Inca Minerals Limited
Annual Report 2020

Plain-text annual report

ANNUAL REPORT 2020 Inca Minerals Limited ACN 128 512 907 THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY   2 CORPORATE PARTICULARS Directors Mr Ross Brown Managing Director Mr Gareth Lloyd Director Dr Jonathan West Director Company Secretary Mr Mal Smartt Registered Office Suite 1, 16 Nicholson Road Subiaco WA 6008 Corporate Office Suite 1, 16 Nicholson Road Subiaco WA 6008 Mailing Address P.O. Box 38 West Perth WA 6872 Share Registry Advanced Share Registry 110 Stirling Highway Nedlands WA 6009 Auditor Stantons International Level 2, 1 Walker Avenue West Perth WA 6005 THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY   Table of Contents Managing Director’s Summary Corporate Governance Statement Managing Director’s Annual Review Directors’ Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Auditor’s Independence Declaration Independent Auditor’s Report Shareholder Information List of Tenements 1 2 3 9 10 19 20 21 22 23 50 51 52 56 58 1 Managing Director’s Summary 2 Welcome to Inca’s Annual Report (Report) for the financial year ended 30 June 2020, a year of COVID-19, a year of travel bans, compromised industry-wide activities and adverse market reactions. This in not going to be the theme of our Report. Indeed, Inca has made tremendous progress this year, a springboard to the future—the theme is that of a new beginning as we set up for a phase of tier-1 target drilling activities. Think Inca, think tier-1 drill testing and think gold, copper and silver. In this Annual Report you will find our Annual Financial Report, Directors’ Report, Directors’ Declaration, the Independent Auditor’s Report, Corporate Governance Statement, various shareholder information and our tenement schedule. Like in the previous annual report, I have provided this summary so that you may quickly understand the past year’s exploration activities, our results, our corporate well-being and perhaps more importantly, our objectives moving forward. The “elephant in the room” was the withdrawal of Inca’s funding partner from our flagship Riqueza Project in Peru in May this year. Having committed well over large-scale $3million to exploration designed to generate drill targets for mineralisation, our former partner withdrew prior to the work being completed. Over three years under an option period, then an earn-in period, the former participant funded inter alia an extensive airborne magnetic and radiometric survey, a +1,200- sample soil geochemical survey, mapping and sampling, and a final induced polarisation (IP) survey. Inca was manager during this phase, and so with the return of 100% of the project, and a list of 28 high quality drill targets, we have quickly “picked up the cudgel” and are moving ahead. This has not been the only development of the year. Inca has now also consolidated its Australian project portfolio to include an expanded Frewena Group Project (Frewena), the Jean Elson Project, the Lorna May Project and the MaCauley Creek Project. All are highly prospective for large-scale forms of mineralisation. Except MaCauley Creek, all are highly prospective for Olympic Dam style iron-ore copper and gold (or IOCG) mineralisation. MaCauley Creek is prospective for gold-copper epithermal and porphyry mineralisation. The short-term, medium-term and long-term strategies described by me in the Managing Director’s Summary of last year’s Annual Report are now fully in play. The comings and goings of funding partners are part and parcel of the vicissitudes of the resources sector, this year tainted by the COVID-19 pandemic. We lose a funding partner in Peru. We gain a funding partner in the Northern Territory Geological Survey (NTGS) at Frewena. It’s ironic that the new funding partner is helping us with an extensive airborne magnetic and radiometric survey at Frewena, the same method-of-choice used by our ex-partner to generate the initial success at Riqueza. I mentioned above that the year is a springboard to the future. This is true. At Riqueza, the long process of drill target generation is behind us. As I write, we are making progress with a drill permit to commence drilling, initially, in the NE part of Riqueza before the end of the year. We call it our “first generation” tier-1 drill program. We have also generated the “next generation” tier-1 drilling targets, this time in the Northern Territory and Queensland. These will be better defined in the year ahead. Then drilled. I’d like to close now by thanking our shareholders for overwhelmingly supporting our recent capital consolidation, (as a post Report Period event) voted and passed at a General Meeting on 25 August 2020. As much as exploration prepares us for future possible discovery and rerate, the consolidation prepares us corporately for share price responsiveness and growth. Ross Brown Managing Director 2 Corporate Governance Statement 3 The Board of Directors of Inca Minerals Limited (Inca or Company) is responsible for the corporate governance of the Company. In developing its corporate governance policies Inca has referred to recommendations within the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations 3rd edition (CGPR) and developed the following policies which can be found on the Company’s website at www.incaminerals.com.au under the section titled “Corporate/Corporate Governance”: ▪ Corporate Governance Policy ▪ Continuous Disclosure Policy ▪ Code of Conduct & Securities Trading Policy ▪ Diversity Policy The Company’s corporate governance practices during the financial year ended 30 June 2019 (Reporting Period) are reported below. Where the Company’s corporate governance practices follow the CGPR the Board has provided appropriate statements reporting on the adoption of the CGPR. In compliance with the “if not, why not” reporting framework, where the Company’s corporate governance practices differ from the relevant CGPR, the Board has explained its reasons for doing so and any alternative practice the Company may have adopted. CORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE PRINCIPLES ADOPTED / NOT ADOPTED AND COMMENT & RECOMMENDATIONS Principle 1: Lay solid foundations for management and oversight. 1.1 Listed entities roles and should disclose responsibilities of its Board and management, those expressly reserved to the Board and those delegated to management. the 1.2 Listed entities should undertake appropriate checks before appointing a person or putting forward to security holders a candidate for election as a Director; and provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a Director. A A 1.3 Listed entities should have written agreements with each Director and senior executive setting out the terms of their appointment. A The Company has formalised and disclosed on its website (at www.incaminerals.com.au) the functions reserved to the Board and those delegated to management within its Corporate Governance Policy. The Company undertakes appropriate checks before appointing a person or putting forward to shareholders a candidate for election or re-election as a Director and provides shareholders with all material information in its possession relevant to a decision on whether to elect or re- elect a Director. The Company has set out the terms of appointment in writing with each Director and senior executive. 1.4 The company secretary of a listed entity should be accountable directly to the Board, through the chair, on all matters to do with proper functioning of the Board. 1.5 Listed entities should: (a) Have a diversity policy which includes requirements for the Board or relevant Board committee to set measurable objectives for achieving gender diversity and to annually assess and disclose the objectives and progress towards their achievement; (b) Disclose that policy or a summary of it; and (c) Disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the Board (or relevant Board committee) in accordance with the entity’s diversity policy and its progress towards achieving them, and either: [1] the respective proportions of men and women on the Board, in senior management positions and across the whole organisation (including how the entity has defined “senior executive” for these purposes) or Legend: A = Adopted NA = Not Adopted NA The Company did not appoint a Chairperson during the Reporting Period. The Company Secretary is accountable directly to the Board as to the proper functioning of the Board. NA The Company has disclosed its Diversity Policy on its website at www.incaminerals.com.au. The Company’s Diversity Policy does not mandate setting measurable objectives for achieving gender diversity as it is impractical to do so at this time. The proportion of women across the whole organisation, in senior executive positions, and on the Board, as at the date of this statement, is as follows: • Whole organisation – 24% • Senior Executive Positions – 50% Board – 0% • For the purposes of this statement and the Company’s gender diversity, “senior executive” means a person who reports directly to the Board or Managing Director and/or who makes or participates in making decisions that could significantly affect the Company’s operations. 3 Corporate Governance Statement (continued) 4 CORPORATE GOVERNANCE PRINCIPLES ADOPTED / NOT ADOPTED AND COMMENT & RECOMMENDATIONS Principle 1: Lay solid foundations for management and oversight (Ctd) 1.5 (ctd) [2] if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators” as defined under that Act. 1.6 Listed entities should have and disclose a process for periodically evaluating the performance of the Board, its individual directors; and disclose committees and whether a performance evaluation was undertaken in the reporting period in accordance with that process. 1.7 Listed entities should have and disclose a process for periodically evaluating the performance of its senior executives; and disclose whether a performance evaluation was undertaken in the reporting period in accordance with that process. A A The Company’s processes for evaluating the performance of the Board and its Directors are disclosed on the Company’s website at www.incaminerals.com.au in the Company’s Corporate Governance Policy. During the Reporting Period these evaluations took place in accordance with the process outlined in the Corporate Governance Policy. The Company’s processes for evaluating its Managing Director and key executives are disclosed on the Company’s website at www.incaminerals.com.au in the Company’s Corporate Governance Policy. During the Reporting period the Board evaluated the performance of its Managing Director in accordance with the process outlined in its Corporate Governance Policy. A similar process, with respect to certain key executives, was completed by the Managing Director. Principle 2: Structure the Board to add value 2.1 (a) The Board of a listed entity should have a nomination committee of at least three members (a majority of whom are independent directors) chaired by an independent director and disclose: A • • • The committee charter The committee members; and As at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) If a nomination committee is not established then disclose that fact and the processes employed to address board succession issues, and to ensure the Board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively. 2.2 Listed entities should have and disclose a board skills matrix setting out the mix of skills and diversity that the Board currently has or is looking to achieve in its membership. Legend: A = Adopted NA = Not Adopted The Company has a small Board consisting of three Directors inclusive of the Managing Director. The Board considers it desirable to use the full complement of knowledge, expertise and experience of all its Directors in making decisions and performing the functions usually associated with a Nomination Committee. The Company’s Corporate Governance Policy and Diversity Policy disclose (on the Company’s website at www.incaminerals.com.au) processes pertaining to board succession, skills, knowledge, experience, independence and diversity. A The Company has disclosed (in its Corporate Governance Policy and Diversity Policy at www.incaminerals.com.au) the mix of skills and diversity the Board currently has and considers desirable in its membership given the Company’s stage of development. 4 Corporate Governance Statement (continued) 5 CORPORATE GOVERNANCE PRINCIPLES ADOPTED / NOT ADOPTED AND COMMENT & RECOMMENDATIONS Principle 2: Structure the Board to add value (Ctd) 2.3 Listed entities should disclose the names of directors considered by the Board to be independent directors, the length of each director’s service and, if a director has an interest, position, association or relationship that might cause doubt about the independence of that director, but the Board is of the opinion that it does not compromise the independence of the director, disclose the nature of the interest, position, association or relationship in question and disclose why the Board is of that opinion. 2.4 A majority of a listed entity’s Board should be independent directors. 2.5 The Chairperson of a listed entity should be an Independent Director and, in particular, should not be the same person as the CEO of the entity. 