Siemens Energy Annual Report 2022

Plain-text annual report

22 annual report 1 E N C O U N T E R R E S O U R C E S L I M I T E D Table of Contents 01. Letter from the Chairman & Managing Director 02. Exploration Review 03. Summary of Tenements 04. Directors’ Report Auditor’s Independence Declaration Consolidated Financial Statements Consolidated Statement of Proﬁt or Loss and other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Audit Report ASX Additional Information Corporate Directory 2 4 25 28 41 42 43 44 45 46 47 77 78 83 86 2 0 2 2 A N N U A L R E P O R T 1 01. Letter from the Chairman and Managing Director 01. Letter from the Chairman & Managing Director Dear Fellow Shareholder, We are pleased to present the 2022 Annual Report for Encounter Resources Ltd (“Encounter”). Encounter is one of Australia’s leading mineral exploration companies. Encounter’s primary focus is on discovering major copper deposits in Australia. Copper is one of the most crucial commodities required in the 21st century with vehicle electriﬁcation and the decarbonisation of global energy infrastructure supercharging its importance. As the world moves more rapidly in this direction, global copper supply is constrained and average mine grades across the sector continue to decline. The major copper mines producing today were discovered many decades ago and are becoming more costly to develop. Importantly, copper is also one of the least substitutable metals required in modern economies. This makes the challenge to ﬁnd the next generation of major new sources of copper irresistible. These discoveries are essential and likely to occur in new areas by implementing new technologies and methods. This drives the construction of Encounter’s project portfolio and our approach to exploration. Encounter is one of Australia’s leading ASX-listed project generation and copper exploration companies. Our project generator business model facilitates exploration of an expansive project pipeline through a mix of alliances, earn-ins and joint ventures as well as sole funded exploration. This allows Encounter to pursue multiple large scale opportunities in parallel. Encounter controls a large portfolio of exciting copper projects in Western Australia and the Northern Territory. The Greater McArthur Superbasin in the Northern Territory is fast emerging as one of the most signiﬁcant global opportunities for the discovery of new, large sediment-hosted copper and zinc deposits under shallow cover. Encounter is advancing this vast opportunity via a combination of farm-in agreements with some of Australia’s largest mining companies (South32 and BHP) and an extensive portfolio of 100% owned projects. Identifying opportunities, completing early-stage exploration and then accelerating work through joint ventures is a core objective. To date Encounter has completed farm-in agreements in the Northern Territory that can provide up to $50 million in initial exploration funding from its partners. The search for Tier-1 copper and zinc deposits in the Northern Territory continues to gather pace and we are delighted to be working with high quality partners with accomplished exploration teams to capture this opportunity. At our 100% owned Sandover project, the evidence of the processes that produce high grade copper mineralisation continue to mount. Sandover is located 170km north of Alice Springs and covers a major structural corridor on the southern margin of the Georgina Basin. Sandover has mapped copper mineralisation over 20km of strike in a stratiform position and has a number of the major elements of the classic sediment- hosted copper system. Furthermore, the project covers a large portion of the North Arunta pegmatite province and its prospectivity for lithium mineralisation will be assessed in tandem with the copper potential. 2 E N C O U N T E R R E S O U R C E S L I M I T E D Letter from the Chairman and Managing Director 01. In Western Australia, the stars are beginning to align at the 100% owned Aileron project in the West Arunta where a recent study by the Geological Survey of Western Australia has identiﬁed a new suite of granites in the northern part of the West Arunta at a similar age to Olympic Dam. Encounter remains one of the most dedicated and active mineral exploration companies listed on the ASX. We are focused on generating signiﬁcant, long-term value for our shareholders through leading edge exploration for major copper deposits in Australia. Aileron has a comparable age host sequence and hydrothermal event as well as similar geochemical signature to the world-class IOCG deposits of South Australia. Favourably, the prospective geology at Aileron is under thin cover, not hundreds of metres of cover like the Gawler Craton, and surface geochemical methods have a good chance of identifying near surface mineralisation. Encounter is disciplined in its approach to capital management and we are steadfast in our commitment to systematic exploration that can create enduring value for our shareholders. Our exploration plans remain well funded and, importantly, we have an extremely capable and experienced team that is dedicated to realising the potential of our portfolio. In the Paterson Province of Western Australia, we are pleased to be partnering with IGO towards unlocking the considerable copper potential of the region, demonstrated by the recent discoveries in the region at Winu and Havieron. IGO has implemented a number of new and innovative exploration techniques in recent years to generate high priority drill targets. Also, in the Paterson Province of Western Australia, Encounter has the 100% owned Lamil project located 25km northwest of the major gold-copper mine at Telfer. Diamond drilling at Lamil has intersected a thick prospective package containing multiple, stacked copper-gold reefs that are open on section and down plunge. In summary, Encounter is advancing a suite of 100% owned copper projects in the Paterson Province and the West Arunta in Western Australia and at Sandover in the Northern Territory. Complementing this, Encounter has numerous large scale copper projects being advanced in partnership with world leading resources companies: BHP, South32 and IGO. In closing, we would like to thank our local communities, employees, joint venture partners and suppliers. We also would take this opportunity to thank our fellow shareholders for your ongoing support. Yours sincerely Paul Chapman Chairman Will Robinson Managing Director 2 0 2 2 A N N U A L R E P O R T 3 02. Exploration Review 2022 Highlights: 100% owned projects in Australia’s most exciting new copper districts: Sandover Copper-Lithium Project NT (100% ENR) • Additional surface sampling conﬁrmed further areas of surface copper oxide mineralisation at Sandover • Nodules of copper sulphide minerals, including bornite, identiﬁed in historical drill core providing evidence of high grade mineralisation processes • Sandover covers a signiﬁcant part of the North Arunta Pegmatite Province identiﬁed by Northern Territory Geological Survey (“NTGS”) • NTGS interpret that the pegmatites in the region are Lithium-Caesium-Tantalum (“LCT”) pegmatites similar to the host pegmatites of the lithium deposits at Greenbushes in WA and at the Finnis deposit in the Pine Creek pegmatite province in the NT • Encounter awarded a $100,000 grant by the Northern Territory Geological Survey (“NTGS”) to complete a gravity survey at Sandover. Gravity survey has commenced and will aid the development of a basin wide stratigraphic model Aileron Copper-Rare Earths Project West Arunta WA (100% ENR) • Geochronology completed by the GSWA classiﬁes the host sequence and mineralisation events at Aileron are a similar age to the events at Olympic Dam. Indications of a potential new IOGC belt include: • Conﬁrmation of important isotopic ages; • Copper–gold anomalism associated with hematite alteration; and • Highly anomalous rare earth elements (“REE”) in drill core • Importantly, the prospective geology is under shallow cover (5m of cover in EAL001) in contrast to +500m of cover in much of the Gawler Craton • A full assay suite of REE analysis has been completed for EAL001 drill core with assays grading up to 0.8% TREO (including 0.14% of high value neodymium-praseodymium) • Airborne magnetic and radiometric survey commencing in October 2022 to reﬁne targets for drilling in 2023 Lamil Copper-Gold Project – Paterson Province WA (100% ENR) • Gravity survey completed in May 2022 • Exploration Incentive Scheme (“EIS”) co funded diamond drilling completed at the Dune Prospect (“Dune”) in September 2022 • Drilling to test for lateral and down plunge extensions of the prospective package that contains stacked, copper-gold reefs. Initial observations: • Conﬁrms the geological model with the prospective package intersected in both holes 2022 Highlights: Exploration Review 02. • A new steep set of structures striking sub-parallel to Elliott Copper Project NT (BHP $25m farm-in) drilling may represent a new untested target • Drill holes have been cased for downhole EM to test for off-hole conductive features that could be concentrations of sulphide associated with Cu-Au mineralisation • Initial assay results are expected in November/December 2022 Major copper exploration drive funded through farm-ins with world leading resources companies Yeneena Copper Project – Paterson Province WA (IGO $15m farm-in) • Substantial 2022 exploration program at the Yeneena Copper-Cobalt Project (“Yeneena”) in the Paterson Province of WA operated and funded by IGO Limited (“IGO”, ASX:IGO) • The 2022 exploration program at Yeneena designed to test high-priority targets identiﬁed by IGO after two years of target reﬁnement and is currently planned to include: • 4,500m of diamond drilling • 1,900m of aircore drilling • 1,200 line km of Heli TEM surveying covering two target areas • Exploration at the Elliott Copper Project is operated and funded by BHP (ASX:BHP) under a $25M exploration earn-in agreement and includes planned deep diamond drilling and seismic surveys • The 2022 diamond drilling program at the Elliott Copper Project is designed to advance the understanding of basin architecture and prospective deposition locations for sediment-hosted copper deposits • The drilling component of the program includes an estimated 2,000m of diamond drilling. The drill program is scheduled to be completed by November 2022 Jessica and Carrara Copper-Zinc Projects NT (South32 $15m & $10m farm-ins) • Two new Farm-in Agreements completed with South32 (ASX:S32) in June 2022 covering the Jessica Copper Project and the Carrara Copper-Zinc Project in the Northern Territory • South32 to wholly fund initial exploration on each project and Encounter carried to the completion of a Scoping Study • Exploration has commenced with reprocessing of seismic lines at Carrara, which is part of the ﬁrst year budget of $1.3 million exploration expenditure across both projects 02. Exploration Review Sandover Copper-Lithium Project – NT (100% ENR) Background Sandover is located 170km north of Alice Springs and covers a major structural corridor on the southern margin of the Georgina Basin. Access is excellent with the Stuart Highway and Alice Springs-Darwin railway extending through the western margin of the project. Sampling in October 2021 was conducted in four ﬁeld areas located up to 6km apart (Figure 1). Each area conﬁrmed the presence of an outcropping red-bed sandstone sequence with multiple narrow but strike extensive grey shale units containing copper oxide mineralisation (malachite). Sampling of copper mineralisation at surface returned assays up to 20.9% Cu and a suite of highly anomalous pathﬁnder elements (Zn, Ag, As, Bi, Mo and Pb) (refer ASX announcement 16 December 2021). Copper Exploration Additional surface sampling and ﬁeld reconnaissance was completed in April 2022. This program conﬁrmed additional mapped areas containing surface copper oxide mineralisation (see Figure 1, Area 5). The surface mapping also identiﬁed small bornite nodules, interpreted to be zones of increased ﬂuid ﬂow after replacement of anhydrite, within the grey shale unit (Photo 1). Surface samples were also collected from various outcropping stratigraphic horizons for chemical analysis and stratigraphic correlation. Inspection of historical drill core from Sandover in the Alice Springs core library was completed in April 2022. A number of historical drill holes (drilled in 1968, 1971 and 1994) were reviewed and conﬁrmed key geological units and processes to enable the formation of sediment hosted copper deposits are present. Signiﬁcantly, narrow zones of copper sulphide minerals, including bornite, were identiﬁed in historical drill core (Photo 2). It is interpreted that the copper rich nodules identiﬁed at the surface represent the weathered form of the bornite nodules observed in historical drill core. This provides encouraging evidence that processes capable of forming high grade copper mineralisation are present in the basin. 6 E N C O U N T E R R E S O U R C E S L I M I T E D Exploration Review 02. Photo 1 (left) – weathered copper rich nodules collected from surface at Area 1 (refer Figure 1) – containing malachite (interpreted after bornite- chalcopyrite), visual estimate 10% malachite in 2.5cm diameter nodule Photo 2 (right) – primary copper rich nodule from historical drillhole (Mt Skinner DDH3 203.3m) located adjacent to Area 4 (refer Figure 1) containing bornite-chalcopyrite, visual estimate 30% bornite-chalcopyrite over ~1cm width Furthermore, shale units containing the outcropping copper mineralisation at Sandover are considered moderate reductants yet have precipitated considerable copper. This suggests that a highly copper charged ﬂuid has been active at the project. Accordingly, exploration activities at Sandover are focused on identifying more reduced units within the basin. There will be a particular emphasis on where these units intersect long-lived basin forming structures which are areas with the potential to host major mineral deposits. NTGS Funding All available geophysical datasets have been compiled, integrated and evaluated by Encounter’s geophysical consultant Terra Resources. As a result of this exercise, 1x1km spaced gravity data has been identiﬁed as a key dataset to be collected. Encounter has been awarded a $100,000 grant to complete this gravity survey at Sandover under the NTGS Geophysics and Drilling Collaborations Program. The gravity survey has commenced. Cautionary statement on visual estimates of mineralisation References to visual results are from historical diamond drilling from Sandover stored at the Alice Springs Core Library. Photos 1 & 2 provide information supporting the geological context of observations of mineral processes reported in this announcement. Visual estimates of mineral percentages are based on preliminary visual observations of the drill core surface as presented in the core trays and may not be representative of potential mineralisation at Sandover. Visual estimates of mineral abundance are not considered to be a proxy or substitute for laboratory analyses where metal concentrations or grades are the factor of principal economic interest. The Company does not intend to complete laboratory assays of the samples in Photos 1 and 2. 2 0 2 2 A N N U A L R E P O R T 7 Sandover Copper-Lithium Project – NT (100% ENR) (Continued) Figure 1 – Geological map showing cupiferous outcrop, drillhole locations and surface sampling (compiled from company reports and Haines 2004) Source: NTGS Geology and Mineral Resources of the Northern Territory. Special Publication 5. Compiled by Ahmad, M. and Munson, T.J., June 2013. Areas 1-4 sampled by Encounter in October 2021, Area 5, 6, 7 sampled in April 2022. 8 ENCOUNTER RESOURCES LIMITED Exploration Review02. Location of Areas 1-7 (see Figure 1) Figure 2 – Location of ﬁeld mapping and sampling Exploration Review 02. 2 0 2 2 A N N U A L R E P O R T 9 02. Exploration Review Sandover Copper-Lithium Project – NT (100% ENR) (Continued) Figure 3 – Northern Arunta Pegmatite Province – LCT pegmatite occurrences sourced from NTGS Report 16 Tin-tantalum pegmatite mineralisation of the Northern Territory (Frater 2005) Lithium Exploration Sandover sits within the Northern Arunta Pegmatite Province which was ﬁrst identiﬁed in a report by the NTGS in 2005. The NTGS interpret that the pegmatites in the region are Lithium-Caesium-Tantalum (“LCT”) pegmatites similar to the host pegmatites of the lithium deposits at Greenbushes in WA and the Finnis deposit in the Pine Creek pegmatite province in the NT*. The region’s lithium potential was also highlighted by rock chip sampling of the Anningie Tin Field (located 30km west of Sandover) completed in 2017 which returned 15 rock chip samples above 1% Li2O including a maximum lithium grade of 4.63% Li2O (see ASX:TRT release 17 December 2017). The presence of LCT type pegmatites is further supported at Sandover by two tin-tantalum occurrences in the south-east of the project area. The region’s lithium prospectivity has been recognised by a number of companies including Core Lithium Ltd (ASX:CXO) which holds the Anningie and Barrow Creek Lithium Projects in the North Arunta district (Figure 3). Encounter is completing a technical assessment of the potential for lithium and other critical minerals at Sandover as part of a strategic review to determine how best to optimise and advance the LCT opportunity. Commencement of an NTGS co-funded gravity survey to aid the development of a basin wide stratigraphic model. The gravity survey will also aid lithium exploration by deﬁning potential key hosting structures. * NTGS Report 16: Tin-tantalum pegmatite mineralisation of the Northern Territory (Frater, 2005) 10 E N C O U N T E R R E S O U R C E S L I M I T E D Exploration Review 02. Aileron Copper – Rare Earths Project – West Arunta – WA (100% ENR) Background Aileron is located in the West Arunta region of WA ~600km west of Alice Springs. The project contains several structural and geophysical targets identiﬁed through aerial magnetic and gravity surveys. To date, one diamond hole, EAL001, has been drilled targeting a discrete magnetic anomaly (Worsley prospect). EAL001 was partially completed to a depth of 158m in October 2020 and drilled through 5m of shallow cover followed by a brecciated hydrothermal hematite-chlorite-altered granite with narrow maﬁc intrusions. Within these units, zones of increased brecciation and alteration correlate with increased REE anomalism with a distinctive IOCG geochemical signature. The hole ended prior to designed depth due to a mechanical failure. Assays from EAL001 include zones of anomalism in copper (up to 0.1% Cu), gold (up to 48ppb Au), molybdenum (up to 155ppm Mo) and highly elevated rare earth elements (up to 0.8% TREO) consistent with the targeted IOCG deposit model (refer ASX announcement 28 January 2021). The metal anomalism in the hole is associated with the most intensely brecciated and chlorite-hematite altered zones (up to 15% Fe). IOCG mineralisation often has a strong density contrast to background and may be identiﬁable through the application of gravity surveys. In November 2021, a ground gravity survey and geological reconnaissance activities, including a successful surface sampling trial, were completed at Aileron. Geochronology The North West Arunta inlier at Aileron has historically been mapped as Carrington suite granites (1805-1770 Ma). Recent zircon dating undertaken by the GSWA* has shown that, while there are older rocks of the Carrington Suite and Lander Rock Formation in the district, EAL001 has intersected a new suite of intrusions, previously unknown in the region, with an age of c.1608 Ma. The GSWA has also found a population of zircons which suggest that brecciation and hydrothermal alteration of this younger intrusion occurred shortly after its emplacement at c.1577 Ma*. Importantly, this age is similar to the ages of known IOCG mineralisation events recorded in the Gawler craton at Olympic Dam* and other deposits (Figure 4). This new information as well as the established REE anomalism, the presence of cross-cutting maﬁc dykes and anomalous copper and gold values in EAL001 are compelling evidence of the region’s IOCG mineral system potential. In summary, age dating by the GSWA completed on samples collected from drillhole EAL001 at Aileron has conﬁrmed: • • a previously unknown granitic intrusion event at Aileron of similar age to the Hiltaba Suite granites in the Gawler Craton in South Australia; and an age of hydrothermal alteration similar to the published mineralising events at Olympic Dam Conﬁrmation of these important dates, coupled with the presence of REE, copper and gold anomalism associated with hematite and chlorite alteration, support the IOGC target model. Importantly, the prospective geology is under shallow cover (5m of cover in EAL001) in contrast to +500m of cover in much of the Gawler Craton. Accordingly, surface geochemical methods can be applied in this region and the trials completed by Encounter demonstrate this. * GSWA Geochronology Record 1897: 203749: altered granitic rock, Aileron prospect (Aileron Province, North Australian Craton) * Jagodzinski, 2014. Australian Earth Sciences Convention (AESC), Newcastle). Next Steps • Airborne magnetic and radiometric survey to be completed in October 2022 to reﬁne targets for drilling in 2023. 