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Hot Chili LimitedA NEW COPPER
SUPPLIER IS COMING
ANNUAL REPORT 2023
Productora
Project
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 Profit or Loss & Other
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
23
28
31
47
48
51
52
53
54
55
56
88
90
96
HOT CHILI Annual Report 2023
Costa
Fuego
Copper Super-Hub
Cortadera
Project
Significant copper-gold
porphyry discovery
El Fuego
Project
(Valentina)
El Fuego
Project
(San Antonio)
HOT CHILI Annual Report 2023
1
2023 Key
Highlights
OPERATIONAL
Preliminary Economic Assessment (PEA)1 Released
for Costa Fuego Copper-Gold Project
Strong Economics and Leverage
• Post-tax NPV8% of US$1.10 B2
•
Pre-tax NPV8% of US$1.54 B2
• Low start-up capital intensity, fast payback
• 16-year mine life for open pit and underground operations
• 112 ktpa CuEq² average production: 95 kt Cu & 49 koz Au for first 14 years
• 97% of PEA inventory is Indicated Resource
• Post-tax NPV8% increases by US$100 M for every U$0.10/lb increase in copper price above
US$3.85/lb
Top 10 Undeveloped Copper Resource
•
Indicated Resource of 725 Mt grading 0.47% CuEq3 & Inferred Resource of 202 Mt grading
0.36% CuEq3 containing:
• 2.8 Mt Copper (Cu) Indicated and 0.6 Mt Copper Inferred
• 2.6 Moz Gold (Au) Indicated, and 0.4 Moz Gold Inferred
• 67.4 kt Molybdenum (Mo) Indicated and 13.4 kt Molybdenum Inferred
• 10.5 Moz Silver (Ag) Indicated and 2.0 Moz Silver Inferred
• Extremely leveraged to looming structural shortage in copper supply
1 The PEA is preliminary in nature and includes 3% of production feed from Inferred Mineral Resources that are considered too
speculative geologically to have the economic considerations applied to them that would enable them to be categorised as Mineral
Reserves (NI 43-101) or Ore Reserves (JORC 2012), and there is no certainty that the PEA will be realised. Mineral Resources that are
not Mineral Reserves or Ore Reserves do not have demonstrated economic viability. References to “Mineral Reserves” in this report
include Ore Reserves (JORC 2012). See page 23 for additional cautionary language.
² The copper-equivalent (CuEq) annual production rate was based on the combined processing feed (across all sources) and used
long-term commodity prices of: Copper US$ 3.85/lb, Gold US$ 1,750/oz, Molybdenum US$ 17/lb, and Silver US$21/oz; and estimated
metallurgical recoveries for the production feed to the following processes: Concentrator (87% Cu, 56% Au, 37% Ag, 58% Mo), Oxide
Leach (55% Cu only), & Low-grade Sulphide Leach (40% Cu only).
3 The resource copper-equivalent (CuEq) considers assumed commodity prices and average metallurgical recoveries for the Mineral
Resource from testwork.
2
HOT CHILI Annual Report 2023
Costa Fuego
Copper-Gold Project.
One of the Largest Scale,
Lowest Elevation Copper
Resources in the World.
CORPORATE
US$15 Million Investment Agreement with Osisko Gold Royalties
The execution of a binding Investment Agreement of US$15 million with Osisko Gold Royalties Limited
provided strong endorsement from one of North America’s leading royalty-streaming groups.
The investment strengthened the Company’s cash position to approximately A$26 million and the
project is now fully funded for the next 12 to 18 months to deliver the next steps in its growth and
development plan.
Key details
• 1% Net Smelter Return (NSR) royalty on copper and 3% NSR royalty on gold
• Equivalent to a 1.12% CuEq* NSR royalty across payable metals on Costa Fuego
• Strong endorsement and clear “look-through” value
Mr Stephen Quin joins board as independent non-executive director
The company was pleased to welcome experienced Canadian director Mr Stephen Quin to the board.
Mr Quin brings a depth of industry experience from exploration to operations that will be invaluable as
the Company advances its Costa Fuego copper hub in Chile.
* CuEq considers assumed commodity prices and average metallurgical recoveries from test work. See qualifying statements page 23.
3
HOT CHILI Annual Report 2023 1 Chairman’s Letter
To Our Shareholders,
On behalf of the entire Hot Chili team and my fellow directors, I would like to thank our shareholders and
stakeholders for their continued support and am excited to share the key milestones that have shaped Hot Chili’s
progress over the past year.
Our strategy at Hot Chili is crystal clear: we remain steadfast in our commitment to delivering exceptional value per
share for our shareholders within the context of the commodity cycle.
I firmly believe that Hot Chili occupies an enviable position to capitalize on the impending copper supply deficit
– an inevitable outcome of the push to electrify everything and a depleted project pipeline. Our flagship Costa
Fuego Copper-Gold Project, located in low elevation Chile, stands as a testament to this, boasting quality and size
advantages alongside readily accessible infrastructure that can materially shorten development timelines. Copper
is unequivocally the most critical of commodities, unparalleled in its electrical and chemical properties, delivering
superior conductivity both electrically and thermally. Governments worldwide have finally recognized this fact, with
the inclusion of copper in the US Department of Energy’s Critical Materials Assessment for 2023—a watershed
moment, and follows the lead of Australia, Canada, the EU and many other countries.
The current copper supply situation has reached a perilous juncture:
. Copper inventories are at alarmingly low levels.
. Production and grade profiles are in a state of continuous decline.
. Industry leaders are unwilling to bring new supply online until the world is “screaming” for it.
. Two decades of underinvestment in exploration has yielded few sizeable discoveries.
. Global political and societal support for mining remains underwhelming, further impeding new production.
. Lead times from discovery to production frequently now exceed 20 years.
This impending supply deficit is exacerbated by forecast demand, driven by the global shift towards Net Zero
and the related increased copper demand for renewable energy and electric vehicles. Glencore’s prediction of a
cumulative refined copper deficit of 50.5Mt by 2030 underscores the urgency of bringing on new supply. Mining,
by its nature, cannot respond elastically to demand, and supply forecasts indicate that global copper production
will start declining from 2025 – going down while demand rises. The only solution to the supply gap is a substantial
increase in the copper price that would incentivize new mine development and pressure governments to be more
proactively supportive. Companies with substantial development assets and infrastructure advantages, with
shorter paths to production, should reap the rewards. Hot Chili is part of this exclusive group.
In 2023, Hot Chili passed significant milestones:
. Successfully completed the Costa Fuego preliminary economic assessment (led by our Chief Operating Officer
. Attracted Osisko Gold Royalties as a strategic partner with a US$15 million investment, acquiring royalty
Grant King), showcasing attractive project economics and significant copper price leverage.
the mining industry.
exposure to all future gold and copper production with zero equity dilution. This includes a buyback option to
reduce the royalty in the event of a change of control.
. Welcomed Stephen Quin as an independent director to the Board, bringing invaluable international expertise in
. Secured land access for the Maritime Concession for seawater extraction.
. Established an electrical connection to the grid with the future option for 100% renewable power.
. Expanded the Costa Fuego prospective footprint through property consolidation contiguous with Cortadera.
. Continuously demonstrated Costa Fuego’s prospectivity with positive drill results throughout the district (led by
our Geology Manager – Chile, Andrea Aravena).
Hot Chili’s strategic positioning as a near-term source of copper supply remains underappreciated. Existing
and future shareholders will undoubtedly benefit from our unwavering commitment and vision, led by Managing
Director Christian Easterday in Australia and supported by Executive Vice President Jose Silva in Chile. One
of our most valuable assets, the Maritime Concession, took eight years to secure, in addition to a further two
years to secure land access for the Maritime Concession – a testament to its significance as one of the only
independently controlled concessions in the country. Water security is a global mining industry risk, impeding the
timely development of new copper supply in Chile and worldwide. Hot Chili is in the fortunate position of not only
having secured the essential supply of water, but can operate without an expensive desalination plant, and has also
secured access to the capacity-limited electrical grid. We believe securing future water supply with the Maritime
Concession holds substantial value and are exploring avenues to realize this value as a potential source of future
funding. These attributes put Hot Chili in an enviable position compared to its remote, high elevation peer projects.
4
HOT CHILI Annual Report 2023 In closing, I want to express my deep appreciation for the Hot Chili management team, employees, and
consultants. Their tireless efforts in creating value per share and systematically de-risking Costa Fuego have
benefited all stakeholders. We are only as strong as the people we work with, and Managing Director Christian
Easterday has assembled an exceptional team. A special acknowledgment is due to Hot Chili’s Resource
Development team, led by Resource Development Manager Kirsty Sheerin and including Senior Resource
Geologist Chris McKie, Senior Project Geologist Madeline Wallace and Senior Database Administrator Katie
Collins. They were awarded first place in the Parker Challenge for their outstanding application and demonstration
of professional best practice in a mineral resource estimation out of hundreds of participants worldwide,
demonstrating their exceptional capabilities.
I want to reiterate a point I made in my previous Chairman’s letter: our industry’s biggest challenge is its reputation.
Many government regulators and voters fail to recognize that their quality of life is intricately linked to the products
of mining. I take immense pride in our industry, but I also believe that our sector’s leaders have been remiss in not
highlighting the many positives of our industry. I implore those in extractive industries to engage with the public and
ensure that our awareness efforts are rooted in fact rather than fleeting emotions.
The times ahead are both challenging and promising, and it is my hope that Hot Chili’s continued dedication will not
only benefit our shareholders but also contribute to reshaping perceptions about the mining industry as a whole.
Yours sincerely,
Dr Nicole Adshead-Bell
Independent Non-Executive Chairman
Access granted
for Maritime
Concession Land
for Costa Fuego.
HOT CHILI Annual Report 2023
5
2 Review of
Operations
Preliminary Economic Assessment (PEA)1 Released for
Costa Fuego Copper-Gold Project
The release of the Costa Fuego PEA is a significant milestone for the Project, which comprises the Cortadera,
Productora and San Antonio deposits, and outlines one of the worlds’ lowest capital intensity, major copper
developments.
The Costa Fuego PEA was prepared by Wood Australia Pty. Ltd. and evaluates a very different project to the
Productora Pre-Feasibility Study. It benefits from an expanded resource base, lifting the scale of the Costa Fuego
development hub and optimising the infrastructure required to transport the resources to a proposed centralised
processing plant at Productora.
Highlights of the Costa Fuego PEA include:
. Strong Economics: Costa Fuego PEA delivers using an 8% discount rate and long-term metal price
. Base-case post-tax Net Present Value (NPV8%) of US$1.10 Billion (approximately, within
a range of US$733 Million to US$1.46 Billion) and Internal Rate of Return (IRR) of 21%
(approximately, within a range of 17% to 25%).
assumptions of US$3.85/lb copper (Cu) and US$1,750/oz gold (Au).
open pit mining fully fund development of a bulk underground operation.
. Low Start-up Capital: US$1.05 Billion estimated, resulting in fast 3.5-year payback. Initial phases of
. Low Capital Intensity: One of the lowest capital intensities of global copper development projects.
. Approximately 112 ktpa Average CuEq2 Production Rate: Including 95 kt Cu and 49 koz Au
during primary production (first 14 years) at C1 Cash Cost4 of US$1.33/lb (estimated, net of by-product
credits).
. Initial Mine Life: 16-years with 1.41 Mt Cu and 718 koz Au produced for total revenue of approximately
US$13.52 Billion and total free cash flow of approximately US$3.28 Billion (post-tax, after operating costs,
capital costs, and royalties).
1 The PEA is preliminary in nature and includes 3% of production feed from Inferred Mineral Resources that are considered too speculative
geologically to have the economic considerations applied to them that would enable them to be categorised as Mineral Reserves (NI 43-101)
or Ore Reserves (JORC 2012), and there is no certainty that the PEA will be realised. Mineral Resources that are not Mineral Reserves or Ore
Reserves do not have demonstrated economic viability. References to “Mineral Reserves” in this announcement include Ore Reserves (JORC
2012). See page 23-27 for additional cautionary language.
2 The copper-equivalent (CuEq) annual production rate was based on the combined processing feed (across all sources) and used long-term
commodity prices of: Copper US$3.85/lb, Gold US$1,750/oz, Molybdenum US$17/lb, and Silver US$21/oz; and estimated metallurgical
recoveries for the production feed to the following processes: Concentrator (87% Cu, 56% Au, 37% Ag, 58% Mo), Oxide Leach (55% Cu only),
& Low-grade Sulphide Leach (40% Cu only).
3 See page 27 for full non-IFRS measures disclaimer.
6
HOT CHILI Annual Report 2023
The strong economics of Costa Fuego are described in Table 1, using financial assumptions of an 8% discount rate and
long-term metal price assumptions for the base case of US$3.85/lb copper (Cu) and US$1,750/oz gold (Au).
Table 1. Copper Price Ranges: Lower-, Base-, and Upper-Case Scenarios5,6
Project Metric
Units
Copper Price
Lower
(US$3.50/lb)
Base
(US$3.85/lb)
Upper
(US$4.20/lb)
Pre-Tax
Post-Tax
Annual Average Revenue
Annual Average EBITDA
Annual Average Free Cash Flow
Payback period (From First Production)
Post-Tax NPV8% /Start-up Capital
NPV8%
US$M
1,046
IRR
%
NPV8%
US$M
IRR
%
US$M
US$M
US$M
years
19%
733
17%
779
384
226
4.25
0.7
1,540
24%
1,100
21%
845
445
271
3.50
1.1
2,029
29%
1,463
25%
911
506
315
3.25
1.4
With the Costa Fuego PEA now complete, the Company has a clear growth and development pathway with a Mineral
Resource update planned in Q4 2023, and a Pre-Feasibility Study (PFS) for the Project planned in H2 2024.
5 Certain terms of measurement used in this Annual Report are not performance measures reported in accordance with International Financial Reporting
Standards (“IFRS”). Non-IFRS terms measures used such as “Cash Cost”, “All-in Sustaining Costs”, “C1”, “Expansion Costs”, “Free Cashflow” and “All-in
costs” are included because these statistics are measures that management uses internally to evaluate performance, to assess how the Project ranks against
its peer projects and to assess the overall effectiveness and efficiency of the contemplated mining operations. These performance measures do not have a
meaning within IFRS and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. These performance
measures should not be considered in isolation as a substitute for measures of performance in accordance with IFRS.
6 The PEA is preliminary in nature and includes 3% of production feed from Inferred Mineral Resources that are considered too speculative geologically to have
the economic considerations applied to them that would enable them to be categorised as Mineral Reserves, and there is no certainty that the PEA will be
realised. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. See page 23-27 for additional cautionary language.
HOT CHILI Annual Report 2023
7
2 Review of
Operations (Cont’d)
Figure 1. Costa Fuego Project Roadmap1
2023
2024
2025
2026
Delivery of Preliminary
Economic Assessment
(Q2 2023)
Delivery of
Pre-Feasibility Study
(H2 2024)
Commence Drilling
Growth Targets
(Q2 2023)
Delivery of Environmental
Impact Assessment
(Q4 2024)
Mineral Resource Upgrade
(H1 2025)
Development Study &
Resource Growth Activities
(Throughout 2025)
Delivery of Definitive
Feasibility Study
(H1 2026)
Decision to Mine &
Project Financing
(Q4 2026)
Mineral Resource Upgrade
(Q4 2023)
Port Agreement
Negotiation
(Throughout 2023)
Development Study &
Resource Growth Activities
(Throughout 2024)
Electrical Connection Secured for
Costa Fuego
In August of 2022, Chile´s Central Authority Electrical Regulator approved Hot Chili’s application for connection to
the Maitencillo sub-electrical power station, located 17 km from the centre of the Costa Fuego copper hub.
Connection to Maitencillo is a key step forward for the development of Costa Fuego, providing access to Chile’s
national energy grid and its multiple renewable energy providers.
Hot Chili will be able to potentially operate Costa Fuego on a 100% renewable power mix (certified by I-Recs)
from nearby solar generators, wind turbines and hydroelectric power – adding significantly to the project’s
environmental credentials.
Access Granted for Maritime
Concession Land for Costa Fuego
In December of 2022, the Company confirmed that the Chilean Naval
Authority had officially granted access to the physical land for its Maritime
Concession for extraction of sea water.
The Maritime Concession and land access granted will supply raw seawater
for processing, which preserves limited regional groundwater resources
and reduces the energy intensity of the project, with no water desalination
required. The seawater extraction point is just 55 kilometres from the
planned Costa Fuego processing facilities at Productora.
Access to the coastal land surrounding the Maritime Concession provides
yet another government approval in the Company’s regulatory process to
develop the Costa Fuego Project.
Hot Chili Field Operations
Manager’ Victor Huerta with
Chilean naval officer following
grant of Maritime concession land.
1 The Mining Project delivery schedule mentioned herein is subject to various risks inherent to the mining industry, and external factors beyond
the control of the project stakeholders, including but not limited to, geological and processing challenges, government policies, permits, or
regulations, fluctuations in commodity prices, or market conditions. These external factors can impact the Project timeline and potentially result
in delays. The delivery schedule provided is based on the best estimates and assumptions available at the time of its creation, and the Project
team is committed to minimising disruptions and implementing mitigation measures to the best of their abilities. However, the effectiveness of
these measures in avoiding delays cannot be guaranteed.
8
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 Port Discussions Advancing
The Company is advancing well with discussions to secure port access and services for the Costa Fuego Project. Several
third-party port facilities, including the nearby Las Losas port, have been assessed with competitive proposals being
received for both bulk- and rotainer-handling options.
Hot Chili and its advisors are working with potential port partners to customise each proposal ahead of advancing toward
commercial agreement. Port facilities represent the final critical infrastructure access required for the Costa Fuego copper hub.
Figure 2. The Costa Fuego Copper Hub
Consolidation Efforts Secure Western
Extension to Cortadera
In November of 2022, the Company announced the execution of an Option Agreement with Chilean copper major
Antofagasta Minerals S.A. (AMSA) enabling Hot Chili to acquire a 100% interest in AMSA’s mining rights adjoining the
western margin of Cortadera. This agreement covers the western extensions to the Cortadera copper-gold porphyry
resource, the centrepiece of the Company’s Costa Fuego copper development in Chile.
Hot Chili also confirmed further consolidation after successfully securing several new prospective mining rights at a
government-run, public auction for the Huasco region of Chile. The new mining rights are located alongside mining rights
subject to the AMSA Option Agreement.
9
HOT CHILI Annual Report 2023 2 Review of
Operations (Cont’d)
Productora Development Study Drilling
Four diamond drill holes completed in 2022 for metallurgical testwork across the Productora resource
have returned further wide zones of copper, following analysis of remaining unsampled core.
Stand-out drill results from the MET drilling at Productora include:
MET025
244m grading 0.8% CuEq* (0.7% Cu & 0.2g/t Au) from 23m depth
including 71m grading 1.0% CuEq* (0.8% Cu, 0.2g/t Au)
MET028
152m grading 0.6% CuEq* (0.6% Cu & 0.1g/t Au) from 42m depth
including 39m grading 1.1% CuEq* (1.0% Cu, 0.1g/t Au)
and 23m grading 0.9% CuEq* (0.8% Cu) from 226m to end of hole
MET027
277m @ 0.5% CuEq* (0.4% Cu, 0.1g/t Au) from 49m
including 25m @ 0.8% CuEq* (0.7% Cu, 0.1g/t Au)
and 46m @ 1.1% CuEq* (1.0% Cu, 0.2g/t Au)
MET026
80m grading 0.7% CuEq* (0.6% Cu, 0.2g/t Au) from 101m depth
including 23m grading 1.0% CuEq* (0.9% Cu, 0.2g/t Au) from 101m
and 28m grading 0.9% CuEq* (0.8% Cu, 0.2g/t Au) from 135m
MET025 (179.15m depth down-hole) – vein-hosted and
disseminated chalcopyrite and pyrite in tourmaline breccia.
Interval graded 2.1% CuEq (1.9% Cu, 0.3% Au, 129ppm Mo).
10 HOT CHILI Annual Report 2023
HOT CHILI Annual Report 2023
Resource Extension at Cuerpo 1, Cortadera
In April 2023, the Company confirmed a significant depth extension to the current Mineral Resource below Cuerpo 1
at Cortadera.
Diamond drill hole CORMET001 was completed to a depth of 350m in April 2022 and indicated mineralisation may
continue below the Cuerpo 1 Mineral Resource, with the drillhole ending in 6m grading 0.6% Copper. CORMET001
was extended to a depth of 611m, and five further drill holes were completed below Cuerpo 1 to define the limits of the
expanded mineralisation extent.
