted in any reclassification of
financial instruments or any adjustments to previously reported
figures.
AASB 15 Revenue from contracts with Customers (which became
effective for financial years commencing after 1 January 2018)
AASB 15 replaces all existing revenue requirements in Australian
Accounting Standards and applies to all revenue arising from
contracts with customers, unless the contracts are in the scope of
other standards, such as AASB 117 (or AASB 16 Leases, once
applied). The core principle of AASB 15 is that an entity
recognises revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which an entity expects to be entitled in exchange for those
goods or services. An entity recognises revenue in accordance with
the core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance
obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a
performance obligation.
The adoption of AASB 15 has had no impact on the consolidated
entity.
New Accounting Standards and Interpretations
The Directors are also reviewing all new Accounting Standards
and Interpretations that have been issued but are not yet effective
for the year ended 30 June 2019.
AASB 16 Leases (Application date: Financial years commencing
after 1 January 2019)
AASB 16 requires lessees to account for all leases under a
single on-balance sheet model in a similar way to finance leases
under AASB 117 Leases. The Standard includes two recognition
exemptions for lessees - leases of 'low-value' assets (e.g.
personal computers) and short-term leases (e.g. leases with a lease
term of 12 months or less). At the commencement date of a lease, a
lessee will recognise a liability to make lease payments (e.g. the
lease liability) and an asset representing the right to use the
underlying asset during the lease term (e.g. the right-of-use
asset). Lessees will be required to separately recognise the
interest expense on the lease liability and the depreciation
expense on the right-of-use asset. Lessees will be required to
remeasure the lease liability upon the occurrence of certain events
(e.g. a change in the lease term, a change in future lease payments
resulting from a change in an index or rate used to determine those
payments). The lessee will generally recognise the amount of the
remeasurement of the lease liability as an adjustment to the
right-of-use asset. Lessor accounting is substantially unchanged
from today's accounting under AASB 117. Lessors will continue to
classify all leases using the same classification principle as in
AASB 117 and distinguish between two types of leases: operating and
finance leases.
The consolidated entity is currently evaluating the impact of
the new standard.
In addition, the consolidated entity is also currently
evaluating the impact of the following new standards:
Effective 1 January 2019:
AASB 2017-4 Amendments to Australian Accounting Standards -
Uncertainty over income tax treatments;
AASB 2017-6 Amendments to Australian Accounting Standards -
Prepayment features with negative compensation;
AASB 2017-7 Amendments to Australian Accounting Standards -
Long-term interests in associates and joint ventures;
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);
AASB 2018-2 Amendments to Australian Accounting Standards - Plan
Amendment, Curtailment or Settlement;
AASB 2018-3 Amendments to Australian Accounting Standards -
Reduced Disclosure Requirements;
Interpretation 23 Uncertainty over income tax treatments.
Effective 1 January 2020:
AASB 2018-6 Amendments to Australian Accounting Standards -
Definition of a Business;
AASB 2018-7 Amendments to Australian Accounting Standards -
Definition of Material;
Conceptual Framework;
AASB 2019-1 Amendments to Australian Accounting Standards -
References to the Conceptual Framework.
Effective 1 January 2021:
AASB 17 Insurance Contracts
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 difference 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 including capitalised
lease assets, but 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
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 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 2019, 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) 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.
(p) 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.
(q) Comparative Figures
When required by Accounting Standards, comparative figures have
been adjusted to conform to changes in presentation for the current
financial year.
(r) 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.
(s) Share based payments - shares and options
The fair value of shares and share options granted is recognised
as an expense 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.
(t) 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.
(u) 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.
Determination of date of reclassification to mine development
expenditure
During the 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.
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 premia 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 2019, the gross asset base of the consolidated
entity directly attributable to the Cononish mine amounted to
$23,602,730 (2018: 16,152,682). The Directors do not believe that
there is any necessity to impair the carrying value of that asset
base at 30 June 2019.
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 2019, the consolidated entity had capitalised mineral
exploration and evaluation expenditure of $2,034,815 (2018:
$16,685,135). The Directors do not believe any indications of
impairment are present.
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 2019 was $238,690 (2018 - $Nil).
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 premia 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.
Recognition of deferred tax assets
The Directors exercise judgement as to the likelihood that
taxable income will arise in future against which assessable losses
can be offset in order to reduce the liability for income tax on
that taxable income. Where such taxable income is adjudged to be
likely to arise, a deferred tax asset will be recognised to the
extent of the future taxation saving.
