Resolute Mining Regulatory News (RSG)

28 August 2020

Resolute Mining Limited

(Resolute or the Company)

Appendix 4D

Half Year Report for the six months ended 30 June 2020

Reporting Period

The reporting period is for the half year ended 30 June 2020 with the corresponding reporting period being for the six months ended 30 June 2019.

Results for Announcement to the Market

Dividend Information

Net Tangible Assets

This half year report should be read in conjunction with the most recent annual financial report for the year ended 31 December 2019. The consolidated entity has changed its reporting currency from Australian dollars (A$) to United States dollars (US$), effective 1 January 2020. Consequently, unless otherwise stated, all reference to dollars are to US$.

Corporate Directory

Directors' Report

Your directors present their half year report on the consolidated entity (referred to hereafter as the "Group" or "Resolute") consisting of Resolute Mining Limited and the entities it controlled at the end of or during the half year ended 30 June 2020 (H1 20).

Corporate Information

Resolute Mining Limited ("Resolute" or "the Company") is a company limited by shares that is incorporated and domiciled in Australia.

Directors

The names of the Company's directors in office during the entire half year period and until the date of this report are as follows:

Martin Botha (Non-Executive Chairman)

John Welborn (Managing Director and CEO)

Yasmin Broughton (Non-Executive Director)

Mark Potts (Non-Executive Director)

Sabina Shugg (Non-Executive Director)

Peter Sullivan (Non-Executive Director)

Company Secretary

Amber Stanton

Key Highlights

Key highlights for half year ended 30 June 2020 include:

· Comprehensive response plan in place to the COVID 19 pandemic with no impact on H1 production

· Return of processing to full capacity

· Refinancing completed, successful equity raising and new low-cost flexible debt facility

· Ravenswood sale completed on 31 March 2020; total proceeds realisable of up to A$300m

· Acquisition of the existing Taurus royalty over Mako gold sales for US$12m

· Updated Life of Mine Plan for Mako delivers 39% more gold and two extra years of mine life

Operations Review

In H1 20, a total of 217,946 ounces (oz) of gold were produced (poured) at an All-In Sustaining Cost (AISC) of $1,020/oz with total gold sales of 212,668oz at an average realised price of $1,427/oz.

During H1 20, 1 million tonnes (Mt) of ore was milled at an average grade of 2.72 grams per tonne (g/t Au) for 226,752oz of gold recovered. An additional 9,241oz (excluding Ravenswood) was held in circuit at the end of H1 20 relative to 31 December 2019, taking the Group's gold in circuit balance to 82,506oz valued at $146m based on a gold price of $1,768 at 30 June 2020.

Production and Cost Summary for H1 20

COVID-19

The challenges presented by COVID-19 continue to change on a daily basis. Resolute is continuously monitoring developments relating to the pandemic and adapting the Company's response accordingly. A comprehensive response plan is in place to manage the COVID-19 pandemic at all Company locations which includes, in addition to hygiene, PPE and social distancing measures, testing and mandatory isolation procedures for positive cases amongst the workforce. The implemented protocols prioritise the health and safety of the workforce and have enabled operational continuity with currently no negative impacts on gold production.

Syama Gold Mine

At the Syama Gold Mine in Mali (Syama), H1 20 production was 121,237oz at an AISC of $1,095/oz.

Sulphide Operations

During H1 20, production from the Syama sulphide circuit was 56,679oz at an AISC of $1,445/oz. Gold production from the sulphide circuit increased by 58% in H1 20 compared to H1 19. The consistent improvement in H1 gold production and overall recovery rates is driven by the completion of repairs to the roaster in December 2019. Plant throughput increased as a result of extensive optimisation and modification of work on the crushing and milling circuits, while recoveries reflected a similar process of optimisation in the operation of the flotation and leach circuits.

Overall sulphide circuit recovery was 78% compared to 69% in FY19. Recoveries of 80% were achieved during the June quarter and are expected to be above 80% for the remainder of 2020 as the Company pursues further incremental improvement toward the long-term target of 85% total recoveries.

