Duke Realty Annual Report 2022

Plain-text annual report

ANNUAL REPORT 2022 F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 2 ABN 840 119 031 864 | ASX : DRE CORPORATE DIRECTORY DIRECTORS Paul Chapman (Non-executive Chairman) Dean Tuck (Managing Director) SHARE REGISTRY Computershare Level 5, 191 St Georges Tce Ian Gordon (Non-executive Director) Perth, WA, 6000 Philip Crutchfield (Non-executive Director) Australia COMPANY SECRETARY Jessamyn Lyons REGISTERED OFFICE Level 3, 35 Outram Street West Perth WA 6005 Telephone: +61 (8) 9473 8345 Website: www.dreadnoughtresources.com.au Telephone: + 61 8 6188 0800 AUDITORS PKF Perth Level 5, 35 Havelock Street West Perth WA 6005 STOCK EXCHANGE Australian Securities Exchange ABN 40 119 031 864 (Home Exchange: Perth, Western Australia) ASX Code: DRE DREADNOUGHT RESOURCES (ASX:DRE) IS A HIGHLY ACTIVE WEST AUSTRALIAN MINERAL EXPLORER FOCUSED ON FINDING THE METALS NEEDED NOW AND IN THE FUTURE. As a small and dedicated team with more than 50 years Dreadnought currently has three core projects: experience, we pride ourselves in how we operate, including Tarraji-Yampi Cu-Ag-Au-Co, Mangaroon Ni-Cu-PGE-REE- our established relationships with companies and communities. Au and the Central Yilgarn Project. 1 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022CONTENTS CHAIRMAN’S LETTER DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDIT REPORT ASX ADDITIONAL INFORMATION 3 5 28 29 30 31 32 33 68 69 74 2 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022CHAIRMAN’S LETTER DEAR FELLOW SHAREHOLDER, We are pleased to present the 2022 Annual Report for Dreadnought Resources Limited (“Dreadnought” or the “Company”). The past year has been another active year for Dreadnought and we have made substantial progress on multiple fronts. Many view Dreadnought as an overnight success story. The reality is that it has taken about 3,000 nights to get to where we are today. Over those 3,000 nights, we have stuck to a number of basic philosophies: • put your money where your mouth is. • drive significant equity returns, that is where the real money is for us and hence our shareholders. • dominate an area and ensure that our projects are something that others may want to own someday. • • • generate a relentless and real news flow, explorers that do well are active and convey regular and meaningful information to investors. put your foot on good projects and the funding will come. find metal and do not be dissuaded by those that say you should be focused on a particular metal or project. • manage risk and create option value for shareholders. • engage good people and remunerate them fairly with plenty of upside to equity success. 3 3 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022NONE OF THIS IS PARTICULARLY ROCKET SCIENCE, IT IS JUST A MATTER OF APPLYING THE RIGOR AND DISCIPLINE TO KEEP GOING WHEN THE WIND MAY BE BLOWING AGAINST YOU. I always like to remember our milestones and these are shown below: 2014: Formed the Tarraji Joint Venture 2015: Acquired Rocky Dam 2017: Acquired Yampi from Rio Tinto 2017: Consolidated ground around Tarraji Yampi 2018: Finalised first ever deeds of access with Department of Defence over YSTA military reserve 2019: ASX listing and board control 2019: Acquired Illaara greenstone belt to ensure year-round news flow 2020: High-grade Au discovery at Metzke's Find 2020: Mangaroon acquired 2021: High-grade Cu-Ag-Au-Co discovery at Orion 2021: FQM Option to Earn-in on Mangaroon Ni-Cu-PGE Project 2022: Ni-Cu sulphides identified in 9/12 Holes at Mangaroon Ni-Cu-PGE Project 2022: FQM Exercises Option to commence Earn-in 2022: High-Grade rare earths discovered at Yin/Sabre To dominate around Tarraji-Yampi, Mangaroon and Central Yilgarn we have completed 2 joint ventures, 14 acquisitions and 1 divestment. Since gaining our ASX listing in 2019, we have raised $32.4 million in equity via 11 different raisings and converted those funds into a market capitalisation of ~$350 million. We have also issued 229 market sensitive announcements at a consistent rate of 1.2 per week from listing. In the year ahead we will continue at a relentless pace. While success breeds its own set of challenges, I can assure shareholders we have a team that is up to the task. In closing, we would like to thank our stakeholders including traditional owners, local communities, employees, joint venture partners, suppliers and other business partners. We also would take this opportunity to thank our fellow shareholders for your ongoing support. PAUL CHAPMAN Non-Executive Chairman 4 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Your directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Dreadnought Resources Limited (referred to hereafter as the Parent Entity, Dreadnought or the Company) and the entities it controlled at the end of, or during, the year ended 30 June 2022. DIRECTORS The following persons were directors of the Company during the whole of the financial year and up to the date of this report, unless otherwise stated: Paul Chapman (Non-executive Chairman) Appointed 9 April 2019 Dean Tuck (Managing Director) Appointed 9 April 2019 Ian Gordon (Non-executive Director) Appointed 21 December 2017 Paul Payne (Non-executive Director) Appointed 21 December 2017– retired 13 September 2022 Philip Crutchfield (Non-executive Director) Appointed 13 September 2022 PRINCIPAL ACTIVITIES The principal activities of the Group during the financial year were minerals exploration and development. There were no significant changes in the nature of activities of the Group during the year. DIVIDENDS No dividends have been declared or paid during the year (2021: Nil). OPERATING RESULTS AND FINANCIAL POSITION The net result of operations for the financial year was a loss of $1,433,764 (2021: $1,277,865). The net assets of the Group have increased by $7,356,437 during the financial year from $12,158,775 at 30 June 2021 to $19,515,212 at 30 June 2022. REVIEW OF OPERATIONS Group Overview The Group is an ASX-listed exploration and development company focussing on acquiring and exploring high-quality projects within the state of Western Australia. The Company’s strategy is to discover major deposits on these projects either by itself or in joint venture with major mining companies. 5 4 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DIRECTORS report, unless otherwise stated: Paul Chapman (Non-executive Chairman) Appointed 9 April 2019 Dean Tuck (Managing Director) Appointed 9 April 2019 Ian Gordon (Non-executive Director) Appointed 21 December 2017 Paul Payne (Non-executive Director) Philip Crutchfield (Non-executive Director) Appointed 13 September 2022 PRINCIPAL ACTIVITIES Appointed 21 December 2017– retired 13 September 2022 The principal activities of the Group during the financial year were minerals exploration and development. There were no significant changes in the nature of activities of the Group during the year. DIVIDENDS No dividends have been declared or paid during the year (2021: Nil). OPERATING RESULTS AND FINANCIAL POSITION The net result of operations for the financial year was a loss of $1,433,764 (2021: $1,277,865). The net assets of the Group have increased by $7,356,437 during the financial year from $12,158,775 at 30 June 2021 to $19,515,212 at 30 June 2022. REVIEW OF OPERATIONS Group Overview The Group is an ASX-listed exploration and development company focussing on acquiring and exploring high-quality projects within the state of Western Australia. The Company’s strategy is to discover major deposits on these projects either by itself or in joint venture with major mining companies. DREADNOUGHT RESOURCES LIMITED DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT DIRECTORS’ REPORT Your directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Dreadnought Resources Limited (referred to hereafter as the Parent Entity, Dreadnought or the Company) and the entities it controlled at the end of, or during, the year ended 30 June 2022. The following persons were directors of the Company during the whole of the financial year and up to the date of this The highlights and significant changes in state of affairs during the year and to date include: Mangaroon Ni-Cu-PGE (FQM Earn-In) • On 30 August 2022, First Quantum Minerals Ltd (TSE:FM “First Quantum”), a ~A$20B TSX listed company, exercised its earn-in option over the Mangaroon Ni-Cu-PGE Project. First Quantum funded the option period and can now earn an initial 51% interest by funding $12M of expenditure by 1 March 2026. First Quantum may withdraw at any time during the earn-in phase with 0% interest. First Quantum also paid Dreadnought $150,000 upon the exercise of the option to earn-in. • Disseminated to net-textured/brecciated magmatic Ni-Cu sulphide (pyrrhotite-chalcopyrite-pentlandite) mineralisation has been intersected in 9 out of the 12 RC holes drilled to date. The drilling covers only ~10% of strike along the ~45km long Money Intrusion, located within the Project. The Money Intrusion has been confirmed as having a bladed/funnel shape with mineralisation along both for massive sulphide mineralisation at depth. sides of intrusion, highlighting the potential the • Mangaroon Rare Earths (100%) Dreadnought made significant progress on the 100% owned rare earths (“REE”) at Mangaroon as summarised below: 100% Controlled by Dreadnought • Mangaroon REE are 100% owned and controlled by Dreadnought. Genuine Scale Potential Already at Yin and Sabre • Yin discovery contains 3km of confirmed mineralised strike and remains open along 16kms of strike – initial JORC Resource in December 2022 quarter, extensional drilling over 13km of strike planned. • Sabre discovery contains ~1km of confirmed mineralised strike and remains open along strike – initial JORC Resource in March 2023 quarter, extensional and infill drilling planned. Long term incentives fully triggered at JORC Resource of at least 30Mt @ >1% TREO, 31 December 2024. • Significant, Step-Change, Growth Potential Beyond Yin and Sabre • Mineralised Y8 REE ironstones confirmed. • Seven carbonatite targets (C1-C7) may be the regional source of REE. • Confirmed mineralisation at 22 outcropping targets with another 10 prospective targets requiring further work. • 100 additional outcropping targets prospective for REE identified. High-Grade TREO Potential • Numerous thick, high-grade assays already announced from first drill program at Yin. High-grade Neodymium and Praseodymium Concentrate Potential • Yin, like the Yangibana REE project controlled by the ~$550M Hastings Technology Metals Ltd (ASX.HAS), (“Hastings”) is a globally unique REE deposit due to the high proportion of neodymium and praseodymium in the total rare earth oxide (NdPr ratio). NdPr values up to ~40%, nearly double the global average. Positive Metallurgy Results • Initial metallurgical test work from Yin performed well, achieving a recovery of 92.8% at a concentrate grade of 12.3% Nd2 O3 and an average 40% TREO. • Yin is predominantly hosted in monazite which is amenable to commercial processing. Analogous to a Globally Unique, Commercially Viable Development 25kms Away • Yangibana is Dreadnought’s immediate neighbour located only 25km to the northeast of Yin and currently has a JORC Resource of 27.42Mt @ 0.97% TREO with 0.33% Nd2O3+Pr6O11. • Yangibana is under construction and development with first production planned for 2024. Global Strategic Imperative Driving Rare Earth Growth & Prices • Supply chain security and low carbon transition are imperatives against a backdrop of heightened geopolitical tension pushing supply away from China. 4 5 6 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Mangaroon Au, Ni-Cu-PGE, REE (100%) • Dreadnought continues to consolidate ground around Mangaroon including with the acquisition (subject to completion) of the high-grade Diamonds, Star of Mangaroon, Pritchard Well and Twin Peaks gold mines and surrounding areas that cover major regional structures. The tenements host at least ten historic gold mines. Importantly, the tenements are strategically located between Dreadnought’s 100% owned rare earths project to the south-east and the First Quantum Minerals Ni-Cu-PGE Earn-in to the north-west. The tenements are highly prospective for gold, base metals and rare earths. Highlights include: • • o Historical estimated gold production from the gold mines: ~7,500oz Au @ 34.8g/t Au (Star of Mangaroon) and 5,000oz Au @ 7.9g/t Au (Two Peaks). o Shear zones with numerous mineralised 1-10m wide, 20-200m long outcrops containing high-grade gold that remain under explored and undrilled. o Rock chip samples along the shear zones of up to 6.9% Cu, 185 g/t Ag, 121 g/t Au and 23% Pb. o Despite the attractive geology and encouraging historical exploration results the area has seen limited to no follow up drilling. Tarraji-Yampi Cu-Ag-Au-Co (“Tarraji-Yampi”) The high-grade Cu-Ag-Au-Co-Zn Orion discovery was made in 2021. The 2022 auger sampling program “fingerprinted” Orion and applied that knowledge across other under cover areas at Tarraji-Yampi. Pleasingly, nine high-quality Orion look a likes were identified, including six new gossanous and mineralised outcrops, from the auger program completed in April-June 2022. Significant outcropping mineralisation associated with auger anomalism was identified at the new Thunderer and Vanguard prospects with results including: • KMRK0289: 37% Cu, 163g/t Ag, 1.0g/t Au, 0.03% Co • KMRK0290: 39.4% Cu, 165g/t Ag, 1.6g/t Au, 0.02% Co • KMRK0291: 14% Cu, 17g/t Ag, 0.6 g/t Au, 0.10% Co • KMRK0295: 12.9% Cu, 51.5 g/t Ag, 0.02% Co, 0.1% Zn Based on this success, a decision was made to expand the program with two auger rigs. It is expected further drill targets will be defined as part of the expanded program. As a consequence, drilling at Tarraji-Yampi was deferred until the 2023 field season. Accordingly, auger generated targets will be prioritised to best position Dreadnought for drilling success. Geophysical surveys will be undertaken in March/April 2023 to define what is expected to be a robust pipeline of drill targets for 2023. Central Yilgarn Gold, Base Metals, Critical Minerals and Iron Ore Project (“Central Yilgarn”) Dreadnought continues to consolidate ground around Central Yilgarn including with the acquisition of seven tenements covering ~100 strike kilometres over the Evanston and Yerilgee greenstone belts (~740sq kms) west of and adjacent to the Illaara greenstone belt. Since 2016, the previous owner undertook first-pass, gold exploration, resulting in numerous significant results including: T1 Prospect: 15m @ 1.5 g/t Au including 3m @ 6.7g/t Au from 12m* T2 Prospect: 21m @ 1.1g/t Au including 3m @ 2.3g/t Au from 63m* • • • Phil’s Lode Prospect: 24m @ 1.6g/t Au including 9m @ 3.3g/t Au from 12m* • Snowflake Prospect: 16m @ 1.9 g/t Au including 4m @ 8.5g/t Au from 0m* • Megatron Prospect: 9m @ 2.6 g/t Au including 3m @ 7.1 g/t Au from 26m* *see ASX release dated 1 August 2022 for references to the previous AMD announcements outlining these results. The gold prospects have had limited to no follow up drilling. Other commodities such as iron ore, LCT pegmatites and komatiite hosted nickel sulphides have received limited attention. A Senior Exploration Geologist (Leah Dawson) who is familiar with the project and the team, was recruited to focus exclusively on the Central Yilgarn Project. Subsequent to 30 June 2022, Dreadnought exercised its option to acquire 100% ownership of tenements E29/965 and E30/485. These tenements cover parts of the Kings and P1 iron ore occurrences including significant magnetite banded iron formations, the Central Komatiite belt, currently under assessment for nickel sulphides, the eastern extensions of the 6 7 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Mangaroon Au, Ni-Cu-PGE, REE (100%) • Dreadnought continues to consolidate ground around Mangaroon including with the acquisition (subject to completion) of the high-grade Diamonds, Star of Mangaroon, Pritchard Well and Twin Peaks gold mines and surrounding areas that cover major regional structures. The tenements host at least ten historic gold mines. Importantly, the tenements are strategically located between Dreadnought’s 100% owned rare earths project to the south-east and the First Quantum Minerals Ni-Cu-PGE Earn-in to the north-west. The tenements are highly prospective for gold, base metals and rare earths. Highlights include: • • o Historical estimated gold production from the gold mines: ~7,500oz Au @ 34.8g/t Au (Star of Mangaroon) and 5,000oz Au @ 7.9g/t Au (Two Peaks). o Shear zones with numerous mineralised 1-10m wide, 20-200m long outcrops containing high-grade gold that remain under explored and undrilled. o Rock chip samples along the shear zones of up to 6.9% Cu, 185 g/t Ag, 121 g/t Au and 23% Pb. o Despite the attractive geology and encouraging historical exploration results the area has seen limited to no follow up drilling. Tarraji-Yampi Cu-Ag-Au-Co (“Tarraji-Yampi”) The high-grade Cu-Ag-Au-Co-Zn Orion discovery was made in 2021. The 2022 auger sampling program “fingerprinted” Orion and applied that knowledge across other under cover areas at Tarraji-Yampi. Pleasingly, nine high-quality Orion look a likes were identified, including six new gossanous and mineralised outcrops, from the auger program completed in April-June 2022. Significant outcropping mineralisation associated with auger anomalism was identified at the new Thunderer and Vanguard prospects with results including: • KMRK0289: 37% Cu, 163g/t Ag, 1.0g/t Au, 0.03% Co • KMRK0290: 39.4% Cu, 165g/t Ag, 1.6g/t Au, 0.02% Co • KMRK0291: 14% Cu, 17g/t Ag, 0.6 g/t Au, 0.10% Co • KMRK0295: 12.9% Cu, 51.5 g/t Ag, 0.02% Co, 0.1% Zn Based on this success, a decision was made to expand the program with two auger rigs. It is expected further drill targets will be defined as part of the expanded program. As a consequence, drilling at Tarraji-Yampi was deferred until the 2023 field season. Accordingly, auger generated targets will be prioritised to best position Dreadnought for drilling success. Geophysical surveys will be undertaken in March/April 2023 to define what is expected to be a robust pipeline of drill targets for 2023. Central Yilgarn Gold, Base Metals, Critical Minerals and Iron Ore Project (“Central Yilgarn”) Dreadnought continues to consolidate ground around Central Yilgarn including with the acquisition of seven tenements covering ~100 strike kilometres over the Evanston and Yerilgee greenstone belts (~740sq kms) west of and adjacent to the Illaara greenstone belt. Since 2016, the previous owner undertook first-pass, gold exploration, resulting in numerous significant results including: • • T1 Prospect: 15m @ 1.5 g/t Au including 3m @ 6.7g/t Au from 12m* T2 Prospect: 21m @ 1.1g/t Au including 3m @ 2.3g/t Au from 63m* • Phil’s Lode Prospect: 24m @ 1.6g/t Au including 9m @ 3.3g/t Au from 12m* • Snowflake Prospect: 16m @ 1.9 g/t Au including 4m @ 8.5g/t Au from 0m* • Megatron Prospect: 9m @ 2.6 g/t Au including 3m @ 7.1 g/t Au from 26m* *see ASX release dated 1 August 2022 for references to the previous AMD announcements outlining these results. The gold prospects have had limited to no follow up drilling. Other commodities such as iron ore, LCT pegmatites and komatiite hosted nickel sulphides have received limited attention. A Senior Exploration Geologist (Leah Dawson) who is familiar with the project and the team, was recruited to focus exclusively on the Central Yilgarn Project. Subsequent to 30 June 2022, Dreadnought exercised its option to acquire 100% ownership of tenements E29/965 and E30/485. These tenements cover parts of the Kings and P1 iron ore occurrences including significant magnetite banded iron formations, the Central Komatiite belt, currently under assessment for nickel sulphides, the eastern extensions of the 6 DIRECTORS’ REPORT Peggy Sue pegmatite field as well as several VMS and gold prospects many with samples awaiting assay. This exercise provided 100% ownership over the highly prospective, 75km long, Illaara Greenstone Belt. At the date of this report outstanding matters in relation to Central Yilgarn include: • Assays from Peggy Sue pegmatite sampling • Assays from RC drilling at Nelson, Trafalgar, Metzke’s Find, Spitfire • Results from Central Komatiite Belt target generation work • Initial JORC Resource for Metzke’s Find Au (Central Yilgarn). Corporate Highlights to 30 June 2022: • On 23 July 2021, the Convertible Loan Note holders elected to convert their notes into 109,090,909 fully paid ordinary shares thereby reducing debt by $600,000 to nil. In relation to employee options, the following activities occurred: • On 2 July 2021, the Company granted 11,500,000 options via the Dreadnought Employee Option Plan (“Plan”) to the current employees and the company secretary of the Company. The options have a $0.04 exercise price and an expiry date of 2 July 2024. • In July and August 2021, employees of the Company exercised 20,000,000 options for a total of $180,000. • On 31 August 2021, the Company issued 2,000,000 options via the Plan to an employee of the Company. The options have a $0.06 exercise price and an expiry date of 11 August 2024. • On 2 December 2021, employees of the Company exercised 2,000,000 options for a total of $27,500. • On 31 January 2022, an employee of the Company opted to early exercise 1,500,000 options for a total of $15,000. • On 30 November 2021, the Company issued a total of 7,000,000 options to an employee and Managing Director of the Company. The 2,000,000 options granted to an employee have an exercise price of $0.06 and an expiry of 26 November 2024 while the 5,000,000 options granted to the Managing Director have an exercise price of $0.04 and expiry of 2 July 2024. In relation to share placements, the following activities occurred: • In September 2021, the Company completed a placement at $0.035 per share to institutional and sophisticated investors raising $7,910,000 (before costs). Directors contributed a further $90,000 to the placement as approved by shareholders at the AGM held on 24 November 2021. In addition to their participation in the placement, the Directors exercised 8,479,452 options for a total amount of $68,699. The Company made the following acquisitions during the year: • On 14 October 2021, the Company acquired tenement E09/2359 at the Company’s Mangaroon Project. 750,000 shares were issued as a result of this acquisition. On 29 April 2022, the Group was awarded a total of up to $400,000 in drilling grants via the WA Government’s co-funded Exploration Incentive Scheme for the Mangaroon REE and Tarraji-Yampi Cu-Ag-Au-Co projects. 