Peak Resources Limited
Annual Report 2021

Plain-text annual report

20 21 ANNUAL REPORT Page 2 | Peak Resources Ltd FY21 Annual Report CONTENTS MESSAGE FROM CHAIR AND MANAGING DIRECTOR REVIEW OF OPERATIONS SUSTAINABILITY ANNUAL FINANCIAL REPORT 30 JUNE 2021 DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION ASX ADDITIONAL INFORMATION TENEMENT SCHEDULE AND RESERVES AND RESOURCES 06 10 18 25 25 47 54 55 56 57 58 94 95 98 CORPORATE DIRECTORY 102 01 OVERVIEW FY2021 HIGHLIGHTS 01 03 05 Ngualla Rare Earth Project is one of the world’s largest, highest-grade undeveloped NdPr Oxide deposits Tanzanian Cabinet approval of a Special Mining Licence application for the Ngualla Rare Earth Project 02 04 Fully integrated ‘Ore-to-NdPr Oxide’ strategy to become a leading and low cost independent rare earths producer Exercise of option over a 250-year lease over a UK rare earths refinery site BFS Update underway, building on the 2017 BFS and extensive pilot plant testwork 06 NdPr Oxide prices increased approximately 124% between June 2020 to September 2021, with increased demand led by the rapidly escalating global decarbonisation thematic 07 Rising recognition around the importance of enhancing diversity of NdPr Oxide supply and supporting production outside of China 08 New Board, management and technical team appointments to drive projects to development Page 4 | Peak Resources Ltd FY21 Annual Report ABOUT PEAK RESOURCES Peak Resources controls the Ngualla Rare Earth Project in Tanzania, which is one of the largest, highest grade Neodymium and Praseodymium (“NdPr”) rare earth deposits in the world. It is located approximately 147km from the city of Mbeya in southern Tanzania and on the edge of the East African Rift Valley. Ngualla contains Ore Reserves (18.5Mt grading at 4.80% Rare Earth Oxide (“REO”) for 887kt REO) and Mineral Resources (214.4Mt grading 2.15% REO for 4.61Mt REO). There is also significant exploration potential existing within the remaining Ngualla lease in relation to not only rare earths, but also barite, niobium, fluorspar and phosphate. The Ngualla Project entails the construction of a mine, mill, concentrator, community projects and associated infrastructure. Construction of the project is expected to cost approximately US$200 million and create around 600 direct jobs during construction and around 220 direct jobs during operations. As part of Peak’s integrated strategy, the project will produce a rare earth concentrate grading 45% REO, which will be shipped to its planned rare earth refinery in the Tees Valley, United Kingdom, which will produce Neodymium-Praseodymium Oxide (“NdPr Oxide”) and other separated rare earth products. The Tees Valley is an established industrial and chemical processing zone, benefits from “plug and play” infrastructure and utilities, and is favourably located with respect to key European and Asian end markets (Figure 1). The Teesside Refinery is expected to cost approximately US$165 million. Significant milestones were achieved at both Ngualla and the Tees Valley during 2021 which support the future development of the integrated project. NdPr Oxide is a critical component of high-strength permanent magnets, which are used in the production of electric vehicles and wind turbines. The demand outlook for NdPr Oxide is strong and closely aligned to global trends around decarbonisation, the electrification of transport and renewable energy generation. China currently produces around 90% of the world’s NdPr Oxide, and Peak’s Ngualla- Teesside Project will position the Company as one of a small number of suppliers of NdPr Oxide and other separated rare earth products outside of China. Rare Earth Refinery, United Kingdom Ngualla Rare Earth Deposit, Tanzania Headquarters, Australia 02 MESSAGE FROM CHAIR AND MANAGING DIRECTOR The capacity to decarbonise our economy is reliant upon raw materials such as rare earths to produce electric vehicles and wind turbines that will support lower carbon emissions. Tony Pearson - Non-Executive Chair Page 6 | Peak Resources Ltd FY21 Annual Report MESSAGE FROM CHAIR AND MANAGING DIRECTOR TONY PEARSON Non-Executive Chair BARDIN DAVIS Managing Director Dear Peak Shareholders, Decarbonisation of our planet is one of the key took some critical steps forward in fulfilling this strategy. structural forces which will drive the global The Tanzanian Cabinet approval of a Special Mining economy over the coming decades. To achieve Licence (SML) application for the Ngualla Project decarbonisation targets under the Paris Agreement, in July 2021 marks the key regulatory milestone governments and businesses across the world required to advance the project. The approval will need to change the way energy is produced followed an extensive due diligence process with and transport is powered. These changes are the Government of Tanzania and we thank Her happening and will gather further momentum in Excellency Samia Suluhu Hassan, the President of future years. The capacity to decarbonise our economy is reliant upon raw materials such as rare earths to produce electric vehicles and wind turbines that will support lower carbon emissions. The high-strength permanent magnets used in these technologies require Neodymium and Praseodymium (NdPr) Oxide and other rare earths with demand growth forecast to grow at a compound rate of close to 10% over the decade from 2020. Peak Resources is positioned to become one of the few fully integrated suppliers of NdPr Oxide outside of China via the development of its integrated Ngualla Rare Earth Project in Tanzania (Ngualla Project) and its Teesside Refinery in the United Kingdom. The Ngualla Project contains one of the world’s largest and highest grade undeveloped NdPr Oxide deposits. Our Teesside Refinery project benefits from a strategic location and will support our objective of being a fully integrated and low- cost independent producer. During the period we Tanzania; Cabinet members; Honourable Minister for Minerals; Honourable Deputy Minister for Minerals; Permanent Secretary for Minerals; the Chairman and members of the Mining Commission; Honourable MP for Songwe Province; Regional Commissioner for the Songwe Region; District Commissioners of the Songwe District; and all other officials involved in assisting Peak to reach this transformational milestone. In May 2021 we exercised a £1.9 million option to enter into a 250-year lease over a 19 hectare site in the Tees Valley near Middlesbrough in the UK. We plan to build our Teeside Refinery on this site, which will receive high-grade rare earth concentrate from our planned Ngualla Project. The Teesside Refinery will produce NdPr Oxide and other separated rare earth products that are critical for electric vehicles and renewable energy technologies. The Tees Valley is an established industrial and chemical processing zone, benefits from “plug and play” infrastructure and utilities and is favourably located 02 MESSAGE FROM CHAIR AND MANAGING DIRECTOR with respect to key European and Asian markets. and thorium. This supports a low-cost structure The construction of the Teesside Refinery is and superior environmental outcomes compared intended to occur in parallel with the development to many competing development projects. The BFS of Ngualla. The integrated Ngualla – Teesside project is one of the most advanced in the rare earth sector with Update is expected to be completed in early 2022 and be followed by Front End Engineering Design activities. a Bankable Feasibility Study (BFS) completed in 2017. The BFS confirms an attractive development During the period a number of changes were made to the Company’s Board and senior management asset with a strong operating margin, long mine team to support the next phase of the Company’s life and highly attractive economics. Following the growth. In October 2020 Tony Pearson was receipt of the SML for the Ngualla Project a BFS appointed Non-Executive Chair and Bardin Davis Update was initiated to ensure estimates reflect was appointed a Non-Executive Director before current market conditions and to pursue a number commencing as Managing Director in December of project enhancement opportunities. Given the 2020. original BFS was supported by extensive pilot plant testing there are not expected to be material changes to the processing route. The high-grade bastnaesite-hosted orebody at Ngualla has very low levels of acid consuming elements, uranium Previous CEO Rocky Smith departed the Company in September 2020. Former Chairman Peter Meurer and Non-Executive Directors Jonathan Murray and Rob Sennitt stepped down from the Board during Page 8 | Peak Resources Ltd FY21 Annual Report Tanzania Cabinet approval of the SML application for Ngualla further enhances its position as one of the most advanced rare earth development projects with a JORC Compliant Ore Reserve, completed BFS, fully piloted process and key approvals in place. Bardin Davis, Managing Director the year and we express our gratitude for their in a strong financial position to drive greater service. The Board was strengthened with the addition of Non-Executive Directors Giselle Collins, Rebecca shareholder returns as we continue to de-risk and advance our integrated Ngualla- Teesside project towards development. Morgan and The Hon. Abdullah Mwinyi during Peak is extremely well positioned to become a fully the year. The Board now has a strong balance of integrated NdPr Oxide producer to support global skillsets and professional experience relevant to decarbonisation efforts and deliver substantial our strategy and we would like to thank our fellow benefits to Tanzania and the Ngualla community. Directors for their guidance and counsel since they On behalf of the Board and Management team, have joined the Board. Post the end of the period, our management team was bolstered with the appointment of a number of senior technical and commercial executives to support the BFS Update and future development of the project. We warmly welcome everyone to the Peak team. Our shareholders continued to support the Company with a $4.35 million capital raising completed during the period and a transformational $31.68 million placement and Share Purchase Plan that was completed after the period. These raisings have enabled the Company to repay and terminate a royalty facility and have left the business we look forward to keeping you appraised of our progress as we enter a very exciting period for the Company. Yours sincerely, Tony Pearson Chair Bardin Davis Managing Director 03 REVIEW OF OPERATIONS Page 10 | Peak Resources Ltd FY21 Annual Report REVIEW OF OPERATIONS Tanzanian Cabinet approves Special Mining Licence application On 22 July 2021, the Company announced that it had received approval from the Cabinet of the Government of the United Republic of Tanzania (Tanzania) for the Special Mining Licence (SML) application by PR NG Minerals Ltd (PR NG), a wholly owned Tanzanian incorporated subsidiary of Peak, for the Ngualla Rare Earth Project. entailing a capital investment of at least US$100 million and will provide the exclusive right to conduct mining operations for specified minerals over the 18.14km2 Ngualla Project site. The SML approval process requires in-depth technical due diligence to be undertaken by the Tanzanian Ministry of Minerals Technical Committee, approval by Cabinet and formal execution of the grant by the Minister for Minerals. Granting of the SML is the milestone regulatory authorisation required to develop the Ngualla Project under the Mining Act of the United Republic of Tanzania. It is the form of mining licence granted in Tanzania for large-scale mining operations Peak Resources Limited (AU) 100% 100% Peak African Minerals Limited (MA) Peak Technology Metals Limited (UK) 100% 100% PR NG Minerals Limited (TZ) Ngualla Group UK Ltd (UK) Government of Tanzania 84% 16% Ngwalla Mining Limited (TZ) 100% 100% Other Prospecting Licences Ngualla SML Subject to the formal grant of the SML by the Minister of Minerals, PR NG has provided a commitment to the Government to work jointly to establish a Tanzanian registered company (Newco), to which PR NG will transfer the SML. Newco is to be owned 84% by Peak (via a wholly owned entity) and 16% by the Tanzanian Government. As required under Tanzanian law, the Government’s ownership is to be in the form of non-dilutable free carried interest shares in the capital of Newco (Figure 1). 100% Teesside Rare Earth Elements Ltd (UK) 100% Teesside Refinery Figure 1: Proposed corporate structure of the Peak’s assets and Tanzanian Government’s ownership in the Ngualla project 03 REVIEW OF OPERATIONS The next steps in the regulatory process include Peak intends to construct its Teesside Refinery on finalising a Shareholders’ Agreement and constitution the site to produce NdPr Oxide and other separated relating to Newco and negotiating an Economic rare earth products from concentrate supplied Framework Agreement (EFA) with the Tanzanian by the Company’s Ngualla Project in Tanzania. In Government. The EFA is expected to set out the fiscal addition to NdPr oxide, the Company intends to framework for the project and provide economic, produce lanthanum carbonate, cerium carbonate regulatory and legal benefits. It will be negotiated with and a SEG and mixed heavy rare earth carbonate. the Tanzanian Government in the coming months. Peak’s other Prospecting Licences over the Mikuwo and Mlingi tenements will continue to be owned 100% by PR NG. Lease option on refinery site exercised On 28 May 2021, the Company exercised its option to enter into a 250-year lease over its 19-hectare Teesside Refinery site near the town of Middlesbrough in the Tees Valley, United Kingdom after an extensive evaluation and The site is located within the Wilton International Site (Wilton) and 3km from the Teesport deep-water port. Wilton is a large-scale industrial park that has existing access to reliable competitively priced power, utilities and services. The Teesport deep- water port is the third largest UK port by volume, has existing capacity to receive rare earth mineral concentrate and reagents, and is close to several facilities that can manage waste residue from the refining process. consultation period. Peak paid an upfront amount of approximately £1.9 million to exercise the option, with annual rent structured as a nominal peppercorn The site is also located within the Teesside designated Freeport area. Following recent announcements by the UK Government, freeport payment. Figure 2: Teesside Rare Earths Separation Facility Page 12 | Peak Resources Ltd FY21 Annual Report areas are expected to benefit from lower tariffs and On 21 October 2020, Peak announced the customs charges, simplified customs procedures, appointments of Tony Pearson as Chair of and tax breaks to encourage investment and the Board of Directors and Mr Bardin Davis as government support to promote regeneration and Managing Director. Mr Davis was appointed as a innovation. Non-Executive Director with immediate effect and commenced his executive duties on 9 December Board and Management changes 2020. In September 2020, the Board considered that while the Company was awaiting approval of the SML it was an appropriate time to place an Mr Pearson has been a Non-Executive Director of Peak since August 2018. Mr Pearson is currently Chair of ASX-listed Cellnet, a Trustee of the Royal increased focus on expenditure management and Botanic Gardens & Domain Trust and a Non- cash conservation, which resulted in a reduction in Executive Director of ASX-listed Xanadu Mines as headcount. Subsequently, Mr Peter Meurer resigned from his role as Non-Executive Chairman while Mr Robert Sennitt and Mr Jonathan Murray also resigned from their positions as Non-Executive Directors. In addition, during the period the CEO, Mr Rocky Smith and CFO, Mr Graeme Scott ceased their employment with the Company. The Company thanks Mr Meurer, Mr Sennitt, Mr Murray and Mr Scott for their significant efforts to the business during their tenure. well as both Communicare and the Foundation and Friends of the Botanic Gardens. Mr Davis has over 20 years of investment banking and corporate experience in the mining and energy sectors across the Asia Pacific Region. He was formerly the CFO of UPC/AC Renewables Australia and previously held senior investment banking roles in Hong Kong and Sydney. Previous roles include the Head of the Resources & Energy Group – Asia Pacific, Deputy Head of Corporates – Asia Pacific and Head of Advisory – Australia for HSBC and Head of Metals & Mining Asia for Macquarie 03 REVIEW OF OPERATIONS Capital. Mr Davis has significant emerging markets sectors of the resource industry, including rare experience and has worked on a broad range earth market research, project due diligence, of international advisory, capital markets and independent reporting and mineral asset valuation. financing transactions. Other board and officer appointments made during the year: • On 9 November 2020, the Hon. Abdullah Mwinyi was appointed as a Non-Executive Firector; Commissioning of Bankable Feasibility Study update On 25 August 2021, the Company announced that it commissioned Amec Foster Wheeler Australia Pty Ltd (part of the Wood Group plc) to lead an • On 16 December 2021, Mr Phil Rundell was updated Bankable Feasibility Study (BFS Update) appointed as Company Secretary and CFO; and on the Ngualla Rare Earth Project and the Teesside • On 9 March 2021 Ms Giselle Collins and Ms Rebecca Morgan were appointed as Non- Executive Directors. The Hon. Mr Mwinyi is a member of the Tanzanian Parliament, having entered Parliament in 2007, at the same time becoming a Member of the East African Legislative Assembly where he was Chair of the Legal, Privileges and Rules Committee and the Regional Affairs and Conflict Resolution Committee and served for a decade. He is also Chair of Swala Oil and Gas (Tanzania) plc. The Hon. Mr Mwinyi is a lawyer by profession and, in 2007, established Asyla Attorneys, where he specialises in corporate, commercial, labour and employment law. Refinery. Peak completed its original Bankable Feasibility Study (BFS) in April 2017 in partnership with Amec Foster Wheeler . The BFS was backed by extensive pilot plant test work, detailed engineering design and cost studies and JORC 2012 Compliant Ore Reserves and Mineral Resources estimates. It covered a mine and multi-stage processing plant on-site at Ngualla and a rare earths refinery in the Tees Valley. Since the BFS, Peak has identified opportunities to further enhance its projects including the: • Adoption of a lower cost flotation collector which would also provide potential for Ms Collins is an experienced company director increased throughput or reduce flotation circuit and brings a wealth of audit, risk, governance and capital requirements; and compliance experience to Peak. She is currently Chair of Larrakia Darwin Hotel, a Non-Executive Director of ASX listed Hotel Property Investments and Cooper Energy, a Non-Executive Director of Generation Life and a Trustee of the Royal Botanic Gardens & Domain Trust. Ms Morgan is a geologist and mining engineer with 19 years of international resources industry experience working with major mining houses, consulting groups, and junior explorers globally, including Africa. She has experience across all • Potential to develop a more direct and lower cost access road to the Ngualla Project site, following changes to regional provincial boundaries in the Ngualla Project being located in Songwe District, which could reduce the length of the access road significantly from ~84km to ~48km. Further, NdPr Oxide prices have strongly appreciated since the BFS as well as the Ngualla 1The Bankable Feasibility Study is reported in the Company’s ASX announcements dated 12 April 2017, 28 August 2017 and 12 October 2017. The technical information and Competent Persons Statements for the Ore Reserves and Mineral Resources are reported in the Company’s ASX announcements 22 February 2016, 2 March 2017 and 12 April 2017. Page 14 | Peak Resources Ltd FY21 Annual Report Rare Earth Project Update that was released to the The key focus areas for the BFS Update include: market in October 2017 and was predicated on long-term NdPr Oxide prices of US$77.50/kg. A comparison of spot prices to the BFS assumed price of US$77.50/kg is set out in Figure 3. • Early delivery of the Southern Access Road rehabilitation works; • Updated transport logistics study; • Flotation process optimisation including test A projected range of NdPr Oxide prices is set out work and analysis; in Figure 4 and captures three pricing scenarios released by Adamas Intelligence in May 2021. Under each of the three scenarios the NdPr Oxide • Mine plan update; • Tailings storage facility evaluation; price is projected to be more than US$100/kg by • Renewable energy studies; 2030. NdPr Oxide and other rare earth price assumptions will be revisited as part of the BFS Update. Given the comprehensive pilot plant test work and detailed engineering undertaken as part of the BFS, no material changes are expected to the existing BFS flow sheets. • Project execution strategy development; • Early works and project execution planning; • Operating and capital expenditure estimate updates to reflect current market pricing; and • Updated pricing assumptions for NdPr Oxide and other separated rare earth products. The completion of the BFS Update is expected to be a major milestone in progressing the Ngualla- Teesside Project towards a final investment decision and will support ongoing project and export financing initiatives. BFS $77.50 $40.78 BFS Published $95 $85 $75 $65 $55 $45 $35 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Jul 2019 Jan 2020 Jul 2020 Jan 2021 Jul 2021 Figure 3: Historical NdPr Oxide Prices Source: Asian Metal Figure 4: Projected NdPr Oxide Price Range Source: Adamsintel 03 REVIEW OF OPERATIONS Technical and commercial executive appointments To support the BFS Update and to advance the Ngualla-Teesside Project towards development Initial capital raising In October 2020, the Company completed a placement of 109,375,000 fully paid ordinary shares in the Company at an issue price of A$0.032 per and construction, a number of new technical and share to sophisticated, professional and other commercial appointments were made in September exempt investors pursuant to section 708 of the 2021. Corporations Act 2001 (Cth) to raise A$3.5 million before costs. The appointments include Head of Development & Operations, Head of Technical Services, Consulting In addition to the placement, and to ensure wider Metallurgist and General Manager, Corporate shareholder participation by the Company’s existing Development & Finance. The new members of the loyal shareholders, the Company made an offer to team are highly experienced with a complementary all eligible shareholders to participate in a Share skill set and a combined track record in developing Purchase Plan (SPP) and raised A$0.85 million. The and optimising African and international mining, Shares offered under the SPP were priced at the refining and rare earth projects. The Company is also finalising the appointment of its Head of same $0.032 per share price as the placement. The SPP closed on 17 November 2020 with 26,562,493 Marketing who is expected to commence in October fully paid ordinary shares in the Company issued to 2021. existing shareholders. Page 16 | Peak Resources Ltd FY21 Annual Report Subsequent capital raising On 6 August 2021 the Company announced the commencement of a two-tranche equity placement to sophisticated, professional and other The Company also announced a Shareholder Placement Plan (“SPP”) of up to A$4.0 million, subject to shareholder approval at the General Meeting called for 28 September 2021. exempt investors pursuant to section 708 of the Both the Tranche Two Placement and the SPP were Corporations Act 2001. The Placement, totalling approved by shareholders at a General Meeting on A$30.0 million at a price of A$0.09 per share, 28 September 2021. The final amount raised under comprised of: the SPP was approximatelty $1.675 million (before • Tranche One: a A$20.4 million raising and the costs). issuance of 226.8 million shares completed The net proceeds of the capital raisings will be used on 13 August 2021, utilising Peak’s capacity by Peak to progress the development of the Ngualla to issue up to 15% new capital without Project and the Teesside Refinery (including shareholder approval per Listing Rule 7.1; and offtake and financing arrangements), to expand the • Tranche Two: an additional A$9.6 million raising and the issuance of a further 106.4 million shares, subject to shareholder approval at the General Meeting called for 28 September 2021. Company’s technical and marketing team, and fund the repayment of the ANRF Royalty Facility. ANRF royalty facility payment On 6 August 2021, the Company announced that it had entered into a Royalty Repayment and Release Agreement (Royalty Agreement) with respect to the repayment of a 2.0% life of mine gross revenue royalty financing facility made available by ANRF Royalty Company Limited (ANRF), a company associated with Peak substantial shareholder Appian Pinnacle Holdco Limited. Under the Royalty Agreement, Peak has required to pay ANRF US$10.0 million, which comprises the repayment of principal of US$5.2 million and an accrued interest payment of US$4.8 million. The Royalty Agreement was approved by shareholders at a meeting held on 28 September 2021 and completed on 6 October 2021. 