70 2022 ANNUAL REPORT Notes to the CONSOLIDATED FINANCIAL STATEMENTS for the year ended 30 June 2022 (cont.) 23 DISCONTINUED OPERATION Sale of Siana Gold Mine (Philippines) During FY21, the Group had been in negotiations with interested parties to divest its interests in Philippine-affiliated company Greenstone Resources Corporation (GRC), which holds both the Siana Gold Project (Siana) and the Mapawa Gold Project. The divestment of its interests in Siana is consistent with Red 5’s strategy to focus on its King of the Hills and Darlot gold mines in Western Australia, with the aim of becoming a substantial mid-tier Australian gold producer. In July 2021, a binding agreement with TVI Resource Development (Phils.) Inc. (TVIRD) was entered into for the sale of GRC. TVIRD is the Philippine affiliate of the Canadian-listed TVI Pacific Inc. The divestment included the process plant and all other infrastructure at Siana. Upon completion of all closing conditions of the agreement, which included certain Philippine regulatory approvals which were satisfied during the September 2021 quarter, the Group received gross proceeds of US$19 million (approximately A$25.3 million) through the repayment of outstanding shareholder advances due from its Philippine-affiliated company, Red 5 Asia Inc, which was a shareholder of GRC. In addition, a royalty of 3.25% payable for up to 619,000 ounces of gold will be payable to the Group from first gold from the restart of the Siana processing plant, which is expected in the first half of 2023. (a) Results of discontinued operation CONSOLIDATED 30 June 2022 30 June 2021 $’000 $’000 Disposal consideration net of costs to sell 22,076 - Net assets disposed of (22,580) - Non-controlling interest (3,976) - Foreign currency translation reserve 25,704 - Gain on sale of discontinued operation (i) 21,224 - Care and maintenance costs (1,175) (7,199) Impairment of discontinued operation (ii) - (26,568) Profit/(loss) from discontinued operation 20,049 (33,767) (i) The gain on sale of discontinued operation is mainly derived from the release of the foreign currency translation reserve associated with the disposal of the discontinued operation’s net assets. There were no tax consequences on the sale consideration due to available tax losses in the Philippines. (ii) Due to uncertainty of receipt of the 3.25% royalties on the ounces of gold to be produced by GRC in the future, an impairment loss to the write down of the assets and liabilities of the discontinued operation to the lower of its carrying amount and fair value was incurred and accounted for in the June 2021 annual report.
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