Elementos Limited
Annual Report 2020

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TOMORROW’S TIN ANNUAL REPORT For the year ended 30 June 2020 ASX:ELT | ABN 49 138 468 756 1 27 28 30 36 40 64 65 Annual Report for the year ended 30 June 2020 CONTENTS Chairman’s Letter to Shareholders Oropesa Project Cleveland Project Tenement Interests Resources Statement Cautionary Statements Directors’ Report 2 4 8 9 10 13 14 Auditor’s Independence Declaration Shareholder Information Corporate Governance Statement Consolidated Financial Statements Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report CORPORATE DIRECTORY Directors and Company Secretary Share Registry Mr Andy Greig (Non-executive Chairman) Mr Christopher Dunks (Executive Director) Mr Calvin Treacy (Non-executive Director) Mr Corey Nolan (Non-executive Director, Chairman of the Audit and Risk Committee) Mr Brett Smith (Non-executive Director) Mr Duncan Cornish (Company Secretary) Head Office and Registered Office Elementos Limited Level 6, 10 Market Street Brisbane QLD 4000 Tel: +61 7 3212 6299 Fax: +61 7 3212 6250 www.elementos.com.au Auditor BDO Audit Pty Ltd Level 10, 12 Creek Street Brisbane QLD 4000 Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Boardroom Pty Limited Level 12, 225 George Street Sydney NSW 2000 Tel: 1300 737 760 Fax: 1300 653 459 www.boardroomlimited.com.au Stock Exchange Listing Australian Securities Exchange Ltd ASX Code: ELT Australian Business Number 49 138 468 756 Banker National Australian Bank Limited Level 19, 259 Queen Street Brisbane QLD 4000 Annual Report for the year ended 30 June 2020 2 CHAIRMAN’S LETTER Dear shareholders As tomorrow’s world becomes increasingly electrified, it’s good to be “in tin”. Currently, tin is primarily used as a solder component for consumer electronics which accounts for about half of its global consumption. While demand is expected to remain subdued in the short term as a result of the coronavirus pandemic, the long-term outlook remains bright for global tin consumption. Consumer electronics are expected to rebound strongly as global economies recover. New and disruptive technologies such as robotics, automation, smart home devices, drones, Internet of Things, 5G, advanced computing, hydrogen-related applications, carbon capture, renewable energy, and electric vehicles will be the strongest new use drivers. Tin additions to lead-acid batteries and solder used for joining solar cells have shown strong increases plus the use of tin in Lithium-ion (Li-ion) batteries has shown some of the highest growth over the last decade, accounting for 0.4% of refined tin consumption in 2011 and growing to 3% in 2019. Tin and tin compound materials offer increased stability to Li-ion batteries. This trend is set to continue, with the degree of vehicle electrification expected to increase substantially over the coming decade. Tin was singled out as the market most favourably impacted by the technology revolution relative to its size in a 2018 Massachusetts Institute of Technology study commissioned by Rio Tinto. Furthermore, in 2017, more than 5,000 scientific papers and tin technology patents were published, which demonstrates a strong future for this metal. With demand economics in our favour, visible tin stocks are very low, and the consensus is that there’s a real supply issue going forward, regardless of the EV story. Data from the International Tin Association clearly indicates an expected shortfall in the supply of tin. Higher extraction costs and lower grades are expected to lead to continued declines in tin production and a market deficit is anticipated to widen through to 2021, with few new tin mines in the pipeline. “ With demand economics in our favour, visible tin stocks are very low, and the consensus is that there’s a real supply issue going forward, regardless of the EV story. “ Elementos is well placed to take advantage of tin’s supply/demand imbalance. Our flagship Oropesa Project in southern Spain is one of the best undeveloped tin resources in the world. Attractions include a large JORC Annual Report for the year ended 30 June 2020 3 Mineral Resource based on more than 54,000 metres of drilling, open-cut mining potential, simple metallurgy and processing, access to development infrastructure, support from local stakeholders and in a secure mining jurisdiction. An Economic Study completed in May found that at a tin price of US$19,750/tonne, the mine could potentially generate an annual gross revenue of more than US$48 million against a forecast operating cost of US$28 million per year or cash cost of US$11,534/tonne of metal. The Study valuation also found a base case pre-tax NPV8% of approximately US$92m and post tax NPV8% of approximately US$66m. The company will move quickly to progress drilling and environmental permitting at Oropesa after raising A$773,000 from our oversubscribed Share Purchase Plan (SPP) in September 2020. This amount is more than double the original target of A$300,000 and is in addition to the A$2,552,000 raised in a private placement completed in August 2020. This represents a great vote of confidence in the company’s strategy and performance. Meanwhile, excellent progress continues to be made at our Cleveland Tin Project in Tasmania following the release of a new JORC resource estimate. This potentially paves the way to move towards the development of a small-scale open cut and tailings retreatment processing facility. Further exploration and metallurgical testing is planned to examine opportunities for enhancing the project economics. It’s an exciting time to be a Shareholder of Elementos. Our experienced mining team is working hard to fast-track our transition from explorer to producer at a time when there is an increasing global demand for tin and falling supply. Our vision to be major tin producer has become much clearer this past financial year and we’re looking forward to an electric tomorrow with tremendous confidence. Yours sincerely Andy Greig Non-executive Chairman Approximately US$26 million has been spent to date at the Oropesa Project including 261 drillholes for a total of 54,026m of drilling. Annual Report for the year ended 30 June 2020 4 OROPESA PROJECT Located in southern Spain, the Oropesa Tin Project is one of the world’s largest undeveloped, open-cut mineable tin deposits, with access to world class infrastructure. Oropesa is an advanced tin project with near term development and cash flow potential. The acquisition of Oropesa represents an excellent opportunity to create value-uplift potential for shareholders as the project is advanced towards development. Attractions of the Oropesa project include: • Large, well-defined resource - A globally significant, undeveloped resource with strong opportunities for resource expansion; The Company announced on 31 December 2019 the finalisation of the acquisition of the Oropesa Tin Project with the transfer of all the shares Minas De Estaño De España S.L.U.(MESPA) from Eurotin Ltd (TSX_V:TIN) to Elementos. • Open-cut mining potential –The deposit is amendable to simple drill and blast, truck and shovel open cut mining operations; • Simple metallurgy - extensive metallurgical testing and process flowsheet designed to produce a 62.4% tin concentrate at a 74.2% metallurgical recovery; • Near-term production potential – A positive Economic Study has been completed; Oropesa consists of an exploration concession package (Investigation Permit No. 13.050) covering an area of 13km2, located approximately 75km north-west of Cordoba and 180km north-east of Seville, in the region of Andalucía, in southern Spain. The Oropesa district has historically been a mining district for base metals with coal mining ceasing in recent times. • Permitting process advanced – A revised Environmental Impact Study (EIS) is being prepared following a review of the initial EIA lodged with the Junta de Andalucia (government) in January 2018 and a Mining Licence application that has been submitted to the Junta for approval; Annual Report for the year ended 30 June 2020 5 • Located close to development infrastructure - Located close to major highways which link to export ports, water supply and power supply. The region has a skilled mining workforce. • Low sovereign risk - The Andalucia region of Spain is home to some of the country’s most significant mining operations and part of the European Union which provides a safe investment environment; • Large sunk cost – significant investment in drilling, geophysics, metallurgical testing and development studies; and • Local community support - The local government and community is extremely supportive of the project moving ahead. Tin mineralisation was first recognised at Oropesa in 1982. Intensive exploration activity since 2010, including 261 drill holes, has resulted in the definition of the current mineral resource. The project area contains numerous geophysical and geochemically anomalous regions that could potentially extend this resource with additional exploration. The tin mineralisation (cassiterite with minor stannite) occurs as a replacement style orebody associated with sulphides, predominantly pyrite and pyrrhotite within a sedimentary sequence at the contact between sandstone and conglomerate units. Widespread folding of the sedimentary sequence has resulted in the mineralised sequence being overturned and repeated in places. Oropesa geological resource model. Highlighted resources (circled) are not included in the current Production Target for the recently completed Economic Study (2017 Geological Resource Model). Annual Report for the year ended 30 June 2020 6 The Oropesa Tin Project contains a JORC compliant Measured, Indicated and Inferred Resource of 67,520 tonnes of tin. The Company is actively advancing the Oropesa Tin Project towards development. The Company has completed an Economic Study on the project during the reporting period. The Economic Study is based on the development of an open-cut mine, processing plant, tailings storage facility and infrastructure to support a 750,000 tonne per annum (tpa) mining operation over a mine life of 14 years. The operation will produce high-quality tin concentrate for sale to commercial smelters in Europe and Asia. The Study, based on a tin price of US$19,750 per tonne, demonstrates a real, pre and post-tax Net Present Value at an 8% discount rate of approximately US$92 million and US$66 million, respectively. The pre and post-tax Internal Rate of Return (IRR) is approximately 25% and 22%, respectively. The capital payback period is approximately four years. Capital development costs have been estimated at US$52.2 million including a 20% contingency. The Study incorporates additional work completed at Oropesa since the Initial Preliminary Economic Assessment was released in 2014 (on SEDAR by Eurotin Ltd). Additional work includes a pilot plant metallurgical test program, ore pre-concentration testing, exploration drilling and development of an updated geological resource model, hydrogeological and geotechnical studies and advanced environmental impact assessment studies. The Study was developed by various independent consultants:- Optimal Mining Solutions (Brisbane, Australia), responsible for the final mine design and schedule, IGAN Consultores, Oviedo, Spain (IGAN), development of the initial mine plans and schedule, Wardell Armstrong International UK, metallurgical test work and Soluciones, Concentradores Y Procesos de Ingeniería, S.L. (SCYPI), process design, capital and operational costs. Project economics were carried out by the company. The Study has been completed to an overall Scoping Study level of accuracy of +/- 35%. Annual Report for the year ended 30 June 2020 7 During the course of the Study the company identified significant areas that have the potential to be optimised and add significant additional value to the project. The optimisation works present a strong opportunity to extract considerably more value from the project. These include; • Exploration drilling to expand and optimise Oropesa’s JORC Mineral Resource, • Reinterpretation of the different styles of tin mineralisation and geological resource boundaries, • Re-examining and assay of existing drill cores from the early exploration phases of the project. When completed, this new data will be used to adjust resource boundaries and estimate a new JORC geological resource. The Company has been progressing the Environmental Approvals and Mining Lease (Exploitation Licence) application process through discussions with representatives of the Andalucian Government (Junta). The Mining Lease application was lodged in October 2017 and the Environmental Impact Study (EIS) was lodged in February 2018. The EIS has been through an initial review stage with a number of recommendations made by the Junta to improve the EIS and overall environmental outcomes. The re-design of the proposed open-cut mining operation will have an impact on the EIS and as such a decision has been made to revise the original EIS to better align with the Company’s newly proposed mining operation. The Company has defined an Exploration Target* for the Oropesa Tin Project in Spain of between 35.5mt and 51.0mt at a grade ranging between 0.46% to 0.62% tin. The Oropesa JORC resource is defined geophysically by an Induced Polarisation (IP) chargeability anomaly identified in an IP survey carried out in 2011. The Oropesa Project area contains a number of parallel IP anomalies, of which only the central IP anomaly has undergone intensive diamond drilling. Detailed drilling of the central IP anomaly has provided sufficient data to build a geological model on which the current Oropesa resource is based, but also provides sufficient data to be able to assess the potential of the Oropesa Project to host additional tin resources. * The potential quantity and grade of the Exploration Target is conceptual in nature and therefore is an approximation. There has been insufficient exploration to estimate a Mineral Resource and it is uncertain if further exploration will result in the estimation of a Mineral Resource. Annual Report for the year ended 30 June 2020 8 CLEVELAND PROJECT The Cleveland Tin Project is located 80km southwest of Burnie in the mineral-rich northwest region of Tasmania, Australia. It is a historic mine boasting excellent power, water and transport infrastructure. The tin province in northwest Tasmania hosts some of the world’s highest grade and most productive tin mines, including Renison Bell, Mt. Bischoff and Cleveland. The region has well-developed infrastructure and a strong mining culture. The site is linked to Burnie Port by sealed roads. Accessible power runs through the Cleveland exploration licence area. Cleveland hosts tin and copper mineralisation in tailings, open cut and underground Mineral Resources, and includes a separate tungsten Mineral Resource. The Company has completed a number of studies assessing the potential of developing these resources. In 2018 the Company completed an update to the JORC Resource Estimate for hard rock resources for the Cleveland tin-copper and tungsten projects in Tasmania. The total contained tin within the revised 2018 JORC Resource Estimate increased by 15.8% and contained copper increased by 20.0%. There has been no change to the existing 2015 estimate for the tailings resource at Cleveland. The results for the 2018 hard rock resource estimate are reported in accordance with the JORC Code (2012). The significant upgrade in the revised JORC Resource Estimate for the Cleveland Project can be viewed in our Resources Statement on page 10. The Cleveland ore body remains open at depth, along strike and down dip from the currently defined ore lenses. The development of new exploration targets at Cleveland has been derived from the collation of historical underground geological mapping and the 2018 geological resource model. The Cleveland Project is continuing to be steadily progressed towards development with the next phases of work including an exploration programme to locate and define additional resources, completion of a metallurgical test work programme on hard rock samples (last carried out in 1986), the assessment of the potential for a larger initial open pit operation, the design and location of a new tailings storage facility and detailed financial modelling of a ‘life of mine’ combined open pit – tailings – underground operation as a prelude to commencing a detailed feasibility study. Annual Report for the year ended 30 June 2020 9 TENEMENT INTERESTS Elementos Limited held the following interests in tenements as at the date of this report: Tenement Name Tenement Number Area (km²) ELT Interest Tenement Location Cleveland EL7/2005 Oropesa 13.050 55 13 100% 100% Tasmania, Australia Andalucia, Spain A summary of the Group’s annual review of its ore reserves and mineral resources of its Cleveland project located in Tasmania at 30 June 2020 compared to 30 June 2019 and its initial reporting of the Oropesa Tin Project located in Spain, is