FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 30 June 2025 108 WESTGOLD RESOURCES LIMITED 22. INTEREST-BEARING LOANS AND BORROWINGS (non-current) (CONTINUED) Non-current (continued) Lease liabilities AASB 16 Leases requires the recognition of right-of-use assets for the remaining term of the current leases for office premises and the warehouse facility, as well as the power stations and equipment at the various mine sites. in $000 Lease liabilities Minimum lease payments Present value of lease payments 2025 Within one year 10,127 8,992 After one year but not more than five years 11,948 10,731 Total lease payments 22,075 19,723 Less amounts representing finance charges (2,352) – Present value of lease payments 19,723 19,723 in $000 Lease liabilities Minimum lease payments Present value of lease payments 2024 Within one year 1,324 1,319 After one year but not more than five years 3,012 2,346 Total lease payments 4,335 3,665 Less amounts representing finance charges (671) – Present value of lease payments 3,665 3,665 23. FINANCIAL LIABILITY – ROYALTY The Group has a participation royalty agreement with Morgan Stanley (“Participation Royalty”), which was inherited through the acquisition of Karora (refer to Note 35). The Group shall pay Morgan Stanley 27.5% of the first 2,500 troy ounces of gold sold from Higginsville in each quarter, multiplied by the difference between the average gold London pm fix price for that quarter and A$1,340 per ounce. Once the Group has paid the equivalent of 110,000 ounces the liability will cease. The Group may terminate its obligation to pay participation royalties on or after 1 January 2035 (unless extended under certain conditions) by paying US$0.7 million. The Group has recognised a derivative liability for the participation royalty agreement which is fair valued at each reporting period. The fair value of the financial instrument not traded in an active market is determined using valuation techniques. These valuation techniques maximize the use of observable market data where it is available. If all significant inputs required to measure the fair value of an instrument are observable, the instrument is included as a Level 2 measurement. As the discount rate is not an observable input, the Participation Royalty liability is classified within Level 3 of the fair value hierarchy. The participation royalty obligation was estimated using a forward contract valuation approach model. The key inputs used in the valuation include: – the gold forward price curve; – USD/AUD foreign exchange rates based on forward curves; – discount rates incorporating the Group’s estimated credit spread of 3.01% as at 30 June 2025 (3.41% as at 31 July 2024); – a current risk-free rate based on the Australian dollar swaps curve; and – the Group’s estimated gold ounce delivery into the participation royalty.
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