Annual
Report
2022
Corporate Directory
Directors
Oliver Kleinhempel
Non-executive Director
Non-executive Chairman
Stephen Layton
Non-executive Director
Richard Morrow
Non-executive Director
Zhui Pei Yeo
Non-executive Director
Company Secretaries
Melanie Leydin
Patricia Vanni de Oliveira
Registered Office
Level 4, 100 Albert Road
South Melbourne VIC 3205
T +61 (0)7 4094 3072
W www.eqresources.com.au
info@eqresources.com.au
E
Principal Place of Business
6888 Mulligan Highway
Mount Carbine QLD 4871
Share Register
Automic Pty Ltd
Level 5 126 Philip Street
Sydney NSW 2000
T (International): +61 (0)2 9698 5414
Auditors
Nexia Melbourne Audit Pty Ltd
Level 12, 31 Queen Street
Melbourne VIC 3000
T +61 (0)3 8613 8888
F +61 (0)3 8613 8800
Stock Exchange Listing
Listed on the Australian Securities Exchange (ASX)
ASX Code: EQR
ACN: 115 009 106
ABN: 77 115 009 106
Contents
1
2
Chairman’s Address
Chief Executive Officer’s Letter
4 Operating and Financial Review
4
Health, Safety, Environment and Social Engagement
12 Mt Carbine Operations
22 Exploration Activities
27 Tungsten Market Outlook and Concentrate Production
29 Corporate Activities
33 Tenement Schedule
34 Mineral Resources and Ore Reserves Statement
39 Directors’ Report
50 Consolidated Statement of Profit or Loss and Other Comprehensive Income
51 Consolidated Statement of Financial Position
52 Consolidated Statement of Cash Flows
53 Consolidated Statement of Changes in Equity
54 Notes to the Consolidated Financial Statements
82 Directors’ Declaration
83 Auditor’s Independence Declaration
84
Independent Auditor’s Report
88 Shareholder Information
92 Forward Looking Statements
EQ Resources Limited Annual Report 2022
1
Chairman’s Address
EQR has progressed towards
being a responsible and industry-
recognised producer of tungsten
– a critical metal for industrialised
nations and with emerging
importance in the New Economy.
Dear Fellow Shareholders
Welcome to the 2022 Annual Report for EQ Resources
Limited (EQR or Company). The past 12 months have
been defined by continuous progress, primarily on
the ground at mighty Mt Carbine, seeing production
ramping up and exploration efforts delivering
promising results. Secondly as an organisation
overall, our Leadership Team has established a strong
operational and administration support crew.
The Company has further progressed towards being
a responsible and industry-recognised producer of
tungsten – a critical metal for industrialised nations
and with emerging importance in the New Energy
Economy.
In this year’s address I would like to recognise three
important factors for the Company’s recent and
upcoming successes. The 3P’s if you like – People,
Partners & Potential:
OUR PEOPLE
The Leadership Team has structured and trained a team
of hard-working employees coming from the region
around Mt Carbine, Queenslanders who understand
and have experienced the positive impact the project
has had in their communities. Success builds upon
people and their individual efforts. We have a resilient
organisation which adapted throughout difficult
COVID-19 times. We are now proudly looking at a team
that ensures a 24/7 operation. We have an advanced
health, safety and training system in place, accepted
by all employees as a basis for their wellbeing at site.
We have recruited a large number of female colleagues
who provide diversity around our workplaces. We
simply have one of the best teams out there of which
we can all be proud, while the workforce can also be
proud of the work they do together and the progress
they have made breathing new life into Mt Carbine.
Mt Carbine. We receive positive feedback about our
open engagement and transparency. Final product
offtakers from Mt Carbine are frequently visiting
site to stay engaged with our team, recognising the
progress and offering support for the expansion
plans. Together with our partners we have grown
into a more technology-driven operation, highlighted
by our successful XRT Sorting operation and recent
developments with Plotlogic a partner which provides
sophisticated technology to precisely understand the
location and material properties of every rock in our
mine, in real-time. Last but not least, the Company has
received continuous support from State and Federal
Governments and their agencies – our work has been
recognised by providing the Company with three
grants in the short time that the Company has been in
development.
OUR POTENTIAL
Technology
leadership enables the Company to
maximise resource recovery at Mt Carbine and any
future project the team engages with. As shown with
the recent Reserve update, the success around XRT
Sorting enabled the Company to extend the open pit
mine life – with more to come! The Company’s approach
towards a sustainable mining operation has resulted in
and continues to generate significant co-contributions
from the sale of quarry products. Recent drilling
offers additional potential to extend the open pit even
further. The West Extension exploration work will be a
main focus for the months to come, with the Geology
Team already having identified new drill targets. We
have no doubt that our teams are delivering on the
Company’s Value Proposition, providing long-lasting
positive impact for our communities, the industry
overall and for all of us as shareholders!
We invite you to continue to support us in our journey
to realise the full potential of EQ Resources.
OUR PARTNERS
Our operations would not function without the
additional support from a wide range of partners who
believe in the potential of the Mt Carbine operations
and
strategy. The
Leadership Team continuously engages with regional
communities, regional contractors and suppliers and
other important stakeholders of the ecosystem around
the Company’s
long-term
Oliver Kleinhempel
Non-Executive Chairman
2
EQ Resources Limited Annual Report 2022
Chief Executive Officer’s Letter
The past year has once again
been a year of strong growth
and definitive value addition for
the business driving the long-
term growth of the Company.
Dear Shareholders
Since the release of last year’s Annual Report, EQR’s Mt Carbine team have been working tirelessly to execute the
Bankable Feasibility Study (“BFS”), define additional resource, drive operational growth and execute the Early
Works capital expansion. In this regard, the EQR Team, with the support of its employees, shareholders, and
contracting partners have been able to achieve all of the above, delivering on the goals for the year and in doing
so, giving confidence to the market on EQR’s ability to deliver a world class tungsten operation which has so often
been seen as a significant challenge for companies in Western economies.
Some of my key highlights for the year are set out below:
1. We have successfully redefined the Mt Carbine Tungsten Resource resulting in the design of a new open pit
that currently allows at least 4-years of open pit mining along with 10 years of Low Grade Stockpile (“LGS”)
mining. In this same regard, hole 26 from the Company’s latest drilling sees the ore body extending strongly to
the west and at depth. This is very exciting, as we look toward the coming year and planning a drill campaign
with the intention of converting additional resource in the Western Extension into Reserves and to better
understand the extent of the ore body through the Western Extension as it appears to have the potential to
extend the open pit life of mine. Lastly, in regard to the mining, EQR was able to complete a Scoping Study on
the Underground Resource at Mt Carbine which gives the team additional confidence to drill out and convert
the study to pre-feasibility in the near future.
2. The completion of the BFS has shown the strong fundamentals of the Mt Carbine Tungsten Project and set the
foundation for further resource definition, expansion, and positive project economics. In the coming months,
the Company is targeting the republication of an updated BFS showing the economics of the new Open Pit
from the recent Reserve Upgrade.
3. Since the completion of the BFS, we have been able to upgrade, acquire and install several key pieces of
equipment at the Mt Carbine operations that have proven their positive economic impact. The exact upgrades
are discussed in detail within the Mt Carbine Expansion section of the Report, however, the past year has seen
a second XRT Sorter purchased and commissioned, the crushing and screening capacity increased through the
Early Works capital expansion, along with the upgrade of the overhead power lines. Several of these upgrades
were part of the BFS capital requirements and therefore reduce future spend requirements for the execution
of the BFS.
4. EQR has had strong support from the Government getting behind their Critical Minerals Strategy for Australia.
This has been shown through the Company receiving Federal Grants from Advanced Manufacturing Growth
Centre (“AMGC”), accelerating the purchase of a second XRT Sorter and the Critical Minerals Accelerator
Initiative, which is a grant for $6M focused on the execution of the BFS capital expansion. These grants greatly
benefit the development of the Mt Carbine Tungsten Project as it is non-dilutive to long-term shareholders.
EQ Resources Limited Annual Report 2022
3
Mt Carbine Low Grade Stockpile and Quarry Operations
EQR has had the opportunity to build on the progress achieved last year, further growing and developing a strong
work force and management team for its operations in a sustainable and incremental manner as this project has
developed. This has allowed the foundation to be set for continued growth and expansion with minimal disruption
as the Company has requisite policies, systems, structures and leadership in place. Coupled with this, EQR continues
to have a strong ESG focus, working across all three pillars of Environment, Social and Governance, through the
newly established ESG Advisory Group made up of local stakeholders.
Mt Carbine is the only primary tungsten producer in Australia at this point, and it has not come without a significant
effort from all involved. It is now benefiting from a strong tungsten price, which I personally believe will continue
to get stronger as Western supply pressure grows and demand constraints remain.
I would like to take this opportunity to once again acknowledge that this growth would not have been possible
without the ongoing efforts of the leadership and site teams working together and the healthy interaction of the
EQR Board for their strategic input, guidance, and involvement in bringing the Company to where it is today,
bolstered by exciting plans for the future.
The Company continues to deliver measurable outcomes towards the short, medium and long-term goals, with a
diverse, collaborative and highly motivated team.
The team at EQR is grateful for the support of all shareholders and partners that see and appreciate the value
in what we are doing and how we as a Company continue to deliver on our milestones as we walk the path of
sustainable, accretive growth.
Kevin MacNeill
Chief Executive Officer
4
EQ Resources Limited Annual Report 2022
Operating and Financial Review
The 2022 financial year has been a progressive year for EQ Resources Limited (“EQR”
or “the Company”) and its flagship project at Mt Carbine in Far North Queensland.
Highlights
The highlights of this year were:
− Positive results from EQR’s Bankable Feasibility Study for the Mt Carbine Expansion Project, were received
over the period, with a project NPV of $131.5 million and an IRR of 154%. Subsequent to this, further drilling has
been completed, increasing the Mt Carbine Reserves and redefining the open pit mining plan resulting in the
processing of addition ore. Revised economics will be completed on the updated Reserve statement in the near
future;
− Consistent and ongoing production at the Mt Carbine Gravity Plant, operated under an unincorporated joint
venture between EQR and CRONIMET Australia Pty Ltd with trial shipments to leading tungsten consumers in
Europe, the US and across Asia;
− Binding Farm-in and Joint Venture Agreement entered into with Sozo Resources Pty Ltd whereby Sozo can earn
up to an 80% interest in EQR’s Panama Hat and Crow Mountain Projects (EL’s 6648 and 8024) by completing
expenditure of A$1.6M over 4 years;
− Secured $600,000 in co-investment from the Federal Government’s Advanced Manufacturing Growth Centre
(AMGC) for the upscaling of the XRT Sorter plant;
− The Federal Government’s Critical Minerals Accelerator Initiative (CMAI) supports EQR’s expansion program at
Mt Carbine with a $6 million grant; and
− The Company achieved a major milestone with the successful financing and completion of the Mt Carbine Early
Works Program, construction and commissioning of associated equipment and infrastructure done.
A further review of the Company’s operating and financial activities for the 2022 financial year, up until the date of
this report, is set out in this section.
Health, Safety, Environment and Social Engagement
Health & Safety
Safety is the Company’s highest priority. The Company is committed to providing a safe, healthy and inclusive
workplace for its people and to conduct business safely and responsibly. Our approach is to not only provide training
and support to our employees but to also promote self-development through obtainment of new qualifications.
The Company’s strong focus on constant improvement in safety has led to the development and implementation
of an Integrated Management System (“IMS”).
Risk planning and management is central to the Company’s activities, EQR’s operations are only conducted when
the risk is within acceptable limits and as low as reasonably practicable (ALARP).
The risk planning and management processes developed and implemented at the Mt Carbine site aim to provide a
logical and systematic method of identifying, analysing, evaluating, treating, monitoring, and communicating risks.
The following hierarchy of controls is applied to mitigate risk to a level which is ALARP:
− Elimination/Removal;
− Substitution;
− Engineering/Isolation Control;
− Administration;
− Personal Protective Equipment; and
− Human Behaviour.
The hierarchy of controls is used to control hazards identified for all risk management processes. Less reliable
control measures (e.g., administrative, PPE or safe behaviour controls) have been implemented as part of a holistic
control strategy in addition to controls from the other more effective measures and are also used on their own
where the level of current risk is ALARP.
EQ Resources Limited Annual Report 2022
5
In an effort to continuously improve systems at the
Mt Carbine site, EQR:
− Conducts systematic reviews of the corporate
guidelines, standards, systems, and processes to
verify the current standards and controls in place;
− Conducts audits and assessments at determined
frequencies to measure the level of compliance
and progress to the standards, and assist in the
correction and prevention of any systemic issues;
− Reviews
performance
accountability
processes to indicate progress or deviations for
early corrections; and
and
− Ensures procedures for Management Review and
Health and Safety Objectives detail the processes
to be applied.
Employee Training
Due to the local workforce having considerable
transferable skills but limited experience working
within the mining industry, the Company continues
to invest in extensive training for its workforce. The
Company is committed to being a significant provider
of local employment and is committed to the upskilling
of its employees to ensure it has a safe and productive
workplace focused on continual safety performance
improvement.
The Company also constantly monitors its safety
performance and engages in a proactive, positive
reporting culture with Safety Resets, Toolbox
Talks, development and improvement of the Safety
Management System and increased focus on the
quantity and quality of risk management tools such as
the Job Safety Analysis and “Take 5” protocols.
The Company ensures it is complying with all relevant
health and safety legislation, industry codes and
guidelines but also conducts studies to measure
occupational exposures. The focus is on planning,
designing, operating and maintaining facilities to
guarantee the safest workplace environment, while
protecting its people from illness, potential exposure
and psychosocial hazards.
See Section 14 of the Bankable Feasibility Study for
the Company’s risk management approach.
EQR Supervisor, Andrew Uwland (middle) is presented with the
first ‘Safety Legend’ Award in QLD by the Hon Stewart, Minister of
Resources (left) and Department of Resources Director General,
M. Cridland.
Mr Uwland, a Supervisor at the Mt Carbine Operations,
has been with the Company since November 2021 and
is exceptionally passionate and vocal about driving
real safety change for the site and the mentality on
shift. He is a strong advocate for his crew regarding
safety practices and their wellbeing (physical &
psychological), placing a focus on training them
appropriately and keenly surveiling them in this regard.
From pre-start to safety documentation, Mr Uwland
places a big emphasis on procedure, training, and
safety-first mentality. He has also trained a full crew of
new-to-the-industry employees (barring 2 individuals
on his crew) and has had no reportable incidents while
developing a sense of safety pride within his crew. Mr
Uwland has implemented morale-boosting and team-
building techniques directly leading to minimal staff
turn-over in a labour market where it is a very common
occurrence.
6
EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
Total Recordable Injury Frequency Rate per million
hours worked 2021-2022
TRIFR
60.0
40.0
20.0
0.0
Q 1
Q 2
Q 3
Q 4
PROACTIVE SAFETY INDICATORS
-44%
Decrease Total Recordable
Injury Frequency
0
Lost Time Injury
Frequency Rate
+167%
Total Man Hour Increase
Year on Year
0
Fatalities
2,806
Take 5 Safety Assessments
114
JSEA Job Safety
Environment Analysis
24
Toolbox Talks
2
Prestart safety
meetings per day
28
Traineeships
started
Environment
The Company is committed to actively identifying and
responding to all risks associated with its operational
activities that could have an adverse impact on the
environment and the local communities in which it
operates.
The Environmental Programs maintained by EQR are
used to establish, implement, control, and maintain
processes to meet the requirements of EQR’s IMS and
implement the environmental objectives identified
by the Company. The environmental data generated
is used to identify potential environmental risks that
require management and to assess the achievement
of the environmental objectives in line with the
Company’s strategic development plan.
During the year the Company has undertaken extensive
environmental studies to both inform the approval
process associated with its plans to recommence
open cut mining and to de-risk the Project in line
with its core values of Treading Lightly to minimise its
environmental footprint and deliver positive societal
impact. Some of the activities undertaken were:
− Noise, Air & Vibration Studies;
− Water Management Plan Update;
− Waste Rock & Tailings Management;
− Enhanced Conceptual Groundwater Model which
involved the drilling of 18 additional investigation
bores;
− Flora and Fauna Studies; and
− Water Engineering Works.
The recent water engineering studies are focused on
not only ensuring adequacy of the Project’s water
storage facilities at Mt Carbine but also addressing
water security, the mitigation of the effects of
extreme weather events (drought and flood) through
a reduction in total water demand, increased water
reuse, water storage and stormwater, sediment and
erosion best practice.
Over the period, the Company has continued its
sponsorship and involvement with the Mitchell River
Watershed Management Group. Together with the
Mareeba Shire Council officers, management of
invasive species is continuing in the Frogbit Sentinel
network.
During the quarter ended March 2022, the Company
announced that due to the heavy rainfall and flooding
experienced through January and February 2022, the
water dam at Mt Carbine experienced a controlled
release with no harm to the receiving environment.
This was supported by the monitoring undertaken
during the release and the findings of the Company’s
annual Aquatic Ecology Study. The Company worked
EQ Resources Limited Annual Report 2022
7
Mt Carbine Tailings Dam is clean and toxin-free, remaining host to
the area’s diverse wildlife.
with environmental group NRA over this period to
ensure full compliance with sampling requirements for
reporting were met and completed in a timely matter.
EQR defines their ESG adoption profile as an ‘early
adopter’. Existing ESG environmental
initiatives
include:
A major achievement for the Company during the
period was the receipt of approval for the processing
of greater than 100,000 tonnes of tungsten bearing
feed material each year through its Retreatment
Plant. This is a significant step forward in maintaining
environmental compliance and meeting planned
production targets for the operation.
− The
implementation of a new waste sorting
technology;
− A review of pollution prevention treatment options;
and
− Ongoing participation in a pilot greenhouse gas
(GHG) emissions tracking scheme in partnership
with the University of Queensland.
and
The Company also have several ‘S’ centric employee
retention programs underway
attraction
centering on
improving employee diversity and
capability. Additionally, EQR sponsors a range of
community programs and events, engaging regularly
and collaboratively with the community to develop
initiatives that positively impact employees and the
local community. The Company is committed to
providing career development opportunities in a
friendly and inclusive workplace where all employees
can express themselves freely, feel valued, included
and socially recognised.
Social, Community and Engagement
ESG has grown in prominence thanks to capital
investment pressures, heightened consumer and
stakeholder expectations, and global regulatory
pressures for greater ESG reporting disclosures.
Underpinning this is the broad realisation that its
is not only about addressing climate
relevance
change, but also providing organisational
long-
term performance insights, both operationally and
financially. ESG is not a separate business strategy, but
the application of shared values and principles that
realise commercial benefits whilst achieving positive
social and environmental outcomes.
EQR appreciates the opportunities that an ESG focus
can provide. As a resource-efficient, value-oriented and
critical resource mining company of the future, EQR
has already aligned its purpose, mission, and values
with some high level ESG objectives. The Company
aims to contribute to sustainable development and
align to the United Nations Sustainable Development
Goals, refer to Table 1.
8
EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
Table 1: EQR ESG Alignment with United Nations Sustainable Development Goals (SDG)
ESG Framework SDG Alignment
We are committed to embedding and
embracing resource efficiency
in our
operations. As a producer of a new economy
critical mineral, we aim to minimize our
impacts on the environment and prevent
degradation through the optimal extraction
of tungsten from a secondary source
and through the integration of advanced
processing technology.
Safety is a core value and a strategic
priority, and we are committed
to
promoting and enhancing a safety culture
in our operations. Our commitment to
society
includes promoting workforce
diversity and inclusion, empowering local
communities through creating employment
opportunities, sourcing materials locally
in our
where possible and
employees and communities for social
development.
investing
As a value-oriented resources company, we
are committed to acting in a transparent,
accountable, and responsible manner in all
our business dealings and operations.
Environment
Social
Governance
Through active engagement with local communities,
environmental experts, and supply chains,
the
Company is building solid credentials for the future.
Underpinning a philosophy of pragmatism and
effectiveness, EQR has taken a multi-process approach
including:
− Working sessions with the Leadership Team on
purpose, core values and key principles;
− Revision of the Risk Management Policy; and
− The completion of an independent ESG Stakeholder
Sentiment Survey and ESG status report.
During the period an ESG Stakeholder Sentiment
Survey was disseminated to 22 EQR stakeholders,
with 19 respondents. Across the EQR Leadership
Team and stakeholders surveyed, shared perceptions
and aspirational goals were prevalent. The close
alignment between stakeholder feedback and current
ESG positioning and intentions reinforces EQR’s high
degree of confidence in its evolving ESG program.
Multiple threads were identified, with five material
themes highlighted:
− Employee and contractor health, safety, and
wellness (Social);
− Proactive management of risk and compliance
management (Governance);
− Creation of meaningful jobs and the creation of
local talent pipelines (Social);
− Water, energy, and resources management and
efficiency (Environmental); and
− Commitment to the accelerated transition to a low
carbon future (Environmental).
Societal Challenges:
When applying a societal lens, additional opportunities
were uncovered, including:
− Reducing site environmental impacts especially
noise and dust;
− Reducing, recycling or repurposing waste;
− Providing local and regional employment especially
for disadvantaged and minority groups;
− Maximising the opportunity for female participation
in non-traditional work areas (currently at 25%);
− Stimulating a sustainable
local supply chain
including accommodation and essential services;
and
− Supporting community health, wellbeing and
resilience through sponsorships and volunteer
work.
EQ Resources Limited Annual Report 2022
9
Strategic Positioning:
The outputs from the leadership workshops and a sentiment survey provided both insight and foresight. Recognising
that ESG is a tightly intertwined series of processes and practices across all business operations, EQR has adopted
the following approach:
− Be an early adopter of ‘Environmental’ opportunities using technology and robust systems that deliver highly
efficient extraction processes, minimising its physical footprint, developing low carbon operations, and
minimising waste and consumables such as water, energy, explosives;
− Lead across a range of ‘Social’ opportunities especially, supporting sustainable communities and local supply
chains, driving diversity and inclusion, preferencing local employment and developing a long-term pipeline of
regional talent; and
− Deliver transparency and compliance regarding ‘Governance’, reporting and public disclosures, recognising
that compliance is the floor not the ceiling of its obligations.
An ESG focus affords the Mt Carbine mine with significant opportunities to maximise positive environmental and
social impacts both now and into the future. The EQR Leadership Team is committed to advancing its current
ESG program with material consideration being given to both immediate opportunities and those longer term.
From prospects for employment and industry expansion created within the local community, to the potential for a
development of green energy via solar powered farms on rehabilitated stockpile and tailings areas, there are many
areas under consideration for future incorporation.
Insight into current stakeholder priorities and suggestions will shape the future direction of the EQR ESG program,
with a particular focus on further developing a robust ESG framework that delivers environmental and social
benefit with a positive and sustainable commercial return.
As EQR continues to develop the Mt Carbine project, it is very aware of the immediate and regional community in
the area and will strive to continuously have a genuine and positive engagement with these parties. The guiding
principles for community and stakeholder engagement are summarised in Table 2.
