Annual Report 2022 STANMORE RESOURCES LIMITED STANMORE RESOURCES LIMITED ABN 27 131 920 968 Contents 2 Chair’s Letter 4 8 Chief Executive Officer’s Report Directors’ Report 37 Auditor’s Independence Declaration 38 Financial Statements 99 Independent Auditor’s Report 105 107 Shareholder Information Reserves and Resources 117 Corporate Directory ABOUT STANMORE RESOURCES LIMITED (ASX: SMR) Stanmore Resources Limited controls and operates the Isaac Plains Complex, South Walker Creek and Poitrel metallurgical coal mines, as well as the undeveloped Wards Well, Isaac Plains underground and Isaac Plains South projects, in Queensland’s prime Bowen Basin region. Stanmore Resources is also a joint owner of the Millennium and Mavis Downs Mines and holds several additional high-quality prospective coal tenements located in Queensland’s Bowen and Surat basins. The Company is focused on the creation of shareholder value via the efficient operation of its mining assets and the identification of further development opportunities within the region. 1 Stanmore | Annual Report 2022 Chair’s Letter Dear Shareholders, Against the backdrop of the continued strength of metallurgical coal market conditions, Stanmore completed the acquisition of 100% of Stanmore SMC Pty Ltd (SMC) in October 2022 and began realising initial synergies from integrating these mines into our operations. With the addition of these assets, Stanmore delivered record production and financial results, and improved safety and sustainability outcomes for the year. With the Company adding the South Walker Creek and Poitrel mines to our portfolio, Stanmore is now positioned as one of the largest exporters of metallurgical coal in the world. Robust performance across the board has enabled Stanmore to strengthen our balance sheet and help position the Company for future growth and value creation. 2022 PERFORMANCE Stanmore is committed to safety as our number one priority, and the Company recorded an encouraging improvement in total recordable injury frequency rates (TRIFR) to 1.5 per million working hours (31 December 2021: 7.9). It is worth noting that this improvement took place while the number of working hours across our operations increased to 3.4 million from approximately 800,000 hours in 2021, as a result of the SMC acquisition. Isaac Plains celebrated 15 months injury free in February 2023 and the introduction of the SMC workforce and management has provided opportunities to share key safety lessons across the business. 2022 revenue totalled US$2.70 billion, compared with US$284 million the previous year. With additional saleable production from the acquired assets, which are relatively low-cost operations, Stanmore delivered record margins and underlying Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) of US$1.46 billion, which was more than five times the Group’s market capitalisation at the end of 2021. This was driven by the significant investment Stanmore made of US$1.62 billion to acquire 100% of the SMC assets over the course of 2022. Operating cash flow totalled US$1.18 billion compared to US$96 million in 2021. This enabled the Company to reduce net debt to US$183 million, from a peak of US$795 million in net debt immediately following the acquisition of 80% of SMC on 3 May 2022. SUSTAINABILITY AND GOVERNANCE Stanmore’s vision is to be a leading resources company in Australia, creating value through sustainable development. For Stanmore, this means conducting our operations in a way that seeks to minimise any adverse impact on our people, communities and environment. During 2022 we conducted our first materiality assessment to help us better understand the areas of our operations that have the greatest impact on stakeholders. Through this assessment we have defined seven sustainability focus areas for our business: decarbonisation; responsible water and waste management; sustainable land management and rehabilitation; health, safety and wellbeing of our people; working with and supporting our communities; workforce development and inclusion; and being a trusted and responsible mining company. We have also established a Board Sustainability Committee to oversee that the strategy is being implemented in line with our business goals and values. The Company’s capabilities in this important area of operations have also been strengthened with the appointment of a General Manager with responsibility for growth and sustainability. Our focus is on embedding sustainability into our operations and moving beyond compliance, and the details of our achievements and future commitments can be found in Stanmore’s 2022 Sustainability Report. 2 Stanmore | Annual Report 2022 In May 2022, the Board also welcomed Caroline Chan, Brett Garland and Matt Latimore as Non-Executive Directors, strengthening our industry expertise and diversity. COMPANY OUTLOOK Stanmore is well positioned to deliver on our strategic priorities. We will continue to optimise our operating assets, focusing on safe operations and realising the synergies from our expanded portfolio. We will also seek to progress organic opportunities for incremental production growth at our mines and across our portfolio of development projects. We will identify and pursue appropriate investments in high quality metallurgical coal assets and sustainable development opportunities that will allow us to create meaningful social, environmental and economic value. On behalf of the Board, I would like to sincerely thank the employees, management team, contract partners and professional advisors of Stanmore for their unwavering efforts which have supported great results for the business. Thanks also to you, our shareholders, for your continued support, particularly through the recent testing market conditions across 2020-21 and the challenges brought about from the Covid-19 pandemic, requiring your patience and financial commitment to help facilitate Stanmore’s transformational journey in what has been a truly remarkable year in 2022. Dwi Suseno Chair Total Recordable Injury Frequency Rate 1.5 per million hours Underlying EBITDA US$1.46b 3 Stanmore | Annual Report 2022 Chief Executive Officer’s Report Dear Shareholders, 2022 has been an exciting and transformative year for Stanmore Resources. We completed the acquisition of 100% of SMC and welcomed new employees and contractors into the business. The Company delivered record operating results while executing a seamless integration of the acquired assets, which demonstrates the strength of our operating culture and puts us in a strong position for future growth. Though the industry continued to face challenges such as global inflationary pressures, supply chain disruptions, labour constraints and unseasonal wet weather, as well as ongoing pandemic recovery, the integration of our business this year has been seamless and the commitment, agility and positivity shown by our people is second to none. 2022 saw the Company achieve a record for run of mine (ROM) coal production of 13.5 million tonnes, driven by strong results at our recently integrated Poitrel and South Walker Creek mines. We reported saleable production of 9.2 million tonnes and total sales of product coal of 9.3 million tonnes. It was pleasing to see that these record results were achieved in spite of the impacts of unseasonal wet weather events and while we integrated the acquired assets into our business. All sites ended the year with healthy levels of product and ROM stockpiles to support performance in 2023. 2022 was a year of change for the Isaac Plains Complex, with construction completion and production ramp up at Isaac Downs, commencement of new mining services and coal haulage contractors, and upgrading the capacity at our CHPP and moving to owner operations. Coal mining had a record year, achieving a ROM coal production record of 3.9 million tonnes. South Walker Creek mine continued to achieve impressive results, including the highest annual coal mining, waste stripping and dragline performance on record for the history of the mine, and ROM coal production of 5.4 million tonnes. Poitrel achieved a number of production records during the year, in spite of the impacts of wet weather, and deliver ROM coal production of 4.2 million tonnes. The full integration of the SMC assets was completed in the second half of the year, which allowed us to realise initial synergistic benefits, which included additional coal blending options for customers and the processing of 200,000 tonnes of ROM coal from Isaac Downs at Poitrel’s coal handling and preparation plant (CHPP), among others. Our operations continued to perform safely while managing the implementation of new systems to replace manual processes, and simplifying injury management and hazard, incident, and investigation processes. The outcome is that these systems are fit for purpose and align with the needs of our business. We also implemented a new enterprise resource planning system (SAP), many new contracts, and introduced a new data management platform across the business. These actions have strengthened the business and will allow us to fully realise SMC’s value and create opportunities across our assets. We also concluded the acquisition of the remaining 20% interest in the South Walker Creek and Poitrel operations and associated assets from Mitsui in October 2022, a well-timed transaction fully funded by strong cash flows generated by our operations, consolidating 100% ownership and streamlining management and control of the operating portfolio. Free on board (FOB) costs, excluding royalties, averaged US$83 per tonne sold which was a marginal increase (2021: US$78 per tonne) reflecting inflationary pressures and rising input prices. Average sales price achieved throughout the year was US$290 per tonne compared to US$131 per tonne in 2021. Stanmore has more than 80,000 hectares of land under our management, and we are committed to progressive rehabilitation of areas of mining activity and ultimately returning it to a sustainable final land use. During the year, a total of 270 hectares was successfully rehabilitated across our portfolio. 4 Stanmore | Annual Report 2022 Approval for the implementation of the Mulgrave Resource Area 2C (MRA2C) creek diversion project at the South Walker Creek Mine demonstrates our confidence in the quality of the asset, and will enable us to access competitive shorter haulage, lower strip ratio and higher yielding ROM volumes. MRA2C provides the ability to combine lower strip ratio material with other ongoing pits to better manage fleet size with required waste volumes. All regulatory and environmental approvals are in place for the development of this project and the program of works is focused on enabling mining to commence early 2025. 2023 will be our first full year of ownership of the SMC assets and we are focused on realising the operating and economic synergies from owning four mines within a 50 kilometre radius of each other. We will also continue to progress a range of opportunities for improvements to operations and organic production increases. In parallel with this, we will continue to embed a strong sustainability culture into our operations, investigating emissions reduction mechanisms to assist in our decarbonisation journey and implementing Stanmore’s first Reconciliation Action Plan. I have been impressed throughout the year with the way our people have embraced our new Stanmore and demonstrated commitment to creating an agile, entrepreneurial, and caring workplace. The culture we are building, which demonstrates real care and seeks to encourage our people to share their views and experiences to achieve the best outcomes, has been paramount to simplifying activities and achieving our goals. I would like to take this opportunity to acknowledge the dedication and efforts of the Stanmore Resources team. I thank our employees and contractors for their contribution to the performance of the business, and the directors for their strategic guidance and support. I would also like to thank our Traditional Owners, neighbours, customers and shareholders for their continuing support. Marcelo Matos Chief Executive Officer The Company delivered record operating results while executing a seamless integration of the acquired assets. 5 Stanmore | Annual Report 2022 Annual Financial Report DECEMBER 2022 8 Directors’ report 37 Auditor’s Independence Declaration 38 Financial Statements 42 Consolidated statement of changes in equity 43 Consolidated statement of cash flows 44 Notes to the financial statements 107 117 Reserves and Resources Corporate Directory 6 Stanmore | Annual Report 2022 38 Consolidated statement of profit or loss 98 Directors’ Declaration 39 Consolidated statement of comprehensive income 40 Consolidated statement of financial position 99 105 Independent Auditor’s Report Shareholder Information These financial statements are the consolidated financial statements of the consolidated entity consisting of Stanmore Resources Limited and its subsidiaries. During the period the Company and its subsidiaries changed their functional and presentational currencies from Australian dollars to United States dollars. This annual report, including the Directors’ report and financial statements, are presented in United States dollars and all amounts reported in United States dollars unless otherwise stated. Prior year comparatives have been restated into US dollars following the change in presentation currency. Stanmore Resources Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Stanmore Resources Limited Level 32 12 Creek Street Brisbane QLD 4000 A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’ report on page 8, which is not part of these financial statements. The financial statements were authorised for issue by the Directors on 27 February 2023. Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press releases, financial reports and other information are available at our Shareholders’ Centre on our website: www.stanmore.net.au 7 Stanmore | Annual Report 2022 Directors’ Report The Directors present their report on the consolidated entity consisting of Stanmore Resources Limited (“the Company” or “Stanmore”) and its controlled entities (“the Group”) for the year ended 31 December 2022. PRINCIPAL ACTIVITIES The principal activity of the Group during the period was the exploration, development, production and sale of metallurgical coal in Queensland, Australia. In the opinion of the Directors, there were no significant changes in the state of affairs of the Group that occurred during the financial year that have not been noted in the review of operations. Directors and company secretary Mr Dwi Suseno Mr Marcelo Matos Mr Jimmy Lim Mr Mark Trevan Mr Richard Majlinder Mr Brett Garland (appointed 25 May 2022) Mr Matthew Latimore (appointed 25 May 2022) Ms Caroline Chan (appointed 25 May 2022) The following person was the Company Secretary of the Company during the financial year and up to the date of this report: Mr Rees Fleming 8 Stanmore | Annual Report 2022 INFORMATION ON DIRECTORS The following information is current as at the date of this report. Dwi Suseno Chair 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 Chief Financial Officer 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, and Hong Kong University of Science and Technology. Executive Director of Golden Energy and Resources Limited (SGX: AUE) Nil • Chair of the Disclosure Committee • Member of the Remuneration and Nominations Committee • Member of the Sustainability Committee Other listed current directorships Former listed directorships in last 3 years Special responsibilities Marcelo Matos Chief Executive Officer and Executive Director (Appointed: 27 November 2020) Experience and expertise Other listed current directorships Former listed directorships in last 3 years Special responsibilities Mr Marcelo Matos has circa 25 years of experience in general management in the mining sector in roles overseeing operations, projects, business development, marketing and sales, strategy and planning roles in Australia, Asia (China and Singapore), Mozambique and Brazil. Mr Matos worked for Vale for close to 20 years in various senior roles, including as its Chief Marketing and Strategy Officer for Coal as well as their Managing Director in Australia. Prior to his appointment as Chief Executive Officer, Mr Matos was a Director at Stanmore and 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 and Safety Committee • Member of the Sustainability Committee • Member of the Disclosure Committee 9 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 Jimmy Lim Non-Executive Director (Appointed: 23 October 2019) Experience and expertise Other listed current directorships Former listed directorships in last 3 years Special responsibilities 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. Non-Executive Director at 5E Advanced Materials Inc (NASDAQ: FEAM): appointed 12 January 2022 Non-Executive Director at American Pacific Borates Limited (ASX:ABR): resigned 4 February 2021 • Chair of the Remuneration and Nominations Committee • Member of the Audit and Risk Management Committee Mark Trevan Non-Executive Director (Appointed: 18 May 2020) 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 • Member of the Health and Safety Committee Experience and expertise Other listed current directorships Former listed directorships in last 3 years Special responsibilities 10 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 Richard Majlinder Non-Executive Director (Appointed: 15 May 2020) Experience and expertise Other listed current directorships Former listed directorships in last 3 years Special responsibilities Mr Richard Majlinder is the Chief Investment Officer at Maranello Capital, an Australian-owned private wealth fund. He was previously Chief Commercial Officer for Madison Group Enterprises, a manufacturer and B2B distributor of communications technology. Prior to this, he held a number of roles with PricewaterhouseCoopers (PwC), including as a Partner in Private Clients Advisory, leading client projects across mergers and acquisitions, consulting and financial management. Mr Majlinder has 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. He is also a Member of the Institute of Chartered Accountants in Australia & New Zealand, and a Member of the Australian Institute of Company Directors (AICD). Nil Nil • Chair of the Audit and Risk Management Committee • Member of the Remuneration and Nominations Committee Matthew Latimore Non-Executive Director (Appointed: 25 May 2022) Experience and expertise Mr Matthew Latimore is Chairman and President of M Resources, a rapidly growing and agile company involved in investment, marketing, and trading of metallurgical coal. M Resources also operates metallurgical coal mines in Queensland, Australia. Prior to establishing M Resources, Mr Latimore held the position of General Manager for Sales and Marketing at Wesfarmers’ Curragh coal mine. In this role, Mr Latimore was responsible for global sales to steel mills and domestic and international power utilities. Mr Latimore was also a Director of Curragh Coal Sales Pty Ltd. Mr Latimore has held various positions with Mitsui & Co (Australia) Pty Ltd in Brisbane, Sydney and Tokyo, working on joint ventures including Atlantic Richfield and BHP Mitsui Coal. Mr Latimore has a Master of Business Administration (Executive) from the Australian Graduate School of Management, and a Bachelor of International Business from Griffith University. He is a Graduate of the Australian Company Directors Course and graduated from the Columbia Senior Executive Program in New York in 2011. Non-Executive Director of Bowen Coking Coal Limited (ASX: BCB): Appointed 17 June 2020 Non-Executive Director of Magnum Mining and Exploration Limited (ASX: MGU): Appointed 4 May 2021 Nil Nil Other listed current directorships Former listed directorships in last 3 years Special responsibilities 11 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 Brett Garland Non-Executive Director (Appointed: 25 May 2022) Experience and expertise Mr Brett Garland has worked in the Australian mining industry for more than 44 years and held numerous management and executive management positions, including Executive Vice-President Production–Macarthur Coal, Project Executive, New Saraji–New Hope Group, Managing Director of Caledon Coal and Chief Executive Officer of Baralaba Coal. Mr Garland served from 2005 until 2015 as a member of the Queensland Ministerial Advisory Committee for the Queensland Coal Mining Safety & Health Act. He is currently Director of the Mining Industry Safety & Health Centre, part of the Sustainable Mining Institute at the University of Queensland. He is also Chairman of the Queensland Mines Rescue Board. Mr Garland holds a Bachelor of Engineering (Honours) from the University of Wollongong and an Executive Master of Business Administration from the Queensland University of Technology. He also holds qualifications as a Certified Coal Mine Manager in NSW & Queensland, and is a Fellow of the Australasian Institute of Mining and Metallurgy and a Chartered Professional with the AusIMM. Other listed current directorships Former listed directorships in last 3 years Special responsibilities Nil Nil • Chair of the Health and Safety Committee Caroline Chan Non-Executive Director (Appointed: 25 May 2022) Ms Caroline Chan has more than 20 years of experience in commercial and investment banking, and corporate commercial roles. Most recently, Ms Chan was Head of Institutional Banking, Western Australia & South Australia for Westpac Banking Corporation. Prior to this, she spent 16 years in Sydney in various roles including Chief Operating Officer of Corporate & Institutional Banking at Westpac Institutional Bank. Before joining Westpac, Ms Chan gained transaction and commercial experience through roles in M&A at Deutsche Bank, acquisition finance at NM Rothschild, and at Singtel Optus and Perth Airport. Ms Chan is currently on the Board of the Australia-ASEAN Council. She was a Board member of Loreto Nedlands, and Chair of its Finance Committee from 2016-2021. Ms Chan is a WA Business News ‘40 under 40’ award winner, and is a passionate advocate for inclusion and diversity initiatives. She holds Bachelor of Laws and Bachelor of Commerce (Accounting & Finance) degrees from the University of Western Australia, a postgraduate Diploma in Applied Finance & Investment from the Securities Institute of Australia, and is a Graduate of the Australian Institute of Company Directors (AICD). Nil Nil • Chair of the Sustainability Committee • Member of the Audit and Risk Management Committee Experience and expertise Other listed current directorships Former listed directorships in last 3 years Special responsibilities 12 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 CHIEF FINANCIAL OFFICER Shane Young (Appointed: 12 August 2021) Experience and expertise Mr Shane Young has over 23 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 Australian Institute of Company Directors (AICD). • Member of the Disclosure Committee Special responsibilities COMPANY SECRETARY Rees Fleming (Appointed: 22 July 2021) Experience and expertise Mr Rees Fleming has more than 22 years’ experience as a lawyer in both private practice and in-house roles across shipping, resources, coal mining and sugar industries. He has held General Counsel and Company Secretarial roles for listed and large multinational companies, including Vale, Wilmar Sugar Australia and in private practice with major law firms Ashurst and Clayton Utz. Mr Fleming holds a Master of Law (International Shipping) and a Bachelor of Law. He is a practising legal practitioner, a graduate and member of the Australian Institute of Company Directors (AICD), and a member of Queensland Law Society, Governance Institute of Australia, Association of Corporate Counsel and Energy Resources Law Association. Special responsibilities Mr Fleming has previously held the role of Director of Sugar Terminals Limited. • Member of the Disclosure Committee DIRECTORS’ INTERESTS Mr Latimore and the entities he controls hold 43,593,804 (4.8%) shares in the Consolidated Entity. As at the date of this report, no other Directors held any shares, options and other equity instruments in the Group. 