2 0 2 2 A N N U A L R E P O R T 11 Aileron Copper – Rare Earths Project – West Arunta – WA (100% ENR) (Continued) Figure 4 – IOCG Gawler Craton Schematic Model – modified from Skirrow et al 2018 Figure 5 – Aileron IOCG project – August-November 2021 gravity survey location plan on TMI background 12 ENCOUNTER RESOURCES LIMITED Exploration Review02. Exploration Review 02. Figure 6 – Aileron IOCG project – Left – Detailed residual gravity image with regional residual gravity image in background with interpreted structures and identiﬁed targets. Right – regional TMI magnetics image with interpreted structures and identiﬁed targets. 2 0 2 2 A N N U A L R E P O R T 13 02. Exploration Review Lamil Copper-Gold Project - Paterson Province – WA (100% ENR) Background Lamil covers an area of ~61km2 and is located 25km northwest of the major copper-gold mine at Telfer, owned by Newcrest Mining Ltd (ASX:NCM). Lamil is adjacent to a major regional gravity lineament which marks the location of an interpreted signiﬁcant crustal scale structure that would have acted as a pathway for mineralising ﬂuids during the formation of the Proterozoic aged deposits. The Dune prospect is located in the northwest of the Lamil project and consists of a laterally extensive copper-gold system, outlined by broad spaced RC drilling over 1km of strike (Figure 7). The mineralisation at Dune is hosted in metasedimentary rocks of the Proterozoic Lamil group which also host the Telfer, Havieron and Winu copper-gold deposits. Dune is situated close to the intersection of the prospective Upper Malu formation and the interpreted fold axis in the north western part of the Lamil Dome. Diamond Drilling at Dune Prospect Prior drilling at Dune intersected multiple, stacked, copper-gold reefs in drill hole ETG0243 within a thick prospective package of interbedded siltstones analogous to Telfer’s Upper Malu formation (see ASX release 16 November 2021). The two holes (ETG0244 & ETG0245) were completed in September 2022 designed to test for lateral and down plunge extensions of the prospective package intersected in ETG0243. Initial observations conﬁrm the geological model with both holes intersecting the target package. Drillhole ETG0244 intersected the prospective package of altered interbedded siltstones and sandstones from 355m to 474m downhole. In addition, a new steep set of structures striking sub-parallel to drilling was observed in the hole which may represent a new untested target. ETG0245 conﬁrmed the dip of the north eastern ﬂank of the Lamil Dome and intersected the prospective package at 159m. The diamond drill program at Lamil is co-funded, up to $220,000, under the WA Government’s Exploration Incentive Scheme (“EIS”). Next Steps ETG0244 and ETG0245 have been cased for downhole EM to assess the proximal area for conductive features that could represent sulphide accumulations often associated with copper-gold mineralisation at Dune. Assay results from this program are expected in November/December 2022. 14 E N C O U N T E R R E S O U R C E S L I M I T E D Exploration Review 02. Figure 7 – Dune prospect plan showing the three previous holes that intersected stacked reef mineralisation in the Telfer analogous stratigraphic package. The locations of the two recent diamond drill holes (ETG0244 & ETG0245) down dip (cross section A-A’, ETG0244) and down plunge (long section B-B’ (ETG0245) 1 2 0 2 2 A N N U A L R E P O R T 15 Lamil Copper-Gold Project - Paterson Province – WA (100% ENR) (Continued) Figure 8 – Schematic Dune cross section with completed drill hole ETG0245. The Telfer analogous stratigraphy including upper and lower reef horizons intersected in ETG0243 contain multiple Cu-Au reefs which are generally sub-parallel to stratigraphy. ETG0245 was completed to test for lateral continuity and increased widths of the upper reefs down dip 1 16 ENCOUNTER RESOURCES LIMITED Exploration Review02. Exploration Review 02. Figure 9 – Schematic long section of Dune showing the interbedded siltstone unit dipping below previous drilling and recently completed drill holes, ETG0244 and ETG0245 1 1 For further details regarding the exploration results at the Lamil Copper-Gold Project, please refer to the following ASX announcements: ASX release 26 April 2017 ASX release 19 January 2017 ASX release 18 December 2020 ASX release 21 April 2021 ASX release 6 September 2021 ASX release 16 November 2021 2 0 2 2 A N N U A L R E P O R T 17 02. Exploration Review East Thomson’s Dome Project – WA (100% ENR) East Thomson’s Dome is located 5km from Telfer in the Paterson Province of WA. The domal structure at East Thomson’s Dome has a core of Malu Formation with the fold axis trending WNW. The majority of surface gold and reef style mineralisation at East Thomson’s Dome has been discovered in the overlying Telfer Formation sediments. This geological setting is similar to that of the high-grade reefs at Telfer. Broad spaced RC drilling completed at the 45 Reef at East Thomson’s Dome intersected: • 6m @ 9.0g/t Au from 178m including • 2m @ 26.0g/t Au from 178m in ETG0045 • 16m @ 0.6g/t Au from 154m in ETG0044 (refer ASX release 16 August 2017) The next drilling program at East Thomson’s Dome will target the south west extension of the high-grade reef intersected in ETG0045. Additional drilling is also planned on section and along strike of ETG0045. 18 E N C O U N T E R R E S O U R C E S L I M I T E D Exploration Review 02. Dunmarra, Maryﬁeld and Broadmere Copper Projects – NT (100% ENR) The Dunmarra, Maryﬁeld and Broadmere projects encompass key targets identiﬁed on the margin of the Beetaloo Basin that were generated through ﬂuid ﬂow modelling of previous oil and gas drilling and seismic surveys. The targets were generated utilising oil and gas developed methodology that was reﬁned to target the sediment hosted copper model. Exploration activity has commenced with compilation of historical exploration, and will include additional sampling of oil and gas wells in the basin adjacent to the targets and ﬁeld reconnaissance. Figure 10 – Encounter copper projects in the Northern Territory – Project Location Plan 2 0 2 2 A N N U A L R E P O R T 19 02. Exploration Review Elliott Copper Project – NT (BHP $25m Farm-in) Elliott was the ﬁrst project secured by Encounter in the NT and now comprises more than 7,200km2. The project is readily accessible being located 200km north of Tennant Creek on the Stuart Highway which runs along the western margin of Elliott. The project is being explored together with BHP where BHP has the right to earn up to a 75% interest in Elliott by sole funding up to $25 million of expenditure within 10 years. Elliott is located at a major structural intersection on the southwestern margin of the Beetaloo Basin which is part of the Greater McArthur Superbasin that hosts the giant sediment-hosted base metal deposit at McArthur River. The Superbasin contains thick, petroleum bearing, reduced sediments which are an ideal trap sequence and the major structures bounding the Superbasin are considered ideal structural ﬂuid pathways for major sediment-hosted copper deposits. The project encompasses key conceptual criteria for the formation of sediment-hosted copper and the target sequence is undercover and untested. New sampling datasets released in 2019 and 2020 have supported the conceptual and structural targeting model at Elliott. The standout, copper-in-groundwater anomaly (an order of magnitude above background) in the extensive dataset is located at Elliott. Diamond Drill Program The approved 2022 diamond drilling program at the Elliott Project is designed to advance the understanding of basin architecture and prospective deposition locations for sediment-hosted copper deposits. The drilling component of the program includes an estimated 2,000m of diamond drilling. The drill program is scheduled to be completed before the end of the dry season in November 2022. Figure 11 – Elliott Copper Project location plan 20 E N C O U N T E R R E S O U R C E S L I M I T E D Exploration Review 02. Jessica Copper Project – NT (South32 $15m Farm-in) In June 2022, South32 entered into a Farm-in Agreement covering the Jessica Copper Project in the Northern Territory. South32 may earn a 60% initial interest in a project by spending $15 million in exploration expenditure over a period of 10 years. South32 may then earn an additional 15% interest in Jessica upon completion of a Scoping Study (refer ASX announcement 23 June 2022). Jessica covers ~6,300km2 along key structural corridors east of Tennant Creek and is prospective for sediment-hosted copper and IOCG style deposits. Access to the project is via the sealed Tablelands Highway that traverses the western side of Jessica. Jessica captures compelling structural targets along the Brunette Downs Rift Corridor that was identiﬁed in the Geoscience Australia Exploring for the Future Program. Jessica was targeted along the northern ﬂanks of the East Tennant gravity ridge and the intersection with a major NNW structural corridor. Jessica has potential for both basement IOCG style mineralisation and sediment-hosted copper deposits. Systematic assessment of drill chips from water bores at Jessica has been conducted by Encounter and a previous explorer utilising handheld XRF machines. Areas of copper anomalism were selected for chemical analysis and for the sample interval 0-3m in RN28419 (No. 39 water bore) which returned 1.5% copper (refer ASX announcement 19 August 2020). 2022 Exploration Activity • Reprocessing of Geoscience Australia seismic lines that extend through Jessica to provide greater detail of the geology and structure in the upper 1,000m along the western margin of the sub-basin. • Inﬁll gravity surveys completed covering a series of high priority magnetic targets in conjunction with an extensive regional gravity survey by the NTGS. Figure 12 – Jessica and Carrara – Project location plan over gravity 2 0 2 2 A N N U A L R E P O R T 21 02. Exploration Review Carrara Copper-Zinc Project – NT (South32 $10m Farm-in) In June 2022, South32 also entered into a Farm-in Agreement covering the Carrara Copper-Zinc Project in the Northern Territory. South32 may earn a 60% initial interest in a project by spending $10 million in exploration expenditure over a period of 10 years. South32 may then earn an additional 15% interest in Carrara upon completion of a Scoping Study. Carrara was secured following the release of the South Nicholson Seismic Survey, a foundational dataset acquired as part of the Geoscience Australia Exploring for the Future Program. A key ﬁnding of this study is the correlation of prospective stratigraphic units from the Isa Superbasin into the Carrara Sub-basin that extend the Mount Isa Province to the west. Carrara is located at an interpreted structural offset of the western margin of the Carrara Sub-basin where the prospective Isa Superbasin units are modelled closer to surface. The giant Century Zinc Mine is located on the eastern margin of the Carrara Sub-basin, and there is a clear correlation of the Century mine stratigraphy across the basin in GA seismic data (Figures 12 and 13). Late in 2020 a 1,751m deep stratigraphic drill hole (NDI Carrara-1) was completed as part of the National Drilling Initiative funded by the Minex CRC. This hole was designed to validate the interpretation of the South Nicholson Seismic Survey and was located within the Carrara tenement. The results of the NDI Carrara-1 stratigraphic drill hole support the interpretation that the geology of the Isa Superbasin extends throughout the Carrara Sub-basin. The presence of copper and zinc sulphide mineralisation (Figure 13) demonstrates that sediment hosted copper and zinc mineralising processes occur within the prospective host unit (refer ASX announcement 28 April 2021). 2022 Exploration Activity • Reprocessing of seismic lines that extend through Carrara to provide greater detail of the geology and structure in the upper 1,000m along the western margin of the sub-basin. • A 2km x 2km gravity survey over Carrara by the NTGS was completed and is being integrated and interpretated in conjunction with other datasets. Figure 13 – Carrara Project – South Nicholson Seismic Survey and approx. Location of NDI Carrara-1 stratigraphic hole (yellow) 22 E N C O U N T E R R E S O U R C E S L I M I T E D Exploration Review 02. Yeneena Copper Project – Paterson Province WA (IGO $15m Farm-in) Yeneena comprises a major land position covering >1,450km2 in the highly prospective Paterson Province, targeting copper- cobalt mineralisation. IGO can sole fund $15 million in exploration expenditure over a maximum of seven years to earn a 70% interest in Yeneena. Exploration at Yeneena is focused on discovering high-value sediment-hosted copper deposits. The strategy implemented by IGO involves the collection of belt-scale high-quality primary datasets, with cutting-edge techniques used to acquire geological, geochemical and geophysical data. Regional target areas have been identiﬁed from the model, deﬁning sub-basins that could contain similar rocks to those found at Nifty copper mine. Diamond drill testing of these targets is to be completed during the 2022 ﬁeld season. 2022 Exploration Program The Yeneena 2022 exploration program, to be operated and funded by IGO, is currently planned to comprise the following activities: • 1,900m aircore drill program to test high-priority targets • 4,500m diamond core drill program to test high-priority targets • 1,200 line km of Heli TEM surveying covering two target areas • Detailed geological mapping of the Lookout Rocks and Aria prospects • Hydro-geochemistry orientation program on cased 2021 aircore drillholes Diamond Drilling Diamond drilling commenced in July 2022 and is focused on two high priority regional targets (see Figure 14): • EB01a: Regional 3D modelling has identiﬁed an area of high prospectivity to focus copper bearing ﬂuid. High permeability ﬂuid pathways and their intersection with favourable stratigraphy forms the basis of the primary targets in this area. Three diamond drill holes are planned to test the targets. • ET01c: A new regional 3D model, as well as ﬁeld mapping, has led to a better understanding of the BM1-BM7 prospect and of the paleo-basin architecture. Several opportunities for favourable traps for copper bearing brines have been identiﬁed. These targets will be tested by three planned diamond drill holes. Aircore Drilling ET01: Regional aircore drilling is being utilised to gain end of hole and litho-geochemical data in areas that are higher priority and will be used to facilitate the 3D model in data poor areas (see Figure 14). Collars will be cased with PVC to allow for hydrogeochemical testing. Further aircore drilling may be added following the hydrogeochemical orientation program. 2 0 2 2 A N N U A L R E P O R T 23 02. Exploration Review Figure 14 – Yeneena 2022 proposed drilling programs The information in this report that relates to Exploration Results is based on information compiled by Mrs Sarah James who is a Member of the Australasian Institute of Mining and Metallurgy. Mrs James holds shares and options in and is a full time employee of Encounter Resources Ltd and has sufﬁcient experience which is relevant to the style of mineralisation under consideration to qualify as a Competent Person as deﬁned in the 2012 Edition of the ‘Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mrs James consents to the inclusion in the report of the matters based on the information compiled by them, in the form and context in which it appears. The Company conﬁrms that it is not aware of any new information or data that materially affects the information in the relevant ASX releases and the form and context of the announcement has not materially changed. This report has been authorised for release by the Board of Encounter Resources Limited. 24 E N C O U N T E R R E S O U R C E S L I M I T E D Summary of Tenements 03. 03. Summary of Tenements Lease E45/2500 E45/2501 E45/2502 E45/2561 E45/2657 E45/2658 E45/3768 E45/2805 E45/2806 E45/5379 E45/5333 E45/5334 E45/5686 E45/4861 E45/4613 Lease Name Yeneena Yeneena Yeneena Yeneena Yeneena Yeneena Yeneena Yeneena Yeneena Yeneena Yeneena Yeneena Yeneena Yeneena Lamil Project Name Area km2 Paterson 107.3 Paterson Paterson Paterson Paterson Paterson 19.12 117.8 50.95 156 95.4 Paterson 149.7 Paterson Paterson Paterson Paterson Paterson Paterson Paterson Paterson Cu/Au 85.8 35 235.3 127.2 102.1 108.4 328 60.7 Managing Company IGO Limited Encounter Interest 75%* and 100% IGO earning up to 70% Encounter Operations Pty Ltd 75%* IGO Limited 100% IGO earning up to 70% Encounter Operations Pty Ltd 75%* IGO Limited IGO Limited IGO Limited IGO Limited IGO Limited IGO Limited IGO Limited IGO Limited IGO Limited IGO Limited 100% IGO earning up to 70% 100% IGO earning up to 70% 100% IGO earning up to 70% 100% IGO earning up to 70% 100% IGO earning up to 70% 0% ** Option to Purchase 100% IGO earning up to 70% 100% IGO earning up to 70% 100% IGO earning up to 70% 100% IGO earning up to 70% Encounter Paterson Pty Ltd 100% E45/3446 East Thomson’s Dome Paterson 6 Encounter Paterson Pty Ltd P45/2750 East Thomson’s Dome Paterson 198 HA Encounter Paterson Pty Ltd P45/2751 East Thomson’s Dome Paterson 177 HA Encounter Paterson Pty Ltd P45/2752 East Thomson’s Dome Paterson 199 HA Encounter Paterson Pty Ltd P45/3032 East Thomson’s Dome Paterson 113.80 HA Encounter Paterson Pty Ltd 100% 100% *** 100% *** 100% *** 100% *** 2 0 2 2 A N N U A L R E P O R T 25 EL32696 Sandover Northern Territory 763.6 Baudin Resources Pty Ltd 03. Summary of Tenements Lease E80/5169 E80/5469 E80/5470 Lease Name Aileron Aileron Aileron Project Name West Arunta West Arunta West Arunta E80/5522 Aileron West Arunta Area km2 187.6 534.3 613.9 429.2 208.8 813.56 136.99 601.11 493.6 795.4 792.67 792.71 787.39 740.11 665.33 750.46 738.6 783.5 791.42 814.55 814.94 813.76 811.55 805.42 805.21 801.69 E30/517 E30/527 EL32156 EL32157 EL32158 EL32159 EL32226 EL32329 EL32437 EL32581 Rani Rani Elliott Elliott Elliott Elliott Elliott Elliott Elliott Yilgarn Yilgarn Northern Territory Northern Territory Northern Territory 807.26 696.31 793.71 Northern Territory 723.9 Northern Territory Northern Territory Northern Territory Elliott Northern Territory EL32374 Sandover Northern Territory EL32421 Sandover Northern Territory EL32694 Sandover Northern Territory EL32695 Sandover Northern Territory EL33060 Sandover Northern Territory EL33065 Sandover Northern Territory EL32273 EL32317 EL32338 EL32339 EL32386 EL32387 EL32388 EL32493 Jessica Jessica Jessica Jessica Jessica Jessica Jessica Jessica Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory EL32476 Carrara Northern Territory EL32477 Carrara Northern Territory Managing Company Encounter Interest Encounter Aileron Pty Ltd Encounter Aileron Pty Ltd Encounter Aileron Pty Ltd Encounter Aileron Pty Ltd Baudin Resources Pty Ltd 6 Baudin Resources Pty Ltd BHP BHP BHP BHP BHP BHP BHP BHP 100% BHP earning up to 75% 100% BHP earning up to 75% 100% BHP earning up to 75% 100% BHP earning up to 75% 100% BHP earning up to 75% 100% BHP earning up to 75% 100% BHP earning up to 75% 100% BHP earning up to 75% Baudin Resources Pty Ltd Baudin Resources Pty Ltd Baudin Resources Pty Ltd Baudin Resources Pty Ltd Baudin Resources Pty Ltd Baudin Resources Pty Ltd 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% South32 South32 South32 South32 South32 South32 South32 South32 South32 South32 South32 South32 100% South32 earning up