PRINCIPAL ACCOUNTING POLICIES

1          Corporate information

The consolidated financial statements of Greatland Gold plc and its subsidiaries (collectively, the Group) for the year ended 30 June 2024 were authorised for issue in accordance with a resolution of the Directors on 18 November 2024.

Greatland Gold plc is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on LSE AIM (AIM:GGP).

2          Basis of preparation

The consolidated financial statements of Greatland Gold plc (Greatland or the Group) have been prepared in accordance with UK-adopted international accounting standards and in accordance with the requirements of the Companies Act 2006.

The financial statements have been prepared on the historical cost basis, except for certain financial instruments and cash-settled share-based payments which have been measured at fair value.

Going Concern

Greatland's principal activities include the development of Havieron. At 30 June 2024 the Group had net current assets of £1.8 million (2023: £35.4 million), with cash of £4.8 million (2023: £31.1 million) and advanced Havieron joint venture cash contributions of £1.5 million (2023: £12.6 million). 

After the conclusion of the financial year, on 10 September 2024 Greatland announced the Havieron-Telfer Acquisition and an associated fully underwritten institutional placing to raise US$325 million (£248.6 million) and retail offer to raise US$8.8 million (£6.7 million).  On 30 September 2024, a general meeting of shareholders approved the Havieron-Telfer Acquisition and the issue of shares under the Institutional Placing, the Retail Offer, and to a subsidiary of Newmont Corporation pursuant to the Havieron-Telfer Acquisition.  Greatland has a cash position of £245.5 million at 31 October 2024.

As part of the Havieron-Telfer Acquisition on 10 September 2024 Greatland Pty Ltd signed a non-legally binding Letter of Support from its banking syndicate comprising of the Australian and New Zealand Banking Group Limited, HSBC Bank and ING Bank (Australia) (together, the Banking Syndicate).  The Letter of Support provides that the Banking Syndicate are fully supportive and interested in the provision of a A$775 million (£406 million) facility which includes a working capital facility of A$100 million (£52 million), for the funding of Havieron.  In addition, a commitment letter from the Banking Syndicate was signed on 10 September 2024 for a facility of A$100 million (£52 million) including a working capital facility of A$75 million (£39 million).

In addition, Greatland had in place a A$50 million (£26.0 million) standby loan facility with Wyloo undrawn at year end. Post year end A$7 million (£3.6 million) was drawn down and then subsequently repaid from the proceeds of the equity placing noted above, and the facility terminated.

Management has prepared cash flow forecasts for the next twelve months under various scenarios. These scenarios anticipate the Group will be able to meet its commitments and pay its debts as and when they fall due.

If required, the Group has a number of options available to manage liquidity including:

§  significantly reduce expenditure on its own exploration programmes;

§  significantly reduce corporate costs;

§  raising additional funding through debt and equity, or a combination of both, which the Company considers it has the ability to do so, should it be required and has demonstrated an ability to do so in the past.

Should the directors not achieve the matters set out above, there is significant uncertainty whether the Company will continue as a going concern and therefore whether they will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

Greatland has considered sensitivities which include increases to the Havieron development costs. In this situation, the Company can mitigate expenditure including ceasing exploration activities and reducing corporate costs. Having prepared forecasts based on current resources and assessing methods of obtaining additional finance, the Directors believe the Group has sufficient resources to meet its obligations for a period of twelve months from the date of approval of these financial statements. Taking these matters into consideration, the Directors continue to adopt the going concern basis of accounting in the preparation of the financial statements.

Rounding

The amounts presented in this financial report have been rounded to the nearest £1,000 where noted (£'000) under the option available to the Company under the Companies Act 2006.

Significant accounting judgements, estimates and assumptions

The preparation of financial statements requires management to use estimates, judgements and assumptions. Application of different assumptions and estimates may have a significant impact on Greatland's net assets and financial results. Estimates and assumptions are reviewed on an ongoing basis and are based on the latest available information at each reporting date.  

