Metals X Limited Annual Report 2022

Plain-text annual report

ACN 110 150 055 Annual Report 2022 CONTENTS CORPORATE DIRECTORY ...................................................................................................................................................... 1 CHAIRMAN’S LETTER .............................................................................................................................................................. 2 DIRECTORS’ REPORT ............................................................................................................................................................. 3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ......................................................................................... 16 CONSOLIDATED STATEMENT OF FINANCIAL POSITION .................................................................................................. 17 CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................................................... 18 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .................................................................................................. 19 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ............................................................................................ 20 DIRECTORS’ DECLARATION ................................................................................................................................................ 58 AUDITOR’S INDEPENDENCE DECLARATION ..................................................................................................................... 59 INDEPENDENT AUDIT REPORT ............................................................................................................................................ 60 TABLES OF MINERAL RESOURCES AND ORE RESERVES .............................................................................................. 66 SECURITY HOLDER INFORMATION ..................................................................................................................................... 68 CORPORATE DIRECTORY Directors Mr Peter Gunzburg (Non-Executive Chairman) Mr Brett Smith (Executive Director) Mr Grahame White (Non-Executive Director) Mr Patrick O’Connor (Non-Executive Director) Joint Company Secretaries Ms Shannon Coates Mr James Doyle (appointed 10 May 2022) Key Management Mr Daniel Broughton (CFO) Share Registry Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth WA 6000 GPO Box Melbourne VIC 3001 Phone: (within Australia) 1300 850 505 Phone: (outside Australia) +61 3 4915 4000 Facsimile: +61 3 9473 2500 Registered Office Unit 202, Level 2 39 Mends Street South Perth WA 6151 Phone: +61 8 9220 5700 E-mail: reception@metalsx.com.au Website: www.metalsx.com.au Postal Address PO Box 7248 Cloisters Square PO WA 6850 Securities Exchange Australian Securities Exchange Central Park 152-158 St George’s Terrace Perth WA 6000 Code: ASX: MLX Domicile and Country of Incorporation Australia 1CHAIRMAN’S LETTER In last year’s Chairman’s letter, I stated that it was your Board’s intention to repay our remaining debt and complete the process of divesting our Nickel assets, following the successful divestment of our Copper assets. I’m pleased to say that both these objectives have been reached and we have also completed an in-specie distribution of the shares we received in consideration of our Nickel assets. Our cash balance has increased significantly due to record tin prices and the performance of the joint venture’s management team. Our cash balance at 30 June 2022 stood at $122 million. Another particularly pleasing aspect of the last 12 months has been the substantial improvement in the mine’s safety performance, again a reflection of the quality of the joint venture’s management team. Our emphasis for the next 12 months will be to support the joint venture to complete the capital works upgrades and maximise the operating margin, whilst maintaining a safe working environment. Peter Gunzburg Non-Executive Chairman 2DIRECTORS’ REPORT For the year ended 30 June 2022 The Directors present their report together with the consolidated financial report of Metals X Limited (“Metals X” or the “Company”) and its controlled entities (together the “Group”) for the year ended 30 June 2022 and the Independent Auditor’s Report thereon. 1. Directors The names of the Company's Directors in office during the year and until the date of this report are set out below. Directors were in office for this entire period unless otherwise stated. Independent Non-Executive Chairman – Mr Peter Gunzburg B. Com (appointed 10 July 2020) Mr Gunzburg has over 40 years’ experience acting as a public company director, stockbroker, and investor. Mr Gunzburg has previously been a director of Resolute Ltd, Australian Stock Exchange Ltd, Eyres Reed Ltd, CIBC World Markets Australia Ltd and Fleetwood Corporation Ltd. Mr Gunzburg was the Non-Executive Chairman of ASX listed BARD1 Life Sciences Limited, now known as Inoviq Ltd (resigned 28 July 2020). Mr Gunzburg is a member of the Remuneration and Nomination Committee and the Audit and Risk committee. Executive Director – Mr. Brett Smith MBA, M.A (appointed 2 December 2019 as Non-Executive Director and Executive Director as of 10 July 2020) Mr Smith has participated in the development of a number of mining and mineral processing projects including coal, iron ore, base and precious metals. He has also managed engineering and construction companies in Australia and internationally. Mr. Smith has served on the board of private and listed mining and exploration companies and has over 33 years international experience in the engineering and construction of mineral processing operations. Mr. Smith is Executive Director and Deputy Chairman of Hong Kong listed company APAC Resources Limited, Executive Director of Hong Kong listed company Dragon Mining Limited and a Non- Executive Director of ASX listed companies Prodigy Gold NL, Elementos NL, Tanami Gold NL and NICO Resources Limited (appointed 19 January 2022). Independent Non-Executive Director – Mr Grahame White B. Eng, MAICD (appointed 10 July 2020) Mr White is a construction and mining executive with comprehensive experience in Australia and Asia. Mr White has held numerous executive management positions in the resources sector and recently served on the Boards of Central West Rural, Forge Group Limited and the Queensland Resource Council. Mr White is Chairman of the Remuneration and Nominations Committee and a member of the Audit and Risk Committee. Independent Non-Executive Director – Mr Patrick O’Connor B. Com, FAICD (appointed Non-Executive Director 24 October 2019 and Non-Executive and Executive Chairman on 3 December 2019 and 17 December 2019, respectively. Reverted to Non-Executive Director on 10 July 2020) Mr O’Connor has significant experience as an independent Non-Executive Director and as a Chief Executive Officer. His experience spans across mining (gold, copper, lead, zinc and coal), oil & gas exploration, biotechnology and government utility sectors. Mr O’Connor was previously a Non-Executive Director of Stanmore Coal Ltd. In addition, he has held the roles of Deputy Chairman and Chairman of Perilya Ltd, the operator of the Broken Hill mine in NSW Australia, prior to its takeover and delisting from the ASX. Mr O’Connor spent nine years as a director of the Water Corporation in WA including four years as its chairman. Mr O’Connor was also the Chief Executive Officer for OceanaGold Corporation at the time of its listing on the ASX and remained for a period as a Non-Executive Director. Prior to OceanaGold, Mr. O’Connor was Managing Director of Macraes Mining Co Ltd for nine years. Mr O’Connor was appointed as Non-Executive Director and Chairman of FAR Limited on 1 July 2021 and 8 July 2021, respectively and as Non-Executive Director of Red River Resources Limited on 9 August 2022. Mr O’Connor is Chairman of the Audit and Risk Committee and a member of the Remuneration and Nomination Committee. 3DIRECTORS’ REPORT (continued) For the year ended 30 June 2022 2. Joint Company Secretaries Ms. Shannon Coates – LLB, GIA (cert), GAICD (appointed on 1 December 2020) Ms Coates has more than 25 years’ experience in corporate law, compliance, and the provision of corporate advisory services to publicly listed companies across a variety of industries including resources, manufacturing, and technology. Ms Coates is currently Executive Director of Emerson Co Sec, a national corporate advisory, compliance, and governance service provider, with clients predominantly in the mineral exploration, development and production sector and acts as company secretary to a number of ASX listed companies. Ms Coates is a qualified lawyer, Chartered Secretary, and graduate of the Australian Institute of Company Directors’ (AICD) Company Directors Course. Mr. James Doyle (appointed on 10 May 2022) Mr Doyle is an experienced advisory and governance professional specialising in the provision of company secretarial and corporate advisory services to public and private companies across a range of sectors including resources, industrials, and information technology. Mr Doyle is currently employed by Emerson CoSec, a national corporate advisory, compliance, and governance service provider, with clients predominantly in the mineral exploration, development and production sector and acts as company secretary to a number of ASX- listed companies. 3. Directors’ Interests As at the date of this report, the relevant interests of the Directors in securities of the Company are: Directors Fully Paid Ordinary Shares Options Mr Peter Gunzburg Mr Brett Smith Mr Patrick O’Connor Mr Grahame White Total 4. Directors Meetings - 250,000 1,000,000 - 1,250,000 - - - - - The number of meetings of Directors’ (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director was as follows: Directors Board Meetings Audit and Risk Committee Meetings Remuneration & Nomination Committee Meetings Eligible to attend Attended Eligible to attend Attended Eligible to attend Attended Mr Peter Gunzburg Mr Brett Smith(1) Mr Patrick O’Connor Mr Grahame White 7 7 7 7 7 7 7 7 2 - 2 2 2 2 2 2 3 - 3 3 3 3 3 3 (1) Mr Brett Smith attended the Audit and Risk Committee meetings and the Remuneration & Nomination Committee meetings as an invitee. 5. Nature of Operations and Principal Activities The Company is a limited liability company and is domiciled and incorporated in Australia. The Company owns a 50% equity interest in the Renison Tin Operation through its 50% stake in the Bluestone Mines Tasmania Joint Venture and comprises the Renison Tin Mine located 15km north-east of Zeehan on Tasmania’s west coast and the Mount Bischoff Project, placed on care and maintenance in 2010, which is located 80km north of Renison. The principal activities of the Group during the year were: • • Investment in a joint venture company operating a tin mine in Australia; and Holding investments in companies undertaking exploration and development of base metals projects in Australia. There have been no significant changes in the nature of those activities during the year. 4 DIRECTORS’ REPORT (continued) For the year ended 30 June 2022 6. Financial Results Overview The Group achieved a consolidated profit after income tax of $183.894 million (2021: Profit $87.199 million). No adjustments have been made to the Group’s financial results for the year because of COVID-19. During the year, Metals X shipped 4,537 tonnes of tin-in-concentrate (2021: 3,838 tonnes of tin-in-concentrate) to its tin customers. Other key financial results for the Company include: • • • • • • • • • Total revenue from continuing operations: $228.876 million (2021: $93.834 million) derived from the Company’s 50% equity interest in the Renison Tin Operation; Cost of sales: increased by $23.155 million to $98.300 million (2021: $75.145 million) due to the following: o o o o o Royalty expense increased by $8.262 million to $12.219 million (2021: $3.957 million); Mining costs increased by $4.773 million to $32.713 million (2021: $27.940 million); Processing costs increased by $1.661 million to $16.367 million (2021: $14.706 million); Other production costs increased by $4.320 million to $8.276 million (2021: $3.956 million); and Employee costs increased by $1.903 million to $16.126 million (2021: $14.223 million). Other income includes the net proceeds from the on-market sale of 5,400,000 fully paid shares held in NICO Resources Limited (“NICO”) and received approximately A$5.950 million (excluding transaction costs) and the 4% annual coupon interest of $1.440 million payable on the Cyprium Convertible Notes; Profit from discontinued operations of $7.557 million representing the gain on the disposal of the Company’s Nickel assets; Income tax benefit: $42.525 million (2021: Nil) relates to the recognition of historical tax losses as a deferred tax asset. Cash flows from operating activities: $149.996 million (2021: $4.404 million); Cash flows used in investing activities: $23.828 million (2021: from investing activities of $12.688 million); Cash flows from financing activities: $17.392 million (2021: used in financing activities $17.715 million); and Closing cash and cash equivalents: $122.248 million (2021: $13.472 million). 7. Review of Operations Renison Tin Operation (50% MLX) Metals X owns a 50% equity interest in the Renison Tin Operation (“Renison”) through its 50% stake in the Bluestone Mines Tasmania Joint Venture (“BMTJV”). Renison is one of the world’s largest operating underground tin mines and Australia’s largest primary tin producer. Renison is the largest of three major skarn, carbonate replacement, pyrrhotite-cassiterite deposits within western Tasmania. The Renison Mine area is situated in the Dundas Trough, a province underlain by a thick sequence of Neoproterozoic-Cambrian siliciclastic and volcaniclastic rocks. At Renison, there are three main shallow-dipping dolomite horizons which host replacement mineralisation. The major structure associated with tin mineralisation at Renison, the Federal Basset Fault, was formed during the forceful emplacement of the Pine Hill Granite during the Devonian and is also an important source of tin mineralisation. The Renison strategy is focussed on continuing to increase Mineral Reserves net of depletion each year to maintain significant mine life and to deliver higher cash margins through an increased mining rate, grade, and recovery, whilst continuing to seek productivity improvements and reduce costs. Covid-19 The majority of previously implemented COVID-19 controls remained in place at Renison during the year to protect the health and safety of its workforce, their families, local suppliers, and neighbouring communities, while ensuring a safe environment for operations to continue. While COVID-19 related delays have impacted the procurement and shipping of overseas items and critical spares for the Area 5 upgrade, these delays have been managed with minimal disruption to the overall Area 5 schedule. Renison regularly updates its COVID-19 assessment in line with public health advice. 5DIRECTORS’ REPORT (continued) For the year ended 30 June 2022 7. Review of Operations (continued) Renison production performance summary (100% BASIS) Physicals UG ore mined UG grade mined Ore processed Head grade Mill recovery Tin produced Unit t % Sn t % Sn % t Key Projects and Focus Areas Area 5 Project 30 June 2022 791,850 1.54 670,291 1.81 78.16 9,461 30 June 2021 810,758 1.30 653,500 1.59 76.48 7,948 Movement (18,908) 0.24 16,791 0.22 1.68 1,513 Movement % (2.33)% 18.46% 2.57% 13.84% 2.20% 19.04% The objective of the Area 5 Project is to develop and mine the high-grade Area 5 Ore Reserve, including construction of the requisite surface and underground infrastructure to support the development. Post completion of the Area 5 Project, the annual production is expected to increase on average 10,000 tonnes of tin per annum. The Area 5 upgrade progressed significantly during the year despite changes in scope, difficult ground conditions, COVID-19 related issues with logistics and contractors, all delays in manufacturing impacting the schedule. Rescheduling of underground activities has minimised the impact of the predicted delays to the 2022 mining schedule. The following key Area 5 activities were completed or significantly advanced during the year: HV Power Upgrade • • • • • Installation of structural steelwork completed. Delivery and installation of Switchroom completed. Administration building voltage transformer delivered. High and Low voltage cable runs completed with commissioning of the new HV substation delayed until the July 2022 shutdown due to engineering issues. Commissioning and cut-over sequence have been determined, however the activity of rescheduling sitewide power outage plans continue. Ventilation Upgrade • • Raise-boring completed. Commissioning of the new ventilation system planned for September 2022. Backfill Facility and Infrastructure • • • Construction of the paste plant progressed significantly with the completion of concrete civil works. Structural steel erection continued on the main filter shed, thickener and tailing storage tanks. Commissioning of the paste plant planned for September 2022. The mining schedule has been managed accordingly. Installation of the underground piping infrastructure was underway at year end with installation on track to meet the revised construction schedule. Total Area 5 incurred and committed costs are $53.4 million with a total forecast cost of $61.9 million which includes additional scope for a new water treatment plant. Metallurgical Improvement Program The Metallurgical Improvement Program (“MIP”) is ongoing with three projects remaining. Key MIP workstreams completed and commissioned during the year included: • • Fine spirals replacement completed. Continuous Falcon Concentrate Cleaning Circuit MGS sighter work completed. 6DIRECTORS’ REPORT (continued) For the year ended 30 June 2022 7. Review of Operations (continued) • • • • • • Deslime Circuit Optimisation and Slime Tail Tin Deportment Variability Study complete. Gravity concentrate pumping improvements completed. Carboxymethylcellulose (“CMC”) mixing, and dosing system (for talc management) completed. Primary Grinding/Sulphide Feed Stability Commissioning completed. Sulphide Regrind Stability completed. CCD reconfiguration completed. Commissioning of these remaining projects is expected by the end of CY2022. • • • Tin flotation circuit re-configuration. 