Table 2: EQR Stakeholder Engagement - Guiding Principles
We will be
Proactive
This means
We will
engage with
communities
early and often,
so that we
understand and
respond to their
interests and
concerns.
Flexible and
inclusive
We will offer
a range of
engagement
opportunities
that are tailored
to the variety
of needs and
preferences of
the community.
Genuine
Respectful
Responsive
We will have
authentic
conversations
with the
community,
clearly
explaining what
can and can’t be
influenced.
We understand
that not
everyone will
support our
projects. We
will create an
environment
to have
professional
conversations.
We will close the
loop, providing
feedback to the
community on
how input has
been taken into
consideration.
10
EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
Mt Carbine welcomed indigenous elder, Mr Rodney
Riley for talks about opportunities for First Nations
employment in the growing project workforce. EQR
is committed to creating jobs and opportunity while
fostering co-existence through genuine relationships
to build sustainable communities.
Ms Nikita Lis, pictured below, is 23 years old and
has become an integral part of the Mt Carbine team
after joining the company while taking a gap year
after completing her bachelor’s degree in Biomedical
Science. Since working at Mt Carbine, Ms Lis has been
inspired to continue studying part time while staying
on roster at Mt Carbine. Ms Lis will now be completing
a post graduate degree in Engineering to use within
the mining industry. Management will continue to
work with Ms Lis to provide career path guidance,
mentorship, and support. Growing young people
to be value-add proponents of the mining industry
while having a long-term future with the Company is
something EQR continuously promotes.
EQR CEO, Kevin MacNeill with Gary Battensby, SSE; Mr Rodney
Riley indigenous elder and EQR Chairman, Oliver Kleinhempel.
Pictured from left to right.
EQR and the operations at Mt Carbine encourage
diversity, inclusion and representation throughout the
workplace. The Company has focused on upskilling
young individuals from the surrounding communities
eager to enter the mining industry which has led to
a thriving and vibrant young group of people that
are making a difference daily in the upliftment of
the community, production of Critical Minerals for
Australia and growing a sustainable career path.
Nikita Lis, on the path for a great career in the mining industry.
EQR has been a participant
in AMEC’s “More
Resourceful Than Ever” campaign which has a strong
environmental focus on clean energy and renewables,
recycling and waste minimisation, conservation, and
shows Australians the different ways our industry
is working to protect and improve the environment.
EQR embraces these values and practices in all of its
operational activities and supports AMEC in its goal to
increase community support for the industry through
an understanding of the work being done to dispel
the widely held assumption that the mining industry
is wasteful.
Diversity within the Mt Carbine Operations Team.
Senior Management inspecting the Mt Carbine Tailings Dam.
EQ Resources Limited Annual Report 2022
11
More than 100 people joined together at Mt Carbine
recently for a Morning Tea event organised by regional
local Karen Pedersen, which raised $3,267 for the
Cancer Council.
EQR’s Mt Carbine Operations continues its annual
support of the Mt Carbine Bull & Bronc Ride community
event and fun day. Established in 2000 by a mix of local
residents, employees and businesses, The Mt Carbine
Rodeo Association
is a voluntary, not-for-profit
organisation with the aim to promote local tourism and
encourage visitors to the area. The Rodeo raises funds
to maintain and upgrade the facilities so other charities
can use the grounds for their fundraising activities.
In addition to its sponsorship, EQR also provided a
hospitality tent for staff and their families to facilitate
the development of close relationships, reinforce team
spirit and promote the Company as a key stakeholder
within the community.
Local resident, Karen Pederson, accepts employee donations
from Mt Carbine Foreman, Myles Egan.
Annual Mt Carbine Rodeo.
Our Values
Act Safe, Feel Safe – Act safe at work. Care and respect
each other. Feel safe to be yourself.
Act Safe
Feel Safe
Embrace
Difference
Tread
Lightly
Embrace Difference – Diversity of thinking, skills and
background creates value and drives innovation.
Tread Lightly – Embed resource efficiency to minimise
environmental footprint and deliver positive societal impact.
Dig Deep – Go one better. Strive to continuously learn and
improve. Challenge the status quo.
Dig Deep
Buddy Up
Lead with
Integrity
Buddy Up – Collaboration is key to realising shared value.
Lead with Integrity – Have courage to do the right thing.
Be accountable.
12
EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
Mt Carbine Operations
Project Timeline
The Company has worked hard implementing the operational and execution strategy for its Mt Carbine assets, this
has seen the update of the Company’s Resource Statement which has delivered the information required to publish
a Bankable Feasibility Study (“BFS”) for the Company in December 2021. The Company has worked hard to ensure
timelines published were adhered to over the past 18-months, with the schedule holding within approximately
3-months of original forecast over the period and through the COVID-19 supply chain delays. The past 12-months
have focused on the upgrade of the Resource Statement, publication of the BFS and expansion of processing
capacities and plant outputs with the Early Works program. Over this period the Company worked hard to secure
the funding for the next phase of expansion at Mt Carbine, which will see the purchase of a new Sandvik crushing
and screening plant to increase capacity throughput once more, increasing efficiencies and reducing overall costs
of the future operations as the open cut mine comes online. On top of this, the Company was able to continue
executing relevant approvals for the reopening of the Open Pit mining operations.
The original results from EQR’s BFS for the Mt Carbine Expansion Project were positive and predicted to produce
operational pre-tax cash flow of $38 million and $95 million in years 3 and 4 respectively, with an NPV of $131.5
million and an IRR of 154%. However, after the reporting period, the Company completed additional drilling around
the defined Open Pit area and toward the Western Extension and is now planning to release an updated BFS with
the new information available.
The coming 12-months for the Company will focus on the re-opening of the open pit, extraction and processing of
primary ore, and additional Resource definition at Mt Carbine to define the further development plan and mining
strategy for the Company at its operations.
Figure 1: Timeline of the Mt Carbine Development.
Mt Carbine Expansion
During the second quarter of the financial year, the Leadership Team developed an early works strategy to increase
revenues during the period from the completion of the BFS through to the final funding, design, engineering and
project execution. This strategy saw minimal capital outlay for the upgrade of specific facilities or equipment to be
upgraded for the BFS which would also allow increased production outputs. The Early Works consisted of several
upgrades, including not only the Crushing and Screening Plant, but also, in summary the following which are all
critical contributors to the accelerated growth and success of the Mt Carbine development:
− Installation of a Second TOMRA XRT (partial funding through the Advanced Manufacturing Growth Centre –
“AMGC” Grant);
− Design, engineering, installation, and integration of a high-volume Sandvik wet screen (170tph) into Mt Carbine’s
crushing circuit;
− Slurry pipeline from the crushing area to the Gravity Plant for fines pumping (OPEX reduction);
EQ Resources Limited Annual Report 2022
13
− Power supply line and substation installation/upgrade;
− Installation of water monitoring bores required prior to submission of Environmental Approval to reopen the
open pit;
− Office upgrade utilising inhouse personnel to execute an optimised layout making room for the growing Mt
Carbine team;
− Dewatering screen purchase for installation in the Gravity Plant; and
− Purchase of tertiary crushing circuit for the crushing of sorter concentrate.
The plant allows for significantly higher throughputs of material targeting a minimum throughput of 170tph. With
the plant designed specifically for the application, the operations team will run the crushing and screening on a
24/7 basis to maximise feed production for the TOMRA XRT Processing Circuit and the Gravity Plant. All of the
points above were key upgrades for the BFS processing plant. Completing these upgrades early has allowed the
Company to increase revenue generation through growing concentrate outputs.
The Company now has 1 million ton per annum (Mtpa) processing capacity and is set to achieve a forecast 90
tonnes (“t”) of concentrate produced per month at current rates. The next production step change will come from
the processing of significantly higher feed grade material from the open pit operation set to kick-off in 2023. This
forecast can be seen in Figure 2.
Since the publication of the BFS, the company has achieved several significant milestones toward the execution of
the BFS and expansion of the Mt Carbine operation. These points are highlighted in Figure 2.
Figure 2: Mt Carbine Tungsten Concentrate Production Forecast.
Federal Government Co-Invests in High-Tech Ore-Sorting Process
EQR successfully secured $600,000 in co-investment from the Federal Government’s Advanced Manufacturing
Growth Centre (“AMGC”) via the $30 million Commercialisation Fund. Combined investment from EQR, its partners
and AMGC, totalling $1.97 million, will assist in commercialising industrial-scale operations for advanced minerals
processing flowsheet developed for the Mt Carbine Expansion Project.
Technologies to be incorporated include the advanced XRT ore sorting technology from TOMRA Sorting Pty
Ltd, as well as hyperspectral imaging sensors developed by Plotlogic Pty Ltd. The implementation will further be
supported by CRONIMET Australia Pty Ltd and The University of Queensland – Sustainable Minerals Institute.
The formal co-funding agreement between AMGC and the Company has been finalised and signed. AMGC is an
industry-led, not-for-profit organisation established through the Australian Government’s Industry Growth Centres
Initiative. AMGC’s vision is to transform Australian manufacturing to become an internationally competitive,
dynamic, and thriving industry with advanced capabilities and skills at its core.
14
EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
Agreement with Sandvik on Binding Terms for Financing of Crushing & Screening Plant
In March 2022, EQR agreed with leading mining technology company Sandvik on the binding terms for the delivery
and financing of the crushing and screening mechanical and structural equipment for the Company’s expansion
program at Mt Carbine (refer ASX Announcement “EQR and Sandvik Agree on Binding Terms for Financing of
Crushing & Screening Plant” dated 8 March 2022).
The scope of supply comprises the primary, secondary and tertiary crushing stations, as well as a screening station
and all related structures. The new crushing and screening plant will have a capacity of 350 metric tonnes per hour,
which is 2.5-times the throughput of the crushing and screening plant currently in operation.
Figure 3: 3D design for new crushing, screening and XRT sorting plant.
As part of the binding terms agreed between EQR and Sandvik, Sandvik Financial Services Pty Ltd (“SFS”) has
extended financing terms as following:
− The agreed delivery scope amounts to $4.8 million, with the financing facility being subject to a 30% deposit
by EQR;
− The facility considers (up to) 48 monthly instalments and a fixed interest rate of 5.75% p.a.; and
− Industry standard security arrangement agreed, subject to SFS standard documentation, including a first rank
priority pledge over the Sandvik supplied equipment
Critical Minerals Accelerator Initiative (“CMAI”)
CMAI is supporting EQR’s expansion program at Mt Carbine with a $6 million grant (refer ASX Announcements
“Federal Government Funding for Mt Carbine Critical Minerals Program” dated 28 April 2022 and “Federal
Government Funding for Mt Carbine Reconfirmed” dated 19 September 2022). This funding will be utilised to
accelerate the Mt Carbine Expansion Program which focuses on the transformation of historic mine waste into a
sustainable source of tungsten along with the commencement of open-cut mining of the Andrew White Open Pit.
Specifically, it will be used to fund plant and equipment, drilling and additional studies, as well as expand on
innovative technologies to efficiently produce tungsten concentrate from relatively low-grade ore currently
stockpiled aboveground and from high-grade resources identified in the accessible Andrew White Open Pit.
− Combined investment from EQR, Cronimet and CMAI, totalling approximately $15 million, in line with the
Company’s BFS, while considering the Early Works Program as currently being completed.
− The formal co-funding agreement will be finalised in the coming weeks.
Expansion Funding (BFS Scope)
As communicated to the market across various platforms, the Company is working to close out the best possible
options of funding arrangements that it has been negotiating over the past several months to ensure the best
interests of the Shareholders are upheld. This has led the Company to secure two Government Grant facilities
as well as binding financing terms from Sandvik for the provision of their crushing and screening plant. The
Company is working to finalise additional finance offers and will announce to the market as finalised. The continued
development of the expansion project and restart of the open pit mining operations remains the key focus of the
Company. The Board and Management are endeavouring to do this in what they believe is the most beneficial way
for shareholders.
1
EQ Resources Limited Annual Report 2022
15
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16
EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
Crushing, XRT Sorting & Gravity Plant Activities
Due to the technologies used at Mt Carbine, the Company constantly works to achieve a circular economy approach
to production and the use of its inert waste materials which can be converted into by-products. With the Company
currently mining and processing the historic Low-Grade Stockpile (“LGS”), there is a variety of materials available
in this regard. Oversize rock is used for various products such as armour rock, gabion stone or mattress rock. The
Process Flow, shown on the previous page, allows the Company to make use of the inert sorter waste material for
the production of various aggregate materials and the Gravity Plant tailings are able to be used as a manufactured
sand that is then sold as is or mixed into various road bases or blended material combinations for the Company’s
quarry business.
Through the completion of the Early Works program, the Company is now able to crush and screen material at
much higher throughput capacities and pump the fines material directly into the Gravity Plant. This plant was
installed to overcome the challenges of the Far North Queensland wet season which has extremely heavy rainfall
over a condensed period of time. The new high-volume wet screening application mitigates production challenges
surrounding this by pumping tungsten carrying fines and dust to the Gravity Plant, reducing material handling
requirements, mobile machinery usage and minimising material build up on conveyors, chutes and throughout all
plants, reducing down time for clean up.
Newly installed screening and crushing plant.
Prior to the Early Works upgrade, crushing and screening was done through mobile processing equipment, the use
of all electric equipment for this circuit will increase operational availability going forward and reduce maintenance
cost and operating cost through reduced diesel consumption and hauling of -6mm material as it is now pumped
through a pipeline. The wet screening application also allows the use of poly panels for the screen media which has
a much higher life span in comparison to conventional steel mesh screen decks.
The operations team now run the upgraded Crushing and Screening Gravity
Plant on a 24/7 basis and as the primary crushing and screening method for the
downstream XRT Sorters and Gravity Plant processing operations.
During the 2021/22 financial year, the Mt Carbine XRT Sorting and Gravity Plants
operated on a continuous basis of ramping up production outputs from Mt Carbine.
The operation has progressed from processing primarily historic tailings material with
trials of LGS fines and sorter concentrate to currently processing primarily LGS and
sorter concentrate. Ongoing plant improvements were completed on the Gravity
Plant targeting increased running time capabilities, higher overall tungsten recoveries
and higher-grade concentrate product.
Over the period, EQR was able to successfully secure a second XRT Sorter for the Mt Carbine operations making use
of the AMGC Grant awarded to the Company in January 2022. This allowed the acceleration of the installation of a
second XRT Sorter into the operations allowing for doubling of the throughput capacity of the sorting operations.
EQ Resources Limited Annual Report 2022
17
The second XRT Sorter has been installed and commissioned with the benefits of the second XRT Sorter being felt in
the operation with over 4,000t of sorter concentrate produced in August 2022. Interfacing of the double XRT Sorter
system has also been completed and commissioned which allows for the two units to be run in parallel or individually.
Table 3: XRT Sorter Concentrate Production
XRT Sorter Concentrate Production (t)
)
t
(
s
e
n
n
o
T
12,000
10,000
8,000
6,000
4,000
2,000
-
Q1 FY2022
Q2 FY2022
Q3 FY2022
Q4 FY2022
Sorter concentrate
September forecast
Q1 FY2023
Estimate
Table 4: Gravity Plant Feed Materials Processed
Gravity Plant WO3 Concentrate Production (kg)
)
g
k
(
l
i
s
m
a
r
g
o
)
t
(
K
s
e
n
n
o
T
)
T
t
(
s
e
n
n
o
T
160,000
140,000
120,000
100,000
12,000
90,000
100,000
80,000
80,000
70,000
60,000
60,000
40,000
50,000
10,000
40,000
8,000
20,000
30,000
-
6,000
20,000
10,000
4,000
-
2,000
-
Gravity Plant Head Feed Throughput (t)
XRT Sorter Concentrate Production (t)
Q1 FY2022
Q2 FY2022
Q3 FY2022
Q4 FY2022
50% WO3 Equivalent (kg)
September forecast
Q1 FY2022
Q2 FY2022
Q3 FY2022
Q4 FY2022
Gravity Plant Head Feed Troughput (t)
Head Feed
September forecast
80,000
Q1 FY2022
Q2 FY2022
Q3 FY2022
Q4 FY2022
Q1 FY2023
Estimate
Q1 FY2023
Estimate
Q1 FY2023
Estimate
Table 5: Gravity Plant Quarterly Concentrate Production
Sorter concentrate
September forecast
70,000
60,000
The future Phase 2 process plant design as set out
in the BFS will also see the current two XRT Sorters
fed in parallel. The system is planned to reutilise the
two sorters currently in operation to reduce further
capital outlay around the XRT Sorters. The two XRT
Sorters operate at +/-120tph with a continued +90%
tungsten recovery. The results over the past year have
further reinforced the early results seen through the
bulk testing of the LGS and continue to prove the
robustness of the technology and specifically the
adaptability of the technology to the Mt Carbine LGS
material. The grade of the LGS has been consistent with
the bulk test work completed on the LGS, reinforcing
the Company’s confidence in this technologically
innovative and XRT Sorter Concentrate Production
cost-effective method of pre-concentration to reduce
downstream processing costs.
The Gravity Plant has continued to operate on a 24/7
basis throughout the year. The processing methodology
and capability over the year has stayed fundamentally
the same after the 2021 Financial Year saw several
changes and continuous improvements throughout. The
Gravity Plant has benefitted greatly from the upgrades
during 2022, mainly through the simplification of the
piping circuit for more direct routes with less pumping
combined with rubber lining throughout the various
high wear areas in the Gravity Plant.
)
t
(
s
e
n
n
o
T
)
g
k
(
s
m
a
r
g
o
l
i
K
50,000
40,000
160,000
30,000
140,000
20,000
120,000
10,000
100,000
-
80,000
60,000
40,000
20,000
-
Gravity Plant WO3 Concentrate Production (kg)
Q1 FY2022
Q2 FY2022
Q3 FY2022
Q4 FY2022
Head Feed
Q1 FY2022
Q2 FY2022
Q3 FY2022
Q4 FY2022
Q1 FY2023
Estimate
50% WO3 Equivalent (kg)
September forecast
Gravity Plant Head Feed Troughput (t)
Scan this QR code with your phone’s
camera to see how EQ Resources is mining
for the future by using the Tomra XRT
Sorters to deliver an economically-proven,
technologically-driven, circular economy.
)
t
(
40,000
80,000
70,000
60,000
50,000
s
e
n
n
o
T
With the mining, crushing, and screening capacities now increased, the material processed has moved from
primarily historic tailings to primarily LGS material. Some of the benefits of processing the LGS material is that it
is much less abrasive on the Gravity Plant, has higher tungsten grades for the -170mm fraction of the LGS being
processed and has a much higher portion of recoverable tungsten. Recoveries of the LGS and sorter concentrate
feed material sit at 79.5%. A big portion of being able to achieve such high recoveries for a tungsten processing
operation is attributed to the use of XRT Sorters early in the process to pre-concentrate feed material for the
Gravity Plant in combination with a strong focus on not over griding the plant feed. Due to the extremely friable
nature of tungsten, yet the requirement to liberate the tungsten, there is a tendency in the industry to over grind
creating losses during the separation of materials and extraction of tungsten. The Mt Carbine operation has been
able to eliminate overgrinding through the use of cone crushers and rolls crushers throughout the process flow,
giving the operation the benefit of increased tungsten recoveries on LGS material.
Q3 FY2022
Q1 FY2022
Q2 FY2022
Q4 FY2022
20,000
30,000
10,000
-
Head Feed
18
EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
The continuous improvement programs over the prior financial year paid off with higher running times in the
current financial year with an average 72% running time for the period achieved. Going forward, the Gravity Plant
is continuing to build redundancy into the process flow which will allow the running times to continue increasing
to a targeted +80% availability.
From Top left to bottom right: Gravity Plant, XRT Sorter, Tungsten Concentrate and Crushing & Screening Plant.
As with the previous financial year, operations continued during the COVID-19 pandemic which presented
challenges over the period. The Company had to explore new ways of sourcing its equipment as logistics were
disrupted, shipping costs increased more than anticipated and deliveries of equipment were considerably delayed.
Whilst the operation was not directly affected by any enforced shutdowns, logistical constraints for the delivery
EQ Resources Limited Annual Report 2022
19
Operational Risks
An operational event can cause disruptions to our
operations, damage assets, affect our reputation
with the community and other stakeholders, or
cause long term damage to our license to operate.
It can also impact our financial performance, reduce
business prospects and can limit future opportunity
development.
The Mt Carbine site is a mature operating site that has
been running since the Gravity Processing Plant started
hot commissioning in February 2020. EQR’s CEO,
Mr Kevin MacNeill, is involved through strategically
guiding the operation and Company from an explorer
to a fully-fledged operation. Mr MacNeill has over 30
years’ of experience in managing mining operations
through North America, Europe, and Africa. This
experience has aided the development of a cohesive,
hands-on management approach and operations team
development and while restricting the reporting chain
to ensure employees are empowered in their roles for
efficient decision making and optimal outcomes.
EQR is an equal opportunity employer with a zero
tolerance for bullying and harassment in the workplace
as it works to build a team of skilled individuals from
surrounding communities. The operation has an
Intergrated Health and Safety Management System
that protects employee’s physical safety and mitigates
operational risks which are guided by the Integrated
Management System (IMS) which addresses the
ISO 9001:2015 Quality
intended outcomes of
Management Systems, ISO 14001:2015 Environmental
Management
45001:2018
Occupational Health and Safety Management Systems.
Systems
and
IOS
External factors
The Company
is committed to developing the
capabilities necessary to identify threats as well as
opportunities that risk factors present, and act upon
them to guarantee a continuous improvement of its
business resilience strategy. There is an ever-growing
necessity for companies to assess the changes in
their macro environment and their associated risks.
While risks have always existed, the Company has
faced new threats that emerged globally in the last
year. These stem from geopolitical developments like
ongoing military conflicts or the threat of pandemics
and resulting in increased economic volatility, global
disruptions in logistics, manufacturing congestion,
trade tensions and uncertain economic growth.
These resulting global political tensions can trigger
changes to laws, regulations or to trade agreements,
tariffs and exports quota.
of spare parts and additional equipment continued
to be experienced as it was in the previous period
and led to some delays in expansion activities. The
operational team at site has created strong inventory
management systems and slightly higher inventory
holdings to combat supply delays. New equipment
was also sourced from local providers wherever
possible, providing local business opportunities whilst
reducing freight costs and minimizing project delays.
These challenges have helped strengthen and broaden
a network of connections with suppliers and vendors
across the industry.
The operation now has over 65 employees with many of
the employees from the local surrounding communities.
Mt Carbine operations are proud to have so many
local employees that have been trained through the
operations and feeding back into the community. All
operations at Mt Carbine operate on a 24/hr roster.
In accordance with the Offtake Agreement between
the unincorporated JV, between the Company and
CRONIMET Australia Pty Ltd, and CRONIMET Asia Pte
Ltd, by the end of the financial year CRONIMET Asia
has taken delivery of over 300 tonnes of concentrate.