04 SUSTAINABILITY Page 18 | Peak Resources Ltd FY21 Annual Report SUSTAINABILITY Overview We offer a true transparent and fully traceable supply chain solution to the burgeoning low carbon It is important to Peak Resources as an organisation technology space. that we show integrity and commitment in all that we do – whether it be in our dealings with partners, customers, shareholders and employees, in striving towards a cleaner and more sustainable environment, or helping to build a better future in the communities in which we operate. Peak is developing its Ngualla Project and Teeside Refinery to enable it to become a long-term, environmentally and socially sustainable supplier of choice to the global rare earth market. Peak’s objective is to provide end users the opportunity to source ethical, environmentally friendly and sustainable compliant mined, refined and processed Rare Earth products. The Company’s own ethics and standards in this regard, together with those of its key investor partners, match the needs of modern global industry to have a responsible source of materials throughout their product supply chains. The Company aims to make a green and sustainable approach to production a fundamental part of its business strategy and a point of differentiation for its products compared with some other sources of rare earths. The Company maintains highest standards of environmental, health, safety and social behaviour and aims to ensure that the development of its Ngualla and Teeside projects benefits all stakeholders including the local communities. Our values To provide an integrated, ethically sustainable, superior quality product solution to global high technology rare earth consumers. Our mission 1 3 5 To become the customer’s number one To become a leading and highly profitable rare earth supplier of choice by supplying valuable and reliable solutions To achieve operational and financial excellence that delivers best in class, 2 4 rare earth supplier outside of China To become a sustainable organisation operating according to the highest superior shareholder value whilst embracing standards of social responsibility health and respecting environmental requirements and safety, for the communities in which to provide a true sustainable green solution we operate, for our employees and their to the global Rare Earth industry families To become a safe and desirable working To act with integrity and honesty in dealing place where we nurture personal development and create a working environment of empowerment and diversity 6 both inside and outside the company 04 SUSTAINABILITY Page 20 | Peak Resources Ltd FY21 Annual Report Safety performance The Company has an exemplary safety record with no Lost Time Injuries (LTIs) recorded over the past three years and a consistent focus in the promotion of a communicative safety culture. Community support initiatives An integral part of the Company’s mission is ensuring our business has a positive impact on our stakeholders, in particular, our employees, their families and the communities in which it operates. Supporting the communities in which Peak operates through a variety of funding initiatives is an example of how the Company can have a positive impact. Projects based on the needs of the village are identified by the Ngualla Village Council and are communicated to Peak for further development and to ensure alignment with the broader programs of the district Government. Programs that have been undertaken to date include: • A school development program comprising the construction and refurbishment of classrooms and accommodation at a number of schools, and the donation of furniture, textbooks and school stationery to these schools • Donation and sponsorship of sports equipment and community sports tournaments • Repairs to a maternity ward and donation of a maternity bed, new mattresses, bed sheets and blankets at Ngwala Village Medical Dispensary • Provision of emergency medical transport • Maintenance of roads and water supply • Donations and assistance for official visits including delegate transport As a means of further supporting local communities, the Company ensures, where possible, that locally sourced materials are used for community development projects, with local tradespeople, labourers and businesses utilised for goods and services. 04 SUSTAINABILITY Decarbonised future powered by Permanent Magnets outside of China – this is the significant market opportunity Peak has been readying for. A global decarbonisation thematic is driving strong demand for rare earth products, in particular high-strength permanent magnet materials such as NdPr Oxide. These market conditions have been exacerbated by tightening supply-side dynamics including bottlenecked supply chains and geopolitical complexities stemming from an over-reliance on China, which currently supplies ~90% of the NdPr Oxide market. These market dynamics, including an emerging structural upward shift on the demand side, have led governments and businesses globally to seek security of supply Peak’s product suite, which is predominantly focussed on NdPr Oxide, stands to benefit from rapidly increasing demand for high-strength permanent magnets, with forecast growth of 9.7% (CAGR) between 2020-2030. Amongst the highest areas of demand growth is the burgeoning Electric Vehicle (EV) and direct drive wind turbine markets. This growth is expected to continue as the uptake of EVs unfolds as internal combustion engines are phased out around the globe and with projections of a further acceleration in offshore wind power generation. Page 22 | Peak Resources Ltd FY21 Annual Report Figure 5: NdPr Oxide market balance Source: Adamas Intelligence Figure 6: Permanent magnet consumption Source: Adamas Intelligence ANNUAL FINANCIAL REPORT 30 June 2021 Page 24 | Peak Resources Ltd FY21 Annual Report PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT DIRECTORS’ REPORT The directors of Peak Resources Limited (“Company”) (ACN: 112 546 700) submit herewith the financial statements of the Company for the financial year ended 30 June 2021. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows: DIRECTORS The names of directors who held office during or since the end of the year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated. Tony Pearson Aug 2018) Bardin Davis Abdullah Mwinyi Giselle Collins Rebecca Morgan Jonathan Murray Peter Meurer Robert Sennitt Non-Executive Chair (appointed Chair 21 October 2020, Non-Exec Director from 21 Managing Director (MD) (appointed Non-Exec Director 21 Oct 2020, MD 9 Dec 2020) Non-Executive Director (appointed 15 November 2020) Non-Executive Director (appointed 9 March 2021) Non-Executive Director (appointed 9 March 2021) Non-Executive Director (resigned 8 March 2021) Non-Executive Chair (resigned 16 September 2020) Non-Executive Director (resigned 11 September 2020) INFORMATION ON DIRECTORS Tony Pearson– Non-Executive Chair (Appointed 21 October 2020), Interim Non- Executive Chair (Appointed 16 September 2020), Non-Executive Director (Appointed 21 August 2018) B.Comm, AICD Tony is an experienced international natural resources executive and company director. He is currently the Chairman of ASX listed Cellnet, a Trustee of the Royal Botanical Gardens & Domain Trust and a Non-Executive Director of Communicare Inc. He was formerly a Commissioner at the Independent Planning Commission, and previously a group executive at TSX/HKEx listed SouthGobi Resources, based in Hong Kong, where he was responsible for the company’s corporate and strategic initiatives. Tony also has over 15 years’ commercial and investment banking experience, covering the Asia Pacific natural resources industry, most recently as a Managing Director at HSBC. Tony is a member of the Audit & Risk Committee and Nomination & Remuneration Committee. Tony serves as a non-executive director of the following other listed companies and held no other public company directorships in the past three years: • Cellnet Group Ltd – from 5 October 2018 • Xanadu Mines Limited - from 3 May 2021 Bardin Davis – Managing Director (Appointed 9 December 2020), Non-Executive Director (Appointed 21 October 2020) GAICD, MAppFin, GradDipAcc, BAg Econ (1st Class Hons) Bardin has over 20 years of investment banking and corporate experience in the mining and energy sectors. Previous roles include the Chief Financial Officer of UPC\AC Renewables, the Head of the Resources & Energy Group – Asia Pacific, Deputy Head of Corporates – Asia Pacific and Head of Advisory – Australia for HSBC and Head of Metals & Mining Asia for Macquarie Capital. He has significant emerging markets experience and has worked on a broad range of international advisory, capital markets and financing transactions. Bardin held no listed public company directorships in the past three years. 25 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT The Hon. Abdullah Mwinyi – Non-Executive Director (Appointed 15 November 2020) LLB, LLM (Cardiff University) Abdullah is a member of the Tanzanian Parliament, having entered Parliament in 2007. He has also held roles as a Member of the East African Legislative Assembly (2007 – 2017), where he was Chair of the Legal, Privileges and Rules Committee and the Regional Affairs and Conflict Resolution Committee, and Chair of Swala Oil and Gas (Tanzania) plc. Abdullah is a lawyer by profession, having been awarded a LLB and LLM from the University of Cardiff, and, in 2007, established Asyla Attorneys, where he specialises in corporate, commercial, labour and employment law. Abdullah has held no ASX listed public company directorships in the past three years. Giselle Collins - Non-executive Director (Appointed 9 March 2021) BA Econ, Chartered Accountant (CAANZ), GAICD Giselle brings a wealth of audit, risk, governance, and compliance experience to Peak. Giselle is currently Chair of Larrakia Darwin Hotel, a non-executive director of ASX listed Hotel Property Investments, a non-executive of Generation Life and a Trustee of the Royal Botanic Gardens & Domain Trust. Giselle was previously Chairman of Aon Superannuation as Trustee for Aon Master Trust (now SmartMonday), Chairman of the Travelodge Hotel Group and Chairman of The Heart Research Institute. Giselle has served as a non executive director on a diverse range of other boards including Big4 Holiday Parks, Minjerribah Camping and the Royal Australian Institute of Architects. Giselle has been appointed Chair of the Company’s Audit & Risk Committee and is a member of the Nomination & Remuneration Committee. Giselle is a non-executive director of ASX listed Cooper Energy Limited, appointed 19 August 2021, and ASX listed Hotel Property Investments, appointed 19 April 2017. Rebecca Morgan - Non-executive Director (Appointed 9 March 2021) BSc(Hons) Engineering) (Applied Geology), GradDip(Mine Engineering), MScEng (Mine Rebecca has a Bachelor of Science (Hons) Applied Geology; Post Graduate Diploma (Mine Engineering, and a Master of Engineering Science (Majoring in Mineral Economics and Mine Optimisation) from Curtin University. Rebecca is also a Member of the Australian Institute of Geoscientists and the Australian Institute of Mining and Metallurgy. Rebecca has been appointed Chair of the Company’s Remuneration and Nomination Committee. Rebecca is a non-executive director of ASX listed Salt Lake Potash Limited, appointed 22 June 2021. She was a director of Vulcan Energy Resources Limited (formerly Koppar Resources Limited) from 5 February 2018 to 4 September 2019. Mr Peter Meurer– Non-Executive Chairman (Appointed 23 April 2018, Resigned 16 September 2020) MBA from RMIT Peter has had a distinguished career of over 40 years in the Corporate Finance sector and was most recently Non-Executive Chairman of Nomura Australia. He first joined Nomura Australia in 2009 and prior to this held the roles of Vice Chairman for Citigroup and Merrill Lynch. Peter has a strong strategic focus and has forged trusted advisor relationships through the many market related transactions in which he has been involved covering all aspect of corporate finance including equity raisings, debt financing, corporate advisory and M&A. 26 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Peter was not a director of any other listed companies and held no public company directorships in the past three years. Mr Jonathan Murray – Non-Executive Director (Appointed 22 February 2011, Chairman from 1 April 2015 to 30 November 2015 and 31 December 2017 until 22 April 2018, Resigned 8 March 2021) Bachelor Laws and Commerce Jonathan is a partner at independent corporate law firm Steinepreis Paganin, based in Perth, Western Australia. He specialises in equity capital raisings, all forms of acquisitions and divestments, governance and corporate compliance. Mr Murray graduated from Murdoch University in 1996 with a Bachelor of Laws and Commerce (majoring in Accounting). He is also a member of FINSIA (formerly the Securities Institute of Australia). In his time as a director of the Group, Jonathan served as a director of the following other listed companies and held no other public company directorships in the past three years: • Hannans Limited Ltd – from 22 January 2010 • Vietnam Industrial Investments Limited - from 19 January 2016 Mr Robert Sennitt – Non-Executive Director (Appointed 15 January 2020, Resigned 11 September 2020) BEc (Sydney Uni) and Member of the Institute of Chartered Accountants Robert is a Senior Advisor to Appian in Australia. He has been involved in the resources sector in Australia for over thirty years, initially as an investment banker where he held senior positions with J.P. Morgan, Macquarie Bank and RBC Capital Markets and more recently as Managing Director and CEO of Mineral Deposits Limited (MDL), before its takeover in July 2018. At MDL, Robert was appointed to the Executive Committee that had responsibility for the management of the TiZir Mineral Sands Joint Venture, comprising the Grande Cote mining operation in Senegal and the TTI smelting operation in Norway. Robert was not a director of any other listed companies and ceased to be a director of listed company, MDL in August 2018. COMPANY SECRETARY Phil Rundell - Company Secretary (Appointed 16 December 2020) CA Phil was a former Partner at Coopers & Lybrand (now PricewatehouseCoopers) and a Director at Ferrier Hodgson. He is now a sole practitioner Chartered Accountant and has specialised in providing company secretarial, compliance, accounting and reconstruction services for the last 10 years. Graeme Scott – Company Secretary (Appointed 3 November 2014, Ceased Employment 16 December 2020) FCCA Graeme is a fellow of the Association of Chartered Certified Accountants (UK) with more than 20 years’ experience in professional and corporate roles in both Australia and the UK. He has spent the last 15 years working in the resources sector in CFO and Company Secretarial roles for both ASX and TSX listed companies. PRINCIPAL ACTIVITIES During the year, the principal activities of the Company consisted of: (a) Mineral processing technological evaluations; (b) Mining and associated infrastructure, feasibility evaluations; and (c) Progressing approvals for the Ngualla Project and Teesside Refinery OPERATING RESULTS The loss of the Group after providing for income tax amounted to $4,770,848 (2020: profit $7,652,714). The basic and diluted loss per share for the Group for the year was 0.31 cents (2020: profit 0.65 cents). 27 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT FINANCIAL POSITION The net assets of the Group have decreased from $55,868,357 at 30 June 2020 to $55,294,679 at 30 June 2021. The Group’s working capital, being current assets less current liabilities, was $2,892,383 at 30 June 2021 (2020: $2,037,355). The Company had $2.68 million cash at bank at the end of the reporting period, and with $20.4 million received (pre transaction costs) post period end for the first tranche of a $30 million capital raising (refer to subsequent event note 27), it is well funded going into the 2021/2022 financial year to fund the Ngualla Project, and its corporate and administration requirements. DIVIDENDS PAID OR RECOMMENDED The Directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the date of this report. Review of Operations The Company continues to progress the pre-development activities of its world-class strategic assets; the Ngualla Rare Earth Project (“Ngualla Project”) in Tanzania and the Teesside Rare Earth Refinery and Separation Facility (“Teesside Refinery”) in the United Kingdom. It aims to become an integrated long-term, low-cost supplier of Neodymium and Praseodymium (NdPr) Oxide to the expanding high-tech permanent magnet market. UK: Teesside Refinery Location of Peak’s world-class strategic assets Tanzania: Ngualla Project The key events with respect to the Company’s operations over the last twelve months and to the date of this Directors’ Report are as follows: Implementation of a board and management restructure; • • Completion of an A$4.35 million capital raising; • Exercise of an option to enter a 250-year lease over the Teesside Refinery site; • Strong engagement with the Government of the United Republic of Tanzania (“Tanzanian Government”) resulting in securing the approval of the Special Mining Licence (SML) application by the Cabinet of the Tanzanian Government in July 2021; • Proceeding with a two tranche A$30.0 million Placement and A$4.0 million Share Purchase Plan, which was initiated August 2021; • Appointing senior technical and commercial executives and consultants; and • Increasingly attractive sector fundamentals and rising NdPr Oxide prices. 