Siemens Energy
Annual Report 2023

Plain-text annual report

annual report 2 0 2 3 A N N U A L R E P O R T 2 0 2 3 A N N U A L R E P O R T 1 1 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 2 4 19 22 35 36 Consolidated Statement of Profit or Loss and Other Comprehensive Income 37 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 38 39 40 41 72 73 77 80 2 0 2 3 A N N U A L R E P O R T 2 0 2 3 A N N U A L R E P O R T 1 1 01. Letter from the Chairman & Managing Director Dear Fellow Shareholder, We are pleased to present the 2023 Annual Report for Encounter Resources Ltd (“Encounter”). This year Encounter’s committed approach to exploration has shone a light on the West Arunta which is emerging as a major, new critical minerals province in Western Australia. In addition to the West Arunta, Encounter continues to progress a large portfolio of 100% owned copper and critical mineral projects in Australia’s most exciting mineral regions. Complementing this, Encounter has numerous large scale copper projects being advanced and funded through farm- in agreements with leading miners: BHP Group, IGO and South32. Copper, zinc, rare earths and niobium are all crucial commodities required for electrification and the decarbonisation of global energy infrastructure, supercharging their importance. This requires deposits to be discovered and for new mines to be developed to meet burgeoning demand. All against a background of constrained supply and lack of discovery success. As such, it is an incredible time to be blazing a path into new mineral districts in central Australia. Encounter believes that major discoveries are likely to occur in these regions by implementing new technologies and methods. This belief has driven the construction of Encounter’s project portfolio and our approach to exploration. Encounter’s primary focus is the 100% owned Aileron project in the West Arunta, now confirmed as a large scale and highly prospective critical minerals province. Early in 2023, Encounter completed a project wide Falcon gravity survey at Aileron. This survey was one of the largest privately funded, belt scale gravity surveys ever completed in Australia. It was a major undertaking for a junior explorer and provided fundamental data to target IOCG and carbonatite- hosted critical mineral deposits. The survey revealed numerous targets that are interpreted as potential alkaline intrusions which are highly prospective for carbonatite-hosted critical minerals and base metals deposits. To date we have already identified niobium-rare earth mineralised carbonatites at the three targets, Hoschke, Crean and Hurley. It is still early days and our success rate speaks to our targeting methods and bodes well for future drill programs at Aileron. Aileron is not just highly prospective for niobium and rare earths, the region has shallow cover and exhibits considerable IOCG copper potential. Aileron has a comparable aged host sequence and hydrothermal events to the world-class IOCG copper deposits within South Australia’s Gawler Craton (including Olympic Dam and Prominent Hill). Unlike the hundreds of metres of cover at the Gawler Craton, Aileron is under shallow cover and surface geochemistry and shallow drilling have a credible chance of identifying near surface mineralisation. In addition to its 100% owned projects, Encounter has a portfolio of exciting copper projects in Western Australia and the Northern Territory which are advancing via farm- in agreements with some of Australia’s largest mining companies (BHP Group, IGO and South32). Encounter is delighted to be working with high quality partners and their accomplished exploration teams. 2 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 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. With an extensive portfolio of 100% owned and farm-in projects, Encounter remains one of the most dedicated and active mineral exploration companies in Australia. We are committed to generating significant, long-term value for our shareholders through leading edge exploration for major copper and critical mineral deposits in Australia. 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 3 A N N U A L R E P O R T 2 0 2 3 A N N U A L R E P O R T 3 3 02. Exploration Review Exploring for the next copper and critical minerals discoveries 100% owned projects in Australia’s most exciting mineral provinces Aileron Critical Minerals Project – West Arunta – WA (100% ENR) • An 8,000 line km airborne magnetic-radiometric survey was completed in November 2022 which identified new targets and upgraded existing targets • A project-wide Falcon airborne gravity survey defined significant gravity anomalies interpreted as potential intrusive bodies or alteration signatures prospective for IOCG mineralisation • A 6 hole diamond drilling program was completed at Caird, Crean and Hoschke in May-June 2023 • The first diamond drill program at Crean discovered a significant niobium-REE carbonatite intrusive complex Junction Lithium Project – NT (100% ENR) • Highly anomalous rock chip assays for lithium and other critical minerals from the pegmatites sampled in December 2022 • Assays confirmed LCT (lithium-caesium-tantalum) pegmatites, comparable to the host pegmatites of the Finniss lithium deposits in the Pine Creek region Irwin REE Projects – WA (100% ENR) • Significant rare earth element (“REE”) potential at the new Irwin Project in the Laverton region of WA • A 10,000m RC drill program commenced August 2023 to extend the niobium-REE mineralisation at Crean as well as drill testing a suite of new, high-quality targets • Targets are centred on a structural corridor that extends north-west from the Mt Weld carbonatite located 100km SE, owned by Lynas Rare Earths Ltd (ASX:LYC) • In September 2023 RC drilling intersected a new, large scale niobium-REE carbonatite at the Hurley target located 3km east of the Crean carbonatite complex Sandover Copper Project – NT (100% ENR) • Major regional gravity survey completed in late 2022 which was co-funded by the Northern Territory Geological Survey (“NTGS”) • Encounter was awarded a co-funded drilling grant by the NT Government (up to $200,000) to complete diamond drilling at Sandover. This program is scheduled to commence in October-November 2023 Lamil Copper-Gold Project – Paterson Province – WA (100% ENR) • High-grade copper-gold reefs, up to 6.5% copper and 21.5g/t gold, intersected in the September 2022 drill program 4 4 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 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 2 0 2 3 A N N U A L R E P O R T 5 Exploration Review02. Major copper exploration drive funded through farm-ins with leading miners Elliott Copper Project – NT (BHP $25m farm-in) • Diamond drill program completed in November 2022 (2 holes – 1,655m) • 2022 diamond drilling intersected a potential “first reductant” horizon defined by anomalism in redox- sensitive elements such as copper, vanadium and molybdenum Jessica and Carrara Copper-Zinc Projects – NT (South32 $15m & $10m farm-ins) • Reprocessing of seismic lines defined new drill targets at Jessica and Carrara − 4 diamond drill holes (3,500m) at Jessica and 3 diamond drill holes (3,000m) at Carrara planned for the 2023 field season − The first drilling at Jessica intersected copper mineralisation in an IOCG setting at Zeta Yeneena Copper Project – Paterson Province - WA (IGO $15m farm-in) • 2022 diamond drill program completed, 6 diamond holes (3,988m) • 2,950 line km airborne magnetic survey completed January 2023 • 5 diamond drill holes (2,900m) and 26 aircore holes (2,600m) to be completed between July and September 2023 4 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 2 0 2 3 A N N U A L R E P O R T 2 0 2 3 A N N U A L R E P O R T 5 5 Exploration Review02. 100% owned projects in Australia’s most exciting provinces Aileron Copper-Critical Minerals Project – West Arunta, WA (100% ENR) The 100% owned Aileron project covers 1,765km2 and is located in the West Arunta region of WA, ~600km west of Alice Springs. Encounter completed large gravity, magnetic and radiometric surveys at Aileron which defined three initial drill targets. In May-June 2023, a diamond drilling program at Caird, Crean and Hoschke was completed. The first diamond hole (EAL001) at Hoschke intersected a niobium-REE mineralised carbonatite dyke within the Elephant Island Fault corridor which intersected 16m at 0.6% Nb2O5 & 0.2% TREO from 350m (ASX release 28 June 2023). Two additional diamond holes at Crean (EAL007 & EAL008) were added to the program following observations of the core from EAL001. Assays from the diamond drill hole EAL007 returned: • 282m @ 0.54% Nb2O5 & 0.17% TREO from 64m to end of hole including: − 19m @ 1.0% Nb2O5 & 0.2% TREO from 65m − 48m @ 1.0% Nb2O5 & 0.2% TREO from 181.5m including: − 4.9m @ 2.2% Nb2O5 & 0.2% TREO from 209m (ASX release 6 September 2023) EAL008 is located 1.5km west of EAL007 and returned: • 68.8m @ 0.8% Nb2O5 & 0.5% TREO from 55m including: − 4m @ 3.8% Nb2O5 & 1.9% TREO from 55m (ASX release 7 August 2023) In September 2023 RC drilling intersected a new, large scale niobium-REE carbonatite at Hurley. Hurley is a coincident magnetic-gravity anomaly located 3km east of the Crean carbonatite complex. Four RC holes drilled at Hurley (EAL029, EAL030, EAL031 and EAL034) intersected niobium-REE anomalous carbonatite to end of hole. 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 2 0 2 3 A N N U A L R E P O R T 7 Exploration Review02. Figure 1 – Aileron diamond drill plan showing 3 holes (EAL001, EAL008 and EAL007) that intersected carbonatites over 3.5km of strike Falcon Gravity Survey In May 2023 a project-wide Falcon airborne gravity survey defined significant gravity anomalies in the eastern part of Aileron that have been prioritised for exploration: • Wordie is a circular density feature about 6km in diameter with significant internal complexity. It is interpreted as a potential alkaline/carbonatite intrusive body. • Mawson and Perce are discrete, high amplitude (~6 mGal) anomalies that could outline alkaline/carbonatite intrusions or hematite alteration prospective for IOCG mineralisation. 