to 75% 100% South32 earning up to 75% 100% South32 earning up to 75% 100% South32 earning up to 75% 100% South32 earning up to 75% 100% South32 earning up to 75% 100% South32 earning up to 75% 100% South32 earning up to 75% 100% South32 earning up to 75% 100% South32 earning up to 75% 100% South32 earning up to 75% 100% South32 earning up to 75% EL32701 EL32813 Carrara Carrara Northern Territory Northern Territory 22.72 EL32478 Brunchilly Northern Territory EL32721 Broadmere Northern Territory EL32723 Dunmarra Northern Territory EL32727 Maryﬁeld Northern Territory EL32728 Maryﬁeld Northern Territory ELA32703 ELA32729 ELA32730 Elliott Elliott Elliott Northern Territory Northern Territory Northern Territory ELA32937 Broadmere Northern Territory ELA32938 Broadmere Northern Territory ELA32724 Dunmarra Northern Territory 798.52 816.73 823.05 795.65 826.95 756.11 672.64 757.92 825.11 744.04 821.54 Baudin Resources Pty Ltd Baudin Resources Pty Ltd Baudin Resources Pty Ltd Baudin Resources Pty Ltd Baudin Resources Pty Ltd 100% 100% 100% 100% 100% BHP BHP BHP 100% BHP earning up to 75% 100% BHP earning up to 75% 100% BHP earning up to 75% Baudin Resources Pty Ltd Baudin Resources Pty Ltd Baudin Resources Pty Ltd 100% 100% 100% 26 E N C O U N T E R R E S O U R C E S L I M I T E D Summary of Tenements 03. Lease Lease Name Project Name Area km2 Managing Company Encounter Interest ELA33048 Sandover Northern Territory 789.2 Baudin Resources Pty Ltd ELA33330 ELA33331 ELA33332 ELA33334 Jessica Jessica Jessica Jessica Northern Territory 805.77 Baudin Resources Pty Ltd Northern Territory 802.06 Baudin Resources Pty Ltd Northern Territory 812.77 Baudin Resources Pty Ltd Northern Territory 814.13 Baudin Resources Pty Ltd 100% 100% 100% 100% 100% Summary of tenements as of 30th September 2022. * Tenement subject to Hampton Hill JV (only includes 4 eastern blocks on E45/2500) see ASX announcement April 23, 2015 ** Shumwari Option IGO JV *** Mining Lease application – M45/1304 (687.41 hectares) 2 0 2 2 A N N U A L R E P O R T 27 04. Directors’ Report 04. Directors’ Report The Directors present their report on Encounter Resources Limited (the Company) and the entities it controlled (the Group) at the end of, and during the year ended 30 June 2022. Directors The names and details of the Directors of Encounter Resources Limited during the ﬁnancial year and until the date of this report are: Paul Chapman – B.Comm, ACA, Grad. Dip. Tax, MAICD, MAusIMM Non-Executive Chairman appointed 7 October 2005 Mr Chapman is a chartered accountant with over 30 years’ experience in the resources sector gained in Australia and the United States. Mr Chapman has experience across a range of commodity businesses including gold, nickel, uranium, manganese, bauxite/alumina and oil/gas and has held managing director and other senior management roles in public companies. Mr Chapman was a founding shareholder/director of the following ASX listed companies: Reliance Mining; Encounter Resources; Rex Minerals; Paringa Resources; Silver Lake Resources and Black Cat Syndicate. Mr Chapman is currently a director of Western Australia based explorers, including Black Cat Syndicate Limited (ASX:BC8), Dreadnought Resources Limited (ASX:DRE), Meeka Metals Limited (ASX:MEK) as Non-Executive Chairman, and Queensland focussed explorer Sunshine Gold Limited (ASX:SHN) as a Non-Executive Director. Will Robinson – B.Comm, MAusIMM Managing Director (Executive) appointed 30 June 2004 Mr Robinson has worked in the resources industry in Australia and Canada for over twenty-ﬁve years. Mr Robinson’s experience includes senior management roles at a large international resources company and executive roles in the junior mining and exploration sector. Mr Robinson is former president of the resources industry advocacy body, the Association of Mining and Exploration Companies (AMEC) a member of the Strategic Advisory Board at the Centre for Exploration Targeting University of Western Australia and was a member of the Australian Government’s Resources 2030 Taskforce. Mr Robinson is a Non- Executive Director of Hampton Hill Mining NL (delisted from ASX effective 21 March 2022) and Non-Executive Chairman of Hamelin Gold Limited (ASX:HMG). 28 E N C O U N T E R R E S O U R C E S L I M I T E D Directors’ Report 04. Peter Bewick – B.Eng (Hons), MAusIMM Non-Executive Director appointed 7 October 2005 (Executive Director to 1 November 2021) Mr Bewick is an experienced geologist and has held a number of senior mine and exploration geological roles during a fourteen year career with WMC. These roles include Exploration Manager and Geology Manager of the Kambalda Nickel Operations, Exploration Manager for St Ives Gold Operation, Exploration Manager for WMC’s Nickel Business Unit and Exploration Manager for North America based in Denver, Colorado. Whilst at WMC, Mr Bewick gained extensive experience in project generation for a range of commodities including nickel, gold and bauxite. Mr Bewick has been associated with a number of brownﬁelds exploration successes at Kambalda and with the greenﬁeld Collurabbie Ni-Cu-PGE discovery. Mr Bewick is currently a Non- Executive Director of Mincor Resources Limited (ASX:MCR) and Managing Director of Hamelin Gold Limited (ASX:HMG). Jonathan Hronsky OAM - BAppSci, PhD, MAusIMM, FSEG Non-executive director appointed 10 May 2007 Dr. Hronsky has more than thirty ﬁve years of experience in the mineral exploration industry, primarily focused on project generation, technical innovation and exploration strategy development. Dr. Hronsky has particular expertise in targeting for nickel sulﬁde deposits, but has worked across a diverse range of commodities. His work led to the discovery of the West Musgrave nickel sulﬁde province in Western Australia. Dr. Hronsky was most recently Manager-Strategy & Generative Services for BHP Billiton Mineral Exploration. Prior to that, he was Global Geoscience Leader for WMC Resources Ltd. He is currently a Director of exploration consulting group Western Mining Services and former Chairman of the board of management of the Centre for Exploration Targeting at the University of Western Australia. During the last 3 years Dr Hronsky has been a director of Cassini Resources Limited until its acquisition by Oz Minerals Limited in 2020 and a Non-Executive Director of Azumah Resources Limited between 7 November 2019 to its delisting on 19 February 2020. Dr Hronsky is currently a Non-Executive Director of Caspin Resources Limited (ASX:CPN) and Azumah Resources Limited (delisted from ASX 19 February 2020). Philip Crutchﬁeld – B. Comm, LL.B (Hons), LL.M LSE Non-executive director appointed 9 October 2019 Mr Crutchﬁeld is a prominent and highly respected barrister specialising in commercial law. Philip was Non-Executive Chairman of Zip Co Limited (ASX:Z1P) (resigned 2nd March 2021) and is Non-Executive Director of Applyﬂow Limited (ASX:AFW), Dreadnought Resources Limited (ASX:DRE), and Western Australian gold focused companies Black Cat Syndicate Limited (ASX:BC8) and Hamelin Gold Limited (ASX:HMG). Mr Crutchﬁeld is a board member of the Bell Shakespeare Theatre Company and the Victorian Bar Foundation Limited. Philip is also a former partner of Mallesons Stephen Jaques (now King & Wood Mallesons). Company Secretaries Kevin Hart – B.Comm, FCA Mr Hart is a Chartered Accountant and was appointed to the position of Company Secretary on 4 November 2005. Mr Hart has over 30 years experience in accounting and the management and administration of public listed entities in the mining and exploration industry. Mr Hart is currently a director of an advisory ﬁrm, Endeavour Corporate, which specialises in the provision of company secretarial and accounting services to ASX listed entities. Dan Travers – BSc (Hons), FCCA Mr Travers is a Fellow of the Association of Chartered Certiﬁed Accountants and was appointed to the position of Joint Company Secretary on 20 November 2008. Mr Travers is an employee of Endeavour Corporate, which specialises in the provision of company secretarial and accounting services to ASX listed entities in the mining and exploration industry. 2 0 2 2 A N N U A L R E P O R T 29 04. Directors’ Report Directors’ Interests As at the date of this report the Directors’ interests in shares and unlisted options of the Company are as follows: Director P Chapman W Robinson P Bewick J Hronsky P Crutchﬁeld Directors’ Interests in Ordinary Shares Directors’ Interests in Unlisted Options Options vested at the reporting date 9,948,816 26,452,556 8,010,303 475,714 3,371,448 2,200,000 1,550,000 4,280,000 1,650,000 2,900,000 2,200,000 1,550,000 4,280,000 1,650,000 2,900,000 Included in the Directors’ Interests in Unlisted Options are 12,580,000 options that are vested and exercisable as at the date of signing this report. Principal Activities The principal activity of the Company during the ﬁnancial year was project generation, mineral exploration and project development in Western Australia and the Northern Territory. There were no signiﬁcant changes in these activities during the ﬁnancial year. Directors’ Meetings The number of meetings of the Company’s Directors held during the year ended 30 June 2022, and the number of meetings attended by each Director are as follows: Director P Chapman W Robinson P Bewick J Hronsky P Crutchﬁeld Results of Operations Board of Directors’ Meetings Audit Committee Meetings Held Attended Held Attended 8 8 8 8 8 8 8 8 8 8 2 - - 2 2 2 - - 2 2 The consolidated net proﬁt after income tax for the ﬁnancial year was $4,428,194 (2021: loss $1,533,150). Included in the consolidated loss for the current year is a write-off of deferred and uncapitalised exploration and joint venture expenditure totalling $4,204,574 (2021: $296,128). Included in the result for the ﬁnancial year is a gain of $10,104,846 recognised on the demerger of Hamelin Gold Limited from the Group. 30 E N C O U N T E R R E S O U R C E S L I M I T E D Directors’ Report 04. Review of Activities Exploration Encounter’s primary focus is on discovering major copper dominant deposits in Australia. Encounter’s exploration activities during the year were directed towards: • A series of camp scale, ﬁrst mover copper opportunities in the Northern Territory. This includes the Elliott copper project which is being advanced in partnership with BHP via a $25m earn-in and joint venture and farm-in agreements with South32 Limited at the Jessica and Carrara projects; • A large project portfolio in the Paterson Province of WA where it is exploring for copper-gold deposits at its 100% owned Lamil Project and for copper-cobalt deposits at the Yeneena project with IGO Limited (ASX:IGO); • The Aileron IOCG - Rare Earths project in the West Arunta in WA. Financial Position At the end of the ﬁnancial year the Group had $2,165,945 (2021: $5,686,505) in cash and term deposits. Capitalised mineral exploration and evaluation expenditure is $13,891,414 (2021: $15,212,300). Matters Subsequent to the End of the Financial Year On 29 September 2022 the Company completed the placement of 33,333,334 shares at $0.12 per share pursuant to a share placement raising $4 million before costs. A total of 2 million unlisted options were issued to the Joint Lead Managers. Other than as already stated in this report, there has not arisen in the interval between the end of the ﬁnancial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent ﬁnancial years. Signiﬁcant Changes in the State of Affairs Other than stated below, there have been no signiﬁcant changes in the state of affairs of the Company and Group during or since the end of the ﬁnancial year. • During the year the Group entered into farm-in and joint venture agreements with South32 Limited. South32 may earn a 60% initial interest in a project by spending: • $15 million in exploration expenditure over a period of 10 years at Jessica; and/or • $10 million in exploration expenditure over a period of 10 years at Carrara South32 may earn an additional 15% interest in Jessica and/or Carrara upon completion of a Scoping Study for the relevant project • During the reporting period the Company completed the demerger of its wholly owned subsidiary Hamelin Gold Limited, which subsequently was admitted to the Ofﬁcial List of the Australian Securities Exchange. The demerger, approved by shareholders on 22 October 2021, was completed with a reduction of capital in the form of an in-specie distribution of 60,000,000 shares in Hamelin Gold Limited to eligible shareholders of the Company on a pro rata basis. The total reduction of capital of $10,489,813 was allocated to issued capital ($8,415,115) and accumulated losses ($2,074,698). Prior to the demerger the Company undertook an internal restructure within the Group such that Hamelin Resources Pty Ltd, holding solely the West Tanami Gold Project assets, was acquired by Hamelin Gold Limited in preparation for the proposed demerger. 2 0 2 2 A N N U A L R E P O R T 31 04. Directors’ Report Options over Unissued Capital Unlisted Options As at the date of this report 20,180,000 unissued ordinary shares of the Company are under option as follows: Number of Options Granted Exercise Price 2,900,000 1,500,000 5,050,000 650,000 2,450,000 800,000 3,630,000 1,200,000 1,000,000 1,000,000 5.2 cents1 8.2 cents1 16.2 cents1 18.2 cents1 22.2 cents1 21.2 cents1 22.5 cents 19.0 cents 20.0 cents 30.0 cents Expiry Date 30 November 2022 30 November 2023 31 October 2023 30 June 2024 26 November 2024 30 April 2025 28 November 2025 28 June 2026 29 September 2025 29 September 2025 1 Option exercise price reduced by 3.8 cents per share following the capital reduction on the in-specie distribution of Hamelin Gold Limited securities on demerger from the Encounter Resources Limited group. All options on issue at the date of this report are vested and exercisable. No options on issue are listed. During the ﬁnancial year: • 5,030,000 options (2021: 5,850,000) were granted over unissued shares of the Company; • 400,000 options (2021: 500,000) were cancelled on the cessation of employment; • 1,500,000 options (2021: nil) were cancelled on expiry of the exercise period; and • 1,650,000 (2021: 2,600,000) options were exercised. Included in options exercised is an amount of 89,697 options foregone in consideration given on exercise (2021: 326,323). Since the end of the ﬁnancial year: • nil (2021: nil) options have been issued by the Company to employees pursuant to the Company’s Employee Option Plan; • no options have been exercised; and • no options have been cancelled due to the lapse of the exercise period. Options do not entitle the holder to participate in any share issue of the Company or any other body corporate. The holders of unlisted options are not entitled to any voting rights until the options are exercised into ordinary shares. Issued Capital Number of Shares on Issue Ordinary fully paid shares 2021 316,256,523 2022 317,216,826 32 E N C O U N T E R R E S O U R C E S L I M I T E D Directors’ Report 04. Likely Developments and Expected Results of Operations The Group expects to maintain exploration programs at its 100% owned Paterson copper-gold project, Northern Territory copper and lithium projects and West Arunta IOCG-Rare Earths project. In addition, the Group will continue to collaborate with its partners at the Yeneena copper-cobalt project (with IGO Limited) and in the Northern Territory at the Elliott copper project (BHP) and Jessica and Carrara base metals projects (South32) pursuant to earn-in and joint venture arrangements. Disclosure of any further information has not been included in this report because, in the reasonable opinion of the Directors to do so would be likely to prejudice the business activities of the Group and is dependent upon the results of the future exploration and evaluation. Dividends No dividend has been paid since the end of the previous ﬁnancial year and no dividend is recommended for the current year. Environmental Regulation and Performance The Group holds various exploration licences to regulate its exploration activities in Australia. These licences include conditions and regulations with respect to the rehabilitation of areas disturbed during the course of its exploration activities. So far as the Directors are aware, all current exploration activities are in compliance with relevant environmental regulations. Remuneration Report (Audited) Remuneration paid to Directors and Ofﬁcers of the Company is set by reference to such payments made by other ASX listed companies of a similar size and operating in the mineral exploration industry. In addition, reference is made to the ﬁnancial position of the Company and the speciﬁc skills and experience of the Directors and Ofﬁcers. Details of the nature and amount of remuneration of each Director, and other Key Management Personnel if applicable, are disclosed annually in the Company’s Annual Report. Remuneration Committee The Board has adopted a formal Remuneration Committee Charter which provides a framework for the consideration of remuneration matters. The Company does not have a separate remuneration committee and as such all remuneration matters are considered by the Board as a whole, with no Member deliberating or considering such matter in respect of their own remuneration. In the absence of a separate Remuneration Committee, the Board is responsible for: 1. Setting remuneration packages for Executive Directors, Non-Executive Directors and other Key Management Personnel; and 2. Implementing employee incentive and equity-based plans and making awards pursuant to those plans. Non-Executive Remuneration The Company’s policy is to remunerate Non-Executive Directors, at rates comparable to other ASX listed companies in the same industry, for their time, commitment and responsibilities. Non-Executive Remuneration is not linked to the performance of the Company, however to align Directors’ interests with shareholders’ interests, remuneration may be provided to Non-Executive Directors in the form of equity based long term incentives. 1. Fees payable to Non-Executive Directors are set within the aggregate amount approved by shareholders at the Company’s Annual General Meeting; 2 0 2 2 A N N U A L R E P O R T 33 04. Directors’ Report 2. Non-Executive Directors’ fees are payable in the form of cash and superannuation beneﬁts; 3. Non-Executive superannuation beneﬁts are limited to statutory superannuation entitlements; and 4. Non-executive directors are offered an annual election to receive cash remuneration or an equivalent amount in unlisted options. The annual election relates to the remuneration period from 1 December to 30 November of the relevant year and is subject to approval by the Company’s shareholders. 5. Participation in equity-based remuneration schemes by Non-Executive Directors is subject to consideration and approval by the Company’s shareholders. The maximum Non-Executive Directors fees, payable in aggregate are currently set at $300,000 per annum. Executive Director and Other Key Management Personnel Remuneration Executive remuneration consists of base salary, plus other performance incentives to ensure that: 1. Remuneration packages incorporate a balance between ﬁxed and incentive pay, reﬂecting short and long-term performance objectives appropriate to the Company’s circumstances and objectives; and 2. A proportion of remuneration is structured in a manner to link reward to corporate and individual performances. Executives are offered a competitive level of base salary at market rates (based on comparable ASX listed companies) and are reviewed regularly to ensure market competitiveness. To date, the Company has not engaged external remuneration consultants to advise the Board on remuneration matters. Incentive Plans The Company provides long term incentives to Directors and Employees pursuant to the Encounter Resources Employee Share Option Plan, which was last approved by shareholders at the Annual General Meeting held on 26 November 2021. The Board, acting in remuneration matters: 1. Ensures that incentive plans are designed around appropriate and realistic performance targets and provide rewards when those targets are achieved; 2. Reviews and approves existing incentive plans established for employees; and 3. Approves the administration of the incentive plans, including receiving recommendations for, and the consideration and approval of grants pursuant to such incentive plans. Engagement of Non-Executive Directors Non-Executive Directors conduct their duties under the following terms: 1. A Non-Executive Director may resign from their position and thus terminate their contract on written notice to the Company; and 2. A Non-Executive Director may, following resolution of the Company’s shareholders, be removed before the expiration of their period of ofﬁce (if applicable). Payment is made in lieu of any notice period if termination is initiated by the Company, except where termination is initiated for serious misconduct. In consideration of the services provided by Non-Executive Directors, the Company pay them $50,000 plus statutory superannuation per annum. Non-Executive Directors are also entitled to fees for other amounts as the Board determines where they perform special duties or otherwise perform extra services or make special exertions on behalf of the Company. During the year the Group incurred costs of $17,842 (2021: $13,800), for geological consulting services from Western Mining services, an entity associated with Dr Jon Hronsky. For the period 1 December 2021 to 30 November 2022, Non-Executive Directors Mr Paul Chapman and Mr Philip Crutchﬁeld elected to receive options in lieu of directors’ fees paid in cash. A total of 900,000 options were issued in respect of this election following shareholder approval at the Company’s 2021 annual general meeting (for further details refer to the notice of meeting lodged with ASX on 27 October 2021). 