Avino Silver & Gold Mines Ltd
Annual Report 2022

Plain-text annual report

Annual Report 2022 rare earths, critical minerals & high-tech metals Disclaimer Competent Persons The Mineral Resources and Ore Reserves Statement has been approved by Mr D Ian Chalmers, FAusIMM, FAIG, a technical consultant to the Company. Mr Chalmers has provided his prior written consent to the inclusion in this report of the Mineral Resources and Ore Reserves Statement in the form and context in which it appears. The information in this report is based on information which has been compiled by Mr Stuart Hutchin, MIAG, an employee of Mining One Pty Ltd. The information in this report is based on information which has been compiled by Mr Levan Ludjio MAusIMM(CP) and Mr Mark Van Leuven FAusIMM (CP), employees of Mining One Pty Ltd. While these forward-looking statements reflect the Company’s expectations at the date of this report, they are not guarantees or predictions of future performance or statements of fact. The information is based on the Company forecasts and as such is subject to variation related to, but not restricted to, economic, market demand/ supply and competitive factors. Forward-looking statements are only predictions and are subject to known and unknown risks, uncertainties, assumptions, and other important factors that could cause the actual results, performances or achievements of the Company to differ materially from future results, performances or achievements expressed, projected or implied by such forward-looking statements. Readers are Each of Mr Chalmers, Mr Hutchin, Mr Ludjio and Mr Van cautioned not to place undue reliance on these forward- Leuven has sufficient experience that is relevant to the style looking statements, which speak only as of the date thereof. of mineralisation and type of deposit under consideration Except as required by applicable laws or regulations, the and to the activity that is being undertaken to qualify as Company does not undertake to publicly update or review a Competent Person as defined in the 2012 Edition of the any forward-looking statements, whether as a result of new ‘Australasian Code for Reporting of Exploration Results, information or future events. The Company cautions against Mineral Resources and Ore Reserves’ (JORC Code). reliance on any forward-looking statements or guidance, Previously reported information particularly in light of the current economic climate and the significant volatility, uncertainty and disruption arising in Information prepared and disclosed under the JORC Code connection with COVID-19. Information on likely developments in the Group’s business strategies, prospects and operations for future financial years and the expected results that could result in unreasonable prejudice to the Group (for example, information that is commercially sensitive, confidential or could give a third party a commercial advantage) has not been included below in this report. The categories of information omitted include forward-looking estimates and projections prepared for internal management purposes, information regarding the Company’s operations and projects, which are developing and susceptible to change, and information relating to commercial contracts. has not materially changed since last reported in Company’s ASX announcements available to view on the Company’s website. The Company is not aware of any new information or data that materially affects the information included in this Annual Report and confirms that the material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. Forward-looking statements This document contains certain statements which constitute “forward-looking statements”. Often, but not always, forward-looking statements can generally be identified by the use of forward-looking words such as “may”, “will”, “expect”, “plan”, “believes”, “estimate”, “anticipate”, “outlook” and “guidance”, or similar expressions, and may include, without limitation, statements regarding plans; strategies and objectives of management; anticipated production and production potential; estimates of future capital expenditure or construction commencement dates; expected costs or production outputs; estimates of future product supply, demand and consumption; statements regarding future product prices; and statements regarding the expectation of future Mineral Resources and Ore Reserves. Contents Company Information Acknowledgement of Country Message from the Chair About us Building our mine to metals business Dubbo Project Korean Metals Plant Sustainability Corporate Governance Statement Financial Report Directors’ Report Auditor’s Independence Declaration Consolidated Financial Statements Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Additional Information Shareholder information Schedule of mining tenements 02 03 04 08 10 12 22 30 38 39 41 56 58 62 96 97 102 102 103 Overview | ASM Annual Report 2022 01 Company Information Company Information ACN 168 368 401 Directors IJ Gandel (Non-Executive Chair) NP Earner (Non-Executive Director) KJ Gleeson (Non-Executive Director) GM Smith (Non-Executive Director) Joint Company Secretaries J Jones D Wilkins Registered office and principal place of business Level 4, 66 Kings Park Road West Perth WA 6005 Telephone: +61 8 9200 1681 Share registry Advanced Share Registry Services 110 Stirling Highway Nedlands WA 6009 Telephone: Facsimile: +61 8 9389 8033 +61 8 9262 3723 Auditor PricewaterhouseCoopers Brookfield Place, 125 St Georges Terrace Perth WA 6000 Website asm-au.com Security exchange listing ASX: ASM Acknowledgement of Country Australian Strategic Materials acknowledges the Traditional Custodians of Country throughout Australia and their connections to land, sea and community. We pay our respect to their Elders past, present and emerging, and extend that respect to all Aboriginal and Torres Strait Islander peoples. Specifically, we acknowledge the Traditional Custodians in the areas where we have our offices and operations: • The Nyoongar Whadjuk people - Perth • The Wilay Wiradjuri people - Dubbo and Toongi • The Turrbal and Jagera/Yuggera people - Brisbane 02 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 03 Message from the Chair On behalf of the Board of Australian Strategic Materials Ltd (ASM), I am pleased to present the Company’s Financial Year 2022 (FY22) Annual Report. FY22 has been another busy year. There have been many notable highlights as ASM continued to build its global rare earths and critical minerals business to provide the high-tech metals needed to solve the challenges of today and the future. Dubbo Project ASM continued with the development of its Dubbo Project - a rare earths and critical minerals project in NSW, Australia. We completed the Project’s Optimisation Study, which confirmed the project’s strong financials. The Optimisation Study Work also included design improvements that enhanced the project’s ESG performance, including reducing trucks on community roads, creating local jobs and reducing water consumption. The Optimisation Study Work was a substantial and crucial piece of foundational work that confirms the compelling case for the development of the Dubbo Project. Throughout the year, to advance project financing, ASM engaged with Australian and Korean government funding agencies and commenced discussions with Australian, Korean and global project finance banks. ASM is encouraged by the support received to date, especially from the Australian and Korean Governments, as we continue to pursue these exciting opportunities. ASM also progressed toward securing a strategic investor, and acquiring offtake agreements for the Dubbo Project, meeting with industrial conglomerates, product end-users, engineering companies and financial investors in Korea, the USA, Europe and Japan. I am confident these discussions will enable the Company to secure an aligned strategic partner for the Dubbo Project, and we look forward to progressing these discussions into FY23. In June 2022, the Dubbo Project took a major step forward, with Hyundai Engineering Corporation Co., Ltd (HEC) awarded the contract to provide Engineering Procurement and Construction Definition (EPCD) work. We are thrilled to have HEC, one of the world’s leading EPC firms, seeking to partner with us on this project. Over the past two decades, we have developed a strong relationship with local Elders and Aboriginal organisations associated with the land on which the Dubbo Project is located. This year it was a real pleasure to have Peter Peckham, Wiradjuri Elder, participate in the opening of our Korean Metals Plant, celebrating the connection between Australia and Korea. Having been an advocate for the Dubbo Project for many years, I find it exciting to see traction on the activities fundamental to delivering the Dubbo Project, and I thank the talented Project team for their hard work over the past 12 months. I am especially pleased that after this extraordinary effort, the first sale and delivery of neodymium praseodymium metal from the Plant occurred in September 2022. Securing the first sale was a key milestone for ASM and, as we ramp up further, we look forward to announcing further agreements. This year, the technology team focussed on commercial scale process development of ASM’s innovative metallisation technology to produce copper titanium alloy products. I am excited about the remarkable opportunity scaling this technology presents for ASM to innovatively produce titanium products. Further work is planned to continue through FY23 on this exciting technology. The Korean Metals Plant and ASM’s presence in Korea have generated support and interest from government and industry. Having travelled to Korea several times during the year, I believe ASM’s relationship in Korea is strong, and look forward to harnessing ongoing opportunities for collaboration. Korea In Korea, ASM’s primary focus has been the construction of the Korean Metals Plant, together with the installation and commissioning of the Phase 1 neodymium praseodymium and titanium furnaces, and ancillary equipment. ASM commenced and completed the refurbishment of the existing main factory and the construction of five additional buildings at the Korean Metals Plant in under 10 months - an incredible feat by the focussed and hardworking team. To celebrate the completion of the refurbishment and construction, the Korean Metals Plant hosted an official opening ceremony in May 2022. We were delighted to be joined by key representatives from the Australian and Korean government and business community, as we celebrated the significance of the plant for the global critical metals supply chain. Installation and commissioning of Phase 1 equipment to produce neodymium praseodymium and titanium fell behind schedule due to the ongoing impacts of COVID-19 and supply chain disruptions, however our team overcame these challenges with the installation of the neodymium praseodymium and titanium furnaces completed before the year end, with commissioning well underway. I extend my thanks to our dedicated team for their ability to navigate through these tough circumstances and produce a critical outcome for our business. 04 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 05 Message from the Chair Environmental Social and Governance As ASM continues to build its business, it will do so adhering to its commitments to community and the highest sustainability standards. ASM continues to undertake the solid groundwork required to meet the standards expected of an ethical and sustainable company. As shown in the Sustainability section of this report, this year ASM further strengthened its governance regime to ensure it operates with high ESG standards across all its operations. Board and Management Following the close of the financial year, Managing Director and CEO David Woodall stepped down. I would like to acknowledge David’s contribution to ASM over the past two years. In July, the Board was delighted to appoint Rowena Smith, as Chief Executive Officer. Rowena has almost 30 years of global mining experience and had been ASM’s Chief Operating Officer since July 2021. The Board believes Rowena is the right person to lead ASM with her strong leadership, technical and commercial skills, and tremendous experience and energy. We welcome her appointment, which will see ASM through this next stage of its development and beyond. In March, we were saddened to announce the retirement of Ian Chalmers as Non-Executive Director from the Board. Ian was one of the founding directors of ASM before its demerger from Alkane Resources Ltd and was responsible for bringing the Dubbo Project into the Company. Ian’s expertise and experience has provided significant value to the Company since its inception and I wish to extend my profound gratitude for his service. In February the Board welcomed Kerry Gleeson as Non-Executive Director. Kerry has two decades of experience as a director, senior executive and board advisor of various ASX listed companies and I believe Kerry will be a valuable addition to the ASM team as we progress our mine to metals strategy. The year ahead ASM will be focused on securing funding for the Dubbo Project, including attracting the right strategic investor and associated offtake agreements for Dubbo’s products. In Korea, ASM intends to complete commissioning and secure further sales for products from the Korean Metals Plant. Concluding remarks Global markets need both the Dubbo Project and Korean Metals Plant products. Megatrends such as decarbonisation, clean energy and automation, are driving industry demand and growth for rare earths, critical minerals and high-tech metals and ASM has the capability to provide these products. Looking forward, I believe ASM is well positioned for the medium to long term, as we build a global rare-earths and critical minerals business to provide the high-tech metals required for a sustainable world, both for today and tomorrow. I acknowledge that we have faced challenges over the past year, but I believe in our talented ASM team and our business objectives. I also remain actively committed to supporting the Company. I wish to reiterate my thanks to all of the ASM and KSM teams for their outstanding efforts over the year and I look forward to our future achievements planned for FY23. To all ASM’s shareholders, I say thank you for your belief in ASM throughout the year. The Board, management and staff recognise your support and are committed to delivering strong returns to you as we grow. I look forward to updating you again next year. Ian Gandel Chair 06 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 07 About us Australian Strategic Materials (ASM) is building a global rare earths and critical minerals business to provide the high-tech metals needed to solve the challenges of today and the future. ASM’s cornerstone project is its Dubbo Project, located 25kms from Dubbo in NSW, Australia. This is a rare earths and critical minerals project with a resource that includes neodymium, praseodymium, dysprosium, terbium, zirconium, niobium and hafnium. The Dubbo Project has strong financials, all major approvals in place, and compelling ESG credentials. ASM intends to develop the Dubbo Project to produce a range of metal oxides and mixed chlorides. Over the past 16 years, ASM has worked in partnership with the Australian Nuclear Science and Technology Organisation (ANSTO) to complete significant successful test work and to develop a flowsheet design. ASM and ANSTO will continue this work to further maximise recoveries. When the Dubbo Project is constructed, the products will be metallised at ASM’s Metals Plants, the first of which is in Ochang, Korea. The Korean Metals Plant will produce high-tech metals and alloys needed for sustainable energy industries, advanced manufacturing and other growth industries. The Korean Metals Plant opened in 2022 and is currently in commissioning, with an initial focus on neodymium praseodymium and titanium products. As part of the titanium commissioning process, ASM is progressing with the commercial-scale process development of its innovative metallisation technology. ASM wants to leave a legacy that delivers enduring benefits to the communities and regions where it operates and will work to ensure it manages environmental impacts, respects human rights, minimises greenhouse gas emissions, and supports local communities. 08 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 09 Building our mine to metals business 10 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 11 Dubbo Project The right project, in the right place, at the right time. Key Facts Dubbo Project Rare Earths and critical minerals resource Includes neodymium, praseodymium, dysprosium, terbium, zirconium, niobium and hafnium. Strong Financials Forecast 23.5% Pre-tax IRR. Forecast CapEx estimate AUD 1,678 million. Refer ASX release 7 December 2021: Dubbo Project Delivers Strong Financials. 20 year life of mine Potential for further 50 years based on resources and subject to approvals. Construction readiness All major approvals in place. Land and water licences owned. Advanced flowsheet Developed in partnership with ANSTO over 16 years. Close to established infrastructure 25kms from Dubbo, NSW Australia 400kms northwest of Sydney. Workforce opportunities Up to 1,000 local jobs during the construction period. Approximately 270 local jobs when operational. Compelling ESG credentials Biodiversity offsets. Exploring use of renewable energy. Commitment to community. 12 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 13 Dubbo Project Year in Review Summary ASM continued to progress development of the Dubbo Project throughout the year. Key achievements included: • Completion of the Optimisation Study Work • Completion and submission of all requirements for a licencing approvals Modification Report (MOD1) to the NSW Government • Awarding the Engineering Procurement and Construction Definition Work contract to Hyundai Engineering Co., Ltd • Completion of the on-site project office construction Over the year, ASM worked toward securing finance for the Dubbo Project. As ASM’s finance strategy is to deliver the project through a mix of equity and debt supported by export credit finance, this involved engagements with Australian and Korean government funding agencies, and engagement with Australian, Korean and global project finance banks. To assist with the procurement of government agency and commercial bank debt, ASM appointed the Australian and New Zealand Banking Group Limited (ANZ) as debt financial advisors. ASM also worked on securing a strategic investor in the Dubbo Project, meeting with government agencies, industrial conglomerates, product end-users, engineering companies and financial investors. A successful outcome of this work was the investment of USD 15 million by KCF Energy Co. Ltd (KCF). Furthermore, ASM continued to advance discussions with various parties seeking to secure long-term supply of rare earths and critical minerals. These discussions led to the signing of a `Joint Statement of Cooperation on Critical Metals’ with the Korean Mine Rehabilitation and Resource Corporation (KOMIR). This aims to enable the supply of critical minerals and metals to Korea. With potential customers interested in products that can meet specific technical requirements, ASM’s technical team progressed sample testing and qualification programs. The team has continued to work collaboratively with ANSTO to further refine ASM’s technology and flowsheet for processing materials from the Dubbo Project. ASM continued to work with local Elders and Aboriginal organisations associated with the land on which the Dubbo Project is located. This includes the Dubbo Aboriginal Community Working Party, Three Rivers Regional Assembly, and the Dubbo Local Aboriginal Land Council. Dubbo Project Optimisation Study work completed In December 2021, ASM completed Optimisation Work for the Dubbo Project, releasing its Optimisation Study and Enhanced Project Addendum. For full details of Optimisation Work for the Dubbo Project, refer ASX release 7 December 2021: Dubbo Project Delivers Strong Financials. Strong financials Diversified revenue Enhanced ESG outcomes AUD 425 million Free Cash Flow per year at full production 23.5% Pre-tax IRR AUD 1,678 million Capital cost estimate 44% Rare earth oxides 33% Zirconium 19% Niobium 4% Hafnium Exchange Rate (A$:US$) 0.75; Discount Rate (real, post-tax %p.a.) 8.0%; Corporate Tax Rate (%) 30% The Dubbo resource offers a diversified product suite, de-risking exposure to single commodity price volatility. Reduced water consumption 270 permanent local jobs to be created Reduced trucks on community roads 14 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 15 Dubbo Project Hyundai Engineering Corporation awarded EPCD contract Signing ceremony with Hyundai Engineering Corporation for Dubbo Project EPCD contract In June 2022, ASM awarded Hyundai Engineering Corporation Co., Ltd. (HEC) a conditional contract to provide Engineering, Procurement and Construction Definition work (EPCD) for the Dubbo Project, allowing for additional services beyond FEED. The EPCD work is expected to take 14 months to complete and will commence after ASM issues a Notice to Proceed to HEC. Refer ASX release 9 June 2022: Hyundai Engineering Co., Ltd. awarded conditional contract for design work for the Dubbo Project. Equity funding of USD 15 million In May 2022, ASM received an equity investment of USD 15 million at an issue price of AUD 8.90 per share from KCF Energy Co. Ltd (KCF). KCF is a company owned by a South Korean consortium comprising Cerritos Holdings Co., Ltd, Polo Equity Partners LLC and ACE Equity Partners LLC. Refer ASX release 16 May 2022 : USD 15 million Subscription Agreement at AUD 8.90 per ASM share Dubbo Project Modification Report The Dubbo Project Optimisation Work completed in December 2021 led to several design improvements in plans already approved for the Dubbo Project. As a result, ASM submitted a Modification Report (MOD1) to the NSW government to reflect the improvements and maintain the status of its approval. The Dubbo Project team completed numerous environmental studies including noise, air quality and emissions. Following completion of this work, ASM submitted the MOD1 to the NSW government in early 2022. The MOD1 was placed on the NSW Department of Planning and Environment (DPE) website for public access. During the public access period, DPE received six public submissions and nine submissions from government agencies. After the financial year end, ASM submitted its response to the public and government submissions. A determination from the DPE on MOD1 is expected in FY23. NSW Deputy Premier, the Member for Dubbo and ASM Chair at NSW strategy launch Launch of NSW Critical Minerals and High-Tech Metals Strategy ASM was proud to host the launch of the NSW Critical Minerals and High-Tech Metals Strategy at its Dubbo Project site in December 2021. The strategy was launched by the Hon. Paul Toole MP, NSW Deputy Premier and the Minister responsible for Resources at the time. ASM welcomed this demonstration of commitment by the NSW government, which further highlighted that the Dubbo Project is in the right place at the right time. Dubbo Project site office completed ASM completed construction of the onsite Dubbo Project Office and received its Occupation Certificate. 