These holes intersected mineralised porphyry (early- and intra-mineral) up to 300m below the Indicated Classified Mineral
Resource for Cuerpo 1. These results will be included in a Mineral Resource update, planned for release in Q4 2023.
Significant intersections recorded to date include:
CRP0202D
270m grading 0.5% CuEq* (0.4% Cu, 0.1g/t Au) from surface
including 114m grading 0.7% CuEq* (0.6% Cu, 0.1g/t Au) from 70m
or including 60m grading 0.9% CuEq* (0.8% Cu, 0.1g/t Au) from 110m
CRP0201D
54m grading 0.5% CuEq* (0.4% Cu, 0.1g/t Au, 55ppm Mo) from surface
CORMET0011 84m grading 0.4% CuEq* (0.4% Cu) from 336m
including 26m grading 0.6% CuEq* (0.6% Cu, 0.1g/t Au) from 374m
CRP0200D
256m grading 0.3% CuEq* (0.3% Cu) from 192m depth
including 36m grading 0.5% CuEq* (0.5% Cu, 0.1g/t Au) from 210m
and including 74m grading 0.4% CuEq* (0.4% Cu) from 374m
CORMET-001 @ 387m
> 5% A+B veins in
PD @ 387m
Figure 3. Long section view showing location of Cortadera Resource Extension drillholes into
Cuerpo 1 and the potential growth of the +0.3% copper model (MG Core).
11
HOT CHILI Annual Report 2023
2 Review of
Operations (Cont’d)
Resource Definition Drilling at High-Grade Satellites
August of 2022 saw the final assay results from Resource Definition drilling at San Antonio and preliminary
drilling at Valentina.
San Antonio and Valentina represent shallow high grade open-pit opportunities, with the potential to provide
front-end ore sources and make a positive impact on the payback period and overall economics of the Costa
Fuego copper-gold development.
San Antonio already has an Inferred Resource of 4.2Mt grading 1.2% CuEq (1.1% Cu, 2.1g/t Ag) for 48kt Cu and
287koz Ag, reported March 2022. The additional drilling, in conjunction with surface mapping will assist the
upgrade of Inferred to Indicated Classification in the next San Antonio MRE, schedule for Q4 2023.
Regional Exploration Update
In January of 2023, the Company commenced drilling across several extensional targets of the Cortadera
copper-gold Mineral Resource, the centrepiece of the Company’s coastal range, low-altitude, Costa Fuego
senior copper development in Chile.
This included drilling into the Cuerpo 4 porphyry target, identified from surface outcropping porphyry, with A+B
vein abundance of between 2-5% over a strike length of approximately 500 m.
Diamond drill hole LCD0001 was drilled as a confirmatory twin hole to historical AMSA drill hole COR-03 and
recorded the following significant drill intersection:
Significant intersections recorded to date include:
• 128m grading 0.5% CuEq* (0.4% Cu & 0.1g/t Au) from 28m downhole depth, including 16m grading
1.3% CuEq* (1% Cu & 0.5g/t Au) from 28m depth (as announced on 28th November 2022).
Results from shallow Reverse Circulation and Diamond drilling across Cuerpo 4 have added further definition,
confirming a zone of near-surface, low-grade mineralisation measuring approximately 350m in strike extent.
12 HOT CHILI Annual Report 2023
HOT CHILI Annual Report 2023
LCD0001 (56m depth) grading 1.0% Cu, 0.7g/t Au, 4.6g/t Ag. Tonalitic porphyry with sericite-
chlorite alteration and 2% A-B porphyry vein abundance. Confirmation drill hole across new
fourth porphyry at Cortadera.
HOT CHILI Annual Report 2023
13
HOT CHILI Annual Report 2023 2 Review of
Operations (Cont’d)
Figure 4. Plan view across the Cortadera West tenements (AMSA) displaying surface
mapping and the collar locations of drilling returned during the quarter.
30,000m Drilling Program Underway Across
Priority Targets
The Company is currently drilling high priority growth targets proximal to the current resource. Drilling will
also test promising greenfield targets as shown in Figure 5.
Further strategic regional consolidation options are concurrently being pursued, with mineral resource
estimate updates expected in Q4 2023 and H1 2025.
14
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 Figure 5. Maps outlining growth phase and up-scale strategy targets.
15
HOT CHILI Annual Report 2023 2 Review of
Operations (Cont’d)
Single, Large Pit Scenario for Cortadera being
studied in H2 2023
The Company is investigating a large single open pit scenario for Cortadera (with no
underground block cave) with the potential to materially increase processing feed inventory
and mine-life.
This scenario would necessitate a second PEA, studied while refining of the model inputs
for metallurgy, geotechnical engineering, and hydrogeology, to be incorporated into the
Pre-feasibility Study (PFS). Once both PEA scenarios are assessed, the Company will
select a single scenario to complete the final stages of its PFS for Costa Fuego, which is
expected to be completed by H2 2024.
Water Optionality Study Underway
Hot Chili’s existing water assets and related infrastructure, including an existing
permit to extract seawater and permitted pipeline route, may represent a significant
upside opportunity for the Company. Central Chile has a significant water deficit and
communities, agriculture and mines all require water. Permitting of land-based
water extraction is becoming increasingly challenging in Chile, while greatly extended
timelines are required for the application process for seawater extraction and pipeline
corridors; it took Hot Chili more than eight years. Hot Chili is assessing
value creation opportunities that could benefit the Company, local
communities and other entities with need in the water-scarce
Huasco region of the Atacama in Chile.
16
HOT CHILI Annual Report 2023
HOT CHILI Annual Report 2023
Developing the
Costa Fuego
Project into an
Operating Asset.
HOT CHILI Annual Report 2023
17
2 Review of
Operations (Cont’d)
Table 1 Significant Drill Results Reported in Year Ending June 30 2023.
Hole ID
Coordinates
North
East
MET0261
6822284
323426
RL
816
Azim. Dip
Hole Depth
90
-62
260
MET0272
6821389
323082
858
90
-62
395
Including
& Including
Including
101
101
135
0
49
49
& Including
280
MET0283
6822576
322851
790
270
-59
250.1
Including
MET0254
6820931
323027
884
90
-60
280
Including
CRP0200D 6814269.2
334736.8
979.3
60
-75
624
CRP0201D
6814340
335204
960
272
-57
582.5
CRP0202D
6814249
334834
975
268
-84
CORMET001
6814269
334736
976
74
-60
Incl
534
Incl
& Incl
& Incl
611
Incl
42
46
226
23
177
192
210
374
0
384
434
478
0
0
70
110
222
336
Or Including
374
LCD0001
6815719
334574
870
61
-57
& Incl
& Incl
142
Incl
Or Including
LCP0002D
6815565
334572
867
159
-69
300
LCP0003D
6815565
334599
875
92
-76
406.2
LCP0004
6815830
334609
LCP0005
6815713
334566
LCD0006
6815677
334540
870
869
872
89
229
135
-60
-64
-60
300
300
167.2
Incl
Or Incl
446
470
22
22
32
65
227
10
18
248
12
34
12
22
24
18
Intersection Interval Copper Gold
Silver Molybdenum
Cu Eq
From To
(m)
(% Cu)
(g/t Au)
(ppm Ag)
(ppm Mo)
(% Cu Eq)
181
124
163
15
326
74
326
194
85
250
267
248
448
246
448
54
426
498
492
470
270
184
170
611
420
400
454
550
142
60
50
118
300
58
22
252
192
142
148
42
28
80
23
28
15
277
25
46
152
39
24
244
71
256
36
74
54
42
64
14
470
270
114
60
389
84
26
8
80
120
38
18
53
73
48
4
4
180
108
136
20
4
0.6
0.9
0.8
0.3
0.4
0.7
1.0
0.6
1.0
0.8
0.7
0.8
0.3
0.5
0.4
0.4
0.3
0.3
0.5
0.3
0.4
0.6
0.8
0.2
0.4
0.6
0.3
0.3
0.4
0.8
1.0
0.1
0.1
0.2
0.3
0.3
0.1
0.1
0.2
0.4
0.8
0.2
0.2
0.2
0.0
0.1
0.1
0.2
0.1
0.1
0.0
0.2
0.2
0.0
0.1
0.0
0.1
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.0
0.0
0.1
0.0
0.0
0.2
0.4
0.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.2
0.3
1.8
5.4
0.5
0.2
0.4
0.2
0.6
0.2
0.3
0.4
0.8
0.7
0.5
0.6
0.6
1.1
0.5
0.7
1.2
0.8
1.2
1.9
2.5
0.5
0.7
1.0
0.4
0.5
1.0
2.4
2.9
0.4
0.3
0.6
0.6
0.6
0.3
0.3
0.5
1.0
2.1
211
239
342
105
193
127
231
81
31
26
144
204
20
5
19
55
49
122
96
38
21
5
4
21
15
15
42
35
2
2
3
6
5
65
50
3
14
19
18
16
38
0.7
1.0
0.9
0.4
0.5
0.8
1.1
0.6
1.1
0.9
0.8
1.0
0.3
0.5
0.4
0.5
0.3
0.3
0.5
0.4
0.5
0.7
0.9
0.2
0.4
0.6
0.3
0.3
0.5
1.0
1.3
0.1
0.1
0.2
0.4
0.3
0.1
0.1
0.2
0.5
1.0
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 Table 1 Significant Drill Results Reported in Year Ending June 30 2023 (Cont’d).
Hole ID
Coordinates
North
East
LCP0007
6815711
334575
RL
870
120
-69
Azim. Dip
Hole Depth
Intersection Interval Copper Gold
Silver Molybdenum
Cu Eq
LCP0008
6815473
334488
879
291
-59
LCP0009
6815560
334598
LCP0011
6815560
334598
875
918
290
45
-57
-60
LCP0012
6815473
334493
LCP0013
6814886
334488
LCP0014
6814436
334770
LCP0015
6814137
334484
VAP0004
6823539
342823
VAP0007
6823597
342870
VAP0009
6823438
342909
VAP0011
6823456
342931
VALMET-002
6823435
342914
918
918
918
931
946
942
947
947
952
45
45
45
255
90
90
90
90
90
-60
-60
-60
-60
-60
-75
-60
-60
-60
VAP0014
6823505
342957
927
285.91 -56.72
VAP0015
6823551
342932
910
104.81 -59.98
300
Incl
Or Incl
300
Incl
192
257
Incl
& incl
264
132
300
300
260
48
200
150
70.3
or
Including
150
150
VAP0016
6823431
342920
945
130.31 -57.27
80
VAP0017
6823545
342836
947
270.2 -59.84
220
VAP0027
6823595
342875
VAP0029
6823463
342933
934
943
28
265
-67
-64
SAP0042
6819270
342486
1204
89.42 -80.06
SAP0044
6818761
342437.9 1208.18 239.59 -59.88
SAP0047
6818793
342448
1213
199.65 -75.04
SAP0048
6818509
342288
1233
329.3 -58.77
100
100
150
170
Including
200
100
Including
From To
108
108
108
12
12
30
6
10
18
30
288
120
114
266
46
114
40
12
22
70
226
238
0
204
288
163
96
208
298
170
46
27
46
4
27
25
29
46
68
0
24
28
41
45
48
35
48
9
37
37
32
48
70
4
27
30
43
47
179
179
189
184
181
191
196
198
46
10
23
95
100
147
146
11
12
49
16
25
97
104
150
151
18
14
(m)
180
12
6
254
34
84
34
2
4
40
12
96
4
10
7
2
8
2
5
10
12
3
2
2
4
3
2
2
2
5
2
2
2
3
6
2
2
4
3
5
7
2
(% Cu)
(g/t Au)
(ppm Ag)
(ppm Mo)
(% Cu Eq)
0.1
0.2
0.3
0.1
0.2
0.1
0.2
0.5
0.4
0.1
0.2
0.1
0.3
0.3
1.9
1.4
5.7
1.8
0.5
5.3
4.5
11.8
0.9
1.5
0.7
1.4
1.2
0.7
1.9
1.5
3.2
0.9
1.0
1.3
1.3
1.1
0.8
1.7
1.2
1.0
1.5
3.9
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.1
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.1
0.2
0.4
0.5
0.8
0.3
0.8
0.3
0.4
1.4
0.4
0.6
0.4
0.4
0.6
2.2
10.8
6.1
24.1
10.7
0.3
19.7
16.5
52.6
5.6
9.3
3.3
8.2
0.4
0.3
6.7
7.8
16.4
3.7
4.2
3.0
0.3
0.8
2.5
3.9
4.1
2.4
4.8
12.9
3
1
2
13
16
37
64
57
183
45
2
13
1
10
2.8
3.5
1.9
1.0
2.4
2.2
2.2
4.2
0.5
2.0
1.3
0.7
5.0
3.0
1.0
0.8
1.0
0.8
1.0
1
1
1
4.8
0.5
0.3
1.4
3.1
7.5
0.1
0.2
0.3
0.1
0.2
0.1
0.3
0.5
0.5
0.1
0.2
0.1
0.3
0.3
2.0
1.5
5.9
1.9
0.5
5.4
4.6
12.1
1.0
1.5
0.8
1.5
1.2
0.7
2.0
1.5
3.3
0.9
1.0
1.4
1.3
1.1
0.9
1.7
1.2
1.0
1.6
4.0
19
HOT CHILI Annual Report 2023 2 Review of
Operations (Cont’d)
Table 1 Significant Drill Results Reported in Year Ending June 30 2023 (Cont’d).
Coordinates
Intersection Interval Copper Gold
Silver Molybdenum
Cu Eq
Hole ID
Azim. Dip
Hole Depth
North
East
RL
From To
(m)
(% Cu)
(g/t Au)
(ppm Ag)
(ppm Mo)
(% Cu Eq)
SAP0049
6818601
342317
1235
14.85 -59.57
120
85
88
SAPMET-001
6818913
342555
1178
329.66 -59.85
165.2
149
150
SAPMET-002 6818824.3
342424.2
1210.6 254.9 -60.17
130
SAPMET-003
6818628
342432
1192
320.72 -61.05
200
SAP0053
6818402
342314
1267
347.14 -59.85
SAP0054
6818545
342409
1217
239.37 -59.92
SZP0002
6807370
334541
1264
280
-60
Including
200
162
486
SZP0003
333923
6807048
1296
119
-60
420
Including
SZP0004
334193
6806731
1324
110
61
498
54
74
133
140
175
115
12
37
80
0
24
0
60
95
146
142
177
119
14
40
83
38
38
30
178
184
3
1
6
21
13
2
2
4
2
3
3
38
14
30
6
1.3
0.8
1.3
1.6
1.3
3.5
2.0
1.4
0.7
0.0
0.1
0.0
0.0
0.0
0.1
0.0
0.1
0.0
0.0
0.0
0.1
0.0
0.2
0.1
0.0
0.0
0.0
0.0
0.0
0.0
3.3
0.6
3.9
3.2
3.2
7.6
3.4
6.4
4.1
5.5
6.3
2.9
4.9
4.5
2.5
2.0
2.8
1.0
1.7
2.2
1.0
0.7
18.0
0.8
10
7
20
9
69
37
1.3
0.8
1.3
1.6
1.3
3.7
2.0
1.6
0.8
0.1
0.1
0.0
0.0
0.1
0.1
For Productora and Cortadera 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 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. Down-hole significant intercept widths are estimated to be at or around true-widths of mineralisation.
For San Antonio and Valentina significant intercepts are calculated above a nominal cut-off grade of 0.5% Cu, with a minimum estimated true thickness of 1.5m. These
parameters are aligned with marginal economic cut-off grades for narrow, high-grade polymetallic copper deposits of similar grade in Chile and elsewhere in the world. Down-
hole significant intersection widths are estimated to be at or around 70 per cent of true-widths of mineralisation.
For Santiago Z, significant intersections are calculated above a nominal cut-off grade of 2.5ppm Ag, with a minimum estimated true thickness of 3m. These parameters are
suitable for reporting of an early stage, polymetallic exploration project. Down-hole significant intersection widths are estimated to be at or around 70 per cent of true-widths of
mineralisation.
* Copper Equivalent (CuEq) reported for the drillhole intersections 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 × Cu_recovery).
The Metal Prices applied in the calculation were: Cu=3.00 USD/lb, Au=1,700 USD/oz, Mo=14 USD/lb, and Ag=20 USD/oz. The entirety of the intersection is assumed as fresh.
The recovery and copper equivalent formula for each deposit is:
• Cortadera – Recoveries of 83% Cu, 56% Au, 83% Mo and 37% Ag. CuEq(%) = Cu(%) + 0.56 x Au(g/t) + 0.00046 x Mo(ppm) + 0.0043 x Ag(g/t).
• Productora – Recoveries of 84% Cu, 47% Au, 47% Mo and 0% Ag (not reported). CuEq(%) = Cu(%) + 0.48 x Au(g/t) + 0.00026 x Mo(ppm).
• San Antonio and Valentina – Recoveries of 88% Cu, 72% Au, 88% Mo and 69% Ag. CuEq(%) = Cu(%) + 0.68 x Au(g/t) + 0.00047 x Mo(ppm) + 0.0076 x Ag(g/t).
• Santiago Z - assumes recoveries from the nearby Cortadera Porphyry deposit, as no metallurgical testwork has been completed at Santiago Z.
1,2,3,4 Drillholes previously reported only metallurgical samples (see ‘New High-Grade Results from Costa Fuego’ dated 19th July 2022. Subsequent entire drillhole analysis
then completed.
20 HOT CHILI Annual Report 2023
HOT CHILI Annual Report 2023 Table 2 Details of All Drill Holes Completed at Costa Fuego in Year Ending June 30 2023.
Coordinates (WGS84)
Hole ID
SAP0051
SAP0052
SAP0053
SAP0054
VAP0017
VAP0018
VAP0019
VAP0020
VAP0021
VAP0022
VAP0023
VAP0024
VAP0025
VAP0026
VAP0027
VAP0028
VAP0029
SZP0001
SZP0002
SZP0003
SZP0004
SZP0005
CRP0197
North
6818601
6818402
6818401
6818545
6823545
6823648
6823659
6823586
6823396
6823507
6823810
6823688
6823688
6823575
6823595
6823545
6823463
6807677
6807370
6807042
6806724
6806921
6814326
CORMET001
6814264
CRP0198D
CRP0199
CRP0200D
CRP0201D
CRP0202D
CRP0203
LCD0001
LCD0006
LCP0002D
LCP0003D
LCP0004
LCP0005
6814527
6815957
6814269
6814347
6814249
6814233
6815718
6815681
6815785
6815568
6815833
6815719
East
342317
342314
342319
342409
342836
342873
342944
342819
342907
342967
342890
342823
342822
342879
342875
342892
342933
334429
334541
333930
334193
334515
334829
334738
334871
334838
334737
335033
334834
334954
334574
334536
334571
334596
334609
334563
RL
1235
1265
1265
1217
955
947
893
940
950
932
886
942
942
933
934
925
943
1212
1264
1295
1317
1317
952
970
957
911
979
958
965
978
867
867
865
871
864
868
Hole
Depth
Azimuth
Dip
Prospect
100
200
150
162
220
40
162
266
150
150
175
200
156
100
100
43
100
358
486
420
438
384
300
611
553
318
625
583
534
192
142
167
300
406
300
300
241
301
347
239
105
88
271
90
50
231
235
89
120
36
28
24
265
229
280
119
110
292
97
-60
156
68
61
272
269
34
61
135
159
92
89
229
-75
-60
-60
-60
-60
-69
-57
-63
-70
-60
-60
-60
-57
-70
-67
-66
-64
-60
-60
-60
-61
-80
-72
-74
-74
-57
-75
-57
-84
-86
-57
-60
-69
-76
-60
-64
San Antonio
San Antonio
San Antonio
San Antonio
Valentina
Valentina
Valentina
Valentina
Valentina
Valentina
Valentina
Valentina
Valentina
Valentina
Valentina
Valentina
Valentina
Santiago Z
Santiago Z
Santiago Z
Santiago Z
Santiago Z
Cortadera
Cuerpo 1
Cuerpo 1
Cortadera North
Cuerpo 1
Cuerpo 1
Cuerpo 1
Cuerpo 1
Cuerpo 4
Cuerpo 4
Cuerpo 4
Cuerpo 4
Cuerpo 4
Cuerpo 4
21
HOT CHILI Annual Report 2023 2 Review of
Operations (Cont’d)
Table 2 Details of All Drill Holes Completed at Costa Fuego in Year Ending June 30 2023 (Cont’d).
