2020 | Annual Repor t S T A V E L Y M I N E R A L S L I M I T E D A B N 3 3 1 1 9 8 2 6 9 0 7 w w w . s t a v e l y . c o m . a u FIND ING THE COPPER THE WORLD NEEDS FOR A LOW- CAR BON FUTU RE CONTENTS ONTENTS CORPORATE DIRECTORY ............................................................................................................... 3 OPERATIONS REPORT ................................................................................................................... 4 DIRECTORS’ REPORT ................................................................................................................... 37 AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS .................................................. 48 DIRECTORS’ DECLARATION ......................................................................................................... 49 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ......... 50 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................... 51 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................................ 52 CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................ 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ........................................................... 54 INDEPENDENT AUDIT REPORT .................................................................................................... 76 ADDITIONAL SHAREHOLDER INFORMATION ............................................................................... 79 TENEMENT SCHEDULE ................................................................................................................. 81 2020 Annual Report | Page 2 CORPORATE DIRECTORY ORPORATE DIRECTORY Directors Christopher Cairns (Executive Chairman & Managing Director) Jennifer Murphy (Technical Director) Peter Ironside (Non-Executive Director) Amanda Sparks (Non-Executive Director) Company Secretary Amanda Sparks Registered and Principal Office First Floor, 168 Stirling Highway Nedlands Western Australia 6009 Telephone: 08 9287 7630 08 9389 1750 Facsimile: Web Page: www.stavely.com.au Email: info@stavely.com.au ABN 33 119 826 907 Share Registry Computershare Investor Services Pty Ltd Level 11 172 St Georges Terrace Perth Western Australia 6000 Telephone: 1300 850 505 Facsimile: 08 9323 2033 Solicitors Steinepreis Paganin Level 4, Next Building 16 Milligan Street Perth Western Australia 6000 Bankers ANZ Bank 32 St Quentins Avenue Claremont Western Australia 6010 Stock Exchange Listing ASX Limited Level 40, Central Park, 152-158 St Georges Terrace Perth Western Australia 6000 ASX Code: SVY Auditors BDO Audit (WA) Pty Ltd Chartered Accountants 38 Station Street Subiaco Western Australia 6008 2020 Annual Report | Page 3 OPERATIONS REPORT Overview EXPLORATION The Company’s assets are located in western Victoria (Stavely, Ararat & Yarram Park Projects), central Victoria (Myola Project), north Queensland (Ravenswood Project) and north eastern Tasmania (Mathinna & Lefroy Projects) in Australia. The Stavely Project hosts an Inferred Mineral Resource of 28 Mt at 0.4% copper for 110kt of contained copper (gold and silver not estimated) in a chalcocite-enriched supergene blanket developed at shallow depth. A review of drill core, assay results and other technical data from the Thursday’s Gossan prospect in the Stavely Project was undertaken by Stavely geologists in conjunction with Stavely’s consultants, Drs Greg Corbett, Scott Halley and Paul Ashley, during the year. The assessment highlighted the significant similarities between the large mineral system at Thursday’s Gossan with the Butte, Montana and Magma, Arizona copper deposits. This prompted Stavely Minerals to test for similar high-grade lode-hosted copper-gold-silver mineralisation at shallower depths. The first diamond hole SMD050, seeking shallower lode-style mineralisation, drilled targeting the high-grade structurally controlled copper-gold-silver mineralisation within the Ultramafic Contact Fault (UCF), returned stunning grades of up to 40% copper within a 32m wide high-grade zone. Diamond drilling during the year continued to demonstrate the growing scale and potential of the shallow copper-gold discovery at Thursday’s Gossan, now known as the Cayley Lode. Mineralisation has grown to 1.5km in strike length and remains open in all directions. Given that a similar style of mineralisation has been previously intersected at drill depths in excess of 900m on the North-South Structure (NSS), it is anticipated that the Cayley Lode mineralisation will extend to similar depths and possibly beyond. As expected with any structurally hosted copper-gold deposit, the intercepts do vary in width and grade due to inherent pinch and swell along the structure, however the Cayley Lode continues to deliver consistently good widths of high-grade copper, gold and silver mineralisation. Recent drilling has demonstrated that the Cayley Lode continues below the Low Angle Structure (LAS) with only a modest offset to the mineralisation. It is now believed that the ‘chalcocite enriched blanket’ Mineral Resource is derived from the weathering and redistribution and dispersion of metals from the high-grade lode-style copper-gold-silver mineralisation as it approaches surface. The polymetallic- precious metal signature of the mineralisation exhibited in the far north-west portion of the Cayley Lode in SMD073 is very similar in character to the peripheral sulphide mineral zonation of the Magma, Arizona lode-style mineralisation. At the end of the year, an intensive resource drill-out was in progress on the now 1.5 km long discovery zone, with in-fill and step-out drilling continuing on a roughly 40m x 40m drill grid. A 2D Seismic survey was conducted at the Stavely Project earlier in the year. The survey comprised two orthogonal lines for 8 km each and were centred on the Thursday’s Gossan porphyry prospect. The seismic survey identified two strong porphyry targets at approximately 1,000m and 1,100m depth at Thursday’s Gossan. During the year, diamond drilling was undertaken at the Mathinna Project in Tasmania. The seven-hole diamond drilling programme included three holes designed to target the potential extensions to the known lodes and four stratigraphic holes designed to better understand the structural and stratigraphic controls of the region. Initial results from the drilling confirmed the down-dip extensions of known lode style gold mineralisation. 