KalNorth Gold Mines Limited
Annual Report 2022

Plain-text annual report

KalNorth Gold Mines Limited and Controlled Entities ACN 100 405 954 Annual Report For the year ended 30 June 2022 CONTENTS Corporate Directory Directors’ 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 Financial Statements Directors’ Declaration Independent Auditor’s Report 1 2 9 10 11 12 13 14 29 30 KalNorth Gold Mines Limited and Controlled Entities ed and Controlled Entities For the year ended 30 June 2014 CORPORATE DIRECTORY For the year ended 30 June 2022 Directors Jiajun Hu (Executive Chairman) Yuanguang Yang (Non-Executive Director) Xiaojing Wang (Non-Executive Director) Company Secretary Jiajun Hu Registered Office and Principal Place of Business Level 2, Suite 9 389 Oxford Street Mount Hawthorn, Western Australia 6016 Share Registry Auditor Advanced Share Registry Limited 110 Stirling Highway Perth WA 6009 BDO (Audit) WA Pty Ltd Level 9, Mia Yellagonga Tower 2 5 Spring Street Perth WA 6000 Company Website www.kalnorthgoldmines.com KalNorth Gold Mines Limited delisted from the Australian Securities Exchange (ASX) in August 2022 but remains a Disclosing Entity as defined by section 111AC of the Corporations Act 2001. The Company’s securities do not trade on any stock exchange at present. As a Disclosing Entity, it is subject to a continuous disclosure regime under section 675 of the Corporations Act. 1 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 DIRECTORS’ REPORT The Directors of KalNorth Gold Mines Limited (“the Company”) present their financial report on the consolidated entity, being the company and its controlled entities, for the financial year ended 30 June 2022. As at the date of this report, the Company is a Disclosing Entity (refer to the preceding page for details) but its securities are not listed for trading on any stock exchange. Directors The names of directors in office at any time during or since the end of the financial year are listed hereunder. Directors have been in office from the start of the financial year to the date of this report unless otherwise stated.    Jiajun Hu Yuanguang Yang Xiaojing Wang Executive Chairman Non-executive Director Non-executive Director Information on Directors JIAJUN HU Executive Chairman & Company Secretary Mr. Jiajun Hu acts as Regional Business Executive of Cross-Strait Common Development Fund Co., Ltd (hereinafter referred to as “Cross-Strait”). Cross-Strait, with its global headquarters in Hong Kong, is one of the largest shareholders in the Company. He is responsible for supervision and administration of Cross-Strait’s investment projects in Oceania and reports directly to the managing director of Cross-Strait and has gained significant experience in international investment, financial accounting, commercial contract negotiation and contract dispute negotiation through corporate transactions in North America, Africa, Asia and Oceania. He has a Bachelor’s Degree in Commerce in 2008 from the Australian National University majoring in finance and accounting. Mr. Hu has specialized knowledge of the financial transactions market and investment capital market and is familiar with Chinese business and capital market operation. Mr. Hu is fluent in both English and Chinese. Mr Hu has held no other directorships of other public companies within the last three years. Interest in shares and options: Nil YUANGUANG YANG Non-Executive Director Mr. Yang is a Hong Kong CPA (practising) and currently operates a CPA firm in Hong Kong with business focus in markets of Hong Kong, Mainland China, Australia and New Zealand. Mr. Yang is also a Chartered Accountant in Australia and New Zealand. He has over 20 years’ experience in audit and assurance, global tax planning, corporate advisory, family business and M & A business and also worked with the Industrial and Commercial Bank of China for several years before running his CPA business. Mr Yang resides in Hong Kong and is an authorised officer of South Victory Global Limited, a major shareholder in the Company. Mr. Yang has held no other directorships of other public companies within the last three years. Interest in shares and options: 2,375,300 shares - 2 - KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 DIRECTORS’ REPORT Information on Directors (cont’d) XIAOJING WANG (REBECCA) Non-Executive Director Mrs Wang holds a Bachelor of Applied Finance, from Macquarie University, NSW and is currently the Finance Manager for a Sydney based private company. Mrs Wang has held no other directorships of other public companies within the last three years. Interest in shares and options: Nil Principal Activities The consolidated entity’s principal activity during the year consisted of evaluation of new mineral exploration opportunities. The consolidated entity will use its exploration expertise and long history and experience in gold exploration in the Goldfields area to target greenfield exploration. The Company divested its remaining exploration assets in the year ended 30 June 2021. During this year ended 30 June 2022, the Company negotiated and completed an early settlement of deferred sale proceeds from the Lindsay project sale entered into in the previous financial year, as well as divesting its Kalgoorlie land and building located at 224 & 226 Dungan Street for $400,000 in cash consideration. Operating Results and Financial Performance The operating loss after income tax of the consolidated entity for the year ended 30 June 2022 was $310,171 (2021 profit: $12,208,461). As at 30 June 2022 the Company had $15,418,782 (2021: $15,036,283) in cash reserves and term deposits at bank and an aggregate liability of $95,371 (2021: $1,896,480). At 30 June 2022, the consolidated entity had net assets of $15,339,931 (2021: $15,650,102). Significant Changes in the State of Affairs There were no significant changes in the state of affairs of the consolidated entity during the financial