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 2 0 2 3 A N N U A L R E P O R T 7 Figure 2 – Aileron Falcon gravity survey has highlighted numerous high priority targets (dotted outlines) Exploration Review02. Aileron Copper-Critical Minerals Project – West Arunta, WA (100% ENR) (Continued) Next Steps • A 10,000m RC drilling commenced in August 2023. This program includes: − drilling of the Hurley and Wild targets located east of Crean; and − drilling to extend the shallow, high-grade niobium-REE − drilling at the Green target north of WA1 Resources’ mineralisation at Crean; Luni niobium-REE discovery Figure 3 – Aileron diamond drill locations (black dots) over residual gravity with planned RC drill program targets (dotted outlines) 8 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 2 0 2 3 A N N U A L R E P O R T 9 Exploration Review02. Sandover Copper Project – NT (100% ENR) Sandover is located 170km north of Alice Springs and covers a major structural corridor on the southern margin of the Georgina Basin. This provides encouraging evidence that processes capable of forming high-grade copper mineralisation are present in the basin. Field mapping and surface sampling has confirmed the presence of an outcropping red-bed sandstone sequence with multiple narrow but strike extensive grey shale units containing copper oxide mineralization (malachite) (Figure 4). Inspection of historical drill holes (drilled in 1968, 1971 and 1994) completed at Sandover confirmed key geological units and processes to enable the formation of sediment hosted copper deposits. Significantly, narrow zones of copper sulphide minerals, including bornite, have been identified in historical drill core (ASX announcement 9 June 2022). An NTGS co-funded gravity survey was completed at Sandover in 2022. This survey covered the western part of the large sub-basin identified at Sandover. This fundamental new dataset is being integrated with existing datasets to assist with target definition. In June 2023, Encounter was awarded a co-funded drilling grant by the NT Government (up to $200,000) to complete diamond drilling at Sandover. This drill program is scheduled to commence in October-November 2023. 8 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 2 0 2 3 A N N U A L R E P O R T 9 Figure 4 – 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 5-7 sampled in April 2022. Exploration Review02. Junction Lithium Project – NT (100% ENR) Junction sits within the North Arunta Pegmatite Province which was first identified in a report by the Northern Territory Geological Survey (“NTGS”) in 2005 (Figure 5). The NTGS interprets that the pegmatites in the region are LCT pegmatites similar to the host pegmatites of the lithium deposits at Greenbushes in WA and the Finniss deposit in the Pine Creek pegmatite province in the NT. In December 2022, initial field reconnaissance was completed at Crawford to investigate a series of outcropping and sub-cropping pegmatites. The outcrops were rock chip sampled over 4km of strike proximal to the margin of a large, interpreted granite body. Outcropping pegmatites and fractionated granites were sampled along the 4km trend which returned highly anomalous lithium and other critical mineral assays. Systematic soil geochemical sampling of the LCT pegmatite prospective corridor will be completed following completion of land access agreements. Figure 5 – North Arunta Pegmatite Province – Junction Lithium Project location highlighting ENR’s Crawford and Nelson targets. Also shown are nearby LCT pegmatite occurrences sourced from company reports and 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 2 0 2 3 A N N U A L R E P O R T 11 Exploration Review02. Irwin REE Projects – WA (100% ENR) In 2009, Encounter completed an aircore drilling program near Lake Irwin located north-west of Laverton that intersected anomalous REE in a felsic intrusion below a sequence of transported sands and clays. With this knowledge, an evaluation of regional geophysics was initiated and highlighted a series of anomalies that are interpreted to be intrusions. In late 2022, Encounter applied for 4 tenements (>800 sq kms) to cover the REE targets identified at Irwin (Figure 6) (ASX announcement 13 April 2023). On ground exploration is expected to commence later in 2023. Figure 6 – RTP magnetic survey image highlighting the Irwin targets. Encounter tenements & historical aircore drillholes are shown 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 2 0 2 3 A N N U A L R E P O R T 11 Exploration Review02. Lamil Copper-Gold Project - Paterson Province – WA (100% ENR) The 100%-owned Lamil Project 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). siltstones and quartzites. The mineralisation is hosted in metasedimentary rocks of the Proterozoic Lamil group which also host the Telfer, Havieron and Winu copper-gold deposits. The Dune prospect is located in the northwest of Lamil and consists of a laterally extensive copper-gold system, outlined by broad spaced RC drilling over 1km of strike (Figure 7). Drilling at Dune has intersected multiple, stacked, copper- gold reefs within a thick prospective package of interbedded Follow up exploration will be designed to test for extensions of the high-grade copper-gold reefs and the up-dip projection of the epithermal copper-silver bearing vein previously intersected. Figure 7 – Dune prospect plan showing copper-gold mineralisation extending over 1km of strike (ASX announcement 28 December 2022) 12 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 2 0 2 3 A N N U A L R E P O R T 13 Exploration Review02. Figure 8 – Encounter copper and lithium projects in the Northern Territory – Project Location Plan 12 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 2 0 2 3 A N N U A L R E P O R T 13 Exploration Review02. Major copper exploration drive funded through farm-ins Jessica Copper Project – NT (South32 $15m Farm-in) Jessica is being explored in partnership with South32 under a Farm-In Agreement. Together with South32, reprocessing of seismic data that extends through Jessica was completed by HiSeis, to provide greater detail of the geology and structure in the upper 1,000m. A 2km spaced gravity survey was also completed with 1km spaced gravity infill data collected over a series of high priority magnetic targets. The seismic reprocessing and gravity surveys have identified a series of targets for drill testing including the Zeta IOCG target (“Zeta”). Zeta is a significant and discrete gravity feature coincident with a prominent magnetic feature on the margin of a large interpreted intrusive body (Figures 10 & 11). In addition, there is a discrete seismic reflector at depth immediately underlying Zeta (Figure 12) (ASX announcement 28 October 2022). A target generation process highlighted additional copper prospects adjacent to Jessica and the Farm-in Agreement tenure was expanded by ~60% in May 2023 and now covers ~10,300km2 along key structural corridors east of Tennant Creek prospective for sediment-hosted and IOCG-style copper. Diamond drilling commenced in July 2023 at Jessica with four diamond drill holes (3,500m) planned to test targets identified through seismic reprocessing and gravity surveys. In September 2023, the first two drill holes completed at Zeta, drilled 1.3km apart, intersected a number of key IOCG indicators including: • Chalcopyrite/bornite in thin quartz-carbonate veins; • • Bimodal felsic volcanic-basalt sequences (indicating a Intense and pervasive red rock hematite alteration; and major, long lived structure) Geophysical techniques are being evaluated to vector into the best parts of the mineral system at Zeta. Figure 9 – Jessica and Carrara project location plan over Bouguer gravity 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 2 0 2 3 A N N U A L R E P O R T 15 Exploration Review02. Figures 10 & 11 – Jessica Project – Zeta IOCG target. Gravity (1VD) (left) and Magnetics (RTP) (right), location of GA seismic lines shown in red Figure 12 - Jessica Project – Zeta IOCG Target – Seismic cross section 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 2 0 2 3 A N N U A L R E P O R T 15 Exploration Review02. 02. Exploration Review Carrara Copper-Zinc Project – (South32 $10m Farm-in) 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 $15m 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. All data is integrated and interpreted into 3D belt-scale and supporting camp-scale models. Drilling to be completed by IGO during the September 2023 quarter is planned to include 5 diamond drill holes (2,900m) and 26 aircore holes (2,600m). 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 survey is the correlation of prospective stratigraphic units from the Isa Superbasin into the Carrara Sub-basin that extends 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 the Geoscience Australia seismic data. Reprocessing of seismic lines that extend through Carrara, has been completed in partnership with South32. This has provided far greater detail of the geology and structure in the upper 1,000m resulting in the definition of multiple targets at key structural locations along the western margin of the sub- basin. Three diamond drill holes (3,000m) are planned to commence at Carrara following completion of the diamond drill program at Jessica. 16 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. Elliott Copper Project – NT (BHP $25m Farm-in) The Elliott copper project (”Elliott”) covers more than 7,200km2 and 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 $25m 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 a giant sediment- hosted base-metal deposit at McArthur River. The Superbasin contains thick, petroleum-bearing, reduced sediments within the Roper Group 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. A 2 hole diamond drill program was completed in November 2022 (1,655m). In drillhole ELT001, the middle and lower members of Velkerri Formation (within the Roper Group) were identified containing multiple zones of organic and pyritic rich black shales. Importantly, from 516m to 538m an anomalously organic and pyrite rich shale was intersected that is interpreted as the Amungee Member of the Velkerri Formation. Encouragingly, this interpreted intersection of the Amungee Member is distinctly anomalous in copper. Importantly, there is a major discontinuity in levels of redox-sensitive elements such as vanadium and molybdenum across this horizon, indicating that it may have behaved as the “first reductant” during evolution of the basin (i.e. the first reduced horizon that overlies an oxidised potential source sequence). Such “first reductant” horizons are a key target for sediment-hosted copper deposits. 