OCEANA GOLD 31 DECEMBER OCEANA GOLD HOLDINGS (NEW ZEALAND) LIMITED Company Number

Transcription

1 OCEANA GOLD OCEANA GOLD HOLDINGS (NEW ZEALAND) LIMITED Company Number ANNUAL REPORT 31 DECEMBER 2017

2 CONTENTS Contents CORPORATE DIRECTORY DIRECTORS' REPORT CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CASH FLOWS INDEPENDENT AUDITORS' REPORT Page

3 CORPORATE DIRECTORY Directors Mark D Cadzow Michael F Wilkes Mark N Chamberlain (resigned 23 October 2017) Shareholder Ultimate Shareholder Registered Office Mining sites Oceana Gold Pty Limited OceanaGold Corporation, Toronto, Canada 22 Maclaggan Street Dunedin New Zealand Macraes, South Island, New Zealand Reefton, South Island, New Zealand Waihi, North Island, New Zealand Auditor PricewaterhouseCoopers, Dunedin Bankers Solicitors HSBC, New Zealand ANZ, New Zealand Anderson Lloyd, Dunedin

4 DIRECTORS' REPORT The Directors are responsible for the preparation of the Annual Report for the year ended 31 December In accordance with section 211 (3) of the Companies Act 1993 (the "Act"), the shareholders have agreed that the annual report need not comply with any of paragraphs (a) and (e) to 0) of Section 211 (1) of the Act. For and on behalf of the Board of Directors, who authorised the issue of the financial statements on 22 May Mark D Cadzow Director Michael F Wilkes Director 2

5 CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2017 Notes Revenue Gold Sales Silver sales Other income 2(a) 493,674 5,947 2, , ,546 6,369 3, ,738 Cost of Sales 2(b) (409,315) (429,439) Gross Profit Other Expenses 2(c) 93,168 86,299 (31,897) (17,743) Finance costs 2(d) (20,342) (25,004) Profit before income tax Income tax expense Profit after tax from continuing operations Profit is attributable to: Owners of 3 40,929 43,552 (8,673) (16,876) 32,256 26,676 32,256 26,676 The above consolidated income statement should be read in conjunction with the accompanying notes. /~ 3

6 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2017 Notes Net profit for year Other comprehensive income Changes in the fair value of available-for-sale financial assets Other comprehensive income for the year 32,256 26, (c) ====2=6=3====56_4 Total comprehensive Income 32,519 27,240 For and on behalf of the Board of Directors, which authorised the issue of the financial statements on 22 May Mark D Cadzow Director Michael F Wilkes Director The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes..]11 4

7 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2017 Contributed Retained Other Total equity Earnings reserves Opening balance 65,473 (30,225) 41 35,289 Profit for the year 26,676 26,676 Dividends provided for or paid (87,408) (87,408) Other comprehensive income Investment revaluation reserve Balance at 31 December ,473 (90,957) 605 (24,879) Balance at 1 January ,473 (90,957) 605 (24,879) Profit for the year 32,256 32,256 Other comprehensive income Investment revaluation reserve Balance at 31 December ,473 (58,701) 868 7,640 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. ~5 l»wc,.

8 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2017 Notes ASSETS Current assets Cash and cash equivalents 4 13,789 31,347 Trade and other receivables 5 128,612 49,740 Inventories 7 44,461 47,112 Prepayments 1,575 1,822 Derivative financial instruments 8 11,855 Total current assets 188, ,876 Non-current assets Available-for-sale financial assets Mining assets , ,654 Property, plant and equipment , ,957 Deferred tax assets 3 40,722 43,360 Intangible assets - Carbon Credits 6 2,568 2,775 Inventories 7 14,154 15,897 Total non-current assets 330, ,329 Total assets 518, ,205 LIABILITIES Current liabilities Trade and other payables 12 27,728 30,960 Loans and borrowings 15 9,208 8,663 Derivative financial instruments 8 1,251 Current tax liabilities 3 28,410 9,731 Provisions 13 13,092 13,827 Employee benefit obligations 14 12,647 10,383 Total current liabilities 92,336 73,564 Non-current liabilities Loans and borrowings , ,466 Deferred tax liabilities 3 18,800 37,663 Provisions 13 85,119 82,391 Total non-current liabilities 418, ,520 Total liabilities 511, ,084 Net assets 7,640 (24,879) EQUITY Contributed equity 16(a) 65,473 65,473 Investment Revaluation Reserve 16(c) Accumulated losses 16(b) (58,701) (90,957) Total Equity/ (Deficit) 7,640 (24,879) The above consolidated statement of financial position should be read in conjunction with the accompanying notes. ~ ~ owe 6

