Bowen Coking Coal Ltd
Annual Report 2022

Plain-text annual report

A N N U A L R E P O R T MAKING THE MOST OF EVERY OPPORTUNITY B O W E N C O K I N G C O A L B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 1 CONTENTS Cautionary Statements Corporate Information Chairman’s Letter Managing Director’s Report Review of Operations Directors’ Report Auditor’s Independence Declaration Financial Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position 2 3 4 7 9 25 42 43 44 45 Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Interests in Tenements Annual Mineral Resources Statement 46 47 48 82 83 89 92 93 CAUTIONARY STATEMENTS 2 FORWARD-LOOKING STATEMENTS This document may contain certain forward-looking statements. Such statements are only predictions, based on certain assumptions and involve known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control. Actual events or results may differ materially from the events or results expected or implied in any forward-looking statement. The inclusion of such statements should not be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions or that any forward-looking statements will be or are likely to be fulfilled. Bowen Coking Coal Ltd undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this document (subject to securities exchange disclosure requirements). The information in this document does not take into account the objectives, financial situation or particular needs of any person or organisation. Nothing contained in this document constitutes investment, legal, tax or other advice. COMPETENT PERSON STATEMENT All exploration results and Mineral Resources referred to in this Annual Report have previously been announced to the market by the Company in accordance with the requirements of Chapter 5 of the ASX Listing Rules and the JORC Code 2012, including as to the requirements for a statement from a Competent Person; and the relevant announcements have been referred to in the body of the Annual Report. The Company confirms that it is not aware of any new information or data that materially affects that information. In respect of the Mineral Resources, all material assumptions and technical parameters continue to apply and have not materially changed. BOWEN COKING COAL ANNUAL REPORT 2022CORPORATE INFORMATION 3 DIRECTORS AND COMPANY SECRETARY NOTICE OF ANNUAL GENERAL MEETING HEAD OFFICE AND REGISTERED OFFICE PRINCIPAL PLACE OF BUSINESS AUDITORS SHARE REGISTRY STOCK EXCHANGE LISTING AUSTRALIAN COMPANY NUMBER SOLICITOR BANKER Nicholas Jorss (Executive Chairman) Gerhard Redelinghuys (Managing Director) Matthew Latimore (Non-Executive Director) Neville Sneddon (Non-Executive Director) Daryl Edwards (Chief Financial Officer) Duncan Cornish (Company Secretary) The details of the annual general meeting of Bowen Coking Coal Ltd are: Level 35, Waterfront Place 1 Eagle Street, Brisbane QLD 4000 10.00 am (AEST) on 23 November 2022 Bowen Coking Coal Ltd Level 4, 167 Eagle Street Brisbane QLD 4000 Tel: +61 7 3191 8413 www.bowencokingcoal.com Level 4, 167 Eagle Street Brisbane QLD 4000 RSM Australia Partners Level 6, 340 Adelaide Street Brisbane QLD 4000 Link Market Services Limited Level 21, 10 Eagle Street Brisbane QLD 4000 Tel: 1300 554 474 www.linkmarketservices.com.au Australian Securities Exchange Ltd ASX Code: BCB 064 874 620 Colin Biggers & Paisley Pty Ltd Level 35, 1 Eagle Street Brisbane QLD 4000 Westpac Banking Corporation Limited BOWEN COKING COAL ANNUAL REPORT 20224 CHAIRMAN’S LETTER The 2022 financial year has been a year of transformation for Bowen Coking Coal as the Company transitioned from exploration and development to first production. DEAR SHAREHOLDERS, Amid very strong coal pricing, Bowen’s first 35,000 tonne delivery of ultra- low volatile pulverised coal injection (ULVPCI) from the Company’s Bluff Mine near Blackwater in the Bowen Basin was shipped from Gladstone’s RG Tanna Port on 30 June 2022. This landmark first sale for the Company was shipped under a sales contract to Formosa Plastics Group, a large diversified multi-national conglomerate headquartered in Taiwan. The ULVPCI coal produced at Bluff typically attracts a premium in the market for its low ash, high energy and high coke replacement ratio. Notably, the shipment was made before 1 July 2022, the starting date of Queensland’s new coal royalties super tax. More about that later. First production is a significant accomplishment for any mining company and for Bowen it marked the culmination of a tremendous team effort since Bluff’s acquisition in December 2021. The milestone was also a terrific reward and reflection of the Company’s relentless efforts since listing in 2017. Bowen is well on track to beat its production target of five million tonnes per annum (Mtpa) of Run-of- Mine coal by the end of 2024. “FIRST PRODUCTION IS A SIGNIFICANT ACCOMPLISHMENT FOR ANY MINING COMPANY AND FOR BOWEN IT MARKED THE CULMINATION OF A TREMENDOUS TEAM EFFORT” All of this progress has not been without its challenges. The aforementioned supertax, which now imposes three new progressive royalty tiers up to 40% on revenues, was an unexpected burden introduced by the Queensland Government. Alongside the rest of the industry and other investors who value the previous stability of Queensland as an investment destination, we will continue to fight for a reasonable outcome on royalties for an industry that is the engine room of the state economy. While disappointed by the lack of any meaningful consultation with industry on what now represents the highest royalty regime in the world, we’re determined not to let this poor decision for Queensland and future Queensland jobs cost the Company any momentum. Both coking and thermal coal pricing reached historic highs this year and are forecast to remain strong as supply falls and several majors consider an exit from the market. The world’s planned energy transition away from hydrocarbons toward sustainable sources, such as wind farms and solar stations, is going to require more steel. More steel will demand more coking coal which really has no credible or near horizon substitute in the steel making process. The International Energy Agency concurs, forecasting that, under its aggressive decarbonisation case, by 2050, steel produced from green hydrogen will total 8%. Given the constraints of physics and the significant energy losses involved in hypothetically creating steel from green hydrogen it is likely that even this target will prove difficult to achieve. The future for Queensland’s first-class metallurgical coal is strong and Bowen is proud to stand beside our coal workers and deliver increasing amounts of this key steel making material to the world. As a new producer, we expect robust coal prices to translate to strong cash flows which will help support further development. Our projects are located in the heart of the world’s best coking coal province. We have convenient access to existing infrastructure and a skilled mining labour force. We have a proven leadership team made up of passionate and experienced people who between them have now successfully opened 13 coal mines and operated more than 25 coal mines worldwide. As the call from global steelmakers for higher quality, energy-rich coking coal grows louder, our resolve to become a top ten metallurgical coal producer in Australia has never been stronger. The 2022 financial year was a pivotal year but it’s only the start of things to come. We will continue to deliver growth and make the most of a once-in-a-generation opportunity to grow a significant metallurgical coal business. On behalf of the Board, I thank you for your continued support and look forward to delivering on your investment in Bowen. Yours faithfully, Nick Jorss Chairman BOWEN COKING COAL ANNUAL REPORT 2022 5 BOWEN COKING COAL ANNUAL REPORT 20226 BOWEN COKING COAL ANNUAL REPORT 20227 MANAGING DIRECTOR’S REPORT FY2022 was a milestone year for Bowen Coking Coal. The company successfully and safely completed the transition from an explorer and developer of coal assets to an operating mine owner. The company’s Bluff Mine near Blackwater was acquired in December 2021 and was shipping coal by June 2022, just seven months later. Coal production is ramping up in coming months to a steady state Run-of-Mine (ROM) target of 80,000t to 100,000t per month, representing an annualised production rate of between 1Mtpa and 1.2Mtpa ROM over four to six years to supply the global steel industry. That’s some achievement given the many challenges associated with bringing a decommissioned mine back to life particularly within an accelerated time span. In achieving such a rapid mine development the team has managed a complex chain of downstream demands including procuring labour and equipment, negotiating trucking, rail and port agreements, accessing washing and processing facilities, and securing sales contracts. Overlaying the entire pit to port process are important environmental, safety and regulatory considerations. Suffice to say, farewelling our first coal shipment from Gladstone’s RG Tanna Port was not only a major career highlight for me but testament to Bowen’s ability to get the job done. Our executive team and key contractors led by HSE Mining worked around the clock during the Bluff mine’s recommissioning. The marketing of the Bluff product coal was negotiated by the Company’s 50:50 Marketing Joint Venture with M Resources which leveraged its strong relationships with Asian buyers to achieve Bowen’s first sales contract in February 2022. Importantly, on the ground activities were undertaken with a key focus on safety. Bluff reported no lost time injuries during the rapid restart of operations where there were many moving parts. Our first shipment from Bluff is just the start of our production ramp up. On 22 July 2022, subsequent to the end of the financial year, we announced first coal had been mined at the Broadmeadow East Pit, the first producing pit of the Company’s Burton Complex which also comprises the Burton and Lenton pits. Announced in December 2021, the purchase of a 90% interest in the Burton Complex from New Hope Corporation Limited materially increased the Company’s attributable resources to more than 500 million tonnes (Mt) and included the co-located Burton coal handling and processing plant (CHPP), train loadout facility, a haul road, 350 plus person camp, offices and workshops. All this infrastructure has than a $300 million replacement value and is key to our plans for self-sufficiency. When refurbished it should comfortably accommodate 4.5Mtpa to 5Mtpa of long‐term ROM production. The Burton CHPP’s staged refurbishment is due to be progressively completed through to the end of FY2023. Prior to this, Broadmeadow East coal is being processed at the neighbouring Fitzroy CHPP under an infrastructure sharing agreement with Fitzroy (CQ) Pty Ltd and exported through the Dalrymple Bay Coal Terminal in Mackay for the remainder of the year. First ROM coal is expected late in Q1 2023 from the Burton Pit. In June, Bowen announced it had executed a series of funding arrangements totalling approximately A$190 million to cover the development of the Burton Complex, including the CHPP refurbishment. This was an extremely complex transaction, some three years in the making, and I would like to personally acknowledge the fantastic efforts of the team at Bowen, our advisors, along with the goodwill of our incoming funding providers Taurus Mining Finance Fund and the New Hope Group. In time, the Company’s Hillalong Coking Coal Project, located only 10km to the north of the Burton and Lenton pits, aims to have its production processed through the Burton Complex as well. The ongoing exploration program at Hillalong is being funded by farm-in partner, Sumitomo Corporation, which has now spent A$5 million for a 15% stake. Sumitomo has an option to earn an additional 5% by spending another $2.5m. Around 50km south of Broadmeadow East, our Isaac River Project is on track to produce first coal in 2023, should Federal environmental approval be obtained later this year. The project was granted a site-specific Environmental Authority from the Queensland State Government in March while sole objections have now been removed against the Mining Lease Application “FAREWELLING OUR FIRST COAL SHIPMENT FROM GLADSTONE’S RG TANNA PORT WAS NOT ONLY A MAJOR CAREER HIGHLIGHT FOR ME BUT TESTAMENT TO BOWEN’S ABILITY TO GET THE JOB DONE” BOWEN COKING COAL ANNUAL REPORT 20228 by the Isaac Regional Council. Federal environmental approval under the Environment Protection and Biodiversity Conservation (EPBC) Act is underway and expected to be obtained towards the end of the year. The project requires only a modest capital investment as it is planned to leverage off existing third- party infrastructure. In closing, Bowen has now rapidly opened its first two mines this year and is on track to have another two mines in production next year as we target 6.2Mt of ROM production by the end of 2024. The team’s considerable achievements to date provide us with a strong financial platform for further logical and accretive growth. Amid strong market fundamentals for metallurgical coal driven by underinvestment in capacity and growing steel demand, Bowen is looking forward to several years of strong cash flows and growth. colleagues, our partners, shareholders, government and other key stakeholders for supporting the Company since its listing. In return, your board will always strive to grow long term value for all stakeholders as we deliver on our vision to become a significant independent metallurgical coal producer. We may be confident of our future but at the same time, we’re very proud of our past. The success we’ve shared follows a lot of hard work, continuing teamwork and enduring belief in our combined capabilities and endless potential. I sincerely thank my Bowen Gerhard Redelinghuys Managing Director & CEO BOWEN COKING COAL ANNUAL REPORT 2022B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 9 REVIEW OF OPERATIONS B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 10 BOWEN COKING COAL PROJECTS B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 11 During the year ended 30 June 2022, Bowen Coking Coal Ltd delivered on its strategy of taking the Company from a developer to a producer, by shipping first coal from its Bluff PCI mine and progressing its portfolio of high-quality coking coal assets readying Broadmeadow East for first production and working towards the finalisation of the transformational acquisition of the Burton Lenton Project. 2022 OPERATIONAL & FINANCIAL HIGHLIGHTS BLUFF MINE ACQUISITION COMPLETE WITH FIRST COAL MINED AND MAIDEN SHIPMENT FROM THE PORT OF GLADSTONE FINAL APPROVAL FOR BROADMEADOW EAST AND MINING CONTRACTOR MOBILISED TO SITE BINDING AGREEMENT SIGNED FOR ACQUISITION OF THE BURTON MINE AND LENTON PROJECT STATE ENVIRONMENTAL APPROVAL FOR ISAAC RIVER INFRASTRUCTURE AND ACCESS DEAL WITH FITZROY MAIDEN 44MT RESOURCE ESTIMATE ANNOUNCED FOR HILLALONG SOUTH HIGH QUALITY COKING COAL CONFIRMED AT BROADMEADOW EAST SECURING FINANCE FACILITIES FOR $190 MILLION TO UNDERPIN THE DEVELOPMENT OF ASSETS BLUFF MINE 12 LOCATION 20km east of Blackwater, Bowen Basin, Queensland TENEMENTS ML 80194, EPC 1175, EPC 1999 COAL TYPE Ultra-low volatile pulverised coal injection (UVPCI) TOTAL JORC RESOURCE 13.5Mt OWNERSHIP 100% The Bluff Mine (Bluff) is an open cut mine located in the southern Bowen Basin, near the township of Bluff and 20km east of Blackwater. The mine is adjacent to the Blackwater rail line which connects it to the Port of Gladstone. The Bluff acquisition was completed in December 2021 and first coal was mined and shipped in June 2022. The Ultra Low Volatile PCI I coal produced at Bluff is well regarded for its low ash, high energy and high coke replacement ratio. The marketing of the Bluff product coal is being handled by the Company’s 50:50 Marketing Joint Venture with M Resources, a specialist metallurgical coal trading company. Bowen operates under an agreement with the QCoal Group to wash coal from Bluff through their nearby Cook coal handling and processing plant. The company has also signed agreements with third parties for rail and port services and has appointed HSE Mining as contractor on site. Coal production at Bluff mine is expected to ramp up to a steady state ROM target of 80,000t to 100,000t per month, representing an annualised production rate of between 1Mtpa and 1.2Mtpa ROM over four to six years to supply the global steel industry. The coal produced at the mine will complement the rest of the Bowen asset portfolio, adding to the product mix of high-quality coal for the steel making industry. BOWEN COKING COAL ANNUAL REPORT 2022B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 13 B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 14 BLUFF MINE FIRST COAL SHIPPED JUNE 2022 BENCHMARK QUALITY ULV PCI COAL MINE PRODUCTION – HSE MINING CHPP AND TLO – COOK COLLIERY December 2021 Acquisition April 2022 First coal mined January 2021 Production crew mobilised June 2022 First coal shipped ANNUAL ROM PRODUCTION TARGET JORC RESOURCE ~1.0Mt* 14Mt *Further exploration planned to test possible LOM extension BURTON COMPLEX LOCATION Northern Bowen Basin TENEMENTS ML 700053, ML 70337, ML 700054, ML The Burton Complex is located around 50km south of Bowen’s Hillalong Project, and 35km 70109, ML 70260, EPC 766, EPC 1675, north of the Company’s EPC 865, EPC 857, MDL 349, MDL 315 COAL TYPE Coking coal and secondary thermal coal TOTAL JORC RESOURCE Burton Pit 64Mt Lenton Pit 140Mt OWNERSHIP 90% Broadmeadow East Project in the northern Bowen Basin. The Burton Complex includes the Burton Mine and Lenton deposit. Burton is an open-cut coal mine currently in care and maintenance which contains three unmined open pit deposits with total coal resources of 64Mt and substantial infrastructure, including the Burton Coal Handling and Preparation Plant (CHPP), with a total replacement value of more than A$300m. Lenton is an adjacent undeveloped open-cut project with total coal resources of 140Mt. In August 2021, Bowen announced its intention to acquire New Hope Corporations 90% interest in the Lenton Joint Venture, owner of the Burton Coal Mine and New Lenton Project. (Formosa Plastics Group holds the remaining 10%). On 24 December 2021, Bowen entered into a binding Share Sale and Purchase Agreement (‘SPA’) with New Hope Corporation Limited for the acquisition 15 of 100% of the shares in New Lenton Coal Pty Ltd (which currently owns a 90% interest in the Lenton Joint Venture). The Conditions Precedent to the SPA were satisfied on 24 June 2022 and a Deed of Variation to the SPA was signed on 1 July 2022. The Deed of Variation included agreement of the Completion Date, Completion Payments and other matters including the replacement of security bonds which was required in order to complete the Transaction. Accordingly, on 1 July 2022, subsequent to period end, the Company completed the acquisition. Bowen’s immediate focus is to recommission the CHPP along with the train load out facility and >350 bed accommodation village. During the period work commenced to refurbish the mine camp under an Early Access Agreement. Orders were also placed for long lead items required for the rebuild of the CHPP and refurbishment of the accommodation village commenced. The Burton mine has a proven track record for the reliable production of coking coal that was valued by the steel industry worldwide for its high quality, low ash and low sulphur. The acquisition will facilitate the creation of the wider Burton Complex, which will include Broadmeadow East, targeting up to 4.5Mtpa of long-term ROM production. BOWEN COKING COAL ANNUAL REPORT 2022B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 16 BOWEN COKING COAL ANNUAL REPORT 2022B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 17 BURTON COMPLEX FIRST ROM COAL FROM BURTON PITS DUE Q1 2023 WORLD RENOWNED COKING COAL BRAND MINE PRODUCTION – BUMA (DOWNER) CHPP/TLO – BURTON COMPLEX 2023 RAIL & PORT – EXPORT VIA DBCT AND POTENTIALLY ABBOT POINT ANNUAL ROM PRODUCTION TARGET JORC RESOURCE* 3.5–4.5Mt 204Mt *Burton and Lenton Pits combined BROADMEADOW EAST COKING COAL PROJECT 18 LOCATION 25km north-east of Moranbah, Bowen Basin, Queensland TENEMENTS ML 70257 COAL TYPE Coking coal and secondary thermal coal TOTAL JORC RESOURCE 33Mt OWNERSHIP 100% Located around 25km north-east of the coal mining town of Moranbah, Broadmeadow East is Bowen’s second producing mine. In March 2022, final environmental approvals were received for the project which forms the first planned pit of the expanded Burton complex. In May 2022 Bowen announced the appointment of BUMA Australia Pty Ltd (BUMA) as mining contractor for the project. First phase mobilisation of site infrastructure, ancillary equipment, haul trucks and an EX3600 excavator supported early site works, and were later supported with another EX3600 excavator and haul trucks for production. First coal was mined at Broadmeadow East in July 2022, subsequent to period end. First production will be processed under an infrastructure sharing agreement with Fitzroy (CQ) Pty Ltd until the full upgrade to infrastructure at the Burton complex is completed. The project hosts a 33Mt Resource and had an initial ROM production target of 0.8Mtpa to 1.1Mtpa over a five-to-seven-year period. Under the contract with BUMA this has now been fast tracked to a rate of ~1.2Mt annually over a shorter period with close to 600,000 tonnes of ROM forecast before the end of this calendar year. The resource at Broadmeadow East has the flexibility to produce a primary coking coal