Explore. Transform. Sustain. STANMORE RESOURCES LIMITED ANNUAL REPORT 2021 Contents 2 4 6 Chairman’s Letter Chief Executive Officer’s Report Directors’ Report 20 31 Renumeration Report (audited) Auditors’ Independence Declaration 32 Financial Statements 89 93 99 Independent Auditors’ Report Shareholder Information Other Information Cover image: In February 2022, Stanmore’s dragline walked across the Peak Downs Highway from Isaac Plains to commence new open cut operations at Isaac Downs. Stanmore Annual Report 2021 1 Chairman’s letter This year has been a truly transformative year for Stanmore, with the Company on its way to becoming one of the largest global exporters of metallurgical coal. Dear Shareholders, The start of 2021 was a testing period for Stanmore and the industry. The COVID-19 pandemic continued to present challenges to operations and the global coal market; Australian metallurgical coal prices were at near all-time lows; and disruptions to the Asian coal market trade flow persisted. In the second half of the year, a rebound in industrial activity as well as tight supply saw a swing in coal prices, reaching record highs by the end of the year. Against this backdrop of uncertain and volatile conditions, we rose to the challenge to significantly reposition Stanmore as a leading metallurgical coal producer on a global scale. We undertook significant works to bring Isaac Downs online with operations to fully commence in 2022 and we announced the acquisition of BHP’s 80% interest in BHP Mitsui Coal Pty Ltd (BMC). The Company is progressing well with its transition to Isaac Downs. Our successful ramp up of operations at Isaac Downs resulted in record production and sales in H2 2021, in time to take advantage of the record high metallurgical coal prices prevailing in the market. Key infrastructure works, including construction of the new Underpass and Diversion of Peak Downs Highway are nearing completion. The coming year will see Stanmore fully transition into Isaac Downs where the lower strip ratios will further lower cost and improve operating margins. We also completed the acquisition of a 50% interest in Millennium and Mavis Downs Mine in July 2021. The acquisition represented a low capital investment opportunity in high quality metallurgical coal, supported by access to existing critical infrastructure. From a state of care and maintenance, mining operations rapidly restarted with first ROM coal produced in Q3 2021 followed by first coal export in Q4 2021. We look forward to working with our JV partner and contractors in transforming the Millennium complex into a successful tier 1 operation. 2 Stanmore Annual Report 2021 Lastly, and most transformative to the Company, is our successful bid to acquire an 80% interest in BMC. The BMC mines are top tier de-risked and cash generating operating assets, backed by experienced people and high-quality equipment and infrastructure access. The acquisition is a highly strategic move, resulting in Stanmore having a portfolio of four mines and three wash-plants within an approximate 50km radius in the premium Bowen Basin region. Upon completion of the acquisition, Stanmore will be positioned as one of the largest global exporters of metallurgical coal. Despite carrying out multiple workstreams over the course of the year, Stanmore remained true to its values. Safety and wellbeing of our staff and contractors remains the top priority of the Company. Stanmore’s safety incident rates remain below industry average. Stanmore has also implemented effective COVID-19 protocols at the Isaac Plains Complex throughout the year. In addition to supporting 40 local community organisations over the year, we are developing a Reconciliation Action Plan involving long term strategies to increase Indigenous employment and business opportunities, in recognition of the need for reconciliation with the traditional owners of the land on which the company operates. Stanmore acknowledges that climate change is a critical issue and commits to play a part in the transition to a low carbon world. We aspire to be a responsible and sustainability driven resources company, to that end we are developing a comprehensive set of ESG policies to guide emissions reductions and mitigation initiatives. The Company is off to a strong start for the next financial year and is well placed to take advantage of the strong metallurgical coal prices. Completion of the BMC acquisition is expected 3 May 2022 and we look forward to this significant milestone for the Company. On behalf of the Board, I would like to sincerely thank the employees, management team, contract partners and professional advisors of the Company for their unyielding efforts over past 12 months. I would also like to thank shareholders for their continued support. Dwi Suseno Stanmore Annual Report 2021 3 Chief Executive Officer’s Report 2021 was a tale of two halves for Stanmore. The Company overcame a challenging first half but ended the year strongly. 4 Dear Shareholders, The Company overcame a challenging first half impacted by the COVID-19 pandemic, historically low coal prices and operational challenges at Isaac Plains East but ended the year strongly with the successful transition to Isaac Downs, record production and the transformational agreement to acquire an 80% interest in BMC. Production volumes in 1H 2021 were below usual historic annualised levels of 2.3 – 2.4Mt, impacted by the transition to Isaac Downs, reduced fleet capacity, La-Nina weather systems and cost controls at Isaac Plains East. Despite a challenging first half, we swiftly ramped up operations at Isaac Downs in 2H 2021 following receipt of mining lease approval in July and achieved record ROM production at c.95% of nameplate capacity for the Isaac Plains CHPP. Monthly feed rates and sales also exceeded historic levels in the second half, more than offsetting softer production in 1H 2021. FOB (free on board) cash cost for the period was A$104/t in 2021, 15% lower than in CY20. In 2H 2021, unit costs were even lower at A$87/t, representing a 19% improvement on 2H 2020. The lower unit cost outcomes were the result of lower strip ratios realised from the Isaac Downs transition. We expect that production rates and unit costs will continue to improve in the next 2 to 3 years, following the transition of the dragline to Isaac Downs in Q1 2022 which will enable mining of a lower strip ratio area. Strong operational performance, particularly in 2H 2021, has translated into strong financial performance. Cash flow from operations was A$127m and underlying EBITDA for the period increased to A$54m in 2021, 127% higher than in CY20. The improved result was facilitated by coal price recovery through the second half of the year, lower FOB costs and strong production. We expect a tight market with strong demand to continue with buoyant global industrial production and tight supply. Stanmore Annual Report 2021 Cash Flow A$127m from operations Underlying EBITDA A$54m 127% higher than CY20 During the year A$1.65m was invested in the rehabilitation of the Isaac Plains Complex, 56 hectares of land was recontoured and 44 hectares was seeded for re-vegetation. To date, 39% of all disturbed land at Isaac Plains is already under rehabilitation. We are committed to integrating this core activity within our operations to ensure timely and efficient rehabilitation of the land on which we operate. Stanmore is acutely focused on safety and ensuring that the ramp-up of production at Isaac Downs and integration of BMC is achieved in a safe and efficient way. Stanmore undertook or managed 754,930 hours of coal mining, drilling, exploration and mine development activities in 2021 and the Total Reportable Injury Frequency Rate was 7.9 per million hours. This result is below industry averages and is a testament to the ongoing efforts of our team, who are committed to maintaining the highest standards of safety discipline. The coming financial year will see Stanmore fully transition into Isaac Downs where the dragline will be uncovering coal rapidly given the lower strip ratios benefitting us with lower costs, improved margins and potentially higher volumes. Stanmore expects to complete the acquisition of an 80% interest in BMC on 3 May 2022 which will be a significant milestone for the Company and represent a step change in scale and operations to see Stanmore become a significant global metallurgical coal producer. We look forward to integrating the business into the Stanmore group and continuing our focus on safety and delivering high quality products and outcomes for our customers, staff and stakeholders. I would like to take the opportunity to acknowledge the dedication and efforts of our team over the past year. I thank our employees and contractors for their contribution to the performance of the business, and my fellow directors for their guidance. I would also like to thank our traditional owners, neighbours, customers and shareholders for their continuing support of Stanmore Resources. Marcelo Matos Chief Executive Officer 5 Stanmore Annual Report 2021 Directors’ report The Directors present their report on the consolidated entity consisting of Stanmore Resources Limited and the entities it controlled at the end of, or during, the year ended 31 December 2021 (referred to in this report as Stanmore Resources Limited, the company, the group, or the Consolidated Entity). The group changed its financial year end to 31 December in 2020 to align with its parent entity. As a result, this financial report which is for a period of 12 months, ended 31 December 2021 (referred to in this report as ‘FY21’), is not entirely comparable with the comparative reporting period of six months, ended 31 December 2020 (referred to as ‘period ended 31 December 2020’). DIRECTORS AND COMPANY SECRETARY Mr Dwi Suseno Mr Marcelo Matos Mr Jimmy Lim Mr Mark Trevan Mr Richard Majlinder Ms Mary Carroll (resigned 2 July 2021) The following persons were the company secretary of Stanmore Resources Limited during the financial year and up to the date of this report: Rees Fleming (appointed 22 July 2021) Tristan Garthe (resigned 22 July 2021) INFORMATION ON DIRECTORS The following information is current as at the date of this report. Dwi Suseno Chairman and Non-Executive Director (Appointed: 15 May 2020) Experience and expertise Mr Dwi Suseno is the Executive Director and Group CEO of Golden Energy and Resources Limited (GEAR), a SGX Mainboard listed international mining and resources company. Mr Suseno is responsible for managing operations for GEAR, including mining, logistics and coal marketing, as well as leading the strategic initiatives and expansions. Mr Suseno began his career in Australia, where he was raised and educated, and he has over 26 years of experience in management, commercial and finance in mining resources as well as oil and gas related industries in both Australia and internationally. Mr Suseno was previously an Executive Director and CFO of Straits Corporation Group, which was then part of the SGX-listed coal mining company Straits Asia Resources Limited. Mr Suseno has previously worked with Baker Hughes Inc. (Fortune 500 NYSE listed oilfield services company), Arthur Andersen Australia and Ernst & Young LLP. Mr Suseno is a Certified Public Accountant in both Australia and Singapore, graduated with a Bachelor of Commerce Degree from the University of Western Australia, Graduate Diploma in Tax from the University of Melbourne’s Law Masters program, as well as a Postgraduate Diploma in Business from Curtin University. He also holds an executive Masters in Business Administration from the Kellogg School of Management & Hong Kong University of Science and Technology. Other current directorships Former directorships in last 3 years Nil Nil Special responsibilities • Member of the Audit and Risk Management Committee • Member of the Remuneration and Nominations Committee 6 Stanmore Annual Report 2021 INFORMATION ON DIRECTORS (CONTINUED) Marcelo Matos Chief Executive Director (Appointed: 27 November 2020) Experience and expertise Other current directorships Former directorships in last 3 years Special responsibilities Mr Marcelo Matos has over 20 years of experience in management, marketing and business development roles in the mining sector in Australia, Asia, Mozambique and Brazil. Mr Matos worked for Vale for many years in various senior roles, including as its Chief Marketing and Strategy Officer for Coal as well as its Managing Director in Australia. Prior to his appointment as Interim Chief Executive Officer, Mr Matos was the Chief Commercial Officer for M Resources. Mr Matos holds a Bachelor of Business Administration degree from the Pontifical Catholic University of Rio de Janeiro (Brazil) and an Executive MBA from IBMEC Business School. Nil Nil • Member of the Health, Safety, Environment and Community Committee • Member of the Audit and Risk Management Committee • Member of the Remuneration and Nominations Committee Jimmy Lim Non-Executive Director (Appointed: 23 October 2019) Experience and expertise Mr Jimmy Lim has 20 years of experience in finance and investment management in the metals and mining sector, with extensive industry relationships in Australia and globally. Mr Lim started his career in Perth with Ernst & Young in Tax, serving natural resources and infrastructure companies of all sizes before moving into Corporate Finance with Ernst & Young and then KPMG where he continued advising clients in the natural resources sector. From there, Mr Lim then went on to work for JP Morgan in Melbourne where he worked on assignments advising and financing some of the largest companies in the world before moving to Hong Kong with Morgan Stanley and Goldman Sachs, where he was responsible for coverage of Metals and Mining in Asia excluding China. Mr Lim is a Fellow of Financial Services Institute of Australasia (FINSIA) and holds an MBA and degrees in Engineering and Science from the University of Western Australia. Other current directorships Non-Executive Director at American Pacific Borates Limited (ASX:ABR): appointed 4 February 2021 Former directorships in last 3 years Nil Special responsibilities • Chair of the Remuneration and Nominations Committee • Member of the Health, Safety, Environment and Community Committee 7 Stanmore Annual Report 2021 INFORMATION ON DIRECTORS (CONTINUED) Mark Trevan Non-Executive Director (Appointed: 18 May 2020) Experience and expertise Other current directorships Former directorships in last 3 years Special responsibilities Mr Mark Trevan has extensive experience in the coal mining industry in Queensland and internationally. Most recently, he was a Director and Deputy Chairman of the Wiggins Island Coal Export Terminal, a Director and consultant at Caledon Coal Pty Ltd and a Non-Executive Director of Ncondezi Energy Limited (a London listed, Mozambique focused coal mine development company). Prior to those appointments, he was the Managing Director of Caledon Resources Plc, based in Brisbane, where under his management the Cook underground coking coal mine was recommissioned and the Minyango underground coking coal project was advanced. Mr Trevan also oversaw the takeover of Caledon by Guandong Rising Asset Management, and the delisting of the company. Prior to joining Caledon in 2006, Mr Trevan spent 25 years with Rio Tinto in senior executive roles in the areas of marketing, general commercial, corporate strategy and project feasibility. Mr Trevan holds a Diploma in Business from the Preston Institute of Technology (now Latrobe University) and a Graduate Diploma in Applied Finance and Investment from the Securities Institute. Nil Nil • Chair of the Health, Safety, Environment and Community Committee Richard Majlinder Non-Executive Director (Appointed: 15 May 2020) Experience and expertise Mr Richard Majlinder is the Chief Commercial Officer for Madison Group Enterprises which is a manufacturer and b2B distributor of technology infrastructure and hardware. Prior to this, Mr Majlinder held a number of roles at PricewaterhouseCoopers (PwC) including as a Partner in Private Clients Advisory, leading client projects across mergers and acquisitions, consulting and financial management. Mr Majlinder holds a Bachelor of Science (Honours) in Economic History from the London School of Economics and is a Fellow of the institute of Chartered Accountants in England and Wales, a Member of the Institute of Chartered Accountants in Australia & New Zealand, and a Member of the Australian Institute of Company Directors (AICD). Other current directorships Former directorships in last 3 years Nil Nil Special responsibilities • Chair of the Audit and Risk Management Committee • Member of the Remuneration and Nominations Committee 8 Directors’ report (CONTINUED)Stanmore Annual Report 2021 INFORMATION ON DIRECTORS (CONTINUED) Mary Carroll Non-Executive Director (Appointed: 15 May 2020, Resigned: 2 July 2021) Experience and expertise Ms Mary Carroll is the Chief Executive Officer of Capricorn Tourism and Economic Development Ltd (Capricorn Enterprise). Capricorn Enterprise is a not-for-profit, membership-based organisation that aims to assist the central Queensland region in tourism and economic development, working with businesses and government to promote the region. Ms Carroll was also previously a Member of the Central Queensland University Council (appointed by the Governor in Council), Director of the Queensland Tourism Industry Council, and the Chair of the Regional Tourism Network in Queensland. Ms Carroll is a member of the AICD. Other current directorships Former directorships in last 3 years Special responsibilities Nil Nil Nil CHIEF FINANCIAL OFFICER Shane Young (Appointed: 12 August 2021) Experience and expertise Mr Shane Young has over 21 years of experience in accounting, financial planning and analysis, commercial, corporate finance, treasury, corporate development, and governance roles in Australia, the United Kingdom, the Netherlands and the United States. Mr Young has worked for major global organisations including KPMG, Shell and Peabody, and held various senior roles in the mining industry over several years, most recently as General Manager Finance at PanAust Limited. Mr Young is a Chartered Accountant and holds a Bachelor of Commerce (Accounting and Finance) degree from Monash University. He is a Member of the Chartered Accountants Australia & New Zealand, a Member of Australia Corporate Treasury Association (Certified Finance and Treasury Professional), and a graduate of AICD. Frederick Kotzee (Appointed: 21 September 2020, Interim Chief Financial Officer: 2 June 2020 to 20 September 2020, Resigned: 12 August 2021) Experience and expertise Mr Kotzee holds a Bachelor of Laws from the University of South Africa and is a qualified Chartered Accountant (South Africa). Mr Frederick Kotzee is an experienced Chief Financial Officer (CFO) of listed companies across a range of industries and commodities. Mr Kotzee served as the CFO of Kidman Resources Limited before the successful takeover by Wesfarmers Limited. Prior to this, Mr Kotzee was the CFO of Kumba Iron Ore Limited, a global iron ore miner listed on the Johannesburg Stock Exchange, and a member of the Anglo American Plc Group. Mr Kotzee has extensive experience in investment banking, joint ventures, corporate finance and business development. COMPANY SECRETARY Rees Fleming (Appointed: 22 July 2021) Experience and expertise Mr Rees Fleming has over 20 years of experience as a lawyer in both private practice and in-house roles across shipping, resources, coal mining and sugar industries. Mr Fleming has held General Counsel and Company Secretarial for listed and large multinational companies. Mr Fleming holds a Masters of Law (International Shipping) and a Bachelor of Law. He is a practising legal practitioner and a Graduate of AICD. 9 Stanmore Annual Report 2021 COMPANY SECRETARY (CONTINUED) Tristan Garthe (Appointed: 16 June 2020, Resigned: 22 July 2021) Experience and expertise Mr Tristan Garthe has worked in a wide range of financial and commercial roles within the coal mining sector, and the mining industry in general. Mr Garthe’s experience crosses both open cut and underground mining operations in Australia and Africa. Mr Garthe has held senior positions in finance and company secretarial roles for listed and international resources companies. Mr Garthe holds a Master of Business Administration and a Bachelor of Commerce (Accounting and Finance). He is a Certified Practising Accountant and a Member of the Governance Institute of Australia. DIRECTORS’ INTERESTS As at the date of this report, the Directors held no shares, options and other equity instruments in the Consolidated Entity. MEETINGS OF DIRECTORS The numbers of meetings of the company’s board of Directors and of each board committee held during the year ended 31 December 2021, and the numbers of meetings attended by each Director were: Board Audit & Risk Management Remuneration & Nomination Health, Safety, Environment & Community Meetings of committees A 6 6 6 5 5 3 B 6 6 6 6 6 3 A 4 4 – – 4 – B 4 4 – – 4 – A – 2 2 – 2 – B – 2 2 – 2 – A – 4 3 4 – – B – 4 4 4 – – Mr Dwi Suseno Mr Marcelo Matos Mr Jimmy Lim Mr Mark Trevan Mr Richard Majlinder Ms Mary Carroll A= Number of meetings attended B= Number of meetings held during the time the Director held office or was a member of the committee during the year PRINCIPAL ACTIVITIES During the year the principal continuing activities of the group consisted of exploration, development, production and sale of metallurgical coal in Queensland, Australia. OPERATING AND FINANCIAL REVIEW Highlights of the group’s operations and results for the year ended 31 December 2021 are described below: • Net profit after tax of $10.413m (31 December 2020: $(16.120m)); • Underlying EBITDA (Earnings Before Interest, Taxation, Depreciation and Amortisation – a non-IFRS measure) of $54.448m (31 December 2020: $(13.383m)); • Isaac Plains Complex operating segment profit of $60.447m (31 December 2020: $1.684m); • Net cash of $62.859m (31 December 2020: $5.041m); • Prime overburden removal of 25.003m bcm (31 December 2020: 17.351m bcm); • US$30m increase to the existing revolving facility with parent entity, GEAR, with US$67.6m debt drawn and outstanding as at the end of the period; and • Isaac Downs mining leases granted and development of the project commenced. 10 Directors’ report (CONTINUED)Stanmore Annual Report 2021 OPERATING AND FINANCIAL REVIEW (CONTINUED) (A) FINANCIAL PERFORMANCE Revenue from contracts with customers Cost of sales Gross profit/(loss) Other income and expenses Profit/(loss) before income tax and net finance expenses Finance income Financial expenses Profit/(loss) before income tax benefit/(expense) Income tax benefit/(expense) Profit/(loss) after income tax expense 6 months to 31 December 2020 $’000 2021 $’000 382,948 136,309 (312,540) (142,928) 70,408 (39,316) 31,092 1,803 (17,060) 15,835 (5,422) 10,413 (6,619) (9,924) (16,543) 27 (5,438) (21,954) 5,834 (16,120) (B) UNDERLYING EBITDA RESULT (UNAUDITED, NON-IFRS MEASURE) Underlying EBITDA (an unaudited, non-IFRS measure) reflects statutory EBITDA as adjusted to reflect the Directors’ assessment of the result for the ongoing business activities of the Consolidated Entity. The items adjusted are determined to be non-cash transactions that are unrelated to mining operations. The presentation of non-IFRS financial information provides stakeholders the ability to compare against prior periods in a consistent manner. Statutory profit/(loss) before income tax and net finance expenses Depreciation and amortisation Earnings before interest, depreciation and amortisation (EBITDA) Remeasurement of rehabilitation provision Remeasurement of onerous contracts Fair value movement – contingent consideration Underlying EBITDA (non-IFRS measure) 6 months to 31 December 2020 $’000 (16,543) 14,682 (1,861) 36 (1,893) (9,665) 2021 $’000 31,092 26,761 57,853 – (1,191) (2,214) 54,448 (13,383) The underlying EBITDA of $54.448m for the year ended 31 December 2021 was a $67.831m increase compared to the underlying EBITDA of $(13.383m) for the 6-month period to 31 December 2020. The increase in EBITDA was due to an increase in underlying margin of $30/t in the period to 31 December 2021 compared to $(8)/t in the previous period. The significant increase in margin was a result of a $62/t increase in average sales price per tonne, combined with a decrease in reportable strip ratio to 9.0x as the company commenced mining in the bulk sample pit area as part of development activities in Isaac Downs which has a lower strip ratio compared to the Isaac Plains mining areas. The EBITDA is also impacted by the expenses related to the remaining overburden in advance (OBIA) inventories for the Isaac Plains (for which mining will cease in the first quarter of 2022), resulting in non-cash inventory adjustments of $49.253m. 11 Stanmore Annual Report 2021 OPERATING AND FINANCIAL REVIEW (CONTINUED) (B) UNDERLYING EBITDA RESULT (UNAUDITED, NON-IFRS MEASURE) (CONTINUED) The average Hard Coking Coal index price was US$208.09/t for the year compared to US$110.28/t in prior period. See page 14 for additional pricing information (source: Platts Coal Trader International). The primary drivers contributing to the Net Profit after Tax (“NPAT”) result include: • Gross revenue from coal sales increased to $382.9m for the year ended 31 December 2021 from $136.3m in the 6-month period to 31 December 2020. The increase was driven by a $62/t increase in the A$ realised price to an average of A$177/t from $115/t in the prior period, and an increase in sales of produced coal to 2,165kt in the period to 31 December 2021 from 1,184kt in the 6-month period to 31 December 2020; • Increase in finance costs from $5.438m for the 6-month period to 31 December 2020 to $17.060m for the year ended 31 December 2021. This is primarily due to the increase in utilisation of the existing borrowing facilities to support the development of the Isaac Downs project, foreign exchanges losses recognised in the period, coupled with initial finance fees incurred in relation to the announced US$625m debt facility for the acquisition of BHP’s 80% interest in BMC; and • Underlying non-cash FOB costs includes $49.253m of costs in relation to the reduction of overburden in advance inventories for the Isaac Plains mining operation, with no corresponding OBIA being recognised for Isaac Downs which is still a development site. The variance between underlying EBITDA and cash flow from operations is primarily due to the settlement of contingent consideration royalties, completion of rehabilitation works and working capital movements, as outlined in the table below: Underlying EBITDA (non-IFRS measure) Net financing costs Settlement of onerous contracts Completion of rehabilitation works Settlement of vendor royalties – contingent consideration Net movement in working capital Cash flow from operations 6 months to 31 December 2020 $’000 (13,383) (3,003) (476) (3,851) (284) 5,297 (15,700) 2021 $’000 54,448 (21,982) (654) (1,650) – 97,253 127,415 In the period to 31 December 2021, working capital significantly improved, with a net inflow of $97.253m (31 December 2020: $5.297m), driven by a reduction in inventories ($55.436m) and an increase in trade payables due to longer credit period from contractors ($42.801m), offset by timing of sales receipts leading to an increase in current trade receivables of $31.144m at 31 December 2021. Financing inflows of $79.733m primarily relate to the changes in the borrowing facilities (see Note 14). In the year to 31 December 2021, $1.650m (31 December 2020: $3.851m) was invested in rehabilitation at Isaac Plains Complex. Stanmore Resources Limited integrates this core activity with operations to ensure timely and efficient close out of rehabilitation. Overall operational cash flows have increased due to significantly high receipts from coal sales, driven by the increased sales tonnes and higher average sales price per tonne. 