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2023 ReportA S X A n n o u n c e m e n t | 2 8 O c t o b e r 2 0 2 0 2020 Annual Report Eagle Mountain Mining Limited (ASX:EM2) (“Eagle Mountain”, the “Company”) is pleased to attach the Annual Report for the year ending 30 June 2020. For further information please contact: Tim Mason BEng, MBA, GAICD Chief Executive Officer tim@eaglemountain.com.au Jane Morgan Investor and Media Relations jm@janemorganmanagement.com.au Mark Pitts B.Bus, FCA, GAICD Company Secretary mark@eaglemountain.com.au This Announcement has been approved for release by the Mark Pitts, Company Secretary of Eagle Mountain Mining Limited EAGLE MOUNTAIN MINING LIMITED Eagle Mountain is a copper-gold explorer focused on the strategic exploration and development of highly prospective greenfields and brownfields projects in Arizona, USA. Arizona is at the heart of America’s mining industry and home to some of the world’s largest copper discoveries such as Bagdad, Miami and Resolution, one of the largest undeveloped copper deposits in the world. Follow the Company developments through our website and social media channels Website https://eaglemountain.com.au/ Twitter https://twitter.com/eagle_mining LinkedIn https://www.linkedin.com/company/eagle-mountain-mining-ltd/ EAGLE MOUNTAIN mining 2 0 2 0 A n n u a l R e p o r t CORPORATE DIRECTORY DIRECTORS Rick Crabb (Non-Executive Chairman) Charles Bass (Managing Director) Roger Port (Non-Executive Director) REGISTERED OFFICE Ground Floor 22 Stirling Highway Nedlands WA 6009 ALTERNATE DIRECTOR AUDITORS Brett Rowe (Alternate Director for Charles Bass) EXECUTIVE Tim Mason (Chief Executive Officer) COMPANY SECRETARY Mark Pitts REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS Ground Floor, 22 Stirling Highway Nedlands, Western Australia 6009 Email: Website: eaglemountain.com.au info@eaglemountain.com.au William Buck Audit (WA) Pty Ltd Level 3 15 Labouchere Road South Perth WA 6151 SHARE REGISTRY Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth WA 6000 CORPORATE GOVERNANCE The Company is transitioning to the 4th Edition of the ASX Corporate Governance Recommendations. A summary statement reporting against the 3rd Edition of the ASX Corporate Governance Recommendations which has been approved by the Board together with current policies and charters is available on the Company website. http://eaglemountain.com.au/corporate- governance/ ASX CODE EM2 ABN 34 621 541 204 CONTENTS PAGE Corporate Directory Chairman’s Letter CEO Letter Review of Operations 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 Auditor’s Report ASX Additional information Page 1 3 4 6 29 44 45 46 47 48 49 84 85 90 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 2 CONTENTS PAGE Corporate Directory Chairman’s Letter CEO Letter Review of Operations 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 Auditor’s Report ASX Additional information Page 1 3 4 6 29 44 45 46 47 48 49 84 85 90 Chairman’s Letter Dear Shareholders, It is with pleasure that I present Eagle Mountain Mining’s third Annual Report. The 2020 financial year has been very productive for the Company with most of the year focused on acquiring and progressing the Oracle Ridge copper project in Arizona. Oracle Ridge complements our existing Silver Mountain project which is also prospective for a large-scale porphyry system at depth. We believe that Oracle Ridge was a quality acquisition due to its location, existing high-grade copper resource and multiple exploration targets. These attributes and more are described further in this Annual report. Oracle Ridge has the potential to support a future mining operation with attractive cash costs. Our goal is to further build on the existing high-grade mineral resource to support an attractive mine life while maximising the production rates necessary to minimise mining unit costs. We continue to undertake our exploration program with a systematic approach, including the use of modern geophysics techniques along with remodelling the extensive available historical information. We are well on track with this goal and the recently commenced diamond drill exploration program is targeting high-grade copper zones as extensions of the existing resources. Exploration programs at Silver Mountain continued during the year including geophysical surveys and mapping. This work enhances our understanding of the geology and the potential source of the outcropping high-grade copper and gold mineralisation. Tim Mason commenced during the year as our CEO and is well supported by the leadership and expertise of Charlie Bass as Managing Director. I have been impressed with Tim’s professional and enthusiastic approach and the Directors are pleased with how he has overseen work in Arizona despite COVID-19 travel restrictions. Notwithstanding the turbulent year, the team has successfully undertaken various geophysical and geological studies, culminating in the drilling program at Oracle Ridge which is now underway. On behalf of the Directors, I would like to thank the Eagle Mountain team in Perth and Arizona for the work they have done on both the Oracle Ridge and Silver Mountain Projects. Next year promises to be very active and exciting for the Company and I thank shareholders for their ongoing support. Yours faithfully Rick Crabb Chairman E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 2 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 3 CEO Letter Dear Shareholders, In my first year as CEO of Eagle Mountain Mining, I am proud to present this report to you and excited with your Company’s prospects in both near and longer terms. The past year has been pivotal with the acquisition of the advanced stage, high-grade, Oracle Ridge Copper Project in Arizona. It is a credit to the Eagle Mountain Mining technical team and Board to have recognised the value of this project and to have negotiated such excellent acquisition terms. This is an outstanding opportunity because of its existing resources, the potential for much greater resource expansion, substantial infrastructure, and exploration potential in the near mine vicinity, all located in a Tier 1 mining jurisdiction. Our aim is to have Oracle Ridge operating in the lowest quartile of the global cost curve for copper mines. This requires growth of the mineral resources from either the existing mine or from the near-mine vicinity. The existing mineral resources at Oracle Ridge benefit from being high-grade, having multiple lodes and situated on the side of Marble Mountain, the combination of which is likely to support relatively lower unit mining costs, increased production rates and overall lower carbon emissions per tonne of copper for any future mining operation. Both pre and post-acquisition of Oracle Ridge, our systematic and modern approach to exploration included thoroughly reviewing extensive historical information and field mapping, in conjunction with magnetic and VTEM Plus geophysical surveys. This work led to the definition of a significant exploration target as an extension of the existing mineralisation, along with further exploration targets close to the mine. At the time of writing, we had commenced a diamond drilling program targeting extensions to the known mineralisation. We are also well on track with our reinterpretation of existing Mineral Resources to a JORC 2012 standard. Several major copper porphyry mines within Arizona have high grade skarn mineralisation very similar to that occurring at Oracle Ridge. These skarns have been mineralised by the influx of very hot solutions emanating from a nearby porphyry system. The much larger supporting mineralised system, likely a porphyry, has not yet been discovered at Oracle Ridge. This presents the Company with significant exploration potential. Our follow-up exploration of geophysical anomalies near the mine included high-grade grab samples of 9.15% Cu, 192 g/t Ag and 0.15g/t Au and 2.38% Cu, 721g/t Ag, 0.44g/t Au and 0.32% Zn which provides support for a potential major feeder system in the area. In October 2020, the Company was successful in securing tenements over these targets for future exploration and drilling. Whilst our recent focus has been on Oracle Ridge, Silver Mountain remains very prospective for the Company. Silver Mountain has seen copper values up to 11% and gold up to 10g/t in surface samples. Further interpretation is ongoing to understand the complex geological system. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 4 The COVID-19 pandemic created many difficulties for our people and therefore our business, both in Australia and in Arizona. The health and safety of our employees, contractors and the communities in which we operate is always our priority. We implemented a range of measures to protect our people whilst being able to progress exploration at both our Oracle Ridge and Silver Mountain projects. In the early days of COVID-19, our employees and Board all graciously took pay cuts, reduced hours and made other sacrifices. I’m both delighted and grateful for the dedication and support that our people gave to your Company. Following my commencement with Eagle Mountain in January this year, I have been continuously impressed by the calibre and dedication of the team. I believe we are well positioned with great people and high-quality assets with significant growth potential. I would like to thank all our dedicated employees, contractors, business partners and shareholders for their contributions to our Company over the last year. I look forward to providing further updates as our activities progress in the coming months. Yours faithfully Tim Mason Chief Executive Officer CEO Letter Dear Shareholders, In my first year as CEO of Eagle Mountain Mining, I am proud to present this report to you and excited with your Company’s prospects in both near and longer terms. The past year has been pivotal with the acquisition of the advanced stage, high-grade, Oracle Ridge Copper Project in Arizona. It is a credit to the Eagle Mountain Mining technical team and Board to have recognised the value of this project and to have negotiated such excellent acquisition terms. This is an outstanding opportunity because of its existing resources, the potential for much greater resource expansion, substantial infrastructure, and exploration potential in the near mine vicinity, all located in a Tier 1 mining jurisdiction. Our aim is to have Oracle Ridge operating in the lowest quartile of the global cost curve for copper mines. This requires growth of the mineral resources from either the existing mine or from the near-mine vicinity. The existing mineral resources at Oracle Ridge benefit from being high-grade, having multiple lodes and situated on the side of Marble Mountain, the combination of which is likely to support relatively lower unit mining costs, increased production rates and overall lower carbon emissions per tonne of copper for any future mining operation. Both pre and post-acquisition of Oracle Ridge, our systematic and modern approach to exploration included thoroughly reviewing extensive historical information and field mapping, in conjunction with magnetic and VTEM Plus geophysical surveys. This work led to the definition of a significant exploration target as an extension of the existing mineralisation, along with further exploration targets close to the mine. At the time of writing, we had commenced a diamond drilling program targeting extensions to the known mineralisation. We are also well on track with our reinterpretation of existing Mineral Resources to a JORC 2012 standard. Several major copper porphyry mines within Arizona have high grade skarn mineralisation very similar to that occurring at Oracle Ridge. These skarns have been mineralised by the influx of very hot solutions emanating from a nearby porphyry system. The much larger supporting mineralised system, likely a porphyry, has not yet been discovered at Oracle Ridge. This presents the Company with significant exploration potential. Our follow-up exploration of geophysical anomalies near the mine included high-grade grab samples of 9.15% Cu, 192 g/t Ag and 0.15g/t Au and 2.38% Cu, 721g/t Ag, 0.44g/t Au and 0.32% Zn which provides support for a potential major feeder system in the area. In October 2020, the Company was successful in securing tenements over these targets for future exploration and drilling. Whilst our recent focus has been on Oracle Ridge, Silver Mountain remains very prospective for the Company. Silver Mountain has seen copper values up to 11% and gold up to 10g/t in surface samples. Further interpretation is ongoing to understand the complex geological system. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 4 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 5 Review of Operations Eagle Mountain acquired an 80% interest in the Oracle Ridge Copper Mine (“Oracle Ridge”) in November 2019 after a lengthy due diligence. Oracle Ridge complements the Silver Mountain exploration project. Both projects are located in Arizona (Figure 1), a Tier 1 mining jurisdiction1 which hosts many large copper mines and projects operated by major mining companies including BHP, Rio Tinto, Freeport-McMoran, Asarco, Hudbay and South 32. Silver Mountain and Oracle Ridge are prospective for both high-grade copper-silver- gold mineralisation and large-scale copper porphyry systems. Both projects are located within the Laramide Arc, a copper porphyry province hosting most of the large copper projects in Arizona (Figure 1). Oracle Ridge benefits from an existing high-grade mineral resources and extensive infrastructure around the existing mine. Silver Mountain Oracle Ridge Figure 1 - Location of Oracle Ridge and Silver Mountain projects 1Arizona is ranked 9th in the world by the Fraser Institute for mining investment attractiveness https://www.fraserinstitute.org/sites/default/files/annual-survey-of-mining-companies-2019.pdf E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 6 Review of Operations Oracle Ridge Copper Project (80%) Eagle Mountain acquired an 80% interest in the Oracle Ridge Copper Mine (“Oracle Overview Ridge”) in November 2019 after a lengthy due diligence. Oracle Ridge complements the Silver Mountain exploration project. Both projects are located in Arizona (Figure 1), a Tier 1 mining jurisdiction1 which hosts many large copper mines and projects operated by major mining companies including BHP, Rio Tinto, Freeport-McMoran, Asarco, Hudbay and South 32. Silver Mountain and Oracle Ridge are prospective for both high-grade copper-silver- gold mineralisation and large-scale copper porphyry systems. Both projects are located within the Laramide Arc, a copper porphyry province hosting most of the large copper projects in Arizona (Figure 1). Oracle Ridge benefits from an existing high-grade mineral resources and extensive infrastructure around the existing mine. Silver Mountain Oracle Ridge Oracle Ridge is an advanced stage project underpinned by a high-grade copper resource with significant gold and silver. The mine has approximately 18 kilometres of underground development along with other supporting infrastructure. The most current Mineral Resource Estimate (“MRE”) from 2014 is 11.7 million tonnes at 1.57% Cu, 17.47 g/t Ag and 0.18g/t Au, calculated under Canada’s NI43-101 reporting regime2 (refer ASX announcement 29 October 2019). The current resource is a high- grade skarn deposit, well known at major mines throughout Arizona, and typically associated with a copper porphyry system. Eagle Mountain has identified a range of exploration targets including extensions to the existing mineralisation and other near mine prospects. The Company believes that Oracle Ridge has the characteristics to become a long-term, flagship operation. The Company’s aim at Oracle Ridge is to define sufficient mineral resources for a future mining operation to have mining costs in the lower quartile of the global cost curve. Various geological studies have been undertaken during the year which culminated in the commencement of a diamond drilling program in September 2020 targeting extensions to the known high-grade resource. Location The Oracle Ridge Copper Mine is located northeast of Tucson and 26 kilometres from BHP’s San Manuel mine, once the largest underground mine in the USA. The site is easily accessible by road and is supported by a nearby railway and copper smelters in the state. Figure 2 shows the location of the Oracle Ridge copper project. Figure 1 - Location of Oracle Ridge and Silver Mountain projects 1Arizona is ranked 9th in the world by the Fraser Institute for mining investment attractiveness https://www.fraserinstitute.org/sites/default/files/annual-survey-of-mining-companies-2019.pdf 2 Cautionary Statement: (refer ASX announcement 29 October 2019) references in this report to the publicly quoted resource tonnes and grade of the Project are foreign in nature and not reported in accordance with the JORC Code 2012, or the categories of mineralisation as defined in the JORC Code 2012. A competent person has not done sufficient work to classify the resource estimate as mineral resources or ore reserves in accordance with the JORC Code 2012. It is uncertain that following evaluation and/or further exploration work that the foreign/historic resource estimates of mineralisation will be able to be reported as mineral resources or ore reserves in accordance with the JORC Code 2012. Resource estimates and other information used in this report are based on the March 2014 NI43-101 compliant Independent Technical Report prepared by Dr Giles Arseneau of Arseneau Consulting Services Inc for Oracle Mining Corp. This report can be found on the Company’s website “www.eaglemountain.com.au”. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 6 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 7 Project History Figure 2 - Location of Oracle Ridge Copper Project Since mining ceased in 1996, there has been little modern exploration and very minimal drilling beyond the defined MRE, until Eagle Mountain acquired the project. Table 1 below shows a brief history of Oracle Ridge. Property Owner Phelps Dodge Copper Co. Time Period 1873-1937 Daily Arizona Copper Co, Control Mines Continental Union Mines Inc Copper Inc, 1937 - 1968 1968 - 1988 Santa Catalina Mining Corp 1988 - 2004 Marble Mountain Ventures LLC Oracle Mining Corp 2004 - 2010 Events • Mining in district begins • 20 t/day copper smelter constructed • Exploration and development • 90 t/day flotation plant constructed • Operations occur sporadically • Large scale analysis of mineralisation • Reported US$19 million expenditure on exploration and development • 750 short ton (“st”)/day mill constructed 1991 • 1000 st/day mill expansion completed 1993 • Roughly 1 million st of ore processed 1991-1995 • Operation closed 1996 and mill removed • Real estate developers – no mining or exploration 2010 - 2014 • Gold Hawk, renamed Oracle Mining Corp, purchased 100% in the Oracle Ridge property from Marble Mountain Ventures • 21,700 m validation and expansion drill program 2010-2013 • Air Quality Permit received 2012 • MOU with Pima County on land exchange E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 8 Receiver of Oracle Ridge Mining LLC (ORM) - Vincere Resource Holdings LLC 2014 – 2019 • Updated Mineral Resource Estimate NI43-101 2014 • Secured note granted to Vincere • Vincere’s secured note puts ORM in receivership • Oracle Ridge mine assets held on care and maintenance at cost of approx. US$400,000 per annum Wedgetail Operations LLC (80% controlled by Eagle Mountain Mining) 2019-2020 • Wedgetail Operations LLC undertook due diligence and negotiations on Oracle Ridge, which resulted in Wedgetail acquiring an 80% interest in the project November 2019 (commercial details of the acquisition are outlined later in the report) Table 1: History of the Oracle Ridge Copper Project Existing Infrastructure and permits The project has substantial infrastructure at the mine including approximately 18 kilometres of underground development, access roads, tailings storage facility, underground ventilation, electrical and water services and surface infrastructure including offices and maintenance buildings. Key mining permits and approvals are in place but will require amendment prior to the recommencement of mining operations. The existing infrastructure and approved permits will reduce capital costs and the time required to re-start potential production, which will be assessed in any future mining study. Project History Figure 2 - Location of Oracle Ridge Copper Project Since mining ceased in 1996, there has been little modern exploration and very minimal drilling beyond the defined MRE, until Eagle Mountain acquired the project. Table 1 below shows a brief history of Oracle Ridge. Property Owner Time Period Events Phelps Dodge Copper Co. 1873-1937 • Mining in district begins Daily Arizona Copper Co, 1937 - 1968 • 90 t/day flotation plant constructed Continental Copper Inc, 1968 - 1988 • Large scale analysis of mineralisation Control Mines Union Mines Inc • 20 t/day copper smelter constructed • Exploration and development • Operations occur sporadically • Reported US$19 million expenditure on exploration and development Santa Catalina Mining Corp 1988 - 2004 • 750 short ton (“st”)/day mill constructed 1991 Marble Mountain Ventures 2004 - 2010 • Real estate developers – no mining or LLC exploration Oracle Mining Corp 2010 - 2014 • Gold Hawk, renamed Oracle Mining Corp, • 1000 st/day mill expansion completed 1993 • Roughly 1 million st of ore processed 1991-1995 • Operation closed 1996 and mill removed purchased 100% in the Oracle Ridge property from Marble Mountain Ventures • 21,700 m validation and expansion drill program 2010-2013 • Air Quality Permit received 2012 • MOU with Pima County on land exchange E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 8 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 9 Photos 1 – 3 – Infrastructure at Oracle Ridge Mineralisation Mineralisation at Oracle Ridge occurs within five main skarn zones, hosted by three limestone formations; Abrigo, Martin and Escabrosa. These same formations also host significant skarn deposits at other major porphyry mines in Arizona. Skarn alteration and copper mineralisation is believed to have formed during the Laramide, a geologic period when many major world class copper deposits such as Globe-Miami, Magma, Resolution, Ray and San Manuel-Kalamazoo were formed in Arizona and throughout the southwestern US. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 10 Skarns are formed by an influx of hot solutions and a nearby intrusive was likely responsible for altering the mineral composition of the pre-existing limestone and prior to depositing copper, gold and silver minerals. The location of the intrusive at Oracle Ridge is not known and locating this system remains a key exploration objective for the Company. A conceptual section of Oracle Ridge is shown in Figure 3 below. Figure 3 - Cross-Section of Conceptual Skarn Mineralisation Previous drilling through skarn-hosted mineralisation at Oracle Ridge has returned excellent intersections including3: • 18.3m @ 2.84% Cu, 0.42g/t Au, 24.8/t Ag • 7.7m @ 5.11% Cu, 0.72g/t Au, 55.8 g/t Ag • 7.6m @ 4.63% Cu, 0.74g/t Au, 43.06g/t Ag • 9.1m @ 3.97% Cu, 1.04g/t Au, 29.89g/t Ag Photos 1 – 3 – Infrastructure at Oracle Ridge Mineralisation Exploration Mineralisation at Oracle Ridge occurs within five main skarn zones, hosted by three limestone formations; Abrigo, Martin and Escabrosa. These same formations also host significant skarn deposits at other major porphyry mines in Arizona. Skarn alteration and copper mineralisation is believed to have formed during the Laramide, a geologic period when many major world class copper deposits such as Globe-Miami, Magma, Resolution, Ray and San Manuel-Kalamazoo were formed in Arizona and throughout the southwestern US. Since acquiring the project in November 2019, the Company has continued to build on the geological knowledge of the mine and region. This work has included reinterpretation of existing data, structural reviews, multispectral studies, and geophysical surveys. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 10 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 11 3 refer ASX announcement 25 May 2020 Photo 4 – Mineralisation accessible from underground development Figure 4 – Cross Section through Oracle Ridge The existing Oracle Ridge drilling database included 618 drill holes for over 76,000 metres of drilling and 11,553 assays. A review of the database was undertaken highlighting multiple zones of high-grade copper mineralisation, along with significant gold and silver (refer ASX announcement 25 May 2020). E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 12 As the project benefits from an accessible underground mine, verification of skarn- hosted mineralisation was undertaken along with interpretation of major structures. In addition, a multispectral study and various field programs were undertaken in areas surrounding the mine to further understand the potential location of feeder systems and other areas prospective for mineralisation. Two airborne geophysical programs were undertaken during the year. The programs included a drone magnetic survey and a helicopter VTEM geophysical survey to build the local and regional geological knowledge and assist in the definition of exploration targets. The magnetic survey covered an area within and around Oracle Ridge. The results identified an area of increased magnetism extending beyond the drill-defined mineralised zones. The area of increased magnetism could be due to potential extensions of the known mineralisation. Conversely, it is also known that some mineralisation at Oracle Ridge has a subdued magnetic response. The magnetic survey identified a zone of low magnetic response (shown in blue in Figure 5) and this area is also considered prospective. In addition to the magnetic geophysical survey, a Versatile Time Domain Electromagnetic (“VTEM”) PlusTM survey was completed covering an area over the Oracle Ridge mine tenement package and the surrounding areas. The results of the VTEM survey will be used in conjunction with the multispectral survey and field mapping to evaluate prospective areas which have potential to further increase the overall mineralisation at Oracle Ridge. This work will include seeking to identify the source of skarn mineralisation such as a concealed porphyry system. Photo 4 – Mineralisation accessible from underground development Figure 4 – Cross Section through Oracle Ridge The existing Oracle Ridge drilling database included 618 drill holes for over 76,000 metres of drilling and 11,553 assays. A review of the database was undertaken highlighting multiple zones of high-grade copper mineralisation, along with significant gold and silver (refer ASX announcement 25 May 2020). Photo 5 - VTEM Plus Survey being undertaken at Oracle Ridge E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 12 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 13 Following the various geological reviews and the results of the magnetic survey and VTEM survey, a significant Exploration Target was defined during the period as shown in Table 2. Following completion of the aeromagnetic survey and the review of select historical drill core and existing data and internal geological analysis, the Company has delineated an Exploration Target as extensions to existing mineralisation that is constrained by a magnetic ‘high’ anomaly. The Exploration Target is in addition to the existing NI43-101 MRE and falls entirely within the Company’s existing patented and unpatented mining claims. Exploration Target Tonnes Grade Copper 1.1-1.9 % Gold 14 – 29 Mt 0.03-0.26 g/t Silver 7.1-19.3 g/t Table 2 – Oracle Ridge Exploration Target (Excludes Existing MRE & Mined Out Areas) The potential quantity and grade of the exploration target is conceptual in nature and that there has been insufficient additional exploration to estimate an expanded Mineral Resource as at the date of this announcement and whilst additional exploration is planned it is uncertain if this will result in the estimation of an expanded Mineral Resource. The Exploration Target is based on a geological model of the mine stratigraphy and major intrusions built from the existing drilling database. Approximately 50 holes have been previously drilled within the Exploration Target with many of these holes intersecting skarn horizons which is evidence of an active hydrothermal system. The spacing of previous drilling is quite irregular, varying from 50 to 150 metres, thus leaving large areas untested. Several of these holes which intersected the skarn horizons also intersected copper mineralisation of varying grade. The model was constrained by the footprint of the historical MRE and excluded mined out areas. Geological zones highly likely to contain skarn-hosted mineralisation were interpreted to be within an area showing a high magnetic anomaly. The resulting volumes were converted to tonnes using a specific gravity of 3t/m3, which is appropriate for mineralisation at Oracle Ridge. A reduction factor of 65% (average) was then applied to the tonnage based on the ratio between known mineralised domains and potentially mineralised volumes within the historical MRE footprint. Final ranges were estimated by applying a lower side discount of 40% and upper side addition of 20%. Where no constraints were available, the average thickness of the potentially mineralised units was used. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 14 Following the various geological reviews and the results of the magnetic survey and VTEM survey, a significant Exploration Target was defined during the period as shown in Table 2. Eagle Mountain has also identified other prospective areas outside the Exploration Target which have potential to further increase the overall mineralisation at Oracle Ridge. Timeline to test the Exploration Target The Company has adopted a stepped approach to its exploration program. It has digitised the database from previous drilling which, together with recent geophysical analysis, field work and ground truthing, has assisted in defining priority drill targets within the Exploration Target. Mineralisation outside the exploration target Exploration Target constrained by a magnetic anomaly Figure 5 – Exploration Target at Oracle Ridge Copper Project The exploration strategy at Oracle Ridge is to initially prove the exploration target through drilling. Concurrently, as skarn mineralisation is sourced from porphyry systems, locating the structural controls leading to the porphyry system remains a key exploration focus for the Company. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 14 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 15 Following completion of the aeromagnetic survey and the review of select historical drill core and existing data and internal geological analysis, the Company has delineated an Exploration Target as extensions to existing mineralisation that is constrained by a magnetic ‘high’ anomaly. The Exploration Target is in addition to the existing NI43-101 MRE and falls entirely within the Company’s existing patented and unpatented mining claims. Exploration Target Tonnes Grade Copper 1.1-1.9 % Gold 14 – 29 Mt 0.03-0.26 g/t Silver 7.1-19.3 g/t Table 2 – Oracle Ridge Exploration Target (Excludes Existing MRE & Mined Out Areas) The potential quantity and grade of the exploration target is conceptual in nature and that there has been insufficient additional exploration to estimate an expanded Mineral Resource as at the date of this announcement and whilst additional exploration is planned it is uncertain if this will result in the estimation of an expanded Mineral Resource. The Exploration Target is based on a geological model of the mine stratigraphy and major intrusions built from the existing drilling database. Approximately 50 holes have been previously drilled within the Exploration Target with many of these holes intersecting skarn horizons which is evidence of an active hydrothermal system. The spacing of previous drilling is quite irregular, varying from 50 to 150 metres, thus leaving large areas untested. Several of these holes which intersected the skarn horizons also intersected copper mineralisation of varying grade. The model was constrained by the footprint of the historical MRE and excluded mined out areas. Geological zones highly likely to contain skarn-hosted mineralisation were interpreted to be within an area showing a high magnetic anomaly. The resulting volumes were converted to tonnes using a specific gravity of 3t/m3, which is appropriate for mineralisation at Oracle Ridge. A reduction factor of 65% (average) was then applied to the tonnage based on the ratio between known mineralised domains and potentially mineralised volumes within the historical MRE footprint. Final ranges were estimated by applying a lower side discount of 40% and upper side addition of 20%. Where no constraints were available, the average thickness of the potentially mineralised units was used. Commencement of Diamond Drilling In September 2020, the Company commenced a surface diamond drilling program at Oracle Ridge. The drilling program is targeting extensions to high-grade portions of the existing MRE in three priority zones as shown in Figure 6. The zones are within the Exploration Target outlined in Figure 5 and are supported by a combination of: • previous drilling outside the existing MRE which has intersected mineralisation; • unconstrained mineral resources; and • a magnetic anomaly. Figure 6 - Significant intercepts at Oracle Ridge mine and proposed Target areas for drilling program E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 16 Commencement of Diamond Drilling In September 2020, the Company commenced a surface diamond drilling program at Oracle Ridge. The drilling program is targeting extensions to high-grade portions of the existing MRE in three priority zones as shown in Figure 6. The zones are within the Exploration Target outlined in Figure 5 and are supported by a combination of: • previous drilling outside the existing MRE which has intersected mineralisation; • unconstrained mineral resources; and • a magnetic anomaly. Photo 6 - Core from diamond drilling program in September 2020 New ‘Near Mine’ Claims Staked Subsequent to the end of the year, and following the completion of field work undertaken to follow-up geophysical anomalies in the near-mine area, the Company staked 105 new Unpatented Mining Claims (“Claims”). The new Claims are within five kilometres of mine portals and cover two prospective areas named OREX and Red Hawk. OREX is prospective for skarn-hosted high-grade Cu-Ag-Au mineralisation while Red Hawk is prospective for porphyry copper mineralisation (Figure 7). The new claims are held by the 80% owned USA subsidiary of Eagle Mountain, Wedgetail Operations LLC. Figure 6 - Significant intercepts at Oracle Ridge mine and proposed Target areas for drilling program E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 16 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 17 Figure 7 - Oracle Ridge area with existing tenements and new Unpatented Mining Claims over OREX and Red Hawk prospects. Results of VTEMTM Plus surveys (SFz25) shown within recently staked ground. Photo 7 - High-grade waste from dump material at OREX target assaying 9.15% Cu, 192 g/t Ag and 0.15 g/t Au. The sample was collected next to a small adit mined along a copper-bearing shear within the Leatherwood intrusive. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 18 Figure 7 - Oracle Ridge area with existing tenements and new Unpatented Mining Claims over OREX and Red Hawk prospects. Results of VTEMTM Plus surveys (SFz25) shown within recently staked ground. Summary of Key Terms for the Acquisition of Oracle Ridge Consideration for Eagle Mountain’s acquisition of an 80% interest in the Oracle Ridge Copper Mine is as follows: • US$500,000 paid to the Receiver of the Oracle Ridge Copper Mine for the benefit of Vincere; • A 20% interest in Wedgetail Operations LLC granted to Vincere; • Project was acquired by Wedgetail Operations LLC in which Eagle Mountain owns an 80% interest through its 100% owned Arizona subsidiary, Wedgetail Holdings LLC; • Osisko Gold Royalties has a 3% NSR attached to the property; • A secured loan (‘Seller Note’) for the amount of US$6,423,000 plus accrued interest is repayable to Vincere in five equal annual instalments commencing after five years; Interest accrues on the principal for the first five years at the rate of 3.15% per annum and is interest free thereafter; • • Eagle Mountain, through Wedgetail Holdings, will free-carry Vincere for the first US$5,000,000 of expenditure. There is no time frame or minimum spend required, however if Eagle Mountain does not incur the expenditure of US$5,000,000 or otherwise wishes to withdraw, it will relinquish its 80% interest in Wedgetail to Vincere with no additional recourse to Eagle Mountain; • Vincere will have a one-time only election to contribute its pro rata share of costs or dilute its interest in Wedgetail Operations upon the $US5,000,000 expenditure being reached; • Eagle Mountain’s wholly owned subsidiary Silver Mountain Mining Operations Inc will be the Operator of Wedgetail Operations; and • Replacement reclamation and environmental bonds will be put in place by Wedgetail Operations to satisfy regulatory requirements. Wedgetail Operations may use existing funds held as financial assurance for a period of three years, after which Wedgetail Operations shall repay these funds to Vincere. The Seller Note is secured solely against the assets comprising the Oracle Ridge Copper Mine and the 80% interest in Wedgetail Operations held by Wedgetail Holdings. Upon the occurrence of each of three milestone events, Vincere can elect to convert up to US$1,000,000 of the Note into ordinary shares in Eagle Mountain Mining Limited. Photo 7 - High-grade waste from dump material at OREX target assaying 9.15% Cu, 192 g/t Ag and 0.15 g/t Au. The sample was collected next to a small adit mined along a copper-bearing shear within the Leatherwood intrusive. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 18 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 19 The three milestone events are as follows: • The completion by Wedgetail Operations of a preliminary feasibility study in connection with the Mortgaged Properties; • The completion of a feasibility study in connection with the Mortgaged Properties leading to a decision to proceed with a bankable feasibility study; and • The decision by Wedgetail Operations to commission the financing for the Mortgaged Properties as evidenced by a feasibility study sufficient to obtain third party financing for the Mortgaged Properties. Notwithstanding the conversion rights held by Vincere, in no event can Vincere hold greater than 10% of Eagle Mountain’s issued shares. Any Eagle Mountain shares issued to Vincere upon the exercise of these conversion rights will be subject to transfer and sale restrictions for six months from date of issue. Eagle Mountain will provide a performance guarantee in relation to the issue of shares on conversion. The Operating Agreement Wedgetail Operations is subject to an operating agreement between Wedgetail Holdings and Vincere. A Management Committee is in place which comprises three members nominated by Wedgetail Holdings and two members nominated by Vincere. For certain circumstances that may affect the asset base or financial stability of Wedgetail Operations, there must be 100% agreement between the parties. Eagle Mountain’s wholly owned Tucson-based subsidiary Silver Mountain Mining Operations Inc. is the Operator of Wedgetail Operations. Silver Mountain Project – 100% owned Overview The Silver Mountain copper/gold project (“Silver Mountain”) is located in Arizona north west of Phoenix. The project area sits on the northwest-southeast Laramide Arc, a geological feature containing world-class porphyry copper mines such as Bagdad, Miami and Resolution. It also lies on the southern extension of a northeast-southwest prospective metallogenic belt which hosts United Verde and Iron King, two historical mines of volcanogenic massive sulphide affinity. The intersection of these two trends results in a favourable geologic setting with high complexity and potential for multiple mineralisation styles. The northern portion of the project area has a history of prospecting and mining of high-grade copper from the 1890s into the 1920s. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 20 Except for very limited campaigns in the 1960s, 1970s and early 1990’s, there had been no modern exploration of the Silver Mountain area. Eagle Mountain and its subsidiaries have been the first companies to undertake modern exploration over the Silver Mountain project area commencing in 2013. Eagle Mountain was the first group to combine the fragmented land ownership along the main copper mining trend. A portion of the tenements are held in patented claims, which grant royalty-free surface and mineral rights with very low carrying costs. Silver Mountain encompasses three main prospects known as “Pacific Horizon”, “Scarlett” and “Red Mule”, each having a unique mineralisation style. Figure 8 below shows a hypothetical cross section across the Silver Mountain project illustrating the different types of mineralisation targets and a postulated porphyry source at depth which could explain the different mineralisation styles observed on the property. The three milestone events are as follows: • The completion by Wedgetail Operations of a preliminary feasibility study in connection with the Mortgaged Properties; • The completion of a feasibility study in connection with the Mortgaged Properties leading to a decision to proceed with a bankable feasibility study; and • The decision by Wedgetail Operations to commission the financing for the Mortgaged Properties as evidenced by a feasibility study sufficient to obtain third party financing for the Mortgaged Properties. Notwithstanding the conversion rights held by Vincere, in no event can Vincere hold greater than 10% of Eagle Mountain’s issued shares. Any Eagle Mountain shares issued to Vincere upon the exercise of these conversion rights will be subject to transfer and sale restrictions for six months from date of issue. Eagle Mountain will provide a performance guarantee in relation to the issue of shares on conversion. The Operating Agreement Wedgetail Operations is subject to an operating agreement between Wedgetail Holdings and Vincere. A Management Committee is in place which comprises three members nominated by Wedgetail Holdings and two members nominated by Vincere. For certain circumstances that may affect the asset base or financial stability of Wedgetail Operations, there must be 100% agreement between the parties. Eagle Mountain’s wholly owned Tucson-based subsidiary Silver Mountain Mining Operations Inc. is the Operator of Wedgetail Operations. Silver Mountain Project – 100% owned Overview The Silver Mountain copper/gold project (“Silver Mountain”) is located in Arizona north west of Phoenix. The project area sits on the northwest-southeast Laramide Arc, a geological feature containing world-class porphyry copper mines such as Bagdad, Miami and Resolution. It also lies on the southern extension of a northeast-southwest prospective metallogenic belt which hosts United Verde and Iron King, two historical mines of volcanogenic massive sulphide affinity. The intersection of these two trends results in a favourable geologic setting with high complexity and potential for multiple mineralisation styles. The northern portion of the project area has a history of prospecting and mining of Figure 8 - Conceptual mineralisation system at Silver Mountain Project high-grade copper from the 1890s into the 1920s. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 20 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 21 Figure 9 - Map showing the land tenure and local geology of the Pacific Horizon, Scarlett and Red Mule prospects Pacific Horizon The local geology of the Pacific Horizon prospect comprises a belt of Proterozoic metamorphic schists with a northeast-southwest strike. Latite porphyry dykes intrude the Proterozoic sequence. Minor siderite-calcite-quartz breccias outcrop along the Pacific Horizon prospect. Anomalous copper, gold, silver and other base metals values are widespread along the horizon. Several historical high-grade copper mines were developed from the 1890s to the 1920s, including, Number 10, Copper Ash, Buffalo, Wellington and Pacific mines. Figure 10 shows the historical mine dump samples taken at each of these historic mines (refer ASX announcement 14 March 2018 – IPO Prospectus). E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 22 Figure 9 - Map showing the land tenure and local geology of the Pacific Horizon, Scarlett and Red Mule prospects Pacific Horizon The local geology of the Pacific Horizon prospect comprises a belt of Proterozoic metamorphic schists with a northeast-southwest strike. Latite porphyry dykes intrude the Proterozoic sequence. Minor siderite-calcite-quartz breccias outcrop along the Pacific Horizon prospect. Anomalous copper, gold, silver and other base metals values are widespread along the horizon. Several historical high-grade copper mines were developed from the 1890s to the 1920s, including, Number 10, Copper Ash, Buffalo, Wellington and Pacific mines. Figure 10 shows the historical mine dump samples taken at each of these historic mines (refer ASX announcement 14 March 2018 – IPO Prospectus). Figure 10 - Results of historical mine dump samples at the Pacific Horizon prospect. Historic mine waste dump samples collected by Silver Mountain Mining LLC, a wholly owned subsidiary of Eagle Mountain Mining, in the Pacific Horizon prospect have assayed as high as 11.1% Cu, 10.7 g/t Au and 251 g/t Ag. Drilling along the Pacific Horizon was completed in March 2019. The drilling confirmed the complex mineralogy in the area with results providing a significant volume of technical and structural information. The occurrence of quartz-carbonate breccia below the Horizon’s footwall gave the Company cause to re-think the mineralization genesis and model. Geochemical analysis suggests a possible epithermal gold signature and this model remains to be investigated. Scarlett The Scarlett prospect is located immediately west of the Pacific Horizon prospect, with a northwest-southeast fault dividing the Scarlett prospect into two domains. To the northeast of the fault, Proterozoic granitoids host a swarm of gold-bearing quartz veins. To the southwest, Tertiary volcanic rocks overlay a basal conglomerate unit resting on Proterozoic basement. Latite dykes with a northeast strike cross the area. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 22 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 23 Gold mineralisation up to 80 g/t Au is hosted in the sulphide-bearing quartz veins. These veins have a northeast-southwest strike occurring in a corridor of approximately 1,500 metres by 300 metres which is subparallel to the regional fault. Small scale mining at the Scarlett prospect was carried out intermittently between the 1860s and 1950s. The Silver Dollar mine was discovered in the 1860s. Several historical adits and small workings are scattered throughout the area. Figure 11 shows the location of rock chip samples taken by Silver Mountain at the Scarlett prospect. Figure 11 - Map showing the location of rock chip samples taken by Silver Mountain at the Scarlett prospect Eagle Mountain considers the Scarlett prospect to be prospective for vein-hosted gold and porphyry copper mineralisation. Drilling at the Scarlett prospect area was designed to test depth extensions to the gold-bearing veins visible at surface and the porphyry potential of the area. This is quite different to the mineralisation encountered along the Pacific Horizon. Results from three holes were inconclusive but the Company was very encouraged by the extent and style of alteration encountered in drilling. Further work is required to understand where the mineralised parts of the system could be found. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 24 Gold mineralisation up to 80 g/t Au is hosted in the sulphide-bearing quartz veins. Red Mule These veins have a northeast-southwest strike occurring in a corridor of approximately 1,500 metres by 300 metres which is subparallel to the regional fault. Small scale mining at the Scarlett prospect was carried out intermittently between the 1860s and 1950s. The Silver Dollar mine was discovered in the 1860s. Several historical adits and small workings are scattered throughout the area. Figure 11 shows the location of rock chip samples taken by Silver Mountain at the Scarlett prospect. Figure 11 - Map showing the location of rock chip samples taken by Silver Mountain at the Scarlett prospect Eagle Mountain considers the Scarlett prospect to be prospective for vein-hosted gold and porphyry copper mineralisation. Drilling at the Scarlett prospect area was designed to test depth extensions to the gold-bearing veins visible at surface and the porphyry potential of the area. This is quite different to the mineralisation encountered along the Pacific Horizon. Results from three holes were inconclusive but the Company was very encouraged by the extent and style of alteration encountered in drilling. Further work is required to understand where the mineralised parts of the system could be found. The Red Mule prospect is located to the south of the Scarlett prospect and immediately west of the southern end of the Pacific Horizon prospect. The Red Mule prospect straddles the Proterozoic basement to the northeast and Tertiary cover to the southwest. The Proterozoic basement is the southern extension of the Pacific Horizon. Tertiary rocks include a basal conglomerate with frequent red staining and volcanics. A northwest-southeast fault system with significant brittle deformation characterises the local geology. Extensive iron-oxide, clay and sericite alteration occurs in the fault zones. Anomalous copper values are widespread and gold values up to 7.6 g/t Au have been sampled from mafic dykes. Several geochemical anomalies have been identified along the fault system crossing the Red Mule prospect, including extensive hematite alteration. Eagle Mountain considers the Red Mule prospect to be prospective for detachment fault-related gold and copper mineralisation as well as porphyry copper mineralisation. One drillhole was completed at Red Mule target which tested a fault structure in the vicinity of a high-grade silver sample. No significant mineralisation was encountered. The VMS horizon discovered near the Rhyolite target and south of Red Mule has a slightly different rock mineralogy. This area requires more field work including mapping and sampling before drill targets can be established. Rhyolite Target The Rhyolite target was identified in 2018 during a geophysical acquisition program. Field crews identified a previously unreported historical mine to the south of Red Mule. Follow up mapping near the historical shaft identified a rhyolite intrusive in contact with Proterozoic schists similar to those at the Pacific Horizon. Assays up to 27 g/t Au and 0.13% Cu were reported at the contact between rhyolite and schist. Preliminary interpretation supports a mineralising event associated with or following the rhyolite emplacement. The rhyolite is younger than the schists and possibly Tertiary in age. This area requires more field work including mapping and sampling before drill targets can be established. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 24 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 25 COMPETENT PERSON STATEMENTS Information in this report relating to Exploration Results is based on information compiled under the supervision of Mr Charles Bass who is a Director of the Company. Mr Bass is a Fellow of the Australasian Institute of Mining and Metallurgy and a Fellow of the Australian Institute of Geoscientist. He holds shares and options in the Company. Mr Bass has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Bass consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. Where the Company references previous ASX announcements, JORC Table 1 disclosures are included within them. The Company confirms that it is not aware of any new information or data that materially effects the information included in those announcements, and that the form and context in which the Competent Persons findings are presented have not been materially modified from the original reports. The information in this report that relates to the Exploration Target and technical information and Mineral Resource Estimate disclosed in the Annual Mineral Resource Statement is based on, and fairly represents information and supporting documentation compiled and reviewed by Mr Kevin Francis who is an independent consultant to the company. Mr Francis is a Registered Member of the Society of Mining, Metallurgy & Exploration. Mr Francis holds no interest in the Company and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (‘JORC Code’). Mr Francis consents to the inclusion in this report of the matters based upon the information in the form and context in which it appears. The Information in this report and including in relation to the NI43-101 Mineral Resource Estimate and references to the ASX announcement made by the Company on 29 October 2019 is an accurate representation of the available data and studies for the Oracle Ridge Copper Mine Project. The Company confirms it is not in possession of any new information or data which impacts on the reliability of the Mineral Resource Estimate and the supporting information disclosed in the initial market announcement on 29 October 2019 continue to apply and have not materially changed; E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 26 COMPETENT PERSON STATEMENTS Information in this report relating to Exploration Results is based on information compiled under the supervision of Mr Charles Bass who is a Director of the Company. Mr Bass is a Fellow of the Australasian Institute of Mining and Metallurgy and a Fellow of the Australian Institute of Geoscientist. He holds shares and options in the Company. Mr Bass has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Bass consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. Where the Company references previous ASX announcements, JORC Table 1 disclosures are included within them. The Company confirms that it is not aware of any new information or data that materially effects the information included in those announcements, and that the form and context in which the Competent Persons findings are presented have not been materially modified from the original reports. The information in this report that relates to the Exploration Target and technical information and Mineral Resource Estimate disclosed in the Annual Mineral Resource Statement is based on, and fairly represents information and supporting documentation compiled and reviewed by Mr Kevin Francis who is an independent consultant to the company. Mr Francis is a Registered Member of the Society of Mining, Metallurgy & Exploration. Mr Francis holds no interest in the Company and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (‘JORC Code’). Mr Francis consents to the inclusion in this report of the matters based upon the information in the form and context in which it appears. The Information in this report and including in relation to the NI43-101 Mineral Resource Estimate and references to the ASX announcement made by the Company on 29 October 2019 is an accurate representation of the available data and studies for the Oracle Ridge Copper Mine Project. The Company confirms it is not in possession of any new information or data which impacts on the reliability of the Mineral Resource Estimate and the supporting information disclosed in the initial market announcement on 29 October 2019 continue to apply and have not materially changed; ANNUAL MINERAL RESOURCE STATEMENT Mineral Resources The Mineral Resource Estimate provided in this report is Canadian NI43-101 compliant. As such, the Canadian Institute of Mining applies a standard that there are “reasonable prospects for economic extraction” in its definition of Mineral Resources. These resources were acquired with the Oracle Ridge Project and have been taken from the 31 March 2014 Independent Technical Report for the Oracle Ridge Project prepared by Dr Gilles Arseneau, P.Geo, principal of Arseneau Consulting Services Inc. (refer ASX announcement 29 October 2019). The table below presents the Mineral Resource Estimate calculated by Arseneau at a 1.0% CuEq (copper equivalent) cut-off grade. The Mineral Resource Estimate is not JORC compliant. Resource Class Tonnes (Millions) Cu % Ag g/t Au g/t Measured Indicated Inferred Total 1.06 5.58 5.12 11.76 0.24 0.21 0.14 0.18 Table 3 - Summary of latest Mineral Resource Estimate – NI43-101 Compliant. 18.86 17.83 16.80 17.47 1.59 1.61 1.53 1.57 Contained Cu, lbs (Millions) 37 199 173 409 Contained Ag, oz (Millions) 0.6 3.2 3 6.8 Contained Au, oz (‘000) 8 38 22 68 Note in respect to Copper Equivalency: The cut-off grade of 1% CuEq was used to ensure reasonable prospects of economic extraction assuming underground mining. Silver and gold grade estimates were based on a less comprehensive data set than the copper grade estimates. Where copper grade estimates exist without accompanying silver and gold grade estimates, the drill hole was not used to estimate silver or gold grade. Copper equivalency has been estimated using metal pricing of US$2.80 per pound of copper, US$20 per ounce of silver and US$1,300 per ounce of gold. Metallurgical recovery was derived from preliminary locked cycle test results and assumed to be 81% for gold and silver. The prices used were a reflection of market at the time of the Mineral Resource Estimate and reasonable forecasts. The formula used is as follows: CuEQ= Cu% + {(Ag oz/ton*US$20*0.81)+(Au oz/ton*US$1,300* 0.81)} /$2.80/2,000*100 As previously advised Eagle Mountain is currently reviewing the NI43-101 Mineral Resource having methodically reviewed available historic data the technical team together with independent consultants are re-interpreting the existing geological information including additional data Eagle Mountain has obtained. The Company is intent on defining a JORC 2012 compliant Mineral Resource in the December 2020 Quarter. Cautionary Statement: (refer ASX announcement 29 October 2019) references in this report to the publicly quoted resource tonnes and grade of the Project are historical and foreign in nature and not reported in accordance with the JORC Code 2012, or the categories of mineralisation as defined in the JORC Code 2012. A competent person has not done sufficient work to classify the resource estimate as mineral resources or ore reserves in accordance with the JORC Code 2012. It is uncertain that following evaluation and/or further exploration work that the foreign/historic resource estimates of mineralisation will be able to be reported as mineral resources or ore reserves in accordance with the JORC Code 2012. Resource estimates and other information used in this report are based on the March 2014 NI43-101 compliant Independent Technical Report prepared by Dr Giles Arseneau of Arseneau Consulting Services Inc for Oracle Mining Corp. This report can be found on the Company’s website “www.eaglemountain.com.au”. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 26 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 27 ANNUAL MINERAL RESOURCE STATEMENT Review of Material Changes As set out in this report Eagle Mountain completed the acquisition of 80% of the Oracle Ridge Copper Project during the period and in doing so acquired an existing NI43-101 Mineral Resource Estimate. The Company is in the process of re-interpreting the geological information together with additional data it has obtained with the intention of preparing a JORC 2012 compliant resource estimate. Other than the above noted change, there were no material changes from the prior year. Governance and Internal Controls The Company acquired the Mineral Resource Estimate it is disclosing. The NI43-101 Mineral Resource Estimate is considered by Eagle Mountain to be both relevant and of significant materiality as it provides an appropriate level of context and background to the Project, informing shareholders of publicly available mining information over a former producing mine. The Company undertook its own due diligence on the Oracle Ridge Copper Mine Project and is confident that the existence of the NI43-101 estimate and the historic production records for the Oracle Ridge Copper Mine provide a reasonable basis for relying on the Foreign Mineral Resource Estimate which was prepared by Dr Gilles Arseneau, P.Geo, principal of Arseneau Consulting Services Inc, an independent consultant. Since 2010, diamond drill core has been geologically and geotechnically logged to a level of detail to support Mineral Resource Estimation, mining studies and metallurgical studies. Drill core was logged in detail for lithology, alteration, mineralisation, structure and veining. In addition, rock quality designation was kept for geotechnical purposes. Core photos and the remaining half core have been retained for further geologic or geotechnical samplings as may become necessary. Since 2011, the project has assayed 6,771 core samples; 5,672 were assayed at Skyline Assayers and Laboratories and 1,099 were assayed at the SGS Mineral Services laboratory. The surface and underground geology was examined by an independent consultant. The mineralisation was observed in drill core and in the underground workings. Drill sites were located at surface and underground. The core logging, sample handling procedures and were also examined. The historical drill core was examined for integrity and all historical drill core was re-sampled so that silver and gold values could be included in the database and so that the apparent high assay bias associated with the historical data could be better quantified. Of the 10,499 assay data in the drill hole database, 6,771 were verified against original assay certificates and no significant errors were identified. In addition, all historical assay data for the surface drilling program were verified against the scanned copies of original drill logs. Several discrepancies were noted with the historical drill holes. All were corrected to match the information on the drill logs. The geologic model is considered robust with information from over 600 surface and underground diamond drill holes. The Company will report any future mineral reserves and resources estimates in accordance with the 2012 JORC Code. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 28 ANNUAL MINERAL RESOURCE STATEMENT Review of Material Changes As set out in this report Eagle Mountain completed the acquisition of 80% of the Oracle Ridge Copper Project during the period and in doing so acquired an existing NI43-101 Mineral Resource Estimate. The Company is in the process of re-interpreting the geological information together with additional data it has obtained with the intention of preparing a JORC 2012 compliant resource estimate. Other than the above noted change, there were no material changes from the prior year. Governance and Internal Controls The Company acquired the Mineral Resource Estimate it is disclosing. The NI43-101 Mineral Resource Estimate is considered by Eagle Mountain to be both relevant and of significant materiality as it provides an appropriate level of context and background to the Project, informing shareholders of publicly available mining information over a former producing mine. The Company undertook its own due diligence on the Oracle Ridge Copper Mine Project and is confident that the existence of the NI43-101 estimate and the historic production records for the Oracle Ridge Copper Mine provide a reasonable basis for relying on the Foreign Mineral Resource Estimate which was prepared by Dr Gilles Arseneau, P.Geo, principal of Arseneau Consulting Services Inc, an independent consultant. Since 2010, diamond drill core has been geologically and geotechnically logged to a level of detail to support Mineral Resource Estimation, mining studies and metallurgical studies. Drill core was logged in detail for lithology, alteration, mineralisation, structure and veining. In addition, rock quality designation was kept for geotechnical purposes. Core photos and the remaining half core have been retained for further geologic or geotechnical samplings as may become necessary. Since 2011, the project has assayed 6,771 core samples; 5,672 were assayed at Skyline Assayers and Laboratories and 1,099 were assayed at the SGS Mineral Services laboratory. The surface and underground geology was examined by an independent consultant. The mineralisation was observed in drill core and in the underground workings. Drill sites were located at surface and underground. The core logging, sample handling procedures and were also examined. The historical drill core was examined for integrity and all historical drill core was re-sampled so that silver and gold values could be included in the database and so that the apparent high assay bias associated with the historical data could be better quantified. Of the 10,499 assay data in the drill hole database, 6,771 were verified against original assay certificates and no significant errors were identified. In addition, all historical assay data for the surface drilling program were verified against the scanned copies of original drill logs. Several discrepancies were noted with the historical drill holes. All were corrected to match the information on the drill logs. The geologic model is considered robust with information from over 600 surface and underground diamond drill holes. 2012 JORC Code. The Company will report any future mineral reserves and resources estimates in accordance with the DIRECTORS’ REPORT The Directors present their report on Eagle Mountain Mining Limited (“Eagle Mountain” or the “Company”) and its controlled entities (the “Group”) for the year ended 30 June 2020. DIRECTORS The names and details of the Group’s Directors in office during the year until the date of this report are as follows. Directors were in office for this entire year unless otherwise stated. Rick Crabb - B. Juris (Hons), LLB, MBA, FAICD (Non-Executive Chairman) Rick Crabb holds degrees of Bachelor of Jurisprudence (Honours), Bachelor of Laws and Master of Business Administration from the University of Western Australia. He practised as a solicitor from 1980 to 2004 with Robinson Cox (now Clayton Utz) and Blakiston & Crabb (now Gilbert + Tobin) specialising in mining, corporate and commercial law, advised in relation to numerous project developments in Australia and Africa. Rick has since focused on his public company directorships and investments. He has been involved as a director and strategic shareholder in a number of successful public companies. He is currently Non-executive Chairman of Ora Gold Limited and a Non-executive Director of WarpForge Limited. He is a former director of Paladin Energy Limited (February 1994-October 2019). Charles Bass - B.Sc. Geology, M.Sc. Mining Engineering/Mineral Processing, FAICD, FAusIMM, FAIG (Managing Director. Resigned as Chief Executive Officer on 15 January 2020) Charles Bass completed his B.Sc. in Geology at Michigan Technological University, followed by a M.Sc in Mining Engineering & Mineral Processing at Queen’s University, Canada. Between his degrees Charles worked as a geologist and then Plant Metallurgist at a copper-gold mine in Northern Quebec. Charles joined AMAX Inc, an American mining company in their Head Office in 1976 and came to Perth in 1978. Between 1980 to 1981, AMAX had him work in Tucson, Arizona at the Twin Buttes copper mine. Charles returned to Australia and established his first company, Metech Pty Ltd in late 1981. Charles established Eagle Mining Corporation in 1992 with Tony Poli and was responsible for the deal that led to the discovery of the very successful Nimary Gold Mine. Eagle Mining Corporation won both Explorer of the Year and then Developer of the Year at Diggers and Dealers conference and was subject to a hostile takeover in 1997. Charles then co-founded Aquila Resources Ltd with Tony Poli in 2000 and helped transition it from a gold explorer to iron ore and coal before it too was subject to a hostile $1.4 billion takeover in 2014 at the hands of a joint bid between Baosteel and ASX listed Aurizon. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 28 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 29 DIRECTORS’ REPORT Roger Port – BA, FCA, SF Fin, FAICD (Non-Executive Director) Roger Port was a partner of PricewaterhouseCoopers from 1997 to 2016. He has 30 years’ experience in financial analysis, company and business valuations, transaction due diligence and mergers and acquisitions and led the PricewaterhouseCoopers Perth Deals team from 2009 to 2016. He has had significant experience in the resources sector in his career and jointly led the PwC Australia Deals Energy & Mining industry group for five years. Roger is a graduate of Macquarie University and gained a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia. He is a Fellow of Chartered Accountants Australia and New Zealand, a Senior Fellow of the Financial Services Institute of Australasia and a Fellow of the Australian Institute of Company Directors. Roger is a board member of MG Kailis Holdings Pty Ltd, the Harry Perkins Institute of Medical Research and Chair of Council of Guildford Grammar School. Brett Rowe - BComm, MAcc, GAICD (Alternate Director for Charles Bass) Brett Rowe has over 20 years’ experience in the financial services industry and is a graduate of the Australian Institute of Company Directors. He holds a Bachelor of Commerce degree and a Masters of Accounting. Brett is a director and the chief executive officer of The Bass Group, as well as a director of The Bass Family Foundation and Silver Mountain Mining Pty Ltd. Brett is responsible for managing the global financial interests of the Bass Family, as well as the Foundation’s ongoing support of education and health in disadvantaged children and youth in regional Western Australia. Brett is also a director of the Centre for Entrepreneurial Research and Innovation Limited (CERI). CERI aims to assist the growth of WA’s non-mining industry through a strong innovation base where high-knowledge start-up company formation can be accelerated. This is achieved through the co-creation of a WA-based venture capital industry. CHIEF EXECUTIVE OFFICER Tim Mason – B. Eng (Hons) MBA; GAICD Mr Mason has 18 years’ experience in the mining and engineering sectors across a broad range of corporate, operations, business development and engineering roles. His recent roles of General Manager Operations and General Manager Projects and Innovation involved conducting feasibility studies, project development and operations start-up, business development, project financing and corporate presentations. Mr Mason holds a Bachelor of Engineering Honours (Geotechnical) from the Royal Melbourne Institute of Technology, a Masters of Business Administration from Murdoch University and is a Graduate Member of the Australian Institute of Company Directors. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 30 DIRECTORS’ REPORT Roger Port – BA, FCA, SF Fin, FAICD (Non-Executive Director) Roger Port was a partner of PricewaterhouseCoopers from 1997 to 2016. He has 30 years’ experience in financial analysis, company and business valuations, transaction due diligence and mergers and acquisitions and led the PricewaterhouseCoopers Perth Deals team from 2009 to 2016. He has had significant experience in the resources sector in his career and jointly led the PwC Australia Deals Energy & Mining industry group for five years. Roger is a graduate of Macquarie University and gained a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia. He is a Fellow of Chartered Accountants Australia and New Zealand, a Senior Fellow of the Financial Services Institute of Australasia and a Fellow of the Australian Institute of Company Directors. Roger is a board member of MG Kailis Holdings Pty Ltd, the Harry Perkins Institute of Medical Research and Chair of Council of Guildford Grammar School. Brett Rowe - BComm, MAcc, GAICD (Alternate Director for Charles Bass) Brett Rowe has over 20 years’ experience in the financial services industry and is a graduate of the Australian Institute of Company Directors. He holds a Bachelor of Commerce degree and a Masters of Accounting. Brett is a director and the chief executive officer of The Bass Group, as well as a director of The Bass Family Foundation and Silver Mountain Mining Pty Ltd. Brett is responsible for managing the global financial interests of the Bass Family, as well as the Foundation’s ongoing support of education and health in disadvantaged children and youth in regional Western Australia. Brett is also a director of the Centre for Entrepreneurial Research and Innovation Limited (CERI). CERI aims to assist the growth of WA’s non-mining industry through a strong innovation base where high-knowledge start-up company formation can be accelerated. This is achieved through the co-creation of a WA-based venture capital industry. CHIEF EXECUTIVE OFFICER Tim Mason – B. Eng (Hons) MBA; GAICD Mr Mason has 18 years’ experience in the mining and engineering sectors across a broad range of corporate, operations, business development and engineering roles. His recent roles of General Manager Operations and General Manager Projects and Innovation involved conducting feasibility studies, project development and operations start-up, business development, project financing and corporate presentations. Mr Mason holds a Bachelor of Engineering Honours (Geotechnical) from the Royal Melbourne Institute of Technology, a Masters of Business Administration from Murdoch University and is a Graduate Member of the Australian Institute of Company Directors. DIRECTORS’ REPORT COMPANY SECRETARY Mark Pitts - B.Bus; FCA; GAICD (Company Secretary) Mark Pitts is a Partner in Corporate Advisory firm Endeavour Corporate and has over 30 years’ experience in business administration and corporate compliance. Having started his career with KPMG in Perth, Mark has worked at a senior management level in a variety of commercial and consulting roles including mining services, healthcare and property development. The majority of the past 15 years has been spent working for or providing services to publicly listed companies in the resources sector. Mark is a registered company auditor and holds a Bachelor of Business Degree from Curtin University, is a Fellow of Chartered Accountants Australia and New Zealand and is a graduate of the Australian Institute of Company Directors. DIRECTORS’ INTERESTS As at the date of this report, the Directors’ interests in shares and unlisted options of the Company are as follows: Director R Crabb C Bass R Port B Rowe (alternate for C Bass) Directors’ Interests in Ordinary Shares 732,000 48,980,001 516,000 Directors’ Interests in Unlisted Options 1,561,000 9,665,000 1,543,000 500,000 1,000,000 Options vested at the reporting date 1,561,000 9,665,000 1,543,000 1,000,000 The Directors’ interests include Unlisted Options which are vested or exercisable as at the date of signing this report. DIRECTORS’ MEETINGS The number of meetings of the Company’s Directors held during the year ended 30 June 2020, and the number of meetings attended by each Director are as follows: Director R Crabb C Bass R Port B Rowe (alternate for C Bass) Board of Directors’ Meetings Attended 8 8 8 8 Eligible to Attend 8 8 8 8 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 30 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 31 DIRECTORS’ REPORT PRINCIPAL ACTIVITIES The Company’s principal activities for the year ended 30 June 2020 have been focussed on, for the first six months, a review of the initial exploration program completed on the Group’s Silver Mountain Project in Arizona in the United States of America and on due diligence and the subsequent acquisition of the Oracle Ridge Copper Mine. The focus for the second half of the year was undertaking exploration activities at the wholly owned Silver Mountain Project and the 80% owned Oracle Ridge Copper Mine in Arizona, as well as capital raising activities. REVIEW OF OPERATIONS With the outbreak of the COVID-19 pandemic, the wellbeing of employees and contractors is of utmost importance to the Company. The Company continues to monitor and abide by all government health advice both in Australia and in the United States of America. The exploration team is based in Arizona and whilst travel has been restricted between the two countries, the exploration activities have been relatively unimpeded at this time. However, due to the uncertainty across global markets, the Group instituted a number of cost reductions including the waiving of Directors’ fees for the June 2020 quarter and a reduction in employee salaries by 20-30%. In addition, the Company qualified for government assistance and received A$50,000 cash flow boost from the Australian government. A wholly owned US subsidiary qualified for US government assistance via a short-term loan of US$106,000. This loan was used to pay employee costs and is expected to be forgiven in the next financial year. The operating loss after income tax of the Group for the year ended 30 June 2020 was $4,368,936 (2019: $6,890,466). Included in the loss for the year are uncapitalised exploration costs of $2,717,101 (2019: $6,004,485) and non-cash items (in respect of depreciation, share-based payments expenses and fair value gains) amounting to $367,623 (2019: $199,637). At 30 June 2020, cash assets amounted to $507,750 (2019: $1,879,883). During the year ended 30 June 2020, the Company received $1,800,001, before related costs, on the issue of shares and options (2019: $1,935,306). SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the financial year, the Group acquired a controlling interest in the Oracle Ridge Copper Mine. The mine and its assets are held 100% within Wedgetail Operations LLC (“WTO”), which in turn is held 80% by Wedgetail Holdings LLC, a wholly owned subsidiary of Eagle Mountain. The remaining 20% is held by Vincere Resource Holdings LLC (“Vincere”). The consideration paid consisted of an upfront cash payment of US$500,000, the issue to Vincere of a US$6,423,000 10 year secured note and the issue of a 20% interest in the issued capital of WTO. Other than the matters stated in this report, there have been no significant changes in the Group’s state of affairs during the financial year. EQUITY SECURITIES ON ISSUE Class of Security Ordinary fully paid shares Unlisted options over unissued shares Performance rights 30 June 2020 115,901,045 26,409,716 30 June 2019 103,816,039 23,801,315 245,000 180,000 Subsequent to the end of the financial year, the Company issued 23,076,923 ordinary shares to institutional and professional investors at an issue price of $0.13 per share. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 32 DIRECTORS’ REPORT PRINCIPAL ACTIVITIES The Company’s principal activities for the year ended 30 June 2020 have been focussed on, for the first six months, a review of the initial exploration program completed on the Group’s Silver Mountain Project in Arizona in the United States of America and on due diligence and the subsequent acquisition of the Oracle Ridge Copper Mine. The focus for the second half of the year was undertaking exploration activities at the wholly owned Silver Mountain Project and the 80% owned Oracle Ridge Copper Mine in Arizona, as well as capital raising activities. REVIEW OF OPERATIONS With the outbreak of the COVID-19 pandemic, the wellbeing of employees and contractors is of utmost importance to the Company. The Company continues to monitor and abide by all government health advice both in Australia and in the United States of America. The exploration team is based in Arizona and whilst travel has been restricted between the two countries, the exploration activities have been relatively unimpeded at this time. However, due to the uncertainty across global markets, the Group instituted a number of cost reductions including the waiving of Directors’ fees for the June 2020 quarter and a reduction in employee salaries by 20-30%. In addition, the Company qualified for government assistance and received A$50,000 cash flow boost from the Australian government. A wholly owned US subsidiary qualified for US government assistance via a short-term loan of US$106,000. This loan was used to pay employee costs and is expected to be forgiven in the next financial year. The operating loss after income tax of the Group for the year ended 30 June 2020 was $4,368,936 (2019: $6,890,466). Included in the loss for the year are uncapitalised exploration costs of $2,717,101 (2019: $6,004,485) and non-cash items (in respect of depreciation, share-based payments expenses and fair value gains) amounting to $367,623 (2019: $199,637). At 30 June 2020, cash assets amounted to $507,750 (2019: $1,879,883). During the year ended 30 June 2020, the Company received $1,800,001, before related costs, on the issue of shares and options (2019: $1,935,306). SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the financial year, the Group acquired a controlling interest in the Oracle Ridge Copper Mine. The mine and its assets are held 100% within Wedgetail Operations LLC (“WTO”), which in turn is held 80% by Wedgetail Holdings LLC, a wholly owned subsidiary of Eagle Mountain. The remaining 20% is held by Vincere Resource Holdings LLC (“Vincere”). The consideration paid consisted of an upfront cash payment of US$500,000, the issue to Vincere of a US$6,423,000 10 year secured note and the issue of a 20% interest in the issued capital of WTO. Other than the matters stated in this report, there have been no significant changes in the Group’s state of affairs during the financial year. EQUITY SECURITIES ON ISSUE Class of Security Ordinary fully paid shares 30 June 2020 115,901,045 Unlisted options over unissued 26,409,716 30 June 2019 103,816,039 23,801,315 shares Performance rights 245,000 180,000 Subsequent to the end of the financial year, the Company issued 23,076,923 ordinary shares to institutional and professional investors at an issue price of $0.13 per share. DIRECTORS’ REPORT EQUITY SECURITIES ON ISSUE (continued) Unlisted Options over Ordinary Shares As at 30 June 2020, 26,409,716 unissued ordinary shares of the Company were under option as follows: Number of Options Granted Exercise Price Expiry Date 4,500,000 1 7,000,000 2 4,500,000 3 815,000 4 5,644,716 5 1,800,000 6 1,500,000 7 650,000 8 30 cents 20 cents 30 cents 20 cents 20 cents 20 cents 21.5 cents 20 cents 7 December 2020 15 January 2023 6 March 2021 1 February 2023 31 July 2021 1 July 2023 15 January 2023 7 October 2023 1 Offer options and vendor options issued as part consideration for the acquisition of Silver Mountain Mining Pty Ltd. 2 Options issued to Directors, Alternate Director, employees and Company Secretary. 3 Options issued pursuant to the IPO Offer. 4 Options issued to employees pursuant to the Company’s employee incentive plan. 5 Options issued pursuant to a pro-rata entitlement offer which closed on 7 June 2019. 6 Options issued to employees pursuant to the Company’s employee incentive plan. 7 Options issued to the Chief Executive Officer. 8 Options issued to employees pursuant to the Company’s employee incentive plan. During the year, no options were exercised and a total of 1,341,599 options were cancelled. Subsequent to 30 June 2020 and the date of this report, 5,771,154 options have vested. No options have been exercised or cancelled in this period. Subsequent to 30 June 2020, the following options were issued: Number of Options Granted Exercise Price Expiry Date 1,923,077 1,923,077 1,325,000 20 cents 30 cents 20 cents 30 June 2021 1 July 2022 1 July 2022 Vesting Date 28 July 2020 28 July 2020 7 August 2020 Options do not entitle the holder to participate in any share issue of the Company or any other body corporate. The holders of unlisted options are not entitled to any voting rights until the options are exercised into ordinary shares. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 32 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 33 DIRECTORS’ REPORT EQUITY SECURITIES ON ISSUE (continued) Performance Rights over Ordinary Shares During the year ended 30 June 2020, the Company issued 150,000 performance rights to the Chief Executive Officer of the Company. Each performance right provides the holder with the right to be issued one ordinary share subject to satisfaction of vesting criteria. During the year, 210,000 performance rights vested and 85,000 vested performance rights were exercised and converted into shares. No performance rights were cancelled during the reporting period. No performance rights have been issued, vested, converted or cancelled between 30 June 2020 and the date of this report. DIVIDENDS No dividend has been paid during the year and no dividend is recommended for the current financial year. EVENTS SUBSEQUENT TO THE END OF THE REPORTING YEAR Subsequent to the end of the financial year, the Company completed a placement of 23,076,923 ordinary shares to institutional and professional investors at an issue price of $0.13 per share, raising a total of $3.0 million (before costs). In August 2020, global drilling company Boart Longyear Limited was appointed to undertake a maiden surface diamond drilling program at the Oracle Ridge Copper Mine. The impact of the COVID-19 pandemic is ongoing. The situation is dependent on measures imposed by the Australian Government, United States government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. It is not practicable to estimate the potential impact, positive or negative, after the reporting date. Other than as stated above, there has not arisen in the interval between the end of the financial year 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 Company to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The Group intends to undertake further exploration programs at the Silver Mountain Project and Oracle Ridge Copper Mine in Arizona in the United States of America. Any other likely developments in the operations of the Group and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the Group. ENVIRONMENTAL ISSUES The Group’s operations are not regulated under any significant environmental regulation under a law of the Commonwealth of Australia, a State or a Territory. The operations and proposed activities of the Group are subject to United States Federal and Arizona State laws and regulations concerning the environment. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 34 the date of this report. period. DIVIDENDS year. DIRECTORS’ REPORT EQUITY SECURITIES ON ISSUE (continued) Performance Rights over Ordinary Shares During the year ended 30 June 2020, the Company issued 150,000 performance rights to the Chief Executive Officer of the Company. Each performance right provides the holder with the right to be issued one ordinary share subject to satisfaction of vesting criteria. During the year, 210,000 performance rights vested and 85,000 vested performance rights were exercised and converted into shares. No performance rights were cancelled during the reporting No performance rights have been issued, vested, converted or cancelled between 30 June 2020 and No dividend has been paid during the year and no dividend is recommended for the current financial EVENTS SUBSEQUENT TO THE END OF THE REPORTING YEAR Subsequent to the end of the financial year, the Company completed a placement of 23,076,923 ordinary shares to institutional and professional investors at an issue price of $0.13 per share, raising a total of $3.0 million (before costs). In August 2020, global drilling company Boart Longyear Limited was appointed to undertake a maiden surface diamond drilling program at the Oracle Ridge Copper Mine. The impact of the COVID-19 pandemic is ongoing. The situation is dependent on measures imposed by the Australian Government, United States government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. It is not practicable to estimate the potential impact, positive or negative, after the reporting date. Other than as stated above, there has not arisen in the interval between the end of the financial year 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 Company to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The Group intends to undertake further exploration programs at the Silver Mountain Project and Oracle Ridge Copper Mine in Arizona in the United States of America. Any other likely developments in the operations of the Group and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the Group. ENVIRONMENTAL ISSUES The Group’s operations are not regulated under any significant environmental regulation under a law of the Commonwealth of Australia, a State or a Territory. The operations and proposed activities of the Group are subject to United States Federal and Arizona State laws and regulations concerning the environment. DIRECTORS’ REPORT ENVIRONMENTAL ISSUES (continued) The Board believes that the Group has adequate systems in place for the management of its environmental requirements. The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance with all environmental legislation. The Directors of the Group are not aware of any breach of environmental legislation for the financial year under review. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS AND AUDITORS During the year ended 30 June 2020, the Company paid an insurance premium to insure certain officers of the Company. The officers of the Company covered by the insurance policy include the Directors named in this report. The Directors and Officers Liability insurance provides cover against all costs and expenses that may be incurred in defending civil or criminal proceedings that fall within the scope of the indemnity and that may be brought against the officers in their capacity as officers of the Company. The insurance policy does not contain details of the premium paid in respect of individual officers of the Company. Disclosure of the nature of the liability cover and the amount of the premium is subject to a confidentiality clause under the insurance policy. The Company has not provided any insurance for an auditor of the Company. PROCEEDINGS ON BEHALF OF THE GROUP No person has applied for leave of court 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. The Company was not a party to any such proceedings during the year. NON-AUDIT SERVICES The following non-audit services were provided by William Buck (WA) Pty Ltd, a related entity of the entity’s auditor, William Buck Audit (WA) Pty Ltd. The Directors are satisfied that the provision of non- audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. William Buck (WA) Pty Ltd received or is due to receive the following amounts for the provision of non- audit services: Taxation services for Silver Mountain Mining Pty Ltd Taxation services for Eagle Mountain Mining Limited 30 June 2020 30 June 2019 $1,660 $3,960 Nil $3,880 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 34 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 35 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) Remuneration paid to Directors and Officers of the Company is set by reference to such payments made by other ASX listed companies of a similar size and operating in the mineral exploration industry. In addition, reference is made to the specific skills and experience of the Directors and Officers. Details of the nature and amount of remuneration of each Director, and other Key Management Personnel are disclosed annually in the Remuneration Report. Remuneration Committee The Board has adopted a formal Nomination and Remuneration Policy which provides a framework for the consideration of remuneration matters. The Company does not have a separate remuneration committee and as such all remuneration matters are considered by the Board as a whole, with no member deliberating or considering such matter in respect of their own remuneration. In the absence of a separate Remuneration Committee, the Board is responsible for: 1. Setting remuneration packages for Executive Directors, Non-Executive Directors and other Key 2. Management Personnel; and Implementing employee incentive and equity based plans and making awards pursuant to those plans. Non-Executive Remuneration The Company’s policy is to remunerate Non-Executive Directors, at rates comparable to other ASX listed companies in the same industry, for their time, commitment and responsibilities. Non-Executive Remuneration is not linked to the performance of the Company, however to align Directors’ interests with shareholders’ interests, remuneration may be provided to Non-Executive Directors in the form of equity based long term incentives. 1. Fees payable to Non-Executive Directors are set within the aggregate amount approved by shareholders at the Company’s Annual General Meeting; 2. Non-Executive Directors’ fees are payable in the form of cash and superannuation benefits; 3. Non-Executive Directors’ superannuation benefits are limited to statutory superannuation entitlements; and 4. Participation in equity based remuneration schemes by Non-Executive Directors is subject to consideration and approval by the Company’s shareholders. The maximum aggregate Non-Executive Directors fees payable are currently set at $300,000 per annum. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 36 made by other ASX listed companies of a similar size and operating in the mineral exploration industry. In addition, reference is made to the specific skills and experience of the Directors and Officers. Details of the nature and amount of remuneration of each Director, and other Key Management Personnel are disclosed annually in the Remuneration Report. Remuneration Committee The Board has adopted a formal Nomination and Remuneration Policy which provides a framework for the consideration of remuneration matters. The Company does not have a separate remuneration committee and as such all remuneration matters are considered by the Board as a whole, with no member deliberating or considering such matter in respect of their own remuneration. In the absence of a separate Remuneration Committee, the Board is responsible for: 1. Setting remuneration packages for Executive Directors, Non-Executive Directors and other Key Management Personnel; and plans. Non-Executive Remuneration Directors’ interests with shareholders’ interests, remuneration may be provided to Non-Executive Directors in the form of equity based long term incentives. 1. Fees payable to Non-Executive Directors are set within the aggregate amount approved by shareholders at the Company’s Annual General Meeting; 2. Non-Executive Directors’ fees are payable in the form of cash and superannuation benefits; 3. Non-Executive Directors’ superannuation benefits are limited to statutory superannuation entitlements; and 4. Participation in equity based remuneration schemes by Non-Executive Directors is subject to consideration and approval by the Company’s shareholders. The maximum aggregate Non-Executive Directors fees payable are currently set at $300,000 per annum. DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (continued) Remuneration paid to Directors and Officers of the Company is set by reference to such payments Executive Director and Other Key Management Personnel Remuneration Executive remuneration consists of base salary, plus other performance incentives to ensure that: 1. Remuneration packages incorporate a balance between fixed and incentive pay, reflecting short and long term performance objectives appropriate to the Company’s circumstances and objectives; and 2. A proportion of remuneration is structured in a manner to link reward to corporate and individual performances. Executives are offered a competitive level of base salary at market rates (based on comparable ASX listed companies) and are reviewed regularly to ensure market competitiveness. To date the Company has not engaged external remuneration consultants to advise the Board on remuneration matters. Incentive Plans The Company provides long term incentives to Directors and Employees pursuant to the Company’s Employee Incentive Plan. The Board, acting in remuneration matters: 2. Implementing employee incentive and equity based plans and making awards pursuant to those 1. Ensures that incentive plans are designed around appropriate and realistic performance targets and provide rewards when those targets are achieved; 2. Reviews and approves existing incentive plans established for employees; and The Company’s policy is to remunerate Non-Executive Directors, at rates comparable to other ASX 3. Approves the administration of the incentive plans, including receiving recommendations for and listed companies in the same industry, for their time, commitment and responsibilities. the consideration and approval of grants pursuant to such incentive plans. Non-Executive Remuneration is not linked to the performance of the Company, however to align Engagement of Non-Executive Directors Non-Executive Directors conduct their duties under the following terms: 1. A Non-Executive Director may resign from his/her position and thus terminate their contract on written notice to the Company; and 2. A Non-Executive Director may, following resolution of the Company’s shareholders, be removed before the expiration of their period of office (if applicable). Payment is made in lieu of any notice period if termination is initiated by the Company, except where termination is initiated for serious misconduct. In consideration of the services provided by Mr Rick Crabb as Non-Executive Chairman, the Company will pay him a fee inclusive of statutory superannuation of $50,000 per annum. In consideration of the services provided by Mr Roger Port as Non-Executive Director, the Company will pay him a fee inclusive of statutory superannuation of $50,000 per annum. For the quarter ended 30 June 2020, director fees owing to Messrs Crabb and Port were waived as part of a cost reduction exercise following the outbreak of the COVID-19 pandemic. Messrs Crabb and Port are also entitled to fees for other amounts as the Board determines where they perform special duties or otherwise perform extra services or make special exertions on behalf of the Company. There were no such fees paid during the year ended 30 June 2020. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 36 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 37 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (continued) Engagement of Executive Directors The Company has entered into an executive service agreement with Mr Charles Bass in his role as Managing Director on the following material terms and conditions. Mr Bass receives a base salary inclusive of statutory superannuation of $50,000 per annum from the commencement of the agreement until 1 June 2018, at which time the remuneration was reviewed. Mr Bass’ remuneration was unchanged as a result of this review. For the quarter ended 30 June 2020, Mr Bass waived his salary as part of a cost reduction exercise following the outbreak of the COVID-19 pandemic. Either party may terminate the agreement by providing 30 days written notice to the other party. Eagle Mountain may otherwise terminate the Managing Director’s employment in accordance with the Constitution or the Corporations Act. Upon termination of the agreement, Mr Bass will cease employment with Eagle Mountain as its Managing Director and will become a Non-Executive Director of Eagle Mountain. Mr Bass may, subject to shareholder approval, participate in Eagle Mountain’s Employee Incentive Plan and other long term incentive plans adopted by the Board. Engagement of Chief Executive Officer The Company has entered into an executive service agreement with Mr Timothy Mason, effective 15 January 2020, in his role as Chief Executive Officer (CEO) on the following material terms and conditions. Mr Mason receives a base salary inclusive of statutory superannuation of $300,000 per annum. For the quarter ended 30 June 2020, Mr Mason’s salary was reduced to $210,000 per annum as part of a cost reduction exercise following the outbreak of the COVID-19 pandemic. The CEO may terminate the agreement by providing 3 months written notice. Eagle Mountain may terminate the agreement with 3 months written notice or the provision of 3 month’s salary in lieu of notice; or may otherwise terminate the CEO’s employment in accordance with the Constitution or the Corporations Act. Upon commencement of his employment, Mr Mason received 1,500,000 unlisted options and 150,000 unlisted performance rights over unissued shares of the Company. An expense of $59,240 was recognised through the consolidated statement of profit or loss and other comprehensive income in the current reporting period in respect of the issue of these securities. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 38 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (continued) Short Term Incentive Payments The Non-Executive Directors set annual Key Performance Indicators (“KPIs”) for Executive Directors. The KPIs are chosen to align the reward of the individual Executives to the strategy and performance of the Company. Performance objectives, which may be financial or non-financial, or a combination of both, are weighted when calculating the maximum Short Term Incentives payable to Executives. At the end of the year, the Non-Executive Directors will assess the actual performance of the Executives against the set Performance Objectives. The maximum amount of the Short Term Incentive, or a lesser amount depending on actual performance achieved is paid to the Executives as a cash payment. No Short Term Incentives are payable to Executives where it is considered that the actual performance has fallen below the minimum requirement. Shareholding Qualifications The Directors are not required to hold any shares in Eagle Mountain under the terms of the Company’s Constitution. and other long term incentive plans adopted by the Board. Group Performance In considering the Company’s performance, the Board provides the following indices in respect of the current financial year: DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (continued) Engagement of Executive Directors The Company has entered into an executive service agreement with Mr Charles Bass in his role as Managing Director on the following material terms and conditions. Mr Bass receives a base salary inclusive of statutory superannuation of $50,000 per annum from the commencement of the agreement until 1 June 2018, at which time the remuneration was reviewed. Mr Bass’ remuneration was unchanged as a result of this review. For the quarter ended 30 June 2020, Mr Bass waived his salary as part of a cost reduction exercise following the outbreak of the COVID-19 pandemic. Either party may terminate the agreement by providing 30 days written notice to the other party. Eagle Mountain may otherwise terminate the Managing Director’s employment in accordance with the Constitution or the Corporations Act. Upon termination of the agreement, Mr Bass will cease employment with Eagle Mountain as its Managing Director and will become a Non-Executive Director of Eagle Mountain. Mr Bass may, subject to shareholder approval, participate in Eagle Mountain’s Employee Incentive Plan Engagement of Chief Executive Officer The Company has entered into an executive service agreement with Mr Timothy Mason, effective 15 January 2020, in his role as Chief Executive Officer (CEO) on the following material terms and conditions. Mr Mason receives a base salary inclusive of statutory superannuation of $300,000 per annum. For the quarter ended 30 June 2020, Mr Mason’s salary was reduced to $210,000 per annum as part of a cost reduction exercise following the outbreak of the COVID-19 pandemic. The CEO may terminate the agreement by providing 3 months written notice. Eagle Mountain may terminate the agreement with 3 months written notice or the provision of 3 month’s salary in lieu of notice; or may otherwise terminate the CEO’s employment in accordance with the Constitution or the Corporations Act. Upon commencement of his employment, Mr Mason received 1,500,000 unlisted options and 150,000 unlisted performance rights over unissued shares of the Company. An expense of $59,240 was recognised through the consolidated statement of profit or loss and other comprehensive income in the current reporting period in respect of the issue of these securities. Closing share price at 30 June $0.16 $0.125 $0.42 As a Group focussed on exploration activities, the Board does not consider the loss attributable to shareholders as one of the performance indicators when implementing Short Term Incentive payments. In addition to technical exploration success, the Board considers the effective management of safety, environmental and operational matters and successful management, acquisition and consolidation of high quality landholdings, as more appropriate indicators of management performance for the financial year. Remuneration Disclosures The Key Management Personnel of the Company have been identified as: Mr Rick Crabb Mr Charles Bass Mr Roger Port Mr Brett Rowe Mr Tim Mason Non-Executive Chairman Managing Director Non-Executive Director Alternate Director for Charles Bass Chief Executive Officer E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 38 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 39 2020 2019 2018 to $(3,985,856) $(6,890,466) $(1,681,900) Loss shareholders the year/period attributable for DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (continued) The details of the remuneration of each Director and member of Key Management Personnel of the Company is as follows: Year Ended 30 June 2020 Base Salary $ Rick Crabb 34,247 Charles Bass 34,247 Roger Port 34,247 Brett Rowe - Tim Mason 1 108,418 Total 211,159 Short Term Post Employment Short Term Incentive Superannuation Contributions Other Long Term Value of Equity Based Remuneration2 $ - - - - Value of Equity as Proportion of Remuneration % - - - - Total $ 37,500 37,500 37,500 - $ 3,253 3,253 3,253 - 9,383 59,240 177,041 33.5% 19,142 59,240 289,541 - $ - - - - - - 1 Appointed 15 January 2020. 2 The fair value of Options and Performance Rights is calculated at the date of grant using a Black Scholes option pricing model and allocated to each reporting period evenly over the period from grant date to vesting date. The value disclosed in the above table is the portion of the fair value of the securities recognised in the reporting period. The basis of the fair value is disclosed later in this Remuneration Report. Short Term Post Employment Year Ended 30 June 2019 Base Salary $ Rick Crabb 45,662 Charles Bass 45,662 Roger Port 45,662 Brett Rowe - Total 136,986 Short Term Incentive Superannuation Contributions $ - - - - - $ 4,338 4,338 4,338 - 13,014 Other Long Term Value of Equity Based Remuneration $ - - - - - Value of Equity as Proportion of Remuneration % - - - - - Total $ 50,000 50,000 50,000 - 150,000 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 40 DIRECTORS’ REPORT DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (continued) REMUNERATION REPORT (AUDITED) (continued) The details of the remuneration of each Director and member of Key Management Personnel of the Company is as follows: Details of Performance Related Remuneration Short Term Post Employment Term Other Long During the year ended 30 June 2020, no Short Term Incentive payments were paid to the Directors or Key Management Personnel. Value of Equity as Proportion Equity Based Remuneration During the year ended 30 June 2020, 1,500,000 unlisted options and 150,000 unlisted performance rights over unissued shares of the Company were issued to Mr Tim Mason pursuant to his executive services agreement. No options, rights or shares were issued to the Directors of the Company as remuneration during the financial years ended 30 June 2020 and 30 June 2019. The fair value of options and performance rights issued as remuneration is allocated to the relevant vesting period of the securities. Options and performance rights are provided at no initial cost to the recipients. No options were exercised by Key Management Personnel during the year ended 30 June 2020. Tim Mason 1 108,418 9,383 59,240 177,041 33.5% Exercise of Options Granted as Remuneration During the year ended 30 June 2020, no ordinary shares were issued in respect of the exercise of options or performance rights previously granted as remuneration to Directors or Key Management Personnel of the Company. Equity Instrument Disclosures Relating to Key Management Personnel Option Holdings Key Management Personnel have the following interests in unlisted options over unissued shares of the Company. Year ended 30 June 2020 Name Balance at beginning of the year Received during the year as remuneration Other changes during the year Balance at the end of the year Vested and exercisable at the end of the year Rick Crabb 1,561,000 Charles Bass 9,665,000 Roger Port 1,543,000 Brett Rowe 1,000,000 - - - - Tim Mason - 1,500,000 - - - - - 1,561,000 1,561,000 9,665,000 9,665,000 1,543,000 1,543,000 1,000,000 1,000,000 1,500,000 - Year Ended 30 June 2020 Short Term Superannuation Based Value of Equity Base Salary Incentive Contributions Remuneration2 Total Remuneration Rick Crabb 34,247 Charles Bass 34,247 Roger Port 34,247 Brett Rowe $ 3,253 3,253 3,253 - 37,500 37,500 37,500 $ - Total 211,159 19,142 59,240 289,541 1 Appointed 15 January 2020. 2 The fair value of Options and Performance Rights is calculated at the date of grant using a Black Scholes option pricing model and allocated to each reporting period evenly over the period from grant date to vesting date. The value disclosed in the above table is the portion of the fair value of the securities recognised in the reporting period. The basis of the fair value is disclosed later in this Remuneration Report. Short Term Post Employment Term Other Long Year Ended 30 June 2019 Short Term Superannuation Based Value of Equity Value of Equity as Proportion Base Salary Incentive Contributions Remuneration Total Remuneration Rick Crabb 45,662 Charles Bass 45,662 Roger Port 45,662 Brett Rowe Total 136,986 $ 4,338 4,338 4,338 - 13,014 50,000 50,000 50,000 $ - 150,000 of % - - - - - of % - - - - - $ - - - - - - $ - - - - - $ - - - - $ - - - - - $ - $ - E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 40 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 41 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (continued) Performance Rights Holdings Key Management Personnel have the following interests in unlisted performance rights over unissued shares of the Company. Balance at beginning of the year Received during the year as remuneration Other changes during the year Balance at the end of the year Vested and exercisable at the end of the year - - - - - - - - - 150,000 - - - - - - - - - 150,000 - - - - - Year ended 30 June 2020 Name Rick Crabb Charles Bass Roger Port Brett Rowe Tim Mason Share Holdings The number of shares in the Company held during the financial year by Key Management Personnel of the Company, including their related parties are set out below. There were no shares granted during the reporting period as compensation. Year ended 30 June 2020 Name Rick Crabb Balance at beginning of the year Received during the year as remuneration 732,000 Charles Bass 43,980,001 Roger Port Brett Rowe Tim Mason 516,000 500,000 - 1 Placement shares issued at 15 cents per share. Loans made to Key Management Personnel Other changes during the year Balance at the end of the year - 732,000 5,000,000 1 48,980,001 - - - 516,000 500,000 - - - - - - No loans were made to Key Management Personnel including personally related entities during the financial year. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 42 REMUNERATION REPORT (AUDITED) (continued) DIRECTORS’ REPORT Performance Rights Holdings shares of the Company. Key Management Personnel have the following interests in unlisted performance rights over unissued Balance at beginning of Received during the Other Vested and changes Balance at exercisable year as during the the end of at the end of the year remuneration year the year the year - - - - - - - - - - - - - - - - - - - - - - - 150,000 150,000 Year ended 30 June 2020 Name Rick Crabb Charles Bass Roger Port Brett Rowe Tim Mason Share Holdings The number of shares in the Company held during the financial year by Key Management Personnel of the Company, including their related parties are set out below. There were no shares granted during the reporting period as compensation. Year ended 30 June 2020 Balance at Received during Charles Bass 43,980,001 5,000,000 1 48,980,001 Name Rick Crabb Roger Port Brett Rowe Tim Mason beginning of the the year as Other changes Balance at the year remuneration during the year end of the year 732,000 516,000 500,000 - - - - - - - - - - 732,000 516,000 500,000 - 1 Placement shares issued at 15 cents per share. Loans made to Key Management Personnel No loans were made to Key Management Personnel including personally related entities during the financial year. DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (continued) Loans received from Key Management Personnel During the year, the Company entered into an unsecured loan agreement with a director related entity, Quartz Mountain Mining Pty Ltd (Quartz Mountain) as trustee for the Bass Family Trust. The principal of US$1,000,000 attracts interest at 2% per annum with the first three months being interest free. Interest expense of US$8,474 (A$13,005) was recognised during the reporting period. Subsequent to the end of the financial year, the Company reached an agreement with Quartz Mountain to extend the maturity date of the loan such that it is repayable on or before 31 December 2021. In addition and subject to shareholder approval, Quartz Mountain has agreed to accept 950,000 unlisted options exercisable at 20 cents each on or before 1 July 2022 in lieu of interest. Other transactions with Key Management Personnel Transactions between related parties are on commercial terms and conditions, no more favourable than those available to other parties unless otherwise stated. The Company has entered into a lease agreement with Elk Mountain Mining Limited (“Elk”), an entity associated with Mr Charles Bass, for the lease of the Company’s administration offices in Perth, Western Australia. Total lease repayments of $85,847 were paid during the year, including interest of $35,402 and lease principal repayments of $50,445. In the prior year, such payments were included in the statement of profit or loss and other comprehensive income and totalled $86,590. Other than the above, there were no other transactions with Key Management Personnel. End of Remuneration Report AUDITOR’S INDEPENDENCE DECLARATION Section 307C of the Corporations Act 2001 requires our auditors, William Buck Audit (WA) Pty Ltd, to provide the Directors of the Group with an Independence Declaration in relation to the audit of the financial report. This Independence Declaration is set out on the following page and forms part of this Directors’ report for the year ended 30 June 2020. This report has been made in accordance with a resolution of the Board of Directors. Rick Crabb Chairman Dated at Perth this 18th day of September 2020 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 42 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 43 AUDITORS INDEPENDENCE DECLARATION E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 44 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the Year Ended 30 June 2020 Continuing Operations Other revenue Interest income Administration and other costs Employee expenses – non-exploration Employee expenses – equity based Finance costs Depreciation expense Exploration and evaluation costs Net change in fair value of convertible notes Realised gain on foreign currency exchange Loss before income tax Income tax expense Notes 4 Year ended 30 June 2020 A$ Year ended 30 June 2019 A$ 50,000 867 (779,231) (310,957) (248,723) (247,281) (387,772) (2,717,101) 268,872 2,390 12 27,389 (555,971) (271,771) (45,494) - (154,143) (6,004,485) - 113,997 4 5 (4,368,936) (6,890,466) - - Loss after income tax from continuing operations (4,368,936) (6,890,466) Other comprehensive income net of income tax Other comprehensive income to be re-classified to profit or loss in subsequent years net of income tax Unrealised gain on foreign currency exchange Total comprehensive loss for the year 16a - 103,077 - 77,575 (4,265,859) (6,812,891) Loss attributable to: Owners of the parent Non-controlling interests Total comprehensive loss attributable to: Owners of the parent Non-controlling interests Basic and diluted loss per share 28 (3,985,856) (383,080) (4,368,936) (6,890,466) - (6,890,466) (3,892,026) (373,833) (4,265,859) (6,812,891) - (6,812,891) cents (3.7) cents (7.4) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 45 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2020 30 June 2020 30 June 2019 Note A$ A$ Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets Exploration and evaluation expenditure Property, plant and equipment Right-of-use assets Bonds and security deposits Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade and other payables Employee leave liabilities Lease liabilities Borrowings Total Current Liabilities Non-Current Liabilities Lease liabilities Borrowings Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS 6 7 8 9 10 11 12 13 12 13 507,750 138,309 646,059 10,378,496 1,265,634 208,493 132,945 11,985,568 1,879,883 54,626 1,934,509 1,164,027 435,324 - 130,101 1,729,452 12,631,627 3,663,961 179,444 58,923 111,315 1,636,325 1,986,007 117,895 9,290,293 9,408,188 224,648 59,391 - 10,908 294,947 - 25,484 25,484 11,394,195 320,431 1,237,432 3,343,530 Equity 15,322,265 Issued capital 4,500 Option capital (1,518,029) Reserves (12,381,375) Accumulated losses 1,427,361 Equity attributable to owners of the parent (189,929) Non-controlling interest 1,237,432 TOTAL EQUITY 13,579,949 4,500 (1,828,582) (8,412,337) 3,343,530 - 3,343,530 15 16 The above statement of financial position should be read in conjunction with the accompanying notes. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 46 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2020 30 June 2020 30 June 2019 Note A$ A$ Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets Exploration and evaluation expenditure Property, plant and equipment Right-of-use assets Bonds and security deposits Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade and other payables Employee leave liabilities Lease liabilities Borrowings Total Current Liabilities Non-Current Liabilities Lease liabilities Borrowings Total Non-Current Liabilities NET ASSETS Equity Option capital Reserves Accumulated losses Non-controlling interest TOTAL EQUITY Equity attributable to owners of the parent 6 7 8 9 10 11 12 13 12 13 15 16 12,631,627 3,663,961 507,750 138,309 646,059 10,378,496 1,265,634 208,493 132,945 11,985,568 179,444 58,923 111,315 1,636,325 1,986,007 117,895 9,290,293 9,408,188 1,879,883 54,626 1,934,509 1,164,027 435,324 - 130,101 1,729,452 224,648 59,391 10,908 294,947 - - 25,484 25,484 1,237,432 3,343,530 15,322,265 4,500 (1,518,029) (12,381,375) 1,427,361 (189,929) 1,237,432 13,579,949 4,500 (1,828,582) (8,412,337) 3,343,530 - 3,343,530 TOTAL LIABILITIES 11,394,195 320,431 The above statement of financial position should be read in conjunction with the accompanying notes. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 46 , 1 3 5 3 2 3 8 , ) , 6 6 4 0 9 8 6 , ( 5 7 5 7 7 , - 4 9 4 5 4 , , 6 0 3 5 3 9 1 , ) 0 1 9 7 4 1 , ( ) , 1 9 8 2 1 8 6 , ( , 0 3 5 3 4 3 3 , , 0 3 5 3 4 3 3 , ) , 6 3 9 8 6 3 4 , ( - - - - - - - - - - ) 0 8 0 3 8 3 , ( - ) , 6 6 4 0 9 8 6 , ( ) , 6 6 4 0 9 8 6 , ( - - - 9 2 0 0 6 1 , ) , 7 3 3 2 1 4 8 , ( ) ) , 7 3 3 2 1 4 8 , ( , 6 5 8 5 8 9 3 , ( , 7 7 0 3 0 1 7 4 2 9 , - ) , 9 5 8 5 6 2 4 , ( ) 3 3 8 3 7 3 , ( ) , 6 5 8 5 8 9 3 , ( ) 7 6 8 2 7 , ( - - , 3 2 7 8 4 2 , 1 0 0 0 0 8 1 , - - - - - , 4 0 9 3 8 1 , 4 0 9 3 8 1 - - - - - 8 1 8 6 1 , , 2 3 4 7 3 2 1 , ) 9 2 9 9 8 1 , ( ) , 5 7 3 1 8 3 2 1 , ( - - - - - - - - - - - - - 4 9 4 5 4 , - - - - - 5 7 5 7 7 , 5 7 5 7 7 , - - - - 0 5 2 1 3 2 , ) ) 1 2 2 1 7 , ( 9 2 0 0 6 1 , ( ) , 6 7 2 4 1 0 3 , ( ) , 6 7 2 4 1 0 3 , ( 5 2 6 8 8 8 , 9 6 0 7 9 2 , 0 0 5 4 , , 5 2 6 8 8 8 , 9 6 0 7 9 2 0 0 5 4 , - - - - - - - - - - - - - - - ) ) 8 1 8 6 1 , ( 2 8 1 5 1 , ( , 3 2 7 8 4 2 ) , 6 7 2 4 1 0 3 , ( , 8 4 3 5 0 1 1 , - - - - - - - 0 3 8 3 9 , 0 3 8 3 9 , - - - - - - - - - , 9 9 8 0 9 3 0 0 5 4 , $ A l a t o T - n o N $ A t s e r e t n i $ A s e s s o l g n i l l o r t n o c l d e t a u m u c c A $ A l o r t n o c e v r e s e r n o m m o C ) , 0 0 9 1 8 6 1 , ( ) , 6 7 2 4 1 0 3 , ( e r a h S d e s a b i n g e r o F y c n e r r u c t n e m y a p l n o i t a s n a r t n o i t p O d e u s s I e v r e s e r e v r e s e r l a t i p a c l a t i p a c $ A $ A $ A $ A 1 3 1 3 4 8 , 4 9 4 9 1 2 , 0 0 5 4 , , 2 8 5 2 5 9 1 1 , , 6 5 0 4 0 7 1 , ) 5 1 , 4 1 e t o n ( s n o i t p o d n a s e r a h s f o e u s s I - - - - - - ) 9 8 6 6 7 , ( , 9 4 9 9 7 5 3 1 , , 9 4 9 9 7 5 3 1 , s t h g i r e c n a m r o f r e p / s n o i t p o f o g n i t s e V s n o i t p o f o n o i t a l l e c n a c n o r e f s n a r T 9 1 0 2 e n u J 0 3 t a e c n a a B l r a e y e h t r o f e m o c n i i e v s n e h e r p m o c r e h t O i n o d e s n g o c e r t s e r e t n i g n i l l o r t n o c - n o N r a e y e h t r o f s s o l i e v s n e h e r p m o c l a t o T ) 7 2 , 5 2 e t o n ( i n o i t i s u q c a t e s s a x a t e m o c n i f o t e n 9 1 0 2 y u l J 1 t a e c n a a B l r a e y e h t r o f s s o L ) 5 1 e t o n ( s t s o c i g n s a r i l a t i p a C , 1 0 0 0 0 8 1 , ) 5 1 , 4 1 e t o n ( s n o i t p o d n a s e r a h s f o e u s s I - - 2 8 1 5 1 , ) 7 6 8 2 7 , ( , 5 6 2 2 2 3 5 1 , s t h g i r e c n a m r o f r e p / s n o i t p o f o e s c r e x E i s t h g i r e c n a m r o f r e p / s n o i t p o f o g n i t s e V s n o i t p o f o n o i t a l l e c n a c n o r e f s n a r T 0 2 0 2 e n u J 0 3 t a e c n a a B l ) 5 1 e t o n ( s t s o c g n s a r i i l a t i p a C 0 2 0 2 e n u J 0 3 d e d n E r a e Y e h t r o F e h t r o f e m o c n i i e v s n e h e r p m o c r e h t O x a t e m o c n i f o t e n r a e y r a e y e h t r o f s s o l i e v s n e h e r p m o c l a t o T 8 1 0 2 y u l J 1 t a e c n a a B l r a e y e h t r o f s s o L Y T I U Q E N I S E G N A H C F O T N E M E T A T S D E T A D I L O S N O C Issued capital - - - 7 4 t r o p e R l a u n n A 0 2 0 2 | G N I N I M N I A T N U O M E L G A E . s e t o n g n i y n a p m o c c a e h t h t i w n o i t c n u n o c n j i d a e r l e b d u o h s y t i u q e n i s e g n a h c f o t n e m e t a t s e v o b a e h T CONSOLIDATED STATEMENT OF CASH FLOWS For the Year Ended 30 June 2020 Cash Flows from Operating Activities Payments to suppliers and employees Payments for exploration and evaluation Payments for interest and other financing costs Interest received Government assistance received Year ended 30 June 2020 A$ Year ended 30 June 2019 A$ Note (1,208,540) (2,674,607) (51,911) 867 50,000 (668,591) (5,941,606) - 39,920 - Net cash used in operating activities 17 (3,884,191) (6,570,277) Cash Flows from Investing Activities Payment for acquisition of exploration assets Payments for purchase of fixed assets Payments for bonds and deposits Net cash used in investing activities Cash Flows from Financing Activities Proceeds from the issue of shares and options Payments for the issue of share and options Proceeds from borrowings Repayments of borrowings Repayment of lease liabilities Net cash generated by financing activities (729,667) (8,644) - (738,311) 1,800,001 (72,867) 1,626,798 (11,373) (100,590) 3,241,969 - (116,183) (127,510) (243,693) 1,935,306 (147,910) - (11,509) - 1,775,887 Net increase/(decrease) in cash held (1,380,533) (5,038,083) Cash and cash equivalents at the beginning of the year Effect of foreign exchange on cash and cash equivalents 1,879,883 6,795,421 8,400 122,545 Cash and cash equivalents at the end of the year 507,750 1,879,883 6 The above statement of cash flows should be read in conjunction with the accompanying notes. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 48 CONSOLIDATED STATEMENT OF CASH FLOWS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 Net cash used in operating activities 17 (3,884,191) (6,570,277) Cash Flows from Operating Activities Payments to suppliers and employees Payments for exploration and evaluation Payments for interest and other financing costs Interest received Government assistance received Cash Flows from Investing Activities Payment for acquisition of exploration assets Payments for purchase of fixed assets Payments for bonds and deposits Net cash used in investing activities Cash Flows from Financing Activities Proceeds from the issue of shares and options Payments for the issue of share and options Proceeds from borrowings Repayments of borrowings Repayment of lease liabilities Net cash generated by financing activities Year ended 30 Year ended 30 June 2020 June 2019 A$ A$ Note (1,208,540) (2,674,607) (51,911) 867 50,000 (668,591) (5,941,606) 39,920 - - - - - (116,183) (127,510) (243,693) 1,935,306 (147,910) (11,509) 1,775,887 (729,667) (8,644) - (738,311) 1,800,001 (72,867) 1,626,798 (11,373) (100,590) 3,241,969 Net increase/(decrease) in cash held (1,380,533) (5,038,083) Cash and cash equivalents at the beginning of the year equivalents Effect of foreign exchange on cash and cash 1,879,883 6,795,421 8,400 122,545 Cash and cash equivalents at the end of the year 507,750 1,879,883 6 The above statement of cash flows should be read in conjunction with the accompanying notes. These consolidated financial statements and notes represent those of Eagle Mountain Mining Limited and its controlled entities (the “Group”). Eagle Mountain Mining Limited is a public limited liability company, incorporated and domiciled in Australia. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. The financial statements for the year ended 30 June 2020 were approved and authorised for issue by the Board of Directors on 18 September 2020. 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the material accounting policies adopted by the Group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. (a) Basis of Preparation These general purpose financial statements for the reporting year ended 30 June 2020 have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial statements and notes comply with International Financial Reporting Standards. The financial report has been prepared on an accruals basis and is based on historical cost and does not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets. (i) Going Concern The Group has incurred a loss of $4,368,936 and a net operating cash outflow of $3,884,191 during the year ended 30 June 2020. Cash assets at 30 June 2020 were $507,750 and current liabilities at that date were $1,986,007. The financial statements have been prepared on the going concern basis which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business. In January 2020, the Group successfully raised $1.8 million (before costs) pursuant to a placement to institutional and sophisticated investors. In July 2020, the Company completed a placement to institutional and professional investors raising an additional $3.0 million (before costs). The ability of the Group to continue to adopt the going concern assumption will depend on future successful capital raisings, the successful exploration and subsequent exploitation of the Group’s mining licences and permits, and/or sale of non-core assets The Directors will continue to manage the Group’s activities with due regard to current and future funding requirements. The Directors reasonably expect that the Company will be able to raise sufficient capital to fund the Group’s exploration and working capital requirements, and that the Group will be able to settle debts as and when they become due and payable. On this basis, the Directors are therefore of the opinion that the use of the going concern basis is appropriate in the circumstances. Should the Company be unable to raise additional funding when required, there is a material uncertainty that may cast significant doubt on whether the Company will be able to continue as a going concern and therefore, whether it will be able to realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 48 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Basis of Preparation (continued) (ii) Basis of Consolidation The financial information comprises the financial information of Eagle Mountain and entities (including special purpose entities) controlled by Eagle Mountain (its “subsidiaries”). Control is achieved when Eagle Mountain: • • • has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. Eagle Mountain reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. The financial information of subsidiaries is prepared for the same reporting period as Eagle Mountain, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All inter-company balances and transactions, including unrealised profits arising from intra- group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Total comprehensive income of subsidiaries is attributed to the owners of Eagle Mountain and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date Eagle Mountain gains control until the date when Eagle Mountain ceases to control the subsidiary. When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between: • • the aggregate of the fair value of the consideration received and the fair value of any retained interest; and the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit and loss or transferred to another category of equity as specified/permitted by the applicable Accounting Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 9, or when applicable, the cost on initial recognition of an investment in an associate or a joint venture. (iii) New Accounting Standards Adopted in the Current Year Application of New and Revised Accounting Standards The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted by the Group for the reporting year ended 30 June 2020. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Basis of Preparation (continued) (ii) Basis of Consolidation (iii) New Accounting Standards Adopted in the Current Year (continued) The following Accounting Standards and Interpretations are most relevant to the Group: The financial information comprises the financial information of Eagle Mountain and entities (including special purpose entities) controlled by Eagle Mountain (its “subsidiaries”). AASB 16 Leases Control is achieved when Eagle Mountain: has power over the investee; • • • • • is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. Eagle Mountain reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. The financial information of subsidiaries is prepared for the same reporting period as Eagle Mountain, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All inter-company balances and transactions, including unrealised profits arising from intra- group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Total comprehensive income of subsidiaries is attributed to the owners of Eagle Mountain and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date Eagle Mountain gains control until the date when Eagle Mountain ceases to control the subsidiary. When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated the aggregate of the fair value of the consideration received and the fair value of any retained as the difference between: interest; and the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit and loss or transferred to another category of equity as specified/permitted by the applicable Accounting Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 9, or when applicable, the cost on initial recognition of an investment in an associate or a joint venture. period. (iii) New Accounting Standards Adopted in the Current Year Application of New and Revised Accounting Standards The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) that are mandatory for the current reporting Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted by the Group for the reporting year ended 30 June 2020. The Group has adopted AASB 16 with effect from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees eliminates the classifications of operating leases and finance leases. Except for short- term leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on the re cognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by interest expense and depreciation in profit or loss. For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments is separately disclosed in financing activities. Reconciliation of operating lease commitments AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. Below is a reconciliation of total operating lease commitments as at 30 June 2019, as disclosed in the annual financial statements for the year ended 30 June 2019, and the lease liabilities recognised on 1 July 2019. Operating lease commitments as disclosed at 30 June 2019 Additional operating lease Discounted using the lessee’s weighted average incremental borrowing rate of 10.6% at 1 July 2019 Foreign currency differences Lease liabilities as at 1 July 2019 1 July 2019 395,947 15,515 (92,485) 3,154 322,131 New accounting policies adopted for the first time during this reporting period in relation to operating leases are disclosed in notes 1(k) and 1(o). New Accounting Standards and Interpretations Not Yet Mandatory or Early Adopted The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application date for future reporting periods. There are no material new or amended Accounting Standards which will materially affect the Group. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 50 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 51 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Exploration, Evaluation and Development Expenditure Exploration and evaluation expenditure is generally written off in the year incurred, except for acquisition of exploration properties which is capitalised and carried forward. When production commences, any accumulated costs for the relevant area of interest which have been capitalised and carried forward will be amortised over the life of the area according to the rate of depletion of the economically recoverable resources. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to the area of interest. The carrying value of any capitalised expenditure is assessed by the Directors each reporting period to determine if any provision should be made for the impairment of the carrying value. The appropriateness of the Group’s ability to recover these capitalised costs has been assessed at the end of each reporting period and the Directors are satisfied that the value is recoverable. The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at an overall level whenever facts and circumstances suggest that the carrying amount of the assets may exceed recoverable amount. An impairment exists when the carrying amount of the assets exceeds the estimated recoverable amount. The assets are then written down to their recoverable amount. Any impairment losses are recognised in the income statement. (c) Trade and Other Receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. (d) Interest Income Interest income is recognised as it accrues. (e) Foreign Currency Transactions The financial statements are presented in Australian dollars, which is the functional currency of the Group. Foreign currency transactions Foreign currency transactions are translated into the functional currency at the rates of exchange prevailing at the dates of the transaction. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the consolidated statement of profit or loss and other comprehensive income. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the consolidated statement of profit or loss and other comprehensive income. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Exploration, Evaluation and Development Expenditure (e) Foreign Currency Transactions (continued) Exploration and evaluation expenditure is generally written off in the year incurred, except for acquisition of exploration properties which is capitalised and carried forward. When production commences, any accumulated costs for the relevant area of interest which have been capitalised and carried forward will be amortised over the life of the area according to the rate of depletion of the economically recoverable resources. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to the area of interest. The carrying value of any capitalised expenditure is assessed by the Directors each reporting period to determine if any provision should be made for the impairment of the carrying value. The appropriateness of the Group’s ability to recover these capitalised costs has been assessed at the end of each reporting period and the Directors are satisfied that the value is recoverable. The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at an overall level whenever facts and circumstances suggest that the carrying amount of the assets may exceed recoverable amount. An impairment exists when the carrying amount of the assets exceeds the estimated recoverable amount. The assets are then written down to their recoverable amount. Any impairment losses are recognised in the income statement. (c) Trade and Other Receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. (d) Interest Income Interest income is recognised as it accrues. (e) Foreign Currency Transactions The financial statements are presented in Australian dollars, which is the functional currency of the Group. Foreign currency transactions Foreign currency transactions are translated into the functional currency at the rates of exchange prevailing at the dates of the transaction. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the consolidated statement of profit or loss and other comprehensive income. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the consolidated statement of profit or loss and other comprehensive income. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rate at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. (f) Operating Segments An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This includes start-up operations which are yet to earn revenues. The chief operating decision maker has been identified as the Board of Directors taken as a whole. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the Board of Directors. Operating segments have been identified based on the information provided to the Board of Directors. (g) Financial Instruments Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, its carrying value is written off. Financial assets at fair value through profit or loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 52 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (g) Financial Instruments (continued) Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income include equity investments which the Group intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition. Impairment of financial assets The Group recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the Group's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12 month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss. (h) Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. (i) Convertible Note – Derivative Liability Derivative financial instruments are stated at fair value. The fair value of the derivative has been valued using a valuation technique, including inputs that include reference to similar instruments and option pricing models, which is updated each period. Gains and losses arising from changes in fair value of these instruments together with settlements in the period are accounted for through the consolidated statement of profit or loss and other comprehensive income through net finance costs. The convertible note liability and derivative are removed from the statement of financial position when the obligations specified in the contract are discharged, cancelled or expired. (j) Convertible Note – Debt Liability The liability component of a convertible note is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The embedded derivative component is recognised initially at fair value and the debt liability component is calculated as the difference between the financial instrument as a whole and the value of the derivative liability at inception. Any directly attributable transaction costs are allocated to the convertible note debt liability and convertible note derivative liability in proportion to their initial carrying amounts. Subsequent to initial recognition, the debt liability component of the convertible note is measured at amortised cost using the effective interest method. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (g) Financial Instruments (continued) Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income include equity investments which the Group intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition. Impairment of financial assets The Group recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the Group's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12 month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss. (h) Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. (i) Convertible Note – Derivative Liability Derivative financial instruments are stated at fair value. The fair value of the derivative has been valued using a valuation technique, including inputs that include reference to similar instruments and option pricing models, which is updated each period. Gains and losses arising from changes in fair value of these instruments together with settlements in the period are accounted for through the consolidated statement of profit or loss and other comprehensive income through net finance costs. The convertible note liability and derivative are removed from the statement of financial position when the obligations specified in the contract are discharged, cancelled or expired. (j) Convertible Note – Debt Liability The liability component of a convertible note is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The embedded derivative component is recognised initially at fair value and the debt liability component is calculated as the difference between the financial instrument as a whole and the value of the derivative liability at inception. Any directly attributable transaction costs are allocated to the convertible note debt liability and convertible note derivative liability in proportion to their initial carrying amounts. Subsequent to initial recognition, the debt liability component of the convertible note is measured at amortised cost using the effective interest method. (k) Lease Liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. (l) Cash and Cash Equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. (m) Impairment of Assets At each reporting date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from the other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generated unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation increase. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 54 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 55 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (n) Property, Plant and Equipment Property, plant and equipment assets are initially recognised at acquisition cost or manufacturing cost, including any costs directly attributable to bringing the assets to the location and condition necessary for the assets to be capable of operating in the manner intended by the Group’s management. Property, plant and equipment assets are subsequently measured using the cost model which reflects cost less subsequent depreciation and impairment losses. Depreciation is recognised on a diminishing value basis to write down the cost less estimated residual value of the assets. Leasehold improvements are capitalised and subsequently amortised over the term of the respective lease. The following depreciation rates are applied to property, plant and equipment assets on the diminishing value basis: • • Motor vehicles: 25% Other property, plant and equipment: 20-50% Material residual value estimates and estimates of useful life are updated as required, but at least annually. Gains or losses arising on the disposal of property, plant and equipment assets are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss within other income or other expenses. (o) Right of Use Assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. (p) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (“ATO”). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (n) Property, Plant and Equipment (q) Taxation Property, plant and equipment assets are initially recognised at acquisition cost or manufacturing cost, including any costs directly attributable to bringing the assets to the location and condition necessary for the assets to be capable of operating in the manner intended by the Group’s management. Property, plant and equipment assets are subsequently measured using the cost model which reflects cost less subsequent depreciation and impairment losses. Depreciation is recognised on a diminishing value basis to write down the cost less estimated residual value of the assets. Leasehold improvements are capitalised and subsequently amortised over the term of the respective lease. The following depreciation rates are applied to property, plant and equipment assets on the diminishing value basis: • • Motor vehicles: 25% Other property, plant and equipment: 20-50% Material residual value estimates and estimates of useful life are updated as required, but at least annually. Gains or losses arising on the disposal of property, plant and equipment assets are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss within other income or other expenses. (o) Right of Use Assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. (p) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (“ATO”). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows. The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit and loss is the tax payable on the taxable income using applicable income tax rates enacted or substantially enacted as at the end of the reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial information. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Where temporary differences exist in relation to investments in subsidiaries and associates, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. (r) Trade and Other Payables Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. (s) Provisions and Contingencies Provisions are recognised when the Group has a legal or constructive obligation, as a result of a past event, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. (t) Employee benefits Short Term Employee Benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other Long Term Employee Benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined Contribution Superannuation Expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 56 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (u) Share Based Payment Transactions The Group recognises the fair value of options granted to Directors, employees and consultants as remuneration as an expense on a pro-rata basis over the vesting period in the consolidated statement of profit or loss and other comprehensive income with a corresponding adjustment to equity. The Group provides benefits to employees (including Directors) of the Group in the form of share based payment transactions, whereby employees render services in exchange for shares or rights over shares (“equity-settled transactions”). The cost of these equity-settled transactions with employees (including Directors) is measured by reference to fair value at the date they are granted. The fair value is determined using the Black Scholes option pricing model. (v) Issued Capital Issued and paid up capital is recognised at the fair value of the consideration received by the Group. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. (w) Critical Accounting Estimates and Judgments In preparing the financial information, the Group has been required to make certain estimates and assumptions concerning future occurrences. There is an inherent risk that the resulting accounting estimates will not equate exactly with actual events and results. (i) Significant Accounting Judgements In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements: Acquisition of Oracle Ridge Copper Mine AASB 3 Business Combinations defines a business as being “an integrated set of activities and assets that is capable of being conducted and managed for the purposes of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants.” A business usually consists of inputs, processes and outputs. Inputs and processes are the essential elements that have to be present in order to be classified as a business. Although a business usually has outputs, outputs are not required for an integrated set of assets to qualify as a business. In November 2019, the Group acquired an 80% share in the Oracle Ridge Copper Mine in Arizona in the United States of America. Management have accounted for this transaction as an acquisition of assets and not as a business combination since, at the date of acquisition, the Oracle Ridge Copper Mine did not have the processes and outputs expected of an operating business. Capitalisation of Operating Leases Determination of lease term In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (u) Share Based Payment Transactions The Group recognises the fair value of options granted to Directors, employees and consultants as remuneration as an expense on a pro-rata basis over the vesting period in the consolidated statement of profit or loss and other comprehensive income with a corresponding adjustment to equity. The Group provides benefits to employees (including Directors) of the Group in the form of share based payment transactions, whereby employees render services in exchange for shares or rights over shares (“equity-settled transactions”). The cost of these equity-settled transactions with employees (including Directors) is measured by reference to fair value at the date they are granted. The fair value is determined using the Black Scholes option pricing model. (v) Issued Capital the share proceeds received. (w) Critical Accounting Estimates and Judgments Issued and paid up capital is recognised at the fair value of the consideration received by the Group. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of In preparing the financial information, the Group has been required to make certain estimates and assumptions concerning future occurrences. There is an inherent risk that the resulting accounting estimates will not equate exactly with actual events and results. (i) Significant Accounting Judgements In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements: Acquisition of Oracle Ridge Copper Mine AASB 3 Business Combinations defines a business as being “an integrated set of activities and assets that is capable of being conducted and managed for the purposes of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants.” A business usually consists of inputs, processes and outputs. Inputs and processes are the essential elements that have to be present in order to be classified as a business. Although a business usually has outputs, outputs are not required for an integrated set of assets to qualify as a business. In November 2019, the Group acquired an 80% share in the Oracle Ridge Copper Mine in Arizona in the United States of America. Management have accounted for this transaction as an acquisition of assets and not as a business combination since, at the date of acquisition, the Oracle Ridge Copper Mine did not have the processes and outputs expected of an operating business. Capitalisation of Operating Leases Determination of lease term In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee. (i) Significant Accounting Judgements (continued) Determination of incremental borrowing rate The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used. To determine the incremental borrowing rate, where possible recent third party financing received by the individual lessee is used as a starting point and adjusted to reflect changes in financing conditions since third party financing was received. If there was no recent third party financing agreement, a build-up approach is used that starts with a risk-free interest rate adjusted for credit risk for the lessee and any further relevant adjustments specific to the lease (such as term, country, currency and security). (ii) Significant Accounting Estimates and Assumptions The carrying amount of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Key Estimates – Impairment of Capitalised Exploration and Evaluation Expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, costs of drilling and production, production rates, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. Key Estimates – Share Based Payment Transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Fair values of share options are determined using the Black Scholes option pricing model. Should the assumptions used in these calculations differ, the amounts recognised could significantly change. Key Assumptions – Oracle Ridge Mine Acquisition: Valuation of derivative liability As part of the acquisition of the Oracle Ridge Copper Mine, a US$6,423,000 secured note was issued to Vincere Resource Holdings LLC. Up to US$3,000,000 of the secured note can be converted into shares of the Company upon the occurrence of various conversion trigger events at variable conversion prices. To derive the fair value of the embedded derivative liability component of the secured note, a number of assumptions have been made. These assumptions are outlined in note 13. Key Judgement – Environmental Issues Balances disclosed in the financial statements and notes thereto are not adjusted for any pending or enacted environmental legislation. At the current stage of the Group’s development and its current environmental impact, the Directors believe such treatment is reasonable and appropriate. Key Judgement – COVID-19 pandemic Judgement has been exercised in considering the impacts that the COVID-19 pandemic has had, or may have, on the Group based on known information. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the Group unfavourably as at the reporting date or subsequently as a result of the COVID-19 pandemic. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 58 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (x) Fair Value of Assets and Liabilities The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy based on the lowest level of input that is significant to the entire fair value measurement, being Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly unforced transaction between independent, knowledgeable and willing market participants at the measurement date and is based on the fair value hierarchy. (y) Government assistance and grants Assistance received from the government by way of grant or other forms of assistance designed to provide an economic benefit to the Group, is presented in the statement of financial position as deferred income, in instances where the grant is related to assets. In all other cases, grant money is presented in the profit and loss as other income. Grants are recognised when there is reasonable assurance that conditions will be complied with and the grant will be received. (z) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of the parent entity, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2. RELATED PARTY TRANSACTIONS (x) Fair Value of Assets and Liabilities The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy based on the lowest level of input that is significant to the entire fair value measurement, being Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly unforced transaction between independent, knowledgeable and willing market participants at the measurement date and is based on the fair value hierarchy. (y) Government assistance and grants Assistance received from the government by way of grant or other forms of assistance designed to provide an economic benefit to the Group, is presented in the statement of financial position as deferred income, in instances where the grant is related to assets. In all other cases, grant money is presented in the profit and loss as other income. Grants are recognised when there is reasonable assurance that conditions will be complied with and the grant will be received. (z) Earnings per share Basic earnings per share issued during the financial year. Diluted earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of the parent entity, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Transactions between related parties are on commercial terms and conditions, no more favourable than those available to other parties unless otherwise stated. o o During the year, the Company entered into an unsecured loan agreement with a director related entity, Quartz Mountain Mining Pty Ltd (Quartz Mountain) as trustee for the Bass Family Trust. The principal of US$1,000,000 attracts interest at 2% per annum with the first three months being interest free. Interest expense of US$8,474 (A$13,005) was recognised during the reporting period. Subsequent to the end of the financial year, the Company reached agreement with Quartz Mountain to extend the maturity date of the loan such that it is repayable on or before 31 December 2021. In addition, and subject to shareholder approval, Quartz Mountain has agreed to accept 950,000 unlisted options exercisable at 20 cents each on or before 1 July 2022 in lieu of interest. The Company has entered into a lease agreement with Elk Mountain Mining Limited (“Elk”), an entity associated with Mr Charles Bass, for the lease of the Company’s administration offices in Perth, Western Australia. Total lease repayments of $85,847 were paid during the year, including interest of $35,402 and lease principal repayments of $50,445. In the prior year, such payments were included in the statement of profit or loss and other comprehensive income and totalled $86,590. 3. REMUNERATION OF AUDITORS Audit and review of the financial statements Taxation services Total Year ended 30 June 2020 A$ 29,000 5,620 34,620 Year ended 30 June 2019 A$ 25,000 3,880 28,880 The auditor of Eagle Mountain Mining Limited is William Buck Audit (WA) Pty Ltd. During the reporting period a related entity of William Buck Audit (WA) Pty Ltd provided non-audit services amounting to $5,620 (2019: $3,880) to companies within the Eagle Mining Group. 4. LOSS FROM ORDINARY ACTIVITIES Included in the loss before income tax are the following specific items of income/(expenses): Gains on foreign exchange Fair value gain on derivative liability Interest paid/payable on borrowings Interest paid/payable on leases Share based payments expense Movements in employee leave liabilities Project assessment/due diligence costs Year ended 30 June 2020 A$ Year ended 30 June 2019 A$ 2,390 268,872 (196,556) (50,725) (248,723) 2,257 (196,260) 113,997 - - - (45,494) (59,391) (30,402) E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 60 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 5. INCOME TAX EXPENSE Year ended 30 June 2020 A$ Year ended 30 June 2019 A$ - - - - (466,738) (521,799) 466,738 521,799 - - Current tax: Current income tax charge/(benefit) Current income tax benefit not recognised Deferred tax: Relating to origination and reversal of timing differences Deferred tax benefit not recognised (a) The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax as follows: Loss before tax (4,368,936) (6,890,466) The prima facie tax on loss from ordinary activities attributable to parent entity before income tax: Prima facie tax (benefit) on loss from ordinary activities before income tax at 27.5% Add/(Less) tax effect of: Exploration costs not deducted for tax Non-deductible share based payments Share issue costs deducted Unrealised movement in fair value of financial liabilities Deferred tax asset not brought to account Income tax attributable to entity (b) Deferred tax – statement of financial position Liabilities Prepaid expenses Accrued income Assets Accrued expenses Employee leave liabilities Revenue losses available to offset against future taxable income Deductible equity raising costs (1,201,457) (1,894,878) 747,198 68,399 (79,584) (73,940) 539,384 - 25,165 - 25,165 - 16,204 1,140,039 212,863 1,369,106 1,646,348 12,511 (56,853) - 292,872 - 9,803 - 9,803 11,941 16,333 679,937 178,695 886,906 Net deferred tax asset not recognised 1,343,941 877,103 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 62 Relating to origination and reversal of timing (466,738) (521,799) Deferred tax benefit not recognised 466,738 521,799 Current tax: Current income tax charge/(benefit) Current income tax benefit not recognised Deferred tax: differences as follows: Loss before tax (a) The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax The prima facie tax on loss from ordinary activities attributable to parent entity before income tax: Prima facie tax (benefit) on loss from ordinary Add/(Less) tax effect of: Exploration costs not deducted for tax Non-deductible share based payments Share issue costs deducted Unrealised movement in fair value of financial liabilities Deferred tax asset not brought to account Income tax attributable to entity (b) Deferred tax – statement of financial position Liabilities Prepaid expenses Accrued income Assets Accrued expenses Employee leave liabilities Revenue losses available to offset against future taxable income Deductible equity raising costs Year ended 30 June Year ended 30 June 2020 A$ 2019 A$ (4,368,936) (6,890,466) - - - - - - 747,198 68,399 (79,584) (73,940) 539,384 25,165 25,165 16,204 1,140,039 212,863 1,369,106 - - - 1,646,348 12,511 (56,853) 292,872 - - 9,803 - 9,803 11,941 16,333 679,937 178,695 886,906 Net deferred tax asset not recognised 1,343,941 877,103 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 5. INCOME TAX EXPENSE 5. INCOME TAX EXPENSE (continued) (c) Deferred tax – income statement Liabilities Prepaid expenses Accrued income Assets Accrued expenses Employee leave liabilities Deductible equity raising costs Increase in tax losses carried forward Deferred tax benefit movement not recognised Year ended 30 June 2020 A$ Year ended 30 June 2019 A$ (15,362) - (11,941) (129) 34,068 460,102 466,738 (1,001) 3,447 11,941 16,333 (16,178) 507,257 521,799 The deferred tax benefit of tax losses not brought to account will only be obtained if: (i) The Company derives future assessable income of a nature and an amount sufficient to enable the benefit from the tax losses to be realised; The Company continues to comply with the conditions for deductibility imposed by tax legislation; and No changes in tax legislation adversely affect the Company realising the benefit from the deduction of the losses. (ii) (iii) activities before income tax at 27.5% (1,201,457) (1,894,878) 6. CASH AND CASH EQUIVALENTS Cash at bank Deposits at call Total 30 June 2020 A$ 507,750 - 507,750 30 June 2019 A$ 1,879,883 - 1,879,883 Included in cash at bank of $507,750 (2019: $1,879,883) are amounts held in US dollar denominated bank accounts equivalent to $302,637 (2019: $229,270). 7. TRADE AND OTHER RECEIVABLES GST receivable Accrued income and other receivables Prepaid expenses and deposits Total 30 June 2020 A$ 30 June 2019 A$ 2,961 43,839 91,509 138,309 2,725 16,253 35,648 54,626 The carrying amounts of trade and other receivables are assumed to approximate their fair values due to their short-term nature. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 62 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 8. EXPLORATION AND EVALUATION EXPENDITURE Movement during the year Carrying value – beginning of year Recognised on acquisition of Oracle Ridge Copper Mine (note 25)1 Effect of movement in foreign exchange rates Carrying value – end of the year 30 June 2020 A$ 30 June 2019 A$ 1,164,027 9,281,112 (66,643) 1,104,495 - 59,532 10,378,496 1,164,027 1Capitalised exploration asset acquisition costs recognised on acquisition of the Oracle Ridge Copper Mine. Exploration and evaluation expenditure is held by Wedgetail Operations LLC, which is an 80% owned US based subsidiary of Wedgetail Holdings LLC, a wholly owned subsidiary in the Group. Capitalised exploration and evaluation expenditure carried forward from the previous year represents the exploration asset acquisition costs recognised on the acquisition of Silver Mountain Mining Pty Ltd. The recoverability of the carrying amount of the exploration and evaluation assets is dependent upon successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. 9. PROPERTY, PLANT AND EQUIPMENT Leasehold improve- ments A$ 356,411 1,301 - Office equipment and furniture A$ 85,375 1,001 5,120 Field equipment and vehicles Mine plant and equipment Total A$ 216,084 A$ - A$ 657,870 5,998 20,436 28,736 78,298 980,785 1,064,203 Cost at the beginning of the year Effect of movements Additions foreign exchange Cost at the end of the year 357,712 91,496 300,380 1,001,221 1,750,809 Accumulated depreciation at the beginning of the year Effect foreign of movements Depreciation charged in the year Accumulated depreciation at the end of the year exchange Net book value at the beginning of the year Net book value at the end of the year (109,807) (43,402) (69,337) - (222,546) (12) (166) 26 3,909 3,757 (80,108) (24,270) (48,665) (113,343) (266,386) (189,927) (67,838) (117,976) (109,434) (485,175) 246,604 41,973 146,747 - 435,324 167,785 23,658 182,404 891,787 1,265,634 Assets with a net book value of A$72,352 (2019: A$54,201) held by Silver Mountain Mining Operations Inc. are pledged as security in respect of vehicle loan liabilities (refer note 13). E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 8. EXPLORATION AND EVALUATION EXPENDITURE Movement during the year Carrying value – beginning of year Recognised on acquisition of Oracle Ridge Copper Mine (note 25)1 Effect of movement in foreign exchange rates Carrying value – end of the year 30 June 2020 30 June 2019 A$ A$ 1,164,027 9,281,112 (66,643) 1,104,495 - 59,532 10,378,496 1,164,027 1Capitalised exploration asset acquisition costs recognised on acquisition of the Oracle Ridge Copper Mine. Exploration and evaluation expenditure is held by Wedgetail Operations LLC, which is an 80% owned US based subsidiary of Wedgetail Holdings LLC, a wholly owned subsidiary in the Group. Capitalised exploration and evaluation expenditure carried forward from the previous year represents the exploration asset acquisition costs recognised on the acquisition of Silver Mountain Mining Pty Ltd. The recoverability of the carrying amount of the exploration and evaluation assets is dependent upon successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. 9. PROPERTY, PLANT AND EQUIPMENT Cost at the beginning of the year 356,411 85,375 216,084 Cost at the end of the year 357,712 91,496 300,380 1,001,221 1,750,809 Leasehold Office Field Mine plant Total improve- equipment equipment and ments and and vehicles equipment A$ 1,301 - furniture A$ A$ A$ - A$ 657,870 1,001 5,120 5,998 20,436 28,736 78,298 980,785 1,064,203 (109,807) (43,402) (69,337) - (222,546) (12) (166) 26 3,909 3,757 (189,927) (67,838) (117,976) (109,434) (485,175) Effect of foreign exchange movements Additions Accumulated depreciation at the beginning of the year Effect of foreign exchange movements Accumulated depreciation at the end of the year Net book value at the beginning of the year year Assets with a net book value of A$72,352 (2019: A$54,201) held by Silver Mountain Mining Operations Inc. are pledged as security in respect of vehicle loan liabilities (refer note 13). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 10. RIGHT-OF-USE ASSET Right-of-use assets at 1 July 2019 on adoption of AASB 16 Depreciation expense Foreign currency differences Total 30 June 2020 A$ 30 June 2019 A$ 322,131 (121,386) 7,748 208,493 - - - - The Group leases land and buildings for its offices in Perth, Australia and Arizona, United States of America under agreements with terms of up to 5 years. 11. TRADE AND OTHER PAYABLES Current Trade creditors and accrued expenses Other payables Payroll liabilities Total 30 June 2020 A$ 30 June 2019 A$ 30,508 70,478 78,458 179,444 173,713 1,496 49,439 224,648 The carrying amounts of trade and other payables are assumed to approximate their fair values due to their short- term nature. 12. LEASE LIABILITIES Current liability Non-current liability Total Depreciation charged in the year (80,108) (24,270) (48,665) (113,343) (266,386) Movement in lease liabilities 246,604 41,973 146,747 - 435,324 Lease liabilities as at the end of the financial year Recognised on 1 July 2019 on adoption of AASB 16 Principal repayments Foreign currency differences 30 June 2020 A$ 30 June 2019 A$ 111,315 117,895 229,210 322,131 (100,590) 7,669 229,210 - - - - - - - Net book value at the end of the 167,785 23,658 182,404 891,787 1,265,634 At the beginning of and during the financial year, the Group did not have any short term leases or leases of low value assets. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 64 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 13. BORROWINGS Current Vehicle loan amounts due within one year 1 Loan – Paycheck Protection Program 2 Loans from related parties 3 Non-Current Loan – derivative liability Loan – debt liability Subtotal loan 4 Vehicle loan amounts due after one year 30 June 2020 A$ 30 June 2019 A$ 11,126 155,763 1,469,436 1,636,325 1,134,644 8,140,713 9,275,357 14,936 9,290,293 10,908 - - 10,908 - - - 25,484 25,484 1 Vehicle loan amounts are secured over assets with a net book value of A$72,352 (2019: A$54,201) held by Silver Mountain Mining Operations Inc. (refer note 9). 2 A wholly owned US subsidiary of the Company qualified for a US$106,900 loan under the US Government’s Paycheck Protection Program, an initiative intended to incentivise employers to retain workers during the COVID crisis. The loan can be forgiven on application substantiating the use of funds. The application for loan forgiveness is expected to be submitted in the near future and the Company expects the loan to be forgiven in full. The loan attracts interest at a rate of 1% per annum and will need to be repaid by 5 May 2022 should the loan or a portion of the loan not be forgiven. Under the terms of the loan, all interest is deferred until 31 December 2020. 3 During the year, the Company entered into an unsecured loan agreement with a director related entity, Quartz Mountain Mining Pty Ltd as trustee for the Bass Family Trust. The principal of US$1,000,000 attracts interest at 2% per annum with the first three months being interest free. Interest expense of US$8,474 (A$13,005) was recognised during the reporting period. Subsequent to the end of the financial year, the Company reached an agreement with Quartz Mountain to extend the maturity date of the loan such that it is repayable on or before 31 December 2021. 4 During the year, the purchase of the Oracle Ridge Copper Mine was completed (see note 25). Under the terms of the purchase agreement, Wedgetail Operations LLC, a subsidiary in which the Company has an 80% interest, entered into a US$6,423,000 secured loan with Vincere Resource Holdings LLC. The loan is secured over all the assets of Wedgetail Operations LLC, has a ten year term and accrues interest at 3.15% per annum for the first five years with no interest accruing thereafter. Under the terms of the agreement, the lender has the right to convert up to US$1,000,000 of the secured loan into ordinary shares of the Company upon each of the following three conversion trigger events: i. ii. iii. The completion of a preliminary feasibility study; A commitment is made to proceed with a bankable feasibility study; and A commitment is made to commission the financing of the project as evidenced by a feasibility study sufficient to obtain third party financing. The terms of the agreement prevent the issue of ordinary shares to the lender where the cumulative amount of shares held as a result of exercising the conversion rights would exceed 10% of the Company’s ordinary shares on issue. The conversion price of each conversion right held by the lender is an amount equal to a 20% discount to the 30 day volume weighted average price of the Company’s shares for the 30 days immediately after the date of public announcement of the applicable conversion trigger event. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 13. BORROWINGS 13. BORROWINGS (continued) Current Vehicle loan amounts due within one year 1 Loan – Paycheck Protection Program 2 Loans from related parties 3 Non-Current Loan – derivative liability Loan – debt liability Subtotal loan 4 Vehicle loan amounts due after one year 30 June 2020 30 June 2019 A$ A$ 11,126 155,763 1,469,436 1,636,325 1,134,644 8,140,713 9,275,357 14,936 9,290,293 10,908 10,908 - - - - - 25,484 25,484 1 Vehicle loan amounts are secured over assets with a net book value of A$72,352 (2019: A$54,201) held by Silver Mountain Mining Operations Inc. (refer note 9). 2 A wholly owned US subsidiary of the Company qualified for a US$106,900 loan under the US Government’s Paycheck Protection Program, an initiative intended to incentivise employers to retain workers during the COVID crisis. The loan can be forgiven on application substantiating the use of funds. The application for loan forgiveness is expected to be submitted in the near future and the Company expects the loan to be forgiven in full. The loan attracts interest at a rate of 1% per annum and will need to be repaid by 5 May 2022 should the loan or a portion of the loan not be forgiven. Under the terms of the loan, all interest is deferred until 31 December 2020. 3 During the year, the Company entered into an unsecured loan agreement with a director related entity, Quartz Mountain Mining Pty Ltd as trustee for the Bass Family Trust. The principal of US$1,000,000 attracts interest at 2% per annum with the first three months being interest free. Interest expense of US$8,474 (A$13,005) was recognised during the reporting period. Subsequent to the end of the financial year, the Company reached an agreement with Quartz Mountain to extend the maturity date of the loan such that it is repayable on or before 31 December 2021. 