new 2016 · 2020. 7. 7. · i am delighted to reflect on a pivotal 2016 financial year...
TRANSCRIPT
ANNUAL REPORT
2016
SARACEN.COM.AUABN: 52 009 215 347
ABN: 52 009 215 347
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Board of DirectorsMr Geoffrey Clifford (Non-Executive Chairman)
Mr Raleigh Finlayson (Managing Director)
Mr Mark Connelly (Non-Executive Director)
Mr Martin Reed (Non-Executive Director)
Ms Samantha Tough (Non-Executive Director)
SecretaryMr Gerard Kaczmarek
Registered Office and Business AddressLevel 4, 89 St Georges Terrace Perth WA 6000
Telephone: 08 6229 9100 Facsimile: 08 6229 9199
Website: saracen.com.au
Stock Exchange ListingListed on the Australian Securities Exchange (ASX Code: SAR)
AuditorsBDO Audit (WA) Pty Ltd 38 Station Street, Subiaco WA 6008
Telephone: +61 8 6382 4600 Facsimile: +61 8 6382 4601
SolicitorsDLA Piper Level 31, Central Park 152 – 158 St Georges Tce, Perth WA 6000
BankersCommonwealth Bank of Australia Limited 367 Collins Street, Melbourne VIC 3000
and
Macquarie Bank Limited 50 Martin Place, Sydney NSW 2000
Share RegistryComputershare Investor Services Pty Limited 452 Johnston Street, Abbotsford VIC 3067
Telephone: 1300 787 272 or 03 9415 5000 Facsimile: 03 9473 2500
cover photo: night operations at Thunderbox. this photo: Thunderbox open pit lookout.
CORPORATE DIRECTORY
photo: Underground remote bogging at Karari.
Managing Director’s Report 3
Review of Operations 5
Mineral Resources and Ore Reserves Statement 27
Corporate Governance Statement 31
Directors’ Report 39
Auditor’s Independence Declaration 63
Financial Statements
- Consolidated Statement of Comprehensive Income 64
- Consolidated Statement of Financial Position 65
- Consolidated Statement of Changes In Equity 66
- Consolidated Statement of Cash Flows 67
- Notes to the Financial Statements 68
Directors’ Declaration 103
Independent Auditor’s Report 104
Shareholder Information 110
CONTENTS
Our cornerstone value is delivery, and I can proudly report that FY2016 marked the fourth consecutive year we have met or exceeded our production and cost guidance.
photo: Red October ore.
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Dear Shareholders,
I am delighted to reflect on a pivotal 2016 financial year (“FY2016”), with robust operational and financial performance enabling Saracen’s evolution into a mid-tier Australian gold miner.
Our cornerstone value is delivery, and I can proudly report that FY2016 marked the fourth consecutive year we have met or exceeded our production and cost guidance.
In FY2016 we also delivered several projects that will form the foundations for an expansive future. The Thunderbox open pit project, acquired in 2014, was brought into production ahead of schedule and below budget. At Carosue Dam, over $10M was invested in the growing Karari underground mine to fast track ore access and install extensional drilling platforms. Also at Carosue Dam, over $12M was invested in the rapid establishment of a new underground mine at Deep South.
FY2016 also saw the acquisition of the Kailis and King of the Hills projects, which will add high grade ore into the processing schedule at the Thunderbox mill.
All FY2016 investing cash flows (project development, acquisitions) were internally funded via record operating cash flows of approximately $110M, allowing Saracen to remain debt free. FY2017 will see a relatively light capital cost profile, substantially boosting free cash flow.
These newly developed assets provide Saracen with unique growth attributes. Our production is set to increase to a rate of 300kozpa during FY2017 (up from the 188koz achieved in FY2016), capitalising on the current near-record Australian dollar gold price. The production and cost profile outlined in Saracen’s five-year outlook published in October 2015 is tracking well, with all-in sustaining costs falling year-on-year.
Organic growth is a key focus for Saracen in FY2017, with record planned exploration funding of $42M (up significantly from a total spend of $25m over the previous two years). This investment is aimed at materially extending the mine life at both operations and also potentially pushing annual production in excess of 300kozpa. The coming 12 months will focus on key underground growth projects at Karari, Deep South, Red October, King of the Hills, and Thunderbox.
Saracen is keenly committed to supporting the local communities in which we operate. During the year we provided funding to numerous community groups, including The Leonora Golden Gift, SolarisCare Foundation, CEO Sleepout, Children’s Charity Network, Everyday Hero, and The Kalgoorlie City Football Club, to name a few.
Throughout the year, Saracen continued to strengthen its ties with the iconic West Australian School of Mines in Kalgoorlie (WASM). We recognise the importance of the school to the development of our talented future miners and leaders, as well as being a nucleus for innovation. Saracen supports numerous events including the WASM Careers Day, the WASM Graduates Association, the WASM Mentoring Program, the WASM Wombats (competing in the international mining games), as well as facilitating student site study visits at our operations.
Saracen continues to work closely with regulators and local stakeholders to ensure that we have minimal impact on the environment in which we operate. We are pleased to report that there were no significant environmental incidents during the year at our operations.
Similarly, our entire organisation worked tirelessly through the year to ensure all of our fellow workmates returned home safely at the end of each and every shift. Pleasingly I can report that our total incident frequency rate (TIFR) dropped to 3.5 during FY2016.
I would like to take this opportunity to acknowledge the contribution of all of our employees, contractors, project partners, and stakeholders for their contribution to this highly successful year. Your on-going alignment with our shared values and aspirations will enable a progressive FY2017.
Yours Sincerely
RALEIGH FINLAYSON
Managing Director
MANAGING DIRECTOR’S REPORT
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L A K E C A R E Y
L A K E M A R M I O N
L A K E Y I N D A R L G O O D A
KEITH-KILKENNYSHEAR
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-LEFR
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ON
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NC
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SH
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R Z
ON
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YA
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AL S
TRU
CTU
RA
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RID
OR
Yarri
Road
Gwalia
GrannySmith
Sunrise Dam
Wallaby
KanownaBelle
Superpit
King Of The Hills
Gwalia
Granny Smith
Sunrise Dam
Wallaby
KanownaBelle
Superpit
Jaguar
Lawlers
Darlot Garden Well
Moolart Well
Agnew
King Of The Hills
LEONORA
LAVERTON
LEINSTER
MENZIES
KALGOORLIE
LEINSTER
KALGOORLIEPERTH
Carosue Dam Plant
C a ros ue Da mOperations
Red October
Thunderbox
Waterloo
Red October
Thunderbox Operations
Deep South
PorphyryPorphyry
ThunderboxPlantPlant
Waterloo
Bannockburn
Whirling DervishWhirling Dervish Karari
Whirling DervishCarosue Dam Plant
Deep SouthCarosue DamOperations
Karari
LEGEND
Main Public RoadsUnsealed Roads
Carosue Dam Operations
AngloGold ownedSaracen Projects
Saracen Private Access Roads
Thunderbox Operations
Thunderbox JV Tenements
Gold Fields ownedSt Barbara ownedRegis Resources owned Northern Star ownedKCGM operated Independence Group owned
450000270000 330000 390000
450000270000
6620
000
6680
000
6740
000
6800
000
6860
000
6920
000
6620
000
6680
000
6740
000
6800
000
6860
000
6920
000
330000 390000
Kailis
Saracen tenement holdings and principal gold deposits.
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Carosue Dam Operations
Saracen Mineral Holdings Limited owns 100% of the Carosue Dam Operations (CDO) through its wholly owned subsidiary Saracen Gold Mines Pty Ltd. Saracen acquired the CDO assets in 2006 and commenced commercial production in 2010. During this period over 850,000 ounces of gold have been won from several open pits and the Red October, Karari, and Deep South underground mines.
Saracen’s CDO tenement holdings and gold deposits are located in one of the world’s most prospective gold provinces, incorporating the Laverton and Keith Kilkenny Tectonic Zones, north-east of Kalgoorlie, Western Australia. This province is home to several world class gold mines and deposits including Sunrise Dam, Granny Smith, and Wallaby. In excess of 23 million ounces of gold in resources have been found and/or brought into production in this province. Saracen is building a long-term strategic infrastructure and resource position in this area.
CDO comprises a processing plant, a modern 238 person accommodation village and water and power infrastructure located approx. 120 km north-north-east of Kalgoorlie. The CDO processing plant was originally commissioned in November 2000 and has a nameplate capacity of 2.4mtpa based on a blend of hard and soft ores.
Thunderbox Operations
In January 2014, the Group acquired the Thunderbox Operations (TBO) from Norilsk Nickel Australia Pty Ltd for consideration of A$20 million cash on settlement, A$3 million cash upon the sooner of commencement of commercial production, or if, after a period of 24 months following settlement, the prevailing gold price has exceeded A$1,550/oz for a calendar month and a 1.5% NSR Royalty on the TBO gold production (capped at A$17 million). The acquisition was completed on 7 May 2014 with the payment of the $20 million initial amount. The NSR royalty was subsequently bought out by Saracen.
TBO is located in the highly prospective Yandal Belt and the Agnew-Wiluna Belt in the North Eastern Goldfields of Western Australia and is centred on the Thunderbox Open Pit and CIL gold treatment plant located 45km south of the town of Leinster in Western Australia and immediately adjacent to the sealed Goldfields Highway.
TBO includes the Thunderbox Project (comprising the Thunderbox, Rainbow and Mangilla gold deposits), the Bannockburn Project (comprising the Bannockburn and North Well gold deposits) and the Waterloo Project (comprising the Waterloo and Amorac nickel deposits).
The Thunderbox processing facility, which had been in care and maintenance since 2007, has an annual capacity of 2.5 Mtpa and incorporates a single-stage crusher, a SAG mill and a ball mill as well as conventional CIL leaching and elution circuits. Existing infrastructure comprises a 268 person accommodation village, an airstrip, power infastructure, Goldfields Gas pipeline spur, borefield water supply and telecommunication services.
During the year, Saracen continued mining the pre-strip waste in stage 1 of the pit, known as ‘A’ zone. In the middle of this reporting period the Mill was refurbished and the commencement of ore mining took place. February 2016 witnessed the first gold pour at the newly refurbished Thunderbox mill.
On 19 August 2015, the Saracen Group entered into an agreement to acquire 100% of the King of the Hills and Kailis gold projects in Western Australia from St Barbara Limited. Consideration for the acquisition of the two projects is $3m cash in two tranches: $0.3m on Completion, plus $2.7m upon the earlier of commercial production from Kailis or 4 years following Completion.
Kailis is located 5km from Leonora and 80km south of Saracen’s Thunderbox project, and within 1km of the sealed Goldfields Highway. In the 1990’s Sons of Gwalia mined a small open pit at Kailis with reconciled production of 250kt @ 6.2g/t for ~50koz.
King of the Hills is located 65km to the south of Thunderbox, immediately adjacent to the sealed Goldfields Highway. King of the Hills is a significantly mineralised system, which produced ~30Mt @ 1.9g/t for 1.9Moz since 1985. King of the Hills has been on care and maintenance since April 2015.
Following the acquisition of the mines, dewatering activities were commenced. A program was initiated to scrutinise all of the historical data for opportunities for value generation and, where appropriate, feasibility studies and exploration programs undertaken.
REVIEW OF OPERATIONS
OVERVIEW
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HEALTH, SAFETY AND ENVIRONMENT
Health and Safety
Saracen values the safety and wellbeing of our employees and pleasingly reported an improvement in our total incident frequency rate (TIFR) for the year. Our lost time injury frequency rate (LTIFR) for the 12 months to June 2016 was 3.5.
During the year the safety focus has been on the strengthening of policies, principal hazard standards and procedures, and this has been coupled with an emphasis on risk management, as part of the drive to achieve and ensure a safe place of work.
Our commitment to safety is supported by the company’s Safety Management System incorporating Principal Hazard Standards. Our team of employees, contractors, suppliers, and other stakeholders underpin Saracen’s operational safety performance.
Environmental Regulation and Performance
The Group’s operations are subject to environmental regulations attached to the granting of licences by the Department of Mines and Petroleum, Western Australia. The Group continues to comply with these regulations. The operations are also licenced under Part 5 of the Environmental Protection Act 1986 and the Rights in Water and Irrigation Act 1914. All licences are up to date and Saracen is in compliance.
The Group is subject to the reporting requirements of the National Environment Protection (National Pollutant Inventory) Measure 1998 and the National Greenhouse and Energy Reporting Act 2007.
The National Environment Protection (National Pollutant Inventory) Measure 1998 and the National Greenhouse and Energy Reporting Act 2007 require the group to report its annual greenhouse gas emissions and energy use. The group has implemented systems and processes for the collection and calculation of the data required and submitted reports to the National Pollution Inventory (NPI) in September 2015 and National Green house and Energy (NGER) in October 2015.
There were no significant environmental incidents during the year at the Company’s operations.
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Our team of employees, contractors, suppliers, and other stakeholders underpin Saracen’s operational safety performance.
photo: Thunderbox mill refurbishment.
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For the financial year ended 30 June 2016 (“FY2016”) Saracen Group gold production was up 13% at 188,656 oz (2015: 167,531 oz) at an “All in” Sustaining Cost of $1,095/oz (2015: $1,139/oz), which was a 4% reduction.
Carosue Dam Quarter
Unit September 15 December 15 March 16 June 16 FY2016
Underground Mining
Total Ore Mined t 143,000 248,000 275,000 334,000 1,000,000
g/t 4.3 4.5 2.9 3.2 3.6
Contained Ounces oz 19,759 36,229 26,051 34,065 116,104
Thunderbox Quarter
Unit September 15 December 15 March 16 June 16 FY2016
Open Pit Mining
Total Mining BCM 2,422,000 4,247,000 3,679,000 3,181,000 13,529,000
Total Ore Mined t 84,000 326,000 577,000 987,000
g/t 0.8 1.0 1.3 1.1
Contained Ounces oz 2,159 10,258 23,412 35,829
Mining of the Whirling Dervish open pit concluded at the end of June 2015 resulting in a large stockpile of ore at the end of FY2015. This stockpile was used to make up the base load mill tonnages during the year, supplemented with high grade underground ore from Red October, Karari and Deep South.
PRODUCTION & COSTS
0
100
200
300 $1,500
$1,000
$500
$0FY16 (A)
31
$1,095
157 155 170 170 160
155130 130
140
$1,250$1,150
$1,050$950
FY17 (F) FY18 (F) FY19 (F) FY20 (F)
Pro
duct
ion
(koz
)
AIS
C (A
$/oz
)
TBO (koz) Group AISC ($/oz)CDO (koz)
Saracen Group 5 Year Plan.
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Red October
During the year Red October underground mine morphed from being the main high grade ore feed source for Carosue Dam, into an exploration platform. In the first part of the year the mine produced above budget tonnes and ounces for the year with total production of 340,000t @ 5.1g/t for 55,700 contained ounces. Saracen also took the opportunity to run Red October and Deep South as a single operation to gain synergies and improve flexibility.
Later in the year as Karari production ramped up and the development of the Deep South underground forged ahead, drilling became the main focus at Red October. During FY2016 24,400m of underground resource definition and grade control drilling into current and future mining areas took place. Exploration in the mine included tests of the lower extension of the Marlin lode and exploring for prospective horizons east and west of the current mine. Several targets intersected by this exploration will be followed up with drilling in FY2017.
photo: Underground charge up.
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KarariDevelopment work commenced at the Karari underground mine in November 2014 with the establishment of portals for the exploration and main declines, with the aim of establishing a suitable drill platform from which to test and delineate the underground resource. Since that time the mine has been developed to a depth of 130m below the open pit, with ore production from long-hole stopes established. Commercial production for Karari was declared in October 2015, and total ore production for the year (including development material) was 520,000 tonnes @ 2.9g/t for 49,000 contained ounces.
Underground drilling at Karari continued through the year resulting in the ore body being extended a further 100m down dip, mineral resources increasing 38% to 873koz, and a 117% increase in the ore reserve estimate to 212koz.
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Karari mineral resources increased 38% to 873koz, and
increased 117% in the ore reserve estimate to 212koz.
photos - top: Ore haulage at Karari. below: Dhoni open stope, Karari.
12 photo: Operator at Deep South.
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Deep South
The Deep South underground mine development commenced in October 2015 following a period of de-watering the pit previously mined by Saracen. Site establishment works commenced in August with the main aim for the year being to provide early access for diamond drilling; to confirm the ore body continuity previously interpreted from surface drilling. The other aim was to provide a parcel of ore to the Carosue Dam processing plant to confirm the crushing and milling characteristics, this also provided an opportunity to strike drive the Butler and Scarlet ore zones in order to obtain a greater level of geological understanding.
The mine commenced producing ore in Q3 after 6 months of mine development, this enabled mining parameters to be evaluated along with mining several trial stopes. Production for the year (being all development material) was 143,000 tonnes @ 2.5g/t for 11,500 contained ounces.
Significant capital investment was also undertaken throughout the year with high voltage electrical reticulation and underground primary ventilation works taking place.
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Thunderbox
Mining pre-strip at TBO commenced in July 2015 and first ore from the open pit was produced in October 2015. Plant refurbishment commenced in September 2015 with wet commissioning commencing in February 2016 and commercial production was declared effective 1 April 2016. The cost of the pre-strip and redevelopment to commercial production was $63.4 million with the operation being brought into production four months ahead of schedule. Gold production for the full year was 31,456 ounces at an AISC of $1,293/oz for the June quarter 2016 (being the first quarter of commercial production). Total material mined for the year stands at over 13.5M bcms.
photo - main: Thunderbox processing plant. inset: Open pit operations.
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Mining pre-strip at TBO commenced in July 2015 and first ore from the open pit
was produced in October 2015.
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photo: Thunderbox processing plant refurbishment team.
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The Carosue Dam processing plant continued to perform above name plate capacity during 2015-16, with 2,321,000 tonnes of ore milled. The plant ran at an average head grade of 2.3g/t reflecting the contribution from higher grade underground ore being partially offset by the lower grade stockpile feed that was mined during the ramp up of production at Karari and the development of the new underground mine at Deep South. During the year the overall recovery was 92%, which is in line with the long term average for Carosue Dam. Ounces produced for the year stand at 157,191oz.
Carosue Dam Quarter
Mill Production Unit September 15 December 15 March 16 June 16 FY2016
Total Ore Milled t 577,000 569,000 565,000 610,000 2,321,000
g/t 2.3 2.6 2.0 2.3 2.3
Recovery % 91.3% 92.5% 91.9% 92.3% 92.0%
Gold Produced oz 38,140 44,265 33,749 41,037 157,191
Thunderbox Quarter
Mill Production Unit September 15 December 15 March 16 June 16 FY2016
Total Ore Milled t 345,000 604,000 949,000
g/t 0.9 1.2 1.1
Recovery % 91.0% 93.0% 92.4%
Gold Produced oz 9,310 22,155 31,465
During 2016 the Thunderbox mill was refurbished ahead of schedule and under budget, with commissioning occurring in the third quarter of the year, and the first gold pour taking place in February. The fourth quarter was the first full quarter of production for the mill and saw annualized throughput hit 2.4mtpa, with a recovery of 93% achieved. Grade for the first quarter of production was dictated by low grade commissioning ore. Ounces produced for the two quarters of production since commissioning of the mill are 31,465oz.
Group ore production stands at 188,656oz from 3,270,000 tonnes of ore, for the year.
PROCESSING
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EXPLORATION
Exploration over the FY2016 period has focused heavily on near mine extensional opportunities and regional reconnaissance mapping, sampling and data review. Building additional mine life at the operations is a critical path to growth and maximises value from the current operations. This will again be a strong theme as we move into FY2017.
Drilling activities at Carosue Dam were centred on Karari, Red October and Deep South. These programs focused on improving the current resource confidence and extending the known mineralisation. Drilling was undertaken from surface and underground drill platforms and was successful in delivering excellent results which have advanced each of the projects.
Regionally, at Carosue Dam a number of mapping and sampling programs were completed. These projects focused on the under explored areas of Mt Celia, which hosts the Deep South and historic Safari Bore mines, as well as the Red October district. These programs have identified a number of empirical and conceptual targets which will be followed up in FY2017.
Regional activities at Thunderbox Operations included geological mapping and re-sampling of historic drill holes to advance the knowledge of gold mineralisation in a number of prospects. Drilling activities at Thunderbox were restricted to grade control RC drilling in the Thunderbox pit and the commencement of underground drilling at King of the Hills.
photo: Exploration drilling at Carosue Dam.
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2000mRL
2250mRL
2000mRL
2250mRL
75
00
mN
75
00
mN
80
00
mNS N
1750mRLKarari Projected
Long Section
0 250m
KRGC32042.8m @ 2.7g/t
KRRD12034m @ 3.2g/t
KRRD1265.8m @ 3.8g/t
KRRD12336m @ 2.9g/t
KRGC31824m @ 5.4g/t
KRRD12712.4m @ 5.6g/t
KRRD12428.8m @ 2.6g/t
KRGC32112.8m @ 4.4g/t
KRGC31513.0m @ 3.1g/t
DH
ON
I LO
DE
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SU
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EC
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OD
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A1 &
HA
NG
ING
WA
LL L
OD
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Open Pit Production8.67Mt @ 1.55g/t for 432,300 oz
2070 Drill Drive
2030 Drill Drive
78
80
mN
Karari
Karari has been a significant focus during FY2016. Drilling was undertaken from underground and surface. The surface drilling targeted the up-dip areas of the Dhoni lode, while the underground drilling focused on the down dip areas of the Dhoni, Resurrection and A1/Hangingwall lodes. The significant drill program resulted in an increase of the Mineral Resource and Ore Reserve in April, 2016. The Karari system continues to grow with drilling and additional drilling platforms have been committed to facilitating further growth opportunities. Karari is quickly becoming the base load ore supply for the Carosue Dam Operations.
Highlights included:
KRRD115: 16.6m @ 8.2g/t
KRRD120: 34.0m @ 3.2g/t
KRRD123: 36.0m @ 2.9g/t
KREX007: 13.0m @ 4.3g/t
photo: Exploration development at Karari Underground
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Red October Cross Section9920 mN
0 500m
4 Ye
ars
of U
G D
evel
opm
ent
680m Below SurfaceAverage Depth of Peer Group Underground Mines
Limit of Drilling
Current Hole
LAMPROPHYRE
ROEX0460.5m @ 5.11g/t
ROEX0401.6m @ 3.5g/t
-500mRL -500mRL
0mRL
-250mRL
250mRL
0mRL
250mRL
-250mRL
4500
mE
5000
mE
5500
mE
4500
mE
6000
mE
-500mRL-750mRL
4000
mE
5000
mE
W ESurface
High MgO Basalt
Felsic Intrusive
BIF
High MgO Basalt
Pillow Basalt
Felsic Intrusive
High MgO Basalt
Pillow Basalt
Differenciated Gabbro
ROEX047
LEGEND
Marlin Lode
Marlin Lode Projection
HW Lode
HW Lode Projection
Repeat Structures
Existing Drilling
Planned Drilling
Mine Infrastructure
Magnetics (25m)
Red October
Red October exploration has been reinvigorated and a significant effort has been directed to understand the local and regional scale geological controls of the mineralisation. This has seen the refinement of the lithological, structural and alteration models. The commencement of the Deep South mine has facilitated a mining hiatus at Red October which has aided the generation of new ideas and concepts which require testing, without the pressures of production. Early testing of such ideas has resulted in the recent discovery of the Lionfish lode, ~150m in the hangingwall of the Red October shear zone. While the current extents of the Lionfish zone is small, it demonstrates that further high grade opportunities are present and proximal to existing mine development.
In addition to the near mine exploration, a deep step out stratigraphic hole drilled from surface (Treasure Island) has been commenced. This deep hole will enable the hangingwall stratigraphy to be understood for the first time as surface drilling is limited or non-existent due to extensive lake cover. This hole will be extremely valuable for future targeting in the Red October corridor.
Highlights included:
RORD105 1.0m @ 9.6 g/t
RORD107 0.6m @ 14.4 g/t
RORD109 0.3m @ 131.0 g/t
RORD119 4.3m @ 17.5 g/t
RORD129 3.8m @ 16.9g/t
photo: Working underground at Red October.
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Deep South
During FY2016 underground mining commenced, and in conjunction with the start up, a surface diamond drill program was initiated to validate the first development levels which were previously defined by RC drilling. The drilling highlighted the robustness of the interpretation and resource. Underground grade control drilling has also been undertaken which similarly confirmed the mineralisation. The local geological understanding has vastly improved with underground mapping and sampling. The lodes display evidence of tight folding and boudinaged veins. High grades appear to have a close association with the fold noses and an increase in the presence of sulphides. This local knowledge assists with the regional understanding and targeting.
As part of the surface drill program two holes were drilled for geophysical purposes. Downhole electromagnetics (EM) was conducted on these holes due to the close association between gold and the sulphide phases. The downhole EM successfully identified two conductive plates which extend beneath the current resource, that have not yet been tested.
Figure x- Long section of Deep Southwww.saracen.com.au
Saracen Mineral Holdings DEEP SOUTH Long Section Projection
0 100 200m
200mRL 200mRL
31000mN
31200mN
31400mN
31000mN
31200mN
31400mN
DSGC028 2.7m @ 14.5g/t
DSGC041 3.4m @ 6.2g/t
DSGC042 5.2m @ 8.8g/t
DSGC051 6.9m @ 5.3g/t
DSGC052 1.6m @ 2.1g/t
DSGC050 2.0m @ 4.6g/t
DSGC048 3.1m @ 7.2g/t
DSGC020 11.0m @ 4.3g/t
Highlights included:
DSSD017 15.5m @ 5.9 g/t
DSGC003 1.8m @ 19.1 g/t
DSGC028 2.7m @ 14.5 g/t
DSGC042 5.2m @ 8.8 g/t
photo - top: Sampling the Butler load at Deep South.
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Thunderbox
Exploration activities at Thunderbox included geological mapping and re-sampling of historic drill holes to advance the knowledge of gold mineralisation at a number of prospects. This included bottom of hole multi-element analysis for alteration and lithology determination. Drilling activities at Thunderbox were restricted to grade control RC drilling in the Thunderbox pit. Moving forward into FY2017, an extensive surface drilling program will be completed targeting the southerly plunging A Zone. Previous drilling to the A Zone has retuned results such as 55m @ 3.0g/t. This drill program will be the precursor to the underground feasibility study due for completion in FY2017.
68
79
17
0
68
79
83
0
PIT DESIGNZONE “A” ZONE “C” ZONE “D”
NS
GA
P F
AU
LT
LIMIT OF DRILLING
PROBABLE ORE RESERVES
10.3mt @ 1.7g/t
557,000oz
TOTAL MINERAL RESOURCE
38.9mt @ 1.6g/t
2,011,000oz
June 30th 2016
MINED PIT
2500 2500
2000 2000
68
79
00
0
68
79
50
0
68
80
00
0
THUNDERBOXLong Section
304180mE0 250 500m
LEGEND
>50 gram-metres
20-50 gram-metres
10-20 gram-metres
<10 gram-metres
Planned Drilling
99m @ 2.1g/t
15m @ 2.5g/t
41m @ 4.2g/t
46m @ 3.1g/t
53m @ 1.5g/t
31m @ 0.6g/t
50m @ 3.0g/t
12m @ 1.7g/t
65m @ 0.6g/t
15m @ 2.6g/t
35m @ 2.3g/t
35m @ 1.7g/t
38m @ 0.8g/t
26m @ 2.1g/t
10m @ 2.1g/t
29m @ 3.1g/t5m @ 2.9g/t
8m @ 7.5g/t
82m @ 1.9g/t
40m @ 2.2g/t
10m @ 2.6g/t
12m @ 2.4g/t
32m @ 3.5g/t
34m @ 2.4g/t62m @ 1.7g/t
12m @ 1.7g/t
103m @ 1.7g/t
100m @ 2.9g/t
TBRD019
46m @ 3.8g/t
38m @ 3.6g/t
48m @ 2.4g/t
55m @ 3.0g/t
N.S.I
89m @ 0.8g/t
38m @ 2.9g/t
41m @ 2.5g/t
38m @ 2.3g/t
160m58m @ 2.4g/t
photo: Load and haul operations at Thunderbox.
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King of the Hills Southern Plan View0 250m
1000mN 1000mN
EW
49
50
0m
E
50
00
0m
E
50
50
0m
E
49
50
0m
E
50
00
0m
E
Riverrun
Theon
Yara
Ironisland
Cersei
Jamie
Marg
aery
Lora
sKin
gs
Lan
din
g
A
A’
Granite
Contact
KHEX010
0.4m @ 5.3g/t
0.4m @ 26.8g/t
0.9m @ 80.4g/t
0.3m @ 2.6g/t
1.2m @ 0.9g/t
1.0m @ 2.6g/t
0.3m @ 126.0g/t
0.3m @ 110.0g/t0.6m @ 51.4g/t 0.4m @ 34.1g/t
1.0m @ 13.4g/t
KHEX008
KH
EX
003
KH
EX
001
0.8m @ 10.2g/t
0.3m @ 6.8g/t
0.3m @ 10.1g/t0.4m @ 12.5g/t
1.3m @ 19.1g/t
4.4m @ 7.6g/t0.3m @ 27.4g/t
0.3m @ 35.4g/t
0.4m @ 20.9g/t
Highlights included:
KHEX008 0.3m @ 126.0 g/t
KHEX008 0.3m @ 110.0 g/t
KHEX008 0.9m @ 80.4 g/t
KHEX010 0.4m @ 34.1 g/t
KHEX010 1.3m @ 19.1 g/t
King of the Hills
Saracen acquired the King of the Hills and Kailis gold projects in August 2015 for a total consideration for both projects of A$3m cash in two tranches, A$0.3m on completion (paid), plus A$2.7m upon the earlier of commercial production from Kailis or 4 years following completion.
Multiple opportunities to define additional Resources were identified following an extensive structural and lithological review of existing data, combined with additional mapping and logging information. Several areas in and around the existing underground workings were highlighted as well as significant potential to the south of the current underground mine.
The detailed re-logging program identified that the mineralisation in the granite is readily identified by the change in the dominate carbonate phase from calcite (+/- chlorite, sericte, albite) to ankerite (+/- sericite and albite). This alteration was modelled to define the overall mineralised trends.
Further structural analysis from mapping and re-logging was then used to constrain the higher grade zones within the alteration envelope. This data was limited and the interpretation also relied on the continuity of gold assay values greater than 5g/t and the presence of quartz veining captured in the logging.
Using the available geological data to constrain the higher grades, it was evident that three distinct orientations were present. The key orientation identified was a set of steeply to moderately dipping tension veins that strike northwest – southeast. Testing of these high grade veins is currently in progress and early results are encouraging.
photo - top: Airleg stope at King of the Hills.
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Shear zones are closely linked to high-grade gold mineralisation in the Red October district and further exploration of these new exploration targets is planned for FY2017.
Regional Exploration
Greenfields exploration undertaken in FY2016 included regional mapping and sampling in the under-explored Mt Celia district, which hosts both the active Deep South and historic Safari Bore mines. This work led to the definition of several targets that are scheduled for drill testing in FY2017. A Tromino survey (passive seismic) was also conducted in the Mt Celia district to assist with levelling corrections of the gravity survey conducted in 2015. In the Red October district, 25m line space ground magnetics was collected in conjunction with mapping and surface sampling. This work identified Anchor-type shear zones approximately 500m north of the Red October mine with coincident soil gold anomalies. These shear zones are closely linked to high-grade gold mineralisation in the Red October district and further exploration of these new exploration targets is planned for FY2017. Exploration near the Carosue Dam gold plant included extensions to the auger drilling near the Blue Manna resource to test for potential gold mineralisation over identified structural targets.
photo: Exploration drilling.
25
At the end of the year, the Company held cash of $34.3
million and was debt free.
The Company reported a net profit after tax of A$25.9 million, an increase of 132% over 2015 of A$11.1 million after allowing for an income tax provision of A$12.4 million (2015: $5.0 million).
Gold production was substantially higher than the previous year at 188,656 ounces (2015: 167,531 ounces) and therefore revenue also increased substantially to $276.5 million (2015: $249.9 million). The average gold price received for the year was A$1,629/oz versus A$1,547/oz in 2015.
Net cash flow generated from operations also increased substantially from $65.4 million in 2015 to $109.8 million. EBITDA for the year was $73.5 million (2015: $66.5 million).
Mine Operating Costs increased to $178.8 million from $162.7 million last year mainly due to the increased production level achieved in the current year. The charge for amortisation and depreciation was $33.9 million compared with $49.5 million in 2015.
At the end of the year, the Company held cash of $34.3 million and was debt free.
