Ionic Rare Earths Limited Annual Report 2020

Plain-text annual report

A N N U A L R E P O R T ASX:IXR IONIC RARE EARTHS LIMITED Annual Report 2020 CORPORATE DIRECTORY This annual report covers the consolidated entity of Ionic Rare Earths Limited (“IonicRE”) and its subsidiaries. The consolidated entity’s functional and presentation currency is AUD ($). A description of the consolidated entity’s operations and of its principal activities is included in the review of operations and activities in the directors’ report. Directors A P Rovira Non-Executive Chairman B D Dickson Finance Director T B Benson Non-Executive Director (appointed 31 August 2020) M J Steffens Non-Executive Director (resigned 31 August 2020) Chief Executive Officer T J Harrison Company Secretary B D Dickson Registered Office and Principal Place of Business Level 1, 34 Colin Street West Perth WA 6005 Telephone: 08 9481 2555 Fax: 08 9485 1290 Share Registry Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth WA 6000 Telephone: 1300 787 272 Auditors BDO Audit (WA) Pty Ltd 38 Station Street SUBIACO, WA 6008 Bank National Australia Bank Level 1, Gateway Building 177-179 Davy Street Booragoon WA 6154 Solicitors K & L Gates Level 32, 44 St. George’s Terrace Perth, WA 6000 Stock Exchange Australian Securities Exchange Code: IXR www.ionicre.com.au CONTENTS DIRECTORS’ REPORT ...............................................................................................................2 DIRECTORS’ DECLARATION ....................................................................................................21 AUDITOR’S INDEPENDENCE DECLARATION .........................................................................22 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ...............................................................................23 CONSOLIDATED STATEMENT OF FINANCIAL POSITION .....................................................24 CONSOLIDATED STATEMENT OF CASH FLOWS ....................................................................25 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY.......................................................26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .................................................27 INDEPENDENT AUDIT REPORT ..............................................................................................53 CORPORATE GOVERNANCE STATEMENT ..............................................................................57 ASX ADDITIONAL INFORMATION ..........................................................................................63 Directors’ Report Directors The names and details of the directors of Ionic Rare Earths Limited in office during the financial year and until the date of this report are as follows. Directors were in office for the whole of the financial year, unless otherwise stated. A P Rovira BSc (Hons), MAusIMM - (Chairman, Non-Executive Director) - Appointed 21 November 2014 Mr Tony Rovira has over 30 years technical and management experience in the mining industry, as an exploration and mining geologist, and as a company executive at Board level. Since graduating from Flinders University in South Australia in 1983, Tony has worked for companies both large and small, including BHP, Barrack Mines, Pegasus Gold and Jubilee Mines. From 1997-2003 Tony was the General Manager of Exploration with Jubilee Mines, during which time he led the team that discovered and developed the world class Cosmos and Cosmos Deeps nickel sulphide deposits in Western Australia. In the year 2000, the Association of Mining and Exploration Companies awarded Mr Rovira the “Prospector of the Year Award” for these discoveries. Other Public Company Directorships in the past 3 years - Azure Minerals Limited. B D Dickson B.Bus, FCPA, FGIA, MAICD – (Finance Director & Company Secretary) – Appointed 21 November 2014 Mr Brett Dickson has over 20 years’ experience in the financial management of companies, principally companies in early stage development of its resource or production and offers broad financial management skills. He has been Company Secretary and Chief Financial Officer (CFO) for a number of successful resource companies listed on the ASX. Other Public Company Directorships in the past 3 years - Rox Resources Limited M J Steffens BEng(Hons), PhD, MAusIMM - (Non-Executive Director) - Appointed 30 November 2018 (resigned 31 August 2020) Dr Steffens is a minerals engineer with a PhD in metallurgy from the WA School of Mines. His experience covers a broad range of commodities and includes areas of project evaluation, project management and process development, as well as experience in African minerals projects. He is a Member of the Australian Institute of Mining and Metallurgy. Other Public Company Directorships in the past 3 years - NIL T B Benson B.Sc – (Non-Executive Director) – Appointed 31 August 2020 Mr Benson has extensive experience as an investment banker and has served on a number of ASX listed company boards as both Chairman and Director. He has specialised in cross border transactions within the natural resources sector across China, Africa and SE Asia, and has been an adviser to Chinese State-Owned Enterprises (SOE’s). His specialist activities include corporate funding solutions and off-take agreement negotiations within the natural resources domain. Trevor holds a Bachelor of Science Degree from the University of Western Australia. Other Public Company Directorships in the past 3 years - Walkabout Resources Ltd, Wolf Minerals Limited – appointed 3 August 2020 Management T J Harrison (Chief Executive Officer) – Appointed 26 June 2020 Mr. Harrison was Project Manager of IonicRE’s Makuutu Rare Earths Project since the start of 2020 and has been driving development and value creation. He holds a Bachelor of Chemical Engineering degree from Adelaide University and has over 20 years of experience and an extensive and successful track record in the fields of both mineral processing and hydrometallurgy in multiple commodities, including rare earths, alumina, coal, cobalt, copper, gold, magnetite, molybdenum, nickel, rhenium, scandium, silver, and uranium. This has involved roles in project development, process and flowsheet development, studies, test work planning and supervision, engineering, construction, commissioning, operations, project management, and as owners’ team representative. 2 IONIC RARE EARTHS LIMITED Annual Report 2020Interests In The Shares And Options Of The Company As at the date of this report the interests of the directors in the securities of the company were: B D Dickson A P Rovira M J Steffens (resigned 31 August 2020) T B Benson (appointed 31 August 2020) Number of Ordinary Shares Number of Options over Ordinary Shares 23,420,330 51,602,016 - - 24,000,000 30,000,000 20,000,000 - Interests In Contracts Or Proposed Contracts With The Company During or since the end of the financial year, no director has had any interest in a contract or proposed contract with the company being an interest the nature of which has been declared by the director in accordance with Section 300(11)(d) of the Corporations Act 2001. Directors’ Meetings During the year 8 directors’ meetings were held. The number of meetings attended by each director was as follows: B D Dickson A P Rovira M J Steffens No. of meetings held while in office Meetings attended 8 8 8 8 8 8 As at the date of this report, the company did not have audit, remuneration or nomination committees, as the directors believe the size of the company does not warrant their existence. Dividends Paid Or Proposed The company has not paid any dividends since the commencement of the financial year, and no dividends are proposed to be paid. Corporate Information The Financial Statements of Ionic Rare Earths Limited for the year ended 30 June 2020 were authorised for issue in accordance with a resolution of the directors on 23 September 2020. The group’s functional and presentation currency is AUD ($). Ionic Rare Earths Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. Principal Activities The principal activity during the year of the group was investment in the mining and resource sector. The group’s business is conducted from operations located in Australia, Uganda through its 46% owned affiliate Rwenzori Rare Metals Limited and in Nicaragua through its 100% owned subsidiary Minera San Cristobal, SA. Employees Other than the Directors the group does not have any employees at 30 June 2020 (2019: 1). 3 Directors’ Report Operating And Financial Review Covid-19 On 24 March 2020 and in response to the worsening COVID-19 pandemic and the ensuing global uncertainties and volatilities the Company suspended its exploration activities at Makuutu. In coming to this decision, the company considered advice and noted the actions of regulatory bodies and authorities in the jurisdictions of both Australia and Uganda. The company took that step to safeguard the wellbeing and safety of its African-based team, contractors and the community in which the company operates. Additionally, at that time the company implemented necessary policies and procedures which include “no travel”, “social distancing”, “no congregating in groups” and “working from home where possible”. While some restrictions have eased and the impact of COVID-19 is not expected to significantly affect the 2020 work program at Makuutu, the Company will continue to monitor the situation with the wellbeing of staff, contractors and community being of the utmost importance. The Company was not eligible for and did not receive any government grant during the period. Overview Makuutu, Rare Earth Elements (IonicRE 46% earning up to 60%) After an extensive and very selective search, on 5 July 2019 Ionic Rare Earths Limited (IonicRE or the Company) announced it had entered into an agreement to acquire up to a 60% interest in the Makuutu Rare Earths Project (Makuutu) by acquiring an initial 20% interest in Ugandan company Rwenzori Rare Metals Limited (Rwenzori) which holds 100% of the Makuutu Project. IonicRE now holds a 46% interest in Rwenzori. Makuutu comprises three licences covering approximately 132 km2 located some 40 km east of the regional centre of Jinja and 120 km east of the capital city of Kampala (Figures 1 and 2). The area has excellent infrastructure with tarred (sealed) roads, rail, power and water all nearby giving good access throughout the year irrespective of weather conditions. Makuutu contains ionic clay-type Rare Earth Element (REE) mineralisation similar to the ionic clay-type deposits of southern China where the world’s cheapest and most readily accessible sources of Critical and Heavy Rare Earth Oxides (CREO and HREO) are extracted by rudimentary mining and processing methods. 4 Core sample of Makuutu ionic adsorption mottled clay from hole RRMDD011 IONIC RARE EARTHS LIMITED Annual Report 2020Makuutu Rare Earths Project Figure 1. Makuutu Rare Earths Project Location. Figure 2. Makuutu Rare Earths Project Tenements and Major Infrastructure. 5 Directors’ Report Ionic clay-hosted Rare Earth deposits are significantly different from hard rock-hosted Rare Earth deposits. Typically, Rare Earth minerals can be recovered from ionic clay mineralisation using salt washing in mild leaching conditions to produce a high-grade Rare Earth Oxide (REO) chemical precipitate concentrate. This generally presents practical processing advantages which are summarized in the following table. Mining/processing stages Clay-hosted ree Hard rock-hosted ree Mineralisation Mining Soft material, negligible (if any) blasting Hard rock Low operating costs: Surface mining (0-15m) High operating costs: Blasting required Minimal stripping of waste material Could have high strip ratios Progressive rehabilitation of mined areas Processing – Mining site No crushing or milling Potential for static or in-situ leaching Ambient temperature Simple process plant Comminution, followed by beneficiation that often requires expensive (flotation) reagents Mine product Mixed high-grade rare earth precipitate (~50-95% depending on precipitant) for feedstock into rare earth separation plant Mixed REE mineral concentrate (typically 20 – 40% TREO) Processing – Refinery (typically not on mining site) Simple acid solubilisation followed by conventional REE separation High temperature mineral “cracking” using strong reagents Complex recycling of reagents and water Complex plant (to withstand strong reagents and high temperatures) Processing – Environmental Non-radioactive tailings Solution treatment and reagent recovery requirements (somewhat off-set by advantageous supporting infrastructure) High reagent consumption per tonne of REO Tailings often radioactive (complex and costly disposal) The company commenced exploration shortly after acquiring an interest in Makuutu and late in 2019 completed an initial 750-metre drilling program in the Makuutu Central Zone (MCZ) (on tenement RL 1693). This program consisted of 41 diamond core holes and 3 window sampler holes for the purpose of generating a maiden Mineral Resource; a further 5 diamond core holes drilled in tenement EL 1766 to test for additional rare earth mineralisation potential. Of the 41 holes drilled in the MCZ 39 intersected mineralised clay grading greater than 500 ppm Total Rare Earth Oxides (TREO). Some of the more significant drill intersections include (ASX: 21 November 2019, 10 December 2019 and 23 December 2019): RRMDD001: 15.0 metres @ 1,005 ppm TREO from 5.10 metres RRMDD003: 9.3 metres @ 1,144 ppm TREO from 2.87 metres RRMDD004: 4.2 metres @ 1,649 ppm TREO from 5.62 metres RRMDD006: 4.0 metres @ 1,298 ppm TREO from 3.50 metres RRMDD010: 8.7 metres @ 1,007 ppm TREO from 3.87 metres RRMDD015: 9.7 metres @ 1,108 ppm TREO from 3.70 metres RRMDD016: 8.1 metres @ 1,199 ppm TREO from 2.50 metres RRMDD017: 7.3 metres @1,034 ppm TREO from 1.50 metres RRMDD029: 7.5 metres @ 1,299 ppm TREO from 6.0 metres RRMDD041: 6.50 metres @1,385 ppm TREO from 4.70 metres 6 IONIC RARE EARTHS LIMITED Annual Report 2020The broad spaced drilling on EL 1766 tested laterite plateaus between 6 and 12 kilometres east of MCZ, in the Makuutu East Zone (MEZ) with all drill holes intersecting a similar mineralised lateritic profile as seen in the MCZ, with better intercepts including: RRMDD042: 4.4 metres @ 981 ppm TREO from 3.80 metres RRMDD043: 3.5 metres @ 589 ppm TREO from 2.95 metres RRMDD046: 5.5 metres @ 642 ppm TREO from 3.75 metres The first quarter of 2020 provided several significant milestones for the Company with the announcement of the maiden mineral resource for Makuutu followed up by excellent metallurgical results. Additionally, the Company’s increased its ownership in Rwenzori, and therefore the Makuutu project, to 31%. Drilling recommenced at Makuutu on 16 March 2020 however this was suspended shortly thereafter due to Government-imposed COVID-19 control measures. Figure 3: Drilling the first infill drill hole RRMDD0047. Following the outbreak of COVID-19, activities were restricted in April and May however IonicRE was still able to make significant advances, including; • • • The Makuutu Mineral Resource Estimate being increased by some 53% to (ASX: 23 June 2020): 78.6 Million tonnes @ 840 ppm TREO, at a cut-off grade of 300 ppm TREO-Ce2O3 Obtaining further very positive results from optimisation of metallurgical test-work; and Generating further high-grade results from the drilling program curtailed by COVID-19. Table 1: Makuutu Mineral Resource Estimate above 300ppm TREO-Ce2O3 Cut-off Grade Resource Classification Tonnes (millions) TREO (ppm) TREO-Ce2O3 (ppm) LREO (ppm) HREO (ppm) CREO (ppm) Indicated Resource Inferred Resource Total Resource 9.5 69.1 78.6 750 860 840 520 620 610 550 640 630 200 210 210 Rounding has been applied to 0.1Mt and 10ppm which may influence grade average calculations. TREO = Total Rare Earth Oxide 280 320 310 7 Directors’ Report Figure 4: Makuutu Central Zone Plan – Mineral Resource Estimate Areas June 2020. Figure 5: Makuutu Rare Earths Project; Cross Section of Regolith Zones.2020. 