Kaiser Reef
Annual Report 2022

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Directors’ Report KAISER REEF LIMITED 2022 Consolidated Financial Report For the year ended 30 June 2022 1 Directors’ Report Contents Managing Directors address to shareholder Directors’ report Remuneration report Auditor’s independence declaration Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Directors’ declaration Independent auditor’s report Corporate directory Additional information for public listed companies KAISER REEF LIMITED 2022 Page 3 5 9 15 17 18 19 20 21 45 46 50 51 2 Directors’ Report Dear Shareholder, MANAGING DIRECTORS ADDRESS TO SHAREHOLDERS KAISER REEF LIMITED 2022 I am pleased to report on the Kaiser Reef Limited (Kaiser) first full financial year of exploration, improving operations and gold production. The first half of this reporting period (July – December 2021) was very much focused on bedding down the operations at the A1 Mine and restoring the mine and processing plant back to reliable and efficient operations. The second half of this reporting period (Jan -Jun 2022) was transformational highlighted the potential of the A1 Mine and validated further investment directed into the future of our operations (Figure 1). A1 Production u A s e c n u O 3000 2500 2000 1500 1000 500 0 Mar 21 Jun 21 Sep 21 Dec 21 Mar 22 Jun 22 Quarter Figure 1: Quarterly Production Results, Gold Produced The 2022 production year delivered a gross profit of $5,868,835 which compares to a gross loss of $1,580,184 over the previous year, largely driven by improvements in the latter half of the reporting period. Accounting depreciation of the carrying values of the Processing Plant and the A1 Mine resulted in accounting depreciation and amortisation write downs totalling $6,780,474 (which should not be confused with cash or operational losses). Running a diamond drilling rig over the whole year and extensive development has however added value to the A1 Mine and the substantial investment in the Processing Plant has seen vast improvements at almost every level -so the depreciation and amortisation treatment is not indicative of any reduced value in the Boards opinion but is necessary in accordance with accounting standards. Looking to the future and leveraging off the production experience, we have cemented a business plan that will target significantly higher production, improving margins and deeper and higher-grade lodes of mineralisation into 2023 and beyond. We are also comforted with the ongoing diamond drilling results that are providing evidence of continuous deep mineralisation as well as some outstanding drill intercepts such as 4.6m @ 135 g/t gold that are supporting our production with some months of mining delivering ore with grades running higher than 14 g/t gold. As well as the exciting A1 Mine planning and the improvements and investment made at the Maldon Processing Plant, we are also increasingly moving towards the groundwork required to bring on a second operation at the Maldon goldfield, the Union Hill Project, that historically produced 2.1M ounces at 28 g/t of gold. Kaiser also wholly owns this project and work is ongoing to progress this with anticipation. Bringing on a second mine is expected to provide unit cost reductions across the businesses and increase Kaisers production substantially. On a side note, and more relevant to more recent macro market events, I am also pleased to note that the gold price is holding very well from the perspective of Australian gold producers. Despite the falling US$ Gold price, the AUD$ gold price has held up very well- keeping lock-step with falling US:AUD exchange rate. The best illustration can be seen in Figure 2 which shows, on a September 2021 to September 2022 basis, that the gold price is actually higher now than it was a year ago. Kaiser is proud to be unhedged and debt free and directly exposed to the gold price, as we believe gold producers should be. 3 Directors’ Report KAISER REEF LIMITED 2022 Figure 2: AUD Gold price in blue – higher than at the beginning of the year Collectively, Kaiser holds an enviable pipeline of development opportunities supported by a dedicated and talented team and a profitable operation and a healthy treasury. I am deeply proud to be involved in our business and we are grateful for the support shown by our shareholders over these challenging market conditions and believe that Kaiser is exceptionally well positioned to survive and thrive! Yours sincerely, Jonathan Downes Managing Director and the Board of Directors 4 KAISER REEF LIMITED 2022 Significant changes in the state of affairs On 6 September 2021, the Group announced a share placement of 10,000,000 shares and non-renounceable 1 for 8 rights issue to raise approximately $5.1 million (before costs). The new Shares were issued under the Placement and Rights Issue at a price of $0.20 per Share, representing a 15.1% and 15.8% discount to the volume weighted average share price over the prior 5 and 10 trading days respectively, prior to the Company’s trading halt (as per the ASX announcement dated 2 September 2021). The Group also entered into an Underwriting Agreement with Westar Capital Limited to act as the underwriter to the Rights Issue and will be paid 6% of the underwritten amount, as well as 8,000,000 options with an exercise price of $0.30 expiring on 30 September 2024. 6,000,000 were issued upon completion of the placement and rights issue and a further 2,000,000 were issued following shareholder approval. Corporate information Kaiser Reef Limited is limited by shares and is incorporated and domiciled in Australia. The Group’s corporate structure is as follows: Directors’ Report Directors’ Report Directors The Directors present their report on “Kaiser” or “the Group”, consisting of Kaiser Reef Limited and the entities it controlled at the end of, or during, the financial year ended 30 June 2022. The following persons were Directors of Kaiser Reef Limited at any time during the year and up to the date of this report: • Adrian Byass Non-Executive Chairman • Jonathan Downes Executive Director • Stewart Howe Executive Director • David Palumbo (resigned 5 July 2021) Non-Executive Director The qualifications, experience and special responsibilities of the Directors are presented on page 6. Principal activities During the year, the principal activities of the Group were mining, production and the sale of gold as well as mineral exploration and development. Dividend paid or recommended No dividend has been paid and the directors do not recommend the payment of a dividend for the year ended 30 June 2022 (30 June 2021: nil). (1) On 12 August 2022 after the reporting date, Centennial Mining Limited changed company type from a limited to proprietary limited and company name to Kaiser Reef Mining Pty Ltd. 5 Directors’ Report Overview of the Group’s activities The Group continued its growth trajectory with a number of milestone achievements during the 2022 financial year. The key results for the year were: • Quarter on Quarter production growth • Conducted substantial resource drilling and mine planning at the A1 Mine • High grade first exploration results from the Maldon Historic Goldfield KAISER REEF LIMITED 2022 The consolidated results for the period are summarised as follows, with negative balances representing loss: EBITDA(3)(6) EBIT(2)(6) 2022 2021 4,541,592 (10,472,589) (2,238,882) (11,791,511) Loss before tax(4) (2,262,838) (11,806,825) • Decline at the A1 Mine to develop the Queens Lode achieved, Statutory loss (1) after tax (2,262,838) (11,806,825) opening multiple new development headings • Successfully transitioned as owner- operator with the purchase of the mining fleet and other equipment. • Completed the expanded tailings facility to support processing • into the future Improved ventilation and electrical systems at the A1 Mine (work ongoing) The Directors’ Report covers the year ended 30 June 2022. During the 2022 financial period the Group recorded a statutory loss of $2,262,838 (2021: $11,806,825) and an underlying net loss of $2,262,838 (2021: $3,956,058), net cash inflows from operating activities of $5,645,520 (2021: net cash outflows from operating activities of $2,476,152) and a closing cash balance of $6,581,919 (2021: closing cash balance of $4,787,279). The focus after acquisition was the future mine development and further exploration at Maldon to ensure an expanded and profitable future mine plan. Total net significant items after tax EBITDA (6) (excluding significant items) EBIT (6) (excluding significant items) Loss before tax (excluding significant items) Underlying net loss after tax(5)(6) - (7,850,767) 4,541,592 (2,621,822) (2,238,822) (3,940,744) (2,262,838) (3,956,058) (2,262,838) (3,956,058) Details of significant items included in the statutory loss for the period are reported in the table below. Descriptions of each item are provided in Note 3 to the Financial Report. Centennial Mining acquisition costs Listing expense Significant items before tax Income tax Significant items after tax 2022 2021 - - - - - (2,213,458) (5,637,309) (7,850,767) - (7,850,767) (1) Statutory loss is net loss after tax attributable to owners of the parent. (2) EBIT is loss before interest revenue, finance costs and income tax expense. (3) EBITDA is EBIT before depreciation and amortisation. (4) Loss before tax is loss before income tax expense. (5) Underlying net loss after income tax is net loss after income tax (“statutory loss”) excluding significant items as described in Note 3 to the consolidated financial statements. (6) EBIT, EBITDA and underlying net loss after tax are non-IFRS financial measures, which have not been subject to review or audit by the Group’s external auditors. These measures are presented to enable understanding of the underlying performance of the Group by users. 6 Directors’ Report Review of operations A1 Mine Operations Safety is a key focus for the Group and since the acquisition of Centennial Mining Limited this has continued. Appointment of new management initiated a series of reviews and improvements to safety processes following the period of administration. The A1 Mine continued its ramp up plan prepared by the Group that is designed to access increased production sources from airleg and mechanical mining methods. During the year decline extension and lateral development has reached the Queens Lode, opening new ore headings allowing for greater volumes of high grade airleg mining and initial Queens Lode ore to be processed. In 2022, the A1 Mine produced 8,727 ounces (2021 under 5 months of Group’s ownership: 2,178 ounces) and sold 8,867 ounces (2021 Group’s ownership of 5 months: 2,192 ounces) of gold at an average realised price of $2,570 Australian dollars (2021: $2,320). The Group has achieved a quarter on quarter production up lift and is pleased to commence the new financial year on a strong footing. Continued ramp up to access the potential for the A1 Mine to mine and process high grade gold ore although the mining operations have been subject to the impact from ongoing and irregular COVID-19 related supply chain and very tight labour market. In the final quarter of the year underground drilling recommenced at the A1 mine with promising results. The first drill hole from the A1 Mine drilling program targeted the south of the Queens Lode returned unexpectedly numerous zones of deeper mineralisation. This particular interval represents an interpreted extension of the Sovereign Lode. The drill holes are targeting near term and deeper including extensions to the recently discovered “Sovereign” Lode which was brought into production during the quarter (Figure 1). The Sovereign Lode is currently providing high-grade gold ore from several mining fronts and its discovery is the result of Kaiser’s aggressive drilling and development into the deeper regions of the mine. lode positions, As detailed in the June 2022 quarter release, the discovery of the high-grade “Neesham Reef” was announced. The discovery hole returned an exceptional drill intercept of 2.4m @ 215 g/t gold. Maldon Processing Plant There were no reportable safety or environmental incidents recorded at the Maldon processing facilities in 2022. The plant processed 28,481 tonnes of ore at an average recovery of 94.6% in 2022 (2021 Group’s ownership of 5 months: 9,841 tonnes of ore at an average recovery of 94.3%) Mill tailings continues to be discharged into Tailings Storage Facility (TSF) No 5. Construction of the next lift of the TSF facility (TSF Lift 5C) was completed in November 2021. During the year the Group underwent a number of community projects to further improve engagement in the region. These projects include continuous noise monitoring, water quality monitoring and community site visits to the facilities. Water from the Union Hill underground mine was used in the processing plant and excess water was directed to the Nuggetty Water Management Group for agriculture irrigation. KAISER REEF LIMITED 2022 In the second half of 2022 the processing plant undertook major refurbishments and upgrade projects to increase efficiency and longevity of the plant The project to refurbish and upgrade the SAG milling circuit in the Maldon Plant was progressed. A newly designed SAG discharge hopper was installed along with the replacement of structural steel within the mill building and a rolling replacement of parts of the leaching circuit. The upgrade will include the installation of new “direct drive” agitators. This will improve the energy efficiency, decrease maintenance cost and reduce the noise footprint of the plant considerably for the benefit of the local community. Phase 2 of the mill upgrade will include the replacement of the classification circuit with newer technology equipment and will take place in August 2022. Phase 3 will include the replacement of the PLC’s and installing a fully digital SCADA control system to replace the existing analogue items, including remote access in November 2022. In addition, the Group will replace all the CIL tanks over the next 2 years. The upgrade works are expected to deliver a 20% increase in throughput rates as well as increased gold recovery. Reduction in lower power consumption and efficient unit cost through operation are expected which will have a direct impact of reducing operating costs and support any future expanded mining activities. Immediately after year end, on 21 July 2022 the Group announced: • A Mineral Resource Estimate of 1.2 Mt at 4.4 g/t gold (Inferred) for 186,656 ounces of gold; and • An Exploration Target of 1.75 to 2.7Mt at between 3 g/t gold and 4 g/t gold for between 165,000 ounces of gold to 345,000 ounces of gold. Impact of COVID-19 The Group continues to proactively manage the COVID-19 risk to the business. in implemented line with relevant As restrictions were put in place at the Group’s various operations, measures were local government advice. These measures included cancelling all non- essential travel, encouraging good hygiene practices and physical distancing across all workplaces, working from home where practicable, enforcing self-isolation policies when appropriate. The company supports the vaccination role out and conducts surveys to assess workforce progress relative to government vaccination targets. The Group’s supply chain was not disrupted with the mining and processing operation obtaining many of its resources within the local communities that it operates. The State border restriction added pressure on our labour force. Nevertheless, as a result of the Group’s measures, and the efforts of staff across sites, the operations were able to continue normal activities. 