2023 ANNUAL REPORT 17 Key risks The Company operates in the mineral exploration industry in Australia and as such is exposed to and manages various risks typical of operating in that sector pursuant to the principles included in the Company’s Audit and Risk Management Committee Charter. A summary of the key risks that the Company is exposed to are as follows: Future capital requirements In relation to tenements which the Company has an interest in or will in the future acquire such an interest, there are areas over which legitimate common law native title rights of Aboriginal Australians exist. Where native title rights exist, the ability to gain access to tenements (through obtaining consent of any relevant landowner), or to progress from the exploration phase to the development and mining phases of operations may be adversely affected. The Company requires financial resources in order to carry out its exploration activities. Environmental risks The Company’s operations and projects are subject to various health and environmental laws and regulations of jurisdictions in which it has interests. The Company conducts its activities to a high standard in compliance with environmental laws. Sovereign risk The Company is subject to political, social, economic and other uncertainties including, but not limited to, changes in policies or the personnel administering them, foreign exchange restrictions, changes of law affecting foreign ownership, currency fluctuations, royalties and tax increases. Failure to obtain appropriate financing on a timely basis could cause the Company to have an impaired ability to expend the capital necessary to undertake or complete drilling programs, forfeit its interests in certain properties, and reduce or terminate its operations entirely. If the Company raises additional funds through the issue of equity securities, this may result in dilution to the existing shareholders and/or a change of control at the Company. Exploration and evaluation risks Mineral exploration and development is inherently highly speculative and involves a significant degree of risk. There is no guarantee that it will be economic to extract these resources or that there will be commercial opportunities available to monetise these resources. Title, tenure and land access risks The rights to mineral tenements carry with them various obligations which the Company is required to comply with in order to ensure the continued good standing of the tenement. Failure to meet these requirements could prejudice the right to maintain title to a given area and result in government or third-party action to forfeit a tenement or tenements. Mining and exploration tenements are subject to periodic renewal. The renewal of the term of granted tenements is subject to compliance with the applicable mining legislation and regulations and the discretion of the relevant mining authority. 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. The Company confirms that the form and context in which the Competent Persons findings are presented have not been materially modified from the original market announcements. 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 2 0 2 3 A N N U A L R E P O R T 19 Exploration Review02. 03. Summary of Tenements Lease Name Project Name Area km2 Managing Company Lease E80/5169 E80/5469 E80/5470 E80/5522 Aileron Aileron Aileron Aileron ELA80/5934 Aileron North ELA80/5935 Aileron North ELA80/5936 Aileron North ELA80/5937 Aileron North Lamil West Arunta West Arunta West Arunta West Arunta West Arunta West Arunta West Arunta West Arunta Paterson 187.6 Encounter Aileron Pty Ltd 534.3 Encounter Aileron Pty Ltd 613.9 Encounter Aileron Pty Ltd 429.2 Encounter Aileron Pty Ltd 636.85 Encounter Aileron Pty Ltd 635.68 Encounter Aileron Pty Ltd 635.74 Encounter Aileron Pty Ltd 635.92 Encounter Aileron Pty Ltd 60.7 Encounter Paterson Pty Ltd Encounter Interest 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% E45/4613 E45/3446 P45/2750 P45/2751 P45/2752 P45/3032 E30/517 E30/527 E38/3794 E37/1518 E38/3811 ELA38/3797 ELA37/1522 East Thomson’s Dome Paterson 6 Encounter Paterson Pty Ltd East Thomson’s Dome Paterson 198 HA Encounter Paterson Pty Ltd 100% ** East Thomson’s Dome Paterson 177 HA Encounter Paterson Pty Ltd 100% ** East Thomson’s Dome Paterson 199 HA Encounter Paterson Pty Ltd 100% ** East Thomson’s Dome Paterson 113.80 HA Encounter Paterson Pty Ltd 100% ** Rani Rani Irwin Irwin Irwin Irwin Irwin Yilgarn Yilgarn Yilgarn Yilgarn Yilgarn Yilgarn Yilgarn 208.8 Baudin Resources Pty Ltd 6 Baudin Resources Pty Ltd 211.75 Encounter Yeneena Pty Ltd 212.13 Encounter Yeneena Pty Ltd 211.56 Encounter Yeneena Pty Ltd 211.63 Encounter Yeneena Pty Ltd 21.22 Encounter Yeneena Pty Ltd 100% 100% 100% 100% 100% 100% 100% 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 2 0 2 3 A N N U A L R E P O R T 19 Summary of Tenements03. 03. Summary of Tenements Lease Lease Name Project Name Area km2 Managing Company Encounter Interest EL32374 Sandover Northern Territory 795.4 Baudin Resources Pty Ltd EL32421 Sandover Northern Territory 792.67 Baudin Resources Pty Ltd EL32694 Sandover Northern Territory 792.71 Baudin Resources Pty Ltd EL32695 Sandover Northern Territory 787.39 Baudin Resources Pty Ltd EL32696 Sandover Northern Territory 763.6 Baudin Resources Pty Ltd EL33060 Sandover Northern Territory 740.11 Baudin Resources Pty Ltd EL33065 Sandover Northern Territory 665.33 Baudin Resources Pty Ltd EL32478 Brunchilly Northern Territory 798.52 Baudin Resources Pty Ltd EL32721 Broadmere Northern Territory 816.73 Baudin Resources Pty Ltd EL32723 Dunmarra Northern Territory 823.05 Baudin Resources Pty Ltd EL32727 Maryfield Northern Territory 795.65 Baudin Resources Pty Ltd EL32728 Maryfield Northern Territory 826.95 Baudin Resources Pty Ltd ELA32937 Broadmere Northern Territory 825.11 Baudin Resources Pty Ltd ELA32938 Broadmere Northern Territory 744.04 Baudin Resources Pty Ltd ELA32724 Dunmarra Northern Territory 821.54 Baudin Resources Pty Ltd ELA33048 Sandover Northern Territory 789.2 Baudin Resources Pty Ltd ELA33330 Jessica North Northern Territory 805.77 Baudin Resources Pty Ltd ELA33331 Jessica North Northern Territory 802.06 Baudin Resources Pty Ltd 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% ELA33412 Jessica West Northern Territory 778.62 Baudin Resources Pty Ltd 100% South32 earning up to 75% ELA33413 Jessica West Northern Territory 786.91 Baudin Resources Pty Ltd 100% South32 earning up to 75% ELA33414 Jessica West Northern Territory 794.59 Baudin Resources Pty Ltd 100% South32 earning up to 75% ELA33396 Aurora Northern Territory 797.4 Baudin Resources Pty Ltd ELA33397 Aurora Northern Territory 796.53 Baudin Resources Pty Ltd ELA33398 Aurora Northern Territory 797.88 Baudin Resources Pty Ltd ELA33399 Aurora Northern Territory 797.58 Baudin Resources Pty Ltd ELA33561 Aurora Northern Territory 776.28 Baudin Resources Pty Ltd ELA33562 Aurora Northern Territory 798.12 Baudin Resources Pty Ltd ELA33616 Broadmere Northern Territory 821.83 Baudin Resources Pty Ltd ELA33617 Broadmere Northern Territory 396.04 Baudin Resources Pty Ltd ELA33626 Birrindudu Northern Territory 817.28 Baudin Resources Pty Ltd ELA33627 Birrindudu Northern Territory 819.14 Baudin Resources Pty Ltd ELA33630 Birrindudu Northern Territory 821.14 Baudin Resources Pty Ltd ELA33631 Birrindudu Northern Territory 820.83 Baudin Resources Pty Ltd ELA33632 Birrindudu Northern Territory 782.07 Baudin Resources Pty Ltd E45/2500 Yeneena Paterson E45/2502 Yeneena E45/2657 Yeneena E45/2658 Yeneena E45/3768 Yeneena E45/2805 Yeneena E45/2806 Yeneena E45/5379 Yeneena E45/5333 Yeneena E45/5334 Yeneena E45/5686 Yeneena E45/4861 Yeneena Paterson Paterson Paterson Paterson Paterson Paterson Paterson Paterson Paterson Paterson Paterson 107.3 IGO Limited 117.8 IGO Limited 156 IGO Limited 95.4 IGO Limited 149.7 IGO Limited 85.8 IGO Limited 35 IGO Limited 235.3 IGO Limited 127.2 IGO Limited 102.1 IGO Limited 108.4 IGO Limited 328 IGO Limited 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 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% 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% 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 Lease Lease Name Project Name Area km2 Managing Company EL32156 EL32157 EL32158 EL32159 EL32226 EL32329 EL32437 EL32581 ELA32703 ELA32729 ELA32730 EL32273 EL32317 EL32338 EL32339 EL32386 EL32387 EL32388 EL32493 EL33332 EL33334 EL32476 EL32477 EL32701 EL32813 Elliott Elliott Elliott Elliott Elliott Elliott Elliott Elliott Elliott Elliott Elliott Jessica Jessica Jessica Jessica Jessica Jessica Jessica Jessica Jessica Jessica Carrara Carrara Carrara Carrara Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Northern Territory Summary of tenements as of 30th September 2023. * Shumwari Option IGO JV ** Mining Lease application – M45/1304 (687.41 hectares) Summary of Tenements 03. Encounter Interest 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% 100% BHP earning up to 75% 100% BHP earning up to 75% 100% BHP 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% 100% South32 earning up to 75% 100% South32 earning up to 75% 807.26 696.31 793.71 723.9 813.56 136.99 601.11 493.6 756.11 672.64 757.92 750.46 738.6 783.5 791.42 814.55 814.94 813.76 811.55 812.77 814.13 805.42 805.21 801.69 BHP BHP BHP BHP BHP BHP BHP BHP BHP BHP BHP South32 South32 South32 South32 South32 South32 South32 South32 South32 South32 South32 South32 South32 22.72 South32 100% South32 earning up to 75% 2 0 2 3 A N N U A L R E P O R T 21 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 2023. 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). 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 2 0 2 3 A N N U A L R E P O R T 23 Directors’ Report04. Peter Bewick – B.Eng (Hons), MAusIMM Non-Executive Director appointed 7 October 2005 (Executive Director to 1 November 2021) Mr Bewick is a geology graduate from the WA School of Mines with over 30 years of industry experience. He held a number of senior mine and exploration geological roles during a 14-year career with WMC, including Exploration Manager and Geology Manager of the Kambalda Nickel Operations and Exploration Manager for St Ives Gold Operations. Mr Bewick also held corporate roles with WMC as Exploration Manager for the Nickel Business Unit and Exploration Manager for North America based in Denver, Colorado. He has extensive experience in project generation for a range of commodities including nickel, gold, copper and bauxite. Mr Bewick has been a member of the MERIWA College since 2013. Mr Bewick is currently Managing Director of Hamelin Gold Ltd (ASX:HMG) and Non-Executive Director of Mincor Resources NL. 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. Dr Hronsky is currently a Non-Executive Director of Paladin Energy Limited (ASX:PDN), 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. 