Nagambie Resources Limited
Annual Report 2020

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Redcastle and Whroo JVs with Mawson Gold – the search for the next Fosterville is being expanded 2020 Annual Report CORPORATE DIRECTORY NAGAMBIE RESOURCES LIMITED ABN 42 111 587 163 CLONBINANE GOLDFIELD PTY LTD ACN 160 928 932 NAGAMBIE DEVELOPMENTS PTY LTD ABN 37 130 706 311 NAGAMBIE LANDFILL PTY LTD ABN 90 100 048 075 REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS 533 Zanelli Road Nagambie Vic 3608 PO Box 339 Telephone: (03) 5794 1750 Website: www.nagambieresources.com.au Email: info@nagambieresources.com.au DIRECTORS Michael W Trumbull (Executive Chairman) Alfonso M G Grillo (Non-Executive Director) Gary R Davison (Non-Executive Director) CHIEF EXECUTIVE OFFICER James C Earle COMPANY SECRETARY Alfonso M G Grillo PRINCIPAL LEGAL ADVISER GrilloHiggins Lawyers Level 4, 114 William Street Melbourne Vic 3000 Telephone: (03) 8621 8881 Website: www.grillohiggins.com.au AUDITOR William Buck Level 20, 181 William Street Melbourne Vic 3000 SHARE REGISTRY Automic Pty Ltd Level 3, 50 Holt Street Surry Hills NSW 2010 Telephone: 1300 288 664 Website: www.automic.com.au SECURITIES EXCHANGE LISTING Nagambie Resources Limited shares are listed on the Australian Securities Exchange ASX Code: NAG TABLE OF CONTENTS Corporate Directory Chairman’s Letter IFC 1 CEO’s Operations & Exploration Review 2 Directors' Report Remuneration Report Auditor's Independence Declaration Statement of Profit and Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes In Equity Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor's Report Additional ASX Information 8 13 17 18 19 20 21 22 41 42 48 Note: Corporate Governance Statement The Corporate Governance Statement was approved by the Board at the same time as this Annual Report and can be found at: https://www.nagambieresources.com.au/investor -information/corporate-governance-statement Chairman’s Letter CHAIRMAN’S LETTER Dear Shareholder Gold exploration has been transformed this year with the Company’s strategic partnership with Mawson Gold Limited (“Mawson”). The North East Link Project (NELP) tender closed in May this year, with Nagambie asked to provide pricing for “Underwater Storage” PASS Management at the Nagambie Mine. Strategic Partnership with Mawson Following extensive negotiations, a game-changing strategic partnership with Mawson, a successful Canadian international gold exploration company, was signed in March this year. Mawson became a cornerstone investor in Nagambie by acquiring a 10.0% shareholding (50.0M shares) in return for 8.5M Mawson shares, purchased the Clonbinane Project from Nagambie for $0.528M and 1.0M Mawson shares, and entered into the Redcastle & Doctors Gully option / joint venture (JV) agreements on terms favourable to Nagambie. The impact on Nagambie’s balance sheet has been very significant. Total Net Assets at 30 June increased by $3.9M to $12.7M, year on year, a 45% increase. Importantly, total Net Current Assets increased by $2.5M to $1.4M, having been negative $1.1M a year before. Finally, Nagambie’s 9.5M Mawson shares at 30 June had a market value of approximately A$4.0M. As recently announced, the Doctors Gully JV is now to be expanded from 4 sq km to 199 sq km with improved terms and become the Whroo JV, subject to Nagambie shareholders approving the JV at this year’s AGM. The JV terms are set out in the AGM Notice of Meeting and I strongly encourage shareholders to vote in favour of the Whroo JV resolution. For the Redcastle and Whroo JVs combined, spending by Mawson could reach $5.25M (JV expenditure and cash payments to Nagambie) before Nagambie needs to contribute to further JV expenditure. Mawson retains its right of first refusal to take up or match all proposals under consideration by Nagambie on its remaining 3,400 sq km of Waranga Domain tenements provided that Mawson continues to hold its original 50.0 million Nagambie shares. Mawson also has the right to appoint a director to the Nagambie board provided it increases its’ holding above, and maintains it above, 15.0% of Nagambie. Nagambie has been limited, for funding reasons, to utilizing only one diamond drilling rig in its 100%-owned tenements between the Nagambie Mine and Wandean in recent years. Mawson has recently been using one or two additional diamond drilling rigs at Nagambie’s Redcastle property, where Nagambie can ultimately retain a 30% interest. Mawson will probably commence drilling in early 2021 at Nagambie’s Whroo property, where Nagambie can ultimately retain a 40% or a 30% interest. The use of multiple drilling rigs instead of one on Nagambie’s tenements greatly improves the chances of exploration success for shareholders. At Redcastle, Mawson is well advanced on a series of geophysical surveys including aerial LiDAR, gradient Induced Polarisation (IP), dipole-dipole IP, ground magnetics and ground gravity. Mawson are proposing to carry out the same suite of surveys at Whroo. Nagambie has shown at the Nagambie Mine that dipole-dipole IP can outline sulphide-gold targets in the Waranga Domain but complementary, supportive geophysical techniques could be established by Mawson that would be applicable throughout Nagambie’s exploration tenements. Covid-19 Impacts The Covid-19 pandemic has affected activities during CY 2020. Local demand for Nagambie quarry products was well down on anticipated levels as business developments in the Nagambie region were put on hold. Diamond drilling of the RAD002 hole at the Racecourse Prospect was delayed by a total of eight weeks because the drilling contractor had manning issues resulting from the strict virus testing protocols required and the closure of the border with Tasmania, the home state for several of its employees. A follow up IP geophysical survey at Racecourse West had to be deferred as the preferred IP contractor, Zonge, is based in Adelaide and the South Australian border has been closed to Victoria. Normal Victorian Government business has also been delayed by Covid-19. The State budget is normally delivered in May but the 2020/21 budget is now expected to be delivered in November. An important component of the budget will be NELP, the biggest-ever infrastructure project in Victoria. Tenders closed as scheduled in May for the construction of NELP, which will require the management of around 5.4 million tonnes of PASS rock plus 1.2 million tonnes of PASS soil which will be excavated by large tunnel boring machines. I would like to take this opportunity to sincerely thank Geoff Turner who, after over 12 years of providing geological services to the Company, this year decided to fully retire. Geoff’s intersecting-faults concept for gold mineralisation in the Waranga Domain has led to Nagambie holding the biggest contiguous tenements package in Victoria and being able to attract Mawson as a strategic partner to accelerate the search for the next Fosterville. As usual I would again like to thank the Company’s very supportive and patient shareholders - also my fellow directors, the CEO and his team, and our various excellent consultants for another productive year. Mike Trumbull Executive Chairman 30 October 2020 Nagambie Resources Limited | 2020 Annual Report | Page 1 CEO’s Operations & Exploration Review CEO’s OPERATIONS & EXPLORATION REVIEW GOLD EXPLORATION Gold exploration for Fosterville-style high-grade underground sulphide-gold deposits in Nagambie Resources’ 100%-owned Waranga Domain tenements continued to be methodically advanced during the year. Following lengthy negotiations in the first half of the year, an extensive strategic partnership with a Canadian gold exploration company, Mawson Gold Limited (“Mawson”), was announced on 30 January 2020. The final agreements relating to the partnership were signed in late March. Strategic Partnership with Mawson Mawson took up an initial 10.0% cornerstone shareholding in Nagambie Resources of 50.0 million fully-paid ordinary shares. Mawson has right of first refusal to take up or match all proposals under consideration by Nagambie on its 3,600 sq km of Waranga Domain tenements provided that Mawson continues to hold its original 50.0 million Nagambie shares. Mawson also has the right to appoint a director to the NRL board provided it increases its’ holding above, and maintains it above, 15.0% of Nagambie. As consideration for the 50.0 million Nagambie shares, Nagambie received 8.5 million shares in Mawson which had a value at the time of the announcement of $2.5 million. The value per Nagambie share of 5.0 cents represented a 31.6% premium to the last ASX sale price for Nagambie shares on 29 January 2020 of 3.8 cents. Mawson acquired 100% of NRL’s Clonbinane tenements for $0.528 million cash and a further 1.0 million Mawson shares, valued at the time of the announcement at $0.294 million. Total consideration to Nagambie for the 50.0 million Nagambie shares and Clonbinane was therefore valued at the time of the announcement at $3.322 million; $0.528 million in cash and approximately $2.794 million in 9.5 million Mawson shares. The 9.5 million Mawson shares were valued at approximately $3.954 million at 30 June 2020, an increase of $1.16 million. Mawson also had the right to spend the next $1.0 million on each of Nagambie’s Redcastle exploration licence and Nagambie’s Doctors Gully retention licence to earn a 70% joint venture interest in each. Redcastle Joint Venture (Nagambie Resources currently 100%) Mawson commenced field work at Redcastle (refer Figures 1 and 2) in the June 2020 quarter and commenced extensive geophysical surveys and diamond drilling at Redcastle during the September quarter. Figure 1 3,600 km² Waranga Domain Tenements (red hatched) and Redcastle & Whroo JVs (outlined in blue) Note: Mawson Figure, modified from Willman et. al, 2010: Economic Geology (2010) 105 (5): 895–915 Nagambie Resources Limited | 2020 Annual Report | Page 2 CEO’s Operations & Exploration Review The surveys being carried out include aerial LiDAR (Light Detection and Ranging), gradient-array Induced Polarisation (IP), dipole-dipole IP, ground magnetics and ground gravity. The principal historical mines are being diamond drilled for the first time ever to establish the major structural controls on gold mineralisation. Subsequent drilling by Mawson Gold will target anomalies outlined from the various geophysical surveys as they are completed. Doctors Gully Joint Venture / Whroo Joint Venture (Nagambie Resources currently 100%) Mawson commenced field work at Doctors Gully during the September 2020 quarter. Negotiations to expand the option / joint venture (JV) from 4 sq km to 199 sq km on improved terms, and rename it the Whroo JV, were carried out during that quarter. On 14 October 2020, Nagambie and Mawson announced the signing of the expanded JV agreement which is subject to the approval of Nagambie’s shareholders at the 2020 AGM. The Whroo JV covers the following 100%-owned contiguous Nagambie gold tenements (refer Figures 3 and 4) in the Waranga Domain, the northern portion of the greatly underexplored Melbourne Zone in Victoria:  Four granted exploration licences - EL6158 (Rushworth, 46 sq km), EL6212 (Reedy Lake, 17 sq km), EL7205 (Angustown, 69 sq km) and EL7209 (Goulburn West, 34 sq km);  Two exploration licence applications - ELA7237 (Kirwans North 1, 20 sq km) and ELA7238 (Kirwans North 2, 9 sq km); and  One granted retention licence - RL2019 (Doctors Gully, 4 sq km). The Whroo JV Property (refer Figures 1 and 2) starts to the north of the Wandean oxide-gold mineralisation and runs northwards to the historic gold mines at Whroo (including the Balaclava Mine) and White Hills (including Doctors Gully). These northern mines are located in a roughly-east-west trend of several Whroo anticlines and thrust faults (refer historical Figure 3). The northern Balaclava and Doctors Gully Thrust Faults can be compared to the east-west-striking Nagambie Mine, Racecourse, Wandean and Wandean North Thrust Faults to the south. Figure 2 Nagambie Resources’ 100%-owned Whroo JV and Redcastle JV Properties Note: Adapted from Mawson Figure. Mawson is paying $0.1 million cash to Nagambie upon approval of the JV at Nagambie’s 2020 AGM and committing to spend an additional $0.4 million in the first year to earn no interest in the Whroo JV Property. Mawson then has the option to spend a cumulative $2.75 million (JV expenditure plus cash to Nagambie) to earn a 60% interest in the Whroo JV Property. When Mawson has earned that 60% interest, Nagambie has the option to call for the formation of a 60:40 Mawson:Nagambie JV. If Nagambie does not exercise that 60:40 option, Mawson then has two options: (1) to call for the formation of a 60:40 JV; or (2) to spend an additional $1.5 million (cumulative $4.25 million of JV expenditure and cash to Nagambie) to earn a 70% interest in the Whroo JV Property, leading to the formation of a 70:30 Mawson:Nagambie JV. Mawson are planning to commence extensive geophysical surveys in the Whroo JV Property and initial diamond drilling at Doctors Gully early in CY 2021. Nagambie Resources Limited | 2020 Annual Report | Page 3 Figure 3 Whroo – White Hills: East-West Trend of Historical Gold Workings CEO’s Operations & Exploration Review Note: Mawson Figure, based on Plan of Whroo Gold Workings (from Bradley 1869). Nagambie Resources’ IP and Diamond Drilling in 2019/2020 WTD002 The WTD002 diamond hole at Wandean was designed to traverse under the surface oxide-gold mineralisation discovered in 2014 and intersect a strong IP chargeability anomaly 300m to the north. No significant gold assays occurred throughout WTD002 with the only anomalous results being beneath the surface oxide-gold mineralisation. The lithogeochemical results indicated hydrothermal alteration of the sediments beneath the surface gold mineralisation but not towards the end of the hole where the IP chargeability anomaly had been recorded. The lithogeochemical analysis did indicate the possibility of carbonaceous material within the siltstone beds that could have resulted in the IP anomaly. Such a sedimentary carbonaceous IP response could be expected to extend for many kilometres east-west, similar