34 E N C O U N T E R R E S O U R C E S L I M I T E D Directors’ Report 04. Engagement of Executive Directors The Company has entered into executive service agreements with Mr Will Robinson and Mr Peter Bewick on the following material terms and conditions: Mr Robinson’s current service agreement with the Company, in respect of his engagement as Managing Director, is effective from 1 October 2019. Mr Robinson will receive a base salary of $270,000 per annum plus statutory superannuation. Mr Bewick’s service agreement with the Company, in respect of his engagement as Exploration Director, was effective from 1 October 2019 until his cessation as an Executive Director on 1 November 2021. Whilst an executive director Mr Bewick received a base salary of $270,000 per annum plus statutory superannuation. Executive directors may also receive an annual short-term performance-based bonus which may be calculated as a percentage of their current base salary, the performance criteria, assessment and timing of which is negotiated annually with the Non- Executive Directors. Either party may give the other six months notice in writing to terminate the Services Agreement or with payment or forfeiture in lieu. The Company may terminate the respective services agreements without notice for serious misconduct by an executive director. Executive directors may, subject to shareholder approval, participate in the Encounter Resources Employee Share Option Plan and other long term incentive plans adopted by the Board. Short Term Incentive Payments Each year, the Non-Executive Directors set the Key Performance Indicators (KPI’s) for the Executive Directors. The KPI’s are chosen to align the reward of the individual Executives to the strategy and performance of the Company. Performance objectives, which may be ﬁnancial or non-ﬁnancial, or a combination of both, are weighted when calculating the maximum short-term incentives payable to Executives. At the end of the year, the Non-Executive Directors will assess the actual performance of the Executives against the set Performance Objectives. The maximum amount of the short-term incentive, or a lesser amount depending on actual performance achieved is paid to the Executives as a cash payment. Shareholding Qualiﬁcations The Directors are not required to hold any shares in Encounter Resources under the terms of the Company’s constitution. However, Directors have made their own investment decisions to hold shares in Encounter Resources which are shown in this report. Group Performance In considering the Company’s performance, the Board provides the following indices in respect of the current ﬁnancial year and previous ﬁnancial years: Proﬁt/(Loss) for the year attributable to shareholders 2022 2021 2020 2019 2018 $4,428,194 $(1,533,150) $(1,126,275) $(1,064,491) $(10,129,591) Closing share price at 30 June $0.12 $0.155 $0.15 $0.07 $0.053 As an exploration company, the Board does not consider the proﬁt/(loss) attributable to shareholders as one of the performance indicators when implementing Short Term Incentive Payments. In addition to economic and technical exploration success, the Board considers more appropriate indicators of management performance for the 2022 ﬁnancial period to include: corporate management and business development (including the identiﬁcation and acquisition of high quality projects); • • project and operational performance (including safety and environmental management); • management of the Company’s farm-in and alliance arrangements; and • cash ﬂow and funding management. 2 0 2 2 A N N U A L R E P O R T 35 04. Directors’ Report Remuneration Disclosures The Key Management Personnel of the Company have been identiﬁed as: Mr Paul Chapman Mr Will Robinson Mr Peter Bewick Dr Jon Hronsky Non-Executive Chairman Managing Director Non-Executive Director (Executive Director to 1 November 2021) Non-Executive Director Mr Philip Crutchﬁeld Non-Executive Director The details of the remuneration of each Director and member of Key Management Personnel of the Company is as follows: 30 June 2022 Base Salary Short Term Incentive Superannuation Contributions Value of Options Short Term Post Employment Other Long Term Paul Chapman Will Robinson Peter Bewick Jon Hronsky $ - 270,000 123,333 50,000 Philip Crutchﬁeld - Total 443,333 $ - - - - - - $ - 27,000 12,333 5,000 - $ 49,688 35,491 14,196 14,196 49,688 Total $ 49,688 332,491 149,862 69,196 49,688 Value of Options as Proportion of Remuneration 100.0% 10.7% 9.5% 20.5% 100.0% 44,333 163,259 650,925 30 June 2021 Base Salary Short Term Incentive Superannuation Contributions Value of Options Total Short Term Post Employment Other Long Term $ $ $ $ Value of Options as Proportion of Remuneration $ Paul Chapman Will Robinson Peter Bewick Jon Hronsky - 270,000 264,288 50,000 Philip Crutchﬁeld - - 47,250 47,250 - - - 25,650 25,107 4,750 - 66,297 46,524 46,524 19,773 66,297 66,297 389,424 383,169 74,523 66,297 100.0% 11.9% 12.1% 26.5% 100.0% Total 584,288 94,500 55,507 245,415 979,710 Details of Performance Related Remuneration During the period, short term incentive payments were paid to the executive directors as follows: Will Robinson Peter Bewick Short term incentive payments - cash bonuses paid 2021/22 ﬁnancial year 2020/21 ﬁnancial year Nil Nil $47,250 $47,250 36 E N C O U N T E R R E S O U R C E S L I M I T E D Directors’ Report 04. Equity instrument disclosures relating to key management personnel Options Granted as Remuneration During the ﬁnancial year ended 30 June 2022 2,070,000 options (2021: 2,110,000) were granted to Directors or Key Management Personnel of the Company, as follows: Options issued in lieu of payment of director fees: Paul Chapman Philip Crutchﬁeld Incentive options: Paul Chapman Will Robinson Peter Bewick Jon Hronsky Philip Crutchﬁeld 450,000 450,000 180,000 450,000 180,000 180,000 180,000 The fair value of options issued as remuneration is allocated to the relevant vesting period of the options. Options are provided at no cost to the recipients. Exercise of Options Granted as Remuneration During the year, 60,303 (2021: 1,025,714) ordinary shares were issued in respect of the exercise of options previously granted as remuneration to Directors or Key Management Personnel of the Company, as follows: KMP Peter Bewick Number of shares issued on exercise of options 60,303 Option details Options exercisable at $0.137 expiring 24 November 2021 1 60,303 ordinary fully paid shares issued on the exercise of 750,000 options pursuant to the cash less exercise provisions of the options. Option holdings Key Management Personnel have the following interests in unlisted options over unissued shares of the Company: 2022 Name P. Chapman W. Robinson P. Bewick J. Hronsky P. Crutchﬁeld Balance at start of the year Received during the year as remuneration Other changes during the year1 Balance at the end of the year Vested and exercisable at the end of the year 1,570,000 1,100,000 4,850,000 1,470,000 2,270,000 630,000 450,000 180,000 180,000 630,000 - - (750,000) - - 2,200,000 1,550,000 4,280,000 1,650,000 2,900,000 2,200,000 1,550,000 4,280,000 1,650,000 2,900,000 1 Options exercised during the ﬁnancial year. 2 0 2 2 A N N U A L R E P O R T 37 04. Directors’ Report Share holdings The number of shares in the Company held during the ﬁnancial year by key management personnel of the Company, including their related parties are set out below. There were no shares granted during the reporting period as compensation. 2022 Name P. Chapman W. Robinson P. Bewick J. Hronsky P. Crutchﬁeld Balance at start of the year Received during the year as remuneration Other changes during the year Balance at the end of the year Vested and exercisable at the end of the year 9,948,816 25,695,414 7,950,000 475,714 3,040,557 - - 60,303 - - - 757,142 - - 330,891 9,948,816 26,452,556 8,010,303 475,714 3,371,448 9,948,816 26,452,556 8,010,303 475,714 3,371,448 Loans made to key management personnel No loans were made to key personnel, including personally related entities during the reporting period. Other transactions with key management personnel During the year the Group incurred costs of $17,842 (2021: $13,800), for geological consulting services from Western Mining Services, an entity associated with Dr Jon Hronsky. There were no other transactions with key management personnel. End of Remuneration Report 38 E N C O U N T E R R E S O U R C E S L I M I T E D Directors’ Report 04. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company or Group, or to intervene in any proceedings to which the Company or Group is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Ofﬁcers’ Indemnities and Insurance During the year the Company paid an insurance premium to insure certain ofﬁcers of the Company. The ofﬁcers of the Company covered by the insurance policy include the Directors named in this report. The Directors and Ofﬁcers Liability insurance provides cover against all costs and expenses that may be incurred in defending civil or criminal proceedings that fall within the scope of the indemnity and that may be brought against the ofﬁcers in their capacity as ofﬁcers of the Company. The insurance policy does not contain details of the premium paid in respect of individual ofﬁcers of the Company. Disclosure of the nature of the liability cover and the amount of the premium is subject to a conﬁdentiality clause under the insurance policy. The Company has not provided any insurance for an auditor of the Company. Non-audit Services During the year Crowe Perth the Company’s auditor, has not performed any other services in addition to their statutory duties. The total remuneration paid to Crowe Perth for 2021 includes audits of the subsidiary companies Hamelin Gold Limited for the period ended 30 June 2021 and Hamelin Resources Pty Ltd for the three ﬁnancial years ended 30 June 2019, 2020 and 2021, undertaken as part of the demerger of Hamelin Gold Limited as described in note 33. Total remuneration paid to auditors during the ﬁnancial year: 2022 $ 2021 $ Audit and review of the Company’s ﬁnancial statements 33,050 54,750 The board considers any non-audit services provided during the year by the auditor and satisﬁes itself that the provision of any non-audit services during the year by the auditor is compatible with, and does not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: • • all non-audit services are reviewed by the board to ensure they do not impact the impartiality and objectivity of the auditor; and the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they do not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. 2 0 2 2 A N N U A L R E P O R T 39 Directors’ Declaration Auditor’s Independence Declaration A copy of the Auditor’s Independence Declaration as required under Section 307C of the Corporations Act is set out on the following page. This report is made in accordance with a resolution of the Directors. Dated at Perth this 30th day of September 2022. W Robinson Managing Director 40 E N C O U N T E R R E S O U R C E S L I M I T E D 40 E N C O U N T E R R E S O U R C E S L I M I T E D Auditor’s Independence Declaration Auditor’s Independence Declaration E CL AR AT N CO I O E SO R E PE R CE S L N CE B SU W AR I ASM T D E CT R S O As lead auditor for the audit of E ncounter Resources L declare that, to the best of my k nowledge and belief, there hav e been: imited for the year ended 30 J une 2022, I ( a) no contrav entions of the auditor independence req uirements of the Corporations Act 2001 in relation to the audit; and ( b) no contrav entions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of E ncounter Resources L year. imited and the entities it controlled during the Crowe Perth Crowe Perth Suwarti Asmono Suwarti Asmono Partner Dated at Perth this 30th day of September 2022 Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a separate and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe Global or any other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or partnership interest in Findex (Aust) Pty Ltd. Services are provided by Crowe Perth, an affiliate of Findex (Aust) Pty Ltd. Liability limited by a scheme approved under Professional Standards Legislation. Liability limited other than for acts or omissions of financial services licensees. © 2022 Findex (Aust) Pty Ltd 2 0 2 2 A N N U A L R E P O R T 41 D I O N F N D N D E Y T O N O T O H E I R O F E U N T E R U I M I T E D Consolidated Financial Statements Consolidated Financial Statements For the Year Ended 30 June 2022 42 E N C O U N T E R R E S O U R C E S L I M I T E D Consolidated Financial Statements Consolidated Statement of Proﬁt or Loss and other Comprehensive Income For the ﬁnancial year ended 30 June 2022 Interest income Gain on demerger Other income Total income Employee expenses Employee expenses recharged to exploration Equity based remuneration expense Non-executive Directors’ fees (Loss)/Gain in fair value of ﬁnancial assets Depreciation and amortisation expense Corporate expenses Administration and other expenses Exploration costs written off and expensed Proﬁt/(Loss) before income tax Income tax beneﬁt Proﬁt/(Loss) after tax Other comprehensive income Total comprehensive income/(loss) for the year Earnings per share for loss attributable to the ordinary equity holders of the Company Basic earnings/(loss) per share Diluted earnings/(loss) per share Consolidated 2022 $ 10,349 10,104,846 179,303 10,294,498 (1,114,583) 907,847 (379,845) (83,333) (447,700) (68,642) (75,973) (399,501) (4,204,574) 4,428,194 - 2021 $ 17,660 - 215,555 233,215 (1,345,583) 1,121,452 (466,124) (50,000) (202,162) (24,678) (78,520) (424,622) (296,128) (1,553,150) - 4,428,194 (1,533,150) - - 4,428,194 (1,533,150) 1.4 1.4 (0.5) (0.5) Note 33 5 20 6,11 6 6,14 7 21 31 31 The above consolidated statement of proﬁt or loss and other comprehensive income should be read in conjunction with the accompanying notes. 2 0 2 2 A N N U A L R E P O R T 43 Consolidated Financial Statements Consolidated Statement of Financial Position As at 30 June 2022 Current assets Cash and cash equivalents Trade and other receivables Other current assets Assets reclassiﬁed as held for sale Total current assets Non-current assets Security bonds and deposits Financial assets Property, plant and equipment Capitalised mineral exploration and evaluation expenditure Right of use assets - leases Total non-current assets Total assets Current liabilities Trade and other payables Employee beneﬁts Lease Liabilities Total current liabilities Total non-current liabilities Lease Liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Accumulated losses Equity remuneration reserve Total equity Note 8 9(a) 9(b) 8(c) 11 12 14 13 16 17 18 18 19 21 21 Consolidated 2022 $ 2021 $ 2,165,945 5,686,505 244,355 13,479 - 330,291 72,787 135,636 2,423,779 6,225,219 75,695 118,861 44,210 75,652 566,561 64,238 13,891,414 15,212,300 109,057 14,239,237 16,663,016 174,493 16,093,244 22,318,463 128,115 225,024 67,713 420,852 49,241 49,241 470,093 322,703 310,971 60,469 694,143 116,954 116,954 811,097 16,192,923 21,507,366 41,666,888 50,000,566 (26,698,304) (29,535,096) 1,224,339 16,192,923 1,041,896 21,507,366 The above consolidated statement of ﬁnancial position should be read in conjunction with the accompanying notes. 44 E N C O U N T E R R E S O U R C E S L I M I T E D Consolidated Financial Statements Consolidated Statement of Changes in Equity For the ﬁnancial year ended 30 June 2022 2021 Consolidated Accumulated \losses Equity remuneration reserve $ $ Issued capital $ Balance at the start of the ﬁnancial year 43,828,235 (28,069,977) 576,644 Total $ 16,334,902 (1,533,150) 582,398 - - (1,533,150) - - 582,398 49,115 68,031 (117,146) - Comprehensive income for the ﬁnancial year Movement in equity remuneration reserve in respect of options vested Transfer to accumulated losses on cancellation of vested options Transactions with equity holders in their capacity as equity holders: Shares issued (net of costs) 6,123,216 - - 6,123,216 Balance at the end of the ﬁnancial year 50,000,566 (29,535,096) 1,041,896 21,507,366 2022 Consolidated Accumulated losses Equity remuneration reserve $ $ Issued capital $ Total $ Balance at the start of the ﬁnancial year 50,000,566 (29,535,096) 1,041,896 21,507,366 Comprehensive income for the ﬁnancial year Movement in equity remuneration reserve in respect of options vested Transfer on exercise and/or cancellation of vested options Derecognition of accumulated losses on demerger of subsidiary - - 4,428,194 - 4,428,194 - 379,845 379,845 8,262 189,140 (197,402) - - 294,156 - - - 294,156 (10,489,813) 73,175 Capital return on in-specie distribution (note 33) (8,415,115) (2,074,698) Transactions with equity holders in their capacity as equity holders: Shares issued (net of costs) 73,175 - Balance at the end of the ﬁnancial year 41,666,888 (26,698,304) 1,224,339 16,192,923 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 2 0 2 2 A N N U A L R E P O R T 45 Consolidated Financial Statements Consolidated Statement of Cash Flows For the ﬁnancial year ended 30 June 2022 Cash ﬂows from operating activities Receipts from tenement option fee income Receipts from other income Interest received Payments to suppliers and employees Net cash used in operating activities Cash ﬂows from investing activities Funds received – subsidiary initial public offer Cash assets transferred on demerger of subsidiary Payments for amounts incurred on behalf of related party Proceeds on repayment of related party loans Payments for security bonds and deposits Contributions received from project generation alliance and farm-in partners Payments for exploration and evaluation State Government funded drilling rebate R&D tax concession for exploration activities Payments for plant and equipment Net cash used in investing activities Cash ﬂows from ﬁnancing activities Proceeds from loans received Payments for loans repaid Proceeds from the issue of shares Payments for share issue costs Repayment of Lease Liability Net cash from ﬁnancing activities Net (decrease)/increase in cash held Cash at the beginning of the ﬁnancial year Cash at the end of the ﬁnancial year Consolidated 2022 $ 25,000 25,646 10,306 (776,274) (715,322) 7,478,125 (7,478,304) (420,101) 335,175 - 170,248 2021 $ - 71,069 17,660 (800,669) (711,940) - - - - (75,652) 2,466,184 (3,055,354) (4,420,473) 152,295 13,749 (1,750) 239,715 117,377 (9,768) (2,805,917) (1,682,617) 32,849 (32,849) 76,925 (3,749) (72,497) 679 (3,520,560) 5,686,505 2,165,945 - - 6,524,997 (285,508) (23,929) 6,215,560 3,821,003 1,865,502 5,686,505 Note 30 8(a) The above consolidated statement of cash ﬂows should be read in conjunction with the accompanying notes. 