Annual Report

RNS Number : 1101L

Scotgold Resources Ltd

30 August 2012

 



Scotgold Resources Limited

Annual Report

For the year ended 30 June 2012

Scotgold Resources Limited ("Scotgold" or "the Company") (ASX:SGX) (AIM:SGZ) announces its final results for the year ended 30 June 2012.

The full annual report will be posted to shareholders [today] and appear on the Company's website at www.scotgoldresources.com.

For further information please contact:

United Kingdom:

Scotgold Resources Limited	Westhouse Securities Limited	Bankside Consultants
John Bentley (Chairman) Chris Sangster (CEO)	Richard Baty / Petre Norton	Simon Rothschild /Elena Kuza
Tel: [phone]	Tel: [phone]	Tel [phone]

Australia:

Scotgold Resources Limited	Professional Public Relations
Shane Sadleir (Non-Executive Director)	Belinda Newman
Tel:       [phone] Mobile: [phone]	Tel:       [phone] Mobile: [phone]

Chairman's Letter to Shareholders

Dear Shareholders

The year under review has been an extraordinarily testing one for the global financial markets with the result that the gold price has maintained a level above $1,500 per ounce albeit down from the high of $1,895 per ounce set in September last year. Importantly for Scotgold which will incur operating costs in sterling, the sterling price of gold has largely maintained a level above £1,000 per ounce.

The strength in the gold price has however not translated into stronger stock prices for gold producers and explorers although Scotgold has performed relatively well as the Company is now poised to become a producer having received planning permission from its governing authority, the Loch Lomond and Trossachs National Park.

As the Operating Review details, permission was received with a unanimous vote in favour of development from the Board of the National Park following an intensive process of dialogue and detailed planning undertaken in collaboration with the National Park's executive.

Since receiving planning approval we have been concentrating on increasing the confidence level in the gold and silver resource through infill drilling of the Cononish ore body. Specifically, the intention is to convert a further 10,000 ounces from inferred to measured and indicated resources in order to provide greater debt capacity thereby limiting the level of equity financing which must be undertaken to provide development funding.

We have recently succeeded in bringing in RMB Resources, a specialist mining finance bank, as the prospective provider of debt finance to the project. In the first instance they have provided a loan of £1.18m structured as a convertible loan and they have accepted the mandate to provide a prepayment facility which it is intended may provide approximately 50% of the capital required for the project.

The endorsement of a bank of RMB Resources' standing in the mining industry is a significant step forward for Scotgold in bringing Scotland's first commercial gold mine into production. We remain confident that the year to come will see the start of development operations leading to first production of gold in late 2013 / early 2014.

John Bentley

Chairman

DIRECTORS' REPORT

Your Directors submit their report on the consolidated entity consisting of Scotgold Resources Limited and its controlled entities ("Scotgold") for the financial year ended 30 June 2012.

OPERATING AND FINANCIAL REVIEW

A review of the operations of the consolidated entity during the financial year is contained in the Review of Operations section of this Annual Report.

PRINCIPLE ACTIVITIES

The principal activity of the consolidated entity during the year was mineral exploration in Scotland.

Operating Results

Consolidated loss after income tax for the financial year is $1,265,173.

Financial Position

At 30 June 2012 the Company has cash reserves of $72,615.

Dividends

No dividends were paid during the year and no recommendation is made as to dividends.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

In the opinion of the Directors, there were no significant changes in the state of affairs of the consolidated entity that occurred during the financial year under review not otherwise disclosed in this report or in the consolidated accounts.

MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR

On 2nd July 2012 the company announced that an agreement had been reached with RMB Resources for a £1.18m financing facility.  This facility is a convertible loan structured as a secured corporate loan with share options which provides for RMB to acquire 26,222,222 Scotgold shares at £0.045.

During July 2012 the company drew down loan funding of $1.7 million which is expected be to sufficient to fund the company into early 2013.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The Company intends to continue its exploration activities with a view to the commencement of mining operations as soon as possible.

Further information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the Company.

MEETINGS OF DIRECTORS

The following table sets out the number of meetings of the Company's Directors held during the year ended 30th June 2012, and the number of meetings attended by each Director.  These meetings included matters relating to the Remuneration and Nomination Committees of the Company.

	Number eligible to attend	Number attended
John Bentley	2	2
Chris Sangster	2	2
Phillip Jackson	2	2
Shane Sadleir	2	2

AUDIT COMMITTEE

The Audit Committee is comprised of Mr Jackson who chaired one meeting of the audit committee during the year ended 30 June 2012.

REMUNERATION REPORT (audited)

This report details the nature and amount of remuneration for each director and executive of Scotgold Resources Limited.

The information provided in the remuneration report includes remuneration disclosures that are required under Accounting Standards AASB 124 "Related Party Disclosures". These disclosures have been transferred from the financial report and have been audited.

Remunerations policy

The board policy is to remunerate Directors at market rates for time, commitment and responsibilities. The Board determines payment to the Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of Directors' fees that can be paid is subject to approval by shareholders in general meeting, from time to time. Fees for Non-Executive Directors are not linked to the performance of the consolidated entity. However, to align Directors' interests with shareholders interests, the Directors are encouraged to hold securities in the company.