7 Directors’ Report Information on Directors Adrian Byass B.Sc (Geo) Hons, B.Eco, FSEG and MAIG Non-Executive Chairman Appointed as Chairman 2 September 2019 KAISER REEF LIMITED 2022 Jonathan Downes B.Sc (Geo) and MAIG Executive Director Appointed as Director 2 September 2019 Mr Byass has more than 20 years’ experience in the mining industry with extensive experience as a Board member of ASX, TSXV and AIM listed companies. This experience has principally been gained both listed and unlisted entities around the world through the operation of as well as the evaluation and development of mining products for a range of base, precious and specialty metals and bulk commodities. Mr Downes has more than 25 years’ experience in the mining industry and has worked in various geological and corporate capacities. Jonathan has experience with nickel, gold and base metals and has also been involved with numerous private and public capital raisings. Jonathan was a founding director of Hibernia Gold (now Moly Mines Ltd) and Siberia Mining Corporation Ltd. Other current listed company directorships: Other current listed company directorships: - Galena Mining Limited - - o Non-Executive Chairman Infinity Lithium Corporation Limited o Non-Executive Chairman Sarama Resources Limited o Non-Executive Director Former listed company directorships in last three years: - Fertoz Limited (resigned 22 June 2020) o Non-Executive Director - Kingwest Resources Limited (resigned 23 May 2022) o Non-Executive Director Interest in Securities • 3,205,000 fully paid ordinary shares • 2,000,000 unlisted options exercisable at $0.30 on 31 Jan 2023 • 2,000,000 unlisted options exercisable at $0.40 on 31 Jan 2024 Stewart Howe BE (Chem), ME (Mining), MAppFin, FAICD and FAusIMM Executive Director Appointed as Director 10 February 2021 Mr Howe has +40 years’ experience in the global resources industry including the last 18 years in mining. Stewart spent 6 years as Chief Development Officer of Zinifex Limited, where he directed the spin-off of Zinifex’s smelters to create Nyrstar N.V. and restarted development of Dugald River Mine now owned by MMG. During the past 14 years Mr Howe has provided advisory roles to boards, private equity and financiers related to restructuring and acquisition of mining assets in base metals and bulk commodities. Mr Howe is an experienced director, chairing the board of Whittle Consulting Group and serving on the boards of a government owned water authority and not-for-profit organisations. Other current listed company directorships: - Galena Mining Limited o Non-Executive Director Interest in Securities • 112,500 fully paid ordinary shares • 200,000 unlisted options exercisable at $0.52 on 8 Feb 20241 • 200,000 unlisted options exercisable at $0.60 on 8 Feb 20241 - - - - Kingwest Resources Limited o Non-Executive Director Corazon Mining Limited o Non-Executive Director Nickel X Limited o Non-Executive Director Cazaly Resources Limited o Non-Executive Director Former listed company directorships in last three years: - - Ironbark Zinc Limited (resigned 2 December 2019) o Managing Director Galena Mining Limited (resigned 29 October 2021) o Non-Executive Director Interest in Securities • 3,735,625 fully paid ordinary shares • 2,000,000 unlisted options exercisable at $0.30 on 31 Jan 2023 • 2,000,000 unlisted options exercisable at $0.40 on 31 Jan 2024 David Palumbo B.Com, CA and GAICD Non-Executive Director & Company Secretary Appointed as Director 15 September 2019 Resigned as a Director 5 July 2021 Mr Palumbo is a Chartered Accountant and graduate of the Australian Institute of Company Directors with over 14 years’ experience across company secretarial, corporate advisory and financial management and reporting of ASX listed companies. David is an employee of Mining Corporate Pty Ltd, where he has been actively involved in numerous corporate transactions. Other current listed company directorships: - - Krakatoa Resources Limited o Non-Executive Director Albion Resources Limited o Non-Executive Director • Interest in Securities2 • 100,000 fully paid ordinary shares • 100,000 unlisted options exercisable at $0.30 on 31 Jan 2023 • 100,000 unlisted options exercisable at $0.40 on 31 Jan 2024 1 Options were granted to Mr Howe on 8 February 2021 and approved at 2 Interest in Securities for Mr Palumbo at resignation date 5 July 2021 the AGM 17 November 2021 8 Directors’ Report Remuneration Report (Audited) Related party transactions KAISER REEF LIMITED 2022 The remuneration report, which forms part of the Directors Report, outlines the remuneration arrangements in place for key management personnel (KMP) who are defined as the persons having the authority and responsibility for planning and directing the major activities of the Group, directly including any direct (whether executive or otherwise). Remuneration philosophy The performance of the Group depends on the quality of the Company Directors and executives and employees and therefore the Group must attract, motivate and retain appropriately qualified industry personnel. During the financial year ended 30 June 2022, Kaiser Reef Limited did not seek the advice of remuneration consultants. Remuneration policy Remuneration levels of the executives are competitively set to attract the most qualified and experienced candidates, taking into account prevailing market conditions and the individuals experience and qualifications. During the year, the Group did not have separately established remuneration committees, The Board is responsible for determining and reviewing remuneration arrangements for the executives and non-executive Directors. Director Appointed Length of service A Byass 2 Sep 2019 2 years Non-Executive Chairman J Downes 2 Sep 2019 2 years Executive Director S Howe 10 Feb 2021 1 year Executive Director A Byass3 J Downes S Howe D Palumbo Annual aggregate fees 2021 2022 89,000 89,000 219,000 280,0004 101,333 133,3335 55,000 -6 464,333 502,333 $ $ $ $ $ no. of non-executive directors 2 1 Shareholder approved annual aggregate Non-Executive Director fees $ 300,000 300,000 Consolidated entity performance and link to remuneration Remuneration for certain individuals is directly linked to the performance of the consolidated entity. Performance rights granted to certain KMP are deemed to be performance based remuneration. Refer to the ‘Performance Rights’ section below for details of the terms and conditions of the performance rights granted to certain KMP during the year. Transaction between related parties were on commercial terms and conditions, no more favourable than those available to otherwise stated. Mining Corporate Pty Ltd – related party to David Palumbo, resigned 5 July 2021, there was not related party transaction during the 5 days. Kingwest Resources Ltd – related party to A Byass and J Downes Shared office facility arrangement during the year. Total for the current year: $46,268 was charged by Kingwest Resources Ltd with an outstanding amount of $3,355 payable at 30 June 2022. Loans to Directors and their related parties No loans have been made to any Directors or any of their related parties during the current year. There were no further transactions with Directors including their related parties other than those disclosed above. Contractual arrangements with executive KMPS Component J Downes Executive Director Fixed remuneration Contract duration Notice by the individual / Company 280,000 Ongoing contract 6 months / 1 Month Component Fixed remuneration Contract duration Notice by the individual / Company Termination of employment (without cause) Termination of employment (without cause) or by individual Component Fixed remuneration Contract duration Notice by the individual / Company Termination of employment (without cause) Termination of employment (with cause) or by individual S Howe Executive Director 133,333 Ongoing contract 6 months / 1 Month Unvested LTI will remain subject to the achievement of the performance targets set at the original date. The Board has discretion to award a greater or lower amount All unvested LTI will lapse A Tran Executive KMP 250,000 Ongoing contract 12 weeks plus 3 weeks for every year after the second year Unvested LTI will remain subject to the achievement of the performance targets set at the original date. The Board has discretion to award a greater or lower amount All unvested LTI will lapse 3 The Chairman’s fee is inclusive of all Board Committee commitments. 4 Increase in 1 December 2021 5 Increase in 1 May 2021 6 Mr Palumbo at resignation date 5 July 2021 9 Directors’ Report Remuneration Report (Audited) continued Details of Remuneration Details of the nature of and amount of each element of the emoluments of each of the Directors and Key Management Personnel (KMP) of the Group for the year ended 30 June 2022 KAISER REEF LIMITED 2022 Short-term benefits Cash salary & fees $ STI payment $ Non-monetary benefits7 $ Post- employment benefits Super- annuation $ Long-term benefits Leave8 $ Share-based payments - Rights9 $ Share-based payments - Options $ Total $ Proportion of total performance related10 2022 Name Directors Adrian Byass Jonathan Downes Stewart Howe David Palumbo13 Total Directors Executives Andy Tran Total Executives Total 2022 KMP Remuneration 2021 Directors Adrian Byass Jonathan Downes Stewart Howe14 David Palumbo Total Directors Executives Andy Tran16 Total Executives Total 2021 KMP Remuneration 439,521 89,000 254,583 133,333 - 476,916 250,000 250,000 726,916 81,578 184,500 39,889 54,750 360,717 78,804 78,804 - - - - - 8,977 8,977 8,977 - - - - - - - 4,103 4,103 - - 8,206 - - 8,206 3,997 3,997 - - 7,994 - - 7,994 8,900 23,568 13,333 - 45,801 23,568 23,568 69,369 - 17,528 3,789 - 21,317 7,486 7,486 - 24,004 9,062 - 33,066 13,465 13,465 46,531 - 15,536 4,555 - 20,091 7,585 7,585 28,803 27,676 - - 16,95711 - 16,957 45,339 45,339 62,296 - - 35,054 - 35,054 35,104 35,104 70,158 - - (66,267) 12 - (66,267) - - (66,267) - - 93,710 - 93,710 117,137 117,137 210,847 102,003 306,258 106,418 - 514,679 341,349 341,349 856,028 85,575 221,561 176,997 54,750 538,883 246,116 246,116 784,999 n/a n/a (46%)15 n/a 16%15 - - n/a n/a 20%15 n/a 14%15 - 7 8 9 Non-monetary benefits for Executives comprise car parking and professional memberships including associated fringe benefits tax. Leave includes long service leave and annual leave entitlements. The value of performance rights disclosed as remuneration is the portion of the fair value of the performance rights recognised in the reporting period in accordance with the Corporations Act 2001 and relevant Australian Accounting Standards. This value may not always reflect what an executive has received in the reporting period. 10 Calculated as ‘STI payment’ plus ‘Share-based payments - Rights’ divided by ‘Total’ remuneration. 11 Includes the issue of 200,000 shares as a bonus at the sole discretion of the Board based on past performance and is subject to shareholder approval at the upcoming AGM on 14 November 2022. The shares have been recognised with reference to the share price on date of common understanding (subject to shareholder approval) of $0.18. Included within the balance is a reversal of $24,164 in relation to Tranche A & B which lapsed during the year. A further $5,121 is included in the balance relating to ongoing vesting of Tranche C & D rights, including the revaluation of these tranche upon shareholder approval occurring during the year.. 12 Mr Howe’s options was approved by shareholders at the AGM on the 17 November 2021, the provisional fair value of $93,710 was reversed and replace with the fair value of $27,443 on approval date. 13 Mr Palumbo resigned as Non-Executive Director and Company Secretary 5 July 2021 14 Mr Howe was appointed Executive Director 10 February 2021. 15 Remuneration for certain individuals is directly linked to the performance of the consolidated entity. Performance rights granted to certain KMP are deemed to be performance based remuneration. Refer to the ‘Performance Rights’ section below for details of the terms and conditions of the performance rights granted to certain KMP during the year. Refer to Performance rights condition on page 9. 16 Mr Tran was appointed Chief Financial Officer 08 March 2021 10 Directors’ Report Remuneration Report (Audited) continued KMP Shareholdings The number of ordinary shares in Kaiser Reef Limited held by each KMP for the year ended 30 June 2022 are as tabled below: KAISER REEF LIMITED 2022 2022 Directors Adrian Byass Jonathan Downes Stewart Howe19 20 David Palumbo 21 Total Directors Executives Andy Tran22 Total Executives KMP Options Holdings Balance at the beginning of year Granted as remuneration during the year Issued on exercise of the rights during the year Other Changes during the year Balance at end of the year 3,000,000 3,185,000 100,000 100,000 6,385,000 631,578 631,578 - - - - - - - - - - - - 100,000 100,000 205,00017 510,62518 12,500 (100,000) 628,125 78,948 78,948 3,205,000 3,695,625 112,500 - 7,013,125 810,526 810,526 The number of options over ordinary shares in Kaiser Reef Limited held by each KMP for the year ended 30 June 2022 are as tabled below: Balance at the beginning of year Granted as remuneration during the year Reduction on exercise of the options during the year Other Changes during the year Balance at end of the year Vested and exercisable at 30 June 2022 4,000,000 4,000,000 400,000 200,000 8,600,000 500,000 500,000 - - - - - - - - - - - - - - - - - (200,000) - - - 4,000,000 4,000,000 400,000 - 8,600,000 500,000 500,000 4,000,000 4,000,000 400,000 - 8,600,000 500,000 500,000 2022 Directors Adrian Byass Jonathan Downes Stewart Howe David Palumbo Total Directors Executives Andy Tran Total Executives Valuation of Options Granted During the 2022 year the Group did not grant further options to KMP. Stewart Howe’s options were approved at the 17 November 2021 AGM and were revalued at the applicable grant date. Description Number of options Grant date (AGM approval 17 November 2021) Grant date share price ($) Exercise price ($) Volatility (%) Risk free rate (%) Term (in years) Fair value per option ($) Total value of options granted Total value of options provisional granted True up of fair value of options in 2022 Stewart Howe Tranche 1 200,000 17/11/2021 0.21 0.52 100 0.95 2.23 0.072 $14,368 $48,064 ($33,696) Stewart Howe Tranche 2 200,000 17/11/2021 0.21 0.60 100 0.95 2.23 0.065 $13,075 $45,646 ($32,571) 17 Mr Byass shares increases were on market purchases. 18 Mr Downes shares increases were on market purchases. 19 Mr Howe was appointed Executive Director 10 February 2021 and the shares were on market purchases. 20 Exclusive of 200,000 shares agreed to be issued as a bonus at the sole discretion of the Board based on past performance, as the issue is subject to shareholder approval at the upcoming AGM on 14 November 2022. The shares have been recognised with reference to the share price on date of common understanding (subject to shareholder approval) of $0.18. 21 Mr Palumbo resigned as Non-Executive Director 05 July 2021 22 Mr Tran was appointed Chief Financial Officer 8 March 2021 and the shares were on market purchases. 