SARACEN MINERAL HOLDINGS LIMITED ANNUAL REPORT 2013 ABN: Annual Report Saracen Mineral Holdings Limited

Transcription

1 SARACEN MINERAL HOLDINGS LIMITED ANNUAL REPORT 2013 ABN: Saracen Mineral Holdings Limited Annual Report

2 Corporate Directory Board of Directors Mr Guido Staltari (Non-Executive Chairman) Mr Raleigh Finlayson (Managing Director) Mr Barrie Parker (Non-Executive Director) Mr Martin Reed (Non-Executive Director) Mr Geoffrey Clifford (Non-Executive Director) Ms Samantha Tough (Non-Executive Director) Secretary Mr Gerard Kaczmarek Registered Office and Business Address Level 4, 89 St Georges Terrace Perth WA 6000 Telephone: Facsimile: Website: saracen.com.au Stock Exchange Listing Listed on the Australian Securities Exchange (ASX Code:SAR) Auditors BDO East Coast Partnership Level 14, 140 William Street Melbourne VIC 3000 Telephone: Facsimile: Solicitors Steinepreis Paganin Level 4, Next Building 16 Milligan Street, Perth WA 6000 Bankers Commonwealth Bank of Australia Limited 367 Collins Street, Melbourne VIC 3000 and Macquarie Bank Limited 1 Martin Place, Sydney NSW 2000 Share Registry Computershare Investor Services Pty Limited 452 Johnston Street Abbotsford VIC 3067 Telephone: or Facsimile:

3 Contents Managing Director s Report 3 Review of Operations 5 Mineral Resources and Ore Reserves Statement 19 Corporate Governance Statement 23 Directors Report 29 Auditor s Independence Declaration 41 Financial Statements - Consolidated Statement of Comprehensive Income 42 - Consolidated Statement of Financial Position 43 - Consolidated Statement of Changes In Equity 44 - Consolidated Statement of Cash Flows 45 - Notes to the Financial Statements 46 Directors Declaration 79 Independent Auditor s Report 80 Shareholder Information 82

4 Achievements in FY2013 put Saracen in a position of strength, enabling it to withstand subdued gold prices and extract maximum value from its operations. 2

5 Managing Director s Report Dear Shareholders, The financial year in many ways was a year of significant progress and transition towards achieving our mission of adding value for shareholders. Many key milestones were achieved during the year, including:- Record gold production of 136,168 ounces from our Operations. Transition of our Red October mine from a trial exploration mine to a fully-fledged producing mine, with 8.38g/t for 29,610 ounces mined for the year. Carosue Dam mill produced its 1 millionth ounce in February Entered into a Debt facility of A$50 million with Macquarie Bank Limited. Entered into a gold hedging facility of 200,000 ounces at an average price of A$1,695/oz over the next three years. Succession of Raleigh Finlayson to Managing Director and Guido Staltari to Non-Executive Chairman as part of our long term succession plan. Transfer of our Head office from Melbourne to Perth. Appointment of Perth based Martin Reed (Non-Executive Director), Gerry Kaczmarek (Chief Financial Officer) and Craig Bradshaw (Chief Operating Officer). Strategic Review conducted in April 2013, with a review of all capital, operating, administration and discretionary expenditures to ensure risk-averse strategy, and optimisation of cashflow. 40% reduction in cash costs over the course of the year. 30% reduction in all in sustaining cash costs. These achievements have helped put Saracen in a position of strength that will enable the Company to withstand subdued gold prices courtesy of our hedge book and a falling cash cost profile, as well as extract maximum value out of our assets due to our developed Whirling Dervish open pit, fully operational Red October underground mine and our significant resource base with considerable exploration upside. On behalf of the Company I would like to thank Guido Staltari for his tireless efforts over the past 10 years as Executive Chairman/Managing Director. Guido can be very proud of his achievements whilst leading the company, including the purchase of the Carosue Dam assets in 2005 for approximately $14 million and turning that initial investment into a business currently worth approximately $150 million. On a personal note, I would especially like to thank Guido for being a great mentor over the past 5 years, and I look forward to his continued counsel and advice through his ongoing Chairmanship. With regard to the future of Saracen and the direction we ll take the Company in the coming years, the Saracen Board of Directors and Management Team have been working on our strategy and are pleased to lay out the following that will in many ways be our roadmap to the future: Our Mission Add value We will add value to our key stakeholders by building a sustainable future through producing, developing, exploring and acquiring gold, and potentially other metals, in an economically disciplined, safe and environmentally responsible manner. Adding Value to our Shareholders is achieved by: Capital Gains in our share price. Paying a Dividend. Adding Value to all stakeholders is achieved by: Operating in a safe and environmentally responsible manner. Ensuring we survive the hard times. Generating sufficient free cashflow to reward excellent performance. Building a pipeline of economically robust projects that will add value and deliver longevity to all stakeholders. 3

6 Our Vision Add Value to our key stakeholders by delivering at least A$60m free cash flow by the end of FY2015 We will add value to our key stakeholders by: Generating A$60m of cumulative free cash flow after all expenses by the end of FY2015 that will enable the Company to realise our mission. Ensuring we remain viable and survive difficult times. Maintain a discipline of adding value which will ultimately reward all stakeholders. Note: revenues are based on an average of hedged ounce prices and a spot gold price of A$1,450/oz. Definition of free cash flow (FCF): A measure of financial performance calculated as operating net cash flow minus capital and corporate expenditures. Free cash flow represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it s tough to develop new products, make acquisitions, pay dividends and reduce debt. Source: Investopedia Our 5 year plan Focus on free cashflow generation that will enhance our credibility and add value for our key stakeholders Our 5 year plan will add value to our key stakeholders by: Remaining focused on our Mission Add value. Living within our means. Focus on free cashflow generation, regardless of the direction the Company takes in the future. Focusing on free cashflow generation, not units produced and reportable cash costs per unit. Building a sustainable business that generates consistent free cashflow. So long as this objective is achieved, the number of ounces we produce, the number of mines we operate, the projects we acquire, and the metals we exploit will be a by-product of our over-arching strategy of Adding Value. Core Values Accountability Creates a performance culture. Freedom to perform your role, with rewards for good performance and consequences for poor performance. Add value by being accountable to our plans. Communication Open, honest and decisive communication flows at all times. A willingness and capacity to vigorously debate internally. Add value by communicating our plan to all key stakeholders. Delivery Motivate a highly capable team focused on gaining and maintaining credibility with our key stakeholders via delivering our plans. Add value by creating a performance culture. Choose your Attitude Our attitude drives our behaviour, which leads to delivering results. There is always a choice about the way we do our work, even if there is no choice about the work itself. Add value by having a great day! Acknowledgments On behalf of the Saracen Board I would like to thank all of our employees and contractors who have contributed to the progress and transition of the Company over the past year. Finally, I would like to thank our shareholders for their ongoing support and we look forward to a prosperous future for all Saracen shareholders and other stakeholders. Yours Sincerely RALEIGH FINLAYSON Managing Director 4

7 Review of Operations Overview Saracen Mineral Holdings Limited is an ASX 300 gold producer with its 100% owned Carosue Dam Operations located in the highly prospective Goldfields region of Western Australia. The operations include: 19 deposits with Mineral Resources, containing 3.8 million ounces of gold, and 12 deposits making up 0.9 million ounces of Ore Reserves providing a mine life based on existing Ore Reserves of approximately 8 years. A modern carbon-in-leach cyanidation (CIL) plant with a nameplate capacity of 2.4 million tonnes per annum, constructed in 2000 with only 9 years of operating history. Since operations re-commenced in January 2010, the plant has regularly exceeded its nameplate capacity, with annualised throughputs in excess of 2.5 million tonnes per annum. The Whirling Dervish open pit mine, providing 273koz of bulk mill feed adjacent to the processing plant over the next 3 years. Continued development of the high-grade Red October underground mine, with a resource grade in excess of 7 g/t. This deposit provides high-grade, high-margin ore to blend with our bulk open pit mill feed. A pipeline of highly prospective exploration targets, both greenfields and brownfields, which will be systematically studied, evaluated and tested with the aim of growing our economically viable resource base. Occupational Health and Safety & Environment Saracen remains focused on improving all aspects of our business, including our safety performance and conducting our business in an environmentally responsible manner. To this end the Board of Directors and Management Team are disappointed that after significant improvements at the start of the year that saw our Lost Time Injury Frequency Rate ( LTIFR ) fall below the industry average in the March quarter 2013, our LTIFR had risen slightly above the industry average in the June quarter This year Saracen rolled out an extensive in-house leadership training program aimed at raising safety awareness and improving our overall safety culture Production & Costs The operations have delivered three consecutive quarterly production records, culminating in a record annual production milestone of 136,168 ounces at a cash cost of A$1,072/oz (excluding royalties of A$60/oz). In February 2013 the processing plant produced its 1 millionth ounce of gold. Gold production statistics are shown in Table 1 and Figure 1. Gold Production Unit Sep 12 Qtr Dec 12 Qtr Mar 13 Qtr June 13 Qtr FY2013 Total Ore Milled t 654, , , ,474 2,500,582 g/t Recovery % 90.1% 90.0% 90.3% 91.3% 90.4% Gold Produced oz 30,448 32,031 36,430 37, ,168 Table 1 - Carosue Dam Operations gold production for The operations have delivered three consecutive quarterly production records, culminating in a record annual gold production milestone of 136,168 ounces... 5

8 Following the Strategic Review undertaken during the year, the operations have achieved a 40% reduction in cash costs per ounce and a 30% reduction in all-in sustaining cash costs per ounce, from a combination of lower costs and increased gold production due to a higher grade. FY2013 Production & Cash Costs $100 $1,733 $1,800 $90 $1,607 $1,600 $80 $1,363 $1,356 $1,400 $70 $1,201 $1,208 $1,200 A$m $60 $50 $40 $ koz 32.0koz $ koz $ koz $1,000 $800 $600 A$/oz $20 $400 $10 $200 $0 Sep Qtr Dec Qtr Mar Qtr Jun Qtr $0 Revenue (A$m) Cash Costs (A$m) Sustaining Capital (A$m) Growth Capital (A$m) Production (koz) Cash Costs (A$/oz) All in Sustaining Cash Costs (A$/oz) Figure 1 - Carosue Dam Operations gold production and cash costs for Open Pit Mining Various open pits were mined during the course of the year with a total of 1,915, g/t for 110,319 ounces mined. The bulk of the open pit ounces mined for were from Karari (60,743 ounces) and Deep South (26,456 ounces). The Deep South open pit, which is located 80km north of the processing plant, was completed ahead of schedule at the end of April 2013, with the mining fleet demobilised in May. The Deep South open pit was a great success, with approximately 5,500 ounces extracted over and above Ore Reserve estimates due to a 26% increase in reconciled headgrade, shown in Table 2. The uplift in realised grade provides comfort that additional upside may exist in the underground reserves at Deep South. Deep South Open Pit Unit Reserve Actual Mined Variance Ore Tonnes t 212, ,447 99% Grade g/t % Contained Gold oz 21,000 26, % Table 2 - Deep South Open Pit reconciliation for The Karari open pit is located adjacent to the processing plant and had approximately 14,300 ounces remaining to be mined at the end of the year. Mining was completed at Karari on schedule at the end of August The Karari mining fleet was demobilised in June and the remainder of the pit utilised the 120 tonne mining fleet shared with Whirling Dervish, resulting in better equipment utilisation, scheduling and lower unit mining costs. The Karari open pit has also yielded over-budget ounces, in the order of 5,200oz, again due to a 19% increase in the reconciled headgrade (1.48g/t v 1.24g/t), with a significant grade overcall occurring at the base of the pit, leading us to remain optimistic with the resource potential at depth, shown in Table 3. Karari Open Pit Unit Reserve Actual Mined Variance Ore Tonnes t 1,387,733 1,273,617 92% Grade g/t % Contained Gold oz 55,544 60, % Table 3 - Karari Open Pit reconciliation for

9 LEONORA WALLABY GRANNY SMITH GWALIA LAKE CAREY SUNRISE DAM Red October District BUTCHER WELL RED OCTOBER FORTITUDE L A K E R A E S I D E TIN DOG SAFARI BORE DEEP SOUTH / MEXICO Safari District LAKE MARMION Road L A K E R E B E C C A PORPHYRY ENTERPRISE MILLION DOLLAR WALLBROOK Porphyry District Yarri TWIN PEAKS ANGLO SAXON WHIRLING DERVISH CAROSUE DAM PLANT KARARI Carosue Dam District LEGEND Main Public Roads Saracen Private Access Roads Saracen Projects Non-SAR owned projects KANOWNA BELLE Carosue Dam District Porphyry District KALGOORLIE L A K E Y I N D A R L G O O D A Safari Bore District Red October District Saracen Mineral Holdings Figure 2 - Plan showing Saracen s tenement holdings and principal gold deposits

10 In October 2012 we commenced the Whirling Dervish open pit cutback, that will deliver the baseload mill feed to our plant over the next three years. 360m 320m 280m 240m 200m 160m 120m 80m 40m 0m 19720mE 19720mE 19760mE 19760mE FINAL PIT DESIGN 19800mE 19800mE MINED STAGE 1 2.6g/t Figure 3 - Whirling Dervish Open Pit Cross Section 19840mE 19840mE 1.7g/t 2.5g/t 2.0g/t 19880mE 19880mE 1.5g/t 2.8g/t 2.3g/t 19920mE 19920mE 1.8g/t 1.8g/t 19960mE 19960mE 2.4g/t -40m -40m 20000mE 20000mE ACTIVE MINING BENCH AS AT JUNE g/t 1.6g/t 20040mE 20040mE 2.9g/t 3.6g/t 5.5g/t 2.6g/t 20080mE 20080mE 4.1 g/t 20120mE 20120mE 20160mE 20160mE REMAINING ALL IN CASH COSTS A$1,150/oz - Jun 2013 A$950/oz - Dec 2013 A$800/oz - Jun 2014 A$700/oz - Dec 2014 A$600/oz - Jun 2015 ALL IN cash costs includes: Pre-strip & development capital Mining operating costs Processing costs Site admin costs Royalties LEGEND > 3.0g/t g/t 20200mE 20200mE 20240mE 20240mE g/t g/t 360m 320m 280m FY m 200m FY m 120m 80m 40m 0m 8

11 In October 2012 we commenced the Whirling Dervish open pit cutback, that will deliver the baseload mill feed to our plant over the next three years. The cutback contains 273,000 ounces, with first ore having been extracted in June The cutback is 700 metres long, 400 metres wide and 230 metres deep. The pit will be mined as one stage to maximise mining efficiency, productivity and to minimise ore mining dilution. Figure 3 shows the active mining bench as at 30 June 2013, with mining in advancing into the hangingwall ore zones. Whirling Dervish contains 6,515,000 million 1.3g/t for 273,000 contained ounces in Ore Reserves that will be mined and milled over the next 3 years. The reserve grade for the Whirling Dervish open pit allows a conservative 25% dilution factor at 0g/t. Figure 4 is a 3D cross section of the Whirling Dervish pit. The all in cash costs for the remainder of the pit as at 30 June 2013 was A$1,150/oz, and by the end of that figure will have fallen to A$800/oz. Karari Open Pit Carosue Dam Processing Plant Whirling Dervish Open Pit Figure 4 - Whirling Dervish Open Pit Cross Section Image: Whirling Dervish Open Pit as at September

12 Underground Mining This year also saw our high grade underground mine at Red October transition from a trial exploration mine to fullyfledged producing mine, with 8.38g/t for 29,610 ounces mined for the year, shown in Figure 5. 40, ,000 30, Ounces 25,000 20,000 15, Grade (g/t) 10, , Sep Qtr Dec Qtr Quarter Mar Qtr Jun Qtr Contained Ounces (oz) Mined Ore (t) Mine Grade (g/t) Figure 5 - Red October underground mine production for Red October is located approximately 120 kilometres north of the processing plant and only 12 kilometres south of the AngloGold Ashanti owned Sunrise Dam Operation, which has produced in excess of 5.5 million ounces of gold over the past 17 years. Many significant milestones were achieved at Red October during the year, including:- Strong reconciliation of mine production to Ore Reserve. All major capital works projects now completed. Primary ventilation circuit commissioned. Additional Jumbo mobilised to site, with one Jumbo focusing on waste development and the second (smaller) Jumbo focusing on ore development. Additional bogging and trucking capacity mobilised to site. Ore development moving into the Central Lode where strike lengths increase significantly. Stoping occurring on multiple levels following the completion of the escape way system. Excellent ground conditions allowing sub-level intervals to be increased, resulting in less capital development and more tonnes mined via stoping (lower cost and less dilution). This year also saw our high grade underground mine at Red October transition from a trial exploration mine to fully-fledged producing mine. 10

13 Figure 6 - Red October underground mine sliced aerial view The benefits of increased strike lengths in the Central Lode, shown in Figure 6, is becoming more apparent with a record 12.72g/t for 4,661 ounces produced in the month of June The structural complexity evident in the data is considered highly encouraging as it adds greater opportunities for resource development in close proximity to existing mine infrastructure. Some exceptionally high-grade drill results were returned from Red October during the year, including 225g/t, 184g/t, 230g/t and 955g/t, that gives us confidence that additional upside exists as we continue to develop the mine at depth. Deep South A feasibility study of the Deep South underground was completed, with robust technical and financial parameters showing an economically viable mine plan at current spot gold prices that would provide cost and logistical synergies with the Red October underground mine. The key outcomes from the feasibility study are: Ore Reserves of 4.0g/t for 130,000 contained ounces Stage 1 mine life 34 months (2.8yrs) Start-up capital - A$4m Peak Negative cashflow - A$15m (assuming A$1,450/oz gold price) Cash Costs of approx A$900/oz All in Total Costs approx $1,230/oz (inc all capital, operating and an allocation of corporate costs) The positive feasibility study results, coupled with the 26% overcall in the headgrade from the mining of the open pit provides comfort that the Deep South underground mine will feature as a viable standalone production centre despite the current lower gold price environment. The decision to commit to the development of the project has been postponed until at least when the existing debt facility has been repaid and/or until a higher gold price environment returns, whereby additional gold hedging can be considered to ensure that overall economic project returns can be achieved. The Deep South orebody remains open at depth and along strike. It s unlikely that additional drilling at depth will be conducted from surface due to the steeply dipping nature of the orebody, and the higher cost of drilling deeper diamond holes. The latest drilling program at depth returned one of the highest grade intercepts to date of 7.4g/t from DSRD