year, other than the early settlement of deferred sale proceeds. Dividends Paid or Recommended The Directors do not recommend the payment of a dividend and no dividends have been paid or declared since the end of the last financial year. Significant Events after the Reporting Date KalNorth Gold Mines Limited delisted from the Australian Securities Exchange (ASX) in August 2022 but remains a Disclosing Entity as defined by section 111AC of the Corporations Act 2001. Other than the above, no matter or circumstance has arisen which has significantly affected, or may significantly affect, the operations of the consolidated entity. Likely Developments and Expected Results As noted earlier in this report, the consolidated entity plans to use its exploration expertise and long history and experience in gold exploration in the Goldfields area of Western Australia to target greenfield exploration. - 3 - KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 DIRECTORS’ REPORT Environmental regulation The consolidated entity was subject to environmental regulation in respect of its exploration activities, until the disposal of all its projects during the last financial year. The directors of the consolidated entity are not aware of any breach of environmental legislation for the year under review. Meetings of Directors During the financial year, one meeting of Directors was held. Attendances by each Director during the year were as follows: Jiajun Hu Yuanguang Yang Xiaojing Wang Directors’ Meetings Number of meetings eligible to attend Number attended 1 1 1 1 1 1 No Audit or Remuneration Committee meetings were held in the year, with all matters dealt with by the Board as a whole. In addition, matters of Board business have been resolved by circular resolutions of Directors, which are a record of decisions made at a number of informal meetings of the Directors held to control, implement and monitor the Company’s activities throughout the period. Options At the date of this report, there were no unissued ordinary shares of KalNorth Gold Mines Limited under option (2021: Nil). During the year ended 30 June 2022 and to the date of this report, no shares were issued on the exercise of options (2021: nil). Risk Management The Board is responsible for ensuring that risks and opportunities are identified in a timely manner and that activities are aligned with the risks and opportunities identified by the Board. The consolidated entity believes that it is crucial for all Board members to be a part of this process and, as such, the Board has not established a separate risk management committee but considers these matters at Board meetings. The Board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with the risks identified by the Board. These include Board approval of a strategic plan which encompasses strategy statements designed to meet stakeholders needs and manage business risk, and implementation of Board approved operating plans and budgets and the monitoring thereof. Key Management Personnel Remuneration This section outlines the remuneration arrangements in place for Directors and executives of the consolidated entity. The following were Key Management Personnel of the Company during or since the end of the financial year: Jiajun Hu Yuanguang Yang Xiaojing Wang Executive Chairman Non-Executive Director Non-Executive Director Remuneration Policy The remuneration policy of KalNorth Gold Mines Limited has been designed to align Director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and - 4 - KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 DIRECTORS’ REPORT Key Management Personnel Remuneration (cont’d) offering specific long-term incentives based on key performance areas affecting the consolidated entity’s ability to attract and retain the best Directors and executives to run and manage the consolidated entity. The Board’s policy for determining the nature and amount of remuneration for Board members and senior executives of the consolidated entity is as follows: The remuneration policy setting out the terms and conditions for executive directors and other senior executives was developed by the Board. All executives receive a base salary (which is based on factors such as the length of service and experience) and superannuation. The Board reviews executive packages annually by reference to the consolidated entity’s performance, executive performance, and comparable information from industry sectors and other listed companies in similar industries. The Board may exercise discretion in relation to approving incentives, bonuses, and options. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long- term growth in shareholder wealth. All remuneration paid to Directors and executives is valued at the cost to the consolidated entity and expensed. Executives are also entitled to participate in the employee share and option arrangements. Shares given to Directors and executives are valued as the difference between the market price of those shares and the amount paid by the Director or executive. Options are valued using the Black-Scholes methodology. Performance-Based Remuneration The consolidated entity currently has no compulsory performance-based remuneration component built into Director and executive remuneration packages. However, performance-based bonuses may be awarded from time to time at the discretion of the Board, and this will be dependent on individual performance linked to the consolidated entity’s strategic objectives for that period. In the current year, no bonuses were paid or declared. Non-Executive Director Remuneration The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. The Board considers the fees paid to non-executive Directors of comparable companies when undertaking the annual review process. Independent advice is obtained when considered necessary to confirm that remuneration is in line with market practice. Each Director