16 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 17 Process and Outputs Dubbo Project Research and Development with ANSTO The Dubbo Project’s Demonstration Pilot Plant (DPP) is located at ANSTO’s Lucas Heights facility in Sydney. During the year, ANSTO and ASM worked collaboratively to run the DPP to provide further updates and confirmation to the design criteria and flowsheet for the Dubbo Project. This also provided feedstock for the preparation of product samples to offtake customers. ASM and ANSTO successfully identified improvements encompassing roasting, counter-current decantation, zirconium and hafnium solvent extraction, and zirconium precipitation. Bench scale testing of an alternative rare earth purification circuit was also conducted, showing significant increases in rare earth recoveries. Rare earths solvent extraction research & development at ANSTO 18 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 19 Funding Resources and Reserves Dubbo Project To develop the Dubbo Project, ASM is targeting a project financing funding strategy based on a mix of equity and debt, supported by export credit finance. During FY22, ASM targeted debt providers, including Australian and Korean government funding agencies and Australian, Korean, and global project finance banks regarding the provision of project finance. To assist, the Australian and New Zealand Banking Group Limited (ANZ) was appointed debt financial advisor in October 2021. Funding Progress builds upon the existing AUD 200 million conditional letter of support ASM received from Export Finance Australia in 2021. (Refer ASX release 28 June 2021: Export Finance Australia issues letter of support for the Dubbo Project) To secure the equity required to develop the Dubbo Project, ASM met with government agencies, industrial conglomerates, product end-users, engineering companies and financial investors regarding potential collaboration and investment in the project. An investment of USD 15 million was made by KCF Energy Co. Ltd (KCF). This investment followed the conditional framework agreement entered with KCF in July 2021. (Refer ASX release 21 July 2021: ASM signs $US250M framework agreement with South Korean consortium for 20% in Dubbo Project and offtake from Korean Metals Plant) Market Outlook This was a turbulent year for all global markets. However, the long-term outlook remains positive for ASM, given the potential use of Dubbo products in industries focused on advanced technologies that support mega trends such as decarbonisation, clean energy and automation. Prices for rare earth elements reached multi-year highs in February 2021 due to increased demand for permanent magnets. While prices for magnetic rare earths have retraced from these peaks, amid a broader sell-off in metals markets that gathered pace in the June quarter, they remain well above five-year averages. Despite falling global vehicle sales due to COVID-19 lockdowns in China, supply chain constraints in Europe and the US, and broader global economic concerns, electric vehicle sales in major markets nevertheless increased to nearly 5 million units in the year to July. This is compared to 6.6 million in the whole of 2021. According to industry consultants Adamas Intelligence, this has driven a more than 60% year-to-date lift in global NdFeB magnet deployment in electric vehicle traction motors in the first seven months of 2022. In the medium term, expectations from the International Energy Agency (IEA) for electric vehicle sales to reach 15.9 million in 2025 and 27.7 million units in 2030, together with solid growth in wind power generation, could see demand for magnetic rare earth oxides, metals and magnet alloys alike outpace supply. As a result, these markets may experience significant shortages before the end of the decade. Similarly, market dynamics for other key commodities from the Dubbo Project are experiencing favourable demand shifts as the global community looks to develop sustainable solutions to meet collective decarbonisation goals. Both zirconium and hafnium are benefitting from renewed interest in developing Small Modular Reactors (SMRs). At the same time, the latter’s use in nickel-based superalloys, critical to efficiencies in aerospace and industrial gas turbine engines, offers further growth potential. Meanwhile, research into niobium-based lithium-ion battery technologies could establish a new end-use application for the element’s oxides. Mineral Resources Resource Category Measured Inferred Total Tonnes (Mt) 42.81 32.37 75.18 ZrO2 (%) 1.89 1.90 1.89 HfO2 (%) 0.04 0.04 0.04 Nb2O5 (%) Ta2O5 (%) 0.45 0.44 0.44 0.03 0.03 0.03 Y2O3 (%) 0.14 0.14 0.14 TREO* (%) 0.74 0.74 0.74 * TREO is the sum of all rare earth oxides excluding ZrO2, HfO2, Nb2O5, Ta2O5 and Y2O3 Ore Reserves Reserve Category Proved Total Tonnes (Mt) 18.90 18.90 ZrO2 (%) 1.85 1.85 HfO2 (%) 0.040 0.040 Nb2O5 (%) Ta2O5 (%) Y2O3 (%) TREO* (%) 0.44 0.44 0.029 0.136 0.735 0.029 0.136 0.735 * TREO is the sum of all rare earth oxides excluding ZrO2, HfO2, Nb2O5, Ta2O5 and Y2O3 Note: As at 30 June 2022, the Mineral Resources and Ore Reserves for the Toongi deposit, which is the basis of the Dubbo Project, are the same as those stated in Company’s Information Memorandum and Demerger Booklet dated 29 July 2020. These estimates were provided by independent industry consultants Mining One Pty Ltd and are reported by ASM in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC 2012). Mineral Resources are wholly inclusive of Ore Reserves, which are based on economic parameters applied to the Mineral Resources, reflecting an initial project horizon of 20 years. Governance and internal controls ASM has governance arrangements and internal controls concerning its estimates of Mineral Resources and Ore Reserves for the Dubbo Project, including: • Oversight and approval of each annual • Annual reconciliation with internal planning statement by a competent person to validate reserve estimates • Establishment of internal procedures and • Board approval of new and materially controls to meet JORC Code 2012 compliance in all external reporting changed estimates • Independent review of new and materially changed estimates Overview | ASM Annual Report 2022 20 Overview | ASM Annual Report 2022 21 Korean Metals Plant Producing high-tech metals Key Facts Rare earths and critical minerals metallisation facility Located in Ochang Foreign Investment Zone Approximately 115 kms south of Seoul, Korea Opened 12 May 2022 ISO accredited ISO 14001:2015 ISO 9000 Neodymium products initial focus NdPr metal & NdFeB alloy 20,000m2 Area of site facility Titanium alloys in development CuTi allloy Operational workforce 70-100 people 22 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 23 Korean Metals Plant Year in Review Summary This year ASM made significant progress at the Korean Metals Plant in Ochang, Korea. ASM commenced development of the 20,000m2 plant site in July 2021 with the refurbishment of the existing main factory and the construction of five additional buildings. This included relocation of the research and development pilot plant and establishment of an on-site Korean national accredited laboratory for product quality assessment. The facility was completed in April 2022, and ASM celebrated this milestone with an official opening ceremony in May 2022. Installation of phase 1 equipment for the production of neodymium praseodymium and titanium products was progressed through the year and completed in June 2022. Completion of installation was delayed due to the ongoing impacts of COVID-19 and supply chain disruptions. Concurrently to installation, ASM progressed commissioning of the plant facility, focussing on neodymium praseodymium and titanium furnace commissioning. Process commissioning for neodymium praseodymium metal progressed, with successful saleable metal production occurring after the end of the financial year. Following commissioning of the titanium furnace, ASM commenced commercial-scale process development of its innovative metallisation technology. The initial focus was on copper- titanium alloy products and this work is planned to continue through FY23. Successful scaling of this technology presents a major opportunity for ASM, as it may be applied in the future to the production of zirconium and hafnium products from its Dubbo Project. ASM conducted commercial-in-confidence discussions with potential customers in Korea, Japan and the USA for products from the Korean Metals Plant. ASM also conducted commercial-in-confidence discussions with potential suppliers of raw materials. Following the end of the financial year, the Korean Metals Plant celebrated the first sale and delivery of neodymium praseodymium metal to a Korean magnet manufacturer. Korean Metals Plant Ribbon cutting at Korean Metals Plant opening ceremony Korean Metals Plant officially opened ASM’s Korean Metals Plant officially opened in May 2022. The attendees at the opening ceremony reflected the level of interest ASM’s presence in Korea had attracted from both government and industry, across Korea. Attendees included H.E. Ms Catherine Raper, Australian Ambassador to the Republic of Korea, Mr Si-jong Lee, Governor of Chungbuk Province, and Mr Se-dong Oh, Vice Mayor of Cheongju, as well as representatives from many Korean organisations important to Australia’s strategic trade partnership. “ASM’s ambitions align well with the objectives of the Australian Government’s Critical Minerals Strategy, which include diversifying global critical mineral supply chains and creating value add downstream.” H.E. Ms Catherine Raper, Australian Ambassador to the Republic of Korea 24 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 25 Korean Metals Plant timeline of development Korean Metals Plant March MOU signed with Chungcheongbuk-do province June KSM corporation established September Laboratory Accreditation received 2021 October ISO Accreditations received July Groundbreaking and construction of six site buildings commenced January March Construction completion (Buildings B & E) Total refurbishment of factory completed April February Construction completion (Buildings A, C, D & F) 2022 June Phase 1 equipment installation completed and commissioning underway Plant registration certificate received September First sale of NdPr metal May Official opening ceremony November Hot commissioning of neodymium furnaces commenced & first ingots cast 26 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 27 Korean Metals Plant Wiradjuri elder Peter Peckham conducting smoking ceremony at Korean Metals Plant opening Korean Deputy Prime Minister, Mr Hong Nam-ki views Korean Metals Plant samples Sharing cultural connections between countries Hot commissioning draws special VIP visit ASM respects and recognises the Wiradjuri indigenous peoples and their culture and connection to Country where the Dubbo Project is located. Wiradjuri elder Peter Peckham attended the Korean Metals Plant’s opening and conducted a smoking ceremony to deepen the connection between the Dubbo Project and Korean Metals Plant. Hot commissioning of the neodymium furnaces at the Korean Metals Plant commenced in November 2021. Then Deputy Prime Minister of South Korea, Mr Hong Nam-ki visited the plant to witness the casting of the plant’s first neodymium metal ingots. 28 ASM Annual Report 2022 | Overview Overview | ASM Annual Report 2022 29 Sustainability ESG ASM seeks to contribute positively to the efforts needed to solve the global challenges of today and the future. Its suite of rare earths, critical minerals and high-tech metals products can be used in green technology solutions such as wind turbines, electric vehicles, and battery storage. ASM understands the importance of managing environmental impacts, respecting human rights, minimising greenhouse gas emissions, and supporting local communities. ASM wants to leave a legacy that delivers enduring benefits to the communities and regions where it operates. As ASM matures, so will the design and refinement of its whole-of-company ESG approach. 30 ASM Annual Report 2022 | ESG Overview | ASM Annual Report 2022 30 ESG | ASM Annual Report 2022 31 Environment ASM strives to minimise the disturbance footprint of its operations in Australia and South Korea. ASM’s Safety, Health and Sustainability Policy describes its commitment and principles in relation to environmental management. ASM’s Korean Metals Plant is also ISO 14001:2015 and ISO 9000 accredited, demonstrating a commitment to safe and environmentally responsible operation. In addition, all works planned and conducted undergo appropriate risk assessment using the ALARP (As Low As Reasonably Practicable) principle. Climate Change ASM supports the initiatives of the Task Force on Climate-related Financial Disclosures (TCFD) and will consider their application to the Company as it grows. Material and strategic risks associated with climate change have been reviewed and noted, recognising the stage of development of both the Dubbo Project and the Korean Metals Plant. ASM also continues registration of a section of its Dubbo Project property as a carbon farming project under the Australian Government’s Emissions Reduction Fund (ERF). This process began in FY21. Under the ERF, measured increases of in-soil carbon content earn Australian carbon credit units (ACCU). These can potentially contribute to the Dubbo Project’s carbon offsets. Biodiversity ASM’s Dubbo Project has a Biodiversity Management Plan (BMP), that provides a framework for managing and monitoring biodiversity. This incorporates the designated biodiversity offset areas (1,021ha) associated with the Dubbo Project, which are designated for the restoration and maintenance of native habitats, especially vulnerable species. Under a Conservation Property Vegetation Plan negotiated with Local Land Services, these areas are protected in perpetuity. Since 2016, ASM’s wholly owned subsidiary, the Toongi Pastoral Company (TPC), has managed the agricultural land, farm assets and offset areas associated with the Dubbo Project totalling approximately 3,715 hectares. Management activities during the reporting period included: • Annual survey of four control sites, comprising Grey Box, Fuzzy Box, White Cypress Pine and White Box woodlands • Management of existing native grasslands, particularly in designated biodiversity offset areas • Ongoing pest animal control programs • Ongoing fence maintenance around biodiversity offset areas to protect from pest animals • Ongoing control of noxious weeds • Ongoing thinning of White Cypress Pine to increase native grass cover and understory, improving biodiversity. Water management ASM holds sufficient river and groundwater licences (including some high security licences) to develop the Dubbo Project as a 1Mtpa operation. During the year, optimisation work on the water treatment, reagent recovery and water recovery systems has been completed. This has resulted in additional savings in raw water and reagent consumption for the project. The Dubbo Project is within the Cockabroo Creek and Wambangalang Creek sub-catchments of the Macquarie River Catchment. The river water licences are in the Cudgegong-Macquarie Water Sharing Plan regulated by the NSW Department of Planning and Environment – Water. ASM understands its role in responsible natural resource management within the catchment, and takes a holistic approach to managing soils, biodiversity and water. ASM also understands the need for water in the catchment to be shared between the environment, towns, irrigators and industry. As such, ASM engages with the Macquarie-Cudgegong Customer Advisory Group, which provides a forum for community consultation. Energy and Emissions ASM’s Korean Metals Plant has entered Phase 1 commissioning. The plant has adopted a continuous improvement approach to energy efficiency and is committed to aligning with the South Korean government’s strategy and target of generating 35% of its electricity from renewables (e.g. solar power) by 2040. Initiatives adopted at the plant to reduce emissions include the use of a fleet of electric forklifts and vehicles. A Stage 1 (construction phase) Water Management Plan, approved by the NSW governing authority, is available on the ASM website. Water management activities during the reporting period included: • Addition of a brine concentrator to the plant design, which will further reduce water consumption • Continued stakeholder discussions regarding water use and temporary trade of ASM’s water to agricultural and manufacturing businesses • Periodic monitoring of bores and surface water, particularly given above average rainfall since early 2020 • Engagement of consultants to commence design and construction of erosion and sediment control structures for the site, in preparation for protection of surface water quality and progressive rehabilitation The Dubbo Project has not commenced construction. However, several opportunities for emissions reduction are being investigated. The project is located in the NSW government’s designated Central-West Renewable Energy Zone. This provides an opportunity to source renewable energy options. As ASM continues to develop its operations, it will publish emission reduction targets. 32 ASM Annual Report 2022 | ESG ESG | ASM Annual Report 2022 33 Social People and Culture ASM seeks to foster a culture of innovation, equal opportunity and integrity among its workforce, partners and supply chain. ASM has its headquarters in Perth, where most of the Executive Management Team is located. The remaining employees are dispersed across Australia and in Korea. The Korean team comprises 80 employees (as at 30 June 2022), and will continue to grow as the plant’s commissioning and production ramps up. ASM’s team based in Dubbo manages the Toongi Pastoral Company and Dubbo Project, while the team in Brisbane has progressed the Dubbo Project Optimisation Study and ongoing project development work. Diversity figures for reporting ASM’s Australian operations have achieved strong gender diversity results. ASM’s focus for FY23 will be on gender representation in its South Korean operations, where much of the operational workforce is male. ASM Gender diversity 20% BOARD 80% Female Male 11% 50% EXECUTIVE MANAGEMENT 50% 55% AUSTRALIA 45% KOREA 89% Data represents permanent and fixed term ASM employees 30 June 2022 After the financial year ended, the Board was 25% female and 75% male. Health and Safety ASM is committed to safeguarding the health, safety and wellbeing of its team members. During the year, along with key policies and procedures, a HSSE Management System was designed and is progressively being implemented. As with all businesses, COVID-19 impacted ASM’s employees and the communities in which it operates. ASM responded by supporting its employees with their unique circumstances, reinforcing safety and hygiene protocols in offices and facilities, and moving office employees to remote work as required. To minimise impact on the Korean Metals Plant, operational planning and alternating shift patterns were implemented. ASM continues to monitor the changing COVID-19 environment, to keep employees and their families safe. HSE metrics No reportable injuries or environmental incidents occurred during the 2022 financial year. World Safety Day at the Korean Metals Plant The team at the Korean Metals Plant acknowledged World Safety Day on 28 April, by posting a safety banner at the plant and conducting additional training to raise awareness of the importance of safety. 34 ASM Annual Report 2022 | ESG ESG | ASM Annual Report 2022 35 Social Community and Social Responsibility ASM wants to leave a legacy that delivers enduring benefits to the communities and regions where it operates. ASM knows that having strong and positive relationships with local communities is critical to being a responsible and sustainable company. First Nations engagement Over the past two decades, ASM has consulted with local Elders and Aboriginal organisations, associated with the land on which the Dubbo Project is located. This includes the Dubbo Aboriginal Community Working Party, Three Rivers Regional Assembly, and the Dubbo Local Aboriginal Land Council. ASM continues to review cultural heritage sites within the project footprint and ensures traditional owners are engaged and consulted on heritage issues, as per the codes and guidelines established by Heritage NSW. ASM has also identified heritage sites (outside of the project footprint) additional to those described in the Dubbo Project’s Environmental Impact Statement (EIS 2013); these sites have been protected from farming activities. Activities during the reporting period included: • Meetings between ASM Management Team and representatives from Aboriginal organisations and Elders to listen to their priorities and grow relationships • Invitation to Traditional Custodians to walk “On Country” • Two Aboriginal representatives nominated for the Dubbo Project Community Consultative Committee • An Aboriginal elder invited to Korea to conduct a traditional smoking ceremony as part of the opening of the Korean Metals Plant Dubbo Project Community Consultative Committee Toongi Pastoral Company Manager talking with Year 7 MAP program cohort Partnered with Macquarie Anglican Grammar School for their Macquarie Agricultural Pathways Program ASM and our subsidiary Toongi Pastoral Company (TPC) partnered with Macquarie Anglican Grammar School for their Macquarie Agricultural Pathways (MAP) program. The program provides for a targeted group of Year 7 students at the school to engage in weekly farm visits to TPC sites. Here they will develop the skills necessary for employment in the Agriculture sector directly, or to prepare for entry into Tertiary-based programs. This is at the core of what we are striving to achieve at Macquarie, the development of resilient young people who are ready and willing to make a difference in the world. Craig Mansour, Headmaster The first group of students started the program in July 2022. Macquarie Anglican Grammar School Headmaster and Toongi Pastoral Company Farm Manager Sponsorships & engagement During the year, ASM continued to engage with the local community in Dubbo through regular Community newsletter distribution and via the community information line. ASM management and representatives also met with various government stakeholders, community and business leaders, local Aboriginal groups and potential local suppliers. Key activities included: • Participated in the Dubbo Project Community Consultative Committee • Supported the Western Region Schools Science and Engineering Challenge • Partnered with Macquarie Anglican Grammar School for their Macquarie Agricultural Pathways Program In Korea, representatives from the Korean Metals Plant have also joined the Chemical Compliance Committee for Cheongju City. The representatives will provide specialist advice to ensure compliance with regulation and use of chemicals within the area and local business operations. This is an initiative to ensure low risk to the community and environment. 36 ASM Annual Report 2022 | ESG ESG | ASM Annual Report 2022 37 ESG | ASM Annual Report 2022 37 Financial Report Governance ASM’s actions are governed by an experienced Board committed to administering our policies and procedures with openness and integrity. This year, ASM strengthened its governance framework, focussing on Environment and Sustainability. As a result, it commenced work on a Health, Safety, Security and Environment management system. ASM also established several new policies, which can all be viewed on the ASM website. These provide the ESG context that ASM will work from and set out strong principles for ASM to sustainably and ethically process and produce rare earths, critical minerals and high-tech metals. ESG data including diversity figures, health and safety metrics, and environmental information were also collected and reviewed. Corporate Governance Statement The Company’s annual Corporate Governance Statement has been published and released to the ASX separately. It is available on the Company’s website at: asm-au.com/about-asm-home/governance ESG | ASM Annual Report 2022 38 Financial | ASM Annual Report 2022 39 Australian Strategic Materials Ltd  Corporate directory  30 June 2022  Directors  I J Gandel  D G Woodall (resigned 15 July 2022)  N P Earner  D I Chalmers (resigned 1 March 2022)  G M Smith  K J Gleeson (appointed 1 February 2022)  Joint Company secretaries  Dennis Wilkins  Julie Jones (appointed 2 August 2021)  Registered office & Principal place of  business  Level 4, 66 Kings Park Road West Perth WA 6005  Telephone: 61 8 9200 1681 Facsimile: 61 8 9200 1682  Share register  Auditor  Stock exchange listing  Advanced Share Registry Limited 110 Stirling Highway, Nedlands WA 6009  PricewaterhouseCoopers  Brookfield Place, 125 St Georges Terrace, Perth WA 6000  Australian Strategic Materials Ltd shares are listed on the Australian Securities Exchange  (ASX  code: ASM)  Admitted to the Official List of ASX on 29 July 2020  Website  http://www.asm‐au.com  Australian Strategic Materials Ltd  Directors' report  30 June 2022  The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the  'Consolidated entity' or 'the Group', or 'ASM') consisting of Australian Strategic Materials Ltd (referred to hereafter as the 'Company'  or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2022.  Directors  The following persons were Directors of Australian Strategic Materials Ltd during the whole of the financial year and up to the date of  this report, unless otherwise stated:  I J Gandel   D G Woodall (resigned 15 July 2022)  N P Earner   D I Chalmers (resigned 1 March 2022)  G M Smith  K J Gleeson (appointed 1 February 2022)  Principal activities  Australian Strategic Materials (ASM) is an emerging producer of rare earths, critical minerals and high‐tech metals.  These materials  are vital inputs for an array of applications across advanced manufacturing, new growth, and sustainable energy industries. ASM has  its cornerstone rare earths and critical minerals project in Dubbo, NSW, and its flagship high‐tech metals plant in Ochang, South  Korea. The Group's principal activities in the year were:  ● Completion  of  construction  of  the  Korean  Metals  Plant,  with  permit  to  operate  received  and  Phase  1  equipment  installation complete.  Commenced  commissioning  of  the  Phase  1  Neodymium  and  Copper  Titanium  furnaces,  with  first  ingots  cast. Equipment and process commissioning continues in the second half of calendar year 2022. Completion  of  the  Optimisation  Study  and  Enhanced  Project  Addendum  (Optimisation  Work)  for  the  Dubbo  Project  which provides  a  foundation  for Front End  Engineering  Design (FEED)  and  is  a  key  component  of obtaining  financing  for  the Dubbo project. Completion of share placement to KCF Energy Co. Ltd for USD$15,000,000 ($8.90 per share). The  signing  of  the  Joint  Statement  of  Cooperation  on  Critical  Metals  with  the  Korean  Mine  Rehabilitation  and  Resource Corporation (KOMIR), to enable the supply of critical minerals and metals into Korea. Awarding the conditional contract to provide Engineering, Procurement and Construction Definition (EPCD) work for the Dubbo Project to Hyundai Engineering Co., Ltd. Execution of debt facilities agreement with the Korea Development Bank for facilities up to $24,600,000 (KRW 22,000,000,000) for operating and capital expenditure at the Korean Metals Plant. ● ● ● ● ● Dividends  There were no dividends paid, recommended nor declared during the current or previous financial year.  