2.6 Listed entities should have an induction program for new directors and provide professional development opportunities for directors to develop and maintain the skills and knowledge to perform their role as directors effectively. Principle 3: Act ethically and responsibly 3.1 Listed entities should have a code of conduct for its directors, senior executives and employees and disclose that code or a summary of it. Principle 4: Safeguard integrity in corporate reporting 4.1 Listed entities should: (a) Have an audit committee which: (1) Has at least three members, all of whom are non- executive directors and a majority of whom are independent directors; and (2) Is chaired by an independent director, who is not the chair of the Board, and disclose: (3) The charter of the committee; (4) The relevant qualifications and experience of the members of the committee; and (5) In relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) If it does not have an audit committee, disclose that fact and the processes employed to independently verify and safeguard the integrity of its corporate the reporting, appointment and removal of the external auditor and the rotation of the audit engagement partner. the processes including for A All current Directors hold shares in Inca either directly or beneficially and a third Director is a part owner of the Company’s former Corporate Advisor meaning none of the current three Directors are considered independent. The Company has disclosed the names of its Directors, their position, relevant interests or associations and their length of service in the Company’s 2020 Annual Financial Report. NA As discussed above, none of the Company’s Directors can be considered independent directors. As shareholders or former commercial advisors, the interests of Inca’s Directors should, in their judgements and decisions, be directly aligned with those of all other shareholders. NA The Company operated without a Chairperson during the Reporting Period. A A An induction program will be provided to any new directors if and when a new director is appointed. Professional development opportunities are provided to the Directors as and when needed. The Company has disclosed its Code of Conduct & Securities at the Policy Trading www.incaminerals.com.au. Company’s website on A The Company has a small Board consisting of two Directors and the Managing Director. At this stage, the Company has not established an Audit Committee and the Board prefers to use the full complement of knowledge, expertise and experience of all Directors in making decisions regarding the Company’s audit and the Company’s external auditors. All three Directors are financially literate. In June 2012 the Company engaged its current accountant – a person with considerable experience as both an external auditor and group accountant in mineral exploration companies. The Company’s external auditors were appointed in November 2012. Prior to their appointment the Board obtained proposals from reputable audit firms and appointed the Company’s current auditor after considering listed exploration companies their experience with operating jurisdictions, the experience and quality of personnel involved with the Company’s audit, their internal quality control measures, their approach and methodology in conducting the audit, references, and awareness of professional requirements within accounting and in foreign and domestic Legend: A = Adopted NA = Not Adopted 5 Corporate Governance Statement (continued) 6 CORPORATE GOVERNANCE PRINCIPLES ADOPTED / NOT ADOPTED AND COMMENT & RECOMMENDATIONS Principle 4: Safeguard integrity in corporate reporting (Ctd) 4.1 (Ctd) 4.2 The Board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. 4.3 Listed entities should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. Principle 5: Make timely and balanced disclosure 5.1 Listed entities should have a written policy for complying with its continuous disclosure obligations under the Listing Rules and disclose that policy or a summary of it. to those pertaining auditing standards including independence, confidentiality and conflicts of interest. A Prior to approving the financial statements for the half- year ended 31 December 2019 and the full year ended 30 June 2020 Inca’s Board received from the Managing Director and Chief Financial Officer declarations that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. A During the Reporting Period and prior to the Company’s AGM the Company contacted its external auditors who agreed to host the Company’s AGM in their offices and attend the AGM. In accordance with section 250S of the Corporations Act the external auditor attended the AGM and the Chair expressly provided the opportunity for shareholders attending the meeting to ask questions relevant to the audit. Had there been any written questions submitted to the auditor (there were none) the Chair would also have ensured the opportunity for the external auditor to answer questions as required under section 250PA of the Corporations Act. A The Company has established written policies for complying with continuous disclosure obligations under the ASX Listing Rules which are disclosed within the Company’s Continuous Disclosure Policy on the Company’s website at www.incaminerals.com.au. Principle 6: Respect the rights of security holders 6.1 A listed entity should provide information about itself A and its governance via its website. Legend: A = Adopted NA = Not Adopted The Company provides information about itself and its governance at www.incaminerals.com.au. its website investors via to 6 Corporate Governance Statement (continued) 7 CORPORATE GOVERNANCE PRINCIPLES ADOPTED / NOT ADOPTED AND COMMENT & RECOMMENDATIONS Principle 6: Respect the rights of security holders (Ctd) 6.2 Listed entities should design and implement an investor facilitate effective two-way relations program to communication with investors. A 6.3 Listed entities should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders. 6.4 Listed entities should provide security holders with the option to receive communications from and send communications to the entity and its share registry electronically. Principle 7: Recognise and manage risk 7.1 The listed entity’s Board should: (a) Have a committee or committees to oversee risk, each of which: (1) Has at least three members, a majority of whom are independent directors; and (2) Is chaired by an independent director, and disclose: (3) The charter of the committee; (4) The members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) If it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management framework 7.2 The listed entity’s Board or a committee of the Board should review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound and disclose, in relation to each reporting period, whether such a review has taken place. 7.3 Listed entities should disclose if they have an internal audit function, how the function is structured and what role it performs or, if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. 7.4 Listed entities should disclose whether they have any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks Legend: A = Adopted NA = Not Adopted to facilitate effective The Company has designed and implemented an investor relations program two-way communication with investors. The program is set out in the Company’s Continuous Disclosure Policy and Corporate Governance Policy (in the section entitled “Shareholder Communication Policy”) as disclosed on its website at www.incaminerals.com.au. Refer above – the Company’s Corporate Governance Policy (containing its “Shareholder Communication Policy”) and the Company’s Continuous Disclosure Policy are both published on the Company’s website at www.incaminerals.com.au. Shareholders are given the option to receive communications from and send communications to the Company and its share registry electronically. A A for overseeing the Company’s is disclosed within A Given the size and composition of the current Board it believes that no efficiencies are to be gained by establishing a separate Risk Committee. During the Reporting Period, risk responsibility management rested with the Board. The Company’s Risk Management Policy its Corporate Governance Policy on the Company’s website at www.incaminerals.com.au. During the Reporting Period the full Board reviewed and where necessary amended its risk management matrix and in so doing identified or confirmed business risks, assessed the likelihood and materiality of these risks, developed and implemented measures to mitigate these risks and during the Reporting Period the Managing Director reported on and confirmed that the Company’s economic, social and environmental risks are being managed effectively. A Refer above. A The Company does not have an internal audit function. Refer above (7.1) for further discussion. A The Company faces economic, social and environmental risks that are inherent to the global and domestic economies, the industry, capital markets and the jurisdictions in which it operates. largely 7 Corporate Governance Statement (continued) 8 CORPORATE GOVERNANCE PRINCIPLES ADOPTED / NOT ADOPTED AND COMMENT A The Board has considered these risks in relation to a “material exposure threshold”, as required under the CPGR, and put in place measures to reduce these risks to tolerable levels and, as defined in CPGR, there does not appear to be “a real possibility that the risk could substantively impact the Company’s ability to create or preserve value for security holders …” in the foreseeable future. A Given the size and composition of the current Board it believes that no efficiencies are to be gained by establishing a separate Remuneration Committee. During the Reporting Period the Board followed the Company’s Remuneration Policy as disclosed in the Director’s Report of the Company’s Annual Financial Report for the year ended 30 June 2020. In doing so the Board employed policies and processes designed to ensure equitable and responsible levels and composition of remuneration to Directors and senior executives. & RECOMMENDATIONS Principle 7: Recognise and manage risk (Ctd) 7.4 (Ctd) Principle 8: Remunerate fairly and responsibly 8.1 Listed entities should: (a) Have a remuneration committee which: (1) Has at least three members, a majority of whom are independent directors; and (2) Is chaired by an independent director, and disclose: (3) The charter of the committee; (4) The members of the committee; and (5) As at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) If it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives ensuring that such is appropriate and not excessive. remuneration 8.2 Listed entities should separately disclose their policies and practices regarding the remuneration of non- executive directors and the remuneration of executive directors and other senior executives A During the Reporting Period the Board followed the Company’s Remuneration Policy which is separately disclosed in the Director’s Report of the Company’s Annual Financial Report for the year ended 30 June 2020. 8.3 Listed entities which have an equity-based remuneration scheme should have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme and disclose that policy or a summary of it. A The Company has adopted a Directors’ Remuneration- Sacrifice Share Plan that was approved by shareholders at a General Meeting on 31 May 2019. The plan was included as Schedule 1 in the Notice of General Meeting for 31 May 2019, and this outlines on how the participants are permitted to enter into transactions. This includes the requirement that all shares issued under the Plan to be done with the requisite shareholder approval required pursuant to the ASX Listing Rules and the Corporations Act. Legend: A = Adopted NA = Not Adopted 8 Managing Director’s Annual Review 9 Shareholders will recall my description of the 2018/2019 year as a period of transformation―the year before that as a period of an exploration “re-set”. I describe 2019-2020 (the Report Period) as a year of preparation, culminating in a state of readiness. We have completed the long process of drill target generation at Riqueza and we have developed a stunning portfolio of new projects in Australia. It has been a three-year progression, mapped out and executed. Changing our exploration focus. Acquiring new-focus assets. Defining new-focus tier-1 targets for drill testing. The Company focus is large-scale (or tier-1) gold, copper and silver mineralisation. Mineralised systems with tremendous gold- copper-silver payloads include porphyries and iron ore copper gold (IOCG) deposits. At Riqueza, a total of 28 drill targets have been generated (most targets generated by an independent consultancy) that are to be tested for large-scale gold-silver-copper epithermal, gold-copper-silver porphyry and copper-zinc skarn mineralisation. The drill proposal is that of 43 holes for a total of 19,010 metres. In the Northern Territory, additional projects have been acquired and existing ones expanded. The Frewena Group Project comprises the Frewena Fable Project (expanded), the Frewena East Project (new) and the Frewena Far East Project (new). They are centrally located in the new East Tennant IOCG belt. The Lorna May Project has been coupled with the Jean Elson Project (new). All of these projects have existing IOCG targets which will be the focus of definition and next-gen drilling. In Queensland, at our MaCauley Creek Project, we have uncovered bonanza silver grade mineralisation and have had past geophysical data reviewed, in which three intrusive bodies have been reinterpreted by an independent consultancy. Mac Creek, as it’s affectionately called, is highly prospective for tier-1 scale porphyry mineralisation. It too is part of the next-gen drilling campaign. On the corporate front, we continue to drive down administrative costs. Our quarterly 2019-2020 administrative costs have averaged $167,000 during 2019-2020, down on a historical average (since listing in May 2012) of $190,000 per quarter. We believe we have struck the right balance between exploration and admin, spending $3.83 on exploration for every dollar spent on admin. The Report Period will be remembered for COVID-19. Whilst exploration programs were not materially affected by this pandemic, Australian travel bans have led to the temporary cancellation of Inca’s shareholder workshop program. We fully intend recommencing these invaluable Inca management-shareholder interactions―Q&A’s designed to explain exploration results and Company strategies. There are three things to remember about Inca when thinking about the Report Period and the coming year(s): • Drill target generation is completed at Riqueza. After 3 years of thorough externally funded exploration, 28 tier-1 epithermal, porphyry and skarn targets have been de-risked to the extent they can. Actual “first-gen” drilling is next. The Australian project portfolio is settled. “Next-gen” drill targeting already begun for tier-1 porphyry and IOCG mineralisation. • • We have our house in order. Thanks to shareholder support, as a post Report Period material outcome, we have completed a capital consolidation. We continue to be careful with funds and strive for the balance between exploration and admin expenditure. The strategy that