Westgold Resources Limited Annual Report 2020

109 Westgold Resources Limited Annual Report 2020 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PT:DA:WGX:046 2. Rehabilitation and restoration provisions Why significant How our audit addressed the key audit matter As a consequence of its operations, the Group incurs obligations to restore and rehabilitate the environment. Rehabilitation activities are governed by a combination of legislative requirements and Group policies. As at 30 June 2020, the Group’s consolidated statement of financial position includes provisions of $76.7 million in respect of such obligations (refer to Note 22). Estimating the costs associated with these future activities requires considerable judgment in relation to factors such as timing of the rehabilitation, the costs associated with the rehabilitation activities and economic assumptions such as discount rates and inflation rates. Accordingly, this was considered to be a key audit matter. We evaluated the assumptions and methodologies used by the Group in determining their rehabilitation obligations. Our audit procedures included the following: • Assessed the qualifications, competence and objectivity of the Group’s internal experts, the work of whom, formed the basis of the Group’s rehabilitation cost estimates. • Our rehabilitation specialists have assessed whether the Group’s cost estimates were reasonable considering industry benchmarks and relevant legislative requirements. Our rehabilitation specialists also compared the data used in calculating the provision to the mine closure plans submitted to Department of Mines, Industry Regulation and Safety and the reasonableness of year-on-year changes of the obligation. • Tested the Group’s calculation of the present values of the liabilities considering the estimated timing of when the cash flows will be incurred by reference to the most appropriate inflation and discount rates. • Assessed the adequacy of the Group's disclosures relating to rehabilitation obligations. 3. Castile demerger Why significant How our audit addressed the key audit matter Castile Resources Pty Ltd (“Castile”) held the Group’s polymetallic assets in the Northern Territory and during the period the Group distributed 100% (“the demerger”) of its shareholding in Castile via an initial public offering. Demergers of this nature are not common transactions for the Group, the accounting is complex and resulted in a net gain within the profit and loss of $8.7 million and a reduction in contributed equity of $8.8 million. Accordingly, this was considered to be a key audit matter. Our audit procedures included the following: • Reviewed the Implementation Deed of the Castile Demerger (“the Deed”). • Reviewed and agreed the key conditions of the Deed to the underlying supporting documents. • Assessed the determination of fair value of the shares distributed. • Tested the mathematical accuracy of the calculation of the net gain on demerger and the split between profit or loss and contributed equity. • Involved our tax specialists to assess the tax implications of the demerger. • Assessed the adequacy of the Group’s disclosure relating to the transaction.