Knaus Tabbert
Annual Report 2022

Plain-text annual report

& Controlled Entities Annual Report For the year ended 30 June 2022 Krakatoa Resources Limited & Controlled Entities CONTENTS CORPORATE DIRECTORY ................................................................................................................... 3 DIRECTORS’ REPORT .......................................................................................................................... 4 AUDITOR’S INDEPENDENCE DECLARATION .................................................................................. 23 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME .............................................................................................................................................................. 24 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................... 25 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ............................................................... 26 CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................ 27 NOTES TO THE FINANCIAL STATEMENTS ...................................................................................... 28 DIRECTORS’ DECLARATION.............................................................................................................. 48 INDEPENDENT AUDITOR’S REPORT ................................................................................................ 49 ASX INFORMATION ............................................................................................................................. 52 SCHEDULE OF MINERAL TENEMENTS ............................................................................................ 55 – 2 – Krakatoa Resources Limited & Controlled Entities CORPORATE DIRECTORY PRINCIPAL AND REGISTERED OFFICE Level 8, 216 St Georges Terrace Perth WA 6000 Tel: +61 8 9481 0389 Fax: +61 8 9463 6103 Email: admin@ktaresources.com Web: https://ktaresources.com CHIEF EXECUTIVE OFFICER Mark Major DIRECTORS Colin Locke – Executive Chairman Timothy Hogan – Non-Executive Director David Palumbo – Non-Executive Director COMPANY SECRETARY David Palumbo SHARE REGISTRAR Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth WA 6000 Tel: +61 8 9323 2000 Fax: +61 8 9323 2033 Web: www.computershare.com.au AUDITORS RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade PERTH WA 6000 STOCK EXCHANGE LISTING Australian Securities Exchange ASX Code: KTA – 3 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT Your directors present the following report on Krakatoa Resources Limited (the “Company”) and controlled entities (referred to hereafter as the “Group”) for the financial year ended 30 June 2022. DIRECTORS The names of directors in office at any time during the financial year and up to the date of this report are: - Colin Locke (Executive Chairman) - Timothy Hogan (Non-Executive Director) - David Palumbo (Non-Executive Director) Unless noted above, all directors have been in office since the start of the financial year to the date of this report. COMPANY SECRETARY The following persons held the position of Company secretary during the financial year: - David Palumbo PRINCIPAL ACTIVITIES The principal activity of the Group during the financial year was the acquisition and exploration of resource based projects. OPERATING RESULTS The loss of the Group after providing for income tax amounted to $4,318,516 (2021: $3,719,276). FINANCIAL POSITION As at 30 June 2022, the Group had a cash balance of $4,220,925 (2021: $2,341,691) and a net asset position of $3,826,063 (2021: $2,202,721). DIVIDENDS PAID OR RECOMMENDED No dividends have been paid, and the directors do not recommend the payment of a dividend for the financial year ended 30 June 2022. SIGNIFICANT CHANGES IN STATE OF AFFAIRS No significant changes in the state of affairs occurred during the financial year. – 4 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) REVIEW OF OPERATIONS During the financial year, the Group continued its active systematic exploration on NSW and WA assets. The company was granted several new tenements at Mt Clere project (in the Gascoyne region of WA) and additional ground around Rand project (in southern NSW). The company completed exploration on most of its assets; with many drilling campaigns, extensive geophysical surveys and first pass geochemical survey’s. Details of the project specific exploration operations are provided below. Mt Clere Project – Prospective for REE, HMS, Ni, Cu +/- Co, PGE During the financial year, the Mt Clere Project tenements were systematically explored for rare earth elements, heavy mineral sands and nickel-copper metal sulphides. The company currently controls more than 2,300km2 of prospective land separated over 11 tenements. The project is located approximately 200km northwest of Meekatharra, within the Narrayer terrane, Gascoyne Region of Western Australia. The Narryer Terrane is thought to represent reworked remnants of greenstone sequences that are prospective for intrusion-hosted Ni-Cu-(Co)-(PGE's) with similar mineralisation-styles of the likes of Julimar. The initial activities focused on following up reconnaissance and geochemical exploration work over the prospective areas of interest (AOI) identified by the extensive stream sediment survey and rock sampling program undertaken during late last financial year (2021). These AOI recorded highly anomalous rare earth elements, base metals and pathfinder elements associated with platinum group mineralisation systems. Stream sediment assays highlight the vast saprolite clay zones overlain by residual laterite cap, all lying above the alkaline granitic basement sequences creating strong potential for clay hosted ionic REE development. The company completed a 95 hole (3,383m) reconnaissance air core (AC) drilling program, around the Tower AOI as well as testing for heavy mineral sands (HMS) including monazite and zircon, and the potential for any secondary ionic weathered clay hosted REE in the main alluvial catchment. This work subsequently discovered the presence of significant REE mineralisation within the well- developed clay-rich regolith profiles over the Tower AOI. These zones were enriched in high value magnetic and critical rare earth elements. These clays are thought to be prospective for ion adsorption REE and the results of the drilling cumulated in the development of a substantial Exploration Target of 87-519 Mt grading 580-1120 ppm Total Rare Earth Oxides (TREO) (Figure 1). Following this, a 100 hole (3,153m) resource development and step out air-core (AC) drill program with most of the holes intersected the expected bedrock of alkaline granitic and gneissic basement rocks, which are typical precursor rocks for this style of mineralisation. Samples are currently in the laboratory for analysis. Once complete, the company envisages to complete a maiden resource statement. The Company completed an extensive helicopter-borne Versatile Time Domain Electromagnetic (VTEMTM Max) geophysical survey system over a large proportion of the southern tenements and three discrete targets in the north at the Mt Clere project in late November 2021. VTEM is an effective first-pass screening tool for detecting shallow conductive sources such as accumulations of sulphides. The results revealed multiple extensive highly conductive targets which have the potential to host significant massive sulphide mineralisation. The data revealed a total of 52 VTEM conductive targets with twenty being considered high-priority targets (defined as late time, with strong amplitude). Sixteen medium-priority targets were defined as mid to late time anomalies generally without a magnetic anomaly association. – 5 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) The company followed up the priority VTEM targets located on the southern cluster (Figure 2) by completing various ground based moving loop electromagnetic (MLEM) surveys. Processing and interpretation of the MLEM defined multiple walk-up drill targets with exceptional 10,000 plus Siemens conductors, from basement sources. Several priority targets MM-1 (Figure 3) and NBB-8 have numerous drill targets. Four of the priority targets have revealed up to 12 conductor drill targets which will be drilled once all regulatory permitting is complete. Figure 1 Map showing the locations of the discovery drill holes (2021) and the recently completed drill holes, all within the area defined within the Exploration Target. – 6 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) Figure 2 Map of Southern Cluster VTEM targets showing MLEM lines over TMI magnetics. Figure 3 Milly Milly (MM-1) Prospect, MLEM plates over AeroMag TMI and AEM VTEM Ch40, with oblique view of 3D magnetic susceptibility isosurface (0.2 SI units). – 7 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) King Tamba Project – Prospective for Ta, Rb, Nb, Sn, W, Li, +/- Base metals The King Tamba Project (formerly known as Dalgaranga project) is located 80km northwest of Mount Magnet in Western Australia and lies within the Dalgaranga Greenstone Belt. The Dalgaranga Greenstone Belt is about 50km long and up to 20km wide and contains gold mineralisation (Dalgaranga gold mine), a zinc deposit (Lasoda), graphite deposits, and occurrences of tantalum, beryllium, tin, tungsten, lithium, and molybdenum related to