Individual production lots are tested against agreed
quality parameters, upon which CRONIMET determines
the acceptance of concentrate. Trial deliveries to
large tungsten consumers in Asia, the US and Europe
were successfully completed and were of utmost
importance, given the specific composition of the Mt
Carbine concentrate (containing mixed mineralisation
of Scheelite and Wolframite).
Risks & Opportunities
The effective management of risks and opportunities is
essential to the successful development and execution
of the Mt Carbine Project and its expansion activities.
Section 14 of the Bankable Feasibility Study defines
the framework which:
− Describes the process for identifying risks and
opportunities that could impact the Project;
− Describes the process for assessing risks using
consistent risk management guidelines;
− Identify and assess the material risks associated
with Project execution and define appropriate
measures to control these risks;
− Establish a process to ensure that risks and
identified and
opportunities continue to be
compliance obligations satisfied throughout the life
of the Project; and
− Ensure that the process is communicated to
relevant stakeholders.
20 EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
These disruptions whether international or national, have the ability to affect sales volume, sales price, production
costs and impact the planning and development of the Company’s projects. From threats, opportunities also
arise and governments have expressed a growing interest in developing critical mineral strategies. As part of the
Company’s risk mitigation it:
− Monitors the macroeconomic and geopolitical developments to prepare scenarios and response plans for
variations in the economic environment;
− Assesses its capabilities to maintain sales plans, develop strategic partnerships and mutually beneficial
relationships with its stakeholders;
− Maintains control of the supply chain to limit costs volatility; and
− Organises systems to navigate through global instability and minimise volatility.
The increase in the severity of extreme weather events we have witnessed nationally and internationally cannot be
ignored and can have longer term repercussions than what the Company could have expected in the past.
There is an increase in unpredictability in the local weather that can disrupt operations, slow project completion,
delay future developments, lead to a potential change in geotechnical conditions or could potentially cause
unforeseeable incidents. To decrease the Company’s vulnerability to such events it monitors potential and
unpredictable conditions and plans on-site activites according to these predictions and prepares responses for
different scenarios.
Quarry Activities
The Mt Carbine Quarry is the largest and one of the most northern hard rock quarries in Queensland. It is a fully
permitted, established business which has been in operation for over 20 years within the Mt Carbine Mining Leases.
The Company’s cost competitiveness is primarily due to all of its feed stock being sourced from readily available
stockpiled mined rock, meaning no drill and blast activities are necessary. The synergies between the Quarry
and the Company’s mining activities through beneficial waste reuse, reinforces the Company’s commitment to
reducing its environmental footprint and maximising value from all resources on site.
EQ Resources Limited Annual Report 2022
21
Large Rocks are used in the construction of breakwaters for local
marinas.
Quarry stockpiles.
The Quarry currently produces more than 18 products,
of which, the regular products are stockpiled on site
and ready for despatch. As contracts continue to be
successfully completed, the modernisation of the
Quarry gains traction and is allowing the Quarry to
tender on larger jobs in more distant regions when
combined with the beneficial reuse of the XRT Sorter
waste materials as a product supply for quarry
aggregates.
income.
look for
innovative
The Company continues to
solutions for the Quarry that will allow for sustainable
and continuous
In this connection, the
Company has continued investigating potential value-
add technologies to transform rock waste into higher-
value,
intensive building products,
mainly for construction materials and innovative road
making materials for the time being.
lower-carbon
Newell Beach boat ramp newly built with Mt Carbine’s green
waste rock.
The Company has once again had another productive
year through its Mt Carbine Quarry operations, which
has completed the supply of 7,500 tonnes of various
repurposed products for the Newell Beach boat
ramp development located north of Port Douglas.
This was the largest tender awarded to the Quarry
during the financial year. Demand for Mt Carbine rock
and aggregate is being driven by increased regional
infrastructure investment by the government.
The Company was able to produce the products
through the stockpiled oversize rock from the mining
of the LGS. The Company envisages making use of all
materials available at Mt Carbine, being in a coastal
setting, this oversize rock is used for armour rock in
local breakwater developments. The Company will
continue to target opportunities of this nature as it
is a by-product of the operation, has a low cost of
production and is effectively a recycled material falling
under the Company’s strategy to beneficially reuse all
of its materials.
EQR has also been able to work with the Mareeba
Shire Council in the delivery of materials for the repair
and upgrade of roads in the regional area.
While EQR is aiming for a leadership role in the
sustainable development of critical mineral projects,
we are continuously looking at non-conventional
waste treatment options. The Quarry provides a
complementary revenue stream to the Company’s
primary product being
tungsten concentrate.
Additional revenue drives down unit costs and helps
Mt Carbine build a mine for the future. The Company’s
ambition is to build a mine with low impact and
maximum use of mined materials, a truly circular
enterprise.
In addition to satisfying the Newell Beach contract,
over the period several other smaller contracts were
also completed and several tenders submitted, with
the Quarry seeing the benefit of these submissions
picking up during the first quarter of the new financial
year.
22 EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
Exploration Activities
Mt Carbine Expansion
EQR completed a BFS on 13 December 2021 using updated Resource and Reserve Statements completed
in September 2021, with an updated Reserve Statement completed in September 2022. Measured Group has
designed an updated pit shell that covers the first 4 years of open cut mining. A summary of these statements can
be found within the Mineral Resource and Reserve Statement on page 34.
The updated pit has a two stage design extracting 14.4Mt of rock for 3.5Mt of Ore at 0.33% WO3 grade. The Stage
1 pit relates to the first year of mining, where the Company begins mining from the bottom of the existing pit while
stripping for a larger pit is underway. Stage 2 Pit follows with a further 3 years of open cut mining to give a current
total mine design of 9 years (including the LGS Reserves). A further Stage 3 pit expansion is under conceptual
design, with a drill program needed to complete the drill out of 43% of the volume of this large extension.
The increase in reserves is primarily due to the addition of a ‘Halo’ of lower grade ore at 0.26% WO3 grade that
surrounds the high grade veins and has added an additional 250,000 mtu units to the mining schedule. A reduction
in the original BFS strip ratio from 11.1:1 down to 3.1:1 is due to the larger shaped ore body allowing for the planning
of larger trucks to affect a reduction in mining costs.
The excellent price of tungsten with APT pricing in the US$345-$350 range, at time of reporting, in combination
with the excellent results of the XRT Sorting justifies the cut off grade to be lowered from 0.15% WO3 in the
Resource Statement dated September 2021 down to 0.05% WO3 for the Resource Statement of August 2022.
The effect of using this lower cut off grade increases the contained reserves in the BFS pit by 29% (refer ASX
Announcement “Material Increase in Mt Carbine Reserves” dated 16 September 2022). A further drilling campaign
conducted in March 2022 targeted the western pit boundary to increase the confidence level of this mineralisation
from Inferred Resources into Indicated Resources. The holes were drilled within the Mt Carbine ML’s 4867 & 4919
license boundaries. This drilling consisted of 10 holes for 2,121.9m in the locations depicted below at the western
end of the BFS Pit. See Appendix 1 Table for drill results.
Figure 4: Map of 9 out of 10 Hole Drilling Program in 2022.
The results of the 10 hole diamond drilling program were used to then update the Resource Statement released in
August 2022 (refer Appendix 1 “Summary of Significant Results for 10 Drill Holes Drilled in 2022”). The success of
ore sorting has enabled grades similar to the LGS (LGS – 10.26Mt @ 0.075% WO3) to be economic.
EQ Resources Limited Annual Report 2022
23
Operating and Financial Review continued
When compared to EQR’s September 2021 Maiden Resource there is a significant increase of +86% in the Indicated
Resources category with an increase in global contained metal of 14%. The Company will be continuing to model
the western extensions with the target to increase the life of the BFS Pit. The increase in the halo ore zone resources
within the pit will add 29% more metal to the BFS and the economics will be updated in coming weeks.
Mt Carbine Mineral Reserves - Increase by 29%
Increased Tungsten in Mt Carbine Mineral Ore Reserves
Orebody
Reserve
Classification
Tonnes (Mt)
Grade
(%WO3)
WO3 (Mtu)
Low Grade
Stockpile
LGS - Proved
LGS - Probable
In- Situ
All
Open Pit -
Proved
Open Pit -
Probable
TOTAL
-
10
-
-
0.08%
-
3.54
0.33%
750,000
1,161,693
+29%
13.54
1,911,693
Orebody
Reserve
Classification
Tonnes (Mt)
Grade
(%WO3)
WO3 (Mtu)
Low Grade
Stockpile
LGS - Proved
-
-
LGS - Probable
10.13
0.075%
In- Situ
All
Open Pit -
Proved
Open Pit -
Probable
TOTAL
759,750
898,380
-
-
1.26
0.713%
11.39
1,658,130
For further details refer to ASX Announcement dated 16 September 2022: Material Increase In Mount Carbine Ore Reserve
For further details refer to ASX Announcement dated 16 September 2022: Material Increase In Mount Carbine Ore Reserve
Figure 5: Mineral Ore Reserves Comparison 2021 to 2022.
Measured Group has been working closely with
EQR to independently calculate the Resources and
Reserves for Mt Carbine. They have optimised the
updated Reserves and designed an economic pit
shell that is currently used to update the BFS Report.
Measured Group has recommended to continue
drilling westward and to the north to bring in further
Indicated Resources into mining Reserves (refer 2022
Reserve Report September).
Key take-aways:
Increase in Reserves by
263,313 MTU in a smaller
pit design as we bring in
Pit designed so 95% of this
increase comes into Year 1
Strip Ratio drops from 11:1
to 3:1
Reserves are anticipated to
grow into Stage 3 Pit
22
Figure 6: Red - Indicated Resources | Green – Inferred Resources.
24 EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
Underground Scoping Study
A Scoping Study was undertaken to see the viability of underground operations. This study was done on the
green Inferred Resources shown in Figure 5. As 78% of the Resources used in the Scoping Study are in the Inferred
EQ Resources |Mt Carbine
category this does not allow for the economics of the Study to be published.
SCOPING STUDY REPORT
EQR is significantly encouraged to move forward into the Pre-feasibility Study (“PFS”). With the planned drilling
campaigns, the Company aims to further define the remaining 8.28Mt @ 0.40% WO3 of Inferred Resources
(currently outside the planned Open Pit) towards Indicated Resources. This is best achieved from an Underground
Drilling Program using the existing 430m decline already installed.
9. CONCLUSIONS AND RECOMMENDATIONS
The Scoping Study broadly consisted of:
− Geological review (to understand geology, structural controls, grade distribution, resource status, inventory to
be assessed for underground potential);
9.1.
CONCLUSIONS
− Stope optimiser runs (to spatially delineate stopes greater than 0.25% WO3);
− Mining method review (appropriate methods, assessment and exclusion exercise);
− Review and update of supplied first-principles cost build up for underground mining costs;
− resourcing the new economy for a better tomorrow;
− Level by level, stope by stope assessment of potentially economic stopes;
− Preliminary design, task creation, sequencing and scheduling of concept design; and
− (Internal) financial cost model and SWOT analysis.
Prima facie, the under-pit resource appears extensive. However, a lot of the modelled ore is
discontinuous (refer to Figure 4-3) and at grade that doesn’t support underground extraction. As a
result, a large portion of the stated resource (at this stage) appears uneconomic from both and open
pit or underground mining perspective (albeit the pit optimisation was done at a lower MTU price). This
is illustrated in the waterfall diagrams shown in Figure 9-1 and Figure 9-2 (refer to APPENDIX B: for
details on calculations).
The Waterfall Diagram below shows the Indicated and Inferred Resources examined in the Scoping Study (2.36Mt
@ 1.05% WO3):
Table 6: Resource Inventory Waterfall
Figure 9-1 Resource inventory depletion (tonnes)
Figure 7: Early Stage Design work for Underground Mining
to understand potential for mining remaining resources.
Figure 9-2 Resource inventory depletion (metal)
The upside is that there is high chance that a re-optimisation of the open pit would result in some of
the “Remaining Resource” being consumed (as well as the obvious depletion from the “Contained
within UG Design”).
Commercial in confidence
[ 44 ]
EQ Resources Limited Annual Report 2022
25
Targets and Future Exploration
As part of its Stage 3 Drilling Program EQR plans to continue drilling westwards to add valuable resources in areas
that could potential make it into future reserves. The diagram below shows the area that remains to be drilled
within the Stage 3 Pit extension. Currently 43%of this pit extension remains undrilled. Drill plans show 2,500m of
drilling will infill this zone into Indicated Resource.
Figure 8: Pit Extension.
Strike Extent Mineralisation
Mapping and Geophysics of the Mt Carbine deposit has shown there are vein packages similar and parallel to the
Mt Carbine Open Pit package. These have been referred to as the Iron Duke Package (Dazzler, Talis & Crown Veins)
and the Daisy Package (Daisy and True Blue Veins). The narrow surface exposure of the veins is now known to be
a function of the RL of the zone (+400m RL) and they are expected to blossom into more productive tungsten
zones between 200-350m RL.
A 25 x 25m grid soil program and ground magnetic program is being undertaken to cover the three tungsten
package zones described above.
Figure 9: Ground TMI Geophysics drapped on topography. Currently under interpretation.
26 EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
New South Wales - Gold Exploration Tenements
EL6648 Crow Mountain tenement was renewed on 3 February 2022 for a period until 19 October 2026. EL8024
remains current until 29 November 2024.
Currently a private group called Sozo Resources Ltd is farming into the NSW gold tenements. The team at Sozo has
a long history of exploration success. The terms require Sozo to spend $1.1M over the next 4 years to earn a 80%
stake in the licenses. EQR has rights to contribute back to the JV.
Work undertaken by Sozo Resources Limited in the last year is summarised in the sections below.
Panama Hat – Broken Hill
− Land Access agreements in place with Huonville and Sunnydale Stations. This was a lengthy process for various
reasons.
− A field trip was postponed several times due to weather events with the first opportunity to get on the ground
being in June 2022. 20 x rock chip samples were taken from the main prospects and analysed for fire assay gold
and a 33 element 4 acid digest. Noteable assays include:
− Sample PH0004: 2.03g/t Au on south western extension of Williams Prospect;
− Sample PH0020: 4.45g/t Au from Willyong Tank Prospect;
− Sample PH 0014: 4.34g/t Au from Panama Hat Prospect; and
− Sample PH0018: 22.1g/t Au from Telephone Line Prospect.
− The dominant strike of the broader Farmcote Gneiss host rock is in a northeasterly direction and cross cutting
this semi-regional fabric are NW trending shear zones These shear zones contain sheeted and sub vertical
quartz veins and where sampled returned good gold grades as discussed above. Other, more homogenous
laminar quartzites/ quartz veins exist but look rather uninteresting and were not sampled as part of this field
trip, more or less due to available exposures positioned off of our ground.
Figure 10: Panama Hat, EL8024.
EQ Resources Limited Annual Report 2022
27
− Preliminary field trip conducted in February 2022
where the following 17 rock chip samples were
taken:
− o
Sample CMRC008: 9.71g/t Au from the Crow
King Prospect and CMRC011: 5.23g/t Au from
the Princess Mine area. These prospects are
east of the Peel Fault and hosted in schistose
sediments and quartz veins. Looks structurally
controlled and more akin to an orogenic gold
system. Abigano drilled in this area in the 80s
and intersected gold mineralisation close to
surface such as: 17m @ 0.75g/t Au from 6m
incl 2m @ 1.85g/t Au from 16m. Ultimately
Abigano abandoned the area due to the low
gold price of circa US $300/Oz. Obvious
opportunity therefore exists to work this area
up with prospect scale mapping, soil sampling
and then shallow percussion drilling.
− Multiple rock chip samples were taken of the
Listwanite (silica-carbonate altered serpentinite)
outcrop in the vicinity of the historic Icon drill holes
and as expected, low level gold was returned, up to
a maximum of 58ppb. Note: the gold in Listwanites
are related to the early Permian-Triassic batholiths
which drove hydrothermal cells and led to the
silica-carbonate or “Listwanite” alteration of the
serpentinites. This alteration scavenges gold from
magnetite and is transported large distances as
a Au-S complex, typically along fault planes. The
gold in our case, has most likely dropped out of
solution when it encountered the carbonaceous
fault gouge of the Peel Fault, upon inspection of
the drill core. So, more drilling is required directly
targeting the Peel Fault itself. There is enough
information to generate targets now, but further
Electromagnetics may assist in fleshing out the
stronger conductive carbonaceous areas. And of
course, the IP chargeability anomalies (obtained by
EQR’s predecessor, Speciality Metals International
Limited) are coincident with Au-As-Hg anomalism
at surface remain valid drill targets.
− No PGEs associated with the Listwanite alteration
the
last year APT
Tungsten Market Outlook and Concentrate
Production
Throughout
(Ammonium
Paratungstate; as the underlying price reference for
tungsten concentrate) prices between US$255/mtu
(metric ton unit; equals 10 kg) in July-August 2021 and
US$350/mtu, as of the date of this report, have been
seen. This represents an increase of approximately
+25% within the period, and confirms the strong
underlying fundamentals the tungsten market is in at
the moment.
− The Panama Hat Project appears structurally
complex and the intersection of the NE and NW
trending structures represent target areas for
drilling. The Telephone Line Prospect has:
1. High grade gold rocks existings at surface
(Visable);
2. Multiple historic pits;
3. Positioned on a small rise showing harder rocks;
and
4. No evidence of historic drilling.
− A field mapping and sampling campaign will start
at the Telephone Line Prospect. If required, a
structural geologist will assist. This information will
determine where and on what azimuth for future
drilling.
Crow Mountain – New England
Figure 11: Total Magnetic Intensity (TMI) of Crow Mountain.
− Land Access Agreement in place with the main
station owner being Kilpara. Sozo is paying monthly
rent for the shipping container which houses the
Icon (former name of EQ Resources Limited) era
drill core.
− Sozo has secured the contiguous exploration
ground to the Crow Mountain Exploration Licence
with EL 9406
28 EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
EQR has developed a market value model as a basis for revenue modelling for the Mt Carbine Project through
the BFS completed in December 2021. The model was informed by the current contractual elements that are
in place for the sale of concentrate from the Mt Carbine site as well as considering end-user purchase prices as
known to EQR. The project economics continue to look favourable for EQR with a strong price forecast looking
forward due to market pressure on the supply side from the Western economies.
Market value modelling was developed to adjust the baseline reference prices to reflect the value of Mt Carbine
products in the global market. The parameters selected for price adjustments were:
− Base Price: Calculated on a metric tonne unit (MTU) of WO3 contained in a dry metric tonne delivered FCA
Mt Carbine (INCOTERMS 2010);
− Index: London Metal Bulletin (LMB) European APT;
− Pricing: Low and High European APT averaged for the calendar month of delivery for the tungsten concentrate;
− APT payable: A floating payable is considered, covering the period under the fixed off-take contract with
CRONIMET and for the period afterwards;
− Payment terms: 95% payment upon delivery of product and 5% balance payment upon final settlement based
on weighing and assay results.
Currently CRONIMET is the sole off-taker for the Project from the rights secured through early investment into the
Mt Carbine Project. Since the start of the Project, concentrate has been sold to customers in Europe, the United
States, Vietnam, and China. CRONIMET is also partnered with EQR through a Joint Venture to process the Low
Grade Stockpile along with the historic tailings materials.
Based on the Off-take Agreement in place between CRONIMET Australia Pty Ltd, CRONIMET Asia Pte Ltd and
Mt Carbine Retreatment Pty Ltd (a wholly owned subsidiary of EQR), the specifications for tungsten concentrate
produced at Mt Carbine are provided in Table 7.
Table 7: Tungsten Concentrate Specifications
Name of Element
Specification
WO3
S
Sn
Mo
Sb
As
H2O
50% min
1.5% max
0.50% max
0.40% max
1.0% max
0.15% max
1.0% max
These specifications are in line with the overall market requirements for tungsten concentrate and shall remain
applicable on the new products being defined in the future.
Tungsten concentrate being loaded for shipment.
EQ Resources Limited Annual Report 2022
29
Corporate Activities
Leadership Team
The Leadership Team has remained stable through the period with no changes. EQR is focused on stability within
the Senior Management team in the development of the Mt Carbine Project and future growth and expansion of
the Company.
Financing Activities
Convertible Notes – September 2021
In September 2021, the Company raised a further $6.0 million via the issuance of 2 year convertible notes with a
conversion of 6.5 cents per share, a ~45% premium to the last price of 4.5 cents per share (“Convertible Notes”).
The funds will be used to commence early works for its Mt Carbine tungsten mine, well ahead of the release of the
Company’s Bankable Feasibility Study.
Details:
Amount:
Term:
Coupon:
A$6.0 million
Two years with the ability to be converted early by the Note Holders.
7% per annum. Coupon payable in shares or cash at the election of the Note Holders.
Conversion Price:
$0.065 per ordinary share, a ~45% premium to the last close on 8 September 2021.
Conversion Terms:
Converted into new ordinary shares or repayment of the loan at the Note Holders election.
The Note Holders may elect to convert the Convertible Notes into new shares early during
the term.
CAPEX Funding – Mt Carbine Project
As announced on 2 May 2022 the following commitments have been secured which will fully fund the circa $15 million
Mt Carbine plant expansion to transform the historic mine waste and the high-grade resources into a sustainable
source of tungsten, along with a green aggregate by-product. For further details refer ASX Announcement “CAPEX
Funding for Mt Carbine Expansion Secured” dated 2 May 2022.
Table 8: CAPEX Funding – Mt Carbine Project
Facility
CMAI Grant *
Amount ($, up to)
Interest p.a. / Cost / T&C
$6.0 million
No cost; Grant support
Sandvik Supply & Finance **
$4.8 million
Offtake Prepayment
$4.2 million
Shareholder Loan
Total
$1.5 million
$16.5 million
5.75% interest p.a.; 30% deposit;
up to 48 months repayment
Interest free; Extension of existing Cronimet
offtake contract
8% interest p.a.; Unsecured;
6 months repayment
*
see ASX announcements ‘Federal Government Funding For Mt Carbine Critical Minerals Program’ dated 28 April 2022 and “Federal
Government Funding for Mt Carbine Reconfirmed” dated 19 September 2022
** see ASX announcement ‘EQR And Sandvik Agree On Binding Terms For Financing Of Crushing & Screening Plant’ dated 8 March 2022
Financial Risk
Refer Note 26 in the “Notes for the Consolidated Financial Statements”.
30 EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
Appendix 1 – Summary of Significant Results for 10 Drill holes drilled in 2022.
Hole
East
North
RL
EOH
Dip
Azm
From
To
Interval WO3%
Zone
EQ017
23050
26422
380.2
345.4
-62.1
EQ018
22483
26159
384.4
465.2
-45.0
45.5
55.0
201.85
203.00
1.15
0.60
Talis
116.66
116.94
0.28
124.09
125.50
Incl.
124.09
124.50
146.64
147.05
174.50
175.53
1.41
0.41
0.41
1.03
Incl.