14 Processing The Carosue Dam processing plant continued to perform above expectations, with 2,500,582 tonnes of ore milled in The plant ran at an average throughput rate of 300 tonnes per hour at a headgrade of 1.87g/t and a recovery of 90.4%. In the Strategic Review, announced in May 2013, the Board decided to indefinitely suspend the expansion of the processing plant that was underway and that would have increased throughput to 3.2 million tonnes per annum. The decision to suspend the expansion was based on the Board s desire to reduce all capital expenditure in light of the then volatility in the gold price. Continued volatility in the gold price has vindicated the decision. Any decision to re-commence the expansion will be based on sustained higher gold prices and confidence that the increased mill capacity can be fed from our reserve base. Construction of a new tailings storage facility (TSF3), from suitable waste material arising from the Whirling Dervish cut back commenced in the second half of Use of this material will significantly reduce the total capital cost of this new storage facility, by as much as 50%. Construction of the facility will continue through with expected completion at the start of , providing up to an additional 6 years of tailings storage capacity for the Carosue Dam Operations. Exploration Following a very successful 2012, the exploration effort focused on following up early stage prospects that would ultimately add to the production profile post A review of the tenement package focused on identifying the highest priority targets to follow up. This review resulted in ranking of all targets based on empirical and conceptual geological data, geophysics and geochemistry. A number of the high priority targets were successfully followed up, most notably the Blue Manna deposit discovery 8km northeast of the Carosue Dam Plant. In January 2012, the Company s strong focus on free cash flow generation resulted in the curtailment of regional exploration expenditure. This slowed the advance of some encouraging results returned from the earlier exploration activities. A total of 2,910 metres diamond core and 36,670 metres of RC drilling was completed in Greenfields exploration effort now is focused on opening up the exploration space by applying advanced geochemical techniques, detailed Sub-Audio Magnetics and 3D Geodynamic Fault modelling on high priority targets including the Blue Manna, Deep South and Red October environs. 12

15 Whirling Dervish The final holes in what was an extensive and extremely successful drilling program were completed. The drilling targeted defining and extending multiple north-south striking shear zones hosted in a sequence of volcaniclastic sedimentary units. An RC drilling program was completed to infill data on the hangingwall lode at the northern end of the final pit design, with the aim of further optimising the final pit design to maximise ore extraction. The results provide validation of the contained ounces in the mine plan, with some localised upside potential evident. Geologically, the holes provide valuable information on the felsic intrusives and cross cutting lamprophyres. Significant hangingwall results include:- WDRC g/t from 79m WDRC g/t from 117m WDRC g/t from 87m WDRC g/t from 89m The underground reserve at Whirling Dervish highlights the potential of the mineralised system to deliver value to the business beyond the current open pit operation. The mineralisation remains open at depth and along strike to the north. Further drilling is required to the north, to test the highly prospective corridor between Whirling Dervish and Luvironza. Identifying the favourable host stratigraphy and following up existing mineralised anomalies will be critical in discovering further mineralisation. Deep South The Deep South mineralisation comprises of two parallel lodes, Butler and Scarlett. The Butler lode is characterised by an iron-rich chert, which is regionally extensive and is dominated by silica alteration. The Scarlett lode is located in the footwall to Butler and is dominated by massive fine grained carbonate whose origin is still unclear. High grade ore shoots in both lodes are steeply north dipping. Deep Well The Deep Well prospect, immediately north of Deep South was purchased in the September quarter The mineralisation at Deep Well is a continuation of the Butler lode from Deep South. A follow up drilling program confirmed the previously defined small high grade shoot at Deep Well which remains open. A wide spaced regional program testing the continuity of the mineralised trend north and south was successful and highlighted the potential for repeat high grade shoots. 13

16 Blue Manna The Blue Manna Prospect is a priority target identified from the drilling program. The prospect is located approximately 8 km north of the Carosue Dam plant, shown in Figure BLUE MANNA WHIRLING DERVISH PIT CAROSUE DAM PLANT KARARI PIT Saracen Mulgabble West tenements Saracen Old Plough Dam tenements Saracen Carosue Dam tenements Figure 7 - Blue Manna location plan OPDRC043 OPDRC039 OPDRC g/t 300 RL 1.16g/t 2.02g/t 300 RL 2.20g/t 250 RL 250 RL Saracen Mineral Holdings Figure 8 - Blue Manna Cross Section 10.08g/t 51050mE 51100mE BLUE MANNA Cross section 16045mN 51150mE CMBC holes drilled by previous tenement holder m 14

17 ROGC183 ROGC183 ROGC183 ROGC183 The prospect had been identified through RAB and limited RC drilling by a previous owner. Saracen followed up this drilling with a successful auger program, which confirmed the anomalous footprint at Blue Manna. In 2012, Saracen executed a first pass RC program that successfully delineated multiple mineralised structures. The increased definition has enabled accurate modelling of the steeply dipping sandstone and shale dominant stratigraphy as well as the mineralisation, which is characterised by strong silicification and quartz veining with associated pyrite. Increased alteration intensity is reflected by elevated grade. Significant intercepts at Blue Manna include: 3.3g/t from 20m 6.1g/t from 19m 2.0g/t from 45m and 10.0g/t from 113m (Figure 8) 7.4g/t from 42m; 3.6g/t from 21m 3.7g/t from 57m, and 6.6g/t from 107m. Further drilling is required to test the extensions along strike and at depth. This will be completed with a combination of RC and diamond drilling. Red October Development and extensive underground drilling activities at Red October have seen significant advances in the geological understanding of the mineralisation. Grade control and resource definition drilling programs have resulted in detailed analysis of the local mineralisation controls and the important discovery of several new lodes. The new lodes enhance the complexity of the system and contribute valuable ounces to the mine plan. Future exploration will target extensions to known mineralisation, follow up exciting new areas identified in recent drilling and test conceptual repetitions of intersecting structures. Testing near mine extensions will initially be driven from underground drill positions. S N Southern Lode New Mineralisation in Footwall (Smurf) RORD g/t RORD g/t RORD g/t Northern Lode RORD g/t ROGC g/t Central Lode ROGC g/t RORD g/t RORD g/t RORD g/t RORD g/t RORD g/t RORD g/t New Mineralisation in Hangingwall (Nemo) Figure 9 - Red October Long Section RORD g/t ROEX g/t ROEX g/t RED OCTOBER Long Section LEGEND >50 gm 20-50gm 10-20gm <10gm Central Lode Marlin Nemo Mineralisation Smurf Lode Previous Reserve 10.0g/t 10.0g/t 10.0g/t 10.0g/t Central Intercept Marlin Intercept Smurf Intercept Nemo Intercept Saracen Mineral Holdings 15

18 Financial Result The Company reported a net loss after tax of A$63.1 million (2012: a profit of A$18.7M). This result is inclusive of pre-tax non-cash write-downs of A$79.6 million on inventory (A$22.9 million), production assets (A$47.6 million) and exploration assets (A$9.1 million). These write-downs mainly relate to the effects of the sharply declining gold price applicable in the latter part of FY2013 and more specifically the low spot gold price as at balance date. The lower price was utilised in assumptions for determining the value of ore stockpiles and production assets of the future value of the Group s cash generating units. The impairment review of mining and development assets was conducted using an average of Saracen s hedge prices and a A$1,300/oz spot gold price, whilst the review of ore stockpiles utilised a spot gold price assumption of A$1,300/oz. Sales revenue for the year was A$210.6 million, up 13% from A$183.8 million in the previous year, mostly as a result of higher gold production of 136,368 ounces, versus 116,122 ounces in FY2012. Average gold price for the year was A$1,582/oz (2012: A$1,624/oz). Net cash flow from operations for the year was up 40% on the previous year to A$72.8 million (2012: A$51.9 million). Capital expenditure on purchases of plant & equipment, mine development and exploration totalled A$107.6 million for the year, an increase of 10% (2012: A$97.9 million). EBITDA (excluding significant items) for the year was a positive A$55.8 million (2012: A$63.2 million). Cash, Debt & Hedging At the end of the year, the Company s total cash position was A$20.7 million, comprising A$9.1 million held in cash, 3,177 ounces of gold in transit (approx A$.3 million at A$1,351/oz) and A$7.4 million held as cash backed environmental bonds. At the end of the year, the Company had drawn down loans of A$22 million out of available facilities of A$45 million. It s important to note that since the Strategic Review, no additional debt has been drawn, with debt remaining at A$22 million. At the end of the year, the Company had 176,600 ounces of gold hedged at an average price of A$1,683/oz. The hedging is divided into monthly allocations spread over the period July 2013 to August At the end of the year, the hedge book had a mark-to-market value of A$45.8 million (based on a spot gold price of A$1,351/oz). Outlook Production guidance for has been increased to 120,000 to 130,000 ounces, an increase of 10,000 ounces from the previous guidance of 110,000 to 120,000 ounces guidance has also increased to 125,000 to 135,000 ounces, an increase of 10,000 ounces from previous guidance of 115,000 to 125,000 ounces. Cash Costs are forecast to fall to A$900/oz in , and further to A$750/oz in All in Sustaining Cash Costs are forecast to be A$1,500/oz in , then reduce to A$950/oz in The dramatic fall in all in cash costs is a function of reporting all high-strip ratio waste in the quarter it s mined, rather than deferring non-cash costs, and the decision to mine the ultimate Whirling Dervish pit in one stage, rather than staging the pit to stagger capital outflows. Mining the ultimate pit in one stage will maximise mining efficiency, productivity and minimise ore mining dilution. Sales revenue for the year was A$210.6 million, up 13% (from A$183.8 million in the previous year) mostly as a result of higher gold production of 136,368 ounces versus 116,122 ounces in FY

19 5 YEAR GOLD PRICE IN AUD/oz Gold Price AUD/oz 2,000 1,900 1,800 1,700 HEDGED 200,000oz (DEC 2013) HEDGE PRICE 1,600 1,500 1,400 PRODUCTION COMMENCED (JAN 2010) 1,300 1,200 HEDGE OUNCES FORECAST PRODUCTION 1,100 1, FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Annual FY Hedging: $1,640 $1,689 $1,722 $1,680 Gold Price AUD/oz 2,000 1,900 1,800 1,700 1,600 $17M $35M $53M $71M $89M $107M $125M $143M Approx in the money hedge book value (AUD) 1,500 1,400 1,300 1,200 1,100 1, % 64% 64% 50% 45% 52% 52% 52% 47% 41% 41% 41% 64% Production 30,000 oz QUARTERLY PRODUCTION Percentage of production hedged 25,000 oz 20,000 oz 15,000 oz 10,000 oz 5,000 oz 0 oz Figure 10 - Saracen s Hedging profile for the next 3 years 17

20 Guidance - Production, Cash Costs & Hedging 200,000 $2, , ,000 $1,646 $1,600 $1,640 $1,500 $1,689 $1, , , koz koz koz A$m 100,000 $1,000 $900 $950 $1,000 A$/oz 80,000 $750 60,000 $500 40,000 20,000 0 FY2013 Figure 11 - Production and Cash Cost Guidance for the next 2 years It s important to note that the guidance provided in Figure 11 (above) only includes current reserves, with production from Red October only included in the guidance, with production being 100% from Whirling Dervish. It s envisaged that production from Red October will be added to in due course once appropriate drilling and modelling has been conducted. This will result in increased production, revenue and free cashflow in As part of the above guidance, Red October is forecast to deliver approximately 48,000 ounces of gold in financial year at a cash cost of A$900/oz and an all in sustaining cost of sub A$1,200/oz, on the back of the recently discovered multiple ore horizons and the introduction of additional underground mining equipment enabling a lift in ore production. FY2014 FY2015 $0 Financial Year 18

21 Mineral Resources and Ore Reserves Statement As at 30 June 2013 Total Resources (Measured, Indicated and Inferred) as at 30 June 2013 were 3.9 Moz. Ore Reserves (Proven and Probable) as at 30 June 2013 were 0.9 Moz. MINERAL RESOURCES Measured Indicated Inferred Total tonnes g/t oz tonnes g/t oz tonnes g/t oz tonnes g/t oz District Deposit Whirling Dervish O/P 203, ,000 13,514, , , ,000 13,962, ,000 Whirling Dervish U/G 0 5,993, ,000 1,917, ,000 7,910, ,000 Karari O/P 460, ,000 3,002, , , ,000 3,845, ,000 Karari U/G 0 248, , , , , ,000 Monty s/elliots 123, ,000 1,422, , , ,000 1,919, ,000 Twin Peaks 0 291, , , , , ,000 North West 332, , , ,000 1,023, ,000 Pinnacles 0 387, ,000 26, , , ,000 Carosue Dam Sub-Total 786, ,000 25,189, ,279,000 4,024, ,000 29,999, ,558,000 Porphyry O/P 702, ,000 7,262, ,000 1,551, ,000 9,515, ,000 Porphyry U/G 488, , , , , ,000 Million Dollar 9,270, ,000 1,639, ,000 10,909, ,000 Wallbrook 1,286, ,000 6,775, ,000 4,037, ,000 12,098, ,000 Margarets 48, , , , , ,000 Enterprise 218, , , , , , , ,000 Porphyry Sub-Total 2,206, ,000 24,153, ,000 8,246, ,000 34,605, ,230,000 Safari Bore 780, ,000 1,358, , , ,000 2,810, ,000 Deep South O/P 355, , , ,000 Deep South U/G 1,256, , , ,000 1,686, ,000 Deep Well 68, ,000 15, ,000 83, ,000 Safari Bore Sub-Total 780, ,000 3,037, ,000 1,117, ,000 4,934, ,000 Red October O/P 251, , , ,000 Red October U/G 105, , , , , , , ,000 Thin Lizzie 325, , , ,000 Tin Dog 1,284, ,000 1,284, ,000 Bulldog 1,529, ,000 1,529, ,000 Crimson Belle 916, , , ,000 1,493, ,000 Butcher Well 2,692, ,000 2,280, ,000 4,972, ,000 Red October Sub-Total 105, ,000 4,103, ,000 6,104, ,000 10,312, ,000 Ore Stockpiles 1,136, ,000 1,136, ,000 Sub-grade stockpiles 3,450, ,000 3,450, ,000 Total Mineral Resources 8,463, ,000 56,482, ,687,000 19,491, ,000 84,436, ,923,000 Carosue Dam Porphyry Safari Bore Red October All Table 1: Mineral Resources Statement by District. 19

22 Mineral Resources and Ore Reserves Statement (continued) As at 30 June 2013 ORE RESERVES Proved Reserves Probable Reserves Total Ore Reserves District Deposit Mine Type tonnes g/t oz tonnes g/t oz tonnes g/t oz Whirling Dervish OP 6,515, ,000 6,515, ,000 Whirling Dervish UG 834, , , ,000 Karari OP 1,116, ,000 1,116, ,000 Monty s/elliots OP 272, , , ,000 Carosue Dam Carosue Dam Sub-Total ,737, ,000 8,737, ,000 Porphyry OP 517, , , ,000 Million Dollar OP 1,404, ,000 1,404, ,000 Wallbrook OP 1,830, ,000 1,830, ,000 Enterprise OP 351, , , ,000 Porphyry Porphyry Sub-Total ,102, ,000 4,102, ,000 Safari Bore OP 362, , , , , ,000 Deep South UG 936, , , ,000 Safari Bore Sub-Total 362, ,000 1,168, ,000 1,530, ,000 Safari Bore Red October UG , , , ,000 Red October Sub-Total , , , ,000 Red October Stockpiles S 1,162, , ,162, ,000 All Total Ore Reserves 1,524, ,000 14,294, ,000 15,818, ,000 Table 2: Ore Reserves Statement by District. 20

23 Mineral Resources and Ore Reserves Statement (continued) As at 30 June 2013 Notes to accompany Mineral Resources Statement The Mineral Resources and Ore Reserves statements are reported according to the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code ) 2004 edition. Historical mining activity has taken place by open pit at Karari, Million Dollar, Red October, Butcher Well, Twin Peaks, Safari Bore, Deep South and Monty s. Historical open pit and underground mining has been carried out at Porphyry. In Saracen mined open pits at Karari, Whirling Dervish, Wallbrook, Margaret s, Deep South and Butcher Well and reserves and resources at these deposits are depleted. Underground mining has been conducted at Red October with reserves and resources depleted as of June 30, Surface Stockpiles have also been depleted for processed material. Various top cuts have been applied based on statistical analysis of mineralisation, domain and deposit. Ordinary Kriging has been used as the resource estimation method, with MIK and ID2 models run on numerous deposits for comparison purposes. Bulk density is applied on the basis of oxide, transition and fresh. Material type boundaries interpreted from geological logging data have been derived from a substantial number of measurements from diamond drill core at each deposit. Density measurements are routinely taken at all operating mines. Resource categories have been applied based on geological confidence and the density of sampling data and Kriging statistics. Tonnages, grades and contained metal have been rounded to reflect the accuracy of the calculations. Rounding errors will occur. A summary of cut-off and other parameters relevant to each deposit is summarised below. Cut-off grades for open pit resources are generally estimated as the marginal cut-off grade determined taking into account transport to and processing costs at the Carosue Dam processing plant. Mineral Resource Parameters Deposit Open Pit Cutoff UG Cutoff Pit Base District Drill Spacing Au g/t Au g/t mrl Whirling Dervish Carosue Dam 25x25 with 12.5x12.5 grade control in active pit Karari Carosue Dam 8x6 Grade Control to 25x25; typically 25x12.5 Montys Dam Carosue Dam 20x20 to 20x10 Elliots Carosue Dam 20x20 to 20x10 Twin Peaks Carosue Dam 20x20 Pinnacles Carosue Dam 20x20 Porphyry Porphyry 8x6 Grade Gontrol to 50x50; typically 20x20m Million Dollar Porphyry 20x20 to 40x20 Wallbrook Porphyry 20x20 North West Porphyry 20x20 to 20x10 Margarets Porphyry 20x20 Enterprise Porphyry 20x20 with 8x6 grade control in active pit area Safari Bore Safari Bore 20x20 to 40x40 Deep South Safari Bore 20x20 Red October Red October 15x15 to 40x40 Thin Lizzie Red October 40x20 Tin Dog Red October 50x25 Bulldog Red October 100x40 Crimson Belle Red October 50x20 Butcher Well Red October 20x20 with 10x10 grade control in pit area Table 3: Mineral Resources Parameters. Mineral Resources are reported as inclusive of Ore Reserves. Notes to accompany Ore Reserves Statement 1. Pit optimisations were run using Whittle and Micromine software, with key inputs as follows: a. Resource models prepared by Saracen s resource geologists. b. Geotechnical, hydrogeological, mine operating and milling parameters estimated by reference to known current/historical Carosue Dam data. c. An average Australian dollar gold price of A$1400 per ounce used for pit optimisations and pit design purposes unless stated. d. Planned mining dilution & mining recoveries are factored into the resource models assuming 120t and 260t class excavators and based on previous mining experience. e. Additional (unplanned) mining dilution & mining recoveries for each deposit shown in Table 6. f. Average plant processing recovery is 92.1 per cent. 21