9 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2017 Notes Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest Received Interest and other costs of finance paid 423, ,856 (267,765) (306,210) (17,532) (22,239) Net cash inflow from operating activities 23(a) 13_8_,5_2_0 1_86_,9_3_9 Cash flows from investing activities Payments for property, plant and equipment Payments for mining assets Net cash (outflow) from investing activities (17,097) (101,766) (118,863) (53,140) (73,184) (126,324) Cash flows from financing activities Proceeds from finance leases Repayment of borrowings Finance lease payments Net cash (outflow) from financing activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at end of year 4 (28,728) (8,487) (37,215) (17,558) 31,347 13,789 15,660 (110,504) (10,985) (105,829) (45,214) 76,561 31,347 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. ~ 7

10 1 SIGNIFICANT ACCOUNTING POLICIES This note provides a list of all significant accounting policies adopted in the preparation of these consolidated financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the group consisting of and its subsidiaries. (a) Corporate Information The reporting entity is Oceana Gold Holdings (New ("OGHNZL" or the "Company"), a company incorporated and domiciled in New Zealand and registered under the Companies Act The consolidated entity comprises Oceana Gold Holdings (New and its wholly owned subsidiaries, Oceana Gold (New, Stanleys Hotel Limited, Oceana Gold Holdings (Waihi) Limited, Oceana Gold (Waihi) Limited and Waihi Gold Company Limited which are wholly owned by Oceana Gold Pty Limited (OGL) a Company incorporated in Australia. The ultimate holding company is OceanaGold Corporation. The financial report of Oceana Gold Holdings (New for the year ended 31 December 2017 was authorised for issue in accordance with a resolution of the directors on 22 May The directors have the power to amend these financial statements after issue. (b) Basis of preparation The consolidated financial statements of the OGHNZL have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP). OGHNZL is a for-profit entity for the purposes of complying with NZ GAAP. The consolidated financial statements comply with New Zealand equivalents to International Financial Reporting Standards Reduced Disclosure Regime ('NZ IFRS RDR'), other New Zealand accounting standards and authoritative notices that are applicable to entities that apply NZ IFRS RDR. The group is eligible and has elected to report in accordance with Tier 2 For-profit Accounting Standards (NZ IFRS RDR) on the basis that the group has no public accountability and is not a large for-profit public sector entity. The group has elected to report in accordance with NZ IFRS RDR and has applied disclosure concessions. The financial statements have also been prepared. on a going concern basis and historical cost basis, except for available-for-sale financial assets and derivative financial instruments which have been measured at fair value. The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the periods presented unless otheiwise stated. The functional and presentation currency of Oceana Gold Holdings (New is the New Zealand dollar (NZD). The financial statements are presented in New Zealand Dollars and all values are rounded to the nearest thousand dollars (). Where the presentation of balances has been changed in the current year, prior year balances have also been reclassified for consistency. The Group is designated as profit oriented entities for financial reporting purposes. (c) Principles of consolidation Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the group NZ IFRS10. lntercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. /_\11 pwc/ 8

11 1 SIGNIFICANT ACCOUNTING POLICIES (d) Estimates The preparation of financial statements in conformity with NZ IFRS RDR requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes. Significant areas where management's judgement is applied include ore reserve and resource determinations, carrying values of exploration and evaluation assets, carrying values of mine development costs, plant and equipment operating lives, contingent liabilities, current tax provisions and future tax balances and asset retirement obligations. Actual result may differ from those estimates. (e) Foreign currency translation Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. Foreign exchange gains and losses that relate to borrowings are presented in the consolidated income statement, within finance costs. All other foreign exchange gains and losses are presented in the consolidated income statement on a net basis within other income or other expenses. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. (f) Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Bullion sales Revenue from sales of gold and silver is recognised when there has been a passing of the significant risks and rewards of ownership, which means the following: Interest The product is in a form suitable for delivery and no further processing is required by, or on behalf of the Group; The quantity and quality (grade) of the product can be determined with reasonable accuracy; The product has been despatched to the customer and is no longer under the physical control of the Group (or ownership in the product has earlier passed to the customer); The selling price can be measured reliably; It is probable that the economic benefits associated with the transaction will flow to the Group; and The costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset). (g) Income tax The income tax expense or benefit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in New Zealand. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. 9

