LACHLAN STAR LIMITED ABN 88 000 759 535 Annual Report 30 June 2022 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 CORPORATE DIRECTORY DIRECTORS G Steinepreis (Non-Executive Chairman) B Aylward (Non-Executive Director) D Smith (Non-Executive Director) COMPANY SECRETARY D Smith AUDITORS Hall Chadwick WA Audit Pty Ltd 283 Rokeby Road Subiaco WA 6008 BANKERS Westpac Banking Corporation Level 13 109 St Georges Terrace Perth, WA, 6000 REGISTERED OFFICE Level 1, 33 Ord Street West Perth WA 6005 Telephone: Facsimile: +61 89420 9300 +61 89420 9399 SHARE REGISTRY Computershare Investor Services Pty Limited Level 11 172 St Georges Terrace Perth WA 6000 Investor Enquiries: Investor Enquiries: Facsimile: 1300 850 505 (within Australia) +61 3 9415 4000 (outside Australia) +61 3 9473 2500 SECURITIES EXCHANGE LISTING Securities of Lachlan Star Limited are listed on ASX Limited. ASX Code: LSA - ordinary shares LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 1 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 CONTENTS Operating and Financial Review Directors’ Report Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report to the Members Additional Shareholder Information 3-8 9-17 18 19 20 21 22 23-41 42 43-47 48-51 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 2 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT OPERATING AND FINANCIAL REVIEW FINANCIAL PERFORMANCE The consolidated entity’s loss after tax for the year ended 30 June 2022 was $418,032 (2021: loss of $841,710) after recognising corporate compliance and management costs of $287,701 (2021: $243,093). FINANCIAL POSITION An analysis of the significant movements in Statement of Financial Position line items is provided below: CASH AND CASH EQUIVALENTS As at 30 June 2022 the Group had cash reserves of $4,327,708, a decrease of $353,327 from 30 June 2021. TRADE AND OTHER RECEIVABLES Trade and other receivables have decreased by $107,019 since 30 June 2021. TOTAL LIABILITIES Total liabilities have increased by $42,421 since 30 June 2021. The movement in contributed equity since 30 June 2021 is shown below: 30-Jun-22 $ No. 9,585,099 1,271,512,709 237,500 47,500,000 - - 9,822,599 1,319,012,709 Ordinary shares 1 July 2021 Issued capital Share capital raising costs 30 June 2022 RESERVES Reserves at 30 June 2022 were $886,202 (2021: 886,202). CORPORATE Conversion of Options / Performance Rights On 26 November 2021, the Company issued 47,500,000 shares following the exercise of options at $0.005 per share, raising $237,500. Annual General Meeting At the Company’s Annual General Meeting held on 26 November 2021 all resolutions were passed by way of a poll. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 3 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT REVIEW OF OPERATIONS KOOJAN NI-PGE PROJECT – WESTERN AUSTRALIA (75%) Farm-in with Minerals 260 Lachlan Star and Minerals 260 Limited (Minerals 260) have a fram-in agreement where Minerals 260 can earn a 51% interest in the Koojan Project held by Coobaloo Minerals (LSA 75%) (Farm-in). Minerals 260 can acquire 51% equity in the Koojan Project by spending a total of $4 million on exploration within 5 years with a minimum expenditure commitment of $500,000 before having the right to withdraw. Upon Liontown earning 51% in the Koojan JV Project, the parties respective interests will be Minerals 260 (51%), Lachlan Star (24%), Wavetime Nominees (25%). Figure 1: Moora and Koojan JV Projects: Location plan and regional geology (source MI6 ASX announcement 11/07/2022) Regional Geological Setting and Rock chip sampling The Koojan Project is located in the New Norcia region of Western Australia. The Project is owned by Coobaloo Minerals Pty Ltd and covers a contiguous area of 600km2. The project is located 80km north of the recent Julimar Ni-PGE-Cu discovery by Chalice Gold Mines Ltd, and is located in a similar geological setting. The Project is located within the Western Gneiss Terrain of the Archaean Yilgarn Craton of south-west Western Australia (Figure 1). The prospective mafic/ultramafic bodies are hosted within the Jimperding Metamorphic belt – a belt up to 70km wide and bounded to the west by the Darling Fault, and to the east by Yilgarn craton units. The geology in the project area consists of laterite duricrust overlying weathered bedrock, with localised areas of outcropping dolerite units and granitic/gneissic units observed. The Koojan Project is located within a farming district with extensive seasonal cropping (wheat, barley, canola etc) and grazing that will impact on the geological exploration at times. The Koojan Project is interpreted to be located within the same geophysical setting as the Julimar and Yarawindah Ni- Cu-PGE prospects. This setting is characterised as a zone of intrusive mafic to ultramafic rocks proximal to the margin LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 4 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT of the Yilgarn craton and hosted within a complex structural setting on the margin of gravity anomalies (Figure 2). This structural zone is interpreted to have intruded the granite dominated terrain, and can be traced from the Julimar prospect through to the Project where filed reconnaissance and Government geological mapping has identified a series of mafic to ultramafic units within the Koojan Project area. Koojan JV Exploration Program Details The reconnaissance aircore drilling will test coincident geochemical and geophysical targets including the previously announced high-priority Mallory and Bourbana prospects (reported by Liontown Resources Limited (ASX:LTR) prior to the demerger and IPO of Minerals 260 – see Liontown ASX release dated 14th July 2021). The Mallory prospect is defined over a strike length of 2km with highly anomalous surface gold (up to 18ppb), PGE’s (up to 160ppb) and copper (up 380ppm) that is coincident with a conductive zone defined by the GAIP survey (Figure 2). Figure 2: Moora/Koojan Projects – Regional greyscale magnetic image showing proposed aircore drill traverses The Bourbana prospect is a broad, multi-peaked gold anomaly (up to 135ppb) that has been defined over a 1km x 2.7km surface area and the completed GAIP survey has identified coincident conductive zones to be targeted by reconnaissance drilling. In addition to the Mallory and Bourbana prospect, the reconnaissance drilling will also target surface gold and PGE anomalies defined by surface geochemical sampling and geophysical interpretation. The aim of the drilling is to provide geological information to fully evaluate and prioritise the anomalies for continued exploration (Figure 2). LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 5 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT The extensive surface geochemical sampling program, designed to infill previously, partially defined anomalies and assess new areas, is ongoing with approximately 40% of the samples collected and submitted for assay. The detailed aeromagnetic and gravity surveys have been completed over the Koojan JV and continued over to ground held directly by MI6. The final data is being processed and when received and combined with the results of the reconnaissance drilling and geochemical sampling will provide a significant amount of data, which once processed and analysed, will be used to optimise drill testing of existing and new targets. KILLALOE GOLD PROJECT – WESTERN AUSTRALIA (100%) The Killaloe Project, located in southeast Western Australia approximately 600km east of Perth and 35km northeast of the historic gold mining town of Norseman, comprises two, largely contiguous exploration licences (E63/1018 and E63/1017) and the separate Buldania mining licence (M63/177) covering a total combined area of 94km2 (refer Figure 3). There are no other land users and access is generally good although sometimes limited by thick bush and weather events. Lachlan Star’s maiden drilling program consisted of 8 RC drill holes for a total of 962m completed made up of 3 drill holes for 362m within the Buldania workings with drill holes oriented to the south and dipping at 60 degrees to intersect the east- west striking mineralised zones (refer Figure 3). In tenement E63/1018 drilling targeted the extensions to the Barrel prosect and parallel targets with 5 drill holes for 600m drilling with holes oriented to the east and dipping 60 degrees to cross-cut the geological sequence. All holes have been sampled on an initial 3m composite basis and analysed for gold, PGE and multi-element. Anomalous samples have been re-split to 1 metre intervals for further assay to confirm the potential for narrow high-grade gold mineralisation. Buldania Gold Workings The Gold mineralisation at the Buldania prospect within tenement M63/117 is interpreted to be controlled by a series of parallel shear zones intruded by quartz veining and associated alteration. Historic gold workings that have exploited the gold mineralised trends and the geological strike approximate an east-west orientation, and historic drilling defined multiple parallel zones that require further testing. Following on from a rock-chip sampling program, the initial drilling program tested a section across the parallel trends to confirm geological and structural interpretation on mineralisation controls. Significant intersections for the RC drill holes calculated using a 0.5g/t gold lower cut-off, maximum 3m internal dilution are tabled below (refer ASX announcement dated 29 April 2022): Hole Id Northing Easting Depth Azimuth Dip Depth From Depth To Width Grade g/t Hole LSK006 LSK007 6453387 6453436 409201 409208 LSK008 6453482 409200 m 82 140 140 180 180 -60 -60 180 -60 54 54 66 36 75 90 114 57 57 69 39 78 93 117 3 6 3 3 9 3 3 1.08 3.74 1.65 2.31 1.38 3.03 2.28 Notes: Drill holes are RC drill holes. Drill holes have been sampled on a 1m basis with samples collected via a cone split system with samples for analysis consisting of 3m composite samples. Drill hole collars are surveyed using a hand-held GPS with sub 5-metre accuracy, coordinate system GDA – Zone 51S, and all holes are survey down- hole for dip and azimuth on approximately 30m intervals. All drill holes are geologically logged and recorded in database. Samples analysed by Intertek-Genalysis Laboratories for gold and PGE’s by 50g Fire Assay and multi-element analysis by mixed acid digest and ICP-MS and ICP-OES finish. Intersections are reported as g/t gold (ppm) Intersections are reported using a 0.5g/t gold lower-cut-off, and allowing for a maximum of 3m (1 composite sample) internal dilution. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 6 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT Figure 3: Killaloe Gold Project – geology and prospect location PRINCHESTER MAGNESITE PROJECT – QUEENSLAND (100%) The Princhester Magnesite Project is located 85km northwest of Rockhampton, Queensland and comprises two granted Mining Leases (ML), ML5831 and ML5832. The project sits within the northern New England Orogen, and within the Marlborough Province. The New England Orogen is a significant mineral province in eastern Australia, extending from Port Macquarie, New South Wales, in the south to north of Mackay, Queensland. The New England Orogen mineralisation includes significant gold mineralisation (Mount Morgan, Gympie) and various mineral deposit styles including mesothermal and epithermal gold, VMS, epithermal silver and lateritic nickel. The New England Orogen also contains economically important commodities including tin, sapphires, diamonds, molybdenum, tungsten, magnesite, cobalt and antinomy. NEW PROJECT OPPORTUNITIES The Company has allocated part of its working capital budget to the identification and evaluation of new mineral resource opportunities in Australia and overseas, undertaking a review of a range of opportunities during the financial period. No decision to invest in any of the projects currently being reviewed has been made at this stage. The Company will also consider the acquisition and development of any other investments, both within the mining industry and in market segments unrelated to the mining industry. ANNUAL STATEMENT OF MINERAL RESOURCES AND ORE RESERVES The Company does not have any Mineral Resources or Ore Reserves. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 7 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT Competent Persons Statement The information in this report that relates to exploration results, including the exploration target, is based on information compiled by Mr Bernard Aylward. Mr Aylward is a Non-Executive Director of the Company. Mr Aylward is a member of The Australasian Institute of Mining and Metallurgy and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Aylward consents to the inclusion in the announcement of matters based on his information in the form and context it appears. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 8 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT DIRECTORS’ REPORT The directors present their report together with the financial report of the consolidated entity, being Lachlan Star Limited (Company or Lachlan) and its subsidiaries (consolidated entity or group), at the end of and for the year ended 30 June 2022. Lachlan Star Limited is a listed public company incorporated and domiciled in Australia. DIRECTORS The names and details of the Company’s directors in office at any time during the financial year and up to the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Gary Steinepreis – Non-executive Chairman Appointed 18 January 2018 Mr Steinepreis holds a Bachelor of Commerce degree from the University of Western Australia and is a Chartered Accountant. He provides corporate, management and accounting advice to a number of companies involved in the resource, technology and leisure industries. Appointed Resigned 30 March 2016 15 July 2016 - - Directorships held in listed entities Company Name CFOAM Limited Taruga Minerals Limited Former directorships over the past 3 years Nil Interest in Shares and Options Fully Paid Shares – 116,382,352 Performance Rights – Nil Options – Nil Bernard Aylward – Non-executive Director Appointed 18 January 2018 Mr Aylward is a geologist with over 20 years’ experience as a manager and exploration geologist in the mining and exploration industry in a variety of commodities. Mr Aylward’s experience includes serving as the Chief Operating Officer of International Goldfields Ltd (ASX: IGS), General Manager of Azumah Resources Ltd (Ghana), and Exploration Manager for Croesus Mining NL. Mr Aylward has been involved in the discoveries and management of the Bepkong, Julie, Collette and Kunche deposits in Ghana, as well as the Deep South gold deposit, Gladstone North deposit, St Patrick’s, Norseman Reef and the Safari Bore gold deposit. Mr Aylward brings considerable relevant skills and experience to the Board. He is a member of the Australasian Institute of Mining and Metallurgy. Directorships held in listed entities Company Name Kodal Minerals Plc. Appointed Resigned 20 May 2016 - Taruga Minerals Limited 21 October 2011 23 January 2020 Former directorships over the past 3 years Nil LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 9 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT Interest in Shares and Options Fully Paid Shares – 4,500,000 Performance Rights – 10,000,000 Options – 10,000,000 Daniel Smith – Non-executive Director Appointed 18 January 2018 Mr Smith is a Fellow of the Governance Institute of Australia and has over 14 years’ primary and secondary capital markets expertise. As a director of corporate consulting firm Minerva Corporate, he has advised on, and been involved in, over a dozen IPOs, RTOs and capital raisings on both the ASX, AIM and NSX. His key focus is on corporate governance and compliance, commercial due diligence and transaction structuring, as well as ongoing investor and stakeholder engagement. Directorships held in listed entities Company Name Appointed Resigned Nelson Resources Limited Alien Metals Ltd Artemis Resources Limited 15 August 2022 27 February 2019 5 February 2019 White Cliff Minerals Limited 14 December 2018 QX Resources Limited Europa Metals Ltd 13 June 2018 16 January 2018 - - - - - - Former directorships over the past 3 years Nil Interest in Shares and Options Fully Paid Shares –9,600,000 Performance Rights – Nil Options – 7,000,000 COMPANY SECRETARY Mr Daniel Smith was appointed Company Secretary on 19 March 2018. DIRECTORS’ MEETINGS During the financial year, the Board conducted the majority of its formal business via director’s resolutions. The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2022, and the number of meetings attended by each Director. G Steinepreis B Aylward D Smith Number eligible to attend Number attended 2 2 2 2 2 2 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 10 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT PRINCIPAL ACTIVITIES The Company’s principal activities revolve around mineral resource exploration in Australia. The Company’s assets include its interest in the Koojan Ni-PGE project in Western Australia, the Killaloe gold project in Western Australia and the Princhester Magnesite project in Queensland. The Company has allocated part of its working capital budget to the identification and evaluation of new mineral resource opportunities in Australia and overseas, undertaking a review of a range of opportunities during the year. No decision to invest in any of the projects currently being reviewed has been made at this stage. The Company will also consider the acquisition and development of any other investments, both within the mining industry and in market segments unrelated to the mining industry. ENVIRONMENTAL REGULATION AND PERFORMANCE The consolidated entity’s exploration and mining activities were concentrated in Australia, and in the prior year Australia and Chile. Environmental obligations are regulated under both State and Federal Laws. No environmental breaches have been notified to the Company by government agencies during the year ended 30 June 2022. DIVIDENDS No dividends were paid during the year and the directors do not recommend payment of a dividend in respect of the reporting period (2021: Nil). AUDIT COMMITTEE The Board considers that the Company is not currently of a size to justify the existence of an Audit Committee. AUDITOR’S INDEPENDENCE DECLARATION The auditor’s independence declaration under Section 307C of the Corporations Act 2001 is set out on page 18 and forms part of the directors’ report for the financial year ended 30 June 2022. REMUNERATION COMMITTEE The Board considers that the Company is not currently of a size to justify the existence of a Remuneration Committee. The whole board act as the remuneration committee. NON-AUDIT SERVICES The auditors did not provide any non-audit services during either the period under review or the corresponding period. Amounts received or due and receivable by Hall Chadwick WA Audit Pty Ltd for: An audit or review of the financial report of the entity Total audit services provided to the Group 30,386 30,386 20,876 20,876 30-Jun-22 $ 30-Jun-21 $ EVENTS SUBSEQUENT TO REPORTING DATE On 21 July 2022, the Company announced the termination of the binding term sheet with Green Critical Minerals Pty Ltd regarding the proposed sale of the Company’s Princhester Magnesite Project. No other matters or circumstances has arisen since 30 June 2022 that in the opinion of the directors has significantly affected, or may significantly affect in future financial years (i) the consolidated entity’s operations, or (ii) the results of those operations, or (iii) the consolidated entity’s state of affairs. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 11 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT INDEMNITY OF DIRECTORS AND COMPANY SECRETARY Deeds of Access and Indemnity have been executed by the parent entity with each of the current directors and Company Secretary. The deeds require the Company to indemnify each director and the Company Secretary against any legal proceedings, to the extent permitted by law, made against, suffered, paid or incurred by the director or Company Secretary pursuant to, or arising from or in any way connected with the director or Company Secretary being an Officer of the Company or its subsidiaries. REMUNERATION REPORT The Remuneration Report is set out on pages 14 to 17 and forms part of this Directors’ Report. INSURANCE OF DIRECTORS AND OFFICERS During the financial year the Company paid a premium to insure the directors and officers of the Company and its controlled entities. The policy prohibits the disclosure of the nature of the liabilities covered and the amount of the premium paid. LIKELY DEVELOPMENTS In line with the objectives set out in the Company’s recapitalisation prospectus, the Board of Directors intend to undertake exploration activities at the wholly owned Princhester Magnesite project. Additionally, the Company has allocated part of its working capital budget to the identification and evaluation of new mineral resource opportunities in Australia and overseas, undertaking a review of a range of opportunities during the year. The Company will also consider the acquisition and development of any other investments, both within the mining industry and in market segments unrelated to the mining industry. OPERATING AND FINANCIAL REVIEW An operating and financial review for the period is set out on pages 3 to 8 and forms part of this