As at 30 June 2019, the amount of deferred tax assets recognised
was $Nil (2018 - $Nil).
NOTE 2 - OTHER INCOME
Other income 2019 2018
$ $
Interest received 6,314 969
Other income - 1,666
Gain on loan renegotiation - 263,707
------ --------
Total other income 6,314 266,342
====== ========
NOTE 3 - LOSS FROM ORDINARY ACTIVITIES BEFORE TAX EXPENSES
Expenses 2019 2018
$ $
Interest expensed 101,943 172,144
-------- --------
Total borrowing cost expensed 101,943 172,144
======== ========
Depreciation of non-current assets
Plant and equipment 121,381 68,171
Motor vehicles 9,140 1,718
Office furniture and equipment 955 18
-------- --------
Total depreciation of non-current assets 131,476 69,907
-------- --------
Loss on disposal of non-current assets
Plant and equipment 72,078 -
Motor vehicles 2,727 -
Office furniture and equipment 2,327 -
-------- --------
Total loss on disposal of non-current assets 77,132 -
======== ========
NOTE 4 - INCOME TAX
The prima facie tax benefit at 27.5% (2018 : 27.5%) on loss from
ordinary activities is reconciled to the income tax benefit in the
financial statements as follows:
2019 2018
$ $
Loss from ordinary activities (3,518,455) (1,899,667)
Prima facie income tax benefit at 27.5% (2018
: 27.5%) 967,575 522,408
Tax effect of permanent differences
Share issue costs amortised 60,421 29,018
Other non-deductible expenses - -
Income tax benefit adjusted for permanent differences 1,027,996 551,426
Deferred tax asset not brought to account (1,027,996) (551,426)
Income tax benefit - -
============ ============
INCOME TAX BENEFIT
The directors estimate the cumulative unrecognised deferred tax
asset attributable to the Company and its controlled entities at
27.5% is as follows:
UNRECOGNISED DEFERRED TAX ASSETS
2019 2018
$ $
Revenue losses after permanent differences 3,198,284 2,637,395
Capital raising costs yet to be claimed - 55,150
---------- ----------
3,198,284 2,692,545
========== ==========
The potential deferred tax asset has not been brought to account
in the financial report at 30 June 2019 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 5 - TRADE AND OTHER RECEIVABLES
Current 2019 2018
$ $
GST / VAT receivable 47,940 56,424
Other receivables 10,030 2,843
---------- -------
57,970 59,267
========== =======
Non-current
Bond on Tenement - 97,894
Rehabilitation, restoration and land management 1,457,292 -
Bond deposits
Performance Bond deposits 54,201 -
---------- -------
1,511,493 97,894
========== =======
During the 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. This 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 Bond which was in place prior to the concluding of the
Section 75 Agreement was refunded to SGZ Cononish Limited and the
following amounts were lodged as security for the performance by
that company of its obligations:
- GBP537,918 ($971,848) in respect of obligations to undertake restoration, decommissioning and environmental aftercare and monitoring on cessation of operations at the Cononish mine; and
- GBP268,693 ($485,444) in respect of obligations in terms of
the Greater Cononish Glen Management Plan.
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, SGZ Cononish Limited lodged a deposit of GBP30,000
($54,201) 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 6 - INVENTORY
2019 2018
$ $
Inventory of gold concentrates - 62,850
Inventory of mining consumables 29,724 -
------- -------
29,724 62,850
======= =======
NOTE 7 - OTHER CURRENT ASSETS
2019 2018
$ $
-------
Prepayments 93,273 53,082
======= =======
NOTE 8 - PLANT AND EQUIPMENT
Plant and equipment 2019 2018
$ $
Cost 1,304,305 661,402
Accumulated Depreciation (307,743) (435,360)
------------ ----------
996,562 226,042
============ ==========
Movement for the year ended 30 June 2018
Plant and Motor vehicles Furniture Total
equipment and office
Cost equipment
Opening balance 560,212 83,918 11,163 655,293
Additions - 6,109 - 6,109
----------- --------------- ------------ ----------
Closing balance 560,212 90,027 11,163 661,402
----------- --------------- ------------ ----------
Accumulated depreciation
Opening balance 296,782 64,208 4,463 365,453
Depreciation expensed 68,171 1,718 18 69,907
----------- --------------- ------------ ----------
Closing balance 364,953 65,926 4,481 435,360
----------- --------------- ------------ ----------
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
----------- --------------- ------------ ----------
Net carrying value
----------- --------------- ------------ ----------
At 30 June 2019 939,315 46,909 10,338 996,562
----------- --------------- ------------ ----------
At 30 June 2018 195,259 24,101 6,682 226,042
----------- --------------- ------------ ----------
Fixed assets with a net carrying value of $842,517 are the
subject of hire purchase agreements and serve as security for the
repayment of amounts owing in terms of these agreements.