This note provides an overview of the areas that involved a higher degree of judgement and complexity, or areas where assumptions are significant to the financial statements. Detailed information about each of these estimates and judgements is included in other notes together with information about the basis of calculation for each affected line item in the financial statements.

Basis of consolidation 

The consolidated financial statements comprise of the financial statements of Greatland Gold plc and its subsidiaries it controls (as outlined in note 21). Accounting for interests in joint arrangements is included in note 22. 

Subsidiaries are those entities controlled directly or indirectly by the Company. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The results of the subsidiaries are included in the Consolidated Statement of Comprehensive Income from the date of acquisition using the same accounting policies as those of the Group.

The consideration transferred in a business combination is the fair value at the acquisition date of the assets transferred and the liabilities incurred by the Group and includes the fair value of any contingent consideration arrangement. Acquisition-related costs are recognised in the income statement as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date.

All intra-group balances and transactions, including any unrealised income and expenses arising from intragroup transactions, are eliminated in full in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Foreign currencies

Both the functional and presentational currency of Greatland Gold plc is sterling (£). Each entity in the Group determines its own functional currency, the primary economic environment in which the entity operates, and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are recorded at the spot rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. All differences are taken to the Statement of Comprehensive Income.

On consolidation of a foreign operation, assets and liabilities are translated at the balance sheet rate, income and expenses are translated at average foreign currency rates prevailing for the relevant period. Gains/losses arising on translation of foreign controlled entities into pounds sterling are taken to the foreign currency translation reserve.

Other accounting policies

Significant and other accounting policies that summarise the measurement basis used and are relevant in understanding the financial statements are provided throughout the notes to the financial statements.

2          Basis of preparation (continued)

New standards, amendments and interpretations adopted by the Group

The group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 July 2023:

§  Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current

§  Amendments to IAS 1: Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies

§  Amendments to IAS 8: Accounting policies, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates

§  Amendments to IAS 12: Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction - effective 1 January 2023

The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

New and amended Standards and Interpretations issued but not effective

At the date of approval of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not been adopted by the UK):

§ IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information - effective 1 January 2024

§ IFRS S2: Climate-related Disclosures - effective 1 January 2024

§ Amendments to IAS 1: Classification of Liabilities as Current or Non-Current - effective 1 January 2024

§ Amendments to IFRS 16: Lease Liability in a Sale and Leaseback - effective 1 January 2024

§ Amendments to IAS 1: Non-current Liabilities with Covenants - effective 1 January 2024

§ Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements - effective 1 January 2024

The new and amended Standards and Interpretations which are in issue but not yet mandatorily effective are not expected to be material.

FINANCIAL PERFORMANCE

3          Segmental information

Operating segments are reported in a manner that is consistent with the internal reporting to the Board and the executive management team (the chief operating decision makers). Greatland operates one segment being Exploration and Evaluation of Minerals and Mine Development in Australia.

4          Employee information

For further details on Director's remuneration refer to Remuneration Report.

4          Employee information (continued)

Recognition and measurement

Employee benefits

Wages, salaries and defined contribution superannuation expenses are recognised as and when employees render their services. Expenses for non-accumulating personal leave are recognised when the leave is taken and measured at the rates paid or payable.

Share-based payments

The accounting policy, key estimates and judgements relating to employee share-based payments are set out in note 24.

5          Administrative Expenses

Recognition and measurement

Administrative expenses are recognised on an accrual basis.

6          Finance income and finance costs

Recognition and measurement

Interest income is recognised as interest accrues using the effective interest method.

Provisions and other payables are discounted to their present value when the effect of the time value of money is significant. The impact of the unwinding of these discounts is reported in finance costs.

Borrowing costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.

All other borrowing costs are recognised in income in the period in which they are incurred.

7          Taxation 

There was no deferred or current tax during the year or in prior year.