was incubated in 2017-2018 is now two years running and paying dividends. The demise of our funding partner at Riqueza is a consequence of global events and high-level decision making. The partnership strategy remains a valid and valuable pursuit. Indeed, Inca secured a co-funding partner for a large geophysical survey at our new Frewena Group Project. We will continue to look for strategic partnerships. Ross Brown Managing Director Ross Brown Director 9 Directors’ Report 10 The Directors of Inca Minerals Limited (Inca or Company) present their financial report on the Company and its controlled entities (Group) for the year ended 30 June 2020. Directors The names of directors in office at any time during or since the end of the financial year are listed hereunder. Directors were in office since the start of the financial year to the date of this report unless otherwise stated. Ross Brown, Managing Director Gareth Lloyd, Director Jonathan West, Director Information on Directors and Company Secretary ROSS BROWN B.Sc (Hons), M.Aus.IMM. Managing Director A geologist by profession, Mr Brown has over 30 years’ experience in mineral exploration in Australia, Asia, Africa and South America and he has worked in a broad range of commodities, including gold, base metals, uranium, phosphate and diamonds. Mr Brown has a rare ability in recognising the commercial potential of exploration projects and geological process, and has a proven track record of bringing technical-based exploration concepts and projects to market. In 2009 Mr Brown co-founded the gold/copper exploration company, Mystic Sands Pty Ltd, which was established for the purposes of conducting exploration in Chile, South America. With the assistance of other technical management, Mr Brown was responsible for the composition of the initial project portfolio. Mystic Sands was purchased by an Australian-listed explorer White Star Minerals Ltd. As part of the transaction, Sandfire Resources NL became a shareholder of White Star Minerals Ltd. Mr Brown turned his attention to Peru in 2009 and through his network of Peruvian-based businessmen and geologists assessed the potential of more than a hundred projects. Mr Brown recognised the great potential of mineral discovery in that country and has subsequently secured a number of projects for the Company including the Riqueza and Cerro Rayas zinc-silver-lead projects which the Company is currently exploring and evaluating. Mr Brown was the co-founder and Managing Director of Urcaguary Pty Ltd (Urcaguary), the Company’s fully owned subsidiary (formerly called Inca Minerals Limited) and he became the Company’s Managing Director after its takeover of Urcaguary. As at 30 June 2020, and in addition to his position with the Company, Mr Brown remains a Director of Urcaguary and the Company’s other subsidiary companies. In the previous 3 years, Mr Brown has not been a director of any other ASX listed companies. Mr Brown has been a member of AusIMM since 1988, and is also a member of GSA, SEG and AICD. 10 Directors’ Report (continued) Information on Directors and Company Secretary (continued) GARETH LLOYD B.Sc (Hons) Director 11 As at 30 June 2020, in addition to his position with Inca, Mr Lloyd was also a Director of Inca’s subsidiary companies. Mr Lloyd has over 30 years’ experience with mining and exploration companies and brings considerable technical, commercial and capital raising expertise to the Company. A mining engineer by training, he has operating experience in gold, base metals and coal operations in Australia, South Africa and the United Kingdom. Mr Lloyd is a part owner of the Element group, a Perth-based boutique advisory and funds management group focused on the resources sector through which Mr Lloyd provides strategic advice and fund-raising services to both listed and unlisted companies (predominantly mining and exploration companies) using both equity and mezzanine instruments. Prior to establishing Element (in 2008), Mr Lloyd was an Associate Director at the Rothschild Group where he helped establish the Golden Arrow Funds I and II, the latter fund becoming the ASX-listed LinQ Resources Fund. At the time of his departure from LinQ, the fund was one of Australia’s largest listed resource funds with funds under management of over $475m. He has held a number of senior positions at Australian resource-focused stockbroking firms including Research Director at Hartleys and Resources Analyst at Eyres Reed. In the previous 3 years, Mr Lloyd has not been a director of any other ASX listed companies. DR JONATHAN WEST BSc (Hons), MSc (Explor Geol), PhD. Director (appointed 21 January 2019) Dr Jonathan West has worked across a variety of resource and energy development and management areas, in both the private and public sector for over 40 years, both in Australia and overseas. He has extensive senior management experience with a particular focus on strategic planning, policy development, resource development and management, and corporate and organisational change management. He has extensive experience with shareholder/stakeholder engagement and in working directly with traditional owners on a range of resource management and economic development projects. He was a director at Excelsior Gold Limited between 2016 – 2018. MALCOLM SMARTT BA (Accounting), Grad Dip Corporate Management, FCPA, FCIS, FCIM Company Secretary (appointed 17 May 2019) Mr Smartt is a Corporate Consultant to listed and unlisted public companies. He is a qualified Accountant and Company Secretary having had considerable experience in Directorial, Financial and Company Secretary roles with a number of listed companies in the resource sector in Australia, South East Asia and Africa. 11 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW Operating Results 12 The Company’s operating loss after income tax for the report period was $1,472,889 (2019: loss of $1,879,854 ). Principal Activities The Company’s principal activities during the year were conducting exploration at our flagship Riqueza Project in Peru, partnership negotiations with South32 regarding Riqueza, assessing new projects and acquiring new projects. Inca’s main focus of the year was to initiate a strategy of project acquisition, exploration and evaluation, and partnership. The strategy is designed to reduce operation costs, achieve partnerships over gold-copper focussed projects with Tier-1 potential and to have significant free carry positions. Review of Operations The Company’s exploration activities, as well as other corporate activities of the year, were released to the Australian Securities Exchange (ASX) throughout the year ended 30 June 2020 (report period). These ASX announcements should be accessed (The Company’s ASX code is ICG) and read in conjunction with this annual report. During the report period, the Company’s payments to suppliers and employees combined with payments for exploration and payments for project acquisitions totalled $3,791,293, of which $3,408,628 (89.90%) represents cash flows on exploration, and $382,665 (10.10%) represents cash outflows on administrative staff and administration. As in previous years, these figures highlight the Company’s continued focus on the deployment of funds for exploration purposes to extract value through mineral discovery at its projects. The value-proposition this year now also extends to developing partnerships for extant and new projects alike. The Company’s funding partner at Riqueza withdrew during the Report Period. A Withdrawal Notice was provided to the Company on 14 May 2020 and, in accordance with the Earn-in Joint Venture Agreement (EIJVA), the EIJVA automatically terminated 60 days later on the 13 July 2020. The former partner funded exploration under an option agreement and EIJVA for a period of approximately 3 years, contributing approximately $3.5million. That company withdrew from Riqueza before the exploration programs it funded were reviewed and before an independent drill proposal was compiled. The Company also focussed on delivering additional projects selected on the basis that they would be prospective for tier-1 scale mineralisation; be conducive to rapid value-add exploration; be attractive to major mining houses; and therefore have a trajectory similar to Riqueza. Very significant developments were achieved during the Report Period at Riqueza. These include: The recognition of a very large (7.5km x7.5km) intrusive-related mineralised hydrothermal system. The generation of 28 drill targets prospective for tier-1 scale: • • • Gold-silver-copper epithermal mineralisation; • Gold-copper-silver porphyry mineralisation; • Copper-zinc skarn mineralisation; • • Gold-copper-zinc volcanic massive sulphide (VMS) mineralisation; and • Silver-lead-zinc carbonate replacement mineralisation; The generation of an independent drill program proposal of 43 holes for 19,010 metres of drilling. 12 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Review of Operations (continued) 13 Very significant developments were achieved during the Report Period at the Australian projects. These include: • • • • • The Frewena Fable Project was expanded to the north through the successful application, NT Government (NTG) allocation and granting of Exploration Licence EL32287 (called Frewena Fable North). Frewena Fable now hosts the large Alpaca Army and Tamborine IOCG’s targets and the project now adjoins a large Newcrest Mining project immediately to the north. The Frewena Far East Project was acquired through the successful application, NTG allocation and granting of Exploration Licence EL32293. Frewena Far East hosts an exceptionally large IOCG target with coincident gravity, magnetic, radiometric and topographic signatures. Initial field work located expansive occurrences of iron-rich breccias, a geological result that serves of a proof-of-concept for the IOCG exploration model of the project. The Company was awarded a co-funding grant as part of the Drilling and Geophysics Collaboration Scheme (DGCS) from the NTG. The grant will fund 45% of the costs of a 1,182km2 airborne magnetic and radiometric survey planned to cover all the IOCG targets of the Frewena Fable and Frewena Far East. It is scheduled in the latter part of 2020. The Frewena East Project was acquired through the successful application, NTG allocation and granting of Exploration Licence EL32289. Notwithstanding the fact that the NTG allocation greatly reduced the Company’s application area, the project remains of strategic value. The Toolebuc Project was dropped by the Company in the Report Period. This was to reduce exploration costs associated with non-core exploration projects. The 2019-2020 report period represents a very significant year, a year of preparedness, as the Company completes pre-drilling tier-1 target generation exploration at Riqueza and settles it’s Australian projects. It’s the third-year of a four-year progression: moving from year 1, changing our exploration focus; to year 2, acquiring tier-1-focus projects; merging with year 3, generating tier-1 targets for drill testing. Year 4 and beyond is the execution of tier-1 drilling, “first-gen” drilling at Riqueza and the “next-gen” drilling in Australia. Pre-empting the increasing fluctuating fortunes of the resource sector and volatility of the money markets, some time ago the Company instigated a strategy of sustained exploration through partnerships to reduce operating costs while accessing exploration know-how and large exploration treasuries. This strategy remains in play, despite the withdrawal of the funding partner from Riqueza. Inca has already obtained a funding partner for exploration at the Frewena Group Project. Financial Position The net assets of the Group were $6,708,691 as at 30 June 2020 ($6,512,208 as at 30 June 2019). Significant Changes in the State of Affairs The Company raised capital of $2.3 million (before broker commissions and other costs of capital raising) during the report period via the issue of 1,102,633,628 fully paid ordinary shares. During the year, the Company bought back 110,000,000 fully paid ordinary shares previously issued as collateral to a broker. There were no other significant changes in the state of affairs of the Group during the financial year. 13 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Dividends Paid or Recommended 14 The directors do not recommend the payment of a dividend and no dividends have been paid or declared since the start of the financial year. Significant Events After Reporting Date The Company received written notification dated 14 May 2020 from South 32, that pursuant to the Agreement, South 32 exercised its right to withdraw from the Project held by Brillandino. Pursuant to the Agreement, the Agreement terminated 60 days from 14 May 2020. On 13 July 2020, the Agreement was terminated. On 7 August 2020, 408,662,207 listed options exercisable at $0.012 per share expired. On 25 August 2020, the Company held a General Meeting where shareholders approved a consolidation of capital on the basis that every twenty shares be consolidated into one share, and where this consolidation results in a fraction of share being held, the Company be authorised to round that fraction down to the nearest whole share. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the Company’s operations or the state of affairs of the Company in future financial years. Likely Developments and Expected Results The Company expects to maintain the present status and level of operation and hence there are no likely unwarranted developments in the entity’s operations. Environmental Issues The Company is subject to environmental regulation in respect of its exploration activities in Peru and Australia. The Company ensures the appropriate standard of environmental care is achieved and, in doing so, that it is aware of and is in compliance with all environmental legislation. The directors of the Company are not aware of any breach of environmental legislation for the year. Proceedings on Behalf of the Company No person has applied for leave of the Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Indemnification of Officers and Insurance Premiums The Company has paid premiums to insure the directors against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in the capacity of director of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The premiums paid in respect of Directors’ and Officers’ insurance during the year amounted to $22,334 (2019: $17,457). Insurance premiums have not been allocated to individual directors or key management personnel. Options At the date of this report, there are 35,802,744 (post-consolidation) unissued ordinary shares of Inca Minerals Limited under option. 