The company's aim is to remunerate at a level that will attract and retain high-calibre Directors and employees. Company officers and Directors are remunerated to a level consistent with size of the Company.

All remuneration paid to directors and executives is valued at the cost to the company and expensed.

Performance-based remuneration

The company does not pay any performance-based component of salaries.

Details of remuneration for year ended 30 June 2012 (audited)

Directors' Remuneration

No salaries, commissions, bonuses or superannuation were paid or payable to Directors during the year. Remuneration was by way of fees paid monthly in respect of invoices issued to the Company by the Directors or Companies associated with the Directors in accordance with agreements between the Company and those entities.

Details of the agreements are set out below.

Agreements in respect of cash remuneration of Directors:

Executive Directors

Chris Sangster is on a contract dated 28^th January 2009 which provides for a fixed salary and benefits, with a termination period of 6 months.  John Bentley (through Ptarmigan Natural Resources Ltd) is on a contract dated 17^th February 2009 which provides for a fixed fee, with a termination period of 6 months.  In both cases the remuneration is reviewed annually.  At the date of this report the annual remuneration for Chris Sangster is £132,000 and for John Bentley is £66,000.  In the event of a termination of contract giving less notice than provided for in these contracts, the remaining notice period will be paid in full.

Non-Executive Directors

The Company's constitution provides that the Non-Executive Directors may collectively be paid as remuneration for their services a fixed sum not exceeding the aggregate sum determined by a general meeting.  The aggregate remuneration has been set at an amount of $300,000 per annum.  A Director may be paid fees or other amounts as the Directors determine where a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. A Director may also be reimbursed for out of pocket expenses incurred as a result of their directorship or any special duties. Executive Directors may be paid on commercial terms as the Directors see fit.

The total remuneration paid to Directors and Executives is summarised below:

Director/Secretary	Associated Company
Year ended 30 June 2011		Fees	Consultancy	Total
John Bentley	Ptarmigan Natural Resources Ltd	54,000	-	54,000
Chris Sangster		-	206,750	206,750
Phillip Jackson	Holihox Pty Ltd	27,000	-	27,000
Edmond Edwards	Tied Nominees Pty Ltd	31,500	10,000	41,500
Shane Sadleir	Mineral Products Holdings Pty Ltd	29,000	28,400	57,400
Adam Davey	Shenton Park Investments Pty Ltd	9,000	-	9,000
Peter Newcomb	Symbios Pty Ltd	-	144,500	144,500
		150,500	389,650	540,150
Year ended 30 June 2012
John Bentley	Ptarmigan Natural Resources Ltd	24,000	68,250	92,250
Chris Sangster		-	297,244	297,244
Phillip Jackson	Holihox Pty Ltd	42,000	-	42,000
Shane Sadleir	Mineral Products Holdings Pty Ltd	42,000	-	42,000
Peter Newcomb	Symbios Pty Ltd	-	166,050	166,050
		108,000	531,544	639,544

The consolidated entity does not have any full time Executive officers, other than the Managing Director as detailed above.

There were no performance related payments made during the year.

ENVIRONMENTAL ISSUES

The consolidated entity has conducted exploration activities on mineral tenements.  The right to conduct these activities is granted subject to environmental conditions and requirements.  The consolidated entity aims to ensure a high standard of environmental care is achieved and, as a minimum, to comply with relevant environmental regulations. There have been no known breaches of any of the environmental conditions.

INDEMNIFICATION OF DIRECTORS

During the financial year, the Company has not given an indemnity or entered into an agreement to indemnify any of the Directors.

AUDITOR

HLB Mann Judd continues in office in accordance with section 327 of the Corporations Act 2001.

NON-AUDIT SERVICES

There were no non-audit services provided during the current year by our auditors, HLB Mann Judd.

AUDITOR'S INDEPENDENCE DECLARATION

The auditor's independence declaration has been received for the year ended 30 June 2012 and forms part of the Directors' report.

PROCEEDINGS ON BEHALF OF COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

The Company was not a party to any such proceedings during the year.

Signed in accordance with a resolution of the Directors.

..............................................................         

CHRIS SANGSTER - Managing Director

Dated at Tyndrum, Scotland, this 30^th day of August, 2012.