set out overleaf. For details regarding any movement in the Reserve or Resource between the reporting period refer to the Review of Operations. A view of our acreage at the Oropesa Tin Project in southern Spain with the nearby town of Fuente Obejuna in tha background Annual Report for the year ended 30 June 2020 10 RESOURCES STATEMENT Oropesa Project Total Tin Metal Resource (at 0.15% Sn cut-off) 30 June 2020 – no comparative as project acquired during the reporting period Category Measured Indicated Inferred Tonnage (Mt) Sn Grade % Contained Sn (t) 0.33 9.01 3.20 1.09 0.53 0.52 3,585 47,320 16,615 Table subject to rounding errors; Sn = tin Cleveland Project Open Pit Tin-Copper Mineral Resource (at 0.35% Sn cut-off) NOTE: this Open Pit Tin-Copper Mineral Resource is a sub-set of the Total Tin-Copper Mineral Resource noted below 30 June 2019 and 30 June 2020 – unchanged Category Indicated Inferred Tonnage (Mt) Sn Grade % Contained Sn (t) Cu Grade % Contained Cu (t) 1.73 0.16 0.93 1.18 16,100 1,900 0.33 0.49 5,700 800 Table subject to rounding errors; Sn = tin, Cu = copper Underground Tin-Copper Mineral Resource (at 0.35% Sn cut-off) NOTE: this Underground Tin-Copper Mineral Resource is a sub-set of the Total Tin-Copper Mineral Resource noted below 30 June 2019 and 30 June 2020 – unchanged Category Indicated Inferred Tonnage (Mt) Sn Grade % Contained Sn (t) Cu Grade % Contained Cu (t) 4.50 1.08 0.68 0.70 30,600 7,500 0.29 0.25 13,000 2,700 Table subject to rounding errors; Sn = tin, Cu = copper Annual Report for the year ended 30 June 2020 11 1 Total Tin-Copper Mineral Resource (at 0.35% Sn cut-off) 30 June 2019 and 30 June 2020 – unchanged Category Indicated Inferred Tonnage (Mt) Sn Grade % Contained Sn (t) Cu Grade % Contained Cu (t) 6.23 1.24 0.75 0.76 46,700 9,400 0.30 0.28 18,700 3,500 Table subject to rounding errors; Sn = tin, Cu = copper Underground Tungsten Mineral Resource (at 0.20% WO3 cut-off) 1 30 June 2019 and 30 June 2020 – unchanged Category Inferred Tonnage (Mt) W03 Grade % 4.00 0.30 Table subject to rounding errors; WO3 = tungsten oxide Tailings Ore Reserve (at 0% Sn cut-off) 2 30 June 2019 and 30 June 2020 – unchanged Category Probable Tonnage (Mt) Sn Grade % Contained Sn (t) Cu Grade % Contained Cu (t) 3.70 0.29 11,000 0.13 5,000 Table subject to rounding errors; Sn = tin, Cu = copper The Group regularly reviews its Mineral Resources and Reserves to assess their reasonableness, engaging suitably qualified competent person/s where required. A summary of the governance and controls applicable to the Group’s Mineral Resources and Reserves processes is as follows: • Review and validation of drilling and sampling methodology and data spacing, geological logging, data collection and storage, sampling and analytical quality control; • Geological interpretation — review of known and interpreted structure, lithology and weathering controls; • Estimation methodology — relevant to mineralisation style and proposed mining methodology; • Comparison of estimation results with previous mineral resource models, and with results using alternate modelling methodologies; • Visual validation of block model against raw composite data; and • Peer review by senior company personnel and independent consultants as required. 1 This information was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. 2 Announced per the JORC Code 2012 on 3 August 2015 “Cleveland Tailings Ore Reserve” Annual Report for the year ended 30 June 2020 12 Competent Persons Statement: The information in this report that relates to the Annual Mineral Resources and Ore Reserves Statement, Exploration Results and Exploration Targets is based on information and supporting documentation compiled by Mr Chris Creagh, who is a full-time employee of Elementos Ltd. Mr Creagh is a Competent Person who is a Member of the Australasian Institute of Mining and Metallurgy and who consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Chris Creagh has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code 2012). The information in this report that relates to Processing and Metallurgy for the Oropesa Tin Project is based on and fairly represents information and supporting documentation compiled by Chris Creagh, who is a full- time employee of Elementos Ltd. Mr Creagh is a Competent Person who is a Member of the Australasian Institute of Mining and Metallurgy and who consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Chris Creagh has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code 2012). The Australian Securities Exchange has not reviewed and does not accept responsibility for the accuracy or adequacy of this release. Annual Report for the year ended 30 June 2020 13 CAUTIONARY STATEMENTS Forward-looking statements Mineral Resources, Ore Reserves and Production Targets This document may contain certain forward-looking statements. Such statements are only predictions, based on certain assumptions and involve known and unknown risks, uncertainties and other factors, many of which are beyond the company’s control. Actual events or results may differ materially from the events or results expected or implied in any forward-looking statement. The inclusion of such statements should not be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions or that any forward-looking statements will be or are likely to be fulfilled. Elementos undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this document (subject to securities exchange disclosure requirements). The information in this document does not take into account the objectives, financial situation or particular needs of any person or organisation. Nothing contained in this document constitutes investment, legal, tax or other advice. For more information on specific risks associated with forward looking statements refer to the Risk Assessment section of the ASX announcement “Positive Economic Study for the Oropesa Tin Project”, 7th May 2020. The information in this report that relates to the Mineral Resources and Ore Reserves were last reported by the company in compliance with the 2012 Edition of the JORC Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. The Mineral Resources, Ore Reserves, production targets and financial information derived from a production target were included in market releases dated as follows: *1 - Cleveland Tailings Ore Reserve, 3 August 2015; *2 - Cleveland JORC Resource Significantly Expanded, 5 March 2014 (tungsten resource); *3 - Acquisition of the Oropesa Tin Project, 31st July 2018; *4 - Substantial Increase in Cleveland Open Pit Project Resources following revised JORC study, 26th September 2018; *5 - Exploration Evaluation at Oropesa tin project, 4th February 2019; *6 - Oropesa Ore Sorting Performance Testwork, 9th August 2019; *7 - Oropesa Presentation – Seville, Spain, 18th October 2019; *8 - Positive Economic Study for the Oropesa Tin Project, 7th May 2020; and *9 - Oropesa optimisation work and drilling to unlock further value, 13th July 2020 The company confirms that it is not aware of any new information or data that materially affects the information included in the market announcements referred above and further confirms that all material assumptions underpinning the production targets, forecast financial information derived from a producation target and all material assumptions and technical parameters underpinning the Ore Reserve and Mineral Resource statements contained in those market releases continue to apply and have not materially changed. Annual Report for the year ended 30 June 2020 14 DIRECTORS’ REPORT The directors submit their report on the consolidated entity (“Group”) consisting of Elementos Limited and the entities it controlled at the end of, and during, the financial year ended 30 June 2020. Chris Dunks Executive Director BEng (Mech), GAICD Directors The following persons were directors of Elementos Limited during the financial year and up to the date of this report, unless otherwise stated: Mr Andy Greig Mr Chris Dunks Mr Corey Nolan Mr Calvin Treacy Mr Brett Smith (appointed 24 January 2020) Information on Directors The board has a strong combination of technical, managerial and capital markets experience. Expertise and experience includes operating and mineral exploration in Australia. The names and qualifications of the current directors are summarised as follows: Andy Greig Non- Executive Chairman GDipBus (Monash); Fellow, ATSE Mr Greig recently retired from a 35-year career with Bechtel Group, Inc., the globally renowned engineering, construction and project management company. Mr Greig was a director of Bechtel Group, Inc., and for 13 years through 2014; the President of its Mining and Metals Global Business Unit. Mr Greig has deep experience in the engineering and construction of large mining and minerals processing projects around the world. Mr Greig has not held any other (ASX listed) directorships in the last three years. Mr Dunks is currently the Managing Director of Synergen Met Pty Ltd, a Brisbane-based company that is commercialising novel minerals processing technology. Mr Dunks was a Founder and Managing Director of Rockwell Minerals Pty Ltd, the company that merged with Elementos in 2013, and negotiated the original deal to purchase the Cleveland Project. Mr Dunks’ experience over the last 20 years has been dominated by working on major minerals processing, refining and power projects both in Australia and the USA. Mr Dunks’ experience has been in mechanical design, construction management and supervision, project controls, project management, contract negotiation, business development and new technology commercialisation. He has worked extensively with Bechtel, Worley Parsons, SNC Lavalin and Jacobs (Aker Kvaerner). Mr Dunks was originally appointed as a Non-Executive Director of Elementos in November 2015. Following the resignation of the Company’s CEO in July 2016, Mr Dunks continued the Company’s permitting and partnering process in an Executive Director capacity. Mr Dunks is a member of the Audit and Risk Committee. During the past three years, Mr Dunks has also served as a director of ASX listed company Strategic Minerals Corporation NL (ASX: SMC) (February 2020 to current). Corey Nolan Non-executive Director B.Com, M.Mineral & Energy Economics, GAICD Mr Nolan is an accomplished public company director whose 30-year career in the resources industry started on the ground in operations before spanning a broad range of corporate roles from equities analyst and corporate finance director to a number of senior executive and board positions. Annual Report for the year ended 30 June 2020 15 As Managing Director of ASX listed Platina Resources Limited since August 2018, he has been instrumental in restructuring the company’s project portfolio, which has included the acquisition, funding, exploration and development of new assets. Prior to Platina, Mr Nolan was Chief Executive Officer at Sayona Mining Limited where he led the acquisition and development of the Authier Lithium Project in Canada and chartered a substantial growth in the company’s market capitalisation. Mr Nolan is a member of the Audit and Risk Committee. Director of Hong Kong listed Dragon Mining which has operating gold mines and processing plants in both Finland and Sweden. Mr Smith is also Deputy Chairman of Hong Kong listed resources investment company APAC Resources and Executive Director of Australian Securities Exchange listed company Metals X. During the past three years, Mr Smith has also served as a director of ASX listed companies Metals X (December 2019 to present), Tanami Gold (November 2018 to present) and Prodigy Gold (May 2016 to present). During the past three years, Mr Nolan has also served as a director of ASX listed companies Leyshon Resources Limited (February 2014 to August 2018) and Platina Resources Limited (August 2018 to current). Duncan Cornish Company Secretary BBus(Acc) Calvin Treacy Non-executive Director (BEng, MBA, MAICD) Mr Treacy has over 20 years senior management experience in mining, mining technology and manufacturing. He has a strong track record of founding and growing companies, and brings a wealth of experience in the areas of strategic planning and capital raising. Mr Treacy has worked in a range of roles including Non- executive Director, Chief Executive Officer, Chief Operating Officer and Production Manager, providing a blend of experience from hands-on management through to executive oversight and strategic management. Mr Treacy is a member of the Audit and Risk Committee. Mr Treacy has not held any other (ASX listed) directorships in the last three years. Brett Smith Non-executive Director BChE(Hons), MBA, MResearch Methodology Mr Smith has over 30 years’ experience in the resources, construction and engineering industries in senior operational and financial positions. Mr Smith is Executive Duncan Cornish held the position of Company Secretary during the financial year and up to the date of this report. Mr Cornish is a Chartered Accountant with significant experience as public company CFO and Secretary, focused on junior resource companies, as well as financial, administration and governance. Mr Cornish is an accomplished and highly efficient corporate administrator and manager. Duncan has more than 20 years’ experience in the accountancy profession both in England and Australia, mainly with the accountancy firms Ernst & Young and PricewaterhouseCoopers. He has extensive experience in all aspects of company financial reporting, corporate regulatory and governance areas, business acquisition and disposal due diligence, capital raising and company listings and company secretarial responsibilities, and serves as corporate secretary and chief financial officer of several Australian and Canadian public companies. Mr. Cornish is a member of the Chartered Accountants Australia and New Zealand. Annual Report for the year ended 30 June 2020 16 Interests in Securities Review of Financial Condition As at the date of this report, the interests of each director in shares and options issued by the Company are shown in the table below: Directors A. Greig C. Dunks C. Nolan C. Treacy B. Smith Shares Options 300,887,439 19,687,505 4,420,428 28,000,004 - - - - - - Principal Activities The principal activity of the Group during the year was the finalisation of the Oropesa Tin Project acquisition from Eurotin Inc. The Group is also developing the Cleveland tin- low-capital copper-tungsten Project through a staged, development strategy, which minimises upfront capital, with cash flow funding future stages. Operating Results The Group’s operating loss for the financial year, after applicable income tax was $1,581,484 (2019: $1,957,377). Dividends Paid or Recommended There were no dividends paid or recommended during the financial year. Review of Operations Information on the operations of the Group during the financial year and up to the date of this report is set out separately in the Annual Report under Review of Operations. Capital Structure At 30 June 2019, the Company had 1,544,330,961 ordinary shares, 10,000,000 unlisted (ESOP) options, 100,000,000 unlisted (other) options, 23,000,000 performance rights on issue and 1,000,000,000 convertible redeemable preference shares. On 31 July 2019, 10,000,000 unlisted options exercisable at 1.215 cents each expired. On 14 January 2020, 1,000,000,000 convertible redeemable preference shares converted to 1,000,000,000 ordinary shares on completion of the Oropesa Tin Project acquisition. On 26 May 2020, 4,000,000 shares were issued to Chris Creagh on the exercise of vested performance rights. On 30 June 2020, 19,000,000 performance rights issued to Chris Creagh expired. On 30 June 2020, 100,000,000 unlisted (other) options exercisable at $0.007 each expired. At 30 June 2020, the Company had 2,548,330,961 ordinary shares on issue. On 6 August 2020, the Company announced that it had received commitments to complete a private placement of 464,000,017 shares to be issued at 0.55 cents per share with participants receiving an attaching option on a one for three basis, with an exercise price of 0.9 cents per share and expiry date of 31 August 2022. The transaction will complete in two tranches as follows: (a) On 14 August 2020 422,727,288 shares were issued at 0.55 cents per share and 140,909,121 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022 were issued. (b) Subject to shareholder approval at the 2020 Annual General Meeting the Company plans to issue 41,272,729 shares at 0.55 cents per share and 13,757,576 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022. Annual Report for the year ended 30 June 2020 17 As part of the Capital Raising activity announced on 6 August 2020 detailed above the Company announced that it had engaged BW Equities to act as lead manager to the placement. As consideration BW Equities are to be issued following shareholder approval at the 2020 Annual General Meeting, 40,000,000 unlisted options with an exercise price of 0.9 cents per share expiring 