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 2 0 2 3 A N N U A L R E P O R T 23 Directors’ Report04. 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 10,782,150 27,285,889 9,510,303 1,051,335 4,559,391 3,410,000 2,410,000 3,130,000 1,000,000 4,110,000 Included in the Directors’ Interests in Unlisted Options are 14,060,000 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 2023, 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 9 9 9 9 9 8 9 9 9 8 2 - - 2 2 2 - - 1 2 The consolidated net loss after income tax for the financial year was $1,429,900 (2022: profit $4,428,194). Included in the consolidated loss for the current year is a write-off of deferred and uncapitalised exploration and joint venture expenditure totalling $236,762 (2022: $4,204,574). Included in the result for the prior financial year is a gain of $10,104,846 recognised on the demerger of Hamelin Gold Limited from the Group. 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 2 0 2 3 A N N U A L R E P O R T 25 Directors’ Report04. Review of Activities Exploration Encounter’s primary focus is on discovering major copper and critical minerals deposits in Australia. Encounter’s exploration activities during the year were directed towards: • The 100% owned Aileron copper-critical minerals project in the West Arunta in WA; • 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, carried to completion of a scoping study, at the Jessica and Carrara projects; and • 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). Financial Position At the end of the financial year the Group had $11,817,728 (2022: $2,165,945) in cash and term deposits. Capitalised mineral exploration and evaluation expenditure is $17,783,090 (2022: $13,891,414). Matters Subsequent to the End of the Financial Year Subsequent to the end of the financial period the Company has issued a total of 1,200,000 unlisted options to employees pursuant to the terms of the Company’s Employee and Share Option Plan. 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 in this report, 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. 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 2 0 2 3 A N N U A L R E P O R T 25 Directors’ Report04. Options over Unissued Capital Unlisted Options As at the date of this report 24,010,000 unissued ordinary shares of the Company are under option as follows: Number of Options Granted Exercise Price 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 3,980,000 250,000 500,000 100,000 500,000 200,000 400,000 400,000 400,000 8.2 cents 16.2 cents 18.2 cents 22.2 cents 21.2 cents 22.4 cents 19.0 cents 20.0 cents 30.0 cents 26.8 cents 28.3 cents 20.8 cents 17.5 cents 50.0 cents 36.8 cents 59.2 cents 67.7 cents 68.9 cents Expiry Date 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 30 November 2026 15 January 2027 28 February 2027 27 March 2027 29 May 2026 20 June 2027 13 July 2027 24 July 2027 1 August 2027 All options on issue at the date of this report are vested and exercisable. No options on issue are listed. During the financial year: • 7,530,000 options (2022: 5,030,000) were granted over unissued shares of the Company; • nil options (2022: 400,000) were cancelled on the cessation of employment; • nil options (2022: 1,500,000) were cancelled on expiry of the exercise period; and • 2,900,000 (2022: 1,650,000) options were exercised at 5.2 cents per share. Included in options exercised is an amount of 424,379 options foregone in consideration given on exercise (2022: 689,697). Since the end of the financial year: • 1,200,000 (2022: nil) options have been issued by the Company to employees pursuant to the Company’s Employee Option Plan; • nil options have been exercised; and • nil 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. 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 2 0 2 3 A N N U A L R E P O R T 27 Directors’ Report04. Issued Capital Number of Shares on Issue Ordinary fully paid shares 2023 395,525,781 2022 317,216,826 Likely Developments and Expected Results of Operations The Group expects to maintain exploration programs at its 100% owned West Arunta copper-critical minerals project, Northern Territory copper and lithium projects and the Paterson copper-gold 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. 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 2 0 2 3 A N N U A L R E P O R T 27 Directors’ Report04. Remuneration Report (Audited) (Continued) 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. 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 (excluding equity-based remuneration otherwise approved by shareholders), 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. 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 2 0 2 3 A N N U A L R E P O R T 29 Directors’ Report04. 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 $14,490 (2022: $17,842), for geological consulting services from Western Mining Services, an entity associated with Dr Jon Hronsky. In addition, the Company incurred costs of $3,900 (2022: $nil) with Western Mining Services in relation to the attendance of training courses by employees of the Company. For the period 1 December 2022 to 30 November 2023, 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 1,720,000 options were issued in respect of this election following shareholder approval at the Company’s 2022 annual general meeting (for further details refer to the notice of meeting lodged with ASX on 28 October 2022). Engagement of Executive Directors The Company has entered into an executive service agreement with Mr Will Robinson 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. An Executive director 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 2023 2022 2021 2020 2019 $(1,429,900) $4,428,194 $(1,533,150) $(1,126,275) $(1,064,491) Closing share price at 30 June $0.455 $0.12 $0.155 $0.15 $0.07 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 2 0 2 3 A N N U A L R E P O R T 29 Directors’ Report04. Remuneration Report (Audited) (Continued) 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 2023 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 joint venture arrangements; and • cash flow and funding management. 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 2023 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 50,000 50,000 Philip Crutchfield - $ - 71,550 64,751 - - $ - 28,350 12,049 5,250 - Total 370,000 136,301 45,649 $ 110,620 78,623 31,997 31,997 110,620 363,857 Total $ 110,620 448,523 158,797 87,247 110,620 915,807 Value of Options as Proportion of Remuneration 100.0% 17.5% 20.1% 36.7% 100.0% 30 June 2022 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 - 270,000 123,333 50,000 Philip Crutchfield - Total 443,333 - - - - - - - 27,000 12,333 5,000 - 49,688 35,491 14,196 14,196 49,688 49,688 332,491 149,862 69,196 49,688 100.0% 10.7% 9.5% 20.5% 100.0% 44,333 163,259 650,925 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 2 0 2 3 A N N U A L R E P O R T 31 Directors’ Report04. Details of Performance Related Remuneration During the year ended 30 June 2023 total short-term incentive bonuses (STI), measured for the periods 1 January 2020 to 31 December 2020 and 1 January 2021 to 31 December 2021, were awarded to the Company’s Executive Directors for the respective periods as follows: Will Robinson Peter Bewick 1 STI bonus stated inclusive of SGC contributions where applicable. Short term incentive payments - cash bonuses paid 2022/23 financial year 2021/22 financial year $71,5501 $71,5501 Nil Nil Executives eligible for the STI are able to earn a bonus of up to a maximum of 25% of their corresponding base remuneration, with the final amount determined by performance against the below stated performance objectives. The STI performance objectives for the abovementioned STI for the measurement periods ended 31 December 2020 and 31 December 2021 were as follows: Performance Objective 1 (PO1) (Weighting up to 50%): Successful execution of the Company’s strategies and budget plans leading to first-rate outcomes for safety, environmental, operational performance and corporate culture. This includes: • Safety, environmental, operational performance and corporate culture • Management of existing Earn-in and Joint Venture Agreements • Commercialisation of additional projects through completion of a joint ventures or similar funding • Management of the equity structure and cash position • Market sensitive announcements This objective is determined at the discretion of the board. Performance Objective 2 (PO2) (Weighting up to 50%): Shareholder returns – determined by Encounter’s volume weighted average share price (VWAP) exceeding the Company’s VWAP for the preceding 12-month period. Assuming a year on year (YOY) increase in the Company’s VWAP, the potential executive bonus: YOY ENR Share Price VWAP Change $ % Weighting <=10% >10% < 20% >20% < 40% >40% <60% >60% <80% >80% 0 10% 20% 30% 40% 50% 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 2 0 2 3 A N N U A L R E P O R T 31 Directors’ Report04. Remuneration Report (Audited) (Continued) The total STI bonuses awarded and paid during the financial year ended 30 June 2023, has been determined against the abovementioned performance objectives for both the Managing Director and Exploration Director as follows: STI Period Ended 31 Dec 2020 31 Dec 2021 Maximum potential STI bonus ($) $67,500 $67,500 PO1 maximum PO1 achieved PO2 maximum PO2 achieved Total STI bonus achieved Total STI bonus achieved % 50% 50% % 37% 39% % 50% 50% % 30% 0% ($) 67% 39% ($) $45,225 $26,325 $71,550 The above STI bonuses awarded were paid to the executives during the year as follows: Will Robinson Peter Bewick Cash (pre-tax) SGC contribution Total STI Bonus ($) $71,550 $64,751 Nil $6,799 $71,550 $71,550 Equity instrument disclosures relating to key management personnel Options Granted as Remuneration During the financial year ended 30 June 2023 3,980,000 options (2022: 2,070,000) 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 860,000 860,000 350,000 860,000 350,000 350,000 350,000 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. 