may receive a fee for being a Director of the Company. Non-executive Directors may also receive options or performance rights (subject to shareholder approval) as it is considered an appropriate method of providing sufficient reward whilst maintaining cash reserves. Relationship between Remuneration Policy and Consolidated Entity Performance The remuneration policy has been tailored to increase goal congruence between shareholders and Directors and executives. From time to time, this is facilitated through the issue of options to the majority of directors and executives to encourage the alignment of personal and shareholder interests. The consolidated entity believes this policy will be effective in increasing shareholder wealth. - 5 - KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 DIRECTORS’ REPORT Key Management Personnel Remuneration (cont’d) Key management personnel service agreements Details of the key conditions of service agreements for key management personnel in place at the date of this report are as follows: Commencement Date 11/01/2017 Notice Period Base Salary One month Base Salary $70,000 Termination Payments Provided - Jiajun Hu – Executive Chairman There are no other agreements with key management personnel. Voting and comments made at the Company's 2021 Annual General Meeting ('AGM') At the 2021 AGM held on 7 December 2021, over 99% 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. Remuneration Details (a) Key management personnel compensation: 2022 Short-term benefits Post-employment benefits Name Directors Jiajun Hu Yuanguang Yang Xiaojing Wang Total Salary and fees $ Annual Leave Entitlements1 $ Superannuation Total $ $ 70,000 30,000 30,000 130,000 6,043 - - 6,043 7,000 - 3,000 83,043 30,000 33,000 10,000 146,043 2021 Short-term benefits Post-employment benefits Name Salary and fees $ Cash Bonus $ Annual Leave Entitlements1 $ Superannuation Total $ $ Directors Jiajun Hu Yuanguang Yang Xiaojing Wang Lionel Liew 70,000 30,000 30,000 20,000 50,000 - - - 5,896 - - - 11,650 - 2,850 - 137,547 30,000 32,850 20,000 Total 150,000 50,000 5,896 14,500 220,397 1 The amounts disclosed in this column represent the increase in the associated provisions. Share-based payment compensation To ensure that the consolidated entity has appropriate mechanisms to continue to attract and retain the services of Directors and Executives of a high calibre, the consolidated entity has a policy of issuing options that are exercisable in the future at a certain fixed price. - 6 - KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 DIRECTORS’ REPORT Key Management Personnel Remuneration (cont’d) No options were granted to Directors or key management personnel during the year ended 30 June 2022 (2021: nil). Key management personnel shareholdings The number of ordinary shares in KalNorth Gold Mines Limited held by each key management personnel of the consolidated entity during the financial year is as follows: 2022 Directors Jiajun Hu Yuanguang Yang Xiaojing Wang Total 2021 Directors Jiajun Hu Yuanguang Yang Xiaojing Wang Lionel Liew Total Balance 1 July 2021 Granted as Remuneration Net Change Other Balance 30 June 2022 - 2,375,300 - 2,375,300 - - - - - - - - - 2,375,300 - 2,375,300 Balance 1 July 2020 Granted as Remuneration Net Change Other Balance 30 June 2021 - 2,375,300 - NA 2,375,300 - - - - - - - - - - - 2,375,300 - NA 2,375,300 Key management personnel option holdings No options were granted or held by key management personnel in the current or prior year. Loans to key management personnel and their related parties There were no loans outstanding at the reporting date (30 June 2021: Nil) to key management personnel and their related parties. Other transactions with KMPs During the year ended 30 June 2021, Jiajun Hu extended additional loans of $71,000 to the Company for working capital purposes, bringing the total amount lent to $261,000. The Company made repayment of $41,000 in September 2020 and a final repayment of $220,000, including accrued interest at 8% pa in June 2021. Refer to Note 12 Borrowing for more details. There were no other transactions with KMPs for the year ended 30 June 2022. Use of Remuneration Consultants The Company did not use any remuneration consultants during the year. The earnings of the consolidated entity for the five years to 30 June 2022 are summarised below: Sales revenue EBITDA EBIT Profit / (Loss) after income tax 2022 $ 2021 $ - - 12,410,885 (310,171) (310,171) 12,410,885 (310,171) 12,208,461 2020 $ - (858,670) (859,137) (900,355) 2019 $ - (823,513) (825,373) (825,373) 2018 $ - (235,792) (251,999) (357,446) - 7 - KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 DIRECTORS’ REPORT Key Management Personnel Remuneration (cont’d) The factors that are considered to affect total shareholders return ('TSR') are summarised below: Share price at financial year end ($) Total dividends declared (cents per share) Basic earnings / (loss) per share (cents per share) 1Shares last traded on ASX in August 2020 2022 2021 2020 2019 2018 0.0131 0.0131 0.007 0.008 0.006 - - - - - (0.03) 1.38 (0.10) (0.09) (0.04) Indemnification and Insurance of Officers and Auditors The Company’s Constitution requires it to indemnify Directors and officers of any entity within the consolidated entity against liabilities incurred to third parties and against costs and expenses incurred in defending civil or criminal proceedings, except in certain circumstances. An indemnity is also provided to the Company’s auditors under the terms of their engagement. Directors and officers of the consolidated entity have been insured against all liabilities and expenses arising as a result of work performed in their respective capacities, to the extent permitted by law. The insurance premium relates to:  costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever the outcome;  other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage. Proceedings