13 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 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 2022, and the numbers of meetings attended by each Director were: Meetings of committees Board Audit & Risk Management Remuneration & Nomination Health & Safety Sustainability A 7 7 7 7 7 5 5 5 B 7 7 7 7 7 5 5 5 A 2 2 2 – 4 – – 2 B 2 2 2 – 4 – – 2 A 3 – 3 – 3 – – – B 3 – 3 – 3 – – – A – 4 2 4 – – 2 – B – 4 2 4 – – 2 – A 2 2 – – – – – 2 B 2 2 – – – – – 2 Mr Dwi Suseno Mr Marcelo Matos Mr Jimmy Lim Mr Mark Trevan Mr Richard Majlinder Mr Matthew Latimore Mr Brett Garland Ms Caroline Chan A= Number of meetings held during the time the Director held office or was a member of the committee during the year B= Number of meetings attended DIVIDENDS PAID OR RECOMMENDED No dividend has been declared or paid for the financial year. SHARES UNDER OPTION At the date of this report, there were nil unissued ordinary shares under Options. During the year ended 31 December 2022, no new Rights were granted to KMP as part of the Stanmore Resources Limited Rights Plan, and 144,898 Rights were forfeited. During the year ended 31 December 2021, no Rights were forfeited and none vested. CHANGES TO CAPITAL STRUCTURE At the date of this report, Stanmore had 901,381,698 (2021: 270,417,381) ordinary shares inclusive of 9,936 employee shares, nil unlisted options and nil Rights on issue. On 3 March 2022, Stanmore announced its Share Entitlement Offer to raise A$694.0m (US$506.0m) to part fund the acquisition of BHP Minerals Pty Ltd’s 80% interest in BMC Mitsui Coal Pty Ltd. A total of 630,964,317 ordinary shares were issued as a result. On 14 February 2022, 9,936 restricted employee shares were converted to ordinary shares. 14 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 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. EVENTS SINCE THE END OF THE FINANCIAL YEAR No matters or circumstance have arisen since 31 December 2022 that have significantly affected the Group’s operations, results or state of affairs, or may do so in future years. 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 hundred thousand dollars unless otherwise stated. ENVIRONMENTAL REGULATION The Group 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. AUDIT AND NON-AUDIT SERVICES The board of Directors has considered the level and type of non-audit services provided by the auditor and, in accordance with advice received from the Audit and Risk Management 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. 15 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 During the year the following fees were paid or payable for non-audit services provided by Ernst & Young, the auditor of the Group: Taxation services Ernst & Young Australian firm: Fees for tax compliance and advisory services Total remuneration for taxation services Other services Ernst & Young Australian firm: Fees for transaction due diligence services Fees for other advisory services Total remuneration for other services Total remuneration for non-audit services Group 2022 $’000 2021 $’000 90.4 90.4 114.3 11.5 125.8 216.2 110.3 110.3 291.1 – 291.1 401.4 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 37. 16 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 OPERATING AND FINANCIAL REVIEW Highlights of the Group’s operations and results for the year ended 31 December 2022 are described below: • Acquisition of 80% interest in BHP Mitsui Coal Pty Ltd (BMC) from BHP, completed on 3 May 2022, for consideration of up to US$1,526.3m. Post completion, BMC was renamed as Stanmore SMC Pty Ltd (SMC) on 11 May 2022; • Successful Share Entitlement Offer during the period, raising A$694.0m (US$506.0m) in funding for the BMC acquisition; • Acquisition of the remaining 20% of SMC from Mitsui on 7 October 2022 for US$270.0m; • There were 5 recordable injuries reported in the period, reducing the rolling total recordable injury frequency rate (TRIFR) for the 12 months ended 31 December 2022 to 1.5 (31 December 2021: 7.9); • Net profit after tax of US$727.4m (31 December 2021: US$6.8m) • Underlying EBITDA (a non-lFRS measure defined below) of US$1,456.0m (31 December 2021: US$34.3m); • Cash inflows from operations of US$1,181.7m (31 December 2021: US$95.7m); and • Cash of US$432.4m as at 31 December 2022 (31 December 2021: US$45.6m). (a) Financial performance Total income Operating Costs Operating profit Profit/(loss) before income tax and net finance expenses Finance income Finance expenses Share of profit/(loss) from associates Profit/(loss) before income tax benefit/(expense) Income tax benefit/(expense) Profit/(loss) after income tax expense Group 31 December 2022 US$M 31 December 2021 US$M Restated 2,699.1 (1,824.3) 874.8 874.8 6.9 (91.7) 19.8 809.8 (82.4) 727.4 284.3 (268.2) 16.1 16.1 1.3 (5.2) (1.8) 10.4 (3.6) 6.8 17 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 (b) Underlying EBITDA result (unaudited, non-IFRS measure) Underlying EBITDA (an unaudited, non-IFRS measure) reflects statutory EBITDA as adjusted to reflect the Directors’ assessment of the result for the ongoing business activities of the Group. The items adjusted are determined to be non-cash transactions that are unrelated to mining operations. The presentation of non-IFRS financial information provides stakeholders the ability to compare against prior periods in a consistent manner. Net Profit after tax Add back: Depreciation and amortisation expense Income tax expense Finance costs–net Earnings before interest, depreciation and amortisation (EBITDA) Transaction and transition costs Inventory Purchase Price allocation adjustment Underlying EBITDA (non-IFRS measure) Group 31 December 2021 US$M Restated 6.8 20.0 3.6 3.9 34.3 – – 34.3 31 December 2022 US$M 727.4 225.7 82.4 84.8 1,120.3 108.3 227.4 1,456.0 The underlying EBITDA of US$1,456.0m for the year ended 31 December 2022 was a US$1,421.7m increase compared to the underlying EBITDA of US$34.3m for the period to 31 December 2021. The increase in EBITDA was primarily driven by the acquisition of the South Walker Creek and Poitrel mines on 3 May 2022, as a result of the acquisition of SMC. FOB cash costs per tonne have decreased year on year due to the transition to the lower strip ratio Isaac Downs mine combined with the contribution from the low cost South Walker Creek and Poitrel mines. The primary drivers contributing to the Net Profit after Tax (‘NPAT’) result include: • Gross revenue from coal sales increased to US$2,695.8m for the year ended 31 December 2022 from US$283.3m in the period to 31 December 2021. The increase was driven by a US$159.08/t increase in the US$ realised price to an average of US$290.04t from US$130.96/t in the prior period, and an increase in sales of produced coal to 9.3mt in the period to 31 December 2022 from 2.2mt in the period to 31 December 2021; • Due to inflationary pressures, our Free on Board (‘FOB’) cash costs per tonne (excluding royalties and inventory movements) have increased year on year, from US$78.2/t to US$82.6/t, more than offsetting the transition to the lower strip ratio Isaac Downs mine, combined with the contributions from the low-cost South Walker Creek and Poitrel mines. • Depreciation and amortisation costs increased from US$20.0m to US$225.7m in line with the increased Property, Plant and Equipment assets, mine property assets and production levels during the period as a result of the acquisition of the SMC assets. 18 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 (c) Cash flow In the period to 31 December 2022, total net cash inflows of US$386.8m, including the effect of exchange rate changes, were recorded (31 December 2021: US$41.7m) The net cash inflow from operating activities was US$1,181.7m (31 December 2021: US$95.7m). Overall operational cash flows have increased due to significantly higher receipts from coal sales, driven by the increased sales tonnes and higher average sales price per tonne. Cash outflows from investing activities were US$1,426.8m (31 December 2021: US$72.9m). Of this US$1,323.4m related to the acquisition of the 80% shares in SMC (including US$100m of deferred consideration) and US$83.5m related to ongoing PPE investment. Net cash from financing activities totalled US$640.4m (31 December 2021: US$51.7m), with US$503.1m of inflows from the issue of shares in the period, US$795.0m from the drawdown of financing arrangements, most notably the US$625m acquisition financing facility entered in the period. US$249.2m of borrowings were repaid, US$110m paid in dividends to non-controlling interests and a US$270.0m outflow relating to the acquisition of the remaining 20% in SMC. See note 14 for further information. Net cash at beginning of period Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effects of exchange rate changes on cash and cash equivalents Net increase/(decrease) in cash held Net cash at end of period (d) Health, safety, environment and community performance Group 31 December 2022 US$M 31 December 2021 US$M Restated 45.6 1,181.7 (1,426.8) 640.4 (8.5) 386.8 432.4 3.9 95.7 (72.9) 20.6 (1.7) 41.7 45.6 The Group continues to be committed to the health, safety and wellbeing of our people, the environment and the communities in which we operate. The safety performance results for the year are directionally encouraging despite five recordable injuries. The 12-month moving average TRIFR for the business reduced to 1.5 per million hours (31 December 2021: 7.9 per million hours), driven by a 15-month injury free period at Isaac Plains. The strong positive safety culture has continued during the period, with learnings integrated and shared across the business since the integration of assets acquired from BHP and Mitsui. Stanmore continues to support the communities in which our operations are located with a number of grants, sponsorships, important community initiatives and events undertaken during the year. Seventy local community organisations received funding during the year. In addition, significant ‘in-kind’ time was also dedicated to regional industry bodies and professional groups to enhance local industry and services in the region. 19 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 (e) Operations Physicals ROM Coal Mined (mt) Clean coal produced (mt) Coals Sales (mt) Unit costs of sales (US$/t sold) Revenue /Sales T US$ FOB Cash Costs / Sales T (ex Royalties & inv) US$ Royalties / Sales T Group 31 December 2022 31 December 2021 13.50 9.20 9.30 $290.0 $82.6 $49.4 2.80 2.10 2.20 $131.0 $78.2 $12.4 Results for the period benefited from the acquisition of the South Walker Creek and Poitrel mines with sales volumes of produced coal increasing compared to the corresponding period by 7.1 million tonnes, reflecting the full consolidation of SMC from 3 May 2022. The volume increase, which has coincided with an increase in average realised sales price to US$290.04/tonne, has driven a record underlying EBITDA of US$1.456.0m after adjusting for US$335.8m of accounting adjustments and one-off transition costs related to the SMC acquisition to better reflect actual business notional performance. The US$335.8m adjustment is made up of: • Inventory revaluation adjustment based on net realisation value as at 3 May 2022 (at elevated coal prices) required for accounting purposes as part of the BMC acquisition–this increased the value of coal acquired (and subsequently sold in May and June) by US$227.4m • One-off transaction costs associated with the acquisition totalling US$108.3m, such as government stamp duty, due diligence, advisory, transition and subsequent integration costs. Notwithstanding the impacts presented by the increase in royalties imposed by the Queensland State, cash generated from our operations has increased to US$1,181.7m (31 December 2021: US$95.7m). The industry during 2022, just like the global economy, has seen significant pressure on costs driven by rising input prices of diesel, explosives, parts as well as labour and general services. These cost pressures are expected to continue and be realised over the full year in 2023. Noting the continued above inflationary pressures, our Free on Board (‘FOB’) cash costs per tonne (excluding royalties and inventory movements) have increased year on year, from US$78.2/t to US$82.6/t, more than offsetting the transition to the lower strip ratio Isaac Downs mine, combined with the contributions from the low-cost South Walker Creek and Poitrel mines. Weather events (both seasonal and unseasonal across the course of the year) resulted in operational impacts especially in relation to truck and excavator pre strip and coal mining and truck haulage across all three mines, however production targets were achieved as per guidance previously provided. 20 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 (f) Isaac Downs Project Isaac Downs is located 10 kilometres south of the existing Isaac Plains operations. Isaac Downs operates as an open cut mining operation utilising the existing Isaac Plains infrastructure with coal washing and train loading activities undertaken at the existing CHPP. During the period, the dragline commenced operations at Isaac Downs at which point full scale production commenced. (g) COVID-19 impacts The Group 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 Group 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 Group as at the reporting date or subsequently as a result of the COVID-19 pandemic. (h) Financing On 7 January 2022, the Group announced that it had executed, through its wholly owned subsidiary Stanmore SMC Holdings Pty Ltd, a definitive debt facility agreement in respect of a US$625 million secured loan facility, to partly fund the acquisition of the 80% interest in BHP Mitsui Coal Pty Ltd (now Stanmore SMC Pty Ltd). The loan was secured against certain assets of the Group and was used for the general corporate purposes of the Company, including to fund working capital needs. The loan was fully drawn prior to successful completion of the SMC acquisition on 3 May 2022. On 3 March 2022, the Group announced that it had entered into a definitive facility agreement in respect of a US$120 million senior secured Revolving Credit Facility (‘RCF’). The RCF was secured against certain assets of the Group and will be used for the general corporate purposes of the Company, including to fund working capital needs. On 3 March 2022, the Group announced its Share Entitlement Offer to raise A$694 million (US$506 million) to part fund the acquisition of BHP Minerals Pty Ltd’s 80% interest in BMC Mitsui Coal Pty Ltd. The institutional component of the Entitlement Offer closed on 3 March 2022 and raised gross proceeds of A$656 million (US$478 million). The retail component of the Entitlement Offer closed on 24 March 2022, raising A$38 million (US$27.7 million) in gross proceeds. On 4 April 2022, the Group announced the execution of a A$110 million facility, comprising a A$60 million bank guarantee facility and A$50 million working capital facility, to be made available upon completion of the acquisition of BMC. On 14 April 2022, the Group executed an US$50 million Senior Secured Facility Agreement, to act as a short-term bridging loan during the completion period of the BMC acquisition. On 3 May 2022, the Group completed the acquisition of an 80% interest in BHP Mitsui Coal Pty Ltd, consisting of the South Walker Creek and Poitrel mining operations, for initial cash consideration of US$1,255m, which was subsequently adjusted to US$1,223.4m as part of the completion processes. See note 2 for additional information regarding the fair value of the assets acquired and the consideration paid, including contingent and deferred consideration recognised upon completion. On 19 May 2022, the Group executed a A$90 million Surety Bond facility to support the contractual performance guarantee requirements of the BMC. The facility is secured against the BMC specific assets. See note 14 for further information. On 8 December 2022, the Group executed a A$25 million unsecured Surety Bond facility to support the contractual performance guarantee requirements of the Stanmore and Isaac Plains. (i) Investment in MetRes incorporated Joint Venture Auger and open-cut mining continued throughout 2022. MetRes are continuing to mine the Millennium pit, which will assist with coal volumes to support the ramp up of underground operations. Underground mining development drivage has commenced, with development coal expected from late 3Q 23. 21 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS (a) Operations Given the transformational changes during 2022, the focus will be to continue streamlining and embedding the acquired operational assets into the Stanmore Group. Healthy ROM inventories at 31 December 2022 have provided a strong position for the early 2023 wet weather events. We expect continued pressure on our input costs, driven by global inflationary environment and labour constraints. However there is optionality to explore competitive value improvement, as well as expansion opportunities to provide incremental volume increases and/or manage these continued input cost pressures. The Mulgrave Resource Area 2C (MRA2C) has been approved, with capital expenditure to commence in 2023. The fully permitted project provides access to lower strip ratio and higher yielding/quality ROM volumes for our South Walker Creek operation. The first annual cash flow sweep of US$252million was paid in February 2023, eliminating 41% of the outstanding principal balance of the acquisition financing facility as at 31 December 2022. As a result, overall balance sheet resilience has been established to provide a strong platform heading into 2023. (b) Exploration and development On 16 February 2022, Stanmore announced a decrease to coal resources and reserves at the Isaac Plains Complex under the relevant Australasian Code for Reporting Exploration Results and Ore Reserves (JORC Code). On 31 October 2022, Stanmore announced an increase to the coal resources and reserves at its SMC assets under the relevant Australasian Code for Reporting Exploration Results and Ore Reserves (JORC Code). On 27 February 2023, Stanmore announced the annual update to coal resources and reserves across the Group under the relevant Australasian Code for Reporting Exploration Results and Ore Reserves (JORC Code). The total Proved and Probable Coal Reserves across all tenements formally declared and published are now 382Mt, and the total Marketable Coal Reserves are 294Mt. The Group will continue to monitor and assess the opportunities to develop or monetise its existing portfolio of assets in the Bowen and Surat Basins and explore acquisition opportunities where it makes financial and commercial sense to do so. (c) Managing risks Stanmore is a metallurgical coal company operating in a volatile pricing market. Factors specific to Stanmore, or those which impact the market more broadly, may individually or in combination impact the financial and operating performance of the Group. These events may be beyond the control of the Board or management of Stanmore. The material risks associated with an investment in Stanmore are summarised below. Stanmore identifies and actively manages the material risks as part of its risk management governance framework and internal control systems. (i) Safety risks The Health and Safety of our employees 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 people associated with our business are not exposed to hazards that will jeopardise their physical and mental health and safety. 22 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 (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. The completion of agreements to acquire 100% of the assets of SMC operations greatly reduces the reliance risk. Operating risks that may result in the reduction in performance that decreases the Group’s ability to produce high quality metallurgical coal to meet customer’s shipping needs include but are not limited to weather conditions, machinery failure, critical infrastructure failure or natural disasters and supplier concentration. (iii) Market risks The Group’s activities expose it to market risks including commodity price risk and foreign currency risk. The Group’s exposure to commodity price risk is predominantly changes in metallurgical coal prices, which are driven by various factors, including but not limited to, changes in seaborne supply, geopolitical economic activity, commodity substitution, international demand and contract sales negotiations. Currently, the Group does not hedge against coal price volatility. As the US dollar is the Group’s predominant sales currency and functional currency, any transactions denominated in a currency other than the US dollar expose the Group to foreign currency risk. The Group enters into Derivative Financial Instruments to hedge a portion of this risk. In order to diversify its customer base and to minimise reliance on key customers, the Group is continuing to work on identifying new customers and markets in 2023 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 results from exploration activities and various assumptions regarding loss and dilution, drilling depth and other geotechnical constraints. Reserves are sensitive to cost and revenue assumptions. Some of the deposits are more sensitive to 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 as more detailed exploration is undertaken the estimates are expected to change. (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 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 advisors to provide expert advice where necessary to ensure it manages its compliance obligations appropriately. 