50’ thickener decommissioning. Leach feed surge tank commissioning. Thermal Upgrade Project and Rentails Project The Thermal Upgrade Project scoping study was completed during the year. Work on the Rentails Definitive Feasibility Study (“DFS”) continued with the development of preliminary process models and production schedules across the life of mine to inform Stage 1 studies. With Stage 1 largely complete, the focus is now on planning for Stage 2. Key activities during the year included • • • • • • Concentrator: o Detailed review and confirmation of the process design criteria and flowsheet configuration was completed, with all major optionality issues resolved. Technology selection: o Option studies for plant furnace technology, off-gas train configuration, and energy source are now complete. Infrastructure Engineering: o o HV power supply study is nearing completion with draft report received. Development of a preliminary overall water balance completed, and water management and supply strategy for the project defined. Tailings Reclaim, Tailings and Water Management: o o Detailed assessment of the tailings reclaim methodology has concluded reclaim by sluicing only is the most appropriate strategy to carry forward for the project. Work on assessing the most appropriate tailings and other waste streams management strategy was completed, and a clear strategy identified to carry forward into Stage 2. Plant Capacity and Grade: o o Detailed financial analysis to assess the optimum plant capacity and TUP grade was progressed and significantly advanced. Rentails Plant feed grade modelling is now complete with 11% Sn appearing optimum. Safety, Health, Environment & Community: o o o o o Permitting gap analysis and planning strategy is now complete. Flora and fauna field assessments covering all potential project locations (process, pipeline, and tailings storage) have been fully scoped and early works initiated. Development of social license analysis and strategies has continued to be progressed. Scoping of critical field works to support the EIS has commenced. Proposals for permitting (State and National) services were received, with award and commencement planned for early Q3 2022. 7DIRECTORS’ REPORT (continued) For the year ended 30 June 2022 7. Review of Operations (continued) Mt Bischoff Project Mt Bischoff was a significant historical tin operation, producing some 60,000 tonnes of tin metal since the late 1800’s. The project was placed on care and maintenance in 2010 and is entering a phase of rehabilitation. NICKEL DIVISION Spin Out of Nickel Cobalt Assets On 7 January 2022, Metals X completed the sale and spin out of its Nickel asset portfolio, including the Wingellina Nickel-Cobalt Project in Western Australia and the Claude Hills Project located in South Australia to NICO. On 13 January 2022, Metals X was allotted 20,000,000 fully paid ordinary shares (“IPO Shares”) at $0.20 per share issued under the NICO IPO. In addition to the IPO Shares, Metals X received the following upon completion: • • 25,000,000 fully paid ordinary shares in NICO at a deemed issue price of $0.20 per share (“Consideration Shares”), and 25,000,000 options to subscribe for shares in NICO, exercisable at $0.25 each, expiring 3 years after grant. On 15 December 2021, shareholders approved the capital reduction and in-specie distribution of the Consideration Shares. On 19 January 2022, NICO (ASX:NC1) commenced trading on the Australian Securities Exchange (“ASX”). In-Specie Distribution of NICO Shares On 13 January 2022, Metals X completed the in-specie distribution of the Consideration Shares to eligible Metals X shareholders. Metals X requested a Ruling from the ATO to determine whether the in-specie distribution of the Consideration Shares constitutes a dividend, a return of capital, or a combination of the two. The Company anticipates the Ruling to be published in September 2022. 8. Corporate Repayment and Termination of ACT Loan Facility On 13 July 2021, the Company repaid $7.75 million, comprising 50% of the outstanding principal amount of $15.50 million to ACT. On 27 July 2021, the Company announced it had agreed to extend the ACT Loan Facility termination date from 31 July 2021 to 31 January 2022, with all other terms and conditions remaining unchanged. On 30 September 2021, the Company made a final payment of $7.764 million, comprising $7.750 million principal plus interest, to ACT. The ACT Loan Facility terminated on 31 January 2022. Mt Gordon Copper Payment On 8 July 2021, the Company received $11.0 million as settlement of the Copper Payment pursuant to the Mt Gordon Sale Agreement, and subsequent binding variation agreement, with Capricorn Copper Holdings Pty Ltd (“CCH”) and its parent entity, EMR Capital Investment (No. 6B) Pte Ltd. The payment from CCH includes the first and second instalments of $5,000,000 each, the agreed extension fee of $250,000, and interest due, being a total payment of $11.0 million. Investments – Convertible Notes, Shares and Options Cyprium Metals Limited Metals X continues to hold $36.0 million in aggregate in Convertible Notes and 20.3 million options, representing the second tranche of the 40.6 million options issued by Cyprium Metals Limited (“Cyprium”). The first tranche of 20.3 million options were exercisable at a price of $0.3141 and expired out of the money on 30 March 2022. The second tranche of 20.3 million options are exercisable at a price of $0.3551 and expire on 30 March 2023. On 30 March 2022, the Company announced it had received payment of A$1.44 million as settlement of the initial 4% annual coupon payable under the terms of the Convertible Notes. 8DIRECTORS’ REPORT (continued) For the year ended 30 June 2022 8. Corporate (continued) NICO Resources Limited Following completion of the sale of the Company’s Nickel Asset portfolio to NICO and subsequent IPO, Metals X held 21,000,000 fully paid ordinary shares (“Shares”) and 25,000,000 options in NICO. Terms of the shares and options are as follows: • • • • 5,400,000 unrestricted shares (sold). 15,000,000 shares escrowed until 19 January 2023. 700,000 shares in escrowed until 19 January 2024. 25,000,000 options, exercisable at $0.25 each, escrowed until 19 January 2024, expiring 3 years after grant date. During the year, Metals X sold 5,400,000 fully paid shares held in NICO on market and received approximately A$5.95 million (excluding transaction costs). At 30 June 2022, Metals X continues to hold 15,700,000 NICO shares and 25,000,000 options (subject to the various escrow provisions). The options are exercisable after 19 January 2024 and on or before 3 November 2024. There have been no further share sales as at the date of this report Change of Financial Year End On 4 January 2022, the Company announced that its Board of Directors resolved to change the Company’s financial year end from 30 June to 31 December. Metals X current financial year ends on 30 June 2022. Metals X will have a six-month transitional financial year beginning on 1 July 2022 and ending on 31 December 2022, and thereafter, from 1 January 2023 Metals X will revert to a twelve-month financial year, commencing on 1 January and ending on 31 December. The change has been made to align the financial year end of the Company with the financial year end of Bluestone Mines Tasmania Joint Venture Pty Ltd, manager of Renison, in which the Company holds a 50% interest. 9. Dividends No dividend was paid or declared during the year and no dividend has been recommended or declared by the Directors for the year ended 30 June 2022 (30 June 2021: Nil). 10. Unissued Shares under Options During the year, 488,024 options were forfeited due to performance criteria not being achieved or cessation of employment. As at the date of this report, there are no ordinary unissued shares under option (2021: 488,024). There were no shares issued under option in the Company since year end. 11. Significant Events After Balance Date There are no significant events after period end as at the date of this report. 12. Business Strategies and Prospects With the divestments of the non-tin assets, the Company is looking to develop a broader tin portfolio. This may be through expansions of its existing operations or through acquiring interests in other operations. The Company will also look to extract the maximum value from its participation in the financial instruments and shareholdings in the organisations continuing with its former copper and nickel assets. The Group expects to continue its participation in the Renison joint venture, undertaking exploration, mining, processing, production, and marketing of tin. These are described in more detail in Section 7 Review of Operations. 9DIRECTORS’ REPORT (continued) For the year ended 30 June 2022 13. Environmental, Regulation and Performance The Group’s operations are subject to the relevant environmental protection legislation (Commonwealth and State legislation). The Group holds various environmental licenses issued under these laws, to regulate its mining and exploration activities in Australia. These licenses include conditions and regulations in relation to specifying limits on discharges into the air, surface water and groundwater, rehabilitation of areas disturbed during mining and exploration activities and the storage of hazardous substances. All environmental performance obligations are monitored by the Board of directors and subjected from time to time to Government agency audits and site inspections. There have been no material breaches of the Group’s licenses and all mining and exploration activities have been undertaken in compliance with the relevant environmental regulations. The Company has engaged external consultants to assist with developing its Environment, Social and Governance (“ESG”) reporting framework in reference to Global Reporting Initiatives (GRI) Standards and will align the publishing of its 2022 ESG Report with the release of its 6-month transitional Annual Report in 2023. 14. Corporate Governance In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of the Company support and have adhered to the principles of Corporate Governance. The Company’s corporate governance statement is available at https://www.metalsx.com.au/aboutus/ corporate-governance/. 15. Remuneration Report - Audited The Directors of Metals X present the Remuneration Report (the “Report”) for the Group for the year ended 30 June 2022. This Report forms part of the Directors’ Report and has been audited in accordance with section 300A of the Corporations Act 2001 and its regulations. This Report details the remuneration arrangements for the Company’s Key Management Personnel (“KMP”) defined as those who directly or indirectly, have authority and responsibility for planning, directing, and controlling the major activities of the Group, including any Director (whether executive or otherwise) and Executives of the Company. 15.1 Remuneration Policy The Board recognises that the Company’s performance depends upon the quality of its Directors and Executives. To achieve its financial and operating activities, the Company must attract, motivate, and retain highly skilled Directors and Executives. The Company embodies the following principles in its remuneration framework: • • • • Provides competitive rewards to attract high calibre Directors and Executives; Structures remuneration at a level that reflects the Executive’s duties and accountabilities and is competitive within Australia; Benchmarks remuneration against appropriate industry groups; and Aligns Executive incentive rewards with the creation of value for shareholders. Performance related executive remuneration, including cash bonuses, are based on the Company’s and individual performance, and are determined at the Board’s discretion. 15.2 Company Performance The table below shows the Company’s financial performance over the last five years. Performance summary 30 June 2022 30 June 2021 30 June 2020 30 June 2019 30 June 2018 Closing share price $0.34 $0.21 $0.08 $0.25 $0.80 Profit/(loss) per share from continuing operations (cents) 19.44 2.53 (1.46) (17.17) (4.30) Net assets per share 0.34 $0.15 $0.06 $0.15 $0.28 Total shareholder return 62% 172% (68%) (69%) 19% Dividend paid per share (cents) - - - - - 10DIRECTORS’ REPORT (continued) For the year ended 30 June 2022 15. Remuneration Report – Audited (continued) 15.3 Remuneration and Nomination Committee Responsibility The Remuneration and Nomination Committee (the “Committee”) is a subcommittee of the Board and is responsible for making recommendations to the Board on KMP remuneration, and the KMP remuneration framework and incentive plan policies. The Committee assesses the appropriateness of the nature and amount of remuneration of KMP on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high performing KMP. To ensure the Committee is fully informed when making remuneration decisions, it can seek external remuneration advice. No external consultants were utilised during the current year. 15.4 Remuneration of Non-Executive Directors The Company’s Non-Executive Director fee policy is designed to attract and retain high calibre directors who can discharge the roles and responsibilities required in terms of good governance, strong oversight, independence, and objectivity. The Company’s Constitution and the ASX listing rules specify that the aggregate remuneration of Non- Executive Directors, shall be approved periodically by shareholders. The last determination was at the Annual General Meeting held on 26 November 2014 when shareholders approved an aggregate fee pool of $600,000 per year. The amount of the remuneration paid to Non-Executive Directors is reviewed annually, within the aggregate fee pool limit approved by shareholders. 15.5 Remuneration of Executives In determining Executive remuneration, the Committee aims to ensure that remuneration practices are: • • • • • Competitive and reasonable; Enabling the Company to attract and retain high calibre talent; Aligned to the Company’s strategic and business objectives and the creation of shareholder value; Transparent and easily understood; and Acceptable to shareholders. The Company’s approach to remuneration ensures that remuneration is competitive, performance-focused, clearly links appropriate reward with desired business performance, and is simple to administer and understand by Executives and shareholders. 15.6 Executive Remuneration Structure The Company’s remuneration structure provides for a combination of fixed and variable pay with the following components fixed remuneration and short-term incentives (“STI”). The Company does not currently consider the issue of long-term incentive (“LTI”) to Directors and Executives to be appropriate. 15.7 Fixed Remuneration Fixed remuneration consists of base salary, superannuation and other non-monetary benefits designed to reward for: • • • The scope of the Executive’s role; The Executive’s skills, experience, and qualifications; and Individual performance. 15.8 Performance Linked Compensation – STI Directors and Executives may have an STI component included in their remuneration package representing a meaningful “at risk” short-term incentive payment. The payment will be “at risk” in that it will only be payable if a set of clearly defined and measurable performance metrics or Key Performance Indicators (“KPI”) have been met in the applicable performance period. The KPI’s may include a combination of company KPI’s and individual KPI’s. The Board must set KPI’s that are based on metrics that are measurable, transparent, and achievable, designed to motivate and incentivise the recipient to achieve high performance, and are aligned with the Company’s short-term objectives and shareholder value creation. 11DIRECTORS’ REPORT (continued) For the year ended 30 June 2022 15. Remuneration Report – Audited (continued) The STI, if achieved, will be paid annually in cash depending on the eligible employee’s employment contract. STI opportunities will vary from employee to employee depending on role and responsibility and will be set out in employee’s employment contract. The maximum STI award for the Executive Director for 2022 is $264,000 and represents 66% of FY2022 total fixed remuneration (“TFR”) being subject to performance related criteria On 2 August 2022, the Remuneration and Nomination Committee considered the achievement of the Executive Director STI KPI’s at 30 June 2022 and approved a cash bonus payment of $211,000 to Mr Brett Smith. The STI award represents 53% of Executive Director TFR for FY2022 (2021: $150,000 representing 50% TFR for FY2021) The STI award threshold for the Directors Executives are subject to annual review of the Board of Directors. KPIs will be set annually as part of the Annual Business Planning Cycle and are targeted to be finalised no later than the 31 July of each financial year as follows: • • • • KPIs for the Company and Executive Director are set and approved by the Board; KPIs for Senior Executives are set by the Executive Director and approved by the Board; KPIs will be reviewed by the Board to ensure that hurdles are objectively measurable and aligned with Company strategy; and KPI achievement may be subject to ‘gate way’ tests as itemised for a particular KPI (for example, irrespective of performance, a safety KPI will not be deemed achieved in the event that the Company experiences a fatality). KPI Targets and Stretch Targets will generally be aligned with the Company’s strategic plan and may include health, safety and environmental metrics, financial metrics, delivery of projects and growth initiatives, sustainability initiatives and improvements to Company systems and processes. KPI Targets are not the same as Budget Targets. Philosophically, employees are paid their TFR for delivering budget performance and are paid “at risk” compensation for delivering better than budget performance. Stretch performance should be a level beyond this. Targets and Stretch Targets will be developed as part of the Annual Business Planning Cycle. The Board is responsible for the determination of whether the KPI Targets or Stretch Targets have been achieved and how much of the STI will be payable for each performance period. In making such determination it may obtain external expert advice. 15.9 Executive Employment Arrangements and Service Contracts Compensation and other terms of employment for KMP are formalised in contracts of employment. The major provisions of each of the agreements relating to compensation are set out below. The Company may terminate employment agreements immediately for cause, in which the executive is not entitled to any payment other than the value of fixed remuneration and accrued leave entitlements up to the termination date. Name Fixed Remunerati on Variable STI Super- annuation Resigned Notice period (months) Maximum terminatio n payment (months) Directors Mr Peter Gunzburg Mr Brett Smith1, 2 Mr Patrick O’Connor Mr Grahame White Executives Mr Michael Spreadborough Mr Daniel Broughton3 $110,000 $400,000 $80,000 $80,000 - $211,000 - - 10.0% 10.0% 10.0% 10.0% - - - - $2,500 / day $100,000 - - - - 6 August 2021 - - 6 - - 1 - - 6 - - - - 1 On 2 August 2022, the Remuneration and Nomination Committee considered the achievement FY2022 STI KPI’s and approved a cash bonus payment of $211,000 to Mr Brett Smith. The STI awarded represents 80% of FY2022 STI award (exclusive of superannuation). 2 On 1 July 2022, Mr Brett Smith’s TFR increased from $400,000 to $450,000 per annum exclusive of superannuation, plus a total STI award of up to 67% of TFR payable on achievement of FY2023 Executive STI KPI’s. 3 Mr Daniel Broughton provides Chief Financial Officer services under a separate service agreement between Dragon Mining Limited and Metals X. 12DIRECTORS’ REPORT (continued) For the year ended 30 June 2022 15. Remuneration Report - Audited (continued) 15.10 Equity Instruments No options over ordinary shares in the Company were granted as compensation to KMP during the year and no options vested during the year. 15.11 Modifications of Terms of Equity-Settled Share-Based Payment Transactions No terms of equity-settled share-based payment transactions (including options and rights granted as compensation to KMP) have been altered or modified by the issuing entity during the year. 15.12 Exercise of Options Granted as Compensation During the year, no shares were issued on the exercise of options previously granted as compensation to KMP. 15.13 Analysis of Options and Rights Over Equity Instruments Granted as Compensation No options have been issued, granted, or will vest to KMP personnel of the Company. 