Notes to the Financial Statements

Note 3: Segment revenue and expenses

Notes to the Financial Statements

Note 3: Segment revenue and expenses (continued)

Notes to the Financial Statements

Note 3: Segment revenue and expenses (continued)

(a)        Revenue from external sales for each reportable segment is derived from several customers.

(b)        This information does not represent an operating segment as defined by AASB 8 and forms part of the reconciliation of the results and positions of the operating segments to the financial statements.

Note 4: Dividend

There were no interim dividends paid or provided for Resolute Mining Limited during the half year end up to the date of this report (half year ended 30 June 2021: $nil).

Note 5: Taxes

At 30 June 2022, the Group recognised an income tax expense of $16 million (30 June 2021: $16 million). The Income tax expense comprises current income tax of $15 million and $1 million of deferred tax expense.

Note 6: Receivables

Current receivables of $37 million at 30 June 2022 (31 December 2021: $28 million) primarily relate to indirect taxes owing to the Group by the Republic of Mali and Senegal.

Note 7: Inventories

Note 8: Mine properties

At 30 June 2022, the Group's mine properties amount to $244 million (31 December 2021: $264 million). During the six-month period to 30 June 2022, further payments for development activities were made of $15 million.

Notes to the Financial Statements

Note 9: Interest bearing liabilities

On 28 March 2022, the Group extended the due date of the Revolving Credit Facility (RCF). Details of the revised repayment terms of the RCF are as follows:

•    $30.0 million in August 2022 upon receipt of the third tranche of the Bibiani sale consideration*

•    $20.0 million in January 2023

•    $20.0 million in March 2023 in line with the original RCF maturity date

•    the final $80.0 million in March 2024.

*The $30.0 million August 2022 payment is only payable if Resolute receives the third payment instalment under the sale agreement between it and Asante Gold Corporation in respect of the sale of the Bibiani Gold Mine. Should this not be received, the Group will instead be required to make three $10.0 million repayment instalments in June 2023, September 2023 and December 2023.

The interest rate under the SFA has also been amended so that reference to the Screen Rate for Facility A (currently, LIBOR) is changed to Secured Overnight Financing Rate ("SOFR").

There are no changes to the repayment schedule of the $150 million Term Loan Facility, with amortisation remaining in line with the previous biannual repayment schedule (each March and September).

In the six months to 30 June 2022, the Group made voluntary repayment of the RCF of $30 million.

Note 10: Provisions

1.  Based on the facts and circumstances at 30 June 2022 and in line with requirements of the accounting standards, the Group has provided an additional $6 million in respect of a withholding tax claim by the Senegalese tax authority. The factual basis and validity of these demands are being strongly disputed by Resolute due to fundamental misinterpretations of the application of certain tax. Resolute continues to work with its legal and tax advisors to contest the demand and will resist any efforts to enforce payment. The demand for Income Tax has been disclosed as a contingent liability.

Notes to the Financial Statements

Note 11: Contributed Equity

*The terms and conditions of the Remuneration Framework are consistent with those disclosed in the Annual Report for the year ended 31 December 2021 and the Notice of Annual General Meeting sent to shareholders on 14 April 2022.

Notes to the Financial Statements

Note 12: Gold forward contracts

As part of its risk management policy, the Group enters into gold forward contracts to manage the gold price of a proportion of anticipated sales of gold. Average Contracted Gold Sale Price per oz ($)

Gold forward contracts commitment at 30 June 2022 (not recorded as derivatives):

Note 13: Events Occurring after Balance Date

On 24 August 2022, Resolute agreed with Asante Gold Corporation (Asante) a deferred payment arrangement for the final tranche of $30 million (plus $2.7 million in respect of an environmental bond) previously due on 22 August 2022. The revised payment terms are over 90 days from the original payment date as follows:

•           payment of $10 million on or before 19 September 2022

•           payment of $10 million on or before 19 October 2022

•           payment of $12.7 million and all interest payable on or before 18 November 2022

The terms of the revised pay arrangements under the Share Sale Agreement include payment by Asante of interest on outstanding amounts at commercial rates, Upon receipt of these amounts, $30 million will be applied to the Company's Revolving Credit Facility (RCF) as a mandatory prepayment (see announcement dated 10 March 2022 for further details).

Other than as disclosed above, no matter or circumstance has occurred subsequent to half-year end 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 or economic entity in subsequent financial period.

Note 14: Asset sale receivable and Contingent consideration

At 30 June 2022, the Group's current asset sale receivable relates to the discounted amount for final $30 million from the Bibiani disposal. The Group's non-current promissory note receivable and contingent consideration amounting to $39 million and $14 million (31 December 2021: $40 million and $15 million) pertains to the proceeds from the Ravenswood disposal.

