De Grey Mining Limited
Annual Report 2020

Plain-text annual report

De Grey Mining Limited Contents Corporate Information ............................................................................................................................................................. 2 Chairman’s Letter ..................................................................................................................................................................... 3 Review of Operations ............................................................................................................................................................... 5 Directors’ Report .................................................................................................................................................................... 14 Audit Independence Declaration ........................................................................................................................................... 29 Consolidated Statement of Comprehensive Income ............................................................................................................. 30 Consolidated Statement of Financial Position ....................................................................................................................... 31 Consolidated Statement of Changes in Equity ....................................................................................................................... 32 Consolidated Statement of Cash Flows ................................................................................................................................. 33 Notes to the Consolidated Financial Statements ................................................................................................................... 34 Director’s Declaration ............................................................................................................................................................ 62 Audit Report ........................................................................................................................................................................... 63 ASX Additional Information ................................................................................................................................................... 68 Annual Mineral Resources Statement ................................................................................................................................... 70 Schedule of Interests in Mining Tenements .......................................................................................................................... 74 1 De Grey Mining Limited Corporate Information ABN 65 094 206 292 Directors Simon Lill (Chairman) Glenn Jardine (Managing Director) Andrew Beckwith (Technical Director & Operations Manager) Peter Hood AO (Non-Executive Director) Eduard Eshuys (Non-Executive Director Bruce Parncutt AO (Non-Executive Director) Company Secretaries Craig Nelmes (CFO) Patrick Holywell Registered Office and Principal Place of Business Level 3, Suites 24-26, 22 Railway Road SUBIACO WA 6008 Telephone: +61 (0)8 6117 9328 Facsimile: +61 (0)8 6117 9330 Postal Address PO Box 2023, SUBIACO WA 6904 Solicitors Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street PERTH WA 6000 Automic Group Level 2/267 St Georges Terrace Perth WA 6000 Telephone: 1300 288 664 Auditors Butler Settineri (Audit) Pty Ltd Unit 16, First Floor Spectrum Offices 100 Railway Road SUBIACO WA 6008 Internet Address www.degreymining.com.au Email Address admin@degreymining.com.au Stock Exchange Listing Australian Securities Exchange (ASX code DEG) Frankfurt Stock Exchange (FRA code WKN 633879) 2 De Grey Mining Limited Chairman’s Letter Dear Shareholder, My opening sentence last year stated that: “I am pleased to report that your company is in a significantly stronger position today than it was twelve months ago.” After a transformative year that statement is certainly truer today than last year, and it is with some pleasure that I present to you the De Grey Mining Ltd annual report for the year ended 30 June 2020 In looking back, I note the 2020 financial year commenced with the introduction of Hemiphaga – now referred to as Hemi. Hemi was one of seven new analogues of the Toweranna deposit that the De Grey geological team had identified through a substantive amount of work undertaken to piece together a large historical database, to interrogate it, and to then identify further intrusions. The Hemi introduction was followed up with excellent aircore results released in December 2019 - which did not appear to be noticed by the investment community. These in turn were followed up with the RC discovery results in February 2020 - which were noticed. During a difficult period for exploration capital, we undertook a $22M capital raising in July/August 2019 at what was a significant discount to the prevailing market price as well as a $5M placement in November 2019. It was important to the Board that the larger raise was concluded as an entitlements issue to ensure all shareholders had the opportunity to participate in the discounted raising. The Company received applications for approximately 61% of the entitlements, with the balance going to parties which had underwritten the issue. I am pleased to note that those shareholders which supported and believed in the Company through the entitlements issue, through to the discovery announcement and hopefully beyond, have been well rewarded. This issue provided for the acquisition of Indee Gold for A$15 million and consequently the amalgamation of the bulk of De Grey’s total land package. It was an ambitious transaction when De Grey first entered into it in 2017 with a market capitalisation of $3M, but it was the foundation that results in De Grey now holding one of the most strategic and valuable gold exploration land positions in WA. Our drilling contractor, Top Drill, and our staff, supported us early in January to enable a rig to commence operations during Pilbara’s wet season which in turn lead to the February discovery announcement. The number of drill rigs operating at Hemi has grown to six as we rapidly test the extent of mineralisation. This also occurred while restrictions were in place for the COVID-19 pandemic, so I commend and thank the discipline of the teams to safely maintain our high drilling productivity rates. We clearly are onto a major discovery at Hemi - the extent is such that at June 30 it had an overall scale of 2,000m north- south and 1,200m east-west. In the three months since Hemi has further grown to 3,000m by 2,000m with five different zones identified at this stage – Aquila, Brolga, Brolga South, Crow, and Falcon. We have not yet assessed the resource size, but clearly the discovery costs are expected to be well below industry average. We remain excited to the extent that the focus on Hemi has not allowed us to test mineralisation at the other intrusives identified at the start of the financial year, nor the additional 20+ magnetic anomalies that may prove to also be intrusives. Looking ahead, we will continue to use aircore, RC and diamond drilling to test the extent of Hemi and other intrusion targets in the Greater Hemi area such as Scooby, Shaggy and Antwerp. This drilling will largely form the basis for a maiden Resource Estimate for Hemi by the end of FY2021. A dedicated team is also being established to focus on regional exploration beyond the Greater Hemi area to ensure the substantial untested potential which exists here continues to be advanced. Major discoveries like Hemi are often considered as being overnight successes - the reality is usually vastly different. The complex process of consolidating, validating and interpreting the large historic datasets and designing an exploration program to prioritise and advance the many targets across our 1,500km2 Mallina Gold Project cannot be underestimated. 3 De Grey Mining Limited De Grey’s exploration team, led by Executive Director Mr. Andy Beckwith, Exploration Manager Mr. Phil Tornatora and Consulting Geologist Mr. Allan Kneeshaw, should be praised for completing this work which was an important pillar for the discovery of Hemi. I must also commend fellow Directors Mr Eduard (Ed) Eshuys and Mr Bruce Parncutt, who joined the Board during the year. They first engaged with me in late 2017, recognising the potential of the Mallina Gold Province and De Grey. They have always believed there would be a major discovery on our tenements, and in a bold move they led DGO Gold Limited to invest substantial capital into that belief – now totalling $43M. Their belief has certainly been vindicated and they continue to encourage further regional exploration activity in addition to the intense activity at Hemi. I should also acknowledge Mr Peter Hood as a valued and experienced Lead Independent Director who has provided me with valuable counsel as the Company has grown with the corresponding additional scrutiny on Board processes. At the end of the year I resigned as Executive Chairman following the earlier appointment of our new Managing Director, Mr Glenn Jardine. Glenn has a skill set that I do not. He is an experienced mining engineer and executive who has a track record of leading the development and operation of mines throughout Australia and overseas. He has made a fantastic contribution to the organisation already and will be a strong leader for De Grey’s next phase of development. Part of this transition also sees the Company searching for a new CFO who can support Glenn through studies, financing, construction and into operation. Our current CFO, Mr. Craig Nelmes, joined me when we commenced our time at De Grey in 2013. He is also aware of the need to transition the Company and is fully supportive of the process. I do thank him personally for his support to myself through the period, whilst noting that shareholders owe him a debt of gratitude. He has in recent times been ably supported by Mr Pat Holywell. We have also enjoyed the support of local aboriginal groups with whom we regularly engage as we move forward with ongoing heritage clearances and into negotiations for mining agreements. Our key pastoral lease holders have also been extremely helpful and supportive. Finally, I thank all staff and contractors, past and present, and perhaps particularly our geological staff, our field staff and our drilling contractors, Topdrill, Wallis Drilling and Bostech. There are other important contributors but without these groups we would not have experienced the market growth we have, which has also resulted in us entering the S&P ASX300 and the Van Eck GDXJ indices in recent weeks. Capital raising activity during this calendar year has seen the completion of two raisings – A$32M in April 2020 and a more recent A$100M in September 2020 post the balance date. We thank our brokers who supported us through these issues, Argonaut Securities, Bell Potter and Canaccord Genuity. It is extremely pleasing to note the quality of the institutional support that has now joined our register and which we hope will support us through to production and beyond. All new shareholders are welcomed. Finally, I give thanks to all of our shareholders for their support during the year. It is very satisfying to have been able to deliver the first step in our vision of establishing a plus Tier 1 asset at the Mallina Gold Project through the Hemi discovery and our existing resources. We believe we have the right elements in place to continue our momentum in FY2021. Yours sincerely, Simon Lill Chairman 4 De Grey Mining Limited Review of Operations De Grey Mining (“De Grey” or the “Company”) is engaged in gold exploration and development activities in one of the world’s strongest Tier 1 mining jurisdictions. The Company has built up a dominant position in the prospective Mallina Basin of the Pilbara Craton, located in the northwest of Western Australia. The Mallina Gold Project (“Project”) comprises a landholding more than 1,500km2, stretching across a contiguous tenement package running SW to NE of 150km and boasts greater than 200km of gold hosting shear zones and numerous intrusion targets (Figure 1). The project currently has a gold resource of 2.2Moz (37.44Mt at 1.8g/t Au) and the New Hemi discovery provides the opportunity to increase this resource base substantially. Figure 1: Mallina Gold Project During the year, De Grey’s exploration team has changed perceptions about the gold potential of the Pilbara with the major Hemi discovery, first discovered in shallow aircore drilling in December 2019. Hemi is a new intrusion style of gold deposit not previously recognised in the region. Hemi is a near surface, intrusion-hosted mineralisation which remains open in multiple directions and now has five separate resource areas within the overall Hemi deposit – Aquila, Brolga, Brolga South, Crow and Falcon. Within 10km radius of Hemi, the Greater Hemi region, the Company has a further four large intrusion targets – Shaggy, Scooby, Antwerp and Alectroenas. Each one of these targets have demonstrated gold mineralisation in limited shallow drilling, except Alectroenas which remains to be drill tested. The Project is located within a 45 minute drive of Port Hedland (Figure 1). The region is rich with critical infrastructure to support a future mining operation. Two major sealed highways run within 20km of the Hemi discovery. A gas pipeline runs within 20km of Hemi with a spur within 4km. A major 220kV electricity transmission line also lies within 20km of Hemi. The town of Port Hedland is a significant regional centre with excellent mining services and large airport facilities, as has the town of Karratha, 120km to the south west. Port Hedland is the largest economic export port in Australia. The Port is also opening up for import shipping which is expected to allow the direct landing of mining equipment into the region, which may provide substantial transport cost savings during development. Forward looking to the 2020-21 year ahead, the Company plans to: • Continue drilling to extend and define the overall footprint of the Hemi discovery, leading to a maiden Hemi Mineral Resource Estimate by the middle of calendar year 2021; Explore and define new mineralised intrusions within the Greater Hemi region; Explore the large prospective regional shear zones and other intrusion targets; Continue to expand the existing 2.2Moz regional resources; Improve site infrastructure, systems and communications to support planned activities; Complete and evaluate early stage project de-risking studies including metallurgy, environmental, hydrology and geotechnical aspects; and Pursue a corporate strategy to develop a Tier 1 Gold Project, defined as a project producing a minimum of 300,000 ounces per year with a minimum mine life of 10 years. • • • • • • 5 De Grey Mining Limited Hemi Gold Discovery Hemi is a major gold discovery made in the central area of the Mallina Gold Project. Hemi’s potential was first identified in July 2019 after a period of detailed evaluation of past exploration data and new geological concepts developed by De Grey’s exploration team. The “blind” discovery was subsequently made with shallow aircore drilling beneath 30m of barren transported cover sediments in December 2019. The initial discovery results include: • • 43m @ 3.7g/t Au from 36m in BWAC245, including 12m @ 9.0g/t (BWAC245) 25m @ 2.7g/t Au from 32m in BWAC258, including 8m @ 4.5g/t (BWAC258) Follow-up aircore drilling was undertaken from January 2020, returning substantial, thick and high-grade mineralisation on two sections 640m apart, confirming the potential for a major gold discovery. Results from this program included: • • • • 24m @ 7.5g/t Au from 126m, including 18m @ 8.6g/t (BWAC315) 49m @ 3.7g/t Au from 65m, including 18m @ 6.6g/t (BWAC309) 36m @ 4.0g/t from 39m, including 11m @ 8.9g/t (BWAC245) 24m @ 4.2g/t Au from 36m, including 10m @ 7.4g/t (BWAC312) RC and diamond drilling commenced during February 2020 with continued success and exciting broad zones of mineralisation initially defined at the Brolga and Aquila Zones. The program rapidly increased to six rigs, (two RC, two diamond rigs and two aircore) operating by June 2020. This growth in activity was all undertaken during the height of the lockdown uncertainty created by COVID-19. De Grey’s drilling strategy at Hemi has been to use shallow aircore drilling to discover and map out the strike orientation and footprint of the mineralised intrusion before closer spaced (80m x 80m) follow-up RC and diamond drilling is undertaken to defined the widths, grade and continuity of mineralisation. Infill RC and diamond resource definition drilling has commenced more recently on tighter 80m x 40m drill spacing to support the future estimation of a Mineral Resource for Hemi. The RC drilling is used to test to depth of approximately 200m and diamond drilling to extend at depth. Aircore drilling out from Hemi continues on wide spaced (640m to 320m) traverses and has resulted in the discovery of Crow and the more recent Falcon zone. By the end of the 2019-2020 financial year, a total of 67,500 metres of drilling had outlined a mineralisation footprint spanning 2,000m north-south and 1,200m east-west across three the Aquila, Brolga and Crow zones. Drilling subsequent to the end of the period, in total close to 150,000m, has extended this area to 3,000m north-south and 2,000m east-west. Mineralisation remains open in all directions, including at depth. Mineralisation at Hemi is characterised by consistent broad zones and of consistent grade with strong continuity along strike. Gold is intimately associated with extensive brecciated and altered diorite to quartz diorite intrusive rocks with the gold predominantly hosted within the strong sulphide development (pyrite and arsenopyrite). The Hemi style mineralisation is markedly different to all the other deposits within the Project with a distinct lack of quartz veining being an obvious difference. This style of mineralisation has not previously been encountered in the Pilbara and has greatly increased the gold prospectivity of the region. De Grey believes the Mallina Basin is the most prospective area within the Pilbara to host this style of intrusion hosted mineralisation and validates the Company’s tenure consolidation strategy underway since 2018. 