to the Cahill sedimentary pyrite IP anomaly to the north west of the Nagambie Mine. The next step to locate the sulphide source for the Wandean oxide-gold mineralisation would logically be to carry out an IP survey to the north and west of the Goulburn River at Wandean. As that area lies immediately to the south of the Whroo JV Property, Nagambie will liaise with Mawson in order to extend Whroo geophysical surveys southwards to the Goulburn River. The Reedy Lake soil anomaly, which occurs at the intersection of the Wandean Crustal Fault and the Wandean North Thrust Fault, lies only 2 km north west of Wandean. Dipole-Dipole IP Surveys IP surveys were carried out in January and March 2020 to the west and north west of the Nagambie Mine. The two strongest IP chargeability anomalies generated to date in the Nagambie Mine area, Racecourse and Nagambie Mine West, straddle the Racecourse Thrust and the Nagambie Mine Thrust respectively and are most intense at or near the respective intersections with the Wandean Crustal Fault (refer Figure 4). Diamond holes RAD002 and NWD001 were then designed to intersect those anomalies. Epizonal (Fosterville-style) versus Mesozonal (Ballarat/Bendigo-style) The Melbourne Zone and the Eastern Bendigo Zone that host the later-formed (370 Ma to 380 Ma) epizonal Fosterville, Costerfield and Nagambie gold mines (refer Figure 1) are entirely underlain by the older crustal Selwyn Block. It is this deep crustal architecture that distinguishes epizonal deposits from the earlier-formed (400 Ma to 420 Ma) mesozonal deposits such as the Bendigo, Ballarat and Stawell gold mines. The gold in mesozonal quartz-vein deposits is typically nuggetty with very uneven distribution, giving rise to highly variable grades and making effective resource drilling problematic and expensive. Gold in epizonal deposits is typically fine grained and evenly disseminated in association with pyrite and arsenopyrite. As a result, resource drilling of epizonal deposits will typically be straightforward and relatively inexpensive. Nagambie Resources Limited | 2020 Annual Report | Page 4 Figure 4 Plan showing Major Structures, IP Sulphide-Gold Targets and Designed DDHs RAD002 & NWD001 CEO’s Operations & Exploration Review Nagambie Resources’ Gold Model for the Waranga Domain Nagambie’s evolving gold mineralisation model for the Waranga Domain, the northern portion of the Melbourne Zone, has as its basis that hot hydrothermal mineralised fluids from the underlying Selwyn Block passed up deep, north-west-striking crustal faults under pressure before intersecting east-west-striking thrust faults nearer surface. These thrust faults typically extend around 6 km or more below the current day surface. As the Selwyn Block-sourced hydrothermal fluids extended east, west and upwards under pressure into fluid pathways associated with the thrust faults, the temperature and pressure of the fluids dropped to optimal levels and quartz, carbonates, pyrite, arsenopyrite, stibnite and gold were precipitated into the surrounding folded and fractured sandstone and siltstone marine-formation rocks (turbidites). In early 2017, Nagambie’s geological consultant, Geoff Turner, began to articulate his intersecting-faults concept for the Waranga Domain (refer Figure 5). He had recognised that the known Fosterville-style, epizonal gold deposits at the Nagambie Mine, Wandean, Whroo (including Balaclava Hill) & White Hills (including Doctors Gully) and several gold anomalies, including the Reedy Lake Soil Anomaly, are all at or near to the intersections of gravity-inferred deep crustal faults and magnetic-inferred or visually-outcropping nearer-surface thrust faults. Waranga Domain Gold Endowment Potential Over 10 years ago, in February 2010, Earth Resources Victoria probabilistically estimated that 3.0 Moz of gold remained to be discovered in the Waranga Domain (refer Nagambie announcement to the ASX of 27 February 2020: “3,600 sq km of Fosterville-style Gold Tenements”). The biggest gold deposit considered in that statistical analysis, based on protocols developed and used extensively by the US Geological Survey, was Fosterville at 2.1Moz. The Fosterville Gold Mine’s total gold endowment today exceeds 10.0 Moz and is continuing to grow in size. Nagambie in the last decade has carried out the first significant research, via IP surveys and deep oriented diamond drilling, into the controls on mineralisation in the Waranga Domain. Based on that research and the dramatic growth of the Fosterville deposit, Nagambie now considers that the total undiscovered gold endowment in the Waranga Domain could greatly exceed the 3.0 Moz estimated by Earth Resources Victoria in 2010. Gold Tenements The Company’s tenements as at 30 September 2020, totalling 3,694.6 sq km, are listed in Table 1. POTENTIAL BACTERIAL RECOVERY OF GOLD IN HISTORIC HEAP LEACH PAD Total recorded gold production from the Nagambie Mine cyanide heap between 1989 and 1997 was 134,000 ounces and Nagambie Resources considers that a significant amount of gold remains in the heap. Nagambie Resources Limited | 2020 Annual Report | Page 5 Figure 5 Intersecting Structures Plan (Geoff Turner, as at 24 January 2017) CEO’s Operations & Exploration Review Notes: (1) Only some of the mapped east-west-trending thrust faults were shown in order to simplify the plan. (2) NRL has pegged additional ground in the area since January 2017 (refer Figure 2). In 1997, the average price of gold was around A$450 per ounce. Currently, the price of gold is around A$2,600 per ounce, over five times the price in 1997. In the USA, the use of naturally-occurring bacteria in solution has been shown to get significant recovery of residual gold in cyanide heap leach pads. Nagambie Resources is investigating the ways it could recover residual gold from the heap using naturally-occurring bacteria and establishing which laboratories are best equipped to carry out the bacterial speciation test work required at an acceptable cost. Nagambie Resources is looking to commence laboratory work early in 2021. PASS PROJECT Nagambie Resources has an Environment Protection Authority of Victoria (EPA)-approved Environment Management Plan (EMP) to store PASS in the legacy water-filled pits at the Nagambie Mine as part of the proposed rehabilitation of those pits. PASS capacity of the pits is around 5.0 million tonnes. The water in the Nagambie Mine open pits is naturally saline and alkaline, making it ideal tor PASS management. The North East Link Project (NELP) tender closed as scheduled in May 2020, with Nagambie asked to provide pricing for “Underwater Storage” PASS Management at the Nagambie Mine. NELP will be the biggest-ever road infrastructure project in Victoria and will require the management of around 5.4 million tonnes of PASS rock plus 1.2 million tonnes of PASS soil which will be excavated 24x7 by large tunnel boring machines. Normal Victorian Government business has been significantly delayed by Covid-19. The State budget is usually delivered in May but the 2020/21 budget is now expected to be delivered in November 2020. As a result, the winning tenderer for the construction of NELP may not be announced until early 2021. Nagambie Resources Limited | 2020 Annual Report | Page 6 Table 1 Nagambie Resources Group Tenements as at 30 September 2020 CEO’s Operations & Exploration Review Tenement Number MIN 5412 EL 5430 EL 5511 EL 6158 EL 6212 EL 6352 EL 6421 EL 6508 EL 6606 EL 6719 EL 6720 EL 6731 EL 6748 EL 6937 ELA 6877 ELA 7205 ELA 7207 ELA 7208 ELA 7209 ELA 7210 EL 7211 ELA 7212 ELA 7213 ELA 7237 ELA 7238 ELA 7264 ELA 7265 RL 2019 EL 5546 ELA 7498 ELA 7499 Tenement Name Nagambie Mining Licence Bunganail Exploration Licence Nagambie Central Exploration Licence Rushworth Exploration Licence Reedy Lake North Exploration Licence Miepoll Exploration Licence Pranjip Exploration Licence Tabilk Exploration Licence Gowangardie Exploration Licence Euroa Exploration Licence Tatura Exploration Licence Arcadia Exploration Licence Waranga Exploration Licence Nagambie East Exploration Licence Nagambie Exploration Licence Application Angustown Exploration Licence Application Arcadia Exploration Licence Application Cullens Road Exploration Licence Application Goulburn West Exploration Licence Application Locksley Exploration Licence Application Shepparton Exploration Licence Shepparton North Exploration Licence Application Pederick Exploration Licence Application Kirwans North (1) Exploration Licence Application Kirwans North (2) Exploration Licence Application Resource Recovery Exploration Licence Application Nagambie Town Exploration Licence Application Doctors Gully Retention Licence Total Waranga Domain Redcastle Exploration Licence Cornella Exploration Licence Application Sheoak Exploration Licence Application Total sq km 3.6 160.0 24.0 46.0 17.0 414.0 94.0 63.0 120.0 81.0 199.0 386.0 136.0 10.0 8.0 69.0 156.0 29.0 34.0 26.0 498.0 321.0 683.0 20.0 9.0 1.0 8.0 4.0 3,619.6 51.0 19.0 5.0 3,694.6 James Earle Chief Executive Officer STATEMENT AS TO COMPETENCY The Exploration Results in this report have been compiled by Adam Jones who is a Member of the Australian Institute of Geoscientists (MAIG). Adam Jones has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity 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”. He consents to the inclusion in this report of these matters based on the information in the form and context in which it appears. FORWARD-LOOKING STATEMENTS This report contains “forward-looking statements” within the meaning of securities laws of applicable jurisdictions. Forward-looking statements can generally be identified by the use of forward-looking words such as “may”, “will”, “expect”, “target”, “intend”, “plan”, “estimate”, “anticipate”, “believe”, “continue”, “objectives”, “outlook”, “guidance” or other similar words, and include statements regarding certain plans, strategies and objectives of management and expected financial performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are outside the control of Nagambie Mining and any of its officers, employees, agents or associates. Actual results, performance or achievements may vary materially from any projections and forward-looking statements and the assumptions on which those statements are based. Exploration potential is conceptual in nature, there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource. Readers are cautioned not to place undue reliance on forward- looking statements and Nagambie Resources assumes no obligation to update such information. Nagambie Resources Limited | 2020 Annual Report | Page 7 Directors’ Report Directors’ Report The directors of Nagambie Resources Limited submit herewith the annual financial report of the company and its controlled entities (the group) for the financial year ended 30 June 2020. Directors The names and particulars of the company directors in office during the financial year and until the date of this report are as follows. The directors were in office for the entire period unless stated otherwise. Name Particulars MICHAEL W TRUMBULL Non-Executive Director Appointed 28 July 2005 Non-Executive Chairman Appointed 20 December 2007 Executive Chairman Appointed 13 September 2013 Michael Trumbull has a degree in mining engineering (first class honours) from the University of Queensland and an MBA from Macquarie University. A Fellow of the Australian Institute of Mining and Metallurgy, he has over 40 years of broad mining industry experience with mines / subsidiaries of MIM, Renison, WMC, CRA, AMAX, Nicron, ACM and BCD Resources. From 1983 to 1991, he played a senior executive role in expanding the Australian gold production assets of ACM Gold. From 1985 to 1987, he was Project Manager and then Resident Manager of the Westonia open pit gold mine and treatment plant in Western Australia. From 1987 to 1991, he was General Manager – Investments for the ACM Group. From 1993 to 2011, he was a Director of the BCD Resources Group and was involved in the exploration, subsequent mine development and operation of the Beaconsfield underground gold mine in Tasmania. From 1993 to 2003, he was the sole Executive Director of BCD and, from 2003 to 2004, was the Managing Director. Other current Directorships of Listed Companies None Former Directorships of Listed Companies in last three years None ALFONSO M GRILLO Non-Executive Director and Company Secretary Independent Appointed 24 November 2017 Alfonso Grillo is a founding Partner at GrilloHiggins Lawyers. He holds a Bachelor of Arts and Bachelor of Law degree. Alfonso has over 20 years experience as a corporate lawyer, including company meeting practice and corporate governance procedures, fundraising and fundraising documentation, ASX Listing Rules and mergers and acquisitions. Alfonso advises resource industry companies in relation to mining and exploration projects, acquisition and divestment of assets, joint ventures and due diligence assessments. Alfonso has been a member of the Audit and Compliance Committee since his appointment. Other Current Directorships of Listed Companies None Former Directorships of Listed Companies in last three years None Nagambie Resources Limited | 2020 Annual Report | Page 8 Directors’ Report GARY R DAVISON Non-Executive Director Independent Appointed 15 May 2019 Gary Davison is a mining engineer. He is Managing Director and principal Mining Engineer of Mining One Pty Ltd which he helped establish in August 2005, an employee-owned independent group which has over 60 technical consultants. Mining One provides expertise in Australia and internationally in resource geology, mine planning, geotechnical engineering, conceptual studies, feasibility studies and corporate strategic advice. Gary has over 40 years’ experience in the mining industry in Australia and overseas. His career began at Renison, Tasmania in 1978 and he has worked at senior mine management levels in Tasmania, Western Australia, Victoria and New South Wales – covering principally underground, but also surface mines. In the early 1990’s, Gary managed the Nagambie Mine open pit and heap leach treatment operations for Perseverance. Gary is chairman of the Audit and