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 2 0 2 3 A N N U A L R E P O R T 33 Directors’ Report04. Exercise of Options Granted as Remuneration During the year 2,075,621 (2022: 60,303) 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 Jon Hronsky Number of shares issued on exercise of options Option details 1,500,000 575,6211 Options exercisable at $0.052 expiring 30 November 2022 Options exercisable at $0.052 expiring 30 November 2022 1 575,621 ordinary fully paid shares issued on the exercise of 1,000,000 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: 2023 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 2,200,000 1,550,000 4,280,000 1,650,000 2,900,000 1,210,000 860,000 350,000 350,000 1,210,000 - - (1,500,000) (1,000,000) - 3,410,000 2,410,000 3,130,000 1,000,000 4,110,000 3,410,000 2,410,000 3,130,000 1,000,000 4,110,000 1 Options exercised during the financial year. 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. 2023 Name P. Chapman W. Robinson P. Bewick J. Hronsky P. Crutchfield Balance at start of the year 9,948,816 26,452,556 8,010,303 475,714 3,371,448 Received during the year on exercise of options Other changes during the year Balance at the end of the year - - 1,500,000 575,621 833,334 833,333 - - - 1,187,943 10,782,150 27,285,889 9,510,303 1,051,335 4,559,391 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 $14,490 (2022: $17,842), 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 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 2 0 2 3 A N N U A L R E P O R T 33 Directors’ Report04. 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. Total remuneration paid to auditors during the financial year: 2023 $ 2022 $ Audit and review of the Company’s financial statements 37,000 33,050 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. 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 28th day of September 2023. W Robinson Managing Director 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 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 2 0 2 3 A N N U A L R E P O R T 35 Directors’ Report04. Auditor’s Independence Declaration 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 2 0 2 3 A N N U A L R E P O R T 35 Directors’ Report04. Crowe Perth ABN 96 844 819 235 Level 24, Allendale Square 77 St Georges Terrace Perth WA 6000 PO Box P1213 Perth WA 6844 Australia Main +61 (8) 9481 1448 Fax +61 (8) 9481 0152 www.crowe.com.au Some of the Crowe personnel involved in preparing this document may be members of a professional scheme approved under Professional Standards Legislation such that their occupational liability is limited under that Legislation. To the extent that applies, the following disclaimer applies to them. If you have any questions about the applicability of Professional Standards Legislation Crowe’s personnel involved in preparing this document, please speak to your Crowe adviser. Liability limited by a scheme approved under Professional Standards Legislation. The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership is external audit, conducted via the Crowe Australasia external audit division and Unison SMSF Audit. All other professional services offered by Findex Group Limited are conducted by a privately owned organisation and/or its subsidiaries. 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 © 2023 Findex (Aust) Pty Ltd 18 DECLARATION OF INDEPENDENCE BY SUWARTI ASMONO TO THE DIRECTORS OF ENCOUNTER RESOURCES LIMITED As lead auditor for the audit of Encounter Resources Limited for the year ended 30 June 2023, I declare that, to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Encounter Resources Limited and the entities it controlled during the year. Crowe Perth Suwarti Asmono Partner Dated at Perth this 28th day of September 2023 Consolidated Financial Statements For the Year Ended 30 June 2023 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 Consolidated Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income For the financial year ended 30 June 2023 Interest income Gain on demerger Other income Total income Employee expenses Employee expenses recharged to exploration Equity based remuneration expense (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 2023 $ 2022 $ 96,565 10,349 - 10,104,846 164,125 260,690 (1,338,186) 981,127 (460,745) (59,519) (73,766) (112,981) (389,758) (236,762) (1,429,900) - 179,303 10,294,498 (1,114,583) 907,847 (379,845) (447,700) (68,642) (75,973) (399,501) (4,204,574) 4,428,194 - (1,429,900) 4,428,194 - - (1,429,900) 4,428,194 (0.4) (0.4) 1.4 1.4 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 3 A N N U A L R E P O R T 37 Consolidated Statement of Financial Position As at 30 June 2023 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 2023 $ 2022 $ 11,817,728 2,165,945 94,472 181,846 244,355 13,479 - 12,094,046 2,423,779 75,652 59,342 92,400 75,695 118,861 44,210 17,783,090 13,891,414 43,621 18,054,105 30,148,151 987,801 267,668 49,059 1,304,528 - - 1,304,528 28,843,623 109,057 14,239,237 16,663,016 128,115 225,024 67,713 420,852 49,241 49,241 470,093 16,192,923 55,158,968 41,666,888 (28,103,156) (26,698,304) 1,787,811 28,843,623 1,224,339 16,192,923 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 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 2 0 2 3 A N N U A L R E P O R T 39 Consolidated Statement of Financial PositionConsolidated Statement of Changes in Equity For the financial year ended 30 June 2023 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 cancella-tion of vested options Derecognition of accumulated losses on demerger of subsidiary - - 4,428,194 - - 379,845 4,428,194 379,845 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 2023 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 Transactions with equity holders in their capacity as equity holders: Shares issued (net of costs) Consolidated Accumulated losses Equity remuneration reserve $ $ Issued capital $ Total $ - - (1,429,900) - (1,429,900) - 618,452 618,452 29,932 25,048 (54,980) - 13,462,148 - - 13,462,148 Balance at the end of the financial year 55,158,968 (28,103,156) 1,787,811 28,843,623 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 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 2 0 2 3 A N N U A L R E P O R T 39 Consolidated Statement of Changes in EquityConsolidated Statement of Cash Flows Consolidated Statement of Cash Flows For the financial year ended 30 June 2023 Note 30 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 Consolidated 2023 $ 2022 $ 30,000 139,714 96,608 (837,764) (571,442) - - - - 25,000 25,646 10,306 (776,274) (715,322) 7,478,125 (7,478,304) (420,101) 335,175 170,248 Contributions received from project generation alliance and farm-in partners 9,844 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 (3,607,292) (3,055,354) 295,934 66,118 (86,411) 152,295 13,749 (1,750) (3,321,807) (2,805,917) - - 14,398,800 (778,945) (74,823) 13,545,032 9,651,783 2,165,945 8(a) 11,817,728 32,849 (32,849) 76,925 (3,749) (72,497) 679 (3,520,560) 5,686,505 2,165,945 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 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 Notes to the Financial Statements Notes to the Financial Statements For the financial year ended 30 June 2023 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 42 48 49 49 49 50 50 52 53 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 54 Note 27 Commitments Note 11 Financial assets – Investments Designated at Fair Value through Profit or Loss 55 Note 28 Related party transactions Note 12 Non-current assets – Property, plant and equipment 55 Note 14 Non-current assets – Capitalised mineral exploration and evaluation expenditure 57 Note 29 Events occurring after the balance sheet date Note 30 Reconciliation of loss after tax to net cash inflow from operating activities 68 Note 31 Earnings per share Note 15 Interest in joint ventures and farm-in arrangements 58 Note 32 Parent entity information Note 16 Current liabilities – Trade and other payables 59 Note 33 Demerger of Hamelin Gold Limited 59 59 60 61 63 64 65 66 66 67 67 68 68 69 70 70 2 0 2 3 A N N U A L R E P O R T 41 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 28 September 2023. 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. 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 2 0 2 3 A N N U A L R E P O R T 43 Notes to the Financial Statements(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 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. 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 2 0 2 3 A N N U A L R E P O R T 43 Notes to the Financial StatementsNote 1 Summary of significant accounting policies (Continued) (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. 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 2 0 2 3 A N N U A L R E P O R T 45 Notes to the Financial StatementsImmediate restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure. 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. operations. These have been incorporated in the financial statements under the appropriate classifications. 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. Farm-out arrangements (in the exploration and evaluation phase) 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 Joint ventures 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 jointly held assets, liabilities, revenues and expenses of joint 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. Long service leave 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. Share based payments 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. 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 2 0 2 3 A N N U A L R E P O R T 45 Notes to the Financial StatementsNote 1 Summary of significant accounting policies (Continued) 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 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. 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: 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. (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. (r) Goods and services tax (GST) Impairment of financial assets 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. 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 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 2 0 2 3 A N N U A L R E P O R T 47 Notes to the Financial Statements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. 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. 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. 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 2 0 2 3 A N N U A L R E P O R T 47 Notes to the Financial StatementsNote 2 Financial risk management (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 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 2023 of $59,342 (2022: $118,861). 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. 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. 