8 IONIC RARE EARTHS LIMITED Annual Report 2020Metallurgical results have been very positive with an initial variability testing program (ASX: 18 February 2020) demonstrating recoveries of up to 75% TREE-Ce. Following those early positive results, the Company commenced an optimisation program to understand the variability in mineralogy and metallurgy across the project mineralisation, and to ultimately drive towards higher recoveries, particularly for areas of the deposit that initially returned lower recoveries. Optimisation of a composite sample of mineralisation that initially produced low recoveries, uncharacteristic of the broader Makuutu mineralisation was undertaken. It was found that by lowering the pH of the lixiviant (leaching liquor) and prolonging the extraction time to 14 days – as is applicable to commercial-scale static leach processing operations – the recovery of Rare Earths increased dramatically, with a particular enhancement of the CREO and HREO recoveries. Figure 6 illustrates the general effect of various pH levels on dissolution of Makuutu Rare Earths. Figure 6: Effect of Lowering Extraction pH on Rare Earth Extraction plus Thorium. The key outcomes and results from the optimisation program on the evaluated composite sample were: • • • In some areas of the Makuutu deposit, a substantive portion of the REE exist in colloidal sediment form (oxides or hydroxides), which has likely resulted from natural weathering processes. Amending the testing procedure so that it is more akin to commercial operations demonstrates that the Rare Earths in the colloidal portion are also recoverable using a slightly more acidified process scheme, together with the easily water-soluble and salt-desorbed ionic form Rare Earths. The recovery of high-value REE (Critical and Heavy Rare Earth Elements, ~ 30% recovery) is markedly higher than the low-value REE (Lanthanum-La and Cerium-Ce, with ~14% recovery). This is favourable both for processing and also for the potential value of the mixed Rare Earth carbonate which will be the nominal product form. The leach liquor composition indicates a REE solution composition with > 51% Critical Rare Earth Elements and > 47% Heavy Rare Earth Elements, indicating the potential to produce a very high value mixed Rare Earth product. Figures 8 and 9 show the constituency of REE in the composite sample and also in the leach liquor (which is representative of the final product). 9 Directors’ Report Figure 7: Composite sample REE distribution Figure 8: Leach liquor showing extracted REE distribution 10 IONIC RARE EARTHS LIMITED Annual Report 2020The Company resumed drilling with two drill rigs in July 2020 with the objective of: • Completing exploration and resource extension drilling of the full 26-kilometre mineralisation corridor from Makuutu Eastern Zone to Makuutu Western Zone; • Assessing the short range REE grade variability within the current Mineral Resource to improve resource grade estimation confidence; • Providing samples for metallurgical testwork representative of the broader project area. This program, comprising over 3,700 metres of diamond core drilling, will add to the 990 metres of diamond core drilling initially undertaken at Makuutu, and will cover an area more than three times larger than the current Mineral Resource Estimate area. Additionally, metallurgical optimisation testwork continues along with activities supporting the Makuutu Rare Earths Scoping Study which the company intends to complete in the December 2020 quarter. Transaction Details Shareholder approval for the following transaction was obtained at a General Meeting of the Company held on 19 August 2019. The Makuutu Rare Earth Elements project is owned 100% by Ugandan registered Rwenzori Rare Metals Limited (Rwenzori) which in turn is owned 85% by South African registered Rare Earth Elements Africa Proprietary Limited (REEA). IonicRE has entered into a binding option agreement with both companies that enables it to acquire up to a 60% direct interest in Rwenzori, and thereby up to a 60% indirect interest in the project by: 1. the payment of US$10,000 for a 30-day exclusive option period. This payment has been made. 2. upon exercise of the option, the payment of US$100,000 cash and issuing US$150,000 in IonicRE shares, at a 30-day VWAP in return for an immediate 20% interest in RRM; This has been completed. 3. IonicRE to contribute US$1,700,000 of expenditure by 1 October 2020 to earn up to a 51% staged interest in RRM as follows: Spend Interest earned Cumulative Interest earned Exercise of Option US$100,000 as in 2 above Expenditure contribution of US$650,000 Expenditure contribution of further US$800,000 Expenditure contribution of further US$250,000 20% 11% 15% 5% 20% 31% 46% 51% As at the date of this report the first three expenditure commitments set out in the above table have been met and IonicRE has earned a 46% interest in the share capital of Rwenzori. 4. IonicRE to fund to completion of a bankable feasibility study to earn an additional 9% interest for a cumulative 60% interest in Rwenzori. 5. During the earn-in phase there are milestone payments, payable in cash or IonicRE shares at the election of the Vendor, as follows: • • • US$750,000 on the Grant of Retention licence over RL1693 which is due to expire in November 2020; US$375,000 on production of 10 kg of mixed rare-earth product from pilot or demonstration plant activities; and US$375,000 on conversion of existing licences to mining licences. 6. At any time should IonicRE not continue to invest in the project and project development ceases for at least two months Rwenzori has the right to return the capital invested by IonicRE and reclaim all interest earnt by IonicRE. 11 Directors’ Report Nicaragua The Company operates the San Isidro mineral concessions in Nicaragua and has three exploration licences under application near the Topacio project (Figure 9). Figure 9 Location of Nicaragua and IonicRE’s Projects San Isidro, IonicRE 100%) The San Isidro Gold Project constitutes a 25 km2 mining concession in north-western Nicaragua and lies adjacent to the La India Gold Project, held by UK company Condor Gold Plc., which contains a reported 2.3 million ounce gold resource. IonicRE’s San Isidro Gold Project has the potential to contain La India-style vein-hosted epithermal gold mineralisation. Opportunities to further monetise the value of San Isidro are being investigated. New Concessions – Iguanas, Galeano and Tigre Three mineral concession applications, Iguanas, Galeano and Tigre were submitted some time ago by Minera San Cristóbal, S.A. (MSC, a 100% owned Nicaraguan subsidiary of IonicRE) for ground covering the land adjacent to the Topacio gold project. The Nicaraguan Ministry of Mines and Energy (MEM) has accepted these applications with certification for the approval of the three concession applications by the MDLB Municipality completed and returned to MEM. Final signoff from MEM for the award of these concessions is awaited, though given the extended time the applications have been with MEM, the award of the concessions cannot be assured. Operating Results The Group’s income was $1,226 (2019: $75,326) and the loss was $1,486,254 (2019: $978,314) for the financial year. Exploration expenses of $54,791 (2019: $186,831) and salaries, wages and consulting fee-based payments of $269,395 (2019: $380,702) account for approximately 22% (2019: 64%) of this year’s loss. Operating income Operating loss 12 2020 $ 1,226 (1,486,254) 2019 $ 75,326 (978,314) IONIC RARE EARTHS LIMITED Annual Report 2020Year in Review Review of Financial Position During the year, the Group raised $2,296,982 (after all expenses) through the issue of 461,470,000 fully paid shares. As a result of that raising and the raising of $3,500,000 (before expenses) subsequent to the end of the financial period the directors believe that at the date of this report the Group has a sound capital structure and is in a position to progress the planned exploration on the Company’s mineral properties. At 30 June 2020 the cash balance of the group stood at $829,933. Likely Developments And Expected Results Of Operations IonicRE will continue to advance the Makuutu Rare Earth Project with the aim of finalising a scoping study by the end of 2020. Upon the successful completion of the scoping study it is expected that a feasibility study on the Makuutu project will commence. The impact of COVID-19 on the Group going forward, including its financial condition cannot be reasonably estimated at this stage and will be reflected in the Group’s 2021 interim and annual financial statements. Indemnification And Insurance Of Directors And Officers During or since the financial year, the company has paid premiums in respect of a contract insuring all the directors of Ionic Rare Earths Limited against legal costs incurred in defending proceedings for conduct involving: (a) a wilful breach of duty; or (b) a contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the Corporations Act 2001. The total amount of insurance contract premiums paid was $16,650 (2019: $17,052). Environmental Regulation And Performance The company is subject to significant environmental regulation in respect of its exploration activities. It aims to ensure the appropriate standard of environmental care is achieved and in so doing, is aware of all relevant environmental legislation. The directors of the company are not aware of any breach of environmental legislation for the year under review. The directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and energy use. The directors have assessed that the Company has no current reporting requirements but may be required to report in the future. Proceedings On Behalf Of Company No person has applied for leave of 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 or intervened in any proceedings during the year. 13 Directors’ Report Remuneration Report (Audited) This remuneration report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report, key management personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company. For the purposes of this report, the term ‘executive’ encompasses the chief executive and secretaries of the Parent and the Group. Details of key management personnel A P Rovira Chairman (Non-Executive) B D Dickson Finance Director M J Steffens Director (Non-Executive) – (resigned 31 August 2020) T J Harrison Chief Executive Officer - (appointed 26 June 2020) W G Martinick Chairman (Non-Executive) - (Retired 30 November 2018) B L Farrell Director (Non-Executive) - (Resigned 16 November 2018) D V Bright Chief Executive Officer - (Contract finished 16 December 2018) Remuneration philosophy The Board of Directors is responsible for determining and reviewing compensation arrangements for the directors. The Board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high- quality board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash and other non-cash payments. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the company. To assist in achieving these objectives, the Board links the nature and amount of executive directors’ and officers’ emoluments on an annual basis based on individual performance and market conditions. In the event of serious misconduct or a material misstatement in the Group’s financial statements, the Board can reduce, cancel or defer performance-based remuneration and may also claw back performance-based remuneration paid in previous financial years. Remuneration structure In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct. Compensation of Directors and Executive Officer (i) Compensation Policy The Board of Directors of Ionic Rare Earths Limited is responsible for determining and reviewing compensation arrangements for the directors and the Chief Executive Officer. (ii) Non-Executive Director Compensation Objective The Board seeks to set aggregate compensation at a level that provides the company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. Structure The Constitution and the ASX Listing Rules specify that the aggregate compensation of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed and reviewed annually. The latest determination was in 2011 when shareholders approved an aggregate remuneration of $400,000 per year. The Board may consider advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. No consultants were used during the year. 14 IONIC RARE EARTHS LIMITED Annual Report 2020 Remuneration Report (Audited) (Continued) Non-executive directors have long been encouraged by the Board to hold shares in the company (purchased by the director on market). It is considered good governance for directors to have an equity interest in the company on which board they sit. (iii) Executive Compensation Objective The entity aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the entity so as to: • • align the interests of executives with those of shareholders; and ensure total compensation is competitive by market standards. Structure The Board periodically assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash and other non-cash benefits. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the company. (iv) Fixed Compensation Objective Fixed compensation is reviewed annually by the Board. The process consists of a review of individual performance, relevant comparative compensation in the market and internally and, where appropriate, external advice on policies and practices. Structure Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash and other non-cash benefits. (v) Variable Compensation Objective The objective is to link the achievement of the company’s targets with the compensation received by the executives charged with meeting those targets. Currently, the company does not restrict executives from entering into arrangements to protect the value of unvested Long-Term Incentives. However, under the Securities Dealing Policy, members of the Board are required to advise the Company Secretary of any shareholdings including any hedging arrangements. Share-based compensation Options or shares may be issued to directors and executives as part of their remuneration. The options or shares are not issued based on performance criteria but are issued to the directors and executives of Ionic Rare Earths Limited to increase goal congruence between executives, directors and shareholders. During the year 40,000,000 options (2019: Nil) were issued to key management personnel, details of the options are set out elsewhere in this report. No shares were issued (2019: 2,971,698) in lieu of cash directors’ fee, details of the shares issued are set out elsewhere in this report. Structure Actual payments granted to each KMP are determined by the Board who meet periodically to assess the achievements of the company’s targets. There are currently no targets established. 15 Directors’ Report Employment contracts Remuneration and other terms of employment for the following KMP are formalised in service agreements, the terms of which are set out below: Mr T J Harrison, Chief Executive Officer: • • • Term of agreement – to 31 January 2021. Fixed consulting fee of $24,000 per month Short Term Incentive of $50,000 upon the issue of a positive scoping study suitable for release to the Australian Securities Exchange before 1 November 2020. • Termination by either party with three months’ notice. Compensation of Key Management Personnel (Consolidated and Parent) Compensation of each director and the executive officer of the parent and group are as follows: Short term Post employment Share based payments Total Total options related Total performance related 30 June 2020 Salaries and fees Non Monetary Benefit1 Superannuation Options $ $ $ $ $ $ Directors B D Dickson A P Rovira M J Steffens5 T J Harrison6 Total 128,750 40,000 134,088 - 302,838 5,550 5,550 5,550 - 18,750 3,799 - - 57,750 57,750 210,800 107,099 57,750 57,750 115,500 255,138 115,500 - - - 16,650 22,549 231,000 573,037 231,000 - - - - - Short term Post employment Share based payments Total Total options related Total performance related 30 June 2019 Salaries and fees Non Monetary Benefit1 Superannuation Options $ $ $ $ $ $ Directors W G Martinick2 M J Steffens5 16,739 19,162 B D Dickson 120,000 A P Rovira B L Farrell4 D V Bright³ Total 30,000 11,332 23,607 220,840 2,079 2,912 4,991 4,991 2,079 - 17,052 1,590 - 2,850 2,850 1,077 - 8,367 - - - - - - - 20,408 22,074 127,841 37,841 14,488 23,607 246,259 - - - - - - - - - - - - 1. The Non-Monetary Benefit relates to the Directors’ Indemnity Insurance. 