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2023 ReportPeers and competitors of Hot Chili Limited:
Hot Chili LimitedCOPPER
POWERING
RENEWABLE
ENERGY
SYSTEMS
ANNUAL
REPORT
2021
Productora
Contents
1 Chairman’s Letter
2 Review of Operations
3 Qualifying Statements
4 Corporate Activities
5 Directors’ Report
6 Auditors’ Independence Declaration
7 Auditors’ Report
8 Directors’ Declaration
9 Statement of Comprehensive Income
10 Statement of Financial Position
11 Statement of Changes in Equity
12 Statement of Cash Flows
13 Notes to the Financial Statements
14 Shareholder Information
15 Tenement Schedule
16 Corporate Directory
4
6
28
31
33
45
46
49
50
51
52
53
54
77
78
83
HOT CHILI Annual Report 2021
Valentina
Costa
Fuego
Copper Super-Hub
Cortadera
Significant copper-gold
porphyry discovery
San
Antonio
Cortadera Project
Productora Project
El Fuego Project
(Valentina & San Antonio)
HOT CHILI Annual Report 2021
1
2021 Key
Highlights
OPERATIONAL
Costa Fuego Becomes a Leading
Global Copper Development
• Hot Chili’s combined Costa Fuego project now
ranks as one of the world’s largest low-altitude,
clean concentrate (no arsenic), copper-gold
Mineral Resources not controlled by a major
mining company
• The Cortadera maiden Mineral Resource takes the
total Mineral Resource estimate for Costa Fuego
to 724Mt at 0.48% copper equivalent (CuEq*) for
2.9Mt copper, 2.7Moz gold, 9.9Moz silver and
64kt molybdenum
• The Cortadera maiden Mineral Resource, is
one of just two major global copper discoveries
recorded in the world since 2016 (S&P Global) and
comprises (+0.25% CuEq*) 451Mt at 0.46% CuEq*,
including a higher grade component (+0.6% CuEq*)
of 104Mt at 0.74% CuEq*
Cortadera On-Track for Resource
Upgrade with High-Grade Core
Continuing to Expand
• Fully funded 40,000m drill programme underway
at the Cortadera copper-gold discovery in Chile,
with three rigs in operation 24/7
• Step-out drilling confirms that the two largest
porphyries (Cuerpo 2 and 3) join at depth, with
several extensional drilling intersections returned
post Cortadera 451Mt resource estimate
• Multiple additional high grade intersections have
demonstrated strong continuity across northern
flank of the Cuerpo 3 main porphyry, and potential
for lateral expansion of high grade core at
Cortadera, following eight world-class drill
result returned from Cortadera
• On track to deliver a significant upgrade to
Cortadera’s 451Mt maiden resource in late 2021
Pipeline of New Growth Targets
Identified and Being Prepared for
Drill Testing
• 4km long copper porphyry footprint
named Santiago Z, secured just 5km
south of Cortadera
• Exploration efforts (geochemical sampling
and surface mapping), have identified and
confirmed Santiago Z as a large-scale
copper porphyry footprint which has never
been drill tested
• First pass drill testing completed at Cortadera
North “look-alike” porphyry target with
anomalous silver returned
• Further exploration work programmes and
environmental permitting are being progressed
ahead of first-pass drill testing of Santiago Z
and the recently identified Productora Central
3D geochemical target later in 2021
Costa Fuego Pre-Feasibility
Study Commences
• Excellent initial copper recoveries and
compatible metallurgy from sulphide
testwork confirm that all three of Costa
Fuego’s deposits (Cortadera, Productora and
San Antonio) can be incorporated into one
combined development
• Wood appointed as lead engineer for Costa
Fuego Pre-Feasibility Study (PFS), aiming
to create a globally significant, low altitude,
clean concentrate, copper-gold project, which
can leverage from a central processing and
combined infrastructure approach
• Crucial water extraction rights granted for
the Costa Fuego coastal copper development,
securing a critical infrastructure requirement
and sufficient water supply to support a large-
scale conventional copper-gold operation
* Reported at or above 0.25% CuEq.
** Copper Equivalent (CuEq) reported for the resource were calculated using the following formula: CuEq% = ((Cu% × Cu price 1% per tonne ×
Cu_recovery)+(Mo ppm × Mo price per g/t × Mo_recovery)+(Au ppm × Au price per g/t × Au_recovery)+ (Ag ppm × Ag price per g/t × Ag_recovery))
/ (Cu price 1 % per tonne). The Metal Prices applied in the calculation were: Cu=3.00 USD/lb, Au=1,550 USD/oz, Mo=12 USD/lb, and Ag=18 USD/
oz. For Cortadera (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=56%, Mo=82%, and Ag=37%.
2
HOT CHILI Annual Report 2021 CORPORATE
Strong Funding, Acquisition of Cortadera and Glencore Investment
• The Company continued to be strongly supported by shareholders and new investors, raising $25.6 million
during the reporting period
• The Company’s recent $40 million capital raising (announced to ASX 6th August 2021) has secured the final
payment for the 100% acquisition of Cortadera and the continued growth and development of Costa Fuego
• Glencore, one of the world’s largest natural resource companies, becomes Hot Chili’s largest shareholder
at 9.99% through its strategic investment in the $40 million funding and adds representative Mr Mark
Jamieson to the Board of Hot Chili
Hot Chili Commences North American Listings - OTCQB & TSXV
• Hot Chili commenced trading on the US-based OTCQB Venture Market under the Ticker symbol HHLKF
(OTCQB: HHLKF) on 6th May 2021 as a first step towards enhancing the visibility and accessibility of
Hot Chili to North American shareholders.
• Hot Chili has commenced the formal application process to list on the TSX Venture Exchange (TSXV) by
the end of 2021, with the move to dual list in Canada considered a key step toward the future funding and
development of Costa Fuego.
• The Canadian market has a proven track record in supporting large-scale exploration and development
companies in the copper and gold space with the transformative dual listings from Equinox Minerals
(C$7.3Bn takeover by Barrick Gold Corp) and Andean Resources Limited (C$3.6Bn takeover by Goldcorp
Inc) the stand-outs.
• A TSXV dual listing would position Hot Chili favourably amongst its Canadian peers which trade at
significantly higher valuation multiples and who control the other leading copper developments in South
America such as Marimaca Copper Corp. (Chile, TSXV:MARI), Filo Mining Corp. (Argentina, TSXV:FIL),
Solaris Resources Inc (Ecuador, TSX: SLS), Josemaria Resources Inc. (Chile, TSX: JOSE) and SolGold Plc
(Ecuador, TSX: SOLG).
VAT Refund Approval from Chilean Tax Authority and Strong Cash
• VAT refund funds set to boost Hot Chili’s annual cash position.
3
HOT CHILI Annual Report 2021 1 Chairman’s
Letter
Dear Shareholder,
Hot Chili has remained steadfast in its vision to transform the Company into a major copper-gold producer.
Central to this vision has been the consolidation of a large coastal region capable of hosting a Tier-1 copper
endowment in the world’s largest copper producing country – Chile.
Our journey feels like it has just begun, following a stunning period of exploration success which has
catapulted Hot Chili to the largest copper developer on the ASX.
Two years ago, we executed a deal to buy a small private discovery named Cortadera located 14km from
Productora copper-gold resource, and today we stand with 100% ownership of one of the most significant
global copper discoveries of recent time and a new centrepiece to our Costa Fuego development.
The addition of Cortadera has tripled the company’s resource base, which now stands at 724Mt for 2.9Mt
copper and 2.7Moz gold. More exciting than that, is what Cost Fuego’s resource base may become
following another year of successful expansion drilling at Cortadera.
Against a challenging COVID backdrop, copper prices have surged and Hot Chili’s talented and growing
team have continued to drive the Company’s work programmes forward. This work and the Company’s
growing stature amongst senior copper developers has been endorsed by one of the world’s largest natural
resource companies with Glencore taking a 9.99% stake in the Company this year.
Our team’s grit and determination have built a rare opportunity to generate significant shareholder value at
a very exciting time for the copper sector. We aimed high from the beginning and our move to dual list the
Company in Canada continues our graduation toward production and catalysing our true value.
I look forward to another exciting year and would like to thank our people and shareholders for their ongoing
support to make Hot Chili’s vision a reality.
Murray Edward Black
Chairman
Hot Chili’s combined Costa Fuego project now ranks as
one of the world’s largest low-altitude, clean concentrate
(no arsenic), copper-gold Mineral Resources not
controlled by a major mining company.
4
HOT CHILI Annual Report 2021 Costa Fuego
Becomes a Leading
Global Copper
Development
HOT CHILI Annual Report 2021
5
2 Review of
Operations
Costa Fuego Becomes a Leading Global
Copper Development
In October 2020, Hot Chili announced a significant
milestone– a maiden 451Mt resource for its world-
class Cortadera copper-gold porphyry discovery
in Chile.
The addition of Cortadera brings Costa Fuego’s
combined resource base to 724Mt grading 0.48%
CuEq for 2.9Mt copper, 2.7Moz gold, 9.9Moz silver
and 64kt molybdenum – ever closer to the Company’s
target of a Tier-1 copper resource (+5Mt copper).
The Cortadera maiden mineral resource estimate,
compares favourably with the only other significant
new copper discovery announced globally since 2016
(source S&P Global Market Intelligence, Wood August
2020) – Rio Tinto’s Winu discovery in Western Australia
(503Mt grading 0.45% CuEq, 100% Inferred and
reported above 0.20% CuEq cut-off grade, announced
to ASX 28th July 2020).
Highlights include:
. Cortadera’s maiden Mineral Resource positions
Hot Chili with the largest copper Mineral
Resources and one of the largest gold Mineral
Resources for an ASX-listed emerging company.
. Cortadera’s maiden Mineral Resource (+0.25%
CuEq) of 451Mt at 0.46% copper equivalent
(CuEq) takes the total Mineral Resource estimate
for Costa Fuego to 724Mt at 0.48% CuEq for
2.9Mt copper, 2.7Moz gold, 9.9Moz Silver and
64kt molybdenum.
. The Cortadera maiden Mineral Resource includes
a higher grade component (+0.6% CuEq) of
104Mt at 0.74% CuEq that is growing rapidly.
The independent Mineral Resource which is 41% Indicated and 59% Inferred, extends from surface, remains open in
several key directions, and is considered amenable to large-scale open pit mining.
Cortadera’s high grade core has delivered eight world-class drilling intersections since it was discovered by Hot Chili
in August 2020, and the high grade core has the potential to grow significantly with further drilling, representing a
potential large underground development opportunity.
Tables 1 and 2 outline the maiden Cortadera Mineral Resource estimate, the re-stated Productora Mineral Resource
estimate and the Global Mineral Resource for the combined Costa Fuego project, respectively.
For further details on the Cortadera Mineral Resource Estimate refer to ASX release “Costa Fuego Becomes a Leading
Global Copper Project” (12th October 2020).
Table 1 Independent JORC Code Cortadera Mineral Resource
Cortadera Resource
Grade
Contained Metal
Classification
(+0.25% CuEq*)
Indicated
Inferred
Total
Tonnage CuEq Cu Au
(g/t)
(%)
(Mt)
(%)
Ag Mo Copper Eq Copper
(tonnes)
(tonnes)
(g/t)
(ppm)
Gold
(ounces)
Silver Molybdenum
(ounces)
(tonnes)
183
267
0.49
0.40 0.15
0.7
0.44
0.35 0.12
0.7
43
73
905,000
728,000
889,000
4,227,000
7,900
1.181,000
935,500
1,022,000
5,633,000
19,400
451
0.46 0.37 0.13 0.7
61
2,086,000 1,663,000 1,911,000 9,860,000
27,300
Reported at or above 0.25% CuEq*. Figures in the above table are rounded, reported to appropriate significant figures, and reported in accordance
with the JORC Code - Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Metal rounded to nearest
thousand, or if less, to the nearest hundred. * * Copper Equivalent (CuEq) reported for the resource were calculated using the following formula:
CuEq% = ((Cu% × Cu price 1% per tonne × Cu_recovery)+(Mo ppm × Mo price per g/t × Mo_recovery)+(Au ppm × Au price per g/t × Au_recovery)+
(Ag ppm × Ag price per g/t × Ag_recovery)) / (Cu price 1 % per tonne). The Metal Prices applied in the calculation were: Cu=3.00 USD/lb, Au=1,550
USD/oz, Mo=12 USD/lb, and Ag=18 USD/oz. For Cortadera (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=56%,
Mo=82%, and Ag=37%.
6
HOT CHILI Annual Report 2021 Table 2 Independent JORC Code Costa Fuego Combined Mineral Resource
Costa Fuego Combined Resource
Grade
Contained Metal
Deposit
Classification
(+0.25% CuEq*)
Tonnage CuEq Cu Au
(g/t)
(%)
(Mt)
(%)
Ag Mo Copper Eq Copper
(tonnes)
(tonnes)
(g/t)
(ppm)
Gold
(ounces)
Silver Molybdenum
(ounces)
(tonnes)
Cortadera
Productora
Indicated
Inferred
183
267
0.49
0.40 0.15
0.7
0.44
0.35 0.12
0.7
43
73
905,000
728,000
889,000
4,227,000
7,900
1.181,000
935,500
1,022,000
5,633,000
19,400
Sub Total
451
0.46 0.37 0.13 0.7
61
2,086,000 1,663,000 1,911,000 9,860,000
27,300
Indicated
Inferred
208
0.54
0.46 0.10
67
0.44
0.38 0.08
140
109
1,122,000
960,000
643,000
295,000
255,500
167,000
Sub Total
273
0.52 0.44 0.09
133
1,417,000 1,215,000 810,000
391
334
0.52
0.43 0.12
0.44
0.36 0.11
95
80
2,027,000
1,688,000
1,533,000
1.476,000
1,191,000
1,189,000
-
-
-
-
-
29,200
7,200
36,400
37,000
26,700
724
0.48 0.40 0.12 0.7** 88
3,503,000 2,879,000 2,722,000 9,860,000
63,700
Costa Fuego
(Combined)
Indicated
Inferred
Total
Reported at or above 0.25% CuEq*. Figures in the above table are rounded, reported to appropriate significant figures, and reported in accordance with the JORC Code
- Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Metal rounded to nearest thousand, or if less, to the nearest hundred. **
Copper Equivalent (CuEq) reported for the resource were calculated using the following formula:: CuEq% = ((Cu% × Cu price 1% per tonne × Cu_recovery)+(Mo ppm ×
Mo price per g/t × Mo_recovery)+(Au ppm × Au price per g/t × Au_recovery)+ (Ag ppm × Ag price per g/t × Ag_recovery)) / (Cu price 1 % per tonne). The Metal Prices
applied in the calculation were: Cu=3.00 USD/lb, Au=1,550 USD/oz, Mo=12 USD/lb, and Ag=18 USD/oz. For Cortadera (Inferred + Indicated), the average Metallurgical
Recoveries were: Cu=83%, Au=56%, Mo=82%, and Ag=37%. For Productora (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=43%
and Mo=42%. For Costa Fuego (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=51%, Mo=67% and Ag=23%.
** Note: Silver (Ag) is only present within the Cortadera Mineral Resource estimate
NB. Costa Fuego is Hot Chili’s central development hub which combines the Productora, Cortadera & El Fuego (San Antonio, Valentina and Santiago Z) projects
Cortadera’s high grade core has
delivered eight world-class drilling
intersections since it was discovered
by Hot Chili in August 2020.
HOT CHILI Annual Report 2021
7
2 Review of
Operations (cont’d)
Figure 1 Location and infrastructure of the Costa Fuego copper project, located along the Chilean
coastal range 600km north of Santiago
Refer to ASX Announcement “Costa Fuego Becomes a Leading Global Copper Project” (12th October 2020) for JORC Table 1 information related
to the Cortadera JORC compliant Mineral Resource estimate by Wood and the Productora re-stated JORC compliant Mineral Resource estimate
by AMC Consultants
* Copper Equivalent (CuEq) reported for the resource were calculated using the following formula: CuEq% = ((Cu% × Cu price 1% per tonne
× Cu_recovery)+(Mo ppm × Mo price per g/t × Mo_recovery)+(Au ppm × Au price per g/t × Au_recovery)+ (Ag ppm × Ag price per g/t × Ag_
recovery)) / (Cu price 1% per tonne). The Metal Prices applied in the calculation were: Cu=3.00 USD/lb, Au=1,550 USD/oz, Mo=12 USD/lb, and
Ag=18 USD/oz. For Cortadera (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=56%, Mo=82%, and Ag=37%.
For Productora (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=43% and Mo=42%. For Costa Fuego (Inferred +
Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=51%, Mo=67% and Ag=23%.
** Reported on a 100% Basis - combining Cortadera and Productora Mineral Resources using a +0.25% CuEq reporting cut-off grade
The addition of the maiden Cortadera mineral resource estimate positions Costa Fuego favourably amongst the
largest undeveloped copper Mineral Resources in the world not controlled by a major mining company, as outlined
in Table 3 and Figure 2.
8
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Table 3 Largest Copper Resources in the World Not Controlled by a Major Mining Company (except Winu)
Rank Project
Company
Country
Stock
Exchange
Contained
CuEq
Metal
(Mt)
Average
CuEq
Grade
(%)
Average
Cu
Grade
(%)
Cut-off
Grade
(%)
Cut-off
Grade
Basis
Surface
Elevation
(masl)
Pebble
Northern Dynasty
USA
TSX
Cascabel
SolGold
Ecuador
LSE/TSX
Loz Azules
McEwen Mining
Argentina
NYSE
Los Helados
NGEx Resources
Chile
TSXV
Casino
Altar
Western Copper
Canada
TSX
Aldebaran Res.
Argentina
TSXV
Vizcachitas
Los Andes Copper
PolyMet Mining
Chile
USA
TSXV
TSX
St Augustine Gold
Phillippines TSX
NorthMet
King-king
Josemaria
Josemaria Res.
Argentina
Canariaco Norte Cadente Copper
Yandera
Era Resources
Peru
PNG
13 Costa Fuego
Hot Chili Limited
Chile
Antakori
La Verde
Regulus Resources
Peru
Solaris Resources Inc PNG
TSX
TSX
Private
ASX
TSXV
TSXV
1
2
3
4
5
6
7
8
9
10
11
12
14
15
16
17
Los Calatos
CD Capital NR
Peru
Corporate
Kharmagtai
Xanadu Mines Ltd
Mongolia
ASX/TSX
18 Winu
Rio Tinto
Australia ASX, LSE, NYSE
19 Hillside
Rex Minerals
Australia
ASX
68.3
14.7
13.9
13.5
12.8
9.1
8.7
6.5
6.2
6.2
5.5
3.7
3.5
3.2
3.2
3.0
2.8
2.5
2.2
0.63
0.46
0.38
0.46
0.33
0.35
0.42
0.52
0.54
0.42
0.42
0.38
0.48
0.61
0.42
0.86
0.46
0.5
0.66
0.34
0.35
0.37
0.36
0.13
0.31
0.37
0.23
0.23
0.29
0.39
0.32
0.4
0.44
0.39
0.76
0.32
0.35
0.58
0.3
CuEq
0.21
CuEq
0.2
0.33
0.08
0.09
0.25
0.1
0.15
0.2
0.2
0.15
0.25
0.3
0.2
0.5
0.3
0.2
0.2
Cu
CuEq
CuEq
CuEq
Cu
CuEq
CuEq
CuEq
Cu
CuEq
CuEq
CuEq
Cu
Cu
CuEq
CuEq
Cu
305
1100
3775
3400
1300
3400
2000
488
600
4180
3000
2000
800
3800
700
3000
1300
240
50
All projects selected only include those not controlled by a major mining company (except Winu) who have stated a publicly announced (ASX, TSX or other) Mineral
Resource estimate classified as either Measured, Indicated or Inferred where copper Is the primary commodity and average metallurgical recoveries have been
declared. Project details assembled from public information by Wood (on behalf of Hot Chili) in July 2020 (used without the consent of the source) and normalised
using the following price deck: Copper 3.00 USD/lb, Gold 1,550 USD/oz, Molybdenum 12 USD/lb, Silver 18 USD/oz, Platinum 1,050 USD/oz, Palladium 1,400
USD/oz, Cobalt 14 USD/lb, Nickel 7 USD/lb. Copper Equivalent grade and tonnes have been normalised using these prices in addition to recoveries declared in
each project’s public company announcements. Several significant copper projects were excluded from the comparative analysis owing to Insufficient reported
Information to calculate Copper Equivalence. These projects were Tampakan, Santo Tomas, Santa Cruz, Escalones, Beschoku and Beutong.