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 2 0 2 3 A N N U A L R E P O R T 49 Notes to the Financial Statements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: 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 values of amounts recognised in respect of share based payments have been estimated based on the fair value of the equity instruments granted. Fair values of options issued are estimated by using an appropriate option pricing model. There are many variables and assumptions used as inputs into the models. If any of these assumptions or estimates were to change this could have a significant effect on the amounts recognised. See note 20 for details of inputs into option pricing models in respect of options issued during the reporting period. 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 Management fees from farm-in and project generation alliance partners Other income Consolidated 2023 $ 30,000 67,840 135 66,150 164,125 2022 $ 25,000 111,397 6,586 36,320 179,303 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 2 0 2 3 A N N U A L R E P O R T 49 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 Depreciation included in exploration costs: Field equipment 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 12 14 Consolidated 2023 $ 2022 $ (8,330) (65,436) (73,766) (18,007) (236,762) (113,186) (59,519) (3,206) (65,436) (68,642) (18,572) (4,204,574) (102,663) (447,700) 1 Adjustment to carrying value of investment in Hampton Hill NL, based on the Company’s share of net assets as at 30 June 2023. 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 2023 $ 2022 $ (1,174,514) 1,174,514 (1,000,415) 1,000,415 (332,004) 332,004 - (742,209) 742,209 - 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 2 0 2 3 A N N U A L R E P O R T 51 Notes to the Financial Statements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 Capitalised exploration expenditure Assets Consolidated 2023 $ 2022 $ (1,429,900) (357,475) 115,186 14,880 23,634 (60,818) 4,428,194 1,107,049 94,961 111,925 1,051,144 (26,154) - (2,526,212) 264,593 187,288 - - (45,462) (4,445,772) (4,491,234) (3,370) (3,472,853) (3,476,223) Revenue losses available to offset against future taxable income 10,582,393 9,430,935 Employee provisions Accrued expenses Deductible equity raising costs Net deferred tax asset not recognised 66,917 53,769 197,588 10,900,667 6,409,433 56,256 2,791 63,670 9,553,652 6,077,429 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 2 0 2 3 A N N U A L R E P O R T 51 Notes to the Financial StatementsNote 7 Income tax (Continued) Note Consolidated 2023 $ 2022 $ 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 7a (42,092) - (972,919) 133,918 50,978 1,151,458 10,661 332,004 15,554 35,265 482,345 (28,772) (10,642) 273,055 (24,596) 742,209 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 2023 $ 317,728 11,500,000 11,817,728 2022 $ 665,945 1,500,000 2,165,945 (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 11,817,728 2,165,945 (b) Term Deposits Amounts classified as term deposits are short term deposits able to be converted into cash within three months or less, and earn interest at the respective short term interest rates. 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 2 0 2 3 A N N U A L R E P O R T 53 Notes to the Financial Statements(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 2023 2022 $ - $ - 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 9 Current assets – Receivables a) Trade and other receivables Deposits paid Funds due from project generation and farm-in partners Trade and other receivables GST recoverable b) Other current assets Prepaid tenement costs Details of fair value and exposure to interest risk are included at note 22. Consolidated 2023 $ 11,885 - 7,324 75,263 94,472 181,846 181,846 2022 $ - 8,193 236,162 - 244,355 13,479 13,479 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 2 0 2 3 A N N U A L R E P O R T 53 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 2023: 2023 2022 Encounter Operations Pty Ltd Encounter Yeneena Pty Ltd Baudin Resources Pty Ltd Encounter Paterson Pty Ltd Encounter Aileron Pty Ltd Subsidiary Company Encounter Operations Pty Ltd Encounter Yeneena Pty Ltd Baudin Resources Pty Ltd Encounter Paterson Pty Ltd Encounter Aileron Pty Ltd $ 2 2 10 1 1 $ 2 2 10 1 1 Country of Incorporation Ownership Interest 2023 2022 Australia Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% • Encounter Operations Pty Ltd was incorporated in Western Australia on 27 November 2006. • 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. • 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. The ultimate controlling party of the group is Encounter Resources Limited. During the prior 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). 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 2 0 2 3 A N N U A L R E P O R T 55 Notes to the Financial Statements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 Encounter Yeneena Pty Ltd Baudin Resources Pty Ltd Encounter Paterson Pty Ltd Encounter Aileron Pty Ltd 2023 $ 2022 $ 22,314,516 22,310,706 888,882 1,561,381 7,456,964 3,623,897 881,285 1,000,240 6,865,391 713,260 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 2023 $ 118,861 (59,519) 59,342 2022 $ 566,561 (447,700) 118,861 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). Note 12 Non-current assets – Property, plant and equipment Field equipment At cost Accumulated depreciation Office equipment At cost Accumulated depreciation Consolidated 2023 $ 2022 $ 863,889 (786,083) 77,806 67,933 (53,339) 14,594 92,400 805,219 (768,076) 37,143 52,076 (45,009) 7,067 44,210 2 0 2 3 A N N U A L R E P O R T 55 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 Notes to the Financial Statements Note 12 Non-current assets – Property, plant and equipment (Continued) Reconciliation Field equipment Net book value at start of the year Cost of additions Depreciation charged (note 6) 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 Note 6 Consolidated 2023 $ 2022 $ 37,143 58,670 (18,007) 77,806 7,067 15,857 (8,330) 14,594 55,715 - (18,572) 37,143 8,523 1,750 (3,206) 7,067 No items of property, plant and equipment have been pledged as security by the Group. 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 2023 $ 2022 $ 109,057 174,493 - (65,436) 43,621 - (65,436) 109,057 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. 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 2 0 2 3 A N N U A L R E P O R T 57 Notes to the Financial StatementsNote 14 Non-current assets – Capitalised mineral exploration and evaluation expenditure Note Consolidated 2023 $ 2022 $ In the exploration and evaluation phase Capitalised exploration costs at the start of the period Total acquisition and exploration costs for the period (i) Exploration costs funded by EIS grant Research and development tax credits (ii) Total exploration and joint venture costs written off and expensed for the period 6 13,891,414 15,212,300 4,490,490 (295,934) (66,118) (236,762) 3,049,732 (152,295) (13,749) (4,204,574) Capitalised exploration costs at the end of the period 17,783,090 13,891,414 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. 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 2 0 2 3 A N N U A L R E P O R T 57 Notes to the Financial StatementsNote 15 Interest in joint ventures and farm-in arrangements 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. a) Joint Venture Agreements – Joint Operations • During the farm-in phase, South32 will be the Manager of 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 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. the project. 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. Earn-in and Joint Venture Agreement - Yeneena Copper-Cobalt Project (“Yeneena”) – IGO Limited (IGO) The key terms of the earn-in and joint venture agreement are as follows: • 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 • Upon South32 earning the Initial Interest or Further • Standard dilution clauses will apply to the parties’ interests. 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. Carrara • 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 Should a party’s interest dilute to below 10% it shall automatically convert to a Net Smelter Royalty. 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: • 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. 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 2 0 2 3 A N N U A L R E P O R T 59 Notes to the Financial StatementsNote 16 Current liabilities – Trade and other payables Trade payables and accruals Other payables Consolidated 2023 $ 945,595 42,206 987,801 2022 $ 98,017 30,098 128,115 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 2023 $ 101,183 166,485 267,668 2022 $ 79,992 145,032 225,024 Consolidated 2023 $ 2022 $ 116,954 177,423 - (74,823) 6,928 49,059 - (72,497) 12,028 116,954 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 2 0 2 3 A N N U A L R E P O R T 59 Notes to the Financial StatementsNote 18 Current liabilities – Lease liabilities (Continued) Lease liabilities are split between current and non-current liabilities at the balance date as follows: Lease liabilities due < 1 year Lease liabilities due > 1 year Total Lease liabilities Consolidated 2023 $ 49,059 - 49,059 2022 $ 67,713 49,241 116,954 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. Refer to Note 22 for details of contractual maturity of the lease liability. 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. Note Issue price 2023 No. 2022 No. 2023 $ 2022 $ b) Share capital Issued share capital c) Share movements during the year Balance at the start of the financial year Exercise of options1 Exercise of options1 Exercise of options1 Exercise of options1 Capital reduction – in-specie distribution 33 395,525,781 317,216,826 55,158,969 41,666,888 317,216,826 316,256,523 41,666,888 50,000,566 $0.10 $0.105 $0.137 $0.062 75,000 425,000 60,303 400,000 - - - - - - - - - 7,500 44,625 8,262 24,800 (8,415,115) Share placement Exercise of options1 Share placement Less share issue costs: Cash-based Equity-based $0.12 35,833,334 $0.052 2,475,621 $0.25 40,000,000 20 - - - - - - - 4,300,000 128,732 10,000,000 - - - (778,945) (157,707) (3,750) - Balance at the end of the financial year 395,525,781 317,216,826 55,158,968 41,666,888 1 Refer Note 20 for details of options exercised. 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 2 0 2 3 A N N U A L R E P O R T 61 Notes to the Financial Statements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. 