Directors’ Report
45
Directors’ Report
Revenue
Total revenue for the Group for the year was 
$329,282,000 down 8% from the previous year. 
Gold revenue decreased by 8% to $302,996,000 
and silver revenue decreased by 5% to 
$26,286,000.
The decrease in gold revenue reflects a lower 
gold price and a decrease in gold production 
from Challenger partially offset by an increase  
in gold production from the Chatree Mine.
The average US$ gold price received was 
US$1,588 (2012: US$1,663). The decrease  
in silver revenue reflects a lower silver price 
received of US$28/oz (2012: US$32/oz).
Costs
The overall increase in cost of sales to 
$195,064,000 including royalties and before 
depreciation and amortisation largely reflects 
increased throughput and production from the 
Chatree Mine due to the expanded Chatree 
process plant. On a unit cost basis, total cash 
costs for the Group were US$888/oz up from 
$US720/oz in the previous year. The total unit 
cash costs for Challenger for the year were 
US$1,135/oz (2012: US$862/oz), with the 
increase mainly due to lower throughput and 
production from the Challenger Mine. The total 
unit cash costs for Chatree for the year were 
US$767/oz up from US$618/oz in 2012.
Impairment of assets
Following a strategic review of the Challenger 
Gold Operations a new mine plan focussing 
mainly on the Challenger West orebody was 
implemented effective 1 July 2013.
As a result of the new mine plan together with 
the continuing low gold price environment, an 
assessment was conducted as at 30 June 2013 
of the carrying value of the Challenger Gold 
Operations and associated assets. This assess-
ment resulted in a pre-tax impairment of 
$311,850,000 ($291,259,000 post-tax).
A review of the carrying value of all regional 
greenfield exploration projects was also 
conducted which resulted in the write down of 
$6,141,000 primarily against the Barton West 
Mineral Sands project in South Australia and the 
write down of $14,280,000 against the carrying 
value of exploration projects in Thailand that fall 
outside the Chatree Mine area of influence.
Depreciation and amortisation
The increase in depreciation and amortisation to 
$85,595,000 reflects amortisation of the higher 
capitalised development costs at the Challenger 
Mine, depreciation of the second plant at 
Chatree and commencement of amortising the 
capital cost of the Chatree Tailings Storage 
Facility #2.
Exploration
Exploration expense was $675,000 and relates 
to exploration licences in Chile that were relin-
quished or disposed of during the year.
Cash flow
Operating cash inflow was $85,020,000. Net 
investing cash outflow was $142,425,000. Net 
cash outflows from financing activities was 
$1,691,000, including a drawdown (net of 
transaction costs) of $36,700,000 of the multi-
currency and syndicated loan facilities following 
a loan restructure by Kingsgate’s Thai subsidiary 
Akara Resources Public Company Limited 
(“Akara”), net repayment (net of transaction 
costs) of $20,000,000 of the corporate loan 
facility, and $19,409,000 dividends paid during 
the year.
Material business risks
The Group uses a range of assumptions and 
forecasts in determining estimates of produc-
tion and financial performance. There is uncer-
tainty associated with these assumptions that 
could result in actual performance differing from 
expected outcomes. 
The material business risks that may have an 
impact on the operating and financial prospects 
of the Group are:
Revenue
Revenue, and hence operating margins, are 
exposed to fluctuations including currency in 
the gold price and to a degree in the silver price. 
Management continually monitors operating 
margins and responds to changes to commodity 
prices as necessary to address this risk, including 
reviewing mine plans and entering into forward 
gold sale contracts.
Changes in the gold and silver price also impact 
assessments of the feasibility of exploration and