STATEMENT OF COMPREHENSIVE INCOME

			CONSOLIDATED
	Notes
			2012		2011
			$		$
Revenue	2		29,124		33,880
Administration costs			(393,551)		(398,734)
Depreciation and loss on disposal of fixed assets	3		(25,165)		(38,448)
Employee and consultant costs			(407,100)		(236,864)
Listing and share registry costs			(135,796)		(147,974)
Legal fees			(185,046)		(5,715)
Office and communication costs			(152,547)		(163,441)
Other expenses			(69,643)		(76,209)
LOSS BEFORE INCOME TAX EXPENSE			(1,339,724)		(1,033,505)
Income tax benefit	4		74,551		123,039
LOSS FOR THE YEAR			(1,265,173)		(910,466)
Other Comprehensive Income
Exchange loss on translation of foreign subsidiaries			(1,662)		(44,370)
Comprehensive result for the year			(1,266,835)		(954,836)
Basic loss per share (cents per share)	22		0.67		0.67

STATEMENT OF FINANCIAL POSITION			CONSOLIDATED
as at 30 June 2012	Notes
			2012		2011
			$		$
CURRENT ASSETS
Cash and cash equivalents	5		72,615		950,668
Trade and other receivables	6		46,731		196,303
Other current assets	7		20,369		20,076
Total Current Assets			139,715		1,167,047
NON CURRENT ASSETS
Trade and other receivables	6		76,923		75,586
Plant and equipment	8		170,721		173,116
Mineral exploration and evaluation	9		12,084,602		10,526,320
Total Non Current assets			12,332,246		10,775,022
TOTAL ASSETS			12,471,961		11,942,069
CURRENT LIABILITIES
Trade and other payables	10		227,147		297,566
Other current liabilities	10		127,243		39,844
TOTAL LIABILITIES			354,390		337,410
NET ASSETS			12,117,571		11,604,659
EQUITY
Issued capital	12		16,079,010		14,299,263
Reserves	13		(46,032)		(44,370)
Accumulated losses	13		(3,915,407)		(2,650,234)
TOTAL EQUITY			12,117,571		11,604,659

STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2012

CONSOLIDATED

	Issued Capital	Accumulated Losses	Foreign Currency Translation Reserve	Total Equity
Year Ended 30 June 2011	$	$		$
Balance 1 July 2010	12,324,019	(1,739,768)	-	10,584,251
Share Placements	986,000	-	-	986,000
Rights Issue	1,020,005	-	-	1,020,005
Option exercise	29,149	-	-	29,149
Share issue expenses	(59,910)	-	-	(59,910)
Total comprehensive result for the year	-	(910,466)	(44,370)	(954,836)
As at 30 June 2011	14,299,263	(2,650,234)	(44,370)	11,604,659
Year Ended 30 June 2012	$	$		$
Balance 1 July 2011	14,299,263	(2,650,234)	(44,370)	11,604,659
Rights Issue	1,409,081	-	-	1,409,081
Rights Issue Shortfall allocation	203,963	-	-	203,963
Option exercise	214,747	-	-	214,747
Share issue expenses	(48,044)	-	-	(48,044)
Total comprehensive result for the year	-	(1,265,173)	(1,662)	(1,266,835)
As at 30 June 2012	16,079,010	(3,915,407)	(46,032)	12,117,571

STATEMENT OF CASH FLOWS			CONSOLIDATED
for the year ended 30 June 2012	Notes
			2012		2011
			$		$
CASH FLOWS FROM OPERATING ACTIVITIES
Payment to suppliers			(1,273,624)		(1,073,130)
Interest income received			28,951		32,285
Net Cash Outflow From Operating Activities	18		(1,244,673)		(1,040,845)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration expenditure			(1,391,102)		(1,524,816)
Payment for other fixed assets			(22,769)		(11,992)
Net Cash Outflow From Investing Activities			(1,413,871)		(1,536,808)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares and options			1,827,791		2,035,154
Share and option issue transaction costs			(48,044)		(59,910)
Hire purchase repayments			-		(7,284)
Net Cash Inflow From Financing Activities			1,779,747		1,967,960
Net decrease in cash held			(878,797)		(609,693)
Effect of exchange rate fluctuations on cash and cash equivalents			744		(32,636)
Cash and cash equivalents at the beginning of this financial year			950,668		1,592,997
Cash and cash equivalents at the end of this financial year	5		72,615		950,668

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the year ended 30 June 2012

NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Accounting Standards and Interpretations and complies with other requirements of the law.  Cost is based on the fair values of the consideration given in exchange for assets.

The financial report has also been prepared on a historical cost basis.  The financial report is presented in Australian dollars.

The company is a listed public company, incorporated in Australia and operating in Australia and Scotland. The entity's principal activity is mineral exploration.

The accounting policies detailed below have been consistently applied to all of the years presented unless otherwise stated.  The financial statements are for the consolidated entity consisting of Scotgold Resources and its subsidiaries.

Reporting Basis and Conventions

The financial report has been prepared on the basis of accounting principles applicable to a going concern, which assumes the commercial realisation of the future potential of the Company's and consolidated entity's assets and the discharge of their liabilities in the normal course of business.

The Board considers that the Company is a going concern and recognises that additional funding is required to ensure that the Company can continue to fund its and the consolidated entity's operations and further develop their mineral exploration and evaluation assets during the twelve month period from the date of this financial report. Such additional funding as occurred during the year ended 30 June 2012 as disclosed in Note 12, can be derived from either one or a combination of the following:

·      The placement of securities under the ASX Listing Rule 7.1 or otherwise;

·      An excluded offer pursuant to the Corporations Act 2001; or

·      The sale of assets.