Oxide Operations

During H1 20, production was 64,558oz at an AISC of $789/oz. Mining was completed at Tabakoroni at the end of May 2020 with the excavation of the Splay pit located north-east of the main Namakan pit. A new satellite open pit operation at the Cashew prospect is expected to be established towards the end of the 3rd quarter FY20.

Exploration

Exploration continues to identify opportunities for further open pit operation to augment the existing stockpiles.

Mako Gold Mine

During H1 20, production from the Mako Gold Mine was 85,663oz at an AISC of $758/oz. During the H1, work was undertaken to develop an updated Life of Mine Plan (LOM) for Mako which was completed in July 2020 (see ASX Announcement 20 July 2020). The updated LOM has generated a 39% increase in total production and a mine life extension of two further years. Mako is now expected to have a total mine life of nine years and produce a total of 1.24 million ounces (Moz) of gold. Including 2020, Resolute plans to mine a further 900,000oz of gold from Mako until early 2027 at an average AISC over this period of $900/oz.

Ravenswood Gold Mine

On 31 March 2020, Resolute successfully completed the sale of Ravenswood Gold Mine to a consortium comprising private equity manager EMR Capital and leading energy and mining company Golden Energy and Resources. Resolute has received A$100m of initial proceeds consisting of A$50m in cash up front and A$50m in promissory notes which will earn interest at a rate of 6 per cent per annum. In addition, Resolute retains significant upside exposure to Ravenswood with up to A$200m in potential payments contingent on future gold prices, future gold production from Ravenswood and the investment outcomes from Ravenswood for EMR Capital.

Bibiani Gold Mine

Resolute is progressing a strategic review of the Bibiani Gold Mine in Ghana designed to evaluate plans to recommission the mine, assess capital requirements, evaluate funding alternatives and investigate expressions of interest from third parties seeking to acquire the assets. The strategic review is ongoing with the Company continuing to engage with third parties despite COVID-19 restricting the ability to travel to site.

Financial Overview

Financial Performance

Revenue for H1 20 was $305m, inclusive of discontinued operations, from gold sales of 212,668oz at an average realised price of $1,427/oz compared to the average spot price over the period of $1,636/oz.

Gross Profit from Operations was $26m after depreciation and amortisation of $91m. Resolute reported a Net Profit After Tax of $36m (including discontinuing operations). Resolute continued to invest heavily in the business in H1 20 with capital expenditures on development, property, plant and equipment totalling $49m and exploration and evaluation expenditure of $4m.

Financial Position

As at 30 June 2020, Resolute has cash ($62m), bullion (14,259oz of gold valued at $25m), additional liquid assets ($35m) and a Promissory note valued at $35m (A$50m). The Group's borrowings inclusive of the Facility and its Bank du Mali (BDM) overdraft facility was $308m at 30 June 2020. Resolute also held receivables of $57m associated with Malian VAT paid and refundable.

Gold Forward Contracts

Resolute maintains a policy of undertaking discretionary short-dated hedging to take advantage of periods of elevated gold prices to comply with funding obligations, which require a minimum of 30% of the next 18 months of forecast production to be hedged. Resolute's hedge book at 30 June 2020 totalled 198,000oz committed to monthly deliveries out to December 2021. This commitment consists of between 5,000oz to 20,000oz per month, forward sold at prices between $1,576/oz and $1,670/oz.

Significant Events After Balance Date

On 2 July 2020, Resolute drew down a further $20m on the Revolving Loan Facility and used these funds to repay a portion of its BDM overdraft facilities. There was no change to the Groups total debt position with total interest payable on debt reducing as a result of this transaction. The balance of the Syndicated loan facility that remains undrawn at the date of this report is $25m.

Resolute is monitoring the political situation in Mali following the resignation of the President and the dissolution of the government on 19 August 2020. The Company's operations in Mali are continuing as normal with no impact to production or to the safety and security of employees and contractors.