14 Directors’ Report (continued) OPERATING AND FINANCIAL REVIEW (continued) Risk Management 15 The Board is responsible for ensuring that risks and opportunities are identified in a timely manner and that activities are aligned with the risks and opportunities identified by the Board. Meetings of Directors During the financial year, 4 meetings of directors were held. Attendances by each director were as follows: Mr Ross Brown Mr Gareth Lloyd Mr Jonathan West Board Meetings No. of meetings eligible to attend Number attended 4 4 4 4 4 4 REMUNERATION REPORT (AUDITED) This report outlines the remuneration arrangements in place for directors and executives of the Company. Remuneration Policy The remuneration policy of Inca Minerals Limited aligns director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and, where the Board believes it appropriate, may also include specific long-term incentives based on key performance areas affecting the Company’s ability to attract and retain the best executives and directors to run and manage the Company. The remuneration policy setting out the terms and conditions for the executive directors and other senior executives was developed by the Board. All executives receive a base salary (which is based on factors such as ability and experience). The Board reviews executive packages annually by reference to the economic entity’s performance, executive performance, and comparable information from industry sectors and other listed companies in similar industries. The performance of the executive directors is measured against the objective of promoting growth in shareholder value. The Board may exercise discretion in relation to approving incentives, bonuses, and options. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth. Executives may, where the Board believes it appropriate, participate in employee share and option arrangements. The Board policy is to remunerate directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to directors and regularly reviews their remuneration based on market practice, duties and accountability. Independent external advice is sought when required. No external advice was sought during the report period. The maximum aggregate amount of fees that can be paid to non- executive directors is subject to approval by shareholders in a general meeting (currently $240,000 per annum). Performance Based Remuneration There was nil performance-based remuneration for the year ended 30 June 2020. 15 Directors’ Report (continued) REMUNERATION REPORT (AUDITED) (continued) Key management personnel service agreements Details of the key conditions of service agreements for key management personnel are as follows: 16 Commencement Date Notice Period Base Salary Base Salary Ross Brown1 1 March 2012 6 months $255,708 per annum Gareth Lloyd Jonathan West 14 September 2012 21 January 2019 Nil Nil $50,000 per annum director fees $50,000 per annum director fees Termination Payments Provided2 The Company may terminate employment by giving 6 months’ notice or 6 months payment in lieu None None 1 Mr Brown is engaged as Managing Director under a contract of employment with the Company. In addition to his base salary, Mr Brown was eligible to receive an additional $20,000 performance-based remuneration (excluding superannuation), none of which became payable during the report period as the conditions had not been met. 2 Other than statutory entitlements. At a General Meeting of the Company held on 31 May 2019, shareholders approved the ability for the Company to undertake a future issue of directors’ remuneration-sacrifice shares to Mr Ross Brown, Mr Gareth Lloyd and Mr Jonathan West. Any shares are to be issued in accordance with the Company’s Directors’ Remuneration-Sacrifice Share Plan (Share Plan). Under the Share Plan, the Company’s directors agreed to reduce their cash remuneration by up to 50% through the issue of shares, in lieu of cash consideration. The reduction in cash consideration is for an amount up to $127,854 for Mr Brown, up to $25,000 for Mr Lloyd, and up to $25,000 for Mr West. There are no other agreements with key management personnel. (a) Key management personnel compensation 2020 Short-term benefits Post-employment benefits Total Performance related compensation as % of total remuneration Name Salary and fees Other Perfor- mance Bonus Directors Ross Brown Gareth Lloyd Jonathan West Executives - Totals $ 255,708 50,000 46,875* - 352,583 $ - - - - - $ 3,000 - - - 3,000 Non- monetary benefits $ Super- annuation Long service leave $ $ - - - - - 22,992 3,266 2,227 - 28,485 (4,954) - - - - - - (4,954) - 0.0% *Jonathan West agreed to forgo part of his remuneration for the year amounting to $3125. Premiums of $22,334 were paid in relation to directors and officers liability insurance. $ 276,746 53,266 49,102 - 379,114 16 Directors’ Report (continued) REMUNERATION REPORT (AUDITED) (continued) 17 2019 Short-term benefits Post-employment benefits Total Performance related compensation as % of total remuneration Name Salary and fees Other Perfor- mance Bonus Directors Ross Brown Gareth Lloyd Jonathan West Justin Walawski Executives - Totals $ 255,708 50,000 20,833 244,650 - 571,191 $ - - - - - - $ 3,600 - - 2,114 - 5,714 Non- monetary benefits $ Super- annuation Long service leave $ $ - - - - - - 24,438 4,750 1,979 15,209 - 46,376 34,228 - - - - - - 34,228 - 0.0% $ 317,974 54,750 22,812 261,973 - 657,509 Premiums of $17,457 were paid in relation to directors and officers liability insurance. b) Options and rights granted as remuneration No options or rights were granted as remuneration during the year (2019: $nil). c) Share Based Payments During the year ended 30 June 2020, shares received by directors in lieu of cash consideration have been issued as follows. Director Shares Issued Ross Brown Gareth Lloyd Jonathan West 2,892,310 5,592,502 11,185,004 Total $ Value of Shares Issued $9,724 $9,375 $18,750 Accrued Salary & Fees at 30 June 2020 to be Received in Shares $6,963 $6,250 $4,688 No other share-based payments were issued as key management personnel remuneration during the year (2019: $nil). Key Management Personnel Relevant Interests The relevant interests of key management personnel in the capital of the Company at the date of this report is as follows: Director Ross Brown Gareth Lloyd Jonathan West Number of Ordinary Shares 39,304,072 5,592,502 45,250,000 Number of Options over Ordinary Shares 3,833,334 - 11,427,334 17 Directors’ Report (continued) REMUNERATION REPORT (AUDITED) (continued) 18 The following tables show the movements in the relevant interests of key management personnel in the share capital of the Company: 2020 Name Ross Brown Gareth Lloyd Jonathan West Totals 2019 Name Ross Brown Gareth Lloyd Jonathan West Justin Walawski Totals Opening balance 1 July 2019 35,911,762 - 17,000,000 52,911,762 Opening balance 1 July 2018 31,411,762 - - 3,060,002 34,471,764 Additions / Director Appointment 3,392,310 5,592,502 28,250,000 37,234,812 Additions / Director Appointment 4,500,000 - 17,000,000 777,773 22,277,773 Disposals / Director Resignation - - - - Disposals / Director Resignation - - - (3,837,775) (3,837,775) Closing balance 30 June 2020 39,304,072 5,592,502 45,250,000 90,146,574 Closing balance 30 June 2019 35,911,762 - 17,000,000 - 52,911,762 END OF REMUNERATION REPORT Non-Audit Services The Directors are 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 Board of Directors prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. No non-audit services were provided by the entity’s auditor, Stantons International, as shown at Note 16. Auditor’s Independence Declaration We have obtained an Auditor’s Independence Declaration. Please refer to “Auditor’s Independence Declaration” included on page 46 of the financial statements. The Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors. Ross Brown Director Dated at Perth this 7th day of September 2020 18 Consolidated Statement of Profit and Loss and Other Comprehensive Income for the year ended 30 June 2020 19 Revenue 2 36,018 279,333 Note 2020 $ 2019 $ Management and directors’ fees Wages and salaries Administrative expenses Advertising and promotional costs Professional fees Listing and share registry expenses Depreciation Impairment of Peruvian Value Added Tax receivable Foreign exchange (loss) / gain Environmental rehabilitation Exploration and evaluation expenditure written off (Loss) before income tax Income tax benefit (Loss) after income tax Other comprehensive income 7 3 (71,076) (131,676) (74,059) (270,171) (666,902) (576,496) - (39,623) (130,629) (184,756) (96,398) (70,886) (18,386) (12,207) (131,380) (223,805) (204,957) (35,717) (21,786) (17,043) (34,942) (655,199) (1,472,889) (1,879,854) - - (1,472,889) (1,879,854) Items that will not be reclassified to profit or loss - - Items that may be reclassified subsequently to profit or loss Exchange differences on operations, net of tax Total comprehensive (loss) translation of foreign (Loss) for the year attributable to members of Inca Minerals Limited Total comprehensive (loss) attributable to members of Inca Minerals Limited (379,011) (1,851,900) 357,218 (1,522,636) (1,472,889) (1,879,854) (1,851,900) (1,522,636) Basic and diluted (loss) per share (cents) 13 (0.04) (0.07) The accompanying notes form an integral part of these financial statements. 19 Consolidated Statement of Financial Position as at 30 June 2020 20 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets Plant and equipment Exploration and evaluation expenditure Right-of-use asset Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Lease liability Trade and other payables Provisions Funding in advance Total Current Liabilities Non-Current Liabilities Lease liability Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Accumulated losses Foreign currency translation reserve Share Option Reserve TOTAL EQUITY Note 14(b) 5 6 7 8(a) 8(e) 9(a) 9(b) 9(c) 8(e) 10 2020 $ 2019 $ 732,856 31,431 764,287 1,377,481 30,597 1,408,078 207.841 9,118,246 42,467 9,368,554 237,937 6,871,149 - 7,109,086 10,132,841 8,517,164 14,117 144,916 114,064 3,121,977 3,395,074 29,076 29,076 - 172,055 126,359 1,706,542 2,004,956 - - 3,424,150 2,004,956 6,708,691 6,512,208 41,559,456 (34,748,899) (134,717) 32,851 39,543,924 (33,276,010) 244,294 - 6,708,691 6,512,208 The accompanying notes form an integral part of these financial statements. 20 Consolidated Statement of Changes in Equity for the year ended 30 June 2020 21 Contributed Equity Accumulated Losses Foreign Currency Translation Reserve Share Option Reserve Total $ $ $ $ $ 2019 Balance at 1 July 2018 Total comprehensive loss for the year 37,270,506 (31,396,156) (112,924) - (1,879,854) 357,218 Shares issued during the year Cost of equity issue 2,401,111 (127,693) - - - - Balance at 30 June 2019 39,543,924 (33,276,010) 244,294 2020 Balance at 1 July 2019 Total comprehensive loss for the year 39,543,924 (33,276,010) 244,294 - (1,472,889) (379,011) Shares issued during the year 2,305,469 Cost of equity issue (289,937) - - - - Balance at 30 June 2020 41,559,456 (34,748,899) (134,717) - - - - - - - - 32,851 32,851 5,761,426 (1,522,636) 2,401,111 (127,693) 6,512,208 6,512,208 (1,851,900) 2,305,469 (257,086) 6,708,691 The accompanying notes form an integral part of these financial statements. 21 Consolidated Statement of Cash Flows for the year ended 30 June 2020 22 Cash flows from operating activities Payments to suppliers and employees Interest received Government grant received Net cash (used in) operating activities Cash flows from investing activities Payments for exploration expenditures Payments for plant and equipment Net cash (used in) investing activities Cash flows from financing activities Proceeds from issue of shares (net of share issue costs) Proceeds from S32 under Share Subscription and Earn-in Agreement Repayment of lease liability Proceeds received in advance for shares Net cash from financing activities Net increase/ (decrease) in cash held Cash and cash equivalents at the beginning of the financial year Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year Note 14 (a) 2020 $ 2019 $ (382,665) 1,089 20,694 (360,882) (864,928) 1,151 - (863,777) (3,408,628) (21,151) (3,429,779) (2,485,169) (62,391) (2,547,560) 1,823,615 2,232,759 1,356,466 (15,956) - 3,164,125 1,718,791 - 43,500 3,995,050 (626,536) 583,713 1,377,481 789,315 (18,089) 4,453 14 (b) 732,856 1,377,481 The accompanying notes form an integral part of these financial statements. 