28 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Board and management restructure Departures and resignations During the year Mr Peter Meurer resigned from his role as Non-Executive Chairman of Peak while Mr Rob Sennitt and Mr Jonathan Murray resigned from their positions as non-executive directors to the Company. In addition, during the period the CEO, Mr Rocky Smith and CFO, Mr Graeme Scott ceased their employment with the Company. Confirmation as Non-Executive Chair – Tony Pearson Tony Pearson was appointed as Non-Executive Chair of the Company on 21 October 2020. Tony has been an independent Non-executive Director of Peak since August 2018 and was appointed acting Chair on 11 September 2020. Tony has been appointed a member of the Company’s Audit & Risk and Remuneration and Nomination Committees. Appointment of Managing Director – Bardin Davis Bardin Davis was appointed a non-executive director of the Company on 21 October 2020 and subsequently commenced duties as Managing Director and Chief Executive Officer of the Company on 9 December 2020. Appointment of Company Secretary and Chief Financial Officer – Phil Rundell Phil Rundell was appointed Company Secretary and Chief Financial Officer to the Company on 16 December 2020. Appointment of The Hon. Abdullah Mwinyi as a non-executive director The Hon. Abdullah Mwinyi joined the board of Peak as non-executive director on 15 November 2020. Appointment of Giselle Collins as a non-executive director* Giselle Collins was appointed to the board of Peak as non-executive director on 9 March 2021. Giselle was subsequently appointed to the role of Chair of the Company’s Audit & Risk Committee and is a member of the Company’s Remuneration and Nomination Committee. Appointment of Rebecca Morgan as a non-executive director* Rebecca Morgan was appointed to the board of Peak as a non-executive director on 9 March 2021. Rebecca was subsequently appointed as Chair of the Remuneration and Nomination Committee and is a member of the Company’s Audit & Risk Committee. *Ms Collins and Ms Morgan, having been appointed by other Directors on 9 March 2021, will retire in accordance with the Constitution and Listing Rule 14.4 and being eligible, seek election from Shareholders at the Annual General Meeting to be held later in 2021. Other personnel changes During the year the Company engaged an international recruitment firm to commence searches for key executive roles. Following the year end the Company was pleased to announce the appointments of Head of Development & Operations, Head of Technical Services, Consulting Metallurgist and General Manager, Corporate Development & Finance. The Company is also in the final stages of negotiation with its preferred Head of Marketing and Sales and hopes to make an announcement in October. $4.35 million capital raising completed A$3.5 million Placement In October 2020, the Company completed a placement of 109,375,000 fully paid ordinary shares in the Company at an issue price of A$0.032 per Share to sophisticated, professional and other exempt investors pursuant to section 708 of the Corporations Act 2001 (Cth) to raise A$3.5 million before costs. Share Purchase Plan Offer for $0.85 million In addition to the placement, and to ensure wider shareholder participation by the Company’s existing loyal shareholders, the Company made an offer to all eligible shareholders to participate in a Share Purchase Plan 29 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT (SPP) to raise up to A$0.85 million. The Shares offered under the SPP were priced at the same $0.032 per Share price as the placement. The SPP closed on 17 November 2020 with 26,562,493 fully paid ordinary shares in the Company issued to existing shareholders. Exercise of Teesside option On 28 May 2021 Peak exercised its option to enter a 250-year lease over its 19-hectare Teesside Refinery site in the Tees Valley, United Kingdom. Peak paid an upfront amount of approximately £1.9 million to exercise the option, with annual rent structured as a nominal peppercorn payment. Peak intends to construct its Teesside Refinery on the site; producing Neodymium Praseodymium (“NdPr”) Oxide and other separated products from rare earth concentrate supplied by the Company’s Ngualla Project in Tanzania. The site is close to the deepwater Teesport and benefits from access to existing and competitive infrastructure and utilities. It is also located within the Teesside designated Freeport area. Following recent announcements by the UK Government, freeport areas are expected to benefit from lower tariffs and customs charges, simplified customs procedures, and tax breaks to encourage investment and government support to promote regeneration and innovation. Ngualla Special Mining Licence Application The Company continued its strong engagement with the Tanzanian Government during the year regarding its Ngualla Project Special Mining Licence (“SML”) application. Events Subsequent to Reporting Date There were several key milestones related to the advancement of the Ngualla project that occurred subsequent to the period end. Approval of SML application On 22 July 2021, the Company announced that the Cabinet of Ministers of the Tanzanian Government had approved its SML application; the final major regulatory approval required for the Ngualla Project to proceed. The SML provides the Company with the exclusive right to conduct mining operations at Ngualla, with the licence area covering approximately 18.14km2. Peak will now work with the Tanzanian Government to finalise an Economic Framework Agreement, Shareholder’s Agreement and other related documentation required as part of a formal grant of the SML by the Minister of Minerals. A$30.0 million Placement and A$4.0 million Share Purchase Plan On 6 August 2021 the Company announced commencement of a two-tranche equity placement to sophisticated, professional and other exempt investors pursuant to section 708 of the Corporations Act 2001. The Placement, totalling A$30.0 million at a price of A$0.09 per share, comprises of: - Tranche One - comprising of an A$20.4 million raising and the issuance of 226.8 million shares completed on 13 August 2021, utilising Peak’s capacity to issue up to 15% new capital without shareholder approval per Listing Rule 7.1; and - Tranche Two - comprising of an additional A$9.6 million raising and the issuance of a further 106.4 million shares, subject to shareholder approval at the General Meeting called for 28 September 2021. - Peak also announced a Shareholder Placement Plan (“SPP”) of up to A$4.0 million, which is subject to shareholder approval at the General Meeting called for 28 September 2021. The net proceeds of the Placement and SPP will be used by Peak to progress the development of the Ngualla Project and the Teesside Refinery (including offtake and financing arrangements), expanding the Company’s technical and marketing team, and the repayment of the ANRF Royalty Facility. Repayment of the ANRF Royalty Facility Contemporaneous to the placement and SPP announced on 6 August 2021, Peak also announced that it had entered into a Royalty Repayment and Release Agreement (“Royalty Agreement) with respect to the repayment of a 2.0% life of mine gross revenue royalty financing facility made available by ANRF Royalty Company Limited (“ANRF”), a company associated with Peak substantial shareholder Appian Pinnacle Holdco Limited. Under the Royalty Agreement, Peak will make a payment to ANRF of US$10.0 million, which comprises the repayment of principal of US$5.2 million and an accrued interest payment of US$4.8 million. The Royalty Agreement is subject to shareholder approval at the General Meeting called for 28 September 2021 pursuant to ASX listing Rule 10.1 30 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT SIGNIFICANT CHANGES IN STATE OF AFFAIRS Other than detailed below, in Note 27 of the financial statements (subsequent events) and in the Review of Operations above, there were no significant changes in the state of affairs of the Company during the financial year: A total of 59,418,747 listed and un-listed options were exercised during the year with various exercise prices and expiry dates raising $3.24 million. A further 15,017,000 vested performance rights were exercised for $nil consideration. During the year 4,829,240 shares were issued in lieu of cash consideration for wages and fees with a value of $202,629. A further 8,250,000 shares were issued raising $435,000 under settlement deeds entered with ex- employees. MEETINGS OF DIRECTORS The number of meetings attended by each Director of the Company during the financial year was: Board Meetings Number held and entitled to attend 23 13 8 6 6 7 17 3 Number attended 22 13 5 6 6 7 16 3 Tony Pearson Bardin Davis Abdullah Mwinyi Giselle Collins Rebecca Morgan Peter Meurer Jonathan Murray Robert Sennitt An Audit and Risk Committee was formed during the year consisting of three non-executive directors. The number of meetings attended by each member of the Committee during the financial year was: Number attended Audit & Risk Committee Meetings Number held and entitled to attend 1 1 1 1 1 1 Giselle Collins Rebecca Morgan Tony Pearson EQUITY HOLDINGS OF DIRECTORS As at the date of this report, the Directors’ interest in the Company were: Performance Rights 3,250,000 16,250,000 1,000,000 - - Details of issues made to directors during the period are provided in the Remuneration Report. Equity options 8,000,000 - - - - Equity shares 4,706,647 9,055,907 - - - Tony Pearson Bardin Davis Abdullah Mwinyi Giselle Collins Rebecca Morgan FUTURE DEVELOPMENTS Likely future developments in the operations of the Group are referred to elsewhere in the Annual Report. Other than as referred to in this report, further information as to likely developments in the operations of the Group and expected results of those operations would, in the opinion of the Directors, be speculative. 31 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT ENVIRONMENTAL ISSUES The Company is aware of its environmental obligations with regards to its exploration activities and the Teesside refinery site and ensures that it complies with all regulations when carrying out any exploration work. The directors of the Company are not aware of any breach of environmental regulations for the year under review. The Directors have considered the National Greenhouse and Energy Reporting Act 2007 (the NGER Act) which introduced a single national reporting framework for the reporting and dissemination of information about the greenhouse gas emissions, greenhouse gas projects, and energy use and production of corporations which exceed specified thresholds. At the current stage of development, the Directors have determined that the NGER Act has no effect on the Company for the current or subsequent financial year. The Directors will reassess this position as and when the need arises. REMUNERATION REPORT (AUDITED) The remuneration report outlines the director and executive remuneration arrangements for the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. Remuneration Policy The remuneration policy of the Company has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component which is assessed on an annual basis in line with market rates and offering specific long-term incentives based on key performance areas affecting the Company’s financial results. The Board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best directors and executives to manage the Company. The Board’s policy for determining the nature and amount of remuneration for Board members and senior executives of the Company is as follows: A Remuneration and Nomination Committee was formed post year end to review the remuneration policy that sets the terms and conditions for the executive directors and other senior executives. All executives receive a base salary (which is based on factors such as length of service, expertise and experience) and superannuation is paid for Australian resident employees and directors. The Company reviews executive packages annually by reference to the Company’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries. The Board may exercise discretion in relation to approving incentives, bonuses, performance rights and options. The policy is to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth. Executives and employees are also entitled to participate in the employee share and option arrangements. The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and subject to shareholders approval are able to participate in the employee option and performance rights plans. Non-executive directors are provided superannuation benefits in accordance with Australian statutory requirements, where the Non-Executive Director is a non- Australian resident the superannuation benefit is provided as an additional fee. All remuneration paid to directors and executives is valued at the cost to the Company and expensed. Shares given to directors and executives are valued at the difference between the market price of those shares and the amount paid by the director or executive. Options and performance rights are valued using the Black- Scholes methodology. Details of options and performance rights provided to directors are detailed in the Remuneration Report. Non-executive director remuneration The total remuneration of non-executive directors has been set at a maximum of $300,000 (that excludes share-based payments) as approved by shareholders at the 26 November 2015 annual general meeting. 32 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Performance based remuneration The Company continues to review and consider the inclusion of performance based remuneration component built into director and executive remuneration packages. The Company received approval from shareholders for adoption of an Incentive Employee Option Plan (EOP), Incentive Performance Rights Plan (PRP), and Director Fee Plan at the Annual General Meeting on 23 December 2020. The objectives of the EOP and PRP are to attract, motivate and retain key employees and the Company considers that the adoption of the Plans and the future issue of securities under the Plans will provide selected employees with the opportunity to participate in the future growth of the Company. The objective of the Director Fee Plan is to permit the issue of Shares in lieu of Director salaries and fees which would otherwise be payable in cash, consistent with the Company’s restructure remuneration model adopted in October 2020. Following shareholder approval at the Annual General Meeting held on 21 December 2020, the company issued the following incentive performance rights expiring 5 February 2025 with an exercise price of $nil to directors with the vesting milestones set out below. Class Bardin Davis Tony Pearson Jonathan Murray Abdullah Mwinyi Class A.1 Performance Rights Class A.2 Performance Rights Class B Performance Rights Class C.1 Performance Rights Class C.2 Performance Rights Class D Performance Rights Class E.1 Performance Rights Class E.2 Performance Rights Class F Performance Rights Class G Performance Rights 1,875,000 1,875,000 3,750,000 1,875,000 1,875,000 3,750,000 1,875,000 1,875,000 3,125,000 3,125,000 375,000 375,000 750,000 375,000 375,000 750,000 375,000 375,000 625,000 625,000 75,000 75,000 150,000 75,000 75,000 150,000 75,000 75,000 125,000 125,000 75,000 75,000 150,000 75,000 75,000 150,000 75,000 75,000 125,000 125,000 Total 25,000,000 5,000,000 1,000,000 1,000,000 The Performance Rights shall have the following vesting criteria (each, a Milestone) attached to them: (i) Class A Performance Rights: Class A Performance Rights shall vest: (A) (B) Class A.1 Performance Rights: on the Company announcing grant of the Special Mining Licence (SML) by the Tanzanian Government for the Ngualla Rare Earth Project (Project); and Class A.2 Performance Rights: on the Company announcing the execution of a binding framework agreement with respect to the Project. (ii) Class B Performance Rights: Class B Performance Rights shall vest on the Company announcing a Teesside solution being one or more of the following: (A) (B) (C) the Company entering into an agreement to purchase the land at Teesside currently the subject of option; the Company entering into an agreement for a site swap of the current Teesside location on terms which include (without limitation) recovery of sunk costs and full permitting of the new site; or the Company entering an agreement securing an alternate site (to Teesside) for the establishment of a rare earth processing hub. (iii) Class C Performance Rights: Class C Performance Rights shall vest: (A) (B) Class C.1 Performance Rights: on the Company announcing the commencement of FEED activities by the Company in relation to a rare earths processing hub; and Class C.2 Performance Rights: on the Company announcing that it has commenced construction of a rare earth processing hub. 33 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT (iv) Class D Performance Rights: Class D Performance Rights shall vest on the Company announcing that it has executed a binding agreement with: (A) (B) a strategic partner for the development of the Project; or with an external party for the financing of the development of the Project. (v) Class E Performance Rights: Class E Performance Rights shall vest on the Company’s Share price achieving a volume average weighted price (VWAP) of: (A) (B) Class E.1 Performance Rights: greater than 10 cents over 20 consecutive trading days; and Class E.2 Performance Rights: greater than 15 cents over 20 consecutive trading days. (vi) Class F Performance Rights: Class F Performance Rights shall vest on the later to occur of: (A) (B) any of one or more of the Milestones set out in paragraphs (a)(i)(A) or (B), (a)(ii), (a)(iii)(A) or (B) or (a)(iv) being satisfied; and the Company’s Share price achieving a VWAP of greater than 10 cents over 20 consecutive trading days; and (vii) Class G Performance Rights: Class G Performance Rights shall vest on the later to occur of: (A) (B) any of one or more of the Milestones set out in paragraphs (a)(i)(A) or (B), (a)(ii), (a)(iii)(A) or (B) or (a)(iv) being satisfied; and the Company’s Share price achieving a VWAP of greater than 15 cents over 20 consecutive trading days. The Board considers that the achievement of these milestones will deliver increased shareholder wealth. During the year class B, E1 and F milestones were met resulting in the vesting of 10,925,000 performance rights, with 350,000 remaining unexercised at the end of the year. During the 2019 financial year the Board approved a Long Term Incentive Scheme (LTIS) and Short Term Incentive Scheme (STIS) with issues made under the EOP and PRP respectively. On 8 September 2020, 4,600,000 STIS performance rights with a expiry date for 8 September 2021 and an exercise price of $nil and 7,600,000 LTIS performance rights with a expiry date for 8 September 2024 and an exercise price of $nil were issued to executives. The STIS Performance Rights vest on achievement of the following performance criteria; Class A.1 17% by number on the receipt by the Company of the Special Mining Licence (SML) from the Tanzanian Government for the Ngualla Rare Earth Project (Project). Class A.2 17% by number on the presentation of a framework agreement received from the Tanzanian Government with respect to the Project that, in the opinion of the Board provides sufficient certainty on the legislative and fiscal terms apply to the Company’s operations that allows the Company to engage with external parties in relation to the potential financing of the Project. Class B 33% by number on completion of an equity capital raising of a minimum amount of AUD$1.5 million for the Company on or before 31 December 2020. Class C 33% by number on a Teesside solution being one or more of the following: (A) the Company entering into an agreement to purchase the land at Teesside currently the subject of option; (B) the Company entering into an agreement for a site swap of the current Teesside location on terms which include (without limitation) recovery of sunk costs and full permitting of the new site; or (C) the Company entering an agreement securing an alternate site (to Teesside) for the establishment of a rare earth processing hub. The vesting criteria must have been met by 8 September 2021. There were no vested and unvested STIS performance rights issued to executives on issue at 30 June 2021. 1,518,000 STIS performance rights issued to executives vested and were exercised during the year. 34 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT The LTIS Performance Rights vest on achievement of the following performance criteria: Class D.1 12.5% by number on the receipt by the Company of the Special Mining Licence (SML) from the Tanzanian Government for the Ngualla Rare Earth Project (Project) Class D.2 12.5% by number on the execution of a binding framework agreement between the Tanzanian Government and PRNG Minerals Ltd (the Tanzanian operating subsidiary of the Company) with respect to the Project. Class E 25% by number on the commencement of FEED activities by the Company. Class F 25% by number on the Company agreeing terms with an external party for the financing of a rare earth processing hub at Teesside in the United Kingdom or entering alternative arrangements for the creation of a rare earth processing hub in a different geographic location. Class G 25% by number on the Company signing of a binding agreement with a strategic partner for the Further Development of the Project. The vesting criteria must be met by 8 September 2024 otherwise the Performance Rights will lapse. There were no vested and unvested LTIS performance rights issued to executives on issue at 30 June 2021. No LTIS performance rights vested during the year. Subsequent to cessation of service to the Company the following unlisted options and performance rights issued to former directors and executives lapsed or were cancelled: Lapsed: • 8,000,000 unlisted options with an exercise price of $0.10 • 20,000,000 unlisted options with an exercise price of $0.15 • 11,607,000 performance rights with an exercise price of $nil Cancelled: • 7,500,000 unlisted options with an exercise price of $0.065 • 2,250,000 unlisted options with an exercise price of $0.035 • 25,975,000 unlisted options with an exercise price of $0.030 Company performance, shareholder returns and director’s and executive’s remuneration Summary of group's performance and movements in Peak Resources Limited's share price over the last five years: Total income ($) Net profit/(loss) before tax ($) Net profit/(loss) after tax ($) 2021 111,008 (4,770,848) (4,770,848) 2020 12,374,452 7,652,714# 7,652,714# 2019 98,795 (4,596,053) (4,596,053) 2018 618,718 (4,903,224) (4,903,224) 2017 1,861,274 (4,886,187) (4,886,187) Closing share price at end of year (cents) Basic profit/(loss) per share (cents) Dividends per share (cents) $0.10 (0.31) - $0.021 $0.048 $0.036 $0.067 0.65 - (0.58) - (0.82) - (1.04) - # Includes gain on remeasurement of financial liabilities of $1.7million (note 19) and gain on derecognition of associate $10.4million (note 4). The remuneration policy has been tailored to increase goal congruence between shareholders and directors and executives. Currently, this is facilitated through a policy to issue options and in some instances performance rights to the majority of directors and executives to encourage the alignment of personal and shareholder interests. The Company believes the policy will be effective in increasing shareholder wealth. Details of directors and executives interests in shares and options at year end are detailed below. Details of KMP remuneration The relevant Key Management Personnel (KMP) of the group for the 2021 financial year were: • Tony Pearson – Chair (appointed Chair 21 October 2020, Non-Exec Director from 21 Aug 2018) • Bardin Davis - Managing Director (MD) (appointed Non-Exec Director 21 Oct 2020, MD from 9 Dec 2020) • Abdullah Mwinyi - Non-Executive Director (appointed 15 November 2020) 35 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT • Giselle Collins - Non-Executive Director (appointed 9 March 2021) • Rebecca Morgan - Non-Executive Director (appointed 9 March 2021) • Peter Meurer – Non-Executive Chair (Resigned 16 September 2020) • Jonathan Murray – Non-Executive Director (Resigned 8 March 2021) • Robert Sennitt – Non-Executive Director (Resigned 11 September 2020) • Philip Rundell - Chief Financial Officer & Company Secretary (Appointed 16 December 2020) • Rocky Smith – Chief Executive Officer (Ceased employment 8 December 2020) • Michael Prassas – General Manager Sales & Marketing (Ceased employment 15 July 2020) • Graeme Scott– Chief Financial Officer & Company Secretary (Ceased employment 18 December 2020) • Lucas Stanfield – General Manager of Development (Ceased employment 15 January 2020) Total KMP remuneration for the year was: Salary and fees Non-monetary benefits Superannuation Share based payments Termination Payments Total 2021 $ 1,078,312 18,240 80,163 787,526 191,661 2020 $ 1,304,150 88,048 69,825 305,485 - 2,155,902 1,767,508 36 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Remuneration of individual KMP’s were: 30-Jun-21 Directors Tony Pearson1 Bardin Davis2 Abdullah Mwinyi3 Giselle Collins4 Rebecca Morgan5 Peter Meurer6 Jonathan Murray 7 Robert Sennitt8 Executives Philip Rundell9 Rocky Smith10 Michael Prassas11 Graeme Scott12 Lucas Stanfield13 Short term benefits Salary & f * $ Non- t $ Post- employment Superannuatio * $ Share based payments Performance ^ Ri ht $ Options^ $ Termination Payments Total Proportion related to: $ T t l $ Equity# % Performance # % 133,476 204,232 35,284 15,457 15,457 10,556 42,345 3,332 460,139 - - - - - - - - - 19,759 19,380 - 1,468 1,468 - - - 42,075 137,785 688,923 27,557 - - - 4,500 - 858,765 28,332 - - - - (110,220) (45,517) - (127,405) - - - - - - - - - 319,352 912,535 62,841 16,925 16,925 (99,664) 1,328 3,332 1,233,574 9% 0% 0% 0% 0% 0% 0% 0% 2% 43% 75% 44% 0% 0% 0% 11% 0% 62% 62,317 162,121 61,180 153,144 179,411 618,173 1,078,312 - 6,500 11,740 - - 18,240 18,240 - - 12,865 14,143 11,080 38,088 80,163 - - - 28,083 28,083 56,166 914,931 - - - - - - (127,405) - - 163,462 28,199 - 191,661 191,661 62,317 168,621 249,247 223,569 218,574 922,328 2,155,902 0% 14% 13% 15% 14% 0% 1% 0% 0% 0% 0% 0% 6% 40% Total * The Company’s executive team agreed to a 50% deferral in their contracted cash remuneration and the Company’s Directors agreed to defer a 100% of their Directors’ fees for four months for the period 1 April 2020 to 31 July 2020. As at 30 June 2020 the gross deferred amounts owing to Directors and Executives reported in trade and other payables totalled $190,323. The deferred executive remuneration and Directors fees was settled in equity based on $0.0342 Per Ordinary Fully Paid Share calculated based on the 5 day VWAP up to and including 6 August 2020 for a total value of consideration $128,662, this amount is net of PAYG withholding tax obligations due on the deferred amounts. The gross deferred amounts are excluded from the salary and fees for 2021 as they have been accrued and reported in 2020. ^Includes the write back of the share-based payments previously recognised for options and performance rights that lapsed during the current period. #The % excludes the value of the options which were written back during the year 1 Mr Pearson received $54,666 for additional executive services the net amount after PAYG withholding tax obligations was settled in shares and is included in salary and fees. From 1 November to 30 June 2021 two thirds of Mr Pearson’s Chair fees were agreed to be settled in shares totalling $51,383 and are included in salary and fees. Mr Pearson was back paid $8,082 in statutory superannuation entitlements for previous periods where the Company had not met this obligation. 