23 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 (vi) Climate change risks The operations of the Group are focused on the production of metallurgical coal for use in the steel making industry. Considering the nature of the industry in which the Group operates, both physical and transitional climate change risks have the potential to impact assets, production and the markets where our product is sold. Transitional risks are climate change risks associated with the transition to the lower-carbon economy and include policy, legal, technology and market related risks. Physical risks have direct financial implications to the Group, and 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 in the potential risks and opportunities to our business and the broader sector as a result of shifts towards a lower-carbon economy. This includes the risk of climate activism. 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. The Group 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. Further details in relation to climate change risk will be provided in the Stanmore 2022 Sustainability Report. Stanmore will report in reference to the Global Reporting Initiative (GRI) Standards, including the GRI Standard 12–Coal Sector 2022. The GRI Standard provides a framework to report Stanmore’s most significant impacts on the economy, environment, and people. Stanmore is working towards tracking and disclosing our climate-related risks and opportunities in line with the Taskforce on Climate Related Financial Disclosures (TCFD) framework. (vii) Indigenous engagement Through a process of facilitation and recognition of the need for reconciliation, Stanmore is dedicated to developing a working and collaborative relationship with the traditional custodians of the land in which we operate. This includes the Barada Barna, Widi and Janga People. The Company has committed to developing a Reconciliation Action Plan (RAP), the draft of which has been submitted to Reconciliation Australia. The process will not only strengthen ties with the traditional owners but pave the way for true reconciliation within the broader meaning. Stanmore has developed Native Title Consent Agreements (ILUA) and Cultural Heritage Management Plans across our operations, with the Barada Barna and Widi People. (viii) Sovereign risks Stanmore 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. Stanmore’s view is metallurgical coal is critical for future steel production. During the period the Queensland Government announced a significant change to the coal royalty regime as part of its 2022-23 budget, making the royalties paid by coal producers in Queensland the highest in the world. Three new progressive royalty tiers have been introduced in addition to the current structure, so the regime is as follows: • As per the existing regime for prices below A$175 per tonne; • 20% for prices above A$175 per tonne; • 30% for prices above A$225 per tonne; and • 40% for prices above A$300 per tonne. 24 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 The previous regime was: • 7% for prices up to A$100 per tonne • 12.5% for prices up to A$150 per tonne; and • 15% for prices above A$150 per tonne. The changes to the safeguard mechanism currently being considered by the Australian federal parliament create a future risk to the Stanmore business. Two of our mines are considered safeguard facilities and will be impacted by declining emissions baselines as proposed. We are monitoring developments and are concurrently putting in place mitigation measures to reduce the financial impact. (ix) Access to capital There is a risk that the Group has insufficient liquidity or is unable to access funding on acceptable terms. The Group manages this risk by retaining a prudent level of cash reserves and maintaining an adequate level of credit facilities. The acquisition of SMC was funded through a combination of financing (US$625 million senior debt facility) and equity (US$503 million) demonstrating the Group’s ability to access funds when required. At 31 December 2022 the Group remains well funded with cash reserves of US$432.4 million and access to finance facilities of US$223.9 million that are expected to be sufficient to meet the business’ requirements. There is a risk of non-compliance with our annual covenant ratios and compliance requirements. This risk is considered low based on current forecast assumptions and current headroom. The Group currently participates in the Queensland Rehabilitation Provisioning Scheme. The Scheme provided for the contribution of an annual fee rather than to put in place bank guarantee or bonding arrangements with the Queensland Government. Should the Group cease to qualify for participation in the Scheme, a bonding arrangement of approximately A$396.6m will be required to be put in place placing further stress on the capacity of the Group to access capital for other activities. (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 of obtaining appropriate levels of insurance or an inability to secure adequate insurance cover. (xi) Cyber risk The Group’s operations are supported by a robust back-up data and information technology security framework. However, security of information and operational systems may still be threatened by cyber-attack, computer viruses and similar unauthorised access and disruptions. The Group looks to manage this risk by investing in systems and processes to prevent and detect attacks and unauthorised access. (xii) Logistics risk The Group is dependent on third party rail and port providers to export our product. Disruptions in the coal logistics chain can have a material impact on our business as would the inability to secure and/or maintain logistical contractual arrangements. The Group looks to manage this risk by operating on two different port / rail corridors, contracting with multiple providers of above rail capacity and securing secondary capacity. (xiii) Attract and retain people The Group’s ability to achieve its strategy is reliant on attracting, developing and retaining skilled and experienced employees and contractors. An inability to attract or retain such personnel could adversely affect the success of the Group’s business. To manage this risk, the Group seeks to design employment arrangements and succession plans to secure and retain key personnel. In addition, the Group seeks to build a future supply of industry labour by focussing on our local communities and new to mining entrants. 25 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 REMUNERATION REPORT (Audited) This report details the nature and amount of remuneration for Key Management Personnel (‘KMP’) of the Group. KMP are defined as those persons who have the authority and responsibility for planning, directing and controlling the activities of the Group, including the Director’s of the parent entity, Stanmore Resources Limited. The Group’s KMP during 2022 and up to the date of this report were: BOARD Name Position Held Mr Dwi Suseno Non-Executive Director Chair of the Board of Directors Chair of the Disclosure Committee Chair of the Sustainability Committee Appointed 20 April 2022 Resigned 1 January 2023 Mr Marcelo Matos Executive Director and Chief Executive Officer Mr Jimmy Lim Non-Executive Director Chair of the Remuneration and Nominations Committee Mr Matthew Latimore Non-Executive Director Appointed 25 May 2022 Mr Mark Trevan Independent Non-Executive Director Chair of the Health & Safety Committee Resigned 1 July 2022 Mr Richard Majlinder Independent Non-Executive Director Chair of the Audit and Risk Management Committee Mr Brett Garland Independent Non-Executive Director Chair of the Health & Safety Committee Ms Caroline Chan Independent Non-Executive Director Chair of the Sustainability Committee Appointed 25 May 2022 Appointed 1 July 2022 Appointed 25 May 2022 Appointed 1 January 2023 OTHER EXECUTIVE KMP Name Position Held Mr Shane Young Chief Financial Officer Mr Leandro Pires General Manager Technical Mr Damian Zagel General Manager Growth and Sustainability Mr Jon Romcke General Manager Development Appointed 19 May 2022 Resigned 29 April 2022 26 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 REMUNERATION GOVERNANCE The Group’s business strategy of managing an operating metallurgical coal business can only be achieved by identifying and retaining high calibre employees with appropriate experience and capability. Developing an appropriate compensation strategy for the Group’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 teams without creating an undue cost burden. The Board maintains overall responsibility for the remuneration of the Executive KMP and ensures structures are competitive and align with the long-term interest of the Group and shareholders. Oversight in relation to KMP remuneration is delegated to the Remuneration and Nominations Committee (RNC) who regularly review, report and make recommendations to the Board. The Board formally reviews Board and senior executive performance on an annual basis. REVIEW OF REMUNERATION ARRANGEMENTS From time to time, the RNC 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 and other executive remuneration. The RNC proposed revised Non-Executive Director remuneration rates which were accepted by the Board. Following the revision to the remuneration, total aggregate Director remuneration remained within the shareholder approved maximum aggregate cap of A$750,000 pa. Following completion of the successful acquisition of the SMC assets, a review of other executive fixed remuneration, including Executive KMP, was carried out using data sourced from an external provider. Following receipt of the data, the RNC proposed revised executive remuneration rates which were accepted by the Board. The RNC has processes in place to ensure that all engagements with independent external remuneration consultants, and recommendations (if any) are free from undue influence. At times, remuneration consultants may be required to interact with management to obtain relevant information required to form any remuneration recommendations. In these instances, the Chair of the RNC has oversight of these interactions. The Board confirms that remuneration recommendations were made free from undue influence. EMPLOYMENT CONTRACTS It is the Board’s policy that employment contracts are entered into with all Non-Executive Directors and Executive KMP. For the purpose of this Remuneration Report, Mr Marcelo Matos is considered as an Executive KMP. Employment contracts detail conditions of employment and individual terms which include cash salary, superannuation, STI and LTI arrangements and non-cash benefits. The details of key employment terms are noted below. Name Term of Agreement and Notice Period Base Remuneration* Marcelo Matos No fixed term–6 month notice period Shane Young No fixed term–3 month notice period Leandro Pires No fixed term–3 month notice period Damian Zagel No fixed term–3 month notice period *As at and for the year ended 31 December 2022 A$646k A$440k A$392k A$400k 27 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 ELEMENTS OF REMUNERATION (i) Fixed annual remuneration Executive KMP fixed remuneration The Group aims to reward the Executive KMP with a base level of remuneration which is both appropriate to the position and competitive in the market. The CEO reviews performance of the senior management team and then makes recommendations for review and approval by the RNC and Board. The RNC reviews performance of the CEO and then makes recommendations for review and approval by the Board. 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. Non-Executive Director fixed remuneration The Board seeks to aggregate remuneration at a level which provides the Company 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 A$750,000 per annum (31 December 2021: A$750,000 p.a.). Non-Executive Director fees are A$113,000 per annum (31 December 2021: A$50,000 p.a.). Committee fees are A$22,600 (31 December 2021: A$10,000) per annum for the Chair and A$11,300 (31 December 2021: A$5,000) per annum for members. In addition, during the period the Board 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, which was paid on 10 June 2022. Total Non-Executive Director remuneration for the year was A$664,189 (31 December 2021: A$541,033). During the year, in recognition of the special exertions dedicated to ensure the successful completion of the BMC acquisition, Non-Executive Directors were awarded a special exertions payment of A$68,862 per Director pursuant to clause 11.11 of the Stanmore Constitution. This payment is noted as a short term bonus in the Statutory Remuneration Table included in this report and is excluded from Total Non-Executive Remuneration calculations per ASX Listing Rules. Non-Executive Directors are 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 2022 is detailed in the Statutory Remuneration Table included in this Report. 28 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 (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 Executive KMP, on the basis that they: • drive realisation of shareholder value; • provide flexibility to the Company to actively manage the way in which it remunerates and incentivises Executive KMP; • preserve the Company’s cash resources; and • contribute to the attraction and retention of skilled talent in a competitive market. Short-term incentives For the year ended 31 December 2022, performance targets for STI were formalised and agreed by the Board. There are no individual targets in the STI Plan. All targets are based on performance of the Group with all employees working towards common goals. The outcomes for the STI scheme for the year ended 31 December 2022 are shown below. Incentive Target (% of STI) Outcome (% of STI) Lead Safety Indicators Clean Coal Production FOB Cash Costs People and Culture Projects Total 20% 20% 20% 20% 20% 100% 40% 27% 23% 40% 24% 154% In FY22, all Executive KMP are entitled to a payment under the STI scheme. The FY22 STI is due to be paid in March 2023. The STI for the year ended 31 December 2022 is ultimately subject to Board discretion, based on performance of the Group, and calculated in line with the STI targets for the financial year, and is shown below: FY22 FY21 Target Actual Target Actual Base of Salary % 60% 50% 40% 40% – Amount US$ Awarded US$ 269,527 412,376 153,161 234,337 108,961 166,710 111,265 170,235 – – Marcelo Matos Shane Young Leandro Pires Damian Zagel Jon Romcke Base of Salary % Base of Salary % Amount US$ Awarded US$ 203,440 248,104 113,954 138,973 101,335 123,584 – – 50% 40% 40% – 40% 105,942 129,216 92% 77% 61% 61% – Base of Salary % 61% 49% 49% – 49% 29 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 DISCRETIONARY BONUS Following successful completion of the acquisition of SMC and in recognition of the efforts made, the board of Stanmore determined an acquisition incentive arrangement for Executive KMP, with payment to be made in five tranches. The first tranche consisting of 50% of the bonus amount was paid in June 2022. The remaining 50% will be paid over four years in four equal instalments equivalent to 12.5% of the total bonus on the anniversary date of the of the first payment from 2023–2026. Payment of each tranche is subject to the individual remaining in employment within the Stanmore Group at the time of payment. These amounts are noted as a long term bonus in the Statutory Remuneration Table included in this report. 2022 Paid US$ 2023 Awarded US$ 2024 Awarded US$ 2025 Awarded US$ 2026 Awarded US$ Total Awarded US$ Marcelo Matos Shane Young Leandro Pires 825,000 300,000 250,000 206,250 206,250 206,250 206,250 1,650,000 75,000 62,500 75,000 62,500 75,000 62,500 75,000 62,500 600,000 500,000 (iii) Long-term incentives 2021 LTI In recognition of the imminent and significant change to Stanmore through the transformational deal to acquire the BMC assets, the Board resolved to vest all LTIP participants their full long-term incentive at par (100%) value as at March 31, 2022, and pay the LTI in cash in three equal annual instalments. The first of these instalments was paid on the same date as the payment of the 2021 STI plan on 24 February 2022. The second and third payments will be made at the same time as payments for the 2022 and 2023 STI plans respectively, or if no STI payment is made in those years, by no later than March 31 in the relevant year, conditional upon the Executive KMP remaining employed by Stanmore at that time. The LTI payment was calculated on a prorate basis from the date of entry into the LTI plan at Stanmore, or June 30, 2020 (whichever is later) until March 31, 2022. Marcelo Matos Shane Young Leandro Pires Jon Romcke 2022 LTI 2022 Paid US$ 2023 Awarded US$ 2024 Awarded US$ 102,620 23,013 46,155 59,027 102,620 23,013 46,155 – 102,620 23,013 46,155 – The current LTI plan (Plan) operates as follows: • The Plan may be offered annually to eligible employees as determined by the Board (Participants). • The Board may award a LTI right to a Participant in accordance with the Plan rules (Award). • Each Award will entitle the Participant to a right to receive a cash amount at the relevant payment date, currently at the end of year 3 of each annual Plan subject to the successful achievement of pre-determined conditions (Vesting Conditions) and / or other conditions as determined by the Board (LTI Payment). • If any applicable Vesting Conditions and / or other conditions are not met, Awards, and subsequent LTI Payment, will lapse, in full or in part, unless otherwise determined hereunder or by the Board. • The Awards are not equal to shares in the Company and do not carry any voting rights or rights to receive dividends or capital distributions. 30 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 • Participants are not required to pay a fee to be granted the Awards. • Payment remains subject to Board discretion. • Participant remains employed by Stanmore at the time of payment. The Plan Award is subject to two Vesting Conditions that are separately tested. Each Vesting Condition contributes 50% towards the assessment of the LTI Payment, The Vesting Conditions are: • Weighted Average TSR (Total Shareholder Returns) against ASX listed coal producer basket (50% of LTI to be assessed against this condition). The share price of the Company for year zero and year three values for each LTI period will be determined on a volume weighted average price basis over a period of 10 days on which the ASX is open for trade (Business Day) being four Business Days prior to 1 April, 1 April and five Business Days after 1 April. TSR will take into account all dividends paid to shareholders over the previous 12 months and any declared but unpaid dividends as at 1 April in the relevant year. A recommended TSR will be calculated, taking into account, without limitation, publicly available information; and • 12% Weighted Average Cost of Capital (50% of LTI to be assessed against this condition). Measurement Targets are as follows: TSR (weighted average) WACC Payment multipliers are as follows: Relative TSR WACC Threshold 80% 80% Threshold 50% 50% Target 80% = 100% 12% = 100% Target 100% 100% Stretch 120% 120% Cap 200% 200% If a result falls in between the ranges, the LTI Payment will be awarded a % multiplier on a linear basis. To be eligible for payment the relevant employee is required to be employed at the time of payment. Link between remuneration and performance Statutory performance indicators Group Profit / (Loss) attributable to the Group ($ million as reported) 2022 727.3 2021 6.8 Revenue ($ million as reported) 2,699.1 284.3 Basic earnings per share ($/share, as reported) Diluted earnings per share ($/share, as reported) Share price at period end (A$/share) Shareholder dividends paid (A$/share) 83.94 83.94 2.95 – 2.6 2.6 1.035 – December 20201,2 (11.8) 99.5 (0.04) (0.04) 0.81 – June 20202 23.4 20192 65.5 244.8 288.4 0.09 0.09 0.78 0.11 0.25 0.25 1.425 0.05 1 2 6-month period to 31 December 2020. Australian dollar results previously reported translated to US$ at the average exchange rate for the period. 31 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 KMP Statutory tables The following table sets out the statutory remuneration disclosures required under the Corporations Act 2001 (Cth) and have been prepared in accordance with appropriate accounting standards. They detail the components of remuneration for KMP, for both the year ended 31 December 2022 and the corresponding period to 31 December 2021. 20226 Short-term employee benefits Post-employment benefits Cash salary and fees $ Cash bonus $ Other non- monetary benefits $ Superannuation $ LTIP $ Termination benefits $ Total $ Directors Mr Dwi Suseno1 Mr Jimmy Lim 101,854 48,439 – – – Mr Marcelo Matos 494,686 1,210,410 20,136 29,864 482,415 Mr Mark Trevan Mr Richard Majlinder Mr Brett Garland2 Ms Caroline Chan2 112,245 119,551 49,641 49,641 Mr Matthew Latimore2,5 – 48,439 48,439 – – – – – – – – 8,521 8,651 5,212 5,212 – – – – – – Sub-total Directors 927,618 1,355,727 20,136 57,460 482,415 Senior Management Mr Shane Young 325,625 524,283 Mr Leandro Pires 297,303 480,054 Mr Damian Zagel4 153,606 191,068 Mr Jon Romcke3 102,540 – 21,651 21,651 11,727 7,217 25,102 231,048 24,527 163,942 16,747 100,662 6,621 (87,884) 17,098 45,592 Sub-total Senior Management Total Director and Senior Management remuneration 879,074 1,195,405 62,246 72,997 407,768 17,098 2,634,588 1,806,692 2,551,132 82,382 130,457 890,183 17,098 5,477,944 1 2 3 4 5 6 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 Group. Mr Garland, Mr Latimore and Ms Chan were appointed 25 May 2022. Mr J Romcke resigned, effective 29 April 2022. Mr D Zagel commenced, effective 19 May 2022. Mr Latimore has waived his Director fees. The Australian dollar compensation paid during the year ended 31 December 2022 have been converted to US$ at an average exchange rate for the year. Both the amount of remuneration and any movement in comparison to prior years may be influenced by changes in the AUD/USD exchange rates. 