NOTE 9 - MINERAL EXPLORATION AND EVALUATION
2019 2018
$ $
Opening balance 16,685,135 16,346,365
Net (gain)/loss from the BPT (5,360) (280,331)
Additional expenditure deferred during the year 641,623 619,101
Reclassification to mine development expenditure (15,180,832) -
Write-off of deferred expenditure attributable (118,402) -
to Pomar licence
Foreign exchange movement 12,651 -
-----------
Closing balance 2,034,815 16,685,135
============= ===========
The ultimate recoupment of exploration expenditure carried
forward is dependent upon successful development and commercial
exploitation, or sale of the respective areas.
The net gain of $5,360 (2018 : $280,331) from the BPT is an
integral part of the Company's mineral exploration and evaluation
activities and includes $68,684 of revenue from Dore sales (2018:
$203,177) and $63,324 of production costs (2018 : $557,477). There
were no concentrate sales during the year, compared to a level of
$634,631 in 2018.
The criteria to reclassify mineral exploration and evaluation
expenditure to mine development expenditure in respect of the
Cononish gold and silver mine project of SGZ Cononish Limited were
met on 19 December 2018 and $15,180,832 of deferred mineral
exploration and evaluation expenditure was accordingly reclassified
to mine development expenditure on that date.
This amount includes deferred expenditure on minor preliminary
works commenced on the development of the Cononish Mine of
$130,635.
Pursuant to the taking of a decision by management not to extend
the Pomar exploration licence in Portugal, $118,402 of deferred
mineral and evaluation expenditure attributable to that licence was
written-off during the year.
NOTE 10 - MINE DEVELOPMENT EXPITURE
2019
$
Reclassification from mineral exploration and
evaluation expenditure 15,180,832
Expenditure incurred subsequent to reclassification 5,606,392
Share-based payment costs capitalised 4,228
Provision for restoration and decommissioning
(see Note 13) 238,690
Foreign exchange movement (736,388)
Closing balance 20,293,754
===========
The criteria for reclassifying mineral exploration and
evaluation expenditure attributable to the Cononish mine project
were met on 19 December 2018, with a consequent transfer of
$15,180,832 of deferred costs. Subsequently, an amount of
$5,606,392 was expended on mine development activities and
capitalised into this asset. As the transfer occurred in the
current financial period, no amounts are presented for the year
ended 30 June 2018.
Share-based payment costs capitalised as mine development
expenditure relates to options granted to senior management to
incentivise the meeting of the corporate target of producing first
gold at the Cononish mine in February 2020.
NOTE 11 - TRADE AND OTHER PAYABLES
2019 2018
$ $
Trade creditors 581,947 294,262
Other accruals 63,123 43,529
-------- --------
645,070 337,791
======== ========
Trade creditors and accruals relating to exploration
expenditure 144,910 42,814
Trade creditors and accruals relating to development 385,770 -
expenditure
Trade creditors and accruals relating to administration 114,390 294,977
645,070 337,791
======== ========
Trade creditors are non-interest bearing and are normally
settled on 30 days terms (2018 : 30 days).
NOTE 12 - BORROWINGS
2019 2018
Non-current $ $
Secured loan facility 3,655,221 -
Hire purchase agreement facilities 557,693 -
---------- -----
4,212,914 -
========== =====
2019 2018
Current $ $
Shareholder loan - 1,740,867
Hire purchase agreement facilities 174,838 -
---------- ----------
174,838 1,740,867
---------- ----------
Total borrowings 4,387,752 1,740,867
---------- ----------
All of the borrowings are denominated in GBP (Pounds
sterling).
Shareholder loan
On 14 March 2017 the Company entered into a short-term loan
agreement for GBP1,000,000 with Nat le Roux, the Company's
non-executive Chairman and major shareholder. Pursuant to the
amendment of the loan terms on 20 March 2018 in terms of which all
interest (including accrued interest) was waived and the date of
repayment was extended to 30 September 2018 (which gave rise to the
gain on renegotiation recognised in 2018), the principal was repaid
on 26 September 2018.