Accordingly, the Directors believe the Company will obtain sufficient funding to enable it and the consolidated entity to continue as going concerns and that it is appropriate to adopt that basis of accounting in the preparation of the financial report.

Additionally, as disclosed in Note 24, the company drew down loan funding of $1.7 million from RMB Resources which is expected to be sufficient to fund the company into early 2013.

The financial report has also been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, and financial assets and financial liabilities for which the fair value basis of accounting has been applied.

Statement of Compliance

The financial report was authorised for issue on 23rd August 2012.

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

Adoption of new and revised standards

Changes in accounting policies on initial application of Accounting Standards

In the year ended 30 June 2012, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period. 

It has been determined by the Directors that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to consolidated entity accounting policies.

The Directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2012. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to consolidated entity accounting policies.

Accounting Policies

(a)     Basis of Consolidation

A controlled entity is any entity controlled by Scotgold Resources Limited. Control exists where Scotgold Resources Limited has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with Scotgold Resources Limited to achieve the objectives of Scotgold Resources Limited. All controlled entities have a 30 June financial year-end.

All inter-company balances and transactions between entities in the consolidated entity, including any unrealised profit or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where controlled entities have entered or left the consolidated entity during the year, their operating results have been included from the date control was obtained or until the date control ceased.

(b)     Income Tax

The charge for current income tax expenses is based on the profit for the year adjusted for any non-assessable or disallowable items.  It is calculated using tax rates that have been enacted or are substantively enacted by the balance date.

Deferred tax is accounted for using the liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the statement of comprehensive income except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary difference can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

(c)     Plant and Equipment

Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation.

Plant and equipment are measured on the cost basis less depreciation and impairment losses.

The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

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 consolidated benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

Depreciation

The depreciable amount of all fixed assets including capitalised lease assets, but excluding computers, is depreciated on a reducing balance commencing from the time the asset is held ready for use. Computers are depreciated on a straight line basis over their useful lives to the consolidated entity commencing from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset:	Depreciation Rate:
Plant and Equipment	15 - 50%

The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

(d)     Exploration and Evaluation Expenditure

Exploration and evaluation expenditure incurred is either written off as incurred or accumulated in respect of each identifiable area of interest. Tenement acquisition costs are initially capitalised. Costs are only carried forward to the extent that they are expected to be recouped through the successful development of the areas, sale of the respective areas of interest or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the areas is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure.

(e)     Impairment of Assets

At each reporting date, the Directors review the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the assets, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the statement of comprehensive income.

Where it is not possible to estimate the recoverable amount of an individual asset, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.

(f)      Provisions

Provisions are recognised where there is a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

(g)     Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

(h)     Revenue

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

(i)      Goods and Services Tax (GST) and Value Added Tax (VAT)

Revenues, expenses and assets are recognised net of the amount of GST or VAT, except where the amount of GST or VAT incurred is not recoverable from the Australian Tax Office. In these circumstances the GST or VATis recognised as part of the cost of acquisition of the asset or as part of an item of the expenses. Receivables and payables in the statement of financial position are shown inclusive of GST or VAT.

(j)      Contributed Equity

Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

(k)     Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

(l)      Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.  The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Scotgold Resources Limited.

(m)    Critical accounting estimates and judgements

The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Key Estimates - Impairment

The Directors assess impairment at each reporting date by evaluating conditions specific to the consolidated entity that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

No impairment has been recognised in respect of costs carried forward as exploration assets. The ultimate recoupment of value is dependent on the successful development and commercial exploration or sale of the respective areas.

(n)     Share based payments - shares and options

The fair value of shares and share options granted is recognised as an expense with a corresponding increase in equity. Fair value is measured at grant date and recognised over the period during which the grantees become unconditionally entitled to the shares or share options.

The fair value of share grants at grant date is determined by the share price at that time.

The fair value of share options at grant date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, any vesting and performance criteria, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option.

Upon the exercise of the option, the balance of the share-based payments reserve relating to the option is transferred to share capital.

(o)        Foreign currency translation

Both the functional and presentation currency of Scotgold Resources Limited and its Australian subsidiaries is Australian dollars. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance date.

All exchange differences in the consolidated financial report are taken to profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss.

Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. 

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.  Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

The functional currency of the foreign operation, Scotgold Resources is Pounds Sterling (£).

As at the balance date the assets and liabilities of these subsidiaries are translated into the presentation currency of Scotgold Resources Limited at the rate of exchange ruling at the balance date and income and expense items are translated at the average exchange rate for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used.

The exchange differences arising on the translation are taken directly to a separate component of equity, being recognised in the foreign currency translation reserve.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit or loss.