2 Mr Davis was appointed in the role of non-executive director on 21 October 2020 before transitioning to the Managing Director position on 9 December 2020. Mr Davis’ non- executive director fees totalled $6,720 the net amount after PAYG withholding tax obligations was settled in shares. Mr Davis ESA stipulated that $75,000 per year of his total Managing Director fees were to be paid in shares, during the year Mr Davis earnt $42,030 as part of his equity component of his salary the net amount after PAYG withholding tax obligations was settled in shares. The share settled fees are included in salary and fees for the period. 3 Mr Mwinyi was appointed to the role of non-executive director on 15 November 2020 4 Ms Collins was appointed to the role of non-executive director on 9 March 2021 5 Ms Morgan was appointed to the role of non-executive director on 9 March 2021 6 Mr Meurer ceased employment with the company on 16 September 2020. On cessation of employment Mr Meurer’s unvested performance-based options lapsed and the expensed share-based payments recognised under AASB 2 of $110,220 for those options reversed. 7 Mr Murray ceased employment with the company on 8 March 2021. Mr Murray received $12,773 in fees for additional executive services, payment of which was settled in 37 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT shares. The share settled fees are included in Salary and fees for the period. On cessation of employment Mr Murry’s unvested performance-based options lapsed and the expensed share-based payments recognised under AASB 2 of $45,517 for those options reversed. 8 Mr Sennitt ceased employment with the company on 11 September 2020. 9 Mr Rundell was appointed to the role of CFO and Company Secretary on 16 December 2020. 10 Mr Smith ceased employment with the company on 8 December 2020. 11 Mr Prassas ceased employment with the company on 15 July 2020, in accordance with the terms of his ESA, Mr Prassas received a termination payment of $125,000 for 6 months’ notice paid in lieu plus other statutory redundancy entitlements. The unused annual leave paid out on termination totalled $50,764 and is included in his salary and fees. 12 Mr Scott ceased employment with the company on 18 December 2020, in accordance with the terms of his ESA, Mr Scott received a termination payment of $28,199 for his notice paid in lieu plus other statutory redundancy entitlements. The unused annual leave paid out on termination totalled $32,318 and is included in his salary and fees. 13 Mr Stanfield ceased employment with the company on 15 December 2020. Remuneration of individual KMP’s were: Short term benefits Salary & f * $ Non- t $ Post- employment Superannuatio * $ Share based payments Performance Ri ht $ Options $ Termination Payments $ 50,000 40,000 18,415 40,000 31,644 180,059 - - - - - - - - - - - - - - - - - - 54,367 22,452 - 57,164 (23,065) 110,918 - - - - - - Total Proportion related to: T t l $ 104,367 62,452 18,415 97,164 8,579 290,977 Equity# % Performance # % 52% 36% 0% 59% 0% 38% 0% 0% 0% 0% 0% 0% 389,091 250,000 250,000 235,000 1,124,091 1,304,150 49,297 38,751 - - 88,048 88,048 - 23,750 23,750 22,325 69,825 69,825 (3,914) (2,516) (2,516) (2,237) (11,183) (11,183) 70,178 46,254 46,254 43,064 205,750 316,668 - - - - - - 504,652 356,239 317,488 298,152 1,476,531 1,767,508 14% 13% 15% 14% 14% 18% 0% 0% 0% 0% 0% 0% Total # The % excludes the value of the options which were written back during the year. * The Company’s executive team agreed to a 50% deferral in their contracted cash remuneration and the Company’s Directors agreed to defer a 100% of their Directors’ fees for four months for the period 1 April 2020 to 31 July 2020. As at 30 June 2020 the gross deferred amounts owing to Directors and Executives reported in trade and other payables and reported in the table above totalled $190,323. The deferred executive remuneration and Directors fees was settled in equity based on $0.0342 Per Ordinary Fully Paid Share calculated based on the 5 day VWAP up to and including 6 August 2020 for a total value of consideration $128,662, this amount is net of PAYG withholding tax obligations due on the deferred amounts. 1 Mr Jetter ceased service with the company on 15 January 2020. 2 Mr Sennitt was appointed 15 January 2020. 3 Mr Smith has a salary of $377,775 and also received an insurance allowance of $11,316 under his employment contract. 30-Jun-20 Directors Peter Meurer Jonathan Murray Robert Sennitt2 Tony Pearson John Jetter1 Executives Rocky Smith3 Michael Prassas Graeme Scott Lucas Stanfield 38 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Options and performance rights granted / vested / lapsed during the year ended 30 June 2021 Movements in options during the year: 30-Jun-21 Date of issue Number of options issued Fair value per Option* Total value of issue $ Vesting Date# Exercise Price Expiry Date Number vested during the year Directors Tony Pearson Bardin Davis Abdullah Mwinyi Giselle Collins Rebecca Morgan Peter Meurer Jonathan Murray Executives Rocky Smith Michael Prassas Graeme Scott Lucas Stanfield - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $0.10 $0.15 $0.10 $0.15 $0.065 $0.035 $0.030 $0.065 $0.030 $0.065 $0.035 $0.030 $0.065 $0.030 - - - - - - 21-Jun-22 21-Jun-23 21-Jun-22 21-Jun-23 16-Jan-21 17-Jan-22 5-Mar-23 16-Jan-21 5-Mar-23 16-Jan-21 17-Jan-22 5-Mar-23 16-Jan-21 5-Mar-23 - - - - - - - - - - - - - - - - - - - - - - - Total * Options are valued using the Black-Scholes option pricing model on date of grant. # Unvested Options vest on achievement of length of service criteria. Number lapsed/ cancelled during the - - - - - (5,000,000) (15,000,000) (3,000,000) (5,000,000) (28,000,000) (3,000,000) (1,500,000) (11,000,000) (1,500,000) (4,350,000) (1,500,000) (750,000) (7,250,000) (1,500,000) (3,375,000) (35,725,000) (63,725,000) 39 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Movements in performance rights during the year: 30-Jun-21 Date of issue Number of performance rights issued Fair value per performance right* Total value of issue $ Vesting Date# Exercise Price Expiry Date Directors Tony Pearson Bardin Davis Abdullah Mwinyi Giselle Collins Rebecca Morgan Peter Meurer Jonathan Murray Robert Sennitt Executives Philip Rundell Rocky Smith Michael Prassas Graeme Scott Lucas Stanfield 5-Feb-21 5-Feb-21 5-Feb-21 - - - 5-Feb-21 - - 5,000,000 25,000,000 1,000,000 - - - 1,000,000 - 32,000,000 - - - 8-Sep-20 8-Sep-20 8-Sep-20 8-Sep-20 - - - - - 2,300,000 3,800,000 2,300,000 3,800,000 12,200,000 44,200,000 $0.06 $0.06 $0.06 - - - $0.06 - - - - $0.037 $0.037 $0.037 $0.037 300,000 1,500,000 60,000 - - - 60,000 - 1,920,000 - - - 85,100 140,600 85,100 140,600 451,400 2,371,400 28-May-21 28-May-21 28-May-21 - - - 5-Mar-21 - - - - 17-Nov-20 - 17-Nov-20 - $nil $nil $nil - - - $nil - - - $nil $nil $nil $nil 5-Feb-25 5-Feb-25 5-Feb-25 - - - 5-Feb-25 - - - 8-Sep-21 8-Sep-24 8-Sep-21 8-Sep-24 Number vested during the year Number lapsed/ cancelled during the 1,750,000 8,750,000 350,000 - - - 75,000 - 10,925,000 (925,000) (925,000) - - - 759,000 - 759,000 - 1,518,000 12,443,000 (1,541,000) (3,800,000) (1,541,000) (3,800,000) (10,682,000) (11,607,000) Total * Performance Rights are valued using the Black-Scholes option pricing model on date of grant. # The unvested Performance Rights to vest on achievement of performance criteria, as determined by the Company’s Board, by 5 February 2025 or the Performance Rights will lapse. For vesting of performance rights with the same expiry date occurring on multiple dates during the period the most recent date is reported in the table. Options and performance rights granted / vested / lapsed during the year ended 30 June 2020 Movements in options during the year: 30-Jun-20 Date of issue Directors Peter Meurer Jonathan Murray John Jetter1 Tony Pearson - - - 11-Nov-19 11-Nov-19 11-Nov-19 Number of options issued - - - 2,000,000 3,000,000 5,000,000 Fair value per Option* Total value of issue $ Vesting Date# Exercise Price Expiry Date Number vested during the year Number lapsed/ cancelled during the - - - $0.0144 $0.0111 $0.0112 - - - 28,754 33,399 56,205 - - - 11-Nov-19 21-Jun-22 21-Jun-23 - - - $0.0500 $0.1000 $0.1500 - - - 21-Jun-21 21-Jun-22 21-Jun-23 - - - 2,000,000 - - - - - - - - 40 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT - - 10,000,000 - - - - - 10,000,000 - 118,358 - - - - - 118,358 5-Mar-20 5-Mar-20 5-Mar-20 5-Mar-20 $0.030 $0.030 $0.030 $0.030 5-Mar-23 5-Mar-23 5-Mar-23 5-Mar-23 Total * Options are valued using the Black-Scholes option pricing model on date of grant. # Unvested Options vest on achievement of length of service criteria. 1Mr Jetter resigned 15 January 2020. 2Mr Sennitt was appointed 15 January 2020. No performance rights were granted during the year. Movements in performance rights during the year: 30-Jun-20 Date of issue Number of performance rights issued Fair value per performance right* Total value of issue $ Vesting Date# Exercise Price Expiry Date - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5-Mar-20 5-Mar-20 5-Mar-20 5-Mar-20 - - - - - - - - - - - - - - - - - - 5-Mar-21 5-Mar-21 5-Mar-21 5-Mar-21 Robert Sennitt2 Executives Rocky Smith Michael Prassas Graeme Scott Lucas Stanfield Directors Peter Meurer Darren Townsend Jonathan Murray John Jetter Tony Pearson Executives Rocky Smith Michael Prassas Graeme Scott Lucas Stanfield - - - - - - - - - - - - Total * Performance Rights are valued using the Black-Scholes option pricing model on date of grant. # The unvested Performance Rights to vest on achievement of performance criteria, as determined by the Company’s Board, by 5 March 2020 or the Performance Rights will lapse. - 2,000,000 11,000,000 7,250,000 7,250,000 6,750,000 32,250,000 34,250,000 - - - - - - - - Number vested during the year Number lapsed/ cancelled during the - - - - - - - - - - - - 700,000 450,000 450,000 400,000 2,000,000 2,000,000 (2,800,000) (1,800,000) (1,800,000) (1,600,000) (8,000,000) (8,000,000) 41 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Shareholdings of KMP’s 30-Jun-21 Opening Balance Granted as Remuneration Exercise of Options/PRs Other Movements Closing Balance Directors Tony Pearson Bardin Davis Abdullah Mwinyi Giselle Collins Rebecca Morgan Peter Meurer* Jonathan Murray* Robert Sennit* Executives Philip Rundell Rocky Smith* Michael Prassas* Graeme Scott* Lucas Stanfield* - - - - - 1,250,000 2,638,753 - 3,888,753 883,056 204,260 - - - 487,365 615,399 389,822 2,579,902 3,750,000 8,750,000 - - - - 2,075,000 - 14,575,000 - - - - - (1,737,365) (5,329,152) (389,822) (7,456,339) - 1,249,989 5,083,334 325,000 - 6,658,323 10,547,076 - 984,934 - 651,808 612,686 2,249,428 4,829,330 - 700,000 450,000 1,209,000 1,159,000 3,518,000 18,093,000 - (2,934,923) (5,533,334) (2,185,808) (1,771,686) (12,425,751) (19,882,090) Total * Ceased to be KMP’s during the period and their holdings are not reported at period end. 4,633,056 8,954,260 - - - - - - 13,587,316 - - - - - - 13,587,316 42 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Option Holdings of KMP’s including performance rights 30-Jun-21 Opening Balance Granted as Remuneration Exercise of Options & PRs Expired/ Lapsed Other Movements Closing Balance Vested at 30 June Directors Tony Pearson Bardin Davis Abdullah Mwinyi Giselle Collins Rebecca Morgan Peter Meurer* Jonathan Murray* Robert Sennitt* Executives Philip Rundell Rocky Smith* Michael Prassas* Graeme Scott* Lucas Stanfield* 10,000,000 - - - - 30,000,000 10,000,000 - 50,000,000 5,000,000 25,000,000 1,000,000 - - - 1,000,000 - 32,000,000 (3,750,000) (8,750,000) - - - - (2,075,000) - (14,575,000) - 16,200,000 10,616,667 9,950,000 9,400,000 46,166,667 96,166,667 - - - 6,100,000 6,100,000 12,200,000 44,200,000 - . (700,000) (450,000) (1,209,000) (1,159,000) (3,518,000) (18,093,000) Total * Ceased to be KMP’s during the period and their holdings are not reported at period end. - - - - - (20,000,000) (8,925,000) - (28,925,000) - (15,500,000) - (5,341,000) (5,341,000) (26,182,000) (55,107,000) - - - - - (10,000,000) - - (10,000,000) - - (10,166,667) (9,500,000) (9,000,000) (28,666,667) (38,666,667) 11,250,000 16,250,000 1,000,000 - - - - - 28,500,000 - - - - - - 28,500,000 - - 350,000 - - - - - 350,000 - - - - - - 350,000 43 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Performance income as a proportion of total income No bonuses have been paid to executives during the year. Service agreements: The key terms of the service agreements with the KMP’s are: Tony Pearson (Appointed acting Chair 16 September 2020 and confirmed as Chair 21 October 2020) Chair Fees are currently set at $95,000 plus superannuation entitlements per annum effective 21 October 2020 ($50,000 per annum previously). Under Tony’s voluntary letter of agreement with the Company, two thirds of his annual directors’ fees were settled in shares quarterly to 30 June 2021, with the issue price based on the 20 day VWAP of the Company’s share price to the end of the respective quarter. Peter Meurer – Non-Executive Chairman (Appointed 23 April 2018, Resigned 16 September 2020) Under Peter’s agreement annual directors’ fees of $50,000 effective 23 April 2018 were payable. Non-Executive Directors - Jonathan Murray (Resigned 8 March 2021) / Tony Pearson (Appointed acting Chair 21 October 2020) / Robert Sennitt (Appointed 15 January 2020, Resigned 11 September 2020) / Bardin Davis (Appointed 21 October 2020, transitioned to MD 9 December 2020)/ Abdullah Mwinyi (Appointed 15 November 2020)/ Giselle Collins (Appointed 9 March 2021)/ Rebecca Morgan (Appointed 9 March 2021) Non-Executive Directors are appointed by letter agreement with no fixed term ceasing on resignation or removal as a director in accordance with the Corporations Act 2001. Fees are currently set at $50,000 plus superannuation entitlements per annum effective 18 September 2020 ($40,000 per annum previously), non-resident directors are entitled to receive the superannuation component as fees. Under Jonathan Murray’s voluntary letter of agreement with the Company, two thirds of his annual directors’ fees are to be settled in shares quarterly, with the issue price based on the 20day VWAP of the Company’s share price to the end of the respective quarter. Bardin Davis – Managing Director - (Appointed MD 9 December 2020) Bardin is employed under an Executive Service Agreement (ESA). The agreement provides for an annual salary of $350,000 plus statutory superannuation capped at the concessional contribution threshold. Under the terms of the ESA, $75,000 of the annual salary after deducting PAYG withholding tax obligations, was settled in shares quarterly to 30 June 2021, with the issue price based on the 20 day VWAP of the Company’s share price to the end of the respective quarter. Bardin has been issued 25,000,000 performance rights under the ESA. Bardin is entitled to leave in accordance with the relevant legislation. The engagement had no fixed term but is subject to a six-month notice period from either party. Philip Rundell – CFO & Company Secretary (Appointed 16 December 2020) Philip is employed under a consulting agreement with the Company. The agreement allows for an hourly charge rate of $200 per hour to a maximum of $1,500 per day. The engagement has no fixed term and is subject to a 15 day notice period from either party. Rocky Smith – Chief Executive Officer - (Transitioned from COO to CEO 21 September 2017, ceased employment 8 December 2020) Rocky was employed under an Executive Service Agreement (ESA). The agreement provided for an annual salary of $377,775 inclusive of superannuation, plus private health and life cover insurance, annual airfares, expenses, discretionary performance bonuses and options. The Executive was entitled to leave in accordance with the relevant legislation. The engagement had no fixed term but was subject to a six-month notice period from either party. Mr Smith ceased employment with the Company on 11 September 2020. Michael Prassas – Executive General Manager Sales, Marketing and Business Development (appointed 18 February 2016, ceased employment 15 July 2020) Michael was employed under an ESA. The agreement provided for an annual salary of $250,000, plus superannuation, plus private health, annual airfares, expenses, discretionary performance bonuses and options. The Executive was entitled to leave in accordance with the relevant legislation. Michael’s engagement had no fixed term but is subject to a six month notice period from either party. Mr Prassas ceased employment with the Company on 15 July 2020. 44 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Lucas Stanfield – Development Manager (appointed executive 2 October 2017, resigned 15 December 2020) Lucas was employed under an ESA. The agreement provided for an annual salary of $265,000 effective 1 September 2020, plus superannuation, expenses, discretionary performance bonuses and eligibility for options. The Executive was entitled to leave in accordance with the relevant legislation. Lucas’s engagement had no fixed term but was subject to a three month notice period from either party except six months’ notice following a change of control termination. Mr Stanfield resigned on 15 December 2020. Graeme Scott – CFO & Company Secretary (appointed 3 November 2014, ceased employment 18 December 2020) Graeme was employed under an ESA. The agreement provided for an annual salary of $265,000 effective 1 September 2020, plus superannuation, expenses, discretionary performance bonuses and eligibility for options. The Executive was entitled to leave in accordance with the relevant legislation. Graeme’s engagement had no fixed term but was subject to a three month notice period from either party except six months’ notice following a change of control termination. Mr Scott ceased employment with the Company on 18 December 2020. Related party transactions During the year, Steinepreis Paganin Lawyers and Consultants, a legal practice associated with Mr Jonathan Murray received $89,677 (2020: $139,723) as fees for the provision of legal advice. The balance outstanding at 30 June 2021 and included in trade creditors is $1,183 (30 June 2020: $7,428). These costs have not been included in directors remuneration as these fees were not paid to the individual director in relation to the management of the affairs of the Company. All transactions were entered into on normal commercial terms. (End of Remuneration Report) OPTIONS AND PERFORMANCE RIGHTS At the date of this report Listed options on issue are: CODE PEKOD Expiry Date 14 April 2022 Exercise Price Number under option $0.03 81,541,253 Unissued ordinary shares of the Company under option to directors, employees and contractors are: Expiry Date Exercise Price $0.10 $0.15 $0.035 $0.03 * Vesting subject to length of service and milestone criteria. 21 June 2022 21 June 2023 17 January 2022 5 March 2023 Number under option 3,000,000* 5,000,000* 2,375,000 9,790,000 There are no unissued ordinary shares of the Company under option to service providers. During the year a total of 59,418,747 listed and unlisted options were exercised at various exercise prices. A total of 75,169,419 unlisted options with exercises prices ranging from $0.03 to $0.15 lapsed, were cancelled, or expired unexercised. No options were issued. Details of options movements during the year are detailed in the Remuneration Report and note 22 to this report. At the date of this report Performance Rights on issue to directors and employees are: Expiry Date Exercise Price 5 February 2025 $Nil Number of Performance Rights 20,632,000 During the year 47,000,000 performance rights were issued to directors and employees of the Company. A total of 15,017,000 vested performance rights were exercised for nil consideration and a total of 12,545,000 performance rights lapsed, were cancelled, or expired. 