2020 Annual Report | Page 4 OPERATIONS REPORT CORPORATE During the previous year, Stavely Minerals, through its 100% owned subsidiary Stavely Tasmania Operations Pty Ltd, agreed to purchase a 100% beneficial interest from BCD Resources NL in the assets of the 350,000tpa capacity Beaconsfield gold processing plant and associated infrastructure, property, rights, leases and permits. In June 2019, the Acquisition Agreement with BCD Resources NL (among other parties) to purchase all assets associated with the Beaconsfield gold processing plant was terminated. Subsequently, the Company was served with a writ of summons in relation to its termination of the Acquisition Agreement as detailed in its ASX announcement dated 18 June 2019. The writ was seeking an order that Stavely Minerals specifically perform its obligations under the Acquisition Agreement and do all things as may be necessary to ensure the Acquisition Agreement is carried into effect or alternatively pay damages (of an unspecified amount). In September 2019, Stavely Minerals agreed a Deed of Settlement and Release with BCD Resources NL (and the other parties) to settle the termination and to release both parties from any further claim. As part of the Deed of Settlement and Release, BCD Resources returned $100,000 of the original purchase deposit to Stavely Minerals. In October 2019, the Company completed a capital raising which was underpinned by a Share Placement of 19.6 million shares at $1.00 per share to sophisticated and institutional investors to raise $19.6M before costs. In November 2019, Stavely Tasmania Pty Ltd (Stavely Tasmania), acquired: o a key exploration licence covering the structural extension of the high-grade Mathinna Gold Project in Tasmania; o the majority of the historical Lefroy goldfield where past gold production is reported to be 180,000 oz at 28g/t gold1; and o an exploration licence in central Victoria approximately 10km east of the world-class 9 million-ounce Fosterville Gold Mine. In addition to the licence acquisitions, Stavely Tasmania was granted up to $50,000 towards direct drilling costs on each of the granted exploration licences, EL4/2019 and EL19/2018 as part of the Mineral Resources Tasmania Exploration Drilling Grant Initiative Program 2020. During the year, Stavely Tasmania was granted three exploration licences (EL19/2018, EL4/2019 & EL6/2019) within the highly prospective Alberton – Mathinna “Gold Corridor” in northeast Tasmania. These exploration licences are subject to an agreement with Bestlevel Holdings Pty Ltd (Bestlevel). Upon grant of the exploration licences, Stavely Tasmania managed the tenements and held a 51% interest in the tenements, with Bestlevel having a 49% interest. Subsequent to the drilling programme at Mathinna, Stavely Tasmania earnt an interest of 75% in EL19/2018, EL4/2019 & EL6/2019 through the expenditure of $500,000. Bestlevel retain a 25% interest in the exploration licences. In April 2020, the Company reached agreement to purchase the existing 3% net smelter royalty (NSR) held by New Challenge Resources on tenement RL2017 (formerly EL4556), which hosts the Thursday’s Gossan prospect and other key prospects at its flagship Stavely Copper-Gold Project in western Victoria. The agreed terms included the payment of $350,000 cash and the issue of 850,000 Stavely Minerals’ shares. The cash payment of $350,000 and the issue of shares occurred on 1 July and 9 July 2020, respectively. In May 2020, Stavely Minerals received correspondence from the Earth Resources Regulation section of the Victorian Department of Jobs, Precincts and Regions informing the Company of the grant of two key Retention Licences covering its principal base metal projects in western Victoria. 1 Tasmania Department of Mines – Report 1994/03, Northeast Goldfields: A Summary of the Beaconsfield, Lefroy, Back Creek and Gladstone goldfields, McClenaghan, 1994 2020 Annual Report | Page 5 OPERATIONS REPORT The Retention Licences, RL2017 over the Stavely Project and RL2020 over the Ararat Project, have been granted for a period of 10 years and are renewable, on approval of a renewal application, for up to a further 10 years. Subsequent to the year end: ➢ ➢ the Company was successful in its application for participation in the Federal Government’s Junior Minerals Exploration Incentive (“JMEI”) scheme for the 2020/2021 income year. The Company received an allocation of up to $1,750,000 in tax credits which can be distributed to eligible investors. The scheme is voluntary and companies must apply each year to participate. This is the third year that Stavely Minerals has been successful in receiving an allocation of JMEI credits. In July 2020, a Letter of Intent (LOI) to divest its Mathinna/ Alberton and Lefroy Goldfields tenements in Tasmania, as well as its Fosterville East tenement in Victoria to Nubian Resources Ltd (TSX-V:NBR) (‘Nubian’) for A$2.5 million in Nubian shares and cash. The terms of the LoI are as follows: o Nubian to pay a non-refundable deposit of A$100,000; o A 60-day exclusivity period to complete final due diligence and execute a definitive agreement; o Upon execution of the definitive agreement, Nubian will issue to Stavely Minerals a number of Nubian shares equivalent in value to A$2.4 million based on the 5-trading day volume-weighted average price (VWAP) prior to the execution date, subject to a minimum issue of 5,050,000 Nubian shares to Stavely Minerals. The consideration for the purchase is based on 100% ownership of the tenements. Stavely Minerals is in Joint Venture with Bestlevel Holdings Pty Ltd (Bestlevel), with Stavely Minerals currently holding a 75% interest in the three Mathinna JV tenements. The value of the Bestlevel 25% interest in the three Mathinna JV tenements equates to approximately A$400,000 of Nubian shares to be issued to Bestlevel or its beneficial owners. ➢ On 30 July 2020, Stavely issued 28,000,000 shares at an issue price of $0.60 per share pursuant to the first tranche of a placement to sophisticated and institutional investors. Gross proceeds were $16,800,000. The second Tranche of 13.67 million shares will be completed subject to shareholder approval at a general meeting to be held on 31 August 2020. ➢ On 14 August 2020, Stavely issued 4,645,000 shares at an issue price of $0.60 per share pursuant to a share purchase plan. Gross proceeds were $2,787,000. 2020 Annual Report | Page 6 OPERATIONS REPORT Review of Operations Background The Ararat and Stavely Projects are located approximately 200 kilometres west of Melbourne and are respectively just west of the regional centre of Ararat and just east of the regional town of Glenthompson in Victoria (Figure 1). The western Victorian Projects include exploration tenements with a total area of 162 square kilometres of 100% owned, 100 square kilometres of joint venture tenure and 1,027 square kilometres of tenement application area. The Projects have excellent infrastructure and access with paved highways, port connection by railroad and a 62 MW wind farm located 8 kilometres from the Stavely Project. The primary land use is grazing and broad acre cropping. The Ravenswood Project is located 90km south of Townsville and 10km south west of Ravenswood in north Queensland. The Mingela- Ravenswood - Burdekin Dam road passes down the eastern boundary of the Project. The Queensland Project includes four granted exploration licences with a total area of 544 square kilometres. The topography is made up of rolling hills alternating with sandy flats. The Burdekin River runs through the Project area. Access within the tenements is by 4WD via station tracks. The Mathinna Project is located in north-eastern Tasmania, approximately 55km due east of Launceston and in the vicinity of the regional towns of Mathinna and Alberton. The Mathinna Project comprises four exploration licences covering a total area of 142 square kilometres. Access to the Project area is excellent via sealed roads. Access within the licence areas is by gravel roads on State Forest and private property. The Lefroy Project is also located in north-eastern Tasmania, approximately 45km north of Launceston. The Lefroy Project comprises one exploration licence and one retention licence covering an area of 28 square kilometres. The licences are accessible by sealed roads and the majority of the area is in State Forest and private bushland. The central Victorian Project, comprising one exploration licence, is located 140km north of Melbourne and covers 111 square kilometres. The majority of the Project area, which is accessible via the Northern Highway, is privately owned and has been cleared for grazing or cultivation. Figure 1. Project Location Plan. 2020 Annual Report | Page 7 OPERATIONS REPORT Regional Geology Western Victoria The Ararat and Stavely Projects, while only 40 kilometres apart, are hosted within materially different geologic domains (Figure 2). The Ararat Project is hosted in the Stawell - Bendigo zone of the Lachlan Fold Belt and is comprised of Cambrian age mafic volcanic and pelitic sedimentary units of the Moornambool Metamorphics which were metamorphosed to greenschist to amphibolite facies during the Silurian period. The Stavely Project is hosted in Cambrian age fault-bounded belts of submarine calc-alkaline volcanics, namely the Mount Stavely Volcanics, structurally in contact with the older quartz-rich turbidite sequence of the Glenthompson Sandstone and the Williams Road Serpentinite. Figure 2. Geology of South-eastern Australia. These sequences were deformed in the Late Cambrian Delamerian Orogeny. Seismic traverses and a recent study by the Victorian Department of Economic Development, Jobs, Transport and Resources in western Victoria have supported the interpretation of an Andean-style continental convergent margin environment for the development of the buried Stavely Arc beneath the Stavely Volcanic Complex and environs (Schofield, A. (ed) 2018). This regional architecture is considered conducive to the formation of fertile copper / gold mineralised porphyry systems (Crawford et al, 2003) as is the case with the younger Macquarie Arc in New South Wales, which hosts the Cadia Valley and North Parkes copper-gold mineralised porphyry complexes. The Lachlan Fold Belt and Delamerian sequences are in fault contact through large-scale thrusting along the east dipping Moyston Fault (Cayley and Taylor, 2001). Largely unconformably overlying both these domains by low-angle décollement is a structural outlier of the younger Silurian fluvial to shallow marine sandstone to mudstone sequences of the Grampians Group. 2020 Annual Report | Page 8 OPERATIONS REPORT Regional Geology North Queensland The dominant rock types within the Ravenswood Project are typically I-type calcic hornblende-biotite granodiorite to tonalite of the Ravenswood Batholith of Middle Silurian to Middle Devonian age (Figure 3). A major structure, the Mosgardies Shear Zone, cuts east-west through the Ravenswood Batholith adjacent to three gold centres. The shear zone is up to 2.5km wide. The main reef at Ravenswood, the “Buck Reef”, is contained within the Mosgardies Shear Zone. The majority of faults in the area are transverse to the Morgardies Shear Zone and trend 30o to 40o either side of north. The bulk of the auriferous quartz reefs and leaders are hosted by shears with NW to NS orientation. Figure 3. Ravenswood Project - Regional Geology Plan. Mineralisation is associated with shear hosted quartz veins and is dominated by pyrite-chalcopyrite-galena-gold. The veins are generally narrow and of limited strike length. This style of mineralisation is widespread but of low tonnage. Copper as chalcopyrite (and molybdenum-gold) mineralisation is also associated with quartz porphyry stocks. Mineralisation is contained both in sparse quartz veins and disseminated within the intrusive. More widespread phyllic (quartz-sericite) and potassic (biotite) alteration is reported suggestive of porphyry style alteration and mineralisation. This style of deposit offers bulk tonnage potential. Cu-Au-Mo occurs in intrusive breccias (“pipes”) at Three Sisters and Mt Wright outside the Project area. Paleo- placer gold deposits occur in Quaternary sediments on the flanks of Tertiary laterites. Regional Geology North East Tasmania The regional geology of the Mathinna & Lefroy Project is dominated by the Mathinna Supergroup rocks and granitoids. Gold mineralisation within the north-westerly trending Mangana to Lyndhurst gold lineament is hosted by the Silurian to Devonian Mathinna Beds (Figure 4). The Mathinna Beds are a folded sequence of 2020 Annual Report | Page 9 OPERATIONS REPORT sediments comprise an alternating sequence of bedded quartzites, sandstones, siltstones and slates. The Mathinna Beds are unconformably overlain by Silurian to Early Devonian sediments of the Panama group. Gold deposits occur as auriferous reefs, hosted in the Mathinna Beds. The New Golden Gate Mine and associated vein deposits are hosted within the Lone Star Siltstone formation which comprises basal bioturbated marine siltstone/shale/mudstone which is laminated to thinly bedded. Minor, commonly pyritic black shale is present. Figure 4. Mathinna & Lefroy Project - Regional Geology Plan. Regional Geology Central Victoria The central Victoria Project is located approximately 10km east of the high-grade +9 million-ounce Fosterville Gold Mine. The Project is underlain by metasediments of Ordovician age, typical of the Bendigo Zone, although these are obscured to a large degree by shallow transported sediments. Based on the publicly available data, there is an interpreted structure running through the tenement, which appears to be sub-parallel to the main north-northwest structures which control the mineralisation at Fosterville. Mineral Resources The Ararat and Stavely Projects host Mineral Resources reported in compliance with the 2012 JORC Code: (a) Ararat Project Mineral Resource In the Ararat Project, the Mount Ararat prospect hosts a Besshi-style VMS deposit with an estimated (using a 1% Cu lower cut-off) Total Mineral Resource of: 1.3Mt at 2.0% copper, 0.5g/t gold, 0.4% zinc and 6g/t silver for a contained 26kt of copper, 21,000 ounces of gold, 5.3kt of zinc and 242,000 ounces of silver (Table 1). Refer to ASX release dated 8 September 2015 for all criteria for sections 1, 2 and 3 of the JORC Code Table 1 and 2. The Mt Ararat Copper Indicated and Inferred Resource Estimate, August 2017, remains unchanged from the Mt Ararat Copper Indicated and Inferred Resource Estimate, August 2015. There has been no additional drill data 2020 Annual Report | Page 10 OPERATIONS REPORT collected from the deposit and although economic circumstances affecting the mining industry have changed since 2015, the underlying assumptions utilised in 2015 Mineral Resource estimate remain valid. (b) Stavely Project Mineral Resource In the Stavely Project, at the Thursday’s Gossan prospect, a near surface secondary chalcocite enriched blanket with an estimated (using a 0.2% Cu grade lower cut-off) - 28Mt at 0.4% copper for 110kt of contained copper (Table 2). The Thursday’s Gossan Chalcocite Copper Inferred Mineral Resource estimate remains unchanged from the Thursday’s Gossan Chalcocite Copper Inferred Resource estimate, August 2013. Although economic circumstances affecting the mining industry have changed since 2013, the underlying assumptions utilised in the 2013 Mineral Resource estimate remain valid. Ararat Project The Ararat Project is prospective for VMS copper-gold-zinc-silver mineralisation as well as ‘Stawell-style’ and intrusion-related gold mineralisation (Figure 5). The Mount Ararat copper deposit lies within a small portion of a much more extensive prospective exhalative horizon on the contact between the Carroll’s Amphibolite and the Lexington Schist. The Ararat Goldfield has significant historic alluvial and deep lead production of circa 640,000 ounces of gold but with no known substantial hard-rock source. No exploration was conducted on the Ararat Project during the year. Table 1. The Mount Ararat Resource Estimate (reviewed in 2020). Reporting Threshold Classification Domain Tonnes: Cu Resource (KT) Cu Grade (%) Tonnes: Au,Ag,Zn Resource (KT) Au Grade (ppm) Ag Grade (ppm) Zn Grade (%) 1.0% Cu 2.0% Cu Indicated Inferred Total 1% Cu Indicated Inferred Total 2% Cu Supergene Fresh Total Weathered Supergene Fresh Total Supergene Fresh Total Weathered Supergene Fresh Total 50 200 250 170 30 870 1070 1320 30 80 110 30 20 230 280 390 2.4 2.2 2.2 1.7 2.2 1.9 1.9 2.0 2.9 2.9 2.9 2.9 3.0 3.0 3.0 2.9 170 80 1070 1320 1320 30 50 310 390 390 0.5 0.4 0.5 0.5 0.5 1.3 0.3 0.6 0.6 0.6 3.1 4.4 6.2 5.7 5.7 7.9 4.2 7.7 7.3 7.3 0.1 0.4 0.4 0.4 0.4 0.2 0.4 0.6 0.5 0.5 Table shows rounded estimates. This rounding may cause apparent computational discrepancies. Significant figures do not imply precision. Nominal copper grade reporting cuts applied. Three material types reported as varied economic factors will be applicable to the deposit base on reported material types. 