Hole ID
LCP0007
LCP0008
LCP0009
LCP0010
LCP0011
LCP0012
LCP0013
LCP0014
LCP0015
LCP0016
Coordinates (WGS84)
North
6815717
6815477
6815570
6815721
6815560
6815472
6814883
6814436
6814137
6814548
East
334572
334488
334591
334571
334598
334499
334496
334765
334484
334491
RL
867
872
871
870
875
875
890
931
918
904
Hole
Depth
Azimuth
Dip
Prospect
300
300
192
156
257
264
300
300
300
300
120
291
291
270
130
125
240
255
45
90
-69
-59
-57
-57
-57
-56
-60
-60
-60
-60
Cuerpo 4
Cuerpo 4
Cuerpo 4
Cuerpo 4
Cuerpo 4
Cuerpo 4
Las Canas Target 2
Las Canas Target 3
Las Canas Target 3
Las Canas Target 3
22 HOT CHILI Annual Report 2023
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 3 Qualifying
Statements
The Mineral Resource summary for the Costa Fuego Project is presented in Table 3.
Mineral Resource Statement
Table 3 Costa Fuego Combined Mineral Resource (Effective Date 31st March 2022).
Costa Fuego Open Pit Resource
Grade
Contained Metal
Classification
(+0.21% CuEq7)
Indicated
M+I Total
Inferred
Tonnes
CuEq7 Cu
Au
Ag
Mo Copper Eq
Copper
Gold
Silver
Molybdenum
(Mt)
576
576
147
(%)
(%)
(g/t)
(g/t)
(ppm)
(tonnes)
(tonnes)
(ounces)
(ounces)
(tonnes)
0.46
0.37
0.10
0.37
0.46
0.37
0.10
0.37
0.35
0.30
0.05
0.23
91
91
68
2,658,000
2,145,000
1,929,000
6,808,000
52,200
2,658,000 2,145,000
1,929,000 6,808,000
52,200
520,000
436,000
220,000
1,062,000
10,000
Costa Fuego Underground Resource
Grade
Contained Metal
Classification
(+0.30% CuEq7)
Indicated
M+I Total
Inferred
Tonnes
CuEq7 Cu
Au
Ag
Mo Copper Eq
Copper
Gold
Silver
Molybdenum
(Mt)
148
148
56
(%)
(%)
(g/t)
(g/t)
(ppm)
(tonnes)
(tonnes)
(ounces)
(ounces)
(tonnes)
0.51
0.39
0.12
0.78
102
750,000
578,000
559,000
3,702,000
15,000
0.51
0.39
0.12
0.78
102
750,000
578,000
559,000
3,702,000
15,000
0.38
0.30
0.08
0.54
61
211,000
170,000
139,000
971,000
3,400
Costa Fuego Total Resource
Grade
Contained Metal
Classification
Indicated
M+I Total
Inferred
Tonnes
CuEq7 Cu
Au
Ag
Mo Copper Eq
Copper
Gold
Silver
Molybdenum
(Mt)
725
725
202
(%)
(%)
(g/t)
(g/t)
(ppm)
(tonnes)
(tonnes)
(ounces)
(ounces)
(tonnes)
0.47
0.38
0.11
0.45
0.47
0.38
0.11
0.45
0.36
0.30
0.06
0.31
93
93
66
3,408,000
2,755,000
2,564,000 10,489,000
67,400
3,408,000 2,755,000 2,564,000 10,489,000
67,400
731,000
605,000
359,000
2,032,000
13,400
1 Mineral Resources are reported on a 100% Basis - combining Mineral Resource estimates for the Cortadera, Productora and San Antonio deposits. All figures
are rounded, reported to appropriate significant figures, and reported in accordance with the Joint Ore Reserves Committee Code (2012) and CIM Definition
Standards (2014) and were estimated in accordance with the CIM 2019 Best Practices Guidelines, as required by NI43-101.
2 The Productora deposit is 100% owned by Chilean incorporated company Sociedad Minera El Aguila SpA (SMEA). SMEA is a joint venture (JV) company – 80%
owned by Sociedad Minera El Corazón SpA (a 100% subsidiary of Hot Chili Limited), and 20% owned by CMP Productora (a 100% subsidiary of Compañía
Minera del Pacífico S.A (CMP)).
3 The Cortadera deposit is controlled by a Chilean incorporated company Sociedad Minera La Frontera SpA (Frontera). Frontera is a subsidiary company – 100%
owned by Sociedad Minera El Corazón SpA, which is a 100% subsidiary of Hot Chili Limited.
4 The San Antonio deposit is controlled through Frontera (100% owned by Sociedad Minera El Corazón SpA, which is a 100% subsidiary of Hot Chili Limited) and
has an Option Agreement with a private party to earn a 90% interest.
5 The Mineral Resource estimates in the tables above form coherent bodies of mineralisation that are considered amenable to a combination of open pit and
underground extraction methods based on the following parameters: Base Case Metal Prices: copper US$ 3.00/lb, gold US$ 1,700/oz, molybdenum US$ 14/lb,
and silver US$20/oz.
6 Metallurgical recovery averages for each deposit consider Indicated + Inferred material and are weighted to combine sulphide flotation and oxide leaching
performance. Process recoveries: Cortadera and San Antonio – Weighted recoveries of 82% Cu, 55% Au, 82% Mo and 37% Ag. CuEq(%) = Cu(%) + 0.56 x
Au(g/t) + 0.00046 x Mo(ppm) + 0.0043 x Ag(g/t). Productora – Weighted recoveries of 84% Cu, 47% Au, 47% Mo and 0% Ag (not reported). CuEq(%) = Cu(%)
+ 0.46 x Au(g/t) + 0.00026 x Mo(ppm). Costa Fuego – Recoveries of 83% Cu, 53% Au, 69% Mo and 23% Ag. CuEq(%) = Cu(%) + 0.52 x Au(g/t) + 0.00039 x
Mo(ppm) + 0.0027 x Ag(g/t).
7 Resource Copper Equivalent (CuEq) grades are calculated based on the 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 × Cu recovery).
The base case cut-off grade for mineral resources considered amenable to open pit extraction methods at the Cortadera, Productora and San Antonio deposits
is 0.21% CuEq while the cut-off grade for mineral resources considered amenable to underground extraction methods at the Cortadera deposit is 0.3% CuEq.
8 Mineral resources are not mineral reserves and do not have demonstrated economic viability. These Mineral Resource estimates include inferred mineral
resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorised as
mineral reserves. It is reasonably expected that the majority of Inferred mineral resources could be upgraded to measured or indicated mineral resources with
continued exploration.
Mineral Reserve Statement
There were material changes to the Productora Project Ore Reserve between 1st July 2022 and 30th June 2023. The previous
Ore Reserve estimate was released to the public on the 2nd March 2016 and included material from Alice and Productora
deposits. Hot Chili released a Preliminary Economic Assessment in June 2023, which superseded the existing 2016 Productora
Pre-Feasibility Study; Hot Chili no longer has Reserves at Productora.
23
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 3 Qualifying
Statements (Cont’d)
Resource Estimates and Exploration
Results Compliance Statement
Technical Information
Certain scientific, technical and economic information
contained in this Annual Report is derived from the
PEA. For readers to fully understand such information,
they should read the PEA technical report prepared
in accordance with NI 43-101 (available on www.
sedarplus.ca or at www.hotchili.net.au) in its entirety,
including all qualifications, assumptions, limitations
and exclusions that relate to the information set out in
this report. The PEA is intended to be read as a whole,
and sections should not be read or relied upon out
of context. The technical information in this Annual
Report is subject to the assumptions and qualifications
contained in the PEA.
The scientific and technical information in this Annual
Report, other than such information derived from the
PEA, has been reviewed and approved by Mr Christian
Easterday, MAIG, Hot Chili’s Managing Director and
Chief Executive Officer, and a qualified person within the
meaning of NI 43-101.
The references to mineral resource estimates in this
Annual Report been extracted from the estimate
of mineral resources contained in the Company’s
announcement to ASX dated 31 March 2022 “Hot
Chili Delivers Next Level of Growth”, a copy of which is
available on the Company’s website at www.hotchili.
net.au/investors/asx-announcements/. The Company
confirms that it is not aware of any new information or
data that materially affects the information included in
this report about the Company’s mineral resources and
that all material assumptions and technical parameters
underpinning the mineral resource estimates continue
to apply and have not materially changed.
The references to exploration results in this Annual
Report have been extracted from the Company’s
announcements to ASX dated 4 April 2023, “New
Drill Results Boost Cortadera’s Copper-Gold Growth
Potential”, 23 February 2023, “Hot Chili Confirms
Fourth Porphyry at Cortadera”, 28 November 2022
“Hot Chili Executes Option to Secure Major Extension
to Cortadera” , 31 October 2022, “New Results Boost
Growth for Costa Fuego” and 19 July 2022 “New High
Grade Drill Results at Costa Fuego”, copies of which are
available on the Company’s website at www.hotchili.
net.au/investors/asx-announcements/. The Company
confirms that it is not aware of any new information or
data that materially affects the information included in
this report about the Company’s exploration results.
24
HOT CHILI Annual Report 2023
HOT CHILI Annual Report 2023
HOT CHILI Annual Report 2023
25
3 Qualifying
Statements (Cont’d)
Forward Looking
Statements
This Annual 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 this report and nothing contained in this 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. This 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.
This report contains “forward-looking statements”. All
statements other than those of historical facts included
in the Announcement are forward-looking statements,
including statements relatingto: estimates of Mineral
Resources; exploration and development activities
and the specifications, targets, results, analyses,
interpretations, benefits, costs and timing of them;
certain plans, strategies, aspirations and objectives of
management; and completion of and anticipated dates
for certain results, studies and reports. Forward-looking
statements are frequently characterized by words such
as “expand”, “demonstrate”, “continue” “potential”,
“prospective”, “priority”, “anticipate”, “expect”, “impact”,
“intersect”, “discover”, and variations of these words as
well as other similar words or statements that certain
events or conditions “could”, “may”, “will” or “would”
occur. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors
that could cause actual events or results to differ
materially from estimated or anticipated events or
results implied or expressed in such forward-looking
statements. Such risks include, but are not limited to,
the actual results of current and planned exploration
activities; the potential to expand the MREs beyond
their current limits, to upgrade inferred to indicated
MREs, and to convert unclassified material within
the MRE-limiting pit to mineral resources; the ability
to further improve confidence in the MREs and the
potential for, and timing of, a larger, updated MRE; the
timing and conclusions of future economic evaluations;
changes in project parameters as plans to continue
to be refined; copper, gold and other metals price
volatility; currency fluctuations and general economic
conditions; increased production costs and variances
in recovery rates from those assumed in mining
plans; the speculative nature of exploration and
project development, including the risks of obtaining
necessary licences and permits and diminishing
quantities or grades of resources; as well as political
and operational risks and governmental regulation
and judicial outcomes.The Company cautions that the
foregoing list of important factors is not exhaustive.
Investors and others who base their decisions on
forward-looking statements should carefully consider
the above factors as well as the uncertainties they
represent and the risk they entail and are cautioned not
to place undue reliance on forward-looking statements.
The Company believes that the expectations reflected
in those forward-looking statements are reasonable,
but no assurance can be given that these expectations
will prove to be correct and such forward-looking
statements included in this report should not be unduly
relied upon. These statements speak only as of the date
of this report.
Although the Company has attempted to identify
important factors that could cause actual actions,
events or results to differ materially from those
described in forward-looking statements, there may
be other factors that cause actions, events or results
not to be anticipated, estimated or intended. There
can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future
events could differ materially from those anticipated in
such statements. 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 this 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 this 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 this report nor
any information contained in this report or subsequently
communicated to any person in connection with this
report is, or should be taken as, constituting the giving
of investment advice to any person.
26
HOT CHILI Annual Report 2023
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 Note to US Investors
Non IFRS Financial Performance Measures
“Total Cash Cost”, “All-in Sustaining Cost”, “All-
in cost LOM”, “C1”, and “Free Cashflow” are not
performance measures reported in accordance with
International Financial Reporting Standards (“IFRS”).
These performance measures are included because
these statistics are key performance measures
that management uses to monitor performance.
Management uses these statistics to assess how
the Costa Fuego Project compares against its peer
projects and to assess the overall effectiveness and
efficiency of the contemplated mining operations. These
performance measures do not have a meaning within
IFRS and, therefore, amounts presented may not be
comparable to similar data presented by other mining
companies. These performance measures should not
be considered in isolation as a substitute for measures
of performance in accordance with IFRS.
This report has been prepared in accordance with the
requirements of the securities laws in effect in Canada
and Australia, which differ from the requirements of
United States securities laws. The terms “mineral
resource”, “indicated mineral resource” and “inferred
mineral resource” are defined, in and are required to
be disclosed by, NI 43-101 and JORC; however, these
terms are not defined terms under the US Securities
and Exchange Commission’s (SEC) S-K 1300 and
are normally not permitted to be used in reports and
registration statements filed with the SEC. Investors
are cautioned not to assume that all or any part of
an “indicated mineral resource” or “inferred mineral
resource” will ever be upgraded to a higher category
or converted into mineral reserves in accordance with
S-K 1300. “Inferred mineral resources” have a great
amount of uncertainty as to their existence, and great
uncertainty as to their economic and legal feasibility.
Under Canadian rules, estimates of inferred mineral
resources may not form the basis of feasibility or
pre-feasibility studies, except in rare cases. Investors
are cautioned not to assume that all or any part of an
inferred mineral resource exists or is economically or
legally mineable. Disclosure of “contained ounces” or
“contained tonnes” in a mineral resource is permitted
disclosure under Canadian and Australian regulations;
however, the SEC normally only permits issuers
to report mineralization that does not constitute
“reserves” by SEC S-K 1300 standards as in place
tonnage and grade without reference to unit measures.
Accordingly, information contained in this Report
contain descriptions of the Company’s mineral deposits
that may not be comparable to similar information made
public by U.S. companies subject to the reporting and
disclosure requirements under the United States federal
securities laws and the rules and regulations thereunder.
HOT CHILI Annual Report 2023
27
HOT CHILI Annual Report 2023 4 Corporate
Activities
The Company is pleased to have attracted a
strategic investment by Osisko Gold Royalties,
and welcomed Mr Stephen Quin as Independent
Non-Executive Director.
Appointment of
New Canadian Director
Following the resignation of two of Hot Chili’s long standing
director’s in November 2022, the Company was pleased to
announce the appointment of Canadian Director Mr Stephen
Quin as independent non-executive director.
Mr Quin is a graduate of the Royal School of Mines, London,
with a BSc (Honours) in Mining Geology and has 41 years
of experience in all stages of the mining industry, from
exploration to mine development, operations and closure.
Mr Quin has also assumed the roles of Chair of the Audit and
Risk Committee, Chair of the ESG and Nomination Committee
and member of the Remuneration Committee.
Unmarketable Parcel
Share Sale Facility
During the last quarter of 2023, the Company established
a share sale facility (Facility) for shareholders who held
fully paid shares on the Australian register of the Company
(Shares) valued at less than A$500 (Unmarketable Parcel).
This enabled shareholders to sell their Unmarketable Parcel
without having to act through a broker or pay brokers fees.
The facility, whilst benefiting small shareholders, also benefits
the company who reduce the administrative costs associated
with maintaining a larger number of shareholdings on the
Company’s registry.
This was also the final step associated with the consolidation
of the company’s shares that was undertaken prior to the
TSXV listing in January 2022.
US$15 Million Investment
Agreement with Osisko
Gold Royalties
On 28 June 2023, the Company was pleased to announce the
execution of a binding US$15 million Investment Agreement
with Osisko Gold Royalties Ltd (“Osisko”) for a 1.0% Net
Smelter Return (NSR) royalty on copper and a 3% NSR royalty
on gold (the “Osisko NSR”) (the “Investment”) across the
Company’s Costa Fuego Copper-Gold Project (“the Project”).
Completion of the Investment and receipt of the US$15 million
(“Royalty Consideration”), which was subject to satisfaction
of customary conditions, was announced 26th July 2023 (see
page 33 of this report Subsequent events).
The Investment Agreement provides strong endorsement of
the Project from a leading North American royalty-streaming
group. It provides a clear “look-through” value given the
Osisko NSR is equivalent to a 1.12% CuEq1 NSR royalty
across payable metals for US$15 million and Hot Chili’s
market capitalisation at the time of announcing the royalty
was US$80 million.
The Royalty Consideration will be applied to advancing the
Costa Fuego Pre-Feasibility Studies (PFS), resource growth
drilling activities and general advancement of the project.
The Investment Agreement between Hot Chili Limited, its
Chilean subsidiaries holding title to the properties comprising
the Costa Fuego Project (each a Seller), and Osisko,
provides for the purchase by Osisko from each Seller of
a net smelter return royalty with respect to a share of the
copper and gold production from the Project. The Royalty
will be payable monthly based on net smelter return revenues
generated by the Project. Deductions applicable against the
royalty payments are typical of those in a net smelter return
calculation but exclude taxes and government royalties.
A Buy-back clause in the event of a Change of Control Event
occurring prior to the 4th anniversary of Closing, states the
Seller shall be entitled to reduce the Royalty percentage such
that the resulting royalty rate applicable on payable copper
becomes 0.5% and the royalty rate applicable on payable gold
becomes 2.5% in exchange for a payment to Osisko in an
amount as follows:
i. 130% of the Royalty Consideration if exercised prior to the
2nd anniversary of Closing;
ii. 140% of the Royalty Consideration if exercised between the
2nd and 3rd anniversary of Closing; and
iii. 150% of the Royalty Consideration if exercised between the
3rd and 4th anniversary of Closing.
Osisko to have a Right of First Offer (ROFO) with respect to
the sale of any future royalty, stream, or similar interests by
Hot Chili.
The Royalty is secured against all property, assets,
undertaking and rights of each Seller, including the Project.
28
HOT CHILI Annual Report 2023
HOT CHILI Annual Report 2023 Our Role in the Community
A Plan for ESG
The Company has developed a strong connection
to the community over the last decade of project
advancement. Local community engagement has
become embedded into the pathway we travel to build
our project so that the people most affected are on the
journey with us. We hold regular public meetings to
maintain our engagement and wherever possible, we
recruit locally so that these substantial employment
opportunities and flow-on benefits are captured nearby.
The company also supports the community by:
. Procuring local goods and services to support the
. Providing support to communities in the vicinity of
region’s businesses,
our projects in times of need (floods, snow, water
shortage),
. Continue our programme of public meetings with
Supporting two orphanages in Freirina and Vallenar,
including additional funding in Vallenar to provide
for children with disabilities.
The Company has recently partnered with a local
sociological and psychological health institution
(associated with University of Chile) to provide
counselling support services in the region. The
community response to this endeavour has been
inspiring, confirming the value of this approach in
improving mental-health outcomes. Accordingly,
the company will expand this programme in the
coming year.
The Company’s ESG Framework is continuing
to develop, having established our roadmap to a
Sustainability Report which will be published in
the second half of 2024. This will precede the key
milestones of the submission of the Costa Fuego
Environmental Impact Assessment and the publication
of the project’s Pre-feasibility Study.
To support the sustainability the Company:
. Has formed an ESG Board Committee chaired
by Stephen Quin to ensure compliance with
best practice,
. Is in the process of finalising the company’s ESG
. Will partner with specialists Digbee ESG, to publish
policy, and
and benchmark the company’s ESG credentials
using their ESG ratings platform, which has been
developed specifically to meet the needs of the
mining industry.
Local community
engagement has
become embedded
into the pathway
we travel.
HOT CHILI Annual Report 2023
29
A new copper
supplier is coming
30
HOT CHILI Annual Report 2023
HOT CHILI Annual Report 2023 5 Directors’
Report
The Directors have pleasure in presenting their report,
together with the financial statements, for Hot Chili Limited
(the “Company”) and its controlled entities (together referred
to as the “consolidated entity” or the “Group”) for the year
ended 30 June 2023 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:
Dr Nicole Adshead-Bell
Independent Non-Executive Chairman
Christian E Easterday
Managing Director
Roberto de Andraca Adriasola
Non-Executive Director
Mark Jamieson
Non-Executive Director
Stephen Quin
Independent Non-Executive Director
(appointed 5 May 2023)
George R Nickson
Independent Non-Executive Director
(retired 29 November 2022)
Dr Allan Trench
Independent Non-Executive Director
(resigned 30 November 2022)
Directors have been in office since the start of the financial
year to the date of this report unless otherwise stated.
Directors’ Information
Dr Nicole Adshead-Bell
Independent Non-Executive Chairman
Dr Nicole Adshead-Bell is a geologist with a deep
understanding of the mining industry from over 27 years
bridging the gap between the technical, corporate (executive
and non-executive director), institutional investor and
investment banking segments of the business – within an
ESG framework.
Dr Adshead-Bell resides in Canada and is currently a non-
executive director of Altius Minerals Corp. (TSX), Dundee
Precious Metals Corp. (TSX) and Matador Mining Ltd (ASX).