product of either high quality (7.5% ash, CSN 7.5) or high yield (9.2% ash, CSN 4.5). In both primary product cases, the secondary energy coal created from the primary coking coal discard has a calorific value of more than 6,500kcal/kg air dried basis, which is also a sought-after product for the export coal markets. BOWEN COKING COAL ANNUAL REPORT 2022B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 19 BROADMEADOW EAST FIRST COAL MINED JULY 2022 FLEXIBILITY TO PRODUCE VARIOUS PRODUCTS MINE PRODUCTION – BUMA, WHO ACQUIRED DOWNER’S MINING CONTRACTOR BUSINESS CHPP/TLO – FITZROY RESOURCES 2022 CHPP/TLO – BURTON COMPLEX FROM Q4 2022 EXPORT VIA DALRYMPLE BAY COAL TERMINAL March 2022 EA granted July 2022 First coal mined May 2022 Mobilisation Q3/4 2022 First coal shipped target ANNUAL ROM PRODUCTION TARGET JORC RESOURCE 0.8–1.1Mt 33Mt Bowen coking coal ann ua l rep or t 202 2 2020 HILLALONG COKING COAL PROJECT LOCATION Northern Bowen Basin, 105km southwest of Mackay TENEMENTS EPC 1824, EPC 2141 COAL TYPE Low ash coking coal and secondary thermal coal TOTAL JORC RESOURCE 87Mt OWNERSHIP 85% The Hillalong Coking Coal Project (“Hillalong”) is located in the northern Bowen Basin approximately 105km west-southwest of Mackay and 10km North of Burton. The project is currently the subject of a farm-in agreement (“Hillalong Farm- In”) with the Sumitomo Corporation (“Sumitomo”) which earned a 10% interest in the project post expending $2.5m on the successful Phase 1 exploration program completed in 2020. Significantly, in March 2021, Sumitomo confirmed its commitment to continue farming into the Hillalong project through a further expenditure of $2.5m in the Phase 2a exploration program to earn an additional 5% interest. Sumitomo now has the ability to earn an additional 5% in Hillalong by funding a further $2.5m of exploration in Phase 2b. This will be subject to the success of the Phase 2a program. The Hillalong Farm-In is in the process of being converted into a formal joint venture. In August 2021, Bowen announced a significant maiden Resource Estimate for Hillalong South of 44 Mt. The maiden resource estimate for Hillalong South follows an earlier exploration program which demonstrated seam continuance and an exceptional intersection of the 9m thick coalesced Elphinstone and Hynds seams. Based on the previous exploration program and coal quality and washability results, there is potential to produce a Mid Volatile Matter (25% ad basis) coking coal from the Hillalong South project, which complements the other products within the Bowen Coking Coal portfolio, including the Low Volatile Matter coking coals of Broadmeadow East. The third exploration program for Hillalong commenced just before the end of the period and is currently underway. BOWEN COKING COAL ANNUAL REPORT 202221 BOWEN COKING COAL ANNUAL REPORT 2022ISAAC RIVER COKING COAL PROJECT 22 LOCATION 30km south-east of Moranbah, Bowen Basin, Queensland TENEMENTS The Isaac River Coking Coal Project (“Isaac River”) covers an area of 14km2 in the Bowen Basin MDL 444, EPC 830, MLA 7000062 in Central Queensland, COAL TYPE Coking coal with secondary PCI TOTAL JORC RESOURCE 8.7Mt OWNERSHIP 100% approximately 30km west of Moranbah. The project is in close proximity to BMA’s (BHP Mitsubishi Alliance) Daunia Mine, and Peabody’s Moorvale South Project. Bowen completed studies for the project which indicated a production target of between 0.4Mtpa to 0.6Mtpa over a four-to-five-year period. Similar to Broadmeadow East, the agreement with Fitzroy on access to their Carborough Downs coal processing facilities could fast track the development of the project, following the Company’s decision to mine which is expected in 2023. On 30 March 2022, Bowen announced the project had been granted a site- specific Environmental Authority from the Queensland government. The project’s Progressive Rehabilitation and Closure Plan (PRCP) was also approved, making it one of the first coal projects to have a PRCP approved. The Mining Lease application is advancing in parallel with the Federal environmental approval under the EPBC Act and is now expected to be completed in the 2023 financial year. BOWEN COKING COAL ANNUAL REPORT 2022CORPORATE 23 BOARD CHANGES Blair Sergeant resigned as Non- Executive Director on 17 September 2021, having moved from the role of Executive Director in May 2021. The Board would like to extend its gratitude to Blair for the contribution he made to the Company during his tenure. INFRASTRUCTURE DEAL WITH FITZROY CQ PTY LTD In September 2022, Bowen announced it had entered into an infrastructure sharing and co-operation Term Sheet with Fitzroy CQ Pty Ltd (Fitzroy) allowing early infrastructure access to enable the commencement of initial coal exports while mining approvals and infrastructure refurbishment is underway at Burton. Under the terms of the agreement, Bowen agreed to provide Fitzroy with access to the haul road, camp facilities and water supply at the Burton Mine. In return, Fitzroy will provide Bowen with port and rail capacity. Fitzroy has also agreed to grant Bowen access to its Broadlea Mine surface infrastructure, including the office and laydown area, in reciprocation for access to Bowen’s Burton infrastructure including the workshop, office, communications and power infrastructure. Additionally, Fitzroy will relinquish a small part in the northern area of its exploration permit (EPC667) that is contiguous and immediately adjacent to Bowen’s Broadmeadow East Project, and allow for a mining lease over that area. In return, Fitzroy earns the right to mine underneath the Mallawa Haul Road at the Burton Mine, and approval to apply for a mining lease in that area. The agreement is subject to approval from the Lenton JV with Bowen voting its majority ownership in favour of the proposal, and the parties agreeing a royalty type compensation for any coal extracted from the Burton Mine by Fitzroy during this process, similar to the compensation Bowen is subjected to under Fitzroy’s EPC667. In the interest of timing for both parties, provision was made for early access to some of the infrastructure prior to the completion of the Burton transaction. PLACEMENT AND RIGHTS ISSUE On 10 August 2021 the Company completed a private placement of 149,253,731 shares at $0.067 per share, raising $10,000,000. The institutional placement was strongly supported by new strategic investor, Ilwella Pty Ltd, an investment entity of the Flannery Family Office. On 30 August 2021, the Company completed an Entitlement Offer (‘Offer’), being a fully underwritten pro-rata non-renounceable entitlement issue of Shares, of 1 New Share for every 12 Shares held by Eligible Shareholders on the Record Date, at an Issue Price of $0.067 per New Share, to raise $5,478,185 (before costs of the Offer). Accordingly on the same date, the Company issued 81,763,969 new shares at $0.067 per share. The issue was heavily oversubscribed, resulting in $7.6 million being returned to shareholders. In addition, on 30 August 2021 the Company applied for the issue 30,000,000 unlisted options each exercisable at $0.10 per share on or before 31 August 2024. 21,000,000 unlisted options were issued on this date with a further 9,000,000 unlisted options to be issued at a future date subject to shareholder approval. In November 2021, the Company successfully completed an oversubscribed $11m placement to facilitate the restart of the Company’s first two projects, Bluff and Broadmeadow East. The $11m (before costs) equity capital was raised through the placement of 68,750,000 shares (49,552,623 issued under ASX Listing Rule 7.1A and 19,197,377 issued under ASX Listing Rule 7.1) at an issue price of $0.16 per share, which represented an 8.6% discount to the closing share price of 17.5c on 18 November 2021. In February 2022 the Company has successfully completed a $41.5 million placement (before costs) to sophisticated and institutional investors. Bowen issued a total of 207,353,813 new shares (135,288,440 under ASX Listing Rule 7.1 and 72,065,373 under ASX Listing Rule 7.1A) at an issue price of $0.20 per share. Funds will be directed to the acquisition of the Burton Lenton project, and to the restart of operations at Burton. CORPORATE FUNDING FACILITY In February 2022, Bowen announced the execution of a $15 million senior secured debt facility agreement with Remagen Capital Management Pty Ltd. The facility was originally intended to support the restart of operations at the Bluff PCI mine. BOWEN COKING COAL ANNUAL REPORT 202224 2,100,000 shares issued at $0.07 and 600,000 shares issued at $0.08 per share. COVID-19 IMPACT The company and its contractors adhere to recommendations from Queensland Health and the Australian Government to provide a COVID-19 safe workplace and to minimise impacts of the pandemic on its operations. Social distancing restrictions and inter-state travel restrictions resulted in roadshows, shareholder meetings and board meetings being scheduled as virtual events. Negotiations and discussions on major transactions and operational matters took place via telephone or video conferencing while restrictions remained in place. The company elected to not utilise this facility (and no establishment, break or non-utilisation fee was payable to Remagen by the Company as a result of that election) and instead entered into a broader debt financing package with Taurus Mining Fund No 2. L.P. (Taurus) to support its capex requirements across its entire asset portfolio of development-ready assets. agreement with New Hope Corporation Limited, subject to the completion of the SPA, with an aggregate limit of $70 million to provide a $61.6 million bank guarantee to the Queensland Government for the Burton/Lenton Mine rehabilitation costs. As at 1 July 2022, Bowen drew down $61.6 million due to the completion of the acquisition of Burton/Lenton on the same date. In April 2022, the Company signed a mandate with Taurus for debt financing to support the Bowen’s capital requirements. The new debt facility is proposed to be senior secured with an aggregate limit of US$55 million (~$79m). The facility is intended for capital expenditure, general working capital and costs of recommissioning the Burton CHPP, development costs for the Burton and Broadmeadow East projects, and Bluff mine operating costs. The facility is structured as an amortisable term loan with an initial term of 18 months and no financial maintenance covenants. At period end, Bowen had drawn US$14 million and US$41 million remained undrawn. NEW HOPE PERFORMANCE FACILITY In June 2022, Bowen signed and utilised a two-year bilateral facility CONVERTIBLE LOAN NOTE ISSUANCE Also in June 2022, the Company signed a convertible note deed for the issuance of $40 million convertible loan notes (Convertible Notes) with the Crocodile Capital 1 Global Focus Fund and the Crocodile Capital Offshore Fund. The Convertible Notes are convertible into fully paid ordinary shares in Bowen and will carry an interest rate of 3.0% per annum and have an initial conversion price of $0.325 per share. Proceeds will be used for working capital to support development of Bowen’s assets. EXERCISE OF OPTIONS On 5 August 2021 the Company issued 2,700,000 fully paid ordinary shares on the exercise of unlisted options, with BOWEN COKING COAL ANNUAL REPORT 2022B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 25 DIRECTORS’ REPORT B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 26 The directors submit their report on the consolidated entity (“Group”) consisting of Bowen Coking Coal Ltd and the entities it controlled at the end of, and during, the financial period ended 30 June 2022. DIRECTORS The following persons were directors of Bowen Coking Coal Ltd during the financial period and up to the date of this report, unless otherwise stated: Nicholas Jorss Gerhard Redelinghuys Matthew Latimore Neville Sneddon Blair Sergeant Executive Chairman Managing Director Non-Executive Director Non-Executive Director Non-Executive Director (resigned on 17 September 2021) INFORMATION ON DIRECTORS The board has a strong combination of technical, managerial and capital markets experience. Expertise and experience include operating and coal exploration. The names and qualifications of the current directors are summarised as follows: 27 NICHOLAS JORSS Executive Chairman GERHARD REDELINGHUYS Managing Director Qualifications: BE (Hons) Civil, MBA, GDip App Fin (Sec Inst) Qualifications: B. Comm. Acc, Hons, B. Compt, GAICD Appointment Date: 12 December 2018 Appointment Date: 29 September 2017 Length of Service: 3.5 years Length of Service: 4.75 years Current ASX Listed Directorships: Ballymore Resources Limited Current ASX Listed Directorships: Nil Former ASX Listed Directorships: Nil Former ASX Listed Directorships: Nil Mr Jorss was the founding Managing Director of Stanmore Resources Ltd (via St Lucia). Mr Jorss served on Stanmore’s Board from its formation in June 2008 through to 26 November 2016. He has over 25 years’ experience in investment banking, civil engineering, corporate finance and project management. Mr Jorss was instrumental in the success of Stanmore Resources Ltd, which currently has a market value of around $1.78b. As the Founding Managing Director, Mr Jorss led Stanmore’s growth from a coal exploration company to a profitable, mid-tier producer. In his prior roles in investment banking (as a director of Pacific Road Corporate Finance) he has been involved in leading advisory mandates with corporate, government and private equity clients across industry sectors ranging from resources to infrastructure. Prior to this Mr Jorss was an engineer with Baulderstone Hornibrook where he delivered significant infrastructure and resource projects over a period of approximately 8 years. Mr Jorss is a founding shareholder and Director of St Lucia Resources, Konstantin Resources, Ballymore Resources and Wingate Capital. He was previously a Director of Kurilpa Uranium, Vantage Private Equity Growth, Vantage Asset Management and WICET Holdings Pty Ltd. Mr Jorss holds a Bachelor with Honours in Civil Engineering from the University of Queensland, a Master of Business Administration from the University of NSW (AGSM) and a Graduate Diploma of Applied Finance and Investment. Mr Redelinghuys is the Managing Director of Cape Coal and founder of Bowen Coking Coal Ltd, and has 27 years’ experience in financial and project development within the mining sector. After studying finance at the University of Pretoria in South Africa, he joined PricewaterhouseCoopers, before commencing his employment with EXXARO Resources Ltd (former ISCOR and KUMBA Resources) in 1995. Since 1995 he has held various senior management positions in the corporate office, as well as both open cut and underground mining operations in South Africa. He has held directorships in Australia, including the position of Managing Director of Exxaro Australia. In addition to his business analysis experience, Mr Redelinghuys has extensive experience in mining project acquisitions and deal making on an international level. He was also the owner’s representative on a multi-billion dollar underground coal project in Queensland until 2015 before founding Bowen Coking Coal Ltd. Mr Redelinghuys is also a graduate member of the Australian Institute of Company Directors. BOWEN COKING COAL ANNUAL REPORT 202228 MATTHEW LATIMORE Non-Executive Director NEVILLE SNEDDON Independent Non-Executive Director Qualifications: Executive Education Program, M.Bus. (Executive), Adv. Dip. of Leadership and Management, B.I.B Qualifications: B. Eng (Mining)(Hons), M. Eng, MAusIMM, Grad AICD Appointment Date: 17 June 2020 Appointment Date: 12 December 2018 Length of Service: 2 years Length of Service: 3.5 years Current ASX Listed Directorships: Stanmore Resources Limited, Magnum Mining and Exploration Ltd Current ASX Listed Directorships: Nil Former ASX Listed Directorships: Nil Former ASX Listed Directorships: Nil Mr Latimore is the President and Founder of M Resources, an entity which specialises in marketing coking coal, including hard coking coal, semi hard coking coal, semi soft coking coal and PCI coals for steel manufacturing. Mr Latimore held the position of General Manager Sales and Marketing for Wesfarmers Curragh mine and was responsible for global sales of Curragh metallurgical coal products to international steel mills and thermal coal to domestic and international power utilities, rail and port and quality and finance functions. Mr Latimore was a Director of Curragh Coal Sales. Prior to joining Wesfarmers in early 2001, Mr Latimore held various positions with Mitsui & Co (Australia) Pty Ltd. A mining engineer with over 40 years’ experience in most facets of the Queensland (QLD) and New South Wales (NSW) resource sectors, and as the recently retired Chairman of Stanmore Resources Ltd, Mr Sneddon brings substantial Board and industry knowledge to the Company. He has developed and operated both underground and open cut mines working for Coal & Allied in the Hunter Valley and from 1997 worked in a senior role in the NSW Mines Inspectorate, covering operations in all forms of mining in the state. Moving to Queensland in 1999, Mr Sneddon accepted the position of Chief Operating Officer with Shell Coal which was acquired by Anglo American’s Australian coal operations the following year. Leaving as CEO in 2007, he held several Board positions with mining and infrastructure companies including Chairman of the operating company at Dalrymple Bay Coal Terminal near Mackay and Director of Port Waratah Coal Services, a major coal export facility at Newcastle. Mr Sneddon has also been a member of the Boards of the QLD, NSW and National Mining Councils. His expertise has been sought by several government committees such as the NSW Mine Subsidence Board, NSW Mines Rescue Board, QLD Ministerial Coal Mine Safety Advisory Committee and the joint federal/state advisory committee. BOWEN COKING COAL ANNUAL REPORT 202229 CHIEF FINANCIAL OFFICER COMPANY SECRETARY DARYL EDWARDS Chief Financial Officer DUNCAN CORNISH Company Secretary Appointment Date: 2 February 2021 Appointment Date: 1 May 2019 Length of Service: 1.4 years Length of Service: 3.2 years Mr Edwards is a Chartered Accountant with over 22 years’ experience in the mining and manufacturing industries. He has held various executive positions including CEO of a private Australian coal explorer, Pioneer Coal, and CFO and Head of Corporate Development for Universal Coal plc (ASX:UNV) for over 7 years, where he managed the commercialisation of the 4Mtpa Kangala Colliery and the 3.3Mtpa New Clydesdale Colliery. Previously, Mr Edwards was CFO at Asenjo Energy, a Botswana-based coal exploration and development company, held privately by Aquila Resources, Sentula Mining and Jonah Capital. Mr Cornish was the founding CFO and Company Secretary for Stanmore Resources Ltd (ASX:SMR), Waratah Coal Ltd (TSX and ASX:WCI) and Cokal Ltd (ASX:CKA) and is a Chartered Accountant with significant experience as a public company CFO and Company Secretary, focused on finance, administration and governance roles. He has more than 20 years’ experience in the accountancy profession both in England and Australia, mainly with the accountancy firms Ernst & Young and PricewaterhouseCoopers. He has extensive experience in all aspects of company financial reporting, corporate regulatory and governance areas, business acquisition and disposal due diligence, capital raising, company initial public offerings and company secretarial responsibilities, and has served as CFO and/or Company Secretary of several Australian and Canadian public companies. BOWEN COKING COAL ANNUAL REPORT 202230 INTERESTS IN SECURITIES As at the date of this report, the interests of each director in shares and options issued by the Company are shown in the table below: Directors Nicholas Jorss Gerhard Redelinghuys Matthew Latimore Neville Sneddon PRINCIPAL ACTIVITIES Shares 51,036,882 55,237,358 184,448,072 7,454,365 Options 10,000,000 15,000,000 6,179,000 3,000,000 The principal activity of the Group during the period was the exploration and development of coal projects with a primary focus on metallurgical coal. CORPORATE Bowen Coking Coal Ltd ACN 064 874 620 was incorporated as an Australian public company limited by shares on 6 July 1994, listing on the Australian Stock Exchange shortly thereafter. The name of the Company was officially changed to Bowen Coking Coal Ltd in 2017. DIVIDENDS PAID OR RECOMMENDED There were no dividends paid or recommended during the financial year. REVIEW OF OPERATIONS Information on the operations of the Group during the financial year and up to the date of this report is set out separately in the Annual Report under Review of Operations. OPERATING RESULTS The Group’s operating loss for the financial year was $18,302,414 (2021: $3,224,368). The increased loss was caused principally by: • Gross loss $8,338,793; • Administrative expenses $5,158,480; and • Employee benefits expense $3,476,236. REVIEW OF FINANCIAL CONDITION CAPITAL STRUCTURE As at 30 June 2022 the Company had 1,542,124,952 ordinary shares, 13,300,000 performance rights, 43,000,000 options and 40,000,000 Convertible Notes on issue. During the year ended 30 June 2022, the following shares were issued: • 425,357,544 shares were issued following share placements (raising $62,470,762); • 81,763,969 shares were issued following a rights issue (raising $5,478,186); • 27,941,177 shares were issued as part of Bluff project consideration; • 24,400,000 shares were issued following option exercises (raising $2,349,740); • 4,200,000 shares were issued following the exercise