15.14 Analysis of movements in options and rights There were no options granted during the year ended 30 June 2022 and 30 June 2021 to KMP. 15.15 Shareholdings of Directors and Key Management Personnel Ordinary Fully Paid Shares Balance 1 July 2021 Granted as Remuneration Net Change Other * Balance 30 June 2022 Directors Mr Peter Gunzburg Mr Brett Smith Mr Patrick O’Connor Mr Grahame White Executives Mr Daniel Broughton Total - 210,000 1,000,000 - - 1,210,000 - - - - - - - 40,000 - - - 250,000 1,000,000 - - 40,000 - 1,250,000 Ordinary Fully Paid Shares Balance 1 July 2020 Granted as Remuneration Net Change Other Balance 30 June 2021 Directors Mr Peter Gunzburg Mr Brett Smith Mr Patrick O’Connor Mr Grahame White Executives Mr Simon Rigby(1) Mr Stephen Robinson(1) Ms Fiona Van Maanen(1) Mr Daniel Broughton Total - 160,000 1,000,000 - 23,334 338,983 607,882 - 2,130,199 - - - - - - - - - - 50,000 - - (23,334) (338,983) (607,882) - (920,199) - 210,000 1,000,000 - - - - - 1,210,000 (1) Movement due to cessation of employment. 1315.16 Directors and Executive Officers Remuneration In dollars Directors Mr Peter Gunzburg (Non-Executive Chairman) Mr Brett Smith (Executive Director) Mr Grahame White (Non-Executive Director) Mr Patrick O'Connor 4 (Non-Executive Director) Mr Brett Lambert 3 (Independent Non-Executive Director) Mr Anthony Polgase 3 (Independent Non-Executive Director) Total all specified Directors Specified Executives Mr Daniel Broughton 1 6 (Chief Financial Officer) Mr Michael Spreadborough 2 (Chief Executive Officer) Mr Simon Rigby 5 7 (GM Geology & Business Development) Mr Stephen Robinson 5 7 (GM Projects and Planning) Ms Fiona Van Maanen 5 7 (CFO and Company Secretary) Total all named Executives Total all specified Directors and Executives 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Short-Term Long-Term Benefits Post- Employment Share Based Payments Salary & Fees AUD Non-Monetary Benefits AUD Bonuses AUD Employee Entitlements AUD Super- annuation Benefits AUD Termination Payments Options AUD AUD Total Emoluments AUD Proportion of Remuneration Performance Related % 110,000 98,172 440,262 294,677 80,000 70,833 80,000 110,167 - 2,151 - 2,192 710,262 578,192 100,000 50,000 34,243 591,777 - 171,873 - 169,231 - 170,358 134,243 1,153,244 844,505 1,731,436 - - - - - - - 4,276 - - - - - 4,276 - - - 10,928 - 7,517 - 7,327 - 7,517 - 33,289 - 37,565 - - 211,000 150,000 - - - - - - - - 211,000 150,000 - - - - - - - - - - - - 211,000 150,000 - - - - - - - - - - - - - - - - - - - 12,103 - 11,840 - 15,715 - 39,658 - 39,658 11,000 9,326 65,126 42,994 8,000 6,729 8,000 6,806 - 204 - 219 92,126 66,278 - - - - - 16,328 - 16,077 - 16,851 - 49,256 92,126 115,534 - - - - - - - - - - - - - - - - - - - (36,838) - (45,660) (44,591) - (127,089) - (127,089) - - - - - - - - - - - - - - - - - - - 91,667 - 112,981 273,973 - 478,621 - 478,621 121,000 107,498 716,388 487,671 88,000 77,562 88,000 121,249 - 2,355 - 2,411 1,013,388 798,746 100,000 50,000 34,243 602,705 - 262,655 - 271,796 - 439,823 134,243 1,626,979 1,147,631 2,425,725 - - 29% 31% - - - - - - - - 21% 19% - - - - - - - - - - - - 18% 6% 1 Mr Daniel Broughton provides Chief Financial Officer services under a separate service agreement between Dragon Mining Limited and Metals X. 2 Resigned 6 August 2021. 3 Resigned 12 November 2020. 4 Resigned as Executive Chairman, continued Non-Executive Director 10 July 2020. 5 Resigned 4 December 2020. 6 Appointed 4 December 2020. 7 Share based payments have been reversed as a result of resignations. 14DIRECTORS’ REPORT (continued) For the year ended 30 June 2022 16. Indemnification and Insurance of Directors, Officers, and Auditors The Company provides Directors’ and Officers’ liability insurance covering Directors’ and Officers of the Company against liability in their role with the Company, except where: • • The liability arises out of conduct involving a wilful breach of duty; or There has been a contravention of Sections 232(5) or (6) of the Corporations Act 2001. The Directors’ have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of this insurance, as such disclosure is prohibited under the terms of the contract. To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the year end. 17. Lead Auditor’s Independence Declaration The Directors have received confirmation from the auditor of Metals X that they are independent of the Company. A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is included on page 59 of this report. 18. Non-Audit Services The following non-audit services were provided by the entity’s auditor, Ernst & Young. The Directors are satisfied that the provision of non-audit is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Ernst & Young received or are due to receive the following amounts for the provision of non-audit services (refer to note 22 of the consolidated financial statements): Tax Compliance Services $0.080 million. 19. Rounding The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (unless otherwise stated), and where noted ($’000) under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors Report) Instrument 2016/191. The Company is an entity to which the instrument applies. Signed in accordance with a resolution of the Directors’. Brett Smith Executive Director 31 August 2022 15CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2022 Continuing operations Revenue Cost of sales Gross profit Contingent consideration income Other income General and administrative expenses Commodity and foreign exchange gain/(loss) Finance costs Fair value (loss)/gain on financial assets Share-based payment reversal Profit before tax Income tax benefit Notes 3 5(a) 4 4 5(b) 5(c) 5(d) 5(e) 21 6 2022 $'000 228,876 (98,300) 130,576 - 7,698 (3,438) 42 (610) (478) 22 133,812 42,525 2021 $'000 93,834 (75,145) 18,689 10,250 1,945 (5,775) (1,866) (2,999) 2,337 344 22,925 - Profit for the year from continuing operations 176,337 22,925 Discontinued operations Profit for the year from discontinued operations 25 7,557 64,274 Profit attributable to: Members of the parent Total comprehensive income attributable to: Members of the parent Basic earnings and diluted earnings per share attributable to the ordinary equity holders of the parent (cents per share) From continuing operations From discontinued operations Total 183,894 87,199 183,894 87,199 7 7 19.44 0.83 20.27 2.53 7.08 9.61 16CONSOLIDATED STATEMENT OF FINANCIAL POSITION For the year ended 30 June 2022 Current assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Assets classified as held for sale Convertible Note receivable Derivative financial instruments Total current assets Non-current assets Other receivables Convertible Note receivable Derivative financial instruments Investment in associate Property, plant, and equipment Mine properties and development costs Exploration and evaluation expenditure Deferred tax asset Total non-current assets Total assets Current liabilities Trade and other payables Liabilities directly associated with assets classified as held for sale Provisions Interest bearing liabilities Total current liabilities Non-current liabilities Provisions Interest bearing liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Accumulated losses Share based payments reserve Total equity Notes 8 9 10 12 12 9 12 12 11 13 14 15 6 16 17 18 17 18 19 20 21 2022 $'000 122,248 11,664 23,583 588 - 360 14,238 172,681 3,457 28,672 - 3,140 58,725 42,129 352 42,525 179,000 351,681 19,185 - 3,551 1,945 24,681 15,706 1,612 17,318 41,999 2021 $'000 15,778 21,121 20,526 570 4,648 360 2,332 65,335 3,457 37,246 3,091 - 36,034 37,884 352 - 118,064 183,399 8,675 43 3,531 17,364 29,613 12,456 2,684 15,140 44,753 309,682 138,646 319,570 (37,703) 27,815 309,682 332,406 (221,597) 27,837 138,646 17CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2022 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Other income Interest paid Notes 2022 $'000 242,398 (93,451) 1,493 95 (539) Net cash flows from operating activities 8 149,996 Cash flows from investing activities Payments for property, plant, and equipment Payments for mine properties and development Payments for exploration and evaluation Payments for other financial assets Payments for investment in associate Proceeds from sale of financial assets Proceeds from disposal of subsidiary Proceeds from sale of property plant and equipment Proceeds from release of performance bond facility Net cash flows (used in)/from investing activities Cash flows from financing activities Repayment of borrowings Payment of lease and hire purchase liabilities Proceeds from borrowings Net cash flows used in financing activities Net increase/(decrease) in cash and cash equivalents Cash at the beginning of the year Cash and cash equivalents at the end of the year 8 (26,562) (9,566) (645) - (4,050) 5,954 11,000 41 - (23,828) (15,528) (1,864) - (17,392) 108,776 13,472 122,248 2021 $'000 86,499 (79,197) 57 68 (3,023) 4,404 (12,618) (8,500) (1,549) (30) - 78 26,768 2,018 6,521 12,688 (47,985) (3,039) 33,309 (17,715) (623) 14,095 13,472 18CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2022 At 1 July 2020 Profit for the year Total comprehensive profit for the year Other Share-based payment reversal At 30 June 2021 At 1 July 2021 Profit for the year Total comprehensive profit for the year Transactions with owners in their capacity as owners In-specie distribution1 Other Share-based payment reversal At 30 June 2022 Issued capital Accumulated losses Share based payments reserve Total Equity $'000 332,406 - - - $'000 (308,796) 87,199 87,199 - 332,406 (221,597) 332,406 - - (12,836) 319,570 - 319,570 (221,597) 183,894 183,894 - (37,703) - (37,703) $'000 28,181 - - (344) 27,837 27,837 - - - 27,837 (22) 27,815 $'000 51,791 87,199 87,199 (344) 138,646 138,646 183,894 183,894 (12,836) 309,704 (22) 309,682 1 On 12 January 2022, the Company requested determination from the ATO ruling on whether the in-specie distribution constitutes a dividend, return of capital, or a combination of the two. The company anticipates the Ruling being published in September 2022. 19NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 1. Corporate Information and Summary of Accounting Policies The financial report of Metals X Limited (the “Company” or “Parent”) for the year ended 30 June 2022 was authorised for issue in accordance with a resolution of the Directors on 31 August 2022. The Company was incorporated and domiciled in Australia and is a for profit company limited by shares which are publicly traded on the Australian Securities Exchange. The consolidated financial statements comprise the financial statements of the Parent and its subsidiaries (the “Group”). The Company’s registered office address is Unit 202, Level 2, 39 Mends Street, South Perth WA 6151. a) Basis of preparation of the consolidated financial report The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on a historical cost basis, except for certain financial instruments measured at fair value through profit and loss. The amounts contained in the financial statements have been rounded to the nearest thousand dollars unless otherwise stated (where rounding is applicable) under the option available to the Group under ASIC Corporations (Rounding in Financial Report) Instrument 2016/191. Both the functional and presentation currency of the Group is Australian dollars (A$). b) Statement of compliance The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. c) New and amended accounting standards and interpretations Since 1 July 2021, the Group has adopted all Accounting Standards and Interpretations effective from 1 July 2021. The accounting policies adopted are consistent with those of the previous financial year. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. d) Changes in accounting policies and disclosures Certain new and amended accounting standards and interpretations have been issued that are not mandatory for 30 June 2022 reporting periods. These standards and interpretations have not been early adopted. The Company has performed a preliminary assessment of the standards and interpretations below and anticipates no material impact on the balances and transactions presented in these financial statements when they come into effect. Reference to the Conceptual Framework – Amendments to AASB 3 – Business Combinations (effective 1 January 2022) The amendments add an exception to the recognition principle of AASB 3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of AASB 137 Provisions, Contingent Liabilities and Contingent Assets or Interpretation 21 Levies, if incurred separately. The exception requires entities to apply the criteria in AASB 137 or Interpretation 21, respectively, instead of the Conceptual Framework, to determine whether a present obligation exists at the acquisition date. At the same time, the amendments add a new paragraph to AASB 3 to clarify that contingent assets do not qualify for recognition at the acquisition date. The amendments are intended to update a reference to the Conceptual Framework without significantly changing requirements of AASB 3. The amendments will promote consistency in financial reporting and avoid potential confusion from having more than one version of the Conceptual Framework in use. Property, Plant and Equipment: Proceeds before Intended Use – Amendments to AASB 116 (effective 1 January 2022) The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment (PP&E), any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the costs of producing those items, in profit or loss. Classification of Liabilities as Current or Non-current – Amendments to AASB 101 (effective 1 January 2023) The amendments clarify that if an entity’s right to defer settlement of a liability is subject to the entity complying with specified conditions, the entity has a right to defer settlement of the liability at the end of the reporting period if it complies with those conditions at that date. The amendments also clarify that the requirement for the right to exist at the end of the reporting period applies regardless of whether the lender tests for compliance at that date or later. 20NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 1. Corporate Information and Summary of Accounting Policies (continued) Amendments to AASB 137 - Onerous Contracts – Costs of Fulfilling a Contract (effective 1 January 2022) The amendments to AASB 137 Provisions, Contingent Liabilities and Contingent Assets to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a ‘directly related cost approach’. The costs that relate directly to a contract to provide goods or services include both incremental costs (e.g., the costs of direct labour and materials) and an allocation of costs directly related to contract activities (e.g., depreciation of equipment used to fulfil the contract as well as costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments are intended to provide clarity and help ensure consistent application of the standard. Entities that previously applied the incremental cost approach will see provisions increase to reflect the inclusion of costs related directly to contract activities, whilst entities that previously recognised contract loss provisions using the guidance from the former standard, AASB 111 Construction Contracts, will be required to exclude the allocation of indirect overheads from their provisions. Amendment to AASB 9 – Fees in the ‘10 per cent’ Test for Derecognition of Financial Liabilities Effective for annual reporting periods beginning on or after 1 January 2022 Under AASB 9, an existing financial liability that has been modified or exchanged is considered extinguished when the contractual terms of the new liability are substantially different, measured by the ’10 per cent’ test. That is, when the present value of the cash flows under the new terms, including any fees paid or received, is at least 10 per cent different from the present value of the remaining cash flows of the original financial liability. The amendment to AASB 9 clarifies that fees included in the 10 per cent test are limited to fees paid or received between the borrower and the lender, including amounts paid or received by on the other’s behalf. When assessing the significance of any difference between the new and old contractual terms, only the changes in contractual cash flows between the lender and borrower are relevant. Consequently, fees incurred on the modification or exchange of a financial liability paid to third parties are excluded from the 10 per cent test. For example, valuation and legal fees paid by the borrower to third-party consultants, will not be included in the 10 per cent test. However, if the modification is not determined to be an extinguishment, such costs would be capitalised and subsequently amortised with a revision to the effective interest rate. AASB 2021-2 Amendments to AASB 108 – Definition of Accounting Estimates Effective for annual reporting periods beginning on or after 1 January 2023. An accounting policy may require items in the financial statements to be measured using information that is either directly observable or estimated. Accounting estimates use inputs and measurement techniques that require judgements and assumptions based on the latest available, reliable information. The amendments to AASB 108 clarify the definition of an accounting estimate, making it easier to differentiate it from an accounting policy. The distinction is necessary as their treatment and disclosure requirements are different. Critically, a change in an accounting estimate is applied prospectively whereas a change in an accounting policy is generally applied retrospectively18. The new definition provides that ‘Accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty.’ The amendments explain that a change in an input or a measurement technique used to develop an accounting estimate is considered a change in an accounting estimate unless it is correcting a prior period error. For example, a change in a valuation technique used to measure the fair value of an investment property from market approach to income approach would be treated as a change in estimate rather than a change in accounting policy. In contrast, a change in an underlying measurement objective, such as changing the measurement basis of investment property from cost to fair value, would be treated as a change in accounting policy. The amendments did not change the existing treatment for a situation where it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate. In such a case, the change is accounted for as a change in an accounting estimate. The amendments are applied prospectively. Earlier application is permitted. 21NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 1. e) Corporate Information and Summary of Accounting Policies (continued) Basis of consolidation The consolidated financial statements comprise the financial statements of the Group as at 30 June 2022. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and can affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: • • • power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee); exposure, or rights, to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect its returns. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: • • • the contractual arrangement with the other vote holders of the investee; rights arising from other contractual arrangements; and the Group’s voting rights and potential voting rights. The Group re-assesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income, and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-Group assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. f) Transactions and balances Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange at the reporting date. All exchange differences in the consolidated financial report are taken to the profit or loss. g) Other accounting policies Significant and other accounting policies that summarise the measurement basis used and are relevant in understanding of the consolidated financial statements are provided throughout the notes to the consolidated financial statements. h) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction, or production of a qualifying asset (i.e., an asset that necessarily takes a substantial amount of time to prepare for its intended use or sale) are capitalised as part of the cost of that asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. i) Goods and service taxes (GST) Revenues, expenses, and assets are recognised net of the amount of GST except: • • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated statement of financial position. Cash flows are included in the consolidated statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of amounts of GST recoverable from, or payable to, the taxation authority. 22NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 1. j) Corporate Information and Summary of Accounting Policies (continued) Investment in associates An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries. The Group’s investment in its associate are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impairment separately. The statement of profit or loss reflects the Group’s share of the results of operations of the associate. Any change in other comprehensive income (“OCI”) of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate. The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognises the loss within “share of profit of an associate” in the statement of profit or loss. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. k) Significant accounting judgements, estimates and assumptions The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the consolidated financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue, and expenses. Management bases its judgements and estimates on historical experience, independent experts, and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Management has identified the following critical accounting policies for which significant judgements have been made as well as the following key estimates and assumptions that have the most significant impact on the consolidated financial statements. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Note Key estimate or judgement Revenue – note 3(a), 3(b), 3(c) and 3(d) Property, plant and equipment and depreciation - note 13 Mine property and development and amortisation - note 14 Provisions - note 17 • • • • • • • • • • • Identification of the enforceable contract Identification of performance obligations for arrangements subject to CIF Incoterms Principal versus agent considerations – freight/shipping services Determining the timing of satisfaction of freight/shipping services Life of mine method of depreciation provided incorporating residual values and useful lives Determination of mineral resources and ore reserves Life of mine method of amortisation based on units of production (“UOP”) resulting in an amortisation charge proportional to the depletion of the economically recoverable mineral reserves Impairment of capitalised mine development expenditure Estimate of future capital development expenditure Future cash flows (amounts and timing) required to rehabilitate Discount rate 23NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 1. Corporate Information and Summary of Accounting Policies (continued) Convertible Note receivable Derivative financial instruments – note 2(g) and 12. Investment in an associate Share price volatility Determination of forecast commodity prices • • • Market interest rate • Determination on whether the Group has significant influence in the policy making process of the investee 2. Financial Risk Management Objectives and Policies The Group’s principal financial instruments comprise receivables, payables, lease liabilities, cash and short-term deposits, derivative financial instruments, and equity investments. Risk exposures and responses The Group manages its exposure to key financial risks in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets while protecting future financial security. The Group enters derivative transactions, principally forward commodity swaps, from time to time, to manage the commodity price risks arising from the Group’s operations. The Group did not have any derivative transactions as at 30 June 20212 of these types. Historically, these derivatives provide economic hedges, but do not qualify for hedge accounting and are based on limits set by the Board. The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, commodity risk, credit risk, equity price risk and liquidity risk. The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate, foreign exchange risk and assessments of market forecasts for interest rate, foreign exchange, and commodity prices. Ageing analysis and monitoring of receivables are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts. Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for managing each of the identified risks, including for interest rate risk, credit allowances and cash flow forecast projections. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in the notes to the consolidated financial statements. The accounting classification of each category of financial instruments, as defined in the notes to the consolidated financial statements, and their carrying amounts, are set out below: a) Interest rate risk The Group’s exposure to risks of changes in market interest rates relate primarily to the Group’s interest-bearing labilities, trade receivables at fair value through the profit and loss, financial assets at fair value through profit or loss, Convertible Note receivable, other receivables, and cash balances. The Group’s policy is to manage its interest cost using fixed rate debt where possible. The Group regularly reviews its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative financing positions and the mix of fixed and variable interest rates. The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. The sensitivity analysis is for variable rate interest bearing loans and cash balances. At 30 June 2022, if interest rates had moved by a reasonably possible 1.50% (2021: 0.25%) as illustrated in the table below, with all other variables held constant, post tax profits and equity would have been affected as follows: Judgement of reasonably possible movements: + 1.50% (150 basis points) - 1.50% (150 basis points) Judgement of reasonably possible movements: + 0.25% (25 basis points) - 0.25% (25 basis points) Post tax profit higher/(lower) 2022 $’000 772 (772) 2021 $’000 17 (17) 24NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 2. Financial Risk Management Objectives and Policies (continued) A sensitivity of +1.50% or -1.50% has been selected as this is considered reasonable given the current level of short- term and long-term interest rates. The movements in profit are due to possible higher or lower interest payable or receivable from variable rate interest bearing loans and cash balances. At balance date, the Group’s exposure to interest rate risk for classes of financial assets and financial liabilities is set out below. 2022 ($’000) Financial assets Cash and cash equivalents Trade receivables at fair value through the profit and loss Convertible Note receivable Financial assets at fair value through profit or loss Financial liabilities Trade and other payables Interest bearing liabilities Net financial assets/(liabilities) 2021 ($’000) Financial assets Cash and cash equivalents Trade receivables at fair value through the profit and loss Other receivables Convertible Note receivable Financial assets at fair value through profit or loss Financial liabilities Trade and other payables Interest bearing liabilities Net financial assets/(liabilities) b) Credit risk 125,036 25,122 Floating interest 121,615 3,421 - - - - - 125,036 Floating interest 12,869 9,147 - - - Fixed interest Non-interest bearing Total carrying amount 145 - 24,977 - - (3,557) (3,557) 21,565 488 - 4,055 14,238 18,781 (19,185) - (19,185) (404) 122,248 3,421 29,032 14,238 168,939 (19,185) (3,557) (22,742) 146,197 Fixed interest Non-interest bearing Total carrying amount 60 - 11,000 22,095 - 543 - - 15,511 5,423 13,472 9,147 11,000 37,606 5,423 22,016 33,155 21,477 76,648 - - - 22,016 - (20,048) (20,048) 14,161 (8,675) - (8,675) 12,802 (8,675) (20,048) (28,723) 48,979 Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The Group’s maximum exposures to credit risk at reporting date in relation to each class of financial asset is the carrying amount of those assets as indicated in the consolidated statement of financial position. Credit risk is managed on a Group basis. Credit risk predominantly arises from cash, cash equivalents, derivative financial instruments, deposits with banks and financial institutions receivables and Convertible Note receivables. The Group has in place policies that aim to ensure that derivative counterparties and cash transactions are limited to high credit quality financial institutions and that the amount of credit exposure to any one financial institution is limited as far as is considered commercially appropriate. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: Cash and cash equivalents and other financial assets are held with ANZ Bank and the National Australia Bank, Australian Banks with an AA- credit rating (Standard & Poor’s). Significant concentrations of credit risk are in relation to cash and cash equivalents with Australian banks. Receivable balances are monitored on an ongoing basis with the result that the Group does not have a significant exposure to bad debts. The Group does not hold any credit derivatives to offset its credit exposure. 25NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 2. Financial Risk Management Objectives and Policies (continued) The Group trades only with recognised, creditworthy third parties and as such collateral, letters of credit or other forms of credit insurance is not requested nor is it the Group’s policy to securitise its trade and other loans and receivables. The Group evaluates the concentration of risk with respect to trade receivables as low, as its customers are in several jurisdictions and operate in largely independent markets. At 30 June 2022, the Group had three customers (2021: two customers) that each owed the Group $698,132, $1,688,777 and $1,033,193 respectively (2021: $8,899,000 and 248,000 respectively) and accounted for approximately 100% (2021: 100%) of all trade receivables owing. At 30 June 2022, there are no trade receivables at amortised cost that are past due. c) Equity security price risk The Group’s income may be exposed to equity security price fluctuations arising from investments in equity securities and the options available to the Group. At the balance date the group had the following exposure to equity price risk: Cyprium Convertible Note NICO Options Cyprium Options 2022 $’000 29,032 13,650 588 43,270 2021 $’000 37,606 - 5,393 42,999 At 30 June 2022, if the underlying equity price in NICO and Cyprium had moved by a reasonably possible 10%, as illustrated in the table below, with all other variables held constant, post tax profits and equity would have been affected as follows: Judgement of reasonably possible movements: Equity price +10% Equity price -10% d) Foreign currency risk Post tax profit higher/(lower) 2022 $’000 1,680 (1,680) 2021 $’000 2,800 (2,800) Other comprehensive income higher/(lower) 2022 $’000 - - 2021 $’000 - - As a result of tin concentrate sales receipts being denominated in US dollars, the Group’s cash flows can be affected by movements in the US dollar/Australian dollar exchange rate. At the balance date the Group had the following exposure to US dollar foreign currency: Cash and cash equivalents Trade and other receivables 2022 $’000 488 3,421 3,909 2021 $’000 543 9,147 9,680 At 30 June 2022, if foreign currency rates had moved by a reasonably possible 10%, as illustrated in the table below, with all other variables held constant, post tax profits and equity would have been affected as follows: Judgement of reasonably possible movements: A$/US$ Rate +10% A$/US$ Rate -10% Post tax profit higher/(lower) 2022 $’000 274 (274) Other comprehensive income higher/(lower) 2022 $’000 - - 2021 $’000 - - 2021 $’000 969 (969) A sensitivity of +10% or -10% has been selected as this is considered reasonable given recent fluctuations in foreign currency rates and management’s expectations of future movements. The overall sensitivity for post-tax profits in 2022 is lower than 2021 due to a lower value exposed to fluctuations in US dollar foreign currency. 26NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 2. e) Financial Risk Management Objectives and Policies (continued) Commodity price risk The Group is exposed to movements in the tin price. As part of the risk management policy of the Group, a variety of financial instruments (such as forward commodity swaps) may be used from time to time to reduce exposure to unpredictable fluctuations in the project life revenue streams. At 30 June 2022, the Group did not hold any commodity derivatives (30 June 2021: Nil). At balance date, the Group had the following exposure to commodity price risk: Trade and other receivables 2022 $’000 3,421 3,421 2021 $’000 9,147 9,147 At 30 June 2022, if commodity price had moved by a reasonably possible 10%, as illustrated in the table below, with all other variables held constant, post tax profits and equity would have been affected as follows: Judgement of reasonably possible movements: Tin Price +10% Tin Price -10% f) Liquidity risk Post tax profit higher/(lower) 2022 $’000 647 (647) 2021 $’000 1,516 (1,516) Other comprehensive income higher/(lower) 2022 $’000 - - 2021 $’000 - - Liquidity risk arises from the financial liabilities of the Group and the subsequent ability to meet the obligations to repay the financial liabilities as and when they fall due. The Group’s objective is to maintain a balance between continuity of funding and flexibility using finance and hire purchase leases. The tables below reflect all contractually fixed payables for settlement repayment resulting from recognised financial liabilities as of 30 June 2022. Cash flows for financial liabilities without fixed amount or timing are based on the conditions existing as 30 June 2022. The remaining contractual maturities of the Group’s financial liabilities are: 2022 ($’000) Financial liabilities Trade and other payables Lease liabilities Total outflow 2021 ($’000) Financial liabilities Trade and other payables Lease liabilities Interest bearing loans Total outflow g) Fair values <6 months 6-12 months 1-5 years >5 years Total (10,699) (973) (11,672) - (973) (973) - (1,703) (1,703) - - - (10,699) (3,649) (14,348) <6 months 6-12 months 1-5 years >5 years Total (8,675) (832) (15,528) (25,035) - (1,004) - (1,004) - (2,684) - (2,684) - - - - (8,675) (4,520) (15,528) (28,723) For all financial assets and liabilities recognised in the consolidated statement of financial position, carrying amount approximates fair value unless otherwise stated in the applicable notes. The methods for estimating fair value are outlined in the relevant notes to the consolidated financial statements. The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise: Level 1 - the fair value is calculated using quoted prices in active markets. Level 2 - Level 3 - the fair value is estimated using inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from price). the fair value is estimated using inputs for the asset or liability that are not based on observable market data. 27 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 2. Financial Risk Management Objectives and Policies (continued) Quoted market price (Level 1) $'000 - - - - Quoted market price (Level 1) $'000 - - - - - 30 June 2022 Valuation technique market observable inputs (Level 2) $'000 3,421 - Valuation technique non-market observable inputs (Level 3) $'000 - 29,032 - 3,421 14,238 43,270 30 June 2021 Valuation technique market observable inputs (Level 2) $'000 9,147 30 - Valuation technique non-market observable inputs (Level 3) $'000 - - 37,606 - 9,177 5,393 42,999 Total $'000 3,421 29,032 14,238 46,691 Total $'000 9,147 30 37,606 5,393 52,176 Trade receivables at fair value1 Convertible Note receivable3 Derivative financial instruments4 Trade receivables at fair value1 Unlisted equity investments2 Convertible Note receivable3 Derivative financial instruments4 1 The fair value of trade receivables relates to tin concentrate provisionally sold at the reporting date. The fair value is based on the applicable KLM or LME forward prices. 