As at 30 June 2016, Saracen had gold hedging in place covering 283,044 ounces at an average price of A$1,548/oz. These ounces are to be delivered over the period from July 2016 to March 2019 (inclusive).
FINANCIAL RESULT
CASH, DEBT & HEDGING
photo: Long hole stope tie-in crew.
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Carosue Dam Operations
In FY2017, gold production will be sourced principally from the Karari and Deep South underground mines and the Whirling Dervish ore stockpiles with a small contribution from the Red October underground mine. Production is forecast to be 155,000 ozs.
Saracen’s business plan for CDO for the next 2 years comprises: -
• Completing the development of the Deep South underground mine to deliver approx. 500,000 tonnes of ore per annum, grading 4.0g/t;
• Commencing underground drill drive development of the Whirling Dervish deposit in the second half of FY2017;
• Complete the feasibility study on the Whirling Dervish underground mining project;
• Extending the life and quality of its open-pittable resources;
• Optimising production through the Carosue Dam processing plant including processing of the extensive ore stockpiles; and
• Generating sustaining cash flows.
Thunderbox Operations
In FY2017, gold production will be sourced principally from the Thunderbox Zone A open pit supplemented by small amounts of ore from the King of the Hills (KoTH). Production is forecast to be 125,000 ozs.
Saracen’s business plan for TBO for the next 2 years comprises: -
• Mining of the Thunderbox A zone open pit;
• Development and mining of the Thunderbox C zone open pit;
• Development and mining of the Kailis open pit;
• Commencing stable, long life, commercial production;
• Extensional drilling on the Thunderbox A zone orebody to confirm underground mining potential;
• Extensional drilling at the King of the Hills project to confirm underground mining potential;
• Mining at the King of the Hills project to commence;
• Continue the underground mining feasibility study for the Thunderbox orebodies; and
• Generate sustaining cash flows.
OUTLOOK
photo: Isolating equipment.
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GO
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CarosueDam Porphyry SafariBore RedOctober All
CAROSUEDAM
MInERALRESOURCESaNDORERESERvESSTaTEMENTAs at 30 June 2016
28
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MInERALRESOURCESaNDORERESERvESSTaTEMENT(CONTiNUED)As at 30 June 2016
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MInERALRESOURCESaNDORERESERvESSTaTEMENT(CONTiNUED)As at 30 June 2016
GO
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CAROSUEDAM THUnDERBOX
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MInERALRESOURCESaNDORERESERvESSTaTEMENT(CONTiNUED)As at 30 June 2016
Notes to accompany Mineral Resources and Ore Reserves Statement (JORC 2012 compliant)
Tonnages, grades and contained metal have been rounded to reflect the accuracy of the calculations. Rounding errorsmayoccur.
Please refer toSaracen’saSXannouncement: ‘2016MineralResourcesandOreReserves’,dated12thOctober2016 forfurtherinformationrelatingtothe2016ResourcesandReservesstatementasrequiredundertherelevantJORCCode.ThisannouncementcanbefoundontheCompany’swebsite,www.saracen.com.auorontheaSXwebsitewww.asx.com.au
Competent Person Statements
TheinformationinthereporttowhichthisstatementisattachedthatrelatestoExplorationResultsandMineralResourcesrelated to Gold is based upon information compiled by Mr Daniel Howe, a Competent Person who is a member of Theaustralasian institute of Mining and Metallurgy and the australian institute of Geoscientists. Daniel Howe is a full-timeemployeeofthecompany.DanielHowehassufficientexperiencethatisrelevanttothestyleofmineralisationandtypeofdepositunderconsiderationandtotheactivitybeingundertakentoqualifyasaCompetentPersonasdefinedinthe2012Editionofthe‘australasianCodeforReportingofExplorationResults,MineralResourcesandOrereserves’.DanielHoweconsentstotheinclusioninthereportofmattersbasedonhisinformationintheformandcontextinwhichitappears.
TheinformationinthereporttowhichthisstatementisattachedthatrelatestoExplorationResultsandMineralResourcesrelatedtoNickelisbaseduponinformationcompiledbyMrLynnWidenbar,aCompetentPersonwhoisamemberofTheaustralasianinstituteofMiningandMetallurgy.LynnWidenbarisaconsultanttoSaracenMineralHoldings.LynnWidenbarhassufficientexperiencethatisrelevanttothestyleofmineralisationandtypeofdepositunderconsiderationandtotheactivitybeingundertaken toqualifyasaCompetentPersonasdefined in the2012Editionof the ‘australasianCode forReportingofExplorationResults,MineralResourcesandOrereserves’.LynnWidenbarconsentstotheinclusioninthereportofmattersbasedonhisinformationintheformandcontextinwhichitappears.
TheinformationinthereporttowhichthisstatementisattachedthatrelatestoundergroundOreReservesatRedOctober,DeepSouth,KarariandWhirlingDervishisbaseduponinformationcompiledbyCampbellMatthews,aCompetentPersonwhoisamemberofTheaustralasianinstituteofMiningandMetallurgy.CampbellMatthewsisafull-timeemployeeofthecompany.CampbellMatthewshassufficientexperiencethat isrelevanttothestyleofmineralisationandtypeofdepositunderconsiderationandtotheactivitybeingundertakentoqualifyasaCompetentPersonasdefinedinthe2012Editionofthe‘australasianCodeforReportingofExplorationResults,MineralResourcesandOrereserves’.CampbellMatthewsconsentstotheinclusioninthereportofmattersbasedonhisinformationintheformandcontextinwhichitappears.
TheinformationinthereporttowhichthisstatementisattachedthatrelatestoopenpitOreReservesrelatedtoGoldisbaseduponinformationcompiledbyHemalPatel,aCompetentPersonwhoisamemberofTheaustralasianinstituteofMiningandMetallurgy.HemalPatelisafull-timeemployeeofthecompany.HemalPatelhassufficientexperiencethatisrelevanttothestyleofmineralisationandtypeofdepositunderconsiderationandtotheactivitybeingundertakentoqualifyasaCompetentPersonasdefinedinthe2012Editionofthe‘australasianCodeforReportingofExplorationResults,MineralResourcesandOrereserves’.HemalPatelconsentstotheinclusioninthereportofmattersbasedonhisinformationintheformandcontextinwhichitappears.
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CORPORATEGOvERnAnCESTaTEMENT
Principle Complied Comment
1–Laysolidfoundationsformanagementandoversight
1.1 alistedentityshoulddisclose:
(a)therespectiverolesandresponsibilitiesofitsboardandmanagement;and
(b)thosemattersexpresslyreservedtotheboardandthosedelegatedtomanagement.
TheCompanyhasaformalBoardCharter(whichisdisclosedontheCompany’swebsite)whichsetsoutthosemattersreservedfortheBoardandthosedelegatedtomanagement.
TheBoard’sfunctionsinclude:developingandsettingtheCompany’sstrategicdirectioninconjunctionwithmanagement,overallreviewofperformanceagainsttargetsandobjectives,reviewingmanagement’sperformance,ensuringtheCompanyhasadequatesystemsandinternalcontrolstogetherwithappropriatemonitoringofcomplianceactivities,approvalandcompliancewithpoliciesincludinghealth,safetyandenvironmentandreportingtoshareholdersonthedirectionandperformanceoftheCompany.
TheBoardhasalsoestablishedvariouscommitteestoassistincarryingoutitsduties.TheseCommittee’sincludetheauditCommittee,RiskManagementCommitteeandtheRemunerationandNominationCommittee.
TheManagingDirector/CEO,supportedbyseniormanagement,isresponsiblefortheday-to-daymanagementoftheCompany’saffairsandtheimplementationofstrategyandpolicyinitiatives.
1.2 alistedentityshould:
(a)undertakeappropriatechecksbeforeappointingaperson,orputtingforwardtosecurityholdersacandidateforelection,asadirector;and
(b)providesecurityholderswithallmaterialinformationinitspossessionrelevanttoadecisiononwhetherornottoelectorre-electadirector.
BeforetheCompanyproposestoappointanewDirector,appropriatechecksareundertakenwhichincludereviewingtheperson’scharacter,experience,education,workexperienceandcriminalrecord.interviewswiththepotentialcandidatesareconductedbyexistingDirectorstomakesuretheirexperience,personalityandethicsareanappropriatefitfortheCompany.
Directors’biographicaldetails,includingtheirrelevantqualifications,experienceandtheskillstheybringtotheBoardaredetailedontheCompanywebsiteandintheannualReport.Detailsofanyothermaterialdirectorshipsheldwithinthelast3yearsarealsoprovidedintheannualReport.
1.3 alistedentityshouldhaveawrittenagreementwitheachdirectorandseniorexecutivesettingoutthetermsoftheirappointment.
WrittenagreementsareinplacewitheachDirectorandSeniorExecutivesettingoutthetermsoftheirappointment.KeytermsoftheagreementswithSeniorExecutivesareincludedintheRemunerationReportwithintheannualReport.
1.4 Thecompanysecretaryofalistedentityshouldbeaccountabledirectlytotheboard,throughthechair,onallmatterstodowiththeproperfunctioningoftheboard.
TheCompanySecretary,MrGerryKaczmarek,isaccountabledirectlytotheBoard,throughtheChairman,onallmatterstodowiththeproperfunctioningoftheBoard.
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Principle Complied Comment
1–Laysolidfoundationsformanagementandoversight(continued)
1.5 alistedentityshould:
(a)haveadiversitypolicywhichincludesrequirementsfortheboardorarelevantcommitteeoftheboardtosetmeasurableobjectivesforachievinggenderdiversityandtoassessannuallyboththeobjectivesandtheentity’sprogressinachievingthem;
(b)disclosethatpolicyorasummaryofit;and
(c)discloseasattheendofeachreportingperiodthemeasurableobjectivesforachievinggenderdiversitysetbytheboardorarelevantcommitteeoftheboardinaccordancewiththeentity’sdiversitypolicyanditsprogresstowardsachievingthemandeither:
(1)therespectiveproportionsofmenandwomenontheboard,inseniorexecutivepositionsandacrossthewholeorganisation(includinghowtheentityhasdefined“seniorexecutive”forthesepurposes);or
(2)iftheentityisa“relevantemployer”undertheWorkplaceGenderEqualityact,theentity’smostrecent“GenderEqualityindicators”,asdefinedinandpublishedunderthatact.
x
TheBoardhasadoptedaDiversityPolicywhichoutlinestheCompany’scommitmenttoensuringadiversemixofskillsandtalentexistsamongstitsDirectors,officersandemployees.TheDiversityPolicyaddressesequalopportunitiesinthehiring,trainingandcareeradvancementofDirectors,officersandemployees.TheBoardproactivelymonitorstheCompany’sperformanceinmeetingthestandardsandguidanceoutlinedinthisPolicy.
acopyoftheDiversityPolicyislocatedontheCompany’swebsite.
MeasurableobjectivesinrelationtotheDiversityPolicyhavenotyetbeenestablishedbytheBoard,however,theCompanymakesitsappointmentdecisionsbasedonmerit,byassessingwhetheraperson’sskillsandexperienceareappropriateforparticularroles.itdoesnotdiscriminatebasedongender,age,ethnicity,religiousorculturalbackground.
TheGroupworkforcegenderprofileasat30June2016issetoutinthefollowingtable:-
ProportionofWomen
Board 1outof5(20%)(2015:17%)
SeniorManagement1 2outof18(11%)(2015:7%)
OtherProfessionalStaff2 17outof79(21%)(2015:15%)
TotalOtherEmployees 25outof195(13%)(2015:16%)
1 SeniorManagementexcludestheManagingDirector/CEO.2 Professionalstaffincludesalldegreequalifiedprofessionalemployeesbut
excludestheManagingDirector/CEOandSeniorManagement.
TheCompanyiscompliantwiththeGenderEqualityact2012(Cth)andacopyofthecompliancereportisavailableontheCompany’swebsite.
1.6 alistedentityshould:
(a)haveanddiscloseaprocessforperiodicallyevaluatingtheperformanceoftheboard,itscommitteesandindividualdirectors;and
(b)disclose,inrelationtoeachreportingperiod,whetheraperformanceevaluationwasundertakeninthereportingperiodinaccordancewiththatprocess.
TheBoard,withtheassistanceoftheRemunerationandNominationCommittee,regularlymonitorsitsperformanceandtheperformanceoftheDirectorsandBoardCommittees.ThismayoccurthroughaninternalreviewledbytheChairman,orbeperformedwiththeassistanceofexternaladvisersasconsideredappropriate.
TheBoardhaveinternallydiscussed,reviewedandevaluateditsperformancewithrespecttotheirrolesasDirectorsindividually,asaBoardandasBoardCommitteeswasundertakenduringtheyear.
1.7 alistedentityshould:
(a)haveanddiscloseaprocessforperiodicallyevaluatingtheperformanceofitsseniorexecutives;and
(b)disclose,inrelationtoeachreportingperiod,whetheraperformanceevaluationwasundertakeninthereportingperiodinaccordancewiththatprocess.
TheCompanyhasaprocessofconductingannualperformancereviewsofallstaffincludingSeniorExecutives.TheperformanceoftheManagingDirector/CEOisevaluatedbytheChairmanandthisisthereviewedanddiscussedwiththeRemunerationandNominationCommittee.
TheManagingDirector/CEOreviewstheperformanceofseniorexecutives.allseniorexecutives,includingtheManagingDirector/CEO,participatedinaperformanceevaluationprocessinrelationtothefinancialyearended30June2016.
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Principle Complied Comment
2–StructuretheBoardtoAddvalue
2.1 Theboardofalistedentityshould:
(a)haveanominationcommitteewhich:
(1)hasatleastthreemembers,amajorityofwhomareindependentdirectors;and
(2)ischairedbyanindependentdirector,
anddisclose:
(3)thecharterofthecommittee;
(4)themembersofthecommittee;and
(5)asattheendofeachreportingperiod,thenumberoftimesthecommitteemetthroughouttheperiodandtheindividualattendancesofthemembersatthosemeetings.
TheBoardhasconstitutedaRemunerationandNominationCommitteewhichcurrentlycomprisesMsSamanthaTough,MrMarkConnellyandMrMartinReed,allofwhomareconsideredtobeindependentnon-executiveDirectors.
MsSamanthaTough,anindependentnon-executiveDirector,istheChairmanoftheCommittee.
acopyoftheNominationCommitteeCharterisavailableontheCompany’swebsite.
Detailsofeachmember’sattendanceatmeetingsoftheRemunerationandNominationCommitteeare:-
Member attended Held
SamanthaTough 3 3
MarkConnelly 3 3
MartinReed 3 3
2.2 alistedentityshouldhaveanddiscloseaboardskillsmatrixsettingoutthemixofskillsanddiversitythattheboardcurrentlyhasorislookingtoachieveinitsmembership.
TheCompanyseekstostructureitsBoardsoastoaddvaluethroughanappropriatecompositionwithabalanceofthedifferentattributes,skillsandexperiencerelevanttotheCompany’soperations.Themainareasdesignatedasbeingrequiredincludeoperationalmanagement,miningengineering,geology,legalandfinance.inadditiontothosegeneralareas,thefollowingskillshavealsobeenidentifiedasbeingnecessarytocomposeawell-roundedBoard:experienceinexploration,projectdelivery,corporategovernanceandequity&capitalmarkets.
ThefollowingtablesummarisessomeofthekeyskillsandexperienceoftheincumbentBoard.Numbersareoutof6beingthetotalnumberofDirectors.
SkillsandExperience NumberofDirectors
OperationalManagement 5MiningEngineering 2ProjectDevelopment 4Finance&CapitalMarkets 3Geology 2Legal 1ExperienceasNon-executiveDirectoronatleast2otherlistedentities 4CorporateGovernance 4
2.3 alistedentityshoulddisclose:
(a)thenamesofthedirectorsconsideredbytheboardtobeindependentdirectors;
(b)ifadirectorhasaninterest,position,associationorrelationshipofthetypedescribedinBox2.3oftheCorporateGovernancePrinciplesandRecommendationsbuttheboardisoftheopinionthatitdoesnotcompromisetheindependenceofthedirector,thenatureoftheinterest,position,associationorrelationshipinquestionandanexplanationofwhytheboardisofthatopinion;and
(c)thelengthofserviceofeachdirector.
ThefollowingDirectorsarecurrentlyconsideredbytheBoardtobeindependent–MrGeoffClifford(Chairman)(3yearsofservice),MrMartinReed(4years),MsSamanthaTough(3years)andMrMarkConnelly(18months).
MrRaleighFinlayson(3yearsasMD)isnotconsideredtobeindependentasheisanexecutiveoftheCompany.
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Principle Complied Comment
2–StructuretheBoardtoAddvalue(continued)
2.4 amajorityoftheboardofalistedentityshouldbeindependentdirectors.
amajorityoftheDirectorsareindependent.atthedateofthisreport,fourofthefiveDirectorsareconsideredtobeindependent.Theonlynon-independentdirectoristheManagingDirectorasheisanemployeeoftheCompany.
2.5 Thechairoftheboardofalistedentityshouldbeanindependentdirectorand,inparticular,shouldnotbethesamepersonastheCEOoftheentity.
MrGeoffCliffordistheChairmanoftheCompanyandisanindependent,non-executiveDirector.
2.6 alistedentityshouldhaveaprogramforinductingnewdirectorsandprovideappropriateprofessionaldevelopmentopportunitiesfordirectorstodevelopandmaintaintheskillsandknowledgeneededtoperformtheirroleasdirectorseffectively.
ThereisaformalinductionprogramfornewDirectorsandallDirectorsareprovidedwithaCorporateGovernanceManualwhichcontainsinformationontheCompany,fellowDirectors,copiesoftheConstitution,Boardcommitteechartersandpolicydocumentsandassociatedmaterial.TheManualalsocontainsacopyoftheDirector’sletterofappointmentandtheirDeedofaccess,indemnityandinsuranceasexecutedwiththeCompany.TheCorporateGovernanceManualisupdatedregularly.
Directorsareencouragedtocontinuetoexpandtheirknowledgebaseandprofessionalskillsthroughattendanceatsuitableseminarsandconferences.Thisincludesundertakingfinancerelatedcoursesfordirectorswhosebackgroundcomesfromdisciplinesoutsideoftheaccountingandfinancefield.
Directorshavetheright,inconnectionwiththedischargeoftheirdutiesandresponsibilities,toseekindependentprofessionaladviceattheCompany’sexpensewithinguidelinesprovidedintheCompany’sBoardCharter.
3–ActEthicallyandResponsibly
3.1 alistedentityshould:
(a)haveacodeofconductforitsdirectors,seniorexecutivesandemployees;and
(b)disclosethatcodeorasummaryofit.
TheBoard’spolicyisthattheDirectorsandmanagementshouldconductthemselveswiththehighestethicalstandards.allDirectorsandemployeesareexpectedtoactwithintegrityandobjectivity,strivingatalltimestoenhancethereputationandperformanceoftheCompany.
TheBoardhasadoptedaCodeofConductwhichsetsoutstandardsforappropriateethicalandprofessionalbehaviourthatappliestoallemployees,includingDirectorsandmanagement,whendealingwitheachother,shareholders,customersandthebroadercommunity.inadditiontotheCodeofConduct,theCompanyhasananti-BriberyandCorruptionPolicy.
acopyoftheCompany’sCodeofConductandtheanti-BriberyandCorruptionPolicyareavailableontheCompany’swebsite.
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Principle Complied Comment
4–SafeguardIntegrityinCorporateReporting
4.1 Theboardofalistedentityshould:
(a)haveanauditcommitteewhich:
(1)hasatleastthreemembers,allofwhomarenon-executivedirectorsandamajorityofwhomareindependentdirectors;and
(2)ischairedbyanindependentdirector,whoisnotthechairoftheboard,
anddisclose:
(3)thecharterofthecommittee;
(4)therelevantqualificationsandexperienceofthemembersofthecommittee;and
(5)inrelationtoeachreportingperiod,thenumberoftimesthecommitteemetthroughouttheperiodandtheindividualattendancesofthemembersatthosemeetings.
TheBoardhasconstitutedanauditCommitteewhichiscurrentlycomprisedofMrMarkConnelly,MsSamanthaToughandMrGeoffClifford,allofwhomareindependentnon-executiveDirectors.
MrConnelly,anindependentnon-executiveDirector,istheChairmanoftheCommittee.
TheauditCommitteeCharterislocatedontheCompany’swebsite.
TherelevantqualificationsandexperienceoftheCommitteemembersisincludedinDirectors’ReportcontainedintheannualReport.
Detailsofeachmember’sattendanceatmeetingsoftheauditCommitteeare:-
Member attended Held
MarkConnelly 3 3
SamanthaTough 3 3
GeoffClifford 3 3
4.2 Theboardofalistedentityshould,beforeitapprovestheentity’sfinancialstatementsforafinancialperiod,receivefromitsCEOandCFOadeclarationthat,intheiropinion,thefinancialrecordsoftheentityhavebeenproperlymaintainedandthatthefinancialstatementscomplywiththeappropriateaccountingstandardsandgiveatrueandfairviewofthefinancialpositionandperformanceoftheentityandthattheopinionhasbeenformedonthebasisofasoundsystemofriskmanagementandinternalcontrolwhichisoperatingeffectively.
TheBoardreceivesawrittendeclarationfromtheManagingDirector/CEOandtheChiefFinancialOfficerinaccordancewithsection295aoftheCorporationsact.Thedeclarationprovidesthat,tothebestoftheirknowledgeandbelief,theaccountingsystemsandfinancialrecordsarefoundedonasoundsystemofriskmanagementandinternalcontrolandthatthesystemisoperatingeffectivelyinrelationtofinancialreportingrisks.
4.3 alistedentitythathasanaGMshouldensurethatitsexternalauditorattendsitsaGMandisavailabletoanswerquestionsfromsecurityholdersrelevanttotheaudit.
TheCompany’sexternalauditorisinvitedto,andattends,theCompany’sannualGeneralMeeting.Theauditor’spresenceismadeknowntothemeetingandshareholdersareprovidedwithanopportunitytoaskquestionsoftheminrelationtotheaccountsoftheCompanyandtheperformanceandfindingsoftheaudit.
5–MakeTimelyandBalancedDisclosure
5.1 alistedentityshould:
(a)haveawrittenpolicyforcomplyingwithitscontinuousdisclosureobligationsundertheListingRules;and
(b)disclosethatpolicyorasummaryofit.
TheBoardhasadoptedaContinuousDisclosurePolicywhichraisesawarenessoftheCompany’sobligationsunderthecontinuousdisclosureregime;establishesaprocesstoensurethatinformationabouttheCompany,whichmaybemarketsensitiveandwhichmayrequiredisclosure,isbroughttotheattentionoftheperson(s)primarilyresponsibleforensuringthattheCompanycomplieswithitscontinuousdisclosureobligationsinatimelymannerandiskeptconfidential;andsetsouttheobligationsofDirectors,officers,employeesandcontractorsoftheCompanytoensurethattheCompanycomplieswithitscontinuousdisclosureobligations.
acopyoftheContinuousDisclosurePolicyislocatedontheCompany’swebsite.
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Principle Complied Comment
6–RespecttheRightsofSecurityHolders
6.1 alistedentityshouldprovideinformationaboutitselfanditsgovernancetoinvestorsviaitswebsite.
TheCompanyprovidesinformationaboutitselfanditsgovernancetoinvestorsviaitswebsite.TheCorporateGovernancetab/menuprovidesaccesstoallCommitteeChartersandotherrelevantCorporateGovernancePolicies.
TheCompany’swebsitealsoincludescopiesofitsannualreportsandfinancialstatements,copiesofitsaSXannouncements,copiesofNoticesofMeetings,presentations,aswellasanoverviewoftheCompany’sbusinessactivitiesinseparatelydesignatedareasofthewebsite.
6.2 alistedentityshoulddesignand
implementaninvestorrelationsprogramtofacilitateeffectivetwo-waycommunicationwithinvestors.
TheBoardaimstoensurethatshareholdersareprovidedwithalloftheinformationnecessarytoassesstheperformanceofthe
Company.TheCompanyfollowstheprinciplesofContinuousDisclosuretoensureallinvestorsarefullyinformedontheactivitiesoftheCompany.
TheManagingDirector/CEOisresponsibleforotherinvestorrelationsactivitieswiththeassistanceoftheChiefCorporateDevelopmentOfficerandtheCompanySecretary.
6.3 alistedentityshoulddisclosethepoliciesandprocessesithasinplacetofacilitateandencourageparticipationatmeetingsofsecurityholders.
TheBoardnotifiesallshareholderswithanoticeofgeneralmeetingsotheycanbefullyinformedofallmatterstobeputtothemeetingandencouragesshareholderstovoteandattendtheseshareholdermeetings.
6.4 alistedentityshouldgivesecurityholderstheoptiontoreceivecommunicationsfrom,andsendcommunicationsto,theentityanditssecurityregistryelectronically.
TheCompany,viaitsshareregistry,providesthecapabilityforshareholderstoelecttoreceiveelectroniccommunicationsfromtheCompanythroughdirectemails,throughitswebsiteandviatheshareregistry.ElectroniccontactdetailsareprovidedontheCompany’swebsite.
7–RecogniseandManageRisk
7.1 Theboardofalistedentityshould:
(a)haveacommitteeorcommitteestooverseerisk,eachofwhich:
(1)hasatleastthreemembers,amajorityofwhomareindependentdirectors;and
(2) ischairedbyanindependentdirector,anddisclose:
(3)thecharterofthecommittee;
(4)themembersofthecommittee;and
(5)asattheendofeachreportingperiod,thenumberoftimesthecommitteemetthroughouttheperiodandtheindividualattendancesofthemembersatthosemeetings;OR
(b)ifitdoesnothaveariskcommitteeorcommitteesthatsatisfy(a)above,disclosethatfactandtheprocessesitemploysforoverseeingtheentity’sriskmanagementframework.
n/a
TheBoardhasaformaloverarchingRiskManagementPolicytogovernthemanagementofrisksandhasestablishedsystemsforthemanagementofitsmaterialrisks.
TheBoardhasestablishedaRiskManagementCommitteegovernedbyitsownCharter.
UndertheoverarchingRiskManagementPolicy,themanagementofrisksisdividedbetweentheauditCommitteeandtheRiskManagementCommittee.
TheRiskManagementCommitteeiscurrentlycomprisedofDirectorsMrMartinReed(Chairman),MrGeoffClifford,MrRaleighFinlaysonandtheCompany’sChiefOperatingOfficer,MrCraigBradshaw.MrBarrieParkerwasamemberoftheCommitteeuntilheretiredfromtheBoardon25November2015.EachofMesser’sReedandCliffordareconsideredtobeindependent,non-executivedirectorsandhencethemajorityoftheRiskManagementCommitteemembersareindependent.
TheChairmanoftheRiskManagementCommittee,MrReed,isanindependent,non-executiveDirector.
Theskills,experienceandqualificationsofthoseindividualstogetherwithdetailsoftheirattendanceatmeetingsheldduringthereportingperiodareincludedintheDirectors’ReportintheannualReport.TheRiskManagementCommitteeisassistedbyothermanagementpersonnelasrequiredandmeetsfrequentlytoidentifyrisksandmonitormitigationstrategiesandoutcomes.TheRiskManagementCommitteereportstotheBoardonaregularbasisandriskmanagementisastandingagendaitemforallregularBoardMeetings.
DetailsoftheauditCommitteeareincludedinsection4.1above.
TheCompany’sRiskManagementPolicyandtheRiskManagementCommitteeChartercanbeaccessedontheCompany’swebsite(www.saracen.com.au)undertheCorporateGovernancesection.
Detailsofeachmember’sattendanceatmeetingsoftheRiskManagementCommitteeare:-
Member attended Held
MartinReed 7 7
GeoffClifford 7 7
RaleighFinlayson 7 7
CraigBradshaw 6 7
BarrieParker 2 3
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Principle Complied Comment
7–RecogniseandManageRisk(continued)
7.2 Theboardoracommitteeoftheboardshould:
(a)reviewtheentity’sriskmanagementframeworkatleastannuallytosatisfyitselfthatitcontinuestobesound;and
(b)disclose,inrelationtoeachreportingperiod,whethersuchareviewhastakenplace.
TheCompanyhas,andcontinuesto,undertakevariousriskreviewstoidentifypotentialbusinessriskswhicharethenassessedandrankedusingtheCompany’sriskmatrix.Theeffectivenessofcontrolsinplacetoaddresseachriskisreviewedonaregularbasisand,wheretheresidualriskisconsideredoutsideofacceptablelimits,furthercontrolsandriskmitigationmeasuresaredevelopedandimplemented.
7.3 alistedentityshoulddisclose:
(a)ifithasaninternalauditfunction,howthefunctionisstructuredandwhatroleitperforms;OR
(b)ifitdoesnothaveaninternalauditfunction,thatfactandtheprocessesitemploysforevaluatingandcontinuallyimprovingtheeffectivenessofitsriskmanagementandinternalcontrolprocesses.
n/a
TheCompanydoesnothaveaformalinternalauditfunction.TheauditCommitteeandtheRiskmanagementCommitteemonitortheriskfactorsoftheCompanyinplaceofaninternalauditfunction.
TheCompany’sManagementperiodicallyundertakesaninternalreviewoffinancialsystemsandprocessesandwheresystemsareconsideredtorequireimprovementthesesystemsaredeveloped.
TheCompany’sexternalauditorsalsoreviewtheprocessandproceduresrelatedtothefinancialandaccountingfunctionsoftheCompany.
7.4 alistedentityshoulddisclosewhetherithasanymaterialexposuretoeconomic,environmentalandsocialsustainabilityrisksand,ifitdoes,howitmanagesorintendstomanagethoserisks.
TheCompanyhasexposuretothefollowingrisks:
GoldPrice:TheCompany’srevenuecomesfromthesaleofgoldinaustraliandollarswhichisacombinationoftheUSdollargoldpriceanda$:US$exchangerates.TheUSgoldpricefluctuatesandisaffectedbymanyfactorsincludingtherelationshipbetweenglobalsupplyanddemand,forwardsellingbyproducers,costsofproductionandgeneralglobaleconomicconditionswhichalsoaffectsexchangerates.Tomitigatetheimpactofpricefluctuations,theCompanyhasenteredintohedgingprogramsforaportionofitsgoldproduction.ThelevelofhedgingisactivelyreviewedbymanagementandtheBoardwiththeassistanceofexpertexternalconsultants.
CostsofProduction:TheCompanyhasmanycostinputsintoitsproductionprofileandmaintainingatightreignoverthesecostsisessentialtomaintainingthefinancialhealthofthebusinessandmaintainingshareholdervalue.Toassistincontrollingtheseinputs,theCompanyhasenteredintolongtermcontractformostofitslargercostinputsincludingminingcontractors,diesel,limeandcyanide.TheCompanyalsohassitespecificEnterpriseagreementswithitsworkforce.ThesemechanismshelpprovideafirmcostbaseonwhichtheCompanycanoperateandmaintainitsbusinessmargins.
ExplorationSuccessandProjectDevelopment:TheCompanyhasafiniteeconomiclifebasedonexistingmineralresources.TheCompanyrequirescontinuedexplorationsuccessinfindingnewprojectsorextendingthelifeofexistingprojectsand/orsuccessfulacquisitionsforcontinuityofproduction.TheCompanyundertakesatargetedexplorationprogrammeandemploysthebesttechnicalpersonneltoassessallexistingandpotentialnewopportunitiesbothwithinandoutsideitsexistingprojectportfolio.
Environmental:TheCompanyissubjectto,andresponsiblefor,ensuringcompliancewithvariousregulations,licenses,standardsandexpectationssothatitsactivitiesdonotcauseunauthorisedenvironmentalharm.Throughitsongoingmanagementofenvironmentalactivitiesatitsoperatingmines,theCompanyhasbeenabletooperateinanenvironmentallysustainableandresponsiblemanner.
Social:Saracenisproudtobeinvolvedinandsupportiveofcommunitygroupsandorganisationsandiscommittedtosupportingthelocalcommunitiesinwhichweoperate.
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Principle Complied Comment
8–RemunerateFairlyandResponsibly
8.1 Theboardofalistedentityshould:
(a)havearemunerationcommitteewhich:
(1)hasatleastthreemembers,amajorityofwhomareindependentdirectors;and
(2)ischairedbyanindependentdirector,anddisclose:
(3)thecharterofthecommittee;
(4)themembersofthecommittee;and
(5)asattheendofeachreportingperiod,thenumberoftimesthecommitteemetthroughouttheperiodandtheindividualattendancesofthemembersatthosemeetings;OR
(b)ifitdoesnothavearemunerationcommittee,disclosethatfactandtheprocessesitemploysforsettingthelevelandcompositionofremunerationfordirectorsandseniorexecutivesandensuringthatsuchremunerationisappropriateandnotexcessive.
n/a
TheBoardhasestablishedaRemunerationandNominationCommitteewhichcomprisesMsSamanthaTough,MrMarkConnellyandMrMartinReed,allofwhomareindependentnon-executiveDirectors.
