Directors’ Report 46 www.kingsgate.com.au Production and cost estimates Environmental, health and safety  regulations Community relations Risk management Finance Corporate loan and convertible loan  facilities Matters subsequent to the end of the financial year Significant change in the state of affairs Multi-currency and syndicated loan facilities The Group prepares estimates of future produc- tion, cash costs and capital costs of production  for each operation though there is a risk that  such estimates will not be achieved. Failure to  achieve production or cost estimates or material  increases in costs could have an adverse impact  on future cash flows, profitability, results of  operations and financial position. The Group’s mining and processing operations  and exploration activities are subject to exten- sive laws and regulations. Delays in obtaining or failure to obtain government permits and  approvals may adversely affect operations,  including the ability to continue operations.  The Group has established community relations  functions that have developed a community  engagement framework, including a set of  principles, policies and procedures designed to  provide a structured and consistent approach to community activities.  A failure to appropriately manage local commu- nity stakeholder expectations may lead to  disruptions in production and exploration  activities. The Group manage the risks listed above, and  other day-to-day risks, through an established  management framework. The Group has policies  in place to manage risk in the areas of health and  safety, environment and equal employment  opportunity. Management and the Board regularly review the  risk portfolio of the business and the effective- ness of the Group’s management of those risks. The Group has a three year secured loan facility  with a limit of A$40,000,000 (30 June 2012:  A$50,000,000), of which A$20,000,000 has  been drawn down as at 30 June 2013 (30 June  2012: A$40,000,000).  The Group also has a five year A$35,000,000  convertible loan facility entered into in a prior  period to provide funding for the Bowdens  acquisition. Kingsgate has the option to make a  prepayment against the facility with an issue of  Kingsgate shares. As indicated previously in the Preliminary Final  report, at balance date it was the Group’s inten- tion to restructure and amalgamate these  facilities in the next financial year. This relates to  the potential for completion of the Initial Public  Offering (“IPO”) of Akara on the Stock Exchange  of Thailand and the updated mine plan for  Challenger. Any restructure would optimise the  Group’s anticipated balance sheet liquidity and  operational cash flows. Accordingly, the Group  classified the total amount drawn down under  these facilities of $55,000,000 as a current  liability at 30 June 2013. In addition as a result of  the intended restructure, $3,900,000 of previ- ously capitalised borrowing costs relating to the  convertible loan and corporate loan facilities has  been expensed at year end. Subsequent to the end of the financial year, the  Group has received from its lenders a credit  approved term sheet (subject to formal docu- mentation) for the restructure of the corporate  loan and convertible loan facilities. Following  completion of the restructure the total amount  outstanding will be reduced to $40,000,000.  This loan will be provided through a single senior  corporate facility which will consist of two  tranches: 〉 Tranche one will be a $25,000,000 Akara Pre IPO Bond with a maturity date of 31 July  2015. The current intention is for this  tranche to be repaid as part of the Akara IPO  although at Kingsgate’s election repayment  can be made by either cash or in Kingsgate’s  shares. 〉 Tranche two is an amortising facility with  $5,000,000 to be repaid during the 2014  financial year and the balance of  $10,000,000 repaid during the 2015 financial year. The Group also has a three year $25,000,000  Convertible Revolving Credit Facility available. At the date of this report the facility is undrawn.  Under the terms of this facility, Kingsgate has  the option of repaying any funds drawn down  under the facility through either cash or by  issuing ordinary shares. It is intended that this  facility will be utilised during the 2014 financial  year for corporate and working capital purposes.  It is the current intention of the Company to  repay any cash drawdown under the facility by  the issuance of fully paid ordinary shares which  Convertible revolving credit facility would rank parri pasu with all existing ordinary  shares, although this position will be reviewed at  the appropriate time. The number of shares has  not yet been determined and they will be issued  at a 2.5% discount to VWAP over a period by  reference to the draw down date. Shareholder  approval is not required. Kingsgate’s Thai operating subsidiary, Akara,  established a six year amortising multi-currency  loan facility equivalent to US$125,000,000  (fully drawn as at year end) and an additional  Thai Baht denominated working capital facility  equivalent to US$15,000,000 (undrawn as at  year end) during the period. The proceeds from  these borrowings were used to fully repay the  outstanding balance on the US$100,000,000  Baht denominated syndicated loan facility in  existence at the beginning of the year as well as  to repay part of the corporate loan facility noted  above. Finance costs include the write off of the  balance of capitalised borrowing fees of  $1,800,000 following the Akara refinancing. There were no significant changes in the state of affairs of the Group that occurred during the  financial year not otherwise disclosed in this  report or the consolidated financial statements. Kingsgate has received from its lender a credit  approved term sheet (subject to formal docu- mentation) for the restructure of the existing  corporate loan facility which is drawn to  $20,000,000 and the existing convertible loan  facility which is drawn to $35,000,000. Subsequent to the end of the financial year, the Group has received from its lenders a credit  approved term sheet (subject to formal docu- mentation) for the restructure of the corporate  loan and convertible loan facilities. Following  completion of the restructure the total amount  outstanding will be reduced to $40,000,000.  This loan will be provided through a single senior  corporate facility which will consist of two  tranches: