annual report 20 24 ABN 47 109 815 796 1 2 0 2 4 A N N U A L R E P O R T 1 Table of Contents 01. Letter from the Executive Chairman 2 02. Exploration Review 4 03. Summary of Tenements 21 04. Directors’ Report 24 Auditor’s Independence Declaration 37 Consolidated Financial Statements 38 Consolidated Statement of Profit or Loss and Other Comprehensive Income 39 Consolidated Statement of Financial Position 40 Consolidated Statement of Changes in Equity 41 Consolidated Statement of Cash Flows 42 Notes to the Financial Statements 43 Consolidated Entity Disclosure Statement 70 Directors’ Declaration 71 Independent Audit Report 72 ASX Additional Information 76 Corporate Directory 79 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 Dear Fellow Shareholder, I am pleased to present the 2024 Annual Report for Encounter Resources Ltd (“Encounter”). This year Encounter made great strides in advancing its ambitious projects in emerging new provinces including the Aileron project in the West Arunta, which is emerging as a major, new minerals province in Western Australia. Encounter’s focus is discovering large copper, niobium and rare earths deposits in Australia. These commodities are crucial for the electrification and decarbonisation of global energy infrastructure being targeted in the 21st century. Most of these key commodities require major new mines to be developed to meet supercharged future demand, but supply has been constrained by the lack of discovery success in recent decades. Encounter believes that these major critical mineral discoveries are likely to occur by bringing new exploration methods and new thinking to frontier areas in Australia. This has driven the construction of Encounter’s project portfolio and its approach to exploration. This approach has contributed to an enduring and sustainable business model, underpinned by partnerships with some of the world’s leading miners while also generating discoveries in a large portfolio of 100% owned projects. In recent years BHP, South32, IGO and Newcrest have all funded mineral exploration partnerships with Encounter to find new world-class deposits in underexplored regions of Australia. Within Encounters 100% owned portfolio, the primary focus is the Aileron project in the West Arunta region of WA. Recent exploration success has confirmed the West Arunta as a new, vast and underexplored critical minerals province in Australia. Encounter has discovered multiple, new mineralised carbonatites at Aileron. In 2024, highly enriched, near surface niobium-REE mineralisation was intersected at the Crean, Emily and Green prospects which are located on separate structures, up to 15km apart. Encounter controls a commanding land position in this globally important, new carbonatite-hosted niobium-REE mineral province in the West Arunta. The exploration of this region has only just begun but has returned an exceptionally high discovery rate in limited drilling to date. Encounter will continue to test new targets and drill to extend recent discoveries in 2025 and beyond. Aileron is not just highly prospective for niobium and rare earths mineralisation. It’s a region of completely unexplored Paleoproterozoic geology under shallow cover with considerable copper-gold potential. Age dating has confirmed that Aileron has a comparable aged host sequence and hydrothermal event, as well as similar geochemical signature, to the world-class IOCG copper deposits of South Australia’s Gawler Craton. Favourably, the prospective geology at Aileron is predominantly under thin cover (5-10 metres) and surface geochemical methods and shallow drilling have a good chance of identifying different styles of near surface mineralisation. In addition to the activities at Aileron, Encounter continues to progress a large portfolio of 100% owned copper and critical mineral projects in Australia’s most exciting mineral regions. Exploration completed during the year at the Sandover (NT) project provided further encouragement of high-grade 01. Letter from the Executive Chairman 3 2 0 2 4 A N N U A L R E P O R T Letter from the Executive Chairman 01. copper mineralisation processes. Sandover is located 170km north of Alice Springs and covers a major structural corridor on the southern margin of the Georgina Basin. In the south-east of Sandover there is an historically mapped outcropping red-bed sandstone sequence with multiple narrow but strike extensive grey shale units (reductants) containing copper oxide mineralisation. This horizon has been mapped over 20km. Encounter’s first diamond drill hole at the western end of the basin in late 2023 intersected narrow, high-grade copper mineralisation on the basement unconformity. This result provided further evidence of highly charged copper fluids in the basin with mineralisation identified in both reduced sedimentary horizons within the basin and now also at the basement unconformity. Encounter also holds an extensive portfolio of large-scale copper projects in Western Australian and the Northern Territory which are advancing via farm-in agreements with some of Australia’s largest mining companies. A 2,500m diamond drill program at the Jessica copper project commenced in October 2024, operated by South32 under a farm-in agreement with Encounter. In addition, a program of diamond and aircore drilling commenced in July 2024 at the Yeneena copper project in the Paterson Province of WA under a farm in agreement with IGO. Encounter is delighted to be working with high quality partners and their accomplished exploration teams. With an extensive portfolio of 100% owned and farm-in partnered projects, Encounter remains one of the most Will Robinson Executive Chairman dedicated and active mineral exploration companies listed on the ASX. We are committed to generating significant, long-term value for its shareholders through leading edge exploration for major copper and other 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 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 02. Exploration Review Aileron Critical Minerals Project – West Arunta – WA (100% ENR) • Multiple carbonatite complexes containing extensive, near surface niobium-REE mineralisation: −Green – shallow aircore drilling confirmed a large carbonatite complex that is well mineralised in niobium & REE with numerous holes ending in mineralisation −Crean – continuous carbonatite containing high-grade, near surface niobium-REE mineralisation −Emily – further highly enriched, near surface niobium-REE mineralisation intersected −Hurley – highly anomalous niobium-REE mineralisation intersected over 1km of strike −Joyce – first line of shallow aircore drilling established Joyce as another mineralised carbonatite complex • Drilling completed during the year included: −a 10,000m RC drill program was completed in December 2023, extending niobium-REE mineralisation at Crean, Emily and Hurley −40,000m of aircore/RC drilling completed in 2024 across Green, Emily, Crean, Hurley and Joyce −4 diamond drill holes (2,200m) completed at the Crean-Hurley carbonatite and the Perce and Mawson targets in the eastern part of Aileron (EIS co-funded) Sandover Copper Project – NT (100% ENR) • A diamond drill hole (669m) was completed in November 2023. The hole intersected high-grade copper mineralisation at the contact between the basin sediments and the basement rocks 100% owned projects in Australia’s most exciting mineral provinces 5 2 0 2 4 A N N U A L R E P O R T Exploration Review 02. Jessica and Carrara Copper – Zinc Projects – NT (South32 $15m farm-in) • A diamond drill program (5 holes, 4,402m) was completed at Jessica testing targets identified through seismic reprocessing and gravity surveys. Copper mineralisation in an IOCG setting was intersected at the Zeta prospect • Three diamond drill holes (2,803m) were completed at Carrara during October-November 2023 Yeneena Copper Project – Paterson Province – WA (IGO $15m farm-in) • 5 diamond drill holes (2,901m) and 42 aircore holes (2,823m) were completed, intersecting encouraging copper and base metal anomalism at the BM5 and Lookout Rocks targets in 2023 • A program of aircore and diamond drilling was completed by IGO in the September quarter of 2024 Major copper exploration drive funded through farm-ins with leading miners Exploring for the next copper and critical minerals discoveries 6 E N C O U N T E R R E S O U R C E S L I M I T E D Exploration Review 02. 7 2 0 2 4 A N N U A L R E P O R T Exploration Review 02. The 100% owned Aileron project covers 1,765km2 and is located in the West Arunta region of WA, ~600km west of Alice Springs. The West Arunta is an emerging critical minerals province with significant niobium and REE discoveries made during 2023 and 2024. Encounter completed large regional gravity, magnetic and radiometric surveys at Aileron and has used these baseline datasets to define initial drill targets within the project. Aileron Copper-Niobium-REE Project – West Arunta, WA (100% ENR) 100% owned projects in Australia’s most exciting provinces Figure 1 – High grade niobium intercepts follow structural corridors defined in geophysics (Magnetics TMI 1vd) 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 Exploration Review 02. Figure 2 – Green Drill Plan (Magnetics TMI 1vd) – Large footprint of near surface +2% Nb2O5 intercepts 5,6 Green Reconnaissance aircore drilling completed at Green has mapped a large, laterally mineralised zone containing frequent high-grade niobium intercepts over 2% Nb2O5 (Figure 2). Aircore assay results include 5,6: • 10m @ 4.2% Nb2O5 from 57m part of 38m @ 1.5% Nb2O5 from 51m (EAL489) • 10m @ 4.3% Nb2O5 from 51m part of 16m @ 3.0% Nb2O5 from 47m to EOH (EAL500) Aileron Copper-Niobium-REE Project – West Arunta, WA (100% ENR) (continued) • 18m @ 2.7% Nb2O5 from 44m part of 72m @ 1.0% Nb2O5 from 40m (EAL515) • 10m @ 3.5% Nb2O5 from 47m part of 47m @ 1.0% Nb2O5 from 43m to EOH (EAL534) • 8m @ 2.9% Nb2O5 from 74m part of 22m @ 2.0% Nb2O5 from 62m (EAL362) The near surface mineralisation extends over 4km of strike through the Green carbonatite complex and remains open. 9 2 0 2 4 A N N U A L R E P O R T Exploration Review 02. Crean Target Broad spaced diamond and RC drilling completed in 2023 intersected a multi-kilometre long trend of niobium-REE mineralised carbonatites along the Elephant Island Fault. This trend was first intersected at Hoschke in EAL001, with further drilling intersecting zones of both shallow enriched oxide and primary niobium-REE carbonatite-hosted mineralisation at Crean and Hurley (located >7km east of EAL001). Crean is a coherent body of high-grade, near-surface niobium mineralisation running parallel to the Elephant Island Fault. The Elephant Island Fault corridor is a significant regional scale control for the emplacement of mineralised carbonatites in the West Arunta. Figure 3 – Crean Drill Status Plan - High-grade mineralisation extended to over 1.2km in strike Aircore drilling has determined the high-grade oxide Crean orebody has a strike extent of over 1.2km. Intercepts include 3,4,6: • 18m @ 3.2% Nb2O5 from 76m incl. 2m @ 17.0% Nb2O5 (EAL238) • 52m @ 3.0% Nb2O5 from 81m to EOH incl. 16m @ 6.0% Nb2O5 (EAL256) • 32m @ 2.5% Nb2O5 from 67m to EOH incl. 12m @ 3.3% Nb2O5 (EAL155) • 43m @ 1.6% Nb2O5 from 79m to EOH incl. 24m @ 2.1% Nb2O5 from 81m (EAL449) • 49m @ 1.7% Nb2O5 from 86m to EOH incl. 10m @ 4.9% Nb2O5 from 98m (EAL439) Figure 4 – Crean Target – Aircore drilling cross section A – A’ 10 E N C O U N T E R R E S O U R C E S L I M I T E D Exploration Review 02. Aileron Copper-Niobium-REE Project – West Arunta, WA (100% ENR) (continued) Emily Target Fifteen widely spaced RC holes were completed at the Emily target in October 2023. Emily is centred on a magnetic low on the Endurance Fault, northwest of WA1 Resources’ Luni discovery. In this first phase of RC drilling, 10 of the 15 reconnaissance holes intersected carbonatite. The carbonatite at Emily is variably anomalous in niobium and REE with shallow, high- grade niobium-REE intersected in two adjacent holes 400m apart: • 12m @ 2.3% Nb2O5 & 0.85% TREO from 54m (EAL098) • 32m @ 1.0% Nb2O5 0.25% TREO from 34m (EAL136, 400m east of EAL098) Aircore drilling at Emily in 2024 returned shallow, high-grade niobium-REE mineralisation north and south of previously reported EAL098 4,7: • 16m @ 2.7% Nb2O5 & 1.0% TREO from 50m to EOH (EAL260) • 20m @ 2.7% Nb2O5 & 0.8% TREO from 41m to EOH (EAL225) • 23m @ 4.2% Nb2O5 from 40m to EOH (EAL259) Figure 5 – Emily Target – Aircore/RC drill status plan 11 2 0 2 4 A N N U A L R E P O R T Exploration Review 02. Figure 6 – Emily Target – Aircore/RC drilling cross section B – B’ 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 Exploration Review 02. Figure 7 – Eastern Targets (Perce, Mawson, Wordie) were highlighted in regional Falcon gravity survey Hurley First pass drilling at Hurley in 2023 identified a large, mineralised carbonatite, over 1km in strike 1: • 24m @ 0.93% Nb2O5 & 0.24% TREO from 66m (EAL034) part of 74m @ 0.53% Nb2O5 & 0.20% TREO from 64m • 28m @ 0.68 % Nb2O5 & 0.16% TREO from 210m (EAL115) part of 165m @ 0.36% Nb2O5 & 0.15% TREO from 90m to end of hole Two diamond drill holes were completed in July 2024 at the intersection of the Elephant Island and Stromness Faults (between the Crean and Hurley targets), where numerous aircore holes did not penetrate cover. These diamond holes intersected carbonatite under Permian cover which supports an interpretation that Crean and Hurley are part of a large integrated carbonatite complex. As such the Elephant Island corridor could be host to variably mineralised carbonatite over a considerable strike length. Joyce The first line of aircore drilling at the Joyce target (located 5km east of Green, see Figure 1) successfully established another carbonatite complex that is anomalous in niobium and rare earth elements (REE) via handheld pXRF field analysis.6 Diamond drilling - Perce and Mawson Diamond drilling (EIS co-funded by the WA Government) was completed at the Perce and Mawson targets at the eastern side of the Aileron project where no previous drilling has been completed. These drill holes confirmed that the cover sequence is shallower than expected in the eastern part of Aileron. As such this area can be tested with aircore/RC drilling and future exploration will focus along the regionally significant NNE trending Weddell Fault. Priorities for 2025 • Delineate high-grade, near surface niobium resources, with mineable dimensions, at Green and Crean • Aircore drilling to continue to test targets on major regional faults for mineralised carbonatites • Follow-up RC drilling to rapidly delineate the better mineralised parts of new carbonatite complexes identified Aileron Copper-Niobium-REE Project – West Arunta, WA (100% ENR) (continued) 13 2 0 2 4 A N N U A L R E P O R T Exploration Review 02. Sandover Copper Project – NT (100% ENR) Background Sandover is located 170km north of Alice Springs and covers a major structural corridor and Neoproterozoic depocenter on the southern margin of the Georgina Basin. Field mapping and surface sampling in the south-east of Sandover confirmed the presence of an outcropping red-bed sandstone sequence with multiple narrow but strike extensive grey shale units containing copper oxide mineralisation. Inspection of historical drill holes (drilled in 1968 and 1971) 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. Furthermore, shale units containing the outcropping copper mineralisation at Sandover are considered moderate reductants yet have precipitated considerable copper. This suggests that a highly copper charged fluid has been active at Sandover. The remainder of the Sandover basin is essentially unexplored. Diamond drilling was conducted by CRA in 1994, when two diamond drill holes (DD94MG001 & 002) were completed, 50km apart, along the northern margin of the basin. An NTGS co-funded gravity survey was completed by Encounter at Sandover. The integration of this gravity data with magnetic data defined a key structural location on the western margin of the basin, named the Ginger prospect (“Ginger”). Figure 8 - Sandover - Ginger Prospect drillhole location plan over Magnetic TMI 1VD image 14 E N C O U N T E R R E S O U R C E S L I M I T E D Exploration Review 02. Diamond drill program A targeted stratigraphic diamond drill hole was completed at Ginger in late 2023 to test the faulted western margin of the Sandover basin where an interpreted NE-SW orientated cross cutting lineament intersects the major NW-SE trending basin margin structure. A sharp lower contact of the Sandover Basin sedimentary sequence was intersected at 634.3m. High grade copper (2.1% Cu) was returned between 634.3-634.6m where hydrothermal sulphide (chalcopyrite) alteration was present in altered granite gneiss. Copper anomalism was also present in Neoproterozoic sediments above the unconformity where 665ppm Cu was returned over 0.5m between 633.8-634.3m.8 The unconformity where copper mineralisation was intersected in ESA001 is interpreted to be flat, suggesting copper charged mineralised fluids moved horizontally to this position. This basement unconformity is laterally extensive and opens up potential for a large scale sediment-hosted copper system at Sandover. A detailed (100m spaced) magnetic survey was completed at Sandover in June 2024 and resolved a broad area of magnetic anomalism 2.5km west of ESA001, proximal to basin margin structures. A diamond drill hole was completed in August 2024 to test the magnetic feature and basal unconformity closer to the interpreted feeder fault with results pending. Sandover Copper Project – NT (100% ENR) (continued) 15 2 0 2 4 A N N U A L R E P O R T Exploration Review 02. 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). 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 9). Drilling at Dune has intersected multiple, stacked, copper- gold reefs within a thick prospective package of interbedded Figure 9 – Dune prospect plan showing copper-gold mineralisation extending over 1km of strike 9 Lamil Copper-Gold Project - Paterson Province – WA (100% ENR) 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. 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. 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. Encounter controls four projects (Elliott, Dunmarra, Maryfield and Broadmere) centred on key stuctural locations on the margins of the Beetaloo Basin which is a sub basin of the Greater McArthur Superbasin. The Greater McArthur Superbasin hosts numerous sediment- hosted base metal deposits including the giant McArthur River zinc-lead mine. Encounter’s projects encompass key conceptual criteria for the formation of sediment-hosted base metal deposits with the target sequences undercover and untested. New precompetitive datasets are providing crucial early insights into areas prospective for sedimentary hosted copper deposits. Northern Territory Sediment Hosted Copper The Maryfield project is located at the intersection of major structures in the north-west of the Beetaloo Basin. Historical RC drilling, completed by Normandy in 1999, intersected wide zones of copper anomalism (to end of hole) in black shale. In addition, evidence of fluid flow, strong silica and accompanying hematite alteration, have been mapped along the Strangways Fault. Historical diamond drill holes from the Maryfield project area have been reviewed and relogged to confirm the stratigraphic context for the copper anomalism. A 1x1km gravity survey was completed at Maryfield in the September 2024 to refine targets for drill testing. Figures 10 – Encounter copper and lithium projects in the Northern Territory – Project Location Plan 17 2 0 2 4 A N N U A L R E P O R T 17 2 0 2 4 A N N U A L R E P O R T Exploration Review 02. Carrara Copper-Zinc Project – NT (100% ENR) 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 Century Zinc Mine is located on the eastern margin of the Carrara Sub-basin, and there is a clear correlation of the Century Zinc Mine stratigraphy across the basin in the Geoscience Australia seismic data and from drill hole (NDI Carrara-1) that was completed as part of the National Drilling Initiative in 2020. Three diamond drill holes (2,803m) were completed at Carrara by South32 during October-November 2023. This drilling intersected prospective geology which contains encouraging base metal anomalism. In September 2024, South32 withdrew from the Carrara Farm-in Agreement and Encounter regained 100% control of the Carrara copper-zinc project. Encounter is evaluating the implications of the initial drilling and the potential for further drilling in this prospective basin. 18 E N C O U N T E R R E S O U R C E S L I M I T E D Exploration Review 02. Jessica Copper Project – NT (South32 $15m Farm-in) Jessica covers ~8.700km2 along key structural corridors east of Tennant Creek and is prospective for sediment-hosted copper and IOCG style deposits (Figure 11). 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 identified a series of targets for drilling 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 12 & 13). In addition, there is a discrete seismic reflector immediately underlying Zeta.11 Two diamond drill holes were completed at the Zeta target (Z23DD001 & Z23DD002) in 2023. These holes contained zones of hematite alteration and quartz carbonate veining containing chalcopyrite and bornite.10 A 2,500m (three hole) diamond drill program is scheduled to commence at Jessica in October 2024. Drilling is planned to test targets identified through seismic reprocessing and interpretations from 2023 diamond drilling. A deep seeking MIMDAS geophysical survey at Zeta is scheduled to be completed in May 2025. Figures 11 – Jessica and Carrara project location plan over Bouguer gravity Major copper exploration drive funded through farm-ins 19 2 0 2 4 A N N U A L R E P O R T 19 2 0 2 4 A N N U A L R E P O R T Exploration Review 02. Yeneena Copper Project – Paterson Province WA (IGO $15m Farm-in) Yeneena comprises a major land position covering >1,450km2 in the highly prospective Paterson Province, targeting copper- cobalt mineralisation. IGO can sole fund $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. Nine aircore holes were completed west of the historical drilling at BM5 in September 2023 as part of a 16 hole regional reconnaissance aircore drill program targeting the upflow source of an identified hydrochemical anomaly. 2023 aircore drilling returned anomalous copper, silver and base metal values in 400m spaced holes to the west of a major regional fault. The anomalous assays occur within an iron-manganese horizon above a carbonate unit. Highly anomalous copper assays occur at the weathering interface and are interpreted to be hydromorphic dispersion up the fault from nearby primary copper mineralisation. Results feature copper, silver and palladium anomalism including11: • 15m @ 0.17% Cu and 21.8g/t Ag from 69m to EOH (23PTAC0109) −including 10m @ 0.23% Cu from 73m • 9m @ 432ppm Cu and 4.7g/t Ag from 65m (23PTAC0108) −including 7m @ 24.7ppb Pd from 67m 13 A program of aircore and diamond drilling was completed by IGO in the September quarter of 2024, with results expected in the December 2024 quarter. Figure 12 - Cross section and drilling target at BM5 1 ASX announcement 29 January 2024 2 ASX announcement 30 January 2024 3 ASX announcement 24 June 2024 4 ASX announcement 8 July 2024 5 ASX announcement 16 July 2024 6 ASX announcement 16 September 2024 7 ASX announcement 14 October 2024 8 ASX announcement 17 May 2024 9 ASX announcement 28 December 2022 10 ASX announcement 10 April 2024 11 ASX announcement 5 March 2024 20 E N C O U N T E R R E S O U R C E S L I M I T E D Exploration Review 02. 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. 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 The Company requires financial resources in order to carry out its exploration activities. 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. 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. 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. 