All projects selected only include those not controlled by a major mining company (other than Winu) who have stated a publicly announced (ASX, TSX or other)
Mineral Resource estimate classified as either Measured, Indicated or Inferred where copper Is the primary commodity and average metallurgical recoveries
have been declared. Project details assembled from public information by Wood (on behalf of Hot Chili) in July 2020 (used without the consent of the source) and
normalised using the following price deck: Copper 3.00 USD/lb, Gold 1,550 USD/oz, Molybdenum 12 USD/lb, Silver 18 USD/oz, Platinum 1,050 USD/oz, Palladium
1,400 USD/oz, Cobalt 14 USD/lb, Nickel 7 USD/lb. Copper Equivalent grade and tonnes have been normalised using these prices in addition to recoveries declared
in each project’s public company announcements. Several significant copper projects were excluded from the comparative analysis owing to Insufficient reported
Information to calculate Copper Equivalence. These projects were Tampakan, Santo Tomas, Santa Cruz, Escalones, Beschoku and Beutong. Further details
regarding the Mineral Resources for each project used in the comparative analysis is set out in Appendix 1.
Figure 2 Costa Fuego ranks as one of the largest copper Mineral Resources in the world not controlled by a
major mining company, and is also one of the few undeveloped large copper resources that is both low-altitude
and with no arsenic impurity
9
HOT CHILI Annual Report 2021 2 Review of
Operations (cont’d)
Figure 3 outlines the extent, morphology, and areas of open extensional potential across the
Cortadera Mineral Resource estimate.
Three Drill Rigs in Operation,
Five Shifts Per Day
Hot Chili’s operational activities were largely unencumbered by the global pandemic, thanks to operational
efficiencies achieved by the Company’s COVID-19 safety management plan. Drilling and other field activities
adhered to strict safety protocols, allowing operations to continue relatively seamlessly during the pandemic.
Although good operational efficiencies were achieved by Hot Chili and its contractors, assay laboratories
were unfortunately affected by COVID-19, with assay turnaround times extended. Fortunately, lagging assay
turnaround times did not impact the Company’s drilling decisions or efficiencies, with all drilling undertaken in
a methodical and staged manner, with regular reviews and prioritisation utilising multiple geological datasets
and 4D geological modelling to guide decision making.
Drilling activities for the year included Reverse Circulation (RC) and Diamond (DD) drilling at the Cortadera
Main Zone and at the Cortadera North “look-alike” porphyry target located to the north of Cortadera. Drilling
completed during the year totalled 74 RC holes for 15,336 metres and 36 DD holes for 13,171 metres. Details
of all drilling completed at the project during the year can be seen in Table 4, and all significant intercepts are
recorded in Table 5.
Drilling and other field activities adhered to strict
safety protocols, allowing operations to continue
relatively seamlessly during the pandemic.
10
HOT CHILI Annual Report 2021
HOT CHILI Annual Report 2021 HOT CHILI Annual Report 2021
11
2 Review of
Operations (cont’d)
Cortadera On-Track for Resource Upgrade
With High-Grade Core Continuing to Expand
Cortadera is a leading copper-gold discovery, where the company has successfully recorded many of the world’s
best copper-gold drill results during 2019 and 2020, including
• 972m grading 0.5% copper and 0.2g/t gold from surface in CRP0020D (including 412m grading 0.7%
copper and 0.3g/t gold),
• 750m grading 0.6% copper and 0.2g/t gold from 204m down-hole depth in CRP0013D (including 188m
grading 0.9% copper and 0.4g/t gold),
• 848m grading 0.4% copper and 0.2g/t gold from 112m down-hole depth in CRP0011D (including 184m
grading 0.7% copper and 0.3g/t gold),
• 649m grading 0.4% copper and 0.1g/t gold from 328m down-hole depth in CRP0029D (including 440m
grading 0.5% copper and 0.2g/t gold),
• 596m grading 0.5% copper and 0.2g/t gold from 328m down-hole depth in CRP0017D (including 184m
grading 0.7% copper and 0.3g/t gold), and
• 542m grading 0.5% copper and 0.2g/t gold from 422m down-hole depth in CRP0040D (including 218m
grading 0.7% copper and 0.2g/t gold).
Cortadera continues to be one of the few large global copper
discoveries to regularly achieve copper-sector leading drill results
from its continued exploration and resource growth drilling activities.
CRP00124D (702m depth down-hole) – 1.0% copper, 0.5g/t gold, 2.2g/t silver and 49 ppm molybdenum.
Early-stage porphyry, sericite-chlorite-albite alteration with 11% A-B vein abundance
12
HOT CHILI Annual Report 2021
HOT CHILI Annual Report 2021
Expansion drilling of the Cortadera resource has seen continued success this year, with wide intersections being
recorded from extensional drilling of the main porphyry (Cuerpo 3) and the second largest porphyry (Cuerpo 2). These
results continue to underpin the Company’s view that extensional drilling at Cortadera is on-track to deliver a significant
upgrade to the Company’s Costa Fuego copper-gold resource in Chile.
A selection of new significant intersections recorded during the period are outlined below.
• 813m grading 0.4% copper and 0.1g/t gold from 54m down-hole depth in CRP0061D (including 318m grading
0.6% copper and 0.2g/t gold)
• 836m grading 0.4% copper and 0.1g/t gold from 536m down-hole depth in CRD0080 (including 436m grading
0.5% copper and 0.2g/t gold)
• 410m grading 0.5% copper and 0.2g/t gold from 440m down-hole depth in CRP088D (including 144m grading
0.8% copper and 0.3g/t gold)
• 373m grading 0.4% copper and 0.1g/t gold from 648m down-hole depth in CRP0032D (including 130m grading
0.5% copper and 0.2g/t gold)
• 382m grading 0.4% copper and 0.1g/t gold from 524m down-hole depth in CRP0052D (including 80m grading
0.6% copper and 0.2g/t gold)
• 248m grading 0.4% copper and 0.1g/t gold from 446m down-hole depth in CRP0053D (including 32m grading
0.6% copper and 0.3g/t gold)
• 114m grading 0.5% copper and 0.2g/t gold from 248m depth and 185m grading 0.5% copper and 0.2g/t gold from
568m depth down-hole in CRP0046D
• 218m grading 0.5% copper and 0.1g/t gold from 720m down-hole depth in CRP0047D (including 134m grading
0.6% copper and 0.2g/t gold)
HOT CHILI Annual Report 2021
13
HOT CHILI Annual Report 2021 2 Review of
Operations (cont’d)
Confirmation That Cortadera’s Two Largest
Porphyries Join at Depth
Results from diamond drilling testing the “gap zone” between Cuerpo 2 and Cuerpo 3 have confirmed that the two
largest porphyries connect at depth. Although no significant results were returned from this drilling, diamond drilling
has intersected wide zones of weakly mineralised “intra-mineral” porphyry.
Intra-mineral porphyries at Cortadera typically grade between 0.1% and 0.4% Cu and were emplaced immediately
following the early porphyry phase of mineralisation which typically grades between 0.3% and 1.0% Cu.
Confirmation that the large porphyries join at depth is exciting for Hot Chili’s technical team and adds large potential
for the addition of further resources in this largely untested region, with further work required.
Cortadera North
“Look-alike” Target
Exploration mapping and infill soil geochemical programmes across the
large “look-alike” Cortadera North target were undertaken in the lead-up
to first drill testing, with the work providing further encouragement across
the 2km-long target zone, identifying multiple areas of outcropping
copper oxides and copper-bearing, porphyry B-veins.
Drilling at Cortadera North was undertaken across several high priority
areas encompassing a large Induced Polarisation (IP) chargeability
anomaly and a strong molybdenum surface geochemical anomaly.
A total of eleven RC holes for 4,732 metres were completed at the
Cortadera “look-alike” target, located immediately north of Cortadera,
with initial drilling confirming molybdenum and silver enrichment,
indicating potential proximity to porphyry mineralisation.
While, no significant results have been recorded so far, the Company
is encouraged by broad results of pathfinder elements being recorded,
such as 124m grading 1.3g/t silver from 92m depth down-hole in drill
hole CRP0079.
Remaining RC and diamond drilling will focus across the IP chargeability
anomaly at Cortadera North and target positions identified from recent
3D geochemical modelling. Pathfinder multielement geochemical
modelling will be key to determining potential areas for second-pass
diamond drill hole tails and RC follow-up drilling.
The third phase of drilling at Cortadera North has been postponed due
to drill rig prioritisation for RC pre-collar drilling at Cortadera, and will be
recommenced later in 2021.
14
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Exploration by Hot Chili across Santiago
Z has confirmed that the 4km-long soil
molybdenum anomaly is associated with
a zone of hydrothermal brecciation.
4km Long Copper Porphyry Footprint Secured
Next to Cortadera – Santiago Z
Hot Chili added the exciting Santiago Z land holding to the Costa Fuego copper development in Chile in March
2021, providing an additional 20 per cent (5,468ha) to the Company’s Costa Fuego landholdings.
Containing a large historical soil molybdenum anomaly, Santiago Z is approximately twice as large in tenor and
scale as the anomaly related to the Cortadera copper-gold porphyry discovery, located just 5km to the north.
Exploration by Hot Chili across Santiago Z has confirmed that the 4km-long soil molybdenum anomaly is
associated with a zone of hydrothermal brecciation related NS regional-scale reverse faults and to a corridor of
porphyries which have intruded the shallowly dipping volcano-sedimentary sequence, similar to the Cortadera
porphyry deposit setting, and of similar age (Late Cretaceous porphyry ~92Ma).
Hot Chili has completed a surface mapping and soil geochemical sampling programme at Santiago Z, with
assay results from the programme confirming the tenor and scale of the molybdenum anomaly from historical XRF
results. Assay results have also highlighted enrichment in copper, gold and silver (Cortadera metal signature).
Other element zonation patterns provide support for the discovery potential targeting a large copper porphyry
system at depth.
A review of historical geophysical datasets across Santiago Z is underway ahead of planning a programme of
extensional soil geochemistry and detailed mapping in advance of first-pass drilling later in 2021. Further detailed
mapping will focus across the corridor of hydrothermal brecciation and identified porphyries.
15
HOT CHILI Annual Report 2021 2 Review of
Operations (cont’d)
Pipeline of New Growth Targets Identified
and Being Prepared for Drill Testing
Exploration workstreams during the period have included expanded surface geochemical surveys, detailed surface
mapping, completion of ground magnetic surveys and the Company’s first-ever application of advanced three-
dimensional (3D) geochemical targeting.
Advanced Three-Dimensional (3D) Geochemical targeting, using multielement surface geochemical data, has been
applied for the first time across Hot Chili’s consolidated Costa Fuego copper-gold development hub in Chile.
The 3D geochemical approach generated probability models which accurately mirrored existing copper resource
models at both Cortadera and Productora.
Two large-scale 3D geochemical targets have been identified as high probability for immediate drill testing–
Productora Central and Santiago Z – and are both larger in size than the main porphyry (Cuerpo 3) at the
Company’s Cortadera copper-gold discovery.
A high probability 3D geochemical target measuring 1.2km by 1km in dimension has been located along the
western flank of the planned central pit area of the Productora resource (Productora Central).
Productora is a breccia-hosted copper-gold deposit located along the eastern flank of a 6km long
porphyry lithocap. Significant exploration efforts have previously been unsuccessful in locating the
potential source for approximately 1.2Mt copper and 0.8Moz gold deposited into the Productora
breccia fault corridor.
The location of the Productora Central target along the regionally important NW-trending
Serrano fault zone, and its location with respect to the most well-endowed sections
of the Productora resource is considered particularly encouraging. Previous shallow
exploration drilling over this target area failed to penetrate an extensive advanced argillic
clay zone, which was believed to overlie a large-scale porphyry system.
Further extensional surface geochemistry and mapping programmes are currently
underway across the Cortadera project to further resolve the Cortadera North
growth target ahead of 3D geochemical modelling and next exploration drilling.
This work is part of a larger exploration rationalisation and prioritisation process
underway across the Company’s landholdings.
Several other large-scale 3D geochemical targets have also been identified within
the Productora landholding.
Advanced Three-Dimensional (3D) Geochemical targeting,
using multielement surface geochemical data, has been
applied for the first time across Hot Chili’s consolidated
Costa Fuego copper-gold development hub in Chile.
16
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Figure 4. Plan view displaying the location of the Cortadera discovery zone in relation to the Cortadera North target.
The plan displays the location of Cuerpo 1, 2, 3 and 4 tonalitic porphyry intrusive centres (represented by modelled
copper envelopes, yellow- +0.1% Cu) in relation to surface molybdenum anomalism and IP chargeability response
at 200m depth slice. Cortadera North, located 2km north of Cortadera displays “look alike” characteristics to the
Cortadera discovery. Note locations of planned first pass RC drill holes at Cortadera North in addition to Cuerpo 1
and Cuerpo 4
17
HOT CHILI Annual Report 2021 2 Review of
Operations (cont’d)
Figure 5. Plan views displaying recently acquired ground magnetic survey in addition to 3D Geochemical
Modelling of surface geochemistry across the Santiago Z surface molybdenum anomaly. Correlation of
surface geochemistry, mapping, magnetics and 3D geochemical modelling outlines a compelling large-scale
target for first-pass drill testing. Santiago Z is located approximately 5km south of Cortadera
Figure 6. View looking SE across Productora – New, large 3D geochemical target set to be drilled in Q4 2021
18
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Costa Fuego Pre-feasibility Study Commences
The Costa Fuego Pre-feasibility Study (PFS) commenced in June 2021. It aims to transform the Company’s 2016 Productora
PFS to create a globally significant, low altitude, clean concentrate, copper-gold project, which can leverage from a central
processing and combined infrastructure approach.
Wood has been appointed and will be responsible for the process plant and infrastructure design, capital and operating cost
estimation and execution planning. Several expert consultants have also been engaged to fully resource the project in the
disciplines of resource development, mining, metallurgy, and infrastructure.
Wood is a world-renowned engineering and consulting group, recognised for its full inhouse capability over
the whole project life cycle of mining & mineral developments.
With the addition of Cortadera, located just 14 km from Productora, the resource base of the
combined project has effectively tripled and expected to grow- currently 724Mt grading
0.48% CuEq for 2.9Mt contained copper and 2.7Moz gold. Costa Fuego is expected to
capture significant option-value through sequencing of deposit extraction.
Internal study workstreams underway for the past year have included
metallurgical and geotechnical testwork, as well as environmental baseline
studies and financial scenario modelling. This work has outlined the potential
for a large-scale, long-life, conventional open-cut and cave mining
operation utilising conventional sulphide and oxide processing with
strong environmental and social credentials.
The Costa Fuego PFS benefits from existing site layout design,
regulatory permitting, a maritime concession for water rights, and
critical infrastructure easement accesses (water pipeline and
power) originally secured for the Productora PFS.
The Costa Fuego PFS will consider a concentrator and leach
throughput range of 20Mtpa to 30Mtpa and is expected to be
complete in Q3 2022.
19
HOT CHILI Annual Report 2021 2 Review of
Operations (cont’d)
Initial Metallurgy Supports Combined
Development Approach for Costa Fuego
Excellent initial copper recoveries and compatible metallurgy from sulphide testwork confirm that all three of Costa
Fuego’s deposits (Cortadera, Productora and San Antonio) can be incorporated into one combined development
Highlights from highly encouraging initial metallurgical testwork results for Cortadera and San Antonio are
outlined below:
• Consistent and Compatible Ore Metallurgy: Sulphide test work results confirm that all three of Hot Chili’s
neighbouring projects (Cortadera, Productora and San Antonio) are compatible and can be incorporated into
one combined development, now named “Costa Fuego”
• Excellent Initial Copper Recoveries: Rougher flotation test work from Cortadera and San Antonio indicates
excellent copper recoveries of 89% to +95%
• Strong Co-Product Recoveries - Gold, silver and molybdenum rougher flotation recoveries consistent with
other leading global copper developments (Rio Tinto’s Winu or SolGold’s Cascabel project)
• Clean-Concentrate Confirmed: No deleterious elements present in rougher concentrate, confirming Costa
Fuego as a clean-concentrate combined copper development
• Low Capital Intensity Maintained: All three deposits indicate high recoveries of payable metals using salt water
processing, no desalination plant required
These first results provide a solid foundation from which to carry out further optimisation of the
metallurgical flowsheet for life-of-mine ore source supply for the Costa Fuego copper development.
Water Rights Secured for
Costa Fuego Copper-Gold
Super Hub
Hot Chili, through its Chilean subsidiary company Sociedad Minera
El Aguila SpA (SMEA), has been granted a Maritime Concession for
extraction of sea water just 60 kilometres from the Company’s Costa
Fuego coastal copper-gold development in Chile.
Following a rigorous seven-year application process, Hot Chili
is now one of the few copper developers in Chile controlling a
Maritime Concession for water. This adds significantly to critical
infrastructure access requirements already secured including
surface rights and water and electricity easements.
The water rights represent a major step forward in establishing
an infrastructure-ready major coastal copper development
which can leverage from a central processing and combined
infrastructure approach.
The Productora PFS completed in 2016 modelled the extraction
of seawater via a 62km buried water pipeline from the coast to
Productora. All metallurgical testwork results from Costa Fuego have
achieved strong metal recoveries using sea water processing.
The seawater pipeline design is now planned to be increased and
extended to Cortadera, as the new operating centre for the combined
Costa Fuego development.
The maritime concession alone is considered a significant asset, and further
enhances the Company’s social license to operate ensuring no ground water
will be used and no de-salination plant is required.
20
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Productora Being Re-Shaped
as a High Value Ore Source
Detailed work over the past year has confirmed the potential for Productora to provide a higher grade open
pit development option for Costa Fuego.
Productora’s current resource of 273Mt grading 0.44% Cu and 0.09g/t Au supports a bulk tonnage open pit
ore reserve estimate of 166.9Mt grading 0.43% copper, 0.09g/t gold.
Channel sample grades and mapping of the Santa Innes underground mine at Productora during the period
have shown positive reconciliation to the Productora 2016 resource estimated block grades, with additional
zones of high grade copper mineralisation recognised while mining.
Structural analysis and mapping suggest the additional zones are high grade (+0.4% Cu) short range
breccias which exist within the current drill density at Santa Innes.
Multiple iterations of estimation parameters have been completed to best represent the distribution of high
grades at Productora, and provide a fit-for-purpose block model for use in revised pit optimisations using
higher cut-off grades. This now gives the Company flexibility to assess Productora as either a bulk tonnage
or higher grade satellite ore source.
Productora’s value has been enhanced and economics improved by higher copper prices and lower power
costs than that considered in the 2016 PFS. Since 2016, the central and southern Chilean electrical grids
have been connected, driving a large influx of solar power derived from the Atacama region. Several large
solar projects are now operating proximal to Costa Fuego.
These factors have allowed contemplation to adopt a finer grind size, a key recommendation of the
Productora PFS. This will see sulphide copper recoveries increase by 2% to 88% overall at Productora.
Further metallurgical testwork programmes are underway to optimise gold and oxide copper recoveries for
the combined Costa Fuego PFS. These items are considered significant potential value levers for the project.
Refer to “Hot Chili Delivers PFS and Near-Doubles Reserves at Productora”, 2nd March 2016. The PFS financial model for Productora is
adjusted each year by independent consultants Wood to model changing economic conditions. The copper price leverage using the 2020
adjustment is shown above. The model was adjusted for the following changes (only) - Au = 1,550 USD/oz Au (increased 300 USD/oz),
Mo = 12.00 USD/lb Mo (decreased 2.00 USD/lb), Foreign Exchange CLP:USD was adjusted from 690 CLP : 1 USD to 719 CLP : 1 USD
(the average FX rate for YTD according to S&P Global, increased 4%)
Figure 7. Productora 2016 PFS Results (NPV & IRR) Versus Copper Price (Wood, 2020)
21
HOT CHILI Annual Report 2021 2 Review of
Operations (cont’d)
Productora Lease Mining
& Processing Agreement
with ENAMI Expanded
Hot Chili, through its Chilean subsidiary company Sociedad
Minera El Aguila SpA (SMEA), significantly expanded its lease
mining and processing agreement with Chilean government
agency ENAMI in December 2020.
The agreement provides concession for lease mining and
processing for a maximum 180,000 tonnes per annum of oxide
and sulphide ore supply from Productora, to ENAMI’s Vallenar
processing facility, located 15km north of Productora.
Hot Chili is very pleased with this positive step forward in its local
partnership with Chilean government agency ENAMI.
The lease mining agreement has served an
important social support programme for
local employment in the Vallenar region
during challenging times throughout the
ongoing COVID pandemic.
