29 October 2021 2021 Annual Report Hammer Metals Limited (ASX:HMX) (“Hammer” or “the Company”) is pleased to attach its Annual Report for the year ended 30 June 2021. For further information, please contact: Daniel Thomas Managing Director T +61 8 6369 1195 E info@hammermetals.com.au This announcement was authorised for issue by Mark Pitts, Company Secretary, Hammer Metals Limited. T (08) 6369 1195 E info@hammermetals.com.au ASX:HMX ABN 87 095 092 158 P Unit 1, 28-30 Mayfair Street, West Perth, WA 6005 hammermetals.com.au Annual Report A BN 87 095 0 92 15 8 2 02 1 ABN 87 095 092 158 BOARD OF DIRECTORS Russell Davis Non-Executive Chairman Daniel Thomas Managing Director Zbigniew Lubieniecki Non-Executive Director David Church Non-Executive Director COMPANY SECRETARY Mark Pitts PRINCIPAL AND REGISTERED OFFICE Unit 1, 28-30 Mayfair Street, West Perth, WA 6005 Telephone: Email: Website: +61 8 6369 1195 info@hammermetals.com.au www.hammermetals.com.au POSTAL ADDRESS Unit 1, 28-30 Mayfair Street, West Perth, WA 6005 2 HAMMER METALS LIMITED / Annual Report 2021 AUDITORS KPMG 235 St Georges Terrace Perth WA 6000 Australia Telephone: Facsimile: +61 8 9263 7171 +61 8 9263 7129 SHARE REGISTRY Advanced Share Registry Ltd 110 Stirling Highway Nedlands WA 6009 Australia Telephone: Facsimile: +61 8 9389 8033 +61 8 9262 3723 STOCK EXCHANGE ASX Limited Level 40, Central Park, 152-158 St Georges Terrace Perth WA 6000 ASX CODE HMX CORPORATE GOVERNANCE The Company’s corporate governance statement can be found at the following URL: www.hammermetals.com.au/company-profile/corporate-governance/ Contents Chairman’s Letter Corporate Strategy Operational Highlights Corporate Activity Operations Summary Competent Persons Statement Annual Mineral Resource Statement Tenement Interests Directors Report Auditor’s Independence Declaration Consolidated Statement Of Financial Position Consolidated Statement Of Profit Or Loss And Other Comprehensive Income Consolidated Statement Of Changes In Equity Consolidated Statement Of Cash Flows Notes To The Consolidated Financial Statements Director’s Declaration Independent Auditor’s Report ASX Additional Information C o n t e n t s 4 6 7 8 9 37 38 45 49 66 67 68 69 70 72 102 103 108 3 HAMMER METALS LIMITED / Annual Report 2021 Chairman’s Letter Chairman’s Letter It is my pleasure to present Hammer Metals Annual Report for the 2021 financial year, providing details of our continued progress against our business strategy. Dear Fellow Shareholders, Your Board’s objective is to bring wealth to our stakeholders by making a significant exploration discovery. Hammer’s directors and senior management are firmly aligned with our shareholders in the desire to successfully achieve this objective. The Company is focused on exploring its highly prospective tenement positions in two of the world’s great mineral provinces - the Eastern Goldfields of Western Australia for gold and the Northwest Mineral Province in Queensland for copper and gold. Our work in Northwest Queensland saw exploration success in late 2020 at the Trafalgar copper-gold project which formed part of the JOGMEC JV. Following this discovery and the interest shown by other Japanese mining groups, JOGMEC undertook a process whereby in August this year Sumitomo Metal Mining Oceana Pty Ltd (Sumitomo Metal Mining) stepped into JOGMEC’s shoes in the JV. Sumitomo Metal Mining’s international operations span several world class operating copper mines and it is of significant credit to the Hammer team and to the quality of the project that the company has attracted a joint venture partner with the stature of Sumitomo Metal Mining. We look forward to working productively with Sumitomo Metal Mining into the future. Exploration activity on the JV was unavoidably reduced during this changeover period however work has now ramped-up, with extensive geochemical, geophysical and drilling programs presently underway. Exploration on the 100%-owned tenements has also progressed well with significant copper-gold results returned from maiden drilling programs at Neptune and Lakeview along with several new copper and gold prospects identified through our regional mapping and sampling. Over in WA at our Bronzewing South project, RC and Aircore drilling programs have continued to return encouraging results. An exciting deep RC drilling program designed to test the conceptual down-plunge position of the 3Moz Bronzewing deposit is also anticipated to commence in October this year. Hammer has secured additional prospective tenure in the Yandal Belt to augment our holdings and as tenement applications are progressively being granted the scope of our exploration activities continues to expand. Hammer remains keen to grow the gold side of the business and to acquire additional tenure when opportunities arise. There is good reason to look forward to the year ahead with anticipation. Hammer ended the year in a strong financial position with the ability to undertake effective work on several large-scale exploration targets at both Mount Isa and Bronzewing South. The key projects and work planned are discussed in more detail in the pages ahead. Lastly, I would like to thank our supportive shareholders, our joint venture partners at Mount Isa (Sumitomo Metal Mining Oceania and Glencore) as well as our small but effective team led by Dan Thomas for their outstanding efforts during another “pandemic” year. Sincerely New target generation is an ongoing process at Hammer, and reviews of Hammer’s extensive exploration datasets both in- house and by consultants NewExco and PGN has produced a range of exciting targets to add to the project pipeline. Russell Davis Chairman With one of the best ground positions in this productive mineral region and the targets Hammer has in front of it, we are confident of adding to Hammer’s existing copper resource inventory at Kalman, Overlander, Elaine and Jubilee. 4 HAMMER METALS LIMITED / Annual Report 2021 C h a i r m a n ’ s L e t t e r HAMMER METALS LIMITED / Annual Report 2021 5 Corporate Strategy Corporate Strategy ■ Position the company for discovery, through innovative ■ Work to consolidate and improve the quality of the and focused exploration for large copper-gold and gold deposits in two of the world’s great metal provinces. Company’s tenement positions. ■ Operate safely and effectively. ■ Grow the Company’s defined JORC resources to progress to a viable mining development scenario in Mount Isa. ■ Deliver positive financial returns to shareholders. 6 HAMMER METALS LIMITED / Annual Report 2021 Operational Highlights ■ Discovery of the Trafalgar copper and gold deposit as part of our Joint Venture with JOGMEC (now Sumitomo Metal Mining). The Trafalgar discovery is part of a 4km trend of copper and gold soil and magnetic anomalies with mineralisation in drilling accompanied by magnetite. ■ Reinvigoration of Hammer’s 100% owned exploration project areas in the Mount Isa region with the successful test of mineralised copper and gold systems at Neptune and Lakeview. ■ Completed the first diamond drilling program at Bronzewing South with several high priority targets defined along the prospective corridor immediately south of the 3Moz Bronzewing mine. ■ Welcomed Sumitomo Metal Mining to the Mount Isa East Joint Venture following their purchase of JOGMEC’s interest in the Joint Venture. ■ Defined multiple new targets within Hammer’s 100% controlled tenure in the Mount Isa region. ■ Hammer continued to acquire additional new properties through tenement applications within both the Yandal and Mount Isa project areas. O p e r a t i o n a l i H g h l i g h t s 7 HAMMER METALS LIMITED / Annual Report 2021 Corporate Activity Corporate Activity The Company’s corporate activities are focussed on enhancing the capacity of our exploration team to make discoveries through adequate funding, as well as securing tenements or projects that improve the quality and potential of the Company’s exploration portfolio. During the year, the Company further enhanced its standing in both the Yandal and Mount Isa regions. In Mount Isa, the company continued to grow its portfolio with the addition of several prospective tenements in close proximity to the Company’s existing tenure. In addition to the growth in tenure, the success of the Mount Isa East JV resulted in JOGMEC selling their interest to Sumitomo Metal Mining. In the Yandal belt the Company acquired the Harrier tenements to the Southeast of the Bronzewing Gold mine. The tenements are lightly explored with a mineralised trend passing through the Harrier and Bower prospects associated with a north-northeast trending structure with historical prospecting in this area encountering zones of gold nuggets. The tenement is located on the eastern limb of the Bronzewing Anticline within 3km of the former Bronzewing Gold Mine. The company was also successful in securing several new tenement applications over prospective areas in the region. Subsequent to the year end, the Company has successfully divested its non-core early-stage Iron Ore project in Western Australia for a consideration of $325,000 and a future NSR royalty of 0.5% on all Iron Ore sales. During the period, the Company completed its first diamond drilling program at Bronzewing South with the assistance of a $150,000 Exploration Incentive Scheme (EIS) grant from the Western Australian state government testing a compelling gravity, geochemical and structural target. The Company also successfully applied for and received additional EIS funding of $52,000 towards a 9km air core drilling program at our North Orelia project. As reported in ASX releases on 23 and 29 April 2021 and 26 May 2021, the company completed a raising of $5 million at a price of 9.5c per share to existing, sophisticated and institutional investors, with a Share Purchase Plan raising an additional $1 million from existing shareholders. The company is well funded for aggressive and extensive exploration programs in the Mount Isa and Yandal regions for the year ahead. The HMXOD listed options expired on 30 September 2020, with 187,820,778 of the quoted options being exercised. This represented over 98% of the total number of quoted options on issue. The exercise of these options at 3 cents each raised over $5.6 million for the Company. Management actively interacts with the investment and exploration community. The Company’s website (www.hammermetals.com. au) provides additional project and corporate information and access to previous announcements. 8 HAMMER METALS LIMITED / Annual Report 2021 Mount Isa Project (Queensland) The Company is an active mineral explorer in the Mount Isa region, focused on discovering large copper-gold deposits of the Ernest Henry style and has a range of prospective targets at various stages of testing. Through its wholly owned subsidiaries, the Company holds a strategic tenement position covering over 2,100km2 with 100% interests in the Kalman (Cu-Au-Mo-Re) deposit, the Overlander North and Overlander South (Cu-Co) deposits, the Elaine-Dorothy (Cu-Au) deposit and a 51% interest in the Jubilee (Cu-Au) deposit. The ground position is focused on major regional-scale structural zones and extends for over 100km from Mary Kathleen in the north to the Tick Hill area in the south. The Company’s discovery of the Trafalgar copper-gold deposit as part of the Mount Isa East Joint Venture was the highlight of the year with a reinvigoration of our exciting and advanced base metals prospects in Mount Isa. The Trafalgar trend is highly prospective with numerous mineralised targets appearing along a prospective trend that runs for 14km from the south of Trafalgar through to the Elaine (100% HMX) and the Jubilee (51% HMX) copper-gold deposits. The significant mineralisation recently intercepted at Neptune and Lakeview on Hammer’s 100% owned tenure demonstrates the potential along this trend to contribute additional resources to Hammer’s portfolio. Significant market interest in the Trafalgar copper-gold discovery resulted in our JV partner, JOGMEC, receiving unsolicited offers for their position in the Joint Venture. This culminated in JOGMEC selling their interest in the Mount Isa East Joint Venture to global base metal producer and developer Sumitomo Metal Mining. In addition to exploration activities at the Mount Isa East JV, the Company continued to advance its own prospects within the Mount Isa region. Copper and gold prospects located within a 25km radius of Kalman were prioritised for further evaluation, with 6 targets areas advancing to drill testing during the year – Lakeview, Kalman West, Overlander, Kings/Charlotte, Neptune and Serendipity. With defined copper-gold resources at Kalman, Overlander, Elaine and Jubilee and significant mineralisation being discovered at Trafalgar, Lakeview and Neptune, Hammer is focussing on the expansion of its mineral inventory with a view to advancing the company to become a future base metal miner. Exploration also continued on Hammer’s gold prospects in Mount Isa with the advancement of exploration efforts in the Tick Hill region. Several areas have been identified for further geochemical, geophysical and field mapping activities with drilling targets to be generated during the coming year. O p e r a t i o n s S u m m a r y Mount Isa Project Locations 9 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Copper-Gold Exploration - Kalman and Surrounds ▲ Kalman Deposit The Kalman Deposit contains 360kt of Copper Equivalent Metal. The Indicated and Inferred Mineral Resource at Kalman stands at 20Mt at 0.61% Cu, 0.14% Mo, 0.34g/t Au and 3.7g/t Re (1.8% CuEq) (refer ASX announcement 27 September 2016). The deposit remains open down plunge and with a molybdenum grade of 0.14%, Kalman is one of the highest-grade molybdenum resources in the world. Kalman is Hammer’s most advanced prospect with significant mineral inventory. It is near Hammer’s other JORC compliant resources at Elaine, Jubilee (51% HMX) and Overlander as well as the Company’s lead exploration projects at Trafalgar, Lakeview and Neptune. All are located within 30km of the main highway between Mount Isa and Cloncurry. Hammer continues to advance its exploration efforts through this region with the aim of defining an appropriate resource that will enable a future development of the Kalman project. Kalman Deposit Block Model (CuEq) (See ASX announcement 27 September 2016) 10 HAMMER METALS LIMITED / Annual Report 2021 Copper-Gold Exploration - Kalman and Surrounds ▲ Kalman West Kalman West is located approximately 1km west of the Kalman Deposit. The prospect contains a multi-element soil anomaly partially coincident with a zone of graphitic sediments and a correlating VTEM anomaly. area has the potential to host a high-grade gold deposit. The sample also contained more than 96 ounces of Ag which is the upper detection limit for the method utilised. The zone has been previously drilled by Hammer with noted zones of lead, zinc and gold anomalism. The anomaly also aligns with the Magneto-Telluric anomaly that was identified during Hammer’s 2020 Queensland government CEI funded survey. Recent prospecting in the area delineated a thin quartz vein with visible gold. A 44,800g/t Au analysis of this vein indicates the In a further test of this anomalous zone, Hammer added two holes (for 188m) to the drilling program. This drilling was completed in addition to the initial planned program which completed a 299m hole drilled targeting a deeper Magneto-telluric (“MT”) and Versatile Time Domain Electromagnetic (“VTEM”) response. O p e r a t i o n s S u m m a r y Example of visible gold samples obtained from a vein at Kalman West. Lab Analysis of a sample from this vein reported 4.48% Au and in excess of 96oz per tonne Ag. Photograph width is 6cm (See ASX announcement 26 July 2021) 11 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Plan of the Kalman West Prospect (see ASX announcement 14 October 2021) 12 HAMMER METALS LIMITED / Annual Report 2021 Northern Minerals Hub –Lakeview, Neptune, Jubilee (51%), Elaine, Blackrock and Sunset ▲ Lakeview The Lakeview prospect is marked by historical workings along an approximate 350m strike length. Production records indicate that the former prospect was worked in the 1960’s and early 1970’s with 1,213 tons of ore extracted at a 16% Cu grade. The lode forms a distinctive sigmoidal shape with shafts being present on the long limbs of the prospective structure. The aim of this follow-up drilling was to determine whether a Cu- Au resource could be defined at Lakeview to add to Hammer’s existing mineral resource inventory. At the time of this report, assays from 3 of the 9-hole follow-up program have been received. Significant intercepts from Lakeview includes: O p e r a t i o n s S u m m a r y The initial four-hole (300m) program was successful in delineating mineralisation and a second nine-hole (1080m) program was completed to further investigate mineralisation at depth (refer to ASX announcement dated 22 June 2021 and 14 October 2021). ■ 10m at 1.97% Cu and 0.42g/t Au from 23m in HMLVRC003 including; o 2m at 4.58% Cu and 0.95g/t Au from 26m; and ■ 8m at 1.97% Cu and 0.24g/t Au from 42m in HMLVRC001 including; o 5m at 2.9% Cu and 0.32g/t Au from 43m in; ■ 17m at 1.05% Cu and 0.39g/t Au from 29m in HMLVRC004 including; o 8m at 1.82% Cu and 0.76g/t Au from 38m. ■ 18m at 1.7% Cu and 0.49g/t Au from 61m in HMLVRC005, including; o 5m at 4.17% Cu and 1.04g/t Au from 61m; Further attractive exploration targets continue to evolve in close proximity to the Lakeview target with a number of prospective surface features mapped, accompanied by high grade copper and gold rock chips. These targets will form part of Hammer’s upcoming Reverse Circulation drilling program. Lakeview eastern shaft which records indicate is approximately 28m deep View of Hammer’s Mount Isa Northern Hub Copper Resources and Prospects 13 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Trafalgar Trend extending into Hammer’s 100% owned project areas showing the location of Pearl, Lakeside, Smoko Gossan and Lakeview prospects approximately 7km to the north of Trafalgar (See ASX announcement 9 March 2021) 14 HAMMER METALS LIMITED / Annual Report 2021 O p e r a t i o n s S u m m a r y 15 Lakeview Plan view showing the location of the initial and follow-up drilling program (See ASX announcement 14 October 2021) HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Long section looking north through the Lakeview Prospect (See ASX announcement 14 October 2021) Comparison of quartz-sulphide mineralisation from Lake View surface dumps (left) with sieved chips from HMLVRC001, interval 44-45m assayed at 4.65% Cu and 0.52g/t Au (right) (See ASX announcement 22 June 2021) 16 HAMMER METALS LIMITED / Annual Report 2021 Northern Minerals Hub –Lakeview, Neptune, Jubilee (51%), Elaine, Blackrock and Sunset ▲ Lady Rose (Neptune) The Lady Rose prospect is located within the Neptune project area and is approximately 2km to the west of Trafalgar in an area of complex magnetic anomalism with multiple copper prospects. Mineralisation is associated with magnetite alteration and shows strong similarities to mineralisation at Trafalgar, Black Rock and the Jubilee Cu-Au resource. This style of mineralisation and alteration is typical of IOCG systems in the Mt Isa region. Hammer completed three drill holes at the prospect for a total of 728m with the aim of extending known mineralisation to the north, whilst also looking to test under previous workings at the Lady Rose Extended and Jola Rose prospects. These two prospects are characterised by small scale shafts and workings and have not been previously drilled. Significant intercepts from drilling include (see ASX announcement 26 July 2021): ■ 100m at 0.48% Cu and 0.18g/t Au from 173m (HMLRRC002) including o 3m at 2.23% Cu and 0.2g/t Au from 185m o 3m at 3.09% Cu and 1.4g/t Au from 198m; and o 5m at 2.21% Cu and 0.37g/t Au from 234m ■ 66m at 0.32% Cu and 0.07g/t Au from 33m (HMLRRC003) including o 2m at 1.92% Cu and 0.42g/t Au from 33m Down hole electromagnetic surveys (“DHEM”) were completed on holes HMLRRC002 and HMLRRC003 with the data from this survey currently being processed by Hammer’s geophysical consultants. This prospect along with others defined through mapping, prospecting, geochemical and geophysical review shape as exciting targets for Hammer in the 2022 Financial Year. Cross section through HMLRRC002 (See ASX announcement 26 July 2021) O p e r a t i o n s S u m m a r y Drilling at Lady Rose Extended 17 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Copper-Gold Exploration - Malbon Area – Kings-Charlotte (100% HMX) The Kings and Charlotte region is characterised by zones of outcropping copper, cobalt and gold mineralisation with numerous anomalous soil geochemical responses. The majority of this project area has a thin layer of cover masking potential mineral systems. Drilling during the year tested outcropping features which consist of two main structural directions. Hammer drilled six holes for 660 meters. Holes 1, 5 and 6 tested the Charlotte structure and holes 2, 3 and 4 tested the Kings structure. All holes intersected anomalous responses and significantly the prospects have a strong gold response relative to copper. Elevated cobalt was also intersected at Charlotte. Significant results included (see ASX announcement 26 July 2021): ■ 3m at 3.89% Cu and 0.56g/t Au from 18m in HMAKRC004 including o 1m at 10.1% Cu and 1.52g/t Au; ■ 1m at 2.13g/t Au from 9m in HMAKRC003; and ■ 10m at 0.58% Cu and 0.12% Co from 19m and 1m at 1.59% Cu from 36m in HMAKRC005. Hammer’s tenements at Malbon contain multiple repeats of this structural regime, in places displaying strong geochemical anomalism. Hammer intends to further delineate and rank these zones through use of surface prospecting and potentially geophysical methods such as Sub-audio Magnetics (“SAM”) during the coming year. Rig on site at HMAKRC001 18 HAMMER METALS LIMITED / Annual Report 2021 Southern Hub - Gold Focussed Exploration ▲ Tick Hill Region Hammer’s first detailed work program in the Tick Hill region was designed to provide an initial assessment of the gold potential of Hammer’s tenements. Approximately 1000 soil samples from seven zones were collected and analysed via a partial digest method. (See ASX release 23 September 2020) Highlights from Hammer’s partial leach gold results include; ■ A program high, gold value of 13ppb is located on eastern side in the main Zone 4. ■ Continuous and broad Au anomalies are located within the Zone 2 and Zone 6 with both anomalies trending more than 1km long. The maximum Au value 5.5ppb was recorded in Zone 6 and 6.0ppb Au in Zone 2. It is believed that Zone 2 could have similar overall lithological and magnetic signature to position of Tick Hill, on the eastern side of quartz-feldspar intrusive. In comparison, the Tick Hill deposit was discovered by a joint MIM and Carpentaria Exploration Company Pty. Ltd. team in October 1989. Follow up work on a bulk cyanide leach (“BCL”) sampling anomaly of 6.9 ppb gold in a stream draining the Tick Hill deposit culminated in the drilling of early discovery holes. Several gold anomalous zones were identified by the sampling. Field reviews of the area of interest have commenced and will continue with the aim of delineating drill ready targets for the coming year. O p e r a t i o n s S u m m a r y Tick Hill soil sampling area Other Commodities As previously reported the significant potential of Hammer’s tenement holding for several critical minerals including cobalt, iron ore, potash, graphite, manganese and rare earth elements. Hammer continues to assess the geological merits of these prospects and remains open to considering partners to explore these highly attractive prospects within Hammer’s large tenement holding. 