LCT pegmatites. The presence of critical metal minerals such as tapiolite, tantalite, columbite, zinnwaldite and lepidolite (lithium-bearing micas) were recognised during field mapping and confirmed anomalous critical metals during the rock chip sampling programmes completed in late 2016 to mid-2017. Opportunistic rock sampling revealed the presence of anomalous rubidium (peak values of >5,000ppm (sample AD004) and 3463.9ppm Rb (sample 17D022)) Tantalum (1,854ppm Ta2O5 (sample 16D016), and Niobium (725ppm Nb in sample 16D005) within the mine and southern pegmatite area. During the period, the company completed a review of all historical drilling and announced a maiden Exploration Target estimated at between 1,470,000 to 3,185,000 tonnes with estimated grades of Rubidium, Lithium and Niobium, Tantalum, Tin and Tungsten as shown in Table 1 below. Table 1: Exploration Target Estimate (grades in ppm) Tonnes Rb Li Nb Ta Sn W 1,470,000 – 3,185,000 500 - 2,000 50- 300 100- 500 25-100 50-700 10-100 The potential quantity and grade of the Exploration Target is conceptual in nature and is therefore an approximation. There has been insufficient exploration to estimate a Mineral Resource and it is uncertain if further exploration will result in the estimation of a Mineral Resource. See ASX Announcement 8 November 2021 for further details of the Target estimation. The Company drilled thirty-two RC drillholes for a total of 3,045m during May and June 2022 (Figure 4). The program targeted a suite of mineralized pegmatites which are enriched in rubidium, tantalum, caesium, niobium and lithium and was designed to infill existing drilling to a nominal 40 x 40m spacing to allow calculation of a maiden mineral resource. Samples are currently in the laboratory for analysis. Once complete the company will complete a maiden resource statement. The drilling showed thick intersections of pegmatite were regularly encountered at the expected depths and the existing geology model was shown to be accurate. The drilling was mainly infill however, a number of extensional holes were added to the program with very promising returns of mineralised pegmatites. – 8 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) Figure 4 Location of drill holes, remanent mine facilities and pre-existing pegmatite model with exploration target estimation. – 9 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) Rand Project- Prospective for IRGS (Au), granite hosted Sn and REE. During the financial year, the Company was granted two exploration licenses within and surrounding the existing Rand licence and applied for additional exploration licences in the area (Figure 5). Figure 5 Map showing location of KTA exploration licences. – 10 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) EL9276 known as West Rand was chosen due to the newly discovered significant gold and pathfinder auger soil anomaly revealed in the corner of EL9000, where the anomaly is positioned on the margin of the large regionally identified geophysical (magnetic) intrusive body which continues west into the new tenement. This intrusive is not known to outcrop and has never been explored. A second tenement was granted within EL9000 for group 2 minerals over the well-known Goombargana granite area. This is a historical mining area which was active prior to 1949 for the industrial mineral feldspar. More recent exploration and metallurgical studies were undertaken on the commercialisation of potash and soda feldspars, in the late 1990’s by Wallarah Minerals Pty Ltd (Wallarah). This project was abandoned due to the Asian economic crisis in late 1990’s. The price for Soda Ash has fluctuated around $250-$300/t within the last 5 years to $700/t more recently. Late in the reporting period the company applied for additional licences after discovering ionic type rare earth element (REE) within the maiden AC drillholes at the Bullseye targets. The Company also completed a significant infill and extensional auger soil geochemical survey over the Bulgandry Goldfield area which is prospectivity for shear-hosted and intrusion-related gold. This program comprised of 842 samples taken across an area of over 35 km2. It was designed to better resolve the numerous gold and multi-element anomalies defined by the Phase 1 survey of 2021. The Phase 2 soil survey has better constrained the initial broad anomalies defined by the initial survey and has also defined a new, large coherent anomaly on a discrete hill in the far south of the survey area (Figure 6). The discrete zones include the newly named Rockingham, and Optux anomalies, Lone Hand and Goodwood anomalies, Grant’s, TW, Middle and KBRC2 anomalies. The Company undertook a gradient array induced polarisation survey (GAIP) over several areas such as Show Day and Gold Hill, known historical mines within the Bulgandry Goldfield. These detailed surveys are designed to map potentially gold-bearing structures, complementing the soil geochemistry to aid drill target definition. A drilling campaign is envisaged over the soil and air core anomalies already identified in the next twelve months. – 11 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) Figure 6 Location of gold soil geochemistry anomalies with selected magnetic linears, showing prospect/mine locations. Belgravia Project – Cu, Au, The Belgravia Project covers an area of 80km2 and is located in the central part of the Molong Volcanic Belt (MVB), Lachlan Fold Belt, NSW. It contains the same rocks (Fairbridge Volcanics and Oakdale Formation), or their lateral equivalents, that respectively host the giant Cadia-Ridgeway mine 35km south and Alkane Resources' Boda discovery 65km north. Historical exploration at Belgravia has failed to adequately consider the regolith and tertiary basalt (up to 40m thick) that obscures much of the prospective geology. The Project contains six targets (Figure 7) with considerable exploration potential for porphyry Cu-Au and associated skarn mineralisation. During the reporting period the Company completed a 2 hole diamond drilling program to test the prominent structurally bound magnetic low Sugarloaf target and completed a Dipole Dipole Induced Polarisation (DDIP) survey along the western tenement anomalies. The two core holes (SDD001 and SDD002) totalling 1039.3 metres tested a coincident annular soil geochemical anomaly and magnetic intersected predominantly massive volcaniclastic sandstones, conglomerates and fine breccias and basalts with minor jaspers and laminated and pyritic siltstones and mudstones. A DDIP survey was completed over the Sugarloaf and Bella-Larras Lee target areas in November- December 2021 for a total of 25.2 line kms. Three main anomalies were defined over the Sugarloaf target. These range from moderately to strongly chargeable and moderately conductive to strongly chargeable and highly conductive. Each anomaly requires future ground-checking. feature. The holes – 12 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) Results from the Bella-Larras Lee target area show that the most significant feature is a moderately chargeable-strongly resistive feature, 200 metres wide and approximately 300 m below surface. Further infill DDIP work will be required to help better define this feature and then if warranted, a small drilling program. Figure 7 Belgravia project location map, prospects and major copper & gold mines and deposits on regional bedrock geology. Turon Project – Au, +/-Cu The Turon Project covers an area of 120km2. It is situated approximately 50km east of the Company's Belgravia Project and 60km northeast of Newcrest Mining's Cadia Valley Operations, in the Hill End Synclinorial Zone, NSW. The geology at Turon bears many similarities in terms of host-rocks, structural and mineralisation-style to other high-grade turbidite-hosted gold deposits, including Fosterville in the Bendigo-Ballarat zone, central Victoria. – 13 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) Past explorers report numerous significant gold grades from chip and mullock sampling along the length of the gold workings, including 1,535g/t, 135g/t, 26g/t, 14.6g/t, 12.55g/t and 11.3 g/t Au . The company completed a small diamond drill program in 2020 over several identified targets within the Turon project. The drilling was designed to test several shallow gold targets situated within the Box Ridge (Britannia Mine) and Quartz Ridge line of workings which strike over 2.4km and 1.6km respectively. Limited site-based reconnaissance and rehabilitation activities were undertaken during the last financial year. Mac Well Project - Au The Mac Well Project has a land area of 66.9km2 and is located 10km west of the Company's Dalgaranga Project. The Project contains a 7.5km strike along the prospective Warda Warra greenstone belt, mostly untested due to a thick transported cover. The Company considers favourable structural conditions for gold mineralisation are likely within the Mac Well tenement, acknowledging the significance and prospectivity of the western granite-greenstone contact, as evidenced by the Western Queen Mine. Late in the reporting period the company received notification that the license renewal had been granted. On hearing this the company has undertaken some rock chip sampling over several areas of prospective outcrop. The results of the mapping and geochemical sampling are still