22 HOT CHILI Annual Report 2021
HOT CHILI Annual Report 2021 Figure 8. Plan view across the Cortadera discovery area displaying significant historical copper-gold
DD intersections across Cuerpo 1, 2, 3 and 4 tonalitic porphyry intrusive centres (represented by
modelled copper envelopes, yellow- +0.1% Cu and magenta +0.4% Cu). Note the selected HCH drilling
intersections (white) and the new result reported from CRP0088D and CRP0124D (magenta)
Figure 9. Long Section displaying the location of CRP0088D and CRP0047D in relation to the Cortadera
copper-gold discovery window. A new shallow porphyry zone confirms that all of Cortadera’s porphyries
join across 2.3km strike length. Results are pending for CRP0090D, CRP00103D and CRP0058D
23
HOT CHILI Annual Report 2021 2 Review of
Operations (cont’d)
Figure 10. Plan view across the Cortadera discovery area displaying significant copper-gold DD intersections
across Cuerpo 3 since the October 2020 resource estimate. The plan view displays the Mineral Resource
extents (represented by modelled copper envelope, yellow- +0.1% Cu). Note the new result reported from
CRP0088D and CRP0047D (Magenta collar) as well as the location of CRP0090D which is pending assay
results (black traces, red collars)
Step-out drilling confirms that the
two largest porphyries (Cuerpo 2 and 3)
oin at depth, with several extensional drilling
intersections returned post Cortadera 451Mt
resource estimate.
24
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Table 4 Significant Drill Results Reported in 2021
Hole_ID
Coordinates (WGS84)
North
East
RL
Azim Dip
Hole
Depth
Intersection
Interval Copper Gold
Silver Molybdenum Cu Eq
From
To
(m)
(% Cu)
(g/t Au)
(ppm
Ag)
(ppm Mo)
(% Cu
Eq)
CRP0016D
6,813,617
336,264
1028
247
-60
652
including
including
CRP0042D
6,813,273
335,968
1106
40
CRP0032D
6,813,851
336,312
1057
224
including
CRP0041D
6,814,214
336,267
1079
CRP0053D
6,814,075
335,726
997
221
240
-62
-70
-60
-70
943
1021
890
844
including
including
including
CRP0052D
6,813,690
336,496
1051
195
-70
1036
including
including
CRP0061D
6,813,542
336,010
1027
109
-77
867
Including
CRP0046D
6,813,763
336,183
1026
147
-60
1101
CRP0063
6,814,476
335,088
CRP0064
6,814,470
335,080
CRP0068
6,814,345
335,029
CRP0069
6,814,338
335,031
CRP0074
6,814,337
334,950
CRP0075
6,814,295
335,031
969
968
960
960
950
955
Including
CRP0079
6,815,374
335,273
1062
CRD0080
6,813,391
335,926
1093
272
271
226
0
71
41
39
35
-61
-60
-61
-60
-58
-59
-59
-70
132
171
324
296
120
120
468
1474
including
CRP0047D
6,813,692
336,497
1050
227
-60
1149
including
including
CRP0068D
6,814,344
335,030
955
CRP0088D
6,813,365
336,621
1060
225
286
-61
-63
679
1434
including
or including
or including
CRP0091
6,814,199
335,058
962
27
-69
106
CRP0094
6,814,200
335,059
CRP0098
6,814,226
334,956
962
975
209
174
-60
-60
150
282
including
106
178
360
392
616
648
676
574
230
446
502
634
524
646
654
54
440
248
568
58
60
0
0
0
0
24
92
536
536
282
414
470
576
632
720
720
756
0
426
682
714
718
0
76
2
40
56
240
220
610
582
930
1021
806
602
844
694
534
658
906
790
734
867
758
362
753
70
74
22
62
134
42
250
190
314
373
130
28
614
248
32
24
382
144
80
813
318
114
185
12
14
22
62
104
104
36
34
216
1372
972
326
426
492
588
646
938
744
890
22
912
850
830
780
14
106
12
96
76
36
10
124
836
436
44
12
22
12
14
218
24
134
22
486
168
116
62
14
30
10
56
20
0.4
0.6
0.5
0.6
0.4
0.4
0.5
0.2
0.3
0.4
0.6
0.6
0.4
0.5
0.6
0.4
0.6
0.5
0.5
0.5
0.4
0.5
0.3
0.2
0.4
0.7
0.0
0.4
0.5
0.3
0.3
0.3
0.3
0.4
0.5
0.7
0.6
0.5
0.5
0.8
0.9
1
0.4
0.3
0.5
0.4
0.7
0.2
0.3
0.2
0.2
0.1
0.1
0.2
0.1
0.1
0.1
0.3
0.2
0.1
0.2
0.2
0.1
0.2
0.2
0.2
0.0
0.0
0.1
0.1
0.0
0.1
0.2
0.0
0.1
0.2
0.1
0.1
0.1
0.2
0.2
0.1
0.2
0.2
0.1
0.2
0.3
0.3
0.4
0.1
0.1
0.1
0.1
0.2
0.8
1.0
0.7
0.9
0.3
0.7
0.9
1.1
0.6
0.8
1.5
1.7
1.1
2.3
0.9
0.7
1.0
0.7
0.9
2.9
2.3
0.9
31.4
30.2
0.9
1.8
1.3
0.8
0.9
0.4
0.3
0.4
0.6
0.7
0.8
1.2
1.0
0.9
0.8
1.4
1.5
1.6
0.8
0.3
0.9
1.0
1.6
19
28
61
58
213
116
165
5
41
15
10
3
229
229
246
72
89
17
41
30
38
26
1
1
27
46
4
109
154
40
29
20
23
10
147
74
177
26
77
109
130
96
6
83
4
17
7
0.48
0.71
0.60
0.68
0.48
0.48
0.64
0.27
0.31
0.43
0.69
0.69
0.50
0.68
0.74
0.44
0.68
0.54
0.57
0.52
0.40
0.53
0.40
0.32
0.44
0.79
0.01
0.5
0.6
0.3
0.4
0.3
0.4
0.5
0.6
0.8
0.7
0.5
0.6
1
1.1
1.2
0.4
0.3
0.5
0.5
0.7
Significant intercepts are calculated above a nominal cut-off grade of 0.2% Cu. Where appropriate, significant intersections may contain up to 30m down-hole
distance of internal dilution (less than 0.2% Cu). Significant intersections are separated where internal dilution is greater than 30m down-hole distance. The selection
of 0.2% Cu for significant intersection cut-off grade is aligned with marginal economic cut-off grade for bulk tonnage polymetallic copper deposits of similar grade in
Chile and elsewhere in the world.
25
HOT CHILI Annual Report 2021
2 Review of
Operations (cont’d)
Table 5 Details of all Drillholes Completed at Cortadera in 2021
Hole ID
CRD0080
CRP0016D
CRP0041D
CRP0044
CRP0045D
CRP0046D
CRP0047D
CRP0048
CRP0049
CRP0050
CRP0052D
CRP0053D
CRP0054
CRP0055
CRP0056
CRP0057
CRP0058D
CRP0059
CRP0060
CRP0061D
CRP0062D
CRP0063
CRP0064
CRP0065
CRP0066
CRP0067
CRP0068D
CRP0069
CRP0070
CRP0071
CRP0072
CRP0073
CRP0074
CRP0075
CRP0076
CRP0077
CRP0078
CRP0079
CRP0081
CRP0082
CRP0083
Coordinates (WGS84)
East
335,926
336,264
336,267
336,180
336,184
336,183
336,497
335,680
335,728
336,356
336,499
335,729
335,277
335,442
335,280
335,117
335,957
336,248
335,959
336,010
335,958
335,088
335,085
335,082
335,091
335,092
335,033
335,031
335,270
335,271
335,404
335,241
334,950
335,030
335,054
335,148
336,421
335,273
335,262
335,668
335,665
North
6,813,391
6,813,617
6,814,214
6,813,770
6,813,767
6,813,763
6,813,692
6,814,111
6,814,080
6,814,278
6,813,698
6,814,076
6,815,862
6,815,886
6,815,862
6,815,822
6,814,177
6,814,120
6,814,172
6,813,542
6,814,175
6,814,476
6,814,468
6,814,472
6,814,469
6,814,471
6,814,334
6,814,338
6,814,297
6,814,297
RL
1,093
1,028
1,079
1,026
1,025
1,026
1,050
1,003
997
1,130
1,050
997
966
987
966
956
1,032
1,122
1,040
1,027
1,031
969
968
968
968
968
960
960
974
974
6,814,368
1,015
6,814,165
6,814,337
6,814,281
6,814,380
6,814,249
6,813,811
6,815,374
6,815,370
6,815,573
6,815,575
958
950
955
955
971
1,080
1,062
1,062
1,050
1,050
Hole Depth
Azimuth
Dip
Prospect
1,474
652
890
168
270
1,101
1,149
270
96
366
1,036
844
366
504
500
318
1,163
192
132
867
1,462
132
171
315
48
66
679
296
108
312
314
93
120
120
126
168
250
468
360
414
516
35
247
221
132
139
148
230
223
194
233
195
238
265
87
85
267
223
200
200
110
200
272
271
316
90
88
226
0
212
70
280
57
71
40
49
0
205
40
240
249
300
-70
-60
-60
-60
-60
-60
-60
-69
-70
-64
-70
-71
-59
-60
-59
-59
-66
-68
-68
-77
-73
-60
-60
-60
-70
-70
-60
-60
-58
-60
-60
-60
-58
-59
-59
-60
-62
-59
-60
-61
-60
Cuerpo 3
Cuerpo 3
Cuerpo 3
Cuerpo 3
Cuerpo 3
Cuerpo 3
Cuerpo 3
Cuerpo 2
Cuerpo 2
Cuerpo 3
Cuerpo 3
Cuerpo 2
Cortadera North
Cortadera North
Cortadera North
Cortadera North
Cuerpo 2
Cuerpo 2-3 Gap Zone
Cuerpo 2-3 Gap Zone
Cuerpo 3
Cuerpo 2-3 Gap Zone
Cuerpo 1
Cuerpo 1
Cuerpo 1
Cuerpo 1
Cuerpo 1
Cuerpo 1
Cuerpo 1
Cuerpo 1
Cuerpo 4
Cuerpo 4
Cuerpo 4
Cuerpo 1
Cuerpo 1
Cuerpo 1
Cuerpo 1
Cuerpo 3
Cortadera North
Cortadera North
Cortadera North
Cortadera North
26
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Hole Depth
Azimuth
Dip
Prospect
Hole ID
CRP0084
CRP0085
CRP0086
CRP0087
CRP0088D
CRP0089D
CRP0090D
CRP0091
CRP0092D
CRP0093
CRP0094
CRP0095
CRP0096
CRP0097
CRP0098
CRP0099
CRP0100D
CRP0101
CRP0102
CRP0103D
CRP0104
CRP0105
CRP0106
CRP0107
CRP0108D
CRP0109
CRP0110
CRP0111D
CRP0112D
CRP0113
CRP0114
CRP0115
CRP0116D
CRP0117
CRP0118
CRP0119
CRP0120
CRP0121
CRP0122
CRP0123
East
335,670
335,270
335,200
336,621
336,621
334,950
336,247
335,059
335,147
336,235
335,083
335,238
335,186
335,182
334,954
335,110
335,183
335,082
335,084
336,324
335,373
335,186
335,009
335,105
335,074
335,102
336,500
335,904
335,183
335,904
335,373
335,446
335,552
335,552
335,678
335,375
335,376
335,982
336,037
336,500
Coordinates (WGS84)
North
6,815,578
6,815,380
6,815,170
6,813,365
6,813,365
6,814,376
6,813,873
6,814,200
6,814,255
RL
1,050
1,062
1,101
1,060
1,060
984
1,059
962
972
6,813,275
1,083
6,814,175
963.4343
6,814,170
957.0982
6,814,041
954.68
6,814,039
965.251
6,814,233
974.2872
6,814,342
960.4399
500
486
300
120
1434.4
508
999
120
106
270
150
177
148
138
282
84
6,814,041
965.2685
438.6
6,813,751
974.0505
6,813,750
974.0029
72
60
6,813,200
1092.534
1149.2
6,813,977
965.6053
6,814,039
965.2233
6,814,366
953.5673
6,813,940
960.9218
138
114
271
93
6,814,105
945.898
288.3
6,813,940
961.0525
6,813,694
1049.31
6,813,876
999.18
6,814,034
965.0869
6,813,876
999.18
6,813,975
965.6802
6,813,806
994.4349
270
244
1039
486.6
162
131
198
6,814,035
979.5295
717.3
6,814,037
979.5483
6,813,716
1017.445
6,813,978
965.6506
6,813,977
965.6657
6,813,647
1014.944
6,813,663
1016.302
6,813,694
1049.31
154
132
90
120
241
270
120
0
310
270
295
286
280
230
30
210
48
209
251
271
210
174
201
239
39
350
37
251
108
343
288
227
250
215
104
159
139
196
259
302
38
13
348
0
281
300
239
-60
-60
-60
-63
-63
-60
-65
-70
-75
-59
-60
-60
-60
-61
-60
-61
-70
-60
-60
-58
-60
-61
-60
-61
-70
-60
-88
-80
-63
-80
-60
-60
-80
-80
-70
-71
-82
-60
-70
-70
Cortadera North
Cortadera North
Cortadera North
Cuerpo 3
Cuerpo 3
Cuerpo 1
Cuerpo 3
Cuerpo 1
Cuerpo 1
Cuerpo 3
Cuerpo 1 south
Cuerpo 1 south
Cuerpo 1 south
Cuerpo 1 south
Cuerpo 1 south
Cuerpo 1 south
Cuerpo 1 south
Cuerpo 1 south
Cuerpo 1 south
Cuerpo 3
Cuerpo 1 south
Cuerpo 1 south
Cuerpo 1
Cuerpo 1 south
Cuerpo 1 south
Cuerpo 1 south
Cuerpo 3
Cuerpo 2
Cuerpo 1 south
Cuerpo 2
Cuerpo 2 South
Cuerpo 2 South
Cuerpo 2
Cuerpo 2
Cuerpo 2
Cuerpo 2
Cuerpo 2
Cuerpo 3
Cuerpo 3
Cuerpo 3
27
HOT CHILI Annual Report 2021 3 Qualifying
Statements
JORC Compliant Ore Reserve Statement
Productora Open Pit Probable Ore Reserve Statement – Reported 2nd March 2016
Grade
Contained Metal
Payable Metal
Reserve Tonnage Cu
(%)
Category
(Mt)
Au Mo
(g/t)
(ppm)
Cu
(tonnes)
Au
(ounces)
Mo
(tonnes)
Cu
(tonnes)
Au
(ounces)
Mo
(tonnes)
24.1
20.5
0.43
0.08
0.45
0.08
49
92
103,000
59,600
91,300
54,700
1,200
1,900
55,600
61,500
24,400
800
122.4
0.43
0.09
163
522,500
356,400
20,000
445,800
167,500
10,400
Probable
166.9 0.43 0.09 138
716,800
470,700
23,100
562,900
191,900
11,200
Ore Type
Oxide
Fresh
Total
Transitional
Probable
Note 1: Figures in the above table are rounded, reported to two significant figures, and classified in accordance with the Australian JORC Code 2012 guidance on
Mineral Resource and Ore Reserve reporting.
Note 2: Price assumptions: Cu price - US$3.00/lb; Au price US$1200/oz; Mo price US$14.00/lb.
Note 3: Mill average recovery for fresh Cu - 89%, Au - 52%, Mo - 53%. Mill average recovery for transitional; Cu 70%, Au - 50%, Mo - 46%. Heap Leach average
recovery for oxide; Cu - 54%.
Note 4: Payability factors for metal contained in concentrate: Cu - 96%; Au - 90%; Mo - 98%. Payability factor for Cu cathode - 100%.
JORC Compliant Mineral Resource Statements
Independent JORC Code Costa Fuego Combined Mineral Resource (Reported 12th October 2020)
Costa Fuego Combined Resource
Grade
Contained Metal
Deposit
Cortadera
Productora
Classification
(+0.25% CuEq*)
Indicated
Inferred
Sub Total
Indicated
Inferred
Costa Fuego
(Combined)
Indicated
Inferred
Total
Tonnage CuEq Cu Au
(g/t)
(%)
(Mt)
(%)
Ag Mo Copper Eq Copper
(tonnes)
(tonnes)
(g/t)
(ppm)
Gold
(ounces)
Silver Molybdenum
(ounces)
(tonnes)
183
267
451
208
67
0.49
0.40 0.15
0.44
0.35 0.12
0.7
0.7
0.46 0.37 0.13 0.7
0.54
0.46 0.10
0.44
0.38 0.08
43
73
61
140
109
905,000
728,000
889,000
4,227,000
7,900
1.181,000
935,500
1,022,000
5,633,000
19,400
2,086,000 1,663,000 1,911,000 9,860,000
27,300
1,122,000
960,000
643,000
295,000
255,500
167,000
-
-
-
-
-
29,200
7,200
36,400
37,000
26,700
Sub Total
273
0.52 0.44 0.09
133
1,417,000 1,215,000 810,000
391
334
0.52
0.43 0.12
0.44
0.36 0.11
95
80
2,027,000
1,688,000
1,533,000
1.476,000
1,191,000
1,189,000
724
0.48 0.40 0.12 0.7** 88
3,503,000 2,879,000 2,722,000 9,860,000
63,700
Reported at or above 0.25% CuEq*. Figures in the above table are rounded, reported to appropriate significant figures, and reported in accordance with the JORC Code
- Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Metal rounded to nearest thousand, or if less, to the nearest hundred.
* * Copper Equivalent (CuEq) reported for the resource were calculated using the following formula: CuEq% = ((Cu% × Cu price 1% per tonne × Cu_recovery)+(Mo ppm
× Mo price per g/t × Mo_recovery)+(Au ppm × Au price per g/t × Au_recovery)+ (Ag ppm × Ag price per g/t × Ag_recovery)) / (Cu price 1 % per tonne). The Metal Prices
applied in the calculation were: Cu=3.00 USD/lb, Au=1,550 USD/oz, Mo=12 USD/lb, and Ag=18 USD/oz. For Cortadera (Inferred + Indicated), the average Metallurgical
Recoveries were: Cu=83%, Au=56%, Mo=82%, and Ag=37%. For Productora (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=43%
and Mo=42%. For Costa Fuego (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=51%, Mo=67% and Ag=23%.
** Note: Silver (Ag) is only present within the Cortadera Mineral Resource estimate
28
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Competent Person’s Statement
Reporting of Copper Equivalent
Copper Equivalent (CuEq) reported for the resource
were calculated using the following formula: CuEq% =
((Cu% × Cu price 1% per tonne × Cu_recovery)+(Mo
ppm × Mo price per g/t × Mo_recovery)+(Au ppm ×
Au price per g/t × Au_recovery)+ (Ag ppm × Ag price
per g/t × Ag_recovery)) / (Cu price 1 % per tonne). The
Metal Prices applied in the calculation were: Cu=3.00
USD/lb, Au=1,550 USD/oz, Mo=12 USD/lb, and
Ag=18 USD/oz. For Cortadera (Inferred + Indicated),
the average Metallurgical Recoveries were: Cu=83%,
Au=56%, Mo=82%, and Ag=37%. For Productora
(Inferred + Indicated), the average Metallurgical
Recoveries were: Cu=83%, Au=43% and Mo=42%.
For Costa Fuego (Inferred + Indicated), the
average Metallurgical Recoveries were:
Cu=83%, Au=51%,
Mo=67% and Ag=23%.
Competent Person’s Statement
- Exploration Results
Exploration information in this Announcement is based
upon work compiled by Mr Christian Easterday, the
Managing Director and a full-time employee of Hot
Chili Limited whom is a Member of the Australasian
Institute of Geoscientists (AIG). Mr Easterday has
sufficient experience that is relevant to the style of
mineralisation and type of deposit under consideration
and to the activity which he is undertaking to qualify as
a ‘Competent Person’ as defined in the 2012 Edition
of the ‘Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves’ (JORC
Code). Mr Easterday consents to the inclusion in the
report of the matters based on their information in the
form and context in which it appears.
Competent Person’s Statement
- Productora Mineral Resources
The information in this Announcement that relates to
the Productora Project Mineral Resources, is based
on information compiled by Mr N Ingvar Kirchner. Mr
Kirchner is employed by AMC Consultants (AMC).
AMC has been engaged on a fee for service basis to
provide independent technical advice and final audit
for the Productora Project Mineral Resource estimates.