2020 Annual Report | Page 11 OPERATIONS REPORT Table 2. The Thursday’s Gossan Chalcocite Copper Inferred Resource Estimate (reviewed in 2020). Table shows rounded estimates. This rounding may cause apparent computational discrepancies. Significant figures do not imply precision. Nominal copper grade reporting cuts applied. Three mineralised thicknesses reported as varied economic factors are likely to be applicable to each. Figure 5. Stavely, Yarram Park and Ararat Project Location Plan. 2020 Annual Report | Page 12 OPERATIONS REPORT Stavely Project The Stavely Project hosts several significant opportunities for discovery of porphyry copper-gold and VMS base- metals +/- gold deposits (Figure 5). During the year, the Company completed diamond drill hole SMD049, targeting the deep porphyry and drilled diamond holes SMD050 to SMD095, which targeted the high-grade structurally-controlled copper-gold-silver mineralisation within the Ultramafic Contact Fault (UCF). During the year, a 2D seismic survey was conducted by HiSeis Pty Ltd. The survey comprised two orthogonal lines for 8 km each and were centred on the Thursday’s Gossan prospect. The seismic data provides a clear target for deeper drill testing for well-developed copper-gold porphyry mineralisation. The location of the two porphyry targets at ~1,000m and ~1,100m depth, is consistent with the Magma, Arizona mineralisation model for Thursday’s Gossan. Thursday’s Gossan Porphyry Prospect During the year, one diamond hole, SMD049, was completed to target the deep porphyry at Thursday’s Gossan. Hole SMD049 was designed to target the source porphyry believed to be responsible for high-grade structurally- controlled polymetallic epithermal copper-gold-silver mineralisation encountered in drill holes SMD044, SMD044W1, SMD045, SMD045W1 and SMD045W2 (Figure 6 & 7). Diamond drill hole SMD044 returned: o 38.3m @ 1.59% Cu, 0.27 g/t Au and 8g/t Ag from 890m including ▪ 6m @ 2.75% Cu, 0.25 g/t Au and 7 g/t Ag, and ▪ 12.3m @ 2.59% Cu, 0.44 g/t Au and 18 g/t Ag, in the NSS. Diamond drill hole wedge SMD045W2 returned: o 12m @ 0.51% Cu, 0.1g/t Au and 2g/t Ag from 1,129m including ▪ 4m @ 0.91% Cu, 0.12g/t Au and 2g/t Ag from 1,133m, in the NSS. SMD049, which was drilled from north to south, parallel to the mineralisation-hosting NSS, was completed to a depth of 1,767.6m (Figure 8). The hole did not intersect the source porphyry, as the hole encountered appreciable molybdenite in porphyry A veins from 1,315m to approximately 1,440m down-hole. This is consistent with an outer molybdenite halo to a porphyry. It is possible that the drill hole ended in the barren core to the QDP porphyry – interpreted to be porphyry #2 in a sequence of four porphyry phases – the later two phases have not yet been seen in drilling but are inferred to be the likely drivers of the structurally-controlled copper-gold-silver mineralisation. Cayley Lode Copper – Gold Mineralisation During the year, 42 diamond holes for 12,016m and 14 sonic holes for 1,278m were drilled to target the high- grade structurally controlled copper-gold-silver mineralisation within the Ultramafic Contact Fault (UCF). The drill collar locations are shown in Figures 9 and 10 and the details are given in Table 3. The drilling focused on follow-up of the exceptional results received from the discovery diamond hole SMD050 (Figure 11), the first hole testing the UCF target which returned: o 32m at 5.88% Cu, 1.00g/t Au and 58g/t Ag from 62m including ▪ 12m at 14.3% Cu, 2.26g/t Au and 145g/t Ag, including • 2m at 40% Cu, 3.00g/t Au and 517g/t Ag The first step out hole SMD051 (Figure 12), located 160m south of the discovery hole, returned an outstanding thick mineralised intercept: o 59m at 1.80% Cu, 0.43g/t Au and 15.4g/t Ag from 98m including: ▪ 8.5m at 4.38% Cu, 0.87g/t Au and 32.7g/t Ag, and ▪ 3m at 5.66% Cu, 0.29g/t Au and 4.6g/t Ag 2020 Annual Report | Page 13 OPERATIONS REPORT and a second intercept of: o 8m at 9.69% Cu, 0.40g/t Au and 16.8g/t Ag from 177m; including: ▪ 2m at 17.3% Cu, 0.57g/t Au and 13.1g/t Ag An intensive resource drill-out was in progress at the end of the year on the south-eastern end of the now 1.5km long discovery zone, with in-fill and step-out drilling based on roughly a 40m x 40m drilling grid. Ongoing drilling at the Cayley Lode continues to deliver strong copper-gold-silver mineralisation over significant widths. The widths and grades vary as the structure pinches and swells, but apart from the few holes that missed the target, the consistency of the mineralisation is notable. The mineralisation remains open in all directions. Drill holes which have delived particularly impressive results include: From SMD064 (Figure 13): o 8m at 5.12% Cu, 1.48g/t Au and 34.3g/t Ag from 121m, including: ▪ 1m at 26.8% Cu, 8.48g/t Au and 201g/t Ag From SMD087 (Figure 14): o 87m at 1.74% Cu, 0.57g/t Au and 20g/t Ag from 140m, including ▪ 24m at 4.19% Cu, 1.27g/t Au and 53g/t Ag from 163m, including: • 2m at 11.75% Cu, 1.45g/t Au and 66g/t Ag from 170m, and including • 1.5m at 13.28% Cu, 2.58g/t Au and 209g/t Ag from 181.7m, and including • 0.8m at 24.1% Cu, 1.16g/t Au and 249g/t Ag ▪ 9m at 4.09% Cu, 1.83g/t Au and 39g/t Ag from 218m down-hole, including • 1m at 1.30% Cu, 10.05g/t Au and 48g/t Ag The base of the 24m high-grade interval hosted a narrower interval of strong polymetallic mineralisation including: o 2m at 9.95% Cu, 0.71g/t Au, 107g/t Ag, 3.87% Zn, 1.18% Pb, 0.89% Ni, 0.90% Cr and 0.05% Co Drill holes SMD088 and SMD089, located 100m apart, intercepted the Cayley Lode both above and below the LAS and demonstrates that the LAS’ influence is simply a modest offset to the mineralisation. From SMD088 (Figure 15): o 30m at 1.98% Cu, 0.23g/t Au and 9.1g/t Ag from 212.3m, including: ▪ 10.8m at 3.20% Cu, 0.31g/t Au and 16g/t Ag from 216m, and ▪ 5.8m at 3.54% Cu, 0.43g/t Au and 14g/t Ag from 233.2m o 11.7m at 1.42% Cu, 0.15g/t Au and 4.5g/t Ag from 