7 8 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR Subsequent to 30 June 2022, the following significant events were undertaken by the Group: • • • • • On 7 July 2022, the Group exercised its option to acquire 100% ownership of E29/965 and E30/485 within the Central Yilgarn. These tenements cover parts of the Kings and P1 Iron ore occurrences including significant magnetite banded iron formations, the Central Komatiite nickel sulphide belt, the eastern extensions of the Peggy Sue pegmatite field as well as several VMS and gold prospects. The exercise provided 100% ownership over the highly prospective, 75km long, Illaara Greenstone Belt. On 20 July 2022, the Group paid $1,000,000 to an unrelated party to settle the transaction. On 9 July 2022, the Group executed a tenement sale and purchase agreement with Arrow Minerals Limited (ASX:AMD) to acquire a 100% interest in seven tenements being E16/495, E30/493, E30/494, E77/2403, E77/2416, E77/2432, E77/2634). The key commercial terms included: o AMD to receive a $20,000 cash payment upon signing of the agreement. This was paid on 11 July 2022. o AMD to receive $280,000 cash payment at settlement. This was paid on 1 August 2022. o The Group to issue AMD 2,350,000 fully paid ordinary shares escrowed until 31 January 2023. These shares were issued 1 August 2022. o AMD to receive a further cash payment of $300,000 by 30 November 2022. o On the identification and reporting of JORC compliant inferred mineral resource of >500,000oz gold equivalent the Group will pay AMD $1,000,000. o AMD to retain a total 1% Net Smelter Return royalty in relation to minerals mined by or on behalf of the Company on the tenements. On 15 July 2022, the Group issued 8,500,000 unlisted options to its employees and company secretary. These options have an exercise price of $0.065 and expire on 14 July 2025. The options vest on 14 July 2023. In August 2022, the Group completed a placement at $0.06 per share to institutional and sophisticated investors raising $12,000,000 (before costs). Directors contributed a further $350,000 to the placement, to be approved by shareholders at the AGM to be held in November 2022. On 17 August 2022, the Board resolved to create a Long-Term Incentive scheme under which employees and, subject to shareholder approval, directors, may receive performance rights representing the right to subscribe for one fully paid ordinary Dreadnought share. The objectives of setting these LTIs in the remuneration review included: o Ensuring employee/director alignment and retention; o Creating long term shareholder value by setting significant targets that will have a material, beneficial impact on Dreadnought’s enterprise value; and o Ensuring that Dreadnought remains a preferred employer of choice in being able to attract and retain professionals in a highly competitive market. The Board of Directors approved LTI scheme involves the issue of performance rights, with each performance right representing the right to subscribe for one fully paid ordinary Dreadnought share, to employees and directors. A LTI Plan will govern the terms of the performance rights. The adoption of the LTI Plan for the purposes of Listing Rule 7.2 Exception 13 will be subject to shareholder approval at the 2022 Annual General Meeting as will the issue of performance rights to directors. The essential terms of the LTIs are as follows: The LTIs are divided into three equal tranches. Each tranche will vest upon the Company announcing, during the vesting period, a JORC 2012 Mineral Resource (“Resource") of Total Rare Earth Oxide (“TREO”) as follows: o o o Tranche 1: A Resource of at least the inferred category of 10Mt @ > 1% TREO by 31 December 2022. Tranche 2: A Resource of at least the inferred category of 20Mt @ > 1% TREO by 31 December 2023. Tranche 3: A Resource of at least the inferred category of 30Mt @ > 1% TREO by 31 December 2024. Vesting of the performance rights will also be conditional on the holder remaining an employee or director as at the date the vesting condition is satisfied (subject to the exercise of any discretion by the Board to waive a vesting condition or to allow an employee or director who retires in certain circumstances to retain their performance rights as provided for by the rules of LTI Plan). 8 9 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DIRECTORS’ REPORT MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR Subsequent to 30 June 2022, the following significant events were undertaken by the Group: • • • • • On 7 July 2022, the Group exercised its option to acquire 100% ownership of E29/965 and E30/485 within the Central Yilgarn. These tenements cover parts of the Kings and P1 Iron ore occurrences including significant magnetite banded iron formations, the Central Komatiite nickel sulphide belt, the eastern extensions of the Peggy Sue pegmatite field as well as several VMS and gold prospects. The exercise provided 100% ownership over the highly prospective, 75km long, Illaara Greenstone Belt. On 20 July 2022, the Group paid $1,000,000 to an unrelated party to settle the transaction. On 9 July 2022, the Group executed a tenement sale and purchase agreement with Arrow Minerals Limited (ASX:AMD) to acquire a 100% interest in seven tenements being E16/495, E30/493, E30/494, E77/2403, E77/2416, E77/2432, E77/2634). The key commercial terms included: o AMD to receive a $20,000 cash payment upon signing of the agreement. This was paid on 11 July 2022. o AMD to receive $280,000 cash payment at settlement. This was paid on 1 August 2022. o The Group to issue AMD 2,350,000 fully paid ordinary shares escrowed until 31 January 2023. These shares were issued 1 August 2022. o AMD to receive a further cash payment of $300,000 by 30 November 2022. o On the identification and reporting of JORC compliant inferred mineral resource of >500,000oz gold equivalent the Group will pay AMD $1,000,000. o AMD to retain a total 1% Net Smelter Return royalty in relation to minerals mined by or on behalf of the Company on the tenements. On 15 July 2022, the Group issued 8,500,000 unlisted options to its employees and company secretary. These options have an exercise price of $0.065 and expire on 14 July 2025. The options vest on 14 July 2023. In August 2022, the Group completed a placement at $0.06 per share to institutional and sophisticated investors raising $12,000,000 (before costs). Directors contributed a further $350,000 to the placement, to be approved by shareholders at the AGM to be held in November 2022. On 17 August 2022, the Board resolved to create a Long-Term Incentive scheme under which employees and, subject to shareholder approval, directors, may receive performance rights representing the right to subscribe for one fully paid ordinary Dreadnought share. The objectives of setting these LTIs in the remuneration review included: o Ensuring employee/director alignment and retention; o Creating long term shareholder value by setting significant targets that will have a material, beneficial impact on Dreadnought’s enterprise value; and o Ensuring that Dreadnought remains a preferred employer of choice in being able to attract and retain professionals in a highly competitive market. The Board of Directors approved LTI scheme involves the issue of performance rights, with each performance right representing the right to subscribe for one fully paid ordinary Dreadnought share, to employees and directors. A LTI Plan will govern the terms of the performance rights. The adoption of the LTI Plan for the purposes of Listing Rule 7.2 Exception 13 will be subject to shareholder approval at the 2022 Annual General Meeting as will the issue of performance rights to directors. The essential terms of the LTIs are as follows: The LTIs are divided into three equal tranches. Each tranche will vest upon the Company announcing, during the vesting period, a JORC 2012 Mineral Resource (“Resource") of Total Rare Earth Oxide (“TREO”) as follows: o o o Tranche 1: A Resource of at least the inferred category of 10Mt @ > 1% TREO by 31 December 2022. Tranche 2: A Resource of at least the inferred category of 20Mt @ > 1% TREO by 31 December 2023. Tranche 3: A Resource of at least the inferred category of 30Mt @ > 1% TREO by 31 December 2024. Vesting of the performance rights will also be conditional on the holder remaining an employee or director as at the date the vesting condition is satisfied (subject to the exercise of any discretion by the Board to waive a vesting condition or to allow an employee or director who retires in certain circumstances to retain their performance rights as provided for by the rules of LTI Plan). 8 DREADNOUGHT RESOURCES LIMITED DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Quantity of Performance Rights: The total number of performance rights proposed to be issued as LTIs across the three tranches has been determined by the Board as 29,200,000 with 7,700,000 issued to the directors and 21,500,000 to employees. The Company will seek shareholder approval at the 2022 Annual General Meeting for the issue of the performance rights to each director in accordance with ASX Listing Rule 10.14 and Chapter 2E of the Corporations Act 2001. • • • As announced on 30 August 2022, First Quantum, a ~A$20B TSX listed company, exercised its earn-in option over the Mangaroon Ni-Cu-PGE Project. First Quantum has funded the option period and can now earn an initial 51% interest by funding $12M of expenditure by 1 March 2026. First Quantum may withdraw at any time during the earn- in phase with 0% interest. First Quantum also paid Dreadnought $150,000 as a consequence. The key terms of the earn-in and Joint Venture Agreement include: • • The Agreement covers the base metal rights over five tenements being E09/2384, E09/2473, E09/2433, E08/3178 and E08/3274. First Quantum can earn an initial 51% interest by sole funding $12M of expenditure by 1 March 2026. First Quantum may withdraw from the project at any time during the earn-in phase with 0% interest. • Upon satisfying the earn-in requirements, a Joint Venture will be formed where First Quantum may elect to increase its interest to 70% by sole funding expenditure up until a Decision to Mine. If First Quantum elects to cease funding expenditure, it will revert to a 49% interest. • Once a Decision to Mine has been made, Dreadnought can elect to either: o Maintain its 30% by co-contributing. o Dilute to 20% and be loan carried by First Quantum, repaid through revenue. o Divest its 30% interest to First Quantum at fair market value. On 2 September 2022, the Company appointed PKF Perth to perform the audit function of the Company. PKF Perth’s appointment is effective until the next Annual General Meeting of the Company. In accordance with section 327C of the Corporations Act 2001, a resolution will be put to shareholders at the 2022 Annual General Meeting to appoint PKF Perth as the Company auditor. In accordance with subsection 329(5) of the Corporations Act and having received the consent of the Australian Securities and Investment Commission (ASIC), Nexia Perth Audit Services Pty Ltd has resigned as Auditor of the Company. On 12 September 2022, subject to completion, the Group announced the acquisition of 100% interest in 5 tenements covering 77 kms2 of major regional structures. The tenements host at least ten historic gold mines including the high- grade Star of Mangaroon, Pritchard Well and Twin Peaks gold mines. The tenements are strategically located between the Group’s 100% owned rare earths project to the south-east and the First Quantum Ni-Cu-PGE Earn-in to the north-west. The key commercial terms with the unrelated party vendors (subject to completion) are outlined below. 1. Key commercial terms to acquire 100% of E09/2290, M09/146, M09/147 and M09/175 include: a. Dreadnought to own 100% upon Completion; b. Dreadnought to pay $50,000 upon signing the Sale & Purchase Agreement (paid); c. Dreadnought to pay $250,000 at Completion; d. Vendors to receive 20,000,000 fully paid ordinary shares at Completion; e. 1% gross royalty payable on E09/2290, M09/146 and M09/147; and f. 0.5% gross royalty payable on M09/175. 2. Key commercial terms to acquire 100% of M09/174 include: a. Dreadnought to own 100% upon Completion; b. Dreadnought to pay $25,000 upon signing the Sale & Purchase Agreement (paid); c. Dreadnought to pay $50,000 at Completion; d. Vendor to receive 1,000,000 fully paid ordinary shares at Completion; and e. 0.5% gross royalty payable. 9 10 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Completion is expected to occur in November 2022. The proposed issue of 21,000,000 fully paid ordinary shares as part of the consideration for the acquisition of the tenements above are expected to be issued on 2 December 2022. • • As announced on 14 September 2022, Philip Crutchfield KC has been appointed as a non-executive director of Dreadnought effective 13 September 2022. In addition, after 5 years on the Board, Paul Payne decided to step down as a non-executive director of Dreadnought effective 13 September 2022. Paul played a pivotal role in the acquisition of the Tarraji-Yampi Project in 2019 and also in the transformation of Dreadnought from a struggling junior resource company to the successful organisation that it is today. Paul’s advice, guidance and contribution to the Company especially during some challenging times is appreciated. Paul will continue to provide a number of consulting services to Dreadnought including an initial JORC Resource on the Metzke’s Find gold deposit at the Central Yilgarn Project in the December 2022 quarter. On 15 September 2022, Dreadnought issued 1,500,000 ordinary fully paid shares as a result of an early exercise of options by an employee. The options were exercisable at any time until 2 July 2024 at an exercise price of $0.04 per option. The amount raised on the exercise of the options was $60,000. Dreadnought has relied on Section 708A of the Corporations Act 2001 (Cth) in relation to the issue of shares. Other than the events detailed above, there has not arisen in the interval between 1 July 2022 and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Group, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future years. FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGY The Group is focused on delivering significant shareholder returns through the discovery of economic mineral deposits in the tier one jurisdiction of Western Australia. The Group will achieve these goals by: • • Identifying projects with significant unrealised potential. Focusing technical effort and financial investment to effectively and efficiently generate and drill exciting, mineralised targets. Maintaining low overheads and keeping the market well informed through continuous activity and news flow. 10 • 11 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT DIRECTORS’ REPORT Completion is expected to occur in November 2022. The proposed issue of 21,000,000 fully paid ordinary shares as part of the consideration for the acquisition of the tenements above are expected to be issued on 2 December 2022. • As announced on 14 September 2022, Philip Crutchfield KC has been appointed as a non-executive director of Dreadnought effective 13 September 2022. In addition, after 5 years on the Board, Paul Payne decided to step down as a non-executive director of Dreadnought effective 13 September 2022. Paul played a pivotal role in the acquisition of the Tarraji-Yampi Project in 2019 and also in the transformation of Dreadnought from a struggling junior resource company to the successful organisation that it is today. Paul’s advice, guidance and contribution to the Company especially during some challenging times is appreciated. Paul will continue to provide a number of consulting services to Dreadnought including an initial JORC Resource on the Metzke’s Find gold deposit at the Central Yilgarn Project in the December 2022 quarter. • On 15 September 2022, Dreadnought issued 1,500,000 ordinary fully paid shares as a result of an early exercise of options by an employee. The options were exercisable at any time until 2 July 2024 at an exercise price of $0.04 per option. The amount raised on the exercise of the options was $60,000. Dreadnought has relied on Section 708A of the Corporations Act 2001 (Cth) in relation to the issue of shares. Other than the events detailed above, there has not arisen in the interval between 1 July 2022 and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Group, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future years. FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGY The Group is focused on delivering significant shareholder returns through the discovery of economic mineral deposits in the tier one jurisdiction of Western Australia. The Group will achieve these goals by: Identifying projects with significant unrealised potential. • • • targets. Focusing technical effort and financial investment to effectively and efficiently generate and drill exciting, mineralised Maintaining low overheads and keeping the market well informed through continuous activity and news flow. ASX Listing Rules Compliance In preparing the Annual Report for the period ended 30 June 2022, the Company has relied on the following ASX announcements. ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement 15/09/2022 15/09/2022 14/09/2022 14/09/2022 14/09/2022 12/09/2022 12/09/2022 09/09/2022 08/09/2022 06/09/2022 05/09/2022 05/09/2022 02/09/2022 02/09/2022 01/09/2022 30/08/2022 22/08/2022 17/08/2022 15/08/2022 10/08/2022 05/08/2022 05/08/2022 02/08/2022 01/08/2022 01/08/2022 01/08/2022 01/08/2022 01/08/2022 01/08/2022 29/07/2022 29/07/2022 29/07/2022 29/07/2022 28/07/2022 25/07/2022 15/07/2022 15/07/2022 13/07/2022 11/07/2022 07/07/2022 23/06/2022 22/06/2022 17/06/2022 16/06/2022 14/06/2022 10/06/2022 30/05/2022 16/05/2022 Cleansing Statement – Early Exercise of Options Application for quotation of securities - DRE Initial Director’s Interest Notice - Philip Crutchfield Final Director’s Interest Notice – Paul Payne Board Changes Proposed issue of securities - DRE Star of Mangaroon Acquisition & Consolidation Investor Webinar Presentation Recording New World Metals Conference Presentation Investor Webinar Presentation Thick Rare Earth Ironstones Confirmed at Sabre(Y3) Discovery Further Assays Confirm Yin as Significant REE Discovery Change of Auditor Investor Webinar Trading Halt Mangaroon Ni-Cu-PGE Project Advances to $12m Earn-in Yin Drilling Complete, Significant Growth Potential Long-Term Incentives on Delivery of Significant REE Resource Nine Orion Look-alikes from Auger Program, More to Come Diamond Drilling Commenced at Yin Rare Earth Discovery Application for quotation of securities - DRE Cleansing Notice - Placement AMD: Completion of Sale of Strickland Copper Gold Project WA Cleansing Notice Application for quotation of securities - DRE Completion of Acquisition – Central Yilgarn Project Proposed issue of securities - DRE Proposed issue of securities - DRE Capital Raise to Accelerate Large Scale Rare Earth Discovery Corporate Presentation – July 2022 Trading Halt Quarterly Cashflow Report – June 2022 Quarterly Activities Report – June 2022 Assays Confirm Yin as a High-Grade Rare Earth Discovery Rare Earth Ironstones Confirmed Over 3km of Stike at Yn Proposed issue of securities - DRE Notification regarding unquoted securities - DRE AMD: Divestment of Strickland Gold Project WA Significant Regional Consolidation – Central Yilgarn Project Exercise of Option Consolidates Ownership of Illaara Gold Coast Investment Showcase Presentation Orion Auger Program – Tarraji-Yampi Project Further Gold Consolidation – Mangaroon Project First Drilling at Yin Intersects High-Grade Rare Earths Trading Halt Drilling Successfully Completed at Mangaroon Project Change of Director’s Interest Notice – Paul Payne Drilling Intersects Magmatic Ni-Cu Sulphides at Mangaroon 10 11 12 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement 11/05/2022 09/05/2022 03/05/2022 29/04/2022 29/04/2022 29/04/2022 19/04/2022 04/04/2022 16/03/2022 02/03/2022 16/02/2022 15/02/2022 14/02/2022 01/02/2022 31/01/2022 31/01/2022 31/01/2022 31/01/2022 31/01/2022 28/01/2022 04/01/2022 08/12/2021 06/12/2021 03/12/2021 03/12/2021 02/12/2021 01/12/2021 30/11/2021 30/11/2021 30/11/2021 30/11/2021 30/11/2021 30/11/2021 30/11/2021 30/11/2021 29/11/2021 24/11/2021 24/11/2021 24/11/2021 15/11/2021 12/11/2021 11/11/2021 02/11/2021 29/10/2021 29/10/2021 29/10/2021 28/10/2021 28/10/2021 25/10/2021 14/10/2021 11/10/2021 04/10/2021 29/09/2021 Drilling Commenced at Mangaroon Project Drilling Complete at Illaara Project RIU Sydney Resources Round-Up Presentation EIS Drilling Grants for Magaroon REE and Orion Cu-Ag-Au-Co Quarterly Activities Report – March 2022 Quarterly Cashflow Report – March 2022 Commencement of Regional Auger Program – Tarrai-Yampi Nelson and Trafalgar Drilling Update – Illaara Project Half Yearly Report and Accounts Drilling Commenced at Illaara Project RIU Explorers Conference Presentation Eight Conductors to be Drilled at Nelson and Trafalgar Conductors Defined Along the Money Intrusion - Mangaroon Mangaroon Rare Earths, Phosphate, Niobium & Zirconium Early Exercise of Options – Cleansing Notice Application for quotation of securities - DRE December 2021 Quarterly Presentation Quarterly Cashflow Report – December 2021 Quarterly Activities Report – December 2021 2022 Activities Update Change of Address Further High-Grade Cu-Ag-Au-Co-Zn from Orion Discovery Trading Halt Application for quotation of securities - DRE Cleansing Notice RIU Resurgence Conference Presentation Change of Director’s Interest Notice – Paul Payne Cleansing Notice Change of Director’s Interest Notice – Dean Tuck Change of Director’s Interest Notice – Paul Chapman Change of Director’s Interest Notice – Ian Gordon Notification regarding unquoted securities - DRE Notification regarding unquoted securities - DRE Application for quotation of securities - DRE Application for quotation of securities - DRE Five Carbonatite Intrusions Identiofied at Mangaroon Project Results of Annual General Meeting Chairman’s Address to Shareholders AGM Presentation High-Grade Cu-Ag-Au-Co Discovery at Orion Trading Halt Noosa Mining Uneartherd Conference Presentation Supergene Confirmed and Massive Sulphides Extended at Orion September 2021 Quarterly Presentation Quarterly Cashflow Report – September 2021 Quarterly Activities Report – September 2021 Proposed issue of securities - DRE South-West Connect ASX Showcase Presentation Notice of Annual General Meeting/Proxy Form Mangaroon Project Exploration Update & Further Consolidation Massive Sulphides Intersected in Multiple Holes at Orion Drilling Program Commenced at Tarraji-Yampi Project Appendix 4G and Corporate Governance Statement 2021 13 12 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT ASX Announcement 11/05/2022 Drilling Commenced at Mangaroon Project ASX Announcement 09/05/2022 Drilling Complete at Illaara Project ASX Announcement 03/05/2022 RIU Sydney Resources Round-Up Presentation ASX Announcement 29/04/2022 EIS Drilling Grants for Magaroon REE and Orion Cu-Ag-Au-Co ASX Announcement 29/04/2022 Quarterly Activities Report – March 2022 ASX Announcement 29/04/2022 Quarterly Cashflow Report – March 2022 ASX Announcement 19/04/2022 Commencement of Regional Auger Program – Tarrai-Yampi ASX Announcement 04/04/2022 Nelson and Trafalgar Drilling Update – Illaara Project ASX Announcement 16/03/2022 Half Yearly Report and Accounts ASX Announcement 02/03/2022 Drilling Commenced at Illaara Project ASX Announcement 16/02/2022 RIU Explorers Conference Presentation ASX Announcement 15/02/2022 Eight Conductors to be Drilled at Nelson and Trafalgar ASX Announcement 14/02/2022 Conductors Defined Along the Money Intrusion - Mangaroon ASX Announcement 01/02/2022 Mangaroon Rare Earths, Phosphate, Niobium & Zirconium ASX Announcement 31/01/2022 Early Exercise of Options – Cleansing Notice ASX Announcement 31/01/2022 Application for quotation of securities - DRE ASX Announcement 31/01/2022 December 2021 Quarterly Presentation ASX Announcement 31/01/2022 Quarterly Cashflow Report – December 2021 ASX Announcement 31/01/2022 Quarterly Activities Report – December 2021 ASX Announcement 28/01/2022 2022 Activities Update ASX Announcement 04/01/2022 Change of Address ASX Announcement 08/12/2021 Further High-Grade Cu-Ag-Au-Co-Zn from Orion Discovery ASX Announcement 06/12/2021 Trading Halt ASX Announcement 03/12/2021 Application for quotation of securities - DRE ASX Announcement 03/12/2021 Cleansing Notice ASX Announcement 02/12/2021 RIU Resurgence Conference Presentation ASX Announcement 01/12/2021 Change of Director’s Interest Notice – Paul Payne ASX Announcement 30/11/2021 Cleansing Notice ASX Announcement 30/11/2021 Change of Director’s Interest Notice – Dean Tuck ASX Announcement 30/11/2021 Change of Director’s Interest Notice – Paul Chapman ASX Announcement 30/11/2021 Change of Director’s Interest Notice – Ian Gordon ASX Announcement 30/11/2021 Notification regarding unquoted securities - DRE ASX Announcement 30/11/2021 Notification regarding unquoted securities - DRE ASX Announcement 30/11/2021 Application for quotation of securities - DRE ASX Announcement 30/11/2021 Application for quotation of securities - DRE ASX Announcement 29/11/2021 Five Carbonatite Intrusions Identiofied at Mangaroon Project ASX Announcement 24/11/2021 Results of Annual General Meeting ASX Announcement 24/11/2021 Chairman’s Address to Shareholders ASX Announcement 24/11/2021 AGM Presentation ASX Announcement 15/11/2021 High-Grade Cu-Ag-Au-Co Discovery at Orion ASX Announcement 12/11/2021 Trading Halt ASX Announcement 11/11/2021 Noosa Mining Uneartherd Conference Presentation ASX Announcement 02/11/2021 Supergene Confirmed and Massive Sulphides Extended at Orion ASX Announcement 29/10/2021 September 2021 Quarterly Presentation ASX Announcement 29/10/2021 Quarterly Cashflow Report – September 2021 ASX Announcement 29/10/2021 Quarterly Activities Report – September 2021 ASX Announcement 28/10/2021 Proposed issue of securities - DRE ASX Announcement 28/10/2021 South-West Connect ASX Showcase Presentation ASX Announcement 25/10/2021 Notice of Annual General Meeting/Proxy Form ASX Announcement 14/10/2021 Mangaroon Project Exploration Update & Further Consolidation ASX Announcement 11/10/2021 Massive Sulphides Intersected in Multiple Holes at Orion ASX Announcement 04/10/2021 Drilling Program Commenced at Tarraji-Yampi Project ASX Announcement 29/09/2021 Appendix 