46 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Notes to the Financial Statements Note 1 Summary of signiﬁcant accounting policies Note 2 Financial risk management Note 3 Critical accounting estimates and judgements Note 4 Segment information Note 5 Other income Note 6 Loss for the year Note 7 Income tax Note 8 Current assets – Cash and cash equivalents Note 9 Current assets – Receivables 49 55 55 56 56 57 57 59 60 Note 17 Current liabilities - Employee beneﬁts Note 18 Current liabilities – Lease liabilities Note 19 Issued capital Note 20 Options and share based payments Note 21 Reserves and accumulated losses Note 22 Financial instruments Note 23 Dividends Note 24 Key management personnel disclosures Note 25 Remuneration of auditors Note 10 Non-current assets – Investment in controlled Note 26 Contingencies entities 61 Note 27 Commitments Note 11 Financial assets – Investments Designated at Fair Value through Proﬁt or Loss 62 Note 28 Related party transactions Note 12 Non-current assets – Property, plant and equipment 63 Note 29 Events occurring after the balance sheet date Note 30 Reconciliation of loss after tax to net cash inﬂow Note 13 Non-current assets – Right of use assets - leases 64 from operating activities Note 14 Non-current assets – Capitalised mineral exploration and evaluation expenditure 64 Note 31 Earnings per share Note 32 Parent entity information Note 15 Interest in joint ventures and farm-in arrangements 65 Note 33 Demerger of Hamelin Gold Limited Note 16 Current liabilities – Trade and other payables 66 66 66 67 68 69 70 71 72 72 73 73 74 74 74 75 76 76 2 0 2 2 A N N U A L R E P O R T 47 Notes to the Financial Statements Note 1 Summary of signiﬁcant accounting policies Reporting basis and conventions These ﬁnancial statements have been prepared under the historical cost convention, and on an accrual basis. The principal accounting policies adopted in the preparation of the ﬁnancial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The ﬁnancial report includes ﬁnancial statements for the consolidated entity consisting of Encounter Resources Limited and its subsidiaries (“Group”). Basis of preparation This general-purpose ﬁnancial report has been prepared in accordance with Australian Equivalents to International Financial Reporting Standards (“AIFRS”), other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The Group is a for- proﬁt entity for ﬁnancial reporting purposes under Australian Accounting Standards. The ﬁnancial report is presented in Australian dollars and all values are rounded to the nearest dollar. The separate ﬁnancial statements of the parent entity have not been presented within this ﬁnancial report as permitted by the Corporations Act 2001. The ﬁnancial report of the Group was authorised for issue in accordance with a resolution of Directors on 30th September 2022. Statement of Compliance The consolidated ﬁnancial report of Encounter Resources Limited complies with Australian Accounting Standards, which include AIFRS, in their entirety. Compliance with AIFRS ensures that the ﬁnancial report also complies with International Financial Reporting Standards (“IFRS”) in their entirety. Adoption of new and revised Accounting Standards The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any signiﬁcant impact on the ﬁnancial performance or position of the Group during the ﬁnancial year. New standards and interpretations not yet adopted The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application date for future reporting periods and which the Group has decided not to early adopt. Critical accounting estimates The preparation of ﬁnancial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signiﬁcant to the ﬁnancial statements, are disclosed in note 3. Principles of consolidation The ﬁnancial statements of subsidiary companies are included in the consolidated ﬁnancial statements from the date control commences until the date control ceases. The ﬁnancial statements of subsidiary companies are prepared for the same reporting period as the parent company, using consistent accounting policies. Inter-entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation. Investments in subsidiary companies are accounted for at cost in the individual ﬁnancial statements of the Company. (a)Segment reporting Operating segments are identiﬁed and segment information disclosed, where appropriate, on the basis of internal reports reviewed by the Company’s board of directors, being the Group’s Chief Operating Decision Maker, as deﬁned by AASB 8. (b) Other income Interest income Interest income is recognised on a time proportion basis and is recognised as it accrues. Option fee income Recognised for option fee income at such time that the option fee becoming receivable by the Company occurs. Management fee income Recognised for management fees from farm-in and alliance partners during the period in which the Company provided the relevant service. 48 E N C O U N T E R R E S O U R C E S L I M I T E D Note 1 Summary of signiﬁcant accounting policies (Continued) (c)Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to the temporary differences between the tax bases of assets and liabilities and their carrying amounts in the ﬁnancial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary timing differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantially enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to those timing differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting proﬁt or taxable proﬁt or loss. Deferred 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 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 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. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. (d) Lease Liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease Notes to the Financial Statements payments comprise of ﬁxed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to proﬁt or loss if the carrying amount of the right-of-use asset is fully written down. (e)Right of use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to proﬁt or loss as incurred. (f) Impairment of assets Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiﬁable cash inﬂows which are largely independent of the cash inﬂows from other assets or groups of assets (cash generating units). Non- ﬁnancial assets, other than goodwill, that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. 2 0 2 2 A N N U A L R E P O R T 49 Notes to the Financial Statements (g) Cash and cash equivalents For cash ﬂow statement 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 known amounts of cash and which are subject to an insigniﬁcant risk of changes in value. (h)Government grants Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are deducted from the carrying value of the relevant asset. Amounts receivable from the Australian Tax Ofﬁce in respect of research and development tax concession claims are recognised in the year in which the claim is lodged with the Australian Tax Ofﬁce. Amounts receivable are allocated in the ﬁnancial statements against the corresponding expense or asset in respect of which the research and development concession claim has arisen. (i) Fair value estimation The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of ﬁnancial liabilities for disclosure purposes is estimated by discounting the future contractual cash ﬂows at the current market interest rate that is available to the Group for similar ﬁnancial instruments. (j) Property, plant and equipment Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁts associated with the item will ﬂow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the ﬁnancial period in which they are incurred. Depreciation of property, plant and equipment is calculated using the straight line and diminishing value methods to allocate their cost, net of residual values, over their estimated useful lives, as follows: Asset Class Depreciation Rate Field equipment and vehicles Ofﬁce equipment 33% 33% Leasehold improvements Over the term of the lease The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(f)). Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement. (k)Non-Current Assets Classiﬁed as Held for Sale Non-current assets that are expected to be recovered primarily through sale rather than through continuing use, are classiﬁed as held for sale. They are measured at the lower of their carrying amount and fair value less cost to sell. For 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. 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. Assets classiﬁed as held for sale are presented separately on the face of the statement of ﬁnancial position, in current assets. (l) Mineral exploration and evaluation expenditure Mineral exploration and evaluation expenditure is written off as incurred or accumulated in respect of each identiﬁable area of interest and capitalised. These costs are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which: • • such costs are expected to be recouped through the successful development and exploitation of the area of interest, or alternatively by its sale; or exploration and/or evaluation activities in the area have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active or signiﬁcant operations in, or in relation to, the area of interest are continuing. In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of reduced value, accumulated costs carried forward are written off in the year in which that assessment is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Immediate restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure. 50 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 1 Summary of signiﬁcant accounting policies (Continued) jointly held assets, liabilities, revenues and expenses of joint operations. These have been incorporated in the ﬁnancial statements under the appropriate classiﬁcations. Exploration activities resulting in future obligations in respect of restoration costs result in a provision to be made by capitalising the estimated costs, on a discounted cash basis, of restoration and depreciating over the useful life of the asset. The unwinding of the effect of the discounting on the provision is recorded as a ﬁnance cost in the income statement. Details of these interests are shown in Note 15. (n)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. Farm-in arrangements (in the exploration and evaluation phase) (o)Employee beneﬁts For exploration and evaluation asset acquisitions (farm-in arrangements) in which the Group has made arrangements to fund a portion of the selling partner’s (farmor’s) exploration and/or future development expenditures (carried interests), these expenditures are reﬂected in the ﬁnancial statements as and when the exploration and development work progresses. Wages, salaries and annual leave Liabilities for wages and salaries, including non-monetary beneﬁts, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Farm-out arrangements (in the exploration and evaluation phase) Long service leave The Group does not record any expenditure made by the farmee on its account. It also does not recognise any gain or loss on its exploration and evaluation farm-out arrangements but designates any costs previously capitalised in relation to the whole interest as relating to the partial interest retained. Monies received pursuant to farm-in agreements are treated as a liability on receipt and until such time as the relevant expenditure is incurred. (m) Joint ventures and joint operations The liability for long service leave is recognised in the provision for employee beneﬁts and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future salaries, experience of employee departures and periods of service. Expected future payments are discounted at the corporate bond rate with terms to maturity and currency that match, as closely as possible, the estimated future cash outﬂows. Joint ventures Share based payments A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Investments in joint ventures are accounted for using the equity method. Under the equity method, the share of the proﬁts or losses of the joint venture is recognised in proﬁt or loss and the share of the movements in equity is recognised in other comprehensive income. Investments in joint ventures are carried in the statement of ﬁnancial position at cost plus post-acquisition changes in the Group’s share of net assets of the joint venture. Goodwill relating to the joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Income earned from joint venture entities reduces the carrying amount of the investment. Joint operations A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. The Group has recognised its share of Share based compensation payments are made available to Directors and employees. The fair value of options granted is recognised as an employee beneﬁt expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option. A discount is applied, where appropriate, to reﬂect the non-marketability and non-transferability of unlisted options, as the Black- Scholes option pricing model does not incorporate these factors into its valuation. 2 0 2 2 A N N U A L R E P O R T 51 Notes to the Financial Statements The fair value of the options granted is adjusted to reﬂect market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee beneﬁt expense recognised each period takes into account the most recent estimate. Upon the exercise of options, the balance of the share based payments reserve relating to those options is transferred to share capital and the proceeds received, net of any directly attributable transaction costs, are credited to share capital. Upon the cancellation of options on expiry of the exercise period, or lapsing of vesting conditions, the balance of the share based payments reserve relating to those options is transferred to accumulated losses. (p) Issued capital 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, net of tax, from the proceeds. (q) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the earnings attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the ﬁnancial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the ﬁgures used in the determination of basic earnings per share 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 to have been issued for no consideration in relation to dilutive potential ordinary shares. (r) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as a part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. 52 E N C O U N T E R R E S O U R C E S L I M I T E D Cash ﬂows are presented on a gross basis. The GST components of cash ﬂows arising from investing or ﬁnancing activities which are recoverable from, or payable to, the taxation authority, are presented as operating cash ﬂow. (s) Comparative ﬁgures When required by Accounting Standards, comparative ﬁgures have been adjusted to conform to changes in presentation for the current ﬁnancial year. (t) Investments and other ﬁnancial assets Investments and other ﬁnancial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for ﬁnancial assets at fair value through proﬁt or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classiﬁcation. Classiﬁcation is determined based on both the business model within which such assets are held and the contractual cash ﬂow characteristics of the ﬁnancial asset unless, an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash ﬂows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a ﬁnancial asset, it’s carrying value is written off. Financial assets at fair value through proﬁt or loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classiﬁed as ﬁnancial assets at fair value through proﬁt or loss. Typically, such ﬁnancial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a proﬁt, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in proﬁt or loss. Impairment of ﬁnancial assets The consolidated entity recognises a loss allowance for expected credit losses on ﬁnancial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity’s assessment at the end of each reporting period as to whether the ﬁnancial instrument’s credit risk has increased signiﬁcantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Note 1 Summary of signiﬁcant accounting policies (Continued) Where there has not been a signiﬁcant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a ﬁnancial asset has become credit impaired or where it is determined that credit risk has increased signiﬁcantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For ﬁnancial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in proﬁt or loss. (u)Fair value estimation A number of the Group’s accounting policies and disclosures require the determination of fair value, for both ﬁnancial and non-ﬁnancial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods: Investments in equity securities The fair value of ﬁnancial assets at fair value through proﬁt or loss, is determined by reference to their quoted bid price at the reporting date. For investments with no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions, reference to the current market value of another instrument that is substantially the same, discounted cash ﬂow analysis and option pricing models. Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash ﬂows, discounted at the market rate of interest at the reporting date. Fair value measurement When an asset or liability, ﬁnancial or non-ﬁnancial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Notes to the Financial Statements Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-ﬁnancial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufﬁcient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classiﬁed, into three levels, using a fair value hierarchy that reﬂects the signiﬁcance of the inputs used in making the measurements. Classiﬁcations are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is signiﬁcant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be signiﬁcant. External valuers are selected based on market knowledge and reputation. Where there is a signiﬁcant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a veriﬁcation of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. (v)Current versus non-current classiﬁcation The Group presents assets and liabilities in the statement of ﬁnancial position based on a current or non-current classiﬁcation. An asset is current when it is: • Expected to be realised, or intended to be sold or consumed in the Group’s normal operating cycle; • Expected to be realised within twelve months after the reporting period; or • Cash or a cash equivalents (unless restricted for at least twelve months after the reporting period. A liability is current when it is: • Expected to be settled in the Group’s normal operating cycle; • It is due to be settled within twelve months after the reporting date; or • There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other assets and liabilities are classed as non-current. 