Review of financial conditions  The loss for the Consolidated entity after providing for income tax and non‐controlling interest amounted to $24,275,000 (30 June  2021: $783,000).  The Group had cash outflows from operating and investing activities of $71,126,000 (30 June 2021: $14,506,000) for the year ended  30 June 2022. At 30 June 2022, the Group had cash on hand of $60,220,000 (30 June 2021: $93,324,000). These funds will be used for  the construction of the Korean Metals Plant, Dubbo Project FEED, exploration obligations and associated corporate expenses.   Going Concern  Based on the Group's cash flow forecast, the Group may require additional funding to enable the Group to continue to realise its  strategic business activities and meet all associated corporate, exploration, construction and development commitments over the  period.  As a result of the above, there is a material uncertainty that may cast significant doubt on the entity's ability to continue as a going  concern and therefore, the entity may be unable to realise its assets and discharge its liabilities in the normal course of business.   The Directors are satisfied that there are reasonable grounds to believe that the Group will be able to continue to meet its debts as  and when they fall due and that it is appropriate for the financial statements to be prepared on a going concern basis.    1  2  40 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 41 Australian Strategic Materials Ltd  Directors' report  30 June 2022  Australian Strategic Materials Ltd  Directors' report  30 June 2022  The Directors have based this determination on the demonstrated ability of the Group to raise capital, the intention to raise new  capital and their assessment of the probability of progressing project financing.  The attached annual report for the year ended 30 June 2022 contains an independent auditor’s report which highlights the existence  of  a  material  uncertainty  that  may  cast  significant  doubt  about  the  Group’s  ability  to  continue  as  a  going  concern.  For  further  information, refer to note 1 to the financial statements, together with the auditor’s report.  Review of operations  Korea The ground‐breaking for the Korean Metals Plant (KMP) took place in July 2021 after signing the Memorandum of Understanding with  Chungcheongbuk‐do province and acquiring the KMP site in Ochang Foreign Investment Zone in the prior quarter.  The construction  of six buildings on the KMP site, including total refurbishment of the existing main factory, was completed by end of Q1 2022, with  the plant registration certificate received on 7th April 2022.   Phase 1 equipment installation and commissioning for Nd metal, NdFeB strip alloy and CuTi alloy ingot progressed throughout the  year  despite  significant  disruptions  from  COVID‐19.  The  Deputy  Prime  Minister  of  South  Korea,  Mr  Hong  Nam‐ki,  visited  the  site  in  November 2021 as commissioning commenced and the first Nd metal ingot was cast.    Phase 1 equipment installation was completed in Q4 2022 with commissioning and ramp up planned to continue over the second half  of calendar year 2022.  To celebrate this achievement, ASM held the KMP official opening ceremony in May 2022 with key  representatives of the Australian and Korean governments and business community.  During the year, ASM received a cash grant from the South Korean government of $6,737,000. The purpose of the cash grant received  was to support the development of the Korean Metals Plant. Further in June 2022, ASM executed debt facilities with Korea  Development Bank for up to $24,600,000 to fund operating and capital expenditure. Dubbo  In December 2021, ASM completed the Optimisation Study and Enhanced Project Addendum (Optimisation Work) for the Dubbo  Project. The Optimisation Work simplified the Dubbo Project process flow sheet and incorporates new operating strategies that will  reduce operating costs and improve the Environmental, Social & Governance (ESG) performance. These strategies now include  increasing the brine concentrator capacity (reducing water consumption), refurbishment of the railway line (which simplifies project  logistics and will provide opportunities for local jobs) and development of a chlor‐alkali plant (which reduces the cost of reagents and  their handling and transportation). These strategies facilitate ESG benefits by reducing water consumption, reducing the handling and  quantum of process chemicals, and reducing the number of trucks on local roads.   In June 2022, ASM awarded Hyundai Engineering Co., Ltd (HEC) the contract to provide Engineering, Procurements and Construction  Definition work for the Dubbo Project. The EPCD includes an Association for the Advancement of Cost Engineering standardised  estimate (AACE Class 2 capital cost estimate), an operating cost estimate, a detailed project schedule, major project plans, and early‐ stage engineering documentation. Completion of the EPCD will allow HEC to produce an open book cost estimate for the Dubbo  Project. This will form the basis of an EPC offer by HEC to deliver the Dubbo Project.   The Dubbo Project has been optimised to produce neodymium, praseodymium, zirconium, hafnium, dysprosium, terbium and  niobium oxides that can all be refined into high‐purity alloys, metals and powders at ASM’s metals plants.  Corporate  Corporate activities during the period ended 30 June 2022 include: ● ASM’s appointment of the Australian and New Zealand Banking Group Limited (ANZ) as the financial advisor for the debt financing of the Dubbo Project. ANZ has strong ties with Korean export credit agencies and financial institutions. Continued  efforts  to  advance  negotiations  to  secure  long‐term  sales  agreements  for  the  Korean  Metals  Plant  and  Dubbo production. Progression of discussions with suppliers of key raw materials to obtain binding and committed long‐term supply agreements. Completion of a share placement with KCF Energy Co. Ltd for USD 15,000,000 at an issue price of AUD $8.90 per share. ● ● ● COVID‐19  During the year ended 30 June 2022, delays caused by the ongoing impacts of COVID‐19 and supply chain disruptions impacted the  installation of equipment at the Korean Metals Plant. Installation of equipment is now complete with NdFeB commissioning  commencing in the second half of calendar year 2022. Throughout the year, ASM continued to observe COVID‐19 management  protocols across our office and site locations in Australia and South Korea. These protocols are in line with our commitment to ensure  safe operations for our staff and contractors.  As at the date these financial statements were authorised, management was not aware of any material adverse effects on the financial  statements as a result of coronavirus.  Significant changes in the state of affairs  There were no significant changes in the state of affairs of the Group during the financial year.  Matters subsequent to the end of the financial year  During July 2022, Rowena Smith was appointed Chief Executive Officer and David Woodall resigned from his position as Managing  Director.   On 19 July 2022, David Woodall held 3,000,000 performance rights, of these performance rights 2,000,000 were forfeited and 1,000,000  vested through the issue of ordinary shares in the Company.    On  8  September  2022,  the  Company  announced  it  signed  a  binding  agreement  for  the  sale  of  neodymium  praseodymium  metal  produced at its Korean Metals Plant with Korean company NS World Co., Ltd. The agreement is for the sale and delivery of 10 tonnes  of neodymium praseodymium metal ingot from September 2022 to December 2022.  No  other  matter  or  circumstance  has  arisen  since  30  June  2022  that  has  significantly  affected,  or  may  significantly  affect  the  Consolidated entity's operations, the results of those operations, or the Consolidated entity's state of affairs in future financial years.  Likely developments and expected results of operations  The Consolidated Entity intends to continue evaluation activities in relation to the Dubbo Project and progress the development of the  Company's first commercial metals plant in South Korea in line with details provided in the Review of Operations.   Environmental regulation  The  Group  is  subject  to  significant  environmental  regulation  and  monitoring  requirements  in  respect  of  its  natural  resource's  exploration and development activities.   The Group aspires to the highest standards of environmental management and insists its entire staff and contractors maintain that  standard. A  significant  environmental  incident  is  considered  to  be  one  that  causes  a  major  impact  or  impacts  to  land  biodiversity,  ecosystem services, water resources or air, with effects lasting greater than one year. The Directors' are not aware of any significant  breaches of these requirements during the period.   Indemnity and insurance of auditor  The Company has agreed to indemnify its auditors, PricewaterhouseCoopers, to the extent permitted by law, against any claim by a  third party arising from the Company’s breach of their agreement. The indemnity stipulates that the Company will meet the full amount  of any such liabilities including a reasonable amount of legal costs.  Auditor  PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.  3  4  42 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 43 Australian Strategic Materials Ltd  Directors' report  30 June 2022  Information on Directors  Ian Jeffrey Gandel ‐ Non‐Executive Chairman  LLB, BEc, FCPA, FAICD  Appointed Non‐Executive Chairman 18 March 2014  Mr Gandel is a successful Melbourne based businessman with extensive experience in retail management and retail property. He has  been a director of the Gandel Retail Trust and has had an involvement in the construction and leasing of Gandel shopping centres. He  has previously been involved in the Priceline retail chain and was the CEO of a chain of serviced offices.  Mr Gandel has been an investor in the mining industry since 1994. Mr Gandel is currently a substantial holder in a number of publicly  listed Australian companies and, through his private investment vehicles, now holds and explores tenements in his own right in Western  Australia. Mr Gandel is currently Non‐Executive Chairman of Alliance Resources Ltd (appointed as a director on 15 October 2003 and in  June  2016  was  appointed  Non‐Executive  Chairman).  He  is  Non‐Executive  Chairman  of  Alkane  Resources  Ltd.  He  is  also  the  Non‐ Executive Chairman of Octagonal Resources Ltd (appointed 10 November 2010).  Nicholas Paul Earner ‐ Non‐Executive Director  BEng (hons)  Appointed Non‐Executive Director 1 September 2017  Australian Strategic Materials Ltd  Directors' report  30 June 2022  Ms  Gleeson’s  other  current  roles  include  Non‐Executive  Director  of  St  Barbara  Limited,  New  Century  Resources  Ltd  and  Chrysos  Corporation Ltd. She is also the Chair of Trinity College at the University of Melbourne.  Key Management Personnel  Dennis Wilkins ‐ Joint Company Secretary  B.Bus, ACIS, AICD Appointed Company Secretary 29 March 2018.  Mr Wilkins is the founder and principal of DWCorporate Pty Ltd, a corporate advisory firm servicing the natural resources industry.   Since 1994 he has been a Director of, and involved in the executive management of, several publicly listed resource companies with  operations in Australia, PNG, Scandinavia and Africa. Since July 2001 Mr Wilkins has been running DWCorporate Pty Ltd, where he  advises on the formation of, and capital raising for, emerging companies in the Australian resources sector.   Mr Wilkins is currently a Director of Key Petroleum Limited.  Julie Jones ‐ Joint Company Secretary & General Counsel  LLB (Law)  Appointed General Counsel and joint Company Secretary 2 August 2021.  Mr Earner is a chemical engineer and graduate of University of Queensland with over 25 years’ experience in technical and operational  optimisation and management, and has held a number of executive roles in mining and processing.   Mr Earner joined the Alkane group as Chief Operations Officer in August 2013, with responsibility for the safe and efficient management  of  Alkane  Resources  Ltd's  operations  at  Tomingley  and  the  Dubbo  Project.  Under  his  supervision,  the  successful  development  of  Tomingley transitioned to profitable and efficient operations. His guidance also drove engineering and metallurgical aspects of the  Dubbo Project, prior to its transition into the separately listed Australia Strategic Materials Ltd.  Ms  Jones  has  more  than  18  years  of  legal,  commercial,  strategic  and  corporate  governance  experience,  underpinned  by  a  strong  background in mining and manufacturing.   Prior to joining ASM, Ms Jones’ held the role of General Counsel and Company Secretary for Matrix Composites and Engineering Ltd.  Her other past roles include General Counsel and Director of People at the Chamber of Commerce and Industry WA, and Corporate  Counsel at Iluka Resources and Solicitor at the State Solicitor’s Office.  Prior to his appointment as Alkane Resources Ltd's Chief Operations Officer in August 2013 he had roles at Straits Resources Ltd, Rio  Tinto Coal Australia's Mount Thorley Warkworth coal mine and BHP/WMC Olympic Dam copper‐uranium‐gold operations.  Rowena Smith – Chief Executive Officer   B.Com, MAICD Mr Earner is the Managing Director of Alkane Resources Ltd.  Gavin Murray Smith ‐ Non‐Executive Director  B.Com, MBA, MAICD Appointed Non‐Executive Director 12 December 2017  Mr Smith is an accomplished senior executive and Non‐Executive Director within multinational business environments. He has more  than 35 years’ experience in information technology, business development, and general management in a wide range of industries  and sectors. As Non‐Executive Director of Bosch Subsidiaries and Joint Ventures in Australia and New Zealand, Mr Smith has led the  restructuring and transformation of the local Bosch subsidiary. Mr Smith is member of the industry advisory boards of the CSIRO and  the Victorian Skills Authority, and is a Non‐Executive Director of Alkane Resources Ltd.   Kerry Jo‐Anne Gleeson ‐ Non‐Executive Director  LLB (Hons), FAICD   Appointed Non‐Executive Director 1 February 2022  Ms Gleeson is an experienced independent Non‐Executive Director, Chair and Committee Member with over two decades of experience  as a director, senior executive and board advisor of various ASX listed companies. Ms Gleeson has worked nationally and internationally  across broad and complex industry sectors, including mining and resources, industrial and agri‐chemicals, manufacturing, transport and  distribution and international education. Ms Gleeson is a qualified lawyer in both the UK and Australia, and spent 15 years in private  practice,  including  as  a  partner  of  an  English  law  firm,  before  emigrating  to  Melbourne  and  joining  Blake  Dawson  Waldron  (now  Ashurst).  Appointed Chief Executive Officer 6 July 2022. Prior to her appointment, Ms Smith held the role of Chief Operating Officer appointed 5  July 2021.  Ms Smith has over 30 years’ experience in the mining and minerals processing sector holding senior roles in strategy, operations and  commercial.   Prior to joining ASM, she was Chief Sustainability Officer at South32, accountable for sustainability strategy, risk management and HSE  business processes. Her other past roles include Vice President Supply at South32, General Manager of BHP’s Kwinana Nickel Refinery,  and operational leadership roles within Rio Tinto’s aluminium smelting business.    Ms Smith is currently a member of the Australian Institute of Company Directors (AICD).  Jason Clifton – Chief Financial Officer   B.Com, MAICD, FCA Appointed Chief Financial Officer 12 July 2021.   Mr Clifton has over 20 years’ of financial, commercial, capital and strategic experience.   Prior to joining ASM, he was Senior Vice President Financial Service at Woodside Energy Ltd, where he was responsible for treasury,  tax, group finance and business finance. His other past roles include Chief Financial Officer of Bankwest and Chief Financial Officer of  Westpac New Zealand.    Mr Clifton is a Fellow of the Institute of Chartered Accountants and a Fellow of the Financial Services Institute of Australia.   5  6  44 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 45 Australian Strategic Materials Ltd  Directors' report  30 June 2022  Meetings of Directors  The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the year ended  30 June 2022, and the number of meetings attended by each Director were:  I J Gandel  D G Woodall1  D I Chalmers2  G M Smith  N P Earner  K J Gleeson3  Full Board  Attended  Held  Nomination  Committee  Attended  Risk   Committee  Attended  Audit   Committee  Attended  Remuneration  Committee  Attended  17  17  7  17  15  10  17  17  7  17  17  11  1  1  1  1  1  ‐  2  2  1  2  2  1  3  ‐  3  3  3  ‐  3  ‐  3  3  3  ‐  Held: represents the number of meetings held during the time the Director held office or was a member of the relevant committee.  1 D Woodall resigned as Managing Director effective 15 July 2022.   2 D I Chalmers resigned as a director on 1 March 2022 and attended all meetings held prior to resignation.  3 K J Gleeson was appointed as a director on 1 February 2022 and attended all meetings held from appointment. Remuneration report (audited)  The remuneration report details the key management personnel remuneration arrangements for the Consolidated entity, in accordance  with the requirements of the Corporations Act 2001 and its Regulations.  The remuneration report is set out under the following main headings:  ● ● ● Principles used to determine the nature and amount of remuneration Details of remuneration of executive KMPs Additional disclosures relating to key management personnel Remuneration governance  The Company has established a Remuneration Committee to assist the Board in fulfilling its corporate governance responsibilities with  respect to remuneration by reviewing and making appropriate recommendations to the Board on:  ● ● ● the overall remuneration strategy and framework for the Company; the  operation  of  the  incentive  plans  which  apply  to  the  executive  team,  including  the  appropriateness  of  key  performance indicators and performance hurdles; and the assessment of performance and remuneration of the executive directors, non‐executive directors and other KMP. The Remuneration Committee is a committee of the Board and at the date of this report the members were non‐executive directors  and included G M Smith (Chair), I J Gandel and K J Gleeson.   Their objective is to ensure that remuneration policies and structures are fair, competitive and aligned with the long term interests of  the Company and its shareholders.   The Company’s annual Corporate Governance Statement provides further information on the role of this committee, and the full stat ement is available at URL: asm-au.com/about-asm-home/governance Statutory performance indicators  The Company aims to align executive remuneration to the Company’s strategic and business objectives and the creation of  shareholder wealth. The table below shows measures of the Group’s financial performance for the current year as required by the  Corporations Act 2001. However, these are not necessarily consistent with the specific measures in determining the variable amounts  of remuneration to  be  awarded  to  KMP.  As  a  consequence,  there  may  not  always  be  a  direct  correlation  between  the  statutory  key  performance  measures and the variable remuneration rewarded.  Australian Strategic Materials Ltd  Directors' report  30 June 2022  Loss for the year attributable to owners ($'000)  Basic loss per share (cents)  Share price at period end ($)  Consolidated  2022  2021  (24,275.00) (17.00) 3.45  (783.00) (1.00) 7.80  Principles used to determine the nature and amount of remuneration  The  objective  of  the  Consolidated  entity's  executive  reward  framework  is  to  ensure  reward  for  performance  is  competitive  and  appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the  creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of  Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices:  ●  are competitive and reasonable, enabling the Company to attract and retain key talent while building a diverse, sustainable and  high‐achieving workforce;  are aligned to the Company's strategic and business objectives and the creation of shareholder value;  promote a high performance culture regarding that leadership at all levels is a critical element in this regard;  are transparent; and  are acceptable to shareholders.  ●  ●  ●  ●  The  Remuneration  Committee  is  responsible  for  determining  and  reviewing  remuneration  arrangements  for  its  directors  and  executives.  The  performance  of  the  Consolidated  entity  depends  on  the  quality  of  its  directors  and  executives.  The  remuneration  philosophy is to attract, motivate and retain high performance and high quality personnel.  In  consultation  with  external  remuneration  consultants  (refer  to  the  section  'Use  of  remuneration  consultants'  below),  the  Remuneration Committee has structured an executive remuneration framework that is market competitive and complementary to the  reward strategy of the Consolidated entity.  Non‐Executive Directors remuneration  Fees and payments to Non‐Executive Directors reflect the demands and responsibilities of their role. Non‐Executive Directors' (NEDs)  fees and payments are reviewed annually by the Remuneration Committee. The Remuneration Committee may, from time to time,  receive advice from independent remuneration consultants to ensure non‐executive directors' fees and payments are appropriate and  in line with the market. The Chairman's fees are determined independently of the fees of other Non‐Executive Directors based on  comparative roles in the external market. The Chairman is not present at any discussions relating to the determination of his own  remuneration. Non‐Executive Directors do not receive share options or other incentives.  ASX  listing  rules  require  the  aggregate  Non‐Executive  Directors'  remuneration  be  determined  periodically by  a  general  meeting.  In  accordance with ASM's Constitution, the remuneration of the non‐executive directors of ASM in each financial year will not exceed the  maximum aggregate amount determined by ASM shareholders in general meeting from time to time. The maximum aggregate amount  is currently $950,000 (as approved at the AGM dated 30 November 2021), inclusive of superannuation and exclusive of reimbursement  of expenses.  This remuneration may be divided among the ASM NEDs in such proportions as they decide. The maximum aggregate remuneration  amount has been set so as to enable the appointment of additional ASM NEDs if required.  Board1  $A  Audit  Committee  $A  Risk  Committee  $A  Remuneration  Committee  $A  Nominations  Committee  $A  190,000  103,000  ‐  ‐  ‐  ‐  14,400  8,500  ‐  ‐  14,400  8,500  ‐  ‐  15,000  7,500  ‐  ‐  15,000  7,500  Chairman of the Board2  Non‐Executive Directors3  Committee Chair  Committee Member  1 NEDs receive Board and Committee fees inclusive of superannuation.  2 Inclusive of committee work.  3 Board fees paid to NEDs other than Chairman.   7  8  46 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 47                              Australian Strategic Materials Ltd  Directors' report  30 June 2022  Australian Strategic Materials Ltd  Directors' report  30 June 2022  Executive remuneration  The Consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of remuneration  which has both fixed and variable components.  The executive remuneration and reward framework has four components:  ●  ●  ●  ●  base pay and non‐monetary benefits  short‐term performance incentives  share‐based payments  other remuneration such as pension, superannuation and long service leave in line applicable jurisdictions requirements.  The combination of these comprises the executive's total remuneration.  Fixed Remuneration  The  components  of  executives'  fixed  remuneration  are  determined  individually  and  may  include  cash  remuneration,  pension,  superannuation,  motor  vehicle  and  parking  benefits  and  reimbursement  of  telephone  expenses.  The  executives'  remuneration  is  reviewed on an annual basis by the Remuneration Committee.   In determining the remuneration package, the Remuneration Committee reviews the individual's remuneration with the use of market  data for positions with comparable companies. Where appropriate, the package is adjusted so as to align with market trends and ensure  continued remuneration competitiveness. In conducting a comparative analysis, the Company's expected performance for the year is  considered in the context of the Company's capacity to fund remuneration budgets.   Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where  it does not create any additional costs to the Consolidated entity and provides additional value to the executive.  