21 2 0 2 4 A N N U A L R E P O R T 03. Summary of Tenements Lease Lease Name Project Name Area km2 Managing Company Encounter Interest E80/5169 Aileron West Arunta 187 Encounter Aileron Pty Ltd 100% E80/5469 Aileron West Arunta 533 Encounter Aileron Pty Ltd 100% E80/5470 Aileron West Arunta 612 Encounter Aileron Pty Ltd 100% E80/5522 Aileron West Arunta 428 Encounter Aileron Pty Ltd 100% ELA80/5935 Aileron North West Arunta 636 Encounter Aileron Pty Ltd 100% ELA80/5999 Aileron North West Arunta 637 Encounter Aileron Pty Ltd 100% ELA80/6000 Aileron North West Arunta 636 Encounter Aileron Pty Ltd 100% ELA80/6001 Aileron North West Arunta 636 Encounter Aileron Pty Ltd 100% E45/4613 Lamil Paterson 61 Encounter Paterson Pty Ltd 100% E30/517 Rani Yilgarn 209 Baudin Resources Pty Ltd 100% E30/527 Rani Yilgarn 6 Baudin Resources Pty Ltd 100% ELA09/2948 Kalbarri Gascoyne 616 Encounter Gascoyne Pty Ltd 100% ELA09/2949 Denham Gascoyne 615 Encounter Gascoyne Pty Ltd 100% ELA09/2950 Carnarvon Gascoyne 617 Encounter Gascoyne Pty Ltd 100% ELA69/4234 Ward South Officer 625 Faure Resources Pty Ltd 100% ELA69/4235 Ward South Officer 624 Faure Resources Pty Ltd 100% ELA69/4236 Ward South Officer 374 Faure Resources Pty Ltd 100% ELA69/4237 Ward South Officer 623 Faure Resources Pty Ltd 100% EL32156 Elliott Northern Territory 502.38 Baudin Resources Pty Ltd 100% EL32157 Elliott Northern Territory 336.22 Baudin Resources Pty Ltd 100% EL32158 Elliott Northern Territory 741.42 Baudin Resources Pty Ltd 100% EL32159 Elliott Northern Territory 360.2 Baudin Resources Pty Ltd 100% EL32329 Elliott Northern Territory 136.99 Baudin Resources Pty Ltd 100% 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 Summary of Tenements 03. Lease Lease Name Project Name Area km2 Managing Company Encounter Interest EL32374 Sandover Northern Territory 795.4 Baudin Resources Pty Ltd 100% EL32421 Sandover Northern Territory 792.67 Baudin Resources Pty Ltd 100% EL32694 Sandover Northern Territory 792.71 Baudin Resources Pty Ltd 100% EL32695 Sandover Northern Territory 787.39 Baudin Resources Pty Ltd 100% EL32696 Sandover Northern Territory 763.6 Baudin Resources Pty Ltd 100% EL33060 Sandover Northern Territory 740.11 Baudin Resources Pty Ltd 100% EL33065 Sandover Northern Territory 665.33 Baudin Resources Pty Ltd 100% EL32721 Broadmere Northern Territory 816.73 Baudin Resources Pty Ltd 100% EL32723 Dunmarra Northern Territory 823.05 Baudin Resources Pty Ltd 100% EL32727 Maryfield Northern Territory 795.65 Baudin Resources Pty Ltd 100% EL32728 Maryfield Northern Territory 826.95 Baudin Resources Pty Ltd 100% EL33331 Jessica North Northern Territory 802.06 Baudin Resources Pty Ltd 100% EL33626 Baines Northern Territory 820.03 Baudin Resources Pty Ltd 100% EL33627 Baines Northern Territory 821.9 Baudin Resources Pty Ltd 100% EL32701 Carrara Northern Territory 801.69 Baudin Resources Pty Ltd 100% EL32476 Carrara Northern Territory 805.42 Baudin Resources Pty Ltd 100% EL32477 Carrara Northern Territory 805.21 Baudin Resources Pty Ltd 100% EL32813 Carrara Northern Territory 22.72 Baudin Resources Pty Ltd 100% EL33688 Carrara West Northern Territory 357.90 Baudin Resources Pty Ltd 100% ELA32937 Broadmere Northern Territory 825.11 Baudin Resources Pty Ltd 100% ELA32938 Broadmere Northern Territory 744.04 Baudin Resources Pty Ltd 100% ELA33616 Broadmere Northern Territory 821.83 Baudin Resources Pty Ltd 100% ELA33617 Broadmere Northern Territory 389.43 Baudin Resources Pty Ltd 100% ELA33720 Broadmere South Northern Territory 824.26 Baudin Resources Pty Ltd 100% ELA33915 Broadmere Northern Territory 376.16 Baudin Resources Pty Ltd 100% ELA33048 Sandover Northern Territory 789.2 Baudin Resources Pty Ltd 100% ELA33942 Sandover Northern Territory 185.96 Baudin Resources Pty Ltd 100% ELA33943 Sandover Northern Territory 483.29 Baudin Resources Pty Ltd 100% ELA33396 Aurora Northern Territory 797.4 Encounter Aileron Pty Ltd 100% ELA33397 Aurora Northern Territory 796.53 Encounter Aileron Pty Ltd 100% ELA33398 Aurora Northern Territory 797.88 Encounter Aileron Pty Ltd 100% ELA33399 Aurora Northern Territory 797.58 Encounter Aileron Pty Ltd 100% ELA33561 Aurora Northern Territory 776.28 Encounter Aileron Pty Ltd 100% ELA33562 Aurora Northern Territory 798.12 Encounter Aileron Pty Ltd 100% ELA33630 Baines Northern Territory 821.14 Baudin Resources Pty Ltd 100% ELA33631 Baines Northern Territory 820.83 Baudin Resources Pty Ltd 100% ELA33632 Baines Northern Territory 782.07 Baudin Resources Pty Ltd 100% ELA33849 Baines Northern Territory 817.68 Baudin Resources Pty Ltd 100% ELA33689 Carrara West Northern Territory 805.46 Baudin Resources Pty Ltd 100% ELA33867 Dunmarra Northern Territory 729.49 Baudin Resources Pty Ltd 100% ELA33868 Jessica North Northern Territory 577.52 Baudin Resources Pty Ltd 100% 23 2 0 2 4 A N N U A L R E P O R T Summary of Tenements 03. Lease Lease Name Project Name Area km2 Managing Company Encounter Interest E45/2500 Yeneena Paterson 107 IGO Limited 100% IGO earning up to 70% E45/2502 Yeneena Paterson 117 IGO Limited 100% IGO earning up to 70% E45/2657 Yeneena Paterson 156 IGO Limited 100% IGO earning up to 70% E45/2658 Yeneena Paterson 95 IGO Limited 100% IGO earning up to 70% E45/3768 Yeneena Paterson 149 IGO Limited 100% IGO earning up to 70% E45/2805 Yeneena Paterson 86 IGO Limited 100% IGO earning up to 70% E45/2806 Yeneena Paterson 35 IGO Limited 100% IGO earning up to 70% E45/5379 Yeneena Paterson 235.3 IGO Limited 0% * Option to Purchase E45/5333 Yeneena Paterson 127 IGO Limited 100% IGO earning up to 70% E45/5334 Yeneena Paterson 102 IGO Limited 100% IGO earning up to 70% E45/5686 Yeneena Paterson 108 IGO Limited 100% IGO earning up to 70% E45/4861 Yeneena Paterson 131 IGO Limited 100% IGO earning up to 70% EL32273 Jessica Northern Territory 750.46 South32 100% South32 earning up to 75% EL32317 Jessica Northern Territory 738.6 South32 100% South32 earning up to 75% EL32338 Jessica Northern Territory 783.5 South32 100% South32 earning up to 75% EL32339 Jessica Northern Territory 791.42 South32 100% South32 earning up to 75% EL32386 Jessica Northern Territory 814.55 South32 100% South32 earning up to 75% EL32387 Jessica Northern Territory 814.94 South32 100% South32 earning up to 75% EL32388 Jessica Northern Territory 813.76 South32 100% South32 earning up to 75% EL32493 Jessica Northern Territory 811.55 South32 100% South32 earning up to 75% EL33742 Jessica Northern Territory 810.71 South32 100% South32 earning up to 75% EL33332 Jessica Northern Territory 812.77 South32 100% South32 earning up to 75% EL33334 Jessica Northern Territory 814.13 South32 100% South32 earning up to 75% * Shumwari Option IGO JV Summary of tenements as of 30th September 2024. 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 Directors’ Report 04. 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 2024. Directors The names and details of the Directors of Encounter Resources Limited during the financial year and until the date of this report are: Will Robinson – B.Comm, MAusIMM Appointed Managing Director on 30 June 2004 and Executive Chairman from 24 November 2023 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 a former president of the resources industry advocacy body, the Association of Mining and Exploration Companies (AMEC). He was previously a member of the Strategic Advisory Board at the Centre for Exploration Targeting University of Western Australia and the Australian Federal Government’s Resources 2030 Taskforce. Mr Robinson is Non-Executive Chairman of Hamelin Gold Limited (ASX:HMG) and a Non-Executive Director of unlisted Hampton Hill Mining NL. 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 was previously Non-Executive Director of Mincor Resources NL (resigned 15 January 2024). 25 2 0 2 4 A N N U A L R E P O R T Directors’ Report 04. Directors (continued) 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 sulphide deposits but has worked across a diverse range of commodities. His work led to the discovery of the West Musgrave nickel sulphide 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. Dr Hronsky is currently a Non-Executive Director of Paladin Energy Limited (ASX:PDN), Caspin Resources Limited (ASX:CPN), Stickland Metals Limited (ASX:STK) and is also General Partner - Global Targeting and Research at Ibaera Capital. 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 Director of Applyflow Limited (ASX:AFW) (resigned 31 July 2023) and Black Cat Syndicate Limited (ASX:BC8) (resigned 30 November 2023) and is a non-executive director of Dreadnought Resources Limited (ASX:DRE) and Western Australian gold focused company 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). Former Directors Paul Chapman – B.Comm, ACA, Grad. Dip. Tax, MAICD, MAusIMM Non-Executive Chairman (appointed 7 October 2005, retired 24 November 2023) 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 Principal of an advisory firm, Automic Group, 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 Automic Group, which specialises in the provision of company secretarial and accounting services to ASX listed entities in the mining and exploration industry. 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 Directors’ Report 04. Directors’ Interests As at the date of this report the Directors’ interests in shares and unlisted options of the Company are as follows: Director Directors’ Interests in Ordinary Shares Directors’ Interests in Unlisted Options W Robinson 27,985,889 2,010,000 P Bewick 11,710,303 1,050,000 J Hronsky 1,351,335 820,000 P Crutchfield 8,059,391 2,530,000 Included in the Directors’ Interests in Unlisted Options are 6,410,000 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, including the Company’s Aileron Project in the West Arunta, Western Australia, and the Sandover copper project in 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 2024, and the number of meetings attended by each Director are as follows: Director Board of Directors’ Meetings Audit Committee Meetings Remuneration and Nomination Committee Meetings Held Attended Held Attended Held Attended W Robinson 7 7 - - - - P Bewick 7 7 1 1 1 1 J Hronsky 7 7 2 2 1 1 P Crutchfield 7 7 2 2 1 1 P Chapman1 3 3 1 1 - - 1 Retired 24 November 2023 Results of Operations The consolidated net loss after income tax for the financial year was $4,331,728 (2023: $1,429,900). Included in the consolidated loss for the current year is a write-off of deferred and uncapitalised exploration and joint venture expenditure totalling $3,024,548 (2023: $236,762). 27 2 0 2 4 A N N U A L R E P O R T Directors’ Report 04. 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 project in the West Arunta in WA; • A series of camp scale copper opportunities in the Northern Territory and Western Australia. −This includes 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 in the NT ; −The Yeneena copper project in the Paterson Province in WA which is operated and funded by IGO Limited (“IGO”, ASX:IGO)under an earn-in agreement; and −a large portfolio of 100% owned projects that are prospective for copper and critical minerals. Financial Position At the end of the financial year the Group had $14,050,537 (2023: $11,817,728) in cash and term deposits. Capitalised mineral exploration and evaluation expenditure is $22,853,601 (2023: $17,783,090). During the financial year the Company raised capital of $10,500,000 million (before costs) pursuant to a placement of ~47.7 million shares at $0.22 per share and a further $1,145,800 on the issue of shares pursuant to the exercise of ~7.6 million options at various prices. Matters Subsequent to the End of the Financial Year Other than as already stated in this report in relation to the issue and exercise of options, 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. 