12 Directors’ report (CONTINUED)Stanmore Annual Report 2021 OPERATING AND FINANCIAL REVIEW (CONTINUED) (C) CASH FLOW In the period to 31 December 2021, total net cash inflows of $57.818m were recorded. The net cash inflow from operating activities was $127.415m. Cash flows from investing activities were $(138.394m). Of this, $15.356m related to sustaining capital expenditure for plant and equipment, $28.950m relates to the Loan receivable with MetRes Pty Ltd, and $44.422m related to the continued investment in Isaac Downs. At the end of period, US$67.6m was drawn from the revolving facility with the parent company, Golden Energy and Resources Limited (GEAR). The net inflow from financing activities includes $80.181m drawn down on the group’s various facilities, primarily offset by the cash outflows for the BMC acquisition deposit (US$30m), the loan issued to MetRes JV ($28.950m), repayment of the short-term loan ($2.693m), repayment of insurance premium funding ($3.874m), and a further $2.262m paid in relation to the equipment loan to finance the CAT 6060 excavator. Net cash at beginning of year Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net increase/(decrease) in cash held Net cash at end of period 6 months to 31 December 2020 $’000 32,244 (15,700) (13,699) 2,196 (27,203) 5,041 2021 $’000 5,041 127,415 (138,394) 68,797 57,818 62,859 (D) HEALTH, SAFETY, ENVIRONMENT AND COMMUNITY PERFORMANCE The Consolidated Entity continues to be committed to the current and future performance of the business for the health, safety and wellbeing of our people, the environment and the communities in which we operate. The Consolidated Entity undertook or managed 754,930 hours (31 December 2020: 400,819 hours) of coal mining, drilling, exploration, and mine development activities (directly and through its contractors) during the year, and reported two lost time injuries (31 December 2020: nil). The rolling 12-month Total Reportable Injury Frequency Rate is 7.9 per million hours (31 December 2020: 5.9 per million hours), with a rolling 12-month Lost Time Injury Frequency Rate of 2.34 (31 December 2020: nil). The Consolidated Entity is encouraged by the safety performance results for the year, which remain lower than the industry averages. The Consolidated Entity supported the communities in which our operations are located with a number of grants, sponsorships, important community initiatives and events undertaken during the year. 40 local community organisations received over $109,000 in funding during the year. In addition, significant ‘in-kind’ time was also dedicated to regional industry bodies and professional groups to enhance local industry and services in the region. (E) OPERATIONS The Isaac Plains Complex mined 25,003kbcm of prime overburden compared to 17,351kbcm in the prior 6-month period to 31 December 2020. The reduction was a result of the expected lower strip ratios at the Isaac Downs mining area, coupled with a focus on ROM coal extraction in the year at the Isaac Plains mine. Coal mining operations delivered 2,767kt of ROM coal to the CHPP at a prime strip ratio of 9x, compared to 1,491kt and a strip ratio of 12.0x in the prior 6-month period. Product coal production was 2,070kt, with the CHPP delivering a total yield of 75.1%. The production split of coking to thermal coal was 91.6% coking and 8.4% thermal. Yields and product split have improved due to mining improved quality coal areas, including the Isaac Downs sample pit area. 13 Stanmore Annual Report 2021 OPERATING AND FINANCIAL REVIEW (CONTINUED) (E) OPERATIONS (CONTINUED) As previously announced, the Isaac Downs mining leases have been granted by the Queensland Government. Mining of this area initially commenced earlier in the year as part of a Sample Pit area, with the Board having also formally approved the development of the Isaac Downs Project. The average sale price achieved for all coal (both metallurgical and thermal) during the period was A$176.7/t, compared to 31 December 2020 of A$115.1/t. The increase in price has been driven by the increases in coal demand after the depths of the Covid pandemic, particularly across Asian markets. The average Hard Coking Coal index price was US$208.09/t for the year compared to US$110.28 in the period ended 31 December 2020. Physicals Prime overburden (kbcm) ROM coal produced – Open cut (kt) ROM strip ratio (prime) CHPP feed (kt) ROM stockpile (kt) Saleable coal produced (kt) Saleable coal purchased (kt) 14 6 months to 31 December 2020 17,351 1,491 12 1,475 86 1,092 – 2021 25,003 2,767 9 2,757 96 2,070 – Directors’ report (CONTINUED)Stanmore Annual Report 20210100200300400500600700Jul 17Oct 17Jan 18Apr 18Jul 18Oct 18Jan 19Apr 19Jul 19Oct 19Oct 20Jan 20Apr 20Jul 20Jan 21Apr 21Jul 21Oct 21Jan 22Apr 22Coal Type PriceUS$ per tonne Premium HCC CFR ChinaPremium HCC FOB AustraliaLow Vol PCI6,000k cal/kg NAR FOB Australia OPERATING AND FINANCIAL REVIEW (CONTINUED) (E) OPERATIONS (CONTINUED) Coal sales - Metallurgical (kt) - Thermal (kt) Total gross coal sales (kt) Product Yield (%) Coal product stockpiles (kt) Average sale price achieved (A$/t) Unit costs of sales (A$/t sold) FOR cost (A$/t sold) FOR to FOB cost (ex. State royalty) (A$/t sold) State royalty (A$/t sold) FOB cash cost (A$/t sold) Margin (A$/t sold) 6 months to 31 December 2020 1,129 55 1,184 74 196 115 96 19 8 123 (8) 2021 1,971 194 2,165 75 98 177 106 24 17 147 30 The variance between coal margins and Underlying EBITDA (non-IFRS measure) is due to net corporate overheads as shown in the table below: Margin (A$/t sold) Coal sales (kt) Coal sales margin ($‘000) Unallocated corporate overhead ($‘000) Underlying EBITDA (non-IFRS measure) ($‘000) 6 months to 31 December 2020 (8) 1,184 (9,946) (3,437) (13,383) 2021 30 2,165 63,002 (8,554) 54,448 (F) ISAAC DOWNS PROJECT Isaac Downs is located 10 kilometres south of the existing Isaac Plains operations. Isaac Downs is being operated as a satellite open cut mining operation utilising the existing Isaac Plains infrastructure with coal washing and train loading activities undertaken at the existing CHPP, ensuring a capital light approach to this project is maintained. During the period, the company invested in the establishment of infrastructure (according to conditions established under the Mineral Resources Act for (MDL137)) at Isaac Downs to undertake a bulk sample pit for testing of proposed product coal cargoes with key international customers. A new access road has been constructed including a new intersection at the Peak Downs Highway, as well as the required infrastructure for environmental controls. As announced on 27 July 2021, the main project has been granted approvals, environmental authority, and approval under the Environmental Protection and Biodiversity Conservation Act. 15 Stanmore Annual Report 2021 OPERATING AND FINANCIAL REVIEW (CONTINUED) (F) ISAAC DOWNS PROJECT (CONTINUED) Since this announcement, the Isaac Downs Project has undertaken key infrastructure works, including the Peak Downs Highway underpass, allowing reduced haulage time and costs between the mining area and the CHPP washplant. Mining operations within the bulk sample pit are currently taking place at the Isaac Downs area, with the dragline expected to commence operations at Isaac Downs at the end of the first quarter of 2022. This is the point at which full scale production will commence from Isaac Downs and the estimated point of completion of the development. (G) COVID-19 IMPACTS The Consolidated Entity continues to follow recommendations from Queensland Health and the Australian Government to provide a COVID-19 safe workplace. COVID-19 impacts have not been significant to the Consolidated Entity in the period. The company does not expect any negative impacts to the financial statements nor triggers for any significant uncertainties with respect to events or conditions which may adversely impact the Consolidated Entity as at the reporting date or subsequently as a result of the COVID-19 pandemic. Consistent with the mining industry there has been an increase in absenteeism in early 2022 due to COVID-19 cases. The company will continue to work with its contractors on protocols to minimise the spread and impacts to operations. (H) DEBT REFINANCE On 2 July 2021, the Consolidated Entity signed an amendment to increase the available facility under its existing finance facility with its parent entity, GEAR, from US$40m to US$70m. The increase in the facility was primarily to ensure the progression of the Isaac Downs project together with the Mavis and Millennium acquisition, as it substantially satisfies the company’s short to medium term debt requirements and allowed a seamless transition from Isaac Plains East to Isaac Downs now that the Mining Lease has been obtained. INVESTMENT IN METRES INCORPORATED JOINT VENTURE (I) On 13 July 2021, the Consolidated Entity announced the completion of the Millennium and Mavis Downs Mine acquisition from Peabody Energy Australia, via MetRes Pty Ltd, the 50/50 joint venture between Stanmore Resources Limited and M Resources. Auger mining commenced in August 2021, in line with operational schedules, with MetRes having reached the milestone of its first coal shipment within five months from acquisition. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS (A) OPERATIONS Financial Year 2022 is expected to be a truly transformational year for the company. As well as the transition of its mining operations from Isaac Plains to Isaac Downs, the Consolidated Entity announced on 8 November 2021 that it has executed a definitive agreement with BHP to acquire BHP’s 80% interest in the BMC (BHP Mitsui Coal Pty Ltd) joint venture. At the same time, Stanmore Resources Limited announced its intention to fund the acquisition with a combination of debt and equity, and has since announced on 7 January 2022 that it has successfully executed documentation with certain financiers in respect of a US$625m debt facility. Stanmore Resources Limited is well placed to take advantage of the high coal sales prices in the first quarter of 2022, due to the lagging effect on sales pricing of certain fixed pricing sales contracts. (B) EXPLORATION AND DEVELOPMENT On 16 February 2022, the Consolidated Entity announced an decrease to the coal and reserves under the relevant Australasian Code for Reporting Exploration Results and Ore Reserves (JORC Code). The total Recoverable Coal Reserves across all tenements formally declared and published are now 160.0Mt, and the total Marketable Coal Reserves are 125.4Mt. The Consolidated Entity will continue to monitor and assess the opportunities to develop or monetise its existing portfolio of assets in the Bowen Basin and explore acquisition opportunities where it makes financial and commercial sense to do so. 16 Directors’ report (CONTINUED)Stanmore Annual Report 2021 LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS (CONTINUED) (C) MANAGING RISKS The Consolidated Entity is a producing coal group operating in a volatile pricing market. Factors specific to the Consolidated Entity, or those which impact the market more broadly, may individually or in combination impact the financial and operating performance of the Consolidated Entity. These events may be beyond the control of the Board or management of Stanmore Resources. The major risks associated with an investment in the Consolidated Entity are summarised below. The Consolidated Entity identifies and actively manages the material risks as part of its risk management governance framework and internal control systems. (i) Safety risks Safety remains of critical importance in the planning, organisation and execution of the group’s exploration and operational activities. The group is committed to providing and maintaining a working environment in which all associated with our business are not exposed to hazards that will jeopardise their health and safety. (ii) Operating risks The group has historically been a single-mine producer and, therefore, reliant on continued performance of operations at the Isaac Plains Complex. As a result, numerous operating risks were highlighted which may result in a reduction in performance that decreases the group’s ability to produce high quality coal to meet customer shipping needs. The risks include, but are not limited to, factors such as weather conditions, machinery failure, critical infrastructure failure or natural disasters. The group has also previously identified a limited remaining life at Isaac Plains and Isaac Plains East. The timely mining assent for Isaac Downs received in Q3 2021 has ensured the availability of mining areas to ensure continuity of coal flows to meet contracted obligations. The Consolidated Entity continues to mitigate risks by identifying potential additional mining opportunities at Isaac Plains, Isaac Plains East and Isaac Plains Underground. The group’s announcement on 8 November 2021 that is has executed an agreement with BHP to acquire BHP’s 80% interest in the BMC joint venture will also reduce the risk regarding the reliance on the performance of the Isaac Plains Complex. (iii) Market risks The key drivers for the business’ financial performance are commodity price and foreign currency markets. The group is not of a size to have influence on coal prices or the exchange rate for Australian Dollars and is therefore a price-taker in general terms. The group sells export coal in United States Dollars and is therefore exposed to movements in currency rates. The group may from time to time use mechanisms to hedge a portion of its currency risk where deemed appropriate by management and the Board. The market price for Stanmore Resource’s products is impacted by many factors which could be favourable or unfavourable for the group. In order to diversify its customer base and to minimise the reliance on key customers, the group is continuing to work on identifying new customers and markets in 2022 where it makes financial sense to do so. (iv) Geological risks Resource and Reserve estimates are prepared by external experts in accordance with the JORC Code 2012 and JORC Code 2004 (as applicable) for reporting. Coal reserves are estimated using various assumptions regarding loss and dilution, drilling depth and other geotechnical constraints. Reserves are sensitive to cost and revenue assumptions used due to geological structure of deposits, which means that all other factors being the same, if the cost assumption is lower or the price assumption is higher, more reserves are estimated. Some of the deposits are more sensitive to the cost and revenue assumptions used than others due to the characteristics and geological structure of those deposits. Due care is taken with each estimation, but is expected to change as more detailed planning is undertaken. 17 Stanmore Annual Report 2021 LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS (CONTINUED) (C) MANAGING RISKS (CONTINUED) (v) Regulatory and land access risks The group’s operations and projects are subject to State and Federal laws and regulations regarding mining, environmental protection, land access and native title. These laws and regulations regulate the conduct of mining operations, set requirements in relation to landholder compensation, environmental protection and certain aspects of health, and provide for penalties and other consequences for the breach of such laws. There is also an obligation to rehabilitate areas impacted by mining activities, which includes the group providing financial assurances in respect of the likely costs and expenses that may be incurred when taking action to rehabilitate areas impacted by mining activities. The Mineral and Energy Resources (Financial Provisioning) Act 2018 has changed the method by which such financial assurance is calculated but the cost of this change to the group has not been material. The rehabilitation provision recorded in these accounts closely mirrors these obligations. In order to undertake exploration and production activities, it is first necessary to apply for and obtain necessary government permits, leases and approvals that authorise such activities. To secure such exploration and mining approvals, or to undertake activities within the area of a granted mining tenement, native title, land access and overlapping tenure are matters that need to be addressed. The group seeks to develop strong, long-term effective relationships with landholders and other stakeholders, with a focus on developing mutually acceptable compensation and access arrangements. The group seeks to minimise these risks by conducting its activities in an environmentally responsible manner, in accordance with applicable laws and regulations. In addition, the group engages experienced lawyers, consultants and other technical advisors to provide expert advice where necessary to ensure it manages its compliance obligations appropriately. (vi) Climate change risks The operations of the Consolidated Entity are focused on the production of coal for use in the steel making industry. Considering the nature of the industry in which the Consolidated Entity operates, both physical and transitional climate changes risks have the potential to impact the company’s assets, production and the markets where our product is sold. Transitional risks being those climate change risks associated with the transition to the lower-carbon economy and include policy, legal technology and market related risks, and physical risks being those which have direct financial implications to the Consolidated Entity. Physical risks refer to risks that are event-driven (such as weather events like cyclones, fires and floods) or are ‘chronic’ risks which are those that are caused by longer-term shifts in climate patterns (including sustained movement in temperature). There is an increasing interest by stakeholders regarding the potential risks and opportunities to our business and the broader sector as a result of shifts towards a lower-carbon economy. Climate change is a complex risk that requires action at all levels of society. It can heighten existing physical and non-physical risks and introduce new ones that can affect business performance in the near and long terms. We continue to work with the industry on this important topic and develop our response to the Taskforce on Climate Related Financial Disclosures (TCFD) framework to improve our disclosure and tracking of climate-related risks and opportunities. The Consolidated Entity also has a role to play in mitigating emissions generated by its operations. Business and operational risks associated with changes caused by climate change and the measures that will be taken to mitigate those risks and overall emissions are considered during the group’s business planning cycle. 18 Directors’ report (CONTINUED)Stanmore Annual Report 2021 LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS (CONTINUED) (C) MANAGING RISKS (CONTINUED) (vii) Indigenous engagement As part of the Isaac Downs approval process, it was recognised that increased collaboration was required with the traditional owners of the land on which the company operates, the Barada Barna people. Through a process of facilitation and recognition of the need for reconciliation, the company is dedicated to developing a working and collaborative relationship with the Barada Barna people. The company has committed to developing a Reconciliation Action Plan working committee. This process will not only strengthen ties with the Barada Barna people, but pave the way for true reconciliation within the broader meaning. The company and the Barada Barna people have developed a Native Title Consent Agreement and reviewed a Cultural Heritage Management Plan. Further, the company aims to facilitate and implement a Reconciliation Action Plan process that develops long-term strategies including increasing Indigenous employment and business opportunities which will enable the Barada Barna people to become more involved in the company and encourage a strong working relationship between both parties. (viii) Sovereign risks The group has limited influence over the direction and development of government policy. Successive changes to the Australian resources policy, including taxation policy, have impacted Australia’s competitiveness and reduced the attractiveness of Australian coal projects to foreign investors. The group’s view is coking coal is critical for future steel production and thermal coal will continue to play a key role in the global energy mix as part of sustaining global growth, particularly in developing regions, through efficient electricity generation. (ix) Access to capital At 31 December 2021 the group remains well funded with cash reserves and a revolving finance facility expected to be sufficient to meet the business’ operating costs. The group’s ability to effectively continue as a coal producing business may be dependent upon several factors including the success of the mine operations, or the successful exploration and subsequent development of the group’s tenements. Should these avenues be delayed or fail to materialise, the group may need to raise additional funding through debt, equity or farm out/sell down to allow the group to continue as a going concern and meet its debts as and when they fall due. There is no guarantee that additional funding through debt will be available, or if it is, there is no guarantee that such new funding will be on terms acceptable to the group. Global credit markets have been severely constrained in the past, and the ability to obtain new funding or refinance may in the future be significantly reduced. Increasingly, financial institutions have made public statements in relation to their unwillingness to finance certain types of coal mines and coal- fired power stations. If the group is unable to obtain sufficient funding, either due to banking and capital market conditions generally, or due to factors specific to the coal sector, the group may not have sufficient cash to meet its ongoing capital requirements or the ability to expand its business. Following the on-market takeover by Golden Investments in 2020, the group has been able to access funding through our parent entity, GEAR. See details of the debt refinance on page 16 of this report. As at the date of this report, GEAR has a credit rating of B1 by rating agency Moody’s and B+ by rating agency Fitch. This has reduced the risk the group may not have access to capital. Any present risk is still being actively monitored by Stanmore Resources Limited. In respect of the BMC transaction, Stanmore Resources Limited has also signed definitive agreements with certain financiers for a US$625 million senior debt facility, demonstrating the group’s ability to access funds when required. Stanmore Resources Limited continues to explore a number of avenues in relation to working capital initiatives. (x) Access to insurance cover There is a risk that the policies of financial institutions with respect to the funding of coal projects may, in the future, extend to an unwillingness to provide insurance products to coal producers and associated companies on terms that are currently provided to such companies. This could result in a material increase in the cost to Stanmore Resources of obtaining appropriate levels of insurance or Stanmore Resources being unable to secure adequate insurance cover. 