11 Directors’ Report KAISER REEF LIMITED 2022 Remuneration Report (Audited) continued KMP Performance Rights The number of rights over ordinary shares in Kaiser Reef Limited held by each KMP for the year ended 30 June 2022 are as tabled below: 2022 Directors Adrian Byass Jonathan Downes Stewart Howe David Palumbo23 Total Directors Executives Andy Tran Total Executives Valuation of Rights Granted Opening rights held Granted as remuneration during the year Vested during the year Forfeited during the year Balance at end of the year - - 350,000 - 350,000 400,000 400,000 - - - - - - - - - - - - - (150,000) (150,000) (100,000) (100,000) - - - - 200,000 - 200,000 300,000 300,000 During the 2022 year the Group did not grant further rights to KMP. During the 2021 year the Group granted the following rights to KMP, which were valued at grant date as follows: Stewart Howe Value Per Right26 $0.21 $0.21 $0.079 $0.21 Number of Rights Granted 75,00024 75,00025 100,000 100,000 350,000 Total Value* Valuation Methodology 15,750 15,750 $7,900 $21,00026 $60,400 Share price at grant date Share price at grant date Trinomial pricing model** Share price at grant date Andy Tran Value Per Right $0.42 $0.42 $0.29 $0.42 Number of Rights Granted 100,00027 100,00028 100,000 100,000 400,000 Total Value* Valuation Methodology $42,000 $42,000 $28,980 $42,00029 $154,980 Share price at grant date Share price at grant date Trinomial pricing model** Share price at grant date Tranche A B C D Total Tranche A B C D Total *The holder must be an employee of the Company in order for the rights to vest on achievement of the relevant performance hurdles. Accordingly, the total value of rights at grant date has been vested over the relevant performance period. 23 Mr Palumbo resigned as Non-Executive Director 05 July 2022 24 Rights lapsed on the 10 February 2022 25 Rights lapsed on the 10 February 2022 26 Rights were granted to Mr Howe on 10 February 2021 and approved at the AGM 17 Nov 2021. The above table reflects the final valuation at date of shareholder approval. The probability of achievement of Tranche D rights has been applied at 30 June 2022 is 100%. 27 Due to Covid 19 disruption the Board has allow for the rights to be extended to 1 February 2023, these rights have vested in the 2022 year 28 Due to Covid 19 disruption the Board has allow for the rights to be extended to 1 February 2023 and 0% probability has been applied at 30 June 2022 29 The probability of achievement has been applied at 30 June 2022 is 100%. 12 Directors’ Report KAISER REEF LIMITED 2022 **Tranche C rights include a market based vesting hurdle linked to the market capitalisation of the Group valued with reference to a trinomial pricing model with the following inputs: Description Underlying share price ($) Exercise price ($) Grant date Performance measurement period Share price barrier ($) Volatility (%) Risk-free rate (%) Value per right ($) Total value of rights granted Total value of rights provisional granted True up of fair value of rights in 2022 Input Stewart Howe 0.21 Nil 17 November 2021 1.72 years 1.068 100 0.575 0.079 $7,900 $28,980 ($20,990) Input Andy Tran 0.42 Nil 8 February 2021 2.5 years 1.305 100 0.11 0.29 $28,980 N/A N/A Performance rights conditions The performance rights granted to Mr Howe include vesting conditions being satisfaction of the following conditions30: Within 12 months of the start date: PRODUCTION: 75,000 Shares when A1 Mine operations reaches and maintains a production profile of 5,000 t/month or more over a 3 rolling month period and during that period the Company’s mining and treatment operations are cash flow positive. 31 PROCESSING: 75,000 Shares when the Company increases utilisation its gold processing facility in excess of 60% of nameplate (nameplate 150,000 tonnes p.a.) for a three-month period and during that period the Company’s mining and treatment operations are cash flow positive, 32 and within 30 months of the start date: MARKET CAPITALISATION: 100,000 Shares when the Company reaches a market capitalisation of $150 million (over a 5 day VWAP period) PROCESSING: 100,000 Shares when the Company operates the Maldon Process plant at 90% of nameplate capacity (nameplate 150,000 tonnes p.a.) for a 6 month period and during that period the Company’s mining and treatment operations are cash flow positive. The performance rights granted to Mr Tran include vesting conditions being satisfaction of the following conditions: By the 1 February 2023: PRODUCTION: 100,000 Shares when A1 Mine operations reaches and maintains a production profile of 5,000 t/month or more over a 3 rolling month period and during that period the Company’s mining and treatment operations are cash flow positive. 33 PROCESSING: 100,000 Shares when the Company increases utilisation its gold processing facility in excess of 60% of nameplate (nameplate 150,000 tonnes p.a.) for a three-month period and during that period the Company’s mining and treatment operations are cash flow positive, 34 and within 30 months of the start date: MARKET CAPITALISATION: 100,000 Shares when the Company reaches a market capitalisation of $150 million (over a 5 day VWAP period) PROCESSING: 100,000 Shares when the Company operates the Maldon Process plant at 90% of nameplate capacity (nameplate 150,000 tonnes p.a.) for a 6 month period and during that period the Company’s mining and treatment operations are cash flow positive. Voting and comments made at the company's 2021 Annual General Meeting ('AGM') At the 2021 AGM, 97.88% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2021. The company did not receive any specific feedback at the AGM regarding its remuneration practices. END OF REMUNERATION REPORT (AUDITED) 30 At the 2021 AGM, 99.25% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2021. The company did not receive any specific feedback at the AGM regarding its remuneration practices 31 Rights lapsed on the 10 February 2022 32 Rights Lapsed on the 10 February 2022 33 Due to Covid 19 disruption the Board has allow for the rights to be extended to 1 February 2023 and have vested in 2022 34 Due to Covid 19 disruption the Board has allow for the rights to be extended to 1 February 2023 and 0% probability has been applied at 30 June 2022 13 Directors’ Report Meeting of Directors During the year 3 Directors’ meeting were held. Attendance by each Director during the year were as follows: A Byass J Downes S Howe Number of eligible to attend Attended 3 3 3 3 3 3 Indemnification and insurance of officers The Company’s Constitution provides that, to the extent permitted by law, the Company must indemnify any person who is, or has been, an officer of the Company against any liability incurred by that person including any liability incurred as an officer of the Company or a subsidiary of the Company and legal costs incurred by that person in defending an action. During the year the Company paid an insurance premium for Directors’ and Officers’ Liability and Statutory Liability policies. The contract of insurance prohibits disclosure of the amount of the premium and the nature of the liabilities insured under the policy. The Company has agreed to indemnify their external auditors, BDO Audit (WA) Pty Ltd, to the extent permitted by law, against any claim by a third party arising from the Company’s breach of their agreement. The indemnity stipulates that the Company will meet the full amount of any such liabilities including a reasonable amount of legal costs. Non-audit services The Group 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 Group are important. The Board of Directors has considered the position and, is satisfied that the provision of non-audit services during the year as set out in Note 18 did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • All non-audit services were reviewed by the Board to ensure they do not impact the impartiality and objectivity of the auditor; and • The Executives annually informs the Board of the detail, nature and amount of any non-audit services rendered by BDO during the financial year, giving an explanation of why the provision of these services is compatible with auditor independence. If applicable, the Board take appropriate action to satisfy itself of the independence of BDO. Future Development, prospect and business strategies Further information, other than as disclosed in this report, about likely developments in the operations of the Group and the expected results of the operations in future periods has not been included in this report as disclosure of this information would likely result in unreasonable prejudice to the Group. Proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to 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 part of those proceedings. KAISER REEF LIMITED 2022 No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. Environmental management The Kaiser Reef Group regards compliance with environmental instruments as the legislation, regulations and regulatory minimum performance standard for its operations. The Group’s operations in New South Wales (NSW) and Victoria are subject to environmental regulation under both Commonwealth and State legislation. The Group has environmental bonds lodged with both the NSW and Victorian government. There were no externally reportable environmental incidents during the year ended 30 June 2022 at any of the Group’s operating sites. Auditor independence A copy of the Auditor’s Independence Declaration required under section 307C of the Corporations Act 2001 is set out on page 15 and forms part of this Directors’ Report. Events occurring after the end of the financial year The Directors are not aware of any matter or circumstance that has arisen since the end of the financial year that, in their opinion, has significantly affected or may significantly affect in future years the Company’s or the Group’s operations, the results of those operations or the state of affairs, except as described below. On 21 July 2022 Kaiser Reef Limited announced in relation to the Maldon exploration projects: • A Mineral Resource Estimate of 1.2 Mt at 4.4 g/t gold (Inferred) for 186,656 ounces of gold; and • An Exploration Target of 1.75 to 2.7Mt at between 3 g/t gold and 4 g/t gold for between 165,000 ounces of gold to 345,000 ounces of gold at its wholly owned Maldon site. The Maldon gold project has extensive existing infrastructure and capital, existing mine permitting and a wholly owned processing plant within a 3km proximity, that is currently operating profitably at well below its production capacity. On the 9 September 2022 Kaiser Reef Limited commenced engineering work used for scoping and other technical/planning studies for the potential development of a second gold mining operation at Union Hill. Continued exploration and infill drilling targeting increasing the resource size and confidence are also proposed and will be initiated following the results obtained from the engineering work. On 11 August 2022, 250,000 unlisted options exercisable at $0.40 issued to consultants expired. On the 07 September 2022, 750,000 unlisted options exercisable at $0.30 and expiring 05 September issued to consultants were issued to Euro Equity Group for services relating to share marketing to the European markets. This report is made in accordance with a resolution of Directors. For and on behalf of the Board Dated at Perth this 30th day of September 2022 Jonathan Downes Executive Director 14 Directors’ Report Auditors’ independence – blank page KAISER REEF LIMITED 2022 Page | 15 Financial Report Contents Consolidated Financial Statements Page About this report Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements A. Key results 1 Business combinations 2 Revenue and expenses 3 Significant items 4 Tax 5 Earnings per share 6 Property, plant and equipment 7 Mine properties 8 Exploration and evaluation 9 Rehabilitation provision 10 Working capital 11 Financial risk management 12 Net debt 13 Parent entity disclosures 14 Controlled entities 15 Employee benefit expenses and provisions 16 Share-based payments 17 Contributed equities 18 Remuneration of auditors 19 Events occurring after the balance sheet date 20 Related party transactions 21 Contingencies 22 Basis of preparation 23 Accounting standards Signed reports Directors’ declaration Independent auditor’s report ASX information Corporate directory Additional information for public listed companies 16 17 18 19 20 21 25 25 26 28 29 30 31 32 33 34 36 37 37 38 39 43 43 43 43 44 44 44 45 46 50 51 KAISER REEF LIMITED 2022 About this report Kaiser Reef Limited (the “Company” or “Parent Entity”) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange. The consolidated financial statements of the Company as at and for the year ended 30 June 2022 comprise the Company and its subsidiaries (together referred to as the “Group”). The Group is a for-profit entity primarily involved in mining and sale of gold, mineral exploration and development. The financial report is a general-purpose financial report, which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Where required by accounting standards comparative figures have been adjusted to conform to changes in presentation in the current year. The consolidated financial report of the Group complies with International Financial Reporting Standards (IFRSs) and interpretations issued by the International Accounting Standards Board. What’s in this report Kaiser Reef’s Directors have included information in this report that they deem to be material and relevant to the understanding of the financial statements and the Group. A disclosure has been considered material and relevant where: • • • • the dollar amount is significant in size (quantitative); the dollar amount is significant in nature (qualitative); the Group’s result cannot be understood without the specific disclosure; and it relates to an aspect of the Group’s operations that is important to its future performance. Accounting policies and critical accounting judgements and estimates applied to the preparation of the consolidated financial statements are presented where the related accounting balance or consolidated financial statement matter is discussed. To assist in identifying critical accounting judgements and estimates, we have highlighted them in the following manner: Accounting judgements and estimates Page | 16 Financial Report KAISER REEF LIMITED 2022 Consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2022 Operations Revenue Mine operating costs Gross profit/(loss) Other revenue Exploration expensed Corporate costs Depreciation and amortisation Expenses associated with acquisition transactions Share based payments Impairment expense Listing expense on acquisition of Golden River Resources Pty Ltd Operating loss Finance costs Foreign exchange movements Loss before income tax Income tax expense Net loss after tax Other comprehensive income Notes 2 2 2 6 1,3 16 8 1,3 12 4 Consolidated 30 Jun 2022 Consolidated Restated 28 Aug 2020 to 30 Jun 2021(1) 22,785,222 (16,916,387) 5,868,835 1,041,732 (988) (1,903,061) (6,780,474) - (149,947) (311,289) - (2,235,192) (23,956) (3,690) (2,262,838) 5,085,396 (6,665,580) (1,580,184) 6,359 (220) (777,116) (1,318,922) (2,213,458) (270,661) - (5,637,309) (11,791,511) (15,314) - (11,806,825) - (2,262,838) - (11,806,825) - - Total comprehensive loss attributable to equity holders of the Company (2,262,838) (11,806,825) Earnings per share Basic Loss per share (cents per share) Diluted Loss per share (cents per share) 5 5 (1.70) (1.70) (19.66) (19.66) 1) Comparative amounts have been shown restated due to changes to provisional accounting on prior period acquisitions as disclosed in Note 1. The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the notes to the consolidated financial statements. Page | 17 Financial Report Consolidated statement of financial position as