2. Retired 30 November 2018 3. Contracted finish 16 December 2018 4. Resigned 16 November 2018 5. Appointed 30 November 2018 6. Appointed Chief Executive Officer on 26 June 2020 During the year directors received shares to the value of Nil (2019: $12,600) in lieu of cash fees. 16 IONIC RARE EARTHS LIMITED Annual Report 2020Compensation Options: Granted and Vested during the year. During the year 40,000,000 compensation options were granted (2019: Nil). There were no alterations to the terms and conditions of options granted as remuneration since their grant date. No Compensation Options were exercised during the financial period (2019: Nil), in addition no Compensation Options were forfeited (2019: 25,000,000). The Company’s remuneration policy prohibits directors and executives from entering into transactions or arrangements which limit the economic risk of participating in unvested entitlements. Apart from the issue of options the company currently has no performance-based remuneration component built into director and executive remuneration (2019: Nil). Shareholdings of Key Management Personnel 2020 Specified Directors M J Steffens A P Rovira B D Dickson Executives T J Harrison Total Balance 1 July 2019 Purchased On Exercise of Options Received in lieu of fees Balance 30 June 2020 - 51,602,016 23,420,330 - 75,022,346 - - - - - - - - - - - - - - - - 51,602,016 23,420,330 - 75,022,346 Option Holdings of Key Management Personnel 2020 Balance at beginning of year 1 July 2019 Purchased Options Exercised Options Lapsed Balance at end of year 30 June 2020 Vested at 30 June 2020 Vested & Exercisable Unvested M J Steffens A P Rovira B D Dickson T J Harrison Total - 20,000,000 42,000,000 10,000,000 36,000,000 10,000,000 - 20,000,0001 78,000,000 60,000,000 - - - - - - 20,000,000 20,000,000 22,000,000 30,000,000 30,000,000 22,000,000 24,000,000 24,000,000 - 20,000,000 20,000,000 44,000,000 94,000,000 94,000,000 - - - - - 1. These options were issued prior to T J Harrison becoming a KMP and CEO. Other Transactions The Company has entered into a sub-lease agreement on normal commercial terms with Azure Minerals Limited, a company of which Mr Rovira is a director. During the year, the Company paid sub-lease fees totalling $17,872 (2019: $4,800). Amounts due and unpaid at 30 June 2020 to Key Management Personnel include consulting fees of $10,539 (2019: $9,034) to Braunelle Trust, a related party of M J Steffens. 17 Directors’ Report Company’s Performance Company’s share price performance The Company’s share price performance shown in the below graph for the year ended 30 June 2020 and is a reflection of the Company’s performance during the year. The variable component of the executives’ remuneration, which at this stage only includes share options, is indirectly linked to the Company’s share price performance. Loss per share Below is information on the Company’s loss per share for the previous four financial years and for the current year ended 30 June 2020. Basic loss per share (cents) 2020 (0.07) 2019 (0.06) 2018 (0.24) 2017 (0.14) 2016 (0.26) Voting and comments made at the company’s 2018 Annual General Meeting IonicRE received a 97.3% “yes” vote on its remuneration report for the 2019 financial year. The company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. End of Remuneration Report (Audited) 18 IONIC RARE EARTHS LIMITED Annual Report 2020Corporate Governance In recognising the need for the highest standards of corporate behaviour and accountability, the directors of the company support and have adhered to the principles of corporate governance. The company’s corporate governance statement is contained in the additional Australian Securities Exchange information section of this annual report. Share Options At the date of this report, there were 448,000,000 (2019: 435,000,000) share options outstanding. Balance at the beginning of the year Share option movements during the year Issued Lapsed/ Exercised Total number of Options 435,000,000 Exercisable at 5.0 cents, on or before 30 Sep ’19 - (73,000,000) (73,000,000) Exercisable at 0.5 cents, on or before 31 Aug ’22 50,000,000 (50,000,000) - Exercisable at 1.8 cents, on or before 30 Nov ’22 100,000,000 - 100,000,000 Exercisable at 0.75 cents, on or before 31 July ‘22 - (14,000,000) (14,000,000) Total options issued and exercised in the year to 30 June 2020 150,000,000 (137,000,000) 13,000,000 Total 448,000,000 The balance is comprised the following: Date Granted Expiry Date Exercise Price (cents) Number of Options 15 December 2017 25 July 2018 23 December 2019 24 March 2020 12 August 2020 30 November 2020 31 July 2021 30 November 2022 30 November 2022 30 November 2022 Total number of options outstanding at the date of this report 1.3 0.75 1.8 1.8 1.8 22,000,000 326,000,000 40,000,000 20,000,000 40,000,000 448,000,000 No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of any other body corporate. No options were exercised during the financial year. Since the end of the financial year 50,000,000 options exercisable at $0.005 and 14,000,000 options exercisable at $0.0075 options have been exercised. On 13 August 2018 the Company issued 50,000,000 Performance Rights. Pursuant to an agreement entered into between the holder of the Performance Rights and the Company 35,000,000 Performance Rights were cancelled and 15,000,000 million vested on 10 February 2020, as a result 15,000,000 fully paid ordinary shares in the capital of the Company were issued. On 31 March 2020 the Company issued 100,000,000 Performance Rights to Airguide Advisory Pte. Ltd in consideration for corporate advisory services. The vesting conditions for the Performance Rights were as follows: (i) based on the reference Share price of $0.011 ("Reference Price A"), the Reference Date Market Capitalisation Target shall be $22,000,000.00. In the event the Fully Diluted Market Capitalisation of the Company is equal or higher than $22,000,000.00, calculated based on the 20-day VWAP of the Shares, the Vesting Condition of 33,300,000 Performance Rights shall be deemed satisfied ("Tranche A Performance Rights"); (ii) based on the reference Share price of $0.022 ("Reference Price B"), the Reference Date Market Capitalisation Target shall be $44,100,000.00. In the event the Fully Diluted Market Capitalisation of the Company is equal or higher than $44,100,000.00, calculated based on the 20-day VWAP of the Shares, the Vesting Condition of 33,300,000 Performance Rights shall be deemed satisfied (''Tranche B Performance Rights"); (iii) based on the reference Share price of $0.033 ("Reference Price C"), the Reference Date Market Capitalisation Target shall be $66,100,000.00. In the event the Fully Diluted Market Capitalisation of the Company is equal or higher than $66,100,000.00, calculated based on the 20-day VWAP of the Shares, the Vesting Condition of 33,400,000 Performance Rights shall be deemed satisfied ("Tranche C Performance Rights"). On 4 August 2020 the Tranche A Performance Rights met their vesting condition. As at 30 June 2020 and the date of this report, other than as set out above, no performance share has vested. 19 Directors’ Report Non Audit Services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the Group are important. Details of the amount paid or payable to the auditor for audit and non-audit services provided during the year are set out below. The Board of Directors has considered the position and is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • All non-audit services have been reviewed by the board to ensure they do not impact the impartiality and objectivity of the auditor • None of the services underline the general principals relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-audit firms. There were no non-audit related services provided. 1. Audit Services BDO Audit (WA) Pty Ltd – audit and review of financial reports BDO (WA) Pty Ltd – Tax advice and attendance at AGM Total remuneration for audit services Auditor’s Independence Declaration Consolidated 2020 2019 $ 39,169 14,100 53,269 $ 40,624 410 41,034 We have obtained an independence declaration from our auditors, BDO Audit (WA) Pty Ltd, as presented on page 22 of this Annual Report. Events After Reporting Date On 31 January 2020, the World Health Organisation (WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (COVID-19 outbreak) and the risks to the international community as the virus spreads globally beyond its point of origin. Because of the rapid increase in exposure globally, on 11 March 2020, the WHO classified the COVID-19 outbreak as a pandemic. The full impact of the COVID-19 outbreak continues to evolve at the date of this report. The Group is therefore uncertain as to the full impact that the pandemic will have on its financial condition, liquidity, and future results of operations during FY2021. Management is actively monitoring the global situation and its impact on the Group’s financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Group is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for the 2021 financial year. On 3 July 2020 the Company completed a share placement of 312,500,000 shares at $0.008 each to raise $2,500,000 (before expenses of the issue) and on 31 July 2020 the Company completed a Share Purchase Plan and issued 125,000,036 shares at $0.008 to raise $1,000,000. During September 2020 the criteria for the group to move to 46% ownership of Rwenzori Rate Metals Limited was met. No other matter or circumstance has arisen since the end of the financial year which significantly affected or may significantly affect the operations of the group, the results of those operations, or the state of affairs of the group in future financial years. Signed in accordance with a resolution of the directors, A Rovira Chairman Perth, 24 September 2020 20 IONIC RARE EARTHS LIMITED Annual Report 2020Directors’ Declaration In accordance with a resolution of the directors of Ionic Rare Earths Limited, I state that: 1. In the opinion of the directors: (a) the financial statements, notes and additional disclosures included in the directors’ report designated as audited, of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards which, as stated in accounting policy Note 2 to the Financial Statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS), the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (b) subject to achievement of the matters as set out in Note 2(a), there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. 2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2020. On behalf of the Board A Rovira Director Perth, 24 September 2020 21 Auditors Independence Declaration 22 IONIC RARE EARTHS LIMITED Annual Report 2020Consolidated Statement of Profit or Loss and Other Comprehensive Income For Year Ended 30 June 2020 Notes Continuing operations Revenue Interest Received Other income Expenses Depreciation Consultants Directors’ fees (excluding executives) Executives’ salaries, wages and consulting fees Interest expenses Exploration expenses Legal fees Travel and accommodation Administration expenses Insurance Promotion Share based payments Impairment of receivables Loss from continuing operations before income tax Income tax credit/(expense) Loss for the year Other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences in translating foreign controlled entities Total other comprehensive loss net of tax Total comprehensive loss for the year Total Loss per share for loss attributable to the ordinary equity holders Basic loss per share (cents) Diluted loss per share (cents) 3 3 4 4 4 4 22 5 16 16 2020 $ 1,226 - - (65,895) (114,974) (203,500) - (54,791) (56,633) (21,930) 2019 $ 4,138 71,188 (3,354) (23,608) (107,233) (249,861) (1,177) (186,831) (1,782) (31,585) (208,444) (136,527) (20,103) (42,651) (670,660) (27,899) (1,486,254) - (18,216) (2,782) (288,096) (2,588) (978,314) - (1,486,254) (978,314) 1,262 1,262 15,489 15,489 (1,484,992) (962,825) (0.07) (0.07) (0.06) (0.06) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 23 Consolidated Statement of Financial Position As at 30 June 2020 Assets Current assets Cash and cash equivalents Receivables Other Total current assets Non-current assets Investments Exploration & evaluation expenditure Total non-current assets Total assets Liabilities Current liabilities Payables Other Total current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Notes 30 June 2020 $ 30 June 2019 $ 14 7 8 10 11 829,933 16,761 6,541 853,235 2,461,308 525,697 2,987,005 691,153 28,722 6,677 726,552 - - - 3,840,240 726,552 127,980 210,000 337,980 65,378 - 65,378 337,980 65,378 3,502,260 661,174 12 13 27,938,424 24,503,006 6,119,656 5,227,734 (30,555,820) (29,069,566) 3,502,260 661,174 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 24 IONIC RARE EARTHS LIMITED Annual Report 2020Consolidated Statement of Cash Flows For Year Ended 30 June 2020 Cash flows from operating activities Payments to suppliers and employees Payments for exploration expenditure Interest received Notes 2020 $ 2019 $ (757,340) (751,892) (54,791) (186,831) 1,226 4,138 Net cash flows used in operating activities 14 (810,905) (934,585) Cash flows from investing activities Proceeds from sale of mineral concessions Proceeds from sale of plant and equipment Payment for investments Payment for capitalised exploration - - (1,031,673) (525,697) 28,796 30,393 - Net cash flows used in investing activities (1,557,370) 59,189 Cash flows from financing activities Proceeds from issue of ordinary shares (net of transaction costs) Proceeds received in advance of 3 July share placement Repayment of borrowings Interest on borrowings 2,296,982 1,332,601 210,000 - - - (100,000) (3,420) Net cash flows from financing activities 2,506,982 1,229,181 Net (decrease)/ increase in cash and cash equivalents 138,707 353,785 Cash and cash equivalents at the beginning of the financial year Effect of exchange rate changes on cash and cash equivalents 691,153 73 Cash and cash equivalents at the end of the financial year 14 829,933 322,994 14,374 691,153 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 25 Consolidated Statement of Changes in Equity For Year Ended 30 June 2020 Ordinary shares $ Convertible notes Reserve $ Share option Reserve $ Foreign Currency Translation Reserve $ Accumulated losses $ Total $ At 1 July 2019 24,503,006 136,403 5,326,197 (234,866) (29,069,566) 661,174 Loss for the period Other Comprehensive loss Total comprehensive loss for the period - - - Transactions with owners in their capacity as owners Shares issued during the period 3,489,756 Transaction costs (159,338) Vesting of performance rights 105,000 Share based payments - - - - - - - - - - - - - (105,000) 995,660 - (1,486,254) (1,486,254) 1,262 - 1,262 1,262 (1,486,254) (1,484,992) - - - - - - - - 3,489,756 (159,338) - 995,660 At 30 June 2020 27,938,424 136,403 6,216,857 (233,604) (30,555,820) 3,502,260 Ordinary shares $ Convertible notes Reserve $ Share option Reserve $ Foreign Currency Translation Reserve $ Accumulated losses $ Total $ At 1 July 2018 23,157,805 136,403 5,038,101 (250,355) (28,091,252) (9,298) Loss for the period Other Comprehensive loss Total comprehensive loss for the period - - - Transactions with owners in their capacity as owners Shares issued during the period 1,437,600 Transaction Costs (92,399) Share based payments - - - - - - - - - - - - 288,096 - (978,314) (978,314) 15,489 - 15,489 15,489 (978,314) (962,825) - - - - - - 1,437,600 (92,399) 288,096 At 30 June 2019 24,503,006 136,403 5,326,197 (234,866) (29,069,566) 661,174 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 26 IONIC RARE EARTHS LIMITED Annual Report 2020Consolidated Statement of Changes in Equity For Year Ended 30 June 2020 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 1. CORPORATE INFORMATION The Consolidated Financial report of Ionic Rare Earths Limited for the year ended 30 June 2020 was authorised for issue in accordance with a resolution of the directors on 23 September 2020. The consolidated financial statements and notes represent those of Ionic Rare Earths Limited and its controlled entities (the “Group”). The consolidated entity’s functional and presentation currency is AUD ($). The separate financial statements of the parent entity, Ionic Rare Earths Limited, have not been presented within this financial report as permitted by the Corporations Act 2001. Ionic Rare Earths Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the Directors’ Report 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Preparation The Financial report is a general-purpose Financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards, Australian Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board. The Financial report has also been prepared on an accruals basis and is based on historical cost basis, except for certain available-for-sale financial assets, which have been measured at fair value. The Group is a for-profit entity for the purpose of preparing the financial statements. Australian Accounting Standards set out accounting policies that the AASB has concluded that 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 reports and notes also comply with International Financial Reporting Standards. Going Concern This report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal course of business. The Consolidated Entity has incurred a net loss after tax for the year ended 30 June 2020 of $1,486,254 (2019: $978,314) and experienced net cash outflows from operating activities of $810,905 (2019: $934,585). At 30 June 2020, the Consolidated Entity had net current assets of $515,255 (2019: $661,174). The ability of the Consolidated Entity to continue as a going concern is dependent on securing additional funding either through the issue of further shares, convertible notes or a combination of both in order to continue to actively explore its mineral properties and meet its spend and milestone payment commitments under the Makuutu earn-in agreement (refer note 7). The COVID-19 pandemic, announced by the World Health Organisation on 31 January 2020, is having a negative impact on world stock markets, currencies and general business activity. The Group has developed a policy and is evolving procedures to address the health and wellbeing of employees, consultants and contractors in relation to COVID-19. The timing and extent of the impact and recovery from COVID-19 is unknown but it may have an impact on activities and potentially impact the ability for the entity to raise capital in the current prevailing market conditions. These conditions indicate a material uncertainty that may cast significant doubt about the Consolidated Entity’s ability to continue as a going concern and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The Directors believe that on successful completion of fund raising activities referred to above there will be sufficient funds to meet the Consolidated Entity’s working capital requirements and as at the date of this report the Consolidated Entity believes it can meet all liabilities as and when they fall due. The Directors have reviewed the business outlook and the assets and liabilities of the Consolidated Entity and are of the opinion that the use of the going concern basis of accounting is appropriate as they believe the Consolidated Entity will continue to be successful in securing additional funds through debt or equity issues or partial sale of its mineral properties as and when the need to raise working capital arises. The Directors note that on 3 July 2020 the Company completed a share placement of 312,500,000 shares at $0.008 each to raise $2,500,000 (before expenses of the issue) and on 31 July 2020 a further $1,000,000 (before expenses of the issue) was raised through the issue of 125,000,036 shares by way of a Share Purchase Plan. Should the Consolidated Entity not be able to continue as a going concern, it may be required to realise its assets and discharge its liabilities other than in the ordinary course of business, and at amounts that differs from those stated in the financial statements. The financial report does not include any adjustments relating to the recoverability and classification of recorded assets or liabilities that may be necessary if the Consolidated Entity is unable to continue as a going concern. 27 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Adoption of new and amended accounting standards The accounting policies adopted are consistent with those of the previous financial year and corresponding reporting period except for the adoption of AASB 16: Leases which became mandatory for the first time this reporting period commencing 1 July 2019. The adoption of this standard did not result in a material adjustment to the amounts or disclosures in the current or prior year. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. The following relevant standards and interpretations have been issued by the Australian Accounting Standards Board (AASB) but are not yet effective for the year ending 30 June 2020: AASB 2018-6: Amendments to the Australia Accounting Standards – Definition of a business This standard amends AASB 3 Business Combinations’ (“AASB 3”) definition of a business. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contributes to the ability to create outputs. The new guidance provides a framework to evaluate when an input and a substantive process are present. The revisions to AASB 3 also introduced an optional concentration test. If the concentration test is met, the set of activities and assets acquired is determined not to be a business combination and asset acquisition accounting is applied. The concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The Group’s assessment of the impact of this new amendment is that it is not expected to have a material impact on the Group in the current or future reporting periods. (iv) Other standards not yet applicable A number of other standards, amendments to standards and interpretations issued by the AASB which are not materially applicable to the Group have not been applied in preparing these consolidated financial statements. (c) Basis of consolidation The parent entity and its subsidiaries are collectively referred to as the “Group”. The parent of this Group is Ionic Rare Earths Limited. Entities (including structured entities) over which the parent (or the Group) directly or indirectly exercises control are called “subsidiaries”. The consolidated financial statements incorporate the assets, liabilities and results of all subsidiaries. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the Group’s subsidiaries is provided in Note 9. The assets, liabilities and results of subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group companies are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are referred to as ‘non-controlling interests’. The Group recognises any non-controlling interests in subsidiaries on a case-by-case basis either at fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of profit or loss and other comprehensive income. (d) Significant accounting estimates and assumptions Impact of Coronavirus (COVID-19) pandemic. Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the company based on known information. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the company unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Treatment of expenditure on the Makuutu project Management have applied judgement in the treatment of expenditure incurred on the Makuutu Project in Uganda. (see further details on the acquisition in note 7). Expenditure incurred in order to acquire the project has been capitalised as initial cost an investment in associate (being Rwenzori Rare Metals Limited (‘RML”)) which represents the group’s 20% interest RML which the group has significant influence over. In addition, exploration expenditure incurred during the period to increase the groups interest to 31% has also been capitalised as a further investment in RML. 28 IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The group assesses whether there is objective evidence that the investment in associate is impaired by reference to the underlying project held by RML which is in exploration stage. Management have in accordance with AASB 6: Exploration and Evaluation of Mineral Assets, performed a review of impairment indicators on the investment in associate which included the review of the rights to tenure and future planned expenditure. During the earn in period contributed expenditure incurred is deemed to be capitalised exploration and evaluation expenditure, as opposed to contributions towards the associate. Once an earn in milestone has been met, expenditure is transferred from capitalised exploration and evaluation expenditure to Investment in Associate. Share based payments The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the binominal or implied barrier formula. For options issued in this financial year, the assumptions detailed as per Note 22 were used. Exploration and evaluation costs Exploration and evaluation costs are written off in the year they are incurred apart from acquisition costs which are carried forward where right of tenure of the area of interest is current and are expected to be recouped through sale or successful development and exploitation of the area of interest or, where exploration and evaluation activities in the area of interest have not reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. The future recoverability of exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself, or, if not, whether it successfully recovers the related exploration and evaluation assets through sale. Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made. (e) Investments in Associates Associates Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for by using the equity method of accounting after being initially recognised at cost. Equity method Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. When the Group’s share of losses in an equity-accounted investment equals or excess its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group. The carrying amount of equity-accounted investments is tested for impairment each reporting period. (f) Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at the bank and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 29 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (g) Other receivables Other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment. (h) Foreign currency translation Both the functional and presentation currency of Ionic Rare Earths Limited and its Australian subsidiaries is Australian dollars (A$). Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. All resulting exchange differences in the consolidated financial statements are taken to the statement of profit or loss and other comprehensive income. Group companies 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. (j) Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the end of the reporting period. Deferred income tax is provided on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: • when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each end of the reporting period and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is 30 IONIC RARE EARTHS LIMITED Annual Report 2020(j) Income tax Continued) realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of the reporting period. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Tax consolidation legislation Ionic Rare Earths Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2003. The head entity, Ionic Rare Earths Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. (i) Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: • where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (m) Trade and other payables Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The Group provides benefits to directors, employees and consultants of the Group (with shareholders’ approval) in the form of share- based payment transactions, whereby directors, employees and consultants render services in exchange for options over shares (‘equity-settled transactions’). The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using a binomial model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Ionic Rare Earths Limited (‘market conditions’). The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’). The cumulative expense recognised for equity-settled transactions at each End of the reporting period until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information at reporting date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification. 31 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 (n) Share-based payment transactions (Continued) Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. (o) 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. Effective 1 July 1998, the corporations legislation abolished the concepts of authorised capital and par value shares. Accordingly, the company does not have authorised capital nor par value in respect of its issued capital. Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. (p) Earnings per share Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: • • costs of servicing equity (other than dividends) and preference share dividends; the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and • other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares: • divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (q) Comparative figures When required by accounting standards comparative figures have been adjusted to conform to changes in the presentation for the current financial year. (r) Exploration and development expenditure Exploration and evaluation costs are written off in the year they are incurred apart from acquisition costs which are carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest or, where exploration and evaluation activities in the area of interest have not reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Where an area of interest is abandoned or the directors decide that it is not commercial, any accumulated acquisition costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs written off to the extent that they will not be recoverable in the future. Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. Farm-In policy The farmee accounts for its expenditure under a farm-in arrangement in the same way as directly incurred exploration expenditure. Farm-out policy The farmor records expenditure made on behalf of the farmee but offsets any reimbursements for this expenditure. No gain or loss on farm-out arrangement is recognised. 32 IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 3. REVENUE The Group derives the following types of income Interest received Profit on minerals concession sale 4. EXPENSES AND LOSSES Profit/(loss) from continuing operations before income tax includes the following specific expenses Depreciation on equipment Salaries & wages expenses Operating lease rentals Directors’ benefit expense (excluding executive directors) Exploration expenses 5. INCOME TAX The major components of income tax expense are: Statement of profit or loss and other comprehensive income Current income tax benefit/(expense) Deferred income tax benefit/(expense) Income tax benefit/(expense) reported in the statement of profit or loss and other comprehensive income 2020 $ 1,226 - 2020 $ - 2019 $ 4,138 57,592 2019 $ 3,354 203,500 249,861 17,872 114,974 54,791 23,588 107,233 186,831 2020 $ - - - 2019 $ - - - A reconciliation between tax expense and the product of accounting profit/(loss) before income tax multiplied by the Group’s applicable income tax rate is as follows: Accounting loss before income tax At the Group’s statutory income tax rate Less: Share options expenses during the year Exploration expenditure Other expenditure not allowable for income tax purposes Current year tax losses not brought to account 2020 $ (1,486,254) (408,720) 184,432 15,068 13,537 (195,683) 195,683 2019 $ (978,314) (269,036) 79,226 51,379 6,786 (131,645) 131,645 Income tax (benefit)/expense reported in the consolidated statement of profit or loss and other comprehensive income - - 33 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 5. INCOME TAX (CONTINUED) Deferred Income Tax Deferred income tax at 30 June relates to the following: Deferred tax liabilities Prepayments Total deferred tax liabilities Deferred tax assets Accrued expenses Capital raising costs Tax assets/losses recognised /(not brought to account) Total deferred tax assets 2020 $ (1,799) (1,799) 5,500 19,964 (23,665) 1,799 2019 $ (1,836) (1,836) 5,500 13,308 (16,972) 1,836 Net deferred tax liabilities/(asset) - - Other than to offset deferred tax liabilities the Group has not recognised tax losses arising in Australia of $12,993,498 (2019: $12,268,908) that may be available for offset against future taxable profits of the companies in which the losses arose. The potential benefit of carried forward losses will only be obtained if assessable income is derived of a nature and, of an amount sufficient to enable the benefit from the deductions to be realised or the benefit can be utilised by the Company provided that : (i) the provisions of deductibility imposed by law are complied with; (ii) the group satisfies the continuity of ownership test from the period the losses were incurred to the time they are to be utilised; and (iii) no change in tax legislation adversely affect the realisation or the benefit from the deductions. Tax Consolidation Ionic Rare Earths Limited and its 100% owned Australian subsidiaries have formed a tax consolidated group. Members of the group entered into a tax sharing arrangement in order to allocate the income tax expense to the wholly owned subsidiaries on a pro-rata basis. The agreement provides for the allocation of income tax liabilities should the head entity default on its tax payment obligations. At the reporting date, the possibility of default is remote. Tax effect accounting by members of the tax consolidated group The allocation of taxes under the tax sharing and funding agreement is recognised as an increase/decrease in the subsidiaries’ inter-company accounts with the tax consolidated group head company, Ionic Rare Earths Limited. The group has applied the group allocation approach in determining the appropriate amount of current taxes to allocate to members of the tax consolidated group. 