28 E N C O U N T E R R E S O U R C E S L I M I T E D Directors’ Report 04. Options over Unissued Capital Unlisted Options As at the date of this report 17,170,000 unissued ordinary shares of the Company are under option as follows: Number of Options Granted Exercise Price Expiry Date 2,450,000 22.2 cents 26 November 2024 800,000 21.2 cents 30 April 2025 3,630,000 22.4 cents 28 November 2025 1,200,000 19.0 cents 28 June 2026 500,000 20.0 cents 29 September 2025 500,000 30.0 cents 29 September 2025 3,980,000 26.8 cents 30 November 2026 250,000 28.3 cents 15 January 2027 150,000 20.8 cents 28 February 2027 400,000 50.0 cents 29 May 2026 200,000 36.8 cents 20 June 2027 400,000 59.2 cents 13 July 2027 400,000 67.7 cents 24 July 2027 400,000 68.9 cents 1 August 2027 660,000 55.6 cents 23 November 2027 1,000,000 41.1 cents 17 December 2027 150,000 35.5 cents 25 February 2028 100,000 65.0 cents 10 September 2028 All options on issue at the date of this report are vested and exercisable. No options on issue are listed. During the financial year: • 3,010,000 options (2023: 7,530,000) were granted over unissued shares of the Company; • 175,000 options (2023: nil) were cancelled on the cessation of employment; • nil options (2023: nil) were cancelled on expiry of the exercise period; and • 7,575,000 (2023: 2,900,000) options were exercised. Included in options exercised is an amount of nil options foregone in consideration given on exercise (2023: 424,379). Since the end of the financial year: • 100,000 options have been issued by the Company to employees pursuant to the Company’s Employee Option Plan; • 1,000,000 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. 29 2 0 2 4 A N N U A L R E P O R T Directors’ Report 04. Issued Capital Number of Shares on Issue 2024 2023 Ordinary fully paid shares 450,828,054 395,525,781 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 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 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. During the year the Company formed a Remuneration and Nomination Committee consisting of the Non-Executive Directors to consider remuneration matters, with no member deliberating or considering such matter in respect of their own remuneration. The Remuneration and Nomination Committee 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. 30 E N C O U N T E R R E S O U R C E S L I M I T E D Directors’ Report 04. 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 and Option Plan, which was last approved by shareholders at the Annual General Meeting held on 24 November 2023. The Remuneration and Nomination Committee, 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. 31 2 0 2 4 A N N U A L R E P O R T Directors’ Report 04. Remuneration Report (Audited) (continued) 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 $nil (2023: $14,490), for geological consulting services from Western Mining Services, an entity associated with Dr Jon Hronsky. In addition, the Company incurred costs of $nil (2023: $3,900) with Western Mining Services in relation to the attendance of training courses by employees of the Company. 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 Executive Chairman, is effective from 24 November 2023. Mr Robinson will receive a base salary of $350,000 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 assessed annually by the Remuneration and Nomination Committee which is comprised of 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 and Option Plan and other long term incentive plans adopted by the Board. Short Term Incentive Payments Each year, the Remuneration and Nomination Committee will 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: 2024 2023 2022 2021 2020 Profit/(Loss) for the year attributable to shareholders $(4,331,728) $(1,429,900) $4,428,194 $(1,533,150) $(1,126,275) Closing share price at 30 June $0.74 $0.455 $0.12 $0.155 $0.15 32 E N C O U N T E R R E S O U R C E S L I M I T E D Directors’ Report 04. 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 2024 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 Non-Executive Chairman (retired 24 November 2023) Mr Will Robinson Executive Chairman (Managing Director until 24 November 2023) Mr Peter Bewick Non-Executive Director Dr Jon Hronsky 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 2024 Short Term Post Employment Other Long Term Total Value of Options as Proportion of Remuneration Base Salary Short Term Incentive Superannuation Contributions Value of Options $ $ $ $ $ Paul Chapman1 - - - - - - Will Robinson2 304,825 91,075 33,531 69,840 499,271 14.0% Peter Bewick 50,000 - 5,500 27,937 83,437 33.5% Jon Hronsky 50,000 - 5,500 27,937 83,437 33.5% Philip Crutchfield 29,167 - 3,208 27,937 60,312 46.3% Total 433,992 91,075 47,739 153,651 726,457 1 Retired from the Board effective 24 November 2023. Mr Chapman received no remuneration during the period. 2 Appointed Executive Chairman effective 24 November 2023, previously Managing Director. 30 June 2023 Short Term Post Employment Other Long Term Base Salary Short Term Incentive Superannuation Contributions Value of Options Total Value of Options as Proportion of Remuneration $ $ $ $ $ Paul Chapman - - - 110,6201 110,620 100.0% Will Robinson 270,000 71,550 28,350 78,623 448,523 17.5% Peter Bewick 50,000 64,751 12,049 31,997 158,797 20.1% Jon Hronsky 50,000 - 5,250 31,997 87,247 36.7% Philip Crutchfield - - - 110,6201 110,620 100.0% Total 370,000 136,301 45,649 363,857 915,807 1 Value of options granted includes an amount of $78,623 granted in the 2023 financial year in respect of remuneration for the period 1 December 2022 to 30 November 2023. 33 2 0 2 4 A N N U A L R E P O R T Directors’ Report 04. Remuneration Report (Audited) (continued) Details of Performance Related Remuneration During the year ended 30 June 2024 total short-term incentive bonuses (STI), measured for the periods 1 January 2022 to 31 December 2022 and 1 January 2023 to 31 December 2023, were awarded to the Company’s Executive Directors for the respective periods as follows: Short term incentive payments - cash bonuses paid 2023/24 financial year 2022/23 financial year Will Robinson $91,0751 $71,5501 Peter Bewick2 Nil $71,5501 1 STI bonus stated inclusive of SGC contributions where applicable. 2 Mr Bewick ceased as an executive director in 2021. 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 2022 and 31 December 2023 were as follows (objectives apply for 2022 and 2023 unless otherwise stated): 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; and • Exploration Success (2022 STI) / Discovery Success (2023 STI). Performance against 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% 0 >10% < 20% 10% >20% < 40% 20% >40% <60% 30% >60% <80% 40% >80% 50% 34 E N C O U N T E R R E S O U R C E S L I M I T E D Directors’ Report 04. Remuneration Report (Audited) (continued) The total STI bonuses awarded and paid during the financial year ended 30 June 2024, has been determined against the abovementioned performance objectives for the Executive Chairman (formerly Managing Director) as follows: STI Period Ended Maximum potential STI bonus PO1 maximum PO1 achieved PO2 maximum PO2 achieved Total STI bonus achieved Total STI bonus achieved ($) % % % % ($) ($) 31 Dec 2022 $67,500 50% 45% 50% 10% 55% $37,125 31 Dec 2023 $69,167 50% 28% 50% 50% 78% $53,950 $91,075 The above STI bonuses awarded were paid to the Executive Chairman during the year as follows: Cash (pre-tax) SGC contribution Total STI Bonus ($) Will Robinson $91,075 Nil $91,075 Equity instrument disclosures relating to key management personnel Options Granted as Remuneration During the financial year ended 30 June 2024 660,000 options (2023: 3,980,000) were granted to Directors or Key Management Personnel of the Company, as follows: Incentive options: Will Robinson 300,000 Peter Bewick 120,000 Jon Hronsky 120,000 Philip Crutchfield 120,000 The fair value of options issued as remuneration is allocated to the relevant vesting period of the options. Where options are issued fully vested the fair value is recognised in the financial period in which the securities are issued. Options are provided at no cost to the recipients. Exercise of Options Granted as Remuneration During the year 5,900,000 (2023: 2,075,621) 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 Number of shares issued on exercise of options Option details Paul Chapman1 1,000,000 Options exercisable at $0.162 expiring 31 October 2023 Will Robinson 700,000 Options exercisable at $0.162 expiring 31 October 2023 Peter Bewick 1,500,000 Options exercisable at $0.082 expiring 30 November 2023 700,000 Options exercisable at $0.162 expiring 31 October 2023 Jon Hronsky 300,000 Options exercisable at $0.162 expiring 31 October 2023 Philip Crutchfield 1,700,000 Options exercisable at $0.162 expiring 31 October 2023 1 Retired as director 24 November 2023. 35 2 0 2 4 A N N U A L R E P O R T Directors’ Report 04. Remuneration Report (Audited) (continued) Option holdings Key Management Personnel have the following interests in unlisted options over unissued shares of the Company: 2024 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 Paul Chapman 3,410,000 - (1,000,000) 2,410,0002 2,410,0002 Will Robinson 2,410,000 300,000 (700,000) 2,010,000 2,010,000 Peter Bewick 3,130,000 120,000 (2,200,000) 1,050,000 1,050,000 Jon Hronsky 1,000,000 120,000 (300,000) 820,000 820,000 Philip Crutchfield 4,110,000 120,000 (1,700,000) 2,530,000 2,530,000 1 Options exercised during the financial year. 2 Balance on retiring as director on 24 November 2023. 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. 2024 Balance at start of the year Received during the year on exercise of options Other changes during the year Balance at the end of the year Paul Chapman 10,782,150 1,000,000 - 11,782,1501 Will Robinson 27,285,889 700,000 - 27,985,889 Peter Bewick 9,510,303 2,200,000 - 11,710,303 Jon Hronsky 1,051,335 300,000 - 1,351,335 Philip Crutchfield 4,559,391 1,700,000 1,800,000 8,059,391 1 Balance on retiring as director on 24 November 2023. 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 $nil (2023: $14,490), 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 36 E N C O U N T E R R E S O U R C E S L I M I T E D Directors’ Report 04. 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 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 other than as stated below. Total remuneration paid to auditors during the financial year: 2024 2023 $ $ Audit and review of the Company’s financial statements 37,600 37,000 Audit of tenement expenditure reports 2,650 - 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 19th day of September 2024. W Robinson Executive Chairman 37 2 0 2 4 A N N U A L R E P O R T Auditor’s Independence Declaration Auditor’s Independence Declaration Crowe Perth ABN 96 844 819 235 Level 24, Allendale Square 77 St Georges Terrace Perth WA 6000 Main +61 (08) 9481 1448 Fax +61 (08) 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 to 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. © 2024 Findex (Aust) Pty Ltd Auditor’s Independence Declaration Under Section 307c of the Corporations Act 2001 to the Directors of Encounter Resources Limited As lead engagement partner, I declare that, to the best of my knowledge and belief, during the year ended 30 June 2024 there have been: (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) no contraventions of any applicable code of professional conduct in relation to the audit. Yours sincerely, Crowe Perth Suwarti Asmono Partner 19 September 2024 Perth 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 Consolidated Financial Statements For the Year Ended 30 June 2024 39 2 0 2 4 A N N U A L R E P O R T Consolidated Financial Statements Consolidated Note 2024 2023 $ $ Interest income 444,421 96,565 Other income 5 173,655 164,125 Total income 618,076 260,690 Employee expenses (2,180,206) (1,338,186) Employee expenses recharged to exploration 1,672,046 981,127 Equity based remuneration expense 20 (670,243) (460,745) (Loss)/Gain in fair value of financial assets 6,11 - (59,519) Depreciation and amortisation expense 6 (74,424) (73,766) Corporate expenses (164,003) (112,981) Administration and other expenses (508,426) (389,758) Exploration costs written off and expensed 6,14 (3,024,548) (236,762) Profit/(Loss) before income tax (4,331,728) (1,429,900) Income tax benefit 7 - - Profit/(Loss) after tax 21 (4,331,728) (1,429,900) Other comprehensive income - - Total comprehensive income/(loss) for the year (4,331,728) (1,429,900) Earnings per share for loss attributable to the ordinary equity holders of the Company: Basic earnings/(loss) per share 31 (1.1) (0.4) Diluted earnings/(loss) per share 31 (1.1) (0.4) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. Consolidated Statement of Profit or Loss and Other Comprehensive Income For the financial year ended 30 June 2024 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 Consolidated Financial Statements Note Consolidated 2024 2023 $ $ Current assets Cash and cash equivalents 8 14,050,537 11,817,728 Trade and other receivables 9(a) 111,355 94,472 Other current assets 9(b) - 181,846 Total current assets 14,161,892 12,094,046 Non-current assets Security bonds and deposits 8(c) 137,466 75,652 Financial assets 11 59,342 59,342 Property, plant and equipment 12 520,475 92,400 Capitalised mineral exploration and evaluation expenditure 14 22,853,601 17,783,090 Right of use assets - leases 13 201,605 43,621 Total non-current assets 23,772,489 18,054,105 Total assets 37,934,381 30,148,151 Current liabilities Trade and other payables 16 1,098,630 987,801 Employee benefits 17 379,964 267,668 Lease liabilities 18 68,197 49,059 Total current liabilities 1,546,791 1,304,528 Total non-current liabilities Lease liabilities 18 137,700 - Total non-current liabilities 137,700 - Total liabilities 1,684,491 1,304,528 Net assets 36,249,890 28,843,623 Equity Issued capital 19 66,693,913 55,158,968 Accumulated losses 21 (32,421,829) (28,103,156) Equity remuneration reserve 21 1,977,806 1,787,811 Total equity 36,249,890 28,843,623 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. Consolidated Statement of Financial Position As at 30 June 2024 41 2 0 2 4 A N N U A L R E P O R T Consolidated Financial Statements 2023 Consolidated Issued capital Accumulated \losses Equity remuneration reserve Total $ $ $ $ Balance at the start of the financial year 41,666,888 (26,698,304) 1,224,339 16,192,923 Comprehensive loss for the financial year - (1,429,900) - (1,429,900) Movement in equity remuneration reserve in respect of options vested - - 618,452 618,452 Transfer on exercise and/or cancellation of vested options 29,932 25,048 (54,980) - Transactions with equity holders in their capacity as equity holders: Shares issued (net of costs) 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 2024 Consolidated Issued capital Accumulated losses Equity remuneration reserve Total $ $ $ $ Balance at the start of the financial year 55,158,968 (28,103,156) 1,787,811 28,843,623 Comprehensive loss for the financial year - (4,331,728) - (4,331,728) Movement in equity remuneration reserve in respect of options vested - - 670,243 670,243 Transfer on exercise and/or cancellation of vested options 467,193 13,055 (480,248) - Transactions with equity holders in their capacity as equity holders: Shares issued (net of costs) 11,067,752 - - 11,067,752 Balance at the end of the financial year 66,693,913 (32,421,829) 1,977,806 36,249,890 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Consolidated Statement of Changes in Equity For the financial year ended 30 June 2024 42 E N C O U N T E R R E S O U R C E S L I M I T E D Consolidated Financial Statements Note Consolidated 2024 2023 $ $ Cash flows from operating activities Receipts from tenement option fee income 35,000 30,000 Receipts from other income 116,766 139,714 Receipts from R&D tax concession 12,345 - Interest received 444,421 96,608 Payments to suppliers and employees (1,141,911) (837,764) Net cash used in operating activities 30 (533,379) (571,442) Cash flows from investing activities Contributions received from project generation alliance and farm-in partners - 9,844 Payments for security deposits (61,814) - Payments for exploration and evaluation (7,977,898) (3,607,292) State Government funded drilling rebate 323,999 295,934 R&D tax concession for exploration activities - 66,118 Proceeds on sale of property, plant and equipment 15,000 - Payments for plant and equipment (521,912) (86,411) Net cash used in investing activities (8,222,625) (3,321,807) Cash flows from financing activities Proceeds from the issue of shares 11,645,800 14,398,800 Payments for share issue costs (578,048) (778,945) Repayment of lease liabilities (78,939) (74,823) Net cash from financing activities 10,988,813 13,545,032 Net (decrease)/increase in cash held 2,232,809 9,651,783 Cash at the beginning of the financial year 11,817,728 2,165,945 Cash at the end of the financial year 8(a) 14,050,537 11,817,728 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Consolidated Statement of Cash Flows For the financial year ended 30 June 2024 43 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements Notes to the Financial Statements For the financial year ended 30 June 2024 Note 1 Summary of material accounting policy information 44 Note 2 Financial risk management 48 Note 3 Critical accounting estimates and judgements 49 Note 4 Segment information 49 Note 5 Other income 50 Note 6 Loss for the year 50 Note 7 Income tax 51 Note 8 Current assets – Cash and cash equivalents 52 Note 9 Current assets – Receivables 53 Note 11 Financial assets – Investments Designated at Fair Value through Profit or Loss 55 Note 12 Non-current assets – Property, plant and equipment 55 Note 13 Non-current assets – Right of use assets - leases 56 Note 14 Non-current assets – Capitalised mineral exploration and evaluation expenditure 56 Note 15 Interest in joint ventures and farm-in arrangements 57 Note 16 Current liabilities – Trade and other payables 58 Note 17 Current liabilities - Employee benefits 58 Note 18 Current liabilities – Lease liabilities 58 Note 19 Issued capital 59 Note 20 Options and share based payments 60 Note 21 Reserves and accumulated losses 62 Note 22 Financial instruments 63 Note 23 Dividends 64 Note 24 Key management personnel disclosures 65 Note 25 Remuneration of auditors 65 Note 26 Contingencies 66 Note 27 Commitments 67 Note 28 Related party transactions 67 Note 29 Events occurring after the balance sheet date 67 Note 30 Reconciliation of loss after tax to net cash inflow from operating activities 68 Note 31 Earnings per share 68 Note 32 Parent entity information 69 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 Notes to the Financial Statements Note 1 Summary of material accounting policy information 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 19 September 2024. 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. Reporting basis and conventions These financial statements have been prepared under the historical cost convention, and on an accrual basis. 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. (c) 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. 45 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements Note 1 Summary of material accounting policy information (continued) 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. (d) 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. (e) 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. (f) 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 either three months or less, or that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value. (g) 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. (h) 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 33% Office equipment 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. 46 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 1 Summary of material accounting policy information (continued) (i) Mineral exploration and evaluation expenditure Mineral exploration and evaluation expenditure is written off as incurred or accumulated in respect of each identifiable area of interest and capitalised. These costs are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which: • such costs are expected to be recouped through the successful development and exploitation of the area of interest, or alternatively by its sale; or • exploration and/or evaluation activities in the area have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active or significant operations in, or in relation to, the area of interest are continuing. In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of reduced value, accumulated costs carried forward are written off in the year in which that assessment is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Immediate restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure. 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. Farm-in arrangements (in the exploration and evaluation phase) 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. (j) 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 operations. These have been incorporated in the financial statements under the appropriate classifications. Details of these interests are shown in Note 15. (k) 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. (l) Employee benefits 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 47 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements Note 1 Summary of material accounting policy information (continued) 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. 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. (m) 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. (n) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the earnings attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (o) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as a part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. 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. (p) Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (q) 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 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 Notes to the Financial Statements Note 1 Summary of material accounting policy information (continued) 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. (r) 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. Note 2 Financial risk management The Group has exposure to a variety of risks arising from its use of financial instruments. This note presents information about the Company’s exposure to the specific risks, and the policies and processes for measuring and managing those risks. The Board of Directors has the overall responsibility for the risk management framework and has adopted a Risk Management Policy. (a) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from transactions with customers and investments. Trade and other receivables The nature of the business activity of the Group does not result in trading receivables. The receivables that the Group does experience through its normal course of business are short term and the most significant recurring by quantity is receivable from the Australian Taxation Office, the risk of non- recovery of receivables from this source is considered to be negligible. Cash deposits The Directors believe any risk associated with the use of predominantly only one bank is addressed through the use of at least an A-rated bank as a primary banker and by the holding of a portion of funds on deposit with alternative A-rated institutions. Except for this matter the Group currently has no significant concentrations of credit risk. 49 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements Note 2 Financial risk management (continued) (b) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages its liquidity risk by monitoring its cash reserves and forecast spending. Management is cognisant of the future demands for liquid finance resources to finance the Company’s current and future operations, and consideration is given to the liquid assets available to the Company before commitment is made to future expenditure or investment. (c) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of 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 2024 of $59,342 (2023: $59,342). The investment is classified at fair value through profit or loss and as such any movement in the value of Hampton Hill NL shares will be recognised as a benefit of expense in profit or loss. No specific hedging activities are undertaken into this investment. Foreign exchange risk The Group enters into earn-in arrangements that may be denominated in currencies other than Australian Dollars. Whilst the Group does not recognise assets or liabilities in respect of these earn-in arrangements and accordingly fluctuations in foreign exchange rates will have no direct impact on the Group’s net assets, movements in foreign exchange may favourably or adversely affect future amounts to be incurred by the Group or its earn-in partners pursuant to such agreements. Other than the above, the Group does not have any direct contact with foreign exchange fluctuations other than their effect on the general economy. Note 3 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. The judgements estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: 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. 