at 30 June 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets Non-current assets Trade and other receivables Property, plant and equipment Mine properties Exploration and evaluation Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Provisions Interest bearing liabilities Total current liabilities Non-current liabilities Rehabilitation provision Other Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity KAISER REEF LIMITED 2022 Consolidated 2022 Consolidated 2021 Restated(1) Notes 12 10 10 10 6 7 8 10 15 12 9 15 17 16 6,581,919 1,439,577 2,180,448 10,201,944 4,787,279 1,768,111 2,218,627 8,774,017 857,000 5,933,674 7,403,195 5,176,034 19,369,903 857,000 6,637,514 7,456,645 2,840,415 17,791,574 29,571,847 26,565,591 3,964,921 582,971 267,836 4,815,728 1,698,000 248,294 1,946,294 6,762,022 3,017,994 1,200,725 281,330 4,500,049 1,667,000 227,781 1,894,781 6,394,830 22,809,825 20,170,761 35,431,839 1,447,649 (14,069,663) 31,499,826 477,760 (11,806,825) 22,809,825 20,170,761 1) Comparative amounts have been shown restated due to changes to provisional accounting on prior period acquisitions as disclosed in Note 1. The above consolidated statement of financial position should be read in conjunction with the notes to the consolidated financial statements. Page | 18 Financial Report Consolidated statement of changes in equity for the year ended 30 June 2022 KAISER REEF LIMITED 2022 Note Contributed Equity Consolidated Share base payment reserve Accumulated Losses Total Balance at 30 June 2021 (1) Transactions with owners of the Company recognised directly in equity: Share-based payments Performance rights issued/(expired) Ordinary shares issued for working capital Cost of Equity issued Total comprehensive loss for the period Loss attributable to equity holders of the Company Other comprehensive gain/(loss) Balance at 30 June 2022 16 17 31,499,826 477,760 (11,806,825) 20,170,761 78,000 101,850 5,123,272 (1,371,109) - - 35,431,839 1,071,739 (101,850) - - - - - - - - 1,447,649 (2,262,838) - (14,069,663) 1,149,739 - 5,123,272 (1,371,109) (2,262,838) - 22,809,825 Note Contributed Equity Consolidated Share base payment reserve Accumulated Losses Total Balance at 28 August 2020 Transactions with owners of the Company recognised directly in equity: Share-based payments Equity issued in relation to acquisitions Conversion of convertible notes Ordinary shares issued for working capital Cost of Equity issued Total comprehensive loss for the period Loss attributable to equity holders of the Company Other comprehensive gain/(loss) Balance at 30 June 2021(1) 16 1 17 2,500 - 477,760 - - - 934,657 10,035,000 13,500,000 7,500,000 (472,331) - - 31,499,826 - - - - - 2,500 1,412,417 10,035,000 13,500,000 7,500,000 (472,331) - - 477,760 (11,806,825) - (11,806,825) (11,806,825) - 20,170,761 1) Comparative amounts have been shown restated due to changes to provisional accounting on prior period acquisitions as disclosed in Note 1. The above consolidated statement of changes in equity should be read in conjunction with the notes to the consolidated financial statements. Page | 19 Financial Report Consolidated statement of cash flows for the year ended 30 June 2022 Cash Flows From Operating Activities: Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest paid KAISER REEF LIMITED 2022 Notes Consolidated 30 Jun 2022 Consolidated 28 Aug 20 to 30 Jun 2021 23,318,505 5,088,940 (17,655,262) (7,552,594) 6,233 (23,956) 2,816 (15,314) Net cash inflow/(outflow) from operating activities 12 5,645,520 (2,476,152) Cash Flows From Investing Activities: Payments for property, plant and equipment Payments for development of mining properties Payments for exploration and evaluation Proceeds from sales of fixed assets Cash paid for acquisition of Centennial Mining Limited Cash acquired on reverse acquisition Net cash outflow from investing activities Cash Flows From Financing Activities: Proceeds from issue of convertible notes Proceeds from issue of ordinary shares Payment for cost of shares issued Insurance premium funding Insurance premium funding principal repayments Lease principal repayments Net cash inflow from financing activities 1 1 11 Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 12 (1,938,443) (1,096,875) (4,084,741) (2,646,907) 80,750 (993,751) (737,619) - - - (13,500,000) 6,639,738 (8,589,341) (9,688,507) - 13,500,000 5,124,072 (371,317) 475,449 (488,943) - 3,653,280 (461,250) 488,294 (218,396) (9,990) 4,738,461 16,951,938 1,794,640 4,787,279 6,581,919 4,787,279 - 4,787,279 Cash flows are included in the consolidated statement of cash flows on a gross basis. The GST component of cash flows arising from investing or financing activities, which are recoverable from, or payable to, the taxation authority are classified as part of operating cash flows. The above consolidated statement of cash flows should be read in conjunction the notes to the consolidated financial statements. Page | 20 Financial Report 1 Acquisition accounting Business Combination Accounting – Centennial Mining Limited Acquisition The acquisition method of accounting used to account for business combination regardless of whether equity instrument or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. in stages, the Where the business combination consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. is achieved Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre- existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) (ii) 12 months from the date of the acquisition or when the acquirer receives all the information possible to determine fair value. Reverse acquisition accounting – Golden River Resources Pty Ltd Acquisition On the 20 January 2021 Kaiser Reef Limited acquired 100% of the issued capital of Golden River Resources Pty Ltd (‘GRR’). Under Australian Accounting Standards GRR was deemed to be the accounting acquirer in this transaction. The acquisition has been accounted for as a share based payment by which GRR acquires the net assets and listing status of Kaiser Reef Limited. KAISER REEF LIMITED 2022 Accordingly, the consolidated financial statements of Kaiser Reef Limited have been prepared as a continuation of the business and operations of GRR. As the deemed acquirer GRR has accounted for the acquisition of Kaiser Reef Limited from 20 January 2021. The from therefore comparative period incorporation of GRR on 28 August 2020 to 30 June 2021. the period represents The implications of the acquisition by GRR on the comparatives in the financial statements are as follows: Consolidated income statement and other comprehensive income • The comparative period consolidated statement of profit or loss and other comprehensive income comprises the total comprehensive income for the period from 28 August 2020 to 30 June 2021. Consolidated Statement of Financial Position • The comparative period consolidated statement of financial position as at 30 June 2021 represents the combination of GRR and Kaiser Reef Limited. Consolidated Statement of Changes in Equity • The comparative period consolidated statement of changes in equity comprises: o The equity of GRR on incorporation as at 28 August 2020; and The total comprehensive loss for the period and transactions with equity holders, being 10 months to GRR’s year ended 30 June 2021 and the period 20 January 2021 to 30 June 2021 of Kaiser Reef Limited. The equity balance of the combined GRR and Kaiser Reef Limited at 30 June 2021. Consolidated Statement of Cashflows • The comparative period consolidated statement of cash flows comprises: o The cash balance of GRR at incorporation on 28 August 2020; and The transactions of GRR from incorporation to 30 June 2021 and the period 20 January 2021 to 30 June 2021 of Kaiser Reef Limited. The cash balance of the combined GRR and Kaiser Reef Limited Group at 30 June 2021. Equity structure The equity structure (the number and type of the equity structure and the equity instruments issued) in the financial statements reflects the consolidated equity structure of Kaiser Reef Limited and GRR. Page | 21 o o o o Financial Report 1 Acquisition accounting (continued) Deemed Consideration The consideration in a reverse acquisition is deemed to have been incurred by the legal Subsidiary (GRR) in the form of equity instruments issued to the shareholders of the legal parent (KAU). The acquisition date fair value of consideration transferred has been determined by reference to the fair value of the issued shares of KAU immediately prior to the acquisition. Hence the purchase consideration is 33,450,000 (KAU share just prior to acquisition) at capital raising price of $0.30 which is $10,035,000. Kaiser Reef Limited also issued 3,115,523 shares to brokers and advisors for services provided in relation to the transaction with a deemed value of $934,657 based on the share price of $0.30. KAISER REEF LIMITED 2022 Below are key balances recognised as a result of the reverse acquisition: Kaiser Reef Limited Share Capital 20 January 2021 Historical issued capital at transaction date 5,494,554 Elimination of Kaiser Reef Ltd issued capital (5,494,554) Deemed consideration on acquisition 10,035,000 3,115,523 shares to brokers and advisors Total Kaiser Reef Limited share capital on completion 934,657 10,969,657 Kaiser Reef Limited share option reserve Historical share option reserve at acquisition date Elimination of historical share option reserve Issue of 1,344,800 options to advisors Total Kaiser Reef Limited share option reserve on completion Kaiser Reef Limited accumulated losses pre- completion Historical accumulated losses at 30 June 2020 Loss incurred from 1 July 2020 to 20 January 2021 Total Kaiser Reef Limited accumulated losses at acquisition date Elimination of Kaiser Reef Limited accumulated losses Total Kaiser Reef Limited accumulated losses on completion Assets and liabilities acquired Cash and cash equivalents Exploration and evaluation assets Other assets Trade and other trade payables Other payables Net assets Listing expense Deemed Consideration Less: net assets of Kaiser Reef Limited Total Kaiser Reef Listing expense (1) 230,995 (230,995) 207,099 207,099 318,998 1,002,160 1,339,158 (1,339,158) - 6,639,738 1,852,798 43,089 (228,768) (3,909,166) 4,397,691 10,035,000 (4,397,691) 5,637,309 (1) Non-Cash once off expense as prescribed by Australian Accounting Standards for the reverse acquisition of Kaiser Reef Limited. Page | 22 Notes to the Financial Report 1 Acquisition accounting (continued) Acquisition accounting – Centennial Mining Limited Acquisition On 21 January 2021, the Group, through its subsidiary Golden River Resources Pty Ltd, acquired 100% of the issued capital of Centennial Mining Limited (“Centennial Mining”), a gold mining, development and exploration company with operations in Victoria, Australia. The acquisition of Centennial Mining achieves all of the Group’s strategic objectives, including: • Valuable mining and exploration licences in the Victorian gold region, which had in the past high-grade mining areas; • Project the Group from a gold exploration and development to a gold mining and producer; and • A processing facility in Victoria which can produce Dore The acquisition was completed through a deed of company arrangement. KAISER REEF LIMITED 2022 The accounting for the acquisition of Centennial Mining Limited has been finalised at 21 January 2022. Consideration transferred Cash and cash equivalents Total Consideration Goodwill arising on acquisition Consideration transferred Less: Fair value of identifiable net assets acquired Total goodwill arising on acquisition Consideration paid in cash Less: Cash and cash equivalents balance acquired Net cash out flow on acquisition of subsidiaries Consolidated 21 January 2021 13,500,000 13,500,000 13,500,000 (13,500,000) - 13,500,000 - 13,500,000 The assets and liabilities recognised as a result of the acquisition are as follows: Assets Current assets Trade and other receivables Inventories Total current assets Non-current assets Trade and other receivables Property, plant and equipment(1) Mine properties Exploration and evaluation(2) Total non-current assets Total assets Liabilities Current liabilities Provisions Total current liabilities Non-current liabilities Rehabilitation provision Total non-current liabilities Total liabilities Net identifiable assets acquired Net assets acquired Provisional fair value reported at 21 January 2021 Adjustments to provisional fair value Final Fair value reported as at 21 January 2021 280,510 1,047,158 1,327,668 857,001 2,524,050 7,174,001 3,849,418 14,404,470 15,732,138 (565,138) (565,138) (1,667,000) (1,667,000) (2,232,138) 13,500,000 13,500,000 - - - - 3,599,418 - (3,599,418) - - - - - - - - - 280,510 1,047,158 1,327,668 857,001 6,123,468 7,174,001 250,000 14,404,470 15,732,138 (565,138) (565,138) (1,667,000) (1,667,000) (2,232,138) 13,500,000 13,500,000 (1) Management has obtained a final independent valuation of the plant, property and equipment acquired and adjusted the provisional amount accordingly. (2) In a mining transaction the residual amount of purchase consideration after all the other assets and liabilities have been identified and re-measured to reflect acquisition date fair value is typically allocated to mine properties (excluding site rehabilitation), due to the complexity of the valuation process in particular exploration and evaluation. (3) Following the increase in valuation of the plant, property and equipment acquired, the additional depreciation has been accounted for over a unit of production basis from date of acquisition. Upon finalisation of acquisition date information, the amortisation of mine properties has also been adjusted from date of acquisition, alongside other minor changes as a result of finalisation of provisional accounting. These have been flowed through the comparative retained earnings accordingly. Page | 23 Notes to the Financial Report KAISER REEF LIMITED 2022 The below is the effect of the restatement due to provisional accounting adjustment on the Consolidated statement of financial position as at 30 June 2021. 1 Acquisition accounting (continued) Assets Current assets Trade and other receivables Non-current assets Property, plant and equipment Mine properties Exploration and evaluation Net Assets Equity Accumulated losses Total Equity Balances reported as at 30 June 2021 Adjustments following finalisation of provisional accounting Restated balances as at 30 June 2021 1,162,019 (77,121) 1,084,898 3,390,922 7,644,508 6,439,832 3,246,592 (187,863) (3,599,417) 6,637,514 7,456,645 2,840,415 20,788,570 (617,809) 20,170,761 (11,189,014) 20,788,570 (617,809) (617,809) (11,806,823) 20,170,761 Page | 24 Notes to the Financial Report 2 Revenue and Mine Operating Costs Revenue Gold sales Silver sales Interest income Sale of asset Reversal of provisions Other Total Consolidated Consolidated 28 Aug 20 to 30 Jun 21 30 Jun 2022 22,785,222 14,656 6,233 80,750 750,000(1) 190,093 (2) 23,826,954 5,085,396 3,543 2,816 - - - 5,091,755 Mine Operating Expenses Gold operation expenditure Employee expense Gross operating profit/(loss) (8,361,772) (8,554,615) 5,868,835 (4,020,610) (2,644,970) (1,580,184) (1) The State Revenue Office Victoria has finalised the stamp duty of the properties acquired in the Centennial Mining Limited acquisition, $15,652 paid April 2022. (2) DOCA finalization settlement of funds head in Escrow of $180,000. KAISER REEF LIMITED 2022 Sales revenue Revenue from the sale of gold and silver in the course of ordinary activities is measured at the fair value of the consideration received or receivable. The Group recognises revenue at a point in time when control (physical or contractual) is transferred to the buyer, the amount of revenue can be reliably measured and the associated costs can be estimated reliably, and it is probable that future economic benefits will flow to the Group. Segment reporting The consolidated entity has considered the requirements of AASB 8 – Operating Segments and has identified its operating segments based on the internal reports that are reviewed and used by the board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The consolidated entity operates predominantly in one business segment and in one geographical location. The operations of the consolidated entity consist of mineral production and exploration, within Australia. 