22 Notes To The Financial Statements For the year ended 30 June 2020 Note 1: Statement of Significant Accounting Policies 23 The financial report covers the Company of Inca Minerals Limited, a listed public company incorporated and domiciled in Australia, and its controlled entities. The financial report was authorised for issue on 7th September 2020 by the Board of Directors. Basis of preparation The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Going Concern The financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business. For the year ended 30 June 2020, the Group incurred after tax losses of $1,472,889 (2019: loss of $1,879,854) and the Group had net cash outflows of $626,536 (2019: net cash inflows of $583,713). The Directors believe that it is reasonably foreseeable that the Company and Group will continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report after consideration of the following factors: • • • The Group has cash at bank at the reporting date of $732,856, a net working capital deficiency of $2,630,787 and net assets of $6,708,691; The ability of the Group to raise capital by the issue of additional shares under the Corporation Act 2001; and The ability to curtail administration, operational and investing cash outflows as required. Accounting Policies The same accounting policies and methods of computation have been followed in this interim financial report as were applied in the most recent annual financial statements, except for those as described below. i) New and Amended Standards Adopted by the Group The Group has considered the implications of new and amended Accounting Standards which have become applicable for the current financial reporting period. The Group had to change its accounting policies and make adjustments as a result of adopting the following Standard: - AASB 16: Leases 23 Notes To The Financial Statements For the year ended 30 June 2020 Note 1: Statement of Significant Accounting Policies (continued) 24 The Group as lessee At inception of a contract the Group assesses if the contract contains or is a lease. If there is a lease present, a right- of-use asset and a corresponding liability are recognised by the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (i.e. leases with a remaining lease term of 12 months or less) and leases of low-value assets are recognised as an operating expense on a straight-line basis over the term of the lease. Initially, the lease liability is measured at the present value of the lease payments still to be paid at the commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses incremental borrowing rate. The incremental borrowing rate was 5%. Lease payments included in the measurement of the lease liability are as follows; fixed lease payments less any lease incentives; variable lease payments that depend on index or rate, initially measured using the index or rate at the the amount expected to be payable by the lessee under residual value guarantees; the exercise price of purchase options if the lessee is reasonably certain to exercise the options; lease payments under extension options, if the lessee is reasonably certain to exercise the options; and payments of penalties for terminating the lease, if the lease term reflects the exercise of options to - - commencement date; - - - - terminate the lease. The right-of-use asses comprise the initial measurement of the corresponding lease liability, any lease payments made at or before the commencement date and any initial direct costs. The subsequent measurement of the right- of-use assets is at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest. Where a lease transfers ownership of the underlying asset or the costs of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. ii. Initial Application of AASB 16: Leases The Group has adopted AASB 16: Leases retrospectively with the cumulative effect of initially applying AASB 16 recognised as 1 July 2019. In accordance with AASB 16, the comparatives for the 2019 reporting period have not been restated. The Group has recognised a lease liability and right-of-use asset for all leases (with exception of short-term and low value leases) recognised as operating leases under AASB 117: Leases where the Group is a lessee. Lease liabilities are measured at the present value of the remaining lease payments. The Group’s incremental borrowing rate as at 1 July 2019 was used to discount the lease payments. The right-of-use assets were measured at their carrying values as if AASB 16 Leases had been applied since the commencement date but discounted using the Group’s incremental borrowing rate per lease term as at 1 July 2019. The right-of-use assets have been recognised in the statement of financial position as at 1 July 2019. 24 Notes To The Financial Statements For the year ended 30 June 2020 Note 1: Statement of Significant Accounting Policies (continued) 25 Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates enacted or substantially enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a largely enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities related to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. a) Mining Tenements and Exploration and Evaluation Expenditure Mining tenements are carried at cost, less accumulated impairment losses. Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development and/or sale of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit or loss in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. d) Mining Tenements and Exploration and Evaluation Expenditure (continued) A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Costs of site restoration are provided for over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs are determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted for on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. 25 26 Notes To The Financial Statements For the year ended 30 June 2020 Note 1: Statement of Significant Accounting Policies (continued) e) Financial Instruments Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories: • • • amortised cost fair value through profit or loss (FVTPL) fair value through other comprehensive income (FVOCI). In the periods presented the corporation does not have any financial assets categorised as FVOCI. The classification is determined by both: • • the entity’s business model for managing the financial asset the contractual cash flow characteristics of the financial asset. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. Subsequent measurement of financial assets Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL): - they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows - the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. 26 27 Notes To The Financial Statements For the year ended 30 June 2020 Note 1: Statement of Significant Accounting Policies (continued) Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments as well as listed bonds that were previously classified as held-to-maturity under AASB 139. Financial assets at fair value through profit or loss (FVTPL) Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit or loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply. The category also contains an equity investment. The Group accounts for the investment at FVTPL and did not make the irrevocable election to account for the investment in unlisted and listed equity securities at fair value through other comprehensive income (FVOCI). The fair value was determined in line with the requirements of AASB 9, which does not allow for measurement at cost. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. Financial assets at fair value through other comprehensive income (FVOCI) The Group accounts for financial assets at FVOCI if the assets meet the following conditions: • • they are held under a business model whose objective it is “hold to collect” the associated cash flows and sell and the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset. Impairment of financial assets AASB 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. This replaced AASB 139’s ‘incurred loss model’. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under AASB 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss. Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. 27 Notes To The Financial Statements For the year ended 30 June 2020 Note 1: Statement of Significant Accounting Policies (continued) 28 In applying this forward-looking approach, a distinction is made between: • financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Level 1’) and • financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Level 2’). ‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date. ‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past due. Classification and measurement of financial liabilities The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income. f) Impairment of Assets At each reporting date, the entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss. 28 Notes To The Financial Statements For the year ended 30 June 2020 Note 1: Statement of Significant Accounting Policies (continued) 29 Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase. g) Plant and Equipment Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. 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 asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. 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 Company 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. Depreciation The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the Company 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 Motor vehicles IT equipment Leasehold improvements 10–33% 20–33% 10-33% 20% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. 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 profit or loss. 29 30 Notes To The Financial Statements For the year ended 30 June 2020 Note 1: Statement of Significant Accounting Policies (continued) h) Cash and Cash Equivalents Cash and cash equivalents include cash on hand and deposits held at call with banks. i) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. j) Contributed Equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. k) Earnings per Share (i) Basic earnings per share Basic earnings per share is calculated 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. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. l) Leases Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to the economic entity, are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. 30 Notes To The Financial Statements For the year ended 30 June 2020 Note 1: Statement of Significant Accounting Policies (continued) l) Employee Benefits 31 Provision is made for the Company’s liability for employee benefits arising from services rendered by employees to reporting date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. m) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. n) Trade and Other Receivables Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. o) Trade and Other Payables Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. p) Foreign Currency Transactions Balances Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s functional currency. Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non- monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised in profit or loss. 31 Notes To The Financial Statements For the year ended 30 June 2020 Note 1: Statement of Significant Accounting Policies (continued) Group companies 32 The financial results and position of foreign operations, whose functional currency is different from the Group’s presentation currency, are translated as follows: • • • assets and liabilities are translated at exchange rates prevailing at the end of the reporting period; income and expenses are translated at average exchange rates for the period; and retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. These differences are recognised in profit or loss in the period in which the operation is disposed of. m) Critical Accounting Estimates and Other Accounting Judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Company is of the view that there are no critical accounting estimates and judgements in this financial report, other than accounting estimates and judgements in relation to the carrying value of mineral exploration expenditure. Key judgements Deferred exploration and evaluation expenditure Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current. These costs are carried forward in respect of an area that has not at reporting date reached a stage that permits reasonable assessment of the existence of economically recoverable reserves, or alternatively, are expected to be sold. Refer to the accounting policy stated in Note 1(d). Deferred taxation The potential deferred tax asset arising from the tax losses and temporary differences have not been recognised as an asset because in the directors’ judgement, it is not probable that the Company will make taxable profits against which the tax losses can be recovered. s) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Note 2: Revenue Interest received Government grant received Income received under option agreement Consolidated 2020 $ 1,100 34,918 - 36,018 2019 $ 1,345 277,988 279,333 32 Notes To The Financial Statements For the year ended 30 June 2020 Note 3: Income Tax (a) Income tax recognised in profit No income tax is payable by the Company as it recorded losses for income tax purposes for the year. (b) Numerical reconciliation between income tax expense and the loss before income tax. 33 Loss before income tax Income tax at 27.5% (2019: 27.5%) Tax effect of: Deferred tax asset not recognised Movement in unrecognised temporary differences Tax effect of permanent differences Income tax benefit (c) Unrecognised deferred tax balances Revenue tax losses available to the Company Capital tax losses available to the Company Total tax losses available to the Company Potential tax benefit at 27.5% (2019: 27.5%) Consolidated 2020 $ (1,472,889) (405,045) 510,590 (96,035) (414,555) - 2019 $ (1,879,854) (516,960) 598,698 (98,464) (500,234) - 28,315,337 1,235 28,316,572 26,689,724 - 26,689,724 7,787,057 7,339,674 A deferred tax asset attributable to income tax losses has not been recognised at reporting date as the probability criteria disclosed in Note 1(c) is not satisfied and such benefit will only be available if the conditions of deductibility, also disclosed in Note 1(c), are satisfied. Note 4: Dividends No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made. Note 5: Trade and Other Receivables Current Other receivables Prepayments None of the trade and other receivables are past due date. Consolidated 2020 $ 29,166 2,265 31,431 2019 $ 21,891 8,706 30,597 33 Notes To The Financial Statements For the year ended 30 June 2020 Note 6: Plant and Equipment 34 Plant and equipment IT equipment $ Leasehold Improvements $ $ Total $ Balance at 1 July 2018 Additions / (disposals) and writeoffs Depreciation / writeback on disposals* 201,509 60,278 2,794 - 1,385 (694) 205,688 59,584 (25,282) (1,362) (691) (27,335) Balance at 30 June 2019 236,505 1,432 - 237,937 At cost Accumulated depreciation 338,275 (101,770) 21,848 (20,416) 6,213 (6,213) Balance at 30 June 2019 236,505 1,432 Balance at 1 July 2019 Additions / (disposals) and writeoffs Depreciation / writeback on disposals* 236,505 11,405 1,432 - (40,069) (1,432) Balance at 30 June 2020 207,841 - - - - - - 366,336 (128,399) 237,937 237,937 11,405 (41,501) 207,841 At cost Accumulated depreciation 349,680 (141,839) 21,848 (21,848) 6,213 (6,213) 377,741 (169,900) Balance at 30 June 2020 207,841 - - 207,841 * Inclusive of depreciation capitalised to exploration and evaluation