Mr Kirchner is a Fellow of the Australasian Institute of
Mining and Metallurgy (AusIMM) and is a Member of the
Australian Institute of Geoscientists (AIG). Mr Kirchner
has sufficient experience that is relevant to the style of
mineralisation and type of deposit under consideration
and to the activity being undertaken to qualify as a
Competent Person as defined in the 2012 Edition of the
‘Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves’ (the JORC Code
2012). Mr Kirchner consents to the inclusion in this
report of the matters based on the source information
in the form and context in which it appears.
Competent Person’s Statement
- Cortadera and Costa Fuego Mineral
Resources
The information in this report that relates to Mineral
Resources for the Cortadera and combined Costa
Fuego Project is based on information compiled
by Elizabeth Haren, a Competent Person who is a
Member and Chartered Professional of the Australasian
Institute of Mining and Metallurgy and a Member of the
Australian Institute of Geoscientists. Elizabeth Haren is
employed as an associate Principal Geologist of Wood,
who was engaged by Hot Chili Limited. Elizabeth Haren
has sufficient experience that is relevant to the style of
mineralisation and type of deposit under consideration
and to the activity being undertaken to qualify as a
Competent Person as defined in the 2012 Edition of the
“Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves”. Elizabeth Haren
consents to the inclusion in the report of the matters
based on her information in the form and context in
which it appears.
29
HOT CHILI Annual Report 2021 3 Qualifying
Statements (cont’d)
Forward Looking
Statements
This Report is provided on the basis that neither the Company
nor its representatives make any warranty (express or implied)
as to the accuracy, reliability, relevance or completeness of the
material contained in the Report and nothing contained in the
Report is, or may be relied upon as a promise, representation
or warranty, whether as to the past or the future. The Company
hereby excludes all warranties that can be excluded by law. The
Report contains material which is predictive in nature and may
be affected by inaccurate assumptions or by known and unknown
risks and uncertainties and may differ materially from results
ultimately achieved.
The Report contains “forward-looking statements”. All statements
other than those of historical facts included in the Report are
forward-looking statements including estimates of Mineral
Resources. However, forward-looking statements are subject
to risks, uncertainties and other factors, which could cause
actual results to differ materially from future results expressed,
projected or implied by such forward-looking statements. Such
risks include, but are not limited to, copper, gold and other metals
price volatility, currency fluctuations, increased production
costs and variances in ore grade recovery rates from
those assumed in mining plans, as well as political
and operational risks and governmental regulation
and judicial outcomes. The Company does not
undertake any obligation to release publicly any
revisions to any “forward-looking statement” to
reflect events or circumstances after the date
of the Report, or to reflect the occurrence
of unanticipated events, except as may be
required under applicable securities laws. All
persons should consider seeking appropriate
professional advice in reviewing the Report
and all other information with respect to
the Company and evaluating the business,
financial performance and operations of the
Company. Neither the provision of the Report
nor any information contained in the Report or
subsequently communicated to any person in
connection with the Report is, or should be taken
as, constituting the giving of investment advice to
any person.
The move to dual list in Canada is a key step toward
the future funding and development of the Company’s
large-scale Costa Fuego copper-gold project in Chile.
30
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 4 Corporate
Activities
The Company is very pleased to have achieved
financing arrangements during the year.
A$25.6 Million Placement
On 1 December 2020 the Company announced its intention
to raise approximately $25.6m (before costs) by way of a
placement of 609,800,000 Shares at 4.2 cents per share.
The Placement saw strong demand from existing major
shareholders as well as professional and sophisticated
investors in Australia. Veritas Securities Pty Ltd acted
as Corporate Advisor to the Placement and were issued
25,000,000 fee options with an exercise price of 10c per
share (expiring 30 November 2022). Continued support was
received from Blue Spec (a related party of Murray Black, who
participated in the placement following shareholder approval.
Funds from the Placement were used to advance exploration
and drilling work at Cortadera and Purisima as well as to
provide general working capital for Hot Chili.
Issue of Shares for
Drilling Services
On 4 September 2020 the Company issued 33,333,334
shares at a deemed price of 1.5c per share in lieu of cash to a
creditor along with 16,666,667 free attaching options following
approval by shareholders at general meeting. The securities
were issued to Blue Spec Sondajes, a related party of Murray
Black in lieu of A$500,000 of payment for drilling services
provided to Hot Chili.
Convertible Notes
Quarterly interest on convertible notes was paid to convertible
note holders in the form of shares, pursuant to the terms and
conditions of the convertible notes. The following issues of
shares in lieu of cash took place during the year:
Date
Interest due $
VWAP
Shares
3 July 2020
160,816
$0.01866
8,618,159
5 October 2020
160,820
$0.03866
4,159,818
5 January 2021
155,660
$0.04194
3,711,453
9 April 2021
145,303
$0.04099
3,544,806
12 July 2021
139,448
$0.03463
4,026,784
29,456,210 shares were issued on conversion of 9,768
convertible notes and interest to conversion date during
the year.
Options over Ordinary Shares
76,276,989 shares were issued on exercise of 76,276,989
$0.025 options during the year.
Hot Chili Commences Trading
on the OTCQB
Hot Chili joined US-based OTCQB Venture Market under the
Ticker symbol HHLKF (OTCQB: HHLKF). Trading commenced
in the US on 6 May 2021 (http://www.otcmarkets.com/stock/
HHLKF/quote).
The OTCQB is a well-established trading platform, operated
by OTC Markets Group in New York, that provides live-market
trading in developing companies which hold primary listings
in other markets. There are no additional compliance or
regulatory standards over and above Hot Chili’s compliance
with ASX Listing Rules.
OTC trading is non-dilutive to existing shareholders, as no
new shares are being issued to enable trading on the OTCQB
and Hot Chili’s shares will continue to trade on the Australian
Securities Exchange under the symbol ASX:HCH.
OTC trading will enhance the visibility and accessibility of the
Company to North American shareholders and media partners.
Hot Chili Commences TSXV
Dual Listing Process
Hot Chili has announced its intention to list in Canada on the
TSX Venture Exchange (TSXV) by the end of 2021. The move
to dual list in Canada is a key step toward the future funding
and development of the Company’s large-scale Costa Fuego
copper-gold project in Chile.
The Company has paid application fees, appointed legal
advisors and commenced the formal application process for
dual listing.
The Canadian market has a proven track record in supporting
large-scale exploration and development companies in the
copper and gold space with the transformative dual listings
from Equinox Minerals (C$7.3Bn takeover by Barrick Gold
Corp) and Andean Resources Limited (C$3.6Bn takeover by
Goldcorp Inc) the stand-outs.
A TSXV dual listing would position Hot Chili favourably
amongst its Canadian peers which trade at significantly higher
valuation multiples and who control the other leading copper
developments in South America such as Marimaca Copper
Corp. (Chile, TSXV:MARI), Filo Mining Corp. (Argentina,
TSXV:FIL), Solaris Resources Inc (Ecuador, TSX: SLS),
Josemaria Resources Inc. (Chile, TSX: JOSE) and SolGold Plc
(Ecuador, TSX: SOLG).
A listing on the TSXV is subject to all necessary approvals
of the TSXV, and there can be no guarantee that Hot Chili
will be accepted for listing pending completion of the
application process.
31
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 32 HOT CHILI Annual Report 2021
HOT CHILI Annual Report 2021 5 Directors’
Report
The Directors have pleasure in presenting their report,
together with the financial statements, for the year ended
30 June 2021 and the auditor’s report thereon.
Directors
The names of the Directors of Hot Chili Limited during the
financial year and to the date of this report are:
Murray E Black
Non-Executive Chairman
Christian E Easterday
Managing Director
Dr Michael Anderson
Non-Executive Director – resigned 4 November 2020
Dr Allan Trench
Independent Non-Executive Director
Roberto de Andraca Adriasola
Non-Executive Director
George Randall Nickson
Independent Non-Executive Director
Mark Jamieson
Non-Executive Director – appointed 2 September 2021
Melanie Leighton
Alternate for M Black
Directors have been in office since the start of the financial
year to the date of this report unless otherwise stated.
Directors’ Information
Murray Edward Black
Non-Executive Chairman
Mr Black has over 45 years’ experience in the mineral
exploration and mining industry and has served as an
executive director and chairman for several listed Australian
exploration and mining companies. He part-owns and
manages a substantial private Australian drilling business,
has interests in several commercial developments and has
significant experience in capital financing.
Christian Ervin Easterday
Managing Director
Mr Easterday is a geologist with over 20 years’ experience
in the mineral exploration and mining industry. He holds an
Honours Degree in Geology from the University of Western
Australia, a Masters degree in Mineral Economics from Curtin
University of Technology and a Masters Degree in Business
Administration from Curtin’s Graduate School of Business.
Mr Easterday has held several senior positions and exploration
management roles with top-tier gold companies including
Placer Dome, Hill 50 Gold and Harmony Gold, specialising
in structural geology, resource development and mineral
economic valuation. Mr Easterday has extensive experience
in project negotiation and valuations covering gold, copper,
uranium, iron ore, nickel, and tantalum resource projects in
Australia and overseas. Mr Easterday is a Member of The
Australian Institute of Geoscientists. Mr Easterday has not
held any directorships in any public listed company in Australia
in the last three years.
Dr Allan Trench
Independent Non-Executive Director
Dr Trench is a geologist/geophysicist and business
management consultant with over 28 years experience across
a broad range of commodities. His minerals sector experience
spans strategy formulation, exploration, project development
and mining operations. Dr Trench holds degrees in geology,
a doctorate in geophysics, a Masters degree in Mineral
Economics and a Masters degree in Business Administration.
He currently acts as independent director to Enterprise Metals
Ltd, commenced 3 April 2012 and Emmerson Resources Ltd,
commenced 3 March 2015.
Dr Trench has previously worked with McKinsey & Company
as a management consultant, with Woodside Petroleum in
strategy development and with WMC both as a geophysicist
and exploration manager. He is an Associate Consultant with
international metals and mining advisory firm CRU Group,
having previously managed the CRU Group global copper
research team.
Dr Trench maintains academic links as a Professor at the
University of Western Australia (UWA) Business School
and also research professor at the Centre for Exploration
Targeting, UWA.
Dr Michael Anderson
Non-Executive Director (resigned 4 November 2020)
Dr Anderson holds a PhD in Geology from Royal Schools
of Mines and has more than 25 years industry experience,
largely in southern Africa and Australia. His career
commenced as a geologist with Anglo American, followed
by roles in the metallurgical and engineering industries with
Mintek, Bateman and Kellogg Brown & Root. Dr Anderson
subsequently held senior management positions including
Corporate Development Manager at Gallery Gold Limited and,
as Managing Director at Exco Resources Limited where he
oversaw the successful development of the White Dam Gold
Project and the sale of the Company’s Cloncurry Copper
Project to Xstrata.
Dr Anderson joined specialist resource investor Taurus Funds
Management Pty Ltd as a Director in August 2011. He was
appointed as a Non-Executive Director of Base Resources
Ltd on 28 November 2011 he resigned on 31 August 2017.
He was appointed as a Non-Executive Director of Heemskirk
Consolidated Ltd on 31 May 2017 on a temporary basis and
resigned on 25 August 2017.
Roberto de Andraca Adriasola
Non-Executive Director
Mr de Andraca Adriasola is a business manager with 25 years’
experience in the financial and mining business. Over the last
five years he has been working in the main Iron Ore and Steel
Producer in Chile, CAP S A. He also oversaw the construction
of the first desalination plant dedicated 100% to producing
water for mining companies in the north of Chile. Mr de
Andraca Adriasola has finance experience working at Chase
Manhattan Bank, ABN Amro and Citigroup, working both in
Chile and in New York and holds an MBA from the Adolfo
Ibanez Business School of Chile. He is a director of Puerto
Los Losas, a port in the Atacama Region of Chile. He was
elected to the board of directors of CAP S.A. on April 18th
2017, until that date he held the position of VP of Business
Development.
33
HOT CHILI Annual Report 2021 5 Directors’
Report (cont’d)
Directors (cont’d)
Corporate Information
George Randall Nickson
Independent Non-Executive Director
Mr. Nickson has more than 36 years of global experience in
the mining industry, including 14 years based in Chile devoted
to copper exploration. His career includes work across
a range of base and precious metals, bulk commodities
and energy. He holds an honours degree in Geological
Engineering and a Masters degree in Business Administration.
Mr Nickson is currently engaged as an independent
consultant to the exploration sector, specializing in business
development, commercial advisory and business evaluations.
Prior to that he spent 16 years with BHP, where he worked
in a variety of senior technical, exploration management and
business development roles while based in Chile, Brazil and
Australia. He is a member of the Australasian Institute of
Mining & Metallurgy and the Prospectors and Developers
Association of Canada. Mr Nickson has not held any
directorships in any public listed company in Australia in the
last three years.
Mark Jamieson
Non-Executive Director (appointed 2 September 2021)
Mr Jamieson is currently General Manager Resource
Engineering for Glencore’s global copper asset group
leading technical support and governance in geology, mine
engineering and asset optimisation for development projects,
operations and JV’s.
Mark brings 20+ years of technical and project experience
in open pit and underground operations, including sub level
and block cave mines with Newcrest, MMG and Barrick Gold
across Australia, Africa, South East Asia and South America.
Mark holds a bachelor’s degree with honours in Geotechnical
Engineering from RMIT University, and a Masters of
Engineering Science in Mining Geomechanics from The
University of New South Wales. Mr Jamieson has not held
any directorships in any public listed company in Australia in
the last three years.
Melanie Leighton
Alternate Director for M Black
Ms Leighton holds a degree in Geology from the University
of Western Australia, is a Member of the Australian Institute
of Geoscientists, and has almost 20 years’ experience within
the mineral exploration industry. She has held project and
senior geologist roles with several Australian listed companies
including Hill 50 Gold, Harmony, and Terra Gold, gaining
practical and management experience within the areas of
exploration, mining and resource development. Ms Leighton
has extensive experience in mineral exploration and resource
development and acts in a project management role for Hot
Chili in regard to resource estimation, land management,
systems development and data integration and stakeholder
relations. Ms Leighton is currently a non-executive director of
Great Boulder Resources Ltd (appointed 6 April 2016).
Key management personnel have no entitlement
to termination payments in the event of removal
for misconduct.
Hot Chili Limited is a Company limited by shares and is
domiciled in Australia.
Principal Activities
During the year, the consolidated entity was involved in
mineral exploration.
Results of Operations
The results of the consolidated entity for the year ended 30
June 2021 was a loss of $9,744,002 (2020: loss $1,265,613).
Dividends
No dividends were paid or declared since the end of the
previous year. The Directors do not recommend the
payment of a dividend.
Review of Operations
Refer to Operations Report on pages above.
Significant Changes in the
State of Affairs
There were no significant changes to the state of affairs,
subsequent to the end of the reporting period, other than
what has been reported in other parts of this report.
Matters Subsequent to the End
of the Financial Year
On 12 July 2021, quarterly interest of $139,448 was settled
by the issue of 4,026,784 fully paid ordinary shares in the
Company at deemed issue price $0.03463 each.
After the financial year end, 6,966,172 shares were issued
on receipt of notice to exercise options. The options were
exercised at $0.025 each raising $174,154 before costs.
On 6 August 2021 the company announced a capital raising
of $40.0m. The first tranche of 665,004,511 shares at an
issue price of $0.032 were issued on 13 August 2021 raising
$21,280,144 before costs. A Share Purchase Plan (SPP)
forming part of the $40.0m raising, raised $5.0m before
costs and the 156,250,000 SPP shares were issued on
2 September 2021.
Tranche 2 of the placement being 428,745,489 shares were
issued on 17 September 2021 following approval at general
meeting on 15 September 2021 at $0.032 per share raising
$13,719,856 before costs. 93,750,000 of the shares were
issued to Blue Spec Sondajes SpA, an entity controlled by
Murray Black. 92,500,000 options with an exercise price
of $0.045 expiring 30 September 2024 forming part of the
capital arrangement fee were issued to co-lead managers.
2,043,668 shares were issued on conversion of 677
convertible notes.
Sociedad Minera El Águila SpA (SMEA) granted Compañía
Minera del Pacífico S.A. (CMP) an option (Additional Purchase
Option) to acquire shares in SMEA such that upon exercise
of the option, CMP will be entitled to acquire a further 32.6%
interest, taking its total interest up to 52.6%, by acquiring
existing shares from Hot Chili subsidiary, SMECL. In the case
where the parties do not execute the option, Hot Chili shall
refund CMP the Option fee. In this regard, the CMP option fee
of USD$1,500,000 (AUD $1,995,212) was repaid subsequent
to the year end.
34
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 The option agreement between Hot Chili and SCM Carola, the
owners of the Cortadera landholding, was dually exercised in
Santiago, Chile on Tuesday 21st September 2021 following
the payment of and acknowledgement of receipt of the final
instalment of US$15 million (AUD $20,638,415) to acquire
a 100% interest in the Company’s world-class Cortadera
copper-gold discovery in Chile.
Likely Developments and Expected
Results of Operations
Further information on the likely developments in the
operations of the consolidated entity and the expected results
of operations have been included in the review of operations.
On 2 September 2021, Mark Jamieson was appointed as
Non-Executive Director.
Corporate Governance Statement
The impact of the COVID-19 pandemic is ongoing and while
it has not significantly impacted the Group up to 30 June
2021, it is not practicable to estimate the potential impact,
positive or negative, after the reporting date. The situation is
rapidly developing and is dependent on measures imposed
by the Australian Government and other countries, such as
maintaining social distancing requirements, quarantine, travel
restrictions and any economic stimulus that may be provided.
There were no other significance events occurring after the
balance date that require reporting.
The Board is responsible for the overall corporate governance
of the Company, and it recognises the need for the highest
standards of ethical behaviour and accountability. It is
committed to administering its corporate governance structures
to promote integrity and responsible decision making.
The Company’s corporate governance structures, policies
and procedures are described in its Corporate Governance
Statement which is available on the Company’s website at
http://www.hotchili.net.au/about/corporate-governance-
procedures-and-policies/
Security Holding Interests of Directors
As at reporting date
Ordinary
Shares
Options Over
Ordinary Shares
Performance
Rights
Convertible
Notes
Direct
Interest
Indirect
Interest
Direct
Interest
Indirect
Interest
Direct
Interest
Indirect
Interest
Direct
Interest
Indirect
Interest
-
-
-
-
-
-
-
-
-
6,000,000 20,000,000
16,803
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,834
-
-
-
-
-
-
-
180,000
- 3,000,000
- 15,000,000
Directors
Murray E Black
- 310,016,943
Christian E Easterday
21,921,429
5,362,647
Dr Allan Trench
Michael Anderson1
-
-
459,358
-
Roberto de Andraca Adriasola
5,000,000
1,000,000
-
-
-
-
George Randall Nickson
Mark Jamieson2
Melanie Leighton
(Alternate for M Black)
1 As at date of resignation 4 November 2020.
2 As at date of appointment 2 September 2021.
Shares under Option
There were 339,446,276 ordinary shares under option at
30 June 2021 (2020: 374,056,598).
Shares Issued on the Exercise
of Options
76,276,989 ordinary shares of Hot Chili Limited issued during
the year ended 30 June 2021 (2020: nil) from the exercise of
76,276,989 options.
Options Lapsed/ Cancelled
During the Year
Nil options (2020; 69,666,667) lapsed or were cancelled
during the year.
Convertible Notes
There are 69,453 convertible notes on issue as at 30 June
2021 (2020: 79,221). 29,456,210 shares (2020: 91,069,399)
were issued during the financial year on conversion of
convertible notes and interest accrued to date of notice to
convert. No shares were issued on redemption were issued
and there were no repayments during the year. Quarterly
interest payable on the convertible notes was settled by the
issue of shares.
Directors Benefits
Since 30 June 2021, no Director of the consolidated entity has
received or become entitled to receive a benefit (other than
a benefit included in the aggregate amount of emoluments
received or due and receivable by Directors shown in the
financial statements) by reason of a contract made by the
consolidated entity with the Director or with a firm of which he
is a member, or with a company in which he has a substantial
financial interest.
35
HOT CHILI Annual Report 2021 5 Directors’
Report (cont’d)
Company Secretary – Lloyd Flint
Lloyd Flint is a Chartered Accountant. He has 25 years’
experience in providing corporate secretarial, financial and
business advice to a diverse group of business clients and
public companies.
Indemnification and Insurance of
Directors and Officers
During the financial year, the consolidated entity maintained
an insurance policy which indemnifies the Directors and
Officers of Hot Chili Limited in respect of any liability incurred
in connection with the performance of their duties as Directors
or Officers of the consolidated entity. The consolidated
entity’s insurers have prohibited disclosure of the amount of
the premium payable and the level of indemnification under
the insurance contract.