Her career includes Managing Director and CEO of ASX-listed
Brazilian gold producer Beadell Resources Ltd (prior to its
acquisition by a Canadian mining company; Director of Mining
Research at Sun Valley Gold LLC (SEC registered precious
metals focused fund); Managing Director, Investment Banking,
Haywood Securities Inc. (Canadian independent investment
dealer) and Mining Analyst covering copper, zinc and uranium
commodities and companies at Dundee Securities Corp.
(former Canadian independent investment dealer). While
at Haywood she was involved in approximately 20 public
transactions including streaming, mergers, acquisitions and
divestures and raising approximately C$1.8 billion in equity/
convertible debenture financings.
More recently she established Cupel Advisory Corp. to focus
on investments and advisory services in the mining sector.
Over the past 10 years Nicole has held directorships with
several public companies including First Majestic Silver Corp.
(TSX/NYSE), Pretium Resources Inc. (TSX/NYSE, acquired by
Newcrest in 2022), Dalradian Resources Inc. (TSXV, acquired
by Orion Mine Finance in 2018) and Bravo Mining Corp (TSXV).
Dr Adshead-Bell has a PhD in structural/economic
geology from James Cook University, Townsville, Australia
where she also completed her geology undergraduate and
honours degrees.
Christian Ervin Easterday
Managing Director
Mr Easterday is a geologist with over 20 years’ experience in
the mineral exploration and mining industry and is a founding
director of Hot Chili, having led the Company since its public
listing in 2010. 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 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 various aspects of project negotiation drawing together
his commercial, financial and project valuation skills. This
work has involved negotiations and valuations covering gold,
copper, uranium, iron ore, nickel, and tantalum resource
projects in Australia and internationally. 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.
Roberto de Andraca Adriasola
Non-Executive Director
Mr de Andraca Adriasola is an executive with 25 years’
experience in the financial and mining business. He is
currently a Director of CAP S.A – one of the largest iron
ore producers and the largest steel maker in Chile. 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 international finance experience
with Chase Manhattan Bank, ABN Amro and Citigroup,
working both in Chile and in New York. He 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
18 April 2017; prior to that date he held the position of Vice
President of Business Development. Mr de Andraca Adriasola
has not held any directorships in any public listed company in
Australia in the last three years.
31
HOT CHILI Annual Report 2023 5 Directors’
Report (Cont’d)
George Randall Nickson
Independent Non-Executive Director
(retired 29 November 2022)
Mr Nickson has over 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.
Dr Allan Trench
Independent Non-Executive Director
(resigned 30 November 2022)
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 or acted as independent
director to Essential Metals Ltd (previously Pioneer Resources
Ltd), commenced 5 September 2008, 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 has
contributed to the development of CRU’s uranium practice,
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.
Mark Jamieson
Non-Executive Director
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 joint ventures.
Mr Jamieson 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.
Mr Jamieson 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.
Stephen Quin
Independent Non-Executive Director (appointed 5 May 2023)
Mr Quin is a graduate of the Royal School of Mines, London,
with a BSc (Honours) in Mining Geology and has 41
years’ experience in all stages of the mining industry, from
exploration to mine development, operations and closure.
He most recently spent a decade as President & CEO of
gold explorer/developer Midas Gold Corp. and, prior to that,
President of copper miner Capstone Mining Corp. and, prior
to the merger with Capstone, was President & CEO of copper
developer and operator Sherwood Copper Corp. Prior to
Sherwood, Mr Quin was Executive Vice President of gold
producer and explorer Miramar Mining Corp. and its copper
exploration affiliate, Northern Orion Exploration. He started
his career with what became Imperial Metals Corp. where he
was a responsible for the advancement of their polymetallic
copper-zinc project through a feasibility study and permitting.
Mr Quin has a combination of technical, governance, and
capital markets experience having led multiple studies
on projects in the copper and gold sectors, ranging from
preliminary economic assessments to feasibility studies,
permitting, mine financing and development, operations
and closure, and also has experience with base metals and
platinum group metal projects.
From a governance perspective, he has sat on and/or
chaired numerous board committees, has led governance
enhancing efforts at a number of companies and has been
an advocate of prioritizing ESG since well before the acronym
became popular.
On a capital markets front, Mr Quin has been involved in
over C$1 billion in financing and more than C$750 million in
M&A for companies where he was CEO or a senior executive,
and has extensive contacts on both the sell-side and buy-side
of the market. Mr Quin is a non-executive director of Bravo
Mining Corp. (TSXV:BRVO), Kutcho Copper Corp. (TSXV:KC)
and West Vault Mining (TSXV:WVM), and is non-executive
Chair of TGD Gold Corp. (TSXV:TDG). He also serves as
technical advisor to a number of copper and gold explorers
and developers.
Mr Quin was on the board of Chalice Mining (ASX:CHN) until
November 24, 2021.
32
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 Corporate Information
Hot Chili Limited is a Company limited by shares and is
domiciled in Australia.
Principal Activities
The principal continuing activity of the consolidated entity is
mineral exploration.
Results of Operations
The results of the consolidated entity after providing for
income tax and non-controlling interest for the year ended
30 June 2023 was a loss of $5,225,065 (2022: $7,146,653).
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 Review of Operations Report in Section 2.
Significant Changes in the
State of Affairs
There were no significant changes to the Company’s state
of affairs during the year or 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 26 July 2023, the Group announced the receipt of the
proceeds of US$15 million in exchange for the sale of a 1.0%
Net Smelter Return (NSR) royalty on copper and a 3% NSR
royalty on gold across the Company’s Costa Fuego Copper-
Gold Project located 600 km north of Santiago in the coastal
range of the Atacama Region, Chile. The proceeds were
received from Osisko Gold Royalties Ltd under the investment
agreement on closing date, 25 July 2023.
On 31 July 2023, 1,900,008 performance rights lapsed
due to vesting conditions not being met by that date. On 14
August 2023, the Company filed a National Instrument 43-101
Technical Report for its Costa Fuego Copper Gold project
in Chile. The report titled “Costa Fuego Copper Project NI
43–101 Technical Report Preliminary Economic Assessment”
and dated August 2023, with an effective date of 28 June
2023 (the “Technical Report”), was prepared pursuant to
National Instrument 43-101 – Standards of Disclosure for
Mineral Projects (“NI 43- 101”). It is available for review on both
SEDAR+ (www.sedarplus.ca) and the Company’s website
(www.hotchili.net.au). The Technical Report supports the news
release dated 28 June 2023 announcing the Costa Fuego
Copper-Gold Project Preliminary Economic Assessment.
On 22 August 2023, the Company issued 345,000 service
rights and 345,000 performance rights which have the same
terms and conditions as the service and performance rights
granted and issued in May 2023 (see Notes 23(a)(i) and 23(b)
(ii) for details of the service and performance rights granted
and issued in May 2023).
On 28 August 2023, the Company announced a binding letter
of intent with Bastion Minerals Limited for the grant to Hot
Chili of an option to acquire 100% of Bastion’s Cometa Project
in Chile (“Cometa”), located near Hot Chili’s Costa Fuego
Copper-Gold Project in the coastal range of the Atacama
Region, Chile.
Other than the above, the Directors are not aware of any
matters or circumstances that have arisen since the end
of the financial year which significantly affected or may
significantly affect the operations of the Group, the results of
those operations, or the state of affairs of the Group in future
financial years.
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
in Section 2. These include:
. Continued derisking of the project, including advancing
toward a commercial agreement to secure port access
and services for the Costa Fuego Project.
. Explore further regional consolidation opportunities
. Present an updated mineral resource estimate to the
adjacent to the Cortadera and Productora resources.
market that includes results of exploration and resource
definition drilling since the last update in March 2022.
. Continue with the announced 30,00m drill program
focusing on priority targets proximal to the current
resource.
. Investigate a single open pit scenario for Cortadera with
an increased mine life, for comparison with the current
PEA, which incorporates a block cave.
The above planned milestones are planned to lead into the
delivery of a Pre-Feasibility Study for the Costa Fuego hub
in H2 2024 as well as the key delivery of the Environmental
Impact Assessment in Q4 2024.
Associated Risks and Opportunities
The developments and roadmap summarised above are
subject to the various risks inherent in the mining industry
as well as external factors beyond the control of the projects
stakeholders which can impact the project timeline, resulting
in delays. Further discussion of these risks are listed on page
24 under the Forward Looking Statements. Material risks
and opportunities to the near term future prospects and
operations that are considered and managed by the board
and management are noted here:
. Access to capital
. Costs and Capital management
. Social license to operate
. Integration of project management, permitting and people
. Environment, climate and weather
. Water, power, access, easements, surface rights,
infrastructure, permitting
Extensive disclosure on risks and opportunities associated
with the project are outlined in the NI 43-101 Technical Report
Preliminary Economic Assessment Effective Date 28 June
released by the Company 14 August 2023.
Corporate Governance Statement
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/
33
HOT CHILI Annual Report 2023 5 Directors’
Report (Cont’d)
Security Holding Interests of Directors
At Reporting Date
Ordinary
Shares
Options Over
Ordinary Shares
Service
Rights
Performance
Rights
Directors
Direct
Interest
Indirect Direct
Interest
Interest
Indirect Direct
Interest
Interest
Indirect Direct
Interest
Interest
Indirect
Interest
Dr Nicole S Adshead-Bell
30,000
203,453
Christian E Easterday
438,430
176,548
Roberto de Andraca Adriasola
130,000
Mark Jamieson
Stephen Quin
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
153,000
828,750
87,000
-
87,000
-
-
-
-
-
-
-
-
-
828,750
-
-
-
Directors Benefits
During or since the financial year ended 30 June 2023, 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.
Company Secretary and
Chief Financial Officer
Ms Beattie is a Chartered Accountant with 20 years’
experience in corporate and financial services globally.
She joined Hot Chili in November 2021.
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.
Unissued Shares under Option and
Performance Rights Vested
There were 14,009,790 unissued ordinary shares under option
as at the date of this report. The details of the options are as
follows:
Listed Options
Expiry Date
No. Shares
Under Option
Exercise
Price
31 January 2024
10,900,000
C$2.50
Unlisted Options
Expiry Date
30 September 2024
28 January 2025
No. Shares
Under Option
Exercise
Price
1,850,001
1,259,789
$2.25
C$1.85
The holders of these options do not have the right, by virtue
of the option, to participate in any share issue or interest issue
of the Company or of any other body corporate or registered
scheme.
There were also 3,161,864 service rights and 2,834,864
performance rights at the date of this report, however, none
of the vesting conditions of these performance rights have
been met and therefore none of the performance rights are
exercisable at the date of this report.
Shares Issued on the Exercise
of Options
No listed options or unlisted options were exercised during or
since the end of the financial year.
Options and Rights Expired, Lapsed
or Cancelled
On 30 November 2022, 500,000 unlisted options exercisable at
$5.00 each expired. No other listed or unlisted options expired
during or since the end of the financial year.
On 31 July 2023, 1,900,008 performance rights which were
granted in previous financial years were cancelled as the
vesting conditions of those performance rights were not met
by 31 July 2023. No other service rights or performance rights
expired during or since the end of the financial year.
34
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 Directors’ Meetings
The number of directors’ meetings attended by each of the Directors of the Company during the year were:
Director
Nicole Adshead-Bell
Christian E Easterday
Roberto de Andraca Adriasola
Mark Jamieson
Stephen Quin
George Randall Nickson
Dr Allan Trench
Board
Meetings
Audit & Risk
Committee
Remuneration
Committee
Held1
Attended
Held1
Attended
Held1
Attended
6
6
6
6
2
2
2
6
6
5
6
2
2
2
3
-
-
-
-
3
3
3
-
-
-
-
2
3
2
-
-
-
-
2
2
2
-
-
-
-
2
2
1 Held indicates the number of meetings available for attendance by the director during the tenure of each director.
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 2023
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 2022 to
30 June 2023, 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 that people´s health and safety is
safeguarded 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 2023) is 18.
*LTIFR = number of lost time injuries in accounting period
*1,000,000 / total thousands of hours worked in accounting
period.
Auditor
RSM Australia Partners continues in office in accordance with
section 327 of the Corporations Act 2001.
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 (including Independence Standards) set by
the Accounting Professional & Ethical Standards Board.
Non-audit services that have been provided by the entity’s
auditor, RSM Australia Partners, have been disclosed in Note 29.
Officers of the Company Who
are Former Partners of RSM
Australia Partners
There are no officers of the Company who are former partners
of RSM Australia Partners.
35
HOT CHILI Annual Report 2023 5 Directors’
Report (Cont’d)
Proceedings on Behalf of Company
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 was not a party to any such
proceedings during the year.
Rounding of amounts
The consolidated entity is of a kind referred to in ASIC
Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191, issued by the Australian Securities and
Investments Commission. As such, the amounts contained
in this report and in the financial report have been rounded
to the nearest dollar in accordance with that Corporations
Instrument, unless otherwise stated.
Auditors Independence Declaration
The Remuneration Committee is responsible for the process
of determining and reviewing remuneration arrangements
for directors and executives. In doing so, the Remuneration
Committee is guided by the objectives and responsibilities
as set out in the Remuneration Committee Charter, a copy of
which is available on the Company’s website.
2. Use of Remuneration Consultants
With this objective, the Remuneration Committee engaged
Remsmart Consulting Services (Remsmart) (formerly BDO
Reward WA Pty Ltd) in May 2022 to undertake a review of
remuneration and develop a fit for purpose remuneration
approach for the business. The review encompassed a
benchmarking process to assist the Committee in assessing
the position and competitiveness of the remuneration
package of the Non-executives Directors and the Managing
Director and then to extend this benchmarking process to all
senior personnel so that the Committee and the Managing
Director could assess the positioning and competitiveness of
the executive and senior management.
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.
Remsmart Consulting Services (formerly BDO Reward Pty
Ltd) was paid a fee of A$46,750 during the year ended
30 June 2023 for this review.
REMUNERATION REPORT (AUDITED)
The remuneration report outlines the key management
personnel arrangements for Hot Chili Limited and its
subsidiaries (“Hot Chili” or the “Company”), in accordance
with the requirements of the Corporations Act 2001 and its
regulations.
Key management personnel are those persons having
authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly,
including all directors (executive or otherwise).
The information provided in this remuneration report has
been audited.
1. Principles Used to Determine
Amount and Nature of
Remuneration
The objective of the entity’s executive reward framework is
to ensure that reward for performance is competitive and
appropriate for the results delivered. The reward framework
should align executive reward with the achievement of
strategic objectives of the organisation and the creation of
value for shareholders. It should provide the ability to attract,
retain and motivate the best incumbents to perform at a high
level. The Board ensures that executive reward satisfies the
following key criteria for good reward governance practices:
• competitiveness and reasonableness;
• acceptability to shareholders;
transparency; and
•
• capital management.
3. Senior Executives
The Company has structured an executive remuneration
framework that is market competitive and aligns the interest
of shareholders with that of the participants in the Employee
Incentive Plan:
. Base pay;
. Superannuation;
. Benefits;
. Short term incentives (STI); and
. Long term incentives (LTI).
The total of these comprise the executive’s total remuneration.
Base Pay
Base pay is the total cost of employment that is reflective
of current markets conditions and has been benchmarked
to peers. It should attract and retain high quality executives
through market competitive and fair remuneration.
The current base remuneration for key management
personnel was last reviewed with effect from January 2023.
Using the information compiled in the benchmarking report
by Remsmart, the Company selected the minimum to
target range for proficient personnel to set the base pay for
executives and senior management.
Superannuation
Superannuation is paid to Australian-based employees at
statutory rates. Canadian and Chilean based directors and
employees are not paid superannuation.
36
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 3. Senior Executives (Cont’d)
Long-Term Incentive Plan (LTIP)
Benefits
The Company provides coverage under the director and
officer insurance policy and travel insurance policy for
appropriate persons. Chile-based employees are paid
mandatory and non-waivable employments benefits that
encompass occupational injuries insurance, unemployment
insurance and disability and survivors’ insurance.
Short and Long-Term Incentives
It is an underlying premise of the incentive plan that executives
should not be unjustly enriched at the expense of the
Company, but rather share in the value they create over a
designated period. The plan should:
technical personnel for the benefit of the Company;
. Attract and retain a high standard of managerial and
. Allow for reward where the Company achieves or exceeds
. Align the interests of plan participants with shareholder
. Provide reward for exceptional performance and not
interests; and
stated goals
reward an executive for performing their “day” job.
The workings of the plan allow for a short-term annual
retention scheme and a long term incentive plan over a
three year period.
The Employee Incentive plan was approved at the Annual
General Meeting held 30 November 2022. The terms of the
performance rights were approved by the board prior to the
General Meeting held 10 May 2023. Terms and conditions of
the Service and performance rights issued to directors and
the Managing Director were approved by shareholders at this
same meeting. Should the rights vest, the vested rights can
be exercised any time between vesting and the expiry date.
Short-Term Incentives
The aim of the short-term incentives is attraction and retention
of key staff engaged in the Company’s business.
. The retention award may be realised in rights. The
terms of the rights granted under the plan shall be
determined by the Board from time to time (subject to
shareholder approval for any rights to be granted to
non-executive directors and the managing director). The
rights themselves do not carry the right to vote, the right
to dividends or a return of capital or participation in the
surplus assets of the Company on winding up.
. The award provides recognition for continuity, loyalty and
. From the Company’s perspective, the risk of losing
commitment to the Company,
key skills or even teams is reduced and it assists the
Company in managing their salary overhead structure in a
constrained manner.
. The incumbent is required to be under the employ of the
Company at the end of a period to qualify for the rights
(subject to good leaver provisions)
While the short-term plan should drive continuity, the long-
term incentive plan should drive behaviour. The structure of
the performance rights compromising the long-term incentive
portion of the plan have been determined with the following
objectives:
long-term business objectives of the Company.
. The deferred award is linked to the achievement of the
. It is linked to both market and non-market objectives.
. In determining the terms of the market-based
performance rights, it is noted that Investors commonly
value their portfolio on both absolute and relative total
return. An absolute return measure reflects the level
of performance that a shareholder requires from their
leadership. A relative return reflects the market’s view of
the leadership team’s performance as measured against
an appropriate peer group. The Company’s peer group
has been selected with the following criteria - relative
to both the exchanges that it is listed on, relative to the
stage and size of the Company, relative to the commodity
and region of the Costa Fuego project - and is disclosed
below.
. The key non-market objective is the growth in resource of
the Company, either by commercial means or exploration
and development activity.
. A further key non-financial measure but relevant to the
well-being of employees and to the perception, reputation
and development of the Company is a long-term safety
performance measure.
The long-term incentives are performance rights measured
over a 3 year performance cycle. The current LTIP rights
issued in the reporting period are subject to a 3 year
performance period up to 10 May 2026. The rights are
subject to the following vesting criteria before they vest:
1) An overall requirement of, subject to terms and conditions,
continued employment at the Company.
2) 10% are assesses based on safety as measure by LTIFR and
zero fatalities. These may vest in three tranches subject to
performance under the conditions as measured at the end of
each calendar year.
3) 25% of overall long terms incentives are based on Relative
Shareholder Return.
The assessment of the Relative Shareholder Return will be
made at the end of each performance period with vesting
to occur in the line with the table below:
Percentile Ranking
Compared to
Peer Group
Amount of
Performance
Rights to Vest
< 50th Percentile
Zero
50th to 75th percentile Pro-rata between 50% and 100%
≥ 75th Percentile
100%
37
HOT CHILI Annual Report 2023 5 Directors’
Report (Cont’d)
REMUNERATION REPORT (AUDITED) (CONT’D)
Each tranche (8.33% each period) will be measured for the periods ended 31 December 2023, 31 December 2024 and 31
December 2025 and the level of vesting will be determined at the end of each performance period. This results in no return
to employees for an average performance, a scaled return for out-performance with the possibility of further vesting on the
attainment of the stretch target. To achieve the incentive target for the relative shareholder return performance measure, the
Company must outperform 49.9% of the peer group established by the board and to achieve the stretch must outperform
74.9% of the peer group. The representative peer group comprise the following:
ASX
AIC Mines (ASX: A!M)
TSX/TSXV
Arizona Sonoran Copper (TSX: ASCU)
Blackstone Minerals (ASX: BSX)
Entrée Resources Ltd. (TSX: ETG)
Dreadnought Resources Ltd (ASX: DRE)
Generation Mining Ltd (TSX: GENM)
Eagle Mountain Mining Ltd (ASX: EM2)
Laurion Mineral Exploration Inc. (TSXV: LME)
KGL Resources Ltd (ASX: KGL)
Latin Resources Ltd (ASX: LRS)
Legend Mining Ltd (ASX: LEG)
Orecorp Ltd (ASX: ORR)
Los Andes Copper Ltd. (TSXV: LA)
Marimaca Copper Corp. (TSX: MARI)
Max Resource Corp. (TSXV: MAX)
Nevada Copper Corp. (TSX: NCU)
Rex Minerals Limited (ASX: RXM)
Northern Dynasty Minerals (TSX: NDM)
Titan Minerals Ltd (ASX: TTM)
Northisle (TSX: NCX)
Northwest Copper (TSX: NWST)
Troilus Gold Corp (TSX: TLG)
Trilogy Metals (TSX: TMQ)
Tudor Gold Corp. (TSX: TUD)
Western Copper and Gold Corporation (TSX: WRN)
4) A further 25% of overall long-term incentives are based on absolute share price performance over the same three year period.