MsTough,anindependentnon-executiveDirectoristheChairmanoftheCommittee.
acopyoftheRemunerationCommitteeCharterislocatedontheCompany’swebsite.
TherelevantqualificationsandexperienceoftheCommitteemembersisincludedinDirectors’ReportcontainedintheannualReport.
Detailsofeachmember’sattendanceatmeetingsoftheRemunerationandNominationCommitteeare:-
Member attended Held
SamanthaTough 3 3
MarkConnelly 3 3
MartinReed 3 3
8.2 alistedentityshouldseparatelydiscloseitspoliciesandpracticesregardingtheremunerationofnon-executivedirectorsandtheremunerationofexecutivedirectorsandotherseniorexecutives.
Thestructureofnon-executiveDirectorremunerationisclearlydistinguishablefromthatofexecutiveDirectorsandotherSeniorExecutives.Non-executiveDirectorsareremuneratedonafixedfeebasisfortimeandresponsibilityaspartofanaggregatepoolofremunerationapprovedbyshareholders.Noincentivesareavailablefornon-executiveDirectors.SeniorExecutives(includingExecutiveDirectors)areremuneratedonanannualbasisbasedonacombinationoffixedremunerationandvariableremuneration,comprising–shorttermandlongtermincentives.
FurtherdetailsregardingtheremunerationpracticesfortheCompany’sKeyManagementPersonnelareincludedintheRemunerationReportthatformspartoftheDirectors’ReportwithintheannualReport.
8.3 alistedentitywhichhasanequity-basedremunerationschemeshould:
(a)haveapolicyonwhetherparticipantsarepermittedtoenterintotransactions(whetherthroughtheuseofderivativesorotherwise)whichlimittheeconomicriskofparticipatinginthescheme;and
(b)disclosethatpolicyorasummaryofit.
TheCompanyissuesequitybasedremunerationtoitsemployeesthroughitsPerformanceRightsPlan.ThePlandetailsthetermsandconditionsunderwhichperformancerightscanbegrantedandstipulatesthataParticipantinthePlanmustnotenterintoanyarrangementforthepurposeofhedging,orotherwiseaffecting,theireconomicexposuretotheirPerformanceRights.
ThePerformanceRightsPlanhasbeenapprovedatameetingofshareholders.
DetailsofPerformanceRightsthathavebeenissuedtoemployeesandtheperformancehurdlesattachingtothoseRightsarelistedintheRemunerationReport.
acopyoftheCompany’sPerformanceRightsPlanisavailableontheCompany’swebsite.
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TheDirectorsofSaracenMineralHoldingsLimited(“Saracen”or“theCompany”)presenttheirreport,togetherwiththefinancialstatementsontheconsolidatedentityconsistingofSaracenMineralHoldingsLimitedanditscontrolledentities(the“Group”)forthefinancialyearended30June2016.inordertocomplywiththeprovisionsoftheCorporationsact2001,theDirectorsreportasfollow:-
DIRECTORS
ThenamesandparticularsoftheCompany’sdirectorsinofficeduringthefinancialyearandatthedateofthisreportareasfollows.Directorsheldofficeforthisentireperiodunlessotherwisestated.
Geoffrey Clifford
Non-ExecutiveChairman(appointedDirector1October2013&Chairman26November2014)(MemberoftheauditandRiskManagementCommittees)
MrCliffordisanaccountantwithmorethan35years’experienceinsenioraccounting,financeandcompanysecretarialroles. HeholdsaBachelorofBusinessdegreefromCurtinUniversityandisaFCPa,FGiaandFaiCD.MrCliffordisaprofessionalcompanydirector,currentlyservingasanon-executivedirectorontheBoardofindependenceGroupNL.From2007to2011,hewasanon-executivedirector(includingasChairmanfortheperiod2008to2011)ofatlasironLimited.Priortothis,hespenteightyearsastheGeneralManageradministrationandCompanySecretaryofPortmanLimited.
MrCliffordbecameNon-ExecutiveChairmanoftheCompanyupontheretirementofthethenChairman,MrStaltari,attheconclusionoftheannualGeneralMeetingheldon26November2014.
Duringthepastthree(3)yearsMrCliffordhashelddirectorshipsinthefollowingotherlistedentities:-
Company appointed Resigned
independenceGroupLimited December2012 Current
Raleigh Finlayson
ManagingDirector(appointed2april2013)(MemberoftheRiskManagementCommittee)
MrFinlaysonisaMiningEngineer,havingstudiedattheWesternaustralianSchoolofMinesandistheholderofaFirstClassMineManagersCertificate,aGraduateCertificateinappliedFinanceandinvestmentandispartwaythroughaMastersofMineralEconomicsatCurtinUniversity.HeisamemberoftheaustralasianinstituteofMiningandMetallurgy.MrFinlaysonhas over 17 years of technical and operational experience in the mining industry in multiple disciplines including bothundergroundandopenpitoperations.SincejoiningtheCompany,hehasmanagedthetimelycompletionoftheDefinitiveFeasibilityStudyanddevelopmentoftheCarosueDamoperationsin2009andwastheChiefOperatingOfficerbeforebeingappointedManagingDirectorinapril2013.MrFinlaysonisamemberoftheRiskManagementCommittee.
MrFinlaysondoesnothold,andhasnotoverthelastthree(3)yearsheld,adirectorshipinanyotherpubliclistedcompany.
Mark Connelly
Non-ExecutiveDirector(appointed1May2015) (ChairmanoftheauditCommitteeandmemberoftheRemuneration&NominationCommittee)
MrConnellyholdsaBachelorofBusinessdegreefromEdithCowanUniversityandhasover29years’experiencecoveringthedevelopment,constructionandoperationofminingprojectsacrossavarietyofcommodities(includinggoldandbasemetals)andjurisdictions(includingaustralia,Westafrica,NorthamericaandEurope).
MostrecentlyMrConnellywasManagingDirectorofPapillonResourcesandwasinstrumentalintheUS$570mtakeoverofPapillonbyB2GoldCorpinOctober2014.PriortoPapillon,MrConnellywasChiefOperatingOfficerofEndeavourMiningCorporation,followingitsmergerwithadamusResourcesLimited,wherehewasManagingDirectorandCEO.MrConnellyhasalsoheldseniorexecutivepositionswithNewmontMiningCorporationandinmetMiningCorporation.HeisaCPa,MaiCD,aiMandSME.
DIRECTORS’REPORT
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Mark Connelly (continued)Duringthepastthree(3)yearsMrConnellyhashelddirectorshipsinthefollowingotherlistedentities:-
Company appointed Resigned
CardinalResources November2015 Current
TigerResourcesLimited October2015 Current
WestafricanResourcesLimited June2015 Current
ausdrillLimited July2012 Current
B2GoldCorporation October2014 June2016
ManasResourcesLimited January2013 June2015
PapillonResourcesLimited November2012 October2014
Martin Reed
Non-ExecutiveDirector(appointed24august2012)(ChairmanoftheRiskManagementCommitteeandamemberoftheRemuneration&NominationCommittee)
MrReedisaqualifiedminingengineer(BEMining,GradDipManagement,aiCDDiploma)withover35years’experienceinoperationsmanagementandprojectdevelopmentacrossarangeofcommodities,countriesandsizesofoperations.RecentroleshaveincludedChiefOperatingOfficerandProjectManagerforanumberofmetalscompaniesincludingSiriusResources,SandfireResources,StBarbaraLimited,PaladinEnergyLtdandWindimurraVanadiumLimited.Priortotheseappointments,MrReedheldanumberofseniorexecutivepositionsintheminingindustryincludingroleswherehewasresponsiblefortheplanninganddevelopmentofseverallargeminingoperationsinremotelocations.
MrReeddoesnothold,andhasnotoverthelastthree(3)yearsheld,adirectorshipinanyotherpubliclistedcompany.
Samantha Tough
Non-Executive Director (appointed 1 October 2013) (Chairman of the Remuneration and Nomination Committee and amemberoftheauditCommittee)
MsToughcompletedaBachelorofLawsandBachelorofJurisprudenceattheUniversityofWesternaustraliaandworkedasabarristerandsolicitorbeforeprogressingtothecommercialsector.SheisaFellowoftheaiCD.MsToughisaprofessionalcompanydirectorwithmorethan15years’experienceonpublicandprivatecompanyboards.Shehasadepthofindustryexperienceinresourcesandenergy.MsTough’sexecutiverolesincludeGeneralManagerNorthWestShelfatWoodsideEnergyLtd,DirectorStrategyforHardmanResourcesLtd,SeniorVicePresidentNaturalResourcesattheCommonwealthBankandProjectDirectorforthePilbaraPowerProject.
Duringthepastthree(3)yearsMsToughhashelddirectorshipsinthefollowingotherlistedentities:-
Company appointed Resigned
Capeplc January2015 Current
MolopoEnergyLimited December2014 Current
SouthernCrossGoldfieldsLimited July2007 September2013
StrikeResourcesLimited January2012 November2015
Barrie Parker
Non-ExecutiveDirector(retired25November2015)
MrParkerholdsadegreeinMineralsEngineeringfromtheUniversityofBirminghamandisaFellowoftheaustralasianinstituteofMiningandMetallurgy.Heworkedintheinternationalminingindustryforalmost50years,primarilyinoperationsmanagementandprojectdevelopmentroles, includingmanagingtheinitialdevelopmentoftheBoddingtonandSunriseDamGoldmines.HewasalsotheRegionalManagerandDirectoroftheangloGoldcompaniesinaustraliaandSouthEastasia.MrParkerwasamemberoftheremunerationandchairmanoftheriskmanagementcommittee.
MrParkerdoesnothold,andhasnotoverthelastthree(3)yearsheld,adirectorshipinanyotherpubliclistedcompany.
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COMPAnYSECRETARY
Gerard Kaczmarek
(appointed17September2012)
MrKaczmarekgraduatedfromtheaustralianNationalUniversity(aNU)withaBachelorinEconomicsandaccounting.Hehasover30years’experienceintheresourcesandmineralprocessingindustryinaustraliaandoverseas.HewasCompanySecretaryandChiefFinancialOfficerforgoldminingcompanyTroyResourcesLimitedforalmosttenyearsandpriortothatspentsevenyearsatBurmineLimitedbeforeitsmergerwithSonsofGwaliaLimited.HecommencedhiscareerwiththebasemetalsdivisionofCRa,nowRioTinto.HeisaCPaandMaiCD.
MrKaczmarekdoesnothold,andhasnotoverthelastthree(3)yearsheld,adirectorshipinanyotherpubliclistedcompany.
InTERESTSInSHARESAnDOPTIOnSOFTHECOMPAnYAnDRELATEDBODIESCORPORATE
asatthedateofthisreport,thedirectandindirectinterestsoftheDirectorsandtheirrelatedpartiesinthesharesandPerformanceRightsofSaracenwere:-
Director Ordinary Shares Performance Rights over ordinary shares - unlisted
GeoffreyClifford - -
RaleighFinlayson 4,381,819 9,035,000
MarkConnelly - -
MartinReed 30,000 -
SamanthaTough - -
PRInCIPALACTIvITIES
TheprincipalactivityoftheGroupduringtheyearwasgoldminingandmineralexploration.
REvIEWAnDRESULTSOFOPERATIOnS
Overview
CarosueDamOperations
SaracenMineralHoldingsLimitedowns100%oftheCarosueDamOperations(CDO)throughitswhollyownedsubsidiarySaracenGoldMinesPtyLtd.SaracenacquiredtheCDOassetsin2006andcommencedcommercialproductionin2010.Sincethen,Saracenhasproducedover850,000ouncesofgoldfromopenpitsandundergroundmines.
Saracen’sCDOtenementholdingsandgolddepositsare located inoneof theworld’smostprospectivegoldprovinces,incorporatingtheLavertonandKeithKilkennyTectonicZones,north-eastofKalgoorlie,Westernaustralia.ThisprovinceishometoseveralworldclassgoldminesanddepositsincludingSunriseDam,GrannySmith,andWallaby.inexcessof23millionouncesofgoldinresourceshavebeenfoundand/orbroughtintoproductioninthisprovince.Saracenisbuildingalong-termstrategicinfrastructureandresourcepositioninthisarea.
CDOcomprisesa2.3Mtpaprocessingplant,238personaccommodationvillageandwaterandpowerinfrastructurelocatedapprox.120kmnorth-north-eastofKalgoorlie.TheCDOprocessingplantwasoriginallycommissionedinNovember2000andhasanameplatecapacityof2.4Mtpabasedonablendofhardandsoftores.
ThunderboxOperations
inJanuary2014,theGroupacquiredtheThunderboxOperations(TBO)fromNorilskNickelaustraliaPtyLtdforconsiderationofa$20millioncashonsettlement,a$3millioncashoncommencementofcommercialproduction(paidinapril2016),anda1.5%NSRRoyaltyontheTBOgoldproduction(cappedata$17million)whichwasacquiredbySaraceninapril2016forcashandsharesforanequivalentconsiderationatthattimeofa$8.6million.
TBOislocatedinthehighlyprospectiveYandalBeltandtheagnew-WilunaBeltintheNorthEasternGoldfieldsofWesternaustraliaandarecentredontheThunderboxOpenPitandCiLgold treatmentplant located45kmsouthof the townofLeinsterinWesternaustraliaandimmediatelyadjacenttothesealedGoldfieldsHighway.
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TBOincludestheThunderboxProject(comprisingtheThunderbox,RainbowandMangillagolddeposits),theBannockburnProject(comprisingtheBannockburnandNorthWellgolddeposits)andtheWaterlooProject(comprisingtheWaterlooandamoracnickeldeposits).
TheThunderboxprocessingfacilityhasanannualcapacityof2.5Mtpaandincorporatesasingle-stagecrusher,aSaGmillandaballmillaswellasconventionalCiLleachingandelutioncircuits.infrastructureincludesa268personaccommodationvillage,airstrip,contractpowersupply,GoldfieldsGaspipelinespur,borefieldwatersupplyandtelecommunicationservices.
inMarch2015,adecisiontore-commenceminingattheThunderboxdepositwastakenbytheBoard.Theminingpre-stripcommencedinJuly2015andtheplantrefurbishmentcommencedinSeptember2015.
inaugust2015,theGroupacquiredtheKailisandKingoftheHills(KoTH)projectsfromStBarbaraLtdforaconsiderationof$3mcashintwotranches:$0.3monacquisition,plus$2.7mupontheearlierofcommercialproductionfromKailisor4yearsfollowingacquisition.
Kailisislocated5kmfromLeonoraand80kmsouthofSaracen’sThunderboxproject,andwithin1kmofthesealedGoldfieldsHighway.inthe1990’sSonsofGwaliaminedasmallopenpitatKailiswithreconciledproductionof250kt@6.2g/tfor~50koz.
KingoftheHillsislocated65kmtothesouthofThunderbox,immediatelyadjacenttotheGoldfieldsHighway.KingoftheHillsisasignificantlymineralisedsystem,[email protected]/tfor1.9Mozsince1985.
Production:
CarosueDamOperations
Forthefinancialyearended30June2016(“FY2016”),goldproductionfromtheCarosueDamOperationswas157,191oz(2015:167,531oz)atanallinSustainingCost(“aiSC”)of$1,067/oz(2015:$1,139/oz).
Carosue Dam Quarter
Unit September15 December15 March16 June16 FY2016
MillProduction
TotalOreMilled t 577,000 569,000 565,000 610,000 2,321,000
g/t 2.3 2.6 2.0 2.3 2.3
Recovery % 91.3% 92.5% 91.9% 92.3% 92.0%
GoldProduced oz 38,140 44,265 33,749 41,037 157,191
UndergroundMining
TotalOreMined t 143,000 248,000 275,000 334,000 1,000,000
g/t 4.3 4.5 2.9 3.2 3.6
ContainedOunces oz 19,759 36,229 26,051 34,065 116,104
MiningoftheWhirlingDervishopenpitconcludedattheendofJune2015resultinginalargestockpileoforeattheendofFY2015.Thisstockpilewasusedtomakeupthebaseloadmilltonnagesduringtheyear,supplementedwithhighergradeundergroundorefromRedOctober,KarariandDeepSouth.
DevelopmentworkcommencedattheKarariundergroundmineinOctober2014andcommercialproductionwasdeclaredinOctober2015.Productionfortheyear(includingdevelopmentmaterial)was520,[email protected]/tfor49,000containedounces.
The Red October underground mine produced above budget tonnes and ounces for the year with total production of340,[email protected]/tfor55,700containedounces.
Development work commenced at the Deep South underground mine in October 2014 and continued throughout theyear.CommercialproductionisexpectedtobedeclaredintheSeptember2016quarter.Productionfortheyear(beingalldevelopmentmaterial)was143,[email protected]/tfor11,500containedounces.
Goldproductionforthefullyearwas157,191ouncesatanaiSCof$1,067/oz.
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ThunderboxOperations
Thunderbox Quarter
Unit September15 December15 March16 June16 FY2016
MillProduction
TotalOreMilled t - - 345,000 604,000 949,000
g/t - - 0.9 1.2 1.1
Recovery % - - 91.0% 93.0% 92.4%
GoldProduced oz - - 9,310 22,155 31,465
OpenPitMining
TotalMining BCM 2,422,000 4,247,000 3,679,000 3,181,000 13,529,000
TotalOreMined t - 84,000 326,000 577,000 987,000
g/t - 0.8 1.0 1.3 1.1
ContainedOunces oz - 2,159 10,258 23,412 35,829
Mining pre-strip at TBO commenced in July 2015 and first ore from the open pit was produced in October 2015. Plantrefurbishment commenced in September 2015 with wet commissioning commencing in February 2016 and commercialproductionwasdeclaredeffective1april2016.
Thecostofthepre-stripandredevelopmenttocommercialproductionwas$63.4millionwiththeoperationbeingboughtintoproductionfourmonthsaheadofschedule.
Goldproductionforthefullyearwas31,456ouncesatanaiSCof$1,293/ozfortheJunequarter2016(beingthefirstquarterofcommercialproduction).
Health and Safety
Saracenvaluesthesafetyandwellbeingofouremployeesandpleasinglyrecordedan improvement inourTotal incidentFrequencyRate(TiFR)fortheyear.Ourlosttimeinjuryfrequencyrate(LTiFR)forthe12monthstoJune2016was3.5.
Duringtheyearthesafetyfocushasbeenonthestrengtheningofpolicies,principalhazardstandards,proceduresandthishasbeencoupledwithanemphasisonriskmanagement,aspartofthedrivetoachieveandensureasafeplaceofwork.
Ourcommitmenttosafetyissupportedbythecompany’sSafetyManagementSystemincorporatingPrincipalHazardStandards.Ourteamofemployees,contractors,suppliersandotherstakeholdersunderpinSaracen’soperationalperformance.
Financial Performance
TheGroupreportedanetprofitbeforetaxof$38.3million,anincreaseof137%onthepreviousyear(2015:$16.2million).Profitaftertaxwas$25.9million,anincreaseof133%overthepreviousyear(2015:$11.1million).
Salesrevenuefortheyearwas$276.5million,up11%from$249.9millioninthepreviousyear.Goldproductionfortheyearwas188,656ouncesup13%from167,531ouncesinFY2015.Goldsalesfortheyearwere188,024versus164,114ouncesin2015.averagegoldpricefortheyearwasa$1,629/oz(2015:a$1,547/oz).Duringtheyear,approx.$30.2millionofgoldsalesweremadefromgoldrecoveredfromdevelopmentactivitiesattheKarariandDeepSouthundergroundminesandtheThunderboxopenpit.Thisamountwasoffsetagainsttheproject’scapitaldevelopmentcostsandisnotaccountedforassalesrevenue.
Grossprofit fromminingoperationsfor theyearwas$51.3million (2015:$26.5million)afterdeducting$12.5millionforroyaltiesand$33.9millionindepreciationandamortisation(2015:$11.1millionand$49.5millionrespectively).
Netcashflowfromoperationsfortheyearwas$109.8million(2015:$65.4million).Capitalexpenditureonpurchasesofplant&equipment,minedevelopmentandexplorationtotalled$111.9millionfortheyearmainlyrelatingtothedevelopmentoftheThunderbox,KarariandDeepSouthmines(2015:$49.3million).
asat30June2016,theGrouphadinplaceatotalgoldhedgingprogramcomprising283,044ozofforwardandspotsalescontractsatanaveragepriceofa$1,548/oz.
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Production & Operational Outlook for 2016/17 and Beyond
CarosueDamOperations
inFY2017,goldproductionwillbesourcedprincipallyfromtheKarariandDeepSouthundergroundminesandtheWhirlingDervish ore stockpiles with a small contribution from the Red October underground mine. Production is forecast to be155,000ozs.
Saracen’sbusinessplanforCDOforthenext2yearscomprises:-
• CompletingthedevelopmentoftheDeepSouthundergroundminetodeliverapprox.500,000tonnesoforeperannum, grading4.0g/t;
• CommencingundergrounddrilldrivedevelopmentoftheWhirlingDervishdepositinthesecondhalfofFY2017;
• CompletethefeasibilitystudyontheWhirlingDervishundergroundminingproject;
• Extendingthelifeandqualityofitsopen-pittableresources;
• OptimisingproductionthroughtheCarosueDamprocessingplantincludingprocessingoftheextensiveorestockpiles; and
• Generatingsustainingcashflows.
ThunderboxOperations
inFY2017,goldproductionwillbesourcedprincipallyfromtheThunderboxZoneaopenpitsupplementedbysmallamountsoforefromtheKingoftheHills(KoTH).Productionisforecasttobe125,000ozs.
Saracen’sbusinessplanforTBOforthenext2yearscomprises:-
• MiningoftheThunderboxazoneopenpit;
• DevelopmentandminingoftheThunderboxCzoneopenpit;
• DevelopmentandminingoftheKailisopenpit;
• Commencingstable,longlife,commercialproduction;
• ExtensionaldrillingontheThunderboxazoneorebodytoconfirmundergroundminingpotential;
• ExtensionaldrillingattheKingoftheHillsprojecttoconfirmundergroundminingpotential;
• MiningattheKingoftheHillsprojecttocommence;
• ContinuetheundergroundminingfeasibilitystudyfortheThunderboxorebodies;and
• Generatesustainingcashflows.
Exploration
Nearly 44,000m of underground and surface drilling completed at Karari during FY2016 has significantly expanded theresourcesandreservesforKarari.ExplorationdrillingalsoshowedmineralisationremainsopentothesouthoftheKararimineandatdepth.asignificantdrillprogramatKarariisplannedforFY2017tocontinuetobuildontheever-growingKarariresource.
PriortothecommencementofundergroundminingatDeepSouth,surfaceRCanddiamonddrillingwasundertakentotestforresourceextensionsnorthandsouthofthemineandcompleteageotechnicalstudy.Downholegeophysicsconductedinsomeofthesedrillholesidentifiedastrongconductorconsistentwithgold-bearingsulphideaccumulationsbelowthecurrentMexicoresourcethatliestothesouthoftheDeepSouthmine.FollowingthecommencementofundergroundminingatDeepSouthinOctober2015approximately5,500mofundergroundgradecontrolandresourcedefinitiondrillinghasbeencompleted.anextensivedrillprogramisplannedforFY2017toconvertresourcesinDeepSouthandthenearbyresourcesofTennesseeandMexico.
DrillingatRedOctoberduringFY2016included24,400mofundergroundresourcedefinitionandgradecontrolintocurrentandfutureminingareas.ExplorationinthemineincludedtestsofthelowerextensionoftheMarlinlodeandexploringforprospectivehorizonseastandwestofthecurrentmine.SeveraltargetsintersectedbythisexplorationwillbefollowedupwithdrillinginFY2017.
TheKingoftheHillsminewasacquiredduringFY2016andSaracenimmediatelymovedforwardtorealisethevalueofthisresourcebycommencingundergrounddiamonddrilltestingofhighgradequartzveinsunderthesouthernpitofKingoftheHill.Thisprogramhasalreadyshownthishighgrademineralisationcontinuesbeneaththepit,andfurtherexplorationisongoing.GradecontroldrillingintoremnantminingareasthatwillformpartoftheFY2017LOMplanwillcontinuefromFY2016intoFY2017.
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Greenfields exploration undertaken in FY2016 included regional mapping and sampling in the under-explored Mt Celiadistrict,whichhostsboththeactiveDeepSouthandhistoricSafariBoremines.ThisworkledtothedefinitionofseveraltargetsthatarescheduledfordrilltestinginFY2017.intheRedOctoberdistrict,mappingandsurfacesamplingundertakenduringFY2016identifiedanchor-typeshearzonesapproximately500mnorthoftheRedOctoberminewithcoincidentsoilgoldanomalies.Theseshearzonesareclosely linked tohigh-gradegoldmineralisation in theRedOctoberand furtherexplorationofthesenewexplorationtargetsisplannedforFY2017.ExplorationneartheCarosueDamgoldplantincludedaugerdrillingneartheBlueMannaresourcetotestforpotentialgoldmineralisationover identifiedstructuraltargets.asmallaircoredrillprogramwasalsoundertakenduringFY2016onanareaadjacenttoBlueManna.
Greenfields activities at Thunderbox Operations included geological mapping and re-sampling of historic drill holes toadvancetheknowledgeofgoldmineralisationinanumberofprospects.DrillingactivitiesatThunderboxwererestrictedtogradecontrolRCdrillingintheThunderboxpit.
Investor Relations
During the year the Company presented at several conferences and conducted roadshows to existing and prospectiveinvestors,analystsandstockbrokers.Theseincluded:-
• DiggersandDealersConference,august2015;
• DeutscheBankGoldDay,September2015;
• DenverGoldConference,September2015;
• MacquarieBankWaResourcesForum,October2015;
• BMOGlobalMetalsandMiningConference,February2016;
• EurozConference,March2016;
• MacquarieBankaustraliaConference,May2016;
• ReadCorporateResourcesRisingStarsConference,May2016;
• Europeaninvestorroadshows,December2015andJune2016;
• asianinvestorroadshow,June2016;
• Variousinvestorminesitevisits;and
• VariouspresentationsinSydneyandMelbourne.
acopyofeachpresentationgiventotheseconferencesandroadshowsisreleasedtotheaSXandareavailableonboththeaSXandtheGroup’swebsite,saracen.com.au.
Human Resources
asat30June2016thebusinesshad293employees.ThecommencementofourThunderboxOperationssawasignificantincrease inemployeenumbersfromthe2015financialyear.Wecontinuetopromoteaworkplaceculturethatembracesdiversity,andwecurrentlyhaveapproximately15%femaleparticipation.
Saracen’scorevalues–accountability,Communication,DeliveryandChooseYourattitude–continuetopromoteastrong,results-drivenculture,whereourpeopleareattheheartofthesuccessofourbusiness.
TheBonusSchemewasagainutilisedtoprovidefurtherincentivetoemployeesinmeetingorganisationalKeyPerformanceindicators,eachemployee’sindividualperformanceintheirrolewasassessedatthemid-yearandannualappraisalsandthishadanimpactontheirbonusentitlement.
Community Support
Saracenisproudtobeinvolvedinandsupportiveofcommunitygroupsandorganisationsandhasmaintainedourcommitmenttosupportingthe localcommunities inwhichweoperate,despite thecurrentdifficultmarketconditions.DuringFY2016Saracenhasprovidedfundingto:-
• LeonoraGoldenGift • TheKalgoorlieCityFootballClub
• SolarisCareFoundation • WaSchoolofMinesGraduatesassociation
• CEOSleepout • EverydayHero
• Children’sCharityNetwork • RockinghamRotaryClub
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DIvIDEnDS
NodividendshavebeenpaidordeclaredbytheGroupsincetheendofthepreviousfinancialyear.
Nodividendisrecommendedinrespectofthecurrentfinancialyear.
SIGnIFICAnTCHAnGESInTHESTATEOFAFFAIRS
DuringthefinancialyeartherewerenosignificantchangesinthestateofaffairsoftheGroupotherthanthatreferredtointhefinancialstatementsornotesthereto.
MATTERSSUBSEQUEnTTOTHEREPORTInGPERIOD
Therehasnotbeenanymatterorcircumstance,otherthanthatreferredtointhefinancialreportthathasarisensincetheendofthefinancialyearthathassignificantlyaffected,ormaysignificantlyaffect,theoperationsoftheGroup,theresultsofthoseoperations,orthestateofaffairsoftheGroup.
LIKELYDEvELOPMEnTSAnDEXPECTEDRESULTSOFOPERATIOnS
TheCompanycontinuestoseeksuitablemineralopportunitiesforacquisitionorfarm-in,aswellascorporateinvestments,whileprogressingtheCompany’soperations.RefertotheProductionandOperationalOutlookfor2016/17andbeyondonpage44.
EnvIROnMEnTALREGULATIOnAnDPERFORMAnCE
TheGroup’soperationsaresubjecttoenvironmentalregulationsattachedtothegrantingoflicencesbytheDepartmentofMinesandPetroleum,Westernaustralia.TheGroupcontinuestocomplywiththeseregulations.
TheoperationsarealsolicencedunderPart5oftheEnvironmentalProtectionact1986andtheRightsinWaterandirrigationact1914.alllicencesareuptodateandSaracenisincompliance.
TheGroupissubjecttothereportingrequirementsoftheNationalEnvironmentProtection(NationalPollutantinventory)Measure1998andtheNationalGreenhouseandEnergyReportingact2007.
The National Environment Protection (National Pollutant inventory) Measure 1998 and the National Greenhouse andEnergyReportingact2007requirethegrouptoreportitsannualgreenhousegasemissionsandenergyuse.ThegrouphasimplementedsystemsandprocessesforthecollectionandcalculationofthedatarequiredandsubmittedreportstotheNationalPollutioninventory(NPi)inSeptember2015andNationalGreenhouseandEnergy(NGER)inOctober2015.
TherewerenosignificantenvironmentalincidentsduringtheyearattheCompany’soperations.
DIRECTORS’MEETInGS
The number of Board and Committee meetings held, and the number of those meetings attended by each Director orCommitteememberduringthefinancialyearwere:-
Director Board Audit Committee Remuneration and Risk Management Meetings Meetings Nomination Committee Committee Meetings Meetings
Meetings Meetings Meetings Meetings Meetings Meetings Meetings Meetings held while attended held while attended held while attended held while attended a director a member a member a member
GeoffClifford 11 11 3 3 - - 7 7
RaleighFinlayson 11 11 - - - - 7 7
MarkConnelly 11 10 3 3 3 3 - -
MartinReed 11 11 - - 3 3 7 7
SamanthaTough 11 11 3 3 3 3 - -
BarrieParker* 5 3 - - - - 3 2
*Retired25November2015
inadditiontothescheduledBoardandCommitteemeetings,Directorsregularlycommunicatebytelephone,emailorotherelectronicmeans,andwherenecessary,circularresolutionsareexecutedtoeffectdecisions.
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REMUnERATIOnREPORT(AUDITED)
TheinformationprovidedinthisRemunerationReporthasbeenauditedasrequiredbysection308(3C)oftheCorporationsact2001.
The Directors present the Saracen Mineral Holdings Limited 2016 Remuneration Report, outlining key aspects of ourremunerationpolicyandframework,andremunerationawardedthisyear.ThisreportformspartoftheDirectors’Report.
Thereportisstructuredasfollows:
1. Keymanagementpersonnel(KMP)coveredinthisreport
2. Keychangessince2015remunerationreport
3. Remunerationgovernance
4. Executiveremunerationpolicyandframework
5. Linkbetweenremunerationandperformance
6. Detailsofremuneration
7. ContractualarrangementswithexecutiveKMP
8. Non-executivedirectorarrangements
9. Otherstatutoryinformation
1. Keymanagementpersonnelcoveredinthisreport
TheDirectorsoftheGroupduringorsincetheendofthefinancialyearwere:-
GeoffreyClifford Non-executiveChairman
RaleighFinlayson ManagingDirector(Executive)
MarkConnelly Non-ExecutiveDirector
MartinReed Non-ExecutiveDirector
SamanthaTough Non-ExecutiveDirector
BarrieParker Non-ExecutiveDirector(retired25November2015)
TheKeyManagementPersonnel(KMP)duringorsincetheendofthefinancialyearwere:-
CraigBradshaw ChiefOperatingOfficer
Gerard(Gerry)Kaczmarek CompanySecretary/ChiefFinancialOfficer
DanielHowe ChiefGeologist
William(Troy)irvin ChiefCorporateDevelopmentOfficer
2. Keychangessince2015remunerationreport
2A. Retirement of Non-executive Director
Barrie Parker retired at the annual General Meeting held on 25 November 2015. The Directors consider the size andcompositionoftheSaracenBoardtobeappropriateandhavenotreplacedMrParkerduringthefinancialyear.