In addition, in relation to the partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

	2012	2011
	$	$
NOTE 2 - REVENUE
Revenue
Interest received	29,124	33,138
Other income	-	742
Total revenue	29,124	33,880

NOTE 3 - LOSS FROM ORDINARY ACTIVITIES BEFORE TAX EXPENSES
	2012	2011
	$	$
Expenses
Borrowing costs expensed	-	251
Total borrowing cost expensed	-	251
Depreciation of non-current assets
Plant and Equipment	22,028	27,636
Office furniture and equipment	42	54
Motor vehicles	7,060	10,685
Total depreciation of non-current assets	29,130	38,375

Profit/(Loss) on disposal of fixed assets

(3,965)

73

NOTE 4 - INCOME TAX

The prima facie tax benefit at 30% on loss from ordinary activities is reconciled to the income tax benefit in the financial statements as follows:

	2012	2011
	$	$
Loss from ordinary activities	1,266,835	954,837
Prima facie income tax benefit at 30%	380,050	286,451
Tax effect of permanent differences
Share Issue Costs amortised	66,952	64,070
R & D Tax Offset refund received	(74,551)	(123,039)
Other non-deductible expenses	(159)	(5,658)
Income tax benefit adjusted for permanent differences	372,292	221,824
Deferred tax asset not brought to account	(297,741)	(98,785)
	74,551	123,039

Income tax benefit

The directors estimate the cumulative unrecognised deferred tax asset attributable to the company and its controlled entity at 30% is as follows:

DEFERRED TAX ASSETS
Revenue Losses after permanent differences	824,884	558,556
Capital Raising Costs yet to be claimed	96,558	149,099
	921,442	707,655

The potential deferred tax asset has not been brought to account in the financial report at 30 June 2012 as the Directors do not believe it is appropriate to regard the realisation of the asset as probable. This asset will only be obtained if:

(a)        The company and its controlled entity derive future assessable income of an amount and type sufficient to enable the benefit from the deductions for the tax losses and the unrecouped exploration expenditure to be realised;

(b)        The company and its controlled entity continue to comply with the conditions for deductibility imposed by tax legislation; and

(c)        No changes in tax legislation adversely affect the company and its controlled entity in realising the benefit from the deductions for the tax losses and unrecouped exploration expenditure.

Franking Credits

No franking credits are available at balance date for the subsequent financial year.

	2012	2011
	$	$
NOTE 5 - CASH AND CASH EQUIVALENTS
Cash at bank and on hand	72,615	950,668

NOTE 6 - TRADE AND OTHER RECEIVABLES
Current
GST / VAT Receivable	42,793	53,932
ATO Research and Development Offset	-	124,330
Other receivables	3,938	18,041
	46,731	196,303
Non Current
Bond on Tenement	76,923	75,586

NOTE 7 - OTHER CURRENT ASSETS
Prepaid expenses	20,369	20,076

NOTE 8 - PLANT AND EQUIPMENT
Plant and equipment
Cost	349,150	329,783
Accumulated Depreciation	(178,429)	(156,667)
	170,721	173,116

Movement for the year
Opening balance	173,116	199,573
Additions	38,263	20,261
Disposals	(11,528)	(8,343)
Depreciation expensed	(29,130)	(38,375)
Closing balance	170,721	173,116

		2012	2011
		$	$
NOTE 9 - MINERAL EXPLORATION AND EVALUATION
Opening balance	10,526,320		8,917,502
Expenditure during the year	1,558,282		1,608,818
Closing balance	12,084,602		10,526,320

The ultimate recoupment of exploration expenditure carried forward is dependent upon successful development and commercial exploration, or sale of the respective areas.

	2012	2011
	$	$
NOTE 10 - TRADE AND OTHER PAYABLES
Trade creditors	227,147	297,566
Other accruals	127,243	39,844
	354,390	337,410

NOTE 11 - INTEREST BEARING LIABILITIES

Financing Agreements

No overdraft facilities have been formalised at 30 June 2012 and neither the company nor its controlled entity have lines of credit at 30 June 2012.

	2012	2011
NOTE 12 - ISSUED CAPITAL	$	$
(a)        Issued capital
196,249,629 ordinary shares fully paid (2011: 161,304,411)	16,079,010	14,299,263

(b)        Movements in ordinary share capital of the Company were as follows:

Date	Details	No of Shares		Value (cents)		$
	Balance at 30 June 2010	117,306,762				12,324,019
11/11/2010	Rights Issue	29,133,284		3.5		1,020,005
19/01/2011	Placement	14,500,000		6.8		986,000
19/01/2011	Options conversion	15,526		8.0		1,242
14/02/2011	Options conversion	61,166		8.0		4,893
28/02/2011	Options conversion	76,512		8.0		6,121
21/03/2011	Options conversion	65,566		8.0		5,245
27/04/2011	Options conversion	145,595		8.0		11,648
	Transaction costs arising on share issues					(59,910)
	Balance at 30 June 2011	161,304,411				14,299,263
	Balance at 30 June 2011	161,304,411				14,299,263
04/08/2011	Options conversion	17,491		8.0		1,399
24/08/2011	Options conversion	7,128		8.0		570
26/08/2011	Rights Issue	28,181,626		5.0		1,409,081
22/09/2011	Rights Issue Shortfall allocation	4,079,256		5.0		203,963
17/10/2011	Options conversion	922		8.0		74
03/11/2011	Options conversion	270,000		8.0		21,600
15/11/2011	Options conversion	25,721		8.0		2,058
15/02/2012	Options conversion	10,207		8.0		817
02/04/2012	Options conversion	253,193		8.0		20,255
10/04/2012	Options conversion	26,937		8.0		2,155
17/04/2012	Options conversion	82,137		8.0		6,571
30/04/2012	Options conversion	1,986,850		8.0		158,948
31/05/2012	Options conversion	3,750		8.0		300
	Transaction costs arising on share issues					(48,044)
	Balance at 30 June 2012	196,249,629				16,079,010