Factors affecting tax charge for the year

The tax assessed on the loss on ordinary activities for the period differs from the standard rate of corporation tax in the UK of 19% (2023: 19%) and Australia of 30% (2023: 30%). The differences are explained below:

Tax losses

The Group has unrecognised carried forward losses for which no deferred tax asset is recognised as the statutory requirements for recognising those deferred tax assets have not yet been met. The Group recognises the benefit of tax losses only to the extent of anticipated future taxable income or gains in relevant jurisdictions. These losses do not expire. Unrecognised UK revenue losses for which no deferred tax asset has been recognised are £14.8 million (2023: £11.3 million). Unrecognised Australian revenue losses for which no deferred tax asset has been recognised are approximately £69.9 million (A$134.2 million) (2023: £46.4 million).

Recognition and measurement

Current tax assets and liabilities for the period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the reporting date in the countries where the Group operates.

Full provision is made for deferred taxation resulting from timing differences which have arisen but not reversed at the reporting date.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

The Group offsets deferred tax assets and deferred tax liabilities if, and only if, it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Deferred tax assets on carried forward losses are only recorded where it is expected that future trading profits will be generated in which this asset can be offset. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Tax consolidation

Greatland Holdings Group Pty Ltd, a 100% owned subsidiary of Greatland Gold plc, and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 14 February 2023. Greatland Holdings Group Pty Ltd is the head entity of the tax consolidated group. Members of the tax consolidated group have entered into a tax funding agreement under which the wholly-owned entities fully compensate Greatland Holdings Group Pty Ltd for any current tax payable assumed and are compensated by Greatland Holdings Group Pty Ltd for any current tax receivable and deferred tax assets related to unused tax losses or unused tax credits that are transferred to Greatland Holdings Group Pty Ltd under the tax consolidation.

8          Earnings per Share

The weighted average number of the Group's shares including outstanding options is 5,164,700,562 (2023: 4,921,573,345). Dilutive earnings per share are not included on the basis inclusion of potential ordinary shares would result in a decrease in basic earnings per share and is considered anti-dilutive.

Recognition and measurement

Basic earnings per share

Basic earnings per share is calculated by dividing:

§ the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares; and

§ by the weighted average number of ordinary shares outstanding during the financial year, adjusted for any bonus elements in the ordinary shares issued during the year and excluding treasury shares.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to consider:

§ the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and  

§ the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.  

CAPITAL MANAGEMENT

9          Cash and cash equivalents

Recognition and measurement

Cash and cash equivalents in the consolidated statement of financial position and consolidated statement of cash flows comprise cash at bank and short-term deposits that are readily convertible to known amounts of cash with insignificant risk of change in value. Short-term deposits are usually between one to three months depending on the short-term cash flow requirements of the Group. The Group holds short-term deposits with financial institutions that have a long term credit rating of AA- or above.

10         Advanced joint venture cash contributions 

Recognition and measurement

Joint venture cash calls are paid in advance of expenditure being incurred. Once the funds have been incurred, they are transferred out of current assets and into the relevant asset or expenditure depending on the nature of the transaction. 

11         Trade and other receivables

Recognition and measurement

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for the expected future issue of credit notes and for non-recoverability due to credit risk. The Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure expected credit losses, trade receivables and contract assets have been grouped based on shared risk characteristics. No such credit loss has been recorded in these financial statements as any effect would be immaterial.

12         Trade and other payables

¹Accruals are primarily related to accrued interest on the Newcrest Operations Limited loan balance of £1.4 million (2023:£1.4 million), accrued capital expenditure related to the Havieron Joint Venture £1.4 million (2023:£4.2 million) and accrued operating expenditure £1.6 million (2023:£1.2 million).

Recognition and measurement

Trade and other payables

Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition. 

Employee benefits  

Short term employee benefits are liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current other payables and accruals in the statement of financial position.