There is an incentive target and a stretch target. 50% of these rights can vest on the attainment of the incentive target (an increase
in HCH VWAP to A$1.69, a 55% increase in share price at grant date) and 100% on attainment of the stretch target (increase in
HCH VWAP to A$2.72).
5) 40% of the performance rights are based on an increase in mineral resources, with an incentive target and a stretch target (see
table below).
Performance Measure
Level of Vesting
Performance Period Notes
Total Resource between 1.2
billion and 1.4 billion tonnes
50% plus straight line
increases between 1.2
billion and 1.4 billion tonnes
From date of grant to 31
December 2025
Total Resources greater
than 1.4 billion tonnes
100%
Mineral resource growth measured
by Company reporting to the ASX
global independently estimated
JORC complaint mineral resources
and reserves, for all Company
projects reported at or above (a)
0.21% Cu equivalent or greater for
open pit mineral resources and (b)
0.3% Cu equivalent or greater for
underground mineral resources
38
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 4. Non-Executive Directors
Shareholders approve the maximum aggregate remuneration for non-executive Directors. The aggregate non-executive
directors’ remuneration was set at a maximum of A$600,000 at a general meeting of shareholders prior to the Company’s IPO
in 2010.
Fees paid to non-executive Directors are recommended by the Remuneration Committee and approved by the Board. The
non-executive directors receive fixed fee remuneration consisting of a cash fee and statutory Superannuation contributions for
Australian directors, and additional fees for committee roles. The fees reflect the demands made on, and the responsibilities of,
the directors.
As outlined in section 2 of the Remuneration Report “Use of Remuneration Consultants”, the Remuneration Committee received
advice from an independent remuneration consultant.
In this case, Remsmart provided the Remuneration Committee with a separate remuneration report assessing the fees of
non-executive directors against a benchmark peer group to ensure that non-executive directors fees are appropriate and in line
with the market. The report found that fees paid to non-executive directors and the on-executive chair were deficient given the
directors experience, skill and expertise. It was recommended by the consultants that the Company provide non-performance
based equity in lieu of the deficit in cash fees with the purpose of:
. Ensuring a strong alignment between the board and the shareholder interests; and
. Has the advantage of preservation of operational cashflow.
Only the cash fees of the non-executive chair were revised upwards. The report also recommended additional fees as payment
for committee roles. These are tabled below:
Base Fees
Chair
Other non-executive directors
2023 (A$)
68,000
46,000
Committee (Audit & Risk, ESG and Nomination, Remuneration)
Each Chair
Each Committee Member
9,000
5,500
2022 (A$)
45,000
42,000 to 45,990
-
-
Approval for allocation of service rights to directors over three years was approved at a general meeting of shareholders
held 10 May 2023. Details of service rights held by directors are detailed in Section 7.3 Director and Other KMP Interests
in Service Rights.
39
HOT CHILI Annual Report 2023 5 Directors’
Report (Cont’d)
REMUNERATION REPORT (AUDITED) (CONT’D)
5. Key Management Personnel
The directors and other key management personnel (“KMP”) of the consolidated entity during or since the end of the financial
year were:
Non-Executive Directors
Position
Dr Nicole S Adshead-Bell
Roberto de Andraca Adriasola
Mark Jamieson
Independent Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Stephen Quin (appointed 5 May 2023)
Independent Non-Executive Director
George R Nickson (retired 29 November 2022)
Independent Non-Executive Director
Dr Allan Trench (resigned 30 November 2022)
Independent Non-Executive Director
Executive Director
Christian E Easterday
Other KMP
José Ignacio Silva
Grant King
Position
Managing Director
Position
Country Manager and Chief Legal Counsel
Chief Operating Officer
John Hearne (resigned 9 December 2022)
Executive Studies Manager
Except as noted, the named persons held their current position for the whole of the financial year and since the end of the
financial year.
40
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 6. Remuneration of Directors and Other KMP for the Reporting Period
2023
Short-Term Benefits
Post-Employment
Benefits
Share-based
Payments
Salary and
Fees
Other
Benefits
Superannuation
Service and
Performance
Rights1
$
$
$
$
Name
Directors
Dr Nicole S Adshead-Bell
59,333
Christian E Easterday
400,000
Roberto de Andraca
Adriasola
Mark Jamieson2
Stephen Quin3
George R Nickson4
Dr Allan Trench5
Other KMP
José Ignacio Silva
Grant King
John Hearne6
45,993
-
11,583
19,163
17,500
553,572
294,334
275,000
121,988
-
-
-
-
-
-
-
-
-
-
85,9946
691,322
85,994
-
42,000
-
-
-
-
1,838
43,838
-
28,875
14,421
43,296
Total
$
76,381
427,208
55,687
-
21,277
19,163
19,338
17,048
(14,792)
9,694
-
9,694
-
-
21,644
619,054
(88,322)
(93,808)
27,672
(154,458)
206,012
210,067
250,075
666,154
Performance
Related
%
22.3
(3.5)
17.4
-
45.6
-
-
3.5
(42.9)
(44.7)
11.1
(23.2)
Total
1,244,894
85,994
87,134
(132,814)
1,285,208
(10.3)
1 To date, no performance rights vesting conditions have been met and thus there have been no issues of shares to directors or KMP. The share-based
payments values disclosed above are based on accounting estimates using valuation models for each class of service or performance rights as
outlined in more detail in Note 23.
2 Mark Jamieson has elected to forego an entitlement to remuneration as a non-executive director on the basis that he is entitled to remuneration as an
employee of Glencore Australia.
3 Appointed 5 May 2023.
4 Retired 29 November 2022.
5 Resigned 30 November 2022.
6 Resigned 9 December 2022. Mr Hearne was also given a redundancy payment of $85,994 upon resignation.
41
HOT CHILI Annual Report 2023 5 Directors’
Report (Cont’d)
REMUNERATION REPORT (AUDITED) (CONT’D)
2022
Short-Term Benefits
Post-Employment
Benefits
Share-based
Payments
Salary and
Fees
Other
Benefits
Superannuation
Performance
Rights1
Name
$
$
$
$
Directors
Dr Nicole S Adshead-Bell2
Murray E Black3
22,500
47,333
Christian E Easterday
400,000
Roberto de Andraca
Adriasola
Mark Jamieson4,5
George R Nickson
Dr Allan Trench
Other KMP
José Ignacio Silva
Grant King
John Hearne
45,990
-
45,990
42,000
603,813
245,021
242,500
252,083
-
-
-
-
-
-
-
-
-
-
-
Melanie Leighton6
62,500
125,000
802,104
125,000
-
4,733
40,000
-
-
-
4,200
48,933
-
24,250
25,208
6,250
55,708
Total
$
22,500
52,066
515,607
45,990
-
45,990
46,200
Performance
Related
%
-
-
14.7
-
-
-
-
-
-
75,607
-
-
-
-
75,607
728,353
10.4
86,429
86,429
235,115
(50,025)
331,450
353,179
512,406
143,725
357,948
1,340,760
26.1
24.5
45.9
(34.8)
26.7
Total
1,405,917
125,000
104,641
433,555
2,069,113
21.0
1 During the previous financial year, no performance rights vesting conditions have been met and thus there have been no issues of shares to directors
or KMP. The share-based payments values disclosed above are based on accounting estimates using valuation models for each class of service or
performance rights as outlined in more detail in Note 23.
2 Appointed 5 January 2022.
3 To date of retirement 1 March 2022.
4 Appointed 2 September 2021.
5 Mark Jamieson has elected to forego an entitlement to remuneration as a non-executive director on the basis that he is entitled to remuneration as an
employee of Glencore Australia.
6 Resigned 1 October 2021. Ms Leighton was also given a redundancy payment of $125,000 on 30 September 2021 and expenses previously
recognised as part of share-based payments in previous years and related to unvested performance rights was reversed upon her resignation.
42
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 7. Director and Other KMP Interests in the Shares, Options, Performance
Rights and Convertible Notes of the Company
7.1 Director and Other KMP Interests in Shares
The number of shares in the Company held during the financial year, and up to 30 June 2023, by each director and other KMP
of Hot Chili Limited, including their personally related parties, is set out below. There were no shares granted as compensation
during the year.
As outlined above, the short-term incentive program aims to maintain employee retention, without the use of Company cash
resources. Service rights are issued in three tranches to vest at the end of each calendar year should the employee remain in the
Company’s employment. The long-term incentives (“LTI”) include long service leave and performance rights. These LTIs may be
granted to eligible employees both to reward employees for performance in the realisation of strategic outcomes and long-term
growth in shareholder wealth and to provide recognition for contribution. The terms of the performance rights seek to align
employees and shareholder interests by:
1. Focusing on the creation of shareholder value and returns;
2. Focusing on the delivery of key strategic goals of the Company;
3. Attract employees with knowledge to support and develop the Company’s ongoing business and activities and;
4. Seeking to retain competent and experienced individuals in key roles.
Balance at the
Start of the Year
No.
Granted as
Compensation
No.
Received on
Exercise of
Options
No.
Other Changes
during the Year
No.
Balance at the
End of the Year
No.
Directors
Dr Nicole S Adshead-Bell
Christian E Easterday
Roberto de Andraca
Adriasola
Mark Jamieson
Stephen Quin
George R Nickson
Dr Allan Trench
Other KMP
José Ignacio Silva
Grant King
John Hearne
Total
78,453
579,684
130,000
-
-
-
18,025
806,162
151,045
11,572
2,000
164,617
970,779
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
155,000
35,294
-
-
-
-
(18,025)1
172,269
-
-
(2,000)2
(2,000)
233,453
614,978
130,000
-
-
-
-
978,431
151,045
11,572
-
162,617
170,269
1,141,048
1 Represents balance held by Dr Trench on his date of resignation on 30 November 2022.
2 Represents balance held by Mr Hearne on his date of resignation on 9 December 2022 following his redundancy.
43
HOT CHILI Annual Report 2023 5 Directors’
Report (Cont’d)
REMUNERATION REPORT (AUDITED) (CONT’D)
7.2 Director and Other KMP Interests in Options
Since the end of the previous financial year, no directors or other KMP held any options in the Company.
7.3 Director and Other KMP Interests in Service Rights
Directors and other KMP holdings of service rights in the Company are as follows:
Balance at the
Start of the Year
No.
Granted as
Compensation1
No.
Rights
Exercised /
Expired
No.
Other Changes
During the Year
No.
Balance at the
End of the Year
No.
Directors
Dr Nicole S Adshead-Bell
Christian E Easterday
Roberto de Andraca
Adriasola
Stephen Quin
Other KMP
José Ignacio Silva
Grant King
Total
-
-
-
-
-
-
-
-
-
153,000
828,750
87,000
87,000
1,155,750
483,176
447,525
930,701
2,086,451
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
153,000
828,750
87,000
87,000
1,155,750
483,176
447,525
930,701
2,086,451
1 Refer to Note 23(a) of the notes to the financial statements for details of the issue of service rights. The total fair value of service rights granted to KMP
on 10 May 2023 amounted to $2,044,722.
No service rights were vested and exercisable at the end of the financial year.
7.4 Director and Other KMP Interests in Performance Rights
Directors and other KMP holdings of performance rights in the Company are as follows:
Balance at the
Start of the Year
No.
Granted as
Compensation1
No.
Rights
Exercised /
Expired
No.
Other Changes
During the Year
No.
Balance at the
End of the Year
No.
Directors
Christian E Easterday
Other KMP
José Ignacio Silva
Grant King
John Hearne
400,002
400,002
300,000
300,000
300,000
900,000
828,750
828,750
483,176
447,525
-
930,701
Total
1,300,002
1,759,451
-
-
-
-
-
-
-
-
-
-
-
(300,000)2
(300,000)
1,228,752
1,228,752
783,176
747,525
-
1,530,701
(300,000)
2,759,453
1 Refer to Note 23(b) of the notes to the financial statements for details of the issue of performance rights. The total fair value of performance rights
granted to KMP on 10 May 2023 amounted to $1.408.426 and are broken down as follows:
- Class A performance rights $172,427
- Class B performance rights $339,296
- Class C performance rights $206,999
- Class D performance rights $689,704
2 Represents balance held by Mr Hearne on his date of resignation on 9 December 2022 following his redundancy.
No performance rights were vested and exercisable at the end of the financial year.
44
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 8. Service Contracts
The Company has executive service, labour or other agreements with the following KMP:
Term of Contract
Notice Period
Termination
Entitlements
Other Details
CE Easterday
Executive Service
Agreement with Initial term
of 3 years from 9 September
2013 and then ongoing
until terminated by either
party. Under the agreement,
Mr Easterday receives an
annual salary of $400,000,
plus superannuation. Mr
Easterday’s remuneration is
subject to annual review.
After the initial term, the
agreement continues
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.
Post termination non-
competition restraints up to
a maximum of 12 months.
Upon termination of the
agreement, Mr Easterday
will be entitled to termination
benefits in accordance
with Part 2D.2 of the
Corporations Act 2001.
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
the Company’s shareholders
in a general meeting.
JI Silva
The Company, through one
of its Chilean subsidiary
entities, Sociedad Minera El
Águila SpA (“SMEA”), has
a labour agreement with
Mr José Ignacio Silva, as
Country Manager for Chile
and Chief Legal Counsel
of the Company. Mr Silva’s
annual salary was reviewed
during the year to $320,000
per annum, effective from
1 January 2023.
G King
Mr King commenced
employment with Hot Chili
Limited on 7 September
2020. Mr King’s annual
salary was reviewed during
the year to $300,000 per
annum, effective from 1
January 2023.
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.
Mr Silva is not subject to
any post termination non-
competition restraints.
The Company may terminate
the agreement summarily
for any serious incidents or
wrongdoing by Mr Silva.
Either party may give notice
that the agreement will
terminate with 3 months’
notice.
Such agreement will
continue until either Mr King
terminates by giving the
Company 3 months’ notice
or the Company terminates
by giving Mr King 3 months’
notice or payment in lieu
of notice up to an amount
equivalent to 3 months’
remuneration.
Mr King is subject to post
termination non-competition
restraints up to a maximum
of 6 months.
The Company may
terminate the agreement
summarily for any serious
incidents or wrongdoing by
Mr King.
KMP have no entitlement to termination payments in the event of removal for misconduct.
45
HOT CHILI Annual Report 2023 5 Directors’
Report (Cont’d)
REMUNERATION REPORT (AUDITED) (CONT’D)
9. Non-Executive Directors
Each of the Non-Executive Directors have signed letters of appointment. The key features of the respective appointments are
(inclusive of board and committee fees):
At Reporting Date
Term
Remuneration
Dr Nicole S
Adshead-Bell
Roberto de
Andraca
Adriasola
N/A
N/A
A$7,333 per
month
A$3,833 per
month
Termination Benefits
Nil
Nil
Mark
Jamieson
Stephen
Quin1
George R
Nickson2
Dr Allan
Trench3
N/A
-
Nil
N/A
N/A
N/A
A$5,792 per
month
A$3,833 per
month
A$3,868 per
month incl. of
superannuation
Nil
Nil
Nil
1 Since appointment on 5 May 2023.
2 Until retirement on 29 November 2022.
3 Until resignation on 30 November 2022.
10. Additional Information
The earnings of the consolidated entity for the five years to 30 June 2023 are summarised below:
Other income
Expenses
EBITDA
EBIT
2023
A$
170,795
(5,594,579)
2022
A$
2,520,701
(9,799,457)
2021
A$
60,465
(9,304,467)
(5,416,529)
(4,780,485)
7,525,912
(5,547,227)
(4,870,519)
7,530,689
2020
A$
3,289,606
(4,555,219)
680,324
671,646
2019
A$
238,112
(4,470,482)
(2,184,855)
(2,196,264)
Loss after income tax
(5,423,784)
(7,278,756)
(9,744,002)
(1,265,613)
(4,232,370)
The factors that are considered to affect total shareholders return (“TSR”) are summarised below:
Share price at financial year end ($)
Basic earnings/(loss) per share
(cents per share)
2023
1.12
2022
0.75
20211
1.70
(4.37)
(7.49)
(17.37)
20201
0.85
(3.50)
20191
1.56
(23.50)
1 Updated to reflect post consolidation share price and basic earnings/(loss) per share amounts.
11. Other Transactions with Directors, Other KMP and Their Related Parties
There were no transactions that occurred with directors, other KMP and their related parties during the current financial year,
other than the reimbursement of expenses.
12. Adoption of Year Ended 30 June 2022 Remuneration Report
At the Annual General Meeting held on 30 November 2022, shareholders adopted the 30 June 2022 Remuneration Report with
a clear majority of 22,736,704 votes in favour, being 94.09% of votes cast.
END OF REMUNERATION REPORT (AUDITED)
This report is made in accordance with a resolution of the Board of Directors made pursuant to section 298(2)(a) of the
Corporations Act 2001.
Signed for on behalf of the Board of Directors by:
Christian E Easterday
Managing Director
Dated this 29th day of September 2023
Perth, Western Australia
46
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 6 Auditors’ Independence
Declaration
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
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Hot Chili Limited for the year ended 30 June 2023, 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.
RSM AUSTRALIA PARTNERS
Perth, WA
Dated: 29 September 2023
AIK KONG TING
Partner
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
47
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023
7 Auditors’
Report
48
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 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 2023, 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 2023 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 (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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. HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 49
Key audit matter How our audit addressed this matter Exploration and Evaluation Expenditure Refer to Note 11 in the financial statements The Group has capitalised exploration and evaluation expenditure with a carrying value of $220,436,849 as at 30 June 2023. We considered this to be a key audit matter due to the significant management judgment involved in assessing the carrying value in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources, including: 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 recoverable reserves may be determined. Our audit procedures included: Assessing the Group’s accounting policy for compliance with Australian Accounting Standards; Assessing whether the rights to tenure of those areas of interest are current; Testing the option agreement payments are up to date; Testing on a sample basis of additions to supporting documentation and checking the amounts capitalised during the year are in compliance with the Group’s accounting policy and relate to the area of interest; Assessing and evaluating management’s assessment of whether indicators of impairment existed at the reporting date; Enquiring with management and reading 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 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; and Assessing the appropriateness of the disclosures in the financial statements. Share-based payment Refer to Note 23 in the financial statements During the year, the Group issued performance rights and service rights to key management personnel and employees. Management has accounted for these instruments in accordance with AASB 2 Share-Based Payment. We considered this to be a key audit matter due to: The complexity of the accounting associated with recording these instruments and management estimation in determining the fair value of instruments granted; Management judgement is required to determine the probability of vesting conditions of these instruments and the inputs used in the valuation model to value these instruments; and The recognition of the share-based payment expense is complex due to the variety of vesting conditions attached to these instruments. Our audit procedures included: Assessing the Group’s accounting policy for compliance with Australian Accounting Standards; Obtaining an understanding of the terms and conditions of these instruments granted; Assessing the completeness of the instruments granted/expired/lapsed at reporting date; Assessing the appropriateness of management’s valuation methodology used to determine the fair value of these instruments granted; Testing the key inputs used in the valuation model for each instrument granted; Critically assessing management’s determination of the vesting probability of each instrument; and Assessing the appropriateness of the disclosures in the financial statements. 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 2023, but does not include the financial report and the auditor's report thereon. HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 7 Auditors’
Report (Cont’d)
50
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. 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 2023. In our opinion, the Remuneration Report of Hot Chili Limited, for the year ended 30 June 2023, 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. RSM AUSTRALIA PARTNERS Perth, WA AIK KONG TING Dated: 29 September 2023 Partner HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 8 Directors’
Declaration
In the opinion of the Directors:
a)
b)
c)
d)
the attached financial statements and notes thereto comply with the Corporations Act 2001, the Australian
Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements;
the attached financial statements and notes thereto comply with the 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 thereto give a true and fair view of the consolidated entity’s financial
position as at 30 June 2023 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.
This declaration is made in accordance with a resolution of the Board of Directors made pursuant to section 295(5)(a) of the
Corporations Act 2001.