No other significant events have occurred since balance date on 30 June 2020 up to the date of this report.

Auditor's Independence

Refer to page 10 for a copy of the Auditor's Independence Declaration to the Directors of Resolute Mining Limited.

Rounding

Resolute is a company of the kind specified in Australian Securities and Investments Commission Corporations (Rounding in Financial Directors' Reports) Instrument 2016/191. In accordance with that Instrument, amounts in the financial report and the Directors' Report have been rounded to the nearest thousand dollars unless specifically stated to be otherwise.

Currency

The Directors have elected to change the Group's presentation currency from Australian dollars to United States (US) dollars effective 1 January 2020. All reference to dollars, cents, US$ or $ in this document are to US currency, unless otherwise stated.

Signed in accordance with a resolution of the directors.

[Electronically signed]

J.P. Welborn

Managing Director & CEO

Perth, Western Australia

28 August 2020

AUDITOR'S INDEPENDENCE DECLARATION

Please see report in the full version of the announcement at www.rml.com.au

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Notes to the Financial Statements

Note 1: Corporate Information

The financial report of Resolute Mining Limited and its controlled entities ("Resolute", the "Group" or "consolidated entity") for the half year ended 30 June 2020 was authorised for issue in accordance with a resolution of directors on 28 August 2020.

Resolute Mining Limited (the parent) is a for profit company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange and the London Stock Exchange.

The principal activities of entities within the consolidated entity during the half year were:

• gold mining; and,

• prospecting and exploration for minerals.

There has been no significant change in the nature of those activities during the half year.

Note 2: Basis of Preparation and Summary of Significant Accounting Practices

a) Basis of Preparation

This interim financial report for the half year ended 30 June 2020 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001.

The half year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the Group as the full financial report.

It is recommended that the half year financial report be read in conjunction with the Annual Report for the year ended 31 December 2019 and considered together with any public announcements made by Resolute Mining Limited during the half year ended 30 June 2020 in accordance with the continuous disclosure obligations of the Australian Securities Exchange listing rules and London Stock Exchange rules. The consolidated financial report is presented in United States dollars ("US$") rounded to the nearest thousand dollars, unless otherwise stated.

The accounting policies and methods of computation are the same as those adopted in the most recent annual financial report except for those disclosed in Note 3 below.

Contingent consideration in respect of sale of Ravenswood Gold mine

A contingent consideration is the right to consideration in exchange for non-financial assets transferred to the buyer. If the Group performs by transferring the non-financial assets to the buyer before the buyer pays consideration or before payment is due, an asset is recognised for the earned consideration that is conditional. The gold price and upside sharing contingent consideration represents variable considerations within the scope of AASB 15. The variable consideration measured at contract inception and at each reporting date is constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

Derecognition of financial Liability

A financial liability is derecognised when the associated obligation is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss and other comprehensive income.

Note 3: Changes in accounting policies

Change in presentation currency

The Directors have elected to change the Group's presentation currency from Australian dollars (A$) to United States (US) dollars effective 1 January 2020. The change in presentation currency is a voluntary change which is accounted for retrospectively. All other accounting policies are consistent with those adopted in the annual financial report from the year ended 31 December 2019. The financial report has been restated to US dollars using the procedures outlined below:

1. Income statement and Statement of Cash Flow have been translated into US dollars using average foreign currency rates prevailing from the relevant period. For material income statement items the spot rate at the date of transaction was used.

2. Assets and liabilities in the Statement of Financial Position have been translated into US dollars at the closing foreign currency rate on the relevant balance sheet dates.

3. The equity section of the Statement of Financial Position, including foreign currency translation reserve, retained earnings, share capital and other reserves, has been translated into US dollars on the basis that the Group had always reported in US dollars.

4. Earnings per share and dividend disclosure have also been restated to US dollars to reflect the change in presentation currency.