4G and Corporate Governance Statement 2021 DIRECTORS’ REPORT ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement ASX Announcement 29/09/2021 24/09/2021 22/09/2021 21/09/2021 21/09/2021 20/09/2021 16/09/2021 14/09/2021 14/09/2021 14/09/2021 14/09/2021 14/09/2021 10/09/2021 09/09/2021 09/09/2021 06/09/2021 01/09/2021 01/09/2021 01/09/2021 31/08/2021 27/08/2021 25/08/2021 04/08/2021 04/08/2021 30/07/2021 30/07/2021 30/07/2021 30/07/2021 26/07/2021 26/07/2021 19/07/2021 16/07/2021 12/07/2021 12/07/2021 08/07/2021 07/07/2021 06/07/2021 06/07/2021 06/07/2021 01/07/2021 Annual Report to Shareholders Airborne Magnetic-Radiometric Survey Commenced at Mangaroon Change in substantial holding Cleansing Notice Application for quotation of securities - DRE Change of Director’s Interest Notice – Paul Chapman Change of Director’s Interest Notice – Dean Tuck Early Exercise of Options – Cleansing Notice Application for quotation of securities - DRE Proposed issue of securities - DRE Proposed issue of securities - DRE Dreadnought Resources Fully Funded Following Placement Trading Halt New World Metals Conference Presentation Four New REE Ironstones Discovered at Mangaroon Junior Minerals Exploration Incentive Change of Director’s Interest Notice – Paul Payne Notification regarding unquoted securities - DRE Encouraging Results for Rare Earths at Yin Texas Diamond Drilling Update – Tarraji Yampi Bonanza Grade Cu-Ag-Sb-Bi Mineralisation at Rough Triangle Large Cu-Au-Ag-Co System at Orion, Grant’s Find and Fuso Application for quotation of securities - DRE Early Exercise of Options – Cleansing Notice June 2021 Quarterly Presentation Quarterly Cashflow Report – June 2021 Quarterly Activities Report – June 2021 Significant Mineralisation at Tarraji-Yampi Project Application for quotation of securities - DRE Cleansing Notice – Note Conversion High-Grade REE Ironstones Confirmed Over 2.5kms at Mangaroon 1km Long Gossanous Ni-Cu-PGE Outcrop at Mangaroon Application for quotation of securities - DRE Early Exercise of Options – Cleansing Notice RC Drilling Commenced at Tarraji-Yampi Project High-Grade Tantalum Results from Peggy Sue – Illaara Project Employee Option Issues Notification regarding unquoted securities - DRE High-Grade Cu-Ag-Sb-Bi Mineralisation at Rough Triangle Sulphides Intersected within the Ruins Dolerite at Texas 12 13 14 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Compliance Statement This report contains information extracted from reports cited herein. These are available to view on the website www.dreadnoughtresources.com.au. In relying on the above ASX announcements and pursuant to ASX Listing Rule 5.23.2, the Company confirms that it is not aware of any new information or data that materially affects the information included in the abovementioned announcements or this Annual Report for the period ended 30 June 2022. ENVIRONMENTAL REGULATION The operations of the Group in Australia are subject to environmental regulations under both Commonwealth and State legislation. In the mining industry, many activities are regulated by environmental laws. The Group conducts its operations under the necessary Commonwealth and State Licences and Works Approvals to its activities on its tenements. The Group considers it has complied with all relevant environmental obligations. INFORMATION ON DIRECTORS Directors have been in office for the entire period unless otherwise stated. PAUL CHAPMAN B.Comm, CA, Grad. Dip. Tax, MAICD, MAusIMM Independent Non-Executive Chairman Experience and Expertise Mr Chapman is a company director with over 30 years in the resource sector. Mr Chapman has held senior management roles across a range of commodity businesses and public companies in Australia and the USA. Mr Chapman was a founding director and shareholder of Reliance Mining, Encounter Resources, Rex Minerals, Silver Lake Resources, Black Cat Syndicate and Dreadnought Resources. Interests in shares and options 311,038,084 shares. Other current directorships Mr Chapman is the non-executive chairman of Meeka Minerals Limited (ASX:MEK) (since May 2022). Mr Chapman is a non-executive chairman of Black Cat Syndicate Limited (ASX:BC8) (since August 2017). Mr Chapman is a non-executive chairman of Encounter Resources Limited (ASX:ENR) (since October 2005). Mr Chapman is a non-executive director of Sunshine Gold Limited (ASX:SHN) (since November 2020). Former directorships in the last 3 years Avanco Resources. 15 14 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Compliance Statement This report contains information extracted from reports cited herein. These are available to view on the website www.dreadnoughtresources.com.au. In relying on the above ASX announcements and pursuant to ASX Listing Rule 5.23.2, the Company confirms that it is not aware of any new information or data that materially affects the information included in the abovementioned announcements or this Annual Report for the period ended 30 June 2022. ENVIRONMENTAL REGULATION The operations of the Group in Australia are subject to environmental regulations under both Commonwealth and State legislation. In the mining industry, many activities are regulated by environmental laws. The Group conducts its operations under the necessary Commonwealth and State Licences and Works Approvals to its activities on its tenements. The Group considers it has complied with all relevant environmental obligations. INFORMATION ON DIRECTORS Directors have been in office for the entire period unless otherwise stated. PAUL CHAPMAN B.Comm, CA, Grad. Dip. Tax, MAICD, MAusIMM Independent Non-Executive Chairman DIRECTORS’ REPORT DEAN TUCK B.Sc (Hons), FGAA, MAIG Managing Director Experience and expertise Mr Tuck is an experienced geologist and exploration manager having worked across a wide range of commodities in Australia, Brazil and Southeast Asia from project generation through to resource evaluation. He has held senior level positions at BHP Billiton and ASX listed junior explorers. Mr Tuck has been instrumental in a number of discoveries including the Strickland gold, Mallinda and Mallina LCT pegmatites and Wonmunna iron ore. Interests in shares and options 20,710,317 shares and 38,500,000 options. Other current directorships Mr Tuck is a non-executive director of Caeneus Minerals Limited (ASX:CAD) (since July 2022). Former directorships in the last 3 years None. IAN GORDON B.Comm, MAICD Non-executive Director Experience and Expertise Mr Chapman is a company director with over 30 years in the resource sector. Mr Chapman has held senior management roles across a range of commodity businesses and public companies in Australia and the USA. Mr Chapman was a founding director and shareholder of Reliance Mining, Encounter Resources, Rex Minerals, Silver Lake Resources, Black Cat Syndicate and Dreadnought Resources. Experience and Expertise Mr Gordon is a mining executive with extensive experience in transaction generation, project acquisition, mine development and the management of public companies. Mr Gordon was formally an Executive Director and Managing Director of Ramelius Resources Limited for seven years and Managing Director of Flinders Mines Limited for two years. He holds a Bachelor of Commerce degree from Curtin University (WA). Interests in shares and options 311,038,084 shares. Interests in shares and options 48,175,187 shares. Other current directorships Mr Chapman is the non-executive chairman of Meeka Minerals Limited (ASX:MEK) (since May 2022). Mr Chapman is a non-executive chairman of Black Cat Syndicate Limited (ASX:BC8) (since August 2017). Mr Chapman is a non-executive chairman of Encounter Resources Limited (ASX:ENR) (since October 2005). Mr Chapman is a non-executive director of Sunshine Gold Limited (ASX:SHN) (since November 2020). Former directorships in the last 3 years Avanco Resources. Other current directorships Mr Gordon is a director of Woomera Mining Limited (ASX:WML) (since October 2020). Former directorships in the last 3 years Mr Gordon resigned as director of ASX listed company Auteco Minerals (ASX:AUT) on 28 January 2020. PHILIP CRUTCHFILED B. Comm, LLB (Hons), LL.M LSE Non-executive Director (Appointed 13 September 2022) Experience and expertise Philip is a senior barrister specialising in commercial law. Philip is also a long standing and third largest shareholder in Dreadnought. Interests in shares and options 67,456,557 shares. Other current directorships Philip is also a director of Black Cat Syndicate Limited (ASX:BC8) (since 6 April 2021), Hamelin Gold Limited (ASX:HMG) (since 31 August 2021), Encounter Resources Limited (ASX:ENR) (since 9 October 2019) and Applyflow Limited (ASX:AFW) (since 17 October 2019). 14 15 16 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT PAUL PAYNE B.AppSc Grad Dip Min Ec, FAusIMM Non-executive Director (Appointed 21 December 207) (Resigned 13 September 2022) Experience and expertise Mr Payne is a geologist and holds in excess of 30 years’ experience in mining including 10 years independent consulting across a range of commodities and jurisdictions. Mr Payne has extensive technical experience in the evaluation of mineral deposits from early stage exploration to definitive feasibility studies. Recent exploration experience includes implementation and management of gold exploration for Dacian Gold Limited in WA and Rift Valley Resources Limited in Tanzania. Mr Payne has held corporate roles including Technical Director and Managing Director of ASX listed companies including founding Managing Director of Dacian Gold Limited, and was instrumental in the Company’s successful IPO and making the major initial gold discovery at its Mount Morgans project. Interests in shares and options 47,277,781 shares. Other current directorships Mr Payne is a director of Carnaby Resources Limited (ASX:CNB) (since July 2016) and a director of Essential Metals Limited (ASX:ESS) (since January 2020). COMPANY SECRETARY JESSAMYN LYONS BComm, AGIA ICSA (Grad Dip Applied Corporate Governance) Appointed 1 July 2020. Experience and expertise Ms Lyons is a Chartered Secretary, a Fellow of the Governance Institute of Australia and holds a Bachelor of Commerce from the University of Western Australia with majors in Investment Finance, Corporate Finance and Marketing. Ms Lyons also has 15 years of experience working in the stockbroking and banking industries and has held various positions with Macquarie Bank, UBS Investment Bank (London) and more recently Patersons Securities. Meetings of directors The size of the Company does not warrant separate Audit & Risk, Remuneration and Nomination Committees at this time, accordingly the full Board performs comprises these roles. The numbers of meetings of the Company's Board of Directors held during the year ended 30 June 2022, and the numbers of meetings attended by each director were as follows: Meetings of directors Paul Chapman Dean Tuck Ian Gordon Paul Payne A = Number of meetings attended B = Number of meetings held during the time the director held office during the year and was eligible to attend A 6 6 6 6 B 6 6 6 6 Indemnification and insurance of officers The Company has indemnified the directors and officers of the Company for costs incurred, in their capacity as a director or officer, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and officers of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. 17 16 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Proceedings on behalf of the Group No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section 237 of the Corporations Act 2001. Non-audit services The Group may decide to employ the auditor on assignments additional to their statutory duties where the auditors’ expertise and experience with the Group are important. The Board of directors is satisfied that the provision of any such 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 services disclosed below did not compromise the external auditor’s independence for the following reasons: • • all non-audit services are reviewed and approved by the Board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants (including Independence Standards) set by the Accounting Professional and Ethical Standards Board. There were no fees for non-audit services paid or payable to the external auditors of the Company, their related practices or non-related audit firms during the year ended 30 June 2022. DIRECTORS’ REPORT PAUL PAYNE B.AppSc Grad Dip Min Ec, FAusIMM Non-executive Director (Appointed 21 December 207) (Resigned 13 September 2022) Experience and expertise Mr Payne is a geologist and holds in excess of 30 years’ experience in mining including 10 years independent consulting across a range of commodities and jurisdictions. Mr Payne has extensive technical experience in the evaluation of mineral deposits from early stage exploration to definitive feasibility studies. Recent exploration experience includes implementation and management of gold exploration for Dacian Gold Limited in WA and Rift Valley Resources Limited in Tanzania. Mr Payne has held corporate roles including Technical Director and Managing Director of ASX listed companies including founding Managing Director of Dacian Gold Limited, and was instrumental in the Company’s successful IPO and making the major initial gold discovery at its Mount Morgans project. Interests in shares and options 47,277,781 shares. Other current directorships Limited (ASX:ESS) (since January 2020). Mr Payne is a director of Carnaby Resources Limited (ASX:CNB) (since July 2016) and a director of Essential Metals JESSAMYN LYONS BComm, AGIA ICSA (Grad Dip Applied Corporate Governance) Ms Lyons is a Chartered Secretary, a Fellow of the Governance Institute of Australia and holds a Bachelor of Commerce from the University of Western Australia with majors in Investment Finance, Corporate Finance and Marketing. Ms Lyons also has 15 years of experience working in the stockbroking and banking industries and has held various positions with Macquarie Bank, UBS Investment Bank (London) and more recently Patersons Securities. The size of the Company does not warrant separate Audit & Risk, Remuneration and Nomination Committees at this time, accordingly the full Board performs comprises these roles. The numbers of meetings of the Company's Board of Directors held during the year ended 30 June 2022, and the numbers of meetings attended by each director were as COMPANY SECRETARY Appointed 1 July 2020. Experience and expertise Meetings of directors follows: Paul Chapman Dean Tuck Ian Gordon Paul Payne Meetings of directors A 6 6 6 6 B 6 6 6 6 A = Number of meetings attended B = Number of meetings held during the time the director held office during the year and was eligible to attend Indemnification and insurance of officers The Company has indemnified the directors and officers of the Company for costs incurred, in their capacity as a director or officer, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and officers of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. 16 17 18 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Shares under option At the date of this report unissued ordinary shares of the Group under option are: Expiry date Exercise price Number of options Vested Unvested Amount paid/payable by recipient ($) 25/05/2023 30/06/2024 09/04/2024 01/10/2023 31/10/2023 02/07/2024 11/08/2024 26/11/2024 14/07/2025 $0.0060 $0.0050 $0.0050 $0.0100 $0.0200 $0.0400 $0.0600 $0.0600 $0.0650 20,000,000 20,000,000 3,500,000 3,500,000 - - 30,000,000 22,500,000 7,500,000 2,750,000 1,375,000 1,375,000 750,000 375,000 375,000 16,500,000 8,250,000 8,250,000 2,000,000 1,000,000 1,000,000 2,000,000 8,500,000 - - 2,000,000 8,500,000 - - - - - - - Shares issued during or since year end as a result of exercise of options: Date granted Exercise price Number of shares issued Date exercise Amount paid for shares ($) 18/10/2019 04/04/2019 16/08/2019 01/07/2020 15/01/2021 02/10/2020 02/10/2020 $0.0080 $0.0100 $0.0050 $0.0098 $0.0200 $0.0100 $0.0100 10,000,000 12/07/2021 10,000,000 04/08/2021 3,000,000 13/09/2021 5,479,452 13/09/2021 750,000 02/12/2021 1,250,000 02/12/2021 1,500,000 31/01/2022 80,000 100,000 15,000 53,699 15,000 12,500 15,000 19 18 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Remuneration report – audited The remuneration report is set out under the following main headings: A Principles used to determine the nature and amount of remuneration B Details of remuneration C Share-based compensation D Shareholdings E Use of Remuneration Consultants F Relationship between remuneration and Company performance G Key Management Personnel Loan The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. A Principles used to determine the nature and amount of remuneration The Group's policy for determining the nature and amounts of remuneration of board members and senior executive officers of the Group is outlined below. The Company's Constitution specifies that the total amount of remuneration of non-executive directors shall be fixed from time to time by a general meeting. The current maximum aggregate remuneration of non-executive directors has been set at $300,000 per annum. Directors may apportion any amount up to this maximum amount amongst the non-executive directors as they determine. Directors are also entitled to be paid reasonable travelling, accommodation and other expenses incurred in performing their duties as directors. Non-executive and executive directors’ remuneration is by way of fees and statutory superannuation contributions. The Company’s Incentive Options Plan (‘Plan”) was approved by shareholders on 30 November 2020. Directors are eligible to participate in the Plan. The Company's remuneration structure is based on a number of factors including the financial position of the Company and the particular experience and performance of the individual in meeting key objectives of the Company. The Board is responsible for assessing relevant employment market conditions and achieving the overall, long term objective of maximising shareholder wealth, through the retention of high quality personnel. The Company does not emphasise cash bonus schemes or other incentive based cash payments given the nature of the Company's business as a mineral exploration entity. However, the Board may approve the payment of cash bonuses from time to time in order to reward individual performance in achieving key objectives as considered appropriate by the Board. The Company’s Incentive Option Plan enables the Board to offer eligible employees and directors options to acquire ordinary fully paid shares in the Company. Under the terms of the Plan, options may be offered to the Company's eligible employees at no cost or no more than nominal monetary consideration unless otherwise determined by the Board in accordance with the terms and conditions of the Plan. The objective of the Plan is to align the interests of employees and shareholders by providing employees of the Company with the opportunity to participate in the equity of the Company as an incentive to achieve greater success and value for the Company and to maximise the long term performance of the Company. 19 20 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Remuneration report – audited (continued) Voting and comments made at the Company’s 2021 Annual General Meeting Dreadnought Resources Limited received more than 99% of ‘yes’ votes on its remuneration report for the 2021 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. B Details of remuneration This report details the nature and amount of remuneration for each key management person of the Company. The names and positions held by directors and key management personnel of the Company during the financial year are: • • • • Mr P Chapman – Chairman, non-executive (appointed 9 April 2019) Mr D Tuck – Managing Director (appointed 9 April 2019) Mr I Gordon – Director, non-executive (since 21 December 2017) Mr P Payne – Director, non-executive (since 21 December 2017) The remuneration policy of the Group has been designed to align directors’ objectives with shareholder and business objectives by providing a fixed remuneration component which is assessed on an annual basis in line with market rates. By providing components of remuneration that are indirectly linked to share price appreciation (in the form of options and/or performance rights), executive, business and shareholder objectives are aligned. The Board of Directors (“Board”) believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best directors to run and manage the Company, as well as create goal congruence between directors and shareholders. The remuneration policy and the relevant terms and conditions has been developed by the full Board as the Company does not currently have a Remuneration Committee due to the size of the Company. In determining competitive remuneration rates, the Board reviews trends among comparative companies and industry generally. It examines terms and conditions for employee incentive schemes, benefit plans and share plans. Reviews are performed to confirm that executive remuneration is in line with market practice and is reasonable in the context of Australian executive remuneration practices. The Company is an exploration entity, and therefore speculative in terms of performance. Consistent with attracting and retaining talented executives, directors and executives are paid market rates associated with individuals in similar positions, within the same industry. (a) Executive remuneration – Mr D Tuck (appointed 9 April 2019) Mr Dean Tuck, Managing Director, was employed by the Group in accordance with the terms and conditions outlined within his service agreement dated 9 April 2019. For the year ended 30 June 2022, Mr Tuck received a base salary of $255,750 in short term remuneration (2021: $200,000), with a further $25,575 in post-employment superannuation contributions (2021: $19,000). Both parties may terminate the employment agreement by giving notice of termination to each other on not less than one (1) months’ notice in writing. The Group granted the Managing Director unlisted incentive options as follows: - On 16 August 2019, 10,500,000 unlisted incentive options exercisable at $0.005 on or before 30 June 2024 vesting immediately, with a fair value of $51,331. 3,000,000 of these options were exercised during the year (2021: 4,000,000). - On 23 December 2019, 30,000,000 unlisted incentive options with a 5 year term vesting quarterly on an annual basis at the end of every financial year. Mr Tuck’s ability to exercise the 40,500,000 long term incentive options is subject to the following conditions: - 10,500,000 unlisted incentive options (total expense of $51,332): vested immediately, may be exercised after grant date and expire on 30 June 2024; and 20 21 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Remuneration report – audited (continued) Voting and comments made at the Company’s 2021 Annual General Meeting DIRECTORS’ REPORT - 30,000,000 unlisted incentive options (total expense of $177,184): 25% may be exercised on or after each of 30 June 2020, 30 June 2021, 30 June 2022 and 30 June 2023, and expire on 9 April 2024. Dreadnought Resources Limited received more than 99% of ‘yes’ votes on its remuneration report for the 2021 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. On 30 November 2021, 5,000,000 unlisted incentive options exercisable at $0.04 on or before 2 July 2024 with a value of $186,900 were granted to the Managing Director. 