2 0 2 2 A N N U A L R E P O R T 53 Notes to the Financial Statements Note 2 Financial risk management The Group has exposure to a variety of risks arising from its use of ﬁnancial instruments. This note presents information about the Company’s exposure to the speciﬁc risks, and the policies and processes for measuring and managing those risks. The Board of Directors has the overall responsibility for the risk management framework and has adopted a Risk Management Policy. (a)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 transactions with customers and investments. Trade and other receivables The nature of the business activity of the Group does not result in trading receivables. The receivables that the Group does experience through its normal course of business are short term and the most signiﬁcant recurring by quantity is receivable from the Australian Taxation Ofﬁce, the risk of non-recovery of receivables from this source is considered to be negligible. Cash deposits The Directors believe any risk associated with the use of predominantly only one bank is addressed through the use of at least an A-rated bank as a primary banker and by the holding of a portion of funds on deposit with alternative A-rated institutions. Except for this matter the Group currently has no signiﬁcant concentrations of credit risk. (b) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its ﬁnancial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufﬁcient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages its liquidity risk by monitoring its cash reserves and forecast spending. Management is cognisant of the future demands for liquid ﬁnance resources to ﬁnance the Company’s current and future operations, and consideration is given to the liquid assets available to the Company before commitment is made to future expenditure or investment. (c)Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of 54 E N C O U N T E R R E S O U R C E S L I M I T E D ﬁnancial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising any return. Interest rate risk The Group has signiﬁcant cash assets which may be susceptible to ﬂuctuations in changes in interest rates. Whilst the Group requires the cash assets to be sufﬁciently liquid to cover any planned or unforeseen future expenditure, which prevents the cash assets being committed to long term ﬁxed interest arrangements; the Group does mitigate potential interest rate risk by entering into short to medium term ﬁxed interest investments. Equity risk The Group has exposure to price risk in respect of its holding of ordinary securities in Hampton Hill NL, which has a carrying value at 30 June 2022 of $118,861 (2021: $566,561). The investment is classiﬁed at fair value through proﬁt or loss and as such any movement in the value of Hampton Hill NL shares will be recognised as a beneﬁt of expense in proﬁt or loss. No speciﬁc hedging activities are undertaken into this investment. Foreign exchange risk The Group enters into earn-in arrangements that may be denominated in currencies other than Australian Dollars. Whilst the Group does not recognise assets or liabilities in respect of these earn-in arrangements and accordingly ﬂuctuations in foreign exchange rates will have no direct impact on the Group’s net assets, movements in foreign exchange may favourably or adversely affect future amounts to be incurred by the Group or its earn-in partners pursuant to such agreements. Other than the above, the Group does not have any direct contact with foreign exchange ﬂuctuations other than their effect on the general economy. Note 3 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a ﬁnancial impact on the Group and that are believed to be reasonable under the circumstances. The judgements estimates and assumptions that have a signiﬁcant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁnancial year are discussed below: Notes to the Financial Statements Note 3 Critical accounting estimates and judgements (Continued) Accounting for capitalised exploration and evaluation expenditure The Group’s accounting policy is stated at 1(l). There is some subjectivity involved in the carrying forward as capitalised or writing off to the income statement exploration and evaluation expenditure. Key judgements applied include determining which expenditures relate directly to exploration and evaluation activities and allocating overheads between those that are expensed and capitalised. Management give due consideration to areas of interest on a regular basis and are conﬁdent that decisions to either write off or carry forward such expenditure reﬂect fairly the prevailing situation. Accounting for share based payments The Group’s accounting policy is stated at 1(l). There is some subjectivity involved in the carrying forward as capitalised or writing off to the income statement exploration and evaluation expenditure. Key judgements applied include determining which expenditures relate directly to exploration and evaluation activities and allocating overheads between those that are expensed and capitalised. Management give due consideration to areas of interest on a regular basis and are conﬁdent that decisions to either write off or carry forward such expenditure reﬂect fairly the prevailing situation. Note 4 Segment information The Group has identiﬁed its operating segments based on the internal reports that are reviewed and used by the board of directors in assessing performance and determining the allocation of resources. Reportable segments disclosed are based on aggregating operating segments, where the segments have similar characteristics. The Group’s sole activity is mineral exploration and resource development wholly within Australia, therefore it has aggregated all operating segments into the one reportable segment being mineral exploration. The reportable segment is represented by the primary statements forming these ﬁnancial statements. Note 5 Other income Operating activities Tenement option fee income Recharged costs Cash ﬂow assistance grant Management fees from farm-in and project generation alliance partners Other income Consolidated 2022 $ 25,000 111,397 - 6,586 36,320 179,303 2021 $ - - 67,500 144,486 3,569 215,555 2 0 2 2 A N N U A L R E P O R T 55 Notes to the Financial Statements Note 6 Loss for the year Loss before income tax includes the following speciﬁc beneﬁts/(expenses): Depreciation and amortisation: Ofﬁce equipment Right of use assets – leases Total exploration and joint venture costs not capitalised and written off Superannuation expense – deﬁned contribution (Loss)/Gain in fair value of ﬁnancial assets1 Note 12 13 14 Consolidated 2022 $ 2021 $ (3,206) (65,436) (68,642) (4,204,574) (102,663) (447,700) (2,866) (21,812) (24,678) (296,128) (109,895) (202,162) 1 Adjustment to carrying value of investment in Hampton Hill NL, based on the Company’s share of net assets as at 30 June 2022. The gain/(loss) on investment has been recognised in the Statement of Proﬁt or Loss. Refer note 11. Note 7 Income tax a) Income tax expense Current income tax: Current income tax charge (beneﬁt) Current income tax not recognised Deferred income tax: Relating to origination and reversal of timing differences Deferred income tax beneﬁt/(liability) not recognised Income tax expense/(beneﬁt) reported in the income statement Consolidated 2022 $ 2021 $ (1,000,415) 1,000,415 (552,721) 552,721 (742,209) 742,209 - (6,022) 6,022 - 56 E N C O U N T E R R E S O U R C E S L I M I T E D Note 7 Income tax (Continued) b) Reconciliation of income tax expense to prima facie tax payable Proﬁt/(Loss) from continuing operations before income tax expense Tax at the Australian rate of 25% (2021 – 26%) Tax effect of permanent differences: Non-deductible share-based payment Unrealised movement in fair value of ﬁnancial assets Exploration costs written off Capital raising costs claimed Gain recognised on demerger Net deferred tax asset beneﬁt not brought to account Tax (beneﬁt)/expense c) Deferred tax – Balance Sheet Liabilities Prepaid expenses Exploration assets reclassiﬁed as held for sale Capitalised exploration expenditure Assets Notes to the Financial Statements Consolidated 2022 $ 2021 $ 4,428,194 1,107,049 (1,533,150) (398,619) 94,961 111,925 1,051,144 (26,154) (2,526,212) 187,288 - 121,192 52,562 2,077 (29,603) - 252,391 - (3,370) - (3,472,853) (3,476,223) (18,924) (35,265) (3,955,198) (4,009,387) Revenue losses available to offset against future taxable income 9,430,935 9,157,880 Employee provisions Accrued expenses Deductible equity raising costs Net deferred tax asset not recognised 56,256 2,791 63,670 9,553,652 6,077,429 80,852 13,433 92,442 9,344,607 5,335,220 2 0 2 2 A N N U A L R E P O R T 57 Notes to the Financial Statements d) Deferred tax – Income Statement Liabilities Prepaid expenses Exploration assets reclassiﬁed as held for sale Capitalised exploration expenditure Assets Deductible equity raising costs Accruals Increase/(decrease) in tax losses carried forward Employee provisions Deferred tax beneﬁt/(expense) movement for the period not recognised Consolidated 2022 $ 2021 $ 15,554 35,265 482,345 (28,772) (10,642) 273,055 (24,596) 742,209 21,774 (35,265) (115,156) 73,846 3,620 50,430 (5,271) (6,022) The deferred tax beneﬁt of tax losses not brought to account will only be obtained if: (i) The Company derives future assessable income of a nature and an amount sufﬁcient to enable the beneﬁt from the tax losses to be realised; (ii) The Company continues to comply with the conditions for deductibility imposed by tax legislation; and (iii) No changes in tax legislation adversely affect the Company realising the beneﬁt from the deduction of the losses. All unused tax losses were incurred by Australian entities. Note 8 Current assets - Cash and cash equivalents Cash at bank and on hand Term Deposits Consolidated 2022 $ 665,945 1,500,000 2,165,945 2021 $ 486,505 5,200,000 5,686,505 (a)Reconciliation to cash at the end of the year The above ﬁgures are reconciled to cash at the end of the ﬁnancial year as shown in the statement of cash ﬂows as follows: Cash and cash equivalents per statement of cash ﬂows 2,165,945 5,686,505 (b)Term Deposits Amounts classiﬁed as term deposits are short term deposits with maturity of three months or less, and earn interest at the respective short term interest rates. 58 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 8 Current assets – Cash and cash equivalents (Continued) (c)Cash balances not available for use Included in cash and cash equivalents above are amounts pledged as guarantees for the following: Ofﬁce lease bond guarantee Note 26 Consolidated 2022 2021 $ - $ - The security deposit in relation to the Group’s lease on its ofﬁce at 1 Alvan Street, Subiaco, Western Australia of $25,652 is included in non-current assets. An amount of $50,000 held on deposit in relation to the Group’s corporate credit card facility is included in non-current assets. The Company recognises liabilities in the ﬁnancial statements for unspent farm-in contributions (Note 16). Note 9 Current assets – Receivables a) Trade and other receivables Funds due from project generation and farm-in partners Trade and other receivables GST recoverable b) Other current assets Prepaid administration costs Prepaid tenement costs Details of fair value and exposure to interest risk are included at note 22. Consolidated 2022 $ 8,193 236,162 - 244,355 5,982 66,805 72,787 2021 $ 100,824 227,346 2,121 2,121 - 147,994 147,994 2 0 2 2 A N N U A L R E P O R T 59 Notes to the Financial Statements Note 10 Non-current assets – Investment in controlled entities a) Investment in controlled entities The following amounts represent the respective investments in the share capital of Encounter Resources Limited’s wholly owned subsidiary companies at 30 June 2022: Encounter Operations Pty Ltd Hamelin Resources Pty Ltd1 Encounter Yeneena Pty Ltd Baudin Resources Pty Ltd Encounter Paterson Pty Ltd Encounter Aileron Pty Ltd Hamelin Gold Limited1 Hamelin Tanami Pty Ltd1 Consolidated 2022 2021 $ 2 - 2 10 1 1 - - $ 2 2 2 10 - - 1 1 1 Hamelin Gold Limited group exited the Encounter Resources Limited group during the ﬁnancial year. Subsidiary Company Encounter Operations Pty Ltd Hamelin Resources Pty Ltd Encounter Yeneena Pty Ltd Baudin Resources Pty Ltd Encounter Paterson Pty Ltd Encounter Aileron Pty Ltd Hamelin Gold Limited Hamelin Tanami Pty Ltd Country of Incorporation Ownership Interest 2022 2021 Australia Australia Australia Australia Australia Australia Australia Australia 100% - 100% 100% 100% 100% - - 100% 100% 100% 100% - - 100% 100% • Encounter Operations Pty Ltd was incorporated in Western Australia on 27 November 2006. • Hamelin Resources Pty Ltd was incorporated in Western Australia on 24 November 2009. • Encounter Yeneena Pty Ltd was incorporated in Western Australia on 23 May 2013. • Baudin Resources Pty Ltd was incorporated in Western Australia on 7 April 2017. • Hamelin Gold Limited was incorporated in Western Australia on 24 May 2021. • Hamelin Tanami Pty Ltd was incorporated in Western Australia on 26 May 2021. The ultimate controlling party of the group is Encounter Resources Limited. During the ﬁnancial year two further companies were formed as wholly owned subsidiaries of Encounter Resources Limited: • Encounter Paterson Pty Ltd was incorporated in Western Australia on 9 July 2021. • Encounter Aileron Pty Ltd was incorporated in Western Australia on 9 July 2021. During the ﬁnancial year the Company completed the demerger of the Hamelin Gold Limited group which comprised Hamelin Gold Limited and its subsidiaries Hamelin Resources Pty Ltd and Hamelin Tanami Pty Ltd (note 33). 60 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 10 Non-current assets – Investment in controlled entities (Continued) b) Loans to controlled entities The following amounts are payable to the parent company, Encounter Resources Limited at the reporting date: Encounter Operations Pty Ltd Hamelin Resources Pty Ltd Encounter Yeneena Pty Ltd Baudin Resources Pty Ltd Encounter Paterson Pty Ltd Encounter Aileron Pty Ltd 2022 $ 2021 $ 22,310,706 - 881,285 1,000,240 6,865,391 713,260 22,096,992 5,939,158 881,285 478,143 - - The loans to Encounter Operations Pty Ltd, Encounter Paterson Pty Ltd, Encounter Aileron Pty Ltd, Encounter Yeneena Pty Ltd and Baudin Resources Pty Ltd, to fund exploration activity are non-interest bearing. The Directors of Encounter Resources Limited do not intend to call for repayment within 12 months. Note 11 Financial assets – Investments Designated at Fair Value through Proﬁt or Loss Balance at the start of the ﬁnancial year1 Gain on investments recognised through proﬁt & loss2 Balance at the end of the ﬁnancial year Consolidated 2022 $ 566,561 (447,700) 118,861 2021 $ 768,723 (202,162) 566,561 1 The investment relates to the shares received from Hampton Hill NL in relation to an option fee pursuant to an election made under an earn-in agreement in respect of the Company’s Millennium project. 2 Adjustment to carrying value of investment in Hampton Hill NL, based on the Company’s share of net assets. The (loss)/gain on investment has been recognised in the Statement of Proﬁt or Loss. Refer note 6. Investments designated at fair value through proﬁt or loss have been measured at level 3 in the fair value measurement hierarchy, refer accounting policy 1(u). 2 0 2 2 A N N U A L R E P O R T 61 Notes to the Financial Statements Note 12 Non-current assets – Property, plant and equipment Field equipment At cost Accumulated depreciation Ofﬁce equipment At cost Accumulated depreciation Reconciliation Field equipment Net book value at start of the year Cost of additions Depreciation charged Net book value at end of the year Ofﬁce equipment Net book value at start of the year Cost of additions Depreciation charged Net book value at end of the year Consolidated 2022 $ 2021 $ 805,219 (768,076) 37,143 52,076 (45,009) 7,067 44,210 805,219 (749,504) 55,715 112,170 (110,549) 1,621 64,238 Note Consolidated 2022 $ 2021 $ 55,715 - (18,572) 37,143 8,523 1,750 (3,206) 7,067 83,574 - (27,859) 55,715 1,621 9,768 (2,866) 8,523 6 No items of property, plant and equipment have been pledged as security by the Group. 62 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 13 Non-current assets – Right of use assets - leases Leases Carrying value at start of the year ROU assets recognised in the year Amortisation charged Carrying value at end of the year Note 6 Consolidated 2022 $ 174,493 - (65,436) 109,057 2021 $ - 196,305 (21,812) 174,493 A right of use asset has been recognised in respect of the Group’s lease of its ofﬁce at Suite 2, 1 Alvan Street, Subiaco, Western Australia. The lease is for a term of three years commencing 1 March 2021 with an option to extend for three further years. Management have determined that based on all available information, it is not reasonably certain that they will exercise the option to renew the lease at the end of the initial three-year term. Refer to Note 18 for details of the corresponding right of use liability arising from the abovementioned lease. Note 14 Non-current assets – Capitalised mineral exploration and evaluation expenditure Note Consolidated 2022 $ 2021 $ In the exploration and evaluation phase Capitalised exploration costs at the start of the period 15,212,300 13,963,789 Total acquisition and exploration costs for the period (i) Exploration costs funded by EIS grant Research and development tax credits (ii) 3,049,732 (152,295) (13,749) Total exploration and joint venture costs written off and expensed for the period 6 (4,204,574) 1,902,054 (239,715) (117,700) (296,128) Capitalised exploration costs at the end of the period 13,891,414 15,212,300 The recoverability of the carrying amount of the exploration and evaluation assets is dependent upon successful development and commercial exploitation, or alternatively, sale of the respective areas of interest The capitalised exploration expenditure written off includes expenditure written off on surrender of or intended surrender of tenements for both the group entities and the Group’s proportionate share of the exploration written off by the joint venture entities. (i) Does not include costs incurred by farm-in partners in respect of spend incurred on assets the subject of farm-in arrangements. (ii) Amounts receivable pursuant to research and development tax credit (R&D) claims lodged during the period. The activities the subject of the R&D claims are subject to review by AusIndustry prior to being submitted. R&D submissions may or may not be subject to future review or audit by AusIndustry or the Australian Taxation Ofﬁce. 2 0 2 2 A N N U A L R E P O R T 63 Notes to the Financial Statements Note 15 Interest in joint ventures and farm-in arrangements Earn-in and Joint Venture Agreement – Elliott Copper Project (“Elliott”) – BHP Group Ltd (BHP) The key terms for the farm-in and joint venture agreement are: a) Joint Venture Agreements – Joint Operations Joint venture agreements may be entered into with third parties. Assets employed by these joint ventures and the Group’s expenditure in respect of them is brought to account initially as capitalised exploration and evaluation expenditure until a formal joint venture agreement is entered into. Thereafter, investment in joint ventures is recorded distinctly from capitalised exploration costs incurred on the company’s 100% owned projects. b) Joint Venture and Farm-in Arrangements Millennium Zinc Project – Hampton Hill NL (HHM) Joint Venture Encounter Resources Limited has a 75:25 contributing joint venture with HHM covering the Company’s Millennium zinc project, comprising exploration licences EL45/2501, EL45/2561 and four blocks of EL45/2500 in the Paterson Province of Western Australia. • HHM hold a 25% and Encounter holds a 75% interest in the joint venture. • Industry standard expenditure contribution or dilution formulas would apply. If a party’s interest is diluted to less than 10%, that interest would convert to a 1% Net Proﬁt Royalty. • Encounter is the Operator. Earn-in and Joint Venture Agreement - Yeneena Copper-Cobalt Project (“Yeneena”) – IGO Limited NL (IGO) • Staged farm-in where BHP has the right to earn up to a 75% interest in Elliott by sole funding up to A$25 million of exploration expenditure within 10 years. • Upon BHP completing the earn-in, a 75:25 joint venture will be formed and the parties must contribute funds based on their percentage interest to maintain their respective interests or dilute according to a standard dilution formula. Should a party’s interest dilute to below 10% it shall automatically convert to a net smelter royalty. • During the farm-in phase, BHP has the right to be the Manager of the project. Earn-in and Joint Venture Agreement – Jessica Copper Project (“Jessica”) and Carrara Copper-Zinc Project (“Carrara”) – South32 Ltd (South32) The key terms for the farm-in and joint venture agreements are: Jessica • South32 has the right to earn a 60% interest in Jessica (the “Initial Interest”) by sole funding $15 million of exploration expenditure within 10 years. • During the farm-in phase or joint venture period, South32 may earn an additional 15% interest in Jessica (the “Further Interest”) by completing a Scoping Study. • Upon South32 earning the Initial Interest or Further Interest in Jessica, a 60:40 or 75:25 joint venture will be formed and in the case of South32 earning the Further Interest, the parties must contribute funds based on their pro-rata interest or dilute according to a standard dilution formula. Should a party’s interest dilute to below 10%, that party’s interest shall automatically convert to a net smelter return royalty. • During the farm-in phase, South32 will be the Manager of the project. The key terms of the earn-in and joint venture agreement are as follows: Carrara • IGO may earn a 70% interest in the project by sole funding $15 million of expenditure over 7 years; • During the earn-in, IGO shall have the right to be the Manager of the project; • Upon IGO completing the earn-in a 70:30 joint venture will be formed, and the parties must contribute funds based on their percentage interest to maintain their respective interests; and • Standard dilution clauses will apply to the parties’ interests. Should a party’s interest dilute to below 10% it shall automatically convert to a Net Smelter Royalty. • South32 has the right to earn a 60% interest in Carrara by sole funding $10 million of exploration expenditure within 10 years. • During the farm-in phase or joint venture period, South32 may earn an additional 15% interest in Carrara by completing a Scoping Study. • Upon South32 earning the Initial Interest or the Further Interest in Carrara, a 60:40 or 75:25 joint venture will be formed and the parties must contribute funds based on their pro-rata interest or dilute according to a standard dilution formula. Should a party’s interest dilute to below 10%, that party’s interest shall automatically convert to a net smelter return royalty. • During the farm-in phase, South32 will be the Manager of the project. 