24 Mineral Resources and Ore Reserves Statement (continued) As at 30 June 2013 Notes to accompany Ore Reserves Statement (continued) 2. Mining costs based on current mining contracts at Carosue Dam Operations and costs provided by an independent consultant. 3. Metallurgical parameters based on a combination of previous mining and/or recent metallurgical test work. 4. Pre-feasibility studies have been completed for underground mining at Deep South and Whirling Dervish. These studies have considered all capital cost requirements and operating costs are based on current underground mining activities at Saracen s operating mines. 5. Red October Ore Reserves are estimated on the basis of drilling results from an ongoing underground drilling programme. The Northern Lodes have been excluded from the Ore Reserve calculation pending results of further metallurgical test work. Ore Reserves will be updated on a regular basis as additional information becomes available. Due to the mine s location on Lake Carey it is not practical to conduct additional drilling activities from surface. Underground drilling platforms will be utilised to extend resources and reserves and these only become available when underground development has advanced to planned levels. 6. Tonnages, grades and contained metal have been rounded to reflect the accuracy of the calculations. Rounding errors may occur. 7. All deposits and stockpiles have allowed for depletion to the end of June Ore Reserve Parameters Deposit Style Cutoff Basis Dilution Ore Loss Karari OP 0.5 Design 15% 2% Whirling Dervish OP 0.5 Design 10% 1% Whirling Dervish UG 3.0 Design 15% 15% Monty s Elliots OP pit shell 15% 2% Wallbrook OP 0.7 Design 10% 2% Million Dollar OP 0.7 Design 15% 2% Enterprise OP 0.7 Design 15% 5% Porphyry OP 0.7 Design 20% 5% Deep South UG 2.5 Design 7% 5% Safari Bore OP 0.9 Design 25% 2% Red October UG 3.0 Design 49% 16% Table 4: Ore Reserves Parameters. Competent Person Statements The information in this report that relates to Exploration results and Mineral Resources has been compiled under the supervision of Mr Daniel Howe (BSc). Mr Howe, who is a Member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists, is a full-time employee of Saracen Gold Mines Pty Ltd. Mr Howe has sufficient experience that is relevant to the styles of mineralisation and types of deposit under consideration and to the activity that he is undertaking to qualify as a Competent person as defined in the 2004 edition of the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves. Mr Howe consents to the inclusion in this report of the matters based on his information in the form and context that the information appears. The information in this report that relates to underground Ore Reserves at Red October, Deep South and Whirling Dervish has been compiled under the supervision of Mr Stephen King (B.Eng). Mr King, who is a Member of the Australasian Institute of Mining and Metallurgy, is a full-time employee of Saracen Gold Mines Pty Ltd. Mr King has sufficient experience that is relevant to the styles of mineralisation and types of deposit under consideration and to the activity that he is undertaking to qualify as a Competent person as defined in the 2004 edition of the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves. Mr King consents to the inclusion in this report of the matters based on his information in the form and context that the information appears. The information in this report that relates to open pit Ore Reserves has been compiled under the supervision of Mr Chris Burton (Dip App.Sc). Mr Burton, who is a Member of the Australasian Institute of Mining and Metallurgy, is a full-time employee of Saracen Gold Mines Pty Ltd. Mr Burton has sufficient experience that is relevant to the styles of mineralisation and types of deposit under consideration and to the activity that he is undertaking to qualify as a Competent person as defined in the 2004 edition of the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves. Mr Burton consents to the inclusion in this report of the matters based on his information in the form and context that the information appears. 22

25 Corporate Governance Statement This statement outlines the main Corporate Governance practices that were in place throughout the year, or part of the year, as the case may be. It follows the reporting guidelines laid out in the 2nd Edition of the Corporate Governance Principles and Recommendations with 2010 Amendments issued by the ASX Corporate Governance Council. Where the Company has not adopted a Recommendation, an explanation is provided under the if not, why not approach. Saracen Mineral Holdings Limited ( Saracen or the Company ) endeavours to maximise the value from its expenditure on activities that will enhance the operations, business prospects and financial performance of the Company. While the Board subscribes to the Corporate Governance principles laid out below, it is mindful that, having regard to the Company s size and available resources, some processes and procedures that are essential for much larger and more complex companies, can lead to significant imposts on management time and significantly greater financial expense. The Company continues to evolve, improve and formalise its corporate governance policies and practices with the Board monitoring the guidelines below and adopting new and revised practices where appropriate. Principle 1: Lay Solid Foundations for Management and Oversight Recommendation 1.1: Establish the functions reserved to the Board and those delegated to senior executives and disclose those functions. The role of the Board of Directors is to formulate business and operational strategies, oversee the Company s management, to regularly review its performance and to monitor the Company s affairs in the best interests of shareholders, while giving cognizance to the expectations of other stakeholders in the activities of the Company. The key responsibilities of the Board include: ensuring the Company is properly managed; where appropriate, the formation of specific focus subcommittees; appointing and reviewing the performance of senior executives; developing with management strategy, planning and major capital expenditure programs; ensuring appropriate audit arrangements are in place; ensuring effective and appropriate reporting systems are in place to assure the Board of proper financial, operational, compliance and risk management; and shareholder communication and regulatory compliance. Senior executives are accountable to the Managing Director and ultimately to the Board. Key responsibilities include: implementing the Board s business and operational strategies; day to day running of the business; appropriate and cost effective exploration and development of Saracen projects; identifying exploration and business development opportunities; managing the operating and financial performance of the Company; designing and implementing effective financial, operational, safety, compliance and risk management controls, procedures and policies; and stakeholder communication and regulatory compliance. The Board has established, through various processes and sub-committees, a structure of functions and responsibilities which amount to an informal charter, enabling it fully to fulfil its role. The Board is in the process of formalising an overarching board charter and formal appointment letters for Directors. Recommendation 1.2: Disclose the process for evaluating the performance of senior executives. Saracen has a bi-annual performance review process whereby all staff, including senior executives, is formally reviewed against relevant operating and non-operating key performance indicators which are aligned with the Company s intrinsic business performance, for example, performance against annual budgets, health and safety measures and other operationsrelated and personal performance criteria. Recommendation 1.3: Provide the information indicated in the Guide to reporting on Principle 1. The information under Principle 1 has been disclosed above. 23

26 Corporate Governance Statement (continued) Principle 2: Structure the Board to Add Value Recommendation 2.1: A majority of the Board should be independent directors. At 30 June 2013, the Board comprised a majority of independent Directors, namely three Non-executive Directors and two executive directors being the Executive Chairman and the Managing Director. For a portion of the year, the Board included four independent, non-executive Directors. Following the resignation of a Non-executive Director in July 2013, the Board now comprises only two independent Non-executive Directors, the Managing Director and the Non-executive Chairman who, due to previously being an executive of the Company, is not classed as independent. The Board has completed a formal process and appointed two additional independent, Non-executive Directors to the Board on 1 October The details of the skills, experience, qualifications, period of office held and attendances at meetings of the main Board and sub-committees of the Directors is included in the Directors Report. Recommendation 2.2: The Chair should be an Independent Director. The Company had an Executive Chairman, Mr Guido Staltari, for the period up to 30 June 2013 which does not comply with this Recommendation. Mr Staltari acted in the joint role of Executive Chairman and Managing Director for the period 1 July 2012 to 2 April 2013 when he stepped down from the role of Managing Director but maintained the position of Executive Chairman until 30 June The Board considers that he is an experienced company director, has intimate knowledge of the Company s affairs and has committed the necessary time to effectively discharge his role as Chairman and will exercise independent judgement in the fulfillment of his role. The Board considers that since 1 July 2013, when Mr Staltari changed to a Non-executive capacity, the Company has had a Non-executive Chairman, but as he is not considered to be independent, the Company is not in compliance with this Recommendation. Recommendation 2.3: The roles of chair and chief executive officer (or equivalent) should not be exercised by the same individual. As noted above, Mr Staltari acted in the role of both Chairman and Managing Director from 1 July 2013 until 2 April 2013 when he relinquished the position of Managing Director. During that period, the Company did not comply with this Recommendation. Since 2 April 2013, the Company has been compliant with the Recommendation. Recommendation 2.4: The Board should establish a Nomination Committee. On 19 March 2013, the Company formed a Nomination Committee and adopted a formal Nomination Committee Charter and consequently has been compliant with this Recommendation since that date. The Nomination Committee currently comprises Mr Martin Reed as Chairman of the Committee and Mr Barrie Parker. No meetings of the Nomination Committee were held during the financial year. Recommendation 2.5: Disclose the process for evaluating the performance of the Board, its committees and individual Directors. The Board has not established a formal evaluation process as it considers, having regard to the size of the Company and the Board, it would not improve the present operation of the Board and the Directors. The Board continues to monitor the need to formalise this process and will act accordingly when it deems the time appropriate. Recommendation 2.6: Provide the information indicated in the Guide to reporting on Principle 2 Directors have the right, in connection with the discharge of their duties and responsibilities, to seek independent professional advice at the Company s expense within guidelines provided in the relevant policy document. The information under Principle 2 has been disclosed above. 24

27 Corporate Governance Statement (continued) Principle 3: Promote ethical and responsible decision-making Recommendation 3.1: Establish a code of conduct and disclose the code or a summary of the code. The Company has instigated a Code of Conduct for all employees and this can be accessed on the Company s website (www. saracen.com.au) under the Corporate Governance section. The Code of Conduct is supported by a series of Board approved policies including Delegation of Authority; Recruitment; Health and Safety; Environment Management etc. In addition, and integral to the Company s employment contracts, are requirements for employees to act lawfully, promote the interests of the Company, avoid conflicts of interest and comply with the Company s policies and procedures. Directors and officers are expected to act with integrity and in the interests of the Company within the framework of the law. Directors are required to disclose any material interest in which they may be in conflict with the interests of the Company. Any matter in which a Director has a material personal interest is dealt with in accordance with the Corporations Act 2001, where the Director will not be present when the matter is being considered unless invited to remain by the non-conflicted Directors and will abstain from any vote. Recommendation 3.2: Establish a policy on diversity and disclose the policy or a summary of the policy The Company has established a Diversity Policy which can be accessed on the Company s website ( under the Corporate Governance section. Recommendation 3.3: Disclose objectives for gender diversity in accordance with the diversity policy and progress there on. The Company believes an inclusive culture and a diverse workforce supports better performance. Whilst acknowledging the historical gender challenges in both the mining industry and the geographical location of the Company s operations, and whilst ensuring all employment is ultimately determined based on merit, the following aspirational goals have been established: 25% female employment across the Company 10% female employment in professional and senior management positions Recommendation 3.4: Disclose the proportion of women employees in the whole organisation, in senior executive positions and on the Board At 30 June 2013: 18% of the Company s employees were female (2012: 20%); 5% of the Company s employees in professional and senior management positions were female (2012: 5%); there were no female Directors (2012: Nil). Recommendation 3.5: Provide the information indicated in the Guide to reporting on Principle 3. The information under Principle 3 has been disclosed above. Principle 4: Safeguard Integrity in Financial Reporting Recommendation 4.1: The Board should establish an Audit Committee The Company has established an Audit Committee. Recommendation 4.2: The Audit Committee should be structured so that it: consists only of non-executive directors; consists of a majority of independent directors; is chaired by an independent chair, who is not chair of the Board; has at least three members. The Audit Committee Charter calls for the Committee to have at least three members, the majority of which are to be independent and non-executive. The Audit Committee has changed membership during the year but at all times consisted of a majority of independent non-executive directors. At various times each of Mr Carl Thompson, Mr Barrie Parker, Mr Ivan Hoffman and Mr Martin Reed have been on the Audit Committee. At 30 June, the Audit Committee comprised Mr Hoffman, as Chairman, Mr Parker and Mr Reed. The details of the skills, experience and qualifications of the Audit Committee members is included in the Directors Report. Mr Hoffman is a Certified Practising Accountant. 25

28 Corporate Governance Statement (continued) Recommendation 4.3: The Audit Committee should have a formal charter The Audit Committee is governed by its own Charter which can be accessed on the Company s website ( au) under the Corporate Governance section. Recommendation 4.4: Provide the information indicated in the Guide to reporting on Principle 4. The external auditor has a rotation policy such that lead and review partners are rotated every 5 years. The information under Principle 4 has been disclosed above. Principle 5: Make timely and balanced disclosure Recommendation 5.1: Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and disclose those policies or a summary of those policies. The Company has adopted a Continuous Disclosure Policy which is designed to ensure compliance with ASX Listing Rules and especially the Continuous Disclosure requirements. The Policy can be accessed on the Company s website ( com.au) under the Corporate Governance section. The Company Secretary oversees the Company s compliance with its continuous disclosure obligations and is the initial person responsible for communications with the ASX. All material ASX announcements are posted to the Company s website ( after release to the ASX. Presentations, analyst briefings and/or media communications that may contain information not previously released to ASX which could have a material effect on the Company s share price are announced to the ASX in advance of the presentation/briefing. Recommendation 5.2: Provide the information indicated in the Guide to reporting on Principle 5. The information under Principle 5 has been disclosed above. Principle 6: Respect the rights of shareholders Recommendation 6.1: Design a communications policy for promoting effective communication with shareholders and encourage their participation at general meetings and disclose that policy or a summary of that policy. The Board of Directors aims to ensure that the shareholders are kept fully informed at all times and have access to all information necessary to assess the performance and prospects of the Company. Mechanisms used to communicate with shareholders include: the annual report which is distributed, or otherwise made available, to all shareholders; quarterly operational reports; the half-year financial report; the annual general meeting and other general meetings called to obtain shareholder approval for Board actions as appropriate; Company announcements and updates released to the ASX; and the Company s website ( In addition, the Company seeks to provide opportunities for shareholders to participate through electronic means. The website includes a feedback mechanism and an option for shareholders to register their address for direct updates on Company matters. The Board ensures that all price sensitive information is disclosed to the ASX as soon as possible subject to the permitted exceptions to such disclosure. The Company welcomes questions from shareholders at any time and these are answered within the confines of information that is not market sensitive or already in the public domain. All material ASX announcements are posted on the Company s website. The external auditor is required by law to attend the Company s annual general meeting to answer questions with regard to the conduct of the audit, the preparation and content of the auditor s report and the financial statements. The Board does not have a formal investor communications policy. Recommendation 6.2: Provide the information indicated in the Guide to reporting on Principle 6. The information under Principle 6 has been disclosed above. 26

29 Corporate Governance Statement (continued) Principle 7: Recognise and manage risk Recommendation 7.1: Establish policies for the oversight and management of material business risks and disclose a summary of those policies. The Board has adopted a formal Risk Management Policy to govern the management of risks and established systems for the management of its material risks. The Board has also established a Risk Management Committee governed by its own Charter. Under the overarching Risk Management Policy, the management of risks is divided between the Audit Committee and the Risk Management Committee. The Risk Management Committee is comprised of Mr Barrie Parker (Chairman), Mr Martin Reed, Mr Raleigh Finlayson and the Company s Chief Operating Officer, Mr Craig Bradshaw, whose skills, experience and qualifications are included in the Directors Report. The Committee is assisted by other management personnel as required and meets frequently to identify risks, implement mitigation strategies and monitor outcomes. The Risk Management Committee reports to the Board on a regular basis. Recommendation 7.2: The Board should require management to design and implement the risk management and internal control system to manage the Company s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the Company s management of its material business risks. The Company has, and continues to, undertaken various risk reviews to identify potential business risks which are then assessed and ranked using the Company s risk matrix. The level of controls in place is reviewed on a regular basis and, where the residual risk is considered unacceptable, further controls and risk mitigation measures are developed and implemented. Recommendation 7.3: The Board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. The Board and the Audit Committee receives assurance from the Managing Director and the Chief Financial Officer / Company Secretary in the form of the signed declaration under s295a of the Corporations Act 2001, prior to approving the financial statements. Recommendation 7.4: Companies should provide the information indicated in the Guide to reporting on Principle 7. The information under Principle 7 has been disclosed above. 27

30 Corporate Governance Statement (continued) Principle 8: Remunerate fairly and responsibly Recommendation 8.1: The Board should establish a Remuneration Committee. The Company has established a Remuneration Committee with its own formal charter, a copy of which is accessible on the Company s website ( under the Corporate Governance section. Recommendation 8.2: Structure the Remuneration Committee to consist of a majority of independent directors, chaired by an independent chair and have at least three members. During the financial year, the Remuneration Committee was comprised of three independent non-executive Directors, namely Mr Ivan Hoffman, Mr Barrie Parker and Mr Carl Thompson (as Chairman). When Mr Thompson retired at the AGM in November 2012, he was replaced as member and Chairman by Mr Martin Reed. The details of their skills, experience and qualifications are included in the Directors Report. Recommendation 8.3: Companies should clearly distinguish the structure of non-executive directors remuneration from that of executive directors and senior executives. The structure of Non-executive Directors remuneration is clearly distinguished from that of executive Directors and senior executives, as described in the Directors Report. The Non-executive Directors of the Company are remunerated by way of fixed annual fees within the aggregate limit (currently $500,000) as approved by shareholders at the Annual General Meeting held on 25 November Non-executive Directors receive a fixed fee and do not participate in options, bonus payments or retirement benefits other than statutory superannuation which is included in their fixed fee. The Non-executive Directors receive an additional fee if they act as Chairman of a Board Committee. The aggregate amount of the fees received by each Director for their role as a Director from the Company is disclosed in the Remuneration Report. Mr Guido Staltari was an Executive Director for the period 1 July 2012 to 30 June During that time, a fee was paid to Renaissance Capital Pty Limited pursuant to a management agreement, which incorporated his services. Full details of that agreement are provided in the Directors Report, the Remuneration Report and in Note 24 of the Notes to the Consolidated Financial Statements. From 1 July 2013, Mr Staltari assumed the position of Non-executive Chairman. The management agreement for the provision of his services was terminated effective 1 July 2013 and Mr Staltari will thereafter receive a fee of $140,000 per annum drawn from the abovementioned shareholder approved Director fee pool for his role as Nonexecutive Chairman. The senior executives of the Company are remunerated by way of a total salary package (inclusive of statutory superannuation) and in some cases equity-based remuneration in the form of options to subscribe for unissued shares. Equity based executive remuneration provided under the Company s Incentive Option Scheme is made in accordance with the terms and conditions of that Scheme which has been approved by shareholders. Recommendation 8.4: Companies should provide the information indicated in the Guide to reporting on Principle 8. The information under Principle 8 has been disclosed above. 28

31 Directors Report The Directors of Saracen Mineral Holdings Limited ( Saracen or the Company ) present their report, together with the financial statements on the consolidated entity consisting of Saracen Mineral Holdings Limited and its controlled entities for the financial year ended 30 June In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:- DIRECTORS The names and particulars of the Company s directors in office during the financial year and at the date of this report are as follows. Directors held office for this entire period unless otherwise stated. Guido Staltari Non-Executive Chairman (appointed 18 August 2003) Mr Staltari holds a Bachelor of Science (Honours) degree and is a Fellow of the Australian Institute of Geoscientists. He worked for North Broken Hill Ltd, BHP Minerals Ltd, and also as a mining and petroleum industry consultant before establishing his first publicly listed mineral exploration company in early He has experience in the management of public companies and is currently a director of Renaissance Capital Pty Limited. Mr Staltari held the joint positions of Executive Chairman and Managing Director until 2 April 2013 when he stood down from the role of Managing Director. He remained as Executive Chairman before reverting to a Non-executive Chairman role effective 1 July Mr Staltari does not hold, and has not over the last 3 years held, a directorship in any other public listed company. Raleigh Finlayson Managing Director (appointed 2 April 2013) Mr Raleigh Finlayson is a Mining Engineer having studied at the Western Australian School of Mines and is the holder of a First Class Mine Managers Certificate, a Graduate Certificate in Applied Finance and Investment and is part way through a Masters of Mineral Economic at Curtin University. He is a member of the Australasian Institute of Mining and Metallurgy. Mr Finlayson has over 15 years of technical and operational experience in the mining industry in multiple disciplines including both underground and open pit operations. Since joining the Company, he has managed the timely completion of the Definitive Feasibility Study and development of the Carosue Dam operations in Mr Finlayson does not hold, and has not over the last 3 years held, a directorship in any other public listed company. Barrie Parker Non-Executive Director (appointed 24 December 2007) Mr Parker holds a degree in Minerals Engineering from the University of Birmingham and is a Fellow of the Australasian Institute of Mining and Metallurgy. He has worked in the international mining industry for more than 40 years, primarily in operations management and project development roles, including managing the initial development of the Boddington and Sunrise Dam Gold mines. His most recent position was as the Regional Manager and Director of the AngloGold companies in Australia and South East Asia. Mr Parker is a member of the remuneration and audit committees and chairman of the risk management committee. Mr Parker does not hold, and has not over the last 3 years held, a directorship in any other public listed company. Martin Reed Non-Executive Director (Appointed 24 August 2012) Mr Reed is a qualified mining engineer (BE Mining, Grad Dip Management, AICD Diploma) with over 35 years experience in operations management and project development across a range of commodities, countries and sizes of operations. Recent roles have included Chief Operating Officer and Project Manager for a number of metals companies including Sirius Resources, Sandfire Resources, St Barbara Limited, Paladin Energy Ltd and Windimurra Vanadium Limited. Prior to these appointments, Mr Reed held a number of senior executive positions in the mining industry including roles where he was responsible for the planning and development of several large mining operations in remote locations. During the past three (3) years Mr Reed has held directorships in the following other listed entities:- Company Appointed Resigned Endeavour Mining Corporation 5 December October 2012 Adamus Resources Limited 4 December December