outstanding. Competent Person’s Statement The information in this announcement is based on, and fairly represents information compiled by Mark Major, Krakatoa Resources CEO, who is a Member of the Australasian Institute of Mining and Metallurgy and a full-time employee of Krakatoa Resources. Mr Major has sufficient experience relevant to the style of mineralisation and type of deposit under consideration, and to the activity which he has undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Major consents to the inclusion in this announcement of the matters based on this information in the form and context in which it appears. – 14 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) INFORMATION ON DIRECTORS Colin Locke Executive Chairman From 1984 to 1993, Colin Locke worked in the mining industry processing base and precious metals. During this time, he traded resource stocks and international futures contracts. In 1993, Mr. Locke joined an Australian commodity and futures broking firm as an investment advisor and became a Director in 1994. In 1998 Mr. Locke founded a boutique Australian Financial Services firm and held the position of Managing Director from 1999 until 2010. In 2007 Mr. Locke held the role of Corporate Advisor during the acquisition process for the Mayoko iron ore project in the Republic of Congo that was subsequently taken over in 2010 for circa AUD 50mi and later on sold for over 300mi. through From 2008, Mr. Locke focused on natural resources exploration pursuits founded Western Mining Network Ltd, (now Aston Minerals Limited, ASO) where he held the role of Executive Director from 2010 until 2012. Indonesian archipelago and the Interest in Securities Mr. Locke brings to the board and shareholders a mining related background with business management and financial experience spanning over 30 years. He currently serves on the board of Albion Resources Limited (ASX: ALB) and Rubix Resources Limited (ASX: RB6) 1,129,000 Fully paid ordinary shares 4,000,000 options exercisable at $0.075 on or before 29 November 2023 2,500,000 share performance rights vesting at $0.20 on or before 29 November 2023 2,500,000 share performance rights vesting at $0.30 on or before 29 November 2023 2,500,000 share performance rights vesting at $0.40 on or before 29 November 2023 Directorships held listed entities in other Albion Resources Limited Rubix Resources Limited – 15 – Krakatoa Resources Limited & Controlled Entities Timothy Hogan Non-Executive Director DIRECTORS’ REPORT (CONT.) Mr. Hogan has approximately 25 years’ experience in the stockbroking industry in Australia, initially as a founding private client advisor at Hogan and Partners. Mr. Hogan has provided corporate and execution services for a wide variety of corporate and private clients. Mr. Hogan is currently a Director of Barclay Wells Limited, a boutique advisory firm that specialises in Australian resource stocks, and has assisted many companies from their initial capital raising and flotation on the ASX through to production. Mr. Hogan brings extensive experience and a wide range of contacts that will benefit the Company. Interest in Securities 400,000 Fully paid ordinary shares 3,000,000 options exercisable at $0.075 on or before 29 November 2023 Directorships held in other listed entities None David Palumbo Non-Executive Director & Company Secretary Mr Palumbo is a Chartered Accountant and graduate of the Australian Institute of Company Directors with over fourteen years’ experience across company secretarial, corporate advisory and financial management and reporting of ASX listed companies. Mr Palumbo is an employee of Mining Corporate Pty Ltd, where he has been actively involved in numerous corporate transactions. Mr Palumbo is currently a Non-Executive Director of Albion Resources Limited (ASX: ALB) and Rubix Resources Limited (RB6). 3,601,500 Fully paid ordinary shares 2,100,000 options exercisable at $0.075 on or before 29 November 2023 Interest in Securities Directorships held in other listed entities Albion Resources Limited Rubix Resources Limited REMUNERATION REPORT (AUDITED) This report details the nature and amount of remuneration for each director of Krakatoa Resources Limited and for the executives receiving the highest remuneration. – 16 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) 1. Employment Agreements Mr Colin Locke has worked for the Group in an executive capacity as Executive Chairman since his appointment on 6 August 2015. Under the terms of his agreement, his remuneration is subject to annual review. It was resolved by the board, under the terms of his existing agreement, to increase his remuneration to $160,000 (plus superannuation) from $144,000 (plus superannuation). Under the terms of his agreement, Mr Locke received reimbursements for travel and other expenses related to his employment during the financial year. The executive agreement may be terminated by either party with 3 months’ written notice. Mark Major was appointed as Chief Executive Officer, effective from 14 October 2020. Under the terms of the executive agreement, Mr Major is entitled to receive a base salary of $220,000 per annum (inclusive of superannuation), which is subject to annual review. The executive agreement may be terminated by either party with 3 months’ written notice. Appointments of non-executive directors Timothy Hogan and David Palumbo are formalised in the form of service agreements between themselves and the Group. Their engagements have no fixed term but cease on their resignation or removal as a director in accordance with the Corporations Act 2001. It was resolved by the board during financial year to increase Mr Hogan’s entitlement to $40,000 per annum plus superannuation (previously $30,000 plus superannuation per annum) and Mr Palumbo’s entitlement to $66,000 per annum (previously $60,000 per annum). 2. Remuneration policy The Group’s remuneration policy has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the Group’s financial results. The board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the Group, as well as create goal congruence between directors, executives and shareholders. The board’s policy for determining the nature and amount of remuneration for board members and senior executives of the Group is as follows:  The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the board.  All executives receive a base salary (which is based on factors such as length of service and  experience), superannuation and are entitled to the issue of share options. Incentive paid in the form of share options are intended to align the interests of directors and Group with those of the shareholders. The performance of executives is measured against criteria agreed annually with each executive and is based predominantly on the forecast growth of the Group’s shareholders’ value. The board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the committee’s recommendations. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth. Executives are also entitled to participate in the employee share and option arrangements. All remuneration paid to directors and executives is valued at the cost to the Group and expensed, or capitalised to exploration expenditure if appropriate. Options, if given to directors and executives in lieu of remuneration, are valued using the Black-Scholes methodology. The board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The remuneration committee determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. – 17 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) The maximum aggregate amount of fees that can be paid to directors is $300,000. Fees for non- executive directors are not linked to the performance of the Group. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Group and are able to participate in the employee share option plan. 3. Performance-based remuneration During the financial year, The Board issued CEO Mark Major 5,000,000 incentive options exercisable at $0.15 expiring on 29 November 2023. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. Voting and comments made at the company's 2021 Annual General Meeting ('AGM') At the 2021 AGM, 91% 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. 