Half Year Report 2019

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# Half Year Report 2019

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# Half Year Report 2019
ABN 72 009 795 046
Half-Year Report
31 December 2019
HALF-YEAR REPORT
31 DECEMBER 2019
Contents
Corporate Directory 3
Auditor’s Independence Declaration 4
Directors’ Report 5
Half-Year Financial Statements 17
Directors’ Declaration 27
Independent Auditor’s Review Report 28
Emerald Resources NL | 2
CORPORATE DIRECTORY
Non-Executive Chairman
Simon Lee AO
Managing Director
Morgan Hart
Executive Director
Michael Evans
Non-Executive Directors
Ross Stanley
Ross Williams
Company Secretary
Mark Clements
Principal & Registered Office
1110 Hay Street
West Perth WA 6005
Telephone: +61 8 9286 6300
Facsimile: +61 8 6243 0032
Share Registry
Automic Group
Level 2, 267 St Georges Terrace
PERTH WA 6000
Telephone: 1300 288 664
Auditors
HLB Mann Judd
Level 4, 130 Stirling Street
PERTH WA 6000
Bankers
National Australia Bank
50 St Georges Terrace
PERTH WA 6000
Solicitors
Steinepreis Paganin
16 Milligan Street
PERTH WA 6000
Securities Exchange Listing
Australian Securities Exchange
(Home Exchange: Perth, Western Australia)
Code: EMR
Website Address
www.emeraldresources.com.au
Emerald Resources NL | 3
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the review of the consolidated financial report of Emerald Resources NL for the half-
year ended 31 December 2019, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
a) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
b) any applicable code of professional conduct in relation to the review.
Perth, Western Australia L Di Giallonardo
12 March 2020 Partner
Emerald Resources NL | 4
DIRECTORS’ REPORT
Your directors present their report on the consolidated entity (or “Group”) consisting of Emerald Resources NL (‘Emerald’
or the ‘Company’) and the entities it controlled at the end of, or during, the half-year ended 31 December 2019.
Directors
The following persons were directors of Emerald during the half-year and up to the date of this report:
Simon Lee AO Non-Executive Chairman
Morgan Hart Managing Director
Michael Evans Executive Director
Ross Stanley Non-Executive Director
Ross Williams Non-Executive Director
Review of Operations
Cambodian Gold Project
Background
Emerald’s main focus is the exploration and development of its Cambodian Gold Projects which comprise of a
combination of 100% owned granted licences, applications and earn-in & joint venture agreements covering a
combined area of 1,442 km². The 100% owned Okvau Gold Project (‘Okvau Gold Project’) is the Company’s most
advanced project which is located approximately 275 kilometres north-east of Cambodia’s capital city of Phnom Penh in
the province of Mondulkiri (refer Figures 1 and 2). The town of Kratie is located on the Mekong River approximately 90
kilometres to the west and the capital of Mondulkiri, Saen Monourom is located approximately 60 kilometres to the
south-east. In May 2017, Emerald completed a Definitive Feasibility Study (‘DFS’) on the development of the Okvau Gold
Project which demonstrated a robust project producing approximately 106,000 ounces of gold per annum on average
over 7 years from a single open pit.
In July 2018 the Company was granted the Industrial Mining Licence covering 11.5km² which allows for the development
of the Okvau Gold Project (‘Mining Licence’). The Mining Licence has an initial 15-year period with the right to two
renewals of up to 10-years for each renewal in accordance with Cambodian laws. The grant of the Mining Licence
followed approval of the Okvau Gold Project by the Office of Council Ministers for both the rezoning of the project area
to ‘Sustainable Use’ within the Phnom Prich Wildlife Sanctuary (‘PPWS’) and the granting of the Mining Licence. The
rezoning of the Mining Licence area to ‘Sustainable Use’ lawfully permits commercial development under Cambodian
law and follows the successful negotiation and approval by the Minister of Environment (‘MoE’) of the environmental
contract (the ‘Environmental Contract’) and environmental licence (‘Environmental Licence’) in December 2017.