(c)        Movements in options were as follows:

Date	Details	No of Options		Issue Price		Value $
	Balance at 30 June 2010	-
11/11/2010	Rights Issue (free attaching options)	14,566,586		-		-
19/01/2011	Placement (free attaching options)	7,250,000		-		-
19/01/2011	Options conversion	(15,526)		-		-
14/02/2011	Options conversion	(61,166)		-		-
28/02/2011	Options conversion	(76,512)		-		-
21/03/2011	Options conversion	(65,566)		-		-
27/04/2011	Options conversion	(145,595)		-		-
	Balance at 30 June 2011	21,452,221		-		-
	Balance at 30 June 2011	21,452,221				-
04/08/2011	Options conversion	(17,491)		-		-
24/08/2011	Options conversion	(7,128)		-		-
17/10/2011	Options conversion	(922)		-		-
03/11/2011	Options conversion	(270,000)		-		-
15/11/2011	Options conversion	(25,721)		-		-
15/02/2012	Options conversion	(10,207)		-		-
02/04/2012	Options conversion	(253,193)		-		-
10/04/2012	Options conversion	(26,937)		-		-
17/04/2012	Options conversion	(82,137)		-		-
30/04/2012	Options conversion	(1,986,850)		-		-
31/05/2012	Options conversion	(3,750)		-		-
30/04/2012`	Expiry	(18,767,885)		-		-
	Balance at 30 June 2012	-		-		-

(d)        Voting and dividend rights

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

At shareholders 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.

	2012	2011
	$	$
NOTE 13 - RESERVES AND ACCUMULATED LOSSES
Accumulated Losses	3,915,407	2,650,234
Foreign Currency Translation Reserve	46,032	44,370
	3,961,439	2,694,604

Accumulated Losses
Balance at beginning of the year	2,650,234	1,739,768
Net Loss from ordinary activities	1,265,173	910,466
Balance at end of the year	3,915,407	2,650,234
Foreign Currency Translation Reserve
Balance at beginning of the year	44,370	-
Reserve arising on translation of foreign currency subsidiary	1,662	44,370
Balance at end of the year	46,032	44,370

NOTE 14 - COMMITMENTS FOR EXPENDITURE

(a)              Mineral Tenement Leases In order to maintain current rights of tenure to mining tenements, the consolidated entity will be required to outlay in the year ending 30 June 2012 amounts of $58,250 in respect of minimum tenement expenditure requirements and lease rentals.  The obligations are not provided for in the financial report and are payable as follows :
	Minimum expenditure		Licence Fee		Total
Not later than one year	27,000		31,250		58,250
Later than 1 year but not later than 2 years	27,000		31,250		58,250
Later than 2 years but not later than 5 years	81,000		93,750		174,750
	135,000		156,250		291,250

The Company has a number of avenues available to continue the funding of its current exploration program and as and when decisions are made, the Company will disclose this information to shareholders.

NOTE 15 - CONTINGENT LIABILITIES

The Company has entered into a donations agreement with the Strathfillan Community Development Trust ("SCDT") pursuant to which the Company will work with SCDT to provide additional facilities and opportunities for the community served by SCDT and provide funding in respect of the same of up to £350,000.  This liability is contingent upon starting the development as defined under the Planning conditions and Decision letter.

Scotgold Resources Limited and its controlled entities have no other known material contingent liabilities as at 30 June 2012.

NOTE 16 - INVESTMENT IN CONTROLLED ENTITY

	Registered Number	Country of Incorporation	Interest Held	Value of investment
Parent
Scotgold Resources Limited	42 127 042 773	Australia	100%	N/A
Subsidiary
Scotgold Resources Limited	SC 309525	Scotland	100%	5,491,881
Subsidiary of subsidiary
Fynegold Exploration Limited	SC 084497	Scotland	100%	-

NOTE 17 - SEGMENT INFORMATION

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.  The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Scotgold Resources Limited.

NOTE 18 - NOTES TO THE STATEMENT OF CASH FLOWS

	2012	2011
	$	$
Reconciliation of loss after income tax to net operating cash flows
Loss from ordinary activities	(1,265,173)	(910,466)
Depreciation and loss on disposals	25,165	38,448
	(1,240,008)	(872,018)
Movement in assets and liabilities
Receivables	141,616	(141,615)
Other current assets	8,738	41,760
Payables	(155,019)	(68,972)
Net cash used in operating activities	(1,244,673)	(1,040,845)

NOTE 19 - KEY MANAGEMENT PERSONNEL    

(a) Directors

The names and positions of Directors in office at any time during the financial year are:

		In office from	In office to
John Bentley	Executive Chairman	17/02/2009	present
Chris Sangster	Managing Director	17/10/2007	present
Phillip Jackson	Non Executive Director	14/08/2007	present
Shane Sadleir	Non Executive Director	12/03/2009	present

(b) Remuneration Polices

Remuneration policies are disclosed in the Remuneration Report which is contained in the Directors' Report.