The movements on the loan are as follows: 2019 2018
$ $
Opening balance 1,740,867 1,742,964
Interest at effective rate 43,384 170,883
Gain on loan renegotiation - (263,707)
Foreign exchange movement 31,270 90,727
Loan repayment (1,815,521) -
------------ ----------
Closing balance - 1,740,867
============ ==========
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 2 October 2018, the period of availability of the
facility was extended to 12 months, with the facility to be drawn
down in three tranches each repayable 24 months after date of
drawdown of that specific tranche; and
(b) On 26 February 2019, the amount available to be drawn down
under the facility was increased from GBP5,000,000 to GBP
6,000,000, the number of tranches to be drawn down increased from
three to four and the terms of payment of the interest on amounts
drawn-down were amended to provide for repayment of interest on
each tranche as at the date of repayment of that tranche.
No amounts had been drawn down on the facility as at the date of
any of these amendments, with the first tranche of GBP2,000,000
being drawn down on 13 May 2019 and no other drawdowns being made
during the year.
The terms of the secured loan as at 30 June 2019 are accordingly
as follows:
i) An overall facility amount of GBP6,000,00 to be drawn down in
two tranches of GBP 2,000,000 followed by two tranches of
GBP1,000,000;
ii) The period of availability of the first tranche ended on 30
June 2019, with the second tranche being available for a period of
six months after the date of drawdown of the first tranche and the
period of availability of the subsequent tranches being the period
of six months from the date of draw-down of the immediately
preceding tranche;
iii) Nominal interest rate is 9.0% applied to all amounts drawn down;
iv) Each tranche, together with accumulated interest thereon, is
repayable 24 months after the date of drawdown of that 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.
The movements on the secured facility loan agreement during the
year are as follows:
2019
$
First tranche drawn down on 13 May 2019 3,729,952
Interest at effective rate 41,626
Foreign exchange movement (116,357)
----------
Closing balance 3,655,221
==========
The effective interest rate on the secured loan facility is
8.63%. As set out in the note on matters subsequent to the end of
the financial year the amount available in terms of the secured
loan facility agreement was increased in August 2019.
Hire purchase facilities
Subsidiaries of the Company have entered into hire purchase
agreements with financial institutions to finance the purchase of
motor vehicles and mobile plant during the year, 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
$ $ $ $ $
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 30 June
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 30 June 2019 455,383 18,814 350,528 17,792 842,517
The respective assets financed in terms of each hire purchase
agreement constitute the sole security for repayment of the amounts
owing in respect of each of these agreements.
The movements during the year on those respective hire purchase
agreements are 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 at 30 June
2019 422,261 23,482 264,342 22,446 732,531
------------ --------- ----------- ------------- ---------
NOTE 13 - PROVISIONS
2019 2018
Provision for restoration and decommissioning $ $
Balance at 30 June 2019 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
2019.
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 2019 using a discount rate of 1.32%.
No provision was made during the year ended 30 June 2018.
NOTE 14 - ISSUED CAPITAL
2019 2018 2019 2018
No. of shares No. of $ $
shares
Ordinary shares - fully
paid 45,639,546 42,911,254 41,098,558 39,706,967
-------------- ----------- ----------- -----------
(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 2018:
Date Details Shares Value $
(cents)
Balance at 30 June 2017 1,593,220,666 27,216,549
04/07/2017 Options conversion 50,000 1.6695 837
---------------- -----------
Total before consolidation 1,593,270,666 27,217,386
25/08/2017 1 for 100 share consolidation (1,577,337,734) -
Total after share consolidation 15,932,932 27,217,386
02/10/2017 Options conversion 4,402 1.6955 7,464
08/11/2017 Options conversion 1,575 1.7074 2,689
28/11/2017 Options conversion 500 1.7374 867
21/12/2017 Rights issue 10,625,940 1.7363 4,612,375
21/12/2017 Rights issue costs (83,343)
04/01/2018 Placing 1,800,000 1.7236 775,620
23/03/2018 Options conversion 450 1.8333 330
17/05/2018 Placing 14,545,455 1.7990 7,196,000
17/05/2018 Placing costs (22,421)
---------------- -----------
Balance at 30 June 2018 42,911,254 39,706,967
================ ===========
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
---------------- -----------
Shares issued for non-cash consideration amounted to Nil during
the year (2018: Nil).