6 Figure 2: Hemi – Overview De Grey Mining Limited Figure 3: Mallina Gold Project – Greater Hemi 7 De Grey Mining Limited Regional Exploration Since the announcement of the Hemi discovery at Aquila and Brolga in February 2020, the Company has been focussed on exploration in and around Hemi. There are multiple intrusion style targets in the Greater Hemi region (Figure 3) and an additional three major gold rich intrusion targets, Charity Well, Geemas and Toweranna (520,000oz resource), defined in the western portion of the project. In June 2020, De Grey completed a detailed aeromagnetic survey over the Greater Hemi region and reassessed the entire project data and defined over 20 new intrusion style targets across the regional tenement package (Figure 4). These initially require further on-ground investigation followed up by aircore and RC drilling. Figure 4: Airborne magnetic survey completed over the Project area Our dedicated exploration team are currently housed in De Grey’s two exploration camps. The Hemi team are based at the Wingina camp which was acquired in 2018 (Photo 1) and currently is being upgraded to cater for up to 72 personnel (Photo 2). The regional team are working from our Withnell camp that caters for up to a further 24 personnel. Additionally, De Grey has had success expanding the shear zone hosted resources that exist on its tenements, all of which remain open along strike and at depth. The Company is confident that new resources will exist across the shear zones, whilst also expanding the existing shear zone hosted resources. Photo 1: Wingina Camp near Indee Station – Before Commencement of an Upgrade 8 Photo 2: Wingina Camp near Indee Station – Upgrade in Progress De Grey Mining Limited Project Studies During 2019 and into the March quarter 2020, the Company further advanced economic studies based on a proposed open pit and underground mining operation at the Withnell deposit. Studies proposed the building of a new standalone centralised processing plant to be located at Withnell. The processing plant design had progressed to a combined 3Mtpa throughput based on 2Mtpa of oxide and free milling ores and 1Mtpa of sulphide rich ores. The process route was through an industry standard CIL processing plant with an additional parallel 1Mtpa sulphide and oxidation circuit. The finalisation of this study was deferred following the Hemi discovery. The Hemi region is now considered the likely location for a processing plant at a significantly larger scale than previously planned. Ongoing studies, including metallurgy, long lead time studies such as environmental, water and infrastructure requirements were commenced and are advancing during 2020. The Company anticipates releasing Scoping Study results in 2021 following the maiden Mineral Resource Estimate at Hemi. Hemi Metallurgy Initial metallurgical testwork on the Hemi discovery was undertaken during the June 2020 quarter, with excellent initial gold recoveries achieved from the first Brolga composite samples. Metallurgical recoveries from one of four samples taken from Brolga was reported in early July 2020 as follows: • Oxide: • Fresh: 93% based on CIL leach; and 96.3% based on sulphide flotation, oxidation and CIL leach Importantly, the testwork on fresh and transition mineralisation showed that high gold recoveries were achieved by flotation into a gold-rich concentrate. Flotation performance was easily achieved at a typical grind size, reagent regime and single flotation cell, producing a concentrate representing approximately 7% – 8% of the original feed volume. Optimisation of flotation performance will continue. The flotation concentrate was then delivered to a pressure oxidation circuit and achieved excellent recoveries for first round, un-optimised testwork. 9 De Grey Mining Limited Pressure oxidation (“POX”) is an industry accepted technology, with the early testwork at Hemi indicating that the scale, capital and operating costs of a POX circuit should be reasonable as: • • It is processing 7% – 8% of the ore throughput as a result of the flotation circuit; The gold to sulphur ratio of the concentrate is high, hence less sulphur requires oxidation for the same gold recovery – as compared to deposits that do not achieve high gold recoveries into a concentrate; • Oxidation of the gold-rich concentrate during testwork was rapid, which would reduce residence time; and • Hemi has good access to grid power and gas so power costs are not expected to be substantial. Further, in considering the overall plant capital cost, Hemi’s proximity to all necessary infrastructure is expected to result in significantly lower infrastructure costs compared to large scale, remote gold projects recently developed in Western Australia. This is expected to offset additional capital costs of a flotation plant and small POX circuit. The initial results are encouraging but not comprehensive as they were only of Hemi ore, with many other ores and ore grades to be tested. Further other methods of oxidation, such as Biox and Albion, will also be assessed during ongoing testwork. Some of these oxidation processes do not require pressure or high temperatures. Figure 5: Simplified testwork flowsheet for fresh ore (note: numbers subject to rounding) Previous testwork conducted on mineralisation from the regional resources outside Hemi indicates that the Hemi testwork flowsheet would be suitable to treat those deposits. The metallurgical testwork program is a long lead time required to further de-risking the project. The recent results remain to be optimised, however, the testwork demonstrates that at least one industry proven method of processing has been successful in achieving high gold recoveries. Regional Deposits and Mineral Resource Upgrade Drilling completed on deposits within the Project during the second half of calendar 2019 was used to update the Mineral Resource Estimate for the Project in April 2020. This resulted in an upgrade to 37.44Mt at 1.8g/t Au for 2.2 million ounces (previously 1.8Moz). The Mineral Resource does not include any drilling from the Hemi discovery or Greater Hemi area (Table 1). A first Mineral Resource Estimate for Hemi is expected to be completed by the end of FY2021. The Mineral Resource upgrade was built on updates to the resource models for the Withnell Resource – open pit and underground, Toweranna open pit and extensions to the Mallina resource. The resource includes the following categories: Measured & Indicated (49%) • Inferred (51%) • Oxide (30%) • Free Milling (29%) • Sulphide (41%) • 18.95Mt @ 1.7g/t Au for 1.1Moz 18.49Mt @ 1.9g/t Au for 1.1Moz 13.56Mt @ 1.5g/t Au for 0.64Moz 11.03Mt @ 1.8g/t Au for 0.62Moz 12.83Mt @ 2.2g/t Au for 0.90Moz 10 De Grey Mining Limited The resource increases were achieved across the following ore bodies: • • • • Withnell Total (↑ 40%) Withnell Underground (↑ 9%) Toweranna (↑ 47%) Mallina (↑ 91%) 7.49Mt @ 2.5g/t Au for 600,000oz 2.50Mt @ 3.9g/t Au for 317,000oz 7.35Mt @ 2.2g/t Au for 524,000oz 6.76Mt @ 1.4g/t Au for 307,000oz Table 1: Total Gold Mineral Resource Estimate as at March 2020 (JORC 2012) by Mining Centre Measured Indicated Inferred Total Area Type Withnell Mining Centre Wingina Mining Centre TOTAL Pilbara Gold Project Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Mt 0.98 0.66 1.63 2.68 0.40 3.08 3.66 1.06 4.71 Au g/t Au Oz Mt Au g/t Au Oz 1.8 1.7 1.8 1.8 1.6 1.7 1.8 1.6 1.7 57,500 34,800 92,300 152,100 20,500 172,700 209,700 55,400 3.49 8.23 11.72 1.84 0.68 2.52 5.33 8.91 265,000 14.24 1.5 1.9 1.8 1.5 1.6 1.5 1.5 1.9 1.7 Mt 2.35 9.87 166,800 496,700 663,500 12.24 87,600 34,900 122,500 254,300 531,700 786,000 2.21 4.04 6.25 4.57 13.90 18.49 Au g/t Au Oz Mt Au g/t Au Oz 1.4 2.4 2.2 1.1 1.3 1.2 1.2 2.1 1.9 102,300 766,600 870,200 74,900 168,400 243,200 177,200 935,000 1,113,500 6.82 18.75 25.58 6.74 5.12 11.86 13.56 23.87 37.44 1.5 2.2 2.0 1.5 1.4 1.4 1.5 2.0 1.8 326,600 1,298,200 1,626,100 314,500 223,800 538,400 641,200 1,522,000 2,164,500 All gold deposits are reported at a 0.5g/t Au cut-off grade except Wingina below -55mRL where a 1.0g/t Au cut-off was applied and Withnell below Pit shell 33, where a 2.0g/t Au cut-off was applied. The Leach Pad resource is reported at zero cut-off grade. The new resources are based on all drilling completed at each deposit up to the end of 31 December 2019. The open pit resources are quoted using a 0.5g/t lower cut-off grade and the Withnell and Toweranna underground resources using a lower cut-off grade of 2g/t. The resources at Mt Berghaus, Wingina, Amanda, Camel, Roe, Dromedary and Calvert remain unchanged. Following the Hemi discovery drilling was not continued on any of the regional resources from January 2020. Each deposit remains open and has potential for further growth. Regional exploration activities will recommence during FY2021. The value of the existing regional resources, as well as any additional discoveries, are significantly enhanced with a large- scale central processing facility at Hemi. In addition, the flowsheet that was successfully employed during the initial metallurgical testwork of Hemi is capable of treating each of the existing regional gold deposits based on metallurgical testwork done to date. Safety and Sustainability De Grey is committed to operating ethically, sustainably, and in accordance with best governance practices. We believe that responsible management of environment, social and government (ESG) elements will be good for our investors, the communities with whom we interact, and our staff. Accordingly, we are committed to identifying, assessing and mitigating ESG risks, and proactively seeking pathways that deliver positive and sustainable outcomes. In October 2019 the Company undertook a safety and risk review of its operations at the Mallina Gold Project which identified immediate and longer term action plans. In July 2020 and subsequent to the reporting date, Mr John Brockelsby was appointed as the Company’s head of Risk and Safety Management. Mr Brockelsby is working with the Managing Director and other senior staff to build stronger processes and drive positive outcomes across all areas of safety, culture and social responsibility areas. Drilling activities were completed during the current financial year with no reportable environmental incidents during the period. Environmental baseline studies to support a future mining development are underway. The Hemi area has undergone heritage clearances in the past. More detailed heritage surveys were planned for early 2020 but were postponed due to COVID-19 restrictions. These surveys are expected to take place in the first quarter of FY2021. Aboriginal negotiations regarding a Claim Wide Mining Agreement are in progress. De Grey maintains a strong working relationship with the owners of the Indee and Mallina Stations on which the Project is located. The Company has also commenced engagement with key groups within Port Hedland and plans to appoint a manager of Indigenous Relations and Communities in the near future. 11 De Grey Mining Limited Subsequent to the end of the reporting date, the Company put in place a formal ESG policy which outlines our approach and commitment in these areas. With respect to our Environmental responsibilities, we will: • Strive for continual improvement in our environmental performance by obtaining and following the best available advice; • Monitor and measure our environmental performance, and implement measures wherever possible to reduce the • impact our operations have on the environment; and Take all available steps to minimise our impact on the environment and remediate any effects in accordance with best practice. When addressing our social responsibilities, we will: • Respect the rights, interests, customs, culture and values of all those with whom we interact; • Proactively engage with impacted communities, and make every endeavour to obtain free, prior and informed consent for activities that we undertake; and Seek to demonstrate, in word and deed, a net positive impact resulting from our operations. • In addressing our governance responsibilities, we are: • Guided by the principles set out by respected institutions such as the Australian Securities Exchange, and the International Council of Mining and Metals; Committed to meeting the highest standards of ethical business practice; and Integrating sustainable development in our corporate strategy and decision-making procedures. • • Response to the COVID-19 pandemic From early 2020, the Company was closely monitoring the onset of the COVID-19 pandemic and made changes to a range of its operating procedures to ensure the safety of our people and our local communities. Shifts for our site-based team were extended from March to June in order to reduce risks associated with travel. All site personnel and visitors are tested for COVID-19 prior to departure and increased hygiene measures remain in place at site and in our Perth office. These measures have been successful in having no employee or contractor test positive to COVID-19. Corporate Capital Raisings and Completion of the Indee Gold Acquisition Capital raisings completed during FY2020 totalled $53 Million (before costs) and comprised of the following: • In July 2019, a placement of 60.3 million shares at $0.05 to raise $3 million. Shares were issued on a cum entitlement basis and were part of the overall raising at this time of $22.1 million; In August 2019, a rights issue on a 1 for every 1.28 shares basis at an offer price of $0.05 per share raising $19.1 million, resulting in the issue of 381 million new shares; In September 2019, a placement of 2.6 million shares at $0.05 raising $0.13 million; In December 2019, a placement of 100 million shares (First Tranche) and in March 2020 a placement of 11.1 million shares (Second Tranche) both at $0.045 per share to raise $5 million; and In May 2020, the First Tranche placement of 92.2 million shares at $0.28 to raise $25.8 million. • • • • A further $5.8 million was raised via the allotment of 30.7 million shares on the exercise of unlisted options at various exercise prices (between $0.10 and $0.35). In August 2019, the following non-cash share issues were also completed during the financial year: • An issue of 59 million shares at a deemed price of ~$0.051 (valued at $3 million) as well as a final cash payment of $9.7 million as final settlement of the Indee Gold Pty Ltd acquisition; • An issue of 3.8 million shares at a deemed price of $0.065 as part settlement of supplier invoices under agreement with Topdrill Pty Ltd; and • An issue of 3.95 million shares on exercise of performance rights to directors and key management personnel. 12 De Grey Mining Limited As at the date of this report and subsequent to the end of financial year, further shares have been allotted via share placements and the exercise of unlisted options, raising $94.7 million (before costs) as follows: • • • In July 2020, the Second Tranche placement of 19.2 million shares at $0.28 per share to raising $5.4 million; In September 2020, the First tranche placement of 73.1 Million shares at $1.20 per share raising $87.7 million; and $1.59 million raised via the allotment of 9.3 million shares on the exercise of unlisted options at various exercise prices (between $0.10 and $0.35) A Second Tranche of the placement, to raise an additional $12.3M was recently approved by shareholders at a general meeting held on 23 October 2020 will allow for shares to be placed to major shareholder, DGO Gold Limited and to Non- executive Director Mr Peter Hood. Changes to the Board Composition During July 2019, the Company announced changes to the composition of the De Grey board with the appointments of Mr Eduard Eshuys and Mr Bruce Parncutt OA, and the resignations of Mr Steve Morris (whom originally commenced in October 2014) and Mr Brett Lambert (whom originally commenced in October 2017). Both Mr Morris and Mr Lambert made significant contributions to the Company during their board tenure and are thanked for their time and contribution. On 20 March 2020, the Company announced the appointment of Mr Glenn Jardine as the Company’s Managing Director. On May 11, 2020, he commenced his role as Managing Director. Glenn is an experienced Mining Executive of 35 years and was appointed due to his strong background in project management, development and operations. As part of this restructure at the management level, Mr Simon Lill moved from the role of Executive Chairman to Chairman, with Mr Peter Hood taking on the role of Lead Independent Director. Farno McMahon Earn-in During the financial year, the Company earned an initial 30% interest in E45-2502. De Grey continues to earn into this tenement with the right to earn up to 75% under a joint venture agreement, with Farno McMahon, a 100% subsidiary of Novo Resources Corp. It is required to spend further funds prior to the end of the year to earn its 75% and expects to be drilling on that ground in the near future. Lag Gravels Agreement In the prior financial year (June 2019), a Letter of Intent was executed with Novo Resources Corp. granting them the right to explore across the 100% owned De Grey tenements for gold bearing lag gravels, and to then enter a Joint Venture at their election, with initial consideration of $1 million, broken into two parts representing the Company’s 100% ownership at that point. At the time of execution De Grey had not yet concluded the acquisition of Indee Gold Pty Ltd. This occurred in August 2019 when the final $300,000 was received on completion of the Indee Gold acquisition. Competent Person The information in this report that relates to exploration results is based on, and fairly represents information and supporting documentation prepared by Mr. Andrew Beckwith, a Competent Person who is a member of The Australasian Institute of Mining and Metallurgy. Mr. Beckwith is a consultant to De Grey Mining Limited. Mr. Beckwith has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resource and Ore Reserves”. Mr. Beckwith consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. The Information in this report that relates to Mineral Resources is based on information compiled by Mr Paul Payne, a Competent Person who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Payne is a full-time employee of Payne Geological Services. Mr Payne has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken 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 Payne consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. 13 Directors’ Report Your directors present their report on the consolidated entity comprising De Grey Mining Limited (“De Grey” or “the Company”) and its controlled entities (“the consolidated entity” or “Group”) for the financial year ended 30 June 2020. De Grey Mining Limited All amounts are expressed in Australian dollars unless otherwise stated. De Grey is a company limited by shares that is incorporated and domiciled in Australia. Directors The following persons were Directors of the Company during the whole of the financial year and up to the date of this report, except as otherwise indicated: Simon Lill Glenn Jardine (appointed 11 May 2020) Andrew Beckwith Peter Hood Eduard Eshuys (appointed 23 July 2019) Bruce Parncutt (appointed 23 July 2019) Steven Morris (resigned 22 July 2019) Brett Lambert (resigned 22 July 2019) Information on Directors Simon Lill, BSc MBA Executive Chairman Mr Lill was appointed to the board in October 2013 and became Executive Chairman in 2014. He has previously worked with Anaconda Nickel Limited through engineering studies, financing and construction phases of the Murrin Murrin Nickel mine. He also has extensive experience since the 1980’s with ASX listed companies, spanning small cap companies to larger concerns, involving restructuring, corporate, compliance, marketing, company secretarial and management activities, resulting in his role at De Grey Mining Ltd. During the past three years Mr Lill has also served as a Director of the following listed companies: Date appointed 18 May 2011 2 September 2013 29 March 2018 Company Finexia Financial Group Limited (formerly Mejority Capital Limited) Purifloh Limited XPD Soccer Gear Group Limited Date ceased 25 November 2019 - - Interest in shares and options: 13,739,063 ordinary fully paid shares 130,566 options over ordinary shares in De Grey Mining Limited 500,000 performance rights Glenn Jardine, BE (Mining) FAusIMM Managing Director Mr Jardine was appointed in May 2020. He is an experienced mining executive of 35 years with direct experience in growing resource companies from early stage exploration through to multi-operation entities, and including taking projects through feasibility studies, equity funding, debt financing, project development and operations. His experience includes Project Manager & General Manager of the Henty Gold Mine in Tasmania for Goldfields Ltd; Project Manager of the Emily Ann & Maggie Hays nickel mines; General Manager New Business, Chief Operating Officer & Managing Director for Lion Ore Australia. He has more recently been Chief Operating Officer of Azure Minerals Limited. Commodity experience includes precious metals, base metals and bulk commodities across underground and open pit operations. Processing methods utilised at these projects and operations include CIP/CIL, DMS, sulphide flotation, BIOX, pressure oxidation and SX/EW. 14 Projects developed have received Australian State and Federal recognition for environmental best practice and health and safety and human resources systems. During the past three years Mr Jardine has not served as a Director of any other listed companies. De Grey Mining Limited Interest in shares and options: 140,846 performance rights Andrew