19 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Mount Isa East Joint Venture (Sumitomo Metal Mining earning 60% Interest) The Joint Venture area covers sections of the Even Steven, Mount Philp, Dronfield West and Malbon target areas covering approximately 290km2 of Hammer’s 2,100km2 Mount Isa Project. The areas are considered highly prospective for the discovery of Iron Oxide Copper Gold deposits (“IOCG”). The Joint Venture was highly successful during its second year in operation with the discovery of the Trafalgar copper and gold deposit. Following this discovery JOGMEC elected to sell their rights and obligations in the Joint Venture to Sumitomo Metal Mining Oceania (SMMO), a subsidiary of Sumitomo Metal Mining. SMMO now holds the right to earn a 60% interest in the Joint Venture. The future expenditure by SMMO combined with the historical expenditure by JOGMEC will need to exceed $6,000,000 by 31 March 2024 to earn the 60% interest in the project. During this period, Hammer will continue to manage and operate the exploration program. Even Steven Area The Even-Steven area comprises three advanced copper/gold Targets encompassing the Trafalgar, Pearl and Even-Steven prospects. Two of these three prospects were drilled during the period culminating in the discovery of the copper and gold deposit at Trafalgar. Aerial view of the Trafalgar prospect looking south. 20 HAMMER METALS LIMITED / Annual Report 2021 ▲ Trafalgar Trafalgar is a north-northeast trending copper-gold prospect located on the regional scale Fountain Range Fault. ■ 15m at 1.15% Cu and 0.35g/t Au from 92m in HMTRRC003 ■ 15m at 0.63% Cu and 0.15g/t Au from 29m in HMTRRC004 ■ 16m at 0.88% Cu and 0.34g/t Au from 192m in HMTRRC006, including: o 9m @ 1.28% Cu and 0.5g/t Au from 195m; ■ 19m at 0.70% Cu and 0.17g/t Au from 117m in HMTRRC007, including O p e r a t i o n s S u m m a r y The Trafalgar deposit remains open to the north and at depth with new zones of mineralisation being discovered to the west of the deposit. Evidence of a fault offset to the south of the deposit was identified and further testing of this zone was not possible with the finite budget and drilling program agreed during the JOGMEC sales process. The southern extension will be considered as a potential target zone in the upcoming drilling program. Small scale historical mining occurred at the prospect until the Mining Lease was abandoned in early 2017. The Trafalgar Mine had been held under a Mining Lease by a non-related party since the late 1970’s and as a result, the two Joint Venture holes drilled in December 2020 were the first known exploration drill holes conducted on the property. The two holes were drilled on lines approximately 140m apart as an initial test of the width and tenor of the prospect. Both holes intersected copper mineralisation with a significant gold credit. Significant intersections included (refer ASX announcement 20 January 2021): ■ 55m at 1.12% Cu and 0.30g/t Au from 119m including 16m at 1.77% Cu and 0.49g/t Au from 149m in HMTRRC001 with maximum individual grades of 1.96g/t Au and 3.2% Cu; and ■ 60m at 1.04% Cu and 0.25g/t Au from 64m including 6m at 2.38% Cu and 1.45g/t Au from 91m in HMTRRC002 with maximum individual of 3.22g/t Au and 7.58% Cu. Additional drilling was completed at Trafalgar in February and June with an additional 7 holes completed for 1256m. The aim of the additional drilling program at Trafalgar was to test along strike and below previous intersections in addition to testing for mineralised zones in the hanging wall. Significant intersections from these two programs were (refer ASX announcement 24 September 2021): Example of sulphide mineralisation encountered in drilling at Trafalgar (HMTRRC001, 151-152m (refer ASX announcement 20 January 2021) 21 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Even Steven Area ▲ Trafalgar Trend The Trafalgar mineralised trend is defined by extensive copper-gold soil anomalism and a strong magnetic ridge with multiple historic workings over a strike length of over 3km. The trend has had very little systematic exploration completed. The scale of the mineralised system and the nature of the alteration and mineralisation present provides encouragement for locating new copper-gold zones along the trend. Apart from Trafalgar, this trend is not tested by drilling. Recent field mapping has identified new outcropping zones of copper mineralisation within the trend. Alteration, the presence of magnetite and elevated light rare earth elements (with individual maximum grades of 0.20% Ce and 0.16% La in HMTRC006, refer ASX announcement 24 September 2021) are all indicative of an IOCG system. Geological mapping indicates the presence of a red rock- magnetite alteration zone which spans the central mineralised trend and extends along strike. At a broader scale the Trafalgar trend is marked by attenuated magnetic and conductive highs which highlight the target zone for immediate exploration and future drill testing. Ivanhoe Copper Outcrop (left) and Lady Northcote Copper Oxide Outcrop (right) Old shaft at Victory, to the south of Trafalgar (left) and massive sulphides from these workings (right) (See ASX announcement 9 February 2021) Trafalgar Trends and Prospects (background is RTP magnetic image) 22 HAMMER METALS LIMITED / Annual Report 2021 Mt Philp Area ▲ Shadow, Toby and Charlie Drilling was also conducted at the Shadow (2 holes), Alpha, Juliett, Bravo and Charlie prospects. At Shadow, two holes for 399m were drilled approximately 180m north of HMSHDD001. The aim of the holes was to test the northern extent of the Shadow prospect in the area with the highest magnetic response. The drilling encountered low levels of Cu and Au anomalism (refer ASX announcement 20 January 2021). The Shadow prospect occurs at the northern end of a 4.7km long anomalous trend marked by elevated Cu, Au and magnetic responses. The Joint Venture continues to assess the potential to drill targets further south along this trend. A strong coherent gold anomaly to the north of the Shadow trend was identified through the soil geochemical surveys completed by the Joint Venture. A follow up soil sampling program has been initiated over this area with the intention of defining a drill ready gold target to the north of the Shadow prospect. Three holes were drilled for 792m at the Alpha, Bravo and Juliett prospects. At the Bravo prospect HMTBRC002 tested a subvertical EM plate defined in mid-2020. This hole intersected graphite rich carbonaceous metasediment which is likely the source of the conductive response. HMTBRC001 and HMTBRC003 were designed to test anomalous soil responses at the Juliett and Alpha prospects. HMTBRC003 intersected (refer ASX announcement 20 January 2021): ■ 5m at 0.18% Cu and 0.11g/t Au from 106m and 1m @ 0.21% Cu and 0.14g/t Au from 131m At Charlie, the Joint Venture drilled one hole (HMCHRC001) to test beneath a Cu-Zn-Ag gossanous zone. The hole intersected a weakly mineralised zone of sulphide mineralisation from 51m with mineralisation of 1m at 0.3% Cu, 48.7g/t Ag and 0.3% Zn over 1m recorded. O p e r a t i o n s S u m m a r y Location of Mt Isa East Joint Venture prospects drilled in late 2020 and early 2021. 23 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Shadow trend and Fountain Range soil sampling program extents (refer ASX announcement 9 December 2020) 24 HAMMER METALS LIMITED / Annual Report 2021 Malbon and Dronfield Area Soil sampling was conducted over the Mount Isa East JV Dronfield and Malbon project areas. The aim of the sampling program was to investigate magnetic and gravity anomalies. The assays for these programs consisted of a mix of 4 acid digest and partial leach soil sampling. The broad spaced programs have defined zones of anomalism which will now be examined in further detail with closer spaced soil surveys during the FY22 year. Dronfield and Malbon soil sampling program (See ASX announcement 26 July 2021) O p e r a t i o n s S u m m a r y 25 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Trafalgar Trend extending into Hammer’s 100% owned project areas showing the location of Pearl, Lakeside and Smoko Gossan Prospects approximately 7km to the north of Trafalgar 26 HAMMER METALS LIMITED / Annual Report 2021 Yandal Gold Projects (WA) Hammer holds a 100% interest in approximately 290sqkm of tenements, located within the Yandal greenstone belt in Western Australia. The Company acquired these projects in 2019 and has been busy exploring and expanding its footprint in a prime gold exploration region, located, close to existing infrastructure. The Company remains keen to increase its exploration footprint in this prospective region. There are three main target areas: 1. The Bronzewing mineralised corridor extending for 5km to the south of the 2.3 Moz Bronzewing Mine. This area is considered highly prospective due to the area’s disrupted exploration history and extensive blanketing by barren transported cover. Previous drilling highlighted several anomalous zones within the Bronzewing corridor which have received limited follow-up with deeper RC and diamond drilling. The previous drilling only tested for north-south lode orientations which did not consider the inherent structural complexity and variable orientation of the Bronzewing lodes. O p e r a t i o n s S u m m a r y 2. The Orelia trend shear zones extending for 15km along strike to the north of the Lotus pit and adjacent 1Moz Orelia gold deposit. RAB interface and Aircore drilling to an average depth of <30m along the trend outlined numerous bottom- of-hole gold anomalies (0.1-1g/t Au) some of which have not been tested by deeper RC or diamond drilling. 3. The Kens Bore quartz vein target is located 11km southeast of Bronzewing. Several strongly anomalous gold results in rock chips coinciding with a 3km long gold-in-soil anomaly at a granite – basalt contact marked by quartz veining. During the year the Company completed a detailed reverse circulation program (3,442m) targeting prospective gold anomalies at North Orelia and Bronzewing South whilst also drill testing a prospective electromagnetic anomaly at Ken’s Bore. Hammer also completed ~1,202m of diamond drilling in two holes targeting gravity low features approximately 5km south of the Bronzewing gold mine. An extensive 9,700m aircore program of 309 holes at several North Orelia geochemical targets was also completed during the period. Yandal Gold Project Areas Bronzewing South Tenements 27 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Bronzewing South Gold Project ▲ Bronzewing South The diamond drilling program at Bronzewing South, part funded by the Western Australian Government Exploration Incentive Scheme grant, was undertaken to test two gravity low targets considered to represent potential alteration zones associated with gold mineralisation south of the Bronzewing gold mine. Results from BWSDD001 include 14m @ 0.14g/t Au from 202m. This drillhole tested the edge of the interpreted gravity anomaly and still encountered a significant zone of quartz and carbonate veining with low levels of gold mineralisation. BWSDD003 tested a similar gravity low approximately 500m to the south of BWSDD003. As with BWSDD001 vein intensity was strongest in gravity lows, however downhole gold anomalism was limited. Despite this the intersection of the quartz and carbonate veining supports Hammer’s targeting rationale and offers encouragement for other target areas within the Bronzewing south tenement. BWSDD001 212.2-216.7m. The core shows the vein styles and alteration accompanying mineralisation at Bronzewing South. This zone is accompanied by fine grained disseminated pyrite. (see ASX announcement 15 January 2021) A single RC hole targeted an intersection zone between northeast trending faults and the eastern shear. The hole encountered a broad low-grade mineralised envelope of 96m at 0.39g/t Au from 48m (see ASX announcement 15 January 2021). Peak gold grades are associated with quartz veined pyritic mafic units with an elevated magnetic response. Intercepts of interest were: ■ 17m at 1.56g/t Au from 120m in drill hole BWSRC0037, including; 1m at 19.69g/t Au from 123m The identification of these zones along with an improved understanding of the structure and stratigraphy plunging to the south of the Bronzewing deposit is assisting in defining potentially shallower targets closer to the tenement boundary. Of most interest, is the corridor that sits in an analogous position to the Bronzewing Gold mine. This corridor is defined by the Bapinmarra dolerite unit to the west and an eastern share zone. It is interpreted that within this corridor the mineralised trend is plunging at 10 to 20 degrees to the south. This target volume is traversed by several northeast trending faults which are considered contributory to the location of mineralisation at Bronzewing. Hammer has defined several targets at the intersection of these key features which will be progressively tested by a potential combination of reverse circulation and diamond drilling. 28 HAMMER METALS LIMITED / Annual Report 2021 A detailed gravity survey conducted at a 50m spacing was undertaken to extend the coverage of a previously completed survey across the immediate southern strike extension of the Bronzewing Deposit. (Refer to ASX announcement dated 13 October 2020). The survey has assisted in refining the structural framework and exploration model for the Bronzewing South prospect, outlining five target zones directly south of the original Bronzewing gold pits. These targets remain untested at depth yet sit in a favourable structural corridor with several attractive geophysical attributes. Two of the five targets were partially tested by a 2020 diamond drilling program (refer to ASX announcement dated 15 January 2021). This initial testing confirmed the location of prospective stratigraphy within the Hammer Metals project area and the presence of altered and mineralised material co-incident with a gravity low Hammer intends to target the third of these five targets located only 300m south of the Bronzewing deposit in an upcoming reverse circulation drilling program. Drill planning is complete and program organisation is underway for a late October mobilisation. O p e r a t i o n s S u m m a r y Long section looking west through the Bronzewing South area showing the five targets identified in the detailed gravity survey. Hammer plans to test the most northern anomaly in the upcoming drilling program. (See ASX announcement 9 December 2020) 29 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Bronzewing South area showing Hammer targets (See ASX announcement 25 August 2021) 30 HAMMER METALS LIMITED / Annual Report 2021 Bronzewing South Gold Project ▲ North Orelia These tenements are situated to the North of the McClure group of deposits which include the Orelia and Lotus gold deposits. The North Orelia tenements comprise of tenements E36/869, 870, 916 and 1006. In addition to our first RC program at North Orelia, Hammer tested several targets with extensive air core programs. During the year, the Company completed its first reverse circulation program at two target areas along with further air core drilling. Hammer also completed a ~9,700m aircore program in May to test several new prospects with previously untested soil geochemical targets on the northern Orelia trend. This work was partly funded by a Western Australia Government Exploration Initiative Scheme grant. O p e r a t i o n s S u m m a r y ▲ North Orelia - Target 1 The RC drilling program at Target 1 aimed to further test key structural positions below the depth of weathering along a 2km mineralisation trend that was identified through Hammer’s previous air core drilling programs. The reverse circulation program consisted of 2,111m of drilling (20 holes). Significant intercepts included (see ASX announcement 15 January 2021): ■ 8m at 4.2g/t Au from 20m in BWSRC0025 including: 1m at 27.1g/t Au from 26m; ■ 4m at 6.3g/t Au from 77m in BWSRC0028; ■ 7m at 1.2g/t Au from 85m in BWSRC0031 including1m at 3.5g/t Au from 88m; ■ 14m @ 1.87g/t Au from 67m in BWSRC018 including4m @ 6.31g/t Au from 77m; and ■ 5m at 3.5g/t Au from 25m in BWSRC0026 including:1m at 16.6g/t from 25m; ■ 7m @ 1.17g/t Au from 85m including1m @ 3.50g/t Au. ▲ North Orelia - Target 4 Target 4 is located 1km along strike to the north of Northern Star’s (ASX:NST) 1Moz Orelia Resource. Orelia and the former Lotus and Cockburn deposits are located within a fault bounded corridor and associated with regional structures such as the Lotus Fault. Hammer Metals has been progressively testing this corridor to identify specific stratigraphic units and discern major fault zones. Two RC holes for 330m were drilled to gather further geological knowledge and test the prospective stratigraphy at Target 4. This drilling confirmed the position of a semi-massive sulphide unit which is also present on the western edge of the Orelia deposits and is a stratigraphic marker for the prospective mineralised zone at Target 4. Gold mineralisation was identified in one of the holes drilled at this target with an intercept of 3m at 0.3g/t Au from 51m in BWSRC0035. The semi-massive sulphide was also anomalous for zinc. The information gathered from drilling at Target 4 highlights the corridor in which Hammer will focus future drilling programs. Example of sulphide mineralisation encountered in drilling at Trafalgar (HMTRRC001, 151-152m (see ASX announcement 20 January 2021) 31 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary North Orelia Target 1 Plan (see ASX announcement 15 January 2021) 32 HAMMER METALS LIMITED / Annual Report 2021 Bronzewing South Gold Project ▲ North Orelia -Target 2 The northern portion of Target 2 was tested by air core drilling with 47 holes for 745m. This drilling targeted the southern margin of a fractionated granite. The best result from this target was 4m at 0.19g/t Au from 8m in BWSAC0794 which was overlain by a plus 5ppb Au-in-soil anomaly. ▲ North Orelia - Target 3 Drilling at Target 3 extended the strike length of known mineralisation up to 3.2km. The 76 holes of air core drilling (2418m) targeted a shear zone with significant intercepts of (see ASX announcement 25 August 2021): ■ 4m at 0.52g/t Au from 32m in BWSAC0638A; ■ 8m at 0.21g/t Au from 40m in BWSAC0641; and ■ 4m at 0.55g/t Au from 24m in BWSAC0653. Drilling at three holes at Target 3 finished in anomalous zones of gold mineralisation – including (see ASX announcement 25 August 2021); ■ 0.15g/Au from 8m in BWSAC0736, 0.11g/t Au from 14m in BWSA0800, and 0.12g/t Au from 45m BWSAC0640 O p e r a t i o n s S u m m a r y The zone is located on the eastern margin of the Orelia mineralisation trend and is associated with elevated Arsenic, Antimony and Tellurium. ▲ North Orelia - Eastern Granite This target is located partly within a granite bordering the eastern margin of the Orelia trend where soil geochemical sampling had defined a1.1km by 300m gold anomaly. No previously drilling had been conducted over this target. Hammer Metals tested the area with 126 air core holes (3101m). Significant geochemical intercepts of 8m at 0.12g/t Au from 20m in BWSAC0621 and 4m at 0.15g/t Au from 12m in BWSAC0622 (see ASX announcement 25 August 2021) were associated with a north-northwest trending shear zone on the margin of the granite. Both holes terminated in anomalous mineralisation. Shear zones within granites are attractive targets within the Yandal Belt and, in some cases host economic mineralisation such as Northern Star’s Ramone Deposit. 33 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary North Orelia Trend Targets three and four showing significant Hammer Drilling Intercepts (Background image Magnetics) (see ASX announcement 25 August 2021) 34 HAMMER METALS LIMITED / Annual Report 2021 Bronzewing South Gold Project ▲ Ken’s Bore Two reverse circulation holes for 480m were drilled to test an EM anomaly. These holes encountered massive and semi massive sulphide with true widths of up to 50m. Intersected gold results include: ■ 11m @ 0.11g/t Au from 123m in BWSRC040; and ■ 2m @ 0.12g/t Au from 175m in BWSRC041 Significantly, the broad intervals of massive sulphide occur at the contact of an ultramafic unit that extends through the Ken’s Bore tenement. ▲ North Orelia - Eastern Granite Several nickel sulphide prospects occur in association with similar ultramafic units in the district and the presence of other untested EM anomalies along this unit upgrades the nickel potential within this tenement. Hammer is examining these untested anomalies in further detail(see ASX announcement dated 15 January 2021). O p e r a t i o n s S u m m a r y This target is located partly within a granite bordering the eastern margin of the Orelia trend where soil geochemical sampling had defined a 1.1km by 300m gold anomaly. No previously drilling had been conducted over this target. Hammer Metals tested the area with 126 air core holes (3101m). Significant geochemical intercepts of 8m at 0.12g/t Au from 20m in BWSAC0621 and 4m at 0.15g/t Au from 12m in BWSAC0622 (see ASX announcement 25 August 2021) were associated with a north-northwest trending shear zone on the margin of the granite. Both holes terminated in anomalous mineralisation. Shear zones within granites are attractive targets within the Yandal Belt and, in some cases host economic mineralisation such as Northern Star’s Ramone Deposit. Ken’s Bore RC Drill chips with broad massive sulphide zone 35 HAMMER METALS LIMITED / Annual Report 2021 Operations Summary Kens Bore composite section showing both BWSRC040 and BWSRC041 (See ASX announcement 15 January 2021) View looking north showing the proximity of the Bronzewing Deposit to E36/854 Pilbara Iron Ore (WA) Subsequent to the year end, the Company divested its early stage Iron Ore project in Western Australia for a consideration of $325,000 and a future NSR royalty of 0.5% on all Iron Ore sales. 