Compliance Committee. Other Current Directorships of Listed Companies None. Former Directorships of Listed Companies in last three years None. Chief Executive Officer JAMES C EARLE BE (Geological) MEM MBA James Earle was appointed as Chief Executive Officer on 4 July 2016. He is a Geological Engineer with over 15 years broad experience with environmental impact assessments and approvals, waste management, environmental management plans, soil and water assessments and strategic advice. The majority of his experience has been in public infrastructure development and site-based environmental management. He has held positions with consulting organisations and government departments in Australia and the UK. The most recent positions held by James were Manager of the Victorian practice of Ramboll Environ and prior to that he was a Senior Consultant, Service Group Manager and Principal Consultant at GHD. Both of these groups are global engineering and environmental consultancies. James has also lectured at the Australian National University. Nagambie Resources Limited | 2020 Annual Report | Page 9 Directors’ Report Operating and Financial Review Principal Activities The principal activities of the group during the financial period were the exploration for, and development of, gold, associated minerals, and construction materials in Australia, and the investigation and development of waste handling assets. Review of Operations Following lengthy negotiations in the first half of the year, an extensive strategic partnership with a Canadian gold exploration company, Mawson Gold Limited (“Mawson”), was announced on 30 January 2020. Induced Polarisation (IP) geophysical surveys carried out in January and March 2020 outlined strong sulphide-gold targets at Racecourse and Nagambie Mine West. Follow up deep diamond drilling of these targets is being carried out. Tenders closed during May 2020 for the construction of the North East Link in Melbourne, which will require the management of around 5.4 million tonnes of PASS rock to be excavated by large tunnel boring machines. Nagambie Resources was requested by one of the tenderers to provide pricing for the underwater management of PASS at the Nagambie Mine and it did so. Strategic Partnership with Mawson Mawson took up an initial 10.0% cornerstone shareholding in Nagambie Resources Limited (“NRL”) of 50.0 million fully-paid ordinary NRL shares. Mawson has right of first refusal to take up or match all proposals under consideration by NRL on its 3,600 sq km of Waranga Domain tenements provided that Mawson continues to hold its original 50.0 million NRL shares. Mawson also has the right to appoint a director to the NRL board provided it increases its’ holding above, and maintains it above, 15.0% of NRL. As consideration for the 50.0 million NRL shares issued for $2,500,000, NRL received 8.5 million shares in Mawson. The value per NRL share of 5.0 cents represented a 31.6% premium to the last ASX sale price for NRL shares on 29 January 2020 of 3.8 cents. Mawson acquired 100% of NRL’s Clonbinane tenements for $500,000 cash and 1.0 million Mawson shares. Mawson also paid NRL $28,000 to cover the tenement bonds. Total consideration to NRL for the 50.0 million NRL shares and Clonbinane was valued at $3,245,412; $528,000 in cash and $2,717,412 in 9.5 million Mawson shares. The 9.5 million Mawson shares were valued at $3,954,108 at 30 June 2020. Mawson also has the right to spend the next $1,000,000 on each of NRL’s Redcastle exploration licence and NRL’s Doctors Gully retention licence to earn a 70% joint venture interest in each. Covid-19 Impacts The Covid-19 pandemic affected activities in the second half of the year. Local demand for quarry products was well down on anticipated levels as business developments in the Nagambie region were put on hold. Diamond drilling of the RAD002 hole at the Racecourse Prospect was delayed by a total of eight weeks because the drilling contractor had manning issues resulting from the strict virus testing protocols required and the closure of the border with Tasmania, the home State for several of his employees. A follow up IP geophysical survey at Racecourse West had to be deferred as the preferred IP contractor is based in Adelaide and the South Australian border was, and remains, closed to Victoria. Likely Developments During the 2021 financial year, Nagambie Resources is planning to: 1. Complete RAD002 into the Racecourse sulphide-gold prospect and drill NWD001, the first hole into the Nagambie Mine West sulphide-gold prospect; 2. Carry out lithogeochemical sampling of RAD002 and NWD001 to assist in vectoring towards and/or prioritising structures and follow up drilling; 3. Carry out a ground IP geophysical survey to the west of the Nagambie Bypass Freeway to assist in targeting a follow up Racecourse prospect hole to the west of RAD002; 4. Secure a PASS Management contract for some of the estimated 5.4 million tonnes of PASS rock to be excavated from the tunnels for the North East Link; Nagambie Resources Limited | 2020 Annual Report | Page 10 Directors’ Report 5. Secure additional joint ventures over more of Nagambie Resources’ 3,600 sq km of contiguous tenements in the Waranga Domain. Mawson is likely to be the joint venture participant as it has right of first refusal to take up or match all gold exploration proposals under consideration by NRL; and 6. Carry out bacterial speciation testwork to establish the best naturally occurring bacteria to use to recover residual gold in the Nagambie Mine 1989-1997 heap leach pad and to establish potential gold recovery. In the USA, the use of naturally occurring bacteria in solution has been shown to get significant recovery of such residual gold. Financial Matters The consolidated loss for the group for the year amounted to $876,491 after tax. This compared to a loss after tax for the year ended 30 June 2019 of $1,485,048. The decrease of $608,557 in the loss for the year arises after a decrease in revenue of $22,731 a decrease in expenditures of $183,050 and receipt of an R&D tax incentive of $727,624. After an increase in the value of the shares in Mawson Gold Limited is taken into account as Other comprehensive income there is a Total comprehensive income of $360,206 for the year. A total of $3,163,800 before costs was raised in share capital by the company during the 2020 financial year. This included $603,800 from issue of 11,392,468 shares at 5.3 cents from a share purchase plan, $60,000 from issue of 1,132,076 shares at 5.3 cents in a placement and $2,500,000 from the issue of 50,000,000 shares at 5.0 cents to Mawson Gold Limited. There was also $200,000 raised from the issue of 4,000,000 convertible notes at 5 cents. Changes in state of affairs There was no significant change in the state of affairs of the Group during the financial year other than already disclosed. Subsequent events There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature, likely in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or state of affairs of the Group, in future financial years. Environmental regulations The company’s exploration and mining tenements are located in Victoria. The operation of these tenements is subject to compliance with the Victorian and Commonwealth mining and environmental regulations and legislation. Licence requirements relating to ground disturbance, rehabilitation and waste disposal exist for all tenements held. The directors are not aware of any ongoing breaches of mining and environmental regulations and legislation during the year and up to the date of this report. Dividends No dividends in respect of the current financial period have been paid, declared or recommended for payment (2019: Nil). Share options Share options granted to directors and executives The following options were granted to directors and executives during the year: Refer to page 10 of the remuneration report for full details. Michael Trumbull (director) Alfonso Grillo (director) Gary Davison (director) James Earle (chief executive officer) 4,000,000 2,000,000 2,000,000 2,000,000 Shares under option or issued on exercise of options No options were exercised during the year. Nagambie Resources Limited | 2020 Annual Report | Page 11 Directors’ Report Options on issue as at reporting date Number of options 11,300,000 2,000,000 12,500,000 13,750,000 1,000,000 4,500,000 10,500,000 2,000,000 14,900,000 72,450,000 Grant date 16/11/2015 4/7/2016 30/11/2016 24/11/2017 20/12/2017 22/8/2018 23/11/2018 27/2/2019 29/11/2019 Vesting date 16/11/2015 4/7/2016 30/11/2016 24/11/2017 20/12/2017 22/8/2018 23/11/2018 27/2/2019 29/11/2019 Expiry date 28/11/2020 4/7/2021 30/11/2021 24/11/2022 20/12/2022 22/8/2023 23/11/2023 27/2/2024 29/11/2024 Exercise price 10 cents 25.5 cents 25.0 cents 10 cents 14.1 cents 12.6 cents 10.8 cents 12.0 cents 10.0 cents Indemnification of officers and auditors During the financial year, the company paid a premium in respect of a contract insuring the directors of the company (as named above), the company secretary, executive officers and any related body corporate against a liability incurred by a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred as such by an officer or auditor. Directors’ meetings The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member). During the financial year 7 board meetings and 5 audit and compliance committee meetings were held. Directors Michael Trumbull Alfonso Grillo Gary Davison Board of directors Audit and compliance committee Held Attended Held Attended 7 7 7 7 7 6 - 5 5 - 5 5 Directors’ shareholdings and options The following table sets out each director’s relevant interest in shares, debentures, and rights or options on shares of the company or a related body corporate as at the date of this report. Directors Michael Trumbull Alfonso Grillo Gary Davison Fully paid ordinary shares Number 21,168,492 1,937,973 586,038 Share options Number 20,000,000 8,000,000 4,000,000 Nagambie Resources Limited | 2020 Annual Report | Page 12 Remuneration Report Remuneration report (Audited) Remuneration policy for directors and executives Details of key management personnel The directors and key management personnel of Nagambie Resources Limited during the financial year were: Michael Trumbull Alfonso Grillo Gary Davison James Earle Remuneration Policy Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer The Board is responsible for determining and reviewing the compensation of the directors, the chief executive officer, the executive officers and senior managers of the company and reviewing the operation of the company’s Employee Option Plan. This process requires consideration of the levels and form of remuneration appropriate to securing, motivating and retaining executives with the skills to manage the company’s operations. The board of directors also recommends levels and form of remuneration for non-executive directors with reference to performance and when required, sought independent expert advice. The total sum of remuneration payable to non-executive directors shall not exceed the sum fixed by members of the company in general meeting. In accordance with ASX Listing Rule 10.17, the current maximum aggregate compensation payable out of the funds of the company to non-executive directors for their services as directors is $250,000 per annum. For the year ending 30 June 2020, the board resolved that the executive chairman’s remuneration be set at $150,000 (2019: $150,000) per annum excluding superannuation and share based payments. For non-executive directors, remuneration was set at $42,000 (2019: $42,000) per annum excluding superannuation and share based payments. Where a director performs special duties or otherwise performs consulting services outside of the scope of the ordinary duties of a director, then additional amounts will be payable. There is no direct relationship between the company’s remuneration policy and the company’s performance. That is, no portion of the remuneration of directors, secretary or senior managers is ‘at risk’. However, in determining the remuneration to be paid in each subsequent financial year, the board will have regard to the company’s performance. Therefore, the relationship between the remuneration policy and the company’s performance is indirect. Options are issued to employees under the company’s Employee Option Plan at the discretion of the board. Options issued to directors require the approval of shareholders at a general meeting. The purpose of the issue of options is to remunerate employees and directors as an incentive for future services. The directors consider it important that the company is able to attract and retain people of the highest calibre and believe that the most appropriate means of achieving this is to provide an opportunity to participate in the company’s future growth and give them an incentive to contribute to that growth. Relationship between the remuneration policy and company performance The tables below set out summary information about the Group earnings and movements in shareholder wealth for the five years to June 2020. Revenue Net loss before tax Net loss after tax 30 June 2020 30 June 2019 30 June 2018 30 June 2017 $306,173 $1,604,115 $876,491 $328,904 $1,764,434 $1,485,048 $762,163 $1,187,261 $1,187,261 $669,836 $1,621,972 $1,621,972 Share price at start of year (cents) Share price at end of year (cents) Dividends paid Basic earnings per share (cents) Diluted earnings per share (cents) 4.4 5.2 Nil (0.19) (0.19) 16.0 4.4 Nil (0.35) (0.35) 4.7 16.0 Nil (0.29) (0.29) 16.5 4.7 Nil (0.43) (0.43) 30 June 2016 $453,058 $619,449 $619,449 3.4 16.5 Nil (0.21) (0.21) Nagambie Resources Limited | 2020 Annual Report | Page 13 Director and executive remuneration The directors, executives and consultants detailed below received the following amounts as compensation for their services during the year: Remuneration Report Short Term Benefits Salary and fees $ Post Employment Benefits Superannuation $ 164,250 164,250 45,990 45,990 45,990 5,749 - 45,990 200,000 172,000 456,230 433,979 - - - - - - - - 19,000 14,250 19,000 14,250 Share Based Payment Performance Related Benefits Other LongTerm