19 Stanmore Annual Report 2021 Remuneration report (audited) This report details the nature and amount of remuneration for each Director of Stanmore Resources Limited and its controlled entities, and for the company’s Key Management Personnel (“KMP”). KMP are defined as those persons who have the authority and responsibility for planning, directing and controlling the activities of the Consolidated Entity. The Consolidated Entity’s Directors and KMP during 2021 were: Non-executive and executive Directors (see pages 6 to 9 for details about each Director) Mr Dwi Suseno Mr Marcelo Matos Mr Jimmy Lim Mr Mark Trevan Mr Richard Majlinder Ms Mary Carroll (until 2 July 2021) Other key management personnel Name Position Mr Frederick Kotzee Chief Financial Officer (until 12 August 2021) Mr Jon Romcke Mr Leandro Pires Mr Shane Young General Manager Development General Manager Operations Chief Financial Officer (from 12 August 2021) (A) REMUNERATION POLICY OVERVIEW The Consolidated Entity’s business strategy of managing an operating coal business can only be achieved by identifying and retaining high calibre employees with appropriate experience and capability. Developing an appropriate compensations strategy for the Consolidated Entity’s employees is a key factor in ensuring employees are engaged and motivated to improve the group’s performance over the long term. The Board’s intention is to maximise stakeholder benefit by the retention of high-quality Board and executive team without creating an undue cost burden for the company. The Board regularly reviews the appropriateness of employees’ fixed compensation considering the group’s cost structure and the practices of its peers. The Board formally reviews Board and senior executive performance on an annual basis. The following describes the Consolidated Entity’s remuneration arrangements for KMP. (B) ELEMENTS OF REMUNERATION (i) Fixed annual remuneration (FR) Chief Executive Officer and Senior Management fixed remuneration The Consolidated Entity aims to reward the CEO and senior management with a base level of remuneration which is both appropriate to the position and competitive in the market. Fixed remuneration is reviewed annually by the Remuneration and Nominations Committee and the Board. The CEO reviews all senior management performance and remuneration and then makes recommendations to the Remuneration and Nominations Committee. The Remuneration and Nominations Committee reviews the performance and remuneration of the management team. The process consists of a review of company and individual performance, relevant comparative remuneration both in the market and internally, and, where appropriate, external advice on policies and remuneration practices. 20 Directors’ report (CONTINUED)Stanmore Annual Report 2021 (B) ELEMENTS OF REMUNERATION (CONTINUED) (i) Fixed annual remuneration (FR) (continued) Non-Executive Director fixed remuneration The Board seeks to aggregate remuneration at a level which provides the Consolidated Entity with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. The Constitution of Stanmore Resources Limited and the ASX Listing Rules specify that the Non-Executive Directors are entitled to remuneration as determined by the company in a general meeting to be apportioned among them in such manner as the Directors agree, and, in default of agreement, equally. The maximum aggregate remuneration currently determined by Stanmore Resources Limited’s shareholders is $750,000 per annum (31 December 2020: $750,000 p.a.). The Non-Executive Director’s fee was $50,000 per annum (31 December 2020: $50,000 p.a.). Committee fees were $10,000 per annum for the Chair and $5,000 per annum for members. The Board, at the recommendation of the Remuneration and Nomination Committee after undertaking a benchmarking remuneration review, determined to increase the Non-Executive Director’s Fees to $113,000 per annum, fees for the Chair of a committee to $22,600 per annum and $11,300 per annum for members of a committee. In addition, the Board also determined to pay to the Non-Executive Directors a once off fee in recognition of the significant additional work performed with respect to the acquisition of the BMC assets. The maximum aggregate fees paid is within the Shareholder’s annual agreed limit. The total Non-Executive Director remuneration for the year was $541,033 (31 December 2020: $126,731). A Non-Executive Director is entitled to be paid travel and other expenses properly incurred by them in attending Directors’ or general meetings of Stanmore Resources Limited or otherwise relating to the business of the group. The fixed remuneration of Non-Executive Directors for the year ending 31 December 2021 is detailed in this Remuneration Report. (ii) Short-term and long-term incentive plan structures The Board considers that the use of Short-Term Incentives (STI) and Long-Term Incentives (LTI) are a reasonable means of remunerating Senior Management, on the basis that they: • encourage Senior Management to drive toward the realisation of shareholder value; • provide flexibility to the company to actively manage the way in which it remunerates and incentivises Senior Management; • preserve the company’s cash resources; and • contribute to the attraction and retention of skilled talent in a competitive market. For the year ended 31 December 2021, performance targets for STI and LTI were formalised and agreed by the Board. For the 6-month financial period to 31 December 2020, no formal STI and LTI performance targets were set, due to the shortened performance period. (iii) Incentive outcomes As noted previously, the STI for the period ended 31 December 2020 was based on the Board’s discretion, after considering management’s performance, and no LTI scheme was in place for the period. 21 Stanmore Annual Report 2021 (B) ELEMENTS OF REMUNERATION (CONTINUED) The incentive outcomes for the STI and LTI scheme for the year ended 31 December 2021 are shown below. (iv) Short-term incentives Incentive Award structure Outcome/discussion FY21 STI FY21 STI Preconditions: zero fatalities/company can fund STI Preconditions (achieved): zero fatalities/ company can fund STI Based on multiple key performance indicators: TRIFR*/HPIFR**/ROM T/FOB cash costs/Working Capital The key performance indicators were met to varying levels, resulting in a total accrued payout of 122% of target. All KMP met eligibility requirements. FY21 STI amounts are highlighted below. TRIFR refers to ‘Total Recordable Injury Frequency Rate’ * ** HPIFR refers to ‘High Potential Injury Frequency Rate’ In FY21, all KMP were entitled to a payment under the STI scheme. The FY21 STI is due to be paid in late February 2022. The STI for the year ended 31 December 2021 is ultimately subject to Board discretion, based on management performance, and calculated in line with the STI and LTI targets for the financial year, and is shown below: Target STI FY21 Target STI December 2020 Base of Salary % Target Amount $ Awarded $ Base of Salary % Base of Salary % Target Amount $ Awarded $ Base of Salary % Jon Romcke Marcelo Matos Leandro Pires Shane Young 40% 50% 40% 40% 141,312 172,337 271,360 330,938 135,168 164,844 152,000 185,372 49% 61% 49% 49% 39% 52% 39% – 67,275 91,887 23,803 – 51,750 70,667 17,852 – 30% 40% 30% – (v) Long-term incentives Incentive Award structure Outcome/discussion FY21 LTI LTI is based on the Relative Total Shareholders Return (TSR) and Working Average Cost of Capital (WACC) performance measures, relative to a fixed measurement point. Due to the expected impact of the Group’s proposed acquisition of BHP’s 80% interest in the BMC joint venture, the current LTIP award structure was not applied for the current period. The Board have approved a discretionary cash LTIP award for eligible members for the period up to the expected acquisition date during Q2 2022. As at 31 December 2021, 144,898 (FY19 and FY20) rights remain in relation to previously disclosed LTIP scheme. 22 Directors’ report (CONTINUED)Stanmore Annual Report 2021 (B) ELEMENTS OF REMUNERATION (CONTINUED) KMP* FY No. of Rights Vesting date** Jon Romcke FY20 36,342 30-Jun-22 Jon Romcke FY19 108,556 30-Jun-21 Target 30% 30% Salary package value at Stretch*** ($) 207,000 191,7111 Price**** ($) 1.42 0.88 Value of Rights***** ($) 0.37 0.45 144,898 KMP employed as at 31 December 2021 Retest available after 12 months if no Rights have vested on vesting date * ** *** Stretch target based on 2x Target % **** Based on the 10-day VWAP of shares in the 24 hours following the release of the annual results ***** Accounting value of rights issued Below is a summary of the performance conditions for vesting for FY20 Rights granted: Total Value ($) 13,447 48,850 62,297 Performance Level Stretch Between Target and Stretch Target Between Threshold and Target Threshold Below Threshold**** Absolute Total Shareholder Return Stanmore Resources Limited * ** *** Compound Annual Growth Rate (CAGR) **** Subject to retest in FY23 at CAGR ATSR* of SMR** CAGR*** % of Stretch/ Max. Vesting June 2022 Share Price for Vesting 20% >15%<20% 15% >10%<15% 10% <10% 100% Pro-rata 50% Pro-rata 0% 0% $2.46 Pro-rata $2.17 Pro-rata $1.90 $0.00 Below is a summary of the performance conditions for vesting for FY19 Rights granted: Performance Level Stretch Between Target and Stretch Target Between Threshold and Target Threshold Below Threshold**** Absolute Total Shareholder Return Stanmore Resources Limited * ** *** Compound Annual Growth Rate (CAGR) **** Subject to retest in FY22 at CAGR ATSR* of SMR** CAGR*** % of Stretch/ Max. Vesting June 2022 Share Price for Vesting 36.24% >26.23%<36.24% 26.23% >14.33%<26.23% 14.33% <14.33% 100% Pro-rata 50% Pro-rata 0% 0% $2.20 Pro-rata $1.75 Pro-rata $1.30 $0.00 In relation to the Rights, one retest is available 12 months after the end of the measurement period only if no vesting occurred in relation to the first test following the completion of the measurement period. The FY19 Rights noted above did not meet conditions for vesting, and will be subject to a retest in FY22. The Consolidated Entity does not intend to issue more than an aggregate of 5% of its share capital, from time to time, under the LTI plans. 23 Stanmore Annual Report 2021 (B) ELEMENTS OF REMUNERATION (CONTINUED) (vi) General incentive and remuneration consultants From time to time, the Remuneration and Nominations Committee seeks and considers advice from external advisors who are engaged by and report directly to the committee. Such advice will typically cover Non-Executive Director fees, Executive KMP and advice in relation to equity plans. The Corporations Act 2001 requires companies to disclose specific details regarding the use of remuneration consultants. The mandatory disclosure requirements only apply to those advisers that provide a ‘remuneration recommendation’ as defined in the act. No advice was sought during the period under review. (C) LINK BETWEEN REMUNERATION AND PERFORMANCE (i) Statutory performance indicators Profit/(loss) attributable to the Group ($’000) 2021 10,413 December 2020* June 2020 (16,120) 34,893 2019 91,598 2018 5,966 Revenue ($’000) 382,948 136,309 364,485 403,059 208,081 Share price at period end ($/Share) 1.035 0.81 Basic earnings per share (c/Share) Diluted earnings per share (c/Share) Shareholder dividends paid (c/Share) * 6-month period to 31 December 2020 3.9 3.9 – (6) (6) – 0.78 13.2 13.2 11 1.425 35.1 35.6 5 0.87 2.4 2.3 – It is the Board’s policy that employment contracts or consultancy agreements are entered into with all Non-Executive Directors and senior management. Contracts do not provide for pre-determining compensation values or method of payment. Rather, portions of compensation are discretionary STI and LTI plan awards that are determined by the Remuneration and Nominations Committee and the Board in accordance with the company’s remunerations policies. All other employment contracts or consultancy agreements have either six or three-month (or lower) notice periods. No current employment contracts contain early termination clauses. All Non-Executive Directors have received letters outlining the key terms of their appointment. The contracts have no specified duration. KMP are entitled to their statutory entitlements of accrued annual leave and long service leave together with statutory superannuation or termination. (ii) Chief Executive Officer Stanmore Resources Limited has an Executive Service Agreement (ESA) with Mr Marcelo Matos for the position of Chief Executive Officer which commenced on 27 November 2020. Mr Matos received a base remuneration of $542,000 per annum plus statutory superannuation. The ESA provides for termination by either party by providing three month’s written notice, or immediately in the case of serious misconduct or bankruptcy. Mr Matos is eligible to participate in the STI and LTI schemes. Under the ESA, the target annual STI is 50% of base remuneration. The target LTI is 50% of base remuneration. 24 Directors’ report (CONTINUED)Stanmore Annual Report 2021 (C) LINK BETWEEN REMUNERATION AND PERFORMANCE (CONTINUED) (iii) Senior management General Manager Operations Stanmore Resources Limited has an ESA with Mr Leandro Pires for the position of General Manager Operations which commenced on 26 October 2020. For the period to 31 December 2021, Mr Pires received a base remuneration of $338,000 (31 December 2020: $330,000) per annum plus statutory superannuation. The ESA provides for termination by either party by providing three month’s written notice, or immediately in the case of serious misconduct or bankruptcy. Mr Pires is eligible to participate in the STI and LTI schemes. The target annual STI is 40% of base remuneration, and the target LTI is 40% of base remuneration. General Manager Development Stanmore Resources Limited has an ESA with Mr Jon Romcke for the position of General Manager Development which commenced on 21 August 2017. For the period to 31 December 2021, Mr Romcke received a base remuneration of $353,000 (31 December 2020: $345,000) per annum plus statutory superannuation. The ESA provides for termination by either party by providing two month’s written notice, or immediately in the case of serious misconduct or bankruptcy. Mr Romcke is eligible to participate in the STI and LTI schemes. The target annual STI is 40% of base remuneration, and the target LTI is 40% of base remuneration. Chief Financial Officer (Appointed 12 August 2021) Stanmore Resources Limited has an ESA with Mr Shane Young for the position of Chief Financial Officer which commenced on 12 August 2021. For the period to 31 December 2021, Mr Young received a base remuneration of $380,000 (31 December 2020: nil) per annum plus statutory superannuation. The ESA provides for termination by either party by providing three month’s written notice, or immediately in the case of serious misconduct or bankruptcy. Mr Young is eligible to participate in the STI and LTI schemes. The target annual STI is 40% of base remuneration, and the target LTI is 40% of base remuneration. Chief Financial Officer (Resigned 12 August 2021) Stanmore Resources Limited had an ESA with Mr Frederick Kotzee for the position of Chief Financial Officer which commenced on 21 September 2020. For the period to 31 December 2021, Mr Kotzee received a base remuneration of $342,000 (31 December 2020: $380,000) per annum plus statutory superannuation. On 12 May 2021, Mr Kotzee resigned from his position and finished with the company on 12 August 2021. Prior to his resignation, Mr Kotzee was eligible to participate in the STI and LTI schemes. The maximum annual STI was 39% (Stretch) of his remuneration package, and the maximum LTI was 30% of his remuneration package at Target performance and a further 30% of his remuneration package at Stretch performance. 25 Stanmore Annual Report 2021 (D) REMUNERATION DETAILS The following table details the components of remuneration for KMP of the company, for both the year ended 31 December 2021 and the 6-months to 31 December 2020. Short-term employee benefits Post- employment benefits Cash salary and Fees $ Cash bonus $ Other non- monetary benefits $ Super- annuation $ LTIP $ Total $ – 212,817 540,763 132,689 22,823 142,962 – – – – 327,405 10,440 – – – – – – – – 23,120 13,269 2,177 14,296 – – – 212,817 384,427 1,286,155 – – – 145,958 25,000 157,258 2021 Directors Mr Dwi Suseno1 Mr Jimmy Lim Mr Marcelo Matos Mr Mark Trevan Ms Mary Carroll2 Mr Richard Majlinder Sub-total Directors 1,052,054 327,405 10,440 52,862 384,427 1,827,188 Senior Management Mr Jon Romcke Mr Frederick Kotzee3 Mr Leandro Pires Mr Shane Young4 Sub-total Senior Management Total Director and Senior Management remuneration 353,280 169,749 212,917 337,920 147,615 – 277,944 185,372 13,729 38,997 1,373 – 22,703 15,895 24,789 10,423 211,968 – 168,960 63,333 771,429 267,809 810,986 406,743 1,051,732 633,065 54,099 73,810 444,261 2,256,967 2,103,786 960,470 64,539 126,672 828,688 4,084,155 1. Mr Suseno is a nominee from Golden Investments. Any remuneration in relation to his role as Director of multiple GEAR entities is paid for by GEAR with no apportionment to the Consolidated Entity 2. Ms Carroll resigned, effective 2nd July 2021 3. Mr Kotzee resigned, effective 12 August 2021 4. Mr Young commenced, effective 12 August 2021 26 Directors’ report (CONTINUED)Stanmore Annual Report 2021 (D) REMUNERATION DETAILS (CONTINUED) Short-term employee benefits Post-employment benefits Cash salary and Fees $ Cash bonus $ Other non- monetary benefits $ Super- annuation $ Termination benefits $ Share based payments Cash settled (Rights) $ 2020 Directors Mr Jimmy Lim Mr Marcelo Matos Mr Mark Trevan Ms Mary Carroll Mr Richard Majlinder 32,500 193,067 29,505 24,587 31,963 – 70,667 – – – – 4,768 – – – – 10,626 2,803 2,336 3,037 Sub-total Directors 311,622 70,667 4,768 18,802 Senior Management Mr Jon Romcke Mr Frederick Kotzee Mr Leandro Pires 185,769 167,762 62,192 80,924 31,148 17,852 Mr Craig McCabe 150,329 48,280 Mr Brendan Schilling 60,577 160,558 8,192 17,238 63,674 – 6,226 120,126 452 2,075 – – – 11,681 11,681 4,172 6,103 5,424 10,847 778 Total $ 32,500 279,128 32,308 26,923 35,000 405,859 284,600 330,717 84,668 206,787 183,000 – – – – – – – – – – 99,761 – – – – – – – – – – – 182,667 50,000 467,746 3,976 – 12,946 795,379 259,116 128,879 50,686 286,404 50,000 1,570,464 1,107,001 329,783 133,647 69,488 286,404 50,000 1,976,323 Mr Bernie O’Neill Mr Ian Poole Sub-total Senior Management Total Director and Senior Management remuneration (E) ADDITIONAL STATUTORY INFORMATION (i) Cash bonuses, performance-related bonuses and share-based payments For the financial year ending 31 December 2021, the details of the STIP and LTIP incentives awarded and payable are shown on page 22. Current Rights on issue to KMP (FY21 and FY20) are outlined below: Jon Romcke 145,366 72,683 36,341 36,342 FY20 Rights issued FY20 Rights vested FY20 Rights forfeited Net FY20 Rights Jon Romcke 217,113 108,557 – 108,557 FY19 Rights issued FY19 Rights vested FY19 Rights forfeited Net FY19 Rights 27 Stanmore Annual Report 2021 (E) ADDITIONAL STATUTORY INFORMATION (CONTINUED) (ii) Equity instruments – shareholdings Details of ordinary shares held directly, indirectly or beneficially by KMP and their related parties are as follows. Balance at 1 January 2021 Granted as remuneration Bonus issue Exercise of Rights Net Change Other* Balance FY21 Jon Romcke** 1,104 – – – – 1,104 * ** The net change in shareholding for all KMP relates to the sale of shares on market Shares held directly and beneficially (iii) Equity instruments – options The Consolidated Entity had no Options on issue at 31 December 2021. (iv) Equity instruments – rights Details of Rights held directly, indirectly, or beneficially by KMP and their related parties are as follows: Jon Romcke Opening balance 144,898 Rights issued – Rights vested Rights forfeited Closing balance Vesting FY22* Vesting FY23** – – 144,898 108,556 36,342 * ** Following the on-market takeover by Golden Investments, the Rights granted in FY19 have vested at 50%, with the balance subject to relevant vesting criteria set prior to change of control Following the on-market takeover by Golden Investments, the Rights granted in FY20 have vested at 50%, with 25% lapsed and the remaining 25% to vest subject to relevant vesting criteria set prior to change of control (v) Other transactions with key management personnel There were no transactions with Directors or Director-related entities during the year ended 31 December 2021. (vi) Loans given to key management personnel There were no loans to KMP during the year ended 31 December 2021. End of Remuneration Report INSURANCE OF OFFICERS AND INDEMNITIES (A) INSURANCE OF OFFICERS Each of the Directors and the Company Secretary of Stanmore Resources have entered into a deed whereby the company has provided certain contractual rights of access to books and records of Stanmore Resources to those Directors and the Company Secretary. The company has insured all its Directors and Executive Officers. The contract of insurance prohibits the disclosure of the nature of the liabilities covered and amount of the premium paid. The Corporations Act 2001 does not require disclosure of the information in these circumstances. (B) INDEMNITY OF AUDITORS To the extent permitted by law, the company has agreed to indemnify its auditors, Ernst & Young, as part of its terms of its audit engagement agreement against claims by third parties arising from the audit. The company has made no payment to indemnify Ernst & Young during or since the financial year. 28 Directors’ report (CONTINUED)Stanmore Annual Report 2021 INSURANCE OF OFFICERS AND INDEMNITIES (CONTINUED) SHARES UNDER OPTION At the date of this report, there were nil unissued ordinary shares under Options and 144,898 potential unissued ordinary shares under Rights as follows: (a) 108,556 unlisted Rights vesting subject to various performance hurdles in 2021 or, in the event that no vesting at all occurs, the Rights may be retested vesting in 2022, subject to escalated performance hurdles and other agreed conditions; and (b) 36,342 unlisted Rights vesting subject to various performance hurdles in 2022 or, in the event that no vesting at all occurs, the Rights may be retested vesting in 2023, subject to escalated performance hurdles and other agreed conditions. No Right holder has any right to participate in any other share issue of Stanmore Resources Limited. During the year ended 31 December 2021, there were 270,417,381 fully paid ordinary shares in Stanmore Resources Limited on issue. During the year ended 31 December 2021, no new Rights were granted to KMP as part of the Stanmore Resources Limited Rights Plan, and no Rights were forfeited. During the 6-month period ended 31 December 2020, no Rights were forfeited and none vested. CHANGES TO CAPITAL STRUCTURE At the date of this report, the Consolidated Entity had 270,417,381 ordinary shares (inclusive of 11,040 employee shares), nil unlisted options and 144,898 Rights on issue. EVENTS SINCE THE END OF THE FINANCIAL YEAR No events have occurred since 31 December 2021, other than those disclosed within Note 27. ROUNDING OF AMOUNTS The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument 2016/191, relating to the ‘rounding off’ of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in accordance with the instrument to the nearest thousand dollars unless otherwise stated. DIVIDENDS PAID OR RECOMMENDED No dividend has been declared for the financial year. ENVIRONMENTAL REGULATION The Consolidated Entity is subject to environmental regulation in respect of its operating and exploration activities. There are no material matters that have arisen in relation to environmental issues up to the date of this report. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to 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 part of those proceedings. The company was not a party to any such proceedings during the year. 29 Stanmore Annual Report 2021 Directors’ report (CONTINUED) AUDIT AND NON-AUDIT SERVICES The board of Directors has considered the position and, in accordance with advice received from the audit committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed and approved by the audit committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor, and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. During the year the following fees were paid or payable for non-audit services provided by Ernst & Young, the auditor of the Consolidated Entity: Taxation services Ernst & Young Australian firm: Tax advisory services Total remuneration for taxation services Other services Ernst & Young Australian firm: Transaction due diligence services Total remuneration for other services Total remuneration for non-audit services 6 months to 31 December 2021 $ 2020 $ 146,825 146,825 387,469 387,469 534,294 24,910 24,910 13,940 13,940 38,850 AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 31. CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Stanmore Resources Limited support and have adhered to the principles of corporate governance. Stanmore Resources Limited’s Corporate Governance Statement can be found on the company’s website and ASX platform (www.stanmore.net.au/ corporate-governance). This report is made in accordance with a resolution of Directors. Mr Marcelo Matos Director Brisbane 16/02/2022 30 Stanmore Annual Report 2021 Auditor’s Independence Declaration 31 Stanmore Annual Report 2021A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young111 Eagle StreetBrisbane QLD 4000 AustraliaGPO Box 7878 Brisbane QLD 4001Tel: +61 7 3011 3333Fax: +61 7 3011 3100ey.com/au Auditor’s Independence Declaration to the Directors of Stanmore Resources Limited As lead auditor for the audit of the financial report of Stanmore Resources Limited for the financial year ended 31 December 2021, I declare to the best of my knowledge and belief, there have been: a.No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; b.No contraventions of any applicable code of professional conduct in relation to the audit; and c.No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. This declaration is in respect of Stanmore Resources Limited and the entities it controlled during the financial year. Ernst & Young Tom du Preez Partner 16 February 2022 30 Consolidated statement of profit or loss Revenue from contracts with customers Cost of sales Gross profit/(loss) Other expenses Other income Operating profit/(loss) Finance income Finance costs Finance costs – net Share of net (loss) of joint ventures Profit/(loss) before income tax Income tax (expense)/benefit Profit/(loss) for the year/period Profit/(loss) is attributable to: Note 2 3(b) 3(b) 3(a) 3(c) 3(c) 23(b) 4 6 months to 31 December 2020 $’000 2021 $’000 382,948 136,309 (312,540) (142,928) 70,408 (42,133) 5,226 33,501 1,803 (17,060) (15,257) (2,409) 15,835 (5,422) 10,413 (6,619) (21,671) 11,747 (16,543) 27 (5,438) (5,411) – (21,954) 5,834 (16,120) Owners of Stanmore Resources Limited 10,413 (16,120) Earnings per share for profit/(loss) attributable to the ordinary equity holders of the company: Basic earnings/(loss) per share (cents per share) Diluted earnings/(loss) per share (cents per share) 20 20 Cents Cents 3.9 3.9 (6.0) (6.0) The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes. 32 Stanmore Annual Report 2021 Consolidated statement of comprehensive income Profit/(loss) for the period Other comprehensive income for the year/period Total comprehensive income/(loss) for the year/period Total comprehensive income/(loss) for the period is attributable to: 6 months to 31 December 2020 $’000 (16,120) – (16,120) 2021 $’000 10,413 – 10,413 Owners of Stanmore Resources Limited 10,413 (16,120) The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 33 Stanmore Annual Report 2021 Consolidated statement of financial position Note 2021 $’000 31 December 2020 $’000 5 7 8 12 7 9 10 10 10 11 12 62,859 52,408 11,748 60,742 – 5,041 21,264 67,184 5,599 5,520 187,757 104,608 15,000 64,903 88,758 43,220 21,848 2,015 21,571 257,315 445,072 – 64,819 44,336 41,141 17,298 2,519 20,048 190,161 294,769 ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Current tax receivables Total current assets Non-current assets Trade and other receivables Property, plant and equipment Capitalised development costs Exploration and evaluation Mine properties Intangible assets Other non-current assets Total non-current assets Total assets 34 Stanmore Annual Report 2021 Note 2021 $’000 31 December 2020 $’000 LIABILITIES Current liabilities Trade and other payables Borrowings Lease liabilities Derivative financial instruments Current tax liabilities Employee benefit obligations Provisions Total current liabilities Non-current liabilities Borrowings Lease liabilities Employee benefit obligations Provisions Deferred tax liabilities Total non-current liabilities Total liabilities Net assets EQUITY Issued capital Share based payment reserves Retained earnings 13 14 15 16 18 17 14 15 18 17 4 21 32 Total equity attributable to the owners of Stanmore Resources Limited Total equity The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 83,492 97,075 180 6,121 6,285 2,537 5,659 201,349 6,739 450 54 43,150 30,443 80,836 282,185 162,887 121,747 2,337 38,803 162,887 162,887 40,692 19,421 117 – – 811 9,497 70,538 9,104 612 60 34,231 27,786 71,793 142,331 152,438 121,725 2,323 28,390 152,438 152,438 35 Stanmore Annual Report 2021 Consolidated statement of changes in equity Balance at 1 July 2020 Loss for the period Total comprehensive loss for the period Transactions with owners in their capacity as owners: Share-based payments Balance at 31 December 2020 Balance at 1 January 2021 Profit for the period Total comprehensive profit for the period Transactions with owners in their capacity as owners: Deferred tax recognised directly in equity Share-based payments 21(a) 21(a) Issued capital $’000 Retained earnings $’000 Note Share based payment reserve $’000 Total $’000 121,725 44,510 2,348 168,583 – – – 21(a) (16,120) (16,120) – – (16,120) (16,120) – (25) (25) 121,725 28,390 2,323 152,438 Issued capital $’000 Retained earnings $’000 Note Share based payment reserve $’000 Total $’000 121,725 28,390 2,323 152,438 – – 22 – 22 10,413 10,413 – – – – – – 14 14 10,413 10,413 22 14 36 Balance at 31 December 2021 121,747 38,803 2,337 162,887 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 36 Stanmore Annual Report 2021 Consolidated statement of cash flows Operating activities Receipts from customers GST refunds Payments to suppliers and employees Interest received Interest and other finance costs paid Income tax received/(paid) Net cash inflow (outflow) from operating activities Investing activities Payments for property, plant and equipment Payments for capitalised development, exploration and evaluation assets Payments for mine property assets Payments of vendor royalties Payments for loan receivable principal Payments for refundable security bonds Payment for acquisition of Joint Venture 6 months to 31 December 2020 $’000 2021 $’000 Note 369,953 27,714 116,751 14,827 (257,331) (148,967) 1,803 (23,786) 9,062 127,415 (15,355) (44,422) (1,791) (4,122) (28,950) (41,345) (2,409) 6 17 24 27 (3,030) 4,692 (15,700) (9,996) (3,513) (190) – – – – Net cash (outflow) from investing activities (138,394) (13,699) Financing activities Proceeds from borrowings Repayment of borrowings Benefit of principal lease liability Payments for financial securities Net cash inflow from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at end of year 5(c) 5(a) The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 79,733 (9,297) (116) (1,523) 68,797 57,818 5,041 62,859 19,609 (3,553) 1 (13,861) 2,196 (27,203) 32,244 5,041 37 Stanmore Annual Report 2021 Notes to the financial statements 1. BASIS OF PREPARATION OF FULL YEAR REPORT The financial statements of Stanmore Resources Limited for the reporting period ended 31 December 2021 covers the Consolidated Entity consisting of Stanmore Resources Limited and its subsidiaries as required by the Corporations Act 2001. The group had changed its financial year to 31 December to align with its parent entity. As a result, the results presented in this financial report, which is for a period of 12 months ended 31 December 2021, are not entirely comparable with the comparative period stated, being the 6-month period 1 July 2020 to 31 December 2020. The financial statements are presented in the Australian currency. Stanmore Resources Limited is a company limited by shares, incorporated and domiciled in Australia, whose shares are publicly traded on the Australian Securities Exchange. The principal activities of the Consolidated Entity are the exploration, development, production and sale of metallurgical coal in Queensland, Australia. The consolidated general-purpose financial report of the Consolidated Entity for the period ended 31 December 2021 was authorised for issue in accordance with a resolution of the Directors on 16/02/2022. The Directors have the power to amend and reissue the financial report. The financial report is a general-purpose financial report which: • has been prepared in accordance with the requirements of the Corporations Act 2001, the Australian Accounting Standards, and other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB); • is presented in Australian dollars with all values rounded to the nearest thousand dollars ($’000) unless otherwise stated, in accordance with ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument 2016/191; • adopts all new and amended Accounting Standards and interpretations issued by the AASB that are relevant to the operations of the Consolidated Entity and effective for reporting periods beginning on or after 1 January 2021. Refer to Note 1(i) or further details; and • does not early adopt any Australian Accounting Standards and interpretations that have been issued or amended but are not yet effective, except for those described in Note 1(i)(i) The financial statements have been prepared on a historical cost basis, except for Vendor Royalties – Contingent Consideration and Derivative Financial Instruments which have been measured at fair value. The Consolidated Entity is a for-profit entity for the purposes of Australian Accounting Standards. (A) KEY JUDGEMENTS AND ESTIMATES In the process of applying the Consolidated Entity’s accounting policies, managements has made a number of judgements and applied estimates of future events. Judgements and estimates which are material to the financial report are found in the following notes: Note 2: Revenue Note 10: Capitalised development costs Note 10: Mine properties Note 10: Exploration and evaluation Note 17: Onerous contracts provision Note 17: Rehabilitation provision Note 17: Vendor royalties – contingent consideration Note 32: Share-based payments 38 Page 40 Page 54 Page 56 Page 56 Page 61 Page 61 Page 62 Page 82 Stanmore Annual Report 2021 1. BASIS OF PREPARATION OF FULL YEAR REPORT (CONTINUED) (B) GOING CONCERN As disclosed in the Directors’ report, the group is in the process of transitioning its core mining operations from Isaac Plains and Isaac Plains East during Q1 2022 to Isaac Downs where full scale production is scheduled to commence once the Drag Line has been walked across and initial development activities are completed. In addition to this, the group has also announced the acquisition of 80% of the shares in BMC from BHP which will be funded through a combination of debt and equity. In respect of the BMC transaction, at the date of this report, the group has signed definitive agreements with certain financiers for a US$625 million senior debt facility. As announced by Stanmore Resources Limited on 8 November 2021, the Group is proposing to part fund the balance of the completion payment for the BMC transaction through an entitlement offer. Further details of the proposed entitlement offer are expected to be announced after key conditions precedent for the transaction have been substantially progressed. In respect of the existing operations and transition from Isaac Plains and Isaac Plains East, the Directors have considered projected cash flow information for the 12 months from the date of the approval of these financial statements under multiple scenarios (which includes the ability to slow or defer spending), including conservative pricing forecasts and the group’s access to undrawn working capital facilities as disclosed in Note 14. On 16 February 2022, the group has also extended the GEAR facility maturity date by another year to 30 June 2023. Based on the above, the group is expected to continue to operate within the available cash levels and is confident in its ability to complete the required capital and debt to be raised to continue to fund the ongoing operations and complete the BMC transaction. The company is also in the process of assessing raising further debt to assist with future capital development and has capacity under the ASX Listing Rules to raise further funds through the issue or placement of securities. Accordingly, the financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the ordinary course of business. (C) DEBT FACILITY On 2 July 2021, the Consolidated Entity signed an amendment to increase the available facility under its existing finance facility with its parent entity, GEAR, from US$ 40m to US$70m. The increase in the facility was primarily to ensure the progression of the Isaac Downs project together with the Mavis and Millennium acquisition, as it substantially satisfies the company’s short to medium term debt requirements and allows a seamless transition from Isaac Plains East to Isaac Downs now that the Mining Lease has been obtained. As at 31 December 2021, US$67.6m (A$93.2m) has been drawn down under this facility. (D) COVID-19 These impacts are not significant to the Consolidated Entity and will not negatively impact the financial statements or trigger any significant uncertainties with respect to events or conditions which may adversely impact the Consolidated Entity as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. There is no impact on the going concern of the Consolidated Entity as a result of the above. (E) BASIS OF CONSOLIDATION Subsidiaries are all those entities over which the company has control. The Consolidated Entity controls an entity when the Consolidated Entity is exposed, or has the rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are de-consolidated from the date that control ceases. 39 Stanmore Annual Report 2021 1. BASIS OF PREPARATION OF FULL YEAR REPORT (CONTINUED) (E) BASIS OF CONSOLIDATION (CONTINUED) All intercompany balances and transactions, including unrealised profits arising from intragroup transactions have been eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. The financial statements of subsidiaries are prepared for the same reporting period as the parent, using consistent accounting policies. (F) OTHER ACCOUNTING POLICIES Significant and other accounting policies that summarise the measurement basis used and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. (G) FOREIGN CURRENCY TRANSLATION Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. (H) NOTES TO THE FINANCIAL STATEMENTS The notes include information which is required to understand the financial statements and is material and relevant to the operations, financial position and performance of the Consolidated Entity. Information is considered relevant and material if for example: • the amount in question is significant because of its size or nature; • • it is important for understanding the results of the Consolidated Entity; it helps to explain the impact of significant changes in the Consolidated Entity’s business, for example, acquisitions and impairment write-downs; or • it is related to an aspect of the Consolidated Entity’s operations that is important to its future performance. (I) NEW AND AMENDED STANDARDS AND INTERPRETATIONS ADOPTED BY THE CONSOLIDATED ENTITY The group has applied all the standards and amendments for the first time for their annual reporting period commencing 1 January 2021. These amendments had no impact on the financial statements of the Group. (i) Early adoption of AASB 2020-3 Annual Improvements 2018-2020 and Other Amendments The group has chosen to early adopt AASB 2020-3: Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments, in relation to changes made to AASB 116. As a result, discreet revenues and operating costs of the Isaac Downs Bulk Sample Pit are to be recognised within the consolidated statement of profit or loss. There is no previously measured pre-production revenues that required restatement in the prior period. 2. REVENUE Revenue from contracts with customers Total revenue 40 6 months to 31 December 2020 $’000 136,309 136,309 2021 $’000 382,948 382,948 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 2. REVENUE (CONTINUED) (A) DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS The group recognises revenue from the transfer of goods at a point in time in the following major product lines and geographical regions: Revenue from external customers Metallurgical coal/Asia Metallurgical coal/Europe Thermal coal/Asia Total segment revenue 2021 $’000 31 December 2020 $’000 296,293 58,388 28,267 382,948 121,930 10,725 3,654 136,309 (B) RECOGNITION AND MEASUREMENT Revenue is recognised when the control of the goods is passed to the customer. The amount of revenue recognised is the consideration the Consolidated Entity is entitled to receive in exchange for transferred goods to the customer. (i) Contracts with customers – coal sales General recognition Revenue from the sale of coal is recognised in the profit or loss when performance obligations have been met, which is deemed to be when control of the coal has been transferred from the Consolidated Entity to the customer. Typically, the transfer of control and the recognition of a sale occurs when the coal passes the ship rail when loading at the port, unless the sale is made on stockpile at which point the transfer of control will occur when the sales agreement is exercised. All coal is shipped through the Dalrymple Bay Coal Terminal and all coal sold during the year ended 31 December 2021 was on a contracted ‘free on board’ basis. As is customary with ‘free on board’ contracts, parameters such as coal quality and mass are tested using independent experts and weightometers as the vessel is being loaded. The bill of lading is only issued upon verification and confirmation from several parties involved with the logistic and handling process. Once confirmed, the measured parameters form the basis for calculation of final price on the commercial invoice. All customer contracts specify a known price and tolerance range for quality parameters prior to the Consolidated Entity committing to the supply of coal to the customer. Coking Coal Quarterly Index Linked Price Contracts recognition Coking Coal Sales contracts with Stanmore Resources customers generally contain quarterly pricing provisions as is customary in the coking coal markets. Sales contracts with regular customers are linked to the relevant coking coal index with index adjustments based on the term agreements/relationship, Isaac Plains specific variations to the index benchmark, or other contractual reasons. When the quarterly benchmark prices have not been settled, sales invoices are issued and paid based on the provisional prices from the prior quarters’ agreed index price. These provisional prices are then adjusted when the final quarterly benchmark prices are settled. Where sales volumes have not been fulfilled within the scope of the contract for the previous quarters, the coal sales are at the prior quarters’ price. At the end of the annual contract period, full year carry over tonnes are discussed between the parties and the supply of tonnes can be cancelled or carried over to the next annual contract. Due to the volatility in the coking coal price indices, management reviews the index price at the of the quarter. Coal sales are then adjusted, based on the final index price, which has been agreed with customers. If the price has not yet been signed off on all contracts, management will make judgements on the risks associated with the customer and adjust the provisional price based on the contract. The risk weighted price would then be used rather than the quarterly index price which has not yet been agreed with the customer. 41 Stanmore Annual Report 2021 2. REVENUE (CONTINUED) (B) RECOGNITION AND MEASUREMENT (CONTINUED) (i) Contracts with customers – coal sales (continued) Thermal coal contracts sales Thermal coal sales are not customarily index linked and are settled based on contract prices as agreed and adjusted by the contract terms. Generally, price and adjustments are finalised and final invoiced within a short period of time after the coal is ‘free on board’. Key judgements Where prices are not finalised at the end of a period due to the timing of contractual adjustments, management will make assessments on the adjustments and provide for the expected impact of the contract adjustments. Price adjustments are minimal in comparison to the total invoice and are generally not material in nature. 3. OTHER INCOME AND EXPENSE ITEMS (A) OTHER INCOME 6 months to 31 December 2020 $’000 (36) 1,893 9,665 225 11,747 6 months to 31 December 2020 $’000 83,374 16,551 21,700 9,944 1,213 7,311 2,835 2021 $’000 602 1,191 2,154 1,279 5,226 2021 $’000 164,705 24,602 47,151 36,570 5,128 27,848 6,536 312,540 142,928 Revaluation in rehabilitation provision Onerous contract re-measurement Fair value movement – vendor royalty – contingent consideration Other income Note 17 17 17 (B) BREAKDOWN OF COST OF SALES AND OTHER EXPENSES Mining costs Processing costs Transport and logistics State royalties Private royalties Production overheads Other production costs Total cost of sales 42 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 3. OTHER INCOME AND EXPENSE ITEMS (CONTINUED) (B) BREAKDOWN OF COST OF SALES AND OTHER EXPENSES (CONTINUED) Other expenses Total other expenses Other expenses include the following specific items: Employee benefits expenses Salaries and wages Employee superannuation Share-based payments Total employee benefits expenses Depreciation and amortisation Plant and equipment Mine properties Intangibles Right of use asset 6 months to 31 December 2020 $’000 21,671 21,671 2021 $’000 42,133 42,133 6 months to 31 December 2020 $’000 3,219 185 (35) 3,369 6 months to 31 December 2020 $’000 6,529 7,838 252 63 2021 $’000 6,346 424 14 6,784 2021 $’000 15,135 10,986 504 136 Total depreciation and amortisation 26,761 14,682 Other overhead expenses Short term lease payments Other overhead expenses Total other overhead expenses 6 months to 31 December 2020 $’000 174 3,446 3,620 2021 $’000 221 8,367 8,588 43 Stanmore Annual Report 2021 3. OTHER INCOME AND EXPENSE ITEMS (CONTINUED) (C) FINANCE INCOME AND COSTS Finance income Interest Finance income Finance costs Interest paid – external parties Interest amortisation unwinding Movement in foreign currency, including derivatives Borrowing costs Interest charge – lease liability Finance costs expensed Net finance costs 6 months to 31 December 2020 $’000 27 27 406 1,697 2,408 898 29 5,438 5,411 2021 $’000 1,803 1,803 5,416 1,570 7,534 2,484 56 17,060 15,257 (D) RECOGNITION AND MEASUREMENT (i) Cost of sales Cost of sales are costs incurred directly or indirectly relating to the mining and preparation of coal for sale to third party customers. Costs have been recognised on an accrual basis at the time the sale is recognised, in line with movements through inventory and survey information from site. Refer to Note 18 on page 63. (ii) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be wholly settled within 12 months of the end of the reporting period are recognised in respect of employees’ services rendered up to the end of the reporting period. They are measured at amounts expected to be paid when the liabilities are settled. Expenses for sick leave are recognised when leave is taken and measured at the actual rates paid or payable. Where the group has liabilities that are not expected to be settled wholly within 12 months after the end of the reporting period, such as long service leave, these obligations are measured at the present value of the expected future payments to be made in respect of the services provided by employees up to the end of the reporting period. 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 end of the reporting period of high-quality corporate bonds with terms and currencies that match, as close as possible, the estimated future cash flows. (iii) Leases The leases recognised in Other Expenses relate to short-term lease obligations where the entity has adopted the recognition exemption. Lease payments for short-term leases are charged to profit or loss on a straight-line basis over the term of the lease, net of any incentives. 44 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 4. INCOME TAX EXPENSE (A) INCOME TAX EXPENSE Current income tax (benefit) Prior year adjustments Deferred income tax expense/(benefit) Income tax expense 6 months to 31 December 2020 $’000 (10,372) – 4,538 (5,834) 2021 $’000 9,368 (6,603) 2,657 5,422 (B) NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE Prima facie tax expense (30%) on profit/(loss) before income tax Add tax effect of: Non-deductible expenses Accounting distribution – MetRes Pty Ltd Prior period taxes over/(under) recognised Income tax expense/(benefit) (c) Deferred tax balances The balance comprises temporary differences attributable to: Deductible temporary differences Taxable temporary differences Net deferred tax liabilities Deferred tax assets will only be recognised when: 6 months to 31 December 2020 $’000 (6,586) 3 – 749 (5,834) 2021 $’000 4,751 8 723 (60) 5,422 6 months to 31 December 2020 $’000 2021 $’000 18,815 (49,258) (30,443) 17,981 (45,767) (27,786) • the Consolidated Entity derives future assessable income of a nature of an amount sufficient to enable the losses to be realised; • the Consolidated Entity continues to comply with the conditions of deductibility imposed by the law; and • no changes in tax legislation aversely affect the Consolidated Entity in realising the losses. 45 Stanmore Annual Report 2021 4. INCOME TAX EXPENSE (CONTINUED) (D) RECOGNITION AND MEASUREMENT The income tax expense for the period is the tax payable on the current period’s taxable income based on the national income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for all temporary differences at the tax rates expected to apply when the assets are recovered, or liabilities settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. Exceptions are made for certain temporary differences arising on initial recognition of an asset or a liability if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit. Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries, associates and interests in joint ventures where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances relating to amounts recognised directly in other comprehensive income and equity are also recognised directly in other comprehensive income and equity, respectively. Opening balance $ ‘000 Recognised in profit or loss $ ‘000 7,974 988 (5,306) 4,157 502 (3,814) (129) 3,631 (756) (14,776) (392) (482) (10,373) (1,545) (12,463) 2,245 5,297 129 – 151 14,776 Closing balance $ ‘000 7,582 506 (15,679) 2,612 (32,720) 2,747 1,483 – 3,631 (605) – Deferred tax asset $ ‘000 Deferred tax liability $ ‘000 7,582 506 – 2,612 – 2,747 1,737 – 3,631 – – – – (15,679) – (32,720) – (254) – – (605) – (27,786) (2,657) (30,443) 18,815 (49,258) Exploration and development costs (20,257) 31 December 2021 Provision for rehabilitation Provision for onerous contracts Property, plant and equipment Vendor private royalty Unrealised FX Other Vendor receivable Provision for impairment – exploration and development Rail loop benefit Overburden in advance TOTAL 46 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 4. INCOME TAX EXPENSE (CONTINUED) (D) RECOGNITION AND MEASUREMENT (CONTINUED) Opening balance $ ‘000 Recognised in profit or loss $ ‘000 31 December 2020 Provision for rehabilitation Provision for onerous contracts Property, plant and equipment Vendor private royalty 8,989 1,609 (5,470) 6,795 Exploration and development costs (18,529) Unrealised FX Other Vendor receivable Provision for impairment – exploration and development Rail loop benefit Overburden in advance 426 (2,626) (1,284) 3,631 (832) (15,957) (1,015) (621) 164 (2,638) (1,728) 76 (1,188) 1,155 – 76 1,181 Closing balance $ ‘000 7,974 988 (5,306) 4,157 (20,257) 502 (3,814) (129) 3,631 (756) (14,776) (27,786) Deferred tax asset $ ‘000 Deferred tax liability $ ‘000 7,974 988 – 4,157 – 502 729 – 3,631 – – – – (5,306) – (20,257) – (4,543) (129) – (756) (14,776) 17,981 (45,767) TOTAL (23,248) (4,538) (i) Tax consolidation Stanmore Resources Limited and its wholly owned subsidiaries have formed a tax consolidated group and are taxed as a single entity. Stanmore Resources Limited is the head entity of the tax consolidated group. The stand-alone taxpayer/ separate taxpayer within a group approach has been used to allocate current income tax expense and deferred tax expense to wholly owned subsidiaries that form part of the tax consolidated group. Stanmore Resources Limited has assumed all the current tax liabilities and the deferred tax assets arising from unused tax losses for the tax consolidated group via intercompany receivables and payables as a tax funding arrangement. 