32 Directors Report (continued) Carl Thompson Non-Executive Director (appointed 21 August Retired 20 November 2012) Mr Thompson holds law and commerce degrees from the University of Melbourne. He was previously a partner of a national law firm, Corrs Chambers Westgarth, practising in the areas of business acquisitions and sales, business structures, capital raisings and company floats, mergers and acquisitions, and the securities industry. He has extensive experience in ASIC policy and regulatory matters. Mr Thompson is currently Company Secretary / General Counsel at a public listed company. During his tenure as a director, Mr Thompson was a member of the audit committee, and chairman of the remuneration committee. Mr Thompson does not hold, and has not over the last 3 years held, a directorship in any other public listed company. Ivan Hoffman OAM Non-Executive Director (appointed 31 May Resigned 25 July 2013) Mr Hoffman is a Certified Practising Accountant and a Fellow of the Institute of Corporate Managers, Secretaries and Administrators. For around 18 years, Mr Hoffman was a corporate advisory consultant specialising in mergers & acquisitions and company reconstructions, during which period he served on the boards of several public listed companies, including mineral exploration and mining companies. Before that, Mr Hoffman worked for several years with local and international financial institutions, including four years in investment management and project financing with Lloyds Bank International. Mr Hoffman is currently chairman of the Fortron group of companies. During his tenure as a director, Mr Hoffman was a member of the remuneration committee and chairman of the audit committee. Mr Hoffman does not hold, and has not over the last 3 years held, a directorship in any other public listed company. COMPANY SECRETARY Gerard Kaczmarek (Appointed 17 September 2012) Mr Kaczmarek graduated from the Australian National University (ANU) with a Bachelor in Economic and Accounting. He has almost 30 years experience in the resources and mineral processing industry in Australia and overseas. He was Company Secretary and Chief Financial Officer for gold mining company Troy Resources for almost ten years and prior to that spend nearly seven years at Burmine Limited prior to its merger with Sons of Gwalia Limited. He commenced his career with the base metals division of CRA, now Rio Tinto. He is a CPA and MAICD. During the past three (3) years Mr Kaczmarek has held directorships in the following other listed entities:- Company Appointed Resigned Kimberley Rare Earths Limited 2 December February 2012 Rajan Narayanasamy (Appointed 8 September Resigned as Company Secretary 17 September 2012) Mr Narayanasamy was appointed Chief Financial Officer on 1 October 2009 and resigned on 17 September He holds a Bachelor of Business degree and is a Certified Practising Accountant, having served more than 20 years in the resources industry. INTERESTS IN SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATE As at the date of this report, the direct and indirect interests of the Directors and their related parties in the shares and options of Saracen were: Director Ordinary Shares Options over ordinary Op tions over ordinary shares - listed shares - unlisted Guido Staltari 16,407, Raleigh Finlayson 1,000, ,000 Barrie Parker 100, Martin Reed PRINCIPAL ACTIVITIES The principal activity of the Group during the year was gold mining and mineral exploration. 30

33 Directors Report (continued) REVIEW AND RESULTS OF OPERATIONS Overview Saracen Mineral Holdings Limited owns 100% of the Carosue Dam Operations, which have been in continuous production over almost four years under Saracen s ownership. During this period over 400,000 ounces of gold have been won from several open pits and the Red October underground mine. Saracen s 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 (M) ounces (oz) of gold in resources have been found and / or brought into production in this province, where Saracen is building a long-term strategic infrastructure and resource position. Saracen s Carosue Dam Operations (CDO) comprises a processing plant, modern accommodation village and water and power infrastructure located approx 120 km north-east of Kalgoorlie. The CDO processing plant was commissioned in November The plant has a nameplate capacity of 2.4mtpa based on a blend of hard and soft ores. Saracen purchased CDO in 2006 and re-commenced operations in early Saracen s business plan involves: - Completing the cutback of the Whirling Dervish open pit to deliver 273,000oz over the next three years; Deliver consistent gold production from the underground Red October mine in FY2014; Extend the life of Red October beyond 2 years; Extending the life and quality of its open-pittable resources; Progressing its other underground mining projects, including Deep South, Whirling Dervish and Karari; Optimising production through the Carosue Dam processing plant; Generating increased cash flows; and Building on and advancing its impressive project pipeline. Health and Safety Safety performance approached an acceptable outcome through the first six months of the year with no LTIs recorded and a LTI frequency rate of 1.9. However the occurrence of five LTI s, from January 2013 through to June 2013, eroded the strong performance during the first 6 months, with the LTI frequency rate increasing to 3.1. This was a very disappointing result, as the Company completed the role out of its in-house Leadership Training for Managers, Supervisors and OHS Representatives and has made what it believes to be significant progress in developing a strong risk management and hazard awareness culture. Financial Performance The Company reported a net loss after tax of A$63.1 million (2012: a profit of A$18.7M). This result is inclusive of pre-tax non-cash write-downs of A$79.6 million on inventory (A$22.9 million), production assets (A$47.6 million) and exploration assets (A$9.1 million). These write-downs mainly relate to the effects of the sharply declining gold price applicable in the latter part of FY2013 and more specifically the low spot gold price as at balance date. The lower price was utilised in assumptions for determining the value of ore stockpiles and production assets of the future value of the Group s cash generating units. In addition to this, an evaluation of the results of exploration activities undertaken over the last year resulted in the impairment of some exploration assets. The impairment review for mining and development assets was conducted using an average of Saracen s hedge prices and a A$1,300/oz spot gold price, whilst the review for ore stockpiles utilised a spot gold price assumption of A$1,300/oz. Sales revenue for the year was A$210.6 million, up 13% (from A$183.8 million in the previous year) mostly as a result of higher gold production of 136,368 ounces versus 116,122 ounces in FY2012. Average gold price for the year was A$1,582/oz (2012: A$1,624/oz). Gross profit from mining operations for the year was A$2.7 million (2012: A$46.0 million) after deducting A$8.2 million for royalties and A$62.3 million in depreciation and amortisation (2012: A$7.0 million and A$26.6 million respectively). Net cash flow from operations for the year was up 40% on the previous year to A$72.8 million (2012: A$51.9 million). Capital expenditure on purchases of plant & equipment, mine development and exploration totalled A$107.6 million for the year, an increase of 10% (2012: A$97.9 million). 31

34 Directors Report (continued) At 30 June 2013 the Company has in place with Macquarie Bank Limited a hedging programme comprising 176,600 oz of gold sold forward at an average price of A$1,681/oz, and an associated debt facility of A$45 million of which A$22 million has been drawn. No dividend has been declared, proposed or paid for or during the financial year. Production Operations For the financial year ending 30 June 2013 ( FY2013 ) gold production from the Carosue Dam operations was 136,168 oz at a cash cost of A$1,072 per oz (excluding royalties of A$60 per oz). Mine developments milestones were passed, namely the Red October Underground Mine evolving from a trial exploration mine to a fully-fledged producing mine, and the A$35 million capital development of the third stage of the Whirling Dervish open pit. Saracen commenced the stage three cut back of the Whirling Dervish pit in October 2012 with first ore mined in June The pit is expected to deliver significant volumes of ore from December The Whirling Dervish open pit will provide the base load mill feed to the Carosue Dam processing plant from December 2013 through to mid Surface mining activity increase by 67% on the previous year, with an increase of 7 Mbcm in material mined in the Whirling Dervish stage three cut back. Total material mined by conventional methods from all open pits was 11 Mbcm, yielding 1.9Mt of ore at 1.79g/t and 110,280 contained ounces. In September 2012, a fourth excavator fleet comprising mainly a larger capacity 200t excavator and an additional six 150t dump trucks, was mobilised for the capital development of Whirling Dervish stage three. Towards the end of the year the mining fleet was reduced in size with the demobilisation of more than half of the mining fleet. Capacity decreased from four production excavators to two, with the resulting downsizing of both personal, truck and ancillary equipment numbers. This fleet size reduction is due to transition from three operating pits (Deep South, Karari and Whirling Dervish) to just one (Whirling Dervish), with only a small amount of activity required to complete mining of the Karari open pit. Ore from open pit mining was sourced from the Old Camp and Sizzler mines near Butchers Well (Northern district), Redbrook and Margaret s (Porphyry District), Deep South (Safari Bore District), Karari and Whirling Dervish (Carosue District). Highlights for the year were the excellent production performance from Deep South and Karari, with Deep South delivering 210,000t of ore at 3.9 g/t for 26,461 contained ounces and Karari delivering 1.3 Mt at 1.48 g/t for 60,738 contained ounces. Red October successfully made the transition from an exploration and development project to a steady state producing underground mine. Critical primary infrastructure works were completed by the end of March 2013, which included the installation of a return air rise (exhaust) system to surface and a primary power distribution network, as well as the establishment of an emergency escape way system. Red October produced 109,000t at 8.38g/t for 29,610 contained ounces. Ore delivered to the processing plant was a combination of ore mined from both surface and underground sources, supplemented from the large ore stockpile from previous years mining activities. The processing plant operated at above the nameplate capacity, with 2.5Mt of ore at 1.87 g/t processed, at a recovery of 91%. Mill Production Unit Sep 12 Qtr Dec 12 Qtr Mar 13 Qtr June 13 Qtr FY2013 Total Ore Milled t 654, , , ,474 2,500,582 g/t Recovery % 90.1% 90.0% 90.3% 91.3% 90.4% Gold Produced oz 30,448 32,031 36,430 37, ,168 Key capital projects included the commencement of the A$25 million expansion of the Carosue Dam processing plant from 2.4 to 3.2 million tonnes per annum through the installation of additional tertiary crushing capacity and downstream absorption tank capacity. This project was placed on hold in April 2013 following the Board s review of the Company s business plan and adoption of a more conservative stance towards capital spending in the face of increased volatility in the spot gold price. Around A$5.1 million of the planned A$25 million had been expensed to the time of curtailment, though part of this expenditure represents quarantined benefits readily realisable should an expansion decision be taken at some future date. Also commenced was the construction of a new tailings storage facility (TSF3), from suitable waste material arising from the Whirling Dervish stage three cut back. Use of this material will significantly reduce the total capital cost of this new storage facility, ultimately saving as much as 50% of the total capital cost. Construction of this facility will continue through FY2014 and the expected completion of facility is the start of FY2015, providing up to an additional 6 years of tailings storage capacity for the Carosue operations. 32

35 Directors Report (continued) Production & Operational Outlook for 2013/14 and Beyond In FY2014, gold production will be sourced principally from the Karari and Whirling Dervish open pit mine s, low grade stockpiled ore and the high grade Red October underground mine. Production is forecast to be in the range of 120,000 to 130,000 oz. Cash Costs are forecast to be approximately A$900/oz in FY2014 and All in Sustaining Cash Costs are forecast to be A$1,500/oz. Guidance for FY2015 is 125,000 to 135,000 oz, with Cash Costs forecast to fall to A$750/oz and All in Sustaining Cash Costs forecast to fall to A$950/oz. Exploration Following a very successful 2012, the exploration effort focused on following up early stage prospects that would ultimately add to the production profile after A strategic review of the tenement package identified the highest priority targets for follow up, and their ranking based on empirical and conceptual geological data, geophysics and geochemistry. A number of these targets were successfully followed up. A total of 2,910 diamond core and 36,670 meters of RC drilling was completed with work undertaken at Whirling Dervish, Deep South, Red October and Deep Well with a new discovery being made late in the year at the Blue Manna Prospect located approximately 8 km northeast of the Carosue Dam plant. Effort was also focused on opening up exploration knowledge by applying advanced geochemical techniques, detailed Sub- Audio Magnetics and 3D Geodynamic Fault modelling. Investor Relations During the year the Company presented at several conferences and participated on Roadshows to current and potential investors, analysts and brokers. These included:- Diggers & Dealers Conference, Kalgoorlie WA, 7 August 2012; Denver Gold Forum, Denver, USA, 12 September 2012; Cannacord Global Resource Conference, Miami, USA 16 October 2012; ASX Spotlight Conference, New York, USA, 26 February 2013; European Gold Forum, Zurich, Switzerland, 17 April 2013; ASX Spotlight Conference, Hong Kong, 14 May 2013; and ASX Spotlight Conference, Singapore, 15 May A copy of the presentation given to each of these conferences has been released to the ASX and is available on the ASX and the Company s websites. Human Resources Workforce re-adjustment comprising mainly amalgamations of roles, retirement of positions, and redundancies arising from the changes in Saracen operations, was implemented during the second half of the year. During the year, approximately 50 direct employees and 100 contractors concluded their employment with Saracen. All aspects of human capital management within Saracen have undergone a focussed analysis to ensure Saracen is maximising its return on investment. Ongoing levels of employee numbers against the forecast budget, employee benefits provided by the Company and how employment is structured within Saracen, have been the focus of the review process. Community Support Retaining our commitment to supporting the community in which we operate has remained a core focus of Saracen even under such trying market conditions. During FY2013 Saracen has provided funding to; Western Australian Ambulance Service The Kalgoorlie Boulder Community High School The Kalgoorlie Football Club Mining Family Matters Support Services Western Australian Special Needs Christmas Party DIVIDENDS No dividends have been paid or declared by the Group since the end of the previous financial year. No dividend is recommended in respect of the current financial year. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the financial year there were no significant changes in the state of affairs of the Group other than that referred to in the financial statements or notes thereto. 33

36 Directors Report (continued) MATTERS SUBSEQUENT TO THE REPORTING PERIOD There has not been any matter or circumstance, other than that referred to in the financial report that has arisen since the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The Directors continue to seek suitable mineral opportunities for acquisition or farm-in, as well as corporate investment interests, while progressing with the Carosue Dam Operations. Further information on likely developments and the expected results of those operations would, in the opinion of the Directors, be speculative and likely to result in unreasonable prejudice to the Group. Accordingly, this information has not been disclosed in this report. 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. Performance bonds are in place to secure the Group s rehabilitation obligations, described in Note 12 of the Notes to the Financial Statements. The group is subject to the reporting requirements of both the Energy Efficiency Opportunities Act 2006 and the National Greenhouse and Energy Reporting Act The Energy Efficiency Opportunities Act 2006 requires the group to assess its energy usage, including the identification, investigation and evaluation of energy saving opportunities, and to report publicly on the assessments undertaken, including what action the group intends to take as a result. The group continues to meet its obligations under this Act. 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 its 2011/12 report to the Greenhouse and Energy Data Officer in October SHARE OPTIONS At the date of this report there were: (i) 4,122,550 unissued ordinary shares under unlisted incentive options to acquire shares at varying exercise dates and prices. Further details of the unlisted incentive options are provided in Note 20(c) of the Notes to the Financial Statements. Option holders do not have any right, by virtue of the option, to participate in any share issue of any related body corporate. Details of shares issued during or since the end of the financial year as a result of exercise of an option are:- Issuing Entity Number of Class of Amount Paid Amount Unpaid Shares Issued Shares for Shares on Shares Saracen Mineral Holdings Limited 265,728 Ordinary Weighted average of A$0.29 per share Nil DIRECTORS MEETINGS The number of Board and Committee meetings held, and the number of those meetings attended by each Director or Committee member during the financial year were:- Director Board Audit Committee Remuneration Risk Management Meetings Meetings Committee Meetings Committee 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 Guido Staltari Raleigh John Finlayson Carl Thompson Ivan Hoffman Barrie Parker Martin Reed In addition to the regular Board and Committee meetings, Directors regularly communicate by telephone, or other electronic means, and where necessary, circular resolutions are executed to effect decisions. 34

37 Directors Report (continued) REMUNERATION REPORT (AUDITED) The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act. The Directors present this Remuneration Report which set out remuneration information for Saracen Mineral Holdings Limited s Executive and Non-executive Directors and other key management personnel. This report forms part of the Directors Report. a) Remuneration Guidance The Board is ultimately responsible for determining and reviewing remuneration arrangements for Directors, within the limits approved by shareholders for such remuneration. The maximum aggregate amount that can be paid for Non-executive Directors remuneration is set at A$500,000 as approved by shareholders at the AGM held on 25 November b) Directors and Key management Personnel Disclosed in this Report The Directors of the Group during or since the end of the financial year were:- Guido Staltari Non-executive Chairman (i) Raleigh Finlayson Managing Director (Executive) (ii) Barrie Parker Director (Non-Executive) Martin Reed Director (Non-Executive), appointed 24 August 2012 Carl Thompson Director (Non-Executive). resigned 20 November 2012 Ivan Hoffman OAM Director (Non-Executive), resigned 25 July 2013 The key management personnel during or since the end of the financial year were:- Craig Bradshaw Chief Operating Officer, appointed 10 April 2013 Gerry Kaczmarek Company Secretary / Chief Financial Officer, appointed 17 September 2012 Richard Maddocks General Manager Geology and Exploration, resigned 9 August 2013 Grant Haywood General Manager Operations, resigned 31 December 2012 Rajan Narayanasamy Company Secretary / Chief Financial Officer, resigned 30 November 2012 (i) Mr Staltari held the positions of Executive Chairman and Managing Director until 2 April 2013 when he stood down from the role of Managing Director. He reverted to a Non-executive Chairman role effective 1 July (ii) Mr Finlayson was appointed Managing Director from 2 April Prior to this he held the position of Chief Operating Officer. c) Remuneration Policy for Directors The Board policy for determining the nature and amount of remuneration of Directors and key personnel, as well as the relevant specific arrangements, are detailed below. Non-executive Directors remuneration is subject to review from time to time, as the Directors deem appropriate, having regard to the scope, scale and degree of complexity of the Company s operations. During the year, the non-executive directors, Carl Thompson, Ivan Hoffman, Martin Reed and Barrie Parker were each paid at the rate of A$100,000 per annum plus an additional amount of A$20,000 per annum for chairing Board Sub-Committees. Both amounts include applicable superannuation. Effective 1 July 2013, Directors base remuneration has been reduced by 20% to A$80,000 per annum (including superannuation). Mr Guido Staltari acted as both Executive Chairman and Managing Director for the period 1 July 2012 until 2 April On 2 April, he stood down from the position of Managing Director upon the appointment of Mr Raleigh Finlayson to that position but remained Executive Chairman until 1 July 2013 when he reverted to the position of Non-executive Chairman. Remuneration for his services as an executive during the 2012/13 year, were incorporated in services provided by Renaissance Capital Pty Limited ( RenCap ) pursuant to the terms of a management agreement. Mr Staltari s family interests control RenCap. Under the management agreement, RenCap provided the Company with office facilities in Melbourne. The Company paid RenCap a fee of A$330,000 (plus GST) in the financial year for the provision of those office facilities. The Company also paid professional fees of A$45,833 per month up to April 2013 and A$22,917 for May 2013 and June 2013 for the services of Mr Staltari and also reimburses RenCap for all out of pocket expenses. Total fees and reimbursements paid or due to RenCap during the year amounted to A$834,167 plus GST (2012: A$910,666). This comprised the A$330,000 (2012: A$360,000) for the provision of office facilities and associated costs and A$504,167 (2012: A$550,666) for professional services and reimbursements. Mr Staltari s Directors Fee for the position of Non-executive Chairman effective 1 July 2013 has been set at $140,000 per annum. Due to the change in Mr Staltari s employment from executive to non-executive effective on 1 July 2013, the RenCap management agreement has been terminated by mutual agreement. Taking into consideration that the lease obligations on the Melbourne office premises to an outside, unrelated entity remain, the Company has agreed to continue to pay A$30,000 a month to RenCap until the lease expires in September Neither the remuneration of Directors nor the RenCap arrangements were linked to the Company s performance. 35

