Prospect Resources Limited
Annual Report 2023

Plain-text annual report

ANNUAL REPORT 2023 Corporate Directory DIRECTORS Mark Wheatley Gerry Fahey Zed Rusike HeNian Chen Sam Hosack Gaurav Gupta SECRETARY Ian Goldberg and Lee Tamplin PRINCIPAL & REGISTERED OFFICE Level 2, 33 Richardson Street West Perth, WA 6005 Telephone: (+61) 405 524 960 Email: info@prospectresources.com.au AUDITORS Stantons International Audit and Consulting Pty Ltd Level 2 40 Kings Park Road West Perth WA 6005 SHARE REGISTRY Automic Pty Ltd Level 5 126 Phillip Street Sydney NSW 2000 Telephone: 1300 288 664 Email: hello@automic.com.au Investor Portal: investor.automic.com.au ASX CODE Shares – PSC LEGAL REPRESENTATIVES King & Wood Mallesons Level 30, QV1 Building 250 St Georges Terrace Perth WA 6000 ACN: 124 354 329 Table of Contents Corporate Directory Overview Chairperson’s Report Review of Operations Directors’ Report Directors’ Report Directors’ Declaration Financial Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Consolidated Financial Statements Auditor’s Independence Declaration Independent Auditor’s Report ASX Additional Information 2 4 16 29 31 32 33 34 35 66 67 71 Annual Report 2023 1. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportChairperson's Report Dear Shareholders, The 2023 financial year has been transformational and seen Prospect successfully return $443.8 million to shareholders from the sale of the Arcadia project and start to use the $34 million retained to progressively advance its strategy of building another leading battery and electrification minerals focused explorer and developer. Over this period, the business has acquired strategic interests in the Kesya Rare Earths Project in Zambia, and the Omaruru Lithium Project in Namibia, adding to its existing 90% ownership of the Step Aside Lithium Project in Zimbabwe. This southern African portfolio of future-facing metals exploration assets offers an excellent opportunity for discovery and a good base from which to grow shareholder value by developing or originating a new flag ship project. Kesya is an undeniably exciting proposition. We have acquired the rights to a 51% interest in the project through execution of an option agreement with Antler Gold Inc. Well located in southern Zambia, Kesya hosts excellent infrastructure and a potential world- class rare earth enriched carbonatite system that has historically returned significant values of neodymium and praseodymium. In short, the project offers outstanding prospectivity to deliver a significant new rare earths discovery. A maiden diamond drilling programme has been designed and will commence on the satisfaction of all conditions precedent. At Omaruru, we have established relationships and a presence in Namibia and are initially earning-in to tenure containing over 60 highly visible, outcropping LCT pegmatites, located within 10 km of Lepidico’s Karibib Lithium Project. Our maiden drilling programme at Omaruru in early CY2023 returned encouraging, near-surface, shallow-dipping, high-grade lithium mineralisation at the Brockmans prospect and confirmed the presence of a thick zone of pegmatite containing petalite-lepidolite at the Karlsbrunn deposit. A second phase of drilling was completed during June 2023, and was focused on follow-up extensional drilling at Brockmans, as well as targeted depth extension of the Karlsbrunn prospect and the testing of several high- potential geochemical anomaly targets along strike from mapped pegmatites. The past year has also seen systematic exploration of our Step Aside Lithium Project, located only 8km to the 2. Leading the way in the battery revolution north of Huayou Cobalt’s Arcadia Lithium Mine (now producing). Phase 1 and 2 drilling successfully extended existing mineralised pegmatites on the tenure. The Phase 3 programme (in progress) has two key objectives: further strike and depth extension testing of Pegmatites B, D and E; and scout exploratory drilling in areas with identified strong, coherent, lithium-in-soil anomalism. It is important to note that we are only partway through executing on our planned strategy. A key objective for the current financial year is to convert an existing project to, or originate a flag ship project that offers a strong, medium-term development proposition. We remain open-minded on the domicile and underlying minerals exposure of this asset, being southern African focused but not exclusively so. To that end, the team continues to thoroughly review the significant pipeline of advanced battery and electrification mineral targets being presented. We are well resourced, technically and commercially, to identify, assess, invest and advance projects that have the potential to meet our development scale and grade criteria. I would like to thank all our people and key consulting partners from around the world for their efforts over the past twelve months. I would also like to thank you, our shareholders, for your strong support over this time. You can rest assured that the entire Prospect team remains resolutely focused on delivering sustainable, value-accretive outcomes for all shareholders. Stay safe and well. Yours faithfully Mark Wheatley Non-Executive Chairperson 21 September 2023 3. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Review of Operations 4. Highlights Highlights during and subsequent to the end of the year were as follows: (i) Retirement of Mr Dev Shetty as a non-executive director. (j) Phase 2 drilling approved and commenced at the Step Aside tenement. (k) New lithium discovery at Omaruru. Exploratory Phase 1 RC drilling programme returned assays outlining a new, near-surface, shallow dipping discovery of lithium mineralisation in the southern Brockmans zone and confirmed historical drilling results at Karlsbrunn. (l) Option secured to earn 51% interest in highly prospective Zambian REE-rich carbonatite with Antler Gold Inc. The Kesya tenure encompasses a Large-Scale Exploration Licence (LEL) application, where previous geological mapping and surface sampling has identified a large, rare earth-enriched carbonatite intrusion. (m) Stage 2 diamond drilling at Step Aside generates more high-grade intersection extensions to the lithium footprint. (a) The establishment of the Company’s strategy to be a battery and electrification minerals focused explorer and developer. With a highly liquid balance sheet and continuation of the management team, the Company is well resourced to deliver on this strategy. (b) Distributed approx. 95% of the net Huayou transaction proceeds to shareholders via a cash distribution of A$0.96 per share (A$443.8 million), with approximately A$34 million cash retained to advance Prospect’s strategy to be a battery and electrification metals explorer and developer focussed on sub-Saharan Africa. (c) Resignation as a Director of Mr Harry Greaves who played a pivotal role throughout Prospect’s journey from the discovery through to the eventual sale of the Arcadia Lithium project for the sum of US$377.8 million. (d) Managing Director and CEO, Sam Hosack, relocated back to Harare for an expected period of 18 to 24 months, where he can more easily lead and oversee the company’s growing number of project activities in Africa. Experienced CFO, Ian Goldberg, continued to be based in Perth to lead that office. (e) The Company applied and received an ATO Class ruling in respect to the capital return component of the distribution which assured this would not be recognised as assessable income for our shareholders. (f) Prospect completes the acquisition of Omaruru Lithium Project in Namibia and exploration commenced. (g) Phase one drilling commenced at the Omaruru Lithium Project. (h) The appointment of a new Director, Mr Gaurav Gupta, as a non-executive director. Mr Gupta manages a Monetary Authority of a Singapore registered family office with high-growth investment holdings across the mineral and biotech industries. Investments including a major holding in Prospect Resources through Eagle Eye Asset Holdings Pte Limited (Eagle Eye). Mr Gupta is being appointed to the Prospect Board as a nominee of Eagle Eye. 5. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Arcadia Lithium Project Huayou Cobalt transaction Distribution On 21 December 2021, Prospect signed a binding agreement with leading new energy lithium-ion battery material producer, Huayou Cobalt, for the sale of its 87% interest in the Arcadia Lithium Project. The transaction comprised cash consideration of approximately US$377.8 million. Upon completion of the transaction in April 2022, and after payment of US$26.9 million in Zimbabwean capital gains tax and US$8 million to Sinomine in relation to the termination of the offtake agreement between Prospect and Sinomine, Prospect received net sale proceeds of US$342.9 million (A$465.6 million). The Prospect Board determined to distribute the vast majority of the Arcadia transaction proceeds to shareholders via a A$0.96 per share distribution. This distribution comprised an unfranked dividend component of A$0.79 per share (Special Dividend) and a capital reduction component of A$0.17 per share (Capital Reduction). The transaction with Huayou was a landmark moment for the Company and the result of extensive efforts over multiple years at Arcadia. The impact for shareholders was significant and can be best illustrated in the graphic below showing the tremendous value returned to shareholders over time. +1,500% PSC share price appreciation over this period 6. Project Generation and Business Development Post its sale of the Arcadia Project, Prospect’s strategy is to be a battery and electrification minerals dedicated explorer and developer, with a focus on the sub-Saharan African region. With the Arcadia transaction now complete, business development and new project generation are the top priorities. The Board believes that, with approximately A$34 million of residual cash post distribution, zero debt and continuity of the current management team, that Prospect is very well placed to deliver on this strategy. The Prospect exploration team continues to develop a pipeline of prospective battery and electrification mineral asset targets. The success and publicity associated with the Arcadia transaction has resulted in an increase in opportunities being presented to Prospect. Project generation activities are advancing well, and the Company is well capitalised to identify, assess, invest and advance projects that have the potential to meet scale and grade criteria. 7. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Current Projects – Zimbabwe Step Aside Lithium Project (Zimbabwe); Prospect’s 90%-owned Step Aside Lithium Project is located within the Archaean Harare Greenstone Belt, approximately 35 km east of Zimbabwe’s capital city Harare, with the single claim (claim number ME19948BM) covering approximately 100 hectares (see Figure 1). Step Aside is 8 km north of the Arcadia Lithium Project, which was discovered by Prospect and holds a Mineral Resource estimate of 72.7 million tonnes grading 1.02% Li2O. The Arcadia asset was sold to Huayou Cobalt by Prospect in mid-2022 for approximately US$377.8 million cash. The Step Aside Project consists of a folded sequence of meta-sediments of the Gwebi and Mapfeni Members, of the Passford Formation. These meta-sediments are intruded by north trending pegmatites, dolerites and quartz veins of the Mashonaland Suite, which make up the youngest rocks found within the Harare Greenstone Belt. Broadly, six visible mineralised pegmatites (denoted “A” to “F”) have been identified within meta-dolerite host rocks at Step Aside. Individual pegmatites, geologically mapped at surface, are all generally parallel to one another, striking roughly north-south with dips of 60-75˚ to the west geologically mapped at surface. Pegmatite A on the eastern side and Pegmatite D to the west are the widest, measuring 5-15m thick and 4-20m thick, respectively. The strike lengths of the A, B, C, D, E and F pegmatite outcrops at surface, are between 50m and 120m long (see Figure 2). Observations made previously by Prospect during drilling at Arcadia show that several parallel narrow pegmatites can coalesce into thicker pegmatites down dip, indicating the potential that parallel pegmatites outcropping at Step Aside could cojoin to form a comprehensive, lithium mineralised pegmatite system at depth. Bifurcating pegmatites have also been noted from drilling at Step Aside, which might also indicate emplacement of the pegmatite deposits during a period of active emplacement of the pegmatite deposits during a period of active faulting in the region (the Mashonganyika Fault zone). Figure 1: Locality Map of Step Aside Lithium Project, 8km north of Arcadia 8. Completion of Phase 2 Diamond Drilling Programme High-grade lithium identified from promising assay results On 1 May 2023, Prospect announced the completion of the Phase 2 diamond drilling programme, comprising a total of 20 drill holes for approximately 2,221 meters, targeting strike and dip extensions of Pegmatites A, B, D, E and F. Prospect received promising Phase 2 assay results which generated encouraging extensional intersections of high- grade mineralisation across the target pegmatites (see Figure 3). The Phase 2 programme followed on from the successful Phase 1 maiden programme of mixed RC and diamond drilling completed last year (refer Prospect ASX Announcement dated 20 October 2022), which outlined extensive, consistent, steep dipping, spodumene- dominated lithium mineralisation in all pegmatites targeted. The goal of the second phase programme was to extend the defined lithium mineralisation at Step Aside both along strike and down dip – which was successfully achieved. Pegmatite D has been extended along strike and down dip, Pegmatite B has thickened at depth and Pegmatite E has generated significant drill intersections of high- grade lithium mineralisation. All these deposits demand significant follow-up drilling in the next phase of exploration at Step Aside. These results are complemented by coherent ‘blind’ lithium anomalies in recent regional soil geochemical sampling programmes. Figure 2: Drill hole collar plan for Step Aside with mineralised lithium pegmatite outcrops 9. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Figure 3: Cross section through Step Aside Project deposits looking north (8040615mN) Figure 4: Cross section through the Pegmatite E deposit looking north (8040785mN) Pegmatite D Best results returned for Pegmatite E included: Pegmatite D was targeted by six diamond drill holes during the Phase 2 programme. All holes intersected lithium mineralisation in the targeted positions. Drilling confirmed that the pegmatite dips at between 60° to 75° to the west, steeper than was mapped at surface (40°-45°). Mineralisation has now been identified over a lateral extent of 160m strike and is open both down dip and along strike to the south. Best results returned for Pegmatite D during the Phase 2 drilling included: • • • • • 5.96m @ 1.08% Li2O from 100.27m (CDD014); 5.17m @ 1.13% Li2O from 120.83m (CDD021); 2.89m @ 1.57% Li2O from 120.63m (CDD030); 5.13m @ 0.85% Li2O from 52.4m (CDD015); and 1.41m @ 1.46% Li2O from 138.0m (CDD029). Additional drilling for Pegmatite D is being designed, and the area south of CDD029 has yet to be targeted. Recent regional soil geochemistry in that area shows coherent and anomalous lithium in surface sampling and therefore, a potential extension of the defined mineralisation in that general direction along strike. Pegmatite E Five diamond drill holes targeted Pegmatite E in the Phase 2 programme, which is located at the far north-eastern end of the Step Aside licence. Whilst drill holes CDD019 and CDD023 are now interpreted to have been drilled too far to the west of the interpreted southerly strike of the deposit, the remaining three holes generated multiple intersections of moderate to wide zones of high-grade lithium mineralisation, that in places exceeded 1.5% Li2O, and in the case of CDD031, exceeded 2.5% Li2O. The Pegmatite E deposits are complex, bifurcating in places, but the overall tenor of the lithium grades are very favourable and located close to surface. In addition, the dip of the mineralised zones defined, appears to be shallower than elsewhere at Step Aside. • • • • 6.28m @ 1.09% Li2O from 67.52m (CDD031), including 1.14m @ 2.63% Li2O from 70.55m; 3.49m @ 1.59% Li2O from 67.96m (CDD025); 3.82m @ 1.04% Li2O from 55.66m (CDD025); and 3.09m @ 1.01% Li2O from 26.63m (CDD027). Follow up drilling as part of the Phase 3 drilling programme will target the Pegmatite E system further to the south and east (to infill the gaps missed by CDD019 and CDD023) and the north, where strong drilling intersections and anomalous lithium-in-soil geochemical anomalies indicate additional prospectivity. Figures 4 – 5 show a simple cross section and long section through the Pegmatite E system with the associated drilling intersections. Pegmatite B The Phase 1 drilling programme at Step Aside returned shallow, but relatively modest, narrow intersections of lower grade lithium mineralisation from two RC holes completed directly west of the outcrop for Pegmatite B (refer Prospect ASX Announcement dated 20 October 2022). These holes returned 3m @ 0.74% Li2O from 37m (CRC005) and 3m @ 0.93% Li2O from 22m (CRC006) respectively. A third hole (CRC007) from the Phase 1 programme was drilled too far to the east and missed the potential northern extension of Pegmatite B. The Phase 2 programme stepped the drilling back under the initial intersections, with very pleasing results returned from both diamond holes completed. Results returned for Pegmatite B were: • • 5.96m @ 1.02% Li2O from 57.27m (CDD026); and 5.13m @ 0.34% Li2O from 82.0m (CDD016). The widths of these two intersections are very encouraging, showing an apparent thickening of the pegmatite body with depth, compared to the Phase 1 RC drilling results, and returning a strong tenor intercept within CDD026. Figure 6 shows a long section through Pegmatite B and new high-grade intersection in CDD026. 10. Figure 5: Cross section through the Pegmatite E deposit looking east (331709mE) Figure 6: Cross section through the Pegmatite B deposit looking east (331925mE) Pegmatite F Geochemical Soil Sampling Nine holes in the Phase 2 programme targeted the Pegmatite F system, directly west of Pegmatite D, with four of these targeting both deposits. Pegmatite F was not targeted during the 2022 Phase 1 drilling campaign. Whilst the average lithium grade returned from the drilling of Pegmatite F has been in line with the other deposits evaluated at Step Aside, the intersections are narrower and the deposit appears to bifurcate to the north. However, this deposit is interpreted to remain open to the south. Significant intersections returned from Pegmatite F included: • • 1.74m @ 1.42% Li2O from 52.7m (CDD020); 2.00m @ 1.17% Li2O from 33.0m (CDD022); and • 0.87m @ 0.91% Li2O from 34.2m and 1.11m @ 0.83% Li2O from 38.28m (CDD030). Pegmatite F is at the western extremity of the lithium-rich pegmatite swarm defined at Step Aside to date. However, lithium-in-soil geochemical sampling indicates that it may yet further develop and thicken to the south, perhaps even coalescing with Pegmatite D, based on current interpretations. Prospect has also received a full set of lithium assay results from its geochemical soil sampling programme undertaken across the Step Aside tenement. These results have strongly indicated the presence of additional lithium mineralisation to the south of the Pegmatite D and F outcrops, and potentially Pegmatite B, and north of Pegmatite E (see Figure 7 for representation of the geochemical soil sampling results). A coherent, wide, lithium-in-soil anomaly of >200 ppm Li extends for at least another 200m south of the Pegmatite D and F outcrops and is interpreted to represent a “blind” mineralised extension of these deposits undercover. Similarly, a relatively strong anomaly presents up to 150m south of Pegmatite B. The anomaly north of Pegmatite E appears to stretch to the northern limit of the current tenement holding. All these areas represent excellent walk- up drilling targets for the next phase of exploratory work at Step Aside, based on the strength and extent of the lithium soil anomalies and the lack of any subsurface drill testing having taken place in those areas previously. Figure 7: Geochemical soil sampling results showing prospective north-south corridor and areas of lithium prospectivity 11. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Phase 3 drilling programme commenced The excellent diamond drilling results returned from the Phase 2 programme at Step Aside, in addition to the generation of potential southerly extensions to the deposits at Pegmatite B, D and F from the lithium-in-soil geochemical sampling work, indicate that the high-grade spodumene mineralisation defined to date, could extend much further both along strike and down dip. The Phase 3 program has two key objectives: • • Strike and depth extension testing of the defined Pegmatites B, D and E; and Scout exploratory drilling south of the Pegmatite B and D/F deposits in areas with strong, coherent, lithium-in- soil geochemical anomalism (refer Prospect ASX release dated 25 May 2023). The Phase 3 program is planned to comprise 4,000 - 5,000m of diamond drilling and be completed during Q4 2023. Omaruru Lithium Project (Namibia); 20% interest, earning to 40%, and potentially up to 85% PSC The Omaruru Lithium Project (“Omaruru”), comprising a single Exploration Prospecting Licence EPL 5533 tenement, is centred on the village of Wilhelmstal, east of Karibib in Namibia and covers 175 square kilometres. The tenement is situated near several mining developments, including Osino’s Twin Hills Gold Project 20 km to the northwest and Lepidico’s Karibib Lithium Project, located 10 km to the southwest. EPL 5533 contains 60 visible outcropping LCT pegmatites, with historical artisanal workings for gemstones common throughout the tenement and significant prospectivity for the identification of further lithium-enriched deposits occurring below cover in the region. Prospect held a 20% interest in Omaruru at the start of the June Quarter 2023, via its equivalent shareholding in Richwing Exploration (Pty) Ltd (Richwing), which is 80%-owned by Osino Resources Corp. (OSI.TSXV). Prospect is currently earning a further 20% interest in Richwing (and thus Omaruru) via an investment of US$1m over a 12-month period (refer Prospect ASX Announcement dated 29 September 2022). Upon completion of the Phase 1 earn- in, Prospect will hold a 40% stake in Richwing, and thus the Omaruru Project. The initial Phase 1 RC drilling program at Omaruru was completed on 14 February 2023. That program involved the drilling of 22 holes for 2,056 metres and also involved initial geophysical and geochemical exploration activities along with a Ground Penetrating Radar (GPR) survey, airborne DTM survey and geochemical soil sampling. The Company completed its detailed exploratory soil geochemical sampling over eight separate grids. This work targeted strike extensions of mapped lithium mineralisation across the licence, including to the northeast of Karlsbrunn, northeast and southwest of Brockmans, southwest of Spirit, southwest of Hillside, southwest of Petalite and adjacent to Bergers prospect. Prospect collected a 50kg bulk sample of identified Figure 1: Location of the Omaruru Lithium Project tenement in Namibia 12. Prospect can then earn a further 11% interest (taking it to majority 51% ownership) via the expenditure of a further US$560,000 on exploration at Omaruru over the following 12 months. This expanded phase of the RC drilling programme is planned to comprise about 24 RC drillholes for a total of approximately 2,000 metres drilled. All assays are expected to be returned during Q3 2023. Kesya Rare Earths Project (Namibia); right to earn up to 51% PSC The Kesya Rare Earths Project (Kesya REE Project, Kesya or the Project) comprises a single Large-Scale Exploration Licence (LEL) application covering just over 1,053 hectares. It is located near the town of Kafue in southern Zambia, which is approximately 90 km via a sealed road from the Zambian capital, Lusaka. lithium mineralisation from the Karlsbrunn deposit which underwent early-stage metallurgical test work and evaluation in South Africa. In addition, in-situ adit sampling was undertaken underground at Karlsbrunn, returning extensive and consistent horizontal intersections of ore grade lithium mineralisation, principally as lepidolite (see ASX announcement dated 26 April 2023). Drilling recommenced at Omaruru Lithium Project On 13 June 2023, Prospect recommenced its Phase 1 RC drilling at Omaruru, with a programme focused on follow-up extensional drilling at the Brockmans prospect. Thick, near-surface, shallow-dipping, higher-grade lithium mineralisation was returned at Brockmans (see ASX announcement dated 28 March 2023), which required follow up work. The expanded Phase 1 programme also encompassed targeted depth extension drilling at the main Karlsbrunn deposit. The programme also tested (via first-pass, short- hole, exploratory scout drilling) several high-potential geochemical soil anomaly targets along strike from mapped pegmatites in the region (see ASX announcement dated 26 April 2023). Completion of the expanded Phase 1 RC drilling programme is expected to result in the satisfaction of Prospect’s initial earn-in to a 40% interest in Omaruru. Subsequent to the completion of this initial earn-in, Figure 1: Location Map for the Kesya REE Project in Zambia Previous geological mapping and surface sampling has identified a large, rare earth-enriched carbonatite intrusion. Antler Gold Inc. undertook two mapping and sampling campaigns at Kesya in 2021, which involved reconnaissance work across the carbonatite complex and the collection of 51 rock chip samples of surface materials identified as being part of the intrusive system. The rock chip samples proved to be strongly and consistently mineralised with REE, with an average of 1,280 ppm (0.13%) total rare earth oxide (TREO) content, peaking at 6,559 ppm (0.66%) TREO. Encouragingly, these chip samples also show a consistently high content of neodymium oxide and praseodymium oxide – key primary materials in the manufacture of strong permanent magnets for powerful motors, used in such devices as large, wind turbines, increasingly utilised in the global renewable energy sector. Neodymium and praseodymium oxides average 29% of the TREO content (basket) of the rock chip samples collected from Kesya (Figure 2). 13. Figure 2: Subset area of the Omaruru Project showing current mapped extent of LCT pegmatites OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023the right to earn a 51% interest in Kesya. Under the Option Agreement, Prospect can earn a call option to acquire a 51% interest in Kesya under a two-phased earn-in arrangement totalling US$3.05 million, which includes consideration payments to Antler and in-ground project expenditure. Prospect disbursed an initial cash payment of US$50,000 to Antler on signing. Following satisfaction of the conditions precedent under Phase 1, Prospect will pay Antler a further US$100,000 in cash, and commits to spend US$350,000 on the Project within one year (subject to certain extensions permitted under the agreement). Prospect will also pay Antler US$500,000 in Prospect scrip at the completion of Phase 1 (the value of the scrip will be set at the price of Prospect shares as at the time of signing, based on previous 10-day VWAP). After completion of Phase 1, Prospect can, if it wishes, elect to proceed to Phase 2 or terminate the Option Agreement (and in this case Prospect will hold no interest in Kesya). If Prospect proceeds to Phase 2, it will pay Antler a further US$150,000 in cash and US$500,000 in Prospect scrip (the value of the scrip will be set at the price of Prospect shares as at the time of election to proceed to Phase 2, based on previous 10-day VWAP), and it will have the right, but not the obligation, to spend a further US$750,000 on Kesya within one year from completion of Phase 1 (subject to certain extensions permitted under the agreement). Completion of Phase 2 will see Prospect obtain a call option to acquire 51% of shares in Antler Exploration Zambia Limited (which will hold a 100% interest in Kesya) if Prospect elects to exercise the option within 30 days after completion of Phase 2 it must make a final payment to Antler of US$150,000 cash and US$500,000 in Prospect scrip (the value of the scrip will be set at the price of Prospect shares as at the time of the exercise of the call option, based on previous 10-day VWAP). Prospect will consult with Antler in relation to the work programme and budget but will ultimately determine and manage all exploration activities in relation to the Project. Upon completion of the acquisition, Antler Exploration Zambia Limited will be governed by a shareholders agreement. Prospect and Antler have agreed on the key principles of the Shareholder Agreement, with a full form Shareholder Agreement to be entered into in due course. Under the proposed Shareholders Agreement, each of Prospect and Antler will grant each other a pre-emptive right in relation to the shares it holds in Antler Exploration Zambia Limited. Further development funds are to be contributed by both parties on a pro-rata basis. If a party does not contribute its pro rata share, its shareholding will be diluted via a prescribed formula. Neither party can be diluted below a 15% interest, from which point such interest shall be free-carried through to the completion of a JORC-Code reportable or NI 43-101 compliant Feasibility Study. Figure 2: Average grades of individual REOs from rock sampling at Kesya Figure 3: Map of Kesya Tenement and rock chip sample results showing TREO% Option Agreement with Antler On 15 May 2023, Prospect announced it had grown its battery minerals presence in sub-Saharan Africa after executing an Option Agreement with Antler Exploration Zambia Limited, being a subsidiary of Antler Gold Inc. (ANTL.TSXV) (Antler), pursuant to which, subject to satisfaction of conditions precedent, Prospect will have 14. Proposed Exploration Programme Prospect has designed a first-pass diamond drilling programme at the Project to evaluate the continuity of the identified surface REE mineralisation to depth. Subject to satisfaction of conditions precedent, Prospect proposes that the first phase of exploration at Kesya should be to prioritise establishing suitable access into the Project region and to facilitate development and construction of pads for scout drilling programmes over higher grade REE mineralisation noted from surface sampling. The current work plan is to complete 20 drill holes for approximately 1,500 metres of diamond drilling (see Figure 4), supported by a suitable portable drilling rig (or similar), pending all environmental and statutory approvals. Figure 4: Location Map for the Kesya REE Project with proposed diamond drill target areas 15. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Directors' Report 16. Directors' ReportThe Directors of Prospect Resources Limited (“the Company”) submit hereby the annual report of the Company and its subsidiaries, (together the “Consolidated Entity” or “Group” or “Prospect”) for the financial year ended 30 June 2023. In order to comply with the provisions of the Corporations Act 2001, the Directors’ Report as follows: ENVIRONMENTAL REGULATIONS The Group is aware of its environmental obligations with regards to its exploration and development activities and ensures that it complies with all regulations when carrying out exploration and development work. The names of the Company’s directors and officers in office during year and until the date of this report are as below. Directors and officers were in office for this entire period unless otherwise stated: Name Particulars Mark Wheatley Non-Executive Director and Chairperson Duncan (Harry) Greaves (resigned 6 September 2022) Executive Director Sam Hosack Gerry Fahey Managing Director Non-Executive Director Zivanayi (Zed) Rusike Non-Executive Director Dev Shetty (resigned 23 January 2023) HeNian Chen (Meng Sun as alternate) Gaurav Gupta (appointed 23 January 2023) Non-Executive Director Non-Executive Director Non-Executive Director Ian Goldberg Chief Financial Officer and Joint Company Secretary Lee Tamplin Joint Company Secretary PRINCIPAL ACTIVITY The principal activity of the Group is exploration, evaluation and development of mineral resources. REVIEW OF OPERATIONS AND RESULTS The Group has recognised an overall loss after tax of $5,556,000 (2022: profit after tax $397,507,000). The profit last year was driven primarily by the sale of the Arcadia project. There was no similar scale assets disposed during the year. As at the date of this report there are 462,259,462 shares on issue. Additional information on the operations and financial position of the Group is set out in the Review of Operations. SIGNIFICANT CHANGES IN STATE OF AFFAIRS The review of operations section in the annual report sets out a number of matters that have had a significant effect on the state of affairs of the consolidated entity. Other than those matters, there were no significant changes in the state of affairs of the consolidated entity during the financial year. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR Other than as stated below, no matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years: • • • In July 2023, the Group entered into a shareholder agreement that reduced its ownership in Eagle Lithium Resources (Private) Ltd, the subsidiary entity that holds the Step Aside exploration project, by 10% through the issue of ordinary shares to three minority shareholders based in Zimbabwe as a consideration for the land access and future support of the exploration activities and local community. In August 2023, Osino Resources Corp has confirmed completion of the Earn-in 1 Expenditure and approved the issue of the additional 20% interest in the Omaruru Lithium Project. In August 2023, a total of 1,540,000 performance rights have lapsed which equates to the ratio of the 2023 short term incentive performance hurdles that have not been met. DIVIDENDS AND CAPITAL RETURNS An unfranked dividend of $0.79 per share and capital return of $0.17 per share were declared at 30 June 2022 and paid in the current year. No dividends or capital return have been declared, provided for or paid in respect of the financial year ended 30 June 2023. LIKELY DEVELOPMENTS / STRATEGIES AND PROSPECTS The Group’s future strategy is to be a battery and electrification minerals focused explorer and developer. INFORMATION ON DIRECTORS Mark Wheatley (Non-Executive Director and Chairman) appointed 8 January 2021; Independent Experience and expertise Mr Wheatley is an experienced listed resources company director including roles as CEO, MD, non-executive director and chairman since 2003.  He has operated on the ASX, TSX, JSE and NASDAQ across the gold, base and battery metals sectors at all stages of the mining life cycle within companies with markets caps ranging from $5 million to $7 billion.  His executive experience began as an undergraduate trainee at a major miner and development 17. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Directors' Reportacross a number of disciplines, then investment banking before moving to a large gold miner and later into the junior mining sector as MD/CEO in uranium and gold.  Mr Wheatley is well known to institutional investors and has served as a nominee director for a leading private equity group across a number of their listed and private portfolio companies. He brings strong corporate experience and in depth understanding of equity markets and has led successful turnaround stories and several highly accretive merger and acquisition transactions. Mr Wheatley holds a Bachelor of Engineering (Chemical Engineering Hons 1) from the University of New South Wales and a Master of Business Administration from West Virginia University. Other current listed directorships Peninsula Energy Limited (appointed 26 April 2016) Former listed directorships in the last three years Ora Banda Mining Ltd (resigned 28 September 2022) Special responsibilities Chairman and member of the Remuneration and Nominations Committee Interest in shares, options, and rights of the Company at the date of this report 12,490,854 ordinary shares, 3,000,000 options, and 1,300,000 performance rights Duncan (Harry) Greaves (Executive Director) appointed 18 July 2013, resigned 6 September 2022 Experience and expertise Mr Greaves is a fourth generation Zimbabwean. He holds a B.Sc (agriculture) from the University of Natal (in South Africa). He is the Managing Director of Farvic Consolidated Mines (Pvt) Ltd which incorporates Mixnote Investments (Pvt) Ltd operating the Beatrice Mine. Other current listed directorships None Former listed directorships in the last three years None Special responsibilities None Interest in shares, options, and rights of the Company at the date of this report Interest in shares, options, and rights of the Company at the date of resignation 3,000,000 ordinary shares, 1,600,000 options, and Nil performance rights 5,517,954 ordinary shares, Nil options, and Nil performance rights Sam Hosack (Managing Director) appointed 14 July 2018 Gerry Fahey (Non-Executive Director) appointed 15 July 2013 Experience and expertise Experience and expertise Mr Hosack is a third generation Zimbabwean. He holds a Bachelors Engineering Degree (Hons) from Essex University in UK, MBA from Ashcroft Business School (UK) and respective professional registrations. He has hands on experience in the delivery of large-scale mining, power and port projects to market, as well as management of their operations. For the 12 years prior to commencing at Prospect Resources, he was employed by First Quantum Minerals Ltd, primarily in the Project delivery team, where in his final role he project managed the building of a port (coal offloading and copper loading), 120km 230kV transmission line and a 300MW coal fired power station for the Minera Panama Project in Panama. His leadership and mining operations experience in North and Southern Africa, Europe, Australia and Central America will be a critical success factor in building Prospect into a diversified mining developer. Other current listed directorships None Mr Fahey has over 40 years’ experience in both the international and local minerals industry. He is a specialist in mining geology, mine development and training and worked for 10 years as Chief Geologist Mining for Delta Gold where he was actively involved in Zimbabwe with the development of the Eureka, Chaka, Globe and Phoenix gold mines and the following Australian gold projects: Kanowna Belle, Golden Feather, Sunrise and Wallaby. Gerry is currently a Director of Focus Minerals Ltd and a former Director of CSA Global Pty Ltd, Modun Resources Limited and a former member of the Joint Ore Reserve Committee (JORC). Other listed current directorships Focus Minerals Ltd (appointed 20 April 2011) Battery Age Minerals Ltd (appointed 2 February 2023) Former listed directorships in the last three years None Special responsibilities Former listed directorships in the last three years Member of the Remuneration and Nominations Committee None Special responsibilities None 18. Interest in shares, options, and rights of the Company at the date of this report 1,325,000 ordinary shares, 1,000,000 options, and Nil performance rights Directors' ReportZivanayi (Zed) Rusike (Non-Executive Director) appointed 26 September 2013 HeNian Chen (Non-Executive Director) appointed 13 November 2017 Experience and expertise Experience and expertise Mr Rusike has a Bachelor of Accountancy Degree (Birmingham) and is a resident of Zimbabwe. He was previously the Managing Director of United Builders Merchants before being promoted to Group Managing Director for Radar Holdings Limited, then, a large, quoted company on the Zimbabwe Stock Exchange. He retired from the Radar Group of companies to pursue personal interests and currently sits on the boards of ZB Capital Limited, Dulux Paints Limited and Halsted Brothers (Pvt) Limited. Mr Rusike is a former President of the Confederation of Zimbabwe Industries (2000 – 2001). Other current listed directorships None Former listed directorships in the last three years None Special responsibilities Member of the Remuneration and Nominations Committee, and Audit and Risk Committee Interest in shares, options, and rights of the Company at the date of this report 3,040,374 ordinary shares, 1,000,000 options, and Nil performance rights Dev Shetty (Non-Executive Director) appointed 18 December 2020, resigned 23 January 2023 Experience and expertise Mr Shetty is a highly experienced mining executive and qualified chartered accountant. He is currently President and CEO of Fura Gems Inc. He was previously a director and group Chief Operating Officer of Gemfields plc (LSE: GEM), and also held roles in a private-equity firm. Mr Chen has served as the Chairman of Changshu Yuhua Property Co. Ltd since 2003 and has served as the Deputy Chairman of Afore New Energy Technology (Shanghai) Co. Ltd since 2007. Other current listed directorships None Former listed directorships in the last three years None Special responsibilities Member of the Remuneration and Nominations Committee, and Audit and Risk Committee Interest in shares, options, and rights of the Company at the date of this report 6,913,744 ordinary shares, 1,000,000 options, and Nil performance rights Gaurav Gupta (Non-Executive Director) appointed 23 January 2023 Experience and expertise Mr Gupta has over 25 years’ experience in international trade and is a qualified Chartered Accountant. He holds a Bachelor of Commerce Degree from the University of Delhi. He also manages high-growth investment holdings across the mineral and biotech industries. Within the mining sector, these investments encompass base and precious metals, coloured gemstones, and the broader Electric Vehicle (EV) supply chain, including a major holding in Prospect Resources through Eagle Eye Asset Holdings Pte Limited (Eagle Eye). Other current listed directorships None Other current listed directorships Former listed directorships in the last three years None None Former listed directorships in the last three years Special responsibilities None Member of the Audit and Risk Committee Special responsibilities Member of the Audit and Risk committee Interest in shares, options, and rights of the Company at the date of resignation 741,039 ordinary shares, Nil options, and Nil performance rights Interest in shares, options, and rights of the Company at the date of this report Nil ordinary shares, options, or performance rights Company Secretary Mr Ian Goldberg and Mr Lee Tamplin were appointed joint company secretaries on 8 March 2021. Mr Goldberg is the Company’s Chief Financial Officer and Mr Tamplin is an employee of Automic Group and is currently the company secretary of several other listed companies. 19. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Directors' ReportMEETINGS OF DIRECTORS The number of Board and Committee meetings of the Company’s board held during the year ended 30 June 2023 that each Director was eligible to attend, and the number of meetings attended by each Director were: Number of Meetings Board Audit & Risk Eligible to attend Attended Eligible to attend Attended Remuneration & Nomination Eligible to attend Attended 7 7 1 7 7 4 7 3 7 7 1 6 7 3 7 3 - - - - 2 1 2 1 - - - - 2 1 2 1 2 - - 2 2 - 2 - 2 - - 1 2 - 2 - Director Mark Wheatley Sam Hosack Harry Greaves Gerry Fahey Zed Rusike Dev Shetty HeNian Chen (or Meng Sun) Gaurav Gupta REMUNERATION REPORT (AUDITED) 1) Principles used to determine the nature The Remuneration Report is set out under the following main headings: (1) Principles used to determine the nature and amount of remuneration; (2) Details of remuneration; (3) Service agreements; and (4) Share-based compensation. The information provided in this Remuneration Report has been audited as required by Section 308(3C) of the Corporations Act 2001. This report details the nature and amount of remuneration for each director and executive of Prospect Resources Limited. The information provided in the remuneration report includes remuneration disclosures that are audited as required by the Corporations Act 2001 and its regulations. For the purposes of this report, Key Management Personnel of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company. For the purposes of this report, the term ‘executive’ includes those key management personnel who are not directors of the parent company. and amount of remuneration It is the Group’s objective to provide maximum stakeholder benefit from the retention of a high quality board and executives by remunerating directors and executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving the objective, the Board links the nature and amount of executive director’s emoluments to the Group’s financial and operational performance. The intended outcomes of this remuneration structure are: • Retention and motivation of directors and executives • Performance rewards to allow directors and executives to share the rewards of the success of the Group. The remuneration of an executive director will be decided by the Board. In determining competitive remuneration rates the Board reviews local and international trends among comparative companies and the industry generally. It also examines terms and conditions for any options issued. During the year, external consultants were used for determining remuneration. The maximum remuneration of non-executive directors is the subject of shareholder resolution in accordance with the Group’s Constitution, and the Corporations Act 2001 as applicable and is set at $500,000. The appointment of non- executive director remuneration within that maximum amount will be made by the Board having regard to the development of the company and benchmarking of fees paid to peer group companies. 20. Directors' ReportREMUNERATION REPORT (AUDITED) (Continued) Group Performance, Shareholder Wealth and Key Management Personnel Remuneration The Board may award additional remuneration to non- executive directors called upon to perform extra services or make special exertions on behalf of the Group. There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive directors. All equity-based remuneration paid to directors and executives is valued at the cost to the Group and expensed. Options are valued using the Black-Scholes methodology. Performance Based Remuneration The Board may pay bonuses to executive directors and executives at its discretion. The issue of options and performance rights to directors and executives is to encourage the alignment of personal and shareholder returns. The intention of this program is to align the objectives of directors/executives with that of the business and shareholders. In addition, all directors and executives are encouraged to hold shares in the Company. The Group is currently undertaking exploration and development activities and does not expect to be undertaking profitable operations (other than by way of material asset sales) until sometime after the successful commercialisation, production and sales of commodities from one or more of its projects. Accordingly, the Board does not consider earnings during the current and previous four financial years when determining, and in relation to, the nature and amount of remuneration of Key Management Personnel. The remuneration policy has been tailored to maximise the commonality of goals between shareholders, directors, and executives. The method applied in achieving this aim to date is to issue options and performance rights to directors and executives to encourage the alignment of personal and shareholder interests while also allowing cash based compensation to be moderated until operating cashflow is achieved. The Group believes this policy will be the most effective in increasing shareholder wealth. Performance of the Group The table below sets out summary information about the consolidated entity’s earnings and movements in shareholder wealth for the financial year ended 30 June 2023 and prior. Revenue Net loss before tax Gain / (loss) from discontinued operations 30 June 2023 30 June 2022 30 June 2021 30 June 2020 30 June 2019 $’000 825 (5,556) - $’000 1,405 (17,882) 415,389 $’000 442 (2,509) (1,236) $’000 369 $’000 3,320 (4,607) (5,722) - - Net (loss) / profit after tax (5,556) 397,507 (3,745) (4,607) (5,753) Share price at beginning of year (cents) Share price at end of year (cents) Dividends paid (cents) Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 30 June 2023 30 June 2022 30 June 2021 30 June 2020 30 June 2019 97.0 16.0 79.0 (1.19) 21.0 97.0 - 7.2 21.0 - 22.5 7.2 - 35.0 22.5 - (4.29) (1.06) (1.79) (3.52) (1.19) (4.20) (1.06) (1.79) (3.52) 21. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Directors' ReportREMUNERATION REPORT (AUDITED) (Continued) Remuneration of Key Management Personnel The following persons were identified as Key Management Personnel of Prospect Resources Limited during the financial year: Name Mark Wheatley Sam Hosack Role Director Director Particulars Non-Executive Director and Chairperson Managing Director Duncan (Harry) Greaves Director Executive Executive Director (until 6 September 2022) Consultant (from 1 September 2022) Gerry Fahey Director Non-Executive Director Zivanayi (Zed) Rusike Director Non-Executive Director Dev Shetty Director Non-Executive Director (until 23 January 2023) HeNian Chen / Meng Sun Director Non-Executive Director Gaurav Gupta Director Non-Executive Director (from 23 January 2023) Ian Goldberg Executive Chief Financial Officer and Joint Company Secretary David Broomfield Executive Business Development Manager 22. Directors' ReportREMUNERATION REPORT (AUDITED) (Continued) 2) Details of remuneration SHORT TERM POST EMPLOYMENT SHARE BASED PAYMENTS OTHER(ii) Total  2023 Salary & Salary Fees Bonus(iv) Sacrifice Superannuation Rights(iv) Options(v) Leave provision movements Performance related $ $ $ $ $ $ $ % Non-Executive Directors M Wheatley 79,276 G Fahey Z Rusike D Shetty H Chen(i) G Gupta 32,579 36,000 21,000 32,579 15,900 Executive Directors H Greaves(iii) 41,667 S Hosack 328,620 - - - - - - - - Other Key Management Personnel I Goldberg 274,708 H Greaves(iii) 208,333 - - D Broomfield 224,444 60,938 Total 1,295,106 60,938 - - - - - - - - - - - - 8,324 3,421 - - 3,421 - - - - - - - - - 84,422 52,764 52,764 - 52,764 - - - - - - - - - 172,022 88,764 88,764 21,000 88,764 15,900 41,667 21,380 111,478 81,188 (31,367) 511,299 25,292 44,318 31,066 (947) 374,437 - 37,500 26,406 - 272,239 23,567 - 23,299 16,160 348,408 85,405 193,296 404,673 (16,154) 2,023,264 0% 0% 0% 0% 0% 0% 0% 38% 20% 23% 24% (i) (ii) (iii) (iv) (v) Mr Chen fees were paid or are payable to his alternate director, Ms Sun. Other represents movement of the annual leave and long service leave provisions. Mr Greaves has resigned from his executive director role effective 6 September 2022. He continues to work closely with the Company through a consultancy arrangement. The consulting agreement commenced on 1 September 2023 and shall continue until terminated by either party on three months notice or shorter period if termination has reasons. His agreed remuneration is $250,000 per annum and subject to review at each anniversary. The short term incentives (STI) during the year were through either cash bonus or performance rights granted to relevant executive directors and other key management personnel. These were subjected to the satisfaction of targets as defined by the company’s annual scorecard which is based on both exploration and corporate targets and approval by the board of directors. At yearend the performance was assessed and 65% was deemed achieved. This was formally approved by the board on 10 August 2023. The cash bonus becomes payable at the date of approval for the first half and the other half will be payable 12 months thereafter provided the personnel remains employed by the Group. For the performance rights, 50% will vest on 7 October 2023 and the other 50% by 12 months thereafter. The total expense recognised during the year is based on the actual incentives that will eventually vest. These options were part of the long term incentives (LTI). The options for executive directors and management will vest on 7 October 2025 and are subject to two performance hurdles such as (a) the Company’s underlying share price exceeding $0.25 per share for a continuous period of 30 days during a 3 year period from the grant date and (b) remaining in employment of the Group 3 years after grant date. The options for the non-executive directors vest evenly on 7 October 2023, 7 October 2024, and 7 October 2025 and requires they remain directors of the Group at the end of each vesting periods. 23. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Directors' ReportREMUNERATION REPORT (AUDITED) (Continued) 2022 SHORT TERM POST EMPLOYMENT EQUITY OTHER (ii) Total Bonus (v) Sacrifice (iii) Superannuation Options Salary Leave provision movements Performance related $ $ $ $ % Salary & Fees $ Non-Executive Directors M Wheatley 139,636 (vi) G Fahey Z Rusike D Shetty H Chen(i) M Sun (iv) Executive Directors H Greaves S Hosack $ - - 32,727 36,000 100,000 36,000 32,727 32,579 - - - $ - - - - - - 7,964 100,380 3,273 50,190 - - - 50,190 3,273 50,190 3,421 - - - - - - - - - 247,980 86,190 136,000 86,190 86,190 36,000 849,989 40% 58% 74% 58% 58% - 56% 33% 38% 45% 250,000 475,000 124,989 - 326,432 - 174,999 23,568 275,981 25,324 826,304 Other Key Management Personnel I Goldberg 276,432 52,000 - 23,568 136,264 8,007 496,271 Total 1,162,533 627,000 299,988 65,067 663,195 33,331 2,851,114 (i) (ii) (iii) (iv) (v) (vi) Mr Chen fees were paid or are payable to his alternate director, Ms Sun. Other represents movement of the annual leave and long service leave provisions. Salary sacrifice represents the reimbursement of salary forgone up to 30 June 2021 when all salaries were restored to their original levels by the board. Alternate director Ms Sun was paid a fee as consideration for consultancy services rendered and special exertions made during the prior year. Bonus of Mr Greaves and Mr Rusike represent short term incentives paid for their additional services rendered and special exertions made in contribution to recent corporate transactions. Bonus of Mr Goldberg represents one-off payment agreed on employment, being the one-off conditional bonus upon the Company declaring final investment decision on the Arcadia project in accordance with his Executive Services Agreement for reduced salary for services from commencement of his employment to 31 December 2021. Salary and fees of Mr Wheatley includes $60,000 for additional days worked in addition to work performed under his Service Agreement. 3) Service agreements Non-Executive Directors The non-executive director remuneration during the year is $36,000 per annum inclusive of superannuation (if applicable) (2022: $36,000). During the financial year ended 30 June 2022, in addition to his salary, Mr Rusike received a short term incentive of $100,000 for additional services rendered and special exertions made in contribution to the sale of the Arcadia project. The Chairperson Mr Wheatley has a service agreement with a total annual salary of $87,600 inclusive of super. After the initial role orientation phase, days worked beyond 6 full days per month which when agreed by the Managing Director prior, are billable at $1,000 per day. A total of $Nil was incurred for the financial year ended 30 June 2023 (2022: $60,000). 24. Directors' ReportREMUNERATION REPORT (AUDITED) (Continued) Executive Directors Mr Hosack entered into an executive service agreement commencing 13 May 2018. The total annual salary increased to $350,000 per annum inclusive of superannuation upon his appointment to Managing Director which occurred on 14 July 2018. Effective 1 April 2020, his remuneration was reduced by 50.3% to $174,000 per annum. Effective 1 July 2021, his annual salary was adjusted back to $350,000 per annum inclusive of superannuation. In addition, he received a one-off salary sacrifice payment of $174,999 during the year ended 30 June 2022. Mr Greaves entered into an executive service agreement commencing 1 June 2016 with a total annual salary of $250,000 per annum inclusive of superannuation (if applicable) from 1 August 2016. Effective 1 April 2020, Mr Greaves’ remuneration was reduced by 50% to $125,000 per annum. Effective 1 July 2021, his annual salary was adjusted back to $250,000 per annum inclusive of superannuation. In addition, during the year ended 30 June 2022 he received a one-off salary sacrifice payment of $124,989 and a short term incentive of $475,000 for additional services rendered and special exertions made in contribution to the sale of the Arcadia project. Other Executives Mr Goldberg entered into an executive services agreement commencing 6 February 2021 with a total salary of $300,000 per annum inclusive of superannuation. Effective 6 February 2021, Mr Goldberg’s remuneration was reduced to $175,000 per annum. As of 1 July 2021, Mr Goldberg’s remuneration was adjusted to a total salary of $300,000 per annum inclusive of superannuation. During the year ended 30 June 2022, Mr Goldberg received a one-off payment of $52,000 for salary forgone during the period. Mr Greaves entered into a consultancy agreement commencing 1 September 2022 to continue to work closely with the Group following his resignation as executive director. His agreed remuneration is $250,000 per annum and subject to yearly review. Mr Broomfield entered into an executive services agreement for the Business Development Manager role commencing 26 April 2022. His total salary is $250,000 per annum inclusive of superannuation. Termination The non-executive directors, executive director, and other executives may terminate their employment by giving three months’ written notice. The Company can terminate the employment of the executive director and other executives by giving three months’ written notice. This notice period is reduced to one month if the executive commits or becomes guilty of gross misconduct or summarily without notice if convicted of any major criminal offence. 4) Share-based compensation The Company issued 13,800,000 share options (2022: Nil) and 4,400,000 performance rights (2022: Nil) to directors and other key management personnel during the financial year. The terms and conditions of each grant of options and rights over ordinary shares affecting remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: Options series No. of shares Grant date Grant date fair value Exercise price Expiry date Vesting date Issued 07/10/22 5,200,000 07/10/22 $0.064 Issued 07/10/22 3,000,000 Issued 07/10/22 (i) 1,866,665 Issued 07/10/22 (i) 1,866,665 Issued 07/10/22 (i) 1,866,670 13,800,000 23/11/22 23/11/22 23/11/22 23/11/22 $0.130 $0.130 $0.130 $0.130 $0.150 $0.150 $0.150 $0.150 $0.150 07/10/26 07/10/25 07/10/26 10/10/25 07/10/26 07/10/23 07/10/26 07/10/24 07/10/26 07/10/25 (i) 333,333 from each tranche were cancelled following the resignation of a director on 23 January 2023. 25. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Directors' ReportREMUNERATION REPORT (AUDITED) (Continued) Rights series No. of shares Grant date Grant date fair value Exercise price Expiry date Vesting date Issued 7/10/22 1,000,000 Issued 7/10/22 1,200,000 Issued 7/10/22 1,000,000 Issued 7/10/22 1,200,000 4,400,000 07/10/22 23/11/22 07/10/22 23/11/22 $0.170 $0.096 $0.170 $0.096 - - - - 07/10/25 07/10/23 07/10/25 07/10/23 07/10/25 07/10/24 07/10/25 07/10/24 Subsequent to 30 June 2023, 1,540,000 of the performance rights above have lapsed resulting from the portion of vesting conditions not being satisfied. During the year, no options or rights granted to directors and other key management personnel were exercised. Key Management Personnel Equity Holdings Ordinary Shares held at 30 June 2023 Opening balance Purchases Exercise of options M Wheatley G Fahey Z Rusike D Shetty(i) H Chen G Gupta S Hosack I Goldberg H Greaves D Broomfield 2,645,162 1,025,000 3,040,374 741,039 6,913,744 - 7,220,854 4,085,153 5,517,954 - 1,000,000 300,000 - - - - 5,270,000 664,847 - - 31,189,280 7,234,847 - - - - - - - - - - - (i) The balance of shares presented represents the shareholdings as at the last day as director. Disposal Closing balance (645,162) 3,000,000 - - - - - - - - - 1,325,000 3,040,374 741,039 6,913,744 - 12,490,854 4,750,000 5,517,954 - (645,162) 37,778,965 26. Directors' ReportREMUNERATION REPORT (AUDITED) (Continued) Options held at 30 June 2023 Opening balance Granted as compensation Exercised Forfeited M Wheatley G Fahey Z Rusike D Shetty H Chen G Gupta S Hosack I Goldberg H Greaves D Broomfield Performance Rights held at 30 June 2023 M Wheatley G Fahey Z Rusike D Shetty H Chen G Gupta S Hosack I Goldberg H Greaves D Broomfield - - - - - - - - - - - 1,600,000 1,000,000 1,000,000 1,000,000 1,000,000 - 3,000,000 2,000,000 1,700,000 1,500,000 13,800,000 - - - - - - - - - - - Closing balance 1,600,000 1,000,000 1,000,000 - - - (1,000,000) - - - - - - - 1,000,000 - 3,000,000 2,000,000 1,700,000 1,500,000 (1,000,000) 12,800,000 Vested during the year Vested and exercisable - - - - - - - - - - - - - - - - - - - - - - Opening balance Granted as compensation Vested and converted Forfeited Closing balance Vested during the year Vested and exercisable - - - - - - - - - - - - - - - - - 2,000,000 1,300,000 1,100,000 - 4,400,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,000,000 1,300,000 1,100,000 - 4,400,000 - - - - - - - - - - - - - - - - - - - - - - Subsequent to 30 June 2023, 1,540,000 of the performance rights above have lapsed resulting from the portion of vesting conditions not being satisfied. (End of Remuneration Report) 27. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Directors' ReportADDITIONAL INFORMATION (a) Shares under option At 30 June 2023 the Company had 17,850,000 unlisted options over ordinary shares under issue (30 June 2022: 13,500,000). (b) Insurance of officers During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company, the company secretary, and any executive officers of the Company and of any related body corporate against a liability incurred by such 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. (c) Agreement to indemnify officers The Company has entered into agreements with the directors to provide access to Company records and to indemnify them. The indemnity relates to any liability as a result of being, or acting in their capacity as, an officer of the Company to the maximum extent permitted by law; and for legal costs incurred in successfully defending civil or criminal proceedings. No liability has arisen under these indemnities as at the date of this report. (d) Proceedings on behalf of the Company To the best of the directors’ knowledge, no person has applied to the court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened on behalf of the Company with leave of the court under Section 237. (e) Indemnity of auditor The appointed auditor (Stantons) has not been indemnified under any circumstance. (f) Audit services During the financial year $81,253 (excluding GST) was paid or payable for audit services provided by Stantons (2022: $99,356). Non related audit firms have been paid or are payable Nil for audit services of subsidiaries (2022: $50,000). (g) Non-audit Services There were no non-audit services provided to the Group by the appointed auditors. (h) Auditor’s independence declaration A copy of the Auditor’s Independence Declaration as required under Section 307C of the Corporations Act 2001 is set out on page 66 of the Annual Report. (i) Corporate Governance Statement The directors of the Group support and adhere to the principles of corporate governance, recognising the need for the highest standard of corporate behaviour and accountability. Please refer to the corporate governance statement dated 23 September 2022 released to ASX and posted on the Company’s website. www.prospectresources.com.au/company/corporate-governance. Signed in accordance with a resolution of the directors. Sam Hosack Managing Director Perth, Western Australia Dated 21 September 2023 28. Directors' Report Directors' Declaration DIRECTORS’ DECLARATION 1) In accordance with a resolution of the directors of Prospect Resources Limited, I state that: (a) the financial statements and notes thereto are in accordance with the Corporations Act 2001 including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2023 and of its performance for the year then ended; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; (b) the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board as stated in Note 2(b) to the financial statements; (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and (d) the audited remuneration report included in the Directors’ Report complies with section 300A of the Corporations Act 2001. 2) This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2023. This declaration is signed in accordance with a resolution of the Board of directors. Sam Hosack Managing Director Perth, Western Australia Dated 21 September 2023 29. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023Financial Report 30. Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 30 June 2023 Continuing operations Revenue Other income Expenses Depreciation expense Development costs expensed Employee benefits expenses Foreign currency exchange gain/(loss) Interest expense Impairment of exploration and evaluation expenditure Share based payments expense Share of net loss in joint venture Other administrative expenses Loss from continuing operations before income tax Income tax expense Loss from continuing operations after tax Profit from discontinued operations (Loss) / profit for the year Other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Other comprehensive income for the year net of tax Total comprehensive income for the year (Loss) / profit attributable to: Equity holders of the Company Non-controlling interests Total comprehensive income attributable to: Equity holders of the Company Non-controlling interests Loss per share from continuing operations Basic loss per share (cents) Diluted loss per share (cents) Profit per share from discontinuing operations Basic profit per share (cents) Diluted profit per share (cents) The accompanying notes form part of these financial statements Note 4 11 12 17(a) 9 5 19(c) 19(a) 19(a) 27 27 27 27 Consolidated 2023 $’000 2022 $’000 825 1,405 (106) - (3,097) 161 (6) (324) (675) (15) (2,319) (5,556) - (5,556) - (5,556) 52 52 (5,504) (5,482) (74) (5,556) (5,430) (74) (5,504) (1.19) (1.19) - - (56) (349) (2,833) (13,305) (7) (198) (699) - (1,840) (17,882) - (17,882) 415,389 397,507 19,246 19,246 416,753 397,573 (66) 397,507 416,271 482 416,753 (4.29) (4.20) 100.06 97.91 31. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportConsolidated Statement of Financial Position For the Year Ended 30 June 2023 Consolidated 2023 $’000 2022 $’000 Notes ASSETS Current Assets Cash and cash equivalents Trade and other receivables Other current assets Total Current Assets Non-Current Assets Investment in joint venture Property, plant and equipment Exploration and evaluation expenditure Other assets Total Non-Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables Lease liability Provisions Total Current Liabilities Non-Current Liabilities Lease liability Provisions Total Non-Current Liabilities Total Liabilities Net Assets EQUITY Contributed equity Reserves (Accumulated losses) / retained earnings Total Equity Attributable to Shareholders of Parent Company Non-controlling interests Total Equity The accompanying notes form part of these financial statements 32. 7 8 10 9 11 12 13 14 15 14 15 16 17 18 19(a) 26,191 474,288 39 55 473 47 26,285 474,808 1,458 389 1,635 7 3,489 29,774 456 57 118 631 41 36 77 708 - 282 486 12 780 475,588 1,131 36 125 1,292 - 37 37 1,329 29,066 474,259 26,646 28,062 (25,642) 29,066 - 29,066 101,344 28,790 345,025 475,159 (900) 474,259 Consolidated Statement of Cash Flows For the Year Ended 30 June 2023 Cash flows from operating activities Payments to suppliers and employees Payment for development costs expensed Income tax paid Notes Consolidated 2023 $’000 (5,588) - - Net cash outflow from operating activities 7(a) (5,588) Cash flows from investing activities Interest received Net proceeds from assets held for sale Proceeds from sale of Penhalonga Gold Project Payments for development costs Payments for capitalised exploration and evaluation expenditure Payments for investment in joint venture Payment for property, plant and equipment Proceeds from sale of property, plant and equipment Payment for additional interest in subsidiary Proceeds from sale of subsidiaries Payments for costs associated with sale of subsidiaries Net cash (outflow) / inflow from investing activities Cash flows from financing activities Payment for lease Interest paid Payment of dividends Payment for return of capital Proceeds from issuance of shares Proceeds from exercise of options Capital raising costs Net cash (outflow) / inflow from financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at beginning of year 825 - - - (1,437) (1,486) (146) - - - - (2,244) (63) (6) (365,185) (78,584) - 3,405 - (440,433) (448,265) 474,288 2022 $’000 (5,189) (363) - (5,552) 315 126 964 (3,984) (592) - (242) 16 (1,187) 508,692 (51,883) 452,225 (34) (6) - - 18,000 2,557 (793) 19,724 466,397 7,877 Effects of exchange rate changes on the balance of cash held in foreign currencies 168 14 Cash and cash equivalents at end of year 7 26,191 474,288 The accompanying notes form part of these financial statements 33. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' Report  0 0 0 $ ’ 0 0 0 $ ’ l a t o T y t i u q E s t s e r e t n i g n i l l o r t n o c - n o N e h t f o s r e n w o t n e r a p 0 0 0 $ ’ 0 0 0 $ ’ 0 0 0 $ ’ 0 0 0 $ ’ 0 0 0 $ ’ 0 0 0 $ ’ i d e n a t e r i s g n n r a e r e h t O n o i t a l s n a r t s t n e m y a p d e t u b i r t n o C s e v r e s e r s e v r e s e r s e v r e s e r y t i u q e e t o N l d e t a u m u c c A ( l o t e b a t u b i r t t A / ) s e s s o l y c n e r r u c n g e r o F i d e s a b e r a h S 3 2 0 2 e n u J 0 3 d e d n E r a e Y e h t r o F y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C 34. ) 2 4 6 5 2 ( , ) 7 7 8 ( 6 3 2 8 1 , 6 5 9 3 3 , ) 2 8 3 , 1 ( 8 3 3 5 3 , ) 8 4 5 2 5 ( , ) 2 8 8 7 1 ( , 9 8 3 5 1 4 , 6 4 2 9 1 , 3 5 7 6 1 4 , - 0 0 0 8 1 , 7 8 0 3 , ) 6 7 2 4 , ( 6 7 2 4 , 7 5 5 2 , 9 9 6 ) 3 9 7 ( - ) 6 6 ( 8 4 5 2 8 4 - - - - - 1 4 9 , 1 8 0 2 ) 9 4 1 , 2 ( ) 6 1 8 7 1 ( , 9 8 3 5 1 4 , 8 9 6 8 1 , , 1 7 2 6 1 4 0 0 0 8 1 , 7 8 0 3 , ) 1 4 9 , 1 ( ) 4 8 4 4 , ( 5 2 4 6 , 7 5 5 2 , 9 9 6 ) 3 9 7 ( - - - - - - - - - ) 6 1 8 7 1 ( , 9 8 3 5 1 4 , , 3 7 5 7 9 3 , 9 5 2 4 7 4 ) 0 0 9 ( 9 5 1 , 5 7 4 , 5 2 0 5 4 3 2 5 ) 6 5 5 5 ( , - ) 4 7 ( ) 4 0 5 5 ( , ) 4 7 ( 5 0 4 3 , - ) 4 8 5 8 7 ( , ) 5 8 1 , 5 6 3 ( - 5 7 6 6 6 0 9 2 , - - 4 7 9 2 5 ) 2 8 4 5 ( , ) 0 3 4 5 ( , 5 0 4 3 , ) 4 8 5 8 7 ( , ) 5 8 1 , 5 6 3 ( 5 7 6 ) 4 7 9 ( 6 6 0 9 2 , - ) 2 8 4 5 ( , ) 2 8 4 5 ( , - - - - ) 5 8 1 , 5 6 3 ( - - - - - - - ) 1 4 9 , 1 ( ) 4 8 4 4 , ( 5 2 4 6 , - - - - - - - - - - - ) 7 7 8 ( ) 7 1 4 ( 6 5 6 , 1 1 7 4 6 6 7 , 1 2 0 2 e n u J 0 3 t a e c n a a B l 1 8 2 8 1 , 9 0 5 0 1 , 4 4 3 , 1 0 1 - 2 5 2 5 - - - - ) 7 9 ( - - 8 9 6 8 1 , 8 9 6 8 1 , - - - - - - - - - - - - - - - - - - 9 9 6 ) 6 4 8 , 1 ( - - - - - - ) 1 8 4 ( 5 7 6 3 0 7 0 1 , - - - 6 8 8 3 , ) 4 8 5 8 7 ( , - - - 6 4 6 6 2 , - - - 3 0 4 4 , - ) 3 9 7 ( ) b ( 9 1 ) b ( 9 1 ) c ( 7 1 ) b ( 6 1 ) a ( 7 1 ) b ( 6 1 8 1 8 1 ) b ( 6 1 ) b ( 9 1 ) a ( 7 1 s n o i t a r e p o g n u n i t n o c m o r f i r a e y e h t r o f s s o L r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T e m o c n i e v i s n e h e r p m o c r e h t O s n o i t p o f o e s i c r e x e n o s e r a h s f o e u s s I l s r e d o h e r a h s o t n r u t e r l a t i p a C s n o i t p o f o e s i c r e x e n o s e r a h s f o e u s s I s t s o c g n i s i a r l a t i p a c e r a h S 2 2 0 2 e n u J 0 3 t a e c n a a B l s t n e m y a p d e s a b e r a h S i y r a d i s b u s n i i p h s r e n w o n i e s a e r c n I i s e i r a d i s b u s f o e a S l p a w s y t i u q e i y r a d i s b u s n i i p h s r e n w o n i e s a e r c n I 3 2 0 2 e n u J 0 3 t a e c n a a B l s t n e m y a p d e s a b e r a h S i d a p s d n e d v D i i s t n e m e t a t s l i a c n a n fi e s e h t f o t r a p m r o f i s e t o n g n y n a p m o c c a e h T - - - - s n o i t a r e p o d e u n i t n o c s i d m o r f r a e y e h t r o f t fi o r P s n o i t a r e p o g n u n i t n o c m o r f i r a e y e h t r o f s s o L r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T e m o c n i e v i s n e h e r p m o c r e h t O 0 0 0 8 1 , ) b ( 6 1 h s a c r o f i s e r a h s y r a n d r o f o e u s s I 7 8 0 3 , ) b ( 6 1 i y r a d i s b u s n i t s e r e t n i l a n o i t i d d a r o f i s e r a h s y r a n d r o f o e u s s I - o t - t b e d m o r f t fi e n e b s t s e r e t n i g n i l l o r t n o c - n o N 1) CORPORATE INFORMATION The consolidated financial statements of Prospect Resources Limited (“the Company”) and its subsidiaries (collectively “the Group”) for the year ended 30 June 2023 was authorised for issue in accordance with a resolution of the directors on 21 September 2023. Prospect Resources Limited is a company limited by shares and incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The Company and its subsidiaries are for-profit entities. The principal activity of the Group is exploration, evaluation and development of mineral resources. 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis except for certain financial instruments, which have been measured at fair values. The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to the years presented, unless otherwise stated. The Group has prepared the financial statements on the basis that it will continue to operate as going concern. (b) Statement of compliance The financial report complies with Australian Accounting Standards and International financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. (c) Comparative figures Certain comparative figures have been reclassified to conform with the current year presentation. (d) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 June 2023. 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 • The ability to use its power to affect its returns Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and 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(s) 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 consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), 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. (e) Application of new and revised accounting standards New and revised standards that are effective for these financial statements In the current year, the Group has adopted all of the new and revised standards, interpretations and amendments that are relevant to its operations and effective for the current reporting period. • AASB 2020-3: Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments AASB 2020-3: Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments is an omnibus standard that amends AASB 1, AASB 3, AASB 9, AASB 116, AASB 137 and AASB 141. The amendment has not had a material impact on the Group’s financial statements. Annual Report 2023 35. 35. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023 New and revised standards issued but not yet effective and not early adopted by the Group Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been early adopted by the Group for the year ended 30 June 2023. The Group’s preliminary assessment indicates that, on adoption, the below new standards or amendments will not have a material impact to the financial statements. • AASB 2020-1: Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current A liability is classified as current if the entity has no right at the end of the reporting period to defer settlement for at least 12 months after the reporting period. The AASB issued AASB 2020-1 Amendments to AASB 101 to clarify the requirements for classifying liabilities as current or non-current, specifically (a) the amendments specify that the conditions which exist at the end of the reporting period are those which will be used to determine if a right to defer settlement of a liability exists, (b) management intention or expectation does not affect the classification of liabilities, and (c) in cases where an instrument with a conversion option is classified as a liability, the transfer of equity instruments would constitute settlement of the liability for the purpose of classifying it as current or noncurrent. The Group will adopt this amendment in the financial year ending 30 June 2024. • AASB 2022-6: Amendments to Australian Accounting Standards –Non-current Liabilities with Covenants A consequence of the AASB 2020-1 is that a liability would be classified as current if its repayment conditions failed their test at reporting date, despite those conditions only becoming effective in the 12 months after the end of the reporting period. In response to this possible outcome, the AASB has issued AASB 2022-6 in December 2022 clarifying that only covenants with which an entity must comply on or before the reporting date will affect a liability’s classification as current or non-current, adding presentation and disclosure requirements for non- current liabilities subject to compliance with future covenants within the next 12 months, and clarifying specific situations in which an entity does not have a right to defer settlement for at least 12 months after the reporting date. The Group will adopt this amendment in the financial year ending 30 June 2024. • AASB 2021-2: Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates The amendment amends AASB 7, AASB 101, AASB 108, AASB 134 and AASB Practice Statement 2. These amendments arise from the issuance by the IASB of the following International Financial Reporting Standards: Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) and Definition of Accounting Estimates (Amendments to IAS 8). The amendments to AASB 101 require disclosure of material accounting policy information, instead of significant accounting policies. Unlike ‘material’, ‘significant’ was not defined in Australian Accounting Standards. Leveraging the existing definition of material with additional guidance is expected to help preparers make more effective accounting policy disclosures. The amendments to AASB Practice Statement 2 supplement the amendments to AASB 101 by illustrating how the four-step materiality process can identify material accounting policy information. The amendments to AASB 108 clarify the definition of an accounting estimate, making it easier to differentiate it from an accounting policy. The distinction is necessary as their treatment and disclosure requirements are different. Critically, a change in an accounting estimate is applied prospectively whereas a change in an accounting policy is generally applied retrospectively. The Group will adopt this amendment in the financial year ending 30 June 2024. • AASB 2021-5 Amendments to AASs –Deferred Tax related to Assets and Liabilities arising from a Single Transaction The amendment amends the initial recognition exemption in AASB 112: Income Taxes such that it is not applicable to leases and decommissioning obligations – transactions for which companies recognise both an asset and liability and that give rise to equal taxable and deductible temporary differences. The Group will adopt the amendment in the financial year ending 30 June 2024. • AASB 2014-10 Amendments to AASs –Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments to AASB 10 Consolidated Financial Statements and AASB 128 Investments in Associates and Joint Ventures clarify that a full gain or loss is recognised when a transfer to an associate or joint venture involves a business as defined in AASB 3 Business Combinations. Any gain or loss resulting from the sale or contribution of assets that does not constitute a business, however, is recognised only to the extent of unrelated investors’ interests in the associate or joint venture. The Group will adopt the amendment in the financial year ending 30 June 2024. • AASB 2022-5 Amendments to AASs –Lease Liability in a Sale and Leaseback The amendment specifies that the seller-lessee measures the lease liability arising from the leaseback in such a way that they would not recognise any gain or loss on the sale and leaseback relating to the right-of-use asset retained. The Group will adopt the amendment in the financial year ending 30 June 2025. (f) Revenue recognition (i) Revenue from contract with customers Revenue from sale of goods in the course of ordinary activities is recognised at a point in time when the control of the product is transferred to the customer and selling prices are known or can be reasonably estimated. For spodumene and petalite concentrate sales, the above conditions are generally satisfied when title passes to the customer, typically on the bill of lading date when the concentrate is delivered to the vessel. For gold, this is generally when the gold is credited to the metal account of the customer. 36. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023(ii) Interest income Interest income is recognised on a time proportionate basis using the effective interest method. (iii) Government tax credits and rebates Government tax credits and rebates, inclusive of research and development tax credit, are recognised as income at their fair value where there is a reasonable assurance that the government tax credit or rebate will be received and the Group will comply with all attached conditions. (iv) Gain on sale of assets A gain or loss is recognised on the disposal of the assets at the time of sale. The gain or loss arising on the disposal is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. (g) Cash and cash equivalents For statement of cash flow presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value, and net of bank overdrafts. (h) Income tax The income tax expense or revenue for the period is the tax payable on a current period’s taxable income based on the income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred tax is accounted for using the liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and tax losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. (i) Trade and other receivables (i) Trade receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Details about the Group’s impairment policies and the calculation of the loss allowance are provided in Note 2(x). (ii) Other receivables Other receivables are recognised at fair value and subsequently measured at amortised cost, less provision for impairment. (j) Assets held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non-current assets to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. An impairment loss is recognised for any initial or subsequent write down of the non-current asset to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal of a non-current asset, but not in excess of any cumulative impairment loss previously recognised. Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised. Non-current assets classified as held for sale are presented separately on the face of the statement of financial position, in current assets. (k) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Depreciation rates and methods shall be reviewed at least annually and, where changed, shall be accounted for as a change in accounting estimate. During the current year, the directors determined that the useful lives of each class of asset are: 37. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023• Buildings: 20 to 40 years • Leasehold improvements: 2 years or lease term, whichever is shorter • Right to use assets: 2 years or lease term, whichever is shorter • Plant and equipment: 5 to 15 years • Office equipment and furniture and fittings: 3 to 5 years • Vehicles: 5 years Where depreciation rates or methods are changed, the net written down value of the asset is depreciated from the date of the change in accordance with the new depreciation rate or method. Depreciation recognised in prior financial years shall not be changed, that is, the change in depreciation rate or method shall be accounted for on a ‘prospective’ basis. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. (l) Exploration and evaluation expenditure Exploration and evaluation expenditure incurred on granted exploration licences is accumulated in respect of each identifiable area of interest. These costs are carried forward where the rights to tenure of the area of interest are current and to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to any abandoned area will be written off in full against profit in the period in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest will be amortised over the life of the area of interest according to the rate of depletion of the economically recoverable reserves. A regular review will be undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. (m) Mine properties (i) Mines under construction Expenditure is transferred from ’Exploration and evaluation assets’ to ’Mines under construction’ which is a subcategory of ’Mine properties’ once the work completed to date supports the future development of the property and such development receives appropriate approvals. After transfer of the exploration and evaluation assets, all subsequent expenditure on the construction, installation, or completion of infrastructure facilities recognised in ’Mines under construction’. Development expenditure is net of proceeds from the sale of ore extracted during the development phase to the extent that it is considered integral to the development of the mine. Any costs incurred in testing the assets to determine if they are functioning as intended, are capitalised, net of any proceeds received from selling any product produced while testing. Where these proceeds exceed the cost of testing, any excess is recognised in the statement of profit or loss and other comprehensive income. After production starts, all assets included in ‘Mines under construction’ are then transferred to ’Producing mines’ which is also a sub- category of ’Mine properties’. (ii) Mine properties and property, plant and equipment • Initial recognition Upon completion of the mine construction phase, the assets are transferred into “Property, plant and equipment” or “Mine properties”. Items of property, plant and equipment and producing mine are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of the rehabilitation obligation, and, for qualifying assets (where relevant), borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. The capitalised value of a finance lease is also included in property, plant and equipment. Mine properties also consist of the fair value attributable to mineral reserves and the portion of mineral resources considered to be probable of economic extraction at the time of an acquisition. When a mine construction project moves into the production phase, the capitalisation of certain mine construction costs ceases, and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for capitalisation relating to mining asset additions, improvements or new developments, mine development or mineable reserve development. • Depreciation / amortisation Accumulated mine development costs are depreciated/ amortised on a Unit Of Production (UOP) basis over the economically recoverable reserves of the mine concerned, except in the case of assets whose useful life is shorter than the life of the mine, in which case, the straight-line method is applied. The unit of account for run-of-mine (ROM) costs is tonnes of ore, whereas the unit of account for post-ROM costs are recoverable tonnes of Li2O. Rights and concessions are depleted on the UOP basis over the economically recoverable reserves of the relevant area. The UOP rate calculation for the depreciation/ amortisation of mine development costs takes into account expenditures incurred to date, together with sanctioned future development expenditure. Economically recoverable reserves include proven and probable reserves. The estimated fair value attributable to the mineral reserves and the portion of mineral resources considered to be probable of economic extraction at the time of the acquisition is amortised on a UOP basis whereby the denominator is the proven and probable reserves, and 38. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023for some mines, a portion of mineral resources which are expected to be extracted economically. These other mineral resources may be included in depreciation calculations in limited circumstances and where there is a high degree of confidence in their economic extraction. This would be the case when the other mineral resources do not yet have the status of reserves merely because the necessary detailed evaluation work has not yet been performed and the responsible technical personnel agree that inclusion of a proportion of measured and indicated resources is appropriate based on historic reserve conversion rates. The estimated fair value of the mineral resources that are not considered to be probable of economic extraction at the time of the acquisition is not subject to amortisation, until the resource becomes probable of economic extraction in the future and is recognised in exploration and evaluation assets. The premium paid in excess of the intrinsic value of land to gain access is amortised over the life of the mine. Other plant and equipment, such as mobile mine equipment, is generally depreciated on a straight-line basis over their estimated useful lives, as follows: • Buildings: 20 to 40 years • Plant and equipment: 5 to 15 years • Office equipment and furniture and fittings: 3 to 5 years • Vehicles: 5 years An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no 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 statement of profit or loss and other comprehensive income when the asset is derecognized. The asset’s residual values, useful lives and methods of depreciation/amortisation are reviewed at each reporting period and adjusted prospectively, if appropriate. • Stripping (waste removal) costs As part of its mining operations, the Group incurs stripping (waste removal) costs both during the development phase and production phase of its operations. Stripping costs incurred in the development phase of a mine, before the production phase commences (development stripping), are capitalised as part of the cost of constructing the mine and subsequently amortised over its useful life using a UOP method. The capitalisation of development stripping costs ceases when the mine/component is commissioned and ready for use as intended by management. Stripping activities undertaken during the production phase of a surface mine (production stripping) are accounted for as set out below. After the commencement of production, further development of the mine may require a phase of unusually high stripping that is similar in nature to development phase stripping. The cost of such stripping is accounted for in the same way as development stripping (as outlined above). Production stripping is generally considered to create two benefits, being either the production of inventory or improved access to the ore to be mined in the future. Where the benefits are realised in the form of inventory produced in the period, the production stripping costs are accounted for as part of the cost of producing those inventories. Where the benefits are realised in the form of improved access to ore to be mined in the future, the costs are recognised as a non-current asset, referred to as a ‘stripping activity asset’, if the following criteria are met: • Future economic benefits (being improved access to the ore body) are probable • • The component of the ore body for which access will be improved can be accurately identified The costs associated with the improved access can be reliably measured If any of the criteria are not met, the production stripping costs are charged to profit or loss as operating costs as they are incurred. In identifying components of the ore body, the Group works closely with the mining operations personnel for each mining operation to analyse each of the mine plans. Generally, a component will be a subset of the total ore body, and a mine may have several components. The mine plans, and therefore the identification of components, can vary between mines for a number of reasons. These include, but are not limited to: the type of commodity, the geological characteristics of the ore body, the geographical location, and/or financial considerations. Given the nature of the Group’s operations, components are generally either major pushbacks or phases and they generally form part of a larger investment decision which requires board approval. The stripping activity asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable overhead costs. If incidental operations are occurring at the same time as the production stripping activity, but are not necessary for the production stripping activity to continue as planned, these costs are not included in the cost of the stripping activity asset. If the costs of the inventory produced and the stripping activity asset are not separately identifiable, a relevant production measure is used to allocate the production stripping costs between the inventory produced and the stripping activity asset. This production measure is calculated for the identified component of the ore body and is used as a benchmark to identify the extent to which the additional activity of creating a future benefit has taken place. The Group uses the expected volume of waste extracted compared with the actual volume for a given volume of ore production of each component. The stripping activity asset is accounted for as an addition to, or an enhancement of, an existing asset, being the mine asset, and is presented as part of ’Mine properties’ in the statement of financial position. This forms part of the total investment in the relevant cash generating unit(s), which is reviewed for impairment if events or changes of circumstances indicate that the carrying value may not be recoverable. 39. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023The stripping activity asset is subsequently depreciated using the UOP method over the life of the identified component of the ore body that became more accessible as a result of the stripping activity. Economically recoverable reserves, which comprise proven and probable reserves, are used to determine the expected useful life of the identified component of the ore body. The stripping activity asset is then carried at cost less depreciation and any impairment losses. • Major maintenance and repairs Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets and overhaul costs. Where an asset, or part of an asset, that was separately depreciated and is now written off is replaced, and it is probable that future economic benefits associated with the item will flow to the Group through an extended life, the expenditure is capitalised. Where part of the asset was not separately considered as a component and therefore not depreciated separately, the replacement value is used to estimate the carrying amount of the replaced asset(s) which is immediately written off. All other day-to-day maintenance and repairs costs are expensed as incurred. • 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 (a qualifying asset) are capitalised as part of the cost of the respective asset. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Where funds are borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs incurred. Where surplus funds are available for a short term from funds borrowed specifically to finance a project, the income generated from the temporary investment of such amounts is also capitalised and deducted from the total capitalised borrowing cost. Where the funds used to finance a project form part of general borrowings, the amount capitalised is calculated using a weighted average of rates applicable to relevant general borrowings of the Group during the period. All other borrowing costs are recognised in the statement of profit or loss and other comprehensive income in the period in which they are incurred. Under the equity method, the investment in a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the joint venture since the acquisition date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of profit or loss reflects the Group’s share of the results of operations of the joint venture. Any change in other comprehensive income (OCI) of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture. The aggregate of the Group’s share of profit or loss of a joint venture is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the joint venture. The financial statements of the joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its carrying value, and then recognises the loss within ‘Share of profit of a joint venture’ in the statement of profit or loss. Upon loss of joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. Upon change of the investment from a joint venture to a subsidiary, the equity method of accounting will be discontinued and the investment will be accounted for in accordance with note 2(d). (n) Investments in joint ventures (o) Leases – the Group as lessee A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining joint control are similar to those necessary to determine control over subsidiaries. The Group’s investment in its joint venture are accounted for using the equity method. At inception of a contract the Group assesses if the contract contains or is a lease. If there is a lease present, a right- of-use asset and a corresponding liability are recognised by the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (i.e. leases with a remaining lease term of 12 months or less) and leases of low-value assets are recognised as an operating expense on a straight-line basis over the term of the lease. Initially, the lease liability is measured at the present value of the lease payments still to be paid at the commencement date. The lease payments are discounted 40. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses incremental borrowing rate. Lease payments included in the measurement of the lease liability are as follows; • fixed lease payments less any lease incentives; • • • • variable lease payments that depend on index or rate, initially measured using the index or rate at the commencement date; the amount expected to be payable by the lessee under residual value guarantees; the exercise price of purchase options if the lessee is reasonably certain to exercise the options; lease payments under extension options, if the lessee is reasonably certain to exercise the options; and • payments of penalties for terminating the lease, if the lease term reflects the exercise of options to terminate the lease. The right-of-use assets comprise the initial measurement of the corresponding lease liability, any lease payments made at or before the commencement date and any initial direct costs. The subsequent measurement of the right- of-use assets is at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is shorter. Where a lease transfers ownership of the underlying asset or the costs of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. (p) 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. (i) Provision for employee entitlements Provision is made for employee entitlements accumulated as a result of employees rendering services up to the end of the reporting period. These benefits include wages, salaries, annual leave and long service leave. Liabilities in respect of employees’ services rendered that are not expected to be wholly settled within one year after the end of the period in which the employees render the related services are recognised as long-term employee benefits. These liabilities are measured at the present value of the estimated future cash outflow to the employees using the projected unit credit method. Liabilities expected to be wholly settled within one year after the end of the period in which the employees render the related services are classified as short-term benefits and are measured at the amount due to be paid. (ii) Provision for site restoration and rehabilitation In accordance with the Group’s environmental policy and applicable legal requirements, a provision for site restoration and rehabilitation in respect of disturbed land is recognised when the land is disturbed. The provision is the best estimate of the present value of the expenditure required to settle the restoration and rehabilitation obligation at the reporting date, based on current legal requirements and technology. Future restoration and rehabilitation costs are reviewed annually, and any changes are reflected in the present value of the restoration and rehabilitation provision at the end of the reporting period. The unwinding of the effect of discounting on the provision is recognised as a finance cost. (q) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and usually paid within 30 days of recognition. (r) Financial instruments (i) Recognition, initial measurement and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial instruments (except for trade receivables) are measured initially at fair value adjusted by transaction costs, except for those carried at ‘fair value through profit or loss’, in which case transaction costs are expensed to profit or loss. Where available, quoted prices in an active market are used to determine the fair value. In other circumstances, valuation techniques are adopted. Subsequent measurement of financial assets and financial liabilities are described below. Trade receivables are initially measured at the transaction price if the receivables do not contain a significant financing component in accordance with AASB 15. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled, or expired. (ii) Classification and measurement • Financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition: • • amortised cost; fair value through other comprehensive income (FVOCI); and 41. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023• fair value through profit or loss (FVPL). Classifications are determined by both: • • the contractual cash flow characteristics of the financial assets; and the Group’s business model for managing the financial asset. The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by AASB, which requires expected lifetime losses to be recognised from initial recognition of the receivables. Financial assets at amortised cost • Financial liabilities Financial assets are measured at amortised cost if the assets meet with the following conditions (and are not designated as FVPL); • • they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Financial assets at fair value through other comprehensive income 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. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss. All interest-related charges and, if applicable, gains and losses arising on changes in fair value are recognised in profit or loss. The Group measures debt instruments at fair value through OCI if both of the following conditions are met: (s) Foreign currency transactions and balances (i) Functional and presentation currency • • 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; and the financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling the financial asset. The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional currency. The functional currency of all subsidiaries is US dollars. For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. 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. 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. (ii) Transaction and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non- monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non- monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity when the exchange difference arises on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation). Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income, otherwise the exchange difference is recognised in the profit or loss. 42. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023(iii) Group companies The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows: • Assets and liabilities are translated at exchange rates prevailing at the end of the reporting period; • Income and expenses are translated at average exchange rates for the period and/or at the exchange rate prevailing on the date of the actual transaction; and been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less cost to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of profit or loss and other comprehensive income. Impairment testing is performed annually for intangible assets with indefinite lives. (y) Share based payment transactions - equity settled • Retained earnings are translated at the exchange rates transactions prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations with functional currencies other than the Australian dollar are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. The cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is disposed of. (t) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds. (u) Earnings per share Basic earnings per share (“EPS”) is calculated by dividing the result attributable to equity holders of the Company by the weighted number of shares outstanding during the year. Diluted EPS adjusts the figures used in the calculation of basic EPS to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed or known to have been issued in relation to dilutive potential ordinary shares. (v) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. Cash flows are presented in the statement of cash flow on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (w) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Company, on or before the end of the financial year but not distributed at balance date. (x) Impairment of assets At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have The Company provides benefits to its employees (including key management personnel) in the form of share based payments whereby employees render services in exchange for shares or rights over shares (equity settled transactions). The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. That cost is recognised as expense, together with a corresponding increase in equity (share based payments reserves), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the 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. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions. No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the unmodified award, provided the original vesting terms of the award are met. An additional expense, measured as at the date of modification, is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise 43. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023 beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share. (z) Critical accounting judgements and key sources of estimation uncertainty The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) Ore reserves Economically recoverable ore reserves represent the estimated quantity of product in an area of interest that can be expected to be profitably extracted, processed and sold under current and foreseeable economic conditions. The Group determines and reports ore reserves under the standards incorporated in the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves, 2012 Edition (the JORC Code). The determination of ore reserves includes estimates and assumptions about a range of geological, technical and economic factors, including: quantities, grades, productions techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates. Changes in ore reserves impact the assessment of recoverability of exploration and evaluation assets, property, plant and equipment, the carrying amount of assets depreciated on a units of production basis, provision for site restoration and the recognition of deferred tax assets, including tax losses. (ii) exploration and evaluation expenditure The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgement to determine whether future economic benefits are likely, from either future exploitation or sale, or whether activities have not reached a stage that permits a reasonable assessment of the existence of reserves. In addition to applying judgement to determine whether future economic benefits are likely to arise from the Group’s exploration and evaluation assets or whether activities have not reached a stage that permits a reasonable assessment of the existence of reserves, the Group has to apply a number of estimates and assumptions. The estimates directly impact when the Group defers exploration and evaluation expenditure. The deferral policy requires management to make certain estimates and assumptions about future events and circumstances, particularly, whether an economically viable extraction operation can be established. Any such estimates and assumptions may change as new information becomes available. If, after expenditure is capitalised, information becomes available suggesting that the recovery of expenditure is unlikely, the relevant capitalised amount is written off in the statement of profit or loss and other comprehensive income in the period when the new information becomes available. (iii) Mine properties Estimated economically recoverable reserves are used in determining the depreciation and/or amortisation of mine- specific assets. This results in a depreciation/amortisation charge proportional to the depletion of the anticipated remaining life-of-mine production. The life of each item, which is assessed at least annually, has regard to both its physical life limitations and present assessments of economically recoverable reserves of the mine property at which the asset is located. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves and estimates of future capital expenditure. The calculation of the Unit of Production (“UOP”) rate of depreciation/amortisation could be impacted to the extent that actual production in the future is different from current forecast production based on economically recoverable reserves, or if future capital expenditure estimates change. Changes to economically recoverable reserves could arise due to changes in the factors or assumptions used in estimating reserves, including: • the effect on economically recoverable reserves of differences between actual commodity prices and commodity price assumptions • unforeseen operational issues Changes in estimates are accounted for prospectively. (iv) Rehabilitation provision The ultimate rehabilitation costs are uncertain, and cost estimates can vary in response to many factors, including estimates of the extent and costs of rehabilitation activities, technological changes, and regulatory changes. These uncertainties may result in future actual expenditure differing from the amounts currently provided. Therefore, significant estimates and assumptions are made in determining the provision for mine rehabilitation. As a result, there could be significant adjustments to the provisions established which would affect future financial result. The provision at reporting date represents management’s best estimate of the present value of the future rehabilitation costs required. (v) Share based payments The fair value of employee share based payments is measured using Black Scholes valuation model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder 44. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023 behaviour), expected dividends, the risk-free interest rate (based on government bonds) and probability applied to the non-vesting conditions (based on management’s judgement formed in consideration of all the available facts and circumstances). The fair value calculation and inputs to the Black Scholes model are shown at Note 21. (vi) deferred tax assets Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies. (aa) Rounding of amounts The Group has applied the relief available to it under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. Accordingly, the amounts in the financial statements and directors’ report have been rounded to the nearest $1,000. 3) SEGMENT INFORMATION (a) Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. In the current year the Group engaged in exploration for minerals and project development activities in Zimbabwe, Namibia, and Zambia. The operations were located in Australia, Singapore, Zimbabwe, Mauritius, Namibia, and Zambia with the head office being in Australia. Singapore balances were included within Australian operations and exploration activities and other transactions in Zimbabwe, Namibia, Mauritius, and Zambia being included within the African operations. (b) Geographical segments Segment revenue, results and depreciation exclude discontinued operations. Continuing operations Revenue from external customers Other income Total segment revenue Results Australia Africa Consolidated 2023 2022 $’000 $’000 825 825 441 441 2023 $’000 - - 2022 $’000 964 964 2023 2022 $’000 $’000 825 825 1,405 1,405 Segment (net loss)/profit before tax (3,282) (18,284) (2,274) 402 (5,556) (17,882) Assets Segment assets Liabilities Segment liabilities Other segment information Impairment of assets Depreciation expense 25,355 474,803 4,419 785 29,774 475,588 540 1,281 168 48 708 1,329 - 83 - 36 - 23 198 20 - 106 198 56 4) REVENUE FROM CONTINUING OPERATIONS Interest income Gain on sale of Penhalonga Gold Project Gain on sale of assets 2023 $’000 825 - - 2022 $’000 315 964 126 Total revenue from continuing operations 825 1,405 45. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 20235) INCOME TAX (a) Components of income tax expense Current income tax Deferred income tax Income tax expense (b) Numerical reconciliation of income tax expense to prima facie tax payable Loss before income tax – continuing operations Profit before income tax – discontinued operations Loss before income tax Tax at the Australian tax rate of 25% (2022: 25.0%) Tax effect of differential corporate tax rates Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Profit on sale of Prospect Lithium Zimbabwe Limited (i) Unrealised foreign exchange loss Others Over / under recognition of prior year tax expense Net deferred tax assets not brought to account / (reversed) Income tax expense Income tax expense is attributable to: Profit from continuing operations Profit from discontinuing operations 2023 $’000 - - - 2023 $’000 (5,556) - (5,556) (1,389) 3 - - 752 (1,008) 1,642 - - - 2022 $’000 - - - 2022 $’000 (17,882) 415,389 397,507 99,377 (112) (104,083) 4,389 627 7 (205) - - - (i) The sale of Prospect Lithium Zimbabwe Limited was subject to capital gains tax (CGT) in Zimbabwe. Total CGT of US$26,793,883 has been paid to the Government of Zimbabwe on settlement of the transaction. The sale of shares in Prospect Lithium Zimbabwe Limited is also prima facie subject to Australian CGT. An estimated capital gain of $474.4m was calculated in relation to this CGT event. The capital gain was reduced to nil on the basis that the Active Foreign Business Percentage calculation in respect to the entity disposed was above 90%. 46. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023(c) Deferred income tax Deferred income taxes relate to the following: Deferred tax liabilities Right of use assets Property, plant and equipment Unrealised foreign exchange movement Deferred tax assets used to offset deferred tax liabilities Deferred tax assets Lease liabilities Accruals Provisions and others Exploration and evaluation expenditure Unused tax losses Deferred tax assets used to offset deferred tax liabilities 2023 $’000 24 1 355 (380) - 25 93 107 66 4,821 (380) 2022 $’000 13 3 303 (319) - 9 228 137 - 2,846 (319) Deferred tax assets not recognised (4,732) (2,901) At the reporting date the Group has unrecognised tax losses of $19,314,031 (2022: $11,366,902) that are available for offset against future taxable profits. The potential tax benefit applied are Australia 25%, Zimbabwe 24.72%, Namibia 32%, and Mauritius 15%. Tax losses have not been recognised as a deferred tax asset as recoupment is dependent on, amongst other matters, sufficient future assessable income being earned. That is not considered certain in the foreseeable future, and accordingly there is uncertainty that the losses can be utilised. - (d) Current tax liability Income tax payable - - - 6) FINANCIAL RISK MANAGEMENT Risk management is the role and responsibility of the Board. The Group's current activities expose it to minimal risk. However, as activities increase there may be exposure to market risks, credit risks, and liquidity risks. (a) Market Risk • Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s cash and cash equivalents on variable interest rates. Interest bearing – variable interest rate Non-interest bearing Total cash and cash equivalents Weighted average interest rate 2023 $’000 24,588 1,603 26,191 1.52% 2022 $’000 467,957 6,331 474,288 0.10% 47. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023The following table demonstrates the sensitivity to a reasonably possible change in variable interest rates on that portion of cash and cash equivalents affected. With all other variables held constant, the Group’s profit before tax is affected through the impact on variable interest rate with +/- 50 basis points (bps) (2022: +/-10 bps), as follows: + / - basis points (bps) Impact to profit before tax 2023 Increase in interest rate Decrease in interest rate 2022 Increase in interest rate Decrease in interest rate • Price risks + 50 bps - 50 bps + 10 bps - 10 bps $’000 123 (123) 340 (340) The Group is not currently exposed to significant commodity price risk as it still operates in the exploration & development phase. However, future operational cash flows will be affected by fluctuations in the lithium price and other commodity prices. The Group will develop strategies to mitigate this risk when it moves from the exploration & development phase into the production phase. (b) Currency Risk Currency risk arises from investments and borrowings that are denominated in a currency other than the respective functional currencies of Group entities. The Group is exposed to foreign currency risk in the form of financial instruments held currency other than the functional currently of the Company. The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars, was as follows: Cash and cash equivalents – USD Trade and other payables – USD Total Exposure 2023 $’000 1,340 (75) 1,265 2022 $’000 6,159 (51) 6,108 Assuming all other variables remain constant, a 10% increase or decrease of the Australian dollar at 30 June 2023 against the USD would have resulted in a decrease in loss before tax by $141,000 (2022: $679,000) or increase in loss before tax by $115,000 (2022: $555,000). (c) Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s cash and cash equivalents. Cash and cash equivalents comprise of cash on hand and demand deposits. The Group limits its credit risk by holding cash balances and demand deposits with reputable counterparties with acceptable credit rating. (d) Liquidity Risk Prudent liquidity risk management implies maintaining sufficient cash to meet commitments as and when they fall due. The Group manages liquidity risk by preparing forecasts and monitoring actual cash flows and requirements for future capital raisings. The Group does not have committed credit lines available, which is appropriate given the nature of its operations. Surplus funds are invested in a cash management account with Westpac Banking Corporation which is available as required. The material liquidity risk for the Group is the ability to raise equity in the future. 48. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 20237) CASH AND CASH EQUIVALENTS Total cash and cash equivalents 2023 $’000 26,191 2022 $’000 474,288 (a) Reconciliation of operating (loss) / income after income tax to net cash flows used in operating activities (Loss) / profit after tax (5,556) 397,507 Adjustments to reconcile (loss) / profit after tax to net cash flows Non-cash income and expense items Depreciation Share based payments Share of net loss in joint venture Impairment of exploration and evaluation expenditure Gain on revaluation of rehabilitation provision Gain on sale of Penhalonga Gold Project Loss on sale of property, plant and equipment Gain on sale of subsidiaries Loss on revaluation of investment Foreign exchange difference Others Interest income received Changes in operating assets and liabilities (Increase) / decrease in operating trade and other receivables Increase in other assets (Decrease) / increase in operating trade and other payables (Decrease) / increase in provisions (Decrease) in tax liabilities 106 675 15 324 - - - - 5 - 56 699 - 137 (2) (964) 16 (415,389) 6 12,423 (825) (315) 434 (8) (750) (8) - (269) (19) 531 31 - Net cash (outflows) from operating activities (5,588) (5,552) 8) TRADE AND OTHER RECEIVABLES GST / VAT receivable Related party receivable (refer Note 26) Other receivables Total trade and other receivables None of these are past due or impaired as at 30 June 2023 (2022: Nil). 2023 $’000 - 33 6 39 2022 $’000 473 - - 473 49. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 20239) INVESTMENT IN JOINT VENTURE Investment in joint venture The movements during the year are as follows: Initial investment Additional funding for Phase 1 Share in net loss of Richwing Effect of foreign currency exchange differences Investment in joint venture 2023 $’000 1,458 870 616 (15) (13) 1,458 2022 $’000 - - - - - - On 27 October 2022, the Group signed the Earn-In and Shareholders Agreement (“the Agreement”) with Osino Gold Exploration and Mining (Pty) Ltd (“Osino”) and Richwing Exploration (Pty) Ltd (“Richwing”). The agreement outlines that the Group has agreed to buy and Osino has agreed to sell the initial interest in Richwing and upon completion, Richwing will serve as a special purpose company to facilitate the joint venture between the Group and Osino for the purpose of exploring and developing a lithium project on the Executive Prospecting Licence. The Group agreed to pay US$560,000 as initial investment to acquire 20% interest in Richwing. In addition to that, the Group must fund solely the Phase 1 Earn-in Expenditure of Richwing amounting to US$440,000 in exchange for an additional 20% interest in Richwing. The Group may also elect to fund the Phase 2 Earn-in Expenditure of Richwing amounting to US$560,000 in exchange for additional interest in Richwing which will be calculated based on formula outlined in the agreement. As at 30 June 2023, the Group has paid the initial investment of US$560,000 and has funded a total of US$416,584 of the Phase 1 Earn-in expenditure. In July 2023, the remaining required funding for the Phase 1 Earn-in Expenditure was fulfilled. In August 2023, the Group was issued with the additional 20% interest in Richwing. In addition, the Group elected to proceed with funding the Phase 2 Earn-in Expenditure. 