34 IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 6. OPERATING SEGMENT The Group has based its operating segment on the internal reports that are reviewed and used by the Board of Directors (“Board”) (the chief operating decision makers) in assessing performance and in determining the allocation of resources. The Group does not have production and is only currently involved in exploration activities. As a consequence, activities in the operating segment are identified by the Board based on the manner in which resources are allocated and the nature of the resources provided. Based on this criterion, the Board has determined that the Group has one operating segment, being exploration, and the segment operations and results are the same as the Groups results. During the period the Company conducted its activities across three geographic locations, being Australia, Uganda and Nicaragua. 2020 Revenues Loss Non-current assets Total assets Total liabilities 2019 Revenues Loss Non-current assets Total assets Total liabilities 7. INVESTMENTS Australia $ 1,226 (1,403,790) - 841,780 (260,585) Australia $ 4,138 (779,904) - 686,449 (63,367) Nicaragua $ - (27,899) - 11,455 - Nicaragua $ 71,188 (198,410) - 40,103 (2,011) Uganda $ - (54,791) - 2,987,005 (77,395) Uganda $ - - - - - Total $ 1,226 (1,486,480) - 3,840,240 (337,980) Total $ 75,326 (978,314) - 726,552 (65,378) An amount of $2,461,308 has been presented in the financial statements as an Investment in Associates. This represents amounts incurred to acquire an interest in Rwenzori Rare Metals Limited which holds 100% of the Makuutu Rare Earth Elements project. Refer to note 21 for further information. This includes the amounts set out below. Subscription for initial 20% interest in Rwenzori Rare Metals Limited US$100,000 paid to Rare Earth Elements Africa Pty Ltd 29,179,517 fully paid shares issued to Rare Earth Elements Africa Pty Ltd 100,000,000 fully paid shares issued to Southern Cross Mining Pty Ltd 50,000,000 options (exercise price) of $0.005 issued to SCM Expenditure on exploration and evaluation for additional 11% interest 2020 $ 148 148,035 233,436 800,000 325,000 954,689 2,461,308 2019 $ - - - - - - 35 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 7. INVESTMENTS (CONTINUED) Summarised financial information for associate – Rwenzori Rare Metals Limited (RRM) Summarised financial information for associate – Rwenzori Rare Metals Limited (RRM) The table below summarises the financial information for the associate that are material to Ionic Rare Earths Limited. The information disclosed reflects the amounts presented in the financial statements of RRM and not Ionic Rare Earths Limited share of those amounts. They have been amended to reflect adjustments, if any, made by Ionic Rare Earths Limited when using the equity method, including fair value adjustments and modifications for differences in accounting policy. Current assets Cash Non-current assets Plant and equipment Current Liabilities Payables Net assets Groups share in % Groups share in $ Fair value uplift Carrying amount 2020 $ 18,346 9,690 1,454 26,582 31% 8,240 2,453,068 2,461,308 2019 $ - - - - - - The fair value uplift is attributable to IonicRE’s contribution towards exploration in excess of their share of the net assets of RRM. The Company’s may increase its interest in RRM from 31% to 46% and then from 46% to 51% by contributing US$800,000 and US$350,000 respectively. At 30 June 2020 the Company had expended US$342,480 towards the US$800,000 contribution (refer to note 21(c)). 8. EXPLORATION AND EVALUATION EXPENDITURE At Cost (a) Impairment of exploration & evaluation expenditure Carrying amount at the end of the financial year Carrying amount at the beginning of the financial year Additions Transferred to Investment in Associate Exchange differences Carrying amount at the end of the financial year 36 2020 $ 525,697 - 525,697 - 1,480,386 (954,689) - 525,697 2019 $ - - - - - - - - IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 8. EXPLORATION AND EVALUATION EXPENDITURE (CONTINUED) (a) This amount represents contribution to expenditure to earn an additional 15% interest in Rwenzori Rare Metals Limited which hold the Makuutu exploration licence. At 30 June 2020 IonicRe held a 31% interest in Rwenzori rare Metals Limited. Subsequent to year end, the criteria for the next milestone was met and this amount was reclassified to investment in associate. Recovery of the capitalised amount is dependent upon: (i) the continuance of the Group’s right to tenure of the area of interest; (ii) the results of future exploration; and (iii) the successful development and commercial exploitation, or alternatively sale. 9. INTEREST IN SUBSIDIARIES The subsidiaries listed below have share capital consisting solely of ordinary shares. Each country of incorporation is also its principal place of business. (Non current) Name of Subsidiary Goldcap Resources Pty Limited And its subsidiary Minera San Cristobal, S.A. Country of Incorporation Australia % equity held by consolidated entity 2020 100 2019 100 Nicaragua 100 100 There are no significant restrictions over the Group’s ability to access or use assets and settle liabilities of the group. 10. PAYABLES (CURRENT) Trade creditors and accruals 11. OTHER LIABILITIES (CURRENT) Amounts received in advance of capital raising completed on 3 July 2020 2020 $ 127,980 2020 $ 210,000 2019 $ 65,378 2019 $ - 37 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 12. CONTRIBUTED EQUITY (a) Issued and paid up capital Fully paid ordinary shares Less: capital raising costs 2020 $ 30,017,154 (2,078,730) 27,938,424 2019 $ 26,422,398 (1,919,392) 24,503,006 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote. (b) Movements in ordinary share capital 2020 2019 Number of shares $ Number of shares $ Beginning of the financial year 1,555,678,533 24,503,006 982,706,835 23,157,805 Issued during the year Issue at $0.0025 Issue at $0.0042 Issue at $0.003 Issue at $0.006 Issue at $0.008 Issue at $0.007 Issue at $0.008 Cost of share issues (i) (ii) (i) (i) (iii) (iv) (i) - - 200,000,000 117,720,000 129,179,517 15,000,000 143,750,000 - - - 570,000,000 2,971,698 1,425,000 12,600 600,000 706,320 1,033,436 105,000 1,150,000 (159,338) - - - - - - - - - - - (92,399) End of the financial year 2,161,328,050 27,938,424 1,555,678,533 24,503,006 (i) Funds raised from the share placements during the 2020 and 2019 year were used to progress the Group’s exploration activities and for general working capital. (ii) Issued in lieu of directors’ fees and executive service fees – shares issued based on volume average weighted price for the relevant quarter. (iii) Facilitation fee for the acquisition of the makutu project in Uganda (iv) Issued on vesting of performance rights. (c) Movements in unlisted options on issue At the date of this report, there were 472,000,000 (2019: 435,000,000) share options outstanding. Issued Exercised Lapsed Total number of Options Balance at the beginning of the year Share option movements during the year Total options issued and lapsed in the year to 30 June 2020 Balance at the end of the year 110,000,000 - (73,000,000) 435,000,000 37,000,000 472,000,000 38 IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 12. CONTRIBUTED EQUITY (CONTINUED) (c) Movements in unlisted options on issue (Continued) The balance of options on issue is comprised of the following: Date Granted 15 December 2017 25 July 2018 6 September 2019 23 December 2019 24 March 2020 Total number of options outstanding at the date of this report (d) Director and staff shares issued During the year the following shares were issued in lieu of fees. Specified Directors W G Martinick Total (e) Capital Management Expiry Date Exercise Price (cents) 30 November 2020 31 July 2021 31 August 2022 30 November 2022 30 November 2022 1.3 0.75 0.5 1.8 1.8 Number of Options 22,000,000 340,000,000 50,000,000 40,000,000 20,000,000 472,000,000 Number of Shares 2020 - - 2019 2,971,698 2,971,698 When managing capital, management’s objective is to ensure the Group continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the Group. The Group is not exposed to any externally imposed capital requirements. 39 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 13. RESERVES Share Option Reserve Balance at beginning of year Vesting of performance rights Movement during the year Balance at the end of year Convertible Note Equity Reserve Balance at beginning of year Movement during the year Balance at the end of year Foreign Currency Translation Reserve Balance at beginning of year Movement during the year Balance at the end of year Nature and purpose of reserves Share option reserve 2020 $ 2019 $ 5,326,197 (105,000) 995,660 6,216,857 5,038,101 - 288,096 5,326,197 136,403 136,403 - - 136,403 136,403 (234,866) 1,262 (233,604) (250,355) 15,489 (234,866) This reserve records the value of options issued to directors, employees and associates as part of their remuneration. Convertible note equity reserve This reserve records the equity portion attributable to the convertible notes at the time of issue. Foreign currency translation reserve This reserve is used to record exchange differences arising from the translation of foreign controlled subsidiaries. 14. STATEMENT OF CASH FLOWS Reconciliation of the net profit/(loss) after tax to the net cash flows from operations Net loss Depreciation of plant and equipment Share based payments Fees paid through share issue Profit on asset sales Interest on director loan Changes in assets and liabilities Trade receivables Prepayments Trade and other creditors Net cash flows used in operating activities 40 2020 $ 2019 $ (1,486,254) (978,314) - 670,660 - - - (16,761) 136 21,314 (810,905) 3,354 288,096 12,600 (42,392) 3,420 (16,083) (1,805) (203,461) (934,585) IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 14. STATEMENT OF CASH FLOWS (CONTINUED) (a) Reconciliation of cash Cash at bank Short term deposit Closing cash balance 2020 $ 796,432 33,501 829,933 2019 $ 657,652 33,501 691,153 Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term deposits are made at various periods on call, depending on the immediate cash requirements of the Group and earn interest at the respective short term deposit rates. At 30 June 2020, the Group had borrowing facilities of $30,000 (2019: $30,000). The short term deposit is provided as security for $30,000 of the facilities. This facility is unutilised at 30 June 2020. The fair value of cash and cash equivalents is $829,933 (2019: $691,153). The effective interest rate on cash at bank was 0.8% (2019: 1.0%). Refer to Note 20 for risk exposure. (b) Non-cash investing and financing activities During the financial year the Group undertook the following non-cash financing activities. Shares issued as facilitation fees for the introduction of the Makuutu Project 29,179,517 fully paid shares issued to Rare Earth Elements Africa Pty Ltd 100,000,000 fully paid shares issued to Southern Cross Mining Pty Ltd (SCM) 50,000,000 options (exercise price) of $0.005 issued to SCM 2020 $ 2019 $ 233,436 800,000 325,000 1,358,436 - - - - 15. EVENTS OCCURRING AFTER THE REPORTING PERIOD On 31 January 2020, the World Health Organisation (WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (COVID-19 outbreak) and the risks to the international community as the virus spreads globally beyond its point of origin. Because of the rapid increase in exposure globally, on 11 March 2020, the WHO classified the COVID-19 outbreak as a pandemic. The full impact of the COVID-19 outbreak continues to evolve at the date of this report. The Group is therefore uncertain as to the full impact that the pandemic will have on its financial condition, liquidity, and future results of operations during FY2021. Management is actively monitoring the global situation and its impact on the Group’s financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Group is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for the 2021 financial year. On 3 July 2020 the Company completed a share placement of 312,500,000 shares at $0.008 each to raise $2,500,000 (before expenses of the issue) and on 31 July 2020 the Company completed a Share Purchase Plan and issued 125,000,036 shares at $0.008 to raise $1,000,000. During September 2020, the criteria for the group to move to 46% ownership of Rwenzori Rate Metals Limited was met. No other matter or circumstance has arisen since the end of the financial year which significantly affected or may significantly affect the operations of the group, the results of those operations, or the state of affairs of the group in future financial years. 41 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 16. EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary Owners of the parent, adjusted to exclude any costs of servicing equity, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary Owners of the parent by the weighted average number of ordinary shares during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. The following reflects the income / (loss) and share data used in the calculations of basic and diluted earnings per share: (a) Basic and diluted earnings per share From continuing operations attributable to the ordinary Owners of the company (b) Reconciliations of earnings used in calculating earnings per share Loss attributable to the ordinary Owners of the company used in calculating basic and diluted earnings per share 2020 Cents (0.07) $ 2019 Cents (0.06) $ From continuing operations (1,486,254) (978,314) Weighted average number of ordinary shares on issue used in the calculation of continuing and discontinued basic and diluted earnings per share 2,000,293,466 1,517,735,008 (c) Effect of dilutive securities Options on issue at reporting date could potentially dilute basic earnings per share in the future. The effect in the current year is to decrease the loss per share hence they are considered anti-dilutive. Accordingly, diluted loss per share has not been disclosed. 17. AUDITOR’S REMUNERATION Amounts received or due for an audit or review of financial statements: BDO Audit (WA) Pty Ltd 18. KEY MANAGEMENT PERSONNEL Compensation of key management personnel by compensation Short-term Post employment Share-based payment 42 2020 $ 39,169 39,169 2020 $ 319,488 22,549 231,000 573,037 2019 $ 40,624 40,624 2019 $ 258,792 46,042 12,600 317,434 IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 19. RELATED PARTY DISCLOSURE (a) Subsidiaries The consolidated financial statements include the financial statement of Ionic Rare Earths Limited and the subsidiaries listed in the following table. Name Country of incorporation Equity interest Investment 2020 % 100 100 2019 % 100 100 2020 $ 2019 $ 120,000 120,000 - - 120,000 120,000 Goldcap Resources and its 100% owned subsidiary Australia Minera San Cristobal, S.A. Nicaragua (b) Ultimate parent Ionic Rare Earths Limited is the ultimate parent entity. (c) Other The Company has entered into a sub-lease agreement on normal commercial terms with Azure Minerals Limited, a company of which Mr Rovira is directors. During the year the Company paid sub-lease fees totalling $17,892 (2019: $4,800). (d) Loans to/from Key Management Personnel There were no loans outstanding to or from key management personnel as at 30 June 2020 (2019: Nil). (e) Other transactions and balances with Key Management Personnel During the year directors received shares to the value of Nil (2019: $12,600) in lieu of cash fees. Amounts due and unpaid at 30 June 2020 to Key Management Personnel includes consulting fees of $10,539 to Braunelle Trust, a related party of M J Steffens. 