on Behalf of Company No person has applied for leave of the Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Non-Audit Services There have been no non-audit services provided by the consolidated entity’s auditor during the year. Auditor’s Independence Declaration The auditor, BDO Audit (WA) Pty Ltd, has provided the Board of Directors with an independence declaration in accordance with section 307C of the Corporations Act 2001 and this is set out on the following page. The Report of Directors is signed pursuant to section 298(2) (a) of the Corporations Act 2001 in accordance with a resolution of the Board of Directors. Jiajun Hu Executive Chairman Dated at Perth 26 October 2022 - 8 - Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au Level 9, Mia Yellagonga Tower 2 5 Spring Street Perth WA 6000 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY NEIL SMITH TO THE DIRECTORS OF KALNORTH GOLD MINES LIMITED As lead auditor of KalNorth Gold Mines Limited for the year ended 30 June 2022, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of KalNorth Gold Mines limited and the entities it controlled during the period. Neil Smith Director BDO Audit (WA) Pty Ltd Perth, 26 October 2022 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 9 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2022 Other income Reduction in rehabilitation obligation Gain on sale of mineral tenements Gain on sale of property, plant and equipment Director and corporate employee costs Professional fees and consultants Listing and registry fees Exploration costs Interest expense Other expenses (Loss) / Profit before income tax Income tax expense (Loss) / Profit after income tax for the year Note 2022 $ 2021 $ 3 11 4 22,614 - 88,066 94,447 (158,301) (186,743) (27,556) - - (142,697) (310,171) - (310,171) 84,760 1,095,566 12,156,009 - (288,034) (66,956) (37,997) (428,191) (86,424) (220,272) 12,208,461 - 84,760 Other comprehensive income Items that may be reclassified subsequently to profit or loss Revaluation of available for sale asset Other comprehensive income for the year, net of tax - - - - Total comprehensive (loss) / income for the year (310,171) 12,208,461 (Loss) / Earnings per share for the year attributable to the members of KalNorth Gold Mines Limited: Basic and diluted (loss) / earnings per share (cents) 16 (0.03) 1.37 The accompanying notes form an integral part of these financial statements. 10 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2022 ASSETS Current Assets Cash and cash equivalents Other receivables Other assets Available for sale assets Total Current Assets Non-Current Assets Other receivables Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Accumulated losses TOTAL EQUITY Note 2022 $ 2021 $ 18(b) 5 6 9 12,418,782 9,020 3,007,500 - 15,435,302 15,036,283 925,926 7,500 290,865 16,260,574 5 10 - - 1,286,008 1,286,008 15,435,302 17,546,582 95,371 95,371 1,896,480 1,896,480 95,371 1,896,480 15,339,931 15,650,102 12 13 92,438,807 (77,098,875) 92,438,807 (76,788,705) 15,339,931 15,650,102 The accompanying notes form an integral part of these financial statements. 11 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2022 2021 As at 1 July 2020 Profit after income tax for the year Total comprehensive loss for the year, net of tax Issued Capital $ Accumulated Losses $ Total Equity $ 92,438,807 (88,997,166) 3,441,641 - - 12,208,461 12,208,461 12,208,461 12,208,461 As at 30 June 2021 92,438,807 (76,788,705) 15,650,102 2021 As at 1 July 2021 Loss after income tax for the year Total comprehensive profit for the year, net of tax Issued Capital $ Accumulated Losses $ Total Equity $ 92,438,807 (76,788,705) 15,650,102 - - (310,171) (310,171) (310,171) (310,171) As at 30 June 2022 92,438,807 (77,098,875) 15,339,931 The accompanying notes form an integral part of these financial statements. 12 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 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) Payment for exploration and evaluation (expensed) Government grant received Interest received Interest paid Net cash used in operating activities Cash flows from investing activities Acquisition of tenements Proceeds from sale of tenements Cost associated with tenement sale Net GST paid on sale of tenements Net proceeds from sale of property, plant and equipment Net funds placed on term deposit Net cash (used in) / from investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Interest on borrowings paid Net cash from financing activities Note 2022 $ - (532,238) (683) - 22,614 - (510,307) 18(a) 2021 $ 9,600 (682,898) (459,438) 75,071 89 (4,912) (1,062,488) - 2,400,000 (169,055) (1,746,591) 385,312 (3,000,000) (2,130,334) (5,317,399) 22,763,687 (475,778) - - 16,970,510 - - - - 5,721,000 (6,479,448) (117,561) 668,447 Net (decrease) / increase in cash held (2,640,641) 15,032,013 Cash and cash equivalents at the beginning of the financial year Foreign exchange movements 15,036,283 23,140 4,270 - Cash and cash equivalents at the end of the financial year 18(b) 12,418,782 15,036,283 The accompanying notes form an integral part of these financial statements. 13 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Notes to the Consolidated Financial Statements Note 1: Statement of Significant Accounting Policies The financial statements cover KalNorth Gold Mines Limited (“KalNorth”, “Company”) as a consolidated entity consisting of KalNorth Gold Mines Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is KalNorth's functional and presentation currency. The financial report was authorised for issue on 26 October 2022 by the Board of Directors. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 2. New and amended standards issued but not yet mandatory Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Company for the annual reporting period ended 30 June 2022. The Company has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. New or amended standards adopted by the Company The Company has not adopted any new or amended standards during the year ended 30 June 2022. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in Note 24. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of KalNorth Gold Mines Limited ('company' or 'parent entity') as at 30 June 2022 and the results of all subsidiaries for the year then ended. KalNorth Gold Mines Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. 14 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Notes to the Consolidated Financial Statements Note 1: Statement of Significant Accounting Policies (cont’d) Principles of consolidation (cont’d) Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating Segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Income tax The income tax expense (income) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit of loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of profit or loss when the tax related to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantially enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. 15 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Notes to the Consolidated Financial Statements Note 1: Statement of Significant Accounting Policies (cont’d) Income tax (cont’d) Current tax assets and liabilities are offset where a largely enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities related to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Mining tenements and exploration and evaluation expenditure Mining tenements and exploration and evaluation expenditure are carried at cost, less accumulated impairment losses. Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months of the reporting date are recognised in current liabilities in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Property, plant and equipment Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. Property Freehold land and buildings are measured on the cost basis less depreciation and impairment losses. 16 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Notes to the Consolidated Financial Statements Note 1: Statement of Significant Accounting Policies (cont’d) Property, plant and equipment (cont’d) Plant and equipment Plant and equipment are measured on the cost basis less depreciation and impairment losses. The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. 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 statement of comprehensive income during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over the useful lives to the consolidated entity commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Class of fixed asset Plant and equipment Motor vehicles IT assets Depreciation rate 10-33% 25% 33% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income or loss. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is current when: it is expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within twelve months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non- current. A liability is current when: it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within twelve months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. 17 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Notes to the Consolidated Financial Statements Note 1: Statement of Significant Accounting Policies (cont’d) Impairment of non-financial assets At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the comprehensive statement of income. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Trade and Other Receivables Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Trade and Other Payables Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. Provision for restoration Long term environmental obligations are based on the Group’s environmental management plans in compliance with current environmental and regulatory requirements. Full provision is made based on the value of the estimated cost restoring the environmental disturbance that has occurred up to the reporting date. The restoration provision relates to exploration and evaluation expenditure and rehabilitation relating to the exploration and mining lease. The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. 18 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Notes to the Consolidated Financial Statements Note 1: Statement of Significant Accounting Policies (cont’d) Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the loans or borrowings are classified as non-current. Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. Revenue Recognition Interest income Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the consolidated entity, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Finance costs Finance costs are expensed in the period in which they are incurred. Government grants Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. 19 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Note 2: Critical accounting estimates and judgments The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group. As a result of the disposal of all mineral assets and other non-current assets during the reporting period and the prior period, there are no aspects of the Company’s assets, liabilities and activities during the period that require critical accounting estimates and judgments. Note 3: Other income 2022 2021 Interest received Government grants Rental income Note 4: Income tax $ $ 22,614 - - 22,614 89 75,071 9,600 84,760 (a) Numerical reconciliation between income tax expense and the profit / (loss) before income tax (Loss) / Profit before income tax Income tax (benefit) / expense at 25% (FY 2021 – 26%) Tax effect of permanent differences Tax effect of temporary differences Tax effect of deduction for tax losses not previously recognised Other deferred tax assets not recognised Income tax expense / benefit reported in the statement of comprehensive income (b) Unrecognised deferred tax balances 2022 $ 2021 $ (310,171) 12,208,461 (77,543) - (10,812) - 88,355 3,174,200 (8,989) 1,083,756 (4,248,968) - - - Tax losses attributable to members of the tax consolidated group – revenue Potential tax benefit at 25% 63,942,288 15,985,572 64,169,904 16,042,476 A deferred tax asset attributable to income tax losses has not been recognised at reporting date as the probability criteria disclosed in Note 1 (Income Tax) is not satisfied and such benefit will only be available if the conditions of deductibility also disclosed in Note 1 (Income Tax) are satisfied. For the purposes of taxation, KalNorth Gold Mines Limited and its 100% owned Australian subsidiaries are a tax consolidated group. The head entity of the tax consolidated group is KalNorth Gold Mines Limited. The group has not entered into a tax sharing agreement. Note 5: Other receivables Current Sale proceeds receivable within 12 months Less: discount Net present value of sales proceeds receivable Interest receivable from term deposit 2022 $ - - - 9,020 9,020 2021 $ 1,000,000 (74,074) 925,926 - 925,926 20 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Note 5: Other receivables (cont’d) Non-current Sale proceeds receivable after 12 months Less: discount Net present value 2022 $ 2021 $ - - - 1,500,000 (213,992) 1,286,008 During the reporting period, the $2.5 million receivables (gross before discount) in relation to the Lindsay Project sale as at 30 June 2021 were fully settled for $2.4 million. Note 6: Other assets Current Credit card facility - security deposit Term deposit at bank Note 7: Property, plant and equipment Land and buildings At cost Accumulated depreciation Reclassify to available for sale asset (refer to Note 9) Total written down value Note 8: Exploration and evaluation expenditure Cost Reconciliation Balance at beginning of year Exploration expenditure incurred Exploration expenditure immediately expensed (i) Write-off of expenditure on disposal of tenements Balance at end of year 2022 $ 2021 $ 7,500 3,000,000 3,007,500 7,500 - - 2022 $ - - - - - 2022 $ 2021 $ 380,866 (90,001) (290,865) - - 2021 $ - 5,259,651 424,067 (424,067) (5,259,651) - - - - - - - (i) During the year ended 30 June 2021, the Company incurred exploration expenditure costs which were immediately expensed as their recoverability was uncertain. All previously capitalised exploration and evaluation expenditure was written off in the period as the consolidated entity disposed the Lindsay’s and Kurnalpi projects. Note 9: Available for sale assets Current Property at 224 & 226 Dungan Street, Kalgoorlie 2022 $ 2021 $ - - 290,865 290,865 A contract for the sale of the property in Kalgoorlie was entered into on 19 July 2021 and completion and settlement took place on 9 September 2021. As an active program for this disposal was entered into prior to the preceding year-end, the asset was reclassified to ‘Available for Sale’ from Property, Plant and Equipment in the preceding financial period. 21 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Note 10: Trade and other payables Current Trade payables (i) GST and other taxes payable (ii) Sundry payables and accrued expenses Provision for annual leave 2022 $ 2021 $ 27,997 (4,029) 39,014 32,390 95,372 19,784 1,754,838 95,512 26,347 1,896,481 (i) There are no amounts included within these balances that are not expected to be settled within the next 12 months. The average credit terms for services received by the Group are 30 days from invoice date and are non-interest bearing; (ii) Includes $1,763,688 net GST collected for the sale of Kurnalpi project and paid to the ATO post year-end and withholding tax on interest paid to lenders of $7,014. Note 11: Restoration provision Non-current Restoration provision (i) (i) The provision movement for the year is as follows: Carrying amount at the start of the year Movement during the year Carrying amount at the end of the year 2022 $ 2022 $ 2021 $ - 2021 $ 1,095,566 (1,095,566) - - - - - During the year ended 30 June 2021, the restoration provision was reversed following the sale of all mineral assets. Note 12: Contributed equity 2022 $ 2021 $ 894,240,060 fully paid ordinary shares (2021: 894,240,060) 92,438,807 92,438,807 Movements in ordinary shares on issue for the year: Balance 30 June 2021 Balance 30 June 2022 Ordinary shares No. of shares Paid up capital $ 894,240,060 92,438,807 894,240,060 92,438,807 Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the consolidated entity, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. 22 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Note 12: Contributed equity (cont’d) Capital risk management The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current company's share price at the time of the investment. The consolidated entity is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. The consolidated entity is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. Note 13: Accumulated Losses Accumulated losses at the beginning of the year (Loss) / Profit for the year Accumulated losses at the end of the year Note 14: Key management personnel compensation 2022 $ 2021 $ (76,679,568) (310,171) (77,098,875) (88,997,166) 12,317,598 (76,679,568) Refer to the Key Management Personnel Remuneration section contained in the Directors’ Report for details of the remuneration paid to each member of the consolidated entity’s key management personnel for the year ended 30 June 2022. The totals of remuneration paid to key management personnel of the consolidated entity during the year are as follows: Short-term employee benefits Post-employment benefits Note 15: Related party transactions 2022 $ 2021 $ 136,043 10,000 146,043 205,896 14,500 220,396 All transactions were made on normal commercial terms and conditions and at market rates. Transactions: During the financial year, other than remuneration paid or payable to key management personnel, the Company had no other related party transactions (2021: no related party