36 HAMMER METALS LIMITED / Annual Report 2021 Competent Persons Statement ▲ Exploration Results The information in this report as it relates to exploration results and geology was compiled by Mr. Mark Whittle, who is a fellow of the AusIMM and an employee of Hammer Metals Limited. Mr. Mark Whittle, who is also a share and option holder in the Company, has sufficient experience which is relevant to the styles of mineralisation and deposit types under consideration and to the activity which he is undertaking to qualify as a Competent ▲ Mineral Resource Estimates Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Reserves. Mr. Whittle consents to the inclusion in the report of the matters based on the information in the form and context in which it appears. Where the company refers to Mineral Resource Estimates for the following prospects: ■ the Kalman deposit (ASX 27 September 2016); and ■ the Jubilee deposit (ASX 20 December 2018) it confirms that it is not aware of any new information or data that materially affects the information included in those announcements and all material assumptions and technical parameters underpinning the resource estimates continue to apply and have not materially changed. C o m p e t e n t P e r s o n s S t a t e m e n t 37 HAMMER METALS LIMITED / Annual Report 2021 Annual Mineral Resource Statement Annual Mineral Resource Statement As of 30 June 2021 The Company’s Mineral Resource Statement has been compiled in accordance with the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code 2012 and 2004 Editions) and Chapter 5 of the ASX Listing Rules and ASX Guidance Note 31. The Company has no Ore Reserve estimates. The Company governs its activities in accordance with industry best-practice. The reported estimates for Overlander and Kalman were generated by reputable, independent consulting firms. The resource reports and supporting data were subjected to internal analysis and peer-review before release. In 2016, Hammer Metals Limited commissioned Haren Consulting Pty Ltd to update the Kalman Resource based on new drilling and geological interpretation. The resource was issued on the 27th of September 2016. In November 2018, H&S Consultants Pty Ltd was commissioned to undertake a resource estimate on the Jubilee Cu-Au Deposit. The resource was issued on 12 December 2018. The estimate is based on good quality RC and Diamond drilling data. The estimate was based on a 42 reverse circulation holes for 5475m and 3 diamond holes for 261m. Of these holes 26 were drilled by Hammer Metals Ltd and the remaining 19 drilled by the previous operator. Drilling extends to a maximum depth of 325m below surface. The drill hole spacing is approximately 50m along strike. There has been no material change to the Jubilee Resource estimate since its initial release to the ASX dated 20 December 2018. The company has not reported the Mineral Resource Estimate over the West Pilbara Iron Ore Deposit, as this immaterial, non-core asset was divested subsequent to the end of the year. In relation to the Kalman, Overlander, Elaine, Mt Philp, and Jubilee Resources, there have been no material changes to the Resource Estimates during the reporting period. Resource Project Mineral Resource Competent Person Mr. L. Burlet Ms. E. Haren Ms. E. Haren Mr. C. Allen Organization ASX Reporting Date H&S Consultants Pty Ltd December 12th, 2018 Haren Consulting September 27th 2016 Haren Consulting August 26th 2015 CSA Global Pty Ltd July 26th 2010 Mr. T. Leahey Cerro Resource NL September 28th 2012 Jubilee Kalman Overlander West Pilbara Mt. Philp 38 HAMMER METALS LIMITED / Annual Report 2021 ▲ Jubilee Deposit JORC 2012 Mineral Resource Estimate (12 December, 2018) (Reported at 0.5% Cu cut-off) Classification Weathering Domain Tonnes Inferred Inferred Total Mod-Slightly Weathered Fresh 0.07 1.34 1.41 Cu % 1.51 1.41 1.41 Au (Cut) g/t Cu Tonnes Au (Cut) Ounces 0.55 0.63 0.62 1,000 1,200 19,000 27,100 20,000 28,300 ■ Note: (1) Numbers rounded to two significant figures to reflect appropriate levels of confidence ■ Note: (2) Totals may differ due to rounding A n n u a l i M n e r a l R e s o u r c e S t a t e m e n t The 51%-owned Jubilee Deposit is situated 50 kilometres west of Mount Isa in North West Queensland. In November 2018, H&S Consultants Pty ltd was commissioned to undertake a resource estimate on the Jubilee Cu-Au Deposit. The resource was issued on 12 December 2018. The estimate is based on good quality RC and Diamond drilling data. The estimate was based on a 42 reverse circulation holes for 5475m and 3 diamond holes for 261m. Of these holes 26 were drilled by Hammer Metals Ltd and the remaining 19 drilled by the previous operator. Drilling extends to a maximum depth of 325m below surface. The drill hole spacing is approximately 50m along strike. There has been no material change to the Jubilee Resource estimate since its initial release to the ASX dated 20 December 2018. Refer to the ASX release dated 20 December, 2018. The company is not aware of any new information or data that materially affects the information in the HMX ASX announcement. All material assumptions and technical parameters underpinning the mineral resource estimate continue to apply and have not materially changed. ▲ Kalman Deposit JORC 2012 Mineral Resource Estimate (27 September, 2016) Classification Mining Method CuEq Cut-off Tonnes Kt CuEq % Indicated Open Pit 0.75% 7,100 Inferred Inferred Total Open Pit 0.75% 6,200 Underground 1.4% 7,000 20,000 1.5 1.6 2.4 1.8 Cu % 0.48 0.44 0.89 0.61 Mo % 0.12 0.15 0.16 0.14 Au ppm 0.27 0.24 0.50 0.34 Ag ppm Re ppm 1.4 1.5 2.9 1.9 2.9 3.9 4.5 3.7 ■ Note: (1) The copper equivalent equation is: CuEq= Cu+(0.864268*Au)+(0.011063*Ag)+(4.741128*Mo)+(0.064516*Re) ■ Note: (2) Copper Equivalent Price assumptions are: Cu: US$4,650/t; Au: US$1,250/oz; Ag: US$16/oz; Mo: US$10/lb; and Re: US$3,000/kg. 39 HAMMER METALS LIMITED / Annual Report 2021 Annual Mineral Resource Statement The Kalman Molybdenum-Rhenium-Copper-Gold-Silver (Mo-Re-Cu-Au-Ag) deposit is situated 60 kilometres southeast of Mt Isa within the Mt Isa Inlier, and forms part of the company’s Kalman Project. Drilling extends to a maximum down hole depth of 998.3 metres and the mineralisation was modelled from surface to a depth of approximately 800 metres below surface. The estimate is based on good quality RC and diamond core drilling data. The drill hole spacing is approximately 100 metres along strike with some 50 metre-spaced infill drilling. In September 2016, Haren Consulting was contracted by Hammer Metals Limited to complete an update of the Mineral Resource estimate for the deposit. The estimate was reported to comply with the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ by the Joint Ore Reserves Committee (JORC). The Kalman Mineral Resource has been reported at two cut-off grades to reflect both open pit and underground mining scenarios. The Kalman Mineral Resource estimate comprises a combined 20 million tonnes at 1.8% copper equivalent (CuEq) at 0.61% copper, 0.34 g/t gold, 0.14% molybdenum and 3.7 g/t rhenium in the Indicated and Inferred categories at revised cut-off grades. (Refer to the ASX release dated 27 September 2016). The Kalman Mineral Resource Estimate disclosed as part of the 2015 review was last updated in March 2014 in accordance with the JORC Code (2012 Edition). The Resource estimate comprised a combined 30 million tonnes at 1.3% copper equivalent (CuEq) at 0.54% Cu, 0.28% Au, 0.08% Mo and 2.2 g/t Re in the Inferred category. (Refer to the ASX Release dated 19 March 2014 for full details of the Resource Estimate.) ▲ Kalman Deposit Mineral Resource Estimate (2015) (Reported at 0.3% CuEq cut-off above 100m RL and 1.0% CuEq cut-off below 100m RL) Classification Mining Method Tonnes kt CuEq % Inferred Inferred Total Open Pit 22,000 Underground 8,300 30,000 1.1 1.9 1.3 Cu % 0.42 0.87 0.54 Au ppm 0.22 0.42 0.28 Ag ppm 1.1 2.0 1.3 Mo % 0.07 0.11 0.08 Re ppm 1.9 2.9 2.2 ■ Note: (1) Numbers rounded to two significant figures ■ Note: (2) Totals may differ due to rounding ■ Note: (3) (CuEq = Cu + 0.594464Au + 0.010051Ag + 4.953866Mo + 0.074375Re) The reasons for the update were: ■ 8 holes (K131-K132 and K134-139) drilled by Hammer in 2014 were incorporated into the resource model. The drill holes intersected multiple, relatively shallow high-grade molybdenum and copper intersections which were considered to have the potential to enhance the existing mineral resource model. ■ The deposit was re-interpreted to improve mineralisation constraints. The 2016 resource update differed from the 2014 update in that the resulting total resource tonnage was reduced from 30,000kt to 20,000kt and average metal grades increased, primarily due to the use of more elevated cut-off grades. 40 HAMMER METALS LIMITED / Annual Report 2021 ▲ Overlander North And South Deposits JORC 2012 Mineral Resource Estimates (26 August, 2015) (Reported at 0.7% Cu cut-off) OVERLANDER NORTH MINERAL RESOURCE Classification Tonnes Indicated Inferred Total 253,000 870,000 1,123,000 Cu % 1.4 1.3 1.3 Co ppm 254 456 410 Cu Tonnes 3,414 11,350 14,764 ■ Note: (1) Numbers rounded to two significant figures to reflect appropriate levels of confidence ■ Note: (2) Totals may differ due to rounding OVERLANDER SOUTH MINERAL RESOURCE Classification Tonnes Indicated Inferred Total - 649,000 649,000 Cu % - 1.0 1.0 Co ppm - 500 500 Cu Tonnes - 6,352 6,352 ■ Note: (1) Numbers rounded to two significant figures to reflect appropriate levels of confidence ■ Note: (2) Totals may differ due to rounding OVERLANDER NORTH AND SOUTH COMBINED MINERAL RESOURCE Classification Tonnes Indicated Inferred Total 253,000 1,518,000 1,772,000 Cu % 1.4 1.2 1.2 Co ppm 254 476 445 Cu Tonnes 3,414 17,700 21,112 ■ Note: (1) Numbers rounded to two significant figures to reflect appropriate levels of confidence ■ Note: (2) Totals may differ due to rounding Co Tonnes 64 396 461 Co Tonnes - 327 327 Co Tonnes 64 723 788 A n n u a l i M n e r a l R e s o u r c e S t a t e m e n t 41 HAMMER METALS LIMITED / Annual Report 2021 Annual Mineral Resource Statement The 100%-owned Overlander Project is situated 60 kilometres to the southeast of the mining centre of Mount Isa in North West Queensland and 6 kilometres to the west of Hammer’s Kalman copper-gold-molybdenum-rhenium deposit. It is a high-priority target area for both shear-hosted copper and IOCG copper mineralisation. The Overlander North and South Copper Deposits are situated approximately one kilometre apart within a common shear zone. Drilling in the Overlander North deposit extends to a vertical depth of approximately 430m and the mineralisation was modelled from surface to a depth of approximately 420 metres below surface. Drilling in the Overlander South deposit extends to a vertical depth of approximately 215 metres and the mineralisation was modelled from surface to a depth of approximately 180m below surface. The resource estimates are based on good quality RC and diamond drilling data. Drill hole spacing is predominantly on a 40 metre by 20 metre spacing with additional drill holes between sections targeted at the higher-grade cores of the deposits. Following additional drilling in 2014 and 2015, the Mineral Resource Estimates for the Overlander North and South shear-hosted copper Deposits were revised by Haren Consulting Pty Ltd and reported in accordance with the guidelines of the JORC Code (2012 Edition). They contain combined resources of 1,772,000 tonnes at 1.2% copper in the indicated and inferred categories (Refer to the ASX release dated 26 August 2015). There has been no material change to the Overlander resource base during the financial year. ▲ Elaine Mineral Resource CuEq cut-off % 0.10 0.20 0.25 0.30 0.40 0.50 0.60 0.70 0.80 Mt 64.34 32.77 26.10 22.81 17.81 15.05 12.47 9.31 6.46 CuEq % 0.34 0.54 0.62 0.67 0.76 0.82 0.88 0.95 1.04 Cu % 0.31 0.49 0.56 0.60 0.68 0.73 0.77 0.82 0.87 Au g/t 0.05 0.08 0.09 0.10 0.12 0.13 0.15 0.19 0.25 The 100%-owned Elaine Cu-Au deposit is situated on granted exploration licence 14022, approximately 50km east of Mount Isa in North West Queensland. A resource estimate was first completed and reported to ASX by previous owners (Chinalco Yunnan Copper Resources Limited, now AUKing Limited) on 18th October 2012. The resource was conducted by Mine Development Associates. The company is not aware of any new information or data that materially affects the information in the AKN ASX announcement. All material assumptions and technical parameters underpinning the mineral resource estimate continue to apply and have not materially changed. A review of the Resource Estimate was completed for the purpose of compiling this statement and the principles and methodology of the resource estimation procedure and the resource classification procedure are considered to comply. The Elaine Project Mineral Resource Estimate is based on approximately 30 holes to a depth of 450 metres below surface. The current resource totals 9.3 million tonnes (Mt) grading 0.82% Cu and 0.19g/t Au and is classified as being all in the Inferred category. The resource is tabulated below at a variety of CuEq % cut-offs. ELAINE INFERRED MINERAL RESOURCE ESTIMATE METAL EQUIVALENT INFORMATION The Copper Equivalent (CuEq) equation has been calculated to reflect current and forecast pricing. CuEq grades were calculated using estimated block grades for Cu and Au. Metal prices used were: ■ Cu: US$5,400/t; ■ Au: US$1,300/oz; The copper equivalent equation is: CuEq % = Cu % + (Au ppm * 0.70216). Cut-offs of 0.7% have been applied for reporting Mineral Resources. 42 HAMMER METALS LIMITED / Annual Report 2021 A n n u a l i M n e r a l R e s o u r c e S t a t e m e n t ▲ Mt. Philp Deposit JORC 2004 Mineral Resource Estimate (12 March, 2012) Classification Tonnes Indicated 19,110,000 Inferred Total 11,400,000 30,510,000 Fe % 41 34 39 P % 0.02 0.02 0.02 SiO2 % Al2O3 % 38 48 42 1.3 2.0 1.6 TiO2 % 0.38 0.46 0.41 LOI % 0.29 0.31 0.30 ■ Note: (1) Numbers rounded to two significant figures to reflect appropriate levels of confidence ■ Note: (2) Totals may differ due to rounding The Mount Philp Iron Ore deposit is located in north-western Queensland, 1,500 kilometres northwest of Brisbane. The Mineral Resource Estimate is based on 48 diamond and reverse circulation (RC) drillholes completed in 2011 for a total of 3,801 metres. Drilling comprises fans located on a nominal 100 metre pattern along the strike length of the ironstone. The Mineral Resource was estimated and reported in-house by Cerro Resource NL. The current resource totals 19.1 million tonnes grading 41.4% iron and 37.9% silica in the Indicated category and 11.4 million tonnes grading 33.8% iron and 47.4% silica in the Inferred category. This resource is open at depth. A resource estimate was first completed and reported to ASX by previous owners on 28th September 2012 and there has been no material change to the resource base during the financial year. A review of the resource estimate was completed for the purpose of compiling this statement and the principles and methodology of the resource estimation procedure and the resource classification procedure have been reconciled with the CIM Resource Reserve definitions and found to comply. ▲ Governance And Internal Controls – Resource Calculations The Company ensures good governance in relation to resource estimation through the use of third-party resource consultants and internal review in accordance with industry best practice. All reported resource estimates were generated by reputable, independent consulting firms. The resource reports and supporting data were subjected to internal analysis and peer review before release. The Company is not aware of any additional information, other than that reported, which would have a material effect on the estimates as reported. Due to the nature, stage and size of the Company’s existing operations, the Board believes there would be no efficiencies gained by establishing a separate mineral reserves and resources committee responsible for reviewing and monitoring the Company’s processes for calculating mineral reserves and resources estimates and for ensuring that the appropriate controls are applied to such calculations. The Company will report any future mineral reserves and resources estimates in accordance with the 2012 JORC Code. 43 HAMMER METALS LIMITED / Annual Report 2021 Annual Mineral Resource Statement Competent Persons Statement The information in this Annual Mineral Resources Statement is based on, and fairly represents information and supporting documentation reviewed by Mr Mark Whittle, a Competent Person who is a fellow of the AusIMM and an employee of Hammer Metals Limited. Mr Whittle, who is a share and option holder of the company, has sufficient experience which is relevant to the styles of mineralisation and deposit types under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2004 JORC Code) and the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012 JORC Code). Mr Whittle consents to the inclusion in the report of the matters based on this information in the form and context in which it appears. 44 HAMMER METALS LIMITED / Annual Report 2021 Tenement Interests ▲ Tenement Interests At End Of September 2020 Mt Isa (Queensland) MT. DOCKERELL MINING PTY LTD Lease EPM 11919 EPM 13870 EPM 18084 EPM 25165 EPM 26474 EPM 26511 EPM 26628 EPM 26694 EPM 26775 EPM 26776 EPM 26777 EPM 26902 EPM 26904 EPM 27018 EPM27469 EPM27470 EPM27806 EPM27815 Lease Name Lease Status Interest Cameron River Pelican Dronfield Cameron River 4 Enterprise Sling Shot Argylla Mt Philp Pilgrim North Pilgrim Central Pilgrim South Marriage Jady Jenny Dingo Creek Mount Moran China Wall Roos Lady Vampire Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% T e n e m e n t I n t e r e s t s 45 HAMMER METALS LIMITED / Annual Report 2021 Tenement Interests MULGA MINERALS PTY LTD Lease EPM 12205 EPM 14019 EPM 14022 EPM 14467 EPM 25145 EPM 25866 EPM 25867 EPM 26126 EPM 26127 EPM 26130 EPM 26512 EPM 27355 Lease E08/1997 Lease Name Lease Status Interest Cloncurry South Mary K North Mary K Mt Frosty Green Creek Malbon Mt Jasper Cathay Resolve El Questro Black Angel Pioneer Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Lease Name Lease Status Cheela Plains Granted 100% 100% 100% 51% 100% 100% 100% 100% 100% 100% 100% 100% Interest 100% Yilgarn (Western Australia) CARNEGIE EXPLORATION PTY LTD Lease E36/854 E36/855 E36/868 E36/869 E36/870 E36/882 E36/916 E36/996 E36/1006 E53/1989 E53/1996 E53/2030 E53/2085 46 Lease Name Lease Status Interest Kens Bore Granted Granted Granted Granted Granted Granted Granted Application Application Granted Granted Granted Granted 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% HAMMER METALS LIMITED / Annual Report 2021 Lease E53/2112 E53/2113 E53/2114 E53/2115 E53/2116 E53/2127 E53/2128 P36/1857 P36/1858 P53/1682 P53/1683 P53/1684 P53/1685 P53/1686 P53/1687 P53/1688 P53/1689 P53/1690 P53/1691 P53/1692 P53/1693 P53/1694 P53/1695 P53/1696 P53/1697 Lease Name Lease Status Interest Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% T e n e m e n t I n t e r e s t s 47 HAMMER METALS LIMITED / Annual Report 2021 Directors Report Directors Report 48 HAMMER METALS LIMITED / Annual Report 2021 The Directors present their report together with the financial report of Hammer Metals Limited (“the Company” or “Hammer”) and of the Group, comprising the Company and its subsidiaries, for the year ended 30 June 2021 and the auditor’s report thereon. ▲ 1. Directors The names and details of the Company’s directors in office during the financial year or since the end of the financial year are set out below. During his career, Mr Thomas has worked across Australia, North America, Asia and Africa, in a wide range of commodities, including base and precious metals. Mr Thomas’ most recent role before joining the Company was as Business Development Manager at Sandfire Resources (ASX:SFR), where he was instrumental in utilising cash-flows generated by the DeGrussa Copper-Gold Mine to grow the Company both organically through exploration and through business development initiatives, including several acquisitions, investments and joint ventures. Prior to his time at Sandfire Resources Limited, Mr Thomas held roles with Wesfarmers, PTT Asia Pacific Mining and Mitsui E&P Australia. ZBIGNIEW LUBIENIECKI RUSSELL DAVIS Non-Executive Chairman BSc (Honours) MBA MAusIMM, MAICD Russell Davis is a Geologist with over 30 years’ experience in the mineral resources business. He has worked on the exploration and development of a range of commodities for a number of international and Australian companies, holding senior technical and corporate positions including Chief Mine Geologist, Exploration Manager and Managing Director. Mr Davis was a founding Director of Gold Road Resources Limited and also Syndicated Metals Limited where he was Managing Director from December 2007 to March 2012. Mr Davis has been a Director of Hammer Metals (Australia) Pty Ltd since its inception in 2012. Non-Executive Director BSc (Applied Geology), MAIG Zbigniew (“Ziggy”) Lubieniecki holds a Bachelor of Science (Applied Geology) and is an experienced exploration geologist with more than 30 years’ experience in exploration, mining, management, property acquisition and company listings. Mr Lubieniecki has held senior positions including Chief Mine Geologist for Plutonic Resources Limited and exploration Manager for Australian Platinum Mines and was most recently an Executive Director of Gold Road Resources Limited. Mr Lubieniecki has had a successful exploration career including the discovery of the 6.2-million- ounce Gruyere gold deposit. DANIEL THOMAS Managing Director BSc (Applied Chemistry), MBA Daniel Thomas has over 20 years’ experience in operations, corporate development, project management and project finance having completed undergraduate studies in Chemistry and Geology as well as attaining an BMA from the Melbourne Business School. DAVID CHURCH Non-Executive Director (appointed 1 July 2020) LLB, BEc D i r e c t o r s R e p o r t David Church is currently the non- executive Chairman of Caprice Resources Limited and a consultant to the Hong- Kong Stock Exchange-listed Regent Pacific Group Limited, performing the functions of General Counsel and Head of Mergers and Acquisitions. Mr Church is a qualified solicitor and has practiced in Australia with Clayton Utz, and in the UK and Hong Kong with Linklaters. 49 HAMMER METALS LIMITED / Annual Report 2021 Directors Report ▲ 2. Directorships Of Other Listed Companies Directorships of other ASX listed companies held by Directors in the 3 years immediately before the end of the financial year are as follows: Name Company Russell Davis Daniel Thomas Zbigniew Lubieniecki David Church None None None Caprice Resources Limited Period of Directorship - - - October 2019 - current ▲ 3. Company Secretary MARK PITTS – COMPANY SECRETARY B.Bus, FCA, GAICD Mr Pitts is a Chartered Accountant with over 25 years’ experience in statutory reporting and business administration. He has been directly involved with, and consulted to, a number of public companies holding senior financial management positions. Mr Pitts is a Partner in the corporate advisory firm Endeavour Corporate providing secretarial support, corporate and compliance advice to a number of ASX listed public companies. ▲ 4. Directors’ Meetings The number of Directors’ meetings held, and the number of meetings attended by each of the Directors of the Company during their term in office in the financial year is as follows: Director Mr R Davis Mr D Thomas Mr Z Lubieniecki Mr D Church Meetings held while in office Meetings attended 4 4 4 4 4 4 3 3 The Company does not have any committees. Matters usually considered by an audit, remuneration or nomination committee were dealt with by the whole Board during regular Board meetings. 50 HAMMER METALS LIMITED / Annual Report 2021 ▲ 5. Principal Activity The principal activity of the Group during the course of the financial year was mineral exploration in Australia. ▲ 6. Operating And Financial Review The Group incurred an after-tax loss for the year of $611,525 (2020: $1,978,610). CORPORATE: The following issues of ordinary shares were completed during the year: The following performance rights were exercised during the year: ■ 750,000 performance rights, vesting on 21 October ■ Between 1 July and 30 September 2020, the 2020. ■ 750,000 performance rights, vesting on 21 October 2020, subject to achieving a minimum share price of $0.031 for a period of 30 days. No performance rights were issued or expired during, or since the end of the financial year. EXPLORATION ACTIVITIES: Hammer Metals Limited is exploring in two great minerals provinces, focused on the discovery of gold and copper deposits. Following a successful drilling program with the discovery of the Trafalgar copper and gold deposit within the Mount Isa East JV with the Japan Oil, Gas and National Metals Corporation (“JOGMEC”), the company has embarked on an aggressive exploration program across its Mount Isa holdings. Hammer continues to advance its gold exploration activities in the Yandal province testing a number of targets near the former Bronzewing and Orelia gold mines D i r e c t o r s R e p o r t Company received valid exercise notices of 167,105,021 of its HMXOD listed options, which were exercisable at $0.03 on or before 30 September 2020. Through the exercise of these options, the company raised $5,013,151. ■ On 8 December 2020, 875,206 ordinary shares were issued to Directors of the Company in lieu of fees totalling $23,500. These shares were approved by shareholders at the Company’s 2020 Annual General Meeting. Furthermore, on this date, 1,500,000 performance rights were exercised and converted into fully-paid ordinary shares. ■ On 3 February 2021, 1,000,000 unquoted options exercisable at $0.032 on or before 30 November 2022 were exercised. ■ On 30 April 2021, the Company completed a placement of 45,789,473 ordinary shares at $0.095 per share, raising $4,350,000 before costs. ■ On 3 February 2021, and additional 250,000 unquoted options exercisable at $0.032 on or before 30 November 2022 were exercised. ■ On 26 May 2021, the Company completed its Share Purchase Plan, issuing 10,526,254 shares at $0.095 per share to raise $999,994 before costs. A total of 4,500,000 unquoted options exercisable at $0.05 were issued to Directors of the Company on 8 December 2020, after being approved by the shareholders of the Company at the 2020 Annual General Meeting. The following options expired during the period: ■ 2,676,078 unquoted options exercisable at $0.07 expired, unexercised, on 1 September 2020. ■ 3,724,428 HMXOD quoted options exercisable at $0.03 expired, unexercised, on 1 October 2020 Since the end of the financial year, no options have been granted or expired and no options have been exercised. 