10) OTHER CURRENT ASSETS Prepayments Deposits Total other current assets 2023 $’000 24 31 55 2022 $’000 23 24 47 50. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 202311) PROPERTY, PLANT AND EQUIPMENT Right of use asset Leasehold improvements Plant and machinery Vehicles Office equipment Total property, plant and equipment 2023 $’000 2022 $’000 97 - 49 188 55 389 52 3 - 195 32 282 Total $’000 441 262 (89) 13 Total $’000 973 242 (14) Included in the right to use asset is the lease for the Company’s head office in Australia. Reconciliation of Property, plant and equipment – 2023 Buildings $’000 Right of use asset $’000 Leasehold improvements $’000 Plant and machinery $’000 Vehicles $’000 Office equipment $’000 Opening balance at cost Additions Disposals Effect of foreign currency exchange differences Closing balance at cost Opening accumulated depreciation Depreciation Disposals Effect of foreign currency exchange differences Closing accumulated depreciation Net written down value - - - - - - - - - - - 89 116 (89) - 116 (37) (71) 89 - (19) 97 7 - - - 7 (4) (3) - - (7) - 42 60 - 3 207 41 - 7 96 45 - 3 105 255 144 627 (42) (12) - (2) (56) 49 (12) (54) - (1) (67) 188 (64) (159) (24) (164) - (1) 89 (4) (89) (238) 55 389 Reconciliation of Property, plant and equipment – 2022 Buildings $’000 Right of use asset $’000 Leasehold improvements $’000 Plant and machinery $’000 Vehicles $’000 Office equipment $’000 Opening balance at cost Additions Disposals Subsidiary assets disposed (see Note 22(c)) Effect of foreign currency exchange differences Closing balance at cost 41 - - (41) - - 89 - - - - 89 7 - - - - 7 396 4 (2) 87 207 - 353 31 (12) (364) (88) (284) (777) 8 42 1 207 8 96 17 441 51. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023Total $’000 (447) (149) 8 (249) (66) 8 245 436 (2) (64) 32 2023 $’000 164 (58) - 106 2023 $’000 - 1,635 1,635 2023 $’000 486 1,437 (324) 36 1,635 (7) (159) 282 2022 $’000 149 - (93) 56 2022 $’000 185 301 486 2022 $’000 91 592 (198) 1 486 Reconciliation of Property, plant and equipment – 2022 Opening accumulated depreciation Depreciation Disposals Subsidiary assets disposed (see Note 22(c)) Effect of foreign currency exchange differences Closing accumulated depreciation Net written down value Buildings $’000 Right of use asset $’000 Leasehold improvements $’000 Plant and machinery $’000 Vehicles $’000 Office equipment $’000 (2) (1) - 2 1 - - (15) (22) - - - (37) 52 (1) (3) - - - (4) 3 (155) (31) - 150 (6) (42) - (25) (26) - 39 - (12) 195 Depreciation Depreciation transferred to capitalised exploration and evaluation expenditure Depreciation transferred to capitalised mine properties Depreciation recognised in statement of profit or loss and other comprehensive income 12) EXPLORATION AND EVALUATION EXPENDITURE Exploration and evaluation expenditure comprises: Shawa – Rare Earth Elements Step Aside – Lithium Total exploration and evaluation Opening balance Expenditure incurred Impairment of exploration and evaluation expenditure Effect of foreign currency exchange differences Total exploration and evaluation expenditure 52. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 202313) TRADE AND OTHER PAYABLES Trade payables (i) Accruals Total trade and other payables 2023 $’000 113 343 456 2022 $’000 97 1,034 1,131 (i) The Group does not have any trade payables more than 31 days past the respective date of the original invoice. 14) LEASE LIABILITY The balance sheet shows the following amounts relating to leases: Right-of-use asset – office space Lease liabilities Current Non current Total lease liabilities 2023 $’000 2022 $’000 57 41 98 36 - 36 With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability. The Group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred. In 2021, the Group entered into a 2 year lease for the head office in Australia. The lease has expired on 28 February 2023 and was further renewed for another 2 year lease term. 15) PROVISIONS Current Annual leave provision Total current provisions Non current Long service leave provision Total non current provisions 2023 $’000 2022 $’000 118 118 36 36 125 125 37 37 53. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 202316) CONTRIBUTED EQUITY (a) Issued share capital Ordinary shares fully paid (b) Movement in ordinary share capital Date Details Balance at 30 June 2021 22 July 2021 5 November 2021 Balance at 30 June 2022 8 July 2022 4 August 2022 Balance at 30 June 2023 Issue of shares to acquire additional ownership in subsidiary Issue of shares via placement Cost of capital raising – cash Issue of shares upon exercise of options (i) Issue of shares upon exercise of options(ii) Capital return to shareholders (note 18) 2023 2022 No. of Shares No. of Shares 462,259,462 448,759,462 No. of Shares 374,025,855 9,497,680 45,000,000 - 20,235,927 448,759,462 $’000 76,647 3,087 18,000 (793) 4,403 101,344 13,500,000 3,886 - 462,259,462 (78,584) 26,646 (i) This includes cash received of $2,557,000 and transfer from the share based payments reserve of $1,846,000. Some option holders utilised a cashless exercise facility offered allowing the conversion of options for a reduced cash payment in forfeiture of shares. This resulted in the issue of only 20,235,927 shares on exercise of the 26,500,000 options. (ii) This includes cash received of $3,405,000 and transfer from the share based payments reserve of $481,000. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands or on a poll every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote. 17) RESERVES Share based payments reserves Other reserves Foreign currency translation reserve Total reserves 2023 $’000 10,703 (877) 18,236 28,062 2022 $’000 10,509 - 18,281 28,790 54. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023Nature and Purpose of Reserves The share based payments reserve arises pursuant to an issue of shares or options as consideration for a service or an acquisition transaction. The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and translation differences on intercompany loans. The other reserves is used for any other equity transactions that are not directly attributed to other component of the equity accounts. (a) Share Based Payments Reserve (i) Balance at yearend 30 June 2023 Options Rights 30 June 2022 Options Rights (ii) Movement in options Date Details Balance at 30 June 2021 November and December 2021 Share based payment expense on options granted in prior periods February to June 2022 Options exercised Balance at 30 June 2022 8 July 2022 7 October 2022 23 November 2022 31 January 2023 January to June 2023 Balance at 30 June 2023 Options exercised Grant of options Grant of options Grant of options Forfeiture No. of Options and Rights 17,850,000 4,400,000 $’000 10,510 193 22,250,000 10,703 13,500,000 10,509 - - 13,500,000 10,509 No. of Options 39,750,000 - (26,250,000) 13,500,000 (13,500,000) 10,250,000 8,600,000 500,000 (1,500,000) $’000 11,656 699 (1,846) 10,509 (481) 154 333 6 (11) 17,850,000 10,510 (iii) Movement in performance rights Date Details No. of Rights $’000 Balance at 30 June 2021 / 30 June 2022 - 7 October 2022 23 November 2022 Balance at 30 June 2023 Grant of performance rights Grant of performance rights In August 2023, a total of 1,540,000 performance rights above have lapsed. - 2,400,000 2,000,000 4,400,000 - 82 111 193 55. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023(b) Foreign Currency Translation Reserve Movement in reserve Opening balance Increase in ownership in subsidiary Currency translation differences Closing balance (c) Other Reserves Movement in Other Reserves Opening balance Increase in ownership of Prospect Lithium Zimbabwe (Pvt) Ltd (Note 19(b)) Impact of debt to equity swap (Note 19(b)) On sale of subsidiary Increase in ownership of Hawkmoth Mining & Exploration (Pvt) Limited Zimbabwe (Note 19(b)) Closing balance 18) (ACCUMULATED LOSSES) / RETAINED EARNINGS Balance at the beginning of the year Payment of dividends Net (loss) / profit attributable to equity holders of the Company (Accumulated losses) / retained earnings at end of year 2023 $’000 18,281 (97) 52 18,236 2023 $’000 - - - - (877) (877) 2023 $’000 345,025 (365,185) (5,482) 25,642 2022 $’000 (417) - 18,698 18,281 2022 $’000 - 4,484 1,941 (6,425) - - 2022 $’000 (52,548) - 397,573 345,025 On 4 August 2022, the Company paid dividend of $365,184,975 to its shareholders (2022: Nil). This represents a payment of $0.79 per share (2022: Nil). At the same time the Company paid a Capital return of $78,584,109 to its shareholders (2022: Nil). This represents a payment of $0.17 per share (2022: Nil). Both payments were made based on 462,259,462 shares on issue at that date. 56. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 202319) SUBSIDIARIES Details of the Group’s material subsidiaries at the end of the reporting period are as follows: Principal activity Country of incorporation Ownership and voting interest Prospect Minerals Pte Ltd Holding company Singapore Promin Resource Holdings Pte Ltd Holding company Singapore Prospect Lithium Zimbabwe (Pvt) Limited Exploration & evaluation Zimbabwe Thornvlei Farming Enterprises (Pvt) Limited Exploration & evaluation Zimbabwe 2023 100% 100% - - Hawkmoth Mining & Explorations (Pvt) Limited Exploration & evaluation Zimbabwe 100% 2022 100% 100% - (i) - (i) 70% Harrier Nickel Resources (Private) Limited (formerly known as Tegridy (Private) Limited) Eagle Lithium Resources (Private) Ltd (formerly known as Breattaking Investments Private Limited) Hawk Rare Earth (Private) Limited (formerly known as Market Street (Private) Limited) Exploration & evaluation Zimbabwe 100% 100% Exploration & evaluation Zimbabwe 100% 100% Exploration & evaluation Zimbabwe 100% Coldawn Investments (Pvt) Limited Exploration & evaluation Zimbabwe Stepaside Lithium Pte Ltd Holding company Singapore Prospect Resources (Mauritius) Limited Holding company Mauritius Belham Investments (Proprietary) Limited Exploration & evaluation Namibia - 100% 100% 100% (i) The entity was sold on 20 April 2022 as detailed in Note 19(c). 100% - (ii) - - - (ii) The Group entered into an option agreement to sell Coldawn Investments (Private) Limited, which holds the Penhalonga Gold Project during 2021. The option agreement was executed in 2022 generating revenue of $964,000 (Note 4). (a) Details of Non-Wholly Owned Subsidiaries that have Material Non-Controlled Interest The table below shows details of non-wholly owned subsidiaries of the Group that have non-controlling interests Place of incorporation and principal place of business Proportion of ownership interests and voting rights held by non-controlling interests Name of subsidiary Prospect Lithium Zimbabwe (Pvt) Limited Zimbabwe Thornvlei Farming Enterprises (Pvt) Limited Zimbabwe 2023 % - - 2022 % - (i) - (i) Hawkmoth Mining & Explorations (Pvt) Limited Zimbabwe -(ii) 30% Profit/(loss) allocated to non-controlling interests Accumulated non-controlling interests 2023 $’000 2022 $’000 2023 $’000 2022 $’000 - - (74) (74) (63) - 129 66 - - - - - - (900) (900) (i) On 21 July 2021 the ownership in Prospect Lithium Zimbabwe (Pvt) Limited has increased to 87% from 70%. On 9 February 2022 the ownership in Thornvlei Farming Enterprises (Pvt) Limited was increased to 100% from 70%. These subsidiaries were then sold by the Group on as detailed in Note 19(c). The loss reported relates to the period before the subsidiaries were sold. (ii) On 29 August 2022, the Group acquired the remaining outside equity interest of 30% (100 shares) in Hawkmoth Mining & Exploration (Pvt) Limited. 57. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023(b) Transactions with Non-controlling Interests (i) Increase in ownership of Prospect Lithium Zimbabwe (Pvt) Limited On 22 July 2021, Prospect Minerals Pte Ltd acquired an additional 17% of the issued shares of Prospect Lithium Zimbabwe (Pvt) Limited for cash consideration of $1,187,000 and the issue of 9,497,680 shares in Prospect Resources Limited valued at $3,087,000. Immediately prior to the purchase, the carrying amount of the existing 30% non-controlling interest in Prospect Lithium Zimbabwe (Pvt) Limited were net liabilities of $208,000. The group recognised a decrease in non-controlling interests of $208,000 and a decrease in equity attributable to owners of the parent of $4,484,000. On 29 August 2022, the Group acquired the remaining outside equity interest of 30% (100 shares) in Hawkmoth Mining & Exploration (Pvt) Limited Zimbabwe for a consideration of USD100. Immediately prior to the purchase, the carrying amount of the existing 30% non-controlling interest in Hawkmoth Mining & Exploration (Pvt) Limited Zimbabwe was $(974,000). The group recognised an increase in non-controlling interests of $974,000 and a decrease in equity attributable to owners of the parent of $877,000. The effects on the equity attributable to the owners of Prospect Resources Limited are summarised as follows: Carrying amount of non-controlling interests acquired Reattribution of owners controlling interest – foreign currency translation reserve Consideration paid to non-controlling interests 2023 $’000 (974) 97 - 2022 $’000 (208) (3) (4,273) Excess of consideration paid recognised in the transactions with non-controlling interests reserve within equity (877) (4,484 (ii) Debt to equity swap On 17 December 2021 Prospect Lithium Zimbabwe (Pvt) Limited issued shares as part of a debt-to-equity swap transaction whereby US$10,700,000 owed by Prospect Lithium Zimbabwe (Pvt) Limited to Prospect Minerals Pte Ltd was converted into equity in Prospect Lithium Zimbabwe (Pvt) Limited. This resulted in the recognition of a share premium of $14,930,000 by the Group. Shares in Prospect Lithium Zimbabwe (Pvt) Limited were issued to the extent necessary to maintain the existing ownership profile of Prospect Lithium Zimbabwe (Pvt) Limited. The shares issued to the non-controlling interest to maintain their 13% ownership was completed for nil consideration resulting in a decrease in equity attributable to owners of the parent of $1,941,000 recognised in the transactions with non-controlling interests reserve within equity. (iii) Increase in ownership of Thornvlei Farming Enterprises (Pvt) Limited On 9 February 2022, Prospect Lithium Zimbabwe (Pvt) Limited acquired the remaining 30% of Thornvlei Farming Enterprises (Pvt) Limited for cash consideration of $0.30. (c) Discontinued Operations (i) Description On 23 August 2021 the Group announced it had decided to commence a structured process giving interested parties the opportunity to put forward proposals to fully fund the Arcadia project. Following this process, on 23 December 2021, the Group announced it had executed a binding agreement for the sale of its 87% interest in the Arcadia project subject to the completion of certain conditions. In accordance with the binding agreement and following the satisfaction of the conditions precedent, the sale of the Arcadia project was completed on 20 April 2022 via the sale of the Group’s ownership in Prospect Lithium Zimbabwe (Pvt) Limited and Thornvlei Farming Enterprises (Pvt) Limited for US$365,755,000. In addition to the sale of its ownership interest in its subsidiaries, the Group sold to the buyer it’s interest in intercompany loans at completion for US$12,000,000 in cash. The sale transaction is detailed in Note 19(c). The amounts presented in the Consolidated Statement of Profit or Loss and Comprehensive Income under discontinuing operations represents the profit on the Group’s share in the subsidiaries sold. Financial information relating to the discontinued operations for the period to date of disposal are listed below. The subsidiaries were not previously classified as held-for-sale or as discontinued operation. 58. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023(ii) Financial performance and cashflow information The financial performance and cashflow information presented are the 9.66 months ended 20 April 2022 (2022 column), disclosed within profit / (loss) from discontinued operations. Revenue Expenses Loss before income tax Net cash outflow from operating activities Net cash outflow from investing activities Net cash inflow from financing activities Net decrease in cash generated by the discontinued operations (iii) Details of the sale of subsidiaries Disposal consideration – cash received for sale of interest in subsidiaries Costs incurred on completion of transaction and operating loss for the period Cost of external consultants for transaction support Loss on sale of intercompany loans Write back of investment in subsidiary Gain on sale before income tax and reclassification of foreign operations Reclassification of foreign operations Income tax on gain Profit from discontinued operations The carrying amounts of assets and liabilities as at the date of sale (20 April 2022) were: 2023 $’000 - - - - - - - 2023 $’000 - - - - - - - - - Cash Property, plant and equipment Trade and other receivables Intangible assets Mine properties (i) Total assets Trade and other payables Loans Provisions Total liabilities Net assets 2022 $’000 98 (611) (513) (293) (4,861) 5,099 (55) 2022 $’000 493,336 (46,957) (8,991) (606) (19,705) 417,077 (1,688) - 415,389 20 April 2022 $’000 150 341 501 293 29,564 30,849 23 18,077 261 18,361 12,488 59. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023(i) The mine properties include the following transactions in the previous year prior to its disposal: Opening balance Expenditure incurred Impairment Proceeds of sale of lithium carbonate produced through the pilot plant Rehabilitation asset Effect of foreign currency exchange differences 20) PROSPECT RESOURCES LIMITED PARENT COMPANY INFORMATION Assets Current assets Non-current assets Total Assets Liabilities Current liabilities Non-current liabilities Total Liabilities Equity Contributed equity Reserves Accumulated (losses) / profits Financial Performance (Loss) / profit for the year Other comprehensive income Total Comprehensive (Loss)/ Income 20 April 2022 $’000 25,605 4,067 61 (674) 195 310 29,564 2022 $’000 474,705 189 474,894 1,241 17,153 18,394 101,344 10,509 344,646 456,499 2023 $’000 25,214 6,195 31,409 458 17,844 18,302 26,646 10,703 (24,242) 13,107 (3,703) 399,569 - - (3,703) 399,569 The accumulated (losses) / profits is after taking into account the payment of dividends of $365,184,975 during the year (2022: $nil). Parent Entity Contingencies and Guarantees The parent entity has not guaranteed any loans for any entities during the year (2022: Nil). Parent Entity Commitments The parent entity has entered into contracts with its directors and certain executives and consultants whereby minimum notice periods (usually three months) have been provided by the parent entity. This totals $516,000 (2022: $615,000). 60. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 202321) SHARE-BASED PAYMENTS During the year, the Group recognised share based payments expense of $674,765 (2022: $699,121) from equity-settled share based payment transactions. The following table lists the inputs to the model used in determining the current year expense: Series Options Issued No. of options Grant date Share price Exercise price Asset Interest rate Expiry date Volatility Fair value at grant date Vesting condition and period Managing Director Long Term Incentive 3,000,000 23/11/2022 $0.170 $0.150 3.27% Non-Executive Directors Long Term Incentive Management Long Term Incentive Management Long Term Incentive 5,600,000 23/11/2022 $0.170 $0.150 3.27% 10,250,000 500,000 7/10/2022 31/01/2023 $0.096 $0.150 3.34% $0.115 $0.170 3.17% 07/10/2026 07/10/2026 07/10/2026 07/10/2026 110% $0.130 (i) 110% $0.130 (ii) (iii) 110% $0.064 (i) (iv) 110% $0.080 (i) (i) Management’s long term incentive options are subject to two performance hurdles: (a) The Company’s underlying share price exceeding $0.25 per share for a continuous period of 30 days during a 3 year period from the grant date; and (b) Remaining in employment of the company 3 years after grant date. (ii) The non-executive directors long term incentive options vest evenly on 7 October 2023, 7 October 2024, and 7 October 2025 and require they remain directors of the Group at the end of each vesting periods. (iii) A total of 1,000,000 of options were lapsed during the year following the resignation of one of the directors on 23 January 2023. (iv) A total of 500,000 options were lapsed during the year following the resignation of an employee. Series Rights Issued No. of Rights Grant date Share price Exercise price Expiry date Fair value at grant date Vesting condition and period Managing Director Short Term incentive Other Key Management Personnel Short Term Incentive 2,000,000 23/11/2022 $0.170 $0.00 07/10/2025 $0.170 (i) 2,400,000 7/10/2022 $0.096 $0.00 07/10/2025 $0.096 (i) (i) Managing director and other key management personnel have been granted rights in lieu of a cash based short term incentive scheme. The rights on offer are subject to satisfaction of targets as defined by the Company’s annual scorecard which is based on both exploration and corporate targets and approval by the Board. Performance against the scorecard is assessed annually based on the company’s performance in the 12 months up to the assessment date. The vesting of these incentives is subject to vesting conditions as discussed above. 50% of the incentive will vest at the end of the year after the grant date and the remaining 50% will vest 24 months after the grant date, provided the employee remains employed by the Group. In August 2023, a total of 1,540,000 performance rights have lapsed which equates to the 35% of the 2023 short term incentive performance hurdles that have not been met. The total expense recognised during the year is based on the actual incentives that will eventually vest. 61. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023 The following table lists the inputs to the model used in determining the prior year expense: Options series No. of options Grant date Share price Exercise price Asset interest rate Expiry date Volatility Fair value at grant date Vesting condition and period Management incentive Management incentive Executive incentive Broker Directors 6,250,000 4,500,000 6,000,000 13,500,000 5,000,000 17/11/2020 06/02/2021 25/06/2021 23/04/2021 25/06/2021 $0.125 $0.24 0.11% $0.18 $0.26 1.77% $0.195 $0.26 1.77% $0.15 (iii) 1.77% $0.195 $0.24 1.77% 05/11/2023 03/02/2025 03/02/2025 31/12/2025 07/01/2025 100% $0.0487 (i), (ii) 42.33% $0.042 (ii) 42.33% $0.047 (ii) 42.33% 42.33% (iii) (iii) $0.051 (ii) (i) Management options vesting conditions (a) 1,562,500 options vested upon employment at 6 months from grant date in the prior period and a further 1,562,500 options vested upon employment at 12 months from grant date; (b) The remaining options vested on 23 December 2021 in line with (ii) below. (ii) The terms of the options provided for their vesting on a Change in Control Event, covering a change of control at both a corporate and project level. The signing of the SSA triggered a change in control event as the Group has agreed to sell all or a substantial part of the assets or business of the Group (the Arcadia Project) to a third party, which was not the result of an internal restructure. (iii) Broker options are fully vested but have exercise prices attached as follows: (a) 4,000,000 options have an exercise price of $0.22 and fair value per option of $0.0415; (b) 4,500,000 options have an exercise price of $0.25 and fair value per option of $0.0357; and (c) 5,000,000 options have an exercise price of $0.28 and fair value per option of $0.0309. The following share-based payment arrangements were in existence during the current year: Series Options Number Grant Date Expiry Date Exercise Price Fair Value per Option at Grant Date Issued 7 October 2022 10,250,000 7/10/2022 07/10/2026 Issued 7 October 2022 8,600,000 23/11/2022 07/10/2026 Issued 31 January 2023 500,000 31/01/2023 07/10/2026 Rights Issued 7 October 2022 2,400,000 7/10/2022 07/10/2025 Issued 7 October 2022 2,000,000 23/11/2022 07/10/2025 $0.15 $0.15 $0.17 $0.00 $0.00 656,000 $1,118,000 $40,000 $230,400 $340,000 The following share-based payment arrangements were in existence during the prior year: Series Options Number Grant Date Expiry Date Exercise Price Fair Value per Option at Grant Date Issued 13 May 2018 4,500,000 13/05/2018 12/05/2022 Issued 17 November 2020 6,250,000 17/11/2020 05/11/2023 Issued 6 February 2021 4,500,000 06/02/2021 03/02/2025 $0.60 $0.26 $0.26 Issued 23 April 2021 13,500,000 23/04/2021 31/12/2025 $0.22-$0.28 Issued 25 June 2021 6,000,000 25/06/2021 03/02/2025 Issued 25 June 2021 5,000,000 25/06/2021 07/01/2025 $0.26 $0.24 $782,289 $304,423 $189,079 $480,938 $279,725 $254,314 62. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023The following table illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options and rights during the year: Outstanding at 1 July Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at 30 June Exercisable at 30 June 2023 No. 2023 WAEP $/Share 13,500,000 19,350,000 (1,500,000) (13,500,000) - 17,850,000 - 0.25 0.15 0.15 0.25 - 0.15 - 2022 No. 2022 WAEP $/Share 39,750,000 0.29 - - (26,250,000) - 13,500,000 13,500,000 - - 0.31 - 0.25 0.25 The weighted average remaining contractual life for the share options and performance rights outstanding as at 30 June 2023 is 3.27 years (2022: 3.51 years) for share options and 2.27 years for performance rights (2022: Nil). The range of exercise prices for options outstanding at the end of the year was $0.15 - $0.17 (2022: $0.22 - $0.28). 22) COMMITMENTS FOR EXPENDITURE (a) Exploration Commitments In order to maintain an interest in the mining and exploration tenements in which the Group is involved, the Group is committed to meet the conditions under which the tenements were granted and the obligations of any joint venture and/ or acquisition agreements. Outstanding exploration commitments are as follows: Not longer than 1 year Longer than 1 year and not longer than 5 years 2023 $’000 2022 $’000 880 - 880 - - - The above does not include the potential commitments for Kesya Rare Earths Project (“Kesya”). On 12 May 2023, the Company signed an option agreement with Antler Exploration Zambia Limited (“Antler”) whereby the Company will have the right to earn a 51% interest in Kesya, an exploration project in southern part of Zambia. The transaction is subject to the satisfaction of certain conditions, which have not been fully satisfied as at 30 June 2023. Upon fulfilment of these preceding conditions, the Company will be committed to spend US$950,000 within one year, which US$500,000 will be through the issue of the Company shares. (b) Operating Lease Commitments The Group has an operating lease commitment for office rental and equipment totaling $104,380 (2022: $45,000). (c) Other Commitments The Group has entered into contracts with its directors and certain executives and consultants whereby minimum notice periods (usually three months) have been provided by the Group. This totals $648,000 as at 30 June 2023 (2022: $615,000). 23) CONTINGENT LIABILITIES The Group has no contingent liabilities. 63. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 202324) AUDITORS REMUNERATION Audit of the parent entity Audit and audit review of the financial reports Other services Auditor of subsidiaries Audit services The auditor of the Group is Stantons. 25) KEY MANAGEMENT PERSONNEL DISCLOSURES The aggregate compensation made to Key Management Personnel of the Group is set out below: Short term employee benefits Post employment benefits Share based payments Total compensation made to key management personnel 26) RELATED PARTY TRANSACTIONS (a) Transactions with related parties in the Group 2023 $’000 2022 $’000 81 - 81 - 98 - 98 50 2023 2022 $ $ 1,339,890 2,122,852 85,405 65,067 597,969 663,195 2,023,264 2,851,114 The Group consists of Prospect Resources Limited (the parent entity) and its controlled entities (see note 19). Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. (b) Transactions with other related parties During the year, the Group acquired 20% interest in Richwing. At 30 June 2023, the Group has capitalised a total investment balance of $1,457,714 (2022: Nil) and has receivable balance of $33,418 (2022: Nil). These are further outlined in Note 9 and Note 8. The accruals at 30 June 2023 include outstanding director fees and bonuses of Nil (2022: $773,451). 64. Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 202327) EARNINGS PER SHARE (EPS) Continuing operation 2023 2022 Loss after income tax attributable to members of Prospect Resources Limited ($’000) (5,482) (17,756) Weighted average number of ordinary shares outstanding during the year for basic EPS 462,000,558 415,154,600 Weighted average number of ordinary shares outstanding during the year for diluted EPS 462,000,558 424,246,520 Basic loss per share (cents per share) Diluted loss per share (cents per share) Discontinued operation (1.19) (1.19) (4.29) (4.20) Profit after income tax attributable to members of Prospect Resources Limited ($’000) - 415,389 Weighted average number of ordinary shares outstanding during the year for basic EPS 462,000,558 415,154,600 Weighted average number of ordinary shares outstanding during the year for diluted EPS 462,000,558 424,246,520 Basic earnings per share (cents per share) Diluted earnings per share (cents per share) - - 100.06 97.91 As at 30 June 2023, 17,500850,000 unlisted options and 4,400,000 performance rights which represent potential ordinary shares of 17,500850,000 and 2,860,000, respectively, were not considered dilutive for the purposes of calculating the loss per share for the year ended 30 June 2023, as they would decrease the loss per share. 28) SUBSEQUENT EVENTS Other than as stated below, no matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years: • • • In July 2023, the Group entered into a shareholder agreement that reduced its ownership in Eagle Lithium Resources (Private) Ltd, the subsidiary entity that holds the Step Aside exploration project, by 10% through the issue of ordinary shares to three minority shareholders based in Zimbabwe as a consideration for the land access and future support of the exploration activities and local community. In August 2023, Osino Resources Corp has confirmed completion of the Earn-in 1 Expenditure and approved the issue of the additional 20% interest in the Omaruru Lithium Project. In August 2023, a total of 1,540,000 performance rights have lapsed which equates to the ratio of the 2023 short term incentive performance hurdles that have not been met. Annual Report 2023 65. 65. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 30 JUNE 2023AUDITORS’ INDEPENDENCE DECLARATION PO Box 1908 West Perth WA 6872 Australia Level 2, 40 Kings Park Road West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au 21 September 2023 Board of Directors Prospect Resources Limited Level 2, 33 Richardson Street West Perth WA 6005 Dear Directors RE: PROSPECT RESOURCES LIMITED In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Prospect Resources Limited. As the Audit Director for the audit of the financial statements of Prospect Resources Limited for the year ended 30 June 2023, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Authorised Audit Company) Samir Tirodkar Director Liability limited by a scheme approved under Professional Standards Legislation Stantons Is a member of the Russell Bedford International network of firms 66. INDEPENDENT AUDITOR’S REPORT PO Box 1908 West Perth WA 6872 Australia Level 2, 40 Kings Park Road West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PROSPECT RESOURCES LIMITED REPORT ON THE AUDIT OF THE FINANCIAL REPORT OPINION We have audited the financial report of Prospect Resources Limited (“the Company”) and its subsidiaries (“Group”), which comprises the consolidated statement of financial position as at 30 June 2023, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. BASIS FOR OPINION We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Liability limited by a scheme approved under Professional Standards Legislation Stantons Is a member of the Russell Bedford International network of firms 67. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' Report INDEPENDENT AUDITOR’S REPORT KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Key Audit Matters How the matter was addressed in the audit Share based payments During the financial year ended 30 June 2023, the Company awarded 4,400,000 Performance Rights and 19,350,000 share options respective directors, management and employees. The awards vest subject to the achievement of certain vesting conditions which commences from the grant date in the current year and extends into subsequent years. to Inter alia, our audit procedures following: included the i. Reviewing minutes of meetings, ASX announcements, agreements and considered other transactions undertaken during the year; The Group valued the share options using the Black Scholes methodology while the performance rights were valued based on the prevailing share price on the date of grant and estimated likelihood of vesting conditions being achieved over the vesting period for each tranche of awards. The Group has performed calculations to record the related share- based payments expense of $674,675 in the consolidated statement of profit or loss and other comprehensive income. Due to the complex nature of the transactions and estimates used in determining the valuation of the share-based payment arrangements and vesting periods, we consider the Group’s calculation of the share-based payments expense to be a key audit matter. In determining the share-based payments expense, the Group made assumptions in respect of future board’s financial decisions as well as estimates of achievement of certain mining targets. Refer to note 21 to the consolidated statement of profit or loss and other comprehensive income for the disclosure relating to share-based payments expense. ii. Reviewing supporting relevant documentation to obtain an understanding of terms and the contractual nature and conditions payment of arrangements; share-based iii. Reviewed the perimeters used by the management’s experts in their assessment of share based payments as follows:- • • assessing the appropriateness of the valuation method used; assessing the reasonableness of the assumptions and inputs used within the valuation model; iv. Challenging management’s assumptions in relation to the likelihood of achieving the vesting conditions; v. Assessing the fair value of the calculation through re-performance using appropriate inputs; and vi. Assessing the accuracy of the share-based payments expense and the adequacy of disclosures made by the financial report. the Group in OTHER INFORMATION The directors are responsible for the other information. The other information comprises the information included in the Company's annual report for the year ended 30 June 2023 but does not include the financial report and our auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. 68. INDEPENDENT AUDITOR’S REPORT In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL REPORT The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL REPORT Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. We evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. 69. Annual Report 2023 OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' Report INDEPENDENT AUDITOR’S REPORT We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in Internal control that we identify during our audit. The Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 20 to 27 of the directors’ report for the year ended 30 June 2023. In our opinion, the Remuneration Report of Prospect Resources Limited for the year ended 30 June 2023 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (An Authorised Audit Company) Samir Tirodkar Director West Perth, Western Australia 21 September 2023 70. ASX Additional Information 71. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023ASX Additional Information Additional Information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below. The shareholder information was applicable as at 12 September 2023. (a) Substantial Shareholders The substantial shareholders are: Holder Name Citicorp Nominees Pty Limited J P Morgan Nominees Australia Pty Limited Morgan Stanley Australia Securities (Nominee) Pty Limited HSBC Custody Nominees (Australia) Limited (b) Voting Rights Ordinary Shares Holding Balance 95,590,359 48,932,677 28,884,125 25,757,232 % IC 20.68% 10.59% 6.25% 5.57% On a show of hands every member present at a meeting of shall have one vote and upon a poll each share shall have one vote. Options There are no voting rights attached to the options (c) Number of Holders Class of Equity Securities Fully paid ordinary shares Options Performance rights (d) Distribution of Equity Security Holders Number of holders 3,338 14 3 Holding Ranges Holders Total Units % Issued Share Capital 0.06% 0.63% 0.90% 7.63% 262,723 2,908,143 4,154,727 35,288,627 419,645,242 90.78% 527 999 527 1,041 244 3,338 462,259,462 100.00% Above 0 up to and including 1,000 Above 1,000 up to and including 5,000 Above 5,000 up to and including 10,000 Above 10,000 up to and including 100,000 Above 100,000 Totals (e) Less than Marketable Parcels There were 1,569 holders of less than a marketable parcel of ordinary shares. (b) Equity Security Holders 72. ASX Additional Information The names of the twenty largest holders of quoted equity securities are listed below: Position Holder Name Holding % Issued Shares 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED "MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED " HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED "BNP PARIBAS NOMS PTY LTD " MBM CAPITAL PARTNERS LLP "MR KENNETH JOSEPH HALL " BUTTONWOOD NOMINEES PTY LTD BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED "MR SAMUEL TIMOTHY HOSACK & MRS BARBARA TAMARA SAMANTHA HOSACK " "NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT>" "BNP PARIBAS NOMINEES PTY LTD " FARVIC CONSOLIDATED MINES (PVT) LTD "ECAPITAL NOMINEES PTY LIMITED " ARMOURED FOX CAPITAL PROPRIETARY LIMITED MRS SAMANTHA JAYNE GOLDBERG "HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED " MR TREVOR MILES BARNARD MR ZIVANAYI RUSIKE  Total  Total issued capital - selected security class(es) 95,590,359 48,932,677 28,884,125 25,757,232 18,303,257 14,125,000 13,150,000 11,005,797 10,705,576 10,000,000 9,970,854 8,950,194 7,293,824 7,123,260 6,767,324 6,018,028 4,185,000 3,454,964 3,212,103 3,040,374 20.68% 10.59% 6.25% 5.57% 3.96% 3.06% 2.84% 2.38% 2.32% 2.16% 2.16% 1.94% 1.58% 1.54% 1.46% 1.30% 0.91% 0.75% 0.69% 0.66% 336,469,948 462,259,462 72.79% 100.00% Restricted securities Class of Restricted Securities Type of Restriction Number on Issue End date Fully paid ordinary shares Voluntary escrow 4,748,840 25% released every 6 months Other Information The Company is not currently conducting an on-market buy back. There are no issues of securities approved for the purposes of item 7 of section 611 of the Corporations Act 2001 (Cth) that have not yet been completed. No securities were purchased on-market during the reporting period under or for the purposes of an employees’ incentive scheme or to satisfy the entitlements of the holders of options or other rights to acquire securities granted under an employee incentive scheme. 73. OverviewReview of OperationsASX Additional InformationFinancial ReportDirectors' ReportAnnual Report 2023ASX Additional Information Exploration and mining licenses granted: Prospect Resources Limited has interests in tenements via the following companies: (1) Eagle Lithium Resources (Private) Ltd ("Eagle Lithium") - Step Aside Project (2) Richwing Exploration (Pty) Limited (“Richwing”) – Omaruru Lithium Project Tenement type & number ME19948BM EPL 5533 Tenement name Country Project Registered company name % Held at 30 June 2023 Step Aside Zimbabwe Step Aside Eagle Lithium Omaruru Namibia Omaruru Richwing 100% 20% 74. Prospect Resources +61 405 524 960 info@prospectresources.com.au Level 2, 33 Richardson Street West Perth, WA 6005 

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