38 Directors Report (continued) d) Remuneration Policy for Executives The Remuneration Committee of the Board is responsible for determining remuneration policies in respect of key management personnel ( Executives ). In establishing such policies, the Remuneration Committee is guided by external remuneration surveys and industry practices, commensurate with the scale and size of the Group s operations. The policies and remuneration levels are reviewed regularly to ensure that the Group remains competitive as an employer. The Group has employment agreements with all Executives. These contracts are capable of termination in accordance with standard employment terms. The terms of the contracts are open ended although the Group retains the right to terminate a contract immediately by making payment equal to the period in lieu of notice. The Executives are also entitled to receive, on termination of employment, their statutory entitlements of accrued annual and long service leave. Each employment contract outlines the components of remuneration paid to each executive but does not prescribe how remuneration levels are modified from year to year. Remuneration levels are reviewed each year to take into account performance, cost of living and industry movements, any change in the scope of the role performed by the executive and any changes to meet the principles of remuneration. Additional details of Executive employment agreements can be found below at section (g) Service Agreements. Other than the above, or as disclosed elsewhere in the remuneration report, apart from the Managing Director, no Executives are subject to specific contract arrangements. A formal biannual performance review system is in place, whereby operating and non-operating key performance indicators ( KPIs ) relevant to each Executive are set, so as to form a basis of assessment of future levels of remuneration. The KPIs set for Executives are mostly directly aligned to the Company s intrinsic business performance, for example, performance against the annual operating budget, health and safety measures, and other operations-related criteria. There is no direct formal relationship between remuneration and such performance measures, and the Board retains the right to determine an Executive s remuneration depending on the outcome of the biannual performance reviews and other factors the Directors consider relevant. The Company has in place an Incentive Option Scheme ( IOS ) which has been approved by shareholders at an annual general meeting. The Scheme is designed to provide incentives to employees and consultants whose contribution is considered by the Directors has assisted in the development of the Company. Options issued pursuant to the Scheme will be commensurate with the position, skills, experience and length of service with the Company and such other criteria that the Directors consider appropriate in the circumstances. e) Share Based Compensation There were no options issued during the 2012/13 financial year. In late 2010, early 2011 and 2012 options were offered to approximately 200 personnel (including several long-serving consultants) under the IOS. The Directors decided that the IOS option grants be based on the following key principles:- 1. A majority of Saracen personnel should participate, in order to promote a Company-wide ownership of Saracen s business and prospects. 2. Grants under the IOS should be linked to annual performance, under the Company s annual performance review system. 3. Options granted should be subject to vesting periods and accordingly should enhance retention of personnel, in a competitive market for skills across a range of disciplines. At the reporting date a total of 4,122,550 options (2012: 13,887,168) remain on issue under the Scheme. Directors do not participate in Saracen s IOS and the options being allocated to personnel are intended to provide a suitable incentive for them to link their actions to the Company s overall business s objectives and performance and to give them the opportunity to derive a reward as and when the Company s value increases markedly. Except in as far as the IOS option grants are linked to KPI performance, there is no formal relationship between remuneration of Executives and the Company s performance when measured directly on the basis of shareholder returns or wealth. It is important to note that the Company has had to compete in a tight labour market in recruiting personnel. Under Saracen s Securities Trading Policy, Directors and key management personnel must provide details of any transactions which operate to limit the economic risk of their security holding to the Company Secretary. The Directors are cognisant of the need to review the remuneration policy in line with changing circumstances, and the desirability of having arrangements that can be administered cost-effectively given the company s size and the need to preserve capital for business activities. To this end, the Remuneration Committee are in the process of formulating a specific incentive scheme structure to be applied to Executives. The Remuneration Committee has taken advice from outside remuneration consultants (refer section (i) below) with respect to formulating a new scheme and applying appropriate KPI s. The scheme will include both short and long term incentives in a combination of cash and equity. It is intended that the scheme would be approved by the Board and introduced by the end of September

39 Directors Report (continued) f) Details of Remuneration Details of the nature and amount of each major element of the remuneration of each director of the Group and each of the key management personnel of the Group during the financial year are:- 30 June 2013 Short-term Post Equity Long Total Propor- Value employee benefits Employ- Term tion of of ment Benefits total option Salary Cash Non Super- Options Long perfor- as % & fees bonus monetary annuation Service mance of benefits and other Leave related total A$ A$ A$ A$ A$ A$ A$ Directors G Staltari (i) 504, , C Thompson (retired 20 November 2012) 42, , , I Hoffman (resigned 25 July 2013) 110, , , B Parker 95, , , M Reed(ii) (appointed 24 August 2012) 97, , R Finlayson (iii)(v) (appointed 2 April 2013) 412,320-4,529 26,965 31,525 16, , % 6.4% Executives G Haywood (iii) (resigned 31 December 2012) 197,884-4,098 14, , R Maddocks (iv) (resigned 9 August 2013) 260,425-11,979 23,438 15, ,257 5% 5% R Narayanasamy (iii) (resigned 30 November 2012) 120,248-3, , , C Bradshaw (commenced 19 February 2013) 142,389-3, , G Kaczmarek (appointed 17 September 2012) 270, , , Total 2,252,902-24, ,786 47,072 17,758 2,881, (i) An amount of A$504,167 has been paid / is payable for services provided by RenCap. (ii) An amount of A$97,192 has been paid / is payable for services provided by PilotHole Pty Ltd. (iii) Non-monetary benefits include company provided health insurance. Post-employment benefits consist of retirement benefits of A$404,045 and superannuation of A$11,305. (iv) Non-monetary benefits include company provided health insurance and car parking. (v) Previously held the position of Chief Operating Officer. No options were granted to named officers of the Company or consolidated entity in the current or the previous financial year. Options incorporated in the remuneration tables above were granted in the 2010/11 financial year. 37

40 Directors Report (continued) 30 June 2012 Short-term Post Equity Long Total Propor- Value employee benefits Employ- Term tion of of ment Benefits total option Salary Cash Non Super- Options Long perfor- as % & fees bonus monetary annuation Service mance of benefits and other Leave related total A$ A$ A$ A$ A$ A$ A$ Directors G Staltari (i) 550, , C Thompson 100, , , I Hoffman 70, , , B Parker 60, , , Executives R Finlayson (ii) 341,784-4,578 24, ,536 8, , % 22.2% G Haywood (iii) 284,250 20,000 6,687 27,382 54,268 1, , % 13.8% R Maddocks (iv) 242,000-16,497 21,780 58, , % 17.3% R Narayanasamy (v) 270,495-4,333 49, ,536 11, , % 24.4% Total 1,921,808 20,000 32, , ,025 21,882 2,547,289 (i) An amount of A$550,666 has been paid / is payable for services provided by RenCap. (ii) Non-monetary benefits include company provided insurances Non-monetary benefits include company provided insurances. (iii) Mr Haywood is received a retention bonus of A$20,000 at the conclusion of 2 years continuous service from the date of his commencement being 19 April Non-monetary benefits include company provided insurances. (iv) Non-monetary benefits include company provided insurances and car parking. (v) Non-monetary benefits include company provided insurances. No options were granted to named officers of the Company or consolidated entity in the current or the previous financial year. Options incorporated in the remuneration tables above were granted in the 2010/11 financial year. In the current financial year, the following named officers exercised and /or had options lapse that were granted to them as part of their compensation in prior financial years: 30 June 2013 Number of Number of Number of Class of Amount Paid Amount Unpaid Options Lapsed Options Exercised Shares Issued Shares for Shares on Shares R Finlayson (i) 1,291, ,333 19,789 Ordinary Nil Nil G Haywood 340, Nil R Maddocks 148, Nil R Narayanasamy 758, , ,666 Ordinary A$58,333 Nil (i) The issue of 19,789 shares was from the exercise of options utilising the cashless exercise facility. During the previous year the following options granted to Directors and named officers were exercised or lapsed. 30 June 2012 Number of Number of Number of Class of Amount Paid Amount Unpaid Options Lapsed Options Exercised Shares Issued Shares for Shares on Shares R Finlayson - 170, ,000 Ordinary A$85,000 Nil G Haywood 85, Nil R Maddocks 59, Nil R Narayanasamy - 170, ,000 Ordinary A$85,000 Nil 38

41 Directors Report (continued) g) Service Agreements Key Terms of Employment Contracts for Executives Remuneration of the Managing Director and Executives are formalised in letters of appointment and service agreements. These agreements provide details of the salary and employment conditions relating to each employee. All Executives are permanent employees and not on time based contracts. All agreements may be terminated by either the Company or the individual giving the required notice period which varies between one and three months. All service agreements comply with the provisions of Part 2, D.2, Division 2 of the Corporations Law. Additional Details for Mr Raleigh Finlayson - Managing Director Mr Finlayson was appointed Managing Director effective 2 April He is employed as a permanent employee under an employment agreement. Specific terms of his agreement are:- Base annual salary of A$500,000 per annum plus statutory superannuation percentage for the period 2 April to 30 June 2013 and no incentives or bonuses will be applicable. Base salary of A$485,000 per annum plus statutory superannuation percentage from 1 July 2013 with participation in a new incentive scheme. Note: details of the scheme are still being finalised. Notice period of 3 months in the absence of gross negligence or other specified event where the Company can terminate immediately. If asked to leave immediately by the Company, the notice period will be paid out. If Mr Finlayson is terminated by the Company following to a change of control event, he will be entitled to a redundancy payment equal to 12 months earnings. h) Voting on the Remuneration Report at the 2012 AGM At the 2012 Annual General Meeting (AGM), 27.4% of the votes cast on the resolution to approve the Remuneration Report were against the adoption of the resolution. Following the AGM, the Company met with several of the larger shareholders that voted against the resolution to discuss their concerns and reasons. The Company is also in the process of developing new Short and Long Term Incentive Schemes which will result in closer correlation between Company performance and the benefits that the employee will receive. The Company has not issued any options or paid any bonuses in the current financial year. i) Use of Remuneration Consultants In April 2013, the Remuneration Committee commissioned McDonald Aon Hewitt (MAH) to provide information on executive short-term and long-term incentive plans that were being used in the resources industry. Under the terms of the engagement, MAH provided remuneration advice as defined in Section 9B of the Corporations Act 2001 and was paid and amount of A$15,000 (excluding GST) for these services. The following arrangements were made to ensure that the recommendations of MAH were free from undue influence:- MAH was engaged by, and reported directly to, the Chair of the Remuneration Committee. The agreement for the provision of their consulting services was executed by the Chair of the Remuneration Committee under the delegated authority of the Board; The report was provided directly by MAH to the Chair of the Remuneration Committee; and MAH was not permitted to provide any member of management with a copy of their draft or final report regarding any of their advice or recommendations. As a consequence, the Board is satisfied that the report is free from undue influence from any members of the key management personnel. This ends the audited Remuneration Report. INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS The Company has not paid any insurance premiums in respect of insuring any directors or officers, named earlier in this report, of the Group against liabilities and expenses arising from claims made against them in their capacity as directors and officers. Other than to the extent permitted by law, the Company has not, during or since the financial year, indemnified or agreed to indemnify an auditor of the Company or any related body corporate against a liability incurred as an auditor. 39

42 Directors Report (continued) AUDITOR S INDEPENDENCE DECLARATION The auditor s independence declaration is attached to this report. NON-AUDIT SERVICES During the year, BDO East Coast Partnership, the Company s auditor, provided tax compliance and advisory services. BDO East Coast Partnership received, or are due to receive, A$27,900 (2012: A$36,138) for these non-audit services. The directors are satisfied that the provision of these services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 and do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants as they did not involve reviewing or auditing the auditor s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. ROUNDING OFF The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the Directors Report and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated. Signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act For and on behalf of the board RALEIGH FINLAYSON Managing Director 27 August

43 Auditor s Independence Declaration Tel: Fax: Level 14, 140 William St Melbourne VIC 3000 GPO Box 5099 Melbourne VIC 3001 Australia DECLARATION OF INDEPENDENCE BY DAVID GARVEY TO THE DIRECTORS OF SARACEN MINERAL HOLDINGS LIMITED As lead auditor of Saracen Mineral Holdings Limited for the year ended 30 June 2013, I declare that, to the best of my knowledge and belief, there have been no contraventions of: the auditor independence requirements of the Corporations Act 2001 in audit; and any applicable code of professional conduct in relation to the audit. relation to the This declaration is in respect Saracen Mineral Holdings Limited and the entities it controlled during the period. David Garvey Partner BDO East Coast Partnership Melbourne, 27 August 2013 BDO East Coast Partnership ABN is a member of a national association off independent entities which are all members of BDO (Australia) Ltd ABN , an Australian company limited by guarantee. BDO East Coast Partnership and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. 41

44 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Financial Year Ended 30 June Note $ 000 $ 000 Revenue from continuing operations 2 210, ,759 Mine operating costs (137,440) (104,250) Depreciation and amortisation 2 (62,278) (26,595) Royalties (8,164) (6,959) Gross profit from mining operations 2,723 45,955 Administration expenses 2 (9,230) (7,971) Share based payments expense (106) (1,497) Finance costs 2 (1,474) (128) Other income 2 1,077 2,764 Loss on disposal of fixed assets (1,637) - Net realised loss on derivatives - (10,584) Change in fair value of derivatives - 4,697 Impairment of deferred exploration costs 14 (9,102) (308) Impairment of mines in production 15 (47,660) - Inventory write-down 9 (22,885) (6,257) Change in fair value of listed shares (30) 21 (Loss)/Profit before income tax (88,324) 26,692 Income tax benefit/(expense) 4 25,226 (7,982) (Loss)/Profit after income tax for the period (63,098) 18,710 Other comprehensive income/(loss), net of income tax Items that may be reclassified subsequently to profit or loss Fair value gain on hedging instruments entered into for cash flow hedges 32,442 - Other comprehensive income for the year 32,442 - Total comprehensive income/(loss) attributable to members of Saracen Mineral Holdings Limited (30,656) 18,710 (Loss)/Earnings per share for the year attributable to the members of Saracen Mineral Holdings Limited: Basic (Loss)/Earnings (cents per share) 5 (10.60) 3.30 Diluted (Loss)/Earnings (cents per share) 5 (10.60) 3.25 The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the notes to the financial statements 42

45 Consolidated Statement of Financial Position As at 30 June Note $ 000 $ 000 Current assets Cash and cash equivalents 23(a) 9,024 20,196 Trade and other receivables 7 3,049 6,392 Financial derivative instruments 11 17,652 - Other financial assets Inventories 9 25,536 44,389 Other Total current assets 56,011 71,699 Non-current assets Plant and equipment 13 40,205 34,762 Financial derivative instruments 11 28,694 - Other financial assets 12 7,423 10,959 Deferred tax assets 4 1,027 - Deferred exploration and evaluation costs 14 22,098 26,485 Mine properties 15 81, ,037 Total non-current assets 181, ,243 Total assets 237, ,942 Current liabilities Trade and other payables 16 18,788 17,221 Borrowings 18 1,217 1,236 Provisions 17 2,554 2,683 Total current liabilities 22,559 21,140 Non-current liabilities Borrowings 18 23,623 1,828 Deferred tax liability 4-10,294 Provisions 17 12,458 11,581 Total non-current liabilities 36,081 23,703 Total liabilities 58,640 44,843 Net assets 178, ,099 Equity Contributed equity 19(a) 185, ,724 Reserves 19(e) 35,888 3,340 (Accumulated Losses)/Retained profits (43,063) 20,035 Total equity 178, ,099 The consolidated statement of financial position should be read in conjunction with the notes to the financial statements. 43

46 Consolidated Statement of Changes In Equity For the Financial Year Ended 30 June 2013 (Accumulated Cash Flow Share Based Contributed Losses) / Hedge Payments Total Equity Retained profits Reserve Reserves $ 000 $ 000 $ 000 $ 000 $ 000 As at 1 July ,724 20,035-3, ,099 Loss for the year after tax - (63,098) - (63,098) Other comprehensive income ,442-32,442 Total comprehensive profit/(loss) for the year after tax - (63,098) 32,442 - (30,656) Transactions with owners in their capacity as owners Share based payments As at 30 June ,901 (43,063) 32,442 3, ,726 As at 1 July ,630 1,325-1, ,798 Profit for the year after tax - 18, ,710 Other comprehensive income Total comprehensive income for the year after tax - 18, ,710 Transactions with owners in their capacity as owners 65, ,695 Share issue costs (3,715) (3,715) Tax effect on share issue costs 1, ,114 Share based payments ,497 1,497 As at 30 June ,724 20,035-3, ,099 The consolidated statement of changes in equity should be read in conjunction with the notes to the financial statements. 44

47 Consolidated Statement of Cash Flows For the Financial Year ended 30 June Note $ 000 $ 000 Cash flows from operating activities Receipts from customers 213, ,280 Payments to suppliers and employees (140,106) (133,944) Interest received 1,023 2,680 Interest paid and other finance costs (1,474) (128) Net cash flows provided by operating activities 23(b) 72,843 51,888 Cash flows from investing activities Purchase of plant, equipment and development assets (95,009) (78,071) Exploration and evaluation costs (12,281) (19,782) Security deposit refund/(paid) 3,536 (2,436) Net cash flows used in investing activities (103,754) (100,289) Cash flows from financing activities Proceeds from issue of shares 77 65,695 Payment of share issue costs - (3,715) Payment of finance lease liabilities (607) (412) Payment for loss on matured derivatives - (10,584) Drawdown on finance facility 21,950 - Repayment of Borrowings (486) - Payment of loan establishment fees (1,195) - Net cash flows provided by / (used in) financing activities 19,739 50,984 Net (decrease) / increase in cash held (11,172) 2,583 Add opening cash brought forward 20,196 17,613 Closing cash carried forward 23(a) 9,024 20,196 The consolidated statement of cash flows should be read in conjunction with the notes to the financial statements. 45