2B. Approval of Performance Rights issued to the Managing Director
Theissueof10,000,000performancerightstoRaleighFinlayson,whichwasprovisionallyincludedinthe2015remunerationreport,wasapprovedbyshareholdersattheannualGeneralMeetingheldon25November2015.Referto“4-ExecutiveRemunerationPolicyandFramework”belowforfurtherdetails.
2C. Issue of Performance Rights to KMP
Duringtheyearanadditional2,805,000performancerightsweregrantedtoemployeesofwhich800,000wereallocatedtoKMP.Referto“4-ExecutiveRemunerationPolicyandFramework”belowforfurtherdetails.
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3. RemunerationGovernance
3A.Remuneration decision making
TheRemuneration&NominationCommittee(”RNC”)isasub-committeeoftheBoard.itisprimarilyresponsibleformakingrecommendationstotheBoardon:-
• theover-archingexecutiveremunerationframework;
• operationoftheincentiveplanswhichapplytoexecutivedirectorsandseniorexecutives(theexecutiveteam)includingkeyperformanceindicatorsandperformancehurdles;
• remunerationlevelsofexecutives;and
• Non-executiveDirectorfees.
ThecommitteereviewsanddeterminestheGroup’sremunerationpolicyandstructureannuallytoensureitremainsalignedtobusinessneeds,andmeetstheGroup’sremunerationprinciples.Fromtimetotime,thecommitteealsoengagesexternalremunerationconsultantstoassistwiththisreview,see“9E–Useofremunerationconsultants”belowforfurtherinformation.
inparticular,theBoardaimstoensurethatremunerationpracticesare:
• competitiveandreasonable,enablingthecompanytoattractandretainkeytalent;
• alignedtothecompany’sstrategicandbusinessobjectivesandthecreationofshareholdervalue;
• transparentandeasilyunderstood;and
• acceptabletoshareholders.
TheRNChasdelegatedauthority totheManagingDirector forapprovingremunerationrecommendationsforemployeesotherthanKMP,withintheparametersofapprovedGroupwideremunerationlevelsandstructures.
Themembersoftheremunerationcommitteeareallindependent,Non-ExecutiveDirectorsand,asatthedateofthisreport,comprised:
SamanthaTough–ChairofCommittee,Non-ExecutiveDirector
MarkConnelly–Non-ExecutiveDirector
MartinReed–Non-ExecutiveDirector
3B. Clawback of remuneration
in the event of serious misconduct or a material misstatement in the Group’s financial statements, the Board has thediscretiontoreduce,cancelorclawbackanyunvestedshorttermorlongtermincentives.
3C. Share trading policy
TheGroup’ssecuritiestradingpolicyappliestoallDirectorsandKMP.inaccordancewiththepolicy,employees,otherthanDirectorsofthecompany,mayonlydealinSaracenMineralHoldingsLimitedsecuritiesintheperiodof30daysfromthedayfollowing:-
• theannouncementofhalf-yearresults;or
• theannouncementofannualresults;or
• theannouncementofquarterlyresults;or
• theholdingoftheannualGeneralMeeting.
Thesearecollectivelyreferredtoasthe“WindowPeriod”.
ThepolicyprohibitsemployeesfromdealinginSaracenMineralHoldingsLimitedsecuritieswhileinpossessionofmaterialnon-publicinformationrelevanttotheGroup,evenifitiswithinaWindowPeriod.
DirectorsoftheGroupareprohibitedfromdealinginSecuritiesofSaracenMineralHoldingsLimitedoutsideofaWindowPeriodandmustreceivewrittenconsentfromtheChairmanortheBoardforanydealingintheGroup’ssecuritieswithinaWindowPeriod.
4. ExecutiveRemunerationPolicyandFramework
The RNC is responsible for determining remuneration policies in respect of executives and KMP. in establishing suchpolicies,theRNCisguidedbyexternalremunerationsurveysandindustrypractices,commensuratewiththescaleandsizeoftheGroup’soperations.Targetpositioningoftotalremunerationagainstmarketisthe50thpercentile.ThepoliciesandremunerationlevelsarereviewedregularlytoensurethattheGroupremainscompetitiveasanemployer.
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TheexecutiveremunerationframeworkforKMPshasthreecomponentsasperthetablebelow:-
* ThisistheGroup’s“allinCost”whichincludesallcostsexceptforacostincurredonlyasaresultofahighergoldprice(eg.aroyaltybasedongoldprice).
**TotalShareholderReturn(TSR)iscalculatedastheincreaseinthepriceofaGroup’ssharesontheaSXoverandinrespectoftheperformance,basedonthe30dayVWaPforthoseshares,plusanyreinvesteddividends,expressedasapercentageofthe30dayVWaPshareprice.
(i) Base pay and benefits
TheGrouphasemploymentagreementswithallKMP.Theseagreementsarecapableofterminationinaccordancewithstandardemploymentterms.ThetermsoftheagreementsareopenendedalthoughtheGroupretainstherighttoterminateanagreementimmediatelybymakingapaymentequaltothenoticeperiodinlieuofthatpersonworkingouttheirnoticeperiod.KMParealsoentitled to receive,on terminationofemployment, their statutoryentitlementsofaccruedannualandlongserviceleave.Eachemploymentagreementoutlinesthecomponentsofremunerationpaidtoeachexecutivebutdoesnotprescribehowremunerationlevelsaremodifiedfromyeartoyear.Remunerationlevelsarereviewedeachyear.additional details of KMP employment agreements can be found below at section “7 – Contractual arrangements withexecutiveKMP”.
Other than above, or as disclosed elsewhere in the Remuneration Report, no KMP are subject to specific employmentagreements.
Operatingandnon-operatingkeyperformanceindicators(“KPis”)relevanttoeachKMParesetsoastoformabasisofassessment of future levels of remuneration. The KPis set for KMP are mostly directly aligned to the Group’s intrinsicbusiness performance, for example, performance against the annual budget, health and safety measures, and otheroperationalcriteria.TheBoardretainstherighttodetermineanexecutive’sremunerationdependingontheoutcomeoftheannualperformancereviewsandotherfactorsthattheDirectorsconsiderrelevant.
aformalannualperformancereviewsystemisinplacewherebyKMPperformanceagainstindividualandcorporateKPi’sarereviewedanddiscussed.
inadditiontobasesalary,superannuationispaidonthebasesalaryatthestatutorylevel.KMPmayelecttocontributeadditionalamountstosuperannuationsubjecttolegislativelimits.
(ii) Short-term incentives (“STI”)
TheSTiisanannual“atrisk”componentofremunerationforKMP.itispayablebasedontheirperformanceagainstKPissetatthebeginningofthefinancialyear.STisarestructuredtoremunerateKMPforachievingannualtargetsonanindividualandagroupbasiswhicharedesignedaroundthesuccessofthebusiness.TheSTiispayableincashafterallowancefortaxdeductions.
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Element Consist of Pupose Performance Metrics
FixedRemuneration(FR)
Basepayandbenefits,includingsuperannuation
Providecompetitivemarketsalaryincludingsuperannuationandbenefits
Nil
Short-termincentives(STi)
CashpaymentstargetedatapercentageofFR
Rewardforin-yearperformance
- GroupTotalincidentFrequencyRate(TiFR);
- CorporateCosts;
- CoreValues(specifictoindividual);and
- Groupallincost*.
Long-termincentives(LTi)
PerformanceRights alignmenttolong-termshareholdervalue
allissuesexceptTranche5
- 3YearPeerGroupTotalShareholderReturn**comparison;
- 3YearGrowthofOreReserves;and
- 3Yearincreaseinshareprice.
Tranche5issuedtoManagingDirector
- CommencementofproductionatThunderboxbefore31December2016;and
- 2and3YearPeerGroupTSRcomparison.
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ForFY2016,theKPissetforKMPrelatedtosafety,goldproduction,cashflowgeneration,closingcashbalance,productioncostsandpersonalperformance.RefertothetablebelowforthestructureoftheSTiplan:
Feature Description
Max opportunity CEO and other KMP: 25% of base salary
Performance Metric Target Weighting Actuals Bonus WeightedMetrics BaseCase MidCase StretchCase Achieved Bonus
-0% -50% -100%
GroupTiFR 326 301 277 20% 358 0% 0%
CorporateCosts $45/oz $44/oz $43/oz 20% $40/oz 100% 20%
CoreValues 3rating 2rating 1rating 20% 2rating* 50% 10% (specifictoindividual)
Groupallincost $1,508/oz $1,429/oz $1,350oz 40% $1,459oz 31% 12%
PercentageofmaximumSTireceived 42%**
*TheCEOandallotherKMPachievedthesamerating.**allKMPachievedthesamepercentageofmaximumavailableSTi.
TheRNCdeterminedthatforFY2016,theManagingDirectorandotherKMPwouldreceive42%oftheirmaximumavailableSTi(11%ofbasesalary).TheSTiamountspayableforFY2016areincludedintheremunerationcalculationinthetableundersection“(i)DetailsofRemuneration”.TheseamountswillbepaidinFY2017.
(iii) Long-term incentives (“LTI”)
LTiawardsarestructuredtorewardKMPforthelongtermperformanceoftheGrouprelativetoitspeersand,fromthecommencement of FY2014, are granted in the form of Performance Rights. Prior to this, LTis had been in the form ofEmployeeOptions.Thelatterhavenotbeenusedforemployeeincentivepurposesoverthelastthreeyears.
Performance Rights
TheSaracenMineralHoldingsLimitedPerformanceRightsPlan(“Plan”)wasapprovedbyshareholdersattheCompany’s2013annualGeneralMeeting.
ThePlanprovidestheBoardwiththediscretiontograntPerformanceRightstoeligibleparticipantsthatwillvestsubjecttotheachievementofperformancehurdlesorKPisasdeterminedbytheBoardfromtimetotime.
TheobjectiveofthePlanistoattract,motivateandretainKMPsanditisconsideredbytheGroupthatthePlanandthefutureissueofPerformanceRightsunderthePlanwillprovideselectedparticipantswiththeopportunitytoparticipateinthefuturegrowthoftheGroup.
ThePlanwillenabletheGrouptomakegrantstoEligibleParticipantssothatlongtermincentivesformakeycomponentoftheirtotalannualremuneration.
TheBoardbelievesthatgrantsunderthePlanwillserveanumberofpurposesincluding:-
• toactasakeyretentiontool;and
• tofocusattentiononfutureShareholdervaluegeneration.
UnderthePlan,EligibleParticipantswillbegrantedPerformanceRights.VestingofanyofthesePerformanceRightswillbesubjecttotheachievementofvariousKPiswhichcanbevariedeachyearandalignedtotheindividual’sperformance.
EachPerformanceRightrepresentsarighttobeissuedoneShareatafuturepointintime,subjecttothesatisfactionofanyvestingconditions.Noexercisepriceispayable.
ThequantumofPerformanceRightstobegrantedwillbedeterminedwithreferencetomarketpracticeandwillbesubjecttoapprovalbytheBoard.
Performancewillbeassessedattheendoftheperformanceperiod.
anygrantsunderthePlanwillbesubjecttotheachievementofKPis.appropriateKPismaybeformulatedforeachEligibleParticipanttoparticipateinthePlanbasedontheirroleandresponsibilitiesintheGroup.
PerformanceRightswilllapseiftheparticipantleavestheGrouppriortoallthevestingconditionsbeingfulfilledalthoughtheBoardhastheability,atitssolediscretion,tovestsomeoralltheRightsif“goodleaver”exemptionsapplytotheceasingofemployment.Personswhoareterminatedfor“badleaver”reasonsautomaticallylosetheirentitlement.TheBoardalsohastherighttoallowearlyvestingofRightsifachangeofcontroleventoccursortheCompanyappliesforvoluntarywindingup.
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TheKPisforTranches1-4andTranche6aresetoutbelow:-
ClassA ClassB ClassC
Performance Comparison of the Company’s Total Increase in ore reserves. Increase in the share price. Condition Shareholder Return (TSR) with that of a group of peer companies.
Vesting Percentile Proportion of Increase in Proportion of Share price Proportion of Condition rights vesting ore reserves rights vesting increase rights vesting
Below50th 0% Between0% 50% Below25% 0%Condition percentile and25%
Between50th Between50% Morethan25% 100% Between25% Between50% and75thpercentile and100%ona and50% and75% straightlinebasis
above75th 100% Morethan50% 100% percentile
TheKPisforTranches5issuedtotheManagingDirectorandapprovedbytheshareholdersattheannualGeneralMeetingheldon25November2015aresetoutbelow:-
ClassA ClassB ClassC
Performance First gold production at the Thunderbox Comparison of the Company’s Comparison of the Company’s Condition Operations by 31 December 2016 Total Shareholder Return (TSR) Total Shareholder Return (TSR) with that of a group of peer with that of a group of peer companies (2 years). companies (3 years).
Vesting Thunderbox goes Proportion of Percentile Proportion of Percentile Proportion of Condition into production rights vesting rights vesting rights vesting
No 0% Below50th 0% Below50th 0% percentile percentile
Yes 100% above50th 100% above50th 100% percentile percentile
ForthecomparisonoftheTotalShareholderReturn(TSR)fortheClassaPerformanceRights,thepeerGroupincludesthefollowingcompanies:-
• BeadellResourcesLimited • EvolutionMiningLimited
• KingsgateConsolidatedLimited • MillenniumMineralsLimited
• NorthernStarResourcesLimited • RameliusResourcesLimited
• ResoluteMiningLimited • StBarbaraLimited
• SilverLakeResourcesLimited • TroyResourcesLimited
• RegisResourcesLimited • DorayMineralsLimited
• PerseusMiningLimited • TerangaGoldCorporation
• OceanagoldCorporation • KingsroseMiningLimited
TheabovepeerGroupwillbeamendedandupdatedtomakeallowanceforchangesinthecircumstancesofanyofthosecompaniesoranynewcompanydeterminedtoenterintoapeerrankingposition.
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Summary of FY2014 Performance Rights (Tranche 1 – Managing Director)
VestingConditions: • GrouppeerTSRcomparison;
• GrowthofOreReserves;and
• increaseinshareprice.
issuePrice: 19November2013-21.5cents
VestingDate: 28September2016
FairValueperRight: • Classa–19.5cents
• ClassB–21.5cents
• ClassC–13.5cents
anallocationof1,500,000RightsweregrantedtotheManagingDirector,RaleighFinlaysonfollowingshareholderapprovalattheannualGeneralMeetinginNovember2013.
aMonteCarlosimulationwasundertakenontheseRightstodeterminetheprobabilityofthemarketconditionsassociatedwiththeRightsbeingmet.TheprobabilityestimateswerethenappliedtoascertainanestimatedfairvaluefortheRights.Thisvaluewasestimated,foraccountingpurposes,tobe$262,500.
Summary of FY2014 Performance Rights (Tranche 2 - KMPs)
VestingConditions: • GrouppeerTSRcomparison;
• GrowthofOreReserves;and
• increaseinshareprice.
issuePrice: 23September2014-37cents
VestingDate: 28September2016
FairValueperRight: • Classa–36.3cents
• ClassB–37.0cents
• ClassC–23.1cents
anallocationof1,115,000RightsweregrantedtoKMP’son23September2014.
aMonteCarlosimulationwasundertakenontheseRightstodeterminetheprobabilityofthemarketconditionsassociatedwiththeRightsbeingmet.TheprobabilityestimateswerethenappliedtoascertainanestimatedfairvaluefortheRights.ThisvaluerelatingtoKMP’swasestimated,foraccountingpurposes,tobe$347,434.
Summary of FY2015 Performance Rights (Tranche 3 – Managing Director)
VestingConditions: • GrouppeerTSRcomparison;
• GrowthofOreReserves;and
• increaseinshareprice.
issuePrice: 26November2014-27.5cents
VestingDate: 28September2017
FairValueperRight: • Classa–19.3cents
• ClassB–27.5cents
• ClassC–17.3cents
anallocationof735,000RightsweregrantedtotheManagingDirector,RaleighFinlaysonfollowingshareholderapprovalattheannualGeneralMeetinginNovember2014.
aMonteCarlosimulationwasundertakenontheseRightstodeterminetheprobabilityofthemarketconditionsassociatedwiththeRightsbeingmet.TheprobabilityestimateswerethenappliedtoascertainanestimatedfairvaluefortheRights.Thisvaluewasestimated,foraccountingpurposes,tobe$148,029.
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Summary of FY2015 Performance Rights (Tranche 4 - KMPs)
VestingConditions: • GrouppeerTSRcomparison;
• GrowthofOreReserves;and
• increaseinshareprice.
issuePrice: 1april2015-41cents
VestingDate: 28September2017
FairValueperRight: • Classa–33.8cents
• ClassB–41.0cents
• ClassC–25.3cents
anallocationof760,000RightsweregrantedtoKMP’son1april2015.
aMonteCarlosimulationwasundertakenontheseRightstodeterminetheprobabilityofthemarketconditionsassociatedwiththeRightsbeingmet.TheprobabilityestimateswerethenappliedtoascertainanestimatedfairvaluefortheRights.ThisvaluerelatingtoKMP’swasestimated,foraccountingpurposes,tobe$241,984.
Summary of FY2016 Performance Rights (Tranche 5 – Managing Director)
TheKPisfortheFY2016PerformanceRightsissuedtotheManagingDirectoraresetoutbelow:-
Tranche Performance Vesting Conditions Issue Vesting Fair Value Rights Price Date Grant Date
Classa 2,000,000 (i) MrFinlaysonbeingManagingDirector;and 53.5cents By 53.5cents
(ii) FirstgoldproductionattheThunderboxOperations 31/12/2016 before31December2016.
ClassB 3,000,000 (i) MrFinlaysonbeingManagingDirector;and 53.5cents 16/03/2017 45.1cents (ii) Saracenisinthetop50%ofTotalShareholder Returns(“TSR”)overtheperiodcommencing 16March2015andendingonorafter16March2017, whencomparedwiththeTSRofthePeerCompanies calculatedoverthesameperiod
ClassC 5,000,000 (i) MrFinlaysonbeingManagingDirector;and 53.5cents 16/03/2018 45.4cents
(ii) Saracenisinthetop50%ofTotalShareholder Returns(“TSR”)overtheperiodcommencing 16March2015andendingonorafter16March2018, whencomparedwiththeTSRofthePeerCompanies calculatedoverthesameperiod
ForthecomparisonofshareholderreturnfortheClassBandClassCPerformanceRights, thepeerGroupincludesthefollowingcompanies:-
• BeadellResourcesLimited • EvolutionMiningLimited
• KingsgateConsolidatedLimited • MillenniumMineralsLimited
• NorthernStarResourcesLimited • RameliusResourcesLimited
• ResoluteMiningLimited • StBarbaraLimited
• SilverLakeResourcesLimited • TroyResourcesLimited
• RegisResourcesLimited • DorayMineralsLimited
• PerseusMiningLimited • TerangaGoldCorporation
• OceanagoldCorporation • KingsroseMiningLimited
anallocationof10,000,000RightsweregrantedtotheManagingDirector,RaleighFinlaysonfollowingshareholderapprovalattheannualGeneralMeetinginNovember2015.
aMonteCarlosimulationwasundertakenontheseRightstodeterminetheprobabilityofthemarketconditionsassociatedwiththeRightsbeingmet.TheprobabilityestimateswerethenappliedtoascertainanestimatedfairvaluefortheRights.Thisvaluewasestimated,foraccountingpurposes,tobe$4,693,000.
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Summary of FY2016 Performance Rights (Tranche 6 - KMPs)
VestingConditions: • GrouppeerTSRcomparison;
• GrowthofOreReserves;and
• increaseinshareprice.
issuePrice: 18December2015-57cents
VestingDate: 28September2018
FairValueperRight: • Classa–42.7cents
• ClassB–57.0cents
• ClassC–39.5cents
anallocationof800,000RightsweregrantedtoKMP’son18December2015.
aMonteCarlosimulationwasundertakenontheseRightstodeterminetheprobabilityofthemarketconditionsassociatedwiththeRightsbeingmet.TheprobabilityestimateswerethenappliedtoascertainanestimatedfairvaluefortheRights.ThisvaluerelatingtoKMP’swasestimated,foraccountingpurposes,tobe$354,240.
Referto“9B-Detailsofsharebasedcompensation”foradetailedbreakdownofperformancerightsissuedtoeachKMP.
5. LinkbetweenRemunerationandPerformance
TheGroupaimstoalignitsexecutiveremunerationtoitsstrategicandbusinessobjectivesandthecreationofshareholderwealth.Thetableandgraphsbelowshowthemeasuresofthegroup’sfinancialperformanceoverthelast5yearsasrequiredby theCorporationsact2001.However, thesearenotnecessarilyconsistentwith themeasuresused indetermining thevariable amounts of remuneration to be awarded to KMP, refer to “4 - Executive Remuneration Policy and Framework”aboveforactualmeasuresused.asaconsequence,theremaynotalwaysbeadirectcorrelationbetweenthestatutorykeyperformancemeasuresandthevariableremunerationawarded.
2012 2013 2014 2015 2016
SalesRevenue($’000) 183,759 210,605 211,424 249,872 276,502
Profit/(loss)beforetax($’000) 26,692 (88,324) 7,890 16,181 38,335
BasicEPS(centspershare) 3.3 (10.6) 0.91 1.41 3.26
Shareprice 0.56 0.12 0.41 0.43 1.44
DIRECTORSREPORT(CONTiNUED)
-12
-10
-8
-6
-4
-2
0
2
4
2012 2013 2014 2015 2016
Basic EPS (cents per share)
-100,000
-80,000
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
2012 2013 2014 2015 2016
Profit/(loss) before tax ($’000)
0
50,000
100,000
150,000
200,000
250,000
300,000
2012 2013 2014 2015 2016
Sales Revenue ($’000)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2012 2013 2014 2015 2016
Share price ($)
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Fortheperiod1July2013to30June2016,theTSRoftheCompanyhasbeenindependentlycalculatedtobe832%placingitfirstinthePeerGroupcomparative.Therefore,asstipulatedforthevestingofTranche1&Tranche2,ClassaPerformanceRights,100%vestingoftheRightswasachievedandshareswereissuedtoeligiblerecipientsinaugust2016.
For the period 1 July 2013 to 30 June 2016, the shareprice of the Company has been independently calculated to haveincreased832%overtheperiod.Therefore,asstipulatedforthevestingofTranche1&Tranche2,ClassCPerformanceRights,100%vestingoftheRightswasachievedandshareswereissuedtoeligiblerecipientsinaugust2016.
6. DetailsofRemuneration
DetailsofthenatureandamountofeachmajorelementoftheremunerationofeachdirectoroftheGroupandeachofthekeymanagementpersonneloftheGroupduringthefinancialyearare:-
30 June 2016 Short-term Post Share Long Total Proportion Employee Benefits Employ- Based Term of total ment Payments Benefits performance related
Salary Cash Non Super- Performance Long & fees bonus monetary annuation Rights / Service benefits (i) and other Options Leave (iv) $ $ $ $ $ $ $
Directors
GClifford 127,854 - - 12,146 - - 140,000 -
RFinlayson(ii)(v) 736,500 76,048 5,918 30,000 2,359,767 13,434 3,221,667 75.6%
MConnelly 82,192 - - 7,808 - - 90,000 -
MReed–DirectorFees(iii) 90,000 - - - - - 90,000 -
STough 82,192 - - 7,808 - - 90,000 -
BParker(retired25November2015) 34,247 - - 3,253 - - 37,500 -
KeyManagementPersonnel
CBradshaw(ii)(v) 408,807 44,313 - 29,193 104,838 2,566 589,717 25.3%
GKaczmarek(ii) 350,000 39,024 - 33,250 126,205 6,748 555,227 29.8%
DHowe(ii) 275,000 31,090 5,355 26,125 82,993 7,169 427,732 26.7%
WTirvin(ii) 275,000 34,743 - 26,472 67,540 690 404,445 25.3%
Total 2,461,792 225,218 11,273 176,055 2,741,343 30,607 5,646,288
(i) Non-monetarybenefitsincludeGroupprovidedhealthinsurance.
(ii) Sharebasedpaymentsaretheperformancerightswhichareexpensedoverthevestingperiod(refertonote21intheconsolidatedfinancialstatements).
(iii) $90,000istheamountpaid/payabletoPilotHolePtyLtdreferabletoMartinReed’sDirectorsFees.
(iv) Theseamountsareaccountingaccrualsandhavenotactuallybeenpaidduringtheyear.
(v) Employeehas reached themaximumsupercontributionbase.Theamountofdeemedsuperannuation inexcessof themaximumcontributionbasewaspaidoutasasalary.
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DIRECTORSREPORT(CONTiNUED)
30 June 2015 Short-term Post Share Long Total Proportion Employee Benefits Employ- Based Term of total ment Payments Benefits performance related
Salary Cash Non Super- Performance Long & fees bonus monetary annuation Rights / Service benefits (i) and other Options (vii) Leave (vii) $ $ $ $ $ $ $
Directors
GStaltari(retired26November2014) 56,639 - - - - - 56,639 -
RFinlayson(ii) 628,679 172,566 5,078 46,349 120,926 53,403 1,196,683 38.7% 169,682(v)
GClifford 98,784 - - 24,549 - - 123,333 -
BParker 47,945 - - 42,055 - - 90,000 -
MReed–DirectorFees(iii) 90,000 - - - - - 90,000 -
MReed–ConsultingFees(iv) 227,469 - - - - - 227,469 -
STough 82,191 - - 7,809 - - 90,000 -
MConnelly(appointed1May2015) 13,699 - - 1,301 - - 15,000 -
KeyManagementPersonnel
CBradshaw(ii) 400,000 99,457 - 49,871 48,200 1,630 599,158 24.6%
GKaczmarek(ii) 350,000 64,712 - 44,243 64,225 2,513 525,693 24.5%
DHowe(ii) 256,250 50,846 4,394 30,979 36,061 6,132 384,662 22.6%
WTirvin(ii)(vi)(appointed30March2015) 65,997 - - 6,270 27,301 - 99,568 27.4%
Total 2,317,653 387,581 9,472 253,426 466,395 63,678 3,498,205
(i) Non-monetarybenefitsincludeGroupprovidedhealthinsurance.(ii) Sharebasedpaymentsaretheperformancerightswhichareexpensedoverthevestingperiod(refertonote21intheconsolidated
financialstatements).(iii) $90,000istheamountpaid/payabletoPilotHolePtyLtdreferabletoMartinReed’sDirectorsFees.(iv) anamountof$227,469hasbeenpaid/ispayabletoPilotHolePtyLtdrelatingtoprofessionalserviceprovidedbyMartinReed.(v) ThisisanestimatedvalueoftheTranche5PerformanceRightsapprovedbytheBoardandadvisedtotheaSXon22May2015.Even
thoughtheseperformancerightsaresubjecttoshareholderapproval(inNovember2015),aaSB2requiresanestimatetobemadeasemploymentserviceshavebeenrenderedpriortograntdate.iftheallocationofPerformanceRightsisnotapproved,thisdeemedvaluewillnotbereceived.
(vi) William(Troy)irvindidnotqualifytoreceiveacashbonushavingonlybeingappointedon30March2015.(vii)Theseamountsareaccountingaccrualsandhavenotactuallybeenpaidduringtheyear.
7. ContractualArrangementswithExecutiveKMP
Remunerationof theManagingDirectorandotherexecutivesare formalised in lettersofappointmentandemploymentagreements.Theseagreementsprovidedetailsofthesalaryandemploymentconditionsrelatingtoeachemployee.
ParticipationinthePerformanceRightsPlanissubjecttotheBoard’sdiscretion.Othermajorprovisionsoftheagreementsrelatingtoremunerationaresetoutbelow.
allemploymentagreementscomplywiththeprovisionsofPart2,D.2,Division2oftheCorporationsLaw.
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DIRECTORSREPORT(CONTiNUED)
NameTerm of agreement and notice period
Base salary (excluding superannuation)
Termination payments
RFinlayson,
Managingdirector
Nofixedterm3Months
$700,000pa ifMrFinlaysonisterminatedbytheCompanywithin1yearfollowinga“changeofcontrol”event,hewillbeentitledtoaredundancypaymentequalto12monthsearnings.
OtherwisepaymentiscalculatedbasedontheFairWorkact2009.
CBradshaw,
ChiefOperatingOfficer
Nofixedterm3Months
$400,000pa ifMrBradshawisterminatedbytheCompanywithin1yearfollowinga“changeofcontrol”event,hewillbeentitledtoaredundancypaymentequalto6monthsearnings.
OtherwisepaymentiscalculatedbasedontheFairWorkact2009.
GKaczmarek,
ChiefFinancialOfficer
Nofixedterm
3Months
$350,000pa ifMrKaczmarekisterminatedbytheCompanywithin1yearfollowinga“changeofcontrol”event,hewillbeentitledtoaredundancypaymentequalto6monthsearnings.
OtherwisepaymentiscalculatedbasedontheFairWorkact2009.
DHowe,
ChiefGeologist
Nofixedterm
3Months
$275,000pa ifMrHoweisterminatedbytheCompanywithin1yearfollowinga“changeofcontrol”event,hewillbeentitledtoaredundancypaymentequalto6monthsearnings.
OtherwisepaymentiscalculatedbasedontheFairWorkact2009.
WTirvin
ChiefCorporateDevelopmentOfficer
Nofixedterm
3Months
$275,000pa ifMrirvinisterminatedbytheCompanywithin1yearfollowinga“changeofcontrol”event,hewillbeentitledtoaredundancypaymentequalto6monthsearnings.
OtherwisepaymentiscalculatedbasedontheFairWorkact2009.
8. non-ExecutiveDirectorArrangements
The Board is ultimately responsible for determining and reviewing remuneration arrangements for Directors, within thelimitsapprovedbyshareholdersforsuchremuneration.ThemaximumaggregateamountthatcanbepaidforNon-executiveDirectorsremunerationissetat$500,000asapprovedbyshareholdersattheaGMheldon25November2011.
TheBoardpolicy fordetermining thenatureandamountof remunerationofDirectorsandKMP,aswellas therelevantspecificarrangements,aredetailedbelow.
Non-executiveDirectors’remuneration issubject toreviewfromtimetotime,astheDirectorsdeemappropriate,havingregardtothescope,scaleanddegreeofcomplexityoftheGroup’soperations.
Non-executivedirectorsreceiveaBoardretainerfeeandanadditionalfeeformembershipofaBoardcommittee.Theydonotreceiveperformancebasedpay.TheChairmandoesnotreceiveadditionalfeesforparticipatingonacommittee.allfeesprovidedtonon-executivedirectorsareinclusiveofsuperannuation.
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Base fees (including superannuation) From 1 July 2015 to 30 June 2016 From 1 July 2014 to 30 June 2015
Chairman $140,000 $140,000
Othernon-executivedirectors $80,000 $80,000
Additionalfees(includingsuperannuation)
MembershipofaBoardCommittee $10,000 $10,000
9. AdditionalStatutoryInformation
9A. Relative Proportion of Fixed vs Variable Remuneration Expense
Thefollowingtableshowstherelativeproportionsofexecutiveremunerationthatarelinkedtoperformanceandthosethatarefixed,basedontheamountsdisclosedasstatutoryremunerationexpenseinthetablesabove:
Fixed Remuneration At Risk - STI At Risk – LTI
Name 2016 2015 2016 2015 2016 2015
ExecutiveDirectors
RFinlayson 25% 61% 2% 15% 73% 24%
KeyManagementPersonnel
CBradshaw 75% 75% 7% 17% 18% 8%
GKaczmarek 70% 76% 7% 12% 23% 12%
DHowe 74% 77% 7% 13% 19% 10%
WTirvin 75% 73% 8% - 17% 27%
9B. Details of Share Based Compensation
Performance Rights
Performancerightsonlyvest90daysaftertheperformanceperiodendedduetoitbeingsubjecttoBoardapproval. Theperformancerightsareexpensedovertheperformanceperiodtowhichisconsistentwiththeperiodoverwhichtheserviceshavebeenperformed.