transactions). The following balances are outstanding at the reporting date in relation to transactions with related parties: Accrued Directors’ bonus 2022 $ - 2021 $ 50,000 23 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Note 15: Related party transactions (cont’d) Loans to/from related parties During the year ended 30 June 2021, the Company drew down a $71,000 loan from Chairman, Jiajun Hu for working capital purposes. The total loan amount, including interest payable, was fully repaid during the same year. Apart from the above, there were no other loans to or from related parties at the current and previous reporting date. Note 16: (Loss) / Profit per share a) Basic (loss) / profit per share (Loss) / Profit after income tax 2022 $ 2021 $ (310,171) 12,208,461 Weighted average number of ordinary shares on issue during the year used as the denominator in calculating basic loss per share 894,240,060 894,240,060 Diluted loss per share is the same as basic loss per share as there are no securities to be classified as dilutive potential ordinary shares on issue. Note 17: Auditors’ remuneration Remuneration of the auditor for: - audit and review of financial reports - BDO Audit (WA) Pty Ltd - other services – audit of tenement expenditure report - BDO Audit (WA) Pty Ltd Note 18: Cash flow information a) Reconciliation of the net profit / (loss) after income tax to the net cash flows from operating activities: Net (loss) / profit for the year Non-cash items included in net profit / (loss): Sale of tenements Loan interest accrued Rehabilitation provision Other receivables – net present value Others Changes in assets and liabilities: (Increase) / decrease in trade and other receivables Increase in trade and other creditors 2022 $ 2021 $ 51,078 49,120 - 51,078 1,288 50,408 2022 $ 2021 $ (310,171) 12,208,461 - - - - 33,120 (12,156,009) 57,530 (1,095,566) 288,067 178,962 (1,801,109) 1,567,853 (2,204,567) 1,660,633 Net cash outflow from operating activities (510,307) (1,062,488) b) Reconciliation of cash Cash balance comprises: - Cash at bank and on hand c) Non-Cash Financing and Investing Activities 12,418,782 15,036,283 There were no non-cash financing and investing activities for the year ended 30 June 2022 and 2021. 24 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Note 19: Commitments The consolidated entity has no commitments as a result of the disposal of all its mineral exploration assets during the year. Note 20: Controlled entities Subsidiaries of KalNorth Gold Mines Limited: Shannon Resources Pty Ltd Lusitan Prospecting Pty Ltd Country of Incorporation Percentage Owned (%) 2021 2022 Australia Australia 100 100 100 100 There was no income earned and no expenses incurred by these entities for the year end 30 June 2022 (2021: nil). Note 21: Segment information Identification of reportable operating segments The consolidated entity is organised into two operating segments: mine development and mineral exploration, both within Australia. 30 June 2022 Revenue Other income Gain on sale of mineral tenements Gain on sale of property, plant and equipment Total income EBITDA Profit / (Loss) before income tax Income tax benefit Mineral Exploration Admin Total consolidated group $ 22,614 88,066 94,447 205,127 $ 22,614 - 94,447 117,061 (398,237) (310,171) (398,237) (310,171) - - $ - 88,066 - 88,066 88,066 88,066 - Profit / (Loss) after income tax 88,066 (398,237) (310,171) Assets Unallocated assets: Cash and cash equivalents Other receivables Other current assets - 9,020 - 12,418,782 - 3,007,500 12,418,782 9,020 7,500 Total assets 9,020 15,426,282 15,435,302 Liabilities Segment liabilities Trade and other payables (1,764,371) 1,668,999 (95,371) Total liabilities (1,764,371) 1,668,999 (95,371) 25 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Note 21: Segment information (cont’d) 30 June 2021 Revenue Other income Gain on sale of mineral tenements Total income EBITDA Reduction in rehab provision Impairment of exploration expenditure Finance costs Mine development Mineral Exploration Admin $ $ - 12,156,009 12,156,009 - - - $ 84,760 - 84,760 Total consolidated group $ 84,760 12,156,009 12,240,769 - 1,095,566 11,731,942 - (528,499) - 11,203,444 1,095,566 - - (4,125) - - (86,424) (4,125) (86,424) Profit / (Loss) before income tax 1,095,566 11,727,818 (614,923) 12,208,461 Income tax benefit - - - - Profit / (Loss) after income tax 1,095,566 11,727,818 (614,923) 12,208,461 30 June 2021 Assets Unallocated assets: Cash and cash equivalents Other receivables Other current assets Available for sale assets Total assets Liabilities Segment liabilities Trade and other payables Total liabilities Mine development Mineral Exploration Admin Total consolidated group - - - - - - - - 2,211,934 - - 15,036,286 - 7,500 290,865 15,036,286 2,211,934 7,500 290,865 2,211,934 15,334,648 17,546,582 (1,764,371) (132,110) (1,896,480) (1,764,371) (132,110) (1,896,480) Note 22: Financial risk management objectives and policies The consolidated entity’s principal financial instruments comprise cash and short-term deposits. The main purpose of these financial instruments is to finance the consolidated entity’s operations. The Consolidated entity has various other financial assets and liabilities such as receivables and payables, which arise directly from its operations. The main risks arising from the consolidated entity’s financial instruments are interest rate risks, commodity price risks, and, indirectly, foreign exchange risk. Other minor risks have been summarised below. The Board reviews and agrees on policies for managing each of these risks. (a) Interest rate risk The consolidated entity’s exposure to market interest rate relates primarily to the consolidated entity’s cash and short-term deposits. All other financial assets in the form of receivables and payables are non-interest bearing. The consolidated entity does not engage in any hedging or derivative transactions