45 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Option or rights holders do not have any right, by virtue of the option or right to participate in any share issue of the Company or any related body corporate. INDEMNIFYING OFFICERS OR AUDITOR During the financial year, the company paid a premium in respect of a contract insuring the directors and officers of the Company and related body corporates against a liability incurred as a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as an officer or auditor. To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. PROCEEDINGS ON BEHALF OF COMPANY No person has applied to the court under legislation such as section 237 of the Corporations Act of Australia 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. No proceedings have been brought or intervened in on behalf of the consolidated entity with leave of the court under such legislation. AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 30 June 2021 has been received and can be found immediately following this Directors’ report. No amounts have been paid or payable to the auditor for non-audit services, payments to the auditors are set out in Note 5 to the Financial Statements. The Board of Directors is satisfied that the provision of non-audit services performed during the year by the Company’s auditors is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services did not compromise the external auditor’s independence for the following reason: • • All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and The nature of the services provided does not compromise the general principles relating to auditors independence as set out in the APES 110 (Code of Ethics for Professional Accountants). The Directors’ report is signed in accordance with a resolution of Directors made pursuant to s.298(2) of the Corporations Act 2001. On behalf of the Directors, Tony Pearson Non-executive Chair Sydney, 15 September 2021 46 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT AUDITOR’S INDEPENDENCE DECLARATION 47 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT INDEPENDENT AUDITOR’S REPORT 48 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT INDEPENDENT AUDITOR’S REPORT (CONTINUED) 49 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT INDEPENDENT AUDITOR’S REPORT (CONTINUED) 50 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT INDEPENDENT AUDITOR’S REPORT (CONTINUED) 51 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT INDEPENDENT AUDITOR’S REPORT (CONTINUED) 52 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT INDEPENDENT AUDITOR’S REPORT (CONTINUED) 53 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the Year Ended 30 June 2021 Interest income R&D rebate Other income Gain on re-measurement of financial liabilities Gain on derecognition of associate Total income Employee benefits expenses Share based payments expenses Depreciation expenses Borrowing costs Administrative and other costs Technical feasibility costs Accretion of interest on royalty liability Share of loss of associate Fair value adjustments to other assets measured at fair value through profit or loss Profit/ (Loss) before income tax Income tax expense Profit/ (Loss) after income tax Other comprehensive income/(loss), net of tax Items that could be transferred to profit or loss in future: Recycled to the profit or loss on derecognition of associate Exchange differences on translation of foreign operations Group’s share of associate’s other comprehensive income Note 5 5 5 19 4 12, 13 19 3 8 2021 $ 2020 $ 9,246 46,137 55,625 37,034 110,037 62,500 - - 1,735,665 10,429,216 111,008 12,374,452 (725,552) (856,325) (23,049) - (705,365) (819,645) (16,899) (297,520) (1,397,265) (1,510,336) (1,555,761) (948,436) (323,904) - - - (353,988) (69,549) (4,770,848) 7,652,714 - - (4,770,848) 7,652,714 - (3,764,892) (4,483,550) 40,792 - 503,253 Total comprehensive income/(loss) for the year (9,254,398) 4,431,867 Profit/(loss) per share (in cents) Basic and Diluted profit/(loss) per share 6 (0.31) 0.65 The statement should be read in conjunction with the accompanying notes 54 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2021 Note 2021 $ 2020 $ ASSETS Current assets Cash and cash equivalents Trade and other receivables Other financial assets Prepayments Total current assets Non-current assets Property plant and equipment Right-of-use asset Exploration and evaluation costs Investments Other assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Provisions Total current liabilities Non-current liabilities Royalty liability Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Accumulated losses Total equity 9 10 11 12 13 14 15 16 17 18 19 21 20 2,680,367 2,546,021 732,455 - 84,740 31,962 30,000 84,466 3,497,562 2,692,449 24,819 3,583,243 41,789 - 54,472,897 59,419,382 8,000 - 8,000 219,284 58,088,959 59,688,455 61,586,521 62,380,904 576,746 28,433 605,179 412,178 242,936 655,114 5,686,663 5,686,663 5,857,433 5,857,433 6,291,842 6,512,547 55,294,679 55,868,357 107,717,730 (11,027) 99,893,335 3,616,198 (52,412,024) (47,641,176) 55,294,679 55,868,357 The statement should be read in conjunction with the accompanying note 55 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT CONSOLIDATED STATEMENT OF CASH FLOWS For the Year Ended 30 June 2021 Note 2021 $ 2020 $ 9 3 4 OPERATING ACTIVITIES Payments to suppliers and employees Interest received Government rebates received Borrowing costs paid Cash used in operating activities INVESTING ACTIVITIES Acquisition of property, plant and equipment Proceeds from sale of non-current assets Payment for Teesside Lease purchase option Contributions to associates Cash acquired on acquisition of PAM Cash generated from (used in) investing activities FINANCING ACTIVITIES Proceeds from issue of equity shares Costs of issuing equity shares Proceeds from redemption of bank guarantee Payment for principal portion of lease liabilities Repayment of borrowings Proceeds from borrowings Repayment to associate and other parties (4,583,832) (3,129,879) 13,574 101,762 - 36,210 172,537 (67,463) (4,468,496) (2,988,595) (245) 531 - - - (11,685) - (92,030) (667,861) 41,897 286 (729,679) 8,227,067 (402,673) 30,000 (3,220,347) - - - 6,295,535 (230,767) - - (1,914,947) 48,246 (28,065) Cash generated from financing activities 4,634,047 4,170,002 Net increase in cash and cash equivalents Balance at the beginning of the year Effect of foreign currency translation Balance at the end of the year 9 165,837 2,546,021 (31,491) 2,680,367 451,728 2,147,324 (53,031) 2,546,021 The statement should be read in conjunction with the accompanying notes 56 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the Year Ended 30 June 2021 Contributed Equity $ 77,223,630 - - Share based payment reserve $ 2,968,113 - - Foreign currency translation reserve $ 3,049,287 - (3,724,100) - - 503,253 - 22,900,472 - (230,767) 99,893,335 - - - 8,227,067 - (402,672) - - 819,645 - 3,787,758 - - (3,220,847) - - - (171,560) - (4,483,550) - - 856,325 - (4,483,550) - - - Accumulated losses $ (55,293,890) 7,652,714 - - 7,652,714 - - - (47,641,176) (4,770,848) - (4,770,848) - - - At 30 June 2019 Profit for the year Other comprehensive loss Group’s share of associate’s other comprehensive income Total income/(loss) for the year Equity issued Equity based payments Transaction costs comprehensive At 30 June 2020 Loss for the year Other comprehensive loss Total income/(loss) for the year Equity issued Equity based payments Transaction costs comprehensive At 30 June 2021 107,717,730 4,644,083 (4,655,110) (52,412,024) The statement should be read in conjunction with the accompanying notes Total equity $ 27,947,140 7,652,714 (3,724,100) 503,253 4,431,867 22,900,472 819,645 (230,767) 55,868,357 (4,770,848) (4,483,550) (9,254,398) 8,227,067 856,325 (402,672) 55,294,679 57 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT NOTES TO FINANCIAL STATEMENTS 1. CORPORATE INFORMATION The financial report of Peak Resources Limited for the year ended 30 June 2021 was authorised for issue in accordance with a resolution of the directors on 15 September 2021. Peak Resources Limited is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange (ASX). The address of its registered office and principal place of business is disclosed in the corporate directory in the Annual Report. The principal activity of the Group during the year was exploration and evaluation of mineral licences. 2. SIGNIFICANT ACCOUNTING POLICIES a) Basis of Preparation The consolidated financial statements have been prepared on the basis of historical cost. All amounts are presented in Australian Dollars unless otherwise noted. Statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations, and complies with other requirements of the law. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Group comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS). Going concern The Group incurred a loss after tax of $4,770,848 (2020: profit of $7,652,714) and had operating cash outflows of $4,468,496 for the year ended 30 June 2021 (2020: $2,988,595). In order to fund the Ngualla Project and Teesside Refinery as well as the Group’s corporate and administration requirements, the Group’s cashflow forecasts through to 31 December 2022 indicate they will be required to obtain additional funding during this period. As disclosed in Note 27 of the financial report, the Group successfully raised $20.4 million on 13 August 2021 under Tranche One of a proposed two-tranche equity placement. The receipt of further funds under Tranche Two of the equity placement totalling $9.6 million, is subject to shareholder approval at the General Meeting called for 28 September 2021. The Company is also undertaking a Share Placement Plan (“SPP”) to raise up to $4 million. The SPP is also subject to shareholder approval and the final amount raised subject to eligible participant take-up. The net proceeds of the two-tranche placement and SPP will be used by Peak to progress the development of the Ngualla Project and the Teesside Refinery (including offtake and financing arrangements), expand the Company’s technical and marketing team and repay the ANRF Royalty Facility and interest (“ANRF royalty”). The US$10 million payment to settle the ANRF royalty comprises the repayment of principal of US$5.2 million and an accrued interest payment of US$4.8 million (see Note 27). The agreement to repay the ANRF royalty is subject to shareholder approval at the General Meeting called for 28 September 2021. In the directors’ opinion, there are reasonable grounds to believe that the Group has the ability to successfully raise adequate equity funding as required, as demonstrated by the successful equity raisings in the current year (see Note 21) and the Tranche One raising completed subsequent to year end. Accordingly, the Directors consider there is a reasonable basis to conclude that the Tranche Two equity raising will be successfully completed at the General Meeting called for 28 September 2021. However, in the event that the Tranche Two equity raising is not successfully completed, and additional funding is not forthcoming, the Group would need to revise its current plans with respect to the development of the Ngualla Project and Teesside Refinery to ensure that it has sufficient cash on hand to continue its operations. As a result of the need to raise additional equity to continue with the planned development of the Ngualla Project and the Teesside Refinery, if the Tranche Two funds are not forthcoming, there is a material uncertainty 58 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT whether the Group will be able to progress with its current development initiatives and continue as a going concern and therefore in this circumstance whether it will realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the consolidated financial statements. No adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Group not continue as a going concern. b) Impact of new standards applied for the first time The accounting policies adopted in the preparation of the consolidated financial statements for the year are consistent with those followed in the preparation of the Company’s annual financial report for the year ended 30 June 2020, except for the adoption of new and amended accounting standards and interpretations effective as of 1 July 2020. The adoption of these new and amended accounting standards and interpretations did not have a material impact on the consolidated entity and no restatement of comparative financial information to reflect the adoption of these new standards and interpretations was required. The Company has not early adopted any other accounting standard, interpretation or amendment that has been issued but is not yet effective. Amendments to AASB 3: Definition of a Business The amendment to AASB 3 Business Combinations clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that, together, significantly contribute to the ability to create output. Furthermore, it clarifies that a business can exist without including all of the inputs and processes needed to create outputs. These amendments had no impact on the consolidated financial statements of the Group. Amendments to AASB 7, AASB 9 and AASB 139 Interest Rate Benchmark Reform The amendments to AASB 9 and AASB 139 Financial Instruments: Recognition and Measurement provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainty about the timing and/or amount of benchmark-based cash flows of the hedged item or the hedging instrument. These amendments have no impact on the consolidated financial statements of the Group as it does not have any interest rate hedge relationships. Amendments to AASB 101 and AAB 108 Definition of Material The amendments provide a new definition of material that states, “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the consolidated financial statements of, nor is there expected to be any future impact to the Group. Conceptual Framework for Financial Reporting issued on 29 March 2018 The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist the IASB in developing standards, to help preparers develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand and interpret the standards. This will affect those entities which developed their accounting policies based on the Conceptual Framework. The revised Conceptual Framework includes some new concepts, updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. These amendments had no impact on the consolidated financial statements of the Group. Amendments to AASB 16 Covid-19 Related Rent Concessions The amendments provide relief to lessees from applying AASB 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the Covid-19 related rent concession the same way it would account for the change under AASB 16, if the change were not a lease modification. This amendment had no impact on the consolidated financial statements of the Group. 59 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Standards issued but not yet effective Significant Australian Accounting Standards and Interpretations that are issued, but are not yet effective, up to the date of issuance of the Group’s financial statements is not expected to be material. The Group intends to adopt these new standards and interpretations, if applicable, when they become effective. Amendments to AASB 101: Classification of Liabilities as Current or Non-current The amendments clarify: - What is meant by a right to defer settlement - - - That a right to defer must exist at the end of the reporting period That classification is unaffected by the likelihood that an entity will exercise its deferral right That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification - The Group is currently assessing the impact the amendments will have on current practice. Reference to the Conceptual Framework – Amendments to AASB 3 The amendments are intended to replace a reference to the Framework for the Preparation and Presentation of Financial Statements, issued in 1989, with a reference to the Conceptual Framework for Financial Reporting issued in March 2018 without significantly changing its requirements. The Board also added an exception to the recognition principle of AASB 3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of AASB 137 or Australian IFRIC 21 Levies, if incurred separately. At the same time, the Board decided to clarify existing guidance in AASB 3 for contingent assets that would not be affected by replacing the reference to the Framework for the Preparation and Presentation of Financial Statements. The amendments are effective for annual reporting periods beginning on or after 1 January 2022 and apply prospectively. Property, Plant and Equipment: Proceeds before Intended Use – Amendments to AASB 116 In May 2020, the IASB issued Property, Plant and Equipment — Proceeds before Intended Use, which prohibits entities deducting from the cost of an item of property, plant and equipment, any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendment is effective for annual reporting periods beginning on or after 1 January 2022 and must be applied retrospectively to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment. The amendments are not expected to have an impact on the Group. Onerous Contracts – Costs of Fulfilling a Contract – Amendments to AASB 137 In May 2020, the IASB issued amendments to AASB 137 to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a “directly related cost approach”. The costs that relate directly to a contract to provide goods or services include both incremental costs and an allocation of costs directly related to contract activities. General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments are effective for annual reporting periods beginning on or after 1 January 2022. The Group will apply these amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments. AASB 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities As part of its 2018-2020 annual improvements to AASB standards process the IASB issued amendment to AASB 9. The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. The amendment is effective for annual reporting periods beginning on or after 1 January 2022 with earlier adoption permitted. The Group will apply the amendments to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the Group first applies the amendment. The amendments are not expected to have an impact on the Group. 60 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT c) Basis of consolidation The consolidated financial statements of Peak Resources Limited comprise the financial statements of the Company and its subsidiaries as at 30 June 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: - Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) - Exposure, or rights, to variable returns from its involvement with the investee, and - The ability to use its power over the investee to affect its returns When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: The contractual arrangement with the other vote holders of the investee - - Rights arising from other contractual arrangements - The Group’s voting rights and potential voting rights The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. All inter-company balances and transactions between entities in the Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those policies applied by the parent entity. All controlled entities have a June financial year-end. If the Group loses control over a subsidiary, it derecognises the related assets, liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value. Where controlled entities have entered or left the economic entity during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased through an equity transaction. d) Investment in associates An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The Group’s investments in its associates are accounted for using the equity method. Under the equity method, the investment in an associate is initially measured at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate since the entity became an associate. The statement of comprehensive income reflects the Group’s share of the results of operations of the associate. Any change in other comprehensive income (OCI) of those investees is presented as part of the Group’s OCI. In addition when there has been a change recognised directly in the equity of an associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains or losses resulting from transactions between the Group and associate are eliminated to the extent of the interest in the associate. The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of comprehensive income outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate. The financial statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. 61 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognises the loss as ‘Share of profit of an associate’ in the statement of profit or loss. Upon loss of significant influence over the associate in a situation which is not an asset acquisition, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognized in profit and loss. In the case of an asset acquisition (which is not a business combination) where the Group loses significant influence but gains control of an investment, the Group takes any difference between the total historical cost of acquisition of the investment and the carrying value of the associate upon loss of significant influence to the profit and loss. e) Foreign Currency Translation The financial statements have been presented in Australian Dollars, which is the Group’s presentation currency. Foreign currency transactions In preparing the financial statements of each individual group entity, transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. The Company’s functional currency is Australian dollars. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date, and gain or loss in exchange rate movements are recognised in profit or loss. Translation of foreign operations As at the reporting date the assets and liabilities of foreign operations are translated from their functional currency at the rate of exchange ruling at the reporting date and the statement of comprehensive income, statement cash flows and statement of changes in equity are translated at the weighted average exchange rates for the year. The exchange differences arising on translation are recognised in other comprehensive income and accumulated balances are carried forward as a separate component of equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss are also recognised in other comprehensive income or profit or loss, respectively). On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the profit or loss. f) Other income Interest Interest income is recognised as the interest accrues on the financial asset carried at amortised cost. R&D rebate grant The Group is treating its receipt of the R&D rebate as a government grant. Government grants are recognised as income when there is reasonable assurance that the grant will be received and all conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, it is deducted from the asset to which it relates, the net value of which is amortised over its expected useful life. g) Employee benefits Employee benefits such as salary and wages are measured at the rate at which the entity expects to settle the liability; and recognised during the period over which the employee services are being rendered. 62 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Provision is made for the Company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Superannuation entitlements Contributions are made by the company to employee superannuation funds and are charged as expenses when incurred. h) Leases The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Group as a lessee The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of- use assets representing the right to use the underlying assets. i) Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows: - Lease 26 years The right-of-use assets are also subject to impairment. The carrying values of right-of-use assets are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. Impairment losses, if any, are recognised in the profit or loss. ii) Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the 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, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. iii) Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of its office space. This has been recognised as an expense in Administrative and other costs in the consolidated statement of comprehensive income. 63 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT i) Income tax Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for the financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: - Where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. - Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised except: - Where the deferred income tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. - The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in equity and not in the profit or loss. j) Other taxes Revenues, expenses and assets are recognised net of the amount of GST/VAT except: When the GST/VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables, which are stated with the amount of GST/VAT included. The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. The GST/VAT component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, is classified as part of operating cash flows. Commitments and contingencies are disclosed net of the amount of GST/VAT recoverable from, or payable to, the taxation authority. k) Earnings per share i) Basic earnings per share Basic earnings per share (“EPS”) is determined by dividing the group operating result after income tax attributable to members by weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. 