Thetermsandconditionsofeachgrantofperformancerightsaffectingremunerationinthecurrentorafuturereportingperiodareasfollows:
Tranche1
Grant Date Vesting date Performance period Value per perfomance % Vested Right at grant date
19November2013–Classa 28September2016 1July2013–30June2016 $0.195 -
19November2013–ClassB 28September2016 1July2013–30June2016 $0.215 -
19November2013–ClassC 28September2016 1July2013–30June2016 $0.135 -
Tranche2
Grant Date Vesting date Performance period Value per perfomance % Vested Right at grant date
23September2014–Classa 28September2016 1July2013–30June2016 $0.363 -
23September2014–ClassB 28September2016 1July2013–30June2016 $0.370 -
23September2014–ClassC 28September2016 1July2013–30June2016 $0.231 -
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Tranche3
Grant Date Vesting date Performance period Value per perfomance % Vested Right at grant date
26November2014–Classa 28September2017 1July2014–30June2017 $0.193 -
26November2014–ClassB 28September2017 1July2014–30June2017 $0.275 -
26November2014–ClassC 28September2017 1July2014–30June2017 $0.173 -
Tranche4
Grant Date Vesting date Performance period Value per perfomance % Vested Right at grant date
1april2015–Classa 28September2017 1July2014–30June2017 $0.338 -
1april2015–ClassB 28September2017 1July2014–30June2017 $0.410 -
1april2015–ClassC 28September2017 1July2014–30June2017 $0.253 -
Tranche5
Grant Date Vesting date Performance period Value per perfomance % Vested Right at grant date
21May2015–Classa 31December2016 21May2015–31December2016 $0.535 -
21May2015–ClassB 16March2017 16March2015–16March2017 $0.451 -
21May2015–ClassC 16March2018 16March2015–16March2018 $0.454 -
Tranche6
Grant Date Vesting date Performance period Value per perfomance % Vested Right at grant date
18December2015–Classa 28September2018 1July2015–30June2018 $0.427 -
18December2015–ClassC 28September2018 1July2015–30June2018 $0.570 -
18December2015–ClassC 28September2018 1July2015–30June2018 $0.395 -
Rightsgrantedundertheplancarrynodividendorvotingrights.
Detailsofperformancerightsprovidedaspartofremunerationtokeymanagementpersonnelareshownbelow.Thevestingconditionsaresetoutinsection“4–Executiveremunerationpolicyandframework”.Furtherinformationontheperformancerightsissetoutinnote21tothefinancialstatements.
DIRECTORSREPORT(CONTiNUED)
name FinancialYearofgrant
FinancialYearsinwhich
PerformanceRightsmayvest
numberofPerformance
Rightsgranted
valueofthePerformance
Rightatgrantdate
numberofPerformanceRightsvested
vested%
R Finlayson Tranche 1
2013/14(Classa)
2013/14(ClassB)
2013/14(ClassC)
Tranche 3
2014/15(Classa)
2014/15(ClassB)
2014/15(ClassC)
Tranche 5
2014/15(Classa)
2014/15(ClassB)
2014/15(ClassC)
2016/17
2016/17
2016/17
2016/17
2016/17
2016/17
2016/17
2016/17
2017/18
600,000
300,000
600,000
294,000
147,000
294,000
2,000,000
3,000,000
5,000,000
$117,000
$64,500
$81,000
$56,742
$40,425
$50,862
$760,000
$1,014,000
$1,690,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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DIRECTORSREPORT(CONTiNUED)
name FinancialYearofgrant
FinancialYearsinwhich
PerformanceRightsmayvest
numberofPerformance
Rightsgranted
valueofthePerformance
Rightatgrantdate
numberofPerformanceRightsvested
vested%
C Bradshaw Tranche 2
2014/15(Classa)
2014/15(ClassB)
2014/15(ClassC)
Tranche 4
2014/15(Classa)
2014/15(ClassB)
2014/15(ClassC)
Tranche 6
2015/16(Classa)
2015/16(ClassB)
2015/16(ClassC)
2016/17
2016/17
2016/17
2017/18
2017/18
2017/18
2018/19
2018/19
2018/19
120,000
60,000
120,000
92,000
46,000
92,000
80,000
40,000
80,000
$43,560
$22,200
$27,720
$31,096
$18,860
$23,276
$34,160
$22,800
$31,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
G Kaczmarek Tranche 2
2014/15(Classa)
2014/15(ClassB)
2014/15(ClassC)
Tranche 4
2014/15(Classa)
2014/15(ClassB)
2014/15(ClassC)
Tranche 6
2015/16(Classa)
2015/16(ClassB)
2015/16(ClassC)
2016/17
2016/17
2016/17
2017/18
2017/18
2017/18
2018/19
2018/19
2018/19
168,000
84,000
168,000
92,000
46,000
92,000
80,000
40,000
80,000
$60,984
$31,080
$38,808
$31,096
$18,860
$23,276
$34,160
$22,800
$31,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
D Howe Tranche 2
2014/15(Classa)
2014/15(ClassB)
2014/15(ClassC)
Tranche 4
2014/15(Classa)
2014/15(ClassB)
2014/15(ClassC)
Tranche 6
2015/16(Classa)
2015/16(ClassB)
2015/16(ClassC)
2016/17
2016/17
2016/17
2017/18
2017/18
2017/18
2018/19
2018/19
2018/19
90,000
45,000
90,000
68,000
34,000
68,000
80,000
40,000
80,000
$32,670
$16,650
$20,790
$22,984
$13,940
$17,204
$34,160
$22,800
$31,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
W T Irvin Tranche 2
2014/15(Classa)
2014/15(ClassB)
2014/15(ClassC)
Tranche 4
2014/15(Classa)
2014/15(ClassB)
2014/15(ClassC)
Tranche 6
2015/16(Classa)
2015/16(ClassB)
2015/16(ClassC)
2016/17
2016/17
2016/17
2017/18
2017/18
2017/18
2018/19
2018/19
2018/19
68,000
34,000
68,000
52,000
26,000
52,000
80,000
40,000
80,000
$24,684
$12,580
$15,708
$17,576
$10,660
$13,156
$34,160
$22,800
$31,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Theassessedfairvalueatgrantdateofperformancerightsgrantedtotheindividualsisallocatedequallyovertheperiodfromgrantdatetovestingdate,andtheamountisincludedintheremunerationtablesabove.
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FairvaluesatgrantdateareindependentlydeterminedusingaMonteCarlosimulationthattakesintoaccountthesharepriceatgrantdateandexpectedpricevolatilityoftheunderlyingshare,theexpecteddividendyield,therisk-freeinterestrateforthetermoftheperformancerightandthecorrelationofGroup’sTotalShareholdersReturn(TSR)andsharepricetotheTSRandsharepricesoftheothercompanieswithinthepeergroup.
9C. Equity Instruments held by KMP
Thetablesbelowshowthenumberof:-
(i) performancerightsoverordinarysharesintheCompanygrantedunderPerformanceRightsPlan;and
(ii) sharesintheCompany.
thatwereheldduringthefinancialyearbydirectorsandKMPoftheGroup,includingtheirclosefamilymembersandentitiesrelatedtothem.
(i) PerformanceRightsholdings
30 June 2016 Balance at beginning Granted as Vested Lapsed Balance at end of of period 1 July 2015 remuneration period 30 June 2016 (Unvested)
Directors
GClifford - - - - -
RFinlayson 12,235,000 - - - 12,235,000
MConnelly - - - - -
BParker(retired25November2015) - - - - -
MReed - - - - -
STough - - - - -
GStaltari - - - - -
KeyManagementPersonnel
CBradshaw 530,000 200,000 - - 730,000
GKaczmarek 650,000 200,000 - - 850,000
DHowe 395,000 200,000 - - 595,000
WTirvin 300,000 200,000 - - 500,000
Total 14,110,000 800,000 - - 14,910,000
(ii)Shareholdings
30 June 2016 Balance at beginning Granted as Vesting of Net change Balance at end of of period 1 July 2015 remuneration Rights - other period 30 June 2016
Directors
GClifford - - - - -
RFinlayson 1,181,819 - - - 1,181,819
MConnelly - - - - -
STough - - - - -
MReed - - - 30,000 30,000
BParker(retired25November2015) 118,182 - - (118,182) -
KeyManagementPersonnel
CBradshaw - - - - -
GKaczmarek 38,100 - - - 38,100
DHowe - - - - -
WTirvin - - - - -
Total 1,388,101 - - (88,182) 1,299,919
9D. Other Transactions with KMP
Duringtheyearanamountof$90,000(2015:$317,469)hasbeenpaid/ispayabletoPilotHolePtyLtd,anentitycontrolledbyMrMartinReed.TheamountrelatestoDirector’sFees.The2015amountincludedprofessionalservicesinrelationtotheThunderboxfeasibilitystudy($227,469).
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9E. Use of remuneration consultants
TheCompanysubscribesfortheMcDonaldGold&GeneralMiningindustriesRemunerationReport(australasia)aspreparedbyaonHewittLimitedasatooltousetobenchmarkremunerationlevelsoftheCompanyagainstthoseofthepeergroupminingcompanies.Thesereportsarereceivedtwiceannually.
9F. Voting on the Remuneration Report at the 2015 AGM
attheannualGeneralMeetingheldinNovember2015,theCompanyreceiveda“yes”voteofmorethan85%onitsRemunerationReportforthe2015financialyear.TheGroupdidnotreceiveanyspecificfeedbackfromshareholdersatthatmeeting.Duringtheyear,theCompanyconsultedwithvariousshareholdersandproxyadvisorygroupsonitsremunerationpractices.ManyofthecommentsandrecommendationsfromthesemeetingshavebeenincorporatedintotheGroup’sRemunerationpolicy.
ThisconcludestheauditedRemunerationReport.
InDEMnIFICATIOnAnDInSURAnCEOFOFFICERSAnDAUDITORS
TheCompany indemnifiesallDirectorsof theCompanynamed in this reportandcurrentand formerKMPof theGroupagainstallliabilitiestopersons(otherthanaGroupcompany)whichariseoutoftheperformanceoftheirnormaldutiesasaDirectororexecutiveofficer,unlesstheliabilityrelatestoconductinvolvingbadfaith.TheCompanyalsohasapolicytoindemnifytheDirectorsandexecutiveofficersagainstallcostsandexpensesincurredindefendinganactionthatfallswithinthescopeoftheindemnityandanyresultingpayments.ThereareDirector’sDeedofaccess,indemnityandinsuranceinplaceforallDirectorsoftheCompany.
Thecontractofinsuranceprohibitsdisclosureoftheamountofthepremiumandthenatureoftheliabilitiesinsuredunderthepolicy.
DuringtheyeartheCompanypaidthepremiumonaPersonalaccident-WorkingDirectorinsurancepolicyonbehalfoftheManagingDirectorasnormalworkerscompensation insurancecoverageforcompanydirectors isnotallowedundertheWesternaustralianWorker’sCompensationscheme.
Otherthantotheextentpermittedbylaw,theGrouphasnot,duringorsincethefinancialyear,indemnifiedoragreedtoindemnifyanauditoroftheGrouporanyrelatedbodycorporateagainstaliabilityincurredasanauditor.
AUDITOR’SInDEPEnDEnCEDECLARATIOn
Theauditor’sindependencedeclarationisattachedtothisreport.
nOn-AUDITSERvICES
Duringtheyear,BDOaudit(Wa)PtyLtd,theGroup’sauditor,andBDOCorporateTax(Wa)PtyLtd,arelatedpartyoftheGroup’sauditor,providedtaxcomplianceandadvisoryservicesinadditiontoauditservices.Together,BDOaudit(Wa)PtyLtdandBDOCorporateTax(Wa)PtyLtdreceived,orareduetoreceive,$76,487(2015:$63,067)forthenon-auditservices.TheDirectorsaresatisfiedthattheprovisionoftheseservicesiscompatiblewiththegeneralstandardofindependenceforauditorsimposedbytheCorporationsact2001anddonotunderminethegeneralprinciplesrelatingtoauditorindependenceassetoutinaPES110CodeofEthicsforProfessionalaccountantsastheydidnotinvolvereviewingorauditingtheauditor’sownwork,actinginamanagementordecisionmakingcapacityfortheGroup,actingasanadvocatefortheGrouporjointlysharingrisksandrewards.
ROUnDInGOFAMOUnTS
TheCompanyisacompanyofthekindreferredtoinaSiCinstrument2016/191,dated1april2016,andinaccordancewiththat instrument amounts in the Directors’ Report and the financial statements are rounded off to the nearest thousanddollars,unlessotherwiseindicated.
Signedinaccordancewitharesolutionofdirectorsmadepursuanttos.298(2)oftheCorporationsact2001.
Forandonbehalfoftheboard
RALEIGH FINLAYSON
Managing Director
25august2016
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38 Station StreetTel: +61 8 6382 4600
DECLARATION OF INDEPENDENCE BY PHILLIP MURDOCH TO THE DIRECTORS OF SARACEN MINERALHOLDINGS LIMITED
As lead auditor of Saracen Mineral Holdings Limited for the year ended 30 June 2016, I declare that, tothe best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 inrelation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Saracen Mineral Holdings Limited and the entities it controlled duringthe period.
Phillip Murdoch
Director
BDO Audit (WA) Pty Ltd
Perth, 25 August 2016
38 Station StreetSubiaco, WA 6008PO Box 700 West Perth WA 6872Australia
Tel: +61 8 6382 4600Fax: +61 8 6382 4601www.bdo.com.au
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, andform part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than forthe acts or omissions of financial services licensees
AUDITOR’SINDEPENDENCE DECLARATION
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2016 2015 Note $’000 $’000
Revenuefromcontinuingoperations 2 276,502 249,872
Mineoperatingcosts (178,802) (162,730)
Depreciationandamortisation 2 (33,896) (49,521)
Royalties (12,539) (11,097)
Grossprofitfromminingoperations 51,265 26,524
administrationexpenses 2 (8,165) (9,067)
Sharebasedpaymentsexpense 21 (3,635) (583)
Financecosts 2 (856) (1,039)
Otherrevenue 2 729 802
Profitondisposaloffixedassets 3 -
Expensingofdeferredexplorationcosts (1,005) (447)
Lossfromsaleofshares - (72)
Changeinfairvalueoflistedshares (1) 63
Profitbeforeincometax 38,335 16,181
incometaxexpense 4 (12,446) (5,033)
Profitafterincometaxfortheperiod 25,889 11,148
Othercomprehensiveincome/(loss),netofincometax
Itemsthatmaybereclassifiedsubsequentlytoprofitorloss
Fairvaluelossonhedginginstrumentsenteredintoforcashflowhedges(netofdeferredtax) 19(e) (5,967) (13,560)
Othercomprehensivelossfortheyear (5,967) (13,560)
Totalcomprehensiveincome/(loss)attributabletomembersofSaracenMineralHoldingsLimited 19,922 (2,412)
Earningspersharefortheyearattributabletothemembers
ofSaracenMineralHoldingsLimited:
Basicearnings(centspershare) 5 3.26 1.41
Dilutedearnings(centspershare) 5 3.20 1.40
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFor the Financial Year Ended 30 June 2016
Theconsolidatedstatementofprofitorlossandothercomprehensiveincomeshouldbereadinconjunctionwiththenotestothefinancialstatements.
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2016 2015 Note $’000 $’000
Currentassets
Cashandcashequivalents 23(a) 34,302 38,378
Tradeandotherreceivables 7 5,189 2,690
Financialderivativeinstruments 11 - 8,524
Otherfinancialassets 8 7 8
inventories 9 29,589 59,384
Otherassets 10 1,391 655
Totalcurrentassets 70,478 109,639
non-currentassets
Plantandequipment 13 84,797 44,436
Otherfinancialassets 12 55 55
Deferredtaxassets 4 - 6,326
Deferredexplorationandevaluationcosts 14 43,552 38,409
Mineproperties 15 163,221 101,444
Totalnon-currentassets 291,625 190,670
Totalassets 362,103 300,309
Currentliabilities
Tradeandotherpayables 16 27,331 17,869
Borrowings 18 1,373 802
Provisions 17 5,112 4,871
Totalcurrentliabilities 33,816 23,542
non-currentliabilities
Deferredtaxliabilities 4 3,562 -
Borrowings 18 2,359 570
Provisions 17 61,648 46,970
Totalnon-currentliabilities 67,569 47,540
Totalliabilities 101,385 71,082
netassets 260,718 229,227
Equity
Contributedequity 19(a) 253,013 245,079
Reserves 19(e) 7,736 10,068
(accumulatedLosses)/Retainedprofits (31) (25,920)
Totalequity 260,718 229,227
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 June 2016
Theconsolidatedstatementoffinancialpositionshouldbereadinconjunctionwiththenotestothefinancialstatements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the Financial Year Ended 30 June 2016
(Accumulated Cash Flow Share Based Contributed Losses) / Hedge Payments Total Equity Retained profits Reserve Reserves $’000 $’000 $’000 $’000 $’000
As at 1 July 2015 245,079 (25,920) 5,967 4,101 229,227
Profitfortheyearaftertax - 25,889 - - 25,889
Othercomprehensiveloss - - (5,967) - (5,967)
Totalcomprehensiveprofit/(loss)fortheyearaftertax - 25,889 (5,967) - 19,922
Transactionswithownersintheircapacityasowners
issueofordinarysharesasconsiderationforassetacquisition 7,934 - - - 7,934
Sharebasedpayments - - - 3,635 3,635
As at 30 June 2016 253,013 (31) - 7,736 260,718
Asat1July2014 245,079 (37,068) 19,527 3,518 231,056
Profitfortheyearaftertax - 11,148 - - 11,148
Othercomprehensiveloss - - (13,560) - (13,560)
Totalcomprehensiveprofit/(loss)fortheyearaftertax - 11,148 (13,560) - (2,412)
Transactionswithownersintheircapacityasowners
Sharebasedpayments - - - 583 583
Asat30June2015 245,079 (25,920) 5,967 4,101 229,227
Theconsolidatedstatementofchangesinequityshouldbereadinconjunctionwiththenotestothefinancialstatements.
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CONSOLIDATED STATEMENT OF CASH FLOwSFor the Financial Year ended 30 June 2016
2016 2015 Note $’000 $’000
Cashflowsfromoperatingactivities
Receiptsfromcustomers 276,502 249,872
Paymentstosuppliersandemployees (166,709) (184,316)
interestreceived 604 743
interestpaidandotherfinancecosts (593) (896)
netcashflowsprovidedbyoperatingactivities 23(b) 109,804 65,403
Cashflowsfrominvestingactivities
Proceedsfromsaleofshares - 10
Purchaseofplant,equipmentanddevelopmentassets (104,591) (35,933)
StampdutyonThunderboxacquisition - (2,260)
Explorationandevaluationcosts (7,326) (11,116)
Securitydepositrefund - 55
netcashflowsusedininvestingactivities (111,917) (49,244)
Cashflowsfromfinancingactivities
Paymentoffinanceleaseliabilities (1,396) (1,659)
Repaymentofborrowings - (11,950)
Paymentofloanestablishmentfees (567) (31)
netcashflowsusedbyfinancingactivities (1,963) (13,640)
netincrease/(decrease)incashheld (4,076) 2,519
Addopeningcashbroughtforward 38,378 35,859
Closingcashcarriedforward 23(a) 34,302 38,378
Theconsolidatedstatementofcashflowsshouldbereadinconjunctionwiththenotestothefinancialstatements.
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1 SUMMARYOFSIGnIFICAnTACCOUnTInGPOLICIES
(a) Reporting Entity
SaracenMineralHoldingsLimitedisafor-profit,publiccompanylistedontheaustralianSecuritiesExchange(tradingunderthecode:‘SaR’),incorporatedandoperatinginaustralia.
OperationsandPrincipalActivities
Theoperationsandprincipalactivitiescomprisemineraldevelopmentandexploration.
RegisteredOffice
Level4,89StGeorgesTerrace,PerthWesternaustralia6000.
(b) Basis of preparation
Statementofcompliance
Theconsolidatedfinancialstatementsaregeneralpurposefinancialstatementswhichhavebeenpreparedinaccordancewith australian accounting Standards Board (aaSB) and the Corporations act 2001. The consolidated financialstatementscomplywith internationalFinancialReportingStandards (iFRS)adoptedby the internationalaccountingStandardsBoard(iaSB).
TheconsolidatedfinancialstatementswereauthorisedforissuebytheBoardofDirectorson25august2016
Basisofmeasurement
Theconsolidatedfinancialstatementshavebeenpreparedonagoingconcernbasisinaccordancewiththehistoricalcostconvention,unlessotherwisestated.
Functionalandpresentationcurrency
Theseconsolidatedfinancialstatementsarepresentedinaustraliandollars,whichistheGroup’sfunctionalcurrency.
Roundingoff
TheCompanyisacompanyofthekindreferredtoinaSiCinstrument2016/191,dated1april2016,andinaccordancewiththatinstrumentamountsinthefinancialreportareroundedofftothenearestthousanddollars,unlessotherwisestated.
new,revisedoramendedstandardsandinterpretationsadoptedbythegroup
TheGrouphasadoptedallof thenew,revisedoramendingaccountingStandardsandinterpretations issuedbytheaustralianaccountingStandardsBoard(‘aaSB’)thataremandatoryforthecurrentreportingperiod.
anynew,revisedoramendingaccountingStandardsorinterpretationsthatarenotyetmandatoryhavenotbeenearlyadopted.
Theadoptionof theseaccountingStandardsandinterpretationsdidnothaveanysignificant impactonthefinancialperformanceorpositionoftheconsolidatedentity.
ThefollowingaccountingStandardsandinterpretationsaremostrelevanttotheGroup:
(i) aaSB2013-9amendmentstoaustralianaccountingStandards–ConceptualFramework,MaterialityandFinancialinstruments
(ii)aaSB2015-3amendmentstoaustralianaccountingStandardsarisingfromtheWithdrawalofaaSB1031Materiality
newstandardsandinterpretationsnotyetmandatoryorearlyadopted
australian accounting Standards and interpretations that have recently been issued or amended but are not yetmandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2016. Theconsolidatedentity’sassessmentoftheimpactoftheseneworamendedaccountingStandardsandinterpretations,mostrelevanttotheGroup,aresetoutbelow.
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year ended 30 June 2016
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1 SUMMARYOFSIGnIFICAnTACCOUnTInGPOLICIES(continued)
(b) Basisofpreparation(continued)
(i) aaSB9Financialinstrumentsanditsconsequentialamendments
Thisstandardanditsconsequentialamendmentsareapplicabletoannualreportingperiodsbeginningonorafter1January2018andcompletesphasesiandiiioftheiaSB’sprojecttoreplaceiaS39(aaSB139)‘Financialinstruments:RecognitionandMeasurement’.Thisstandardintroducesnewclassificationandmeasurementmodelsforfinancialassets,usingasingleapproachtodeterminewhetherafinancialassetismeasuredatamortisedcostorfairvalue.TheaccountingforfinancialliabilitiescontinuestobeclassifiedandmeasuredinaccordancewithaaSB139,withoneexception,beingthattheportionofachangeoffairvaluerelatingtotheentity’sowncreditriskistobepresentedinothercomprehensiveincomeunlessitwouldcreateanaccountingmismatch.Chapter6‘Hedgeaccounting’supersedesthegeneralhedgeaccountingrequirementsinaaSB139andprovidesanewsimplerapproachtohedgeaccountingthatisintendedtomorecloselyalignwithriskmanagementactivitiesundertakenbyentitieswhenhedgingfinancialandnon-financialrisks.TheGroupwilladoptthisstandardandtheamendmentsfrom1July2018.itisnotexpectedfortheapplicationofthenewstandardtohaveasignificantimpactontheentity’sfinancialstatements.
(ii) aaSB15RevenuefromContractswithCustomers
TheaaSBhasissuedthisnewstandardfortherecognitionofrevenue.Thisstandardisapplicabletoannualreportingperiodsbeginningonorafter1January2018.ThestandardwillreplaceaaSB118whichcoverscontractsforgoodsandservicesandaaSB111whichcoversconstructioncontracts.Thenewstandardisbasedontheprinciplethatrevenueisrecognisedwhencontrolofagoodorservicetransferstoacustomer–sothenotionofcontrolreplacestheexistingnotionofrisksandrewards.itisnotexpectedfortheapplicationofthenewstandardtohaveasignificantimpactontheentity’sfinancialstatements.
(iii)aaSB16Leases
aaSB 16 will replace aaSB 117 Leases, interpretation 4 Determining whether an arrangement contains a Lease,interpretation 115 Operating Leases – incentives and interpretation 127 Evaluating the Substance of TransactionsinvolvingtheLegalFormofaLease.Thisstandardisapplicabletoannualreportingperiodsbeginningonorafter1January2019.TheStandardwillprovideacomprehensivemodelfortheidentificationofleasearrangementsandtheirtreatmentinthefinancialstatementsofbothlesseesandlessors.
ThenewStandardintroducesthreemainchanges:
• Enhancedguidanceonidentifyingwhetheracontractcontainsalease;
• acompletelynew leasesaccountingmodel for lessees that require lessees to recogniseall leasesonbalancesheet,exceptforshort-termleasesandleasesoflowvalueassets;and
• Enhanceddisclosures.
Lessoraccountingwillnotsignificantlychange.
TheGroupwilladoptthisstandardandtheamendmentsfrom1July2019.Duetotherecentreleaseofthisstandard,theentityhasnotyetmadeadetailedassessmentoftheimpactofthisstandard.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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(b) Basisofpreparation(continued)
(iv)Newstandardsandinterpretationsnotexpectedtohaveasignificantimpact
ThefollowingstandardsarenotyeteffectiveandarenotexpectedtohaveasignificantimpactontheGroup’sconsolidatedfinancialstatements:
Standard/Interpretation Effective for annual Expected to be initially reporting periods applied in the financial beginning on or after year ending
aaSB2014-3‘amendmentstoaustralianaccountingStandards–accountingforacquisitionsofinterestsinJointOperations’ 1January2016 30June2017
aaSB2014-4‘amendmentstoaustralianaccountingStandards–ClarificationofacceptableMethodsofDepreciationandamortisation’ 1January2016 30June2017
aaSB2014-9‘amendmentstoaustralianaccountingStandards–EquityMethodinSeparateFinancialStatements’ 1January2016 30June2017
aaSB2015-1‘amendmentstoaustralianaccountingStandards–annualimprovementstoaustralianaccountingStandards2012-2014Cycle’ 1January2016 30June2017
aaSB2015-2‘amendmentstoaustralianaccountingStandards–Disclosureinitiative:amendmentstoaaSB101’ 1January2016 30June2017
Significantjudgements,estimatesandassumptions
ThepreparationoftheGroup’sconsolidatedfinancialstatementsrequiresmanagementtomakejudgementsestimatesandassumptionsthataffectthereportedamountsofrevenues,expenses,assetsandliabilities,andtheaccompanyingdisclosuresatthedateoftheconsolidatedfinancialstatements.Estimatesandassumptionsarecontinuallyevaluatedandarebasedonmanagement’sexperienceandotherfactors,includingexpectationsoffutureeventsthatarebelievedto be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result inoutcomesthatrequireamaterialadjustmenttothecarryingamountofassetsorliabilitiesaffectedinfutureperiods.
inparticular,theGrouphasidentifiedanumberofareaswheresignificantjudgements,estimatesandassumptionsarerequired.FurtherinformationoneachoftheseareasandhowtheyimpactthevariousaccountingpoliciesareeitherdescribedwiththeassociatedaccountingpolicynotewithinNote1oraredescribedbelow:
Theseinclude:
Judgements,estimatesandassumptions:
• assetacquisitionnotconstitutingaBusiness (Note1(x))
• Explorationandevaluationexpenditure (Notes1(s)and14)
• impairmentofassets (Note1(o))
• inventories (Notes1(n)and9)
• Minerehabilitation (Notes1(u)and17)
• Orereserveestimates (Notes1(t)and15)
• Productionstartdate (Note1(y))
• Recoveryofdeferredtaxassets (Notes1(f)and4)
• Sharebasedpayments (Notes1(i)and21)
• Strippingcosts (Notes1(t)and15)
1 SUMMARYOFSIGnIFICAnTACCOUnTInGPOLICIES(continued)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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(c) Principles of Consolidation
Subsidiaries
TheconsolidatedfinancialstatementscomprisethefinancialstatementsofSaracenMineralHoldingsLimitedanditssubsidiaries(theGroup)asat30Juneeachyear.
Subsidiariesareallentities(includingstructuredentities)overwhichtheGrouphascontrol.TheGroupcontrolsanentitywhentheGroupisexposedto,orhasrightsto,variablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowertodirecttheactivitiesoftheentity.SubsidiariesareconsolidatedfromthedateonwhichcontrolistransferredtotheGroupandceasetobeconsolidatedfromthedateonwhichcontrolistransferredoutoftheGroup.
TheacquisitionmethodofaccountingisusedtoaccountforbusinesscombinationsbytheGroup.
inpreparingtheconsolidatedfinancialstatements,allintercompanybalancesandtransactions,incomeandexpensesandprofitandlossesfromintra-grouptransactionshavebeeneliminatedinfull.Unrealisedlossesarealsoeliminatedunlessthetransactionprovidesevidenceofanimpairmentofthetransferredasset.Thefinancialstatementsofthesubsidiariesarepreparedforthesamereportingperiodastheparentcompany,usingconsistentaccountingpolicies.
(d) Segment reporting
OperatingsegmentsarereportedinamannerconsistentwiththeinternalreportingprovidedtotheBoardofDirectors.
(e) Revenue Recognition
RevenueisrecognisedtotheextentthatitisprobablethattheeconomicbenefitswillflowtotheGroupandtherevenuecanbereliablymeasured.Thefollowingspecificrecognitioncriteriamustbemetbeforerevenueisrecognised:
Goldandsilversales
Revenuefromthesaleofgoldandsilverismeasuredatfairvalueoftheconsiderationreceivedorreceivable.Revenueisrecognisedwhenthesignificantrisksandrewardsofownershiphavebeentransferredtothebuyer.
Interestincome
interestincomeisrecognisedwhentheGroupgainscontroloftherighttoreceivetheinterestpayment.
(f) Taxation
Currenttax
Currenttaxistheexpectedtaxpayableorreceivableonthetaxableincomeorlossfortheyear,usingtaxratesenactedorsubstantivelyenactedatthereportingdate,andanyadjustmenttotaxpayableinrespectofpreviousyears.
Judgement is required in determining the provision for income tax. There are many transactions and calculationsundertakenduringtheordinarycourseofbusinessforwhichtheultimatetaxdeterminationisuncertain.TheGrouprecognisesassetsandliabilitiesforthepotentialtaxeffectbasedontheGroup’scurrentunderstandingoftaxlawsandrequirements.Wherethefinaltaxoutcomeoftheseitemsisdifferentfromthecarryingamounts,suchdifferenceswillimpactthecurrentanddeferredtaxassetsand/orprovisionsintheperiodinwhichsuchdeterminationismade.
Deferredtax
Deferred tax is recognisedon temporarydifferencesbetween thecarryingamountsof assetsand liabilities in thefinancialstatementsandthecorrespondingtaxbasesusedinthecomputationoftaxableprofit.Deferredtaxliabilitiesaregenerallyrecognisedforall taxabletemporarydifferences.Deferredtaxassetsaregenerallyrecognisedforalldeductibletemporarydifferencestotheextentthatit isprobablethattaxableprofitswillbeavailableagainstwhichthosedeductibletemporarydifferencescanbeutilised.Suchdeferredtaxassetsandliabilitiesarenotrecognisedifthetemporarydifferencearisesfromgoodwillorfromtheinitialrecognition(otherthaninabusinesscombination)ofotherassetsandliabilitiesinatransactionthataffectsneitherthetaxableprofitnortheaccountingprofit.
Thecarryingamountofdeferredtaxassetsisreviewedattheendofeachreportingperiodandreducedtotheextentthatitisnolongerprobablethatsufficienttaxableprofitswillbeavailabletoallowallorpartoftheassettoberecovered.
1 SUMMARYOFSIGnIFICAnTACCOUnTInGPOLICIES(continued)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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(f) Taxation (continued)
Deferredtaxassetsandliabilitiesaremeasuredatthetaxratesthatareexpectedtoapplyintheperiodinwhichtheliability is settledor theasset realised,basedon tax rates (and tax laws) thathavebeenenactedor substantivelyenactedby theendof thereportingperiod.Themeasurementofdeferredtax liabilitiesandassetsreflects thetaxconsequencesthatwouldfollowfromthemannerinwhichtheGroupexpects,attheendofthereportingperiod,torecoverorsettlethecarryingamountofitsassetsandliabilities.
DeferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttosetoffcurrenttaxassetsagainstcurrenttaxliabilitiesandwhentheyrelatetoincometaxesleviedbythesametaxationauthorityandtheGroupintendstosettleitscurrenttaxassetsandliabilitiesonanetbasis.