31 August 2022. On 9 September 2020, the Company announced the successful completion of an oversubscribed Share Purchase Plan (“SPP”) to existing shareholders raising $773,000. The SPP will complete as follows: Throughout the year the Group focussed on: • finalising the acquisition of the Oropesa Tin Project; and • exploring innovative ways of enhancing the value of the Oropesa Tin Project and Cleveland Project. The Group’s working capital, being current assets less current liabilities has decreased from $212,825 in 2019 to ($1,433,783) in 2020, principally due to ongoing exploration expenditure, acquisition and operating costs of the Oropesa Tin Project and $1,250,000 loan outstanding to Chairman Andy Greig. (a) On 9 August 2020 135,545,486 shares were issued at 0.55 cents per share. Treasury Policy (b) The Company will offer SPP participants up to 45,181,875 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022 subject to a separate offer under a cleansing prospectus. (c) Subject to shareholder approval at the 2020 Annual General Meeting the Company plans to issue 5,000,001 shares at 0.55 cents per share and 1,666,668 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022 to Directors that participated in the SPP. As at the date of this report, the Company had 3,106,603,735 ordinary shares, 140,909,121 unlisted (other) options. In addition, the Company has agreements in place to issue the following subject to a cleansing prospectus and shareholder approval, 137,181,821 ordinary shares and 130,909,151 unlisted (other) options. Financial Position At 30 June 2020, the Group’s net assets totalled $7,017,848 (2019: $5,656,160) which included cash assets of $199,176 (2019: $400,812). The movement in net assets largely resulted from the following factors: • Operating losses of $1,581,484; and • Acquisition of the Oropesa Tin Project from Eurotin Inc. See note 24 for further details of the initial recognition of the transaction. The Group does not have a formally established treasury function. The Board is responsible for managing the Group’s finance facilities. The Group does not currently undertake hedging of any kind. Liquidity and Funding Following the recently completed capital raising in August 2020 and the existing loan facility, the Group has sufficient funds to finance its operations and exploration activities, and to allow the Group to take advantage of favourable business opportunities, not specifically budgeted for, or to fund unforeseen expenditure. Of the $1,250,000 loan outstanding to Director Andy Greig, $500,000 will be converted to equity. Significant Changes in State of Affairs Elementos Limited remained relatively unaffected during the period by COVID-19. Staff worked remotely when possible and followed enhanced social distancing and health and safety procedures when at the workplace. The Company did not receive any subsidies beyond the universally available ATO cashflow boost scheme ($50,000). There was no other matter or circumstance during the financial year that has significantly affected the state of affairs of the Group. Annual Report for the year ended 30 June 2020 18 Events After Reporting Date • On 6 August 2020, the Company announced that it had received commitments to complete a private placement of 464,000,017 shares to be issued at 0.55 cents per share with participants receiving an attaching option on a one for three basis, with and exercise price of 0.9 cents per share and expiry date of 31 August 2022. The transaction will complete in two tranches as follows: (a) On 14 August 2020 422,727,288 shares were issued at 0.55 cents per share and 140,909,121 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022 were issued. (b) Subject to shareholder approval at the 2020 Annual General Meeting the Company plans to issue 41,272,729 shares at 0.55 cents per share and 13,757,576 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022. As part of the Capital Raising activity announced on 6 August 2020 detailed above the Company announced that it had engaged BW Equities to act as lead manager to the placement. As consideration BW Equities are to be issued 40,000,000 share options with an exercise price of 0.9 cents per share expiring 31 August 2022. • On 6 August 2020, the Company announced that it had entered into an agreement, subject to shareholder approval at the 2020 Annual General Meeting, to convert $500,000 of the outstanding loan balance with Mr Andy Greig (Chairman). On conversion of the loan Mr Greig will receive 90,909,091 ordinary shares with an issue price of 0.55 cents per share and 30,303,030 options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022. • On 9 September 2020, the Company announced the successful completion of an oversubscribed Shares Purchase Plan (“SPP”) to existing shareholders raising $773,000. The SPP will complete as follows: (a) On 9 August 2020 135,545,486 shares were issued at 0.55 cents per share. (b) The Company will offer SPP participants up to 45,181,875 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022 subject to a separate offer under a cleansing prospectus. (c) Subject to shareholder approval at the 2020 Annual General Meeting the Company plans to issue 5,000,001 shares at 0.55 cents per share and 1,666,668 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022 to Directors that participated in the SPP. Other than the events noted above, there are no other matters or circumstances that have arisen since the end of the year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. Environmental Issues The Group is subject to significant environmental regulations under the laws of the Commonwealth of Australia and states of Australia in which the Group currently operates. Following completion of the Oropesa Tin Project acquisition the Group is subject to the environmental regulations of the Central Government of Spain, Cordoba Province of Andalucia, Fuente Obejuna municipality and to a lesser extent the European Union. The directors monitor the Group’s compliance with environmental obligations. The directors are not aware of any compliance breach arising during the year and up to the date of this report. Native Title Mining tenements that the Group currently holds, are subject to Native Title claims. The Group has a policy that is respectful of the Native Title rights and is continuing to negotiate with relevant indigenous bodies. Annual Report for the year ended 30 June 2020 19 Remuneration Report (Audited) This report details the nature and amount of remuneration for each director and other key management personnel. The names of key management personnel of Elementos Ltd who have held office during the financial year are: Directors Position Andy Greig Director – Non-executive Chairman Chris Dunks Director – Executive Corey Nolan Director - Non-executive Calvin Treacy Director - Non-executive Brett Smith Chris Creagh Director - Non-executive (appointed 24 January 2020) Chief Executive Officer (resigned 31 March 2020) Drew Speedy Chief Financial Officer (appointed 1 April 2019) The Group’s remuneration policy seeks to align director and executive objectives with those of shareholders and business, while at the same time, recognising the early development stage of the Group and the criticality of funds being utilised to achieve development objectives. The board believes the current policy has been appropriate and effective in achieving a balance of these objectives. The Group’s remuneration policy provides for long-term incentives to be offered through a director and employee share option plan and also through a performance rights plan. Options may be granted under these plans to align directors’, executives’, employees’ and shareholders’ interests. Two methods may be used to achieve this aim, the first being performance rights and options that vest upon reaching or exceeding specific predetermined objectives, and the second being options granted with higher exercise prices (than the share price at issue) rewarding share price growth. The board of directors is responsible for determining and reviewing the Group’s remuneration policy, remuneration levels and performance of both executive and non- executive directors. Independent external advice will be sought when required. No independent external advice was sought during the current year. Performance-Based Remuneration Performance-based remuneration includes both short- term and long-term incentives and is designed to reward key management personnel for reaching or exceeding specific objectives or as recognition for strong individual performance. Short-term incentives are available to eligible staff of the Group and may be comprised of cash bonuses, determined on a discretionary basis by the board. No short-term incentives were made available during the year. Long-term incentives are comprised of share options and performance rights, which are granted from time-to-time to encourage sustained strong performance in the realisation of strategic outcomes and growth in shareholder value. The exercise price of the options is determined after taking into account the underlying share price performance in the period leading up to the date of grant and if applicable, performance conditions attached to the share options. Subject to specific vesting conditions, each option is convertible into one ordinary share. Chris Creagh (CEO) until 31 March 2020 was issued with 30,000,000 Performance Rights for nil consideration on 9 February 2018, pursuant to Board approval and the shareholder approved Performance Rights Plan. Each Performance Right carries the right to one Elementos Limited ordinary share, subject to satisfaction of certain performance hurdles/vesting conditions. The performance period for the performance rights expired on 30 June 2020. Performance Rights shall be divided into tranches of the amounts set out in Column 1, vesting on satisfaction of conditions set out in Column 2 overleaf: Annual Report for the year ended 30 June 2020 20 Column 1 Column 2 (1) 4,000,000(a) On continuous employment with the Company until 31 March 2018 (2) 2,000,000 On successful completion of the Definitive Feasibility Study Tranches 2, 4, 5 and 7 all expired at 30 June 2020 without meeting the vesting conditions. The Group’s policy for determining the nature and amount of remuneration of board members and key executives is set out below. (3) 3,000,000(a) On continuous employment with the Company until 1 January 2019 Directors (4) 3,000,000 On final approval of Environmental Permitting by any relevant authority (5) 4,000,000 On completion of a capital raising (debt or equity, or a combination) sufficient to fund construction of a project and Elementos' corporate costs (6) 4,000,000(b) On continuous employment with the Company until 1 January 2020 (7) 10,000,000 On the commissioning of a process plant that uses the low concentrate, roasting, leaching and electrowinning technology introduced to Elementos and reaching 80% of planned monthly production rate for a period of 3 months at any site operated by Elementos (a) These 7,000,000 performance rights were exercised into fully paid ordinary shares on 17 April 2019. (b) These 4,000,000 performance rights were exercised into fully paid ordinary shares on 26 May 2020. If a vesting condition is satisfied after the Employee's employment ends, the Board may in its absolute discretion (acting reasonably) assess and rate the Employee's performance or contribution toward the satisfaction of a vesting condition ('Performance Rating') in which event the Performance Rights for that Tranche will convert in the limited proportion set out in the table below ('Determined Rights'), and otherwise do not convert to ordinary Shares: Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The maximum aggregate amount of fees that can be paid to non- executive directors is subject to approval by shareholders at the Annual General Meeting and is not linked to the performance of the Group. The maximum aggregate amount of fees that can be paid to non-executive directors approved by shareholders is currently $250,000. One-third, by number, of non-executive directors retires by rotation at the Company’s Annual General Meeting. Retiring directors are eligible for re- election by shareholders at the Annual General Meeting of the Company. The appointment conditions of the non- executive directors are set out and agreed in letters of appointment. The Company currently believes it is prudent it continues to maintain a very low-cost corporate overhead and preserve its cash resources. Consequently, non-executive director fees are $25,000 per annum (including superannuation) to each non-executive director. The Company’s chairman, Andy Greig has chosen to not accept a (director) fee. Chris Dunks was appointed as an executive director and his fee was increased to $73,000 per annum from 1 August 2016. If directors perform services for the Company that, in the opinion of the other directors, is outside the scope of the ordinary duties of the director, the Company may pay that director for those services in addition to the remuneration outlined above. During the current Financial Year Mr Treacy received $2,000 of additional fees in relation to work undertaken on investor relations. Performance Rating % Perfomance Rights capable of converting Executives Excellent Very Good Good Fair Poor 100% 75% 50% 25% 0% The remuneration structure for executives is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the Group. The executives receive payments provided for under an employment or service agreement, which may include cash, superannuation, short-term incentives, and equity based performance remuneration. Annual Report for the year ended 30 June 2020 21 Chris Creagh was appointed Chief Executive Officer (CEO) on 1 January 2017 and resigned as CEO on 31 March 2020 and has continued employment with the Company in the role of Project Geologist. The key terms of the employment agreement with Chris Creagh were: • Total Fixed Remuneration of $200,000 per annum (inclusive of superannuation) which was amended from October 2020 to $100,000 per annum (inclusive of superannuation) as a result of a transition of the role from full-time to part-time; • Total Fixed Remuneration of $200,000 per annum (inclusive of superannuation); • Annual cash bonus at the discretion of the board (no STI was granted during the 2020 or 2019 financial years); • Incentive package of 30,000,000 performance rights (issued on 9 February 2018); and • 90 days’ notice of termination by either party. Drew Speedy was appointed Chief Financial Officer (CFO) on 1 April 2019. The key terms of the employment agreement with Drew Speedy are: • Annual cash bonus at the discretion of the board (no STI was granted during the 2020 or 2019 financial years); and • 90 days’ notice of termination by either party. The Company has a services agreement with Corporate Administration Services Pty Ltd (“CAS”) and Duncan Cornish, the Company’s CFO until 31 March 2019 and Company Secretary. Under the agreement, CAS also provided accounting, bookkeeping and administrative services. Both Elementos and CAS are entitled to terminate the agreement upon giving not less than three months’ written notice. The base fee under the services agreement is $120,000 per annum which reduced to $33,000 from 1 April 2019 for Company Secretary Annual Report for the year ended 30 June 2020 22 Remuneration Details of Key Management Personnel The remuneration of the key management personnel of Elementos Limited for the year ended 30 June 2020 was as follows: Year Ended 30 June 2020 Short Term Benefits Key Management Personnel Salary & Fees Bonuses Equity Settled Shares Equity Settled Performance Rights Post- Employment Super- annuation Total Performance related % % consisting of options $ $ $ $ $ $ A. Greig C. Dunks C. Nolan C. Treacy(1) B. Smith(2) C. Creagh(3) D. Speedy(4) - 72,996 22,831 26,819 10,896 155,942 119,424 408,908 - - - - - - - - - - - - - - - - - - - - - - - 2,169 181 - - 72,996 25,000 27,000 10,896 - - - - - 25,692 13,014 194,648 13.2% - 11,345 130,769 - 25,692 26,709 461,309 - - - - - - - 1. During the period Mr Treacy received $2,000 of additional fees in relation to work undertaken on investor relations. 2. Appointed Non-Executive Director on 24 January 2020. 3. Resigned as CEO on 31 March 2020 and ceased to be a KMP. 4. Transitioned from full-time to part-time in October 2019. Year Ended 30 June 2019 Short Term Benefits Key Management Personnel Salary & Fees Bonuses Equity Settled Shares Equity Settled Performance Rights Post- Employment Super- annuation Total Performance related % % consisting of options A. Greig $ - C. Dunks(1) 144,996 C. Nolan C. Treacy C. Creagh D. Speedy(2) D. Cornish(3) 22,831 24,396 182,648 42,150 73,363 490,384 $ $ - - - - - - - - - - - - - - - - $ - - - - $ - - 2,169 2,169 $ - 144,996 25,000 26,565 - - - - 42,916 17,352 242,916 17.7% - - 4,004 - 46,154 73,363 - - 42,916 25,694 558,994 - - - - - - - 1. During the period Mr Dunks received $80,000 of additional fees in relation to work undertaken on the Oropesa Tin Project acquisition and investor relations. 