Variable Remuneration   Short‐term Incentives  Executives may receive variable remuneration in the form of short‐term incentives ('STI') of up to 30% of their annual salary package.  STI payments are based on the Board's assessment of the executives' performance towards achieving key Company objectives over the  relevant period. Annually the Remuneration Committee reviews the performance of each executive prior to or after the reporting date.  The Remuneration Committee then determines the amount of STI to be allocated to each executive with approval from the Board. The  total potential STI available for award is at the Board's discretion. STI's are made through the issue of performance rights after the  reporting period. Where an executive resigns during or after the relevant financial year, it remains at the discretion of the Board as to  whether any of the STI is payable for the relevant financial year.     The focus of the 2021/22 financial year was on the Company's progress towards the further development of the Korean Metals Plant  and the Dubbo project.   2021/2022 STI  The 2021/22 STI targets and outcomes are summarised below:  An amount of 81,148 performance rights were granted to KMP's. Vesting occurs up until the end of the measurement period, being 30  June 2022, with a nil exercise price, if the following performance conditions are met:   ●  ●  ●  ●  ●  ●  ●  20% of the performance rights will vest if the Korean Metals plant saleable production rate is 1,254 tpa  20% of the performance rights will vest if an offtake is secured for 75% of the KMP saleable product   10% of the performance rights will vest if the ESG performance is viewed as 'excellent' by the Board  10% of the performance rights will vest if the Executives personal performance is viewed as 'performing' by the Board  for the Chief Operating Officer 10% of the performance rights will vest if the Korea Metals plant capex is less than $17m  for the Chief Operating Officer 20% of the performance rights will vest if the Dubbo FEED contract commences prior to end Feb 2022  for the Chief Financial Officer 20% of the performance rights will vest if an offtake is secured for 80% of the Dubbo saleable product  by 30 June 2022  Further, the Board has discretion to abandon the incentive opportunity should the Company’s overall performance be substantially  lower than expectations.   The KPI's were selected to encourage and support business growth and deliver ASM's mine to metals strategy.   The Board exercised its discretion to abandon the incentive program and as a result all 81,148 performance rights were cancelled on 8  August 2022.   Long‐term Incentives  The long‐term incentives ('LTI') include performance rights awarded to executives. Executives may participate in the Executive Incentive  Plan to receive variable remuneration of up to 30% of their annual salary package. Shares are awarded to executives over a period of  three years based on long‐term incentive measures.  2021/2022 LTI  The 2021/22 LTI targets and outcomes are summarised below:  An amount of 81,148 performance rights were granted to KMP's. Vesting occurs up until the end of the measurement period, being 30  June 2022, with a nil exercise price, if the following performance conditions are met:   ●  ●  50% of the performance rights will vest if the 30 June 2022 Total Metal Production of Saleable Quantity is 545t  50% of the performance rights will vest if the percentage total of Dubbo Financing committed and delivered is 100% at 30 June 2022  The KPI's were selected to encourage and support business growth and deliver ASM's mine to metals strategy.   Further, the Board has discretion to abandon the incentive opportunity should the Company’s overall performance be substantially  lower than expectations.    The Board exercised its discretion to abandon the incentive program and as a result all 81,148 performance rights were cancelled on 8  August 2022.   Sign on rights  LTI's  were  issued  to  the  Chief  Operating  Officer  and  Chief  Financial  Officer  as  sign‐on  incentives  for  the  commencement  of  their  employment.   The Chief Financial Officer received 125,248 options with 50% vesting after 3 years and 50% vesting after 5 years. The options had a  service condition only and there were no performance conditions associated with these options.   The  Chief  Operating Officer received 54,714  performance  rights  with 50%  vesting after  3 years and 50%  vesting after  5  years.  The  performance had a service condition only and there were no performance conditions associated with these options.  Assessing performance and claw‐back of remuneration  While  there  is  no  formal  malus/clawback  policy,  the  Board  has  ultimate  discretion  to  adjust  the  STI  and  LTI  outcomes  upwards  or  downwards  (including  zero),  in  exception  circumstances,  where  the  STI  and  LTI  generated  outcomes  are  inconsistent  with  the  Company's performance or resulted in misalignment with Shareholders (eg. fatality, financial misstatement, misconduct, reputational  damage, etc.).  Use of remuneration consultants  During  the  financial  year  ended  30  June  2022,  the  Consolidated  entity,  through  the  Remuneration  Committee,  engaged  Godfrey  Remuneration Group Pty Limited and BDO Reward (WA) Pty Ltd, remuneration consultants, to provide details of market remuneration  practices for specific key management personnel (KMP) roles in the market capitalisation ranges relevant to the Company and to review  its existing remuneration policies and provide recommendations on structuring STI and LTI programs. This has resulted in STI and LTI's  in the form of performance rights being implemented. Godfrey Remuneration Group Pty Limited was paid $3,500 for these services  and BDO Reward (WA) Pty Ltd was paid $27,500.  9  10  48 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 49                       Australian Strategic Materials Ltd  Directors' report  30 June 2022  An agreed set of protocols were put in place to ensure that the remuneration recommendations would be free from undue influence  from  key  management  personnel.  These  protocols  include  requiring  that  the  consultant  not  communicate  with  affected  key  management personnel without a member of the Remuneration Committee being present, and that the consultant not provide any  information relating to the outcome of the engagement with the affected key management personnel. The Board is also required to  make  inquiries  of  the  consultant's  processes  at  the  conclusion  of  the  engagement  to  ensure  that  they  are  satisfied  that  any  recommendations made have been free from undue influence. The Board is satisfied that these protocols were followed and as such  there was no undue influence.  Voting and comments made at the Company's 30 June 2021 Annual General Meeting ('AGM')  At the 2021 AGM, 99% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2021. The  Company did not receive any specific feedback at the AGM regarding its remuneration practices.  Details of remuneration of executive KMPs  Amounts of remuneration  Details of the remuneration of key management personnel of the Consolidated entity are set out in the following tables.  Since the end of the reporting period, the following changes to KMP are as follows:  ●  ●  R Smith was appointed as Chief Executive Officer on 6 July 2022.  D Woodall resigned as Managing Director on 15 July 2022.  There have been no other changes to Directors or KMP since the end of the reporting period.  Total Fixed  Remuneration  Position  Date  Commenced  Contract  Duration  Termination  notice period  ‐ Company  Termination  notice period  ‐ Executive  Termination Payment  $600,000  Managing  Director  10 February  2020  Ongoing  3 months  3 months  KMP  David  Woodall1  Frank Moon2  $388,000  President Asia  1 June 2021  Ongoing  3 months  3 months  Rowena  Smith3  $500,000  Jason Clifton  $500,000  Chief  Operating  Officer  Chief Financial  Officer  5 July 2021  Ongoing  3 months  3 months  12 July 2021  Ongoing  3 months  3 months  1 David Woodall resigned as Managing Director effective 15 July 2022.  2 Frank Moon's total fixed remuneration is KRW 333,200,000 and converted at the foreign exchange rate on 1 June 2021 ($388,000).   3 Rowena Smith was appointed as Chief Executive Officer effective 6 July 2022.  If terminated by ASM ‐ 3  months payment in  additional to termination  notice by Company  If terminated by ASM ‐ 3  months payment in  additional to termination  notice by Company  If terminated by ASM ‐ 3  months payment in  additional to termination  notice by Company  If terminated by ASM ‐ 3  months payment in  additional to termination  notice by Company  Australian Strategic Materials Ltd  Directors' report  30 June 2022  2022  Non‐Executive Directors  I J Gandel  G M Smith  N P Earner  K J Gleeson1  D I Chalmers2  D Woodall3  Other KMP  R Smith4  J Clifton  F Moon  Total  Cash salary  and fees  $  Non‐monetary  benefits  $  Annual and  long service  provision  $  Post‐ employment  benefits5  $  Performance  Rights  $  Total  $  172,727  146,800  115,909  42,917  75,530  576,431  473,378  460,347  354,111  2,418,150  ‐  ‐  ‐  ‐  ‐  6,976  2,303  3,901  65,485  78,665  ‐  ‐  ‐  ‐  ‐  61,995  17,273  ‐  11,591  4,292  7,553  23,570  ‐  ‐  ‐  ‐  ‐  659,597  190,000  146,800  127,500  47,209  83,083  1,328,569  42,518  37,798  ‐  142,311  23,570  23,570  3,234  114,653  90,928  125,975  ‐  876,500  632,697  651,591  422,830  3,630,279  1 K J Gleeson was appointed as a director effective 1 February 2022.  2 D I Chalmers resigned as a director effective 1 March 2022.  3 D Woodall resigned as Managing Director effective 15 July 2022.  4 R Smith was appointed as Chief Executive Officer effective 6 July 2022.  5 Post‐employment benefits are provided through superannuation contributions and national pension scheme.  2021  Non‐Executive Directors:  I J Gandel   G M Smith   D I Chalmers   N P Earner   Executive Directors:  D G Woodall  Other Key Management Personnel:  F Moon 3  A MacDonald 4  Cash salary  and fees  $  Post‐ employment  benefits5  $  Annual and  long service  provision1  $  Performance  Rights2  $  Total  $  112,508  85,900  67,213  71,094  10,688  ‐  6,386  6,754  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  123,196  85,900  73,599  77,848  452,637  20,442  54,643  661,409  1,189,131  425,980  263,239  1,478,571  277  14,941  59,488  ‐  (30,485) 24,158  ‐  ‐  661,409  426,257  247,695  2,223,626  1 The amounts disclosed in this column represent the movements in the associated provisions. They may be negative where a KMP has taken more leave than accrued during the year.  2 Performance rights have been granted and valued, however vesting is subject to performance hurdles.  3 F Moon was paid through Soon Hyun Huh, a company in which he has a controlling interest. From 1 June 2021, F Moon was employed directly by the Group.  4 Resigned 12 March 2021.  5 Post‐employment benefits are provided through superannuation contributions and national pension scheme.  11  12  50 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 51                                                                                                                                                   Australian Strategic Materials Ltd  Directors' report  30 June 2022  Australian Strategic Materials Ltd  Directors' report  30 June 2022  The proportion of remuneration linked to performance and the fixed proportion are as follows:  Performance metrics  Weighting  Vested  Performance period  Name  Non‐Executive Directors:  I J Gandel  G Smith  N Earner  K J Gleeson  D I Chalmers  Executive Directors:  D Woodall  Other Key Management Personnel:  R Smith  J Clifton  F Moon  Fixed remuneration  2021  2022  At risk ‐ LTI  2022  2021  100%   100%   100%   100%   100%   100%   100%   100%   ‐  100%   ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  51%   44%   49%   56%   86%   81%   100%   ‐  ‐  100%   14%   19%   ‐  ‐  ‐  ‐  Details of Performance Rights and Options of KMP are as follows:   Performance  period start  date  Grant date  Fair value at  grant date  $  Total Fair  value at  grant date2  Vesting  period  Number  D Woodall1  D Woodall1  R Smith  1,800,000  1,200,000  54,714  10/02/2020  10/02/2020  5/07/2021  19/05/2020  19/05/2020  22/06/2021  0.59  1.14  6.40  R Smith2  R Smith2  J Clifton  22,210  22,210  125,248  5/07/2021  5/07/2021  12/07/2021  28/02/2022  28/02/2022  16/06/2021  8.14  8.14  3.90  J Clifton2  J Clifton2  20,520  20,520  12/07/2021  12/07/2021  25/03/2022  25/03/2022  8.13   8.13   1,062,000  3 years  1,368,000  3 years  352,090  50% 3 years  50% 5 years  1 year  1 year  50% 3 years  50% 5 years  1 year  1 year  180,789  180,789  488,467  166,828  166,828  Vesting date  Valuation  method  13/10/2023  13/10/2023  5/07/2024  5/07/2026  30/06/2022  30/06/2022  12/07/2024  12/07/2026  30/06/2022  30/06/2022  Monte Carlo  Monte Carlo  Black‐Scholes  Black‐Scholes  Black‐Scholes  Black‐Scholes  Monte Carlo  Monte Carlo  Black‐Scholes  Black‐Scholes  1 D Woodall resigned as Managing Director effective 15 July 2022. Of the 3,000,000 performance rights, 2,000,000 performance rights were forfeited and 1,000,000 vested and were issued on 19 July 2022.  2 The performance rights were determined to have a 0% probability of vesting at grant date and at 30 June 2022 and no share‐based payments expense was recognised during FY22. These performance rights  were cancelled on 8 August 2022.  For David Woodall's performance rights targets as per below:  Absolute total shareholder return  % Performance rights vesting  Final share price <150% of starting share price  Final share price >= 150%  and less than 200% of starting share  price   Final share price >=200% and less than 300% of starting share  price  Final share price >= 300% of starting share price  Nil  33.33%  66.67%  100%  The performance rights (1,200,000 performance rights) that are milestone based have the performance metrics provided in the table  below.  In the event a strategic partner organised by ASM buys >15% of  ASM/Project  In the event off‐take agreement >40% of project revenue is signed  25%  25%  In the event if debt >40% of project capital is signed  In the event if a Korean metals plant is successfully commissioned  25%  on a positive cash flow basis  25%  Additional disclosures relating to key management personnel  0%  0%  0%  0%  Performance period ends 30 July 2023  Performance period ends 30 July 2023  Performance period ends 30 July 2023  Performance period ends 30 July 2023  Shareholding  The number of shares in the Company held during the financial year by each Director and other members of key management personnel  of the Consolidated entity, including their personally related parties, is set out below:  Balance at   the start of   the year  Received   as part of   remuneration  Disposals/   Additions  other  Balance at   the end of   the year  Directors  I J Gandel  G M Smith  N P Earner  D I Chalmers1  K J Gleeson  D Woodall2  Other key management personnel  R Smith   J Clifton  F Moon  31,584,110  71,117  725,499  1,218,833  ‐  7,500  ‐  ‐  ‐  ‐  ‐  33,607,059  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  (575,499) (122,484) ‐  ‐  ‐  ‐  ‐  ‐  ‐  (697,983) 31,584,110  71,117  150,000  1,096,349  ‐  7,500  ‐  ‐  ‐  ‐  ‐  32,909,076  1 These were the number of shares held by D I Chalmers when he resigned from the Board on 1 March 2022.  2 These were the numbers of shares held by D Woodall when he resigned from the Board on 15 July 2022.  Performance rights and Options holdings  The number of performance rights and options over ordinary shares in the Company held during the financial year by each Director and  other members of key management personnel of the Consolidated entity, including their personally related parties, for the year ended  30 June 2022 is set out below:  Performance rights and Options over ordinary  shares  D Woodall1  R Smith  J Clifton   Balance at   the start of   the year  Granted  Vested  Expired/   forfeited/   other  Balance at   the end of   the year  3,000,000  ‐  ‐  3,000,000  ‐  99,434  166,288  265,422  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  3,000,000  99,434  166,288  3,265,722  1 D Woodall resigned as Managing Director effective 15 July 2022. Of the 3,000,000 performance rights, 2,000,000 performance rights were forfeited and 1,000,000 vested and were issued on 19 July 2022.  13  14  52 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 53                                                                                                                                                       Australian Strategic Materials Ltd  Directors' report  30 June 2022  Australian Strategic Materials Ltd  Directors' report  30 June 2022  The Directors, in accordance with advice provided by the audit committee, are of the opinion that the services as disclosed in note 22  to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the  following reasons:  ●  ●  all non‐audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and  none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.  Rounding of amounts  The  Company  is  of  a  kind  referred  to  in  Corporations  Instrument  2016/191,  issued  by  the  Australian  Securities  and  Investments  Commission, relating to 'rounding‐off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument  to the nearest thousand dollars, or in certain cases, the nearest dollar.  The Financial Report has been prepared in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless  otherwise stated.  Auditor's independence declaration  A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately  after this Directors' report.  This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001.  On behalf of the Directors  ___________________________  I Gandel   Chairman   21 September 2022  The following table lists the key variables used in the valuation of each performance rights and options granted to key management  personnel during the year ended 30 June 2022:   Grant date   Expiry date  22/06/2021  16/06/2021  22/06/2021  16/06/2021  28/02/20221  28/02/20221  25/03/20221  25/03/20221  05/07/2024  12/07/2024  05/07/2026  12/07/2026  30/06/2022  30/06/2022  30/06/2022  30/06/2022  Share price at  grant date  $ Exercise price  Expected  volatility  Dividend yield  Risk‐free  interest rate  Fair value at  grant date  $ 6.40  6.21  6.40  6.21  8.14  8.14  8.13  8.13  ‐  $6.38  ‐  $6.38  ‐  ‐  ‐  ‐  70.00%   70.00%   70.00%   70.00%   70.00%   70.00%   70.00%   70.00%   ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  1.09%   1.09%   1.09%   1.09%   1.02%  1.02%  1.54%  1.54%  6.40  3.90  6.40  3.90  8.14  8.14  8.13  8.13  1 The performance rights were determined to have a 0% probability of vesting at grant date and at 30 June 2022 and no share‐based payments expense was recognised during FY22. These performance  rights were cancelled on 8 August 2022.  The following table lists the key variables used in the valuation of each performance right granted to key management personnel during  the year ended 30 June 2021:   Grant date  Expiry date  Share price at  grant date  $  Exercise price  Expected  volatility  Dividend yield  Risk‐free  interest rate  Fair value at  grant date  $ 19/05/2020  19/05/2020  13/10/2023  13/10/2023  1.14  1.14  ‐  ‐  71.75%   71.75%   ‐  ‐  0.26%   0.26%   0.59  0.59  This concludes the remuneration report, which has been audited.  Indemnity and insurance of officers  ASM Ltd (the Parent Company) has entered into deeds of indemnity, access and insurance with each of the Directors. These deeds  remain in effect as at the date of this report. Under the Deeds, the Ultimate Parent Company indemnifies each Director to the maximum  extent  permitted  by  law  against  legal  proceedings  or  claims  made  against  or  incurred  by  the  Directors  in  connection  with  being  a  Director of the Consolidated Entity, or breach by the Consolidated Entity of its obligations under the Deed.  During the financial year, the Company paid a premium in respect of a contract to insure the Directors and executives of the Company  against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of  the liability and the amount of the premium.  No liability has arisen under this indemnity as at the date of this report.  Proceedings on behalf of the Company  No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the  Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the  Company for all or part of those proceedings.  Non‐audit services  The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise  and experience with the group is important.  The Directors are satisfied that the provision of non‐audit services during the financial year, by the auditor (or by another person or  firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act  2001.  15  16  54 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 55                                                     Auditor’s Independence Declaration As lead auditor for the audit of Australian Strategic Materials Limited for the year ended 30 June 2022, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Australian Strategic Materials Limited and the entities it controlled during the period. Helen Bathurst Partner PricewaterhouseCoopers Perth 21 September 2022 Australian Strategic Materials Ltd  Contents  30 June 2022  Consolidated statement of profit or loss and other comprehensive income  Consolidated balance sheet  Consolidated statement of changes in equity  Consolidated statement of cash flows  Notes to the consolidated financial statements  Directors' declaration  Independent auditor's report to the members of Australian Strategic Materials Ltd  Shareholder information  General information  58  59  60 61 62 96  97  102  The financial statements cover Australian Strategic Materials Ltd as a Consolidated entity consisting of Australian Strategic Materials  Ltd and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which  is Australian Strategic Materials Ltd's functional and presentation currency.  Australian Strategic Materials Ltd is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered  office and principal place of business are:  Registered office  Principal place of business  Australian Strategic Materials Ltd  Level 4, 66 Kings Park Road, West Perth, Western Australia  A description of the nature of the Consolidated entity's operations and its principal activities are included in the Directors' report, which  is not part of the financial statements.  The financial statements were authorised for issue, in accordance with a resolution of Directors, on 21 September 2022. The Directors  have the power to amend and reissue the financial statements.  PricewaterhouseCoopers, ABN 52 780 433 757 Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840 T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. 