4. Details of remuneration for the year ended 30 June 2022 The remuneration for each director and key management personnel of the Group during the financial year ended 30 June 2022 and 30 June 2021 was as follows: 2022 Short-term Benefits Post- employment Benefits Other Long-term Benefits Share based Payment Total Perfor- mance Related Value of Options / Rights Re- muneration Directors and Key Management Person Cash, salary & commissions Super- annuation Other Shares Options / Rights $ $ $ $ $ $ % % Colin Locke 160,000 16,000 Timothy Hogan David Palumbo 40,000 66,000 4,000 - Mark Major 200,913 20,091 466,913 40,091 - - - - - - - - - - - 176,000 44,000 66,000 - 371,704 592,708 - 371,704 878,708 - - - - - - - - 63 63 2021 Short-term Benefits Post- employment Benefits Other Long-term Benefits Share based Payment Total Perfor- mance Related Value of Options / Rights Re- muneration Cash, salary & commissions Super- annuation Other Shares Options Mark Major 143,664 13,648 $ 144,000 30,000 60,000 $ 5,700 2,850 - $ $ $ $ % % - - - - - 407,577 557,277 - 93,440 126,290 168,000 93,440 321,440 - 356,540 513,852 - - 52 - 11 73 74 29 69 63 377,664 22,198 - 168,000 950,997 1,518,859 – 18 – Directors and Key Management Person Colin Locke Timothy Hogan David Palumbo Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) 5. Equity holdings of key management personnel Shareholdings Number of shares held by key management personnel during the financial year ended 30 June 2022 was as follows: 2022 Directors and Key Management Person Colin Locke Timothy Hogan David Palumbo Mark Major Total Balance 1.7.2021 No. Received as Compensation No. Options Exercised No. Net Change Other No. Balance 30.6.2022 No. 129,000 - 2,601,500 - 2,730,500 - - - - - 1,000,000 400,000 1,000,000 - 2,400,000 - - - - - 1,129,000 400,000 3,601,500 - 5,130,500 Option holdings Number of options held by key management personnel during the financial year ended 30 June 2022 was as follows: 2022 Directors and Key Management Person Colin Locke Timothy Hogan David Palumbo Mark Major Total Balance 1.7.2021 No. Received as Compensation No. Options Expired No. Net Change Other No. Balance 30.6.2022 No. 11,000,000 9,000,000 4,639,389 5,000,000 29,639,389 (6,000,000) - (5,600,000) - (1,539,389) - 5,000,000 - 5,000,000 (13,139,389) (1,000,000) (400,000) (1,000,000) - (2,400,000) 4,000,000 3,000,000 2,100,000 10,000,000 19,100,000 Share performance rights Number of performance rights held by key management personnel during the financial year ended 30 June 2022 was as follows: 2022 Balance 1.7.2021 No. Received as Compensation No. Rights Expired No. Net Change Other No. Balance 30.6.2022 No. Directors and Key Management Person Colin Locke Timothy Hogan David Palumbo Mark Major Total 7,500,000 - - 7,500,000 15,000,000 - - - - - - - - - - - - - - - 7,500,000 - - 7,500,000 15,000,000 6. Other transactions with key management personnel There were no related party transactions during the year ended 30 June 2022 (2021: $14,220 plus GST, was invoiced to the Group by Barclays Wells Limited for brokerage fees on capital placements, a Company in which Tim Hogan is a director). – 19 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) All related party transactions are made on normal commercial terms and condition and at market rates. 7. Equity instruments granted as compensation There were no other equity instruments granted as compensation during the year. 8. Group Performance The earnings of the consolidated entity for the five years to 30 June 2022 are summarised below: Sales revenue EBITDA EBIT (Loss) after income tax 2022 $ - (4,314,173) (4,318,516) (4,318,516) 2021 $ - (3,719,276) (3,719,276) (3,719,276) 2020 $ - (2,650,603) (2,650,603) (2,650,603) 2019 $ - (739,390) (739,390) (739,390) 2018 restated $ - (1,122,558) (1,122,558) (1,122,558) The factors that are considered to affect total shareholder return (‘TSR’) are summarised below: 2022 2021 2020 2019 2018 restated Share price at financial year end ($) Dividends declared share) Basic loss per share (cents per share) (cents per 0.047 0.048 0.038 0.022 - - - - (1.43) (1.38) (1.47) (0.63) 0.027 - (1.08) End of “Remuneration Report (Audited)” MEETINGS OF DIRECTORS The number of Directors' meetings held during the financial year and the number of meetings attended by each Director are: Director Colin Locke Timothy Hogan David Palumbo Directors’ Meetings Number eligible to attend 3 3 3 Number attended 3 3 3 EVENTS AFTER THE REPORTING PERIOD No matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods. – 20 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) INDEMNITY AND INSURANCE OF AUDITOR The Group has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Group or any related entity against a liability incurred by the auditor. During the financial year, the Group has not paid a premium in respect of a contract to insure the auditor of the Group or any related entity. ENVIRONMENTAL ISSUES The Group’s operations are subject to significant environmental regulation under the law of the Commonwealth and State in relation to discharge of hazardous waste and materials arising from any mining activities and development conducted by the Group on any of its tenements. To date there have been no known breaches of any environmental obligations. INDEMNIFYING AND INSURANCE OF OFFICERS The Group has entered into deeds of indemnity with each director and the company secretary whereby, to the extent permitted by the Corporations Act 2001, the Group agreed to indemnify each director against all loss and liability incurred as an officer of the Group, including all liability in defending any relevant proceedings. The Group has paid premiums to insure each of the directors and the company secretary against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the Group, other than conduct involving a wilful breach of duty in relation to the Group. The disclosure of the amount of the premium is prohibited by the insurance policy. FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES Further information, other than as disclosed this report, about likely developments in the operations of the Group and the expected results of those operations in future periods has not been included in this report as disclosure of this information would be likely to result in unreasonable prejudice to the Group. PROCEEDINGS ON BEHALF OF THE GROUP No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings during the year. – 21 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ REPORT (CONT.) NON-AUDIT SERVICES The following fees were paid or payable to the auditor for non-audit services provided during the year ended 30 June 2022: — taxation services $ 1,050 The directors are satisfied that the provision of non-audit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the non-audit services provided by the auditor do not compromise the auditor’s independence requirements of the Corporations Act 2001 for the following reasons:  all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and  none of the services provided undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board. OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF RSM AUSTRALIA PARTNERS There are no officers of the Group who are former partners of RSM Australia partners. AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 30 June 2022 has been received and can be found on the next page of the directors’ report. Auditor RSM Australia Partners continues in office in accordance with section 327C of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001 Colin Locke Executive Chairman Dated: 15 September 2022 – 22 – RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 8 9261 9100 F +61 8 9261 9111 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Krakatoa Resources Limited for the year ended 30 June 2022, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) (ii) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS Perth, WA Dated: 15 September 2022 ALASDAIR WHYTE Partner THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation Krakatoa Resources Limited & Controlled Entities CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2022 Other Revenue Administration expense Compliance and regulatory expense Employee benefits expense Exploration expenditure and project evaluation costs Depreciation Share based payment expense Loss before income tax expense Income tax expense Note 2 13 3 2022 $ 2021 $ 51,275 13,428 (197,300) (245,064) (397,848) (3,020,284) (4,343) (504,952) (131,335) (280,152) (282,945) (1,901,839) - (1,136,433) (4,318,516) - (3,719,276) - Loss from continuing operations after tax (4,318,516) (3,719,276) Loss attributable to members of the parent entity (4,318,516) (3,719,276) Other comprehensive income/(loss) - - Total comprehensive (loss) attributable to members of the parent entity (4,318,516) (3,719,276) Basic and diluted loss per share (cents per share) 4 (1.43) (1.38) The accompanying notes form part of these financial statements. – 24 – Krakatoa Resources Limited & Controlled Entities CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2022 Note 2022 $ 2021 $ CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other Assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Trade and other receivables Plant and Equipment TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY 5 6 7 6 8 9 10 11 12 4,220,925 152,632 69,597 4,443,154 2,341,691 57,957 3,004 2,402,652 109,600 151,723 261,323 61,600 - 61,600 4,704,477 2,464,252 833,562 44,852 878,414 244,827 16,704 261,531 878,414 261,531 3,826,063 2,202,721 21,968,622 3,293,270 (21,435,829) 16,525,965 2,794,069 (17,117,313) 3,826,063 2,202,721 The accompanying notes form part of these financial statements. – 25 – Krakatoa Resources Limited & Controlled Entities CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2022 Note Issued Capital $ Accumulated Losses $ Option Premium Reserve $ Total $ Balance at 1 July 2020 12,057,138 (13,398,037) 1,819,885 478,986 Loss for the year Other comprehensive income Total comprehensive loss Transactions with owner directly recorded in equity Shares issued during the year Less: transaction costs arising from issue of shares Options issued during the year Balance at 30 June 2021 11 11 - - (3,719,276) (3,719,276) - - (3,719,276) (3,719,276) 4,803,000 - - 4,803,000 (334,173) - 16,525,965 - - (17,117,313) - 974,184 2,794,069 (334,173) 974,184 2,202,721 Balance at 1 July 2021 16,525,965 (17,117,313) 2,794,069 2,202,721 Loss for the year Other comprehensive income