Beckwith, BSc Geology, Aus IMM Technical Director & Operations Manager Mr Beckwith was appointed to the board in October 2017, having commenced his time with De Grey as a Technical Consultant in February 2016. He is a successful and experienced exploration geologist who has previously held senior technical roles with AngloGold Ashanti, Acacia Resources, Helix Resources, Normandy NFM, North Flinders Mines, BP Minerals Australia, and Westgold Resources. At Westgold, Mr Beckwith initially held the role of exploration manager before appointment as Managing Director. Additionally, Mr Beckwith was an Executive director of Bulletin Resources Limited until June 2014. During his time at Westgold, he was intimately involved in the Explorer 108 Pb-Zn-Ag and the Au-Cu Rover 1 (1.2Moz) discoveries in the Northern Territory as well as the acquisition of the Central Murchison Gold Project located in Western Australia. During the past three years Mr Beckwith has also served as a Director of the following listed companies: Company Carnavale Resources Limited Date appointed 29 July 2014 Date ceased - Interest in shares and options: 7,031,668 ordinary fully paid shares 1,163,207 options over ordinary shares in De Grey Mining Limited 400,000 performance rights Peter Hood AO, BE(Chem), MAusIMM, FlChemE, FAICD Non-executive Director & Lead Independent Director Mr Hood was appointed to the board on 19 November 2018. Mr Hood, a Chemical Engineer, has had a distinguished career in the Australian Mining and Chemical Industries. He held the position of Senior Production Engineer at the Kwinana Nickel Refinery from 1971 to 1981, then Mill Superintendent of the WMC Kambalda Nickel and Gold Operations between 1982 to 1985. In 1985, he joined Coogee Chemicals Pty Ltd in the position of General Manager and then as their CEO between 1998 and 2005. He then held the position of CEO of Coogee Resources Ltd before retiring in 2008. Through that period he was part of the management team that oversaw significant growth in Coogee Chemicals. In 2020, Mr Hood was recognised as Officer in the Order of Australia in the Australia Day Honours List for distinguished service to business and commerce at the state, national and international level, and to the resources sector. During the past three years Mr Hood has also served as a Director of the following listed companies: Company Cue Energy Resources Limited GR Engineering Limited Matrix Composites and Engineering Limited Date appointed 23 February 2018 10 February 2011 15 September 2011 Date ceased - - - Interest in shares and options: 4,000,000 ordinary fully paid shares 52,227 options over ordinary shares in De Grey Mining Limited Committees Audit & Risk Committee (appointed 29 August 2019) Remuneration & Nomination Committee (appointed 29 August 2019) 15 De Grey Mining Limited Eduard Eshuys, BSc, FAusIMM, FAICD Non-executive Director Mr Eshuys was appointed to the board on 23 July 2019. Mr Eshuys is a highly experienced and well credentialled geologist with over 40 years exploration and company management experience in Australia. In the late 1980s and early 1990s he led the teams that discovered the Plutonic, Bronzewing and Jundee gold deposits, and the Cawse Nickel Deposit. He has also had involvement in the Maggie Hays and Mariners nickel discoveries in the 1970’s. He was the Managing Director and CEO of St Barbara Limited from July 2004 to March 2009. During this time St Barbara Limited grew substantially as a gold producer. During the past three years Mr Eshuys has also served as a Director of the following listed companies: Company DGO Gold Limited* NTM Gold Limited Date appointed 15 July 2010 26 March 2019 Date ceased - - As at the date of this report, DGO Gold Ltd holds 193,577,703 ordinary fully shares in De Grey Mining Limited (representing 15.13%). Interest in shares and options: Nil ordinary fully paid shares 52,227 options over ordinary shares in De Grey Mining Limited Committees Remuneration & Nomination Committee (Chairman, appointed 29 August 2019) Audit & Risk Committee (appointed 29 August 2019) Bruce Parncutt AO, BSc, MBA Non-executive Director Mr Parncutt was appointed to the board on 23 July 2019. Mr Parncutt is currently Chairman of investment banking group Lion Capital and has had a career spanning over 40 years in investment management, investment banking and stock broking, where he has previously held roles as Managing Director of McIntosh Securities, Senior Vice President of Merrill Lynch, Director of Australian Stock Exchange Ltd. In 2016, Mr Parncutt was recognised as Officer in the Order of Australia in the Queen’s Birthday Honours List for distinguished service to the community as a philanthropist (particularly in arts and education) and as an advocate and supporter of charitable causes, and to business and commerce. He is currently a member of The Australian Ballet Board and a Trustee of the Helen MacPherson Smith Trust. During the past three years Mr Bruce Parncutt has also served as a director of the following listed companies: Company DGO Gold Limited Date appointed 23 May 2018 Date ceased - As at the date of this report, DGO Gold Ltd holds 193,577,703 ordinary fully shares in De Grey Mining Limited (representing 15.13%). Interest in shares and options: Nil ordinary fully paid shares 52,227 options over ordinary shares in De Grey Mining Limited Committees Audit & Risk Committee (Chairman, appointed 29 August 2019) Remuneration & Nomination Committee (appointed 29 August 2019) 16 De Grey Mining Limited Steven Morris, Dip Fin Mkts Non-executive Director Mr Morris resigned from the board on 22 July 2019. Committees Remuneration & Nomination Committee (appointed 26 July 2018, resigned 22 July 2019) Brett Lambert, B.AppSc (Mining Engineering), MAICD Non-executive Director Mr Lambert resigned from the board on 22 July 2019. Committees Remuneration & Nomination Committee (Chairman, appointed 26 July 2018, resigned 22 July 2019) Company Secretaries The following persons acted as Company Secretary of the Company during the whole of the financial year and up to the date of this report: Craig Nelmes, BBus Mr Nelmes is an Accountant who joined De Grey in October 2013 and has over 25 years experience in finance, secretarial, governance, financial systems and accounting services to the mining sector in Australia and overseas. His experiences include over seven years with International Accounting firm Deloitte, nine years with a multi-national resource’s entity and most recently ten years with Corporate Consultants Pty Ltd, a Company providing accounting, secretarial and administrative services to ASX and TSX listed entities. Patrick Holywell, FGIA GradDipCA GAICD BCom Patrick Holywell is a Chartered Accountant who joined De Grey in July 2018. He has over 15 years of experience in corporate governance, finance and accounting including employment with Deloitte and Patersons Securities Ltd. Mr Holywell has been employed by and acted as company secretary, CFO and/or director of a number of companies in various sectors. Principal Activities The principal activity of the consolidated entity during the course of the year was exploration and development activities at the Mallina Gold Project (“MGP”) , 80 kms south west of Port Hedland in the Pilbara region of Western Australia. De Grey currently controls a considerable tenement package comprising over 1,500km2. The tenement package is highly prospective for gold, other precious metals and also comprises significant base metals resources (Zn-Ag-Pb) as well as lithium prospects. In August 2019, the settlement of the Indee Gold Pty Ltd acquisition consolidated De Grey’s ownership of the MGP. Over the last four (4) years the MGP resource base has grown six (6) fold from 346koz @ 1.6g/t Au in February 2016 to 2.2Moz @ 1.8g/t Au as at April 2020. During the current financial year, a new style of intrusion-related gold mineralisation was discovered and an initial seven new targets identified for testing. The first of these to be tested was the Hemi gold prospect, which has since delivered impressive exploration results and confirmed gold mineralisation across numerous defined zones. Exploration activity is now accelerating with the objective of delivering significant resource growth. 17 De Grey Mining Limited Financial Review The consolidated loss after tax for the year ended 30 June 2020 was $3,976,002 (2019: $2,009,130). Earnings per share The basic loss per share for the year ended 30 June 2020 was 0.41 cents per share (2019: 0.50 cents per share). Dividends No dividends were paid or declared during the financial year. No recommendation for payment of dividends has been made. Significant changes in state of affairs There were no significant changes in the nature of the activities of the Group during the period, other than those included in the Key Highlights within the Review of Operations. Matters subsequent to the end of the financial year There has been no matters or circumstances occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect the operations of the Group, the result of those operations, or the state of affairs of the Group in future financial years, other than: • On 14 July 2020, the Company completed a placement of 19.2 Million shares at a price of $0.28 per share to raise $5.4 Million (before costs of raising). This represented the 2nd tranche of the placement announced on 28 April 2020 after shareholder approval was received at a General Meeting held on 10 July 2020, for related parties DGO Gold Limited (12.2 Million New Shares) and Mr. Peter Hood (1 Million New Shares) to participate. • On 29 July 2020, the Company completed an allotment of 450,454 unlisted option, zero priced exercise and expiring 29 July 2022 (“ZEPO’s”). These were issued to directors Mr. Andrew Beckwith (163,207 ZEPO’s), Mr. Simon Lill (130,566 ZEPO’s) and Messrs Eduard Eshuys, Peter Hood and Bruce Parncutt (52,227 ZEPO’s each), after shareholder approval was received at a General Meeting held on 10 July 2020, • On 18 September 2020, the Company completed a placement of 73.1 Million shares to sophisticated, professional and institutional investors including clients of Argonaut Securities Pty Limited, Canaccord (Genuity) Limited and Bell Potter Securities Pty Ltd at a price of $1.20 per share to raise $87.72 Million (before costs of raising). This represented the 1st tranche of the placement announced on 14 September 2020, with the 2nd tranche of 10.3 Million shares to raise a further $12.36 Million subject to shareholder approval of related party participation by DGO Gold Limited (12 Million New Shares) and Mr. Peter Hood (300,000 New Shares). • On 18 September 2020, an allotment was made of 140,846 Performance rights (“rights”) to Mr. Glenn Jardine after shareholder approval was received at a General Meeting held on 10 July 2020, and he had completed his employment probation period. The rights represent the long-term incentive component of Mr. Jardine’s remuneration with respect to his first year of employment. • Since the reporting date, a total of 9,637,047 unlisted options have been exercised, at various exercised prices between $0.10 and $0.35, raising a total of $1,588,621. 18 De Grey Mining Limited Likely developments and expected results De Grey seeks to maximise shareholder value through its ongoing exploration and development work at The Mallina Gold Project (“MGP”). The Project consists of 100% owned tenements as well as tenements the subject of a farm in agreement. The Company expects to continue its drilling program at the recent Hemi Gold Discovery which currently comprises five key zones, Aquila, Brolga, Brolga South, Crow and Falcon. Hemi is a mineralised intrusion that had never previously been drilled. The Company has identified a further four intrusions in the Hemi corridor, of which three are known to contain mineralisation (Antwerp, Scooby, Shaggy), as well as a further two to the west of the Project tenements, being Charity Well and Geemas. These are additional to Toweranna, which is also a mineralised intrusion. Additionally, De Grey has identified greater than 20 new magnetic features that may be additional intrusion targets. The Company will: • • Continue to drill at Hemi and within its corridor to discover the extents of the mineralisation whilst also infilling the discovery to provide a resource by the middle of 2021; Explore the other known mineralised targets through aircore drilling initially, and followed up by RC and diamond drilling where warranted; • Ongoing identification of possible new intrusion targets through a combination of geophysics, geochemistry and aircore drilling; and • Regional drilling along existing shear zone structures. The Company has an aspirational goal of achieving a Tier 1 scale of mineralisation within the MGP. 19 De Grey Mining Limited Remuneration Report (Audited) The remuneration report is set out under the following headings: A. Key Management Personnel B. Remuneration policy C. Service agreements D. Details of Remuneration E. Securities Based Compensation F. Other Transactions and Balances with Key Management Personnel The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. A. Key management personnel Names and positions held by the Company’s key management personnel (“Key Management Personnel”) in office at any time during the financial year and up to the date of this annual report are: Key Management Personnel Mr Simon Lill Mr Glenn Jardine Mr Andrew Beckwith Mr Peter Hood AO Mr Eduard Eshuys Mr Bruce Parncutt AO Mr Steven Morris Mr Brett Lambert Mr Craig Nelmes Mr Patrick Holywell Position Chairman (formerly Executive Chairman until 11 May 2020) Managing Director (appointed 11 May 2020) Technical Director & Operations Manager Non-Executive Director Non-Executive Director (appointed 23 July 2019) Non-Executive Director (appointed 23 July 2019) Non-Executive Director (resigned 22 July 2019) Non-Executive Director (resigned 22 July 2019) Company Secretary & CFO Company Secretary Except as noted, the named persons held their current position for the whole of the financial year and/or at the date of this report. B. Remuneration policy The remuneration policy of De Grey Mining Limited has been designed by the board taking into consideration the stage of development of the Group and the activities undertaken. The guidance is to align key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component or fee for service (where that is applicable) and offering specific long-term incentives based on key performance areas affecting the Group’s financial results or operational milestones. The board of De Grey Mining Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the Group. From time to time when reviewing remuneration, the Company may also source external advice to assist with salary setting and determination of other benefits, including short term and long-term incentive plans. The remuneration policy has been tailored to increase the direct positive relationship between shareholders’ investment objectives and director and key management personnel performance. Currently, this is facilitated through the issue of options and/or performance rights to the majority of key management personnel to encourage the alignment of personal and shareholder interests. The company believes this policy will be effective in increasing shareholder wealth. 20 De Grey Mining Limited Executive remuneration The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework has the following components: • Base salary (which is based on factors such as length of service, performance and experience) and (where applicable) employer contributions to superannuation; • Consulting fees for executives providing services under a services contract; • • Short-term performance incentives taking into consideration executive and/or Company performance indicators that the Company may set from time and other matters that it deems appropriate; and Long-term incentives through participation in the Performance Rights (“PRP”) and/or Employee Option (“EOP”) Plans of De Grey Mining Limited and as approved by the Board. Non-executive Directors’ remuneration The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Fees for non-executive directors are not linked to the performance of the Group. However, to align Directors’ interests with shareholder interests, the non-executive directors may receive short term performance incentives and longer-term performance incentives as approved by shareholders. 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 currently $700,000. The annual remuneration for each non-executive director was set in the range of $36,000 - $48,000 per annum for the 2019- 2020 financial year. These fees have been determined by the Board of the Company, taking into consideration factors such as the market rates of industry peer companies and the current level of activity. Where there is a significant change in the size and scale of Company activities these annual fees will be reviewed. Where approved and at the request of the board, any of the Non-Executive Directors may from time to time be required to fulfil certain executive functions. Use of remuneration consultants The Board from time to time engages the services of external consultants to advise on the remuneration policy and to benchmark director and key management personnel remuneration against comparable entities so as to ensure that remuneration packages are consistent with the market and are appropriate for the organisation. The Group employed the services of a remuneration consultant during the financial year ended 30 June 2020. 21 De Grey Mining Limited Performance Rights (PRP) and Employee Option Plans (EOP) of De Grey Mining Limited The PRP and EOP were last approved by Shareholders at the 2017 and 2018 Annual General Meetings respectively. All Directors, full and part time employees, as well as key consultants of De Grey Mining Limited are eligible to participate in each Plan. Any issue of Rights or Options to Directors under either Plan will be subject to Shareholder approval pursuant to the provisions of the ASX Listing Rules and the Corporations Act 2001. The Directors consider that collectively the PRP and EOP represent an appropriate method to: • Reward Directors, Key management personnel and employees for their past performance; • • • • • Provide long term incentives for participation in the Company’s future growth; To motivate and retain Directors, KMP and senior employees; Establish a sense of ownership in the Company for the Directors and employees; Enhance the relationship between the Company and its employees for the long-term mutual benefit of all parties; and Enable the Company to attract high calibre individuals who can bring specific expertise to the Company. Voting on the Remuneration Report - 2019 Annual General Meeting The Company received approximately 98.3% of “yes” votes on its remuneration report for the current financial year (2018: 99.6%). C. Executive service agreements Remuneration and other terms of employment for the executive directors and other KMP are formalised in employment or service agreements. The major provisions of the agreements relating to remuneration for the year ended 30 June 2020 are set out in the table below: Name Agreement Simon Lill¹ Glenn Jardine² Andrew Beckwith Craig Nelmes Patrick Holywell Service Employment Employment Service (100%) Service Base Salary /Fees (p.a.) $156,000 $362,500 $250,000 $226,008 - STIP/LTIP - $150,000 - - - Consulting/Hr Duration Notice Period Termination - - - - $120 Ongoing Ongoing Ongoing Ongoing Ongoing 3 months 3 months 3 months 3 months 1 month 6 months 6 months 6 months 6 months 1 month ¹Mr. Lill moved from the role of Executive Chairman to Chairman, as announced on 11 May 2020, to coincide with the appointment of Managing Director – Glen Jardine. ²Mr. Jardine commenced employment on 4 May 2020 and appointed to the board as Managing Director on 11 May 2020. The salary package includes Short-term incentive plan “STIP” ($50,000) and Long-Term incentive plan “LTIP” ($100,000) on the basis of key performance indicators agreed with the board. ³Mr. Nelmes Executive Service arrangements were 75% of his time devoted to the Company and moved to 100% from 1 Feb 2020. 