23 2022 ANNUAL REPORT DIRECTORS’ Report (cont.) 3. RESULTS OF OPERATIONS The consolidated result for Red 5 Limited was a net loss after income tax for the year ended 30 June 2022 of $28,615,000 (2021: Loss of $43,245,000). The consolidated result incorporates two one-off adjustments: 1. With the Darlot underground transitioning to a satellite mine providing ore to King of the Hills, accelerated depreciation and impairments for the Darlot Process Plant (now in care and maintenance) totalled $22.585 million. 2. Completing the Siana Gold Mine divestment resulted in a gain from discontinued operations of $20.049 million. The current year results include an unaudited underlying EBITDA (a) loss of $4,258,000 (2021: Profit of $11,635,000). 30 June 2022 30 June 2021 $’000 $’000 Sales revenue 164,962 173,358 Cost of sales (excluding depreciation) (153,934) (147,848) Other income 208 692 Administration and other expenses (excluding depreciation) (12,972) (9,281) Care and maintenance (excluding depreciation) - (2,069) Exploration expenditure (2,522) (3,217) Underlying EBITDA (4,258) 11,635 (a) Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) is an unaudited non - IFRS measure and is a common measure used to assess profitability before the impact of different financing methods, income taxes, depreciation of property, plant and equipment and amortisation of intangible assets, fair value movements and ineffective cashflow hedges. The underlying EBITDA reconciles to the profit/(loss) before tax as follows: 30 June 2022 30 June 2021 $’000 $’000 Underlying EBITDA (4,258) 11,635 Financing income 8 347 Financing expenses (2,815) (1,345) Ineffective portion of cashflow hedges - (1,410) Depreciation and amortisation (42,514) (23,493) (Loss)/profit from continuing operations before income tax expense (49,579) (14,266) 3.1 OPERATING REVIEW Red 5, with the support of its EPC partner MACA Interquip, completed construction of Red 5’s new King of the Hills Gold Mine (KOTH) within budget and on schedule, with the first gold pour on 5 June 2022. Meanwhile, Red 5 delivered steady-state gold production from its Darlot Gold Mine, with ore sourced from the Darlot underground mine and Great Western satellite open pit mine. In July 2022, the Darlot process plant was placed into care and maintenance, with the Darlot underground mine transitioning to a satellite mine to King of the Hills. (a) Covid-19 response Red 5 continues to manage and mitigate the potential impact of the COVID-19 global pandemic on the Company’s operations. The Management Response Plan remains focused on ensuring the health and safety of Red 5 personnel and limiting the disruption risk to our operations. This plan has been progressively developed in line with the formal guidance of State and Federal health authorities, in close coordination with the Australian Resources and Energy Group (AMMA) and under the Company’s existing Emergency Management Policies. The Company continues to closely monitor the advice and requirements from State and Federal Governments and health authorities and maintain its focus on minimising the effects of COVID-19 on the health and well-being of staff and the communities in which we operate. (b) Construction of the King of the Hills (KOTH) project FY22 marked a defining period in Red 5’s growth pathway to becoming a mid-tier Australian gold producer with the construction of the KOTH project. First gold at KOTH was achieved on 5 June 2022, with construction completed on time and on budget. This was achieved despite a very challenging operating environment due to COVID-19, closed borders and disruptions to both global supply chains and local labour markets. The new 4.7Mtpa process plant is now commissioned and ramping up towards full production. The SAG mill is currently operating at moderate load and power draw, which is indicative of the potential of this low-cost processing hub. The open pit and underground mines are both operational and are delivering ore to the process plant. Deliveries of ore from the Darlot satellite underground mine began in August 2022, and the processing plant is ramping up towards the target throughput of 4.7Mtpa. There is a significant amount of ore on the KOTH ROM pad, representing approximately three months of production.
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