50% will vest after 12 months from grant date and 50% after 24 months from grant date. B Details of remuneration (b) Non-Executive remuneration The agreements in place during the 2022 financial year with the non-executive chairman, Paul Chapman and the non- executive directors, Ian Gordon and Paul Payne are summarised below: - - Term of agreement is renewed annually Fee of $3,000 per month (plus minimum statutory superannuation entitlements) was paid for the 2022 financial year - No payment of termination benefits - Annual election in writing to take base fee in options under the Company’s Incentive Option Plan 21 22 This report details the nature and amount of remuneration for each key management person of the Company. The names and positions held by directors and key management personnel of the Company during the financial year are: • • • • Mr P Chapman – Chairman, non-executive (appointed 9 April 2019) Mr D Tuck – Managing Director (appointed 9 April 2019) Mr I Gordon – Director, non-executive (since 21 December 2017) Mr P Payne – Director, non-executive (since 21 December 2017) The remuneration policy of the Group has been designed to align directors’ objectives with shareholder and business objectives by providing a fixed remuneration component which is assessed on an annual basis in line with market rates. By providing components of remuneration that are indirectly linked to share price appreciation (in the form of options and/or performance rights), executive, business and shareholder objectives are aligned. The Board of Directors (“Board”) believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best directors to run and manage the Company, as well as create goal congruence between directors and shareholders. The remuneration policy and the relevant terms and conditions has been developed by the full Board as the Company does not currently have a Remuneration Committee due to the size of the Company. In determining competitive remuneration rates, the Board reviews trends among comparative companies and industry generally. It examines terms and conditions for employee incentive schemes, benefit plans and share plans. Reviews are performed to confirm that executive remuneration is in line with market practice and is reasonable in the context of Australian executive remuneration practices. The Company is an exploration entity, and therefore speculative in terms of performance. Consistent with attracting and retaining talented executives, directors and executives are paid market rates associated with individuals in similar positions, within the same industry. (a) Executive remuneration – Mr D Tuck (appointed 9 April 2019) Mr Dean Tuck, Managing Director, was employed by the Group in accordance with the terms and conditions outlined within his service agreement dated 9 April 2019. For the year ended 30 June 2022, Mr Tuck received a base salary of $255,750 in short term remuneration (2021: $200,000), with a further $25,575 in post-employment superannuation contributions (2021: $19,000). Both parties may terminate the employment agreement by giving notice of termination to each other on not less than one (1) months’ notice in writing. The Group granted the Managing Director unlisted incentive options as follows: - On 16 August 2019, 10,500,000 unlisted incentive options exercisable at $0.005 on or before 30 June 2024 vesting immediately, with a fair value of $51,331. 3,000,000 of these options were exercised during the year (2021: 4,000,000). - On 23 December 2019, 30,000,000 unlisted incentive options with a 5 year term vesting quarterly on an annual basis at the end of every financial year. Mr Tuck’s ability to exercise the 40,500,000 long term incentive options is subject to the following conditions: - 10,500,000 unlisted incentive options (total expense of $51,332): vested immediately, may be exercised after grant date and expire on 30 June 2024; and 20 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Remuneration report – audited (continued) Details of key management personnel remuneration Short-Term Post-employment Long- term Share- based payments TOTAL Total performance related Options as % of total 2022 Salary fees Cash bonus Non- monetary D Tuck P Chapman I Gordon P Payne Total $ 255,750 36,000 36,000 38,769 366,519 $ $ - - - - - - - - - - Accrued annual leave $ 19,231 - - - 19,231 Super- annuation Retirement benefits Termination benefits Incentive plans Options $ 25,575 3,600 3,600 3,863 36,638 $ - - - - - $ - - - - - $ - - - - - $ 83,721 - - - 83,721 $ 384,277 39,600 39,600 42,632 506,109 % - - - - - % 22% - - - - Short-Term Post-employment Long- term Share- based payments TOTAL Total performance related Options as % of total 2021 Salary fees Cash bonus Non- monetary Super- annuation Retirement benefits Termination benefits Incentive plans Options $ $ $ % - - - 100% - - - - - - - - *Appointed on 31 July 2019; resigned on 9 July 2020. Mr Day was engaged under a service contract with 133 North Trust to act as Company Secretary and Chief Financial Officer. D Tuck P Chapman I Gordon P Payne N Day* Total $ 200,000 - 36,000 36,000 3,992 275,992 $ 19,000 - 3,420 3,420 - 25,840 242,167 114,182 39,420 39,420 3,992 439,181 - 114,182 - - - 114,182 % - - - - - - $ - - - - - - $ - - - - - - - - - - - - - - - - - - $ $ Accrued annual leave $ 23,167 - - - - 23,167 23 22 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Remuneration report – audited (continued) C Share-based compensation Employee Incentive Options Plan The Company has an Employee Incentive Options Plan approved by shareholders that enables the Board to offer eligible employees and directors options to acquire ordinary fully paid shares in the Company. Under the terms of the Plan, options to acquire ordinary fully paid shares may be offered to the Company's eligible employees at no cost unless otherwise determined by the Board in accordance with the terms and conditions of the Plan. Options granted as remuneration Incentive options were granted to key management personnel of the Company during the year. The terms and conditions of each grant of options over ordinary shares affecting remuneration of key management personnel in this financial year or future reporting years are as follows: Name Dean Tuck Number of options granted 5,000,000 Grant date Vesting date and exercisable date Expiry Date Exercise Price 24 November 2021 50% vest after 12 months, 50% vest after 24 months 02 July 2024 $0.04 Fair value per option at grant date $0.0374 Options granted carry no dividend or voting rights. All options were granted over unissued fully paid ordinary shares in the Company. Options vest based on the provision of service over the vesting period whereby the executive becomes beneficially entitled to the option on vesting date. Options are exercisable by the holder as from the vesting date. There has not been any alteration to the terms or conditions of the grant since the grant date. There are no amounts paid or payable by the recipient in relation to the granting of such options other than on their potential exercise. Shares issued on exercise of remuneration options On 13 September 2021, Paul Chapman exercised all of his 5,479,452 options granted as remuneration during the year ended 30 June 2021 for an amount of $53,699. On 13 September 2021, Dean Tuck exercised 3,000,000 options granted as remuneration during the year ended 30 June 2020 for an amount of $15,000. 23 24 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Remuneration report – audited (continued) Directors' interests in shares and options Directors' relevant interests in shares and options of the Company are disclosed below. Options The number of options held by key management personnel of the Group during the financial year is as follows: Balance at beginning of year Granted as remuneration during the year Options exercised Net change other Balance at year end Total vested 30/06/22 Total exercisable 30/06/22 30 June 2022 Directors P Chapman I Gordon P Payne D Tuck 5,479,452 - - 36,500,000 41,979,452 - - - 5,000,000 5,000,000 (5,479,452) - - (3,000,000) (8,479,452) - - - - - - - - 38,500,000 38,500,000 - - - 26,000,000 26,000,000 - - - 26,000,000 26,000,000 D Shareholdings The number of ordinary shares held by key management personnel of the Group during the financial year is as follows: Balance at beginning of year Participation in Placement during the year Issued on exercise of options during the year Other changes during the year Balance at end of year 30 June 2022 Directors P Chapman D Tuck I Gordon P Payne 304,130,061 17,710,317 47,603,758 46,706,352 416,150,488 1,428,571 - 571,429 571,429 2,571,429 5,479,452 3,000,000 - - 8,479,452 - - - - - 311,038,084 20,710,317 48,175,187 47,277,781 427,201,369 25 24 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DIRECTORS’ REPORT Remuneration report – audited (continued) Directors' interests in shares and options Directors' relevant interests in shares and options of the Company are disclosed below. The number of options held by key management personnel of the Group during the financial year is as follows: Granted as Balance at remuneration beginning of during the year year Options exercised Net change other Balance at Total vested exercisable year end 30/06/22 30/06/22 Total 5,479,452 - - - - - (5,479,452) - - - - - - - - - - - 36,500,000 5,000,000 (3,000,000) 38,500,000 26,000,000 26,000,000 41,979,452 5,000,000 (8,479,452) 38,500,000 26,000,000 26,000,000 - - - - - D Shareholdings The number of ordinary shares held by key management personnel of the Group during the financial year is as follows: Participation in Issued on exercise Balance at Placement of options during Other changes Balance at end beginning of year during the year the year during the year of year Options 30 June 2022 Directors P Chapman I Gordon P Payne D Tuck 30 June 2022 Directors P Chapman D Tuck I Gordon P Payne DREADNOUGHT RESOURCES LIMITED DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT D Shareholdings (Continued) Other transactions with key management personnel and their related parties Transactions with key management personnel and their related parties recognised during the year (excluding re- imbursement of expenses incurred on behalf of the Company) relating to directors and their director related entities were as follows: Director Transaction P Chapman Payments to a director related entity for office rental (ie Stone Poneys Nominees Pty Ltd atf Chapman Superannuation Fund). The lease has been terminated effective 31 December 2021. No amounts were owing to related parties as at 30 June 2022 (2021: nil). E Use of Remuneration Consultants Consolidated 2022 $ 9,350 2021 $ 11,627 The Board seeks external remuneration advice as required. No such advice was obtained during the financial year ended 30 June 2022. F Relationship between remuneration and Company performance Remuneration for certain individuals is directly linked to the performance of the Group. Details of the earnings and total shareholders return for the last five years. Due to the nature of the Group’s principal activities, the Directors assess the performance of the Group with regard to the annual volume weighted share price of the Group’s ordinary shares listed on the ASX and the market capitalisation of the Group. 304,130,061 17,710,317 47,603,758 46,706,352 416,150,488 1,428,571 - 571,429 571,429 2,571,429 5,479,452 3,000,000 - - 8,479,452 - - - - - 311,038,084 20,710,317 48,175,187 47,277,781 427,201,369 Operating revenue Net profit/(loss) Share price at year end Annual VWAP Market capitalisation at year end 2022 $ 398,289 (1,433,764) 0.0470 0.0424 2021 $ 389,814 (1,277,865) 0.0240 0.0184 2020 $ 72,163 (1,215,539) 0.0060 0.066 2019 $ 3,474 (688,822) 0.0040 0.0042 2018 $ 3,993 (324,155) 0.0050 0.0048 Market capitalisation as at 30 June 2022 was $133,528,577. G Key Management Personnel Loan There were no loans issued to key management personnel during the financial year (2021: Nil). Remuneration report ends. 24 25 26 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Auditor’s independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. The Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors. Dean Tuck Managing Director Dated 28 September 2022 27 26 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED DIRECTORS’ REPORT Auditor’s independence declaration immediately after this directors' report. A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out The Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors. PKF Perth Dean Tuck Managing Director Dated 28 September 2022 AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF DREADNOUGHT RESOURCES LIMITED In relation to our audit of the financial report of Dreadnought Resources Limited for the year ended 30 June 2022, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. PKF PERTH SHANE CROSS PARTNER 28 SEPTEMBER 2022 WEST PERTH, WESTERN AUSTRALIA Level 4, 35 Havelock Street, West Perth, WA 6005 PO Box 609, West Perth, WA 6872 T: +61 8 9426 8999 F: +61 8 9426 8900 www.pkfperth.com.au PKF Perth is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. Liability limited by a scheme approved under Professional Standards Legislation. 26 28 DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 30 June 2022 Other income Gain on fair value of financial asset Grant income Administration expenses Finance expense Exploration expenditure Legal fees Depreciation expense Impairment of exploration expenditure Director and employee benefits expense Loss from continuing operations before income tax Income tax benefit Consolidated Note 30 June 2022 $ 30 June 2021 $ 2 11 3 3 3 10 3 4 398,289 307,314 50,000 - - 82,500 (793,691) (669,158) (42,312) (76,477) (268,852) (282,247) (28,912) (20,191) (62,114) - (123,715) (315,169) (562,457) (304,437) (1,433,764) (1,277,865) - - Loss from continuing operations before income tax (1,433,764) (1,277,865) Other comprehensive loss, net of income tax Equity instruments at fair value through other comprehensive loss - - Total comprehensive loss for the year (1,433,764) (1,277,865) Loss per share for loss attributable to the ordinary equity holders of the Company Cents Basic loss per share (cents) Diluted loss per share (cents) Note Cents 17 17 (0.05) (0.05) (0.06) (0.06) The above consolidated statement of profit or loss and comprehensive income should be read in conjunction with the accompanying notes. 29 28 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 30 June 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Consolidated Statement of Financial Position As at 30 June 2022 Other income 398,289 307,314 Gain on fair value of financial asset 50,000 Consolidated 30 June 2022 30 June 2021 Note $ 2 11 3 3 3 10 3 4 - 82,500 (793,691) (669,158) (42,312) (76,477) (268,852) (282,247) (28,912) (20,191) (62,114) (123,715) (315,169) (562,457) (304,437) $ - - - - Grant income Administration expenses Finance expense Exploration expenditure Legal fees Depreciation expense Impairment of exploration expenditure Director and employee benefits expense Income tax benefit Loss from continuing operations before income tax (1,433,764) (1,277,865) Loss from continuing operations before income tax (1,433,764) (1,277,865) Other comprehensive loss, net of income tax Equity instruments at fair value through other comprehensive loss Total comprehensive loss for the year (1,433,764) (1,277,865) - - Loss per share for loss attributable to the ordinary equity holders of the Company Cents Basic loss per share (cents) Diluted loss per share (cents) Note Cents 17 17 (0.05) (0.05) (0.06) (0.06) The above consolidated statement of profit or loss and comprehensive income should be read in conjunction with the accompanying notes. ASSETS Current Assets Cash and cash equivalents Trade and other receivables Other assets Exploration asset held for sale Financial assets Total Current Assets Non-Current Assets Property, plant and equipment Right-of-use-assets Exploration assets Total Non-Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables Provisions Lease liability Total Current Liabilities Non-Current Liabilities Lease liability Other financial liabilities Total Non-Current Liabilities Total Liabilities Net Assets EQUITY Issued capital Reserves Accumulated losses Total Equity Consolidated Note 30 June 2022 $ 30 June 2021 $ 6 7 8 10 11 9 9 10 12 13 13 14 2,501,971 86,172 150,446 - 150,000 2,645,136 157,172 334,613 100,000 - 2,888,589 3,236,921 291,498 198,782 17,660,998 - - 10,371,428 18,151,278 10,371,428 21,039,867 13,608,349 1,222,313 95,023 29,742 807,641 62,986 - 1,347,078 870,627 177,577 - - 578,947 177,577 578,947 1,524,655 1,449,574 19,515,212 12,158,775 15 16 60,954,153 770,418 (42,209,359) 52,030,339 904,031 (40,775,595) 19,515,212 12,158,775 28 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 29 30 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Consolidated Statement of Changes in Equity For the Year Ended 30 June 2022 Attributable to shareholders Dreadnought Resources Limited Issued Capital Accumulated Losses Equity Reserve Options Reserve Total $ $ $ $ $ Balance at 1 July 2020 43,389,962 (39,497,730) 39,520 664,500 4,596,252 Loss for year Other comprehensive loss Total comprehensive loss for the year Transactions with owners in their capacity as owners Share issues, net of transaction costs (Note 15) Exercise of options (Note 15) Equity component of the convertible notes Option issues, net of transaction costs and tax (Note 16) Balance at 30 June 2021 - - - (1,277,865) - (1,277,865) 7,987,877 652,500 - - - - - - - - - - - 16,199 - - - - - - (1,277,865) - (1,277,865) 7,987,877 652,500 16,199 - 183,812 183,812 52,030,339 (40,775,595) 55,719 848,312 12,158,775 Balance at 1 July 2021 52,030,339 (40,775,595) 55,719 848,312 12,158,775 Loss for year Other comprehensive loss Total comprehensive loss for the year Transactions with owners in their capacity as owners Share issues, net of transaction costs (Note 15) Conversion of convertible notes Exercise of options (Note 15) Option vesting and issues, net of transaction costs and tax (Note 16) Balance at 30 June 2022 - - - (1,433,764) - (1,433,764) - - - - - - (1,433,764) - (1,433,764) 7,509,657 655,719 758,438 - - - - (55,719) - - - (467,239) 7,509,657 600,000 291,199 - 60,954,153 - (42,209,359) 389,345 770,418 389,345 19,515,212 - The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 31 30 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Consolidated Statement of Changes in Equity For the Year Ended 30 June 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Consolidated Statement of Cash Flows For the Year Ended 30 June 2022 Balance at 1 July 2020 43,389,962 (39,497,730) 39,520 664,500 4,596,252 Payments to suppliers and employees (1,262,281) (704,365) CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated Note 30 June 2022 $ 30 June 2021 $ Interest received Interest and other costs of finance paid Receipts from JV Partner Government grants 5,167 4,035 (5,945) (60,278) 502,169 203,279 - 100,973 Net cash used in operating activities 26 (760,890) (456,356) CASH FLOWS FROM INVESTING ACTIVITIES: Payments for exploration assets Payment for property, plant and equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issue of shares Capital raising costs Exercise of options Payment of lease liability Balance at 30 June 2022 60,954,153 (42,209,359) 389,345 389,345 770,418 19,515,212 Net cash provided by financing activities (6,794,242) (6,002,235) (325,215) (749) (7,119,457) (6,002,984) 8,000,000 8,535,998 (518,843) (548,121) 291,199 652,500 (35,174) - 7,737,182 8,640,377 Attributable to shareholders Dreadnought Resources Limited Issued Capital Accumulated Losses Equity Reserve Options Reserve Total $ $ $ $ $ - - - - - - - - - (1,277,865) (1,277,865) (1,433,764) (1,433,764) - - - - - - - - - - - - - - - - - - - - - - (1,277,865) - (1,277,865) 7,987,877 652,500 16,199 (1,433,764) - (1,433,764) - - - - - - - - - - - 7,509,657 655,719 758,438 (55,719) (467,239) 7,509,657 600,000 291,199 Loss for year Other comprehensive loss Total comprehensive loss for the year Transactions with owners in their capacity as owners Share issues, net of transaction costs (Note 15) Exercise of options (Note 15) Equity component of the convertible notes Option issues, net of transaction costs and tax (Note 16) Balance at 30 June 2021 Loss for year Other comprehensive loss Total comprehensive loss for the year Transactions with owners in their capacity as owners Share issues, net of transaction costs (Note 15) Conversion of convertible notes Exercise of options (Note 15) Option vesting and issues, net of transaction costs and tax (Note 16) 7,987,877 652,500 16,199 52,030,339 (40,775,595) 55,719 848,312 12,158,775 183,812 183,812 Balance at 1 July 2021 52,030,339 (40,775,595) 55,719 848,312 12,158,775 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Cash and cash equivalents at beginning of year 2,645,136 464,099 Net increase/(decrease) in cash and cash equivalents held (143,165) 2,181,037 Cash and cash equivalents at end of financial year 2,501,971 2,645,136 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 30 31 32 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 1 Summary of Significant Accounting Policies The principal accounting policies adopted in the preparation of these consolidated Financial Statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The Financial Statements are for the consolidated entity consisting of Dreadnought Resources Limited and its subsidiaries. (a) Basis of Preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Dreadnought Resources Limited is a for profit entity for the purpose of preparing the financial statements. (i) Compliance with IFRS These consolidated financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) Historical cost convention These financial statements have been prepared on an accrual basis, under the historical cost convention, as modified by the revaluation of financial assets through other comprehensive income. (iii) Critical accounting estimates The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. (b) Going concern The financial statements have been prepared on a going concern basis which assumes the Company and Consolidated Group will have sufficient funds to pay its debts, as and when they become payable, for a period of at least 12 months from the date the financial report is authorised for issue. As at 30 June 2022, the Consolidated Group had net assets of $19,515,212 (2021: $12,158,775) and a working capital surplus of $1,541,511 (2021: working capital surplus of $2,366,294). Included in non-current liabilities as at 30 June 2021 are Convertible Notes of $578,947 which have been fully converted into ordinary shares in 2022. In addition, during the financial year, the Consolidated Group had cash outflows from operating activities of $760,890 (2021: $456,356) and cash outflows from investing activities (including payments for exploration) of $7,119,457 (2021: 6,002,984). In August 2022, the Group completed a placement at $0.06 per share to institutional and sophisticated investors raising $12,000,000 (before costs). Directors contributed $350,000 to the placement subject to shareholder approval at the AGM to be held in November 2022.The Group’s cash flow forecast out to 30 September 2023 indicates that the Group will have sufficient cash flows to meet all commitments and working capital requirements for the 12-month period from the date of signing this financial report. To address the future funding requirements of the Group, the directors have: • • developed a business plan that provides encouragement for investors to invest; and continued their focus on maintaining an appropriate level of corporate overheads and projects spending in line with the Group’s available cash. Based on the cash flow forecasts, the directors are satisfied that the going concern basis of preparation is appropriate. 