2 Quoted market price represents the fair value determined based on quoted prices on active markets as at the reporting date without any deduction for transaction costs. The fair value of equity investments and derivatives are based on quoted market prices. Unlisted equity investments are recognised at cost. 3 The carrying value of the Convertible Note receivable on inception was equivalent to $35.070 million and on 30 June 2022 $29.032 million (2021: 37.606 million). The change in fair value resulted from $8.574 million in remeasurement. To estimate the fair value of the Convertible Notes, the Group uses a discounted cash flow (“DCF”) technique, applying market interest rates. In addition, the Group adds the fair value of the conversion option. Exercising the conversion option would result in the Group receiving 101.380 million shares in Cyprium Metals Limited (“Cyprium”). The fair value is estimated using a Black & Scholes valuation model (“B&S Model”). The inputs to these models and techniques require a degree of judgement, including consideration of the risk-free rates, share price volatility and market interest rates. The inputs used to value the Convertible Notes at 30 June 2022 are as follows: Expected volatility Risk-free interest rate Expected life Options exercise price Share price at valuation date Expiry date/maturity date Face value of Convertible Notes Market interest rates Fair value per instrument Number of instruments Total fair value at 30 June 2022 B&S Model 100% 3.155% 2.75 years $0.3551 $0.110 30 Mar 2025 - - $0.040 101,379,893 $4.055m DCF Total Fair Value at 30 June 2022 - - 2.75 years - - 30 Mar 2025 $36.000 million 20% - - $24.977m $29.032 28NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 2. Financial Risk Management Objectives and Policies (continued) The inputs used to value the Convertible Notes at 30 June 2021 are as follows: Expected volatility Risk-free interest rate Expected life Options exercise price Share price at valuation date Expiry date/maturity date Face value of Convertible Notes Market interest rates Fair value per instrument Number of instruments Total fair value at 30 June 2021 B&S Model 100% 0.77% 3.75 years $0.3551 $0.250 30 Mar 2025 - - $0.153 101,379,893 $15.511m DCF Total Fair Value at 30 June 2021 - - 3.75 years - - 30 Mar 2025 $36.000 million 20% - - $22.095m $37.606m 4 The derivative financial assets include the remaining 20.3 million options, representing the second tranche of the 40.6 million options, to acquire shares in Cyprium and 25 million options to acquire shares in NICO (together “Options”). The fair value of the Options was determined using a B&S Model, which considers factors including the option’s exercise prices, the volatility of the underlying share price, the risk-free interest rate, the market price of the underlying share at measurement date and the expected life of the Options. Cyprium options The first tranche of 20.3 million options were exercisable at a price of $0.3141 and expired out of the money on 30 March 2022 (2021: 20.3 million options $2.352 million). At 30 June 2022, the fair value of the second tranche of 20.3 million options (“T2”) is $0.588 million (2021: 20.3 million options $3.041 million). The change in fair value of $2.453 million is the result of a valuation remeasurement using the B&S Model. Exercising the options can result in bonus shares being awarded to the Group depending on the copper price on the date of exercise. To accommodate the additional award, the Group has estimated the fair value of the bonus shares that are most likely to be awarded at the exercise dates, which is judged to be the expiry dates. The number of bonus shares to be awarded is estimated with reference to forecast copper prices on the expiry dates and applying the pre- set factor. The increase in fair value is then calculated by applying that factor to the number of Cyprium options converted and multiplying by the price of Cyprium shares, on the measurement dates. NICO options The fair value of the 25.0 million NICO options at 30 June 2022 is $13.650 million (2021: Nil). The inputs used to value the NICO and Cyprium options at 30 June 2022 are as follows: Expected volatility Risk-free interest rate Expected life of options Options exercise price Share price at measurement date Forecast copper price per tonne Bonus share factor / award Expiry date Fair value as at 30 June 2022 NICO Options Cyprium T2 Options 85% 2.725 2.35 years $0.250 $0.730 N/A N/A 3 Nov 2024 $13.650m 100% 2.725 0.75 years $0.3551 $0.110 $US 8,976 1.2x 30 Mar 2023 $0.142m Cyprium T2 Bonus Shares - - - - $0.110 - 4.055 m - $0.446m Total Fair Value at 30 June 2022 $14.238 m 29 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 2. Financial Risk Management Objectives and Policies (continued) The inputs used to value the Cyprium options at 30 June 2021 are as follows: Expected volatility Risk-free interest rate Expected life of options Options exercise price Share price at measurement date Forecast copper price per tonne Bonus share factor / award Expiry date Total fair value as at 30 June 2021 T1 Options 100% 0.06% 0.75 years $0.3141 $0.250 $US 8,752 1.2x 30 Mar 2022 $1.338m T2 Options 100% 0.06% 1.75 years $0.3551 $0.250 $US 8,204 1.2x 30 Mar 2023 $2.027m Total Fair Value at 30 June 2021 T1 Bonus Shares - - - - $0.205 - 4.045 m T2 Bonus Shares - - - - $0.250 - 4.045 m - - $1.014m $1.014m $5.393m The effects of fair value changes are reflected in the consolidated statement of comprehensive Income. Significant estimates and judgments – level 3 inputs The following significant estimates and judgments were made for inputs used in determining the fair value of financial instruments categorised as level 3: (i) Volatility for buyer options and conversion feature Management used an external expert to assist with the estimate of volatility for the purposes of its Black Scholes valuation technique. Volatility was estimated based on the performance of the shares of the loaned party, Cyprium, over a historical period equivalent to that of the time to expiry of the option being valued. Due to NICO’s limited trading history, the volatilities of comparable ASX-listed companies were used. The volatility of the share price of comparable companies was calculated over historical one, two and three year periods using historical data extracted from Bloomberg. (ii) Market interest rates Management used an external expert to assist with the estimate of the market interest rate of borrowing. The estimate compared the terms and conditions of the Group’s Convertible Note to a lending transaction that was judged to have the most similar characteristics. The lending rate in this comparable transaction was 15%. The rate was benchmarked to other lending transactions that were similar in terms and conditions but not as alike. The rate was then risk-adjusted by adding 5% to estimate a market interest rate of 20% of which management has adopted in its valuation technique. The risk adjustment was estimated to address differences between the stages of operations when comparing the loaned party in the comparative lending arrangements to that of the Group’s counterparty, Cyprium. A range of 15% - 25% was then estimated to be appropriate to address inherent estimation uncertainty. (iii) Copper price forecasts Management used an external expert to assist with the estimate of future copper prices. Future copper prices were estimated based on Consensus Economics forecasts. 30NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 2. Financial Risk Management Objectives and Policies (continued) A quantitative sensitivity analysis as at 30 June 2022 is shown below: Instrument Convertible Note receivable Valuation technique DCF Significant unobservable inputs Market interest rates Value/ 20% Black & Scholes Volatility 100% Derivative financial instruments – T2 Black & Scholes model plus share price * estimated bonus shares to be awarded based on forecast copper price Copper price forecasts on 31 March 2023 US$8,976 Volatility 100% Derivative financial instruments – NICO Options Black & Scholes model Volatility 85% h) Changes in liabilities arising from financing activities The Group classifies interest paid as cash flows from operating activities. Sensitivity of the input to fair value 1.5% change in the market interest rate would result in a change in fair value by +/-$0.800 million. +/(-)10% change in volatility would result in a change in fair value of $0.716 and ($0.734) million. +/(-)$500 change in copper price would result in a change in fair value of $0.223 million and ($0.000) million. +/(-)10% change in volatility would result in a change in fair value of $0.055 million and ($0.047) million. +/(-)10% change in volatility would result in a change in fair value of $0.355 million and ($0.341) million. Current interest-bearing loans and borrowings Non-current interest bearing loans and borrowings Total liabilities from financing activities Current interest-bearing loans and borrowings Non-current interest bearing loans and borrowings Total liabilities from financing activities 1 July 2021 $’000 Payments Net Transfers & New Leases New loans 30 June 2022 $’000 17,364 (16,600) 1,181 2,684 - (1,072) 20,048 (16,600) 109 - - - 1,945 1,612 3,557 1 July 2020 $’000 Payments Net Transfers & New Leases New loans 30 June 2021 $’000 33,108 (47,985) (1,068) 33,309 17,364 2,468 (3,039) 35,576 (51,024) 3,255 2,187 - 2,684 33,309 20,048 31NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 3. Revenue Revenue from contracts with customers – Tin concentrate Recognition and measurement 2022 $’000 228,876 2021 $’000 93,834 The Group is principally engaged in the business of producing tin-in-concentrate. Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has generally concluded that it is the principal in its revenue contracts because it typically controls the goods or services before transferring them to the customer. Based on the current contractual terms, revenue is recognised when control passes to the customer, which occurs at a point in time when the metal in concentrate physically arrives at the customer’s works or the customers destination port for tin concentrate. Revenue is measured as the amount to which the Group expects to be entitled, being the estimate of the price expected to be received at the end of the Quotational Period (“QP”), and a corresponding trade receivable is recognised. The Group’s sales of metal in concentrate allow for price adjustments based on the market price at the end of the relevant QP stipulated in the contract. These are referred to as provisional pricing arrangements and are such that the selling price for metal in concentrate is based on prevailing spot prices on a specified future date after shipment to the customer. Adjustments to the sales price occur based on movements in quoted market prices up to the end of the QP. The QP for tin concentrate is not expected to result in a material adjustment due to the short period between the point of control of the concentrate passing to the customer and the end of the QP. For the provisional pricing arrangements, any future changes that occur over the QP are embedded within the provisionally priced trade receivables and are, therefore, within the scope of AASB 9 Financial Instruments (“AASB 9”) and not within the scope of AASB 15 Revenue from Contracts with Customers (“AASB 15”). Revenue is initially recognised based on the most recently determined estimate of metal in concentrate using the expected value approach based on initial internal assay and weight results. The Group has determined that it is highly unlikely that a significant reversal of the amount of revenue recognised will occur due to variations in assay and weight results. Subsequent changes in the fair value based on the customer’s final assay and weight results are recognised in revenue at the end of the QP. Key estimates and judgements Revenue from contracts with customers • Identification of the enforceable contract For tin-in-concentrate (metal in concentrate) sales, there are master services agreements with key customers that set out the general terms and conditions governing any sales that occur. The customer is only obliged to purchase tin-in-concentrate when it places an order for each shipment. Therefore, the enforceable contract has been determined to be each purchase order. 32NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 4. Other Income Contingent consideration income Interest income (i) Gain on sale of investment in associate (ii) Grant of options (iii) Profit on sale of property plant and equipment Other income Total other income 2022 $’000 - 1,504 5,014 750 335 95 7,698 2021 $’000 10,250 1,886 - - - 59 1,945 (i) (ii) (iii) Interest income is recognised as interest accrues using the effective interest 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. Gain on sale of investment in associate relates to the sale of 5,400,000 shares held in NICO on the ASX. The shares held in NICO are classified as an investment in an associate (refer to note (1k)) with gains/loss recognised in other income on the disposal of the shares. Grant of options represents the fair value of NICO options at grant date. Subsequent changes in the fair value of NICO options are accounted for as fair value gain/(loss) in financial assets through profit or loss. Refer to note 5(e). 33NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 5. Expenses a) Cost of sales Salaries, wages expense and other employee benefits Superannuation expense Mining costs Processing costs Other production costs Changes in stockpiles Write down in value of stores inventory to NRV Royalty expense Depreciation - property, plant, and equipment Depreciation - buildings Mine properties and development costs amortisation Total cost of sales b) General and administration expenses Salaries and wages expense Directors' fees and other benefits Superannuation expense Other employee benefits Consulting expenses Travel and accommodation expenses Net loss on sale of assets Administration costs Depreciation – other assets Total general and administration expense c) Commodity and foreign exchange Foreign exchange (gain)/loss Forward commodity swaps Total commodity and foreign exchange d) Finance costs Interest expense Borrowing costs Unwinding of rehabilitation provision discount Total finance costs e) Fair value change in financial assets 2022 $’000 16,126 1,613 32,713 16,367 8,276 (2,064) 79 12,219 4,145 457 8,369 98,300 166 391 53 18 921 155 - 1,590 144 3,438 (42) - (42) 195 344 71 610 2021 $’000 14,223 1,351 27,940 14,706 3,956 (5,557) 207 3,957 3,784 466 10,112 75,145 1,925 623 240 14 1,548 131 108 926 260 5,775 409 1,457 1,866 770 2,199 30 2,999 Fair value loss/(gain) in financial assets through profit and loss Total fair value change in financial assets 478 478 (2,337) (2,337) Recognition and measurement Salaries, wages, and other employee benefits are recognised as and when employees render their services. Expenses for non-accumulating personal leave are recognised when the leave is taken and measured at the rates paid or payable. Refer to note 17 for the accounting policy relating to short-term and long-term employee benefits. Provisions and other payables are discounted to their present value when the effect of time value of money is significant. The impact of the unwinding of these discounts is reported in finance costs. 34NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 6. Income Tax (a) Major components of income tax (benefit)/expense: Income statement Current income tax expense Current income tax expense Adjustments in respect of current income tax of previous years Deferred income tax Relating to origination and reversal of temporary differences in current year Recognition of carry forward losses and other temporary differences Income tax (benefit)/expense reported in the consolidated statement of comprehensive income 2022 $'000 2021 $'000 39,808 - (30) (82,303) (42,525) 13,560 - 11,892 (25,452) - (b) A reconciliation of income tax benefit and the product of accounting loss before income tax multiplied by the Group's applicable income tax rate is as follows: Total accounting profit before income tax from continuing and discontinued operations 141,369 87,199 At statutory income tax rate of 30% (2021: 30%) 42,411 26,160 Non-assessable items Gain on disposal of subsidiary Non-deductible items Share-based payments Sundry items Deductible items Recognition of net deferred tax assets not previously recognised Income tax benefit reported in the statement of comprehensive income (2,272) (6) 19 (374) (82,303) (42,525) - (103) 6 (611) (25,452) - 35NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 6. Income Tax (continued) Deferred income tax at 30 June relates to the following: Deferred tax liabilities Exploration Derivative financial instruments Deferred mining Mine site establishment and refurbishment Consumables Interest income Diesel rebate Non-current financial assets Accelerated depreciation for tax purposes Gross deferred tax liabilities Deferred tax assets PPE and mine properties Inventories Legal costs Accrued expenses Provision for employee entitlements Provision for fringe benefits tax Provision for rehabilitation Unrecognised timing differences Recognised tax losses Gross deferred tax assets Deferred tax (benefit)/expense Statement of Financial Position Statement of Other Comprehensive Income 2022 $'000 43 (2,478) (10,033) (1,204) (3) (3) (9) - (2,037) (15,724) - 356 253 85 1,345 2 4,360 - 51,848 58,249 2021 $'000 (1,207) - (9,179) (1,800) (1,777) - (18) - - (13,981) 9,168 333 274 38 1,308 3 3,503 (646) - 13,981 2022 $'000 (1,250) 2,478 854 (596) (1,774) 3 (9) - 2,037 9,168 (23) 21 (47) (37) 1 (857) (646) (51,848) (42,525) 2021 $'000 (2,833) (460) 127 (929) (6,674) - 2 361 5,563 - 5,075 (125) 9 22 2 11,691 - - 11,831 At 30 June 2022, there are unrecognised transferred losses of $156,534,000 (2021: $156,534,000) for the Group subject to a restricted rate of utilisation. 36NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 6. Income Tax (continued) Recognition and measurement Current income tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. Current income tax relating to items recognised directly in equity is recognised in equity and not in the consolidated statement of comprehensive income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred tax Deferred tax is provided for using the balance sheet full liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred income tax liabilities are recognised for all taxable temporary differences except: • • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss except for transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences such as recognition of an ROU Asset and a lease liability; and in respect of taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised except: • • when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of the deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised income taxes are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in equity and not in the profit and loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Tax consolidation legislation Metals X Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2004. The head entity, Metals X Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. Members of the group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payments obligations. No amounts have been recognised in the consolidated financial statements in respect of this agreement on the basis that the possibility of default is remote. 37NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 6. Income Tax (continued) Tax consolidation legislation (continued) Members of the group have also entered into tax sharing agreements. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group. The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the controlled entities intercompany accounts with the tax consolidated group head company, Metals X Limited. The nature of the tax funding agreement is such that no tax consolidation contributions by or distributions to equity participants are required. 7. Earnings Per Share The following reflects the data used in the basic and diluted earnings per share computations. For basic and diluted earnings per share: Profit attributable to continuing operations ($’000) Profit attributable to discontinued operations ($’000) Weighted average number of ordinary shares outstanding during the period used in the calculation of basic and diluted earnings per share Basic and diluted earnings per share (cents) From continuing operations From discontinued operations Total Recognition and measurement 2022 2021 176,337 7,557 183,894 22,925 64,274 87,199 907,266,067 907,266,067 19.44 0.83 20.27 2.53 7.08 9.61 Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit attributable to members of the parent adjusted for: • • • cost of servicing equity (other than dividends) and preference share dividends; the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised; and other non-discriminatory changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares. The result is divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. The Company had no (2021: 488,024 ) share options on issue which are anti-dilutive and are therefore not required to be included in the calculation of diluted earnings per share. There have been no transactions involving ordinary shares or potential ordinary shares since that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and before the completion of these consolidated financial statements. 38NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 8. Cash and Cash Equivalents Cash at bank and in hand - denominated in AUD Cash at bank and in hand - denominated in USD Short-term deposits (i) Total 2022 $'000 121,615 488 145 122,248 2021 $'000 12,869 543 60 13,472 (i) Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. Refer to note 2(b) for more details on the Group’s credit risk management practices. As all deposits are on demand or have maturity dates of less than twelve months, the Group has assessed the credit risk on these financial assets using lifetime expected credit losses. In this regard, the Group has concluded that the probability of default is insignificant. Recognition and measurement Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and in hand and short-term deposits that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Reconciliation of net profit after income tax to net cash flows from operating activities Profit before income tax Amortisation and depreciation Impairment reversal in discontinued operations – note 25 Foreign exchange loss Fair value gain in financial assets Share based payment reversal Rehabilitation expense Gain on disposal of property, plant, and equipment Gain on disposal of Copper asset portfolio – note 25 Gain on disposal of Nickel asset portfolio – note 25 Interest accrued on Convertible Note Changes in assets and liabilities Increase in inventories Decrease/(increase) in trade and other receivables and prepayments (Decrease)/increase in trade and other creditors Increase/(decrease) in provisions Increase in DTA Net cash flows from operating activities 2022 $'000 183,894 13,113 - 42 (5,286) (22) 71 - - (7,572) - 184,240 (3,041) 13,369 (2,169) 122 (42,525) 149,996 2021 $'000 87,199 14,651 (15,753) - (2,337) (344) (587) (432) (60,930) - (1,054) 20,413 (198) (16,860) 1,157 (108) - 4,404 39NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 9. Trade and Other Receivables Current Trade receivables at fair value through profit or loss (i) Contingent consideration receivable – Mt Gordon Other receivables at amortised cost (ii) 2022 $’000 3,421 - 8,243 11,664 2021 $’000 9,147 11,000 3,280 23,427 Non-current Other receivables – performance bond facility (iii) 3,457 3,457 (i) On 30 June 2022, tin concentrate sales totalling 415 tonnes remained open to price adjustment (2021: 520 tonnes). Trade receivables (subject to provisional pricing) are non-interest bearing but are exposed to future commodity price movements over the quotational period (“QP”) and are measured at fair value through profit or loss up until the date of settlement. These trade receivables are initially measured at the amount which the Group expects to be entitled, being the estimate of the price expected to be received at the end of the QP. For tin concentrate 80% - 85% of the provisional invoice (based on the provisional price) is received in cash within four weeks of the arrival of shipment at smelter. The QP for tin concentrate is not expected to result in a material adjustment due to the short period between the point of control of the concentrate passes to the customer and the end of the QP. (ii) (iii) Cash calls advanced to the Bluestone Mines Tasmania Joint Venture Pty Ltd $6.414 million, GST receivable $0.873 million, diesel rebate $0.028 million and other debtors of $0.928 million. The performance bond facility is interest bearing and is used as security for government performance bonds. The fair value approximates cost. Refer to note 2(b) for credit risk assessment. 10. Inventories Ore stocks at cost Tin in circuit – at cost Tin concentrate – at cost Stores and spares at cost Provision for obsolete and impairment stores and spares 2022 $’000 2,177 141 15,484 6,969 (1,188) 23,583 2021 $’000 1,201 105 14,433 5,895 (1,108) 20,526 Recognition and measurement Inventories are valued at the lower of cost and net realisable value. Cost includes expenditure incurred in acquiring and bringing the inventories to their existing condition and location and is determined using the weighted average cost method. 11. Investment in associate Investment in associate Seed funding share purchase (600,000 shares) Seed funding share purchase (500,000 shares) IPO purchase (20,000,000 shares) Sale of shares (5,400,000 shares) at cost (i) 2022 $’000 30 50 4,000 (940) 3,140 2021 $’000 - - - - - (i) These shares were sold for a total of $5.954 million resulting in a gain of $5.014 million. Refer to note 4. 40NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 11. Investment in associate (continued) The Group’s investment in associate pertains to NICO Resources Limited (“NICO”). The balance has been measured initially at cost paid by the Group for its shares in NICO. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. As at 30 June 2022, the Group’s share of net assets of the associate has not materially changed since acquisition, and therefore continues to be carried at initial cost. As at 30 June 2022, the Group has 15,700,000 shares (2021: 600,000) in NICO carried at a cost of $3.140 million (2021: $0.030 million). The shares are subject to various escrow conditions 12. Financial Assets at Fair Value Through Profit or Loss Current Convertible Notes Derivative financial assets Non-current Shares – Australian unlisted Derivative financial assets Convertible Notes 2022 $’000 360 14,238 14,598 - - 28,672 28,672 2021 $’000 360 2,332 2,692 30 3,061 37,246 40,337 Derivative financial assets and debt instruments Derivative financial assets are financial instruments. A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. On 30 June 2022, the Group continues to hold: • • • four (4) Convertible Notes with a value of $9.000 million each, for an aggregate of $36.000 million 20.3 million options representing the second tranche of options to acquire Cyprium shares and exercisable at $0.3551 per option with an expiry date of 30 March 2023 25 million options to acquire NICO shares and exercisable at $0.250 per option with an expiry date of 3 November 2024. Initial recognition and measurement The Group initially recognises financial assets in the following measurement categories: • • • those to be measured at fair value through profit or loss (“FVTPL”); fair value through other comprehensive income (“FVTOCI”), and financial assets measured at amortised cost (“Debt Instruments”). The classification of financial assets at initial recognition, depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. 41NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 12. Financial Assets at Fair Value Through Profit or Loss (continued) For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at FVTOCI. At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at FVTPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed. For a financial asset to be classified and measured at amortised cost or FVTOCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (“SPPI”) on the principal amount outstanding. Financial assets with cash flows that are not SPPI are classified and measured at FVTPL, irrespective of the business model. The Group reclassifies debt investments when and only when its business model for managing those assets changes. Convertible Notes are financial assets with embedded derivatives which are considered in their entirety when determining whether their cash flows are solely the payment of principal and interest. Subsequent measurement Equity instruments The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to the consolidated statement of comprehensive income following the derecognition of the investment. Dividends from such investments continue to be recognised in the consolidated statement of comprehensive income as other income when the Group’s right to receive payment is established. Changes in the fair value of financial assets at FVTPL are recognised in other gains/(losses) in the consolidated statement of comprehensive income as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVTOCI are not reported separately from other changes in fair value. Debt instruments The subsequent measurement of Debt Instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories for Debt Instruments: • • • Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate (“EIR”) method. Any gain or loss arising on derecognition is recognised directly in the consolidated statement of comprehensive income and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the consolidated statement of comprehensive income. Financial assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVTOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in the consolidated statement of comprehensive income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the EIR. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the consolidated statement of comprehensive income. Assets that do not meet the criteria for amortised cost or FVTOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL is recognised in the consolidated statement of comprehensive income in other gains/(losses) in the period in which it arises. Impairment Further disclosures relating to impairment of financial assets are also provided in: • • • Disclosures for significant assumptions in note 1(k). Financial assets at fair value through profit and loss, note 12. Trade and other receivables, note 9. The Group recognises an allowance for expected credit losses (“ECL’s”) for all debt instruments not carried at FVTPL. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. The Group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. 42NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 12. Financial Assets at Fair Value Through Profit or Loss (continued) Financial liabilities at FVTPL Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the consolidated statement of comprehensive income. Financial liabilities designated upon initial recognition at FVTPL are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied. The Group has not designated any financial liability as at FVTPL. Financial liabilities at amortised cost (loans and borrowings) After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in consolidated statement of comprehensive income when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the consolidated statement of comprehensive income. This category generally applies to interest-bearing loans and borrowings. For more information, refer to note 18. Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the consolidated statement of comprehensive income. Estimates and judgments Fair value measurement of financial instruments These financial assets cannot be measured based on quoted prices in active markets and are therefore measured using valuation techniques. The Convertible Notes receivable conveys a right to receive cash upon maturity of 30 March 2025 or the option to convert the principle amount outstanding into shares of Cyprium. The Convertible Notes attract interest at a coupon rate of 4% per annum to be capitalised and paid annually, payable in cash unless Metals X elects to receive the interest in fully paid ordinary Cyprium shares. To determine the fair value of the Convertible Notes, the Group estimates the fair value of the right to receive the cash using discounted cash flow techniques and market interest rates. In addition, the Group adds the fair value of the conversion option, which is estimated using the Black Scholes valuation model. Refer to note 2. The inputs to this model and technique requires a degree of judgement, including consideration of the risk-free rate, Cyprium share price volatility and market coupon rates. The Group’s derivative financial instruments are options to acquire shares in Cyprium and NICO. a) b) The Group’s derivative financial instruments include options to acquire shares in Cyprium with an additional award of shares granted by a factor dependant on commodity prices on the date of exercise. To determine the fair value of these instruments, the Group has used Black Scholes. To accommodate for the additional award, the Group has increased the Black Scholes fair value by multiplying the quoted price of Cyprium shares on the Option grant dates by the most likely factor to apply on the estimated dates of exercise (assumed to be the dates of expiry). Refer to note 1(k). The inputs to these models and techniques require a degree of judgement, including consideration of the risk-free rates, Cyprium share price volatilities and forecast commodity prices. The Group’s derivative financial instruments also include options to acquire shares in NICO. To determine the fair value of these instruments, the Group has used Black Scholes. Refer to note 2. The inputs to these models and techniques require a degree of judgement, including consideration of the risk-free rates and NICO share price volatilities. Changes in assumptions relating to the above factors could affect the reported fair value of financial assets. See note 1(k) for further disclosures. Future developments may require further revisions to the estimate. The Convertible Notes and derivative financial instruments are classified as financial assets at FVTPL. 43NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 13. Property, Plant, and Equipment Plant and equipment Gross carrying amount - at cost Accumulated depreciation and impairment Net carrying amount Land and buildings Gross carrying amount - at cost Accumulated depreciation and impairment Net carrying amount Capital work in progress at cost Gross carrying amount - at cost Net carrying amount Total property, plant, and equipment Reconciliations: Reconciliations of the carrying amounts of property, plant, and equipment at the beginning and end of the reporting period: Plant and equipment At 1 July net of accumulated depreciation Transfer from capital in progress Disposals Disposal and discontinued operations Depreciation charge for the year At 30 June net of accumulated depreciation Land and buildings At 1 July net of accumulated depreciation Transfer from capital in progress Disposals Disposal and discontinued operations Depreciation charge for the year At 30 June net of accumulated depreciation Capital work in progress At 1 July Additions Transfer to mine properties & development Transfer to plant and equipment Transfer to land and buildings At 30 June 2022 $'000 59,762 (39,216) 20,546 10,910 (3,881) 7,029 31,150 31,150 58,725 20,606 4,244 - - (4,304) 20,546 3,299 4,187 - - (457) 7,029 12,129 27,452 - (4,244) (4,187) 31,150 2021 $'000 56,299 (35,693) 20,606 6,723 (3,424) 3,299 12,129 12,129 36,034 31,521 8,429 (57) (15,244) (4,043) 20,606 5,843 - (388) (1,690) (466) 3,299 5,951 15,420 (813) (8,429) - 12,129 44NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 13. Property, Plant, and Equipment (continued) Recognition and measurement Plant and equipment are stated at historical cost less accumulated depreciation and any impairment in value. Capital work-in-progress is stated at cost and comprises all costs directly attributable to bringing the assets under construction ready to their intended use. Capital work-in-progress is transferred to property, plant and equipment or mine properties and development at cost on completion. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset, or where appropriate, over the estimated life of the mine. Major depreciation periods are: • • • Mine specific plant and equipment is depreciated using – the shorter of life of mine and useful life. Useful life ranges from 2 to 10 years. Buildings – the shorter of life of mine and useful life. Useful life ranges from 5 to 40 years. Office Plant and equipment is depreciated at 33% per annum for computers and office machines and 20% per annum for other office equipment and furniture. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the profit and loss in the period the item is derecognised Key estimates and judgements Life of mine method of amortisation and depreciation The Group applies the life of mine method of amortisation and depreciation to its mine specific plant and to mine properties and development based on ore tonnes mined. These calculations require the use of estimates and assumptions. Significant judgement is required in assessing the available reserves and the production capacity of the plants to be depreciated under this method. Factors that are considered in determining reserves and production capacity are the Group’s history of converting resources to reserves and the relevant time frames, the complexity of metallurgy, markets, and future developments. When these factors change or become known in the future, such differences will impact pre-tax profit and carrying values of assets. 14. Mine Properties and Development Recognition and measurement Expenditure on the acquisition and development of mine properties within an area of interest are carried forward at cost separately for each area of interest. Accumulated expenditure is amortised over the life of the area of interest to which such costs relate on a production output basis. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Key estimates and judgements In determining amortisation of its mine capital development, the Group applies the UOP method and factors in future development spend required to access the remaining ore reserves. For Mine site establishment, the Group applies the life of mine method of amortisation, which is also based on ore tonnes mined. Determination of mineral resources and ore reserves The determination of reserves impacts the accounting for asset carrying values, depreciation and amortisation rates and provisions for mine rehabilitation. The Group estimates its mineral resource and reserves in accordance with the Australian code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2012 (the “JORC code”). The information on mineral resources and ore reserves were prepared by or under the supervision of Competent Persons as defined in the JORC code. The amounts presented are based on the mineral resources and ore reserves determined under the JORC code. There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in the reserves being restated. 45NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 14. Mine Properties and Development (continued) Determination of future capital development spend Management estimates its future capital development spend based on historical annual requirements forecasted over the remaining estimated life of mine. Mine site establishment Gross carrying amount - at cost Accumulated depreciation and impairment Net carrying amount Mine capital development Gross carrying amount - at cost Accumulated depreciation and impairment Net carrying amount 2022 $'000 44,644 (36,750) 7,894 121,053 (86,818) 34,235 2021 $'000 40,909 (34,315) 6,594 112,175 (80,885) 31,290 Total mine properties and development 42,129 37,884 Movement in mine properties and development Development areas at cost At 1 July Additions Disposal and discontinued operations At 30 June Mine site establishment At 1 July net of accumulated amortisation Additions Transfer from capital work in progress Increase/(decrease) in rehabilitation provision Amortisation charge for the year At 30 June net of accumulated amortisation Mine capital development At 1 July net of accumulated amortisation Additions Amortisation charge for the year At 30 June net of accumulated amortisation - 34 (34) - 6,594 656 - 3,080 (2,436) 7,894 31,290 8,878 (5,933) 34,235 225 - (225) - 8,964 - 813 (540) (2,643) 6,594 30,444 8,315 (7,469) 31,290 46NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 15. Exploration and Evaluation Expenditure Exploration and evaluation costs carried forward in respect of mining areas of interest Pre-production areas At cost Net carrying amount Movement in exploration and evaluation At 1 July net of accumulated impairment Transfers to assets held for sale At 30 June net of accumulated impairment Recognition and measurement 2022 $'000 2021 $'000 352 352 352 - 352 352 352 13,993 (13,641) 352 Expenditure on acquisition, exploration and evaluation relating to an area of interest is carried forward at cost where rights to tenure of the area of interest are current and; • • it is expected that expenditure will be recouped through successful development and exploitation of the area of interest or alternatively by its sale and/or; exploration and evaluation activities are continuing in an area of interest but at reporting date have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Where uncertainty exists as to the future viability of certain areas, the value of the area of interest is written off to the profit and loss or provided against. The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment regularly and if after expenditure is capitalised, information becomes available suggesting that the recovery of expenditure is unlikely or that the Group no longer holds tenure, the relevant capitalised amount is written off to profit or loss in the period when the new information becomes available. The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective mining areas. Amortisation of the costs carried forward for the development phase is not recognised pending the commencement of production. 