Notes to the Financial Statements

Note 15: Impairment testing

In accordance with the Group's accounting policies, each asset or cash-generating unit (CGU) is evaluated to determine whether there are any indications of impairment. If any such indications of impairment exist, a formal estimate of the recoverable amount is performed.

In assessing whether an impairment is required, the carrying value of the asset or CGU is compared with its recoverable amount. The recoverable amount is the higher of the CGU's fair value less costs of disposal (FVLCD) and value in use (VIU). Recoverable amount has been determined based on FVLCD. Given the nature of the Group's activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, the FVLCD for each CGU is estimated based on discounted future estimated cash flows (expressed in real terms) expected to be generated from the continued use of the CGUs using market-based gold price assumptions, the level of proved and probable reserves and measured, indicated and inferred mineral resources, estimated quantities of recoverable gold, production levels, operating costs and capital requirements, including any expansion projects, and its eventual disposal, based on the CGU latest life of mine (LOM) plans. These cash flows are discounted using a real post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU. When LOM plans do not fully utilise existing mineral properties for a CGU, and options exist for the future extraction and processing of all or part of those resources, an estimate of the value of mineral properties is included in the determination of fair value.

The determination of FVLCD for each CGU are considered to be Level 3 fair value measurements, as they are derived from valuation techniques that include inputs that are not based on observable market data. The Group considers the inputs and the valuation approach to be consistent with the approach taken by market participants.

Impairment indicator assessment

At 30 June 2022, Resolute's quoted market capitalisation was lower than its net asset carrying value. This represents an indicators of impairment. As a result, an impairment test was performed to determine the recoverable amounts for all CGU's of the Group, being the Syama Gold Mine and the Mako Gold Mine using the FVLCD method.

Syama CGU

Syama indicator assessment

Whilst Syama's H1 2022 forecast production and cost remain in line with budget, as a result of the general indicator of impairment noted above, a formal impairment test was performed to determine the recoverable amount for the Syama CGU.

Key Assumptions used to determine recoverable amount

The table below summarises the key assumptions used in the carrying value assessment:

Notes to the Financial Statements

Note 15: Impairment testing (continued)

Gold prices

Gold prices are estimated with reference to external market forecasts based on a consensus view of market experts.

Unmined resources

Unmined resources which are not included in the life‐of‐mine plan as result of the current assessment of economic returns, timing of specific production alternatives and the prevailing economic environment have been valued and included in the assessed fair value.

Operating costs

Life‐of‐mine operating cost assumptions are based on the Group's latest budget and life‐of mine plans. Operating cost assumptions reflect an assumption of maintaining current cost, over the long term, without including expected improvements over the life of mine.

Recognition

As a result of the analysis performed, there is no impairment loss recognised for Syama CGU for H1 2022.

Syama Sensitivity Analysis

It was estimated that reasonable possible changes in key assumptions, in isolation, would have had the following approximate impact on the (impairment loss) or reversal of impairment recognised for the Syama CGU as at 30 June 2022.

Notes to the Financial Statements

Note 15: Impairment testing (continued)

Mako CGU

Mako indicator assessment

Whilst Mako's 2022 forecast production and cost remain in line with budget, as a result of the general indicator of impairment noted above, a formal impairment test was performed to determine the recoverable amount for the Mako CGU.

Key Assumptions

The table below summarises the key assumptions used in the carrying value assessment:

Gold prices

Gold prices are estimated with reference to external market forecasts based on a consensus view of market experts.

Discount rate

In determining the recoverable amount of assets, the future cash flows were discounted using rates based on the CGU's estimated real weighted average cost of capital, with an additional premium applied having regard to the CGU's risk profile.

Operating costs

Life‐of‐mine operating cost assumptions are based on the Group's latest budget and life‐of mine plans. Operating cost assumptions reflect an assumption of maintaining current cost, over the long term, without including expected improvements over the life of mine.

Recognition

As a result of the analysis performed, there is no impairment loss recognised for Mako CGU for H1 2022.

Mako Sensitivity Analysis

It was estimated that reasonable possible changes in key assumptions, in isolation, would have had the following approximate impact on the (impairment loss) or reversal of impairment recognised for the Mako CGU as at 30 June 2022.

Directors' Declaration

In the opinion of the directors:

a)   the financial statements and notes are in accordance with the Corporations Act 2001, including:

(i)   complying with Accounting Standard AASB 134 Interim Financial Reporting, the Corporations Regulations 2001; and

(ii)   giving a true and fair view of the Group's financial position as at 30 June 2022 and of its performance, as required by Accounting Standards, for the half year ended on that date.

b)   there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.

This declaration has been made in accordance with a resolution of the directors.

Signed version available at Resolute website: www.rml.com.au 

Terence Holohan

Managing Director & CEO

Perth, Western Australia

25 August 2022