Indemnification and Insurance
of Auditor
The consolidated entity has not, during or since the end of the
financial year, indemnified or agreed to indemnify the auditor
of the company or any related entity against a liability incurred
by the auditor.
During the financial year, the company has not paid a premium
in respect of a contract to insure the auditor of the company
or related entity.
Directors’ Meetings
The number of directors’ meetings attended and written resolutions signed by each of the Directors of the Company during the
year were:
Director
Murray E Black
Dr Michael Anderson
Christian E Easterday
Dr Allan Trench
Roberto de Andraca Adriasola
George Randall Nickson
Melanie Leighton (Alternate for M Black)
Environmental Issues
The consolidated entity’s exploration and mining operations
are subject to environment regulation under the law of Chile.
No bonds are necessary in respect of the consolidated
entity’s tenement holdings.
The Directors advise that during the year ended 30 June 2021
no claim has been made by any competent authority that any
environmental issues, condition of license or notice of intent
has been breached.
The Directors have considered compliance with the National
Greenhouse and Energy Reporting Act 2007 which requires
entities to report annual greenhouse gas emissions and
energy use. For the measurement period, 1 July 2020 to
30 June 2021, the Directors have assessed that there are
no current reporting requirements but may be required to
do so in the future.
Occupational Health and Safety
Health and Safety actions are framed within the “Quality,
Environment, Safety and Occupational Health Integrated
Policy” that states people´s health and safety is safeguarded
Eligible
Meetings while
in office
Eligible
Meetings
attended
7
3
7
7
7
7
-
7
3
7
7
3
7
-
within the different fields of our activity. Hot Chili Limited
strictly follows the Chilean safety rules and communicates a
set of key performance indicators to the Chilean Mining Safety
Authority on a monthly basis. Health and Safety activities
follow an action plan aimed to prevent and control different
forms of risk at company operations. The plan covers specific
areas such as the Compliance of Legal and Other Standards,
Risk Assessment and Control, Occupational Health,
Emergency Response, Training, Incidents - Corrective and
Preventive Action, Management of Contractors and Suppliers,
Audit and Management Review.
Hot Chili Limited provides continuous training to enable
employees to perform their work safely and efficiently.
Training focuses on six areas where the risks are more evident
according to the nature of our operations: Safe Driving, Drilling
Platform Operations, Emergency Plans and Protection from
Ultraviolet Radiation, Dust and Noise Emissions.
In terms of Safety performance, “Lost Time Incident
Frequency Rate (LTIFR*)” is the main indicator we monitor to
make sure our action plan remains effective and relevant. The
LTIFR during the last 24 months (until 30 June 2021) is 27.0.
*LTIFR: number of lost time injuries in accounting period / total
hours worked in accounting period *1,000,000.
36
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Proceedings on Behalf of Company
Rounding of amounts
No person has applied for leave of Court to bring proceedings
on behalf of the consolidated entity or intervene in any
proceedings to which the consolidated entity is a party for the
purpose of taking responsibility on behalf of the consolidated
entity for all or any part of those proceedings.
The consolidated entity is of a kind referred to in Corporations
Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to ‘rounding-off’. Amounts
in this report have been rounded off in accordance with that
Corporations Instrument to the nearest dollar.
Auditors Independence Declaration
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act 2001 is set out
immediately after this directors’ report.
The consolidated entity was not a party to any such
proceedings during the year.
Non-Audit Services
The Board of Directors is satisfied that the provision of non-
audit services during the year is compatible with the general
standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the
services disclosed below did not compromise the external
auditor’s independence for the following reasons:
. all non-audit services are reviewed and approved by the
directors prior to commencement to ensure they do not
adversely affect the integrity and objectivity of the auditor;
and
.
the nature of the services provided does not compromise
the general principles relating to auditor independence in
accordance with APES 110: Code of Ethics for Professional
Accountants set by the Accounting Professional and
Ethical Standards Board..
Non-audit services that have been provided by the entity’s
auditor, RSM Australia Partners, have been disclosed in Note 17.
37
HOT CHILI Annual Report 2021 5 Directors’
Report (cont’d)
REMUNERATION REPORT (AUDITED)
The information provided in this remuneration report has been audited.
Principles used to determine amount and nature of remuneration
The objective of the consolidated entity’s executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The Board ensures that executive reward satisfies the following key criteria for good reward
governance practices:
• competitiveness and reasonableness
• acceptability to shareholders
•
transparency
The current base remuneration for Directors was last reviewed with effect from November 2020. All director fees are periodically
recommended for approval by shareholders.
The consolidated entity’s policy regarding executive’s remuneration is that the executives are paid a commercial salary and
benefits based on the market rate and experience.
Details of Remuneration of Directors
2021
Short Term
Post-
Employment
Share-based
Payments
Salary and
Cash Fees
Other
Benefits
Superannuation
Performance
Rights
$
$
$
Name
Murray E Black
Dr Michael Anderson1
Christian E Easterday
Dr Allan Trench
Mark Jamieson2
Roberto de Andraca
Adriasola
George R Nickson
$
66,267
9,607
353,067
39,200
-
42,924
42,924
553,989
1 To date of resignation 4 November 2020.
2 Appointed 2 September 2021.
-
-
-
-
-
-
-
-
Total
$
72,562
9,607
Performance
Related
%
-
-
-
-
353,367
739,975
47.8
-
-
-
-
42,924
-
42,924
42,924
-
-
-
6,295
-
33,541
3,724
-
-
-
43,560
353,367
950,916
37.2
2020
Short Term
Post-
Employment
Share-based
Payments
Salary and
Cash Fees
Other
Benefits
Superannuation
Performance
Rights
Name
Murray E Black
Dr Michael Anderson
Christian E Easterday
Dr Allan Trench
Roberto de Andraca
Adriasola
George R Nickson
$
56,800
36,792
259,200
33,600
36,792
36,792
459,976
$
$
$
-
-
-
-
-
-
-
5,396
-
24,624
3,192
-
-
33,212
-
-
-
-
-
-
-
Total
$
62,196
36,792
283,824
36,792
36,792
36,792
493,188
Performance
Related
%
-
-
-
-
-
-
-
38
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Remuneration of Key Management Personnel
2021
Name
Melanie Leighton
(Corporate Projects Manager /
Alternate Director)
Jose Ignacio Silva
(Chief Legal Counsel)
2020
Name
Melanie Leighton
(Corporate Projects Manager /
Alternate Director)
Jose Ignacio Silva
(Chief Legal Counsel)
Short Term
Post-
Employment
Share-based
Payments
Salary and
Cash Fees
Other
Benefits
Superannuation
Performance
Rights
$
$
$
$
Total
$
226,667
235,088
461,755
-
-
-
21,533.35
215,000
463,200
-
466,737
701,825
21,533
681,737
1,165,025
Short Term
Post-
Employment
Share-based
Payments
Salary and
Cash Fees
Other
Benefits
Superannuation
Performance
Rights
$
$
$
$
180,000
152,300
332,300
-
-
-
17,100
-
17,100
-
-
-
Total
$
197,100
152,300
349,400
Performance
Related
%
46.4
66.5
58.5
Performance
Related
%
-
-
-
39
HOT CHILI Annual Report 2021 5 Directors’
Report (cont’d)
Key Management Personnel Interests in the Shares, Options and Convertible Notes
of the Company
Shares
The number of shares in the company held during the financial year, and up to 30 June 2021, by each Key Management
Personnel of Hot Chili Limited, including their personally related parties, is set out below. There were no shares granted as
compensation during the year.
2021
Directors
Murray E Black
Christian E Easterday
Dr Allan Trench
Dr Michael Anderson
Roberto de Andraca Adriasola
George Randall Nickson
Key Management Personnel
Melanie Leighton
Jose Ignacio Silva
Total
2020
Directors
Murray E Black
Christian E Easterday
Dr Allan Trench
Dr Michael Anderson
Roberto de Andraca Adriasola
George Randall Nickson
Key Management Personnel
Melanie Leighton
Jose Ignacio Silva
Total
Balance at the
start of the year
Granted as
compensation
Other changes
during the year
Balance at the
end of the year
153,154,734
27,082,371
257,653
-
6,000,000
-
186,494,758
180,000
9,350,734
9,530,734
196,025,492
-
-
-
-
-
-
-
-
-
-
-
62,889,918
-
-
-
-
216,044,652
27,082,371
257,653
-
6,000,000
-
62,889,918
249,384,676
-
(2,000,000)
(2,000,000)
60,889,918
180,000
7,350,734
7,530,734
256,915,410
Balance at the
start of the year
Granted as
compensation
Other changes
during the year
Balance at the
end of the year
124,212,498
27,082,371
224,046
-
6,000,000
-
157,518,915
180,000
8,131,073
8,311,073
165,829,988
-
-
-
-
-
-
-
-
-
-
-
28,942,236
153,154,734
-
33,607
-
-
-
27,082,371
257,653
-
6,000,000
-
28,975,843
186,494,758
-
1,219,661
1,219,661
30,195,504
180,000
9,350,734
9,530,734
196,025,492
40
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Options
Directors and key management personnel holdings of options are as followed:
2021
Directors
Murray E Black
Dr Allan Trench
Christian E Easterday
Key Management Personnel
Melanie Leighton
Jose Ignacio Silva
Balance at the
start of the year
Granted as
compensation1
Other changes
during the year
Balance at the
end of the year
-
16,803
6,000,000
3,000,000
3,609,830
12,626,633
21,166,666
-
-
-
-
-
-
-1
-
-
-
-
-
-
16,803
6,000,000
3,000,000
3,609,830
12,626,633
12,626,633
1 Net change. 16,666,667 free options exerciseable at 2.5c per share attaching to a placement of shares were issued 4
September 2020 pursuant to shareholder approval and exercised 3 June 2021.
2020
Directors
Murray E Black
Dr Allan Trench
Christian E Easterday
Key Management Personnel
Melanie Leighton
Jose Ignacio Silva
Balance at the
start of the year
Granted as
compensation1
Other changes
during the year
Balance at the
end of the year
6,666,666
-
6,833,333
3,000,000
4,666,667
21,166,666
-
-
-
-
-
-
(6,666,666)
16,803
(833,333)
-
(1,056,837)
(8,540,033)
-
16,803
6,000,000
3,000,000
3,609,830
12,626,633
Convertible Notes
Directors and key management personnel holdings of convertible notes are as followed:
2021
Directors
Murray E Black
2020
Directors
Murray E Black
Balance at the
start of the year
Issued during
the year
Other changes
during the year
Balance at the
end of the year
3,834
3,834
-
-
-
-
3,834
3,834
Balance at the
start of the year
Issued during
the year
Other changes
during the year
Balance at the
end of the year
3,834
3,834
-
-
-
-
3,834
3,834
At the date of this report, the Company had no employees that fulfilled the role of key management personnel, other than those
disclosed above.
41
HOT CHILI Annual Report 2021
5 Directors’
Report (cont’d)
Performance Rights
Directors and key management personnel holdings of options are as followed:
2021
Directors
Christian E Easterday
Key Management Personnel
Melanie Leighton
Jose Ignacio Silva
Total
Balance at the
start of the year
Granted as
compensation1
Other changes
during the year
Balance at the
end of the year
-
-
-
-
20,000,000
15,000,000
15,000,000
50,000,000
-
-
-
-
20,000,000
15,000,000
15,000,000
50,000,000
1 Refer to note 15b for details of the issue of performance rights.
At the date of this report, the Company had no employees that fulfilled the role of key management personnel, other than those
disclosed above
Service Contracts
The Company has entered into an executive service agreement
with Mr Christian Easterday, as Managing Director of the
Company.
Remuneration
Under the agreement, Mr Easterday will receive an annual
salary of $400,000, plus superannuation at the rate of 10.0%
and other entitlements. Mr Easterday’s remuneration is subject
to annual review.
Term and termination
Mr Easterday was employed for an initial term of 3 years,
commencing on 9 October 2013. At least 6 months before the
End Date, either party may give notice that the agreement will
terminate on the End date.
After the initial term, the agreement will continue until either Mr
Easterday terminates by giving the Company 6 months’ notice
or the Company terminates by giving Mr Easterday 6 months’
notice or payment in lieu of notice up to an amount equivalent
to 6 months’ remuneration.
Service Contracts
The Company, through Its subsidiary Chilean entity Sociedad
Minera El Aguila SpA, has entered into a labour agreement
with Mr José Ignacio Silva, as Country Manager for Chile and
Legal Counsel of the Company. José Ignacio Silva Is a Key
Management Personnel.
Remuneration
Under such agreement, Mr. Silva will receive an annual salary
of CLP 136,775,000 before any legal and voluntary reductions.
The superannuation is included in such amount. Mr. Silva’s
remuneration is subject to annual review.
Term and termination
Mr. Silva commenced employment on July 1st, 2011. Either
party may give notice that the agreement will terminate with 1
months’ notice.
Such agreement will continue until either Mr. Silva terminates by
giving the Company 1 months’ notice or the Company terminates
by giving Mr. Silva 1 months’ notice or payment in lieu of notice
up to an amount equivalent to 1 months’ remuneration.
The Company may terminate the agreement summarily for any
serious incidents or wrongdoing by Mr Easterday.
The Company may terminate the agreement summarily for any
serious incidents or wrongdoing by Mr. Silva.
Termination entitlements
Termination entitlements
Upon termination of the agreement, Mr Easterday will be
entitled to termination benefits in accordance with Part 2D.2 of
the Corporations Act. The termination benefits (including any
amount of payment in lieu of notice) must not exceed the amount
equal to one times the executive’s average annual base salary in
the last 3 years of service with the Company, unless the benefit
has first been approved by Shareholders in a general meeting.
Post termination restraints
Mr Easterday is subject to post termination non-competition
restraints up to a maximum of 12 months from the date of
termination.
Upon termination of the agreement, Mr. Silva will be entitled
to termination benefits in accordance with the Chilean Labour
Code, including any amount of payment in lieu of notice, and a
monthly salary per year of work in the Company, unless other
benefits have first been approved by Shareholders in a general
meeting.
Post termination restraints
Mr. Silva is not subject to post termination non-competition
restraints up to a maximum of 12 months from the date of
termination.
42
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 Service contracts
The Company has entered into an executive service
agreement with Ms Melanie Leighton, as Corporate Projects
Manager of the Company.
Remuneration
Under the agreement, Ms Leighton will receive an annual
salary of $250,000, plus superannuation at the rate of 10.0%
and other entitlements. Ms Leighton’s remuneration is subject
to annual review.
Term and termination
Ms Leighton is employed on a permanent part time basis.
Either party can terminate the agreement by giving 4 weeks
notice or payment in lieu of notice. The Company may
terminate the agreement summarily for any misconduct by
Ms.Leighton.
Termination entitlements
There are no entitlements accruing upon termination of the
agreement.
Non-executive Directors
Each of the non-executive Directors have signed letters of appointment. The key features of the respective
appointments are:
Murray
Black
Allan
Trench
George
Nickson
Roberto de
Andraca Adriasola
Mark
Jamieson
Term
Remuneration
n/a
$6,479 per month
inclusive of super-
annuation
n/a
$3,833 per month
inclusive of super-
annuation
n/a
n/a
$3,833 per month
$3,833 per month
Termination benefits
Nil
Nil
Nil
Nil
n/a
-
Nil
Additional information
The earnings of the consolidated entity for the five years to 30 June 2021 are summarised below:
Other income
Expenses
EBITDA
EBIT
2021
60,465
2020
3,289,606
(9,304,467)
(4,555,219)
7,525,912
7,530,689
680,324
671,646
Loss after income tax
(9,744,002)
(1,265,613)
2019
238,112
(4,470,482)
(2,184,855)
(2,196,264)
(4,232,370)
2018
140,513
(4,151,069)
(2,419,012)
(2,431,564)
(4,010,556)
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
Share price at financial
year end ($)
Basic earnings per share
(cents per share)
2021
0.034
2020
0.017
2019
0.032
(0.35)
(0.07)
(0.47)
2018
0.03
(0.65)
2017
1,356,693
(3,855,169)
(1,311,457)
(1,327,339)
(2,498,476)
2017
0.023
(0.44)
43
HOT CHILI Annual Report 2021 5 Directors’
Report (cont’d)
Other transactions with directors, key management personnel and their
related parties
MRA Consulting Pty Ltd, a company associated with Dr Anderson, a director, was paid $9,607 (2020: $36,792) in directors and
consulting fees. There were no amounts payable as at 30 June 2021 (2020: Nil).
Quarterly interest accruing on the convertible notes payable to Blue Spec Drilling Pty Ltd of $30,877 (2020: $30,962) for the year
was settled by the issue of 794,912 shares (2020: 927,525). $7,698 was payable as at 30 June 2021 (2020: $7,698) which was
settled by issue of 222,291 shares on 12 July 2021 (2020: 412,536 shares on 3 July 2020). The shares were issued to Blue Spec
Drilling Pty Ltd, a company associated with Mr Murray Black, a director, following shareholder approval.
Blue Spec Sondajes Chile Limitada, a company in which Mr Murray Black is a director was provided $10,379,605 (2020:
$4,151,946) rent and drilling services of which, as at 30 June 2021 $3,718,982 (2020: $1,802,486) was owing to Blue Spec
Sondajes Chile Limitada for rent and for drilling at Cortadera.
All transactions were made on commercial terms.
End of Remuneration Report
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
Christian E Easterday
Managing Director
30 September 2021
Perth, WA
44
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 6 Auditors’ Independence
Declaration
45
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021THE POWER OF BEING UNDERSTOODAUDIT | TAX | CONSULTINGRSM Australia Partnersis a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036Liability limited by a scheme approved under Professional Standards LegislationRSM Australia PartnersLevel 32, Exchange Tower 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Hot Chili Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) Any applicable code of professional conduct in relation to the audit.David Wall Partner RSM Australia Partners Perth, WA Dated: 30 September 2021 7 Auditors’
Report
RSM Australia Partners
Level 32, Exchange Tower
2 The Esplanade Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 (0) 8 9261 9100
F +61 (0) 8 9261 9111
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
To the Members of Hot Chili Limited
Opinion
We have audited the financial report of Hot Chili Limited (Company) and its subsidiaries (Group), which
comprises the statement of financial position as at 30 June 2021, the statement of profit or loss and other
comprehensive income, the statement of changes in equity and the statement of cash flows for the year then
ended, and notes to the financial statements, including a summary of significant accounting policies, and the
directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i)
Giving a true and fair view of the Group's financial position as at 30 June 2021 and of its financial
performance for the year then ended; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the audit of the financial report section of our
report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (Code) that are relevant to our audit of the financial report
in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Material uncertainty related to going concern
We draw attention to Note 1 in the financial report, which indicates that the Group incurred a net loss of $9,744,002
and had net cash outflows from operating activities of $3,614,989 and from investing activities of $25,345,294
during the year ended 30 June 2021 and, as of that date, the Group's current liabilities exceeded its current assets
by $10,499,954. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1,
indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a
going concern. Our opinion is not modified in respect of this matter.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent
accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
46
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material uncertainty related to going concern section of our report, we
have determined the matter described below to be the key audit matter to be communicated in our report.
Key audit matter
How our audit addressed this matter
Carrying value of exploration and evaluation expenditure
Refer to Note 10 in the financial statements
The Group has capitalised a significant amount of
exploration and evaluation expenditure, with a
carrying value of $158,329,683 as at 30 June 2021.
We determined this to be a key audit matter due to the
in
significant management
assessing the carrying value in accordance with AASB
6 Exploration for and Evaluation of Mineral Resources,
including:
judgment
involved
Determination of whether expenditure can be
associated with finding specific mineral resources,
and the basis on which that expenditure is
allocated to an area of interest;
Assessing whether any indicators of impairment
are present and if so, judgement applied to
determine and quantify any impairment loss; and
Assessing whether exploration activities have
reached a stage at which the existence of
economically
reserves may be
determined.
recoverable
Our audit procedures in relation to the carrying value
exploration and evaluation expenditure included:
Ensuring that the right to tenure of the area of
interest was current;
Ensuring that the option agreement payments are
up to date;
Agreeing a sample of additions to supporting
documentation and ensuring the amounts are
capital in nature and relate to the area of interest;
Enquiring with management and
reviewing
budgets and other documentation as evidence that
active and significant operations in, or relation to,
the area of interest will be continued in the future;
Assessing
and
evaluating management’s
assessment of whether indicators of impairment
existed at the reporting date; and
Through discussions with the management and
review of the Board Minutes, ASX announcements
and other relevant documentation, assessing
management’s determination
that exploration
activities have not yet progressed to the stage
where the existence or otherwise of economically
recoverable reserves may be determined.