56 ASM Annual Report 2022 | Financial Report 17 18  Financial Report | ASM Annual Report 2022 57 Australian Strategic Materials Ltd  Consolidated statement of profit or loss and other comprehensive income  For the year ended 30 June 2022  Australian Strategic Materials Ltd  Consolidated balance sheet  As at 30 June 2022  Revenue  Other income  Expenses  Operating expenses  Net foreign exchange loss  Professional fees and consulting services  Employee remuneration  Share based payments  Directors' fees and salaries  General and administration expenses  Pastoral company expenses  Depreciation and amortisation expense  Fair value movement in biological assets  Loss before income tax benefit  Income tax benefit  Loss after income tax benefit for the year  Other comprehensive income  Items that may be reclassified subsequently to profit or loss  Foreign currency translation  Other comprehensive income for the year, net of tax  Total comprehensive loss for the year  Loss for the year is attributable to:  Non‐controlling interest  Owners of Australian Strategic Materials Ltd  Total comprehensive loss for the year is attributable to:  Non‐controlling interest  Owners of Australian Strategic Materials Ltd  Basic loss per share  Diluted loss per share  Note  Consolidated  2022  $'000  2021  $'000  3  4  5  6  34  1,870   306   (5,826) (1,413) (5,745) (8,227) (876) (1,263) (3,604) (2,124) (1,857) 535   1,377   5,283   ‐   (46) (1,915) (912) (917) (581) (2,316) (1,408) (970) 430   (28,224) (1,975) 7  3,967   1,166   (24,257) (809) 21  (790) (790) 9   9   (25,047) (800) 18   (24,275) (24,257) ‐   (25,047) (25,047) (26) (783) (809) ‐   (800) (800) Cents  Cents  32  32  (17) (17) (1) (1) Assets  Current assets  Cash and cash equivalents  Trade and other receivables  Inventories  Biological assets  Total current assets  Non‐current assets  Inventories  Property, plant and equipment  Intangibles  Exploration and evaluation  Biological assets  Other  Total non‐current assets  Total assets  Liabilities  Current liabilities  Trade and other payables  Interest bearing liabilities  Provisions  Unearned revenue  Other  Total current liabilities  Non‐current liabilities  Interest bearing liabilities  Deferred tax  Provisions  Other  Total non‐current liabilities  Total liabilities  Net assets  Equity  Issued capital  Reserves  Accumulated losses  Equity attributable to the owners of Australian Strategic Materials Ltd  Non‐controlling interest  Total equity  Note  Consolidated  2022  $'000  2021  $'000  8  9  10  11  10  12  14  13  11  15  16  17  18  16  7  17  19  20  21  60,220   2,266   13,117   451   76,054   984   64,177   3,616   104,225   1,346   298   174,646   93,324   739   243   581   94,887   ‐   31,451   4,668   96,742   663   224   133,748   250,700   228,635   3,479   176   479   6,554   ‐   10,688   17,095   20,609   2,611   ‐   40,315   1,202   ‐   159   ‐   22   1,383   ‐   24,561   27   59   24,647   51,003   26,030   199,697   202,605   228,425   12,336   (41,141) 199,620   77   207,162   12,250   (16,866) 202,546   59   199,697   202,605   The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the  accompanying notes  19  58 ASM Annual Report 2022 | Financial Report The above consolidated balance sheet should be read in conjunction with the accompanying notes  20  17 Financial Report | ASM Annual Report 2022 59                                                                                                                                                                                                                                                                                         (783) (26)  (800) Net cash used in operating activities  28  (37,594) (5,215) Australian Strategic Materials Ltd  Consolidated statement of changes in equity  For the year ended 30 June 2022  Australian Strategic Materials Ltd  Consolidated statement of cash flows  For the year ended 30 June 2022  Consolidated  Contributed  equity  $'000  Capital  contribution  $'000  Foreign  currency  reserve  $'000  Share‐based  payment  reserve  $'000  Accumulated  losses  $'000  Non‐ controlling  interest  $'000  Total equity  $'000  Balance at 1 July 2020  1  11,324  ‐  ‐  (16,083) ‐  (4,758) Cash flows from operating activities  Receipts from customers (inclusive of goods and services tax)  Payments to suppliers (inclusive of goods and services tax)  Loss after income tax benefit for  the year  Other comprehensive income for  the year, net of tax  Total comprehensive income for  the year  Transactions with owners in their  capacity as owners:  Contributions of equity, net of  transaction costs (note 19)  Share‐based payments (note 34)  Deferred tax recognised in equity  Non‐controlling interests  ‐  ‐  ‐  206,845  ‐  316  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  Balance at 30 June 2021  207,162  11,324  ‐  9  9  ‐  ‐  ‐  ‐  9  ‐  ‐  ‐  ‐  917  ‐  ‐  (783) (26)  (809) ‐  ‐  9  Interest received  Other income  Finance costs paid  ‐  ‐  ‐  ‐  ‐  ‐  ‐  85  206,845  917  316  85  Cash flows from investing activities  Payments for investments  Payments for property, plant and equipment  Payments for exploration and evaluation  Payments for biological assets  Net cash acquired with subsidiaries  Proceeds of government grants received  917  (16,866) 59  202,605  Net cash used in investing activities  Consolidated  Contributed  equity  $'000  Capital  contribution  $'000  Foreign  currency  reserve  $'000  Share‐based  payment  reserve  $'000  Accumulated  losses  $'000  Non‐ controlling  interest  $'000  Total equity  $'000  Cash flows from financing activities  Proceeds from issue of shares  Proceeds from borrowings  Share issue transaction costs  917  (16,866) 59  202,605  Net cash from financing activities  Balance at 1 July 2021  207,162  11,324  Profit/(loss) after income tax  benefit for the year  Other comprehensive loss for the  year, net of tax  Total comprehensive income for  the year  Transactions with owners in their  capacity as owners:  Contributions of equity, net of  transaction costs (note 19)  Share‐based payments (note 34)  Deferred tax recognised in equity  ‐  ‐  ‐  21,278  ‐  (15) ‐  ‐  ‐  ‐  ‐  ‐  9  ‐  (790)  (790)  ‐  ‐  ‐  (24,275) 18  (24,257) ‐  ‐  (790) (24,275) 18  (25,047) ‐  ‐  ‐  ‐  876  ‐  ‐  ‐  ‐  ‐  ‐  ‐  21,278  876  (15) Note  Consolidated  2022  $'000  2021  $'000  1,414   (39,212) (37,798) 29   246   (71) 1,145   (6,676) (5,531) 75   242   (1) 12  13  19  16  19  ‐   (31,464) (8,410) (1,140) ‐   7,482   (414) (2,955) (5,840) (196) 114   ‐   (33,532) (9,291) 21,816   16,758   (538) 91,919   ‐   (2,633) 38,036   89,286   (33,090) 93,324   (14) 74,780   18,544   ‐   Net (decrease)/increase in cash and cash equivalents  Cash and cash equivalents at the beginning of the financial year  Effects of exchange rate changes on cash and cash equivalents  Cash and cash equivalents at the end of the financial year  8  60,220   93,324   Balance at 30 June 2022  228,425  11,324  (781)  1,793  (41,141) 77  199,697  The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes  21  The above consolidated statement of cash flows should be read in conjunction with the accompanying notes  22  60 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 61                                                                                                                                                                                                                                                                                                                 Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 1. Significant accounting policies  Note 2. Critical accounting judgements, estimates and assumptions  Note 3. Revenue  Note 4. Other income  Note 5. Operating expenses  Note 6. Net foreign exchange loss  Note 7. Income tax  Note 8. Cash and cash equivalents  Note 9. Trade and other receivables  Note 10. Inventories  Note 11. Biological assets  Note 12. Property, plant and equipment  Note 13. Exploration and evaluation  Note 14. Intangibles  Note 15. Trade and other payables  Note 16. Interest bearing liabilities  Note 17. Provisions  Note 18. Unearned revenue  Note 19. Issued capital  Note 20. Reserves  Note 21. Accumulated losses  Note 22. Remuneration of auditors  Note 23. Contingent liabilities  Note 24. Commitments  Note 25. Related party transactions  Note 26. Parent entity information  Note 27. Interests in subsidiaries  Note 28. Reconciliation of loss after income tax to net cash used in operating activities  Note 29. Key management personnel disclosures  Note 30. Operating segments  Note 31. Financial risk management  Note 32. Earnings per share  Note 33. Capital risk management  Note 34. Share‐based payments  Note 35. Events after the reporting period  63 72 73 73  74 74 74 76 76 76 77 77 78 78 79 79 80 81 81 82 82 82 83 83 83 84 85 85 86 87 89 92 93 93 96 Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 1. Significant accounting policies  The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective notes or  below. These policies have been consistently applied to all the years presented, unless otherwise stated.  Basis of preparation  These  general  purpose  financial  statements  have  been  prepared  in  accordance  with  Australian  Accounting  Standards  and  Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for‐ profit  oriented  entities.  These  financial  statements  also  comply  with  International  Financial  Reporting  Standards  as  issued  by  the  International Accounting Standards Board ('IASB').  New or amended Accounting Standards and Interpretations adopted  The Consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian  Accounting Standards Board ('AASB') that are mandatory for the current reporting period.  Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.  The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or  position of the Consolidated entity.  The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or  position of the Consolidated entity.  New Accounting Standards and Interpretations not yet mandatory or early adopted  Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not  been early adopted by the Consolidated entity for the annual reporting period ended 30 June 2022. The Consolidated entity has not  yet assessed the impact of these new or amended Accounting Standards and Interpretations.  The following Accounting Standards and Interpretations are most relevant to the Consolidated entity:  Reclassifications of items in the financial statements  Minor reclassifications of items in the financial statements of the previous period have been made in accordance with the classification  of items in the financial statements for the year ended 30 June 2022.  Going concern  The consolidated financial statements have been prepared on a going concern basis which contemplates the realisation of assets and  settlement of liabilities in the normal course of business.   The Group has cash outflows from operating and investing activities of $71,126,000 for the year ended 30 June 2022. At 30 June 2022,  the Group had cash on hand of $60,220,000 (30 June 2021: $93,324,000). The Group has net working capital as at 30 June 2022 of  $65,366,000 and outstanding commitments of $23,023,709 relating to construction of the Korean Metals Plant, Dubbo Project FEED,  Dubbo land acquisitions, and exploration obligations all due within 12 months (Refer Note 24).  Based  on  the  Group's  cash  flow  forecast,  the  Group  may  require  additional  funding  to  enable  the  Group  to  continue  to  realise  its  strategic  business  activities  and  meet  all  associated  corporate,  exploration,  construction,  and  development  commitments  over  the  period.  The continuing viability of the Group and its ability to continue as a going concern and meet its debts and commitments as they fall due  are dependent upon the Group:  23  24  62 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 63 Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 1. Significant accounting policies (continued)  ●  ●  ●  ●  Continuing to source new customers for sale of product produced from the Korean Metals Plant.   Raising additional equity capital. The Directors are of the view that the Group will be able to raise further equity capital as they were successful in raising approximately $91.9 million in equity (before costs) during April 2021 and $21.8m during May 2022.  Raising debt financing for the Dubbo Project. ASM has appointed the Australian and New Zealand Banking Group Limited (ANZ) as a debt financial advisor based on ANZ's experience and strong relationships in Australia and Korea, including with Australian  and Korean export finance agencies. ASM is currently working closely with ANZ to secure funding for the development of the Dubbo Project financing commitments; and/or  Satisfying Export Finance Australia (EFA) conditions precedent to access $200 million in finance support for the Dubbo Project as  announced on 28 June 2021.  As a result of the above, there is a material uncertainty that may cast significant doubt on the entity's ability to continue as a going  concern and therefore, that the entity may be unable to realise its assets and discharge its liabilities in the normal course of business. However, the Directors believe that the Group will be able to continue as a going concern and that it is appropriate to adopt the going  concern basis in the preparation of the financial report. Biological Assets  The Company recognises biological assets when, and only when, the Company controls the assets as a result of past events, it is probable  that future economic benefits associated with such assets will flow to the Company and the fair value or cost of the assets can be  measured reliably. Expenditure incurred on biological assets are measured on initial recognition and at the end of each reporting period  at its fair value less costs to sell in terms. The gain or loss arising on initial recognition of such biological assets at fair value less costs to  sell and from a change in fair value less costs to sell of biological assets are included in the Consolidated Statement of profit or loss and  other comprehensive Income for the period in which it arises.  Cash and Cash Equivalents  Cash  and  cash  equivalents  includes  cash  on  hand,  deposits  held  at  call  with  financial  institutions,  other  short‐term,  highly  liquid  investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are  subject to an insignificant risk of changes in value.  Historical cost convention  The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of  financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income,  investment properties, certain classes of property, plant and equipment and derivative financial instruments.  Parent entity information  In  accordance  with  the  Corporations  Act  2001,  these  financial  statements  present  the  results  of  the  Consolidated  entity  only.  Supplementary information about the parent entity is disclosed in note 26.  Principles of consolidation  The  consolidated  financial  statements  incorporate  the  assets  and  liabilities  of  all  subsidiaries  of  Australian  Strategic  Materials  Ltd  ('Company' or 'parent entity') as at 30 June 2022 and the results of all subsidiaries for the year then ended. Australian Strategic Materials  Ltd and its subsidiaries together are referred to in these financial statements as the 'Consolidated entity'.  Subsidiaries are all those entities over which the Consolidated entity has control. The Consolidated entity controls an entity when the  Consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect  those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control  is transferred to the Consolidated entity. They are de‐consolidated from the date that control ceases.  Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 1. Significant accounting policies (continued)  Intercompany transactions, balances and unrealised gains on transactions between entities in the Consolidated entity are eliminated.  Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting  policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Consolidated entity.  The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without  the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book  value of the share of the non‐controlling interest acquired is recognised directly in equity attributable to the parent.  Non‐controlling  interest  in  the  results  and  equity  of  subsidiaries  are  shown  separately  in  the  statement  of profit  or  loss  and  other  comprehensive  income,  balance  sheet  and  statement  of  changes  in  equity  of  the  Consolidated  entity.  Losses  incurred  by  the  Consolidated entity are attributed to the non‐controlling interest in full, even if that results in a deficit balance.  Where  the  Consolidated  entity  loses  control  over  a  subsidiary,  it  derecognises  the  assets  including  goodwill,  liabilities  and  non‐ controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Consolidated entity  recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in  profit or loss.  Property Plant and Equipment   Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure  that is directly attributable to the acquisition of the items.        ●  expenditure that is directly a�ributable to the acquisi�on and commissioning of items;        ●  the present value of the estimated costs of dismantling and removing the asset and restoring the site on which it is located  Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable  that future economic benefits associated with the item will flow to the Consolidated Entity and the cost of the item can be measured  reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and  maintenance are charged to profit or loss during the reporting period in which they are incurred. Land is not depreciated.   The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An assets  carrying value amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated  recoverable amount.  Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of  comprehensive income.  Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure  that is directly attributable to the acquisition of the items.   Depreciation is calculated on a straight‐line basis to write off the net cost of each item of property, plant and equipment (excluding  land) over their expected useful lives as follows:  Buildings  40 years  Plant and equipment 3‐7 years  The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.  An  item  of  property,  plant  and  equipment  is  derecognised  upon  disposal  or  when  there  is  no  future  economic  benefit  to  the  Consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.  25  26  64 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 65                                          Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 1. Significant accounting policies (continued)  Exploration and Evaluation  Exploration and evaluation costs are carried forward on an area of interest basis. Costs are recognised and carried forward where rights  to tenure of the area of interest are current and either:  ● The expenditures are expected to be recouped through successful development and exploita�on of the area of interest; or  ●  ac�vi�es  in  the  area  of  interest  have  not  at  the  repor�ng  date,  reached  a  stage  which  permits  a  reasonable  assessment  of  the  existence or otherwise of economically recoverable resources, and active and significant exploration and evaluation activities in, or in  relation to, the area of interest continuing.  Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial  viability,  and  facts  and  circumstances  suggest  that  the  carrying  amount  exceeds  the  recoverable  amount.  For  the  purposes  of  impairment testing, exploration and evaluation assets are allocated to cash‐generating units to which the exploration activity relates.  The cash generating unit is not larger than the area of interest.  Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable,  exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mine  properties under development. No amortisation is charged during the exploration and evaluation phase.  Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial  exploitation, or alternatively, sale of the respective areas of interest.  Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 1. Significant accounting policies (continued)  Foreign operations  The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The  revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate  the  rates  at  the  dates  of  the  transactions,  for  the  period.  All  resulting  foreign  exchange  differences  are  recognised  in  other  comprehensive income through the foreign currency reserve in equity.  The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.  Current and non‐current classification  Assets and liabilities are presented in the balance sheet based on current and non‐current classification.  An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Consolidated entity's  normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting  period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months  after the reporting period. All other assets are classified as non‐current.  A liability is classified as current when: it is either expected to be settled in the Consolidated entity's normal operating cycle; it is held  primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional  right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non‐ current.  Costs carried forward in respect of an area of interest that is abandoned are written off in the period in which the decision to abandon  is made.  Deferred tax assets and liabilities are always classified as non‐current.  There may exist, on the Consolidated Entity’s exploration properties, areas subject to claim under native title or containing sacred sites  or sites of significance to Aboriginal people. As a result, exploration properties or areas within tenements may be subject to exploration  or mining restrictions.  Intangible Assets  Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date  of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised  and  are  subsequently  measured  at  cost  less  any  impairment.  Finite  life  intangible  assets  are  subsequently  measured  at  cost  less  amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are  measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful  lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted  for prospectively by changing the amortisation method or period.  Intellectual Property  Significant  costs  associated  with  intellectual  property  are  deferred  and  amortised  on  a  straight‐line  basis  over  the  period  of  their  expected benefit, being their finite life of 5 years.  Trade and other payables  These amounts represent liabilities for goods and services provided to the Consolidated entity prior to the end of the financial year and  which  are  unpaid.  Due  to  their  short‐term  nature  they  are  measured  at  amortised  cost  and  are  not  discounted.  The  amounts  are  unsecured and are usually paid within 30 days of recognition.  Foreign currency translation  The financial statements are presented in Australian dollars, which is Australian Strategic Materials Ltd's functional and presentation  currency.  Foreign currency transactions  Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions.  Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year‐end  exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.  Investments and other financial assets  Investments  and  other  financial  assets  are  initially  measured  at  fair  value.  Transaction  costs  are  included  as  part  of  the  initial  measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised  cost or fair value depending on their classification. Classification is determined based on both the business model within which such  assets are held and the contractual cash flow characteristics of the financial asset unless an accounting mismatch is being avoided.  Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the Consolidated  entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part  or all of a financial asset, its carrying value is written off.  Financial assets at amortised cost  A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within a business model  whose objective is to hold assets in order to collect contractual cash flows; and (ii) the contractual terms of the financial asset represent  contractual cash flows that are solely payments of principal and interest.  Impairment of financial assets  The  Consolidated  entity  recognises  a  loss  allowance  for  expected  credit  losses  on  financial  assets  which  are  either  measured  at  amortised  cost  or  fair  value  through  other  comprehensive  income.  The  measurement  of  the  loss  allowance  depends  upon  the  Consolidated entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased  significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort  to obtain.  Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12‐month expected credit loss  allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event  that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit  risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit  loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the  instrument discounted at the original effective interest rate.  For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance is recognised in other  comprehensive income with a corresponding expense through profit or loss. In all other cases, the loss allowance reduces the asset's  carrying value with a corresponding expense through profit or loss.  27  28  66 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 67                    Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 1. Significant accounting policies (continued)  Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 1. Significant accounting policies (continued)  Financial liabilities  Initial recognition and measurement  Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings,  payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.   ●  ●  the Group is able to control the reversal of the temporary difference  the temporary difference is not expected to reverse in the foreseeable future. Deferred tax assets and liabilities are measured at  the tax rates that are expected to apply in the year in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantially enacted by the end of the reporting year.  All  financial  liabilities  are  recognised  initially  at  fair  value  and,  in  the  case  of  loans  and  borrowings  and  payables,  net  of  directly  attributable transaction costs. The Group’s financial liabilities include trade and other payables and loans and borrowings including  bank overdrafts.  Subsequent measurement ‐ financial liabilities at amortised cost  This  is  the  category  most  relevant  to  the  Group.  After  initial  recognition,  interest‐bearing  loans  and  borrowings  are  subsequently  measured at amortised cost using the Effective Interest Rate (EIR) method. Gains and losses are recognised in profit or loss when the  liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any  discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance  costs in the statement of profit or loss.   Derecognition   A  financial  liability  is  derecognised  when  the  obligation  under  the  liability  is  discharged  or  cancelled  or  expires.  When  an  existing  financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are  substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of  a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.  