32 – – – – – – – – – – – 150,293 2,237,511 169,205 176,641 54,853 54,853 – 2,843,356 1,127,709 987,477 473,810 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 KMP Statutory tables (continued) 20215 Short-term employee benefits Post-employment benefits Cash salary and fees $ Cash bonus $ Other non- monetary benefits $ Superannuation $ LTIP $ Total $ Directors Mr Dwi Suseno1 Mr Jimmy Lim – 159,547 – – – – – – – – – 159,547 Mr Marcelo Matos 405,406 245,453 7,827 17,333 288,201 964,220 Mr Mark Trevan Ms Mary Carroll2 Mr Richard Majlinder 99,476 17,110 107,178 – – – – – – 9,948 1,632 10,718 – – – 109,424 18,742 117,896 Sub-total Directors 788,717 245,453 7,827 39,631 288,201 1,369,829 Senior Management Mr Shane Young4 Mr Leandro Pires 110,666 138,972 253,336 208,372 Mr Frederick Kotzee3 159,622 – 264,851 127,259 – 1,029 29,236 10,293 7,814 47,480 304,932 18,584 126,668 607,989 11,916 17,020 – 200,774 158,911 578,334 788,475 474,603 40,558 55,334 333,059 1,692,029 1,577,192 720,056 48,385 94,965 621,260 3,061,858 Mr Jon Romcke Sub-total Senior Management Total Directors and Senior Management 1 2 3 4 5 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 Group. Ms Carroll resigned, effective 2nd July 2021. Mr Kotzee resigned, effective 12 August 2021. Mr Young commenced, effective 12 August 2021. The Australian dollar compensation paid during the year ended 31 December 2021 have been converted to US$ at an average exchange rate for the year. Both the amount of remuneration and any movement in comparison to prior years may be influenced by changes in the AUD/USD exchange rates. 33 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 ADDITIONAL STATUTORY INFORMATION (i) Movement in options and rights held by KMP Following the resignation of Mr J Romcke on 29 April 2022, a total of 144,498 rights in relation to a previously disclosed LTIP lapsed. Details of Rights held directly, indirectly, or beneficially by KMP and their related parties are as follows: Opening Balance Rights Issued Rights Vested Rights forfeited Closing Balance Jon Romcke 144,698 – – 144,698 – (ii) Movement in ordinary shares held by KMP There are no shares held in the Company by executive KMP or Non Executive Directors. See below table of shares held by related parties during the course of the year. GEAR M Latimore/ M Resources Opening Balances Shares Issued Shared purchased Shares sold Closing Balances 203,697,945 373,317,737 38,866,531 22,727,273 – – – 577,015,682 18,000,000 43,593,804 (iii) Related party transactions and additional disclosures Mr M Latimore is the sole Director and owner of M Resources Trading Pty Ltd which is exclusively contracted to provide marketing and logistics services to the Group. Mr Latimore is also Director and holder of 50% of shares in MetRes Pty Ltd. Mr D Suseno is an Executive Director and Group Chief Executive Officer of GEAR who are the majority shareholder holding 64.01% of shares in Stanmore. (iv) Loans with executive KMP and Non-Executive Directors The Group has provided a secured total finance facility to MetRes Pty Ltd of up to A$30m which was negotiated on market terms. As at 31 December 2022, the balance of the facility is $0 (31 December 2021: US$18.3m). Financing related income charged to MetRes totalled $1.437m (31 December 2021: US$1.180m). The key terms of the facility are: • Secured finance facility up to A$30 million comprising a working capital facility of up to A$15 million to cover initial working capital requirements and an additional A$15 million debt facility as required • Loan is fully secured against the underlying property, plant and equipment, and mine properties of the Joint Venture • Interest rate on drawn funds of 9% per annum • Interest rate on undrawn funds of 3% per annum. 34 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 The Group currently has a secured loan facility for US$70m with its parent entity, GEAR, which was negotiated on market terms. As at 31 December 2022, the balance of the facility is $0 (31 December 2021: US$67.6m). Financing related costs paid to GEAR totalled $5.191m (31 December 2021: $1.991m) The key terms of the facility are: • US$70 million facility until 30 June 2023 • Upfront commitment fee of 2% • Interest rate on drawn funds of 8% per annum • Interest rate on undrawn funds of 2% per annum. There were no other loans outstanding to or owed by executive KMP or any Non-Executive Director or their related party entities at any time in the current or prior reporting periods. (v) Other KMP Transactions Transactions with Mr M Latimore’s related entities include: • Fees for services provided on market terms for marketing and logistics services totalling US$42.020m for the year ended 31 December 2022 (31 December 2021: USS4.098m) • Fees for services provided on market terms for support of the SMC acquisition totalling US$1.524m (31 December 2021: US$0m) • Stanmore purchased coal from M Resources Trading Pty Ltd on market terms before on-selling the coal on a back-to-back basis to a third party customer totalling US$13.424m (31 December 2021: US$0) • Stanmore sold coal on market terms to MetRes Pty Ltd on a back-to-back to a third-party customer totalling US$115.825m (31 December 2021: US$0) and purchased coal on market terms before on-selling the coal on a back-to-back basis to a third party customer totalling US$10.024m (31 December 2021: US$0) • Stanmore sold coal on market terms to ML Resources Pte Ltd on a back-to-back to a third-party customer totalling US$18.575m (31 December 2021: US$0m) • US$5.959m was owing to M Resources Trading Pty Ltd in relation to these services as at 31 December 2022 (31 December 2021: US$0.800m) • US$3.954m was owing to MetRes Pty Ltd in relation to coal purchases as at 31 December 2022 (31 December 2021: US$0m). Transactions with GEAR include: • Fees for services provided on market terms for support of the SMC acquisition totalling US$33.275m (31 December 2021: US$0m) • US$30.299m was owing to GEAR in relation to transaction costs as at 31 December 2022 (31 December 2021: US$0m). Apart from the details disclosed above, no other executive KMP or Non-Executive Director or their related parties has entered into a material contract with the Group since the end of the previous financial year and there were no material contracts involving those peoples interest existing at year end. End of Remuneration Report 35 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 Directors’ Report (CONTINUED) 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 27 February 2023 36 Stanmore | Annual Report 2022 Auditor’s Independence Declaration 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 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 2022, I declare to the best of my knowledge and belief, there have been: a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; b. No contraventions of any applicable code of professional conduct in relation to the audit; and c. No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. This declaration is in respect of Stanmore Resources Limited and the entities it controlled during the financial year. Ernst & Young Tom du Preez Partner 27 February 2023 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 37 Stanmore | Annual Report 2022 Consolidated statement of profit or loss Revenue from contracts with customers Notes 3 Other income Total income Net inventory movements Employee benefits expense Royalties expense Operating expenses Materials and supplies Foreign exchange gains/(losses) Other expenses Transaction and transition costs Depreciation and amortisation expense Operating profit Finance income Finance costs Share of profit/(loss) from joint ventures Profit before income tax Income tax (expense)/benefit Profit for the period Profit is attributable to: Owners of Stanmore Resources Limited Non-controlling interests 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) 4(b) 2 4(c) 4(c) 23(b) 5 20 20 Group 31 December 2022 $M 31 December 2021 $M Restated* 2,695.8 3.3 2,699.1 (248.5) (83.2) (464.1) (399.9) (224.4) 39.5 (109.7) (108.3) (225.7) 874.8 6.9 (91.7) 19.8 809.8 (82.4) 727.4 666.8 60.6 727.4 Cents 83.9 83.9 283.3 1.0 284.3 (39.4) (5.3) (30.7) (147.0) (5.5) (5.4) (14.9) – (20.0) 16.1 1.3 (5.2) (1.8) 10.4 (3.6) 6.8 6.8 – 6.8 Cents 2.6 2.6 * Prior year comparatives have been restated into US dollars following a change in presentation currency. Refer to note 1(a) for further details. The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes. 38 Stanmore | Annual Report 2022 Consolidated statement of comprehensive income Profit/(loss) for the period Items that will not be reclassified to profit or loss Foreign currency translation 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: Owners of Stanmore Resources Limited Non-controlling interests Group 31 December 2022 $M 31 December 2021 $M Restated* 727.4 (14.1) (14.1) 713.3 652.7 60.6 713.3 6.8 (5.6) (5.6) 1.2 1.2 – 1.2 * Prior year comparatives have been restated into US dollars following a change in presentation currency. Refer to note 1(a) for further details. The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 39 Stanmore | Annual Report 2022 Consolidated statement of financial position Notes 31 December 2022 $M Group 31 December 2021 $M Restated* 1 January 2021 $M Restated* 6 8 9 16 12 23(b) 10 12 11 13 14 15 16 18 17 432.4 333.2 107.5 – 6.5 20.0 899.6 19.3 – 25.0 1,103.3 22.1 1,246.5 2,416.2 3,315.8 424.5 290.7 61.9 – 127.7 30.3 4.3 939.4 45.6 41.5 8.5 – – 14.1 109.7 – 7.4 – 46.9 47.1 111.6 213.0 322.7 61.9 70.4 0.1 4.4 4.6 0.5 4.2 146.1 3.9 16.3 18.6 4.2 – 4.3 47.3 – – – 49.7 17.3 111.6 178.6 225.9 31.2 15.0 0.1 – – 0.6 7.3 54.2 ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Current tax receivables Derivative financial instruments Other current assets Total current assets Investments accounted for using the equity method Trade and other receivables Financial assets at FV through OCI Property, plant and equipment Other assets Exploration, development and mine properties Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Borrowings Lease liabilities Derivative financial instruments Current tax liabilities Employee benefit obligations Provisions Total current liabilities 40 Stanmore | Annual Report 2022 Consolidated statement of financial position (CONTINUED) Non-current liabilities Borrowings Lease liabilities Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets EQUITY Share capital and share premium Other reserves Retained earnings Equity attributable to owners of Stanmore Resources Limited Total equity Notes 31 December 2022 $M Group 31 December 2021 $M Restated* 1 January 2021 $M Restated* 14 15 5 17 21 21(b) 21(c) 313.4 198.2 183.1 348.1 1,042.8 1,982.2 1,333.6 616.4 (23.7) 740.9 1,333.6 1,333.6 4.9 0.3 22.1 31.3 58.6 204.7 118.0 113.3 (9.6) 14.3 118.0 118.0 6.9 0.5 21.3 26.2 54.9 109.1 116.8 113.3 (4.0) 7.5 116.8 116.8 * Prior year comparatives have been restated into US dollars following a change in presentation currency. Refer to note 1(a) for further details. The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 41 Stanmore | Annual Report 2022 Consolidated statement of changes in equity Group Balance at 1 January 2021 Restated* Profit for the period Restated* Other comprehensive income Restated* Total comprehensive loss for the period Transactions with owners in their capacity as owners: Issued capital $M 113.3 – – – – Retained earnings $M Other reserves $M 7.5 6.8 – 6.8 – (4.0) (5.6) (5.6) – Total $M 116.8 6.8 (5.6) 1.2 – Balance at 31 December 2021 Restated* 113.3 14.3 (9.6) 118.0 Group Notes Balance at 1 January 2021 Restated* Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: Issue of Share Capital, net of transactions costs Share-based payment Non-controlling interests on acquisition of subsidiary Acquisition of non-controlling interests Dividends provided for or paid Balance at 31 December 2022 Retained earnings $M Other reserves $M Non- controlling interests $M Total $M (9.6) 118.0 666 (14.1) – 60.6 Share capital $M 113.3 – – – 14.3 666.8 – 666.8 – – – 59.8 – 59.8 740.9 – (14.1) (14.1) – – – – – – 652.7 60.6 503.1 – – – – 381.6 59.8 (332.2) – 562.9 (110.0) (60.6) – 21(a) 503.1 21(a) 2 19(a) – – – – 503.1 616.4 (23.7) 1,333.6 * Prior year comparatives have been restated into US dollars following a change in presentation currency. Refer to note 1(a) for further details. The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 42 Stanmore | Annual Report 2022 Consolidated statement of cash flows 31 December 2022 $M Notes Group 31 December 2021 $M Restated* Operating activities Receipts from customers Payments to suppliers and employees Interest received Interest and other finance costs paid Income tax received/(paid) Dividends received Net cash inflow from operating activities Investing activities Payment for acquisition of subsidiary, net of cash acquired Payments for property, plant and equipment Payments for capitalised development, exploration and evaluation assets Payments for mine property assets Payments of vendor royalties Payment of deferred consideration Repayment of/issuance of loans to related parties Payment for acquisition of Joint Venture Net cash (outflow) from investing activities 7 2 17 24 Financing activities Proceeds from issues of shares and other equity securities 21(a) Proceeds from borrowings Repayment of borrowings Payment of principal lease liability Payment for acquisition of Non-Controlling interests Dividends paid to non–controlling interests in subsidiaries Payments for financial securities Payments for refundable security bonds Net cash inflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of year 6(b) 2,746.4 (1,303.1) 6.9 (93.4) (176.3) 1.2 1,181.7 (1,223.3) (83.5) – (34.4) (2.7) (100.0) 17.1 – (1,426.8) 503.1 795.0 (249.2) (52.9) (270.2) (110.0) – 24.6 640.4 395.3 45.6 (8.5) 432.4 * Prior year comparatives have been restated into US dollars following a change in presentation currency. Refer to note 1(a) for further details. The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 277.9 (172.5) 1.4 (17.9) 6.8 – 95.7 – (11.5) (33.4) (1.3) (3.1) – (21.8) (1.8) (72.9) – 59.9 (7.0) (0.1) – – (1.1) (31.1) 20.6 43.4 3.9 (1.7) 45.6 43 Stanmore | Annual Report 2022 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 2022 covers the Group consisting of Stanmore Resources Limited and its subsidiaries as required by the Corporations Act 2001. The financial statements are presented in US dollars. 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 Group are the exploration, development, production and sale of metallurgical coal in Queensland, Australia. The consolidated general-purpose financial report of the Group for the period ended 31 December 2022 was authorised for issue in accordance with a resolution of the Directors on 27 February 2023. 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 United States dollars with all values rounded to the nearest hundred thousand dollars 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 Group and effective for reporting periods beginning on or after 1 January 2022. 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. The financial statements have been prepared on a historical cost basis, except for Contingent Consideration, Financial assets held at fair value and Derivative Financial Instruments which have been measured at fair value. The Group is a for- profit entity for the purposes of Australian Accounting Standards. (a) Change in functional and presentation currency The Company and its subsidiaries changed their functional currencies from Australian dollars to US dollars in the current financial year. The functional currency is deemed the currency of the primary economic environment in which the Group operates. As a result of the acquisition of the 80% share in Stanmore SMC Pty Ltd on 3 May 2022, a reassessment of the functional currency was undertaken. The Group’s revenues continue to be predominantly denominated in US dollars, however the quantum has increased as a result of the acquisition. Local labour and material costs are generally denominated in Australian dollars, however associated sales and marketing costs are often denominated in US dollars. Significant US dollar financing arrangements were entered into during the period, further increasing the Group’s exposure to US dollar denominated transactions. As such, the change in the functional currency of all entities in the Group to US dollars is considered most appropriate. 44 Stanmore | Annual Report 2022 1 BASIS OF PREPARATION OF FULL YEAR REPORT (CONT.) The Group changed its presentation currency from Australian dollars to US dollars in the current financial period. The change in presentation currency is accounted for retrospectively. Comparative financial information previously reported in Australian dollars, has been restated into US dollars using the procedures outlined below: • The consolidated statement of profit or loss, consolidated statement of comprehensive income and consolidated statement of cash flows have been translated to US dollars using average exchange rates for the relevant period; • Assets and Liabilities in the consolidated statement of financial position have been translated to US dollars using the exchange rate as at the relevant balance dates; • The Equity section of the consolidated statement of financial position has been converted to US dollars using historical exchange rates; • Earnings per share and dividend disclosures have also been restated to US dollars based on restated US dollar results for the period; • Translation differences are recognised in the Foreign Currency Translation Reserve, through Other Comprehensive Income. (b) Key judgements and estimates In the process of applying the Groups accounting policies, management 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: Fair value of assets/liabilities/consideration payable upon acquisition Note 3: Revenue recognised on provisional pricing arrangement Note 5: Reset of tax bases Note 11: Capitalised development costs Note 11: Identification of impairment indicators Note 17: Rehabilitation provision (c) Going concern Page 47 Page 50 Page 54 Page 65 Page 66 Page 72 At 31 December 2022, the current liabilities exceed the current assets by US$39.8m, primarily as a result of the cash flow sweep mechanism set out in the acquisition finance debt facility disclosed in note 14 being triggered. The triggering of this mechanism results in an accelerated repayment of the loan principal of US$252.3m in addition to the agreed principal repayments initially set out in the facility agreement. The Directors have considered projected cash flow information for the 12 months from the date of 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. Based on this analysis, the Group is expected to continue to satisfy its obligations as and when they fall due. 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. 45 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 1 BASIS OF PREPARATION OF FULL YEAR REPORT (CONT.) (d) COVID-19 The Group 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 Group 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 Group as at the reporting date or subsequently as a result of the COVID-19 pandemic. (e) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2022. 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. All intercompany balances and transactions, including unrealised profits arising from intragroup transactions have been eliminated. 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 Group 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 Group; • it helps to explain the impact of significant changes in the Group’s business, for example, acquisitions and impairment write-downs; or • it is related to an aspect of the Group’s operations that is important to its future performance. (i) New and amended standards and interpretations adopted by the Group The Group has applied all the standards and amendments for the first time for their annual reporting period commencing 1 January 2022. These amendments had no material impact on the financial statements of the Group. 46 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 2 BUSINESS COMBINATION Accounting policies Business combinations are accounted for using the acquisition method. The cost of acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions in existence at the acquisition date. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The Group retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. For each business combination, Non-Controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs expenses as incurred to profit or loss. Acquisition of Dampier Coal (Queensland) Pty Ltd Summary of acquisition On 3 May 2022, the Group acquired 100% of the ordinary shares in Dampier Coal (Queensland) Pty Ltd for total consideration of up to US$1,526.3 million. This enabled the entity to acquire BHP’s 80% interest in BHP Mitsui Coal Pty Ltd (now Stanmore SMC Pty Ltd). This entity produces and sells metallurgical and thermal coal operating in the same geographic area as the current operating business. A further US$100.0 million was paid on 3 November 2022 in relation to deferred consideration agreed as part of the acquisition. The values identified in relation to the acquisition are provisional as at 31 December 2022. 47 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 2 BUSINESS COMBINATION (CONT.) Details of the purchase consideration, the net assets acquired and goodwill are as follows: Purchase consideration Cash paid Deferred consideration Contingent consideration Total purchase consideration The assets and liabilities recognised as a result of the acquisition are as follows: Cash Trade and other receivables Inventories Property, plant and equipment Capitalised development and exploration Financial assets at fair value through other comprehensive income Trade and other payables Current tax liability Deferred tax liability Provision for employee benefits Lease liabilities Rehabilitation provisions Net identifiable assets acquired Less: non-controlling interests Net assets acquired Outflow of cash to acquire subsidiary, net of cash acquired Total consideration Deferred consideration Contingent consideration Less: Balances acquired Cash Net outflow of cash – investing activities 48 $M 1,286.3 100.0 140.0 1,526.3 Provisional fair value $M 63.0 362.8 314.7 1,067.3 1,175.3 25.0 (255.8) (16.1) (364.5) (16.2) (256.8) (190.8) 1,907.9 (381.6) 1,526.3 31 December 2022 $M (1,526.3) 100.0 140.0 63.0 (1,223.3) Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 2 BUSINESS COMBINATION (CONT.) The US$100m of deferred consideration was subsequently paid on 3 November 2022, in accordance with the sales and purchase agreement, and has been presented separately in the consolidated statement of cash flows. Acquisition-related costs Transaction costs associated with the acquisition have been expensed as transaction and transition costs in the period totalling US$70.4m. (i) Significant estimate: contingent consideration As part of the acquisition AASB 3 required the recognition of the additional consideration yet to the paid to the vendor. 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. As at 31 December 2022, it is management’s expectation that those conditions will be met, and as such have recognised the expected discounted cash flows of the contingent consideration in full. (ii) Accounting policy choice for non-controlling interests The Group recognises non-controlling interests in an acquired entity either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. This decision is made on an acquisition-by-acquisition basis. For the non-controlling interests in Stanmore SMC Pty Ltd, the Group elected to recognise the non-controlling interests at its proportionate share of the acquired net identifiable assets. Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. Revenue and profit contribution Since the acquisition the SMC Group has contributed US$2,103.9m in revenue and US$447.3m in profit after tax. Had the business combination occurred at the beginning of the financial reporting period, it is estimated that Group revenues and profit after tax would have been US$4,004.3m and US$1,310.4m respectively. Acquisition of non-controlling interests in Stanmore SMC Pty Ltd Summary of acquisition On 7 October 2022, Dampier Coal (Queensland) Pty Ltd, a 100% owned subsidiary of the Consolidated Entity completed the acquisition of the remaining 20% interest in Stanmore SMC Pty Ltd from Mitsui Coal. The acquired entity was already a consolidated subsidiary of the Group and as such the acquisition did not result in any further fair value adjusted in relation to the operational assets of Stanmore SMC Pty Ltd. The final price paid for the acquisition was US$270m, paid in full at the time of acquisition. As the acquisition was acquiring the remaining 20% minority interests in Stanmore SMC Pty Ltd, the purchase does not result in any changes to the fair value of Stanmore SMC’s assets. Any difference between the purchase price and the cumulative Non-Controlling Interests prior to the acquisition has been recognised within Retained Earnings in the Statement of Changes in Equity, as it is considered a transaction with owners in their capacity as owners. 49 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 3 REVENUE Revenue from contracts with customers Total revenue Group 31 December 2022 $M 31 December 2021 $M 2,695.8 2,695.8 283.3 283.3 (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 Metallurgical coal/South America Thermal coal/Asia Thermal coal/Europe Total segment revenue Group 31 December 2022 $M 31 December 2021 $M 2,128.2 331.6 103.3 116.7 16.0 2,695.8 219.5 43.1 – 20.7 – 283.3 50 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 3 REVENUE (CONT.) (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 Group 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 Group 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 either through the Dalrymple Bay Coal Terminal or the North Queensland Export Terminal, with the significant majority of the coal sold during the year ended 31 December 2022 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 Group committing to the supply of coal to the customer. Coking Coal Quarterly Index Linked Price Contracts recognition Coal Sales contracts with Stanmore Resources customers generally contain monthly or quarterly pricing provisions linked to the relevant coking coal index or benchmarks. Index relativities take into account quality specifications and other contractual considerations. When the final pricing has not been determined at the time of invoicing, sales invoices are issued based on provisional prices. These provisional prices are then adjusted when the final index levels are known or benchmark prices have been settled. Due to the potential volatility in coal price indices, Management reviews the revenue recognised for any provisionally priced shipments at the end of each period. Coal sales revenue recognised for these shipments is then adjusted based on current index levels, price forecasts and managements judgements on the risks associated with the customer. 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. 51 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 4 OTHER INCOME AND EXPENSE ITEMS (a) Other income Dividends Services (b) Breakdown of other expenses Operational accommodation and travel Sales and marketing Administration and other operational expenses Total other expenses Transaction costs Transition costs Total transaction and transition costs Group 31 December 2022 $M 31 December 2021 $M 1.2 2.1 3.3 – 1.0 1.0 Group 31 December 2022 $M 31 December 2021 $M 27.1 41.0 41.6 109.7 6.1 4.5 4.3 14.9 Group 31 December 2022 $M 31 December 2021 $M 70.4 37.9 108.3 – – – Transaction costs primarily consist of fees and expenses incurred in the completion of the sale and purchase of the 100% interest in Dampier Coal (Queensland) Pty Ltd, such as stamp duty, legal fees, and due diligence activities. Transition costs primarily consist of those fees and expenses incurred to enable the Consolidated Entity to take ownership and operate the operations once legal completion occurred, such as IT systems, consultancy, and other business readiness activities. 52 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 4 OTHER INCOME AND EXPENSE ITEMS (CONT.) (c) Finance income and costs Other income and expense items Finance income Interest Finance income Finance costs Interest paid Interest amortisation unwinding Interest charge – lease liability Finance costs expensed Net finance costs (d) Recognition and measurement (i) Cost of sales Group 31 December 2022 $M 31 December 2021 $M 6.9 6.9 73.6 7.8 10.3 91.7 84.8 1.3 1.3 4.0 1.2 – 5.2 3.9 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. (ii) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non–monetary benefits and annual leave 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. 53 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 5 INCOME TAX EXPENSE (a) Income tax expense Current income tax expense Prior year adjustments Deferred income tax (benefit)/expense Income tax expense Group 31 December 2022 $M 31 December 2021 $M 284.6 (3.7) (198.5) 82.4 7.0 (5.4) 2.0 3.6 (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: Tax offset for franked dividends Accounting distribution – MetRes Pty Ltd Prior period taxes over/(under) recognised Deferred tax upon tax base reset Income tax expense/(benefit) Group 31 December 2022 $M 31 December 2021 $M 242.9 0.3 (5.8) (3.7) (151.3) 82.4 3.1 – 0.5 – – 3.6 As a result of the acquisition for the remaining 20% interest in Stanmore SMC, the Group obtained 100% ownership, resulting in Stanmore SMC and Red Mountain Infrastructure Pty Ltd joining the Stanmore Resources tax group from 7 October 2022. This resulted in a resetting of the tax base of those assets and liabilities, with an overall reduction in the deferred tax liabilities recognised. In assessing the reset of the tax bases of these subsidiaries, judgement has been applied in developing the estimated values used to determine the tax bases and the accounting for the reset. On the basis that the reset of the tax bases is not a direct consequence of the acquisition of the NCI but indirect, the tax effects of the adjustment of the tax base has been recognised in the profit or loss through income tax expense. 54 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 5 INCOME TAX EXPENSE (CONT.) (c) Deferred tax balances The balance comprises temporary differences attributable to: Deductible temporary differences Taxable temporary differences Net deferred tax liabilities Group 31 December 2022 $M 31 December 2021 $M 164.2 (347.3) (183.1) 13.5 (35.6) (22.1) Deferred tax assets will only be recognised when: • the Group derives future assessable income of a nature of an amount sufficient to enable the losses to be realised; • the Group continues to comply with the conditions of deductibility imposed by the law; and • no changes in tax legislation aversely affect the Group in realising the losses. (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. 55 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 5 INCOME TAX EXPENSE (CONT.) 31 December 2022 Provision for rehabilitation Provision for onerous contracts Property, plant and equipment Contingent consideration Exploration and development costs Unrealised FX Other Vendor receivable Provision for impairment – exploration Rail loop benefit Mineral rights Lease liabilities TOTAL Opening balance $ ‘M Recognised in profit or loss $ ‘M Recognised on acquisition $ ‘M Closing balance $’M Deferred tax asset $’M Deferred tax liability $’M 5.5 0.4 (11.2) 1.9 (24.0) 2.0 1.1 – 2.6 (0.4) – – (8.1) (0.1) 48.3 – 1.0 (8.1) 74.1 3.1 – – 84.9 7.1 57.2 – 54.6 0.3 (254.6) (217.5) – 1.9 (11.6) (34.6) – (59.3) – – – (173.6) 78.7 (6.1) 15.9 3.1 2.6 (0.4) (88.7) 85.8 (22.1) 202.2 (363.2) (183.1) 54.6 0.3 – 1.9 – – 15.9 3.1 2.6 – – 85.8 164.2 – – (217.5) – (34.6) (6.1) – – – (0.4) (88.7) – (347.3) 56 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 5 INCOME TAX EXPENSE (CONT.) 31 December 2021 Provision for rehabilitation Provision for onerous contracts Property, plant and equipment Contingent consideration 6.1 0.8 (4.1) 3.2 Exploration and development costs (15.6) Unrealised FX Other Vendor receivable Provision for impairment – exploration and development Rail loop benefit Overburden in advance TOTAL (i) Tax consolidation 0.4 (2.9) (0.1) 2.8 (0.6) (11.4) (21.4) Opening balance $ ‘M Recognised in profit or loss $ ‘M Closing balance $’M Deferred tax asset $’M Deferred tax liability $’M (0.6) (0.4) (7.1) (1.3) (8.4) 1.6 4.0 0.1 (0.2) 0.2 11.4 (0.7) 5.5 0.4 (11.2) 1.9 (24.0) 2.0 1.1 – 2.6 (0.4) – (22.1) 5.5 0.4 – 1.9 – 2.0 1.1 – 2.6 – – 13.5 – – (11.2) – (24.0) – – – – (0.4) – (35.6) 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. 57 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 6 CASH AND CASH EQUIVALENTS Current assets Cash at bank and in hand (a) Recognition and measurement Group 31 December 2022 $M 31 December 2021 $M 432.4 45.6 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. (b) Reconciliation of liabilities arising from financing activities Chattel mortgage $ ‘M Acquisition financing $ ‘M Lease liabilities $ ‘M Insurance premium funding facility $ ‘M Working capital facility $ ‘M Revolver facility $ ‘M Bridging facility $ ‘M Total $ ‘M – 0.5 0.8 67.6 – – 75.5 6.6 – (1.5) – – – Liabilities as at 1 January 2022 Cash inflows Cash outflows Foreign exchange movements Non-cash changes Recognised on acquisition Liabilities as at 31 December 2022 Liabilities as at 1 January 2021 Cash inflows Cash outflows Non-cash changes Liabilities as at 31 December 2021 58 625.0 (10.0) – – – – (52.9) (14.1) 69.9 256.8 11.4 (8.7) – – – – 120.0 50.0 806.4 (67.6) (120.0) (50.0) (310.7) – – – – – – – – – – – (14.1) 69.9 256.8 – 883.8 5.1 615.0 260.2 3.5 Working capital facility $ ‘M Chattel mortgage $ ‘M Lease liability $ ‘M Insurance premium funding facility $ ‘M 9.9 59.9 (4.9) 2.6 67.5 8.7 – (2.1) – 6.6 0.6 – (0.1) – 0.5 – 2.1 (1.3) – 0.8 Total $ ‘M 19.2 62.0 (8.4) 2.6 75.4 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 7 CASH FLOW INFORMATION (a) Cash generated from operations Reconciliation of profit/(loss) after income tax to net cash flow from operating activities Profit for the period Adjust for non-cash items: Depreciation and amortisation and disposal of fixed assets (Profit)/Loss joint ventures Non-cash movement in provisions Foreign exchange (gain)/loss 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 payable (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 other provisions Increase/(decrease) in provisions for employee benefits Increase/(decrease) in Insurance premium funding Net cash inflow from operating activities Group 31 December 2022 $M 31 December 2021 $M 734.3 7.8 215.7 (19.8) 18.1 (58.1) 77.3 215.7 (4.9) 88.8 (178.1) 87.1 (0.2) (15.5) 2.9 13.2 5.2 1,181.7 20.1 1.8 (1.9) 10.3 (12.5) 40.2 (10.0) 8.6 1.9 29.6 (0.5) (0.9) – 1.2 – 95.7 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. 59 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 8 TRADE AND OTHER RECEIVABLES Current Trade receivables Related party receivables Other receivables GST receivable Non-current Loans to related parties Group 31 December 2022 $M 31 December 2021 $M 281.6 – 14.0 37.6 333.2 – – 26.0 10.9 0.2 4.4 41.5 7.4 7.4 During 2021, the Company provided MetRes Pty Ltd, a 50% owned Joint Venture (see Note 24), with a secured, total finance facility up to A$30m, including a working capital debt facility of A$15m to the Joint Venture to cover initial working capital requirements, and an additional A$15m debt facility as required. The loan is fully secured against the underlying property, plant & equipments, and mine properties of the Joint Venture. The loan was fully repaid as at 31 December 2022 (31 Dec 2021: US$18.3m). (a) Recognition and measurement Trade and other receivables 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. (i) Impairment The Group 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 and other 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. 60 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 9 INVENTORIES Current assets ROM coal inventories Product coal stocks Warehouse inventories Group 31 December 2022 $M 31 December 2021 $M 52.8 31.3 23.4 107.5 2.5 6.0 – 8.5 (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: • 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. 61 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 10 PROPERTY, PLANT AND EQUIPMENT Plant and equipment At cost Accumulated depreciation Land and buildings At cost Accumulated depreciation Right of use asset At cost Accumulated depreciation Capital work in progress At cost Group 31 December 2022 $M 31 December 2021 $M 570.6 (113.0) 457.6 259.3 (11.8) 247.5 315.3 (46.0) 269.3 128.9 128.9 1,103.3 64.3 (29.2) 35.1 7.7 (3.4) 4.3 0.5 (0.2) 0.3 7.2 7.2 46.9 62 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 10 PROPERTY, PLANT AND EQUIPMENT (CONT.) (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 Group 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 Group and the cost of the item can be measured reliably. (i) Movements in carrying amounts Group Year ended 31 December 2022 Opening net book amount Exchange differences Acquisition of subsidiary Additions Transfers Depreciation charge Closing net book amount Group Period ended 31 December 2021 Opening net book amount Exchange differences Additions Transfers Depreciation charge Closing net book amount Plant & equipment $M Buildings & improvements $M Right of use asset $M Capital work in progress $M 35.1 14.3 497.8 – 8.4 (98.0) 457.6 4.3 (5.3) 256.9 – – (8.4) 247.5 0.3 – 256.8 58.0 – (45.8) 269.3 7.2 (0.5) 55.8 74.8 (8.4) – 128.9 Plant & equipment $M Buildings & improvements $M Right of use asset $M Capital work in progress $M 43.8 (2.2) – 3.1 (9.6) 35.1 4.2 (1.8) – 2.1 (0.2) 4.3 0.5 – – – (0.2) 0.3 1.2 (0.3) 11.5 (5.2) – 7.2 Total $M 46.9 8.5 1,067.3 132.8 – (152.2) 1,103.3 Total $M 49.7 (4.3) 11.5 – (10.0) 46.9 63 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 10 PROPERTY, PLANT AND EQUIPMENT (CONT.) (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 wash plant and loadout facilities utilise the Economically Recoverable Resources of the associated mining complex, which includes an estimate of recoverable underground coal reserves. The depreciation rates used for each class of assets are: • Plant and equipment • Furniture and office equipment • Buildings and improvements • Right-of-use asset 5-10% straight line 5-25% straight line over the lease term 5-25% straight line/units of production 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. 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 and operating costs. 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. The Group’s assets are metallurgical coal assets and 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 Group 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 Group 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. 64 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 11 CAPITALISED DEVELOPMENT, EXPLORATION AND MINE PROPERTIES Group 31 December 2022 $M 31 December 2021 $M Capitalised development costs Exploration and evaluation Mine properties Group Year ended 31 December 2022 Opening net book amount Exchange differences Acquisition of subsidiary Additions Reclassifications Depreciation charge Closing net book amount Group Period ended 31 December 2021 Opening net book amount Exchange differences Additions Depreciation charge Closing net book amount – 68.9 1,177.6 1,246.5 Capitalised development costs $ ‘M Exploration and evaluation assets $ ‘M Mine properties $ ‘M 64.4 (0.9) – 22.4 (85.9) – – 32.2 (2.3) 38.8 0.2 – – 68.9 15.0 7.8 1,136.5 2.3 85.9 (69.9) 1,177.6 Capitalised development costs $M Exploration and evaluation $M Mine properties $M 34.0 (2.9) 33.3 – 64.4 31.5 (0.9) 1.6 – 32.2 13.3 (0.2) 11.6 (9.7) 15.0 64.4 32.2 15.0 111.6 Total $ ‘M 111.6 4.6 1,175.3 24.9 – (69.9) 1,246.5 Total $M 78.8 (4.0) 46.5 (9.7) 111.6 (a) Recognition and measurement – capitalised development Capitalised Development expenditure includes costs transferred from Exploration and Evaluation when the Group 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. 65 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 11 CAPITALISED DEVELOPMENT, EXPLORATION AND MINE PROPERTIES (CONT.) 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 commenced in the first quarter of 2022, at which point the capitalised development costs were reclassified to Mine properties and amortisation commenced accordingly. (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 Group 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, US$85.9m of costs have been transferred during the financial year in relation to the Isaac Downs operation. The Group 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. 66 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 12 OTHER ASSETS Other current assets Prepayments Other non-current assets Security bonds Intangible assets Other Group 31 December 2022 $M 31 December 2021 $M 20.0 20.0 19.7 1.1 1.3 22.1 14.1 14.1 44.2 1.5 1.4 47.1 (a) Recognition and measurement Other current assets related to operational and financing costs paid in advance of the period to which the Group 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 Group’s banking provider which are secured against the Group’s bank guarantee facilities. The increase in the period is due to the acquisition of the South Walker and Poitrel mining assets in the period, increasing the number of prepaid expenses in the period, along with required security deposits in the period. 13 TRADE AND OTHER PAYABLES Group Current liabilities Trade and other payables Accrued expenses Other payables 31 December 2022 $M 31 December 2021 $M 104.1 288.7 31.7 424.5 16.4 41.9 3.6 61.9 (a) Recognition and measurement Trade and other payables represent liabilities for goods and services provided to the Group 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 Group have been pledged as security for the trade and other payables. 67 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 14 INTEREST BEARING LOANS AND BORROWINGS Group 31 December 2022 31 December 2021 Current $M Non- current $M Total $M Current $M Non- current $M Acquisition financing Chattel Mortgage Working capital facility Insurance premium funding 285.6 309.4 595.0 1.1 – 4.0 4.0 – – 5.1 – 4.0 Total interest-bearing loans and borrowings 290.7 313.4 604.1 – 1.7 67.6 1.1 70.4 – 4.9 – – 4.9 (a) Financing arrangements The Group entered into a number of financing facilities in order to fund the acquisition of BMC from BHP, and for the expanded operations of the Group. The facilities available to the Group during the period are detailed in the categories below. Loans and borrowing facilities Total $M – 6.6 67.6 1.1 75.3 Group 31 December 2022 $M 31 December 2021 $M Acquisition Financing Total facility Facility utilised Stanmore Revolving Credit Facility Total facility Facility utilised Available facility SMC Working Capital Facility Total facility Facility utilised Available facility Group Revolving Credit Facility – GEAR Total facility Facility utilised Available facility Chattel Mortgage Total loan amount Loan balance outstanding 68 625.0 (615.0) 120.0 – 120.0 33.9 – 33.9 70.0 – 70.0 9.3 (5.1) – – – – – – – – 70.0 (67.6) 2.4 9.9 (6.6) Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 14 INTEREST BEARING LOANS AND BORROWINGS (CONT.) The ‘Acquisition Financing’ facility totals US$625m, with a fixed interest rate of 11.5% and matures 5 years following the first utilisation at 3 May 2022. Repayments are comprised of a fixed amortisation schedule, and an annual sweep of residual excess cash, scaling upwards from a minimum of 25% in periods of higher cash flow. As a result of this mechanism, an additional US$252m of the loan principle has been classified as a current liability as at 31 December 2022, in line with the expected cash flows in 2023. The ‘Stanmore Revolving Credit Facility’ is a 3-year US$120m revolving credit facility. The facility has a fixed interest rate of 8% and commitment fees of 2% of the undrawn amount. The facility matures 2 March 2025. The ‘SMC Working Capital Facility’ is a 5-year A$50m working capital facility. This facility has a floating interest rate set as BBSY + 5% margin and with commitment fees of 2%. The facility matures 3 May 2027. The ‘Group Revolving Credit Facility’ is a revolving working capital facility with its major shareholder GEAR. The key terms of the US$70m facility are: • US$70m facility until 30 June 2023, with final draw down available until 31 March 2023; • upfront fee of 2.0%; • fixed interest rate on drawn funds of 8.0% per annum; and • commitment fee of 2.0% per annum. The ‘Chattel Mortgage’ is an equipment loan facility with Caterpillar Financial Australia Limited to acquire a 600-tonne excavator from Hastings Deering (Australia) Limited. The term of the loan facility is five years and the Group pays 4.55% p.a. fixed interest on the Chattel Mortgage facility to Caterpillar Financial Australia Limited, who subsequently holds security over the excavator. The Chattel Mortgage facility is denominated in A$. 69 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 14 INTEREST BEARING LOANS AND BORROWINGS (CONT.) Guarantee and bonding facilities SMC Bank Guarantee Facility Total facility Facility utilised Available facility SMC Surety Bonding Facility Total facility Facility utilised Available facility Group Bank Guarantee Facility Total facility Facility utilised Available facility Group Surety Bonding Facility Total facility Facility utilised Available facility Group 31 December 2022 $M 31 December 2021 $M 40.7 (33.7) 7.0 61.0 (33.9) 27.1 3.9 (2.7) 1.2 16.9 (6.1) 10.8 – – – – – – 3.9 (2.6) 1.3 – – – The ‘SMC Bank Guarantee Facility’ is a 5-year A$60m bank guarantee facility and matures 3 May 2027. The ‘SMC Surety Bonding Facility’ is a A$90m surety bonding facility. The ‘Group Bank Guarantee Facility’ is the Group’s pre-existing bank guarantee facility for general purpose usage. The ‘Group Surety Bonding Facility’ is an unsecured A$25m surety bonding facility. Other facilities Insurance Premium Funding Total funding amount Funding balance outstanding Group 31 December 2022 $M 31 December 2021 $M 11.4 (4.0) 2.1 (0.8) The ‘Insurance Premium Funding’ is a short-term agreement to access financing for the annual insurance premiums. The facility is fully repaid in during the relevant insurance periods. (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. 