Benefits Total Options (non-cash) $ 113,916 155,928 56,958 77,964 56,958 - - 77,964 56,958 155,928 284,790 467,784 $ - - - - - - - - - - - - $ - - - - - - - - - - - - $ 278,166 320,178 102,948 123,954 102,948 5,749 - 123,954 275,958 342,178 760,020 916,013 Alfonso Grillo (2) Directors Michael Trumbull (1) 2020 2019 2020 2019 2020 2019 2020 2019 Gary Davison (3) Kevin Perrin (4) Chief Executive Officer James Earle (5) 2020 2019 Total for Year Total for Year 2020 2019 Apart from the contracts disclosed at (1) and (4) below there were no other contracts with management or directors in place during the 2020 and the 2019 financial years. (1) (2) (3) (4) (5) Michael Trumbull is employed as Executive Chairman under a consultancy agreement which commenced on 1 July 2013 and is ongoing. The fixed annual remuneration level was set at $150,000 plus superannuation of $14,250 (2019: $150,000 plus superannuation of $14,250) plus provision of a motor vehicle and reimbursement of out of pocket expenses. The contract may be terminated upon giving 6 months notice by the company or 3 months by the Consultant. Apart from accrued entitlements there are no other termination benefits. During the 2020 financial year, fees of $164,250 (2019: $164,250) were paid to Cypron Pty Ltd, an entity controlled by Michael Trumbull, for his services as a director of the company. At 30 June 2020, there was an amount of $90,337 (2019: Nil) owing to Cypron Pty Ltd. During the 2020 financial year, fees of $45,990 (2019: $45,990) were paid to GrilloHiggins Lawyers, an entity in which Alfonso Grillo is a partner, for his services as a director of the company. The amount of $45,990 is comprised of $42,000 director’s fee plus an allowance of $3,990 for superannuation. During the 2020 financial year the company also paid fees of $99,802 (2019: $44,438) to GrilloHiggins Lawyers for secretarial and legal services provided by Alfonso Grillo and other GrilloHiggins personnel. At 30 June 2020, there was an amount of $3,437 (2019: $3,770) owing to GrilloHiggins. Gary Davison was appointed a director on 15 May 2019. During the 2020 financial year he was paid $45,990 (2019: $5,749) for his services as a director of the company. The amount of $45,990 is comprised of $42,000 director’s fee plus an allowance of $3,990 for superannuation. At 30 June 2020, there was no amount (2019: $5,749) owing to Gary Davison. Kevin Perrin retired as a director on 30 June 2019. James Earle is employed as the Chief Executive Officer under an employment agreement which commenced on 8 August 2016 and is ongoing. The fixed remuneration is $200,000 per annum plus superannuation. He is also entitled to a cash incentive bonus subject to performance hurdles. For the 2020 financial year there was no cash bonus paid (2019: $22,000). The agreement may be terminated by either party upon giving 3 months notice. Apart from accrued entitlements, there are no other termination benefits. Nagambie Resources Limited | 2020 Annual Report | Page 14 Remuneration Report Shareholdings of key management personnel Balance 1 July 2019 Granted as remuneration On exercise of options Net change (1) Balance 30 June 2020 Michael Trumbull Alfonso Grillo Gary Davison James Earle Total 20,602,454 1,371,935 - 975,268 22,949,657 - - - - - - - - - - 566,038 566,038 586,038 283,019 2,001,133 21,168,492 1,937,973 586,038 1,258,287 24,950,790 (1) Net change refers to on and off market acquisitions/disposals. Executive Options The Group has an ownership-based remuneration scheme for staff and executives (including executive and non- executive directors) of the company. In accordance with the provisions of the scheme, as approved by shareholders at a previous annual general meeting, staff and executives of the company may be granted options to purchase parcels of ordinary shares at an exercise price determined at the discretion of the board of directors. Each share option converts into one ordinary share of Nagambie Resources Limited on exercise by the payment of the exercise price. No amounts are paid or payable by the recipient on receipt of the options. The options carry neither right to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. The number of options granted is at the discretion of the board of directors of the company. The options granted expire five years after their issue or one month after the resignation of the staff member or executive, whichever is the earlier, or as otherwise determined by the board of directors. There are 72,450,000 share options on issue under this plan, of which 43,000,000 are held by directors and key management personnel and 29,450,000 are held by other current and former executives and employees. Options on issue at the end of the financial year Number of options Grant date Vesting date Expiry date Exercise price 11,300,000 2,000,000 12,500,000 13,750,000 1,000,000 4,500,000 10,500,000 2,000,000 14,900,000 72,450,000 16/11/2015 4/7/2016 30/11/2016 24/11/2017 20/12/2017 22/8/2018 23/11/2018 27/2/2019 29/11/2019 16/11/2015 4/7/2016 30/11/2016 24/11/2017 20/12/2017 22/8/2018 23/11/2018 27/2/2019 29/11/2019 16/11/2020 4/7/2021 30/11/2021 24/11/2022 20/12/2022 22/8/2023 23/11/2023 27/2/2024 29/11/2024 10 cents 25.5 cents 25 cents 10 cents 14.1 cents 12.6 cents 10.8 cents 12.0 cents 10.0 cents Value of options issued to directors and executives The following grants of share-based payment compensation to directors and executives relate to the 2020 financial year: Name Michael Trumbull Alfonso Grillo Gary Davison James Earle Option series issued 29/11/2019 issued 29/11/2019 issued 29/11/2019 issued 29/11/2019 Number granted 4,000,000 2,000,000 2,000,000 2,000,000 Number vested 4,000,000 2,000,000 2,000,000 2,000,000 % of grant vested 100% 100% 100% 100% % of grant forfeited 0% 0% 0% 0% % of compensation for year consisting of options 40.9% 55.3% 55.3% 34.2% Nagambie Resources Limited | 2020 Annual Report | Page 15 Remuneration Report The following table summarises the value of options granted, exercised or lapsed during the 2020 financial year to directors and executives: Name Michael Trumbull Alfonso Grillo Gary Davison James Earle Value of options granted at the grant date (i) $ 113,916 56,958 56,958 56,958 Value of options exercised at the exercise date (ii) $ Nil Nil Nil Nil Value of options lapsed at the date of lapse (iii) $ $56,000 $14,000 Nil Nil (i) (ii) (iii) The value of options granted during the period is recognised in compensation at the grant date which is also the vesting date. The assessed value was 2.85 cents per option. No options were exercised during the reporting period. 5,000,000 directors options and no executives options lapsed during the reporting period. Option holdings of key management personnel Balance 1 July 2019 Granted as remuneration Options Exercised Options Lapsed Balance 30 June 2020 Vested and exercisable at 30 June 2020 Michael Trumbull 20,000,000 7,000,000 Alfonso Grillo 2,000,000 Gary Davison 9,000,000 James Earle 38,000,000 Total 4,000,000 2,000,000 2,000,000 2,000,000 10,000,000 - - - - - (4,000,000) 20,000,000 8,000,000 (1,000,000) 4,000,000 - - 11,000,000 (5,000,000) 43,000,000 20,000,000 8,000,000 4,000,000 11,000,000 43,000,000 This concludes the Remuneration report which has been audited. Corporate Governance The Company’s Corporate Governance Statement and other corporate governance related documents may be accessed the Company’s website at https://www.nagambieresources.com.au/investor-information/corporate- governance-statement. from Non-audit services As detailed in note 27 to the financial statements, no amount has been paid to the auditor during the financial year for non-audit services. Auditor’s independence declaration The auditor’s independence declaration is attached to this directors’ report. Proceedings on behalf of the company No person has applied for leave of court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of these proceedings. Signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act 2001. On behalf of the directors Michael W Trumbull Executive Chairman Melbourne 28 September 2020 Nagambie Resources Limited | 2020 Annual Report | Page 16 AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF NAGAMBIE RESOURCES LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2020 there have been: — no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and — no contraventions of any applicable code of professional conduct in relation to the audit. William Buck Audit (Vic) Pty Ltd ABN: 59 116 151 136 A. A. Finnis Director Melbourne, 28 September 2020 Nagambie Resources Limited | 2020 Annual Report | Page 17 Statement of Profit and Loss and Other Comprehensive Income Statement of Profit and Loss and Other Comprehensive Income for the financial year ended 30 June 2020 Revenue 4 306,173 328,904 Consolidated Note 2020 $ 2019 $ Corporate expenses Cost of sales and rehabilitation Depreciation Employee benefits expense Impairment of assets Interest expense Loss before income tax Income tax benefit (575,860) (628,971) (10,287) (199,923) (205,982) (122,195) (547,428) (755,448) (107,303) - (463,428) (386,801) 4 10 (1,604,115) (1,764,434) 5 727,624 279,386 Loss for the year after tax (876,491) (1,485,048) Items that will not be re-classified to profit or loss Other comprehensive income 1,236,697 - Total comprehensive income (loss) for the year 360,206 (1,485,048) Loss per share calculated on Loss for the year after tax Basic and diluted loss per share in cents 6 (0.19) (0.35) The accompanying notes form part of these financial statements Nagambie Resources Limited | 2020 Annual Report | Page 18 Statement of Financial Position as at 30 June 2020 Current assets Cash and cash equivalents Trade and other receivables Equity investments at fair value Total current assets Non-current assets Security deposits Equity investments at fair value Property, plant and equipment Right of use assets Exploration and evaluation assets Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Lease liabilities Provisions Revenue in advance Total current liabilities Non-current liabilities Borrowings Lease liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Options reserve Asset revaluation reserve Accumulated losses Total equity Statement of Financial Position Note 16(b) 7 8 9 8 11 12 10 13 17 18 17 18 14 15 15 Consolidated 2020 $ 2019 $ 224,057 75,235 1,977,054 2,276,346 709,213 1,977,055 284,013 743,579 12,149,498 15,863,358 224,988 68,477 - 293,465 635,479 - 817,051 - 11,768,062 13,220,592 18,139,704 13,514,057 246,725 300,000 279,349 32,303 41,188 899,565 4,234,000 287,092 18,927 4,540,019 341,553 1,060,622 - 15,523 - 1,417,698 3,330,489 - 10,845 3,341,334 5,439,584 4,759,032 12,700,120 8,755,025 27,284,103 2,105,677 1,236,697 (17,926,357) 12,700,120 24,123,551 1,828,340 - (17,196,866) 8,755,025 The accompanying notes form part of these financial statements Nagambie Resources Limited | 2020 Annual Report | Page 19 Statement of Changes In Equity Statement of Changes in Equity for the financial year ended 30 June 2020 Issued capital $ Options reserve $ Note Consolidated Asset revaluation reserve $ Accumulated losses $ Total $ Balance at 30 June 2018 22,091,390 1,214,896 Loss for the year Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners - - - Shares issued during the year 14(b) 2,025,500 Share issue expenses (20,749) - - - - - Recognition of share based payments Transfer on lapse of options - - 662,694 (21,840) Transfer on exercise of options 27,410 (27,410) Balance at 30 June 2019 24,123,551 1,828,340 Loss for the year Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners - - - Shares issued during the year 14(b) 3,163,800 Share issue expenses (3,248) - - - - - Recognition of share based payments Transfer on lapse of options - - 424,337 (147,000) - - - - - - - - - - - (15,733,658) 7,572,628 (1,485,048) (1,485,048) - - (1,485,048) (1,485,048) - - - 2,025,500 (20,749) 662,694 21,840 - - - (17,196,866) 8,755,025 (876,491) (876,491) 1,236,697 - 1,236,697 1,236,697 (876,491) 360,206 - - - - - - - 3,163,800 (3,248) 424,337 147,000 - Balance at 30 June 2020 27,284,103 2,105,677 1,236,697 (17,926,357) 12,700,120 The accompanying notes form part of these financial statements Nagambie Resources Limited | 2020 Annual Report | Page 20 Statement of Cash Flows for the financial year ended 30 June 2020 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid R&D tax incentive Statement of Cash Flows Consolidated Note 2020 $ 2019 $ 327,309 408,149 (779,204) (955,694) 11,213 16,980 (422,325) (340,506) 727,624 279,386 Net cash inflows used in operating activities 16(a) (135,383) (591,685) Cash flows from investing activities Payments for exploration expenditure (1,235,018) (2,092,107) Payments for security bonds Proceeds from sale of Clonbinane Goldfield assets Purchase of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds (repayment) of borrowings Proceeds from issue of convertible notes Repayment of lease liabilities Net cash provided by financing activities (71,653) (479) 528,867 - - (13,810) (777,804) (2,106,396) 660,552 2,004,751 300,000 (133,752) 200,000 700,000 (248,296) - 912,256 2,570,999 Net increase (decrease) in cash and cash equivalents (931) (127,082) Cash and cash equivalents at the beginning of the financial period 224,988 352,070 Cash and cash equivalents at the end of the financial period 16(b) 224,057 224,988 The accompanying notes form part of these financial statements Nagambie Resources Limited | 2020 Annual Report | Page 21 Notes to the Financial Statements Notes to the Financial Statements for the financial year ended 30 June 2020 1. General information Nagambie Resources Limited (the Company) is a listed for-profit public company, incorporated in Australia and operating in Victoria. The registered office and principal place of business for the Company are located at 533 Zanelli Road, Nagambie Vic 3608. These financial statements were authorised for issue on the date of the signing of the attached Directors’ Declaration. 