Employee benefits  The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at  the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using  the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures  and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate  bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.  Provisions  Provisions are recognised when the Consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is  probable the Consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the  obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at  the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material,  provisions are discounted using a current pre‐tax rate specific to the liability. The increase in the provision resulting from the passage  of time is recognised as a finance cost.  Taxes  Recognition and measurement   The income tax expense or revenue for the year is the tax payable on the current year’s taxable income based on the national income  tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between  the tax bases of assets and liabilities and their carrying amounts in the financial statements, and by unused tax losses (if appropriate).   Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for deductible temporary  differences, unused tax losses and unused tax credits only if it is probable that sufficient future taxable income will be available to utilise  those temporary differences and losses.   Deferred tax is not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business  combination) of assets and liabilities in a transaction that affects neither taxable profit or loss; or the accounting profit or loss arising  from taxable differences related to investment in subsidiaries, associates and interests in joint ventures to the extent that:   Deferred tax assets and liabilities are offset only if certain criteria are met. Income taxes relating to items recognised directly in equity  are recognised in equity.   Tax consolidation  ASM  and  its  wholly‐owned  Australian  controlled  entities  implemented  the  tax  consolidation  legislation  as  of  21  July  2020  and  the  entities in the tax consolidated group entered into a tax sharing agreement, which limits the joint and several liability of the wholly‐ owned entities in the case of a default by the head entity, Australian Strategic Materials Limited. The entities have also entered into a  tax funding agreement under which the wholly‐owned entities fully compensate Australian Strategic Materials Limited for any current  tax payable assumed and are compensated by Australian Strategic Materials Limited for any current tax receivable.  Impairment of non‐financial assets  At each balance sheet date, the Consolidated Entity reviews the carrying amounts of its non‐current assets to determine whether there  is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset  is estimated in order to determine the extent, if any, of the impairment loss. Where it is not possible to estimate the recoverable  amount of an individual asset, the Consolidated Entity estimates the recoverable amount of the cash‐generating unit (CGU) to which  the asset belongs.  If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU  is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.  Where an impairment loss subsequently reverses the carrying amount of the asset or CGU is increased to the revised estimate of its  recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised  for the asset or cash generating unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.  The recoverable amount of a CGU is the higher of its fair value less costs to dispose (FVLCTD) and its value‐in‐use (VIU). FVLCTD is the  best estimate of the amount obtainable from the sale of a CGU in an arm’s length transaction between knowledgeable willing parties,  less  the  costs  of  disposal.  This  estimate  is  determined  on  the  basis  of  available  market  information  taking  into  account  specific  circumstances.  VIU is the present value of the future cash flows expected to be derived from the assets or group of assets (CGUs). Cash flow projections  are based on economic and regulatory assumptions and forecast trading conditions prepared by management.  Finance costs  Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in  which they are incurred.  Goods and Services Tax ('GST') and other similar taxes  Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from  the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.  Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or  payable to, the tax authority is included in other receivables or other payables in the balance sheet.  Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are  recoverable from, or payable to the tax authority, are presented as operating cash flows.  Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.  29  30  68 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 69                 Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 1. Significant accounting policies (continued)  Reserves  Foreign currency reserve  The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to  Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations.  Capital contributions reserve  This reserve has been used to recognise the discounted value of a loan from Alkane Resources Ltd prior to the demerger in accordance  with AASB 9.   Share‐based payments reserve  The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and  other parties as part of their compensation for services.  Subsidiaries  Subsidiaries  are  all  entities  over  which  the  Consolidate  Entity  has  control.  The  Consolidated  Entity  controls  an  entity  when  the  Consolidated Entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect  those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control  is transferred to the Consolidated Entity. They are deconsolidated from the date that control ceases.  Intercompany  transactions,  balances  and  unrealised  gains  on  transactions  between  Consolidated  Entity  companies  are  eliminated.  Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting  policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.   Non‐controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive  income, statement of comprehensive income, statement of changes in equity and balance sheet respectively.   Government grants  Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached conditions will  be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the  related costs, for which is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as an offset to  the asset and is recognised in the income statement on a systematic basis over the life of the asset. Where grant criteria are not fully  satisfied a portion of the grant may be repaid subject to performance condition requirements.  Decommissioning liability  Decommissioning costs are provided for at the present value of expected costs to settle restoration obligations using estimated cash  flows and are recognized as part of the cost of the relevant asset. The cash flows are discounted at a current pre‐tax rate that reflects  the  risks  specific  to  the  decommissioning  liability.  The  unwinding  of  the  discount  is  expensed  as  incurred  and  recognized  in  the  statement of profit or loss as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as  appropriated. A corresponding decommissioning asset is recognised, whereby it is added to the cost of the plant and will be amortised  over the plants useful life following commissioning.  Inventories  Raw materials are physically measured and are valued at the lower of cost or net realisable value. Cost of raw materials comprises the  direct  purchase  costs.  Net  realisable  value  is  the  estimated  selling price in  the ordinary course  of  business,  less  estimated costs of  completion and the estimated costs necessary to make the sale.   Consumables relating to plant and equipment and farm supplies are recognised as inventory and measured at cost.   Any provision for obsolescence is determined by reference to specific items of stock. A regular review is undertaken to determine the  extent of any provision for obsolescence.  Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 1. Significant accounting policies (continued)  Share‐based payments  Equity‐settled and cash‐settled share‐based compensation benefits are provided to employees.  Equity‐settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering  of services. Cash‐settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by  reference to the share price.  The cost of equity‐settled transactions are measured at fair value on grant date. Fair value is independently determined using either  the Binomial or Black‐Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of  dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free  interest rate for the term of the option, together with non‐vesting conditions that do not determine whether the Consolidated entity  receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.  The cost of equity‐settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period.  The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number  of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is  the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.  The cost of cash‐settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or  Black‐Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative  charge to profit or loss until settlement of the liability is calculated as follows:    ●  ●  during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired  portion of the vesting period.  from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting  date.  All changes in the liability are recognised in profit or loss. The ultimate cost of cash‐settled transactions is the cash paid to settle the  liability.  Market  conditions  are  taken  into  consideration  in  determining  fair  value.  Therefore  any  awards  subject  to  market  conditions  are  considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.  If equity‐settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional  expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share‐based  compensation benefit as at the date of modification.  If the non‐vesting condition is within the control of the Consolidated entity or employee, the failure to satisfy the condition is treated  as a cancellation. If the condition is not within the control of the Consolidated entity or employee and is not satisfied during the vesting  period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.  If  equity‐settled  awards  are  cancelled,  it  is  treated  as  if  it  has  vested  on  the  date  of  cancellation,  and  any  remaining  expense  is  recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as  if they were a modification.  If the non‐vesting condition is within the control of the Consolidated entity or employee, the failure to satisfy the condition is treated  as a cancellation. If the condition is not within the control of the Consolidated entity or employee and is not satisfied during the vesting  period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.  If  equity‐settled  awards  are  cancelled,  it  is  treated  as  if  it  has  vested  on  the  date  of  cancellation,  and  any  remaining  expense  is  recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as  if they were a modification.  31  32  70 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 71                                           Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 1. Significant accounting policies (continued)  Rounding of amounts  The  Company  is  of  a  kind  referred  to  in  Corporations  Instrument  2016/191,  issued  by  the  Australian  Securities  and  Investments  Commission, relating to 'rounding‐off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument  to the nearest thousand dollars, or in certain cases, the nearest dollar.  Note 2. Critical accounting judgements, estimates and assumptions  The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the  reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets,  liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical  experience and on other various factors, including expectations of future events, management believes to be reasonable under the  circumstances.  The  resulting  accounting  judgements  and  estimates  will  seldom  equal  the  related  actual  results.  The  judgements,  estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities  (refer to the respective notes) within the next financial year are discussed below.  Exploration and evaluation costs  Exploration and evaluation costs have been capitalised on the basis that the Consolidated entity will commence commercial production  in the future, from which time the costs will be amortised in proportion to the depletion of the mineral resources. Key judgements are  applied in considering costs to be capitalised which includes determining expenditures directly related to these activities and allocating  overheads between those that are expensed and capitalised. In addition, costs are only capitalised that are expected to be recovered  either  through  successful  development  or  sale  of  the  relevant  mining  interest.  Factors  that  could  impact  the  future  commercial  production at the mine include the level of reserves and resources, future technology changes, which could impact the cost of mining,  future legal changes and changes in commodity prices. To the extent that capitalised costs are determined not to be recoverable in the  future, they will be written off in the period in which this determination is made.  Where economic recoverable reserves for an area of interest have been identified, and a decision to develop has occurred, capitalised  expenditure is classified as mine development.   To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the period in which the  determination is made.  Impairment of non‐financial assets other than goodwill   The Consolidated Entity assesses impairment of non‐financial assets other than goodwill and other indefinite life intangible assets at  each reporting date by evaluating conditions specific to the Consolidated Entity and to the particular asset that may lead to impairment.  If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or  value‐in‐use calculations, which incorporate a number of key estimates and assumptions.  Income tax  The  Consolidated  Entity  is  subject  to  income  taxes  in  the  jurisdictions  in  which  it  operates.  Significant  judgement  is  required  in  determining  the  provision  for  income  tax.  There  are  many  transactions  and  calculations  undertaken  during  the  ordinary  course  of  business for which the ultimate tax determination is uncertain. The Consolidated Entity recognises liabilities for anticipated tax audit  issues based on the Consolidated Entity's current understanding of the tax law. Where the final tax outcome of these matters is different  from  the  carrying  amounts,  such  differences  will  impact  the  current  and  deferred  tax  provisions  in  the  period  in  which  such  determination is made.  The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable  income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and  to unused tax losses.   The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting  period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management  periodically  evaluates  positions  taken  in  tax  returns  with  respect  to  situations  in  which  applicable  tax  regulation  is  subject  to  interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.   Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 2. Critical accounting judgements, estimates and assumptions (continued)  Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and  liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if  they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an  asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor  taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by  the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income  tax liability is settled.  Deferred  tax  assets  are  recognised  only  if  it  is  probable  that  future  taxable  amounts  will  be  available  to  utilise  those  temporary  differences and losses.  Deferred  tax  liabilities  and  assets  are  not  recognised  for  temporary  differences  between  the  carrying  amount  and  tax  bases  of  investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it  is probable that the differences will not reverse in the foreseeable future.  Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and  where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity  has  a  legally  enforceable  right  to  offset  and  intends  either  to  settle  on  a  net  basis,  or  to  realise  the  asset  and  settle  the  liability  simultaneously  Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive  income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.  Note 3. Revenue  Pastoral company revenue  Note 4. Other income  Net gain on loan forgiveness  Interest income  Property and Rental income  Sundry income  Other income  Consolidated  2022  $'000  2021  $'000  1,870   1,377   Consolidated  2022  $'000  2021  $'000  ‐   29   120   157   306   4,731   69   151   332   5,283   33  34  72 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 73                                     Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 5. Operating expenses  Inventory write off  Service fees  Supplies expenses  Export fee  Electricity  Insurance expense  Rental expenses  Other  Operating expenses  Note 6. Net foreign exchange loss  Realised foreign exchange loss  Unrealised foreign exchange loss  Note 7. Income tax  Income tax benefit  Deferred tax ‐ origination and reversal of temporary differences  Aggregate income tax expense  Deferred tax included in income tax benefit comprises:  Decrease in deferred tax assets  Numerical reconciliation of income tax benefit and tax at the statutory rate  Loss before income tax benefit  Tax at the statutory tax rate of 30%  Tax effect amounts which are not deductible/(taxable) in calculating taxable income:  Non‐deductible expenses  Tax rate differential on foreign income  Under Provision in Prior Year  Non‐assessable income  Non‐Deductible equity raising costs  Income tax benefit  Consolidated  2022  $'000  2021  $'000  2,392   799   542   295   300   189   61   1,248   5,826   Consolidated  2022  $'000  2021  $'000  38   1,375   1,413   Consolidated  2022  $'000  2021  $'000  ‐   ‐   ‐   ‐   ‐   ‐   ‐   ‐   ‐   45   1   46   3,967   1,166   3,967   1,166   3,967   1,166   (28,224) (1,975) (8,467) (593) 3,029   1,002   842   (278) (95) 836   88   ‐   (1,419) (78) (3,967) (1,166) Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 7. Income tax (continued)  Amounts credited directly to equity  Deferred tax assets  Deferred tax asset  Deferred tax asset comprises temporary differences attributable to:  Amounts recognised in profit or loss:  Tax losses  Accruals and provisions  Blackhole expenses  Property, plant and equipment  Other  Offset against deferred tax liabilities  Deferred tax asset  Movements:  Opening balance  Charged to profit or loss  Credited/(charged) to equity  Closing balance  Deferred tax liability  Deferred tax liability comprises temporary differences attributable to:  Amounts recognised in profit or loss:  Prepayments  Property, plant and equipment  Exploration  Set‐off of deferred tax asset  Deferred tax liability  Movements:  Opening balance  Charged/(credited) to profit or loss  Credited to equity  Closing balance  Consolidated  2022  $'000  2021  $'000  (15) 316   Consolidated  2022  $'000  2021  $'000  8,787   499   301   ‐   159   (9,746) 2,086   103   317   3   36   (2,545) ‐   ‐   24,561   (3,967) 15   26,043   (1,166) (316) 20,609   24,561   Consolidated  2022  $'000  2021  $'000  4   113   30,238   (9,746) 3   ‐   27,103   (2,545) 20,609   24,561   24,561   (3,967) 15   26,043   (1,166) (316) 20,609   24,561   35  36  74 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 75                                                                                                                                                                                                                                     Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 8. Cash and cash equivalents  Current assets  Cash at bank  Note 9. Trade and other receivables  Current assets  Trade receivables  Prepayments  Non trade receivables  Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 11. Biological assets  Current assets  Biological asset  Non‐current assets  Biological asset  Consolidated  2022  $'000  2021  $'000  451   581   1,346   663   1,797   1,244   Biological  assets  comprise  sheep  and  cattle  owned  by  ASM's  wholly  owned  subsidiary  Toongi  Pastoral  Company  Pty  Ltd  as  part  of  farming operations on the surrounding land to the Dubbo Project mining lease.  Livestock are classified as current assets if they are to be sold within one year.  Note 12. Property, plant and equipment  Consolidated  2022  $'000  2021  $'000  60,220   93,324   Consolidated  2022  $'000  2021  $'000  528   1,505   233   2,266   392   347   ‐   739   Allowance for expected credit losses  The Group has assessed the credit risk on the receivables using life‐time expected credit losses. In this regard, the Group has concluded  that the probability of default on the receivables is low. Accordingly, no impairment allowance has been recognised for expected credit  losses on the receivables.  Note 10. Inventories  Current assets  Toongi Pastoral Company supplies  Korea Materials [i]  Non‐current assets  Korea Materials ‐ at cost  Consolidated  2022  $'000  2021  $'000  193   12,924   13,117   984   14,101   243   ‐   243   ‐   243   [i] Of the Korean materials inventory recorded at 30 June 2022, $9,217,000 is recorded at net realisable value.  Amounts recognised in the profit or loss  Write‐downs of inventories to net realisable value amounts to $2,392,000 (30 June 2021: nil). These were recognised as an operating  expense during the year ended 30 June 2022 in the consolidated statement of profit or loss and other comprehensive income.   Non‐current assets  Land and buildings ‐ at cost  Less: Accumulated depreciation  Decommissioning asset  Plant and equipment ‐ at cost  Less: Accumulated depreciation  Right of use  Less: Accumulated depreciation  Capital Work in Progress  Consolidated  2022  $'000  2021  $'000  46,423   (234) 2,140   48,329   3,101   (594) 2,507   638   (128) 510   12,831   28,895   (49) ‐   28,846   2,800   (341) 2,459   122   (5) 117   29   64,177   31,451   37  38  76 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 77                                                                                                                                                                             Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 12. Property, plant and equipment (continued)  Reconciliations  Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:  Consolidated  Balance at 1 July 2020  Additions  Additions through business combinations   Disposals  Transfers between classes  Depreciation expense  Balance at 30 June 2021  Additions  Disposals  Exchange differences  Transfers between classes  Decommissioning asset  Depreciation expense  Land &   Buildings  $'000  Plant &  Equipment  $'000  Work in  Progress  $'000  Right of Use  Asset  $'000  Total  $'000  27,033  ‐  ‐  ‐  1,835  (22) 28,846  12,951  ‐  (73) 4,650  2,140  (185) 336  1,027  1,214  (5) 117  (230) 2,459  389  (22) (88) 187  ‐  (418) 198  1,783  ‐  ‐  (1,952) ‐  29  17,639  ‐  ‐  (4,837) ‐  ‐  ‐  122  ‐  ‐  ‐  (5) 117  521  ‐  (6) ‐  ‐  (122) 27,567  2,932  1,214  (5) ‐  (257) 31,451  31,500  (22) (167) ‐  2,140  (725) Balance at 30 June 2022  48,329  2,507  12,831  510  64,177  Note 13. Exploration and evaluation  Opening balance  Expenditure capitalised during the year [i]  R&D Tax Incentives on capitalised costs [ii]  Closing balance  Consolidated  2022  $'000  2021  $'000  96,742  8,410  (927) 90,665  6,077  ‐  104,225  96,742  [i] Additions during the year‐ended 30 June 2022 relate to the Optimised Feasibility Study and metallurgical, engineering and test work.  [ii] During the year the group received R&D Tax Incentives of $927,387 on costs capitalised to exploration and evaluation.   Note 14. Intangibles  The  intangible  assets  are  related  to  the  internally generated  intellectual  property,  which  was  part  of  the  acquisition  of  the  Korean  entities.   Non‐current assets  Intellectual property (IP)  Less: Accumulated amortisation  Consolidated  2022  $'000  2021  $'000  5,397   (1,781) 5,380   (712) 3,616   4,668   Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 15. Trade and other payables  Current liabilities  Trade payables  Accruals  Other payables  Consolidated  2022  $'000  2021  $'000  157   3,090   232   154   973   75   3,479   1,202   Trade and other payables represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial  period which are unpaid. Trade payables are unsecured and are usually paid within 30 days of recognition. Trade and other payables  are presented in current liabilities unless payment is not due within 12 months from the reporting date.  