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 2022 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 Number of options exercised Details of options exercised 2,900,000 Exercisable at $0.052 expiring 30 November 2022 1 Included in options exercised above is an amount of 424,379 options foregone in consideration given on exercise (2022: 689,697). c) Options cancelled during the year During the year nil options (2022: 400,000) were cancelled upon termination of employment; and nil options (2022: 1,500,000) were cancelled on expiry of the exercise period. d) Options on issue at the balance date The number of options outstanding over unissued ordinary shares at 30 June 2023 is 22,810,000 (2022: 18,180,000). The terms of these options are as follows: Number of options outstanding 1,500,000 5,050,000 Exercise price Expiry date 8.2 cents 30 November 2023 16.2 cents 31 October 2023 650,000 18.2 cents 30 June 2024 2,450,000 22.2 cents 26 November 2024 800,000 21.2 cents 30 April 2025 3,630,000 1,200,000 1,000,000 1,000,000 3,980,000 250,000 500,000 100,000 500,000 200,000 22,810,000 22.4 cents 28 November 2025 19.0 cents 28 June 2026 20.0 cents 29 September 2025 30.0 cents 29 September 2025 26.8 cents 30 November 2026 28.3 cents 15 January 2027 20.8 cents 28 February 2027 17.5 cents 27 March 2027 50.0 cents 29 May 2026 36.8 cents 20 June 2027 During the financial year the Company granted 7,530,000 options (2022: 5,030,000) over unissued shares. e) Subsequent to the balance date b) Options exercised during the year During the financial year the Company issued shares on the exercise of 2,900,000 (2022: 1,650,000) unlisted options, as follows: 1,200,000 (2022: nil) options have been granted subsequent to the balance date and to the date of signing this report. Nil options have been exercised subsequent to the balance date to the date of signing this report. Subsequent to the balance date nil options have been cancelled on expiry of the exercise period. Weighted average contractual life The weighted average contractual life for un-exercised options is 23.3 months (2022: 24.3 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. 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 2 0 2 3 A N N U A L R E P O R T 61 Notes to the Financial StatementsNote 20 Options and share based payments (Continued) Issued as equity-based remuneration: Date granted 1 Dec 2022 16 Jan 2023 1 Mar 2023 28 Mar 2023 21 Jun 2023 Number of options granted 3,980,000 250,000 500,000 100,000 200,000 Exercise price (cents) 26.8 28.3 20.8 17.5 36.8 Expiry date 30 Nov 2026 15 Jan 2027 28 Feb 2027 27 Mar 2027 20 Jun 2027 Issued as equity-based compensation for capital raising services provided: Date granted 29 Sep 2022 29 Sep 2022 29 May 2023 Number of options granted 1,000,000 1,000,000 500,000 Exercise price (cents) 20.0 30.0 50.0 Expiry date 29 Sep 2025 29 Sep 2025 29 May 2026 1 Historical volatility has been used as the basis for determining expected share price volatility. Risk free interest rate used 3.28% 3.32% 3.67% 2.91% 3.92% Risk free interest rate used 3.73% 3.73% 3.43% Volatility applied1 79.29% 79.50% 82.67% 83.78% 91.40% Volatility applied1 75.40% 75.40% 93.34% Value of Options $363,857 $24,247 $37,300 $6,296 $29,045 $460,745 Value of Options $50,511 $37,934 $69,262 $157,707 Reconciliation of movement of options over unissued shares during the period including weighted average exercise price (WAEP) 2023 2022 No. WAEP (cents). $ WAEP (cents) Options granted during the year Options exercised during the year1 Options cancelled and expired unex-ercised during the year Options outstanding at the end of the year 18,180,000 7,530,000 (2,900,000) - 22,810,000 16.3 27.7 5.2 - 21.5 16,700,000 5,030,000 (1,650,000) (1,900,000) 18,180,000 18.2 21.6 10.9 22.6 16.3 1 Included in options exercised above is an amount of 689,697 options foregone in consideration given on exercise (2022: 689,697). 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 2 0 2 3 A N N U A L R E P O R T 63 Notes to the Financial StatementsNote 21 Reserves and accumulated losses Consolidated 2023 2022 Accumulated losses Equity remuneration reserve1 Accumulated losses Equity remuneration reserve (i) $ $ $ $ Balance at the beginning of the year (26,698,304) 1,224,339 (29,535,096) 1,041,896 Profit/(Loss) for the period (1,429,900) Derecognition of reserves on de-merger of subsidiary Capital return on in-specie distribu-tion 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) - - - 618,452 - 379,845 - - - 25,048 (25,048) 189,140 (189,140) Transfer to share capital on exer-cise of options2 - (29,932) - (8,262) Balance at the end of the year (28,103,156) 1,787,811 (26,698,304) 1,224,339 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 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 2 0 2 3 A N N U A L R E P O R T 63 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 assets1 1 Cash and cash equivalents. Carrying amount ($) 2023 2022 $ - $ - 11,817,728 2,165,945 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. 2023 Profit or loss Equity 1% increase 1% decrease 1% increase 1% decrease $ $ $ $ Variable rate instruments 118,177 (118,177) 118,177 (118,177) 2022 Profit or loss Equity 1% increase 1% decrease 1% increase 1% decrease $ $ $ $ Variable rate instruments 21,659 (21,659) 21,659 (21,659) 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 2 0 2 3 A N N U A L R E P O R T 65 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): 2023 Carrying amount Contractual cash flows < 6 months 6-12 months $ $ $ $ 1-2 years $ 2-5 years $ > 5 years $ Consolidated Trade and other payables 987,801 987,801 987,801 Lease liabilities 49,059 49,059 49,059 1,036,860 1,036,860 1,036,860 - - - Consolidated 2022 Carrying amount Contractual cash flows < 6 months 6-12 months $ $ $ $ 1-2 years $ Trade and other payables 128,115 128,115 128,115 Lease liabilities 116,954 116,954 32,822 245,069 245,069 160,937 - 34,891 34,891 Fair values Fair values versus carrying amounts - - - - 49,241 49,241 - - - - - - - - - - - - > 5 years $ 2-5 years $ The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet are as follows: Consolidated 2023 2022 Carrying amount Fair value Carrying amount Fair value $ $ $ $ Cash and cash equivalents 11,817,728 11,817,728 Financial assets Lease liabilities 59,342 (49,059) 59,342 (49,059) Trade and other payables (987,801) (987,801) 2,165,945 118,861 (116,954) (128,115) 10,840,210 10,840,210 2,0239,737 2,165,945 118,861 (116,954) (128,115) 2,039,737 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 2023 or 30 June 2022. The Company has no franking credits available as at 30 June 2023 or 30 June 2022. 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 2 0 2 3 A N N U A L R E P O R T 65 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 (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 2023 $ 506,301 363,857 45,649 915,807 2022 $ 443,333 163,259 44,333 650,925 During the year the Group incurred costs of $14,490 (2022: $17,842), for geological consulting services from Western Mining Services, an entity associated with Dr Jon Hronsky. Note 25 Remuneration of auditors Audit and review of the Company’s financial statements 37,000 33,050 Consolidated 2023 $ 2022 $ 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 2 0 2 3 A N N U A L R E P O R T 67 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 2023 or 30 June 2022. 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 $2,490,520 (2022: $2,305,520). The exploration expenditure obligations stated above include amounts (approximately $1.4m (2022: approximately $1.2m)) that are funded by third parties pursuant to various farm- in agreements (Note 15). Therefore current expenditure commitment on Encounter 100% owned projects is approximately $1.1m (2022: approximately $1.1m). (c) Contractual Commitment There are no material contractual commitments as at 30 June 2023 or 30 June 2022 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 2023 or 30 June 2022 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 in Western Australia. 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. 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 2 0 2 3 A N N U A L R E P O R T 67 Notes to the Financial StatementsNote 28 Related party transactions Note 29 Events occurring after the balance sheet date Transactions with Directors during the year are disclosed at Note 24 – Key Management Personnel. In addition, the Company incurred costs of $3,900 (2022: $nil) with Western Mining Services, an entity associated with Dr Jon Hronsky, in relation to the attendance of training courses by employees of the Company. There are no other related party transactions other than as stated in the financial statements. Subsequent to the end of the financial period the Company has issued a total of 1,200,000 unlisted options to employees pursuant to the terms of the Company’s Employee and Share Option Plan. 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 Profit/(Loss) from ordinary activities after income tax 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 Consolidated 2023 $ 2022 $ (1,429,900) 4,428,194 - (10,104,846) 73,766 236,762 460,745 59,519 (135) 6,928 (9,633) 30,506 (571,442) 68,642 4,093,178 379,845 447,700 (6,586) 12,028 (3,921) (29,556) (715,322) Non-Cash Investing and Financing Activities During the year the Company issued options to lead managers to capital raising services provided, with a total fair value amounting to $157,707 (refer note 20). 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 2 0 2 3 A N N U A L R E P O R T 69 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 2023 Cents (0.4) (0.4) $ 2022 Cents 1.4 1.4 $ c) Loss used in calculation of basic and diluted loss per share Consolidated profit/(loss) after tax from continuing operations (1,429,900) 4,428,194 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. 349,011,344 316,715,223 Weighted average number of shares used as the denominator in calculating basic earnings per share 349,011,344 321,115,223 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 2 0 2 3 A N N U A L R E P O R T 69 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 Equity Issued capital Equity remuneration reserve Accumulated losses TOTAL EQUITY Financial performance Profit/(Loss) for the year Other comprehensive income Total comprehensive income Company 2023 $ 2022 $ 12,018,264 18,163,514 30,181,778 1,338,155 - 1,338,155 28,843,623 55,158,968 1,787,811 2,423,579 14,260,399 16,683,978 441,814 49,241 491,055 16,192,923 41,666,888 1,224,339 (28,103,156) (26,698,304) 28,843,623 16,192,923 (1,429,900) 8,555,175 - - (1,429,900) 8,555,175 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 comparative 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. 