43 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 20. FINANCIAL INSTRUMENTS (a) Financial Risk Management The Group’s financial instruments comprise receivables, payables and cash. The Group’s main risks arising from the financial instruments are: (i) interest rate risk, (ii) liquidity risk, (iii) credit risk (iv) foreign currency risk. Risk Exposures and Responses (i) Interest Rate Risk Interest rate risk is the risk that changes in interest rates will affect the Group’s income. The objective of interest rate risk management is to manage and control risk exposures within acceptable parameters, while optimising any return. As the Group has interest bearing assets, the Group’s income and operating cash flows are exposed to changes in market interest rates. The assets are short term interest bearing deposits. The Group does not have any policy in place and no financial instruments are employed to mitigate interest rate risks. At reporting date, the Group had the following financial assets exposed to Australian and Nicaraguan variable interest rate risk: Australia Financial assets Cash at bank Nicaragua Financial assets Cash at bank 2020 $ 2019 $ 784,977 679,772 11,455 11,381 The Group has no interest bearing liabilities and is therefore not exposed to interest rate risks. The following sensitivity analysis is based on the interest rate risk exposures in existence at the end of the reporting period. The 1% sensitivity is based on reasonable possible change over the financial year using the observed range for the historic 2 years. At 30 June, if interest rates had moved, as illustrated in the table below, with all variables held constant, post tax profit and equity would have been affected as follows: Judgements of reasonably possible movements: Post tax profit Higher/(Lower) Equity Higher/(Lower) CONSOLIDATED +1% (100 basis points) -1% (100 basis points) 2020 $ 7,964 (7,964) 2019 $ 6,912 (6,912) 2020 $ 7,964 (7,964) 2019 $ 6,912 (6,912) The movements in profit and equity are due to higher/lower interest costs from variable rate cash balances. 44 IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 20. FINANCIAL INSTRUMENTS (CONTINUED) (ii) Liquidity Risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The table below reflects all contractually fixed pay-offs and receivables for settlement, repayments and interest resulting from recognised financial assets and liabilities. Undiscounted cash flows of financial liabilities are presented The Group has no derivative financial instruments. The remaining contractual maturities of the Group’s financial liabilities are: 6 months or less 6 – 12 months 1 – 5 years 2020 $ 127,980 - - 2019 $ 65,378 - - 127,980 65,378 Maturity analysis of financial assets and liability based on management’s expectation The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and (outflows). Leasing obligations, trade payables and other financial liabilities mainly originate from the financing of assets used in our ongoing operations such as property, plant and equipment and investments in working capital e.g. inventories and trade receivables. These assets are considered in the Group’s overall liquidity risk. Consolidated Year ended 30 June 2020 Financial assets Cash & cash equivalents Trade & other receivables Financial liabilities Trade & other payables Net Maturity Year ended 30 June 2019 Financial assets Cash & cash equivalents Trade & other receivables Financial liabilities Trade & other payables Net Maturity <6 months $ 6 – 12 months $ 1 – 5 years $ > 5 years $ Total $ 829,933 16,761 846,694 127,980 718,714 691,153 28,722 719,875 65,378 65,378 654,497 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 829,933 16,761 846,694 127,980 718,714 691,153 28,722 719,875 65,378 65,378 654,497 45 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 20. FINANCIAL INSTRUMENTS (CONTINUED) (iii) Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from transactions with customers and investments. The Group’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of the financial assets of the Group, which comprises of cash and cash equivalents, trade and other receivables and available for sale financial assets. The Group does not hold any credit derivatives to offset its exposure. The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. Receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. The Group places its cash deposits with institutions with a credit rating of AA or better and only with major banks. Fair value The fair values of financial assets and liabilities approximate their carrying amounts shown in the statement of financial position due to their short-term nature. The carrying amounts of financial assets and liabilities as described in the statement of financial position are as follows: Consolidated Carrying Amount Aggregate Net Fair Value Financial Asset Cash Receivables Total financial assets Financial Liabilities Trade creditors and accruals and other creditors Total financial liabilities 2020 $ 829,933 16,761 846,694 127,980 127,980 2019 $ 691,153 28,722 719,875 2020 $ 829,933 16,761 846,694 2019 $ 691,153 28,722 719,875 65,378 65,378 127,980 127,980 65,378 65,378 The following methods and assumptions are used to determine the net fair values of financial assets and liabilities: Cash and cash equivalent: The carrying amount approximates fair value because of their short-term to maturity. Receivables and payables: The carrying amount approximates fair value. (iv) Foreign Currency Risk Foreign currency risk is the risk that changes in foreign exchange rates will affect the Group’s income or the value of its holdings of financial instruments. The Group is exposed to currency risk on purchases that are denominated in a currency other than the respective functional currencies of Group entities, primarily the United Sates Dollar (USD) and Nicaragua Cordoba (NiC). The currencies in which the transactions primarily are denominated are USD and NiC. The Group has not entered into any derivative financial instruments to hedge such transactions and anticipated future receipts or payments that are denominated in a foreign currency. Group’s investments in its subsidiaries are not hedged as those currency positions are considered to be long term in nature. 46 IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 (iv) Foreign Currency Risk (Continued) Exposure to currency risk The Group’s exposure to foreign currency risk at reporting date, expressed in Australian dollars (AUD), was: Cash Trade Receivables Trade Payables Gross Statement of Financial Position Exposure Forward exchange contracts Net Exposure The following significant exchange rates applied during the year: 2020 (AUD) Nic 2019 (AUD) Nic 11,455 - - 11,455 - 11,455 11,381 28,722 (2,011) 38,092 - 38,092 AUD/Nic Sensitivity analysis Average rate Reporting date spot rate 2020 22.7 2019 23.2 2020 23.5 2019 23.3 Over the reporting period there have been significant movements in the Australian dollar when compared to other currencies, it is therefore considered reasonable to review sensitivities base on a 10% movement in the Australian dollar. A 10 percent movement of the Australian dollar against the Nicaraguan Cordoba at 30 June would have affected equity and loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis was performed on the same basis for 2018. 30 June 2020 Nicaragua Cordoba 30 June 2019 Nicaragua Cordoba Equity $ Profit or loss $ Nil +/- 1,984 - - 47 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 21. PARENT ENTITY FINACIAL INFORMATION (a) Summary Financial Information The following information has been extracted from the books and records of the parent and has been prepared in accordance with Accounting Standards: Statement Of Financial Position Assets Current assets Non-Current assets Total assets Liabilities Current liabilities Total liabilities Equity Issued capital Reserves Share-option Convertible note equity Accumulated loses Total Equity Statement Of Profit Or Loss And Other Comprehensive Income Total loss Total comprehensive loss (b) Guarantees 2020 $ 2019 $ 841,780 2,987,005 3,828,785 337,980 337,980 686,449 - 686,449 63,367 63,367 27,938,424 24,503,006 6,216,857 5,326,197 136,403 136,403 (30,800,879) (29,342,523) 3,490,805 623,083 (1,458,355) (1,118,682) (1,458,355) (1,118,682) Ionic Rare Earths Limited has not entered into any guarantees, in the current or previous financial year, in relation to the debts of its subsidiaries. (c) Contingent liabilities On 19 August 2019, the Group received shareholder approval to acquire up to a 60% interest in the Makuutu rare earths project (Makuutu). Makuutu is owned 100% by Ugandan registered Rwenzori Rare Metals Limited (RRM) which at the time was owned 85% by South African registered Rare Earth Elements Africa Proprietary Limited (REEA). IonicRE has entered into a binding option agreement with both companies that enables it to acquire up to a 60% direct interest in RRM, and thereby up to a 60% indirect interest in the project by: 1. the payment of US$10,000 for a 30-day exclusive option period. This payment has been made. 2. Upon exercise of the option, the payment of US$100,000 cash and issuing US$150,000 in IonicRE shares, at a 30-day VWAP in return for an immediate 20% interest in RRM. This payment has been made and the issue of shares completed. 3. IonicRE to contribute US$1,700,000 of expenditure by 1 October 2020 to earn up to a 51% staged interest in RRM as follows: Spend Interest earned Cumulative Interest earned Exercise of Option US$100,000 as in 2 above Expenditure contribution of US$650,000 Expenditure contribution of further US$800,000 Expenditure contribution of further US$250,000 20% 11% 15% 5% 20% 31% 46% 51% As at the date of this report the first three expenditure commitments set out in the above table have been met and IonicRE has earned a 46% interest in the share capital of Rwenzori. 48 IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 21. PARENT ENTITY FINACIAL INFORMATION (CONTINUED) (c) Contingent liabilities (CONTINUED) 4. IonicRe to fund to completion of a bankable feasibility study to earn an additional 9% interest for a cumulative 60% interest in RRM. 5. During the earn-in phase there are milestone payments, payable in cash or IonicRe shares at the election of the Vendor, as follows: • US$750,000 on the Grant of Retention licence over RL1693 which is due to expire in November 2020; • US$375,000 on production of 10 kg of mixed rare-earth product from pilot or demonstration plant activities; and • US$375,000 on conversion of existing licences to mining licences. 6. At any time should IonicRE not continue to invest in the project and project development ceases for at least two months RRM has the right to return the capital sunk by IonicRE and reclaim all interest earnt by IonicRE. Ionic Rare Earths Limited does not have any other contingent liabilities as at 30 June 2020 or 30 June 2019. 22. SHARE BASED PAYMENTS Details of each class of option issues are set out below. (a) Employee and consultants’ option plan The Company does not have a current Employee and Consultants Option Plan and there are no options on issue that were issued under an Employee and Consultants Option Plan. (b) Directors and executive options During the year 60,000,000 options were issued to directors and senior executives (2019: Nil). Set out below are summaries of options issued to senior executives. 2020 Grant Date Expiry Date Exercise Price (cents) 27 Nov ‘14 30 Sep ‘19 31 Mar ‘15 30 Sep ‘19 15 Dec ‘17 30 Nov ‘20 23 Dec ‘19 30 Nov ‘22 24 Mar ‘20 30 Nov ‘22 Total Weighted average exercise price 5.0 5.0 1.3 1.8 1.8 Value per option at grant date (cents) 0.37 0.28 0.35 0.58a 0.27b Balance at the start of the year Granted during the year Exercised during the year Lapsed during the year Balance at end of the year Vested and Exercisable at end of the year 5,000,000 2,000,000 22,000,000 - - - - - 40,000,000 20,000,000 29,000,000 60,000,000 $0.022 $0.018 - - - - - - - 5,000,000 2,000,000 - - - - - - - 22,000,000 22,000,000 40,000,000 40,000,000 20,000,000 20,000,000 7,000,000 82,000,000 82,000,000 $0.05 $0.017 $0.017 The weighted average remaining contractual life of share options outstanding at the end of the period was 1.88 years (2019: 1.14 years). 2019 Grant Date Expiry Date Exercise Price (cents) 27 Nov ‘14 30 Sep ‘19 31 Mar ‘15 30 Sep ‘19 15 Dec ‘17 30 Nov ‘20 Total Weighted average exercise price 5.0 5.0 1.3 Value per option at grant date (cents) 0.37 0.28 0.35 Balance at the start of the year Granted during the year Exercised during the year Lapsed during the year Balance at end of the year Vested and Exercisable at end of the year 5,000,000 2,000,000 47,000,000 54,000,000 $0.0018 - - - - - - - - - - 5,000,000 5,000,000 2,000,000 2,000,000 25,000,000 22,000,000 22,000,000 25,000,000 29,000,000 29,000,000 $0.013 $0.022 $0.022 The weighted average remaining contractual life of share options outstanding at the end of the period was 1.14 years (2018: 2.27 years). 49 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 22. SHARE BASED PAYMENTS (CONTINUED) Fair value of director and senior executive options granted During the year 60,000,000 options were issued (2019: Nil). The weighted average fair value of the options granted was 0.48 cents. The price was calculated by using the Binominal Option valuation methodology applying the following inputs: Number of options issued Weighted average exercise price (cents) Weighted average life of the option (years) Weighted average underlying share price (cents) Expected share price volatility (%) Risk free interest rate (%) a 40,000,000 b 20,000,000 1.8 3 0.9 135 0.73 1.8 2.7 0.5 135 0.30 Total expenses arising from share-based payment transactions to executives in their capacity as executives recognised during the period were as follows Options issued to executives (c) Performance Share Rights Consolidated 2020 $ 284,560 2019 $ - During the year 100,000,000 performance rights were granted (2019: 50,000,000). Set out below are summaries of performance rights issued. Grant Date Expiry Date Exercise Price (cents) 1.0 1.5 2.0 1.1 2.2 3.3 13 Aug’18 13 Aug ‘20 13 Aug’18 13 Aug ‘20 13 Aug’18 13 Aug ‘20 31 Mar ‘20 31 Mar ‘23 31 Mar ‘20 31 Mar ‘23 31 Mar ‘20 31 Mar ‘23 Total 1620 Capital Pty Ltd Value per option at grant date (cents) 0.60 0.60 0.50 0.44 0.39 0.34 Balance at the start of the year Granted during the year Vested during the year Lapsed during the year Balance at end of the year Vested and Exercisable at end of the year 15,000,000 15,000,000 20,000,000 - - - 15,000,000 - - - 15,000,000 20,000,000 - - - 33,300,000 33,300,000 33,300,000 33,400,000 - - - - - - - - - 33.300.000 33.400.000 50,000,000 100,000,000 48,300,000 35,000,000 66.700.000 - - - - - - - On 13 August 2018 the Company issued 50,000,000 Performance Rights to 1620 Capital Pty Ltd in consideration for corporate advisory services. The vesting conditions for the Performance Rights were as follows: 1. 15 million performance shares which vest if the 10 Day volume weighted average price (“VWAP”) of the Company shares exceed $0.01 per share; 2. 15 million performance shares which vest if the 10 Day volume weighted average price (“VWAP”) of the Company shares exceed $0.015 per share; and 3. 20 million performance shares which vest if the 10 Day volume weighted average price (“VWAP”) of the Company shares exceed $0.02 per share The Performance Rights were issued for nil cash consideration and no consideration will be payable upon vesting of the Performance Rights. Upon satisfaction of the vesting conditions, each Performance Right will automatically vest into one fully paid ordinary share of the Company. The Performance Rights will lapse on 13 August 2020. 