12 1 SIGNIFICANT ACCOUNTING POLICIES (g) Income tax (continued) Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised: except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to items recognised directly in equity are recognised in the Statement of Changes in Equity and not in the Consolidated Income Statement. (h) Leases Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if tower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the income statement. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. Operating lease payments are recognised as an expense in the Consolidated Income Statement on a straight-line basis over the lease term. (i) Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets. The excess of the consideration transferred and the amount of any non-controlling interest in the acquires over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as gain on bargain purchase. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. When control of a subsidiary is acquired in stages, its carrying value prior to the acquisition of control is compared with the fair value of the identifiable net assets at that date. If fair value is greater than/less than carrying value, the gain/loss is recorded in the consolidated income statement. /jh10

13 1 SIGNIFICANT ACCOUNTING POLICIES (j) Impairment of assets Other assets are tested 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 inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. lf such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at its revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. (k) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (I) Trade and other receivables Trade receivables are initially recorded at the amount of contracted sales proceeds, and then subsequently carried at amortised cost less impairment. Receivables from related entities are initially recognised at fair value and then subsequently carried at amortised cost less impairment. Where these receivables are interest bearing, interest is recognised as income on an effective interest basis. (m) Inventories Bullion and Ore Inventories are valued at the lower of weighted average cost and net realisable value. Costs include mining and production costs as well as attributable commercial, environmental, health and safety expenses. Gold in circuit Gold in circuit is valued at the lower of weighted average cost and net realisable value. The average cash cost of production for the month is used and allocated to gold that is in the circuit at period end. These costs include mining and production costs as well as commercial, environmental, health and safety expenses, and stock movements. Stores Inventories of consumable supplies and spare parts are valued at the lower of cost and net realisable value. Cost is assigned on a weighted average basis. /)h11

14 1 SIGNIFICANT ACCOUNTING POLICIES (n) Investments and other financial assets (i) Classification The group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at the end of each reporting period. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are expected to be settled within 12 months; otherwise they are classified as non-current. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets. Loans and receivables are included in trade and other receivables and receivables in the consolidated statement of financial position. Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long-term. (ii) Reclassification The group may choose to reclassify a non-derivative trading financial asset out of the held-for-trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be reclassified out of the held-for-trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. ln addition, the group may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held-for-trading or available-for-sale categories if the group has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification. Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables and held-to-maturity categories are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates prospectively. (iii) Recognition and derecogni/ion Regular way purchases and sales of financial assets are recognised on trade-date - the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership. When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss as gains and losses from investment securities. /jh 12

15 1 SIGNIFICANT ACCOUNTING POLICIES (n) Investments and other financial assets (continued) (iv) Measurement At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost using the effective interest method. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value are recognised as follows: for 'financial assets at fair value through profit or loss' - in profit or loss within other income or other expenses for available for sale financial assets that are monetary securities denominated in a foreign currency - translation differences related to changes in the amortised cost of the security are recognised in profit or loss and other changes in the carrying amount are recognised in other comprehensive income for other monetary and non-monetary securities classified as available for sale - in other comprehensive income. Dividends on financial assets at fair value through profit or loss and available-for-sale equity instruments are recognised in profit or loss as part of revenue from continuing operations when the group's right to receive payments is established Interest income from financial assets at fair value through profit or loss is included in the net gainsl(losses). Interest on available-for-sale securities calculated using the effective interest method is recognised in the consolidated income statement as part of revenue from continuing operations. (v) Impairment The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired. Assets carried at amortised cost For loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument's fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. Impairment testing of trade receivables is described in note 20(b). Assets classified as available-for-sale If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in profit or loss. Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period. If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss. /JL13