319.5m, and o 15.6m at 1.26% Cu, 0.17g/t Au and 5g/t Ag from 342m, and o 4.4m at 1.61% Cu, 0.20g/t Au and 5.7g/t Ag from 365.6m From SMD089 (Figure 16): o 11.8m at 1.54% Cu, 0.42g/t Au and 14g/t Ag from 87m, including: ▪ 3m at 3.28% Cu, 1.09g/t Au and 34g/t Ag from 91m o 19.9m at 2.40% Cu, 0.35g/t Au and 17g/t Ag from 214m, including: ▪ 7.1m at 4.30% Cu, 0.52g/t Au and 35g/t silver from 219m, including: • 3m at 6.02% Cu, 0.71g/t Au and 52g/t Ag from 219m o 9.7m at 3.10% Cu, 0.97g/t Au and 26g/t Ag from 271m, including: ▪ 2m at 7.86% Cu, 2.09g/t Au and 88g/t Ag 2020 Annual Report | Page 14 OPERATIONS REPORT A full list of significant intercepts is presented in Table 3. The mineralisation is characterised by structurally controlled massive to semi-massive sulphide and quartz- sulphide dominated by early pyrite that is fractured and brecciated by later copper sulphides chalcopyrite, bornite and chalcocite. Drill hole SMD073, located in the far north-west portion of the Cayley Lode, intercepted an interval of moderate to strong sphalerite (zinc sulphide) mineralisation within pyritic massive sulphide in the Cayley Lode from 359.2m to 365.0m. This zone returned polymetallic-gold mineralisation (Figure 17): o 5m at 1.67g/t Au, 27g/t Ag, 2.35% Zn, 0.43% Pb and 0.25% Cu from 359m including, ▪ 0.9m at 4.58g/t Au, 51g/t Ag, 4.49% Zn, 0.52% Pb and 0.42% Cu of recognition from The chalcocitebornitechalcopyritesphalerite, as exemplified by polymetallic-gold mineralisation in SMD073, is entirely consistent with the well-documented spatial zonation observed in the Magma, Arizona lode-style vein system, which is considered the best geological analogue for the discovery at Thursday’s Gossan. lateral/temporal zonation Cayley Lode the the of Junction 3 Prospect Diamond hole SMD071 was drilled to investigate a magnetic high and coincident copper anomaly at the Junction 3 prospect (Figure 18 and 19). The hole intersected a large package of sandstone and siltstones with some intervals of dacite porphyry. The sandstones and siltstones had variable disseminated magnetite as well as fine chalcopyrite on fracture surfaces which may explain the magnetic feature and copper anomaly. However, the presence of fine chalcopyrite veins could possibly indicate proximity to a Lode as it does at Thursdays Gossan and further drilling is needed to determine this. SMD071 did not return any anomalous assay results. Junction 1 Prospect Diamond holes SMD075 and SMD077 were drilled to follow-up high-grade copper in historical aircore holes at the Junction 3 prospect (Figure 18 and 19). SMD075 intersected a package of sandstone and siltstones with trace pyrite veining with sericite halos. This hole did not explain the presence of the high-grade copper in the historical aircore holes. SMD077 intersected sandstone and siltstone for the majority of the hole before ending in dacite porphyry. Trace to locally weak quartz+carbonate+sulphide+base metal veining was intersected from 240m to 360m. These two holes have not been sampled as yet. While the mineralisation in the diamond drill holes differs in character to that in aircore drill hole TGAC078, it is likely that there is some structural complexity in this prospect area that needs to be resolved. 2020 Annual Report | Page 15 OPERATIONS REPORT Figure 6. Thursday’s Gossan Prospect - Drill Collar Location Plan over Aeromagnetic Image. Figure 7. Thursday’s Gossan Prospect - Drill Collar Location Plan. 2020 Annual Report | Page 16 OPERATIONS REPORT Figure 8. Thursday’s Gossan Prospect Schematic Cross Section SMD049. 2020 Annual Report | Page 17 OPERATIONS REPORT Figure 9. Cayley Lode – Drill Collar Location Plan. Figure 10. Cayley Lode – Drill Collar Location Plan over Aeromagnetic Image. 2020 Annual Report | Page 18 OPERATIONS REPORT Figure 11. Drill Section SMD056, SMD055, SMD050, SMS010 & SMS006. Figure 12. Drill Section SMD059, SMD051 & SMS001D. 2020 Annual Report | Page 19 OPERATIONS REPORT Figure 13. Drill Section SMD064. Figure 14. Drill Section SMD087, SMD058 & SMS004. 2020 Annual Report | Page 20 OPERATIONS REPORT Figure 15. Drill Section SMD084, SMD068, SMD092 and SMD088. Figure 16. Drill Section SMD065, SMD066 & SMD089. 2020 Annual Report | Page 21 OPERATIONS REPORT Figure 17. Drill Section SMD073 & SMD072. Figure 18. Junction 3 Drill Collar Location Plan. 2020 Annual Report | Page 22 OPERATIONS REPORT Figure 19. Junction 3 Drill Collar Locations over Aeromagnetics. Black Range Joint Venture Project During the year, work conducted on the Black Range JV included the completion of two diamond drill holes at the Yarram Gap prospect (Figure 20). The Yarram Gap prospect comprises two inferred Cambrian intrusions within ultramafic and volcanic units of the Stavely Belt and is considered to have potential for porphyry copper- gold and epithermal gold mineralisation. The possible intrusions coincide with demagnetized zones, surrounded by strongly magnetic units. They occur at the intersection between the northwest-trending Elliott Belt and the northerly-trending Stavely Belt. Diamond hole SYGD001 was drilled to a depth of 201.6m at the Yarram Gap prospect targeting the north-west trending contact between volcanic-sedimentary rocks and serpentinite (Figure 21). SYGD001 was positioned to test beneath the historic aircore gold intersect of 3m at 1.42g/t gold from 24m. The hole did intersect a fault zone however there was no obvious indications of gold mineralisation associated with the fault. Diamond hole SYGD002 (Figure 21) was drilled to a depth of 201.5m to target the ultramafic contact. Unfortunately, SYDG002 went directly into serpentinite at 25m, directly below the cover and failed to test the ultramafic contact. Neither of the drill holes returned any anomalous gold or base metal results. 