22 D. Details of Remuneration Details of the remuneration of the directors, the key management personnel of the Group (as defined in AASB 124 Related Party Disclosures) and specified executives of De Grey Mining Limited and the Group are set out in the following tables. The key management personnel of the Group are the Directors of De Grey Mining Limited and the Company Secretaries. De Grey Mining Limited Short-term Post- employment Share based payments Total Salary or Consulting Fees $ Bonus⁷ $ Other $ Superannuation Options Performance rights $ $ $ $ % % of remuneration performance- based Directors Simon Lill 2020 2019 Glenn Jardine2 2020 Andrew Beckwith 156,000 156,000 10,000 25,000 100,000¹ - - - - 42,600 32,414 118,627 298,414 342,227 55,175 - 5,242 - - 60,417 - - - - - - - - - - 2020 2019 228,324 223,933 10,000 25,000 Peter Hood³ 2020 2019 Bruce Parncutt⁴ 2020 Eduard Eshuys⁴ 2020 Steven Morris⁵ 2020 2019 Brett Lambert⁵ 2020 2019 Sub-total Directors 43,836 27,397 41,096 41,096 3,000 36,000 3,653 42,922 - - - - - - - - 22,641 21,274 4,164 2,603 3,904 10,000⁴ 3,904 9,000⁵ - 12,000⁵ - - - 347 4,078 - 42,600 55,238 164,817 316,203 477,624 - - - - - 10,650 - 10,650 - - - - 20,714 61,806 13,809 41,204 48,000 30,000 45,000 55,000 32,714 108,456 29,809 98,854 2020 2019 572,180 486,252 20,000 50,000 131,000 - 40,202 27,955 - 106,500 122,176 386,454 885,557 1,057,161 Other Key management personnel Craig Nelmes⁶ 2020 2019 200,505 169,698 10,000 - Patrick Holywell4 2020 2019 90,520 60,690 Total key management personnel compensation 863,205 716,640 32,000 50,000 2,000 - 2020 2019 131,000 - - - - - 40,202 27,955 36,480 10,650 19,448 71,176 266,433 251,522 18,240 4,260 54,720 121,410 - - 110,760 64,950 141,624 457,630 1,262,750 1,373,633 11% 54% 0% 17% 49% 0% 0% 0% 0% 63% 67% 46% 52% 21% 33% 16% 7% ¹Mr. Lill received the payment in lieu of termination of his Executive Services agreement on 30 June 2020. ²Mr Jardine commenced employment on 4 May 2020, and appoint to the board on 11 May 2020. ³Mr Hood was appointed 16 November 2018. ⁴Mr. Parncutt and Mr Eshuys were appointed 23 July 2019. Mr. Eshuys received an additional fee for assistance with the August 2019 capital raising. ⁵Mr Lambert and Mr Morris resigned 22 July 2019, and received a payment in lieu of notice. ⁶Mr Nelmes service agreement was entered into from 1 May 2018 on basis of 75% and 100% from 1 Feb 2020. ⁷In December 2019, the board approved each discretionary cash bonus on the basis of past performance and as recommended by the Remuneration Committee. 23 Shareholdings of Key Management Personnel De Grey Mining Limited Opening Balance 1 July 2019 No. 6,983,333 - 6,091,668 1,000,000 - - 2,333,334 - 3,641,316 - 20,049,651 Directors Simon Lill Glenn Jardine1 Andrew Beckwith Peter Hood Bruce Parncutt2 Eduard Eshuys2 Steven Morris³ Brett Lambert³ Other executives Craig Nelmes Patrick Holywell Total Received on exercise of rights &/or options No. 800,000 - Purchases (disposals) during the year Other changes Closing Balance during the year 30 June 2020 No. No. No. 5,455,730 - 1,200,000 340,000 - - - - - 2,000,000 - - - - - - - - - - (2,333,334)3 -3 500,000 - 556,937 150,000 - - 2,500,000 8,502,667 (2,333,334) 13,239,063 - 7,631,668 3,000,000 - - - - 4,698,253 150,000 28,718,984 1Mr Jardine was appointed 11 May 2020. 2Mr Parncutt and Mr Eshuys were appointed 23 July 2019. ³Mr Morris and Mr Lambert both resigned as directors on 22 July 2019. 4Performance rights which vested 22 August 2019 with no consideration payable. 24 Option-holdings of Key Management Personnel Opening Balance 1 July 2019 Options acquired as compensation Purchases (disposals) during the year Exercised/other changes during the year Closing Balance 30 June 2020⁴ No. No. No. No. No. De Grey Mining Limited Directors Simon Lill Glenn Jardine1 Andrew Beckwith Peter Hood Bruce Parncutt2 Eduard Eshuys2 Steven Morris³ Brett Lambert³ Other executives Craig Nelmes Patrick Holywell 1,000,000 - 2,000,000 - - - 250,000 250,000 750,000 100,000 - - - - - - - - 600,000 300,000 Total 4,350,000 1Mr Jardine was appointed 11 May 2020. 2Mr Parncutt and Mr Eshuys were appointed 23 July 2019. ³Mr Morris and Mr Lambert both resigned as directors on 22 July 2019. ⁴All remaining options were fully vested and exercisable as at 30 June 2020. 900,000 - - - - - - - - - 50,000 50,000 - - - - - - (250,000)3 (250,000)3 - - (500,000) 1,000,000 - 2,000,000 - - - - - 1,350,000 450,000 4,800,000 Performance rights of Key Management Personnel Opening Balance 1 July 2019 No. 1,500,000 - 2,000,000 - - - 750,000 500,000 900,000 - 5,650,000 Directors Simon Lill Glenn Jardine1 Andrew Beckwith Peter Hood Bruce Parncutt2 Eduard Eshuys2 Steven Morris3 Brett Lambert3 Other executives Craig Nelmes Patrick Holywell Total 1Mr Jardine was appointed 11 May 2020. 2Mr Parncutt and Mr Eshuys were appointed 23 July 2019. ³Mr Morris and Mr Lambert both resigned as directors on 22 July 2019. ⁴All remaining performance rights as at 30 June 2020 were unvested. Rights acquired as compensation Rights exercised Other changes Closing Balance during the year during the year 30 June 2020⁴ No. No. No. No. (800,000) - (1,200,000) - - - - - (500,000) - (2,500,000) (200,000) - (400,000) - - - (750,000)3 (500,000)3 (100,000) - 500,000 - 400,000 - - - - - 300,000 - (1,950,000) 1,200,000 - - - - - - - - - - - 25 De Grey Mining Limited E. Securities based compensation - options The Company granted 900,000 (2019: 2,850,000) options over unissued ordinary shares during the financial year to Directors and other key management personnel as part of their remuneration, as detailed in the table below: Grant Date Expiry Date Exercise Price (cents) Value per option at grant date (cents) Granted Number Exercised Number Vesting Date Number Vested at end of year 2020 Craig Nelmes 12 March 2020 12 March 2022 Patrick Holywell 12 March 2020 12 March 2022 2019 Simon Lill Andrew Beckwith Steve Morris Brett Lambert Craig Nelmes Pat Holywell 17 Oct 2018 31 May 2021 17 Oct 2018 31 May 2021 17 Oct 2018 31 May 2021 17 Oct 2018 31 May 2021 17 Oct 2018 31 May 2021 17 Oct 2018 31 May 2021 35.0 35.0 30.0 30.0 30.0 30.0 30.0 30.0 6.08 6.08 4.26 4.26 4.26 4.26 4.26 4.26 600,000 300,000 1,000,000 1,000,000 250,000 250,000 250,000 100,000 - - - - - - - - 12 March 2020 12 March 2020 600,000 300,000 17 Oct 2018 1,000,000 17 Oct 2018 1,000,000 17 Oct 2018 17 Oct 2018 17 Oct 2018 17 Oct 2018 250,000 250,000 250,000 100,000 Options granted to Key management personnel under the shareholder approved Employee Option plans as compensation for their past performance. There are no performance related conditions attached to any of these issued options and they were all issued for nil consideration. F. Securities based compensation – performance rights There were no performance rights granted to directors and key management personnel as part of compensation during the year ended 30 June 2020 (30 June 2019: nil). G. Other transactions and balances with Key Management Personnel There were no other transactions and balances with key management personnel. ----------- End of Audited Remuneration Report ----------- 26 De Grey Mining Limited Directors’ and Committee Meetings The number of meetings of the Company’s Board of Directors and its committees held in the 12 months to 30 June 2020 and the number of meetings attended by each Director are as per the following table: Directors Meetings Audit & Risk Committee1 Remuneration & Nomination Committee2 Eligible Attended Eligible Attended Eligible Attended Simon Lill Glenn Jardine3 Andrew Beckwith Peter Hood1,2 Eduard Eshuys1,2 Bruce Parncutt1,2 Steven Morris1,2 Brett Lambert1,2 14 3 14 14 14 14 - - 14 3 14 14 14 14 - - n/-a n/-a n/-a 1 1 1 - - -n/a -n/a -n/a - 1 - - - -n/a -n/a -n/a 1 1 1 - - -n/a -n/a -n/a 1 1 1 - - 1On 22 July 2019, both Mr Lambert and Mr Morris resigned. On 29 August 2019, the full board of Company appointed Mr Peter Hood, Mr Eshuys and Mr Parncutt to the Audit & Risk Committee, with Mr Parncutt as its Chairman. 2On 22 July 2019, both Mr Lambert and Mr Morris resigned. On 29 August 2019, the full board of Company appointed Mr Peter Hood, Mr Eshuys and Mr Parncutt to the Remuneration & Nomination Committee, with Mr Eshuys as its Chairman. 3Mr Jardine was appointed on 11 May 2020. Share Options and Performance rights At the date of this report there are 10,757,454 unissued ordinary shares in respect of which options are outstanding and 1,450,000 performance rights outstanding. Unlisted options Unlisted options Unlisted options Unlisted options Unlisted options Performance rights Number 750,000 3,050,000 2,000,000 4,507,000 450,454 1,450,000 Exercise Price 10 cents 30 cents 10 cents 35 cents Nil cents N/A Expiry Date 31 October 2020 30 May 2021 13 December 2021 12 March 2022 29 July 2022 30 November 2022 During the financial year 19,000,000 options were issued, 30,655,953 options were exercised and 45,833,333 options expired. No performance rights were issued, 3,950,000 were exercised and 1,300,000 expired. Since the end of the financial year, a further 450,454 options have been issued and 9,537,047 options have been exercised. No person entitled to exercise options and/or performance rights had or has any right by virtue of the option to participate in any share issue of the company or a right to vote at a shareholder meeting. Environmental Regulation The Group is subject to environmental regulation in respect to its exploration activities. The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance with all environmental legislation. The directors of the Group are not aware of any breach of environmental legislation for the year under review. Risk Management The board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities are aligned with the risks and opportunities identified by the board. Given the size and scale of its current operations, the board and key management personnel as a group periodically assess risks and develop strategies to mitigate the impact of any perceived risks. The board endeavours to identify potential risks when carrying out strategy planning and budgeting tasks and assessment and monitoring through its board meetings. 27 De Grey Mining Limited Insurance of Directors and Officers During the financial year, De Grey Mining Limited paid a premium to insure the directors and secretary of the Company. The total amount of insurance contract premiums paid is confidential under the terms of the insurance policy. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Company, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Non-Audit Services The following non-audit services were provided by the Group’s auditor, Butler Settineri (Audit) Pty Ltd, or associated entities (refer note 24). The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non- audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • All non-audit services have been reviewed by the board to ensure they do not impact the impartiality and objectivity of the auditor; and • None of the services undermine the general standard of independence for auditors. Butler Settineri received or are due to receive the following amounts for the provision of non-audit services: Tax compliance services Proceedings on behalf of the company 2020 $ 3,675 2019 $ 2,800 As at the date of this report there are no leave applications or proceedings booked on behalf of De Grey Mining Limited under section 237 of the Corporations Act 2001. Auditor’s Independence Declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 18. This report is made in accordance with a resolution of the Directors Simon Lill Chairman Perth, 30 September 2020 Bruce Parncutt Chairman of the Audit & Risk Committee 28 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of De Grey Mining Limited for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been: a) No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) No contraventions of any applicable code of professional conduct in relation to the audit. The declaration is in respect of De Grey Mining Limited and the entities it controlled during the year. BUTLER SETTINERI (AUDIT) PTY LTD LUCY P GARDNER Director Perth Date: 30 September 2020 Consolidated Statement of Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2020 Notes Consolidated 2020 $ 2019 $ REVENUE & OTHER INCOME 5 366,029 1,253,929 De Grey Mining Limited EXPENDITURE Exploration expenditure – written off Depreciation expense Director & employee expenses Share based payments (directors & employees) Corporate and compliance expenses Consulting expenses Corporate advisory Share based payments – corporate advisory Investor relations & promotional expenses Occupancy expenses Finance costs Administration and other expenses LOSS BEFORE INCOME TAX INCOME TAX BENEFIT / (EXPENSE) LOSS FOR THE YEAR OTHER COMPREHENSIVE INCOME Items that may be reclassified to profit or loss Other comprehensive income for the year, net of tax 6/33 6 7 (27,571) (336,823) (1,449,448) (514,489) (492,538) (89,479) (566,858) (136,251) (482,464) (48,527) (14,204) (183,379) - (182,117) (1,068,499) (751,744) (315,451) (48,667) (133,501) - (516,929) (105,735) - (140,416) (3,976,002) (2,009,130) - - (3,976,002) (2,009,130) - - TOTAL COMPREHENSIVE LOSS FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS OF DE GREY MINING LIMITED (3,976,002) (2,009,130) Basic and diluted loss per share for loss attributable to the ordinary equity holders of the company (cents per share) 32 (0.41) (0.50) The above Consolidated Statement of Comprehensive Income should be read in conjunction with the Notes to the Consolidated Financial Statements. 30 Consolidated Statement of Financial Position AT 30 JUNE 2020 Notes Consolidated De Grey Mining Limited CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Financial assets Deferred exploration & evaluation expenditure Property, plant and equipment Right of use asset – office premises TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Operating lease liabilities – office premises Employee benefit obligations Contract liabilities TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Operating lease liabilities – office premises Rehabilitation provision TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY 2020 $ 28,152,622 428,348 87,758 1,797 28,670,525 201,275 48,938,399 1,455,005 499,975 51,094,654 2019 $ 1,335,398 735,031 10,993 29,177 2,110,599 115,103 30,675,391 729,089 - 31,519,583 79,765,179 33,630,182 2,915,522 115,864 79,318 - 3,110,704 399,815 1,022,230 1,422,045 1,287,046 - 29,429 12,700,000 14,016,475 - - - 4,532,749 14,016,475 75,232,430 19,613,707 130,713,404 862,609 (56,343,583) 75,232,430 70,787,718 1,414,570 (52,588,581) 19,613,707 8 9 10 11 12 13 14 15 16 17 18 19 17 20 21 22 22 The above Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Consolidated Financial Statements. 31 Consolidated Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2020 Notes Contributed Equity Reserves Accumulated Losses Consolidated $ $ $ Total $ De Grey Mining Limited BALANCE AT 30 JUNE 2018 Loss for the year OTHER COMPREHENSIVE INCOME 22(b) IN THEIR TOTAL COMPREHENSIVE LOSS TRANSACTIONS WITH OWNERS CAPACITY AS OWNERS Shares issued during the year Share issue costs Share based payments - options Share based payments – performance rights Transfer of reserve on exercise options BALANCE AT 30 JUNE 2019 Loss for the year OTHER COMPREHENSIVE INCOME 21(b) 21(b) 22(a) 22(a) 22(a) 22(b) IN THEIR TOTAL COMPREHENSIVE LOSS TRANSACTIONS WITH OWNERS CAPACITY AS OWNERS Shares issued during the year Share issue costs Share based payments - options Share based payments – performance rights Transfer of reserve – on exercise of options Transfer of reserve – on exercise of performance rights Transfer of reserve – on expiry of performance rights 21(b) 21(b) 22(a) 22(a) 22(a) 59,464,845 711,106 (50,579,451) 9,596,500 - - - - - - (2,009,130) (2,009,130) - (2,009,130) - (2,009,130) 11,453,068 (178,475) - - 48,280 - - 202,350 549,394 (48,280) - - - - - 11,453,068 (178,475) 202,350 549,394 - 70,787,718 1,414,570 (52,588,581) 19,613,707 - - - - (3,976,002) (3,976,002) (3,976,002) (3,976,002) 62,088,208 (3,144,223) - - 310,201 - - 470,651 180,089 (310,201) 671,500 (671,500) - - - - - - - (221,000) 221,000 62,088,208 (3,144,223) 470,651 180,089 - - - BALANCE AT 30 JUNE 2020 130,713,404 862,609 (56,343,583) 75,232,430 The above Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Consolidated Financial Statements. 32 Consolidated Statement of Cash Flows De Grey Mining Limited FOR THE YEAR ENDED 30 JUNE 2020 CASH FLOWS FROM OPERATING ACTIVITIES Option fee received – lag gravel rights Exploration data sale received Royalties received EIS Grant received Research & development grant received Payments to suppliers and employees Interest received Payments for exploration and evaluation expenditure NET CASH OUTFLOW FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Option payments to acquire tenements Payments to acquire – Indee Gold Pty Ltd Proceeds/(payments) - available for sale financial assets Payments for plant and equipment NET CASH INFLOW / (OUTFLOW) FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of ordinary shares Payments of share issue transaction costs Principal elements of lease payments (AASB 16) Transaction costs related to loans & borrowings NET CASH INFLOW FROM FINANCING ACTIVITIES Notes Consolidated 2020 $ 2019 $ 31 330,000 - 16,535 91,102 306,651 (2,762,755) 52,192 (15,456,942) (17,423,217) - (10,142,178) - (845,712) (10,987,890) 58,841,029 (3,144,223) (100,724) (367,752) 55,228,330 26,817,224 1,335,398 28,152,622 700,000 150,000 20,335 7,320 - (2,003,971) 23,265 (8,263,267) (9,411,599) (10,000) (700,000) 94,000 (291,212) (907,212) 10,836,105 (178,475) (45,281) (150,959) 10,461,390 187,860 1,147,538 1,335,398 NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the financial year CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 8 The above Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Consolidated Financial Statements. 33 De Grey Mining Limited Notes to the Consolidated Financial Statements FOR THE YEAR ENDED 30 June 2020 1. Summary of significant accounting policies De Grey Mining Limited is a company limited by shares, domiciled and incorporated in Australia. The financial statements are for the consolidated entity consisting of De Grey Mining Limited and its subsidiaries (“Group”), and have been presented in Australian dollars. The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements were authorised for issue by the directors on 30 September 2020. A. Basis of preparation These general purpose financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB).De Grey Mining Limited is a for-profit entity for the purpose of preparing the financial statements. (i) Compliance with IFRS The financial report also complies with the International Financial Reporting Standards (IFRS) including interpretations as issued by the International Accounting Standards Board (IASB). (ii) Historical cost convention These financial statements have been on a historical cost basis, except for available for sale financial assets which have been measured at fair value through profit or loss. (iii) New, revised or amending Accounting Standards and Interpretations adopted The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group during the financial year, other than as noted below. Standards and interpretations affecting amounts reported in current period (and/or prior periods) AASB 16 Leases The Group has adopted AASB 16 from 1 July 2019 using the modified retrospective method of adoption. The Group has not restated comparatives for the reporting period as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 July 2019. AASB 16 eliminates the distinction between operating and finance leases and brings all leases (other than short term and low value leases) on to the balance sheet. As a lessee, the Group recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. An assessment is made, at inception or when contract terms are changed, to determine whether the contract is, or contains, a lease. A contract is or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. 