of vested performance rights; • 21,000,000 fee options were issued on 31 August 2021 and 9,000,000 fee options were issued on 30 November 2021 relating to the share placement and rights issue; • 34,000,000 (incentive) options were issued to directors and the company secretary; • 4,000,000 performance rights lapsed; BOWEN COKING COAL ANNUAL REPORT 202231 • 1,500,000 performance rights were issued to a senior executive; and • 40,000,000 Convertible Notes were issued (raising $40,000,000). Since 30 June 2022 the following securities were issued: • 948,560 shares and 2,165,913 performance rights were issued to staff and management (under the Company’s Employee and Executive Incentive Plan); and • 4,450,000 shares were issued following the exercise of vested performance rights. As at the date of this report the Company had 1,547,523,512 ordinary shares, 11,015,913 performance rights, 43,000,000 options and 40,000,000 Convertible Notes on issue. FINANCIAL POSITION At 30 June 2022, the Group’s net assets totalled $83,446,758 (2021: $14,948,951) which included cash assets of $72,520,051 (2021: $2,997,030). The movement in net assets largely resulted from the following factors: • Operating losses of $18,302,414; • Cash outflows from operating activities of $19,012,290; • Cash outflows from investing activities of $32,628,646; and • Net cash inflows from financing activities of $121,163,957. Throughout the year the Group focussed on exploration and development on the Group’s coal projects and the return to operations of the acquired Bluff Mine which recorded first coal sales at the year end. The Group’s working capital, being current assets less current liabilities has increased from $2,175,369 in 2021 to $55,326,526 in 2022. TREASURY POLICY The Group does not have a formally established treasury function. The Board is responsible for managing the Group’s finance facilities. The Group does not currently undertake hedging of any kind and is not currently directly exposed to material currency risks other than exposure to the United States Dollar. LIQUIDITY AND FUNDING The Group anticipates that it has sufficient funds to finance its mine development, operations and exploration activities and to allow the Group to take advantage of favourable business opportunities, not specifically budgeted for, or to fund unforeseen expenditure. SIGNIFICANT CHANGES IN STATE OF AFFAIRS Other than the securities issued as noted above, there were no other significant changes in the state of affairs of the Group in the financial year. SUBSEQUENT EVENTS In August 2021, Bowen announced its intention to acquire New Hope Corporation’s 90% interest in the Lenton Joint Venture, owner of the Burton Coal Mine and New Lenton Project. (Formosa Plastics Group holds the remaining 10%). On 24 December 2021, Bowen entered into a binding Share Sale and Purchase Agreement (‘SPA’) with New Hope Corporation Limited (‘NHC’) for the acquisition of 100% of the shares in New Lenton Coal Pty Ltd (‘New Lenton’) (which currently owns a 90% interest in the Lenton Joint Venture) (‘Lenton JV’, the ‘Acquisition’). The Conditions Precedent to the SPA were satisfied on 24 June 2022 and a Deed of Variation to the SPA was signed on 1 July 2022. The Deed of Variation included agreement of the Completion Date, Completion Payments and other matters including the replacement of security bonds which was required in order to complete the Transaction. Accordingly, on 1 July 2022, subsequent to period end, the Company completed the acquisition. On 5 July 2022, 948,560 shares and 2,165,913 performance rights were issued to staff and management (under the Company’s Employee and Executive Incentive Plan), and the Company issued 4,000,000 ordinary shares on 9 August 2022 and 450,000 ordinary shares on 5 September 2022 following the exercise of vested performance rights. Other than the matters noted above, there are no material matters or circumstances that have arisen since the end of the year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. BOWEN COKING COAL ANNUAL REPORT 202232 BUSINESS RISKS The prospects of the Group in progressing their exploration and development projects may be affected by a number of factors. These factors are similar to most exploration and development companies moving through the exploration phase and advancing projects into development and production. Some of these factors include: EXPLORATION The results of the exploration activities may be such that the estimated resources are insufficient to justify the financial viability of the projects. The Group undertakes extensive exploration and product quality testing prior to establishing JORC compliant resource estimates and to (ultimately) support mining feasibility studies. The Group engages external experts to assist with the evaluation of exploration results where required and utilises third party competent persons to prepare JORC resource statements or suitably qualified senior management of the Group. Economic feasibility modelling of projects will be conducted in conjunction with third party experts and the results of which will usually be subject to independent third party peer review. SOCIAL LICENCE TO OPERATE The ability of the Group to secure and undertake exploration and development activities within prospective areas is also reliant upon satisfactory resolution of native title and (potentially) overlapping tenure. To address this risk, the Group develops strong, long term effective relationships with landholders with a focus on developing mutually acceptable access arrangements. The Group takes appropriate legal and technical advice to ensure it manages its compliance obligations appropriately. ENVIRONMENTAL All phases of mining and exploration present environmental risks and hazards. The Group’s operations are subject to environmental regulations pursuant to a variety of state and municipal laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with mining operations. Compliance with such legislation can require significant expenditures and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability and potentially increased capital expenditures and operating costs. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The Group assesses each of its projects very carefully with respect to potential environmental issues, in conjunction with specific environmental regulations applicable to each project, prior to commencing field exploration, development and in operations. Periodic reviews are undertaken regularly. SAFETY Safety is of critical importance in the planning, organisation and execution of the Group’s exploration, development and operating activities. The Group is committed to providing and maintaining a working environment in which its employees are not exposed to hazards that will jeopardise an employee’s health, safety or the health and safety of others associated with our business. The Group recognises that safety is both an individual and shared responsibility of all employees, contractors and other persons involved with the operation of the organisation. The Group has a Safety and Health Management system which is designed to minimise the risk of an uncontrolled safety and health event and to continuously improve the safety culture within the organisation. DEVELOPMENT AND OPERATING The Group has historically undertaken exploration activities only but has advanced towards operating activities through the acquisition and restarting of the Bluff mine and through mine development activities at the Broadmeadow East pit. As a result, numerous mine development and operating risks have been highlighted which may result in delayed mine development and / or a reduction in performance that decreases the Group’s ability to develop assets on time and on budget and to produce high quality coal to meet customer shipping needs. The risks include, but are not limited to, factors such as delayed mine development, weather conditions, machinery failure and under performance, labour and equipment shortages, critical infrastructure failure or natural disasters. GEOLOGICAL Resource and Reserve estimates are prepared by external experts in accordance with the JORC Code 2012 for reporting. Coal Resources are estimated using various assumptions regarding drill spacing and drilling depth, coal quality and other geotechnical constraints. The Group has no Reserves at 30 June 2022 and for the reported Resources, some of the deposits are more sensitive to the cost and revenue assumptions used than others due to the characteristics and geological structure of those deposits. Due care is taken with each estimation, but is expected to change as more detailed planning is undertaken. BOWEN COKING COAL ANNUAL REPORT 202233 FUNDING At 30 June 2022 the Group remains well funded with cash reserves and debt finance facilities expected to be sufficient to meet the business’ operating and development costs. The Group’s ability to effectively transition into a coal producing business may be dependent upon several factors including speed of mine development activities, the ability to limit working capital requirements, delivery of early cashflows, successful mining operations, funding rail and port bonding requirements and/or the successful exploration and subsequent development of the Group’s tenements. Should these avenues be delayed or fail to materialise, the Group may need to raise additional funding through debt, equity or farm out/sell down to allow the Group to continue as a going concern and meet its debts as and when they fall due. There is no guarantee that additional funding through debt will be available, or if it is, there is no guarantee that such new funding will be on terms acceptable to the Group. Global credit markets have been severely constrained in the past, and the ability to obtain new funding or refinance may in the future be significantly reduced. Increasingly, financial institutions have made public statements in relation to their unwillingness to finance certain types of coal mines and coal- fired power stations. If the Group is unable to obtain sufficient funding, either due to banking and capital market conditions generally, or due to factors specific to the coal sector, the Group may not have sufficient cash to meet its ongoing capital requirements or the ability to expand its business. MARKET There are numerous factors involved with exploration, development and operating projects, including variance in commodity price and foreign currency markets which can result in exploration, development and / or operating assets becoming uneconomical. The Group is not of a size to have an influence on coal prices or the exchange rate for Australian Dollars and is therefore a price-taker in general terms. The Group sells export coal in United States Dollars and is therefore exposed to movements in currency rates. The Group has not adopted mechanisms to hedge any portion of its currency risk, however may do so in the future once coal sales volumes stabilise. INSURANCE There is a risk that the policies of financial institutions with respect to the funding of coal projects, may extend to an unwillingness to provide insurance products to coal producers and associated companies on terms that are currently provided to such companies. This could result in a material increase in the cost to Bowen Coking Coal of obtaining appropriate levels of insurance or Bowen Coking Coal being unable to secure adequate insurance cover. ENVIRONMENTAL ISSUES The Group is subject to significant environmental regulations under the (Federal, State and local) laws in Australia. The directors monitor the Group’s compliance with environmental obligations. The directors are not aware of any significant compliance breach arising during the year and up to the date of this report. NATIVE TITLE Mining tenements that the Group currently holds, may be subject to Native Title claims. The Group has a policy that is respectful of the Native Title rights and will, as required, negotiate with relevant indigenous bodies. BOWEN COKING COAL ANNUAL REPORT 2022REMUNERATION REPORT (AUDITED) 34 The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the requirements of the Corporation Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the entity, directly or indirectly, including all directors. The names of key management personnel of Bowen Coking Coal Ltd who have held office during the financial year are: Nicholas Jorss Gerhard Redelinghuys Matthew Latimore Neville Sneddon Blair Sergeant Daryl Edwards Executive Chairman Managing Director Non-Executive Director Non-Executive Director Non-Executive Director (resigned 17 September 2021) Chief Financial Officer PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION The Group’s remuneration policy seeks to align director and executive objectives with those of shareholders and the business, while at the same time, recognising the development and early production stage of the Group and the criticality of funds being utilised to achieve development objectives. The board believes the current policy has been appropriate and effective in achieving a balance of these objectives. The Group’s remuneration policy provides for short-term bonuses, long-term incentives and staff retention to be offered through an employee equity incentive plan. Options, shares or performance rights may be granted under this plan to align directors’, executives’, employees’ and shareholders’ interests. Methods used to achieve this aim, include securities that vest upon reaching or exceeding specific predetermined objectives, securities with future vesting dates based on continued employment and options granted with higher exercise prices (than the share price at issue) rewarding share price growth. The board of directors is responsible for determining and reviewing the Group’s remuneration policy, remuneration levels and performance of both executive and non-executive directors. Independent external advice will be sought when required. Independent external advice was sought during the year ended 30 June 2022 and subsequent to 30 June 2022 to assist in setting appropriate directors and senior executive remuneration levels and incentives. PERFORMANCE-BASED REMUNERATION Performance-based remuneration includes both short-term and long-term incentives and is designed to reward key management personnel for reaching or exceeding specific objectives or as recognition for strong individual performance. Short- term incentives are available to eligible staff of the Group and may be comprised of cash and/or shares bonuses, determined on a discretionary basis by the board. No short-term incentives were made available during the year ended 30 June 2022, however shares and performance rights were issued to all employees subsequent to 30 June 2022 as short and long-term incentives. Long-term incentives are currently comprised of share options and performance rights, which are granted from time-to-time to encourage sustained strong performance in the realisation of strategic outcomes and growth in shareholder value. BOWEN COKING COAL ANNUAL REPORT 202235 The exercise price of the options is determined after taking into account the underlying share price performance in the period leading up to the date of grant and if applicable, performance conditions attached to the share options. Subject to specific vesting conditions, each option is convertible into one ordinary share. The Group’s policy for determining the nature and amount of remuneration of board members and key executives is set out below. DIRECTORS Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting and is not linked to the performance of the Group. The maximum aggregate amount of fees that can be paid to non-executive directors approved by shareholders is currently $500,000. One-third, by number, of non-executive directors retires by rotation at the Company’s Annual General Meeting. Retiring directors are eligible for re-election by shareholders at the Annual General Meeting of the Company. The appointment conditions of the non- executive directors are set out and agreed in letters of appointment. The Company’s non-executive directors (Matthew Latimore and Neville Sneddon) are currently receiving fees of $70,000 including superannuation per annum. Subsequent to 30 June 2022 the Board resolved (and Messrs Latimore and Sneddon accepted) to vary the non-executive fees to $97,737.56 (plus superannuation) effective from 1 October 2022. EXECUTIVES The remuneration structure for executives is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the Group. The executives receive payments provided for under an employment or service agreement, which may include cash, superannuation, short-term incentives and equity-based performance remuneration. The Company has entered into an employment agreement with Gerhard Redelinghuys, the Company’s Managing Director and Chief Executive Officer on the following material terms: • Notice period: The Company must give 3 months’ notice to terminate the agreement other than for cause. The executive must give 3 months’ notice to terminate the agreement. • Remuneration: $400,000 including superannuation per annum, indexed per CPI Brisbane on 1 July each year, plus an allowance of $5,000 per annum for death & disability insurance. • Other industry standard provisions for senior executive of a public listed company are included in the agreement. • Subsequent to 30 June 2022 the Board resolved (and Mr Redelinghuys accepted) to vary the remuneration for Mr Redelinghuys to $702,707.60 (plus superannuation) effective from 1 October 2022. The Company has entered an employment agreement with Nicholas Jorss (recently converted to an executive services agreement), the Company’s Executive Chairman. The current material terms include: • Notice period: The Company must give 3 months’ notice to terminate the agreement other than for cause. The executive must give 3 months’ notice to terminate the agreement. • Remuneration: $240,000 per annum including superannuation per annum. • Subsequent to 30 June 2022 the Board resolved (and Mr Jorss accepted) to vary the remuneration and notice period for Mr Jorss to $513,707.60 (plus superannuation) and 4 months (respectively) effective from 1 October 2022. The revised remuneration is based on Mr Jorss allocating 70% of his time to Bowen Coking Coal Ltd. The Company has entered an executive services agreement with Daryl Edwards, the Company’s Chief Financial Officer. The material terms include: • Notice period: The Company must give 3 months’ notice to terminate the agreement other than for cause. The executive must give 3 months’ notice to terminate the agreement. • Remuneration: $388,000 including superannuation per annum, indexed per CPI, Brisbane on 1 July each year. • Other industry standard provisions for senior executive of a public listed company are included in the agreement. • Subsequent to 30 June 2022 the Board resolved (and Mr Edwards accepted) to vary the remuneration and notice period for Mr Edwards to $454,707.60 (plus superannuation) and 4 months (respectively) effective from 1 October 2022. BOWEN COKING COAL ANNUAL REPORT 2022REMUNERATION DETAILS OF KEY MANAGEMENT PERSONNEL The remuneration of the key management personnel of Bowen Coking Coal Ltd for the year ended 30 June 2022 was as follows: 36 Short Term Benefits Salary & Fees Provision for leave entitlements Post- Employment Equity-settled Share-based Payments Superannuation Options/Rights $ 206,061 349,765 53,333 53,333 7,500 378,208 1,048,200 $ - 44,136 - - - 14,017 58,153 $ 20,606 23,568 5,333 5,333 - 11,784 66,624 Total $ 696,136 1,121,673 199,507 199,507 7,500 657,983 Performance related % 67% 63% 71% 71% 0% 39% $ 469,469 704,204 140,841 140,841 - 253,974 1,709,329 2,882,306 Key Management Personnel N. Jorss G. Redelinghuys M. Latimore N. Sneddon B. Sergeant1 D. Edwards Total 1. Represents remuneration from 1 July 2021 to 17 September 2021. The remuneration of the key management personnel of Bowen Coking Coal Ltd for the year ended 30 June 2021 was as follows: Short Term Benefits Post- Employment Equity-settled Share-based Payments Key Management Personnel N. Jorss G. Redelinghuys M. Latimore N. Sneddon B. Sergeant S. Formica1 J. Agenbag1 D. Cornish2 D. Edwards Total Salary & Fees $ 117,384 298,306 34,521 51,479 187,721 13,140 12,000 116,000 165,900 996,451 Provision for leave entitlements $ - 17,978 - - - - - - - Superannuation Options/Rights $ 10,495 21,694 3,279 4,891 14,952 - - - - Performance related % 0% 0% 45% 0% 0% 0% 0% 0% 41% Total $ 127,879 337,978 68,563 56,370 202,673 13,140 12,000 116,000 280,571 1,215,174 $ - - 30,763 - - - - - 114,671 145,434 1. Represents remuneration from 1 July 2020 to 31 October 2020. 2. Represents remuneration from 1 July 2020 to 2 February 2021. 