27 2022 ANNUAL REPORT 10. BUSINESS STRATEGY AND PROSPECTS FOR FUTURE YEARS (cont.) Operational risks: \ \ Drilling, mining and processing activities carry risk and as such, activities may be curtailed, delayed or cancelled as a result of a number of factors outside the Company’s control. These include geological conditions, technical difficulties, securing and maintaining tenements, weather, residue storage and tailings storage facility failures and construction of efficient processing facilities. The operation may be affected by force majeure, fires, labour disruptions and availability, landslides, the inability to obtain adequate machinery, engineering difficulties and other unforeseen events. As with most mines, reserves, resources and stockpiles are based on estimates of grade, volume and tonnage. The accuracy and precision of these estimates will depend upon drill spacing and other information such as continuity, geology, rock density, metallurgical characteristics, mining dilution and costs, etc. which evolve as the mine moves through different parts of the ore body. Red 5 endeavours to take appropriate action to mitigate these operational risks (including by properly documenting arrangements with counterparties and adopting industry best practice policies and procedures) or to insure against them, but the occurrence of any one or a combination of these events may have a material adverse effect on the Company’s performance and the value of its assets. COVID-19 \ \ Red 5 has continued to manage the Company’s ongoing response to COVID-19 in cooperation with our contractors. The COVID-19 situation remains unpredictable, and the Company will continue to monitor and manage for potential impacts, particularly around labour availability. \ \ The Company is maintaining a range of measures across its business consistent with advice from State and Federal health authorities and commensurate with the community risk profile. These measures help ensure the health and welfare of our employees and their respective communities. Legal compliance and maintaining title \ \ The Company has systems and processes in place to ensure title to all its properties, but these can be subject to dispute or unforeseen regulatory changes. Climate Change \ \ Changes to climate-related regulations and government policy have the potential to impact our future financial results. These changes may include the imposition of a carbon tax on carbon output or the implementation of new regulatory requirements for diesel or other fossil fuel consumption used in Red 5’s operations. Capital and Liquidity \ \ The Company has processes in place to monitor and manage its liquidity and capital structure to ensure sufficient funds are available to meet the Group’s financial commitments. Red 5 has a single debt facility with external financiers. Health and Safety \ \ Red 5 has implemented management systems which promote a strong safety culture and support a genuine commitment to keep its people and stakeholders safe and healthy. The Company’s safety management practices are focused on a bottom-up approach supporting the organisational values. Environmental \ \ The Company has environmental liabilities associated with its tenements. The Company monitors its ongoing environmental obligations and risks and implements preventative, rehabilitation and corrective actions as appropriate. Community relations \ \ Red 5 has an established community relations function that includes principles, policies and procedures designed to provide a structured and consistent approach to community activities. Red 5 recognises that a failure to manage local community stakeholder expectations appropriately may lead to dissatisfaction, potentially disrupting production and exploration activities. 11. ENVIRONMENTAL REGULATIONS The consolidated entity is subject to significant environmental regulation in respect to its mineral exploration activities. These obligations are regulated under relevant government authorities within Australia. The consolidated entity is a party to exploration and development licences and has beneficial interests in Mineral Production Sharing Agreements. Generally, these licences and agreements specify the environmental regulations applicable to exploration and mining operations in the respective jurisdictions. The consolidated entity aims to ensure that it complies with the identified regulatory requirements in each jurisdiction in which it operates. Compliance with environmental obligations is monitored by the Risk and Environment Committee. There have been no significant environmental breaches during the year ended 30 June 2022. DIRECTORS’ Report (cont.)
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