34 On adoption, the Group recognised lease liabilities in relation to leases which had previously been classified as operating leases under the principles of AASB 117 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using an incremental borrowing rate as of 1 July 2019 of 4%. The impact on the Group at inception on 1 July 2019 was the recognition of $495,129 right of use assets and a $495,129 lease liability on the balance sheet, with $87,060 of that lease liability recognised as a current liability and $408,069 as a non- current liability as outlined in the table that follows: De Grey Mining Limited Finance and operating lease liabilities Recognised at 30 June 2019 Recognised on adoption of AASB16 Lease liability recognised at 1 July 2019 Current Non-current Right of use asset Recognised at 30 June 2019 Recognised on adoption of AASB16 as Plant and Equipment 1 July 2019 $ $ - 495,129 495,129 87,060 408,069 495,129 Nil 495,129 495,129 (iv) New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2020. These new standards will have no impact on the Group. B. Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of De Grey Mining Limited (“company” or “parent entity”) as at 30 June 2020 and the results of all subsidiaries for the year then ended. De Grey Mining Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. 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. The acquisition method of accounting is used to account for business combinations by the Group. 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 subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and statement of financial position respectively. Investments in subsidiaries are accounted for at cost in the separate financial statements of De Grey Mining Limited. (ii) Joint ventures Jointly controlled assets - the proportionate interests in the assets, liabilities and expenses of joint venture activities have been incorporated in the financial statements under the appropriate headings. Details of the joint ventures are set out in note 30. 35 De Grey Mining Limited (iii) Changes in ownership interests The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of De Grey Mining Limited. When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in a jointly controlled entity or associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate. C. Segment reporting 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 full Board of Directors. D. Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is De Grey Mining Limited's functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. (iii) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; income and expenses for each statement of comprehensive income are translated at average exchange rates (unless that is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and all resulting exchange differences are recognised in other comprehensive income. • • 36 De Grey Mining Limited E. Revenue recognition Revenue from contract(s) 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 consolidated entity: 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 with the transaction price, if any, reflects concessions provided to the customers 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 the variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probably 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. Interest Revenue Interest income is recognised as it accrues using the effective interest method. F. Cash and cash equivalents For the purposes of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of nine months or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. G. Trade & other receivables Classification as trade and other receivables If collection of the amounts is expected in one year or less they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are generally due for settlement within 30 days and therefore are all classified as current. Fair value of trade and other receivables As the majority of receivables are short term in nature, their carrying amount is assumed to be the same as their fair value. H. Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 37 De Grey Mining Limited Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. De Grey Mining Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. I. Financial instruments Classification of financial instruments those to be measured at fair value (either through other comprehensive income, or through profit or loss); and those to be measured at amortised cost. The Group classifies its financial assets into the following measurement categories: • • The classification depends on the Group’s business model for managing financial assets and the contractual terms of the financial assets' cash flows. The Group classifies its financial liabilities at amortised cost unless it has designated liabilities at fair value through profit or loss or is required to measure liabilities at fair value through profit or loss such as derivative liabilities. Debt instruments Investments in debt instruments are measured at amortised cost where they have: • contractual terms that give rise to cash flows on specified dates, that represent solely payments of principal and interest on the principal amount outstanding; and are held within a business model whose objective is achieved by holding to collect contractual cash flows. • These debt instruments are initially recognised at fair value plus directly attributable transaction costs and subsequently measured at amortised cost. The measurement of credit impairment is based on the three-stage expected credit loss model described below regarding impairment of financial assets. Financial instruments designated as measured at fair value through profit or loss Financial instruments held at fair value through profit or loss are initially recognised at fair value, with transaction costs recognised in the income statement as incurred. Subsequently, they are measured at fair value and any gains or losses are recognised in the income statement as they arise. 38 De Grey Mining Limited Where a financial asset is measured at fair value, a credit valuation adjustment is included to reflect the credit worthiness of the counterparty, representing the movement in fair value attributable to changes in credit risk. A financial liability may be designated at fair value through profit or loss if it eliminates or significantly reduces an accounting mismatch or: • • if a host contract contains one or more embedded derivatives; or if financial assets and liabilities are both managed and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy. Where a financial liability is designated at fair value through profit or loss, the movement in fair value attributable to changes in the Group’s own credit quality is calculated by determining the changes in credit spreads above observable market interest rates and is presented separately in other comprehensive income. Impairment of financial assets The entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. Recognition and derecognition of financial instruments A financial asset or financial liability is recognised in the balance sheet when the Group becomes a party to the contractual provisions of the instrument, which is generally on trade date. Loans and receivables are recognised when cash is advanced (or settled) to the borrowers. Financial assets at fair value through profit or loss are recognised initially at fair value. All other financial assets are recognised initially at fair value plus directly attributable transaction costs. The Group derecognises a financial asset when the contractual cash flows from the asset expire or it transfers its rights to receive contractual cash flows from the financial asset in a transaction in which substantially all the risks and rewards of ownership are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. A financial liability is derecognised from the balance sheet when the Group has discharged its obligations, or the contract is cancelled or expires. Offsetting Financial assets and liabilities are offset and the net amount is presented in the balance sheet when the Group has a legal right to offset the amounts and intends to settle on a net basis or to realise the asset and settle the liability simultaneously. 39 De Grey Mining Limited J. Plant and equipment Each class of Plant, equipment and motor vehicle is carried at historical cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the asset. The carrying amounts are reviewed annually by Directors to ensure it is not in excess of the estimated recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts and an asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Depreciation of plant and equipment is calculated using the reducing balance method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term. The rates vary between 20% and 40% per annum. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. K. Right of use assets and lease liabilities The Group recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments and discloses the right of use asset separately as a Non-current asset. An assessment is made, at inception or when contract terms are changed, to determine whether the contract is, or contains, a lease. A contract is or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. The Group recognises all right of use assets and liabilities, except for leases that are short-term (12 months or less) and low value leases at the lease commencement date. The lease liability is measured at the present value of the future lease payments and includes lease extension options when the Group is reasonably certain that it will exercise the option. The present value of future lease payments is determined by discounting future lease payments using the interest rate implicit in the lease or, if that rate cannot be determined then the Group’s borrowing rate, which is generally the case. The right of use asset, at initial recognition, reflects the lease liability and is depreciated over the term of the lease. The present value of the lease liability is increased by the interest cost and decreased by the lease payment each period over the life of the lease. For leases that are short-term (12 months or less) and/or low value leases at the lease commencement date, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. L. Exploration and evaluation costs Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which the expenditure is incurred where; • • The Group has secured (or has the legal right to) tenure, and/or the legal rights to explore an area of interest; Exploration and evaluation activities in the area of interest have not at the end of the reporting period reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing; and The exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale. • Where the conditions outlined are not met in relation to specific area(s) of interest, then those exploration and evaluation costs are expensed as incurred. 40 M. Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are paid on normal commercial terms. De Grey Mining Limited N. Employee benefits Wages and salaries, annual leave and long service leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave and long service leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables. O. Rehabilitation provision Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. 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 in full 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 a 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. Any changes in the estimates for the costs or other assumptions against the cost of relevant assets 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. P. Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Q. Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to owners 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 bonus elements in ordinary shares issued during the year. (ii) 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. 41 De Grey Mining Limited R. Share-based payments The Group provides benefits to employees (including directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’), refer to note 33. The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option pricing model. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of options that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award. Options over ordinary shares have also been issued as consideration for the acquisition of interests in tenements and other services. These options have been treated in the same manner as employee options described above, with the expense being included as part of exploration expenditure. S. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. T. Significant accounting judgements estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates these judgements, estimates and assumptions, taking into consideration matters such as historical experiences and its expectations of future events. The The material significant judgements, estimates and assumptions within this financial report are: Exploration and evaluation expenditure – Note 13. • • Rehabilitation provision – Note 20. • Share based payments – Note 33. 42 De Grey Mining Limited 2. Financial Risk Management The Group’s exposure to a variety of financial risks that may affect the Group’s future financial performance. The Board has the overall responsibility for the establishment, with the Audit and Risk Committee having oversight of all risk management policies. The Committee reports periodically to the Board on its activities and with the assistance of senior management team are responsible for identifying, assessing, treating and monitoring risks and risk management policies. The Committee oversees management’s compliance monitoring processes as well as reviewing the adequacy of the risk management framework in relation to the risks faced by the Group. Risk management policies and systems are reviewed regularly by the senior management team to reflect changes in market conditions and the Group’s activities. The Group aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. A. Market risk Foreign exchange risk The Group’s operations are in Australia and currently has limited exposures to foreign exchange risk arising from foreign currency transactions. Foreign exchange risk arises from recognising assets and liabilities denominated in a currency that is not the functional currency of the relevant entity. The Company has a holding of Canadian dollar listed securities. Financial assets at fair value thru the profit or loss Consolidated Total 2020 $ 201,275 201,275 2019 $ 115,103 115,103 The sensitivity of profit or loss to changes in the exchange rates arises mainly from Canadian dollar-denominated financial instruments. A 10 percent increase in the AUD/CAD exchange rate would increase post tax loss by $18,298, while a 10 percent decrease in the AUD/CAD exchange rate would decrease post tax loss by $22,364. Price risk Given the current level of operations, the Group is not exposed to price risk. Interest rate risk The Group is exposed to movements in market interest rates on cash and cash equivalents. The Group policy is to monitor the interest rate yield curve out to six months to ensure a balance is maintained between the liquidity of cash assets and the interest rate return. The balance of cash and cash equivalents for the Group of $28,152,622 (2019: $1,335,398) is subject to interest rate risk. The proportional mix of floating interest rates and fixed rates to a maximum of six months fluctuate during the year depending on current working capital requirements. The weighted average interest rate received on cash and cash equivalents by the Group was 0.70% (2019: 0.54%). Sensitivity analysis At 30 June 2020, if interest rates had changed by -/+ 100 basis points from the weighted average rate for the year with all other variables held constant, post-tax loss for the Group would have been $78,721 lower/higher (2019: $36,615 lower/higher) as a result of lower/higher interest income from cash and cash equivalents. 43 De Grey Mining Limited B. Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligation resulting in financial loss to the Group. (i) Risk management The Group has adopted the policy of dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. Cash is deposited only with institutions approved by the Board and typically with a current minimum credit rating of A (or equivalent) as determined by a reputable credit rating agency. The Group has established a policy of having aggregate funds on term deposit or invested in money markets allocated across financial counterparties. Trade receivables Counterparties without external credit rating - other Total trade receivables Cash and cash equivalents A + external credit rating A - external credit rating Total cash and cash equivalents (ii) Impaired trade receivables Consolidated Total 2020 $ 2019 $ 48,510 48,510 359,562 359,562 22,152,622 6,000,000 28,152,622 1,335,398 - 1,335,398 In determining the recoverability of trade and other receivables, the Group performs a risk analysis considering the type and age of the outstanding receivable and the creditworthiness of the counterparty. If appropriate, an impairment loss is recognised in profit or loss. The Group does not have any impaired Trade and other receivables as at 30 June 2020 (2019: nil). C. Liquidity risk The Group manages liquidity risk by monitoring the immediate and forecasted cash requirements, and ensures that adequate cash reserves and/or marketable securities are available to pay debts as and when due. The Group’s primary activities are currently mineral exploration. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities as the Group does not have ready access to credit facilities at this stage of its life cycle. Management regularly monitor its rolling cash forecasts and the state of equity markets in initiating the timing of capital raisings for its future funding requirements. 44 Maturities of financial liabilities An analysis of the Group's financial liabilities into relevant maturity groupings based on their contractual maturities and on the basis of the contractual undiscounted cash flows as presented in the table that follows. De Grey Mining Limited As at 30 June 2020 Trade and other payables Operating lease liabilities Total non-derivatives As at 30 June 2019 Trade and other payables Operating lease liabilities Contract liabilities Total non-derivatives D. Fair value estimation Less than 6 months 6-12 months $ 2,915,522 57,005 2,972,527 $ - 58,859 58,859 1-2 years $ - 125,220 125,200 2-5 years $ - 274,595 274,595 Total $ 2,915,522 515,679 3,431,201 1,287,046 - 12,700,000 13,987,046 - - - - - - - - - - - - 1,287,046 - 12,700,000 13,987,046 The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. All financial assets and financial liabilities of the Group at the balance date are recorded at amounts approximating their carrying amount. The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the current bid price. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. 3. Capital management The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they may continue to provide returns for shareholders and benefits for other stakeholders Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is the current working capital position against the requirements of the Group to meet exploration programmes and corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Group at 30 June 2020 and 30 June 2019 are as follows: Cash and cash equivalents Trade and other receivables Trade and other payables (i) Working capital position 2020 $ 28,152,622 430,145 (3,031,386) 25,551,381 Consolidated 2019 $ 1,335,398 735,031 (1,039,868) 1,030,561 (i) This is net of payables totalling $Nil (2019: $247,178) settled/or to be settled by an equity issue of ordinary fully paid shares. 