16 1 SIGNIFICANT ACCOUNTING POLICIES (o) Derivative financial instruments and hedge accounting The Group benefits from the use of derivative financial instruments to manage commodity price and foreign currency exposures. The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments. For the purposes of hedge accounting, hedges are classified as either fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability; or cash flow hedges where they hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction. (i) Fair Value Hedges In relation to fair value hedges (interest rate swaps) which meet the conditions for special hedge accounting, any gain or loss from re-measuring the hedging instrument at fair value is recognised immediately in the Consolidated Income Statement. Any gain or loss attributable to the hedged risk on re-measurement of the hedged item is adjusted against the carrying amount of the hedged item and recognised in the Consolidated Income Statement. Where the adjustment is to the carrying amount of a hedged interest-bearing financial instrument, the adjustment is amortised to the Consolidated Income Statement such that it is fully amortised by maturity. (ii) Cash Flow Hedges In relation to cash flow hedges (forward foreign currency contracts) to hedge the foreign currency risk of firm commitments which meet the conditions for special hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity and the ineffective portion is recognised in the Consolidated Income Statement. When the hedged firm commitment results in the recognition of a non-financial asset or a non-financial liability, then, at the time the asset or liability is recognised, the associated gains or losses that had previously been recognised in equity are included in the initial measurement of the acquisition cost or other carrying amount of the asset or liability. For all other cash flow hedges, the gains or losses that are recognised in equity are transferred to the Consolidated Income Statement in the same year in which the hedged firm commitment affects the net profit and loss, for example when the future sale actually occurs. For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are included in the Consolidated Income Statement for the year. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity until the forecasted transaction occurs. If a hedged transaction is no tonger expected to occur, the net cumulative gain or loss recognised in equity is transferred to the Consolidated Income Statement for the year. (p) Gold Options The fair value of the gold put options is calculated by discounting the future value of the hedge contract at the appropriate prevailing quoted market rates at balance date. /JL 14

17 1 SIGNIFICANT ACCOUNTING POLICIES (q) Property, plant and equipment (PPE) Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment tosses. All such assets, except freehold land, are depreciated over their estimated useful lives on a straight line, reducing balance or production output basis, as considered appropriate, commencing from the time the asset is held ready for use. Depreciation rates used: Buildings Mining plant and equipment Other plant and equipment 2% - 11 % per annum straight line unit of production based on Life of Mine Produced ounces 2% - 49% per annum straight line Impairment The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Consolidated Income Statement. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount through the Consolidated Income Statement. The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit). A reversal of impairment loss is recognised in profit and loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of an impairment loss is treated as a revaluation increase. (r) Intangible assets Intangible assets relate to the Emissions Trading Scheme ("ETS") in New Zealand. These are initially recorded at cost or deemed cost and subsequently at the lower of cost and net realisable value. For allocations of emissions allowances granted by the New Zealand government, cost is deemed to be equal to the fair value at the date of allocation. (s) Exploration, Evaluation, Development and Restoration Costs Exploration and Evaluation Expenditure Exploration and evaluation expenditure is stated at cost and is accumulated in respect of each identifiable area of interest. Such costs are only carried forward as an asset to the extent that they are expected to be recouped through the successful development of the area of interest (or alternatively by its sale), or where activities in the area have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active operations are continuing. Accumulated costs in relation to an abandoned area are written off to the Consolidated Income Statement in the period in which the decision to abandon the area is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. /~ 15

18 1 SIGNIFICANT ACCOUNTING POLICIES (s) Exploration, Evaluation, Development and Restoration Costs (continued) Mining Properties in Production or Under Development Mining properties in production are accumulated and brought to account at cost less accumulated amortisation in respect of each identifiable area of interest. Amortisation of capitalised costs, including the estimated future capital costs over the life of the area of interest, is provided on the production output basis, proportional to the depletion of the mineral resource of each area of interest expected to be ultimately economically recoverable. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry foiward costs in relation to that area of interest. Should the carrying value of expenditure not yet amortised exceed its estimated recoverable amount in any year, the excess is written off to the Consolidated Income Statement. Rehabilitation, Restoration and Environmental Costs Long-term environmental obligations are based on the Group's environmental management plans, in compliance with current environmental and regulatory requirements. Full provision is made based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the balance sheet date. Increases due to additional environmental disturbances in the development or construction phase are capitalised to the appropriate cost pool, i.e. exploration or mining properties in production. Annual increases in the provision relating to the change in the net present value of the provision are accounted as an interest expense in the Consolidated Income Statement. The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. Cost estimates are not reduced by the potential proceeds from the sale of assets or from plant clean-up at closure. Impairment The carrying values of exploration, evaluation and development costs are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows, the recoverable amount ls determined for the cash-generating unit to which the asset belongs. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount through the Consolidated Income Statement. The recoverable amount of exploration, evaluation and development costs is the greater of fair value less costs to sell and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) ls increased to the revised estimate of recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit). A reversal of impairment loss is recognised in profit and loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of impairment loss is treated as a revaluation increase. (t) Deferred Stripping In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted economically. The process of removing overburden and waste materials is referred to as stripping. During the development of a mine (or pit), before production commences, stripping costs are capitalised as part of the investment in construction of the mine (or pit) and are subsequently amortised over the life of the mine (or pit) on a units of production basis. Production stripping activity is disclosed within Mining Assets in production. In order for production phase stripping costs to qualify for capitalisation as a stripping activity asset, three criteria must be met: it must be probable that economic benefit will be realised in a future accounting period as a result of improved access to the ore body created by the stripping activity; /jt};