2. Significant accounting policies Statement of compliance The financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001 and the Corporations Regulations 2001, Australian Accounting Standards and Interpretations. The financial statements include the consolidated financial statements of the group. Compliance with Australian Accounting Standards (AASBs) ensures that the financial statements and notes of the group comply with International Financial Reporting Standards (‘IFRS’). Basis of preparation The financial statements have been prepared on an accruals basis using historical cost with the exception of certain assets measured at fair value. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, which is the functional and presentation currency of the Company and its controlled entities. Comparative information where necessary has been reclassified in order to achieve consistency in presentation with amounts disclosed in the current year. Changes in accounting policies Other than the policies described below there have been no changes in accounting policies. AASB 16 – Leases (“AASB 16”) The Group has adopted AASB 16 from 1 July 2019. This standard replaces AASB 117 “Leases” and for leases eliminates the classification of operating leases and finance leases. Except for short-term leases and leases of low value assets, right of use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (including operating costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier period of the lease, the expense associated with the lease under AASB 16 will be higher when compared to the lease expense under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by interest expense and depreciation in profit or loss. For classification with the statement of cash-flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments are separately disclosed in the financing activities. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. Impact of adoption As the Group’s only lease expired on 14 October 2019 there was no impact on adoption of this standard as at 1 July 2019. A new lease was signed on 15 October 2019 which has been recorded as a right of use asset / lease liability on 15 October 2019. Hire purchase assets were transferred from plant and equipment to right on use asset on 1 July 2019. This did not result in any financial impact to the Group. The following significant accounting policies have been adopted in the preparation and presentation of the financial statements: (a) Going concern The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation and settlement of liabilities in the normal course of business. (b) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (referred to as ‘the group’ in these financial statements). The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Nagambie Resources Limited | 2020 Annual Report | Page 22 Notes to the Financial Statements 2. Significant accounting policies (continued) The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. (c) Cash and cash equivalents Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (d) Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be wholly settled within 12 months of the reporting date are recognised in current liabilities in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for annual leave and long service leave not expected to be wholly settled within 12 months of the reporting date are recognised in non-current liabilities, provided there is an unconditional right to defer settlement of the liability. The liability is 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 government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (e) Exploration and evaluation assets Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied: the rights to tenure of the area of interest are current; and (8) (ii) at least one of the following conditions is also met: (a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale; or (b) exploration and evaluation activities in the area of interest have not at the end of the reporting period reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing. Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortisation of assets used in exploration and evaluation activities. General and administrative costs are only included in the measure of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest. Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset (or the cash-generating unit(s) to which it has been allocated, being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years. Where a decision is made to proceed with the development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment and the balance will then be reclassified to capitalised development costs. Nagambie Resources Limited | 2020 Annual Report | Page 23 Notes to the Financial Statements 2. Significant accounting policies (continued) (f) Impairment of tangible assets At the end of each reporting period, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. (g) Income tax Current tax Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted at the end of the reporting period. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred tax Deferred tax is accounted for using the liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the statement of financial position. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. A deferred tax liability is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures except where the group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis. Nagambie Resources Limited | 2020 Annual Report | Page 24 Notes to the Financial Statements 2. Significant accounting policies (continued) Current and deferred tax for the period Current and deferred tax is recognised as an expense or income in the statement of profit or loss and other comprehensive income, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess. (h) Research & development tax incentive The Research & development (R&D) tax incentive refund relates to eligible R&D activities undertaken by the group. The tax credit is recognised when the money is received from the Australian Taxation Office. This credit is recognised in current tax (refer note 2(h) above). .(i) Right of use assets A right of use asset is recognised at the commencement date of a lease. The right of use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable; any lease payment made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset and restoring the site or asset. Right of use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. When the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with a term of 12 months or leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. (j) Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payment to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments comprise of fixed payments, less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following; future lease payments arising from a change in an index or a rate used, residual guarantees, lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the following right-of-use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Depreciation is calculated on a straight line basis so as to write off the net cost amount of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes recognised on a prospective basis. (k) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. Depreciation is provided on property, plant and equipment except for freehold land. Depreciation is calculated on a straight line basis so as to write off the net cost amount of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes recognised on a prospective basis. The range of useful lives for each class of plant equipment for the year were: Plant and equipment: Computer equipment: Motor vehicles: 4-10 years 3-5 years 3-5 years The gain or loss arising on disposal or retirement of an item of property, plant or equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit and loss. Nagambie Resources Limited | 2020 Annual Report | Page 25 Notes to the Financial Statements 2. Significant accounting policies (continued) (l) Provisions Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. (m) Revenue Revenue is measured at the fair value of the consideration received or receivable. Sale of rock revenue Revenue from the sale of rock is measured at the fair value for the consideration received or receivable. The revenue is recognised when the rock is removed from the company premises. There are no cartage expenses as the customer utilises their own assets to source and remove the rock. Interest revenue Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. Rental revenue Property rental income is recognised on a straight-line basis over the period of the lease term. When rental income is received in advance at the end of a period it is recognised as income in the following period to which it relates. Government Grants Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. (n) Share-based payments Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of a Binomial option pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. The fair value determined at the grant date of the equity-settled share-based payments is expensed when options are granted since in all cases there is no delay until options are vested. Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods and services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. (o) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: 8. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or for receivables and payables which are recognised inclusive of GST. ii. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are presented on a net basis. The GST components of cash flows arising from investing or financial activities which are recoverable from a payable to the taxation authority are presented as operating cash flows. (p) (q) Trade and other payables Accounts payable and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the company during the reporting period which remain unpaid. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. Trade and other receivables Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Nagambie Resources Limited | 2020 Annual Report | Page 26 Notes to the Financial Statements 2. Significant accounting policies (continued) (r) Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. (s) (t) (u) (v) Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the loans or borrowings are classified as non-current. The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial position, net of transaction costs. Convertible notes are initially classified as a financial liability until extinguished on conversion or redemption. The corresponding interest on convertible notes is expensed to profit or loss. Finance costs Finance costs are expensed in the period in which they are incurred, including interest on bank accounts and interest on short-term and long-term borrowings. Investments and other financial assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the company has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, it’s carrying value is written off Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income include equity investments which the company intends to hold and has irrevocably elected to classify them as such upon initial recognition. There are two types of FVOCI accounting under AASB 9 (Equity FVOCI and Debt FVOCI) Impairment of financial assets The company recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the company’s assessment at the end of each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance is recognised in other comprehensive income with a corresponding expense through profit or loss. In all other cases, the loss allowance reduces the asset’s carrying value with a corresponding expense through profit or loss. (w) Critical accounting estimates and judgements Exploration and evaluation costs Exploration and evaluation costs have been capitalised on the basis that the group may commence commercial production in the future, from which time the costs will be amortised in proportion to the depletion of the mineral resources. Key judgements are applied in considering costs to be capitalised which includes determining expenditures directly related to these activities and directly allocating overheads between those that are expensed and capitalised. Nagambie Resources Limited | 2020 Annual Report | Page 27 Notes to the Financial Statements 2. Significant accounting policies (continued) In addition, costs are only capitalised that are expected to be recovered either through successful development or sale of the relevant mining interest or activities that are not at a stage that permits a reasonable estimate of the existence of economically recoverable reserves. Factors that could impact the future commercial production at the mine include the level of reserves and resources, future technology changes, which could impact the cost of mining, future legal changes and changes in commodity prices. To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the period in which this determination is made. Management have assessed the balance of capitalised exploration costs in line with future planned exploration activities and the group’s accounting policy and have determined that no impairment was necessary. If a tenement has been relinquished or reduced, then an impairment charge is taken. This charge is generally based on the pro-rata area reduced, however there can be other reasons for not using such an approach. When a tenement is not relinquished or reduced but is thought to be of reduced carrying value then an impairment based on management’s estimate of fair value has been applied. Any charge for impairment is recognised in profit or loss immediately and also shown at Note 9. Rehabilitation of tenements The group has considered whether a provision for rehabilitation of any tenement is required. The directors do not consider that such a provision is necessary due to the fact that rehabilitation is being undertaken on a progressive basis. Whilst the company is in exploration phase it cannot reliably estimate the scope and costs of rehabilitation work that will need to be undertaken. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Share based payments The group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a Binomial valuation method of taking into account the terms and conditions upon which the instruments were granted. The company employs an external consultant to complete the valuation and this takes into account the expected volatility of the share price as one of the key components of the valuation. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Fair value of convertible notes Under the group’s accounting policy for convertible notes with cash redemption features, at initial recognition an amount equal to the fair value of the convertible notes issued is recognised as a financial liability (“debt”), and the residual value, being the proceeds of consideration less the debt component recognised at fair value, is recognised in equity. On initial recognition, the directors have assessed the terms of the convertible notes and determined that in their view the fair value of the debt component is equal to the proceeds such that there is no residual amount to be allocated to an equity component. In making this determination, the directors are of the view that the value of the consideration received, net of costs, provided reliable evidence of the fair value of the debt component of the convertible note. (x) Fair value measurement hierarchy The company is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. (y) Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the group only. Supplementary information about the parent entity is disclosed in note 29. Nagambie Resources Limited | 2020 Annual Report | Page 28 Notes to the Financial Statements 3. New Accounting Standards for Application in Current and Future Periods The AASB has issued new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods and which the Company has decided not to early adopt. In the directors’ view none of these standards and interpretations will have a material effect on these financial statements, Standard Mandatory date for annual reporting periods beginning on or after Reporting period standard adopted by the company The revised Conceptual Framework for Financial Reporting 1 January 2020 1 July 2020 AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material AASB 2020-1 Amendments to Australian Accounting Standards – Classification of liabilities as Current or Non- Current 1 January 2020 1 July 2020 1 January 2020 1 July 2020 1 January 2023 1 July 2023 4. Revenue and expenses The loss before income tax includes the following items of revenue and expenses. (a) Revenue Revenue from contracts with customers Rental income Sale of rock and quarry products Other revenue Government cash flow boost Interest Sundry income Total revenue (b) Expenses Employee benefits expense Employee benefits Share based payments expense Superannuation expense Consolidated 2020 $ 2019 $ 190,542 44,851 50,730 11,213 8,837 306,173 95,785 424,337 27,306 547,428 194,695 102,601 - 16,980 14,628 328,904 60,595 662,694 32,159 755,448 Nagambie Resources Limited | 2020 Annual Report | Page 29 5. Income tax (a) Income tax expense Loss from operations Notes to the Financial Statements (1,604,115) (1,764,434) Prima facie tax benefit calculated at 30% (2019: 30%) 481,235 529,330 Add tax effect of: - Non deductible expenses - Share based payments Less tax effect of: Current year tax loss not recognised Add R&D tax incentive Income tax benefit (b) Deferred tax asset A deferred tax asset attributable to tax losses and timing differences has not been brought to account due to the uncertainty of recoverability in future periods. 6. Loss per share 5,201 (127,301) 1,727 (198,808) (359,135) (332,249) 727,624 727,624 279,386 279,836 5,180,203 4,892,103 Consolidated 2020 $ 2019 $ Basic and diluted loss per share is calculated as net loss 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. Net loss 876,491 1,485,048 Weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share 458,442,320 428,548,060 Basic and diluted loss per share in cents 0.19 0.35 As discussed in Note 22, the company has issued options over its unissued share capital. All these options are anti- dilutive in nature due to the company incurring losses and the share price being less than the exercise price. They therefore have not been incorporated into the diluted earnings per share calculation. 7. Receivables Trade receivables Other receivables Total receivables 8. Equity investments at fair value Current assets Shares in Mawson Gold Limited Non-current assets Shares in Mawson Gold Limited 16,901 58,334 75,235 4,039 64,438 68,477 1,977,054 1,977,055 - - The shares shown above as current assets are those which are available for sale within the next 12 months. Those shown as non-current assets are subject to escrow periods which expire beyond that time. The difference between fair value at balance date and the cost at the date of the transaction for equity investments is $1,236,697. This amount is reflected in an Asset revaluation reserve and shown at Note 15. Nagambie Resources Limited | 2020 Annual Report | Page 30 Notes to the Financial Statements 8. Equity investments at fair value (continued) Financial assets at fair value through other comprehensive income relate to Mawson Gold Limited which are ordinary shares in a company listed on the Toronto Stock Exchange. These have been valued at the quoted prices at accordance with AASB 13, using Level 1 of the fair value hierarchy - quoted prices (unadjusted) in active markets for identical assets or liabilities AASB 13 'Fair Value Measurement' requires disclosure of fair value measurements by level of the fair value hierarchy, as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). 9. Security deposits Non-current assets Security deposits - environmental bonds (i) Deposit on land Total other assets (i) Security deposits – environmental bonds 559,213 150,000 709,213 585,479 50,000 635,479 The company holds security deposits, in the form of term deposits with its banker. These are guarantees for performance conditions set by the Department of Economic Development, Jobs, Transport and Resources Victoria on mining tenements held by the company. Those guarantees are held to cover any future rehabilitation obligations the company may have on the mining tenements. When all obligations in relation to a mining tenement are finalised, the relevant guarantee will be released and associated environmental bond will be redeemed. The deposits are shown as non-current assets since it is not expected that they will be repaid during the coming 12 months. These cash deposits earn interest for the company. 10. Exploration and evaluation assets Balance at beginning of the year add Exploration costs capitalised for the year less Disposal of Clonbinane Goldfield tenements less Impairment charge Balance at end of the year Consolidated 2020 $ 11,768,062 1,235,018 (746,279) (107,303) 12,149,498 2019 $ 9,675,955 2,092,107 - - 11,768,062 During the financial year the group reassessed the recoverable value of all tenement areas to which exploration costs have been capitalised and an amount of $72,888 was deemed applicable as an impairment charge. This matter is discussed further in ‘Critical accounting estimates and judgements’ at Note 2(s). On 24 March 2020 the group announced completion of the sale of the subsidiary Clonbinane Goldfield Pty Ltd to Mawson Gold Limited. That sale resulted in an impairment charge of $34,415 arising on the disposal tenements which were owned by the subsidiary company. Nagambie Resources Limited | 2020 Annual Report | Page 31 11. Property, plant and equipment Gross carrying amount Balance at 1 July 2018 Additions Balance at 1 July 2019 Transfer - right of use asset Balance at 30 June 2020 Accumulated depreciation Balance at 1 July 2018 Depreciation expense Balance at 1 July 2019 Depreciation expense Transfer - right of use asset Balance at 30 June 2020 Net book value As at 30 June 2019 As at 30 June 2020 12. Right of use assets Gross carrying amount Balance at 1 July 2019 Additions Transfer - right of use asset Balance at 30 June 2020 Accumulated depreciation Balance at 1 July 2019 Depreciation expense Transfer - right of use asset Balance at 30 June 2020 Net book value As at 30 June 2019 As at 30 June 2020 Notes to the Financial Statements Land and buildings $ Plant and equipment $ Consolidated Computer equipment $ Motor vehicles $ Total $ 45,063 - 45,063 - 45,063 986,737 13,810 1,000,547 (609,674) 390,873 - - - - - - (188,940) (103,688) (292,628) (28,169) 161,843 (158,954) 25,951 - 25,951 - 25,951 (16,179) (4,233) (20,412) (2,166) - (22,578) 195,143 - 195,143 (88,932) 106,211 (122,339) (14,274) (136,613) (1,220) 35,280 (102,553) 1,252,894 13,810 1,266,704 (698,606) 568,098 (327,458) (122,195) (449,653) (31,555) 197,123 (284,085) 45,063 45,063 707,919 231,919 5,539 3,373 58,530 3,658 817,051 284,013 Consolidated Land and buildings $ Plant and equipment $ Motor vehicles $ Total $ - 416,523 - 416,523 - - 609,674 609,674 - - 88,932 88,932 - 416,523 698,606 1,115,129 - (98,650) - (98,650) - (62,327) (161,843) (224,170) - (13,450) (35,280) (48,730) - (174,427) (197,123) (371,550) - 317,873 - 385,504 - 40,202 - 743,579 Land and buildings consists of the group’s rental lease for farm land in Nagambie (remaining term is 29 months, no option to extend is included in valuation). For calculation of the value the group has used a discount rate based on weighted average incremental borrowing rate of 10%. Plant and equipment consists of the group’s rental lease for equipment. For calculation of the value the group has used a discount rate based on weighted average incremental borrowing rate of 10%. Motor vehicles consists of the group’s rental leases for motor vehicles. For calculation of the value the group has used a discount rate based on weighted average incremental borrowing rate of 10%. 13. Trade and other payables Trade payables Other payables Consolidated 2020 $ 96,149 150,576 246,725 2019 $ 196,157 145,396 341,553 Nagambie Resources Limited | 2020 Annual Report | Page 32 14. Issued capital (a) Issued and paid capital Ordinary shares fully paid (b) Movements in shares on issue Balance at beginning of the year Movements during the year Placement of shares November 2019 issue price 5.3 cents March 2020 issue price of 5.0 cents October 2018 issue price 6.2 cents Share purchase plan November 2019 issue price 5.3 cents October 2018 issue price 6.2 cents Exercise of options at 10.0 cents Options reserve transfers Share issue expenses Balance at end of the year Notes to the Financial Statements 2020 $ 27,284,103 2019 $ 24,123,551 Year ended 30 June 2020 Year ended 30 June 2019 Number of shares issued Issued capital $ 437,407,802 24,123,551 Number of shares issued 407,085,912 Issued capital $ 22,091,390 1,132,076 50,000,000 - 60,000 2,500,000 - - - 9,677,417 - - 600,000 11,392,468 - - - - 499,932,346 603,800 - - - (3,248) 27,284,103 - 16,814,473 3,830,000 - - 437,407,802 - 1,042,500 383,000 27,410 (20,749) 24,123,551 (c) Terms and conditions of issued capital Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on the shares held. Ordinary shares entitle their holder to one vote, either in person or proxy, at a meeting of the company. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. Share options granted under the employee share option plan As at 30 June 2020 there were 29,450,000 (2019 19,650,000) options over ordinary shares in respect of the employee share option plan. These options were issued in accordance with the provisions of the employee share option plan to executives and senior employees. Of these options 29,450,000 were vested by 30 June 2020 (2019: 19,650,000). Share options granted under the employee share option plan carry no rights to dividends and have no voting rights. Further details of the employee share option plan are contained in note 20 to the financial statements. Other share options on issue As at 30 June 2020 there were 43,000,000 options over ordinary shares issued to directors (2019:48,000,000). Of these options 43,000,000 were vested by 30 June 2020 (2019: 48,000,000). The options carry no rights to dividends and have no voting rights. Further details of these options are shown in note 20 to the financial statements. Shares issued to Mawson Gold Limited In March 2020 50,000,000 shares were issued to Mawson Gold Limited for $2,500,000. This was part of a strategic alliance whereby Nagambie Resources received 8,500,000 shares in Mawson Gold Limited. Further details are included in the Directors’ Report. (d) Capital management The group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current company's share price at the time of the investment. The group is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. The group is subject to equipment financing arrangements and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the 30 June 2019 Financial Statements. Nagambie Resources Limited | 2020 Annual Report | Page 33 15. Reserves Options reserve Balance at beginning of the year Recognition of share based payments Value of options exercised Value of options lapsed Balance at end of the year Notes to the Financial Statements Consolidated 2020 $ 2019 $ 1,828,340 424,337 - (147,000) 2,105,677 1,214,896 662,694 (27,410) (21,840) 1,828,340 The options reserve represents the fair value of unvested and vested ordinary shares under options granted to directors, consultants and employees. Asset revaluation reserve Balance at beginning of the year Increase on Equity investments at fair value Balance at end of the year 16. Notes to the statement of cash flows - 1,236,697 1,236,697 - - - (a) Reconciliation of loss after tax to net cash flows from operations Net loss for the period (876,491) (1,485,048) Depreciation of property, plant and equipment Share based payment expense Non-cash interest on lease liabilities Impairment of assets Changes in assets and liabilities (Increase)/Decrease in receivables Increase/(Decrease) in creditors Increase/(Decrease) in employee provisions Net cash from (used in) operating activities (b) Reconciliation of cash Cash and cash equivalents comprise: Cash on hand and at call (c) Non-cash investing activity Equity investments acquired by issue of shares Equity investments acquired by sale of tenements 17. Borrowings Current Unsecured convertible notes (i) Loan – Shareholder (ii) Non-current Unsecured convertible notes (i) Total borrowings 205,982 424,337 41,104 107,303 (8,840) (53,640) 24,862 (135,383) 122,195 662,694 - - 96,225 23,876 (11,627) (591,685) 224,057 224,057 224,988 224,988 2,500,000 217,412 2,717,412 - - - - 300,000 300,000 934,000 - 934,000 4,234,000 4,234,000 3,100,000 3,100,000 4,534,000 4,034,000 Nagambie Resources Limited | 2020 Annual Report | Page 34 Notes to the Financial Statements 17. Borrowings (continued) (i) The Company has four series of unsecured Convertible Notes outstanding for a total of $4,234,000. Series 5: 3,333,333 Notes issued at 18 cents on 19 September 2016 for a total of $600,000 Series 6: 18,000,000 Notes issued at 10 cents on 17 November 2017 for a total of $1,800,000 Series 7: 7,000,000 Notes issued at 10 cents on 27 February 2019 for a total of $700,000 Series 8: 22,680,000 Notes issued at 5 cents on 19 January 2020 for a total of $1,134,000 Each series of Convertible Note has the following terms:   Interest is payable at 10% per annum every six months after the issue date; Convertible on a 1 for 1 basis into ordinary shares in the company at any time prior to the maturity date at the option of the note holder; Redeemable for cash in full after 5 years, if not converted; Unsecured but rank ahead of shareholders; and Protected for reorganisation events such as bonus issues and share consolidations.    