64 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT ii) Diluted earnings per share Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. l) Financial Instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI) and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under AASB 15. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset. Subsequent measurement For purposes of subsequent measurement, financial assets are classified in four categories: - - - - Financial assets at amortised cost (debt instruments) Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments) Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) Financial assets at fair value through profit or loss Financial assets at amortised cost (debt instruments) This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met: - - The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised cost includes trade receivables. Financial assets designated at fair value through OCI (equity instruments) 65 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under AASB 132 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis. Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment. The Group elected to classify irrevocably its non-listed equity investments under this category. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss. This category includes derivative instruments and listed equity investments which the Group had not irrevocably elected to classify at fair value through OCI. Dividends on listed equity investments are also recognised as other income in the statement of profit or loss when the right of payment has been established. A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category. A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss. Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when: - - The rights to receive cash flows from the asset have expired; or The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass- through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it 66 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. Impairment of financial assets The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). Financial liabilities Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables and loans and borrowings. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below Loans and borrowings This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. This category generally applies to the royalty liability. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss. The financial instruments of the Group are (i) cash and cash equivalents, including other financial assets; (ii) trade and other receivables; (iii) investments, (iv) trade and other payables and v) royalty liability. 67 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT m) Cash and Cash Equivalents Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand and short term deposits with an original maturity of three months or less. For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. n) Trade and Other Receivables Trade receivables, which generally have 30-90 day terms, are recognised initially at fair value and subsequently at amortised cost, less provisions for expected credit losses. For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. o) Property, plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Plant and equipment is depreciated on the straight line basis over their expected useful lives to their estimated residual value The useful life of the assets have been set at the following levels to determine the depreciation rates: Plant and equipment: 2 to 5 years Impairment The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. Impairment losses, if any, are recognised in the profit or loss. Derecognition and disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. p) Exploration and evaluation costs Exploration and evaluation expenditure in relation to each separate area of interest is recognised as an exploration and evaluation asset in the year in which it is incurred where the following conditions are satisfied: The rights to tenure of the area of interest are current; and at least one of the following conditions is also met: - - the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale; or exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing. Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory drilling and associated activities and an allocation of depreciation and amortisation of assets used in exploration and evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest. 68 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). The recoverable amount of exploration and evaluation assets is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment exists when the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. Any impairment losses are recognised in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years. Where a decision has been made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment and the balance is then reclassified to production assets. q) Trade and Other Payables Trade payables and other payables are initially recognised at fair value, then carried at amortised cost. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arising when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. r) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. s) Share-based payment transactions Equity settled transactions: The Group provides benefits to employees (including senior executives) of the Group in the form of share- based payments, whereby employees render services in exchange for shares or rights over shares (equity- settled transactions). The current plans in place to provide these benefits are the Incentive Employee Option Plan (EOP), Incentive Performance Rights Plan (PRP), and Director Fee Plan, which provides benefits to directors, senior executives and other eligible participants as determined by the Board. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black-Scholes option pricing model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Peak Resources Limited (market conditions) if applicable. 69 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects: - - the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. t) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. u) Critical accounting judgements and estimates In the application of Australian Accounting Standards, management is required to make judgments about applying accounting policies and estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. 70 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Impairment of exploration and evaluation costs The future recoverability of exploration and evaluation costs are dependent on a number of factors, including the level of proved, probable and inferred mineral resources, future technological changes which could impact the cost of mining, future legal changes (including changes to environment restoration obligations) and changes to commodity prices. To the extent that exploration and evaluation costs is determined not to be recoverable in the future, this impairment will reduce profits and net assets in the period in which this determination is made. Share based payment transactions The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. Accounting for contingent consideration in asset acquisition In accounting for the cash component of contingent consideration payable in an asset acquisition, including future royalties, the Group considers AASB 137 “Provisions, Contingent Liabilities and Contingent Assets” to be the applicable accounting standard. Accordingly, no obligation for the cash component of contingent consideration payable based on the future performance of the asset and actions of the Group is recognised at the date of purchase of the related asset. Measurement of royalty liability The Group is required to estimate the amount and timing of anticipated repayment dates for the royalty liability disclosed in note 18. Any changes in either the estimated timing or amount of repayments will impact the measurement of this liability through the profit and loss and these changes could be significant. 3. INVESTMENTS IN ASSOCIATES Prior to acquisition of the remaining interest in Peak African Minerals (PAM) on 12 November 2019 (see Note 4), the investment in PAM was accounted for using the equity method in the consolidated financial statements. For the year ended 30 June 2020, the Group recognised a share of loss in the associate amounting to $353,988. 71 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 4. ASSET ACQUISITION On 4 November 2019 Peak’s shareholders approved the acquisition of the remaining 25% interest in PAM. All conditions of the acquisition were satisfied and completion occurred on 12 November 2019. A total of 386,161,369 new fully paid ordinary shares were issued at an issue price at the completion date of $0.043 to Appian Pinnacle Holdco Limited (Appian) and International Finance Corporation (IFC), after reduction for their outstanding contributions for the PAM group costs to completion. The cost of this acquisition consideration was $16,604,938. The total cost of acquisition has been determined using the accumulated cost approach with the difference between this cost and the carrying value of Peak’s equity accounted investment of its interest in associate on derecognition taken through the profit and loss as part of the gain on acquisition and reconsolidation of associate of $10,429,216. The Group’s acquisition of PAM was accounted for as an asset acquisition rather than a business combination in the consolidated financial statements. The following table illustrates the apportionment of the acquisition cost to the assets and liabilities of PAM Group at their relative fair values at the acquisition date. Fair value of consideration transferred Amount settled for the purchase of the 25% interest in PAM Previous costs of acquisition Total cost of PAM acquisition Assignment of carrying amounts in PAM on acquisition at their relative fair values: Cash and cash equivalents Trade and other receivables Prepayments Exploration and evaluation expenditure Property, plant and equipment Trade and other payables Royalty liability Total cost of PAM acquisition 12 November 2019 $ 16,604,938 35,182,644 51,787,582 41,897 811 78,160 59,173,422 40,807 (29,165) (7,518,350) 51,787,582 Tenure over Ngualla Project The Ngualla Project tenure is held over three licence areas held by PRNG. The area containing the Mineral Resource is subject to a Special Mining Licence (SML) application. The Prospecting Licence (PL) which PRNG held over this area, at the time of lodgement of the SML application, expired in September 2017. The Tanzanian Mining Act provides that the PL will remain valid until grant or refusal to grant an application for a licence is made. In July 2021, the Cabinet of Ministers of the Government of the United Republic of Tanzania has approved the SML application. The Group is committed to working with the Tanzanian Government to finalise an Economic Framework Agreement, Shareholders’ Agreement and other related documentation required as part of a formal grant of the SML by the Minister of Minerals. The other two licence areas are also held by PRNG under granted PLs. 72 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 5. INCOME AND EXPENDITURE ITEMS Included in profit/(loss) for the year are: Interest income Australian R&D rebate Other income Total other income 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 Total fees to Ernst & Young (Australia) (A) Fees to other overseas member firms of Ernst & Young (Australia) Fees for auditing the financial report of any controlled entities Total fees to overseas member firms of Ernst & Young (Australia) (B) Total auditor’s remuneration (A)+(B) 2021 $ 2020 $ 9,246 46,137 37,034 110,037 55,625 62,500 111,008 209,571 Auditors’ remuneration 75,560 79,971 75,560 79,971 29,119 29,119 30,229 30,229 104,679 110,200 6. PROFIT/(LOSS) PER SHARE The following reflects the income and share data used in the total operations basic and dilutive earnings per share computations: Basic and Diluted profit/ (loss) per share based on reported losses after the Statement of Comprehensive Income tax as set out in Weighted average number of ordinary shares used in calculating basic profit/(loss) per share Weighted average number of ordinary shares used in calculating diluted profit/(loss) per share Anti-dilutive options over ordinary shares and performance rights excluded from the weighted average number of shares 2021 Cents (0.31) 2020 Cents 0.65 2021 Nos. 1,526,071,733 2020 Nos. 1,174,788,181 1,526,071,733 1,175,432,990 98,206,253 204,794,419 73 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 7. OPERATING SEGMENTS Information reported to the chief operating decision makers for the purposes of resource allocation and assessment of segment performance focuses on the exploration activities of the Group. The chief operating decision makers include the board of directors. The Group’s reportable segments under AASB 8 are as follows: • Exploration & Development (E&D) – Group’s exploration and development activities for the Ngualla project in Tanzania; and • Unallocated - to manage the corporate affairs of the group. The segments have applied the same accounting policies as applied to the Group and disclosed in the notes 1 and 2 to these financial statements. Interest income Other income Re-measurement gain on royalty liability Gain on derecognition of associate Total income Depreciation and amortisation Share based payment expenses Borrowing costs Share of loss of associate 30 June 2021 30 June 2020 E&D Unallocated Total E&D Unallocated Total $ $ $ $ $ $ - - - - - 9,246 9,246 101,762 101,762 - - - - 111,008 111,008 - - - - - 37,034 37,034 172,537 172,537 1,735,665 1,735,665 10,429,216 10,429,216 12,374,452 12,374,452 (16,607) (6,442) (23,049) (11,196) (5,703) (16,899) - - - (856,325) (856,325) - - - - - (353,988) - - (819,645) (819,645) (297,520) (297,520) - - (353,988) (948,436) Technical feasibility costs (1,555,761) (1,555,761) (948,436) Other expenses Income Tax - - (2,446,721) (2,446,721) - - - - (2,285,249) (2,285,249) - - Segment results (1,572,368) (3,198,480) (4,770,848) (1,313,620) 8,966,335 7,652,716 Segment assets 58,076,050 3,510,471 61,586,521 59,448,993 2,931,911 62,380,904 Segment liabilities (5,686,663) (605,179) (6,291,842) (5,857,433) (655,114) (6,512,547) Additions to non-current assets during the year: Plant and equipment Right-of-use assets Investment in associate - 3,583,243 - 3,583,243 245 - - 245 245 3,583,243 - 3,583,488 - - 667,861 667,861 11,686 - - 11,686 11,686 - 667,861 679,547 74 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 8. INCOME TAX a. The components of tax expense comprise: Current tax Deferred tax Income tax expense reported in statement of comprehensive income b. The prima facie tax expense/(benefit) on profit/(loss) from ordinary activities before income tax is reconciled to the income tax as follows: CONSOLIDATED CONSOLIDATED 2021 $ 2020 $ - - - - - - Profit/(Loss) before income tax (4,770,848) 7,652,714 Prima facie tax expense/(benefit) on profit/(loss) from ordinary activities before income tax at 30.0% (2020:30%) (1,431,254) 2,295,814 Add tax effect of: - Revenue losses not recognised - Other non-allowable items - Other deferred tax balances not recognised Less tax effect of: - Gain on derecognition of associate - Gain on re-measurement of financial liabilities - Other deferred tax balances not recognised - Non-assessable items Income tax expense reported in statement of comprehensive income c. Deferred tax recognised at 30.0% (2020:30%) (Note 1): Deferred tax liabilities: Accrued interest Other Deferred tax assets: Carry forward revenue losses Net deferred tax d. Unrecognised deferred tax assets at 30.0% (2020:30%) (Note 1): Carry forward revenue losses Carry forward capital losses Unrealised FX Capital raising costs Provisions and accruals Other 617,258 1,320,223 - 699,892 686,311 61,301 506,227 3,743,318 - - 3,128,765 520,700 136,169 370,058 - - - - - - 93,853 - (1,299) 3,649) 4,948 - 8,037,807 7,452,367 295,504 265,945 86,725 979,943 9,350 295,504 487,097 93,369 859,008 - 9,675,274 9,187,345 75 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT The tax benefits of the above deferred tax assets will only be obtained if: (a) the company derives future assessable income of a nature and of an amount sufficient to enable the benefits to be utilised; (b) the company continues to comply with the conditions for deductibility imposed by law; and (c) no changes in income tax legislation adversely affect the company in utilising the benefits. Note 1 - the corporate tax rate for eligible companies will reduce from 30% to 25% by 30 June 2022 providing certain turnover thresholds and other criteria are met. Deferred tax assets and liabilities are required to be measured at the tax rate that is expected to apply in the future income year when the asset is realised or the liability is settled. The Directors have determined that the deferred tax balances be measured at the tax rates stated. Note 2 - Tax Consolidation For the purpose of income taxation, the Company and its 100% Australian controlled entities have formed a tax consolidated group effective from 1 July 2012. 9. CASH AND CASH EQUIVALENTS Reconciliation of cash and cash equivalent For the purpose of the Cash Flow Statement, cash and cash equivalents comprise the following: Cash at bank and in hand Short term deposits Reconciliation of operating profit/(loss) to operating cash flows Profit/(Loss) for the year Adjustments for non-cash items: Gain on derecognition of associate Gain on re-measurement of financial liabilities Accretion of interest on royalty liability Fair value adjustments Share of loss of associate Share based payments expenses Depreciation expenses Foreign exchange gain/loss Other non-cash items Movement in working capital items: Increase in trade and other receivables (Increase)/Decrease in prepayments Increase in trade and other payables Increase/(Decrease) in provisions 2021 $ 2020 $ 2,680,367 546,021 - 2,000,000 2,680,367 2,546,021 (4,770,848) 7,652,714 - - (10,429,216) (1,735,665) 323,904 - - 856,325 23,049 (6,089) - 69,549 353,988 819,645 16,899 43,948 543 (174,131) (845,171) (25,551) (274) 164,568 (214,503) 624 372,333 46,268 (4,468,496) (2,988,595) 76 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 10. TRADE AND OTHER RECEIVABLES Current GST/VAT receivable Other receivable Ageing of receivables Recoverable within 3 months Receivables are non-interest bearing and unsecured. 11. OTHER FINANCIAL ASSETS Bank Term Deposit 2021 $ 2020 $ 730,375 2,080 732,455 732,455 732,455 21,671 10,291 31,962 31,962 31,962 2021 $ 2020 $ - - 30,000 30,000 On termination of the office lease in December 2020, the bank guarantee secured against a deposit of $30,000 was released, and the deposit was returned to the Company (2020: deposit $30,000). 12. PROPERTY, PLANT AND EQUIPMENT Plant and equipment At cost Accumulated depreciation Movement in net carrying amount Balance at the beginning of the year Additions on acquisition of PAM Net Additions / (Disposals) Depreciation for the year Balance at the end of the year 2021 $ 2020 $ 213,309 309,768 (188,490) (267,979) 24,819 41,789 41,789 - (828) 6,196 40,807 11,685 (16,142) (16,899) 24,819 41,789 77 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 13. LEASES RIGHT OF USE ASSETS Movement in net carrying amount: Balance at beginning of year Additions Depreciation for the year Balance at 30 June LEASE LIABILITIES Movement in net carrying amount: Balance at beginning of year Additions Repayments Balance at 30 June 2021 $ 2020 $ - 3,590,150 (6,907) 3,583,243 2021 $ 2020 $ - 3,220,392 (3,220,392) - - - - - - - - - During the year, the Group executed an option for a 250-year lease on a 19-hectare parcel of land in Teesside for an upfront payment of £1,858,712 (net of VAT receivable) and with an annual peppercorn lease payment of £0.01 per annum. The historical option payment costs were deducted from the final settlement amount. The Group also has certain contracts which contain a lease with terms of 12 months or less and contracts which contain a lease of low value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these. Leases that are short-term and low value amounted to $35,434 for the year ended 30 June 2021 (2020: $56,769). 14. EXPLORATION AND EVALUATION EXPENDITURE Movement in net carrying amount: Balance at beginning of year Additions on acquisition of PAM Foreign exchange movements Balance at 30 June Capitalised areas of interest Ngualla Rare Earth Project, Tanzania 15. INVESTMENTS Investment in listed shares – at fair value through profit or loss (Level 1) 2021 $ 2020 $ 59,419,382 - - 59,173,422 (4,946,485) 245,960 54,472,897 59,419,382 54,472,897 59,419,382 54,472,897 59,419,382 2021 $ 8,000 8,000 2020 $ 8,000 8,000 78 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 16. OTHER ASSESTS Teesside option payment 2021 $ - - 2020 $ 219,284 219,284 During the period, the Group executed an option for a 250-year lease on a 19 hectare parcel of land in Teesside for a rare earth refinery and separation plant. The historical option payment costs were deducted from the final settlement amount, which has been accounted for as a right-of-use asset under Note 13 of the consolidated financial statements. 17. TRADE AND OTHER PAYABLES Current Trade and other payables Ageing of payables Payable within 3 months Beyond 12 months 2021 $ 2020 $ 576,746 412,178 576,476 - 576,476 412,178 - 412,178 Payables are non-interest bearing, unsecured and are generally payable in 30-120 days. 18. PROVISIONS Employee benefits - leave entitlements 19. ROYALTY LIABILITY Non-current: ANRF Royalty Liability 2021 $ 2020 $ 28,433 242,936 2021 $ 2020 $ 5,686,663 5,857,433 5,686,663 5,857,433 Advance for future royalty – In July 2015 ANRF Royalty Company Limited (ANRF) and International Finance Corporation (IFC) advanced US$5,191,191 for a 2% Gross Sales Royalty from the Ngualla Rare Earth's project. Forms of security customary for an agreement of this type have been agreed and have been or are registered including asset level security given by PR NG Minerals Limited. The 2% Gross Sales Royalty is a life-of-mine/ life-of-refinery Royalty that will continue to be payable on revenues generated from the operation after the Royalty Advance of US$5,191,191 has been repaid. As the Group has yet to be granted the Special Mining Licence for the Ngualla project or made a Final Investment Decision, at this point in time, the recognition of a liability for its contingent consideration is not considered probable and hence no additional liability has been brought to account. On 6 August 2021, the Group announced that it had entered into a Royalty Repayment and Release Agreement with respect to the ANRF Royalty Liability, details of which are set out in Note 27. 