Signed for on behalf of the Board of Directors by:
Christian E Easterday
Managing Director
Dated this 29th day of September 2023
Perth
51
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023
9 Statement of
Profit or Loss & Other
Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2023
Interest income
Gain on revaluation of derivative liability
Other income
Total Income
Depreciation
Convertible notes compliance
Corporate fees
Legal and professional
Employee benefits expense
Administration expenses
Accounting fees
Other expenses
Foreign exchange gain/(loss)
Share-based payments reversal/(expense)
Finance costs
Total Expenses
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
Note
4
4
Consolidated Entity
2023
$
170,795
-
-
2022
$
3,688
2,425,593
91,420
170,795
2,520,701
(130,698)
-
(359,220)
(588,185)
(2,322,005)
(1,076,963)
(15,848)
(90,034)
(48,500)
(549,709)
(882,042)
(2,145,481)
(982,687)
(266,326)
5
23
(1,263,900)
(1,181,380)
119,145
90,447
(47,352)
(5,594,579)
(466,471)
(774,902)
(2,411,925)
(9,799,457)
(5,423,784)
(7,278,756)
6
-
-
(5,423,784)
(7,278,756)
-
-
(5,423,784)
(7,278,756)
(198,719)
(132,103)
(5,225,065)
(7,146,653)
(5,423,784)
(7,278,756)
Basic and diluted loss per share (cents)
attributable to the owners of Hot Chili Limited
7
(4.37)
(7.49)
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
52
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023
10 Statement of
Financial Position
AS AT 30 JUNE 2023
Current Assets
Cash and cash equivalents
Other current assets
Total Current Assets
Non-Current Assets
Plant and equipment
Exploration and evaluation expenditure
Right-of-use assets
Other non-current assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Lease liabilities
Total Current Liabilities
Non-Current Liabilities
Provisions
Lease liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Share-based payments reserve
Foreign currency translation reserve
Accumulated losses
Capital and Reserves Attributable to Owners of Hot Chili Limited
Non-controlling interests
Total Equity
Consolidated Entity
Note
2023
$
2022
$
8
13
10
11
12
13
14
15
16
15
16
2,948,964
23,721,808
271,678
69,898
3,220,642
23,791,706
134,721
75,149
220,436,849
207,436,542
277,591
362,688
292,274
-
221,211,849
207,803,965
224,432,491
231,595,671
1,202,362
6,376,830
231,546
124,490
107,368
67,081
1,558,398
6,551,279
16,218
209,118
225,336
9,145
263,767
272,912
1,783,734
6,824,191
222,648,757
224,771,480
19
20(a)
20(b)
21
269,189,573
269,189,573
5,230,152
5,517,849
1,222
1,222
(71,081,853)
(68,785,934)
203,339,094
205,922,710
22
19,309,663
18,848,770
222,648,757
224,771,480
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
53
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023
11 Statement of
Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2023
Consolidated Entity
Balance at 30 June 2022
Reclassification of historical
allocation of NCI and
accumulated losses
NCI contributions from
previous periods1,2
Contributed
Equity
Share-Based
Payments
Reserve
Foreign
Currency
Translation
Reserve
Accumulated
Losses
Non-
Controlling
Interest
(“NCI”)
Total Equity
$
$
$
$
$
$
269,189,573
5,517,849
1,222
(68,785,934)
18,848,770
224,771,480
-
-
-
-
-
-
2,754,221
(2,754,221)
-
(22,325)
1,477,934
1,455,609
Balance at 1 July 2022
269,189,573
5,517,849
1,222
(66,054,038)
17,572,483
226,227,089
Loss for the year
Total Comprehensive
Income for the Year
Options expired
Share based payments
reversal
NCI contribution1
-
-
-
-
-
-
-
(197,250)
(90,447)
-
-
-
-
-
-
(5,225,065)
(198,719)
(5,423,784)
(5,225,065)
(198,719)
(5,423,784)
197,250
-
-
-
-
-
(90,447)
1,935,899
1,935,899
Balance at 30 June 2023
269,189,573
5,230,152
1,222
(71,081,853)
19,309,663
222,648,757
188,314,123
2,774,476
1,222
(62,179,021)
18,980,873
147,891,673
Balance at 1 July 2021
Loss for the year
Total Comprehensive
Income for the Year
-
-
-
-
Shares issued during the
period
88,444,420
2,508,211
Share issue costs
(7,568,970)
-
Options expired
Share-based payments
-
-
(539,740)
774,902
-
-
-
-
-
-
(7,146,653)
(132,103)
(7,278,756)
(7,146,653)
(132,103)
(7,278,756)
-
-
539,740
-
-
-
-
-
90,952,631
(7,568,970)
-
774,902
Balance at 30 June 2022
269,189,573
5,517,849
1,222
(68,785,934)
18,848,770
224,771,480
1 The above NCI contribution was made by Compañía Minera del Pacífico S.A. (“CMP”) to maintain its interest of 20% in Sociedad Minera El Águila SpA
2 Adjustments have been made to the figures disclosed for exploration and evaluation assets, opening retained earnings, and non-controlling interests.
These were the result of reclassifications to gross-up NCI contributions previously offset against exploration and evaluation assets. The effect of these
adjustments was to increase exploration and evaluation assets by $1,455,609, increase the minority interest by $1,477,934, and decrease retained
earnings by $22,325.
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
54
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023
12 Statement of
Cash Flows
FOR THE YEAR ENDED 30 JUNE 2023
Cash Flows from Operating Activities
Payments to suppliers and employees
Interest received
Interest paid
Other receipts
Consolidated Entity
2023
$
2022
$
Note
(5,408,260)
(6,101,583)
159,509
(417)
-
3,688
(2,582)
91,420
Net Cash Used in Operating Activities
9
(5,249,168)
(6,009,057)
Cash Flows from Investing Activities
Payments for plant and equipment
Payments for tenements
Payments for exploration and evaluation
Net Cash Used in Investing Activities
Cash Flows from Financing Activities
Proceeds from issue of shares
Proceeds from exercise of options
Share issue costs
Repayment of lease liabilities
Net Cash (Used in) / Provided by Financing Activities
Net (decrease)/increase in cash held
Cash and cash equivalents at the beginning of the year
Foreign exchange differences on cash
10
11
(102,700)
(42,816)
(1,536,835)
(23,254,689)
(13,856,439)
(25,584,862)
(15,495,974)
(48,882,367)
-
-
-
76,813,915
3,822,245
(5,060,759)
(146,847)
(100,323)
(146,847)
75,475,078
(20,891,989)
20,583,654
23,721,808
3,604,625
119,145
(466,471)
Cash and Cash Equivalents at the End of the Year
8
2,948,964
23,721,808
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
55
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023
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.
(a) New, Revised or Amended Accounting Standards
(e) Parent Entity Information
and Interpretations Adopted
The consolidated entity has adopted all of the new, revised
or amended accounting standards, interpretations and
other accounting pronouncements issued by the Australian
Accounting Standards Board (“AASB”) that are mandatory for
the current reporting period.
Any new, revised or amending accounting standards,
interpretations and other accounting pronouncements that are
not yet mandatory have not been early adopted.
(b) Accounting Standards and Interpretations Issued
But Not Yet Effective
Australian Accounting Standards and Interpretations that
have recently been issued or amended are not yet mandatory,
and have not been early adopted by the consolidated entity
for the annual reporting period ended 30 June 2023. The
consolidated entity has not yet assessed the impact of these
new or amended Accounting Standards and Interpretations.
(c) 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
29th September 2023 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 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 Note 2.
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.
(d) Rounding of Amounts
The Company is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument
2016/191, issued by the Australian Securities and Investments
Commission. Therefore, the amounts in this report have
been rounded to the nearest dollar in accordance with that
Corporations Instrument, unless otherwise stated.
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.
(f) 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 2023 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”.
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.
56
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(g) Segment Reporting
(j) Revenue Recognition
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.
(h) 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.
(i) Goods and Services Tax (“GST”) and Other
Similar Taxes
Revenues, expenses and assets are recognised net of the
amount of associated GST (or “VAT”, as it is referred to in
some jurisdictions), 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.
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:
Interest Income
Interest revenue is recognised on a proportional basis taking
into account the interest rates applicable to the financial assets.
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.
(k) 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.
(l) 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
Australian Tax Consolidation Regime.
57
HOT CHILI Annual Report 2023 13 Notes to the
Financial Statements(cont’d)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(m) Current and Non-Current Classification
(o) 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).
(p) Cash and Cash Equivalents
Cash and cash equivalents include 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.
(q) Other Receivables
Other receivables are recognised at amortised cost, less any
allowance for expected credit losses.
(r) 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.
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.
(n) 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 2023HOT CHILI Annual Report 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Depreciation
(u) Lease Liabilities
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.
(s) 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.
(t) 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.
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.
(v) 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.
(w) 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.
59
HOT CHILI Annual Report 2023 13 Notes to the
Financial Statements(Cont’d)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(x) 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.
(y) 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.
(z) Issued Capital
Ordinary shares are classified as equity.
The cost of cash-settled transactions is initially, and at each
reporting date until vested, determined by applying either the
Hoadley Employee Stock Option, Hoadley ESO2, Hoadley
Parisian Barrier, Hybrid Barrier Up and In Trinomial, 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:
(i) 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.
(ii)
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.
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.
(bb) Earnings per Share
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.
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.
(aa) Share-Based Payments
Equity-based compensation benefits can be provided to
directors and executives.
The cost of equity-settled transactions are measured at fair
value on grant date. Fair value is independently determined
using any of the Hoadley Employee Stock Option, Hoadley
Employee Stock Option 2 (“Hoadley ESO2”), Hoadley Parisian
Barrier, Hybrid Barrier Up and In Trinomial, or Black-Scholes
option pricing models 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 or right, 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.
60
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 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.
(a) Exploration and Evaluation Costs
(b) Share-Based Payment Transactions
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.
The consolidated entity measures the cost of equity-settled
transactions with directors, employees and key consultants
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 Hoadley Employee Stock Option, Hoadley
ESO2, Hoadley Parisian Barrier, Hybrid Barrier Up and In
Trinomial, or Black-Scholes option pricing models 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.
61
HOT CHILI Annual Report 2023 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 (the 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, and is domiciled in Australia.
Segment revenues are allocated based on the country in which the party is located. Operating non-interest revenue of $91,420
during the previous financial year was derived from a single external party. There was no operating
non-interest revenue during the current financial year.
All the assets relate to mineral exploration. Segment assets are allocated to segments based on the purpose for which they
are used.
The following is an analysis of the consolidated entity’s revenue, results, assets and liabilities by reportable operating segment:
2023
Revenue (non-interest)
EBITDA
Depreciation
Interest income
Finance costs
Loss Before Income Tax Expense
Income tax expense
Loss After Income Tax Expense
Segment Assets
Segment Liabilities
2022
Revenue (non-interest)
EBITDA
Depreciation
Interest income
Finance costs
Loss Before Income Tax Expense
Income tax expense
Loss After Income Tax Expense
Segment Assets
Segment Liabilities
62
Australia
$
Chile
$
Total
$
-
-
-
(3,813,944)
(1,602,585)
(5,416,529)
(130,698)
170,795
(47,352)
(5,423,784)
-
(5,423,784)
2,615,989
221,816,502
224,432,491
(978,517)
(805,217)
(1,783,734)
-
91,420
91,420
(3,590,621)
(1,189,864)
(4,780,485)
(90,034)
3,688
(2,411,925)
(7,278,756)
-
(7,278,756)
21,454,201
210,141,470
231,595,671
(636,640)
(6,187,551)
(6,824,191)
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 4. OTHER INCOME
Gain on revaluation of derivative liability
Other income
5. OTHER EXPENSES
Marketing expenses
Travel costs
Community development costs
6.
INCOME TAX EXPENSE
(a) Reconciliation of Income Tax Expense to Prima Facie Tax Payable
Loss before income tax
Prima facie income tax at 25% (2022: 25%)
Tax-effect of amounts not deductible in calculating taxable income
Tax loss not recognised
Income Tax Expense
(b) Tax Losses:
Consolidated Entity
2023
$
2022
$
-
-
-
2,425,593
91,420
2,517,013
836,470
352,094
75,336
826,120
355,260
-
1,263,900
1,181,380
(5,423,784)
(1,355,946)
139,161
1,216,785
(7,278,756)
(1,819,689)
329,435
1,490,254
-
-
Unused tax losses for which no deferred tax asset has been recognised
36,460,217
33,580,584
Potential tax benefit at 25% (2022: 25%)
9,115,054
8,395,146
As shown above, the directors estimate that the potential deferred tax asset at 30 June 2023 in respect of tax losses not brought
to account is $9,115,054 (2022: $8,395,146).
In addition, Chilean subsidiaries of Hot Chili Limited also have tax losses that are a potential deferred tax asset of $33,203,301
(2022: $26,862,337).
The benefit of tax losses will only be obtained if:
i. The consolidated entity and the subsidiaries derive income, sufficient to absorb tax losses; and
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.
63
HOT CHILI Annual Report 2023
13 Notes to the
Financial Statements(Cont’d)
7. LOSS PER SHARE
Loss after tax attributable to the owners of Hot Chili Limited
The weighted average number of ordinary shares on issue used in the calculation
of basic loss per share (post consolidation number of shares)
Weighted average number of ordinary shares and potential ordinary shares used
as the denominator in calculating diluted loss per share (i)
Basic Loss Per Share (Cents)
Diluted Loss Per Share (Cents) (i)
(i) Unexercised options are not dilutive.
8. CASH AND CASH EQUIVALENTS
Cash at bank
Total Cash and Cash Equivalents
Consolidated Entity
2023
$
2022
$
(5,225,065)
(7,146,653)
119,445,206
95,441,990
119,445,206
95,441,990
(4.37)
(4.37)
(7.49)
(7.49)
2,948,964
23,721,808
2,948,964
23,721,808
Reconciliation to cash and cash equivalents:
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
2,948,964
23,721,808
9. NOTES TO STATEMENT OF CASH FLOWS
(a) Reconciliation of Net Cash Used in Operating Activities
Loss for the year
Adjustments for:
Depreciation
Foreign exchange (gain)/loss
Community development costs recognised as investing activities
Share based payments
Effect on revaluation of derivative liability
Amortised finance costs
Non-cash finance costs
Finance costs on lease liabilities
(5,423,784)
(7,278,756)
130,698
(119,145)
75,336
(90,447)
-
-
-
46,935
90,034
466,471
-
774,902
(2,425,593)
2,364,841
44,502
14,684
Net cash flows from operating activities before change in assets and liabilities
(5,380,407)
(5,948,915)
Change in assets and liabilities during the financial year (i):
Other current assets
Trade and other payables
Provisions
(326,695)
326,683
131,251
(69,765)
(106,890)
116,513
Net Cash Outflow from Operating Activities
(5,249,168)
(6,009,057)
(i) As related to operating activities.
64
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023
9. NOTES TO STATEMENT OF CASH FLOWS (CONT’D)
(b) Non-Cash Investing and Financing Activities
2023
There were no non-cash investing and financing activities during the current year.
2022
92,500,000 options (pre-consolidation (1,850,001 post consolidation)) were issued to lead managers of a capital raising.
The options are exercisable at $5 per option ($0.10 pre-consolidation) and expire 30 September 2024.
1,259,789 options were issued (post consolidation) to lead managers of a capital raising. The options are exercisable at
C$1.85 and expire on 31 January 2025.
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
Date Paid
Interest Due $
VWAP
30 September 2021
8 Oct 2021
31 December 2021
17 Jan 2022
31 March 2022
13 April 2022
22 June 2022
30 June 2022
139,615
139,617
121,918
105,652
$0.03808
$1.70101
$1.38965
$0.92309
Shares Issued
Pre Share
Consolidation
3,666,369
-
-
-
Shares Issued
Post Share
Consolidation
-
82,043
87,904
114,455
A total of 9,695 Convertible Notes and respective interest to dates of conversion were converted to 2,043,668 pre consolidation
shares and 547,451 post-consolidation shares during the year.
A total of 59,758 Convertible Notes remaining outstanding at final maturity (22 June 2022) were converted to 6,473,671 shares at
a deemed price of $0.92309 as per the terms and conditions of the notes.
10. PLANT AND EQUIPMENT
Plant and equipment at cost
Less provision for depreciation
Total Plant and Equipment
Reconciliation:
Carrying amount at the beginning of the year
Additions
Disposals and scrapped
Depreciation expensed
Depreciation capitalised into exploration costs
Foreign exchange
Carrying Amount at the End of the Year
Consolidated Entity
2023
$
2022
$
1,043,203
(908,482)
134,721
810,615
(735,466)
75,149
75,149
102,700
-
(13,340)
(29,788)
-
134,721
61,944
42,816
-
(10,323)
(19,288)
-
75,149
65
HOT CHILI Annual Report 2023 13 Notes to the
Financial Statements(Cont’d)
11. EXPLORATION AND EVALUATION EXPENDITURE
Carrying amount at the beginning of the year
Consideration given for mineral exploration acquisition (i)
Capitalised mineral exploration and evaluation
Carrying Amount at the End of the Year (ii)
Consolidated Entity
2023
$
2022
$
207,436,542
158,329,683
1,536,835
11,463,472
23,254,689
25,852,170
220,436,849
207,436,542
(i) Capitalised mineral exploration and evaluation is net of reimbursements of VAT recovered following approval for VAT refunds
from the Chilean Tax Authorities.
(ii) 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.
Based on this assessment, 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.
12. RIGHT OF USE ASSET
Right-of-use assets at cost
Less: Accumulated depreciation
Reconciliation of Right-of-Use Assets
Opening balance
Additions (i)
Amortisation
Closing balance
Consolidated Entity
2023
$
2022
$
474,660
(197,069)
277,591
292,274
102,675
(117,358)
277,591
371,985
(79,711)
292,274
-
371,985
(79,711)
292,274
(i) Effective on 1 August 2022, the Company entered into a lease agreement for further floor space (on the ground floor) at
its current premises, which will expire on 28 February 2025. This additional lease agreement was previously disclosed in
Note 22 of the annual report for the year ended 30 June 2022 as part of the consolidated entity’s minimum lease payment
commitments.
(ii) In addition, the Company exercised its option to renew its existing lease agreement for the first floor of its current premises for
a further 3 years to 28 February 2026.
(iii) The Chilean entities leases their office premises under operating leases. The operating leases are on a month-to-month basis
and are not material to the consolidated entity, and therefore have been expensed as incurred and not capitalised as right-of-
use assets. Refer to Note 17(c) for details of commitments for minimum lease payments in relation to these operating leases at
year end.
66
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 13. OTHER ASSETS
Current
Prepayments
VAT receivable
Other receivables
Total Other Current Assets
Non-Current
Term deposits and bonds
Total Other Non-Current Assets
Consolidated Entity
2023
$
2022
$
260,392
69,765
-
11,286
271,678
362,688
362,688
133
-
69,898
-
-
Total Other Assets
634,366
69,898
14. TRADE AND OTHER PAYABLES
Trade payables and accruals
15. PROVISIONS
Current
Annual leave
Long service leave
Non-Current
Long service leave
Total Provisions
1,202,362
1,202,362
6,376,830
6,376,830
153,213
78,333
231,546
16,218
16,218
107,368
-
107,368
9,145
9,145
247,764
116,513
67
HOT CHILI Annual Report 2023
13 Notes to the
Financial Statements(Cont’d)
16. LEASE LIABILITIES
Current
Non-current
Total Lease Liabilities
Reconciliation of Lease Liabilities:
Opening balance
Additions (refer to Note 12(i))
Repayments
Interest
Closing Balance
Maturity Analysis:
Year 1
Year 2
Year 3
Year 4
Less: Interest portion of lease liabilities
Closing Balance
Consolidated Entity
2023
$
2022
$
124,490
209,118
333,608
330,848
102,675
(146,847)
46,932
333,608
158,783
148,784
81,780
-
389,347
(55,739)
333,608
67,081
263,767
330,848
-
371,985
(85,639)
44,502
330,848
104,108
110,634
119,905
81,780
416,427
(85,579)
330,848
The Group does not face a significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within the
Group’s treasury function. Refer to Note 12 for further details of the Group’s leases.
68
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 Consolidated Entity
2023
$
2022
$
17. 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 the expiry of leases. These obligations are not provided for in the
financial statements and are payable as follows:
Within one year
Later than one year but not later than five years
More than five years
(b) Option Payment Commitments
2,312,030
2,668,572
5,279,035
10,259,637
555,680
2,222,721
5,080,563
7,858,964
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 year end as tabled below:
Within one year
Later than one year but not later than five years
More than five years
(c) Operating Leases
7,088,989
12,217,195
-
653,215
16,257,802
-
19,306,184
16,911,017
The below reflects the Group’s commitments for minimum lease payments in relation to operating leases at year end. Operating
leases are not material to the consolidated entity and are not accounted for as right-of-use assets under AASB 16 Leases. Refer
to Note 16 for further details of the Group’s leases.