13         Borrowings  

The borrowings presented above relate to a loan agreement with Newcrest Operations Limited, a wholly owned subsidiary of Newmont Corporation, dated 29 November 2020 in respect of Havieron. As at 30 June 2024, the loan was fully drawn down. The key terms of the facility with Newcrest include:

§  The loan is made up of Facility A and Facility B with values of US$20 million and US$30 million respectively, in addition to capitalised interest;

§  Interest is calculated on the LIBOR rate plus a margin of 8% annually and is calculated every 90 days. Following the removal of LIBOR this was subsequently updated to SOFR plus a margin of 8.26161%;

§  The facility is secured against Greatland's share of the Havieron asset;

§  Repayment of the loan is from 80% of net proceeds from the sale of Havieron products and must be repaid by the earlier of 10 years from the date of the Feasibility Study or 12 years from the date of the Newcrest Loan Agreement;

§  There are no financial covenants.

Unrealised foreign exchange loss of £0.1 million (2023: £1.7 million) was incurred on the US$52.4 million loan balance held by the Australian subsidiary. The functional currency of the Australian subsidiary is Australian dollars while the loan is denominated in US dollars. The exchange rate decreased during the year from 0.6630 USD/AUD at 30 June 2023 to 0.6624 USD/AUD at 30 June 2024.

Exchange differences arising on the translation of the functional currency of the Australian subsidiary differing from the Group's presentation currency resulted in a reduction to borrowings of £0.1 million during the year (2023: reduction of £3.3 million). The exchange rate decreased during the year from 0.5250 GBP/AUD at 30 June 2023 to 0.5244 GBP/AUD at 30 June 2024.

At 30 June 2024, Greatland has access to a A$50 million (£26.0 million) standby loan facility with Wyloo undrawn at year end. Refer to note 28 for details of the extinguishment of the facility post year end.

Details of the Group's exposure to risks and the maturity of the loan are set out in note 15.

13         Borrowings (continued)

Recognition and measurement

At initial recognition, financial liabilities are classified as financial liabilities at fair value through profit or loss, amortised cost, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of those measured at amortised cost, net of directly attributable transaction costs. The subsequent measurement of financial liabilities depends on their classification, as described below.

Financial liabilities measured at amortised cost

Borrowings are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the effective interest method amortisation process.

Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the effective interest. Refer to note 17 for interest capitalised to mine development.

14         Equity

(a) Contingent deferred acquisition consideration

In July 2022 (prior to the outcome of the Havieron 5% option process), Greatland successfully renegotiated the deferred consideration that was due to be paid in respect of its 2016 acquisition of Havieron. The original terms of the acquisition comprised an initial payment of A$25,000 in cash and 65,490,000 new ordinary shares. A further 145,530,000 new ordinary shares were payable if Greatland's ownership interest in Havieron reduced to 25% or less, or upon a decision to mine at Havieron whichever occurs earlier.

The 145,530,000 deferred share payment was renegotiated as follows:

i)    138,981,150 Greatland shares were issued to the vendor nominee, Five Diggers, during the year. This represented a 4.5% reduction in total shares issued relative to the ordinary agreed quantum

ii)   In respect of the 138,981,150 shares issued, Five Diggers are subject to the following restrictions:

§ A lock up which prohibits any shares from being disposed of for the first 12 months from grant, subject to carveouts (such as recommend takeovers), and

§ Orderly market arrangement, under which the shares may only be traded through Greatland's broker (subject to customary carve outs)

The new ordinary shares were issued in Greatland on 2 August 2022. The fair value of the contingent consideration formed part of the original acquisition in 2016 and as such the equity instruments were issued to share capital for £0.001 as required by the Companies Act 2006, with nil value attributable to share premium in August 2022.

(b) August 2022 equity raise

On 25 August 2022, Greatland raised total gross proceeds of £29.8 million through placing 362,880,180 new ordinary shares at an issue price of £0.082. The raise was facilitated through an incorporated Jersey registered company, Ferdinand (Jersey) Limited. The proceeds of the share issue were held in trust by Greatland on behalf of Ferdinand (Jersey) Limited, which was then acquired by way of share for share exchange in circumstances which qualified for merger relief, therefore no amount was recognised as share premium on the share issue as required under section 612 of the Companies Act.

The amount recognised in the merger reserve reflects the amount by which the fair value of the shares issued exceeded their nominal value and is recorded within the merger reserve on consolidation, rather than in a share premium account.