50 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 5 Other income Operating activities Consolidated 2024 2023 $ $ Tenement option fee income 35,000 30,000 Recharged costs 45,088 67,840 Profit on sale of property, plant and equipment 14,494 - Management fees from farm-in and project generation alliance partners - 135 R&D tax concession 12,345 - Other income 66,728 66,150 173,655 164,125 Note 6 Loss for the year Loss before income tax includes the following specific benefits/(expenses): Note Consolidated 2024 2023 $ $ Depreciation: Office equipment (note 12) (5,603) (8,330) Right of use assets – leases (note 13) (68,821) (65,436) (74,424) (73,766) Depreciation included in exploration costs expensed: Field equipment (note 12) (116,351) (18,007) Previously capitalised exploration costs written off (note 14) (2,375,690) (94,535) Exploration costs expensed for the period (note 14) (648,858) (142,227) Total exploration costs in profit or loss (3,024,548) (236,762) (Loss)/Gain in fair value of financial assets1 - (59,519) 1 Adjustment to carrying value of investment in Hampton Hill NL, based on the Company’s share of net assets as at 30 June. The gain/(loss) on investment has been recognised in the Statement of Profit or Loss. Refer note 11. 51 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements Note 7 Income tax a) Income tax expense Consolidated 2024 2023 $ $ Current income tax: Current income tax charge (benefit) (2,370,281) (1,174,514) Current income tax not recognised 2,370,281 1,174,514 Deferred income tax: Relating to origination and reversal of timing differences (301,970) (332,004) Deferred income tax benefit/(liability) not recognised 301,970 332,004 Income tax expense/(benefit) reported in the income statement - - b) Reconciliation of income tax expense to prima facie tax payable Profit/(Loss) from continuing operations (4,331,728) (1,429,900) Tax at the Australian rate of 25% (2023 – 25%) (1,082,932) (357,475) Tax effect of permanent differences: Non-deductible share-based payment 167,561 115,186 Unrealised movement in fair value of financial assets - 14,880 Exploration costs written off 593,923 23,634 Capital raising costs claimed (89,184) (60,818) Net deferred tax asset benefit not brought to account 410,632 264,593 Tax (benefit)/expense - - c) Deferred tax – Balance Sheet Liabilities Prepaid expenses - (45,462) Capitalised exploration expenditure (5,713,400) (4,445,772) (5,713,400) (4,491,234) Assets Revenue losses available to offset against future taxable income 11,987,736 10,582,393 Employee provisions 94,991 66,917 Accrued expenses 44,568 53,769 Deductible equity raising costs 297,508 197,588 12,424,803 10,900,667 Net deferred tax asset not recognised 6,711,403 6,409,433 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 Notes to the Financial Statements Note 7 Income tax (continued) d) Deferred tax – Income Statement Note Consolidated 2024 2023 $ $ Liabilities Prepaid expenses 45,462 (42,092) Capitalised exploration expenditure (1,267,628) (972,919) Assets Deductible equity raising costs 99,920 133,918 Accruals (9,201) 50,978 Increase/(decrease) in tax losses carried forward 1,405,343 1,151,458 Employee provisions 28,074 10,661 Deferred tax benefit/(expense) movement for the period not recognised (note 7a) 301,970 332,004 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 Consolidated 2024 2023 $ $ Cash at bank and on hand 1,750,537 317,728 Term Deposits 12,300,000 11,500,000 14,050,537 11,817,728 (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 14,050,537 11,817,728 53 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements Note 8 Current assets – Cash and cash equivalents (continued) (b) Term Deposits Amounts classified as term deposits are short term deposits able to be converted at the Company’s election into known amounts of cash within three months or less and earn interest at the respective short term interest rates and are subject to an insignificant risk of change in value. (c) Cash balances not available for use There are no amounts reported in cash that are no available for use. Included in non-current assets are various cash backed security deposits amounting to $137,466 (2023: $75,652). The security deposits at 30 June 2024 relate to the Group’s lease on its office at 1 Alvan Street, Subiaco, Western Australia of $25,652, an exploration licence security fee of $11,814 and an amount of $100,000 held on deposit in relation to the Group’s corporate credit card facility. The Company recognises liabilities in the financial statements for unspent farm-in contributions. Note 9 Current assets – Receivables a) Trade and other receivables Consolidated 2024 2023 $ $ Deposits paid - 11,885 Trade and other receivables 8,942 7,324 GST recoverable 102,413 75,263 111,355 94,472 b) Other current assets Prepaid tenement costs - 181,846 - 181,846 Details of fair value and exposure to interest risk are included at note 22. 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 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 2024: 2024 2023 $ $ Encounter Operations Pty Ltd 2 2 Encounter Yeneena Pty Ltd 2 2 Baudin Resources Pty Ltd 10 10 Encounter Paterson Pty Ltd 1 1 Encounter Aileron Pty Ltd 1 1 Encounter Gascoyne Pty Ltd 1 - Faure Resources Pty Ltd 1 - Subsidiary Company Date of Incorporation Country of Incorporation Ownership Interest 2024 2023 Encounter Operations Pty Ltd 27 Nov 2006 Australia 100% 100% Encounter Yeneena Pty Ltd 23 May 2013 Australia 100% 100% Baudin Resources Pty Ltd 7 April 2017 Australia 100% 100% Encounter Paterson Pty Ltd 9 July 2021 Australia 100% 100% Encounter Aileron Pty Ltd 9 July 2021 Australia 100% 100% Encounter Gascoyne Pty Ltd 21 Nov 2023 Australia 100% - Faure Resources Pty Ltd 16 Jan 2024 Australia 100% - The ultimate controlling party of the group is Encounter Resources Limited and all subsidiary companies are incorporated in Western Australia. b) Loans to controlled entities The following amounts are payable to the parent company, Encounter Resources Limited at the reporting date: 2024 2023 $ $ Encounter Operations Pty Ltd 22,317,646 22,314,516 Encounter Yeneena Pty Ltd 969,642 888,882 Baudin Resources Pty Ltd 2,946,292 1,561,381 Encounter Paterson Pty Ltd 7,337,114 7,456,964 Encounter Aileron Pty Ltd 9,338,333 3,623,897 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. 55 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements Note 11 Financial assets – Investments Designated at Fair Value through Profit or Loss Consolidated 2024 2023 $ $ Balance at the start of the financial year1 59,342 118,861 Gain on investments recognised through profit & loss2 - (59,519) Balance at the end of the financial year 59,342 59,342 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(q). Note 12 Non-current assets – Property, plant and equipment Note Consolidated 2024 2023 $ $ Field equipment At cost 1,330,959 863,889 Accumulated depreciation (821,893) (786,083) 509,066 77,806 Office equipment At cost 70,351 67,933 Accumulated depreciation (58,942) (53,339) 11,409 14,594 520,475 92,400 Reconciliation Field equipment Net book value at start of the year 77,806 37,143 Cost of additions 548,117 58,670 Net book value of disposals (506) - Depreciation charged 6 (116,351) (18,007) Net book value at end of the year 509,066 77,806 Office equipment Net book value at start of the year 14,594 7,067 Cost of additions 2,418 15,857 Depreciation charged 6 (5,603) (8,330) Net book value at end of the year 11,409 14,594 520,475 92,400 No items of property, plant and equipment have been pledged as security by the Group. 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 Notes to the Financial Statements Note 13 Non-current assets – Right of use assets - leases Note Consolidated 2024 2023 $ $ Leases Carrying value at start of the year 43,621 109,057 ROU assets recognised in the year 226,805 - Depreciation charged 6 (68,821) (65,436) Carrying value at end of the year 201,605 43,621 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. A new lease was recognised during the reporting period for accounting purposes on the exercise of an option in the original lease, resulting in an extension for a further term of three years commencing 1 March 2024. Refer to Note 18 for details of the corresponding right of use liability arising from the abovementioned lease. Note 14 Non-current assets – Capitalised mineral exploration and evaluation expenditure Note Consolidated 2024 2023 $ $ In the exploration and evaluation phase Capitalised exploration costs at the start of the period 17,783,090 13,891,414 Total acquisition and exploration costs for the period (i) 8,419,058 4,490,490 Exploration costs funded by EIS grant (323,999) (295,934) Research and development tax credits (ii) - (66,118) Previously capitalised exploration costs written off 6 (2,375,690) (94,535) Exploration expensed for the period 6 (648,858) (142,227) Capitalised exploration costs at the end of the period 22,853,601 17,783,090 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. 57 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements Note 15 Interest in joint ventures and farm-in arrangements a) Joint Venture Agreements – Joint Operations Joint venture agreements may be entered into with third parties. Assets employed by these joint ventures and the Group’s expenditure in respect of them is brought to account initially as capitalised exploration and evaluation expenditure until a formal joint venture agreement is entered into. Thereafter, investment in joint ventures is recorded distinctly from capitalised exploration costs incurred on the company’s 100% owned projects. b) Joint Venture and Farm-in Arrangements Earn-in and Joint Venture Agreement – Jessica Copper Project (“Jessica”) and Carrara Copper-Zinc Project (“Carrara”) – South32 Ltd (South32) The key terms for the farm-in and joint venture agreements are: Jessica • South32 has the right to earn a 60% interest in Jessica (the “Initial Interest”) by sole funding $15 million of exploration expenditure within 10 years. • During the farm-in phase or joint venture period, South32 may earn an additional 15% interest in Jessica (the “Further Interest”) by completing a Scoping Study. • Upon South32 earning the Initial Interest or Further Interest in Jessica, a 60:40 or 75:25 joint venture will be formed and in the case of South32 earning the Further Interest, the parties must contribute funds based on their pro-rata interest or dilute according to a standard dilution formula. Should a party’s interest dilute to below 10%, that party’s interest shall automatically convert to a net smelter return royalty. • During the farm-in phase, South32 will be the Manager of the project. 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 formed and the parties must contribute funds based on their pro-rata interest or dilute according to a standard dilution formula. Should a party’s interest dilute to below 10%, that party’s interest shall automatically convert to a net smelter return royalty. • During the farm-in phase, South32 will be the Manager of the project. 