Significantjudgements,estimatesandassumptions
Deferredtaxassets,includingthosearisingfromunutilisedtaxlosses,requiremanagementtoassessthelikelihoodthat the Group will comply with the relevant tax legislation and will generate sufficient taxable earnings in futureperiods in order to recognise and utilise those deferred tax assets. Estimates of future taxable income are basedonforecastcashflowsfromoperations.Theseassessmentsrequiretheuseofestimatesandassumptionssuchascommodityprices,exchangeratesandoperatingperformanceoverthelifeoftheassets.
GoodsandServicesTax(GST)
Revenues,expensesandassetsarerecognisednetoftheamountofGSTexcept:
• wheretheGSTincurredonapurchaseofgoodsandservicesisnotrecoverablefromthetaxationauthority,inwhichcasetheGSTisrecognisedaspartofthecostofacquisitionoftheassetoraspartoftheexpenseitemasapplicable;and
• receivablesandpayablesarestatedwiththeamountofGSTincluded.
TheamountofGSTrecoverablefrom,orpayableto,thetaxationauthorityisincludedaspartofreceivablesorpayablesin the statement of financial position. Commitments and contingencies are disclosed net of the amount of GSTrecoverablefrom,orpayableto,thetaxationauthority.
(g) Financial Assets and Liabilities
FinancialassetsandfinancialliabilitiesarerecognisedontheconsolidatedstatementoffinancialpositionwhentheGroupbecomespartytothecontractualprovisionsofthefinancialinstrument.afinancialassetisderecognisedwhenthecontractualrightstothecashflowsfromthefinancialassetsexpireoraretransferredandnolongercontrolledbytheentity.afinancialliabilityisremovedfromthestatementoffinancialpositionwhentheobligationspecifiedinthecontractisdischarged,cancelledorexpires.
Listedsharesheldfortradingareincludedinthecategoryfinancialassetsatfairvaluethroughprofitorloss.Financialassetsareclassifiedasheldfortradingiftheyareacquiredforthepurposeofsellinginthenearterm.Financialassetsatfairvaluethroughprofitorlossarestatedatfairvalue,withanyresultantgainorlossrecognisedinprofitorloss.
Financialassetsnotmeasuredatfairvaluecomprise:
• loansandreceivablesbeingnon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket.Thesearemeasuredatamortisedcostusingtheeffectiveinterestmethod.
• held-to-maturityinvestmentsbeingnon-derivativefinancialassetswithfixedordeterminablepaymentsandfixedmaturitythatwillbeheldtomaturity.Thesearemeasuredatamortisedcostusingtheeffectiveinterestmethod.
• investmentsinequityinstrumentsthatdonothaveaquotedmarketpriceinanactivemarketandwhosefairvaluecannotbereliablymeasured.Thesearemeasuredatcost.
available-for-salefinancialassetsarenon-derivativefinancialassetsthatarenotclassifiedasloansandreceivables,held-to-maturity investments or financial assets at fair value through profit or loss. a gain or loss arising from achangeinthefairvalueofanavailable-for-salefinancialassetisrecogniseddirectlyinequity,throughthestatementofchangesinequity(exceptforimpairmentlossesandforeignexchangegainsandlosses)untilthefinancialassetisderecognisedatwhichtimethecumulativegainorlosspreviouslyrecognisedinequityisrecognisedinprofitorloss.
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(h) Property, Plant and Equipment
Buildings, plant and equipment are stated at historical cost less accumulated depreciation and any accumulatedimpairmentlosses.Historicalcostincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheitems.
Subsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheGroupandthecostoftheitemcanbemeasuredreliably.allotherrepairsandmaintenancearechargedtotheincomestatementduringthefinancialperiodinwhichtheyareincurred.
Depreciationiscalculatedonastraight-linemethodovertheestimatedusefullife,orovertheremaininglifeofmineifthatisshorterandthereisnoalternativeusefortheasset.Theusefullivesofmajorassetsofacash-generatingunitareoftendependantonthelivesoftheorebodiesintheregiontowhichtheyrelate.Wherethemajorassetsofacash-generatingunitarenotdependantonthelifeofarelatedoreorebody,managementappliesjudgementinestimatingtheremainingservicepotentialoflong-livedassets.
Thefollowingusefullivesareusedinthecalculationofdepreciation:
Plantandequipment 3–33years
Capitalworkinprogressisprojectsofacapitalnaturewhichusuallyrelatestotheconstruction/installationofbuildings,plantorequipment.Uponcompletion(whenreadyforuse)capitalworkinprogressistransferredtotherelevantassetcategory.Capitalworkinprogressisnotdepreciated.
Where depreciation is attributable to exploration and evaluation activities, costs are treated in accordance with theaccountingPolicyNote1(s).Theassets’residualvalue,useful livesandamortisationmethodsarereviewedateachfinancialyearendandifappropriateadjusted.
(i) Employee Benefits
Short-termemployeebenefits
Liabilitiesforwagesandsalaries,includingnon-monetarybenefits,annualleaveandlongserviceleaveexpectedtobesettledwithin12monthsofthereportingdatearerecognisedincurrentliabilitiesinrespectofemployees’servicesuptothereportingdateandaremeasuredattheamountsexpectedtobepaidwhentheliabilitiesaresettled.
Otherlong-termemployeebenefits
Theliabilityforannualleaveandlongserviceleavenotexpectedtobesettledwithin12monthsofthereportingdateare recognised innon-current liabilities,provided there isanunconditional right todefersettlementof the liability.Theliabilityismeasuredasthepresentvalueofexpectedfuturepaymentstobemadeinrespectofservicesprovidedbyemployeesuptothereportingdateusingtheprojectedunitcreditmethod.Considerationisgiventotheexpectedfuturewageandsalarylevels,experienceofemployeedeparturesandperiodsofservice.Expectedfuturepaymentsarediscountedusingmarketyieldsatthereportingdateonnationalcorporatebondswithtermstomaturityandcurrencythatmatch,ascloselyaspossible,theestimatedfuturecashoutflows.
Share-basedpayments
SharebasedcompensationbenefitsareprovidedtoemployeesviaaPerformanceRightsPlan(Note21).Thefairvalueofoptions/rightsgrantedunderthisschemeisrecognisedasasharebasedpaymentexpensewithacorrespondingincreaseinequity.Thetotalamounttobeexpensedisdeterminedbyreferencetothefairvalueoftherightsgranted,which includes any market performance conditions and the impact of any non-vesting conditions but excludes theimpactofanyserviceandnon-marketperformancevestingconditions.
Non-marketvestingconditionsareincludedinassumptionsaboutthenumberofrightsthatareexpectedtovest.Thetotalexpenseisrecognisedoverthevestingperiod,whichistheperiodoverwhichallofthespecifiedvestingconditionsaretobesatisfied.attheendofeachperiod,theentityrevisesitsestimatesofthenumberofrightsthatareexpectedtovestbasedonthenon-marketvestingconditions.itrecognisestheimpactoftherevisiontooriginalestimates,ifany,inprofitorloss,withacorrespondingadjustmenttoequity.
TheGroupmeasures thecostofequitysettled transactionswith vendorsby reference to the fair valueofgoodsorservicesreceived.
Significantjudgements,estimatesandassumptions
The Group measures the cost of equity settled transactions with employees by reference to the fair value of equityinstrumentsatthedateatwhichtheyaregranted.ThefairvalueisdeterminedusingtheassumptionsdetailedinNote21.
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(j) Superannuation Funds
TheGroupcontributestoseveralaccumulationtypesuperannuationfunds.Contributionsarechargedasanexpenseastheyaremade.FurtherinformationissetoutinNote20(e).
(k) Earnings Per Share
Basicearningspershareiscalculatedasprofit/(loss)aftertaxattributabletomembers,adjustedtoexcludecostsofservicing equity (other than dividends) and preference share dividends, divided by the weighted average number ofordinaryshares,adjustedforanybonuselement.
Dilutedearningspershareiscalculatedasprofit/(loss)aftertaxattributabletomembers,adjustedfor costs ofservicingequity(otherthandividends)andpreferencesharedividends, the after tax effect of dividends andinterestassociatedwithdilutivepotentialordinarysharesthathavebeenrecognisedasexpenses,and other non-discretionarychangesinrevenuesorexpensesduringtheperiodthatwouldresultfromthedilutionofpotentialordinarysharesdividedbytheweightedaveragenumberofordinarysharesanddilutivepotentialordinaryshares,adjustedforanybonuselement.
(l) Cash and Cash Equivalents
Cashonhandandinbankandshort-termdepositsarestatedatnominalvalue.Forthepurposeofthestatementofcashflows,cashincludescashonhandandinbank,andbanksecuritiesreadilyconvertibletocash,netofoutstandingbankoverdrafts.
(m) Trade and Other Receivables
Receivablestobesettledwithin30-90daysarecarriedatamountsdue.Thecollectabilityofdebtsisassessedatthereportingdateandspecificallowanceismadeforanydoubtfulaccounts.
(n) Inventories
Rawmaterialsandstoresarevaluedatthelowerofcostandnetrealisablevalue.Regularreviewsareundertakentoestablishwhetheranyitemsareobsoleteordamaged,andifsotheircarryingvalueiswrittendowntonetrealisablevalue.
inventoriesoforeandgoldincircuitarevaluedatthelowerofcostandnetrealisablevalue.Costscomprisedirectmaterial,labourandanappropriateproportionofvariableandfixedoverheadonthebasisofnormaloperatingcapacity,andareincludedaspartofmineoperatingcostsintheconsolidatedstatementofprofitorlossandcomprehensiveincome.Netrealisablevalueistheestimatedsellingpriceintheordinarycourseofbusinesslessprocessingcostandtheestimatedsellingcost.
iftheorestockpileisnotexpectedtobeprocessedin12monthsafterreportingdate,itisincludedinnon-currentassetsandthenetrealisablevalueiscalculatedonadiscountscashflowbasis.
Significantjudgements,estimatesandassumptions
inventoriesrequirecertainestimatesandassumptionsmostnotablyinregardsgrades,volumesanddensities.
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the numberofcontainedouncesbasedonassaydata,andtheestimatedrecoverypercentage.Stockpiletonnagesareverifiedtoperiodicsurveys.
Netreliablevaluetestsareperformedateachreportingdateandrepresenttheestimatefuturesalespriceofgold,lesscostofcompletion(processingcosts)andtheestimatedcostnecessarytoperformthesale.
Suchestimatesandassumptionsmaychangeasnewinformationbecomesavailableandcouldimpactonthecarryingvalueofinventories(Note9).
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(o) Impairment of Assets
TheGroupundertakesanimpairmentreviewtodeterminewhetheranyindicatorsofimpairmentarepresent.Whereindicatorsofimpairmentexist,anestimateoftherecoverableamountoftheCashGeneratingUnit(CGU)ismade.animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separatelyidentifiable cash flows. Where an impairment loss subsequently reverses, the carrying amount of the asset, otherthan goodwill, is increased to the revised estimate of its recoverable amount, but only to the extent the increasedcarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognisedinprioryears.areversalofanimpairmentlossisrecognisedimmediatelyinprofitorloss.
animpairmentindicatorassessmentwasundertakenforalloperationatreportingdateanditwasconcludedthatnoindicatorswhereidentifiedwhichwouldgiverisetoimpairmenttesting.
Significantjudgements,estimatesandassumptions
assessmentsoftherecoverableamountsrequiretheuseofestimatesandassumptionssuchasreserves,minelives,discountrates,exchangerates,commodityprices,gradeoforemined,recoverypercentage,operatingperformance,costsandcapitalestimates.
(p) Trade and Other Payables
LiabilitiesarerecognisedforamountstobepaidinthefutureforgoodsandservicesreceivedwhetherornotbilledtotheGroup.Tradepayablesareusuallysettledwithin30daysofrecognition.
(q) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequentlymeasuredatamortisedcost.anydifferencebetweentheproceeds(netoftransactioncosts)andtheredemptionamountisrecognisedinprofitorlossovertheperiodoftheborrowingsusingtheeffectiveinterestmethod.Feespaidontheestablishmentofloanfacilitiesarerecognisedastransactioncostsoftheloantotheextentthatitisprobablethatsomeorallofthefacilitywillbedrawndown.inthiscase,thefeeisdeferreduntilthedrawdownoccurs.Totheextentthereisnoevidencethatitisprobablethatsomeorallofthefacilitywillbedrawndown,thefeeiscapitalisedasaprepaymentforliquidityservicesandamortisedovertheperiodofthefacilitytowhichitrelates.
(r) Provisions
ProvisionsarerecognisedwhentheGrouphasapresentobligationasaresultofapastevent,itisprobableafuturesacrificeofeconomicbenefitswillberequiredandareliableestimateofobligationcanbemade.
(s) Exploration and Evaluation Expenditure
Explorationandevaluationcostsrelatedtoareasofinterestarecarriedforwardtotheextentthat:
• therightstotenureoftheareasof interestarecurrentandtheGroupcontrolstheareaof interest inwhichtheexpenditurehasbeenincurred;and
• suchcostsareexpectedtoberecoupedthroughsuccessfuldevelopmentandexploitationoftheareaofinterest,oralternativelybyitssale;or
• explorationandevaluationactivities intheareaof interesthavenotatthereportingdatereachedastagewhichpermitsareasonableassessmentoftheexistenceorotherwiseofeconomicallyrecoverablereserves,andactiveandsignificantoperationsin,orinrelationto,theareaofinterestarecontinuing.
Explorationandevaluationcostsincludetheacquisitionofrightstoexplore,studies,exploratorydrilling,samplingandassociatedactivitiesandanallocationofdepreciationandamortisationofassetsusedinexplorationandevaluationactivities.Generalandadministrativecostsareincludedinthemeasurementofexplorationandevaluationcostswheretheyarerelateddirectlytooperationalactivitiesinaparticularareaofinterest.
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(s) Exploration and Evaluation Expenditure (continued)
The above accounting policy requires certain estimates and assumptions on future events and circumstances, inparticularwhetheraneconomicallyviableextractionoperationcanbeestablished.Theseestimatesandassumptionsmaychangeasnewinformationbecomesavailableandcouldhaveamaterialimpactonthecarryingvalueofdeferredexplorationandevaluationcosts(Note14).Explorationandevaluationassetsareassessedforimpairmentwherefactsandcircumstancessuggestthatthecarryingamountoftheassetsmayexceeditsrecoverableamount.iftherecoverableamountislessthanthecarryingamount,theassetiswrittendowntoitsrecoverableamountandanimpairmentlossrecognised.
Whereeconomicallyrecoverablereservesforanareaof interesthavebeenidentified,andadecisiontodevelophasoccurred, capitalisedexpenditure isclassifiedasminesunderconstruction. in theevent thatanareaof interest isabandonedoriftheDirectorsconsidertheexpendituretobeofnovalue,accumulatedcostscarriedforwardarewrittenoffintheyearinwhichthatassessmentismade.
Significantjudgements,estimatesandassumptions
TheapplicationoftheGroup’saccountingpolicyforexplorationandevaluationexpenditurerequirescertainestimatesandassumptionsonfutureeventsandcircumstances,inparticularwhetheraneconomicallyviableextractionoperationcanbeestablished.Theseestimatesandassumptionsmaychangeasnewinformationbecomesavailableandcouldhaveamaterialimpactonthecarryingvalueofdeferredexplorationandevaluationcosts(Note14).if,afterexpenditureis capitalised, information becomes available suggesting that the recovery of expenditure is unlikely, the relevantcapitalisedamountiswrittenoffinthestatementofprofitorlossandothercomprehensiveoncomeintheperiodwhenthenewinformationbecomesavailable.
(t) Mines Properties
Mines under construction are accumulated separately for each area of interest in which economically recoverablereserveshavebeenidentifiedandadecisiontodevelophasoccurred.Thisexpenditureincludesallcapitalisedexplorationandevaluationexpenditureinrespectoftheareaofinterest,directcostsofconstruction,anappropriateallocationofoverheadsandwhereapplicableborrowingcostscapitalisedduringconstruction.Onceminingoftheareaofinterestcancommence,theaggregatedcapitalisedcostsareclassifiedundernon-currentassetsasminesinproductionoranappropriateclassofproperty,plantandequipment.
Mines in production represent the aggregated exploration and evaluation expenditure and capitalised developmentcostsinrespectofareasofinterestinwhichminingisreadytoorhascommenced.Minedevelopmentcostsaredeferreduntilcommercialproductioncommences,atwhichtimetheyareamortisedonaunits-of-productionbasisoverthemineablereserves.Onceproductioncommences,furtherdevelopmentexpenditureisclassifiedaspartofthecostofproduction,unlesssubstantialfutureeconomicbenefitscanbeestablished.
Deferredstrippingcostsrepresentcertainminingcosts,principallythosethatrelatetothestrippingofwaste,whichprovidesaccesssothatfutureeconomicallyrecoverableorecanbemined.Stripping(i.e.overburdenandotherwasteremoval)costsincurredintheproductionphaseofasurfaceminearecapitalisedtotheextentthattheyimproveaccesstoanidentifiedcomponentoftheorebodyandaresubsequentlyamortisedonasystematicbasisovertheexpectedusefullifeoftheidentifiedcomponentoftheorebody.CapitalisedstrippingcostsaredisclosedasacomponentofMineProperties.
Componentsofanorebodyaredeterminedwithreferencetolifeofmineplansandtakeaccountoffactorssuchasthegeographicalseparationofmininglocationsand/ortheeconomicstatusofminedevelopmentdecisions.
Capitalisedstrippingcostsareinitiallymeasuredatcostandrepresentanaccumulationofcostsdirectlyincurredinperformingthestrippingactivitythatimprovesaccesstotheidentifiedcomponentoftheorebody,plusanallocationofdirectlyattributableoverheadcosts.
The amount of stripping costs deferred is based on a relevant production measure which uses a ratio obtained bydividingthetonnageofwasteminedbythequantityoforeminedforanidentifiedcomponentoftheorebody.Strippingcosts incurred in theperiod foran identifiedcomponentof theorebodyaredeferredto theextent that thecurrentperiodratioexceedstheexpectedwastetoratioforthelifeoftheidentifiedcomponentoftheorebody.Suchdeferredcostsarethenchargedagainstthestatementofprofitandlosswhenthestrippingratiofallsbelowthelifeofmineratio.Theseareafunctionoftheminedesignandthereforeanychangestothedesignwillgenerallyresultinchangestotheratio.Changesinothertechnicaloreconomicparametersthatimpactonreservesmayalsohaveanimpactonthecomponentratioeventhoughtheymaynotimpacttheminedesign.
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(t) Mines Properties (continued)
Changestothelifeofmineplan,identifiedcomponentsofanorebody,strippingratios,unitsofproductionandexpectedusefullifeareaccountedforprospectively.
Deferredstrippingcostsformpartofthetotalinvestmentinacashgeneratingunit,whichisreviewedforimpairmentifeventsorchangesincircumstancesindicatethatthecarryingvaluemaynotberecoverable.
Significantjudgements,estimatesandassumptions
Significant judgement is required to distinguish between development stripping and production stripping and todistinguishbetweentheproductionstrippingthatrelatestotheextractionofinventoryandthatwhichrelatestothecreationofastrippingasset.
Once the Group has identified its production stripping for each surface mining operation it identifies the separatecomponentsoftheorebodiesforeachofitsminingoperations.anidentifiablecomponentisaspecificvolumeoftheorebodythatismademoreaccessiblebythestrippingactivity.Significantjudgementisrequiredtoidentifyanddefinethesecomponents,andalsotodeterminetheexpectedvolumesofwastetobestrippedandoretobeminedineachofthesecomponents.Theseassessmentsareundertakenforeachindividualminingoperationbasedontheinformationavailableinthemineplan.
Judgementisalsorequiredtoidentifyasuitableproductionmeasuretobeusedtoallocateproductionstrippingcostsbetween inventoryandanystrippingactivityasset(s) foreachcomponent.TheGroupconsidersthat theratioof theexpectedvolume(e.g.tonnes)ofwastetobestrippedforanexpectedvolume(e.g..intonnes)oforetobeminedforaspecificcomponentoftheorebody,isthemostsuitableproductionmeasure.
Reserve estimates
Estimatesofrecoverablequantitiesofprovenandprobablereservesincludeassumptionsregardingcommodityprices,exchangerates,discountrates,recoveryratesandproductionandtransportationcostsforfuturecashflows.italsorequiresinterpretationofcomplexanddifficultgeologicalandgeophysicalmodelsinordertomakeanassessmentofthesize,shape,depthandqualityofreservesandtheiranticipatedrecoveries.Theeconomic,geologicalandtechnicalfactorsusedtoestimatereservesmaychangefromperiodtoperiod.Changesinreportedreservescanimpactassetcarryingvalues,theprovisionforrestorationandtherecognitionofdeferredtaxassets,duetochangesinexpectedfuture cash flows. Reserves are integral to the amount of depreciation, depletion and amortisation charged to theprofit or loss and the calculation of inventory. The Group prepares reserve estimates in accordance with the JORCCode,guidelinespreparedbytheJointOreReservesCommitteeofTheaustralianinstituteofMiningandMetallurgy,australianinstituteofGeoscientistsandMineralCouncilofaustralia.
Significantjudgementsandestimates
Thedeterminationoforereservesimpactstheaccountingforassetcarryingvalues.
Therearenumerousuncertaintiesinherentinestimatingorereserves,andassumptionsthatarevalidatthetimeofestimationmaychangesignificantlywhennewinformationbecomesavailable.
Changes in the forecast commodity prices, exchange rates, discount rates, recovery rates and production andtransportationcostsmaychangetheeconomicstatusofreservesandmayultimatelyresultsinreservesbeingrestated.
(u) Restoration, Rehabilitation and Environmental Provision
ObligationsassociatedwithexplorationanddevelopmentassetsarerecognisedwhentheGrouphasapresentobligation,thefuturesacrificeoftheeconomicbenefitsisprobable,andtheprovisioncanbemeasuredreliably.Theprovisionismeasuredatthepresentvalueofthefutureexpenditureandacorrespondingrehabilitationassetisalsorecognised.
Onanongoingbasis,therehabilitationwillberemeasuredinlinewiththechangesinthetimevalueofmoney(recognisedasanexpenseandanincreaseintheprovision),andadditionaldisturbances(recognisedasadditionstoacorrespondingassetandrehabilitationliability).
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(u) Restoration, Rehabilitation and Environmental Provision (continued)
Significantjudgementsandestimates
The determination of the provision requires significant judgement in terms of the best estimate of the costs ofperformingtheworkrequired,thetimingofthecashflows,theappropriatediscountrateandinflationrate.
inrelationtoestimatingthecostsofperformingtheworkrequired,significantjudgementandestimatesarerequiredin relation to estimating the extent of rehabilitation activities, including volume to be rehabilitated and unit rates,technologicalchangesandregulatorychanges.
Whentheseestimateschangeorbecomeknowninthefuture,suchdifferenceswill impacttheminerehabilitationprovisionontheperiodinwhichtheychangeorbecomeknown.
achangeinany,oracombinationof,thekeyestimatesusedtodeterminetheprovisioncouldhaveamaterialimpactonthecarryingvalueoftheprovision(Note17).
(v) Contributed Equity
Ordinarysharecapital isrecognisedatthefairvalueoftheconsiderationreceivedbytheGrouporatthefairvalueofequityissuedasconsiderationfortheacquisitionofassets.anytransactioncostsarisingontheissueofordinarysharesarerecogniseddirectlyinequityasareductionoftheshareproceedsreceived.
(w) Leased Assets
Leasesareclassifiedasfinanceleaseswhenthetermsoftheleasetransfersubstantiallyalloftherisksandrewardsincidentaltoownershipoftheleasedassetstothelessee.allotherleasesareclassifiedasoperatingleases.assetsheldunderfinanceleasesareinitiallyrecognisedattheirfairvalueor,iflower,atamountsequaltothepresentvalueoftheminimumleasepayments,eachdeterminedattheinceptionofthelease.Thecorrespondingliabilityisincludedintheconsolidatedstatementoffinancialpositionasafinanceleaseobligation.Leasepaymentsareapportionedbetweenfinancechargesandreductionoftheleaseobligationsoastoachieveaconstantrateof interestontheremainingbalanceoftheliability.Financechargesareexpensed,unlesstheyaredirectlyattributabletoqualifyingassets,inwhichcasetheyarecapitalised.Financeleasedassetsareamortisedonastraightlinebasisovertheestimatedusefullifeoftheasset.Whereamortisationisattributabletoexplorationandevaluationactivities,costsaretreatedinaccordancewiththeaccountingPolicyNote1(s).
Operatingleasepaymentsarerecognisedasanexpenseonastraightlinebasisovertheleaseterm.
(x) Asset Acquisition not constituting a Business
Whenanassetacquisitiondoesnotconstituteabusinesscombination,theassetsandliabilitiesareassignedacarryingamountbasedontheirrelativefairvaluesinanassetpurchasetransactionandnodeferredtaxwillariseinrelationtotheacquiredassetsandassumedliabilitiesastheinitialrecognitionexemptionfordeferredtaxunderaaSB112applies.Nogoodwillwillariseontheacquisitionandtransactioncostsoftheacquisitionwillbeincludedinthecapitalisedcostoftheasset.
Significantjudgementsandestimates
indeterminingwhenanacquisitionisdeterminedtobeanassetacquisitionandnotabusiness,significantjudgementisrequiredtoassesswhethertheassetsacquiredconstituteabusinessinaccordancewithaaSB3.UnderaaSB3abusinessisanintegratedsetofactivitiesandassetsthatiscapableofbeingconductedormanagedforthepurposeofprovidingareturn,andconsistsofinputsandprocesses,whichwhenappliedtothoseinputshastheabilitytocreateoutputs.
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(y) Production Start Date
Significantjudgementsandestimates
TheGroupassessesthestageofeachmineunderconstructiontodeterminewhenaminemovesintotheproductionphase,thisbeingwhenthemineissubstantiallycompleteandreadyforitsintendeduse.TheGroupconsidersvariousrelevant criteria to assess when the production phase is considered to have commenced. at this point, all relatedamountsarereclassifiedfrom‘Minesunderconstruction’to‘Minesinproduction’.Someofthecriteriausedtoidentifytheproductionstartdateinclude,butarenotlimitedto:
• Levelofcapitalexpenditureincurredcomparedwiththeoriginalconstructioncostestimate
• Completionofareasonableperiodoftestingofthemineplantandequipment
• abilitytoproducemetalinsaleableform(withinspecifications)
• abilitytosustainongoingproductionofmetal
• Positivecashflowpositionfromoperations.
Whenaminedevelopmentprojectmovesintotheproductionphase,thecapitalisationofcertainminedevelopmentcostsandpre-productionrevenuesceaseandcostsareeitherregardedasformingpartofthecostofinventoryorexpensed,exceptforcoststhatqualifyforcapitalisationrelatingtominingassetadditionsorimprovements,undergroundminedevelopmentormineablereservedevelopment.itisalsoatthispointthatamortisationcommences.
(z) Derivative Financial Instruments, including Hedge Accounting
TheGroupholdsderivativefinancialinstrumentstohedgeitsforeigncurrencyandcommodityriskexposures.Oninitialdesignationofthederivativeasthehedginginstrument,theGroupformallydocumentstherelationshipbetweenthehedginginstrumentandhedgeditem,includingtheriskmanagementobjectivesandstrategyinundertakingthehedgetransactionandthehedgedrisk,togetherwiththemethodsthatwillbeusedtoassesstheeffectivenessofthehedgingrelationship.TheGroupmakesanassessment,bothattheinceptionofthehedgerelationshipaswellasonanongoingbasis,ofwhetherthehedginginstrumentsareexpectedtobehighlyeffectiveinoffsettingthechangesinthefairvalueorcashflowsoftherespectivehedgeditemsattributabletohedgedrisk,andwhethertheactualresultsofeachhedgearewithinarangeof80–125percent.Foracashflowhedgeofaforecasttransaction,thetransactionshouldbehighlyprobabletooccurandshouldpresentanexposuretovariationsincashflowsthatultimatelycouldaffectreportingprofitorloss.
Derivativesarerecognisedinitiallyatfairvalue;anyattributabletransactioncostsarerecognisedinprofitorlossasincurred.Subsequenttoinitialrecognition,derivativesaremeasuredatfairvalue,anychangesthereinareaccountedforasdescribedbelow.
Cashflowhedges
Whenaderivativeisdesignatedasthehedginginstrumentinahedgeofthevariabilityincashflowsattributabletoaparticularriskassociatedwitharecognisedassetorliabilityorahighlyprobableforecasttransactionthatcouldaffectprofitorloss,theeffectiveportionofchangesinthefairvalueofthederivativeisrecognisedinothercomprehensiveincomeandpresentedinthehedgingreserveinequity.anyineffectiveportionofchangesinthefairvalueofthederivativeisrecognisedimmediatelyinprofitorloss.
Whenthehedgeditemisanon-financialasset,theamountaccumulatedinequityisretainedinothercomprehensiveincomeandreclassifiedtoprofitorlossinthesameperiodorperiodsduringwhichthenon-financialitemaffectsprofitorloss.inothercasesaswell,theamountaccumulatedinequityisreclassifiedtoprofitorloss.ifthehedginginstrumentnolongermeetsthecriteriaforhedgeaccounting,expiresor issold,terminatedorexercised,orthedesignationisrevoked,thenhedgeaccountingisdiscontinuedprospectively.iftheforecasttransactionisnolongerexpectedtooccur,thenthebalanceinequityisreclassifiedtoprofitorloss.
(aa) Comparatives
Wherenecessary,comparativeshavebeenreclassifiedandrepositionedforconsistencywiththecurrentyeardisclosures.
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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
2016 2015 $’000 $’000
2 REvEnUEAnDEXPEnSES
Goldsales 276,056 249,487
Silversales 446 385
Revenuefromcontinuingoperations 276,502 249,872
interestrevenue 639 702
Otherrevenue 90 100
Otherrevenue 729 802
Totalrevenue 277,231 250,674
amortisationofmineproperties 20,668 40,762
Depreciationofplantandequipment 13,228 8,759
Depreciationandamortisation 33,896 49,521
Directorsandemployeeexpenses 6,728 6,244
indirecttaxesandcharges - 1,071
Managementfees - 90
Professionalfees 385 458
Other 1,052 1,204
Administrationexpenses 8,165 9,067
Borrowingcosts 856 1,039
Financecosts 856 1,039
Perthofficerentals 440 419
Other - 90
Operatingleaserentals 440 509
Definedcontributionsuperannuationexpense 3,175 2,935
3 AUDITOR’SREMUnERATIOn
amountsreceivedordueandreceivablebytheauditoroftheGroupfor:
BDOaudit(Wa)PtyLtd
-audit/reviewofthefinancialreport 94 87
-Otherassuranceservices - 28
94 115
amountsreceivedordueandreceivablebyanassociateoftheauditoroftheGroupfor:
BDOCorporateTax(Wa)PtyLtd
-Taxservices 76 35
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2016 2015 $’000 $’000
4 INCOME TAX
(a) Income tax expense comprises:
Currentincometax
-Currentincometaxcharge/(benefit) - -
-Under/(over)recognitionintheprioryear - -
Deferredtax
-Movementintemporarydifferences 12,446 5,033
incometaxexpense 12,446 5,033
(b) Reconciliation of prima facie income tax expense to income tax expense per the Consolidated Statement of Profit or Loss and Comprehensive Income:
accountingprofitbeforetax 38,335 16,181
Primefacieincometaxexpenseat30%(2015:30%) 11,500 4,854
-Non-deductibleexpenses 1,098 185
-Recognitionofpreviouslyunrecognisedtemporarydifferences (152) (6)
incometaxexpense 12,446 5,033
Effectivetaxrate 32% 31%
(c) Deferred tax assets and liabilities
Deferredtaxassetsandliabilitiesareattributabletothefollowing:
Balance at Charged / Charged / Balance at 1 July 2015 credited to income credited to equity 30 June 2016 $’000 $’000 $’000 $’000
Deferredtaxassets
Taxlosses 12,804 9,227 - 22,031
Provisions 7,938 10,313 - 18,251
Other 209 3 - 212
Undeductedborrowingcost 6 (4) - 2
Undeductedshareissuecosts 751 (399) - 352
Total 21,708 19,140 - 40,848
Deferredtaxliabilities
Deferredminingexpenditure (12,824) (32,090) (44,914)
Property,plantandequipment - 504 - 504
Derivatives (2,558) - 2,558 -
Total (15,382) (31,586) 2,558 (44,410)
Netdeferredtaxasset/(liability) 6,326 (12,446) 2,558 (3,562)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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4 InCOMETAX(Continued)
(c) Deferred tax assets and liabilities (continued)
Balance at Charged / Charged / Balance at 1 July 2014 credited to income credited to equity 30 June 2015 $’000 $’000 $’000 $’000
Deferredtaxassets
Taxlosses 23,060 (10,256) - 12,804
Provisions 7,737 201 - 7,938
Other 64 145 - 209
Undeductedborrowingcost 83 (77) - 6
Undeductedshareissuecosts 1,189 (438) - 751
Total 32,133 (10,425) - 21,708
Deferredtaxliabilities
Deferredminingexpenditure (18,216) 5,392 - (12,824)
Derivatives (8,369) - 5,811 (2,558)
Total (26,585) 5,392 5,811 (15,382)
Netdeferredtaxasset 5,548 5,033 5,811 6,326
Deferredtaxliabilitiesareset-offagainstdeferredtaxassetspursuanttoset-offprovisions.