(c) Strategic placement to Wyloo

On 12 September 2022, Greatland entered into an agreement for a strategic equity investment with Wyloo, a privately owned minerals investment company. Wyloo subscribed for 430,024,390 shares for A$60 million (£33.5 million), an equivalent at the date of the agreement of £0.082 per share. This placement occurred at the same price as the August 2022 raise which equated to a small premium to the five-day VWAP of 9 September 2022. The transaction was approved by shareholders on 7 October 2022, resulting in Wyloo becoming Greatland's largest shareholder with approximately 8.6% of shares on issue. Settlement occurred on 14 October 2022 at a converted share price of £0.078 per share. On settlement, the A$60 million (£33.5 million) consideration received from Wyloo was allocated to share capital and share premium reflecting the fair value of the ordinary shares at settlement date.

As part of the equity subscription, a further £35 million may be raised from Wyloo in the future through the conversion of 352,620,000 warrants with a strike price of £0.10 per share and expiry date of 6 October 2025. The warrants were recognised in the statement of financial position at nil value on issue.

(d) Farm-in to Rio Tinto Exploration's Paterson South 

In May 2023, Greatland entered into a farm-in and joint venture agreement with Rio Tinto in respect of the Paterson South Project which comprises of nine exploration licences. Under the farm-in and joint venture arrangement, Greatland is required to make a payment to RTX of A$350,000 which Greatland has elected to settle in shares. TAt the time of this report the shares are yet to be issued. As the farm-in and joint venture agreement was executed during the prior year, the up-front payment was capitalised as part of the acquisition costs of the tenements and recognised in share-based payment reserves until the shares are issued.

Capital management

Greatland's capital includes shareholders' equity, reserves and net debt. Net debt is defined as borrowings and lease liabilities less cash and cash equivalent.

Management controls the capital of the Group to generate long-term shareholder value and ensure that the Group can fund operations and continue as a going concern. Management effectively manages the Group's capital by assessing the Group's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include share issues and debt considerations. Given the nature of the Group's current activities, the entity will remain dependent on debt and equity funding in the short to medium term until such time as the Group becomes self-financing from the commercial production of mineral resources.

Recognition and measurement

Share capital and share premium

Share capital is the nominal value of shares issued at £0.001.

Share premium is the amount subscribed for share capital in excess of nominal value, less share issue cost.

Ordinary shares participate in dividends and the proceeds on winding up the Company in proportion to the number of shares held. At shareholder meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

14         Equity (continued)

Merger reserve

Where the Company issues equity shares in consideration for securing a holding of at least 90% of the nominal value of each class of equity in another company, the application of merger relief is compulsory. Merger relief is a statutory relief from recognising any share premium on shares issued. A merger reserve is recorded equal to the value of share premium which would have been recorded if the provisions of section 612 of the Companies Act 2006 had not been applicable.

15         Financial risk management 

This note explains the Group's material exposure to financial risks and how these risks could affect the Group's future financial performance.  

There have been no changes in financial risks from the previous year. The Group did not have any hedging in place at 30 June 2024 or in prior year. Details on commodity price risk is included in the Principal Risks and Uncertainties section above.

Market Risk

(a) Foreign currency risk and sensitivity analysis

The Group's exposure to foreign currency risk at the end of the reporting period was as follows:

The following table demonstrates the sensitivity of the exposure at the balance sheet date to a reasonably possible change in AUD/USD/GBP exchange rate, with all other variables held constant. The impact on the Group's profit before tax and equity is due to changes in the fair value of monetary assets and liabilities, expressed in GBP. 

(b) Interest rate risk management and sensitivity analysis

The Group's policy is to retain its surplus funds in interest bearing deposit accounts including term deposits available up to twelve months' maximum duration. An increase / decrease of 2% in interest rates will impact the Group's income statement by a gain/loss of £0.3 million (2023: £1.2 million). The Group considers that a +/-2% movement in interest rates represents reasonable possible changes.