5. CASH AND CASH EQUIVALENTS Current assets Cash at bank and in hand 2021 $’000 31 December 2020 $’000 62,859 5,041 (A) RECONCILIATION TO CASH FLOW STATEMENT The above figures reconcile to the amount of cash shown in the consolidated statement of cash flows at the end of the financial year as follows: Balances as above Balances per consolidated statement of cash flows 2021 $’000 62,859 62,859 31 December 2020 $’000 5,041 5,041 47 Stanmore Annual Report 2021 5. CASH AND CASH EQUIVALENTS (CONTINUED) (B) RECOGNITION AND MEASUREMENT For the purposes of the consolidated statement of cash flows, cash and cash equivalents includes (1) cash on hand and at bank; (2) deposits held at call with financial institutions; (3) other short-term, highly liquid investments with original maturities of three months or less; that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts. (C) RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES Chattel mortgage $ ‘000 Lease liabilities $ ‘000 Short- term loan $ ‘000 11,373 – (2,730) – 467 9,110 729 – (116) – 17 630 2,693 – (2,693) – – – Working capital facility $ ‘000 12,983 75,795 Insurance premium funding facility $ ‘000 1,476 3,938 – (3,874) 4,386 – – – Total $ ‘000 29,254 79,733 (9,413) 4,386 484 93,164 1,540 104,444 Net debt as at 1 January 2021 Cash inflows Cash outflows Foreign exchange movements Non-cash changes Net debt as at 31 December 2021 Net debt as at 1 July 2020 12,469 823 – – Chattel mortgage $ ‘000 Lease liabilities $ ‘000 Short- term loan $ ‘000 Working capital facility $ ‘000 Insurance premium funding facility $ ‘000 Total $ ‘000 13,292 19,610 – 3,727 2,693 13,189 – – – (2,251) (3,553) (206) – (95) 2,693 12,983 1,476 29,254 Cash inflows Cash outflows Non-cash changes – (1,302) 206 Net debt as at 31 December 2020 11,373 1 – (95) 729 48 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 6. CASH FLOW INFORMATION (A) CASH GENERATED FROM OPERATIONS Reconciliation of profit/(loss) after income tax to net cash flow from operating activities Profit/(loss) for the period Adjust for non-cash items: Depreciation and amortisation and disposal of fixed assets Non-cash employee benefits expense – share-based payments Loss joint ventures Non-cash movement in onerous contracts Non-cash movement in rehabilitation provisions Non-cash movement in contingent considerations Foreign exchange loss Forward foreign exchange contracts Change in operating assets and liabilities: (Increase)/decrease in trade and other receivables (Increase)/decrease in inventories (Increase)/decrease in prepayments (Increase)/decrease in income taxes receivable (Decrease)/increase in deferred tax liabilities Increase/(decrease) in trade and other payables Increase/(decrease) in provisions for onerous contracts Increase/(decrease) in rehabilitation provisions Increase/(decrease) in contingent considerations Increase/(decrease) in provisions for employee benefits 6 months to 31 December 2020 $’000 2021 $’000 10,413 (16,120) 26,761 14 2,409 (951) (602) (1,028) 4,853 6,121 (17,194) 55,436 (13,798) 11,805 2,679 40,739 (654) (1,307) – 1,719 14,682 (25) – (1,595) 468 (8,508) – – (16,549) 11,680 (2,732) (5,680) 4,538 8,778 (476) (3,851) (284) (26) Net cash inflow/(outflow) from operating activities 127,415 (15,700) Cash flows are included in the consolidated statement of cash flows on a gross basis and the GST components of cash flows arising from investing and financing activities are classified as operating cash flows. 49 Stanmore Annual Report 2021 7. TRADE AND OTHER RECEIVABLES Current Trade receivables at amortised cost GST receivable Other receivables Loans to related parties Non-current Loans to related parties 6 months to 31 December 2020 $’000 2021 $’000 35,783 6,156 233 10,236 52,408 15,000 15,000 19,030 1,957 277 – 21,264 – – During the period, the company provided MetRes Pty Ltd, a 50% owned Joint Venture (see Note 24), with a secured, total finance facility up to A$50m, including a working capital debt facility of A$15m to the Joint Venture to cover initial working capital requirements, and an additional A$35m debt facility as required. The loan is fully secured against the underlying property, plant & equipments, and mine properties of the Joint Venture. A total of $28.95m was drawn as at 31 December 2021, less an offsetting cash prepayment of $3.714m. (A) RECOGNITION AND MEASUREMENT Trade and other receivables are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at Amortised Cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses), together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the Statement of Profit or Loss and Comprehensive Income. Impairment (i) The Consolidated Entity assesses on a forward-looking basis the expected credit loss associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the group applies the simplified approach permitted by AASB 9 which requires expected lifetime losses to be recognised from initial recognition of the receivables. Loans to related parties are assessed using the general approach required by AASB 9 for the assessment of expected credit losses. Management has determined that assessment of expected credit loss associated with trade receivables is immaterial. 50 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 8. INVENTORIES Current assets ROM coal inventories Product coal stocks Overburden in advance 2021 $’000 31 December 2020 $’000 3,423 8,325 – 11,748 3,546 14,385 49,253 67,184 (A) RECOGNITION AND MEASUREMENT Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimate selling price in the ordinary course of business, less the estimate costs of completion and selling expenses. The cost of coal inventories is determined using a direct costing basis. Costs include blasting, overburden removal, coal mining, processing, labour, transport and other costs which are directly related to mining activities at site. Inventories are classified as follows: • overburden in advance material extracted through the pre-strip mining process and includes blasting activities; • run of mine material (ROM) extracted through the mining process and awaiting process at the coal handling and preparation plant; and • product coal which has been processed into final saleable form. Product coal may be held at the site or at port shared stockpile facilities awaiting delivery to customers. (B) INTERPRETATION 20 – STRIPPING COSTS IN THE PRODUCTION PHASE OF A SURFACE MINE In open pit mining operations, overburden and other waste materials must be removed to allow extractions of the coal minerals underneath. Previously, the costs of overburden removal are capitalised separately as Inventory under AASB 102, to the extent that a future benefit from the stripping activity is expected to be realised from future coal extraction. In the current year, Isaac Downs was in development within mining from the bulk sample pit and ongoing development which is scheduled to be completed in the coming months. 51 Stanmore Annual Report 2021 9. PROPERTY, PLANT AND EQUIPMENT Plant and equipment At cost Accumulated depreciation Buildings and improvements At cost Accumulated depreciation Furniture and office equipment At cost Accumulated depreciation Right of use asset At cost Accumulated depreciation Capital work in progress At cost 2021 $’000 31 December 2020 $’000 95,979 (43,885) 52,094 3,141 (856) 2,285 132 (121) 11 735 (223) 512 89,788 (29,020) 60,768 2,366 (587) 1,779 137 (123) 14 718 (87) 631 10,001 10,001 64,903 1,627 1,627 64,819 (A) RECOGNITION AND MEASUREMENT Property, plant and equipment is measured at cost less accumulated depreciation and impairment losses, if any. The cost of fixed assets constructed within the Consolidated Entity includes the cost of materials, direct labour, borrowing costs and an appropriate portion of fixed and variable costs. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, only when it is probable that future economic benefits associated with the item will flow to the Consolidated Entity and the cost of the item can be measured reliably. 52 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) (A) RECOGNITION AND MEASUREMENT (CONTINUED) (i) Movements in carrying amounts Year ended 31 December 2021 Opening net book amount Additions Transfers Depreciation charge Closing net book amount Plant and equipment $’000 Buildings and improvements $’000 Furniture and office equipment $’000 Right of use asset $’000 Capital work in progress $’000 Total $’000 60,768 – 6,184 (14,858) 52,094 1,779 – 775 (269) 2,285 14 – 5 (8) 11 631 17 – (136) 512 1,627 64,819 15,338 15,355 (6,964) – – (15,271) 10,001 64,903 Period ended 31 December 2020 Plant and equipment $’000 Buildings and improvements $’000 Furniture and office equipment $’000 Right of use asset $’000 Capital work in progress $’000 Opening net book amount 54,976 1,583 Additions Disposals Transfers Depreciation charge Closing net book amount – – 12,227 (6,435) 60,768 – – 289 (93) 1,779 15 – – – (1) 14 788 – (94) – (63) 631 Total $’000 62,891 8,614 (94) – 5,529 8,614 – (12,516) – (6,592) 1,627 64,819 (ii) Revaluation, depreciation methods and useful lives The carrying amount of all non-mining property fixed assets, except land, is depreciated over their useful life from the time the asset is held ready for use. Property, plant and equipment are depreciated on a units of production basis over the life of the economically recoverable resources. The base for the units of production is drawn from the assets principal use. Items that are specific to open cut operations are depreciated over the run of mine open cut coal reserves. Surface infrastructure that is not specific to a mining method such as the was plant and loadout facilities utilise the Economically Recoverable Resources of Isaac Plains Complex, which includes an estimate of recoverable underground coal reserves. The depreciation rates used for each class of assets are: • Plant and equipment 5-25% straight line/units of production • Furniture and office equipment 5-25% straight line • Buildings and improvements 5-10% straight line • Right-of-use asset 18% straight line The group assesses at each reporting date whether there is an indication that an asset (or Cash Generating Unit – CGU) may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the group estimates the asset’s or CGU’s recoverable amount. The recoverable amount is the higher of an asset’s or CGU’s Fair Value Less Cost of Disposal and its Value in Use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the asset is tested as part of a larger CGU to which it belongs. If the carrying amount of an asset or CGU exceeds its recoverable amount, the asset/CGU is considered impaired and is written down to its recoverable amount. 53 Stanmore Annual Report 2021 9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) (A) RECOGNITION AND MEASUREMENT (CONTINUED) (ii) Revaluation, depreciation methods and useful lives (continued) The group bases its impairment calculation on detailed budgets and forecasts which are prepared separately for each of the group’s CGUs to which the individual assets are allocated, based on the life-of-mine plans. The estimated cash flows are based on expected future production, metal selling prices, operating costs and forecast capital expenditure. As part of the Group’s impairment assessment, the Group considers the expected future demand for its product, impact of known climate policies and potential policy responses to climate change. Based on the Group’s research, demand for its product will continue over the life of the CGU. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period which they arise. (iii) Right-of-use asset At the inception of a contract, the Consolidated Entity assesses whether a contract contains a lease based on whether the contract conveys the right to use or control the use of an identified asset for a period of time in exchange for consideration. At the commencement date of the lease, the Consolidated Entity recognises a lease liability and a corresponding right-of- use asset. The lease liability is initially recognised at present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, and are discounted using the interest rate determined using the lessee’s incremental borrowing rate. The right-of-use asset is initially measured at cost which includes any direct costs, and subsequently measured at costs less any depreciation and impairment. The right-of-use asset is depreciated to the earlier of the useful life of the asset or the lease term using the straight-line method and is recognised in the Statement of Profit or Loss in depreciation and amortisation. The unwind of the financial charge on the lease liability is recognised in the Statement of Profit or Loss in financial expenses based on the lessee’s incremental borrowing rate. 10. CAPITALISED DEVELOPMENT, EXPLORATION AND MINE PROPERTIES Capitalised development costs Cost Exploration and evaluation assets Cost Accumulated impairment Mine properties Cost Accumulated depreciation 54 2021 $’000 31 December 2020 $’000 88,758 88,758 55,325 (12,105) 43,220 64,164 (42,316) 21,848 153,826 44,336 44,336 53,246 (12,105) 41,141 48,627 (31,329) 17,298 102,775 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 10. CAPITALISED DEVELOPMENT, EXPLORATION AND MINE PROPERTIES (CONTINUED) Year ended 31 December 2021 Opening net book amount Additions Depreciation charge Closing net book amount Period ended 31 December 2020 Opening net book amount Transfers Additions Depreciation charge Provision for impairment Closing net book amount Capitalised development costs $’000 Exploration and evaluation assets $’000 Mine properties $’000 44,336 44,422 – 88,758 41,141 2,079 – 43,220 17,298 15,536 (10,986) 21,848 Capitalised development costs $’000 Exploration and evaluation assets $’000 Mine properties $’000 Total $’000 102,775 62,037 (10,986) 153,826 Total $’000 314 43,550 472 – – 44,336 93,075 (43,550) 3,721 – (12,105) 41,141 24,946 118,335 – 190 (7,838) – 17,298 – 4,383 (7,838) (12,105) 102,775 (A) RECOGNITION AND MEASUREMENT – CAPITALISED DEVELOPMENT Capitalised Development expenditure includes costs transferred from Exploration and Evaluation when the Consolidated Entity can demonstrate: • the technical feasibility of completing the intangible asset so that it will be available for use or sale; • its intention to complete and its ability to use or sell the asset; • how the asset will generate future economic benefits; • the availability of resources to complete the asset; and • the ability to measure reliably the expenditure during development. Following recognition, the asset is carried at cost less any accumulated impairment losses. Once the development phase is complete and production begins, the costs are transferred from Capitalised Development Costs to Mine Properties where they are amortised over the life of the development project. (i) Key judgements Initial capitalisation of costs is based on management’s judgement that technical and economic feasibility is confirmed. In determining the amounts to be capitalised, management makes assumptions regarding the expected future cash generating potential of the project, discount rates to be applied and the expected period of which cash flows are expected to be received. In respect of the development costs incurred at Isaac Downs, full scale production is set to commence upon completion of the development in the first quarter of 2022, and once the dragline has been walked across costs would be reclassified to Mine properties and amortisation will commence. As at 31 December 2021, the carrying amount of Capitalised Development costs was $88.758m (31 December 2020: $44.336m). 55 Stanmore Annual Report 2021 10. CAPITALISED DEVELOPMENT, EXPLORATION AND MINE PROPERTIES (CONTINUED) (B) RECOGNITION AND MEASUREMENT – EXPLORATION AND EVALUATION Exploration and evaluation expenditure incurred is capitalised on an area of interest basis. Such expenditures comprise net direct costs and an appropriate portion of related overhead expenditure. These costs are carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable resources and active or significant operations in relation to the area are continuing. A regular review is undertaken on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Accumulated costs in relation to an abandoned area are written off against profit in the period in which the decision to abandon the area is made. Where an uncertainty exists for further exploration of the area, a provision is raised for the costs of exploration. When the technical feasibility and commercial viability is demonstrated, the accumulated costs for the relevant area of interest are transferred to capitalised development costs. (i) Key judgements The Consolidated Entity performs impairment testing on specific exploration assets as required in AASB 6 para. 20. The accumulated impairment on these exploration and evaluation assets remained unchanged at $12.105m. (C) RECOGNITION AND MEASUREMENT – MINE PROPERTIES Mining property assets include costs transferred from Capitalised Development following start of production, and the rehabilitation asset capitalised to offset rehabilitation provisions when disturbance occurs. Following transfer from Capitalised Development, all subsequent development costs are capitalised to the extent that commercial viability conditions continue to be satisfied. The costs associated with mine properties are amortised based on a units of production method. (i) Key judgements Due to the expectation that saleable coal will be produced as a result of the initial mine development, management judgement is required in relation to when a mine is considered to have started production, and therefore transferred to Mine Properties and depreciated. As a result of this exercise, no costs have been transferred during the financial year. The Consolidated Entity assesses at the end of each period whether there are any impairment indicators in relation to Mine Property assets. As a result of this assessment, no impairment indicators were noted for this financial year. 11. INTANGIBLE ASSETS Infrastructure intangible asset Gross value Year ended 31 December 2021 Opening net book amount Amortisation charge Closing net book amount 56 2021 $’000 31 December 2020 $’000 2,015 2,519 Infrastructure $’000 2,519 (504) 2,015 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 11. INTANGIBLE ASSETS (CONTINUED) Period ended 31 December 2020 Opening net book amount Amortisation charge Closing net book amount Infrastructure $’000 2,771 (252) 2,519 (A) IMPAIRMENT OF INTANGIBLE ASSETS At the end of each reporting period, the Consolidated Entity assesses whether there is any indication that individual assets are impaired. Where impairment indicators exist, recoverable amount is determined, and impairment losses are recognised in profit or loss where the asset’s carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of 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. Where it is not possible to estimate recoverable amount for an individual asset, the Consolidated Entity estimates the recoverable amount of the CGU to which the asset belongs. (B) INTANGIBLE ASSETS The intangible asset relates to future rebates on the cost of coal railings based on an agreement with the below rail infrastructure owner. Receipts of coal railing rebates are recognised in profit or loss as a credit against the cost incurred. The estimated useful life of the asset is aligned with the term of the contractual agreement and is amortised on a straight-line basis in accordance with the anticipated profile of benefits received. 12. OTHER ASSETS Other current assets Prepayments BMC Deposit Other non-current assets Term deposits Security bonds Other 2021 $’000 31 December 2020 $’000 19,397 41,345 60,742 3,710 15,915 1,946 21,571 5,599 – 5,599 3,711 14,391 1,946 20,048 (A) RECOGNITION AND MEASUREMENT Other current assets related to BMC deposits and operational costs paid in advance of the period to which the Consolidated Entity will receive the benefit from those goods and services. Non-current assets relate to cash security bond payments made to key operational suppliers, and term deposits with the Consolidated Entity’s banking provider which are secured against the Consolidated Entity’s bank guarantee facilities. The increase in the period is due to the Consolidated Entity making a deposit payment of US$30m (A$41.345m) in relation to the recently announced acquisition of 80% of the BMC joint venture from BHP, as well as $12.845m of financing fees prepaid in relation to the US$625m BMC financing loan. 57 Stanmore Annual Report 2021 13. TRADE AND OTHER PAYABLES Current liabilities Trade and other payables Statutory liabilities 2021 $’000 31 December 2020 $’000 83,389 103 83,492 40,588 104 40,692 (A) RECOGNITION AND MEASUREMENT Trade and other payables represent liabilities for goods and services provided to the Consolidated Entity prior to the period end and which are unpaid. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. No assets of the Consolidated Entity have been pledged as security for the trade and other payables. 14. INTEREST BEARING LOANS AND BORROWINGS Chattel Mortgage Revolving facility Short-term loan Insurance premium funding 2021 31 December 2020 Current $’000 Non-current $’000 Total $’000 Current $’000 Non-current $’000 Total $’000 2,371 93,164 – 1,540 6,739 9,110 2,269 9,104 11,373 – – – 93,164 12,983 – 1,540 2,693 1,476 – – – 12,983 2,693 1,476 Total interest-bearing loans and borrowings 97,075 6,739 103,814 19,421 9,104 28,525 (A) FINANCING ARRANGEMENTS The following table details the group’s financing facilities, available and used: 2021 $’000 31 December 2020 $’000 5,354 (3,588) 1,766 96,472 (93,164) 3,308 5,284 (3,588) 1,696 51,935 (12,983) 38,952 Facility A – Bank guarantee facility – NAB Facility A – Total available facility Facility A – Facility utilised Available facility Facility B – Revolving facility – GEAR Facility B – Total available facility Facility B – Facility utilised Available facility 58 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 14. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED) (A) FINANCING ARRANGEMENTS (CONTINUED) Facility C – Chattel mortgage – 6060 Facility C – Total loan amount Facility C – Loan balance outstanding Facility C – Total loan Facility D – Short team loan Facility D – Total loan amount Facility D – Loan balance outstanding Facility D – Total loan Facility E – Insurance and premium funding Facility E – Total funding amount Facility E – Funding balance outstanding utilised Facility E – Total funding 2021 $’000 31 December 2020 $’000 13,684 9,111 9,111 – – – 3,938 1,540 1,540 13,684 11,373 11,373 2,693 2,693 2,693 3,727 1,476 1,476 (B) RECOGNITION AND MEASUREMENT Interest bearing liabilities are initially recognised at fair value, net of any transaction costs incurred. They are subsequently measured at amortised cost using the effective interest method. The Consolidated Entity has an arrangement for a $5m bank guarantee facility with its existing financial services provider (Facility A). The Consolidated Entity has also a finance facility with GEAR in respect to a US$70m secured loan facility (Facility B). The key terms of the US$70m facility are: • US$70m facility until 30 June 2022; • upfront commitment fee of 2.0%; • • interest rate on drawn funds of 8.0% per annum; and interest rate on undrawn funds of 2.0% per annum. As at 31 December 2021, US$67.6m (A$93.164m) has been drawn down under this facility (31 December 2020: US$10m, A$12.983m). In 2019, the Consolidated Entity entered into an equipment loan facility (Facility C) with Caterpillar Financial Australia Limited to acquire a 600-tonne excavator from Hastings Deering (Australia) Limited. The term of the loan facility is five years and the Consolidated Entity pays 4.55% p.a. fixed interest on the Chattel Mortgage facility to Caterpillar Financial Australia Limited, who subsequently holds security over the excavator. The Chattel Mortgage facility is denominated in A$. During the prior period, the Consolidated Entity entered into a short-term loan agreement for $2.693m (Facility D) with a related party. The loan was undertaken under market conditions and was repaid in full on 4 January 2021. The Consolidated Entity enters into short-term agreements to access financing for the annual insurance premiums. The facility is fully repaid in during the relevant insurance periods (Facility E). 59 Stanmore Annual Report 2021 15. LEASE LIABILITY Lease liabilities current Lease liabilities non-current Total lease liability 2021 $’000 31 December 2020 $’000 180 450 630 117 612 729 (A) RECOGNITION AND MEASUREMENT The lease liability recognised relates to property leases recognised under AASB 16 Leases. Refer to Note 9 on page 52 for the recognition and measurement policy for lease liabilities. Reconciliation of movements Opening balance Depletions through settlement Remeasurement against right-of-use asset Unwinding discount Closing balance 16. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments Total derivative financial instruments 2021 $’000 31 December 2020 $’000 729 (172) 17 56 630 823 (29) (94) 29 729 2021 $’000 6,121 6,121 31 December 2020 $’000 – – (A) RECOGNITION AND MEASUREMENT Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. 17. PROVISIONS Onerous contracts provision Rehabilitation provision Vendor Royalties – Contingent consideration 2021 31 December 2020 Current $’000 Non-current $’000 Total $’000 Current $’000 Non-current $’000 Total $’000 395 2,559 2,705 5,659 1,291 1,686 35,856 38,415 6,003 8,708 43,150 48,809 615 1,868 7,014 9,497 2,676 3,291 24,711 26,579 6,844 13,858 34,231 43,728 60 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 17. PROVISIONS (CONTINUED) (A) RECONCILIATION OF MOVEMENTS Movements in each class of current provision during the financial year, other than employee benefits, are set out below: 2021 Opening balance Additions – current period disturbance Adjustments through remeasurement Depletions through settlement Unwinding of discount via profit and loss Closing balance 2020 Opening balance Additions – current period disturbance Adjustments through remeasurement Depletions through settlement Unwinding of discount via profit and loss Closing balance Onerous contracts provision $’000 Rehabilitation provision $’000 3,291 – (1,191) (654) 240 1,686 26,579 13,745 (602) (1,650) 343 38,415 Vendor Royalties $’000 13,858 – (2,154) (4,122) 1,126 8,708 Onerous contracts provision $’000 Rehabilitation provision $’000 Vendor Royalties $’000 5,362 – (1,893) (476) 298 3,291 29,962 190 36 (3,851) 242 26,579 22,650 – (9,665) (284) 1,157 13,858 Total $’000 43,728 13,745 (3,947) (6,426) 1,709 48,809 Total $’000 57,974 190 (11,522) (4,611) 1,697 43,728 (B) ONEROUS CONTRACTS PROVISION (i) Recognition and measurement The Consolidated Entity assesses onerous contracts at each reporting date by evaluating conditions specific to each contract and the current business plan. Where a contract provides capacity above that required to meet the business plan or for a longer period than the current extent of the business plan, the contract is deemed onerous and the onerous portion of the contract is recognised as a liability using an estimate of future onerous cash flows discounted to a net present value. Any re-measurement of the assessed level of onerous contracts is taken through profit or loss in the period in which the assessment is made. During the year ended 31 December 2021 a total of $654,000 of onerous contracts were settled through payment, with the unwinding of the discount being $240,000 and $1.191m through consolidated statement of profit or loss for re-measurement. (C) REHABILITATION PROVISION (i) Recognition and measurement The provision for rehabilitation closure costs relates to areas disturbed during the operation of the mine up to reporting date and not yet rehabilitated. Provision has been made to rehabilitate all areas of disturbance including surface infrastructure, contouring, topsoiling and revegetation, using internal and external expert assessment of each aspect to calculate am anticipated cash outflow discounted to a net present value. At each reporting date, the rehabilitation liability is re-measured in line with the then-current level of disturbance, cost estimates and other key inputs. The amount of provision relating to rehabilitation of areas caused by mining disturbance is capitalised against Mine Properties as incurred, to the extent there is a future economic benefit, otherwise the re-measurement is recognised in the profit or loss. Any unwinding discounting is recognised in the profit or loss. 61 Stanmore Annual Report 2021 17. PROVISIONS (CONTINUED) (C) REHABILITATION PROVISION (CONTINUED) (i) Recognition and measurement (continued) The Consolidated Entity assesses rehabilitation liabilities at each reporting date as there are numerous factors that may affect the ultimate liability payable. This includes the extent and nature of rehabilitation activity to be undertaken, changes in technology and techniques, changes in discount rates and regulatory impacts. There may be differences between the future actual expenditure and the assessment made at balance date. The provisions at balance date represent management’s best estimate of the present value of rehabilitation cost to completely rehabilitate the site. During the year ended 31 December 2021, a decrease in the rehabilitation provision of $1.650m was recognised due to the rehabilitation works completed at Isaac Plains Complex (31 December 2020: $3.851m). Clearing has continued in line with mining operations of $13.745m. A corresponding asset is recognised in Mine Properties. The discount rate used in the calculation of the provision at 31 December 2021 equalled 1.81% (31 December 2020: 0.98%). (D) VENDOR ROYALTIES – CONTINGENT CONSIDERATION (i) Recognition and measurement During the business combination of Isaac Plains in 2015, AASB 3 Business Combination required the recognition of contingent consideration. The contingent consideration relates to a royalty stream payable to the vendors of Isaac Plains in the event that benchmark Hard Coking Coal prices are above an Australia Dollar equivalent of 160 (adjusted for CPI) and coal is produced and from either Isaac Plains or Isaac Plains East. Each royalty is capped at predetermined amount for each vendor. Once the price threshold and production requirements are met, the royalty is payable at $2 per product tonne (2015 dollars) to each of the two vendors of Isaac Plains. As part of the historical acquisition of the Isaac Downs mining rights, a royalty stream is payable to the vendors in the event that benchmark Hard Coking Coal prices are above an Australia Dollar equivalent of 170 (adjusted for CPI) and coal is produced from Isaac Downs mining area. The royalty is capped at a predetermined amount, and once the price threshold and production requirements are met, the royalty is payable at $1 per product tonne (2018 dollars) to the vendor. Royalties across all royalty streams were paid during the year ended 31 December 2021 to the vendors and, as a result, the remaining cap is $17.2m. (ii) Key judgements and estimates The valuation above was performed using a discounted cash flow methodology which was consistent with that used in the previous financial year. The method used is classed as a level 3 valuation under AASB 13. The following key unobservable inputs are used in its calculation: • Hard Coking Coal price curve based on a compilation of short-term (12 months) price from the Group’s coal marketing agent M Resources Pty Ltd, and long-term estimates by Wood McKenzie; • A$/US$ foreign exchange forward curve estimates are based on market consensus curves; and • Coal sales based on the current mining plans of the Isaac Plains Complex, including the Isaac Plains mine, the Isaac Plains East mine (commenced July 2018), and the Isaac Downs mine. As considered in AASB 13 para 93(h)(i), the following unobservable inputs contain sensitivities that would result in significant changes to the market valuation. Interactions between the sensitivities in the coking coal price and the US$/A$ foreign exchange rate. As the coal commodity is currently traded in US$, the interaction between the index price and the foreign exchange rate could both magnify and mitigate each other depending on the timing and direction of movements of both indexes. 62 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 17. PROVISIONS (CONTINUED) (D) VENDOR ROYALTIES – CONTINGENT CONSIDERATION (CONTINUED) A matrix is shown below of changes in the Hard Coking Coal index and the A$/US$ exchange rate. The numbers are shown in millions and the highlighted number in blue is the current valuation: e v r u c x e d n I X F +10% +5% Current –5% –10% +10% 8.708 8.708 8.708 8.708 8.708 Hard Coking Coal Index curve +5% 8.708 8.708 8.708 8.708 8.708 Current 7.289 8.708 8.708 8.708 8.708 Below shows the previous matrix as a percentage change in value: e v r u c x e d n I X F +10% +5% Current –5% –10% Hard Coking Coal Index curve +10% +5% – – – – – – – – – – Current –16.3% – – – – –5% 3.334 7.289 8.708 8.708 8.708 –5% –61.7% –16.3% – – – –10% 3.334 3.334 6.763 8.708 8.708 –10% –61.7% –61.7% –22.3% – – (E) OTHER PROVISIONS Provisions for legal claims, service warranties and make good obligation are recognised when the Consolidated Entity has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation, and the amount can be reliably estimated. 18. PROVISION FOR EMPLOYEE BENEFITS 2021 31 December 2020 Current $’000 Non-current $’000 Total $’000 Current $’000 Non-current $’000 Total $’000 431 1,812 294 2,537 – – 54 54 431 1,812 348 2,591 217 300 294 811 – – 60 60 217 300 354 871 Provision for annual leave Provision for STI bonus Provision for long service leave Total employee benefit obligations (A) RECOGNITION AND MEASUREMENT Refer to Note 3(d)(ii) for accounting policies. 63 Stanmore Annual Report 2021 19. DIVIDENDS AND FRANKING CREDITS (A) DIVIDENDS (i) Ordinary shares Dividends provided for or paid during the year (ii) Dividends not recognised at the end of the reporting period No dividend proposed for 31 December 2021 (B) FRANKED CREDITS Franking credits available for subsequent reporting periods based on a tax rate of 30.0% (2021 – 30.0%) 20. EARNINGS PER SHARE (A) BASIC EARNINGS PER SHARE Basic earnings per share (cents) 6 months to 31 December 2020 $’000 – 2021 $’000 – 6 months to 31 December 2020 $’000 – 2021 $’000 – Consolidated entity 6 months to 31 December 2020 $’000 2021 $’000 2,693 7,539 2021 $’000 3.9 31 December 2020 $’000 (6.0) Basic earnings per share is calculated by dividing the profit attributable to the owners of Stanmore Resources Limited by the weighted average number of ordinary shares outstanding during the financial period. (B) DILUTED EARNINGS PER SHARE Diluted earnings per share (cents) 6 months to 31 December 2020 $’000 (6.0) 2021 Cents 3.9 Earnings used to calculate diluted earnings per share are calculated by adjusting the amount used in determining basic earnings per share by the after-tax effect of dividends and interest associated with dilutive potential ordinary shares. The weighted average number of shares used is adjusted for the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive ordinary shares. 64 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 20. EARNINGS PER SHARE (CONTINUED) (C) WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Earnings per share 6 months to 31 December 2020 Number 2021 Number 270,417,000 270,417,000 Weighted average number of long-term incentive rights issued 145,000 145,000 Weighted average number of ordinary and potential ordinary shares used as the denominator in calculating diluted earnings per share 270,562,000 270,562,000 21. EQUITY SECURITIES ISSUED (A) SHARE CAPITAL Ordinary shares Fully paid (i) Movements in ordinary shares: Details Opening balance 1 July 2020 Balance 31 December 2020 Opening balance 1 January 2021 Balance 31 December 2021 6 months to 31 December 2020 Shares 2021 Shares 270,417,381 270,417,381 270,417,381 270,417,381 2021 $’000 121,725 121,725 Number of shares (thousands) 270,417 270,417 270,417 270,417 6 months to 31 December 2020 $’000 121,725 121,725 Total $’000 121,725 121,725 121,725 121,725 Ordinary shares participate in dividends and the proceeds on winding up of the Consolidated Entity in proportion to the number of shares held. At shareholders’ meetings, each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. Ordinary shares have no par value and Stanmore Resources Limited does not have a limited amount of authorised capital. The shares issued as part of the Employee shares issued are subject to a trading lock of three years, or until such time as the employee resigns from the Consolidated Entity – these are referred to as deferred shares. As at 31 December 2021, 11,040 deferred shares were still subject to trading lock. Excluding 11,040 deferred shares, there are 270,404,133 tradable shares. The difference between the original issued shares under the Employee shares relate to employees that have left the Consolidated Entity and had the holding lock removed from their shares. (ii) Options As at 31 December 2021, no options were held by or issued to employees of the Consolidated Entity (31 December 2020: nil). 65 Stanmore Annual Report 2021 21. EQUITY SECURITIES ISSUED (CONTINUED) (A) SHARE CAPITAL (CONTINUED) (iii) Rights issue All rights on issue at 31 December 2021 are shown below: No. of shares 108,556 36,342 Exercise price End of measurement period Conditions Nil Nil 30 June 2021 30 June 2022 Share price targets based on ASTR CAGR in FY20. If no vesting occurs in FY21, then retest in FY22. See note 30 for further details. Share price targets based on ASTR CAGR in FY21. If no vesting occurs in FY22, then retest in FY23. See note 30 for further details. (B) CAPITAL MANAGEMENT The capital of the Consolidated Entity is managed to provide capital growth to shareholders and ensure the Consolidated Entity can fund its operations and continue as a going concern. The Consolidated Entity’s capital comprises equity as shown in the consolidated statement of financial position. There are no externally imposed capital requirements. Management oversees the Consolidated Entity’s capital by assessing the financial risks and adjusting its capital structure in response to changes in these risks and the market. These responses include the management of share issues and debt. There have been no changes in the strategy adopted by management to control the capital of the Consolidated Entity since the prior period. (C) RECOGNITION AND MEASUREMENT Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. 22. FINANCIAL RISK MANAGEMENT In common with all other businesses, the Consolidated Entity is exposed to risks that arise from its use of financial instruments. This note describes the Consolidated Entity’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Consolidated Entity’s exposure to financial instruments. The Consolidated Entity’s financial instruments consist mainly of deposits with banks, trade and other receivables, security deposits, trade and other payables, borrowings, and Vendor Royalty – Contingent Consideration. The Board has overall responsibility for the determination of the Consolidated Entity’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Consolidated Entity’s finance function. The Consolidated Entity’s risk management policies and objectives are therefore designed to minimise the potential impacts to these risks on the results of the Consolidated Entity where such impacts may be material. The overall objective of the Board is to set policies that seek to reduce risk as possible without unduly affecting the Consolidated Entity’s competitiveness and flexibility. Further details regarding these policies are set out below. 66 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 22. FINANCIAL RISK MANAGEMENT (CONTINUED) (A) CREDIT RISK Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation, resulting in the Consolidated Entity incurring a financial loss. This usually occurs when debtors fail to settle their obligations owing to the Consolidated Entity. The Consolidated Entity’s objective is to minimise the risk of loss from credit risk exposure. The Consolidated Entity’s maximum exposure to credit risk at the end of the reporting period, without taking into account the value of any collateral or other security, in the event other parties fail to perform their obligations under financial instruments in relation to each class of recognised financial asset at reporting date, is as follows: Cash and cash equivalents Term deposits Trade and other receivables Security bonds Loans to related parties Credit risk exposure 2021 $’000 62,859 3,710 52,408 15,915 28,950 2020 $’000 5,041 3,711 21,264 14,391 – 163,842 44,407 Credit risk is reviewed regularly by the Board and the Audit and Risk Management Committee. The Consolidated Entity’s credit risk exposure is influenced by mainly by the individual characteristics of each customer. Given the Consolidated Entity trades predominately with recognised, credit worthy third parties, the credit risk is determined to be low. The group assessed the expected credit losses in relation to trade and other receivables in the current and prior years to be immaterial and no low allowance has been recorded. Bank deposits are held with the National Australia Bank Limited. The National Australia Bank has a long-term credit rating with rating agency S&P of AA-. (B) LIQUIDITY RISK Liquidity risk is the risk that the Consolidated Entity may encounter difficulties raising funds to meet financial obligations as they fall due. The objective of managing liquidity risk is to ensure that the Consolidated Entity will always have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed conditions. Liquidity risk is reviewed regularly by the Board and the Audit and Risk Management Committee. The Consolidated Entity manages liquidity risk by monitoring forecast cash flows and liquidity ratios such as working capital. The Consolidated Entity’s working capital, being current assets less current liabilities, has decreased from $34.070m at 31 December 2020 to $(13.592)m at 31 December 2021, primarily due to the presentation of the Group’s finance facility being presented within current liabilities. 67 Stanmore Annual Report 2021 22. FINANCIAL RISK MANAGEMENT (CONTINUED) (B) LIQUIDITY RISK (CONTINUED) (i) Maturities of financial liabilities The tables below analyse the group’s financial liabilities into relevant maturity groupings based on their contractual maturities: 31 December 2021 Financial liabilities Trade payables Other payables Lease liabilities Contingent consideration – vendor royalties payable Chattel mortgage Revolving facility Short term loan Insurance premium funding Derivative financial instruments Carrying amount $’000 Contractual cash flows $’000 Less than 6 months $’000 Between 6 and 12 months $’000 Between 1 and 3 years $’000 Over 3 years $’000 90,446 90,446 90,446 107 630 8,708 9,110 93,164 – 1,540 6,121 107 737 10,890 9,839 93,164 – 1,599 6,121 107 89 2,001 1,365 – – 1,599 6,121 – – 91 1,230 1,365 93,164 – – – – – 386 4,890 5,461 – – – – – – 171 2,769 1,647 – – – – Total financial liabilities 209,826 212,903 101,728 95,850 10,737 4,587 31 December 2020 Financial liabilities Trade payables Other payables Lease liabilities Contingent consideration – vendor royalties payable Chattel mortgage Revolving facility Short term loan Insurance premium funding Carrying amount $’000 Contractual cash flows $’000 Less than 6 months $’000 Between 6 and 12 months $’000 Between 1 and 3 years $’000 Over 3 years $’000 40,588 40,588 40,588 104 729 13,858 11,373 12,983 2,693 1,476 104 909 14,946 12,569 12,983 2,707 1,491 104 85 3,716 1,365 – 2,707 1,491 – – 87 3,667 1,365 12,983 – – – – – – 369 368 4,046 5,461 3,517 4,378 – – – – – – Total financial liabilities 83,804 86,297 50,056 18,102 9,876 8,263 Further information regarding commitments is included in Note 25 on page 76. 68 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 22. FINANCIAL RISK MANAGEMENT (CONTINUED) (C) CURRENCY RISK The Australian dollar (A$) is the functional currency of the Consolidated Entity and, as a result, currency exposure arises from transactions and balances in currencies other than the A$. The Consolidated Entity’s potential currency exposures comprise: (i) Coal sales denominated in US$ Coal sales for export coal are denominated in US$. The Consolidated Entity is therefore exposed to volatility in the US$:A$ exchange rates. The Consolidated Entity generally aligns all coking coal prices to relevant coking coal indexes, while thermal coal sales are generally sold on the spot market via negotiation with relevant counter parties. The Consolidated Entity does not use any derivative products to mitigate fluctuations in the relevant coal price indexes. (ii) Revolving finance facility On 2 July 2021, the Consolidated Entity signed an amendment to increase the available facility under its existing finance facility with its parent entity, GEAR, from US$ 40m to US$70m, with US$67.6m (A$93.164m) drawn down as at 31 December 2021. As noted above, the Consolidated Entity coal sales are denominated in US$, which provides a natural economic hedge in relation to adverse foreign currency movements that affect the drawn down facility position, and the current policy is not to hedge foreign exchange risk. (iii) Expenses denominated in currencies other than A$ Currently, the exposure to such expenses is minimal, but it is noted that equipment parts and other mine related expenditure can be in various foreign currencies. When entering major transactions in foreign currencies, it is the policy of the Consolidated Entity to assess the currency risk of the transaction and review derivative products or other methods to offset this risk. Where appropriate, these products would be used but no such transactions occurred in current or prior financial years. As at 31 December 2021, the effect on profit or loss as a result of changes in the foreign exchange rates would be: 31 December 2021 Cash and cash equivalents – US$ Trade receivables – US$ Revolving facility – US$ Derivative financial instruments – US$ Tax charge of 30% After tax increase/(decrease) Decrease in FX rate by 5% Increase in FX rate by 5% Carrying amount $’000 Profit or loss $’000 Profit or loss $’000 51,028 35,444 (93,164) (4,441) – – 2,551 1,772 (4,658) (222) 167 (390) (2,551) (1,772) 4,658 222 (167) 390 69 Stanmore Annual Report 2021 22. FINANCIAL RISK MANAGEMENT (CONTINUED) (C) CURRENCY RISK (CONTINUED) 31 December 2020 Cash and cash equivalents – US$ Trade receivables – US$ Revolving facility – US$ Tax charge of 30% After tax increase/(decrease) Decrease in FX rate by 5% Increase in FX rate by 5% Carrying amount $’000 Profit or loss $’000 Profit or loss $’000 4,670 19,543 (12,984) – – 246 1,029 (683) (177) 415 (222) (931) 618 160 (375) (D) MARKET RISK Market risk arises from the use of interest bearing, tradable and foreign currency financial instruments. It is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (price risk). The Consolidated Entity does not have any material exposure to market risk. (E) INTEREST RISK Interest rate risk arises principally from cash and cash equivalents. The objective of interest rate risk management is to manage and control interest exposures within acceptable parameters while optimising the return. Interest rate risk is managed with a mixture of fixed and floating rate investments. For further details on interest rate risk, refer to the tables below: 31 December 2021 FINANCIAL ASSETS Floating interest rate $’000 Fixed interest rate $’000 Non- interest bearing $’000 Total carrying amount $’000 Weighted average effective interest rate % Cash and cash equivalents 62,859 Restricted cash Receivables Security deposits Total financial assets FINANCIAL LIABILITIES Trade and other payables Other payables Vendor royalties – contingent consideration Derivative financial instruments Lease liabilities Chattel Mortgage Revolving facility Insurance premium fundings Total financial liabilities 62,859 32,660 – 3,710 28,950 – – – – – 630 9,110 93,164 1,540 – – 38,459 57,260 95,719 62,859 3,710 67,409 57,260 191,238 83,390 83,390 107 8,708 6,121 – – – 107 8,708 6,121 630 9,110 93,164 1,540 104,444 98,326 202,770 – – – – – – – – – – – – 0.30%* 0.48%** 9%*** – – – – – – – 4.47% 8% – – 0.3% based on cash rate of 0.1% plus 0.2% margin per NAB Same as period ended 31 December 2020: no change to rates on term deposits * ** *** MetRes utilised interest rate 70 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 22. FINANCIAL RISK MANAGEMENT (CONTINUED) (E) INTEREST RISK (CONTINUED) 31 December 2020 FINANCIAL ASSETS Cash and cash equivalents Restricted cash Receivables Security deposits Total financial assets FINANCIAL LIABILITIES Trade payables Chattel Mortgage Vendor royalties – contingent consideration Lease liabilities Other payables Revolving facility Short term loan facility Insurance premium fundings Total financial liabilities Floating interest rate $’000 Fixed interest rate $’000 Non- interest bearing $’000 Total carrying amount $’000 Weighted average effective interest rate % 5,041 – – – – 3,711 – – – – 21,264 14,391 5,041 3,711 21,264 14,391 5,041 3,711 35,655 44,407 – – – – – – – – – – 40,588 40,588 11,373 – – – 12,983 2,693 1,476 – 13,858 729 104 – – – 11,373 13,858 729 104 12,983 2,693 1,476 28,525 55,279 83,804 0.30% 0.48% – – – – 4.55% – – – 8% 5.5% 2.3% – The Consolidated Entity has performed a sensitivity analysis relating to its exposure to interest rate risk. This sensitivity demonstrates the effect on the current period’s results and equity which could result from a change in these risks. 71 Stanmore Annual Report 2021 22. FINANCIAL RISK MANAGEMENT (CONTINUED) (E) INTEREST RISK (CONTINUED) As at 31 December 2021, the effect on profit and equity as a result of changes in the interest rate would be as follows: 31 December 2021 Cash and cash equivalents Tax charge of 30% After tax increase/(decrease) 31 December 2020 Cash and cash equivalents Tax charge of 30% After tax increase/(decrease) Carrying amount $’000 62,859 – – Carrying amount $’000 5,041 – – Increase in interest rate by 1% Decrease in interest rate by 1% Profit or loss $’000 Equity $’000 Profit or loss $’000 629 (189) 440 629 (189) 440 (629) 189 (440) Equity $’000 (629) 189 (440) Increase in interest rate by 1% Decrease in interest rate by 1% Profit or loss $’000 Equity $’000 Profit or loss $’000 50 (15) 35 50 (15) 35 (50) 15 (35) Equity $’000 (50) 15 (35) (F) FAIR VALUES The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 9 Financial Instruments: Disclosure which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2); and c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The Consolidated Entity completed a level 3 valuation on contingent consideration (Note 17(d)). The carrying value of a significant portion of all financial assets and financial liabilities approximate the fair values due to their short-term nature. There were no transfers between the levels during the period. 