The Company has successfully completed the resettlement of 62 local families and site works to remove abandoned
structures away from the Okvau Mining Licence area. Emerald has completed the installation of a security fence around
the Project Development Area (“PDA”) to ensure the safety of personnel, visitors and wildlife. Construction of a 35 tonne
bridge across the Prek Te River has now been completed with substantial completion of upgrades to the existing 50km
of dirt roads and current finalisation of the construction of 14km of new road to site which will allow for all year
continuous access to the Okvau site.
Topography of the tenure area is relatively flat with low relief of 80 metres to 200 metres above sea level. The Okvau
Deposit and other gold occurrences within the tenure are directly associated with diorite and granodiorite intrusions and
are best classed as Intrusive Related Gold mineralisation. Exploration to date has demonstrated the potential for large
scale gold deposits with the geology and geochemistry analogous to other world class Intrusive Related Gold districts, in
particular the Tintina Gold Belt in Alaska (Donlin Creek 38Moz, Pogo 6Moz, Fort Knox 10Moz, Livengood 20Moz).
In December 2019 the Mineral Investment Agreement (‘MIA’) was signed which provides certainty and stability of the
fiscal regime for the development and operations of the Okvau Gold Project. Following confirmation of the key fiscal
incentives of the MIA, the key assumptions and inputs of the DFS were reviewed resulting in a significant improvement
in the NPV and IRR of the Project.
Emerald Resources NL | 5
DIRECTORS’ REPORT
Review of Operations (continued)
Table 1 | Okvau Mineral Resource Estimate
Okvau June 2019 Mineral Resource Estimate
Indicated Resources Inferred Resources Total Resources
Cut-off Tonnage Grade Contained Tonnage Grade Contained Tonnage Grade Contained
(Au g/t) (Mt) (g/t Au) Au (Koz) (Mt) (g/t Au) Au (Koz) (Mt) (g/t Au) Au (Koz)
0.70 15.11 2.08 1,008 2.57 1.61 133 17.68 2.01 1,141
The Project has a JORC Ore Reserve (Probable) estimate of 14.26Mt @ 1.98g/t Au for 907,000 oz gold (refer Table 2).
Figure 1 | Cambodian Gold Project | Location Okvau Gold Project | Definitive Feasibility Study
Following the approval of the MIA by the Cambodian
Council of Ministers and subsequent execution by the
Minister of Mines & Energy and the Minister of
Economy & Finance, Emerald reviewed key
assumptions and inputs of its DFS and the financial
incentives of the MIA. Based on the prevailing gold
price of US$1,450/oz, and updating the key
assumptions and inputs, the NPV (5%) of the Okvau
Gold Project significantly improved to US$337M
(A$488M) pre-tax and US$238M (A$345M) post-tax
with an outstanding Internal Rate of Return (IRR) of
69% pa pre-tax and 57% post-tax. The payback of
the total capital funding requirement is now expected
to be 17 months pre-tax and 20 months post-tax,
from first gold pour.
The significant improvement in the NPV and IRR is
the result of an ongoing effort by Emerald to critically
examine and pursue improvements in all aspects of
the 1.14Moz at 2.0g/t Au Okvau Gold Project
economics. The comparison to the NPV announced as
part of the DFS is outlined at Table 3. Of note, the
uplift is primarily based upon a gold price of
US$1,450/oz and concessions negotiated within the
Figure 2 | Cambodian Gold Project | Exploration Licence Areas
MIA.
An initial DFS was completed in May 2017 which was
subsequently updated in November 2019 for the
development of a 2.0Mtpa operation at the Okvau
Gold Project and was completed to +/-15% level of
accuracy (refer Table 3). The completion of the DFS
fulfilled a milestone set by Emerald since becoming
involved in the project in March 2016. The DFS
confirms an initial operating LOM of over 7 years,
producing approximately 106,000 ounces of gold per
annum on average, with ore processed through a
plant utilising a single stage crushing circuit and SAG
mill, sulphide flotation, regrind mill followed by
conventional cyanide leaching.