48 Notes to the Financial Statements For the Financial Year ended 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Reporting Entity Saracen Mineral Holdings Limited is a for-profit, public company listed on the Australian Securities Exchange (trading under the symbol SAR ), incorporated and operating in Australia. Operations and Principal Activities The operations and principal activities comprise mineral development and exploration. Scope of the Financial Statements The consolidated financial statements have been prepared by Saracen Mineral Holdings Limited in accordance with AASB 127 Consolidated and Separate Financial Statements. Registered Office Level 4, 89 St Georges Terrace, Perth Western Australia (b) Basis of preparation Statement of compliance The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards Board (AASB) and the Corporations Act The consolidated financial statements comply with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were authorised for issue by the Board of Directors on 27 August 2013 Basis of Measurement The consolidated financial statements have been prepared on a going concern basis in accordance with the historical cost convention, except where stated. Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company s functional currency. The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. (c) Significant Judgements and Estimates The preparation of the consolidated financial statements in conformity with Australian Accounting Standards requires judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These accounting policies have been consistently applied by each entity in the Group. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The Company has identified the Provision for Rehabilitation (Note 1(v) and Note 17), Deferred Exploration and Evaluation Costs (Note 1(s) and Note 14), Mine Properties (Note 1(t) and Note 15) and Inventories (Note 1(n) and Note 9) under which significant judgements, estimates and assumptions are made, and where actual results may differ from those estimates under different assumptions and conditions. Principles of Consolidation The consolidated financial statements comprise the financial statements of Saracen Mineral Holdings Limited and its subsidiaries as at 30 June each year (the Group). The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses from intra-group transactions have been eliminated in full. 46

49 Notes to the Financial Statements (continued) For the Financial Year ended 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (d) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors. (e) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must be met before revenue is recognised: Gold and silver sales Revenue from the sale of gold and silver is measured at fair value of the consideration received or receivable. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer. Interest income Interest income is recognised when the Group gains control of the right to receive the interest payment. (f) Taxation Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except: where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of GST included. The amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. 47

50 Notes to the Financial Statements (continued) For the Financial Year ended 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (g) (h) Financial Assets and Liabilities Financial assets and financial liabilities are recognised on the consolidated statement of financial position when the Group becomes party to the contractual provisions of the financial instrument. A financial asset is derecognised when the contractual rights to the cash flows from the financial assets expire or are transferred and no longer controlled by the entity. A financial liability is removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expires. Listed shares held for trading are included in the category financial assets at fair value through profit and loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. Financial assets not measured at fair value comprise: loans and receivables being non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These are measured at amortised cost using the effective interest method. held-to-maturity investments being non-derivative financial assets with fixed or determinable payments and fixed maturity that will be held to maturity. These are measured at amortised cost using the effective interest method. investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured. These are measured at cost. Available-for-sale financial assets are non-derivative financial assets that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. A gain or loss arising from a change in the fair value of an available-for-sale financial asset is recognised directly in equity, through the statement of changes in equity (except for impairment losses and foreign exchange gains and losses) until the financial asset is derecognised at which time the cumulative gain or loss previously recognised in equity is recognised in profit or loss. Plant and Equipment Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on a straight-line method over the estimated useful life. Capital work in progress is not depreciated, and is transferred to the relevant asset category on completion. The following useful lives are used in the calculation of depreciation: Plant and equipment 3 33 years During the financial year a review of the useful lives of all items of Plant and Equipment was undertaken to assess if there had been any change to the condition of the assets, location or operating environment of the assets. Following this review, the useful lives of some Plant and Equipment items were amended to be more closely matched to their reasonable useful lives. The result of this was an increase in depreciation for the year of approximately $786,000. Where depreciation is attributable to exploration and evaluation activities, costs are treated in accordance with the Accounting Policy Note 1(s). The assets residual value, useful lives and amortisation methods are reviewed at each financial year end and if appropriate adjusted. (i) Employee Benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave. Liabilities arising in respect of employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash flows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used. Share based compensation benefits are provided to employees via the Incentive Option Scheme (Note 21). The fair value of options granted under the Incentive Option Scheme is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The fair value at grant date is determined using an appropriate valuation methodology. 48

51 Notes to the Financial Statements (continued) For the Financial Year ended 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (j) Superannuation Funds The Group contributes to several accumulation type superannuation funds. Contributions are charged as an expense as they are made. Further information is set out in Note 20(d). (k) Earnings Per Share Basic earnings per share is calculated as net profit/(loss) attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit/(loss) attributable to members, adjusted for costs of servicing equity (other than dividends) and preference share dividends, the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses, and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (l) Cash and Cash Equivalents Cash on hand and in bank and short-term deposits are stated at nominal value. For the purpose of the statement of cash flows, cash includes cash on hand and in bank, and bank securities readily convertible to cash, net of outstanding bank overdrafts. (m) Trade & Other Receivables Receivables to be settled within days are carried at amounts due. The collectability of debts is assessed at the reporting date and specific allowance is made for any doubtful accounts. (n) Inventories Inventories of consumable supplies and spare parts expected to be used in production are valued at the lower of cost and net realisable value. Regular reviews are undertaken to establish whether any items are obsolete or damaged, and if so their carrying value is written down to net realisable value. Inventories of ore and gold in circuit are valued at the lower of cost and net realisable value. Costs comprise direct material, labour and an appropriate proportion of variable and fixed overhead on the basis of normal operating capacity, and are included as part of mine operating costs in the consolidated statement of profit or loss and comprehensive income. Net realisable value is the estimated selling price in the ordinary course of business less cost of completion and the estimated cost necessary to perform the sale. Inventories require certain estimates and assumptions most notably in regards grades, volumes and densities. Such estimates and assumptions may change as new information becomes available and could impact on the carrying value of inventories (Note 9). (o) Impairment of Assets (p) Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Where an impairment loss subsequently reverses, the carrying amount of the asset, other than goodwill, is increased to the revised estimate of its recoverable amount, but only to the extent the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. Trade & Other Payables Liabilities are recognised for amounts to be paid in the future for goods and services received whether or not billed to the Group. Trade payables are usually settled within 30 days. 49

52 Notes to the Financial Statements (continued) For the Financial Year ended 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (q) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. (r) Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable a future sacrifice of economic benefits will be required and a reliable estimate of obligation can be made. (s) Exploration and Evaluation Expenditure Exploration and evaluation costs related to areas of interest are carried forward to the extent that: the rights to tenure of the areas of interest are current and the Group controls the area of interest in which the expenditure has been incurred; and such costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively by its sale; or exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing. Exploration and evaluation costs include the acquisition of rights to explore, studies, exploratory drilling, sampling and associated activities and an allocation of depreciation and amortisation of assets used in exploration and evaluation activities. General and administrative costs are included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest. The above accounting policy requires certain estimates and assumptions on future events and circumstances, in particular whether an economically viable extraction operation can be established. These estimates and assumptions may change as new information becomes available and could have a material impact on the carrying value of deferred exploration and evaluation costs (Note 14). Exploration and evaluation assets are assessed for impairment where facts and circumstances suggest that the carrying amount of the assets may exceed its recoverable amount. If the recoverable amount is less than the carrying amount, the asset is written down to its recoverable amount and an impairment loss recognised. Where economically recoverable reserves for an area of interest have been identified, and a decision to develop has occurred, capitalised expenditure is classified as mines under construction. In the event that an area of interest is abandoned or if the directors consider the expenditure to be of no value, accumulated costs carried forward are written off in the year in which that assessment is made. (t) Mines Properties Mines under construction are accumulated separately for each area of interest in which economically recoverable reserves have been identified and a decision to develop has occurred. This expenditure includes all capitalised exploration and evaluation expenditure in respect of the area of interest, direct costs of construction, an appropriate allocation of overheads and where applicable borrowing costs capitalised during construction. Once mining of the area of interest can commence, the aggregated capitalised costs are classified under non-current assets as mines in production. Mines in production represent the aggregated exploration and evaluation expenditure and capitalised development costs in respect of areas of interest in which mining is ready to or has commenced. Mine development costs are deferred until commercial production commences, at which time they are amortised on a units-of-production basis over the mineable reserves. Once production commences, further development expenditure is classified as part of the cost of production, unless substantial future economic benefits can be established. 50

53 Notes to the Financial Statements (continued) For the Financial Year ended 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (t) Mines Properties (continued) Deferred mining expenditures represent certain mining costs, principally those that relate to the stripping of waste, which provides access so that future economically recoverable ore can be mined. The amount of mining costs deferred is based on the ratio obtained by dividing the waste tonnes mined by the quantity of gold ounces contained in the ore. Mining costs incurred in the period are deferred to the extent that the current period waste to contained gold ounce ratio exceeds the life of mine waste to ore ratio. Deferred mining costs are then charged against reported earnings to the extent that, in subsequent periods, the ratio falls below the life of mine ratio. The life of mine ratio is based on economically recoverable reserves of the operation. The life of mine ratio is a function of an individual mine s design and therefore changes to that design or other technical or economic parameters may impact reserves which will generally result in changes to the ratio. The recoverable amount of each cash generating asset is determined as the higher of value-in-use and fair value less costs to sell. Value-in-use is generally determined as the present value of the estimated future cash flows, using a risk adjusted discount rate appropriate to the risks inherent in the asset. Future cash flow estimates are based on expected production volumes, gold price forecasts, ore reserves, operating costs and future capital expenditure, with an interrelationship between these key assumptions. Estimates are particularly sensitive to a change in gold price. There is the possibility that changes in circumstances will alter estimates and projections, affecting the recoverability of assets and in turn materially impacting the carrying value of mine properties (Note 15). (u) Borrowing Costs Borrowing costs incurred for the acquisition, construction or production of qualifying assets are capitalised during the period of time it is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are recognised as an expense in the period in which they are incurred. (v) Restoration, Rehabilitation and Environmental Provision Obligations associated with exploration and development assets are recognised when the Group has a present obligation, the future sacrifice of the economic benefits is probable, and the provision can be measured reliably. The provision is measured at the present value of the future expenditure and a corresponding rehabilitation asset is also recognised. The determination of the provision requires significant judgement in terms of the best estimate of the costs of performing the work required, the timing of the cash flows and the appropriate discount rate. In support of these judgements, the Group periodically seeks independent external advice on the adequacy of the provision. A change in any, or a combination of, the key assumptions used to determine the provision could have a material impact on the carrying value of the provision (Note 17). On an ongoing basis, the rehabilitation will be remeasured in line with the changes in the time value of money (recognised as an expense and an increase in the provision), and additional disturbances (recognised as additions to a corresponding asset and rehabilitation liability). (w) Contributed Equity Ordinary share capital is recognised at the fair value of the consideration received by the Company or at the fair value of equity issued as consideration for the acquisition of assets. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. (x) Leased Assets Leases are classified as finance leases when the terms of the lease transfer substantially all of the risks and rewards incidental to ownership of the leased assets to the lessee. All other leases are classified as operating leases. Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability is included in the consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are expensed, unless they are directly attributable to qualifying assets, in which case they are capitalised. Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset. Where amortisation is attributable to exploration and evaluation activities, costs are treated in accordance with the Accounting Policy Note 1(s). Operating lease payments are recognised as an expense on a straight line basis over the lease term. 51

54 Notes to the Financial Statements (continued) For the Financial Year ended 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (y) Derivative Financial Instruments, including hedge accounting The Group holds derivative financial instruments to hedge its foreign currency and commodity risk exposures. On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to hedged risk, and whether the actual results of each hedge are within a range of percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that ultimately could affect reporting profit or loss. Derivatives are recognised initially at fair value; any attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, any changes therein are accounted for as described below. Cash flow hedges When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. When the hedged item is a non-financial asset, the amount accumulated in equity is retained in other comprehensive income and reclassified to profit or loss in the same period or periods during which the non-financial item affects profit or loss. In other cases as well, the amount accumulated in equity is reclassified to profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified to profit or loss. (z) Capital Management Management s objective is to ensure the Group continues as a going concern and in the interests of shareholders. It aims to maintain a capital structure with the lowest cost of capital available to the Group. The Group has detailed planning processes, budgets and cash flow forecasts through which it continually monitors its position against the above objectives. At 30 June 2013 the capital structure consisted of total shareholders funds, cash and other financial assets less finance lease borrowings and borrowings from Macquarie Bank Limited. (aa) Joint Ventures The interests of the Group in unincorporated joint ventures are brought to account by recognising in its financial statements its share of the assets it controls, the liabilities it incurs, the expenses it incurs and its share of income earned from the sale of goods or services by the joint venture. (ab) Comparatives Where necessary, comparatives have been reclassified and repositioned for consistency with the current year disclosures. 52

55 Notes to the Financial Statements (continued) For the Financial Year ended 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (ac) Impact of Adopting New Accounting Standards and Accounting Standards Not Yet Effective The following new accounting standards applicable to the Group have been adopted: Amendments to AASB 101 Presentation of Financial Statements The amendment (part of AASB Amendments to Australian Accounting Standards - Presentation of Items of Other Comprehensive Income introduce new terminology for the statement of comprehensive income and income statement. Under the amendments to AASB 101, the statement of comprehensive income is renamed as a statement of profit or loss and other comprehensive income and the income statement is renamed as a statement of profit or loss. The amendments to AASB 101 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to AASB 101 require items of other comprehensive income to be grouped into two categories in the other comprehensive income section: (a) items that will not be reclassified subsequently to profit or loss and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis the amendments do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to AASB 101 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income. The following standards, amendments to standards and interpretations most applicable to the Group that are not yet mandatory and have not been applied in these financial statements: AASB 9 Financial Instruments includes requirements for the classification and measurement of financial assets resulting from the first part of Phase 1 of the project to replace AASB 139 Financial Instruments: Recognition and Measurement, which becomes mandatory for the Group s 30 June 2016 financial statements. AASB 10 Consolidated Financial Statements introduces a new definition of control in regards to consolidation, which becomes mandatory for the Group s 30 June 2014 financial statements. AASB 11 Joint Arrangements addresses joint operations and joint ventures, which becomes mandatory for the Group s 30 June 2014 financial statements. AASB 12 Disclosure of Interests in Other Entities addresses the disclosure requirements for all forms of interests in other entities, which becomes mandatory for the Group s 30 June 2014 financial statements. AASB 13 Fair Value Measurement consolidates the measurement and disclosure requirements in respect of fair values into one standard, which becomes mandatory for the Group s 30 June 2014 financial statements. Interpretation 20 Stripping Costs provides guidance on stripping costs during the production phase of a surface mine, which becomes mandatory for the Group s 30 June 2014 financial statements. The Group has not yet determined the eventual effect of the above standards, amendments to standards and interpretations, however at this stage it is not thought to be material. 53

56 Notes to the Financial Statements (continued) For the Financial Year ended 30 June $ 000 $ REVENUE AND EXPENSES Gold sales 210, ,157 Silver sales Revenue from continuing operations 210, ,759 Interest revenue 912 2,695 Other revenue Other revenue 1,077 2,764 Total income 211, ,523 Amortisation of mine properties 54,145 24,275 Depreciation of plant and equipment 8,133 2,320 Depreciation and amortisation 62,278 26,595 Directors and employee expenses 7,218 6,475 Management fees Professional fees Other Administration expenses 9,230 7,971 Borrowing costs 1, Finance costs 1, AUDITOR S REMUNERATION Amounts received or due and receivable by the auditor of the Company for: - Audit / review of the financial report 130, ,826 - Tax services 27,900 36, , ,964 54

57 Notes to the Financial Statements (continued) For the Financial Year ended 30 June $ 000 $ INCOME TAX (a) Income tax expense comprises: Current income tax - Current income tax charge / (benefit) (12,955) (1,872) - Under / (over) recognition in the prior year 331 (475) Deferred tax - Movement in temporary differences (12,602) 10,329 Income tax expense / (benefit) (25,226) 7,982 (b) Reconciliation of prima facie income tax expense to income tax expense per the Consolidated Statement of Profit or Loss and Comprehensive Income: Accounting profit / (loss) before tax (88,324) 26,692 Prime facie income tax expense / (benefit) at 30% (26,497) 8,008 - Non-deductible expenses Recognition of previously unrecognised temporary differences 331 (475) Income tax (benefit)/expense (25,226) 7,982 (c) Deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Balance at Charged / Charged / Balance at 1 July 2012 credited to income credited to equity 30 June 2013 $ 000 $ 000 $ 000 $ 000 (d) Deferred tax assets Tax losses 18,549 12,623-31,172 Provisions 4, ,504 Other 151 (46) Undeducted share issue costs 1,291 (454) Total 24,270 12,348-36,618 Deferred tax liabilities Deferred mining expenditure (34,338) 12,679 (21,659) Plant and equipment (90) 62 (28) Derivatives - - (13,904) (13,904) Other (136) Total (34,564) 12,877 (13,904) (35,591) Net deferred tax asset/(liability) (10,294) 25,225 (13,904) 1,027 Tax-consolidated group Saracen Mineral Holdings Limited and its wholly-owned subsidiaries formed a tax consolidated group with effect from 1 July Saracen Mineral Holdings Limited is the head entity in the tax consolidated group. At the financial year end, members of the tax consolidated group have not yet entered into a tax funding arrangement. Hence, no compensation is receivable or payable for any deferred tax asset arising from tax losses or current tax payable assumed by the head entity from the wholly owned subsidiaries. 55

58 Notes to the Financial Statements (continued) For the Financial Year ended 30 June $ 000 $ EARNINGS PER SHARE The following reflects the income and share data used in the calculations of basic and diluted earnings per share. Net profit/(loss) from continuing operations (63,098) 18,710 Net profit/(loss) after tax (63,098) 18,710 Number Number Weighted average number of ordinary shares for basic earnings per share 595,079, ,730,861 Effect of dilution share options - 8,834,777 Weighted average number of ordinary shares adjusted for the effect of dilution 595,079, ,565,638 Due to the Group being in a loss position in the current year, there is no dilution on shares $ 000 $ DIVIDENDS During the year no dividends were paid or provided for. Franking account balance at the end of the financial year at 30% TRADE AND OTHER RECEIVABLES Current Goods and services tax (GST) recoverable 2,492 2,787 Accrued gold sales - 2,795 Other (i) ,049 6,392 (i) Other receivables comprise accrued interest income and fuel supplied to contractors which are settled on 30 day terms. These receivables are within term and do not show signs of impairment. The Group s exposure to credit and market risks is disclosed in Note OTHER FINANCIAL ASSETS Listed shares at fair value The value of listed shares, designated as financial assets at fair value through profit and loss, has been determined by reference to the quoted market bid price at the close of business on the reporting date. Listed shares are readily saleable and have no fixed maturity date. 56

59 Notes to the Financial Statements (continued) For the Financial Year ended 30 June $ 000 $ INVENTORIES Ore stocks (i) 10,625 33,066 Gold in circuit 3,874 4,644 Gold on hand 5,027 1,199 Consumable supplies and spares 6,010 5,480 25,536 44,389 (i) During the financial year there was an inventory write-down to net realisable value of some ore stocks by $22,885,000 (2012: 6,257,000). Inventories require estimates and assumptions most notably in regards to grades, volumes, densities, future completion costs and ultimate sale price. Such estimates and assumptions may change as new information becomes available which may impact upon the carrying value of inventory. 10 OTHER ASSETS Prepayments Prepayments consist of prepaid insurance and prepaid establishment fees on the Macquarie Bank Limited debt facilities. 11 FINANCIAL DERIVATIVE INSTRUMENTS Financial derivative assets Current: Cash flow hedge asset 17,652 - Non-Current: Cash flow hedge asset 28,694-46,346 - During the year, Saracen entered into a series of gold hedging contracts with Macquarie Bank Limited, whereby an initial total of 200,000 ounces are hedged at an average price of A$1695/oz over a period of 4 years. As at 30 June 2013 Saracen had 176,600 ounces outstanding at an average price of A$1, to be delivered into over the period from July 2013 to August The gain or loss from remeasuring the hedging instruments at fair value is recognised in other comprehensive income and deferred in equity in the hedging reserve to the extent that the hedge is effective. There was no hedge ineffectiveness in the current period. 12 OTHER FINANCIAL ASSETS Security deposit 7,423 10,959 A deposit of $7.313 million is held as security by a bank for performance bonds issued to the Department of Mines and Petroleum ( DMP ) in relation to the Group s tenement licences in Western Australia. $110,000 is held as security for other guarantees provided by another bank. 57