Within one year
Later than one year but not later than five years
More than five years
18. CONTINGENT LIABILITIES
At year-end, Hot Chili Limited had accumulated:
100,992
488,267
-
589,259
69,535
187,731
-
257,266
. VAT refund payments of $16,890,566 (2022: $12,903,932) with respect to VAT recovered at year end by SMEA (refer to the
. VAT refund payments of $9,604,604 (2022: $5,263,509) with respect to VAT recovered at year-end by Sociedad Minera
table below); and
Frontera SpA (refer to the table below).
VAT recovered by Sociedad Minera El Águila SpA
(CLP 8,988,767,896; 2022: CLP 8,178,026,868)
VAT recovered by Sociedad Minera Frontera SpA
(CLP 5,111,348,028; 2022: CLP 3,335,840,009)
16,890,566
12,903,932
9,604,604
5,263,509
Under the initial 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 had the right to extend this term.
The Company exercised its right to extend the date of commercial production from Productora with the Chilean Tax Authority.
An extension to the benefit was extended to 30 June 2022 and a further extension until 30 June 2026 was also granted.
An agreement with Sociedad Minera Fronters SpA provides an extension to 31 December 2026 for exports related to the
Cortadera deposit.
In the event that the term is not extended further and the Company does not meet certain export targets, the Company 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 within that timeframe or its renewal, if required, any VAT refund payments will not be required to
be repaid.
69
HOT CHILI Annual Report 2023 13 Notes to the
Financial Statements(Cont’d)
19. CONTRIBUTED EQUITY
Consolidated Entity
2023
2022
No. Shares
$
No. Shares
$
(a) Share Capital
Ordinary shares – fully paid
119,445,206
269,189,573
119,445,206
269,189,573
(b) Movement in Ordinary Share Capital
Balance at the beginning of the period
119,445,206
269,189,573
3,104,169,531
188,314,123
Shares Issued Pre Share Consolidation
Shares issued on capital raising
Shares issued in lieu of convertible note costs
Shares issued on conversion of convertible notes
Shares issued upon exercise of options
50 to 1 share consolidation
Shares Issued Post Share Consolidation
Shares issued upon TSXV IPO
Shares issued in lieu of convertible note costs
Shares issued on conversion of convertible notes
Shares issued on maturity of convertible notes
Shares issued upon exercise of options
Less: Costs associated with issue of share capital
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,250,100,000
40,003,200
7,693,153
2,043,668
13,378,254
279,065
92,673
334,456
(4,289,835,156)
-
21,800,000
36,810,715
284,402
547,451
6,473,671
2,790,232
369,615
1,091,107
5,975,800
3,487,789
-
(7,568,970)
Balance at the End of the Period
119,445,206
269,189,573
119,445,206
269,189,573
(c) 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.
(d) Listed Ordinary Share Purchase Warrants (“Warrants”) Over Ordinary Share Capital
Issue Date
Expiry Date
Balance at
Start of Year
No.
Issued During
the Year
No.
Expiry/
Exercise
No.
Balance at
End of Year
No.
Exercisable at
End of Year
No.
28 Feb 2022
31 Jan 2024
10,900,000
10,900,000
-
-
-
-
10,900,000
10,900,000
10,900,000
10,900,000
The Warrants are listed on the Canadian TSX Venture Exchange (“TSXV”) and were exercisable at year-end.
70
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 19. CONTRIBUTED EQUITY (CONT’D)
(e) Unlisted Options Over Ordinary Share Capital
Grant Date
Expiry Date
14 Jan 2021
30 Nov 2022
15 Sep 2021
30 Sep 2024
31 Jan 2022
28 Jan 2025
Balance at
Start of Year
No.
Issued During
the Year
No.
Expiry/
Exercise(i)
No.
Balance at
End of Year
No.
Exercisable at
End of Year
No.
500,000
1,850,001
1,259,789
3,609,790
-
-
-
-
(500,000)
-
-
-
(500,000)
1,850,001
1,259,789
3,109,790
-
1,850,001
1,259,789
3,109,790
(i) On 30 November 2022, 500,000 unlisted options expired and were not exercised.
(ii) Weighted average exercise price of options on issue is $2.19 (2022: $2.57). The weighted average remaining contractual life of
options outstanding at the end of the financial year was 1.39 years (2022: 2.12 years).
(f) Service Rights
Grant Date
Last Vesting
Day
Expiry Date(i)
10 May 2023
31 Dec 2023
12 May 2028
10 May 2023
31 Dec 2024
12 May 2028
10 May 2023
31 Dec 2025
12 May 2028
Balance at
Start of Year
No.
Issued During
the Year
No.
Expiry/
Exercise
No.
Balance at
End of Year
No.
Exercisable at
End of Year
No.
-
-
-
-
938,953
938,955
938,956
2,816,864
-
-
-
-
938,953
938,955
938,956
2,816,864
-
-
-
-
(i) Later expiry dates apply if service rights have vested on or before the last vesting day.
(ii) During the year, $313,871 (2022: $nil) was expensed in relation to the vesting of service rights (see Note 23).
(g) Performance Rights
Grant Date
Last Vesting
Day
Expiry Date(i)
12 Aug 2020
31 Jul 2023
31 Jul 2023
1 Sep 2020
31 Jul 2023
31 Jul 2023
3 Nov 2020
31 Jul 2023
31 Jul 2023
2 Sep 2021
31 Jul 2023
31 Jul 2023
20 Sep 2021
31 Jul 2023
31 Jul 2023
10 May 2023
31 Dec 2023
12 May 2028
10 May 2023
31 Dec 2024
12 May 2028
10 May 2023
31 Dec 2025
12 May 2028
10 May 2023
10 May 2026
12 May 2028
Balance at
Start of Year
No.
Issued During
the Year
No.
Expiry/
Exercise
No.
Balance at
End of Year
No.
Exercisable at
End of Year
No.
400,002
700,002
100,002
300,000
400,002
-
-
-
-
-
-
-
-
-
290,480
290,485
1,286,433
622,466
1,900,008
2,489,864
-
-
-
-
-
-
-
-
-
-
400,002
700,002
100,002
300,000
400,002
290,480
290,485
1,286,433
622,466
4,389,872
-
-
-
-
-
-
-
-
-
-
(i) Later expiry dates apply if performance rights have vested on or before the last vesting day.
(ii) During the year, $404,318 was reversed (2022: $774,902 expensed) in relation to the vesting of performance rights
(see Note 23).
(h) 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. The capital risk management policy remains unchanged
from the 2022 Annual Report.
71
HOT CHILI Annual Report 2023 13 Notes to the
Financial Statements(Cont’d)
Consolidated Entity
2023
$
2022
$
20. RESERVES
(a) Share-Based Payments Reserve
The share-based payments reserve is used to recognise the fair value of options,
service and performance rights issued:
Balance at the beginning of the year
Vesting of service and performance rights during the year (see Note 23)
Issue of options during the year (see Note 23(c))
5,517,849
2,774,476
(90,447)
774,902
-
2,508,211
Options expiring during the year (transferred to accumulated losses)
(197,250)
(539,740)
Balance at the End of the Year
5,230,152
5,517,849
(b) Foreign Currency Translation Reserve
Balance at the beginning of the year
Balance at the End of the Year
21. ACCUMULATED LOSSES
1,222
1,222
1,222
1,222
Accumulated losses at the beginning of the year
(68,785,934)
(62,179,021)
Reclassification of historical allocation of NCI and accumulated losses
Reclassification of NCI contributions from previous periods1
2,754,221
(22,325)
-
-
Net loss for the year attributable to the owners of Hot Chili Limited
(5,225,065)
(7,146,653)
Options expired during the year (transferred from share-based payments reserve)
197,250
539,740
Accumulated Losses at the End of the Year
(71,081,853)
(68,785,934)
1 See footnote 2 of Note 22 below.
22. NON-CONTROLLING INTERESTS
Balance at the beginning of the year
18,848,770
18,980,873
Reclassification of historical allocation of NCI and accumulated losses
Reclassification of NCI contributions from previous periods1,2
Share of net loss for the year
NCI contributions (current year)1
Balance at the End of the Year
(2,754,221)
1,477,934
(198,719)
1,935,899
-
-
(132,103)
-
19,309,663
18,848,770
1 The above NCI contributions were made by Compañía Minera del Pacífico S.A. (“CMP”) to maintain its interest of 20% in Sociedad Minera El Águila
SpA.
2 Adjustments have been made to the figures disclosed for exploration and evaluation assets, opening retained earnings, and non-controlling interests.
These were the result of reclassifications to gross-up NCI contributions previously offset against exploration and evaluation assets. The effect of these
adjustments was to increase exploration and evaluation assets by $1,455,609, increase the minority interest by $1,477,934, and decrease retained
earnings by $22,325.
.
72
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 23. SHARE-BASED PAYMENTS
Share-Based Payments (Reversal)/Expense Recognised in Profit or Loss
Vesting of service rights to employees and key consultants of the Company during the
year (see Note 23(a) below)
Vesting of performance rights to employees and key consultants of the Company during
the year (see Note 23(b) below)
Total Share-Based Payments (Reversal)/Expense
Shares issued for quarterly interest on convertible notes (included in finance costs)
Consolidated Entity
2023
$
2022
$
313,871
(404,318)
(90,447)
-
-
774,902
774,902
646,300
Total Share-Based Payments (Reversal)/Expense Recognised in Profit or Loss
(90,447)
1,421,202
Share-Based Payments Recognised Directly in Equity
Shares issued for interest on convertible notes converted
Options granted to capital raising lead managers during the year (see Note 23(c) below)
Total Share-Based Payments Recognised in Equity
-
-
-
12,211
2,508,212
2,520,423
Total Share-Based Payment Transactions
(90,447)
3,941,625
Below are details of share-based payments made during the current and prior financial years.
(a) Service Rights
$313,871 has been expensed in relation to the vesting of service rights during the year. Other details of service rights granted
during the current financial year are set out below. No service rights were granted during the previous financial year.
(i) Fair Value of Service Rights Issued During the Year Ended 30 June 2023
During the current year, 2,816,864 service rights were issued to certain directors and employees of the Company. The key terms
and conditions of the service rights issued were as follows:
Service
Rights
Tranche
Tranche 1
Tranche 2
Tranche 3
Total
Quantity
Granted
10 May 2023
938,953 issued
938,955 issued
938,956 issued
2,816,864 Issued
Vesting
Determination
Date
Vesting Conditions
31 Dec 2023
Continued employment during the 2023 calendar year.
31 Dec 2024
Continued employment during the 2024 calendar year.
31 Dec 2025
Continued employment during the 2025 calendar year.
73
HOT CHILI Annual Report 2023 13 Notes to the
Financial Statements(Cont’d)
23. SHARE-BASED PAYMENTS (CONT’D)
(a) Service Rights (Cont’d)
(i) Fair Value of Service Rights Issued During the Year Ended 30 June 2023 (Cont’d)
The fair values for the service rights were determined using the Hoadley ESO2 valuation model. The inputs for the fair value model for
the service rights issued during the year were as follows:
Number
Issue date
Valuation date
Spot price at grant date
Exercise price
Vesting date
Expiry date
Expected price volatility of the Company’s shares
Risk-free interest rate
Dividend yield
Fair value of per service right
Total Value of Service Rights Granted
(b) Performance Rights
(i) Net Share-Based Payments (Reversal)/Expense
Tranche 1
Tranche 2
Tranche 3
938,953
12 May 2023
10 May 2023
$0.9800
Nil
938,955
938,956
12 May 2023
12 May 2023
10 May 2023
10 May 2023
$0.9800
Nil
$0.9800
Nil
31 Dec 2023
31 Dec 2024
31 Dec 2025
12 May 2028
12 May 2028
12 May 2028
75%
3.17%
Nil
$0.9800
$920,174
75%
3.17%
Nil
$0.9800
$920,176
75%
3.17%
Nil
$0.9800
$920,177
A net of $404,318 was reversed during the year (2022: $774,902 expensed) in relation to the vesting of performance rights during the
year. The net reversal is related to the following performance rights:
Issued in May 2023 (refer to note (ii) below)
Issued in previous financial years
2023
$
105,665
(509,983)
(404,318)
2022
$
-
774,902
774,902
The reversal of share-based payments charges for the performance rights issued in previous financial years was due to non-market
vesting conditions not being met before the last vesting day of 31 July 2023 (after year-end). After year-end, the remaining 1,900,008
performance rights that were issued in previous financial years lapsed due to all vesting conditions not being met by that date.
74
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 23. SHARE-BASED PAYMENTS (CONT’D)
(b) Performance Rights (Cont’d)
Other details of performance rights granted or cancelled during the current and previous financial years are set out below:
(ii) Fair Value of Performance Rights Issued During the Year Ended 30 June 2023
During the current year, 2,489,864 performance rights were issued to a director and certain employees of the Company. The key terms
and performance of the performance rights issued were as follows:
Class A
Tranche
Tranche 1
Quantity Granted
10 May 2023
Vesting
Determination
Date
82,994 issued
31 Dec 2023
Tranche 2
82,995 issued
31 Dec 2024
Tranche 3
82,998 issued
31 Dec 2025
Total Class A
248,987 issued
Class B
Tranche
Tranche 1
Quantity Granted
10 May 2023
Vesting
Determination
Date
207,486 issued
31 Dec 2023
Tranche 2
207,490 issued
31 Dec 2024
Tranche 3
207,491 issued
31 Dec 2025
Total Class B
622,467 issued
Class C
Tranche
Tranche 1
Quantity Granted
10 May 2023
Vesting
Determination
Date
311,234 issued
As conditions vest
Tranche 2
311,232 issued
As conditions vest
Total Class C
622,466 issued
Class D
Tranche
Tranche 1
Quantity Granted
10 May 2023
Vesting
Determination
Date
497,972 issued
As conditions vest
Tranche 2
497,972 issued
As conditions vest
Total Class D
995,944 issued
Total
2,489,864 Issued
Vesting Conditions
Lost Time Injury Frequency Rate (“LTIFR”) of less than
27 and zero fatalities during the 2023 calendar year.
LTIFR of less than 27 and zero fatalities during the
2024 calendar year.
LTIFR of less than 27 and zero fatalities during the
2025 calendar year.
Vesting Conditions
The Company’s relative shareholder return (“SR”)
performance during the 2023 calendar year ranked
against a “Peer Group” of comparable companies.
Company’s ranking must be above 50th percentile for
any rights in tranche to vest. Ranking must be above
75th percentile for all rights in tranche to vest.
Criteria as per above applied as relevant to the 2024
calendar year.
Criteria as per above applied as relevant to the 2025
calendar year.
Vesting Conditions
Increase in the Company’s 20-day VWAP to $1.69 per
share on or before 10 May 2026.
Increase in the Company’s 20-day VWAP to $2.72 per
share on or before 10 May 2026.
Vesting Conditions
Total resources growth to 1.2 billion tonnes on or
before 31 December 2025.
Total resources growth to between 1.2 billion tonnes
and 1.4 billion tonnes on or before 31 December 2025,
vesting on a pro-rata basis.
75
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 13 Notes to the
Financial Statements(Cont’d)
23. SHARE-BASED PAYMENTS (CONT’D)
(b) Performance Rights (Cont’d)
(ii) Fair Value of Performance Rights Issued During the Year Ended 30 June 2023 (Cont’d)
The fair values for the Class A and Class D performance rights were determined using the Hoadley ESO2 valuation model, the
fair values for the Class B performance rights were determined using the Hoadley Employee Stock Option valuation model,
and the fair values for the Class C performance rights were determined using the Hoadley Parisian Barrier and Hoadley
Employee Stock Option valuation model. The inputs for the fair value models for the performance rights issued during the
year were as follows:
For Class A Performance Rights
Number
Issue date
Valuation date
Spot price at grant date
Exercise price
Vesting date
Expiry date
Expected price volatility of the Company’s shares
Risk-free interest rate
Dividend yield
Fair value of per performance right
Tranche 1
82,994
12 May 2023
10 May 2023
$0.9800
Nil
31 Dec 2023
12 May 2028
75%
3.17%
Nil
$0.9800
Tranche 2
82,995
12 May 2023
10 May 2023
$0.9800
Nil
31 Dec 2024
12 May 2028
75%
3.17%
Nil
$0.9800
Tranche 3
82,998
12 May 2023
10 May 2023
$0.9800
Nil
31 Dec 2025
12 May 2028
75%
3.17%
Nil
$0.9800
Total Value of Performance Rights Granted
$81,334
$81,335
$81,338
For Class B Performance Rights
Number
Issue date
Valuation date
Spot price at grant date
Exercise price
VWAP barrier price
Vesting date
Expiry date
Expected price volatility of the Company’s shares
Risk-free interest rate
Dividend yield
Fair value of per performance right
Tranche 1
Tranche 2
207,486
12 May 2023
10 May 2023
$0.9800
Nil
Nil
31 Dec 2023
12 May 2028
75%
3.17%
Nil
$0.7152
207,490
12 May 2023
10 May 2023
$0.9800
Nil
Nil
31 Dec 2024
12 May 2028
75%
3.17%
Nil
$0.7711
Tranche 3
207,491
12 May 2023
10 May 2023
$0.9800
Nil
Nil
31 Dec 2025
12 May 2028
75%
3.17%
Nil
$0.8278
Total Value of Performance Rights Granted
$148,394
$159,996
$171,761
For Class C Performance Rights
Number
Issue date
Valuation date
Spot price at grant date
Exercise price
VWAP barrier price
Last vesting date
Expiry date
Expected price volatility of the Company’s shares
Risk-free interest rate
Dividend yield
Fair value of per performance right
Total Value of Performance Rights Granted
Tranche 1
311,234
12 May 2023
10 May 2023
$0.9800
Nil
$1.6900
10 May 2026
12 May 2028
75%
3.17%
Nil
$0.4706
$146,467
Tranche 2
311,232
12 May 2023
10 May 2023
$0.9800
Nil
$2.7200
10 May 2026
12 May 2028
75%
3.17%
Nil
$0.4706
$146,466
76
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 23. SHARE-BASED PAYMENTS (CONT’D)
(b) Performance Rights (Cont’d)
(ii) Fair Value of Performance Rights Issued During the Year Ended 30 June 2023 (Cont’d)
For Class D Performance Rights
Tranche 1
Tranche 2
Number
Issue date
Valuation date
Spot price at grant date
Exercise price
Last vesting date
Expiry date
Expected price volatility of the Company’s shares
Risk-free interest rate
Dividend yield
Fair value of per performance right
Total Value of Performance Rights Granted
497,972
12 May 2023
10 May 2023
$0.9800
Nil
497,972
12 May 2023
10 May 2023
$0.9800
Nil
31 Dec 2025
31 Dec 2025
12 May 2028
12 May 2028
75%
3.17%
Nil
$0.9800
$488,013
75%
3.17%
Nil
$0.9800
$488,013
(iii) Fair Value of Performance Rights Issued During the Year Ended 30 June 2022
During the previous financial year, 35,000,000 performance rights (pre share consolidation) were issued to key consultants of the
Company. The key terms and conditions of the performance rights issued were as follows:
Class of
Performance
Rights
Quantity Granted
2 Sep 2021
(Pre Share
Consolidation)
Quantity Granted
20 Sep 2021
(Pre Share
Consolidation)
Class A
5,000,000 issued
6,666,666 issued
Class B
5,000,000 issued
6,666,666 issued
Class C
5,000,000 issued
6,666,668 issued
Vesting Conditions
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.
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.
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.
The fair values for the Class A and Class B performance rights were determined using the Hybrid Barrier Up and In Trinomial methods
which uses an iterative procedure allowing for specification of points in time, during the time span between the valuation date and the
option or performance right’s expiration date. They take into account the barrier price, exercise price, the share price at value date and
expected price volatility of the underlying share, and the risk-free interest rate for the options or performance rights’ term.
The fair value for the Class C performance rights was determined using the Black-Scholes valuation method, which takes into account
the price of the underlying security, the strike price, the time to expiration, the expected volatility of the security, and the risk-free
interest rate.