Other information
The directors are responsible for the other information. The other information comprises the information included
in the Group's annual report for the year ended 30 June 2021, but does not include the financial report and the
auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
47
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 7 Auditors’
Report (cont’d)
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description
forms part of our auditor's report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included within the directors' report for the year ended 30 June 2021.
In our opinion, the Remuneration Report of Hot Chili Limited, for the year ended 30 June 2021, complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
David Wall
Partner
RSM Australia Partners
Perth, WA
Dated: 30 September 2021
48
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 8 Directors’
Declaration
In the directors’ opinion:
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2021
and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of Corporations Act 2001.
On behalf of the directors
Director
Christian E Easterday
Managing Director
Dated this 30th day of September 2021
Perth
49
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 9 Statement of
Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2021
Statement of Profit or Loss & Other Comprehensive Income
Consolidated Entity
Note
2021
$
Interest income
Gain on revaluation of derivative liability
Other income
Depreciation
Convertible notes expenses
Exploration expenses written off
Corporate fees
Legal and professional
Employee benefits expense
Administration expenses
Accounting fees
Travel costs
Other expenses
Foreign exchange loss
Share based payments
Loss on revaluation of derivative liability
Finance costs
Loss before income tax
Income tax expense
Loss after income tax
Other comprehensive income
Total Comprehensive Loss
Loss attributable to:
Non-controlling interests
Owners of Hot Chili Limited
Basic earnings per share (cents)
Diluted earnings per share (cents)
4
5
5
10
5
6
16
16
2020
$
4,115
3,202,904
82,587
3,289,606
(8,678)
(37,198)
-
(202,902)
(364,745)
(997,656)
(263,163)
(194,098)
(103,136)
(397,513)
(154,186)
-
-
(1,831,944)
(1,265,613)
-
1,065
-
59,400
60,465
(4,777)
(35,000)
-
(207,820)
(68,366)
(1,549,884)
(460,143)
(251,891)
(63,031)
(654,494)
(285,248)
(2,234,736)
(1,874,949)
(2,114,128)
(9,744,002)
-
9,744,002)
(1,265,613)
-
-
(9,744,002)
(1,265,613)
(99,185)
(109,430)
(9,644,817)
(1,156,183)
(9,744,002)
(1,265,613)
(0.35)
(0.35)
(0.07)
(0.07)
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
50
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
10 Statement of
Financial Position
AS AT 30 JUNE 2021
Current Assets
Cash and cash equivalents
Other current assets
Total Current Assets
Non-Current Assets
Plant and equipment
Exploration and evaluation expenditure
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Total Current Liabilities
Non-Current Liabilities
Borrowings
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Share based payment reserve
Foreign currency translation reserve
Accumulated losses
Consolidated Entity
Note
2021
$
2020
$
7
8
9
10
11
12
13
12
3,604,625
6,307,894
133
6,960
3,604,758
6,314,854
61,944
57,431
158,329,683
131,070,506
158,391,627
131,127,937
161,996,385
137,442,791
6,375,148
4,999,787
2,729,777
14,104,712
4,667,920
-
1,445,136
6,113,056
-
-
4,186,801
4,186,801
14,104,712
10,299,857
147,891,673
127,142,934
14
15(b)
15(c)
15(a)
188,314,123
160,056,118
2,774,476
1,222
539,740
1,222
(62,179,021)
(52,534,204)
Capital and reserves attributable to owners of Hot Chili Limited
128,910,800
108,062,876
Non-controlling interests
Total Equity
15(d)
18,980,873
19,080,058
147,891,673
127,142,934
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
51
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
11 Statement of
Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2021
Consolidated Entity
Contributed
Equity
Share
based
payment
Reserve
Foreign
Currency
Translation
Reserve
Accumulated
Losses
Non-
controlling
Interest
Total Equity
$
$
$
$
$
$
Balance at 1 July 2019
131,837,269
52,530
1,222
(51,401,511)
19,189,488
99,678,998
Loss for the year
Total Comprehensive
Income for the Year
-
-
-
-
Shares issued
Share issue costs
Share based payments
30,133,115
(1,914,266)
Balance at 30 June 2020
160,056,118
487,210
539,740
-
-
-
-
-
(1,156,183)
(109,430)
(1,265,613)
1,156,183)
(109,430)
(1,265,613)
-
-
23,490
-
-
-
30,133,115
(1,914,266)
510,700
1,222
(52,534,204)
19,298,918
127,142,934
Balance at 1 July 2020
160,056,118
539,740
1,222
(52,534,204)
19,080,058
127,142,934
Loss for the year
Total Comprehensive
Income for the Year
-
-
Shares issued
Share issue costs
29,873,805
(1,615,800)
-
-
-
-
Share based payments
-
2,234,736
-
-
-
-
-
(9,644,817)
(99,185)
(9,744,002)
(9,644,817)
(99,185)
(9,744,002)
-
-
-
-
-
-
29,873,805
(1,615,800)
2,234,736
Balance at 30 June 2021
188,314,123
2,774,476
1,222
(62,179,021)
18,980,873
147,891,673
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
52
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
12 Statement of
Cash Flows
FOR THE YEAR ENDED 30 JUNE 2021
Cash Flows from Operating Activities
Payments to suppliers and employees
Interest received
Other receipts
Consolidated Entity
2021
2020
Note
$
$
(3,675,454)
(2,657,171)
1,065
59,400
4,115
82,587
Net cash used in operating activities
19
(3,614,989)
(2,570,469)
Cash Flows from Investing Activities
Payments for exploration and evaluation
Net cash used in investing activities
Cash Flows from Financing Activities
Proceeds from issue of shares
Share issue costs
Net cash provided by financing activities
Net (decrease)/increase in cash held
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rates on cash holdings in foreign currencies
(25,345,294)
(16,990,661)
(25,389,701)
(16,990,661)
28,018,525
26,008,924
(1,615,800)
(1,403,565)
26,402,725
24,605,359
(2,575,743)
5,044,229
6,307,894
1,377,545
(127,526)
(113,880)
Cash and cash equivalents at the end of the financial year
7
3,604,625
6,307,894
The above Statement of Cash Flows should be read on conjunction with the accompanying notes.
53
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
13 Notes to the Financial
Statements
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of
the financial statements are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
New, revised or amending Accounting Standards
and Interpretations adopted
The consolidated entity has adopted all of the new, revised or
amending Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board (‘AASB’) that
are mandatory for the current reporting period. Any new,
revised or amending Accounting Standards or Interpretations
that are not yet mandatory have not been early adopted.
As disclosed in Note 20, the consolidated entity has future
option payment commitments of $1,463,116 in the next 12
months and $35,846,346 due after 12 months. As disclosed
in Note 21 the company paid $20,638,415 of the future option
payment commitments subsequent to the reporting date
which Is the final Instalment to acquire 100% interest in the
Company’s world-class Cortadera copper-gold discovery
in Chile.
These factors indicate a material uncertainty which may cast
significant doubt over the ability of the consolidated entity to
continue as a going concern and therefore whether it will realise
its assets and extinguish its liabilities in the normal course of
business and at the amounts stated in the financial report.
The directors believe there are reasonable grounds to believe
that the consolidated entity will be able to continue as going
concern, after consideration of the following factors
The adoption of these Accounting Standards and
Interpretations did not have any significant Impact on the
financial performance or position of the consolidated entity.
• The company completed the $40 million capital raising
before costs, subsequent to the reporting date as
disclosed in Note 21.
(a) Basis of preparation
These general purpose financial statements have been
prepared in accordance with Australian Accounting Standards
and Interpretations issued by the Australian Accounting
Standards Board (‘AASB’) and the Corporations Act 2001,
as appropriate for for-profit oriented entities. These financial
statements also comply with International Financial Reporting
Standards as issued by the International Accounting
Standards Board (‘IASB’).
The financial report was authorised for issue on
30th September 2021 by the Board of Directors.
The functional and presentation currency of Hot Chili Limited
is Australian Dollars.
Critical accounting estimates
The preparation of financial statements in conformity of AIFRS
requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in
the process of applying the consolidated entity’s accounting
policies. The areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates
are significant to the financial statements are disclosed in the
notes to the financial statements.
Historical cost convention
These financial statements have been prepared under the
historical cost convention, as modified by the revaluation of
available-for-sale financial assets.
Going concern
The directors have prepared the financial statements on
a going concern basis, which contemplates continuity of
normal business activities and the realisation of assets and
extinguishment of liabilities in the normal course of business.
As disclosed in the financial statements, the consolidated
entity incurred a net loss of $9,744,002 and had cash outflows
from operating activities of $3,614,989 and from investing
activities of $25,345,294 for the year ended 30 June 2021.
As of that date, the consolidated entity had net current
liabilities $10,499,954.
•
Included in liabilities is a derivative liability of $2,729,777
(Note 13) and debt component of $4,999,787 (Note 12)
attributed to granting an option to the convertible note
holder that may be converted at any time prior to maturity.
The convertible note is redeemable at the option of the
company and thus will not be a drain on the company’s
funds; and
• The company has issued equity securities after year end
(as detailed in note 21) and expects to issue additional
equity securities, in particular via the exercise of options
under the Corporations Act 2001,to fund ongoing working
requirement. Other sources of funding have also been
contemplated, including small scale production by 3rd
parties at the Productora project (for which a contract has
been signed).
Accordingly, the Directors believe that the consolidated
entity will be able to continue as a going concern and that
it is appropriate to adopt the going concern basis in the
preparation of the financial report.
The financial report does not include any adjustments relating
to the amounts or classification of recorded assets or liabilities
that might be necessary if the consolidated entity does not
continue as a going concern.
(b) Parent entity information
In accordance with the Corporations Act 2001, these financial
statements present the results of the consolidated entity
only. Supplementary information about the parent entity is
disclosed in note 26.
(c) Principles of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Hot Chili Limited (‘parent
entity’) as at 30 June 2021 and the results of all subsidiaries
for the year then ended. Hot Chili Limited and its subsidiaries
together are referred to in these financial statements as the
‘consolidated entity’.
54
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 1.
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
Subsidiaries are all those entities over which the consolidated
entity has control. The consolidated entity controls an entity
when the consolidated entity 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 to direct
the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the
consolidated entity. They are de-consolidated from the
date that control ceases
Intercompany transactions, balances and unrealised gains on
transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the
policies adopted by the consolidated entity.
Non-controlling interests in the results and equity of the
consolidated entity is shown separately in the consolidated
statement of profit or loss and other comprehensive
income and the consolidated statement of financial position
respectively.
Where control of an entity is obtained during a financial year,
its results are included in the consolidated statement of profit
and loss and comprehensive income from the date on which
control commences. Where control ceases, de-consolidation
occurs from that date.
Investments in associates are accounted for in the
consolidated financial statements using the equity method.
Under this method, the consolidated entity’s share of the
post-acquisition profits or losses of associates is recognised
in the consolidated statement of comprehensive income,
and its share of post-acquisition movements in reserves is
recognised in consolidated reserves. The cumulative post-
acquisition movements are adjusted against the cost of the
investment. Associates are those entities over which the
consolidated entity exercises significant influence, but not
control. Investments in subsidiaries are recognised at cost
less impairment losses.
(d) Income tax
The consolidated entity adopts the liability method of tax-effect
accounting whereby the income tax expense is based on the
profit adjusted for any non-assessable or disallowed items.
Deferred tax is accounted for using the statement of balance
sheet liability method in respect of temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. No deferred
income tax will be recognised from the initial recognition of
an asset or liability, excluding a business combination, where
there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected
to apply to the period when the asset is realised or liability
is settled. Deferred tax is credited in the statement of
comprehensive income except where it relates to items that
may be credited directly to equity, in which case the deferred
tax is adjusted directly against equity.
The amount of benefits brought to account or which may
be realised in the future is based on the assumption that
no adverse change will occur in income taxation legislation
and the anticipation that the consolidated entity will derive
sufficient future assessable income to enable the benefit to
be realised and comply with the conditions of deductibility
imposed by the law.
Hot Chili Limited and its wholly-owned Chilean subsidiaries
have not formed an income tax consolidated group under the
Tax Consolidation Regime.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are net
of returns, trade allowances and amounts collected on behalf
of third parties. Revenue is recognised for major business
activities as follows:
i.
Interest Income
Interest revenue is recognised on a proportional basis
taking into account the interest rates applicable to the
financial assets.
ii. Other Services
Other debtors are recognised at the amount
receivable and are due for settlement within 30 days
from the end of the month in which services were
provided.
(f) Current and non-current classification
Assets and liabilities are presented in the statement of financial
position based on current and non-current classification.
An asset is current when: it is expected to be realised or
intended to be sold or consumed in normal operating cycle;
it is held primarily for the purpose of trading; it is expected to
be realised within twelve months after the reporting period;
or the asset is cash or cash equivalent unless restricted
from being exchanged or used to settle a liability for at least
twelve months after the reporting period. All other assets are
classified as non-current.
A liability is current when: it is expected to be settled in
normal operating cycle; it is held primarily for the purpose
of trading; it is due to be settled within twelve months after
the reporting period; or there is no unconditional right to defer
the settlement of the liability for at least twelve months after
the reporting period. All other liabilities are classified as
non-current.
Deferred tax assets and liabilities are always classified as
non-current.
(g) Exploration and evaluation expenditure
Exploration and evaluation expenditure in relation to
separate areas of interest for which rights of tenure are
current is carried forward as an asset in the statement of
financial position where it is expected that the expenditure
will be recovered through the successful development and
exploitation of an area of interest, or by its sale; or exploration
activities are continuing in an area and activities have not
reached a stage which permits a reasonable estimate of the
existence or otherwise of economically recoverable reserves.
Where a project or an area of interest has been abandoned,
the expenditure incurred thereon is written off in the year in
which the decision is made.
55
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
13 Notes to the
Financial Statements(cont’d)
1.
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
(j) Share-based payments
Equity-based compensation benefits can be provided to
directors and executives.
(h) Plant and equipment
Plant and equipment
Plant and equipment are measured on the cost basis less
depreciation and impairment losses.
Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with
the item will flow to the consolidated entity and the cost of
the item can be measured reliably. All other repairs and
maintenance are charged to the statement of comprehensive
income during the financial period in which they are incurred.
Each class of plant and equipment is carried at cost or fair
value less, where applicable, any accumulated depreciation
and impairment losses.
The carrying amount of plant and equipment is reviewed
annually by directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable
amount is assessed on the basis of the expected net cash
flows that will be received from the assets’ employment and
subsequent disposal. The expected net cash flows
have been discounted to their present values in determining
recoverable amounts.
Depreciation
The depreciable amount of all plant and equipment is
depreciated on a diminishing value over their useful lives to
the consolidated entity commencing from the time the asset is
held ready for use.
The depreciation rates used for each class of depreciable
assets are:
Class of Fixed Asset
Plant and Equipment
Depreciation Rate
10-33%
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount. These gains and losses
are included in the statement of comprehensive income.
(i) Trade and other payables
These amounts represent liabilities for goods and services
provided to the consolidated entity prior to the end of the
financial year and which are unpaid, together with assets
ordered before the end of the financial year. The amounts are
unsecured and are usually paid within 30 days of recognition.
The cost of equity-settled transactions are measured at fair
value on grant date. Fair value is independently determined
using any of the Hybrid Barrier Up and In Trinomial, Binomial
or Black-Scholes option pricing model that takes into account
the exercise price, the term of the option, the impact of
dilution, the share price at grant date and expected price
volatility of the underlying share, the expected dividend
yield and the risk free interest rate for the term of the option,
together with non-vesting conditions that do not determine
whether the consolidated entity receives the services that
entitle the employees to receive payment. No account is taken
of any other vesting conditions.
The cost of equity-settled transactions are recognised as
an expense with a corresponding increase in equity over
the vesting period. The cumulative charge to profit or loss is
calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest
and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative
amount calculated at each reporting date less amounts
already recognised in previous periods.
The cost of cash-settled transactions is initially, and at each
reporting date until vested, determined by applying either the
Binomial or Black-Scholes option pricing model, taking into
consideration the terms and conditions on which the award
was granted. The cumulative charge to profit or loss until
settlement of the liability is calculated as follows:
• during the vesting period, the liability at each reporting
date is the fair value of the award at that date multiplied by
the expired portion of the vesting period.
•
from the end of the vesting period until settlement of the
award, the liability is the full fair value of the liability at the
reporting date.
All changes in the liability are recognised in profit or loss. The
ultimate cost of cash-settled transactions is the cash paid to
settle the liability.
(k) Earnings per share
i. Basic earnings per share
Basic earnings per share is determined by dividing the
profit attributable to equity holders of the company,
excluding any costs of servicing equity other than
ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued
during the year.
ii. Diluted earnings per share
Diluted earnings per share adjusts the figures used
in the determination of basic earnings per share to
take into account the after income tax effect of
interest and other financing costs associated with
dilutive potential ordinary shares and the weighted
average number of shares assumed to have been
issued for no consideration in relation to dilutive
potential ordinary shares.
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HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
1.
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
(l) 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.
(m) Impairment of assets
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. Assets
that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash
generating units).
(n) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value,
and bank overdrafts.
(o) Provisions
Provisions are recognised when the consolidated entity has
a present legal or constructive obligation as a result of past
events, it is more likely than not that an outflow of resources
will be required to settle the obligation and the amount has
been reliably estimated.
(p) GST
Revenues, expenses and assets are recognised net of the
amount of associated GST, unless the GST incurred is not
recoverable from the taxation. In this case it is recognised as
part of the cost of acquisition of the asset or as part of the
expense.
Receivables and payables are stated as inclusive of the
amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is
included with other receivables or payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the
taxation authority, are presented as operating cash flow.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
tax authority.
(q) Borrowings
Loans and borrowings are initially recognised at the fair value
of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the
effective interest method.
Where there is an unconditional right to defer settlement of
the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
The component of the convertible notes that exhibits
characteristics of a liability is recognised as a liability in the
statement of financial position, net of transaction costs.
On the issue of the convertible notes the fair value of the
liability component is determined using a market rate for an
equivalent non-convertible bond and this amount is carried
as a non-current liability on the amortised cost basis until
extinguished on conversion or redemption. The increase in
the liability due to the passage of time is recognised as a
finance cost. The remainder of the proceeds are allocated
to the conversion option that is recognised and included
in shareholders equity as a convertible note reserve, net of
transaction costs. The carrying amount of the conversion
option is not remeasured in the subsequent years. The
corresponding interest on convertible notes is expensed to
profit or loss.
(r) Derivative financial instruments
Derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The
accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument,
and if so, the nature of the item being hedged.
(s) Finance costs
Finance costs attributable to qualifying assets are capitalised
as part of the asset. All other finance costs are expensed in
the period in which they are incurred, including interest on
short-term and long-term borrowings.
(t) Issued Capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
(u) Other Receivables
Other receivables are recognised at amortised cost, less any
allowance for expected credit losses.
(v) Rounding of amounts
The company is of a kind referred to in Corporations
Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to ‘rounding-off’. Amounts
in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in
certain cases, the nearest dollar.
57
HOT CHILI Annual Report 2021
13 Notes to the
Financial Statements(cont’d)
(y) 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 consolidated
entity’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.
(z) Foreign currency translation
The financial statements are presented in Australian
dollars, which is Hot Chili Limited’s functional and
presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian
dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated
into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign
operations are translated into Australian dollars using the
average exchange rates, which approximate the rates at the
dates of the transactions, for the period. All resulting foreign
exchange differences are recognised in other comprehensive
income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss
when the foreign operation or net investment is disposed of.
1.
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT’D)
(w) 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
consolidated entity 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 consolidated entity 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.
(x) Fair value measurement
When an asset or liability, financial or non-financial, is
measured at fair value for recognition or disclosure purposes,
the fair value is based on the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement
date; and assumes that the transaction will take place either:
in the principal market; or in the absence of a principal market,
in the most advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For
non-financial assets, the fair value measurement is based
on its highest and best use. Valuation techniques that are
appropriate in the circumstances and for which sufficient data
are available to measure fair value, are used, maximising the
use of relevant observable inputs and minimising the use of
unobservable inputs.
Assets and liabilities measured at fair value are classified
into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements.
Classifications are reviewed at each reporting date and
transfers between levels are determined based on a
reassessment of the lowest level of input that is significant to
the fair value measurement.
For recurring and non-recurring fair value measurements,
external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant.
External valuers are selected based on market knowledge and
reputation. Where there is a significant change in fair value of
an asset or liability from one period to another, an analysis is
undertaken, which includes a verification of the major inputs
applied in the latest valuation and a comparison, where
applicable, with external sources of data.