Note 16. Interest bearing liabilities  On 10 June 2022, ASM executed two loan facilities with the Korean Development Bank in South Korea. The facilities executed were an  Industrial Facility for operating and capital expenditure and an Overdraft Facility. The Industrial Facility is comprised of an operating  facility of KRW 15.0bn  ($16.7m) and a capital facility of KRW 4.0bn ($4.5m). Additionally, ASM entered into a KRW 3.0 bn ($3.4m)  overdraft facility under the same terms as the Loan Facility.   At 30 June 2022, $16.7m of the Loan Facility has been drawn down and is classified as non‐current liabilities as contractual repayment  is not within 12 months ($16.7m contractually repayable in June 2024).   Current liabilities  Lease Liability [i]  Non‐current liabilities  Bank loan [ii]  Lease liability [i]  [i] Leases  Consolidated  2022  $'000  2021  $'000  176   16,758   337   17,095   17,271   ‐   ‐   ‐   ‐   ‐   As at 30 June 2022, the Group leased various assets under leases expiring within 1 to 9 years. The interest rates are fixed and payable  over a period of the lease term from the inception of the lease. These leases are effectively secured as the rights to the leased assets  recognised in the financial statements revert to the lessor in the event of default.  [ii] Bank loans  Secured liabilities and assets pledged as security  The Korea Development Bank loan facility is not secured against any Group assets.  Fair value  For the majority of the borrowings, the fair values approximate their carrying amounts, since the interest payable on those borrowings  is either close to current market rates or the borrowings are of a short‐term nature.   39  40  78 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 79                                                                                                                                                                   Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 16. Interest bearing liabilities (continued)  As at the year‐ended 30 June 2022, the Group had:   ●  ●  $24.6m Industrial Loan Facility, $16.7m is drawn representing the operating portion of the facility, the capital facility of $4.5m is  undrawn  $3.4m overdraft facility is undrawn  The interest rate on these loans are fixed upon draw down. The interest on the operating Industrial Facility loan is 4.22% being the  KDB 2‐year industrial financial debenture rate (on date of transfer) + 1.05% p.a.   Debt covenants  There are no debt covenants associated with the Korea Development Bank loan facility.  Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 17. Provisions (continued)  The following amounts reflect leave that is not expected to be taken within the next 12 months:  Employee benefits obligation expected to be settled after 12 months  224   25   Note 18. Unearned revenue  Consolidated  2022  $'000  2021  $'000  Note 17. Provisions  Current liabilities  Annual leave  Long service leave  Other  Non‐current liabilities  Long service leave  Provision for decommissioning 1  Consolidated  2022  $'000  2021  $'000  Current liabilities  Unearned revenue [i]  445   22   12   479   471   2,140   2,611   3,090   95   ‐   64   159   27   ‐   27   186   Consolidated  2022  $'000  2021  $'000  6,554   ‐   [i] Unearned revenue relates to a cash grant from the South Korean government to support the development of the Korean Metals  Plant. The grant will be recognised as an offset to the assets that it relates to and will be recognised in the income statement on a  systematic basis over the life of the asset through a reduced depreciation expense. Should any grant criteria not be fully satisfied by 31  December 2022 a portion of the grant may be required to be repaid.  Note 19. Issued capital  Consolidated  2022  Shares  2021  Shares  2022  $'000  2021  $'000  Ordinary shares ‐ fully paid  141,956,062  139,506,006  228,425   207,162   Movements in ordinary share capital  Details  Balance  Issue of shares as part of demerger  Consideration for purchase of RMR group  Share placement  Rights issue  Less: Transactions costs arising on share issue  Deferred tax credit recognised directly into equity  Date  1 July 2020  Balance  Issue of shares in accordance with subscription agreement    Less: Transactions costs arising on share issue  Deferred tax credit recognised directly into equity  30 June 2021  Shares  Issue price  $'000  5  119,049,773  1,306,417  13,541,666  5,608,145  ‐  ‐  139,506,006  2,450,056  ‐  ‐  $0.95   $3.49   $4.80   $4.80   ‐  ‐  $8.90   ‐  ‐  1  113,000  4,559  65,000  26,919  (2,633) 316  207,162  21,816  (538) (15) 228,425  Balance  30 June 2022  141,956,062  1 During the period, ASM subsidiary Korean Strategic Metals (KSM) executed a land lease which included an obligation to restore its  site to its original state on completion, ASM has recognised this restoration liability as a provision for decommissioning at 31 December  2021. This provision for decommissioning represents the discounted value of the present obligation to decommission, dismantle and  rehabilitate certain items of property, plant and equipment. The discounted value reflects a combination of management's assessment  of the nature and extent of the work required, estimates of the future cost of performing the work required, the expected timing of  cash flows and the discount rate applied. Changes to one or more of these assumptions is likely to result in a change to the carrying  value of the provision and the related asset or a change to profit and loss in accordance with the Group's accounting policy stated in  Note 1.  Amounts not expected to be settled within the next 12 months  The current provision for employee benefits includes all unconditional entitlements where employees have completed the required  period of service and also those where employees are entitled to pro‐rata payments in certain circumstances. The entire amount is  presented as current, since the Consolidated entity does not have an unconditional right to defer settlement. However, based on past  experience, the Consolidated entity does not expect all employees to take the full amount of accrued leave or require payment within  the next 12 months.  41  42  80 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 81 Ordinary shares  Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the  number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a  limited amount of authorised capital.                                                                                                                                                            Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 19. Issued capital (continued)  On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have  one vote.  On 16 May 2022, the Company finalised $21,816,000 (before costs) subscription with KCF Energy Co. Ltd through the issue of 2,450,056  shares at an issue price of $8.90 per share.  Note 20. Reserves  Foreign currency reserve  Share‐based payments reserve  Capital contribution reserve  Consolidated  2022  $'000  2021  $'000  (781) 1,793   11,324   9   917   11,324   12,336   12,250   Foreign currency reserve  The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to  Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations.  Note 21. Accumulated losses  Accumulated losses at the beginning of the financial year  Loss after income tax benefit for the year  Accumulated losses at the end of the financial year  Note 22. Remuneration of auditors  Consolidated  2022  $'000  2021  $'000  (16,866) (24,275) (16,083) (783) (41,141) (16,866) Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 23. Contingent liabilities  The  Consolidated  Entity  has  contingent  liabilities  estimated  at  up  to  $4,247,801  for  the  potential  acquisition  of  parcels  of  land  surrounding the Dubbo Project (2021: $5,375,000). The landholders have the right to require the Consolidated Entity to acquire their  property when the development consent conditions for the Dubbo Project have been met.  In June 2022, ASM and Hyundai Engineering signed an agreement to provide the Engineering, Procurement, Construction and Design  for the Dubbo project. The contract is for $46,200,000 after an initial non‐refundable payment of A$500,000 is paid to Hyundai. This  payment was included in payables at 30 June 2022. ASM must issue a Notice to Proceed for the remainder of the contract to come into  effect. If the Notice to Proceed is not provided within 12 months the parties can terminate with no obligation. As at 30 June 2022, a  notice to proceed has not been issued.  Note 24. Commitments  Mineral tenement leases  In order to maintain current rights of tenure to exploration and mining tenements, the Consolidated Entity will be required to outlay  amounts of approximately $100,000 within the next twelve months (2021: $179,000). These costs are discretionary, however if the  expenditure commitments are not met then the associated exploration and mining leases may be relinquished.  Capital commitments  The Consolidated Entity has capital commitments estimated at $1,419,177 for the acquisition of parcels of land surrounding the Dubbo  Project  (2021:  $2,623,000).  The  amount  to  be  paid  is  based  upon  a  multiple  of  market  values  and  is  subject  to  movement.  The  landholders have the right to require Australian Strategic Materials (Holdings) Limited to acquire their property as provided for under  the agreement with Australian Strategic Materials (Holdings) Limited as development consent conditions have been met for the Dubbo  Project. In addition, $1,306,949 has been committed regarding activities for the Dubbo Project.  Commitments related to capital purchases related to the Korean Metallisation Plant are $5,745,583 and inventory commitments of  $14,452,000.  Note 25. Related party transactions  Parent entity  Australian Strategic Materials Ltd is the parent entity.  Subsidiaries  Interests in subsidiaries are set out in note 27.  During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the auditor of the  Company, and its network firms:  Key management personnel  Disclosures relating to key management personnel are set out in note 29 and the remuneration report included in the Directors' report.  Audit services ‐ PricewaterhouseCoopers  Audit or review of the financial statements  Other services ‐ PricewaterhouseCoopers  Tax compliance services  Tax advisory services  Consulting services  Consolidated  2022  $  2021  $  119,210   92,000   76,540   18,870   10,060   ‐   41,000   ‐   105,470   41,000   Transactions with related parties  The following transactions occurred with related parties:  Purchase of goods and services from other related parties:  Nuclear IT1  Alkane Resources  Gandel Metals Pty Ltd  1 From 1 March 2022 Nuclear IT ceased to be a related entity upon resignation of Director.   Consolidated  2022  $  2021  $  114,277   430,156   152,974   4,371   ‐   ‐   43  44  82 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 83                                                                                                   Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 25. Related party transactions (continued)  Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 26. Parent entity information (continued)  Nuclear IT, a Director related entity, provides information technology consulting services to the Consolidated Entity which includes the  coordination of the purchase of information technology hardware and software.   Capital commitments ‐ Property, plant and equipment  The parent entity had no capital commitments for property, plant and equipment as at 30 June 2022 and 30 June 2021.  Alkane Resources, a Director related entity, for personnel and office services under its ongoing Trade Service Agreement with ASM.   Gandel Metals Pty Ltd, a Director related entity, for travel related services.  Receivable from and payable to related parties  As at 30 June 2022, amounts totalling $24,531 remained payable to Gandel Metals Pty Ltd for travel related services (2021: nil).  Loans to/from related parties  There were no loans to or from related parties at the current and previous reporting date.  Terms and conditions  All transactions were made on normal commercial terms and conditions and at market rates.  Note 26. Parent entity information  Set out below is the supplementary information about the parent entity.  Statement of profit or loss and other comprehensive income  (Loss)/Profit after income tax  Total comprehensive (Loss)/Profit  Balance sheet  Total current assets  Total Assets  Total current liabilities  Total liabilities  Equity  Issued capital  Share‐based payments reserve  Capital contributions reserve  Accumulated losses  Total equity  Parent  2022  $'000  2021  $'000  (10,699) (10,699) 4,631  4,631  Parent  2022  $'000  2021  $'000  48,515  211,483  1,727  (7,909) 228,425  1,793  11,324  (22,150) 90,613  208,288  333  (338) 207,162  917  11,323  (11,452) 219,392  207,950  Guarantees entered into by the parent entity in relation to the debts of its subsidiaries  The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2022 and 30 June 2021.  Contingent liabilities  The parent entity had no contingent liabilities as at 30 June 2022 and 30 June 2021.  Significant accounting policies  The accounting policies of the parent entity are consistent with those of the Consolidated entity, as disclosed in note 1, except for the  following:  ●  ●  ●  Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.  Investments in associates are accounted for at cost, less any impairment, in the parent entity.  Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of  an impairment of the investment.  Note 27. Interests in subsidiaries  The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the  accounting policy described in note 1:  Name  Australian Strategic Materials (Holdings) Ltd  Toongi Pastoral Company Pty Ltd  ASM Korea Co. Ltd  KSM Technology Co. Ltd   ASM Metals Corporation Pty Ltd  ASM Technology Corporation Pty Ltd  KSM Metals Limited  Principal place of business /  Country of incorporation  Australia  Australia  South Korea  South Korea  Australia  Australia  South Korea  Note 28. Reconciliation of loss after income tax to net cash used in operating activities  Loss after income tax benefit for the year  Adjustments for:  Depreciation and amortisation  Finance charges  Share‐based payments  Loan forgiveness income  Inventory ‐ Non‐cash movement  Gain / loss on disposal of assets  Unrealised FX gains  Change in operating assets and liabilities:  Increase in receivables  Increase in inventory  Increase in deferred tax asset  Increase in trade and other payables  Increase in other provisions  Increase in biological assets  Net cash used in operating activities  Ownership interest  2021  2022  %  %  100%   100%   100%   95%   100%   100%   100%   100%   100%   100%   95%   100%   100%   100%   Consolidated  2022  $'000  2021  $'000  (24,257) (809) 1,857   138   876   ‐   (535) (2) 1,314   (1,735) (14,222) (3,952) 2,224   570   130   970   70   917   (4,731) ‐   ‐   ‐   (633) (239) (1,165) 858   7   (460) (37,594) (5,215) 45  46  84 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 85                                                                                             Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 28. Reconciliation of loss after income tax to net cash used in operating activities (continued)  Note 30. Operating segments  Net debt reconciliation  Cash and cash equivalents  Borrowings ‐ repayable within one year (note 16)  Borrowings ‐ repayable after one year [i]  Net debt  Consolidated  2022  $'000  2021  $'000  60,220  (176) (17,095) 93,324  ‐  ‐  42,949  93,324  [i] Includes long term portion of a lease liability expiring within 1 to 9 years and a industrial loan facility with the Korea Development  Bank (drawn portion of the loan facility is $16.7m)  Note 29. Key management personnel disclosures  Directors  The following persons were Directors of Australian Strategic Materials Ltd during the financial year:  I J Gandel  D G Woodall (resigned 15 July 2022)  N P Earner  D I Chalmers (resigned 1 March 2022)  G M Smith  K J Gleeson (appointed 1 February 2022)  Other key management personnel  The  following  persons  also  had  the  authority  and  responsibility  for  planning,  directing  and  controlling  the  major  activities  of  the  Consolidated entity, directly or indirectly, during the financial year:  F Moon  R Smith (appointed 6 July 2021)  J Clifton (appointed 12 July 2021)  Compensation  The aggregate compensation made to Directors and other members of key management personnel of the Consolidated entity is set out  below:  Short‐term employee benefits  Post‐employment benefits  Long‐term benefits  Share‐based payments   Consolidated  2022  $  2021  $  2,627,098   114,653   12,028   876,500   1,478,571   59,488   24,158   661,409   3,630,279   2,223,626   Identification of reportable operating segments  The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive management  team (the chief decision makers) in assessing performance and in determining the allocation of resources.  Previously, the Group had identified a single segment being the Australian segment. For the year ended 30 June 2022, the Company  has reassessed its operating segments and has organised them into three segments as follows:  ●  ●  ●  Korea: which includes the construction and commissioning of the Korean Metals Plant.  Dubbo: which includes the evaluation and feasibility of the Dubbo project.  Corporate: which includes corporate activities and the Pastoral company.  The comparative information has been restated to reflect this.  Intersegment transactions  Any Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.  Intersegment receivables, payables and loans  Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or  incur  non  market  interest  are  not  adjusted  to  fair  value  based  on  market  interest  rates.  Intersegment  loans  are  eliminated  on  consolidation.  Operating segment information  Consolidated 30 June 21  Revenue  Interest income  Other Income  Expenses  Professional fees and consulting services  Employee remuneration  Depreciation and Amortisation  Unrealised foreign exchange loss  Other unallocated  Income tax benefit  Corporate  $'000  Dubbo  Project  $'000  Korea  $'000  Consolidated  $'000  1,377  69  5,167  6,613  (1,698) (1,565) (87) (1) (3,261) 1,166  1,167  ‐  ‐  ‐  ‐  (217) ‐  ‐  ‐  ‐  ‐  (217) ‐  ‐  47  47  ‐  (264) (883) ‐  (659) ‐  1,377  69  5,214  6,660  (1,915) (1,829) (970) (1) (3,920) 1,166  (1,759) (809) 47  48  86 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 87                                                                                                                   Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 30. Operating segments (continued)  Consolidated 30 June 21  Assets  Cash and cash equivalents  Trade and other receivables  Inventories  Property, plant and equipment1  Intangibles1  Exploration and evaluation1  Biological assets1  Other  Total assets  Liabilities  Trade and other payables  Deferred tax  Provisions  Other  Total liabilities  1Additions to non‐current assets  Property, plant and equipment (note 12)  Exploration and evaluation  (note 13)  Biological assets  Intangible (note 14)  Consolidated 30 June 22  Revenue  Interest income  Other income  Expenses  Operating expenses  Professional fees and consulting services  Employee remuneration  Share based payments  Depreciation and Amortisation  Unrealised foreign exchange loss  Other unallocated  Income tax benefit  Corporate  $'000  Dubbo  Project  $'000  Korea  $'000  Consolidated  $'000  93,222  457  243  387  ‐  ‐  1,244  ‐  95,553  387  24,561  132  ‐  25,080  40  ‐  326  ‐  366  ‐  ‐  ‐  28,873  ‐  96,742  ‐  20  125,635  509  ‐  54  ‐  563  1,743  6,077  ‐  ‐  7,820  102  282  ‐  2,191  4,668  ‐  ‐  204  7,447  306  ‐  ‐  81  387  1,149  ‐  ‐  5,342  6,491  93,324  739  243  31,451  4,668  96,742  1,244  224  228,635  1,202  24,561  186  81  26,030  2,932  6,077  326  5,342  14,677  Corporate  $'000  Dubbo  Project  $'000  Korea  $'000  Consolidated  $'000  1,870  14  230  2,114  ‐  (5,191) (4,302) (876) (108) (410) (6,175) 3,967  ‐  ‐  ‐  ‐  ‐  (554) ‐  ‐  ‐  ‐  (200) ‐  ‐  15  47  62  (5,825) ‐  (3,925) ‐  (1,749) (965) (120) ‐  1,870  29  277  2,176  (5,825) (5,745) (8,227) (876) (1,857) (1,375) (6,495) 3,967  (10,981) (754) (12,522) (24,257) Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 30. Operating segments (continued)  Consolidated 30 June 22  Assets  Cash and cash equivalents  Trade and other receivables  Inventories  Property, plant and equipment1  Intangibles  Exploration and evaluation1  Biological assets1  Other  Total assets  Liabilities  Trade and other payables  Borrowings  Deferred tax  Provisions  Unearned revenue  Total liabilities  1Additions to non‐current assets  Property, plant and equipment (note 12)  Exploration and evaluation  (note 13)  Biological assets  Note 31. Financial risk management  Corporate  $'000  Dubbo  Project  $'000  Korea  $'000  Consolidated  $'000  40,574  872  193  585  ‐  ‐  1,797  ‐  44,021  1,419  ‐  20,609  502  ‐  22,530  187  ‐  659  846  ‐  ‐  ‐  33,484  ‐  104,225  ‐  20  137,729  1,054  ‐  ‐  ‐  ‐  1,054  4,731  8,410  ‐  13,141  19,646  1,394  13,908  30,108  3,616  ‐  ‐  278  68,950  1,006  17,271  ‐  2,588  6,554  27,419  26,582  ‐  ‐  26,582  60,220  2,266  14,101  64,177  3,616  104,225  1,797  298  250,700  3,479  17,271  20,609  3,090  6,554  51,003  31,500  8,410  659  40,569  The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate  risk), credit risk and liquidity risk. The Consolidated Entity's overall risk management program focuses on the unpredictability of financial  markets and seeks to minimise potential adverse effects on the financial performance of the Consolidated Entity.   This  note  presents  information  about  the  group's  exposure  to  each  of  the  above  risks,  their  objectives,  policies  and  processes  for  measuring and managing risk, and the management of capital.   The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management  monitors and manages the financial risks relating to the operations of the group through regular reviews of the risks and mitigating  strategies.   The  Consolidated  Entity  undertakes  certain  transactions  denominated  in  foreign  currency  and  is  exposed  to  foreign  currency  risk  through foreign exchange rate fluctuations.  Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated  in a currency that is not the entity's functional currency, which is Australian Dollars (AUD). The risk is measured using sensitivity analysis  and cash flow forecasting.  49  50  88 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 89                                                                                                                                                                           Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 31. Financial risk management (continued)  Market risk  Foreign currency risk  The group operated internationally and is exposed to foreign exchange risk arising from currency exposures with respect to changes in  USD/AUD,  KRW  (Korean Won) /AUD  and KRW  /  USD  exchange  rates. The  Group  is  exposed  to  currency  risk  on  purchases  that  are  denominated in a currency other the respective functional currency of Group entities, primarily the United States Dollar (USD) and  Korean Won (KRW).   Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 31. Financial risk management (continued)  Credit risk  The  Consolidated  Entity  has  adopted  a  lifetime  expected  loss  allowance  in  estimating  expected  credit  losses  to  trade  receivables  through  the  use  of a provisions  matrix using  fixed  rates of  credit  loss provisioning.  These  provisions  are considered  representative  across  all  customers  of  the  Consolidated  Entity  based  on  recent  sales  experience,  historical  collection  rates  and  forward‐looking  information that is available.  The Groups expenditure obligations in Korea are primarily in KRW. Funding requirements in Korea are met by transfer of USD from the  Australian based parent and converted into KRW or deposited into USD accounts.  As a result, the Group is exposed to fluctuations in  the USD / KRW to Australian currency. These exposures are not subject to a hedging programme.  In determining the recoverability of a trade or other receivable using the expected credit loss model, the group performs a risk analysis  considering the type and age of the outstanding receivables, the creditworthiness of the counterparty, contract provisions, letter of  credit and timing of payment.  The Consolidated Group’s risk from movements in foreign currency rates, relates to USD held within Australia and Korea and KRW held  in Korean Won (KRW).   Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposure to customers,  including outstanding receivables and committed transactions.   The  risk  exposure  is  minimized  by  only  holding  sufficient  funds  in  KRW  to  meet  the  immediate  cash  requirements  of  the  subsidiaries. Once funds are converted to KRW, they are only used to pay expenses in KRW.  