79 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Movement in net carrying amount of ANRF Royalty Liability: Balance at beginning of year Additions on acquisition of PAM Gain on re-measurement Accretion of interest Foreign exchange movements Balance at 30 June 20. RESERVES 2021 $ 2020 $ 5,857,433 - - - 7,518,350 (1,735,665) 323,904 - (494,674) 74,748 5,686,663 5,857,433 At 30 June 2019 Share based payment made in 2020 Group’s share of associates FCTR Recycled to the profit or loss on derecognition of associate Exchange difference on translation of foreign operations At 30 June 2020 Share based payment made in 2021 Exchange difference on translation of foreign operations At 30 June 2021 Share based payment reserve $ 2,968,113 819,645 - - - Foreign currency translation reserve $ 3,049,287 - 503,253 Total $ 6,017,400 819,645 503,253 (3,764,892) (3,764,892) 40,792 40,792 3,787,758 (171,560) 3,616,198 856,325 - 856,325 - (4,483,550) (4,483,550) 4,644,083 (4,655,110) (11,027) Share based payment reserve – the reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for supply of goods and services. Foreign currency translation reserve – the reserve is used to recognise exchange differences arising from translation of foreign operations to the Australian dollar. 21. CONTRIBUTED EQUITY Balance at 30 June 2019 Placement @4c per share PAM Rollup consideration Placement @ 1.5c per share Equity issue costs Balance at 30 June 2020 8-Aug-19 12-Nov-19 14-Apr-20 Nos. 799,255,869 119,888,380 386,161,369 100,000,000 - 1,405,305,618 $ 77,223,630 4,795,534 16,604,938 1,500,000 (230,767) 99,893,335 Issue of shares for nil consideration on exercise of vested Performance Rights Shares issued in settlement of deferred directors fees and deferred executive remuneration @ $0.0342 Placement @3.2c per share SPP @3.2c per share 3-Jul-20 2,000,000 - 7-Aug-20 3,762,020 128,661 28-Oct-20 17-Nov-20 109,375,000 26,562,493 3,500,000 850,000 80 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Issue of shares for nil consideration on exercise of vested Performance Rights Shares issued in settlement of director fees at $0.063078 per Share Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares on settlement deed Issue of shares on exercise of unlisted options Issue of shares on settlement deed Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares on settlement deed Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares for nil consideration on exercise of vested performance rights Issue of shares on exercise of unlisted options Issue of shares for nil consideration on exercise of vested performance rights Shares issued in settlement of director fees at $0.0954 per share Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares on exercise of unlisted options Issue of shares for nil consideration on exercise of vested performance rights Issue of shares on exercise of unlisted options Equity issue costs Balance at 30 June 2021 Nos. $ 24-Nov-20 2,442,000 23-Dec-20 861,469 25-Jan-21 25-Jan-21 29-Jan-21 29-Jan-21 1-Feb-21 2-Feb-21 2-Feb-21 2-Feb-21 4-Feb-21 11-Feb-21 15-Feb-21 15-Feb-21 19-Feb-21 750,000 14,000,000 3,019,230 400,000 4,500,000 4,000,000 4,000,000 800,000 800,000 2,000,000 730,770 1,125,000 3,375,000 5-Mar-21 1,750,000 8-Mar-21 75,000 - 54,340 48,750 700,000 196,250 20,000 191,250 240,000 240,000 40,000 40,000 100,000 47,500 39,375 101,250 52,500 - 11-Mar-21 3,000,000 180,000 1-Apr-21 2,250,000 1-Apr-21 205,751 6-May-21 7-May-21 11,166,295 2,171,596 10-May-21 662,109 25-May-21 208,747 4-Jun-21 4,500,000 10-Jun-21 4,500,000 21-Jun-21 8,250,000 25-Jun-21 210,000 - 19,628 669,978 130,296 39,727 6,262 292,500 292,500 - 6,300 1,628,758,098 (402,672) 107,717,730 Ordinary shares have the right to receive dividends as declared, and in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid upon on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Options over ordinary shares At the end of the reporting period, there were 127,644,253 options (including performance rights) over unissued shares as follows: Options over Ordinary Shares Balance at 30 June 2020 Expired/ Lapsed/ Cancelled: Date of expiry/ exercise or issue Nos Status Exercise Price Expiry Date 242,794,419 81 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Options over Ordinary Shares Expired unexercised – PEKAI Vested Options Cancelled – PEKAI Unlisted options vesting subject to various performance milestones Cancelled – PEKAI Options vesting subject to various performance milestones Lapse of Unlisted PEKAI Options Lapse of Unlisted PEKAI Options Lapse of Unlisted PEKAI Options Expired unexercised - Unlisted PEKAI Options PEKAK Performance Rights lapsed on cessation of employment PEKAK Performance Rights lapsed on cessation of employment Expired unexercised - Unlisted options Cancelled on settlement deed - Unlisted options Cancelled on settlement deed - Unlisted options Cancelled on settlement deed - Unlisted options Cancelled – PEKAI Options vesting subject to various performance milestones Cancelled – PEKAI Options vesting subject to various performance milestones Performance Rights lapsed on cessation of employment Issued: Performance Rights as a Short Term Incentive employees. The Performance Rights will vest on achievement of performance milestones set by the Board Performance Rights as a Long Term Incentive to employees. The Performance Rights will vest on achievement of performance milestones set by the Board. Performance Rights issued under the Company’s Incentive Performance Rights Plan and with the approval of the Company’s shareholders given at the Annual General Meeting held on 21 December 2020. Exercised: Vested Performance Rights Date of expiry/ exercise or issue Nos Status Exercise Price Expiry Date 24-Nov-20 (5,994,419) $0.06 11-Nov-20 24-Nov-20 (5,000,000) $0.10 21-Jun-22 24-Nov-20 (15,000,000) $0.15 21-Jun-23 18-Dec-20 (3,000,000) $0.065 16-Jan-21 18-Dec-20 (1,500,000) $0.035 17-Jan-22 18-Dec-20 (11,000,000) $0.03 5-Mar-23 25-Jan-21 (2,250,000) $0.065 16-Jan-21 25-Jan-21 (4,020,000) 25-Jan-21 (7,600,000) - - 8-Sep-21 8-Sep-24 29-Jan-21 (5,750,000) $0.065 16-Jan-21 29-Jan-21 (9,675,000) $0.03 5-Mar-23 01-Feb-21 (750,000) $0.035 17-Jan-22 01-Feb-21 (7,250,000) $0.03 5-Mar-23 09-Mar-21 (3,000,000) $0.10 21-Jun-22 09-Mar-21 (5,000,000) $0.15 21-Jun-23 09-Mar-21 (925,000) (87,714,419) 08-Sep-20 7,400,000 Vested & Unvested - - 5-Feb-25 8-Sep-21 08-Sep-20 7,600,000 Unvested - 8-Sep-24 05-Feb-21 32,000,000 Unvested - 5-Feb-25 47,000,000 03-Jul-20 (2,000,000) - 5-Mar-21 82 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Options over Ordinary Shares Date of expiry/ exercise or issue Nos Status Exercise Price Expiry Date Vested PEKAK STI Performance Rights Unlisted PEKAI Options Unlisted PEKAI Options Unlisted PEKAI Options Unlisted PEKAI Options Unlisted PEKAI Options Unlisted PEKAI Options Unlisted PEKAI Options Unlisted PEKAI Options Unlisted PEKAI Options Unlisted PEKAI Options Listed PEKOD Options Vested PEKAK Performance Rights Unlisted PEKAI Options Vested PEKAK Performance Rights Unlisted PEKAI Options Unlisted PEKAI Options Unlisted PEKAI Options Listed PEKOD Options Unlisted PEKAI Options Unlisted PEKAI Options Vested Performance Rights Unlisted PEKAI Options Balance at 30 June 2021 24-Nov-20 (2,442,000) - 8-Sep-21 25-Jan-21 25-Jan-21 29-Jan-21 02-Feb-21 02-Feb-21 02-Feb-21 04-Feb-21 11-Feb-21 15-Feb-21 19-Feb-21 05-Mar-21 08-Mar-21 (750,000) (14,000,000) (400,000) (4,000,000) (4,000,000) (800,000) (800,000) (2,000,000) (1,125,000) (3,375,000) (1,750,000) (75,000) $0.065 $0.05 $0.05 $0.06 $0.06 $0.05 $0.05 $0.05 $0.035 $0.03 $0.03 - 16-Jan-21 21-Jun-21 21-Jun-21 27-Feb-21 11-May-21 21-Jun-21 21-Jun-21 21-Jun-21 17-Jan-22 5-Mar-23 14-Apr-21 5-Feb-25 11-Mar-21 (3,000,000) $0.06 11-May-21 01-Apr-21 (2,250,000) 06-May-21 07-May-21 10-May-21 25-May-21 04-Jun-21 10-Jun-21 21-Jun-21 25-Jun-21 (11,166,295) (2,171,596) (662,109) (208,747) (4,500,000) (4,500,000) (8,250,000) (210,000) (74,435,747) 127,644,253 - $0.06 $0.06 $0.06 $0.03 $0.065 $0.065 - $0.03 5-Feb-25 11-May-21 11-May-21 11-May-21 14-Apr-21 14-Jun-21 14-Jun-21 5-Feb-25 5-Mar-23 Vested & unvested $0.00 - $0.15 08/09/2021 - 05/02/2025 During the year 47,000,000 performance rights were issued to employees under the Performance Rights Plan’s approved at the Annual General Meeting held on 29 November 2017 and 21 December 2020. No options were issued under the EOP. During the year a total of 75,169,419 options and 12,545,000 performance rights expired, lapsed or were cancelled. Capital Management Policy The Group’s policy is to effectively manage its capital structure so that it would continue to operate as a going concern. The Group manages its contributed equity and reserves as part of its capital. The Group is not subject to any externally imposed capital requirements. As is similar with many other exploration companies, the operational requirements of the Group are funded through equity and debt raised in various tranches. The overall capital management policy of the Group remains unchanged and is consistent with prior years. 83 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 22. SHARE BASED PAYMENTS Employee share option plan The Group has an Incentive Employee Option Plan (EOP) for the granting of options to eligible participants which was approved by Shareholders at a General Meeting of the Company on 21 December 2020. During the financial year ended 30 June 2021, no options were issued under the EOP to executives and employees. Options granted during and as at the year ended 30 June 2021: Outstanding at 1 July 2020 Granted / Vested during the year: Exercised during the year Expired/ Lapsed/ Cancelled during the year Outstanding at 30 June 2021 Exercisable at 30 June 2021 ^WA (weighted average) Options granted during and as at the year ended 30 June 2020: Outstanding at 1 July 2019 Granted / Vested during the year: 12-Nov-2019 issue of $0.05 vested Unlisted options expiring 21-Jun-2021 12-Nov-2019 issue of $0.10 unvested Unlisted options expiring 21-Jun-20221 12-Nov-2019 issue of $0.15 unvested Unlisted options expiring 21-Jun-20232 11-Nov-2019 Issue of $0.06 vested Unlisted Options expiring 11-May-2021 18-Dec-2019 Issue of $0.06 vested Unlisted Options expiring 11-May-2021 11-Nov-2019 Issue of $0.06 vested Unlisted Options expiring 11-Nov-2020 14-Apr-2020 Issue of $0.03 vested PEKOD Listed Options expiring 14-Apr-2022 Exercised during the year Expired during the year Outstanding at 30 June 2020 Exercisable at 30 June 2020 ^WA (weighted average) Number WA Exercise Price^ Fair value per option 190,794,419 - 57,460,000) (75,169,419) 58,165,000 50,165,000 $0.0659 - - - $0.0441 $0.0302 - Number WA Exercise Price^ Fair value per option 123,800,000 $0.0701 2,000,000 $0.05 $0.0144 3,000,000 $0.10 $0.0111 5,000,000 $0.15 $0.0112 14,000,000 $0.06 $0.0115 7,000,000 $0.06 $0.0083 5,994,419 $0.06 $0.0083 38,000,000 $0.03 $0.0049 - (8,000,000) 190,794,419 154,794,419 - - $0.0659 $0.0436 1 The Unlisted Options exercisable at $0.10, expiring 21 June 2022 issued to Directors, vesting subject to continuous service and the Company either (a) entering into an agreement with a strategic partner for the development of its Ngualla Project; or (b) attracting $20 million worth of funding for FEED (Front End Engineering and Design) for the development of the Ngualla Project. 84 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 2 The Unlisted Options exercisable at $0.15, expiring 21 June 2023 issued to Directors, vesting subject to continuous service and the Company settling a funding package for the development and construction of the Ngualla Project. The volume weighted exercise price of options issued during the year was $nil (2020: $0.052). The weighted average remaining contractual life for share options outstanding at 30 June 2021 was 1.04 years (2020: 1.78 years). The weighted average fair value of options issued during the year was $nil per option (2020: $0.0076). Performance Rights Plan The Group has an Incentive Performance Rights Plan (PRP) for the granting of performance rights to eligible participants which was last approved by Shareholders at a General Meeting of the Company on 21 December 2020. 47,000,000 performance rights were issued during the year ended 30 June 2021 (2020: Nil). Performance rights granted during and as at the year ended 30 June 2021: Number Exercise Price Outstanding at 1 July 2020 2,000,000 Granted during the year: Performance Rights as a Short-Term Incentive employees. The Performance Rights will vest on achievement of performance milestones set by the Board Performance Rights as a Long-Term Incentive to employees. The Performance Rights will vest on achievement of performance milestones set by the Board Performance Rights issued under the Company’s Incentive Performance Rights Plan and with the approval of the Company’s shareholders given at the Annual General Meeting held on 21 December 2020 Expired/ Lapsed during the year Exercised during the year Outstanding at 30 June 2021 Exercisable at 30 June 2021 WA (weighted average) Performance rights granted during and as at the year ended 30 June 2020: 7,400,000 7,600,000 32,000,000 (12,545,000) (15,017,000) 21,438,000 - - - - - - - - Fair value per performance right $0.024 0.037 0.037 0.06 Outstanding at 1 July 2019 Expired during the year Outstanding at 30 June 2020 Exercisable at 30 June 2020 WA (weighted average) Fair value per performance right $0.024 Number Exercise Price 10,000,000 (8,000,000) 2,000,000 2,000,000 - - $0.00 $0.00 *Vest subject to achievement of performance criteria as determined by the Company’s Board. The volume weighted exercise price of rights issued during the year was $0.00 (2020: $0.00) 85 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT The weighted average remaining contractual life for rights outstanding at 30 June 2021 was 3.81 years (2020: 0.68 years) The weighted average fair value of rights issued during the year was $0.059 per right (2020: $nil) The options and performance rights have been valued using the Black-Scholes option pricing model with the following inputs: $0.037 0.75% 0% 77% $0.037 Options and performance rights granted during the year ended 30 June 2021: 8-Sep-2020 – unvested STI Performance Rights to vest on achievement of performance criteria by 8 Sep 2021 or the Performance Rights will lapse WA Share price on date of grant WA Risk-free interest rate Dividend yield Expected volatility Fair value per performance right 8-Sep-2020 – unvested LTI Performance Rights to vest on achievement of performance criteria by 8 Sep 2024 or the Performance Rights will lapse WA Share price on date of grant WA Risk-free interest rate Dividend yield Expected volatility Fair value per performance right 5-Feb-2021 unvested – Performance Rights to vest on achievement of performance criteria by 5 Feb 2025 or the Performance Rights will lapse WA Share price on date of grant WA Risk-free interest rate Dividend yield Expected volatility Fair value per performance right $0.037 0.75% 0% 77% $0.037 $0.06 0.75% 0% 77% $0.06 (WA weighted average) Options and performance rights granted during year ended 30 June 2020: 12-Nov-2019 issue of $0.05 vested Unlisted options expiring 21-Jun-2021 WA Share price on date of grant WA Risk-free interest rate Dividend yield Expected volatility Fair value per Option 12-Nov-2019 Unlisted unvested expiring 21-Jun-2022 WA Share price on date of grant WA Risk-free interest rate issue of $0.10 options $0.043 0.75% 0% 77% $0.0144 $0.043 0.75% 86 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT issue of $0.15 options Dividend yield Expected volatility Fair value per Option 12-Nov-2019 Unlisted unvested expiring 21-Jun-2023 WA Share price on date of grant WA Risk-free interest rate Dividend yield Expected volatility Fair value per Option Issue of $0.06 11-Nov-2019 vested Unlisted Options expiring 11-May-2021 WA Share price on date of grant WA Risk-free interest rate Dividend yield Expected volatility Fair value per Option Issue of $0.06 18-Dec-2019 vested Unlisted Options expiring 11-May-2021 WA Share price on date of grant WA Risk-free interest rate Dividend yield Expected volatility Fair value per Option 11-Nov-2019 Issue of $0.06 vested Unlisted Options expiring 11-Nov-2020 WA Share price on date of grant WA Risk-free interest rate Dividend yield Expected volatility Fair value per Option 14-Apr-2020 Issue of $0.03 vested PEKOD Listed Options expiring 14-Apr-2022 WA Share price on date of grant WA Risk-free interest rate Dividend yield Expected volatility Fair value per Option (WA weighted average) 0% 77% $0.0111 $0.043 0.75% 0% 77% $0.0112 $0.043 0.75% 0% 77% $0.0115 $0.038 0.75% 0% 77% $0.0083 $0.043 0.75% 0% 77% $0.0085 $0.018 0.25% 0% 77% $0.0049 The expected volatility reflects the assumption that historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the case. The value of options and performance rights granted are expensed over the vesting period. Included in share based payments expense of $856,325 (2020: $819,645) is $Nil (2020: $Nil) relating to the shares issued during year, the -$127,405* (2020: $830,828*) related to options granted during the year and prior year, and $983,730* (2020: -$11,183*) relating to performance rights granted in the prior year. * Includes write back of non-market based Options and Performance Rights expired unvested during the year. 87 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 23. CONTINGENCIES AND COMMITMENTS Lease commitments The Group is committed to an office lease for its Tanzanian office with the lease commitments until 28 February 2024. Up to 1 year 1 to 5 Years 2021 $ 2020 $ 12,425 20,708 33,133 17,505 - 17,505 The Group also has certain contracts which contain a lease with terms of 12 months or less and contracts which contain a lease of low value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these. Leases that are short-term and low value amounted to $35,434 for the year ended 30 June 2021 (2020: $56,769). Capital Commitments At 30 June 2021, the Group has no capital commitments. (2020: Nil). Contingencies At 30 June 2021, the Group had no contingencies (2020: Nil). 24. KEY MANAGEMENT PERSONNEL DISCLOSURE Salary and fees – short term benefits Non-monetary benefits Superannuation Share based payments^ Termination Payments 2021 $ 2020 $ 1,078,312 1,304,150 18,240 80,163 787,526 191,661 88,048 69,825 305,485 - 2,155,902 1,767,508 ^Includes the write back of the share-based payments previously recognised for options and performance rights that lapsed during the period. Loans to KMP’s No loans were made to KMP’s during the financial year (2020: Nil) Other transaction and balances with KMP’s During the year Steinepreis Paganin Lawyers and Consultants, a legal practice associated with Mr Jonathan Murray received $89,677 (2020: $139,723) as fees for the provision of legal advice. Balance outstanding at 30 June 2021 and included in trade creditors amounted to $1,183 (30 June 2020: $7,428). These costs have not been included in directors’ remuneration as these fees were not paid to individual directors in relation to the management of the affairs of the Company. All transactions were entered into on normal commercial terms. 88 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 25. GROUP STRUCTURE Parent and subsidiaries The parent and the ultimate parent entity of the Group is Peak Resources Limited, a company listed on the Australian Securities Exchange. The components of the Group are: Parent Peak Resources Limited Controlled entities PRL Pty Ltd Peak Hill Gold Mines Pty Ltd Redpalm Pty Ltd Pan African Exploration Limited Peak Resources (Tanzania) Limited Peak African Minerals Limited PR Ng Minerals Limited (Indirectly) Incorporation Ownership interest 2020 2021 Australia 100% 100% Australia Australia Australia Australia Tanzania Mauritius Tanzania 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - - Peak Technology Metals Limited United Kingdom Teesside Rare Earth Elements Limited (indirectly) United Kingdom Ngualla Group UK Limited (indirectly) United Kingdom 26. FINANCIAL INSTRUMENTS The financial instruments of the Group are (i) cash and cash equivalents, including other financial assets; (ii) trade and other receivables; (iii) investments, (iv) trade and other payables, v) royalty liability. The Group’s principal financial instruments are cash and short term deposits. The main purpose of these financial instruments is to finance the Group’s operations. It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. The financial instruments expose the group to certain risks. The nature and extent of such risks, and the management's risk management strategy are noted below. Fair value of financial instruments Cash and cash equivalents Trade and other receivables Other financial assets Investments Trade and other payables Royalty liability 2021 $ 2020 $ 2,680,367 2,546,021 732,455 - 8,000 31,962 30,000 8,000 (576,746) (412,178) (5,686,663) (5,857,433) The carrying amount of financial instruments closely approximate their fair value on account of the short maturity cycle except for royalty liability. The carrying amount of royalty liability approximates its fair values as it is subject to market rates (Level 2). 