58
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
Derivative financial instruments
The directors have determined that the convertible notes
issued during the year are a compound financial Instrument
with both a debt component and derivative financial liability
representing the conversion option. The accounting for
the derivative financial instrument requires management
judgements and estimates in determining the fair value.
Consolidation of entities
The directors have concluded that the group controls
Sociedad Minera El Aguila SpA (SMEA), even though it holds
less than all the voting rights of this subsidiary. This is because
the group is the largest shareholder with an 80% equity
interest and the ability to appoint 4 of the 5 Directors while the
remaining 20% of shares are held by Compañía Minera del
Pacífico S.A (CMP) with the ability to appoint the remaining
Director. An agreement signed between the group and CMP
requires a quorum to hold a Board meeting and adopt a
resolution to be of at least three Directors with the right to
vote. The accounting treatment of SMEA will be evaluated at
each reporting date subject to any developments between
the shareholders.
Fair value measurement hierarchy
The consolidated entity is required to classify all assets and
liabilities, measured at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the
entire fair value measurement, being: Level 1: Quoted prices
(unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date; Level
2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or
indirectly; and Level 3: Unobservable inputs for the asset or
liability. Considerable judgement is required to determine what
is significant to fair value and therefore which category the
asset or liability is placed in can be subjective.
2. CRITICAL ACCOUNTING
JUDGEMENTS, ESTIMATES
AND ASSUMPTIONS
The preparation of the financial statements requires
management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements.
Management continually evaluates its judgements and
estimates in relation to assets, liabilities, contingent liabilities,
revenue and expenses. Management bases its judgements,
estimates and assumptions on historical experience and
on other various factors, including expectations of future
events; management believes to be reasonable under the
circumstances. The resulting accounting judgements and
estimates will seldom equal the related actual results. The
judgements, estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amounts
of assets and liabilities (refer to the respective notes) within the
next financial year are discussed below.
Exploration and evaluation costs
Exploration and evaluation costs have been capitalised on the
basis that the consolidated entity will commence commercial
production in the future, from which time the costs will
be amortised in proportion to the depletion of the mineral
resources. Key judgements are applied in considering costs
to be capitalised which includes determining expenditures
directly related to these activities and allocating overheads
between those that are expensed and capitalised. In
addition, costs are only capitalised that are expected to be
recovered either through successful development or sale of
the relevant mining interest. Factors that could impact the
future commercial production at the mine include the level of
reserves and resources, future technology changes, which
could impact the cost of mining, future legal changes and
changes in commodity prices. To the extent that capitalised
costs are determined not to be recoverable in the future,
they will be written off in the period in which this determination
is made.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled
transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted.
The fair value is determined by using either the Binomial
or Black-Scholes model taking into account the terms and
conditions upon which the instruments were granted. The
accounting estimates and assumptions relating to equity-
settled share-based payments would have no impact on
the carrying amounts of assets and liabilities within the
next annual reporting period but may impact profit or loss
and equity.
59
HOT CHILI Annual Report 2021 13 Notes to the
Financial Statements(cont’d)
3. SEGMENT INFORMATION
The consolidated entity has identified its operating segments based on the internal reports that are reviewed and used by the
board of directors (chief operating decision makers) in assessing performance and determining the allocation of resources.
The consolidated entity operates as a single segment which is mineral exploration.
The consolidated entity is domiciled in Australia. All revenue from external parties is generated from Australia only. Segment
revenues are allocated based on the country in which the party is located.
Operating revenues of approximately Nil (2020: Nil) are derived from a single external party.
All the assets relate to mineral exploration. Segment assets are allocated to segments based on the purpose for which they
are used.
2021
Assets
Liabilities
P&L (EBITDA)
Interest
Depreciation
Finance costs
P&L (Loss)
2020
Assets
Liabilities
P&L (EBITDA)
Interest
Depreciation
Finance costs
P&L (Loss)
4.
INTEREST INCOME
Interest income
5. OTHER INCOME
Net gain on revaluation of derivative liability
Other
60
Australia
$
2,765,959
Chile
$
159,230,426
Total
$
161,996,385
(8,067,082)
(6,037,630)
(14,104,712)
(6,958,522)
(667,640)
(7,626,162)
1,065
(4,777)
(2,114,128)
(9,744,002)
Australia
$
6,268,011
Chile
$
131,174,780
Total
$
$137,442,791
(5,957,048)
(4,342,809)
(10,299,857)
1,337,536
(766,642)
570,894
4,115
(8,678)
(1,831,944)
(1,265,613)
Consolidated Entity
2020
2021
$
$
1,065
1,065
4,115
4,115
(1,874,949)
3,202,904
59,400
82,587
(1,815,549)
3,285,491
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 6.
INCOME TAX EXPENSE
(a) Reconciliation of income tax expense to prima facie tax payable
Loss before income tax
Prima facie income tax at 26% (2020: 27.5%)
Tax-effect of amounts not deductible in calculating taxable income
Tax loss not recognised
Income tax expense
(b) Tax losses:
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 26% (2020: 27.5%)
Consolidated Entity
2021
$
(9,744,002)
(2,533,441)
1,693,598
839,843
-
2020
$
(1,265,613)
(348,044)
(356,069)
704,113
-
26,600,968
6,916,252
24,873,513
6,840,216
(a) The directors estimate that the potential deferred tax asset at 30 June 2021 in respect of tax losses not
brought to account is $6,916,252 (2020: $6,840,216).
In addition, Chilean subsidiaries of Hot Chili Limited also have tax losses that are a potential deferred tax asset of $26,543,542
(2020: $28,093,526).
(b) The benefit for tax losses will only be obtained if:
i. The consolidated entity and the subsidiaries derive income, sufficient to absorb tax losses.
ii. There is no change to legislation to adversely affect the consolidated entity and its subsidiaries in realising the benefit from the
deduction of the losses.
7. CASH AND CASH EQUIVALENTS
Cash at bank
Reconciliation to cash and cash equivalents at the end of the financial year
The above figures are reconciled to cash and cash equivalents at the end of the
financial year as shown in the statement of cash flows as follows:
Cash and cash equivalents
8. OTHER CURRENT ASSETS
Accounts receivable
VAT receivable
9. PLANT AND EQUIPMENT
Plant and equipment at cost
Less provision for depreciation
Reconciliations:
Plant and equipment
Carrying amount at the beginning of the year
Additions
Disposals and scrapped
Depreciation (i)
Foreign exchange
Carrying amount at the end of the year
3,604,625
3,604,625
6,307,894
6,307,894
3,604,625
6,307,894
-
133
133
6,827
133
6,960
767,802
(705,858)
61,944
640,798
(583,367)
57,431
57,431
157,919
-
-
(21,709)
26,222
61,944
-
-
(17,891)
(82,597)
57,431
(i) Depreciation of $16,932 (2020: $9,213) was capitalised into exploration costs.
61
HOT CHILI Annual Report 2021
13 Notes to the
Financial Statements(cont’d)
10. EXPLORATION AND EVALUATION EXPENDITURE
Carrying amount at the beginning of the year
Consideration given for mineral exploration acquisition
Capitalised mineral exploration and evaluation
Consolidated Entity
2021
$
131,070,506
14,026,229
13,232,948
2020
$
113,176,541
10,460,873
7,433,092
Carrying amount at the end of the year (i)
158,329,683
131,070,506
(i) Management have determined that the capitalised expenditure relating to the projects in Chile are still in the exploration phase
and are to be classified as Exploration and Evaluation expenditure. In accordance with AASB 6 Exploration for and evaluation
of Mineral Resources management have assessed whether there are any indicators of impairment on the capitalised
expenditure as at balance date. In making this assessment management have considered whether sufficient data exists to
conclude that the exploration and evaluation assets are unlikely to be recovered in full from successful development or sale.
This included management engaging an independent consultant to review and update the key drivers within the Productora
pre-feasibility financial model including the long term copper price, discount rate and the operating and capital costs. Based
on this review, management are satisfied that there are no impairment indicators as at balance date.
The future realisation of these non-current assets is dependent on further exploration and funding necessary to commercialise
the resources or realisation through sale.
11. TRADE AND OTHER PAYABLES
Trade payables and accruals
Refundable deposit (option fee) (i)
4,379,936
1,995,212
6,375,148
2,488,764
2,179,156
4,667,920
(i) Sociedad Minera El Águila SpA (SMEA) granted Compañía Minera del Pacífico S.A. (CMP) an option (Additional Purchase
Option) to acquire shares in SMEA such that upon exercise of the option, CMP will be entitled to acquire a further 32.6%
interest, taking its total interest up to 52.6%, by acquiring existing shares from Hot Chili subsidiary, SMECL.. In the case where
the parties do not execute the option, Hot Chili shall refund CMP the Option fee. In this regard the option fee was repaid
subsequent to the year end.
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HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
12. BORROWINGS
CURRENT
Convertible note – debt component1
Consolidated Entity
2020
2021
$
$
4,186,801
4,999,787
4,999,787
4,186,801
1 There are a total of 69,453 convertible notes on issue as at 30 June 2021 (2020: 79,221). On 22 June 2017, the consolidated
entity issued 109,175, 8% five-year convertible notes, with a face value of $100 each and a further 3,834 convertible notes
were issued on 8 September 2017 for total proceeds of $11,300,900. During the year 9,768 (2020: 30,264) convertible noted
were converted to ordinary shares in the capital of the company on receipt of notices to convert. Interest is paid quarterly in
arrears at a rate of 8% per annum based on the face value. The maturity date of the notes is 22 June 2022. The conversion
rights associated with the convertible notes are:
a) The holder of the notes may convert into ordinary shares of the parent entity at any time prior to maturity at a conversion
price of A$0.03333 per share;
b) The company can redeem the notes early in cash for the face value plus interest accrued, only after two years since the
issue date provided the VWAP for the shares traded on the ASX for the 20 consecutive trading days preceding the date
on which the notice of redemption is given is not less than 300% of the conversion price of A$0.03333 per share; and
c) The Convertible note will automatically be converted on the maturity date at the lower of $0.03333 or 95% of the VWAP
traded on the ASX for the 10 consecutive trading days preceding the maturity date.
Convertible note - reconciliation
Balance Brought forward
Notes and accrued interest converted
Finance charges amortised
At the end of the financial year
13. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative Liability - Convertible Note
4,186,801
(642,320)
1,455,306
4,999,787
4,561,540
(1,117,623)
742,884
4,186,801
2,729,777
2,729,777
1,445,136
1,445,136
The holders of the convertible notes have the option to convert into ordinary share capital of the Company. Refer to Note 12.
Fair value hierarchy
The consolidated entity using a three-level hierarchy, based on the lowest level of input that is significant to the entire fair value
measurement, being:
• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly;
• Level 3: Unobservable inputs for the asset or liability
The derivative liability is determined to be Level 2 and has been valued using quoted market prices at the end of the reporting
period. This valuation technique maximises the use of observable market data where it is available and relies as little as possible
on entity specific measurements.
Derivative liability - reconciliation
Balance at beginning of period
Fair value of Exercised Notes
Net Change in fair value during the period
At the end of the financial year
1,445,136
(650,291)
1,934,932
2,729,777
6,565,547
(1,917,507)
(3,202,904)
1,445,136
63
HOT CHILI Annual Report 2021
13 Notes to the
Financial Statements(cont’d)
14. CONTRIBUTED EQUITY
(a) Share capital
No. Shares
Consolidated Entity
2021
2020
2021
$
2020
$
At the beginning of the financial year
Shares issued on capital raising during the
financial year
2,335,268,762
1,119,407,682
160,056,118
131,837,269
643,133,334
1,096,891,168
26,111,559
26,011,813
Shares issued in lieu of convertible note costs
20,034,236
Shares issued on conversion of convertible notes
29,456,210
Shares issued on exercise of options
Less cost of issue
76,276,989
-
27,900,513
91,069,399
-
-
622,593
1,232,728
1,906,925
779,883
3,341,419
-
(1,615,800)
(1,914,266)
At the end of the financial year
3,104,169,531
2,335,268,762
188,314,123
160,056,118
(b) Terms and Conditions of Contributed Equity
Ordinary Shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the
proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.
(c) Movement in Unlisted Options
Balance at beginning of financial year
Issued during the financial year
Exercised during the year
Expired during the year
Balance at end of financial year
Listed Options
2021
Options
2020
Options
374,056,598
81,666,667
41,666,667
362,056,598
(76,276,989)
-
-
(69,666,667)
339,446,276
374,056,598
There are no listed options over ordinary shares in the company at 30 June 2021 (2020: NIL).
(d) Capital Risk Management
The consolidated entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so
that they can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the consolidated entity may issue new
shares, pay dividends or return capital to shareholders. Capital is calculated as ‘equity’ as shown in the statement of financial
position and is monitored on the basis of funding exploration activities.
64
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 15. RESERVES, ACCUMULATED LOSSES AND NON-CONTROLLING INTERESTS
(a) Accumulated losses
Accumulated losses at the beginning of the year
Net loss for the year
Options expired during the year
Accumulated losses at the end of the year
(b) Option reserve
The options reserve is used to recognise the fair value of options issued.
As at 30 June 2021, no options to which the reserve relates have been exercised.
Balance at the beginning of the year
Issues of options during the year
Issues of performance rights during the year
Options expiring during the year
Balance at the end of the year
80,000,000 Performance Rights were issued during the year (2020; nil).
Consolidated Entity
2021
$
2020
$
(52,534,204)
(9,644,817)
-
(62,179,021)
(51,401,511)
(1,156,183)
23,490
(52,534,204)
539,740
197,250
2,037,486
-
2,774,476
52,530
510,700
-
(23,490)
539,740
Class of
Performance
Rights
Class A
Performance
Rights
Class B
Performance
Rights
Class C
Performance
Rights
Quantity
Vesting Condition
26,666,667
The price of Shares traded on ASX is greater than $0.06 per Share for 15 consecutive
trading days or more before 31 July 2023.
26,666,666
The price of Shares traded on ASX is greater than $0.08 per Share for 15 consecutive
trading days or more before 31 July 2023.
26,666,667
The Company announcing to ASX global independently estimated JORC compliant
resources at the Cortadera Project and surrounding satellite projects, excluding
currently reported resources at Productora, of 750 Mt at 0.5% Cu equivalent or greater
(within 0.2% CuEq grade envelope or higher as deemed appropriate in the independent
resource estimate) before 31 July 2023.
Total
80,000,000
65
HOT CHILI Annual Report 2021
13 Notes to the
Financial Statements(cont’d)
15. RESERVES, ACCUMULATED LOSSES AND NON-CONTROLLING INTERESTS (CONT’D)
The valuation methodology for Classes A and B was the Hybrid Barrier Up and In Trinomial. The Black Scholes valuation model was used
for Class C:
Tranche 1
Tranche 2
Tranche 3
Class A
Class B
Class C
11,666,666
11,666,667
11,666,667
12-08-20
$0.029
Nil
$0.06
N/A
12-08-20
$0.029
Nil
$0.08
N/A
12-08-20
$0.029
Nil
Nil
N/A
31-07-23
31-07-23
31-07-23
100%
0.27%
Nil
$0.0226
$263,667
100%
0.27%
Nil
$0.0204
$238,000
100%
0.27%
Nil
$0.0290
$338,333
13,333,334
13,333,333
13,333,333
1-09-20
$0.046
Nil
$0.06
N/A
1-09-20
$0.046
Nil
$0.08
N/A
1-09-20
$0.046
Nil
Nil
N/A
31-07-23
31-07-23
31-07-23
100%
0.27%
Nil
$0.0406
$541,333
1,666,667
3-Nov-20
$0.051
Nil
$0.06
N/A
31-07-23
100%
0.11%
Nil
$0.0457
$76,167
100%
0.27%
Nil
$0.0375
$500,000
1,666,666
3-Nov-20
$0.051
Nil
$0.08
N/A
31-07-23
100%
0.11%
Nil
$0.0423
$70,500
26,666,667
$881,167
26,666,666
$808,500
100%
0.27%
Nil
$0.0460
$613,333
1,666,667
3-Nov-20
$0.051
Nil
Nil
N/A
31-07-23
100%
0.11%
Nil
$0.051
$85,000
26,666,667
1,036,666
Number
Valuation Date
Spot Price
Exercise Price
Barrier Price
Vesting Date
Expiry Date
Expected Future Volatility
Risk Free Rate
Dividend Yield
Valuation
Value
Number
Valuation Date
Spot Price
Exercise Price
Barrier Price
Vesting Date
Expiry Date
Expected Future Volatility
Risk Free Rate
Dividend Yield
Valuation
Value
Number
Valuation Date
Spot Price
Exercise Price
Barrier Price
Vesting Date
Expiry Date
Expected Future Volatility
Risk Free Rate
Dividend Yield
Valuation
Value
Total Issued
Total Value
66
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 15. RESERVES, ACCUMULATED LOSSES AND NON-CONTROLLING INTERESTS (CONT’D)
The Performance Rights were issued to directors (related parties) and officers of the company in three tranches. The related party issues
were approved in general meeting. Directors, Christian Easterday received 6,666,666 of each of Class A, B and C Rights and Melanie
Leighton was issued 5,000,000 of each of Class A, B and C Rights. Classes A and B have been expensed in the current period. Class C
Rights will be expensed over two years from date of issue. A total of $2,037,486 has been expensed in the period (2020: nil) in relation to
the issue of the rights.
(c) Foreign currency translation reserve
Balance at the beginning of the year
Balance at the end of the year
(d) Non-controlling interests
Balance at the beginning of the year
Share of loss for the year
Balance at the end of the year
16. LOSS PER SHARE
Loss after tax attributable to the owners of Hot Chili Limited
Basic loss per share (cents)
Diluted loss per share (cents)
Unexercised options are not dilutive.
Consolidated Entity
2020
2021
$
$
1,222
1,222
1,222
1,222
19,080,058
(99,185)
18,980,873
19,189,488
(109,430)
19,080,058
(9,644,817)
(1,156,183)
(0.35)
(0.35)
(0.07)
(0.07)
The weighted average number of ordinary shares on issue used in the calculation
of basic loss per share
Weighted average number of ordinary shares and potential ordinary shares used as
the denominator in calculating diluted loss per share
2,774,507,436
1,641,345,793
2,774,507,436
1,641,345,793
17. REMUNERATION OF AUDITORS
Audit Services – RSM Australia Partners
- Auditing and reviewing of financial reports
Othert Services – RSM Australia Partners
- Tax services and advice
55,000
48,750
8,750
63,750
8,750
57,500
67
HOT CHILI Annual Report 2021
13 Notes to the
Financial Statements(cont’d)
18. KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Directors
The following persons were Directors of Hot Chili Limited during the financial year and up to the date of this report:
Murray E Black
Christian E Easterday
Dr Michael Anderson
Dr Allan Trench
Roberto de Andraca Adriasola
George Randall Nickson
Mark Jamieson
(b) Company Secretary
Lloyd Flint
(Non-Executive Chairman)
(Managing Director)
(Non-Executive Director – resigned 4 November 2020)
(Independent Non-Executive Director)
(Non-Executive Director)
(Independent Non-Executive Director)
(Non-Executive Director – appointed 2 September 2021)
(c) Corporate Projects Manager
Melanie Leighton (Alternative Director for M Black)
(d) Chief Legal Counsel and country manager
Jose Ignacio Silva
(e) Details of Remuneration of Key Management Personnel for the year ended 30 June 2021:
Directors
Short-term benefits
Post-employment benefits
Share based payments
Key Management Personnel
Short-term benefits
Post-employment benefits
Share based payments
Total
Consolidated Entity
2020
2021
$
$
553,989
43,560
353,367
950,916
461,755
21,533
681,737
1,165,025
2,115,941
459,976
33,212
-
493,188
332,300
17,100
-
349,400
842,588
68
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
19. NOTES TO STATEMENT OF CASH FLOWS
(a) Reconciliation of Net Cash used in Operating Activities
Loss for the year
Non-cash items:
Depreciation
Effect of exchange rates on holdings in foreign currencies
Effect on revaluation of derivative liability
Amortised finance costs
Non-cash finance costs
Share based payments
Net cash flows from operating activities before change in assets and liabilities
Change in assets and liabilities during the financial year:
Other current assets
Trade and other payables
Net cash outflow from operating activities
(b) Non cash investing and financing activities
2021
Consolidated Entity
2021
$
(9,744,002)
4,777
101,304
1,874,949
601,231
1,455,406
2,234,736
(3,471,599)
2020
$
(1,265,613)
8,678
113,880
(3,202,904)
782,771
1,049,173
-
(2,514,015)
6,826
(150,216)
(3,614,989)
485
(56,939)
(2,570,469)
33,333,334 shares and 16,666,667 free attaching options were issued to Blue Spec Sondajes as part of an issue of securities in
lieu of cash. The options are exercisable at AUD$0.025 per and expire 22 May 2022.