The Company has a short term unsecured loan from a shareholder. The loan is repayable on 31 October 2020 and bears interest at a rate of 10% per annum. (ii) 18. Provisions Current Employee benefits Non-current Employee benefits Total provisions 19. Commitments Consolidated 2020 $ 2019 $ 32,303 15,523 18,927 10,845 51,230 26,368 (a) Planned exploration expenditure The amounts detailed below are the minimum expenditure required to maintain ownership of the current tenements held. An obligation may be cancelled if a tenement is surrendered. Not longer than 1 year Longer than 1 year and not longer than 5 years Longer than 5 years 1,038,640 2,038,261 - 3,076,901 1,122,657 3,120,858 - 4,243,515 (b) Capital expenditure commitments There were no capital expenditure commitments at 30 June 2020 or 30 June 2019 except for the one noted at 19(d) below. (c) Operating lease commitments Not longer than 1 year Longer than 1 year and not longer than 5 years Longer than 5 years - - - - 139,071 371,167 - 510,238 (d) Property acquisition with deferred settlement As noted in the 2019 Annual Financial Report the company is in the process of purchasing a farming property in the Nagambie area. The balance due on or before 15 October 2022 will be $1,513,488. The land as an asset and the balance due at settlement as a liability have been brought to account as a Right of use – Land and buildings and the liability as a lease liability in respect of the rental prior to acquisition. 20. Contingent Liabilities Apart from the matter discussed in Note 9 the group has no contingent liability as at 30 June 2020. Nagambie Resources Limited | 2020 Annual Report | Page 35 Notes to the Financial Statements 21. Financial instruments The board of directors is responsible for monitoring and managing the financial risk exposures of the group, to which end it monitors the financial risk management policies and exposures and approves financial transactions and reviews related internal controls within the scope of its authority. The board has determined that the only significant financial risk exposures of the group are liquidity risk and market risk. Other financial risks are not significant to the group due to the following:       It has no foreign exchange risk as all of its account balances and transactions are in Australian Dollars; It has no significant outstanding receivable balances that have a credit risk; Its mining operations are in the exploration phase and therefore have no direct exposure to movements in commodity prices; All of the interest bearing instruments are held at amortised cost which have fair values that approximate their carrying values since all cash and payables (except for convertible notes refer note 15) have maturity dates within one financial year. Term deposits on environmental bonds and convertible notes have interest rate yields consistent with current market rates; All of the financing for the group is from equity and convertible note instruments, and The group has no externally imposed capital requirements with the exception of an ASX requirement to not issue more than 25% of its share capital through a placement in a 12-month period. (a) Categories of financial instruments Financial assets Cash and cash equivalents Receivables Equity investments at fair value Financial liabilities Trade and other payables Borrowings Consolidated 2020 $ 224,057 75,235 3,954,108 2019 $ 224,988 68,477 - 246,725 4,534,000 341,553 4,391,111 (b) Liquidity risk Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk management framework for the management of the group’s funding and liquidity management requirements. The group manages liquidity risk by maintaining sufficient cash balances to meet obligations as and when they fall due. The following tables detail the company’s and the group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the group can be required to pay. The table includes both interest and principal cash flows. Consolidated liabilities Interest rate % Less than 1 month $ 1-3 months $ 3+ months to 1 year $ 1-5 years $ 5+ years $ 2020 Trade and other payables Lease liabilities Borrowings 2019 Trade and other payables Lease liabilities Borrowings 10.0 10.0 10.0 10.0 98,451 24,010 - 122,461 202,436 11,283 - 213,719 126,486 48,020 - 174,506 72,565 22,565 65,000 160,130 21,698 207,319 300,000 529,017 66,552 101,543 1,272,400 1,440,495 - 287,092 4,234,000 4,521,092 - 237,512 3,920,000 4,157,512 - - - - Nagambie Resources Limited | 2020 Annual Report | Page 36 Notes to the Financial Statements 21. Financial instruments (continued) (c) Market risk The group is exposed to price risk in relation to equity investments which it holds in Mawson Gold Limited. These shares are listed on the Toronto Stock Exchange and the price will fluctuate. The following table shows the impact of a 50% change in the price of those listed securities. Average price increase Effect on profit before tax Effect on equity Average price decrease % change Effect on profit before tax Effect on equity Nil $1,977,054 -50% Nil ($1,977,054 ) % change +50% Shares in Mawson Gold Limited 22. Share-based payments The group has an ownership-based remuneration scheme for executives (including executive directors) of the group. In accordance with the provisions of the scheme, as approved by shareholders at a previous annual general meeting, executives with the company may be granted options to purchase parcels of ordinary shares at an exercise price determined at the discretion of the board of directors. Each executive share option converts into one ordinary share of Nagambie Resources Limited on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither right to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. The number of options granted is at the discretion of the board of directors. The options granted expire five years after their issue, or one month after the resignation of the executive, whichever is the earlier. The total of options on issue is 72,450,000 (2019: 67,650,000). Of these 29,450,000 (2019: 28,650,000) have been issued to executives and employees and the balance of 43,000,000 (2019: 39,000,000) have been issued to directors and key management personnel. Information with respect to the number of all options granted including executive options is as follows. Balance at beginning of period granted exercised lapsed Balance at end of period 30 June 2020 30 June 2019 Number of options 67,650,000 14,900,000 - (10,100,000) 72,450,000 Exercise price 10 cents 10 cents Number of options 57,600,000 17,000,000 (3,830,000) (3,120,000) 67,650,000 Exercise price 10.8 - 12.6 cents 10 cents 10 cents Options on issue at the end of the reporting period Number of options 11,300,000 2,000,000 12,500,000 13,750,000 1,000,000 4,500,000 10,500,000 2,000,000 14,900,000 74,250,000 Grant date Vesting date Expiry date Exercise price 16/11/2015 4/7/2016 30/11/2016 24/11/2017 20/12/2017 22/8/2018 23/11/2018 27/2/2019 29/11/2019 16/11/2015 4/7/2016 30/11/2016 24/11/2017 20/12/2017 22/8/2018 23/11/2018 27/2/2019 29/11/2019 16/11/2020 4/7/2021 30/11/2021 24/11/2022 20/12/2022 22/8/2023 23/11/2023 27/2/2024 29/11/2024 10 cents 25.5 cents 25 cents 10 cents 14.1 cents 12.6 cents 10.8 cents 12.0 cents 10.0 cents Fair value at grant date 1.00 cents 3.40 cents 3.44 cents 2.80 cents 2.80 cents 3.90 cents 3.90 cents 3.90 cents 2.85 cents (i) (ii) Exercised during the financial year There were no options exercised during the financial year Equity-settled employee benefits reserve The equity-settled employee benefits reserve arises on the grant of share options to executives and senior employees under the employee share option plan. Amounts are transferred out of the reserve and into issued capital when the options are exercised. (iii) There are no vesting conditions for the above options Nagambie Resources Limited | 2020 Annual Report | Page 37 Notes to the Financial Statements 22. Share-based payments (continued) The weighted average fair value of the share options granted during the financial year is 3.90 cents (2019: 2.80 cents). Options were priced using a Binomial option valuation model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioural considerations. Expected volatility is based on the historical share price volatility over the past 3 years. The options may be exercised early, but not before vesting date. Inputs into the valuation model Grant date Options Issued Share price at grant date Exercise price Expected volatility 29/11/2019 14,900,000 5.5 cents 10.0 cents 79.5% 23. Key Management personnel compensation Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payment 24. Subsidiaries Name of entity Parent entity Nagambie Resources Limited Subsidiaries Nagambie Developments Pty Ltd property owning entity Nagambie Landfill Pty Ltd no business activity conducted during the year Clonbinane Goldfield Pty Ltd development of gold and associated minerals 25. Related party transactions Option life Dividend yield Risk free interest rate Vesting date 5 years Nil 0.90% 29/11/2019 Consolidated 2020 $ 456,230 19,000 - - 284,700 760,020 2019 $ 433,979 14,250 - - 467,784 916,013 Ownership interest 2019 2020 % % - 100 100 Nil - 100 100 100 Country of incorporation Australia Australia Australia Australia Transactions with key management personnel and related parties There were no related party transactions undertaken during the year other than disclosures already identified elsewhere in this report. 26. Segment information The group operates in one principal geographical area – in Australia. The group carries out exploration for, and development of gold associated minerals and construction materials in the area. During the year the group earned $164,752 (2019 $166,345) of its rental income described in note 4 from the Department of Defence. There was no other major reliance on any other customer. Nagambie Resources Limited | 2020 Annual Report | Page 38 Notes to the Financial Statements Consolidated 2020 $ 2019 $ 26,900 - 26,900 25,962 - 25,962 27. Remuneration of auditors Auditor of the parent entity Audit or review of the financial report Other non-audit services The auditor of Nagambie Resources Limited is William Buck 28. Subsequent events There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature, likely in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or state of affairs of the Group, in future financial years. 29. Parent entity disclosures The following information are the disclosures pertaining to the parent entity: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Issued capital Options reserve Accumulated losses Asset revaluation reserve Total equity Loss Total comprehensive income Parent 2020 $ 2019 $ 2,276,346 292,068 15,802,280 13,289,365 18,078,626 13,581,433 877,304 328,615 4,521,092 4,391,111 5,398,396 4,719,726 27,254,003 24,123,551 2,105,677 1,828,340 (17,916,147) (17,090,184) 1,236,697 - 12,680,230 8,861,707 (867,067) (1,486,574) 369,630 (1,486,574) There were no contingent liabilities and commitments of the parent entity not otherwise disclosed in the consolidated financial statements Nagambie Resources Limited | 2020 Annual Report | Page 39 Directors’ Declaration Directors’ Declaration In the Directors opinion: (a) (b) (c) The financial statements and notes are in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its performance for the year ended on that date; with Accounting Standards, the Corporations Regulations 2001 and other mandatory, professional reporting requirements; and (ii) Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory, professional reporting requirements. There are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and At the date of this declaration there are reasonable grounds to believe that the members of the group are able to meet their obligations as and when they become due and payable. Note 2 confirms that the financial statements also comply with International Reporting Standards as issued by the International Accounting Standards Board. The directors have been given the declarations required by s.295A of the Corporations Act 2001 Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001. On behalf of the directors Michael W Trumbull Executive Chairman Melbourne 28 September 2020 Nagambie Resources Limited | 2020 Annual Report | Page 40 Nagambie Resources Limited Independent auditor’s report to members Report on the Audit of the Financial Report Qualified Opinion We have audited the financial report of Nagambie Resources Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, except for the matters described below in the Basis for Qualified Opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Qualified Opinion Fair valuation of the debt component of convertible notes upon initial recognition As disclosed in