expenditure. Note 7: Exploration and Evaluation Expenditure Costs carried forward in respect of areas of interest in the following phases: Exploration and evaluation phase – at cost Balance at 1 July Expenditure incurred (including exchange rate movements) Expenditure written off Balance at 30 June Consolidated 2020 $ 2019 $ 6,871,149 2,268,883 (21,786) 5,307,999 2,218,349 (655,199) 9,118,246 6,871,149 34 Notes To The Financial Statements For the year ended 30 June 2020 Note 8: Right-of-use Asset and Lease Liability 35 The Company’s lease portfolio includes the office lease, The average term of the lease is 1-2 years with an option to extend for an additional 2 years. (a): Carrying value Balance at inception of the lease Accumulated depreciation Consolidated 2020 $ 56,623 (14,156) 42,467 2019 $ - - - (b): AASB 16 related amounts recognised in the Statement of Profit or Loss and Other Comprehensive Income Depreciation expense Interest expense (included in administrative expenses) (c): Total cash outflows for leases Repayment of lease liabilities (d): Option to extend or terminate Consolidated 2020 $ 14,156 2,526 16,682 2019 $ - - - Consolidated 2020 $ (15,956) 2019 $ - The Company uses high sight in determining the lease term where the contract contains options to extend or terminate the lease. (e): Lease liability Consolidated Recognised on 1 July 2019 Less: principal repayments Add: interest expense on lease liability Current lease liability Non-current lease liability 2020 $ 56,623 (15,956) 2,526 43,193 14,117 29,076 2019 $ - - - 35 Notes To The Financial Statements For the year ended 30 June 2020 Note 9(a): Trade and Other Payables (current) 36 Trade and other creditors Accrued liabilities Share capital funds received in advance None of the payables are past due date. Note 9(b): Provisions (current) Annual leave Long service leave Note 9(c): Funding in Advance (current) Funding received under Share Subscription Agreement and Earn-In Agreement with South32* Consolidated 2020 $ 104,911 40,005 - 144,916 2019 $ 107,009 21,546 43,500 172,055 Consolidated 2020 $ 75,157 38,907 114,064 2019 $ 92,131 34,228 126,359 Consolidated 2020 $ 2019 $ 3,121,977 3,121,977 1,706,542 1,706,542 *Under the terms of the Share Subscription and Earn-In Agreement (Agreement) with South32 Group Operations Pty Ltd (South32) dated 29 March 2019, this amount represents funding received from South32 in relation to project expenditure that the Company must incur on the Greater Riqueza Project held by its 100% subsidiary Brillandino Minerales S.A.C. (Brillandino). The Company received written notification dated 14 May 2020 from South 32, that pursuant to the Agreement, South 32 exercised its right to withdrawn from the Project held by Brillandino. Pursuant to the Agreement, the Agreement shall terminate 60 days from 14 May 2020. The funding provided is not refundable to South 32. Refer to note 19 Subsequent Events as well as note 21 for contractual obligations in relation to the Agreement 36 Notes To The Financial Statements For the year ended 30 June 2020 Note 10: Contributed Equity a) Paid up capital 4,078,233,994 ordinary shares (30 June 2019: 3,085,600,366 ordinary shares) b) Movements in shares on issue Balance at 30 June 2018 Issued 2 August 2018 Issued 5 September 2018 Issued 19 September 2018 Issued 1 October 2018 Issued 22 October 2018 Issue 7 November 2018 Issued 3 December 2018 Issued 7 December 2018 Issued 7 December 2018 Issued 13 March 2019 Issued 13 March 2019 Issued 2 May 2019 Issued 2 May 2019 Issued 5 June 2019 Issued 5 June 2019 Transaction costs from issue of shares Balance at 30 June 2019 Issued 4 July 2019 Issued 22 August 2019 Issued 2 October 2019 Issued 30 October 2019 Issued 19 November 2019 Issued 19 November 2019 Issued 7 January 2020 Selective buy-back 9 January 2020 Issued 6 April 2020 Transaction costs from issue of shares Balance at 30 June 2020 c) Movements in options on issue 37 Consolidated 2020 $ 2019 $ 41,559,456 39,543,924 No of shares 2,592,788,159 27,500,000 136,128,818 32,961,000 12,900,000 9,875,000 10,000,000 143,292,389 1,540,000 12,950,000 13,450,000 25,150,000 46,640,000 14,925,000 3,000,000 2,500,000 - 3,085,600,366 8,750,000 40,000,000 5,680,813 966,087,592 46,000,000 8,700,000 11,788,223 (110,000,000) 15,627,000 - 4,078,233,994 Paid up capital $ 37,270,506 137,500 680,644 164,805 64,500 39,500 50,000 716,462 7,700 51,800 67,250 102,750 233,200 60,000 15,000 10,000 (127,693) 39,543,924 43,750 150,000 19,099 1,932,175 94,733 26,133 23,952 - 15,627 (289,937) 41,559,456 In relation to listed options exercisable at $0.012 per option at any time up to 7 August 2020, there were 8,750,000 options issued during the year, and 408,662,207 options outstanding over unissued ordinary shares on issue at 30 June 2020. I In relation to listed options exercisable at $0.007 per option at any time up to 31 October 2022, there were 716,058,395 options issued during the year, and 716,058,395 options outstanding over unissued ordinary shares on issue at 30 June 2020. d) Ordinary shares Ordinary shares have the right to receive dividends as declared and, in the event of winding up of 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. 37 Notes To The Financial Statements For the year ended 30 June 2020 Note 11: Interests of Key Management Personnel a) Key management personnel compensation 38 Refer to the Remuneration Report contained in the Director’s Report for details of the remuneration paid to each member of the Company’s key management personnel for the year ended 30 June 2020. The totals of remuneration paid to key management personnel of the Company during the year are as follows: Short-term employee benefits (i) Post-employment benefits (ii) (i) Includes payments for salaries, director fees, consulting fees and allowances. (ii) Includes superannuation contributions and long service leave entitlements. b) Key management personnel shareholdings Consolidated 2020 $ 350,629 28,485 379,114 2019 $ 576,905 80,604 657,509 The number of ordinary shares in Inca Minerals Limited held by key management personnel of the Company during the financial year is as follows: 2020 Name Ross Brown Gareth Lloyd Jonathan West Totals 2019 Name Ross Brown Gareth Lloyd Jonathan West Justin Walawski Totals Opening balance 1 July 2019 35,911,762 - 17,000,000 52,911,762 Opening balance 1 July 2018 31,411,762 - - 3,060,002 34,471,764 Additions / Director Appointment 3,392,310 5,592,502 28,250,000 37,234,812 Additions / Director Appointment 4,500,000 - 17,000,000 777,773 22,277,773 Disposals / Director Resignation - - - - Disposals / Director Resignation - - - (3,837,775) (3,837,775) Closing balance 30 June 2020 39,304,072 5,592,502 45,250,000 90,146,574 Closing balance 30 June 2019 35,911,762 - 17,000,000 - 52,911,762 Note 12: Related Party Transactions During the year ended 30 June 2020, shares received by directors in lieu of cash consideration have been issued as follows. Director Shares Issued Ross Brown Gareth Lloyd Jonathan West 2,892,310 5,592,502 11,185,004 Total $ Value of Shares Issued $9,724 $9,375 $18,750 Accrued Salary & Fees at 30 June 2020 to be Received in Shares $6,963 $6,250 $4,688 38 Notes To The Financial Statements For the year ended 30 June 2020 Note 12: Related Party Transactions (continued) 39 On 19 November 2019, Mr Jonathan West was issued 8,700,000 fully paid ordinary shares at $0.003 in relation to expenses incurred in the identification, development and exploration of a number of projects in the Northern Territory, being the Frewena projects, which were acquired by the Company. The total fair value of the shares issued was $26,133. There were no other transactions and balances with directors and other key management personnel. Note 13: Loss Per Share a) Basic Earnings Per Share Consolidated 2020 $ 2019 $ Loss used in calculating basic earnings per share (1,472,889) (1,879,854) Weighted average number of ordinary shares on issue during the year used as the denominator in calculating basic loss per share 3,767,265,224 2,889,474,545 Basic loss per share (cents) b) Diluted loss per share (cents) (0.04) (0.07) Diluted loss per share is the same as basic loss per share as the Company is in a loss making position. Note 14: Cash Flow Information a) Reconciliation of the net loss after income tax to the net cash flows from operating activities Consolidated Net loss for the year Depreciation Impairment of Peruvian value added tax Foreign exchange (gains) / losses Exploration and evaluation expenditure written off Peruvian capitalised exploration expenditure Professional fees paid in share capital Interest on lease liability Changes in assets and liabilities (Increase) / decrease in trade and other receivables Increase / (decrease) in trade and other payables Increase / (Decrease) in provisions Increase / (Decrease) in income received in advance Net cash outflow from operating activities (b) Reconciliation of cash and cash equivalents 2020 $ (1,472,889) 18,386 131,380 204,957 21,786 773,240 - 2,526 (834) (27,139) (12,295) - (360,882) 2019 $ (1,879,854) 12,207 223,805 17,043 655,199 332,082 49,500 - 93,934 (130,592) 40,887 (277,988) (863,777) Cash balance comprises: cash assets 732,856 1,377,481 (c) Non-cash financing activities On 19 November 2019, the Company issued 46,000,000 fully paid ordinary shares at $0.0206 for a total value of $94,733 as payment for services provided to the Company. 39 Notes To The Financial Statements For the year ended 30 June 2020 Note 15: Expenditure Commitments 40 The Group has certain commitments to meet minimum expenditure requirements on the mineral exploration assets in which it has an interest. These commitments are optional and only required if the Company wishes to maintain its rights of earn-in or rights of tenure. Outstanding exploration commitments for not later than one year and for between one and five years are as follows: Not later than one year Between one and five years Consolidated 2020 $ Consolidated 2019 $ 1,492,082 5,993,580 7,485,662 791,786 5,211,435 6,003,221 The exploration expenditure commitments above include commitments related to agreements for the acquisition of interests in mining concessions pertaining to the Group’s Greater Riqueza (Riqueza) and Cerro Rayas projects in Peru. As at 30 June 2020 the Group has met all its obligations in respect of the agreements and all future exploration commitments are payable at the Group’s discretion and dependent upon the Group acquiring the exclusive rights to the mining concessions. The key terms of the agreements pertaining to concessions within the Riqueza and Cerro Rayas projects are set out below. 1. Riqueza Project: A 5-year mining concession transfer option and assignment agreement granting the Group the exclusive option to acquire 100% interest in a mining concession called Nueva Santa Rita and referred to as the Riqueza Project. The Group has the exclusive right to terminate at any time during the transfer option and assignment period and any unpaid amounts are not payable to the vendor. On 31 October 2018, 17 May 2019 and 7 July 2020, the Group executed addendums to the option and assignment agreement extending the payment timing. The total consideration payable has been increased in US$15,000. The addendum extended the assignment period to 6 years from the commencement date. Other key terms are: Total Mining Concession Transfer Option & Assignment (MCTOA) Consideration US$1,798,000: - US$10,000 (Mining Assignment); and, - US$1,788,000 (Mining Option). Payment Consideration Timing of MCTOA Mining Assignment Payment (MAP): MAP Payment on Execution Date (ED): US$10,000* Mining Transfer Option Payments (MTOP): MTOP Payment on ED: US$30,000* MTOP Payment 6 months from ED: US$20,000* MTOP Payment 12 months from ED: US$50,000* MTOP Payment 18 months from ED: US$60,000* MTOP Payment 24 months from ED: US$50,000* MTOP Payment on or before November 15, 2018: US$31,500* MTOP Payment on or before December 15, 2018: US$31,500* MTOP Payment on or before 20 May 2019: US$10,000* MTOP Payment on or before 20 June 2019: US$20,000* MTOP Payment on or before 20 July 2019: US$70,000* 40 Notes To The Financial Statements For the year ended 30 June 2020 Note 15: Expenditure Commitments (continued) 41 MTOP Payment 42 months from ED: US$100,000* MTOP Payment on or before 30 May 2020: US$15,000* MTOP Payment on or before 30 September 2020: US$30,000 MTOP Payment on or before 30 December 2020: US$30,000 MTOP Payment on or before 30 January 2021: US$30,000 MTOP Payment 60 months from ED: US$170,000 MTOP Payment 66 months from ED: US$520,000 MTOP Payment 72 months from ED: US$520,000 6 years from the Execution Date (19 May 2016). 2% NSR. The Group has a 20-year option to buy back 50% of the NSR for US$1,000,000 leaving a 1% NSR to the vendor. The Group has the exclusive right to terminate at any time during the option and assignment period without cost or penalty. Any unpaid amounts are not payable to the vendor. Mining assignment period NSR Royalty Cancellability * As at the date of the Directors’ Declaration, the Group has met all applicable commitments under the agreement. 2. Cerro Rayas Project - La Elegida Concession: A 2-year mining concession transfer option and assignment agreement commencing 30 June 2017 granting the Group the exclusive option to acquire 100% interest in a mining concession known as La Elegida which forms part of the Group’s Cerro Rayas Project. The Group has the exclusive right to terminate at any time during the transfer option and assignment period and any unpaid amounts are not payable to the vendor. On 17 July 2017, 10 April 2019 and 2 July 2020, the Group executed addendums to the option and assignment agreement extending the payment timing. The total consideration payable remains unchanged. The addendum extended the assignment period to 38 months from the commencement date. In addition, on 28 April 2020, the Group notified the decision to exercise the Mining Option. On 2 July 2020, the Group acquired 100% of La Elegida Concession. Other key terms are: Total Mining Concession Transfer Option and Assignment (MCTOA) Consideration - US$245,000:US$1,000 (Mining Assignment); and, - US$244,000 (Mining Option). Payment Timing of MCTOA Consideration Mining Assignment Payment (MAP): MAP on Commencement Date (CD): US$1,000* Mining Transfer Option Payment (MTOP): MTOP on CD: US$5,000* MTOP on or before 6 months from CD: US$11,000* MTOP on or before 12 months from CD: US$90,000* MTOP on or before 13 – 19 months from CD: US$4,000 per month. These payments total USD28,000* MTOP on 2 April 2019: US$4,000* MTOP on or before 22 months from CD: US$2,500* MTOP on or before 23 months from CD: US$2,500* 41 Notes To The Financial Statements For the year ended 30 June 2020 Note 15: Expenditure Commitments (continued) 42 Mining assignment period MTOP on or before 24 – 32 months from CD: US$4,000 per month. These payments total USD36,000* MTOP on or before 33 months from CD: US$10,000* MTOP on or before 34 months from CD: US$5,000* MTOP on or before 38 months from CD: US$5,000* 38 months from the Commencement Date (30 June 2017). * As at the date of the Directors’ Declaration, the Group has met all applicable commitments under the agreement. 