(d) Tax-consolidated group
SaracenMineralHoldingsLimitedanditswholly-ownedsubsidiariesformedataxconsolidatedgroupwitheffectfrom1July2003.SaracenMineralHoldingsLimitedistheheadentityinthetaxconsolidatedgroup.atthefinancialyearend,membersofthetaxconsolidatedgrouphavenotyetenteredintoataxfundingarrangement.Hence,nocompensationisreceivableorpayableforanydeferredtaxassetarisingfromtaxlossesorcurrenttaxpayableassumedbytheheadentityfromthewhollyownedsubsidiaries.
2016 2015 $’000 $’000
5 EARnInGSPERSHARE
Thefollowingreflectstheincomeandsharedatausedinthecalculationsofbasicanddilutedearningspershareaftertaxattributabletomembersofthecompany.
Netprofitfromcontinuingoperations 25,889 11,148
25,889 11,148
Number Number
Weightedaveragenumberofordinarysharesforbasicearningspershare 794,339,474 792,784,738
Effectofdilution–performancerights 14,780,751 4,692,137
Weightedaveragenumberofordinarysharesadjustedfortheeffectofdilution 809,120,225 797,476,875
6 DIVIDENDS
Duringtheyearnodividendswerepaidorprovidedfor.
Frankingaccountbalanceattheendofthefinancialyearat30%. 19 19
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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2016 2015 $’000 $’000
7 TRADEAnDOTHERRECEIvABLES
Current
Goodsandservicestax(GST)recoverable 4,454 2,059
Other(i) 735 631
5,189 2,690
(i) Otherreceivablescompriseaccruedinterestincomeandfuelsuppliedtocontractorswhicharesettledon30dayterms.Thesereceivablesarewithintermanddonotshowsignsofimpairment.
TheGroup’sexposuretocreditandmarketrisksisdisclosedinNote26.
8 OTHERFInAnCIALASSETS
Current
Listedsharesatfairvalue 7 8
Thevalueoflistedshares,designatedasfinancialassetsatfairvaluethroughprofitorloss,hasbeendeterminedbyreferencetothequotedlasttradepriceatthecloseofbusinessonthereportingdate.Listedsharesarereadilysaleableandhavenofixedmaturitydate.
9 InvEnTORIES
Orestocks(i) 12,318 44,280
Goldincircuit 4,653 3,824
Goldonhand 3,042 4,561
Consumablesuppliesandspares 9,576 6,219
ConsumablesacquiredonacquisitionofThunderbox - 500
29,589 59,384
(i) inventoriesrequireestimatesandassumptionsmostnotablyinregardstogrades,volumes,densities,futurecompletioncostsandultimatesaleprice.Suchestimatesandassumptionsmaychangeasnewinformationbecomesavailablewhichmayimpactuponthecarryingvalueofinventory.Therewerenowritedowntonetrealisablevalueoforestockpilesoranyotherinventorybalancesrequiredinthecurrentfinancialyear(2015:Nil).
10 OTHERASSETS
Prepayments 1,391 655
Prepaymentsmainlyconsistofprepaidamountsforinsurance,payrolltaxonperformancerightsandestablishment&professionalfeesontheCompany’sdebtfacilities.
11 FInAnCIALDERIvATIvEInSTRUMEnTS
Financialderivativeassets
Current:Cashflowhedgeasset - 8,524
TheGrouphasexposuretogoldcommodityprices.Tomanageanyadverseimpactofmovementsincommodityprices,managementdetermineditmaybeappropriatetoprotectpredictedfinancialoutcomesbyhedgingthepriceofgoldongoldbullionsales.anticipatedgoldsalesareforecastafterconsideringreservecalculationsandmineproductionschedules.
Thegainorlossfromremeasuringthehedginginstrumentsatfairvalueisrecognisedinothercomprehensiveincomeanddeferredinequityinthehedgingreservetotheextentthatthehedgeiseffective.Thecontractstowhichhedgeaccountinghavebeenappliedwereallcompletedduringthefinancialyearandthereforeasat30June2016thecashflowhedgeassetwashasbeenderecognised.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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2016 2015 $’000 $’000
12 OTHERFInAnCIALASSETS
non-Current
Securitydeposits 55 55
The$55,000isheldassecurityforminorguaranteesandcreditcardfacilitiesprovidedbytheCommonwealthBank.
13 PLAnTAnDEQUIPMEnT
Plantandequipment
Openingbalancenetofaccumulateddepreciation 34,616 39,807
additions 4,431 160
Transferfromcapitalworkinprogress 36,458 3,417
Transferfromminesinproduction 15,844 -
Transfertominesunderconstruction 231 -
Disposals (31) -
Depreciation (13,578) (8,768)
Closingbalancenetofaccumulateddepreciation 77,971 34,616
Capitalworkinprogress
Openingbalancenetofaccumulateddepreciation 9,820 4,133
additions 68,260 11,020
Transfertominesinproduction (34,780) (897)
Transfertominesunderconstruction (16) (1,019)
Transfertoplantandequipment (36,458) (3,417)
Closingbalancenetofaccumulateddepreciation 6,826 9,820
Accumulateddepreciation
Openingbalance 30,121 21,353
Depreciation 13,578 8,768
Disposals (1,607) -
Transferfromminesinproduction 10,784 -
Closingbalance 52,876 30,121
Cost 137,673 74,557
accumulateddepreciation (52,876) (30,121)
Netcarryingamount 84,797 44,436
14 DEFERREDEXPLORATIOnAnDEvALUATIOnCOSTS
Deferredexplorationandevaluationcosts
Balanceatthestartoftheyear 38,409 27,811
additions 7,568 11,116
Transferredtominesunderconstruction (521) (518)
Transferredtominesinproduction (899) -
Explorationexpensed (1,005) -
Balanceattheendoftheyear 43,552 38,409
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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14 DEFERREDEXPLORATIOnAnDEvALUATIOnCOSTS(Continued)
Theultimaterecoupmentofcostscarriedforwardisdependentonthesuccessfuldevelopmentandcommercialexploitationorsaleoftheareasofinterest.
TheGrouphasinterestsinthefollowingnon-whollyownedexplorationactivities:
Agreement Principal Activity Percentage Interest Other Participants
PHaNTOMWELL Exploration 85.15% RoyalHarryGoldMinesNL
MOUNTMiNNiE Exploration 73.9% anglogoldashantiaustraliaLtd
WiLGaWELLWEST Exploration 90.0% Richmond,WilliamRobert
MOUNTFLORENCE Exploration 87.8% Ladyman,R.P;Ladyman,i.M;Evans,a.
LEHMaNNSWELL Exploration 90.0% BlackMountainGoldLtd
SPiDERWELL Exploration 65.0% DevantPtyLtd;CharlesGeorgeChitty
WaRRiDaWELL Exploration 67.8% agnewGoldMiningCompany
NexusJV Exploration 50% NexusMineralsLimited(earningupto85%)
asat30June2016theGroup’sinterestsintheabovementionedexplorationactivities,beingdeferredexplorationandevaluationcosts,total$5,882,077(2015:$3,844,142).
inordertomaintaincurrentrightsoftenuretoexplorationtenements,theGroupisrequiredtomeetminimumexpenditurerequirements.astheseexpenditurecommitmentscanbereducedbyselectiverationalisationofinterestsinexplorationtenementsorbyrenegotiationoftheagreementtermsitisdifficulttoaccuratelyforecasttheamountoffutureexpenditure.TheGroup’snominalexpenditureobligationsovertheabovetenementsforthenext12monthsareapproximately$1million.Contingentliabilitiesarenil.
2016 2015 $’000 $’000
15 MInEPROPERTIES
Mineproperties
Minesunderconstruction 87,359 56,986
Minesinproduction 70,088 44,458
Deferredminingexpenditure 5,774 -
Total 163,221 101,444
Minesunderconstruction
Balanceatthestartoftheyear 56,986 36,213
additions 29,842 19,236
acquiredaspartofassetacquisition* 2,500 -
Transferredfromcapitalworkinprogress 16 1,019
Transferredfromdeferredexplorationandevaluationcosts 521 518
Transferredtominesinproduction (15,516) -
Transferredtoplantandequipment (231) -
increaseinrehabilitationprovision 13,241 -
Balanceattheendoftheyear 87,359 56,986
*inaugust2015,theGroupacquiredtheKailisandKingoftheHills(KoTH)projectsfromStBarbaraLtdforaconsiderationof$3millioncashintwotranches:$0.3milliononacquisition,plus$2.7millionupontheearlierofcommercialproductionfromKailisor4yearsfollowingacquisition.Oftheconsideration,$2.5millionwasallocatedtominesunderconstruction.Theremaining$0.5millionwasallocatedtoproperty,plantandequipment.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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2016 2015 $’000 $’000
15 MInEPROPERTIES(Continued)
Minesinproduction
Balanceatthestartoftheyear 44,458 80,480
additions 10,947 3,843
Transferredfromcapitalworkinprogress 34,780 897
Transferredfromdeferredexplorationandevaluationcosts 899 -
Transferredfromminesunderconstruction 15,516 -
Transferredtoplantandequipment (15,844) -
amortisationfortheyear (20,668) (40,762)
Balanceattheendoftheyear 70,088 44,458
TheGroupundertakesregularimpairmentreviewsincorporatinganassessmentofrecoverabilityofcashgeneratingassets.CashgeneratingassetsrelatetospecificareasofinterestintheGroup’sminepropertyassets.Therecoverablevalueofspecificareasofinterestareassessedbyvalueinusecalculationsdeterminedwithreferencetotheprojectednetcashflowsestimatedunderthelifeofmineplan.Noimpairmentchargesforproducingminesorminesunderdevelopmenthavebeenrecordedin2016.
Deferredminingexpenditure
Balanceatthestartoftheyear - 32,208
additions 5,774 2,849
Expensingofdeferredcosts - (35,057)
Balanceattheendoftheyear 5,774 -
DeferredminingexpenditurerelatestocapitalisedoverburdenrelatingtotheThunderboxmine(Note1(t)).
16 TRADEAnDOTHERPAYABLES
Current
Tradeandotherpayables 27,331 17,869
Tradeandotherpayablesarenon-interestbearingandarenormallysettledon30dayterms.
Duetotheshorttermnatureofthesepayables,theircarryingvalueisassumedtobethesameastheirfairvalue.
17 PROvISIOnS
Current
Employeebenefits 5,112 4,871
non-current
Employeebenefits 1,055 756
Deferredconsideration–Thunderboxacquisition - 3,000
Deferredconsideration–KingoftheHillsacquisition 2,700 -
Provisionforrehabilitation 57,893 43,214
61,648 46,970
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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2016 2015 $’000 $’000
17 PROvISIOnS(Continued)
Movementinprovisionforrehabilitation
Balanceatthestartoftheyear 43,214 42,582
Unwindingofdiscount 120 632
increaseasaresultofKingoftheHillsacquisition 16,184 -
increaseasaresultofKailisacquisition 1,844 -
Decreaseinprovisiononexistingassets (2,729) -
Rehabilitationwork (740) -
Balanceattheendoftheyear 57,893 43,214
ThenatureandpurposeoftheprovisionforrehabilitationisdisclosedinNote1(v).
18 BORROWInGS
Current
Financeleaseliabilities 1,373 802
non-current
Financeleaseliabilities 2,359 570
(a) Leasing arrangements
Financeleasesrelatetoequipmentandvehicleswithleasetermsnotexceeding5years.
(b) Finance lease liabilities
Minimum future Present value of minimum lease payments future lease payments
2016 2015 2016 2015 $’000 $’000 $’000 $’000
Nolaterthan1year 1,486 854 1,373 802
Laterthan1yearandnotlaterthan5years 2,463 593 2,359 570
Minimumfutureleasepayments 3,949 1,447 3,732 1,372
Lessfuturefinancecharges (217) (75) - -
Presentvalueofminimumleasepayments 3,732 1,372 3,732 1,372
includedintheStatementofFinancialPositionas:
Currentborrowings 1,373 802
Non-currentborrowings 2,359 570
3,732 1,372
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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19 COnTRIBUTEDEQUITYAnDRESERvES
Number 2016 Number 2015 of shares $’000 of shares $’000
(a) Issued capital
Ordinarysharesfullypaid 800,799,292 253,013 792,784,738 245,079
TheCompanydoesnothavealimitedauthorisedcapitalandissuedshareshavenoparvalue.
(b) Movements in shares on issue
Beginningofthefinancialperiod 792,784,738 245,079 792,784,738 245,079
-assetacquired(royaltypurchase)(a) 8,014,554 7,934 - -
Endofthefinancialperiod 800,799,292 253,013 792,784,738 245,079
(a)Refertonote21forfurtherdetailsontheassetacquired.
(c) Performance Rights (See note 21(a))
2015 Granted vested Lapsed 2016
Tranche1
Classaperformancerightsvestingon28September2016 600,000 - - - 600,000
ClassBperformancerightsvestingon28September2016 300,000 - - - 300,000
ClassCperformancerightsvestingon28September2016 600,000 - - - 600,000
Tranche2
Classaperformancerightsvestingon28September2016 1,148,000 - - (45,000) 1,103,000
ClassBperformancerightsvestingon28September2016 574,000 - - (22,500) 551,500
ClassCperformancerightsvestingon28September2016 1,148,000 - - (45,000) 1,103,000
Tranche3
Classaperformancerightsvestingon28September2017 294,000 - - - 294,000
ClassBperformancerightsvestingon28September2017 147,000 - - - 147,000
ClassCperformancerightsvestingon28September2017 294,000 - - - 294,000
Tranche4
Classaperformancerightsvestingon28September2017 890,000 - - (40,000) 890,000
ClassBperformancerightsvestingon28September2017 445,000 - - (20,000) 445,000
ClassCperformancerightsvestingon28September2017 890,000 - - (40,000) 890,000
Tranche5
Classaperformancerightsvestingon31December2016 2,000,000 - - - 2,000,000
ClassBperformancerightsvestingon16March2017 3,000,000 - - - 3,000,000
ClassCperformancerightsvestingon16March2018 5,000,000 - - - 5,000,000
Tranche6
Classaperformancerightsvestingon28September2018 - 1,122,000 - - 1,122,000
ClassBperformancerightsvestingon28September2018 - 561,000 - - 561,000
ClassCperformancerightsvestingon28September2018 - 1,122,000 - - 1,122,000
17,330,000 2,805,000 - (212,500) 19,922,500
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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19 COnTRIBUTEDEQUITYAnDRESERvES(continued)(c) Performance Rights (continued)
2014 Granted vested Lapsed 2015
Tranche1 Classaperformancerightsvestingon28September2016 600,000 - - - 600,000
ClassBperformancerightsvestingon28September2016 300,000 - - - 300,000
ClassCperformancerightsvestingon28September2016 600,000 - - - 600,000
Tranche2 Classaperformancerightsvestingon28September2016 - 1,148,000 - - 1,148,000
ClassBperformancerightsvestingon28September2016 - 574,000 - - 574,000
ClassCperformancerightsvestingon28September2016 - 1,148,000 - - 1,148,000
Tranche3 Classaperformancerightsvestingon28September2017 - 294,000 - - 294,000
ClassBperformancerightsvestingon28September2017 - 147,000 - - 147,000
ClassCperformancerightsvestingon28September2017 - 294,000 - - 294,000
Tranche4 Classaperformancerightsvestingon28September2017 - 890,000 - - 890,000
ClassBperformancerightsvestingon28September2017 - 445,000 - - 445,000
ClassCperformancerightsvestingon28September2017 - 890,000 - - 890,000
Tranche5 Classaperformancerightsvestingon31December2016 - 2,000,000 - - 2,000,000
ClassBperformancerightsvestingon16March2017 - 3,000,000 - - 3,000,000
ClassCperformancerightsvestingon16March2018 - 5,000,000 - - 5,000,000
1,500,000 15,830,000 - - 17,330,000
(d) Terms and conditions of contributed equity
Ordinaryshareshavetherighttoreceivedividendsasdeclaredand,intheeventofwindinguptheCompany,toparticipateintheproceedsfromthesaleofallsurplusassetsinproportiontothenumberofandamountspaiduponsharesheld.Ordinarysharesentitletheirholdertoonevote,eitherinpersonorbyproxy,atameetingoftheCompany.
(e) Reserves
2016 2015 $’000 $’000
Sharebasedpayments
Balanceatbeginningofyear 4,101 3,518
Sharebasedpayments–performancerights 3,635 583
Balanceatendofyear 7,736 4,101
Thesharebasedpaymentsreserveisusedtorecognisethefairvalueofoptionsandperformancerightsissued.RefertoNote21forfurtherdetails.
CashFlowHedgeReserve
Balanceatbeginningofyear 5,967 19,527
Hedgereserve (8,525) (19,371)
Taxeffectonthemovementinhedgereserve 2,558 5,811
Balanceatendofyear - 5,967
Thehedgingreserveisusedtorecordgainsorlossesonderivativesthataredesignatedandqualifyascashflowhedgesandthatarerecognisedinothercomprehensiveincome.amountsarereclassifiedtoprofitorlosswhentheassociatedhedgedtransactionaffectsprofitorloss.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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20 COMMITMEnTS
(a) Gold delivery commitments
Goldfor Contracted valueof physicaldelivery salesprice committedsales oz A$/oz $’000
Withinoneyear* 143,044 1,576 225,437
Laterthanonebutnotlaterthanfiveyears 140,000 1,520 212,800
283,044 438,237
*ThecounterpartytothephysicalgolddeliverycontractsisMacquarieBankLimited.Contractsaresettledbythephysicaldeliveryofgoldasperthecontractterms.ThecontractsareaccountedforassalecontractswithrevenuerecognisedoncegoldhasbeendeliveredtoMacquarie.Thephysicalgolddeliverycontractsareconsideredacontracttosellanon-financialitemandthereforedonotfallwithinthescopeofaaSB139Financialinstruments:RecognitionandMeasurement.Hence,noderivativesarerecognised.
2016 2015 $’000 $’000
(b) Operating lease commitments
TheGrouphasenteredintocommercialleasesonitemsofplant,machineryandproperty.Futureminimumrentalspayableundernon-cancellableoperatingleasesasat30Juneareasfollows:
-notlaterthanoneyear 473 547
-laterthanoneyearandnotlaterthanfiveyears - 473
473 1,020
(c) Contractual commitments
TheGrouphasenteredintoanagreementtosupplygastotheThunderboxgoldmine.ThetermsofthisagreementcommittheGrouptopurchasingaminimumamountofgasatapriceescalatingonaquarterlybasisinlinewithCPi.asat30June2016,atthecurrentcontractprice,theGrouphadcommitmentstopurchasegasoverthenext12monthsof$574,059.
(d) Exploration expenditure commitments
inordertomaintaincurrentrightsoftenuretoexplorationtenements,theGroupisrequiredtomeetminimumexpenditurerequirements.astheseexpenditurecommitmentscanbereducedbyselectiverationalisationofinterestsinexplorationtenementsorbyrenegotiationofjointventurecommitmentsitisdifficulttoaccuratelyforecasttheamountoffutureexpenditure.Oncurrenttenementholdings,theGroup’snominalexpenditureobligationsforthenext12monthsareapproximately$9.0million.
(e) Superannuation
TheGroupcontributestosuperannuationfundsinaccordancewiththerequirementsoftheSuperannuationGuaranteeLegislation.Employercontributionsarebasedonvariouspercentagesofsalariesordirectors’fees.allfundsareaccumulationtypeandassuchanactuarialassessmentisnotrequired.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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21 SHAREBASEDPAYMEnTS
(a) Performance Rights
DuringthefinancialyeartheGroupgrantedPerformanceRightstoeligiblemanagementpersonnelundertheSaracenMineralHoldingsLimitedPerformanceRightsPlan(“Plan”)(RefertoTranche6below).inadditiontothese,PerformanceRightsweregrantedtoMrRaleighFinlayson(ManagingDirector)underthePlanandprovisionallyaccountedforin2015(Tranche5).ThesePerformanceRightswereapprovedbyshareholdersattheCompany’sannualGeneralMeetingheldinNovember2015.UnderthePlan,EligibleParticipantswillbegrantedPerformanceRights.VestingofanyofthesePerformanceRightswillbesubjecttothesatisfactionofperformancehurdles.EachPerformanceRightrepresentsarighttobeissuedoneShareatafuturepointintime,subjecttothesatisfactionofanyvestingconditions.NoexercisepriceispayableandeligibilitytoreceivePerformanceRightsunderthePlanisattheBoard’sdiscretion.ThePerformanceRightscannotbetransferredandarenotquotedontheaustralianSecuritiesExchange(aSX).TherearenovotingrightsattachedtothePerformanceRights.
Fordetailsregardingthevestingconditionsofperformancerightsrefertopage51oftheremunerationreport.
Referbelowfordetailsregardingallunvestedperformancerightsissued:
Tranche1–ManagingDirector
ThefairvalueatgrantdateisdeterminedusingaMonteCarlomodelwiththefollowingfactorsrelevant:-
Class A Class B Class C
StockPriceatGrant $0.215 $0.215 $0.215
ExercisePrice N/a N/a N/a
VolatilitybasedonhistoricalannualvolatilityofSaRsecurities 68.9% 68.9% 68.9%
GrantDate 19/11/2013 19/11/2013 19/11/2013
PerformancePeriod 01/07/2013-30/06/2016 01/07/2013-30/06/2016 19/11/2013-19/11/2016
VestingDate 28/09/2016 28/09/2016 28/09/2016
Riskfreerate 3.06% 3.06% 3.06%
Numberofrightsgranted 600,000 300,000 600,000
atthereportingdatetherewere600,000Classa,300,000ClassBand600,000ClassCperformancerightsonissue.
Thefairvalueoftheperformancerightsgrantedis$262,500.
Tranche2–Management
ThefairvalueatgrantdateisdeterminedusingaMonteCarlomodelwiththefollowingfactorsrelevant:-
Class A Class B Class C
StockPriceatGrant $0.37 $0.37 $0.37
ExercisePrice N/a N/a N/a
VolatilitybasedonhistoricalannualvolatilityofSaRsecurities 75.5% 75.5% 75.5%
GrantDate 23/09/2014 23/09/2014 23/09/2014
PerformancePeriod 01/07/2013-30/06/2016 01/07/2013-30/06/2016 01/07/2013-30/06/2016
VestingDate 28/09/2016 28/09/2016 28/09/2016
Riskfreerate 2.87% 2.87% 2.87%
Numberofrightsgranted 1,148,000 574,000 1,148,000
atthereportingdatetherewere1,148,000Classa,574,000ClassBand1,148,000ClassCperformancerightsonissue.
Thefairvalueoftheperformancerightsgrantedis$894,292.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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21 SHAREBASEDPAYMEnTS(continued)
(a) Performance Rights (continued)
Tranche3–ManagingDirectorThefairvalueatgrantdateisdeterminedusingaMonteCarlomodelwiththefollowingfactorsrelevant:-
Class A Class B Class C
StockPriceatGrant $0.275 $0.275 $0.275
ExercisePrice N/a N/a N/a
VolatilitybasedonhistoricalannualvolatilityofSaRsecurities 76.5% 76.5% 76.5%
GrantDate 26/11/2014 26/11/2014 26/11/2014
PerformancePeriod 01/07/2014-30/06/2017 01/07/2014-30/06/2017 01/07/2014-30/06/2017
VestingDate 28/09/2017 28/09/2017 28/09/2017
Riskfreerate 2.81% 2.81% 2.81%
Numberofrightsgranted 294,000 147,000 294,000
atthereportingdatetherewere294,000Classa,147,000ClassBand294,000ClassCperformancerightsonissue.Thefairvalueoftheperformancerightsgrantedis$148,029.
Tranche4-ManagementThefairvalueatgrantdateisdeterminedusingaMonteCarlomodelwiththefollowingfactorsrelevant:-
Class A Class B Class C
StockPriceatGrant $0.41 $0.41 $0.41
ExercisePrice N/a N/a N/a
VolatilitybasedonhistoricalannualvolatilityofSaRsecurities 80% 80% 80%
GrantDate 01/04/2015 1/04/2015 1/04/2015
PerformancePeriod 01/07/2014-30/06/2017 01/07/2014-30/06/2017 01/07/2014-30/06/2017
VestingDate 28/09/2017 28/09/2017 28/09/2017
Riskfreerate 2.65% 2.65% 2.65%
Numberofrightsgranted 890,000 445,000 890,000
atthereportingdatetherewere890,000Classa,445,000ClassBand890,000ClassCperformancerightsonissue.Theestimatedfairvalueoftheperformancerightsgrantedis$708,440.
Tranche5-ManagingDirectorThefairvalueatgrantdateisdeterminedusingaMonteCarlomodelwiththefollowingfactorsrelevant:-
Class A Class B Class C
StockPriceatdatefromwhichservicesarerendered $0.535 $0.535 $0.535
ExercisePrice N/a N/a N/a
VolatilitybasedonhistoricalannualvolatilityofSaRsecurities 80% 80% 80%
Datefromwhichservicesrendered 21/05/2015 21/05/2015 21/05/2015
PerformancePeriod 21/05/2015-31/12/2016 16/03/2015-16/03/2017 16/03/2015-16/03/2018
VestingDate 31/12/2016 16/03/2017 16/03/2018
Riskfreerate 2.65% 2.65% 2.65%
Numberofrightsgranted 2,000,000 3,000,000 5,000,000
atthereportingdatetherewere2,000,000Classa,3,000,000ClassBand5,000,000ClassCperformancerightsonissue.Theestimatedfairvalueoftheperformancerightsgrantedis$4,693,000.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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21 SHAREBASEDPAYMEnTS(continued)
(a) Performance Rights (continued)
Tranche6-Management
ThefairvalueatgrantdateisdeterminedusingaMonteCarlomodelwiththefollowingfactorsrelevant:-
Class A Class B Class C
StockPriceatGrant $0.57 $0.57 $0.57
ExercisePrice N/a N/a N/a
VolatilitybasedonhistoricalannualvolatilityofSaRsecurities 76.6% 76.6%76.6%
GrantDate 18/12/2015 18/12/2015 18/12/2015
PerformancePeriod 01/07/2015-30/06/2018 01/07/2015-30/06/2018 01/07/2015-30/06/2018
VestingDate 28/09/2018 28/09/2018 28/09/2018
Riskfreerate 2.47% 2.47% 2.47%
Numberofrightsgranted 1,122,000 561,000 1,122,000
atthereportingdatetherewere1,122,000Classa,561,000ClassBand1,122,000ClassCperformancerightsonissue.
Thefairvalueoftheperformancerightsgrantedis$1,242,054.
(b) Share based payments expense reconciliation
2016 2015 $’000 $’000
Sharebasedpaymentsexpense
PerformanceRights 3,635 583
(c) Asset purchase
DuringtheyeartheGroupexerciseditspre-emptiverighttobuytheNorilskNetSmelterReturnroyalty(NSR)of1.5%(cappedata$17m)relatingtotheThunderboxProject.Thisacquisitionwassettledon11april2016foraconsiderationof8,014,554newfullypaidordinarysharesinSaracen(valuedat$0.99persharebasedona10dayVWaPcalculation,plusUS$500,000cash(aU$642,838.78)).
22 InTERESTSInSUBSIDIARIES
Percentage of equity interest held by the group
2016 2015 % %
ParentEntity:
SaracenMineralHoldingsLimited(i)(ii)
Subsidiaries:
SaracenGoldMinesPtyLimited(ii)(iii) 100 100
SaracenMetalsPtyLimited(ii) 100 100
allentitiesareincorporatedinaustraliaandshareholdingsrelatetoordinaryshares.
(i) SaracenMineralHoldingsLimitedistheheadentitywithinthetax-consolidatedGroupandtheparententity.(ii) Thesecompaniesaremembersofthetax-consolidatedgroup.(iii)ThesubsidiarieshaveenteredintoadeedofcrossguaranteewithSaracenMineralHoldingsLimitedpursuantto
aSiCClassOrder98/1418andarerelievedfromtherequirementtoprepareandlodgeanauditedfinancialreport.inthecurrentandprioryeartheconsolidatedstatementsofprofitorlossandothercomprehensiveincomeandfinancialpositionoftheentitiespartytotheDeedofCrossGuaranteearethesameastheGroup’sandhavethereforenotbeenreproduced.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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2016 2015 $’000 $’000
23 STATEMEnTOFCASHFLOWS
(a) Reconciliation of cash
Cashbalancecomprises:
-Cash 19,557 37,993
-Cashatcallandinshorttermdeposits 14,745 385
Closingcashbalance 34,302 38,378
(b) Reconciliation of the operating result after income tax to the net cash flows from operating activities
Operatingprofitafterincometax 25,889 11,148
non-cashitems
Depreciationandamortisation 33,896 49,521
(Profit)/lossonthesaleofassets (3) -
Effectiveinterestonestablishmentfees 478 795
Decreaseinmarketvalueoflistedsecurities 1 (63)
Lossonthesaleoflistedsecurities - 72
Expensingofdeferredexplorationcost 763 -
Expensingofdeferredminingcosts - 35,057
Taxeffectofmovementindeferredtaxbalances 12,446 5,033
Sharebasedpayments 3,635 583
Unwindingofdiscount-rehabprovision 330 340
Changesinassetsandliabilities:
(increase)/decreaseintradeandotherreceivables (2,499) 152
increaseinprepayments (648) (103)
(increase)/decreaseininventory 29,796 (40,134)
increaseintradeandotherpayables 8,921 3,496
Decreaseinprovisions (3,201) (494)
Netcashflowsprovidedbyoperatingactivities 109,804 65,403
(c) Non-cash financing and investing activities
inthecurrentyear,theGroupacquired$3,756,000(30June2015:$373,000)ofequipmentunderfinancelease.Theseacquisitionswillbereflectedinthestatementofcashflowsoverthetermoftheleaseviatheirleasepayments.
(d) Cash balances not available for use
asdescribedinNote12,theGrouphasdepositsof$55,000(2015:$55,000)heldassecuritybyabankforguaranteesandcreditcardfacilities.
Thisamountisnotavailableforuseandhasthereforenotbeenincludedincashandcashequivalents.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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2016 2015 $’000 $’000
24 RELATEDPARTYDISCLOSURES
(a) Ultimate parent
SaracenMineralHoldingsLimitedistheultimateparentcompany.
informationrelatingtoSaracenMineralHoldingsLimited:
Currentassets 17,809 39,767
Totalassets 257,194 232,119
Currentliabilities 2,735 2,509
Totalliabilities 6,315 2,516
Contributedequity 250,879 245,079
Sharebasedpaymentreserve 7,736 4,101
HedgeReserve - 5,967
accumulatedloss (9,871) (25,920)
Totalequity 253,013 229,227
Netprofitoftheparent 16,050 11,148
SaracenMineralHoldingsLimitedispartytoadeedofcrossguaranteewithitswhollyownedsubsidiarySaracenGoldMinesPtyLimitedandSaracenMetalsPtyLimitedasdescribedinNote22(iii)pursuanttoaSiCClassOrder98/1418.
at30June2016SaracenMineralHoldingsLimitedhadnocontingentliabilitiesandhadnotenteredintocontractualcommitmentstopurchaseproperty,plantorequipment(2015:Nil).
(b) Subsidiaries
DetailsofinterestsinsubsidiariesaresetoutinNote22.
Loansbetweengroupentitieshavenospecificrepaymenttermsandareunsecured.
Theaggregateamountsreceivable/(payable)bytheCompanyfrom/tosubsidiariesatthereportingdatewere:
Non-currentreceivable 239,265 185,617
Reconciliationofnon-currentreceivable
Balanceatbeginningofyear 185,617 174,520
Loansprovidedto/(repaidby)subsidiaries 16,092 (11,666)
Reversalofprioryearimpairment 37,556 60,319
impairment - (37,556)
Balanceatendofyear 239,265 185,617
Duringtheyearthenon-currentreceivablewaswrittendowntothenetassetvalueofthesubsidiary.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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24 RELATEDPARTYDISCLOSURES(continued)
(c) Key management personnel
DisclosuresrelatingtokeymanagementpersonnelaresetoutintheremunerationreportintheDirectors’Report.