89 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Credit Risk The Group's credit risks arise from potential default of trade and other receivables, cash and cash equivalents and other financial assets. The maximum credit exposure is limited to the carrying amount of trade and other receivables of $732,455 (2020: $31,962) at 30 June 2021. As at 30 June 2021, the receivable balances consist primarily of GST credits. Management does not consider the GST receivable to be at risk of default as these are receivable from the Government agencies. Credit risk from balances with banks and financial instruments is mitigated by holding balances with banks with a high credit rating. The maximum exposure for cash and cash equivalents is shown below. There were no significant concentrations of credit risks. Liquidity risk The Group's liquidity risks arise from potential inability of the Group to meet its financial obligations as and when they fall due, generally due to shortage of cleared funds. The Group is exposed to liquidity risk on account of trade and other payables. The Group manages its liquidity risk through continuously monitoring the cleared funds position; and by utilising short term cash budgets. The contractual maturity analysis of the Group's financial instruments are noted below: 2021 2020 Up to 3 months $ > 3 months $ Total $ Up to 3 months $ > 3 months $ Total $ Financial liabilities Trade and other payables Royalty liability Total financial liabilities Financial assets Cash and cash equivalents Other financial assets Investments Trade and other receivables Total financial assets (576,746) - (576,746) (412,178) - (412,178) - (5,686,663) (5,686,663) - (5,857,433) (5,857,433) (576,746) (5,686,663) (6,263,409) (412,178) (5,857,433) (6,269,611) 2,680,367 - - - - 2,680,367 2,546,021 - 2,546,021 - 8,000 8,000 - - 30,000 30,000 8,000 8,000 732,455 - 732,455 31,962 - 31,962 3,412,822 8,000 3,420,822 2,577,983 38,000 2,615,983 Interest rate risk Interest rate risk is the risk that fair values and cash flows of the Group’s financial instruments will be affected by changes in the market interest rates. The Group’s cash and cash equivalents are impacted by interest rate risks. Trade and other receivables and payables have short maturities and are non-interest bearing. Management believes that the risk of interest rate movement would not have a material impact of the Group’s operations. Management does not closely monitor the interest rates offered on cash and cash equivalents as the Group’s primary objective is exploration of resources rather than earning interest income. The cash balances are invested at the prevailing short term market interest rates with credit worthy financial institutions. The sensitivity of the interest bearing financial instruments to a 1% change in market interest rate are noted below: 90 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Cash and cash equivalents Impact on profit and equity: +1% movement Impact on profit and equity: -1% movement 2021 $ 2020 $ 2,680,367 26,804 (26,804) 2,546,021 25,460 (25,460) Foreign currency risk The Group’s exposure to foreign currency price risk is limited to the USD denominated loans and royalty liability balances. At 30 June 2021 the Group had an outstanding balance of USD $5,191,191 (2020: USD $5,191,191). The Group will transfer cash and cash equivalents into foreign currency to meet short term expenditure obligations. The Group’s expenditure obligations in Tanzania are primarily in US dollars as a result the Group is exposed to fluctuations in the US dollar to Australian currency. These exposures are not subject to a hedging programme. The Board and management from time to time having regard to likely forward commitments review this policy. The following table demonstrate the sensitivity to a reasonably possible change in USD exchange rates, with all other variables held constant. The impact on the Group’s profit before tax and equity is due to changes in the fair value of the USD denominated loan balances. USD$ denominated Royalty liability balances in AU$ Impact on profit and equity: +5% movement in USD exchange rate Impact on profit and equity: -5% movement in USD exchange rate 2021 $ 5,686,663 284,333 (284,333) 2020 $ 5,857,433 292,872 (292,872) Commodity price risk The Group’s exposure to commodity price risk is minimal at this stage of the operation. Changes in liabilities arising from financing activities during the year ended 30 June 2021: 1-Jul-20 Cash flows $ $ 2021 Foreign exchange movement $ Other Movement 30-Jun-21 $ $ 5,857,433 - (494,674) 323,904 5,686,663 - (3,220,392) - 3,220,392 - 5,857,433 (3,220,392) (494,674) 3,544,296 5,686,663 Financial liabilities Royalty liability Lease liabilities Total liabilities from financing activities Changes in liabilities arising from financing activities during the year ended 30 June 2020: 1-Jul-19 Cash flows $ $ 2020 Foreign exchange movement $ Other Movement 30-Jun-20 $ $ 6,865,884 - 6,865,884 - - - - (6,865,884) - 74,748 5,782,685 5,857,433 74,748 (1,083,199) 5,857,433 Financial liabilities Current and Non-current interest bearing loans and borrowings Royalty Liability Total liabilities from financing activities 91 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 27. SUBSEQUENT EVENTS On 22 July 2021, the Cabinet of Ministers of the Government of Tanzania announced that it had approved Peak’s SML application, the final major regulatory approval required for the Ngualla project. The SML provides the Company with the exclusive right to conduct mining operations at Ngualla, with the licence covering an area of approximately 18.14km2. Peak will now work with the government to finalise an Economic Framework Agreement, Shareholder’s Agreement and other related documentation required as part of a formal grant of the SML by the Minister of Minerals. Following firm commitments from investors, on 6 August 2021 the Company announced commencement of a two-tranche equity placement to sophisticated, professional and other exempt investors pursuant to section 708 of the Corporations Act 2001. The Placement, totalling A$30.0 million at a price of A$0.09 per share, consists of: - Tranche One placement comprising of 226.8 million shares (A$20.4 million) issued on 13 August 2021 which utilised Peak’s capacity to issue up to 15% new capital without shareholder approval per Listing Rule 7.1; and - Tranche Two placement comprising of a further 106.4 million shares (A$9.6 million), subject to shareholder approval at the General Meeting called for 28 September 2021. - Additionally, as a way for existing shareholders to increase their investment in the Company at the same price as the placement, Peak also announced a SPP of up to A$4.0 million subject to shareholder approval at the General Meeting called for 28 September 2021. The net proceeds of the Placement and SPP will be used by Peak to progress the development of the Ngualla Project and the Teesside Refinery (including offtake and financing arrangements), expanding the Company’s technical and marketing team, and the repayment of the ANRF Royalty Facility. Contemporaneous to the placement and SPP announced on 6 August 2021, Peak also announced that it had entered into a Royalty Repayment and Release Agreement (“Royalty Agreement) with respect to the repayment of a 2.0% life of mine gross revenue royalty financing facility made available by ANRF Royalty Company Limited (“ANRF”), a company associated with Peak substantial shareholder Appian Pinnacle Holdco Limited. Under the Royalty Agreement, Peak will make a payment to ANRF of US$10.0 million (gross of withholding tax), which comprises the repayment of principal of US$5.2 million and an accrued interest payment of US$4.8 million. The Royalty Agreement is subject to shareholder approval at the General Meeting called for 28 September 2021 pursuant to ASX listing Rule 10.1. Other than the matters referred to above there were no other events that have a material impact on the financial statements or operations of the Group and Company. 92 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT 28. PARENT ENTITY DISCLOSURE The following details information related to the parent entity, Peak Resources Limited, at 30 June 2021. The information presented here has been prepared using consistent accounting policies as presented in Note 2. Financial position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Equity Contributed equity Share based payment reserve Accumulated losses Total equity Financial performance Loss for the year Other comprehensive income Total comprehensive loss for the year 2021 $ 2020 $ 3,347,560 46,208,048 2,551,299 40,997,981 49,555,608 43,549,280 420,005 7,834,740 8,254,745 573,547 7,580,226 8,153,773 41,300,863 35,395,507 108,033,483 100,209,089 4,707,567 3,851,242 (71,440,187) (68,664,824) 41,300,863 35,395,507 (2,775,363) (3,606,640) - - (2,775,363) (3,606,640) Peak Resources Limited had no commitments to purchase property, plant and equipment or contingent liabilities at 30 June 2021 (2020: None). 93 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT DIRECTORS’ DECLARATION In accordance with a resolution of the directors of Peak Resources Limited, I state that: In the opinion of the Directors: (a) (b) (c) Subject to the matters set out in Note 2(a) to the Financial Statements there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; the attached financial statements are in compliance with International Financial Reporting Standards, as stated in note 2 to the financial statements; the attached financial statements and notes thereto for the financial year ended 30 June 2021 are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position as at 30 June 2021 and performance of the Group for the year ended on that date; (d) The Directors have been given the declarations required by section 295A of the Corporations Act 2001 Signed in accordance with a resolution of the Directors made pursuant to s295(5) of the Corporations Act 2001. On behalf of the Directors Tony Pearson Non-Executive Chair Sydney, 15 September 2021 94 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT ASX ADDITIONAL INFORMATION Quoted security distribution The distribution of members and their holdings of quoted equity securities in the company as at 8 October 2021 were as follows: Number Held as at 4 October 2021 Class of Equity Securities PEK Fully Paid Ordinary Shares 1-1,000 1,001 - 5,000 5,001 – 10,000 10,001 - 100,000 100,001 and over Total 174 353 518 2,140 1,382 4,567 There were 633 holders with less than a marketable parcel of fully paid shares. Number Held as at 8 October 2021 Class of Equity Securities PEKOD $0.03 Options (Expire 14 April 2022) 1-1,000 1,001 - 5,000 5,001 – 10,000 10,001 - 100,000 100,001 and over Total Substantial Security holders - 2 2 7 68 79 The substantial shareholder listed in the Company’s register as at 8 October 2021 was: Holder Appian Pinnacle Holdco Limited Number of shares 435,878,376 Percentage of issued capital 21.93% Unquoted Securities Class of Equity Security $0.035 options expiring 17 January 2022 Unvested $0.10 options expiring 21 June 2022 Unvested $0.15 options expiring 21 June 2023 Unvested Performance Rights expiring 5 February 2025 20,500,000 $0.03 options expiring 5 March 2023 8,490,000 Number 2,000,000 3,000,000 5,000,000 Number of Security Holders 6 1 1 3 6 Names of persons holding greater than 20% of a class of unquoted securities not issued under an employee incentive scheme: Class of Equity Security Unvested $0.10 options expiring 21 June 2022 Number Holder 3,000,000 Ciao! Punto Pty Limited ATF Ciao! Punto Family Trust Ciao! Punto Pty Limited ATF Ciao! Punto Family Trust Unvested $0.15 options expiring 21 June 2023 5,000,000 Voting Rights Ordinary Shares In accordance with the Company's Constitution, on a show of hands every member present in person or by proxy or attorney or duly authorised representative has one vote. On a poll every member present in person or by proxy or attorney or duly authorised representative has one vote for every fully paid ordinary share held. Restricted Securities As at 30 June 2021, there were no restricted securities. 95 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Twenty largest security holders The names of the twenty largest holdings of quoted equity securities as at 8 October 2021 are as follows: PEK Fully Paid Ordinary Shares Name APPIAN PINNACLE HOLDCO LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMINEES PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED DELPHI UNTERNEHMENSBERATUNG AKTIENGESELLSCHAFT CS THIRD NOMINEES PTY LIMITED CITICORP NOMINEES PTY LIMITED SPARTA AG SAIL AHEAD PTY LTD NATIONAL NOMINEES LIMITED BUSHELL NOMINEES PTY LTD ACN 161 604 315 PTY LTD ONE MANAGED INVESTMENT FUNDS LIMITED SAMBOLD PTY LTD ASHABIA PTY LTD CRX SECURITIES PTY LIMITED BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM PINNACLE SUPERANNUATION PTY LIMITED BNP PARIBAS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 MEURER INVESTMENTS PTY LTD TOTAL TOP 20 TOTAL ON ISSUE PEKOD Options Name NINETY THREE PTY LTD ACN 161 604 315 PTY LTD 924 PTY LTD SHAW AND PARTNERS LIMITED SAIL AHEAD PTY LTD JBBM PTY LTD MRS DANIELLA WEBER CASTLELYONS PTY LTD BOSTON FIRST CAPITAL PTY LTD PINNACLE SUPERANNUATION PTY LIMITED MR DAVID JAMES STEWART MR RICHARD SMITH ASHABIA PTY LTD MISS JACLYN MARIE LEMKE KRUGER PARK PTY LTD MR ALISTAIR JAMES MCKENZIE SEVENSPEED PTY LTD DUNN & HORNE PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED FIVE T CAPITAL PTY LTD BONOMINI ENTERPRISES PTY LTD EASTERN UNION INVESTMENTS PTY LTD MR MICHAEL DIMITRIOS PRASSAS WISEVEST PTY LTD ACN 161 604 315 PTY LTD Number Held % Held 435,878,376 62,968,462 49,378,619 41,159,651 31,250,000 27,699,375 27,407,811 27,060,419 24,000,000 22,600,868 20,000,000 20,000,000 16,333,335 16,325,000 15,650,000 15,437,500 15,146,469 14,000,000 13,212,090 13,067,930 13,000,000 921,575,905 1,987,867,461 Number Held 13,000,000 13,000,000 5,200,000 5,000,000 4,000,000 3,133,333 3,000,000 2,500,000 2,037,090 2,000,000 1,872,877 1,666,667 1,500,000 1,500,000 1,166,667 1,166,000 1,000,000 1,000,000 1,000,000 750,000 750,000 720,000 666,667 666,666 530,000 21.93 3.17 2.48 2.07 1.57 1.39 1.38 1.36 1.21 1.14 1.01 1.01 0.82 0.82 0.79 0.78 0.76 0.70 0.66 0.66 0.65 46.36 100.00 % Held 15.94 15.94 6.38 6.13 4.91 3.84 3.68 3.07 2.50 2.45 2.30 2.04 1.84 1.84 1.43 1.43 1.23 1.23 1.23 0.92 0.92 0.88 0.82 0.82 0.65 96 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT TOTAL TOP 20 TOTAL PEKOD ON ISSUE 68,825,967 81,541,253 84.41 100.00 Note: Information in the above schedule is based on data recorded in the Company’s Share Register on the date noted. A listed holder may hold shareholdings or hold an associated shareholding in addition to those listed above. The data provided is solely attributable to a HIN or SRN particular to that holding and as such may not necessarily represent the total of all holdings of the shareholder noted or their associates. Corporate Governance Statement The Company has adopted the recommendations of the ASX Corporate Governance Council’s Principles and Recommendations (Third Edition) in regard to the Corporate Governance Disclosures and provides disclosure of the at: http://www.peakresources.com.au/corporate-governance/ Governance Company’s Company’s Statement Corporate website the on 97 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT TENEMENT SCHEDULE AND RESERVES AND RESOURCES Project Tenement % Status Arrangement/Comment Tanzanian Projects Mikuwo PL 9157/2013 100 Granted Mlingi Ngualla PL 10897/2016 100 Granted SML 00601/2017 100 Approved Application; Formal Grant Pending Held by 100% Tanzanian subsidiary company PR NG Minerals Ltd Held by 100% Tanzanian subsidiary company PR NG Minerals Ltd Held by 100% Tanzanian subsidiary company PR NG Minerals Ltd ORE RESERVES AND MINERAL RESOURCES CORPORATE GOVERNANCE AND INTERNAL CONTROLS Peak ensures that the Ore Reserve and Mineral Resources estimates are subject to appropriate governance and internal controls which are reviewed periodically in line with the expansion and development of the Company. The annual review date is 30 June. The Mineral Resource estimate and Ore Reserve were derived by independent consulting organisations whose staff are highly competent and professional. Competent Persons named by the company are Members or Fellows of the Australian Institute of Mining and Metallurgy and/or the Australian Institute of Geoscientists and qualify as Competent Persons as defined in the JORC Code. The Mineral Resource consultant carried out rigorous reviews of the quality of the database and geological models prior to estimation. Internal technical reviews are carried out systematically by both of the independent consulting organisations. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements and that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person's findings are presented have not been materially modified from the original market announcements. THERE HAS BEEN NO CHANGE TO ORE RESERVES AND MINERAL RESOURCES WITH PREVIOUS YEAR As announced on the 25 August 2021, a Bankable Feasibility Study Update has been commissioned by Peak for the Ngualla Rare Earth Project and the Teesside Refinery Project. At this time, it is not known whether the Bankable Feasibility Study Update will result in any update to the Ore Reserve or Mineral Resources. Ore Reserve estimates The Ore Reserve estimate was completed by Orelogy Consulting Pty Ltd and released to the ASX on 12 April 2017 titled "Ngualla Rare Earth Project - Updated Ore Reserve". The release includes a detailed summary of the supporting project assumptions and data. 98 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Table 1: Classification of Ore Reserve estimates for the Weathered Bastnaesite Zone at Ngualla. JORC Category Proved Probable Total ORE RESERVE AS AT 30 JUNE 2021 Ore Tonnes (millions) 17.0 1.5 18.5 REO % Contained REO Tonnes 4.78 5.10 4.80 813,000 74,000 887,000 See Table 2 for the breakdown of individual REO’s. Reported according to the JORC 2012 Code and Guidelines. Table 2: Relative components of individual rare earth oxides (including yttrium) as a percentage of total REO for the Ngualla Project Ore Reserve estimate (refer to Table 1) RARE EARTH OXIDES Lanthanum Cerium REO GRADE (%) % OF TOTAL REO Proved Probable All Proved Probable All 1.318 1.418 1.326 27.59 27.80 27.61 2.305 2.456 2.317 48.25 48.15 48.24 Praseodymium 0.228 0.243 0.229 4.77 4.77 4.77 Neodymium Samarium Europium Gadolinium Terbium Dysprosium Holmium Erbium Thulium Ytterbium Lutetium Yttrium 0.788 0.838 0.792 16.49 16.43 16.49 0.077 0.082 0.077 1.61 1.61 1.61 0.014 0.015 0.014 0.30 0.28 0.30 0.029 0.031 0.030 0.62 0.60 0.62 0.002 0.002 0.002 0.05 0.05 0.05 0.004 0.004 0.004 0.07 0.07 0.07 0.000 0.000 0.000 0.01 0.01 0.01 0.001 0.002 0.002 0.03 0.03 0.03 0.000 0.000 0.000 0.00 0.00 0.00 0.001 0.001 0.001 0.000 0.000 0.000 0.01 0.00 0.01 0.01 0.00 0.00 0.010 0.010 0.010 0.20 0.19 0.20 Total REO 4.78 5.10 4.80 100.00 100.00 100.00 Values may not balance due to rounding to 0.01% Ore Reserves The information in the announcement that relates to Ore Reserve estimates and estimated mine operating costs is based on information compiled by Mr Ryan Locke, a Competent Person who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Locke is a Principal Planner and is employed by Orelogy Pty Ltd, an independent consultant to Peak Resources. Mr Locke has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken 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. Ryan Locke consents to the inclusion in the report of the maters based on his information in the form and context in which it appears. 99 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Mineral Resource estimates The information in this statement that relates to the Mineral Resource estimates is based on work conducted by Rod Brown of SRK Consulting (Australasia) Pty Ltd, and the work conducted by Peak Resources, which SRK has reviewed. Rod Brown takes responsibility for the Mineral Resource estimate. Rod Brown is a Member of The Australian Institute of Mining and Metallurgy and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration, and to the activities undertaken, to qualify as Competent Person in terms of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code, 2012 edition).Rod Brown consents to the inclusion of such information in this report in the form and context in which it appears. Mineral Resource estimates The Mineral Resource as at 30 June 2020 is detailed in the ASX announcement titled ‘Mineral Resource estimate re-stated to include barite’ of 2 March 2017. The estimates were reported according to the JORC 2012 Code and Guidelines and were completed by Rod Brown of SRK Consulting (Australasia) Pty Ltd. Table 3: Classification of All Mineral Resources for the Ngualla Rare Earth Project at a 1.0% REO cut-off grade. Lower Cut- off Grade JORC Category Ngualla All Mineral Resources 1.0% REO Measured Indicated Inferred Total MINERAL RESOURCE AS AT 30 JUNE 2021 Ore Tonnes (millions) 86.1 112.6 15.7 214.4 REO % 2.61 1.81 2.15 2.15 Contained REO Tonnes 2,250,000 2,040,000 340,000 4,620,000 BaSO4 % 20.2 13.8 17.6 16.6 * REO (%) includes all the lanthanide elements plus yttrium oxide. See Tables 5 for breakdown of individual REO’s. Figures above may not sum due to rounding. The number of significant figures does not impy an added level of precision. The Weathered Bastnaesite Zone Mineral Resource estimate summarised below is a subset and contained within the All Mineral Resources reported in Table 3 above and is detailed in the same ASX announcements as stated above. Table 4: Classification of Mineral Resources for the Weathered Bastnaesite Zone mineralisation at a 1.0% and 3.0% REO cut-off grades. Lower Cut-off Grade JORC Category Ore Tonnes (millions) REO % Contained REO Tonnes BaSO4 % MINERAL RESOURCE AS AT 30 JUNE 2021 Ngualla Weathered Bastnaesite Zone 1.0% REO 3.0% REO Measured Indicated Inferred Total Measured Indicated Inferred Total 18.9 1.9 0.5 21.3 17.9 1.7 0.4 19.9 4.75 4.85 4.43 4.75 4.88 5.14 4.84 4.90 900,000 90,000 20,000 1,010,000 870,000 90,000 20,000 980,000 37.8 38.3 31.5 37.7 38.6 39.3 35.4 38.6 * REO (%) includes all the lanthanide elements plus yttrium oxide. See Table 5 for breakdown of individual REO’s. The Weathered Bastnaesite Zone Mineral Resource is contained within an is a subset of the Total All Ngualla Project Mineral Resource at a 1% REO cut-off grade in Table 3 above. Figures above may not sum due to rounding. The number of significant figures does not impy an added level of precision. 100 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT Table 5: Relative components of individual rare earth element oxides (including yttrium) as a percentage of total REO for 2018 Total Ngualla +1% REO, Weathered Bastnaesite Zone +1% REO and Weathered Bastnaesite Zone +3% REO and Mineral Resources summarised in Tables 3 and 4. NGUALLA 2020 TOTAL MINERAL RESOURCE NGUALLA 2020 WEATHERED BASTNAESITE ZONE RESOURCE NGUALLA 2020 WEATHERED BASTNAESITE ZONE RESOURCE 1% REO 1% REO 3% REO REO grade (%) % of total REO REO grade (%) % of total REO REO grade (%) % of total REO 0.587 27.25 1.310 1.039 48.23 2.293 27.58 48.27 0.104 0.348 0.036 0.007 0.016 0.001 0.003 0.000 0.001 0.000 0.001 0.000 0.010 2.15 4.81 16.2 1.66 0.34 0.75 0.07 0.16 0.02 0.06 0.00 0.04 0.00 0.47 100 0.227 0.784 0.076 0.014 0.029 0.002 0.004 0.000 0.002 0.000 0.001 0.000 0.010 4.75 4.77 16.5 1.60 0.29 0.61 0.05 0.07 0.01 0.03 0.00 0.01 0.00 0.20 100 1.353 2.364 0.234 0.806 0.078 0.014 0.030 0.002 0.004 0.000 0.002 0.000 0.001 0.000 0.010 4.90 27.63 48.27 4.77 16.5 1.60 0.29 0.61 0.05 0.08 0.01 0.03 0.00 0.01 0.00 0.20 100 OXIDE Lanthanum Cerium La2O3 CeO2 Praseodymium Pr6O11 Neodymium Nd2O3 Samarium Europium Sm2O3 Eu2O3 Gadolinium Gd2O3 Terbium Tb4O7 Dysprosium Dy2O3 Holmium Erbium Thulium Ytterbium Lutetium Yttrium Total Ho2O3 Er2O3 Tm2O3 Yb2O3 Lu2O3 Y2O3 * Figures may not sum due to rounding. 101 PEAK RESOURCES LIMITED – ANNUAL FINANCIAL REPORT CORPORATE DIRECTORY PEAK RESOURCES LIMITED ABN:72 112 546 700 DIRECTORS Tony Pearson Bardin Davis Abdullah Mwinyi Giselle Collins Rebecca Morgan Non-Executive Chair Managing Director Non-Executive Director Non-Executive Director Non-Executive Director COMPANY SECRETARY Philip Rundell REGISTERED OFFICE Mezzanine Floor 190 St Georges Terrace Perth WA 6000 SOLICITORS Corrs Chambers Westgarth (Australia) Level 6 Brookfield Place Tower 2 123 St Georges Terrace Perth WA 6000 Clyde & Co/Ako Law (Tanzania) 11th Floor, Jubilee Towers Ohio Street, Dar es Salaam White & Case Level 32 525 Collins Street Melbourne VIC 3000 AUDITORS Ernst and Young 11 Mounts Bay Road Perth WA 6000 SHARE REGISTRY Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 CONTACT DETAILS Website: www.peakresources.com.au Email: info@peakresources.com.au Telephone: Facsimile: (08) 9200 5360 (08) 9226 3831 STOCK EXCHANGE LISTING Australian Securities Exchange Limited Home Exchange: Perth, Western Australia Code: PEK 102 

Continue reading text version or see original annual report in PDF format above