to manage interest rate risk. The following tables set out the carrying amount by maturity of the consolidated entity’s exposure to interest rate risk and the effective weighted interest rate for each class of these financial instruments 26 KalNorth Gold Mines Limited and Controlled Entities Note 22: Financial risk management objectives and policies (cont’d) For the year ended 30 June 2022 Weighted average interest Rate % 0.005% 0.82% Weighted average interest Rate % 0.005% - Floating interest rate $ Fixed interest maturing 1 year or less $ 12,418,782 - 12,418,782 - 3,000,000 3,000,000 Floating interest rate $ Fixed interest maturing 1 year or less $ 15,036,283 15,036,283 - - - - - - 30 June 2022 Cash at bank Other assets (term deposit) Total assets 30 June 2021 Cash at bank Total assets Interest bearing liabilities Total liabilities Interest rate sensitivity analysis – cash at bank At 30 June 2022, if interest rates had changed by 1% during the entire year with all other variables held constant, profit for the year and equity would have been $262,568 higher/lower (2021: $17,062), mainly as a result of higher/lower interest income from cash and cash equivalents. (b) Credit risk The maximum exposure to credit risk at reporting date on financial assets of the consolidated entity is the carrying amount, net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements. (c) Liquidity risk The consolidated entity manages liquidity risk by monitoring forecast and actual cash flows and ensuring that adequate reserves and borrowing facilities are available to meet its financial obligations as they fall due. The table below details the Group’s expected maturity for its financial liabilities. These have been drawn based on undiscounted contractual maturities of the financial liabilities based on the earliest date on which the Group can be required to pay. 30 June 2022 Financial liabilities due for payment Trade and other payables 30 June 2021 Financial liabilities due for payment Trade and other payables Less than 12 months $ 12 months or more $ Total $ (95,371) (95,371) (1,896,480) (1,896,480) 27 - - - - (95,371) (95,371) (1,896,480) (1,896,480) KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 Note 22: Financial risk management objectives and policies (cont’d) (d) Foreign exchange risk The Company is exposed to fluctuations in foreign currencies arising from financial asset denominated in a currency other than the functional currency of the Group. The main currency exposure is to the United States dollars through maintaining a cash balance in United States dollars. The Company’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars was as follows: Cash and cash equivalents (e) Net fair value of financial assets and liabilities 2022 $ 2021 $ 2,023,139 - The carrying amounts of financial instruments included in the statement of financial position approximate their fair values due to their short terms of maturity, except other receivables (Note 5) which has been discounted to net present value. Note 23: Contingent liabilities and contingent assets There are no contingent liabilities or assets at the reporting date or arising since. Note 24: Parent Information As referred to in Note 20, the consolidated entity comprises KalNorth Gold Mines Limited, the parent entity and two wholly-owned subsidiaries. The Parent entity disclosures are not materially different to the consolidated entity’s disclosures in the Statement of Financial Position and the Statement of Profit or Loss and Other Comprehensive Income. In addition, there are: a) no guarantees entered into by the parent entity in relation to the debts of its subsidiaries. b) no contingent liabilities of the parent entity as at the reporting date. c) no contractual commitments by the parent entity for the acquisition of property, plant and equipment as at the reporting date. Note 25: Events subsequent to reporting date On 24 August 2022, the Company was delisted from the Australian Securities Exchange. Other than the above, there are no matters or circumstances that have arisen which have significantly affected, or may significantly affect, the operations of the consolidated entity subsequent to year end. 28 KalNorth Gold Mines Limited and Controlled Entities For the year ended 30 June 2022 DIRECTORS’ DECLARATION In the opinion of the Directors of KalNorth Gold Mines Limited (the ‘Company’): a. the accompanying financial statements and notes are in accordance with the Corporations Act 2001 including: i. ii. giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2022 and of its performance for the year then ended; and complying with Australian Accounting Standards, the Corporations Regulations 2001, professional reporting requirements and other mandatory requirements; there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. b. c. This declaration is signed in accordance with a resolution of the Board of Directors. On behalf of the Directors: Jiajun Hu Executive Chairman Dated at Perth 26 October 2022 29 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au Level 9, Mia Yellagonga Tower 2 5 Spring Street Perth, WA 6000 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR’S REPORT To the members of KalNorth Gold Mines Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of KalNorth Gold Mines Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of KalNorth Gold Mines Limited, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other information The directors are responsible for the other information. The other information obtained at the date of this auditor’s report is information included in the directors report, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 30 In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar3.pdf This description forms part of our auditor’s report. BDO Audit (WA) Pty Ltd Neil Smith Director Perth, 26 October 2022 31 

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