45 De Grey Mining Limited 4. Segment Information Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. For management purposes, the Group has identified one reportable operating segment being exploration activities undertaken in one geographical segment being Australasia. These segments include the activities associated with the determination and assessment of the existence of commercial economic reserves, from the Group’s mineral assets in the sole geographic location. Segment performance is evaluated based on the operating profit and loss and cash flows and is measured in accordance with the Group’s accounting policies. Segment revenue 102,991 1,178,541 102,991 1,178,541 Minerals Exploration Australasia Consolidated Total 2020 $ 2019 $ 2020 $ 2019 $ Reconciliation of segment revenue to total revenue before tax: Interest revenue Change in fair value of equity investments at fair value through profit or loss Other revenue Total revenue and other income 78,721 19,744 86,172 98,145 366,029 9,103 46,541 1,253,929 Segment results (120,533) 1,020,483 (120,533) 1,020,483 Reconciliation of segment result to net loss before tax: Corporate advisory Share based payments Other corporate and administration Net loss before tax (566,858) (650,740) (2,637,871) (3,976,002) (133,501) (751,744) (2,144,368) (2,009,130) Segment operating assets 50,437,690 32,160,880 50,437,690 32,160,880 Reconciliation of segment operating assets to total assets: Cash and cash equivalents Other corporate and administration assets Total assets 29,327,489 79,765,179 1,469,302 33,630,182 Segment operating liabilities 3,562,853 13,491,175 3,562,853 13,491,175 Reconciliation of segment operating liabilities to total liabilities: Other corporate and administration liabilities Total liabilities 969,896 4,532,749 525,300 14,016,475 46 5. Revenue and other income Revenue - from continuing operations Option fee – lag gravels (i) Exploration data fee Royalties- sands Other Income EIS Grant Interest income Change in fair value of equity investments through profit or loss Other De Grey Mining Limited Note Consolidated 2020 $ - - 11,889 91,102 78,721 86,172 98,145 366,029 2019 $ 1,000,000 150,000 21,221 7,320 19,744 9,103 46,541 1,253,929 (i) The prior financial year lag gravels option fee relates to a binding Letter of Intent with Novo Resources Corp that granted them the right to explore the Mallina Gold Project (for gold-bearing lag gravel deposits for an initial three-year period from 30 June 2019. 6. Expenses Loss before income tax includes the following specific expenses: Contributions to superannuation funds Lease liability – interest charge Share based payments – options (Directors & under approved plan) Share based payments – performance rights (Directors & under approved plan) Share based payments – corporate advisory services 15 33 33 33 199,747 14,025 334,400 180,089 136,251 130,663 - 202,350 549,394 - 7. Income tax (a) Income tax expense Current tax Deferred tax (b) Numerical reconciliation of income tax expense to prima facie tax payable Loss from continuing operations before income tax expense Prima facie tax benefit at the Australian tax rate of 27.5% (2019: 27.5%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Capital raising fees Other allowable expenditure Sundry items Tax effect of current year tax losses for which no deferred tax asset has been recognised Income tax expense (c) Unrecognised deferred tax assets Capital raising fees Carry forward tax losses Gross deferred tax assets 47 - - - - - - (3,976,002) (2,009,130) (1,093,401) (552,511) (219,286) (5,022,327) 137,979 (6,197,035) (46,354) (2,474,823) 240,256 (2,833,431) 6,197,035 - 2,833,431 - 752,058 22,990,529 23,742,587 106,682 17,077,916 17,184,598 De Grey Mining Limited No deferred tax asset has been recognised for the above balance as at 30 June 2020 and it is not considered probable that future taxable profits will be available against which it can be utilised. (d) Tax consolidation Effective 1 July 2004, for the purposes of income taxation, De Grey Mining Limited and its 100% owned Australian subsidiaries formed a tax consolidated group. Members of the group have entered into a tax sharing arrangement in order to allocate income tax between the entities should the head entity default on its tax payment obligations. At the balance date, the possibility of default is remote. The head entity of the tax consolidated group is De Grey Mining Limited. The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate De Grey Mining Limited for any current tax payable assumed and are compensated by De Grey Mining Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to De Grey Mining Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current intercompany receivables or payables. Effective 21 August 2019, for the purposes of income taxation, new subsidiary Indee Gold will be added to the tax consolidated group. (e) Franking credits The company has no franking credits available for use in future years. 8. Current assets – Cash and cash equivalents Cash at bank & on hand (i) Short-term & on-call deposits (ii) Consolidated 2020 $ 2019 $ 391,734 27,760,888 28,152,622 838,960 496,438 1,335,398 (i) Cash at bank earns interest at floating rates based on daily bank deposit rates. (ii) Short-term deposits are made for varying periods of between one day and up to nine months depending on the immediate cash requirements of the Group and earn interest at the respective short-term deposit rates. 9. Current assets – Trade and other receivables Trade receivables GST receivable (net) R&D offset receivable Fuel tax credits receivable Accrued interest Sundry debtors 48,510 252,580 - 67,075 26,767 33,416 428,348 359,562 34,140 306,651 34,143 - 535 735,031 As the majority of receivables are short term in nature, their carrying amount is assumed to be the same as their fair value. 48 10. Current assets - Inventories Diesel fuel inventories 11. Current assets – Other assets Prepayment – other Advances & deposits 12. Financial assets Financial assets at fair value through profit or loss Current De Grey Mining Limited Consolidated 2020 $ 87,758 87,758 2019 $ 10,993 10,993 - 1,797 1,797 27,380 1,797 29,177 Canadian (TSX-V) listed equity securities (i) (ii) 115,103 115,103 (i) The financial assets are presented as non-current assets unless management intends to dispose of them within 12 201,275 201,275 months of the end of the reporting period. (ii) Financial assets are valued at the quoted closing share price as at reporting date. During the year, a gain of $86,172 (2019: $9,103) was recognised in the profit and loss and other comprehensive income (Note 5). 13. Non-current assets – Deferred exploration & evaluation expenditure Beginning of financial period Exploration expenditure - all areas of interest (i) Tenement option payments (non Indee Gold Pty Ltd) Indee Gold Pty Ltd –recognised on settlement of acquisition (Note 29) Expensed to P&L 30,675,391 16,839,283 - 1,451,296 (27,571) 48,938,399 21,982,686 8,682,705 10,000 - - 30,675,391 (i) The Group has capitalised all costs associated with The Mallina Project. The recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. 14. Non-current assets – Property, plant and equipment Plant and equipment Cost Accumulated depreciation Net book amount Plant and equipment Opening net book amount Additions Additions – on acquisition of Indee Gold Pty Ltd (Note 29) Assets written-off Depreciation charge Depreciation written back on assets written-off Closing net book amount 49 1,944,765 (489,760) 1,455,005 729,089 946,272 13,113 (351,184) (233,469) 351,184 1,455,005 1,349,679 (620,590) 729,089 691,087 220,119 - - (182,117) - 729,089 15. Non-current Right of use asset Right of use asset – office premises Cost (i) Accumulated depreciation Net book amount Plant and equipment Opening net book amount Additions on inception – 1 July 2019 (ii) Additions – additions for the year Depreciation for the year – leased office premises Closing net book amount De Grey Mining Limited Consolidated 2020 2019 603,329 (103,354) 499,975 - 495,129 108,200 (103,354) 499,975 - - - - - - - - (i) The right of use asset assumes that the options for office lease term extensions will be exercised. (ii) The impact on the Group at inception on 1 July 2019 was the recognition of $495,129 right of use assets and a $495,129 lease liability on the balance sheet, with $87,060 of that lease liability recognised as a current liability and $408,069 as a non-current liability as outlined in the table that follows: Finance and operating lease liabilities Recognised at 30 June 2019 Recognised on adoption of AASB16 Initial lease liability recognised at 1 July 2019 Current Non-current Right of use asset Recognised at 30 June 2019 Recognised on adoption of AASB16 16. Current liabilities – Trade and other payables Trade payables Trade payables to be settled via an equity issue Other payables and accruals (i) 1 July 2019 $ Nil 495,129 495,129 87,060 408,069 495,129 Nil 495,129 495,129 Consolidated 2020 $ 2,798,952 - 116,570 2,915,522 2019 $ 907,792 247,178 132,076 1,287,046 (i) Trade, other payables and accruals are non-interest bearing and are normally settled on terms of 30-45 days. 50 17. Current & non-current operating lease liabilities Current Operating lease liabilities – office premises Non-current Operating lease liabilities – office premises De Grey Mining Limited Consolidated 2020 $ 115,864 399,815 2019 $ - - 18. Current liabilities – Employee benefit obligations Employee benefit obligations (i) 79,318 29,429 (i) The current provision for employee benefits includes all unconditional entitlements where employees have completed the required period of service. The entire amount is presented as current, since the consolidated entity does not have an unconditional right to defer settlement and has an expectation that employees will take the full amount of accrued leave or require payment within the next 12 months. 19. Current liabilities – Contract liabilities Contract liabilities (i) - - 12,700,000 12,700,000 (i) On 12 February 2018, the Company executed a fully binding Share Sale Agreement (“SSA”) to acquire 100% of the issued shares in the capital of Indee Gold Pty Ltd (“Indee Gold”) from Northwest Nonferrous Australia Mining Pty Ltd (“NNAM”). On 22 August 2019, settlement was completed, and the Company became the 100% shareholder of Indee Gold Pty Ltd, with the final payment of $9.7 Million in cash and 59,065,579 shares in De Grey (valued at $3.0 Million on allotment) as full and final settlement of the outstanding Contract liabilities. 20. Non-current liabilities – Rehabilitation provision Rehabilitation provision (i) 1,022,230 1,022,230 - - (i) This provision was brought to account on settlement of the Indee Gold acquisition, and covers the mining leases the subject of an approved Mine closure plan (Note 29). The Group assesses its mine rehabilitation provision annually. Significant judgement is required in determining the provision for mine rehabilitation and closure as there are many factors that will affect the ultimate liability payable to rehabilitate the mine sites, including future disturbances caused by further development, changes in technology, changes in regulations, price increases, changes in timing of cash flows which are based on life of mine plans and changes in discount rates. When these factors change or become known in the future, such differences will impact the mine rehabilitation provision in the period in which the change becomes known. 51 21. Contributed equity (a) Share capital Ordinary shares fully paid Total contributed equity (b) Movements in ordinary share capital Beginning of the financial year Issued during the current & prior years: Shares issued on exercise of options De Grey Mining Limited 2020 2019 Issue Price Number of shares $ Number of shares $ 1,172,514,204 130,713,404 427,590,370 70,787,718 1,172,514,204 130,713,404 427,590,370 70,787,718 427,590,370 70,787,718 334,468,800 59,464,846 $0.10 $0.30 $0.04 Placement share issue Shares issued on exercise of options Shares issued on exercise of options Shares issued on exercise of options Share issued in exercise of performance rights Share issued in lieu of supplier invoices (non-cash) - 17,039,286 13,016,667 600,000 3,802,748 3,950,000 - $0.20 $0.045 111,111,111 $0.05 444,142,014 92,196,429 $0.28 59,065,579 Shares issued part consideration – Indee Gold Pty Ltd (non-cash) $0.050791 - Transaction costs - Placement share issue Placement share issue Placement share issue $0.35 Share based payments reserve transfer on option exercise Share based payments reserve transfer on performance rights exercise - 1,703,928 3,905,000 210,000 247,179 - - 5,000,000 22,207,101 25,815,000 3,000,000 (3,144,223) 310,201 3,084,611 59,627,200 - - 5,409,759 - 25,000,000 - - - - - - 123,384 5,962,720 - - 616,963 - 4,750,000 - - - - (178,475) 48,280 End of the financial year (c) Movements in options on issue Beginning of the financial year Net issued / (exercised or cancelled) during the year: − Exercisable at 4 cents, on or before 10 June 2019 − Exercisable at 10 cents, on or before 30 Nov 2018 − Exercisable at 10 cents, on or before 30 Nov 2018 − Exercisable at 10 cents, on or before 31 Oct 2019 − Exercisable at 20 cents, on or before 30 Nov 2019 − Exercisable at 25 cents, on or before 30 Nov 2019 − Exercisable at 30 cents, on or before 30 May 2021 − Exercisable at 30 cents, on or before 30 Sep 2021 − Exercisable at 10 cents, on or before 31 Dec 2021 − Exercisable at 35 cents, on or before 12 Mar 2021 End of the financial year - 1,172,514,204 671,500 130,713,404 - 427,590,370 - 70,787,718 Number of options 2020 2019 77,333,333 110,295,144 - - - (7,039,286) (33,333,333) (12,500,000) (13,016,667) 1,500,000 2,000,000 4,900,000 19,844,047 (3,084,611) (53,527,200) (6,100,000) - - 12,500,000 17,250,000 - - - 77,333,333 Unlisted Listed Unlisted Unlisted Unlisted Unlisted Unlisted Unlisted Unlisted Unlisted 52 (d) Movement in performance rights on issue During the year there were no unlisted Performance Rights issued (2019: nil) to directors and employees of the Group. Tranche 1¹ Tranche 22 Tranche 3¹ Tranche 4 Tranche 5¹ Total De Grey Mining Limited Opening balance – 1 July 2019 1,300,000 1,300,000 1,450,000 1,450,000 1,200,000 6,700,000 Performance rights vested (1,300,000) (1,450,000) Performance rights expired Performance rights issued Closing balance – 30 June 2020 - - - (1,300,000) - - - - - - - - 1,450,000 (1,200,000) (3,950,000) - - - (1,300,000) - 1,450,000 1. The vesting conditions for tranches one, three and five were met during the reporting period. Each of the tranches were exercised by the holders and shares allotted on 22 August 2019. • Tranche One – the Company declaring greater than 1,500,000 ounce gold resource (JORC 2012) at an overall grade of at least 1.7 g/t and a minimum category of JORC inferred at the Mallina Gold Project, on or before 30 November 2019; • Tranche Three – settlement of the Company’s 100% acquisition of Indee Gold Pty Ltd; and • Tranche Five – The Company confirming higher grade resources of at least 200,000 ounces and at an overall grade of greater than 5 g/t or before 30 November 2019. 2. The vesting conditions for the following tranche expired during the financial year: • Tranche Two – the Company declaring greater than 2,000,000 ounce gold resource (JORC 2012) at an overall grade of at least 1.7 g/t and a minimum category of JORC inferred at the Mallina Gold Project, or before 30 November 2019. 3. The following Performance Right tranche remains outstanding as at the end of the financial year: • Tranche Four – The Company securing Project Financing for the Mallina Gold Project at a minimum throughput of 1M tpa. (e) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. Neither the Company, nor any of its subsidiaries, holds any shares in the Company at 30 June 2020 (2019: Nil). 53 22. Reserves and accumulated losses (a) Reserves Share-based payments reserve (i) Movements: Share-based payments reserve Balance at beginning of year Share based payments (options) expense (Directors & EOP plan) Share based payments (options) expense (Corporate advisory) Share based payments (performance rights) expense (Directors & PR plan) Transfer to Issued Capital on exercise of performance rights Transfer to Issued Capital on exercise of options Transfer to Accumulated losses on expiry of performance rights Balance at end of year (b) Accumulated losses Balance at beginning of year Net loss for the year Transfer from Reserves on expiry of performance rights Balance at end of year De Grey Mining Limited Consolidated 2020 $ 862,609 862,609 1,414,570 334,400 136,251 180,089 (671,500) (310,201) (221,000) 862,609 2019 $ 1,414,570 1,414,570 711,106 202,350 - 549,394 - (48,280) - 1,414,570 (52,588,581) (3,976,002) 221,000 (56,343,583) (50,579,451) (2,009,130) - (52,588,581) (c) Nature and purpose of reserves (i) Share-based payments reserve - The share-based payments reserve is used to recognise the value of equity benefits provided to either employees or directors as remuneration or to suppliers as payment for products and services. 23. Dividends No dividends were paid during the financial year. No recommendation for payment of dividends has been made. 24. Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non- related audit firms: (a) Audit services Butler Settineri (Audit) Pty Ltd - audit and review of financial reports Total remuneration for audit services (b) Non-audit services Butler Settineri – tax compliance services Total remuneration for other services 54 - - 47,842 47,842 3,675 3,675 33,777 33,777 2,800 2,800 25. Contingent liabilities There are no contingent liabilities or contingent assets of the Group at reporting date. 26. Commitments (a) Exploration commitments The Group has certain commitments to meet minimum expenditure requirements on the mineral exploration assets it has an interest in. Outstanding Mallina Project exploration commitments are as follows: Mallina Project tenements (100% owned) Tenements under option agreements (i) Annual commitment for the Mallina Project assets De Grey Mining Limited Consolidated 2020 $ 2019 $ 1,474,040 199,280 1,673,320 1,474,760 197,160 1,671,920 (i) The tenements that remain under option and/or earn-in agreements are with respect to the Farno McMahon and Vanmaris Projects, as detailed in Note 30. (b) Capital commitments The Group did not have any capital commitments as at the current or prior balance date. 27. Related party transactions (a) Parent entity The ultimate parent entity within the Group is De Grey Mining Limited. (b) Subsidiaries Interests in subsidiaries are set out in note 28. (c) Transactions with related parties Transactions between related parties are on commercial terms and conditions, no more favourable than those available to other parties unless otherwise stated. (d) Loans to related parties De Grey Mining Limited has provided unsecured, interest free loans to each of its wholly owned Australian subsidiaries and all of which have been fully impaired. 55 De Grey Mining Limited 28. Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b): Name Country of Incorporation Class of Shares Equity Holding¹ Beyondie Gold Pty Ltd Domain Mining Pty Ltd Winterwhite Resources Pty Ltd Last Crusade Pty Ltd Indee Gold Pty Ltd² Australia Australia Australia Australia Australia Ordinary Ordinary Ordinary Ordinary Ordinary ¹ The proportion of ownership interest is equal to the proportion of voting power held. ² The acquisition of Indee Gold Pty Ltd was completed on 22 August 2019. 