Directors’ Report. DIRECTORS’ INTERESTS At the date of this report, the relevant interests of the directors in securities of the Company are as follows: Ordinary shares 2022 Share Options Performance Rights Ordinary shares 2021 Share Options Performance Rights G Steinepreis 116,382,352 - - 83,882,352 32,500,000 - B Aylward D Smith 4,500,000 10,000,000 10,000,000 2,000,000 12,500,000 10,000,000 9,600,000 7,000,000 - 7,100,000 9,500,000 - SHARES UNDER OPTION The following unissued ordinary shares of the Company are under option: Expiry Date Exercise price Balance at start of year Issued during the year Exercised during the year Balance at the end of the year 31/12/2021 0.5 cents 47,500,000 - 47,500,000 - 27/11/2023 2.2 cents - 17,000,000 - 17,000,000 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 12 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT PERFORMANCE RIGHTS The following performance rights of the Company are issued: Expiry Date Balance at start of year Issued during the year Converted during the year Cancelled/ lapsed during the year Balance at the end of the year 01/04/2021 10,000,0001 - - - 10,000,000 1 As at the date of this report the Company has 10,000,000 performance rights held with the following performance conditions: 10,000,000 convertible upon the Company achieving a 20 day VWAP of 2.5 cents per share. Subject to achievement of the performance conditions one share will be issued for each performance right that has vested on the same terms and conditions as the Company’s issued shares and will rank equally with all other issued shares from the issue date. 2 On 29 March 2021 the following performance shares were converted to fully paid ordinary shares: 20,000,000 convertible upon the Company achieving a 20 day Volume Weighted Average Price (‘VWAP’) of 2.5 cents per share; PROCEEDINGS ON BEHALF OF THE CONSOLIDATED ENTITY No person has applied for leave to the Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 13 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) The information provided in this remuneration report has been audited as required by section 308 (3C) of the Corporations Act 2001. Principles used to determine the nature and amount of compensation The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms to market best practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices: (i) (ii) (iii) (iv) (v) competitiveness and reasonableness; acceptability to shareholders; performance linkage / alignment of executive compensation; transparency; and capital management. The Company has structured an executive remuneration framework that is market competitive and complimentary to the reward strategy of the organisation. Alignment to shareholders’ and program participants’ interests: (i) (ii) (iii) (iv) focuses on sustained growth in shareholder wealth; attracts and retains high calibre executives; rewards capability and experience; and provides a clear structure for earning rewards. Use of remuneration consultants The Company did not engage remuneration consultants during the current or prior financial year. Voting and comments made at the Company’s Annual General Meeting The Company received evidence 99.73% of “yes” proxy votes on its remuneration report for the 2021 financial year, inclusive of discretionary proxy votes. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. AGREEMENTS IN RESPECT OF CASH REMUNERATION OF DIRECTORS: Non-executive Directors The Company’s constitution provides that the Non-executive Directors may collectively be paid as remuneration for their services a fixed sum not exceeding the aggregate sum determined by a general meeting. The aggregate remuneration has been set at an amount of $325,000 per annum. Mr Gary Steinepreis is on a contract dated 7 August 2018, which provides for a fixed fee of $4,000 per month. Mr Bernard Aylward is on a contract dated 7 August 2018, which provides for a fixed fee of $4,000 per month. Mr Daniel Smith (through Minerva Corporate Pty Ltd) is on a contract dated 7 August 2018 which provides for a fixed fee of $4,000 per month. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 14 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT Loans to and other transactions with key management personnel Lachlan Star Limited director and company secretary, Mr Daniel Smith, is a director of Minerva Corporate Pty Ltd. Minerva Corporate Pty Ltd provided accounting consultancy and company secretarial services to Lachlan Star Limited. Payments to Minerva Corporate Pty Ltd during the period total $72,000 (2021: $58,000). The transactions with key management personnel have been entered into under terms and conditions no more favourable than those the Company would have adopted if dealing at arm's length. Current trade and other payables include $59,536 (2021: $19,467) to key management personnel at reporting date in respect of outstanding fees. The consolidated entity did not have any other loans or transactions with related parties during the current year. Directors’ and other key management personnel remuneration, Company and consolidated entity Details of the nature and amount of each major element of the remuneration of each director of the Company and each of the named Company and consolidated entity key management personnel receiving the highest remuneration are as follows: Short term salary and fees ($) Share based payments - options ($) Share based payments – performance rights ($) Post- employment (superannuation contributions) ($) 48,000 70,000 48,000 30,000 196,000 - - - - - - - - - - - - - - - Short term salary and fees ($) Share based payments - options ($) Share based payments – performance rights ($) Post- employment (superannuation contributions) ($) 2022 Name Directors Mr G Steinepreis Mr B Aylward Mr D Smith Company Secretary Mr D Smith Total 2021 Name Directors Mr G Steinepreis Mr B Aylward Mr D Smith Mr K Eckhof1 34,000 34,000 34,000 14,000 - 98,354 68,848 - - 320,000 - (47,098) Company Secretary Mr D Smith Total 26,500 142,500 1 Mr K Eckhof resigned 27 January 2021 Notes - 167,202 - 272,902 Proportion of remuneration performance related (%) Value of options as a % of remuneration (%) - - - - - - - - - - Proportion of remuneration performance related (%) Value of options as a % of remuneration (%) - 70.74% - 142.30% - - - 21.74% 66.94% - - - Total ($) 48,000 70,000 48,000 30,000 196,000 Total ($) 34,000 452,354 102,848 (33,098) 26,500 582,604 - - - - - - Director and other key management personnel fees are paid to the individual or their related entity Share options The movement during the reporting period in the number of options in Lachlan Star Limited held, directly, indirectly or beneficially by each key management person are as follows. All share options on issue at 30 June 2022 were vested and exercisable at that date. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 15 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT No options over unissued ordinary shares of the Company were issued in the prior period. The following options over unissued ordinary shares of the Company were granted to key management personnel during the period: 2022 Opening Balance Received as Remuneration Received During Year on Exercise of Options Net Change Other Closing Balance Directors G Steinepreis B Aylward D Smith Total 32,500,000 12,500,000 9,500,000 54,500,000 - - - - - - - - (32,500,000) (2,500,000) (2,500,000) (37,500,000) - 10,000,000 7,000,000 17,000,000 2021 Opening Balance Received as Remuneration Received During Year on Exercise of Options Net Change Other Closing Balance Directors G Steinepreis 32,500,000 - B Aylward D Smith K Eckhof1 Total 2,500,000 10,000,000 2,500,000 7,000,000 - - 37,500,000 17,000,000 1 Mr K Eckhof resigned 27 January 2021 - - - - - - - - - - 32,500,000 12,500,000 9,500,000 - 54,500,000 No options have been granted since the end of the financial year, nor have any options held by key management personnel been exercised during or since the end of the reporting period. During the reporting period there was no forfeiture or vesting of options granted in previous periods. Ordinary Shares The movement during the reporting period in the number of ordinary shares in Lachlan Star Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows: 2022 Directors Opening Balance Net acquired / (disposed) Granted as compensation Net Change Other Closing Balance G Steinepreis 83,882,352 32,500,000 B Aylward D Smith Total 2,000,000 7,100,000 2,500,000 2,500,000 92,982,352 37,500,000 - - - - - - - - 116,382,352 4,500,000 9,600,000 130,482,352 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 16 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ REPORT 2021 Directors Opening Balance Net acquired / (disposed) Granted as compensation Net Change Other Closing Balance G Steinepreis 78,000,000 5,882,352 B Aylward D Smith K Eckhof1 Total 2,000,000 5,000,000 20,000,000 - 2,100,000 - 105,000,000 7,982,352 1 On resignation of Mr K Eckhof 27 January 2021 - - - - - - - - (20,000,000)1 83,882,352 2,000,000 7,100,000 - (20,000,000) 92,982,352 No ordinary shares were granted to key management personnel during the current or prior periods. End of Audited Remuneration Report Signed in accordance with a resolution of the directors. Mr Daniel Smith Director Perth, Western Australia 28 September 2022 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 17 To the Board of Directors Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 As lead audit director for the audit of the financial statements of Lachlan Star Limited for the financial year ended 30 June 2022, I declare that to the best of my knowledge and belief, there have been no contraventions of: • • 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. Yours Faithfully HALL CHADWICK WA AUDIT PTY LTD D M BELL CA Director Dated this 28th day of September 2022 Perth, Western Australia LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2022 Note 30-Jun-22 $ 30-Jun-21 $ Revenue from continuing operations Finance income Expenses Corporate compliance and management Other expenses Finance expense Share based payment expense Loss from continuing operations before income tax Income tax expense Loss from continuing operations after income tax 3 15(c) 909 634 (287,701) (131,135) (105) - (418,032) - (243,093) (159,053) (94) (440,104) (841,710) - (418,032) (841,710) Other comprehensive loss for the year, net of tax Total comprehensive loss for the year - - (418,032) (841,710) Loss per share from continuing operations attributable to the ordinary equity holders of the Company: Basic and diluted loss per share 2 Cents (0.03) Cents (0.08) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes to the financial statements. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 19 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2022 Current Assets Cash & cash equivalents Trade & other receivables Total Current Assets Non-Current Assets Exploration & Evaluation Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade & other payables Total Current Liabilities Note 11(b) 5 6 7 30-Jun-22 $ 4,327,708 39,783 30-Jun-21 $ 4,681,035 146,802 4,367,491 4,827,837 2,634,875 2,634,875 2,312,640 2,312,640 7,002,366 7,140,477 102,379 102,379 59,958 59,958 TOTAL LIABILITIES 102,379 59,958 NET ASSETS Equity Issued capital Reserves Accumulated losses TOTAL EQUITY 6,899,987 7,080,519 15(a) 15(b) 15(c) 9,822,599 886,202 9,585,099 886,202 (3,808,814) (3,390,782) 6,899,987 7,080,519 The above consolidated statement of financial position should be read in conjunction with the accompanying notes to the financial statements. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 20 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Issued Capital $ Share- based Payment Reserve $ Options Premium Reserve $ Accumulated Losses $ Total $ At 1 July 2021 9,585,099 487,202 399,000 (3,390,782) 7,080,519 Loss for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners: Shares issued (net of costs) – exercise of options - - 237,500 - - - - - - (418,032) (418,032) (418,032) (418,032) - 237,500 At 30 June 2022 9,822,599 487,202 399,000 (3,808,814) 6,899,987 Issued Capital $ Share- based Payment Reserve $ Options Premium Reserve $ Accumulated Losses $ Total $ At 1 July 2020 3,794,804 145,337 399,000 (2,549,072) 1,790,069 Loss for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners: Share-based payment – performance share Share-based payment – options Shares issued (net of costs) – capital raisings Shares issued (net of costs) – exercise of options Shares issued (net of costs) – conversion of performance rights Shares issued (net of costs) – acquisition costs - - - - 3,484,556 287,500 - - 272,902 167,202 - - 98,239 (98,239) 1,920,000 - - - - - - - - - (841,710) (841,710) (841,710) (841,710) - - - - - - 272,902 167,202 3,484,556 287,500 - 1,920,000 At 30 June 2021 9,585,099 487,202 399,000 (3,390,782) 7,080,519 The consolidated statement of changes in equity should be read in conjunction with the accompanying notes to the financial statements. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 21 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2021 Note 11 Cash Flows from Operating Activities Payments to Suppliers and Employees Interest Received Net Cash Outflow from Operating Activities Cash Flow from Investing Exploration and Evaluation expenditure Payments to acquire tenements Net Cash Outflow from Investing Activities Cash Flows from Financing Activities Issued capital Cost of Capital Net Cash Inflow from Financing Activities Net Increase/(Decrease) In Cash and Cash Equivalents Cash and Cash Equivalents at beginning of Year 30-Jun-22 $ 30-Jun-21 $ (289,786) 909 (288,877) (301,950) - (301,950) 237,500 - 237,500 (504,701) 634 (504,067) (307,241) (61,895) (369,136) 3,987,500 (215,444) 3,772,056 (353,327) 2,898,853 4,681,035 1,782,182 Cash and Cash Equivalents at end of Year 11 4,327,708 4,681,035 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to the financial statements. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 22 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. financial These policies have been consistently applied to all the years presented, unless otherwise stated. The statements are for the consolidated entity consisting of Lachlan Star Limited and its subsidiaries. (A) BASIS OF PREPARATION These general-purpose financial statements have been prepared in accordance with Australian Accounting Standards (“AASs”) (including Australian Accounting Interpretations), as adopted by the Australian Accounting Standards Board (“AASB”), other authoritative pronouncements of the AASB, Urgent Issues Group Interpretations, and the Corporations Act 2001. Lachlan Star Limited is a for-profit entity for the purposes of preparing the financial statements. Compliance with Australian Accounting Standards ensures that the consolidated financial report of Lachlan Star Limited complies with International Financial Reporting Standards as issued by the International Accounting Standards Board. The functional and presentation currency of the Company is Australian dollars. The financial report was authorised for issue by the board of on 28 September 2022. Lachlan Star Limited is a company limited by shares, incorporated and domiciled in Australia. BASIS OF MEASUREMENT The financial report is prepared on a historical cost basis as modified by the revaluation of financial assets and liabilities (including derivative instruments) at fair value through profit and loss. GOING CONCERN The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realization of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The directors are satisfied that there is sufficient capital to meet current estimated expenditure commitments and working capital requirements, the expenditure requirements will increase as the project progresses to the extent that may lead to the requirement to access additional funding. Use of estimates and judgements The preparation of the financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year and judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements, are: (i) Functional currency Companies in the consolidated entity have to determine their functional currencies based on the primary economic environment in which each entity operates. In order to do that management has to analyse several factors, including which currency mainly influences sales prices of product sold by the entity, which currency influences the main expenses of providing services, in which currency the entity has received financing, and in which currency it keeps its receipts from operating activities. For Lachlan Star Limited and its subsidiaries management have determined that the Australian dollar is the functional currency for those companies given their recurring revenue and expenditure is mostly in Australian dollars. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 23 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (A) BASIS OF PREPARATION (CONTINUED) (ii) Income taxes The consolidated entity is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the provision for income taxes. There are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The group estimates its tax liabilities based on the group's understanding of the tax law. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. The corporate tax rate for eligible companies reduced from 30% to 25% for 30 June 2022 providing certain turnover thresholds and other criteria are met. Deferred tax assets and liabilities are required to be measured at the tax rate that is expected to apply in the future income year when the asset is realised or the liability is settled. The Directors have determined that the deferred tax balances be measured at the tax rates stated. (iii) Coronavirus (COVID-19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the Company based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the Company 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 Company unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. (B) PRINCIPLES OF CONSOLIDATION Subsidiaries The consolidated financial report comprises the financial statements of the Company and its controlled entities. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. All inter- company balances and transactions between entities in the consolidated entity, including any unrealized profits or losses, have been eliminated on consolidation. Where a subsidiary enters or leaves the consolidated entity during the year, its operating results are included or excluded from the date control was obtained or until the date control ceased. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those applied by the parent entity. (C) RECEIVABLES Trade and other receivables are initially stated at fair value and subsequently measured at amortized cost, less impairment losses. Trade receivables comprise amounts due from customers for metal sales in the ordinary course of business. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the impairment loss is recognized within other expenses in the statement of profit or loss and other comprehensive income. When a trade receivable for which an impairment allowance had been recognized becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the statement of profit or loss and other comprehensive income. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 24 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (D) EARNINGS PER SHARE The consolidated entity presents basic and diluted earnings per share (“EPS”) for its ordinary shares. Basic EPS is calculated by dividing the result attributable to equity holders of the Company by the weighted number of shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all potential ordinary shares, which comprise share options granted. (E) SHARE BASED PAYMENTS Fair value of shares and share options granted as compensation is recognized as an expense with a corresponding increase in equity. Fair value is measured at grant date and recognized over the period during which the grantees become unconditionally entitled to the shares or share options. Fair value of share grants at grant date is determined by the share price at that time. The fair value of share options at grant date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, any vesting and performance criteria, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option. Upon the exercise of the option, the balance of the share-based payments reserve relating to the option is transferred to contributed equity. There are no non-market conditions attached to share options granted. The fair value of performance rights at grant date is determined using a Monte Carlo simulation model that takes into account the exercise price, the term of the right, any vesting and performance criteria, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the right. Upon the vesting of the right, the balance of the share-based payments reserve relating to the right is transferred to contributed equity. There are no non-market conditions attached to performance rights granted. (F) INCOME TAX The charge for current income tax expense is based on the result for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by balance date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. 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 is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is recognised in the profit or loss except where it relates to items recognised directly in equity, in which case it is recognised in equity. Deferred income tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and tax losses. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the consolidated entity intends to settle its current tax assets and liabilities on a net basis. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. The carrying amount of deferred tax assets is reviewed at each balance date and only recognised to the extent that sufficient future assessable income is considered probable. (G) GOODS AND SERVICES TAX Revenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”) except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. The cash flow statement discloses the GST component of investing and financing activities as operating cash flows. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 25 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (H) EMPLOYEE BENEFITS Provision is made for the consolidated entity’s liability for employee benefits and termination indemnities arising from services rendered by employees to balance date. (i) Share-based payments Share-based compensation in the form of options is measured using an option pricing model and is expensed or charged to contributed equity over the vesting period of the options with a corresponding credit to the share based payments reserve. (I) CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, and highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (J) CONTRIBUTED EQUITY Ordinary shares are classified as equity. Incremental costs directly attributable to an equity transaction are shown as a deduction from equity, net of any recognised income tax benefit. (K) FOREIGN CURRENCY (i) Functional and presentation currency The functional currency of each of the consolidated entity’s entities is measured using the currency of the primary economic environment in which that entity operates (the “functional” currency). The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary assets and liabilities are translated at the exchange rate at balance sheet date. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Exchange differences arising on the translation of monetary items are recognised in the profit and loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss, and translation differences on non-monetary assets such as equities classified as available-for- sale financial assets are recognized in profit or loss. (L) TRADE AND OTHER PAYABLES Trade and other payables are initially stated at fair value and subsequently measured at amortised cost. The amounts are unsecured and usually paid within 90 days of recognition. (M) COMPARATIVE FIGURES When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial period. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 26 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (N) REVENUE RECOGNITION Revenue is recognised and measured at the fair value of consideration received or receivable to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (i) Interest Revenue is recognised as interest accrues using the effective interest rate method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. (O) NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP No new and/or revised Standards and Interpretations have been required to be adopted, and/or are applicable in the current year by/to the Group, as standards, amendments and interpretations which are effective for the financial year beginning on 1 July 20201are not material to the Group. (P) PARENT ENTITY FINANCIAL INFORMATION The financial information for the parent entity, Lachlan Star Limited, disclosed in Note 12 has been prepared on the same basis as the consolidated financial statements, except as set out below. (i) Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Lachlan Star Limited. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments. (ii) Tax consolidation The Company and its wholly-owned Australian resident-controlled entities have formed a tax-consolidated group and are therefore taxed as a single entity. Lachlan Star Limited is the head entity of the tax-consolidated group. In future periods the members of the group will, if required, enter into a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group. (Q) SEGMENT REPORTING Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors. (R) PROVISIONS Provisions are recognized when the consolidated entity has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are determined by discounting the expected future cash flows at a pre-tax discount rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 27 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (S) CONTINGENCIES Contingent liabilities are defined as possible obligations resulting from past events whose existence depends on future events, obligations that are not recognised because it is not probable that they will lead to an outflow of resources, or obligations that cannot be measured with sufficient reliability. Contingent liabilities are not recognized in the statement of financial position other than as part of a business combination, but are disclosed in the notes to the financial statements, with the exception of contingent liabilities where the probability of the liability occurring is remote. (T) FINANCIAL INSTRUMENTS (i) Classification of financial instruments The Group classifies its financial assets into the following measurement categories: • those to be measured at fair value (either through other comprehensive income, or through profit or loss); and • those to be measured at amortised cost. The classification depends on the Group’s business model for managing financial assets and the contractual terms of the financial assets' cash flows. The Group classifies its financial liabilities at amortised cost unless it has designated liabilities at fair value through profit or loss or is required to measure liabilities at fair value through profit or loss such as derivative liabilities (ii) Financial assets measured at amortised cost Debt instruments Investments in debt instruments are measured at amortised cost where they have: • contractual terms that give rise to cash flows on specified dates, that represent solely payments of principal and interest on the principal amount outstanding; and • are held within a business model whose objective is achieved by holding to collect contractual cash flows. These debt instruments are initially recognised at fair value plus directly attributable transaction costs and subsequently measured at amortised cost. The measurement of credit impairment is based on the three-stage expected credit loss model described below in note (c) Impairment of financial assets. (a) Financial assets measured at fair value through other comprehensive income Equity instruments Investment in equity instruments that are neither held for trading nor contingent consideration recognised by the Group in a business combination to which AASB 3 "Business Combination" applies, are measured at fair value through other comprehensive income, where an irrevocable election has been made by management. Amounts presented in other comprehensive income are not subsequently transferred to profit or loss. Dividends on such investments are recognised in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 28 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (U) FINANCIAL INSTRUMENTS (CONTINUED) (b) Items at fair value through profit or loss Items at fair value through profit or loss comprise: • items held for trading; • items specifically designated as fair value through profit or loss on initial recognition; and • debt instruments with contractual terms that do not represent solely payments of principal and interest. Financial instruments held at fair value through profit or loss are initially recognised at fair value, with transaction costs recognised in the income statement as incurred. Subsequently, they are measured at fair value and any gains or losses are recognised in the income statement as they arise. Where a financial asset is measured at fair value, a credit valuation adjustment is included to reflect the credit worthiness of the counterparty, representing the movement in fair value attributable to changes in credit risk. Financial instruments held for trading A financial instrument is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing in the near term, or forms part of a portfolio of financial instruments that are managed together and for which there is evidence of short-term profit taking, or it is a derivative not in a qualifying hedge relationship. Financial instruments designated as measured at fair value through profit or loss Upon initial recognition, financial instruments may be designated as measured at fair value through profit or loss. A financial asset may only be designated at fair value through profit or loss if doing so eliminates or significantly reduces measurement or recognition inconsistencies (i.e. eliminates an accounting mismatch) that would otherwise arise from measuring financial assets or liabilities on a different basis. A financial liability may be designated at fair value through profit or loss if it eliminates or significantly reduces an accounting mismatch or: • if a host contract contains one or more embedded derivatives; or • if financial assets and liabilities are both managed and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy. Where a financial liability is designated at fair value through profit or loss, the movement in fair value attributable to changes in the Group’s own credit quality is calculated by determining the changes in credit spreads above observable market interest rates and is presented separately in other comprehensive income. (c) Impairment of financial assets The Group applies a three-stage approach to measuring expected credit losses (ECLs) for the following categories of financial assets that are not measured at fair value through profit or loss: • debt instruments measured at amortised cost and fair value through other comprehensive income; • loan commitments; and • financial guarantee contracts. No ECL is recognised on equity investments. Determining the stage for impairment At each reporting date, the Group assesses whether there has been a significant increase in credit risk for exposures since initial recognition by comparing the risk of default occurring over the remaining expected life from the reporting date and the date of initial recognition. The Group considers reasonable and supportable information that is relevant and available without undue cost or effort for this purpose. This includes quantitative and qualitative information and also, forward-looking analysis. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 29 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (U) FINANCIAL INSTRUMENTS (CONTINUED) An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequent period, asset quality improves and also reverses any previously assessed significant increase in credit risk since origination, then the provision for doubtful debts reverts from lifetime ECL to 12-months ECL. Exposures that have not deteriorated significantly since origination are considered to have a low credit risk. The provision for doubtful debts for these financial assets is based on a 12-months ECL. When an asset is uncollectible, it is written off against the related provision. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off reduce the amount of the expense in the income statement. The Group assesses whether the credit risk on an exposure has increased significantly on an individual or collective basis. For the purposes of a collective evaluation of impairment, financial instruments are Grouped on the basis of shared credit risk characteristics, considering instrument type, credit risk ratings, date of initial recognition, remaining term to maturity, industry, geographical location of the borrower and other relevant factors. (d) Recognition and derecognition of financial instruments A financial asset or financial liability is recognised in the balance sheet when the Group becomes a party to the contractual provisions of the instrument, which is generally on trade date. Loans and receivables are recognised when cash is advanced (or settled) to the borrowers. Financial assets at fair value through profit or loss are recognised initially at fair value. All other financial assets are recognised initially at fair value plus directly attributable transaction costs. The Group derecognises a financial asset when the contractual cash flows from the asset expire or it transfers its rights to receive contractual cash flows from the financial asset in a transaction in which substantially all the risks and rewards of ownership are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. A financial liability is derecognised from the balance sheet when the Group has discharged its obligation or the contract is cancelled or expires. (e) Offsetting Financial assets and liabilities are offset and the net amount is presented in the balance sheet when the Group has a legal right to offset the amounts and intends to settle on a net basis or to realise the asset and settle the liability simultaneously. (U) EXPLORATION AND EVALUATION EXPENDITURE Exploration and evaluation costs are capitalised as exploration and evaluation assets on a project by project basis pending determination of the technical feasibility and commercial viability of the project. The capitalised costs are presented as either tangible or intangible exploration and evaluation assets according to the nature of the assets acquired. When a licence is relinquished or a project abandoned, the related costs are recognised in the Statement of profit or loss and other comprehensive Income immediately. Exploration and evaluation assets shall be assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. When facts and circumstances suggest that the carrying amount exceeds the recoverable amount an impairment loss is recognised in the Statement of Comprehensive Income. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 30 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2. EARNINGS PER SHARE Loss attributable to ordinary shareholders 30-Jun-22 $ 30-Jun-21 $ (418,032) (841,710) Weighted average number of ordinary shares 1,299,622,298 1,026,414,260 Basic loss per share (cents per share) (0.03) (0.08) All potential ordinary shares, being options to acquire ordinary shares, are not considered dilutive in the calculation of the diluted loss per share as the exercise of the options would not increase the loss per share. 3. INCOME TAX BENEFIT (a) Income tax expense: Current income tax Deferred income tax (b) Reconciliation of Income tax expense to prima facie tax payable: Loss before income tax Prima facie income tax at 30% (2021: 30%) Revenue losses not recognised Other deferred tax balances not recognised Other non-allowable items Other non-assessable items Income tax expense 30-Jun-22 $ 30-Jun-21 $ - - - (418,032) (125,409) 266,166 (140,757) - - - - - - (841,710) (252,513) 150,512 (30,030) 132,031 - - (c) Unrecognised deferred tax assets at 30% (2021: 30%): Carry forward revenue losses 881,602 515,583 Project evaluation fees Capital raising costs Provisions and accruals Other Deferred tax assets not recognised - - 4,950 - - 57,242 3,000 560 (654,006) (576,385) 232,546 - LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 31 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. INCOME TAX BENEFIT (CONTINUED) (d) Deferred tax liabilities comprise: Exploration expenditure Project acquisitions (e) Income tax not recognised directly in equity Share issue costs Deferred tax assets not recognised (187,556) (44,990) (232,546) 42,470 (42,470) - - - - - - - The tax benefits of the above deferred tax assets will only be obtained if: (a) (b) (c) the company derives future assessable income of a nature and of an amount sufficient to enable the benefits to be utilised; the company continues to comply with the conditions for deductibility imposed by law; and no changes in income tax legislation adversely affect the company in utilising the benefits. 4. AUDITORS’ REMUNERATION 30-Jun-22 $ 30-Jun-21 $ Amounts received or due and receivable by Hall Chadwick WA Audit Pty Ltd for: An audit or review of the financial report of the entity Total audit services provided to the Group 30,386 30,386 20,876 20,876 5. TRADE AND OTHER RECEIVABLES Current Other receivables and prepayments - third parties Trade and other receivables are non-interest-bearing and are not past due. 6. EXPLORATION AND EVALUATION Opening balance Project acquisition costs (i) Capitalised exploration Acquisition costs in respect of areas of interest in the exploration phase 30-Jun-22 $ 30-Jun-21 $ 39,783 39,783 146,802 146,802 30-Jun-22 $ 30-Jun-21 $ 2,312,640 33,607 - 1,981,895 322,235 297,138 2,634,875 2,312,640 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 32 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6. EXPLORATION AND EVALUATION (CONTINUED) The recoverability of deferred project acquisition costs is dependent upon the successful development and commercial exploitation, or alternately the sale of the areas of interest. (i) On 22 December 2020 the Company exercised its option to acquire an initial 50% of the Koojan Cu-Ni-PGE Project by the issue 82,500,000 shares in the Company valued at $1,320,000. Project acquisition costs include Stamp Duty of $61,895. On 27 January 2021, the Company acquired the Killaloe Gold Project, in the Eastern Goldfields, Western Australia by the issue of 40,000,000 shares in the Company valued at $600,000. 7. TRADE AND OTHER PAYABLES Current Trade payables – third parties Non-trade payables and accrued expenses – third parties 30-Jun-22 $ 30-Jun-21 $ 85,879 16,500 102,379 45,958 14,000 59,958 Trade and other payables are non-interest-bearing liabilities stated at cost and are predominantly settled within 30 days. The carrying amounts of trade and other payable are assumed to be the same as their fair values, due to their short- term nature. 8. RELATED PARTY DISCLOSURES Lachlan Star Limited is the ultimate parent entity. TRANSACTIONS WITH OTHER RELATED PARTIES Lachlan Star Limited director and company secretary, Mr Daniel Smith, is a director of Minerva Corporate Pty Ltd. Minerva Corporate Pty Ltd provided accounting consultancy and company secretarial services to Lachlan Star Limited. Payments to Minerva Corporate Pty Ltd during the period total $72,000 (2021: $58,000). Current trade and other payables include $59,536 (2021: $19,467) to key management personnel at reporting date in respect of outstanding fees. Refer to note 18 for key management personnel compensation which is further disclosed in the remuneration report. The transactions with key management personnel have been entered into under terms and conditions no more favourable than those the Company would have adopted if dealing at arm's length. 9. CAPITAL COMMITMENTS There have been no changes of a material nature in contingent liabilities or contingent assets since the last annual reporting date. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 33 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10. SEGMENT INFORMATION A. Identification of reporting segments The Company identifies operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The information presented in the financial report is the same information that is reviewed by the directors. The Company has currently no identifiable operating segments, other than exploration in Australia. 11. RECONCILIATION OF (LOSS) AFTER INCOME TAX TO NET CASH FLOWS USED IN OPERATING ACTIVITIES (a) Cash flows generated used in operating activities Net loss after income tax (418,032) (841,710) 30-Jun-22 $ 30-Jun-21 $ Non- Cash Items adjustment Share-based payments Exploration expenditure Changes in assets and liabilities: (Increase) / decrease in receivables Increase / (decrease) in payables - - 440,104 14,000 107,109 22,046 (102,430) (14,031) Net cash outflow from operating activities (288,877) (504,067) (b) Reconciliation of cash and cash equivalents Cash at bank and at call 4,327,708 4,681,035 (c) Non-cash financing and investing activities The consolidated entity’s exposure to interest rate risk is discussed in Note 19. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of cash and cash equivalents mentioned above. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 34 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 12. PARENT ENTITY FINANCIAL INFORMATION The individual financial statements for the parent entity show the following aggregate amounts: Current Assets Non-Current Assets Total Assets Current Liabilities Total liabilities Contributed equity Reserves Accumulated losses Net Assets/(Liabilities) Profit/(Loss) for the year Total comprehensive profit/(loss) for the year 30-Jun-22 $ 4,367,491 2,634,875 30-Jun-21 $ 4,827,327 2,312,640 6,732,366 7,140,477 102,379 102,379 59,958 59,958 9,822,599 9,585,099 886,202 886,202 (3,808,814) (3,390,782) 6,899,987 7,080,519 (418,032) (418,032) (841,710) (841,710) The parent entity did not have any contingent liabilities or capital commitments as at 30 June 2022 or 30 June 2021. The Company and its wholly-owned Australian resident-controlled entities have formed a tax-consolidated group and are therefore taxed as a single entity. Lachlan Star Limited is the head entity of the tax-consolidated group. In future periods the members of the group will, if required, enter into a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group. 