(c) Movements in options were as follows:
During the year ended 30 June 2018
Details Number $
Balance at 30 June 2017 156,457,334 224,769
Options exercised (56,477) -
Options expired 22 September 2017 (30,000,000) (90,000)
Options expired 30 September 2017 (123,400,857) -
-------------- ----------
Options before share consolidation 3,000,000 134,769
1 for 100 share consolidation (2,970,000) -
-------------- ----------
Total after share consolidation 30,000 134,769
Options issued with Rights issue 2,125,149 -
Options issued with placement 360,000 -
Conversion of options (450) -
-------------- ----------
Balance at 30 June 2018 2,514,699 134,769
============== ==========
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
========== ==========
Option exercise dates and prices
Number Exercise Price Expiry Date Reserve $
30,000 $8.00 31 March 2022 134,769
2,483,681 GBP0.40 31 December -
2019
2,513,681 134,769
Details of options issued to key management and senior managers
are set out in Note 16.
NOTE 15 - RESERVES AND ACCUMULATED LOSSES
Accumulated Losses 2019 2018
$ $
Balance at beginning of the year (13,467,793) (11,658,126)
Net loss from ordinary activities (3,518,455) (1,899,667)
Options expiry - 90,000
------------- -------------
Balance at end of the year (16,986,248) (13,467,793)
============= =============
2019 2018
$ $
Foreign Currency Translation Reserve
Balance at beginning of the year (61,295) (170,486)
Reserve arising on translation of foreign currency
subsidiary (726,967) 109,191
------------- -------------
Balance at end of the year (788,262) (61,295)
============= =============
Share Option Reserve
Balance at beginning of the year 134,769 224,769
Options expiry - (90,000)
Balance at end of the year 134,769 134,769
======== =========
Share-based payment Reserve
Balance at beginning of the year - -
Issue of options for services rendered (Note 16) 205,182 -
Balance at end of the year 205,182 -
========
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 16 - 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
are 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 2019, only 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.
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 2019, only 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 2019, the share options granted to management for
services rendered and expected to vest in future have the following
expiry date 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 2019 of the 1,120,000
options outstanding at that date and expected to vest in future is
GBP0.304.
NOTE 17 - COMMITMENTS FOR EXPITURE
Mineral Tenement Leases
As at 30 June 2019, the consolidated entity held five licences in
Scotland. In December 2018, an application was made to the Crown
Estate Scotland to exchange these licenses for thirteen licences
broadly covering the same area as the original, but with some decrease
in overall land holding.
On making that application, the following programme of exploration
costs was proposed:
Minimum expenditure Licence Fee Total
(est.) (est.) (est.)
$ $ $
Not later than one year 5,824,554 117,435 5,941,989
Later than 1 year but not later
than 2 years 2,590,561 117,435 2,707,996
Later than 2 years but not later
than 5 years 7,427,403 352,305 7,779,708
-------------------- ------------ -----------
15,842,518 587,175 16,429,693
==================== ============ ===========
Contract for purchase of processing plant
On 14 February 2018, SGZ Cononish Limited entered into a
contract with Appropriate Process Technologies Pty Limited for the
fabrication of a 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 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 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:
$
Not later than one year 269,864
Later than 1 year but not later
than 2 years 123,546
Later than 2 years but not later
than 5 years 23,375
Later than 5 years 85,351
--------
502,136
========
Minimum royalty 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. The amount payable
for the year ended 30 June 2019 amounted to $33,588 and the amount
paid in July 2019 amounted to $34,694.
Assuming a 2.0% per annum increase in the RPI in future, the
amounts payable in respect of annual rental shall be as
follows:
$
Not later than one year 34,694
Later than 1 year but not later
than 2 years 35,388
Later than 2 years but not later
than 5 years 110,467
Later than 5 years 241,632
--------
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 2019:
$
Not later than one year 271,003
Later than 1 year but not later
than 2 years 397,563
Later than 2 years but not later
than 5 years 1,978,673
Later than 5 years 3,695,284
----------
6,342,253
----------
Rental of immovable property
Rental payments expected to be incurred in terms of rental
agreements in place in respect of immovable property after 30 June
2019 are as follows:
$
Not later than one year 57,310
Later than 1 year but not later
than 2 years 60,923
Later than 2 years but not later
than 5 years 182,770
301,003
--------
Rental of mobile equipment
Rental payments in respect of agreements for the rental of
mobile equipment utilised in mining activities are due to be made
after 30 June 2019 as follows:
$
Not later than one year 161,879
Later than 1 year but not later
than 2 years 40,469
202,348
--------
NOTE 18 - 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 during the year 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, 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. 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 17).