70 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 15 LEASE LIABILITY Lease liabilities current Lease liabilities non-current Total lease liability 31 December 2022 $M 31 December 2021 $M 61.9 198.2 260.1 0.1 0.3 0.4 (a) Recognition and measurement The lease liability recognised relates to property leases recognised under AASB 16 Leases. Refer to Note 10 on page 64 for the recognition and measurement policy for lease liabilities. Reconciliation of movements Opening balance Additions Additions through acquisitions Depletions through settlement Foreign exchange remeasurements Interest expense Closing balance 16 DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial assets/(liabilities) Total derivative financial instruments (a) Recognition and measurement 2022 $ ‘M 0.4 58.0 256.8 (64.7) (0.7) 10.3 260.1 2021 $ ‘M 0.5 – (0.1) – – 0.4 31 December 2022 $ ‘M 31 December 2021 $ ‘M 6.5 6.5 (4.4) (4.4) 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. 71 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 17 PROVISIONS Onerous contracts provision Rehabilitation provision Contingent consideration 31 December 2022 31 December 2021 Current $M Non-current $M Total $M Non-current $M Current $M 0.3 3.0 4.3 0.7 200.2 1.0 348.1 1.0 203.2 147.2 352.4 0.3 1.9 148.2 4.2 0.9 26.0 2.0 31.3 Total $M 1.2 27.9 4.4 35.5 (a) Reconciliation of movements Movements in each class of current provision during the financial year, other than employee benefits, are set out below: Group 2022 Opening balance Additions through acquisition Adjustments through remeasurement Depletions through settlement Unwinding of discount via profit and loss Exchange differences Closing balance Group 2021 Opening balance Additions – current period disturbance Adjustments through remeasurement Depletions through settlement Unwinding of discount via profit and loss Exchange differences Closing balance (b) Onerous contracts provision (i) Recognition and measurement Onerous contracts provision $M Rehabilitation provision $M Contingent consideration $M 1.2 – (0.2) (0.1) – 0.1 1.0 27.9 190.8 – (4.5) 4.6 (15.6) 203.2 6.4 140.0 0.5 (2.6) 3.1 0.8 148.2 Onerous contracts provision $M Rehabilitation provision $M Contingent consideration $M 1.4 – – (0.3) 0.1 – 1.2 24.3 6.1 0.4 (0.5) 0.2 (2.6) 27.9 7.7 – 2.8 (3.6) (0.6) 0.1 6.4 Total $M 35.5 330.8 0.3 (7.2) 7.7 (14.7) 352.4 Total $M 33.4 6.1 3.2 (4.4) (0.3) (2.5) 35.5 The Group 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 2022 a total of $0.1m of onerous contracts were settled through payment, with the unwinding of the discount being $0.04m and $0.2 through consolidated statement of profit or loss for re-measurement. 72 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 17 PROVISIONS (CONT.) (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 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 there-measurement is recognised in the profit or loss. Any unwinding discounting is recognised in the profit or loss. The Group 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 2022, an increase in the provision of $190.8m was recognised as a result of the acquisition of Stanmore SMC Pty Ltd. A decrease in the rehabilitation provision of $4.5m was recognised due to the rehabilitation works completed in the period (31 December 2021: US$0.5m). The discount rate used in the calculation of the provision at 31 December 2022 equalled 3.99% (31 December 2021: 1.81%). (d) Contingent consideration (i) Recognition and measurement As part of the acquisition of the 80% interest in Stanmore SMC Pty Ltd, AASB 3 required the recognition of the additional consideration yet to the paid to the vendor. 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. As at 31 December 2022, it is managements expectation that those conditions will be met, and as such have recognised the expected discounted cashflows of the contingent consideration in full. There has been no change to the range of outcomes expected by management during the reporting period. (ii) Key judgements and estimates The valuation above was performed using a discounted cash flow methodology which was consistent with that used for previous deferred royalty streams. 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; • Coal sales since acquisition, plus expected future sales of Stanmore SMC Pty Ltd’s operating assets, including South Walker Creek and Poitrel mines. (e) Other provisions Provisions for legal claims, service warranties and make good obligation are recognised when the Group 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. 73 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 18 PROVISION FOR EMPLOYEE BENEFITS Provision for annual leave Provision for bonus Provision for long service leave Total employee benefit obligations (a) Recognition and measurement Refer to Note 4(d)(ii) for accounting policies. 19 DIVIDENDS AND FRANKING CREDITS (a) Dividends (i) Ordinary shares Group 31 December 2022 Total $M 31 December 2021 Total $M 16.9 12.9 0.5 30.3 0.3 – 0.2 0.5 Dividends provided for or paid during the year – – (ii) Dividends not recognised at the end of the reporting period Group 31 December 2022 $M 31 December 2021 $M No dividend proposed for 31 December 2022 – – Group 31 December 2022 $M 31 December 2021 $M (b) Franking credits Franked credits Franking credits available for subsequent reporting periods based on a tax rate of 30.0% (2021 – 30.0%). Consolidated entity 31 December 2022 $M 31 December 2021 $M 75.0 – 74 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 20 EARNINGS PER SHARE (a) Basic earnings per share Basic earnings per share (cents) Group 31 December 2022 Cents 31 December 2021 Cents 83.9 2.6 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) Group 31 December 2022 Cents 31 December 2021 Cents 83.9 2.6 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. (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. Group 2022 Number 2021 Number 794,228,828 270,417,000 Adjustments for calculation of diluted earnings per share: Weighted average number of long-term incentive rights issued. – 145,000 Weighted average number of ordinary and potential ordinary shares used as the denominator in calculating diluted earnings per share. 794,228,828 270,562,000 75 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 21 EQUITY SECURITIES ISSUED (a) Share capital 31 December 2022 Shares 31 December 2021 Shares 31 December 2022 $M 31 December 2021 $M Ordinary shares Fully paid 901,381,698 901,381,698 270,417,381 270,417,381 616.4 616.4 (i) Movements in ordinary shares: Details Opening balance 1 January 2021 Balance 31 December 2021 Opening balance 1 January 2022 Share entitlement offer Balance 31 December 2022 Number of shares (thousands) 270.4 270.4 270.4 631.0 901.4 113.3 113.3 Total $M 113.3 113.3 113.3 503.1 616.4 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. (ii) Options As at 31 December 2022, no options were held by or issued to employees of the Consolidated Entity (31 December 2021: nil). 76 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 21 EQUITY SECURITIES ISSUED (CONT.) (b) Other reserves The following table shows a breakdown of the consolidated statement of financial position line item ‘other reserves’ and the movements in these reserves during the year. A description of the nature and purpose of each reserve is provided below the table. Share-based payments Foreign currency translation Movements: Share-based payments Opening balance Foreign currency translation Opening balance Currency translation differences arising during the year Balance 31 December (i) Nature and purpose of other reserves Share-based payments Group 31 December 2022 $M 31 December 2021 $M 0.6 (24.3) (23.7) 0.6 (10.2) (9.6) 31 December 2022 $M 31 December 2021 $M 0.6 0.6 (10.2) (14.1) (24.3) (4.6) (5.6) (10.2) The share-based payments reserve is used to recognise: • the grant date fair value of options and rights issued to employees but not exercised. • the grant date fair value of shares issued to employees • the grant date fair value of deferred shares granted to employees but not yet vested • the issue of shares held by the Example Employee Share Trust to employees. Foreign currency translation Exchange differences arising on translation of the Group’s historical financial records as a result of the changes in functional and presentational currencies during the year, are recognised in other comprehensive income as described in note and accumulated in a separate reserve within equity. 77 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 21 EQUITY SECURITIES ISSUED (CONT.) (c) Retained earnings Movements in retained earnings were as follows: Balance 1 January Net profit for the period Acquisition of Non-Controlling Interests Balance 31 December (d) Capital management Group 31 December 2022 $M 31 December 2021 $M 14.3 666.8 59.8 740.9 7.5 6.8 – 14.3 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. (e) 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 Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’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. Due to the recent acquisition of Stanmore SMC Pty Ltd, the Group’s exposure to financial instruments has changed compared to previous periods. As a consequence, the Group has changed its functional and presentational currency to US dollars during the period, which has partly mitigated the foreign exchange risks. The Group’s financial instruments consist mainly of deposits with banks, trade and other receivables, security deposits, trade and other payables, borrowings, leases, financial assets held at fair value through other comprehensive income, derivative financial instruments and contingent consideration. The Board has overall responsibility for the determination of the Group’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 Group’s finance function. The Group’s risk management policies and objectives are therefore designed to minimise the potential impacts to these risks on the results of the Group where such impacts may be material. The overall objective of the Board is to set policies that seek to reduce risk where possible without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below. 78 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 22 FINANCIAL RISK MANAGEMENT (CONT.) (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 Group incurring a financial loss. This usually occurs when debtors fail to settle their obligations owing to the Group. The Group’s objective is to minimise the risk of loss from credit risk exposure. The Group’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 Trade and other receivables Security bonds Loans to related parties Derivative financial assets Credit risk exposure Group 31 December 2022 $M 31 December 2021 $M 432.4 333.2 19.7 – 6.5 791.8 45.6 41.5 44.2 29.0 (4.4) 155.9 Credit risk is reviewed regularly by the Board and the Audit and Risk Management Committee. The Group’s credit risk exposure is influenced by mainly by the individual characteristics of each customer. Given the Group 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, Bank of China, and ANZ. The National Australia Bank has a long-term credit rating with rating agency S&P of AA-. The Bank of China has a long-term credit rating with rating agency S&P of A+. The ANZ has a long-term credit rating with rating agency S&P of AA-. (b) Liquidity risk Liquidity risk is the risk that the Group may encounter difficulties raising funds to meet financial obligations as they fall due. The objective of managing liquidity risk is to ensure that the Group 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 Group manages liquidity risk by monitoring forecast cash flows and liquidity ratios such as working capital. The Group’s working capital, being current assets less current liabilities, has marginally decreased from $(36.4)m at 31 December 2021 to $(39.8)m at 31 December 2022. The decrease is driven by one off cash payments in Q4 2022, relating to the acquisition of the additional 20% interest in Stanmore SMC, voluntary repayment of the US$120m and US$70m financing facilities (both available for redraw as at 31 December 22), and US$289m of the US$625m acquisition financing facility being classified as a current liabilities. 79 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 (i) Maturities of financial liabilities The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities: Total financial liabilities 1,457.0 1,562.0 758.9 31 December 2022 Financial liabilities Trade payables Other payables Lease liabilities Contingent consideration Chattel mortgage Acquisition financing Insurance premium funding 31 December 2021 Financial liabilities Trade payables Other payables Lease liabilities Contingent consideration Chattel mortgage Revolving facility Insurance premium funding Carrying amount $M Contractual cash flows $M Less than 6 months $M Between 6 and 12 months $M Between 1 and 3 years $M Over 3 years $M 392.9 31.7 260.1 148.2 5.1 615.0 4.0 392.9 31.7 295.9 150.0 5.1 682.4 4.0 392.9 31.7 38.3 – 0.9 291.1 4.0 – – 38.3 – 0.9 49.5 – 88.7 – – 188.6 150.0 3.2 341.8 – – – 30.6 – – – – 683.6 30.6 Carrying amount $ ’M Contractual cash flows $ ’M Less than 6 months $ ’M Between 6 and 12 months $ ’M Between 1 and 3 years $ ’M Over 3 years $ ’M 58.3 3.6 0.5 6.3 6.6 67.6 1.1 58.3 3.6 0.5 7.7 7.2 67.6 1.1 58.3 3.6 0.1 1.5 1.0 – 1.1 – – – 0.6 1.0 67.6 – 69.2 – – 0.3 3.6 4.0 – – 7.9 – – 0.1 2.0 1.2 – – 3.3 Total financial liabilities 144.0 146.0 65.6 As disclosed in Note 14, the Acquisition Financing facility is subject to a cash sweep mechanism, increasing in times of higher cash flows. An assessment of the expected cash sweep impacts has been made as at 31 December 2022 to ensure appropriate classifications and liquidity impacts have been reflected in these financial statements. Further information regarding commitments is included in Note 25 on page 89. 80 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 22 FINANCIAL RISK MANAGEMENT (CONT.) (c) Currency risk The United States dollar (US$) is the functional currency of the Group and, as a result, currency exposure arises from transactions and balances in currencies other than the US$. The Group’s potential currency exposures comprise: (i) Operational costs denominated in A$ The operations of the Group are location in Queensland, Australia, and as such a large proportion of its operational costs are incurred and paid in A$. These costs include a combination of employee expenses and contractor expenses, which also include material lease agreements recognised under AASB16. As a result the Group’s payable and lease liability provisions give rise to a foreign exchange risk for the Group. (ii) Tax liabilities Whilst the Group changed its functional and presentational currency during the period the Group is still required to prepare and submit income tax returns to the Australian Tax Office (‘ATO’) in A$, leading to a foreign exchange risk on both current and deferred tax balances as at 31 December 2022. In order to mitigate this risk, the Group has changed its functional currency with the ATO to US$, effective 1 January 2023. 81 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 22 FINANCIAL RISK MANAGEMENT (CONT.) (iii) Rehabilitation provisions The Group expects to fulfil its rehabilitation obligations through the use of existing operational resources, as when required, which will be incurred in A$. In addition, the Group is party to the Queensland Treasury Financial Provisioning Scheme, which is a scheme denominated in A$. As a result, the Group’s rehabilitation provisions are recorded in A$, giving rise to foreign exchange risk for these significant provisions. As at 31 December 2022, the effect on profit or loss as a result of changes in the foreign exchange rates would be: 31 December 2022 Cash and cash equivalents – A$ Derivative financial assets – A$ Trade payables – A$ Tax liabilities – A$ Chattel Mortgage – A$ Insurance premium funding – A$ Lease liability – A$ Rehabilitation provision – A$ Tax charge of 30% After tax increase/(decrease) Cash and cash equivalents – A$ Derivative financial liabilities – A$ Trade payables – A$ Tax liabilities – A$ Chattel Mortgage – A$ Insurance premium funding – A$ Lease liability – A$ Rehabilitation provision – A$ Tax charge of 30% After tax increase/(decrease) (d) Market risk Carrying amount $ ‘M 41.8 6.5 (392.9) (314.1) (5.1) (3.9) (260.1) (203.2) – – 8.6 (4.4) (58.3) (26.6) (6.6) (1.1) (0.5) (27.9) – – Decrease in FX rate by 5% Increase in FX rate by 5% Profit or loss $ ‘M Profit or loss $ ‘M 2.1 0.3 (20.0) (15.7) (0.3) (0.2) (13.0) (10.2) 17.1 (39.9) 0.4 (0.2) (2.9) (1.3) (0.3) – – (1.4) 1.7 (4.0) (2.1) (0.3) 20.0 15.7 0.3 0.2 13.0 10.2 (17.1) 39.9 (0.4) 0.2 2.9 1.3 0.3 – – 1.4 (1.7) 4.0 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 Group has implemented a strategy during the year to reduce its foreign currency risks noted above, notably the exposure to A$. The Group recognise any exposure on these arrangement on its balance sheet as part of its estimated fair value of its derivatives. As at 31 December 2022 the Group has recognised a derivative financial asset position of US$6.5m. 82 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 22 FINANCIAL RISK MANAGEMENT (CONT.) (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 2022 Financial assets Cash and cash equivalents Receivables Derivative financial instruments Security deposits Total financial assets Financial liabilities Trade and other payables Contingent consideration Lease liabilities Chattel Mortgage Acquisition financing Insurance premium fundings Total financial liabilities Floating interest rate $ ‘M Fixed interest rate $ ‘M Non- interest bearing $ ‘M Total carrying amount $ ‘M Weighted average effective interest rate % 432.4 – – – 432.4 – – – – – – – – – – – – 260.1 5.1 615.0 3.9 884.1 – 282.4 6.5 17.1 432.4 282.4 6.5 17.1 306.0 738.4 424.6 148.2 – – – 424.6 148.2 260.1 5.1 615.0 3.9 572.8 1,456.9 1.56%* – – – – – – 4.55% 14.10% – – * 1.56% based on averages rates across financial institutions. Floating interest rate $ ‘M Fixed interest rate $ ‘M Non- interest bearing $ ‘M Total carrying amount $ ‘M Weighted average effective interest rate % 31 December 2021 Financial assets Cash and cash equivalents Receivables Security deposits Total financial assets Financial liabilities Trade payables Contingent consideration Derivative financial instruments Lease liabilities Chattel Mortgage Insurance premium funding Revolving facility Total financial liabilities * 0.30% based on cash rate of 0.10% plus 0.20% margin per NAB. 45.6 – 11.5 57.1 – – – – – – – – – – – – – – – 0.5 6.6 1.1 67.6 75.8 – 25.9 11.5 37.4 7.7 6.3 4.4 – – – – 18.5 45.6 25.9 23.1 94.6 7.7 6.3 4.4 0.5 6.6 1.1 67.6 94.2 0.30%* – – – – – – – 4.55% 2.30% 8.00% – 83 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 22 FINANCIAL RISK MANAGEMENT (CONT.) The Group 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. As at 31 December 2022, the effect on profit and equity as a result of changes in the interest rate would be as follows: 31 December 2022 Cash and cash equivalents Tax charge of 30% After tax increase/(decrease) Increase in interest rate by 1% Decrease in interest rate by 1% Carrying amount $ ‘M Profit or loss $ ‘M Equity $ ‘M Profit or loss $ ‘M 432.4 – – 4.3 (1.3) 3.0 4.3 (1.3) 3.0 (4.3) 1.3 (3.0) Equity $ ‘M (4.3) 1.3 (3.0) Increase in interest rate by 1% Decrease in interest rate by 1% 31 December 2021 Cash and cash equivalents Tax charge of 30% After tax increase/(decrease) Carrying amount $ ‘M Profit or loss $ ‘M Equity $ ‘M Profit or loss $ ‘M 45.6 – – 0.6 (0.2) 0.4 0.6 (0.2) 0.4 (0.6) 0.2 (0.4) Equity $ ‘M (0.6) 0.2 (0.4) 84 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 22 FINANCIAL RISK MANAGEMENT (CONT.) (f) Fair values The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 13 Fair Value Measurement 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). 31 December 2022 Derivative financial instruments held at fair value through profit or loss Investments at Fair Value through other comprehensive income Total financial assets Contingent consideration held at fair value through profit or loss Total financial liabilities 31 December 2022 Contingent consideration held at fair value through profit or loss Derivative financial instruments held at fair value through profit or loss Total financial liabilities Level 1 $ ‘M Level 2 $ ‘M – – – – – 6.5 – 6.5 – – Level 1 $ ‘M Level 2 $ ‘M – – – – – 4.4 Level 3 $ ‘M – 25.0 25.0 148.2 148.2 Level 3 $ ‘M 6.3 4.4 6.3 Sensitivity analysis regarding the contingent consideration liabilities has been considered by management, and it is deemed highly probably that the contingent liability will be paid in full on its due date. There were no other financial assets or liabilities carried at fair value as at 31 December 2022. There were no transfers between the levels during the period. 85 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 23 INTERESTS IN OTHER ENTITIES (a) Material subsidiaries The Group’s principal subsidiaries at 31 December 2022 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. Name of entity Principal activities Comet Coal & Coke Pty Limited 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 Stanmore Wotonga Pty Ltd Stanmore IP Coal Pty Ltd Coal exploration Coal exploration Coal exploration Trustee of Stanmore Employee Share Coal exploration Coal exploration Coal exploration Coal exploration Coal exploration Coal exploration and mining Coal mining Stanmore IP South Pty Ltd Coal exploration and mining Stanmore Bowen Coal pty Ltd Coal exploration and mining Isaac Plains Coal Management Pty Ltd Coal exploration and mining Isaac Plains Sales & Marketing Pty Ltd Coal exploration and mining Stanmore SMC Holdings Pty Ltd Coal exploration and mining Stanmore Green Pty Ltd Renewable energy Dampier Coal (Queensland) Pty Limited Coal mining Stanmore SMC Pty Limited Red Mountain Infrastructure Pty Ltd Coal mining Coal mining * Previously Bowen River Coal Pty Ltd. (b) Interests in joint arrangements Place of business/ country of incorporation % of ownership interest 2022 2021 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – – – Set out below are the significant farm in arrangements of the Group as at 31 December 2022. 