4 During the year, the purchase of the Oracle Ridge Copper Mine was completed (see note 25). Under the terms of the purchase agreement, Wedgetail Operations LLC, a subsidiary in which the Company has an 80% interest, entered into a US$6,423,000 secured loan with Vincere Resource Holdings LLC. The loan is secured over all the assets of Wedgetail Operations LLC, has a ten year term and accrues interest at 3.15% per annum for the first five years with no interest accruing thereafter. Under the terms of the agreement, the lender has the right to convert up to US$1,000,000 of the secured loan into ordinary shares of the Company upon each of the following three conversion trigger events: The completion of a preliminary feasibility study; A commitment is made to proceed with a bankable feasibility study; and A commitment is made to commission the financing of the project as evidenced by a feasibility study sufficient to obtain third party financing. The terms of the agreement prevent the issue of ordinary shares to the lender where the cumulative amount of shares held as a result of exercising the conversion rights would exceed 10% of the Company’s ordinary shares on i. ii. iii. issue. The conversion price of each conversion right held by the lender is an amount equal to a 20% discount to the 30 day volume weighted average price of the Company’s shares for the 30 days immediately after the date of public announcement of the applicable conversion trigger event. The face value of US$6,423,000 is deemed to comprise of the value of the derivative liability (or conversion right), with the residual being the debt liability component. The debt liability component of the secured loan is amortised at each reporting period using the effective interest method. The derivative liability component is revalued at each reporting date over the life of the secured loan. Fair Value Measurement The derivative liability component of the US$6,423,000 loan is measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement. Refer to accounting policy note 1(x) for a description of the three levels. The derivative liability has been categorised as Level 3 in the fair value hierarchy and the fair value at the end of the reporting period was A$1,134,644. There were no transfers between levels during the financial year. An independent valuation of the derivative liability has been undertaken at 30 June 2020 using a Monte Carlo simulation model with the following assumptions: Assumptions Valuation date Spot price (A$) 1 Exercise price 2 Risk free rate Expected future volatility Expiry date 3 Conversion Event 1 30 June 2020 $0.16 0.129 0.26% 100% 25 November 2022 Conversion Event 2 30 June 2020 $0.16 0.130 0.41% 100% 25 November 2023 Conversion Event 3 30 June 2020 $0.16 0.131 0.41% 100% 25 November 2024 1 The share price of an EM2 share traded on the ASX to market close on 30 June 2020. 2 Exercise price is equal to a 20% discount to the estimated volume weighted average price of the Company’s shares for the 30 days immediately after the public announcement of the applicable conversion trigger event. 3 The expiry date is the estimated date on which the conversion right will be exercised, for each tranche of conversion rights and is estimated from the date of the agreement. Based on the above assumptions, the revaluation of the derivative liability resulted in a fair value gain of US$178,163 (A$268,872) which has been recognised through the profit and loss. In relation to the restriction of conversion rights up to 10% of the ordinary shares on issue, the valuation is based on the number of shares on issue at valuation date. Reconciliation of movement in Level 3 derivative liability 30 June 2020 A$ 30 June 2019 A$ Movement during the year Balance at the start of the financial year Fair value on acquisition Gain recognised in profit or loss Effect of movement in foreign exchange rates Balance at the end of the financial year - 1,365,785 (268,872) 37,731 1,134,644 - - - - - E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 66 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 13. BORROWINGS (continued) Unobservable inputs for fair value measurement In determining the fair value measurement of the derivative liability, certain observable inputs (for example the share price and exercise price of the conversion rights) are used, together with unobservable inputs. The unobservable inputs used in the valuation of the derivative liability are deemed to be: 1. Issued capital – as the conversion rights are restricted to not more than 10% of the ordinary shares on issue, any increase in issued shares may impact the number of conversion rights that can be exercised; and 2. Timing of the three milestones to be achieved (conversion trigger events). Fair Value Measurement (continued) The Level 3 unobservable inputs and sensitivity are as follows: Unobservable Input Change in input Shares on Issue +10% Date of conversion trigger event +1 year Sensitivity An 10% increase in share capital will result in an increase in fair value of approximately $126,700 An increase of 1 year in achieving the first and subsequent milestones will result in an increase in fair value of approximately $135,500 14. OPTIONS AND EQUITY BASED PAYMENTS Options – Reconciliation of Movements Options on issue at the beginning of the year Offer options issued – entitlement offer1 Offer options exercised – entitlement offer1 Options cancelled on expiry – entitlement offer1 Options issued on exercise of offer options – entitlement offer1 Options cancelled on expiry of offer options – entitlement offer1 Options issued to employees2 Options issued attaching to entitlement offer securities3 Options cancelled on expiry – employee options Options on issue at 30 June 30 June 2020 No. 23,801,315 - - - - (26,599) 3,950,000 - (1,315,000) 26,409,716 30 June 2019 No. 16,000,000 23,125,000 (26,599) (23,098,401) 26,599 - 2,130,000 5,644,716 - 23,801,315 1 The Company issued options at a price of 1 cent per option pursuant to an entitlement offer exercisable at 40 cents each expiring 15 December 2018. Upon exercise into shares the holder received a further option for each share exercised at 80 cents each and expiring 12 months from issue. 2 Unlisted options issued to employees of the Company pursuant to the Company’s employee incentive plan. 3 Unlisted options issued to subscribers to the non-renounceable pro-rata entitlement offer of shares which closed on 7 June 2019. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 14. OPTIONS AND EQUITY BASED PAYMENTS (continued) In determining the fair value measurement of the derivative liability, certain observable inputs (for example the Option Capital – Reconciliation of Movements Balance at the beginning of the year Offer options issued – entitlement offer Less: costs of option entitlement offer Less: transfer to reserves on exercise/expiry of offer options Issue Price A$ $0.01 N/a N/a Options outstanding at the beginning of the year Options granted during the year Options exercised during the year Options cancelled and expired unexercised during the year Options outstanding at 30 June 2020 Weighted Average Exercise Price (cents) 23.8 20.6 - 21.2 23.5 No. 23,801,315 3,950,000 - (1,341,599) 26,409,716 30 June 2020 A$ 4,500 - - 30 June 2019 A$ 4,500 231,250 (71,221) - (160,029) 4,500 4,500 2019 Weighted Average Exercise Price (cents) 25.6 35.0 40.0 20.0 23.8 No. 16,000,000 30,926,315 (26,599) (23,098,401) 23,801,315 Basis and Assumptions Used in the Valuation of Options The options issued during the year were valued using the Black-Scholes option valuation methodology, using the following inputs: Date granted 30 August 2019 15 January 2020 17 January 2020 Number of options granted 1,800,000 1,500,000 650,000 Exercise price (cents) 20 21.5 20 Expiry date 1 July 2023 15 January 2023 7 October 2023 Risk free interest rate used 1.25% 0.79% 0.79% Volatility applied 100% 96% 96% Value of Options $186,392 $135,450 $69,160 Historical volatility over the previous 12 months has been used as the expected share price volatility. An expense of $89,106 has been recognised through the consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2020 (2019: $27,242) in respect of the vesting of options during the year. Weighted Average Contractual Life The weighted average contractual life for unexercised options is 19.2 months (2019: 28.4 months). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 13. BORROWINGS (continued) Unobservable inputs for fair value measurement share price and exercise price of the conversion rights) are used, together with unobservable inputs. The unobservable inputs used in the valuation of the derivative liability are deemed to be: 1. Issued capital – as the conversion rights are restricted to not more than 10% of the ordinary shares on issue, any increase in issued shares may impact the number of conversion rights that can be exercised; and 2. Timing of the three milestones to be achieved (conversion trigger events). Fair Value Measurement (continued) The Level 3 unobservable inputs and sensitivity are as follows: Unobservable Input Change in input Sensitivity Shares on Issue +10% an increase in fair value of approximately An 10% increase in share capital will result in $126,700 $135,500 An increase of 1 year in achieving the first and subsequent milestones will result in an increase in fair value of approximately Date of conversion trigger event +1 year 14. OPTIONS AND EQUITY BASED PAYMENTS Options – Reconciliation of Movements Options on issue at the beginning of the year Offer options issued – entitlement offer1 Offer options exercised – entitlement offer1 Options cancelled on expiry – entitlement offer1 Options issued on exercise of offer options – entitlement offer1 Options cancelled on expiry of offer options – entitlement offer1 Options issued to employees2 Options issued attaching to entitlement offer securities3 Options cancelled on expiry – employee options Options on issue at 30 June 30 June 2020 No. 23,801,315 - - - - - (26,599) 3,950,000 (1,315,000) 26,409,716 30 June 2019 No. 16,000,000 23,125,000 (26,599) (23,098,401) 26,599 2,130,000 5,644,716 - - 23,801,315 1 The Company issued options at a price of 1 cent per option pursuant to an entitlement offer exercisable at 40 cents each expiring 15 December 2018. Upon exercise into shares the holder received a further option for each share exercised at 80 cents each and expiring 12 months from issue. 2 Unlisted options issued to employees of the Company pursuant to the Company’s employee incentive plan. 3 Unlisted options issued to subscribers to the non-renounceable pro-rata entitlement offer of shares which closed on 7 June 2019. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 68 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 14. OPTIONS AND EQUITY BASED PAYMENTS (continued) Performance Rights During the year ended 30 June 2020 the Company issued 150,000 performance rights on the following terms: Number of Performance Rights 150,000 Vesting Date Expiry Date 15 April 2020 15 January 2024 Value of Performance Rights $24,750 The performance rights were granted on 15 January 2020 and valued at 16.5 cents per right based on the determined underlying value of the Company’s shares. An expense of $24,750 has been recognised through the consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2020 in respect of the vesting of these rights during the period. 15. ISSUED CAPITAL Shares Balance at the beginning of the year Shares issued on exercise of options Shares issued on exercise of performance rights Entitlement issue shares issued Less: share issue costs – cash * Balance at 30 June Issue price $0.40 $0.15 - Year ended 30 June 2020 Year ended 30 June 2019 Shares A$ Shares A$ 103,816,039 13,579,949 92,500,001 11,952,582 - - 26,599 10,640 85,000 12,000,006 15,182 1,800,001 - - 11,289,439 1,693,416 - (72,867) - (76,689) 115,901,045 15,322,265 103,816,039 13,579,949 * No deferred tax asset has been recognised in respect of the share issue costs as at the date of the financial report as it is not probable that it will be realised (refer note 5). The Company is a public company limited by shares. The Company was incorporated in Perth, Western Australia. The Company’s shares are limited whereby the liability of its members is limited to the amount (if any) unpaid on the shares respectively held by them. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value. There is no limit to the authorised share capital of the Company. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 14. OPTIONS AND EQUITY BASED PAYMENTS (continued) 16. RESERVES Performance Rights During the year ended 30 June 2020 the Company issued 150,000 performance rights on the following terms: Number of Vesting Date Expiry Date Value of Performance Performance Rights 150,000 15 April 2020 15 January 2024 Rights $24,750 The performance rights were granted on 15 January 2020 and valued at 16.5 cents per right based on the determined underlying value of the Company’s shares. An expense of $24,750 has been recognised through the consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2020 in respect of the vesting of these rights during the period. 15. ISSUED CAPITAL Shares Balance at the beginning of the year Shares issued on exercise of options Shares issued on exercise of performance rights Entitlement issue shares issued Less: share issue costs – cash * Balance at 30 June Issue price $0.40 $0.15 - Year ended 30 June 2020 Year ended 30 June 2019 Shares A$ Shares A$ 103,816,039 13,579,949 92,500,001 11,952,582 - - 26,599 10,640 85,000 15,182 12,000,006 1,800,001 11,289,439 1,693,416 - (72,867) (76,689) 115,901,045 15,322,265 103,816,039 13,579,949 - - - * No deferred tax asset has been recognised in respect of the share issue costs as at the date of the financial report as it is not probable that it will be realised (refer note 5). The Company is a public company limited by shares. The Company was incorporated in Perth, Western Australia. The Company’s shares are limited whereby the liability of its members is limited to the amount (if any) unpaid on the shares respectively held by them. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value. There is no limit to the authorised share capital of the Company. Foreign currency translation reserve Share based payments reserve Common control reserve Movements: a) Foreign currency translation reserve Balance at the beginning of the year Exchange gains for the year Non-controlling interest in translation differences Balance at 30 June As at 30 June 2020 A$ As at 30 June 2019 A$ 390,899 1,105,348 297,069 888,625 (3,014,276) (3,014,276) (1,518,029) (1,828,582) Year ended 30 June 2020 A$ Year ended 30 June 2019 A$ 297,069 103,077 (9,247) 390,899 219,494 77,575 - 297,069 Foreign currency translation reserve The foreign currency translation reserve records unrealised exchange gains and losses on translation of controlled entities accounts during the year. b) Share based payments reserve Balance at the beginning of the year Fair value of options and performance rights issued during the year Fair value of performance rights exercised during the year Fair value of options cancelled during the year Balance at 30 June Year ended 30 June 2020 A$ Year ended 30 June 2019 A$ 888,625 248,723 (15,182) (16,818) 843,131 45,494 - - 1,105,348 888,625 Share based payments reserve The share based payments reserve has been used to recognise the fair value of options and performance rights issued and vested but not exercised as at the end of the reporting year. c) Common control reserve Balance at the beginning of the year Common control transactions during the year Year ended 30 June 2020 A$ Year ended 30 June 2019 A$ (3,014,276) (3,014,276) - - Balance at 30 June Common control reserve The amount recognised in the common control reserve represents the excess in fair value consideration given, over the net assets acquired, on the acquisition of Silver Mountain Mining Pty Ltd from Silver Mountain Mining Nominees Pty Ltd on 7 December 2017. (3,014,276) (3,014,276) E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 70 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 17. CASH FLOW INFORMATION Reconciliation of cash flows from operating activities with loss after income tax Loss after income tax Non-cash items included in profit or loss Depreciation expense Gains on foreign exchange Fair value gain on derivative liability Share based payment expense Accrued interest expense Changes in assets and liabilities: (Increase)/decrease in receivables (Increase)/decrease in prepayments (Decrease)/increase in employee leave liabilities (Decrease)/increase in accounts payable and accruals (Increase)/decrease in accrued income Year ended 30 June 2020 A$ Year ended 30 June 2019 A$ (4,368,936) (6,890,466) 387,772 (2,390) (268,872) 248,743 195,370 (27,822) (55,861) (468) 8,273 - 154,143 (113,997) - 45,494 - (8,040) (1,878) 59,391 172,542 12,534 Net cash outflows from operating activities (3,884,191) (6,570,277) 18. SEGMENT INFORMATION AASB 8 “Operating Segments” requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. The Group operates in one segment, being exploration for mineral resources. This is the basis on which internal reports are provided to the Directors for assessing performance and determining the allocation of resources within the Group. Following the acquisition of Silver Mountain Mining Pty Ltd on 7 December 2017, the Group operates in Australia and United States of America. Information regarding the non-current assets by geographical location is reported below. No segment information is provided for United States of America in relation to revenue and profit or loss for the year ended 30 June 2020 or year ended 30 June 2019. Reconciliation of Non-Current Assets by Geographical Location Australia United States of America 30 June 2020 A$ 30 June 2019 A$ 329,533 11,656,035 11,985,568 225,536 1,503,916 1,729,452 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 17. CASH FLOW INFORMATION 19. SUBSEQUENT EVENTS Reconciliation of cash flows from operating activities with loss after income tax Loss after income tax Non-cash items included in profit or loss Depreciation expense Gains on foreign exchange Fair value gain on derivative liability Share based payment expense Accrued interest expense Changes in assets and liabilities: (Increase)/decrease in receivables (Increase)/decrease in prepayments (Decrease)/increase in employee leave liabilities (Decrease)/increase in accounts payable and accruals (Increase)/decrease in accrued income 18. SEGMENT INFORMATION Year ended Year ended 30 June 2020 30 June 2019 A$ A$ (4,368,936) (6,890,466) 387,772 (2,390) (268,872) 248,743 195,370 (27,822) (55,861) (468) 8,273 - 154,143 (113,997) 45,494 - - (8,040) (1,878) 59,391 172,542 12,534 AASB 8 “Operating Segments” requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. The Group operates in one segment, being exploration for mineral resources. This is the basis on which internal reports are provided to the Directors for assessing performance and determining the allocation of resources Information regarding the non-current assets by geographical location is reported below. No segment information is provided for United States of America in relation to revenue and profit or loss for the year ended 30 June 2020 or year ended 30 June 2019. Reconciliation of Non-Current Assets by Geographical Location within the Group. and United States of America. Australia United States of America 30 June 2020 30 June 2019 A$ A$ 329,533 11,656,035 11,985,568 225,536 1,503,916 1,729,452 Subsequent to the end of the financial year, the Company completed a placement of 23,076,923 ordinary shares to institutional and professional investors at an issue price of $0.13 per share, raising a total of $3.0 million (before costs). In August 2020, global drilling company Boart Longyear Limited, was appointed to undertake a maiden surface diamond drilling program at the Oracle Ridge Copper Mine. The impact of the COVID-19 pandemic is ongoing. The situation is dependent on measures imposed by the Australian Government, United States government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. It is not practicable to estimate the potential impact, positive or negative, after the reporting date. Other than as stated above, there has not arisen in the interval between the end of the financial year 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 Company to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years. 20. KEY MANAGEMENT PERSONNEL (a) Directors and Key Management Personnel Net cash outflows from operating activities (3,884,191) (6,570,277) The following persons were Directors or Key Management Personnel of Eagle Mountain Mining Limited during the financial year: (i) (ii) (iii) (iv) Chairman – Non-Executive Rick Crabb Executive Director Charles Bass, Managing Director Non-Executive Director Roger Port Brett Rowe (as Alternate Director to Charles Bass) Chief Executive Officer Timothy Mason Following the acquisition of Silver Mountain Mining Pty Ltd on 7 December 2017, the Group operates in Australia There were no other persons employed by or contracted to the Company during the financial year, having responsibility for planning, directing and controlling the activities of the Company, either directly or indirectly. (b) Key Management Personnel Compensation A summary of total compensation paid to Key Management Personnel is as follows: Total short term employment benefits Total equity-based payments Total post-employment benefits Year ended 30 June 2020 A$ 211,159 59,240 19,142 Year ended 30 June 2019 A$ 136,986 - 13,014 289,541 150,000 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 72 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 21. CONTINGENT ASSETS AND LIABILITIES The Group has an exploration service agreement with Dragon’s Deep Exploration, Inc., an Arizona corporation (“Dragon”). Included in this agreement is a performance bonus payable to Dragon consisting of cash together with shares in Eagle Mountain Mining Limited (shares at market price, escrowed as required by the appropriate exchange) within 10 days of the events detailed below: Criteria (Specifically related to the Silver Mountain Project) Minimum of 24 holes completed by the Group with 70% success within 24 months of first drilling1 Commencement of a preliminary feasibility study in respect of any land covered by any mining claims or permits held by Silver Mountain Mining LLC and located in Arizona, USA.2 Cash Bonus Shares of Value US$50,000 US$150,000 US$100,000 US$200,000 1. 2. Success defined as a minimum 40 gram-metre zone (Au equivalent) within each drill hole for 70% of non- condemnation holes drilled. The milestone satisfaction date is the date on which the Company announces to the Australian Securities Exchange that it has commenced a pre-feasibility study on the relevant mining claims or permits. “Pre- feasibility Study” is as defined in the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012 Edition). Phase 1 drilling commenced at the Silver Mountain Project on 1 October 2018 and ended in early June 2019. Based on the completed drilling, current exploration plans and drill advancement rate it is considered unlikely that the first criterion listed above will be met. The Group does not currently foresee a preliminary feasibility study covering the claims held by Silver Mountain Mining LLC commencing in the near future. Other than the above, the Group has no contingent assets or liabilities outstanding at the end of the year. 22. COMMITMENTS (a) Exploration Expenditure In order to maintain the current tenure status of its exploration assets, the Group has certain obligations and minimum expenditure requirements with respect to unpatented claims and Arizona state exploration permits located in Arizona in the United States of America, as follows: Within 1 year After 1 year but not more than 5 years Total 30 June 2020 A$ 464,192 1,943,611 2,407,803 30 June 2019 A$ 161,685 728,892 890,577 (b) Asset Acquisition The Group has no commitments for asset acquisitions at 30 June 2020 or 30 June 2019. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 21. CONTINGENT ASSETS AND LIABILITIES 23. FINANCIAL RISK MANAGEMENT The Group has an exploration service agreement with Dragon’s Deep Exploration, Inc., an Arizona corporation (“Dragon”). Included in this agreement is a performance bonus payable to Dragon consisting of cash together with shares in Eagle Mountain Mining Limited (shares at market price, escrowed as required by the appropriate exchange) within 10 days of the events detailed below: Criteria (Specifically related to the Silver Mountain Project) Minimum of 24 holes completed by the Group with 70% success within 24 months of first drilling1 Commencement of a preliminary feasibility study in respect of Cash Bonus Shares of Value US$50,000 US$150,000 any land covered by any mining claims or permits held by Silver US$100,000 US$200,000 Mountain Mining LLC and located in Arizona, USA.2 Success defined as a minimum 40 gram-metre zone (Au equivalent) within each drill hole for 70% of non- 1. 2. condemnation holes drilled. The milestone satisfaction date is the date on which the Company announces to the Australian Securities Exchange that it has commenced a pre-feasibility study on the relevant mining claims or permits. “Pre- feasibility Study” is as defined in the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012 Edition). Phase 1 drilling commenced at the Silver Mountain Project on 1 October 2018 and ended in early June 2019. Based on the completed drilling, current exploration plans and drill advancement rate it is considered unlikely that the first criterion listed above will be met. The Group does not currently foresee a preliminary feasibility study covering the claims held by Silver Mountain Mining LLC commencing in the near future. Other than the above, the Group has no contingent assets or liabilities outstanding at the end of the year. 22. COMMITMENTS (a) Exploration Expenditure In order to maintain the current tenure status of its exploration assets, the Group has certain obligations and minimum expenditure requirements with respect to unpatented claims and Arizona state exploration permits located in Arizona in the United States of America, as follows: After 1 year but not more than 5 years Within 1 year Total 30 June 2020 A$ 464,192 1,943,611 2,407,803 30 June 2019 A$ 161,685 728,892 890,577 (b) Asset Acquisition The Group has no commitments for asset acquisitions at 30 June 2020 or 30 June 2019. The Group has exposure to a variety of risks arising from its use of financial instruments. This note presents information about the Company’s exposure to the specific risks, and the policies and processes for measuring and managing those risks. The Board of Directors has the overall responsibility for the risk management framework and has adopted a Risk Management Policy. (a) Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from transactions with customers and investments. (b) (c) Trade and Other Receivables The nature of the business activity of the Group does not result in trading receivables. The receivables that the Group does experience through its normal course of business are short term and the most significant recurring by quantity is receivable from the Australian Taxation Office. The risk of non-recovery of receivables from this source is considered to be negligible. Cash Deposits The Directors believe any risk associated with the use of predominantly one bank is addressed through the use of at least an A-rated bank as a primary banker. Except for this matter the Group currently has no significant concentrations of credit risk. Liquidity Risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages its liquidity risk by monitoring its cash reserves and forecast spending. Management is cognisant of the future demands for liquid finance resources to finance the Company’s current and future operations, and consideration is given to the liquid assets available to the Company before commitment is made to future expenditure or investment. Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising any return. Interest Rate Risk The Group has cash assets which may be susceptible to fluctuations in changes in interest rates. Whilst the Group requires the cash assets to be sufficiently liquid to cover any planned or unforeseen future expenditure, which prevents the cash assets being committed to long term fixed interest arrangements, the Group does mitigate potential interest rate risk by entering into short to medium term fixed interest investments. Equity Risk The Group has no direct exposure to equity risk. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 74 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 23. FINANCIAL RISK MANAGEMENT (continued) Foreign Exchange Risk The Group holds a portion of its cash assets in US dollar denominated bank accounts and bank deposits. The Group is also significantly exposed to foreign exchange risk through transactions and arrangements in respect of its US based operations. Other than the above, the Group does not have any direct contact with foreign exchange fluctuations other than their effect on the general economy. The Group seeks to mitigate foreign exchange risk by considering capital requirements and foreign exchange rates when undertaking treasury transactions, such as utilising US dollar denominated term deposits. 24. FINANCIAL INSTRUMENTS Credit Risk The Directors do not consider that the Group’s financial assets are subject to anything more than a negligible level of credit risk, and as such no disclosures are made (refer note 23(a)). Impairment Losses The Directors do not consider that any of the Group’s financial assets are subject to impairment at the reporting date. No impairment expense or reversal of impairment charge has occurred during the financial year. Interest Rate Risk At the reporting date the interest profile of the Group’s interest-bearing financial instruments was: Fixed rate instruments Financial liabilities Variable rate instruments Financial assets Carrying amount ($) 2020 Carrying amount ($) 2019 (10,926,618) (36,392) 507,750 1,879,883 Cash Flow Sensitivity Analysis for Variable Rate Instruments A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. 