51 HAMMER METALS LIMITED / Annual Report 2021 Directors Report QUEENSLAND - MOUNT ISA REGION PROJECTS ownership of the JV interests are formally transferred. Hammer is exploring its Mount Isa project for large iron oxide copper-gold (IOCG) deposits of the Ernest Henry style (approximately 220 million tonnes at 1.1% Cu and 0.5g/t Au). The Group holds approximately 2,100 km2 of tenure in the Mt. Isa region. A systematic IOCG targeting exercise within the Mount Isa region is ongoing through the Mt Isa East JV and 100% funded activities. Mt. Isa project – wholly-owned projects Hammer’s activities in Mount Isa were reinvigorated on the back of the success within the Mt Isa East JV. Early work during the year focused on the gold potential in proximity to the historic Tick Hill mine with a number of promising prospects identified. Work continues to develop these targets whilst recent activities focused on prospective Copper and Gold targets in close proximity to Hammer’s Kalman deposit and the prospective trend running from Trafalgar through to the Jubilee deposit (of which the Company has a 51% interest). In total, 6 separate areas were drill tested; Lakeview, Neptune, Kings/Alice (Malbon), Kalman West, Overlander and Serendipity. Key results include (See ASX Announcement 22 June and 26 July 2021): ■ 100m at 0.48% Cu and 0.2g/t Au from 173m in HMLRRC002 at Neptune (Lady Rose); and ■ 10m at 1.97% Cu and 0.24g/t Au from 23m in HMLVRC003 at Lakeview Further programs focusing in on the copper and gold mineralisation at Neptune are likely in the new financial year along with other prospects which are being advanced through geochemical and geophysical surveys. A drilling program is likely in the last quarter of the 2021 calendar year. Mt Isa East Joint Venture The Mt Isa East Joint Venture (the “JV”) with JOGMEC was executed in late 2019 and field activities continued throughout the financial year. The JV agreement allows JOGMEC to earn a 60% interest in approximately 290sq. km of tenure by expending $6 million in five years. The JV encountered success with the exploration program at Trafalgar with the initial two holes intersecting (See ASX Announcement 20 January 2021): WESTERN AUSTRALIA - BRONZEWING SOUTH PROJECT Hammer’s tenements cover prospective structural trends in the core of the Yandal Greenstone Belt. This region has reported greater than 24Moz of current and historical gold production from deposits such as Bronzewing, Jundee, Mt McClure, Darlot and Thunderbox. Hammer continues to acquire tenure, progressively applying for areas as they become available and acquiring low-cost tenements from others in the region (See ASX announcement 1 March 2021). The company now holds approximately 300km2 of tenure in the Yandal gold province. North Orelia Hammer’s tenements cover prospective trends along strike from the former Lotus and Cockburn Deposits (of the Mt McClure group) and the current 1.1Moz Orelia gold resource owned by Northern Star Resources (ASX:NST). Hammer completed an extensive air core and reverse circulation drilling program during the year. Hammer was able to complete 309 air-core holes for 9,700m during the period (Refer to ASX release dated 25 August 2021). A total of 2,111m of drilling in 20 holes was completed at Target 1 at North Orelia, focusing on a 2km stretch of gold anomalism identified in previous Hammer air core drilling. At Target 4, two reverse circulation holes were drilled for 330m targeting prospective stratigraphy to the North of the Orelia gold deposit. Bronzewing South During the reporting period, Hammer tested two geological targets, approximately 4km to the south of the former Bronzewing Gold mine. Development of innovative targeting concepts resulted in Hammer being awarded a $150,000 Western Australian Government Exploration Incentive Grant to partly fund diamond drill testing of gravity anomalies. In addition to the three diamond drill holes (1326m), Hammer also completed a single reverse circulation hole (178m) (See ASX announcement 9 November 2020 and 1 March 2021) and a detailed gravity survey across select portions of the tenement. ■ 55m at 1.12% and 0.3g/t Au from 119m in HMTRRC001; and Ken’s Bore Two reverse circulation holes for 480m were drilled to test an Electromagnetic anomaly. These holes encountered massive and semi massive sulphide with true widths of up to 50m (See ASX announcement 15 January 2021). ■ 60m at 1.04% Cu and 0.25g/t Au from 64m in HMTRC002 Further drilling at Trafalgar was completed in June with results yet to be reported. With the drilling success at Trafalgar, JOGMEC received unsolicited approaches regarding their interests in the JV. Following a formal sale process, JOGMEC has elected to sell their interest in the JV to Sumitomo Metal Mining Oceania. The transfer of the JV remains outstanding at the time of this report. Exploration activities within the JV remain ongoing whilst the 52 HAMMER METALS LIMITED / Annual Report 2021 IMPACT OF COVID-19 PANDEMIC During the previous financial year, Hammer reacted promptly to the COVID-19 pandemic and conducted a full review of its activities and expenditures during March 2020. It focused on delaying fieldwork to safeguard the safety of employees, whilst reducing overheads where possible to conserve working capital against the growing uncertainty and volatility. These measures have been gradually unwound over the course of the current financial year, and the levels of operations have returned to normal. During the current financial year, Hammer has been impacted by COVID-19 related border closures, however the Board has instituted a number of measures to ensure that delays and disruptions from these closures are minimal. ▲ 7. Dividends All personnel and contractors of the Company are instructed in operating during the pandemic in a safe manner, which includes the use of masks, social distancing, and regular health checks as appropriate. The Directors recognise the continuing uncertainty surrounding the pandemic and its impact upon the Group’s operations, and believes the measures undertaken by the Group are proportionate. No dividends were paid or declared by the Company during the financial year. ▲ 8. Events Subsequent To Balance Date Subsequent to year end the following events have occurred: ■ On 15 July 2021, the Company issued 6,842,104 shares to Directors of the Company, which related to the Director’s participation in the placement completed in April 2021. These shares were issued at $0.095 per share, raising $650,000 before costs. Other than the above, there has not been any other matter or circumstance that has arisen after balance date that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods. D i r e c t o r s R e p o r t ■ On 19 August 2021, the Company announced that Japan Oil, Gas and Metals National Corporation (“JOGMEC”) and Sumitomo Metal Mining Oceania Pty. Ltd. (“SMMO”) had signed an agreement whereby JOGMEC would transfer its position within the Mt Isa East JV to SMMO. The original terms of the agreement between the Company and JOGMEC remain unchanged, with the JV partner required to spend $6 million over 5 years to earn a 60% interest in the project. ▲ 9. Likely Developments The Company will continue planning and executing exploration and development work on its existing projects in Australia as well as projects under review in Australia to complement and expand on existing tenement holdings. 53 HAMMER METALS LIMITED / Annual Report 2021 Directors Report ▲ 10. Directors’ Interests The relevant interest of each Director in the shares and options of the Company as notified by the Directors to the Australian Securities Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows: Director Mr R Davis Mr D Thomas Mr Z Lubieniecki Mr D Church Ordinary shares Unlisted options Performance Rights 39,679,289 2,241,407 62,664,283 1,052,631 3,500,000 7,000,000 4,500,000 1,000,000 - 6,500,000 - - The above table includes indirect shareholdings held by related parties to the directors. ▲ 11. Environmental Regulations In the course of its normal mining and exploration activities Hammer adheres to environmental regulations imposed on it by the various regulatory authorities, particularly those regulations relating to ground disturbance and the protection of rare and endangered flora and fauna. Hammer has complied with all material environmental requirements up to the date of this report. The Board believes that Hammer has adequate systems in place for the management of its environmental requirements and is not aware of any breach of these environmental requirements as they apply to it. 54 HAMMER METALS LIMITED / Annual Report 2021 ▲ 12. Remuneration Report – Audited 12.1 PRINCIPLES OF COMPENSATION Consequences of performance on shareholder wealth Remuneration levels for key management personnel and other staff of Hammer are competitively set to attract and retain appropriately qualified and experienced personnel and therefore includes a combination of cash paid and the issuance of options and rights. Key management personnel comprise the directors of the Company and senior executives for Hammer. Staff remuneration is reviewed annually. In establishing performance measures and benchmarks to ensure incentive plans are appropriately structured to align corporate behaviour with the long-term creation of shareholder wealth, the Board has regard for the stage of development of the Company’s business, share price, operational and business development achievements (including results of exploration activities) that are of future benefit to the Company. In considering Hammer’s performance and benefits for shareholder wealth, the Board have regarded the following indices in respect to the current and previous four financial years: Loss per share (cents) (0.08) 2021 2020 (0.40) 2019 (0.29) 2018 (0.26) 2017 (0.28) Net loss ($) (611,525) (1,978,610) (852,517) (673,062) (539,578) Share price at 30 June $0.092 $0.043 $0.023 $0.025 $0.036 Service contracts Share trading policy D i r e c t o r s R e p o r t In December 2010, Hammer introduced a share trading policy which sets out the circumstances in which directors, executives, employees and other designated persons may deal with securities held by them in the Company. This includes any shares or any other securities issued by the Company such as options. The policy includes restriction on key management personnel and other employees from entering into arrangements that limit their exposure to losses that would result from share price decreases. Entering into such arrangements has been prohibited by law since 1 July 2011. Daniel Thomas – Managing Director The Company has entered into an Executive Service agreement with Mr Thomas on 21 October 2019. An Executive service fee of $220,000 (plus superannuation at 9.5%) per annum is payable with an indefinite term. Either Party can terminate the agreement subject to a three-month notice period. Mr Thomas is not entitled to any termination payments other than for services rendered at time of termination. Mark Pitts – Company Secretary Mr Pitts is a Partner in the corporate advisory firm Endeavour Corporate providing secretarial support and corporate and compliance advice, pursuant to a contract between Endeavour Corporate and the Company. The contract with Endeavour Corporate has no fixed term with the option of termination by either party with two months’ written notice. Mr Pitts is not entitled to any termination payments other than for services rendered at time of termination. Non-executive directors All non-executive Directors receive a fixed annual Directors’ fee of $40,000 (plus superannuation benefits as required under the applicable legislation). The Chair receives a fixed annual fee of $60,000 (plus superannuation benefits as required under the applicable legislation). The maximum aggregate amount of non-executive Directors’ fees payable by the Company as approved by the shareholders at the 2011 annual general meeting is $300,000 per annum. 55 HAMMER METALS LIMITED / Annual Report 2021 % n o i t a r e n u m e r % d e t a e r l $ l a t o T $ s t h g R i $ s t fi e n e b $ 1 s l a u r c c a e v a e l $ s e e f $ s e e f Directors Report s n o i t p o f o e u a V l f o n o i t r o p o r P s a s t h g i r d n a n o i t a r e n u m e r f o n o i t r o p o r p e c n a m r o f r e p d n a s n o i t p O n o i t a u n n a r e p u S n i t n e m e v o M g n i t l u s n o C & y r a a S l m r e T g n o L m r e T t r o h S 1 2 0 2 e n u J 0 3 d e d n E r a e Y : e r a p u o r G e h t f o l e n n o s r e p t n e m e g a n a m y e k r e h o t d n a y n a p m o C e h t f o r o t c e r i d h c a e f o n o i t a r e n u m e r e h t f o t n e m e e l j r o a m h c a e f o t n u o m a d n a e r u t a n e h t f o s l i a t e D n o i t a r e n u m e r ’ s e v i t u c e x e i r o n e s d n a ’ s r o t c e r i D 2 . 2 1 ▲ 56 % 8 1 4 . % 4 9 2 . % 9 4 3 . - - - 3 6 4 2 1 1 , 0 0 0 7 4 , 3 6 4 5 , 8 5 7 9 1 1 , 0 5 2 5 3 , 0 0 8 3 , 0 0 3 7 6 , 0 0 5 3 2 , 0 0 8 3 , - - - % 5 4 2 . % 6 4 1 . , 8 6 6 0 3 3 2 5 4 0 1 8 , 0 0 9 0 2 , 3 2 7 8 , - - , 0 0 0 0 2 2 0 0 0 0 6 , 8 0 7 0 4 , 0 0 0 0 4 , i s a m o h T D r M e v i t u c e x E e v i t u c e x e n o N - s i v a D R r M s r o t c e r i D i k c e n e b u L i Z r M - 0 0 0 0 4 , h c r u h C D r M % 6 9 2 . % 7 6 7 . , 9 8 1 0 3 6 , 5 9 7 6 8 1 3 6 9 3 3 , 3 2 7 8 , 8 0 7 0 4 , , 0 0 0 0 6 3 s r o t c e r i D - l a t o T - - 0 0 5 8 5 , - - - - 0 0 5 8 5 , % 1 7 2 . % 2 0 7 . , 9 8 6 8 8 6 , 5 9 7 6 8 1 3 6 9 3 3 , 3 2 7 8 , 8 0 7 0 4 , , 0 0 5 8 1 4 l e n n o s r e p t n e m e g a n a m y e k l l a – l a t o T ) y r a t e r c e S y n a p m o C ( s t t i P M r M . l e n n o s r e P t n e m e g a n a M y e K f o r e b m e m e h t o t i d a p s t n u o m a t o n d n a , s e i t i l i b a i l e v a e l d e u r c c a n i t n e m e v o m e h t f o e u a v l g n i t n u o c c a e h t s t n e s e r p e R – 1 . d o i r e p s u o i v e r p a g n i r u d d e u s s i s t h g i r d n a s n o i t p o f o e s n e p x e g n i t s e v e h t s t n e s e r p e R – 2 s e v i t u c e x E l e n n o s r e P t n e m e g a n a M y e K r e h t O HAMMER METALS LIMITED / Annual Report 2021 % n o i t a r e n u m e r % d e t a e r l $ l a t o T $ s t h g R i $ s t fi e n e b $ 1 s l a u r c c a e v a e l $ s e e f $ s e e f s n o i t p o f o e u a V l f o n o i t r o p o r P s a s t h g i r d n a n o i t a r e n u m e r f o n o i t r o p o r p e c n a m r o f r e p d n a s n o i t p O n o i t a u n n a r e p u S n i t n e m e v o M g n i t l u s n o C & y r a a S l m r e T g n o L m r e T t r o h S 0 2 0 2 e n u J 0 3 d e d n E r a e Y d e u n i t n o c n o i t a r e n u m e r ’ s e v i t u c e x e i r o n e s d n a ’ s r o t c e r i D 2 . 2 1 ▲ - - - - - - 0 0 5 7 8 , 5 7 8 8 9 , 1 3 7 2 3 , - - - - - 1 3 7 2 , % 8 6 1 . % 9 0 1 . 4 6 7 1 7 4 , 7 0 0 8 7 , 1 0 3 6 1 , % 6 3 2 . - 0 0 0 5 5 , 0 0 0 3 1 , - % 5 7 1 . % 8 9 . , 4 6 7 6 2 5 7 0 0 1 9 , 1 0 3 6 1 , - - - - - - % 8 1 3 . % 6 0 2 . 8 5 6 2 5 2 , 7 0 0 8 7 , 0 7 5 3 1 , 0 4 2 7 , - - , 1 4 8 3 5 1 0 0 5 7 8 , 5 7 8 8 5 , 0 0 0 0 4 , i s a m o h T D r M e v i t u c e x E e v i t u c e x e n o N - 2 s i v a D R r M s r o t c e r i D i k c e n e b u L i Z r M - 0 0 0 0 3 , d e y a S l E N r M 5 7 8 8 5 , 1 4 3 1 1 3 , s r o t c e r i D - l a t o T - 0 0 0 2 4 , 5 7 8 8 5 , , 1 4 3 3 5 3 l e n n o s r e p t n e m e g a n a m y e k l l a – l a t o T ) y r a t e r c e S y n a p m o C ( s t t i P M r M s e v i t u c e x E l e n n o s r e P t n e m e g a n a M y e K r e h t O . l e n n o s r e P t n e m e g a n a M y e K f o r e b m e m e h t o t i d a p s t n u o m a t o n d n a , s e i t i l i b a i l e v a e l d e u r c c a n i t n e m e v o m e h t f o e u a v l g n i t n u o c c a e h t s t n e s e r p e R – 1 . r i a h C e v i t u c e x E - n o N a o t r i a h C e v i t u c e x E n a m o r f l e o r i s h d e d n e m a s i v a D r M , 9 1 0 2 r e b o t c O 1 2 n o s a m o h T r M f o t n e m t n o p p a i e h t o t t n e u q e s b u S – 2 D i r e c t o r s R e p o r t 57 HAMMER METALS LIMITED / Annual Report 2021 Directors Report ▲ 12.3 Value of options to executives The value of options will only be realised if and when the market price of the Company shares, as quoted on the Australian Securities Exchange, rises above the Exercise Price of the options. Further details of the options are contained below. ▲ 12.4 Options and rights over equity instruments granted as compensation 4,500,000 options were granted to the Non-Executive Directors during the year. The terms of these options and rights are noted in the table below. ▲ 12.5 Analysis of options and rights over equity instruments granted as compensation GRANTED DURING THE CURRENT FINANCIAL YEAR The table below details the vesting profile of the options granted as remuneration to each key management person during the year. Key Management Personnel Number of options granted Date granted % Vested % Forfeited / Lapsed Financial year in which grant vested / will vest Russell Davis 2,000,000 30 November 2020 100% Zbigniew Lubieniecki 1,500,000 30 November 2020 100% David Church 1,000,000 30 November 2020 100% - - - - - - The fair value of the options issued during the year to Key Management Personnel was determined by reference to the Black-Scholes option pricing model. The key inputs and valuations are summarised as follows: Underlying security spot price on grant date Exercise price Grant date Expiration date Vesting date Life (years) Volatility Risk free rate Dividend Yield Number of options Valuation per option Remaining life (years) Total value Value recognised to date Value still to be recognised 58 Directors $0.037 $0.05 30 November 2020 30 November 2024 Immediate 4 100% 0.20% - 4,500,000 $0.0235 3.4 $105,750 $105,750 - HAMMER METALS LIMITED / Annual Report 2021 GRANTED DURING PREVIOUS FINANCIAL YEARS The following options were granted as remuneration to key management personnel during the prior year. Key Management Personnel Number of options granted Date granted % Vested Mr D Thomas – Tranche 1 3,000,000 14 November 2019 100% Mr D Thomas – Tranche 2 4,000,000 14 November 2019 0% Mr M Pitts 500,000 23 June 2020 100% % Forfeited / Lapsed Financial year in which grant vested / will vest 0% 0% 0% 30 June 2021 30 June 2022 30 June 2020 The fair value of the options issued during the prior year to Key Management Personnel was determined by reference to the Black- Scholes option pricing model. The key inputs and valuations are summarised as follows: Underlying security spot price on grant date Exercise price Grant date Expiration date Vesting date Life (years) Volatility Risk free rate Dividend Yield Number of options Valuation per option Remaining life (years) Total value Value recognised to date Value still to be recognised Mr D Thomas – Tranche A Mr D Thomas – Tranche B $0.021 $0.05 $0.021 $0.06 Mr M Pitts $0.04 $0.05 14 November 2019 14 November 2019 23 June 2020 21 October 2023 21 October 2023 30 June 2024 21 October 2020 21 October 2021 Immediate D i r e c t o r s R e p o r t 4 100% 0.795% - 3,000,000 $0.0111 2.3 $33,360 $33,360 - 4 100% 0.795% - 4,000,000 $0.0105 2.3 $42,080 $33,354 $6,726 4 100% 0.340% - 500,000 $0.0260 2.0 $13,000 $13,000 - The above options issued to Mr Thomas include a service condition for the individual to remain employed until the vesting date. There are no further vesting conditions attached to the options issued to Mr Pitts. The following performance rights, which all expire on 13 December 2023, were issued to the Company’s Managing Director during the prior year: ■ 750,000 performance rights, vesting on 21 October 2020; ■ 750,000 performance rights, vesting on 21 October 2020, subject to achieving a minimum share price of $0.031 for a period of 30 days at any point during the vesting period; ■ 750,000 performance rights, vesting on 21 October 2021; ■ 750,000 performance rights, vesting on 21 October 2021, subject to achieving a minimum share price of $0.036 for a period of 30 days at any point during the vesting period; and ■ 5,000,000 performance rights, vesting upon the satisfactory completion of a transaction in accordance with the terms outlined in the Company’s Notice of Annual General Meeting dated 8 October 2019. 