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 2019, no grants had been received by SGZ Cononish
Limited from Scottish Enterprise. A grant payment of GBP50,000 was
received on 7 August 2019.
Scotgold Resources Limited and its controlled entities have no
other known material contingent liabilities as at 30 June 2019.
NOTE 19 - 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%
The Scottish subsidiary Scotgold Resources Limited changed its
name to SGZ Grampian Limited during the year.
NOTE 20 - 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.
The structure of internal reporting changed during the year in
order to report the mine development and corporate activities
carried out by SGZ Cononish Limited separately from the mineral and
exploration activities undertaken by SGZ Grampian Limited. The
comparative segment information for the year ended 30 June 2018 has
been restated accordingly.
Year ended 2018 Scotland Scotland Australia Other Total
Mining Exploration
$ $ $ $ $
Segment other income - 968 1 - 969
Segment loss 796,852 459,074 586,139 57,602 1,899,667
Segment assets 16,152,682 12,039,947 58,892 139,785 28,391,306
Segment non-current
assets 15,493,781 1,390,414 6,474 118,402 17,009,071
Segment liabilities 245,386 56,515 1,759,067 17,690 2,078,658
Included in segment
result:
Interest expense - - 172,144 - 172,144
Depreciation 34,381 35,043 483 - 69,907
Capitalised exploration - 275,857 - 62,913 338,770
Mine development - - - - -
costs
Acquisition of fixed
assets - 6,074 - - 6,074
All of the segment liabilities at 30 June 2018 were current.
Year ended 2019 Scotland Scotland Australia Other Total
Mining Exploration
$ $ $ $ $
Segment other income 24 6,289 1 - 6,314
Segment loss 2,608,799 52,293 670,480 186,883 3,518,455
Segment assets 23,602,730 5,252,032 74,334 6,415 28,935,511
Segment non-current
assets 22,388,271 2,440,389 7,964 - 24,836,624
Segment liabilities 4,808,425 429,788 23,127 10,172 5,271,512
Segment non-current
liabilities 4,259,083 192,521 - - 4,451,604
Included in segment
result:
Interest expense 55,223 3,336 43,384 - 101,943
Depreciation 94,521 36,544 411 - 131,476
Capitalised exploration - 636,263 - - 636,263
Mine development costs 5,849,310 - - - 5,849,310
Acquisition of fixed
assets 636,762 435,874 - - 1,072,636
The following material agreements were in place at 30 June 2019
in each segment:
Scotland - Mining
Location Agreement Grant 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
Cononish Glen Orchy Option Agreement 5 November 2015 975 sq km
----------------- ---------------- ------------
Glen Lyon Option Agreement 5 November 2015 1,369 sq km
----------------- ---------------- ------------
Inverliever Option Agreement 5 November 2015 660 sq km
----------------- ---------------- ------------
Knapdale Option Agreement 5 November 2015 676 sq km
----------------- ---------------- ------------
Ochils Option Agreement 5 November 2015 426 sq km
----------------- ---------------- ------------
Portugal
Location Agreement Grant Date Area
Pomar MN/PP/001/16 Exploration Contract 21 April 2016 264 sq km
--------------------- -------------- ----------
During the year, an application was made to divide the existing
five Crown Option agreements in respect of exploration into
thirteen agreements as well as to extend the effective period of
those agreements as follows:
Existing agreement Area Replacement agreements Area
Cononish Glen Orchy 975 sq km Glen Orchy Central 242 sq km
------------ ----------------------- ----------
Glen Orchy East 241 sq km
------------ ----------------------- ----------
Glen Orchy West 103 sq km
------------ ----------------------- ----------
Glen Lyon 1,369 sq km Glen Lyon North 244 sq km
------------ ----------------------- ----------
Glen Lyon East 247 sq km
------------ ----------------------- ----------
Glen Lyon South 243 sq km
------------ ----------------------- ----------
Glen Lyon West 246 sq km
------------ ----------------------- ----------
Inverliever 660 sq km Inverliever West 250 sq km
------------ ----------------------- ----------
Inverliever East 233 sq km
------------ ----------------------- ----------
Knapdale 676 sq km Knapdale South 250 sq km
------------ ----------------------- ----------
Knapdale North 250 sq km
------------ ----------------------- ----------
Ochills 426 sq km Ochills East 150 sq km
------------ ----------------------- ----------
Ochills West 189 sq km
------------ ----------------------- ----------
The thirteen new exploration agreements were concluded on 24
October 2019, with the effective date thereof being retrospective
to 5 November 2018. The portion of the licence costs attributable
to the period of use from 5 November 2018 to 30 June 2019 has been
accrued at 30 June 2019.