The estimated operating costs highlight a financially
robust project with an average LOM AISC of
US$754/oz. The estimated development costs are
US$91M with a further US$7M in mining contractor
establishment costs and pre-production mining costs.
The development costs include a US$4.4M allowance
for spare parts and first fills.
An updated independent JORC Indicated and Inferred
Mineral Resource estimate for the Okvau Deposit of
17.7Mt grading 2.01g/t gold containing 1.141Moz (at
0.70g/t gold cut-off) was updated by independent
resource consultant EGRM Consulting Pty Ltd as part
of the DFS (refer Table 1).
Emerald Resources NL | 6
DIRECTORS’ REPORT
Review of Operations (continued)
Table 2| Okvau Ore Reserve Estimate
Okvau June 2019 Ore Reserve Estimate
Tonnage Grade Contained
(Mt) (g/t Au) Au (Koz)
Probable Ore Reserve 14.26 1.98 907
Key operating and financial outcomes of the DFS were revised and announced to market on 26 November 2019,
prepared in accordance with the requirements of the JORC Code (2012 Edition), are presented in Table 3.
Table 3| Revised DFS Economics1
Ore Reserve 14.3Mt @ 2.0g/t gold for 907koz contained
LOM Strip Ratio (waste t : ore t) 5.8:1
Throughput 2.0Mtpa
Life of Mine 7.2 years
Processing Recovery 84%
Recovered Ounces 762koz
Average Annual Production 106koz
Pre-production Capital Costs2 US$98M
Sustaining Capital Costs3 US$23M
Gold Price US$1,250/oz US$1,450/oz US$1,600/oz
Gross Revenue US$952M US$1,104M US$1,219M
LOM Net Revenue (net of royalties4 and refining) US$906M US$1,051M US$1,160M
Operating Cash Flow pre-tax US$408M US$554M US$663M
Project Cash Flow pre-tax US$290M US$435M US$544M
NPV(5%) pre-tax US$217M US$337M US$426M
NPV(5%) post-tax5 US$155M US$238M US$296M
Payback pre-tax 2.2 years 1.4 years 1.2 years
Payback post-tax 2.4 years 1.7 years 1.3 years
IRR pre-tax 48% 69% pa 85%
IRR post-tax5 40% 57% pa 70%
LOM C1 Cash Costs6 US$658/oz US$658/oz US$658/oz
LOM All-In Sustaining Costs (‘AISC’)7 US$745/oz US$754/oz US$761/oz
1 All economics are 100% attributable to Emerald.
2 Includes US$4.4m of capital spares and first fills and US$7.0m of mining capital and pre-production mining costs
3 Includes US$14.4m of rehabilitation and closure costs.
4 Royalties include Government royalty of 3.0% gross and a third-party royalty of 1.5% gross (capped to A$22.5m).
5 Taxation is based on the Mineral Investment Agreement and includes tax incentives for the first 5 years.
6 C1 Cash Costs include site-based mining, processing and admin operating costs plus transport and refining costs.
7 Includes C1 Cash Costs plus royalties, sustaining capital, contributions to environmental & community funds and rehabilitation & closure costs.
Reference is made to the Company’s ASX release dated 1 May 2017 titled Okvau DFS Delivers Ore Reserve of 907,000oz and ASX announcement
dated 26 November 2019. All material assumptions underpinning the production target or the forecast financial information continue to apply and
have not materially changed.
Okvau Gold Project | Project Implementation
During the current half-year period, Emerald announced that it had achieved a significant milestone with the approval of
the Mineral Investment Agreement. Following the approval of the agreement, the focus has been to finalise the
financing for the development of the project while continuing to advance various aspects of early works and awarding
contracts to order long lead items.
Emerald will manage the construction and development of the Okvau Gold Project with its own internal construction
team. Key senior members of th

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