175.30
175.53
0.23
182.65
185.81
182.65
182.81
185.68
185.81
209.15
210.58
209.15
209.37
210.09
210.58
231.62
235.51
231.62
231.80
232.89
233.15
235.40
235.51
3.16
0.16
0.13
1.43
0.22
0.49
3.89
0.18
0.26
0.11
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
131.55
132.03
0.48
2.57
Incl.
137.39
137.59
0.20
3.98
Incl.
145.63
146.11
0.48
4.94
Incl.
147.00
147.71
0.71
0.72
1.51
1.06
2.73
1.01
0.83
3.45
0.37
5.53
2.15
0.54
1.54
0.89
0.52
1.56
3.28
8.01
3.21
0.22
1.24
2.09
1.46
0.19
5.16
1.27
0.16
Iolanthe
Iolanthe
Iolanthe
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Johnson
Johnson
Johnson
Johnson
Iolanthe
Iolanthe /
Bluff
Iolanthe /
Bluff
Iolanthe /
Bluff
Iolanthe /
Bluff
Iolanthe /
Bluff
Bluff
Bluff
Bluff
Iolanthe
Iolanthe
Iolanthe
Iolanthe
4.84
Iolanthe
1.29
0.22
1.91
0.95
0.18
0.68
1.41
0.63
0.79
0.89
4.25
0.20
Iolanthe
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Johnson
Johnson
Johnson
Johnson
EQ019
22461
26159
384.4
249.3
-44.5
40.8
124.55
124.80
0.25
131.55
165.19
33.64
EQ020
22513
26217
385.1
204
-50.0
52.0
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
Incl.
152.04
152.72
156.77
157.21
164.77
165.19
39.82
48.34
39.82
40.02
47.88
48.34
61.45
72.96
61.45
61.76
72.74
72.96
89.63
93.50
89.63
89.80
91.86
92.28
141.27
147.53
141.27
141.58
142.73
143.17
147.06
147.53
165.56
167.35
0.68
0.44
0.42
8.52
0.20
0.46
11.51
0.31
0.22
3.87
0.17
0.42
6.26
0.31
0.44
0.47
1.79
165.56
166.25
0.69
167.16
167.35
185.41
190.62
0.19
5.21
EQ Resources Limited Annual Report 2022
31
Hole
East
North
RL
EOH
Dip
Azm
From
To
Interval WO3%
Zone
EQ021
22566
26232
384.9
140.4
-44.6
36.2
38.80
39.32
Incl.
Incl.
185.41
186.12
190.37
190.62
Incl.
39.16
39.32
54.49
57.06
Incl.
56.63
57.06
61.59
64.79
Incl.
64.29
64.79
Incl.
Incl.
73.73
73.73
79.31
74.23
78.55
79.31
104.96
106.36
0.71
0.25
0.52
0.16
2.57
0.43
3.20
0.50
5.58
0.50
0.76
1.40
Incl.
104.96
105.03
0.07
113.20
113.60
0.40
128.78
138.19
132.54
132.79
134.88
135.04
137.12
137.49
9.41
0.25
0.16
0.37
Incl.
Incl.
Incl.
Incl.
1.24
0.68
1.30
Johnson
Johnson
Iolanthe
4.09
Iolanthe
0.35
1.85
0.24
1.29
0.23
0.84
1.11
0.42
6.88
1.67
0.54
1.15
6.02
9.94
Iolanthe
Iolanthe
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Hole
EQ022
East
22613
North
26227
RL
385
EOH
147
Dip
-47.9
Azm
350.4
From
56.34
63.44
65.18
79.94
EQ023
22604
26259
379.4
120
-44.8
341.4
58.86
63.97
63.97
69.8
82.28
82.28
93.89
93.89
65.58
63.85
65.58
83.05
59.12
69.99
64.29
69.99
84.75
82.52
94
To
Interval
WO3%
Zone
9.24
0.41
0.40
3.11
0.75
8.63
0.36
5.07
2.24
0.63
2.55
0.46
79.94
80.69
98.00
106.63
137.84
138.92
101.60
101.90
0.30
12.85
1.08
0.26
6.02
0.32
0.19
2.47
0.24
0.11
0.50
0.25
0.32
2.24
1.75
0.19
1.94
2.83
0.22
1.66
0.32
2.63
2.91
4.82
5.74
109.66
15.77
100.18
100.68
102.1
102.35
106.23
106.55
Iolanthe
Iolanthe
Iolanthe
Bluff
Bluff
Bluff
Bluff
Bluff
Iolanthe
Bluff
Bluff
Bluff
Bluff
Bluff
Johnson
Johnson
Johnson
Johnson
Johnson
32 EQ Resources Limited Annual Report 2022
Operating and Financial Review continued
Hole
East
North
RL
EQ024
22493
26259
402.3
EOH
144.4
Dip
-50
Azm
356.8
From
56.12
EQ025
22456
26232
397.9
156
-45.1
356.2
EQ026
22424
26209
394.3
150.2
-45
357.4
83.28
86.00
97.18
97.18
98.41
108.2
99.90
97.5
98.88
113.7
108.87
109.2
113.48
15.90
34.32
65.17
65.17
113.7
16.90
34.52
67.26
65.40
100.77
103.93
100.77
101.12
103.76
103.93
36.47
36.47
72.92
72.92
75.20
84.96
86.63
87.75
89.18
89.77
92.43
38.07
36.89
93.29
73.40
75.55
85.21
87.16
88.4
89.33
90.91
93.29
To
Interval
WO3%
58.39
2.27
2.72
2.72
0.32
0.47
5.50
0.33
0.22
1.00
0.20
2.09
0.23
3.16
0.35
0.17
1.6
0.42
20.37
0.48
0.35
0.25
0.53
0.65
0.15
1.14
0.86
0.21
0.21
0.57
1.88
1.78
0.26
1.43
4.08
0.47
1.76
0.30
2.66
0.22
1.54
0.83
0.26
0.76
0.36
0.80
1.04
0.73
6.23
1.12
1.92
0.92
1.04
Zone
Bluff
Bluff
Johnson
Johnson
Johnson
Johnson
Johnson
Johnson
Iolanthe
Iolanthe
Bluff
Bluff
Bluff
Bluff
Bluff
Iolanthe
Iolanthe
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
Bluff
EQ Resources Limited Annual Report 2022
33
Tenement Schedule
Table 9: Details of mining tenements held by the Company and its controlled entities:
State
Ownership
Area
Status
Interest Held at
Year End
Expiry Date
Queensland, Australia
ML 4867
ML 4919
EPM 14871
EPM 14872
EPM 27394
Mt Carbine
Quarries Pty Ltd
(wholly owned
subsidiary of the
Company)
Mt Carbine
Quarries Pty Ltd
(wholly owned
subsidiary of the
Company)
EQ Resources
Limited
EQ Resources
Limited
EQ Resources
Limited
New South Wales, Australia
EL 6648
EL 8024
EQ Resources
Limited
EQ Resources
Limited
ML = Mining Lease;
EPM = Exploration Permit for Minerals (QLD);
EL = Exploration Licence (NSW)
358.5 ha
Granted
100%
31/07/2022 1)
7.891 ha
Granted
100%
31/08/2023
10 sub-blocks
Granted
100%
21 sub-blocks
Granted
100%
12/12/2025
11/12/2025
4 sub-blocks
Granted
100%
01/06/2025
4 Units
Granted
100%
19/10/2026 2)
19 Units
Granted
100%
29/11/2024 2)
1)
Renewal in progress. The application for renewal was submitted on 31 January 2022 accompanied by an initial Development Plan. The
renewal process is advancing smoothly with good communication between all parties. This process may take longer than normal given
the Department’s review of the Company’s open cut development proposal planned for 2023.
2) Sozo farm-in arrangement. As at the date of this report EQ Resources Limited still holds a 100% beneficial interest in each tenement.
34 EQ Resources Limited Annual Report 2022
Mineral Resources and Ore Reserves Statement
Summary of Results of Annual Review of Resources and Reserves
An updated resource to the September 2021 resource was released in July, 2022 specifically targeting the grade
envelopes within the BFS open cut. The updated Resource Statement has also allowed an updated Reserve
Statement issued in September, 2022.
Table 10: Mt Carbine Resource Estimate as of July, 2022
Mt Carbine Mineral Resources
Orebody
Low Grade Stockpile
In Situ
All
Resource
Classification
Tonnes
(mt)
Grade
(WO3%)
WO3
(mtu)
Indicated
12.00
0.075%
900.000
Indicated
Inferred
Total
Total
12.04
8.28
20.32
32.32
0.27
0.40
0.32
3,296,800
3,281,500
6,578,300
7,478,300
Table 11: Mt Carbine Ore Reserve Estimate at September 2022
Mt Carbine Ore Reserves
Reserve Category
ROM Tonnes (mt)
WO3%
Contained WO3 (mtu)
Open Cut - Proved
Open Cut - Probable
Open Cut - Total
LGS - Proved
LGS - Probable
LGS - Total
Total - Proved
Total - Probable
Total
NOTES:
–
3.54
3.54
–
10.00
10.00
–
13.54
13.54
–
0.33%
0.33%
–
0.075%
0.075%
–
0.142%
0.142%
–
1,161,693
1,161,693
–
750,000
750,000
–
1,911,693
1,911,693
1. Total estimates are rounded to reflect confidence and resource categorisation.
2.
3.
Classification of Mineral Resources incorporates the terms and definitions from the Australasian Code for Reporting Exploration Results,
Mineral Resources and Ore Reserves (JORC Code, 2012) published by the Joint Ore Reserve Committee (JORC).
No uppercut was applied to individual assays for this resource, a lower cut of 0.05% was applied to the Southern Domain 1 block and 0.15%
WO3 to the area outside of this area was applied, which is the grade where the mineralisation forms distinct veins.
4. Drilling used in this methodology was all diamond drilling with 1/2 core sent according to geological intervals to ALS for XRF15b analysis.
5. Resource estimation was completed using the Kriging Methodology.
6.
Indicated spacing is approximately 30m x 30m; Inferred in approximately 60m x 60m.
7.
The deposit is a sheeted vein system with subparallel zones of quartz tungsten mineralisation that extend for >1.2 km in length and remain
open. At depth, the South Wall Fault cuts the Iolanthe to Johnson’s veins but the Iron Duke zones remain open to depth.
A comparison to the previous Ore Reserve estimate (as of 31 December 2021) is summarised below:
− Open cut ROM tonnes increased from 1.26mt to 3.54mt,
− Open cut ROM WO3 grade decreased from 0.71% to 0.33%,
− Open cut contained WO3 increased from 900k mtu to 1.161m mtu (1 mtu = 10kg WO3)
− LGS depleted by 0.13mt
EQ Resources Limited Annual Report 2022
35
The changes in open cut Ore Reserves are predominantly driven by changes in the Resource interpretation (see
ASX announcement ‘Increased Tungsten in Updated Mt Carbine Mineral Resource’ dated 4 August 2022) with
significantly larger areas of lower grade tungsten included in the Resource model. This is shown in the following
two figures which show the difference between the previous and current Resource models.
Figure 12: Cross Section Through Previous Resource Model (ore colour coded by vein group).
Figure 13: Cross Section Through Current Resource Model (Indicated Resources are red, Inferred Resources are green).
36 EQ Resources Limited Annual Report 2022
Mineral Resources and Ore Reserves Statement continued
The increase in Ore Reserves has reduced the ROM strip ratio within the open cut from 11.1 (waste t:ore t) to 3.1.
The updated Ore Reserve estimate will be used to inform the updated BFS which is due for completion in the
coming weeks. The increased Ore Reserves combined with a lower strip ratio has improved the economic viability
of the project via the implementation of larger mining equipment and a reduction in the amount of costly selective
ore mining.
The Ore Reserves have been limited to a practical pit shell based on the current economic limits of the deposit. An
isometric view of the Ore Reserves pit shell is shown below.
Figure 14: Isometric View of Ore Reserves Pit Shell.
Ramps were designed into the pit shell using suitable widths and grades to accommodate the planned open cut
mining fleet. The open cut shell and the LGS were subdivided into detailed mining blocks which were then fully
scheduled, including haulage modelling, for the planned life of mine. The results of the schedule were then assessed
in a financial model to determine the overall economic viability of the project. Only Ore Reserves, including the
LGS, were used to generate revenue, with all other materials classified as waste. The financial assessment showed
that the deposit generated substantial cash flows, which will be quantified in the updated BFS.
EQ Resources Limited Annual Report 2022
37
Competent Person’s Statement - Resources
Statements contained in this Report relating to the Mt Carbine Project Mineral Resource Estimation, are based on,
and fairly represents, information and supporting documentation prepared by Mr Chris Grove, who is a member
of the Australian Institute of Mining & Metallurgy (AusIMM), Member No 310106. Mr Grove is a full-time employee
of the mineral resource consulting company “Measured Group”, who were contracted by EQ Resources Limited to
prepare an estimate of the Mineral Resource at Mt Carbine. Mr Grove has sufficient relevant experience in relation
to the mineralisation styles being reported on to qualify as a Competent Person as defined in the Australian Code
for Reporting of Identified Mineral Resources and Ore Reserves (JORC) Code 2012. Mr Grove consents to the use
of this information in this announcement in the form and context in which it appears.
EQ Resources’ exploration and Resource work is being managed by Mr Tony Bainbridge, AusIMM. Mr Bainbridge
is engaged as a contractor by the Company and is not “independent” within the meaning of the Australasian Code
for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Mr Bainbridge has
sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and
to the activity which he is undertaking to qualify as a Competent Person as defined in JORC Code 2012.
The technical information contained in this Report relating exploration results are based on, and fairly represents,
information compiled by Mr Bainbridge. Mr Bainbridge has verified and approved the data disclosed in this
release, including the sampling, analytical and test data underlying the information. The diamond core samples
were assayed at the ALS Laboratory in Brisbane, Australia. The mineral Resource estimate has been prepared by
Measured Group. Mr Bainbridge has consented to the inclusion in this release of the matters based on his compiled
information in the form and context in which it appears in this Report.
Competent Person’s Statement - Reserves
The information in this Report relating to the Reserves Estimate is published and based on information compiled
by Mr Tony O’Connell, Principal Mining Consultant and Director of Optimal Mining Solutions Pty Ltd. Mr O’Connell
is a qualified Mining Engineer, (BE (Mining), University of Queensland), has over 24 years of experience and is a
member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr O’Connell has sufficient experience that
is relevant to the style of mineralisation and type of deposit under consideration and the activity being undertaken
to qualify as a Competent Person as defined in the JORC Code 2012. Mr O’Connell consents to the inclusion in the
release of the matters based on his information in the form and context in which it appears.
Neither Mr O’Connell, Measured Group Pty Ltd or Optimal Mining Solutions Pty Ltd has any material interest or
entitlement, direct or indirect, in the securities of EQ Resources Limited or any associated companies.
38 EQ Resources Limited Annual Report 2022
Financial Report
The Directors of EQ Resources present their report on the
consolidated entity (Group), consisting of EQ Resources
and the entities it controlled at the end of, and during,
the financial year ended 30 June 2022.
Contents
18. Directors’ Report
33. Auditor’s Independence Declaration
34. Consolidated Statement of Comprehensive Income
35. Consolidated Statement of Financial Position
36. Consolidated Statement of Changes in Equity
38. Consolidated Statement of Cash Flows
39. Notes to the Financial Statements
99. Directors’ Declaration
100. Independent Auditor’s Report
102. Corporate Governance Statement
110. Additional Stock Exchange Information
Contents
39 Directors’ Report
50 Consolidated Statement of Profit or Loss and Other Comprehensive Income
51 Consolidated Statement of Financial Position
52 Consolidated Statement of Cash Flows
53 Consolidated Statement of Changes in Equity
54 Notes to the Consolidated Financial Statements
82 Directors’ Declaration
83 Auditor’s Independence Declaration
84
Independent Auditor’s Report
88 Shareholder Information
92 Forward Looking Statements
EQ Resources Limited Annual Report 2022
39
ANNUAL Report June 2022
Directors’ Report
Directors’ Report
Directors’ Report
The Directors of EQ Resources present their report on the consolidated entity (Group), consisting of EQ
Resources and the entities it controlled at the end of, and during, the financial year ended 30 June 2022.
Directors
The following persons were Directors of EQ Resources during the whole of the financial year and up to the
date of this report, unless otherwise stated:
• Oliver Kleinhempel, Non-executive Chairman
•
Stephen Layton, Independent Non-executive Director
• Richard Morrow, Independent Non-executive Director
•
Zhui Pei Yeo, Non-executive Director
Company Secretary (Joint)
Melanie Leydin
Patricia Vanni de Oliveira
Principal Activities
The principal activities of the Group during the 2022 financial year focused on the:
▪
▪
▪
▪
▪
continued optimisation of the production processes and recoveries from the Mt Carbine Retreatment and
XRT Sorter Plants as part of the Company’s unincorporated joint venture with CRONIMET Australia Pty
Ltd for the development of the Mt Carbine Tungsten Tailings Retreatment and Stockpile Projects;
completion of the Bankable Feasibility Study and Underground Scoping Study;
securing funding for the Mt Carbine Project and undertaking activities to advance the Project, including
significant capital upgrades to plant and equipment such as the successful completion and commissioning
of an upgraded Crushing and Wet Screening Circuit and the installation of an additional XRT Sorter as
part of the Mt Carbine Early Works Program;
the continuation of focused drilling programs to further define the Mt Carbine Tungsten resource; and
the continued assessment of the exploration potential of the Group’s tungsten tenements in Far North
Queensland whilst entering into a Farm-In and Joint Venture Agreement over its gold exploration licences
in New South Wales.
The Group also continues to evaluate other corporate and exploration opportunities within the new
economy and critical minerals sector.
Results
The net result of operations for the consolidated entity after applicable income tax expense was a loss of
$6,063,051 (2021: loss of $4,574,191).
Dividends
No dividends were paid or proposed during the period.
8
40 EQ Resources Limited Annual Report 2022
Directors’ Report continued
ANNUAL Report June 2022
Directors’ Report
Operating & Financial review
Information on the operations and financial position of the Group and its business strategies and prospects for
future financial years is set out earlier in this Annual Report. The auditors have issued an unqualified opinion.
Corporate Structure
EQ Resources is a limited company that is incorporated and domiciled in Australia.
Significant Changes
Significant changes in the state of affairs of the Group for the financial year were as follows:
(a) 16-hole Resource Drilling Program hits Iron Duke extension and bonanza grades under the Open Pit
(refer ASX announcements “EQR Drilling at Mt Carbine Hits Iron Duke Extensions” dated 13 July 2021
and “Mt Carbine Hits Bonanza Grades under Open Pit” dated 5 August 2021).
(b) The raising of $6 Million via the issuance of 2-year Convertible Notes with a conversion of 6.5 cents per
share at a coupon rate of 7% per annum to fund the commencement of the Early Works Program for the
Mt Carbine Tungsten Mine expansion (refer ASX Announcement “Early Works Funding Secured for Mt
Carbine Expansion, Well Ahead of BFS Release” dated 13 September 2021.
(c)
Increase in contributed equity of $2,004,100:
Conversion of 2,000,000 convertible notes plus interest at $0.065
per share to institutional and sophisticated investors (refer ASX
announcements “Application for quotation of securities- EQR”
dated 28, 29 and 30 September 2021)
Date
Shares
$
30-09-2021
30,832,307
2,004,100
TOTAL
2,004,100
(d) The release of an updated Resource Statement for the Mt Carbine Tungsten Project on 23 September
2021 (Refer ASX Announcement “Mineral Resource Update Drives Mt Carbine BFS Optimization” dated
23 September 2021).
(e) The group moved to double its high tech X-ray ore-sorting (XRT) capacity with the acquisition of a second
TOMRA XRT sorter (refer ASX Announcement “EQR Moves to Double High-Tech Ore Sorting Capacity”
dated 14 October 2021).
(f) Farm-In and Joint Venture Agreement (the “Agreement”) executed with Sozo Resources Pty Ltd (“Sozo”)
whereby Sozo can earn up to an 80% interest in EQR’s Panama Hat and Crow Mountain Projects (EL’s
6648 and 8024) by completing expenditure of A$1.6M over 4 years (refer ASX announcement ‘EQR
Farms-Out NSW Projects to Focus On Mt Carbine Tungsten Mine’ dated 25 November 2021).
(g) Completion of a Bankable Feasibility Study (“BFS”) covering a 12-year operation with the focus on
production from its high-grade open pit ore being processed in years 3 and 4 where it is expected to
produce operational pre-tax cash flow of $38 million and $95 million respectively along with delivering
impressive economics including an NPV8 of $131.5 million and an IRR of 154% (refer ASX announcement
‘Mt Carbine BFS Delivers Low Capex, Strong Early Cash Flow Operation With Significant Development
Potential’ dated 13 December 2021).
(h) Continued capital work upgrades to plant and equipment (refer ASX announcements “EQR Moves to
Double High-Tech Ore Sorting Capacity” dated 14 October 2021 and “Upgraded Power Line
Commissioned Leads to Record Production” dated 10 January 2022).
(i) Positive results from the Mt Carbine Underground Mine Scoping Study providing conference to proceed
with Pre-feasibility Work, with the Underground Mine having potential for a long life, as well as being a
technically and economically viable project (at current tungsten price) (refer ASX announcement
“Underground Scoping Study gives Confidence to proceed with pre-feasibility work” dated 12 April 2022).
9
EQ Resources Limited Annual Report 2022
41
ANNUAL Report June 2022
Directors’ Report
(j) The securing of a $600,000 co-investment grant from the Advanced Manufacturing Growth Centre
(AMGC) (refer ASX announcement “Federal Government Co-Invests In High-Tech Ore-Sorting Process”
dated 25 January 2022) along with a $6,000,000 grant from the Critical Minerals Accelerator Initiative
(CMAI) (refer ASX announcement “Government Funding for Mt Carbine Critical Minerals Program” dated
28 April 2022).
(k) CAPEX Funding for Mt Carbine Expansion Secured, including a $4.8 million supplier finance facility, as
well as additional financing comprising a further offtake prepayment facility of up to US$3 million ($4.2
million) and a shareholder loan amounting to $1.5 million (refer ASX announcements “Binding Terms for
Crushing Plant Financing Agreed” dated 8 March 2022 and “CAPEX Funding for Mt Carbine Expansion
Secured” dated 2 May 2022).
(l) Mt Carbine West Dyke Area drilling campaign shows ore body extends strongly in this direction and that
mineralisation remains open to the west (refer ASX announcements “Drilling Confirms Mineralisation at
Western it Extension” dated 15 March 2022; “Further High-Grade Tungsten Intercepts in Near-Pit Drilling”
dated 20 May 2022 and “High-Grade King-Veins Extend Towards West Dyke Area” dated 4 May 2022).
(m) Successful completion and commissioning of an upgraded Crushing and Wet Screening Circuit as part of
the Mt Carbine Early Works Program (refer ASX announcement “Early Works Program Completed” refer
ASX announcement dated 27 June 2022).