17,978 55,311 BOWEN COKING COAL ANNUAL REPORT 202237 The percentage of equity-based remuneration for persons who were key management personnel of the Group during the year ended 30 June 2022 is set out below: Key Management Personnel Equity Based Salary and Fees Proportion of Remuneration N. Jorss G. Redelinghuys M. Latimore N. Sneddon B. Sergeant D. Edwards 67% 63% 71% 71% 0% 39% 33% 37% 29% 29% 100% 61% COMPANY PERFORMANCE, SHAREHOLDER WEALTH, AND DIRECTOR AND EXECUTIVE REMUNERATION During the financial year, the Company generated losses as its principal activity was mineral exploration. As the Company is still in the exploration and development stage, the link between remuneration, company performance and shareholder wealth is tenuous. Share prices are subject to the influence of commodity prices and market sentiment towards the sector, and as such, increases and decreases might occur independent of executive performance and remuneration. OPTIONS HELD BY KEY MANAGEMENT PERSONNEL Details of options held directly, indirectly or beneficially by key management personnel during the year ended 30 June 2022 were as follows: Balance at 1 July 2021 Granted as Compensation Acquired Exercised Sold Balance at 30 June 2022 Total Vested 30 June 2022 Total Vested & Exercisable 30 June 2022 Key Management Personnel N. Jorss G. Redelinghuys - - 10,000,000 15,000,000 - - - - M. Latimore 2,100,000 3,000,000 3,179,0001 (2,100,000) N. Sneddon - 3,000,000 - - Total 2,100,000 31,000,000 3,179,000 (2,100,000) 1. Options issued as part of the August 2021 rights issue PERFORMANCE RIGHTS HELD BY KEY MANAGEMENT PERSONNEL - - - - - 10,000,000 10,000,000 10,000,000 15,000,000 15,000,000 15,000,000 6,179,000 6,179,000 6,179,000 3,000,000 3,000,000 3,000,000 34,179,000 34,179,000 34,179,000 Details of Performance Rights held directly, indirectly or beneficially by key management personnel during the year ended 30 June 2022 were as follows: Key Management Personnel Balance at 1 July 2021 Granted as Compensation Vested/ Exercised Lapsed Balance at 30 June 2022 Total Vested 30 June 2022 D. Edwards 12,000,000 - 4,000,000 - 8,000,000 - BOWEN COKING COAL ANNUAL REPORT 202238 OPTIONS GRANTED AS REMUNERATION The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key management personnel in this financial year are as follows: Key Management Personnel N. Jorss G. Redelinghuys M. Latimore N. Sneddon Number of options granted Grant date Vesting date Expiry date Exercise price 10,000,000 15,000,000 3,000,000 3,000,000 30.11.2021 30.11.2021 30.09.2024 30.11.2021 30.11.2021 30.09.2024 30.11.2021 30.11.2021 30.09.2024 30.11.2021 30.11.2021 30.09.2024 $0.25 $0.25 $0.25 $0.25 Fair Value per option at grant date $0.0469 $0.0469 $0.0469 $0.0469 Values of options over ordinary shares granted, exercised and lapsed for directors and other key management personnel as part of compensation during the year ended 30 June 2022 are set out below: Key Management Personnel N. Jorss G. Redelinghuys M. Latimore N. Sneddon Value of options granted during the year Value of options exercised during the year Value of options lapsed during the year Remuneration consisting of options for the year $469,469 $704,204 $140,841 $140,841 - - $30,763 - - - - - 67% 63% 71% 71% No options have been granted to Key Management Personnel since the end of the financial year. PERFORMANCE RIGHTS GRANTED AS REMUNERATION The terms and conditions of each grant of performance right over ordinary shares affecting remuneration of directors and other key management personnel in this financial year are as follows: Key Management Personnel Number of Performance rights granted Grant date Expiry date Exercise price Fair Value per option at grant date D. Edwards1 D. Edwards D. Edwards 1. Exercised on 29 December 2021 4,000,000 4,000,000 4,000,000 01.02.2021 30.04.2022 01.02.2021 31.12.2023 01.02.2021 31.12.2024 $Nil $Nil $Nil $0.05 $0.05 $0.05 Values of performance rights over ordinary shares granted, exercised and lapsed for directors and other key management personnel as part of compensation during the year ended 30 June 2022 are set out below: Key Management Personnel D. Edwards Value of performance rights recognised during the year Value of performance rights vested during the year Value of performance rights lapsed during the year Remuneration consisting of performance rights for the year $253,974 $200,000 - 39% No performance rights have been granted to Key Management Personnel since the end of the financial year. BOWEN COKING COAL ANNUAL REPORT 202239 SHARES HELD BY KEY MANAGEMENT PERSONNEL Details of shares held directly, indirectly or beneficially by key management personnel during the year ended 30 June 2022 were as follows: Key Management Personnel Balance at 1 July 2021 Performance rights Rights issues Shares acquired Options exercised Shares disposed Resignation N. Jorss 60,957,120 G. Redelinghuys 117,449,868 M. Latimore 156,320,726 N. Sneddon B. Sergeant1 D. Edwards 6,880,952 21,835,000 - 4,000,000 - - - - - 5,079,762 9,787,490 - - - - - (65,000,000) 13,201,729 65,000,000 2,100,000 (2,174,383) 573,413 - - - 1,819,584 - - - - - - - 1. Held at date of resignation 17 September 2021 OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIES There have been no other transactions with key management personnel during the year ended 30 June 2022. This concludes the remuneration report, which has been audited. Balance at 30 June 2022 66,036,882 62,237,358 234,448,072 7,454,365 - - - - (23,654,584) - - 4,000,000 BOWEN COKING COAL ANNUAL REPORT 202240 OPTIONS AND PERFORMANCE RIGHTS At 30 June 2022 and as at the date of this report, the unissued ordinary shares of the Company under options are as follows: UNLISTED OPTIONS Issue Date 30 November 2021 30 November 2021 Total Expiry Date Exercise Price No. Under Option 30 November 2024 30 September 2024 $0.10 $0.25 9,000,000 34,000,000 43,000,000 At the date of this report, there are 11,015,913 unlisted performance rights on issue, with various vesting conditions and expiry dates. There have been no unissued shares or interests under option of any controlled entity within the Group during or since reporting date. Option holders do not have any rights to participate in any share issue or other interests in the Company or any other entity. MEETINGS OF DIRECTORS The meetings (held while a director) attended by each director during the financial year were: Directors Nicholas Jorss Gerhard Redelinghuys Matthew Latimore Neville Sneddon Blair Sergeant Board Meetings Attended 13 13 13 13 2 13 13 11 11 2 It is noted that the Directors were able to attend to business of the Company during the year by circulated resolution and telephone meetings as permitted by the Company’s Constitution in place of conducting meetings. The Company does not have an audit committee or nomination and remuneration committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by an audit committee and nomination and remuneration committee can be adequately handled by the full Board. At such time when the Company is of sufficient size, a separate Audit and Risk Management Committee and Nomination and Remuneration Committee will be formed. CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Bowen Coking Coal Ltd support and, where practicable or appropriate, have adhered to the ASX Principles of Corporate Governance. The Company’s Corporate Governance Statement is lodged separately on the ASX and can be found on the Company’s website (www.bowencokingcoal.com.au). INDEMNITY AND INSURANCE OF OFFICERS The Company has entered into a Deed with each of the Directors (and the Company Secretary) whereby the Company has agreed to provide certain indemnities to each Director (and the Company Secretary) to the extent permitted by the Corporations Act and to use its best endeavours to obtain and maintain directors’ and officers’ indemnity insurance, subject to such insurance being available at reasonable commercial terms. The Company has paid premiums to insure each of the directors (and the Company Secretary) of the Company against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director (or Company Secretary) of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The contracts include a prohibition on disclosure of the premium paid and nature of the liabilities covered under the policy. BOWEN COKING COAL ANNUAL REPORT 202241 INDEMNITY AND INSURANCE OF AUDITORS The Company has not given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums in respect of any person who is or has been an auditor of the Company or a related entity during the year and up to 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 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 any part of those proceedings. The Company was not a party to any such proceedings during the year. NON-AUDIT SERVICES Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 26 to the financial statements. 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. The directors are of the opinion that the services as disclosed in note 26 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 issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration under section 307C of the Corporations Act 2001 is attached to and forms part of this directors’ report. AUDITOR RSM Australia continue in office in accordance with section 327 of the Corporation Act 2001. Signed in accordance with a resolution of the board of directors Gerhard Redelinghuys, Director 29 September 2022 Brisbane, Queensland BOWEN COKING COAL ANNUAL REPORT 2022AUDITOR’S INDEPENDENCE DECLARATION 42 THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation RSM Australia Partners Level 6, 340 Adelaide Street Brisbane QLD 4000 GPO Box 1108 Brisbane QLD 4001 T +61 (0) 7 3225 7800 F +61 (0) 7 3225 7880 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Bowen Coking Coal Limited for the year ended 30 June 2022, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS Albert Loots Partner Brisbane, Queensland Dated: 29 September 2022 THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation RSM Australia Partners Level 6, 340 Adelaide Street Brisbane QLD 4000 GPO Box 1108 Brisbane QLD 4001 T +61 (0) 7 3225 7800 F +61 (0) 7 3225 7880 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Bowen Coking Coal Limited for the year ended 30 June 2022, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS Albert Loots Partner Brisbane, Queensland Dated: 29 September 2022 BOWEN COKING COAL ANNUAL REPORT 2022B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 43 FINANCIAL REPORT 44 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2022 Revenue Cost of sales Gross loss Administrative expenses Other expenses Operating loss Finance income Finance expense Share of profit/(loss) of joint ventures accounted for using equity method Loss before income tax expense Income tax expense Loss for the year Other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive loss for the year Total comprehensive loss for the year attributable to the owners of the Company Note 2 3(A) 3(B) 3(C) 4 4 18 6 2022 $ 11,862,313 (20,201,106) (8,338,793) 2021 $ - - - (5,158,480) (1,699,722) (4,105,577) (1,454,494) (17,602,850) (3,154,216) 5,506 (716,260) 11,190 531 (5,682) (65,001) (18,302,414) (3,224,368) - - (18,302,414) (3,224,368) - - (18,302,414) (3,224,368) (18,302,414) (3,224,368) Loss per share attributable to owners of the parent company Basic earnings per share Diluted earnings per share 7 7 Cents (1.39) (1.39) Cents (0.35) (0.35) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. BOWEN COKING COAL ANNUAL REPORT 2022CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2022 45 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other current assets Total Current Assets NON-CURRENT ASSETS Receivables Property, plant & equipment Exploration and evaluation assets Mine development assets Mining assets Other non-current assets Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Interest-bearing loans and borrowings Lease Liability Provisions Total Current Liabilities NON-CURRENT LIABILITIES Interest-bearing loans and borrowings Investments accounted for using the equity method Lease Liability Provisions Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Share based payment reserve Convertible Note reserve Accumulated losses TOTAL EQUITY Note 30 June 2022 $ 30 June 2021 $ 8 9 10 11 9 12 13 13 13 11 14 15 16 17 15 18 16 17 19 20 20 72,520,051 15,088,758 5,999,733 2,505,614 2,997,030 150,126 - 23,142 96,114,156 3,170,298 255,000 384,469 133,000 134,688 10,250,911 12,648,191 20,862,235 22,202,648 22,632,803 - - 206,824 76,588,066 13,122,703 172,702,222 16,293,001 31,871,292 8,726,924 53,596 135,818 897,787 - 46,738 50,404 40,787,630 994,929 32,607,061 53,810 29,201 15,777,762 48,467,834 - 65,000 82,797 201,324 349,121 89,255,464 1,344,050 83,446,758 14,948,951 134,113,511 63,917,409 4,149,174 13,210,888 755,943 - (68,026,815) (49,724,401) 83,446,758 14,948,951 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. BOWEN COKING COAL ANNUAL REPORT 2022CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2022 46 Issued Capital $ Share based payment reserve $ Convertible Note reserve $ Accumulated Losses $ Total Equity $ Note Balance at 30 June 2020 56,399,643 581,039 Loss for the year Total comprehensive loss Issue of shares Exercise of options Conversion of performance shares Share-based payments Share issue costs Balance at 30 June 2021 Loss for the year Total comprehensive loss Issue of shares Exercise of options Issue of Bluff consideration Conversion of performance shares Share-based payments Convertible Notes issued Share issue costs 19 19 19 5 19 19 19 19 5 15 - - 5,250,000 2,106,660 - - - - 332,000 (332,000) - 506,904 (170,894) - 63,917,409 755,943 - - 67,948,948 2,349,740 4,750,000 - - - - - 261,000 (261,000) 2,164,809 - - - 13,210,888 (5,113,586) 1,489,422 - - - - - - - - - - - - - - - - - (46,500,033) 10,480,649 (3,224,368) (3,224,368) (3,224,368) (3,224,368) - - - - - 5,250,000 2,106,660 - 506,904 (170,894) (49,724,401) 14,948,951 (18,302,414) (18,302,414) (18,302,414) (18,302,414) - - - - - - - 67,948,948 2,349,740 4,750,000 - 2,164,809 13,210,888 (3,624,164) Balance at 30 June 2022 134,113,511 4,149,174 13,210,888 (68,026,815) 83,446,758 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. BOWEN COKING COAL ANNUAL REPORT 2022CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2022 47 CASH FLOWS FROM OPERATING ACTIVITIES Interest receipts Payments to suppliers and employees Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment Payments for exploration and evaluation assets Payments for mine development assets Payments for mining assets Payments for rehabilitation security Payments for loans to joint venture Payments for exploration costs recoverable from farmee Receipts for exploration costs from farmee Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Financing transaction costs Proceeds from issue of shares and options Proceeds from Convertible Notes Payments for capital raising costs Payments for lease liability Net cash provided by financing activities Net increase in cash held Cash at beginning of the year Cash at end of the year Note 2022 $ 2021 $ 5,506 531 (19,017,796) (2,646,343) 22 (19,012,290) (2,645,812) 11 15 15 (320,120) (9,533) (3,372,219) (3,077,371) (3,809,830) (7,493,255) (18,115,402) (122,000) (432,610) 1,036,790 - - (206,824) (131,500) (1,463,210) 1,463,210 (32,628,646) (3,425,228) 20,207,252 (5,662,379) - - 70,298,688 6,871,659 40,000,000 (3,624,164) (55,440) - (170,894) (27,014) 121,163,957 6,673,751 69,523,021 602,711 2,997,030 2,394,319 8 72,520,051 2,997,030 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. BOWEN COKING COAL ANNUAL REPORT 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 48 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are general purpose financial statements that have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards, and other authoritative pronouncements of the Australian Accounting Standards Board. Bowen Coking Coal Ltd is a for-profit entity for the purpose of preparing the financial statements. The financial statements are presented in Australian dollars. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. The financial statements are for the consolidated entity consisting of Bowen Coking Coal Ltd and its Controlled Entities (the Group). Bowen Coking Coal Ltd is a listed public company, incorporated and domiciled in Australia. The financial report was authorised for issue on 29 September 2022 by the directors of the Company. Material accounting policies adopted in the preparation of these financial statements are presented below. They have been consistently applied unless otherwise stated. NEW OR AMENDED ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED The Group 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. The Group has early adopted AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018– 2020 and Other Amendments from 1 July 2021. The impact of this adoption is that the Group now recognises the sales proceeds from selling items produced while preparing property, plant and equipment for its intended use and the related cost in profit or loss, instead of deducting the amounts received from the cost of the asset. This change has not impacted prior periods Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. 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 orientated entities. These financial statements and notes also comply with the International Financial Reporting Standards and Interpretations as issued by the International Accounting Standards Board (‘IASB’). 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, certain classes of property, plant and equipment and derivative financial instruments. GOING CONCERN The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the ordinary course of business. For the year ended 30 June 2022 the Group generated a consolidated loss of $18,302,414 and incurred operating and investing cash outflows of $19,012,290 and $32,628,646 respectively. As at 30 June 2022 the Group has cash and cash equivalents of $72,520,051 and net working capital of $55,326,526. BOWEN COKING COAL ANNUAL REPORT 202249 Subsequent to year end (as set out in Note 30), the Group concluded the acquisition of New Lenton Coal Pty Ltd. Pursuant to the Share Sale and Purchase Agreement (SPA), the Group was required to make a $19 million cash payment on 1 July 2022 and assumed a $61.6 million environmental obligation. The environmental obligation was funded through a loan facility agreement with New Hope Corporation Limited which has an aggregate limit of $70 million. Pursuant to the terms of the Taurus Mining Finance Fund No. 2 LP facility (refer Note 15), the Group has access to unutilised loan facilities totalling US$41 million after conclusion of the SPA. Management has prepared a cash flow forecast for the next 12 months which anticipates that the Group will trade profitably and generate positive cash flows during that period. The cash flow forecast includes the assumption that the Group’s Bluff Mine and Broadmeadow East operations will reach steady state production in the first half of FY2023 and that the Burton operation will produce first coal in the second half of FY2023. Underpinning cash flow forecast assumptions include the US$/AUD$ exchange rate, coking and thermal coal spot prices, coal production rates and the cash cost of coal production. Directors note that the Group is yet to achieve steady state production at each of its operations and certain of these assumptions can also be subject to volatility beyond the direct control of the Group. Whilst recognising the above matters, the Directors have concluded that with the recent equity and debt capital raises successfully completed and the onset of production, the cash flow forecast of the Group is reasonable. Accordingly, Directors believe that the Group will be able to realise its assets and discharge its liabilities in the normal course of business and that it is appropriate that the financial report be prepared on the going concern basis. PRINCIPLES OF CONSOLIDATION Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Bowen Coking Coal Ltd (“Company” or “parent entity”) as at 30 June 2022, and the results of all subsidiaries for the year then ended. Bowen Coking Coal Ltd and its subsidiaries together are referred to in these financial statements as the “Group”. The names of the subsidiaries are contained in Note 28. All subsidiaries in Australia have a 30 June financial year end and are accounted for by the parent entity at cost. Subsidiaries are all entities over which the Group has control. The Group has control over an entity when the Group is exposed to, or has a right to, variable returns from its involvement with the entity, and has the ability to use its power to affect those returns. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of controlled entities have been changed where necessary to ensure consistency with the policies adopted by the Group. Changes in ownership interests Where the Group 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. OTHER ACCOUNTING POLICIES Significant and other accounting policies relevant to gaining an understanding of the Consolidated Financial Statements have been grouped with the relevant Notes to the Financial Statements. FOREIGN CURRENCY TRANSACTIONS AND BALANCES Functional and presentation currency The functional and presentation currency of Bowen Coking Coal Ltd and its Australian subsidiaries is Australian dollars. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. BOWEN COKING COAL ANNUAL REPORT 202250 Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non- monetary items measured at fair value are reported at the exchange rate at the date when fair values were measured. Exchange differences arising on the translation of monetary items are recognised in profit or loss. Foreign operations The financial results and position of foreign operations whose functional currency is not Australian dollars are translated as follows: • assets and liabilities are translated at period-end exchange rates prevailing at that reporting date; • • income and expenses are translated at average exchange rates for the period; retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations are recognised in other comprehensive income. GOODS AND SERVICES TAX (GST) Revenues, expenses and assets are recognised net of the amount of GST (or overseas VAT), except where the amount of GST incurred is not recoverable. In these circumstances the GST (or overseas VAT) is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis except for the GST component of investing and financing activities which are disclosed as operating cash flows. CURRENT AND NON-CURRENT CLASSIFICATION Assets and liabilities are presented in the statement of financial position 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 Group’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 Group’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. Deferred tax assets and liabilities are always classified as non-current. NEW AND AMENDED 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 Group for the annual reporting period ended 30 June 2022. The Group has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements are disclosed within the following notes: Note 5: Share-based Payments Note 6: Income Tax Expense Note 10: Inventories Note 13: Exploration and Evaluation, Mine Development and Mining Assets Note 17: Provisions BOWEN COKING COAL ANNUAL REPORT 202251 NOTE 2 REVENUE ACCOUNTING POLICY The Group recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. Sale of coal Sale of coal is recognised at the point of sale, which is where the customer has taken delivery of the goods, the risks and rewards are transferred to the customer and there is a valid sales contract. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. REVENUE FROM OPERATING ACTIVITIES REVENUE Sale of Coal 2022 $ 11,862,313 11,862,313 2021 $ - - BOWEN COKING COAL ANNUAL REPORT 2022NOTE 3 EXPENSES INCLUDED IN EXPENSES ARE THE FOLLOWING ITEMS: (A) BREAKDOWN OF COST OF SALES Mining costs Processing costs Transport and logistics State royalties Private royalties Production overheads Other production costs Total cost of sales (B) ADMINISTRATIVE EXPENSES Accounting and audit fees ASX, ASIC, share registry expenses Consulting fees Corporate advisory fees Insurance Legal fees Marketing Occupancy costs Other Travel expenses Total administrative expense (C) OTHER EXPENSES Other expenses Total other expenses OTHER EXPENSES INCLUDE THE FOLLOWING SPECIFIC ITEMS: Breakdown of Employee benefits expense Directors and senior management fees Superannuation expense Salaries and wages Provision for leave entitlements Share based payments Total employee benefits expense Breakdown of other overhead expenses Depreciation Exploration expense Total other expenses 52 2022 $ 2021 $ 12,770,908 2,627,440 976,493 1,430,105 770,693 978,814 646,653 20,201,106 136,206 296,013 3,186,673 51,210 401,222 365,048 318,103 191,887 96,002 116,116 - - - - - - - - 78,283 101,248 1,008,632 - 75,102 289,917 27,796 60,440 39,284 19,020 5,158,480 1,699,722 4,105,577 4,105,577 1,454,494 1,454,494 852,209 92,243 286,450 80,525 2,164,809 3,476,236 629,341 - 629,341 829,251 55,311 - 11,531 506,904 1,402,997 25,713 25,784 51,497 BOWEN COKING COAL ANNUAL REPORT 202253 NOTE 4 FINANCE INCOME AND FINANCE EXPENSES ACCOUNTING POLICY Interest received is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. 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. FINANCE INCOME Interest received from other persons FINANCE EXPENSE Finance cost Interest paid Total finance expense NOTE 5 SHARE-BASED PAYMENTS ACCOUNTING POLICY 2022 $ 5,506 689,494 26,766 716,260 2021 $ 531 - 5,682 5,682 The Group makes equity-settled share-based payments to directors, employees and other parties for services provided or the acquisition of exploration assets. Where applicable, the fair value of the equity is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using the Black-Scholes option valuation pricing model which incorporates all market vesting conditions. Where applicable, the number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Where the fair value of services rendered by other parties can be reliably determined, this is used to measure the equity-settled payment. 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 Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group 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. BOWEN COKING COAL ANNUAL REPORT 2022DIRECTOR AND EMPLOYEE SHARE-BASED PAYMENTS Share-based payment expense recognised during the year: Share-based payment expense recognised during the period: Options issued to directors and company secretary1 Options issued to placement lead manager2 Performance rights issued to a consultant3 Performance rights vested for the Chief Financial Officer4 Performance rights issued to an employee5 54 2021 $ 30,763 25,350 336,120 114,671 - 2022 $ 1,596,196 - 77,333 253,974 237,306 2,164,809 506,904 Notes for the above table, relating to the years ended 30 June 2022 and 30 June 2021 are: 1. 34,000,000 options were granted to directors and the company secretary with an exercise price of $0.25 on 30 November 2021. The options vested on 30 November 2021 and expire on 30 September 2024 (Tranche 1). 2. None in the current year. 3. 4. 5. 12,000,000 performance rights which have various vesting conditions, performance hurdles and expiry dates were granted to a consultant on 16 September 2019 (Tranche 2). 12,000,000 performance rights which have various vesting conditions, performance hurdles and expiry dates were granted to the Chief Financial Officer on 2 February 2021 (Tranche 3). 1,500,000 performance rights which have various vesting conditions, performance hurdles and expiry dates were granted to an employee on 13 April 2022 (Tranche 4). KEY JUDGEMENTS AND ESTIMATES The Group measures the cost of equity-settled transactions with Directors, executives and employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. The estimates include volatility, risk free rates and consideration of satisfaction of performance criteria for recipients of equity instruments. The following table lists the inputs to the models used: For the 30 June 2022 year Tranche 1 Tranche 2 Tranche 3 Tranche 4 Grant date 30 Nov 2021 16 Sept 2019 2 Feb 2021 13 Apr 2022 Number of options/performance rights 34,000,000 12,000,000 12,000,000 1,500,000 Expected volatility Risk-free interest rate Weighted average share price at grant date Expected life Expected dividend 70.0% 0.874% $0.150 2.9 years - 79.2% 0.930% $ 0.083 various - 70.0% 0.085% $ 0.050 various - 70.0% 2.132% $ 0.305 Various - Fair Value per option/performance rights $ 0.069 $ 0.083 $ 0.050 $ 0.305 Notes for the above share-based payment expense, relating to the 30 June 2021 year are: 1. 2,100,000 options with an exercise price of $0.07 were granted to a director for nil consideration on 11 November 2020. The options vested on grant date and expire on 31 December 2022). (Tranche 1). 2. 1,300,000 options with an exercise price of $0.08 were granted to the June 2020 placement lead manager on 03 July 2020. The options vested on grant date and expire on 30 September 2023. (Tranche 2). BOWEN COKING COAL ANNUAL REPORT 202255 Tranche 1 Tranche 2 11 Nov 2020 2,100,000 70.0% 0.15% $0.050 3 Jul 2020 1,300,000 77.74% 0.27% $ 0.058 2.14 years 3.24 years - - $ 0.018 $ 0.019 For the 30 June 2021 year Grant date Number of options Expected volatility Risk-free interest rate Weighted average share price at grant date Expected life Expected dividend Fair Value per option NOTE 6 INCOME TAX EXPENSE ACCOUNTING POLICY The income tax expense or benefit for the period comprises current income tax expense/income and deferred tax expense/ income. Current income tax expense charged to profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities/assets are therefore measured at the amounts expected to be paid to/recovered from the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the period as well unused tax losses. Current and deferred income tax expense/income is charged or credited directly to equity instead of profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. The Company and its Australian 100% owned controlled entities have formed a tax consolidated Group. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. BOWEN COKING COAL ANNUAL REPORT 2022Recognised in the Consolidated statement of profit or loss and other comprehensive income (A) TAX EXPENSE Current tax expense Deferred tax expense Total income tax expense per the consolidated statement of profit or loss and other comprehensive income 56 2021 $ - - - 2022 $ - - - (B) NUMERICAL RECONCILIATION BETWEEN TAX EXPENSE AND PRE-TAX NET PROFIT OR (LOSS) Net loss before tax Corporate tax rate applicable Income tax benefit on above at applicable corporate rate Increase in income tax due to tax effect of: Share-based payments expense Non-deductible expenses Current year tax losses not recognised Movement in unrecognised temporary differences Decrease in income tax expense due to: Utilisation of previously unrecognised tax losses Deductible equity raising costs Income tax expense attributable to entity (C) AMOUNTS CHARGED/(CREDITED) DIRECTLY TO EQUITY Deferred tax assets Deferred tax assets and liabilities (D) RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES Deferred tax assets Employee provisions Other provisions and accruals Plant & Equipment Blackhole – previously expensed Blackhole – Capital Raising Cost reflect in equity Tax losses Provision for rehabilitation Amount recognised in equity Tax losses Set-off of deferred tax liabilities Net deferred tax assets Deferred tax liabilities Prepayments Exploration and evaluation and mine development assets Plant and Equipment Mining Assets Other Gross deferred tax liabilities (18,302,414) (3,224,368) 30% (5,490,724) 30% (967,310) 649,443 1,001,134 4,123,104 - (3,357) (279,600) - - 152,071 83,975 756,415 37,942 - (63,093) - - 30% 30% 40,745 21,966 - 42,060 917,915 3,505,319 4,733,328 9,261,333 3,973,560 13,234,893 (13,234,893) - - (4,412,242) (92,648) (4,733,328) (23,115) 15,121 12,435 (2,627) 157,498 - 1,946,402 - 2,128,829 - 2,128,829 (2,128,829) - (6,943) (2,121,886) - - - (9,261,333) (2,128,829) BOWEN COKING COAL ANNUAL REPORT 2022Amount recognised in equity Convertible Note Set-off of deferred tax assets Net deferred tax liabilities (E) UNUSED TAX LOSSES AND TEMPORARY DIFFERENCES FOR WHICH NO DEFERRED TAX ASSETS HAS BEEN RECOGNISED Deferred tax assets have not been recognised in respect of the following using corporate tax rates of: Deductible temporary differences Tax revenue losses Tax capital losses Total unrecognised deferred tax assets 57 2021 $ - 2022 $ (3,973,560) (13,234,893) (2,128,829) 13,234,893 2,128,829 - - 30% - 9,198,043 1,104,890 10,302,933 30% 148,208 5,280,653 1,104,890 6,533,751 The corporate tax rates on both recognised and unrecognised deferred tax assets and deferred tax liabilities have been calculated with respect to the tax rate that is expected to apply in the year the deferred tax asset is realised or the liability is settled. KEY JUDGEMENTS AND ESTIMATES Income tax The consolidated Group 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 Group recognises liabilities for anticipated tax audit issues based on the consolidated Group’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. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. NOTE 7 EARNINGS PER SHARE ACCOUNTING POLICY Basic earnings per share Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company, 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 any bonus elements in ordinary shares issued during the 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. BOWEN COKING COAL ANNUAL REPORT 2022Net loss used in the calculation of basic and diluted EPS attributable to owners of the parent company 58 2022 $ 2021 $ (18,302,414) (3,224,368) Weighted average number of ordinary shares outstanding during the period used in the calculation of basic EPS 1,314,961,259 910,093,769 Options are considered potential ordinary shares. Options issued are not presently dilutive and were not included in the determination of diluted earnings per share for the period. NOTE 8 CASH AND CASH EQUIVALENTS ACCOUNTING POLICY Cash and cash equivalents include cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of less than 3 months. Cash at bank and on hand Short term deposit 2022 $ 72,474,044 46,007 72,520,051 2021 $ 2,895,033 101,997 2,997,030 Reconciliation to cash and cash equivalents at the end of the financial year The above figures are reconciled to cash and cash equivalents at the end of the financial year as shown in the consolidated statement of cash flows. The short term deposit is secured against the Group’s guarantee facilities in relation to premises the entity leases for its corporate office under an operating lease. NOTE 9 RECEIVABLES ACCOUNTING POLICY Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. CURRENT Receivable from joint venture entities Other receivables NON-CURRENT Receivable from joint venture entities 2022 $ 11,587,700 3,501,058 15,088,758 255,000 255,000 2021 $ - 150,126 150,126 133,000 133,000 BOWEN COKING COAL ANNUAL REPORT 202259 NOTE 10 INVENTORIES ACCOUNTING POLICY Coal Stocks are valued at the lower of cost and net realisable value on a ‘first in first out’ basis. The cost of coal inventories comprises direct cost (including blasting, overburden removal, coal mining, processing and transport costs), direct labour and an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity. Inventories are classified as follows: • Overburden in advance material extracted through the pre-strip mining process and includes blasting activities. • Run-of-mine material (ROM) extracted through the mining process and awaiting processing at the coal handling and preparation plant • Product coal stock which has been processed into final saleable form. Product coal may be held at site or at port shared stockpile facilities awaiting delivery to customer. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Run-of-mine (ROM) stockpiles (Mine) Run-of-mine (ROM) stockpiles (Wash plant) Coal product stockpiles Total inventories KEY JUDGEMENTS AND ESTIMATES 2022 $ 1,744,908 805,384 3,449,441 5,999,733 2021 $ - - - - Inventory stockpiles are measured by appropriately qualified persons, applying surveying methodologies, which consider the size and grade of the coal stockpile. The estimated recovery percentage is based on the expected processing method. In addition, net realisable value tests are performed at each reporting date and represent the estimated future sales price of the run-of-mine (ROM) coal the entity expects to realise when the ROM coal is processed and sold, less estimated costs to bring the ROM coal to sale. Judgment is applied in estimating the variables noted above. NOTE 11 OTHER ASSETS ACCOUNTING POLICY Other current assets relate to operational costs paid in advance of the period to which the Group will receive the benefit from those goods or services. Non-current assets relate to cash security bond payments made to key operational suppliers and security bonds in relation to rehabilitation bonding obligations to Queensland Treasury, a property rental security bond and payments relating to an asset currently under acquisition. BOWEN COKING COAL ANNUAL REPORT 202260 2021 $ 23,142 23,142 5,500 201,324 - 206,824 2022 $ 2,505,614 2,505,614 5,500 18,316,725 4,310,578 22,632,803 CURRENT Prepayments NON-CURRENT Rental bonds Security deposit Other receivable NOTE 12 PROPERTY PLANT AND EQUIPMENT ACCOUNTING POLICY 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: Motor vehicles Office equipment Plant and equipment Computer equipment 5 years 5 years 5 years 3 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 Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. RIGHT-OF-USE ASSETS A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. IMPAIRMENT OF ASSETS At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss. BOWEN COKING COAL ANNUAL REPORT 202261 2021 $ - - - - - - 9,533 (775) 8,758 - - - 150,867 (24,937) 125,930 134,688 Total $’000 135 320 (70) 385 Motor Vehicles – at cost Less: Accumulated depreciation Plant & equipment – at cost Less: Accumulated depreciation Office equipment – at cost Less: Accumulated depreciation Computer equipment – at cost Less: Accumulated depreciation Right of use asset Less: Accumulated depreciation Reconciliations 2022 $ 135,000 (9,395) 125,605 153,133 (6,597) 146,536 13,523 (2,837) 10,686 27,997 (1,995) 26,002 150,867 (75,227) 75,640 384,469 Reconciliations of the written down values at the beginning and end of the current financial year are set out below: Motor vehicles $’000 Plant & equipment $’000 Office equipment $’000 Computer equipment $’000 Right of use asset $’000 Balance at 1 July 2021 Additions Depreciation expense Balance at 30 June 2022 - 135 (9) 126 - 153 (7) 146 9 4 (2) 11 - 28 (2) 26 126 - (50) 76 NOTE 13 EXPLORATION AND EVALUATION, MINE DEVELOPMENT AND MINING ASSETS ACCOUNTING POLICY Exploration and evaluation asset Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. Such expenditures comprise net direct costs and an appropriate portion of related overhead expenditure but do not include overheads or administration expenditure not having a specific nexus with a particular area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and active or significant operations in relation to the area are continuing. A regular review will be undertaken on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. A provision is raised against exploration and evaluation assets where the directors are of the opinion that the carried forward net cost may not be recoverable or the right of tenure in the area lapses. The increase in the provision is charged against the results for the year. Accumulated costs in relation to an abandoned area are written off in full against profit or loss in the year in which the decision to abandon the area is made. BOWEN COKING COAL ANNUAL REPORT 202262 The future recoverability of capitalised exploration and evaluation expenditure is dependent upon a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact future recoverability include the level of reserves and resources, future technological changes which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity process. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which the determination is made. Mine development assets Exploration and evaluation assets are transferred to “Mine development assets” once the technical feasibility and commercial viability of extracting the mineral resources supports the future development of the property and such development has been appropriately approved. Prior to transferring the exploration and evaluation assets to mine development assets, an impairment test is completed. Mine development assets represents the costs incurred in preparing mines for production and includes plant and equipment under construction and operating costs incurred before production commences. These costs are capitalised to the extent they are expected to be recouped through the successful exploitation of the related mining leases. Once production commences, these costs are transferred to property, plant and equipment and mining assets, as relevant, and are depreciated and amortised using the units-of-production method based on the estimated run-of-mine ore included in the life of mine plan to which they relate or are written off if the mine property is abandoned. Any proceeds from sales in the pre-production phase are recognised in the statement of comprehensive income. Any costs incurred in testing the assets to determine if they are functioning as intended, are capitalised. Rehabilitation assets Restoration costs expected to be incurred are provided for as part of development phase that give rise to the need for restoration are recognised as rehabilitation assets. Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the exploration and mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted for on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. Mining assets Once the development phase is complete and production starts, all assets included in “Mine development assets” are transferred to “Mining assets”. Amortisation of mining asset is computed by the units of production basis over the estimated proved and probable reserves. Proved and probable mineral reserves reflect estimated quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits. These reserves are amortised from the date on which production commences. The amortisation is calculated from recoverable proven and probable reserves and a predetermined percentage of the recoverable measured, indicated and inferred resource. This percentage is reviewed annually. Pre-strip costs In open pit mining operations, it is necessary to remove overburden and waste materials to access the coal. This process is referred to as stripping and the Group capitalises stripping costs incurred during the development phase of a mine (or pit) as part of the investment in constructing the mine (“pre-strip”). These costs are subsequently amortised over the run-of-mine coal included in the life of mine plan on a units of production basis, where the unit of account is run-of-mine tonnes of coal mined. BOWEN COKING COAL ANNUAL REPORT 202263 Production stripping costs Once access to the coal is attained, all waste that is removed from that point forward is considered production stripping activity. The amount of production stripping costs deferred is based on the extent to which the current period cost per tonne of coal mined exceeds the expected cost per tonne for the life of the identified component. A component is defined as a specific volume of the coal resource that is made more accessible by the stripping activity, and is identified based on the mine plan. The production stripping asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of the coal resource. The production stripping asset is then carried at cost less accumulated amortisation and any impairment losses. The production stripping asset is amortised over the expected useful life of the identified component (determined based on run-of-mine coal included in the life of mine plan), on a unit of production basis. The unit of account is run-of-mine tonnes of coal mined. Capital development costs Costs associated with extraction of waste material in order to gain access to the coal mining operations are considered capital development costs. Capital development costs are stated at cost, less accumulated amortisation and accumulated impairment losses. The capital development asset is amortised over the expected total recoverable run-of-mine coal tonnes of the mine concerned. The unit of account is run-of-mine tonnes of coal mined. Exploration & evaluation cost Mine development assets Mining assets Less: Accumulated depreciation Reconciliations 2022 $ 10,250,911 10,250,911 20,862,235 20,862,235 22,761,651 (559,003) 22,202,648 53,315,794 Reconciliations of the written down values at the beginning and end of the current financial year are set out below: Exploration & evaluation $’000 Mine development assets $’000 12,648 - 3,232 (5,629) - - - - 9,962 5,629 5,271 - Mining assets $’000 - 5,000 7,243 - 10,518 (559) 10,251 20,862 22,202 Balance at 1 July 2021 Additions through asset acquisition (Note 19 & 29) Additions Transfer from exploration & evaluation to mine development asset Rehabilitation assets Depreciation expense Balance at 30 June 2022 KEY JUDGEMENTS AND ESTIMATES Exploration and Evaluation 2021 $ 12,648,191 12,648,191 - - - - - 12,648,191 Total $’000 12,648 5,000 20,437 - 15,789 (559) 53,315 Exploration and evaluation costs have been capitalised on the basis that the Group 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 BOWEN COKING COAL ANNUAL REPORT 202264 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. Production stripping costs The Group capitalises mining costs incurred during the production stage of its operations in accordance with the accounting policy described above. The identification of specific components will vary between mines as a result of both the geological characteristics and location of coal resources. The financial considerations of the mining operations may also impact the identification and designation of a component. The expected cost per tonne is a function of an individual mine’s design and therefore changes to that design will generally result in changes to the expected cost. Changes in other technical or economic parameters that impact resources will also have an impact on the expected costs per tonne for each identified component. Changes in the expected cost per tonne are accounted for prospectively from the date of change. NOTE 14 TRADE AND OTHER PAYABLES ACCOUNTING POLICY These amounts represent liabilities for goods and services provided to the Group 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. CURRENT Trade payables and accrued expenses Farm-in funds received in advance Total payables (unsecured) 2022 $ 30,943,739 927,553 31,871,292 2021 $ 622,959 274,828 897,787 The average credit period on purchases of goods and services is 30 days. No interest is paid on trade payables. Refer Note 27 for further information on Financial Instruments. NOTE 15 INTEREST-BEARING LOANS AND BORROWINGS ACCOUNTING POLICY Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. The component of the Convertible Notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial position, net of transaction costs. On the issue of the Convertible Notes the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a non-current liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds are allocated to the conversion option that is recognised and included in shareholders equity as a Convertible Note Reserve, net of transaction costs. The carrying amount of the conversion option is not remeasured in the subsequent years. The corresponding interest on Convertible Notes is expensed to profit or loss. BOWEN COKING COAL ANNUAL REPORT 202265 2022 $ 2021 $ 8,726,924 8,726,924 5,817,949 26,789,112 32,607,061 - - - - - CURRENT Loan – Taurus facility NON-CURRENT Loan – Taurus facility Convertible Notes Taurus Facility At 30 June 2022, $20,207,252 (US$14,000,000) was drawn down on the Taurus facility and $5,662,379 of transaction costs comprising establishment, corporate and legal advisory fees have been offset. $3,397,427 of transaction costs relate to the current portion and $2,264,952 of transaction costs relate to the non-current portion. The Taurus Mining Finance Fund No.2, L.P. (“Taurus facility”) is senior secured with an aggregate limit of US$55 million with the use of proceeds for capital expenditure, general working capital and expenses incurred in recommissioning the Burton coal handling and preparation plant, developing the Burton and Broadmeadow East projects and operating the Bluff Mine. The Taurus facility is structured as an amortisable term loan comprising five equal quarterly repayments over its term of 18 months. The first principal payment is scheduled for 31 December 2022. The Taurus facility has a front-end fee of 2% of the facility limit and a coupon rate of 8% per annum. Security over the debt facilities involve first ranking security over assets, including charges over movable and immovable property and mining leases, development licences and exploration permits. New Hope facility The Company has signed a new bilateral facility agreement with New Hope Corporation Limited (“New Hope facility”). The New Hope facility is secured on a second ranking basis to the Taurus facility. The New Hope facility has an aggregate limit of A$70 million with funds drawn accreting by 8.0% per annum up to repayment as a redemption premium and a maximum term of 24 months. The New Hope facility has an interest rate of three-month BBSY plus an initial margin of 8% per annum for the first twelve months of the facility and 10% per annum for the remainder of its term, in each case payable quarterly or capitalised in certain circumstances. The New Hope facility will be used to provide a bank guarantee under the Queensland financial provisioning regime. The Company’s share of the bond that will be required for the Lenton/Burton Mine rehabilitation cost is estimated to be circa A$61.6 million. Completion of this financing is subject to the satisfaction of customary conditions precedent and the completion of the acquisition of the Burton Mine and Lenton project (Transaction). At 30 June 2022, the Transaction had not yet completed, accordingly the New Hope facility has not been accounted for in this financial period. The Taurus and New Hope facilities contains warranties, indemnities and covenants (including cross default provisions) that are usual for a facility of this nature. Convertible Notes On 20 June 2022, the Company achieved financial close on a convertible note deed for the issuance of A$40 million convertible loan notes (Convertible Notes) with the Crocodile Capital 1 Global Focus Fund and the Crocodile Capital Offshore Fund. The Convertible Notes are convertible into fully paid ordinary shares in Bowen Coking Coal Ltd and have a maturity of five years unless earlier redeemed or converted in accordance with their terms and conditions. Maturity of the Convertible Notes will accelerate to 15 July 2022 in the event the acquisition of the Burton Mine and Lenton Project does not reach completion by 5 July 2022. The Convertible Notes carry an interest rate of 3.0% per annum and have an initial conversion price of A$0.325 per share. The Company has the ability to capitalise interest to the outstanding convertible loan note balance in lieu of cash at an interest rate of 4.0% per annum. Adjustments to the conversion price include an increase of $0.005 per share every six months, a proportionate reduction should the Company issue shares at a lower price and other adjustments for dividends, capital reductions and other corporate actions. BOWEN COKING COAL ANNUAL REPORT 202266 The proceeds have been used to support the Company’s working capital requirements as it ramps up production across its key development assets. Refer Note 27 for further information on Financial Instruments. NOTE 16 LEASE LIABILITIES ACCOUNTING POLICY A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. CURRENT Lease Liability NON-CURRENT Lease Liability Refer Note 27 for further information on Financial Instruments. NOTE 17 PROVISIONS ACCOUNTING POLICY 2022 $ 53,596 53,596 29,201 29,201 2021 $ 46,738 46,738 82,797 82,797 Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group 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. EMPLOYEE BENEFITS Short-term employee benefit obligations: Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months after the end of the reporting period are recognised in liabilities in respect of employees’ services rendered up to the end of the reporting period and are measured at amounts expected to be paid when the liabilities are settled. Other long-term 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 BOWEN COKING COAL ANNUAL REPORT 202267 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 corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense: Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. REHABILITATION PROVISIONS Rehabilitation costs include the dismantling and removal of mining plant, equipment and building structures, waste removal and rehabilitation of the site in accordance with the requirements of the mining permits. Such costs are determined using estimates of future costs, current legal requirements and technology. Rehabilitation costs are recognised at present value as a non-current liability. An equivalent amount is capitalised as part of the cost of the asset when an obligation arises to decommission or restore a site to certain condition after abandonment as a result of bringing the assets to its present location. The capitalised cost is amortised over the life of the project and the provision is accreted periodically as the discounting of the liability unwinds. The unwinding of the discount is recorded as a finance cost. CURRENT Short term employee benefits NON-CURRENT Rehabilitation provision – Broadmeadow East ML 70257 Rehabilitation provision – Bluff Coal Mine ML 80194 KEY JUDGEMENTS AND ESTIMATES Rehabilitation provision 2022 $ 135,818 135,818 5,472,373 10,305,389 15,777,762 2021 $ 50,404 50,404 201,324 - 201,324 A provision has been made for the present value of anticipated costs for future rehabilitation of land explored or mined. The Group’s mining and exploration activities are subject to various laws and regulations governing the protection of the environment. The Group recognises management’s best estimate for assets retirement obligations and site rehabilitations in the period in which they are incurred. Actual costs incurred in the future periods could differ materially from the estimates. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could affect the carrying amount of this provision. NOTE 18 JOINT VENTURES ACCOUNTING POLICY Under AASB 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. Interests in joint ventures are accounted for using the equity method, after initially being recognised at cost in the consolidated balance sheet. Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. BOWEN COKING COAL ANNUAL REPORT 202268 Where the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group. The carrying amount of equity-accounted investments is tested for impairment in accordance with the Group’s policy. On 23 March 2020 the Company entered into an Umbrella Deed with M Resources Trading Pty Ltd, Latimore Family Pty Ltd and Latimore Finance Pty Ltd (Latimore Parties) which sets out the terms of a 50/50 joint venture arrangement between the Company and the Latimore Parties. In accordance with the Umbrella Deed the parties have registered Bowen Coking Coal Marketing Pty Ltd (Marketing Co) as a joint venture coal marketing vehicle, of which the Company and the Latimore Parties are shareholders in equal proportion. Marketing Co. will market, promote and sell, all coking coal produced by and from any of the Company’s existing wholly owned coking coal portfolio as well as third party coal for blending purposes. M Resources Trading Pty Ltd will provide marketing support services to Marketing Co. Interests in joint ventures are accounted for using the equity method of accounting. Information relating to Marketing Co joint venture is set out below: Percentage ownership interest Non-current assets Current assets Non-current liabilities Current liabilities Net liabilities (100%) Group’s share of net assets Carrying amount of interest in associate REVENUE Profit/(loss) from continuing operations (100%) Total comprehensive income/(loss) (100%) Group’s share of total comprehensive income/(loss) NOTE 19 CONTRIBUTED EQUITY ACCOUNTING POLICY 2022 $ 50% - 14,265,609 (255,000) (14,118,229) (107,620) 50% (53,810) 22,380 22,380 11,190 2021 $ 50% - 3,000 (133,000) - (130,000) 50% (65,000) (130,000) (130,000) (65,000) Ordinary shares are classified as equity. Transaction costs (net of tax where the deduction can be utilised) arising on the issue of ordinary shares are recognised in equity as a reduction of the share proceeds received. BOWEN COKING COAL ANNUAL REPORT 20222022 No. of Shares $ No. of Shares 69 2021 $ Balance at the beginning of the year 978,462,262 63,917,409 803,762,262 56,399,643 Share issues: Placement: 3 July 2020 Placement: 9 November 2020 Exercise of 2.5c options: 12 December 2020 Exercise of 3.0c options: 12 December 2020 Exercise of 3.5c options: 12 December 2020 Exercise of 3.38c options: Feb to June 2021 Performance rights conversion: 1 March 2021 Exercise of options: 4 August 2021 Placement: 10 August 2021 Rights Issue: 30 August 2021 Placement:18 November 2021 Issue of Bluff consideration shares: 29 Dec 2021 Performance rights conversion: 29 Dec 2021 Placement: 24 February 2022 Exercise of options – 25 May 2022 Performance rights conversion: 30 June 2022 (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) - - - - - - - - - - - - - - 45,000,000 60,000,000 10,000,000 10,000,000 10,000,000 35,700,000 4,000,000 2,250,000 3,000,000 250,000 300,000 350,000 1,206,660 332,000 2,700,000 195,000 149,253,731 10,000,000 81,763,969 5,478,186 68,750,000 11,000,000 27,941,177 4,000,000 4,750,000 200,000 207,353,813 41,470,762 21,700,000 2,154,740 200,000 61,000 - - - - - - - - - - - - - - - - - - - (170,894) Transaction costs associated with share issues - (5,113,586) Balance as at 30 June 1,542,124,952 134,113,511 978,462,262 63,917,409 Ordinary shareholders are entitled to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amount paid on the shares held. Every ordinary shareholder present at a meeting in person or by proxy is entitled to one vote on a show of hands or by poll. Ordinary shares have no par value. Notes for the above table: (a) 45,000,000 shares were issued at $0.05 each in the placement on 03 July 2020, raising $2,250,000. (b) 60,000,000 shares issued at $0.05 each in the placement on 9 November 2020, raising $3,000,000. (c) 10,000,000 shares were issued upon exercise of options at $0.025 each on 12 December 2020, raising $250,000. (d) 10,000,000 shares were issued upon exercise of options at $0.03 each on 12 December 2020, raising $300,000 (e) 10,000,000 shares were issued upon exercise of options at $0.035 each on 12 December 2020, raising $350,000. (f) 35,700,000 shares were issued upon exercise of options at $0.0338 each between February 2021 to June 2021, raising $1,206,660. (g) 4,000,000 performance rights with a fair value of $332,000 converted into ordinary shares at no consideration on 1 March 2021. (h) 2,700,000 shares were issued upon exercise of options at $0.08 each (for 600,000 options) and $0.07 each (for 2,100,000 options) on 4 August 2021, raising $195,000. (i) 149,253,731 shares were issued at $0.067 each in the placement on 10 August 2021, raising $10,000,000. (j) 81,763,969 shares were issued upon rights exercised $0.067 each on 30 August 2021, raising $5,478,186. (k) 68,750,000 shares were issued at $0.016 each in the placement on 18 November 2021, raising $11,000,000. (l) 27,941,177 shares were issued at $0.17 per share to fund part of the Bluff consideration of $4,750,000 on 29 December 2021. (m) 4,000,000 performance rights with a fair value of $200,000 converted into ordinary shares at no consideration on 29 December 2021. (n) 207,353,813 shares were issued at $0.20 each in the placement on 24 February 2022, raising $41,470,762. (o) 21,700,000 shares were issued upon exercise of options at $0.10 each (for 21,000,000) and $0.0782 (for 700,000 options) on 25 May 2022, raising $2,154,740. (p) 200,000 performance rights with a fair value of $61,000 converted into ordinary shares at no consideration on 30 June 2022 BOWEN COKING COAL ANNUAL REPORT 202270 UNLISTED OPTIONS Weighted average exercise price 2022 No. of Options Weighted average exercise price 2021 No. of Options Unlisted Share Options Balance at the beginning of the year CHANGE OF OPTIONS DURING THE YEAR Issued during the year Exercised during the year Exercisable at end of year PERFORMANCE RIGHTS $0.218 $0.074 $0.179 $0.096 $0.218 43,000,000 3,400,000 64,000,000 (24,400,000) 43,000,000 $0.074 $0.032 $0.074 $0.032 $0.074 3,400,000 65,700,000 3,400,000 (65,700,000) 3,400,000 Weighted average exercise price 2022 No. of Performance Rights Weighted average exercise price 2021 No. of Performance Rights Unlisted Performance Rights Balance at the beginning of the year - - CHANGE OF PERFORMANCE RIGHTS DURING THE YEAR Issued Converted Lapsed Balance at end of year CAPITAL MANAGEMENT - - - 13,300,000 20,000,000 1,500,000 (4,200,000) (4,000,000) 13,300,000 - - - - - 20,000,000 12,000,000 12,000,000 (4,000,000) - 20,000,000 Management controls the capital of the Group to ensure it can fund its operations and continue as a going concern. During the current year the Group started transition from explorer to developer and now heading towards becoming a steady state producer, the Company Capital management policy has moved from exclusively funded by share capital to combination of equity and debt. In the current year the Group raised finance through issuing of share capital, Convertible Notes and secured debt facilities. There are no externally imposed capital requirements. There have been no other changes to the capital management policies during the year. NOTE 20 RESERVES Balance at beginning of year Share based payments Conversion of performance shares Equity component of Convertible Notes Share issue costs Note 5 15 Share Based Payment Reserve Convertible Note Reserve 2022 $ 755,943 2,164,809 (261,000) - 1,489,422 4,149,174 2021 $ 581,039 506,904 (332,000) 2022 $ - - - - - 13,210,888 - 755,943 13,210,888 2021 $ - - - - - - BOWEN COKING COAL ANNUAL REPORT 202271 SHARE-BASED PAYMENTS RESERVE The share-based payment reserve is used to recognise the fair value of options and performance shares issued to directors, employees and consultants. This reserve can be reclassified as retained earnings if options lapse or performance hurdles attached to the performance rights are not achieved. CONVERTIBLE NOTES RESERVE The convertible notes reserve relates to the equity component of the Convertible Notes issued (refer Note 15: Interest Bearing Loans and Borrowings). NOTE 21 OPERATING SEGMENTS ACCOUNTING POLICY Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director. The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Group is managed primarily on the basis of geographical locations as these locations have notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis. Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are similar with respect to any external regulatory requirements. Identification of reportable segments The Group is managed primarily on geographic basis, that is, the location of the respective areas of interest (tenements) in Australia. Operating segments are determined on the basis of financial information reported to the board of directors which is at the Group level. The Group’s exploration and development activities in Australia is the Group’s sole focus. All investments in associates and subsidiaries operate in one geographical location being Australia and are organised into two business units from which the Group’s expenses are incurred and revenues are earned, being (1) for the exploration and development of coal and (2) mining and sale of coal. The reporting on these investments to the Chief Operating Decision Makers, the Board of Directors, focuses on the on the key performance indicators that the Directors monitor on a regular basis which are: • Run-of-Mine (ROM) tonnages, processing plant yields and sales tonnages • Revenue per tonne • Cash cost per run-of-mine tonne (ROMt) • Gross margin in percentage and gross margin per sales tonne • Management of liquid resources through regular analysis of working capital requirements, bank balances, stay in business capital requirements, cash flow forecasts, accounts receivable and accounts payable ageing metrics. The non-current assets relating to the capitalisation expenditure associated with the coal projects are located in Australia. All corporate expenditure, assets and liabilities relate to incidental operations carried out in Australia. BOWEN COKING COAL ANNUAL REPORT 2022For the year ended 30 June 2022 Mining and sale of coal $’000 Exploration and development of coal $’000 Corporate (Unallocated) $’000 Revenue Cost of sales Gross loss Administrative expenses Other expenses Operating loss Finance income Finance expense Share of profit of joint ventures accounted for using equity method Loss before income tax expense Income tax expense Loss for the year Additions to non-current assets Total non-current assets Total assets Total liabilities 11,862 (20,201) (8,339) (377) (575) (9,291) - - 11 (9,280) - (9,280) 35,524 35,524 63,957 - - - (365) - (365) - - - (365) - (365) 23,536 36,386 37,438 - - - (4,417) (3,530) (7,947) 6 (716) - - (8,657) 4,405 4,678 71,307 (30,059) (15,395) (43,801) (8,657) (18,302) 72 Total $’000 11,862 (20,201) (8,339) (5,159) (4,105) (17,603) 6 (716) 11 - (18,302) 63,465 76,588 172,702 (89,255) Revenue, from the sale of coal, in the amount of $11,862,313 (2021: $ nil) was received from a single customer, being Formosa Ha Tinh Steel Corporation. All revenues were earned in Australia. For the year ended 30 June 2021 Mining and sale of coal $’000 Exploration and development of coal $’000 Corporate (Unallocated) $’000 Revenue Cost of sales Gross loss Administrative expenses Other expenses Operating loss Finance income Finance expense Share of loss of joint ventures accounted for using equity method Loss before income tax expense Income tax expense Loss for the year Additions to non-current assets Total non-current assets Total assets Total liabilities - - - - - - - - - - - - - - - - - - - (408) - (408) - - - (408) - (408) 3,531 12,850 14,847 (847) - - - (1,292) (1,454) (2,746) - (5) (65) (2,816) - (2,816) 475 273 1,446 (497) Total $’000 - - - (1,700) (1,454) (3,154) - (5) (65) (3,224) - (3,224) 4,006 13,123 16,293 (1,344) BOWEN COKING COAL ANNUAL REPORT 202273 NOTE 22 CASH FLOW INFORMATION RECONCILIATION OF CASH FLOW FROM OPERATIONS WITH LOSS AFTER INCOME TAX Loss after income tax (18,302,414) (3,224,368) NON-CASH FLOWS IN LOSS FROM ORDINARY ACTIVITIES 2022 $ 2021 $ Amortisation and depreciation Interest on lease payments Share of (profit)/loss of joint ventures accounted for using equity method Share-based payments CHANGES IN OPERATING ASSETS AND LIABILITIES (Increase)/decrease in receivables Increase in prepayments and other assets Increase in inventories Increase/(decrease) in payables and accruals (Decrease)/increase in provisions Net cash used in operations NOTE 23 COMMITMENTS (A) EXPLORATION COMMITMENTS 629,341 8,702 (11,190) 25,713 5,682 65,001 2,164,809 506,904 (14,938,632) (6,793,050) (5,999,733) 24,357,470 (127,593) 12,634 (3,293) - (45,616) 11,531 (19,012,290) (2,645,812) The Group has certain obligations to expend minimum amounts on exploration in tenement areas. These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations of the Group. The following commitments exist at balance date but have not been brought to account. If the relevant option to acquire a mineral tenement is relinquished the expenditure commitment also ceases. The Group has the option to negotiate new terms or relinquish the tenements and also to meet expenditure requirements by joint venture or farm-in arrangements. Not later than 1 year Later than 1 year but not later than 5 years Later than 5 years Total commitment (B) OPERATING LEASE COMMITMENTS 2022 $ 362,106 862,500 25,000 2021 $ 701,175 651,260 - 1,249,606 1,352,435 On 15 July 2022 the Company entered a lease agreement for its head office for a period of three years, with no option to extend. The lease agreement commences on 1 August 2022 with lease payment monthly and fixed annual increase of 4% included in the lease terms. (C) CAPITAL COMMITMENTS The Group has no capital commitments. BOWEN COKING COAL ANNUAL REPORT 202274 NOTE 24 CONTINGENT LIABILITIES On 30 September 2020 the Company completed an agreement to acquire the Broadmeadow East coking coal project, located within undeveloped Mining Lease 70257. The compensation agreement included the following contingent consideration item: • Royalty payable of $1/t on all coal produced and sold from ML 70257, to a maximum of 1.5Mt, being $1.5M; On 25 October 2021 Bowen PCI Pty Ltd (Bowen PCI) signed a Toll Washing and Rail Loadout Agreement with Constellation Mining Pty Ltd (Constellation). The agreement required Bowen PCI to provide an unconditional bank guarantee in favor of Constellation for the amount of $500,000 to secure the payment obligations of Bowen PCI. On 9 August 2022 a Cash Surety Deed replaced the bank guarantee requirement. On 29 December 2021 the Company completed an agreement to acquire the Bluff PCI Mine, located within developed Mining Lease 80194 and coal exploration permits EPC 1175 and EPC 1999. The compensation agreement included the following contingent consideration items: • Base Royalty payable, if benchmark price for the quarter is more than USD 120, the royalty is $2/tonne on all coal produced and sold from ML 80194, EPC 1175 and EPC 1999, subject to a maximum amount payable of $10,000,000; • Super Royalty payable, if benchmark price for the quarter is more than USD 150, the uncapped royalty is $5/tonne on all coal produced and sold from ML 80194, EPC 1175 and EPC 1999, and if benchmark price for the quarter is more than USD 200, the uncapped royalty is $10/tonne. On 24 December 2021 the Company announced that it had executed binding a Share Sale and Purchase Agreement with New Hope Corporation Limited for the acquisition of 100% of the shares in New Lenton Coal Pty Ltd (which currently owns a 90% interest in the Lenton Joint Venture). Total consideration payable is as follows: 1. Cash consideration of $20,000,000 (including an equity component of up to $10,000,000 at Bowen’s election), payable upon Completion; 2. Up to $7.5 million in milestone payments associated with production ramp-up and time-based payments (24 and 36 months); 3. Assumption of environmental rehabilitation obligations of $61.6 million; and 4. Payment of royalties as follows: a. Base Royalty; a non-indexed royalty on 90% of all coal mined from the Lenton JV assets at a royalty rate of $0.55 per product tonne, capped at $16m; and b. Average Price Royalty; a non-indexed royalty on 90% of all coal mined from the Lenton JV assets during a quarter if the average price for PLVHA00 for that quarter exceeds US$160/tonne at a royalty rate of $1.65 per product tonne, capped at $24m; and c. High Price Royalty; a non-indexed royalty on 90% of all coal mined from the Lenton JV assets during a quarter if the average price for PLVHA00 for that quarter exceeds US$190/tonne at a royalty rate of $3.30 per product tonne, capped at $30m. The acquisition was completed on 1 July 2022 and the full cash consideration was paid. Items 2 and 4 above remain a contingent liability, subsequent to the acquisition date. In June 2022 Bowen Coking Coal Ltd signed a Royalty Deed with Taurus Mining Funding No 2 LP. The contingent royalty rate is as follows: • 1% in respect of the Bluff Tenement’s monthly gross revenue • 0.25% in respect of the Broadmeadow East Tenement and the Burton Tenement’s monthly gross revenue. There were no other contingent liabilities at the end of the reporting period. BOWEN COKING COAL ANNUAL REPORT 2022NOTE 25 RELATED PARTY TRANSACTIONS PARENT ENTITY Bowen Coking Coal Ltd is the legal parent and ultimate parent entity of the Group. SUBSIDIARY Interest in subsidiaries are disclosed in Note 28. KEY MANAGEMENT PERSONNEL Short-term benefits Post-employment – superannuation Share-based payments 75 2022 $ 1,106,353 66,624 1,709,329 2,882,306 2021 $ 1,014,429 55,311 145,434 1,215,174 During the year the Group paid M Resources Trading Pty Ltd, an entity associated with Mr M. Latimore, $162,625 (2021: $169,690) for marketing consulting and technical services. At reporting date there was no outstanding amount payable to M Resources Trading Pty Ltd. At reporting date there was an amount outstanding to Protea Resources Pty Ltd of $nil (2021: $20,213), an entity associated with Mr Daryl Edwards for consulting fees due. At reporting date there was an amount outstanding to Gerhard Redelinghuys of $4,483 (2020: $1,228) for expense reimbursements due. NOTE 26 AUDITOR’S REMUNERATION During the financial year the following fees were paid or payable for services provided by RSM Australia Partners, the auditor of the Company: AUDIT SERVICES Audit or reviewing the financial reports OTHER SERVICES Preparation and lodgement of QLD stamp duty NOTE 27 FINANCIAL INSTRUMENTS ACCOUNTING POLICY Recognition and Initial Measurement 2022 $ 2021 $ 99,000 40,750 15,000 114,000 - 40,750 Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets. Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. BOWEN COKING COAL ANNUAL REPORT 202276 Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. Classification and Subsequent Measurement Financial instruments are subsequently measured at fair value or amortised cost using the effective interest rate method. Fair value is the price that would be received to sell an asset or paid to transfer an asset. Amortised cost is calculated as: (a) the amount at which the financial asset or financial liability is measured at initial recognition; (b) less principal repayments; (c) plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and (d) less any reduction for impairment. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss. The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments. Compound financial instruments Compound financial instruments issued by the Group comprise convertible notes denominated in AUD that can be converted to ordinary shares at the option of the holder, when the number of shares to be issued is fixed and does not vary with changes in fair value. The liability component of compound financial instruments is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured. Interest related to the financial liability is recognised in profit or loss. On conversion at maturity, the financial liability is reclassified to equity and no gain or loss is recognised. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Impairment The Group 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 Group’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. BOWEN COKING COAL ANNUAL REPORT 202277 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. (A) FINANCIAL RISK MANAGEMENT POLICIES The Group’s financial instruments comprises cash balances, receivables and payables and loans to and from subsidiaries. The main purpose of these financial instruments is to provide finance for Group operations. Treasury Risk Management Key executives of the Company meet on a regular basis to analyse exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. Management is responsible for developing and monitoring the risk management policies and reports to the board. Financial Risks The main risks the Group is exposed to through its financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. These risks are managed through monitoring of forecast cash flows, interest rates, economic conditions and ensuring adequate funds are available. Interest Rate Risk The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s cash flows or fair value will fluctuate as a result of changes in market interest rates, arises in relation to the Group’s bank balances and debt facilities. The risk of fluctuation in interest rates on bank balances is managed through the use of variable interest rate bank accounts while the interest rate risk on the Taurus debt facility and Convertible Note are managed through the interest rate on these facilities being fixed. Sensitivity analysis: At 30 June 2022, if interest rates on Australian Dollar-denominated cash balances had been 2% higher/(lower) with all other variables held constant, post-tax profit for the year would have been $743,665 (2021: $41,958) higher/(lower), mainly as a result of higher/(lower) interest rates. At 30 June 2022, if interest rates on United States Dollar-denominated cash balances had been 2% higher/(lower) with all other variables held constant, post-tax profit for the year would have been $271,756 (2021: $nil) higher/(lower), mainly as a result of higher/(lower) interest rates. Liquidity Risk Liquidity risk is the risk that the Group will not be able meet its financial obligations as they fall due. This risk is managed by ensuring, to the extent possible, that there is sufficient liquidity to meet liabilities when due, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group’s activities are funded from equity and where required and available debt and/or project finance. During the year ended 30 June 2022, the Group executed a finance facility with Taurus Mining Finance Fund No. 2 L.P., to provide the Group with a finance facility of up to US$55 million, primarily for the rebuilding of the Burton Infrastructure. At 30 June 2022, the Group had drawn US$14 million and at the date of this report, the Group had drawn US$30 million leaving US$25 million in undrawn facilities. On 20 June 2022, the Company achieved financial close on a convertible note deed for the issuance of A$40 million convertible loan notes (Convertible Notes) with the Crocodile Capital 1 Global Focus Fund and the Crocodile Capital Offshore Fund. The Convertible Notes are convertible into fully paid ordinary shares in Bowen Coking Coal Ltd and have a maturity of five years BOWEN COKING COAL ANNUAL REPORT 2022 78 unless earlier redeemed or converted in accordance with their terms and conditions. Maturity of the Convertible Notes will accelerate to 15 July 2022 in the event the acquisition of the Burton Mine and Lenton Project does not reach completion by 5 July 2022. The liquidity risk is managed by maintaining sufficient liquidity in cash in should the Burton Mine and Lenton Project acquisition not reach completion by 5 July 2022, forcing potential acceleration of the redemption of the Convertible Notes Credit Risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is their carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. Credit risk arises from exposures to deposits with financial institutions and outstanding receivables. Credit risk is managed and reviewed regularly by key executives. The key executives monitor credit risk by actively assessing the rating quality and liquidity of counter parties: • only banks and financial institutions with an ‘A’ rating are utilised; and • all other entities are rated for credit worthiness taking into account their size, market position and financial standing. • Sales transactions are secured by letters of credit when deemed appropriate. The below table summaries the assets which are subject to credit risk: Cash and cash equivalents Trade and other receivables Security deposit Loans to related parties Credit risk exposure Foreign Currency Risk 2022 $ 72,520,051 15,088,758 18,316,725 255,000 2021 $ 2,997,030 150,126 201,324 133,000 106,180,534 3,481,480 The Australian dollar is the functional currency of the Group and as a result, currency exposure arises from transactions and balances in currencies other than Australian dollar. The Group potential currency exposure comprise: • Coal sales are denominated in United States dollar. The Group is therefore exposed to volatility in the US$:A$ exchange rates. The Group generally aligns all coking coal prices to relevant coking coal indexes. The Group has not used any derivative products to mitigate fluctuations in the relevant coal price indexes or US$:A$ exchange rates. • The Group drew down US$14m on a US$55m finance facility on 27 June 2022. As noted above, the Group’s coal sales are denominated in US$, which provides a natural economic hedge in relation to adverse foreign currency movements that affect the drawn down facility position and the current policy is not to hedge foreign exchange risk. Foreign Currency Risk Sensitivity Analysis: Cash and cash equivalents Trade and other receivables Loans – Taurus facilities Total Profit or loss before tax Carrying amount $ 19,411,150 11,587,700 Decrease in FX by 10% $ 2,156,794 1,287,522 (20,207,253) (2,245,250) 1,199,066 Increase in FX by 10% $ (1,764,650) (1,053,427) 1,837,023 (981,054) BOWEN COKING COAL ANNUAL REPORT 202279 (B) FINANCIAL INSTRUMENT COMPOSITION AND CONTRACTUAL MATURITY ANALYSIS The following tables detail the Group’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. WITHIN 12 MONTHS Payables1 Lease liability2 Loans3 BETWEEN 12 MONTHS AND 24 MONTHS Lease liability2 Loans3 MORE THAN 24 MONTHS Lease liability2 Loans3 Notes 2022 $ 2021 $ 30,943,740 58,312 12,124,351 43,126,403 29,886 8,082,900 8,112,786 - 46,003,288 46,003,288 814,888 55,440 - 870,328 58,312 - 58,312 29,886 - 29,886 1. Non-interest bearing. The contractual cash flows do not differ to the carrying amount. 2. The Group has recognised a lease liability in relation to premises the entity leases for its corporate office under a three year agreement commencing on 1 January 2021. 3. Interest bearing. The contractual cash flows differ to the carrying amount by the amount of transactions costs comprising establishment, corporate, legal advisory fees and interest. (C) NET FAIR VALUES Fair values of financial assets and financial liabilities are materially in line with carrying values. (D) SENSITIVITY ANALYSIS The Company has performed sensitivity analysis relating to its exposure to interest rate risk. At year end, the effect on profit and equity as a result of a 10% change in the interest rate, with all other variables remaining constant, is immaterial. NOTE 28 SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in accordance with the accounting policy described in Note 1: BOWEN COKING COAL ANNUAL REPORT 202280 Coking Coal One Pty Ltd Cabral Metais Ltd (dormant) Bowen PCI Pty Ltd Country of incorporation Australia Brazil Australia 2022 100% 100% 100% Ownership interest 2021 100% 100% - NOTE 29 BLUFF MINE (BLUFF PCI COAL PROJECT) ASSET ACQUISTION On 26 October 2021, the Company announced that it had executed binding agreements with MACA Ltd, appointed receivers for Carabella Resources Pty Ltd, to acquire the Bluff PCI Coal Project, located within developed Mining Lease 80194. The acquisition was completed on 29 December 2021. The Company agreed to acquire the following: 1. Granted Mining Lease ML 80194; 2. Associated surface infrastructure; 3. 1931ha of grazing land; 4. An Approved Environments Authority to mine to 1.8Mtpa; and 5. Coal exploration permit EPC1175 and EPC 1999. Total consideration payable in relation to the acquisition was as follows: 1. Cash consideration of $250,000; 2. Shares in the Company with a fair value of $4,750,000; and 3. Assumption of environmental rehabilitation obligations. In addition, contingent consideration is also payable as follows: 1. Base Royalty payable, if benchmark price for the quarter is more than USD 120, the royalty is $2/tonne on all coal produced and sold from ML 80194, EPC 1175 and EPC 1999, subject to a maximum amount payable of $10,000,000; and 2. Super Royalty payable, if benchmark price for the quarter is more than USD 150, the uncapped royalty is $5/tonne on all coal produced and sold from ML 80194, EPC 1175 and EPC 1999, and if benchmark price for the quarter is more than USD 200, the uncapped royalty is $10/tonne. The value of the assets acquired and liabilities assumed has been allocated on a Fair Value basis. Details of the purchase consideration and the net assets acquired are as follows: Net assets acquired Mining asset (including Rehabilitation provision) Land Rehabilitation provision Total Purchase consideration NOTE 30 SUBSEQUENT EVENTS Note 13 13 17 2022 $ 15,118,396 400,000 (10,518,396) 5,000,000 In August 2021, Bowen announced its intention to acquire New Hope Corporation’s 90% interest in the Lenton Joint Venture, owner of the Burton Coal Mine and New Lenton Project. (Formosa Plastics Group holds the remaining 10%). On 24 December 2021, Bowen entered into a binding Share Sale and Purchase Agreement (‘SPA’) with New Hope Corporation Limited (‘NHC’) for the acquisition of 100% of the shares in New Lenton Coal Pty Ltd (‘New Lenton’) (which currently owns a 90% interest in the Lenton Joint Venture) (‘Lenton JV’, the ‘Acquisition’). The Conditions Precedent to the SPA were satisfied on 24 June 2022 and a Deed of Variation to the SPA was signed on 1 July 2022. The Deed of Variation included agreement of the Completion Date, BOWEN COKING COAL ANNUAL REPORT 202281 Completion Payments and other matters including the replacement of security bonds which was required in order to complete the Transaction. Accordingly, on 1 July 2022, subsequent to period end, the Company completed the acquisition. On 5 July 2022, 948,560 shares and 2,165,913 performance rights were issued to staff and management (under the Company’s Employee and Executive Incentive Plan), and the Company issued 4,000,000 ordinary shares on 9 August 2022 and 450,000 ordinary shares on 5 September 2022 following the exercise of vested performance rights. Other than the matters noted above, there are no material matters or circumstances that have arisen since the end of the year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. NOTE 31 PARENT ENTITY INFORMATION The following information relates to the parent entity, Bowen Coking Coal Ltd at 30 June 2022. This information has been prepared using consistent accounting policies as presented in Note 1. Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Contributed equity Reserves Accumulated losses Total equity Loss for the period Other comprehensive income for the period Total comprehensive loss for the period 2022 $ 66,629,105 74,082,956 2021 $ 1,172,888 15,312,062 140,712,061 16,484,950 14,132,326 32,690,072 46,822,398 93,889,663 134,113,511 17,360,062 (57,583,910) 93,889,663 (8,646,338) - 601,372 147,798 749,170 15,735,780 63,917,409 755,943 (48,937,572) 15,735,780 (2,816,576) - (8,646,338) (2,816,576) Refer to Note 23 outlining a (conditional) contractual commitments for the acquisition of assets, also considered contingent liabilities at 30 June 2022. Other than the transactions described in Note 24, the Company has: • no other contingent liabilities, nor has it entered into any guarantees in relation to the debts of its subsidiaries; and • has not entered into any other contractual commitments for the acquisition of property, plant and equipment. The Company and its Australian controlled entities have formed a tax consolidated Group as at the date of this report. NOTE 32 COMPANY DETAILS The registered office and principal place of business is: Level 4, 167 Eagle Street Brisbane, Queensland, 4000 Australia NOTE 33 DIVIDENDS & FRANKING CREDITS There were no dividends paid or recommended during the financial year. There are no franking credits available to the shareholders of the Company. BOWEN COKING COAL ANNUAL REPORT 2022DIRECTORS’ DECLARATION 82 The directors of the Company declare that: 1. The attached financial statements and notes are in accordance with the Corporations Act 2001, the Corporations Regulations 2001, including: a. complying with the Australian Accounting Standards which, as stated in accounting policy note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and b. giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date. 2. The Managing Director and chief financial officer have each declared that: a. the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; b. the financial statements and notes for the financial year comply with the Accounting Standards; and c. the financial statements and notes for the financial year give a true and fair view. 3. In the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Gerhard Redelinghuys Managing Director 29 September 2022 Brisbane, Queensland BOWEN COKING COAL ANNUAL REPORT 2022B OW E N C O K I N G C OA L A N N UA L R E P O R T 2 0 2 2 83 INDEPENDENT AUDITOR’S REPORT THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation RSM Australia Partners Level 6, 340 Adelaide Street Brisbane QLD 4000 GPO Box 1108 Brisbane QLD 4001 T +61 (0) 7 3225 7800 F +61 (0) 7 3225 7880 www.rsm.com.au INDEPENDENT AUDITOR’S REPORT To the Members of Bowen Coking Coal Limited Opinion We have audited the financial report of Bowen Coking Coal Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) 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; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. 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 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 and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (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. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation RSM Australia Partners Level 6, 340 Adelaide Street Brisbane QLD 4000 GPO Box 1108 Brisbane QLD 4001 T +61 (0) 7 3225 7800 F +61 (0) 7 3225 7880 www.rsm.com.au INDEPENDENT AUDITOR’S REPORT To the Members of Bowen Coking Coal Limited Opinion We have audited the financial report of Bowen Coking Coal Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) 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; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. 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 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 and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (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. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 84 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 of the current period. These matters were addressed in the context of our audit of the financial report and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How our audit addressed this matter Carrying value of capitalised exploration and evaluation expenditure Refer to Note 13 in the financial statements At 30 June 2022, the Group held capitalised exploration and evaluation assets of $10,250,911. We consider the carrying amount of these assets under AASB 6 Exploration for and Evaluation of Mineral Resources to be a key audit matter due to the significant management judgments involved, including: • whether the exploration and evaluation spend can be associated with finding specific coal resources, and the basis on which that expenditure is allocated to an area of interest; • the Group's ability and intention to continue to explore the area of interest; • which costs should be capitalised; • the existence of any impairment indicators (such as the potential that coal resources may not be commercially viable for extraction, or that the carrying value of the assets may not be recovered through sale or successful development) - and if so, those applied to determine and quantify any impairment loss; and • whether exploration activities have reached the stage at which the existence of an economically recoverable reserve may be determined. Our audit procedures included: • Assessing the Group’s accounting policy for compliance with Australian Accounting Standards; • Assessing whether the rights to tenure of those areas of interest are current; • Testing a sample of additions to supporting documentation and assessing whether the amounts capitalised during the year are in compliance the Group’s accounting policy and relate to the relevant area of interest; • Enquiring with management and reading budgets and other documentation as evidence that active and significant operations in, or relation to, the relevant area of interests will be continued in the future; • Assessing and evaluating management’s determination that exploration activities have not yet progressed to the stage where the existence or otherwise of economically recoverable reserves may be determined; • Assessing and evaluating management’s assessment of whether indicators of impairment existed at the reporting date; and • Assessing the appropriateness of the disclosures in the financial statements. Mine development asset The Group has recognized $20,862,235 as mine development assets at 30 June 2022. We determined this to be a key audit matter due to: • the complexity exercised in the classification of these amounts as mine development assets; • complexity and management judgement involved in assessing exploration and Our audit procedures included: • Assessing the Group’s accounting policy for compliance with Australian Accounting Standards; • In relation to the reclassification of exploration and evaluation assets: • Challenging management's assessment that the technical feasibility and commercial viability of BOWEN COKING COAL ANNUAL REPORT 202285 evaluating expenditure for impairment prior to its re-classification to mine development assets; and • judgements and management estimates associated with measuring the rehabilitation obligation applicable to mine development assets. extracting a mineral resource was demonstrable; and • Testing the methods, assumptions and data used by management in its impairment assessment of the exploration and evaluation asset to be reclassified; • Testing, on a sample basis, additions to supporting documentation and assessing whether the amounts were capital in nature; • Testing the methods, assumptions and data utilised by management to measure the rehabilitation obligation applicable to mine development assets and checking the mathematical accuracy of the rehabilitation provision; • Critically evaluating management’s assessment that no indicators of impairment existed; and • Assessing the appropriateness of the disclosures in the financial statements. Mining assets The Group holds mining assets with a carrying value of $22,202,648. Mining assets includes $15,118,396 arising in relation to the acquisition of Bluff PCI Coal Project on 29 December 2021. We considered this to be a key audit matter due to the management judgement and estimation exercised in: • Determining whether the acquisition of Bluff PCI Coal Project was a business combination or an asset acquisition, based on whether the definition of a business in AASB 3 Business Combinations was met; • Determining the acquisition date and management estimates associated with determining the fair value of consideration paid and assets and liabilities acquired with respect to Bluff PCI Coal Project; • the application of units of production method in determining the appropriate run-of-mine production estimate and the attributable cost allocation; and • Measuring the rehabilitation obligation applicable to mining assets. Our audit procedures included: • Assessing the Group’s accounting policy for compliance with Australian Accounting Standards; • Reading the acquisition agreement for Bluff PCI Coal Project and other documents to understand key terms and conditions relating to the acquisition; • Evaluating management’s determination that the acquisition did not meet the definition of a business within AASB 3 Business Combinations and therefore should be accounted for as an asset acquisition; • Assessing management’s determination of the fair value of consideration paid and the acquisition date; • Evaluating the assumptions and methodology applied by management in determining the fair value of mining assets acquired; • Agreeing, on a sample basis, additions to supporting documentation and checking that the amounts were capital in nature; • Assessing for reasonableness management's mining asset amortisation model, including assessing the methodologies adopted and key assumptions and agreeing key inputs to supporting information. Our testing included an BOWEN COKING COAL ANNUAL REPORT 202286 assessment of the work performed by management's expert in respect of the mine plan/life of mine model and the ore reserve estimate, including the competency and objectivity of the expert; • Testing the methods, assumptions and data utilised by management to measure the rehabilitation obligation applicable to mining assets and checking the mathematical accuracy of the rehabilitation provision; • Assessing the appropriateness of the disclosures in the financial statements. Convertible note Refer to Note 15 in the financial statements On 23 June 2022, the Group issued $40 million convertible loan notes to Crocodile Capital 1 Global Focus Fund and Crocodile Capital Offshore Fund. The convertible notes are convertible into fully paid ordinary shares in the Company and have a maturity of five years unless earlier redeemed or converted in accordance with their terms and conditions. The measurement and classification of convertible notes is considered a key audit matter due to the materiality of the balance and the complexity of the accounting treatment required under Australian Accounting Standards. Our audit procedures included: • Assessing the Group’s accounting policy for compliance with Australian Accounting Standards; • Reading the convertible notes deed to understand their terms and evaluating the classification of the convertible notes against the criteria contained within Australian Accounting Standards; • Vouching the proceeds from the issue of convertible notes to bank statements and other supporting documentation; • Assessing the fair value of the equity and debt components of the convertible notes at inception, including challenging the reasonableness of key inputs used by management to determine fair value; • Challenging management’s classification of the debt component as a non-current liability; • Checking the mathematical accuracy of the remeasurement at year-end of the debt component of the convertible note using the effective interest rate method; and • Assessing the appropriateness of the disclosures in financial report. Emphasis of Matter – Subsequent events We draw attention to Note 30, Subsequent Events, to the financial statements which describes the significant effects related to the acquisition of New Lenton Coal Pty Ltd on 1 July 2022. Our opinion is not modified in respect of this matter. BOWEN COKING COAL ANNUAL REPORT 202287 Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2022 but does not include the financial report and the auditor's report thereon. 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, 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. 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 this 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/auditorsresponsibilities/ar2.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 34 to 39 of the Directors' Report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Bowen Coking Coal Limited, for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. BOWEN COKING COAL ANNUAL REPORT 202288 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. RSM AUSTRALIA PARTNERS Albert Loots Partner Brisbane, Queensland Dated: 29 September 2022 BOWEN COKING COAL ANNUAL REPORT 2022SHAREHOLDER INFORMATION 89 Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 20 September 2022. (A) DISTRIBUTION OF EQUITY SECURITIES The number of holders, by size of holding, in each class of security are: 1–1,000 1,001–5,000 5,001–10,000 10,001–100,000 100,001 and over Total 1–1,000 1,001–5,000 5,001–10,000 10,001–100,000 100,001 and over Total 1–1,000 1,001–5,000 5,001–10,000 10,001–100,000 100,001 and over Total Ordinary Shares Unlisted Options ($0.10 @ 30-Nov-24) No. Holders No. Shares No. Holders No. Options 173 569 448 1,419 638 3,247 33,193 1,720,914 3,585,548 59,306,232 1,482,877,625 1,547,523,512 - - - - 2 2 - - - - 9,000,000 9,000,000 Unlisted Options ($0.25 @ 30-Sep-24) Performance Rights No. Holders No. Options No. Holders No. Rights - - - - 5 5 - - - - 34,000,000 34,000,000 - - - 2 10 12 - - - 86,217 10,929,696 11,015,913 No. Holders No. Options Convertible Notes - - - - 2 2 - - - - 40,000,000 40,000,000 There are 192 shareholders holding less than a marketable parcel of 1,316 shares. BOWEN COKING COAL ANNUAL REPORT 2022(B) TWENTY LARGEST SHAREHOLDERS The names of the twenty largest holders of Quoted Ordinary Shares are: # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Registered Name BNP PARIBAS NOMS PTY LTD* HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED* CITICORP NOMINEES PTY LIMITED LATIMORE FAMILY PTY LTD* METRES INVEST PTY LTD CAPE COAL PTY LTD* UBS NOMINEES PTY LTD ST LUCIA RESOURCES CAPITAL FUND PTY LTD BRAZIL FARMING PTY LTD* CS FOURTH NOMINEES PTY LIMITED MACA LIMITED SAS INVESTMENTS PTY LTD WARBONT NOMINEES PTY LTD NORFOLK ENCHANTS PTY LTD OLROSS INVESTMENTS PTY LIMITED MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED SEYMOUR GROUP PTY LTD BRISPOT NOMINEES PTY LTD BOND STREET CUSTODIANS LIMITED 20 M RESOURCES PTY LTD TOP 20 TOTAL Total of Securities *Denotes merged holding 90 Number of Shares % of total Shares 216,560,907 153,891,244 138,852,852 112,150,811 55,000,000 54,849,774 46,162,501 40,439,261 31,533,517 30,838,968 27,941,177 24,000,000 23,543,060 22,500,000 21,666,667 20,548,255 20,000,000 18,015,914 15,921,662 15,022,261 14.0% 9.9% 9.0% 7.2% 3.6% 3.5% 3.0% 2.6% 2.0% 2.0% 1.8% 1.6% 1.5% 1.5% 1.4% 1.3% 1.3% 1.2% 1.0% 1.0% 1,089,438,831 1,547,523,512 70.40% 100.0% BOWEN COKING COAL ANNUAL REPORT 202291 (C) SUBSTANTIAL SHAREHOLDERS The latest substantial shareholder notices that the Company has received are set out below: Name of Shareholder Ordinary Shares % of total Shares 184,448,072 104,477,612 168,031,652 128,120,642 11.95% 8.62% 10.86% 8.43% M Resources Pty Ltd and Matthew Latimore Ilwella Pty Ltd Regal Funds Management Pty Ltd Crocodile Capital and its related body VP Fund Solutions (Luxembourg) SA (D) VOTING RIGHTS All ordinary shares carry one vote per share without restriction. Options and performance rights do not carry voting rights. (E) RESTRICTED SECURITIES As at the date of this report, there are no ordinary shares subject to ASX escrow. (F) ON-MARKET BUY BACK There is not a current on-market buy-back in place. (G) BUSINESS OBJECTIVES The Group has used its cash and assets that are readily convertible to cash in a way consistent with its business objectives. BOWEN COKING COAL ANNUAL REPORT 2022INTERESTS IN TENEMENTS 92 Bowen Coking Coal Ltd held the following interests in tenements as at the date of this report: Location Project Queensland Cooroorah Tenement MDL 453 Granted Status Current Interest (%) Country Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Queensland Broadmeadow East ML 70257 Under renewal Queensland Mt Hillalong Queensland Hillalong East Queensland Carborough Queensland Queensland Queensland Lilyvale Lilyvale Mackenzie Queensland Comet Ridge Queensland Queensland Queensland Queensland Queensland Queensland Queensland Queensland Isaac River Isaac River Isaac River Isaac River Bluff Bluff Bluff Lenton2 Queensland Lenton North2 Queensland Lenton West2 Queensland New Lenton2 Queensland New Lenton2 Queensland New Lenton2 Queensland Queensland Queensland Queensland Queensland Burton2 Burton2 Burton2 Burton2 Burton2 EPC 1824 EPC 2141 EPC 1860 EPC 1687 EPC 2157 EPC 2081 EPC 1230 MDL 444 EPC 830 ML 700062 ML 700063 EPC 1175 EPC 1999 ML 80194 EPC 766 EPC 865 EPC 1675 ML 70337 ML 700053 ML 700054 EPC 857 MDL 315 MDL 349 ML 70109 Granted Granted Under renewal Granted Granted Granted Granted Granted Granted Application Application Under renewal Under renewal Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Under renewal ML 70260 Under renewal 100% 100% 85%1 85%1 100% 15% 15% 5% 100% 100% 100% 100% 100% 100% 100% 100% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 1. Sumitomo Corporation elected to proceed with the Hillalong Joint Venture (“Hillalong JV”) following the completion of the $2.5m on Phase 1 another $2.5m on Phase 2a exploration program at Hillalong, resulting in Sumitomo solidifying a 15% interest in the Project. Completion of the first 10% transfer was completed on 13 April 2021 and a further 5% transfer was completed on 10 February 2022. Sumitomo Corporation is currently earning-in for a further 5% by spending $2.5m under Phase 2b of the Farm-In Agreement. Post the completion of Phase 2b, Sumitomo has the option to obtain an additional 5% (for a total interest of 20%) in the project by spending a further $2.5m on Phase 2b exploration. 2. Bowen Coking Coal Ltd acquired the Burton and Lenton tenements on 1 July 2022 through the acquisition of New Lenton Coal Pty Ltd. BOWEN COKING COAL ANNUAL REPORT 2022ANNUAL MINERAL RESOURCES STATEMENT 93 RESOURCES STATEMENT AS AT 30 JUNE 2022 (JORC 2012, MT) Project Broadmeadow East Bluff Tenement ML70257 ML80194, EPC1175, EPC1999 Cooroorah MDL 453 Lilyvale EPC 1687 &2157 Comet Ridge EPC 1230 MDL 444/MLA700062 & EPC830 EPC2141 &1824 Isaac River Hillalong Total Measured Resource Indicated Resource Inferred Resource Total % Holding 6 - - - 8 6 - 20 4 11 96 - 9 3 47 170 23 2 81 33 43 - 40 33 13 177 33 60 9 87 100% 100% 100% 15% 100% 100% 85%** 222* 412* *Includes 28Mt attributable to Stanmore Resources Ltd as part of the Lilyvale Joint Venture. ** Includes 13Mt attributable to Sumitomo Corporation following the completion of the Phase 1 farm in and Phase 2A farm in. See ASX release 11 December 2020 and 31 August 2021. RESOURCES STATEMENT AS AT 30 JUNE 2021 (JORC 2012, MT) Project Broadmeadow East Cooroorah Tenement ML70257 MDL 453 Lilyvale EPC 1687 &2157 Comet Ridge EPC 1230 MDL 444/MLA700062 & EPC830 EPC2141 &1824 Isaac River Hillalong Total Measured Resource Indicated Resource Inferred Resource Total % Holding 6 - - 8 6 - 20 4 96 - 9 3 21 133 23 81 33 43 - 22 33 177 33 60 9 43 100% 100% 15% 100% 100% 90%** 202* 355* *Includes 28Mt attributable to Stanmore Resources Ltd as part of the Lilyvale Joint Venture. **Includes 4Mt attributable to Sumitomo Corporation following the completion of the Phase 1 farm in. See ASX release 4 May 2020, 9 June 2020 and 11 December 2020. BOWEN COKING COAL ANNUAL REPORT 202294 MOVEMENTS: On 29 December 2021 the Company announced the completion of the Bluff Mine acquisition. See ASX release 29 December 2021 “Bluff Mine Update”. On 28 January 2022 Sumitomo farmed in a further 5% into Hillalong under Phase 2A. The Group regularly reviews its Mineral Resources and Reserves to assess their reasonableness, engaging suitably qualified competent persons where required. A summary of the governance and controls applicable to the Group’s Mineral Resources and Reserves processes is as follows: • Review and validation of drilling and sampling methodology and data spacing, geological logging, data collection and storage, sampling and analytical quality control; • Geological interpretation — review of known and interpreted structure, lithology and weathering controls; • Estimation methodology — relevant to mineralisation style and proposed mining methodology; • Comparison of estimation results with previous mineral resource models, and with results using alternate modelling methodologies; • Visual validation of block model against raw composite data; and • Peer review by independent consultants as required. This Annual Mineral Resources and Ore Reserves Statement: • is based on, and fairly represents, information and supporting documentation prepared by competent persons (referred to on the previous page); and • has been approved by Mr Troy Turner who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Turner, Managing Director and a fulltime employee of Xenith Consulting Pty Ltd, has sufficient experience that is relevant to the styles of mineralisation under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Turner has approved this Annual Mineral Resources and Ore Reserves Statement as a whole in the form and context in which it appears in this Annual Report. BOWEN COKING COAL ANNUAL REPORT 2022B O W E N C O K I N G C O A L bowencokingcoal.com.au 

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