59 HAMMER METALS LIMITED / Annual Report 2021 Directors Report For Tranches 1 and 3, these rights vest on the vesting date (being the service period) with no additional vesting conditions. During the financial year, the first two tranches above were exercised. No further rights were issued during the year and, as at the end of the financial year, 6,500,000 rights were outstanding, none of which had vested. The number of rights under each tranche on issue during the current and previous financial years are as follows: Managing Director Performance Rights – Tranche 1 Managing Director Performance Rights – Tranche 2 Managing Director Performance Rights – Tranche 3 Managing Director Performance Rights – Tranche 4 Managing Director Performance Rights – Tranche 5 30 June 2021 No. 30 June 2020 No. - - 750,000 750,000 5,000,000 6,500,000 750,000 750,000 750,000 750,000 5,000,000 8,000,000 The fair value of the performance rights issued during the prior year to Key Management Personnel was determined by reference to the underlying security on the date of issue, adjusted as necessary for any market-based performance conditions. The key inputs and valuations are summarised as follows: Mr D Thomas – Tranche 1 Mr D Thomas – Tranche 2 Mr D Thomas – Tranche 3 Mr D Thomas – Tranche 4 Mr D Thomas – Tranche 5 Underlying security spot price on grant date $0.021 $0.021 $0.021 $0.021 $0.021 Grant date 14 Nov 2019 14 Nov 2019 14 Nov 2019 14 Nov 2019 14 Nov 2019 Expiration date 13 Dec 2023 13 Dec 2023 13 Dec 2023 13 Dec 2023 13 Dec 2023 Vesting date Life (years) Discount applied (Note 1) Number of rights Value per right Remaining life (years) (Note 2) 21 Oct 2020 21 Oct 2020 21 Oct 2021 21 Oct 2021 Note 3 4.1 - 4.1 39% 4.1 - 4.1 26% 4.1 - 750,000 $0.021 750,000 $0.0129 750,000 $0.021 750,000 $0.0156 5,000,000 $0.021 N/A N/A 2.5 2.5 2.5 Total value $15,750 $9,642 $15,750 $11,729 $105,000 Value recognised to date Value still to be recognised $15,750 $9,642 $13,233 $9,854 $41,859 - - $2,517 $1,875 $63,141 Note 1 – this discount represents the expected likelihood that the share-price hurdle condition would be met and was determined by an independent valuation. Note 2 – the remaining life represents the time, in years, left until the expiry of the right. The rights may vest before this date, as noted for tranches 1 and 2. Note 3 – Tranche 5 contains a performance-based vesting condition. For measurement and recognition purposes, it has been estimated that these rights would vest over their entire life. 60 HAMMER METALS LIMITED / Annual Report 2021 ▲ 12.6 Option holdings The movement during the reporting period in the number of options over ordinary shares in Hammer Metals Limited held, directly, indirectly or beneficially, by each key management person, including their personally-related entities, is as follows: Key Management Personnel Held at beginning of period/on appointment Granted Purchased Exercised Held at end of period / on resignation Vested and exercisable at end of period Lapsed or Expired Mr R Davis 6,500,000 2,000,000 Mr D Thomas 7,000,000 - Mr Z Lubieniecki 3,000,000 1,500,000 Mr D Church - 1,000,000 Mr M Pitts 1,582,287 - - - - - - (5,000,000) - - - (582,287) - - - - - 3,500,000 3,500,000 7,000,000 3,000,000 4,500,000 4,500,000 1,000,000 1,000,000 1,000,000 1,000,000 ▲ 12.7 Equity holdings and transactions During the year, 875,206 shares were issued to key management personnel in lieu of fees for the prior year (2020: nil). The movement during the reporting period in the number of ordinary shares in Hammer Metals Limited held directly, indirectly or beneficially, by each key management person, including their personally related entities, is as follows: D i r e c t o r s R e p o r t Held at beginning of period/on appointment Purchases Sales Mr R Davis 33,600,000 252,631 Mr D Thomas 282,711 84,210 Mr Z Lubieniecki 57,200,837 Mr D Church Mr M Pitts - 842,294 - - - Exercise of Options and Performance Rights Held at end of period/on resignation Granted in lieu of fees - - - - - 300,432 5,000,000 39,152,973 374,486 1,500,000 2,241,407 200,288 - - - - 57,401,125 - 582,287 1,424,581 61 HAMMER METALS LIMITED / Annual Report 2021 Directors Report ▲ 12.8 Performance right holdings The movement during the reporting period in the number of performance rights over ordinary shares in Hammer Metals Limited held, directly, indirectly or beneficially, by each key management person, including their personally-related entities, is as follows: Held at beginning of period/on appointment Granted Exercised Other movements Held at end of period / on resignation Vested and exercisable at end of period Mr R Davis - Mr D Thomas 8,000,000 Mr Z Lubieniecki Mr D Church Mr M Pitts - - - - - - - - - 1,500,000 - - - - - - - - - 6,500,000 - - - - - - - - 12.9 Key management personnel transactions The following table provides the total amount of transactions which have been entered into with related parties for the relevant financial year exclusive of GST: Key management Personnel Transaction 30 June 2021 $ 30 June 2020 $ 30 June 2021 $ 30 June 2020 $ Transaction value year ended Balance outstanding as at Zbigniew Lubieniecki Consulting Services 40,708 58,875 - 9,075 Mark Pitts Accounting services 41,520 41,140 3,670 1,280 The Company paid fees to Endeavour Corporate, a company associated with Mark Pitts, for accounting and financial reporting services provided to the company. The Company also paid fees to Zbigniew Lubieniecki, as consulting fees for geological services provided. END OF REMUNERATION REPORT 62 HAMMER METALS LIMITED / Annual Report 2021 ▲ 13. Share Options Unissued shares under option At the date of this report unissued ordinary shares of the Company under option are: Expiry Date Exercise price Number of options Director/Executive/Employee Options 30 November 2021 Corporate Advisor Options – Tranche 1 13 December 2022 Managing Director Options – Tranche 1 21 October 2023 Managing Director Options – Tranche 2 21 October 2023 Corporate Advisor Options – Tranche 2 30 June 2023 Employee and Consultant Options 30 June 2024 Director Options 30 November 2024 $0.032 $0.035 $0.05 $0.06 $0.035 $0.05 $0.05 8,750,000 1,000,000 3,000,000 4,000,000 3,000,000 2,600,000 4,500,000 These options do not entitle the holder to participate in any share issue of the Company or any other body corporate. Shares issued on exercise of options The Company has issued 167,105,021 ordinary shares as a result of the exercise of HMXOD quoted options (exercisable at 3 cents on or before 21 September 2020) and 1,250,000 as the result of the exercise of unquoted options exercisable at 3.2 cents on or before 30 November 2021 during this year (2020: 19,525,757). Subsequent to year end, on 15 July 2021, the Company issued 6,842,104 shares to Directors of the Company, which related to the Director’s participation in the placement completed in April 2021. These shares were issued at $0.095 per share, raising $650,000 before costs. D i r e c t o r s R e p o r t ▲ 14. Performance Rights Unissued shares under performance rights At the date of this report unissued ordinary shares of the Company under performance rights are: Expiry Date Number of rights Managing Director Rights – Tranche 3 13 December 2023 Managing Director Rights – Tranche 4 13 December 2023 Managing Director Rights – Tranche 5 13 December 2023 750,000 750,000 5,000,000 The terms of these rights are summarised in section 12.5 above. ▲ 15. Corporate Governance In recognising the need for the highest standards of corporate behaviours and accountability, the Directors support and have adhered to the principles of sound corporate governance. The Board recognises the recommendations of the ASX Corporate Governance Council and considers the Company is in compliance with those guidelines which are of importance to the operations of the Company. Where a recommendation has not been followed, that fact has been disclosed together with the reasons for the departure. The Company’s Corporate Governance Statement and disclosures available on the Company’s website at www.hammermetals.com.au. 63 HAMMER METALS LIMITED / Annual Report 2021 Directors Report ▲ 16. Indemnification Of Officers And Auditors The Company has entered into Director and Officer Protection Deeds (Deed) with each Director and the Company Secretary (officers). Under the Deed, the Company indemnifies the officers to the maximum extent permitted by law and the Constitution against legal proceedings, damage, loss, liability, cost, charge, expense, outgoing or payment (including legal expenses on a solicitor/client basis) suffered, paid or incurred by the officers in connection with the officers being an officer of the Company, the employment of the officer with the Company or a breach by the Company of its obligations under the Deed. Also pursuant to the Deed, the Company must insure the officers against liability and provide access to all board papers relevant to defending any claim brought against the officers in their capacity as officers of the Company. The Company has paid insurance premiums during the year in respect of liability for any past, present or future Directors, secretary, officers and employees of the Company or related body corporate. The insurance policy does not contain details of the premium paid in respect of individual officers of the Company. Disclosure of the nature of the liability cover and the amount of the premium is subject to a confidentiality clause under the insurance policy. The Company has not provided any insurance or indemnification for the Auditor of the Company. ▲ 17. Non-Audit Services During the year, KPMG, the Company’s auditor provided taxation compliance services in addition to their statutory duties. Refer to Note 7 to the financial statements for more information. ▲ 18. Lead Auditor’s Independence Declaration Under Section 307c Of The Corporations Act 2001 The lead auditor’s independence declaration is set out on page 66 and forms part of the Directors’ report for the financial year ended 30 June 2021. ▲ 19. Significant Changes In State Of Affairs In the opinion of Directors, other than that disclosed elsewhere in this report, there were no other significant changes in the state of affairs of the Group that occurred during the financial year under review. This report is made with a resolution of the Directors: R Davis Chairman Perth 29 September 2021 64 HAMMER METALS LIMITED / Annual Report 2021 D i r e c t o r s R e p o r t HAMMER METALS LIMITED / Annual Report 2021 65 Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 Auditor’s Independence Declaration Auditor’s Independence Declaration To the Directors of Hammer Metals Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Hammer Metals Limited for the financial year ended 30 June 2020 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. ii. Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Hammer Metals Limited KPMG R Gambitta Partner I declare that, to the best of my knowledge and belief, in relation to the audit of Hammer Metals Limited for the financial year ended 30 June 2021 there have been: Perth i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and 29 September 2020 KPM_INI_01 ii. no contraventions of any applicable code of professional conduct in relation to the audit. PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 Glenn Brooks Partner Perth 29 September 2021 - 13 - KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. KPMG 66 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation HAMMER METALS LIMITED / Annual Report 2021 Consolidated Statement Of Financial Position ▲ As At 30 June 2021 Current Assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Other financial assets Right-of-use assets Exploration and evaluation expenditure Total non-current assets Total assets Current liabilities Trade and other payables Lease liabilities Total current liabilities Non-current liabilities Lease liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Accumulated losses Total equity Note 30 June 2020 30 June 2019 10 11 12 14 15 16 17 17 9,706,093 2,678,535 140,842 154,728 9,846,935 2,833,263 484,299 271,097 303,302 71,570 17,429,445 14,110,772 18,217,046 14,453,439 28,063,981 17,286,702 1,171,283 363,896 63,997 17,208 1,235,280 381,104 C o n s o l i d a t e d S t a t e m e n t O f i F n a n c a i 232,595 232,595 56,302 56,302 1,467,875 437,406 l P o s i t i o n 26,596,106 16,849,296 18 19 62,277,335 51,429,354 1,291,101 1,794,923 (36,972,330) (36,374,981) 26,596,106 16,849,296 The consolidated statement of financial position is to be read in conjunction with the accompanying notes. 67 HAMMER METALS LIMITED / Annual Report 2021 Consolidated Statement Of Profit Or Loss And Other Comprehensive Income Consolidated Statement Of Profit Or Loss And Other Comprehensive income ▲ For The Year Ended 30 June 2021 Note 30 June 2020 30 June 2019 Other income Marketing expenses Administrative expenses Share based payments Occupancy expenses Depreciation and amortisation Fair value adjustment on financial assets Other expenses Loss from operating activities Finance income Finance expenses Net finance income / (expense) Loss before income tax Income tax benefit Net loss for the year from continuing operations Other comprehensive income Other comprehensive loss for the year, net of income tax 4 5 5 6 8 308,019 99,092 (114,839) (78,954) (765,502) (732,957) (186,795) (233,707) (45,878) (45,756) (26,906) - 213,202 (987,661) (1,915) - (620,614) (1,979,943) 14,006 (4,917) 9,089 2,299 (966) 1,333 (611,525) (1,978,610) - - (611,525) (1,978,610) - - - - Total Comprehensive loss for the year (611,525) (1,978,610) Loss per share: Basic and diluted loss per share (cents per share) 9(a) (0.08) (0.40) The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes. 68 HAMMER METALS LIMITED / Annual Report 2021 , 0 7 9 0 9 8 3 1 , , ) 1 7 3 6 9 3 4 3 ( , 4 5 8 7 4 7 , , 1 9 9 0 1 9 , 6 9 4 8 2 6 6 4 , l d e t a u m u c c A e u s s i n o i t p O d e s a b e r a h S l a t o T s e s s o l e v r e s e r e v r e s e r t n e m y a p l a t i p a c e r a h S y t i u q E n I s e g n a h C f O t n e m e t a t S d e t a d i l o s n o C 0 2 0 2 e n u J 0 3 d e d n E r a e Y e h T r o F ▲ , ) 0 1 6 8 7 9 1 ( , , ) 0 1 6 8 7 9 1 ( , - - , 9 6 9 1 9 3 4 , , ) 0 1 6 8 7 9 1 ( , , 2 7 7 5 8 5 , 7 0 7 3 3 2 , ) 2 1 5 4 7 2 ( , ) 6 9 2 9 4 8 6 1 ( , - - - - , ) 0 1 6 8 7 9 1 ( , , ) 1 8 9 4 7 3 6 3 ( , - - ) 5 2 5 1 1 6 ( , ) 5 2 5 1 1 6 ( , ) 5 2 5 1 1 6 ( , ) 5 2 5 1 1 6 ( , , ) 6 9 2 9 4 8 6 1 ( , , ) 1 8 9 4 7 3 6 3 ( , - - - - - - - - - ) 9 2 6 7 9 ( , , 5 2 2 0 5 6 , 5 2 2 0 5 6 - - - - - - - - , 1 0 4 3 8 6 , 9 6 9 1 9 3 4 , d o i r e p e h t r o f s s o l e v i s n e h e r p m o c l a t o T s s o l / e m o c n i e v i s n e h e r p m o c r e h t O h s a c r o f d e u s s i s e r a h S r a e y e h t r o f s s o L 9 1 0 2 y l u J 1 t a e c n a a B l s n o i t p o f o i e s c r e x E , 7 0 7 3 3 2 - - , ) 2 1 5 4 7 2 ( , 8 9 6 4 4 1 1 , , 4 5 3 9 2 4 1 5 , - - - - - - , 8 9 6 4 4 1 1 , , 4 5 3 9 2 4 1 5 , d o i r e p e h t r o f s s o l e v i s n e h e r p m o c l a t o T s s o l / e m o c n i e v i s n e h e r p m o c r e h t O 0 2 0 2 e n u J 0 3 t a e c n a a B l s t n e m y a p d e s a b e r a h S s t s o c e u s s i e r a h S 0 2 0 2 y l u J 1 t a e c n a a B l r a e y e h t r o f s s o L , 0 5 1 3 5 0 5 , , 4 9 9 9 4 3 5 , - - 0 0 0 0 5 , 0 0 5 3 2 , , 5 9 7 6 8 1 , ) 4 0 1 5 0 3 ( , ) 6 0 1 6 9 5 6 2 ( , 6 7 1 4 1 , ) 6 7 1 4 1 ( , - - - - - - , ) 9 4 0 6 3 6 ( ) 0 0 0 5 1 ( , - - - - - - - ) 2 9 3 5 2 ( , - - , ) 0 3 3 2 7 9 6 3 ( , - - - - , 5 9 7 6 8 1 , 1 0 1 1 9 2 1 , . , 4 9 9 9 4 3 5 , - - 0 0 0 0 5 , 0 0 5 3 2 , 2 9 3 5 2 , , ) 4 0 1 5 0 3 ( , 5 3 3 7 2 2 2 6 , s t n e m e n e t e r i u q c a o t d e u s s i s e r a h S s t h g i r e c n a m r o f r e p f o i n o s r e v n o C s e e f f o u e i l n i d e u s s i s e r a h S h s a c r o f d e u s s i s e r a h S s n o i t p o d e t s i l f o e s p a L s t n e m y a p d e s a b e r a h S s t s o c e u s s i e r a h S 1 2 0 2 e n u J 0 3 t a e c n a a B l C o n s o l i d a t e d S t a t e m e n t O f C h a n g e s I n E q u i t y i t s e o n g n y n a p m o c c a e h t h t i w n o i t c n u n o c j n i d a e r e b o t s i y t i u q e n i s e g n a h c f o t t n e m e a t s d e a d t i l o s n o c e h T 69 , 9 9 1 4 0 7 5 , s n o i t p o f o i e s c r e x E HAMMER METALS LIMITED / Annual Report 2021 Consolidated Statement Of Cash Flows Consolidated Statement Of Cash Flows ▲ For The Year Ended 30 June 2021 Cash flows from operating activities Interest received Receipts from other parties to joint operations Rental income received COVID-related government assistance received Fuel rebate received Payments to suppliers and employees Note 30 June 2020 30 June 2019 14,006 100,000 2,299 - - 9,185 38,500 4,667 - 2,035 (776,845) (812,617) Net cash used in operating activities 24 (619,672) (799,098) Cash flows from investing activities Payments for exploration expenditure Management fees received from farm-in and joint arrangement partners Receipt of research and development grant Government exploration grants received Purchase of plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of share capital Share funds received in advance Proceeds from issue of options Transaction costs from issue of shares and options Lease payments made Net cash from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year (3,868,940) (2,369,818) 197,170 75,798 384,209 214,939 377,224 (5,946) - - (2,916,283) (2,079,081) 5,349,994 4,391,969 500,000 - 5,053,150 585,772 (305,104) (274,512) (34,527) (7,171) 10,563,513 4,696,058 7,027,558 1,817,879 2,678,535 860,656 Cash and cash equivalents at end of year 10 9,706,093 2,678,535 The consolidated statement of cash flows is to be read in conjunction with the accompanying notes. 70 HAMMER METALS LIMITED / Annual Report 2021 C o n s o l i d a t e d S t a t e m e n t O f C a s h l F o w s HAMMER METALS LIMITED / Annual Report 2021 71 Notes To The Consolidated Financial Statements Notes To The Consolidated Financial Statements ▲ 1. Reporting Entity Hammer Metals Limited (the “Company”) is a company domiciled in Australia. The Company’s registered office is Unit 1, 28-30 Mayfair Street, West Perth, Western Australia. The consolidated financial statements of the Company for the financial year ended 30 June 2021 comprises the Company and its subsidiaries (together referred to as the “Group”). The Group is a for profit entity and is primarily involved in the exploration and extraction of mineral resources. ▲ 2. Basis Of Preparation (A) STATEMENT OF COMPLIANCE The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements also comply with International Financial Reporting Standards (IFRS’s) adopted by the International Accounting Standards Board (IASB). The consolidated financial report was authorised for issue by the Directors on 29 September 2021. (B) BASIS OF MEASUREMENT The financial report is prepared on the historical cost basis except for share based payments and other financial assets which are measured at their fair value. (C) FUNCTIONAL AND PRESENTATION CURRENCY The financial report is presented in Australian dollars which is the functional and presentation currency of the Company and its subsidiaries. (D) USE OF ESTIMATES AND JUDGEMENTS Set out below is information about: ■ critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements; and ■ assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year. Critical judgements i. Going concern A key assumption underlying the preparation of the financial statements is that the Group will continue as a going concern. An entity is a going concern when it is considered to be able to pay its debts as and when they are due, and to continue in operation without any intention or necessity to liquidate or otherwise wind up its operations. A significant amount of judgement has been required in assessing whether the Group is a going concern, as set out in note 2(f). 72 HAMMER METALS LIMITED / Annual Report 2021 Estimates and assumptions ii. Ore Reserves and Mineral Resources Economically recoverable reserves represent the estimated quantity of product in an area of interest that can be expected to be profitably extracted, processed and sold under current and foreseeable economic conditions. The Group determines and reports ore reserves and mineral resources under the standards incorporated in the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves, 2012 edition (the JORC Code). The determination of ore reserves or mineral resources includes estimates and assumptions about a range of geological, technical and economic factors, including: quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates. Changes in ore reserves and mineral resources impact the assessment of recoverability of exploration and evaluation assets, provisions for site restoration and the recognition of deferred tax assets, including tax losses. iii. Exploration and evaluation assets Determining the recoverability of exploration and evaluation expenditure capitalised in accordance with the Group’s accounting policy (refer note 3(n)), requires estimates and assumptions as to future events and circumstances, in particular, whether successful development and commercial exploitation, or alternatively sale, of the respective areas of interest will be achieved. Critical to this assessment is estimates and assumptions as to ore reserves (refer note 2(d)(ii)), the timing of expected cash flows, exchange rates, commodity prices and future capital requirements. Changes in these estimates and assumptions as new information about the presence or recoverability of an ore reserve becomes available, may impact the assessment of the recoverable amount of exploration and evaluation assets. If, after having capitalised the expenditure under accounting policy 3(n), a judgement is made that recovery of the expenditure is unlikely, an impairment loss is recorded in the statement of profit and loss and other comprehensive income in accordance with accounting policy 3(f). The carrying amounts of exploration and evaluation assets are set out in note 15. (E) ADOPTION OF NEW AND REVISED STANDARDS The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. (F) GOING CONCERN The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. For the year ended 30 June 2021, the Group has incurred a consolidated loss before tax of $611,525 and net cash outflows from operating and investing activities of $3,570,482. As at 30 June 2021, the Group had $9,706,093 in cash and cash equivalents and net current assets of $8,611,655. Subsequent to year end, the Company has received $650,000 (before costs) from the issue of shares at $0.095 per share. On the above basis, the Directors are of the view that the going concern basis of preparation is appropriate. N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s 73 HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements ▲ 3. Statement Of Significant Accounting Policies The Group has consistently applied the accounting policies set out in note 3 to all periods presented in these consolidated financial statements. (A) BASIS OF CONSOLIDATION i. Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. ii. Investments in associates Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 percent and 50 percent of the voting power of another entity. Investments in associates are accounted for using the equity method and are recognised initially at cost. The cost of the investments includes transaction costs. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of the investment, including any long-term interest that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. iii. Joint arrangements The Group classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Group’s rights to the assets and obligation for the liabilities of the arrangements. When making this assessment, the Group considers the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. iv. Transactions eliminated on consolidation Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. v. Business combinations Business combinations are accounted for by applying the acquisition method. For every business combination, the Group identifies the acquirer, which is the combining entity that obtains control of the other combining entities or businesses. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another. vi. Contingent liabilities A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably. vii. Non-controlling interest The Group measures any non-controlling interest at its proportionate interest in the identifiable net assets of the acquiree. 74 HAMMER METALS LIMITED / Annual Report 2021 (B) FOREIGN CURRENCY Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of profit and loss and other comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined. The assets and liabilities of foreign operations, including fair value adjustments arising on consolidation, are translated to Australian dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Australian dollars at rates approximating the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised directly in a separate component of equity. (C) PLANT AND EQUIPMENT Items of plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see accounting policy 3(f)). Depreciation is charged to the statement of profit and loss and other comprehensive income on a straight-line basis over their estimated useful lives. The estimated useful lives in the current and comparative periods are as follows: ■ Office equipment 3 to 4 years ■ Plant and equipment 3 to 5 years The residual value, if significant, is reassessed annually. (D) FINANCIAL INSTRUMENTS Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). For the purpose of subsequent measurement, financial assets, are classified into the following categories: ■ amortised cost ■ fair value through profit or loss (FVTPL) ■ equity instruments at fair value through other comprehensive income (FVOCI) ■ debt instruments at fair value through other comprehensive income (FVOCI). All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. The classification is determined by both: ■ the entity’s business model for managing the financial asset ■ the contractual cash flow characteristics of the financial asset. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. 75 N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements Subsequent measurement of financial assets Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL): ■ they are held within a business model whose objective is to hold the financial assets to collect its contractual cash flows ■ the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Financial assets at fair value through profit or loss (FVTPL) Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. The category also contains an equity investment. The Group accounts for the investment at FVTPL and did not make the irrevocable election to account for the investment in unlisted and listed equity securities at fair value through other comprehensive income (FVOCI). The fair value was determined in line with the requirements of AASB 9, which does not allow for measurement at cost. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. Equity instruments at fair value through other comprehensive income (Equity FVOCI) Investments in equity instruments that are not held for trading are eligible for an irrevocable election at inception to be measured at FVOCI. Under Equity FVOCI, subsequent movements in fair value are recognised in other comprehensive income and are never reclassified to profit or loss. Dividend from these investments continue to be recorded as other income within the profit or loss. Any gains or losses recognised in other comprehensive income (OCI) are not recycled upon derecognition of the asset. Debt instruments at fair value through other comprehensive income (Debt FVOCI) Financial assets with contractual cash flows representing solely payments of principal and interest and held within a business model of collecting the contractual cash flows and selling the assets are accounted for at debt FVOCI. The Group accounts for financial assets at FVOCI if the assets meet the following conditions: ■ they are held under a business model whose objective it is to “hold to collect” the associated cash flows and sell financial assts; and ■ the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past due. Classification and measurement of financial liabilities The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. 76 HAMMER METALS LIMITED / Annual Report 2021 Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income. (E) CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. (F) IMPAIRMENT The Group assesses at each balance date whether a financial asset or group of financial assets is impaired. Financial assets at amortised cost The group assesses on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised cost. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group always recognises the lifetime expected credit loss for trade receivables carried at amortised cost. The expected credit losses on these financial assets are estimated based on the Group’s historic credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as forecast conditions at the reporting date. For all other receivables measured at amortised cost, the Group recognises lifetime expected credit losses when there has been a significant increase in credit risk since initial recognition. If the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to expected credit losses within the next 12 months. The Group considers an event of default has occurred when a financial asset is more than 90 days past due or external sources indicate that the debtor is unlikely to pay its creditors, including the Group. A financial asset is credit impaired when there is evidence that the counterparty is in significant financial difficulty or a breach of contract, such as a default or past due event has occurred. The Group writes off a financial asset when there is information indicating the counterparty is in severe financial difficulty and there is no realistic prospect of recovery. Non-financial assets The carrying amounts of the Company’s non-financial assets, other than deferred tax assets (see accounting policy 3(k)) are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. 77 N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (G) SHARE CAPITAL Ordinary shares Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit. (H) INTEREST BEARING BORROWINGS Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the statement of profit and loss and other comprehensive income over the period of the borrowings on an effective interest basis. (I) EMPLOYEE BENEFITS Defined contribution plans Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of profit and loss and other comprehensive income as incurred. Share based payment transactions The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcome. Wages, salaries, annual leave, sick leave and non-monetary benefits Liabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting from employees’ services provided to reporting date, calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date including related on-costs, such as, workers compensation insurance and payroll tax. (J) FINANCE INCOME AND EXPENSES Net finance income Net finance income comprises interest payable on borrowings calculated using the effective interest method, interest receivable on funds invested and realised foreign exchange gains and losses. Interest income is recognised in the statement of profit and loss and other comprehensive income as it accrues, using the effective interest method. 78 HAMMER METALS LIMITED / Annual Report 2021 (K) INCOME TAX Income tax on the statement of profit and loss and other comprehensive income for the periods presented comprises current and deferred tax. Income tax is recognised in the statement of profit and loss and other comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The Company and its Australian resident wholly owned subsidiaries adopted the tax consolidation legislation with effect from 1 July 2014 and are therefore taxed as a single entity from that date. Hammer Metals Ltd is the head entity within the tax-consolidated group. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the head entity in the tax-consolidated group. (L) PROVISIONS A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability. A provision for site restoration in respect of contaminated and disturbed land, and the related expense, is recognised when the land is contaminated or disturbed. Such activities include dismantling infrastructure, removal and treatment of waste material, and land rehabilitation, including restoring, topsoiling and revegetation of the disturbed area. (M) SEGMENT REPORTING Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Company. (N) EXPLORATION AND EVALUATION EXPENDITURE Exploration for and evaluation of mineral resources is the search for mineral resources after the Group has obtained legal rights to explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resources. Accordingly, exploration and evaluation expenditures are those expenditures incurred by the Group in connection with the exploration for and evaluation of minerals resources before the technical feasibility and commercial viability of extracting mineral resources are demonstrable. Accounting for exploration and evaluation expenditure is assessed separately for each area of interest. An area of interest is an individual geological area which is considered to constitute a favourable environment for the presence of a mineral deposit or has been proved to contain such a deposit. Expenditure incurred on activities that precede exploration and evaluation of mineral resources, including all expenditure incurred prior to securing legal rights to explore an area, is expensed as incurred. For each area of interest, the expenditure is recognised as an exploration and evaluation asset where the following conditions are satisfied a) The rights to tenure of the area of interest are current; and b) At least one of the following conditions is also met: 79 N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements i. The expenditure is expected to be recouped through successful development and commercial exploitation of an area of interest, or alternatively by its sale; and ii. Exploration and evaluation activities in the area of interest have not, at reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise ‘economically recoverable reserves’ and active and significant operations in, or in relation to, the area of interest are continuing. Economically recoverable reserves are the estimated quantity of product in an area of interest that can be expected to be profitably extracted, processed and sold under current and foreseeable conditions. Exploration and evaluation assets include ■ Acquisition of rights to explore; ■ Topographical, geological, geochemical and geophysical studies; ■ Exploratory drilling, trenching, and sampling and ■ Activities in relation to evaluating the technical feasibility and commercial viability of extracting the mineral resource. General and administrative costs are allocated to, and included in, the cost of exploration and evaluation assets only to the extent that those costs can be related directly to the operational activities in the area of interest to which the exploration and evaluation assets relate. In all other instances, these costs are expensed as incurred. Exploration and evaluation assets are transferred to Development Assets once technical feasibility and commercial viability of an area of interest is demonstrable. Exploration and evaluation assets are assessed for impairment, and any impairment loss is recognised prior to being reclassified. The carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective area of interest. Impairment testing of exploration and evaluation assets Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability or facts and circumstances suggest that the carrying amount exceeds the recoverable amount. Exploration and evaluation assets are tested for impairment when any of the following facts and circumstances exist: ■ The term of exploration licence in the specific area of interest has expired during the reporting period or will expire in the near future, and is not expected to be renewed; ■ Substantive expenditure on further exploitation for and evaluation of mineral resources in the specific area are not budgeted or planned; ■ Exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the decision was made to discontinue such activities in the specified are; or ■ Sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development of by sale. Where a potential impairment is indicated, an assessment is performed for each cash generating unit which is no larger than the area of interest. The Group performs impairment testing in accordance with accounting policy 3(f). Farm-in arrangements (in the exploration and evaluation phase) For exploration and evaluation asset acquisitions (farm-in arrangements) in which the Group has made arrangements to fund a portion of the selling partner’s (farmor’s) exploration and/or future development expenditures (carried interests), these expenditures are reflected in the financial statements as and when the exploration work progresses. Farm-out arrangements (in the exploration and evaluation phase) The Group does not record any expenditure made by the farmee on its account. It also does not recognise any gain or loss on its exploration and evaluation farm-out arrangements but redesignates any costs previously capitalised in relation to the whole interest as relating to the partial interest retained. Monies received pursuant to farm-in agreements are treated as a liability (advanced cash call) on receipt and until such time as the relevant expenditure is incurred 80 HAMMER METALS LIMITED / Annual Report 2021 . (O) GOVERNMENT GRANTS Government grants are recognised when there is reasonable assurance that (a) the Group will comply with the conditions attaching to them; and (b) the grants will be received; they are then recognised in profit or loss as other income or as a deduction against the carrying value of an underlying asset. The Group recognises the refundable research and development tax incentive (received under the tax legislation passed in 2011) as a government grant. This incentive is refundable to the Group regardless of whether the Group is in a tax payable position and is presented by deducting the grant from the carrying amount of the related exploration asset. (P) RIGHT-OF-USE ASSETS A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. (Q) LEASE LIABILITIES A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. 4. OTHER INCOME Management fee from farm-in partners Rental income COVID-related government assistance Fees received from preparation of exploration information Other income 30 June 2021 $ 30 June 2020 $ 141,780 - 38,500 100,000 27,739 308,019 75,798 9,185 - - 14,109 99,092 81 N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements 5. RESULT FROM OPERATING ACTIVITIES Net loss for the year before tax has been arrived at after the charging the following expenses: Depreciation of property, plant and equipment Amortisation of right-of-use assets Salary and wages Superannuation expense Share based payments Total employee costs 6. FINANCE INCOME AND FINANCE COSTS Recognised in loss for the year: Interest income Finance costs Net finance income 7. AUDITORS’ REMUNERATION Auditors of the Company - KPMG Audit services: 30 June 2021 $ 30 June 2020 $ 5,946 20,960 26,906 - - - 239,315 139,888 17,982 186,795 444,092 12,665 233,707 386,260 30 June 2021 $ 30 June 2020 $ 14,006 (4,917) 9,089 2,299 (966) 1,333 30 June 2021 $ 30 June 2020 $ Audit and review of financial reports 37,000 32,500 Non-audit services: Taxation compliance services - 37,000 34,048 66,548 82 HAMMER METALS LIMITED / Annual Report 2021 8. INCOME TAX (a) Income tax benefit Current tax Deferred tax Total income tax benefit 30 June 2021 $ 30 June 2020 $ - - - - - - Numerical reconciliation of income tax benefit to pre-tax accounting loss: Loss before income tax Income tax benefit using the Company’s domestic tax rate of 27.5% (2020: 27.5%) Adjusted for: Non-deductible expenses / (Non-Assessable Income) Under/over from prior year (611,525) (1,978,610) (168,169) (544,118) (820) - (880) - Temporary differences and tax losses not recognised 168,989 544,998 Income tax benefit - - (b) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: Temporary timing differences related to: Property, plant and equipment Investments Accrued expenses and provisions Capital raising costs Income tax losses (c) Recognised deferred tax assets & liabilities Temporary timing differences related to: Exploration and evaluation expenditure Income tax losses 539 212,976 73,772 131,500 174 271,607 53,757 99,424 7,566,723 7,483,908 7,985,510 7,908,870 N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i (4,793,097) (3,880,462) 4,793,097 3,880,462 - - l S t a t e m e n t s The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits from. 83 HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements (d) Movement of temporary differences recognised during the year ended 30 June 2021: Balance 1 July 2020 Profit or Loss Other comprehensive income Equity Balance 30 June 2021 Exploration and evaluation expenditure (3,880,462) (912,635) Carried-forward tax losses 3,880,462 912,635 - - - - - - - - (4,793,097) 4,793,097 - (e) Movement of temporary differences recognised during the year ended 30 June 2020: Exploration and evaluation expenditure Balance 1 July 2019 Profit or Loss (3,287,520) (768,355) Carried-forward tax losses 3,287,520 768,355 - - Other comprehensive income Equity - - - - - - Balance 30 June 2020 (3,880,462) 3,880,462 - 9. LOSS PER SHARE 30 June 2021 $ 30 June 2020 $ (a) Basic and dilutive loss per share calculated using the weighted average number of fully paid ordinary shares on issue at the reporting date. (0.08) cents (0.40) cents Options disclosed in Note 16(b) are potential ordinary shares which are considered anti-dilutive, therefore diluted earnings per share are the same as basic earnings per share. (b) Weighted average number of shares used in calculation of basic and dilutive earnings per share 721,519,795 490,120,306 10. CASH AND CASH EQUIVALENTS Cash at bank and on hand 30 June 2021 $ 30 June 2020 $ 9,706,093 2,678,535 The Group’s exposure to interest rate risk and sensitivity analysis for financial assets and financial liabilities are disclosed in Note 26. 84 HAMMER METALS LIMITED / Annual Report 2021 11. TRADE AND OTHER RECEIVABLES Current GST receivable Security deposit Exploration grant receivable Other receivables Trade and other receivables are non-interest bearing. 12. OTHER FINANCIAL ASSETS Non - Current Investments in other entities 30 June 2021 $ 30 June 2020 $ 23,733 25,150 - 91,959 5,704 38,858 99,000 11,166 140,842 154,728 30 June 2021 $ 30 June 2020 $ Listed shares in TSXV and ASX-listed companies - at fair value 484,299 271,097 The Group’s exposure to equity price risk and sensitivity analysis in disclosed in Note 26. Listed shares recognised as non-current assets have been recognised at fair value through profit or loss (“FVTPL”). 13. PLANT AND EQUIPMENT Office equipment and fittings at cost Accumulated depreciation Net book value 14. RIGHT-OF-USE ASSETS Plant and equipment – right of use Less: accumulated depreciation Total right-of-use assets Movements in right-of-use assets for the period: Opening balance at the beginning of the period Additions for the period Depreciation Disposals 30 June 2021 $ 30 June 2020 $ 258,852 252,906 (258,852) (252,906) - - 30 June 2021 $ 30 June 2020 $ 324,262 (20,960) 303,202 71,570 252,592 (20,960) - 71,570 - 71,570 - 71,570 - - N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s 85 Closing balance at the end of the period 303,202 71,570 HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements 15. EXPLORATION AND EVALUATION EXPENDITURE Balance at 1 July Exploration and evaluation expenditure incurred Tenements acquired Exploration grants received Research and development grant received Balance at 30 June 30 June 2021 $ 30 June 2020 $ 14,110,772 11,954,619 4,030,106 2,461,092 50,000 - (377,224) (90,000) (384,209) (214,939) 17,429,445 14,110,772 The ultimate recovery of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective areas of interest at an amount greater than or equal to carrying value. Refer note 3 (n). Expenses capitalised to Exploration and Evaluation Expenditure assets for the year include direct exploration costs (drilling, rock chip programs and surveys including magnetic and SAM), laboratory costs (assaying, analysis and review), geological and geochemical consultants as well as allocated administration costs (including salary and wages) where those costs can be directly attributed to the exploration or evaluation activities upon a given area of interest. 16. TRADE AND OTHER PAYABLES Trade payables and accruals Employee Leave Accruals Share issue funds received in advance – Note 1 30 June 2021 $ 30 June 2020 $ 623,965 346,048 47,318 17,848 500,000 - 1,171,283 363,896 All trade and other payables are non-interest bearing and payable on normal commercial terms. The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 26. Note 1 – relates to funds received for the subscription of shares in the Company by a director, which was subject to shareholder approval. Approval was obtained after balance date and therefore these funds were subsequently reallocated to issued capital. 30 June 2021 $ 30 June 2020 $ 63,997 232,595 296,592 17,208 56,302 73,510 17. LEASE LIABILITIES Current lease liabilities Non-current lease liabilities 86 HAMMER METALS LIMITED / Annual Report 2021 18. ISSUED CAPITAL (a) Share capital Ordinary shares On issue at 1 July 30 June 2021 No. 30 June 2020 No. 30 June 2021 $ 30 June 2020 $ 578,356,565 351,213,748 51,429,354 46,628,496 Shares issued for cash at $0.02 per share Shares issued for cash at $0.022 per share - - 87,803,437 119,813,623 - - 1,756,069 2,635,900 Exercise of HMXOD listed options 167,105,021 19,525,757 5,649,199 683,401 Shares issued to acquire tenements 1,250,000 Shares issued for cash at $0.095 per share 56,315,727 Shares issued in lieu of fees Conversion of performance rights Exercise of unlisted options Share issue costs 875,206 1,500,000 1,250,000 - - - - - - - 50,000 5,349,994 23,500 25,392 55,000 - - - - - (305,104) (274,512) On issue at 30 June – fully paid 806,652,519 578,356,565 62,277,335 51,429,354 Terms and conditions Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. The company does not have authorised capital or par value in respect of its issued shares. In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any proceeds of liquidation. Dividends No dividends were paid or declared for the year (2020: NIL). N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s 87 HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements 18. ISSUED CAPITAL Continued (b) Options outstanding over ordinary shares Listed options (Option issue reserve) 30 June 2021 No. 30 June 2020 No. Listed HMXOD options exercisable at $0.03 on or before 30 Sep 2020 - 170,829,449 Unlisted options (Share-based payment reserve) Unlisted options exercisable at $0.032 on or before 30 Nov 2022 8,750,000 10,000,000 Unlisted options exercisable at $0.05 expiring 21 Oct 2023 Unlisted options exercisable at $0.06 expiring 21 Oct 2023 Unlisted options exercisable at $0.035 expiring 13 Dec 2022 Unlisted options exercisable at $0.035 expiring 30 Jun 2023 Unlisted options exercisable at $0.05 expiring 30 Jun 2024 Unlisted options exercisable at $0.05 expiring 30 Nov 2024 3,000,000 3,000,000 4,000,000 4,000,000 1,000,000 1,000,000 3,000,000 3,000,000 2,600,000 2,600,000 4,500,000 - 26,850,000 197,105,527 No listed options were issued during the year (2020: Nil). 4,500,000 unlisted options were granted to directors, executives and employees during the year (2020: 9,600,000). 1,250,000 unlisted options were exercised during the year (2020: Nil). No unlisted options were granted to consultants during the year (2020: 4,000,000) 167,105,021 Listed options were exercised during the year (2020: 19,525,757), and 3,724,428 lapsed (2020: Nil). 2,676,078 fully vested unlisted options expired unexercised during the period (2020: 14,300,000). Options carry no voting rights until converted to fully paid ordinary shares. All unlisted options were granted for no cash consideration. 30 June 2021 No. 30 June 2020 No. - - 750,000 750,000 750,000 750,000 750,000 750,000 5,000,000 5,000,000 6,500,000 8,000,000 (c) Performance rights Performance rights (Share-based payment reserve Managing Director Performance Rights – Tranche 1 Managing Director Performance Rights – Tranche 2 Managing Director Performance Rights – Tranche 3 Managing Director Performance Rights – Tranche 4 Managing Director Performance Rights – Tranche 5 88 HAMMER METALS LIMITED / Annual Report 2021 The following performance rights were granted during the period (refer note 21): 18. ISSUED CAPITAL Continued Managing Director Performance Rights - - - - - Tranche 1 Tranche 2 Tranche 3 Tranche 4 Tranche 5 Number of options Vesting Date Vesting Condition Expiry Date 750,000 21/10/2020 - 13/12/2023 750,000 21/10/2020 Note 1 13/12/2023 750,000 21/10/2021 - 13/12/2023 750,000 21/10/2021 Note 2 13/12/2023 5,000,000 Note 3 Note 3 13/12/2023 All performance rights require the managing director to remain employed until vesting date. For Tranches 1 and 3, these rights vest on the vesting date (being the service period) with no additional vesting condition. Tranches 2, 4 and 5 contain additional performance condition as follows: - Tranche 2 performance rights include a vesting condition of maintaining a minimum share price of $0.031 for a period of 30 Days at any point during the vesting period. - Tranche 4 performance rights include a vesting condition of maintaining a minimum share price of $0.036 for a period of 30 Days at any point during the vesting period. - Tranche 5 performance rights include a vesting condition of the satisfactory completion of a transaction in accordance with the terms outlined in the Company’s Notice of AGM dated 8 October 2019. 