3. Cerro Rayas Project - La Elegida I Concession: A 2.5-year mining concession transfer option and assignment agreement commencing 10 October 2016 granting the Group the exclusive option to acquire 100% interest in a mining concession known as La Elegida I which forms part of the Group’s Cerro Rayas Project. The Group had the exclusive right to terminate at any time during the transfer option and assignment period and any unpaid amounts are not payable to the vendor. The group exercised its right to early terminate the agreement, through a letter dated February 27, 2019. On 27 June 2019, the Group lodged with the Lima Registry Office the termination of the agreement and has no further rights or obligations pursuant to the agreement. In addition to exploration expenditure commitments the Group has certain operating commitments pertaining to non-cancellable operating leases and agreements contracted for but not recognised in the financial statements: Not later than one year Between one and five years Note 16: Auditor’s Remuneration Statutory audit by auditor of the parent company Audit and review of financial statements of parent entity Audit and review of financial statements of subsidiary entity Statutory audit by auditor of Inca Minerales S.A.C. and Brillandino Minerales S.A.C. Other services by auditor of Inca Minerales S.A.C. and Brillandino Minerales S.A.C. Consolidated 2020 $ Consolidated 2019 $ 39,109 35,102 74,211 38,618 52,654 91,272 Consolidated 2020 $ 29,937 - 29,937 12,068 - 12,068 42,005 Consolidated 2019 $ 29,100 500 29,600 14,687 2,139 16,826 46,426 42 Notes To The Financial Statements For the year ended 30 June 2020 Note 17: Segment Information 43 The Company has identified its operating segments based on the internal reports that are reviewed and used by the Board of directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Company operates in the segments of mineral exploration within Peru and Australia. The Company is domiciled in Australia. All revenue from external parties is generated from Australia only. Segment revenues are allocated based on the country in which the party is located. Operating revenues of approximately Nil (2019: Nil) are derived from a single external party. All the assets are located in Peru and Australia. Segment assets are allocated to countries based on where the assets are located. Reportable segments: Segment revenue 2020 2019 Segment result 2020 2019 Segment assets 2020 2019 Segment liabilities 2020 2019 Depreciation and amortisation expense 2020 2019 Australia $ 36,018 279,333 (548,614) (515,928) 1,067,584 227,598 (184,794) (188,181) (15,777) (2,938) Peru $ - - (924,275) (1,363,926) 9,065,297 8,289,566 Consolidated $ 36,018 279,333 (1,472,889) (1,879,854) 10,132,881 8,517,164 (3,239,356) (1,816,775) (3,424,150) (2,004,956) (2,609) (9,269) (18,386) (12,207) Note 18: Financial Risk Management Objectives and Policies (a) Interest rate risk The Company’s exposure to interest rate risk which is the risk that a financial instruments value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rate for each class of financial assets and financial liabilities as set out below: Weighted average interest rate (%) Non- interest bearing Floating interest rate $ $ Fixed interest maturing 1 year or less $ Fixed interest maturing 1 to 5 years $ 30 June 2020 Cash and cash equivalents 30 June 2019 Cash and cash equivalents 0.11 76,858 635,998 20,000 0.06 1,183,293 174,188 20,000 - - Total $ 732,856 1,377,481 43 44 Notes To The Financial Statements For the year ended 30 June 2020 Note 18: Financial Risk Management Objectives and Policies (continued) (b) Interest rate sensitivity analysis At 30 June 2020, if interest rates had changed by 25 basis points during the entire year with all other variables held constant, profit for the year and equity would have been $2,638 higher/lower (2019: $2,708), mainly as a result of higher/lower interest income from cash and cash equivalents. A 25-basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates. (c) Credit risk The maximum exposure to credit risk at reporting date on financial assets of the Company is the carrying amount, net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements. (d) Commodity price risk The Company is not exposed to commodity price risk as the operations of the Company are not yet at the production stage. (e) Liquidity risk The Company manages liquidity risk by monitoring forecast cash flows. The table below analyses the entity’s financial liabilities into relevant maturity groupings based on the remaining period from the statement of financial position date to the contractual maturity date. As the amounts disclosed in the table are the contractual undiscounted cash flows, these balances will not necessarily agree with the amounts disclosed in the statement of financial position. 44 Notes To The Financial Statements For the year ended 30 June 2020 Note 18: Financial Risk Management Objectives and Policies (continued) 45 30 June 2020 Financial liabilities due for payment Trade and other payables Lease liabilities Funds in advance Financial assets – cash flows realisable Cash assets Trade and other receivables Net (outflow)/inflow on financial instruments 30 June 2019 Financial liabilities due for payment Trade and other payables Funds in advance Financial assets – cash flows realisable Cash assets Trade and other receivable Net (outflow)/inflow on financial instruments Less than 6 months $ 6 months to 1 year $ 1 to 5 years $ Total $ (144,916) (7,058) (3,121,977) (3,273,951) - (7,059) - (7,059) - (29,076) - (29,076) (144,916) (43,193) (3,121,977) (3,310,086) 732,856 29,166 762,022 - - - - - - 732,856 29,166 762,022 (2,511,929) (7,059) (29,076) (2,548,064) (172,055) - (172,055) - (1,706,542) (1,706,542) 1,377,481 30,597 1,408,078 - - - 1,236,023 (1,706,542) - - - - - - - (172,055) (1,706,542) (1,878,597) 1,377,481 30,597 1,408,078 (470,519) There were no Level 2 or Level 3 financial instruments. (f) Foreign exchange risk The Company is exposed to foreign exchange risk as certain transactions are denominated in United States Dollars and Peruvian Nuevos Soles as a result of operating in Peru. The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars, is mainly in relation to its cash and cash equivalents and exploration and evaluation expenditure, and was as follows. 30 June 2020 Cash and cash equivalents Exploration and evaluation expenditure 30 June 2019 Cash and cash equivalents Exploration and evaluation expenditure USD $ PEN $ 40,869 - 1,137,028 - 64,805 7,646,058 51,344 5,870,693 45 Notes To The Financial Statements For the year ended 30 June 2020 Note 18: Financial Risk Management Objectives and Policies (continued) (g) Net fair value of financial assets and liabilities 46 The carrying amounts of financial instruments included in the statement of financial position approximate their fair values due to their short terms of maturity. Note 19: Events Subsequent to Reporting Date The Company received written notification dated 14 May 2020 from South 32, that pursuant to the Agreement, South 32 exercised its right to withdrawn from the Project held by Brillandino with immediate effect. Pursuant to the Agreement, the Agreement shall terminate 60 days from 14 May 2020. On 13 July 2020, the Agreement was terminated. On 7 August 2020, 408,662,207 listed options exercisable at $0.012 per share expired. On 25 August 2020, the Company held a General Meeting where shareholders approved a consolidated of capital on the basis that every twenty shares be consolidated into one share, and where this consolidation results in a fraction of share being held, the Company be authorised to round that fraction down to the nearest whole share. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the Company’s operations or the state of affairs of the Company in future financial years. Note 20: Contingent Liabilities There are no contingent liabilities at reporting date. Note 21: Contractual Obligations Share Subscription and Earn-In Agreement (Agreement) with South32 Group Operations Pty Ltd (S32) On 29 March 2019, the Company entered into an Agreement with S32 in relation to share subscription and earn-in on its 100% subsidiary Brillandino Minerales S.A.C. (Brillandino), the holder of the Greater Riqueza Project. Under the Agreement, S32 can earn-in to Brillindino by way of the following. Phase 1 Funding During the Phase 1 funding period: (a) S32 must contribute 100% of the annual funding to allow Brillandino to incur project expenditure forming part of the Phase 1 funding obligation; (b) S32 must contribute such funding as is required to satisfy each annual funding, provided that S32, at a minimum, contributes the cumulative funding specified below within the following timeframes: (i) (ii) (iii) (iv) Year 1 Commitment - US$1. 7 million. Year 2 Commitment - US$3.7 million. Year 3 Commitment – US$6.0 million; and Year 4 Commitment - US$9.0 million. Share subscription Tranche of subscription share 46 Notes To The Financial Statements For the year ended 30 June 2020 Note 21: Contractual Obligations (continued) 47 Subject to satisfying each annual programme and annual budget, Brilliandino must allot and issue, such number of shares equivalent to: (i) Year 1 Commitment - US$1. 7 million. Subscription Shares equivalent to 11% of the Shares (on a diluted basis) in Brilliandino. (ii) Year 2 Commitment - US$3.7 million. An additional 13% of Shares (on a diluted basis) which results in S32 holding 24% of Shares (on a diluted basis); (iii) Year 3 Commitment – US$6.0 million. An additional 16% of Shares (on a diluted basis) which results in S32 holding 40% of Shares (on a diluted basis); (iv) Year 4 Commitment - US$9.0 million. An additional 20% of Shares (on a diluted basis) which results in S32 holding 60% of Shares (on a diluted basis). Over the course of the 4-year phase 1 period, should the US$9.0 million expenditure commitment be met by S32, S32 will be issued a total of 60% of the issued share capital in Brilliandino. Right of withdrawal S32 may elect to withdraw on the completion of each annual programme/annual budget during Phase 1 provided that S32 has: (i) fully met the expenditures set out in the relevant annual funding; and (ii) by the proposed date of withdrawal, paid the total cumulative amount specified in the relevant annual commitment, then S32 may exercise its right to withdraw from the Agreement and S32 is released from all further obligations, funding commitments and liabilities under the Agreement, and the Agreement will terminate. Failure to complete Phase 1 funding (a) Unless otherwise agreed in writing, if Inca complies with its obligations under the Agreement and S32 fails to contribute in accordance with the terms and conditions of the Agreement or withdraws from the Agreement then: (A) S32 may issue a notice to Inca requiring Inca to acquire or buy back all of S32's Shares for $1; or (B) Inca may issue a notice to S32 requiring S32 to sell all or agree to the buy-back of all of S32's shares to Inca for $1. Satisfaction of Phase 1 Funding Obligation If S32 satisfies the Phase 1 funding obligation and has not withdrawn from the Agreement: (a) S32, Brillandino and Inca must promptly meet and negotiate in good faith to agree the final terms and conditions of a Shareholders' Agreement, which must be on customary terms and conditions, with such agreement to be reached within 90 days from the date that S32 satisfies the Phase 1 funding obligation; and (b) S32 may within 60 days of the end of the Phase 1 funding period elect to exercise its right to carry out the Phase 2 funding obligation. 