3 Significant items Significant items are those items where their nature or amount is considered material to the financial report. Such items included within the consolidated results for the year are detailed below. Centennial Mining Limited acquisition costs(1) Listing expense(2) Total significant items – pre tax Tax Effect Tax effect on acquisition cost Total significant items – post tax Consolidated 30 Jun 22 - - - - Consolidate d 28 Aug 20 to 30 Jun 21 (2,213,458) (5,637,309) (7,850,767) - (7,850,767) (1) Centennial Mining Limited acquisition costs Costs relating to the acquisition of Centennial Mining Limited included due diligence costs, share registry charges, stamp duty and integration costs. (2) Golden River Resources listing expense Non-Cash once off expense from the reverse acquisition of Kaiser Reef Limited (refer to Note 1). Page | 25 Notes to the Financial Report 4 Income Tax Income tax expense Consolidated Current tax expense Under provision in respect of the prior year Deferred income tax cost/(benefit) Total income tax expense 30 Jun 22 - - - - Consolidated 28 Aug 20 to 30 Jun 21 - - - - Numerical reconciliation of income tax expense to prima facie tax payable Consolidated 30 Jun 22 (2,262,838) (565,710) Consolidated 28 Aug 20 to 30 Jun 21 (11,806,825) (3,069,774) 1,260 37,487 1,630 - - 77,823 86,799 1,845 70,372 718 2,201,829 30,577 - (120,896) 360,711 885,329 Loss before income tax Tax at the Australian tax rate of 25% (2021: 26%) Tax effect of amounts not deductible/ (taxable) in calculating taxable income: Entertainment Share based payments Fines & penalties Reverse acquisition / acquisition of subsidiary Change in corporate tax rate other permanent differences Deferred tax assets not brought to account Tax losses not brought to account Income tax expense KAISER REEF LIMITED 2022 Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in the consolidated income statement, except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable profit for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Tax exposure In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities may impact tax expense in the period that such a determination is made. Tax consolidation Entities in the Australian tax consolidated group at 30 June 2022 included: Golden River Resources Pty Ltd (head entity), Centennial Mining Limited and Maldon Resources Pty Ltd. Current and deferred tax amounts are allocated using the “separate taxpayer within group” method. A tax sharing and funding agreement has been established between the entities in the tax consolidated group. The Company recognises deferred tax assets arising from the unused tax losses of the tax consolidated group to the extent that it is probable that future taxable profits of the tax consolidated group will be available against which the asset can be utilised. At 30 June 2022, the Australian tax consolidated group did not have any unused tax losses. - - Current tax liability As at 30 June 2022, the Company had a nil current tax liability. Accounting judgements and estimates Deferred tax assets relating to the acquiree which have been brought to account to the extent of offsetting deferred tax liabilities relating to the acquisition of Centennial Mining Limited are expected to be available for use by the Group in accordance with AASB 112 and IFRIC 23. At 30 June 2022, tax losses not recognised relating to entities associated of $360,711 (tax effected) were not booked (30 June 2021: $885,329). Page | 26 Notes to the Financial Report 4 Income Tax (continued) Deferred tax balances Deferred tax liabilities Property, plant and equipment Mine properties Exploration and evaluation assets Other temporary differences Total Offset of deferred tax assets Net deferred tax liability recognised Deferred tax assets Trade and other payables Interest bearing borrowings Provisions - current Rehabilitation provision – non- current Provisions – non-current Other tax deductible amounts Tax losses Total Offset against deferred tax liabilities Net deferred tax assets not brought to account Consolidated 2022 Consolidated 2021 (480,482) (2,683,342) (915,205) (119,343) (4,198,372) 4,198,372 - (763,190) (1,911,127) (1,151,350) - (3,825,667) 3,825,667 - 83,015 - 152,548 424,500 58,809 4,166,185 1,367,006 6,252,063 18,745 2,858 163,254 416,750 55,906 4,115,509 885,329 5,658,351 (4,198,372) (3,825,667) 2,053,691 1,832,684 KAISER REEF LIMITED 2022 Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; • Temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and • Taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. Accounting judgements and estimates At each reporting date, the Group performs a review of the probable future taxable profit in each jurisdiction. The assessments are based on the latest life of mine plans relevant to each jurisdiction and the application of appropriate economic assumptions such as gold price and operating costs. Any resulting recognition of deferred tax assets is categorised by type (e.g. tax losses or temporary differences) and recognised based on which would be utilised first according to that particular jurisdiction’s legislation. Page | 27 Notes to the Financial Report 5 Earnings per share Consolidated 30 Jun 22 Cents (1.70) (1.70) Consolidated 28 Aug 20 to 30 Jun 21 Cents (19.66) (19.66) Basic (loss) per share Diluted (loss) per share Reconciliation of earnings/(losses) used in calculating earnings/(losses) per share Consolidated 30 Jun 22 Consolidated 28 Aug 20 to 30 Jun 21 Basic and diluted earnings/(losses) per share: Loss after tax for the period Weighted average number of shares Weighted average number of ordinary shares used in calculating basic earnings per share Weighted average number of ordinary shares and potential ordinary shares used in calculating diluted earnings per share Consolidated 2022 Number Consolidated 2021 Number 132,965,982 60,051,653 132,965,982 60,051,653 (2,262,838) (11,806,825) Basic loss per share is not diluted. Performance rights and options KAISER REEF LIMITED 2022 Basic earnings/(losses) per share Basic earnings/(losses) per share is calculated by dividing the profit or loss attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the reporting period. Diluted earnings/(losses) per share in the Diluted earnings per share adjusts the figures used determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Performance rights and options granted to employees under the Kaiser Performance Rights Plan are considered to be potential ordinary shares and are included in the determination of diluted earnings per share to the extent to which they are dilutive. The rights and options are not included in the determination of basic earnings per share until the performance conditions are met. Weighted average of number of shares The calculation of the weighted average number of shares is based on the number of ordinary shares and performance shares during the period. Page | 28 Notes to the Financial Report 6 Property, plant and equipment KAISER REEF LIMITED 2022 Consolidated Consolidated 2021 2022 Buildings, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Non-current Land and buildings At the beginning of the period Acquired fixed assets – business combination Additions Depreciation (range 3-15 years) Disposals At the end of the period Plant and equipment At the beginning of the period Acquired fixed assets - business combination Additions Assets under construction Disposals Depreciation (range 3-15 years) At the end of the period Total 27,299 - 20,000 (2,863) - 44,436 - 28,551(1) - (1,252) - 27,299 6,610,215 - - 1,645,748 272,695 - (2,639,420) 5,889,238 5,933,674 6,119,902 758,713 338,162 - (606,562) 6,610,215 6,637,514 Consolidated Consolidated 28 Aug 20 to 30 Jun 21 30 Jun 22 (2,863) (2,639,420) (1,252) (606,562) Reconciliation of depreciation and amortisation to the consolidated income statement Depreciation Land and buildings Plant and equipment Amortisation Mine properties Total (711,108) (1,318,922) (1) Right of use assets totaling $10,810 have been included within balance (4,138,191) (6,780,474) Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the consolidated income statement during the financial period in which they are incurred. Depreciation of assets is calculated using the straight line method to allocate the cost or revalued amounts, net of residual values, over their estimated useful lives. Where the carrying value of an asset is less than its estimated residual value, no depreciation is charged. Residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount, if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains and losses are included in the consolidated income statement when realised. The Group’s leasing activities The Group leases offices, warehouses, equipment and vehicles as part of its operational requirements. Contracts are typically made for fixed periods of 6 months to 5 years, but may have extension options as described below. Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone value. As a Lessee the Group will individually access single lease components. Lease terms are negotiated on individual operational requirements and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets are not used as security for borrowing purposes. Accounting judgements and estimates Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation charges for its property, plant and equipment. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in- use calculations, which incorporate a number of key estimates and assumptions. Page | 29 Notes to the Financial Report 7 Mine properties Non-current Mine properties At beginning of the period Acquired mine (Centennial Mining) Additions Amortisation for the period At end of the period properties Consolidated Consolidated 2021 - 7,174,002 2022 7,456,645 - 4,084,741 (4,138,191) 7,403,195 993,751 (711,108) 7,456,645 Mine properties Mine development expenditure represents the acquisition cost and/or accumulated exploration, evaluation and development expenditure in respect of areas of interest in which mining has commenced. When further development expenditure is incurred in respect of a mine, after the commencement of production, such expenditure is carried forward as part of the mine development only when substantial future economic benefits are established, otherwise such expenditure is classified as part of production and expensed as incurred. Mine development costs are deferred until commercial production commences, at which time they are amortised on a unit-of- production basis over mineable reserves. The calculation of amortisation takes into account future costs which will be incurred to develop all the mineable reserves. Changes to mineable reserves are applied from the beginning of the reporting period and the amortisation charge is adjusted prospectively from the beginning of the period. Accounting judgements and estimates The Group applies the units of production method for amortisation of its life of mine specific assets, which results in an amortisation charge proportional to the depletion of the anticipated remaining life of mine production. Amortisation has been based on indicated resource estimates. These calculations require the use of estimates and assumptions in relation to reserves, metallurgy and the complexity of future capital development requirements; changes to these estimates and assumptions will impact the amortisation charge in the consolidated income statement and asset carrying values. Impairment of assets All asset values are reviewed at each reporting date to determine whether there is objective evidence that there have been events or changes in circumstances that indicate that the carrying value may not be recoverable. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made. An impairment loss is recognised for the amount by which the carrying amount of an asset or a cash generating unit (‘CGU’) exceeds the recoverable amount. Impairment losses are recognised in the consolidated income statement. The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and to the particular assets that may lead to impairment. The identified CGU of the Group is: Centennial Mining. The carrying value of all CGUs are assessed when an indicator of impairment is identified using fair value less costs of disposal (‘Fair Value’) to calculate the recoverable amount. When required by an indicator of impairment, fair Value is determined as the net present value of the estimated future cash flows. Future cash flows are based on life-of-mine plans using market based commodity price quantities of ore reserves, operating KAISER REEF LIMITED 2022 costs and future capital expenditure. Costs to dispose have been estimated by management. Accounting judgements and estimates - Impairment Significant judgements and assumptions are required in making estimates of Fair Value. The CGU valuations are subject to variability in key assumptions including, but not limited to: long-term gold prices, currency exchange rates, discount rates, production, operating costs, future capital expenditure and permitting of new mines. An adverse change in one or more of the assumptions used to estimate Fair Value could result in a reduction in a CGU’s recoverable value. This could lead to the recognition of impairment losses in the future. At 30 June 2022, the Group determined that there were no indicators of impairment for the Centennial Mining cash generating unit due to strong spot gold and consensus forecast prices at 30 June 2022, existing long life mining at A1 mine and further development of resources, together with the relatively low carrying value to recover. Ore Reserves The Group determines and reports Ore Reserves under the 2012 edition of the Australian Code for Reporting of Mineral Resources and Ore Reserves, known as the JORC Code. The JORC Code requires the use of reasonable investment assumptions to calculate reserves. Due to the fact that economic assumptions used to estimate reserves change from period to period, and geological data is generated during the course of operations, estimates of reserves may change from period to period. Accounting judgements and estimates– Ore Reserves Reserves are estimates of the amount of gold product that can be economically extracted from the Group’s properties. In order to calculate reserves, estimates and assumptions are required about a range of geological, technical and economic factors, including quantities, grades, production rates, production costs, future capital requirements, short and long term commodity prices and exchange rates. techniques, recovery Estimating the quantity and/or grade of reserves requires the size, shape and depth of ore bodies to be determined by analysing geological data. This process may require complex and difficult geological judgements and calculations to interpret the data. Changes in reported reserves may affect the Group’s financial results and financial position in a number of ways, including: • Asset carrying values may be impacted due to changes in estimated future cash flows. • The recognition of deferred tax assets. • Depreciation and amortisation charged in the consolidated income statement may change where such charges are calculated using the units of production basis. • Capital development deferred in the balance sheet or charged in the consolidated income statement may change due to a revision in the development amortisation rates. • Decommissioning, site restoration and environmental provisions in estimated reserves affect may change where changes expectations about the timing or cost of these activities. Page | 30 Notes to the Financial Report 8 Exploration and evaluation Non-current At beginning of the period Acquired exploration (Centennial Mining) Additions Impairment expense* At end of the period Consolidated Consolidated 2021 - 2,840,415 2022 - 2,646,907 (311,288) 5,176,034 2,352,796 487,619 - 2,840,415 Commitments for exploration 2022 2021 minimum In order to maintain rights of tenure to mining tenements for the next financial year, the Group is committed to tenement rentals and exploration in terms of the expenditure requirements of the relevant government mining departments in Australia. This requirement will continue for future years with the upon amount tenement holdings. dependent 1,281,190 1,168,690 KAISER REEF LIMITED 2022 Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that the Group holds current rights to tenure and the costs are expected to be recouped through the successful development of the area or where activities in the area have not yet reach a stage that permits reasonable assessment of the existence of economically recoverable reserves. Exploration and evaluation expenditure consists of an accumulation of acquisition costs and direct exploration and evaluation costs incurred, together with an allocation of directly related overhead expenditure. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward cost in relation to that area of interest. When an area of interest is abandoned, or the Directors determine it is not commercially viable to pursue, accumulated costs in respect of that area are written off in the period the decision is made. Impairment expense* On the 10 May 2022, the Group announced the divestment discussion of its NSW Stuart town tenements to Checkmate Minerals Limited for $25,000 deposit, 5,000,000 shares in the capital of Checkmate Minerals Limited with a deemed issue price of $0.20 and Deferred Consideration: On the first anniversary of the Company’s admission to ASX, buyer is to: Issue to KAU a total $500,000 in shares (deemed issue price per share based on market price) OR Make a cash payment in the amount of $500,000 by way of electronic funds prior to such date. Given the information arising as part of the divestment discussions, it was determined that under AASB 6 section 20(d) the carrying amount of the exploration and evaluation asset was unlikely to be recovered in full from successful development or by sale. Accordingly, the asset was subject to impairment of $311,288 to reflect its evaluated value of $1,694,444. Accounting judgements and estimates Exploration and evaluation costs have been capitalised on the basis that the consolidated entity will commence commercial production in the future, from which time the costs will be amortised in proportion to the depletion of the mineral resources. Key judgements are applied in considering costs to be capitalised which includes determining expenditures directly related to these activities and allocating overheads between those that are expensed and capitalised. In addition, costs are only capitalised that are expected to be recovered either through successful development or sale of the relevant mining interest. Factors that could impact the future commercial production at the mine include the level of reserves and resources, future technology changes, which could impact the cost of mining, future legal changes and changes in commodity prices. To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the period in which this determination is made. Page | 31 Notes to the Financial Report 9 Rehabilitation provision Non-current Provision for rehabilitation Movements in Provisions Rehabilitation Balance at start of period Acquired rehabilitation (Centennial Mining) Additions Balance at end of period Consolidated Consolidated 2021 2022 1,698,000 1,698,000 1,667,000 1,667,000 1,667,000 - - 1,667,000 31,000 1,698,000 - 1,667,000 KAISER REEF LIMITED 2022 Provisions, including those for legal claims and rehabilitation and restoration costs, are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognised for future operating losses. The Group has obligations to dismantle, remove, restore and rehabilitate certain items of property, plant and equipment and areas of disturbance during mining operations. A provision is made for the estimated cost of rehabilitation and restoration of areas disturbed during mining operations up to reporting date but not yet rehabilitated. The provision also includes estimated costs of dismantling and removing the assets and restoring the site on which they are located. The provision is based on current estimates of costs to rehabilitate such areas, discounted to their present value based on expected future cash flows. The estimated cost of rehabilitation includes the current cost of contouring, topsoiling and revegetation to meet legislative requirements. Changes in estimates are dealt with on a prospective basis as they arise. There is some uncertainty as to the extent of rehabilitation obligations that will be incurred due to the impact of potential changes in environmental legislation and many other factors (including future developments, changes in technology and price increases). The rehabilitation is remeasured at each reporting date in line with changes in the timing and /or amounts of the costs to be incurred and discount rates. The liability is adjusted for changes in estimates. Adjustments to the estimated amount and timing of future rehabilitation and restoration cash flows are a normal occurrence in light of the significant judgments and estimates involved. liability As the value of the provision represents the discounted value of the present obligation to restore, dismantle and rehabilitate, the increase in the provision due to the passage of time is recognised as a borrowing cost. A large proportion of the outflows are expected to occur at the time the respective mines are closed. Accounting judgements and estimates Mine rehabilitation provision requires significant estimates and assumptions as there are many transactions and other factors that will ultimately affect the liability to rehabilitate the mine sites. Factors that will affect this liability include changes in regulations, prices fluctuations, changes in technology, changes in timing of cash flows which are based on life of mine plans and changes to discount rates. When these factors change or are known in the future, such differences will impact the mine rehabilitation provision in the period in which it becomes known. Page | 32 Notes to the Financial Report 10 Working capital Trade and other receivables Current Trade receivables Other receivables Prepayments Non-current Rehabilitation Bond Consolidated Consolidated 2021 2022 9,649 1,381,093 48,835 1,439,577 - 790,949 977,162 1,768,111 857,000 857,000 Total 2,296,577 2,625,111 KAISER REEF LIMITED 2022 Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are usually due for settlement no more than 30 days from the date of recognition. Cash placed on deposit with a financial institution to secure bank guarantee facilities and restricted from use (‘restricted cash’) within the business is disclosed as part of trade and other receivables. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. The amount of the provision for doubtful receivables is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The Group does not have material trade receivables for which there is an expected credit loss though the consolidated income statement. It only sells to reputable banks, refiners and commodity traders. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Inventories Current Consumables Ore stockpiles Gold in circuit Bullion on hand Total Consolidated Consolidated 2021 2022 864,216 569,848 746,384 - 2,180,448 841,467 424,080 590,930 362,150 2,218,627 Trade and other payables Current Trade payables Other payables Total Consolidated Consolidated 2021 2022 2,621,652 1,343,269 3,964,921 2,545,717 472,277 3,017,994 Raw materials and consumables, ore stockpiles, gold-in-circuit and bullion on hand are valued at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure relating to mining activities, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. Accounting judgements and estimates The calculation of net realisable value (NRV) for ore stockpiles, gold in circuit and bullion on hand involves significant judgement and estimation in relation to timing and cost of processing, future gold prices, exchange rates and processing recoveries. A change in any of these assumptions will alter the estimated NRV and may therefore impact the carrying value of inventories. These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year, which remain unpaid as at reporting date. The amounts are unsecured and are usually paid within 30 days from the end of the month of recognition. Page | 33 Notes to the Financial Report 11 Financial risk management Financial risk management The Group’s management of financial risk is aimed at ensuring net cash flows are sufficient to withstand significant changes in cash flow under certain risk scenarios and still meet all financial commitments as and when they fall due. The Group continually monitors and tests its forecast financial position and has a detailed planning process that forms the basis of all cash flow forecasting. The Group's normal business activities expose it to a variety of financial risk, being: market risk (especially gold price and foreign currency risk), credit risk and liquidity risk. The Group may use derivative instruments as appropriate to manage certain risk exposures. Risk management in relation to financial risk is carried out by a centralised executive function in accordance with Board approved directives that underpin policies and processes. The Executive Leadership Team (and when required external consultants) assist the Board in relation to forecasted risk profiles, risk issues, risk mitigation strategies and compliance with company policy. The executive team regularly reports the findings to the Board. in discharging their responsibilities (a) Market risk Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments, cash flows and financial position. The Group may enter into derivatives, and also incur financial liabilities, in order to manage market risks. All such transactions are carried out within directives and policies approved by the Board. (b) Currency risk The currencies in which transactions primarily are denominated are Australian Dollars. The Group is exposed to currency risk only to the extent of currency fluctuation effects on gold sales and purchases of import inventories. (c) Interest rate exposures The Board manages the interest rate exposures. Any decision to hedge interest rate risk is assessed in relation to the overall Group exposure, the prevailing interest rate market, and any funding counterparty requirements. (d) Capital management The Group’s total capital is defined as total shareholders’ funds plus net debt. The Group aims to maintain an optimal capital structure to reduce the cost of capital and maximise shareholder returns. The KAISER REEF LIMITED 2022 Group has a capital management plan that is reviewed by the Board on a regular basis. The Group is not subject to externally imposed capital requirements other than normal banking requirements. (e) Credit risk Credit risk is the risk that a counter party does not meet its obligations under a financial instrument or customer contract, with a maximum exposure equal to the carrying amount of the financial assets as recorded in the consolidated financial statements. The Group is exposed to credit risk from its operating activities (primarily customer receivables) and from its financing activities, including deposits with banks and financial institutions. Credit risks related to receivables Based on historic rates of default, the Group believes that no impairment has occurred with respect to trade receivables, and none of the trade receivables at 30 June 2022 were past due. (f) Fair value estimation The fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of the Group approximates carrying value. The fair value of other monetary financial assets and financial liabilities is based upon market prices. The fair value of financial assets and financial liabilities must be estimated for recognition and measurement, or for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price. The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined using generally accepted valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. Page | 34 Notes to the Financial Report 11 Financial risk management (continued) (h) Liquidity risk KAISER REEF LIMITED 2022 Prudent liquidity risk management requires maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows, and matching maturity profiles of financial assets and liabilities. The Group undertakes sensitivity analysis to stress test the operational cash flows, which are matched with capital commitments to assess liquidity requirements. The capital management plan provides the analysis and actions required in detail for the next twelve months and longer term. Fixed Interest Maturing in 2022 Financial assets Cash and cash equivalents Receivables Non-current bonds Financial liabilities Trade and other payables Insurance premium funding Net financial assets Fixed Interest Maturing in 2021 Financial assets Cash and cash equivalents Receivables Non-current bonds Financial liabilities Trade and other payables Right-of-use assets lease liability Insurance premium funding Net financial assets Floating Interest rate 1 year or less Over 1 to 2 years Over 2 to 5 years Total - - 0.3% - - 4% - - - - 0.3% - - 3% 4% - - 6,581,919 1,439,577 - 8,021,496 3,964,921 267,836 4,232,757 3,788,739 4,787,279 1,768,111 - 6,555,390 3,017,994 11,432 269,898 3,229,324 3,256,066 - - - - - - - - - - - - - - - - - - - 857,000 857,000 - - - 857,000 - - 857,000 857,000 - - - - 857,000 6,581,919 1,439,577 857,000 8,878,496 3,964,921 267,836 4,232,757 4,645,739 4,787,279 1,768,111 857,000 7,412,390 3,017,994 11,432 269,898 3,299,324 4,113,066 Page | 35 Notes to the Financial Report 12 Net debt Cash and cash equivalents Cash at bank and on hand KAISER REEF LIMITED 2022 Consolidated Consolidated 2021 4,787,279 4,787,279 2022 6,581,919 6,581,919 Cash and cash equivalents includes cash on hand, deposits and cash at call held at financial institutions, other short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Reconciliation of loss from ordinary activities after income tax to net cash flows from operating activities Consolidated Consolidated 28 Aug 20 to 30 Jun 21 30 Jun 22 Loss after tax for the period (2,262,838) (11,806,825) Non-cash investing and financing activities: Year ended 30 June 2022: • 8,000,000 options fair value at $999,792 were issued during the period to brokers for services provided in conjunction with the capital raising refer to note 17. Depreciation and amortisation Listing expense (reverse acquisition) Non-cash expenses associated with acquisition Equity settled share-based payments Impairment expense Change in operating assets and liabilities 6,780,474 1,318,992 Period ended 30 June 2021: - - 5,637,309 1,873,979 • 2,700,000 and 415,523 shares were issued during the period to brokers and advisors respectively, for services provided in conjunction with the acquisition transactions as disclosed in Notes 1 and 16. 