Directors' Interests in Shares, Options and Performance Rights
Director
Shares Directly and
Indirectly Held
Options Directly and
Indirectly Held
Performance Rights
Directly and Indirectly
Held
O. Kleinhempel
S. Layton
R.D. Morrow
Z.P. Yeo
18,783,600
54,181,559
4,422,000
70,232,310
10,000,000
4,000,000
4,000,000
4,000,000
-
-
-
-
Directors’ interests in shares, options and performance rights as at 30 June 2022 are set out under Section (e)
of the Remuneration Report .
Company Secretary
Joint Company Secretaries:
Melanie Leydin
Patricia Vanni de Oliveira
Ms Leydin has over 25 years’ experience in the accounting profession and over 15 years as a Company
Secretary with extensive experience in relation to Public Company responsibilities. Ms Leydin holds a Bachelor
of Business majoring in Accounting and Corporate Law, is a member of the Institute of Chartered Accountants,
Fellow of the Governance Institute of Australia and Registered Company Auditor. Ms Leydin graduated from
Swinburne University in 1997, became a Chartered Accountant in 1999 and since February 2000 has been
the Principal of Leydin Freyer Corp Pty Ltd. Following Leydin Freyer’s acquisition by Vistra Australia in
November 2021, Ms Leydin now holds the position of Australian Managing Director of Vistra Australia which
provides outsourced Company Secretarial and accounting services to public and private companies across a
host of industries.
Ms Vanni de Oliveira has more than 15 years’ professional experience in corporate governance, mergers and
acquisitions, project finance, engineering, procurement and construction contracts and compliance. She has
been working as an in-house counsel of multi-national companies, an associate in Brazilian top tier law firms
(300+ lawyers) and as Company Secretariat and joint Company Secretary providing outsourced Corporate
Governance and Company Secretarial services to various Australian listed companies.
10
42 EQ Resources Limited Annual Report 2022
Directors’ Report continued
ANNUAL Report June 2022
Directors’ Report
Meetings of Directors
During the financial year, six (6) Board Meetings and two (2) Audit Committee Meetings were held.
Director
Meetings Eligible to Attend
Meetings Attended
O. Kleinhempel
S. Layton
R.D. Morrow
Z.P. Yeo
8
8
8
8
8
8
8
8
The following table sets out the number of meetings of committees of Directors held during the financial year
and the number of meetings attended by each Director (while they were a committee member):
Remuneration &
Nomination Committee
Audit Committee
Risk Committee
Meetings
Eligible to
Attend
Meetings
Attended
Meetings
Eligible to
Attend
Meetings
Attended
Meetings
Eligible to
Attend
Meetings
Attended
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
1
1
1
1
1
1
1
1
Director
O. Kleinhempel
S. Layton
R.D. Morrow
Z.P. Yeo
Share Options and Performance Rights
No Share Options nor Performance Rights were granted during the reporting period to Key Management
Personnel of the Group.
There are 89,000,000 unissued ordinary shares of EQ Resources under vested options at the date of this
report, 21,000,000 of which relate to options issued to Key Management Personnel. During or since the end
of the financial year no options were exercised. Refer to Remuneration Report for further details.
Remuneration Report - Audited
This report for the year ended 30 June 2022 outlines the remuneration arrangements for the Group in
accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information
has been audited in accordance with section 308(3C) of the Act.
The Remuneration Report details the remuneration arrangements of key management personnel (KMP) who
are defined as those persons having the authority and responsibility for planning, directing and controlling the
major activities of the Group, directly or indirectly, including any Director (whether executive or otherwise) of
the parent company.
For the purposes of this report, the term ‘Executive’ includes the executive directors, senior executives and
general managers of the Group, whilst the term ‘NED’ refers to Non-Executive Directors only.
The Remuneration Report is set out under the following main headings:
(a) Policy Used to Determine the Nature and Amount of Remuneration;
(b) Key Management Personnel;
(c) Details of Remuneration;
(d) Cash Bonuses;
11
EQ Resources Limited Annual Report 2022
43
ANNUAL Report June 2022
Directors’ Report
(e) Equity Instruments;
(f) Options and Performance Rights Granted as Remuneration;
(g) Equity Instruments Issued on Exercise of Remuneration Options or Rights;
(h) Service Agreements; and
(i) EQ Resources’ Financial Performance.
(a) Policy Used to Determine the Nature and Amount of Remuneration
The objective of the Company’s remuneration framework is to ensure reward for performance is
competitive and appropriate for the results delivered. The framework aligns executive reward with
achievement of strategic objectives and the creation of value for shareholders. The Board believes that
executive remuneration satisfies the following key criteria:
▪
competitiveness and reasonableness;
▪ acceptability to shareholders;
▪ performance linkage / alignment of executive compensation;
▪
▪
transparency; and
capital management.
These criteria result in a framework which can be used to provide a mix of fixed and variable remuneration
and a blend of short and long-term incentives in line with the Company’s limited financial resources.
Fees and payments to the Company’s Non-executive Directors and senior executives reflect the demands
which are made on, and the responsibilities of, the Directors and the senior management. Such fees and
payments are reviewed annually by the Board. The Company’s Executive and Non-executive Directors,
senior executives and officers are entitled to receive performance rights, options and/or shares under the
Company’s Equity Incentive Plan which was approved by shareholders at the General Meeting held on
26 November 2020.
Fees for Non-executive Directors are not linked to the performance of the Group.
Use of Remuneration Consultants
The Group has not used any remuneration consultants during the year.
Voting and Comments made at the Group’s 2021 Annual General Meeting
The Group received votes against its Remuneration Report for the 2021 financial year however did not
receive any specific feedback on its remuneration practices at the 2021 Annual General Meeting or during
the year.
(b) Key Management Personnel
The following persons were Key Management Personnel of the Group during the 2022 financial year:
Position
Appointment
Resignation
Directors
O. Kleinhempel
Non-executive Director
Non-executive Chairman
12 August 2019
24 April 2020
S. Layton
Independent Non-executive Director
14 November 2017
R.D. Morrow
Independent Non-executive Director
16 March 2021
Z.P. Yeo
Non-executive Director
12 August 2019
-
-
-
-
12
44 EQ Resources Limited Annual Report 2022
Directors’ Report continued
ANNUAL Report June 2022
Directors’ Report
Executives
K.B. MacNeill
Interim Chief Executive Officer &
Senior Technical Advisor
Chief Executive Officer
4 May 2020
1 April 2021
-
-
(c) Details of Remuneration
Directors are entitled to remuneration out of the funds of the Company, but the remuneration of the Non-
executive Directors may not exceed in any year the amount fixed by the Company in general meeting for
that purpose. The aggregate remuneration of the Non-executive Directors has been fixed at a maximum
of $200,000 per annum to be apportioned among the Non-executive Directors in such a manner as they
determine. Directors are also entitled to be paid reasonable travelling, accommodation and other
expenses incurred in consequence of their attendance at Board Meetings and otherwise in the execution
of their duties as Directors.
Details of the nature and amount of each element of the remuneration of each of the Key Management
Personnel of the Company and the consolidated entity during the year ended 30 June 2022 are set out in
the following tables:
Short-term benefits
Share-based payments
Salary &
fees
$
Non-
monetary
benefits
$
Leave
provisions $
Post-
employment
benefits
$
Performance
rights and
options1
$
Shares
$
Total
$
%
Performance
based
2022
Directors
O. Kleinhempel
S. Layton
R. Morrow
Z.P. Yeo
Executives
48,000
48,000
48,000
48,000
-
-
-
-
-
-
-
-
K.B. MacNeill
300,000
105,004
21,343
Total KMP
compensation
492,000
105,004
21,343
-
-
-
-
1,806
1,806
-
-
-
-
-
-
98,280
39,312
39,312
39,312
146,280
87,312
87,312
87,312
67.2%
45.0%
45.0%
45.0%
76,167
504,320
15.1%
292,383
912,536
1 Performance rights and options do not represent cash payment to Directors or senior executives and performance rights / options
granted may or may not be exercised by the Directors or executives.
Short-term benefits
Share-based payments
Salary &
fees
$
Non-
monetary
benefits
$
Leave
provisions
$
Post-
employment
benefits
$
Performance
rights and
options1
$
Shares
$
Total
$
%
Performance
based
48,000
48,000
14,000
48,000
226,457
47,560
18,655
212,991
18,333
8,000
-
-
-
-
814
19,155
77,229
-
623,781
47,560
18,655
97,198
-
-
-
-
-
-
-
-
10,565
4,226
4,226
4,226
68,923
86,808
-
-
58,565
52,226
18,226
52,226
362,409
318,954
95,562
8,000
178,974
966,168
2021
Directors
O. Kleinhempel
S. Layton
R. Morrow1
Z.P. Yeo
Executives
K.B. MacNeill2
K.Y. Cavallaro3
C.P. Godfrey4
A.M. Wing5
Total KMP
compensation
1 R. Morrow appointed Non-executive Director on 16 March 2021.
18.0%
8.1%
23.2%
8.1%
19.0%
27.2%
0.0%
0.0%
13
EQ Resources Limited Annual Report 2022
45
ANNUAL Report June 2022
Directors’ Report
2 K.B. MacNeill appointed Chief Executive Officer on 1 April 2021. Restated to include non-monetary benefits, leave provisions
and long-term benefits.
3 K.Y. Cavallaro appointed Chief Commercial Officer on 1 July 2020; Executive Director on 1 October 2020 and resigned on 15
January 2021 from both positions.
4 C.P. Godfrey's position as Chief Operating Officer made redundant as of 31 July 2020.
5 A.M. Wing resigned as Company Secretary on 1 September 2020.
6 Performance rights and options do not represent cash payment to Directors or senior executives and performance rights / options
granted may or may not be exercised by the Directors or executives.
(d) Cash Bonuses
No cash bonuses were paid during the period.
(e) Equity Instruments
The Company rewards Directors and executives for their performance and aligns their remuneration with
the creation of shareholder wealth by issuing shares, options or performance rights. Share-based
compensation is at the discretion of the Board and no individual has an unconditional contractual right to
participate in any share-based plan or receive any guaranteed benefits.
(i) Shareholdings
The trading of shares issued pursuant to the Company’s Equity Incentive Plan are subject to the
Company’s Securities Trading Policy; further, Key Management Personnel and employees are
encouraged not to trade shares granted in order to align Director, Key Management Personnel and
employee interests with those of all shareholders. Details of equity instruments (other than options
and rights) held directly, indirectly or beneficially by Key Management Personnel and their related
parties are as follows:
30 June 2022
Directors
O. Kleinhempel
S. Layton
R. Morrow
Z.P. Yeo
Executives
K.B. MacNeill
Balance at
1 July 2021
Granted as
compensation
Received on
exercise of
Performance
Rights
Other
Changes
Balance at
30 June 2022
Balance held
nominally
17,833,600
54,181,559
4,442,000
70,232,310
-
146,669,469
-
-
-
-
-
-
-
-
-
-
-
-
950,000
18,783,600
-
-
-
54,181,559
4,422,000
70,232,310
439,989
439,989
1,389,989
148,059,458
-
-
-
-
-
-
There were no shares granted to Key Management Personnel as remuneration in the 2022 Financial Year.
(ii) Options and Performance Rights Holdings
Details of options and performance rights held directly, indirectly or beneficially by Key Management
Personnel and their related parties, during the financial year, are as follows:
Balance at
1 July 2021
Granted
Exercised
Balance
Total vested
and
exercisable
Total unvested
and unexercisable
30 June 2022
Directors
O. Kleinhempel
10,000,000
S. Layton
R. Morrow
Z.P. Yeo
Executives
4,000,000
4,000,000
4,000,000
K.B. MacNeill
15,000,000
37,000,000
-
-
-
-
-
-
-
-
-
-
-
-
10,000,000
5,000,000
4,000,000
2,000,000
4,000,000
2,000,000
4,000,000
2,000,000
5,000,000
2,000,000
2,000,000
2,000,000
15,000,000
10,000,000
5,000,000
37,000,000
21,000,000
16,000,000
14
46 EQ Resources Limited Annual Report 2022
Directors’ Report continued
ANNUAL Report June 2022
Directors’ Report
(iii) Loans to Key Management Personnel
No loans have been made to Key Management Personnel of the consolidated Group, including their
personally-related entities.
(iv) Other Transactions and Balances
No other transactions were entered into with Key Management Personnel during the financial year
other than those disclosed in Note 32 (d).
(f) Options and Performance Rights Granted as Remuneration
No Options nor Performance Rights were granted by the Company to the Directors and Executives of the
Group during the financial year as part of their remuneration.
(g) Equity Instruments Issued on Exercise of Remuneration Options or Rights
No equity instruments were issued during the 2022 financial year to Directors or other Key Management
Personnel as a result of options or rights exercised that had previously been granted as remuneration.
(h) Service Agreements
Remuneration and other terms of employment for the Directors and Executives are formalised in
Service/Appointment Agreements. All contracts with Directors and executives may be terminated by either
party with regards to the stipulated notice period, subject to any termination payments as detailed below.
Directors
O. Kleinhempel
There is a written agreement with Mr Kleinhempel dated 12 August 2019 in his role as a Non-executive
Director of the Company and subsequently as Non-Executive Chairman on 24 April 2020. Cash payments
and benefits totalling $48,000 were paid to Mr Kleinhempel during the 2022 financial year.
S. Layton
There is a written agreement with Mr Layton dated 9 November 2017 in his role as a Non-executive
Director of the Company. Cash payments and benefits totalling $48,000 were paid to Mr Layton during
the 2022 financial year. The payments were made through Bodie Investments Pty Ltd, a company in
which Mr Layton has a substantial interest.
R.D. Morrow
There is a written agreement with Mr Morrow dated 22 February 2021 in his role as a Non-executive
Director of the Company. Payments and benefits totalling $48,000 were paid to Mr Morrow during the
2022 financial year.
Z.P. Yeo
There is a written agreement with Mr Yeo dated 12 August 2019 in his role as a Non-executive Director
of the Company. Cash payments and benefits totalling $48,000 were paid to Mr Yeo during the 2022
financial year.
Executives
K.B. MacNeill
There was a written agreement with Mr MacNeill dated 1 April 2021 in his role as Chief Executive Officer.
The Company or Mr MacNeill may terminate the contract by giving three month’s written notice. Cash
payments and non-monetary benefits totalling $405,004 were received by Mr MacNeill during the 2022
financial year.
15
EQ Resources Limited Annual Report 2022
47
ANNUAL Report June 2022
Directors’ Report
(i) EQ Resources’ Financial Performance
EQ Resources’ financial performance for the five years to 30 June 2022 is summarised below and the
relationship between results and performance is discussed.
Year ended
Measure
2022
2021
2020
2019
2018
Net profit / (loss) after tax
Net assets
Cash and cash equivalents
Cash flows from operating activities
EBITDA
Share price at 30 June
$
$
$
$
$
$
Basic earnings / (loss) per share
Cents
(6,063,051)
(4,574,191)
(3,015,680)
3,808,863
(1,478,746)
14,317,218
16,725,734
14,936,296
10,905,040
2,672,436
1,723,426
3,504,721
2,989,859
217,962
602,675
(3,112,770)
(3,816,722)
(2,948,321)
(1,627,127)
(1,368,767)
(4,478,339)
(3,947,550)
(2,789,350)
3,847,034
(1,022,747)
$0.047
(0.45)
$0.028
(0.39)
$0.028
(0.30)
$0.031
0.67
$0.019
(0.29)
Financial Performance
The loss for the consolidated Group for the financial year after tax amounted to $6,063,051 (2021: loss of
$4,574,191). This result was primarily brought about by an increase in operating costs associated with
the continued ramp-up of its operations from the Mt Carbine Tailings Retreatment and Stockpile Projects.
The Group has created value for shareholders through:
▪
its continued focus on optimising production and recoveries from the Mt Carbine Retreatment and XRT
Sorter Plants;
▪ ongoing investment in drilling programs to further define the Mt Carbine Tungsten resource and
reserves; and
▪ delivery of strong pre-tax economics upon the finalisation of the Bankable Feasibility Study covering
a 12-year operation with the early years focused on the high-grade ore from the Company’s 100%
owned Andy White Open Pit, supplemented by the Low-Grade Stockpile.
▪ Underground Scoping Study findings providing significant confidence to progress to a Pre-Feasibility
Study on the potential for an underground operation at Mt Carbine.
▪ Execution of an Early Engagement Contract with Golding Contractors Pty Ltd for the restart of open
pit operations.
The Company also continues to evaluate its NSW Exploration Licences in conjunction with the
development and commercialisation of its tungsten assets in Far North Queensland.
Financial Position
In accordance with the Company’s accounting policy, the recoverability of the carrying amounts of
Deferred Exploration and Evaluation Expenditure were reassessed during the 2022 financial year with no
impairments recognised, resulting in exploration and evaluation expenses of $2,616,884, before
amortisation and R&D Tax Offset, being capitalised for the 2022 financial year. The carrying value of the
exploration assets as at 30 June 2022 is $10,803,974 (2021: $8,280,353).
At 30 June 2022, the Group had a net working capital deficit of $4,090,968 (2021: $234,358 deficit). The
deficit in net working capital is predominately due to the Company funding its capital growth initiatives via
short-term financing facilities such as equipment leases, offtake advance extension and trade payables.
It should be noted that whilst the offtake advance facility of $3,266,190 is classified as a current liability,
due to the Company not having an unconditional right to defer settlement for at least 12 months after
reporting date, it is scheduled to be repaid over the life of the joint venture between EQ Resources Limited
and Cronimet Australia Pty Ltd rather than within the next 12 months as depicted on the Balance Sheet.
As the Group is an exploration and development entity, ongoing exploration and development activities
are reliant upon future capital raisings.
16
48 EQ Resources Limited Annual Report 2022
Directors’ Report continued
ANNUAL Report June 2022
Directors’ Report
During the year, the Company’s issued share capital increased by $1,588,790 due to the conversion of
2,000,000 convertible notes in September 2021.
Indemnification and Insurance of Officers and Auditors
Indemnification
The Company has not, during or since the end of the financial period, in respect of any person who is or has
been an Officer of the Company or a related body corporate indemnified or made any relevant agreement for
indemnifying against a liability incurred as an Officer, including costs and expenses in successfully defending
legal proceedings.
Insurance Premiums
During the financial period the Company has paid premiums to insure each of the Directors and Officers against
liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their
conduct whilst acting in the capacity of a Director or Officer of the Company, other than conduct involving a
wilful breach of duty in relation to the Company.
The premiums paid are not disclosed as such disclosure is prohibited under the terms of the insurance
contract.
Audit and Non–Audit Services
During the financial year, the following fees for audit and non-audit services were paid or payable to Nexia
Melbourne Audit Pty Ltd and Nexia Melbourne Pty Ltd:
Audit-related services
Amounts paid or payable to Nexia Melbourne Audit Pty Ltd
- Audit services
Taxation services
Amounts paid or payable to Nexia Melbourne Pty Ltd
- Tax compliance services (tax returns)
- Other tax advice
2022
$
2021
$
65,100
62,000
13,000
-
78,100
21,500
10,273
93,773
The Directors are satisfied that the provision of non-audit services during the year by the auditor is compatible
with the general standard of independence for auditors imposed by the Corporations Act 2001.
On the advice of the Audit Committee, the Directors are satisfied that the provision of non-audit services by
the auditor, as set out above, did not compromise the auditor independence requirements of the Corporations
Act 2001 for the following reasons:
•
•
all non-audit services have been reviewed by the Audit Committee to ensure that they do not impact the
integrity and objectivity of the auditor; and
none of the non-audit services undermine the general principles relating to auditor independence as set
out in APES 110 Code of Ethics for Professional Accountants.
Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act
2001 is set out and located after the Director’s Declaration and forms part of this report.
17
EQ Resources Limited Annual Report 2022 49
ANNUAL Report June 2022
Directors’ Report
Corporate Governance
A statement disclosing the extent to which the Company has followed the best practice recommendations set
by the ASX Corporate Governance Council during the period is displayed on the Company’s website at
https://www.eqresources.com.au/site/who-we-are/corporate-governance.
Signed this 30th day of September 2022 in accordance with a resolution of Directors.