2. Appointed CFO on 1 April 2019. 3. Resigned as CFO on 31 March 2019 and ceased to be a KMP. Annual Report for the year ended 30 June 2020 23 The percentage of equity-based remuneration for persons who were key management personnel of the Group during the year ended 30 June 2020 is set out below: Key Management Personnel Proportion of Remuneration Equity Based Salary and Fees A. Greig C. Dunks C. Nolan C. Treacy B. Smith n/a - - - - C. Creagh 13.2% D. Speedy D. Cornish - - n/a 100% 100% 100% 100% 86.8% 100% 100% Company Performance, Shareholder Wealth, and Director and Executive Remuneration During the financial year, the Company has generated losses as its principal activity was mineral exploration. The following table shows the share price of the Company since 2016. 30 June 2020 30 June 2019 30 June 2018 30 June 2017 30 June 2016 Share Price at year end ($) 0.005 0.006 0.006 0.0084 0.008 As the Company is still in the exploration and development stage, the link between remuneration, company performance and shareholder wealth is tenuous. Share prices are subject to the influence of metal prices and market sentiment towards the sector, and as such, increases and decreases might occur independent of executive performance and remuneration. Options Granted as Remuneration As noted above, there were no options issued to key management personnel during the year ended 30 June 2020. Annual Report for the year ended 30 June 2020 24 Performance Rights Held by Key Management Personnel Chris Creagh (CEO) is the only key management personnel who has been issued performance rights Details of the performance rights held directly, indirectly or beneficially by Chris Creagh during the year ended 30 June 2020 were as follows: Key Management Personnel Balance at 1 July 2019 Granted as Compensation Exercised Expired Balance at 30 June 2020 Total Vested and Exercisable 30 June 2020 C. Creagh 23,000,000 - 4,000,000 19,000,000 - - The value of performance rights exercised was $32,000 which was determined to be the intrinsic value of the options at that date. Shares Held by Key Management Personnel Details of shares held directly, indirectly or beneficially by key management personnel during the year ended 30 June 2020 were as follows: Key Management Personnel Balance at 1 July 2019 Granted as Compensation Received on Exercise of Options / Rights Net change other Balance at 30 June 2020 A. Greig C. Dunks C. Nolan C. Treacy B. Smith C. Creagh D. Speedy 300,887,439 19,687,505 4,420,428 28,000,004 - 8,363,637 - 361,359,013 - - - - - - - - - - - - - - - - - - 4,000,000 (12,363,637)1 - - 300,887,439 19,687,505 4,420,428 28,000,004 - - - 4,000,000 (12,363,637) 352,995,376 1Chris Creagh’s shareholding as at the date he ceased being a KMP is shown above. Annual Report for the year ended 30 June 2020 25 Other transactions with Key Management Personnel On 17 April 2019, the Company executed a loan facility with the Company’s Non-Executive Chairman Mr Andy Greig, a related party, with the following key terms: • Loan amount = $2,000,000 • Loan term = 2 years • Interest rate = 6.0% on drawn funds • Unsecured • No conversion rights • No requirement to repay principal or pay interest during the loan term • Repayable by the Company at any time (during the loan term) As at 30 June 2020 the Company had drawn $1,250,000 on the loan facility. End of Remuneration Report (Audited) Option and Performance Right holders do not have any rights to participate in any share issue or other interests in the Company or any other entity. Directors’ Meetings The meetings attended by each director during the financial year were: Directors A. Greig C. Dunks C. Nolan C. Treacy B. Smith Board Audit & Risk Committee Meetings Attended Meetings Attended 6 6 6 6 4 6 6 6 6 4 2* 0* 2 2 2 2 2 2 1* 0* * Mr Greig and Mr Smith are not members of the Audit & Risk Committee. Options Corporate Governance At the date of this report, the unissued ordinary shares of the Company under options are as follows: Unlisted Options Grant Date/s Expiry Date Exercise Price No. Under Option 14 August 2020 31 August 2022 0.9 cents 140,909,121 Performance Rights At the date of this report there are no Performance Rights on issue. During the year ended 30 June 2020, no performance rights were issued and 4,000,000 performance rights issued on 9 February 2018 were exercised into ordinary shares by Key Management Personnel. On 30 June 2020 the remaining 19,000,000 performance rights expired. In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Elementos Limited support and, where practicable or appropriate, have adhered to the ASX Principles of Corporate Governance. The Company’s corporate governance statement is set out in this Annual Report. Indemnification and Insurance of Directors and Auditors The Company has entered into a Deed with each of the directors whereby the Company has agreed to provide certain indemnities to each director to the extent permitted by the Corporations Act and to use its best endeavours to obtain and maintain directors’ and officers’ indemnity insurance, subject to such insurance being available at reasonable commercial terms. The economic entity has paid premiums to insure each of the directors of the Company against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the Annual Report for the year ended 30 June 2020 26 capacity of director of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The contracts include a prohibition on disclosure of the premium paid and nature of the liabilities covered under the policy. The Company has not given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums in respect of any person who is or has been an auditor of the Company or a related entity during the year and up to the date of this report. Proceedings on Behalf of the Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Non-Audit Services The auditors did not provide any non-audit services during the year (2019: Nil). Future Developments and Likely Outlook Planned developments in the operations of the Group and the expected results of those operations in subsequent financial years has been discussed where appropriate in the Annual Report under Review of Operations. There are no further developments of which the Directors are aware which could be expected to affect the results of Group's operations and plans, other than information which the Directors believe comment on, or disclosure of, would prejudice the interests of the Group. Auditor’s Independence Declaration The lead auditor’s independence declaration under section 307C of the Corporations Act 2001 is attached to this financial report. Signed in accordance with a resolution of the board of directors. Chris Dunks Director Dated 28 September 2020 Brisbane, Queensland Annual Report for the year ended 30 June 2020 27 Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia DECLARATION OF INDEPENDENCE BY D P WRIGHT TO THE DIRECTORS OF ELEMENTOS LIMITED As lead auditor of Elementos Limited for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Elementos Limited and the entities it controlled during the year. D P Wright Director BDO Audit Pty Ltd Brisbane, 28 September 2020 BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. Annual Report for the year ended 30 June 2020 28 SHAREHOLDER INFORMATION Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows. The information is current as at 16 September 2020. (b) Twenty Largest Shareholders The names of the twenty largest holders of Quoted Ordinary Shares are: (a) Distribution of equity securities The number of holders, by size of holding, in each class of security are: 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total Ordinary Shares No. Holders No. Shares 59 70 69 252 535 985 12,751 210,954 559,674 11,338,830 3,094,481,526 3,106,603,735 Share Option No. Holders No. Options 60 60 140,909,121 140,909,121 The number of shareholders holding less than a marketable parcel is 408. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Registered Name No. of Shares % of total shares CITICORP NOMINEES PTY LIMITED BOND STREET CUSTODIANS LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED KEO PROJECTS PTY LTD UBS NOMINEES PTY LTD ZCR CORP TR NOMINEES PTY LTD JAMES CALAWAY* SANGWILL PTY LTD 327TH P & C NOMINEES PTY LTD TD WATERHOUSE CANADA GOM PROPERTIES PTY LTD MR JOSEPH IGNATIUS D'SOUZA THREE ZEBRAS PTY LTD LIONS BAY CAPITAL INC BOURSE SECURITIES PTY LTD OCKLESTON NOMINEES PTY LTD CALVIN PATRICK TREACY* PAN ANDEAN CAPITAL PTY LTD MR JOHN DOUGLAS JEFFERY & MRS ELSPETH LOUISE JEFFERY Top 20 Total 485,568,975 15.63% 300,887,439 9.69% 289,679,105 9.32% 112,141,558 3.61% 90,909,091 86,363,637 68,181,818 60,020,768 2.93% 2.78% 2.19% 1.93% 51,386,945 1.65% 48,193,038 1.55% 42,536,475 1.37% 40,901,394 1.32% 40,000,000 1.29% 36,636,365 1.18% 35,689,305 32,821,213 1.15% 1.06% 28,108,780 0.90% 28,000,004 28,000,000 0.90% 0.90% 27,349,575 0.88% 1,933,375,485 62.23% Total of Securities 3,106,603,735 * Merged holding Annual Report for the year ended 30 June 2020 29 (c) Substantial Shareholders (e) Restricted securities The Company notes that, as at the date of this report, the following shareholders own substantial shareholdings (>= 5.0%) in Elementos Limited: The Group currently has no restricted securities on issue. (f) On-market buy back Name of Shareholder Ordinary Shares % of total Shares There is not a current on-market buy-back in place. MARK WELLINGS 437,268,686 14.08% (g) Business objectives BOND STREET CUSTODIANS LIMITED 300,887,439 9.69% (d) Voting rights All ordinary shares carry one vote per share without restriction. Options do not carry voting rights. The Group has used its cash and assets that are readily convertible to cash in a way consistent with its business objectives. Annual Report for the year ended 30 June 2020 30 CORPORATE GOVERNANCE STATEMENT The board of directors of Elementos Limited is responsible for the corporate governance of the consolidated entity. The Board guides and monitors the business and affairs of Elementos Limited on behalf of the shareholders by whom they are elected and to whom they are accountable. Elementos Limited’s Corporate Governance Statement (which can be found on the Company’s website www.elementos.com.au) is structured with reference to the Australian Securities Exchange (“ASX”) Corporate Governance Council’s (the “Council”) “Corporate Governance Principles and Recommendations, 3rd Edition”, which are as follows: Principle 1 Principle 2 Principle 3 Principle 4 Principle 5 Principle 6 Principle 7 Principle 8 Lay solid foundations for management and oversight Structure the board to add value Act ethically and responsibly Safeguard integrity in corporate reporting Make timely and balanced disclosure Respect the rights of security holders Recognise and manage risk Remunerate fairly and responsibly The Board is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the Group’s needs. Generally, the powers and obligations of the Board are governed by the Corporations Act and the general law. Without limiting those matters, the Board expressly considers itself responsible for the following: • Ensuring compliance with the Corporations Act, ASX Listing Rules (where appropriate) and all relevant laws; • Oversight of the Group including its framework of control and accountability systems to enable risk to be assessed and managed; • Appointing and removing the chief executive officer; • Ratifying the appointment and, where appropriate, removal of senior executives including the chief financial officer and the Group secretary; • Input into and final approval of management’s development of corporate strategy and performance objectives; A copy of the eight Corporate Governance Principles and Recommendations can be found on the ASX’s website. • Monitoring senior executive’s performance and implementation of strategy; The Board is of the view that, during the reporting period, with the exception of the departures from the ASX Guidelines as set out below, it otherwise complies with all of the ASX Guidelines. • Ensuring appropriate resources are available to senior executives; • Approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures; Roles and Responsibilities of the Board and Management ASX CGC Principle 1 Lay solid foundations for management and oversight. • Approving and overseeing Committees where appropriate to assist in the Board’s function and powers. Role of the Board The Board of Directors is pivotal in the relationship between shareholders and management and the role and responsibilities of the Board underpin corporate governance. The Functions, Powers and Responsibilities of the Board are set out in the Company’s Corporate Governance Charter which is available from the corporate governance section of the Group’s website. Annual Report for the year ended 30 June 2020 31 The Board meets on a regular basis to review the performance of the Company against its goals both financial and non-financial. In normal circumstances, prior to the scheduled board meetings, each board member is provided with a formal board package containing appropriate management and financial reports. Appropriate background checks are conducted on proposed new directors and material information about a director being re-elected is provided to security holders. Written agreements are entered in to with directors and senior management clearly setting out their roles and responsibilities. The company secretary works directly with the chair and the executive director on the functioning of all board and committee procedures. Diversity The Group is committed to workplace diversity and ensuring a diverse mix of skills amongst its directors, officers and employees. Recommendation 1.5 requires that listed entities should establish a policy concerning diversity. Whilst the Group does not currently have a Diversity policy due to its size and nature of its operations, it strives to attract the best person for the position regardless of gender, age, ethnicity or cultural background. As at 30 June 2020, the proportion of women in the whole organisation is a follows: Male Female Board Members Officers Employees 5 1 4 Performance Evaluation - - 2 The Board (in carrying out the functions of the Remuneration and Nomination Committees) considers remuneration and nomination issues annually and otherwise as required in conjunction with the regular meetings of the Board. No formal performance evaluation of the CEO has been undertaken to date. No formal performance evaluation of the non-executive directors was undertaken during the year ended 30 June 2020. Board Composition ASX CGC Principle 2 Structure of the Board to add value Nomination Committee Recommendation 2.1 requires the Board to establish a nomination committee. Although the Board has adopted a Nominations Committee Charter, the Board has not formally established a Nominations Committee as the Directors consider that the Company is currently not of a size nor are its affairs of such complexity as to justify the formation of this Committee. The Board as a whole is able to address these issues and is guided by the Nominations Committee Charter. The Company will review this position annually and determine whether a Nominations Committee needs to be established. The Nomination Committee Charter is set out in the Company’s Corporate Governance Charter which is available from the corporate governance section of the Group’s website. The Company is developing an appropriate board skills matrix. The skills, experience and expertise relevant to the position of each director who is in office at the date of the Annual Report is detailed in the Directors’ report. Corporate Governance Council Recommendation 2.4 requires a majority of the Board to be independent Directors. The Corporate Governance Council defines independence as being free from any interest, position, association or relationship that might influence, or reasonably be perceived to influence, in a material capacity to bring independent judgement to bear on issues before the board and to act in the best interests of the entity and its security holders generally. In the context of Director independence, “materiality” is considered from both the Group and the individual Director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. Annual Report for the year ended 30 June 2020 32 Qualitative factors considered included whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors which point to the actual ability of the Director in question to shape the direction of the Group. In accordance with the Council’s definition of independence above and the materiality thresholds set, all of the Company’ s directors except for those listed below are considered independent therefore the Group does currently comply with Recommendation 2.4: Name Position Reason for non- compliance Act Ethically and Responsibly ASX CGC Principle 3 Code of Conduct The Directors are subject to certain