149,947 311,288 270,661 • Advisors also were also granted 1,344,800 options as disclosed - in Note 16. Receivables and prepayments 328,534 (807,679) Inventories Other assets Trade creditors and payables Provisions and other liabilities Net cash outflows from operating activities 38,179 (1,094,417) (80,750) 946,926 (22,553) 786,481 (566,240) 1,367,900 5,645,520 (2,476,152) Interest bearing liabilities Current Secured Lease liabilities Insurance premium funding Total current Consolidated Consolidated 2021 2022 - 267,836 267,836 11,432 269,898 281,330 Loss before income tax includes the following specific expenses: Finance Costs Interest paid/payable Consolidated Consolidated 28 Aug 20 to 30 Jun 21 30 Jun 22 23,956 23,956 15,314 15,314 o 2,700,000 and 415,523 shares were issued during the period to brokers and advisors respectively, for services provided in conjunction with the acquisition transactions as disclosed in Notes 1 and 16. o Advisors also were also granted 1,344,800 options as disclosed in Note 16. Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the consolidated income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not incremental costs relating to the actual draw down of the facility, are recognised as prepayments and amortised on a straight line basis over the term of the facility. Loans to Directors and their related parties No loans have been made to any Directors or any of their related parties during this year. There were no further transaction with Directors including their related parties other than those disclosed in note 20. Page | 36 Notes to the Financial Report 13 Parent entity disclosures 14 Controlled entities KAISER REEF LIMITED 2022 The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy on consolidation. Except as noted below, all subsidiaries are 100% owned at 30 June 2021 and 30 June 2022. Parent entity Kaiser Reef Limited Subsidiaries of Kaiser Reef Ltd Golden River Resources Pty Ltd Chase Metals Pty Ltd Country of Incorporation Australia Australia Australia Subsidiaries of Golden River Resources Ltd Centennial Mining Limited(1) Australia Subsidiaries of Centennial Mining Ltd Maldon Resources Pty Ltd(2) Australia (1) On 12 August 2022 after the reporting date, Centennial Mining limited change company type from a limited to proprietary limited and company name to Kaiser Reef Mining Pty Ltd. As at, and throughout, the financial year ended 30 June 2022, the parent company of the Group was Kaiser Reef Limited. Financial statements Result of the parent entity Loss after tax for the year Total comprehensive loss for the year Parent Entity 1 Jul 21 to 30 Jun 22 1 Jul 20 to 30 Jun 21 (2,263,838) (11,492,632) (2,263,838) (11,492,632) Financial position of the parent entity Current assets Total assets 30 June 2022 5,802,872 23,467,213 30 June 2021 4,339,200 20,338,592 Current liabilities Total liabilities (657,388) (657,388) (167,831) (167,831) Total equity of the parent entity comprising: Share capital Reserves Accumulated losses Total equity 35,431,839 1,447,649 (14,069,663) 22,809,825 31,499,826 477,760 (11,806,825) 20,170,761 Transactions with entities in the wholly-owned group Kaiser Reef Limited is the parent entity in the wholly-owned group comprising the Company and its wholly-owned subsidiaries. It is the Group’s policy that transactions are at arm’s length. Net loans payable to the Company amount to a net payable of $7,814,980 (2021: $5,304,121). Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation. Page | 37 Notes to the Financial Report 15 Employee benefit expenses and other provisions Expenses Employee related expenses Wages and salaries Retirement benefit obligations Equity settled share-based payments Consolidated Consolidated 28 Aug 20 to 30 Jun 21 30 Jun 22 8,647,947 889,299 3,212,357 259,945 149,947 9,687,193 263,705 3,736,007 Key management personnel Short term employee benefits Post-employment benefits Leave Share-based payments Other provisions Current Employee benefits – annual leave Employee benefits – long service leave Other provisions Non-current Employee benefits - long service leave Consolidated Consolidated 1 Jul 20 to 30 Jun 21 447,515 28,804 27,676 281,004 784,999 1 Jul 21 to 30 Jun 22 744,099 69,369 46,531 (3,971) 856,028 Consolidated Consolidated 2021 2022 509,336 73,635 386,048 74,677 - 582,971 740,0001 1,200,725 248,294 227,781 248,294 227,781 1Provision for stamp duty associated with the acquisition of Centennial Mining Limited. Refer to Note 3. KAISER REEF LIMITED 2022 Wages and salaries, and annual leave Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be paid within 12 months of the reporting date, are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid, including expected on-costs, when the liabilities are settled. Retirement benefit obligations Contributions to defined contribution funds are recognised as an expense as they are due and become payable. The Group has no obligations in respect of defined benefit funds. Equity settled share-based payments Performance rights issued to employees are recognised as an expense by reference to the fair value of the equity instruments at the date at which they are granted. Refer to Note 16 for further information. Executive incentives Senior executives may be eligible for short term incentive payments (“STI”) subject to achievement of key performance indicators, approved by the Board of Directors. The Group recognises a liability and an expense for STIs in the reporting period during which the service is provided by the employee. Disclosures relating to Directors and key management personnel are included within the Remuneration Report, with the exception of the table opposite. Employee related and other provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made, plus expected on-costs, in respect of services provided by employees up to the reporting date. Consideration is given to the expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted with reference to market yields on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Page | 38 Notes to the Financial Report 16 Share-based payments Reserve Details Opening balance Value of options and rights vested during the period Closing balance KMP Performance Rights KAISER REEF LIMITED 2022 Consolidated 2022 477,760 969,889 1,447,649 Consolidated 2021 - 477,760 477,760 The Group provides benefits to KMP of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. Accounting standards preclude the reversal through the consolidated income statement of amounts which have been booked in the share based payments reserve for performance rights, and which satisfy service conditions but do not vest due to market conditions. Set out below are summaries of rights granted to KMP in the current year under the Kaiser Limited Performance Rights Plan to be approved by shareholder's: Consolidated 2022 Grant Date Expiry Date Fair value 07 Oct 2022 07 Oct 2022 07 Oct 2023 07 Oct 2023 01 Feb 2022 01 Feb 2022 01 Feb 2024 01 Feb 2024 07 Oct 2021 07 Oct 2021 07 Oct 2021 07 Oct 2021 01 Feb 2022 01 Feb 2022 01 Feb 2022 01 Feb 2022 17 Nov 2021 10 Feb 2022(1) 08 Feb 2021 17 Nov 2021 10 Aug 2023(1) 08 Feb 2021 Total 01 Feb 2023 08 Sep 2024 $0.235 $0.235 $0.235 $0.079 $0.205 $0.205 $0.205 $0.079 $0.21 $0.42 $0.079&$0.21 $0.29&$0.42 Consolidated 2021 Grant Date Expiry Date Fair value 17 Nov 2021 10 Feb 2022(1) 08 Feb 2021 01 Feb 2023 $0.21 $0.42 17 Nov2021 10 Aug 2023(1) $0.079&$0.21 08 Feb 2021 08 Sep 2024 $0.29&$0.42 Balance at start of the period (Number) - - - - - - - - 150,000 200,000 200,000 200,000 750,000 Balance at start of the period (Number) - - - - Granted during the period (Number) 150,000 150,000 100,000 100,000 120,000 120,000 80,000 80,000 - - - - 900,000 Granted during the period (Number) 150,000 200,000 200,000 200,000 Vested during the period (Number) (150,000) - - - (120,000) - - - - (100,000) - - (370,000) Expired during the period (Number) - - - - - - - - (150,000) - - - (150,000) Balance at end of the period (Number) - 150,000 100,000 100,000 - 120,000 80,000 80,000 - 100,000 200,000 200,000 1,130,000 Exercisable at end of the year (Number) - - - - - - - - - - - - - Vested during the period (Number) - Expired during the period (Number) - - - - - - - Balance at end of the period (Number) 150,000 200,000 200,000 200,000 Exercisable at end of the year (Number) - - - - - Total (1) Mr Howe’s options were approved by shareholders at the AGM on the 17 November 2021. The provisional fair value of $93,710 was reversed and replaced - 750,000 750,000 - - with the fair value of $27,443 on approval date Page | 39 KAISER REEF LIMITED 2022 Notes to the Financial Report 16 Share-based payments Reserve (continued) Valuation of Performance Rights at Grant Date During the period the Group did not granted further rights to KMP. During the current year, 900,000 performance rights were granted to employees, valued at the share price of grant date as set out in the previous table. These rights are subject to achievement of various non-market performance hurdles. During the current year, 270,000 rights vested. The remaining 630,000 remain unvested at year-end. The below table discloses the valuation of KMP rights granted in the prior year, including the revaluation of rights for Stewart Howe following shareholder approval at the AGM 14 November 2021: Stewart Howe Tranche A B C D Total Value Per Right(4) $0.21 $0.21 $0.079 $0.21 Number of Rights Granted 75,000(1) 75,000(1) 100,000 100,000(5) 350,000 Total Value* Valuation Methodology 15,750 15,750 $7,900 $21,000 $60,400 Share price at grant date Share price at grant date Trinomial pricing model** Share price at grant date Andy Tran Tranche Total Value* Valuation Methodology A B C D Total Value Per Right $0.42 $0.42 $0.29 $0.42 Number of Rights Granted 100,000(2) 100,000(3) 100,000 100,000(5) 400,000 (1) Rights lapsed on the 10 February 2022 (2) Due to Covid 19 disruption the Board has allow for the rights to be extended to 1 February 2023, these rights have vested in the 2022 year (3) Due to Covid 19 disruption the Board has allow for the rights to be extended to 1 February 2023 and 0% probability has been applied at 30 June 2022 (4) Rights were granted to Mr Howe on 10 February 2021 and approved at the AGM 17 Nov 2021. The above table reflects the final valuation at date of Share price at grant date Share price at grant date Trinomial pricing model** Share price at grant date $42,000 $42,000 $28,980 $42,000 $154,980 shareholder approval. (5) The probability of achievement of Tranche D rights has been applied at 30 June 2022 is 100%. *The holder must be an employee of the Company in order for the rights to vest on achievement of the relevant performance hurdles. Accordingly, the total value of rights at grant date has been vested over the relevant performance period. **Tranche C rights include a market based vesting hurdle linked to the market capitalisation of the Group valued with reference to a trinomial pricing model with the following inputs: Description Underlying share price ($) Exercise price ($) Grant date Performance measurement period Share price barrier ($) Volatility (%) Risk-free rate (%) Value per right ($) Total value of rights granted Total value of rights provisional granted True up of fair value of rights in 2022 Input Stewart Howe 0.21 Nil 17 November 2021 1.72 years 1.068 100 0.575 0.079 $7,900 $28,980 ($20,990) Input Andy Tran 0.42 Nil 8 February 2021 2.5 years 1.305 100 0.11 0.29 $28,980 N/A N/A The weighted average remaining contractual life of performance rights outstanding at the end of the year was 2.08 years. Conditions associated with rights granted during the period ended 30 June 2021 included: i. ii. iii. iv. Rights are granted for no consideration. The vesting of rights granted in 2021 is subject to set key performance objectives to be achieved. Performance rights do not have an exercise price. Any performance right which does not vest will lapse. Grant date varies with each issue. Page | 40 Notes to the Financial Report 16 Share-based payments Reserve (continued) Performance Rights – Vesting Conditions Tranche Performance Period Performance Hurdle A B C D 12 months from appointment(1) 12 months from appointment(1) 30 months from appointment 30 months from appointment Rights vest into shares when A1 Mine operations reaches and maintains a production profile of 5,000 t/month or more over a 3 rolling month period and during that period the Company’s mining and treatment operations are cash flow positive. Rights vest into shares when the Company increases utilisation its gold processing facility in excess of 60% of nameplate (nameplate 150,000 tonnes p.a.) for a three- month period and during that period the Company’s mining and treatment operations are cash flow positive, Rights vest into shares when the Company reaches a market capitalisation of $150 million (over a 5 day VWAP period). Rights vest into shares when the Company operates the Maldon Process plant at 90% of nameplate capacity (nameplate 150,000 tonnes p.a.) for a 6 month period and during that period the Company’s mining and treatment operations are cash flow positive. (1) Andy Tran’s tranche A and B rights were extended during the year allowing achievement by 1 February 2023. KAISER REEF LIMITED 2022 Probability Applied N/A – vested / lapsed 0% N/A – market hurdle 100% Movement in unlisted options on issue Outstanding at the beginning of the year Issued during the year Expired or lapsed during the year Exercised during the year Outstanding at the end of the year 2022 12,994,800 8,000,000 - - 20,994,800 2021 10,750,000 2,244,800 - - 12,994,800 Valuation of Options at Grant Date During the prior period the Group granted the following options, which vested immediately and were valued at grant date with reference to a Black Scholes valuation model with the following inputs: Advisor Number of options Grant date Grant date share price Exercise price Volatility Risk free rate (%) Term (in years) Fair value per option ($) Total fair value Total value of options provisional granted True up of fair value of options in 2022 (1) The options granted on 8 February 2021 were approved by shareholders at the AGM 17 November 2021. 