Oliver Kleinhempel
Non-executive Chairman
18
ANNUAL Report June 2022
50 EQ Resources Limited Annual Report 2022
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Profit or Loss
Consolidated Statement of Profit or Loss and Other
and Other Comprehensive Income
Comprehensive Income
For the year ended 30 June 2022
For the Year ended 30 June 2022
Revenue
Other income
Total revenue & other income
Administration expenses
Consultant expenses
Depreciation
Amortisation – deferred exploration & evaluation
Development and testwork costs
Exploration expenses written-off
Finance costs
Foreign exchange gains (losses)
Occupancy expenses
Gain / (Loss) on disposal of fixed assets
Production expenses
Salaries and employee benefits expense
Share based payments
Superannuation
Travel and accommodation
Total Expenses
Profit (Loss) before income Tax Expense
Income tax expense
Profit (Loss) After Income Tax Expense
Other comprehensive income/(loss)
Gain/(loss) on revaluation of financial assets
Total Comprehensive Profit / (Loss)
Attributable to Owners of EQ Resources Limited
Basic profit (loss) per share
Diluted profit (loss) per share
Note
2
2
9
10
27
3
14
14
2022
$
4,072,177
2,159,086
6,231,263
(783,403)
(121,490)
(866,847)
(72,745)
(462,779)
(3,868)
(643,185)
(397,138)
(135,303)
(36,421)
2021
$
4,547,080
871,620
5,418,700
(661,194)
(140,288)
(412,507)
(176,038)
(432,068)
(886)
(39,643)
302,345
(109,524)
(22,537)
(3,950,231)
(4,455,540)
(4,047,291)
(3,295,284)
(411,648)
(287,224)
(76,674)
(279,446)
(213,937)
(57,891)
(12,296,247)
(9,994,438)
(6,064,984)
(4,575,738)
-
-
(6,064,984)
(4,575,738)
1,933
1,547
(6,063,051)
(4,574,191)
Cents
(0.45)
(0.42)
Cents
(0.39)
(0.39)
19
EQ Resources Limited Annual Report 2022
51
ANNUAL Report June 2022
Consolidated Statement of Financial Position
Consolidated Statement of Financial Position
As at 30 June 2022
Consolidated Statement of Financial Position
For the Year ended 30 June 2022
Current Assets
Cash assets
Trade and other receivables
Prepayments
Inventory
Total current assets
Non-Current Assets
Receivables
Plant and equipment
Inventory
Deferred exploration and evaluation
Financial assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Employee benefits
Lease liability
Contract liability – offtake
Contract liability - sublease
Total Current Liabilities
Non-Current Liabilities
Employee benefits
Lease liability
Convertible notes
Contract liability - sublease
Other borrowings
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Accumulated profit / (loss)
Total Equity
Note
21(b)
7
7
4
8
9
4
10, 19
5
11, 26
28
24, 26
22
22
28
24, 26
13
22
23
2022
$
2021
$
1,723,426
2,323,599
632,292
876,438
3,504,721
1,927,630
324,619
673,024
5,555,755
6,429,994
1,081,292
7,015,995
6,812,875
10,803,974
5,543
1,082,071
2,807,615
7,142,176
8,280,353
3,610
25,719,679
19,315,825
31,275,434
25,745,819
5,026,531
3,647,525
282,397
665,754
3,266,190
405,851
182,840
268,167
2,323,423
242,397
9,646,723
6,664,352
15,418
1,335,829
3,004,651
1,432,259
1,523,336
24,112
681,140
-
1,650,481
-
7,311,493
2,355,733
16,958,216
9,020,085
14,317,218
16,725,734
12
22,192,705
20,603,915
2,848,576
782,831
(10,724,063)
(4,661,012)
14,317,218
16,725,734
20
52 EQ Resources Limited Annual Report 2022
ANNUAL Report June 2022
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
For the year ended 30 June 2022
Consolidated Statement of Cash Flows
For the Year ended 30 June 2022
Cash Flows from Operating Activities
Proceeds from sales to customers
Proceeds from R & D tax offset
Proceeds from diesel fuel rebate
Proceeds from grants
Proceeds from government COVID-19 relief packages
Proceeds from other sources
Payment to suppliers and employees
Interest paid
Interest paid for lease liabilities
Interest received
Note
2022
$
2021
$
4,809,948
1,501,199
229,063
451,000
-
44,436
4,690,563
610,106
151,257
-
77,436
8,100
(10,120,348)
(9,353,465)
(4,185)
(25,278)
1,395
(9,684)
(879)
9,844
Net Cash Flows Used in Operating Activities
21(a)
(3,112,770)
(3,816,722)
Cash Flows from Investing Activities
Payments for the purchase of plant and equipment
Payments for the capitalised exploration and evaluation expenditure
Proceeds from the sale or disposal of plant and equipment
Proceeds from release of other security deposits
Payments for the purchase of tenements
Payments / proceeds for tenement security deposits
Net Cash Flows Used in Investing Activities
Cash Flows from Financing Activities
Proceeds from the issue of shares
Proceeds from the issue of convertible notes
Payments for share / convertible note issue costs
Proceeds from short-term loan facilities
Payments for lease liabilities
Proceeds from offtake advance extension
Proceeds from working capital loan (unincorporated joint venture)
Proceeds from prepayments for sales of concentrate and quarry materials
Net Cash Flows from Financing Activities
Net (decrease)/increase in cash held
Add opening cash brought forward
Effect of movement in exchange rates on cash held
(3,350,052)
(1,221,800)
(3,098,868)
(835,667)
-
4,100
-
255
16,500
-
-
7,262
(6,444,565)
(2,033,705)
-
6,500,000
6,000,000
(302,422)
1,500,000
(93,729)
689,266
-
-
-
(418,343)
-
(9,644)
-
1,860
312,973
7,793,115
6,386,846
(1,764,220)
3,504,721
(17,075)
536,419
2,989,859
(21,557)
Closing Cash Carried Forward
21(b)
1,723,426
3,504,721
21
ANNUAL Report June 2022
Consolidated Statement of Changes in Equity
EQ Resources Limited Annual Report 2022
53
Consolidated Statement of Changes in Equity
Consolidated Statement of Changes in Equity
For the year ended 30 June 2022
For the Year ended 30 June 2022
Attributable to the Shareholders of EQ Resources Limited
Consolidated
At 1 July 2020
Profit / (loss) for the period
Adjustment to prior year
Other comprehensive income for the period
Total comprehensive loss for the period
Issue of share capital
Share issue costs
Share based payments
At 1 July 2021
Profit / (loss) for the period
Adjustment to prior year
Other comprehensive income for the period
Total comprehensive loss for the period
Issue of share capital
Share issue costs
Share based payments
Issued Capital
$
Accumulated
Losses
$
15,023,117
(86,821)
-
(4,575,738)
(50)
-
-
1,547
(50)
(4,574,191)
6,500,000
(919,152)
-
Reserves
$
Total Equity
$
-
-
-
-
-
-
-
782,831
782,831
782,831
-
-
-
-
-
-
2,065,745
2,065,745
-
-
-
-
-
-
-
-
14,936,296
(4,575,738)
(50)
1,547
(4,575,241)
6,500,000
(919,152)
782,831
6,363,679
16,725,734
16,725,734
(6,064,984)
-
1,933
(6,063,051)
2,004,100
(415,310)
2,065,745
3,654,535
20,603,915
(4,661,012)
782,831
-
-
-
-
(6,064,984)
-
1,933
(6,063,051)
2,004,100
(415,310)
-
Total transactions with owners in their capacity as owners
5,580,848
BALANCE AT 30 JUNE 2021
20,603,915
(4,661,012)
Total transactions with owners in their capacity as owners
1,588,790
Balance at 30 June 2022
22,192,705
(10,724,063)
2,848,576
14,317,218
22
54 EQ Resources Limited Annual Report 2022
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Going Concern Basis for Preparation of Financial Statements
These financial statements have been prepared on the going concern basis which contemplates the
continuity of normal business activities and the realisation of assets and the discharge of liabilities in the
normal course of business.
For the full-year ended 30 June 2022, the consolidated entity incurred a total comprehensive loss of
$6,063,051 (2021: loss of $4,574,191), incurred cash outflows from operating activities of $3,112,770
(2021: $3,816,722) and had a net working capital deficit of $4,090,968 (2021: $234,358 deficit). The deficit
in net working capital is predominately due to the Company funding its capital growth initiatives via short-
term financing facilities such as equipment leases, offtake advance extension and trade payables.
It should be noted that whilst the offtake advance facility of $3,266,190 is classified as a current liability,
due to the Company not having an unconditional right to defer settlement for at least 12 months after
reporting date, it is scheduled to be repaid over the life of the joint venture between EQ Resources Limited
and Cronimet Australia Pty Ltd rather than within the next 12 months as depicted on the Balance Sheet.
The ability of the Company to continue to adopt the going concern assumption is based upon:
-
The awarding of a $6,000,000 (including GST) grant from the Critical Minerals Accelerator Initiative (CMAI)
(refer ASX announcement “Government Funding for Mt Carbine Critical Minerals Program” dated 28 April
2022) which was re-announced via a media release by the Minister for Resources on 16 September 2022
(refer ASX announcement “Federal Government Funding for Mt Carbine Reconfirmed” dated 19 September
2022); and
- Capital raising to cover any delays of incoming funds from above grant to enable the Company to implement
the BFS schedule.
-
The commencement of open-cut mining operations in early 2023; along with
- Continued income stream from the Mt Carbine Quarry and the Company’s joint venture with CRONIMET
Australia Pty Ltd for the processing of the Mt Carbine tailings and low-grade stockpiles.
Should additional funds be necessary the Directors are confident of securing these funds if and when
necessary to meet the Company’s obligations as and when they fall due and consider the adoption of the
going concern basis to be appropriate in the preparation of these financial statements.
(b) Basis of Preparation
These general-purpose financial statements have been prepared in accordance with the requirements of
the Australian Accounting Standards, Australian Accounting Interpretations, other authoritative
pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. These
financial statements have been prepared on a historical cost basis. The financial report is presented in
Australian currency. The consolidated entity operates on a for-profit basis.
(c) Statement of Compliance
The financial statements have been prepared and comply with Australian Accounting Standards. The
financial statements also comply with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board.
(d) Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company (its subsidiaries) as at 30 June each year. Control is defined as entities which
the Group has power over and the rights to, or is exposed to, variable returns from its involvement with
the entity and has the ability to use its power to affect those returns.
23
EQ Resources Limited Annual Report 2022
55
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
The financial statements of subsidiaries are prepared for the same reporting period as the parent
company, using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies that may exist.
All inter-company balances and transactions, including unrealised profits arising from intra-group
transactions, have been eliminated in full.
Subsidiaries are fully consolidated from the date upon which control is transferred to the Group and cease
to be consolidated from the date upon which control is transferred out of the Group.
Interests in Joint Operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the
contractually agreed sharing of control of an arrangement, which exists only when decisions about the
relevant activities require unanimous consent of the parties sharing control.
When a Group entity undertakes its activities under joint operations, the Group as a joint operator
recognises in relation to its interest in a joint operation:
▪
▪
▪
▪
▪
its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its revenue from the sale of its share of the output arising from the joint operation;
its share of the revenue from the sale of the output by the joint operation; and
its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenue and expenses relating to its interest in a joint
operation in accordance with the IFRS Standards applicable to the particular assets, liabilities, revenue
and expenses.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a
sale or contribution of assets), the Group is considered to be conducting the transaction with the other
parties to the joint operation, and gains and losses resulting from the transactions are recognised in the
Group’s consolidated financial statements only to the extent of other parties’ interests in the joint
operation.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a
purchase of assets), the Group does not recognise its share of the gains and losses until it resells those
assets to a third party. The requirements of IAS 36 are applied to determine whether it is necessary to
recognise any impairment loss with respect to the Group’s investment in an associate or a joint venture.
When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment
in accordance with IAS 36 as a single asset by comparing its recoverable amount (higher of value in use
and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not
allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any
reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable
amount of the investment subsequently increases.
(e) Property, Plant and Equipment
Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.
Depreciation is calculated either on a diminishing value or straight-line basis over the estimated useful life
of the asset. Plant and equipment useful life ranges from 1 – 25 years.
Impairment
The carrying values of plant and equipment are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable.
An item of plant and equipment is derecognised upon disposal.
24
56 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the item) is included in the income statement in the period
the item is derecognised.
(f)
Inventory
Inventories are valued at the lower of cost and net realisable value as per AASB 102 with the exception
of the 7 million tonnes of stockpiled inventory which was recognised at fair value as part of the business
combination upon the acquisition of Mt Carbine Quarries Pty Ltd on 28 June 2019. This inventory will be
consumed on a units of operation basis.
The cost of partly-processed and saleable products is generally the cost of production, including:
▪
▪
labour costs, materials and contractor expenses which are directly attributable to the processing of
quarry material or the production of tungsten concentrate;
the depreciation of property, plant and equipment used in the processing of quarry material or the
production of tungsten concentrate; and
▪ Production overheads.
(g) Borrowings
Borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using
the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the
settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with
the accounting policy for borrowing costs.
Borrowings are classified as current unless the Group has an unconditional right to defer the settlement
of the liability for at least 12 months after the reporting date.
(h) Recoverable Amount of Assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired.
Where an indicator of impairment exists, the Group makes a formal estimate of the recoverable amount.
Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired
and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use.
(i) Exploration, Evaluation, Development and Restoration Costs
Exploration and Evaluation
Exploration and evaluation expenditure incurred by or on behalf of the Company is accumulated
separately for each area of interest. Such expenditure comprises net direct costs and an appropriate
portion of related overhead expenditure but does not include general overheads or administrative
expenditure not having a specific connection with a particular area of interest.
Exploration and evaluation costs in relation to separate areas of interest for which rights of tenure are
current are brought to account in the year in which they are incurred and carried forward provided that:
▪
▪
such costs are expected to be recouped through successful development and exploitation of the
area, or alternatively through its sale; or
exploration and/or evaluation activities in the area have not yet reached a stage which permits a
reasonable assessment of the existence or otherwise of economically recoverable reserves.
Once a development decision has been taken, all past and future exploration and evaluation expenditure
in respect of the area of interest is aggregated within costs of development.
25
EQ Resources Limited Annual Report 2022
57
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
Exploration and Evaluation – Impairment
The Directors assess at each reporting date whether there is an indication that an asset has been impaired
and for exploration and evaluation costs whether the above carry forward criteria are met.
Accumulated costs in respect of areas of interest are written off or a provision made in profit or loss when
the above criteria do not apply or when the Directors assess that the carrying value may exceed the
recoverable amount. The costs of productive areas are amortised over the life of the area of interest to
which such costs relate on the production output basis, provisions would be reviewed and if appropriate,
written back.
Development
Development expenditure incurred by or on behalf of the Company is accumulated separately for each
area of interest in which economically recoverable reserves have been identified to the satisfaction of the
Directors. Such expenditure comprises net direct costs and, in the same manner as for exploration and
evaluation expenditure, an appropriate portion of related overhead expenditure having a specific
connection with the development property.
All expenditure incurred prior to the commencement of commercial levels of production from each
development property is carried forward to the extent to which recoupment out of revenue to be derived
from the sale of production from the relevant development property, or from the sale of that property, is
reasonably assured.
No amortisation is provided in respect of development properties until a decision has been made to
commence mining. After this decision, the costs are amortised over the life of the area of interest to which
such costs relate on a production output basis.
Remaining Mine Life
In estimating the remaining life of the mine at each mine property for the purpose of amortisation and
depreciation calculations, due regard is given not only to the volume of remaining economically
recoverable reserves but also to limitations which could arise from the potential for changes in technology,
demand, product substitution and other issues that are inherently difficult to estimate over a lengthy time
frame.
(j) Cash and Cash Equivalents
Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and in hand
and short-term deposits with an original maturity of three months or less.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of any outstanding bank overdrafts, if any.
(k) Revenue
Revenue from contracts with customers is measured based on the consideration specified in a contract
with a customer and excludes amounts collected on behalf of third parties. The revenue is recognised
when it transfers control over a product to a customer.
Where payment is received upfront a contract liability is recognised on receipt of payment and revenue is
recognised over a period in time as product/services are delivered.
In addition to the above, the following specific recognition criteria must also be met before revenue is
recognised:
Sublease Rent
Revenue is recognised in accordance with the Retreatment Operations Sublease Agreement when the
gross value of the consideration of the minerals extracted from the subleased area has been received.
26
58 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
Interest
Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that
exactly discounts estimated future cash receipts through the expected life of the financial instrument) to
the net carrying amount of the financial asset.
Research and Development Refundable Tax Offset
The Research and Development Refundable Tax Offset is recognised as other income when it is received
as it relates to expenditure incurred in the past.
(l) Leases
The Group as lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group
recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements
in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months
or less) and leases of low value assets (such a tablets and personal computers, small items of office
furniture and telephones). For these leases, the Group recognises the lease payments as an operating
expense on a straight-line basis over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily
determined, the Group uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
▪
▪
▪
▪
fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payments that depend on an index or rate, initially measured using the index or rate at
the commencement date;
the amount expected to be payable by the lessee under residual value guarantees;
the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
▪ payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to
terminate the lease.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the
lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease
payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-
use asset) whenever:
▪ The lease term has changed or there is a significant event or change in circumstances resulting in a
change in the assessment of exercise of a purchase option, in which case the lease liability is
remeasured by discounting the revised leave payments using a revised discount rate.
▪ The lease payments change due to changes in an index or rate or a change in expected payment
under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the
revised lease payments using an unchanged discount rate (unless the lease payments change is due
to a change in a floating interest rate, in which case a revised discount rate is used).
▪ A lease contract is modified and the lease modification is not accounted for as a separate lease, in
which case the lease liability is remeasured based on the lease term of the modified lease by
discounting the revised lease payments using a revised discount rate at the effective date of the
modification.
The Group did not make any such adjustments during the periods presented.
27
EQ Resources Limited Annual Report 2022
59
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease
payments made at or before the commencement day, less any lease incentives received and any initial
direct costs. They are subsequently measured at cost less accumulated depreciation and impairment
losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the
site on which it is located or restore the underlying asset to the condition required by the terms and
conditions of the lease, a provision is recognized and measured under AASB 137. To the extent that the
costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those
costs are incurred to produce inventories.
The right-of-use assets are presented as a separate line in the consolidated statement of financial
position.
The Group applies AASB 136 to determine whether a right-of-use asset is impaired and accounts for any
identified impairment loss as described in the “Property, Plant and Equipment” policy (as outlined in the
financial report for the annual reporting period).
Variable rents that do not depend on an index or rate are not included in the measurement of the lease
liability and the right-of-use asset. The related payments are recognised as an expense in the period in
which the event or condition that triggers those payments occurs and are included in the line “Other
Expenses” in profit or loss.
As a practical expedient, AASB 16 permits a lessee not to separate non-lease components, and instead
account for any lease and associated non-lease components as a single arrangement.
(m) Income Tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected
to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted at reporting date.
Deferred income tax is provided on all temporary differences at reporting date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
▪ except where the deferred income tax liability arises from the initial recognition of an asset or liability
in a transaction that is not a business combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; and
▪
in respect of taxable temporary differences associated with investments in subsidiaries, associates
and interests in joint ventures, except where the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary differences will not reverse in the foreseeable
future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of
unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences, the carry-forward of unused tax assets and
unused tax losses can be utilised:
▪ except where the deferred income tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
▪
in respect of deductible temporary differences associated with investments in subsidiaries, associates
and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and taxable profit will be available
against which the temporary differences can be utilised.
28
60 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
(n) Other Taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
▪ where the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part
of the expense item as applicable; and
▪
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the Balance Sheet.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of
cash flows arising from investing and financing activities, which is recoverable from, or payable to, the
taxation authority is classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable
to, the taxation authority.
(o) Currency
Both the functional and presentation currency is Australian dollars (A$).
In preparing the financial statements of the Group entities, transactions in currencies other than the
entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the
dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair
value that are denominated in foreign currencies are translated at the rates prevailing at the date when
the fair value was determined. Non-monetary items that are measured in terms of historical cost in a
foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for:
▪ exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an
adjustment to interest costs on those foreign currency borrowings;
▪ exchange differences on transactions entered into to hedge certain foreign currency risks (see below
under financial instruments/hedge accounting); and
▪ exchange differences on monetary items receivable from or payable to a foreign operation for which
settlement is neither planned nor likely to occur in the foreseeable future (therefore forming part of
the net investment in the foreign operation), which are recognised initially in other comprehensive
income and reclassified from equity to profit or loss on disposal or partial disposal of the net
investment.
(p)
Investment in Subsidiaries
The parent entity’s investment in its subsidiaries is accounted for under the cost method of accounting
in the Company’s financial statements included in Note 18.
29
EQ Resources Limited Annual Report 2022
61
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
(q) Share Based Payments
Equity-settled share-based payments to employees and others providing similar services are measured
at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-
market-based vesting conditions. Details regarding the determination of the fair value of equity-settled
share-based transactions are set out in Note 27.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group’s estimate of the number of equity
instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number
of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions.
The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the
cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves.
Equity-settled share-based payment transactions with parties other than employees are measured at the
fair value of the good or services received, except where fair value cannot be estimated reliably, in which
case they are measured at the fair value of the equity instruments granted, measured at the date the
entity obtains the goods or the counterparty renders the service.
For cash-settled share-based payments, a liability is recognised for the goods or services acquired,
measured initially at the fair value of the liability. At each reporting date until the liability is settled, and at
the date of settlement, the fair value of the liability is remeasured, with any changes in fair value
recognised in profit or loss for the year.
(r) Critical Accounting Judgements, Estimates and Assumptions
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually
evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and
expenses. Management bases its judgements, estimates and assumptions on historical experience and
on other various factors, including expectations of future events, which management believes to be
reasonable under the circumstances. The resulting accounting judgements and estimates will seldom
equal the related actual results. The judgements estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year are discussed below.
Accounting for Acquisition of Businesses
Accounting for acquisition of businesses requires judgement and estimates in determining the fair value
of acquired assets and liabilities. The relevant accounting standard allows the fair value of assets acquired
to be refined for a window of a year after the acquisition date and judgement is required to ensure that
any adjustments made reflect new information obtained about facts and circumstances that existed as of
the acquisition date.
Impairment of Non-Financial Assets
The consolidated entity assesses impairment of non-financial assets at each reporting date by evaluating
conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less
costs to sell or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Refer to notes 9, 10, and 19 for further detail regarding judgements made when assessing impairment of
plant and equipment and deferred exploration and evaluation costs and determining their recoverable
amount.
(s) 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 Mr K. MacNeill, Chief
Executive Officer (CEO) and prior to his appointment the Board of Directors of the Company.
30
62 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
2. REVENUE AND OTHER INCOME
Revenue
Sales and hire income
Sub-lease rent (unincorporated joint venture)
Interest received – other persons/corporation
Other income:
Government subsidies (various)
AMGC grant
R&D tax offset
Diesel fuel rebates
Other income
Total revenue and other income
3.
INCOME TAX
(a) Reconciliation of income tax expense to prima facie tax payable
Profit / (loss) before income tax
Tax at the statutory rate of 25% (30 June 2021: 25%)
Tax effect of amounts which are not taxable in calculating taxable income:
Non-deductible expenses
Non-assessable income
Deferred tax assets not recognised
Income tax benefit
(b) Unrecognised deferred tax assets
Balance at beginning of year
Current year not recognized
Adjustments in respect of prior year tax balances
Tax rate change 26% to 25% (Prior Year: Tax rate change from 26% to 25%)
Balance at end of year
Deferred tax assets have not been recognized in respect of the following items:
Tax losses
Less: other timing differences
Net deferred tax assets
2022
$
2021
$
4,014,380
4,522,982
54,768
3,029
17,578
6,520
4,072,177
4,547,080
52,726
392,000
1,501,200
205,959
7,201
69,872
-
610,106
191,642
-
2,159,086
871,620
6,231,263
5,418,700
2022
$
2021
$
(6,063,052)
(4,574,191)
(1,515,763)
(1,189,290)
852,912
(375,300)
1,038,151
-
5,123,772
(612,477)
-
-
4,511,295
72,656
(170,003)
1,286,637
-
5,219,268
669,121
(593,284)
(171,333)
5,123,772
7,685,999
7,112,830
(3,174,703)
(1,989,058)
4,511,295
5,123,772
No provision for income tax is considered necessary in respect of the Company for the period ended 30
June 2022.
Deferred tax assets have not been recognised in respect of these items because it is not probable in the
short to medium term that these assets will be realised. The Group has total tax losses at 30 June 2022
of $30,743,977 (2021: $28,451,322). A future income tax benefit which may arise from tax losses of 25%
of approximately $7,685,994 will only be obtained if:
▪
▪
the parent and the subsidiaries derive future assessable income of a nature and of an amount
sufficient to enable the benefit from the deductions for the losses to be realised;
the parent and the subsidiaries continue to comply with the conditions for deductibility imposed by the
law; and
31
EQ Resources Limited Annual Report 2022
63
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
▪ no changes in tax legislation adversely affect the Parent and the Subsidiaries in realising the benefit
from the deductions for the losses, i.e. current tax legislation permits carried forward tax losses to be
carried forward indefinitely.
No franking credits are available for subsequent years.
Tax consolidation
The tax consolidation scheme is applicable to the Company. As at the date of this report the Directors
have assessed the financial effect the scheme may have on the Company and its consolidated entities
and have made a decision to be taxed as a consolidated entity. The financial effect of the tax consolidation
scheme on the Group has not been recognised in the financial statements.
4.