60 Notes to the Financial Statements (continued) For the Financial Year ended 30 June $ 000 $ PLANT AND EQUIPMENT Plant and equipment Opening balance net of accumulated depreciation 28,895 9,984 Transfer from capital work in progress 10,579 20,874 Transfer from equipment under finance lease 4, Transferred from deferred exploration Disposals (1,659) - Depreciation (8,133) (1,978) Closing balance net of accumulated depreciation 34,712 28,895 Equipment under finance lease Opening balance net of accumulated depreciation 2, Additions 2,310 2,473 Transfer to plant and equipment (4,835) (15) Depreciation - (342) Transfer to CWIP (net of depreciation) - (49) Closing balance net of accumulated depreciation - 2,525 Capital work in progress Opening balance net of accumulated depreciation 3,342 8,372 Additions 15,650 15,844 Transfer to mines in production (2,920) - Transfer to plant and equipment (10,579) (20,874) Closing balance net of accumulated depreciation 5,493 3,342 Cost 52,936 39,720 Accumulated depreciation (12,731) (4,958) Net carrying amount 40,205 34, DEFERRED EXPLORATION AND EVALUATION COSTS Deferred exploration and evaluation costs Balance at the start of the year 26,485 11,032 Additions 12,292 21,108 Transferred from mines under construction 2,496 (3,787) Transferred from mines in production 2,656 - Transferred to plant and equipment (195) - Depreciation transferred from equipment under finance lease - 49 Transferred to mines in production (12,534) (1,609) Capitalised expenditure written off (9,102) (308) Balance at the end of the year 22,098 26,485 The ultimate recoupment of costs carried forward is dependent on the successful development and commercial exploitation or sale of the areas of interest. 58

61 Notes to the Financial Statements (continued) For the Financial Year ended 30 June $ 000 $ MINE PROPERTIES Mine properties Mines under construction - 41,706 Mines in production 78,313 52,101 Deferred mining expenditure 3,595 16,230 Balance at the end of the year 81, ,037 Mines under construction Balance at the start of the year 41,706 13,206 Additions ,251 Transferred from deferred exploration and evaluation costs - 3,787 Transferred to deferred exploration and evaluation costs (2,496) - Transferred to mines in production (39,876) - Increase in rehabilitation provision - 1,462 Balance at the end of the year - 41,706 Mines in production Balance at the start of the year 52,101 52,203 Additions 66,098 20,126 Transferred from capital work in progress 2,920 - Transferred from deferred exploration and evaluation costs 12,534 1,609 Transferred to deferred exploration and evaluation costs (2,656) - Transferred from mines under construction 39,876 - Amortisation for the year (54,145) (24,275) Impairment of mines in production (39,078) - Increase in rehabilitation provision 663 2,438 Balance at the end of the year 78,313 52,101 The Group undertakes regular impairment reviews incorporating an assessment of recoverability of cash generating assets. Cash generating assets relate to specific areas of interest in the Group s mine property assets. The recoverable value of specific areas of interest are assessed by value in use calculations determined with reference to the projected net cash flows estimated under the life of mine plan. Deferred mining expenditure Balance at the start of the year 16,230 16,039 Additions 11,899 17,536 Expensing of deferred costs (15,952) (17,345) Impairment of deferred mining expenditure (8,582) - Balance at the end of the year 3,595 16,230 Reconciliation of impairment Impairment of mines in production 39,078 - Impairment of deferred mining expenditure 8,582 - Balance at the end of the year 47,660 59

62 Notes to the Financial Statements (continued) For the Financial Year ended 30 June $ 000 $ TRADE AND OTHER PAYABLES Current Trade and other payables 18,788 17,221 Trade and other payables are non-interest bearing and are normally settled on 30 day terms. 17 PROVISIONS Current Employee benefits 2,454 2,583 Provision for rehabilitation ,554 2,683 Non-current Employee benefits Provision for rehabilitation 12,241 11,450 12,458 11,581 Movement in provision for rehabilitation Balance at the start of the year 11,550 7,650 Increase in provision 791 3,900 Balance at the end of the year 12,341 11,550 The nature and purpose of the provision for rehabilitation is disclosed in Note 1(v). 18 BORROWINGS Current Finance lease liabilities 1, Insurance premium funding ,217 1,236 (a) Non-current Macquarie bank loan 21,950 - Prepaid establishment fees (951) Finance lease liabilities 2,624 1,828 23,623 1,828 Macquarie Bank Loan During the year, the Group accepted an offer from Macquarie Bank Limited ( MBL ) for debt and gold hedging facilities (together Finance Facilities ) as follows:- Debt facility of $45 million, comprising a $30 million project loan facility, and a $15 million revolving working capital facility, with a term of three years; DMP environmental bonding facility of $20 million; and Provision for an additional conditional $15 million mezzanine facility, should Saracen wish to access it for further project expansion purposes in the future. The loan and hedging is secured by fixed and/or floating charges over the assets of the Saracen Group. As at 30 June 2013, $15,000,000 has been drawn down on the working capital facility and $6,950,100 on the project loan facility. 60

63 Notes to the Financial Statements (continued) For the Financial Year ended 30 June BORROWINGS (continued) (b) Leasing arrangements Finance leases relate to equipment and vehicles with lease terms not exceeding 5 years. (c) Finance lease liabilities Minimum future Present value of minimum lease payments future lease payments $ 000 $ 000 $ 000 $ 000 No later than 1 year 1, , Later than 1 year and not later than 5 years 2,788 1,999 2,624 1,828 Minimum future lease payments 4,240 2,926 3,841 2,578 Less future finance charges (399) (348) - - Present value of minimum lease payments 3,841 2,578 3,841 2,578 Included in the Statement of Financial Position as: Current Borrowings 1, Non-current Borrowings 2,624 1,828 3,841 2, CONTRIBUTED EQUITY AND RESERVES Number 2013 Number 2012 of shares $ 000 of shares $ 000 (a) Issued capital Ordinary shares fully paid 595,263, , ,815, ,724 The Company does not have a limited authorised capital and issued shares have no par value. (b) Movements in shares on issue Beginning of the financial period 594,815, , ,251, ,630 - share placement ,800,000 50,184 - share purchase plan ,566,394 10,585 - share placement - - 6,492,431 4,415 - acquisition settlement (i) 181, ,650, options exercise (ii) 219, ,055, options exercise (iii) 45, share issue costs (3,715) - Tax effect on share issue costs ,114 End of the financial period 595,263, , ,815, ,724 (i) On 21 December 2012, the Company issued 181,818 fully paid ordinary shares to Zodiac Resources for the purchase of a mining tenement. The issue was valued at $100,000. (ii) During the year ended 30 June 2013, the Company issued a total of 219,966 fully paid ordinary shares following the exercise of various options. The issues raised approximately $77,000. (iii) Issue of shares from the exercise of options utilising the cashless exercise facility. 61

64 Notes to the Financial Statements (continued) For the Financial Year ended 30 June CONTRIBUTED EQUITY AND RESERVES (continued) (c) Share options 2012 Granted Exercised Lapsed 2013 Listed participating options exercisable on or before 30 June 2013 at cents each 7,086,993-3,300 7,083,693 - Unlisted participating options exercisable on or before 30 June 2013 at cents each. 2,500, ,500,000 - Unlisted incentive options exercisable on or before 31 October 2012 at cents each 200, ,000 - Unlisted incentive options exercisable on or before 30 November 2012 at cents each 200, ,000 - Unlisted incentive options exercisable on or before 31 December 2012 at cents each 200, ,000 - Unlisted incentive options exercisable on or before 31 January 2013 at cents each 524, , Unlisted incentive options exercisable on or before 28 February 2013 at cents each 758, ,335 - Unlisted incentive options exercisable on or before 31 March 2013 at cents each 758, ,336 - Unlisted incentive options exercisable between 1 October 2012 and 31 December 2012 at cents each 2,354, ,354,500 - Unlisted incentive options exercisable between 1 March 2013 and 31 May 2013 at cents each 3,531, ,531,750 - Unlisted incentive options exercisable between 1 October 2013 and 31 December 2013 at cents each 3,531, ,200 2,796,550 Unlisted incentive options exercisable between 1 March 2013 and 31 May 2013 at cents each 365, ,500 - Unlisted incentive options exercisable between 1 October 2013 and 31 December 2013 at cents each 365, , ,500 Unlisted incentive options exercisable between 1 March 2014 and 31 May 2014 at cents each 548, , ,250 Unlisted incentive options exercisable between 1 October 2014 and 31 December 2014 at cents each 548, , ,250 23,474, ,297 18,823,314 4,122,550 62

65 Notes to the Financial Statements (continued) For the Financial Year ended 30 June CONTRIBUTED EQUITY AND RESERVES (continued) (c) Share options (continued) 2011 Granted Exercised Lapsed 2012 Listed participating options exercisable on or before 30 June 2013 at cents each 7,109,993-23,000-7,086,993 Unlisted participating options exercisable on or before 30 June 2013 at cents each. 2,500, ,500,000 Unlisted incentive options exercisable on or before 31 October 2012 at cents each 200, ,000 Unlisted incentive options exercisable on or before 30 November 2012 at cents each 200, ,000 Unlisted incentive options exercisable on or before 31 December 2012 at cents each 200, ,000 Unlisted incentive options exercisable on or before 31 January 2013 at cents each 578,329 36,666 16, ,997 Unlisted incentive options exercisable on or before 28 February 2013 at cents each 911, ,666 16, ,335 Unlisted incentive options exercisable on or before 31 March 2013 at cents each 811,671 36,668 16, ,336 Unlisted incentive options exercisable between 1 March 2012 and 31 May 2012 at cents each 3,095, ,400 2,273,300 - Unlisted incentive options exercisable between 1 October 2012 and 31 December 2012 at cents each 3,095, ,200 2,354,500 Unlisted incentive options exercisable between 1 March 2013 and 31 May 2013 at cents each 4,643,550 1,111,800 3,531,750 Unlisted incentive options exercisable between 1 October 2013 and 31 December 2013 at cents each 4,643,550 1,111,800 3,531,750 Unlisted incentive options exercisable between 1 March 2013 and 31 May 2013 at cents each - 552, , ,500 Unlisted incentive options exercisable between 1 October 2013 and 31 December 2013 at cents each - 552, , ,500 Unlisted incentive options exercisable between 1 March 2014 and 31 May 2014 at cents each - 828, , ,250 Unlisted incentive options exercisable between 1 October 2014 and 31 December 2014 at cents each - 828, , ,250 (d) Terms and conditions of contributed equity 27,990,161 2,762,500 1,055,400 6,223,100 23,474,161 Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. 63

66 Notes to the Financial Statements (continued) For the Financial Year ended 30 June CONTRIBUTED EQUITY AND RESERVES (continued) $ 000 $ 000 (e) Reserves Share based payments Balance at beginning of year 3,340 1,843 Share based payments 106 1,497 Balance at end of year 3,446 3,340 The share based payments reserve is used to recognise the fair value of options issued. Cash Flow Hedge Reserve Balance at beginning of year - - Hedge reserve 32,442 - Balance at end of year 32,442 - The hedge reserve represents the fair value gain on hedging instruments entered into for cash flow hedges. 20 COMMITMENTS (a) Operating lease commitments The Group has entered into commercial leases on items of plant, machinery and property. Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows: - not later than one year 501 1,332 - later than one year and not later than five years 1,544 2,045 2,045 3,377 (b) Other expenditure commitments Commitments contracted for corporate services as at 30 June, but not recognised as liabilities are as follows: - not later than one year later than one year and not later than five years 90 1, ,972 (c) Exploration expenditure commitments (d) In order to maintain current rights of tenure to exploration tenements, the Group is required to meet minimum expenditure requirements. As these expenditure commitments can be reduced by selective rationalisation of interests in exploration tenements or by renegotiation of joint venture commitments it is difficult to accurately forecast the amount of future expenditure. On current tenement holdings, the Group s nominal expenditure obligations for the next 12 months are approximately $4.3 million. Superannuation The Group contributes to superannuation funds in accordance with the requirements of the Superannuation Guarantee Legislation. Employer contributions are based on various percentages of salaries or directors fees. All funds are accumulation type and as such an actuarial assessment is not required. 64

67 Notes to the Financial Statements (continued) For the Financial Year ended 30 June SHARE BASED PAYMENTS An incentive option scheme has been established where employees and other eligible participants of the Group are issued with options over the ordinary shares of Saracen Mineral Holdings Limited. The options, issued for nil consideration, are issued in accordance with the position, skills, experience and length of service with the Group and such other criteria that the Directors consider appropriate in the circumstances. The options cannot be transferred and are not quoted on the Australian Securities Exchange (ASX). There are no voting rights attached to the options. During the financial year no options were granted. In the prior financial year 2,762,500 options were granted for no consideration under this scheme to eligible participants. The fair value at grant date is determined using a Black-Scholes option pricing model with the following factors relevant:- 15 March 2012 Tranche 1 Tranche 2 Tranche 3 Tranche 4 Stock Price at Grant $0.56 $0.56 $0.56 $0.56 Exercise Price $0.84 $0.92 $0.96 $1.00 Volatility based on historical annual volatility of SAR securities 49.48% 49.48% 49.48% 49.48% Grant Date 15/03/ /03/ /03/ /03/2012 Exercise Period 01/03/13-01/10/13-01/03/14-01/10/14-31/05/ /12/ /05/ /12/2014 Vesting Date 1/09/2012 1/04/2013 1/09/2013 1/04/2014 Risk free rate 2.86% 2.46% 2.46% 2.65% Number of options granted 552, , , ,750 The vesting of the above options is subject to continuing service conditions and, in the case of tranches 3 and 4, subject to a satisfactory outcome in the performance reviews. At the reporting date there were 1,326,000 of these options (2012: 1,827,500) on issue. In the 2011 financial year 16,745,000 options were granted for no consideration under this scheme to eligible participants. The fair value at grant date is determined using a Black-Scholes option pricing model with the following factors relevant: 22 November 2010 Tranche 1 Tranche 2 Tranche 3 Tranche 4 Stock Price at Grant $0.67 $0.67 $0.67 $0.67 Exercise Price $0.50 $0.53 $0.55 $0.58 Volatility based on historical annual volatility of SAR securities 53.59% 53.59% 53.59% 53.59% Grant Date 22/11/ /11/ /11/ /11/2010 Exercise Period 01/03/12-01/10/12-01/03/13-01/10/13-31/05/ /12/ /05/ /12/2013 Vesting Date 1/09/2011 1/04/2012 1/09/2012 1/04/2013 Risk free rate 4.82% 4.95% 4.97% 5.04% Number of options granted 2,833,900 2,833,900 4,250,850 4,250,850 65

68 Notes to the Financial Statements (continued) For the Financial Year ended 30 June SHARE BASED PAYMENTS (continued) 31 March 2011 Tranche 1 Tranche 2 Tranche 3 Tranche 4 Stock Price at Grant $0.75 $0.75 $0.75 $0.75 Exercise Price $0.50 $0.53 $0.55 $0.58 Volatility based on historical annual volatility of SAR securities 55.57% 55.57% 55.57% 55.57% Grant Date 31/03/ /03/ /03/ /03/2011 Exercise Period 01/03/12-01/10/12-01/03/13-01/10/13-31/05/ /12/ /05/ /12/2013 Vesting Date 1/09/2011 1/04/2012 1/09/2012 1/04/2013 Risk free rate 4.82% 4.95% 4.97% 5.04% Number of options granted 515, , , ,650 The vesting of the above options is subject to continuing service conditions and, in the case of tranches 3 and 4, subject to a satisfactory outcome in the performance reviews. At the reporting date there were 2,796,550 of these options (2012: 9,418,000) on issue under the scheme. The remaining incentive options which were granted pre July 2010 and at the reporting date there none of these options (2012: 2,641,668) on issue under the scheme as all of them either lapsed or were exercised. Refer Note 19(c) for details of options that were exercised or lapsed during the year. The weighted average remaining contractual life for incentive options outstanding as at 30 June 2013 is 155 days (2012: 312 days). The range of exercise prices for incentive options outstanding at the end of the year was 50 to 100 cents per share. 22 INTERESTS IN SUBSIDIARIES Parent Entity: Saracen Mineral Holdings Limited (i)(ii) Percentage of equity Investment interest held by the group % % $ $ Subsidiaries: Saracen Gold Mines Pty Limited (ii)(iii) Saracen Metals Pty Limited (ii) All entities are incorporated in Australia and shareholdings relate to ordinary shares. (i) Saracen Mineral Holdings Limited is the head entity within the tax-consolidated group and the parent entity. (ii) These companies are members of the tax-consolidated group. (iii) Saracen Gold Mines Pty Limited, a wholly-owned subsidiary, entered into a deed of cross guarantee on 21 April 2010 with Saracen Mineral Holdings Limited pursuant to ASIC Class Order 98/1418 and is relieved from the requirement to prepare and lodge an audited financial report. In the current and prior year the consolidated statements of profit or loss and other comprehensive income and financial position of the entities party to the Deed of Cross Guarantee are the same as the Group s and have therefore not been reproduced. 66

69 Notes to the Financial Statements (continued) For the Financial Year ended 30 June $ 000 $ STATEMENT OF CASH FLOWS (a) Reconciliation of cash Cash balance comprises: - Cash 8,891 3,438 - Cash at call and in short term deposits ,758 Closing cash balance 9,024 20,196 (b) Reconciliation of the operating result after income tax to the net cash flowsfrom operating activities Operating profit/(loss) after income tax (63,098) 18,710 Non-cash items Depreciation and amortisation 62,278 26,595 Loss on the sale of assets 1,637 - Inventory write-down 22,885 6,257 (Gain) / loss on derivatives - 5,887 Effective interest on establishment fees (Increase) / decrease in market value of listed securities 30 (21) Impairment written off 56, Expensing of deferred mining costs 15,952 17,345 Tax effect of movement in temporary differences (25,225) 7,982 Accrual for the purchase of CWIP (297) - Share based payments 106 1,497 Changes in assets and liabilities: (Increase)/Decrease in trade and other receivables 3,343 (1,641) (Increase)/Decrease in prepayments (58) (119) (Increase)/Decrease in inventory (4,032) (37,643) Increase in trade and other payables ,797 Increase in provisions Net cash flows provided by operating activities 72,843 51,888 (c) Non-cash financing and investing activities (d) In the current year, the Group acquired $2,310,000 (30 June 2012: $2,473,000) of equipment under finance lease. These acquisitions will be reflected in the statement of cash flows over the term of the lease via their lease payments. Cash balances not available for use As described in Note 12, the Group holds deposits of $7.423 million (2012: $ million) as security by a bank for performance bonds and guarantees. These balances are not available for use and have therefore not been included in cash and cash equivalents. 67