19 1 SIGNIFICANT ACCOUNTING POLICIES (t) Deferred Stripping (continued) it must be possible to identify the "component" of the ore body for which access has been improved; and it must be possible to reliably measure the costs that relate to the stripping activity. A "component" is a specific volume of the ore body that is made more accessible by the stripping activity. It will typically be a subset of the larger orebody that is distinguished by a separate useful economic life. Such deferred costs are then charged against the income statement on a systematic units of production basis over the expected useful life of an identified component of the ore body. Changes to the life of mine plan, identified components of an ore body, stripping ratios, units of production and expected useful life are accounted for prospectively. (u) Trade and other payables These amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. (v) Borrowing costs General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. (w) Interest-bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received net of directly attributable issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any directly attributable issue costs, and any discount or premium on settlement. Borrowings are removed from the consolidated statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any noncash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. Gains and losses are recognised in the Consolidated Income Statement when the liabilities are derecognised and as well as through the amortisation process. (x) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Consolidated Income Statement net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.,,. "117 -':lh

20 1 SIGNIFICANT ACCOUNTING POLICIES (y) Employee benefits Provision is made for employee benefits accumulated as a result of employee services up to the reporting date. These employee benefits include wages and salaries, annual leave, and long service leave, and include related on-costs such as superannuation, payroll tax and workers compensation insurance. Provision for annual leave and the current portion of long service leave together with the associated employment on-costs are measured at their nominal amounts based on remuneration rates expected to be paid when the liability is settled. (z) Issued Capital Issued and paid up capital is recognised at the fair value of the consideration received by the Group and Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the proceeds received. (aa)dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. (ab)cash Flow Cash means cash balances on hand, held in bank accounts, demand deposits and other highly liquid investments with original maturities of three months or less in which the Group invests as part of its day-to-day cash management. Operating activities include cash received from all income sources of the Group and records the cash payments made for the supply of goods and services and other activities that are not mining or financing activities. Investing activities are those activities relating to the acquisition and disposal of non-current assets. Financing activities comprise the change in equity and debt capital structure of the Group and those activities relating to the cost of servicing the Group's equity capital. (ac) Changes in Accounting Policy There have been no changes in accounting policies applied during the year. Where appropriate, prior year comparatives have been restated to be in line with current year reporting.

21 2 REVENUES AND EXPENSES (a) Other revenue Interest income Rent revenue Investment Income other Total other revenue ,574 1, , ,862 3,823 (b) Cost of sales Employee benefit expenses Subcontract mining costs Mining materials and consumable costs Depreciation/amortisation (refer (f) below) Movement in mining inventory Operating leases Royalties Insurance Provision for rehabilitation and restoration 84,628 72,010 8,227 19, , , , ,041 5,780 26,934 5,192 5,688 7,791 10,065 3,089 2,997 4,294 Total cost of sales 409, ,439 (c) Other expenses Management fees paid to parent company (Gain)/ Loss on fair value of undesignated hedges (Gain)/ Loss on sale/ writedown of assets (refer (e) below) Redundancy Contract Labour Consulting Other Computer software and upgrades Share based payments Gold Handling fees Employee benefit expenses Net foreign exchange (gain) Auditors remuneration - audit fees Auditors remuneration - taxation services Auditors remuneration - crown royalty Total other expenses 7,336 5,043 13,106 (3,395) (1,210) , ,097 3,184 2,846 1,619 1,256 1, ,520 5,150 (3,799) (2,307) ,897 17,743 /ja19