33 32 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 1 Summary of Significant Accounting Policies 1 Summary of Significant Accounting Policies (continued) The principal accounting policies adopted in the preparation of these consolidated Financial Statements are set out (c) Basis of Consolidation below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The Financial Statements are for the consolidated entity consisting of Dreadnought Resources Limited and its subsidiaries. These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Dreadnought Resources Limited is a for profit entity for the purpose of preparing the (a) Basis of Preparation financial statements. (i) Compliance with IFRS These consolidated financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) Historical cost convention These financial statements have been prepared on an accrual basis, under the historical cost convention, as modified by the revaluation of financial assets through other comprehensive income. (iii) Critical accounting estimates The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. (b) Going concern The financial statements have been prepared on a going concern basis which assumes the Company and Consolidated Group will have sufficient funds to pay its debts, as and when they become payable, for a period of at least 12 months from the date the financial report is authorised for issue. As at 30 June 2022, the Consolidated Group had net assets of $19,515,212 (2021: $12,158,775) and a working capital surplus of $1,541,511 (2021: working capital surplus of $2,366,294). Included in non-current liabilities as at 30 June 2021 are Convertible Notes of $578,947 which have been fully converted into ordinary shares in 2022. In addition, during the financial year, the Consolidated Group had cash outflows from operating activities of $760,890 (2021: $456,356) and cash outflows from investing activities (including payments for exploration) of $7,119,457 (2021: 6,002,984). In August 2022, the Group completed a placement at $0.06 per share to institutional and sophisticated investors raising $12,000,000 (before costs). Directors contributed $350,000 to the placement subject to shareholder approval at the AGM to be held in November 2022.The Group’s cash flow forecast out to 30 September 2023 indicates that the Group will have sufficient cash flows to meet all commitments and working capital requirements for the 12-month period from the date of signing this financial report. To address the future funding requirements of the Group, the directors have: developed a business plan that provides encouragement for investors to invest; and • • with the Group’s available cash. continued their focus on maintaining an appropriate level of corporate overheads and projects spending in line Based on the cash flow forecasts, the directors are satisfied that the going concern basis of preparation is appropriate. The Group financial statements consolidate those of the Parent and all of its subsidiaries. The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. (d) Investments in joint arrangements Joint arrangements represent the contractual sharing of control between parties in a business venture where unanimous decisions about relevant activities are required. Separate joint venture entities providing joint ventures with an interest to net assets are classified as a joint venture and accounted for using the equity method. Joint operations represent arrangements whereby joint operators maintain direct interests in each asset and exposure to each liability of the arrangement. The Group’s interests in assets, liabilities, revenue and expenses of joint operations are included in the respective line items of the consolidated financial statements. Gains and losses resulting from sales to a joint operation are recognised to the extent of the other parties’ interests. When the Group makes purchases from a joint operation, it does not recognise its share of the gains and losses from the joint arrangement until it resells those goods/assets to a third party. (e) Comparative Amounts Comparatives are consistent with prior years, unless otherwise stated. Where a change in comparatives has also affected the opening retained earnings previously presented in a comparative period, an opening statement of financial position at the earliest date of the comparative period has been presented. 32 33 34 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 iv (f) Summary of Significant Accounting Policies (continued) Income Tax The tax expense recognised in the profit or loss and other comprehensive income relates to current income tax expense plus deferred tax expense (being the movement in deferred tax assets and liabilities and unused tax losses during the year). Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for the year and is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is provided on temporary differences which are determined by comparing the carrying amounts of tax bases of assets and liabilities to the carrying amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax consequences relating to a non-monetary asset carried at fair value are determined using the assumption that the carrying amount of the asset will be recovered through sale. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and losses can be utilised. Current tax assets and liabilities are offset where there is a legally enforceable right to set off the recognised amounts and there is an intention either to settle on a net basis or to realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset where there is a legal right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. Current and deferred tax is recognised as income or an expense and included in profit or loss for the period except where the tax arises from a transaction which is recognised in other comprehensive income or equity, in which case the tax is recognised in other comprehensive income or equity respectively. Dreadnought Resources Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under tax consolidation legislation. Each entity in the Group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the ‘stand-alone taxpayer’ approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity. The tax consolidated group has entered into a tax funding arrangement whereby each company in the Group contributes to the income tax payable by the Group in proportion to their contribution to the Group’s taxable income. Differences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by, or distribution to the head entity. 35 34 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 iv (f) Income Tax The tax expense recognised in the profit or loss and other comprehensive income relates to current income tax expense plus deferred tax expense (being the movement in deferred tax assets and liabilities and unused tax losses during the year). Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for the year and is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is provided on temporary differences which are determined by comparing the carrying amounts of tax bases of assets and liabilities to the carrying amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax consequences relating to a non-monetary asset carried at fair value are determined using the assumption that the carrying amount of the asset will be recovered through sale. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and losses can be utilised. simultaneously. Current tax assets and liabilities are offset where there is a legally enforceable right to set off the recognised amounts and there is an intention either to settle on a net basis or to realise the asset and settle the liability Deferred tax assets and liabilities are offset where there is a legal right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. Current and deferred tax is recognised as income or an expense and included in profit or loss for the period except where the tax arises from a transaction which is recognised in other comprehensive income or equity, in which case the tax is recognised in other comprehensive income or equity respectively. Dreadnought Resources Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under tax consolidation legislation. Each entity in the Group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the ‘stand-alone taxpayer’ approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity. The tax consolidated group has entered into a tax funding arrangement whereby each company in the Group contributes to the income tax payable by the Group in proportion to their contribution to the Group’s taxable income. Differences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by, or distribution to the head entity. 34 Summary of Significant Accounting Policies (continued) iv Summary of Significant Accounting Policies (continued) Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 (g) Leases The Group as lessee At inception of a contract, the Group assesses if the contract contains a lease or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability are recognised by the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (i.e. a lease with a remaining lease term of 12 months or less) and leases of low-value assets are recognised as an operating expense on a straight-line basis over the term of the lease. Initially the lease liability is measured at the present value of the lease payments still to be paid at the commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate. Lease payments included in the measurement of the lease liability are as follows: • • fixed lease payments less any lease incentives; variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; the amount expected to be payable by the lessee under residual value guarantees; the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; lease payments under extension options, if the lessee is reasonably certain to exercise the options; and payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. • • • • The right-of-use assets comprise the initial measurement of the corresponding lease liability, any lease payments made at or before the commencement date and any initial direct costs. The subsequent measurement of the right-of-use assets is at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest. Where a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. (h) Revenue and other income (including government grants) Revenue is recognised when or as the Group transfers control of goods or services to a customer at the amount to which the Group expected to be entitled. If the consideration promised includes a variable amount, the Group estimates the amount of consideration to which it will be entitled. Revenue is measured at the transaction price received or receivable (which excludes estimates of variable consideration) allocated to the performance obligation satisfied and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT, GST and other sales related taxes. Where the expected period between transfer of a promised service and payment from the customer is one year or less no adjustment for a financing component is made. Revenue arising from the provision of services is recognised when and to the extent that the customer simultaneously receives and consumes the benefits of the Group’s performance or the Group does not create an asset with an alternative use but has an enforceable right to payment for performance completed to date. Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue is recognised when it is received or when the right to receive payment is established. Government assistance revenue is recognised when it is received or when the right to receive payment is established. 35 36 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 1 Summary of Significant Accounting Policies (continued) (i) Goods and Services Tax (GST) Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payable are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as part of receivables or payables in the statement of financial position. Cash flows in the statement of cash flows are included on a gross basis and the GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. (j) Property, Plant and Equipment Where the cost model is used, the asset is carried at its cost less any accumulated depreciation and any impairment losses. Costs include purchase price, other directly attributable costs and the initial estimate of the costs of dismantling and restoring the asset, where applicable. Plant and equipment Plant and equipment is measured on a cost basis. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Subsequent costs are included in the assets’ carrying amounts or recognised as separate assets as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost can be measured reliably. All other repairs and maintenance are charged to the statement of profit or loss and other comprehensive income during the financial year in which they are incurred. Depreciation The depreciable amount of all property, plant and equipment, except for freehold land is depreciated on a reducing balance method from the date that management determine that the asset is available for use. The depreciation rates used for each class of depreciable assets vary from 25% to 40%. Where the asset qualifies for the ATO instant write-off deduction, it is written off in the statement of profit or loss and other comprehensive income. (k) Financial instruments Classification and Measurement Under AASB 9, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Under AASB 9, debt financial instruments are subsequently measured at fair value through profit or loss (FVPL), amortised cost, or fair value through other comprehensive income (FVOCI). Classification is based on two criteria: • The Group’s business model for managing the assets; and • Whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding (the ‘SPPI criterion’). 37 36 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 1 Summary of Significant Accounting Policies (continued) 1 Summary of Significant Accounting Policies (continued) (i) Goods and Services Tax (GST) (k) Financial instruments (continued) Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payable are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as part of receivables or payables in the statement of financial position. Cash flows in the statement of cash flows are included on a gross basis and the GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. (j) Property, Plant and Equipment Where the cost model is used, the asset is carried at its cost less any accumulated depreciation and any impairment losses. Costs include purchase price, other directly attributable costs and the initial estimate of the costs of dismantling and restoring the asset, where applicable. Plant and equipment Plant and equipment is measured on a cost basis. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Subsequent costs are included in the assets’ carrying amounts or recognised as separate assets as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost can be measured reliably. All other repairs and maintenance are charged to the statement of profit or loss and other comprehensive income during the financial year in which they are incurred. Depreciation income. The depreciable amount of all property, plant and equipment, except for freehold land is depreciated on a reducing balance method from the date that management determine that the asset is available for use. The depreciation rates used for each class of depreciable assets vary from 25% to 40%. Where the asset qualifies for the ATO instant write-off deduction, it is written off in the statement of profit or loss and other comprehensive (k) Financial instruments Classification and Measurement Under AASB 9, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Under AASB 9, debt financial instruments are subsequently measured at fair value through profit or loss (FVPL), amortised cost, or fair value through other comprehensive income (FVOCI). Classification is based on two criteria: • The Group’s business model for managing the assets; and • Whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding (the ‘SPPI criterion’). The classification and measurement of the Group’s debt financial assets are, as follows: • Debt instruments are amortised cost for financial assets that are held within a business model with the objective to hold the financial assets in order to collect contractual cash flows that meet the SPPI criterion. This category includes the Group’s trade and other receivables. Other financial assets are classified and subsequently measured, as follows: • Equity instruments at FVOCI, with no recycling of gains or losses to profit or loss on derecognition. This category only includes equity instruments which the Group has irrevocably elected to so classify upon initial recognition or transition. Impairment The Group applies the AASB 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component. Where applicable, in measuring the expected credit losses, the trade receivables are assessed on a collective basis as they possess shared credit risk characteristics. They are grouped based on the days past due. The expected loss rates are based on the historic payment profile for as well as the corresponding historical credit losses during that period. The historical rates are adjusted to reflect current and forwarding looking macroeconomic factors affecting the customer’s ability to settle the amount outstanding. Trade receivables are written off when there is no reasonable expectation of recovery. Failure to make payments within 180 days from the invoice date and failure to engage with the Group on alternative payment arrangement amongst others is considered indicators of no reasonable expectation of recovery. Compound financial instruments Compound financial instruments issued by the Group comprise convertible notes that can be converted to ordinary shares at the option of the holder, when the number of shares to be issued is fixed and does not vary with changes in fair value. The liability component of compound financial instruments is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured. Interest related to the financial liability is recognised in profit or loss. On conversion at maturity, the financial liability is reclassified to equity and no gain or loss is recognised. 36 37 38 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 1 Summary of Significant Accounting Policies (continued) (l) Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. (m) Cash and cash equivalents For the purpose of presentation in the consolidated 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 twelve months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Any bank overdrafts the Group have are shown within borrowings in current liabilities in the consolidated statement of financial position. (n) Employee benefits Short-term employee benefits Short-term employee benefits are benefits, other than termination benefits, that are expected to be settled wholly within twelve months after the end of the period in which the employees render the related service. Examples of such benefits include wages and salaries and non-monetary benefits. Short-term employee benefits are measured at the undiscounted amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The Group’s liabilities for long service leave are included in other long term benefits as they are not expected to be settled wholly within twelve months after the end of the period in which the employees render the related service. They are measured at the present value of the expected future payments to be made to employees. The expected future payments incorporate anticipated future wage and salary levels, experience of employee departures and periods of service. Any re-measurements arising from experience adjustments and changes in assumptions are recognised in profit or loss in the periods in which the changes occur. The Group presents employee benefit obligations as current liabilities in the statement of financial position if the Group does not have an unconditional right to defer settlement for at least twelve (12) months after the reporting period, irrespective of when the actual settlement is expected to take place. 39 38 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 1 Summary of Significant Accounting Policies (continued) 1 Summary of Significant Accounting Policies (continued) (l) Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. (m) Cash and cash equivalents For the purpose of presentation in the consolidated 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 twelve months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Any bank overdrafts the Group have are shown within borrowings in current liabilities in the consolidated statement of financial position. (n) Employee benefits Short-term employee benefits Short-term employee benefits are benefits, other than termination benefits, that are expected to be settled wholly within twelve months after the end of the period in which the employees render the related service. Examples of such benefits include wages and salaries and non-monetary benefits. Short-term employee benefits are measured at the undiscounted amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The Group’s liabilities for long service leave are included in other long term benefits as they are not expected to be settled wholly within twelve months after the end of the period in which the employees render the related service. They are measured at the present value of the expected future payments to be made to employees. The expected future payments incorporate anticipated future wage and salary levels, experience of employee departures and periods of service. Any re-measurements arising from experience adjustments and changes in assumptions are recognised in profit or loss in the periods in which the changes occur. The Group presents employee benefit obligations as current liabilities in the statement of financial position if the Group does not have an unconditional right to defer settlement for at least twelve (12) months after the reporting period, irrespective of when the actual settlement is expected to take place. (o) Loss per share Dreadnought Resources Ltd presents basic and diluted loss per share information for its ordinary shares. Basic loss per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share adjusts the 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 additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (p) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options which vest immediately are recognised as a deduction from equity, net of any tax effects. (q) Share-Based Payments Equity-settled and cash-settled share-based compensation benefits are provided to employees and non- employees. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a Black Scholes pricing model which incorporates all market vesting conditions. The amount to be expensed is determined by reference to the fair value of the options or shares granted. This expense takes in account any market performance conditions and the impact of any non-vesting conditions but ignores the effect of any service and non-market performance vesting conditions. Non-market vesting conditions are taken into account when considering the number of options expected to vest. At the end of each reporting period, the Group revises its estimate of the number of options which are expected to vest based on the non-market vesting conditions. Revisions to the prior period estimate are recognised in profit or loss and equity. If the Group modifies the terms or conditions of the equity instruments granted in a manner that reduces the total fair value of the share-based payment arrangement, or is not otherwise beneficial to the employee, the Group shall nevertheless continue to account for the services received as consideration for the equity instruments granted as if that modification had not occurred. In addition, the Group recognises the effect of modifications that increase the total fair value of the share-based payment arrangement or are otherwise beneficial to the employee. (r) Exploration and development expenditure Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. As the asset is not available for use it is not depreciated or amortised. Accumulated costs in relation to an abandoned area are impaired in full against profit or loss in the period in which the decision to abandon that area is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. 38 39 40 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 1 Summary of Significant Accounting Policies (continued) (s) Reserves FVOCI reserves represent financial assets at fair value through other comprehensive income reserve. The reserve records fair value change of equity instruments. The equity reserve represents the equity component (conversion rights) on the issue of unsecured convertible notes. (t) Key estimates and judgments The preparation of the consolidated financial statements requires management to make estimates and judgments. These estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) Estimated impairment The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets as noted in note 1(l). Where an impairment trigger exists, the recoverable amount of the asset is determined. (ii) Exploration and evaluation The Group policy for exploration and evaluation is discussed in note 1 (r). The application of this policy requires management to make certain assumptions as to future events and circumstances. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised exploration and evaluation expenditure, management concludes that the capitalised expenditure is unlikely to be recovered by future sale or exploration, then the relevant capitalised amount will be written off through the statement of profit or loss. (Iii) Compound financial instrument The Group’s policy for compound financial instrument is discussed in Note 1(k). The fair value of the liability component is determined based on the contractual stream of future cash flows which is discounted at the rate of interest that would apply to an identical financial instrument without the conversion option. The Group uses its judgement to determine the discount rate based on the market interest rates existing at the end of each reporting period. (iv) Estimation of tax losses carried forward Potential future income tax benefits attributable to gross tax losses of $43,532,798 (2021: $34,898,311) carried forward have not been brought to account at 30 June 2022 because the directors do not believe it is appropriate to regard realisation of the future tax benefit as probable. These benefits will only be obtained if: a. the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the losses and deductions to be released; the Group continues to comply with the conditions for deductibility imposed by the law; and no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the losses. b. c. Tax losses carried forward have no expiry date. 40 41 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 1 Summary of Significant Accounting Policies (continued) (s) Reserves FVOCI reserves represent financial assets at fair value through other comprehensive income reserve. The reserve records fair value change of equity instruments. The equity reserve represents the equity component (conversion rights) on the issue of unsecured convertible notes. (t) Key estimates and judgments The preparation of the consolidated financial statements requires management to make estimates and judgments. These estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) Estimated impairment amount of the asset is determined. (ii) Exploration and evaluation The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets as noted in note 1(l). Where an impairment trigger exists, the recoverable The Group policy for exploration and evaluation is discussed in note 1 (r). The application of this policy requires management to make certain assumptions as to future events and circumstances. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised exploration and evaluation expenditure, management concludes that the capitalised expenditure is unlikely to be recovered by future sale or exploration, then the relevant capitalised amount will be written off through the statement of profit or loss. (Iii) Compound financial instrument The Group’s policy for compound financial instrument is discussed in Note 1(k). The fair value of the liability component is determined based on the contractual stream of future cash flows which is discounted at the rate of interest that would apply to an identical financial instrument without the conversion option. The Group uses its judgement to determine the discount rate based on the market interest rates existing at the end of each reporting period. (iv) Estimation of tax losses carried forward Potential future income tax benefits attributable to gross tax losses of $43,532,798 (2021: $34,898,311) carried forward have not been brought to account at 30 June 2022 because the directors do not believe it is appropriate to regard realisation of the future tax benefit as probable. These benefits will only be obtained if: a. the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the losses and deductions to be released; the Group continues to comply with the conditions for deductibility imposed by the law; and no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for b. c. the losses. Tax losses carried forward have no expiry date. 40 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 1 Summary of Significant Accounting Policies (continued) (u) Joint control The Group’s accounting policy for Joint Arrangements is set out in Note 1(d). AASB 11 Joint Arrangements requires an investor to have contractually agreed the sharing of control when making decisions about the relevant activities (in other words requiring the unanimous consent of the parties sharing control). However, what these activities are is a matter of judgement. As at the reporting date 30 June 2022, the Group does not have any Joint Arrangements as defined in this policy. While there are agreements in place with other parties (for the Group’s 80% interest in certain tenements which form part of its Tarraji-Yampi project), there is no joint control over decisions about relevant activities required to progress these projects. For the Tarraji-Yampi project, it is the view of the Group that it controls this project through its 80% interest. (v) Financial report The financial report was authorised for issue on 28 September 2022 by the Board of Directors. (w) Adoption of new and revised accounting standards and interpretations In the year ended 30 June 2022, the directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Group and effective for the current reporting periods beginning on or after 1 July 2022. As a result of this review, the directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Group and, therefore, no material change is necessary to the Group’s accounting policies. (x) New accounting standards and interpretations that are not yet mandatory The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. Amendments to AASB 101 clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The amendments also clarify that ‘settlement’ includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. The Group is currently assessing the impact of new accounting standards and amendments. The Group does not believe that the amendments to AASB 101 will have a significant impact on the classification of its liabilities. 41 42 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 2 Other Income Receipts from JV Option fee income (Note 9(v)) Others 3 Expenses Administration expenses Compliance and regulatory Computer expenses Consulting fees (a) Insurance Seminar/conference Share registry Travel and accommodation Marketing / investor relations Other (a) Consulting fees Accounting and secretarial services Tenement related Director and employee benefit expenses Non-executive directors’ fees Share-based payment (Note 16 and 27) - Directors - Employees Superannuation Other employee benefit Consolidated 30 June 2022 $ 393,122 - 5,167 30 June 2021 $ 203,279 100,000 4,035 398,289 307,314 103,577 28,914 193,494 29,635 45,719 36,860 41,633 142,165 171,694 119,764 47,834 243,290 33,665 36,389 55,375 16,154 34,000 82,687 796,691 669,158 184,615 196,787 8,879 46,503 193,494 243,290 110,770 66,049 83,721 114,182 305,624 11,063 51,279 69,630 6,533 48,043 562,457 304,437 Salaries and wages recharged to Exploration Assets during the year was $1,074,947 (2021: $641,709). Finance expense Of the total balance, $5,010 (2021: $60,000) relates to payment on the convertible loan note interest which was cash in nature. The remaining relates to interest on lease liability of $15,314 (2021: Nil), interest accrued on the convertible loan note of $21,053 (2021: $16,199) and $935 (2021: $278) on interest on insurance premium funding. 43 42 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 2 Other Income Receipts from JV Option fee income (Note 9(v)) Others 3 Expenses Administration expenses Compliance and regulatory Computer expenses Consulting fees (a) Insurance Seminar/conference Share registry Travel and accommodation Marketing / investor relations Other (a) Consulting fees Accounting and secretarial services Tenement related Director and employee benefit expenses Non-executive directors’ fees Share-based payment (Note 16 and 27) - Directors - Employees Superannuation Other employee benefit Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 Consolidated 30 June 2022 30 June 2021 $ 393,122 - 5,167 $ 203,279 100,000 4,035 398,289 307,314 3 Expenses (continued) Depreciation expense: Depreciation of property, plant and equipment Amortisation of right-of-use assets 4 Income Tax Expense Income tax expense/(benefit) Current tax Deferred tax Income tax expense/(benefit) Reconciliation of income tax to accounting loss: Prima facie loss from ordinary activities Tax at the Australian tax rate of Prima facie tax expenses/(income) on ordinary activities Add: Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non assessable income Other non allowable items Share-based payments Tax effect of temporary differences not brought to account as they do not meet the recognition criteria 103,577 28,914 193,494 29,635 45,719 36,860 41,633 142,165 171,694 119,764 47,834 243,290 33,665 36,389 55,375 16,154 34,000 82,687 796,691 669,158 184,615 196,787 8,879 46,503 193,494 243,290 110,770 66,049 83,721 114,182 305,624 11,063 51,279 69,630 6,533 48,043 562,457 304,437 42 Salaries and wages recharged to Exploration Assets during the year was $1,074,947 (2021: $641,709). Finance expense Of the total balance, $5,010 (2021: $60,000) relates to payment on the convertible loan note interest which was cash in nature. The remaining relates to interest on lease liability of $15,314 (2021: Nil), interest accrued on the convertible loan note of $21,053 (2021: $16,199) and $935 (2021: $278) on interest on insurance premium funding. Consolidated 30 June 2022 $ 30 June 2021 $ 33,717 28,397 62,114 - - - Consolidated 30 June 2022 $ 30 June 2021 $ - - - - - - - - (1,433,764) (1,277,865) 25% 26% (358,441) (332,245) - 6,532 97,336 (9,750) 570 47,791 254,573 293,634 - - 43 44 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 4 Income Tax Expense (continued) Deferred Income Tax Deferred income tax at 30 June relates to the following Deferred tax liabilities Prepayments Other financial assets Property, plant and equipment Exploration assets Deferred tax assets Accruals Leases Provision for employee entitlements Section 40-880 expenditure Revenue tax losses Capital losses Deferred tax assets not brought to account as realisation is not probable Deferred tax assets Consolidated 2022 $ 2021 $ (37,612) (12,500) (122,570) (4,406,889) 88 51,830 23,756 216,780 10,910,697 399,331 (66,865) - - (2,603,803) 9,201 - 16,376 223,035 9,027,843 441,304 (7,022,911) (7,047,091) - - A deferred tax liability of $Nil (2021: $Nil) was recognised in equity during the financial year. A deferred tax asset (DTA) has not been recognised in respect of temporary differences as they do not meet the recognition criteria per AASB 112 Income Taxes. A DTA has not been recognised in respect of tax losses as realisation of the benefit is not regarded as probable. The Group is part of a tax consolidated group in accordance with the tax consolidation legislation. The Group has unrecognised assessed gross tax losses of $43,532,798 (2021: $34,898,311) that are available indefinitely for offset against future taxable profits of the Group subject to satisfaction of the relevant tax losses recoupment tests. The tax rates applicable to each potential tax benefit are as follows: Timing differences – 25%; Tax losses – 25%. The Group has JMEI credits available from the Australian Taxation Office of $Nil in respect of the year ending 30 June 2023 (2022: $750,000). The JMEI entitles Australian resident investors in eligible minerals exploration companies to obtain either a refundable tax offset or (where the Eligible Investor is a corporate tax entity) franking credits. 45 44 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 4 Income Tax Expense (continued) 5 Operating Segments Deferred Income Tax Deferred income tax at 30 June relates to the following Deferred tax liabilities Prepayments Other financial assets Property, plant and equipment Exploration assets Deferred tax assets Accruals Leases Provision for employee entitlements Section 40-880 expenditure Revenue tax losses Capital losses probable Deferred tax assets Consolidated 2022 $ 2021 $ (37,612) (12,500) (122,570) (4,406,889) 88 51,830 23,756 216,780 10,910,697 399,331 - (66,865) (2,603,803) 9,201 16,376 223,035 9,027,843 441,304 - - - - Deferred tax assets not brought to account as realisation is not (7,022,911) (7,047,091) A deferred tax liability of $Nil (2021: $Nil) was recognised in equity during the financial year. A deferred tax asset (DTA) has not been recognised in respect of temporary differences as they do not meet the recognition criteria per AASB 112 Income Taxes. A DTA has not been recognised in respect of tax losses as realisation of the benefit is not regarded as probable. The Group is part of a tax consolidated group in accordance with the tax consolidation legislation. The Group has unrecognised assessed gross tax losses of $43,532,798 (2021: $34,898,311) that are available indefinitely for offset against future taxable profits of the Group subject to satisfaction of the relevant tax losses recoupment tests. The tax rates applicable to each potential tax benefit are as follows: Timing differences – 25%; Tax losses – 25%. The Group has JMEI credits available from the Australian Taxation Office of $Nil in respect of the year ending 30 June 2023 (2022: $750,000). The JMEI entitles Australian resident investors in eligible minerals exploration companies to obtain either a refundable tax offset or (where the Eligible Investor is a corporate tax entity) franking credits. The directors have considered the requirements of AASB 8 – Operating Segments and the internal reports that are reviewed by the chief operating decision maker (the Board) in allocating resources and have concluded that at this time are no separately identifiable segments. The principal products and services of this operating segment are the mining and exploration operations predominately in Western Australia. 6 Cash and cash equivalents Cash at bank and in hand 7 Trade and other receivables Current: Receivable for option fee GST receivable Other receivables Total current trade and other receivables Consolidated 30 June 2022 $ 30 June 2021 $ 2,501,971 2,645,136 2,501,971 2,645,136 Consolidated 30 June 2022 $ 30 June 2021 $ - 84,210 1,962 110,000 46,163 1,009 86,172 157,172 The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable in the financial statements. As at 30 June 2022 there were no material trade and other receivables that were considered to be past due or impaired (2021: Nil) and therefore there no expected loss credit provision required. 8 Other current assets Prepayments Total other assets Consolidated 30 June 2022 $ 30 June 2021 $ 150,446 334,613 150,446 334,613 44 45 46 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 9 Fixed assets Property, plant and equipment: Leasehold improvements – at cost Less: Accumulated depreciation Motor vehicles – at cost Less: Accumulated depreciation Right-of-use assets: Right of use assets – at cost (see Note 13) Less: Accumulated amortisation Total fixed assets Consolidated 30 June 2022 $ 30 June 2021 $ 140,375 (8,474) 131,901 184,840 (25,243) 159,597 291,498 227,179 (28,397) 198,782 490,280 - - - - - - - - - - Reconciliations Reconciliations of the written down values at the beginning and end of the current financial year are set out below: Leasehold improvements $ Motor vehicles $ Right of use assets $ Total $ Balance at 1 July 2021 Additions Right of use asset at inception of lease Depreciation expense Amortisation of right of use asset - 140,375 - (8,474) - - 184,840 - (25,243) - - - 227,179 - (28,397) - 325,215 227,179 (33,717) (28,397) Balance at 30 June 2022 131,901 159,597 198,782 490,280 47 46 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 10 Exploration and evaluation assets Current Exploration asset held for sale (i) Consolidated 30 June 2022 $ 30 June 2021 $ - - 100,000 100,000 (i) On 19 June 2021, the Group entered into a binding Terms Sheet to sell its Rocky Dam Gold Project to Lycaon Resources Limited, a then pre-IPO company that listed on the ASX on 17 November 2021. The Group received 500,000 Lycaon shares as consideration plus a 1% net smelter royalty over all minerals extracted from Rocky Dam. The shares were recognised at a cost of $0.20 per share totalling $100,000 based on the sale and purchase agreement. Non-Current Exploration and evaluation asset Balance at 1 July 2020 Impairment (iii) Expenditure incurred Balance at 30 June 2021 Balance at 1 July 2021 Acquisition (i) Impairment (ii) Expenditure incurred Balance at 30 June 2022 30 June 2022 $ 17,660,998 17,660,998 30 June 2021 $ 10,371,428 10,371,428 5,104,501 (315,169) 5,582,096 10,371,428 10,371,428 58,500 (123,715) 7,354,785 17,660,998 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. (i) The Group purchased the license for tenement E09/2359 from an unrelated party by way of cash consideration of $30,000 and 750,000 shares of the Company at an issue price of $0.038 per share. (ii) The impairment of the exploration assets in 2021/2022 relates to the surrender of tenements during the year. (iii) The impairment of the exploration assets in 2020/2021 relates to the impairment within the Rocky Dam project as disclosed in (i) above. 47 48 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 11 Financial assets Investment in listed entity: Fair value at beginning of the year Additions at cost Change in fair value Fair value at end of the year Consolidated 30 June 2022 $ 30 June 2021 $ - 100,000 50,000 150,000 - - - - In June 2021, the Group entered into an agreement to divest tenements in its Rocky Dam projects to Lycaon Resources Ltd, a then pre-IPO company that listed on the ASX on 17 November 2021. The Group received 500,000 Lycaon shares as consideration plus a 1% net smelter royalty over all minerals extracted from Rocky Dam. The shares were recognised at a cost of $0.20 per share totalling $100,000 based on the sale and purchase agreement. As at 30 June 2022, the investment was revalued to reflect the share price of Lycaon as of that date which resulted in a gain in fair value of $50,000. There were no financial assets as at 30 June 2021. 12 Trade and other payables Trade payables Accrued expenses PAYG and wages payable Superannuation payable Total trade and other payables Consolidated 30 June 2022 $ 30 June 2021 $ 802,257 381,896 37,810 350 1,222,313 739,233 24,574 22,443 21,391 807,641 All amounts are short term and the carrying values are considered to be a reasonable approximation of fair value. 13 Lease liability Office space lease: Current portion Noncurrent portion Total lease liability Consolidated 30 June 2022 $ 30 June 2021 $ 29,742 177,577 207,319 - - - The lease liability relates to the Company’s office space in Unit 1, 4 Burgay Court, Osborne Park, WA 6017 for an initial period of 3 years. The Company has an option to extend the lease for another 3 years. 49 48 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 14 Other financial liabilities Convertible notes – liability component – non-current Total financial liabilities Consolidated 30 June 2022 $ - - 30 June 2021 $ 578,947 578,947 The Group received a total amount of $600,000 from issuing Convertible Notes in June 2019. The issue of Convertible Notes was approved by shareholders in August 2019. Each of the Convertible Notes carries a face value of $1.00 with an annual interest rate of 10% and maturity date of 2 July 2021. On 8 April 2021, the maturity date was extended to 1 July 2022. The holder may elect to convert the Convertible Notes into shares at $0.0055 per share. Upon the occurrence of default, the lender may require immediate redemption of all outstanding Convertible Notes together with all interest and other outstanding moneys to be immediately due and payable to the lender. The Convertible Notes were determined to be a compound financial instrument, resulting in a split between liability and equity components (Note 1(k)). The fair value of the liability component is determined based on the contractual future cash flows which is discounted at the rate of interest (14%) that would apply to an identical financial instrument without the conversion option. At 30 June 2021, $55,719 was attributed to equity component. On 23 July 2021, the Convertible Loan Note holders elected to convert their Convertible Notes into 109,090,909 fully paid ordinary shares thereby reducing the debt to $nil. 15 Issued Capital Ordinary shares fully paid Date At 1 July 2020 15/07/2020 Options exercised 05/08/2020 Options exercised 30 June 2022 $ 30 June 2021 $ 60,954,153 52,030,339 No. $ 1,891,680,768 43,389,962 17,500,000 137,500 1,000,000 5,000 13/08/2020 Share Placement – Sophisticated and professional investors 170,666,673 1,536,000 20/08/2020 Options exercised 19/10/2020 Options exercised 26/10/2020 Options exercised 15,000,000 75,000 10,000,000 100,000 21,000,000 165,000 30/10/2020 Share Placement – Sophisticated and professional investors 125,000,000 3,500,000 19/11/2020 Options exercised 07/04/2021 Options exercised 10,000,000 60,000 12,000,000 110,000 19/04/2021 Share Placement – Sophisticated and professional investors 166,666,667 3,000,000 06/05/2021 Share Purchase Plan – Eligible shareholders 27,777,653 499,998 Less: Transaction costs - (548,121) At 30 June 2021 2,468,291,761 52,030,339 49 50 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 15 Issued capital (continued) At 1 July 2021 12/07/2021 Options exercised 23/07/2021 Conversion of Notes 4/08/2021 Options exercised 13/09/2021 Options exercised 13/09/2021 Options exercised 21/09/2021 Placement 30/11/2021 Issues of shares regarding acquisition 30/11/2021 Director Participation in Placement 30/11/2021 Options exercised 2/12/2021 Options exercised 31/01/2022 Options exercised Exercise of options and conversion of notes Less: Transaction costs 30 June 2022 No. 30 June 2021 $ 2,468,291,761 52,030,339 10,000,000 109,090,909 80,000 600,000 10,000,000 100,000 3,000,000 5,479,452 15,000 53,699 226,000,000 7,910,000 750,000 2,571,429 750,000 1,250,000 1,500,000 28,500 90,000 15,000 12,500 15,000 - - 522,958 (518,843) At 30 June 2022 2,838,683,551 60,954,153 Capital Management Management controls the capital of the Group in order to maintain and generate long-term shareholder value and ensure that the Group can fund its operations and continue as a going concern. The Group is not subject to any externally imposed capital requirements. Management effectively manages the Group capital by assessing the Group financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. The Group received a total amount of $600,000 from the issue of Convertible Notes. The issue of Convertible Notes was approved by shareholders on 16 August 2019. The Convertible Notes each with a face value of $1.00 bear interest at 10% per annum, have a Conversion Price of $0.0055 and mature on 1 July 2022. On 23 July 2021, the Convertible Loan Note holders elected to convert their notes into 109,090,909 fully paid ordinary shares thereby reducing debt to $nil. (a) Options The details of the unlisted options are as follows: Number 20,000,000 3,500,000 30,000,000 2,750,000 750,000 16,500,000 2,000,000 2,000,000 77,500,000 Exercise Price $ 0.0060 0.0050 0.0050 0.0100 0.0200 0.0400 0.0600 0.0600 Expiry Date 25-May-23 30-Jun-24 9-Apr-24 1-Oct-23 31-Oct-23 02-Jul-24 11-Aug-24 26-Nov-24 Refer Note 16(a) for further information. 51 50 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 16 Reserves Options reserve (a) Equity reserve (b) (a) Options Reserve Consolidated 30 June 2022 $ 30 June 2021 $ 770,418 - 848,312 55,719 770,418 904,031 No. $ Grant Date At 1 July 2020 163,000,000 664,500 04/04/2019 Options exercised – IronRinger Vendor Options (40,000,000) - 16/08/2019 Options exercised – Director Options 25/05/2020 Options exercised – Broker Options 01/07/2020 Options issued – Chairman Options (1) 02/10/2020 Options issued – Employee Options (2) 15/01/2021 Options issued – Employee Options (3) At 30 June 2021 Grant Date At 1 July 2021 02/07/2021 Options issued - employees(4) 11/08/2021 Options issued - employee(5) 24/11/2021 Options issued - Managing Director(6) 29/11/2021 Options issued – employee(6) Options issued in prior years but partly vesting during the current year Options exercised during the year Reclassification of exercised options to issued capital At 30 June 2022 (26,500,000) - (20,000,000) - 5,479,452 114,182 5,500,000 1,500,000 54,779 14,851 88,979,452 848,312 No. $ 88,979,452 11,500,000 2,000,000 5,000,000 2,000,000 848,312 168,832 45,525 83.721 30,831 - 60,436 (31,979,452) - - (467,239) 77,500,000 770,418 1) A term of Paul Chapman’s appointment as a director of the Company was that he was entitled to $36,000 plus superannuation in fees for the year ending 30 June 2021 (year ended 30 June 2020 $nil). Paul Chapman elected to receive his remuneration for the financial year ending 30 June 2021 by way of an issue of options. The Board resolved to grant 5,479,452 options to Paul Chapman under the Company’s Plan on 1 July 2020, subject to obtaining shareholder approval. Shareholder approval was obtained on 30 November 2020. The options vested in four equal tranches quarterly from 1 July 2020. 