Total comprehensive loss Transactions with owner directly recorded in equity Shares issued during the year Less: transaction costs arising from issue of shares Options issued during the year Balance at 30 June 2022 11 11 - - (4,318,516) (4,318,516) - - (4,318,516) (4,318,516) 5,787,996 - - 5,787,996 (345,339) - 21,968,622 - - (21,435,829) - 499,201 3,293,270 (345,339) 499,201 3,826,063 The accompanying notes form part of these financial statements. – 26 – Krakatoa Resources Limited & Controlled Entities CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2022 Note 2022 $ 2021 $ CASH FLOWS FROM OPERATING ACTIVITIES Other income Payments to suppliers and employees Payment for exploration and evaluation expenditure and project evaluation costs 51,275 (871,222) 13,428 (665,427) (2,581,660) (1,999,058) Net cash used in operating activities 14 (3,401,607) (2,651,057) CASH FLOWS FROM INVESTING ACTIVITIES Payment for plant and equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares and options Payment of transaction costs associated with capital raising (156,066) (156,066) - - 5,782,246 4,640,750 (345,339) (334,172) Net cash provided by financing activities 5,436,907 4,306,578 Net increase in cash held Cash at beginning of financial year 1,879,234 2,341,691 1,655,521 686,170 Cash at end of financial year 5 4,220,925 2,341,691 The accompanying notes form part of these financial statements. – 27 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES These financial statements and notes represent those of Krakatoa Resources Limited (the “Company”) and its controlled entities (the “Group” or “consolidated entity”). Krakatoa Resources Limited is a listed public Company, incorporated and domiciled in Australia. The financial statements were authorised for issue on 15 September 2022 by the directors. Basis of Preparation The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. The Group is a for profit entity for financial reporting purposes under Australian Accounting Standards. Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income, 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 1 (p). Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated. The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected financial assets for which the fair value basis of accounting has been applied. All amounts are presented in Australian dollars unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australia Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that not yet mandatory have not been early adopted. The following Accounting Standards and Interpretations are most relevant to the Group. Conceptual Framework for Financial Reporting (Conceptual Framework) The Group has adopted the revised Conceptual Framework from 1 July 2021. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards, but it has not had a material impact on the Group’s financial statements. – 28 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) Accounting Policies a) Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries). Income and expense of subsidiaries acquired or disposed of during the year are included in profit or loss from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing control are accounted for as equity transactions. The carrying amounts of the Company’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. 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. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 22. Income Tax b) The income tax expense (revenue) for the period comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit or 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 period as well unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. – 29 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) 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 substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally 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 relate 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. c) Exploration and Evaluation Expenditure Exploration and evaluation expenditure, including the costs of acquiring tenements, are expensed as incurred. Expensing exploration and evaluation expenditure as incurred is irrespective of whether or not the Board believe expenditure could be recouped from either a successful development and commercial exploitation or sale of the respective assets. Investments and other financial assets d) Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, it's carrying value is written off. – 30 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) Financial assets at fair value through profit or loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss. Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition. Impairment of financial assets The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss. e) Foreign Currencies The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Australian dollars (‘$’), which is the functional currency of the Group and the presentation currency for the consolidated financial statements. In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. – 31 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:  exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;  exchange differences on transactions entered into in order to hedge certain foreign currency risks; and  exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate). On the disposal of a foreign operation (i.e. a disposal of the Company’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the Company are reclassified to profit or loss. In addition, in relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate share of accumulated exchange differences are reattributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Company losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. Impairment of Assets f) At the end of each reporting date, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. 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. Impairment testing is performed annually for intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. g) 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 3 months or less. – 32 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) h) Revenue Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. All revenue is stated net of the amount of goods and services tax (GST”). i) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. j) Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses Collectability of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off. k) Trade and other payables These amounts represent liabilities for goods and services provided to the Group before the end of the financial period and which are unpaid. The amounts are unsecured and usually paid within 30 days of recognition. l) Employee Benefits Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The Group’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as a part of current trade and other payables in the statement of financial position. The Group’s obligations for employees’ annual leave and long service leave entitlements are recognised as provisions in the statement of financial position. Defined contribution superannuation expense Contributions to defined contributions superannuation plans are in the period in which they are incurred. m) Issued capital Ordinary shares are classified as equity. Costs directly attributable to the issue of 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, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration. n) Earnings per share Basic earnings per share Basic earnings per share is determined by dividing the net profit after income tax attributable to members of the Group, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. – 33 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) 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. o) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. p) Property, Plant and Equipment Land and buildings are shown at fair value, based on periodic, at least every 3 years, valuations by external independent valuers, less subsequent depreciation and impairment for buildings. The valuations are undertaken more frequently if there is a material change in the fair value relative to the carrying amount. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Increases in the carrying amounts arising on revaluation of land and buildings are credited in other comprehensive income through to the revaluation surplus reserve in equity. Any revaluation decrements are initially taken in other comprehensive income through to the revaluation surplus reserve to the extent of any previous revaluation surplus of the same asset. Thereafter the decrements are taken to profit or loss. Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Plant and equipment 3-7 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits. q) 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. Share-based payment transactions The Group 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 a valuation 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. – 34 – Krakatoa Resources Limited & Controlled Entities Coronavirus (COVID-19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the Group based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the Group operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the Group unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. r) 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 classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 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 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. s) Accounting Standards that are mandatorily effective for the current reporting year The Group has adopted all of the new and revised Accounting Standards and Interpretations issued by the Australian Accounting Standards Board that are mandatory for the current reporting period. The adoption of these new and revised Accounting Standards and Interpretations has not resulted in a significant or material change to the Group’s accounting policies. The adoption of the new Conceptual Framework for Financial Reporting from 1 July 2021 has not led to any changes in accounting or disclosure for the Group, but the new Conceptual Framework may be referred to if accounting matters arise that are not addressed by accounting standards. The adoption of the new definition of Material included in AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material from 1 July 2021 provides a new definition of material, which now extends materiality consideration to obscuration and clarifies that materiality now depends on the nature or magnitude of information. Future effects of the implementation of these standards will depend on future details. – 35 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 NOTE 2: OTHER REVENUE Other Income NOTE 3: INCOME TAX EXPENSE a. Reconciliation of income tax expense to prima facie tax payable: Loss from ordinary activities before income tax expense Prima facie tax benefit on loss from ordinary activities before income tax at 30% (2021: 30%) Increase/(decrease) in income tax due to: - Capital raising costs - Losses and recognised temporary differences not Income tax attributable to the Group b. Unused tax losses and temporary differences for which no deferred tax asset has been recognised at 30% (2021: 30%): tax assets have not been Deferred recognised in respect of the following: Tax revenue losses 2022 $ 2021 $ 51,275 51,275 13,428 13,428 2022 $ 2021 $ (4,318,516) (3,719,276) (1,295,555) (1,115,783) (55,327) 1,350,882 (132,495) 1,248,278 - - 18,318,021 14,398,759 Potential deferred tax assets attributable to tax losses and exploration expenditure carried forward have not been brought to account at 30 June 2022 because the directors do not believe it is appropriate to regard realisation of the deferred tax assets as probable at this point in time. These benefits will only be obtained if: - the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the loss and exploration expenditure to be realised; - no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the loss and exploration expenditure. – 36 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 2022 $ 2021 $ NOTE 4: EARNINGS PER SHARE Loss used to calculate basic EPS (4,318,516) (3,719,276) Weighted average number of ordinary shares outstanding during the period used in calculating basic and diluted EPS 302,004,725 268,683,699 Basic and diluted loss per share (1.43) (1.38) Cents Cents No. No. NOTE 5: CASH AND CASH EQUIVALENTS Cash at bank NOTE 6: TRADE AND OTHER RECEIVABLES Current GST receivable Non-Current Other receivables 2022 $ 2021 $ 4,220,925 4,220,925 2,341,691 2,341,691 152,632 152,632 109,600 109,600 57,957 57,957 61,600 61,600 Allowance for expected credit losses The consolidated entity has not recognised a loss in respect of the expected credit losses for the year ended 30 June 2022. NOTE 7: OTHER ASSETS Other Assets 69,597 69,597 3,004 3,004 – 37 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 NOTE 8: PLANT AND EQUIPMENT Equipment at cost Equipment – accumulated depreciation Equipment Opening balance Additions Disposals Depreciation NOTE 9: TRADE AND OTHER PAYABLES Trade payables and accrued expenses 2022 $ 2021 $ 156,066 (4,343) 151,723 - 156,066 - (4,343) 151,723 - - - - - - - - 833,562 833,562 244,827 244,827 Trade creditors, excluding related party payables, are expected to be paid on 30-day terms. NOTE 10: PROVISIONS CURRENT Employee benefits NOTE 11: ISSUED CAPITAL 2022 $ 44,852 44,852 2021 $ 16,704 16,704 2022 No. 2022 $ 2021 No. 2021 $ Fully paid ordinary shares with no par value 344,709,917 21,968,622 278,950,000 16,525,965 a) Ordinary shares At the beginning of reporting period Shares issued during the year: - 14 July 2020 (i) - 10 August 2020 (ii) - 19 October 2020 (iii) - 30 November 2021 - 13 July 2021 – Option conversion (refer note 12b(i)) 278,950,000 16,525,965 218,750,000 12,057,138 - - - - 702,200 - - - - 35,110 2,200,000 30,000,000 2,400,000 110,000 25,000,000 2,125,000 168,000 - 3,000,000 - - 22 July 2021 – Option conversion 4,111,777 205,589 (refer note 12b(i)) - 29 July 2021 – Option conversion 6,870,922 343,546 (refer note 12b(i)) - 3 August 2021 – Option conversion 4,075,018 203,751 (refer note 12b(i)) - 29 April 2022 (iv) Less capital raising costs 50,000,000 - 5,000,000 (345,339) - - - - - - - - - (334,173) Net share capital 344,709,917 21,968,622 278,950,000 16,525,965 – 38 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 (i) (ii) (iii) (iv) 30,000,000 shares were placed to investors on 14 July 2020 at an issue price of $0.08 per share raising $2,400,000 in cash before costs. 2,200,000 shares were issued on 10 August 2020 after options exercisable at $0.05 per share were exercised raising $110,000. 25,000,000 shares were issued on 19 October 2020 at an issue price of $0.085 per share raising $2,125,000 in cash before costs. 50,000,000 shares were issued on 29 April 2022 at an issue price of $0.10 per share raising $5,000,000 in cash before costs. Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. 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. b) Capital risk management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it may continue to provide returns for shareholders and benefits for other stakeholders. The Group’s capital includes ordinary share capital and financial liabilities, supported by financial assets. Due to the nature of the Group’s activities, being mineral exploration, it does not have ready access to credit facilities, with the primary source of funding being equity raisings. Accordingly, the objective of the Group’s capital risk management is to balance the current working capital position against the requirements of the Group to meet exploration programmes and corporate overheads. This is achieved by maintaining appropriate liquidity to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The Group is not subject to any externally imposed capital requirements. Cash and cash equivalents Trade and other receivables Trade and other payables Provisions Working capital position 2022 $ 4,220,925 152,632 (833,562) (44,852) 2021 $ 2,341,691 57,957 (244,827) (16,704) 3,495,143 2,138,117 – 39 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 NOTE 12: RESERVES 2022 $ 2021 $ (a) Share based payment reserve 3,293,270 2,794,069 (b) Movement in share based payment reserve Balance at 1 July 2020 Share based payment reserve movement during the prior period Balance at 30 June 2021 No. 102,000,000 17,000,000 $ 1,819,885 974,184 119,000,000 2,794,069 Balance at 1 July 2021 Options exercised during period – 13 July 2021 (i) Options exercised during period – 22 July 2021 (i) Options exercised during period – 29 July 2021 (i) Options exercised during period – 3 August 2021 (i) Options lapsed during the period (ii) Options lapsed during the period (ii) Amounts received for exercise prior to 30 June 2021 Corporate advisory options issued (Note 13a) Employees options (Note 13a) KMP Performance rights (Note 13a & b) KMP Options issued – 29 April 2022 (iii) Balance at 30 June 2022 119,000,000 (702,200) (4,111,777) (6,870,922) (4,075,018) (67,040,083) (5,000,000) - 5,000,000 - - 5,000,000 41,200,000 2,794,069 - - - - - - (5,751) 105,000 28,248 82,182 289,522 3,293,270 (i) A total of 15,759,917 listed options with an exercise price of $0.05 were exercised during the period. Refer note 11. (ii) On 31 July 2021, 67,040,083 listed options exercisable at $0.05 per share and 5,000,000 unlisted options exercisable at $0.075 per share expired unexercised. (iii) On 29 April 2022, 5,000,000 unlisted options exercisable at $0.15 on or before 29 November 2023 were issued to CEO Mark Major. NOTE 13: SHARE BASED PAYMENTS Below is a summary of share based payments made by the group: KMP options Employee options Corporate advisory options Director performance rights KMP performance rights Director Shares 2022 $ 289,522 28,248 105,000 - 82,182 2021 $ 467,200 17,437 - 282,989 200,807 - 168,000 504,952 1,136,433 – 40 – Krakatoa Resources Limited & Controlled Entities a) Options NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 The Group issued 10,000,000 Options during the period as follows: - - 5,000,000 Options were issued to unrelated parties for corporate advisory services performed during the period. 