Totally agree GreedyCroc. Ross and Jamie’s bonuses (well...

Totally agree GreedyCroc. Ross and Jamie’s bonuses (well deserved IMO), should have been deferred and paid in shares with a 12 month lockup period where they can’t be sold. This practice is fairly common across the market. I particularly like remuneration in the form of shares as it aligns management’s interests with those of shareholders. You would think this wouldn’t be an issue but a quick look at Nuix (NXL) suggests otherwise.
I also like the content of this release, Kingsgate trying to become fully operational utilising borrowed money at a bare minimum and have outlined how this will be achieved. Clearly by awarding themselves bonuses Ross and Jamie don’t see ongoing funding being an issue.
What I don’t like is how this strategy has been applied in the Annual Report. I have stated loudly that the 2016 assets need to come back onto the balance sheet now Chatree is open and producing gold and AASB 136 Impairment confirms this (s109-110). The Auditor PwC has however cited “material uncertainty” as to Kingsgate’s viability as a going concern. This issue should have been drawn to the BoD’s attention by the auditors ages ago, as the result is an understatement of Shareholders’Equity of $167m. Since this “Material Uncertainty” prevents the impaired assets being written back, why then could management not convince the auditor that there isn’t any material uncertainty (per this release)? Could extending the liability to the Preference Shareholder out by 12 months not have been negotiated earlier? I strongly suspect this is just PwC erring on the side of caution in the very unlikely scenario that they get sued (never mind the Mgt Representation Letter and all the disclaimers…).
The effect of this position is that PwC have put their name to a Total Net Assets, Shareholders’ Equity figure of $50m. That is what they think the entire group including Nueva Esperanza is worth and are prepared to put the PwC name to. Ross has also signed the Directors’ Declaration stating this is “a true and fair view of the group’s financial position”. Really? So if Resolute came along and offered $60m to takeover the company, we should accept the offer as it is at a significant premium to the true and fair value of the assets?

I’m speculating, but I think Ross has been coerced into signing the Directors’ Declaration simply to lodge the financial statements on time and tick the box with ASIC. Of course he thinks the Group is worth 10 times the audited figure despite his explicit declaration on behalf of all directors to the contrary!

The Statement of Financial Position (balance sheet) is meaningless. $50m equates to $0.194 cents per share! I know you can’t directly equate Shareholder Equity with Market Capitalisation, but that is what is implied by PwC’s valuation. I really expect more from Auditor’s Remuneration of $734k. Time to get some new auditors who can produce an audit report shareholders can use and isn’t delivered at the 11th hour. As noted by Hotcongo, it gives the impression of schoolboys who haven’t done their homework and are finishing it in class and there is no reason this couldn’t have been released days (or weeks even) earlier.

We as shareholders certainly seem to be paying top dollar when compared to other (including Big4) audit firms. I certainly don’t necessitate the audit opinion only coming from a Big4 firm, and this is an area where I think value to shareholders is could be improved. Have a look at the exert from the annual report below from Tietto (TIE). BDO (second tier audit firm) has given an unqualified audit opinion with emphasis of matter paragraph drawing users attention to “material uncertainty as a going concern”….this sounds familiar! The annual audit of the financial statements, resulted in a total cost to Tietto’s shareholders of $204k and with a far more realistic Total Net Asset value ($246m) despite the assets being located in Côte d’Ivoire in West Africa.


Lastly, I am expecting plenty of positive announcements between now and the AGM. Perhaps Rossand Jamie can pull a funding solution not listed at Note 1(a) in the form of ethereal grade ore from the quartz lease increasing Plant 2’s revenue exponentially…

This is an exciting time for shareholders (even Adam A is excited although he probably won’t admit it) , what we have all been years for! Shareholders need to see results reflected in the share price. Ross and Jamie, time to bring it home.