The financial assets and liabilities that are exposed to foreign exchange risk at the ends of the reporting period, expressed in Australian  dollars are:  Cash and cash equivalents ‐ USD  Cash and cash equivalents ‐ KRW  Trade Receivables ‐ KRW  Trade Payables ‐ KRW  Borrowings ‐ KRW  2022  $'000  2021  $'000  11,073  19,646  1,156  (74) (17,095) 14,565  ‐  102  240  (65) ‐  277  Price risk  Commodity price risk in the group primarily results from price fluctuations and the availability of rare earth oxides required by the  Korean  operations. The  Group  considers  the  outlook  for  rare  earths  regularly  in  considering  the  need  for  active  financial  risk  management. As the Group continues to progress towards production of a saleable product the Group will monitor and develop a policy  to mitigate its exposure to price risk.  Interest rate risk  Interest rate risk is the risk that fair values and cash flows of the Group’s financial instruments will be affected by changes in the market  interest  rates. The  group's  main  interest  rate  risk  arises  through  its  cash  and  cash  equivalents,  other  financial  assets  and  financial  liabilities held within financial institutions. The group minimises this risk by utilising fixed rate instruments where appropriate.   Summarised market risk sensitivity analysis:  30 June 2022  30 June 2021  Carrying  Amount  $'000  +100BP  $'000  ‐100BP  $'000  Carrying  Amount  $'000  +100BP  $'000  ‐100BP  $'000  Financial assets  Cash‐and cash equivalents  Receivables (current)1  Other financial assets  Trade and other payables   (120) (2) ‐  (15) (137) 1The receivables balance excludes prepayments and tax balances which do not meet the definition of financial assets and liabilities.  60,220  952  20  7,685  68,877  120  2  ‐  15  137  93,324  393  22  1,202  94,941  187  ‐  ‐  2  189  (187) ‐  ‐  (2) (189) The group limits its exposure to credit risk in relation to cash and cash equivalents and other financial assets by only utilising banks and  financial institutions with acceptable credit ratings. The Groups cash deposits are all on call or in term deposits and attract a rate of  interest at normal short‐term money market rates.  Tax receivables and prepayments do not meet the definition of financial assets. The group assesses the credit quality of the customer,  taking into account its financial position, past experience and other factors.  Liquidity risk  Liquidity risk is the risk that the group will not be able to meet its financial liabilities as they fall due. The group's approach to managing  liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal  and stressed conditions, without incurring unacceptable losses or risking damage to the group's reputation. The Board of Directors'  monitors liquidity levels on an ongoing basis.  Liquidity risk management involves maintaining sufficient cash on hand or undrawn credit facilities to meet the operating and capital  requirements of the business.  Maturity analysis of financial assets and liabilities based on management expectation  The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and outflows:  Liquidity Risk  Year ended 30 June 2022  Financial Assets  Cash & cash equivalents  Trade & Other Receivables  Financial Liabilities  Trade & Other payables  Borrowings  Net Maturity  Within 1 year  1 to 5 years  $  $  Over 5 years  $  Total  $  60,220  2,266  62,486  ‐  ‐  ‐  (10,033) (176) (10,209) ‐  (17,802) (17,802) 52,277  (17,802) ‐  ‐  ‐  ‐  ‐  ‐  ‐  60,220  2,266  62,486  (10,033) (17,978) (28,011) 34,475  51  52  90 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 91                                                                                                                                            Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 31. Financial risk management (continued)  Year ended 30 June 2021  Financial Assets  Cash & cash equivalents  Trade & Other Receivables  Financial Liabilities  Trade & Other payables  Net Maturity  Within 1 year  1 to 5 years  $  $  Over 5 years  $  Total  $  93,324  739  94,063  (1,202) 92,861  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  93,324  739  94,063  (1,202) 92,861  The group's financial liabilities generally mature within 3 months, therefore the carrying amount equals the cash flow required to settle  the liability.  Note 32. Earnings per share  Loss after income tax  Non‐controlling interest  Loss after income tax attributable to the owners of Australian Strategic Materials Ltd  Basic loss per share  Diluted loss per share  Consolidated  2022  $'000  2021  $'000  (24,257) (18) (24,275) (809) 26   (783) Cents  Cents  (17) (17) (1) (1) Number  Number  Weighted average number of ordinary shares used in calculating basic earnings per share  139,808,068  114,644,807  Weighted average number of ordinary shares used in calculating diluted earnings per share  139,808,068  114,644,807  The number of potential ordinary share not considered dilutive are as follows:  Performance rights  Accounting policy for earnings per share  3,204,928  Basic earnings per share  Basic earnings per share is calculated by dividing the profit attributable to the owners of Australian Strategic Materials Ltd, excluding  any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the  financial year, adjusted for bonus elements in ordinary shares issued during the financial year.  Diluted earnings per share  Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after  income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average  number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.  Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 33. Capital risk management  The group's objectives when managing capital are to safeguard the ability to continue as a going concern, so that it can continue to  provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of  capital. In order to maintain or adjust the capital structure, the group may return capital to shareholders, pay dividends to shareholders,  issue new shares or sell assets.  Note 34. Share‐based payments  Share‐based payments are‐based compensation benefits are provided to employees via the group's incentive plans. The incentive plans  consist of short‐term and long‐term incentive plans for the Group's Executives. Information relating to these plans is set out in the  remuneration report and below.   The fair value of rights granted under the short‐term and long‐term incentive plans is recognised as an employee benefits expense with  corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the rights granted,  which includes any market performance conditions and the impact of any non‐vesting conditions but excludes the impact of any service  non‐market performance vesting conditions.   Non ‐market vesting conditions and the impact of service conditions are included in assumptions about the number of rights that are  expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting  conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of rights that are expected to  vest based on the non‐market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in the  statement of profit or loss and other comprehensive income, with a corresponding adjustment to equity.   The initial estimate of fair value for market based and non‐vesting conditions is not subsequently adjusted for differences between the  number of rights granted and number of rights that vest.  When the rights are exercised, the appropriate number of shares are transferred to the employee. The proceeds received are net of  any directly attributable transaction costs are credited directly to equity.   The fair value of deferred shares granted to employees for nil consideration under the employee share scheme is recognised as an  expense over the relevant service period, being the year to which the incentive relates and the vesting period of the shares. The fair  value is measured using the Monte Carlo valuation method for long‐term incentive plans and Black‐Scholes valuation method for short‐ term incentive plans at the grant date of the shares and is recognised in equity in the share‐based payment reserve.   The number of shares expected to vest is estimated based on the non‐market vesting conditions. The estimates are revised at the end  of each reporting period and adjustments are recognised in profit or loss and the share‐based payment reserve.   Executives  The Company's remuneration framework is set out in the remuneration report, including all details of the performance rights plans,  the associated performance hurdles and vesting criteria. Participation in the plans is at the discretion of the Board of Directors and no  individual has a contractual right to participate in the plans or to receive any guaranteed benefits.   Participation is currently restricted to Executives within the group. The following tables illustrate the number and weighted average  fair value of, and movements in, share rights during the year.   53  54  92 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 93                                                                                                                      Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 34. Share‐based payments (continued)  Set out below are summaries of performance rights and options granted under the plan:  Outstanding at the beginning of the financial year  Granted [i]  Forfeited  Exercised  Expired  Outstanding at the end of the financial year [ii]  Number of rights  2022  2021  3,000,000  342,258  ‐  ‐  ‐  ‐  3,000,000  ‐  ‐  ‐  3,342,258  3,000,000  [i] Of the 342,258 granted during the year, 125,248 related to options and 217,010 related to performance rights. The options  granted have a weighted average exercise price of $6.38. On and from the vesting date, each option entitles the holder to be issued  with one share upon the payment of the exercise price and the transition rights will lapse upon cessation of employment. For the  purpose of valuation, the contractual life is determined as 5 to 7 years.   [ii] At 30 June 2022, 3,342,258 of the performance rights and options granted have not vested and are not exercisable. The weighted  average remaining contractual life of performance rights is 1.39 years (30 June 2021: 2.28 years).   2022  Grant date  Expiry date  19/05/2020  19/05/2020  07/02/2022  07/02/2022  07/02/2022  07/02/2022  24/02/2022  24/02/2022  28/02/2022  28/02/2022  25/03/2022  25/03/2022  13/10/2023  13/10/2023  05/07/2024  [i]  05/07/2026  [ii]  30/06/2022  30/06/2022  30/06/2022  30/06/2022  30/06/2022  30/06/2022  Exercise   price  Balance at   the start of   the year  Granted  Exercised  Expired/   forfeited/   other  Balance at   the end of   the year  ‐  ‐  ‐  $6.38   ‐  $6.38   ‐  ‐  ‐  ‐  ‐  ‐  1,800,000  1,200,000  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  3,000,000  ‐  ‐  27,357  62,624  27,357  62,624  14,057  14,057  46,571  46,571  20,520  20,520  342,258  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  1,800,000  1,200,000  27,357  62,624  27,357  62,624  14,057  14,057  46,571  46,571  20,520  20,520  3,342,258  [i] These options can be exercised at any point between the end of the service condition, being 12 July 2024 and the end of the employment period which for the purpose of valuation was considered to be  between 5 and 7 years.  [ii] These options can be exercised at any point between the end of the service condition, being 12 July 2026 and the end of the employment period which for the purpose of valuation was considered to be  between 5 and 7 years.  2021  Grant date  Expiry date  Exercise   price  Balance at   the start of   the year  19/05/2020  19/05/2020  13/10/2023  13/10/2023  $0.00  $0.00  ‐  ‐  ‐  55  Granted  Exercised  1,800,000  1,200,000  3,000,000  ‐  ‐  ‐  Expired/   forfeited/   other  Balance at   the end of   the year  ‐  ‐  ‐  1,800,000  1,200,000  3,000,000  Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 34. Share‐based payments (continued)  FY21/22 Executive STI and LTI  Executives may receive variable remuneration in the form of short‐term incentives ('STI') of up to 30% of their annual salary package.  STI payments are based on the Board's assessment of the executives' performance towards achieving key Company objectives over the  relevant period. Annually the Remuneration Committee reviews the performance of each executive prior to or after the reporting date.  The Remuneration Committee then determines the amount of STI to be allocated to each executive with approval from the Board. The  total potential STI available for award is at the Board's discretion. STI's are made through the issue of performance rights after the  reporting period. Where an executive resigns during or after the relevant financial year, it remains at the discretion of the Board as to  whether any of the STI is payable for the relevant financial year.     The focus of the 2021/22 financial year was on the Company's progress towards the further development of the Korean Metals Plant  and the Dubbo project.   The long‐term incentives ('LTI') include performance rights awarded to executives. Executives may participate in the Executive  Incentive Plan to receive variable remuneration of up to 30% of their annual salary package. Shares are awarded to executives over a  period of three years based on long‐term incentive measures.  LTI  and STI  awards  for  the Executive  team  in  the  2022  financial  year FY22  STI  were based  on  non‐market  scorecard  measures and  weighting, with the estimated value of the grant determined at the reporting date.   Performance  Hurdle  Non‐market  Non‐market  Non‐market  Non‐market  Non‐market  Non‐market  Grant date  24/02/2022  24/02/2022  28/02/2022  28/02/2022  25/03/2022  25/03/2022  Share price  at grant date  $7.20   $7.20   $8.14   $8.14   $8.13   $8.13   Exercise  price  Fair value  at grant date1  Valuation  Model  ‐  ‐  ‐  ‐  ‐  ‐  $7.20   Black‐Scholes  $7.20   Black‐Scholes  $8.14   Black‐Scholes  $8.14   Black‐Scholes  $8.13   Black‐Scholes  $8.13   Black‐Scholes  1 The performance rights were determined to have a 0% probability of vesting at grant date and at 30 June 2022 and no share‐based payments expense was recognised during FY22. These performance  rights were cancelled on 8 August 2022.  Sign‐on Rights  LTI's were issued to the Chief Operating Officer and Chief Financial Officer as sign‐on incentives for the commencement of their  employment. These sign‐on rights had a service condition only and there were no performance conditions associated with these  options.   Performance  Hurdle  Share price  Exercise Expected Dividend  Risk‐free  Fair value  interest rate at grant date  Valuation  Model  Service condition  16/06/2021  Service condition  16/06/2021  Service condition  22/06/2021  Service condition  22/06/2021  Grant date  at grant date  price  volatility  $6.21   $6.38   70.00%   $6.21   $6.38   70.00%   ‐  70.00%  $6.40   ‐  70.00%  $6.40   Expenses arising from share‐based payment transactions  Performance rights  Options  1.09%   1.09%   1.09%  1.09%  $3.90   Monte Carlo  $3.90   Monte Carlo  $6.40  Black‐Scholes  $6.40  Black‐Scholes  2022  $’000  2021  $’000  751  125  876  917  ‐  917  yield  ‐  ‐  ‐  ‐  56  94 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 95                                                                                                                                                                        Australian Strategic Materials Ltd  Notes to the consolidated financial statements  30 June 2022  Note 35. Events after the reporting period  During July 2022, Rowena Smith was appointed Chief Executive Officer and David Woodall resigned from his position as Managing  Director.   On 19 July 2022, David Woodall held 3,000,000 performance rights, of these performance rights 2,000,000 were forfeited and 1,000,000  vested through the issue of ordinary shares in the Company.    On  8  September  2022,  the  Company  announced  it  signed  a  binding  agreement  for  the  sale  of  neodymium  praseodymium  metal  produced at its Korean Metals Plant with Korean company NS World Co., Ltd. The agreement is for the sale and delivery of 10 tonnes  of neodymium praseodymium metal ingot from September 2022 to December 2022.  No  other  matter  or  circumstance  has  arisen  since  30  June  2022  that  has  significantly  affected,  or  may  significantly  affect  the  Consolidated entity's operations, the results of those operations, or the Consolidated entity's state of affairs in future financial years.  Australian Strategic Materials Ltd  Directors' declaration  30 June 2022  In the Directors' opinion:  ●  ●  ●  ●  the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;  the  attached  financial  statements  and  notes  comply  with  International  Financial  Reporting  Standards  as  issued  by  the International Accounting Standards Board as described in note 1 to the financial statements;  the attached financial statements and notes give a true and fair view of the Consolidated entity's financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and  subject to the matters set out in note 1 there are reasonable grounds to believe that the Company will be able to pay its debts as  and when they become due and payable.  The Directors have been given the declarations required by section 295A of the Corporations Act 2001.  Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.  On behalf of the Directors  ___________________________  I Gandel   Chairman   21 September 2022  96 ASM Annual Report 2022 | Financial Report 57  58  Independent auditor’s report To the members of Australian Strategic Materials Limited Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Australian Strategic Materials Limited (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group's financial position as at 30 June 2022 and of its financial performance for the year then ended (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: • • • • • • the consolidated balance sheet as at 30 June 2022 the consolidated statement of changes in equity for the year then ended the consolidated statement of cash flows for the year then ended the consolidated statement of profit or loss and other comprehensive income for the year then ended the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information the directors’ declaration. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. PricewaterhouseCoopers, ABN 52 780 433 757 Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840 T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. Financial Report | ASM Annual Report 2022 97                     Material uncertainty related to going concern We draw attention to Note 1 in the financial report, which indicates that the Group has cash outflows from operating and investing activities of $71.1 million for the year ended 30 June 2022. At 30 June 2022, the Group had cash on hand of $60.2 million. The Group has net working capital as at 30 June 2022 of $65.4 million and outstanding commitments of $23.0 million. The ongoing operation of the Group will remain dependent upon raising further additional funding from shareholders or other parties. These conditions, along with other matters set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt about the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Our audit approach An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality Audit scope Key audit matters • Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. • The accounting processes are structured around a Group finance function at its head office in Perth. • • Amongst other relevant topics, we communicated the following key audit matter to the Audit Committee: −− Carrying value of exploration and evaluation assets These are further described in the Key audit matters section of our report. • For the purpose of our audit we used overall Group materiality of $2,540,000, which represents approximately 1% of the Group’s total assets. • We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. • We chose total assets of the Group because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. • We utilised a 1% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. Key audit matter How our audit addressed the key audit matter Carrying value of exploration and evaluation assets (Refer to note 13 of the financial statements) We performed the following procedures: The Group’s Dubbo Project is a large exploration asset that is subject to the impairment indicators assessment required by AASB 6 Exploration for and Evaluation of Mineral Resources. Due to the relative size of this balance in the consolidated balance sheet, as well as the judgemental application of AASB 6 this has been considered a key audit matter. Judgement was required by the Group to assess whether there were indicators of impairment of the capitalised exploration and evaluation assets due to the need to make estimates and assumptions about future events and circumstances, such as whether the mineral resources may be economically viable to mine in the future. • Assessed whether the Group retained right of tenure for all of its exploration licence areas by obtaining licence status records from relevant government databases. • For a sample of additions to exploration and evaluation assets during the year, inspected relevant supporting documentation such as invoices, and compared the amounts to accounting records. • For a sample of additions to exploration and evaluation assets during the year, tested the nature of the expense being capitalised and whether this was in accordance with AASB 6. • Inquired of management and directors as to the future plans for the capitalised exploration and evaluation assets and assessed plans for future expenditure to meet minimum licence requirements. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2022, but does not include the financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other information we obtained included the Director's Report, Shareholders’ Information and Company Directory. We expect the remaining other information to be made available to us after the date of this auditor's report. 98 ASM Annual Report 2022 | Financial Report 1 Financial Report | ASM Annual Report 2022 992 Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the other information not yet received, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action to take. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report. Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 46 to 54 of the directors’ report for the year ended 30 June 2022. In our opinion, the remuneration report of Australian Strategic Materials Limited for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. PricewaterhouseCoopers Helen Bathurst Partner Perth 21 September 2022 100 ASM Annual Report 2022 | Financial Report Financial Report | ASM Annual Report 2022 101 4 3 Additional Information Additional information required by Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 10 October 2022. Distribution of Equity Securities Analysis of numbers of equity security holders by size of holding: 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over The number of equity security holders holdingless than a marketable parcel of securities are: Twenty Largest Shareholders The names of the 20 largest holders of quoted ordinary shares are: Ordinary shares Number of holders Number of shares 6,111 3,992 1,003 2,665,647 9,679,950 7,405,450 1,095 28,829,246 110 94,375,769 12,311 142,956,062 2,128 263,718 13 LILYCREEK PTY LTD 14 MAGNABAY PTY LTD 15 16 17 18 19 ILG ESTATE CO 2 PTY LTD ILG ESTATE CO 1 PTY LTD ILG ESTATE CO 3 PTY LTD ILG ESTATE CO 4 PTY LTD LEEFAB PTY LTD 20 MR PATRICK JOHN MCHALE Substantial Shareholders The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are: Listed ordinary shares Number of shares % of shares on issue 1,430,194 1,430,194 1,127,689 1,127,688 1,127,688 1,127,688 1,000,000 932,500 1.00 1.00 0.79 0.79 0.79 0.79 0.7 0.65 75,076,785 52.52 Number of shares Abbotsleigh Pty Ltd and Mr Ian Jeffrey Gandel 31,584,110 Chapelgreen Pty Ltd 9,990,582 Listed ordinary shares Number of shares % of shares on issue Voting Rights All ordinary shares (whether fully paid or not) carry one vote per share without restriction. Unquoted Securities At 10 October 2022, the Company had the following unlisted securities on issue: 1 2 3 4 5 6 7 8 9 10 11 12 ABBOTSLEIGH PTY LTD CITICORP NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CHAPELGREEN PTY LTD BNP PARIBAS NOMINEES PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED HOME IDEAS SHOW PTY LTD 25,335,888 10,453,991 7,171,968 5,699,999 3,749,177 3,747,659 1,883,623 ABBOTSLEIGH PTY LTD 1,737,468 BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM MILFORD PARK SUPERANNUATION PTY LTD FYVIE PTY LTD AUBURNVALLEY PTY LTD 1,526,176 1,525,000 1,512,000 1,430,195 17.72 7.31 5.02 3.99 2.62 2.62 1.32 1.22 1.07 1.07 1.06 1.00 Holders of 20% or more of the class Number of Securtities Number of Holders Holder Name Employee Performance Rights Sign On Incentive 54,714 Transition Rights (Options) $6.38 125,248 1 1 Rowena Smith Jason Clifton Schedule of mining tenements as at 30 June 2022 Tenement location Tenement Interest Nature of interest Dubbo, NSW Dubbo, NSW EL 5548 EL 7631 Dubbo, NSW ML 1724 100% 100% 100% Equity Equity Equity 102 ASM Annual Report 2022 | Additional Information Additional Information | ASM Annual Report 2022 103 

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