INVENTORY
Current
Finished Goods
Work-in-progress
Raw materials
Workshop inventory
Non-current
Raw materials
2022
$
2021
$
353,889
364,552
72,547
85,450
876,438
493,400
7,953
64,661
107,010
673,024
6,812,875
6,812,875
7,142,176
7,142,176
7,689,313
7,815,200
The above amount for raw materials incorporates the fair value of the estimated 7 million tonnes of
stockpiled inventory acquired as part of the acquisition of Mt Carbine Quarries Pty Ltd on 28 June 2019
along with the work-in-progress and finished goods inventory which have been created from this
stockpiled material since acquisition. The inventory will be consumed on a units of operation basis in
accordance with AASB102. All inventory, regardless of type and stage in the production process has been
valued at the lower of cost and net realisable value (NRV). Inventories expected to be processed or sold
within twelve months after the balance sheet date are classified as current assets. All other inventories
are classified as non-current assets.
The cost of inventories recognised as an expense includes write-downs of inventory to NRV in the amount
of $22,322.
5. FINANCIAL ASSETS
Shares in listed companies:
Critical Resources Limited (ASX: CRR)
2022
$
2021
$
5,543
3,610
Equity instruments are measured at fair value as at reporting date with all changes recognised as other
comprehensive income / (loss) in the Consolidated Statement of Profit or Loss and Other Comprehensive
Income.
32
64 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
6. AUDITOR’S REMUNERATION
Audit-related services
Amounts paid or payable to Nexia Melbourne Audit Pty Ltd
- Audit services
Taxation Services
Amounts paid or payable to Nexia Melbourne Pty Ltd
- Tax compliance services (tax returns)
- Other tax advice
7. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Allowance
Other taxation
Other receivables
Total trade & other receivables
Prepayments
Trade Receivables
2022
$
2021
$
65,100
62,000
13,000
-
78,100
21,500
10,273
93,773
2022
$
2021
$
1,645,546
1,213,453
-
-
1,645,546
1,213,453
484,950
193,103
384,889
329,288
2,323,599
1,927,630
632,292
324,619
The average credit period on sales of product is 30 days. No interest is charged on outstanding trade
receivables.
The collectability of trade receivables is assessed continuously, and individual receivables are written off
when management deems them unrecoverable. No provision has been made for doubtful debts as all
trade receivables were deemed to be recoverable as at reporting date.
8. RECEIVABLES
Tenement security deposits
Other security deposits
2022
$
2021
$
1,075,130
1,075,385
6,162
6,686
1,081,292
1,082,071
The tenement deposits are restricted so that they are available for any rehabilitation that may be required
on the mining leases and/or exploration tenements (refer to Notes 16 and 17).
9. PLANT AND EQUIPMENT AT COST
Plant and equipment
Accumulated depreciation
Plant and equipment – right of use assets
Accumulated depreciation
2022
$
2021
$
6,975,823
3,298,373
(1,979,791)
(1,609,688)
2,676,371
(656,408)
1,291,148
(172,218)
7,015,995
2,807,615
33
EQ Resources Limited Annual Report 2022
65
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
Reconciliation of the carrying amount of plant and equipment at the beginning and end of
the current and previous financial year
Carrying amount at beginning
Additions
Disposals
Plant and equipment written down
Depreciation expense
10. DEFERRED EXPLORATION AND EVALUATION
Costs brought forward
Costs incurred during the period
Capitalised portion of R&D tax offset
Total deferred exploration and evaluation
Amortisation deferred exploration and evaluation
Costs carried forward
Exploration expenditure costs carried forward are made up of:
Expenditure on joint venture areas
Expenditure on non-joint venture areas
Costs carried forward
2022
$
2021
$
2,807,615
5,111,648
(36,421)
-
2,254,941
1,070,671
(105,490)
-
(866,847)
(412,507)
7,015,995
2,807,615
2022
$
8,280,353
2,616,884
(20,518)
10,876,719
(72,745)
10,803,974
-
10,803,974
10,803,974
2021
$
6,896,994
1,572,597
(13,200)
8,456,391
(176,038)
8,280,353
-
8,280,353
8,280,353
The above amounts represent costs of areas of interest carried forward as an asset in accordance with
the accounting policy set out in Note 1. The ultimate recoupment of deferred exploration and evaluation
expenditure in respect of an area of interest carried forward is dependent upon the discovery of
commercially viable reserves and the successful development and exploitation of the respective areas or
alternatively sale of the underlying areas of interest for at least their carrying value. Amortisation, in
respect of the relevant area of interest, is not charged until a mining operation has commenced.
The Directors reassess the carrying value of the Group’s tenements at each half year, or at a period other
than that, should there be any indication of impairment.
Farm-In and Joint Venture Agreement – NSW Projects
EQ Resources Limited entered into a binding Farm-In and Joint Venture Agreement with Sozo Resources
Pty Ltd (“Sozo”) in November 2021 whereby Sozo can earn up to an 80% interest in EQR’s 100% owned
NSW projects, Crow Mountain (EL6648) and Panama Hat (EL8024), by completing expenditure of $1.6
million over 4 years as follows:
▪ Stage 1 – Sozo to complete $100K of expenditure within 9 months from the Agreement
Commencement Date;
▪ Stage 2 – Sozo to spend a further $750K of expenditure within a further 24 months to earn a 49%
interest. If Sozo elects to continue sole funding exploration expenditure at the end of Stage 2, it will
have earnt a further 2% (51% in total) and a Joint Venture will be formed; and
▪ Stage 3 – Sozo to spend a further $750K of expenditure and complete a Scoping Study (as defined
by the 2012 JORC Code) within a further 24 months to earn a further 29% (in total $1.6M for 80%).
For further details refer to ASX announcement “EQR Farms-Out NSW Projects to Focus on Mt Carbine
Tungsten Mine” dated 25 November 2021.
34
66 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
11. TRADE AND OTHER PAYABLES
PAYABLES
Trade payables
Other taxation
Unearned revenue
Accrued expenses
Other
12. ISSUED CAPITAL
Share Capital
1,344,186,938 (2021: 1,313,354,631) ordinary shares fully paid
(a) Movements in Ordinary Share Capital
1 July 2021 to 30 June 2022
Date
Balance b/fwd
Issue of 11,560,592 shares @ $0.065 per share on the
conversion of 750,000 convertible notes plus accrued interest
to conversion date (refer ASX announcement dated 28
September 2021)
Issue of 9,646,535 shares @ $0.065 per share on the
conversion of 625,800 convertible notes plus accrued interest
to conversion date (refer ASX announcement dated 29
September 2021)
Issue of 9,625,180 shares @ $0.065 per share on the
conversion of 624,200 convertible notes plus accrued interest
to conversion date (refer ASX announcement dated 30
September 2021)
Convertible note issue costs
Balance as at 30 June 2022
1 July 2020 to 30 June 2021
Date
Balance b/fwd
Prior year adjustment
Placement of 187,500,000 shares @ $0.032 per share to
institutional and sophisticated investors undertaken pursuant to
placement capacities under Listing Rule 7.1 (15% Rule) and
Rule 7.1A (10% Rule) (refer ASX announcement dated 15
March 2021)
Placement of 15,625,000 shares @ $0.032 per share to
Directors undertaken pursuant to placement capacities under
Listing Rule 7.1 (15% Rule) and Rule 7.1A (10% Rule) (refer
ASX announcement dated 15 March 2021)
Lead manager options
Share issue costs
2022
$
2021
$
3,747,115
2,485,388
316,960
284,550
677,906
-
171,343
393,519
597,275
-
5,026,531
3,647,525
2022
$
2021
$
22,192,705
20,603,915
22,192,705
20,603,915
Number of
Shares
Issue Price
$
1,313,354,631
20,603,915
28/08/2021
11,560,592
$0.065
751,438
29/09/2021
9,646,535
$0.065
627,025
30/09/2021
9,625,180
$0.065
625,637
1,344,186,938
Number of
Shares
1,110,229,631
-
(415,310)
22,192,705
Issue Price
$
15,023,117
(50)
19/03/21
187,500,000
$0.0320
6,000,000
20/05/21
15,625,000
$0.0320
500,000
Balance as at 30 June 2021
1,313,354,631
(503,385)
(415,767)
20,603,915
35
EQ Resources Limited Annual Report 2022
67
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
Terms and Conditions of Contributed Equity
Ordinary Shares
Ordinary shares have the right to receive dividends as declared and in the event of winding up the
Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of
and amounts paid up, on the shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
Option holders have no voting rights until the options are exercised.
(b) Movements in Share Options
The following table illustrates the share-based payments expense, number and weighted average
exercise prices (WAEP) of, and movements in, share options during the year:
Balance at 1 July 2021
Options recognised as share-based payments expense
Options recognised as share issue costs
Options recognised as capitalised borrowing costs
Amortisation share based payments
Forfeited / cancelled
Exercised
Expired
Number
WAEP
84,000,000
2,000,000
7,250,000
17,750,000
-
-
-
-
0.055
0.060
0.065
0.065
-
-
-
-
$
782,831
43,097
146,962
359,802
368,551
-
-
-
Balance at 30 June 2022
111,000,000
0.056
1,701,243
The following table illustrates outstanding options that have vested and are exercisable at year end:
Employee Options
Issue EQRAB
Issue EQRAC
Issue EQRAD
Issue EQRAE
Issue EQRAF
Issue EQRAI
Issue EQRAJ
Issue EQRAH
Issue EQRAG
Issue EQRAK
Number
outstanding
Number vested
and exercisable
Exercise price
Expiry Date
Remaining
Contractual
Life (Years)
2,000,000
3,000,000
2,000,000
3,000,000
2,000,000
12,000,000
10,000,000
22,000,000
30,000,000
25,000,000
2,000,000
3,000,000
2,000,000
3,000,000
2,000,000
6,000,000
5,000,000
11,000,000
30,000,000
25,000,000
0.040
0.060
0.040
0.060
0.040
0.060
0.060
0.060
0.432
0.065
05/05/23
05/05/23
01/07/23
01/07/23
01/02/24
23/06/24
23/06/24
25/05/24
19/03/24
17/09/23
0.85
0.85
1.00
1.00
1.59
1.98
1.98
1.90
1.72
1.22
Outstanding at 30 June 2022
111,000,000
89,000,000
(c) Movements in Performance Rights
No performance rights were issued nor outstanding at the end of the reporting period.
13. CONVERTIBLE NOTES
On 17 September 2021 the Company issued 6,000,000 convertible notes with an aggregate principal
value of $6,000,000.
The notes are convertible at the option of the noteholders into ordinary shares at a conversion price of
$0.065 per share at any time after issuance and up to the close of business on the maturity date.
36
68 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
Noteholders have an option to redeem the notes at the end of 2 years at face value plus any accrued
interest. Any convertible notes not converted will be redeemed on 17 September 2023 at the principal
amount together with accrued but unpaid interest thereon. The notes carry interest at a coupon rate of
7.00% per annum (effective interest rate of 1.4% per month based on a 2-year amortisation period on
estimated cashflow timing in line with the 2-year redemption option) which is payable annually in arrears
in September.
The fair value of the liability component was estimated at issuance date using an “Interest Rate
Differential” methodology which discounts the convertible notes’ cash flows at a commercial discount
(interest) rate to a present value. The residual amount is assigned as the equity component and is
included in reserves.
Subsequent to issue, 2,000,000 notes plus accrued interest were converted into 30,832,307 ordinary
shares on 28 September, 29 September and 30 September 2021.
The convertible notes issued and converted during the period have been split into liability and equity
components as follows:
Opening balance at 1 July 2021
Debt ($)
Equity ($)
Total
-
-
-
Nominal value of convertible notes issued on 17 September 2021
4,279,000
1,721,000
6,000,000
Notes converted during the period
Balance as at 30 June 2022
(1,426,333)
(573,667)
(2,000,000)
2,852,667
1,147,333
4,000,000
(a) Debt Component – Convertible Notes
Opening balance at 1 July 2021
Convertible notes issued on 17 September 2021
Notes converted 28, 29 & 30 September 2021
Convertible notes on issue as at 30 September 2022
Accrued Interest at effective interest rate
Capitalised Borrowing Costs
Balance as at 30 June 2022
Accounting Policy
2022
$
-
4,279,000
(1,426,333)
2,852,667
380,235
(228,251)
3,004,651
The component of convertible notes that exhibits characteristics of a liability is recognised as a liability in
the balance sheet, net of transaction costs. The increase in liability due to passage of time is recognised
as a finance cost. The remainder of the proceeds are included in shareholders’ equity, net of transaction
costs. The carrying amount of the conversion option is not remeasured in subsequent years. Transaction
costs are apportioned between the liability and equity components of the convertible notes based on the
allocation of proceeds to the liability and equity components when the instruments are first recognised.
The liability component of the convertible notes has been classified as a current liability in accordance
with AASB 101 Amendments to Australian Accounting Standards – Classification of Liabilities as Current
or Non-Current due to the Company not having a right to defer settlement for at least twelve months after
the reporting period.
37
EQ Resources Limited Annual Report 2022
69
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
14. EARNINGS PER SHARE
Profit (Loss) after income tax attributable to the owners of the Company used in calculating
basic and diluted earnings per share
Weighted average number of ordinary shares on issue used in the calculation of basic loss
per share
Weighted average number of ordinary shares used in calculating diluted earnings per share.
Note options outstanding at reporting date have not been brought to account as they are
anti-dilutive.
Basic profit (loss) per share (cents)
Diluted profit (loss) per share (cents)
15. KEY MANAGEMENT PERSONNEL COMPENSATION
2022
$
2021
$
(6,063,051)
(4,574,191)
Number
Number
1,336,589,754
1,165,452,234
1,444,252,768
1,177,616,617
(0.45)
(0.42)
(0.39)
(0.39)
Short-term employee benefits
Post-employment benefits
Share based payments
Balance at the end of period
(1) Restated to include non-monetary benefits, leave provisions and long-term employee benefits.
2022
$
618,347
1,806
292,383
912,536
2021(1)
$
689,996
97,198
178,974
966,168
16. CONTINGENT LIABILITIES
The Group has provided guarantees totalling $1,075,130 in respect of mining exploration tenements and
environmental bonds. These guarantees in respect of mining and exploration tenements are secured
against deposits with the relative State Department of Mines. The Company does not expect to incur any
material liability in respect of the guarantees.
17. COMMITMENTS
Exploration Licence Expenditure Requirements
Queensland
The Queensland Government has approved a number of changes to Exploration Permits under the
Natural Resources and Other Legislation Amendment Act 2019 (known as NROLA Act). This Act
commenced in May 2020 which results in a change from an expenditure-based approach upon which a
company’s compliance with its licence conditions will be assessed on an outcomes-based approach.
New South Wales
In November 2021 EQ Resources Limited entered into a binding Farm-In and Joint Venture Agreement
with Sozo Resources Pty Ltd (“Sozo”) whereby Sozo can earn up to an 80% interest in EQR’s 100%
owned NSW projects, Crow Mountain (EL6648) and Panama Hat (EL8024), by completing expenditure
of $1.6 million over 4 years as follows:
▪ Stage 1 – Sozo to complete $100K of expenditure within 9 months from the Agreement
Commencement Date;
▪ Stage 2 – Sozo to spend a further $750K of expenditure within a further 24 months to earn a 49%
interest. If Sozo elects to continue sole funding exploration expenditure at the end of Stage 2, it will
have earnt a further 2% (51% in total) and a Joint Venture will be formed; and
▪ Stage 3 – Sozo to spend a further $750K of expenditure and complete a Scoping Study (as defined
by the 2012 JORC Code) within a further 24 months to earn a further 29% (in total $1.6M for 80%).
38
70 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
For further details refer to ASX announcement “EQR Farms-Out NSW Projects to Focus on Mt Carbine
Tungsten Mine” dated 26 November 2021.
This agreement ensures that the Company’s minimum expenditure requirements, as shown in the table
below, will be satisfied in order to maintain each tenement in good standing.
Payable not later than 1 year (NSW only)
Payable later than one year but not later than two years
2022
$
118,000
278,000
396,000
2021
$
38,000
76,000
114,000
It is likely also, that the granting of new licences and changes in licence areas at renewal or expiry will
change the expenditure commitment of the Group from time to time.
18. INVESTMENT IN SUBSIDIARIES
Parent Entity
EQ Resources Limited
Controlled Entities
South Eastern Resources Pty Ltd
Mt Carbine Retreatment Pty Ltd
Troutstone Resources Pty Ltd
Mt Carbine Quarrying Operations Pty Ltd
Mt Carbine Quarries Pty Limited
Equity Interest
2022
%
2021
%
100
100
100
100
100
100
100
100
100
100
Cost of Parent Entity’s
Investment
2022
$
2
200
1
100
2021
$
2
200
1
100
8,130,000
8,130,000
Icon Resources Africa Pty Ltd
Mt Carbine Retreatment Management Pty Ltd1
1 Mt Carbine Retreatment Management Pty Ltd acts as the agent for the unincorporated joint venture between Mt Carbine
100
100
10
50
10
50
50
50
Retreatment Pty Ltd and CRONIMET Australia Pty Ltd.
EQ Resources Limited and all of its subsidiaries are located and incorporated in Australia.
19. IMPAIRMENT OF DEFERRED EXPLORATION EXPENDITURE AND PLANT AND
EQUIPMENT
The Directors reassess the carrying value of the Group’s assets including deferred exploration
expenditure, tenements and plant and equipment at each half year, or at a period other than that, should
there be any indication of impairment to fair value. When making their assessment for the 2022 financial
year the Directors took the following into consideration:
▪ The results from Bankable Feasibility Study for the Mt Carbine Expansion Project which delivered
strong Pre-Tax Economics* including:
IRR of 154%;
Pre-Tax NPV8 of $131.5M;
Payback period of 2.25 years;
o
o
o
o
o
* Concentrate sales price basis US$315/mtu (mtu = metric tonne unit, 10kg).
Life of Mine EBITDA of $206.9M; and
Project life of 12 years.
39
EQ Resources Limited Annual Report 2022
71
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
This study focused on the open pit development with high-grade ore from the Company’s 100% owned
Andy White Open Pit, supplemented with the processing of the 12 million tonne Low-Grade Stockpile
which is a 50:50 joint venture between EQ Resources Limited and Cronimet Australia Pty Ltd (“JV”)
(refer ASX announcement “Mt Carbine BFS Delivers Strong Early Cash Flow” dated 13 December
2022.
▪ Continued increases in production and concentrate sales from the Company’s JV with CRONIMET
Australia Pty Ltd as a direct result of capital improvements to existing infrastructure as well as the
successful completion and commissioning of the Mt Carbine Early Works Program.
▪ APT (Ammonium Paratungstate; as the underlying price reference for tungsten concentrate) price
continued to appreciate from $285/mtu a year ago to approximately US$340/mtu as at the end of July
2022.
▪ The release of an updated resource statement for the Mt Carbine Tungsten Project which added
~85% contained metal (in WO3) to Indicated resources (refer ASX Announcement “Increased
Tungsten in Updated Mt Carbine Mineral Resource” dated 4 August 2022).
▪ The Company’s wholly owned subsidiary, Mt Carbine Quarrying Operations Pty Ltd, continues to
dedicate resources to the development of its ‘green aggregates’ business to enable the repurposed
Mt Carbine aggregates to be classified as a recycled product. This will open additional opportunities
in both the local and regional markets with the potential to increase future sales as regional industries
demand more recycled products. The Company continues to submit tenders for substantial civil
projects in the Quarry’s operational area, all of which are dependent upon either Federal or State
funding.
▪ The Company continues to hold:
o
o
Two (2) gold prospects in NSW and has entered into Farm-In and Joint Venture Agreement (the
“Agreement”) executed with Sozo Resources Pty Ltd (“Sozo”) whereby Sozo can earn up to an
80% interest in EQR’s Panama Hat and Crow Mountain Projects (EL’s 6648 and 8024) by
completing expenditure of A$1.6M over 4 years (refer ASX announcement ‘EQR Farms-Out
NSW Projects to Focus On Mt Carbine Tungsten Mine’ dated 25 November 2021).
Three (3) tungsten focused Exploration Permits being as EPM 27394, EPM 14871 and EPM
14872 located at Mt Carbine, North Queensland. EPM 14872 contains both the Iron Duke and
Petersen’s Lode prospects whilst EPM 14871 features the Mt Holmes tin-tungsten prospect.
EPM 14872 holds significant exploration upside given that the tungsten grades indicated in
the sampling of the Iron Duke and Petersen’s Lode are extensively higher than the estimated
global average grade in the present open-pit resource within the Mt Carbine Mining Leases.
These unencumbered, greenfield sites also offer the added advantage of having minimal
environmental legacy issues.
Based on the above, Directors’ have assessed there to be no indication of impairment in the current
financial year.
40
72 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
Combined Deferred Expenditure, Plant and Equipment and Financial Assets
Non-current assets
Receivables
Plant and equipment
Plant and equipment – at cost
Accumulated depreciation
Inventory
Inventory – Quarry Material
Inventory – Workshop
Deferred exploration and evaluation expenditure
Exploration and evaluation expenditure
Amortisation
TOTAL
2022
$
2021
$
1,081,292
1,081,292
1,082,071
1,082,071
9,652,194
4,589,521
(2,636,199)
(1,781,906)
7,015,995
2,807,615
7,603,863
7,708,190
85,450
107,010
7,689,313
7,815,200
10,876,719
(72,745)
10,803,974
8,456,391
(176,038)
8,280,353
26,590,574
19,985,239
Reconciliation of the carrying amount of Mt Carbine assets at the beginning and end
of the current and previous financial year:
2022
$
2021
$
Combined assets carrying amount at the beginning of the year
19,985,239
17,784,029
Receivables – prior year adjustment
Plant and equipment – additions
Plant and equipment – WDV of disposals
Plant and equipment – depreciation expense
Inventory – increase / (depletion)
Tenement & other security deposits – decrease
Capitalised exploration and evaluation expenses
Capitalised exploration and evaluation expenses - R&D Tax Offset
Capitalised exploration and evaluation – amortisation
-
5,111,648
(36,421)
(866,847)
(125,887)
(779)
2,616,884
(20,518)
(72,745)
(50)
1,070,670
(105,490)
(412,507)
269,787
(4,560)
1,572,598
(13,200)
(176,038)
TOTAL
26,590,574
19,985,239
20. SUBSEQUENT EVENTS
There have been no material events subsequent to 30 June 2022 that have not previously been reported
other than:
▪ Queensland-based Golding Contractors signed for early-stage work on Mt Carbine Open Pit restart,
with key outcomes of the early engagement including stakeholder engagement, equipment selection,
final pit design and price finalisation (refer ASX announcement “EQR Early Engagement with Contract
Miner” dated 4 July 2022.
▪ The release of an updated Resource Statement for the Mt Carbine Tungsten Project which added
~85% contained metal (in WO3) to Indicated resources (refer ASX Announcement “Increased
Tungsten in Updated Mt Carbine Mineral Resource” dated 4 August 2022).