2020 Annual Report | Page 23 OPERATIONS REPORT Figure 20. Location of the Yarram Gap Prospect – Black Range JV. 2020 Annual Report | Page 24 OPERATIONS REPORT Figure 21. Black Range JV – Drill Hole Location Plan. Yarram Park Project The Yarram Park Project is located within an area where interpretation of the regional aeromagnetic data has identified the presence of an offset portion of either the Mount Stavely Belt, or the parallel Bunnagul Belt, beneath the Quaternary cover. Both the Mount Stavely Belt and the Bunnagul Belt are considered to be highly prospective for intrusive-related porphyry copper-gold and diatreme-hosted gold mineralisation. Maiden drilling in 2017 confirmed the existence of the right host rocks with the presence of distal porphyry-style alteration. During the year, assays were received for the one diamond hole, STWD004, drilled at the Toora West prospect in 2019 (Figure 22). Toora West Prospect Diamond hole STWD004 was drilled to a depth of 372 metres to test a discrete magnetic anomaly in the vicinity of the previous drilling at the Toora West prospect. STWD004 intercepted a south westerly-dipping sequence of massive and amygdaloidal basaltic andesite and basalt lavas, intruded by numerous, northwest and southwest- dipping stocks and/or dykes of very coarse-grained, sparsely feldspar phyric rhyodacite. The lavas were overprinted by a moderate pervasive chlorite±magnetite±epidote alteration assemblage with intervals of coarse- grained blebby pyrite and trace chalcopyrite. Below 170m, the lavas were cut by laminated quartz+pyrite shear- related veins with sericite selvedges and low temperature carbonate+quartz veins with colloform banding and no sulphides. The circular aeromagnetic feature appears to be related to patchy secondary magnetite within the 2020 Annual Report | Page 25 OPERATIONS REPORT intermediate to mafic lavas. No anomalous gold and only minor anomalous base metal assays were returned from drill hole STWD004. Figure 22. Yarram Park Project - Drill Collar Plan over Aeromagnetic Image. Ravenswood Project The Ravenswood Project is highly prospective for gold-copper mineralisation, with excellent potential for orogenic and intrusive-related gold mineralisation, epithermal gold mineralisation as well as having four porphyry copper-molybdenum-gold prospects identified. During the year, work commenced on applications for approvals, gaining landholder access and cultural heritage clearance for a drill program planned at the Kirkers prospect on EPM26041 (Figure 23). At the Kirkers prospect, rock chip sampling in 2017 returned up to 3.71g/t gold and 536ppm copper from the NE- trending Kirkers vein. Recent mapping has indicated that the 670m long vein possibly bifurcates into two or more subparallel veins at the southern end. Mineralised quartz veins containing hematite, galena and chalcopyrite rimmed by chalcocite extend 500m SW of the Kirkers mine. 2020 Annual Report | Page 26 OPERATIONS REPORT Figure 23. Ravenswood Project - Project Location Plan. Tasmania and Central Victoria During the year, the Company’s wholly owned subsidiary, Stavely Tasmania Pty Ltd (Stavely Tasmania), was granted three exploration licences (EL19/2018, EL4/2019 & EL6/2019) within the highly prospective Alberton – Mathinna “Gold Corridor” in northeast Tasmania (Figure 24). The Mathinna Goldfield, which was particularly prolific prior to the first World War produced 289,000 ounces of gold up to 19322. In addition, Stavely Tasmania acquired a key exploration licence (EL2/2015) covering the structural extension of the high-grade Mathinna Gold Project in Tasmania; the majority of the historical Lefroy goldfield (EL3/2015, RL1/2015) where past gold production is reported to be 180,000 oz at 28g/t gold3; and an exploration licence (EL6668) in central Victoria approximately 10km east of the world-class 9 million-ounce Fosterville Gold Mine (Figure 25). 2 Tasmania Department of Mines – Report 1992/10, Northeast Goldfields: A Summary of the Tower Hill, Mathinna and Dans Rivulet Goldfields, Taheri and Findlay, 1992 3 Tasmania Department of Mines – Report 1994/03, Northeast Goldfields: A Summary of the Beaconsfield, Lefroy, Back Creek and Gladstone goldfields, McClenaghan, 1994 2020 Annual Report | Page 27 OPERATIONS REPORT Figure 24. Tasmania Project Location Plan. 2020 Annual Report | Page 28 OPERATIONS REPORT Figure 25. Central Victoria Project Location Plan. Mathinna Project A total of seven diamond drill holes were completed for 2,194m at the Mathinna Project in the vicinity of the New Golden Gate Mine (Figure 26). Three diamond drill holes (MDD002 to MDD004) were designed to test the potential extensions of the historical mine area. Drill hole MDD001 failed and was redrilled as MDD002. Four diamond drill holes (MDD005 to MDD008) were drilled as part of Mineral Resources Tasmania’s (MRT) Exploration Drilling Initiative Program to better understand the overall stratigraphic and structural setting of the Mathinna area. The extensional drilling identified lode style gold mineralisation in the projected locations and included a number of intervals containing small amounts of visible gold (Photo 1). Photo 1. Photograph of Visible Gold in Mathinna Diamond Drilling (MDD005 179.3m Down-hole). 