(c) Directors' Remuneration

No salaries, commissions, bonuses or superannuation were paid or payable to Directors during the year. Remuneration was by way of fees paid monthly in respect of invoices issued to the Company by the Directors or Companies associated with the Directors in accordance with agreements between the Company and those entities.

The Directors are entitled to reimbursement of out-of-pocket expenses incurred whilst on company business.

The total remuneration paid to directors is summarised below:

Director/Secretary	Associated Company
Year ended 30 June 2011		Fees	Consultancy	Total
John Bentley	Ptarmigan Natural Resources Ltd	54,000	-	54,000
Chris Sangster		-	206,750	206,750
Phillip Jackson	Holihox Pty Ltd	27,000	-	27,000
Edmond Edwards	Tied Nominees Pty Ltd	31,500	10,000	41,500
Shane Sadleir	Mineral Products Holdings Pty Ltd	29,000	28,400	57,400
Adam Davey	Shenton Park Investments Pty Ltd	9,000	-	9,000
Peter Newcomb	Symbios Pty Ltd	-	144,500	144,500
		150,500	389,650	540,150
Year ended 30 June 2012
John Bentley	Ptarmigan Natural Resources Ltd	24,000	68,250	92,250
Chris Sangster		-	297,244	297,244
Phillip Jackson	Holihox Pty Ltd	42,000	-	42,000
Shane Sadleir	Mineral Products Holdings Pty Ltd	42,000	-	42,000
Peter Newcomb	Symbios Pty Ltd	-	166,050	166,050
		108,000	531,544	639,544

 (d) Shareholding

	Balance 30 June 2010		Purchase and Sales		Balance at date of resignation		Balance 30 June 2011
John Bentley	900,000		225,000		-		1,125,000
Chris Sangster	4,500,000		1,125,000		-		5,625,000
Phillip Jackson	1,750,000		437,500		-		2,187,500
Edmond Edwards	1,847,843		-		1,847,843		-
Shane Sadleir	11,582,785		2,895,696		-		14,478,481
	20,580,628		4,683,196		1,847,843		23,415,981

	Balance 30 June 2011		Purchase and Sales		Options exercised		Balance 30 June 2012
John Bentley	1,125,000		225,000		112,500		1,462,500
Chris Sangster	5,625,000		532,000		281,250		6,438,250
Phillip Jackson	2,187,500		-		-		2,187,500
Shane Sadleir	14,478,481		-		125,000		14,603,481
	23,415,981		757,000		518,750		24,691,731

(e) Aggregate amounts payable to Directors and their personally related entities.

	Consolidated Entity		Consolidated Entity
	2012		2011
	$		$
Accounts payable	64,495		16,669

(f) Optionholding

	Balance 30 June 2010		Rights Issue		Converted during the year		Balance 30 June 2011
John Bentley	-		112,500		-		112,500
Chris Sangster	-		562,500		-		562,500
Phillip Jackson	-		218,750		-		218,750
Shane Sadleir	-		1,447,848		-		1,447,848
	-		2,341,598		-		2,341,598

	Balance 30 June 2011		Converted during the year		Expired  during the year		Balance 30 June 2012
John Bentley	112,500		112,500		-		-
Chris Sangster	562,500		281,250		281,250		-
Phillip Jackson	218,750		-		218,750		-
Shane Sadleir	1,447,848		125,000		1,322,848		-
	2,341,598		518,750		1,822,848		-

NOTE 20 - RELATED PARTY INFORMATION

		Parent Entity		Parent Entity
		2012		2011
Transactions within the Consolidated Entity		$		$
Aggregate amount receivable within the consolidated entities at balance date
Non-current receivables		12,089,670		10,264,890

NOTE 21 - REMUNERATION OF AUDITORS

	2012		2011
	$		$
Auditing and reviewing of the financial statements of Scotgold Resources Limited and of its controlled entities.	27,150		34,150
	27,150		34,150

NOTE 22 - LOSS PER SHARE

		2012		2011
		Number		Number
Weighted average number of ordinary shares outstanding during the year used in the calculation of basic loss per share		189,392,568		142,279,083

There are no potential ordinary shares on issue at the date of this report.

NOTE 23 - FINANCIAL INSTRUMENTS

(a)  Financial Risk Management Policies

The consolidated entity's financial instruments consist mainly of deposits with banks, accounts receivable, accounts payable and hire purchase liabilities.

The Board's overall risk management strategy seeks to assist the Group in meeting its financial targets, whilst maintaining potential adverse effects on financial performance. The Group has developed a framework for a risk management policy and internal compliance and control systems that covers the organisational, financial and operational aspects of the group's affairs. The Chairman is responsible for ensuring the maintenance of, and compliance with, appropriate systems.