Note 17 to the financial statements in the current and prior year, the Company has raised $3,634,000 from investors through the issue of Series 6, Series 7 and Series 8 unsecured convertible notes. All tranches of unsecured convertible notes have a coupon interest rate of 10% per annum and include an equity conversion feature, entitling the noteholder to convert the principal value of each note into ordinary shares at 10 cents per share for Series 6 and Series 7, and 5 cents per share for Series 8. AASB 132 Financial Instruments: Presentation requires that the debt component of such convertible notes, with fixed conversion formulae, be valued at fair value upon initial recognition (the date upon which the Company and the convertible noteholder became party to contract), with any difference between the face value of those notes and the fair value of the debt component recognised in equity. The directors of the Company believe there is no reliable basis for measuring at fair value the debt component at initial recognition, principally upon the basis that there is no readily accessible market for unsecured debt with no equity conversion rights for exploration enterprises with similar market capitalisation levels either in Australia or any other foreign jurisdiction, upon which it could benchmark a reliable discount rate to fair value the debt. Upon that basis, they have assessed the fair value of the debt component to equal the face value of the convertible notes for both tranches of convertible notes. Nagambie Resources Limited | 2020 Annual Report | Page 41 Notwithstanding this, we consider that a market value for the debt component of such convertible notes can be imputed from other like-for-like Australian-based listed exploration companies, principally due to the growth in popularity of convertible notes as a mechanism for obtaining finance in recent years. Our view is that the depth of the active market has become sufficient for our basis of opinion around the time that the Series 6 notes were issued. Based upon our analysis, we believe that 25% would be an appropriate discount rate for Series 6 and Series 7 and a 20% discount rate for Series 8 to apply in calculating the fair value of the debt component of convertible notes at initial recognition. Based upon this key assumption, had such a discount been applied against the three tranches of convertible notes which were issued during the current and prior years, the following adjustments would be required to these financial statements as at 30 June 2020: Series 6 — Convertible notes held at $1,800,000 in the statement of financial position would be restated to $1,368,929; — An equity reserve would be created, worth $691,837, representing the difference between the face value and fair value of the Convertible Note at initial recognition; and — An additional interest charge of $260,766, representing the proportionate unwind of the discount applied to the convertible notes from initial recognition through to 30 June 2020. Series 7 — Convertible notes held at $700,000 in the statement of financial position would be restated to $503,615; — An equity reserve would be created, worth $269,048, representing the difference between the face value and fair value of the Convertible Note at initial recognition; and — An additional interest charge of $72,663, representing the proportionate unwind of the discount applied to the convertible notes from initial recognition through to 30 June 2020 Series 8 — Convertible notes held at $1,134,000 in the statement of financial position would be restated to $811,049; — An equity reserve would be created, worth $322,951, representing the difference between the face value and fair value of the Convertible Note at initial recognition; and — An additional interest charge of $67,587, representing the proportionate unwind of the discount applied to the convertible notes from initial recognition through to 30 June 2020. Other matters relevant to the Basis for Qualified Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. Nagambie Resources Limited | 2020 Annual Report | Page 42 We confirm that the independence declaration required by the Corporations Act 2001, has been provided on the date of this report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for Qualified Opinion sections, we have determined the matters described below to be the key audit matters to be communicated in our report. CARRYING VALUE OF EXPLORATION AND EVALUATION ASSETS Area of focus Refer also to notes 2 and 10 The Group has incurred exploration and evaluation costs for exploration projects in Victoria over a number of years. The Group holds the right to explore and evaluate those projects through tenement and licence agreements. There is a risk that the Group may lose its right to further explore and evaluate those areas of interest and therefore amounts capitalized to the statement of financial position from the current and historical periods be no longer recoverable. How our audit addressed it Our audit procedures included: — Understanding and vouching the underlying contractual entitlement to explore and evaluate each area of interest, including an evaluation of the requirement to renew that tenement at its expiry; — Examining project spend per each area of interest and comparing this spend to the minimum expenditure requirements set out in the underlying tenement expenditure plan; — Examining project spend to each area of interest to ensure that it is directly attributable to that area of interest; — For areas of interest that were disposed of during the year we have obtained the sale documentation to verifiy that the disposal has been accounted for correctly;and — From an overall perspective, comparing the market capitalisation of the Group to the net carrying value of its assets on the statement of financial position to identify any other additional indicators of impairment. We also assessed the adequacy of the Group’s disclosures in respect of exploration and evaluation assets in the financial report. Nagambie Resources Limited | 2020 Annual Report | Page 43 SHARE BASED PAYMENTS Area of focus Refer also to notes 2, 15, 22 and the Remuneration Report The Group rewards its key management personnel and employees through ownership-based incentive scheme through the granting and issuing of options. These are share-based payments which are charged to the profit or loss as they vest. These options had no performance hurdles or service conditions attached to their vesting, hence they vested immediately upon grant and issue. How our audit addressed it Our audit procedures included: — Determining the grant dates, and evaluating what were the most appropriate dates based on the terms and conditions of the share-based payment arrangements; — Evaluating the fair values of share-based payment arrangements by reviewing the independent experts report; — Evaluating the vesting of the share-based payments; There were significant subjectivities relating to the accounting for these options in this financial report, including: — The determination of the grant date for the options and their vesting period for identifying the appropriate share price used in the formula for calculating the value of the option; — For the specific application of the option pricing model, we assessed the experience of the external expert used to advise the value of the arrangement to management. We retested some of the key assumptions used in the model; and — We considered that the forecast volatility applied in the model to be appropriately reasonable and within industry norms. We also assessed the adequacy of the Group’s disclosures in respect of share based payments in the financial report. — Determining the volatility rate used in pricing the options and the selection and use of the Binomial model in computing the value of those options; and — Reflecting the vested benefit attributed to key management personnel in disclosures in the financial report and in the Remuneration Report. The Group commissioned the use of an independent expert during the year to appraise the fair value of the options which were granted and issued. Nagambie Resources Limited | 2020 Annual Report | Page 44 TRANSACTION WITH MAWSON GOLD LIMITED Area of focus Refer also to notes 2, 8 and 15 During the year the Group entered a strageic partnership with Mawson Gold Limited (“Mawson”). How our audit addressed it Our audit procedures included: — Examining the contractual arrangement between Mawson and the Group; Under the terms of the transaction Mawson acquired a 10% shareholding in the Group. In consideration the Group received 8.5 million shares in Mawson. — Verifying that the Group has accounted for the transaction in accordance with AASB 9 – Financial Instruments at initial recognition; and — Assessing the value of the Mawson investment Acccounting for this transaction in complex in nature under the requirements of AASB 9 – financial instruments and therefore has been disclosed as a key audit matter. as at 30 June 2020 has been valued in accordance with AASB 13 – Fair Value Measurement, including the measurement hierarchy. We also assessed the adequacy of the Group’s disclosures in respect of share based payments in the financial report. Other Information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2020, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Nagambie Resources Limited | 2020 Annual Report | Page 45 Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of these financial statements is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our independent auditor’s report. Report on 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 2020. In our opinion, the Remuneration Report of Nagambie Resources Limited, for the year ended 30 June 2020, 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. William Buck Audit (Vic) Pty Ltd ABN: 59 116 151 136 A. A. Finnis Director Melbourne, 28 September 2020 Nagambie Resources Limited | 2020 Annual Report | Page 46 Additional ASX Information Additional ASX Information Additional information required by the ASX Ltd and not shown elsewhere in this report is as follows. The information was current as at 23 October 2020. Number of holders of equity securities Ordinary share capital 499,932,346 fully paid ordinary shares are held by 996 individual shareholders. All the shares carry one vote per share. Options 72,450,000 options are held by 17 individual optionholders. Options do not carry a right to vote. Unsecured convertible notes 51,013,333 unsecured convertible notes are held by 8 individual noteholders. The notes do not carry a right to vote. Buy-Back The company does not have a current on-market buy-back. Distribution of holders of ordinary shares Holding Ranges 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Totals Holders 55 86 110 457 288 996 Total Units 4,197 318,523 963,363 20,437,799 478,208,464 499,932,346 % Issued Share Capital 0.00% 0.06% 0.19% 4.09% 95.65% 100.00% The number of holders with an unmarketable parcel was 190, holding a total of 677,964 amounting to 0.14% of the Issued Share Capital. Substantial Shareholders Fully Paid Ordinary Shareholders MAWSON GOLD LIMITED MR RALPH DOUGLAS RUSSELL & MS ANNE-MAREE HYNES ADARE MANOR PTY LTD MR GEOFFREY MICHAEL WALCOTT & MRS JULIE ANN WALCOTT Total Shares 50,000,000 34,318,434 30,049,522 26,378,905 140,746,861 % 10.00% 6.86% 6.01% 5.28% 28.15% Distribution of holders of unquoted options Number of holders Number of options 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,000 and over - - - - 17 - - - - 72,450,000 Distribution of holders of unquoted convertible notes Number of holders Number of convertible notes 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,000 and over - - - - 8 - - - - 51,013,333 Nagambie Resources Limited | 2020 Annual Report | Page 47 Additional ASX Information Optionholders holding greater than 20% of the unquoted options Optionholder Mr Michael W Trumbull Options held 20,000,000 % held 27.61% Convertible Noteholders holding more than 20% of the unquoted convertible notes Noteholder PPT Nominees Pty Ltd Notes held 38,163,333 % held 74.81% Unquoted options over unissued shares Exercise price Grant Date Vesting Date Expiry Date $0.10 $0.10 $0.255 $0.25 $0.10 $0.141 $0.126 $0.108 $0.12 $0.10 Number 3,300,000 8,000,000 2,000,000 29 October 2015 29 October 2015 16 November 2020 16 November 2015 16 November 2015 16 November 2020 4 July 2016 4 July 2016 4 July 2021 30 November 2016 30 November 2016 30 November 2021 12,500,000 24 November 2017 24 November 2017 24 November 2022 13,750,000 20 December 2017 20 December 2017 20 December 2022 22 August 2018 22 August 2018 22 August 2023 1,000,000 4,500,000 23 November 2018 23 November 2018 23 November 2023 10,500,000 27 February 2019 27 February 2019 27 February 2024 2,000,000 29 November 2019 29 November 2019 29 November 2024 14,900,000 Total 72,450,000 Twenty largest holders of quoted equity securities The names of the twenty largest holders and their shareholding in the quoted shares are as follows: Rank Holder Name PPT NOMINEES PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED PRECISION SUPER PTY LTD CYPRON PTY LTD 1 2 MAWSON GOLD LIMITED 3 ADARE MANOR PTY LTD 4 5 MR GEOFFREY MICHAEL WALCOTT & MRS JULIE ANN WALCOTT 6 7 8 ADMIC SUPER PTY LTD 9 MR RALPH DOUGLAS RUSSELL & MS ANN MAREE HYNES 10 LINCONRIDGE PTY LTD 11 HEPSBOURNE PTY LTD 12 NORMET INDUSTRIES NOMINEE PTY LTD 13 MCCARTHY CATTLE COMPANY PTY LTD 14 MR ROBERT CARL GUERNIER & MRS JEAN GUERNIER 15 EGAN SUPERCO PTY LTD 16 MR GEOFFREY TURNER 17 MR RICHARD MOGOROVICH & MRS GIULIANA MOGOROVICH 18 CYPRON PTY LTD 19 MR SVEN BRENN 20 MR DARRYL SCOTT Total Total issued shares % Shares 16.19% 80,919,662 10.00% 50,000,000 6.01% 30,049,522 5.84% 29,201,705 4.77% 23,829,211 4.44% 22,190,505 2.87% 14,346,038 2.11% 10,546,481 2.08% 10,418,510 1.87% 9,369,229 1.78% 8,905,143 1.67% 8,333,333 1.10% 5,500,000 0.96% 4,786,816 0.75% 3,726,908 0.74% 3,707,325 0.71% 3,542,756 0.67% 3,342,390 0.60% 3,000,000 0.56% 2,820,001 328,535,535 65.72% 499,932,346 100.00% Nagambie Resources Limited | 2020 Annual Report | Page 48

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