50 IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 (c) Performance Share Rights (CONTINUED) On 10 February 2020 1620 Capital Pty Ltd and the Company reached agreement (Agreement) whereby it was acknowledged that, as at that date, the Vesting Condition in 1 above had been satisfied and 15,000,000 Performance Rights had vested (Vested Performance Rights) and the Vesting Conditions in 2 and 3 above had not been satisfied and 35,000,000 Performance Rights remained unvested (Unvested Performance Rights). The value of the performance rights issued have been expensed in prior periods. Pursuant to the Agreement, from 10 February 2020, the Unvested Performance Rights were irrevocably cancelled for nil consideration and 1620 Capital no longer had any right to acquire any shares in the capital of IonicRE in respect of the Unvested Performance Rights and, within 5 business days of 10 February 2020, IonicRE would issue 15,000,000 fully paid ordinary shares in the capital of the Company to 1620 Capital (or its nominee/s) representing conversion of the Vested Performance Rights. Airguide Advisory Pte. Ltd On 31 March 2020 the Company issued 100,000,000 Performance Rights to Airguide Advisory Pte. Ltd in consideration for corporate advisory services. The vesting conditions for the Performance Rights were as follows: (i) based on the reference Share price of $0.011 (“Reference Price A”), the Reference Date Market Capitalisation Target shall be $22,000,000.00. In the event the Fully Diluted Market Capitalisation of the Company is equal or higher than $22,000,000.00, calculated based on the 20-day VWAP of the Shares, the Vesting Condition of 33,300,000 Performance Rights shall be deemed satisfied (“Tranche A Performance Rights”); (ii) based on the reference Share price of $0.022 (“Reference Price B”), the Reference Date Market Capitalisation Target shall be $44,100,000.00. In the event the Fully Diluted Market Capitalisation of the Company is equal or higher than $44,100,000.00, calculated based on the 20-day VWAP of the Shares, the Vesting Condition of 33,300,000 Performance Rights shall be deemed satisfied (‘’Tranche B Performance Rights”); and (iii) based on the reference Share price of $0.033 (“Reference Price C”), the Reference Date Market Capitalisation Target shall be $66,100,000.00. In the event the Fully Diluted Market Capitalisation of the Company is equal or higher than $66,100,000.00, calculated based on the 20-day VWAP of the Shares, the Vesting Condition of 33,400,000 Performance Rights shall be deemed satisfied (“Tranche C Performance Rights”). Fair value of performance rights granted Pitcher Partners Corporate Pty Ltd (Pitchers) were requested to prepare a valuation of the Performance Rights. In carrying out its valuation Pitchers utilised a version of the Black Scholes Options Pricing Model (BSM) which incorporated Monte Carlo simulation analysis. The BSM model applied the following inputs: Item Tranche A Trance B Tranche C Underlying share price (cents) Exercise price Share price volatility (%) Risk free Interest rate Expected dividend yield (%) Expected life of the Rights the option (years) This yielded the following valuations Value per Right Value per tranche $0.006 Nil 150% 0.34% Nil 3 years $0.006 Nil 150% 0.34% Nil 3 years $0.006 Nil 150% 0.34% Nil 3 years $0.0044 $145,200 $0.0039 $128,700 $0.0034 $112,200 Total expenses arising from the issue of performance share rights were expensed in full during the period as there were no service conditions associated with the performance rights and were as follows. Performance Share Rights issued Consolidated 2020 $ 386,100 2019 $ 288,096 51 Notes to the Consolidated Financial Statements For Year Ended 30 June 2020 22. SHARE BASED PAYMENTS (CONTINUED) d. Shares and Options issued to unrelated Parties Investment in Associate During the year, the Group acquired a 31% interest in Associate, Rwenzori Rare Metals Limited (“RRM”) which owns 100% of the Makuutu Rare Earths Elements Project. To assist with negotiations for the acquisition the Group paid facilitation fees to unrelated parties consisting of 129,179,517 fully paid ordinary shares at $0.008 per share and 50,000,000 options an exercise price of $0.005. The 50,000,000 options issued were valued at $0.0065 each. The price of each option was calculated by using the Black Scholes valuation methodology applying the following inputs: Number of options I ssued Grant date Expiry date (years) Underlying share price (cents) Exercise price (cents) Expected share price volatility (%) Risk free interest rate (%) 50,000,000 19 August 2019 3 0.8 0.5 135 0.73 In accordance with AASB 2 Share Based Payments, there is a rebuttable presumption that the fair value of goods or services received can be estimated reliably for transactions with parties other than employees. This presumption has been rebutted given that the fair value of the underlying assets of RRM (being exploration and evaluation assets) could not be reliably measured. Accordingly, the Investment in RRM has been recorded based on the fair value of the shares issued, calculated at the closing share price on the date of issue. There were no other share based payments to unrelated parties during the 2019 or 2020 financial years. Total expenses arising from the issue of shares and options to unrelated parties were capitalised as Investment in Associate during the year as follows. Investment in Associate Consolidated 2020 $ 1,358,436 2019 $ - 52 IONIC RARE EARTHS LIMITED Annual Report 2020For Year Ended 30 June 2020 Independent Auditor’s Report 53 Independent Auditor’s Report 54 IONIC RARE EARTHS LIMITED Annual Report 2020Independent Auditor’s Report 55 Independent Auditor’s Report 56 IONIC RARE EARTHS LIMITED Annual Report 2020Corporate Governance Statement 30 June 2020 Approach to Corporate Governance Ionic Rare Earths Limited ACN 083 646 477 (Company) has established a corporate governance framework, the key features of which are set out in this statement. In establishing its corporate governance framework, the Company has referred to the recommendations set out in the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations 4th edition. The Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company’s corporate governance practices follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. In compliance with the “if not, why not” reporting regime where, after due consideration, the Company’s corporate governance practices do not follow a recommendation, the Board has explained the reasons for not following the recommendation and disclosed what, if any, alternative practices the Company has adopted instead of those in the recommendation. The following governance-related documents can be found on the Company’s website at https://ionicre.com.au/governance/ Charters • Board • Audit and Risk Committee • Nomination Committee • Remuneration Committee Policies and procedures • Policy and Procedure for the Selection and (Re)Appointment of Directors • Process for Performance Evaluations • Securities Trading Policy • Code of Conduct (summary) • Diversity Policy (summary) • Continuous Disclosure Policy (summary) • Continuous Disclosure Compliance Procedures (summary) • Shareholder Communication and Investor Relations Policy • Whistle Blower Policy The Company reports below on whether it has followed each of the recommendations during the Reporting Period. This statement was approved by a resolution of the Board on, and the information in this statement is current as at, 23 September 2020. Principle 1: Lay solid foundations for management and oversight Recommendation 1.1 The Company has established the respective roles and responsibilities of its Board and management, and those matters expressly reserved to the Board and those delegated to management and has documented this in its Board Charter, which is disclosed on the Company’s website. Recommendation 1.2 The Company undertakes appropriate checks before appointing a person or putting forward to shareholders a candidate for election as a director and provides shareholders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director. The checks which are undertaken, and the information provided to shareholders are set out in the Company’s Policy and Procedure for the Selection and (Re)Appointment of Directors, which is disclosed on the Company’s website. The Company appointed Mr. Trevor Benson to the board on 31 August 2020, and the checks referred to in the Company’s policies and Procedures for the selection and (Re)Appointment of Directors were undertaken. The Company provided shareholders with all material information in relation to the re-election of Mr Tony Rovira at its 2019 Annual General Meeting. Recommendation 1.3 The Company has a written agreement with each director and senior executive setting out the terms of their appointment. The material terms of any employment, service or consultancy agreement the Company, or any of its child entities, has entered into with its Chief Executive Officer, any of its directors, and any other person or entity who is related party of the Chief Executive Officer or any of its directors has been disclosed in accordance with ASX Listing Rule 3.16.4 (taking into consideration the exclusions from disclosure outlined in that rule). 57 Corporate Governance Statement 30 June 2020 Recommendation 1.4 The Company Secretary is accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board. Recommendation 1.5 The Company has a Diversity Policy, a summary of which is disclosed on the Company’s website. However, the Diversity Policy does not include requirements for the Board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the Company’s progress in achieving them. Nor has the Board set measurable objectives for achieving gender diversity. Given the Company’s stage of development as an exploration company, the number of employees in Australia and the nature of the labour market in Uganda and Nicaragua, the Board considers that it is not practical to set measurable objectives for achieving gender diversity. The respective proportions of men and women on the Board, in senior executive positions and across the whole organisation are set out in the following table. “Senior executive” for these purposes means a person who makes, or participates in the making of, decisions that affect the whole or a substantial part of the business or has the capacity to affect significantly the Company’s financial standing. During the Reporting Period, this included the Finance Director & Company Secretary: Whole organisation (including the Board) Senior executive positions Board Recommendation 1.6 Proportion of women 0 out of 4 (0%) 0 out of 1 (0%) 0 out of 3 (0%) The Chair is responsible for evaluation of the Board and, when deemed appropriate, Board committees and individual directors in accordance with the process disclosed in the Company’s Process for Performance Evaluations. During the Reporting Period, an evaluation of the Board, its committees and individual directors took place in accordance with the process disclosed in the Company’s Process for Performance Evaluations. The Chairperson’s performance is evaluated by the other members of the Board in accordance with the process disclosed in the Company’s Process for Performance Evaluations. During the Reporting Period, an evaluation of the Chairperson took place in accordance with the process disclosed in the Company’s Process for Performance Evaluations. Recommendation 1.7 The Chief Executive Officer is responsible for evaluating the performance of senior executives in accordance with the process disclosed in the Company’s Process for Performance Evaluations. The Chairman is responsible for evaluating the Chief Executive Officer in accordance with the process disclosed in the Company’s Process for Performance Evaluations. During the Reporting Period, an evaluation of the Company’s sole senior executive (the Finance Director & Company Secretary) took place in accordance with the process disclosed in the Company’s Process for Performance Evaluations. Principle 2: Structure the board to be effective and add value Recommendation 2.1 The Board has not established a separate Nomination Committee. The Board believes that there would be no efficiencies or other benefits gained by establishing a separate Nomination Committee. Accordingly, the Board performs the role of the Nomination Committee. Although the Board has not established a separate Nomination Committee, it has adopted a Nomination Committee Charter which describes the role, composition, functions and responsibilities of the full Board in its capacity as the Nomination Committee. The Company’s Nomination Committee Charter is disclosed on the Company’s website. The Board carries out those functions which are delegated to it in the Company’s Nomination Committee Charter. When matters that are within the responsibility of the full Board in its capacity as the Nomination Committee are considered, they are marked as separate agenda items at Board meetings. The Board deals with any conflicts of interest that may occur when nomination related matters are considered by ensuring that the director with conflicting interests is not party to the relevant discussions. 58 IONIC RARE EARTHS LIMITED Annual Report 2020Corporate Governance Statement 30 June 2020 Recommendation 2.2 The mix of skills and diversity for which the Board is looking to achieve in membership of the Board is represented by the Board’s current composition, which includes extensive geological experience and qualifications, experience in mineral processing, experience in operating in locations outside of Australia, accounting qualifications and financial management skills, leadership, governance and strategy. While the Company is at exploration stage, it does not wish to increase the size of the Board and considers that the Board weighted towards technical experience is appropriate at this stage of the Company’s development. External consultants may be brought in with specialist knowledge to address areas where this is an attribute deficiency in the Board. Recommendation 2.3 The Board considers the independence of directors having regard to the relationships listed in Box 2.3 of the Principles & Recommendations. Details of the Board of directors, their appointment date, length of service and independence status is as follows: Director’s name Appointment date Length of service at 30/06/2020 Independence status M J Steffens Non-executive Director A P Rovira Non-executive Director B D Dickson Finance Director 30 November 2018 1 year 7 months Independent 21 November 2014 5 years 7 months Independent 21 November 2014 5 years 7 months Not independent Dr Steffens resigned effective 31 August 2020 and Mr Trevor Benson was appointed an Independent non-executive director on 31 August 2020. Recommendation 2.4 The Board has a majority of directors who are independent. The Board does not wish to increase its size at present, and considers that the current composition of the Board is adequate for the Company’s current size and operations, and includes an appropriate mix of skills and expertise relevant to the Company’s business. Recommendation 2.5 The Chair is Mr Tony Rovira an independent director and is not the CEO of the Company. Recommendation 2.6 The Company has an induction program that it uses to when new directors join the Board and when new senior executives are appointed. The goal of the program is to assist new directors to participate fully and actively in Board decision-making at the earliest opportunity and to assist senior executives to participate fully and actively in management decision-making at the earliest opportunity. The full Board in its capacity as the Nomination Committee regularly reviews whether the directors as a group have the skills, knowledge and familiarity with the Company and its operating environment required to fulfil their role on the Board and the Board committees effectively using a Board skills matrix. Where any gaps are identified, the full Board in its capacity as the Nomination Committee considers what training or development should be undertaken to fill those gaps. In particular, the full Board in its capacity as the Nomination Committee ensures that any director who does not have specialist accounting skills or knowledge has a sufficient understanding of accounting matters to fulfil his or her responsibilities in relation to the Company’s financial statements. Principle 3: Instil a culture of acting lawfully, ethically and responsibly Recommendation 3.1 The Company expects that its board and senior executives will conduct themselves with integrity and honesty in accordance with the Code of Conduct. Directors, executives and employees shall deal with the Company’s customers, suppliers, competitors, shareholders and each other with honesty, fairness and integrity and observe the rule and spirit of the legal and regulatory environment in which the Company operates. The Company aims to increase shareholder value within an appropriate framework which safeguards the rights and interests of the Company’s shareholders and the financial community and to comply with systems of control and accountability which the Company has in place as part of its corporate governance with openness and integrity. The Company is to comply with all legislative and common law requirements which affect its business wherever it operates. Where the Company has operations overseas, it shall comply with the relevant local laws as well as any applicable Australian laws. Any transgression from the applicable legal rules is to be reported to the Managing Director as soon as a person becomes aware of such a transgression. 