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 2 0 2 3 A N N U A L R E P O R T 71 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 $ 7,478,304 30,889 716,155 135,636 8,360,984 (440,248) (7,478,125) (442,609) (8,360,982) 2 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 2 0 2 3 A N N U A L R E P O R T 71 Notes to the Financial StatementsDirectors’ Declaration In the opinion of the Directors of Encounter Resources Limited (“the Company”) (a) the financial statements and notes set out on pages 37 to 71 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 2023 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 2023. This declaration is made in accordance with a resolution of the Directors. Signed at Perth this 28th day of September 2023. W Robinson Managing Director 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 2 0 2 3 A N N U A L R E P O R T 73 Directors’ Declaration Independent Audit Report Crowe Perth ABN 96 844 819 235 Level 24, Allendale Square 77 St Georges Terrace Perth WA 6000 PO Box P1213 Perth WA 6844 Australia Main +61 (8) 9481 1448 Fax +61 (8) 9481 0152 www.crowe.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ENCOUNTER RESOURCES LIMITED Report on the Audit of the Financial Report Opinion We have audited the financial report of Encounter Resources Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2023, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its financial performance for the year then ended; and (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Some of the Crowe personnel involved in preparing this document may be members of a professional scheme approved under Professional Standards Legislation such that their occupational liability is limited under that Legislation. To the extent that applies, the following disclaimer applies to them. If you have any questions about the applicability of Professional Standards Legislation Crowe’s personnel involved in preparing this document, please speak to your Crowe adviser. Liability limited by a scheme approved under Professional Standards Legislation. The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership is external audit, conducted via the Crowe Australasia external audit division and Unison SMSF Audit. All other professional services offered by Findex Group Limited are conducted by a privately owned organisation and/or its subsidiaries. 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 © 2023 Findex (Aust) Pty Ltd 58 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 2 0 2 3 A N N U A L R E P O R T 73 Independent Audit Report Independent Auditor’s Report Encounter Resources Limited Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How we addressed the Key Audit Matter Consideration of impairment of capitalised mineral exploration and evaluation expenditure The Group’s Capitalised Mineral Exploration and Evaluation Expenditure of $17,783,090 is a significant asset to the consolidated financial statements and involved significant management’s estimate and judgement in the impairment assessment. This matter is considered a key audit matter due to: • • the high degree of judgement applied in assessing whether impairment indicators are present; and the significance of additions to capitalised expenditure of $4,490,490 in the current year. The related accounting policies, critical accounting estimates and judgements and disclosures are contained in Note 1(l), Note 3 and Note 14 of the financial report. Our procedures included, but were not limited to: • • • • • assessed the nature of the capitalised costs through testing on a sample basis and assessing whether the nature of the expenditure met the capitalisation criteria. conducted discussions with management regarding the criteria used in their impairment assessment and ensuring that this was in line with the requirements of AASB 6 Exploration for and Evaluation of Mineral Resources. corroborated representations made by management regarding their intentions for exploration activities in the tenement areas with evidence of activities carried out assessed the third party information supporting the Group’s rights to tenure; and considered the appropriateness of the disclosures in Note 1(l), Note 3 and Note 14 to the financial statements in accordance with the relevant requirements of Australian Accounting Standards. Information Other than the Financial Report and the Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s 2023 Annual Report for the year ended 30 June 2023 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based upon the work we have performed, we conclude that there is material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. © 2023 Findex (Aust) Pty Ltd www.crowe.com.au 59 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 2 0 2 3 A N N U A L R E P O R T 75 Independent Audit Report Independent Auditor’s Report Encounter Resources Limited Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards, International Financial 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 gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the group financial report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. © 2023 Findex (Aust) Pty Ltd www.crowe.com.au 60 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 2 0 2 3 A N N U A L R E P O R T 75 Independent Audit Report 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 2 0 2 3 A N N U A L R E P O R T 77 Independent Audit ReportIndependent Auditor’s Report Encounter Resources Limited © 2023 Findex (Aust) Pty Ltd www.crowe.com.au 61We communicate with the directors regarding, among other matters, the planned scope and timing ofthe audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Wealsoprovide the directors witha statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters thatmay reasonably bethoughttobear on our independence,and whereapplicable, actions taken to eliminate threats or safeguards applied. From thematters communicatedwith the directors, we determine those matters thatwereofmost significance intheaudit ofthefinancial report of the currentperiod and are therefore the keyaudit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosureaboutthe matter or when,in extremely rarecircumstances, we determine that amatter shouldnotbecommunicated in our auditor’sreportbecause the adverse consequences ofdoing sowould reasonably beexpected to outweigh the public interest benefits ofsuch communication. Report onthe Remuneration Report Opiniononthe Remuneration Report We have audited theRemunerationReport included in pages 27 to 33of the directors’ report for the yearended30June2023.Inour opinion,the Remuneration Report of EncounterResources Limited for the year ended 30June 2023, complies withsection 300A oftheCorporations Act 2001. Responsibilities The directors ofthe Company are responsible for the preparation and presentation oftheRemuneration Report in accordance withsection 300Aofthe Corporations Act 2001. Our responsibility isto express an opinion on theRemuneration Report,based onour audit conducted inaccordance withAustralian Auditing Standards. Crowe PerthSuwarti AsmonoPartnerDated at Perththis28thday of September 2023ASX Additional Information Pursuant to the Listing Requirements of the Australian Securities Exchange, the shareholder information set out below was applicable as at 2 October 2023. 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 136 539 418 1,010 379 2,482 46,735 1,628,523 3,366,201 39,856,789 350,627,533 395,525,781 0.01% 0.41% 0.85% 10.08% 88.65% 100.00% There are 224 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 Issued Ordinary Shares Number of shares % of shares 28,400,572 27,285,889 20,513,397 7.18% 6.90% 5.19% 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 2 0 2 3 A N N U A L R E P O R T 77 ASX Additional InformationC. Twenty Largest Shareholders The names of the twenty largest holders of quoted shares are listed below:: Shareholder Name HSBC Custody Nominees (Australia) Limited IGO Limited William Robinson and associates Silver Lake Resources Limited UBS Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited – GSCO ECA Paul Chapman and associates Precision Opportunities Fund Ltd Peter Bewick and associates BNP Paribas Nominees Pty Ltd Picton Cove Pty Ltd Citicorp Nominees Pty Ltd Fifty Second Celebration Pty Ltd Philip Crutchfield and associates BNP Paribas Nominees Pty Ltd – HUB24 Custodial Services Seneschal (WA) Pty Ltd HS Superannuation Pty Ltd Wythenshawe Pty Ltd Kiki Super Fund Gremar Holdings Pty Ltd Total Ordinary Shares - Quoted Number of shares % of Shares 33,680,053 28,400,572 27,285,889 20,513,397 15,000,000 14,765,586 10,782,150 10,000,000 9,510,303 7,337,244 5,656,937 4,595,146 4,566,124 4,559,391 4,505,104 4,012,679 2,777,717 2,701,761 2,600,000 2,510,000 8.52% 7.18% 6.90% 5.19% 3.79% 3.73% 2.73% 2.53% 2.40% 1.86% 1.43% 1.16% 1.15% 1.15% 1.14% 1.01% 0.70% 0.68% 0.66% 0.63% 215,760,053 54.55% 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 2 0 2 3 A N N U A L R E P O R T 79 ASX Additional InformationD. Unquoted Securities Options over Unissued Shares Number of Options Exercise Price Expiry Date Number of Holders 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 3,980,000 250,000 500,000 100,000 500,000 200,000 400,000 400,000 400,000 24,010,000 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 26.8 cents 28.3 cents 20.8 cents 17.5 cents 50.0 cents 36.8 cents 59.2 cents 67.7 cents 68.9 cents 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 30 November 2026 15 January 2027 28 February 2027 27 March 2027 29 May 2026 20 June 2027 13 July 2027 24 July 2027 1 August 2027 8 1 3 7 3 10 3 61 61 5 1 2 1 62 2 1 1 1 1 2 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. 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 May 2023. 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. 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 2 0 2 3 A N N U A L R E P O R T 79 ASX Additional Information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 24, Allendale Square 77 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. 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 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 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 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 Suite 2/1 Alvan Street Subiaco WA 6008 +61 8 9486 9455 contact@enrl.com.au www.enrl.com.au 

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