19. RESERVES Share-based payment reserve (1) Balance at beginning of period Options issued to Directors and executives Options issued to Employees and contractors Performance rights issued to Managing Director Options exercised during the period Performance rights exercised during the period Further vesting expense of options and rights issued in previous periods Option issue reserve (2) Balance at beginning of period Options exercised during the period Lapse of unexercised options 30 June 2021 $ 30 June 2020 $ 1,144,698 910,991 105,750 - - (15,000) (25,392) 81,045 35,967 155,700 42,040 - - - 1,291,101 1,144,698 650,225 (636,049) (14,176) 747,854 (97,629) - - 650,225 1,291,101 1,794,923 N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s 89 HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements (1) The share-based payment reserve is used to record the fair value of options and rights issued to Directors and employees and consultants under various share-based payment schemes and options issued for the acquisition of assets. (2) The option issue reserve is used to record the value of listed options issued under an entitlement issue during a previous financial year, less the costs of that issue. All listed options either were exercised or lapsed during the period, therefore the balance of the reserve is now nil. 20. COMMITMENTS a) Exploration Expenditure Commitments In order to maintain current rights of tenure to exploration tenements the Company is required to perform minimum exploration work to meet the minimum expenditure requirements specified by various State Governments within Australia. These obligations may be reset when application for a mining lease is made and at other times. The Group has a minimum expenditure commitment on tenure under its control. The Company can apply for exemption from compliance with the minimum exploration expenditure requirements. These obligations are not provided for in the financial report and are payable: Consolidated Company 30 June 2021 $ 30 June 2020 $ 30 June 2021 $ 30 June 2020 $ Annual minimum exploration expenditure 2,325,718 1,590,410 - - 21. SHARE BASED PAYMENTS Incentive Option Plan The Hammer Metals Incentive Option Plan was approved by shareholders on 14 November 2019. The key features of this plan are: (a) The plan will be available to directors, employees and other permitted persons of the Company and its subsidiaries. (b) Options are granted for no consideration. (c) The options are issued at an exercise price as determined by the Board from time to time. (d) The number of shares the subject of options issued under this plan and other similar plans will not exceed 5% of the Company’s issued capital from time to time. (e) If a holder ceases to be an eligible participant of the plan during the exercise period of a vested option, the holder may exercise the options within 30 days of ceasing to be an eligible participant and thereafter the options will lapse. (f) The options issued under this plan shall not be quoted on ASX. (g) The options’ terms are at the discretion of the Directors. The number and weighted average exercise price of unlisted share options on issue is as follows: 90 HAMMER METALS LIMITED / Annual Report 2021 21. SHARE BASED PAYMENTS Continued 30 June 2021 30 June 2020 No of unlisted options Weighted average exercise price No of unlisted options Weighted average exercise price Outstanding at 1 July 26,276,078 Granted during the period 4,500,000 Exercised during the period (1,250,000) $0.044 $0.050 $0.032 26,276,078 - (13,600,000) Expired / lapsed during the period (2,676,078) $0.070 (14,300,000) Outstanding at 30 June Exercisable at 30 June 26,850,000 22,850,000 $0.045 26,276,078 8,000,000 $0.051 - $0.061 $0.044 $0.044 The options outstanding at year end have exercise prices ranging from $0.032 to $0.07 and a weighted average remaining contractual life of 2.652 years. The following options were granted during the prior year. Number of options granted Date granted % Vested % Forfeited / Lapsed Financial year in which grant vested / will vest Key Management Personnel Russell Davis 2,000,000 30 November 2020 Zbigniew Lubieniecki 1,500,000 30 November 2020 David Church 1,000,000 30 November 2020 100% 100% 100% - - - - - - The fair value of the options issued during the year to Key Management Personnel was determined by reference to the Black-Scholes option pricing model. The key inputs and valuations are summarised as follows: Underlying security spot price on grant date Exercise price Grant date Expiration date Vesting date Life (years) Volatility Risk free rate Dividend Yield Number of options Valuation per option Remaining life (years) Directors $0.037 $0.05 30 November 2020 30 November 2024 Immediate 4 100% 0.20% - 4,500,000 $0.0235 3.4 N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s 91 HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements 21. SHARE BASED PAYMENTS Continued Granted during previous financial years The following options were granted during the prior year: Key Management Personnel Number of options granted Date granted % Vested Mr D Thomas – Tranche A 3,000,000 14 November 2019 100% Mr D Thomas – Tranche B 4,000,000 14 November 2019 0% Employees and contractors Corporate advisors – Tranche A Corporate advisors – Tranche B 2,600,000 23 June 2020 100% 1,000,000 14 November 2019 100% 3,000,000 23 June 2020 100% % Forfeited / Lapsed Financial year in which grant vested / will vest 0% 0% 0% 0% 0% 30 June 2021 30 June 2022 30 June 2020 30 June 2020 30 June 2020 The fair value of the options issued during the prior year to Key Management Personnel was determined by reference to the Black- Scholes option pricing model. The key inputs and valuations are summarised as follows: Mr D Thomas – Tranche A Mr D Thomas – Tranche B Mr M Pitts Corp. Advisors – Tranche A Corp. Advisors – Tranche B Underlying security spot price on grant date $0.021 $0.021 Exercise price $0.05 $0.06 $0.04 $0.05 $0.021 $0.04 $0.035 $0.035 Grant date 14 Nov 2019 14 Nov 2019 23 Jun 2020 14 Nov 2019 23 Jun 2020 Expiration date 21 Oct 2023 21 Oct 2023 30 Jun 2024 13 Dec 2022 30 Jun 2023 Vesting date Life (years) Volatility Risk free rate Dividend Yield 21 Oct 2020 21 Oct 2021 Immediate Immediate Immediate 4 100% 0.795% - 4 100% 0.795% - 4 100% 0.340% - 3 100% 0.795% - 3 100% 0.340% - Number of options 3,000,000 4,000,000 500,000 1,000,000 3,000,000 Valuation per option $0.0111 $0.0105 $0.0260 $0.0110 $0.0257 Remaining life (years) 2.3 2.3 3.0 1.5 2.0 Total value $33,360 $42,080 $13,000 $11,000 $77,100 Value recognised to date Value still to be recognised $33,360 $33,354 $13,000 $11,000 $77,100 - $6,726 - - - The above options issued to Mr Thomas include a service condition for the individual to remain employed until the vesting date. There are no further vesting conditions attached to the options issued to Mr Pitts or the Corporate Advisors. 92 HAMMER METALS LIMITED / Annual Report 2021 The number of performance rights on issue is as follows: 21. SHARE BASED PAYMENTS Continued Outstanding at 1 July Granted during the period Exercised during the period Expired / lapsed during the period Outstanding at 30 June Vested and exercisable at 30 June 30 June 2021 No. 30 June 2020 No. 8,000,000 - - 8,000,000 (1,500,000) - - - 6,500,000 8,000,000 - - The fair value of the performance rights issued during the prior year to Key Management Personnel was determined by reference to the underlying security on the date of issue, adjusted as necessary for any market-based performance conditions. The key inputs and valuations are summarised as follows: Mr D Thomas – Tranche 1 Mr D Thomas – Tranche 2 Mr D Thomas – Tranche 3 Mr D Thomas – Tranche 4 Mr D Thomas – Tranche 5 Underlying security spot price on grant date $0.021 $0.021 $0.021 $0.021 $0.021 Grant date 14 Nov 2019 14 Nov 2019 14 Nov 2019 14 Nov 2019 14 Nov 2019 Expiration date 13 Dec 2023 13 Dec 2023 13 Dec 2023 13 Dec 2023 13 Dec 2023 Vesting date Life (years) Discount applied (Note 1) Number of rights Value per right Remaining life (years) (Note 2) 21 Oct 2020 21 Oct 2020 21 Oct 2021 21 Oct 2021 Note 3 4.1 - 750,000 $0.021 4.1 39% 750,000 $0.0129 4.1 - 4.1 26% 4.1 - 750,000 $0.021 750,000 5,000,000 $0.0156 $0.021 N/A N/A 2.5 2.5 2.5 Total value $15,750 $9,642 $15,750 $11,729 $105,000 Value recognised to date Value still to be recognised $15,750 $9,642 $13,233 $9,854 $41,859 - - $2,517 $1,875 $63,141 Note 1 – this discount represents the expected likelihood that the share-price hurdle condition would be met and was determined by an independent valuation. Note 2 – the remaining life represents the time, in years, left until the expiry of the right. The rights may vest before this date, as noted for tranches 1 and 2. Note 3 – Tranche 5 contains a performance-based vesting condition. For measurement and recognition purposes, it has been estimated that these rights would vest over their entire life. 93 N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements 22. RELATED PARTIES Key Management Personnel Compensation: The following were key management personnel of the Group at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period: Executive Directors Mr D Thomas Non-executive Directors Mr R Davis Mr Z Lubieniecki Mr D Church (appointed 1 July 2020) Executives Mr M Pitts (Company Secretary) The key management personnel compensation comprised: Short-term employee benefits Post-employment benefits Share-based payments 30 June 2021 $ 30 June 2020 $ 489,208 412,216 37,050 186,794 713,052 16,301 91,007 519,524 Remuneration levels are competitively set to attract and retain appropriately qualified and experienced Directors and executives. Remuneration packages include a mix of fixed remuneration and equity-based remuneration. Information regarding individual Directors and executive’s compensation and some equity instruments disclosures as permitted by Corporations Regulations 2M.3.03 and 2M.6.04 is provided in the remuneration report section of the Directors’ report. Certain key management personnel, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities. Some of these entities (as detailed below) transacted with the Group during the reporting period. The aggregate value of transactions and outstanding balances relating to this entity were as follows: Transaction value year ended Balance outstanding as at Transaction 30 June 2021 $ 30 June 2020 $ 30 June 2021 $ 30 June 2020 $ Mr Z Lubieniecki Consulting Fees Mr M Pitts Accounting services 40,708 41,520 58,875 41,140 - 3,670 9,075 1,280 The Company paid fees to Endeavour Corporate, a company associated with Mark Pitts, for accounting and financial reporting services provided to the company. The Company also paid fees to Zbigniew Lubieniecki, as consulting fees for geological services provided. 94 HAMMER METALS LIMITED / Annual Report 2021 Country of Incorporation Percentage held 2021 Percentage held 2020 23. INTEREST IN OTHER ENTITIES Name Parent and ultimate controlling entity Hammer Metals Limited Subsidiaries Hammer Metals Australia Pty Ltd Mt. Dockerell Mining Pty Ltd Mulga Minerals Pty Ltd Carnegie Exploration Pty Ltd Australia Australia Australia Australia Hammer Bulk Commodities Pty Ltd (i) Australia Midas Metals Asia Pty Ltd (i) Australia 100% 100% 100% 100% 100% 85% 100% 100% 100% 100% 100% 85% (i) These subsidiaries are dormant and have not traded during the year. The investments held in controlled entities are included in the financial statements of the parent at cost. Element Minerals Australia Pty Ltd was disposed of on 28 June 2019. Refer Note 28 for details. Carnegie Exploration Pty Ltd was acquired on 21 May 2019. Refer Note 22 for details. Joint arrangements The Group has the following farm-in / farm-out arrangements: Dronfield The Group has a farm-in agreement in relation to a tenement held in the Mt. Isa region. The Group has earned an 80% interest in the project. The Group’s interest in the above arrangement includes capitalised exploration phase expenditure totalling $659,627 at 30 June 2021 and is included in exploration and evaluation assets (note 15). Mt Frosty – Mt Isa Mines (Glencore) During a previous financial year the Group (through its wholly owned subsidiary Mulga Minerals Pty Ltd (‘Mulga’)) completed the acquisition of a 51% interest in the Mt. Frosty prospect and agreed terms for a new joint venture agreement with Mount Isa Mines Limited (‘MIM’) (a 100% owned subsidiary of Glenore PLC). Each party to the joint arrangement contributes exploration expenditure according to their participating interest (Hammer – 51% and MIM – 49%). Dilution provisions apply if a party elects not to contribute to a programme. If a party’s participating interest falls below 10% their interest will convert to a 3% Net Profits Royalty. Mulga acts as the initial manager of the joint arrangement. The Group’s interest in the above arrangement includes capitalised exploration phase expenditure totalling $594,717 at 30 June 2021 and is included in exploration and evaluation assets (note 15). N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i Mt Isa East JV – JOGMEC/SMMO The Agreement with Japan Oil, Gas and Metals National Corporation (“JOGMEC“) was signed in November 2019 and covers sections of the Even Steven, Mount Philp, Dronfield West and Malbon targets for a total area of approximately 290km2 of the 2,200km2 Mount Isa Project. The arrangement is referred to as the Mount Isa East Joint Venture, however in accordance with the Australian Accounting Standards is a joint arrangement by nature. During the Farm-in period, JOGMEC can achieve a 60% interest in the project areas by expending $6,000,000 by 31 March 2024. The Farm-in Period is staged as follows, noting that JOGMEC earns its interest after the completion of the Fifth and final Farm-in Period: l S t a t e m e n t s 95 HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements ■ The First Farm-in Period is a minimum expenditure of $1,000,000 by 31 March 2020 before JOGMEC can withdraw from the agreement; ■ The Second Farm-in Period is an aggregate expenditure of $2,000,000 by 31 March 2021; ■ The Third Farm-in Period is an aggregate expenditure of $3,000,000 by 31 March 2022; ■ The Fourth Farm-in Period is an aggregate expenditure of $4,500,000 by 31 March 2023; and ■ The Fifth and final Farm-in Period is an aggregate expenditure of $6,000,000 by 31 March 2024. Upon completion of the Fifth Farm-in Period, each company can elect to contribute its pro-rata share of future funding. If either party does not contribute and is diluted to an ownership of less than 10% of the Mt Isa East JV, the Group’s equitable interest will convert to a 2% Net Smelter Return Royalty. At any time, the Net Smelter Royalty Return Rate can be reduced to 1% via the payment of A$2,000,000. The areas of interest are all 100% held by the Company’s subsidiaries Mt Dockerell Mining Pty Ltd and Mulga Minerals Pty Ltd. Subsequent to the end of the financial year, JOGMEC and Sumitomo Metal Mining Oceania Pty. Ltd. (“SMMO”) signed an agreement whereby JOGMEC would transfer its position within the Mt Isa East JV to SMMO. The terms of the agreement remain unchanged. Refer Note 28. 24. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES Loss for the year Adjustments for: Depreciation and amortisation Share based payments Fair value adjustment on financial assets Gain on disposal of subsidiary Interest expense Management fee from farm-in partners Shares issued in lieu of fees Movements attributable to operating activities: Decrease / (increase) in trade and other receivables Increase / (decrease) in trade and other payables Net cash used in operating activities 30 June 2021 $ 30 June 2020 $ (611,525) (1,978,610) 26,906 186,795 (213,202) - 233,707 987,661 - (58,424) 4,917 71 (141,780) (75,798) 23,500 - (41,504) 146,221 (13,743) 106,038 (619,672) (799,098) 25. SEGMENT INFORMATION The Group has three reportable segments, being mineral exploration in Queensland and Western Australia, and corporate activities. The Group’s operating segments have been determined with reference to the monthly management accounts, program budgets and cash flow forecasts used by the chief operating decision maker to make decisions regarding the Group’s operations and allocation of working capital. Segment information The following tables represent revenue and profit information and certain asset and liability information regarding geographical segments for the year ended 30 June 2021. 96 HAMMER METALS LIMITED / Annual Report 2021 25. SEGMENT INFORMATION (Continued) Queensland Exploration $ Western Australia Exploration $ Corporate Overheads $ 30 June 2021 Segment income - Segment loss before income tax expense (17,782) - (273) 308,019 (611,525) Segment assets Segment liabilities 30 June 2020 Segment income Segment loss before income tax expense 12,914,534 (139,607) 4,514,911 (22,842) 10,634,536 (1,305,426) - (337) - 99,092 (8,261) (1,946,671) Segment assets Segment liabilities 11,947,179 (18,448) 406,267 (101,983) 4,933,256 (316,975) 26. FINANCIAL INSTRUMENTS DISCLOSURES Overview The Group has exposure to the following risks from their use of financial instruments: Credit risk Liquidity risk Market risk This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the Group through regular reviews of the risks. Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers and investment securities. Trade and other receivables As the Company operates in the mining exploration sector it does not have significant trade receivables and is therefore not exposed to credit risk in relation to trade receivables. The Group receives advanced cash calls from its farm-in / joint arrangement partner which are classified as liabilities. The cash call amounts are reduced as and when expenditure in terms of the farm-in/ joint arrangement agreement is incurred. Presently, the Group undertakes exploration and evaluation activities in Australia. At the balance sheet date there were no significant concentrations of credit risk. Exposure to credit risk The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was: 97 N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements Carrying amount 30 June 2021 $ 9,706,093 140,842 30 June 2020 $ 2,678,535 154,728 Note 10 11 Cash and cash equivalents Trade and other receivables Impairment losses None of the Group’s trade and other receivables are past due and impaired (2020: Nil). Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due (refer Note 2(f)). The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows. Typically, the Group ensures it has sufficient cash on demand to meet expected operational expenses for a period of 90 days, this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The expected settlement of the Group’s financial liabilities is as follows. Consolidated Carrying Amount Contractual Cash-Flows < 6 months 6-12 months 1-2 years 2-5 years 30 June 2021 1,171,283 1,171,283 1,171,283 - - - Trade and Other Payables 296,592 320,305 36,201 36,201 72,401 175,502 Lease liabilities 1,467,875 1,491,588 1,207,484 36,201 72,401 175,502 30 June 2021 363,896 363,896 363,896 - Trade and Other Payables 73,510 78,886 8,606 8,606 Lease liabilities 437,406 442,782 372,502 8,606 - 17,212 17,212 - 44,462 44,462 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Currency risk The Group has no exposure to currency risk on investments and transactions that are denominated in a currency other than the respective functional currencies of Group entities. The Group has not entered into any derivative financial instruments to hedge such transactions and anticipated future receipts or payments that are denominated in a foreign currency. Interest rate risk The Group is not exposed to interest rate risk on borrowings as it has no borrowings subject to variable interest. The Group is exposed to interest rate risk on its cash balances. Profile At the reporting date the interest rate profile of the Company’s and the Group’s interest-bearing financial instruments was: 98 HAMMER METALS LIMITED / Annual Report 2021 Fixed rate instruments Cash and cash equivalents Weighted average interest rates Variable rate instruments Cash and cash equivalents Weighted average interest rates Carrying amount 30 June 2021 $ 30 June 2020 $ 22,256 0.25% 21,992 1.20% 9,683,837 2,656,543 0.01% 0.41% Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss or equity (2020: Nil) Cash flow sensitivity analysis for variable rate instruments A sensitivity of 50 basis points has been used and considered reasonable given current interest rates. A 0.5% movement in interest rates at the reporting date would have increased equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis for 2020 was performed on the same basis. Consolidated Loss Equity 50bp increase 50bp decrease 50bp increase 50bp decrease 30 June 2021 Variable rate instruments $48,419 ($48,419) $48,419 ($48,419) 30 June 2020 Variable rate instruments $13,283 ($13,283) $13,283 ($13,283) Carrying amounts versus fair values The fair values of financial assets and liabilities materially equates to the carrying amounts shown in the statement of financial position. Financial assets carried at fair value through profit or loss Equity securities – listed on TSXV at quoted prices 484,299 271,097 30 June 2021 $ 30 June 2020 $ Financial assets carried at amortised costs Cash and cash equivalents Trade and other receivables Financial liabilities carried at amortised costs Trade and other payables Lease liabilities 9,706,093 2,678,535 140,842 154,728 (1,171,283) (363,896) (296,592) (73,510) 99 N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i l S t a t e m e n t s HAMMER METALS LIMITED / Annual Report 2021 Notes To The Consolidated Financial Statements Other Market Price Risk Other Equity price risk is the risk that the value of the instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market. Investments are managed on an individual basis and material buy and sell decisions are approved by the Board of Directors. The primary goal of the Group’s investment strategy is to maximise investment returns. Fair value sensitivity analysis for equity securities (listed investments) A sensitivity of 10% has been used and considered reasonable given current market rates. A 10% movement in market prices at the reporting date would have increased equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis for 2020 was performed on the same basis. Consolidated Loss Equity 10% increase 10% decrease 10% increase 10% decrease 30 June 2021 Equity securities – listed on TSXV $48,430 ($48,430) $48,430 ($48,430) 30 June 2020 Equity securities – listed on TSXV $27,110 ($27,110) $27,110 ($27,110) Commodity Price Risk The Group operates primarily in the exploration and evaluation phase and accordingly the Group’s financial assets and liabilities are subject to minimal commodity price risk at this stage. Capital Management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so as to maintain a strong capital base sufficient to maintain future exploration and development of its projects. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets to reduce debt. The Group’s focus has been to raise sufficient funds through equity to fund exploration and evaluation activities. There were no changes in the Group’s approach to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. 100 HAMMER METALS LIMITED / Annual Report 2021 27. PARENT ENTITY DISCLOSURES Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Issued capital Accumulated losses Reserves Total equity Financial Performance Loss for the year Other comprehensive income Total comprehensive income Company 30 June 2021 $ 30 June 2020 $ 21,241,534 10,822,666 6,729,891 6,341,410 27,971,425 17,164,076 1,200,479 258,478 174,840 56,302 1,375,319 314,780 26,596,106 16,849,296 62,277,335 51,429,354 (36,972,330) (36,374,981) 1,291,101 1,794,923 26,596,106 16,849,296 (597,349) (1,978,610) - - (597,349) (1,978,610) There were no contingent liabilities of the parent entity at 30 June 2021 (2020: None), nor where there any commitments of the parent entity (2020: None). 