2) On 2 October 2020, the Company agreed to issue employees of the Company who are not related parties of the Company, 2,500,000 and 3,000,000 Options respectively under the Plan, subject to obtaining Shareholder approval. Shareholder approval was obtained on 30 November 2020. 50% of the options vest 12 months from grant date and the other 50% vest 24 months from grant date. 51 52 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 16 Reserves (Continued) (a) Options Reserve (Continued) 3) On 1 November 2020, the Company agreed to offer an employee of the Company who is not a related party of the Company, 1,500,000 Options under the Plan. 50% of the options vest 12 months from grant date and the other 50% vest 24 months from grant date. 4) On 2 July 2021, the Company granted 11,500,000 options via the Dreadnought Plan to the current employees and the company secretary of the Company. The options have a $0.04 exercise price and an expiry date of 2 July 2024. 50% of the options vest 12 months from grant date and the other 50% vest 24 months from grant date. 5) On 31 August 2021, the Company issued 2,000,000 options via the Plan to an employee of the Company. The options have a $0.06 exercise price and an expiry date of 11 August 2024. 50% of the options vest 12 months from grant date and the other 50% vest 24 months from grant date. 6) On 30 November 2021, the Company issued a total of 7,000,000 options to an employee and the Managing Director of the Company - 2,000,000 options have an exercise price of $0.06 and an expiry of 26 November 2024, while the remaining 5,000,000 options have an exercise price of $0.04 and expiry of 2 July 2024. 50% of each series of options vest 12 months from grant date and the other 50% vest 24 months from grant date. (b) Equity Reserve Relates to the equity component of the Convertible Note. Refer to Note 14 for more details. During the year ended 30 June 2022, the reserve was transferred to issued capital upon the conversion of the notes to shares of stock. 17 Loss per share (a) Basic loss per share Loss attributable to the ordinary equity holders Weighted average number of shares outstanding during the year Basic loss per share (cents) Consolidated 30 June 2022 $ 30 June 2021 $ (1,433,764) 2,774,262,376 (0.05) (1,277,865) 2,223,544,155 (0.06) (b) Dilutive earnings per share In accordance with AASB 133 Earnings per Share, potential ordinary shares in the form of options and convertible notes are antidilutive when their conversion to ordinary shares decrease loss per share from continuing operations. The calculation of diluted earnings/(losses) per share does not assume conversion, exercise, or other issue of potential ordinary shares that would have an antidilutive effect on earnings/(losses) per share. 53 52 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 16 Reserves (Continued) (a) Options Reserve (Continued) 3) On 1 November 2020, the Company agreed to offer an employee of the Company who is not a related party of the Company, 1,500,000 Options under the Plan. 50% of the options vest 12 months from grant date and the other 50% vest 24 months from grant date. 4) On 2 July 2021, the Company granted 11,500,000 options via the Dreadnought Plan to the current employees and the company secretary of the Company. The options have a $0.04 exercise price and an expiry date of 2 July 2024. 50% of the options vest 12 months from grant date and the other 50% vest 24 months from grant date. 5) On 31 August 2021, the Company issued 2,000,000 options via the Plan to an employee of the Company. The options have a $0.06 exercise price and an expiry date of 11 August 2024. 50% of the options vest 12 months from grant date and the other 50% vest 24 months from grant date. 6) On 30 November 2021, the Company issued a total of 7,000,000 options to an employee and the Managing while the remaining 5,000,000 options have an exercise price of $0.04 and expiry of 2 July 2024. 50% of each series of options vest 12 months from grant date and the other 50% vest 24 months from grant date. Relates to the equity component of the Convertible Note. Refer to Note 14 for more details. During the year ended 30 June 2022, the reserve was transferred to issued capital upon the conversion of the notes to shares of stock. (b) Equity Reserve 17 Loss per share (a) Basic loss per share Basic loss per share (cents) (b) Dilutive earnings per share In accordance with AASB 133 Earnings per Share, potential ordinary shares in the form of options and convertible notes are antidilutive when their conversion to ordinary shares decrease loss per share from continuing operations. The calculation of diluted earnings/(losses) per share does not assume conversion, exercise, or other issue of potential ordinary shares that would have an antidilutive effect on earnings/(losses) per share. Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 18 Exploration Commitments Exploration expenditure commitments payable: Not later than 12 months Between 12 months and five years Later than five years Total exploration tenement minimum expenditure Consolidated 30 June 2022 30 June 2021 $ $ 1,929,000 1,157,760 1,048,000 1,955,000 - 3,086,760 3,003,000 The Group can seek deferral of minimum expenditures or relinquish tenements as required. Director of the Company - 2,000,000 options have an exercise price of $0.06 and an expiry of 26 November 2024, 19 Financial Risk Management The Group is exposed to a variety of financial risks through its use of financial instruments. This note discloses the Group’s objectives, policies and processes for managing and measuring these risks. The Group’s overall risk management plan seeks to minimise potential adverse effects due to the unpredictability of financial markets. The Group does not speculate in financial assets. Consolidated 30 June 2022 30 June 2021 $ $ Specific risks • • • Market risk - currency risk, interest rate risk and equity price risk Credit risk Liquidity risk The principal categories of financial instrument used by the Group are: • • • • Cash at bank Trade and other receivables Trade and other payables Other financial liabilities – convertible notes Loss attributable to the ordinary equity holders (1,433,764) (1,277,865) Objectives, policies and processes Weighted average number of shares outstanding during the year 2,774,262,376 2,223,544,155 (0.05) (0.06) Specific information regarding the mitigation of each financial risk to which the Group is exposed is provided below. Liquidity risk Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The Group maintains cash to meet its liquidity requirements for up to 30-day periods. The Group manages its liquidity needs by carefully monitoring long-term financial liabilities as well as cash-outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day period are identified monthly. At the reporting date, these reports indicate that the Group expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances. 52 53 54 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 19 Financial Risk Management (continued) The Group’s assets and liabilities have contractual maturities which are summarised below: Consolidated Within 1 year More than 1 year 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ 2,501,971 2,645,136 86,172 157,172 150,000 - 2,738,143 2,802,308 1,222,313 807,641 29,742 - - - - - - - - 177,577 - - - - - - - 578,947 1,252,055 807,641 177,577 578,947 Financial assets Cash and cash equivalents Trade and other receivables Investment in listed entity Financial Liabilities Trade and other payables Lease liability Convertible notes – liability component, at amortised cost Market risk (i) Foreign currency sensitivity All of the Group transactions are carried out in Australian Dollars, therefore the Group is not exposed to foreign exchange risk. (ii) Cash flow interest rate sensitivity The Group is not exposed to interest rate sensitivity on its financial assets and liabilities during the year ended 30 June 2022. (iii) Price sensitivity The Group is not exposed to price sensitivity. Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to the Group. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposure to wholesale and retail customers, including outstanding receivables and committed transactions. Management considers that all the financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due. The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. The long term and short term ratings is AA- and A-1+ respectively (Source: S&P Global Ratings). 55 54 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 19 Financial Risk Management (continued) Fair value estimation The fair values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying values as presented in the consolidated statement of financial position. Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Fair values derived may be based on information that is estimated or subject to judgement, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgement and the assumptions have been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. 30 June 2022 30 June 2021 Net Carrying Value $ Net Fair value $ Net Carrying Value $ Net Fair value $ 2,501,971 2,501,971 2,645,136 2,645,136 86,172 86,172 157,172 157,172 150,000 150,000 - - 2,738,143 2,738,143 2,802,308 2,802,308 Financial assets Cash and cash equivalents Trade and other receivables Investment in listed entity Total financial assets Financial liabilities Trade and other payables 1,222,313 1,222,313 807,641 807,641 Lease liability 207,319 207,319 - - Convertible notes – liability component - - 578,947 578,947 Total financial liabilities 1,429,632 1,429,632 1,386,588 1,386,588 20 Dividends There were no dividends paid during the year (2021: nil). 55 56 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 21 Key Management Personnel Disclosures The totals of remuneration paid to the key management personnel of Dreadnought Resources Ltd during the year are as follows: Short-term employee benefits Post-employment benefits Share-based payments Total Remuneration Consolidated 30 June 2022 $ 385,750 36,638 83,721 30 June 2021 $ 299,159 25,840 114,182 505,929 439,181 The Remuneration Report contained in the Directors' Report contains details of the remuneration paid or payable to each member of the Group’s Key Management Personnel for the years ended 30 June 2022 and 30 June 2021. Other key management personnel transactions For details of other transactions with key management personnel, refer to Note 22: Related Party Transactions. 22 Remuneration of Auditors Remuneration of the auditor, for: Auditing or reviewing the financial report PKF Perth - - Nexia Perth Pty Ltd (Australia) 23 Deed of Cross-Guarantee Consolidated 30 June 2022 $ 30 June 2021 $ 18,000 11,000 29,000 - 30,000 30,000 The Company has not entered into any guarantees, in the current or previous financial year, in relation to the debts of its subsidiaries. 57 56 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 24 Contingent Liabilities In December 2019, the Company signed an agreement with an unrelated party, granting the Company an exclusive license and option to acquire 100% interest in tenements E30/485 and E29/965. The Company paid an Initial Option Fee of $100,000 on 12 December 2019. The option term was extended for an additional fifteen (15) months by the Company giving an extension notice to the unrelated party and paying the option extension fee of $100,000. On 7 July 2022, the Company exercised its option and completed the purchase free from all encumbrances for $1 million. As part of the consideration for the acquisition of tenements E04/2560, E29/1050, E29/957, E29/959, E30/471, E30/476, E08/3178, E08/3274, E08/3275, E09/2359, E09/2370, E09/2384, E09/2433, E09/2448, E09/2449 and E09/2450 from relevant parties, the Company has the obligation to pay royalties, which only become due and payable when and if mining commences. There were no other material contingent liabilities or contingent assets for the year ended 30 June 2022. 25 Related Parties The Group’s main related parties are as follows: (i) Key management personnel: Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity are considered key management personnel. For details of remuneration disclosures relating to key management personnel, refer to the remuneration report in the Directors' Report. The aggregate amounts recognised during the year (excluding re-imbursement of expenses incurred on behalf of the Company) relating to directors and their director related entities were as follows: Director Transaction P Chapman Payments to a director related entity for office rental (ie Stone Poneys Nominees Pty Ltd atf Chapman Superannuation Fund). The lease has been terminated effective 31 December 2021. Consolidated 2022 $ 9,350 2021 $ 11,627 No amounts were outstanding and owing to related parties as at 30 June 2022 (2021: nil). (ii) Subsidiaries: The consolidated financial statements include the financial statements of Dreadnought Resources Ltd and the following subsidiaries: Name of subsidiary Dreadnought Exploration Pty Ltd (formerly Dreadnought Kimberley Pty Ltd) Dreadnought Yilgarn Pty Ltd % ownership interest 2022 % ownership interest 2021 100 100 100 100 57 58 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 26 Cash Flow Information Reconciliation of result of loss for the year to cashflows from operating activities: Reconciliation of net loss to net cash provided by operating activities: Loss for the year Cash flows excluded from loss attributable to operating activities Non-cash flows in loss: - share based payments - net gain on revaluation of investment in listed entity - - property, plant and equipment expensed - impairment loss on exploration assets - interest on convertible notes - interest on lease liability - depreciation expense - amortisation of ROU asset - exploration expenditure Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries: - (increase)/decrease in trade and other receivables - (increase)/decrease in prepayments - increase in trade and other payables Cashflow outflow from operations Non-cash investing and financing activities Conversion of notes to shares Non-cash assets acquisition Consolidated 30 June 2022 $ 30 June 2021 $ (1,433,764) (1,277,865) 389,345 (50,000) - 123,715 - 15,314 33,717 28,397 - 183,812 - 749 315,169 16,199 - - - 78,968 109,047 (15,091) 38,430 (105,779) 243,495 88,896 (760,890) (456,356) 600,000 28,500 - - 59 58 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 27 Share-based Payments At 1 July 2021 Options exercised Options issued Options vesting At 30 June 2022 Number 88,979,452 (31,979,452) 20,500,000 - 77,500,000 Weighted Average Exercise Price $0.04 $0.011 $0.03 $0.01 $0.03 $ 848,312 (467,239) 328,909 60,436 770,418 Share-based payments granted during the year: 11,500,000 Employees and Company Secretary Options granted on 2 July 2021. On 2 July 2021, the Company granted 11,500,000 options via the Plan to employees of the Company who are not related parties of the Company. The exercise price of the options is $0.04 and the options will expire on 2 July 2024. 50% of these options will vest to the employees on 12 months of continued employment and 50% on 24 months of continued employment. The options were deemed to have a fair value at grant date of $0.0197 per option. This value was calculated using the Black-Scholes option pricing model applying the following inputs: Share price Exercise price Expected volatility Risk free interest rate Useful life $0.025 $0.04 158.33% 0.18% 3 years 2,000,000 Employee Options granted on 11 August 2021. On 11 August 2021, the Company granted an employee of the Company who is not a related party of the Company, 2,000,000 Options under the Plan. The exercise price of the options is $0.06 and the options will expire on 11 August 2024. 50% of these options will vest to the employee on 12 months of continued employment and 50% on 24 months of continued employment. The options were deemed to have a fair value of $0.0343 per option. This value was calculated using the Black- Scholes option pricing model applying the following inputs: Share price Exercise price Expected volatility Risk free interest rate Useful life $0.042 $0.06 161.46% 0.19% 3 years 5,000,000 Managing Director Options granted on 24 November 2021 On 24 November 2021, the Company granted the Managing Director of the Company, 5,000,000 Options under the Plan. The exercise price of the options is $0.04 and the options will expire on 2 July 2024. 50% of these options will vest to the employee on 12 months of continued employment and 50% on 24 months of continued employment. 59 60 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 27 Share-based Payments (continued) Share-based payments granted during the year (continued): The options were deemed to have a fair value of $0.0374 per option. This value was calculated using the Black- Scholes option pricing model applying the following inputs: Share price Exercise price Expected volatility Risk free interest rate Useful life $0.046 $0.04 157.46% 0.99% 3 years 2,000,000 Employee Options granted on 26 November 2021 On 26 November 2021, the Company granted an employee of the Company who is not a related party of the Company, 2,000,000 Options under the Plan. The exercise price of the options is $0.06 and the options will expire on 26 November 2024. 50% of these options will vest to the employee on 12 months of continued employment and 50% on 24 months of continued employment. The options were deemed to have a fair value of $0.0352 per option. This value was calculated using the Black- Scholes option pricing model applying the following inputs: Share price Exercise price Expected volatility Risk free interest rate Useful life $0.044 $0.06 157.20% 0.92% 3 years A share-based payment expense has been included within the Consolidated Statement of Profit or Loss and Other Comprehensive Income, with the expense recognised over the useful life/term of the options. The total share-based payment expense for the year in respect to equity instruments issued was $389,345, classified under Director & Employee Benefits (Note 3) in the profit and loss. Share-based payment arrangements granted in prior years and exercised during the financial year ended 30 June 2022: 1) On 4 April 2019, the Group issued a total of 50,000,000 unlisted options exercisable at $0.01 on or before 3 April 2024, vesting immediately to vendors of IronRinger Resources Pty Ltd. 10,000,000 options were exercised during the year (2021: 40,000,000 were exercised). 2) On 16 August 2019, the Group granted 10,500,000 unlisted incentive options exercisable at $0.005 on or before 30 June 2024, vesting immediately to the Managing Director. 3,000,000 options were exercised during the year (2021: 4,000,000 options were exercised). 3) On 23 December 2019, the Group granted 30,000,000 unlisted incentive options exercisable at $0.005 on or before 9 April 2024, vesting annually over 4 financial years to the Managing Director. 4) On 25 May 2020, the Group engaged the services of Shaw and Partners Ltd as broker to manage the placement and the consideration for doing so included 40,000,000 options. The options are exercisable at $0.006 on or before 25 May 2023 vesting immediately to the broker. There were no options exercised during the year ended 30 June 2022 (2021: 20,000,000 options were exercised). 5) On 1 July 2020, The Board resolved to grant 5,479,452 options to Paul Chapman under the Company’s Plan. This was approved by the shareholders on 30 November 2020. The options vested immediately and were exercised in full on 13 September 2021. 61 60 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 27 Share-based Payments (continued) Share-based payment arrangements granted in prior years and exercised during the financial year ended 30 June 2022 (continued): 6) On 2 October 2020, the Company agreed to offer two employees of the Company who are not related parties of the Company, 2,500,000 and 3,000,000 Options respectively under the Plan, subject to obtaining Shareholder approval. Shareholder approval was obtained on 30 November 2020. 50% of the options vest 12 months from grant date and the other 50% vest 24 months from grant date. Nick exercised 1,250,000 options on 1 December 2021 and Matthew exercised 1,500,000 options on 31 January 2022. In addition, a total of $46,029 was recognised as part of share-based payment expense for the portion vested during the year ended 30 June 2022. 7) On 1 November 2020, the Company agreed to offer an employee of the Company who is not a related party of the Company, 1,500,000 Options under the Plan. 50% of the options vest 12 months from grant date and the other 50% vest 24 months from grant date. Luke exercised 750,000 options during the year ended 30 June 2022. In addition, $14,407 was recognised as part of share-based payment expense for the portion vested during the year ended 30 June 2022. The share options outstanding at the end of the financial year had a weighted average remaining contractual life of 1.61 years (2021: 3.03 years) and weighted average exercise price of $0.016 (2021: $0.04). 28 Events Occurring After The Reporting Date Subsequent to 30 June 2022, the following significant events were undertaken by the Group: • • • • On 7 July 2022, the Group exercised its option securing 100% ownership over tenements E29/965 and E30/485 within the Illaara Project. These tenements cover parts of the Kings and P1 Iron ore occurrences including significant magnetite banded iron formations, the Central Komatiite belt, currently under assessments for nickel sulfides, the Eastern extensions of the Peggy Sue pegmatite field as well as several VMS and gold prospects many with samples awaiting assay. The exercise provides 100% ownership over the highly prospective, 75 km long, Illaara Greenstone Belt. On 20 July 2022, the Group paid $1,000,000 to Mel Dalla Costa to settle the transaction. On 9 July 2022, the Group executed a tenement sale and purchase agreement with Arrow Minerals Limited (ASX:AMD) to acquire a 100% interest in the Strickland Copper Gold Project (comprising E16/495, E30/493, E30/494, E77/2403, E77/2416, E77/2432, E77/2634) in Western Australia. The commercial terms of the agreement are as follows: o AMD received a $20,000 cash payment upon signing of the agreement. This was paid on 11 July 2022. o AMD will receive $280,000 cash payment at settlement. This was paid on 1 August 2022. o The Company will issue AMD 2,350,000 fully paid ordinary shares in Dreadnought Resources Ltd at settlement, escrowed until 31 January 2023. The Company issued the shares on 1 August 2022. o AMD will receive a further cash payment of $300,000 by 30 November 2022. o On the identification and reporting of JORC compliant inferred mineral resource of >500,000oz gold equivalent the Group will pay AMD $1,000,000 cash. o AMD will retain a total 1% Net Smelter Return royalty in relation to minerals mined by or on behalf of the Company on the Strickland Copper Gold Project. On 15 July 2022, the Group issued 8,500,000 unlisted options to its employees and company secretary. These options have an exercise price of $0.065 and will expire on 14 July 2025. The options will vest on 14 July 2023. In August 2022, the Group completed a heavily oversubscribed placement at $0.06 per share to institutional and sophisticated investors raising $12,000,000 (before costs). Directors contributed a further $350,000 to the placement maintaining 14% ownership and bringing their total investment to ~1.81 million, to be approved by shareholders at the AGM to be held in November 2022. 