stringent legal requirements regulating the conduct both in terms of their internal conduct as directors and in their external dealings with third parties both on their own and on behalf of the Group. To assist directors in discharging their duty to the Group and in compliance with relevant laws to which they are subject, the Group has adopted a Corporate Ethics Policy and Corporate Code of Conduct within its Corporate Governance Charter. A. Greig Non-Executive Chairman Director is a substantial (>5%) shareholder The Corporate Ethics Policy sets out rules binding Directors in respect of: C. Dunks Executive Director Director is engaged by the Company in an executive capacity • a Directors’ legal duties as an officer of the Company; • a Directors’ obligations to make disclosures to the ASX and the market generally; and Elementos Limited considers industry experience and specific expertise, as well as general corporate experience, to be important attributes of its Board members. The Directors noted above have been appointed to the Board of Elementos Limited due to their considerable industry and corporate experience. The term in office held by each Director in office at the date of this report is as follows: Name A. Greig C. Dunks C. Nolan C. Treacy B. Smith Term in Office 4 years, 11 months 4 years, 11 months 11 years 2 months 6 years 11 months 8 months Directors have the right to seek independent professional advice in the furtherance of their duties as directors at the Group’s expense. Written approval must be obtained from the chair prior to incurring any expense on behalf of the Group. Informal induction is provided to any new directors. • dealings by Directors in shares in the Company. The Corporate Ethics Policy, as set out in the Company’s Corporate Governance Charter is available from the corporate governance section of the Group’s website. Safeguard Integrity in Corporate Reporting ASX CGC Principle 4 Audit Committee The Board has established an Audit and Risk Management Committee which operates under a charter approved by the Board. Recommendation 4.1 states that an audit committee should be structured so that it: i. consists only non-executive directors; ii. consists of a majority of independent directors; iii. is chaired by an independent chair, who is not the chair of the Board; and iv. has at least three members. Annual Report for the year ended 30 June 2020 33 The members of the Audit & Risk Management Committee are Corey Nolan, Calvin Treacy and Chris Dunks. The Committee is chaired by an independent director (Corey Nolan). While Messrs Nolan and Treacy are both non- executive directors, Chris Dunks is engaged in an executive capacity. The majority of the Committee are independent directors, with only Chris Dunks not considered as being independent (based on the Council’s definition). The Company does not presently comply fully with Recommendation 4.1 having not met point i above. All members of the Audit & Risk Management Committee are considered financially literate in the context of the Company’s affairs. The Company believes that given the size and nature of its operations, non-compliance by the Company with Recommendation 4.1 will not be detrimental to the Company. The Chief Financial Officer has made the following certifications to the Board: • That the Group’s financial reports are complete and present a true and fair view, in all material respects, of the financial position and performance of the Group and are in accordance with relevant accounting standards; • The integrity of the reports is founded on sound system of financial risk management and internal compliance and control. The Group ensures that its external auditor is present at the AGM to answer any questions with regard to the efficacy of the financial statement audit and the associated independent audit report. The number of meetings of the Audit & Risk Management Committee held during the year and the number of meetings attended by each Director was as follows: Continuance Disclosure ASX CGC Principle 5 Make timely and balanced disclosure Audit & Risk Management Committee Number of meetings held while in office Meetings attended C. Nolan C. Dunks C. Treacy 2 2 2 2 2 2 The Audit Committee Charter is set out in the Company’s Corporate Governance Charter which is available from the corporate governance section of the Group’s website. Certification of financial reports The Executive Director has made the following certifications to the Board: • That the Group’s financial reports are complete and present a true and fair view, in all material respects, of the financial position and performance of the Group and are in accordance with relevant accounting standards; • The integrity of the reports is founded on a sound system of financial risk management and internal compliance and control. The Group duly complies with ASX and ASIC requirements for the timely and accurate reporting of the Group’s financial activities, thus ensuring that the Group has disclosed all information which has a material impact on shareholders. This includes the Annual Financial Report, Interim Financial Report, quarterly cash flows, new and relinquished tenements and changes in directors and shareholder interests and other events which are identified to be material. All ASX announcements are available on the Group’s website. The Company Secretary is responsible for communication with the ASX, including responsibility for ensuring compliance with the continuous disclosure requirements of the ASX Listing Rules and oversight of information distributed to the ASX. Respect the Rights of Security Holders ASX CGC Principle 6 The Board of directors undertakes to ensure that shareholders are informed of all major developments affecting the Group. Information is communicated to shareholders through the annual report, interim financial report, announcements made to the ASX, notices of Annual General and Extraordinary General Meetings, the AGM and Extraordinary General Meetings. Annual Report for the year ended 30 June 2020 34 The Board encourages full participation of shareholders at Annual and Extraordinary General Meetings to ensure a high level of accountability and identification with the Group’s direction, strategy and goals. In particular, shareholders are responsible for voting on the re-election of directors. The Group also offers shareholders the option to receive ASX announcements and other notices from the Company electronically. Risk Management ASX CGC Principle 7 Recognise and manage risk The Board has established an Audit and Risk Management Committee which operates under a charter approved by the Board. Recommendation 7.1 states that an audit committee should be structured so that it: i. consists only non-executive directors; ii. consists of a majority of independent directors; iii. is chaired by an independent chair, who is not the chair of the Board; and iv. has at least three members. The members of the Audit & Risk Management Committee are Corey Nolan, Calvin Treacy and Chris Dunks. The Committee is chaired by an independent director (Corey Nolan). While Messrs Nolan and Treacy are both non- executive directors, Chris Dunks is engaged in an executive capacity. The majority of the Committee are independent directors, with only Chris Dunks not considered as being independent (based on the Council’s definition). The Company does not presently comply fully with Recommendation 7.1 having not met point i above. All members of the Audit & Rick Management Committee are considered to have sufficient technical, legal and industry experience in the context of the Company’s affairs to properly assess the risks facing the Group. The Company believes that given the size and nature of its operations, non-compliance by the Company with Recommendation 7.1 will not be detrimental to the Company. The number of meetings of the Audit & Risk Management Committee held during the year and the number of meetings attended by each Director was as follows: Audit & Risk Management Committee Number of meetings held while in office Meetings attended 2 2 2 2 2 2 C. Nolan C. Dunks C. Treacy The Company has developed a basic framework for risk management and internal compliance and control systems which cover organisational, financial and operational aspects of the Company’s affairs. Further detail of the Company’s risk management policies can be found within the Audit and Risk Management Committee Charter. Recommendation 7.2 requires that the Board review the Company’s risk management framework and disclose whether such a review has taken place. Business risks are considered regularly by the Board and management at management and Board meetings. A formal report to the Board as to the effectiveness of the management of the Company’s material business risks has not been formally undertaken. The Audit and Risk Management Committee Charter is set out in the Company’s Corporate Governance Charter which is available from the corporate governance section of the Group’s website. The Company does not have a separate internal audit function. The board considers that the Company is not currently of the size or complexity to justify a separate internal audit function, and that appropriate internal financial controls are in place. Such controls are monitored by senior financial management and the Audit and Risk Committee. The Directors’ Report sets out some of the key risks relevant to the Company and its operations. Although not specifically defined as such, the risks include economic, environmental and social sustainability risks. As noted above, the Company regularly reviews risks facing the Company and adopts appropriate mitigation strategies where possible. Annual Report for the year ended 30 June 2020 35 Remuneration ASX CGC Principle 8 Remunerate fairly and responsibly Remuneration Committee The Board has not established a Remuneration Committee which operates under a charter approved by the Board. Although the Board has adopted a Remuneration Committee Charter, the Board has not formally established a Remuneration Committee as the Directors consider that the Company is currently not of a size nor are its affairs of such complexity as to justify the formation of this Committee. The Board as a whole considers themselves to have sufficient legal, corporate, commercial and industry experience in the context of the Company’s affairs to properly assess the remuneration issues required by the Group and is able to address these issues while being guided by the Remuneration Committee Charter. The Company will review this position annually and determine whether a Remuneration Committee needs to be established. The Company believes that given the size and nature of its operations, non-compliance by the Company with Recommendation 8.1 will not be detrimental to the Company. It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and Executive team by remunerating directors and key executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the Board links the nature and amount of executive Directors’ and officer’s remuneration to the Group’s financial and operations performance. The expected outcomes of the remuneration structure are: • retention and motivation of key Executives • attraction of quality management to the Group • performance incentives which allow executives, management and staff to share the rewards of the success of Elementos Limited. For details on the amount of remuneration and all monetary and non-monetary components for Key Management Personnel during the period, please refer to the Remuneration Report within the Directors’ Report. In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the Remuneration Committee and the Board, having regard to the overall performance of Elementos Limited and the performance of the individual during the period. There is no scheme to provide retirement benefits to directors other than statutory superannuation. The Remuneration Committee Charter is set out in the Company’s Corporate Governance Charter which is available from the corporate governance section of the Group’s website. Remuneration Policy The Group’s remuneration policy is also further detailed in the Remuneration Report in the Directors Report. Non-Executive Director Remuneration Non-executive directors are remunerated at market rates for time, commitment and responsibilities. Non-executive directors are remunerated by fees as determined by the Board with the aggregate directors’ fee pool limit of $250,000. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Independent consultancy sources provide advice, as required; ensuring remuneration is in accordance with market practice. Fees for non-executive Directors are not linked to the performance of the Group. However, to align Directors’ interests with shareholders’ interests, the Directors are encouraged to hold shares in the Company and are, subject to approval by shareholders, periodically offered options and/or performance rights. The Company has adopted a Trading Policy that includes a prohibition on hedging, aimed at ensuring participants do not enter into arrangements which would have the effect of limited their exposure to rick relating to an element of their remuneration. Other Information Further information relating to the Group’s corporate governance practices and policies has been made publicly available on the Group’s web site. Annual Report for the year ended 30 June 2020 36 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 30 June 2020 Interest income Other income Note 30 June 2020 30 June 2019 $ $ 341 50,000 10,400 - Corporate and administrative expenses 2 (1,641,250) (1,967,777) Foreign Currency Gain 9,425 - Loss before income tax expense (1,581,484) (1,957,377) Income tax expense 3 - - Loss for the period attributable to members of the parent entity (1,581,484) (1,957,377) Other comprehensive income Items that may be reclassified to profit or loss: Exchange gains on translation of foreign operations Other comprehensive income for the period, net of tax (51,093) (51,093) - - Total comprehensive loss attributable to members of the parent entity (1,632,577) (1,957,377) Basic and diluted loss per share (cents per share) 12 (0.08) (0.13) The accompanying notes form part of these financial statements. Annual Report for the year ended 30 June 2020 37 Consolidated Statement of Financial Position as at 30 June 2020 Note 30 June 2020 30 June 2019 $ $ CURRENT ASSETS Cash and cash equivalents Trade and other receivables Total Current Assets NON-CURRENT ASSETS Exploration and evaluation assets Right of use assets Other non-current assets Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Lease liability Borrowings Total Current Liabilities NON-CURRENT LIABILITIES Lease liability Borrowings Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY The accompanying notes form part of these financial statements. 4 5 6 8 7 8 7 9 199,176 138,267 337,443 400,812 257 401,069 9,438,708 5,436,336 14,487 80,000 21,910 7,000 9,533,195 5,465,246 9,870,638 5,866,315 515,576 5,651 1,250,000 1,771,227 16,260 1,065,303 1,081,563 182,754 - 5,490 188,244 - 21,911 21,911 2,852,790 210,155 7,017,848 5,656,160 19,699,725 (51,093) 16,667,725 430,935 (12,630,784) (11,442,500) 7,017,848 5,656,160 Annual Report for the year ended 30 June 2020 38 Consolidated Statement of Changes in Equity For the Year Ended 30 June 2020 Note Issued Capital Accumulated Losses Share-Based Payments Reserve Foreign Currency Translation Reserve $ $ $ $ Total $ 6,212,845 (1,957,377) (1,957,377) 1,231,908 (198,302) - 367,086 5,656,160 (1,581,484) - - - - - - - - - Balance at 1 July 2018 15,578,119 (9,485,123) 119,849 Loss for the period Total comprehensive income - - (1,957,377) (1,957,377) Issue of shares Transaction costs 8 8 1,231,908 (198,302) Transfer of exercised performance rights Issue options and performance rights 56,000 - - - - - - - - - (56,000) 367,086 Balance at 30 June 2019 16,667,725 (11,442,500) 430,935 Loss for the period Other comprehensive loss Total comprehensive income - - - (1,581,484) - (1,581,484) Issue of shares 8 3,000,000 Transfer of exercised performance rights Issue and expiry of performance rights Transfer of expired options 32,000 - - - - - - (32,000) (5,735) - - - 393,200 (393,200) (51,093) (51,093) (51,093) (1,632,577) - - - - 3,000,000 - (5,735) - Balance at 30 June 2020 19,699,725 (12,630,784) - (51,093) 7,017,848 The accompanying notes form part of these financial statements. Annual Report for the year ended 30 June 2020 39 Consolidated Statement of Cash Flows For the Year Ended 30 June 2020 CASH FLOWS FROM OPERATING ACTIVITIES Interest received Government COVID Assistance Payments to suppliers and employees Payments in relation to Oropesa Tin Project 30 June 2020 30 June 2019 $ $ 341 50,000 12,017 - (1,022,864) (1,258,705) (413,305) (317,138) Net cash used in operating activities 11 (1,385,828) (1,563,826) CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration and evaluation assets Research and development refunds Proceeds received on acquisition of Oropesa Tin Project (255,288) - 186,988 (250,982) 148,479 - Net cash used in investing activities (68,300) (102,503) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Costs associated with share issues Proceeds from loan Lease payments - - 1,250,000 (6,933) 1,227,255 (89,743) - (6,933) 8 8 Net cash provided by financing activities 1,243,067 1,130,579 Net increase/(decrease) in cash held Net foreign exchange difference Cash at Beginning of Year (211,061) 9,425 400,812 (535,750) - 936,562 Cash at End of Year 4 199,176 400,812 The accompanying notes form part of these financial statements. Annual Report for the year ended 30 June 2020 40 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2020 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are general purpose financial statements that have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations, and other authoritative pronouncements of the Australian Accounting Standards Board. Elementos Limited is a for-profit entity for the purpose of preparing the financial statements. The financial statements are presented in Australian dollars. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting and Interpretation Standards. The financial statements are for the consolidated entity consisting of Elementos Limited and its Controlled Entities. Elementos Limited is a public company, incorporated and domiciled in Australia. The financial statements have been prepared on an accruals basis and are based on historical cost. The financial report was authorised for issue on 28 September 2020 by the directors of the Company. Separate financial statements for Elementos Limited as an individual entity are no longer presented following a change to the Corporations Act 2001. However, financial information required for Elementos Limited as an individual entity is included in Note 22. Material accounting policies adopted in the preparation of these financial statements are presented below. They have been consistently applied unless otherwise stated. Going Concern The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the ordinary course of business. The ability of the Group to maintain continuity of normal business activities and to pay its debts as and when they fall due is dependent on the ability of the Group to successfully raise additional capital and/or successful exploration and subsequent exploitation of areas of interest through sale or development. The Group has not generated any revenues from operations. Subsequent to the reporting period, the Group raised $3,325,000 of cash through equity raisings (before costs). The Group has entered into an agreement with the Group’s Non-Executive Chairman to convert $500,000 of the balance of the Loan Facility entered into in the previous financial period into equity. Should the Group not be able to raise further capital, dispose of assets when required or manage its expenditure so as to conserve cash over the coming 12 months, there exists a material uncertainty that may cast significant doubt over the Group’s ability to continue as a going concern and realise its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial statements. The financial report does not include any adjustments relating to the recoverability or classification of recorded asset amounts, or to the amounts or classification of liabilities which might be necessary should the Group not be able to continue as a going concern. COVID-19 Impacts Elementos Limited remained relatively unaffected during the period by COVID-19. Staff worked remotely when possible and followed enhanced social distancing and health and safety procedures when at the workplace. The Company did not receive any subsidies beyond the universally available ATO cashflow boost scheme ($50,000). The Company is not expecting any significant impacts in the coming year. Principles of Consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Elementos Limited ("Company" or "parent entity") as at 30 June 2020, and the results of all subsidiaries for the year then ended. Elementos Limited and its subsidiaries together are referred to in these financial statements as “the Group” or “the consolidated entity”. The names of the subsidiaries are contained in Note 20. All subsidiaries are accounted for by the parent entity at cost. Annual Report for the year ended 30 June 2020 41 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Principles of Consolidation (continued) rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Subsidiaries are all entities over which the Group has control. The Group has control over an entity when the Group is exposed to, or has a right to, variable returns from its involvement with the entity, and has the ability to use its power to affect those returns. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of controlled entities have been changed where necessary to ensure consistency with the policies adopted by the Group. Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Director. Income Tax The income tax expense/(income) for the year comprises current income tax expense/(income) and deferred tax expense/(income). Current income tax expense charged to profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities/ (assets) are therefore measured at the amounts expected to be paid to/ (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the period as well as unused tax losses. Current and deferred income tax expense/ (income) is charged or credited directly to equity instead of profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. The Company and its Australian 100% owned controlled entities have formed a tax consolidated group. Members of the Group entered into a tax sharing arrangement. The agreement provides for the allocation of income tax liabilities between the entities in proportion to their contribution to the Group's taxable income. The head entity of the tax consolidated Group is Elementos Ltd. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Exploration and Evaluation Assets Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. Such expenditures comprise net direct costs and an appropriate portion of related overhead expenditure but do not include overheads or administration expenditure not having a specific nexus with a particular area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and active or significant operations in relation to the area are continuing. Annual Report for the year ended 30 June 2020 42 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Impairment of Non-Financial Assets Exploration and Evaluation Assets (continued) A regular review has been undertaken on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. A provision is raised against exploration and evaluation assets where the directors are of the opinion that the carried forward net cost may not be recoverable or the right of tenure in the area lapses. The increase in the provision is charged against the results for the year. Accumulated costs in relation to an abandoned area are written off in full against profit or loss in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. At each reporting date, the economic entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to profit or loss. No impairment existed at reporting date. Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short- term nature they are measured at amortised cost and not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Restoration Costs Cash and Cash Equivalents Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the exploration and mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted for on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. The economic entity currently has no obligation for any restoration costs in relation to discontinued operations, nor is it currently liable for any future restoration costs in relation to current areas of interest. Consequently, no provision for restoration has been deemed necessary. Cash and cash equivalents include cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of less than 3 months. Issued Capital Ordinary shares are classified as equity. Transaction costs (net of tax where the deduction can be utilised) arising on the issue of ordinary shares are recognised in equity as a reduction of the share proceeds received. Share Based Payments and Performance Rights The economic entity makes equity-settled share based payments to directors, employees and other parties for services provided or the acquisition of exploration assets. Where applicable, the fair value of the equity is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a Black Scholes option pricing model. Where Annual Report for the year ended 30 June 2020 43 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Share Based Payments and Performance Rights (continued) applicable, the number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Where the fair value of services rendered by other parties can be reliably determined, this is used to measure the equity-settled payment. Interest income Interest income is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Employee Benefits Short-term employee benefit obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled wholly within 12 months after the end of the reporting period are recognised in liabilities in respect of employees' services rendered up to the end of the reporting period and are measured at amounts expected to be paid when the liabilities are settled. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST (or overseas VAT), except where the amount of GST incurred is not recoverable. In these circumstances the GST (or overseas VAT) is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis except for the GST component of investing and financing activities which are disclosed as operating cash flows. Foreign Currency Transactions and Balances Functional and presentation currency The functional and presentation currency of Elementos Ltd and its Australian subsidiaries is Australian dollars ($A). Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non- monetary items measured at fair value are reported at the exchange rate at the date when fair values were measured. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Group Companies The financial results and position of foreign operations whose functional currency is different from the economic entity’s presentation currency are translated as follows: • assets and liabilities are translated at period-end exchange rates prevailing at that reporting date; • • income and expenses are translated at average exchange rates for the period; retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations are recognised in other comprehensive income. Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate. Annual Report for the year ended 30 June 2020 44 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Government grants (continued) Government grants relating to exploration and evaluation assets that have been capitalised are recognised by deducting the grant received from the carrying amount of the exploration and evaluation asset recognised on the statement of financial position. Earnings Per Share (EPS) Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period adjusted for any bonus elements in ordinary shares issued during the period. 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. New and Amended Standards and Interpretations Adopted During the Year A number of new or amended standards became applicable for the current reporting period and the group had to change its accounting policies as a result of adopting AASB 16 Leases. The impact of the adoption of this standard and the new accounting policies are disclosed below. The other standards did not have any impact on the group’s accounting policies and did not require retrospective adjustments. AASB 16 Leases This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2019. This standard replaces the accounting requirements applicable to leases in AASB 117 Leases and related interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases. This means that for most leases, a right-to-use asset and a liability will be recognised, with the right-to-use asset being depreciated and the liability being unwound in principal and interest components over the life of the lease. Upon adoption of this standard, the Consolidated Entity’s transitioned using the modified retrospective approach, where the right-of-use asset is recognised at the date of initial application at an amount equal to the lease liability, using the entity’s current incremental borrowing rate. Comparative figures are not restated. Based on the transition approach and the entity’s current leasing arrangements, there were no material impacts in the current or future reporting periods and on foreseeable future transactions. There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. Accounting policy adopted from 1 July 2019 Lease Liabilities Lease liabilities include the net present value of the following lease payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable; • variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable by the Group under residual value guarantees; • the exercise price of a purchase option if the group is reasonably certain to exercise that option; and • payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. 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 that relate to building premises, the entity’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. Annual Report for the year ended 30 June 2020 45 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair Values Accounting policy adopted from 1 July 2019 (continued) The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use Assets Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability • any lease payments made at or before the commencement date less any lease incentives received • any initial direct costs, and • restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. Fair values may be used for financial asset and liability measurement as well as for sundry disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is based on the presumption that the transaction takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market. The principal or most advantageous market must be accessible to, or by, the Group. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability assuming that market participants act in their best economic interest. The fair value measurement of a non- financial asset takes into account the market participant's ability to generate economic benefits by using the asset at its highest and best use or by selling it to another market participant that would use the asset at its highest and best use. In measuring fair value, the Group uses valuation techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Critical Accounting Estimates and Judgements The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the economic entity. Key Judgements: New Standards and Interpretations not yet adopted Exploration and Evaluation Assets Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2020 reporting periods. The consolidated entity has decided against early adoption of these standards. The Consolidated Entity’s has assessed the impact of these new standards that are not yet effective and determined that they are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. The economic entity performs regular reviews on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. These reviews are based on detailed surveys and analysis of drilling results performed to reporting date. Exploration and evaluation assets at 30 June 2020 were $9,438,708 (2019: $5,436,336). Annual Report for the year ended 30 June 2020 46 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) deferred income tax assets and liabilities in the period in which such determination is made. Critical Accounting Estimates and Judgements (continued) Deferred Tax Assets The Company is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the worldwide provision for income taxes. There are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity estimates its tax liabilities based on the consolidated entity’s understanding of the tax law. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and In addition, the consolidated entity has recognised deferred tax assets relating to carried forward tax losses to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same subsidiary against which the unused tax losses can be utilised. However, utilisation of the tax losses also depends on the ability of the entity, which is not part of the tax consolidated group, to satisfy certain tests at the time the losses are recouped. Due to the parent entity acquiring the entity that holds the losses it is expected that the entity will fail to satisfy the continuity of ownership test and therefore has to rely on the same business test. As at 30 June 2020 the consolidated entity has not received advice that the losses are unavailable, however should this change in the future the consolidated entity may be required to derecognise these losses. Annual Report for the year ended 30 June 2020 47 NOTE 2: EXPENSES Included in expenses are the following items: Depreciation ASX, ASIC, share registry expenses Business development and investor relations costs Legal fees Oropesa Tin Project operating costs Insurances Audit, tax and external accounting fees Interest on loans Employee benefits expense comprises: Salaries and wages Consulting fees Contributions to defined contribution plans Equity settled securities Annual leave expensed 30 June 2020 30 June 2019 $ $ 7,423 58,559 120,472 62,333 413,305 42,612 97,619 69,519 431,610 108,215 37,122 (5,735) (4,037) 2,619 53,184 227,814 240,440 393,432 34,782 97,507 - 232,699 245,024 34,952 37,086 6,406 Annual Report for the year ended 30 June 2020 48 NOTE 3: INCOME TAX EXPENSE The prima facie tax on the operating loss is reconciled to income tax expense as follows: Prima facie tax/ (benefit) on loss from ordinary activities before income tax at 30% (2019: 30%) Adjust for tax effect of: Non-deductible amounts Tax loss not recognised (current year and true up) Temporary differences recognised Under/Over Income tax expense/(benefit) 30 June 2020 30 June 2019 $ $ (474,445) (587,213) 262,992 321,538 - 209,993 272,421 - (110,084) 104,799 - - - - 4,749,120 4,437,673 Deferred tax assets and liabilities not recognised, the net benefit of which will only be realised if the conditions for deductibility as set out in Note 1 occur: Temporary differences Tax losses The Group has carried forward tax losses of $20,874,305 in Australia, which must satisfy the Continuity of Ownership Test, or failing that, the Same Business Test, in order to be utilised in the future. NOTE 4: CASH AND CASH EQUIVALENTS Cash at bank and on hand Short term deposits 30 June 2020 30 June 2019 $ 189,176 10,000 199,176 $ 390,812 10,000 400,812 Annual Report for the year ended 30 June 2020 49 NOTE 5: EXPLORATION AND EVALUATION ASSETS Exploration and evaluation expenditure carried forward in respect of areas of interest are: Exploration and evaluation phase - at cost 9,438,708 5,436,336 30 June 2020 30 June 2019 $ $ Movement in exploration and evaluation assets: Opening balance - at cost Capitalised exploration expenditure Capitalised exploration on initial recognition of Oropesa Tin Project Foreign exchange differences Total exploration and evaluation assets Less research and development refunds Carrying amount at the end of the year 5,436,336 284,275 3,798,330 (80,233) 9,438,708 - 9,438,708 5,326,936 257,879 - - 5,584,815 (148,479) 5,436,336 Recoverability of the carrying amount of exploration assets is dependent on the successful development and commercial exploitation of projects, or alternatively, through the sale of the areas of interest. NOTE 6: TRADE AND OTHER PAYABLES Current: Trade payables and accrued expenses Short term employee benefits Total payables (unsecured) 30 June 2020 30 June 2019 $ $ 503,982 11,594 515,576 167,123 15,631 182,754 The average credit period on purchases of goods and services is 30 days. No interest is paid on trade payables. Annual Report for the year ended 30 June 2020 50 NOTE 7: BORROWINGS Current: Unsecured: Hire purchase lease Loan (a) Total unsecured current liability Non-Current: Unsecured: Hire purchase lease Loan (b) Total unsecured non-current liability 30 June 2020 30 June 2019 $ - 1,250,000 1,250,000 - 1,065,303 1,065,303 $ 5,490 - 5,490 21,911 - 21,911 (a) On 17 April 2019, the Company executed a loan facility with the Company’s Non-Executive Chairman Mr Andy Greig, a related party, with the following key terms: • • • • • • • Loan amount = $2,000,000 Loan term = 2 years Interest rate = 6.0% on drawn funds Unsecured No conversion rights No requirement to repay principal or pay interest during the loan term Repayable by the Company at any time (during the loan term) As at 30 June 2020 the Company had drawn $1,250,000 on the loan facility. (b) As part of the Oropesa Tin Project acquisition the Company acquired a loan owing from its newly acquired wholly owned subsidiary MESPA to the Eurotin Inc. chairman Mr Mark Wellings, with the following key terms: • • • • • • • Loan amount = CAD$1,000,000 Loan term = 2 years from grant date being 14 January 2020 Interest rate = 5.0% on drawn funds Unsecured Conversion rights: subject to the Company’s prior written consent (which may be given or refused in the Company’s sole discretion) the principal amount and accrued interest may be converted into fully paid ordinary shares of Elementos Ltd. The conversion price is the higher of $0.004 or the 20 trading day volume weighted average price of Elementos shares traded on the ASX. No requirement to repay principal or pay interest during the loan term Repayable by the Company at any time (during the loan term) Annual Report for the year ended 30 June 2020 51 NOTE 8: LEASE LIABILITIES Current: Unsecured: Lease liability Total unsecured non-current liability Non-Current: Unsecured: Lease liability Total unsecured non-current liability 30 June 2020 30 June 2019 $ 5,651 5,651 16,260 16,260 $ - - - - Reconciliation of cash and non-cash movements in borrowings from financing activities 2019 Cash flows Interest accrued Acquired through acquisition Foreign exchange movements 2020 Lease liability 27,401 (6,932) 1,442 - - 21,911 Borrowings Total - 1,250,000 - 1,096,000 (30,697) 2,315,303 27,401 1,243,068 1,442 1,096,000 (30,697) 2,337,280 Hire purchase lease Total 2018 Cash flows Interest accrued 2019 32,583 (6,933) 1,751 27,401 32,583 (6,933) 1,751 27,401 Annual Report for the year ended 30 June 2020 52 NOTE 9: CONTRIBUTED EQUITY Fully paid ordinary shares Balance as at 1 July Share issues: 4 July 2018 26 October 2018 14 November 2018 17 April 2019 14 January 2020 26 May 2020 Balance as at 30 June No. of Shares $ No. of Shares 2020 2019 $ 1,544,330,961 16,667,725 1,332,012,910 15,578,119 (a) (b) (b) (c) (d) (e) - - - - - - - - 1,000,000,000 3,000,000 5,318,052 149,999,999 50,000,000 7,000,000 7,000,000 4,000,000 32,000 - 31,908 900,000 300,000 56,000 56,000 - 2,548,330,961 19,699,725 1,544,330,961 16,866,027 Total transaction costs associated with share issues Net issued capital - 19,699,725 (198,302) 16,667,725 Ordinary shareholders are entitled to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amount paid on the shares held. Every ordinary shareholder present at a meeting in person or by proxy is entitled to one vote on a show of hands or by poll. Ordinary shares have no par value. Notes for the above table, relating to the year ended 30 June 2020, are: (a) (b) (c) (d) Issued at 0.60 cents each upon the exercise of options On 31 July 2018, the Company announced that it had received commitments to complete a private placement of 199,999,999 shares to be issued at 0.60 cents per share to raise a total of $1,200,000 (before costs). The transaction completed in two tranches as follows: (a) On 26 October 2018 149,999,999 shares issued at 0.60 cents per share (b) On 14 November 2018 50,000,000 shares issued at 0.60 cents per share Issued on the exercise of vested performance rights, no funds were raised as this amount reflects the valuation of performance rights at the time of grant. On 14 January 2020, the Company announced completion of the transaction with Eurotin Inc. for the acquisition of the Oropesa Tin Project. As a result of completion 1,000,000,000 convertible redeemable preference shares converted to 1,000,000,000 ordinary shares. (e) Issued on the exercise of vested performance rights, no funds were raised as this amount reflects the valuation of performance rights at the time of grant. Annual Report for the year ended 30 June 2020 53 NOTE 9: CONTRIBUTED EQUITY (continued) (Incentive) Options Note Weighted average exercise price (cents) 30 June 2020 No. of Options Weighted average exercise price (cents) 30 June 2019 No. of Options - 1.21 - 1.21 - - 1.21 10,000,000 10,000,000 - (10,000,000) - 1.21 - 1.16 1.21 11,000,000 - (1,000,000) 10,000,000 Note Weighted average exercise price (cents) - 30 June 2020 No. of Options - 0.70 100,000,000 - - 0.70 - - - (100,000,000) - Weighted average exercise price (cents) 0.70 0.60 0.70 0.60 - 0.70 30 June 2019 No. of Options 100,000,000 5,318,052 100,000,000 (5,318,052) - 100,000,000 Unlisted Share Options Balance at the beginning of the reporting period Options issued during the period Options expired during the period Exercisable at end of year(i) (Other) Options Unlisted Share Options Balance at the beginning of the reporting period Options issued during the period: Options exercised during the period Expired Exercisable at end of year Capital Management Exploration companies such as Elementos Limited are funded almost exclusively by share capital. In April 2019, the Group also entered in to a loan facility set out in more detail in Note 7 (Borrowings). Management controls the capital of the Group to ensure it can fund its operations and continue as a going concern. Capital management policy is to fund its exploration activities principally by way of equity, and where required, debt and/or project finance. No dividend will be paid while the Group is in exploration stage. There are no externally imposed capital requirements. There have been no other changes to the capital management policies during the year. Annual Report for the year ended 30 June 2020 54 NOTE 10: RESERVES Foreign Currency Translation Reserve The foreign currency translation reserve recorded exchange differences arising on translation of foreign controlled subsidiaries. Share-Based Payments Reserve The share-based payment reserve is used to recognise the fair value of options issued to employees and consultants. This reserve can be reclassified as retained earnings if options lapse. NOTE 11: CASH FLOW INFORMATION Reconciliation of Cash Flow from Operations with Loss after Income Tax: Loss after income tax Non-cash flows in loss from ordinary activities: Depreciation Equity settled compensation Changes in operating assets and liabilities: (Increase)/Decrease in receivables (Decrease)/Increase in payables 30 June 2020 $ 30 June 2019 $ (1,581,484) (1,957,377) 7,423 (5,735) (40,123) 234,091 2,619 255,202 - 135,730 Cash flows from operations (1,563,826) Options and performance rights issued to employees and consultants for no cash consideration are disclosed in note 9. (1,385,828) NOTE 12: LOSS PER SHARE Net loss used in the calculation of basic and diluted LPS Weighted average number of ordinary shares outstanding during the period used in the calculation of basic LPS 30 June 2020 $ (1,581,484) 30 June 2019 $ (1,957,377) 2,004,988,495 1,472,013,279 Options are considered potential ordinary shares. Options issued are not presently dilutive and were not included in the determination of diluted loss per share for the period. Shares and options issued subsequent to 30 June 2020 are also not dilutive. If the 422,727,288 shares issued on 14th August 2020 were issued on 1 July 2019, the loss per share for 30 June 2020 would have been (0.07) cents per share. Annual Report for the year ended 30 June 2020 55 NOTE 13: COMMITMENTS (a) Exploration Commitments The Group has certain obligations to expend minimum amounts on exploration in tenement areas. These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations of the Group. The following commitments exist at reporting date but have not been brought to account. If the relevant option to acquire a mineral tenement is relinquished, the expenditure commitment also ceases. The Group has the option to negotiate new terms or relinquish the tenements and also to meet expenditure requirements by joint venture or farm-in arrangements. 30 June 2020 $ 400,000 - 400,000 30 June 2019 $ 850,000 - 850,000 Not later than 1 year Later than 1 year but not later than 5 years Total commitment NOTE 14: CONTINGENT LIABILITIES There were no contingent liabilities at the end of the reporting period. NOTE 15: RELATED PARTY TRANSACTIONS Parent Entity Elementos Limited is the legal parent and ultimate parent entity of the Group, owning 100% of all subsidiaries at 30 June 2020. Subsidiaries Interest in subsidiaries are disclosed in Note 20. Key Management Personnel Short-term employee benefits Post-employment benefits Equity-based payments 30 June 2020 30 June 2019 $ 408,908 26,709 25,692 461,309 $ 490,384 25,694 42,916 558,994 On 17 April 2019, the Company executed a loan facility with the Company’s Non-Executive Chairman Mr Andy Greig, a related party, for up to $2,000,000. The Company had drawn $1,250,000 under the loan at 30 June 2020. Further details are contained in Note 7 (Borrowings). Annual Report for the year ended 30 June 2020 56 NOTE 16: SHARE-BASED PAYMENTS Director and Employee Share-based Payments Share based payment expense recognised during the year: 30 June 2020 30 June 2019 Share based payment expense recognised during the period: Performance Rights issued to an employee under performance rights plan Options movement schedule Balance at 1 July 2019 Granted as Compensation Exercised Expired Balance at 30 June 2020 Total Vested 30 June 2020 $ 42,916 42,916 $ 25,692 25,692 Total Vested and Exercisable 30 June 2020 10,000,000 10,000,000 - - - - 10,000,000 10,000,000 - - - - - - Performance Rights Held by Key Management Personnel Chris Creagh (CEO) is the only key management personnel who has been issued performance rights Details of the performance rights held directly, indirectly or beneficially by Chris Creagh during the year ended 30 June 2020 were as follows: Key Management Personnel Balance at 1 July 2019 Granted as Compensation Exercised Expired Balance at 30 June 2020 Total Vested and Exercisable 30 June 2020 C. Creagh 23,000,000 - 4,000,000 19,000,000 - - During the year ended 30 June 2018, 30,000,000 performance rights were granted to the Company’s Chief Executive Officer, Chris Creagh, one of the Group’s key management personnel, under the (shareholder approved) Performance rights Plan. The performance rights have seven tranches that each have difference test dates, vesting dates and vesting conditions. All of the Performance Rights have an expiry date of 30 June 2020. The Company obtained an independent valuation of the Performance Rights, who took into account the share price at grant date and the (director) estimated probability of achieving each vesting condition. These values were then spread evenly (for each tranche) over the period to the test date for each tranche. Annual Report for the year ended 30 June 2020 57 NOTE 16: SHARE-BASED PAYMENTS (CONTINUED) Performance Rights shall be divided into tranches of the amounts set out in Column 1, vesting on satisfaction of conditions set out in Column 2: Column 1 (1) 4,000,000(a) (2) 2,000,000 (3) 3,000,000(a) (4) 3,000,000 (5) 4,000,000 (6) 4,000,000(b) (7) 10,000,000 Column 2 On continuous employment with the Company until 31 March 2018 On successful completion of the Definitive Feasibility Study On continuous employment with the Company until 1 January 2019 On final approval of Environmental Permitting by any relevant authority On completion of a capital raising (debt or equity, or a combination) sufficient to fund construction of a project and Elementos' corporate costs On continuous employment with the Company until 1 January 2020 On the commissioning of a process plant that uses the low concentrate, roasting, leaching and electrowinning technology introduced to Elementos and reaching 80% of planned monthly production rate for a period of 3 months at any site operated by Elementos (a) These 7,000,000 performance rights were exercised into fully paid ordinary shares on 17 April 2019. (b) These 4,000,000 performance rights were exercised into fully paid ordinary shares on 26 May 2020. Tranches 2, 4, 5 and 7 all expired at 30 June 2020 without meeting the vesting conditions. If a vesting condition is satisfied after the Employee's employment ends, the Board may in its absolute discretion (acting reasonably) assess and rate the Employee's performance or contribution toward the satisfaction of a vesting condition ('Performance Rating') in which event the Performance Rights for that Tranche will convert in the limited proportion set out in the table below ('Determined Rights'), and otherwise do not convert to ordinary Shares: Performance Rating % Performance Rights capable of converting Excellent Very Good Good Fair Poor 100% 75% 50% 25% 0% Annual Report for the year ended 30 June 2020 58 NOTE 17: AUDITOR’S REMUNERATION Remuneration for the auditor of the parent entity: BDO Audit Pty Ltd and its related entities: Auditing or reviewing the financial reports NOTE 18: FINANCIAL RISK MANAGEMENT (a) Financial Risk Management Policies 30 June 2020 30 June 2019 $ 47,648 47,658 $ 41,443 41,443 The Elementos Group's financial instruments comprises cash balances, receivables and payables, loans to and from subsidiaries. The main purpose of these financial instruments is to provide finance for Group operations. Treasury Risk Management Key