70 Notes to the Financial Statements (continued) For the Financial Year ended 30 June DIRECTOR AND EXECUTIVE DISLOSURES Directors of the Group during the year:- Guido Staltari Non-executive Chairman(i) Carl Thompson Director (Non-Executive), retired 20 November 2012 Ivan Hoffman OAM Director (Non-Executive), resigned 25 July 2013 Barrie Parker Director (Non-Executive) Martin Reed Director (Non-Executive), appointed 24 August 2012 Raleigh John Finlayson Managing Director, appointed 2 April 2013 Other key management personnel of the Group during the year:- Craig Bradshaw Chief Operating Officer, appointed 10 April 2013 Grant Haywood General Manager Operations Richard Maddocks General Manager Geology and Exploration, resigned 9 August 2013 Rajan Narayanasamy Company Secretary / Chief Financial Officer, resigned 30 November 2012 Gerry Kaczmarek Company Secretary / Chief Financial Officer, appointed 17 September 2012 (i) Mr Staltari held the positions of Executive Chairman and Managing Director until 2 April 2013 when he stood down from the role of Managing Director. He reverted to a Non-executive Chairman role effective 1 July (a) Remuneration of key management personnel The Board is ultimately responsible for determining and reviewing remuneration arrangements for Directors, within the limits approved by shareholders, and Executives. The Board assesses the appropriateness of the nature and amount of emoluments on an annual basis by reference to industry and market conditions. Details of the remuneration of Directors and key management personnel of the Group, including their personally related entities, are set out in the following tables: $ $ Short term benefits 2,252,902 1,941,808 Post-employment benefits 538, ,479 Non-monetary benefits 24,557 32,095 Long term benefits 17,758 21,882 Equity 47, ,025 2,881,075 2,547,289 68

71 Notes to the Financial Statements (continued) For the Financial Year ended 30 June DIRECTOR AND EXECUTIVE DISLOSURES (continued) (b) Option holdings of directors and executives 30 June 2013 Balance at Granted as Options Options Balance at Not Exercisable beginning remuneration exercised lapsed end of exercisable of period period 1 July June 2013 Directors G Staltari 5,721, ,721, R Finlayson (i) 1,680, ,333 1,291, , ,000 - C Thompson (ii) I Hoffman (iii) B Parker M Reed (iv) Executives G Haywood (v) 340, , R Maddocks (vi) 238, ,750 89,250 89,250 - R Narayanasamy (vii) 1,180, , , , ,000 - C Bradshaw (viii) G Kaczmarek (ix) Total 9,159, ,999 8,260, , ,250 - (i) Appointed 2 April 2013 (ii) Retired 20 November 2012 (iii) Resigned 25 July 2013 (iv) Appointed 24 August 2012 (v) Resigned 31 December 2012 (vi) Resigned 9 August 2013 (vii) Resigned 30 November 2012 (viii) Appointed COO 10 April 2013 (ix) Appointed 17 September June 2012 Balance at Granted as Options Options Balance at Not Exercisable beginning remuneration exercised lapsed end of exercisable of period period 1 July June 2012 Directors G Staltari 5,721, ,721,437-5,721,437 C Thompson I Hoffman B Parker Executives R Finlayson 1,850, ,000-1,680, ,000 1,000,000 G Haywood 425, (85,000) 340, ,000 - R Maddocks 297, (59,500) 238, ,000 - R Narayanasamy 1,350, ,000-1,180, , ,000 Total 9,643, ,000 (144,500) 9,159,437 1,938,000 7,221,437 69

72 Notes to the Financial Statements (continued) For the Financial Year ended 30 June DIRECTOR AND EXECUTIVE DISLOSURES (continued) (c) Shareholdings of directors and executives 30 June 2013 Balance at Granted as Options Net change Balance at beginning remuneration exercised - other end of of period period 1 July June 2013 Directors G Staltari 14,407, ,407,252 R Finlayson (i) 237,059-19, ,848 C Thompson (ii) I Hoffman (iii) B Parker 100, ,000 M Reed (iv) Executives G Haywood (v) R Maddocks (vi) , ,000 R Narayanasamy (vii) 180, ,666 (246,666) 100,000 C Bradshaw (viii) G Kaczmarek (ix) Total 14,924, ,455 (65,666) 15,045,100 (i) Appointed 2 April 2013 (ii) Retired 20 November 2012 (iii) Resigned 25 July 2013 (iv) Appointed 24 August 2012 (v) Resigned 31 December 2012 (vi) Resigned 9 August 2013 (vii) Resigned 30 November 2012 (viii) Appointed COO 10 April 2013 (ix) Appointed 17 September June 2012 Balance at Granted as Options Net change Balance at beginning remuneration exercised - other end of of period period 1 July June 2012 Directors G Staltari 28,407, (14,000,000) 14,407,252 C Thompson 1,797, (1,797,223) - I Hoffman B Parker 100, ,000 Executives R Finlayson 45, ,000 22, ,059 G Haywood 15, (15,000) - R Maddocks R Narayanasamy 330, ,000 (320,000) 180,000 Total 30,694, ,000 (16,110,164) 14,924,311 70

73 Notes to the Financial Statements (continued) For the Financial Year ended 30 June DIRECTOR AND EXECUTIVE DISLOSURES (continued) (d) Other transactions with Directors and Executives During the year, the Company was a party to a management agreement with Renaissance Capital Pty Limited ( RenCap ), an entity controlled by Mr Staltari, for the provision of management and technical services and office facilities. During the year, the Group incurred fees and reimbursements of $834,167 (2012: $910,666), comprising approximately $330,000 (2012: $360,000) for the provision of office facilities and associated costs and approximately $504,167 (2012: $550,666) for professional fees and expense reimbursements to RenCap pursuant to the agreement, a summary of which is contained in the Remuneration Report within the Directors Report. At 30 June 2013 $37,917 was due and payable to RenCap (2012: $83,416). During the year an amount of $97,192 has been paid/is payable to PilotHole Pty Ltd, an entity controlled by Mr Martin Reed. The amount paid was for Mr Reed s Director s fee. Transactions with Directors and executives have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm s length. 25 RELATED PARTY DISCLOSURES $ 000 $ 000 (a) Ultimate parent Saracen Mineral Holdings Limited is the ultimate parent company. Information relating to Saracen Mineral Holdings Limited: Current assets 25,832 17,050 Total assets 201, ,193 Current liabilities Total liabilities 22,497 10,709 Contributed equity 185, ,724 Share based payment reserve 3,446 3,340 Hedge Reserve 32,442 - Accumulated profit (43,080) 1,420 Total equity 178, ,484 Net profit of the parent 4,502 Total comprehensive income of the parent - - Saracen Mineral Holdings Limited is party to a deed of cross guarantee with its wholly owned subsidiary Saracen Gold Mines Pty Limited described in Note 22(iii) pursuant to ASIC Class Order 98/1418. At 30 June 2013 Saracen Mineral Holdings Limited had no contingent liabilities and had not entered into contractual commitments to purchase property, plant or equipment (2012: Nil). 71

74 Notes to the Financial Statements (continued) For the Financial Year ended 30 June RELATED PARTY DISCLOSURES (continued) $ 000 $ 000 (b) Subsidiaries Details of interests in subsidiaries are set out in Note 22. Loans between group entities have no specific repayment terms and are unsecured. The aggregate amounts receivable/ (payable) by the Company from/to subsidiaries at the reporting date were: Non-current receivable 137, ,142 Reconciliation of non-current receivable Balance at beginning of year 184, ,447 Loan drawdown by subsidiary 19,292 64,083 Interest Received 7,737 12,612 Impairment (74,078) - Balance at end of year 137, ,142 During the year the non-current receivable was written down to the net asset value of the subsidiary. 26 SEGMENT INFORMATION The Group has adopted AASB 8 Operating Segments with effect from 1 July AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker ( CODM ) in order to allocate resources to the segments and to assess their performance. On this basis the Group s reportable segments under AASB 8 are as follows: Saracen Gold Mines Pty Limited ( SGM ) which includes the Group s exploration, production and related administration Saracen Mineral Holdings Limited ( SAR ) which includes the Group s corporate administration The accounting policies of the reportable segments are the same as the Group s accounting policies described in Note 1. The CODM reviews segment profit before tax in assessing segment performance which corresponds to operating profit before other income / expenses in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Information regarding the Group s reportable segments is presented below $ 000 $ 000 (a) Segment external revenues SGM - Metal sales 210, ,759 SGM - Interest income SGM - Other SAR - Interest income 446 2, , ,523 72

75 Notes to the Financial Statements (continued) For the Financial Year ended 30 June SEGMENT INFORMATION (continued) $ 000 $ 000 (b) Segment profit before tax SGM (62,165) 39,949 SAR (2,741) (2,273) Operating profit before other income / (expenses) (64,906) 37,676 Finance costs (1,474) (128) Other income 1,077 2,764 Share based payments expense (106) (1,497) Net realised loss on derivatives - (10,584) Change in fair value of derivatives - 4,697 Inventory write-down (22,885) (6,257) Change in fair value of listed shares (30) 21 Profit before income tax (88,324) 26,692 (c) Segment assets and liabilities Assets SGM 174, ,892 SAR 62,152 17,050 Unallocated 1, , ,942 Liabilities SGM 37,094 34,135 SAR 21, Unallocated - 10,294 58,640 44,843 For the purposes of monitoring segment performance and allocating resources between segments, all assets and liabilities are allocated to reportable segments other than tax assets and liabilities. (d) Other segment information Depreciation and amortisation of $ million (2012: $ million) are attributable to the SGM segment. Total non-current asset additions of $ million (2012: million) is attributable to the SGM segment. Impairment write off of $56,762 million (2012: $0.308 million) is attributable to the SGM segment. The Group operates within one geographical segment, being Australia. 73

76 Notes to the Financial Statements (continued) For the Financial Year ended 30 June FINANCIAL INSTRUMENTS The Group s principal financial instruments comprise cash, short-term deposits, borrowings and derivatives. In addition the Group has financial assets at fair value through profit and loss, trade receivables, trade payables and finance leases arising directly out of its operations. The Board as a whole guides and monitors the business and affairs of Saracen. Risk oversight, management and internal control are dealt with on a continuous basis by management and the Board, with differing degrees of involvement depending upon the nature and materiality of the matter being dealt with. (a) Market risk (i) Interest rate risk The Group s exposure to interest rate risk relates primarily to the assets and liabilities bearing variable interest rates. The Group does not engage in any hedging or derivative transactions to manage interest rate risk. The following tables sets out the carrying amount, by maturity of the Group s exposure to interest rate risk and the effective weighted average interest rate for each financial instrument. 30 June 2013 Weighted Interest Non- Conaverage bearing interest solidated rate bearing Total Under year years years years % $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Financial Assets Cash assets , ,024 Other receivables N/A ,026 3,049 Security deposits , ,423 Financial Derivative Asset N/A ,346 46,346 Listed Investments N/A Total Financial Assets 16, ,457 65,927 Financial Liabilities Trade payables N/A ,788 18,788 Borrowings , ,999 Finance leases ,217 1, ,841 Total Financial Liabilities - 1,217 22, ,788 43, June 2012 Weighted Interest Non- Conaverage bearing interest solidated rate bearing Total Under year years years years % $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Financial Assets Cash assets ,196 10, ,196 Other receivables ,258 6,392 Security deposits , ,959 Listed Investments N/A Total Financial Assets 21,289 10, ,373 37,662 Financial Liabilities Trade payables N/A ,221 17,221 Borrowings Finance leases , ,578 Total Financial Liabilities - 1, ,149-17,221 20,285 74

77 Notes to the Financial Statements (continued) For the Financial Year ended 30 June FINANCIAL INSTRUMENTS (continued) (ii) Commodity risk The Group s exposure to commodity risk arises from movements in the gold price. During the year the Group entered into a hedge contract (Note 11) for specified quantities of gold on specific dates to partly manage the commodity risk. (iii) Currency risk The Group is exposed to the Australian dollar currency risk on gold sales, which are denominated in US dollars. During the year the Group entered into a hedge contract (Note 11) for specified quantities of gold on specific dates to partly manage the currency risk. (b) Credit risk The Group trades only with recognised, creditworthy third parties. There are no significant concentrations of credit risk within the Group. (c) Liquidity risk The Group manages liquidity risk by maintaining sufficient cash reserves and marketable securities, and through the continuous monitoring of budgeted and actual cash flows. At the reporting date there is no significant liquidity risk. The table below analyses the Group s maturity of financial liabilities: 30 June month 6 12 months 1 5 years 5+ years Total $ 000 $ 000 $ 000 $ 000 $ 000 Trade payables 18, ,788 Borrowings ,999-20,999 Finance leases ,624-3,841 Total Financial Liabilities 19, ,623-43, June month 6 12 months 1 5 years 5+ years Total $ 000 $ 000 $ 000 $ 000 $ 000 Trade payables 17, ,221 Borrowings Finance leases ,828-2,578 Total Financial Liabilities 18, ,828-20,285 75

78 Notes to the Financial Statements (continued) For the Financial Year ended 30 June FINANCIAL INSTRUMENTS (continued) (d) Sensitivity analysis The following table summarises the Group s exposure to interest rate risk, commodity and currency risk (AUD gold price) at the reporting date. The sensitivities are based on management s best estimate of the market views for future interest rates, gold price and currency movements over the next 12 months with reference to recent historical movements. The analysis demonstrates the after tax effect on the profit/(loss) and equity which could result from changes based on the following: 30 June 2013 Profit/(loss) Equity $ 000 $ 000 Interest rate risk - Increase interest rate by 1% (59) (59) - Decrease interest rate by 1% Gold price risk associated with the financial derivative instruments - Increase $AUD gold price by 10% - (23,809) - Decrease $AUD gold price by 10% - 23, June 2012 Profit/(loss) Equity $ 000 $ 000 Interest rate risk - Increase interest rate by 1% Decrease interest rate by 1% (198) (198) Gold price risk associated with the financial derivative instruments - Increase $AUD gold price by 10% Decrease $AUD gold price by 10% - - (e) Derivative assets and liabilities designated as cash flow hedges The following table indicates the periods in which the cash flows associated with cash flow hedges are expected to occur, are expected to impact profit and loss and the fair values of the related hedging instruments. 30 June 2013 Expected cash flows Fair Total 2 months value or less months years years $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Hedged Assets 46, ,819 19,030 89,681 97,604 90,504 76

79 Notes to the Financial Statements (continued) For the Financial Year ended 30 June FINANCIAL INSTRUMENTS (continued) (f) Net fair values The net fair values of financial assets and financial liabilities at the reporting date are as follows: Total carrying amount Aggregate net as per the Balance Sheet fair value Consolidated Consolidated $ 000 $ 000 $ 000 $ 000 Financial Assets Cash and cash equivalents 9,024 20,196 9,024 20,196 Other receivables 3,049 6,392 3,049 6,392 Investments listed Financial Derivative Asset 46,346-46,346 - Other financial assets 7,423 10,959 7,423 10,959 Total Financial Assets 65,927 37,662 65,927 37,662 Financial Liabilities Trade payables 18,788 17,221 18,788 17,221 Borrowings 20, , Finance leases 3,841 2,578 3,841 2,578 Total Financial Liabilities 43,628 20,285 43,628 20,285 The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). $ 000 $ 000 $ 000 $ June 2013 Level 1 Level 2 Level 3 Total Assets Listed shares at fair value Derivative assets - 46,346-46,346 Total 85 46,346-46,431 Liabilities Derivative liabilities Total June 2012 Assets Listed shares at fair value Derivative assets Total Liabilities Derivative liabilities Total

80 Notes to the Financial Statements (continued) For the Financial Year ended 30 June JOINT VENTURES The Group has interests in the following unincorporated joint ventures: Joint Venture Principal Activity Percentage Interest Other Participants PHANTOM WELL Exploration 81.4% Royal Harry Gold Mines NL MOUNT MINNIE Exploration 73.9% Anglogold Ashanti Australia Ltd WILGA WELL WEST Exploration 90.0% Richmond, William Robert MOUNT FLORENCE Exploration 87.8% Ladyman, R.P; Ladyman, I.M; Evans, A. YUNDAMINDERA Exploration 40.0% Nex Metals Exploration Limited As at 30 June 2013 the Group s interests in joint venture assets, being deferred exploration and evaluation costs, are $1,950,066 (2012: $2,288,000). In order to maintain current rights of tenure to exploration tenements, the Group is required to meet minimum expenditure requirements. As these expenditure commitments can be reduced by selective rationalisation of interests in exploration tenements or by renegotiation of the joint venture terms it is difficult to accurately forecast the amount of future expenditure. On current tenement holdings, the Group s nominal expenditure obligations over joint venture tenements for the next 12 months are approximately $0.6 million. Contingent liabilities are nil. 29 CONTINGENT LIABILITIES There are no contingent liabilities at 30 June 2013 (2012: Nil). 30 MATTERS SUBSEQUENT TO THE REPORTING DATE There has not been any matter or circumstance, other than referred to in the financial statements or notes thereto, that has arisen since the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group. 78

81 Directors Declaration The Directors of Saracen Mineral Holdings Limited declare that, in their opinion: (a) the financial statements and notes and the Remuneration Report in the Directors Report set out on pages 35-39, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group s financial position as at 30 June 2013 and of its performance, for the financial year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001 and other mandatory professional reporting requirements. (b) the financial report also complies with International Financial Reporting Standards issued by the International Accounting Standards Board ( IASB) as disclosed in Note 1(b); and (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. At the date of this declaration there are reasonable grounds to believe that the Company and the group entities identified in Note 22 will be able to meet any obligations or liabilities to which they are or may have become subject to by virtue of the Deed of Cross Guarantee between the Company and those group entities pursuant to ASIC Class Order 98/1418. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 by the chief executive officer and chief financial officer for the financial year ended 30 June Signed in accordance with a resolution of the directors. RALEIGH FINLAYSON Managing Director 27 August

82 Independent Auditor s Report To the members of Saracen Mineral Holdings Limited Tel: Fax: Level 14, 140 William St Melbourne VIC 3000 GPO Box 5099 Melbourne VIC 3001 Australia Report on the Financial Report We have audited the accompanying financial report of Saracen Mineral Holdings Limited, which comprises the consolidated statement of financial position as at 30 June 2013, the consolidated statement of profit or loss and other 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 consolidated entity comprising the company and the entities it controlled at the year s end or from time to time during the financial year. Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1(b), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the disclosing entity s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the disclosing entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BDO East Coast Partnership ABN is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN , an Australian company limited by guarantee. BDO East Coast Partnership and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. 80

83 Independent Auditor s Report (continued) To the members of Saracen Mineral Holdings Limited Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Saracen Mineral Holdings Limited, would be in the same terms if given to the directors as at the time of this auditor s report. Opinion In our opinion: (a) the financial report of Saracen Mineral Holdings Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity s financial position as at 30 June 2013 and of its 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 in Note 1(b). Report on the Remuneration Report We have audited the Remuneration Report included in pages 35 to 39 of the directors report for the year ended 30 June The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Saracen Mineral Holdings Limited for the year ended 30 June 2013 complies with section 300A of the Corporations Act BDO East Coast Partnership David Garvey Partner Melbourne, 27 August