13. CONSOLIDATED ENTITIES Name Legal Parent Lachlan Star Limited Legal Subsidiaries Ord Investments Pty Ltd Midland Minerals Pty Ltd Coobaloo Minerals Pty Ltd Country of incorporation 2022 2021 Australia Australia Australia Australia 100% 100% 75% 100% 100% 50% LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 35 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14. EVENTS SUBSEQUENT TO REPORTING DATE On 21 July 2022, the Company announced the termination of the binding term sheet with Green Critical Minerals Pty Ltd regarding the proposed sale of the Company’s Princhester Magnesite Project. No other matters or circumstances has arisen since 30 June 2022 that in the opinion of the directors has significantly affected, or may significantly affect in future financial years (i) the consolidated entity’s operations, or (ii) the results of those operations, or (iii) the consolidated entity’s state of affairs. 15. CAPITAL AND RESERVES (A) ISSUED CAPITAL: Ordinary shares Balance at the beginning of the year 1,271,512,709 9,585,099 853,865,663 3,794,804 30-Jun-22 Number 30-Jun-22 $ 30-Jun-21 Number 30-Jun-21 $ Shares issued during the year – capital raising Shares issued during the year – acquisition of tenements Shares issued during the year – exercise of options Shares issued during the year – conversion of performance rights Share capital raising costs - - - - 217,647,046 3,700,000 122,500,000 1,920,000 47,500,000 237,500 57,500,000 287,500 - - - - 20,000,000 98,239 - (215,444) Balance at the end of the year 1,319,012,709 9,822,599 1,271,512,709 9,585,099 Ordinary shares have the right to one vote per share at meetings of the Company, to receive dividends as declared and in the event of a winding-up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of, and amounts paid up on, shares held. Ordinary shares have been fully paid, have no par value, and the Company does not have a limited amount of authorized capital. (B) OPTIONS PREMIUM RESERVE Movements in the options premium reserve are set out in the statement of changes in equity on page 21. This reserve represents the fair value at grant of share options issued. The fair value is recognized as an expense over the vesting period. The reserve is reversed to contribute equity when shares are issued on exercise of the options or when the options are cancelled or expire. Refer to note 17 for details of these plans. (C) ACCUMULATED LOSSES Accumulated losses at the beginning of the financial year (3,390,782) (2,549,072) Loss for the period (418,032) (841,710) Accumulated losses at the end of the financial year (3,808,814) (3,390,782) 30-Jun-22 $ 30-Jun-21 $ LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 36 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 16. CONTINGENT ASSETS AND LIABILITIES KOOJAN NI-PGE PROJECT – WESTERN AUSTRALIA (75%) On 26 June 2020, the Company announced that it had entered into a 6 month Option Agreement, in which Lachlan can purchase an initial 50% interest in Coobaloo Minerals Pty Ltd (Coobaloo) and its Koojan Copper-Nickel-PGE Project (Koojan Project) located approximately 80km north of the recent Julimar Ni-PGE discovery by Chalice Gold Mines Ltd and approximately 130km north of Perth. Lachlan Star paid a fee of $50,000 on signing the Option Agreement. Lachlan Star is entitled to a further 25% of Coobaloo by way of spending $350,000 (inclusive of the initial expenditure) on the Koojan Project within 18 months. Lachlan Star exercised its option over 50% of Coobaloo on 22 December 2020 and subsequent to year end, on 8 September 2021, it satisfied the expenditure commitment to earn the additional 25% thereby becoming a 75% shareholder in Coobaloo with the balance of 25% owned by Wavetime Nominees Pty Ltd. Additionally, Lachlan Star will have the following obligations: (a) Performance Milestone: Following Lachlan Star delineating a JORC Indicated Resource (as defined in JORC 2012) of 50,000t of greater than 2.5% Ni Equivalent (Ni, Cu, Co) at the Project, Lachlan Star will make a milestone payment to the vendors of A$600,000 which may at the election of Lachlan Star be paid in cash or Ordinary Fully Paid Shares at the 14-day VWAP of Lachlan Star’s Share price as traded on the ASX; (b) Free-Carry: In the event Lachlan Star has met the Additional Expenditure Commitment, it will free-carry the Vendor’s 25% retained interest through to the completion of a Bankable Feasibility Study (Free Carried Period); and (c) Conversion of retained interest: Following completion of the Free Carried Period, the Vendor will have a one-time right to elect to convert their retained interest to an additional 1% NSR. If the Vendor decides not to convert their retained interest to an NSR, they shall co-fund their portion of Project expenditure or dilute using the AMPLA standard dilution clause. Royalties Lachlan Star and the Vendors will execute a NSR agreement on the exercise of the Option, pursuant to which Lachlan Star will pay the Vendors a 1% NSR in respect of all precious, industrial minerals and base metals produced, sold and proceeds received from the Project. Lachlan Star has the first right of refusal to purchase the Royalties in the event that the Vendors seek to sell the rights. KILLALOE GOLD PROJECT – WESTERN AUSTRALIA (90-100%) On 27 January 2021, Lachlan and Liontown signed a binding term sheet for the acquisition by Lachlan Star of Liontown’s Killaloe Gold Project, in the Eastern Goldfields, WA. Under the terms of the agreement, Lachlan Star will pay Liontown a 1% NSR for all minerals produced by Lachlan Star. There were no other contingent assets or contingent liabilities at 30 June 2022 or 30 June 2021. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 37 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17. SHARE BASED PAYMENTS OPTIONS GRANTED DURING THE YEAR No options were granted during the year (2021: nil). The number and weighted average exercise price of share options is as follows: 2022 2022 2022 2021 2021 2021 Weighted average exercise price Number of Options Expiry date Weighted average exercise price Number of Options Expiry date Outstanding 1 July 0.5 cents 105,000,000 31 Dec 2021 0.5 cents 105,000,000 31 Dec 2021 Exercised/expired 0.5 cents (105,000,000) 31 December 2021 - - - Issued during the period Outstanding at 30 June 2.2 cents 17,000,000 27 Nov 2023 2.2 cents 17,000,000 27 Nov 2023 17,000,000 - 122,000,000 - 17,000,000 options were issued to directors on 27 November 2020 as incentive-based remuneration. There are no other options on issue at 30 June 2022. PERFORMANCE RIGHTS – KEY MANAGEMENT PERSONNEL – 1 APRIL 2021 During the previous year Mr Aylward was issued performance rights incentives for his work and ongoing commitment and contribution to the Company. Details of the performance rights issued are as follows: Tranche Director and Other KMP Number Issued Grant Date Expected Date of Milestone Achievements Underlying Share Price on Grant Date ($) Total Fair Value ($) 1 Mr Aylward 10,000,000 01/04/21 01/01/24 0.032 320,000 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 38 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18. KEY MANAGEMENT PERSONNEL DISCLOSURES KEY MANAGEMENT PERSONNEL COMPENSATION The key management personnel compensation is as follows: Short-term benefits Share based Payments 30-Jun-22 $ 196,000 - 196,000 30-Jun-21 $ 142,500 440,104 582,604 Current trade and other payables of $59,536 (2021: 19,467) were payable to key management personnel at reporting date in respect of outstanding fees and expenses. 19. FINANCIAL RISK MANAGEMENT The consolidated entity’s activities expose it to credit risk, market risk (including interest rate risk, foreign exchange risk and price risk), and liquidity risk. This note presents qualitative and quantitative information about the consolidated entity’s exposure to each of the above risks, its objectives, policies and procedures for managing risk, and the management of capital. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The consolidated entity’s overall risk management approach focuses on the unpredictability of financial markets and seeks to minimize the potential adverse effects on the financial performance of the consolidated entity. The consolidated entity does not currently use derivative financial instruments to hedge financial risk exposures and therefore it is exposed to daily movements in interest rates and exchange rates, however these risks are currently negligible. The consolidated entity uses various methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rates and ageing analysis for credit risk. There are no formal targets set for return on capital. There were no changes to the consolidated entity’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. (A) CREDIT RISK Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the consolidated entity. Exposure to credit risk is considered minimal but is monitored on an ongoing basis. Cash transactions are limited to financial institutions considered to have a suitable credit rating. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position at balance date. The carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure. None of the receivables as at 30 June 2022 are past due or impaired. The consolidated entity’s maximum exposure to credit risk at the reporting date was: Carrying amount: Cash and cash equivalents Trade and other receivables 30-Jun-22 $ 30-Jun-21 $ 4,327,708 39,783 4,367,491 4,681,035 146,802 4,827,837 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 39 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 19. FINANCIAL RISK MANAGEMENT (CONTINUED) (B) MARKET RISK (i) Cash flow and fair value interest rate risk The significance and management of the risks to the consolidated entity is dependent on a number of factors including (i) interest rates (current and forward) and the currencies that are held; (ii) level of cash and liquid investments and borrowings; (iii) maturity dates of investments and loans; and (iv) proportion of investments and borrowings with fixed rate or floating rates. The risk is managed by the consolidated entity maintaining an appropriate mix between fixed and floating rate investments. The consolidated entity’s exposure to interest rate risk is considered minimal. The effective interest rates of financial assets and financial liabilities with interest obligations at the reporting date are as follows. Variable rate instruments at call Fixed rate instruments Weighted average interest rate Variable rate instruments at call Fixed rate instruments Weighted average interest rate 2022 ($) 2022 ($) 2022 2021 ($) 2021 ($) 2021 Financial assets Cash and cash equivalents 4,327,708 - - 4,681,035 - - The values above were the carrying amount of the consolidated entity’s interest-bearing financial instruments at 30 June 2022 and 30 June 2021. (ii) Foreign exchange risk The consolidated entity’s exposure to foreign exchange risk at statement of financial position date was as follows, based on carrying amounts in A$: 2022 Totals A$ 2021 Totals A$ 4,327,708 4,681,035 39,783 146,802 (102,379) (59,958) 4,265,112 4,767,879 Cash and cash equivalents Trade and other receivables Trade and other payables (iii) Price risk There was no price risk in the current or prior period. The consolidated entity is not exposed to equity securities price risk at 30 June 2022 or 30 June 2021. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 40 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 19. FINANCIAL RISK MANAGEMENT (CONTINUED) (C) LIQUIDITY RISK The following are the contractual maturities of consolidated financial liabilities: Trade and other payables: Carrying amounts Contractual cashflows Payable 6 months or less (D) FAIR VALUES 30-Jun-22 $ 30-Jun-21 $ 102,379 102,379 102,379 59,958 59,958 59,958 The carrying amounts of consolidated financial assets and financial liabilities shown in the statement of financial position approximate their fair values. The basis for determining fair values is disclosed in Note 1(t). AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: • quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); • inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2); and • inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). There were no financial assets and liabilities measured and recognised at fair value at 30 June 2022 or 30 June 2021. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 41 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | DIRECTORS’ DECLARATION DIRECTORS’ DECLARATION 1. In the opinion of the directors of Lachlan Star Limited: (a) the financial statements and notes set out on pages 19 to 41 are in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date; complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (b) subject to Note 1(a) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001. Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. Signed in accordance with a resolution of the directors. Mr Daniel Smith Director Perth, Western Australia 28 September 2022 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 42 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF LACHLAN STAR LIMITED Report on the Audit of the Financial Report Opinion We have audited the financial report of Lachlan Star 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: a. the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a). Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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 the Key Audit Matter Exploration and Evaluation Our audit procedures included but were not limited to: As disclosed in note 6 to the financial statements, as at 30 June 2022, the Group’s capitalised exploration and evaluation expenditure was carried at $2,634,875. • Assessing management’s determination of its areas of interest for consistency with the definition in AASB 6 Exploration and Evaluation of Mineral Resources (“AASB 6”); The recognition and recoverability of exploration and evaluation expenditure was considered a key audit matter due to: • • The significance of the balance to the Group’s financial position; and level of judgement The in evaluating management’s application of the requirements of AASB 6 Exploration for and required requiring is an standard Evaluation of Mineral Resources (“AASB 6”). AASB 6 industry specific accounting the application of significant judgements, estimates and industry knowledge. This includes for expenditure to be capitalised as an asset and subsequent requirements which must requirements specific be complied with for capitalised expenditure to be carried as an asset. • Assessing the Group’s rights to tenure for a sample of tenements; • Testing the Group’s additions to capitalised exploration costs for the year by evaluating a sample of recorded expenditure for consistency the capitalisation to underlying requirements of the Group’s accounting policy records, and the requirements of AASB 6; • Reviewing acquisition agreements for projects acquired during the period and assessment of the calculation of the deemed consideration with underlying information inputs including share price with the terms of the acquisition agreement; • By testing the status of the Group’s tenure and planned future activities, reading board minutes and enquiries with management we assessed each area of interest for one or more of the indicate following circumstances impairment of the capitalised exploration costs: that may o The licenses for the rights to explore expiring in the near future or are not expected to be renewed; o Substantive expenditure for further exploration in the area of interest is not budgeted or planned; o Decision or intent by the Group to discontinue activities in the specific lack of area of commercially viable quantities of resources; and interest due to Key Audit Matter How our audit addressed the Key Audit Matter o Data indicating that, although a development in the specific area is likely to proceed, the carrying amount of the exploration asset is unlikely to be recovered in full from successful development or sale. o We assessed the appropriateness of the related disclosures in note 6 to the financial report. 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 our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1(a), the directors also state in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our responsibility is to express an opinion on the financial report based on our audit. Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2022. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with s 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. Auditor’s Opinion In our opinion, the Remuneration Report of Lachlan Star Limited, for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. HALL CHADWICK WA AUDIT PTY LTD D M BELL CA Director Dated this 28th day of September 2022 Perth, Western Australia LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | ADDITIONAL SHAREHOLDER INFORMATION ADDITIONAL SHAREHOLDER INFORMATION Additional information required by the ASX Limited (“ASX”) Listing Rules and not disclosed elsewhere in this report is set out below. (A)SHAREHOLDINGS AS AT 21 SEPTEMBER 2022 SUBSTANTIAL SHAREHOLDERS The following shareholders have lodged substantial shareholder notices with ASX: Name of Shareholder Number of shares % held Oakhurst Enterprises Pty Ltd, LeisureWest Consulting Pty Ltd & Gary Steinepreis 116,382,352 8.82% VOTING RIGHTS The voting rights attaching to Ordinary Shares are governed by the Constitution. On a show of hands every person present who is a member or representative of a member shall have one vote and on a poll, every member present in person or by proxy or by attorney or duly authorised representative shall have one vote for each share held. No options have any voting rights. LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 48 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | ADDITIONAL SHAREHOLDER INFORMATION (A)SHAREHOLDINGS AS AT 21 SEPTEMBER 2022 TWENTY LARGEST SHAREHOLDERS Rank Name Units % Units 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 20 20 20 OAKHURST ENTERPRISES PTY LTD LIONTOWN RESOURCES LIMITED CITICORP NOMINEES PTY LIMITED LEISUREWEST CONSULTING PTY LTDMOUTIER PTY LTD MR PETER FREDERICK NIXON + MRS CAROLINE HOLLINGWORTH NIXON M G PRENTICE PTY LTD KERSEY HOLDINGS PTY LTD RANCHLAND HOLDINGS PTY LTD BNP PARIBAS NOMS PTY LTD MR ARTHUR BROMIDIS MR KENDY KWAN + MRS XIONG HUI KWAN LEISUREWEST CONSULTING PTY LTD DHALIWAL SUPER PTY LTD MR ANDREW NIXON MR BRUCE STEGNER SUPERHERO SECURITIES LIMITED MR RUSSELL WAYNE ALLEN BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD BEERSHEBA INVESTMENTS PTY LTD REPLAY HOLDINGS PTY LTD GARY CHRISTIAN STEINEPREIS JACQUELINE MARY STEINEPREIS Totals: Top 23 holders of ORDINARY FULLY PAID SHARES (Total) Total Remaining Holders Balance 48,882,352 40,000,000 38,661,397 30,000,000 25,000,000 24,100,000 18,753,705 18,290,000 17,000,000 13,157,423 13,000,000 12,603,205 12,500,000 11,500,000 11,175,000 11,000,000 10,912,139 10,888,576 10,633,241 10,000,000 10,000,000 10,000,000 10,000,000 418,057,038 900,955,671 3.71 3.03 2.93 2.27 1.90 1.83 1.42 1.39 1.29 1.00 0.99 0.96 0.95 0.87 0.85 0.83 0.83 0.83 0.81 0.76 0.76 0.76 0.76 31.69 68.31 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 49 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | ADDITIONAL SHAREHOLDER INFORMATION (A)SHAREHOLDINGS AS AT 21 SEPTEMBER 2022 (CONTINUED) Distribution of equity security holders Size of Holding 1 1,001 5,001 10,001 to to to to 1,000 5,000 10,000 100,000 100,001 and over Number of shareholders Number of fully paid shares 1,067 156 79 1,178 1,248 3,728 188,196 390,230 665,863 55,959,051 1,214,309,369 1,271,512,709 The number of shareholdings held in less than marketable parcels is 1,396. (B)UNLISTED OPTION & PERFORMANCE RIGHTS HOLDINGS AS AT 21 SEPTEMBER 2022 Options Exercisable at $0.022 expiring 27/11/2023 % Interest Bernard Michael Aylward Orwellian Investments 58.82% 41.18% There are 10,000,000 performance rights which, subject to meeting the vesting condition, can be converted before 8 April 2024. (C)ON-MARKET BUYBACK There is no current on-market buyback. (D)INTEREST IN MINING AND EXPLORATION PERMITS Exploration / Mining Lease Location % interest E70/5515 E70/5516 E70/5312 E70/5429 E70/5337 E70/5450 P70/1743 M63/177 E63/1018 Koojan, Western Australia Koojan, Western Australia Koojan, Western Australia Koojan, Western Australia Koojan, Western Australia Koojan, Western Australia Koojan, Western Australia Norseman, Western Australia Norseman, Western Australia 75%1 75%1 75%1 75%1 75%1 75%1 75%1 100% 80% LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 50 LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 | ADDITIONAL SHAREHOLDER INFORMATION E63/1713 ML 5831 ML 5832 EL 5574 Norseman, Western Australia Princhester, Queensland Princhester, Queensland 100% 100% 100% Bushranger, New South Wales Net Smelter Royalty 1. As announced 10 August 2021, Minerals 260 Limited (MI6) can acquire 51% equity in the Koojan Project by spending a total of $4 million on exploration within 5 years, with a minimum expenditure commitment of $500,000 before having the right to withdraw. Upon MI6 earning 51% in the Koojan JV Project, the parties respective interests will be MI6 (51%), Lachlan Star (24%), Wavetime Nominees (25%). LACHLAN STAR LIMITED | ANNUAL REPORT 30 JUNE 2022 PAGE 51