61 62 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 28 Events Occurring After The Reporting Date (continued) • On 17 August 2022, the Board of Directors, as part of the remuneration review for the 2022-2023 financial year, resolved to create a Long-Term Incentive scheme under which employees and, subject to shareholder approval, directors, may receive performance rights. The objectives of setting these LTIs in the remuneration review included: o Ensuring employee/director alignment and retention; o Creating long term shareholder value by setting significant targets that will have a material, beneficial impact on Dreadnought’s enterprise value; and o Ensuring that Dreadnought remains a preferred employer of choice in being able to attract and retain professionals in a highly competitive market. The Board of Directors approved LTI scheme involves the issue of performance rights, with each performance right representing the right to subscribe for one fully paid ordinary Dreadnought share, to employees and directors. A LTI Plan will govern the terms of the performance rights. The adoption of the LTI Plan for the purposes of Listing Rule 7.2 Exception 13 will be subject to shareholder approval at the 2022 Annual General Meeting as will the issue of performance rights to directors. The essential terms of the LTIs are as follows: Vesting Conditions: The LTIs are divided into three equal tranches. Each tranche will vest upon the Company announcing, during the vesting period, a JORC 2012 Mineral Resource (“Resource") of Total Rare Earth Oxide (“TREO”) as follows: • • • Tranche 1: A Resource of at least the inferred category of 10Mt @ > 1% TREO by 31 December 2022. Tranche 2: A Resource of at least the inferred category of 20Mt @ > 1% TREO by 31 December 2023. Tranche 3: A Resource of at least the inferred category of 30Mt @ > 1% TREO by 31 December 2024. Vesting of the performance rights will also be conditional on the holder remaining an employee or director as at the date the vesting condition is satisfied (subject to the exercise of any discretion by the Board to waive a vesting condition or to allow an employee or director who retires in certain circumstances to retain their performance rights as provided for by the rules of LTI Plan). Quantity of Performance Rights: The total number of performance rights proposed to be issued as LTIs across the three tranches has been determined by the Board as 29,200,000 with 7,700,000 issued to the directors and 21,500,000 to employees. The Company will seek shareholder approval at the 2022 Annual General Meeting for the issue of the performance rights to each director in accordance with ASX Listing Rule 10.14 and Chapter 2E of the Corporations Act 2001. • As announced on 30 August 2022, First Quantum Minerals Ltd (TSE:FM “First Quantum”), a ~A$20B TSX listed company, has exercised its earn-in option over the Mangaroon Ni-Cu-PGE Project. First Quantum has funded the option period and can now earn an initial 51% interest by funding $12M of expenditure by 1 March 2026. First Quantum may withdraw at any time during the earn-in phase with 0% interest. First Quantum must also pay Dreadnought $150,000 by 30 September 2022. The key terms of the earn-in and Joint Venture Agreement include: The Agreement covers the base metal rights over five tenements being E09/2384, E09/2473, E09/2433, E08/3178 and E08/3274. First Quantum can earn an initial 51% interest by sole funding $12M of expenditure by 1 March 2026. First Quantum may withdraw from the project at any time during the earn-in phase with 0% interest. • Upon satisfying the earn-in requirements, a Joint Venture will be formed where First Quantum may elect to increase its interest to 70% by sole funding expenditure up until a Decision to Mine. If First Quantum elects to cease funding expenditure, it will revert to a 49% interest. • • Once a Decision to Mine has been made, Dreadnought can elect to either: o Maintain its 30% by co-contributing. o Dilute to 20% and be loan carried by First Quantum, repaid through revenue. o Divest its 30% interest to First Quantum at fair market value. 62 • 63 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 28 Events Occurring After The Reporting Date (continued) • • • • On 2 September 2022, the Company appointed PKF Perth to perform the audit function of the Company. PKF Perth’s appointment is effective until the next Annual General Meeting of the Company. In accordance with section 327C of the Corporations Act 2001, a resolution will be put to shareholders at the 2022 Annual General Meeting to appoint PKF Perth as the Company auditor. In accordance with subsection 329(5) of the Corporations Act and having received the consent of the Australian Securities and Investment Commission (ASIC), Nexia Perth Audit Services Pty Ltd has resigned as Auditor of the Company. On 12 September 2022, subject to completion, the Group announced the acquisition of 100% interest in 5 tenements covering 77 square kilometres of major regional structures. The tenements host at least ten historic gold mines including the high-grade Star of Mangaroon, Pritchard Well and Twin Peaks gold mines. The tenements are strategically located between the Group’s 100% owned rare earths project to the south-east and the First Quantum Minerals Ni-Cu-PGE Earn-in to the north-west. The key commercial terms with the unrelated party vendors (subject to completion) are shown below. 1. Key commercial terms to acquire 100% of E09/2290, M09/146, M09/147 and M09/175 include: a. Dreadnought to own 100% upon Completion; b. Dreadnought to pay $50,000 upon signing the Sale & Purchase Agreement (paid); c. Dreadnought to pay $250,000 at Completion; d. Vendors to receive 20,000,000 fully paid ordinary shares at Completion; e. 1% gross royalty payable on E09/2290, M09/146 and M09/147; and f. 0.5% gross royalty payable on M09/175. 2. Key commercial terms to acquire 100% of M09/174 include: a. Dreadnought to own 100% upon Completion; b. Dreadnought to pay $25,000 upon signing the Sale & Purchase Agreement (paid); c. Dreadnought to pay $50,000 at Completion; d. Vendor to receive 1,000,000 fully paid ordinary shares at Completion; and e. 0.5% gross royalty payable. Completion is expected to occur in November 2022. On 12 September 2022, the Group also announced the proposed issue of 21,000,000 fully paid ordinary shares of the Company with an estimated issued price of $0.13 per share as part of the consideration for the acquisition of the tenements above. The shares are expected to be issued on 2 December 2022. As announced on 14 September 2022, Philip Crutchfield KC was appointed as a non-executive director of Dreadnought effective 13 September 2022. In addition, after 5 years on the Board, Paul Payne decided to step down as a non-executive director of Dreadnought effective 13 September 2022. Paul will continue to provide a number of consulting services to Dreadnought including an initial JORC Resource on the Metzke’s Find gold deposit at the Central Yilgarn Project in the December 2022 quarter. On 15 September 2022, Dreadnought issued 1,500,000 ordinary fully paid shares as a result of an early exercise of options by an employee. The options were exercisable at any time until 2 July 2024 at an exercise price of $0.04 per option. The amount raised on the exercise of the options was $60,000. Dreadnought has relied on Section 708A of the Corporations Act 2001 (Cth) in relation to the issue of shares. 63 64 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 28 Events Occurring After The Reporting Date (continued) Other than the events detailed above, there has not arisen in the interval between 1 July 2022 and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Group, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future years. 65 64 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 29 Parent entity Statement of Financial Position Assets Current assets Non-current assets Total Assets Liabilities Current liabilities Non-current liabilities Total Liabilities Equity Issued capital Accumulated losses Reserves Total Equity Statement of Profit or Loss and Other Comprehensive Income Total loss for the year Total comprehensive loss 30 June 2022 $ 30 June 2021 $ 2,840,494 18,327,553 3,134,597 10,367,656 21,168,047 13,502,253 1,346,802 177,577 777,787 578,947 1,524,379 1,356,734 60,954,153 (42,080,903) 770,418 52,030,339 (40,788,851) 904,031 19,643,668 12,145,519 (1,292,052) (1,291,121) (1,292,052) (1,291,121) 65 66 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2022 30 Company Details The registered office of the Company is: Dreadnought Resources Ltd Level 3, 35 Outram Street West Perth WA 6005 The principal place of business of the Company is: Dreadnought Resources Ltd Unit 1, 4 Burgay Court Osborne Park WA 6017 The postal address of the Company is: PO Box 646 West Perth WA 6005 www.dreadnoughtresources.com.au Email: info@dreadnoughtresources.com.au 67 66 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 Directors’ Declaration For the Year Ended 30 June 2022 In the directors' opinion: ● ● ● ● the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in Note 1 to the financial statements; the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Dean Tuck Managing Director Dated 28 September 2022 67 68 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 PKF Perth INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DREADNOUGHT RESOURCES LIMITED Report on the Financial Report Opinion We have audited the accompanying financial report of Dreadnought Resources Limited (the company), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the company and the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. In our opinion the accompanying financial report of Dreadnought Resources Limited is in accordance with the Corporations Act 2001, including: i) Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the year ended on that date; and ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the consolidated entity 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 other ethical responsibilities in accordance with the Code. Level 4, 35 Havelock Street, West Perth, WA 6005 PO Box 609, West Perth, WA 6872 T: +61 8 9426 8999 F: +61 8 9426 8900 www.pkfperth.com.au PKF Perth is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. Liability limited by a scheme approved under Professional Standards Legislation. 68 69 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 PKF Perth Key Audit Matters A key audit matter is a matter that, in our professional judgement, was of most significance in our audit of the financial report of the current year. This matter was addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate audit opinion on this matter. For the matter below, our description of how our audit addressed this matter is provided in that context. 1. Valuation of capitalised exploration expenditure Why significant How our audit addressed the key audit matter As at 30 June 2022 the carrying value of exploration and evaluation assets was $17,660,998 (2021: $10,371,428), as disclosed in Note 10. The consolidated entity’s accounting policy in respect of exploration and evaluation expenditure is outlined in Note 1(r). Significant judgement is required: • • in determining whether facts and circumstances indicate that the exploration and evaluation assets should be tested for impairment in accordance with Australian Accounting Standard AASB 6 Exploration for and Evaluation of Mineral Resources (“AASB 6”); and in determining the treatment of exploration and evaluation expenditure in accordance with AASB 6, and the consolidated entity’s accounting policy. In particular: o whether the particular areas of interest meet the recognition conditions for an asset; and o which elements of exploration and evaluation expenditures qualify for capitalisation for each area of interest. Our work included, but was not limited to, the following procedures: • conducting a detailed review of management’s trigger events impairment assessment of prepared in accordance with AASB 6 including: o o o assessing whether the rights to tenure of the areas of interest remained current at reporting date as well as confirming that rights to tenure are expected to be renewed for tenements that will expire in the near future; obtaining specific representations with the directors and management as to the status of ongoing exploration programmes for the areas of interest, as well as assessing if there was evidence that a decision had been made to discontinue activities in any specific areas of interest; and obtaining and assessing evidence of the consolidated entity’s future intention for the areas of interest, including reviewing future budgeted expenditure and related work programmes. • • • considering whether exploration activities for the areas of interest had reached a stage where of assessment reasonable economically recoverable reserves existed; a testing, on a sample basis, exploration and evaluation expenditure incurred during the year for compliance with AASB 6 and the consolidated entity’s accounting policy; and reviewing the impairment calculations provided and related assumptions and disclosures in Notes 1(r), 1(t) and 10 for accuracy and completeness. 69 70 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 PKF Perth 2. Share Based Payments Why significant How our audit addressed the key audit matter issued For the year ended 30 June 2022, the value of share- totalled $389,345 as based payments disclosed in Note 3 and 27. This has been recognised as a share-based payment expense in the Statement of Profit or Loss and Other Comprehensive Income for $389,345. The consolidated entity’s accounting judgement and estimates in respect of share-based payments is outlined in Note 1(q). Significant judgement is required in relation to: • The valuation method used in the model; and • The assumptions and inputs used within the model. Our work included, but was not limited to, the following procedures: • Reviewed the company’s valuations of the equity instruments issued, including: o assessing the appropriateness of the valuation method used; and o assessing the reasonableness of the assumptions and inputs used within the valuation model. • Reviewed Board meeting minutes and ASX announcements as well as enquired of relevant personnel to ensure all share-based payments had been recognised; • Assessed the allocation and recognition to ensure these are reasonable; and • Assessed the appropriateness of the related disclosures in Notes 1(q), 3 and 27. Other Information Those charged with governance are responsible for the other information. The other information comprises the information included in the consolidated entity’s annual report for the year ended 30 June 2022, but does not include the financial report and our 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, with the exception of the Remuneration Report. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Directors’ for the Financial Report The Directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the consolidated entity’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 consolidated entity or to cease operations, or have no realistic alternative but to do so. 70 71 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 PKF Perth 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 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the 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 consolidated entity’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 consolidated entity’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 consolidated entity 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 consolidated entity to express an opinion on the group 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. 71 72 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 PKF Perth 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 significance in the audit of the financial report of the current period and are therefore the 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 the public interest benefits of such communication. Report on the Remuneration Report Opinion We have audited the Remuneration Report included in the Directors’ Report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Dreadnought Resource Limited for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. PKF PERTH SHANE CROSS AUDIT PARTNER 28 SEPTEMBER 2022 WEST PERTH WESTERN AUSTRALIA 73 72 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 ASX Additional Information Additional information required by the ASX Listing Rules is set out below. 1. Shareholdings The issued capital of the Company as at 23 September 2022 is: 3,042,533,551 ordinary fully paid shares All issued ordinary fully paid shares carry one vote per share. 2. Distribution of Equity Securities as at 21 September 2022 Ordinary Shares (ASX Code: DRE) Holding Ranges Holders Total Units % Issued Share Capital 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 Over 104 183 491 2,944 2,441 28,517 720,290 4,030,774 133,075,595 2,904,678,375 Totals 6,137 3,042,533,551 0.00 0.02 0.13 4.35 95.49 100.00% 3. Unmarketable parcels There were 208 holders of less than a marketable parcel of ordinary shares. 4. Substantial shareholders as at 23 September 2022 Name Number of Shares % Holding Paul Chapman and associated entities 311,038,084 10.22% 5. Restricted Securities Subject to Escrow as at 23 September 2022 The 2,350,000 shares issued to Arrow Minerals Limited as partial consideration for the Group’s acquisition of seven tenements are escrowed until 31 January 2023. 6. On-market buy back There is currently no on-market buyback program for any of the Company’s listed securities. 7. Group cash and assets In accordance with Listing Rule 4.10.19, the Group confirms that it has been using the cash and assets for the year ended 30 June 2022 consistent with its business objective and strategy. 8. Voting Rights All ordinary fully paid shares have one voting right per share. Unlisted options have no voting rights. 73 74 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 ASX Additional Information 9. Top 20 Largest Holders of Listed Securities as at 21 September 2022 Holder Name Holding % STONE PONEYS NOMINEES PTY LTD 296,471,330 PARETO NOMINEES PTY LTD MR PHILIP DAVID CRUTCHFIELD 69,829,613 60,834,525 MR DAVID MICHAEL CHAPMAN + MS MICHELE WOLLENS 54,224,107 1 2 3 4 5 6 7 8 9 CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM PAYNE GEOLOGICAL SERVICES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA PARKRANGE NOMINEES PTY LTD 10 MRS BELINDA GORDON + MR IAN GORDON 11 MR NEVRES CRLJENKOVIC 11 MR TAO WU 13 MR DEAN TUCK + MRS DIANNE MAE TUCK 14 MR IAN JAMES GORDON 15 MR DREW GRIFFIN MONEY 15 MR LIZHONG WU + MRS WEIPING QIU 17 MR STEPHEN JAMES FOLEY + MS NATALIE CHANTAL MELLONIUS 18 NATIONAL NOMINEES LIMITED 19 KAOS INVESTMENTS PTY LIMITED 20 CAMPBELL KITCHNER HUME & ASSOCIATES PTY LTD 9.74 2.30 2.00 1.78 1.77 1.68 1.30 1.28 1.12 0.91 0.82 0.82 0.68 0.68 0.66 0.66 53,930,364 50,990,162 39,652,781 39,000,000 34,200,000 27,611,114 25,000,000 25,000,000 20,710,317 20,564,073 20,000,000 20,000,000 18,333,330 0.60 18,077,468 17,750,000 0.59 0.58 17,400,000 0.57 Total held by top 20 registered shareholders 929,579,184 30.55 75 74 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 Dreadnought Resources Ltd and Controlled Entities ABN: 40 119 031 864 ASX Additional Information 10. Unquoted securities The following table lists the unquoted options over unissued shares issued under the Dreadnought Employee Incentive Plan. Options Class Securities on Issue Holder(s) UNLISTED OPTIONS @ $0.01 EXPIRING 01/10/23 2,750,000 UNLISTED OPTIONS @ $0.005 EXPIRING 9/04/2024 30,000,000 UNLISTED OPTIONS @ $0.06 EXPIRING 11/08/2024 2,000,000 UNLISTED OPTIONS @ $0.005 EXPIRING 30/06/2024 3,500,000 UNLISTED OPTIONS @ $0.02 EXPIRING 31/10/2023 750,000 UNLISTED OPTIONS @ $0.04 EXPIRING 02/07/2024 15,000,000 UNLISTED OPTIONS @ $0.06 EXPIRING 26/11/2024 2,000,000 UNLISTED OPTIONS @ $0.065 EXPIRING 14/07/2025 8,500,000 2 1 1 1 1 5 1 7 The following table lists the unquoted options over unissued shares issued outside of the Dreadnought Employee Incentive Plan. UNLISTED OPTIONS @ $0.006 EXPIRING 25/05/2023 Holder Name Holding % 1 MR BLAIR OLIVER CAMPBELL SPAULDING 5,000,000 25% 2 3 PARETO NOMINEES PTY LTD RAVENHILL ASSET MANAGEMENT PTY LTD Total 10,000,000 50% 5,000,000 25% 20,000,000 100% 75 76 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 ASX Additional Information – Tenement List Project Tenement Lease Name State Status % Owned by DRE Holders DREADNOUGHT RESOURCES LIMITED Tarraji-Yampi E04/2315 Tarraji WA Granted 80% Tarraji-Yampi E04/2508 Yampi WA Granted Tarraji-Yampi E04/2557 Yampi WA Granted Tarraji-Yampi E04/2572 Yampi WA Granted Tarraji-Yampi E04/2608 Robinson River WA Granted E04/2675 Meda WA Granted E04/2676 Easton WA Granted E04/2560 Wombarella WA Granted 100% 100% 100% 100% 100% 100% 100% Dreadnought Exploration Pty Ltd (80%) Whitewater Resources Pty Ltd (20%) Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd E04/2574 Broome Creek WA Application 100% Dreadnought Exploration Pty Ltd E04/2573 Napier Downs WA Granted 100% Dreadnought Exploration Pty Ltd E04/2815 Meda WA Application 100% Dreadnought Exploration Pty Ltd E04/2816 Meda WA Application 100% Dreadnought Exploration Pty Ltd 76 West Kimberley West Kimberley West Kimberley West Kimberley West Kimberley West Kimberley West Kimberley 77 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 ASX Additional Information – Tenement List Project Tenement Lease Name State Status % Owned by DRE Holders DREADNOUGHT RESOURCES LIMITED Illaara E29/0957 Illaara WA Granted Illaara E29/0959 Illaara WA Granted Illaara E29/1050 Metzke’s Find WA Granted Illaara E30/0471 Illaara WA Granted Illaara E30/0476 Illaara WA Granted Illaara E29/0965 Ularing WA Granted Illaara E30/0485 Wailing Rock WA Granted Mangaroon E08/3178 Gascoyne WA Granted Mangaroon E08/3274 Lyndon WA Granted Mangaroon E08/3275 Lyndon WA Granted Mangaroon E08/3439 Lyndon WA Granted 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Dreadnought Resources Ltd Dreadnought Resources Ltd Dreadnought (Yilgarn) Pty Ltd Dreadnought Resources Ltd Dreadnought Resources Ltd Dalla-Costa, Melville Raymond Dalla-Costa, Melville Raymond Dreadnought Exploration Pty Ltd Dreadnought Resources Ltd Dreadnought Resources Ltd Dreadnought Exploration Pty Ltd 77 78 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 ASX Additional Information – Tenement List Project Tenement Lease Name State Status % Owned by DRE Holders DREADNOUGHT RESOURCES LIMITED Mangaroon E09/2359 Gascoyne WA Granted Mangaroon E09/2370 Gascoyne WA Granted Mangaroon E09/2384 Gascoyne WA Granted Mangaroon E09/2433 Gascoyne WA Granted Mangaroon E09/2448 Lyons WA Granted Mangaroon E09/2449 Lyons WA Granted Mangaroon E09/2450 Lyons WA Granted Mangaroon E09/2467 Lyndon WA Granted Mangaroon E09/2473 Lyndon WA Granted Mangaroon E09/2478 Lyndon WA Granted Mangaroon E09/2531 Lyons WA Granted Mangaroon E09/2535 Hardey WA Granted 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Resources Ltd Dreadnought Resources Ltd Dreadnought Resources Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd 79 78 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 ASX Additional Information – Tenement List Lease Name Project Tenement Status State DREADNOUGHT RESOURCES LIMITED % Owned by DRE Holders Mangaroon E09/2616 Hardey WA Granted Mangaroon E09/2620 Hardey WA Granted Mangaroon E09/2405 Mangaroon WA Granted 100% 100% 100% Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Historic Gold Mines Pty Ltd Illaara E30/534 Ularing WA Application 100% Dreadnought Exploration Pty Ltd Illaara L29/0143 Wailing Rock WA Application 100% Dreadnought Exploration Pty Ltd West Kimberley West Kimberley West Kimberley West Kimberley P04/306 Mt Amy WA Granted P04/307 Mt Amy WA Granted P04/308 Mt Amy WA Granted P04/309 Mt Amy WA Granted 100% 100% 100% 100% Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Dreadnought Exploration Pty Ltd Windell E52/4139 Bresnahan WA Application 100% Dreadnought Exploration Pty Ltd Windell E52/4141 Bresnahan WA Application 100% Dreadnought Exploration Pty Ltd Windell E52/4142 Bresnahan WA Application 100% Dreadnought Exploration Pty Ltd 79 80 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHT RESOURCES LIMITED ASX Additional Information – Tenement List Project Tenement Lease Name State Status % Owned by DRE Holders Windell E52/4143 Bresnahan WA Application 100% Dreadnought Exploration Pty Ltd Windell E52/4144 Bresnahan WA Application 100% Dreadnought Exploration Pty Ltd Windell E52/4145 Bresnahan WA Application 100% Dreadnought Exploration Pty Ltd Windell E52/4146 Bresnahan WA Application 100% Dreadnought Exploration Pty Ltd Windell E52/4147 Bresnahan WA Application 100% Dreadnought Exploration Pty Ltd Teano E52/4137 Range Creek WA Application 100% Dreadnought Exploration Pty Ltd Teano E52/4138 Range Creek WA Application 100% Dreadnought Exploration Pty Ltd Teano E52/4140 Range Creek WA Application 100% Dreadnought Exploration Pty Ltd Bulga E29/1074 Central Yilgarn WA Granted Mt Elvire E77/2403 Evanston WA Granted Evanston E77/2416 Evanston WA Granted Evanston E77/2432 Evanston WA Granted 100% 100% 100% 100% Dalla-Costa, Melville Raymond Arrow (Strickland) Pty Ltd Arrow (Strickland) Pty Ltd Arrow (Strickland) Pty Ltd 81 80 DREADNOUGHT RESOURCES LTD AND CONTROLLED ENTITIES ABN: 40 119 031 864DREADNOUGHT RESOURCES | ANNUAL REPORT 2022 DREADNOUGHTRESOURCES.COM.AU

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