28. EVENTS SUBSEQUENT TO BALANCE DATE Subsequent to year end the following events have occurred: N o t e s T o T h e C o n s o l i d a t e d i F n a n c a i ■ On 15 July 2021, the Company issued 6,842,104 shares to Directors of the Company, which related to the Director’s participation in the placement completed in April 2021. These shares were issued at $0.095 per share, raising $650,000 before costs. ■ On 19 August 2021, the Company announced that Japan Oil, Gas and Metals National Corporation (“JOGMEC”) and Sumitomo Metal Mining Oceania Pty. Ltd. (“SMMO”) had signed an agreement whereby JOGMEC would transfer its position within the Mt Isa East JV to SMMO. The original terms of the agreement between the Company and JOGMEC remain unchanged, with the JV partner required to spend $6 million over 5 years to earn a 60% interest in the project. l S t a t e m e n t s Other than the above, there has not been any other matter or circumstance that has arisen after balance date that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods. 101 HAMMER METALS LIMITED / Annual Report 2021 Directors’ Declaration Directors’ Declaration 1. In the opinion of the Directors of Hammer Metals Limited (“the Company”): (a) the consolidated financial statements and notes and the remuneration report in the Directors’ report, are in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. The Directors have been given the declarations by the managing director and company secretary for the financial year ended 30 June 2020 pursuant to Section 295A of the Corporation Act 2001. 3. The Directors draw attention to Note 2(a) to the consolidated financial statements, which includes a statement of compliance with International Financial Reporting Standards. Signed in accordance with a resolution of the Directors: R Davis Executive Chairman Perth Dated 29 September 2021 102 HAMMER METALS LIMITED / Annual Report 2021 Independent Auditor’s Report To the shareholders of Hammer Metals Limited Independent Auditor’s Report Independent Auditor’s Report To the shareholders of Hammer Metals Limited Report on the audit of the Financial Report To the shareholders of Hammer Metals Limited Report on the audit of the Financial Report Opinion Report on the audit of the Financial Report We have audited the Financial Report of Hammer Metals Limited (the Company). Opinion In our opinion, the accompanying Financial Opinion We have audited the Financial Report of Report of the Company is in accordance with the Hammer Metals Limited (the Company). Corporations Act 2001, including: We have audited the Financial Report of In our opinion, the accompanying Financial Hammer Metals Limited (the Company). • giving a true and fair view of the Group’s Report of the Company is in accordance with the financial position as at 30 June 2020 and of In our opinion, the accompanying Financial Corporations Act 2001, including: its financial performance for the year ended Report of the Company is in accordance with the • giving a true and fair view of the Group’s on that date; and Corporations Act 2001, including: financial position as at 30 June 2021 and of • complying with Australian Accounting • giving a true and fair view of the Group’s its financial performance for the year ended Standards and the Corporations Regulations financial position as at 30 June 2021 and of on that date; and 2001. its financial performance for the year ended complying with Australian Accounting on that date; and Standards and the Corporations Regulations complying with Australian Accounting 2001. Standards and the Corporations Regulations 2001. • • The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2020 The Financial Report comprises: • Consolidated statement of profit or loss and other • Consolidated statement of financial position The Financial Report comprises: comprehensive income, Consolidated statement as at 30 June 2021. • Consolidated statement of financial position of changes in equity, and Consolidated statement • Consolidated statement of profit or loss and as at 30 June 2021. of cash flows for the year then ended other comprehensive income, Consolidated • Consolidated statement of profit or loss and • Notes including a summary of significant statement of changes in equity, and other comprehensive income, Consolidated accounting policies Consolidated statement of cash flows for the statement of changes in equity, and year then ended. • Directors’ Declaration. Consolidated statement of cash flows for the • Notes including a summary of significant year then ended. The Group consists of the Company and the entities accounting policies. it controlled at the year-end or from time to time • Notes including a summary of significant during the financial year. • Directors’ Declaration. accounting policies. Basis for opinion The Group consists of the Company and the • Directors’ Declaration. entities it controlled at the year-end or from time The Group consists of the Company and the to time during the financial year. entities it controlled at the year-end or from time We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit to time during the financial year. evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Basis for opinion I n d e p e n d e n t A u d i t o r ’ s R e p o r t Our responsibilities under those standards are further described in the Auditor’s responsibilities for the Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit audit of the Financial Report section of our report. evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit We are independent of the Group in accordance with the Corporations Act 2001 and the ethical Our responsibilities under those standards are further described in the Auditor’s responsibilities for evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for the audit of the Financial Report section of our report. Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of Our responsibilities under those standards are further described in the Auditor’s responsibilities for the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the We are independent of the Group in accordance with the Corporations Act 2001 and the ethical the audit of the Financial Report section of our report. Code. requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics We are independent of the Group in accordance with the Corporations Act 2001 and the ethical for Professional Accountants (including Independence Standards) (the Code) that are relevant to our requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in Key Audit Matters for Professional Accountants (including Independence Standards) (the Code) that are relevant to our accordance with the Code. audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. Key Audit Matters are those matters that, in our professional judgement, were of most significance in our Key Audit Matters audit of the Financial Report of the current period. Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our audit of the Financial Report of the current period. our opinion thereon, and we do not provide a separate opinion on this matter. Key Audit Matters are those matters that, in our professional judgement, were of most significance in This matter was addressed in the context of our audit of the Financial Report as a whole, and in our audit of the Financial Report of the current period. forming our opinion thereon, and we do not provide a separate opinion on this matter. This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. - 47 - KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated a scheme approved under Professional Standards Legislation with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation 103 HAMMER METALS LIMITED / Annual Report 2021 Independent Auditor’s Report Exploration and evaluation expenditure capitalised ($17,429,445) Exploration and evaluation expenditure capitalised ($17,429,445) Refer to Note 15 ‘Exploration and Evaluation expenditure’ to the Financial Report Refer to Note 15 ‘Exploration and Evaluation expenditure’ to the Financial Report The key audit matter How the matter was addressed in our audit The key audit matter Exploration and evaluation expenditure capitalised (E&E) is a key audit matter due to: Exploration and evaluation expenditure • The significance of the activity to the Group’s capitalised (E&E) is a key audit matter due to: business and] the balance (being 62% of • The significance of the activity to the Group’s total assets); and business and] the balance (being 62% of • The greater level of audit effort to evaluate total assets); and the Group’s application of the requirements • The greater level of audit effort to evaluate of the industry specific accounting standard the Group’s application of the requirements AASB 6 Exploration for and Evaluation of of the industry specific accounting standard Mineral Resources, in particular the AASB 6 Exploration for and Evaluation of conditions allowing capitalisation of relevant Mineral Resources, in particular the expenditure and presence of impairment conditions allowing capitalisation of relevant indicators. The presence of impairment expenditure and presence of impairment indicators would necessitate a detailed indicators. The presence of impairment analysis by the Group of the value of E&E, indicators would necessitate a detailed therefore given the criticality of this to the analysis by the Group of the value of E&E, scope and depth of our work, we involved therefore given the criticality of this to the senior team members to challenge the scope and depth of our work, we involved Group’s determination that no such senior team members to challenge the indicators existed. Group’s determination that no such indicators existed. In assessing the conditions allowing capitalisation of relevant expenditure, we focused on: In assessing the conditions allowing capitalisation • The determination of the areas of interest of relevant expenditure, we focused on: • The determination of the areas of interest • Documentation available regarding rights to (areas). tenure, via licensing, and compliance with • Documentation available regarding rights to relevant conditions, to maintain current rights tenure, via licensing, and compliance with to an area of interest and the Group’s relevant conditions, to maintain current rights intention and capacity (including the ability to to an area of interest and the Group’s fund) to continue the relevant E&E activities. intention and capacity (including the ability to • The Group’s determination of whether the fund) to continue the relevant E&E activities. E&E are expected to be recouped through • The Group’s determination of whether the successful development and exploitation of E&E are expected to be recouped through the area of interest, or alternatively, by its successful development and exploitation of sale. the area of interest, or alternatively, by its sale. In assessing the presence of impairment indicators, we focused on those that may draw In assessing the presence of impairment into question the commercial continuation of indicators, we focused on those that may draw E&E activities for areas of interest where into question the commercial continuation of significant capitalised E&E exists. In addition to E&E activities for areas of interest where the assessments above, we paid particular significant capitalised E&E exists. In addition to attention to results from latest exploration the assessments above, we paid particular activities regarding the existence or otherwise of attention to results from latest exploration potentially commercially viable quantity of activities regarding the existence or otherwise of reserves and resources. potentially commercially viable quantity of reserves and resources. (areas). 104 How the matter was addressed in our audit Our procedures included: • Evaluating the Group’s accounting policy to Our procedures included: recognise E&E using the criteria in the • Evaluating the Group’s accounting policy to accounting standard. recognise E&E using the criteria in the • Assessing the Group’s determination of its accounting standard. areas of interest for consistency with the • Assessing the Group’s determination of its definition in the accounting standard. This areas of interest for consistency with the involved evaluating the Group’s planned definition in the accounting standard. This exploration programmes as well as involved evaluating the Group’s planned announcements made to the ASX. exploration programmes as well as • Assessing the Group’s current rights to announcements made to the ASX. tenure for each area of interest by checking • Assessing the Group’s current rights to the ownership of the relevant license to tenure for each area of interest by checking government registries and evaluating the ownership of the relevant license to agreements in place with other parties. We government registries and evaluating also tested for compliance with conditions, agreements in place with other parties. We such as minimum expenditure requirements, also tested for compliance with conditions, on a sample of licenses. such as minimum expenditure requirements, • Testing the Group’s additions to E&E for the on a sample of licenses. year by evaluating a statistical sample of • Testing the Group’s additions to E&E for the recorded expenditure for consistency to year by evaluating a statistical sample of underlying records, the capitalisation recorded expenditure for consistency to requirements of the Group’s accounting underlying records, the capitalisation policy and the requirements of the requirements of the Group’s accounting accounting standard. policy and the requirements of the • Evaluating Group documents, such as accounting standard. minutes of Board meetings, for consistency • Evaluating Group documents, such as with their stated intentions regarding minutes of Board meetings, for consistency continuing activities in certain areas of with their stated intentions regarding interest and the expectation of recoupment continuing activities in certain areas of of E&E. We corroborated this through interest and the expectation of recoupment interviews with key operational and finance of E&E. We corroborated this through personnel and announcements made by the interviews with key operational and finance Group to the ASX. personnel and announcements made by the • Evaluating project and corporate budgets Group to the ASX. identifying areas with existing funding and • Evaluating project and corporate budgets those requiring alternate funding sources to identifying areas with existing funding and assess the Group’s capacity to continue E&E those requiring alternate funding sources to activities and for consistency with the assess the Group’s capacity to continue E&E expectation of recoupment of E&E. We activities and for consistency with the compared the allocation of funding for expectation of recoupment of E&E. We consistency to areas with E&E, for evidence compared the allocation of funding for of the ability to fund continued activities. consistency to areas with E&E, for evidence of the ability to fund continued activities. exploration activities regarding the potential existence of reserves and resources for exploration activities regarding the potential consistency to the treatment of E&E and the existence of reserves and resources for requirements of the accounting standard. consistency to the treatment of E&E and the requirements of the accounting standard. • Comparing the results from the latest • Comparing the results from the latest HAMMER METALS LIMITED / Annual Report 2021 Other Information Other Information Other Information is financial and non-financial information in Hammer Metals Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors Other Information is financial and non-financial information in Hammer Metals Limited’s annual are responsible for the Other Information. reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Report and the Remuneration Report. The Chairman’s Letter, Corporate Strategy, Operational The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Highlights, Corporate Activity, Operations Summary, Competent Person’s Statement Annual Mineral Report and the Remuneration Report. The Chairman’s Letter, Corporate Strategy, Operational Resource Statement, Tenements Interests and ASX Additional Information are expected to be made Highlights, Corporate Activity, Operations Summary, Competent Person’s Statement Annual Mineral available to us after the date of the Auditor's Report. Resource Statement, Tenements Interests and ASX Additional Information are expected to be made Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not available to us after the date of the Auditor's Report. and will not express an audit opinion or any form of assurance conclusion thereon, with the exception Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not of the Remuneration Report and our related assurance opinion. and will not express an audit opinion or any form of assurance conclusion thereon, with the exception In connection with our audit of the Financial Report, our responsibility is to read the Other of the Remuneration Report and our related assurance opinion. Information. In doing so, we consider whether the Other Information is materially inconsistent with In connection with our audit of the Financial Report, our responsibility is to read the Other the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially Information. In doing so, we consider whether the Other Information is materially inconsistent with misstated. the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially We are required to report if we conclude that there is a material misstatement of this Other misstated. Information, and based on the work we have performed on the Other Information that we obtained We are required to report if we conclude that there is a material misstatement of this Other prior to the date of this Auditor’s Report we have nothing to report. Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with Australian The Directors are responsible for: Accounting Standards and the Corporations Act 2001. • • preparing the Financial Report that gives a true and fair view in accordance with Australian implementing necessary internal control to enable the preparation of a Financial Report that • Accounting Standards and the Corporations Act 2001. gives a true and fair view and is free from material misstatement, whether due to fraud or implementing necessary internal control to enable the preparation of a Financial Report that error. gives a true and fair view and is free from material misstatement, whether due to fraud or • assessing the Group and Company’s ability to continue as a going concern and whether the error. use of the going concern basis of accounting is appropriate. This includes disclosing, as • assessing the Group and Company’s ability to continue as a going concern and whether the applicable, matters related to going concern and using the going concern basis of accounting use of the going concern basis of accounting is appropriate. This includes disclosing, as unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Auditor’s responsibilities for the audit of the Financial Report Our objective is: Our objective is: • • • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and to obtain reasonable assurance about whether the Financial Report as a whole is free from to issue an Auditor’s Report that includes our opinion. material misstatement, whether due to fraud or error; and • to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it Misstatements can arise from fraud or error. They are considered material if, individually or in the exists. aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on A further description of our responsibilities for the audit of the Financial Report is located at the the basis of the Financial Report. Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our A further description of our responsibilities for the audit of the Financial Report is located at the Auditor’s Report. Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our Auditor’s Report. I n d e p e n d e n t A u d i t o r ’ s R e p o r t 105 HAMMER METALS LIMITED / Annual Report 2021 Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of Hammer Metals Limited for the year ended 30 June 2021, complies with Section 300A of the Corporations Act 2001. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in section 12 of the Directors’ report for the year ended 30 June 2021. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Glenn Brooks Partner Perth 29 September 2021 KPMG 106 HAMMER METALS LIMITED / Annual Report 2021 HAMMER METALS LIMITED / Annual Report 2021 107 ASX Additional Information ASX ADDITIONAL INFORMATION Additional information required by the Australian Stock Exchange Listing Rules and not disclosed elsewhere in this report is set out below. Information regarding share and option holdings is current as at 19 October 2021. (A) ORDINARY SHAREHOLDERS Twenty largest holders of ordinary shares Number of Shares % held Central Mutual (Investments) Pty Ltd80,822,184 Mr Zbigniew Waldemar Lubieniecki Zenith Pacific Limited Davis Family Capital Pty Ltd 62,664,283 50,000,000 39,378,947 BNP Paribas Nominees Pty Ltd 36,863,743 BNP Paribas Nominees Pty Ltd Six Sis Ltd Lundie Investments Pty Ltd HSBC Custody Nominees (Australia) Limited Samlisa Nominees Pty Ltd BNP Paribas Nominees Pty Ltd ACF Clearstream B + C Watson Holdings Pty Ltd Darrell James Holdings Pty Ltd Sacchetta Group Holdings Pty Ltd Mr Shane Ronald Britten Mr Ernst Kohler Mr Bryce Roy Symons AXSIM Funds Management Pty Ltd Mr Peter William Karlson + Mr Peter James Cargin Mrs Natasha Kay Clarke Mr Robert Spooner 27,906,578 25,916,704 21,126,035 20,000,000 9,950,224 9,099,999 7,000,000 6,669,414 6,352,095 4,714,273 4,400,000 4,000,000 3,850,000 3,700,000 3,300,000 9.94 7.7 6.15 4.84 4.53 3.43 3.19 2.6 2.46 1.22 1.12 0.86 0.82 0.78 0.58 0.54 0.49 0.47 0.45 0.41 427,714,479 52.58 108 HAMMER METALS LIMITED / Annual Report 2021 Significant Shareholders are: Shareholder Mr Paul Clarke Mr Zbigniew Waldemar Lubieniecki Zenith Pacific Limited Number of Shares 108,888,888 62,664,283 50,000,000 % held 13.39 7.70 6.15 Each fully paid ordinary share entitles the holder to one vote at general meetings of shareholders and is entitled to dividends when declared. The total number of shares on issue is 813,494,623. The number of shareholders holding less than a marketable parcel is 450. There is no current on market buy back. The Company has no ordinary shares which are subject to voluntary escrow. Distribution of ordinary shareholders: Category of shareholding Number of shareholders Number of shares % 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total 154 124 340 1,197 702 2,517 29,637 455,059 2,636,651 50,959,648 759,413,628 813,494,623 0.00% 0.06% 0.32% 6.26% 93.35% 100% A S X A d d i t i o n a l I n f o r m a t i o n 109 HAMMER METALS LIMITED / Annual Report 2021 www.hammermetals.com.au ASX Additional Information (B) UNQUOTED SECURITIES The Company has the following unquoted securities on issue. Category of security Number Number of holders Unlisted options exercisable at $0.032 on or before 30 November 2022 8,750,000 10 Unlisted options exercisable at $0.05 on or before 21 October 2023 Unlisted options exercisable at $0.06 on or before 21 October 2023 Unlisted options exercisable at $0.035 on or before 13 December 2022 Unlisted options exercisable at $0.05 on or before 30 June 2024 Unlisted options exercisable at $0.035 on or before 30 June 2023 Unlisted options exercisable at $0.05 on or before 30 November 2024 3,000,000 4,000,000 1,000,000 2,600,000 3,000,000 4,500,000 Performance rights expiring 13 December 2023, vesting on 21 October 2021 750,000 Performance rights expiring 13 December 2023, vesting on 21 October 2021 and upon the achievement of a share price hurdle of $0.036 for a period of 30 days Performance rights expiring 13 December 2023, vesting on the satisfaction of a suitable transaction Performance rights expiring 13 December 2023, vesting on the satisfaction of a suitable transaction 750,000 5,000,000 5,000,000 1 1 1 5 1 3 1 1 1 1 110 HAMMER METALS LIMITED / Annual Report 2021 www.hammermetals.com.au