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 21 - NOTES TO THE STATEMENT OF CASH FLOWS
2019 2018
$ $
Reconciliation of loss after income tax to net
operating cash flows
Loss from ordinary activities (3,518,455) (1,899,667)
Depreciation 131,476 69,907
Loss on disposal of plant and equipment 77,132 -
Interest expense 101,943 -
Exchange loss on repayment of loan 31,270 -
Share-based payments 200,954 -
Deferred mineral exploration and evaluation costs 118,402 -
written off
Exploration expenditure expensed - 68,009
Gain on loan renegotiation - (263,707)
------------ ------------
(2,857,278) (2,025,458)
Movement in assets and liabilities
Receivables 1,355 (17,157)
Inventory - 159,398
Other current assets (12,593) (36,813)
Payables (183,168) 282,257
Revaluation effect of foreign currency working
capital - (105,615)
------------ ------------
Net cash used in operating activities (3,051,684) (1,743,388)
============ ============
NOTE 22 - 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
and Non- Executive 09/10/2017 present
Director
Peter Hetherington Non-Executive Director 18/06/2018 present
William Styslinger Non-Executive Director 18/06/2018 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
2019 2018
$ $
Short-term employee benefits 451,310 377,327
Post-employment benefits 8,491 3,471
Share-based payments 148,084 52,870
-------- --------
607,885 433,668
======== ========
(d) Aggregate amounts payable to Directors and their personally
related entities for remuneration.
Consolidated Entity
2019 2018
$ $
Accounts payable 14,393 29,477
========== ==========
NOTE 23 - RELATED PARTY INFORMATION
Parent Entity
2019 2018
a) Transactions within the Consolidated $ $
Entity
Aggregate amount receivable within the
consolidated entities at balance date
Total non-current receivables 32,135,303 32,166,970
Write down of loans attributable to
losses of subsidiaries (14,304,488) (9,936,324)
------------- ------------
Non-current receivables in parent entity 17,830,815 22,230,646
============= ============
Interest charged within the consolidated 793,221 -
entities
============= ============
b) 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 the
Remuneration Report.
iii) Nat le Roux received repayment of loan funds previously
advanced and provided further loan funds to the consolidated entity
on commercial terms. The details of the loan repaid and the further
loan funds provided are shown in Note 12. Refer also the
Remuneration Report.
NOTE 24 - REMUNERATION OF AUDITORS
Consolidated
2019 2018
$ $
Auditing and reviewing of the financial
statements of Scotgold Resources Limited
and of its controlled entities. 35,560 19,605
Other services (tax) 8,488 3,519
44,048 23,124
======= =======
NOTE 25 - LOSS PER SHARE
Consolidated
2019 2018
$ $
Earnings used in calculation of loss
per share (3,518,455) (1,899,667)
============ ============
Number Number
Weighted average number of ordinary
shares outstanding during the year used
in the calculation of basic loss per
share 44,891,914 23,978,240
============ ============
There are 3,633,681 potential ordinary shares as at 30 June 2019
(30 June 2018 : 2,514,699). The issuing of these potential ordinary
shares would be anti-dilutive.
NOTE 26 - FINANCIAL INSTRUMENTS
(a) Financial Risk Management Policies
The consolidated entity's financial instruments consist mainly
of deposits with banks, accounts receivable, accounts payable, hire
purchase 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
2019 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
2019 2018 2019 2018
$ $
Financial Assets
Cash at Bank 0.05% 0.03% 3,917,920 11,207,036
Trade and other receivables - - 57,970 59,267
Non-current Bond obligation
deposits 1.25% 0.03% 1,511,493 97,894
---------- -----------
Total Financial Assets 5,487,383 11,364,197
========== ===========
Financial Liabilities
Trade and other payables - - 581,947 294,262
Hire purchase agreements 7.77% - 732,531 -
Secured loan facility 8.63% - 3,655,221 -
Shareholder loan 10% 10% - 1,740,867
---------- -----------
Total Financial Liabilities 4,969,699 2,035,129
========== ===========
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 2019 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. If the draw-down on the secured
loan facility had been made on 1 July 2018 instead of 13 May 2019,
the interest charge for the year attributable to the secured loan
facility would have been $310,074. In that case, had there been an
increase of 100 basis points in the interest rate applicable to the
secured loan facility, then the interest charge for the year would
have been $343,019, resulting in a decrease in equity of $32,945
and a corresponding increase in the secured loan facility balance
of $32,945.