5,000,000 incentive Options were issued to CEO Mark Major on 29 April 2022. Class Employee Options1 Corporate Advisory Options2 CEO Options3 Number of Instruments Grant Date Expiry Date Exercise Price Fair value per instrument $ 1,200,000 15/01/2021 29/11/2023 $0.075 0.045 Total Value $ 54,336 5,000,000 02/08/2021 29/11/2023 $0.075 0.021 105,000 5,000,000 21/04/2022 29/11/2023 $0.15 $0.058 289,522 1 Options were issued to employees in tranches of 500,000 (tranche 1) and 700,000 (tranche 2) on 21 January 2021. Options were recognised on a pro-rata basis at the balance date 30 June 2022, as service conditions associated with the employment agreement will not be completed until 15 January 2022 (tranche 1) and 15 January 2023 (tranche 2). At the balance date 30 June 2022, a total of $28,248 vested during the current reporting period. 2 Options were issued to unrelated parties for corporate advisory services on 2 August 2021 with an exercisable price of $0.075 and an expiry of 29 November 2023. Options were recognised in full on the grant date, as there were no attached vesting conditions. 3Options were issued to CEO Mark Major for improved share price performance based on exploration work performed at Mt Clere rare earth project. Options were issued on 29 April 2022 with an exercisable price of $0.015 and an expiry of 29 November 2023. Options were recognised in full on the grant date, as there were no attached vesting conditions. Advisory options issued during the period were calculated using the Trinomial option pricing model with the following inputs: Expected volatility (%) Risk free interest rate (%) Weighted average expected life of options (years) Expected dividends Option exercise price ($) Share price at grant date ($) Fair value of option ($) Options granted Range 100% 0.2% 2.32 Nil $0.075 $0.049 $0.022 – 41 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 CEO options issued during the period were calculated using the Black-Scholes option pricing model with the following inputs: Expected volatility (%) Risk free interest rate (%) Weighted average expected life of options (years) Expected dividends Option exercise price ($) Share price at grant date ($) Fair value of option ($) Set out below is a summary of options on issue by the Group: Options granted Range 100% 2.1% 1.61 Nil $0.15 $0.13 $0.058 2022 Expiry Grant Date Date 16/08/2019 31/07/2021 28/11/2019 31/07/2021 28/11/2019 31/07/2021 30/11/2020 29/11/2023 15/01/2021 29/11/2023 2/08/2021 29/11/2023 29/04/2022 29/11/2023 Exercise Price 0.05 0.05 0.075 0.075 0.075 0.075 0.15 Granted Balance at the Start of Exercised the year - (15,759,917) 72,800,000 - - 10,000,000 - - 5,000,000 - - 15,000,000 - - 1,200,000 - 5,000,000 - - 5,000,000 - (15,759,917) 104,000,000 10,000,000 Balance at the end of the period Forefeited Other/Expired (57,040,083) (10,000,000) (5,000,000) - - - - 15,000,000 1,200,000 - 5,000,000 - 5,000,000 - (72,040,083) 26,200,000 weighted average exercise price 0.06 0.11 0.05 0.05 0.09 – 42 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 2021 Grant Date Expiry Date 24/10/2017 24/10/2020 16/08/2019 31/07/2021 28/11/2019 31/07/2021 28/11/2019 31/07/2021 30/11/2020 29/11/2023 15/01/2021 29/11/2023 Exercise Price 0.10 0.05 0.05 0.075 0.075 0.075 Balance at the Start of the year Granted 12,000,000 75,000,000 10,000,000 - - Forefeited Other/Expired Exercised - (12,000,000) - (2,200,000) 72,800,000 - 10,000,000 - Balance at the end of the period - 5,000,000 - - - 15,000,000 1,200,000 - 102,000,000 16,200,000 - - (2,200,000) - 5,000,000 15,000,000 1,200,000 (12,000,000) 104,000,000 - - weighted average exercise price 0.06 0.01 0.00 0.01 0.06 - - b) Performance Rights On 30 November 2020, the Group issued 7,500,000 Performance Rights to the Group’s CEO, Mark Major which will vest 12 months after his employment commenced which will be on 14 October 2021. These Performance Rights have been recognised on pro-rata basis at the reporting date 30 June 2022 with a total value of $82,182 (2021:$200,807) recognised in the consolidated statement of profit or loss. On 30 November 2020, the Group issued and 7,500,000 Performance Rights to Executive Chairman Colin Locke following shareholder approval at the Group’s AGM. These Performance Rights have been recognised on pro-rata basis at the reporting date 30 June 2022 with a total value of $nil (2021: $282,989) recognised in the consolidated statement of profit or loss. NOTE 14: RECONCILIATION OF CASH FLOW FROM OPERATIONS WITH LOSS AFTER INCOME TAX Loss after income tax Non cash-flows in loss: Share based payments Depreciation expense Changes in assets and liabilities: Trade and other receivables Other assets Trade payables and accruals Provisions 2022 $ 2021 $ (4,318,516) (3,719,276) 504,952 4,343 (94,675) (114,593) 588,734 28,148 1,136,433 - (17,063) (61,686) (6,169) 16,704 Cash flow used in operations (3,401,607) (2,651,057) – 43 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Non Cash Investing & Financing Activities: There were no non-cash investing entered into by the Group during the year (2021: Nil). NOTE 15: REMUNERATION OF AUDITORS Audit Services – RSM Australia Partners Audit and review of the financial statements Other services – RSM Australia Preparation of tax return 2022 $ 2021 $ 35,000 33,000 1,050 36,050 2,410 35,410 NOTE 16: KEY MANAGEMENT PERSONNEL COMPENSATION Remuneration of Key Management Personnel The totals of remuneration paid to the KMP of the Group during the year are as follows: Short-term employee benefits Post-employment benefits Share based payments Total remuneration 2022 $ 466,913 40,091 371,704 2021 $ 377,664 22,198 1,118,997 878,708 1,518,859 NOTE 17: RELATED PARTY TRANSACTIONS There were no related party transactions during the year ended 30 June 2022 (2021: $14,220 plus GST, was invoiced to the Group by Barclays Wells Limited for brokerage fees on capital placements, a Company in which Tim Hogan is a director). All related party transactions are made on normal commercial terms and condition and at market rates. NOTE 18: CONTINGENT LIABILITIES The Group has no contingent liabilities as at 30 June 2022 (2021: Nil). NOTE 19: EVENTS AFTER THE REPORTING PERIOD No matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods. – 44 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 NOTE 20: COMMITMENTS In order to maintain current rights of tenure to Western Australia exploration tenements, the Group is required to perform minimum exploration requirements specified by the Department of Mines and Petroleum of $830,440 (2021: $402,440). In order to maintain current rights of tenure to the New South Wales exploration tenements, the Group is required to perform minimum exploration requirements specified by the NSW Resources Regulator of $146,660 (2021: $390,000). The Group has no other commitments. NOTE 21: CONTROLLED ENTITIES Equity Holding Equity Holding Country of Incorporation Subsidiaries of Krakatoa Resources Ltd: Krakatoa Australia Pty Ltd Krakatoa Minerals Pty Ltd Krakatoa Minerals – SMC Limited 2634501 Ontario Limited Australia Australia Uganda Canada NOTE 22: PARENT ENTITY DISCLOSURES Financial position 2022 % 100 100 100 100 2021 % 100 100 100 100 Assets Current assets Non-current assets Total assets Liabilities Current liabilities Total liabilities Equity Issued capital Accumulated losses Reserves Total equity Financial performance (Loss) for the year Total comprehensive (loss) for the year 2022 $ 2021 $ 4,423,734 151,723 4,575,457 2,365,005 - 2,365,005 846,020 846,020 163,893 163,893 21,968,622 (21,532,455) 3,293,270 3,729,437 16,525,965 (17,118,922) 2,794,069 2,201,112 2022 $ (4,413,533) (4,413,533) 2021 $ (3,720,885) (3,720,885) Guarantees: Krakatoa Resources Limited has not entered into any guarantees in the current or previous financial year, in relation to the debts of its subsidiaries. – 45 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Other Commitments and Contingencies: Krakatoa Resources Limited has no commitment to acquire property, plant and equipment and has no contingent liabilities (Note 20). NOTE 23: OPERATING SEGMENTS The Group has identified its operating segments based on the internal reports that are used by the Board (the chief operating decision makers) in assessing performance and in determining the allocation of resources. The operating segments are identified by the Board based on the phase of operation within the mining industry. For management purposes, the Group has organised its operations into two reportable segments on the basis of stage of development as follows:  Development assets; and  Exploration and evaluation assets, which includes assets that are associated with the determination and assessment of the existence of commercial economic reserves. The Board as a whole will regularly review the identified segments in order to allocate resources to the segment and to assess its performance. During the year ended 30 June 2022, the Group had no development assets. The Board considers that it has only operated in one segment, being mineral exploration. The Group is domiciled in Australia. All revenue from external customers are only generated from Australia. No revenues were derived from a single external customer. NOTE 24: FINANCIAL RISK MANAGEMENT The Group has exposure to the following risks from their use of financial instruments: credit risk; liquidity risk; and - - - market risk. This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the Group through regular reviews of the risks. Credit risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions is spread amongst approved counterparties. Credit risk related to balances with banks and other financial institutions is managed by the board. The board’s policy requires that surplus funds are only invested with counterparties with a Standard & Poor’s rating of at least AA-. All of the Group’s surplus funds are invested with AA Rated financial institutions. – 46 – Krakatoa Resources Limited & Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 The credit risk for counterparties included in cash and cash equivalents at 30 June 2022 is detailed below: Financial assets: Cash and cash equivalents - AA rated counterparties 2022 $ 2021 $ 4,220,925 2,341,691 The Group does not have any material credit risk exposure to any single receivable or Group of receivables under financial instruments entered into by the Group. Liquidity risk The responsibility with liquidity risk management rests with the Board of Directors. The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate working capital is maintained. The Group’s policy is to ensure that it has sufficient cash reserves to carry out its planned exploration activities over the next 12 months. Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. Interest rate risk The Group does not have any exposure to interest rate risk as there were no external borrowings at 30 June 2022 (2021: nil). Interest bearing assets are all short-term liquid assets and the only interest rate risk is the effect on interest income by movements in the interest rate. There is no other material interest rate risk. – 47 – Krakatoa Resources Limited & Controlled Entities DIRECTORS’ DECLARATION In accordance with a resolution of the Directors of Krakatoa Resources Limited, I state that: 1. In the opinion of the directors: (a) the financial statements and notes of the Group are in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the financial position of the Group as at 30 June 2022 and of its performance for the year ended on that date; and complying with Accounting Standards (including Interpretations) and the Corporations Regulations 2001; the Australian Accounting (b) (c) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable; and the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1. 2. This declaration has been made after receiving the declarations required to be made by the directors in accordance with sections of 295A of the Corporations Act 2001 for the financial year ended 30 June 2022. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the Board Colin Locke Executive Chairman Dated: 15 September 2022 – 48 – RSM Australia Partners Level 32 Exchange Tower 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111 www.rsm.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KRAKATOA RESOURCES LIMITED Opinion We have audited the financial report of Krakatoa Resources 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 statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) (ii) 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 then ended; and Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How our audit addressed this matter Exploration expenditure and project evaluation costs Refer to statement of profit or loss and other comprehensive income The Group incurred exploration expenditure and project evaluation costs of $3,020,284 during the year ended 30 June 2022. In accordance with its accounting policy, the Group expenses these costs as incurred. is the Group’s most significant We considered this to be a key audit matter because it transaction category and a matter of significant audit attention in performing the audit. Share based payments Refer to Note 13 in the financial statements During the year, the Company issued 10,000,000 options to corporate advisors and key management personal Management has applied an option valuation model to value the options issued during the year. We determined this to be a key audit matter due to the significant judgements involved in assessing the fair value of the options issued during the year. in relation to exploration Our audit procedures expenditure and project evaluation costs included; • Assessing whether the Group’s accounting policy for exploration and evaluation expenditure is in compliance with Australia Accounting Standards; • Obtaining evidence that the right to tenure of the exploration areas of interests are valid; • Performing substantive testing on exploration expenditure on a sample basis with additional attention to any items identified as large or unusual; and • Assessing the adequacy of the disclosures in the financial report. Our audit procedures in relation to share based payments included: • Assessing the key terms and conditions of the options issued; • Obtaining the valuation models prepared by management and assessing whether the models were appropriate for valuing the options granted during the year; • Challenging the key assumptions used by management to value the options; and reasonableness of • Reviewing the relevant disclosures in the financial statements to ensure compliance with Accounting Standards. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2022 but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the directors' report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Krakatoa Resources Limited, for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. RSM AUSTRALIA PARTNERS Perth, WA Dated: 15 September 2022 ALASDAIR WHYTE Partner Krakatoa Resources Limited & Controlled Entities ASX INFORMATION AS AT 12 SEPTEMBER 2022 The following additional information is required by the ASX Limited in respect of listed public companies and was applicable at 12 September 2022. 1. Shareholder and Option holder information a. Number of Shareholders and Option Holders Shares As at 12 September 2022, there were 2,129 shareholders holding a total of 344,709,917 fully paid ordinary shares. Options As at 12 September 2022, there were 21,200,000 Unquoted Options exercisable at $0.075 on or before 29 November 2023 held by 8 holders, and 5,000,000 Unquoted Options exercisable at $0.15 on or before 29 November 2023 held by 1 holder. Share Performance Rights As at 12 September 2022, there were 5,000,000 Unquoted Share Performance Rights exercisable at $0.20, 5,000,000 Unquoted Share Performance Rights exercisable at $0.30, and 5,000,000 Unquoted Share Performance Rights exercisable at $0.40 held by 2 holders. All Performance Rights expire on 29 November 2023. b. Distribution of Equity Securities Fully paid ordinary shares Number (as at 12 September 2022) Category (size of holding) Shareholders Ordinary Shares 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over 89 63 334 1,123 520 2,129 10,658 266,352 2,889,390 47,242,625 294,300,892 344,709,917 The number of shareholdings held in less than marketable parcels is 277 shareholders amounting to 1,132,293 shares. c. The names of substantial shareholders listed in the company’s register as at 12 September 2022 are: Shareholder Ordinary Shares Helmsdale Investments Pty Ltd Lafras Luitingh 20,912,500 18,783,294 %Held of Total Ordinary Shares 6.07% 5.45% – 52 – Krakatoa Resources Limited & Controlled Entities d. Voting Rights The voting rights attached to the ordinary shares are as follows: 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 Shareholders as at 12 September 2022 — Ordinary Shares Number of Ordinary Fully Paid Shares Held % Held of Issued Ordinary Capital HELMSDALE INVESTMENTS PTY LTD MR LAFRAS LUITINGH PETERS INVESTMENTS PTY LTD CITICORP NOMINEES PTY LIMITED MRS MEILY DAHLIA EVIANA PROF YEW KWANG NG KEBIN NOMINEES PTY LTD 20,912,500 18,783,294 15,000,000 8,004,927 3,750,000 3,500,000 3,339,118 JSR PROMOTIONS PTY LTD 3,311,000 BNP PARIBAS NOMINEES PTY LTD 3,255,544 6.07 5.45 4.35 2.32 1.09 1.02 0.97 0.96 0.94 Name 1 2 3 4 5 6 7 8 9 10 E C DAWSON SUPER PTY LTD 3,200,000 0.93 11 MR GRAHAM GEOFFREY WALKER + MRS THELMA JEAN 2,800,000 0.81 WALKER 12 MR GURUMURTHY NIDIGAL + MRS PURNIMA NIDIGAL 13 DR ZACHARY PATRICK O'BRIEN 14 MOUNTS BAY INVESTMENTS PTY LTD 2,415,488 2,242,120 0.70 0.65 15 MR BAO FENG PAN + MS MIN HUA XUAN 15 BNP PARIBAS NOMS PTY LTD 15 MR DAVID LEE PALUMBO 18 MR KENNETH ERNEST CONWAY + MRS BARBARA ANN CONWAY 19 20 SANCOAST PTY LTD SURFIT CAPITAL PTY LTD 2,193,900 2,100,000 2,000,000 2,000,000 2,000,000 0.64 0.61 0.58 0.58 0.58 107,503,141 31.19 2. The name of the company secretary is David Palumbo. 3. The address of the principal registered office in Australia is: Level 8, 216 St Georges Terrace Perth WA 6000 – 53 – Krakatoa Resources Limited & Controlled Entities 4. 5. Registers of securities are held at the following address: Computershare Investor Services Pty Ltd, Level 11, 172 St Georges Terrace, Perth WA 6000 Stock Exchange Listing Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the ASX Limited. – 54 – Krakatoa Resources Limited & Controlled Entities SCHEDULE OF MINERAL TENEMENTS AS AT 15 SEPTEMBER 2022 Project Tenement Interest held by Krakatoa Resources Limited Belgravia Turon Rand Rand Rand Rand Mt Clere Mt Clere Mt Clere Mt Clere Mt Clere Mt Clere Mt Clere Mt Clere Mt Clere Mt Clere Mt Clere Mac Well Dalgaranga Dalgaranga Dalgaranga Dalgaranga Dalgaranga Dalgaranga EL8153 EL8942 EL9000 EL9276 EL9277 EL9365 E09/2357 E51/1994 E52/3730 E52/3731 E52/3836 E52/3873 E52/3876 E52/3877 E52/3938 E52/3962 E52/3972 E59/2175 P59/2082 P59/2140 P59/2141 P59/2142 E59/2389 E59/2503 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - All tenements not indicated as 100% owned are under application. – 55 – 

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