1,344,800 20/01/2021 0.30 0.50 100 0.3 3 0.15 207,099 N/A N/A KMP tranche 1(1) 200,000 8/02/2021 0.21 0.52 100 0.95 2.3 0.072 14,368 48,064 (33,969) KMP tranche 2(1) 200,000 8/02/2021 0.21 0.60 100 0.95 2.3 0.065 13,075 45,646 (32,571) KMP tranche 3 250,000 8/02/2021 0.42 0.52 100 0.11 3 0.24 60,080 N/A N/A KMP tranche 4 250,000 8/02/2021 0.42 0.60 100 0.11 3 0.23 57,057 N/A N/A Page | 41 Notes to the Financial Report Expenses arising from share based payment transactions Total expenses arising from equity settled share based payment transactions recognised during the year were as follows: Consolidated 30 Jun 2022 Consolidated 28 Aug 20 to 30 Jun 21 Advisor options for prior year (acquisition expense) KMP options KMP performance rights Shares granted to employee as remuneration during the current year Rights vesting expense in relation to performance rights granted in the current year Reversal of expense in relation to true-up of KMP options and performance rights upon shareholder approval Reversal of lapsed rights previously recognised share based payment expense of KMP Reversal of previously recognised share based payment expense due hurdle achievement probabilities Shares granted to KMP Total share based payment expense - - 70,030 78,000 75,929 (72,718) (24,164) (13,118) 36,000 207,099 210,847 59,814 - - - - - - 149,959 477,760 Equity-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is determined using either the Trinomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. KAISER REEF LIMITED 2022 If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Other Share Based Payments During the year 6,000,000 and 2,000,000 options were issued to brokers and advisors for services provided in conjunction with the capital raising. These options were valued at $774,575 and $225,217 respectively, based on the Black Scholes options pricing model and recognised as a reduction of equity as a cost of raising capital. Description Underlying share price ($) Exercise price ($) Grant date Performance measurement period Volatility (%) Risk-free rate (%) Value per right ($) Total value of rights granted Input 0.228 0.30 03 September 2022 3 years Input 0.21 0.30 17 November 2022 3 years 100 0.19 0.129 $774,575 100 0.95 0.113 $225,217 During the year 200,000 shares were provisionally awarded to Stewart Howe, subject to shareholder approval. These shares were valued at $36,000 based on the closing share price at 13 May 2022 of $0.18. Accounting judgements and estimates Share-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either a Black-Scholes model or Trinomial Pricing Model, taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Where performance rights are subject to vesting conditions, Management has formed judgments around the likelihood of vesting conditions being met. Page | 42 KAISER REEF LIMITED 2022 Notes to the Financial Report 17 Contributed equity Details Number of shares $ Opening balance 30 June 2021 114,898,877 31,499,826 Share placement 10,000,000 2,000,000 1:8 rights issue to shareholders 15,612,360 3,123,272 Share issue fees Share issue fees via Options - - (371,317) (999,792) (1) 19 Events occurring after the balance sheet date The Directors are not aware of any matter or circumstance that has arisen since the end of the financial year that, in their opinion, has significantly affected or may significantly affect in future years the Company’s or the Group’s operations, the results of those operations or the state of affairs, except as described in this note. On 21 July 2022 Kaiser Reef Limited announced: • A Mineral Resource Estimate of 1.2 Mt at 4.4 g/t gold (Inferred) Vesting of performance rights 370,000 101,850 for 186,656 ounces of gold; and Shares issued to employees as remuneration for services performed 400,000 78,000 35,431,839 Closing balance 30 June 2022 (1) 6,000,000 and 2,000,000 options were issued to brokers and advisors for services provided in conjunction with the capital raising, refer note 16. 141,281,237 Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and performance rights are recognised as a deduction from equity, net of any tax effects. Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of 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. 18 Remuneration of auditors During the year the following fees were paid or payable for services provided by BDO Audit (WA) Pty Ltd, the auditor of the parent entity, and its related practices: Consolidated 2022 103,500 Consolidated 2021 57,500 43,099 41,645 - 14,420 116,849 113,565 BDO Audit (WA) Pty Ltd - Audit and Review of the Consolidated Financial Report Non-audit services BDO Corporate Tax (WA) - Ltd Taxation Pty consulting services BDO Corporate Finance (WA) Pty Ltd – Investigating Accounting Report Total remuneration for audit and non-assurance related services The above information stated covers the full financial year ended 30 June 2022. • An Exploration Target of 1.75 to 2.7Mt at between 3 g/t gold and 4 g/t gold for between 165,000 ounces of gold to 345,000 ounces of gold at its wholly owned Maldon site. The Maldon gold project has extensive existing infrastructure and capital, existing mine permitting and a wholly owned processing plant within a 3km proximity currently operating profitably well below capacity. On the 9 September 2022 Kaiser Reef Limited the company has commenced engineering work used for the scoping and other technical/planning studies for the potential development of a second gold mining operation at Maldon. Continued exploration and infill drilling targeting increasing the resource size and confidence are also proposed and will be initiated following the results obtained from the engineering work. On 11 August 2022, 250,000 unlisted options exercisable at $0.40 issued to consultants expired. On the 07 September 2022, 750,000 unlisted options exercisable at $0.30 and expiring 05 September issued to consultants were issued to Euro Equity Group for services relating to share marketing to the European markets. 20 Related party transactions Transaction between related parties are on commercial terms and conditions, no more favourable than those available to otherwise stated. The below information stated covers the full financial year ended 30 June 2022. Mining Corporate Pty Ltd – related party to David Palumbo, resigned 5 July 2021, there was not related party transaction during the 5 days.$187,913 was charged by Mining Corporate Pty Ltd for the comparative year ended 30 June 2021. Total outstanding to Mining Corporate Pty Ltd for the transition facilitation secretarial, accounting and bookkeeping services during the current year was nil and $15,619 for the comparative year ended 30 June 2021. company services, Kingwest Resources Ltd – related party to A Byass and J Downes Shared office facility arrangement during the year. Total for the current year: $46,268 was charged by Kingwest Resources Ltd with an outstanding amount of $3,355 payable at 30 June 2022. Refer to Note 15 for details of KMP remuneration. Refer to Note 16 for details of share based payments granted in the current year to KMP. Page | 43 Notes to the Financial Report 21 Contingencies The Directors are not aware of any contingencies for the year ending 30 June 2022. 22 Basis of preparation Basis of measurement The consolidated financial statements have been prepared on the historical cost basis, except for the following material items: • Share based payment arrangements are measured at fair value. Principles of consolidation - Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Kaiser Reef Limited as at 30 June 2022 (comparatives: 30 June 2021) and the results of all subsidiaries for the year ending 30 June 2022 (comparatives: period from 28 August 2020 to 30 June 2021) as disclosed in Note 1. Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, and as a result has an exposure or rights to variable returns, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control commences until the date control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Critical accounting judgement and estimates The preparation of consolidated financial statements in conformity with AASB and IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Going Concern This report is prepared on a going concern basis, which assumes the continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal course of business. For the year ended 30 June 2022 the Group recorded a loss of $2,262,840 (2021: a loss of $11,806,825), net cash inflows from operating activities of $5,645,520 (2021: net cash outflows from operating activities of $2,476,152) and a closing cash balance of $6,581,919 (2021: closing cash balance of $4,787,279). The Group has forecasted positive cash flow from operating activities in the next 12 months. The Directors have assessed the cash flow requirements for the 12 month period from the date of approval of the financial statements and its impact on the Group and believe there will be sufficient funds to meet the Group’s working capital requirements. KAISER REEF LIMITED 2022 23 Accounting standards New Standards adopted The accounting policies applied by the Group in this 30 June 2022 consolidated financial report are consistent with Australian Accounting Standards. All new and amended Australian Accounting Standards and interpretations mandatory as at 1 July 2021 to the group have been adopted and have not had a material impact upon recognition. The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Kaiser Reef Limited as at 30 June 2022 (comparatives: 30 June 2021) and the results of all subsidiaries for the year ending 30 June 2022 (comparatives: period from 28 August 2020 to 30 June 2021) as disclosed in Note 1. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2022. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. Critical accounting judgement and estimates The preparation of consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Page | 44 Financial Report Directors’ declaration 1 In the opinion of the directors of Kaiser Reef Limited (the Company): KAISER REEF LIMITED 2022 (a) the consolidated financial statements and notes that are contained in pages 16 to 44 and the remuneration report in the Directors’ report, set out on pages 9 to 13, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (iii) 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 3 The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the executive director and chief financial officer for the financial year ended 30 June 2022. The directors draw attention to page 14 of the consolidated financial statements, which includes a statement of compliance with International Financial Reporting Standards. Signed in accordance with a resolution of the Directors: Jonathan Downes Executive Director Perth 30 September 2022 Page | 45 Financial Report Auditor opinion KAISER REEF LIMITED 2022 Page | 46 Financial Report KAISER REEF LIMITED 2022 Page | 47 Financial Report KAISER REEF LIMITED 2022 Page | 48 Financial Report KAISER REEF LIMITED 2022 Page | 49 KAISER REEF LIMITED 2022 SHARE REGISTRY Automic registry Pty Ltd Level 2, 267 St Georges Terraces Perth WA 6000 AUDITOR BDO Audit (WA) Pty Ltd Level 9, Mia Yellagonga Tower 5 Spring Street WA 6000, AUSTRALIA REGISTERED OFFICE Level 8, 216 St Georges Terrace Perth WA 6000 Financial Report Corporate Directory BOARD OF DIRECTORS A Byass J Downes S Howe Non-Executive Chairman Executive Director Executive Director COMPANY SECRETARY A Tabakovic S Brockhurst PRINCIPAL PLACE OF BUSINESS Unit 3, Churchill Court 335 Hay Street Subiaco WA 6008 Telephone: +61 8 9481 0389 Email: admin@kaiserreef.com.au Website: www.kaiserreef.com.au STOCK EXCHANGE LISTING Shares in Kaiser Reef Limited are quoted on the Australian Securities Exchange Ticker Symbol: KAU Page | 50 Financial Report KAISER REEF LIMITED 2022 Additional information for public listed companies Schedule of Tenement Project Tenement Number Location of Tenement EL8491 EL8592 EL9203 EL9198 EL9199 MIN5294 MIN5146 MIN5529 MIN5528 EL7029 New South Wales New South Wales New South Wales New South Wales New South Wales Victoria Victoria Victoria Victoria Victoria Stuart Town A1 Maldon ASX Share Information Status Granted Granted Granted Granted Granted Granted Granted Granted Granted Applied Beneficial Interest 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% The following additional information is required by the Australian Securities Exchange Ltd in respect of listed public companies only. The information is current as at 21 September 2022. 1. a. (i) Shareholding Distribution of Shareholders Ordinary share capital - 141,281,237 fully paid shares held by 1,109 shareholders. All issued ordinary share carry one vote per share and carry the rights to dividends. Category (size of holding) 1 - 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over Class of Equity Security Number of Holders 32 Fully Paid Ordinary Shares 5,783 219 171 478 209 1,109 629,648 1,343,097 18,741,218 104,949,896 141,281,237 b. c. The number of shareholdings held in less than marketable parcels is 155. The Company had the following substantial shareholders at the date of this report. Fully Paid Ordinary Shares Holder Timothy Neesham Number 10,215,000 % 7.23 Page | 51 Financial Report d. Voting Rights The voting rights attached to each class of equity security are as follows: Ordinary shares – Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. e. 20 Largest holders of quoted equity securities (fully paid ordinary shares) KAISER REEF LIMITED 2022 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 20. 2. 3. Name BATH RESOURCES PTY LTD DC & PC HOLDINGS PTY LTD LIQUIDITY PARTNERS PTY LTD ANGKOR IMPERIAL RESOURCES PTY LTD STEVSAND INVESTMENTS PTY LTD VALIANT EQUITY MANAGEMENT PTY LTD KIANDRA NOMINEES PTY LTD ALITIME NOMINEES PTY LTD PELOTON CAPITAL PTY LTD RXO PTY LIMITED MAJI MAZURI PTY LTD & MAWINGO PTY LTD THE SUN W INVESTMENT PTY LTD CITICORP NOMINEES PTY LIMITED BROOKAVA PTY LTD BNP PARIBAS NOMINEES PTY LTD JEFF TOWLER BUILDING PTY LTD MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED KITARA INVESTMENTS PTY LTD PELOTON CAPITAL PTY LTD HOLICARL PTY LIMITED BFB HOLDINGS PTY LTD Total Total issued capital – ordinary shares Number Held Percentage % 6,660,000 3,600,000 3,375,000 3,350,000 3,331,250 3,205,000 3,200,000 3,100,000 2,662,501 2,500,000 2,279,256 2,266,667 2,118,546 2,055,740 1,974,444 1,907,556 1,776,193 1,750,000 1,711,154 1,687,500 1,687,500 4.71% 2.55% 2.39% 2.37% 2.36% 2.27% 2.26% 2,19% 1.88% 1.77% 1.61% 1.60% 1.50% 1.46% 1.40% 1.35% 1.26% 1.24% 1.21% 1.19% 1.19% 56,198,307 141,281,237 39,78% 100.00% Stock Exchange Listing Quotation has been granted for all the ordinary shares of the company on the Australian Securities Exchange Limited. Restricted Securities The Company has the following restricted securities on issue as at the date of this report - 11,440,523 fully paid ordinary shares – escrowed to 28 January 2023 - 1,344,800 unlisted options – escrowed to 28 February 2023 4. Unquoted Securities The Company has the following unquoted securities on issue as at the date of this report: - 4,250,000 options exercisable at $0.30 on or before 31 January 2023 - 1,750,000 options exercisable at $0.30 on or before 21 February 2023 - 1,344,800 options exercisable at $0.50 on or before 25 January 2024 - 4,500,000 options exercisable at $0.40 on or before 31 January 2024 - 8,000,000 options exercisable at $0.30 on or before 30 September 2024 - 250,000 options exercisable at $0.52 on or before 8 March 2024 - 250,000 options exercisable at $0.60 on or before 8 March 2024 - 200,000 options exercisable at $0.52 on or before 16 December 2024 Page | 52 Financial Report - 200,000 options exercisable at $0.60 on or before 16 December 2024 - 750,000 options exercisable at $0.30 on or before 5 September 2025 - 200,000 performance rights expiring 8 August 2023 - 200,000 performance rights expiring 8 September 2023 5. Use of Funds KAISER REEF LIMITED 2022 Between the date of official re-instating on ASX and the date of this report the Company has used the cash to further develop and explore the Victorian and New South Wales projects in a way consistent with its business objectives and as set out in the pursuant to the Prospectus dated 7 December 2020. Page | 53

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