29. Asset acquisition 2020 2019 % 100 100 100 100 100 % 100 100 100 100 - De Grey originally executed a detailed Share Sale Agreement (“SSA”) on 9 February 2018, to acquire all the shares in Indee Gold Pty Ltd from Northwest Nonferrous Australia Mining Pty Ltd for a total acquisition price of $15 Million. At the beginning of the financial reporting period, there was a remaining $12.7 Million due and payable and on 22 August 2019, settlement was completed. The final payment made consisted of $9.7M in cash and 59,065,579 shares in De Grey (valued at $3.0M on allotment) as full and final settlement of the outstanding Contract liabilities (Note: 19). The Group determined the transaction represented an asset acquisition, rather than a business combination, on the assessment that the concentration test in AASB 3 Business Combinations was met. The concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The determination of the fair values for such assets and thus both the concentration test and any subsequent asset acquisition accounting involves the use of significant estimates and judgements. The value paid for Indee Gold Pty Ltd was determined to be concentrated in the value of acquired exploration and evaluation assets. When an asset acquisition does not constitute a business combination, the assets and liabilities are assigned a carrying amount based on their relative fair values. No goodwill arises on the acquisition and transactions costs of the acquisition are included in the capitalised cost of the asset. 56 Purchase consideration Cash paid 59,065,579 ordinary fully paid shares at an issue price of $0.050791 Acquisition costs Fair value on acquisition Exploration and evaluation assets – recognised on execution of binding share sale agreement – Feb 2018 Exploration and evaluation assets – recognised on settlement of acquisition – Aug 2019 (Note 13) Plant and equipment (Note 14) Provision for rehabilitation (Note 20) Net identifiable assets acquired De Grey Mining Limited $ 12,000,000 3,000,000 442,179 15,442,179 $ 15,000,000 1,451,296 13,113 (1,022,230) 15,442,179 30. Interests in joint ventures / other acquisitions (a) Attgold Pty Ltd Retained Pegmatite Rights across E45-2364 (a tenement within the Mallina Project) In February 2007, De Grey acquired 100% of tenement E45-2364 on exercise of an option. Under the agreement, Attgold retained the pegmatite related rights on this tenement only. The pegmatite rights give Attgold rights to explore on the tenement for pegmatite minerals, which in turn are defined as “tin, tantalum, niobium, lithium, caesium and non-gold bearing or base metal bearing aggregate.” This is subject to various clauses of priority, access and normal statutory requirements. De Grey holds all other mineral rights in this tenement, most specifically gold and base metals and the joint venture has a carrying value of nil. (b) Mount Dove Iron Rights On 22 September 2015, the company entered into a Deed of Termination with the Atlas Iron Group, where the Atlas Iron Group relinquished its iron ore rights on any of the Turner River Project tenements. , If De Grey mines iron ore on any of its the Turner River Project tenements it will pay the Atlas Iron Group a one-off payment of $50,000. (c) Turner River Shingles, River Sand and Limestone Blocks Farm-Out In October 2012 De Grey, through its wholly owned subsidiary Last Crusade Pty Ltd (“LC”), entered into an agreement with Mobile Concreting Solutions Pty Ltd (“MCS”) under which LC facilitated the excision of graticule B703 from LC’s Exploration Licence 45/3390. Under the agreement, MCS applied for a mining licence over the excised graticule to mine for shingles, river sand and limestone blocks. LC retains the right to explore for all other minerals on the affected ground and MCS pays a royalty of $0.50 per tonne to LC for all material removed. The sands mining operations commenced in the December 2013 quarter and have continued throughout the current financial year. (d) Farno McMahon Project Option On 28 July 2017, De Grey secured an option to enter into a joint venture for tenement E47/2502, and referred to as the Farno McMahon Project. An option fee of $40,000 was paid to the Vendor granting De Grey an exclusive right and period to assess the project and on 2 October 2017, the Company elected to enter into a Joint Venture Earn-in. The vendor retains all alluvial rights. The Joint Venture Earn-in consists of two stages: Stage 1 – During the financial year and having expended a minimum of $1.0M over the 3 year period to 13 December 2019, the Company has earned an initial 30% interest. Stage 2 - DEG may spend a further $1.0M expenditure over an additional 1-year period (Year 4) to earn an additional 45% equity in the tenement for a total equity of 75%. 57 De Grey Mining Limited (e) Vanmaris Project Option On 25 September 2017, De Grey entered into a letter agreement with the owner of tenements E47/3399, E47/3428-3430, P47/1732-1733 whereby De Grey may acquire an 80% interest in each of these listed tenements, within a 4 year option period. The terms of the letter agreement included a cash and script option payment to the vendors of $30,000 cash and 150,000 ordinary fully paid De Grey shares. De Grey are to maintain the tenements in good standing during the 4 year option period and during which time it can elect to acquire an 80% interest on payment of $500,000 cash. The vendor retains the alluvial and prospecting rights to a depth of 3 metres. 31. Statement of cash flows Reconciliation of net loss after income tax to net cash outflow from operating activities Net loss for the year Non-Cash Items Depreciation of non-current assets Share based payments (options and performance rights) Equity settlement of expenses Gain on available for sale investments Lease accounting adoption/reclassification Change in operating assets and liabilities (Increase)/decrease in trade, other receivables and assets (Increase)/decrease in inventories (Decrease)/increase in trade, other payables and provisions Other Items Payments to acquire or option mineral tenements Payments for transaction costs – loans and borrowings Payments for exploration & evaluation expenditure capitalised Net cash outflow from operating activities 32. Loss per share (a) Reconciliation of earnings used in calculating loss per share Loss attributable to the owners of the company used in calculating basic and diluted loss per share (b) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share Consolidated 2020 $ 2019 $ (3,976,002) (2,009,130) 336,823 650,740 - (86,173) 13,074 334,083 (76,765) 1,824,965 - 367,752 (16,811,714) (17,423,217) 182,117 751,744 616,964 (9,103) - (353,831) 8,901 239,136 10,000 150,959 (8,999,356) (9,411,599) 2020 $ 2019 $ (3,976,002) (2,009,130) Number of shares 959,669,364 398,278,765 (c) Information on the classification of options As the Group has made a loss for the year ended 30 June 2020, all options on issue are considered antidilutive and have not been included in the calculation of diluted earnings per share. These options could potentially dilute basic earnings per share in the future. 58 De Grey Mining Limited 33. Share-based payments From time to time options are granted to; (i) eligible employees under the Performance Rights Plan (“PRP”) and/or the Employee Option Plan (“EOP”) of De Grey Mining Limited to align their interests with that of the shareholders of the company. (ii) Directors under rules comparable with the PRP and/or EOP, but subject to shareholder approval pursuant to the provisions of the ASX Listing Rules and the Corporations Act 2001. (a) Options Employee Option Plan of De Grey Mining Limited (“EOP”) ¹ Shareholders last approved the EOP at the Annual General Meeting held on 28 November 2018. The EOP is designed to attract and retain eligible employees, provide an incentive to deliver growth and value for the benefit of all Shareholders and facilitate capital management by enabling the Company to preserve cash reserves for expenditure on principal activities. Participation in the Plan is at the discretion of the Board and no eligible employee has a contractual right to receive an option under the Plan. The exercise price and expiry date for all options granted will be determined by the board prior to granting of the options, and in the case of Director options subject to shareholder approval. The options granted may also be subject to conditions on exercise and usually have a contractual life of two to three years. Options granted carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share in the capital of the company with full dividend and voting rights. There were no director options granted (2019: 2,500,000) and 5,500,000 EOP options granted (2019: 2,250,000) in the financial year ended 30 June 2020 and are all currently outstanding are detailed in the following table: Grant date Expiry date Exercise price Cents Balance at start of the year Number Granted during the year Number Exercised during the year Number Balance at end of the year Number Vested and exercisable at end of the year Number 2019-2020 24 Sep 2017 17 Oct 2018 12 Mar 2020 31 Oct 2020 30 May 2021 12 Mar 2022 10 cents 30 cents 35 cents 2018-2019 30 Nov 2016 24 Sep 2017 17 Oct 2018 30 Nov 2018 31 Oct 2020 30 May 2021 10 cents 10 cents 30 cents 2,250,000 4,750,000 - 7,000,000 6,100,000 2,250,000 4,750,000 8,350,000 - - 5,500,000 5,500,000 - - 4,750,000 4,750,000 - (516,667) (600,000) (1,116,667) 2,250,000 4,233,333 4,900,000 11,383,333 2,250,000 4,233,333 4,900,000 11,383,333 (6,100,000) - - (6,100,000) - 2,250,000 4,750,000 7,000,000 - 2,250,000 4,750,000 7,000,000 Expenses arising from share-based payment transactions - options The weighted average fair value of the options granted during the year was $0.0608 (2019: $0.0426). The price was calculated by using the Black-Scholes European Option Pricing Model applying the following inputs: 2020 2019 Weighted average exercise price (cents) Weighted average life of the option (years) Weighted average underlying share price (cents) 30.0 2.6 15.0 75% 1.5% Historical volatility has been used as the basis for determining expected share price volatility as it assumed that this is indicative of future trends, which may not eventuate. Weighted average risk-free interest rate Expected share price volatility 0.25% 35.0 21.0 80% 2.0 No assumptions have been made relating to dividends or expected early exercise of the options and there are no other inputs to the model. 59 De Grey Mining Limited Total expenses arising from equity settled share-based payment transactions recognised during the period were as follows: 2020 $ 2019 $ Options issued to directors and EOP to eligible employees 334,400 202,350 (b) Performance rights Employee Performance Rights Plan of De Grey Mining Limited (“PRP”) Shareholders approved the PRP at the Annual General Meeting held on 30 November 2017. The PRP, like the EOP Plan is designed to attract and retain eligible employees, provide an incentive to deliver growth and value for the benefit of all Shareholders and facilitate capital management by enabling the Company to preserve cash reserves for expenditure on principal activities. Participation in the Plan is at the discretion of the Board and no eligible employee has a contractual right to receive performance rights under the Plan. The performance rights granted will be determined by the board prior to granting of the rights, and in the case of Director performance rights, these are subject to shareholder approval. The rights granted may be subject to performance milestones before the holder has the right to exercise (Refer Note 21 (d)) and can have a contractual life of up to 5 years. Rights granted carry no dividend or voting rights. When exercisable, each right is convertible into one ordinary share in the capital of the company with full dividend and voting rights. There were Nil performance rights granted (2019: nil) in the financial year ended 30 June 2020 and all remained outstanding as at the reporting date, as detailed in the following table: Expenses arising from share-based payment transactions - performance rights On 21 December 2017, 6,700,000 unlisted Performance Rights were issued to directors and employees of the Group, with vesting conditions as described in Note 21(d). As at the end of the financial year only Tranche 2 remains outstanding (1,450,000). Number Issued (No.) Grant Date Exercise Price ($) Expiry/Amortisation Date Underlying Share Price on Grant ($) Total Fair Value ($) – Life of Right Tranche 1¹ Tranche 2 Tranche 3¹ Tranche 4 Tranche 5¹ 1,300,000 1,300,000 1,450,000 1,450,000 1,200,000 21-Dec-2017 21-Dec-2017 21-Dec-2017 21-Dec-2017 21-Dec-2017 N/A N/A N/A N/A N/A 30-Nov-2019 30-Nov-2019 24-Jul-2019 30-Nov-2022 30-Nov-2019 $0.17 $0.17 $0.17 $0.17 $0.17 $221,000 $221,000 $246,500 $246,500 $204,000 Total Fair Value ($) – Expensed 30 June 2020 $47,624 $47,624 $10,182 $30,698 $43,961 ¹ On 22 August 2019 and subsequent to the reporting date, the vesting conditions on Tranches 1, 3 and 5 had been met, with 100% of those performance rights exercises and shares allotted. ² On 30 November 2019, the Tranche 2 performance rights expired on basis that the vesting condition, as defined in Note 22, had not been met as at that date. $180,089 34. Events occurring after the reporting date There have been no matters or circumstances occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect the operations of the Group, the result of those operations, or the state of affairs of the Group in future financial years, other than; • On 14 July 2020, the Company completed a placement of 19.2 Million shares at a price of $0.28 per share to raise $5.4 Million (before costs of raising). This represented the 2nd tranche of the placement announced on 28 April 2020 after shareholder approval was received at a General Meeting held on 10 July 2020, for related parties DGO Gold Limited (12.2 Million New Shares) and Mr. Peter Hood (1 Million New Shares) to participate. • On 29 July 2020, the Company completed an allotment of 450,454 unlisted option, zero priced exercise and expiring 29 July 2022 (“ZEPO’s”). These were issued to directors Mr. Andrew Beckwith (163,207 ZEPO’s), Mr. Simon Lill (130,566 ZEPO’s) and Messrs Eduard Eshuys, Peter Hood and Bruce Parncutt (52,227 ZEPO’s each), after shareholder approval was received at a General Meeting held on 10 July 2020, 60 De Grey Mining Limited • On 18 September 2020, the Company completed a placement of 73.1 Million shares to sophisticated, professional and institutional investors including clients of Argonaut Securities Pty Limited, Canaccord (Genuity) Limited and Bell Potter Securities Pty Ltd at a price of $1.20 per share to raise $87.72 Million (before costs of raising). This represented the 1st tranche of the placement announced on 14 September 2020, with the 2nd tranche of 10.3 Million shares to raise a further $12.36 Million subject to shareholder approval of related party participation by DGO Gold Limited (12 Million New Shares) and Mr. Peter Hood (300,000 New Shares). • On 18 September 2020, an allotment was made of 140,846 Performance rights (“rights”) to Mr. Glenn Jardine after shareholder approval was received at a General Meeting held on 10 July 2020, and he had completed his employment probation period. The rights represent the long-term incentive component of Mr. Jardine’s remuneration with respect to his first year of employment • Since the reporting date, a total of 9,637,047 unlisted options have been exercised, at various exercised prices between $0.10 and $0.35, raising a total of $1,588,621. 35. Parent entity information The following information relates to the parent entity, De Grey Mining Limited, at 30 June 2020. The information presented here has been prepared using accounting policies consistent with those presented in Note 1. Parent Entity 2020 $ 2019 $ Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Reserves Accumulated losses Total equity Loss for the year Other comprehensive loss Total comprehensive loss for the year 28,670,525 51,094,654 79,765,179 3,110,704 1,422,045 4,532,749 130,740,019 860,954 (56,368,543) 75,232,430 (3,953,338) - (3,953,338) 2,225,702 31,404,480 33,630,182 14,016,475 - 14,016,475 70,787,718 1,414,570 (52,588,581) 19,613,707 (2,009,130) - (2,009,130) Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019. Capital commitments The parent entity had no capital commitments as at 30 June 2020 and 30 June 2019. Accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1. 61 De Grey Mining Limited Director’s Declaration In the directors’ opinion: (a) the financial statements and notes set out on pages 30 to 61 are in accordance with the Corporations Act 2001, including: (i) (ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and giving a true and fair view of the company’s and the consolidated entity’s financial position as at 30 June 2020 and of their performance for the financial year ended on that date; the audited remuneration report set out on pages 20 to 26 of the directors’ report complies with section 300A of the Corporations Act 2001; there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and (b) (c) Note 1 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. Simon Lill Executive Chairman Perth, 30 September 2020 62 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DE GREY MINING LIMITED Report on the Financial Report Opinion We have audited the financial report of De Grey Mining Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2020 the consolidated statement of 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: a) 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 2020 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 have 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 (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our ethical requirements in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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 as a while, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How our audit addressed the key audit matter exploration Deferred expenditure (refer notes 1(L) and 13) and evaluation The Group operates as an exploration entity its primary activities entail and as such expenditure focussed on the exploration for and evaluation of economically viable mineral deposits. These activities are currently limited to the Pilbara region in Western Australia. All exploration and evaluation expenditure incurred during the year has been capitalised and recognised as an asset in the Statement of Financial Position. The closing value of deferred exploration and evaluation expenditure is $48,938,399 as at 30 June 2020. The carrying value of exploration and evaluation assets is subjective based on the Group’s intention, and ability, to continue to explore the asset. The carrying value may also be affected by results of ongoing exploration activity indicating that the mineral reserves and resources may not be commercially viable for extraction. This creates a risk that the asset value included within the financial statements may not be recoverable. the Our audit procedures included the following: • ensuring the Group’s continued right to explore in the relevant areas of interest including assessing documentation such as exploration and mining licences; • enquiring of management and the directors as to the Group’s intentions and strategies for future exploration activity and reviewing budgets and cash flow forecasts; • assessing the results of recent exploration activity to determine whether there are any indicators suggesting a potential impairment of the carrying value of the asset; • assessing the Group’s ability to finance the planned exploration and evaluation activity; and • assessing the adequacy of the disclosures made by the Group in the financial report. Issued capital (refer note 21) Our audit procedures included the following: The Group has issued ordinary shares as a result of capital raisings, on the exercise of unlisted options and on the exercise of performance rights. As a result of these issues the number of ordinary shares has risen significantly during the year. • examining each issue of and conversion to fully paid ordinary shares during the year as shown in note 21; and • assessing the adequacy of the disclosures made by the Group in the financial report. Share based payments – performance rights (refer notes 21 and 33(b)) Our audit procedures included the following: The Group awarded performance rights to key management personnel and employees in the 2018 year. The rights vest subject to the achievement of specific performance milestones. Three tranches of these rights vested during the year and ordinary shares were issued while a further tranche of rights lapsed prior to the associated milestone being met. • assessing the recognition of the value of the performance rights; • assessing whether the accounting treatment for both the rights vested and exercised and the rights which lapsed was in accordance with the relevant accounting standard; and • assessing the adequacy of the disclosures made by the Group in the financial report. Key Audit Matter Deferred Taxation (refer note 7) The Company relies on the use of an expert to prepare the taxation disclosures which are included in the financial statements. How our audit addressed the key audit matter In accordance with Australian Auditing Standards, we relied on the work of management's expert with respect to the assumptions used in the calculation of deferred Our audit taxes. procedures included the following: • examining the qualifications, objectivity and experience of management's expert; • evaluating the assumptions, methodologies and conclusions used by in preparing their estimate of deferred taxes; and the Group • assessing the adequacy of the disclosures made by the Group in the financial report. Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2020, 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. Directors’ Responsibilities 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 the 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 Company’s ability 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 Company or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significant in the audit of the financial report of the current period and are therefore key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh public interest benefits of such communication. Report on the Remuneration Report Opinion We have audited the Remuneration Report included on pages 20 to 26 of the directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of De Grey Mining Limited, for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BUTLER SETTINERI (AUDIT) PTY LTD LUCY P GARDNER Director Perth Date: 30 September 2020 ASX Additional Information De Grey Mining Limited Additional information required by Australian Stock Exchange Ltd, and not shown elsewhere in this report, is as follows. The information is current as at 9 October 2020. (a) Distribution of equity securities Analysis of numbers of equity security holders by size of holding: 1 1,001 5,001 10,001 100,001 - - - - 1,000 5,000 10,000 100,000 and over The number of shareholders holding marketable parcel of shares are: less than a Ordinary shares Number of holders Number of shares 2,106 4,065 1,841 3,060 733 11,805 341 1,346,301 11,297,562 14,676,048 102,084,749 1,144,995,401 1,274,400,061 59,927 (b) Twenty largest shareholders The names of the twenty largest holders of quoted ordinary shares are as follows: Listed ordinary shares Number of shares Percentage of ordinary shares DGO Gold Limited 1 Citicorp Nominees Pty Limited 2 3 HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Pty Limited 4 5 Northwest Nonferrous Australia Mining Pty Ltd 6 Kirkland Lake Gold Ltd 7 Mr Yi Weng & MS Ning Li 8 HSBC Custody Nominees (Australia) Limited 9 Merrill Lynch (Australia) Nominees Pty Limited 10 BNP Paribas Nominees Pty Ltd 11 National Nominees Limited 12 Mr John Henry Matterson 13 Caroline House Superannuation Fund Pty Ltd 14 Mr Andrew Rhys Jackson 15 HSBC Custody Nominees (Australia) Limited - A/C 2 16 Penand Pty Ltd 17 BNP Paribas Nominees Pty Ltd 18 Mr Raymond Wolpers & Mrs Leith Anne Wolpers 19 Nelson Enterprises Pty Ltd 20 Calliton Pty Ltd 193,577,703 188,332,323 171,345,674 85,576,596 51,015,579 35,656,084 18,971,275 17,818,291 12,044,787 11,129,979 8,960,055 8,700,000 7,941,621 7,095,000 6,851,524 4,802,181 4,785,866 3,700,000 3,312,500 3,300,000 844,917,038 68 15.19% 14.78% 13.45% 6.72% 4.00% 2.80% 1.49% 1.40% 0.95% 0.87% 0.70% 0.68% 0.62% 0.56% 0.54% 0.38% 0.38% 0.29% 0.26% 0.26% 66.30% De Grey Mining Limited (c) Substantial shareholders The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are: DGO Gold Limited (i) Van Eck Associates Corporation and its associates Number of Shares % 193,577,703 71,905,550 15.19% 5.64% (i) DGO Ltd has confirmed its commitment to subscribe for 10 Million placement shares which will be subject to shareholder approval at the upcoming General Meeting to be held 23 October 2020. Following that approval, its holding will move to ~15.8% of DEG’s issued shares. (d) Unquoted (unlisted) Securities Holders of 20% or more of the class Class Number of Securities Number of Holders Holder Name Unlisted $0.10 options, expiry 31 October 2020 Unlisted $0.30 options, expiry 31 May 2021 750,000 3,050,000 1 8 Phil Tornatora Andrew Beckwith Unlisted $0.35 options, expiry 12 March 2022 Unlisted $0.10 options, expiry 13 Dec 2021 Unlisted $Nil options, expiry 29 July 2022 Performance rights – Series 1 4,507,000 2,000,000 450,454 1,450,000 Performance rights – Series 2 140,846 28 Nil 1 5 Killin Investments Pty Ltd, Andrew Beckwith Simon Lill Simon Lill Andrew Beckwith Craig Nelmes Glenn Jardine 5 1 Number of Securities 750,000 1,000,000 - 2,000,000 163,207 130,566 500,000 400,000 300,000 140,846 (e) Voting rights All ordinary shares (whether fully paid or not) carry one vote per share without restriction. The Quoted and unquoted (unlisted) options have no voting rights. (f) Corporate Governance De Grey Mining Ltd and its subsidiaries (“Group”) and the board are committed to achieving and demonstrating the highest standards of corporate governance. The Group has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. The 2020 corporate governance statement reflects the corporate governance practices in place throughout the 2020 financial year. The 2020 corporate governance statement is current as at 30 September 2020 and was approved by the board of Directors of De Grey Mining Ltd. A description of the group's current corporate governance practices is set out in the group's corporate governance statement which can be viewed at www.https://degreymining.com.au/corporate-governance. (g) Application of Funds During the financial year, De Grey Mining Limited confirms that it has used its cash and assets (in a form readily convertible to cash) in a manner which is consistent with the Company’s business objectives. 69 De Grey Mining Limited Annual Mineral Resources Statement JORC Table 1: Total Gold Mineral Resource Estimate as at March 2020 (JORC 2012) by deposit Withnell - Mining Centre Measured Indicated Inferred Total Au g/t Au Oz Mt Au g/t Au Oz Deposit Type Withnell Open Pit Withnell Underground Mallina Toweranna Open Pit Toweranna Underground Camel Calvert Roe Dromedary Leach Pad Hester Withnell Mining Centre Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Type Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Wingina Mt Berghaus Amanda Wingina Mining Centre Mt 0.63 0.63 1.26 0.18 0.01 0.19 0.06 0.01 0.08 0.10 1.4 1.6 1.5 28,500 33,200 61,700 2.8 2.1 2.8 2.7 2.5 2.7 2.2 16,400 600 17,000 5,500 1,000 6,500 7,200 0.10 2.2 7,200 0.98 0.66 1.63 1.8 1.7 1.8 57,500 34,800 92,300 2.68 0.40 3.08 1.8 1.6 1.7 152,100 20,500 172,700 0.36 2.68 3.05 0.11 0.11 0.71 0.90 1.61 0.62 3.71 4.33 0.32 0.14 0.46 0.43 0.56 0.99 0.13 0.07 0.20 0.03 0.03 0.06 0.86 0.86 0.04 0.01 0.06 3.49 8.23 11.72 1.2 1.9 1.8 4.3 4.3 1.3 1.2 1.2 2.4 2.1 2.1 2.6 1.4 2.2 1.3 1.3 1.3 1.5 2.3 1.8 1.6 1.6 1.6 0.7 0.7 2.1 2.1 2.1 1.5 1.9 1.8 14,400 163,500 177,800 15,600 15,600 30,200 33,900 64,100 47,700 245,500 293,200 26,800 6,500 33,300 17,900 23,800 41,700 6,000 5,300 11,300 1,400 1,700 3,200 19,300 19,300 3,000 900 3,900 166,800 496,700 0.65 0.34 0.99 0.68 0.27 0.95 0.51 0.07 0.58 1.84 0.68 2.52 1.3 1.5 1.4 1.8 1.7 1.7 1.3 1.8 1.4 1.5 1.6 1.5 27,000 16,300 43,300 38,900 14,400 53,300 21,700 4,200 25,800 87,600 34,900 122,500 70 Mt 0.15 0.53 0.68 0.00 2.38 2.39 1.68 3.47 5.15 0.24 2.21 2.46 0.56 0.56 0.04 0.14 0.19 0.05 0.23 0.28 0.11 0.21 0.33 0.04 0.08 0.12 0.03 0.05 0.07 2.35 9.87 Au g/t Au Oz 1.1 2.2 2.0 2.5 3.9 3.9 1.3 1.5 1.5 1.6 2.1 2.1 3.6 3.6 1.1 1.8 1.7 0.8 1.2 1.2 1.6 2.2 2.0 1.6 1.8 1.7 1.3 1.4 1.4 1.4 2.4 2.2 5,300 38,000 43,300 300 301,100 301,400 72,300 171,100 243,300 12,600 152,500 166,400 64,500 64,500 1,500 8,600 10,100 1,400 9,300 10,700 5,700 14,800 20,500 2,200 4,700 6,900 1,100 2,100 3,300 102,300 766,600 870,200 Mt 1.14 3.85 4.99 0.00 2.50 2.50 2.39 4.36 6.76 0.86 5.92 6.79 0.56 0.56 0.54 0.29 0.84 0.48 0.79 1.27 0.30 0.30 0.60 0.17 0.12 0.29 0.86 0.86 0.07 0.06 0.13 6.82 18.75 25.58 Au g/t Au Oz 1.3 1.9 1.8 2.5 3.9 3.9 1.3 1.5 1.4 2.2 2.1 2.1 3.6 3.6 2.6 1.7 2.2 1.3 1.3 1.3 1.8 2.2 2.0 1.9 1.7 1.9 0.7 0.7 1.8 1.6 1.7 1.5 2.2 2.0 48,200 234,700 282,900 300 316,700 317,100 102,500 204,900 307,400 60,300 398,000 459,600 64,500 64,500 44,700 15,700 60,400 19,300 33,100 52,400 17,200 21,100 38,300 10,800 6,400 17,200 19,300 19,300 4,100 3,100 7,200 326,600 1,298,200 1,626,100 Mt 0.34 1.08 1.42 0.99 2.40 3.39 0.89 0.56 1.44 2.21 4.04 6.25 Au g/t Au Oz 1.3 1.7 1.6 1.1 1.2 1.2 0.9 1.1 0.9 1.1 1.3 1.2 14,400 57,400 71,700 35,800 91,800 127,600 24,700 19,200 43,900 74,900 168,400 243,200 Mt 3.67 1.82 5.49 1.67 2.67 4.34 1.40 0.63 2.03 6.74 5.12 11.86 Au g/t Au Oz 1.6 1.6 1.6 1.4 1.2 1.3 1.0 1.2 1.1 1.5 1.4 1.4 193,500 94,200 287,700 74,700 106,300 181,000 46,300 23,300 69,700 314,500 223,800 538,400 Wingina - Mining Centre Measured Indicated Inferred Total 663,500 12.24 Au g/t Au Oz Mt Au g/t Au Oz Mt 2.68 0.40 3.08 1.8 1.6 1.7 152,100 20,500 172,700 JORC Table 2: Total Gold Mineral Resource Estimate as at March 2020 (JORC 2012) at the by Mining Centre Measured Indicated Inferred Total De Grey Mining Limited Area Type Withnell Mining Centre Wingina Mining Centre TOTAL Pilbara Gold Project Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Mt 0.98 0.66 1.63 2.68 0.40 3.08 3.66 1.06 4.71 Au g/t Au Oz Mt Au g/t Au Oz 1.8 1.7 1.8 1.8 1.6 1.7 1.8 1.6 1.7 57,500 34,800 92,300 152,100 20,500 172,700 209,700 55,400 3.49 8.23 11.72 1.84 0.68 2.52 5.33 8.91 265,000 14.24 1.5 1.9 1.8 1.5 1.6 1.5 1.5 1.9 1.7 Mt 2.35 9.87 166,800 496,700 663,500 12.24 87,600 34,900 122,500 254,300 531,700 786,000 2.21 4.04 6.25 4.57 13.90 18.49 Au g/t Au Oz Mt Au g/t Au Oz 1.4 2.4 2.2 1.1 1.3 1.2 1.2 2.1 1.9 102,300 766,600 870,200 74,900 168,400 243,200 177,200 935,000 1,113,500 6.82 18.75 25.58 6.74 5.12 11.86 13.56 23.87 37.44 1.5 2.2 2.0 1.5 1.4 1.4 1.5 2.0 1.8 326,600 1,298,200 1,626,100 314,500 223,800 538,400 641,200 1,522,000 2,164,500 All gold deposits are reported at a 0.5g/t Au cut-off grade except Withnell Underground (beneath Pit 33 Whittle shell) where a 2.0g/t cut- off was applied and Wingina below -55mRL where a 1.0g/t Au cut-off was applied. JORC Table 3: Total Base Metals Mineral Resource Estimate as at September 2019 (JORC 2012) Deposit Class Discovery Massive Sulphide Discovery Deposit Halo Mineralisation Discovery Deposit Total Orchard Deposit Total Tank Indicated Inferred Total Indicated Inferred Total Indicated Inferred Total Indicated Inferred Total Tonnes Mt 0.27 0.35 0.61 0.15 0.63 0.78 0.41 0.98 1.39 2.08 2.08 Zn % 5.2 5.2 5.2 0.9 1.1 1.0 3.7 2.6 2.9 3.4 3.4 Pb % 2.4 2.1 2.2 0.5 0.5 0.5 1.7 1.0 1.2 1.4 1.4 Cu % 0.2 0.2 0.2 0.1 0.1 0.1 0.2 0.1 0.1 0.1 0.1 Turner River Total September 2019 Base Metal Mineral Resources De Grey Total Class Indicated Inferred Total Tonnes Mt 0.41 3.06 3.47 Zn % 3.7 3.1 3.2 Pb % 1.7 1.3 1.3 Cu % 0.2 0.1 0.1 Au ppm 1.9 1.3 1.5 0.9 0.6 0.6 1.6 0.8 1.0 0.7 0.7 Au ppm 1.6 0.7 0.8 Zn Ag ppm Metal Tonnes 192 13,900 196 18,200 32,100 194 47 1,300 60 6,900 8,200 15,200 25,100 40,300 57 140 108 118 Pb Cu 6,400 7,100 13,500 700 2,900 3,600 7,100 10,000 17,100 600 600 1,200 100 400 400 700 900 1,700 Au Oz 16,300 14,100 30,400 4,300 11,700 16,000 20,600 25,800 46,400 Ag kOz 1,600 2,200 3,800 200 1,200 1,400 1,900 3,400 5,300 105 105 70,800 70,800 28,900 28,900 2,400 2,400 45,500 45,500 7,000 7,000 Zn Ag ppm Metal Tonnes 15,200 140 95,800 106 111,000 110 Pb Cu 7,100 39,000 46,100 700 3,400 4,100 Au Oz 20,600 71,300 91,900 Ag kOz 1,900 10,400 12,300 Discovery and Orchard Tank deposits are reported at a 0.5% Zn cut-off grade Resources and Reserves As at 30 June 2020, De Grey’s Group Gold Mineral Resource estimate was 37.44 million tonnes at 1.8 grams per tonne gold for 2.164 million ounces (JORC Table 2). Material changes to the Group’s Mineral Resource inventory have been made between the September 2019 and March 2020 estimates. Overall, the gold resources for the MGP have increased 29% and the oxide and fresh domains increased 12% and 37% respectively. The Base Metals Resource did not change. The gold resource growth is attributed to the Withnell Mining Centre where a combined significant increase (49%) occurred from extension drilling at the Toweranna, Withnell and Mallina deposits. At the Wingina Mining Centre, resource did not change. 71 De Grey Mining Limited Comparison of the September 2019 and March 2020 Gold Mineral Resources. Measured Indicated Inferred Total Area Type Withnell Mining Centre Wingina Mining Centre TOTAL Pilbara Gold Project Oxide Fresh Total Oxide Fresh Total Oxide Fresh Total Mt Au g/t Au Oz Mt Au g/t Au Oz Mt Au g/t Au Oz Mt Au g/t Au Oz 106% 106% 106% 100% 100% 100% 102% 104% 102% 98% 98% 98% 100% 100% 100% 100% 99% 99% 4% 4% 4% 1% 2% 1% 114% 121% 119% 100% 100% 100% 109% 120% 115% 96% 88% 90% 100% 100% 100% 97% 89% 92% 10% 7% 8% 6% 7% 7% 210% 186% 190% 100% 100% 100% 137% 149% 146% 101% 106% 104% 100% 100% 100% 105% 113% 112% 112% 97% 99% 44% 68% 64% 134% 148% 144% 100% 100% 100% 115% 134% 126% 95% 99% 99% 100% 100% 100% 98% 102% 102% 28% 47% 42% 12% 37% 29% Withnell - Mining Centre Measured Indicated Inferred Total Au g/t Au Oz Mt Au g/t Au Oz Mt 1.26 1.17 8% 1.5 1.5 -2% 61,700 58,300 6% Mt 4.99 2.43 105% 2.50 2.22 13% 6.76 3.83 77% 6.79 5.33 28% 0.56 NA 0.84 0.84 1.27 1.27 0.60 0.60 0.29 0.29 0.86 0.86 0.13 0.13 Au g/t Au Oz 1.8 1.8 0% 3.9 4.1 -4% 1.4 1.3 8% 2.1 2.1 1% 3.6 NA 2.2 2.2 1.3 1.3 2.0 2.0 1.9 1.9 0.7 0.7 1.7 1.7 282,900 137,400 106% 317,100 291,900 9% 307,400 160,700 91% 459,600 356,600 29% 64,500 NA 60,400 60,400 52,400 52,400 38,300 38,300 17,200 17,200 19,300 19,300 7,200 7,200 Mt 0.68 0.08 704% 2.39 1.55 54% 5.15 2.57 Au g/t Au Oz 2.0 2.0 -2% 3.9 4.0 -1% 1.5 1.3 43,300 5,500 687% 301,400 197,900 52% 243,300 110,100 101% 10% 121% 2.1 1.8 14% 3.6 166,400 72,600 129% 64,500 2.46 1.23 101% 0.56 NA 0.19 0.19 0.28 0.28 0.33 0.33 0.12 0.12 0.07 0.07 12.24 6.43 90% NA 10,100 10,100 10,700 10,700 20,500 20,500 6,900 6,900 3,300 3,300 NA 1.7 1.7 1.2 1.2 2.0 2.0 1.7 1.7 1.4 1.4 2.2 2.1 4% Deposit Type Withnell O/P Withnell U/G Mallina Toweranna Open Pit Toweranna Underground Camel Calvert Roe Dromedary Leach Pad Hester Withnell Mining Centre 2020 2019 Change 2020 2019 Change 2020 2019 Change 2020 2019 Change 2020 2019 Change 2020 2019 Change 2020 2019 Change 2020 2019 Change 2020 2019 Change 2020 2019 Change 2020 2019 Change 2020 2019 Change 0.19 0.19 2.8 2.8 17,000 17,000 0.08 0.08 0.10 0.10 2.7 2.7 2.2 2.2 6,500 6,500 7,200 7,200 3.05 1.17 160% 0.11 0.67 -83% 1.61 1.26 27% 4.33 4.10 6% 0.46 0.46 0.99 0.99 0.20 0.20 0.06 0.06 0.86 0.86 0.06 0.06 1.8 2.0 -7% 4.3 4.4 -2% 1.2 1.2 -1% 2.1 2.2 -2% 2.2 2.2 1.3 1.3 1.8 1.8 1.6 1.6 0.7 0.7 2.1 2.1 1.8 1.9 177,800 73,700 141% 15,600 94,000 -83% 64,100 50,600 27% 293,200 284,000 3% 33,300 33,300 41,700 41,700 11,300 11,300 3,200 3,200 19,300 19,300 3,900 3,900 663,500 615,000 -10% 8% 72 1.63 1.54 6% 1.8 1.8 -2% 92,300 88,900 4% 11.72 9.82 19% 870,200 437,500 99% 25.58 17.79 44% 2.0 2.0 -1% 1,626,100 1,141,400 42% De Grey Mining Limited At Toweranna, drilling at depth has increased the total ounces from 356,600 to a combined open pit and underground resource of 520,000 ounces. A 29% increase was attributed the open pit resource and a new underground resource was defined as 64,500ounces. Withnell drilling continued to target depth and lateral extensions resulting in a combined increased from 429,300 to 600,000ounces. A 106% increase was attributed the open pit resource and a 9% increase to the underground resource. A large portion of the open pit increase was due to a larger open pit shell chosen to define the open pit resource and reflects the increased gold price during the period. Mallina drilling targeting both lateral and depth extensions to the mineralisation resulting in an 91% increase to 307,400 ounces from 160,700 ounces. Mineral Resource and Ore Reserve governance and internal controls De Grey ensures that the Mineral Resource and Ore Reserve estimates quoted are subject to governance arrangements and internal controls activated at a site level and at the corporate level. Internal and external reviews of Mineral Resource estimation procedures and results are carried out through a team of experience technical personnel that is comprised of highly competent and qualified professionals. These reviews have not identified any material issues. De Grey reports its Mineral Resources and Ore Reserves on at least an annual basis in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code) 2012 Edition. Competent Persons named by De Grey are Members or Fellows of the Australasian Institute of Mining and Metallurgy and/or the Australian Institute of Geoscientists and qualify as Competent Persons as defined in the JORC Code. The Company’s procedures for the sample techniques and sample preparation are regularly reviewed and audited by independent experts. Assays are performed by independent internationally accredited laboratories with a QAQC program showing acceptable levels of accuracy and precision. The exploration assay results database is maintained and appropriate backed-up internally. All De Grey Mineral Resource estimates have been undertaken independently by Payne Geological Services Pty Ltd. COMPETENT PERSON STATEMENT The information in this Annual Mineral Resources Statement is based on, and fairly represents information and supporting documentation prepared by Mr Paul Payne, a Competent Person who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Payne is a full-time employee of Payne Geological Services. Mr Payne has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken 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 Payne consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Mr Payne has approved this Mineral Resources Statement as a whole and consents to its inclusion in the Annual Report in the form and context in which it appears. In relation to Mineral Resources, the Company confirms that all material assumptions and technical parameters that underpin the relevant market announcement continue to apply and have not materially changed. 73 Schedule of Interests in Mining Tenements De Grey Mining Limited Project/Location Country Tenement Percentage held/earning Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Farno-McMahon Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Mallina Gold Project Vanmaris Vanmaris Vanmaris Vanmaris Vanmaris Vanmaris 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 Australia Australia Australia Australia Australia E47/891 E45/2533 E45/2364 E45/2983 E45/2995 E45/3390 E45/3391 E45/3392 E45/4751 E47/3552 E47/3553 E47/3554 E47/3750 P45/3029 P47/1866 E47/2502 E47/2720 E47/3504 M47/473 M47/474 M47/475 M47/476 M47/477 M47/480 L47/164 L47/165 E47/3399 E47/3428 E47/3429 E47/3430 P47/1732 P47/1733 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 30%¹ 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 0%² 0%² 0%² 0%² 0%² 0%² ¹ De Grey has entered into an option to joint venture agreement with Farno McMahon Pty Ltd (owned 100% by Novo Resources Corp) to earn up to a 75% interest, and during the year earned an initial 30% interest (Note 30(d)). ² De Grey Option has an option to acquire an 80% interest from tenement holder Mr Mathew Vanmaris (Note 30(g)). 74 De Grey Mining Limited Registered Office Level 3, Suites 24-26, 22 Railway Road, Subiaco WA 6008 Postal Address PO Box 2023, Subiaco WA 6904 Telephone: +61 8 6117 9328 Fax: +61 8 6117 9330 E-mail: admin@degreymining.com.au Website: www.degreymining.com.au 75 

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