59 Corporate Governance Statement 30 June 2020 Principle 3: Act ethically and responsibly (continued) Recommendation 3.2 The Company has established a Code of Conduct for its directors, senior executives and employees, a summary of which is disclosed on the Company’s website. Any breach of that code is reported to the board at the next meeting of directors. Recommendation 3.3 The Company has adopted a Whistleblower Policy to encourage the raising of any concerns or reporting of instances of any violations (or suspected violations) of the Code of Conduct (or any potential breach of law or any other legal or ethical concern) without the fear of intimidation or reprisal. Recommendation 3.4 The Company has established an anti-bribery and corruption policy which is disclosed on the Company’s website. Any breach of that policy is immediately reported to the Chief Executive Officer and Chairman of the board of directors. Principle 4: Safeguard the integrity of corporate reports Recommendation 4.1 The Board has not established a separate Audit and Risk Committee. The Board believes that there would be no efficiencies or other benefits gained by establishing a separate Audit and Risk Committee. Accordingly, the Board performs the role of the Audit and Risk Committee. Although the Board has not established a separate Audit and Risk Committee, it has adopted an Audit and Risk Committee Charter which describes the role, composition, functions and responsibilities of the full Board in its capacity as the Audit and Risk Committee. The Company’s Audit and Risk Committee Charter is disclosed on the Company’s website. The Board carries out those functions which are delegated to it in the Company’s Audit and Risk Committee Charter. When matters that are within the responsibility of the full Board in its capacity as the Audit and Risk Committee are considered, they are marked as separate agenda items at Board meetings. The Board deals with any conflicts of interest that may occur when audit or risk related matters are considered by ensuring that the director with conflicting interests is not party to the relevant discussions. The Company has also established a Procedure for the Selection, Appointment and Rotation of its External Auditor, which is an appendix to its Audit and Risk Committee Charter disclosed on the Company’s website. The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises, as recommended by the Audit and Risk Committee (or its equivalent). Candidates for the position of external auditor must demonstrate complete independence from the Company through the engagement period. The Board may otherwise select an external auditor based on criteria relevant to the Company’s business and circumstances. The performance of the external auditor is reviewed on an annual basis by the Audit and Risk Committee (or its equivalent) and any recommendations are made to the Board. Recommendation 4.2 Before the Board approved the Company financial statements for the half year ended 31 December 2019 and the full-year ended 30 June 2020, it received from the Finance Director a declaration that, in his opinion, the financial records of the Company for the relevant financial period have been properly maintained and that the financial statements for the relevant financial period comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the Company and the consolidated 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 (Declaration). The Board did not receive a Declaration for each of the quarters ending 30 September 2019, 31 December 2019, 31 March 2020 and 30 June 2020 because in the Board’s view its quarterly reports are not financial statements to which the Declaration can be appropriately given. Recommendation 4.3 Processes are in place to verify the integrity of the Company’s periodic corporate reports released to the market and not audited or reviewed by the external auditor. Examples of periodic corporate reports released by the company include quarterly cash flow reports. IonicRE has adopted a Continuous Disclosure Policy which sets out how market announcements are prepared and released and has appointed the Company Secretary as the Continuous Disclosure officer who oversees the drafting of and approves the final release of announcements. The Company Secretary is responsible for satisfying him/herself that the content of any announcement is accurate and not misleading and is supported by appropriate verification. 60 IONIC RARE EARTHS LIMITED Annual Report 2020Principle 5: Make timely and balanced disclosure Recommendation 5.1 The Company has established written policies and procedures for complying with its continuous disclosure obligations under the ASX Listing Rules. A summary of the Company’s Continuous Disclosure Policy and Continuous Disclosure Compliance Procedures are disclosed on the Company’s website. Recommendation 5.2 The Company secretary circulates all material market announcements to the board prior to release to ASX. Recommendation 5.3 All new presentations are released to ASX Markets Platform ahead of any presentation to investors. Principle 6: Respect the rights of security holders Recommendation 6.1 The Company provides information about itself and its governance to investors on its website at www.ionicre.com.au. Recommendation 6.2 The Company has designed and implemented an investor relations program to facilitate effective two-way communication with investors. The program is set out in the Company’s Shareholder Communication and Investor Relations Policy, which is disclosed on the Company’s website. Recommendation 6.3 The Company has in place a Shareholder Communication and Investor Relations Policy (disclosed on the Company’s website) which outlines the policies and processes that it has in place to facilitate and encourage participation at meetings of shareholders. Recommendation 6.4 All resolutions put to meetings of shareholders are decided by way of a poll. Recommendation 6.5 The Company engages its share registry to manage the majority of communications with shareholders. Shareholders are encouraged to receive correspondence from the company electronically, thereby facilitating a more effective, efficient and environmentally friendly communication mechanism with shareholders. Shareholders not already receiving information electronically can elect to do so through the share registry, Computershare Investor Services Pty Ltd at www.computershare.com.au. 61 Corporate Governance Statement 30 June 2020 Principle 7: Recognise and manage risk Recommendation 7.1 The Board has not established a separate Audit and Risk Committee. The Board performs the role of the Audit and Risk Committee. Please refer to the disclosure above in relation to Recommendation 4.1. Recommendation 7.2 The full Board in its capacity as the Audit and Risk Committee reviews the Company’s risk management framework annually to satisfy itself that it continues to be sound, to determine whether there have been any changes in the material business risks the Company faces and to ensure that the Company is operating within the risk appetite set by the Board. The Board carried out these reviews during the Reporting Period. Recommendation 7.3 The Company does not have an internal audit function. To evaluate and continually improve the effectiveness of the Company’s risk management and internal control processes, the Board relies on ongoing reporting and discussion of the management of material business risks as outlined in the Company’s Risk Management Policy. Recommendation 7.4 As the Company is not in production, the Company has not identified any material exposure to any environmental and/or social sustainability risks. However, the Company does have a material exposure to the following economic risks: i. Market risk – movements in commodity prices. The Company manages its exposure to market risk by monitoring market conditions and making decisions based on industry experience. ii. Future capital risk – cost and availability of funds to meet the Company’s business requirements. The Company manages this risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows. Principle 8: Remunerate fairly and responsibly Recommendation 8.1 The Board has not established a separate Remuneration Committee. The Board believes that there would be no efficiencies or other benefits gained by establishing a separate Remuneration Committee. Accordingly, the Board performs the role of the Remuneration Committee. Although the Board has not established a separate Remuneration Committee, it has adopted a Remuneration Committee Charter which describes the role, composition, functions and responsibilities of the full Board in its capacity as the Remuneration Committee. The Company’s Remuneration Committee Charter is disclosed on the Company’s website. The Board carries out those functions which are delegated to it in the Company’s Remuneration Committee Charter. When matters that are within the responsibility of the full Board in its capacity as the Remuneration Committee are considered, they are marked as separate agenda items at Board meetings. The Board deals with any conflicts of interest that may occur when remuneration related matters are considered by ensuring that the director with conflicting interests is not party to the relevant discussions. Recommendation 8.2 Details of remuneration, including the Company’s policy on remuneration, are contained in the “Remuneration Report” which forms of part of the Directors’ Report and commences at page 10. The Company has not adopted a policy regarding the deferral of performance- based remuneration and the reduction, cancellation or clawback of the performance-based remuneration in the event of serious misconduct or a material misstatement in the Company’s financial statements as other punitive measures, including dismissal, are available to be utilised by the Company. Recommendation 8.3 The Company’s Securities Trading Policy includes a statement of the Company’s policy on prohibiting executives and directors from entering into transactions which limit the economic risk of participating in any equity-based remuneration scheme. 62 IONIC RARE EARTHS LIMITED Annual Report 2020Additional ASX Information Additional information required by the Australian Securities Exchange Ltd and not disclosed elsewhere in this report is as follows. The information is current as at 4 September 2019. (a) Statement of shareholdings Range Names of 20 largest shareholders Ordinary Shares Fully paid No of holders No. of shares held % held 100,001or more Mr Bilal Ahmad Mr Sufian Ahmad JGM Property Investments Pty Ltd Ms Chunyan Niu MGL Corp Pty Ltd Mr Anthony Paul Rovira Markovic Family No 2 Pty Ltd Reco Holdings Pty Ltd Martinick Investments Pty Ltd Upsky Equity Pty Ltd Dr Wolf Gerhard Martinick Mr Hayden Malcolm Buswell BNP Paribas Nominees Pty Ltd Airguide International Pte Ltd J P Morgan Nominees Australia Pty Ltd Mrs Lisa Marlane Roberts Rare Earth Elements Africa (Pty) Ltd DDPEVCIC (WA) Pty Ltd Norfolk Blue Pty Ltd Mr BD & GF Dickson Various Sub-total 10,001 - 100,000 Various 5,001 – 10,000 1,001 – 5000 1 – 1,000 Total Various Various Various Holding an unmarketable parcel The Company has the following unquoted securities on issue. 30 November 2020, 1.3 cent options 31 July 2021, .075 cent options 30 November 2022, 1.8 cent options Performance Rights with various vesting conditions Restricted Securities There are no restricted securities. Voting Rights All ordinary shares carry one vote per share without restriction. 20 1,258 696 83 211 257 2,525 783 106,666,666 104,719,973 103,400,000 74,792,185 55,000,000 52,315,915 50,600,000 46,884,289 40,000,000 36,000,000 35,055,763 35,000,000 33,819,278 33,300,000 30,330,000 29,747,480 29,179,517 26,476,802 25,794,182 23,658,034 972,740,084 1,681,031,799 2,653,771,883 41,086,649 633,257 527,319 108,978 2,696,128,086 8,035,805 3.96 3.88 3.84 2.77 2.04 1.94 1.88 1.74 1.48 1.34 1.30 1.30 1.25 1.24 1.12 1.10 1.08 0.98 0.96 0.88 36.08 62.35 98.43 1.52 0.02 0.02 0.01 100.00 0.30 Number of options 22,000,000 326,000,000 100,000,000 66,700,000 63 Additional ASX Information Substantial Shareholders As at 4 September 2020 shareholders who have notified the company in accordance with section 671B of the Corporations Act 2001 Beneficial Owner JGM Property Investments Pty Ltd Table 1: Schedule of Mining Tenements Held No. of Shares 154,000,000 Project Hemco-SID Makuutu Common Name Type of Concession Concession No. Percentage Held San Isidro - - - Exploration Retention Licence Retention Licence Exploration 1351 1693 0007 1766 100% 31% 31% 31% MINERAL RESOURCES ESTIMATION GOVERNANCE STATEMENT Governance of IonicRE’s mineral resources is a responsibility of the Executive Management of the Company. The Makuutu mineral resource is a new resource this financial year and its first estimate was released to ASX on 10 March 2020. This estimate was updated on 23 June 2020. IonicRe has ensured that its mineral resources estimates are subject to appropriate levels of governance and internal controls. The mineral resources reported have been estimated by independent external consultants who are experienced in best practices in modelling and estimation methods. The consultants have also undertaken reviews of the quality and suitability of the underlying information used to generate the resource estimations. Additionally, the Company carries out regular internal peer reviews of processes and contractors engaged. Competent Persons named by IonicRE are members of the Australian Institute of Mining and Metallurgy and/or the Australian Institute of Geoscientists and/or of a “Recognised Professional Organisation”, as included in a list on the JORC and ASX websites. Table 2: Makuutu Mineral Resource Estimate above 300ppm TREO-Ce2O3 Cut-off Grade Resource Classification Tonnes (millions) TREO (ppm) TREO-Ce2O3 (ppm) LREO (ppm) HREO (ppm) CREO (ppm) Indicated Resource Inferred Resource Total Resource 9.5 69.1 78.6 750 860 840 520 620 610 550 640 630 200 210 210 280 320 310 Rounding has been applied to 0.1Mt and 10ppm which may influence grade average calculations. TREO = Total Rare Earth Oxide COMPETENT PERSON STATEMENT: Information in this report that relates to previously reported Exploration Results has been crossed-referenced in this report to the date that it was reported to ASX. The information in this report that relates to Mineral Resources for the Makuutu deposit is extracted from the report “Significant 53% increase in Mineral Resource at the Makuutu Rare Earths Project” created and released to ASX on 23 June 2020 and is available to view on www.asx. com. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements and that all material assumptions and technical parameters underpinning the estimates in the relevant market announcements continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcements. 64 IONIC RARE EARTHS LIMITED Annual Report 2020Level 1, 34 Colin Street West Perth WA 6005 Australia Telephone: +61 (0) 8 9481 2555 Facsimile: +61 (0) 8 9485 1290 Email: info@ionicre.com.au www.ionicre.com.au

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