64 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 15 Interest in joint ventures and farm-in arrangements (Continued) During the farm-in phase for both projects, a technical committee comprising representatives from each of Encounter and South32 will review and approve annual exploration programs and budgets. All decisions of the technical committee will be decided by majority vote, with South32 having a casting vote. Scoping Study means an order of magnitude technical and economic study of the potential viability of JORC Mineral Resources for the relevant project. Note 16 Current liabilities – Trade and other payables Trade payables and accruals Unspent funds advanced by joint venture partner Other payables Consolidated 2022 $ 98,017 - 30,098 128,115 2021 $ 229,371 40,785 52,547 322,703 Liabilities are not secured over the assets of the Group. Details of fair value and exposure to interest risk are included at note 22. Note 17 Current liabilities - Employee beneﬁts Liability for annual leave Liability for long service leave Note 18 Current liabilities – Lease liabilities Leases Carrying value at start of the year Lease liabilities recognised in the year Lease payments made Lease interest charged to proﬁt or loss Carrying value at end of the year Consolidated 2022 $ 79,992 145,032 225,024 Consolidated 2022 $ 177,423 - (72,497) 12,028 116,954 2021 $ 112,182 198,789 310,971 2021 $ - 196,305 (23,929) 5,047 177,423 2 0 2 2 A N N U A L R E P O R T 65 Notes to the Financial Statements Lease liabilities are split between current and non-current liabilities at the balance date as follows: Lease liabilities due > 1 year Total Lease liabilities Consolidated 2022 $ 49,241 116,954 2021 $ 116,954 177,423 A lease liability has been recognised in respect of the Group’s lease of its ofﬁce at Suite 2, 1 Alvan Street, Subiaco, Western Australia. Refer to Note 13 for details of the corresponding right of use asset arising from the abovementioned lease. Note 19 Issued capital a) Ordinary shares The Company is a public company limited by shares. The Company was incorporated in Perth, Western Australia. The Company’s shares are limited whereby the liability of its members is limited to the amount (if any) unpaid on the shares respectively held by them. 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 every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value. There is no limit to the authorised share capital of the Company. Issue price 2022 No. 2021 No. 2022 $ 2021 $ b) Share capital Issued share capital c) Share movements during the year Balance at the start of the ﬁnancial year Share placement Exercise of options1 Exercise of options1 Exercise of options1 Exercise of options1 Exercise of options1 Exercise of options1 Capital reduction – in-specie distribution (note 33) Less share issue costs $0.19 $0.13 $0.09 $0.10 $0.105 $0.137 $0.062 317,216,826 316,256,523 41,666,888 50,000,566 316,256,523 280,824,968 50,000,566 43,828,235 - - - 75,000 425,000 60,303 400,000 - - 33,157,878 1,580,857 192,820 250,000 250,000 - - - - - - - 7,500 44,625 8,262 24,800 (8,415,115) 6,299,997 205,511 17,354 25,000 26,250 - - - (3,750) (401,781) Balance at the end of the ﬁnancial year 317,216,826 316,256,523 41,666,888 50,000,566 1 Refer Note 20 for details of options exercised. 66 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 19 Issued capital (Continued) Number of options exercised Details of options exercised Capital risk management The Company’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and beneﬁts for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. 425,000 Exercisable at $0.105 expiring 1 November 2021 75,000 Exercisable at $0.10 expiring 31 May 2022 750,0001 Exercisable at $0.137 expiring 24 November 2021 400,000 Exercisable at $0.062 expiring 31 May 2022 1 Included in options exercised above is an amount of 326,323 options foregone in consideration given on exercise (2020: Nil). Capital is regarded as total equity, as recognised in the statement of ﬁnancial position, plus net debt (where applicable). Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Company may seek to raise capital to fund its exploration and evaluation programs, invest in project generation or acquisition and to fund the corporate and administrative costs that support such activities. The capital risk management policy remains unchanged from the 30 June 2021 Annual Report. Note 20 Options and share based payments The establishment of the Encounter Resources Limited Employee Share Option Plan (“the Plan”) was last approved by a resolution at the Annual General Meeting of shareholders of the Company on 26 November 2021. All eligible Directors, executive ofﬁcers and employees of Encounter Resources Limited who have been continuously employed by the Company are eligible to participate in the Plan. The Plan allows the Company to issue free options to eligible persons. The options can be granted free of charge and are exercisable at a ﬁxed price in accordance with the Plan. a) Options issued during the year During the ﬁnancial year the Company granted 5,030,000 options (2021: 5,850,000) over unissued shares. c) Options cancelled during the year During the year 400,000 options (2021: 500,000) were cancelled upon termination of employment; and 1,500,000 options (2021: nil) were cancelled on expiry of exercise period. d) Options on issue at the balance date The number of options outstanding over unissued ordinary shares at 30 June 2022 is 18,180,000 (2021: 16,700,000). The terms of these options are as follows: Number of options outstanding 2,900,000 1,500,000 5,050,000 650,000 2,450,000 800,000 3,630,000 1,200,000 18,180,000 Exercise price Expiry date 5.2 cents 8.2 cents 16.2 cents 18.2 cents 22.2 cents 21.2 cents 22.4 cents 19.0 cents 30 November 2022 30 November 2023 31 October 2023 30 June 2024 26 November 2024 30 April 2025 28 November 2025 28 June 2026 e) Subsequent to the balance date No (2021: nil) options have been granted subsequent to the balance date and to the date of signing this report. No options have been exercised subsequent to the balance date to the date of signing this report. Subsequent to the balance date no options have been cancelled on expiry of the exercise period. b) Options exercised during the year Weighted average contractual life During the ﬁnancial year the Company issued shares on the exercise of 1,650,000 (2021: 2,600,000) unlisted options, as follows: The weighted average contractual life for un-exercised options is 24.3 months (2021: 22.1 months). Basis and assumptions used in the valuation of options. The options issued during the year were valued using the Black-Scholes option valuation methodology. 2 0 2 2 A N N U A L R E P O R T 67 Notes to the Financial Statements Date granted 29 Nov 2021 30 Jun 2022 Number of options granted 3,830,000 1,200,000 Exercise price (cents) 22.4 19.0 Expiry date 28 Nov 2025 28 Jun 2026 Risk free interest rate used 1.48% 3.50% Volatility applied1 84.0% 80.8% Value of Options $302,069 $77,776 $379,845 1 Historical volatility has been used as the basis for determining expected share price volatility. Reconciliation of movement of options over unissued shares during the period including weighted average exercise price (WAEP) 2022 2021 No. WAEP (cents). $ WAEP (cents) Options outstanding at the start of the year Options granted during the year Options exercised during the year1 Options cancelled and expired unexercised during the year 16,700,000 5,030,000 (1,650,000) (1,900,000) 18.2 21.6 10.9 22.6 13,950,000 5,850,000 (2,600,000) (500,000) Options outstanding at the end of the year 18,180,000 16.3 16,700,000 1 Included in options exercised above is an amount of 689,697 options foregone in consideration given on exercise (2021: 326,323). 14.6 24.4 12.1 21.0 18.2 Note 21 Reserves and accumulated losses Consolidated 2022 2021 Accumulated losses Equity remuneration reserve1 Accumulated losses Equity remuneration reserve (i) $ $ $ $ Balance at the beginning of the year (29,535,096) 1,041,896 (28,069,977) 576,644 Proﬁt/(Loss) for the period Derecognition of reserves on demerger of subsidiary Capital return on in-specie distribution Movement in equity remuneration reserve in respect of options issued (note 20) Transfer to accumulated losses on cancellation of options 4,428,194 294,156 (2,074,698) - - - - 379,845 (1,553,150) - - - - - - 582,398 189,140 (189,140) 68,031 (68,031) Transfer to share capital on exercise of options2 - (8,262) - (49,115) Balance at the end of the year (26,698,304) 1,224,339 (29,535,096) 1,041,896 1 The equity remuneration reserve is used to recognise the fair value of options issued and vested but not exercised. 2 Transfer to issued capital in respect of the deemed exercise price receivable on the exercise of options pursuant to cash less exercise provisions. 68 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 22 Financial instruments Credit risk The Directors do not consider that the Group’s ﬁnancial assets are subject to anything more than a negligible level of credit risk, and as such no disclosures are made, note 2(a). Impairment losses The Directors do not consider that any of the Group’s ﬁnancial assets are subject to impairment at the reporting date. No impairment expense or reversal of impairment charge has occurred during the reporting period, other than the write off of deferred exploration assets at note 14. Interest rate risk At the reporting date the interest proﬁle of the Group’s interest-bearing ﬁnancial instruments was: Fixed rate instruments Financial assets Variable rate instruments Financial assets Carrying amount ($) 2022 2021 $ - $ - 2,165,945 5,686,505 Cash ﬂow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and proﬁt or loss by the amounts shown below. This analysis assumes that all other variables remain constant. 2022 Proﬁt or loss Equity 1% increase 1% decrease 1% increase 1% decrease $ $ $ $ Variable rate instruments 21,659 (21,659) 21,659 (21,659) 2021 Proﬁt or loss Equity 1% increase 1% decrease 1% increase 1% decrease $ $ $ $ Variable rate instruments 56,865 (56,865) 56,865 (56,865) 2 0 2 2 A N N U A L R E P O R T 69 Notes to the Financial Statements Liquidity risk The following are the contractual maturities of ﬁnancial liabilities, including estimated interest payments and excluding the impact of netting agreements, note 2(b): 2022 Consolidated Carrying amount Contractual cash ﬂows < 6 months 6-12 months $ $ $ $ 1-2 years $ 2-5 years $ > 5 years $ Trade and other payables 128,115 128,115 128,115 - - Lease liabilities 116,954 116,954 32,822 34,891 49,241 245,069 245,069 160,937 34,891 49,241 - - - 2021 Consolidated Carrying amount Contractual cash ﬂows < 6 months 6-12 months $ $ $ $ 1-2 years $ 2-5 years $ > 5 years $ Trade and other payables 177,704 177,704 177,704 Lease liabilities Fair values Fair values versus carrying amounts 177,723 177,723 29,281 355,127 355,127 206,985 - 31,188 31,188 - 67,713 67,713 - 49,241 49,241 The fair values of ﬁnancial assets and liabilities, together with the carrying amounts shown in the balance sheet are as follows: - - - - - - Consolidated 2022 2021 Carrying amount Fair value Carrying amount Fair value $ $ $ $ Cash and cash equivalents Financial assets Lease liabilities Trade and other payables 2,165,945 118,861 (116,954) (128,115) 2,0239,737 2,165,945 118,861 (116,954) (128,115) 2,039,737 5,686,505 566,561 (177,723) (177,704) 5,897,639 5,686,505 566,561 (177,723) (177,704) 5,897,639 The Group’s policy for recognition of fair values is disclosed at note 1(u). Note 23 Dividends No dividends were paid or proposed during the ﬁnancial year ended 30 June 2022 or 30 June 2021. The Company has no franking credits available as at 30 June 2022 or 30 June 2021. 70 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 24 Key management personnel disclosures (a)Directors and key management personnel The following persons were directors of Encounter Resources Limited during the ﬁnancial year: (i) Chairman – non-executive Paul Chapman (ii) Executive directors Will Robinson, Managing Director Peter Bewick, Exploration Director (to 1 November 2021) (iii)Non-executive directors Jonathan Hronsky, Director Philip Crutchﬁeld, Director Peter Bewick, Director (from 1 November 2021) There were no other persons employed by or contracted to the Company during the ﬁnancial year, having responsibility for planning, directing and controlling the activities of the Company, either directly or indirectly. (b) Key management personnel compensation A summary of total compensation paid to key management personnel during the year is as follows: Total short-term employment beneﬁts Total share-based payments Total post-employment beneﬁts 2022 $ 443,333 163,259 44,333 650,925 2021 $ 678,788 245,415 55,507 979,610 During the year the Group incurred costs of $17,842 (2021: $13,800), for geological consulting services from Western Mining Services, an entity associated with Dr Jon Hronsky. Note 25 Remuneration of auditors Consolidated 2022 $ 2021 $ Audit and review of the Company’s ﬁnancial statements 54,750 32,000 The total remuneration paid to Crowe Perth for 2021 includes audits of the subsidiary companies Hamelin Gold Limited for the period ended 30 June 2021 and Hamelin Resources Pty Ltd for the three ﬁnancial years ended 30 June 2019, 2020 and 2021, undertaken as part of the demerger of Hamelin Gold Limited as described in note 33. 2 0 2 2 A N N U A L R E P O R T 71 Notes to the Financial Statements Note 26 Contingencies Bank guarantees ANZ Bank has provided an unconditional bank guarantee amounting to $25,652 in relation to the lease over the Company’s ofﬁce premises at Suite 2, 1 Alvan Street, Subiaco, Western Australia. A bank guarantee exists, and a corresponding amount of $50,000 held on deposit, in relation to the Group’s corporate credit card facility. These amounts are not reported as a cash asset in these ﬁnancial statements, and are classiﬁed within bonds in non- current assets. (ii) Contingent assets There were no material contingent assets as at 30 June 2022 or 30 June 2021. Note 27 Commitments (a)Exploration The Group has certain obligations to perform minimum exploration work on mineral leases held. These obligations may be varied as a result of renegotiations of the terms of the exploration licences or their relinquishment. The minimum exploration obligations are less than the normal level of exploration expected to be undertaken by the Group. As at balance date, total exploration expenditure commitments on tenements held by the Group have not been provided for in the ﬁnancial statements and which cover the following twelve-month period amount to $2,305,520 (2021: $2,888,687). The exploration expenditure obligations stated above include amounts (approximately $1.2m (2021: approximately $1.1m)) that are funded by third parties pursuant to various farm-in agreements (Note 15). Hence current expenditure commitment on Encounter 100% owned projects is approximately $1.1m (2021: approximately $1.8m). (c)Contractual Commitment There are no material contractual commitments as at 30 June 2022 or 30 June 2021 not otherwise disclosed in the Financial Statements. (i) Contingent liabilities There were no material contingent liabilities not provided for in the ﬁnancial statements of the Group as at 30 June 2022 or 30 June 2021 other than: Yeneena Project Gold Claw-back Included in the agreement for the Group’s acquisition of the remaining 25% interest of certain licences in the Yeneena Project is a gold claw-back right in the event of a major discovery of a deposit of minerals dominant in gold, with gold revenue measured in a mining study equal to or exceeding 65% of total revenue and where a JORC compliant mineral resources exceeds 4,000,000 ounces of gold or gold equivalent, or is capable of producing at least 200,000 ounces of gold or gold equivalent per year for 10 years. Under the agreement Barrick (Australia Paciﬁc) Limited retains the right to regain an interest of between 70 and 100% in the gold discovery at a price of between US$40-100 per ounce, with a 1.5% net smelter royalty to Encounter Resources. The Yeneena Project Gold Claw-back relates to the following exploration licences: E45/2500, E45/2501, E45/2502, E45/2561, E45/2657, E45/2658, E45/2805 and E45/2806. Lamil Production Royalty The Group is subject to a production unit royalty of $1 per dry metric tonne of ore mined and sold from licence E45/4613 at its Lamil Copper-Gold Project. Native Title and Aboriginal Heritage The Group has Land Access and Mineral Exploration Agreements with Western Desert Lands Aboriginal Corporation in relation to the tenements comprising the Yeneena Base Metals Project and the Paterson Gold Projects. Western Desert Lands Aboriginal Corporation ((Jamukurnu- Yapalikunu/WDLAC) is the Prescribed Body Corporate for the Martu People of the Central Western Desert region in Western Australia. The Company has entered into the Mineral Exploration and Land Access Deed of Agreement with the Parna Ngururrpa (Aboriginal Corporation) RNTBC in relation to the Aileron project in the West Arunta. Native title claims have been made with respect to areas which include tenements in which the Group has an interest. The Group is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or not and to what extent the claims may signiﬁcantly affect the Group or its projects. Agreement is being or has been reached with various native title claimants in relation to Aboriginal Heritage issues regarding certain areas in which the Group has an interest. 72 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 28 Related party transactions Transactions with Directors during the year are disclosed at Note 24 – Key Management Personnel. During the reporting period the Company completed a demerger of Hamelin Gold Limited. During the period from 1 July 2021 to 29 October 2021, whilst Hamelin Gold Ltd was part of the Encounter Resources Limited (ENR) group the following transactions occurred: • ENR incurred total costs of $416,274 on behalf of the Hamelin Gold group in respect of exploration, initial public offer and demerger costs; • ENR forgave intercompany loans amounting to $294,171 due to it from the Hamelin Gold group; • ENR acquired exploration assets at book value of $5,498,795 from the Hamelin Gold group, with the consideration offset against amounts due to the ENR group through intercompany loans; and • ENR received a cash refund on behalf of the Hamelin Gold group amounting to $10,556. There are no other related party transactions other than as stated in the ﬁnancial statements. Note 29 Events occurring after the balance sheet date On 29 September 2022 the Company completed the placement of 33,333,334 shares at $0.12 per share pursuant to a share placement raising $4 million before costs. A total of 2 million unlisted options were issued to the Joint Lead Managers. Other than as already stated in this report, there has not arisen in the interval between the end of the ﬁnancial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent ﬁnancial years. Note 30 Reconciliation of loss after tax to net cash inﬂow from operating activities Consolidated 2022 $ 2021 $ Proﬁt/(Loss) from ordinary activities after income tax 4,428,194 (1,533,150) Gain on demerger Depreciation and amortisation Exploration cost written off and expensed Share based payments expense Unrealised (gain)/loss on investments Contribution to overheads from farm-in and project alliance partners Lease interest Movement in assets and liabilities: (Increase)/decrease in receivables Increase/(decrease) in payables Net cash outﬂow from operating activities (10,104,846) 68,642 4,093,178 379,845 447,700 (6,586) 12,028 (3,921) (29,556) (715,322) - 24,678 296,128 466,124 202,162 (144,486) 5,047 (53,075) 24,632 (711,940) 2 0 2 2 A N N U A L R E P O R T 73 Notes to the Financial Statements Note 31 Earnings per share a) Basic earnings per share Proﬁt/(Loss) attributable to ordinary equity holders of the Company b) Diluted earnings per share Proﬁt/(Loss) attributable to ordinary equity holders of the Company Consolidated 2022 Cents 1.4 1.4 $ 2021 Cents (0.5) (0.5) $ c) Loss used in calculation of basic and diluted loss per share Consolidated proﬁt/(loss) after tax from continuing operations (1,533,150) (1,126,275) d) Weighted average number of shares used as the denominator Weighted average number of shares used as the denominator in calculating basic earnings per share No. No. 303,846,344 280,192,048 Weighted average number of shares used as the denominator in calculating basic earnings per share 303,846,344 280,192,048 74 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 32 Parent entity information Financial position Assets Current assets Non-current assets Total Assets Liabilities Current liabilities Non-current liabilities Total Liabilities NET ASSETS Issued capital Equity remuneration reserve Accumulated losses TOTAL EQUITY Financial performance Proﬁt/(Loss) for the year Other comprehensive income Total comprehensive income Company 2022 $ 2021 $ 2,423,579 14,260,399 16,683,978 441,814 49,241 491,055 16,192,923 41,666,888 1,224,339 6,086,957 16,231,508 22,318,465 694,145 116,954 811,099 21,507,366 50,000,566 1,041,896 (26,698,304) (29,535,096) 16,192,923 21,507,366 8,555,175 (1,524,973) - - 8,555,175 (1,524,973) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries No guarantees have been entered into by the parent entity in relation to the debts of its subsidiary companies. Contingent liabilities For full details of contingencies see Note 26. Commitments For full details of commitments see Note 27. Note 33 Demerger of Hamelin Gold Limited During the reporting period the Company completed the demerger of its wholly owned subsidiary Hamelin Gold Limited, which subsequently was admitted to the Ofﬁcial List of the Australian Securities Exchange. The demerger, approved by shareholders on 22 October 2021, was completed with a return of capital in the form of an in-specie distribution of 60,000,000 shares in Hamelin Gold Limited to eligible shareholders of the Company on a pro rata basis. 2 0 2 2 A N N U A L R E P O R T 75 Notes to the Financial Statements Notional value of shares received on demerger of Hamelin Gold Limited1 Less: Difference to the fair value of in-specie distribution to Company shareholders2 Net assets of Hamelin Gold Limited at the demerger date Adjust pre-demerger proﬁt attributable to Hamelin Resources Costs attributable to the demerger Gain recognised on Demerger $ 12,000,000 (1,510,187) (2) (294,154) (90,811) 10,104,846 1 Being 60,000,000 ordinary fully paid shares in Hamelin Gold Limited at the Initial Public Offer issue price of $0.20 per share. 2 Notional value less capital reduction amount of $10,489,8133 per ATO Class Ruling 2021/93 published 8 December 2021. 3 The fair value of the in-specie distribution of shares to the Company’s shareholders has been allocated to issued capital and accumulated losses as follows: Fair value of in-specie distribution attributed to issued capital (Note 19) Fair value of in-specie distribution attributed to accumulated losses (Note 21) Fair value of in-specie distribution to Company shareholders $ 8,415,115 2,074,698 10,489,813 The capital reduction allocation has been determined with reference to the respective market values of the Company and Hamelin Gold Limited at the demerger date. The market value of the Company has been determined using the 5-day closing volume weighted average price preceding the date of demerger, and the market value of Hamelin Gold Limited determined using the 5-day closing volume weighted average price following commencement of trading on ASX. Prior to the demerger the Company undertook an internal restructure within the Group such that Hamelin Resources Pty Ltd, holding solely the West Tanami Gold Project assets, was acquired by Hamelin Gold Limited in preparation for the proposed demerger. As part of the restructure an intercompany loan amounting to $294,171 due from Hamelin Resources Pty Ltd to Encounter Resources Limited was forgiven. As at the demerger date of 29 October 2021, the assets and liabilities of the Hamelin Gold Limited group were: Cash assets Other receivables Prepaid Initial Public Offer (IPO) related costs Capitalised exploration costs Total Assets Trade and other payables Share subscription liability (IPO applications received) Loan due to Encounter Resources Limited Total Liabilities Net Assets 76 E N C O U N T E R R E S O U R C E S L I M I T E D $ 7,478,304 30,889 716,155 135,636 8,360,984 (440,248) (7,478,125) (442,609) (8,360,982) 2 Directors’ Declaration Directors’ Declaration (a) the ﬁnancial statements and notes set out on pages 43 o 76 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the ﬁnancial position as at 30 June 2022 and of the performance for the year ended on that date of the Group. (b) the remuneration disclosures that are contained in the Remuneration Report in the Directors Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures, The Corporations Act 2001 and the Corporations Regulations 2001. (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. (d) the ﬁnancial statements comply with International Financial Reporting Standards as set out in Note 1. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Ofﬁcer and Chief Financial Ofﬁcer for the ﬁnancial year ended 30 June 2022. This declaration is made in accordance with a resolution of the Directors. Signed at Perth this 30th day of September 2022. W Robinson Managing Director 2 0 2 2 A N N U A L R E P O R T 77 Independent Audit Report Independent Audit Report E PE T M AU R S O E PO R S R N CO E R E SO R CE S L R ep ort on the Aud it of the F inanc ial R ep ort O pinion roup) , which comprises the consolidated statement of financial position as at 30 W e hav e audited the financial report of E ncounter Resources L subsidiaries ( the G J une 2022, the consolidated statement of profit or loss and other comprehensiv e income, the consolidated statement of changes in eq uity 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. imited ( the Company) and its I n our opinion, the accompanying financial report of the G Act 2001, including: roup is in accordance with the Corporations ( a) giv ing a true and fair v iew of the G roup’s financial position as at 30 J une 2022 and of its financial performance for the year then ended; and ( b) complying with Australian Accounting Standards and the Corporations Regulations 2001. a sis f or O pinion W e 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. W e are independent of the G roup in accordance with the auditor independence req uirements of the Corporations Act 2001 and the ethical req uirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) ( the Code) that are relev ant to our audit of the financial report in Australia. W e hav e also fulfilled our other ethical responsibilities in accordance with the Code. W e believ e that the audit ev for our opinion. K ey A it M a tter s idence we hav e obtained is sufficient and appropriate to prov ide a basis K ey audit matters are those matters that, in our professional j udgement, 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 prov ide a separate opinion on these matters. F or each matter below, our description of how our audit addressed the matter is prov ided in that context. Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a separate and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe Global or any other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or partnership interest in Findex (Aust) Pty Ltd. Services are provided by Crowe Perth, an affiliate of Findex (Aust) Pty Ltd. Liability limited by a scheme approved under Professional Standards Legislation. Liability limited other than for acts or omissions of financial services licensees. © 2022 Findex (Aust) Pty Ltd 78 E N C O U N T E R R E S O U R C E S L I M I T E D I N D N D E N T D I T O R T T O H E E M B E F U N T E R U I M I T E D B u d Independent Audit Report K ey Aud it M atter H ow we ad d ressed the K ey Aud it M atter Consid eration of imp airment of c ap ital ised mineral ex l oration and ev al uation ex p end iture The consideration of impairment of the carrying value of the Group’s Capitalised ineral E xploration and E v aluation E xpenditure assets was material to our audit and represented an area of significant estimate and j udgement within the financial report. This matter is considered a k ey audit matter due to the high degree of j udgement req uired by the directors to assess whether impairment indicators are present for specified tenements held and due to the significance of the capitalised amount of $ 13.9 m at 30 J une 2022. The conditions and assessment undertak en in relation to impairment are disclosed in the Group’s accounting policy in N otes 1 and 14 of the financial report. D emerg er of H amel in G ol L imited During the reporting period the Company completed the demerger of its wholly owned subsidiary H amelin G old L subseq uently was admitted to the Official L of the Australian Securities E xchange. imited, which ist This matter is considered a k ey audit matter due to the significance of the gain on demerger recognised of $ 10.1m, fair v alue of in- specie distribution attributed to issued capital of $ $ 2.1m .4 m and accumulated losses of imited is The demerger of H amelin G old L disclosed in notes N ote 19 and 33 of the financial report. Our procedures included, but were not limited to: • Rev iewed management’s documented assessment of the existence or otherwise of impairment indicators from both internal and external sources; • Corroborated representations made by management with av ailable external data and ev course of our audit; and idence obtained by us during the • Considered the appropriateness of relev ant disclosures in the notes to the financial statements. Our procedures included, but were not limited to: • Considered management’s documented • assessment of the reduction in share capital and the gain on demerger recognised; Agreed inputs included within management’s calculation to external data and ev obtained by us during the course of our audit; and idence • Considered the appropriateness of relev ant disclosures in the notes to the financial statements. 2 2 0 2 2 A N N U A L R E P O R T 79 p M d 8 Independent Audit Report Information Other than the Financial Report and the Audit’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s 2022 Annual Report for the year ended 30 J une 2022 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cov er the other information and we do not express any form of assurance conclusion thereon. I n 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 k nowledge obtained in the audit or otherwise appears to be materially misstated. I f, based upon the work we hav e performed, we conclude that there is material misstatement of this other information, we are req uired to report that fact. W e hav e nothing to report in this regard. Responsibilities of th e D ir ec tor s f or th e F ina nc ia l Repor t The directors of the Company are responsible for the preparation of the financial report that giv es a true and fair v iew in accordance with Australian Accounting Standards, I nternational F Reporting 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 giv es a true and fair v and is free from material misstatement, whether due to fraud or error. inancial iew I n preparing the financial report, the directors are responsible for assessing the ability of the G roup 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 liq uidate the G roup or to cease operations, or hav e no realistic alternativ e but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our obj ectiv es 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 lev el of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material isstatements can arise from fraud or error and are considered material misstatement when it exists. M if, indiv decisions of users tak en on the basis of this financial report. idually or in the aggregate, they could reasonably be expected to influence the economic As part of an audit in accordance with Australian Auditing Standards, we exercise professional j udgement and maintain professional scepticism throughout the audit. W e also: • idence that is sufficient and appropriate to prov I dentify and assess the risk s of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsiv e to those risk s, and obtain audit ev detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may inv olv e collusion, forgery, intentional omissions, misrepresentations, or the ov erride of internal control. ide a basis for our opinion. The risk of not 80 E N C O U N T E R R E S O U R C E S L I M I T E D 3 Independent Audit Report • Obtain an understanding of internal control relev ant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an roup’s internal control. opinion on the effectiv eness of the G • v aluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting in roup’s ability to continue as a going concern. I f we conclude that a material the preparation of the financial report. W e also conclude, based on the audit ev idence obtained whether a material uncertainty exists related to ev ents and conditions that may cast significant doubt on the G uncertainty exists, we are required to draw attention in the auditor’s report to the disclosures in the financial report about the material uncertainty or, if such disclosures are inadeq uate, to modify the opinion on the financial report. H owev er, future ev ents or conditions may cause the G cease to continue as a going concern. roup to • v aluate the ov erall presentation, structure and content of the financial report, including the disclosures and whether the financial statements represent the underlying transactions and ev ents in a manner that achiev es fair presentation. • Obtain sufficient appropriate audit ev idence regarding the financial information of the entities or business activ ities within the G auditor is responsible for the direction, superv auditor remains solely responsible for the audit opinion. roup to express an opinion on the group financial report. The ision and performance of the group audit. The W e 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. ide the directors with a statement that we hav e complied with relev ant ethical W e also prov req uirements regarding independence, and to communicate with them all relationships and other matters that may be reasonably be thought to bear on our independence, and where applicable, actions tak en to eliminate threats or safeguards applied. F rom the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the k ey 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 be communicated in the auditor’s report because the adv erse conseq uences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. R ep ort on the R emuneration R ep ort O pinion on th e Rem u ner a tion Repor t W e hav e audited the Remuneration Report included in pages 33 (cid:87)(cid:82) 38 of the directors’ report for the year ended 30 J une 2022. I n our opinion, the Remuneration Report of E ncounter Resources L 2022, complies with section 300A of the Corporations Act 2001. imited for the year ended 30 J une 2 0 2 2 A N N U A L R E P O R T 81 4 E E Independent Audit Report 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. Crowe Perth Suwarti Asmono Partner Dated at Perth this 30th day of September 2022 82 E N C O U N T E R R E S O U R C E S L I M I T E D 5 ASX Additional Information Pursuant to the Listing Requirements of the Australian Securities Exchange, the shareholder information set out below was applicable as at 30 September 2022. A. Distribution of Equity Securities Analysis of numbers of ordinary fully paid shareholders by size of holding: Distribution 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 More than 100,000 Totals Number of shareholders Securities held % Securities 114 310 250 729 341 1,744 39,849 1,012,085 1,983,428 30,810,231 316,704,567 350,550,160 0.01% 0.29% 0.57% 8.79% 90.34% 100.00% There are 343 shareholders holding less than a marketable parcel of ordinary shares. B. Substantial Shareholders An extract of the Company’s Register of Substantial Shareholders (who hold 5% or more of the issued capital) is set out below: Shareholder Name IGO Limited William Michael Robinson Silver Lake Resources Limited Deutsche Balaton Aktiengesellschaft Issued Ordinary Shares Number of shares % of shares 28,400,572 26,452,556 18,437,397 17,728,071 8.10% 7.55% 5.26% 5.06% 2 0 2 2 A N N U A L R E P O R T 83 ASX Additional Information C. Twenty Largest Shareholders The names of the twenty largest holders of quoted shares are listed below: Shareholder Name Zero Nominees Pty Ltd Deutsche Balaton Aktiengesellschaft Silver Lake Resources Limited Mr William Michael Bennett Robinson HSBC Custody Nominees (Australia) Limited-GSCO ECA UBS Nominees Pty Ltd Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited Stone Poneys Nominees Pty Ltd Superhero Securities Limited Precision Opportunities Fund Ltd Picton Cove Pty Ltd Solvista Pty Ltd Sundin Pty Ltd Fifty Second Celebration Pty Ltd Wythenshawe Pty Ltd Kiki Super Fund A/C IGO Limited Wythenshawe Pty Ltd Mr Peter Bewick & Mrs Stephanie Bewick Ordinary Shares - Quoted Number of shares % of Shares 25,700,000 17,728,071 16,684,210 16,216,900 15,848,600 15,140,527 14,647,839 12,560,553 8,998,816 7,247,705 6,333,334 6,039,074 5,750,000 5,580,000 4,843,063 4,000,000 3,000,000 2,700,572 2,200,000 2,200,000 7.33% 5.06% 4.76% 4.63% 4.52% 4.32% 4.18% 3.58% 2.57% 2.07% 1.81% 1.72% 1.64% 1.59% 1.38% 1.14% 0.86% 0.77% 0.63% 0.63% Total 193,419,264 55.18% 84 E N C O U N T E R R E S O U R C E S L I M I T E D ASX Additional Information D. Unquoted Securities Options over Unissued Shares Number of Options Exercise Price Expiry Date Number of Holders 2,900,000 5,050,000 1,500,000 650,000 2,450,000 800,000 3,630,000 1,200,000 1,000,000 1,000,000 20,180,000 5.2 cents 16.2 cents 8.2 cents 18.2 cents 22.2 cents 21.2 cents 22.4 cents 19.0 cents 20.0 cents 30.0 cents 30 November 2022 31 October 2023 30 November 2023 30 June 2024 26 November 2024 30 April 2025 28 November 2025 28 June 2026 29 September 2025 29 September 2025 5 8 1 3 7 3 10 3 61 61 1 Issued to Cannacord Genuity (Australia) Pty Ltd and Chieftain Securities (WA) Pty Ltd for joint lead manager services to the share placement completed on 29 September 2022. E. Voting Rights In accordance with the Company’s Constitution, voting rights in respect of ordinary shares are on a show of hands whereby each member present in person or by proxy shall have one vote and upon a poll, each share will have one vote. There are no voting rights in respect of options over unissued shares. F. Restricted Securities There are no restricted securities. 2 0 2 2 A N N U A L R E P O R T 85 Corporate Directory Directors Share Registry Paul Chapman Non-Executive Chairman Automic Group Will Robinson Managing Director Address Peter Bewick Non-Executive Director Jonathan Hronsky Non-Executive Director Philip Crutchﬁeld Non-Executive Director Level 5, 191 St Georges Terrace Perth, Western Australia 6000 Telephone 1300 288 664 Company Secretaries Securities Exchange Listing Kevin Hart Dan Travers The Company’s shares are quoted on the Australian Securities Exchange. The home exchange is Perth, Western Australia. Principal and Registered Ofﬁce ASX Code Encounter Resources Limited ENR – Ordinary shares Address Suite 2, 1 Alvan Street Subiaco, Western Australia 6008 Telephone (08) 9486 9455 Web www.enrl.com.au Auditor Crowe Perth Address Level 5, 45 St Georges Terrace Perth, Western Australia 6000 Company Information The Company was incorporated and registered under the Corporations Act 2001 in Western Australia on 30 June 2004 and became a public company on 26 May 2005. The Company is domiciled in Australia. 86 E N C O U N T E R R E S O U R C E S L I M I T E D Notes 2 0 2 2 A N N U A L R E P O R T 87 Notes 88 E N C O U N T E R R E S O U R C E S L I M I T E D 89 Suite 2/1 Alvan Street Subiaco WA 6008 +61 8 9486 9455 contact@enrl.com.au www.enrl.com.au

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