47 Notes To The Financial Statements For the year ended 30 June 2020 Note 21: Contractual Obligations (continued) Phase 2 Funding 48 Under the Phase 2 funding: (i) S32 is entitled to subscribe for an additional total 10% shareholding in Brillandino; and (ii) S32 must contribute 100% of the funding to allow Brillandino to incur project expenditure pursuant to such annual programmes and annual budgets as is necessary in order to complete a pre-feasibility study. (b) Provided that S32 has satisfied the expenditures set out in the relevant annual programme and annual budget during the Phase 2 funding period, S32 may withdraw from its obligation to carry out the Phase 2 funding obligation at any time during the Phase 2 funding in which case S32 has no ·entitlement to retain any of the shares in Brillandino which it acquired as part of the Phase 2 funding obligation. As noted in note 19, the Company received written notification dated 14 May 2020 from South 32, that pursuant to the Agreement, South 32 exercised its right to withdrawn from the Project held by Brillandino. Pursuant to the Agreement, the Agreement shall terminate 60 days from 14 May 2020. On 13 July 2020, the Agreement was terminated. Note 22: Controlled Entities Subsidiaries of Inca Minerals Limited: Urcaguary Pty Ltd Inca Minerales S.A.C. Brillandino S.A.C. Dos Colinas S.A.C. Hydra Minerals Ltd Dingo Minerals Pty Ltd Note 23: Parent Information Country of Incorporation Australia Peru Peru Peru Australia Australia Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Accumulated Losses Total equity Percentage Controlled (%) 2020 2019 100 100 100 - 100 100 2020 $ 100 100 100 100 100 100 2019 $ 677,183 6,216,301 6,893,484 225,921 6,474,469 6,700,390 (155,718) (29,076) (184,794) (188,181) - (188,181) 6,708,690 6,512,209 41,559,456 32,851 (34,883,617) 6,708,690 39,543,925 - (33,031,716) 6,512,209 48 Notes To The Financial Statements For the year ended 30 June 2020 49 Note 23: Parent Information (continued) Financial performance (Loss) for the year Other comprehensive income Total comprehensive income (1,851,901) - (1,851,900) (1,522,970) - (1,522,970) There are no guarantees entered into by the parent entity in relation to the debts of its subsidiaries. There are no contingent liabilities of the parent entity as at the reporting date. There are no contractual commitments by the parent entity for the acquisition of property, plant and equipment as at the reporting date. The Company has certain operating commitments pertaining to non-cancellable operating leases and agreements contracted for but not recognised in the financial statements: 2020 $ 17,551 35,102 52,653 2019 $ 17,947 52,654 70,601 Not later than one year Between one and five years Note 24: Company Details The principal place of business of the Company is: Inca Minerals Limited Suite 1, 16 Nicholson Road Subiaco, WA, 6008 Australia 49 Directors’ Declaration The Directors of the Company declare that: 50 1. the financial statements and notes, as set out on pages 12 to 43, are in accordance with the Corporations Act 2001 and: a. b. comply with Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); give a true and fair view of the financial position as at 30 June 2020 and of the performance for the year ended on that date of the Group; 2. the Directors have been given the declarations required by s295A of the Corporations Act 2001 that: a. b. c. the financial records of the Company for the financial year have been properly maintained in accordance with s286 of the Corporations Act 2001; the financial statements and notes for the financial year comply with Accounting Standards; and the financial statements and notes for the financial year give a true and fair view. 3. in the Directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. On behalf of the Directors: ` Ross Brown Director Dated at Perth this 7th day of September 2020 50 PO Box 1908 West Perth WA 6872 Australia Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au Stantons International Audit and Consulting Pty Ltd trading as Chartered Accountants and Consultants 7 September 2020 The Directors Inca Minerals Limited Suite 1, 16 Nicholson Road Subiaco WA 6008 Dear Sirs RE: INCA MINERALS LIMITED In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Inca Minerals Limited. As Audit Director for the audit of the financial statements of Inca Minerals Limited for the year ended 30 June 2020, 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. Yours faithfully, STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company) Samir Tirodkar Director Liability limited by a scheme approved under Professional Standards Legislation Stantons International Audit and Consulting Pty Ltd trading as Chartered Accountants and Consultants PO Box 1908 West Perth WA 6872 Australia Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INCA MINERALS LIMITED Report on the Audit of the Financial Report Opinion We have audited the financial report of Inca Minerals Limited (the Company and its subsidiaries (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended and notes to the financial 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 2020 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going concern Without modifying our audit opinion expressed above, attention is drawn to the following matter: As referred to Note 1 to the financial statements, the consolidated financial statements have been prepared on a going concern basis. As at 30 June 2020, the Group had cash and cash equivalents of $732,856, incurred a loss after tax of $1,472,889 for the financial year ended 30 June 2020 and had net cash outflows from operating and investing activities of $3,790,661. The ability of the Group to continue as a going concern and meet its planned exploration, administration and other commitments is dependent upon the Group raising further working capital and/or successfully exploiting its mineral assets. In the event that the Group is not successful in raising further equity or successfully exploiting its mineral assets, the Group may not be able to meet its liabilities as and when they fall due and the realisable value of the Group’s current and non-current assets may be significantly less than book values. 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. Liability limited by a scheme approved under Professional Standards Legislation Key Audit Matters How the matter was addressed in the audit Carrying Value of Capitalised Exploration and Evaluation Expenditure As at 30 June 2020, Capitalised Exploration and Evaluation expenditure totals $9,118,246 (refer to Note 1(d) and note 7 to the financial report). The carrying value of Capitalised Exploration and Evaluation expenditure is a key audit matter due to: • • • The significance of the total balance (90% of total assets); to assess management’s The necessity application of the requirements of the accounting standard Exploration for and Evaluation of Mineral Resources (“AASB 6”), in light of any indicators of impairment that may be present; and The assessment of significant judgements made by management in relation to the Capitalised Exploration and Evaluation Expenditure. Contributed Equity the During to The Group’s Contributed Equity amounted $41,559,456. year, 1,102,633,628 ordinary shares were issued through placements and shares issued as consideration for services, resulting in an increase in Contributed Equity of $2,015,532 net of capital raising costs (refer to Note 10 to the financial report). reporting Contributed Equity is a key audit matter due to: • • the quantum of share capital issued during the year; and the varied nature of the movements during the year. We have spent significant audit effort on ensuring the Contributed Equity was appropriately accounted for and disclosed. Inter alia, our audit procedures included the following: i. Assessing the Group’s right tenure over exploration assets by corroborating the ownership of the relevant licences for mineral resources to government registries and relevant third party documentation; to ii. Reviewing the directors’ assessment of the carrying value of the exploration and evaluation expenditure, ensuring the veracity of the data presented and that management has considered the effect of potential indicators, commodity prices and the stage of the Group’s projects against AASB 6; impairment iii. Evaluation of Group documents for consistency with the intentions for the continuing of exploration and evaluation activities in certain areas of interest, and corroborated with enquiries of management. the documents we evaluated included: Inter alia, ▪ Minutes of meetings of the board and management; ▪ Announcements made by the Group to the Australian Securities Exchange; and ▪ Cash flow forecasts; and iv. Consideration of the requirements of accounting standard AASB 6. We assessed the financial statements in relation to AASB 6 to ensure appropriate disclosures are made. Inter alia, our audit procedures included the following: i. Obtaining an understanding of the underlying transactions; ii. Verifying all issued capital movements to the relevant ASX announcements; iii. Vouching proceeds from capital raisings to bank relevant supporting statements and other documentation; iv. Verifying underlying capital raising costs and costs were appropriately these ensuring recorded; v. Ensuring consideration for services provided are measured in accordance with AASB 2 Share- Based Payments and agreed the related costs to relevant supporting documentation; and vi. Ensuring the relevant requirements of accounting standards and disclosures achieve fair financial presentation statements to ensure appropriate disclosures are made. reviewing and the the 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 2020, but does not include the financial report and our auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. 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. As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. We evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in Internal control that we identify during our audit. The Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the consolidated financial report of the current period and are therefore key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report We have audited the Remuneration Report included in pages 9 to 12 of the directors’ report for the year ended 30 June 2020. 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. Opinion on the Remuneration Report In our opinion, the Remuneration Report of Inca Minerals Limited for the year ended 30 June 2020 complies with section 300A of the Corporations Act 2001. STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company) Samir Tirodkar Director West Perth, Western Australia 7 September 2020 Shareholder Information 56 The shareholder information set out below is applicable as at 11 September 2020 unless otherwise stated. CAPITAL STRUCTURE The Company currently has issued capital of 203,911,338 fully paid ordinary shares. The Company has also issued 35,802,744 options with an exercise price of $0.14 and an expiry date of 31 October 2022. The Company has no other class of security or options on issue. VOTING RIGHTS The Company’s Constitution provides that at a meeting of shareholders, and on a show of hands, each shareholder present in person and each other person present as a proxy, attorney or representative of a shareholder has one vote. On a poll, each shareholder present in person has one vote for each fully paid ordinary share held by the shareholder and each person as a proxy, attorney or representative of a shareholder has one vote for each fully paid ordinary share held by the shareholder that person represents. DISTRIBUTION OF EQUITY SECURITIES at 11 September 2020 The number of holders by size of their holding of fully paid ordinary issued shares in the Company is as follows: SPREADS OF HOLDINGS NUMBER OF NUMBER % OF TOTAL ISSUED HOLDERS OF UNITS CAPITAL 138,464 0.68% 1,424,534 0.699% 2,579,742 1.265% 32,275,511 15.828% 167,493,087 82.14% 203,911,338 100% 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 > TOTAL 383 473 334 896 330 2,416 SUBSTANTIAL SHAREHOLDERS There are no Substantial Shareholders. ESCROW There are no Company securities subject to voluntary escrow. UNMARKETABLE PARCELS As at 11 September 2020 there were 1,066 shareholders with an unmarketable share parcel of less than 8,333 shares at the prevailing share price of .06 cents. 56 Shareholder Information (continued) 57 TWENTY LARGEST SHAREHOLDERS The names and details of the twenty largest quoted shareholdings in the Company as at 11 September 2020 are as follows: 57 Tenement Schedule 58 END OF REPORT 58 CountryStateProject NameTenement NamePeruRiquezaNeuva Santa RiaGranted10045501Earning 100%1Brillandino Minerals S.A.C.PeruRiquezaRita MariaGranted10171016100%Brillandino Minerals S.A.C.PeruRiquezaAntacocha IGranted10249916100%Brillandino Minerals S.A.C.PeruRiquezaAntacocha IIGranted10249716100%Brillandino Minerals S.A.C.PeruRiquezaMaihuasiGranted10249816100%Brillandino Minerals S.A.C.PeruRiquezaUchpangaGranted10170916100%Brillandino Minerals S.A.C.PeruRiquezaUchpanga IIGranted10251716100%Brillandino Minerals S.A.C.PeruRiquezaUchpanga IIIGranted10251616100%Brillandino Minerals S.A.C.PeruRiquezaPicuyGranted10171116100%Brillandino Minerals S.A.C.PeruCerro RayasLa Elegida Granted010109205100%Inca Minerales S.A.C.PeruCerro RayasPuyuhuanGranted010336917100%Inca Minerales S.A.C.PeruCerro RayasHuaytapataGranted010337017100%Inca Minerales S.A.C.PeruCerro RayasHuaytapata SurGranted010221018100%Inca Minerales S.A.C.PeruCerro RayasVicuna PuquioGranted010221018100%Inca Minerales S.A.C.PeruCerro RayasVicuna Puquio IIGranted010221018100%Inca Minerales S.A.C.PeruCerro RayasTablamachayGranted010221018100%Inca Minerales S.A.C.PeruCerro RayasYacunaGranted010221318100%Inca Minerales S.A.C.PeruCerro RayasIntihuanunanGranted010221418100%Inca Minerales S.A.C.AustraliaQLDMaCauley CreekMaCauley Creek SouthGrantedEPM27124Earning 100%2Inca Minerals LimitedAustraliaQLDMaCauley CreekMaCauley Creek NorthGrantedEPM27163Earning 100%2Inca Minerals LimitedAustraliaNTFrewena FableFrewena FableGrantedEL31974Earning 100%3Inca Minerals LimitedAustraliaNTFrewena FableFrewena Fable NorthApplicationEL32287Earning 100%3Inca Minerals LimitedAustraliaNTFrewena EastFrewena EastApplicationEL32289Earning 100%4Inca Minerals LimitedAustraliaNTFrewena Far EastFrewena Far EastApplicationEL32293Earning 100%5Inca Minerals LimitedAustraliaNTLorna May Lorna May ApplicationEL32107Earning 100%6Inca Minerals LimitedAustraliaNTJean ElsonJean Elson WestApplicationEL32485Earning 100%7Inca Minerals LimitedAustraliaNTJean ElsonJean Elson EastApplicationEL32486Earning 100%7Inca Minerals LimitedEast TimorManatutoManatutoApplicationN/A100%Inca Minerals LimitedEast TimorOssuOssuApplicationN/A100%Inca Minerals LimitedEast TimorPaatalPaatalApplicationN/A100%Inca Minerals LimitedNote 1: Mining Option Agreement between Inca Minerales and Minera Rimpago S.A.C. with Rimpago carried free interest to residual 1% NSR.Note 2: JV between Inca and MRG Resources Pty Ltd (MRG) with MRG having 10% carried free interest up to feasibility and residual 1.5 % NSR.Note 3: JV between Inca (90%), MRG (5%) and Dr West (5%) with MRG and West carried free up to feasibility and residual 1.5 % NSR shared between MRG and West.Note 4: JV between Inca (90%), MRG (5%) and Dr West (5%) with MRG and West carried free up to feasibility and residual 1.5 % NSR shared between MRG and West.Note 5: JV between Inca (90%), MRG (5%) and Dr West (5%) with MRG and West carried free up to feasibility and residual 1.5 % NSR shared between MRG and West.Note 6: JV between Inca and MRG with MRG having 5% carried free interest up to feasibility and residual 1.5 % NSR.Note 7: JV between Inca and MRG with MRG having 10% carried free interest up to feasibility and residual 1.5 % NSR.Tenement NumberLocationTenement StatusTenement IdentificationTenement Ownership THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY   

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