25,000,000 options were issued to lead managers of a capital raising. The options are exercisable at AUD$0.10 per and expire
30 November 2022.
Quarterly convertible note interest that accrued to noteholders was settled through the issue of fully paid ordinary shares
calculated on the 5 day volume weighted average price (VWAP) prior to quarter end:
Quarter ended
30 September 2020
31 December 2020
31 March 2021
30 June 2021
Date paid
5 October 2020
5 January 2021
9 April 2021
12 July 2021
Interest due $
160,820
155,660
145,303
139,448
VWAP
$0.03866
$0.04194
$0.04099
$0.03463
Shares issued
4,159,818
3,711,453
3,544,806
4,026,784
A total of 9,768 Convertible Notes and respective interest to dates of conversion were converted to 29,456,210 shares during
the year.
2020
15,000,000 Plan options were issued to lead managers of a capital raising. The options are exercisable at AUD$0.10 per and
expire 12 November 2021.
50,000,000 Plan options were issued to lead managers of a capital raising. The options are exercisable at AUD$0.025 per and
expire 20 May 2022.
Quarterly convertible note interest that accrued to noteholders was settled through the issue of fully paid ordinary shares
calculated on the 5 day volume weighted average price (VWAP) prior to quarter end:
Quarter ended
30 September 2019
31 December 2019
31 March 2020
30 June 2021
Date paid
2 October 2019
6 January 2020
3 April 2020
3 July 2020
Interest due $
209,640
189,606
160,815
160,815
VWAP
$0.04479
$0.03817
$0.01400
$0.01866
Shares issued
4,680,499
4,967,404
11,486,751
8,618,159
A total of 30,264 Convertible Notes and respective interest to dates of conversion were converted to 91,069,399 shares during
the year.
69
HOT CHILI Annual Report 2021
13 Notes to the
Financial Statements(cont’d)
20. COMMITMENTS FOR EXPENDITURE
(a) Exploration Commitments
In order to maintain current rights of tenure to exploration and mining tenements, the consolidated entity has the following
discretionary exploration expenditure requirements up until expiry of leases. These obligations are not provided for in the
financial statements and are payable:
Within one year
Later than one year but not later than five years
More than five years
(b) Option Payment Commitments
Consolidated Entity
2020
2021
$
$
558,807
2,022,410
5,652,949
8,234,166
603,079
1,690,223
7,183,448
9,476,750
The mining rights (which vary between 90% to 100%) of the various projects undertaken by Hot Chili will be transferred upon
satisfaction of the Option payments committed as at 30 June 2021 tabled below:
Within one year
Later than one year but not later than five years
(c) Operating Leases
1,463,116
35,846,346
37,309,462
1,019,962
54,495,119
55,515,081
The consolidated entity leases office premises under operating leases. The leases have various terms and renewal rights.
Commitments for minimum lease payments in relation to operating leases* are payable as follows:
Within one year
Later than one year but not later than five years
103,285
68,857
172,142
103,284
172,140
275,424
* Operating leases are not material to the consolidated entity and are not accounted for as Right-of-Use Assets under AASB16.
21. EVENTS OCCURRING AFTER REPORTING DATE
On 12 July 2021, quarterly interest of $139,448 was settled by the issue of 4,026,784 fully paid ordinary shares in the Company
at deemed issue price $0.03463 each.
After the financial year end, 6,966,172 shares were issued on receipt of notice to exercise options. The options were exercised at
$0.025 each raising $174,154 before costs.
On the 6 August 2021 the company announced a capital raising of $40.0m. The first tranche of 665,004,511 shares at an issue
price of $0.032 were issued on 13 August 2021 raising $21,280,144 before costs. A Share Purchase Plan (SPP) forming part of
the $40.0m raising raised $5.0m before costs and the 156,250,000 SPP shares were issued on 2 September 2021. Tranche 2
of the placement being 428,745,489 shares were issued on 17 September 2021 subsequent to approval at general meeting on
15 September 2021 at $0.032 per share raising $13,719,856 before costs. 93,750,000 of the shares were issued to Blue Spec
Sondajes Spa, an entity controlled by Murray Black. 92,500,000 options with an exercise price of $0.045 expiring 30 September
2024 forming part of the capital arrangement fee were issued to co-lead managers.
2,043,668 shares were issued on conversion of 677 convertible notes.
Sociedad Minera El Águila SpA (SMEA) granted Compañía Minera del Pacífico S.A. (CMP) an option (Additional Purchase
Option) to acquire shares in SMEA such that upon exercise of the option, CMP will be entitled to acquire a further 32.6% interest,
taking its total interest up to 52.6%, by acquiring existing shares from Hot Chili subsidiary, SMECL. In the case where the parties
do not execute the option, Hot Chili shall refund CMP the Option fee. In this regard the option fee of USD$1,500,000 (AUD
$1,995,212) was repaid subsequent to the year end.
The option agreement between Hot Chili and SCM Carola, the owners of the Cortadera landholding, was dually exercised
in Santiago, Chile on Tuesday 21st September 2021 following the payment of and acknowledgement of receipt of the final
instalment of US$15 million (AUD $20,638,415) to acquire a 100% interest in the Company’s world-class Cortadera copper-gold
discovery in Chile.
On 2 September 2021, Mark Jamieson was appointed as Non-Executive Director.
The impact of the COVID-19 pandemic is ongoing and while it has not significantly impacted the Group up to 30 June 2021, it is
not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing
and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social
distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
There were no other significant events occurring after the balance date that require reporting.
70
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
22. RELATED PARTIES
Parent Entity
Hot Chili Limited Is the parent entity
Subsidiaries
Interests In subsidiaries are set out in Note 24.
Key management personnel
Disclosures relating to key management personnel are set out in note 17 and the remuneration report included in the
directors’ report.
Transactions with related parties
The following transactions occurred with related parties:
MRA Consulting Pty Ltd, a company associated with Dr Anderson, a director, was paid $9,607 (2020: $36,792) in directors and
consulting fees. There were no amounts payable as at 30 June 2021 (2020: Nil).
Quarterly interest accruing on the convertible notes payable to Blue Spec Drilling Pty Ltd of $30,877 (2020: $30,962) for the year
was settled by the issue of 794,912 shares (2020: 927,525). $7,698 was payable as at 30 June 2021 (2020: $7,698) which was
settled by issue of 222,291 shares on 12 July 2021 (2020: 412,536 shares on 3 July 2020). The shares were issued to Blue Spec
Drilling Pty Ltd, a company associated with Mr Murray Black, a director, following shareholder approval.
Blue Spec Sondajes Chile Limitada, a company in which Mr Murray Black is a director was provided $10,379,605 (2020:
$4,151,946) rent and drilling services of which, as at 30 June 2021 $3,718,982 (2020: $1,802,486) was owing to Blue Spec
Sondajes Chile Limitada for rent and for drilling at Cortadera.
All transactions were made at commercial terms.
23. CONTINGENT LIABILITIES
As at 30 June 2021, Hot Chili Limited had accumulated VAT refund payments of $11,001,642 (CLP 6.018.998.372) with respect
to VAT recovered as at 30 June 2021 by Sociedad Minera El Águila SpA and by Sociedad Minera Frontera SpA is $2,062,843
(CLP1.128.581.298).
Under the terms of the VAT refund payment, the consolidated entity initially had until the 31 December 2019 to commercialise
production from Productora and meet certain export targets. Hot Chili also has the right to extend this term. In the event that
the term is not extended and Hot Chili does not meet certain export targets, Hot Chili will be required to re-pay the VAT refund
payments to the Chilean Tax Authority subject to certain terms and conditions. However, if Hot Chili achieves the export targets
from Productora within that timeframe or its renewal, if required, any VAT refund payments will not be required to be repaid. The
Company has to exercised its right to extend the date of commercial production from Productora with the Chilean Tax Authority.
An extension to the benefit had been extended to 30 June 2022 and a further extension until 30 June 2026 has been granted.
24. INTEREST IN SUBSIDIARIES
(a) Material subsidiaries
The consolidated financial statements incorporate the assets, liabilities, and results of the following material subsidiaries, in
accordance with the accounting policy described in Note 1:
Name of Entity
Sociedad Minera El Corazon Limitada
Sociedad Minera El Aguila SpA*
Sociedad Minera Los Mantos SpA
Sociedad Minera Frontera SpA
Sociedad Minera Bandera SpA
Equity Holding
Country of
Incorporation
Chile
Chile
Chile
Chile
Chile
Class of
Shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2021
%
100
80*
100
100
100
2020
%
100
80*
100
100
100
* The non-controlling interests hold 20% of Sociedad Minera El Aguila SpA (SMEA) - refer to note 24 (b).
71
HOT CHILI Annual Report 2021 13 Notes to the
Financial Statements(cont’d)
24. INTEREST IN SUBSIDIARIES (CONT’D)
(b) Non-controlling interests (NCI)
Summarised financial information of the subsidiary with non-controlling interests that are material to the consolidated entity are
set out below:
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Summarised statement of profit or loss and other comprehensive income
Revenue
Expenses
Loss before income tax expense
Income tax expense
Loss after income tax expense
Other comprehensive income
Total comprehensive loss
Statement of cash flows
Net cash used in operating activities
Net cash used in investing activities
Net cash from financing activities
Net increase in cash and cash equivalents
Other financial information
Loss attributable to non-controlling interests
Accumulated non-controlling interests at the end of reporting period
SMEA
30-Jun-21
30-Jun-20
223,291
110,424,030
110, 647,321
132,116
109,349,451
109,481,567
63,596
29,428,152
29,491,748
45,827
27,784,241
27,830,068
81,155,573
81,651,499
(495,924)
(495,924)
(547,150)
(547,150)
-
(495,924)
(547,150)
(495,924)
(547,150)
(525,833)
(1,026,903)
1,643,911
91,175
-
(547,150)
(598,728)
(537,021)
(673,347)
1,176,309
(34,059)
(99,185)
(109,430)
18,980,873
19,080,058
72
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 25. FINANCIAL RISK MANAGEMENT
The consolidated entity’s principal financial instruments comprise receivables, payables cash and short-term deposits. The
consolidated entity manages its exposure to key financial risks in accordance with the consolidated entity’s financial risk
management policy. The objective of the policy is to support the delivery of the consolidated entity’s financial targets while
protecting future financial security.
The main risks arising from the consolidated entity’s financial instruments are interest rate risk, credit risk and liquidity risk. The
consolidated entity uses different methods to measure and manage different types of risks to which it is exposed. These include
monitoring levels of exposure to interest rates and assessments of market forecasts for interest rates. Ageing analysis of and
monitoring of receivables are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling
cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarized below.
Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for
managing each of the risks identified below, including for interest rate risk, credit allowances and cash flow forecast projections.
Risk Exposures and Responses
(a) Interest rate risk exposure
The consolidated entity’s is not exposed to interest rate risk. Borrowings are issued at fixed rates (Note 12).
(b) Credit risk exposure
Credit risk arises from the financial assets of the consolidated entity, which comprise deposits with banks and trade and other
receivables. The consolidated entity’s exposure to credit risk arises from potential default of the counter party, with the maximum
exposure equal to the carrying amount of these instruments. The carrying amount of financial assets included in the statement of
financial position represents the consolidated entity’s maximum exposure to credit risk in relation to those assets.
The consolidated entity does not hold any credit derivatives to offset its credit exposure.
The consolidated entity trades only with recognised, credit worthy third parties and as such collateral is not requested nor is it
the Company’s policy to securities it trades and other receivables.
Receivable balances are monitored on an ongoing basis with the result that the consolidated entity does not have a significant
exposure to bad debts. There are no significant concentrations of credit risk within the consolidated entity.
(c) Liquidity risk
Liquidity risk arises from the financial liabilities of the consolidated entity and the consolidated entity’s subsequent ability to meet
their obligations to repay their financial liabilities as and when they fall due.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and, the availability of
funding through the ability to raise further equity or through related party entities. Due to the dynamic nature of the underlying
businesses, the Board aims at maintaining flexibility in funding through management of its cash resources. The consolidated
entity has no financial liabilities at the year-end other than normal trade and other payables incurred in the general course
of business.
Financing arrangements
Remaining contractual maturities
The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities. The tables
have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial
liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual
maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
73
HOT CHILI Annual Report 2021 13 Notes to the
Financial Statements(cont’d)
25. FINANCIAL RISK MANAGEMENTS (CONT’D)
Weighted
average
interest rate
%
1 year
or less
$
Between 1
and 5 years
$
Remaining
contractual
maturities
$
Amount as
per Statement
of Financial
Position
$
-%
-%
8%
-%
4,379,936
1,995,212
4,999,787
11,374,935
2,729,777
2,729,777
-
-
-
-
-
-
4,379,936
1,995,212
4,379,936
1,995,212
4,999,787
4,999,787
11,374,935
11,374,935
2,729,777
2,729,777
2,729,777
2,729,777
Weighted
average
interest rate
%
1 year
or less
$
Between 1
and 5 years
$
Remaining
contractual
maturities
$
Amount as
per Statement
of Financial
Position
$
-%
-%
8%
-%
2,488,764
2,179,156
4,667,920
1,445,136
1,445,136
2,488,764
2,179,156
7,922,100
7,922,100
7,922,100
12,590,020
-
-
1,445,136
1,445,136
2,488,764
2,179,156
4,186,801
8,854,721
1,445,136
1,445,136
Consolidated - 2021
Non-derivatives
Non-interest bearing
Trade payables
Refundable deposit
Convertible note debt –
fixed rate
Total non-derivatives
Derivatives
Convertible note debt
Total derivatives
Consolidated - 2020
Non-derivatives
Non-interest bearing
Trade payables
Refundable deposit
Convertible note debt
– fixed rate
Total non-derivatives
Derivatives
Convertible note debt
Total derivatives
(d) Market risk
Foreign exchange risk
The consolidated entity has considered the sensitivity relating to its exposure to foreign currency risk at reporting date. This
sensitivity analysis considers the effect on current year results and equity which could result in a change in the USD / AUD rate.
The consolidated entity is exposed to foreign exchange risk through its USD cash holdings at reporting date. The table below
summarises the impact of + / - 10% strengthening / weakening of the AUD against the USD on the consolidated entities post tax
profit for the year and equity. The analysis is based on a 10% strengthening /weakening of the AUD against the USD at reporting
date with all other factors remaining equal.
2021
2020
AUD/USD + 10%
AUD/USD - 10%
AUD/USD + 10%
AUD/USD - 10%
74
Consolidated Entity
Post tax profit
Equity
$
(47,884)
87,061
$
(47,884)
87,061
Post tax profit
Equity
$
$
-
-
-
-
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
26. PARENT ENTITY DISCLOSURES
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Financial performance
Loss for the year
Total comprehensive income
2021
$
2020
$
2,654,013
6,165,562
139,040,075
112,002,100
141,694,088
118,167,662
8,067,082
-
8,067,082
1,770,247
4,186,801
5,957,048
188,314,123
160,056,129
2,775,764
541,009
(57,462,881)
(48,386,524)
133,627,006
112,210,614
(9,076,357)
(9,076,357)
(494,408)
(494,408)
Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2021 or 30 June 2020.
Contractual commitments for the acquisition of property, plant or equipment
The parent entity did not have any contractual commitments for the acquisition of property, plant or equipment as at 30 June 2021
or 30 June 2020.
27. SHARE BASED PAYMENTS
Below are details of share based payments made during the current year and prior financial years.
(a) Options granted
Set out below is a summary of options on issue as at 30 June 2021:
Grant
date
Expiry date
Balance
at start of
year
Number
granted
during year
Number
expired
during year
Exercised
during the
year
Balance at
end of year
Number
exercisable
at end of
year
19/12/20183
19/12/2021
12,000,000
-
12/11/20191
15/11/2021
15,000,000
29/06/20202
20/05/2022
50,000,000
29/06/20202
20/05/2022
297,056,598
4/09/20204
20/05/2022
14/01/20215
30/11/2022
-
-
16,666,667
25,000,000
Total
374,056,598
41,666,667
-
-
-
-
-
-
-
-
-
-
12,000,000
12,000,000
15,000,000
15,000,000
50,000,000
50,000,000
(59,610,322)
237,446,276
237,446,276
(16,666,667)
-
-
-
25,000,000
25,000,000
(76,276,989) 339,446,276
339,446,276
Weighted average exercise price of options on issue is $0.035 (2020: $0.029). The weighted average remaining contractual life
of options outstanding at the end of the financial year was 0.89 years (2020: 1.65 years).
75
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021 13 Notes to the
Financial Statements(cont’d)
(b) Fair value of options issued
The fair value at issue date was determined using a Black-Scholes option pricing model that takes into account the exercise price, the
share price at issue date and expected price volatility of the underlying share, and the risk-free interest rate for the term of the loan.
2021
( 4) These options are exercisable at 2.5c each expiring 22 May 2022 were issued pursuant to a creditor taking shares in lieu
of cash. The creditor was Blue Spec Sondajes, an entity controlled by Murray Black and were free attaching options.
They have the same terms and conditions of options issued at note 2 below and were approved in general meeting
14 January 2021:
( 5) 25,000,000 options were issued to lead managers of a capital raising which took place in December 2020 and the issue was
approved in general meeting on 14 January 2021. The inputs for the fair value model for fee options were as follows:
a) options are granted for no consideration.
b) exercise price - $0.10
c)
issue date – 19 January 2021
d) expiry date – 30 November 2022
e) expected price volatility of the Company’s shares: 80%
f)
risk-free interest rate: 0.08%
g) spot price at date of issue: $0.042
h)
fair value of 0.789c per option (total $197,250)
2020
( 1) 15,000,000 Plan options were issued to lead managers of a capital raising. The inputs for the fair value model for fee options
were as follows:
a) options are granted for no consideration.
b) exercise price - $0.10
c)
issue date – 12 November 2019
d) expiry date – 12 November 2021
e) expected price volatility of the Company’s shares: 90%
f)
risk-free interest rate: 0.785%
g) spot price at date of issue: $0.036
h)
fair value of 0.868c per option (total $130,200)
( 2) 347,056,598 options exercisable at 2.5c each expiring 20 May 2022 were issued pursuant to a placement and rights issue
announced 18 May 2020 and a prospectus of the same date. 297,056,598 of the options were free attaching options issued to
successful placees and rights offer applicants on a “one option for every two shares” successfully applied for. 50,000,000 of
the options were a share based payment forming part of the fees paid for managing the placement. The inputs for the fair value
model for fee options were as follows:
a) options are granted for no consideration.
b) exercise price - $0.025
c)
issue date – 29 June 2020
d) expiry date – 20 May 2022
e) expected price volatility of the Company’s shares: 102%
f)
g) spot price at date of issue: $0.0175
h)
fair value of 0.761c per option (total $380,500)
risk-free interest rate: 0.27%
During the year the Company issued 20,034,236 shares (2020: 27,900,513) at a fair value of $713,997 (2020: $697,338) in lieu
of interest on the convertible note issue and conversion of notes and accrued interest to shares. As at 30 June 2021 interest of
$139,448 had accrued and the 4,026,784 shares issued on 12 July 2021 are not included in total issued for the year.
(c) Expenses arising from share-based payment transactions:
Total transactions arising from share-based payment transactions recognised during the year were as follows:
Performance rights issued
Options issued
Shares issued for interest accrued on convertible notes
Convertible note costs
76
2021
$
2,037,486
197,250
255,928
622,593
2020
$
-
-
315,019
779,883
3,113,257
1,094,902
HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021HOT CHILI Annual Report 2021
14 Shareholder
Information
AS AT 24 SEPTEMBER 2021
Information Required by the Australian Securities Exchange Limited
(a) Spread of Holdings
1
1,001
5,001
10,001
100,001 & Over
- 1,000
- 5,000
- 10,000
- 100,000
Shareholders
Units
130
224
185
3,718
2,805
7,062
29,630
627,321
1,580,490
154,460,853
4,210,607,861
4,367,306,155
%
0.00%
0.01%
0.04%
3.54%
96.41%
100%
There are 845 holders of unmarketable parcels comprising 5,773,159 shares.
(b) The names of the twenty largest shareholders as at 24 September 2021, who between them held 46.58% of
the issued capital are listed below:
GLENCORE AUSTRALIA HOLDINGS PTY LIMITED
GS GROUP AUSTRALIA PTY LTD
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