Financial Risk Exposures and Management

The main risks the group is exposed to through its financial instruments are interest rate risk, foreign currency risk and liquidity risk.

Interest Rate Risk

The consolidated entity's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of change in the market, interest rate and the effective weighted average interest rate on these financial assets, is as follows:

		Weighted Average Effective Interest Rate			Floating Interest Rate
		2012	2011		2012		2011
Financial Assets
Cash at Bank		3.16%	2.70%		72,615		950,668
Total Financial Assets					72,615		950,668

There are no Financial Liabilities subject to interest rate fluctuations.

The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the statement of financial position and in the notes to and forming part of the financial statements.

Interest Rate Sensitivity Analysis

The Group has performed a sensitivity analysis relating to its exposure to interest rate risk. This sensitivity analysis demonstrates the effect on the current year results and equity which could result in a change in these risks.

At 30 June 2012 the effect on the loss and equity as a result of changes in the interest rate with all other variables remaining constant is as follows:

		$		$
		2012		2011
Change in Loss
·      Increase in interest by 2%		(18,417)		(24,524)
·      Decrease in interest by 2%		18,417		24,524
Change in Equity
·      Increase in interest by 2%		18,417		24,524
·      Decrease in interest by 2%		(18,417)		(24,524)

Foreign Currency Risk

The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise.

The carrying amount of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:

Currency		Liabilities		Assets		Liabilities		Assets
		2012		2012		2011		2011
		$		$		$		$
£ Sterling		277,457		104,800		185,865		411,530

Foreign currency

Other than translational risk the Group has no significant exposure to foreign currency risk at the balance date.

Liquidity Risk

The group manages liquidity risk by monitoring forecast cash flows.

Credit Risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date, is the carrying amount net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes to the financial statement.

In the case of cash deposited, credit risk is minimised by depositing with recognised financial intermediaries such as banks, subject to Australian Prudential Regulation Authority Supervision.

The consolidated entity does not have any material risk exposure to any single debtor or group of debtors under financial instruments entered into by it.

Capital Management Risk

Management controls the capital of the Group in order to maximise the return to shareholders and ensure that the group can fund its 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 the management of expenditure and debt levels and share and option issues.

There have been no changes in the strategy adopted by management to control capital of the Group since the prior year.

Net Fair Values

For financial assets and liabilities, the net fair value approximates their carrying value. The consolidated entity has no financial assets or liabilities that are readily traded on organised markets at balance date and has no financial assets where the carrying amount exceeds net fair values at balance date.

NOTE 24 - MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR

On 2 July 2012 the company announced that an agreement had been reached with RMB Resources for a £1.18m financing facility.  This facility is a convertible loan structured as a secured corporate loan with share options which provides for RMB to acquire 26,222,222 Scotgold shares at £0.045.

During July 2012 the company drew down loan funding of $1.7 million which is expected to be sufficient to fund the company into early 2013.

NOTE 25 - PARENT ENTITY DISCLOSURES

Financial Position			2012		2011
			$		$
CURRENT ASSETS
Cash and cash equivalents			29,661		604,040
Trade and other receivables			5,255		151,477
Total Current Assets			34,916		755,517
NON CURRENT ASSETS
Plant and equipment			7,067		6,473
Investment in subsidiary			5,491,881		5,491,881
Loan to subsidiary			12,089,670		10,264,890
Total Non Current assets			17,588,618		15,763,244
TOTAL ASSETS			17,623,534		16,518,761
CURRENT LIABILITIES
Trade and other payables			76,934		151,546
Total Current Liabilities			76,934		151,546
TOTAL LIABILITIES			76,934		151,546
NET ASSETS			17,546,600		16,367,215
EQUITY
Issued capital			20,156,501		18,376,754
Accumulated losses			(2,609,901)		(2,009,539)
TOTAL EQUITY			17,546,600		16,367,215

Financial Performance

Loss for the year			600,362		(575,287)
Other comprehensive income			-		-
Total comprehensive income			600,362		(575,287)

The parent entity has not entered into any guarantees in relation to debts of its subsidiaries, has no contingent liabilities, and has no commitments for acquisition of property, plant and equipment.

1.   In the opinion of the Directors of Scotgold Resources Limited (the 'Company'):

a.   the accompanying financial statements and notes are in accordance with the Corporations Act 2001 including:

i. giving a true and fair view of the consolidated entity's financial position as at 30 June 2012 and of its performance for the year then ended; and

ii. complying with Australian Accounting Standards, the Corporations Regulations 2001, professional reporting requirements and other mandatory requirements.

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

c.   the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board.

This declaration has been made after receiving the declarations required to be made to the Directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2012.

This declaration is made in accordance with a resolution of the Board of Directors.

..............................................................   

CHRIS SANGSTER - Managing Director

Dated at Tyndrum, Scotland, this 30^th day of August, 2012.

 

END

 

 

FR URAARUBAWOAR