16. Trade and Other Payables Trade creditors Sundry creditors and accruals Unearned revenue Recognition and measurement 2022 $'000 3,575 7,124 8,486 19,185 2021 $'000 3,129 5,546 - 8,675 Trade and other payables are initially recognised, at fair value and subsequently measured at amortised cost using the effective interest rate method. Trade creditors are non-interest bearing and generally on 30-day terms. Sundry creditors and accruals are non- interest bearing and generally on 30-day terms. Due to the short-term nature of these payables, their carrying value approximates their fair value. 47NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 17. Provisions Current Provision for annual leave Provision for long service leave Other provisions Non-current Provision long service leave Provision for rehabilitation Rehabilitation movement Balance at 1 July Arising during the year Disposal of copper asset portfolio Reclassification of liability as held for sale Rehabilitation borrowing discount unwound Balance at 30 June Provision for long service leave 2022 $’000 2,867 679 5 3,551 935 14,771 15,706 11,663 3,037 - - 71 14,771 2021 $’000 2,657 874 - 3,531 793 11,663 12,456 50,465 (460) (38,537) (15) 30 11,663 The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. Provision for rehabilitation Environmental obligations associated with the retirement or disposal of mining properties and/or of exploration activities are recognised when the disturbance occurs and are based on the extent of the damage incurred. The provision is measured as the present value of the future expenditure. The rehabilitation liability is remeasured at each reporting period in line with the change in the time value of money (recognised as an interest expense in the consolidated statement of comprehensive the provision), and additional income and an disturbances/change in the rehabilitation cost are recognised as additions/changes to the corresponding asset and rehabilitation liability. The carrying value of the provision is calculated by applying an inflation factor of 5.10% (2021: 1.10%) which has been estimated based on rates throughout the period and a weighted average discount rate of 3.29% (2021: 0.34%), which has been estimated using government bond yields for an equivalent period. Costs are inflated and discounted with reference to the Group’s anticipated timing of payment, which is estimated based on the Group’s life of mine and planned activities. A majority of the payments are anticipated within 8 years (2021: 5 years). increase in 48NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 18. Interest Bearing Liabilities Current liabilities Lease liabilities relating to right-of-use assets Hire purchase liabilities ACT finance facility Non-current liabilities Hire purchase liabilities ACT Finance Facility 2022 $'000 34 1,911 - 1,945 1,612 1,612 2021 $'000 94 1,742 15,528 17,364 2,684 2,684 During the year, the Company repaid the ACT Finance Facility in full comprising $15.50 million principal plus interest. The facility was terminated on 31 January 2022. Leases Group as lessor The Group has entered into lease contracts for various items of plant, machinery, vehicles, equipment, and remote area residential accommodation. These leases have an average life of between one month and three years with renewal options included in the contracts. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. The Group's obligations under its leases are secured by the lessor's title to the leased assets. Generally, the Group is restricted from assigning and subleasing the lease assets. The Group also has certain leases of machinery with lease terms of 12 months or less and leases of office equipment with low value. The Group applies the short-term lease and lease of low-value assets recognition exemptions for these leases. Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period: Reconciliations of the carrying amounts of right-of-use assets and lease liabilities at the beginning and end of the year. Right of use assets At 1 July Additions Depreciation Disposal and discontinued operations At 30 June Lease liabilities At 1 July Additions Accretion of interest Payments Disposal and discontinued operations At 30 June Current lease liabilities 2022 $'000 90 - (90) - - 94 - 1 (61) - 34 34 34 2021 $'000 698 - (90) (518) 90 328 - 12 (102) (144) 94 94 94 49NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 18. Interest Bearing Liabilities (continued) The maturity analysis of lease liabilities is disclosed in note 2(f). The following amounts are recognised in profit or loss: Depreciation expense of right-of-use assets Interest expense on lease liabilities Expense relating to short-term leases (included in cost of sales) Total amount recognised in profit or loss 2022 $’000 90 1 61 152 2021 $’000 90 12 10 112 The Group had total cash outflows for lease liabilities related to right of use assets plus hire purchase liabilities related to the Renison operations of $1.864 million in 2022 (2021: $3.039 million). Recognition and measurement The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Group as a lessee The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. i) Right-of-use assets The Group recognises right-of-use assets at the lease commencement date, which is when the assets are available for use. The assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any make-good obligations and initial direct costs incurred. Right-of-use assets are depreciated using the straight-line method over the shorter of their useful life and the lease term. Periodic adjustments are made for any re-measurements of the lease liabilities and for impairment losses, assessed in accordance with the Group’s impairment policies. If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. ii) Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of future minimum lease payments, discounted using the Group’s incremental borrowing rate if the rate implicit in the lease cannot be readily determined, and are subsequently measured at amortised cost using the effective interest rate. Minimum lease payments are fixed payments or index-based variable payments incorporating the Group’s expectations of extension options and do not include non-lease components of a contract. The lease liability is re-measured when there are changes in future lease payments arising from a change in rates, index, or lease terms from exercising an extension or termination option. A corresponding adjustment is made to the carrying amount of the lease assets, with any excess recognised in the consolidated statement of comprehensive income. iii) Short-term leases and leases of low-value assets The Group has elected not to recognise assets and lease liabilities for short-term leases (lease term of 12 months or less) and leases of low value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. 19. Issued Capital Share capital Ordinary shares fully paid Movements in issued capital Balance at 1 July 2021 Capital reduction via demerger Balance at 30 June 2022 30 Jun 2022 30 Jun 2021 Average number. of shares 907,266,067 907,266,067 30 Jun 2022 AU$’000 319,569 30 Jun 2021 AU$’000 332,406 AU$'000 No. of Shares 907,266,067 332,406 (12,836) - 907,266,067 319,570 50NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 19. Issued Capital (continued) Recognition and measurement Issued and paid-up capital is recognised at the fair value of the consideration received by the Group. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction in the proceeds received. Dividend Reinvestment Plan The Company operates a dividend reinvestment plan (DRP) which allows eligible shareholders to elect to invest dividends in ordinary shares. There were no shares issued under the DRP in the 2022 financial year (2021: Nil). Options on issue There are no unissued ordinary shares of the company under option at the date of this report. Capital management gearing ratio Gearing ratio Net debt Capital1 2022 $000 1.28% 3,557 309,682 2021 $000 14.49% 20,048 138,646 1Includes issued capital and all other equity reserves attributable to the equity holders of the parent for the purpose of the Group’s capital management. The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios to support its business and maximise the shareholder’s value. The Group manages its capital structure and adjusts considering changes in economic conditions and the requirements of any financial covenants. To maintain or adjust the capital structure, the Group’s may return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 30 June 2022 and 30 June 2021. 20. Accumulated Losses At 1 July Net profit attributable to members of the parent entity At 30 June 21. Reserves Share based payments reserve At 1 June Share based payment reversal At 30 June 2022 $’000 (221,597) 183,894 (37,703) 2021 $’000 (308,796) 87,199 (221,597) 27,837 (22) 27,815 28,044 (344) 27,837 This reserve is used to recognise the fair value of rights and options issued to employees in relation to equity-settled share-based payments. During the year ended 30 June 2022, the Company recognised income for reversal of ($0.022) million for share- based payments (30 June 2021: $0.344 million) in the consolidated statement of comprehensive income. There were no share-based payments granted during the year. 51NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 22. Auditor Remuneration Fees to Ernst & Young (Australia) 2022 $'000 2021 $'000 Fees for auditing the statutory financial report of the Parent covering the Group and auditing the statutory financial reports of any controlled entities 155 185 Fees for other assurance and agreed-upon-procedures services under other legislation or contractual arrangements where there is discretion as to whether the service is provided by the auditor or another firm: - Renison joint venture audit Fees for other services - tax compliance Total fees to Ernst & Young (Australia) 23. Commitments Capital commitments Commitments relating to joint arrangements - 52 80 235 104 341 At 30 June 2022, the Group has capital commitments that relate principally to the purchase and maintenance of plant and equipment for its mining operations. Refer to note 13. Estimated capital expenditure contracted for at reporting date, but not recognised as liabilities for the Group: Within one year Mineral tenement commitments 2022 $’000 3,670 2021 $’000 9,037 The Company has tenements in which the mining operations are located. These tenement leases have a life of up to twenty-one years. To maintain current rights to explore and mine the tenements the Group is required to perform minimum exploration work to meet the expenditure requirements specified by the relevant state governing body. The commitments include Renison commitments as disclosed in note 24. Within one year After one year but not more than five years After more than five years Other commitments 2022 $’000 283 1,129 1,156 2,567 2021 $’000 128 319 441 888 The Group has obligations for various expenditures such as state government royalties, production based payments, and exploration expenditure. Such expenditures are predominantly related to the earning of revenue in the ordinary course of business. 52NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 24. Interest in Joint Operations The Group’s interest in the assets and liabilities of joint operations are included in the consolidated statement of financial position. Renison Tin Project Subsidiary Bluestone Mines Tasmania Pty Ltd has a 50% interest and participating share in the Renison Tin Project, which is operated and managed by Bluestone Mines Tasmania Joint Venture Pty Ltd. The Group is entitled to 50% of the production. The Renison Tin Project is located in Tasmania. Recognition and measurement Joint arrangements are arrangements over which two or more parties have joint control. Joint Control is the contractual agreed sharing of control of the arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Joint arrangements are classified as ether a joint operation or a joint venture, based on the rights and obligations arising from the contractual obligations between the parties to the arrangement. To the extent the joint arrangement provides the Group with rights to the individual assets and obligations arising from the joint arrangement, the arrangement is classified as a joint operation and as such, the Group recognises its: • • • • • Assets, including its share of any assets held jointly; Liabilities, including its share of liabilities incurred jointly; Revenue from the sale of its share of the output arising from the joint operation; Share of revenue from the sale of the output by the joint operation; and Expenses, including its share of any expenses incurred jointly To the extent the joint arrangement provides the Group with rights to the net assets of the arrangement, the investment is classified as a joint venture and accounted for using the equity method. Under the equity method, the cost of the investment is adjusted by the post-acquisition changes in the Group’s share of the net assets of the joint venture. 25. Discontinued Operations On 4 November 2021, the Company announced it had signed a formal share sale and subscription agreement with NICO (“SSA”) that provided for the sale of all the shares in Metals Exploration Pty Ltd (Metals Exploration), a 100%- owned subsidiary of the Company, to NICO with eligible Metals X shareholders to receive an in-specie distribution of NICO shares, subject to the approval of shareholders and the Foreign Investment Review Board, so as to spin out the Nickel assets from the Company. In conjunction with the transaction, NICO proposed to undertake an initial public offering of its shares (“IPO”) and apply for listing on the ASX. Under the SSA, NICO proposed to raise at least $8.000 million by the issue of: • approximately 20,000,000 fully paid ordinary shares at $0.20 per share to Metals X (MLX IPO Shares); and • at least 20,000,000 fully paid ordinary shares at $0.20 per share under the IPO. In addition to receiving the MLX IPO Shares, the consideration payable by NICO to Metals X for the purchase of the Nickel Assets will be $5,000,000, to be satisfied by the issue to Metals X of: • 25,000,000 shares in NICO at a deemed issue price of $0.20 per share (Consideration Shares); and • 25,000,000 options to subscribe for shares in NICO, exercisable at $0.25 each, expiring 3 years after grant. Shareholder approval for the capital reduction and in-specie distribution to eligible Metals X shareholders of the 25,000,000 NICO shares at a deemed issue price of $0.20 per share as the sole consideration payable by NICO to Metals X under the SSA for the purchase of the Nickel Assets (equating to $5,000,000) (Consideration Shares) was received on 15 December 2021. Refer to ASX Announcement “Results of Meeting” lodged on 15 December 2021. On 7 January 2022, the Nickel asset portfolio including the Wingellina Nickel-Cobalt Project located in Western Australia and the Claude Hills Project located in South Australia, was demerged from the Metals X Consolidated Group and sold to NICO Resources. The fair value of the Nickel assets at demerger was 12.836 million, which was determined by multiplying the Consideration Shares by approximately $0.513 representing the 5-day VWAP from the date of NICO listing on the ASX. The results of the discontinued operation included in the statement of profit or loss and other comprehensive income are set out below. 53NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 25. Discontinued Operations (continued) (a) Nickel assets and liabilities disposed of at 7 January 2022: Assets Cash and cash equivalents Trade and other receivables Inventories Property, plant, and equipment Land and buildings Exploration assets Mine properties Rehabilitation asset Liabilities Trade and other payables Rehabilitation provision Carrying value of Nickel assets disposal group (b) Consideration received for Nickel asset portfolio: Consideration received: Fair value of consideration shares Carrying value of Nickel assets disposal group Profit on disposal of Nickel assets (c) The results for the discontinued Nickel asset portfolio during the year are presented as follows: Revenue Cost of sales Gross profit/(loss) Profit on disposal of Nickel assets Other income Corporate costs Depreciation Profit/(loss) for the year from discontinued operations (d) The net cash flows incurred by the Nickel assets is as follows: Net cash flows (used in)/from operating activities Net cash flows used in investing activities Net cash outflow 2022 $’000 - - - 7,572 - - (15) 7,557 - (598) (598) As at 7 Jan 2022 $’000 8 32 11 72 7 4,813 323 15 5,281 2 15 17 5,264 7 Jan 2022 $’000 12,836 (5,264) 7,572 2021 $’000 - - - - 6 (1) (31) (26) - (990) (990) On 30 March 2021, Metals X completed the sale of its Copper asset portfolio including the Nifty Copper operations, the Maroochydore Copper project, and the Paterson exploration project to Cyprium. 54NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 25. Discontinued Operations (continued) (e) Copper assets and liabilities disposed of at 30 March 2021: Assets Prepayments Inventories Property, plant, and equipment Exploration and evaluation expenditure Liabilities Trade and other payables Interest bearing liabilities Rehabilitation provision Carrying value of Copper assets disposal group (i) (f) Consideration received for Copper asset portfolio: Consideration received: Cash consideration Convertible Notes receivable Derivative financial instruments Working capital adjustment Carrying value of Copper assets disposal group (i) Profit on disposal of Copper assets (ii) As at 30 Mar 2021 $'000 272 16,858 16,499 11,023 44,652 647 18 38,537 39,202 5,450 30 Mar 2021 $’000 24,000 35,070 4,542 2,768 66,380 (5,450) 60,930 (g) The results for the discontinued Copper asset portfolios during the year are presented as follows: Revenue Cost of sales Gross loss Profit on disposal of Copper assets (ii) Impairment reversal upon categorising as assets held for sale Other income Commodity and foreign exchange trading gains Rehabilitation interest accretion Finance and admin costs Care and maintenance costs Loss on sale of assets Profit for the year from discontinued operations 2022 $’000 - - - - - - - - - - - - 2021 $’000 - - - 60,930 15,753 73 2 (187) (87) (8,463) (3,747) 64,274 55NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 25. Discontinued Operations (continued) (h) The net cash flows incurred by the Copper and Nickel assets is as follows: Net cash flows used in operating activities Net cash flows from investing activities Net cash outflow 25. Key Management Personnel Compensation of Key Management Personnel Short-term employee benefits Post-employment benefits Other long-term benefits Share-based payment Termination payments 26. Related Party Disclosure Subsidiaries 2022 $’000 - - - 2022 $ 1,055,505 92,126 - - - 1,147,631 2021 $’000 (9,699) 30 (9,669) 2021 $ 1,919,001 115,534 39,658 (127,089) 478,621 2,425,725 The consolidated financial statements of the Group include Metals X and the subsidiaries listed as follows: Country of Ownership Interest Name Bluestone Australia Pty Ltd Metals Exploration Pty Ltd (i) Subsidiary companies of Bluestone Australia Pty Ltd Bluestone Mines Tasmania Pty Ltd Bluestone Mines Tasmania Joint Venture Pty Ltd Subsidiary companies of Metals Exploration Pty Ltd Austral Nickel Pty Ltd (i) Hinckley Range Pty Ltd (i) Metex Nickel Pty Ltd (i) Incorporation Australia Australia Australia Australia Australia Australia Australia 2022 100% - 100% 50% - - - (i) Demerged on 7 January 2022 as part of the Groups Nickel assets sold to NICO. Transactions with related parties 2021 100% 100% 100% 50% 100% 100% 100% Related party transactions Shareholder’s Loan & Interest: Asia Cheer Trading Limited (subsidiary of Company’s substantial shareholder APAC Resources Strategic Holdings Limited) Dragon Mining Limited: Provider of services to Metals X. 2022 2021 2022 2021 Sales to related parties $’000 Purchases and interest charges from related parties $’000 Amounts owed by related parties $’000 Amounts owed to related parties $’000 - - - - 15,528 1,583 404 116 - - - - - 15,528 31 11 56NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont’d) For the year ended 30 June 2022 27. Parent Entity Disclosure Current assets Total assets Current liabilities Total liabilities Issued capital Accumulated losses Share based payment reserve Total equity Profit of the Parent entity Total comprehensive profit of the Parent entity 28. Significant Events After Period End There are no significant events after period end as at the date of this report. 2022 $'000 139,685 206,411 202 99,674 341,685 (262,763) 27,815 106,737 52,587 52,587 2021 $'000 30,913 119,219 15,750 15,750 341,685 (266,053) 27,836 103,469 82,526 82,526 57DIRECTORS’ DECLARATION For the year ended 30 June 2022 In accordance with a resolution of the Directors of Metals X Limited, I state that: In the opinion of the Directors: (a) the consolidated financial statements and notes of the Group are in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the financial position as at 30 June 2022 and the performance for the year ended on that date of the Group; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and the consolidated financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1(b) and; 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 for the financial year ended 30 June 2022. (b) (c) (d) On behalf of the Board Brett Smith Executive Director 31 August 2022 58Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Auditor’s independence declaration to the directors of Metals X Limited As lead auditor for the audit of the financial report of Metals X Limited for the financial year ended 30 June 2022, I declare to the best of my knowledge and belief, there have been: a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; b. No contraventions of any applicable code of professional conduct in relation to the audit; and c. No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. This declaration is in respect of Metals X Limited and the entities it controlled during the financial year. Ernst & Young Philip Teale Partner 31 August 2022 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 59Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Independent auditor’s report to the members of Metals X Limited Report on the audit of the financial report Opinion We have audited the financial report of Metals X Limited (the Company) and its subsidiaries (collectively 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, notes to the consolidated financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a. Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022 and of its consolidated financial performance for the year ended on that date; and b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We 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 judgment, were of most significance in our audit of the financial report of the current year. The matters we identified are addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on the matters. For the matters below, our description of how our audit addressed the matters is provided in that context. We have determined the matters described below to be key audit matters to be communicated in our report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 60We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, Including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. 1. Fair value of financial assets through profit and loss Why significant How our audit addressed the key audit matter The Group completed the sale of its Nickel asset portfolio on 7 January 2022. As part of the share sale and subscription agreement, the Group was granted unlisted options NiCo Resources Limited on 3 November 2021. These were held by the Group at 30 June 2022, in addition to their unlisted Cyprium Metals Limited options and convertible notes gained in the previous year. These financial assets are required to be subsequently measured at fair value through profit or loss under AASB 9 Financial Instruments. At 30 June 2022, the fair value of these financial assets was $43.3 million as disclosed in Note 12. Due to the inherent complexity and judgement required to value these financial assets, the Group engaged an independent expert to assist in determining the fair value. Given the size of the financial assets relative to the Group’s total assets and judgements involved in determining fair value, this was considered a key audit matter. Our audit procedures included: ► Assessed the Group’s recognition, measurement, classification and treatment of the financial instruments, in accordance with the Australian Accounting Standards, which included an understanding of the terms and conditions within the sales agreement. ► Assessed the competency and objectivity of management’s expert. ► Read the valuation reports prepared by Group’s external expert and: ► compared the inputs used by the expert to supporting evidence; and ► re-computed the fair value outcomes based on the inputs and techniques applied. ► For the options granted, we engaged our internal valuation specialist to determine our own point estimate based on the appropriate valuation techniques and compared the results to that of Group’s expert. ► Assessed the adequacy of disclosures in the Notes to the financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 612. BMTPL operations – reliance on the work of a non-EY component team Why significant How our audit addressed the key audit matter As disclosed in Note 24 to the financial report, a significant component of the Group’s operating segments and activities take place as part of the Subsidiary Bluestone Mines Tasmania Pty Ltd (“BMTPL”). These operations require adequate monitoring activities from a financial reporting perspective. In our role as Group auditor, we are required to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities (“components”) within the Group in order to be able to express an audit opinion on the consolidated financial report. We are responsible for the direction, supervision, and performance of the Group audit. Given the financial significance of the component to the Group audit, the extent of our direction and supervision of the non–EY component (“Component Auditor”) audit team was considered a key audit matter. In fulfilling our responsibilities as Group auditor, our audit procedures included: ► Performed a risk assessment and component scoping at the consolidated Group level, and based on this scoping, identified the component to be audited by a non-EY component auditor. ► Sent instructions to the Component Auditor detailing significant audit areas to be covered, including the relevant risks and the information to be reported to the Group audit team. The Group audit team approved the component materiality, having regard to the size and risk profile of the component relative to the Group. ► The Component Auditor provided written confirmation to the Group audit team confirming the work performed and the results of that work as well as key documents supporting their independence, significant findings and observations. ► Met with the Component Auditor in the current year in order to gain an understanding of the component’s operations. ► Held regular meetings with the Component Auditor to discuss the outcome and extent of their procedures. ► Reviewed the underlying working papers and documentation of the Component Auditor for selected areas of audit focus. ► Ensured that the trial balance and related supporting schedules audited by the Component Auditor agreed to the Group consolidation schedules, and where relevant, financial statement note disclosures. ► We assessed the accounting policies of the component for consistency with the Group’s accounting policies and tested the Group’s accounting for intercompany transactions. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 62Information other than the financial statements and auditor’s report The directors are responsible for the other information. The other information comprises the information included in the Company’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, with the exception of the Remuneration Report and our related assurance opinion. 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 consistent with the financial report and our knowledge obtained in the audit or otherwise doesn’t appear to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 63As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment 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, actions taken to eliminate threats or safeguards applied. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 64From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year 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 audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the Directors' report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Metals X Limited for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Philip Teale Partner Perth 31 August 2022 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 65TABLES OF MINERAL RESOURCES AND ORE RESERVES As at 31 March 2022 Mineral Resource Estimates (50% MLX) – Consolidated Summary & Annual Comparison Project 31 Mar 2021 Renison Bell Rentails Total Mining Depletion Renison Bell Rentails Total Resource Adjustments Renison Bell Rentails Total 31 Mar 2022 Renison Bell Rentails Tonnes1 (Mt) 18.2 23.9 42.1 (0.83) - (0.83) 2.45 - 2.45 19.8 23.9 Tin (%Sn) 1.65 0.44 0.96 (1.50) - (1.50) 1.23 - 1.23 1.61 0.44 Copper (%Cu) 0.20 0.22 0.21 (0.17) - (0.17) 0.36 - 0.36 0.20 0.22 Contained Metal Tin Copper (kt) 302 104 406 (12.4) - (12.4) 30.0 - 30.0 320 104 (kt) 36.5 52.7 89.2 (1.38) - (1.38) 4.46 - 4.46 39.6 52.7 Total 1Figures are rounded according to JORC Code guidelines and may show apparent addition errors. Contained metal does not imply recoverable metal. 43.7 0.97 0.21 92.3 424 Ore Reserve Estimates (50% MLX) – Consolidated Summary & Annual Comparison The Ore Reserve estimates are a subset of the Mineral Resource estimates Project 31 March 2021 Renison Bell Rentails Mining Depletion Renison Bell Rentails Reserve Adjustments Renison Bell Rentails 31 Mar 2022 Renison Bell Rentails Ore Kt Grade % Sn 7,837 22,310 30,147 1.41 0.44 0.69 Tin Metal Kt Sn 110 99 209 Ore Kt Grade % Cu Copper Metal Kt Cu 7,837 22,310 30,147 0.19 0.23 0.22 16 51 67 (830) - 1.50 - (12) - (830) - 0.17 (1.4) - - 1,840 - 1.68 - 31 - 1,840 (0.02) (0.4) - - - 8,848 22,310 1.46 0.44 129 99 8,848 22,310 0.16 0.23 14 51 31,158 Renison Bell and Rentails Resources and Reserves are 50% owned by Metals X. The geographic region for Tin Mineral Resources and Ore Reserves is Australia. For further details on total Mineral Resources refer to ASX announcement dated 14 June 2022. For further details on total Ore Reserves refer to ASX announcement dated 26 September 2022. Ore Reserves have been adjusted to reflect mining depletion to 31 March 2022. 31,158 0.73 0.21 228 65 66COMPETENT PERSONS STATEMENT The information in this report that relates to Mineral Resources has been compiled by Bluestone Mines Tasmania Joint Venture Pty Ltd technical employees under the supervision of Mr Colin Carter B.Sc. (Hons), M.Sc. (Econ. Geol), AusIMM. Mr Carter is a full-time employee of the Bluestone Mines Tasmania Joint Venture Pty Ltd and has sufficient experience which is relevant to the style of mineralisation and types of deposit under consideration and to the activities which 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 Carter consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. The information in this report that relates to Ore Reserves has been compiled by Bluestone Mines Tasmania Joint Venture technical employees under the supervision of Mr Philip Bremner, B Engineering (Mining Engineering), AusIMM. Mr. Bremner is a principal mining consultant at Oreteck Mining Solutions. Mr Bremner has sufficient experience which is relevant to the style of mineralisation and types of deposit under consideration and to the activities which 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 Bremner consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. STATEMENT OF GOVERNANCE ARRANGEMENTS AND INTERNAL CONTORLS In accordance with ASX Listing Rule 5.21.5, governance of the Company’s Mineral Resources and Ore Reserves development and management activities are managed through the management team of Renison in Tasmania which is 50%-owned by Metals X through the BMTJV. Senior geological and mining engineering staff of the BMTJV oversee reviews and technical evaluations of the estimates and evaluates these with reference to actual physical, cost and performance measures. The evaluation process also draws upon internal skill sets in operational and project management, ore processing and commercial/financial areas of the business. The BMTJV Management Committee of which Metals X has three members is responsible for monitoring the planning, prioritisation and progress of exploratory and resource definition drilling programs across the Company and the estimation and reporting of resources and reserves. These definition activities are conducted within a framework of quality assurance and quality control protocols covering aspects including drill hole siting, sample collection, sample preparation and analysis as well as sample and data security. A four-level compliance process guides the control and assurance activities by the BMTJV: 1. Provision of internal policies, standards, procedures and guidelines; 2. Mineral Resources and Ore Reserves reporting based on well-founded assumptions and compliance with external standards such as the Australasian Joint Ore Reserves Committee (JORC) Codes; 3. 4. Internal review of process conformance and compliance; and Internal assessment of compliance and data veracity. The BMTJV Management Committee aims to promote the maximum conversion of identified mineralisation into Mineral Resources and Ore Reserves compliant with JORC 2012. The Company reports its Mineral Resources and Ore Reserves, as a minimum, on an annual basis, in accordance with ASX Listing Rule 5.21 and clause 14 of Appendix 5A (the JORC Code). Mineral Resources are quoted inclusive of Ore Reserves. Competent Persons named by the Company are members of the Australasian Institute of Mining and Metallurgy (AusIMM) and/or the Australian Institute of Geoscientists (AIG) and qualify as Competent Persons as defined in the JORC Code. CORPORATE GOVERNANCE The Company’s 2022 Corporate Governance Statement is available for in the Corporate Governance section of the Company’s website: https://www.metalsx.com.au/aboutus/corporate-governance/. 67SECURITY HOLDER INFORMATION As at 26 September 2022 Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. The information is current as at 26 September 2022. Issued Equity Capital Number of holders Number on issue Voting Rights Ordinary Shares 5,079 907,266,067 Options - - The voting rights for each class of security on issue are: Ordinary fully paid shares Each ordinary shareholder is entitled to one vote for each share held. Options The holders of options have no rights to vote at a general meeting of the company. Distribution of Holdings of Equity Securities Fully Paid Ordinary Shares Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Total Holders 407 1,053 1,016 2,205 398 5,079 Unmarketable Parcels Ordinary Shares Units 156,531 2,972,746 8,259,863 72,701,483 823,175,444 907,266,067 % Units 0.02 0.33 0.91 8.01 90.73 100.00 The number of shareholders holding less than a marketable parcel was 699 as at 26 September 2022 (being 1,924 shares based on a closing share price of $0.26 at 26 September 2022). 68 SECURITY HOLDER INFORMATION (Continued) As at 26 September 2022 Substantial Shareholders Substantial Shareholders as disclosed in substantial shareholder notices provided to the Company as at 26 September 2022. APAC Resources Limited and its related bodies corporate1 Old Peak Group Ltd2 Bank of America Corporation and its related bodies corporate3 Number of Ordinary Shares 179,596,319 130,063,131 58,685,188 Percentage (%) 19.80 14.40 6.47 1. As lodged on 16 September 2021 2. As lodged on 8 August 2022 3. As lodged on 18 January 2022 On Market Buy Back There is no current on-market buy-back. Restricted Securities The Company has no restricted securities on issue. Top 20 Shareholders Rank Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED SUN HUNG KAI INVESTMENT SERVICES LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA JINCHUAN GROUP LTD FARJOY PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMINEES PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMS PTY LTD BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM MRS YUQIN ZHUANG NATIONAL NOMINEES LIMITED CS FOURTH NOMINEES PTY LIMITED JETOSEA PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED NGE CAPITAL LIMITED MR RAM SHANKER KANGATHARAN MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED Total Number of Ordinary Shares Percentage (%) 158,702,323 99,961,127 79,636,595 64,449,105 44,000,000 40,897,831 35,003,230 26,129,968 21,413,336 20,878,613 18,003,661 11,323,251 9,970,000 9,361,865 8,794,619 8,446,973 6,639,563 6,500,000 5,000,000 4,122,108 679,234,168 17.49 11.02 8.78 7.10 4.85 4.51 3.86 2.88 2.36 2.30 1.98 1.25 1.10 1.03 0.97 0.93 0.73 0.72 0.55 0.45 74.87 69

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