31 December 2021 Vendor royalties contingent consideration held at fair value through profit or loss Derivative financial instruments held at fair value through profit or loss Total financial liabilities 31 December 2020 Vendor royalties contingent consideration held at fair value through profit or loss Total financial liabilities Level 1 $’000 Level 2 $’000 Level 3 $’000 – – – – 8,708 6,121 6,121 – 8,708 Level 1 $’000 Level 2 $’000 – – – – Level 3 $’000 13,858 13,858 There were no other financial assets or liabilities carried at fair value as at 31 December 2021. The carrying amount of all other financial assets and financial liabilities measured at amortised costs approximates their fair value. 72 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 23. INTERESTS IN OTHER ENTITIES (A) MATERIAL SUBSIDIARIES The group’s principal subsidiaries at 31 December 2021 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group. The country of incorporation or registration is also their principal place of business. Place of business/ country of incorporation Ownership interest held by the group 2021 % 2020 % Name of entity Principal activities Comet Coal & Coke Pty Limited Coal exploration Belview Coal Pty Ltd Mackenzie Coal Pty Limited Stanmore Coal Custodians Pty Ltd* Emerald Coal Pty Ltd New Cambria Pty Ltd Kerlong Coking Coal Pty Ltd Stanmore Surat Coal Pty Ltd Theresa Creek Coal Pty Ltd Coal exploration Coal exploration Trustee of Stanmore Employee Share Trust Coal exploration Coal exploration Coal exploration Coal exploration Coal exploration Australia Australia Australia Australia Australia Australia Australia Australia Australia Stanmore Wotonga Pty Ltd Coal exploration and mining Australia Stanmore IP Coal Pty Ltd Coal mining Australia Stanmore IP South Pty Ltd Coal exploration and mining Australia Stanmore Bowen Coal pty Ltd Coal exploration and mining Australia Isaac Plains Coal Management Pty Ltd Coal exploration and mining Australia Isaac Plains Sales & Marketing Pty Ltd Coal exploration and mining Australia Stanmore SMC Holdings Pty Ltd Coal exploration and mining Australia Stanmore Green Pty Ltd Renewable energy Australia * Previously Bowen River Coal Pty Ltd 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – – (B) INTERESTS IN JOINT ARRANGEMENTS Set out below are the significant farm in arrangements of the group as at 31 December 2021. The proportion of ownership interest is the same as the proportion of voting rights held. Name of entity MetRes Pty Ltd Clifford Joint Venture Lilyvale Joint Venture Mackenzie Joint Venture % ownership interest Place of business/ country of incorporation 2021 % 2020 % Nature of relationship Australia Australia Australia Australia 50 60 85 95 – 60 85 95 Joint venture Farm in arrangement Farm in arrangement Farm in arrangement 73 Stanmore Annual Report 2021 23. INTERESTS IN OTHER ENTITIES (CONTINUED) (B) INTERESTS IN JOINT ARRANGEMENTS (CONTINUED) During the period, the group purchased 50% of the issued shares in an incorporated joint venture, MetRes Pty Ltd (the JV), totalling $2.408m as at 31 December 2021. MetRes Pty Ltd is deemed to be a joint venture under relevant accounting standards, and will be accounted for by using the equity method. 24. INTERESTS IN JOINT ARRANGEMENTS The group has a 50% interest in MetRes Pty Limited, a joint venture between Stanmore Resources Limited and M Resources to acquire the Millennium and Mavis Downs Mine. The group’s interest in MetRes Pty Limited is accounted for using the equity method in the consolidated financial statements. Summarised financial information of the joint venture, based on its IFRS financial statements, and reconciliation with the carrying amount of the investment in the consolidated financial statements are set out below: Summarised balance sheet Current assets Other current assets Non-current assets Current liabilities Non-current liabilities Equity The position above is inclusive of the following: • Cash and cash equivalents – $8,718k • Current financial liabilities excluding accounts payable – $41,235k • Non-Current financial liabilities excluding accounts payable and provision – $2,502k Group’s share in equity – 50% Goodwill Carrying amount Summarised statement of comprehensive income Revenue from contracts with customers Cost of sales Depreciation and amortisation Interest expense 74 2021 $’000 23,484 11,245 36,876 (65,192) (15,827) (9,414) 2021 $’000 – – – 2021 $’000 8,103 (21,040) (5,117) (1,563) Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 24. INTERESTS IN JOINT ARRANGEMENTS (CONTINUED) Profit/(Loss) before tax Income tax expense Income tax expense Loss for the year Total comprehensive income for the year Group’s share of profit/(loss) for the year 2021 $’000 (19,617) (5,885) (13,732) (13,732) (2,409) The Group’s full share of losses is $6.865m for the period to 31 December 2021, of which $4.456m is unrecognised as the losses that exceed the Group’s investment in MetRes Pty Ltd. The joint venture had no other contingent liabilities or commitments as at 31 December 2021 for which the Group is jointly liable. (A) RECOGNITION AND MEASUREMENT A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The group’s investment in its joint venture is accounted for using the equity method. Under the equity method, the investment in a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the group’s share of net assets of the joint venture since the acquisition date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of profit or loss reflects the group’s share of the results of operations of the joint venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the group and the joint venture are eliminated to the extent of the interest in the joint venture. The aggregate of the group’s share of profit or loss of a joint venture is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the joint venture. If The Group’s share of losses of a joint venture equals or exceeds its interest in the joint venture, the Group discontinues recognising its share of further losses. After the entity’s interest is reduced to zero, additional losses are provided for, and a liability is recognised, only to the extent that the entity has incurred legal or constructive obligations or made payments on behalf of the joint venture. If the joint venture subsequently reports profits, the Group will resume recognising its share of those profits only after its share of the profits equals the share of losses not recognised. The financial statements of the joint venture are prepared for the same reporting period as the group. When necessary, adjustments are made to bring the accounting policies in line with those of the group. After application of the equity method, the group determines whether it is necessary to recognise an impairment loss on its investment in its joint venture. At each reporting date, the group determines whether there is objective evidence that the investment in the joint venture is impaired. If there is such evidence, the group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss within ‘Share of profit of a joint venture’ in the statement of profit or loss. Upon loss of significant influence over the joint control over the joint venture, the group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 75 Stanmore Annual Report 2021 25. COMMITMENTS (A) EXPLORATION AND MINING The commitments to be undertaken are as follows: Payable Within one year Later than one year but not later than five years Later than five years 6 months to 31 December 2020 $’000 818 1,994 395 3,207 2021 $’000 244 788 12 1,044 The Consolidated Entity has certain obligations to spend minimum amounts on exploration and mining tenement areas. These obligations are expected to be fulfilled in the normal course of operations. (B) LOW VALUE LEASES The commitments to be undertaken are as follows: Payable Within one year Later than one year but not later than five years (C) CAPITAL COMMITMENTS The commitments to be undertaken are as follows: Payable Within one year 6 months to 31 December 2020 $’000 2021 $’000 10 6 16 10 6 16 6 months to 31 December 2020 $’000 2021 $’000 8,213 7,257 The Consolidated Entity has non-cancellable, open purchase orders for committed capital works. (i) Land acquisitions On 7 April 2011, the Consolidated Entity announced that it had completed an agreement for the right to purchase The Range thermal coal project in the Surat Basin. Variations to this agreement have been negotiated such that final payment and transfer of title is due 30 days after the Mining Lease is granted by the Department of Natural Resources, Mines and Energy, or an earlier date by agreement. The final payment is indexed to land valuation movements with reference to comparable properties, with a reference price of $3.7m based at 2014. The agreement gives the group access to undertake evaluation and development work as the project moves through the approval process and, ultimately. development and production. The terms of the acquisition are within normal market expectations. 76 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 25. COMMITMENTS (CONTINUED) (C) CAPITAL COMMITMENTS (CONTINUED) (ii) Isaac Plains Complex royalty On 26 November 2015, the Consolidated Entity established a finance facility with Taurus to fund the acquisition of and re-start of mining at the Isaac Plains Complex and agreed to a 0.8% royalty payable on: • the saleable value of all product coal owned by the group at that time and processed through the Isaac Plains infrastructure; and • any processing or handling fees arising from the treatment of third-party coal processed through the Isaac Plains infrastructure. The royalty payable increased to 1% during 2017 and this finance facility has since been cancelled (see Note 14 on page 58), but the royalty streams stay on foot and associated costs are included within cost of sales as private royalties (Note 3 on page 42). (iii) Isaac Plains east landholder agreement On 20 July 2017, the Consolidated Entity completed a land holder compensation agreement for access to MLA 70016, MLA 70017, MLA 70018, and MLA 70019. The compensation agreement includes the following contingent consideration item: • a royalty of $0.60/product tonne sold (increasing by 2.5% p.a.) from July 2018 when the published Hard Coking Coal Price for any quarter is greater than US$200/t (increasing by 2.5% p.a.) from July 2017. 26. CONTINGENT LIABILITIES AND CONTINGENT ASSETS (A) CONTINGENT LIABILITIES Utility providers Other 2021 $’000 3,377 211 3,588 31 December 2020 $’000 3,377 211 3,588 (B) CONTINGENT ASSETS The group had no contingent assets at 31 December 2021 (2020: nil). 27. EVENTS OCCURRING AFTER THE REPORTING PERIOD (A) INTENDED ACQUISITION OF 80% OF BMC JOINT VENTURE AND ASSOCIATED DEBT FACILITY As announced on 8 November 2021, Stanmore Resources Limited has executed a definitive agreement with BHP to acquire BHP’s 80% interest in the BMC (BHP Mitsui Coal Pty Ltd) joint venture. Consideration for the acquisition comprises of US$1.2bn cash with a potential follow-up payment of up to US$150m after two years, the value of which is dependent on the prevailing coal price exceeding certain targets. Completion of the acquisition is anticipated to occur during the second quarter of 2022, subject to certain conditions precedent. Stanmore Resources Limited intends to fund the acquisition with a combination of debt and equity, and announced on 7 January 2022 that Stanmore have signed a definitive agreement, through its wholly owned subsidiary Stanmore SMC Holdings Pty Ltd, with certain financiers in respect of a US$625m debt facility. The debt facility is an amortising loan note facility which matures five years from first utilisation, and is secured against all the assets of Stanmore SMC Holdings and its 100% subsidiary Dampier Coal (the “Borrower Group”). The security includes Dampier Coal’s 80% shareholding in BMC, however, the security does not extend to BMC’s assets and operations and there is no recourse to Stanmore Resources Limited’s existing assets and operations, all of which sit outside the Borrower Group. 77 Stanmore Annual Report 2021 27. EVENTS OCCURRING AFTER THE REPORTING PERIOD (CONTINUED) (B) ISAAC DOWNS MINING SERVICE AGREEMENT As announced on 19 January 2022, ESPA Pacific were awarded the Isaac Downs Open-cut mining services contract, with a current value of $564m. Awarding of this contract marks a major milestone in moving to full production at the Isaac Downs Mine, following completion of all regulatory approvals in the third quarter of 2021. In conjunction of the awarding of this contract, Stanmore Resources Limited will transition to an owner-operator model for the Coal Handling and Preparation Plant (CHPP). (C) EXTENSION OF GEAR LOAN FACILITY REPAYMENT TERMS As announced on 16 February 2022, the group have extended the GEAR facility maturity date by another year to 30 June 2023. All other terms of the agreement remain unchanged as a result of the extension. 28. KEY MANAGEMENT PERSONNEL Total key management personnel compensation: Total key management personnel compensation Short term employee benefits Post employment benefits Termination benefits Long term benefits 6 months to 31 December 2020 $ 2021 $ 3,128,795 1,609,933 126,672 – 828,688 79,988 286,404 – 4,084,155 1,976,325 29. REMUNERATION OF AUDITORS During the year the following fees were paid or payable for services provided by the auditor of Stanmore Resources Limited, its related practices and non-related audit firms: Statutory audit services Amounts paid/payable to Ernst & Young for audit or review of the financial statements for the entity or any entity in the group Amounts paid/payable to BDO Audit Pty Ltd for audit or review of the financial statements for the entity or any entity in the group 6 months to 31 December 2020 $ 2021 $ 122,451 105,000 – 93,069 122,451 198,069 78 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 29. REMUNERATION OF AUDITORS (CONTINUED) Other assurance services required to be performed by the group’s auditor Amounts paid/payable to Earnst & Young for other assurance services for the entity or any entity in the group Taxation services Amounts paid/payable to related entities of Ernst & Young for non-audit taxation services performed for the entity or any entity in the group Amounts paid/payable to related entities of BDO Audit Pty Ltd for non-audit taxation services performed for the entity or any entity in the group Other services Amounts paid/payable to related entities of Ernst & Young for other non-audit services performed for the entity or any entity in the group Amounts paid/payable to related entities of BDO Audit Pty Ltd for other non-audit services performed for the entity or any entity in the group 6 months to 31 December 2020 $ – – 2021 $ 5,000 5,000 6 months to 31 December 2020 $ 2021 $ 146,825 24,910 – 57,276 146,825 82,186 6 months to 31 December 2020 $ 2021 $ 387,469 13,940 – 14,300 387,469 28,240 79 Stanmore Annual Report 2021 30. PARENT ENTITY FINANCIAL INFORMATION The Corporations Act 2001 requirement to prepare parent entity financial statements where consolidated financial statements are prepared has been removed and replaced by the new regulation 2M.3.01 which requires the following disclosure in regard to the parent entity, Stanmore Resources Limited. The consolidated financial statements incorporate the assets, liabilities and results of the parent entity in accordance with the Consolidated Entity’s accounting policy. The financial information for the parent entity has been prepared on the same basis as the consolidated financial statements, except as follows: • investments in subsidiaries, associates and joint ventures are accounted for at cost. (A) SUMMARY FINANCIAL INFORMATION The individual financial statements for the parent entity, Stanmore Resources Limited, show the following aggregate amounts: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Issued capital Share-based reserve Retained earnings Total shareholders’ equity Profit/(loss) for the year/period Total comprehensive income/(loss) 2021 $’000 6,351 88,833 95,184 10,321 7,400 17,721 121,747 2,337 (38,176) 85,908 (8,446) (8,446) 31 December 2020 $’000 7,082 84,388 91,470 986 21,977 22,963 121,725 2,323 (55,541) 68,507 6,849 6,849 (B) GUARANTEES Under the terms of the Secured Financing Facility entered into in November 2015, Stanmore Resources Limited has provided certain guarantees in relation to the arrangements between the Financier and the borrowing entity (Stanmore IP Coal Pty Ltd). These guarantees relate primarily to payment performance and maintaining the tenure of the Isaac Plains Coal Mine in good standing. (C) CONTINGENT LIABILITIES AND CONTINGENT ASSETS The parent entity did not have any contingent liabilities or contingent assets as at 31 December 2021 or 31 December 2020. (D) CAPITAL COMMITMENTS The parent entity did not have any capital commitments as at 31 December 2021 or 31 December 2020. 80 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 31. SEGMENT INFORMATION The Consolidated Entity has identified is operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers – CODM) in assessing performance and determining the allocation of resources. The Consolidated Entity is managed primarily on a producing asset versus non-producing asset basis. Operating segments are determined on the basis of financial information reported to the Board which is at Consolidated Entity level. All segments are located within Australia. Accordingly, management currently identifies the Consolidated Entity as having two reportable segments, the first being the operation of the Isaac Plains Complex (including the Isaac Plains East project and Isaac Downs bulk sample pit), and the second being all other exploration and development coal assets and corporate. (A) DESCRIPTION OF SEGMENTS (i) Accounting policies adopted Unless otherwise stated, all amount reported to the Board of Directors, being the CODM with respect to operating segments, are determined in accordance with accounting policies that are consistent with those adopted in the annual financial statements of the Consolidated Entity. (ii) Segment assets Where an asset is used across multiple segments, the asset is allocated to the segment that receives most of the economic value from the assets. In most instances, segment assets are clearly identifiable based on their nature and physical location. (iii) Segment liabilities Liabilities are allocated to segments where there is a direct nexus between the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the whole Consolidated Entity and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings. (iv) Unallocated items Coal trading, corporate, marketing and infrastructure functions which are managed on a group basis are not allocated to an operating segment. The Consolidated Entity’s income taxes are managed on a group basis and are not allocated to reportable segments. (v) Major customers The Consolidated Entity has several customers to whom it sells export grade coal. The Consolidated Entity supplies one such external customer who accounts for 33% of revenue. The next most significant customer accounts for 16% of revenue. (B) SEGMENT RESULTS The segment information for the reportable segments for the year ended 31 December 2021 is as follows: Isaac Plains Complex $’000 Exploration and Development $’000 Unallocated operations $’000 Adjustments and eliminations $’000 31 December 2021 Total segment revenue Segment operating result Depreciation and amortisation Net finance expense Income tax expense Net profit/(loss) after tax Total segment assets Total segment liabilities 382,948 60,477 (25,726) (15,622) – 19,129 360,944 268,043 – – – – – – 43,223 – – (2,624) (1,035) 365 (5,422) (8,716) 57,766 24,826 Total % 382,948 57,853 (26,761) (15,257) (5,422) 10,413 – – – – – – (16,856) 445,077 (10,678) 282,191 81 Stanmore Annual Report 2021 31. SEGMENT INFORMATION (CONTINUED) (B) SEGMENT RESULTS (CONTINUED) The segment information provided to the CODM for the reportable segments for the period ended 31 December 2020 is as follows: Isaac Plains Complex $’000 Exploration and Development $’000 Unallocated operations $’000 Adjustments and eliminations $’000 31 December 2020 Total segment revenue Segment operating result Depreciation and amortisation Net finance expense Income tax expense Net profit/(loss) after tax Total segment assets Total segment liabilities 136,309 1,684 (14,682) (5,411) – (18,409) 237,298 121,409 – – – – – – 41,141 – – (3,545) – – 5,834 2,289 15,630 9,710 Total % 136,309 (1,861) (14,682) (5,411) 5,834 (16,120) 700 294,769 11,212 142,331 32. SHARE-BASED PAYMENTS The following share-based payment arrangements existed at 31 December 2021. Share-based payments to Directors, executives and employees. (A) SHARES During the year ended 31 December 2021, there were no shares granted to eligible employees (31 December 2020: nil). (B) RIGHTS The amount recognised as share-based payment expense in the consolidated statement of profit or loss and other comprehensive income is as follows: Share-based payments 31 December 2021 $’000 31 December 2020 $’000 14 (35) These amounts have been recognised in equity in the consolidated statement of financial position as follows: Shared based payment reserve 31 December 2021 $’000 31 December 2020 $’000 14 25 (C) OPTIONS During the year ended 31 December 2021, no options granted to eligible employees as share-based payments (31 December 2020: nil). 82 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 32. SHARE-BASED PAYMENTS (CONTINUED) (D) RECOGNITION AND MEASUREMENT The fair value of shares, options or rights granted to employees and consultants are recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees or consultants become unconditionally entitled of the instruments. In determining fair value, no account is taken of any performance conditions other than those related to the share price of Stanmore Resources Limited (market conditions). The cumulative expense recognised between grant date and vesting date is adjusted to reflect the Directors’ best estimate of the number of instruments that will ultimately vest because of internal conditions of the instruments, such as the employees having to remain with the Consolidated Entity until vesting date, or such that employees are required to meet internal targets. During the year ended 31 December 2021, no rights were granted to employees as long-term incentive. The terms and conditions of previous grants are as follows: Grant date Measurement date Exercise price Balance at start of the period Granted during the period Exercised during the period Forfeited during the period Balance at end of the period 05/11/2018 30/06/2021 24/10/2019 30/06/2022 – – 219,066 89,905 308,971 – – – – – – (110,510) 108,556 (53,563) 36,342 (164,073) 144,898 (i) Performance rights pricing model The fair value of performance rights granted under the previous LTI program was based on the Absolute Shareholder Total Return (ASTR), measured using a Monte Carlo Simulation model incorporating the probability of the performance hurdles being met. The following table lists the inputs to the models used for the periods ended 30 June 2020 and 30 June 2019, prior to the modification following change of control: Performance hurdle Grant date Vesting date Fair value at grant date Share price Exercise price Dividend yield Tranche 1 (issued in FY19) ASTR 5 November 2018 31 July 2021 $0.45 $0.94 $0.00 0% Tranche 2 (issued in FY20) ASTR 24 October 2019 31 July 2022 $0.37 $1.13 $0.00 4.47% Expected measurement period 30 June 2021 – 30 June 2022 30 June 2022 – 30 June 2023 Risk-free interest rate Expected volatility 2.09% 60% 0.73% 50% (ii) Key estimates The Consolidated Entity uses estimates to determine the fair value of equity instruments issued to Directors, executives and employees. The estimates include volatility, risk free rates and consideration of satisfaction of performance criteria for recipients of equity instruments. 83 Stanmore Annual Report 2021 33. RELATED PARTY TRANSACTIONS Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. (A) PARENT ENTITY The parent entity is Stanmore Resources Limited, a company incorporated in Australia. The ultimate parent company of the Consolidated Entity is PT Sinarindo Gerbangmas. (B) SUBSIDIARIES Interests in subsidiaries are set out in Note 23. (C) KEY MANAGEMENT PERSONNEL COMPENSATION Disclosures relating to KMP are set out in Note 28. (D) TRANSACTIONS WITH OTHER RELATED PARTIES During the year, the Consolidated Entity has negotiated an increase to the financing agreements with its parent entity, GEAR. These negotiations were deemed to be on market terms, and further details are shown within Note 14. M Resources Pty Ltd continues to exclusively manage Stanmore Resources Limited’s global sales contract and relationships. M Resources Pty Ltd is also a minority shareholder of the group, and fees totalling $5.454m were incurred for the year ended 31 December 2021 (31 December 2020: $1.227m) for services provided on market terms. During the year, the Company provided MetRes Pty Ltd, a 50% owned Joint Venture, with a secured, total finance facility of up to A$50m. See Note 7 for further information. 