Note 4: Segment revenue and expenses

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

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

(c) The discrete financial information for Bibiani (Ghana) is no longer regularly reviewed by the Chief Operating Decision Maker on a standalone basis and now forms part of the reconciliation of the results and positions of the operating segments to the financial statements. As such, Bibiani is no longer presented as a reported segment. The comparative information have also been restated to reflect this.

Note 5: Segment cash flow, expenditure, assets and liabilities

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

Note 6: Dividend

There were no interim dividends paid or provided for during the half year end up to the date of this report (half year ended 30 June 2019: $nil).

Note 7: Taxes

At 30 June 2020, the Group has an income tax expense of $16m (30 June 2019: $0.2m). The Income tax expense comprises current income tax of $6m for the Mali operations and $10m of deferred tax expense in relation to the sale of the Ravenswood mine.

Note 8: Receivables

Current receivables at 30 June 2020 primarily relate to indirect taxes owing to the Group by the Republic of Mali.

Note 9: Inventories

Note 10: Mine properties

At 30 June 2020, the Group's mine properties amounts to $488m (31 December 2019: $536m). During the six-month period to 30 June 2020, further payments for development activities were made of $15m, partially offset by amortisation recognised on production assets.

Note 11: Interest bearing liabilities

Syndicated facilities

As part of the process of syndication of the Syndicated Facility Agreement (the "SFA"), the facility limit of Facility C was expanded to a term loan amounting to $150m with 6 banks maturing on 26 March 2023 with the option to extend for 1 year. Under the facility expansion, the $150m Facility A was also rolled into the SFA with the new maturity of 26 March 2023. The expanded facility was signed 25 March 2020.

Other than the security disclosed in the annual financial report for year ended 31 December 2019, the updated SFA and hedging facilities, additionally provided the lenders or their affiliates the following security:

(i) Security Agreement granted by Resolute Treasury UK Limited over all current and future assets including bank accounts and assignment of all Hedging contracts,

(ii) Specific Security Deed granted by Resolute over all its share in Resolute (Finkolo) Pty Ltd and a featherweight security over its assets not secured under a Security Document,

(iii) Share Pledge Agreement granted by Toro Gold Limited over all its share in Bambuk Mineral Limited; and,

(iv) Mortgage of Contractual Rights granted by Resolute (Bibiani) Pty Ltd over loans provided to Drilling and Mining Services Limited, Noble Mining Ghana Limited and Mensin Gold Bibiani Limited.

Neither the covenants nor the negative pledges has been breached at any time during the reporting period.

Note 12: Provisions

(1) Resolute's subsidiary SOMISY, has received demands for payment to the Mali Tax Authorities in relation to Income Tax and Value Added Tax (VAT) for the tax years ended 31 December 2015, 2016, 2017 and 2018. Based on the facts and circumstances available at the date of this report and in line with requirements of the accounting standards the Group has provided for the VAT demands as at 30 June 2020 amounting to $43m. The factual basis and validity of these demands are being strongly disputed by Resolute due to fundamental misinterpretations of the application of certain tax laws to SOMISY with reference to the provisions of SOMISY's Establishment Convention. Resolute continues to work with its legal and tax advisors to contest the demand and will resist any efforts to enforce payment. The demand for Income Tax has been disclosed as a contingent liability. Refer to Note 18.

Note 13: Discontinued operation

On 15 January 2020, Resolute signed a definitive agreement for the sale of the Ravenswood Gold Mine in Queensland to a consortium comprising of a fund managed by private equity manager EMR Capital and energy and mining company Golden Energy and Resources Limited. The consideration for the sale comprised A$50m of cash up front, A$50m promissory note and up to A$200m potential payments. The potential payments are contingent on future gold prices and future gold production from the Ravenswood Gold Mine as well as the investment outcomes from the Ravenswood Gold Mine for EMR Capital. The sale was completed 31 March 2020.