The Group has borrowing facilities with Newmont as part of the Havieron project with a total facility limit of US$50 million, excluding interest. Interest is calculated on the SOFR plus a margin of 8.26161% pa. Interest is calculated every 90 days. Under the Group's accounting policy, interest on the loan is capitalised to mine development and therefore movements in interest rates had no impact on the profit or loss in the current year.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its financing activities, including deposits with financial institutions. At the reporting date, the carrying amount of the Group's financial assets represents the maximum credit exposure.

The credit risk on cash and cash equivalents is managed by restricting dealing and holding of funds to banks which are assigned high credit ratings by international credit rating agencies. The Group's cash and cash equivalents as at 30 June 2024 are predominately held with financial institutions with an investment grade long term credit rating with Standard & Poor's. As short-term deposits have maturity dates of less than twelve months, the Group has assessed the credit risk on these financial assets using life time expected credit losses. In this regard, the Group has concluded that the probability of default on the term deposits is relatively low. Accordingly, no impairment allowance has been recognised for expected credit losses on the short-term deposits.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The Group manages liquidity risk by conducting regular reviews of the timing of cash flows to ensure sufficient funds are available to meet these obligations.

(a) Maturities of financial liabilities

The table below analyses the Group's financial liabilities into relevant maturity groupings based on their contractual maturities. The amounts disclosed in the table are contractual discounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

INVESTED CAPITAL

16         Exploration and evaluation assets 

(a) Farm-in to Rio Tinto Exploration's Paterson South 

Greatland entered into a farm-in and joint venture agreement with RTX during the year in respect of the Paterson South Project which comprises of nine exploration licences. Greatland elected to settle the up-front payment to RTX of A$350,000 in shares. Refer to note 14(d) for further details.

Recognition and measurement

Exploration and evaluation and development assets includes acquisition costs, costs associated with exploring, investigating, examining and evaluating an area of mineralisation, and assessing the technical feasibility and commercial viability of extracting the mineral resource from that area.

Exploration and evaluation expenditure is capitalised and carried forward to the extent that it relates to:

(i) acquisition costs; or

(ii) costs are expected to be recouped through successful development and exploitation of the area of interest or alternatively through sale.

If the above criteria are not met, exploration expenditure is expensed when incurred.

The recoverability of the exploration and evaluation assets is dependent on the successful development and commercial exploration, or alternatively, sale of the respective area of interest. Exploration and evaluation assets are assessed for impairment if one or more of the following facts and circumstances exist:

§ the right to explore the specific area has expired during the period or will expire in the near future, and is not expected to be renewed;

§ substantive expenditure on further exploration for and evaluation of mineral resources is the specific areas is neither budgeted nor planned;

§ exploration and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the company has decided to discontinue such activities in the specific area;

§ sufficient data exists to indicate that, although development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

An exploration and evaluation asset will be reclassified to mine development when the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.

17         Mine Development 

Recognition and measurement

Mine Development

Mine development represents expenditure incurred when the technical feasibility and commercial viability of extracting a mineral resource are demonstrable and includes costs incurred up until such time as the asset is capable of being operated in a manner intended by management.

Mine development is stated at historical cost less impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items and costs incurred in bringing the asset into use.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is de-recognised. All other repairs and maintenance costs are recognised in the income statement as incurred.

Depreciation does not commence until the asset is in the location and condition necessary for it to be capable of operating in the manner intended by management.

An item of mine development is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.

Impairment  

At each reporting date, the Company assesses whether there are any indicators of impairment. If any indicator exists, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash generating unit's (CGU) fair value less cost of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

The recoverable amount of mine development is dependent on the Company's estimate of the Ore Reserve that can be economically and legally extracted. The Company estimates its Ore Reserve and Mineral Resource based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body, and requires complex geological judgments to interpret the data.

Impairment losses are recognised in the profit or loss.

Capitalised borrowing costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.

17         Mine Development (continued)

18         Leases 

(a) Amounts recognised in the balance sheet