34. DEED OF CROSS GUARANTEE Stanmore Resources Limited and its wholly owned subsidiaries (as shown in note 23) with the exception of Stanmore SMC Holdings Pty Ltd, are parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. (A) CONSOLIDATED STATEMENT OF PROFIT OR LOSS, STATEMENT OF COMPREHENSIVE INCOME AND SUMMARY OF MOVEMENTS IN CONSOLIDATED RETAINED EARNINGS The above companies represent a ‘closed group’ for the purposes of the instrument, and as there are no other parties to the deed of cross guarantee that are controlled by Stanmore Resources Limited, they also represent the ‘extended closed group’. Set out below is a consolidated statement of profit or loss, a consolidated statement of comprehensive income and a summary of movements in consolidated retained earnings for the year ended 31 December 2021 of the closed group consisting of Stanmore Resources Limited and its wholly owned subsidiaries, excluding Stanmore SMC Holdings Pty Ltd. 84 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 34. DEED OF CROSS GUARANTEE (CONTINUED) (A) CONSOLIDATED STATEMENT OF PROFIT OR LOSS, STATEMENT OF COMPREHENSIVE INCOME AND SUMMARY OF MOVEMENTS IN CONSOLIDATED RETAINED EARNINGS (CONTINUED) Consolidated statement of comprehensive income Revenue from continuing operations Other income Cost of sales of goods Other expenses from ordinary activities Employee benefits expense Depreciation and amortisation expense Finance costs Share of net profits of associates and joint ventures accounted for using the equity method Profit before income tax Income tax expense Profit for the period Other comprehensive income Other comprehensive income for the period, net of tax Total comprehensive income for the period Summary of movements in consolidated retained earnings Retained earnings at the beginning of the financial year Profit for the period Retained earnings at the end of the financial year 2021 $’000 382,948 4,623 (312,540) (14,666) (6,784) (26,761) (7,604) (2,409) 16,807 (5,714) 11,093 – 11,093 28,389 11,093 39,482 85 Stanmore Annual Report 2021 2021 $’000 62,859 52,409 11,748 47,897 174,913 15,000 88,758 43,223 21,849 21,572 64,426 2,015 256,843 431,756 34. DEED OF CROSS GUARANTEE (CONTINUED) (B) CONSOLIDATED STATEMENT OF FINANCIAL POSITION Set out below is a consolidated statement of financial position as at 31 December 2021 of the closed group. Current assets Cash and cash equivalents Trade and other receivables Inventories Other financial assets at amortised cost Total current assets Non-current assets Receivables Capitalised development costs Exploration and evaluation Mine properties Other financial assets Property, plant and equipment Intangible assets Total-non-current assets Total assets 86 Stanmore Annual Report 2021Notes to the financial statements (CONTINUED) 34. DEED OF CROSS GUARANTEE (CONTINUED) (B) CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED) Current liabilities Trade and other payables Borrowings Lease liabilities Derivative financial instruments Current tax liabilities Provisions Total current liabilities Non-current liabilities Borrowings Lease liabilities Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity 2021 $’000 75,137 97,076 180 6,121 6,285 6,407 191,206 6,739 450 26,590 43,205 76,984 268,190 163,566 121,747 2,337 39,482 163,566 87 Stanmore Annual Report 2021 Directors’ declaration The Directors’ of the Consolidated Entity declare that: (a) The consolidated financial statements, comprising the consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity and consolidated statement of cash flows, and accompanying notes are in accordance with the Corporations Act 2001, and: (i) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) give a true and fair view of the consolidated entity’s financial position as at 31 December 2021 and of its performance for the financial year ended on that date, and (b) The Consolidated Entity has included in the notes to the Financial Statements an explicit and unreserved statement of compliance with International Financial Reporting Standards; (c) In the Directors’ opinion, there are reasonable grounds to believe that the Consolidate Entity will be able to pay its debts as and when they become due and payable; (d) The remuneration disclosures included on pages 20 to 28 of the Directors’ report (as part of audited Remuneration Report) for the year ended 31 December 2021 comply with section 300A of the Corporations Act 2001; and (e) The Directors have been given the declarations by the CEO and CFO required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. Mr Marcelo Matos Director Brisbane 16/02/2022 88 Stanmore Annual Report 2021 Independent auditor’s report Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Independent Auditor’s Report to the Members of Stanmore Resources Limited Report on the audit of the financial report Opinion We have audited the financial report of Stanmore Resources Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 31 December 2021, the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2021, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a. Giving a true and fair view of the consolidated financial position of the Group as at 31 December 2021 and of its consolidated financial performance for the year ended on that date; and b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 89 Stanmore Annual Report 2021 Independent auditor’s report (CONTINUED) Vendor Royalty – Contingent Consideration Liability Why significant How our audit addressed the key audit matter The Group recognised contingent consideration at 31 December 2021 of $8.7 million, relating predominantly to its acquisition of Isaac Downs in July 2018. As detailed in note 17 to the financial report, the contingent consideration is a production- based royalty, payable when benchmark hard coking coal prices exceed a threshold coal price. The carrying amount of the royalty payable is estimated based on forecast hard coking coal prices, foreign exchange rates and production volumes, capped at a maximum amount payable as determined within the Royalty Deed. The contingent consideration is a key audit matter due to: the size of the liability; the judgement involved in forecasting hard coking coal prices, foreign exchange rates and production volumes; and the profit and loss volatility that can result from movements in these key input assumptions. Our audit procedures included the following: • Assessed the methodology used to recognise and measure the liability for consistency with Australian Accounting Standards and the requirements of the Royalty Deed. • Tested the mathematical accuracy of the model used to calculate the liability. • Compared the production volumes used in the model to the Board approved budget and life-of-mine model for the Isaac Downs mine. • In conjunction with our valuation specialists, evaluated the forecast coal prices and foreign exchange rates used to measure the liability with reference to market prices (where available) and broker consensus data. • Assessed the adequacy of the disclosures made in the financial statements, including disclosure of significant judgements and estimates adopted by management. Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2021 annual report other than the financial report and our auditor’s report thereon. We obtained the directors’ report and the shareholder information that is to be included in the annual report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the annual report after the date of this auditor’s report. Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 90 Stanmore Annual Report 2021 Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ► Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ► Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. ► Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 91 Stanmore Annual Report 2021 Independent auditor’s report (CONTINUED) ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 20 to 28 of the directors’ report for the year ended 31 December 2021. In our opinion, the Remuneration Report of Stanmore Resources Limited for the year ended 31 December 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Tom du Preez Partner Brisbane 16 February 2022 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 92 Stanmore Annual Report 2021A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 20 to 28 of the directors’ report for the year ended 31 December 2021. In our opinion, the Remuneration Report of Stanmore Resources Limited for the year ended 31 December 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Tom du Preez Partner Brisbane 16 February 2022 Shareholder information A. DISTRIBUTION OF EQUITY SECURITIES The number of Ordinary Shares by size of holding as at 8 April 2022 are: Range 100,001 and over 10,001 – 100,000 5,001 – 10,000 1,001 – 5,000 1 – 1000 TOTAL Ordinary shares Shares Securities 885,040,645 13,518,093 1,456,137 1,234,806 132,017 901,381,698 % 98.19% 1.50% .16% .14% .01% 100% No. of holders 108 403 196 458 360 % 7.08% 26.43% 12.85% 30.03% 23.61% 1,525 100.00% The number of shareholders holding less than a marketable parcel of 297 securities ($1.685 on 8 April 2022) is 168 and they hold 4,580 securities. 93 Stanmore Annual Report 2021 Shareholder information (CONTINUED) B. SUBSTANTIAL HOLDERS The names of the twenty largest holders of quoted equity securities as at 8 April 2022 are listed below: Ordinary shares HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED LATIMORE FAMILY PTY LTDJ P MORGAN NOMINEES AUSTRALIA PTY LIMITED UBS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 LATIMORE FAMILY PTY LTD NATIONAL NOMINEES LIMITED OLD FORRESTER PTY LTD BNP PARIBAS NOMS PTY LTD BNP PARIBAS NOMS PTY LTD LATIMORE FAMILY PTY LTD TREASURY SERVICES GROUP PTY LTD ARGO INVESTMENTS LIMITED ARGO INVESTMENTS LIMITED SANDHURST TRUSTEES LTD BNP PARIBAS NOMS PTY LTD M RESOURCES PTY LTD TRI-STAR E&P PTY LTD SIR RONALD ALFRED BRIERLEY TOTAL OF 20 LARGEST HOLDERS TOTAL ORDINARY SHARES C. RESTRICTED SECURITIES There are 11,040 restricted shares on issue as at 8 April 2022. D. VOTING RIGHTS Number of shares % of total shares 599,668,260 66.53% 47,422,396 31,836,070 31,259,672 26,399,437 26,307,882 22,727,273 15,175,161 14,006,584 7,199,677 5,256,952 5,151,516 5,145,640 3,181,819 3,000,000 2,723,036 2,356,511 1,878,945 1,818,182 1,466,667 5.26% 3.53% 3.47% 2.93% 2.92% 2.52% 1.68% 1.55% .80% .58% .57% .57% .35% .33% .30% .26% .21% .20% .16% 853,981,680 94.74% 901,381,698 100.00% All ordinary shares carry one vote per share without restriction. Options and performance rights do not carry voting rights. 94 Stanmore Annual Report 2021 Reserves and Resources Stanmore Coal Reserves as at end December 2021 Project Name Tenement Proved Probable Total Proved Probable Total Coal Reserves Marketable Coal Reserves Competent Person Report Date ML 700016, ML 700017, ML 700018, ML 700019 ML 70342, ML 700018, ML 700019 ML 700046, ML 700047, ML 700048 EPC 1112, EP 2030 Isaac Plains East Opencut Isaac Plains Underground Isaac Downs opencut Isaac Plains Complex The Range opencut Total Coal Reserves 0.9 0.6 1.5 0.7 0.5 1.2 H Feb-22 11.8 7.7 19.5 9.5 6.1 15.6 F Feb-21 21.1 0.4 21.5 14.2 0.3 14.4 H Feb-22 33.8 8.8 42.5 24.3 6.9 31.2 117.5 117.5 94.2 94.2 G Jul-11 33.8 126.3 160.0 24.3 101.1 125.4 Coal Type Ration - Coking:Thermal (% of Marketable Coal Reserve) Competent Person Isaac Plains East Issac Plain Underground Isaac Downs The Range 99%:1% 77%:23% 96%:4% 100% Thermal F - Mr Benjamin Smith - Xenith H - Mr Tony O’Connell - Optimal G - Mr Richard Hoskings - Minserve Note 1: All Coal Reserves are reported under The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (‘the JORC Code’) applicable at the time each report was published. Reports dated 2012, and earlier, used the JORC 2004 version, reports dated after 2012 reported against the requirements of the 2012 JORC Code. Note 2: Totals may not be exact due to significant figure rounding. Note 3: The Reserves quoted for The Range project were established in 2011 under the relevant JORC Code at the time and used a coal price forecast of A$120/tonne for benchmark NEWC thermal coal equivalent. These Reserves were supported by a Feasibility Study that assumed the completion of the Surat Basin rail to connect the mine to the Port of Gladstone. Note 4: All Coal Reserves are reported on a 100% basis, and Stanmore’s economic interest in the tenures above is 100% 95 Stanmore Annual Report 2021 Reserves and Resources (CONTINUED) Stanmore Coal Resources as at end December 2021 Project Name Tenement Coal Type* Measured Resources Indicated Resources Inferred Resources Total Resources Competent Person** Report Date Isaac Plains Isaac Plains East Isaac Downs ML 70342, ML 700018, ML 700019 ML 700016, ML 700017, ML 700019, EPC 755 ML 700046, ML 700047, ML 700048 Isaac South EPC755 Isaac Plains Complex Clifford The Range Surat Basin Complex Mackenzie Belview Tennyson Lilyvale Total Coal Resources Sub Total EPC 1274, EPC 1276 EPC 1112, EPC 2030 Sub Total EPC 2081 EPC 1114, EPC 1186, EPC 1798 EPC 1168, EPC 1580 EPC 1687, EPC 2157 C, T 24.3 16.0 C, T 6.4 9.8 C, T C, T 29.2 11.9 2.9 14.5 71.8 43.2 0 200.0 18.1 187.0 18.1 0 0 0 0 387.0 25.7 50.0 0.0 0 T T C, T C, PCI T C 5 18 0 25 48 430 81 511 117 280 140 33 45 34 32 52 163 630 286 916 143 330 140 33 89.9 505.9 1129 1725 A Dec-21 D B C A A A A A A Jan-22 Feb-22 Jun-18 Aug-16 Oct-12 Nov-11 Mar-15 Nov-12 Feb-19 *Coal Types Potential Legend **Competent Person C - Coking Coal, semi-soft or greater potential A - Mr Troy Turner - Xenith Consulting PCI - Pulverised Coal Injection T - Export Thermal grade B - Mr Toby Prior - Measured Group C - Mr Mal Blaik - JB Mining D - Dr Bronwyn Leonard - Stanmore Resources Note 1: All Coal Resources are reported under The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (‘the JORC Code’) applicable at the time each report was published. Reported dated 2012, and earlier, used the JORC 2004 version, reports dated after 2012 are reported against the requirements of the 2012 JORC Code. Note 2: Rounding to the nearest significant figure is applied to Total Resource Tonnes and inferred category resources. This is deemed conservative and reflective of the Inferred Resource category confidence level and accounts for the minor differences in the overall total reported resources. Note 3: All Coal Resources are reported on a 100% basis; Stanmore’s economic interest in Clifford is 60%, Mackenzie is 95%, and Lilyvale is 85%, all other tenure noted above is 100% owned by Stanmore. 96 Stanmore Annual Report 2021 INCORPORATED JOINT VENTURE INTERESTS METRES PTY LTD MetRes Pty Ltd (MetRes) is a 50% Stanmore owned, incorporated joint venture with M Resources Pty Ltd. M Mining Pty Ltd, a wholly owned subsidiary of M Resources, is the Joint Venture’s manager and operator. For accounting purposes, Stanmore reports MetRes on an equity accounted basis and therefore no production or sales volumes for MetRes are included in Stanmore’s financial results. However, to demonstrate Stanmore’s effective ownership interest in MetRes’s Resources and Reserves, these are further detailed, in the tables below. MetRes Resources and Reserves are shown on a 50% interest basis, that is only half of the present total JORC Resource or Reserve is noted. MetRes Coal Reserves as at end December 2021 (at 50% Stanmore ownership interest) Project Name Tenement Proved Probable Total Proved Probable Total Coal Reserves Marketable Coal Reserves Competent Person* Report Date Millennium/ Mavis Opencut & Auger Millennium/ Mavis Underground Millennium Mavis/ Complex ML 70313, ML 70344, ML 70401, ML 70485, ML 70457 ML 70483 TOTAL RESERVES 0.1 0.2 0.3 0.1 0.2 0.2 J Dec-21 0.9 2.0 3.0 0.8 1.7 2.5 F Feb-22 1.0 2.2 3.2 0.9 1.8 2.7 Coal Type Ration - Coking:PCI (% of Marketable Coal Reserve) *Competent Person Open-cut & Auger Underground 48% Coking: 52% PCI 54% Coking: 46% PCI F - Mr Benjamin Smith - Xenith J - Mr Sunil Kumar - Xenith Note 1: All Coal Reserves are reported under requirements of The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (‘the JORC Code’) 2012 Note 2: Totals may not be exact due to significant figure rounding Note 3: Coal Reserves are shown on a 50% interest basis, that is only half of the present total JORC Reserve is noted in the Table above 97 Stanmore Annual Report 2021 Reserves and Resources (CONTINUED) MetRes Coal Resources as at end December 2021 (at 50% Stanmore ownership interest) Project Name Tenement Coal Type* Measured Resources Indicated Resources Inferred Resources Total Resources Competent Person** Report Date Millennium Mavis Downs Millennium Complex ML 70313, ML 70344, ML 70401 ML 70485, ML 70457, ML 70483 TOTAL RESERVES C, PCI C, PCI 2.7 3.5 6.2 3.2 5.5 8.7 2 1.5 4 8 10 18 A A Jan-22 Jan-22 *Coal Types Potential Legend **Competent Person C - Coking Coal, semi-soft or greater potential A - Mr Troy Turner - Xenith Consulting PCI - Pulverised Coal Injection Note 1: All Coal Resources are reported under requirements of The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (‘the JORC Code’) 2012 Note 2: Rounding to the nearest significant figure is applied to Total Resource Tonnes and Inferred category resources. This is deemed conservative and reflective of the Inferred Resource category confidence level and accounts for the minor differences in the overall total reported resources Note 3: Coal Resources are shown on a 50% interest basis, that is only half of the present total JORC Resource is noted in the Table above 98 Stanmore Annual Report 2021 Other Information RESOURCES AND RESERVES NOTE As part of the market release dated 16 February 2022 of the Stanmore Annual Financial Report for the period ended 31 December 2021, Stanmore included a summary of the results of the mining entity’s annual review of its Coal Resources and Coal Reserves, including a comparison of the Resources and Reserves holdings against that from the previous year. These results were titled “December 2021 Annual Coal Resources & Reserve Summary” and “Coal Resource and Reserve update for Isaac Plains Complex”. All Coal Reserves Estimates are a modified sub-set of the applicable underlying Resource Estimate; therefore, all Resources are inclusive of any Estimated Reserves. All Marketable Coal Reserves are derived from the ROM Coal Reserves; therefore, Marketable Coal Reserves are a sub-set of ROM Coal Reserves. The summary tables of all Coal Resources and all Coal Reserves, as announced on 16 February 2022, have been provided at Appendix 2 of the report announced on 16 February 2022. The Company confirms that it is not aware of any new information or data that materially affects the information included in the announcements made on 16 February 2022 and that all material assumptions and technical parameters underpinning the estimates in the announcement made on 16 February 2022 continue to apply and have not materially changed. COMPETENT PERSONS STATEMENT The information in this report relating to Coal Resources for the Isaac Plains Mine, Millennium/Mavis Downs, Clifford, The Range, Mackenzie, Belview, Tennyson and Lilyvale, is based on information prepared by consultants under the guidance of Mr Troy Turner who is Managing Director of Xenith Consulting Pty Ltd. Mr Turner is a qualified Geologist, BAppSc (Geology) from University of Southern Queensland, and a member of the Australian Institute of Mining and Metallurgy. Mr Turner has over 25 years’ relevant experience, to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking and qualifies as Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Turner consents to the inclusion of these Resource Estimates in reports disclosed by the Company in the form and context in which it appears. The information in this report relating to Coal Resources for Isaac Plains East Mine is based on information prepared by Dr Bronwyn Leonard who is a full-time employee of Stanmore Resources and has held the position of Superintendent Mine Geology at Isaac Plains since October 2017. Dr Leonard is a qualified Geologist with a degree from University of Canterbury, and a PhD from James Cook University majoring in Geology/Earth Sciences and is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM). Dr Leonard has over 15 years’ experience in exploration and resource modelling, to the style of mineralisation and type of deposit under consideration and to the activity which she is undertaking and qualifies as Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Dr Leonard consents to the inclusion of this Resource Estimate in reports disclosed by the Company in the form and context in which it appears. The information in this report relating to Coal Resources for the Isaac Downs Mine is based on information prepared by Mr Toby Prior who is Principal Geologist and Director of Measured Group Pty Ltd. Mr Prior is a qualified Geologist, BAppSc (Geology) from University of Southern Queensland, and a member of the Australian Institute of Mining and Metallurgy. Mr Prior has over 24 years’ relevant experience, to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking and qualifies as Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Prior consents to the inclusion of this Resource Estimate in reports disclosed by the Company in the form and context in which it appears. 99 Stanmore Annual Report 2021 Other information (CONTINUED) The information in this report relating to Coal Resources for Isaac South is based on information complied by Mr Mal Blaik who is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM) and is a Principal Consultant of JB Mining Services Pty Ltd. Mr Blaik is a qualified Geologist, BSc App Geol (Hons) from University of Queensland, 1979. Mr Blaik has more than 30 years’ experience in Coal Geology, having sufficient relevant experience to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Blaik consents to the inclusion of this Resource Estimate in reports disclosed by the Company in the form and context in which it appears. The information in this report relating to the opencut Coal Reserves estimates for Isaac Plains Complex (IPE-IPM) and for Isaac Downs are based on information compiled by Mr Tony O’Connell, who is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr O’Connell is the Principal Mining Consultant of Optimal Mining Solutions Pty Ltd and holds a bachelor’s degree in Mining Engineering from University of Queensland and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person, as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr O’Connell has over 20 years’ experience in the estimation, assessment, evaluation, and economic extraction of Coal Reserves. Mr O’Connell consents to the inclusion of these Reserve Estimates in reports disclosed by the Company in the form and context in which it appears. The information in this report relating to the Millennium/Mavis Opencut and Auger Coal Reserve estimate is based on information compiled by Mr Sunil Kumar, who is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Kumar is Principal Mining Engineer at Xenith Consulting Pty Ltd and has over 25 years’ experience in the opencut coal mining industry and as such has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person, as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Kumar consents to the inclusion of this Reserve Estimate in reports disclosed by the Company in the form and context in which it appears. The information in this report relating to Isaac Plains Underground and Millennium/Mavis Underground Coal Reserve estimates, is based on information compiled by Mr Benjamin Smith, who is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM) and Mine Manager’s Association of Australia (MMAA). Mr Smith is an associate of Xenith Consulting Pty Ltd and is a qualified Mining Engineer, holding a Master of Engineering (Mining Management) and Graduate Diploma (Mine Ventilation) from the University of New South Wales, and a Bachelor of Engineering (Mining, Honours) and Bachelor of Commerce (Management) from the University of Wollongong. Mr Smith also holds a First-Class Certificate of Competency for opencut and underground (Mine Manager) in New South Wales, a Second-Class Certificate of Competency (Undermanager) in New South Wales, a Third-Class Certificate of Competency (Deputy) in New South Wales, and a Mine Ventilation Officer’s Certificate of Competency in New South Wales. He has over 24 years’ experience domestically and internationally in underground coal mining, risk and mine planning and design, and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person, as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Smith consents to the inclusion of these Reserve Estimates in reports disclosed by the Company in the form and context in which it appears. The information in this report relating to the Range Coal Reserve estimate is based on information compiled by Mr Richard Hoskings, who is a Mining Engineer and Member of the Minserve Group Pty Ltd and a Fellow of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Hoskings has over 40 years’ experience in the opencut coal mining industry and as such has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person, as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Hoskings consents to the inclusion of this Reserve Estimate in reports disclosed by the Company in the form and context in which it appears. 100 Stanmore Annual Report 2021 Corporate information DIRECTORS Dwi Suseno Jimmy Lim Marcelo Matos Mark Trevan Richard Majlinder COMPANY SECRETARY Rees Fleming REGISTERED OFFICE AND PRINCIPAL BUSINESS OFFICE* Level 15, 133 Mary Street Brisbane Qld 4000 Phone: + 61 7 3238 1000 COUNTRY OF INCORPORATION Australia SHARE REGISTRY Link Market Services Level 21, 10 Eagle St Brisbane Qld 4000 Phone: 1300 554 474 Fax: +61 2 9287 0303 AUDITOR Ernst & Young Level 51, 111 Eagle Street Brisbane QLD 4000 Phone: 07 3011 3333 www.ey.com/au STOCK EXCHANGE LISTING Australian Securities Exchange ASX Code: SMR INTERNET ADDRESS www.stanmore.net.au AUSTRALIAN BUSINESS NUMBER ABN 27 131 920 968 * The registered address will change to Level 32, 12 Creek Street, Brisbane Qld, 4000 on or about 3 May 2022. 101 Stanmore Annual Report 2021 102 Level 15, 133 Mary Street Brisbane Qld 4000 Phone: + 61 7 3238 1000 stanmore.net.au Stanmore Annual Report 2021Notes to the financial statements (CONTINUED)