2016 2015 $ $
Shorttermbenefits 2,687,010 2,705,234
Post-employmentbenefits 176,055 253,426
Non-monetarybenefits 11,273 9,472
Longtermbenefits 30,607 63,678
Equity 2,741,343 466,395
5,646,288 3,498,205
Detailedremunerationdisclosuresareprovidedintheremunerationreportonpages47to62.
Transactionswithrelatedparties
Thefollowingtransactionsoccurredwithrelatedparties:
Paymentforgoodsandservices:
ProvisionofofficefacilitiestoRenaissanceCapitalPtyLtd(adirectorrelatedentityofGuidoStaltari) - 90,000
ProfessionalservicesfromPilotHolePtyLtd(directorrelatedentityofMartinReed) - 227,469
Director’sfeesPilotHolePtyLtd(directorrelatedentityofMartinReed) 90,000 90,000
Payabletorelatedparties
Therewerenopayablestorelatedpartiesatthecurrentandpreviousreportingdate.
Loansto/fromrelatedparties
Therewerenoloanstoorfromrelatedpartiesatthecurrentandpreviousreportingdate.
Termsandconditions
TransactionswithDirectorsandkeymanagementpersonnelhavebeenenteredintoundertermsandconditionsnomorefavourablethanthosetheentitywouldhaveadoptedifdealingatarm’slength.
25 SEGMEnTInFORMATIOn
TheGrouprequireoperatingsegmentstobeidentifiedonthebasisofinternalreportsaboutcomponentsoftheGroupthatareregularlyreviewedbythechiefoperatingdecisionmaker(“CODM”)inordertoallocateresourcestothesegmentsandtoassesstheirperformance.OnthisbasistheGroup’sreportablesegmentsunderaaSB8areasfollows:
- SaracenGoldMinesPtyLimited(“SGM”)whichincludestheGroup’sexploration,productionandadministrationrelatingtotheCarosueDamoperations.
- SaracenMineralHoldingsLimited(“SaR”)whichincludestheGroup’scorporateadministration.
- Saracen Metals Pty Limited (“SME”) which includes the Group’s exploration, development, production andadministrationrelatingtotheThunderboxoperations.
TheaccountingpoliciesofthereportablesegmentsarethesameastheGroup’saccountingpoliciesdescribedinNote1.TheCODMreviewssegmentprofitbeforetaxinassessingsegmentperformancewhichcorrespondstooperatingprofitbeforeotherincome/expensesintheConsolidatedStatementofProfitorLossandOtherComprehensiveincome.informationregardingtheGroup’sreportablesegmentsispresentedbelow.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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25 SEGMEnTInFORMATIOn(continued)
2016 2015 $’000 $’000
(a) Segment external revenues
SGM-Metalsales 240,048 249,872
SME-Metalsales 36,454 -
SGM-Other 63 100
SME-Other 30 -
SGM-interestincome 67 70
SME-interestincome 1 -
SaR-interestincome 571 632
277,234 250,674
(b) Segment profit before tax
SGM 34,157 23,079
SME 13,505 -
SaR (5,567) (6,069)
Operatingprofitbeforeotherincome/(expenses) 42,095 17,010
Financecosts (856) (1,039)
Otherincome 732 802
Sharebasedpaymentsexpense (3,635) (583)
Lossfromsaleofshare - (72)
Changeinfairvalueoflistedshares (1) 63
Profitbeforeincometax 38,335 16,181
(c) Segment assets and liabilities
Assets
SGM 179,089 195,111
SaR 17,928 39,799
SME 165,086 59,073
Unallocated–DeferredTaxasset - 6,326
362,103 300,309
Liabilities
SGM 43,924 43,800
SaR 2,753 2,515
SME 51,146 24,767
Unallocated–DeferredTaxLiability 3,562 -
101,385 71,082
Forthepurposesofmonitoringsegmentperformanceandallocatingresourcesbetweensegments,allassetsandliabilitiesareallocatedtoreportablesegmentsotherthantaxassetsandliabilities.
(d) Other segment information
Depreciationandamortisationof$27.755million(2015:$49.521million)and$6.141million(2015:$0)areattributabletotheSGMandSMEsegmentsrespectively.
Totalnon-currentassetadditionsof$37.890million(2015:$35.636million)and$89.272million(2015:$12.588million)areattributabletotheSGMandSMEsegmentsrespectively.
TheGroupoperateswithinonegeographicalsegment,beingaustralia.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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26 FInAnCIALRISKMAnAGEMEnT
TheGroup’sprincipalfinancialinstrumentscomprisecash,short-termdeposits,borrowingsandderivatives.inadditiontheGrouphasfinancialassetsatfairvaluethroughprofitandloss,tradereceivables,tradepayablesandfinanceleasesarisingdirectlyoutofitsoperations.Riskoversight,managementandinternalcontrolaredealtwithonacontinuousbasisbymanagementandtheBoard,withdifferingdegreesofinvolvementdependinguponthenatureandmaterialityofthematterbeingdealtwith.
TheBoardasawholeguidesandmonitorsthebusinessandaffairsofSaracen.TheBoardhasalsoconstitutedRiskManagementandauditCommitteeswhichoverseevariousaspectsofthefinancialrisksoftheGroup.
(a) Market risk
InterestrateriskTheGroup’sexposuretointerestrateriskrelatesprimarilytotheassetsandliabilitiesbearingvariableinterestrates.TheGroupdoesnotengageinanyhedgingorderivativetransactionstomanageinterestraterisk.Thefollowingtablessetsoutthecarryingamount,bymaturityoftheGroup’sexposuretointerestrateriskandtheeffectiveweightedaverageinterestrateforeachfinancialinstrument.
30 June 2016 Weighted Variable Non- Con- average Interest Fixed Interest Rate interest solidated rate Rate bearing Total Under 1 1 – 2 2 – 5 5+ year years years years % $’000 $’000 $’000 $’000 $’000 $’000 $’000
FinancialassetsCashassets 1.76 34,302 - - - - - 34,302Otherreceivables N/a - - - - - 5,189 5,189Securitydeposits N/a - - - - - 55 55Listedinvestments N/a - - - - - 7 7TotalFinancialassets 34,302 - - - - 5,251 39,553FinancialLiabilitiesTradepayables N/a - - - - - 27,331 27,331Financeleases 4.40 - 1,373 1,087 1,272 - - 3,732TotalFinancialLiabilities - 1,373 1,087 1,272 - 27,331 31,063
30 June 2015 Weighted Variable Non- Con- average interest FixedinterestRate interest solidated rate Rate bearing Total Under1 1–2 2–5 5+ year years years years % $’000 $’000 $’000 $’000 $’000 $’000 $’000
FinancialassetsCashassets 1.84 38,378 - - - - - 38,378Otherreceivables N/a - - - - - 2,690 2,690Securitydeposits N/a - - - - - 55 55FinancialDerivativeasset N/a - - - - - 8,524 8,524Listedinvestments N/a - - - - - 8 8TotalFinancialassets 38,378 - - - - 11,277 49,655FinancialLiabilitiesTradepayables N/a - - - - - 17,869 17,869Financeleases 5.71 - 802 376 194 - - 1,372TotalFinancialLiabilities - 802 376 194 - 17,869 19,241
CommodityriskTheGroup’sexposuretocommodityriskarisesfrommovementsinthegoldprice.TheGroupispartytogolddeliverycontracts(Note20)wherebyspecifiedquantitiesofgoldaresoldonspecificdatestopartiallymanagethecommodityrisk.
CurrencyriskTheGroupisexposedtotheaustraliandollarcurrencyriskongoldsales,whicharedenominatedinUSdollars.TheGroupispartytogolddeliverycontracts(Note20)forspecifiedquantitiesofgoldonspecificdatestopartiallymanagethecurrencyrisk.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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26 FInAnCIALRISKMAnAGEMEnT(continued)
(b) Credit risk
TheGrouptradesonlywithrecognised,creditworthythirdparties.TherearenosignificantconcentrationsofcreditriskwithintheGroup.Thecreditriskonliquidfundsandderivativefinancialinstrumentsislimitedbecausethecounterpartiesarebankswithaminimumcreditratingof-aaassignedbyreputablecreditratingagencies.
(c) Liquidity risk
TheGroupmanagesliquidityriskbymaintainingsufficientcashreservesandmarketablesecurities,andthroughthecontinuousmonitoringofbudgetedandactualcashflows.atthereportingdatethereisnosignificantliquidityrisk.ThetablebelowanalysestheGroup’smaturityoffinancialliabilities:
30 June 2016 ‹ 6 month 6 – 12 months 1 – 5 years 5+ years Total $’000 $’000 $’000 $’000 $’000
Tradepayables 27,331 - - - 27,331
Financeleases 816 557 2,359 - 3,732
TotalFinancialLiabilities 28,147 557 2,359 - 31,063
30 June 2015 ‹ 6 month 6 – 12 months 1 – 5 years 5+ years Total $’000 $’000 $’000 $’000 $’000
Tradepayables 17,869 - - - 17,869
Financeleases 465 337 570 - 1,372
TotalFinancialLiabilities 18,334 337 570 - 19,241
(d) Sensitivity analysis
ThefollowingtablesummarisestheGroup’sexposuretointerestraterisk,commodityandcurrencyrisk(aUDgoldprice)atthereportingdate.Thesensitivitiesarebasedonmanagement’sbestestimateofthemarketviewsforfutureinterestrates,goldpriceandcurrencymovementsoverthenext12monthswithreferencetorecenthistoricalmovements.Theanalysisdemonstratestheaftertaxeffectontheprofit/(loss)andequitywhichcouldresultfromchangesbasedonthefollowing:
30 June 2016 Profit/(loss) Equity $’000 $’000
- increaseinterestrateby1% 214 214
- Decreaseinterestrateby1% (214) (214)
30 June 2015 Profit/(loss) Equity $’000 $’000
- increaseinterestrateby1% 259 259
- Decreaseinterestrateby1% (259) (259)
Goldpriceriskassociatedwiththefinancialderivativeinstruments
- increase$aUDgoldpriceby10% - (7,423)
- Decrease$aUDgoldpriceby10% - 7,423
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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26 FInAnCIALRISKMAnAGEMEnT(continued)
e) Derivative assets and liabilities designated as cash flow hedges
Thefollowingtableindicatestheperiodsinwhichthecashflowsassociatedwithcashflowhedgesareexpectedtooccurandthefairvaluesoftherelatedhedginginstruments.
30 June 2016 Expected cash flows
Fair Total 2 months 2 - 12 1 - 2 2+ value or less months years years
$’000 $’000 $’000 $’000 $’000 $’000
Hedgedassets - - - - - -
30 June 2015 Expected cash flows
Fair Total 2 months 2 - 12 1 - 2 2+ value or less months years years
$’000 $’000 $’000 $’000 $’000 $’000
Hedgedassets 8,524 83,679 15,300 68,379 - -
(f) Net fair values
Thenetfairvaluesoffinancialassetsandfinancialliabilitiesatthereportingdateareasfollows:
Total carrying amount as per Aggregate net the Statement of Financial fair value Position Consolidated Consolidated
2016 2015 2016 2015 $’000 $’000 $’000 $’000
Financialassets
Cashandcashequivalents 34,302 38,378 34,302 38,378
Otherreceivables 5,189 2,690 5,189 2,690
investments–listed 7 8 7 8
Financialderivativeasset - 8,524 - 8,524
Otherfinancialassets 55 55 55 55
TotalFinancialassets 39,553 49,655 39,553 49,655
FinancialLiabilities
Tradepayables 27,331 17,869 27,331 17,869
Financeleases 3,732 1,372 3,732 1,372
TotalFinancialLiabilities 31,063 19,241 31,063 19,241
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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26 FInAnCIALInSTRUMEnTS(continued)
(f) Net fair values (continued)
Fairvaluehierarchy
aaSB13requiresdisclosureoffairvaluemeasurementsbylevelofthefollowingfairvaluemeasurementhierarchy:
• quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(level1),• inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefortheassetorliability,eitherdirectlyor
indirectly(level2),and• inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs)(level3).ThefollowingtablepresentstheGroup’sfinancialassetsandfinancialliabilitiesmeasuredandrecognisedatfairvalueat30June2016and30June2015onarecurringbasis:-
$’000 $’000 $’000 $’000 30 June 2016 Level 1 Level 2 Level 3 Total
assets
Listedsharesatfairvalue 7 - - 7
$’000 $’000 $’000 $’000 30 June 2015 Level 1 Level 2 Level 3 Total
assets
Listedsharesatfairvalue 8 - - 8
Derivativeassets - 8,524 - 8,524
Total 8 8,524 - 8,532
Thegroupdidnotmeasureanyfinancialassetsorfinancialliabilitiesatfairvalueonanon-recurringbasisasat30June2016anddidnottransferanyfairvalueamountsbetweenthefairvaluehierarchyduringtheperiodFY2016.
valuationtechniquesusedtoderivelevel2andlevel3fairvalues
Thefairvalueoffinancialinstrumentsthatarenottradedinanactivemarket(forexample,over–the–counterderivatives)isdeterminedusingvaluationtechniques.Thesevaluationtechniquesmaximisetheuseofobservablemarketdatawhereitisavailableandrelyaslittleaspossibleonentityspecificestimates.ifallsignificantinputsrequiredtofairvalueaninstrumentareobservable,theinstrumentisincludedinlevel2.
ifoneormoreofthesignificantinputsisnotbasedonobservablemarketdata,theinstrumentisincludedinlevel3.
Specificvaluationtechniquesusedtovaluefinancialinstrumentsinclude:
• Theuseofquotedmarketpricesordealerquotesforsimilarinstruments.• Othertechniques,suchasdiscountedcashflowanalysis,areusedtodeterminefairvaluefortheremainingfinancial
instruments.inthe2015financialyearandinaccordancewithaaSB13,FairValueMeasurement,theGrouphasclassified,accordingtofairvaluehierarchy,thecashflowhedgeasalevel2asset.Thefairvalueofthecashflowhedgewasdeterminedbyusingobservableforeignexchangeforwardpricesandtheforwardgoldpricesatthereportingdate.Theforwardcurvesarederivedusingacombinationofcashandfuturesprices.Cashflowsarethennetpresentvaluedusingthederivedforwardcurves.Thecontractstowhichhedgeaccountinghavebeenappliedwereallcompletedduringthefinancialyearthereforeasat30June2016thehedgeassetwaszeroandthereforedoesnothaveanylevel2assetsorliabilitiesin2016.
TheGroupdoesnothaveanylevel3assetsorliabilities.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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27 CAPITALMAnAGEMEnT
Management’sobjectiveistoensuretheGroupcontinuesasagoingconcernandintheinterestsofshareholders.itaimstomaintainacapitalstructurewiththelowestcostofcapitalavailabletotheGroup.TheGrouphasdetailedplanningprocesses,budgetsandcashflowforecaststhroughwhichitcontinuallymonitorsitspositionagainsttheaboveobjectives.at30June2016thecapitalstructureconsistedoftotalshareholders’funds,cashandotherfinancialassetslessfinanceleaseborrowings.TheGroup’soverallstrategyremainsunchangedfrom2015.
28 COnTInGEnTLIABILITIES
Therearenocontingentliabilitiesat30June2016(2015:Nil).
29 MATTERSSUBSEQUEnTTOTHEREPORTInGDATE
Therehasnotbeenanymatterorcircumstance,otherthanthatreferredtointhefinancialreportthathasarisensincetheendofthefinancialyearthathassignificantlyaffected,ormaysignificantlyaffect,theoperationsoftheGroup,theresultsofthoseoperations,orthestateofaffairsoftheGroup.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the Financial Year ended 30 June 2016
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DIRECTORS’DECLARATION
TheDirectorsofSaracenMineralHoldingsLimiteddeclarethat,intheiropinion:
(a) thefinancialstatementsandnotesandtheRemunerationReportintheDirectors’Reportsetoutonpages47to62,areinaccordancewiththeCorporationsact2001,including:
(i) givingatrueandfairviewoftheGroup’sfinancialpositionasat30June2016andofitsperformance,forthefinancialyearendedonthatdate;and
(ii) complying with australian accounting Standards (including the australian accounting interpretations) andCorporationsRegulations2001andothermandatoryprofessionalreportingrequirements.
(b) thefinancialreportalsocomplieswithinternationalFinancialReportingStandardsissuedbytheinternationalaccountingStandardsBoard(iaSB)asdisclosedinNote1(b);and
(c) therearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasandwhentheybecomedueandpayable.
atthedateofthisdeclarationtherearereasonablegroundstobelievethattheCompanyandthegroupentitiesidentifiedinNote22willbeabletomeetanyobligationsorliabilitiestowhichtheyareormayhavebecomesubjecttobyvirtueoftheDeedofCrossGuaranteebetweentheCompanyandthosegroupentitiespursuanttoaSiCClassOrder98/1418.
ThedirectorshavebeengiventhedeclarationsrequiredbySection295aoftheCorporationsact2001bythechiefexecutiveofficerandchieffinancialofficerforthefinancialyearended30June2016.
Signedinaccordancewitharesolutionofthedirectors.
RALEIGH FINLAYSON
Managing Director
25august2016
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INDEPENDENT AUDITOR’S REPORTTo the members of Saracen Mineral Holdings Limited
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, andform part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than forthe acts or omissions of financial services licensees
38 Station StreetSubiaco, WA 6008PO Box 700 West Perth WA 6872Australia
Tel: +61 8 6382 4600Fax: +61 8 6382 4601www.bdo.com.au
To the members of Saracen Mineral Holdings Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Saracen Mineral Holdings Limited (the Company), including its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the Company.
In our opinion:
(a) the accompanying financial report of Saracen Mineral Holdings Limited is in accordance with theCorporations Act 2001, including:
(i) giving a true and fair view of the Group’s consolidated financial position as at 30 June 2016and of its consolidated financial performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed inNote 1(b).
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities underthose standards are further described in the Auditor’s responsibilities for the audit of the FinancialReport section of our report. We are independent of the Group in accordance with the CorporationsAct 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’sAPES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of thefinancial report in Australia. We have also fulfilled our other ethical responsibilities in accordancewith the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has beengiven to the directors of Saracen Mineral Holdings Limited, would be in the same terms if given to thedirectors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance inour audit of the financial report of the current period. These matters were addressed in the context ofour audit of the financial report as a whole, and in forming our opinion thereon, and we do not providea separate opinion on these matters.
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INDEPENDENT AUDITOR’S REPORT (CONTINUED)
To the members of Saracen Mineral Holdings Limited
Provision for rehabilitation
As at 30 June 2016, the carrying value of the Group’s provision for rehabilitation was $57.893 million.
The Group’s provision for rehabilitation as disclosed in Note 1(u) and 17 is material to our audit, andrequires significant estimates of future costs.
The determination of the provision requires management’s judgement in relation to estimating thecosts of performing the work required, including volume and unit rates, the timing of cash flows andthe appropriate discount rate.
We assessed the competence and objectivity of the expert used by management in the preparation ofthe cost models.
We evaluated management’s cost model for each mine, and critically challenged the key estimates andassumptions made in the models. We also assessed the expected timing of the rehabilitation to therespective life of mine (‘LoM’) models and assessed the reasonableness of the discount rate applied tothe expected cash flows.
We performed a sensitivity analysis on the key estimates and assumptions in the cost models.
Our testing included comparison of a sample of unit rates included in the cost models to supportingdocumentation including current contracts.
Carrying value of ore stocks and mine properties (mines in production)
Ore stocks
As at 30 June 2016, the carrying value of the Group’s ore stocks was $12.318 million, as disclosed inNote 9.
The carrying value of ore stocks is a significant area of judgement by management as detailed in Note1(n), including determining estimates of future gold prices, future processing costs, ore grades, volumeand density.
In respect to the ore stocks valuations, we considered the appropriateness of the Group’s accountingpolicy and application. We considered the methodology applied by management to record allappropriate costs into the inventory model and management’s calculation of net recoverable value(‘NRV’).
We agreed the ore grades, volume and density included in the model as at 30 June 2016 to technicalreports. We assessed the competence and objectivity of the expert used by management for thepreparation of the technical reports.
We also evaluated the inputs and process undertaken by the expert in preparing the technical reports.
To verify existence of ore stocks at year end, we observed the surveying process and procedures atThunderbox at 30 June 2016 as part of our site visit. We then agreed the ore volumes surveyed andrecorded at site to the volumes included in the inventory model.
In relation to NRV, our testing included comparison of the future gold prices to current gold price data,market consensus and trends and we also critically assessed the expected processing and selling costs(i.e. royalties) to actual rates during the year.
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Mine properties (mines in production)
As part of the Group’s carrying value of mines in production of $70.088 million, amortisation representsan area of significant judgement within the financial statements as detailed in Note 1(t) and 15. TheGroup applies the units of production amortisation policy, which involves judgement in determining theappropriate ore reserve estimation attributable to each mine and the cost allocation to each mine.
In respect of the Group’s amortisation calculations on mine properties (mines in production), weevaluated the Group’s amortisation policy in accordance with Australian Accounting Standards and itsconsistent application. As part of this process, we agreed the amortisation rate inputs to supportinginformation, including LoM models, and reserve estimation statements.
We also assessed the competency and objectivity of the expert used by management in compiling thereserve estimation statements.
In relation to the substantial capitalisation of expenditure during the year to mine properties, weperformed detailed testing, including verifying the authorisation, accuracy and completeness of therecording and classification of capital expenditure. Where expenditure was allocated across variousmines, we critically assessed management’s basis for this allocation.
We also critically evaluated management’s assessment that there were no impairment indicatorsidentified in relation to all mine properties which would require impairment testing to be performed.
Carrying value of the deferred stripping asset
As at 30 June 2016, the carrying value of the Group’s deferred stripping asset, as included in mineproperties, was $5.774 million, as disclosed in Note 15.
The recognition and measurement of the asset requires significant management judgement, as detailedin Note 1(t), which includes determining the date of commercial production, identification ofcomponents within the ore body, estimation of the components’ LoM average stripping ratio, theallocation of mining costs to the stripping activity and the amortisation methodology to be applied tothe asset.
We assessed whether the stripping activity asset accounting policy adopted by management in respectto production stripping complies with the relevant accounting interpretation, IFRIC 20: Stripping Costsin the Production Phase of a Surface Mine (‘IFRIC 20’), including satisfying the recognitioncriteria. Under this interpretation a deferred stripping asset can be recognised when the followingcriteria are met; it is probable that future economic benefits associated with the stripping activity willflow to the Group, the component of the ore body can be identified, and the cost relating to thestripping activity can be measured reliably.
We evaluated management’s assessment in determining the date of commercial production as well asthe identification of separate components within the Thunderbox ore body. We compared thisassessment to recent mining public announcements and respective LoM models for consistency.
We assessed management’s calculation of the stripping asset based on actual stripping ratios fromtechnical reports and compared this data to the average stripping ratio per the LoM model.
We also challenged management’s amortisation methodology and evaluated the application of thispolicy in accordance with the accounting interpretation, IFRIC 20.
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
To the members of Saracen Mineral Holdings Limited
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INDEPENDENT AUDITOR’S REPORT (CONTINUED)
To the members of Saracen Mineral Holdings Limited
As part of our testing we also assessed the competency and objectivity of the expert used bymanagement in the preparation of the technical reports.
Other information
The directors are responsible for the other information. The other information comprises theinformation contained in the 2016 Financial Year Results (but does not include the financial report andour auditor’s report thereon), which we obtained prior to the date of this auditor’s report, and theAnnual report to Shareholders, which is expected to be made available to us after that date.
Our opinion on the financial report does not cover the other information and accordingly we do not andwill not express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other informationidentified above and, in doing so, consider whether the other information is materially inconsistentwith the financial report or our knowledge obtained in the audit, or otherwise appears to be materiallymisstated.
If, based on the work we have performed on the other information that we obtained prior to the dateof this auditor’s report, we conclude that there is a material misstatement of this other information,we are required to report that fact. We have nothing to report in this regard.
When we read the Annual report to Shareholders, if we conclude that there is a material misstatementtherein, we are required to communicate the matter to the directors, and will request that it iscorrected. If it is not corrected, we will seek to have the matter appropriately brought to the attentionof users for whom our report is prepared.
Responsibilities of the Directors of the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives atrue and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001and for such internal control as the directors determine is necessary to enable the preparation of thefinancial report that gives a true and fair view and is free from material misstatement, whether due tofraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless the directors either intend to liquidate the Group or to ceaseoperations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is freefrom material misstatement, whether due to fraud or error, and to issue an auditor’s report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with the Australian Auditing Standards will always detect a materialmisstatement when it exists. Misstatements can arise from fraud or error and are considered materialif, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is included in appendix1. This description forms part of our auditor’s report.
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Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 47 to 62 of the directors’ report for theyear ended 30 June 2016.
In our opinion, the Remuneration Report of Saracen Mineral Holdings Limited, for the year ended 30June 2016, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of theRemuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibilityis to express an opinion on the Remuneration Report, based on our audit conducted in accordance withAustralian Auditing Standards.
BDO Audit (WA) Pty Ltd
Phillip Murdoch
Director
Perth, 25 August 2016
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
To the members of Saracen Mineral Holdings Limited
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BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, andform part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than forthe acts or omissions of financial services licensees
Tel: +61 8 6382 4600Fax: +61 8 6382 4601www.bdo.com.au
38 Station StreetSubiaco, WA 6008PO Box 700 West Perth WA 6872Australia
Appendix 1 – Additional information on the Auditor’s responsibilities for the audit of the FinancialReport
As part of an audit in accordance with the Australian Auditing Standards, we exercise professionaljudgement and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial report, whether due to fraudor error, design and perform audit procedures responsive to those risks, and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting amaterial misstatement resulting from fraud is higher than for one resulting from error, as fraudmay involve collusion, forgery, intentional omissions, misrepresentations, or the override ofinternal control.
• Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Group’s ability to continue as a goingconcern. If we conclude that a material uncertainty exists, we are required to draw attention inour auditor’s report to the related disclosures in the financial report or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained upto the date of our auditor’s report. However, future events or conditions may cause the Group tocease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including thedisclosures, and whether the financial report represents the underlying transactions and events ina manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the financial report. We areresponsible for the direction, supervision and performance of the Group audit. We remain solelyresponsible for the audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing ofthe audit and significant audit findings, including any significant deficiencies in internal control thatwe identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, relatedsafeguards.
From the matters communicated with the directors, we determine those matters that were of mostsignificance in the audit of the financial report of the current period and are therefore the key auditmatters. We describe these matters in our auditor’s report unless law or regulation precludes publicdisclosure about the matter or when, in extremely rare circumstances, we determine that a mattershould not be communicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest benefits of such communication.
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
To the members of Saracen Mineral Holdings Limited
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SHAREHOLDERiNFORMaTiON
Thefollowingadditionalinformationwasapplicableasat30September2016.
1. SUBSTAnTIALSHAREHOLDERS
Thenamesofthesubstantialshareholdersandthenumberofsharesinwhichtheyhavearelevantinterestare:
Substantial Shareholder Fully Paid Ordinary Shares %
VanEckassociatesCorporation 136,890,967 16.98
WroxbyPtyLtd* 56,422,703 7.00
SevenGroupHoldingsLimited* 56,422,703 7.00
*Note:Coversthesameparcelofshares.
2. FULLYPAIDORDInARYSHARES
(a) Thereare6,742holdersoffullypaidordinaryshares.Holdersoffullypaidordinarysharesareentitledtoonevoteperfullypaidordinaryshare.
(b) Distributionoffullypaidordinaryshareholders:
Category Number of Fully Paid (Size of Holding) Ordinary Shareholders
1-1,000 1,214
1,001-5,000 2,336
5,001-10,000 1,219
10,001-100,000 1,767
100,001andover 206
Total 6,742
(c) Thenumberoffullypaidordinaryshareholdingsheldinlessthanmarketableparcelsis362(basedonasharepriceof$1.44).
(d) The20largestfullypaidordinaryshareholderstogetherheld85.11%ofthesecuritiesinthisclass.
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20 LARGEST FULLY PAID ORDINARY SHAREHOLDERS Name Number %
1 HsbcCustodyNominees(australia)Limited 193,375,871 23.98
2 NationalNomineesLimited 187,650,495 23.28
3 JPMorganNomineesaustraliaLimited 136,615,468 16.95
4 WroxbyPtyLtd 56,422,703 7.00
5 CiticorpNomineesPtyLimited 51,028,313 6.33
6 BNPParibasNomsPtyLtd‹DRP› 14,400,013 1.79
7 BNPParibasNomsPtyLtd‹agencyLendingDRP› 6,606,959 0.82
8 NationalNomineesLimited‹DBa/C› 5,898,008 0.73
9 HSBCCustodyNominees(australia)Limited‹NT-CmnwlthSuperCorpa/C› 5,220,222 0.65
10 MrsVanessaMarnieFinlayson‹FinlaysonFamilyTrusta/C› 4,381,819 0.54
11 MrRichardarthurLockwood 3,940,000 0.49
12 CiticorpNomineesPtyLimited‹ColonialFirstStateinva/C› 3,204,721 0.40
13 aBNamroClearingSydneyNomineesPtyLtd‹Custodiana/C› 3,033,739 0.38
14 QualityLifePtyLtd‹NeillFamilya/C› 2,800,000 0.35
15 MerrillLynch(australia)NomineePtyLimited 2,246,073 0.28
16 QualityLifePtyLtd‹NeillFamilya/C› 2,200,000 0.27
17 RBCinvestorServicesaustraliaNomineesPtyLtd‹BKCUSTa/C› 2,183,093 0.26
18 HSBCCustodyNominees(australia)Limited–GscoEca 2,130,218 0.25
19 SwissTradingOverseasCorp 1,581,681 0.20
20 BrispotNomineesPtyLtd‹HouseHeadNomineeNo1a/C› 1,260,112 0.16
Total 686,179,508 85.11
Thereisatotalof806,205,292fullypaidordinarysharesonissue,allofwhicharelistedontheaustralianSecuritiesExchange.
3. UnLISTEDEMPLOYEEPERFORMAnCERIGHTS
asat30September2016,thereareatotalof15,561,500unlistedPerformanceRightsonissueheldby50differentpersons.TheseRightshavenoexercisepriceandvestbetween30June2016and30June2019subjecttothefulfilmentoftherelevantvestingconditionsandthattheholderisstillanemployeeoftheSaracenGroupatthattime.
4. COMPAnYSECRETARY
MrG.Kaczmarek
SHAREHOLDERiNFORMaTiON(CONTiNUED)
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SHAREHOLDERiNFORMaTiON(CONTiNUED)
5. REGISTEREDAnDPRInCIPALOFFICE
Theaddressoftheregisteredandprincipalofficeis:-
Level489StGeorgesTerracePerth,Wa6000
Telephone: (08)62299100Facsimile: (08)62299199
6. REGISTEROFSECURITIES
Heldatthefollowingaddress:-
ComputershareinvestorServicesPtyLimited
452JohnstonStreetabbotsford,ViC3067
Telephone: 1300787272or(03)94155000Facsimile: (03)94732500
Board of DirectorsMr Geoffrey Clifford (Non-Executive Chairman)
Mr Raleigh Finlayson (Managing Director)
Mr Mark Connelly (Non-Executive Director)
Mr Martin Reed (Non-Executive Director)
Ms Samantha Tough (Non-Executive Director)
SecretaryMr Gerard Kaczmarek
Registered Office and Business AddressLevel 4, 89 St Georges Terrace Perth WA 6000
Telephone: 08 6229 9100 Facsimile: 08 6229 9199
Website: saracen.com.au
Stock Exchange ListingListed on the Australian Securities Exchange (ASX Code: SAR)
AuditorsBDO Audit (WA) Pty Ltd 38 Station Street, Subiaco WA 6008
Telephone: +61 8 6382 4600 Facsimile: +61 8 6382 6401
SolicitorsDLA Piper Level 31, Central Park 152 – 158 St Georges Tce, Perth WA 6000
BankersCommonwealth Bank of Australia Limited 367 Collins Street, Melbourne VIC 3000
and
Macquarie Bank Limited 50 Martin Place, Sydney NSW 2000
Share RegistryComputershare Investor Services Pty Limited 452 Johnston Street, Abbotsford VIC 3067
Telephone: 1300 787 272 or 03 9415 5000 Facsimile: 03 9473 2500
cover photo: night operations at Thunderbox. this photo: Thunderbox open pit lookout.
CORPORATE DIRECTORY
photo: Underground remote bogging at Karari.
ANNUAL REPORT
2016
SARACEN.COM.AUABN: 52 009 215 347
ABN: 52 009 215 347
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