Transaction consideration comprises total cash payments to Resolute of up to A$300m as follows:

- A$100m of immediate value represented by

o A$50m of cash; and

o A$50m in Promissory Note;

- Up to A$50m via a Gold Price Contingent Payment instrument; and

- Up to A$150m via an Upside Sharing Payment instrument

The consideration received from EMR is being accounted for under AASB 15: Revenue from Contract with Customers.

Promissory Note

A A$50m promissory note with an annual coupon rate of 6% to be paid in cash to Resolute at maturity. The receivable matures at the earlier of liquidity date or maximum term of seven years.

The Promissory Note is initially valued at net present value of A$50m ($31m) and subsequently measured at amortised cost under AASB 9 of A$51m ($35m) as at 30 June 2020.

The carrying amount of the promissory note at 30 June 2020 approximates its fair value.

Gold Price Contingent Payment Instrument

A Gold Price Contingent Payment is payable to Resolute for years following Financial Close based on the following bands:

- A$10m if the average gold price is greater than A$1,900/oz,

- A$20m if the average gold price is greater than A$1,975/oz,

- A$30m if the average gold price is greater than A$2,050/oz,

- A$40m if the average gold price is greater than A$2,075/oz, and

- A$50m if the average gold price is greater than A$2,100/oz.

Payment of the Gold Price Contingent Payment is subject to the cumulative ounces produced from Ravenswood exceeding 500,000oz of gold over the four-year period and is subject to adjustment if the production adopted by the buyer is reduced or lower than expected.

For the Gold Price Contingent Payment Instrument, we have assessed the likelihood of the production target being met as well as the likely weighted average gold price to be achieved over the 4-year period. We have used the following assumptions in the determination of this variable consideration:

- Resolute assumed that the 500,000oz of gold production over the four year period will be met.

- Resolute used forecast gold prices submitted by reputable banks and brokerage firms and forecast out to a period of up to 5 years.

- Resolute assessed that the occurrence of a liquidity event within the 4-year period to be unlikely.

The Gold Price Contingent Payment Instrument is valued at a net present value of A$20m ($14m) at 30 June 2020, based on the most likely amount method.

Upside Sharing Payment Instrument

The Upside Sharing Payment is designed to align Resolute with investment outcomes of EMR Fund. This is determined by reference to the gross money multiple to EMR Fund which is the gross proceeds (before the payment of the Upside Sharing Payment) divided by the capital invested in the acquisition, development and operation of Ravenswood by EMR Fund. Resolute will receive the Upside Sharing Payment from EMR based on the amount by which the gross money multiple exceeds a minimum threshold up to a cap of A$150m as follows:

- A$7.5m for each 0.1 that the gross money multiple is above 2.5 up to 4.0; and

- A$5.0m for each 0.1 that the gross money multiple is above 4.0.

Resolute has not recognised an amount for the variable consideration for the Upside Sharing Payment instrument due to the fact that a significant risk of reversal of any amount recognised is considered highly probable.

Results of the disposal group held for sale asset:

Carrying value of net assets at date of disposal:

Cash flow information for disposal group:

Note 14: Measurement period changes to business combination

On 31 July 2019, Resolute (through its wholly owned subsidiary, Resolute UK 2 Limited) signed a binding agreement to acquire all the shares of Toro Gold. When Resolute issued its 31 December 2019 financial statements, the measurement of the acquired assets and liabilities was provisional. In the 31 December 2019 financial statements, Resolute had recognised a deferred tax liability on acquisition of $9m and mine properties and development of $257m . During the period ended 30 June 2020:

· the valuation of the deferred tax liability was finalised and updated to $2m following further clarification on operation of tax regime in Senegal.

· The valuation of mine properties and development was finalised and updated to $250m

Adjustment in the 31 December 2019 financial statements:

In accordance with accounting standards, Resolute has made retrospective adjustments by restating the 31 December 2019 financial information in accounting for the finalisation of the business combination as detailed below:

· the carrying amount of the deferred tax liability at 31 December 2019 decreased by $7m.

· the carrying amount of mine properties and development at 31 December 2019 decreased by $7m.

Note 15: Contributed Equity