24 2022 ANNUAL REPORT DIRECTORS’ Report (cont.) 3. RESULTS OF OPERATIONS (cont.) 3.1 OPERATING REVIEW (cont.) (c) Gold operations A total of 66,871 ounces of gold was recovered for the 12 months to 30 June 2022, with ore predominantly sourced from the Darlot and Great Western gold mines. Darlot achieved its production guidance for FY22. A summary of key production statistics for the year ended 30 June 2022 and 30 June 2021 is provided below: Year ended Units 30 June 2022 30 June 2021 Mined tonnes t 2,660,914 931,002 Mined grade g/t 1.15 2.57 Tonnes milled t 1,359,974 984,220 Average head grade g/t 1.66 2.63 Recovery % 92.1 91.5 Gold recovered oz 66,871 76,104 Gold operational sales oz 64,315 75,907 In July 2022, the Darlot Gold Mine has transitioned to a satellite underground mine to King of the Hills, with the majority of surface employees at Darlot transitioning or having already transitioned to King of the Hills. As a result, the Darlot process plant has been placed into care and maintenance. Following a review of the related assets at Darlot, one-off accelerated depreciation and inventory write-downs totalling $22.585 million have been applied in FY22. (d) Siana Gold Project, Philippines In July 2021, the Group entered into a binding agreement with TVI Resource Development (Phils) Inc to divest its interests in Philippine-affiliated company, Greenstone Resources Corporation (GRC), which holds the Siana Gold Project and the Mapawa Gold Project in the Philippines. Financial close on this transaction was achieved in September 2021. These transactions have been classified as discontinued for the purpose of the financial statements. Consideration under the transaction was as follows: \ \ US$19 million cash (approximately A$25.3 million) paid upon completion; and \ \ Net Smelter Return royalty of 3.25% payable for up to 619,000 ounces of gold, with an estimated future face value of US$36 million (based on a US$1,800/oz gold price). As per the accounting standards, the royalty represents a variable consideration and is treated as a contingent asset pending re-commencement of production at Siana, hence royalty accounting value is not recorded as at 30 June 2022. The completion of the divestment in the Siana Gold Mine resulted in a gain from discontinued operations of $20.049 million in FY22. (e) Exploration and Resource Development During FY2022, results were reported for drilling completed at the Darlot Underground Mine, delivering high-grade results from multiple locations. The drilling forms part of an ongoing exploration and Resource development program at Darlot focused on extending new mining areas such as Middle Walters South and reducing the dependency on remnant mining. Results reported included strong intercepts from Middle Waters South and positive results from Dar-Cent, Oval 1300 and Pedersen Lower, all of which offer the opportunity for Resource growth. Full details of the drilling and assay results were provided in the Company’s ASX Announcement dated 22 February 2022. Darlot also commenced drilling as part of the government-funded Exploration Incentive Scheme (EIS) hole (CAX0075) which commenced in the June Quarter. The hole is designed primarily to target the Pipeline Fault to the south of the underground workings proximal to an interpreted jog or zone of flattening. This change in geometry could generate a favourable dilation and mineralisation site. The hole also intersects the Lords Fault enroute to target, with the nearest existing drill hole approximately 350 metres north of the target area. For regional exploration, the Exploration team focused on several geochemical surveys utilising a Portable X-ray analysis tool across the exploration tenements. Upon completion of this work, the team used the results to refine existing programs and identified additional grass root targets. (f) Corporate During the year, the Group drew down all of the $175 million debt funding package supporting the construction and development of King of the Hills. Repayments of the debt funding package will commence in December 2022 over four years. Borrowing establishment costs of $2.730 million were capitalised to the loan. Ms Fiona Harris AM was appointed as a Non-Executive Director of the Board, effective from 8 June 2022. Red 5 has appointed Mr Patrick Duffy as Chief Financial Officer of the Company, effective from 1 September 2022. Mr Duffy is currently Red 5’s Chief Corporate Development Officer, and this role will be consolidated with the CFO position. 3.2 FINANCIAL REVIEW (a) Gold sales Gold and silver sales for the reporting period totalled $164,962,000 with 64,315 gold ounces sold at an average price of $2,526 per ounce (2021: $173,358,000 with 75,907 gold ounces sold at an average price of $2,252 per ounce).
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