77
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 13 Notes to the
Financial Statements(Cont’d)
23. SHARE-BASED PAYMENTS (CONT’D)
(b) Performance Rights (Cont’d)
(iii) Fair Value of Performance Rights Issued During the Year Ended 30 June 2022 (Cont’d)
The inputs for the fair value models for the performance rights issued during the previous financial year were as follows:
For Performance Rights Granted 2 September 2021
Number (pre share consolidation)
Valuation date
Spot price at grant date
Exercise price
Barrier price
Vesting date
Expiry date
Expected price volatility of the Company’s shares
Risk-free interest rate
Dividend yield
Fair value of per performance right
Class A
5,000,000
Class B
5,000,000
Class C
5,000,000
2 Sep 2021
2 Sep 2021
2 Sep 2021
$0.045
Nil
$0.06
31-07-23
31-07-23
100%
0.17%
Nil
$0.03
$0.045
Nil
$0.08
31-07-23
31-07-23
100%
0.17%
Nil
$0.025
$0.045
Nil
Nil
31-07-23
31-07-23
100%
0.17%
Nil
$0.039
Total Value of Performance Rights Granted
$150,000
$125,000
$195,000
For Performance Rights Granted 20 September 2021
Number (pre share consolidation)
Valuation date
Spot price at grant date
Exercise price
Barrier price
Vesting date
Expiry date
Expected price volatility of the Company’s shares
Risk-free interest rate
Dividend yield
Fair value of per performance right
Class A
6,666,666
Class B
6,666,667
Class C
6,666,667
20 Sep 2021
20 Sep 2021
20 Sep 2021
$0.039
Nil
$0.06
31-07-23
31-07-23
100%
0.17%
Nil
$0.03
$0.039
Nil
$0.08
31-07-23
31-07-23
100%
0.17%
Nil
$0.025
$0.039
Nil
Nil
31-07-23
31-07-23
100%
0.17%
Nil
$0.039
Total Value of Performance Rights Granted
$200,000
$166,667
$260,000
78
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 23. SHARE-BASED PAYMENTS (CONT’D)
(b) Performance Rights (Cont’d)
(iii) Fair Value of Performance Rights Issued During the Year Ended 30 June 2022 (Cont’d)
After the 50 to 1 share consolidation on 15 November 2021, the amount of performance rights and vesting hurdles under the terms
and conditions of the performance rights were updated to reflect the share consolidation, as follows:
Quantity
Granted
2 Sep 2021
(Post Share
Consolidation
Equivalent)
Quantity
Granted
20 Sep 2021
(Post Share
Consolidation
Equivalent)
100,000
133,333
100,000
133,333
Class of
Performance
Rights
Class A
Class B
Class C
100,000
133,334
Vesting Conditions
The price of Shares traded on ASX is greater than $3.00 per Share
for 15 consecutive trading days or more before 31 July 2023.
The price of Shares traded on ASX is greater than $4.00 per Share
for 15 consecutive trading days or more before 31 July 2023.
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.
All other terms and conditions were unchanged as part of the share consolidation, and none of these performance rights vested
or were exercised during the current or previous financial years. These performance rights (as part of the parcel of 1,900,008
performance rights) lapsed after year-end on 31 July 2023 (see Note 23(b)(i) and Note 23(b)(iv)).
(iv) Performance Rights Lapsed or Cancelled During the Year
No performance rights lapsed during the current financial year. However, after year end on 31 July 2023, 1,900,008 performance
rights that were issued in previous financial years lapsed due to all vesting conditions not being met by that date (see Note 23(b)(i)).
During the previous financial year, 15,000,000 performance rights (pre share consolidation) lapsed upon the resignation of
Melanie Leighton, a previous alternate director of the Company. 100,002 performance rights (post share consolidation) also
lapsed upon the resignation of Mr Lloyd Flint (a previous company secretary of the Company). The amounts previously expensed
for Ms Leighton’s and Mr Flint’s performance rights, which did not vest, were reversed during the previous financial year.
(c) Options Granted
There were no options issued during the current year ended 30 June 2023.
The following details options issued during the previous financial year ended 30 June 2022:
(i) Fair Value of Options Granted in September 2021
92,500,000 options were issued (pre share consolidation) to lead managers of a capital raising and the issue was approved in a
general meeting on 15 September 2021. The fair value was determined using the Hoadley ESO2 valuation model that takes into
account the exercise price, the share price at value date and expected price volatility of the underlying share, and the risk-free
interest rate for the options term. The inputs for the fair value model for fee options were as follows:
Pre Share
Consolidation
Post Share
Consolidation Equivalent
Number of options
Issue date
Valuation date
Consideration
Spot price at grant date
Exercise price
Expiry date
Expected price volatility of the Company’s shares
Risk-free interest rate
Dividend yield
Fair value of per option
Total Value of Options Granted
92,500,000
20 Sep 2021
20 Sep 2021
Nil
$0.041
$0.045
30 Sep 2024
80%
0.17%
Nil
$0.0183
$1,692,750
1,850,001
20 Sep 2021
20 Sep 2021
Nil
$2.05
$2.25
30 Sep 2024
80%
0.17%
Nil
$0.915
$1,692,750
79
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 13 Notes to the
Financial Statements(Cont’d)
23. SHARE-BASED PAYMENTS (CONT’D)
(c) Options Granted
(ii) Fair Value of Options Granted in January 2022
1,259,789 options were issued (post share consolidation) to lead managers of a capital raising and the issue was approved in
a general meeting on 31 January 2022. The fair value was determined using the Hoadley ESO2 valuation model that takes into
account the exercise price, the share price at value date and expected price volatility of the underlying share, and the risk-free
interest rate for the options term. The inputs for the fair value model for the fee options were as follows:
Number of options
Issue date
Valuation date
Consideration
Spot price at grant date
Exercise price
Expiry date
Expected price volatility of the Company’s shares
Risk-free interest rate
Dividend yield
Fair value of per option
Total Value of Options Granted
24. FINANCIAL RISK MANAGEMENT
Post Share
Consolidation
1,259,789
4 Feb 2022
31 Jan 2022
Nil
$1.61
C$1.85 ($1.998)
28 Jan 2025
75%
0.9%
Nil
A$0.6473
$815,461
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 market risk (including interest rate risk and foreign
exchange 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 summarised 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 is exposed to interest rate risk on financial assets and financial liabilities at the end of the reporting period
where a change in interest rates may affect future cashflows or fair values of financial instruments. The group is exposed to
interest rate risk on its cash and cash equivalent balances which are subject to floating interest rates. At year end, cash balances
subject to floating interest amounted to of $699,453 (2022: $18,503,502).
80
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 24. FINANCIAL RISK MANAGEMENT (CONT’D)
Risk Exposures and Responses: (Cont’d)
(a) Interest Rate Risk Exposure (Cont’d)
The following table illustrates sensitivities to the consolidated entity’s exposures to changes in interest rates. The table indicates
how profit and equity values reported at reporting date would have been affected by changes in the relevant risk variable that
management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is
independent of other variables.
Sensitivity Analyses
At 30 June 2023 and at 30 June 2022, the effect on profit and equity as a result of changes in the interest rate, with all other
variables remaining constant would be as follows:
2023
Increase in interest rate by 2%
Decrease in interest rate by 2%
2022
Increase in interest rate by 2%
Decrease in interest rate by 2%
(b) Credit Risk Exposure
Consolidated Entity
Post Tax Profit
Equity
$
13,989
(13,989)
$
13,989
(13,989)
370,070
(370,070)
370,070
(370,070)
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 not significant and 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.
81
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 13 Notes to the
Financial Statements(Cont’d)
24. FINANCIAL RISK MANAGEMENT (CONT’D)
Risk Exposures and Responses: (Cont’d)
(c) Liquidity Risk (Cont’d)
Financing Arrangements
Remaining Contractual Maturities
The following tables detail the consolidated entity’s remaining contractual maturity for its financial liability instruments. The tables
have been drawn up based on the undiscounted cash flows of financial instruments liabilities based on the earliest date on which
the financial instruments 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.
Consolidated – 2023
Non-Derivatives
Trade payables
Weighted
Average
Interest Rate
%
-
Lease liabilities - interest bearing
13.00
Total Financial Liabilities
Consolidated – 2022
Non-Derivatives
Trade payables
-
Lease liabilities - interest bearing
13.00
Total Financial Liabilities
1 Year
or Less
$
1,202,362
124,490
1,326,852
6,376,830
67,081
6,443,911
Between 1
and 5 Years
Remaining
Contractual
Maturities
$
$
Amount per
Statement
of Financial
Position
$
-
209,118
209,118
-
263,767
263,767
1,202,362
333,608
1,535,970
1,202,362
333,608
1,535,970
6,376,830
330,848
6,707,678
6,376,830
330,848
6,707,678
The table below represents the financial assets available to manage the Group’s liquidity:
Weighted
Average
Interest Rate
%
1 Year
or Less
$
Between 1
and 5 Years
$
Remaining
Contractual
Maturities
$
Amount per
Statement
of Financial
Position
$
Consolidated – 2023
Non-Derivatives
Cash and cash equivalents
Other receivables (term deposits
and bonds)
1.91%
0.86%
Total Financial Assets
Consolidated – 2022
Non-Derivatives
Cash and cash equivalents
0.10
Total Financial Assets
(d) Market Risk
Foreign Exchange Risk
2,948,964
-
2,948,964
-
2,948,964
2,948,964
362,688
362,688
362,688
362,688
3,311,652
3,311,652
23,721,808
23,721,808
-
-
23,721,808
23,721,808
23,721,808
23,721,808
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
and the CLP/AUD rate. The consolidated entity is exposed to foreign exchange risk through its USD and CLP cash holdings
and liabilities at reporting date. The table below summarises the impact of + / - 10% strengthening / weakening of the AUD
against the USD and CLP 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 and CLP at reporting date with all other factors remaining constant.
82
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 24. FINANCIAL RISK MANAGEMENT (CONT’D)
Risk Exposures and Responses: (Cont’d)
(d) Market Risk
Foreign Exchange Risk (Cont’d)
2023
AUD/CLP + 10%
AUD/CLP - 10%
AUD/USD + 10%
AUD/USD - 10%
AUD/CAD + 10%
AUD/CAD - 10%
2022
AUD/CLP + 10%
AUD/CLP - 10%
AUD/USD + 10%
AUD/USD - 10%
Consolidated Entity
Post Tax Profit
$
Equity
$
(56,161)
68,641
(10,300)
12,589
8,783
(10,734)
61,674
(75,379)
250,217
(305,821)
(56,161)
68,641
(10,300)
12,589
8,783
(10,734)
61,674
(75,379)
250,217
(305,821)
25. RELATED PARTIES
(a) Parent Entity
Hot Chili Limited is the ultimate parent entity. Relevant parent entity disclosures are set out in Note 26.
(b) Subsidiaries
Interests in subsidiaries are set out in Note 27.
(c) Key Management Personnel
Disclosures relating to key management personnel (“KMP”) are set out in Note 28 and the Remuneration Report included in the
Directors’ Report.
(d) Transactions with Related Parties
There were no related party transactions during the financial year ended 30 June 2023.
The following transactions occurred with related parties during the previous financial years. All transactions were made at
commercial terms:
(i) Quarterly Interest Paid on Convertible Notes Payable
Quarterly interest accruing on the convertible notes payable to Blue Spec Drilling Pty Ltd (a company associated with Mr Murray
Black, a previous director of the Company who retired on 1 March 2022) of $30,108 for the year ended 30 June 2022 was settled
by the issue of shares as follows:
Value of interest settled
No. of shares issued (post-consolidation equivalent)2
Amounts Settled Pre-Retirement of Mr Black
Post Share
Consolidation
$7,782
Total Settled
Pre-Retirement
$15,565
4,575
8,663
Pre Share
Consolidation
$7,783
4,0881
1 The number of shares stated here is the post share consolidation equivalent of 204,388 shares which were issued, pre the 50 to 1 share
consolidation, to Blue Spec Drilling Pty Ltd to settle the interest accruing on the convertible notes payable.
2 Stated at the number of total shares, equivalent post share consolidation.
No interest on convertible notes was payable to Blue Spec Drilling Pty Ltd at 30 June 2022.
The shares were issued to Blue Spec Drilling Pty Ltd following shareholder approval.
83
HOT CHILI Annual Report 2023
13 Notes to the
Financial Statements(Cont’d)
25. RELATED PARTIES (CONT’D)
(d) Transactions with Related Parties (Cont’d)
(ii) Maturity of Convertible Notes
On 30 June 2022, the Company issued 415,344 shares on final maturity of the 3,834 convertible notes (with a face value of $100
each, totalling $383,400) which had been issued to Blue Spec Drilling Pty Ltd on 8 September 2017. The deemed price for the
conversion of the notes was $0.92309 per share as per the terms and conditions of the notes.
The shares were also issued to Blue Spec Drilling Pty Ltd following shareholder approval. The shares were issued post Mr
Black’s retirement on 1 March 2022.
(iii) Other Fees and Charges
Blue Spec Sondajes Chile Limitada, a company in which Mr Murray Black is a director, charged a total of $12,948,500 to the
consolidated entity for the period from 1 July 2021 to just prior to Mr Black’s retirement on 1 March 2022 for rent and drilling
services at Cortadera. Of this amount, $2,466,497 was owing at the date of Mr Black’s retirement and was paid in April 2022.
26. PARENT ENTITY DISCLOSURES
(a) 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
(b) Financial Performance
Loss for the year
Total Comprehensive Income
Hot Chili Limited
2023
$
2022
$
2,079,212
21,017,491
206,684,331
191,315,824
208,763,543
212,333,315
753,181
225,336
978,517
363,728
272,912
636,640
269,189,573
269,189,584
5,230,152
5,519,117
(66,634,699)
(63,012,026)
207,785,026
211,696,675
(3,821,199)
(6,088,892)
(3,821,199)
(6,088,892)
(c) Contingent Liabilities of the Parent Entity
The parent entity did not have any contingent liabilities as at 30 June 2023 or 30 June 2022.
(d) 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 2023 or 30 June 2022.
(e) Significant Accounting Policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in Note 1, except
for the following:
. Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity;
. Investments in associates are accounted for at cost, less any impairment, in the parent entity; and
. Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator
of an impairment of the investment.
84
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023 27. 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(f):
Name of Entity
Sociedad Minera El Corazón SpA
Sociedad Minera El Águila SpA*
Sociedad Minera La Frontera SpA
Sociedad Minera Banderas SpA
Sociedad Minera Los Mantos SpA
Country of
Incorporation
Class of
Shares
2023
%
2022
%
Equity Holding
Chile
Chile
Chile
Chile
Chile
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
80*
100
100
100
100
80*
100
100
100
* The non-controlling interests hold 20% of Sociedad Minera El Águila SpA (SMEA) - refer to Note 27(b) below.
(b) Non-Controlling Interests (“NCI”)
Summarised financial information of the subsidiary with NCI that are material to the consolidated entity are set out below:
(i) 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
(ii) Summarised Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
(iii) 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
(iv) Other Financial Information
Loss attributable to non-controlling interests
SMEA
2023
$
2022
$
34,940
(1,028,535)
(993,595)
-
116,929
(777,441)
(660,512)
-
(993,595)
(660,512)
-
-
(993,595)
(660,512)
125,418
121,874,889
122,000,307
193,314
116,360,366
116,553,680
484,302
24,967,692
25,451,994
1,864,351
34,194,262
36,058,613
96,548,313
80,495,067
(1,028,541)
(3,468,119)
4,428,764
(67,896)
1,114,734
(5,910,821)
4,766,110
(29,977)
(198,719)
(132,103)
Accumulated Non-Controlling Interests at the End of Reporting Period
19,309,663
18,848,770
85
HOT CHILI Annual Report 2023 13 Notes to the
Financial Statements(Cont’d)
28. KEY MANAGEMENT PERSONNEL DISCLOSURES
The following were the directors and other key management personnel (“KMP”) of the consolidated entity at any time during the
current and previous financial years and unless otherwise indicated, were KMP for the entire period:
Non-Executive Directors
Dr Nicole S Adshead-Bell
(appointed 5 January 2022)
Murray E Black (retired 1 March 2022)
Roberto de Andraca Adriasola
Mark Jamieson (appointed 3 September 2021)
Stephen Quin (appointed 5 May 2023)
George R Nickson (retired 29 November 2022)
Dr Allan Trench (resigned 30 November 2022)
Executive Director
Christian E Easterday
Other KMP
José Ignacio Silva
Grant King
John Hearne (resigned 9 December 2022)
Melanie Leighton (resigned 1 October 2021)
Position
Independent Non-Executive Chairman
(from 1 March 2022)
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Position
Managing Director
Position
Country Manager and Chief Legal Counsel
Chief Operating Officer
Executive Studies Manager
Corporate Projects Manager and
Alternate Director for M Black
The remuneration of the directors and other KMP of the consolidated entity, as listed above, is set out below in aggregate:
Directors
Short-term benefits
Post-employment benefits
Share-based payments
Other KMP
Short-term benefits
Post-employment benefits
Share-based payments
Other benefits
Consolidated Entity
2022
2023
$
$
553,572
43,838
21,644
619,054
691,322
43,296
(154,458)
85,994
666,154
603,813
48,933
75,607
728,353
802,104
55,708
357,948
125,000
1,340,760
Total
1,285,208
2,069,113
86
HOT CHILI Annual Report 2023HOT CHILI Annual Report 2023
29. REMUNERATION OF AUDITORS
(a) RSM Australia Partners and Related Network Firms
Audit or review of financial reports for the Group
Statutory review required by Canadian legislation to be provided by the auditor to
the Group for the purposes of the TSX listing
Tax compliance services
Consolidated Entity
2023
$
2022
$
72,700
-
23,288
67,000
50,500
17,500
Total Audit and Other Services Provided by RSM Australia Partners and
Related Network Firms
95,988
135,000
(b) Other Auditors and Their Related Network Firms
Other assurance and agreed-upon procedures under other contractual arrangements
Total Audit and Other Services Provided by Other Auditors and Their
Related Network Firms
-
-
131,648
131,648
Total Remuneration of Auditors
95,988
266,648
30. EVENTS OCCURRING AFTER REPORTING DATE
On 26 July 2023, the Group announced the receipt of the proceeds of US$15 million in exchange for the sale of a 1.0% Net
Smelter Return (NSR) royalty on copper and a 3% NSR royalty on gold across the Company’s Costa Fuego Copper-Gold Project
located 600 km north of Santiago in the coastal range of the Atacama Region, Chile. The proceeds were received from Osisko
Gold Royalties Ltd under the investment agreement on closing date, 25 July 2023.
On 31 July 2023, 1,900,008 performance rights lapsed due to vesting conditions not being met by that date. On 14 August
2023, the Company filed a National Instrument 43-101 Technical Report for its Costa Fuego Copper Gold project in Chile. The
report titled “Costa Fuego Copper Project NI 43–101 Technical Report Preliminary Economic Assessment” and dated August
2023, with an effective date of 28 June 2023 (the “Technical Report”), was prepared pursuant to National Instrument 43-101 –
Standards of Disclosure for Mineral Projects (“NI 43- 101”). It is available for review on both SEDAR+ (www.sedarplus.ca) and the
Company’s website (www.hotchili.net.au). The Technical Report supports the news release dated 28 June 2023 announcing the
Costa Fuego Copper-Gold Project Preliminary Economic Assessment.
On 22 August 2023, the Company issued 345,000 service rights and 345,000 performance rights which have the same terms
and conditions as the service and performance rights granted and issued in May 2023 (see Notes 23(a)(i) and 23(b)(ii) for details
of the service and performance rights granted and issued in May 2023).
On 28 August 2023, the Company announced a binding letter of intent with Bastion Minerals Limited for the grant to Hot Chili of
an option to acquire 100% of Bastion’s Cometa Project in Chile (“Cometa”), located near Hot Chili’s Costa Fuego Copper-Gold
Project in the coastal range of the Atacama Region, Chile.
Other than the above, the directors are not aware of any other matters or circumstances that have arisen since the end of the
financial period which significantly affected or may significantly affect the operations of the consolidated entity the results of
those operations, or the state of affairs of the consolidated entity in future financial periods.
87
HOT CHILI Annual Report 2023 14 Shareholder
Information
AS AT 31 AUGUST 2023
Information Required by the Australian Securities Exchange Limited
(a) Spread of Holdings
1
- 1,000
1,001
- 5,000
5,001
- 10,000
10,001
- 100,000
100,001 & Over
Shareholders
Units
1,719
2,292
699
841
134
1,098,209
5,884,681
5,252,736
25,022,033
82,187,547
5,685
119,445,206
%
0.92%
4.92%
4.40%
20.95%
68.81%
100%
There are 215 holders of unmarketable parcels comprising 34,348 shares.
(b) The names of the twenty largest shareholders as at 31 August 2023, who between them held 49.25% of
the issued capital are listed below:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
GLENCORE AUSTRALIA HOLDINGS PTY LIMITED
CITICORP NOMINEES PTY LIMITED
CDS & CO
GS GROUP AUSTRALIA PTY LTD
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