executives of the Company meet on a regular basis to analyse exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The board of directors has overall responsibility for the establishment and oversight of the Group's risk management framework. Management is responsible for developing and monitoring the risk management policies and reports to the board. Financial Risks The main risks the Group is exposed to through its financial instruments are interest rate risk, credit risk and liquidity risk. These risks are managed through monitoring of forecast cash flows, interest rates, economic conditions and ensuring adequate funds are available. Interest Rate Risk The Group's exposure to interest rate risk, which is the risk that a financial instrument's cash flows from interest will fluctuate as a result of changes in market interest rates, arises in relation to the Group's bank balances. This risk is managed through careful placement of surplus funds in interest bearing bank accounts. The Company has performed sensitivity analysis relating to its exposure to interest rate risk. At year end, the effect on profit and equity as a result of a 1% change in the interest rate, with all other variables remaining constant, is immaterial (2019: immaterial). Liquidity Risk Liquidity risk is the risk that the Group will not be able meet its financial obligations as they fall due. This risk is managed by ensuring, to the extent possible, that there is sufficient liquidity to meet liabilities when due, without incurring unacceptable losses or risking damage to the Group's reputation. The Group's activities are funded from equity and where required and available debt and/or project finance. There is no requirement to repay principal or pay interest on the related party loan during the loan term. Annual Report for the year ended 30 June 2020 59 NOTE 18: FINANCIAL RISK MANAGEMENT (CONTINUED) Credit Risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date to recognised financial assets, is their carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. Credit risk arises from exposures to deposits with financial institutions and sundry receivables. Credit risk is managed and reviewed regularly by key executives. The key executives monitor credit risk by actively assessing the rating quality and liquidity of counter parties: ▪ only banks and financial institutions with an ‘A’ rating are utilised; and ▪ all other entities are rated for credit worthiness taking into account their size, market position and financial standing. At 30 June 2020, there was no concentration of credit risk, other than bank balances and on geographical basis with most financial assets in Australia (2019: nil). (b) Financial Instrument Composition and Contractual Maturity Analysis Financial assets: Within 6 months: cash & cash equivalents receivables (i) Financial liabilities: Within 6 months: payables (i) Within 12 months: Borrowings (ii) Lease liabilities Greater than 12 months: Borrowings (ii) Lease liabilities 30 June 2020 30 June 2019 $ $ 199,176 138,267 337,443 400,812 257 401,069 (515,575) (182,754) (1,250,000) (6,932) (1,065,303) (16,957) (2,854,767) (6,932) - (23,890) - (213567) (i) Non-interest bearing. The contractual cash flows do not differ to the carrying amount. (ii) Interest bearing with a weighted average interest rate of 6% per annum. (c) Fair Values Fair values of financial assets and financial liabilities are materially in line with carrying values due to their short term nature. Annual Report for the year ended 30 June 2020 60 NOTE 19: SEGMENT REPORTING Operating segments have been determined on the basis of reports reviewed by the board of directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Group is managed primarily on a geographic basis, that is, the location of the respective areas of interest (tenements) in Australia and Spain. Operating segments are determined on the basis of financial information reported to the board of directors. Accordingly, management currently identifies the Group as having two reportable segments, being Australia and Spain. This has changed from previous reporting periods as a result of the completion of the Oropesa Tin Project acquisition. Basis of accounting for purposes of reporting by operating segments. (a) Accounting policies adopted Unless stated otherwise, all amounts reported to the Board of Directors, being the chief decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group. (b) Segment Assets Where an asset is used across multiple segments, the asset is allocated to that segment that receives majority economic value from that asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location. (c) Segment Liabilities Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Segment liabilities include trade and other payables, lease liabilities and borrowings. Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Reserves Accumulated losses Total equity Loss for the period Other comprehensive income for the period Total comprehensive income for the period Australia $ 193,952 5,499,444 5,693,396 1,543,695 16,260 1,559,955 16,699,725 - (12,566,285) 4,133,440 (1,516,985) Spain $ 143,491 4,033,751 4,177,242 227,532 1,065,303 1,292,834 3,000,000 (51,093) (64,499) 2,884,408 (64,499) Total $ 337,443 9,533,195 9,870,638 1,771,226 1,081,563 2,852,789 19,699,725 (51,093) (12,630,784) 7,017,848 (1,581,484) - (51,093) (51,093) (1,516,985) (115,592) (1,632,577) Annual Report for the year ended 30 June 2020 61 NOTE 20: SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in accordance with the accounting policy described in Note 1: Country of incorporation Rockwell Minerals Pty Ltd Rockwell Minerals (Tasmania) Pty Ltd Elementos Minerales S.A. Elementos Chile Limitada Elementos Spain Pty Ltd Minas de Estano de Espana, S.L.U Australia Australia Argentina Chile Australia Spain NOTE 21: EVENTS AFTER REPORTING PERIOD Ownership interest 2019 100% 100% 100% 100% 100% -% 2020 100% 100% 100% 100% 100% 100% • On 6 August 2020, the Company announced that it had received commitments to complete a private placement of 464,000,017 shares to be issued at 0.55 cents per share with participants receiving an attaching option on a one for three basis, with and exercise price of 0.9 cents per share and expiry date of 31 August 2022. The transaction will complete in two tranches as follows: (a) On 14 August 2020 422,727,288 shares were issued at 0.55 cents per share and 140,909,121 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022 were issued. (b) Subject to shareholder approval at the 2020 Annual General Meeting the Company plans to issue 41,272,729 shares at 0.55 cents per share and 13,757,576 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022. As part of the Capital Raising activity announced on 6 August 2020 detailed above the Company announced that it had engaged BW Equities to act as lead manager to the placement. As consideration BW Equities are to be issued 40,000,000 share options with an exercise price of 0.9 cents per share expiring 31 August 2022. • On 6 August 2020, the Company announced that it had entered into an agreement, subject to shareholder approval at the 2020 Annual General Meeting, to convert $500,000 of the outstanding loan balance with Mr Andy Greig (Chairman). On conversion of the loan Mr Greig will receive 90,909,091 ordinary shares with an issue price of 0.55 cents per share and 30,303,030 options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022. • On 9 September 2020, the Company announced the successful completion of an oversubscribed Shares Purchase Plan (“SPP”) to existing shareholders raising $773,000. The SPP will complete as follows: (a) On 9 August 2020 135,545,486 shares were issued at 0.55 cents per share. (b) The Company will offer SPP participants up to 45,181,875 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022 subject to a separate offer under a cleansing prospectus.Subject to shareholder approval at the 2020 Annual General Meeting the Company plans to issue 5,000,001 shares at 0.55 cents per share and 1,666,668 unlisted options with an exercise price of 0.9 cents per share and expiry date of 31 August 2022 to Directors that participated in the SPP. Other than the events noted above, there are no other matters or circumstances that have arisen since the end of the year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. Annual Report for the year ended 30 June 2020 62 NOTE 22: PARENT ENTITY INFORMATION The following information relates to the parent entity, Elementos Limited at 30 June 2020. This information has been prepared using consistent accounting policies as presented in Note 1. Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Reserves Accumulated losses Total equity Loss for the period Other comprehensive income for the period Total comprehensive income for the period 30 June 2020 30 June 2019 $ 193,826 12,141,209 12,335,035 1,553,286 16,095 1,569,381 35,595,256 - (24,829,602) 10,765,654 (1,039,149) - $ 400,943 5,398,504 5,799,447 121,376 21,911 143,287 32,563,256 430,935 (27,338,031) 5,656,160 (1,555,239) - (1,039,149) (1,555,239) The Company has no contingent liabilities, nor has it entered into any guarantees in relation to the debts of its subsidiaries (2019: nil). The Company has not entered into any contractual commitments for the acquisition of property, plant and equipment (2019: nil). NOTE 23: DIVIDENDS & FRANKING CREDITS There were no dividends paid or recommended during the financial year. There are no franking credits available to the shareholders of the Company. Annual Report for the year ended 30 June 2020 63 NOTE 24: ASSET ACQUISITION As announced on 14 January 2020 the Company completed the acquisition of the Oropesa Tin Project from Eurotin Inc. The completion of the transaction represents the acquisition of the Oropesa Tin Project which includes the tenement and all historical exploration information including drilling results, core samples, environmental and development applications. No goodwill is recognised on the transaction. As part of the acquisition Elementos assumed a CAD$1m loan owed from MESPA to Eurotin’s Chief Executive officer and Eurotin and subsequently Elementos’ largest shareholder, Mark Wellings. The Loan is unsecured, accrues interest at a rate of 5.0% p.a. and is to be repaid by the second anniversary of the Final Completion. In support of the Loan Agreement, Elementos has issued to Mark Wellings a convertible debenture, pursuant to which Mark Wellings shall have the right to convert, from time to time, up to the principal amount and all accrued interest into Elementos shares at a price equal to the higher of the 20 day VWAP of Elementos shares preceding the date that Mark Wellings provides notice of his intention to convert and $0.004 per share. Conversion during the term of the Convertible Debenture will be subject to Elementos’ prior consent, other than during a 10 business day period at the end of the Convertible Debenture’s terms. At interim completion the Company issued 1,000,000,000 convertible redeemable preference shares to Eurotin Inc. shareholders. On 14 January 2020 the Company confirmed that final completion had occurred and the CRPS had converted on a 1 for 1 basis to 1,000,000,000 fully paid ordinary shares of Elementos Ltd. The Group has determined that the assets acquired did not include the sufficient inputs, processes and outputs to meet the definition of a business defined in the Australian Accounting Standards as at the date of acquisition and therefore is not a business combination. The acquisition has been accounted for as an asset acquisition. Details of the relative fair value of the assets acquired and liabilities assumed at 14 January 2020 being the date control of MESPA was obtained, are as follows: Purchase Consideration Elementos Ltd ordinary shares Total Purchase Consideration Net assets acquired Cash Trade and other receivables Other assets Exploration and Evaluation assets Trade and other payables Borrowings Net identifiable assets acquired 14 January 2020 $ 3,000,000 3,000,000 186,988 97,887 74,557 3,798,330 (61,762) (1,096,000) 3,000,000 Annual Report for the year ended 30 June 2020 64 DIRECTOR’S DECLARATION The directors of the Company declare that: 1. The attached financial statements and notes are in accordance with the Corporations Act 2001, including: a. complying with Australian Accounting Standards and Interpretations which, as stated in accounting policy note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and b. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its performance for the financial year ended on that date. c. the financial statements and notes for the financial year give a true and fair view. 3. In the directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the board of directors. 2. The executive director and chief financial officer have each declared under section 295A that: Chris Dunks Director a. the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; 28 September 2020 Brisbane, Queensland b. the financial statements and notes for the financial year comply with the Australian Accounting Standards and Interpretations; and Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia 65 INDEPENDENT AUDITOR'S REPORT To the members of Elementos Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Elementos Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 1 in the financial report which describes the events and/or conditions which give rise to the existence of a material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern and therefore the group may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 66 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Carrying value of exploration and evaluation assets Key audit matter How the matter was addressed in our audit Refer to Note 5 in the financial report. The Group carries exploration and evaluation assets as at 30 June 2020 in relation to the application of the Group’s accounting policy for exploration and evaluation assets. The recoverability of exploration and evaluation asset is a key audit matter due to: • • the significance of the total balance; and the level of procedures undertaken to valuate management’s application of the requirements of AASB 6 Exploration for and Evaluation of Mineral Resources (‘AASB 6’) in light of any indicators of impairment that may be present. Our procedures included, but were not limited to, the following: • • • Obtaining evidence that the Group has valid rights to explore in the areas represented by the capitalised exploration and evaluation expenditure by obtaining supporting documentation and considering whether the Group maintains the tenements in good standing. Making enquiries of management with respect to the status of ongoing exploration programs in the respective areas of interest, assessing the Group's cashflow budget for the level of budgeted spend on exploration projects, and held discussions with Directors of the Group as to their intentions and strategy. Enquiring of management, reviewing ASX announcements, and reviewing directors' minutes to ensure that the Group had not decided to discontinue activities in any applicable areas of interest and to assess whether there are any other facts or circumstances that existed to indicate impairment testing was required. BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 67 Accounting for the acquisition of Oropesa Tin Project Key audit matter How the matter was addressed in our audit Refer to Note 24 in the financial report. Our procedures included, amongst others: The Group disclosures about the acquisition of Oropesa Tin Project includes details of the key events that occurred in the transaction including the consideration transferred and the assets and liabilities acquired. The acquisition of Oropesa Tin Project is considered a significant transaction for the group. The presentation, measurement and disclosures around this transaction are important in the users’ understanding of the financial statements. The transaction is material in the context of the audit and involved significant auditor effort, and was therefore key to our audit. • • • Assessing management’s determination of whether the acquisition was a business combination or an asset acquisition Evaluating management’s assessment of the fair value of the identifiable assets and liabilities acquired Assessing the disclosures related to the acquisition to ensure they are in compliance with applicable accounting standards. Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2020, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 68 Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 19 to 25 of the directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Elementos Limited, for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit Pty Ltd D P Wright Director Brisbane, 28 September 2020 BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. Annual Report for the year ended 30 June 2020 66

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