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 86 Place of business/ country of incorporation % of ownership interest 2021 Australia Australia Australia Australia 50 60 85 95 Nature of relationship Joint venture Farm in arrangement Farm in arrangement Farm in arrangement Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 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 own and operate 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 AASB 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 31 December 2022 $M 31 December 2021 $M 24.6 – 29.7 (16.7) (18.3) 19.3 17.0 8.2 26.8 (47.3) (11.5) (6.8) The position above is inclusive of the following: • Cash and cash equivalents – US$14.5m (2021: US$6.3m) • Current financial liabilities excluding accounts payable – US$nil (2021: US$29.9m) • Non-Current financial liabilities excluding accounts payable and provision – US$12.6m (2021: US$1.8m) 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 Profit/(Loss) before tax Income tax expense Income tax expense Profit/(loss) for the year Total comprehensive income for the year Group’s share of profit/(loss) for the year 31 December 2022 $ ‘M 31 December 2021 $ ‘M 19.3 – 19.3 – – – 31 December 2022 $M 31 December 2021 $M 180.2 (120.9) (3.7) (1.7) 53.9 (7.7) 46.2 46.2 23.1 6.1 (15.8) (3.8) (1.2) (14.7) 4.4 (10.3) (10.3) (1.8) The Group’s full share of losses was $6.865m for the period to 31 December 2021, of which $3.3m was 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 2022 for which the Group is jointly liable. 87 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 24 INTERESTS IN JOINT ARRANGEMENTS (CONT.) (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 consolidated 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 consolidated 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. 88 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 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 Group 31 December 2022 $M 31 December 2021 $M 1.1 2.0 3.1 0.2 0.6 0.8 The Group 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) Operating commitments 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 Group 31 December 2022 $M 31 December 2021 $M 121.7 359.5 12.5 493.7 – – – – The Group has ongoing operational commitments, primarily in relation to its long-term port and rail capacity requirements. (c) Capital commitments The commitments to be undertaken as follows: Payable Within one year Group 31 December 2022 $M 31 December 2021 $M 10.9 6.0 The Group has non-cancellable, open purchase orders for committed capital works. 89 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 25 COMMITMENTS (CONT.) (d) Other commitments (i) Land acquisitions On 7 April 2011, the Group 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. (ii) Isaac Plains Complex royalty On 26 November 2015, the Group 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 68), but the royalty streams stay on foot and associated costs are included within cost of sales as private royalties. (iii) Isaac Plains east landholder agreement On 20 July 2017, the Group 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. 90 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 26 CONTINGENT LIABILITIES AND CONTINGENT ASSETS (a) Contingent liabilities Under its contractual performance obligations, the Group is required to provide bank guarantees to third parties through its available facilities. During the period, a number of additional guarantee facilities were entered, and subsequently utilised to issue required guarantees, as well as replace some previously issued cash deposits held by third parties. Further details of the facilities entered are shown in Note 14. The guarantees provided as at the end of the reporting period are detailed in the table below: As a result, a number of these obligations have been replaced with cash deposit payments (see Note 12 on page 67), leading to an overall reduction in the number of guarantees provided, as detailed in the table below: Rail capacity providers Port capacity providers Utility providers Other (b) Contingent assets The Group had no contingent assets at 31 December 2022 (2021: nil). Group 31 December 2022 $M 31 December 2021 $M 19.8 56.8 0.8 2.8 80.2 – – – 2.6 2.6 91 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 27 EVENTS OCCURRING AFTER THE REPORTING PERIOD No matter or circumstance has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial years. 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 Group 31 December 2022 $’000 31 December 2021 $’000 4,440 131 17 890 5,478 2,346 95 – 621 3,062 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: Fees to Ernst & Young (Australia) Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities Fees for assurance services that are required by legislation to be provided by the auditor Fees for tax compliance and advisory services Fees for transaction due diligence services Fees for other advisory services Group 31 December 2022 $’000 31 December 2021 $’000 506.3 10.4 90.4 114.3 11.5 732.9 92.0 3.8 110.3 291.1 – 497.2 92 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 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 Group’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 less any impairment. (a) Summary financial information The individual financial statements for the parent entity, Stanmore Resources Limited, show the following aggregate amounts: 31 December 2022 $M 31 December 2021 $M Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Issued capital Foreign currency translation reserve Share-based reserve Retained earnings Total shareholders’ equity Profit/(loss) for the year/period Total comprehensive income/(loss) 83.3 974.1 1,057.4 324.3 155.3 479.6 616.4 (20.3) 2.6 (21.0) 577.7 32.0 32.0 48.6 20.3 68.9 7.2 8.3 15.5 113.3 (9.5) 2.6 (53.0) 53.4 (8.8) (8.8) 93 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 30 PARENT ENTITY FINANCIAL INFORMATION (CONT.) (b) Guarantees Stanmore Resources Limited has guaranteed obligations and performance in respect of the following agreements entered into by subsidiaries: • Share Sale and Purchase Agreement entered into between BHP Minerals Pty Ltd and Stanmore SMC Holdings Pty Ltd (SMC) on 8 November 2021 – unconditional and irrevocable guarantee of the performance of SMC’s obligations under the agreement • Share Sale Agreement entered into between Mitsui & Co., Ltd, Mitsui & Co. (Australia) Ltd and Dampier Coal (Queensland) Proprietary Limited (Dampier) and, Stanmore Resources Limited, as the Guarantor, on 12 August 2022 – unconditional and irrevocable guarantee of the due and punctual performance of all present and future obligations and the payment of all present and future liabilities of Dampier under the agreement • Water Purchase Agreement entered into between Stanmore Green Pty Ltd and SOURCE Global Australia Pty Ltd on 29 March 2022 – guarantee of the payment and performance obligations of Stanmore Green Pty Ltd • Master Loan Agreement entered into between Caterpillar Financial Australia Limited and Stanmore IP Coal Pty Ltd on 2 July 2019 – guarantee the punctual performance of all obligations under the agreement and any loan agreement under that agreement and to pay any amount owing and not paid under the agreement • Facility Agreement entered into between Stanmore IP Coal Pty Ltd and Golden Energy and Resources (GEAR) on 2 November 2020 – guarantee the performance of all obligations of the obligors under the agreement and to pay to GEAR any amount not paid when due and payable by Stanmore IP Coal Pty Ltd to GEAR • Deed of cross guarantee entered into on 6 December 2021 – guarantee the debts of all entities within the closed group, as detailed in Note 33. (c) Contingent liabilities and contingent assets The parent entity did not have any contingent liabilities or contingent assets as at 31 December 2022 or 31 December 2021. (d) Capital commitments The parent entity did not have any capital commitments as at 31 December 2022 or 31 December 2021. 31 SEGMENT INFORMATION The Group has identified the operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision maker – CODM) in assessing performance and determining the allocation of resources and the financial information available to be reported to the Board. The Group primarily produces and sells metallurgical coal in Queensland, Australia. Accordingly, management currently identifies the Group as having one reportable segment. (a) Description of segments (i) Major customers The Group has several customers to whom it sells export grade metallurgical coal. The Group supplies four major customers who accounts for 55% of revenue, as follows: Major Customer A: 16.7% (2021: 27.3%) Major Customer B: 16.3% (2021: 2.1%) Major Customer C: 12.5% (2021: 9.8%) Major Customer D: 9.9% (2021: 18.4%) 94 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 32 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 immediate parent entity of Stanmore Resources Limited is Golden Investments (Australia) Pte Ltd, a company incorporated in Singapore. The ultimate parent company of the Consolidated Entity is PT Sinarindo Gerbangmas, a company incorporated in Indonesia. (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 The Group previously entered into a financing agreement with its parent entity, GEAR, which was negotiated on market terms, and further details are shown within Note 14. In addition to the financing agreement, fees for services provided on market terms for support of the SMC acquisition were paid during the year, totalling $33.275m. M Resources Pty Ltd continues to exclusively manage Stanmore Resources Limited’s global sales contract and relationships, as well providing logistics services to the Group. M Resources Pty Ltd is also a minority shareholder of the Group, and their sole Director, Mr M Latimore also become a Director of Stanmore Resources Limited during the period. Transactions with M Resources Pty Ltd and its associates included: • Fees for services provided on market terms for marketing and logistics services totalling $42.020m for the year ended 31 December 2022 (31 December 2021: S$4.098m) • Fees for services provided on market terms for support of the SMC acquisition totalling $1.524m (31 December 2021: US$0m) • Stanmore purchased coal from M Resources Trading Pty Ltd on market terms before on-selling the coal on a back-to-back basis to a third-party customer totalling $13.424m (31 December 2021: US$0m) • Stanmore sold coal on market terms to ML Resources Pte Ltd on a back-to-back basis to a third-party customer totalling $18.575m (31 December 2021: US$0m). The Company continues to provided MetRes Pty Ltd, a 50% owned Joint Venture, with a secured, total finance facility of up to A$30m. Mr Latimore is also Director and holder of 50% of shares in MetRes Pty Ltd. See Note 8 for further information on the finance facility provided. During the period to 31 December 2022, Stanmore sold coal on market terms to MetRes Pty Ltd on a back-to-back basis to a third-party customer totalling $115.825m (31 December 2021: nil) and purchased coal on market terms before on-selling the coal on a back to back basis to a third party customer totalling US$10.024m (31 December 2021: US$0m). 95 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 33 DEED OF CROSS GUARANTEE Stanmore Resources deed of cross guarantee group Stanmore Resources Limited and its wholly owned subsidiaries (as shown in note 23) with the exception of Stanmore SMC Holdings Pty Ltd, Dampier Coal (Queensland) Pty Ltd, Stanmore SMC Pty Limited, and Red Mount Infrastructure 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. Consolidated statements 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 2022 of the closed group. Consolidated statement of comprehensive income Revenue from continuing operations Other income Operating costs 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 Items that may be reclassified to profit or loss Foreign currency translation 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 31 December 2022 $M 31 December 2021 $M 570.7 0.2 (243.8) (19.6) 19.8 327.3 (84.2) 243.1 (14.1) (14.1) 229.0 14.3 243.1 257.4 283.3 1.0 (268.2) (3.9) (1.8) 10.4 (3.6) 6.8 (5.6) (5.6) 1.2 7.5 6.8 14.3 96 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 33 DEED OF CROSS GUARANTEE (CONT.) Consolidated statement of financial position Set out below is a consolidated statement of financial position as at 31 December 2022 of the closed group. 31 December 2022 $M 31 December 2021 $M Current assets Cash and cash equivalents Trade and other receivables Inventories Other financial assets at amortised cost Total current assets Non-current assets Investments Exploration, development and mine properties Other financial assets Property, plant and equipment Intangible assets Total-non-current assets Total assets Current liabilities Trade and other payables Financial liabilities Lease liabilities Derivative financial instruments Current tax liabilities Provisions Total current liabilities Non-current liabilities Trade and other payables Borrowings Lease liabilities Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity 73.9 28.1 28.9 26.2 157.1 400.2 140.1 4.1 114.0 1.1 659.5 816.6 84.1 12.5 7.2 – 57.8 8.5 170.1 0.8 141.6 43.8 33.1 20.9 240.2 410.3 406.3 616.4 155.9 (366.0) 406.3 45.6 41.4 8.5 14.1 109.6 – 111.6 45.7 54.3 1.5 213.1 322.7 61.9 70.4 0.1 4.4 4.6 4.7 146.1 – 4.9 0.3 22.1 31.3 58.6 204.7 118.0 113.3 (9.6) 14.3 118.0 97 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 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 statement of financial position, 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 2022 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 Consolidated Entity will be able to pay its debts as and when they become due and payable; (d) In the Directors’ opinion, as at the date of this report, there are reasonable grounds to believe that the members of the close group (as defined in note 33) will be able to meet any liabilities to which they are, or may become, subject because of the deed of the cross guarantee; (e) The remuneration disclosures included on pages 26 to 35 of the Directors’ report (as part of audited Remuneration Report) for the year ended 31 December 2022 comply with section 300A of the Corporations Act 2001; and (f) 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 27 February 2023 98 Stanmore | Annual Report 2022 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 Audit or’s Report t o t he Members of St anmore Resources Limit ed Report on t he Audit of t he Financial Report Opinion We have audit ed t he financial report of St anmore Resources Limit ed (t he Company) and it s subsidiaries (collect ively t he Group), which comprises t he consolidat ed st at ement of financial posit ion as at 31 December 2022, t he consolidat ed st at ement of profit or loss and other comprehensive income for t he year ended 31 December 2022, consolidat ed st at ement of changes in equit y and consolidat ed st at ement of cash flows for t he year t hen ended, not es t o t he financial st at ement s, including a summary of significant account ing policies, and t he direct ors’ declarat ion. In our opinion, t he accompanying financial report of t he Group is in accordance wit h t he Corporat ions Act 2001, including: a. Giving a t rue and fair view of t he consolidated financial posit ion of t he Group as at 31 December 2022 and of it s consolidated financial performance for t he year ended on t hat dat e; and b. Complying wit h Aust ralian Account ing Standards and t he Corporat ions Regulat ions 2001. Basis f or opinion We conduct ed our audit in accordance wit h Aust ralian Audit ing St andards. Our responsibilit ies under t hose st andards are furt her described in t he Audit or’s responsibilit ies for t he audit of the financial report sect ion of our report . We are independent of t he Group in accordance wit h t he audit or independence requirement s of t he Corporat ions Act 2001 and t he et hical requirements of t he Account ing Professional and Et hical St andards Board’s APES 110 Code of Ethics for Professional Account ant s (including Independence Standards) (t he Code) t hat are relevant t o our audit of t he financial report in Aust ralia. We have also fulfilled our ot her et hical responsibilit ies in accordance with t he Code. We believe t hat t he audit evidence we have obt ained is sufficient and appropriat e t o provide a basis for our opinion. Key audit mat t ers Key audit mat t ers are t hose mat t ers t hat , in our professional judgment , were of most significance in our audit of t he financial report of t he curr ent year. These mat t ers were addressed in t he cont ext of our audit of t he financial report as a whole, and in forming our opinion thereon, but we do not provide a separat e opinion on t hese mat t ers. For each mat t er below, our descript ion of how our audit addressed t he matt er is provided in t hat cont ext . We have fulfilled t he responsibilit ies described in t he Auditor’s responsibilit ies for t he audit of t he financial report sect ion of our report , including in relat ion t o t hese mat t ers. Accordingly, our audit included t he performance of procedures designed t o respond t o our assessment of t he risks of mat erial misstat ement of t he financial report . The result s of our audit procedures, including t he procedures performed t o address t he mat t ers below, provide t he basis for our audit opinion on the accompanying financial report . A member firm of Ernst & Young Global Limit ed Liabilit y limit ed by a scheme approved under Professional St andards Legislat ion 99 Stanmore | Annual Report 2022 Independent auditor’s report (CONTINUED) Acquisit ion of Dampier Coal (Queensland) Pt y Lt d and it s cont rolled ent it ies Why significant On 3 May 2022, St anmore Resour ces Limit ed (“ St anmore” ) complet ed t he acquisit ion of Dampier Coal (Queensland) Pt y Lt d and it s cont rolled ent it y, which includes 80% of t he shares on issue of St anmore SMC Pt y Lt d (“ SMC” ), formerly BHP Mit sui Coal Pt y Lt d. The t ransact ion const it ut es a business combinat ion under AASB 3 Business Combinat ions and St anmore’s wholly owned subsidiary, St anmor e SMC Holdings Pt y Lt d, was det er mined t o be t he acquir er for account ing pur poses. The det ails of t he business combinat ion account ing ar e disclosed in Not e 2 of t he financial st at ement s. In undert aking t he business combinat ion account ing, St anmor e is required t o measure t he considerat ion t ransferred and t he f air value of ident ifiable asset s, liabilit ies and cont ingent liabilit ies acquired at t he acquisit ion dat e and assess t he exist ence of any goodwill. The fair value measurement of ident ifiable asset s, liabilit ies, and cont ingent liabilit ies requir es significant judgement and complex est imat ion, including: The ident ificat ion and measurement of all asset s, liabilit ies and cont ingent liabilit ies. The fair valuat ion of non-current asset s, including propert y, plant and equipment , mineral right s (including coal reserves and resources) and explorat ion and evaluat ion asset s which ar e dependent upon, amongst ot her fact ors, t he exist ence and ext ent of underlying coal r eserves and resources and key for ecast assumpt ions such as discount rat es, commodit y prices and operat ing and capit al cost s. The valuat ion of rest orat ion and rehabilit at ion liabilit ies, which in t urn are dependent upon t he ext ent of environment al dist urbances at t he acquisit ion dat e, t he t iming of proposed rehabilit at ion and decommissioning act ivit ies and applicable regulat ory and compliance requir ement s. The measurement of def erred t ax asset s and liabilit ies recognised on init ial acquisit ion of SMC. Treat ment of non-cont rolling int erest , which was subsequent ly acquired in Oct ober 2022 As a result , we considered t he Group’s business combinat ion account ing and t he relat ed disclosures in t he financial report t o be a key audit mat t er. How our audit addr essed t he key audit mat t er Our audit pr ocedures included t he following: Assessed t he Group’s det er minat ion of t he acquisit ion dat e of t he business combinat ion and t he conclusion St anmor e SMC Holding Pt y Lt d was t he acquirer in t he t ransact ion. Evaluat ed t he Group’s det er minat ion of t he purchase considerat ion wit h ref erence t o Aust ralian Account ing St andards including cont ingent considerat ion payable. Evaluat ed t he compet ence and object ivit y of t he Group’s expert s used t o det er mine SMC’s coal reserves and r esources quant it ies and t he fair value allocat ed t o t he acquir ed proper t y, plant and equipment , mining right s, explorat ion and evaluat ion asset s, and rest orat ion liabilit ies. In conjunct ion wit h EY’s valuat ion specialist s, we: ► ► ► ► Considered whet her t he valuat ion met hodology, used by t he Group’s ext ernal expert t o measure fair value, was in accordance wit h t he requir ement s of Aust ralian Account ing St andards. Evaluat ed t he reasonableness of t he key input assumpt ions including discount rat es and forecast commodit y prices wit h ref erence t o a variet y of t hird-part y forecast s, peer informat ion and mar ket dat a. Performed valuat ion cross checks on t he acquired proper t y, plant and equipment , mining right s and explorat ion and evaluat ion asset s wit h ref erence t o reserve and resour ce t ransact ion and t rading mult iples. Assessed decommissioning and rest orat ion liabilit y amount s r ecognised wit h r eference t o int ernal and t hird-part y r est orat ion cost est imat es. We considered t he composit ion of t he cost est imat es and met hodologies used as well as t he appropriat eness of cont ingency rat es and t he ot her market input s applied, such as inflat ion and discount rat es. Test ed t he working capit al balances, including cash, invent ory, t rade receivable and payables at t he acquisit ion dat e. Test ed t ransact ion cost s associat ed wit h business combinat ion were recorded in profit and loss for t he year . Test ed t he non-cont rolling int erest r ecognised dir ect ly wit hin equit y for t he 20% minorit y int er est in SMC not held by t he Group. Assessed t he adequacy of t he disclosures in Not e 2 t o t he financial st at ement s. A member firm of Ernst & Young Global Limit ed Liabilit y limit ed by a scheme approved under Professional St andards Legislat ion 100 Directors’ Report (CONTINUED)Stanmore | Annual Report 2022 Independent auditor’s report (CONTINUED) Remeasurement of deferred t ax balances upon subsidiaries ent ering St anmore Resources Limit ed’s t ax consolidat ion group Why significant On 7 Oct ober 2022, t he Group complet ed t he acquisit ion of t he non-cont rolling int erest in St anmor e SMC Pt y Lt d (“ SMC” ), result ing in SMC and Red Mount ain Infrast ruct ure Pt y Lt d becoming wholly owned subsidiaries of St anmore Resources Limit ed (“ St anmor e” ). Upon becoming wholly owned subsidiaries of St anmor e, t he ent it ies wer e requir ed t o irr evocably join St anmore’s pre-exist ing t ax consolidat ion group. On 7 Oct ober 2022, t he ent it ies joined t he t ax consolidat ion group. Upon ent r y int o t he t ax consolidat ion group, Aust ralian t ax legislat ion requires t he Group t o perform an allocable cost amount (“ ACA” ) assessment whereby t he t ax bases of t he ent it ies ent ering t he Group are r eset . Significant judgment and complex est imat ion is required in measuring t he t ax bases of non-current asset s such as propert y, plant and equipment and mine propert ies, r equir ing t he use of t hird part y valuat ion specialist s. The reset of t he ent it ies t ax bases has result ed in t he remeasurement of def erred t ax asset s and def erred t ax liabilit ies. The reset of SMC’s t ax bases result ed in a net decrease t o deferred t ax liabilit ies of US$151.3m, which has been recognised wit hin t he st at ement of profit or loss wit hin t he income t ax expense account . As a result , we considered t he Group’s remeasurement of deferred t ax balances result ing fr om t hese ent it ies joining t he St anmor e t ax consolidat ed group and t he relat ed disclosures in t he financial repor t t o be a key audit mat t er. How our audit addr essed t he key audit mat t er Our audit pr ocedures included t he following: Assessed t he requirement of t he ent it ies t o irr evocably ent er t he St anmore Resources Limit ed t ax consolidat ed group. Involved EY’s t axat ion specialist s t o evaluat e t he impact of t he ent it ies ent ering t he St anmore Resources Limit ed t ax consolidat ed group and t he applicat ion of t he relevant t ax legislat ion in det er mining t he allocable cost amount (“ ACA” ) used t o reset t ax bases of t he ent it ies. Evaluat ed t he compet ence and object ivit y of t he Group’s expert s used t o det er mine t he f air value allocat ed t o proper t y, plant and equipment and mine propert ies used in t he ACA calculat ion. In conjunct ion wit h EY’s valuat ion specialist s, we: ► ► ► Considered whet her t he valuat ion met hodology, used by t he Group’s ext ernal expert t o measure fair value, was in accordance wit h t he requir ement s of t he relevant t ax legislat ion. Evaluat ed t he reasonableness of t he key input assumpt ions including discount rat es and forecast commodit y prices wit h ref erence t o a variet y of t hird-part y forecast s, peer informat ion and mar ket dat a. Performed valuat ion cross checks on t he acquired proper t y, plant and equipment and mine proper t ies wit h ref erence t o r eserve and resource t ransact ion and t rading mult iples. Test ed t he changes in t ax bases agr eed t o t he movement in t he Group’s deferr ed t ax asset s and deferred t ax liabilit ies and t he consequent ial impact on t he Group’s consolidat ed income t ax expense. Assessed t he adequacy of t he disclosures in Not e 5 t o t he financial st at ement s. Informat ion ot her t han t he financial report and audit or’s report t hereon The direct ors are responsible for t he ot her informat ion. The other informat ion comprises t he informat ion included in t he Company’s 2022 annual report ot her t han t he financial report and our audit or’s report t hereon. We obt ained t he direct ors’ report and shareholders informat ion t hat is t o be included in t he annual report , prior t o t he dat e of t his audit or’s report , and we expect t o obt ain t he remaining sect ions of t he annual report aft er the dat e of t his audit or’s report . Our opinion on the financial report does not cover t he ot her informat ion and we do not and will not express any form of assurance conclusion t hereon, wit h t he except ion of t he Remunerat ion Report and our relat ed assurance opinion. A member firm of Ernst & Young Global Limit ed Liabilit y limit ed by a scheme approved under Professional St andards Legislat ion 101 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Independent auditor’s report (CONTINUED) In connect ion wit h our audit of t he financial report , our responsibilit y is t o read t he ot her informat ion and, in doing so, consider whet her t he ot her informat ion is mat erially inconsist ent wit h t he financial report or our knowledge obt ained in t he audit or ot herwise appears t o be mat erially misst at ed. If, based on t he work we have performed on the ot her informat ion obt ained prior t o t he dat e of t his audit or’s report , we conclude t hat t here is a mat erial misst at ement of t his ot her informat ion, we are required t o report t hat fact . We have not hing t o report in t his regard. Responsibilit ies of t he direct ors for t he financial report The direct ors of t he Company are responsible for t he preparat ion of t he financial report t hat gives a t rue and fair view in accordance wit h Aust ralian Account ing St andards and t he Corporat ions Act 2001 and for such int ernal cont rol as t he direct ors det ermine is necessary t o enable t he preparat ion of t he financial report t hat gives a t rue and fair view and is free from mat erial misst at ement, whet her due t o fraud or error. In pr eparing t he financial report , t he direct ors are responsible for assessing t he Gr oup’s abilit y t o cont inue as a going concern, disclosing, as applicable, mat t ers relat ing t o going concern and using t he going concern basis of account ing unless t he direct ors eit her int end t o liquidat e t he Group or t o cease operat ions, or have no realist ic alt ernat ive but t o do so. Audit or’s responsibilit ies for t he audit of t he financial report Our object ives are t o obtain reasonable assurance about whether t he financial report as a whole is free from mat erial misst at ement , whether due t o fraud or error, and t o issue an auditor’s report t hat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarant ee t hat an audit conduct ed in accordance wit h t he Australian Audit ing St andards will always det ect a mat erial misstat ement when it exists. Misst at ement s can arise from fraud or error and are considered mat erial if, individually or in t he aggregat e, t hey could reasonably be expect ed to influence t he economic decisions of users t aken on the basis of t his financial report . As part of an audit in accordance wit h t he Australian Audit ing St andards, we exercise professional judgment and maint ain professional scept icism t hroughout t he audit . We also: ► Ident ify and assess t he risks of mat erial misst at ement of t he financial report , whet her due t o fraud or error , design and perform audit procedures responsive t o t hose risks, and obt ain audit evidence t hat is sufficient and appropriat e t o provide a basis for our opinion. The risk of not det ect ing a mat erial misst at ement result ing from fraud is higher than for one result ing from error, as fraud may involve collusion, forgery, int ent ional omissions, misrepr esent at ions, or t he override of int ernal cont rol. ► Obt ain an underst anding of int ernal cont rol relevant t o t he audit in order to design audit procedures t hat are appropriat e in t he circumst ances, but not for t he purpose of expressing an opinion on the effect iveness of the Group’s int ernal control. ► Evaluat e the appropriat eness of account ing policies used and t he reasonableness of account ing est imat es and relat ed disclosures made by t he direct ors. ► Conclude on t he appropriat eness of t he direct ors’ use of t he going concern basis of account ing and, based on the audit evidence obt ained, whet her a mat erial uncert aint y exist s relat ed t o event s or condit ions t hat may cast significant doubt on t he Group’s abilit y t o cont inue as a going concern. If we conclude t hat a mat erial uncert aint y exist s, we are required t o draw at t ent ion in our audit or’s report t o t he relat ed disclosures in t he financial report or, if such disclosures are inadequat e, to modify our opinion. Our conclusions are based on t he audit A member firm of Ernst & Young Global Limit ed Liabilit y limit ed by a scheme approved under Professional St andards Legislat ion 102 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Independent auditor’s report (CONTINUED) evidence obt ained up t o the dat e of our audit or’s report . However, fut ure event s or condit ions may cause t he Group t o cease t o cont inue as a going concern. ► Evaluat e the overall present at ion, st ruct ure and cont ent of t he financial report , including t he disclosures, and whet her t he financial report represent s t he underlying transact ions and event s in a manner t hat achieves fair present at ion. ► Obt ain sufficient appropriat e audit evidence regarding t he financial informat ion of t he ent it ies or business act ivit ies wit hin the Group to express an opinion on t he financial report . We are responsible for t he direct ion, supervision and performance of t he Group audit . We remain solely responsible for our audit opinion. We communicat e wit h t he direct ors regarding, among ot her matt ers, t he planned scope and t iming of t he audit and significant audit findings, including any significant deficiencies in int ernal control t hat we ident ify during our audit . We also provide t he direct ors wit h a st at ement t hat we have complied with relevant et hical requirement s regarding independence, and t o communicat e wit h t hem all relat ionships and ot her mat t ers that may reasonably be t hought t o bear on our independence, and where applicable, act ions t aken to eliminat e t hreat s or safeguards applied. From t he mat t ers communicat ed t o t he direct ors, we det ermine t hose mat t ers t hat were of most significance in t he audit of t he financial report of t he curr ent year and are t herefore t he key audit mat t ers. We describe t hese mat t ers in our audit or’s report unless law or regulat ion precludes public disclosure about the mat t er or when, in ext remely rare circumst ances, we det ermine t hat a mat t er should not be communicat ed in our report because t he adverse consequences of doing so would reasonably be expect ed to out weigh t he public int erest benefits of such communicat ion. A member firm of Ernst & Young Global Limit ed Liabilit y limit ed by a scheme approved under Professional St andards Legislat ion 103 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Independent auditor’s report (CONTINUED) Report on t he Audit of t he Remunerat ion Report Opinion on t he Remunerat ion Report We have audit ed t he Remunerat ion Report included in pages 19 t o 27 of t he direct ors’ report for t he year ended 31 December 2022. 26 to 35 In our opinion, t he Remunerat ion Report of St anmore Resources Limit ed for t he year ended 31 December 2022, complies wit h sect ion 300A of t he Corporat ions Act 2001. Responsibilit ies The direct ors of t he Company are responsible for t he preparat ion and present at ion of t he Remunerat ion Report in accordance wit h sect ion 300A of t he Corporat ions Act 2001. Our responsibilit y is t o express an opinion on t he Remunerat ion Report , based on our audit conduct ed in accordance with Aust ralian Audit ing St andards. Ernst & Young Tom du Preez Part ner Brisbane 27 February 2023 A member firm of Ernst & Young Global Limit ed Liabilit y limit ed by a scheme approved under Professional St andards Legislat ion 104 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Shareholder information A. DISTRIBUTION OF EQUITY SECURITIES The number of Ordinary Shares by size of holding as at 13 March 2023 is: Range 100,001 and over 10,001 - 100,000 5,001 - 10,000 1,001 - 5,000 1 - 1000 TOTAL Ordinary shares Shares Securities 873,311,861 20,628,111 3,967,976 3,078,411 405,275 901,391,634 % No. of holders 96.88% 2.29% 0.44% 0.34% 0.04% 100% 103 700 519 1,123 933 3,378 % 3.05% 20.72% 15.36% 33.24% 27.62% 100% The number of security investors holding less than a marketable parcel of 142 securities ($3.540 on 13/03/2023) is 200 and they hold 4,894 securities. 105 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Shareholder information (CONTINUED) B. SUBSTANTIAL HOLDERS The names of the twenty largest holders of quoted equity securities as at 13 March 2023 are listed below: 13 Mar 2023 577,015,682 43,593,804 36,468,791 21,082,489 17,441,733 16,897,373 12,746,487 11,715,000 10,430,646 7,957,212 5,838,037 5,738,013 4,758,205 4,481,529 4,256,892 4,234,100 4,174,183 4,154,140 3,579,968 3,353,986 % of isc 64.01% 4.84% 4.05% 2.34% 1.93% 1.87% 1.41% 1.30% 1.16% 0.88% 0.65% 0.64% 0.53% 0.50% 0.47% 0.47% 0.46% 0.46% 0.40% 0.37% 799,918,270 88.74% Investor 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Golden Energy and Resources Mr Matthew J Latimore Regal Funds Mgt JPMorgan Securities Australia VGI Partners Odey Asset Mgt Argo Investments Construction and Building Industry Super - Cbus UBS Securities Private Clients of Interactive Brokers PM Capital Goldman Sachs Asia Private Portfolio Managers PPM Morgan Stanley Acadian Asset Mgt Perpetual Investments JPMorgan Securities BofA Securities IFM Investors 20 Norges Bank Investment Mgt Total C. RESTRICTED SECURITIES There are Nil restricted shares on issue as at 13 March 2023. D. VOTING RIGHTS All ordinary shares carry one vote per share without restriction. Options and performance rights do not carry voting rights. 106 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Reserves and Resources COAL RESOURCES FOR STANMORE PROJECTS Stanmore Coal Resources as at end December 2022 Project Name Tenement Coal Type* Measured Resources Indicated Resources Inferred Resources Total Resources Competent Person Report Date ML 1791, ML 4749, ML 70312, EPC 1646, EPC 1951 ML 4750, ML 70131, EPC 1647, EPC 2071, EPC 2109 Poitrel South Walker Creek Bee Creek ML 4751 Nebo West MDL 235 Lancewood ML 4752 ML 1790, ML 70443, ML 70495, ML 70443 Wards Well SMC Asset Sub Total ML 70342, ML 700018, ML 700019 ML 700016, ML 700017, ML 700018, ML 700019, EPC 755 ML 700046, ML 700047, ML 700048 Isaac Plains Isaac Plains East Isaac Downs Isaac South EPC 755 Isaac Plains Complex Clifford The Range Surat Basin Complex Sub Total EPC 1274, EPC 1276 EPC 1112, EPC 2030 C, PCI 57 45 47 149 E Feb-23 PCI PCI PCI, A C C 254 0 0 62 485 858 303 9 0 184 585 1126 123 13 71 3 98 355 679 23 71 249 1168 2339 E I I E E Feb-23 Jun-21 Jun-21 Feb-23 Feb-23 C, T 24 16 5 45 A Dec-21 C, T C, T C, T T T 6 26 12 68 0 18 Sub Total 18 387 10 3 15 43 200 187 511 18 0 25 48 430 81 916 34 29 52 160 630 286 D B C A A Feb-23 Feb-23 Jun-18 Aug-16 Oct-12 107 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Reserves and Resources (CONTINUED) Project Name Tenement Coal Type* Mackenzie EPC 2081 C, T EPC 1114, EPC 1186, EPC 1798 EPC 1168, EPC 1580 EPC 1687, EPC 2157 C, PCI T C Belview Tennyson Lilyvale Total Coal Resources Measured Resources Indicated Resources Inferred Resources Total Resources Competent Person 0 0 0 0 26 50 0 0 117 143 280 140 33 330 140 33 944 1632 1484 4061 A A A A Report Date 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 A – Anthracite B – Mr Toby Prior –Measured Group C – Mr Mal Baik – JB Mining D – Dr Bronwin Leonard – Stanmore Resources E – Mr Brad Willis – Palaris I – Mr Rod MacPherson – 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. Reports 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 Millennium Complex is 50%; Clifford is 60%, Mackenzie is 95%, and Lilyvale is 85%, all other tenure is 100% owned by Stanmore. 108 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Reserves and Resources (CONTINUED) COAL RESERVES AND MARKETABLE COAL RESERVES FOR STANMORE PROJECTS Stanmore Coal Reserves as at end December 2022 Project Name Tenement Proved Probable Total Proved Probable Total ROM Coal Reserves Marketable Coal Reserves Competent Person Report Date ML 1791, ML 4749, ML 70312, EPC1646, EPC1951 ML 4750, ML 70131, EPC1647, EPC2071, EPC2109 ML 700016, ML 700017, ML 700018, ML 700019 ML 70342, ML 700018, ML 700019 ML 700046, ML 700047, ML 700048 EPC 1112, EPC 2030 Poitrel South Walker Creek SMC Assets Isaac Plains East Opencut Isaac Plains Underground Isaac Downs Isaac Plains Complex The Range Total Coal Reserves 26 18 44 18 12 30 K Feb-23 162 188 20 38 182 226 127 145 15 27 142 172 K Feb-23 0.8 0.4 1.2 0.5 0.3 0.8 11.8 7.7 19.5 9.5 6.1 15.6 17.5 0.5 18.0 11.4 0.3 11.7 30 0 9 118 39 118 21 0 7 94 28 94 218 164 382 166 128 294 H F H Jan-23 Feb-21 Jan-23 G Jul-11 Coal Type Ration – (% of Marketable Coal Reserve) Competent Person Poitrel South Walker Creek Isaac Plains East Issac Plain Underground Isaac Downs The Range 63%Coking:37%PCI F – Mr Benjamin Smith – Xenith 100%PCI 99%:1% 77%:23% 96%:4% 100% Thermal H – Mr Tony O’Connell – Optimal G – Mr Richard Hoskings – Minserve K – Mr John Pala – Palaris 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 are 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%. 109 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Reserves and Resources (CONTINUED) INCORPORATED JOINT VENTURE INTERESTS MetRes Pty Ltd MetRes Pty Ltd (MetRes) is a 50% Stanmore owned, incorporated joint venture. M Mining Pty Ltd is the Joint Venture’s manager and operator. MetRes is holder of the Millennium and Mavis Downs Mine Complex, which lies adjacent to the east of Stanmore’s Isaac Downs Mine. 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. All MetRes Resources and Reserves are estimated as current to 31 December 2022. The MetRes Resource update was conducted by depletion, it references the latest model and removes any coal which had been extracted via mining, since this date until 31 December 2022. COAL RESOURCES FOR METRES PROJECTS MetRes Mineral Resources as at end December 2022 (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 ML 70313, ML 70344, ML 70401 ML 70485, ML 70457, ML 70483 Millennium Complex Total Resources C, PCI 3.4 3.4 3.5 C, PCI 5.9 9.3 2.6 5.9 1.5 5 A A Jan-23 Jan-23 10 10 20 *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 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 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: 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. 110 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Reserves and Resources (CONTINUED) COAL RESERVES AND MARKETABLE COAL RESERVES FOR METRES PROJECTS MetRes Coal Resources 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 ML 70313, ML 70344, ML 70401, ML 70485, ML 70457 ML 70483 Millennium/ Mavis Complex TOTAL RESERVES 0.1 0.0 0.1 0.1 0.0 0.1 J Jan-23 1.1 1.2 1.8 1.8 2.9 3.0 1.0 1.1 1.5 1.5 2.5 2.6 F Feb-23 Coal Type Radio – Coking: Thermal (% of Marketable Coal Reserve) Competent Person Millennium/Mavis – 100% Coking 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 Resource is noted in the Table above. 111 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Reserves and Resources (CONTINUED) STANMORE RESOURCES CURRENT QUEENSLAND TENEMENTS 112 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Reserves and Resources (CONTINUED) COMPETENT PERSON 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 in the report of the matters based on the information, 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 relevant 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 in the report of the matters based on the information, 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 in the report of the matters based on the information, in the form and context in which it appears. 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 in the report of the matters based on the information, 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. He consents to the inclusion of this Reserve Estimate in reports disclosed by the Company in the form in which it appears. 113 Notes to the financial statements (CONTINUED)Stanmore | Annual Report 2022 Reserves and Resources (CONTINUED) 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. He consents to the inclusion of this Reserve Estimate in reports disclosed by the Company in the form in which it appears. The information in this report relating to Coal Resources for Bee Creek and Nebo West is based on information prepared by Mr Rod Macpherson who is a full-time employee of Stanmore Resources and has held the position of Superintendent Strategic Resources since May 2022. Mr Macpherson is a qualified Geologist with an Honours degree from the NSW Institute of Technology majoring in Applied Geology and is a Member of the Australian Institute of Geoscientists (AIG). Mr Macpherson has over 30 years’ experience in mining, exploration, and resource modelling relevant 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 Macpherson consents to the inclusion in the report of the matters based on the information, 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 and 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. He consents to the inclusion of this Reserve Estimate in reports disclosed by the Company in the form 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 this Reserve Estimate in reports disclosed by the Company in the form in which it appears. 114 Stanmore | Annual Report 2022 The information in this report relating to the Poitrel and South Walker Creek Coal Resource estimates are based on information compiled by Mr Brad Willis. The Wards Well & Lancewood Resource estimate is based on information compiled by Mr Brad Willis. Mr Brad Willis is a Member of the Australasian Institute of Mining and Metallurgy and is a full-time employee of Palaris Australia Pty Ltd, Willis is a Principal Geologist at Palaris. He 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 Willis has more than 23 years’ experience in exploration and mining of coal deposits. Mr Willis consents to the inclusion of this Resource Estimate in reports disclosed by the Company in the form in which it appears. The information in this report relating to the Reserve estimates for Poitrel and SWC is based on information compiled by Mr John Pala, who is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Pala is Managing Director of Palaris. He has sufficient experience relevant for 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 Pala has over 35 years’ experience in the estimation, assessment, evaluation, and economic extraction of Coal Reserves. Mr Pala consents to the inclusion of this Reserve Estimate in reports disclosed by the Company in the form in which it appears. 115 Stanmore | Annual Report 2022 116 Stanmore | Annual Report 2022 Corporate Directory PRINCIPAL REGISTERED OFFICE IN AUSTRALIA Level 32 12 Creek Street Brisbane QLD 4000 Australia +61 7 3238 1000 SHARE AND DEBENTURE REGISTER Link Market Services Level 21 10 Eagle Street Brisbane QLD 4000 1300 554 474 AUDITOR Ernst & Young Level 51 111 Eagle Street Brisbane QLD 4000 07 3011 3333 STOCK EXCHANGE LISTINGS Australian Securities Exchange ASX Code: SMR WEBSITE ADDRESS www.stanmore.net.au DIRECTORS Mr Dwi Suseno Non-Executive Director and Chairman Mr Marcelo Matos Chief Executive Officer and Executive Director Mr Jimmy Lim Non-Executive Director Mr Mark Trevan Non-Executive Director Mr Richard Majlinder Non-Executive Director Mr Brett Garland Non-Executive Director Mr Matthew Latimore Non-Executive Director Ms Caroline Chan Non-Executive Director SECRETARY Mr Rees Fleming FURTHER INFORMATION Investors investors@stanmore.net.au Media media@stanmore.net.au 117 Stanmore | Annual Report 2022 stanmore.net.au