2020 Variable rate instruments 2019 Variable rate instruments Profit or loss 1% increase 1% decrease Equity 1% increase 1% decrease 5,077 (5,077) 5,077 (5,077) 18,799 (18,799) 18,799 (18,799) E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 23. FINANCIAL RISK MANAGEMENT (continued) 24. FINANCIAL INSTRUMENTS (continued) Foreign Exchange Risk The Group holds a portion of its cash assets in US dollar denominated bank accounts and bank deposits. The Group is also significantly exposed to foreign exchange risk through transactions and arrangements in respect of its US based operations. Other than the above, the Group does not have any direct contact with foreign exchange fluctuations other than their effect on the general economy. The Group seeks to mitigate foreign exchange risk by considering capital requirements and foreign exchange rates when undertaking treasury transactions, such as utilising US dollar denominated term deposits. 24. FINANCIAL INSTRUMENTS Credit Risk Impairment Losses Interest Rate Risk The Directors do not consider that the Group’s financial assets are subject to anything more than a negligible level of credit risk, and as such no disclosures are made (refer note 23(a)). The Directors do not consider that any of the Group’s financial assets are subject to impairment at the reporting date. No impairment expense or reversal of impairment charge has occurred during the financial year. At the reporting date the interest profile of the Group’s interest-bearing financial instruments was: Carrying amount ($) 2020 Carrying amount ($) 2019 (10,926,618) (36,392) 507,750 1,879,883 Fixed rate instruments Financial liabilities Variable rate instruments Financial assets Cash Flow Sensitivity Analysis for Variable Rate Instruments A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. Profit or loss 1% 1% Equity 1% 1% increase decrease increase decrease 2020 2019 Variable rate instruments 5,077 (5,077) 5,077 (5,077) Variable rate instruments 18,799 (18,799) 18,799 (18,799) Foreign Exchange Risk At the reporting date the Australian dollar equivalent of amounts recognised by the Group in US dollars were as follows: Financial assets Cash at bank Deposits at call Financial liabilities Trade and other payables Borrowings Carrying amount ($) 2020 Carrying amount ($) 2019 302,637 - 302,637 (93,695) (10,926,618) 229,270 - 229,270 (86,749) (36,392) (11,020,313) (123,141) Cash Flow Sensitivity Analysis for Foreign Exchange A change in foreign exchange rates of 5% at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. Profit or loss Equity 5% increase 5% decrease 5% increase 5% decrease 2020 Financial assets - - 15,132 (15,132) Financial liabilities 551,016 (551,016) 551,016 (551,016) 2019 Financial assets - - 11,464 (11,464) Financial liabilities 6,157 (6,157) 6,157 (6,157) E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 76 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 24. FINANCIAL INSTRUMENTS (continued) Liquidity Risk The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements (refer note 23(b)): Carrying amount $ Contractual cash flows $ < 6 months $ 6-12 months $ 1-2 years $ 2-5 years $ > 5 years $ 179,444 9,791,974 229,210 179,444 9,794,013 229,210 179,444 1,475,436 60,396 - 6,000 50,918 - 167,762 77,067 - 4,102 40,829 - 8,140,713 - 10,200,628 10,202,667 1,715,276 56,918 244,829 44,931 8,140,713 1,134,644 1,134,644 1,134,644 1,134,644 - - 224,648 224,648 224,648 - - - - - - - - - 36,392 39,316 5,882 5,882 11,765 15,787 261,040 263,964 230,530 5,882 11,765 15,787 1,134,644 1,134,644 - - - Consolidated 2020 Non-Derivatives Trade and other payables Borrowings Lease liabilities Derivatives Derivative liability 2019 Trade and other payables Borrowings Fair Values Fair Values Versus Carrying Amounts The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position are as follows: Consolidated 2020 Carrying amount $ Fair value $ 507,750 (179,444) (10,926,618) (229,210) 507,750 (179,444) (10,926,618) (229,210) (10,827,522) (10,827,522) Consolidated 2019 Carrying amount $ 1,879,883 (224,648) (36,392) - 1,618,843 Fair value $ 1,879,883 (224,648) (36,392) - 1,618,843 Cash and cash equivalents Trade and other payables Borrowings Lease liabilities The Group’s policy for recognition of fair values is disclosed at note 1(x). E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 24. FINANCIAL INSTRUMENTS (continued) Liquidity Risk The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements (refer note 23(b)): Carrying Contractual < 6 6-12 1-2 years > 5 years Consolidated amount cash flows months months $ $ $ $ $ 2-5 years $ 2020 Non-Derivatives Trade and other payables Borrowings Derivatives Derivative liability 2019 Trade and other payables Borrowings 179,444 179,444 179,444 - - - 9,791,974 9,794,013 1,475,436 6,000 167,762 4,102 8,140,713 Lease liabilities 229,210 229,210 60,396 50,918 77,067 40,829 10,200,628 10,202,667 1,715,276 56,918 244,829 44,931 8,140,713 1,134,644 1,134,644 1,134,644 1,134,644 - - 1,134,644 1,134,644 - - - - - - - - - 224,648 224,648 224,648 36,392 39,316 5,882 5,882 11,765 15,787 261,040 263,964 230,530 5,882 11,765 15,787 Fair Values Fair Values Versus Carrying Amounts financial position are as follows: The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of Consolidated 2020 Carrying amount $ Fair value $ Consolidated 2019 Carrying amount $ 1,879,883 (224,648) (36,392) - Fair value $ 1,879,883 (224,648) (36,392) - Cash and cash equivalents Trade and other payables Borrowings Lease liabilities 507,750 (179,444) 507,750 (179,444) (10,926,618) (10,926,618) (229,210) (229,210) The Group’s policy for recognition of fair values is disclosed at note 1(x). (10,827,522) (10,827,522) 1,618,843 1,618,843 $ - - - - - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 25. ACQUISITION OF ORACLE RIDGE COPPER MINE In November 2019, the purchase of the Oracle Ridge Copper Mine in Arizona in the United States of America was completed. The mine is held 100% within Wedgetail Operations LLC, which in turn is held 80% by Wedgetail Holdings LLC, a wholly owned subsidiary of the Company. The non-controlling interest of 20% is held by Vincere Resource Holdings LLC. Management have accounted for this transaction as an acquisition of assets and not as a business combination since, at the date of acquisition, the Oracle Ridge Copper Mine did not have the processes and outputs expected of an operating business. The material transaction events in relation to the purchase are as follows: • US$500,000 was paid by Eagle Mountain’s existing wholly owned Arizona subsidiary, Wedgetail Operations LLC (“WTO”) as the purchase price for all assets of Oracle Ridge Mining LLC (“ORM”) to the Receiver for the benefit of the sole secured creditor Vincere Resource Holdings LLC (“Vincere”); • Shares comprising a 20% interest in WTO were issued to Vincere; • WTO assumed a 10 year note with Vincere for US$6,423,000 which is secured over the assets of WTO; • The Company will free-carry Vincere for the first US$5,000,000 of relevant expenditure on the Oracle Ridge project; • WTO assumed all ORM’s leases, easements and access agreements with third parties; and • An Operating Agreement was signed which appoints the Company’s wholly owned subsidiary Silver Mountain Mining Operations Inc as Operator of WTO. Consideration for the acquisition, at exchange rates applicable on the acquisition date, was: Details Cash – US$500,000 Shares – 20% Interest in Wedgetail Operations LLC US$125,000 Secured Loan – US$6,423,000 (refer note 13) 1 The assets acquired were: Details Property, plant and equipment Capitalised exploration and evaluation expenditure Fair value A$ 735,618 183,905 9,449,757 10,369,280 Net asset value A$ 1,088,168 9,281,112 10,369,280 1 The Australian dollar amount of the secured loan is shown at acquisition date and differs from the balance shown at note 13 which is translated at the prevailing exchange rate at 30 June 2020. In addition, the derivative liability portion of the loan has been revalued to fair value at 30 June 2020. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 78 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 26. CONTROLLED ENTITIES Eagle Mountain Mining Limited is the ultimate parent entity of the Group. The following were controlled entities at the end of the financial year and have been included in the consolidated financial statements: Name Country of Incorporation Date acquired/incorporated Percentage Interest Held 2020 Percentage Interest Held 2019 Silver Mountain Mining Pty Ltd Silver Mountain Mining LLC Silver Mountain Mining Operations Inc Wedgetail Arizona Pty Ltd Wedgetail Holdings LLC Wedgetail Operations LLC Australia 7 December 2017 United States of America United States of America 7 December 2017 18 January 2018 Australia 18 July 2019 United States of America United States of America 25 June 2019 18 July 2019 100% 100% 100% 100% 100% 80% 100% 100% 100% - 100% - Silver Mountain Mining LLC and Silver Mountain Mining Operations Inc are both 100% owned subsidiaries of Silver Mountain Mining Pty Ltd. Wedgetail Operations LLC is an 80% owned subsidiary of Wedgetail Holdings LLC, which in turn is a 100% subsidiary of Wedgetail Arizona Pty Ltd. The following amounts are payable by subsidiary companies to the parent company at the reporting date: Name Silver Mountain Mining Pty Ltd Silver Mountain Mining LLC Silver Mountain Mining Operations Inc Wedgetail Holdings LLC Amount due to Eagle Mountain Mining Limited 2019 A$ 69,727 528,472 7,082,555 - 2020 A$ 69,727 528,472 8,670,459 1,909,877 The loans to subsidiary companies are non-interest bearing and the Directors of Eagle Mountain Mining Limited do not intend to call for repayment within 12 months. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 26. CONTROLLED ENTITIES 27. NON-CONTROLLING INTEREST Eagle Mountain Mining Limited is the ultimate parent entity of the Group. The following were controlled entities at the end of the financial year and have been included in the consolidated financial statements: Name Country of Date Percentage Percentage Incorporation acquired/incorporated Interest Held Interest Held Australia 7 December 2017 Silver Mountain Mining Pty Ltd Silver Mountain Mining LLC United States of America Silver Mountain United States of Mining Operations Inc America Wedgetail Arizona Pty Ltd LLC LLC Wedgetail Holdings United States of Wedgetail Operations United States of America America 7 December 2017 18 January 2018 25 June 2019 18 July 2019 Australia 18 July 2019 2020 100% 100% 100% 100% 100% 80% 2019 100% 100% 100% 100% - - Silver Mountain Mining LLC and Silver Mountain Mining Operations Inc are both 100% owned subsidiaries of Silver Mountain Mining Pty Ltd. subsidiary of Wedgetail Arizona Pty Ltd. Wedgetail Operations LLC is an 80% owned subsidiary of Wedgetail Holdings LLC, which in turn is a 100% The following amounts are payable by subsidiary companies to the parent company at the reporting date: Name Silver Mountain Mining Pty Ltd Silver Mountain Mining LLC Silver Mountain Mining Operations Inc Wedgetail Holdings LLC Amount due to Eagle Mountain Mining Limited 2020 A$ 69,727 528,472 8,670,459 1,909,877 2019 A$ 69,727 528,472 7,082,555 - The loans to subsidiary companies are non-interest bearing and the Directors of Eagle Mountain Mining Limited do not intend to call for repayment within 12 months. Wedgetail Holdings LLC, a wholly owned subsidiary of the Company, holds an 80% interest in Wedgetail Operations LLC with the non-controlling interest (NCI) of 20% being held by Vincere Resource Holdings LLC. The following table summarises the information relating to Wedgetail Operations LLC that has a material NCI, before any intra-group eliminations. Summarised Statement of Financial Position NCI Percentage Assets Current assets Non-current assets Total Assets Liabilities Current liabilities Non-current liabilities Total Liabilities Net Assets Summarised Statement of Profit and Loss and Other Comprehensive Income Revenue Loss before income tax Other comprehensive income Total comprehensive loss for the year Loss allocated to NCI Other comprehensive income allocated to NCI Summarised Statement of Cash Flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net decrease in cash and cash equivalents 30 June 2020 A$ 20% 12,113 10,147,738 10,159,851 692,309 9,275,357 9,967,666 192,185 A$ - (1,915,403) 46,236 (1,869,167) (383,080) 9,247 A$ (1,158,696) (754,569) 1,171,090 (742,175) E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 80 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 28. LOSS PER SHARE Loss used in calculation of loss per share Weighted average number of shares used in the calculation of loss per share Year Ended 30 June 2020 $(3,985,856) Year Ended 30 June 2019 $(6,890,466) 108,321,041 92,947,012 Basic and diluted loss per share (3.7 cents) (7.4 cents) Options and performance rights to acquire ordinary shares granted by the Company and not exercised at the reporting date are included in the determination of diluted loss per share, to the extent that they are considered dilutive. There are 26,409,716 options and 245,000 performance rights on issue at 30 June 2020 (2019: 23,801,315 options and 180,000 performance rights) that have not been considered in calculating diluted loss per share as they are not considered to be dilutive to the reported loss. 29. PARENT ENTITY INFORMATION Assets Current assets Non-current assets1 Total Assets Liabilities Current liabilities Non-current liabilities Total Liabilities Net Assets Equity Issued capital Option capital Reserves Accumulated losses Total Equity Loss for the period1 Other comprehensive income Total comprehensive loss for the period Parent 30 June 2020 A$ Parent 30 June 2019 A$ 226,699 2,981,224 1,567,069 1,950,849 3,207,923 3,517,918 1,662,667 117,895 174,388 - 1,780,562 174,388 1,427,361 3,343,530 15,322,265 4,500 1,105,348 (15,004,752) 13,579,949 4,500 888,625 (11,129,544) 1,427,361 3,343,530 (3,875,208) - (6,629,787) - (3,875,208) (6,629,787) 1The Company has recognised a provision against the investment in subsidiary holdings to the extent that parent company net assets exceed those of the Group. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2020 28. LOSS PER SHARE 29. PARENT ENTITY INFORMATION (continued) Year Ended Year Ended 30 June 2020 30 June 2019 $(3,985,856) $(6,890,466) 108,321,041 92,947,012 Loss used in calculation of loss per share Weighted average number of shares used in the calculation of loss per share dilutive. Basic and diluted loss per share (3.7 cents) (7.4 cents) Options and performance rights to acquire ordinary shares granted by the Company and not exercised at the reporting date are included in the determination of diluted loss per share, to the extent that they are considered There are 26,409,716 options and 245,000 performance rights on issue at 30 June 2020 (2019: 23,801,315 options and 180,000 performance rights) that have not been considered in calculating diluted loss per share as they are not considered to be dilutive to the reported loss. 29. PARENT ENTITY INFORMATION Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity is the guarantor in relation to the US$6,423,000 loan from Vincere Resource Holdings LLC (Vincere). In addition, the parent entity has entered into a Guarantee of Performance with Vincere under which the parent entity guarantees the full and timely performance of the conversion obligations under the note with Vincere. Refer to note 13.. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019. Commitments The parent had no exploration or capital commitments as at 30 June 2020 and 30 June 2019. Accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1. Assets Current assets Non-current assets1 Total Assets Liabilities Current liabilities Non-current liabilities Total Liabilities Net Assets Equity Issued capital Option capital Reserves Accumulated losses Total Equity Loss for the period1 Other comprehensive income Total comprehensive loss for the period 1The Company has recognised a provision against the investment in subsidiary holdings to the extent that parent company net assets exceed those of the Group. Parent 30 June 2020 A$ Parent 30 June 2019 A$ 226,699 2,981,224 1,567,069 1,950,849 3,207,923 3,517,918 1,662,667 117,895 174,388 - 1,780,562 174,388 1,427,361 3,343,530 15,322,265 13,579,949 4,500 1,105,348 4,500 888,625 (15,004,752) (11,129,544) 1,427,361 3,343,530 (3,875,208) (6,629,787) - - (3,875,208) (6,629,787) E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 82 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 83 DIRECTORS’ DECLARATION In the opinion of the Directors of Eagle Mountain Mining Limited (“the Company”) (a) the financial statements and notes set out on pages 45 to 83 are in accordance with the Corporations Act 2001, including: (i) (ii) complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements which, as stated in accounting policy note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and give a true and fair view of the financial position as at 30 June 2020 and of the performance for the year ended on that date of the Group. the remuneration disclosures that are contained in the Remuneration Report in the Directors’ Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures, The Corporations Act 2001 and the Corporations Regulations 2001. there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. (b) (c) (d) the financial statements comply with International Financial Reporting Standards as set out in note 1. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2020. This declaration is made in accordance with a resolution of the Directors. Signed at Perth this 18th day of September 2020. Rick Crabb Chairman E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 84 DIRECTORS’ DECLARATION In the opinion of the Directors of Eagle Mountain Mining Limited (“the Company”) (a) the financial statements and notes set out on pages 45 to 83 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements which, as stated in accounting policy note 1 to the financial statements, constitutes explicit and unreserved compliance with International (ii) give a true and fair view of the financial position as at 30 June 2020 and of the performance Financial Reporting Standards (IFRS); and for the year ended on that date of the Group. (b) the remuneration disclosures that are contained in the Remuneration Report in the Directors’ Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures, The Corporations Act 2001 and the Corporations Regulations 2001. (c) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. (d) the financial statements comply with International Financial Reporting Standards as set out in note 1. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2020. This declaration is made in accordance with a resolution of the Directors. Signed at Perth this 18th day of September 2020. Rick Crabb Chairman Independent auditor’s report E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 84 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 85 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 86 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 86 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 87 3643 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 88 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 88 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 89 ASX ADDITIONAL INFORMATION Pursuant to the Listing Requirements of the Australian Securities Exchange, the shareholder information set out below was applicable as at 6 October 2020. A. Distribution of Equity Securities Analysis of numbers of shareholders by size of holding: Ordinary Fully Paid Shares Distribution Number of shareholders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 More than 100,000 Totals 16 80 110 359 152 717 Securities held 5,139 260,501 943,025 15,848,283 126,420,120 143,477,968 There are 19 shareholders holding less than a marketable parcel of ordinary shares. B. Substantial Shareholders An extract of the Company’s Register of Substantial Shareholders (who hold 5% or more of the issued capital) is set out below: Holder of Relevant Interest Silver Mountain Mining Nominee Pty Ltd C. Twenty Largest Shareholders Issued Ordinary Shares Number of shares % of shares 53,480,001 37.27% The names of the twenty largest holders of quoted shares are listed below: Shareholder Name Silver Mountain Mining Nominee Pty Ltd CS Third Nominees Pty Limited Dr Salim Cassim Mr Philip John Cawood Aralad Management Pty Ltd National Nominees Limited UBS Nominees Pty Ltd Maximus Flannery Pty Ltd Citicorp Nominees Pty Limited Snowball 3 Pty Ltd HSBC Custody Nominees (Australia) Limited BFB Holdings Pty Ltd Equity Trustees Limited Dahima Pty Ltd Alitime Nominees Pty Ltd Mr Nicolas Michael Watt Mr Geoffrey John Fennell + Mrs Carmel Ann Fennell Flue Holdings Pty Ltd Mainview Holdings Pty Ltd Kero Investments Pty Ltd Total Ordinary Shares - Quoted Number of shares % of Shares 53,480,001 6,885,107 3,940,000 3,639,100 3,130,770 2,417,125 2,177,603 1,923,077 1,691,109 1,557,153 1,441,456 1,366,667 1,153,846 1,101,668 1,100,000 1,100,000 1,000,000 1,000,000 1,000,000 966,000 92,070,682 37.27% 4.80% 2.75% 2.54% 2.18% 1.68% 1.52% 1.34% 1.18% 1.08% 1.00% 0.95% 0.80% 0.77% 0.77% 0.77% 0.70% 0.70% 0.70% 0.67% 64.17% E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 90 ASX ADDITIONAL INFORMATION ASX ADDITIONAL INFORMATION Pursuant to the Listing Requirements of the Australian Securities Exchange, the shareholder information set D. Unquoted Securities Options over Unissued Shares Number Options 4,500,0001 7,000,0002 815,0003 5,644,7164 1,800,0003 1,500,0003 650,0003 1,923,0775 1,923,0775 1,325,0003 375,0002 950,0006 28,405,870 of Exercise Price Expiry Date Number of Holders 30 cents 20 cents 20 cents 20 cents 20 cents 21.5 cents 20 cents 20 cents 30 cents 20 cents 20 cents 20 cents 6 March 2021 15 January 2023 1 February 2023 31 July 2021 1 July 2023 15 January 2023 7 October 2023 30 June 2021 1 July 2022 1 July 2022 1 July 2022 1 July 2022 17 6 1 108 2 1 1 4 4 6 3 1 1 Options issued pursuant to the initial public offer prospectus 2 Options issued to directors, officers and employees 3 Options issued to employees pursuant to the Company’s Employee Incentive Plan 4 Options issued pursuant to a pro rata entitlement offer 5 Broker options 6 Options issued in lieu of loan interest expense The names of the twenty largest holders of quoted shares are listed below: Performance Rights Number of Rights Expiry Date 25,000 35,000 35,000 150,000 245,000 1 December 2027 1 July 2027 1 July 2028 1 July 2028 Number of Holders 1 2 2 1 E. Voting Rights In accordance with the Company’s Constitution, voting rights in respect of ordinary shares are on a show of hands whereby each member present in person or by proxy shall have one vote and upon a poll, each share will have one vote. There are no voting rights in respect of options or performance rights over unissued shares. F. Restricted Securities There are no restricted securities on issue. E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 90 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 91 out below was applicable as at 6 October 2020. A. Distribution of Equity Securities Analysis of numbers of shareholders by size of holding: Ordinary Fully Paid Shares Distribution Number of shareholders Securities held 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 More than 100,000 Totals 16 80 110 359 152 717 5,139 260,501 943,025 15,848,283 126,420,120 143,477,968 There are 19 shareholders holding less than a marketable parcel of ordinary shares. An extract of the Company’s Register of Substantial Shareholders (who hold 5% or more of the issued B. Substantial Shareholders capital) is set out below: Holder of Relevant Interest Silver Mountain Mining Nominee Pty Ltd C. Twenty Largest Shareholders Shareholder Name Silver Mountain Mining Nominee Pty Ltd CS Third Nominees Pty Limited HSBC Custody Nominees (Australia) Limited Dr Salim Cassim Mr Philip John Cawood Aralad Management Pty Ltd National Nominees Limited UBS Nominees Pty Ltd Maximus Flannery Pty Ltd Citicorp Nominees Pty Limited Snowball 3 Pty Ltd BFB Holdings Pty Ltd Equity Trustees Limited Dahima Pty Ltd Alitime Nominees Pty Ltd Mr Nicolas Michael Watt Flue Holdings Pty Ltd Mainview Holdings Pty Ltd Kero Investments Pty Ltd Total Mr Geoffrey John Fennell + Mrs Carmel Ann Fennell Issued Ordinary Shares Number of shares % of shares 53,480,001 37.27% Ordinary Shares - Quoted Number of shares % of Shares 53,480,001 37.27% 6,885,107 3,940,000 3,639,100 3,130,770 2,417,125 2,177,603 1,923,077 1,691,109 1,557,153 1,441,456 1,366,667 1,153,846 1,101,668 1,100,000 1,100,000 1,000,000 1,000,000 1,000,000 966,000 4.80% 2.75% 2.54% 2.18% 1.68% 1.52% 1.34% 1.18% 1.08% 1.00% 0.95% 0.80% 0.77% 0.77% 0.77% 0.70% 0.70% 0.70% 0.67% 92,070,682 64.17% ASX ADDITIONAL INFORMATION G. Schedule of interests in mining tenements Eagle Mountain mineral licences as at 6 October 2020 are all presently located in the State of Arizona, United States of America. Claim Reference (Tenement) SILVER MOUNTAIN PROJECT Percentage held Prospect & Tenure type Pacific Horizon Patented Claims (26 individual claims) Unpatented Claims (150 individual claims) Empire, Copper Ash, Palestine, Buffalo, Little Pittsburg, Austin, Wellington, Eagle, Number Ten, Number Eleven, Number Twelve, Number Thirteen, Noonday, South Noonday, Dudley, Comet, Alameda, Virginia, Mars, Ashland, Oakland, Sunnyside, Cuprite, Azurite, Yavapai and Jumbo SMM#1-14, SMM#17-145, SMM#147, SMM#149, SMM151, SMM#159, SMM#161 SMM#155, SMM#157, Exploration Permit (1 individual permit) 008-012-0870 Scarlett Unpatented Claims (92 individual claims) Exploration Permit (2 individual permits) Red Mule Unpatented Claims (98 individual claims) Exploration Permit (2 individual permits) Rhyolite Target Unpatented Claims (70 individual claims) Exploration Permit (1 individual permit) SCA#1-15, SCA#57-133 008-120868, 008-120869 SMM#146, SMM#153, SMM#162-207, SMM#210-212, SCA#16-56 SMM#148, SMM#154, SMM#150, SMM#158, SMM#152, SMM#160, 008-120871, 008-120872 SMMSO#001 SMMSO#054; SMMSO#056; SMMSO#058 - 084 SMMSO#023 015; - - 048; 008-120101 100% 100% 100% 100% 100% 100% 100% 100% 100% E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 92 Eagle Mountain mineral licences as at 6 October 2020 are all presently located in the State of Arizona, Prospect & Tenure type Claim Reference (Tenement) Percentage held ASX ADDITIONAL INFORMATION Patented Claims (60 individual claims) ORACLE RIDGE COPPER PROJECT Parcel 1 (Roosevelt, Way-up, Homestake, Lone Pine, Imperial and Hidden Treasure) Parcel 2 (Eagle, York, Copper Peak and Golden Peak No 2) Parcel 3 (Grand Central Lode) Parcel 4 (Tunnel Site, Major McKinley, Marble Peak, Wedge, Giant, Copper Head, Centennial, General R E Lee and Blizzard) Parcel 5 (Oversight MS3461) Parcel 6 (Daily No3, Daily No5, Sphinx, Roskruge, Calumet, Edith, Daily Extension, Cave, Wedge No3, Wedge No2 and Katherine) Parcel 7 (Copper Princess, Apache Central and Daily Tunnel Site) Parcel 8 (Oversight MS3504) Parcel 9 (Apex, Alabama, Bornite, Contact, Cuprite, Epidote, Embersite, Garnet, Over the Top, Yellow Copper, Valley, Apex No2, Keeney and Wilson) Parcel 10 (Chalcopyrite and Peacock) Parcel 11 (Daily Extension No2, Daily Extension No3, Daily Extension No4) Parcel 12 (H T Fraction) Parcel 13 (Turkey) Parcel 22 (Cochise) Parcel 27 (Holly Terror) Parcel 28 (Precious Metals) That portion of Parcels 24 and 25 lying within: Apache, Maricopa, Yavapai, Buster, Major, Greenlee 80% Unpatented Claims (50 individual claims) Jody 1 – 20, Lorelei 1 – 7, Olesya #1 – 23 80% ASX ADDITIONAL INFORMATION G. Schedule of interests in mining tenements United States of America. Prospect & Tenure type Pacific Horizon Claim Reference (Tenement) SILVER MOUNTAIN PROJECT Percentage held Empire, Copper Ash, Palestine, Buffalo, Little Pittsburg, Austin, Wellington, Eagle, Number Ten, 100% Patented Claims Number Eleven, Number Twelve, Number Thirteen, (26 individual claims) Noonday, South Noonday, Dudley, Comet, Alameda, Virginia, Mars, Ashland, Oakland, Sunnyside, Cuprite, Azurite, Yavapai and Jumbo Unpatented Claims SMM#1-14, SMM#17-145, SMM#147, SMM#149, 100% (150 individual claims) SMM151, SMM#155, SMM#157, SMM#159, SMM#161 008-012-0870 SCA#1-15, SCA#57-133 008-120868, 008-120869 Exploration Permit (1 individual permit) Scarlett Unpatented Claims (92 individual claims) Exploration Permit (2 individual permits) Red Mule Unpatented Claims (98 individual claims) Exploration Permit (2 individual permits) Rhyolite Target SMM#146, SMM#148, SMM#150, SMM#152, 100% SMM#153, SMM#154, SMM#158, SMM#160, SMM#162-207, SMM#210-212, SCA#16-56 008-120871, 008-120872 Unpatented Claims SMMSO#001 - 015; SMMSO#023 - 048; 100% (70 individual claims) SMMSO#054; SMMSO#056; SMMSO#058 - 084 Exploration Permit (1 individual permit) 008-120101 100% 100% 100% 100% 100% E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 92 E A G L E M O U N T A I N M I N I N G | 2020 Annual Report 93 www.EAGLEMOUNTAIN.com.au
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