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 NL (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 • Standard dilution clauses will apply to the parties’ interests. Should a party’s interest dilute to below 10% it shall automatically convert to a Net Smelter Royalty. 58 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 16 Current liabilities – Trade and other payables Consolidated 2024 2023 $ $ Trade payables and accruals 1,024,089 945,595 Other payables 74,541 42,206 1,098,630 987,801 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 Consolidated 2024 2023 $ $ Liability for annual leave 169,233 101,183 Liability for long service leave 210,731 166,485 379,964 267,668 Note 18 Current liabilities – Lease liabilities Note Consolidated 2024 2023 $ $ Leases Carrying value at start of the year 49,059 116,954 Lease liabilities recognised in the year 226,805 - Lease payments made (78,939) (74,823) Lease interest charged to profit or loss 8,972 6,928 Carrying value at end of the year 205,897 49,059 Lease liabilities are split between current and non-current liabilities at the balance date as follows: Lease liabilities due < 1 year 68,197 49,059 Lease liabilities due > 1 year 137,700 - Total lease liabilities 205,897 49,059 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. 59 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements 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. b) Share capital Issue price 2024 2023 2024 2023 No. No. $ $ Issued share capital 450,828,054 395,525,781 66,693,913 55,158,968 c) Share movements during the year Balance at the start of the financial year 395,525,781 317,216,826 55,158,968 41,666,888 Share placement $0.12 - 35,833,334 - 4,300,000 Exercise of options1 $0.052 - 2,475,621 - 128,732 Share placement $0.25 - 40,000,000 - 10,000,000 Share placement $0.22 47,727,273 - 10,500,000 - Exercise of options1 $0.082 1,500,000 - 123,000 - Exercise of options1 $0.162 5,050,000 - 818,100 - Exercise of options1 $0.208 175,000 - 36,400 - Exercise of options1 $0.20 100,000 - 20,000 - Exercise of options1 $0.30 100,000 - 30,000 - Exercise of options1 $0.182 650,000 - 118,300 - Transfer from reserves on exercise of options - - 467,193 - Less share issue costs: Cash-based - - (578,048) (778,945) Equity-based (note 20) - - - (157,707) Balance at the end of the financial year 450,828,054 395,525,781 66,693,913 55,158,968 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 Notes to the Financial Statements Note 19 Issued capital (continued) 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 2023 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 24 November 2023. All eligible Directors, executive officers and employees of Encounter Resources Limited who have been continuously employed by the Company are eligible to participate in the Plan. The Plan allows the Company to issue free options to eligible persons. The options can be granted free of charge and are exercisable at a fixed price in accordance with the Plan. a) Options issued during the year During the financial year the Company granted 3,010,000 options (2023: 7,530,000) over unissued shares. b) Options exercised during the year During the financial year the Company issued shares on the exercise of 7,575,000 (2023: 2,900,000) unlisted options, as follows: Number of options exercised Details of options exercised 1,500,000 Exercisable at $0.082 expiring 30 November 2023 5,050,000 Exercisable at $0.162 expiring 31 October 2023 175,000 Exercisable at $0.208 expiring 28 February 2027 100,000 Exercisable at $0.20 expiring 29 September 2025 100,000 Exercisable at $0.30 expiring 29 September 2025 650,000 Exercisable at $0.182 expiring 30 June 2024 c) Options cancelled during the year During the year 175,000 options (2023: nil) were cancelled upon termination of employment; and nil options (2023: nil) 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 2024 is 18,070,000 (2023: 22,810,000). The terms of these options are as follows: 61 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements Note 20 Options and share based payments (continued) Number of options outstanding Exercise price Expiry date 2,450,000 22.2 cents 26 November 2024 800,000 21.2 cents 30 April 2025 3,630,000 22.4 cents 28 November 2025 1,200,000 19.0 cents 28 June 2026 900,000 20.0 cents 29 September 2025 900,000 30.0 cents 29 September 2025 3,980,000 26.8 cents 30 November 2026 250,000 28.3 cents 15 January 2027 150,000 20.8 cents 28 February 2027 100,000 17.5 cents 27 March 2027 500,000 50.0 cents 29 May 2026 200,000 36.8 cents 20 June 2027 400,000 59.2 cents 13 July 2027 400,000 67.7 cents 24 July 2027 400,000 68.9 cents 1 August 2027 660,000 55.6 cents 23 November 2027 1,000,000 41.1 cents 17 December 2027 150,000 35.5 cents 25 February 2028 e) Subsequent to the balance date 100,000 options have been granted subsequent to the balance date and to the date of signing this report. 1,000,000 options have been exercised subsequent to the balance date to the date of signing this report, as follows: Number of options exercised Exercise price (cents) Expiry date 100,000 $0.175 27 Mar 2027 400,000 $0.20 29 Sep 2025 400,000 $0.30 29 Sep 2025 100,000 $0.50 29 May 2026 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 22.4 months (2023: 21.5 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. 62 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 20 Options and share based payments (continued) Issued as equity-based remuneration: Date granted Number of options granted Exercise price (cents) Expiry date Risk free interest rate used Volatility applied1 Value of Options 14/07/2023 400,000 59.2 13 Jul 2027 3.93% 96.17% $ 97,898 25/07/2023 400,000 67.7 24 Jul 2027 3.86% 96.10% $111,876 2/08/2023 400,000 68.9 1 Aug 2027 3.73% 96.20% $113,677 24/11/2023 660,000 55.6 23 Nov 2027 4.19% 97.25% $153,651 14/12/2023 1,000,000 41.1 17 Dec 2027 3.80% 100.79% $170,664 26/02/2024 150,000 35.5 25 Feb 2028 3.80% 98.85% $22,477 $670,243 1 Historical volatility has been used as the basis for determining expected share price volatility. Reconciliation of movement of options over unissued shares during the period including weighted average exercise price (WAEP) 2024 2023 No. WAEP (cents). $ WAEP (cents) Options outstanding at the start of the year 22,810,000 21.5 18,180,000 16.3 Options granted during the year 3,010,000 53.6 7,530,000 27.7 Options exercised during the year (7,575,000) 15.1 (2,900,000) 5.2 Options cancelled and expired unexercised during the year (175,000) 20.8 - - Options outstanding at the end of the year 18,070,000 29.5 22,810,000 21.5 Note 21 Reserves and accumulated losses Consolidated 2024 2023 Accumulated losses Equity remuneration reserve1 Accumulated losses Equity remuneration reserve (i) $ $ $ $ Balance at the beginning of the year (28,103,156) 1,787,811 (26,698,304) 1,224,339 Profit/(Loss) for the period (4,331,728) (1,429,900) - Movement in equity remuneration reserve in respect of options issued (note 20) - 670,243 - 618,452 Transfer to accumulated losses on cancellation of options 13,055 (13,055) 25,048 (25,048) Transfer to share capital on exercise of options2 - (467,193) - (29,932) Balance at the end of the year (32,421,829) 1,977,806 (28,103,156) 1,787,811 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. 63 2 0 2 4 A N N U A L R E P O R T 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: Carrying amount ($) 2024 2023 $ $ Fixed rate instruments Financial assets - - Variable rate instruments Financial assets1 14,050,537 11,817,728 1 Cash and cash equivalents. 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. 2024 Profit or loss Equity 1% increase 1% decrease 1% increase 1% decrease $ $ $ $ Variable rate instruments 140,505 (140,505) 140,505 (140,505) 2023 Profit or loss Equity 1% increase 1% decrease 1% increase 1% decrease $ $ $ $ Variable rate instruments 118,177 (118,177) 118,177 (118,177) 64 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 22 Financial instruments (continued) 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): Consolidated 2024 Carrying amount Contractual cash flows < 6 months 6-12 months 1-2 years 2-5 years > 5 years $ $ $ $ $ $ $ Trade and other payables 1,098,630 1,098,630 1,098,630 - - - - Lease liabilities 205,897 235,936 42,314 43,441 89,175 61,006 - 1,304,527 1,334,566 1,140,944 43,441 89,175 61,006 - Consolidated 2023 Carrying amount Contractual cash flows < 6 months 6-12 months 1-2 years 2-5 years > 5 years $ $ $ $ $ $ $ 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 - - - - Fair values Fair values versus carrying amounts The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet are as follows: Consolidated 2024 2023 Carrying amount Fair value Carrying amount Fair value $ $ $ $ Cash and cash equivalents 14,050,537 14,050,537 11,817,728 11,817,728 Financial assets 59,342 59,342 59,342 59,342 Lease liabilities (205,897) (205,897) (49,059) (49,059) Trade and other payables (1,098,630) (1,098,630) (987,801) (987,801) 12,805,352 12,805,352 10,840,210 10,840,210 The Group’s policy for recognition of fair values is disclosed at note 1(q). Note 23 Dividends No dividends were paid or proposed during the financial year ended 30 June 2023 or 30 June 2024. The Company has no franking credits available as at 30 June 2023 or 30 June 2024. 65 2 0 2 4 A N N U A L R E P O R T 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 (retired 24 November 2023) (ii) Executive directors Will Robinson, Executive Chairman (Managing Director to 24 November 2023) (iii) Non-executive directors Jonathan Hronsky, Director Philip Crutchfield, Director Peter Bewick, Director 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: 2024 2023 $ $ Total short-term employment benefits 525,067 506,301 Total share-based payments 153,651 363,857 Total post-employment benefits 47,739 45,649 726,457 915,807 During the year the Group incurred costs of $Nil (2023: $14,490), for geological consulting services from Western Mining Services, an entity associated with Dr Jon Hronsky. Note 25 Remuneration of auditors 2024 2023 $ $ Audit and review of the Company’s financial statements 37,600 37,000 Audit of tenement expenditure reports 2,650 - 40,250 37,000 66 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 26 Contingencies (i) Contingent liabilities There were no material contingent liabilities not disclosed for in the financial statements of the Group as at 30 June 2023 or 30 June 2024 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. 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 $100,000 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 as security bonds and deposits in non-current assets (refer Note 8(c)). (ii) Contingent assets There were no material contingent assets as at 30 June 2023 or 30 June 2024. 67 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements 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 $2,478,500 (2023: $2,490,520). The exploration expenditure obligations stated above include amounts (approximately $1.3m (2023: approximately $1.4m)) 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 $1.2m (2023: approximately $1.1m). (b) Contractual Commitment There are no material contractual commitments as at 30 June 2023 or 30 June 2024 not otherwise disclosed in the Financial Statements. Note 28 Related party transactions Transactions with Directors during the year are disclosed at Note 24 – Key Management Personnel. In addition, the Company incurred costs of $Nil (2023: $3,900) 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. Note 29 Events occurring after the balance sheet date Other than as stated in note 20, 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. 