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
2019 2019 2018 2018
$ $ $ $
GBP Sterling 5,163,200 4,527,250 276,572 11,318,329
EUR Euro 75,153 6,415 17,690 21,383
USD US Dollars - 921,142 - -
------------ ---------- ------------ -----------
5,238,353 5,454,807 294,262 11,339,712
============ ========== ============ ===========
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
2019 in terms of this contract, details of which are set out in
Note 17. 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
$148,712.
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 2019 the consolidated entity had an amount of
GBP4,000,000 (30 June 2018 : GBP5,000,000) 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 27 - MATTERS SUBSEQUENT TO THE OF FINANCIAL YEAR
On 18 July 2019, the consolidated entity 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.
On 7 August 2019, SGZ Cononish Limited received GBP50,000 from
Scottish Enterprise in the form of the first payment of the
Regional Selective Assistance grant.
On 14 August 2019, Ian Proctor was appointed as a Non-Executive
Director.
On 28 August 2019, the consolidated entity announced an increase
of GBP1,500,000 in the amount available under the secured loan
facility provided by Bridge Barn Limited and the subscription by
investors, including key management personnel, for 3,285,783 new
ordinary shares in the Company at a subscription price of GBP0.35
per share. At the same time, the terms of the secured loan facility
were amended to extend the repayment period of each tranche drawn
down on the facility from 24 months to 36 months
The first of five shipments of components of the processing
plant to be installed at the Cononish mine arrived at Grangemouth
on 28 August 2019, with all seaborne components being received by
12 October 2019.
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 voluntary liquidation of SGZ France SAS was concluded on 1
October 2019.
On 24 October 2019, the Company announced the conclusion of the
thirteen new exploration agreements and the replacement of the five
agreements in effect at 30 June 2019, with the effective date of
these new exploration agreements being retrospective to 5 November
2018.
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 28 - PARENT ENTITY DISCLOSURES
Financial Position 2019 2018
$ $
CURRENT ASSETS
Cash and cash equivalents 34,988 21,367
Trade and other receivables 31,382 31,051
------------- -------------
Total Current Assets 66,370 52,418
------------- -------------
NON CURRENT ASSETS
Plant and equipment 7,964 6,474
Investment in subsidiary 5,781,978 5,781,978
Loan to subsidiaries 17,830,815 22,230,646
------------- -------------
Total Non-Current assets 23,620,757 28,019,098
------------- -------------
TOTAL ASSETS 23,687,127 28,071,516
------------- -------------
CURRENT LIABILITIES
Trade and other payables 23,128 18,000
Borrowings - 1,740,867
Total Current Liabilities 23,128 1,758,867
------------- -------------
TOTAL LIABILITIES 23,128 1,758,867
NET ASSETS 23,663,999 26,312,649
============= =============
EQUITY
Issued capital 45,176,049 43,784,458
Reserves 339,951 134,769
Accumulated losses (21,852,001) (17,606,578)
TOTAL EQUITY 23,663,999 26,312,649
============= =============
Financial Performance
Loss for the year attributable to
the parent 4,245,423 1,700,475
---------- ----------
Total comprehensive loss 4,245,423 1,700,475
========== ==========
The loss attributable to the parent entity includes write down
of loans to subsidiaries caused by subsidiary losses of $4,368,164
(2017: $1,205,482). During the year, the parent entity issued a
guarantee to Scottish Enterprise in respect of any amounts of
grants received from that entity by SGZ Cononish Limited which may
become repayable (see Note 18). No grants had been received by SGZ
Cononish Limited as at 30 June 2019. The parent entity has no other
contingent liabilities or commitments for acquisition of plant and
equipment.
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.
For further information please contact:
Scotgold Resources Limited
Richard Gray Tel: +44 (0)1838 400 306
SP Angel Corporate Finance LLP
Nomad and Joint Broker
Ewan Leggat / Charlie Bouverat Tel +44 (0) 20 3470 0470
Capital Markets Consultants
Financial PR
Simon Rothschild Tel: +44(0)7703 167 065
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.
END
FR LLFIDLELLLIA
(END) Dow Jones Newswires
November 11, 2019 12:11 ET (17:11 GMT)
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