41
EQ Resources Limited Annual Report 2022
73
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
▪ The release of an updated Ore Reserve estimate for its Mt Carbine Tungsten Project current as of 1
September 2022 which accounts for all mining activities undertaken to date. Refer ASX
Announcement "Mineral Increase in Mt Carbine Ore Reserve” dated 16 September 2022)
Reserve Category
Open Cut - Proved
Open Cut - Probable
Open Cut - Total
LGS - Proved
LGS - Probable
LGS - Total
Total - Proved
Total - Probable
Total
ROM Tonnes (mt)
-
3.54
3.54
-
10.00
10.00
-
13.54
13.54
WO3 %
-
0.33%
0.33%
-
0.075%
0.075%
-
0.142%
0.142%
Contained W03
(mtu)
-
1,161,693
1,161,693
-
750,000
750,000
-
1,911,693
1,911,693
21. STATEMENT OF CASH FLOWS
Reconciliation of net cash outflow from operating activities to operating loss after
income tax
2022
$
2021
$
(a) Operating profit / (loss) after income tax
(6,063,051)
(4,574,191)
Depreciation and amortisation
Share based payments expense
Amortised finance expense
Gain on disposal of assets
Loss on disposal of assets
(Revaluation) Devaluation of investment to market value
Unrealised foreign exchange (gains) losses
Change in assets and liabilities:
Decrease (Increase) in receivables
Decrease (Increase) in other assets
Increase/(decrease) in trade and other creditors
Net cash outflow from operating activities
(b) For the purpose of the Statement of Cash Flows, cash includes cash on hand, at bank,
deposits and bank bills used as part of the Company’s cash management function. The
Company does not have any unused credit facilities.
The balance at 30 June 2022 comprised:
Cash assets
Cash on hand
939,592
411,648
540,523
-
36,421
(1,933)
372,958
588,545
279,446
-
-
22,537
(1,547)
(323,179)
(702,863)
(1,607,890)
98,068
1,255,867
(331,770)
2,131,327
(3,112,770)
(3,816,722)
1,723,426
3,504,721
1,723,426
3,504,721
42
74 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
22. CONTRACT LIABILITIES
Contract Liability - Sublease1
Current
Non-current
Contract Liability - Offtake2
Balance at beginning of the year
Plus: Offtake extension (partial draw down)
Less: Unrealised foreign exchange (gain) / loss
2022
$
2021
$
405,851
1,432,259
1,838,110
242,397
1,650,481
1,892,878
2,323,423
2,547,615
689,265
253,502
-
(224,192)
3,266,190
2,323,423
1 Mt Carbine Sublease Rent prepaid to Mt Carbine Quarries Pty Ltd as per the Retreatment Operations Sublease Agreement
between Mt Carbine Quarries Pty Ltd, CRONIMET Australia Pty Ltd and Mt Carbine Retreatment Pty Ltd.
2 The Company’s wholly owned subsidiary and 50% unincorporated joint venture partner, Mt Carbine Retreatment Pty Ltd’s,
Offtake Advance recognition. The Loan is denominated in USD and the terms and repayment of this advance are governed by
the Offtake Advance Agreement between CRONIMET Asia Pte Ltd, CRONIMET Australia Pty Ltd and Mt Carbine Retreatment
Pty Ltd.
A further offtake prepayment facility of up to US $3 million was secured from the Company’s joint venture and offtake partner,
CRONIMET Asia Pte Ltd with US $1 million of this additional facility being drawn as at 30 June 2022 (refer ASX Announcement
“CAPEX Funding for Mt Carbine Expansion Secured” dated 2 May 2022). Note: The Company’s wholly owned subsidiary and
50% unincorporated joint venture partner, Mt Carbine Retreatment Pty Ltd’s, interest in the offtake prepayment equates to 50%
of the total prepayment facility.
The contract liability arrangements for the Offtake Advance are secured as follows:
▪ general security deed from Mt Carbine Retreatment Pty Ltd over its present and subsequent acquired
assets;
▪ general security deed from CRONIMET Australia Pty Ltd over all its present and subsequent acquired
assets; and
▪ mortgage from Mt Carbine Quarries Pty Ltd over mining leases ML4867 and ML4919. This mortgage
also includes an interest over “Featherweight Property” which is all other property of Mt Carbine
Quarries Pty Ltd other than the mining leases. The mortgage is limited recourse, in that it is limited to
the value of the mining leases.
The contract liability arrangement for the unincorporated joint venture between Mt Carbine Retreatment
Pty Ltd and CRONIMET Australia Pty Ltd (Joint Venture) are as follows:
▪ Deed of Cross Security between the Joint Venture parties and Mt Carbine Retreatment Management
Pty Ltd (as the manager) which secures the performance of their obligations to each other under the
Joint Venture; and
▪ General Security Deed from Mt Carbine Quarries Pty Ltd in favour of the Joint Venture parties over
all present and after acquired property of Mt Carbine Quarries Pty Ltd including its rights under the
Mining Leases.
43
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
23. OTHER BORROWINGS
Unsecured at amortised cost
Principal
Accrued interest
EQ Resources Limited Annual Report 2022
75
2022
$
2021
$
1,500,000
23,336
1,523,336
-
-
-
A 6-month unsecured loan facility was provided by a related party of the Group, Director and shareholder,
Zhui Pei Yeo, at an interest rate of 8% per annum charged on the outstanding loan balance. The
repayment of this loan was subsequently extended to July 2023 hence its classification as a non-current
liability in the Balance Sheet.
24. LEASES
Right-of-use assets
Balance at 1 July 2021
Additions:
- Plant & equipment
- Motor vehicle
Disposals
Depreciation charge for the year
Balance at 30 June 2022
Lease Liability - Maturity Analysis
Less than 1 year
1 to 5 years
5+ years
Amounts Recognised in profit or loss
Interest on lease liabilities
Expenses relating to short-term leases
Amounts recognised in statement of cash flows
Total cash outflow for leases
25. CORPORATE INFORMATION
2022
$
2021
$
1,118,930
1,225,390
1,269,864
129,047
(11,749)
(486,129)
2,019,963
57,066
-
(163,526)
1,118,930
665,754
1,335,829
-
268,167
681,140
-
2,001,583
949,307
93,238
-
93,238
29,425
-
29,425
119,007
10,523
The Financial Report of the Group for the year ended 30 June 2022 was authorised for issue in
accordance with a resolution of the Directors on 30 September 2022.
EQ Resources Limited is a company limited by shares and incorporated in Australia. Its shares are
publicly traded on the Australian Securities Exchange under the ticker code “EQR”.
26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company’s principal financial instruments comprise cash, short term deposits and available for sale
investments.
The main purpose of these financial instruments is to finance the Company’s operations. The Company
has various other financial assets and liabilities such as trade receivable and trade payables, which arise
directly from its operations. It is, and has been throughout the entire period under review, the Company’s
policy that no trading in financial instruments shall be undertaken.
44
76 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
The main risks arising from the Company’s financial instruments are cash flow interest rate risk and equity
price risk. Other minor risks are summarised below. The Board reviews and agrees policies for managing
each of these risks.
(a) Price Risk
The Group is not exposed to equity securities price risk.
(b) Liquidity Risk
The Company manages liquidity risk by maintaining sufficient cash reserves and marketable securities
and through the continuous monitoring of budgeted and actual cash flows.
Contracted Maturities for Payables
2022
Trade and other payables
Lease liabilities
Convertible note interest payable
Total
2021
Trade and other payables
Lease liabilities
Total
<6
Months
6 - 12
Months
1 - 5
Years
Total
5,026,531
277,397
280,000
-
-
5,026,531
388,357
1,335,829
2,001,583
-
-
280,000
5,583,928
388,357
1,335,829
7,308,114
3,647,525
-
-
3,647,525
111,736
156,430
681,140
949,307
3,759,261
156,430
681,140
4,596,832
(c) Fair Value of Financial Instruments
The following tables detail the consolidated entity’s fair values of financial instruments categorised by the
following levels:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices).
Level 3:
Inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
Consolidated – 2022
Assets
Ordinary shares
Total assets
Total liabilities
Consolidated – 2021
Assets
Ordinary shares
Total assets
Total liabilities
Level 1
Level 2
Level 3
5,543
5,543
-
Level 1
3,610
3,610
-
-
-
-
-
-
-
Level 2
Level 3
-
-
-
-
-
-
Total
5,543
5,543
-
Total
3,610
3,610
-
There were no transfers between levels during the financial year.
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying
amounts of trade receivables and trade payables are assumed to approximate their fair values due to
their short-term nature.
45
EQ Resources Limited Annual Report 2022
77
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the
current market interest rate that is available for similar financial instruments.
(d) Commodity Price Risk
The Company is exposed to commodity price risk. This risk arises from its activities directed at exploration
and mining development of mineral commodities. If commodity prices fall, the market for companies
exploring and/or mining for these commodities is affected. The Company does not currently hedge its
exposures.
(e) Fair Values
For financial assets and liabilities, the fair value approximates their carrying value. No financial assets
and financial liabilities are readily traded on organised markets in standardised form, other than listed
investments. The Company has no financial assets including derivative financial assets and liabilities
where the carrying amount exceeds the net fair values at reporting date. The Company’s receivables at
reporting date comprise of GST input tax credits refundable by the Australian Taxation Office and other
receivables. The balance (if any) of receivables comprises prepayments (if any). The credit risk on
financial assets of the Company which have been recognised on the Statement of Financial Position is
generally the carrying amount.
(f) Capital Risk Management
The consolidated entity’s objectives when managing capital are to safeguard its ability to continue as a
going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to
maintain an optimum capital structure to reduce the cost of capital. Consistently with others in the industry,
the consolidated entity monitors capital on the basis of the gearing ratio. This ratio is calculated as net
debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents.
Total capital is calculated as “equity” as shown in the Statement of Financial Position plus net debt. The
gearing ratio as at 30 June 2022 was 41% as opposed to 9% at 30 June 2021. The increase in the ratio
is predominately due to the Company financing its capital growth initiatives for the Mt Carbine Tungsten
Project via debt rather than equity.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce
debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or company
was seen as value adding relative to the current parent entity’s share price at the time of the investment.
The consolidated entity continues to evaluate corporate and exploration opportunities within the new
economy and critical minerals sector.
The consolidated entity is subject to certain financing arrangements and covenants and meeting these is
given priority in all capital risk management decisions. There have been no events of default on the
financing arrangements during the financial year.
The capital risk management policy remains unchanged from the 30 June 2021 Annual Report. The
consolidated entity is not subject to externally imposed capital requirements.
46
78 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
27. SHARE BASED PAYMENTS
(a) Expenses arising from share-based payment transactions
Total expenses rising from share-based payment transactions recognised during the period were as
follows:
FV at
Grant Date
Expensed /
Capitalised in
prior years
Lapsed /
Forfeited
Expensed
2022 Year
Capitalised
2022 Year
AASB 2
Not yet
Expensed
Options issued to directors
308,454
23,242
-
216,216
-
68,996
Options issued to employees /
consultants
1,550,511
Total share-based payments
1,858,965
759,589
782,831
20,612
20,612
195,432
506,764
68,114
411,648
506,764
137,110
The fair value of options issued during the year were calculated by using a black-scholes pricing model
applying the following inputs:
Grant date
Number issued
Share price at grant date
Exercise Price
Life of options (years)
Expected share price volatility
Weighted average risk-free interest rate
Fair value per option
Vesting conditions
Employees /
Consultants
Employees /
Consultants
Employees /
Consultants
25/01/2022
25/01/2022
17/09/2021
1,000,000
1,000,000
25,000,000
$0.060
$0.060
2 Years
85.943%
1.290%
$0.060
$0.060
2 Years
85.943%
1.290%
$0.048
$0.065
2 Years
95.000%
0.010%
$0.03019
$0.03019
$0.02000
None
12 Months
Service1
None
1 Anniversary of issue date, subject to continuous employment by the Company to the vesting date.
Each option provides the right for the option holder to be issued one fully paid share in the Company,
upon payment of the exercise price of each option once vesting conditions have been met.
Historical volatility has been used as the basis for determining expected share price volatility as it is
assumed that this is indicative of future trends, which may not eventuate.
For service provider options the value of the service rendered was unable to be measured reliably and
therefore the value was measured by reference to the fair value of the options issued.
(b) Options Issued
The following table details the number and movements in options issued as employment incentives to
Key Management Personnel during the year.
Outstanding at the beginning of the year
42,000,000
2022
Number
Granted
Forfeited / cancelled
Exercised1
Expired
Outstanding at year end
Exercisable at year end
-
-
(5,000,000)
-
37,000,000
21,000,000
2022
WAEP
0.058
-
-
0.052
-
0.059
0.058
2021
Number
5,000,000
37,000,000
-
-
-
42,000,000
10,000,000
1 Options are deemed exercised upon the resignation of Key Management Personnel.
(c) Performance Rights / Options lapsed during the reporting period
There were no Performance rights issued during the reporting period.
2021
WAEP
0.052
0.059
-
-
-
0.058
0.043
47
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
28. EMPLOYEE BENEFITS
Current
Annual leave benefits
Long service leave benefits
Non-current
Long service leave benefits
Total employee benefits
EQ Resources Limited Annual Report 2022
79
2022
$
2021
$
263,736
18,661
282,397
15,418
297,815
182,840
-
182,840
24,112
206,952
29. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
Adoption of New Standards and Interpretations
Changes in accounting policies on initial application of Accounting Standards
From 1 July 2021, the Group has adopted all the standards and interpretations mandatory for annual periods
beginning on or after 1 July 2021 Adoption of these standards and interpretations did not have any effect on the
statements of financial position or performance of the Group. The Group has not elected to early adopt any new
standards or amendments.
30. PARENT ENTITY INFORMATION
The following information relates to the parent entity, EQ Resources Limited. The information presented
has been prepared using accounting policies that are consistent with those presented in Note 1.
ASSETS
Current assets
Non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
FINANCIAL PERFORMANCE
Profit (loss) for the year
Other comprehensive income/(loss) for the year
Total comprehensive profit/(loss)
Contingent Liabilities
2022
$
2021
$
12,969,887
8,878,042
19,921,558
17,054,241
32,891,445
25,932,283
4,236,606
5,347,157
9,583,763
1,226,826
3,823,821
5,050,647
23,307,682
20,881,636
22,192,755
20,603,965
2,848,576
(1,733,649)
782,831
(505,160)
23,307,682
20,881,636
(1,228,489)
(2,000,234)
1,933
1,547
(1,226,556)
(1,998,687)
As at 30 June 2022 and 30 June 2021 the Company had no contingent liabilities other than those
disclosed in Note 16.
48
80 EQ Resources Limited Annual Report 2022
Notes to the Consolidated Financial Statements continued
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
Contractual Commitments
As at 30 June 2022 and 30 June 2021 the Company had no contractual commitments.
Guarantees Entered into by Parent Entity
As at 30 June 2022, the Company has not provided any financial guarantees.
31. OPERATING SEGMENTS
Segment Information
Identification of Reportable Segments
During the 2022 financial year, the Company operated principally in one business segment being mineral
exploration and in two geographical segments being Queensland and New South Wales, Australia.
The Company’s revenues and assets and liabilities according to geographical segments are shown below.
June 2022
Total
$
Queensland
$
NSW
$
Total
$
June 2021
Australia
$
NSW
$
REVENUE
Revenue & Other Income
6,231,263
6,231,263
Total segment revenue
6,231,263
6,231,263
RESULTS
Profit / (loss) before income tax
(6,063,051)
(6,063,051)
Income tax
-
-
Profit/ (loss) after income tax
(6,063,051)
(6,063,051)
-
-
-
-
-
5,418,700
5,418,700
5,418,700
5,418,700
(4,574,191)
(4,574,191)
-
-
(4,574,191)
(4,574,191)
-
-
-
-
-
ASSETS AND LIABILITIES
Assets
Liabilities
31,275,434
30,914,939
360,495
25,745,819
25,568,239
177,580
(16,958,216)
(16,958,216)
-
9,020,085
9,020,085
-
32. RELATED PARTY DISCLOSURES
(a) The Company’s main related parties are as follows:
Key management personnel:
Any person(s) having authority and responsibility for planning, directing and controlling the activities
of the Company, directly or indirectly, including any director (whether executive or otherwise), are
considered key management personnel.
49
EQ Resources Limited Annual Report 2022
81
ANNUAL Report June 2022
Notes to the Consolidated Financial Statements
The Directors and Officers in office during the year were as follows:
• Oliver Kleinhempel
(Sonnenalee Investments Limited)
Appointed Non-executive Director, 12 August 2019
Appointed Non-executive Chairman, 24 April 2020
• Stephen Layton
(Bodie Investments Pty Ltd)
• Richard Damon Morrow
(Yavern Creek Holdings Pty Ltd)
Appointed Non-executive Director, 14 November 2017
Appointed Non-executive Director, 16 March 2021
• Zhui Pei Yeo
Appointed Non-executive Director, 12 August 2019
(Whitfords Holdings Investments PtyLtd)
• Kevin Bruce MacNeill
Appointed Chief Executive Officer, 1 April 2021
For details of disclosures relating to key management personnel, refer to Key Management Personnel
disclosures Directors and Remuneration Report.
(b) Transactions with other related parties:
Transactions between other related parties are on normal commercial terms and conditions no more
favourable than those available to other parties unless otherwise stated.
There were no transactions with other related parties during the reporting period.
(c) Receivable from and payable to related parties
There were no trade receivables from nor trade payables to related parties at the current and
previous reporting date.
(d) Loans to/from related parties
During the reporting period, the Group obtained a $1.5 million, 6-month unsecured loan facility from
Director and shareholder, Zhui Pei Yeo, at an interest rate of 8% per annum (refer ASX
Announcement “CAPEX Funding for Mt Carbine Expansion Secured” dated 2 May 2022). The
repayment of this loan was subsequently extended to July 2023 hence its classification as a non-
current liability in the Balance Sheet.
There were no loans to or from related parties as at the previous reporting date.
(e) Parent entity
EQ Resources Limited is the parent entity.
(f) Subsidiaries
Interests in subsidiaries are set out in Note 18.
50
82 EQ Resources Limited Annual Report 2022
ANNUAL Report June 2022
Directors’ Declaration
Directors’ Declaration
Directors’ Declaration
The Directors of the Company declare that:
1.
the Financial Statements, comprising the Statement of Profit or Loss and Other Comprehensive Income,
Statement of Financial Position, Statement of Cash Flows, Statement of Changes in Equity and
accompanying Notes, are in accordance with the Corporations Act 2001 and:
a) comply with Accounting Standards, which, as stated in the accounting policy Note 1, to the financial
statements, constitutes explicit and unreserved compliance with international Financial Reporting
Standards (IFRS); and
b) give a true and fair view of the financial position as at 30 June 2022 and of the performance for the
year ended on that date of the company and consolidated group;
2.
the directors have been given the declaration required by s.295A of the Corporations Act 2001 by the
Interim Chief Executive Officer declaring that:
a)
the financial records of the company for the financial year have been properly maintained in
accordance with s 286 of the Corporations Act 2001;
b)
the Financial Statements and notes for the financial year comply with Accounting Standards; and
c)
the Financial Statements and notes for the financial year give a true and fair view; and
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 the resolution of the Board of Directors.
On behalf of the Board
Oliver Kleinhempel
Non-executive Chairman
30 September 2022
51
EQ Resources Limited Annual Report 2022
83
Auditor’s Independence Declaration
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84 EQ Resources Limited Annual Report 2022
Independent Auditor’s Report
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EQ Resources Limited Annual Report 2022
85
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86 EQ Resources Limited Annual Report 2022
Independent Auditor’s Report continued
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EQ Resources Limited Annual Report 2022
87
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88 EQ Resources Limited Annual Report 2022
ANNUAL Report June 2022
Shareholder Information
Shareholder Information
Shareholder Information
Registered Office
Level4, 96-100 Albert Road
South Melbourne VIC 3205, Australia
Phone: +61 3 9692 7222
Joint Company Secretaries
Ms Melanie Leydin and Ms Patricia Vanni De Oliveira
Shareholder Enquiries
Shareholder’s information in relation to shareholding or share transfer can be obtained by contacting the
Company’s share registry:
Automic Registry Services
Level 5/126 Phillip Street, Sydney NSW 2000
Telephone: 1300 288 664 (local), +61 2 9698 5414 (international) Website: www.automicgroup.com.au
For all correspondence to the share registry, please provide your Security-holder reference Number (SRN) or
Holder Identification Number (HIN).
Change of Address
Changes to your address can be updated online at https://www.automicgroup.com.au or by obtaining a
Change of Address Form from the Company’s share registry. CHESS sponsored investors must change their
address details via their broker.
Annual General Meeting
The Annual General Meeting will be held in Melbourne on 23 November 2022 at 2.00pm (AEST). The time
and other details relating to the meeting will be advised in the Notice of Meeting to be sent to all shareholders
and released to the ASX immediately upon dispatch.
The Closing date for receipt of nomination for the position of Director is 5 October 2022. Any nominations must
be received in writing no later than 5.00pm (Melbourne time) on 5 October 2022, at the Company’s Registered
Office.
The Company notes that the deadline for the nominations for the position of Director is separate to voting on
Director elections Details of the Director’s to be elected will be provided in the Company’s Notice of Annual
General Meeting in due course.
Corporate Governance Statement
The Company’s 2022 Corporate Governance Statement, once released to the ASX, will be available on the
Company’s website at https://www.eqresources.com.au
Annual Report Mailing List
All shareholders are entitled to receive the Annual Report. In addition, shareholders may nominate not to
receive an annual report by advising the share registry in writing, by fax, or by email, quoting their SRN/HIN.
57
EQ Resources Limited Annual Report 2022
89
ANNUAL Report June 2022
Shareholder Information
Securities Exchange Listing
EQ Resources shares are listed on the Australian Securities Exchange and trade under the ASX code EQR.
The securities of the Company are traded on the ASX under CHESS (Clearing House Electronic Sub-Register
System).
ASX Shareholder Disclosures
The following additional information is required by the Australian Securities Exchange in respect of listed public
companies. The information is current as at 8 September 2022.
Distribution of Equity Securities
Analysis of numbers of ordinary shareholders by size of holding.
Options over Ordinary
Shares
Number
of
Holders
Options
Issued
Convertible Notes
Number
of
Holders
Options
Issued
-
-
-
-
15
15
-
-
-
-
111,000,000
111,000,000
100%
-
-
-
-
3
3
-
-
-
-
4,000,000
4,000,000
100%
Ordinary Shares
Number
of
Holders
79
49
148
885
Shares
Issued
12,803
165,428
1,310,907
38,380,933
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
671
1,304,316,867
Total
Holdings less than a
marketable parcel
1,832
1,344,186,938
100%
285
1,581,436
Equity Security Holders
Twenty largest quoted equity security holders.
Position & Holder Name
1. BNP Paribas Noms Pty Ltd
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