68 E N C O U N T E R R E S O U R C E S L I M I T E D Notes to the Financial Statements Note 30 Reconciliation of loss after tax to net cash inflow from operating activities Consolidated 2024 2023 $ $ Profit/(Loss) from ordinary activities after income tax (4,331,728) (1,429,900) Depreciation and amortisation 74,424 73,766 Exploration cost written off and expensed 3,024,548 236,762 Share based payments expense 670,243 460,745 Unrealised (gain)/loss on investments - 59,519 Profit on disposal of property, plant and equipment (14,494) - Contribution to overheads from farm-in and project alliance partners - (135) Lease interest 8,972 6,928 Movement in assets and liabilities: (Increase)/decrease in receivables (4,300) (9,633) Increase/(decrease) in payables 38,956 30,506 Net cash outflow from operating activities (533,379) (571,442) Non-Cash Investing and Financing Activities During the comparative period the Company issued options to lead managers to capital raising services provided, with a total fair value amounting to $157,707. Note 31 Earnings per share Consolidated 2024 2023 Cents Cents a) Basic earnings per share Profit/(Loss) attributable to ordinary equity holders of the Company (1.1) (0.4) b) Diluted earnings per share Profit/(Loss) attributable to ordinary equity holders of the Company (1.1) (0.4) $ $ c) Loss used in calculation of basic and diluted loss per share Consolidated profit/(loss) after tax from continuing operations (4,331,728) (1,429,900) No. No. d) Weighted average number of shares used as the denominator Weighted average number of shares used as the denominator in calculating basic and diluted earnings per share 410,722,867 349,011,344 69 2 0 2 4 A N N U A L R E P O R T Notes to the Financial Statements Note 32 Parent entity information Financial position Company 2024 2023 $ $ Assets Current assets 14,059,478 12,018,264 Non-current assets 23,898,240 18,163,514 Total Assets 37,957,718 30,181,778 Liabilities Current liabilities 1,570,128 1,338,155 Non-current liabilities 137,700 - Total Liabilities 1,707,828 1,338,155 NET ASSETS 36,249,890 28,843,623 Equity Issued capital 66,693,913 55,158,968 Equity remuneration reserve 1,977,806 1,787,811 Accumulated losses (32,421,829) (28,103,156) TOTAL EQUITY 36,249,890 28,843,623 Financial performance Profit/(Loss) for the year (4,331,728) (1,429,900) Other comprehensive income - - Total comprehensive income (4,331,728) (1,429,900) 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. 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 Entity Name Entity Type Body Corporates Tax Residency Place of Incorporation % Share Capital Held Australian or Foreign Foreign Jurisdiction Encounter Resources Limited Body Corporate Australia N/a Australian N/a Encounter Operations Pty Ltd Body Corporate Australia 100% Australian N/a Encounter Aileron Pty Ltd Body Corporate Australia 100% Australian N/a Encounter Paterson Pty Ltd Body Corporate Australia 100% Australian N/a Encounter Gascoyne Pty Ltd Body Corporate Australia 100% Australian N/a Encounter Yeneena Pty Ltd Body Corporate Australia 100% Australian N/a Faure Resources Pty Ltd Body Corporate Australia 100% Australian N/a Baudin Resources Pty Ltd Body Corporate Australia 100% Australian N/a All entities are members of the Encounter Resources Limited consolidated tax group. None of the abovementioned entities acts as a trustee of a trust within the Consolidated Entity, or is a partner in partnership with the Consolidated Entity, or is a participant in a joint venture within the Consolidated Entity. Consolidated Entity Disclosure Statement As at 30 June 2024 71 2 0 2 4 A N N U A L R E P O R T Directors’ Declaration In the opinion of the Directors of Encounter Resources Limited (“the Company”) (a) the financial statements and notes set out on pages 39 to 70 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 2024 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. (e) the Consolidated Entity Disclosure Statement is true and correct. 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 2024. This declaration is made in accordance with a resolution of the Directors. Signed at Perth this 19th day of September 2024. Will Robinson Executive Chairman 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 Independent Audit Report Independent Audit Report Crowe Perth ABN 96 844 819 235 Level 24, Allendale Square 77 St Georges Terrace Perth WA 6000 Main +61 (08) 9481 1448 Fax +61 (08) 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 to 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. © 2024 Findex (Aust) Pty Ltd 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 2024, 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 material accounting policy information, the consolidated entity disclosure statement 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 2024 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. 73 2 0 2 4 A N N U A L R E P O R T Independent Audit Report Independent Auditor’s Report Encounter Resources Limited © 2024 Findex (Aust) Pty Ltd www.crowe.com.au 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 asset of $22,853,601 is a significant asset to the Group and involved significant management’s estimated and judgement in the impairment assessment. This matter is considered a key audit matter due to the amounts involved being material as well as high degree of judgement applied in the impairment assessment. The related accounting policies, critical estimates and judgements and disclosures are contained in Note 1, Note 3, Note 4 and Note 14 of the financial statements. Our procedures included, but were not limited to: • 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. • checked evidence of activities carried out and management’s intentions for areas of interest the Group holds so as to assess for impairment; • checked the Group’s right of tenure by obtaining and assessing third party information supporting the Group’s rights to tenure; • checked the Group’s cashflow forecast for the next twelve months that it included exploration and evaluation expenditure on further exploration activities; and • considered the appropriateness of the disclosures in the financial statements in accordance with the relevant requirements of Australian Accounting Standards. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2024, 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 on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of a) the financial report (other than the consolidated entity disclosure statement) that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; and b) the consolidated entity disclosure statement that is true and correct in accordance with the Corporations Act 2001, and 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 Independent Audit Report Independent Auditor’s Report Encounter Resources Limited © 2024 Findex (Aust) Pty Ltd www.crowe.com.au for such internal control as the directors determine is necessary to enable the preparation of a) the financial report (other than the consolidated entity disclosure statement) that gives a true and fair view and is free from material misstatement, whether due to fraud or error. b) the consolidated entity disclosure statement that is true and correct and is free of 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. • Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the group as a basis for forming an opinion on the group financial report. We are responsible for the direction, supervision and review of the audit work performed for the purposes of the group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 75 2 0 2 4 A N N U A L R E P O R T Independent Audit Report Independent Auditor’s Report Encounter Resources Limited © 2024 Findex (Aust) Pty Ltd www.crowe.com.au We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the remuneration report included in pages 29 to 35 of the directors’ report for the year ended 30 June 2024. In our opinion, the remuneration report of Encounter Resources Limited, for the year ended 30 June 2024, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Crowe Perth Suwarti Asmono Partner 19 September 2024 Perth 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 ASX Additional Information ASX Additional Information Pursuant to the Listing Requirements of the Australian Securities Exchange, the shareholder information set out below was applicable as at 3 October 2024. A. Distribution of Equity Securities Analysis of numbers of ordinary fully paid shareholders by size of holding: Distribution Number of shareholders Securities held % Securities 1 – 1,000 256 143,942 0.03% 1,001 – 5,000 885 2,569,373 0.57% 5,001 – 10,000 565 4,578,853 1.01% 10,001 – 100,000 1,211 45,142,749 9.99% More than 100,000 397 399,393,137 88.40% Totals 3,314 451,828,054 100.00% There are 301 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: Name of Substantial Holder Issued Ordinary Shares Number of shares % of shares IGO Limited 28,400,572 6.29% William Michael Robinson 27,985,889 6.19% Chalice Mining Limited 27,331,579 6.05% Paradice Investment Management Pty Ltd 26,773,236 5.93% 77 2 0 2 4 A N N U A L R E P O R T ASX Additional Information C. Twenty Largest Shareholders The names of the twenty largest holders of quoted shares are listed below: Shareholder Name Ordinary Shares - Quoted Number of shares % of Shares HSBC Custody Nominees (Australia) Limited 44,011,543 9.74% Will Robinson And Associates 27,985,889 6.19% Chalice Mining Limited 27,331,579 6.05% Zero Nominees Pty Ltd 25,700,000 5.69% HSBC Custody Nominees (Australia) Limited - GSCO 16,813,876 3.72% UBS Nominees Pty Ltd 15,965,004 3.53% Precision Opportunities Fund Ltd 12,000,000 2.66% Peter Bewick And Associates 11,710,303 2.59% Paul Chapman And Associates 9,832,150 2.18% Philip Crutchfield And Associates 8,059,391 1.78% Picton Cove Pty Ltd 6,419,437 1.42% BNP Paribas Nominees Pty Ltd - IB AU Noms Retailclient 5,584,160 1.24% BNP Paribas Nominees Pty Ltd - Hub24 Custodial Serv Ltd 5,482,029 1.21% HSBC Custody Nominees (Australia) Limited - GSCO ECA 5,000,000 1.11% Seneschal (WA) Pty Ltd 4,961,763 1.10% Citicorp Nominees Pty Limited 4,755,401 1.05% Fifty Second Celebration Pty Ltd 4,412,063 0.98% Evergem Pty Ltd 3,350,000 0.74% Endless Summer (WA) Pty Ltd 3,102,273 0.69% HS Superannuation Pty Ltd 3,047,717 0.67% Total 245,524,578 54.34% 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 ASX Additional Information D. Unquoted Securities Options over Unissued Shares Number of Options Exercise Price Expiry Date Number of Holders 2,450,000 22.2 cents 26 November 2024 7 800,000 21.2 cents 30 April 2025 3 3,630,000 22.4 cents 28 November 2025 10 1,200,000 19.0 cents 28 June 2026 3 500,000 20.0 cents 29 September 2025 11 500,000 30.0 cents 29 September 2025 11 3,980,000 26.8 cents 30 November 2026 5 250,000 28.3 cents 15 January 2027 1 150,000 20.8 cents 28 February 2027 1 400,000 50.0 cents 29 May 2026 42 200,000 36.8 cents 20 June 2027 2 400,000 59.2 cents 13 July 2027 1 400,000 67.7 cents 24 July 2027 1 400,000 68.9 cents 1 August 2027 1 660,000 55.6 cents 23 November 2027 4 1,000,000 39.7 cents 17 December 2027 6 150,000 35.5 cents 25 February 2028 1 100,000 65.0 cents 10 September 2028 1 17,170,000 1 Issued to Cannacord Genuity (Australia) Pty Ltd and Chieftain Securities (WA) Pty Ltd for joint lead manager services to the share placement completed on 29 September 2022. 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 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. 79 2 0 2 4 A N N U A L R E P O R T ASX Additional Information Directors Will Robinson Executive Chairman Peter Bewick Non-Executive Director Jonathan Hronsky Non-Executive Director Philip Crutchfield Non-Executive Director Share Registry Automic Group Address Level 5, 191 St Georges Terrace Perth, Western Australia 6000 Telephone 1300 288 664 Securities Exchange Listing The Company’s shares are quoted on the Australian Securities Exchange. The home exchange is Perth, Western Australia. ASX Code ENR – Ordinary shares 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. Company Secretaries Kevin Hart Dan Travers Principal and Registered Office Encounter Resources Limited 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 Corporate Directory 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 Suite 2/1 Alvan Street Subiaco WA 6008 +61 8 9486 9455 contact@enrl.com.au www.enrl.com.au