2020 Annual Report | Page 29 OPERATIONS REPORT Significant intercepts (using 30g Fire Assay method) include: o MDD002 - 3m at 1.48 g/t Au from 90m ▪ 3.05m at 1.38 g/t Au from 113.95m4 ▪ 3.24m at 1.20 g/t Au from 126m ▪ 4m at 1.67 g/t Au from 312m o MDD004 - 1m at 2.77 g/t Au from 133.4m o MDD005 - 8m at 0.61 g/t Au from 44m ▪ 2.69m at 0.48 g/t Au from 61.95m ▪ 0.54m at 0.27 g/t Au from 179.3m3 The individual sample repeatability using the 30g fire assay methods available in Tasmania was poor. As a result, anomalous samples from MDD002 were sent to Perth for check analysis using the larger (500g) sample sized PhotonAssay method. The individual check assays using the PhotonAssay method varied from the original 30g fire assay (FA) results by up to +420% (0.32g/t using FA repeated at 1.66g/t using PhotonAssay) and the overall mineralised zones were up to 51% higher using the larger (and more representative) PhotonAssay method (MDD002 113.95m to 117m - 3.05m at 1.38 g/t using FA methods repeated at 2.09 g/t using PhotonAssay). Clearly variability of this magnitude is unusual and needs to be investigated along with the low grades reported from intervals where visible gold was observed. Individual sample results from MDD002 using the PhotonAssay method identified that the gold distribution in a number of the samples was heterogeneous, indicating the presence of nuggety coarse gold. This could go part of the way to explain why the very small (30g) fire assay methods available in Tasmania have not resulted in higher grade results. Based on the limited amount of check assay results to date, the results received using the 30g fire assay method (and reported above) may not be representative of the mineralisation. Four co-funded drill holes (MDD005 – 008) were completed to understand the stratigraphic and structural setting of the Mathinna mineralisation. MRT’s Exploration Drilling Grant Initiative contributed 50% of direct drilling costs, capped at $100,000 for these four holes. These holes have provided a significant dataset of excellent structural information that will help to target further exploration both at Mathinna and along the structural trend which extends for more than 30km from Tower Hill in the south to Alberton in the north. 4 Interval where visible good was observed 2020 Annual Report | Page 30 OPERATIONS REPORT Figure 26. Mathinna Project - Diamond Drill Hole Location Plan. 2020 Annual Report | Page 31 OPERATIONS REPORT Table 3. Cayley Lode - Significant Intercept Table. Thursday’s Gossan Prospect – Cayley Lode Intercept Table MGA 94 zone 54 Intercept Hole id Hole Type East North Dip/ Azimuth RL (m) Total Depth (m) From (m) SMD050 DD 642070 5836609 -60/59.5 264 132.6 Incl. and 62 82 85 To (m) 94 94 87 SMD051 DD 642160 5836476 -60/59.5 264 220.9 98.0 157.0 96.7 101.1 Incl. and 106.6 115.1 134.0 137.0 177.0 185 Incl. 179.0 181.0 SMD052 DD 642238 5836421 -60/59.5 264 271.7 SMD053 DD 642302 5836355 -60/59.5 264 273.6 Incl. Incl. 25 76 77 30 92 92 84 52 176 178 SMD054 DD 642048 5836641 -60/59.5 264 245.52 Incl. and and Incl. Incl. SMD055 DD 642032 5836595 -60/59.5 264 169.9 SMD056 DD 642031 5836590 -60/59.5 264 185.8 202 203 204 55 86 90 92 96 24 78 156 162 79 207 204 205 57 97 97 95 101 29 83 157 163 82 Width (m) Cu (%) Au Ag (g/t) (g/t) Ni (%) 32 12 2 4.4 59 8.5 3.0 8.0 2.0 67 16 7 22 2 5.88 1.00 58 14.3 2.26 40 3.00 145 517 1.80 0.43 15.4 4.38 0.87 32.7 5.66 0.29 4.60 9.69 0.40 16.8 17.30 0.57 13.1 0.38 0.10 0.63 0.28 0.98 0.23 0.37 2.5 7.0 12 1.17 1.23 4.1 5.81 3.20 43.6 8.42 1.77 97 2.91 8.69 23.9 5 1 1 2 1.89 0.56 11 4.62 0.57 7 3 5 5 5 1 1 3 7.10 0.72 10.87 0.67 1.00 0.32 1.37 0.17 1.18 0.72 3.64 0.60 1.68 0.18 16 25 39 52 7 8 8 43 8 3.98 1.42 201 211.3 10.3 3.09 1.69 22.6 157 165.3 8.3 1.65 0.23 7.2 Incl. 157 160 3 3.75 0.25 10.2 SMD057 SMD058 DD DD 642386 5836309 -60/59.5 264 242.2 642115 5836542 -60/59.5 264 140.5 Incl. No Significant Results 19 68 88 48 91 91 29 23 3 0.37 1.34 0.26 6.33 0.27 3.5 2.9 2020 Annual Report | Page 32 OPERATIONS REPORT Thursday’s Gossan Prospect – Cayley Lode Intercept Table MGA 94 zone 54 Hole id Hole Type East North Dip/ Azimuth RL (m) Total Depth (m) SMD059 DD 642122 5836461 -60/59.5 264 317.8 Intercept From (m) 21 197 235 To (m) 22 202 253 Incl. 245.8 252.6 Width (m) Cu (%) Au Ag (g/t) (g/t) Ni (%) 1 5 18 6.8 3.15 3.28 0.27 1.00 0.10 1.85 0.17 SMD060 DD 642137 5836508 -60/59.5 264 203.2 19.2 135.4 102.31 0.68 Incl. Incl. and Incl. 74 74 135.4 48.22 1.04 0.31 86 12 1.55 0.63 111 135.4 13.63 1.90 0.38 129 135.1 6.10 3.55 0.73 116.6 119 2.44 SMD061 SMD062 DD DD 642276 586435 -60/59.5 264 219.5 160.2 164.5 642337 5836367 -60/59.5 264 227.70 25 13 3 6 14 13 33 41 23 11 16 31 35 1.20 Incl. and SMD063 SMD064 SMD065 SMD066 SMD067 DD DD DD DD DD 642063 5836585 -60/59.5 264 162.7 642041 5836619 -60/59.5 264 184.9 Incl. 642427 5836356 -60/239.5 264 350 641936 5836807 -60/59.5 264 294 641884 5836880 -60/59.5 264 236 Incl. SMD068 DD 642342 5836414 -60/239.5 264 342 641725 5837063 -60/59.5 264 Incl. 130.7 642199 5836451 -60/59.5 264 275.9 Incl. and and 100.9 641585 5837196 -60/59.5 264 641473 5837155 -60/59.5 264 409.9 SMD069 SMD070 DD DD SMD072 SMD073 DD DD 128 156 160 160 106 121 128 16 25 107 50.3 98 285 20 65 69.3 71 149 359 131 162 162 161 107 129 129 34 27 109 102 102 287 95 84 73 72 153 364 4.3 3.0 6.0 2.0 1.0 1.0 8.0 1.0 2.06 0.44 2.43 0.25 3.95 0.38 7.46 0.61 10.5 0.86 1.10 0.16 5.12 1.48 5.5 34 26.8 8.48 201 Assays Pending No Significant Results 18.0 0.43 0.35 2.0 2.0 1.21 0.27 1.32 51.7 0.39 4 2 1.75 0.31 0.26 0.65 No Significant Results 75.0 0.60 0.19 19.0 1.48 0.40 13 27 8 16 1.8 5 15 66 3.7 1.0 6.02 1.18 9.23 2.67 125 No Significant Results 4.0 5.0 0.9 1.31 0.31 0.25 1.67 0.42 4.58 6 27 51 2020 Annual Report | Page 33 Incl. 361.1 362 OPERATIONS REPORT Thursday’s Gossan Prospect – Cayley Lode Intercept Table MGA 94 zone 54 Hole id Hole Type East North Dip/ Azimuth RL (m) Total Depth (m) SMD074 DD 642162 5836437 -60/59.5 264 302 Intercept From (m) 25 To (m) Width (m) Cu (%) Au Ag (g/t) (g/t) Ni (%) 59 34.0 0.32 176 183.6 7.6 1.36 0.24 193 197.7 4.35 1.94 0.27 213 234.3 21.3 1.31 0.43 7 10 6 SMD076 DD 642174 5836523 -60/59.5 264 198.4 Incl. 128 139 144 144 16 5 1.01 0.24 6.5 2.42 0.55 SMD078 DD 642237 5836464 -60/59.5 264 274.9 227.2 231 3.8 4.97 3.08 SMD079 DD 642099 5836496 -60/59.5 264 306.7 SMD080 DD 642196 5836406 -60/59.5 264 309.3 24 86 141 153 159 41 87 144 154 161 17 0.31 1 3 1 2 1.29 0.41 1.38 0.15 1.16 0.31 0.64 1.82 207.9 211 3.1 3.16 0.70 23 25 25 52 2 27 1.75 0.58 SMD082 DD 642264 5836342 -60/59.5 264 313.4 Incl. Incl. 154 157.95 3.95 3.78 0.43 54 Incl. 156 157.95 1.95 7.02 0.35 102 189 196 7 1.07 0.26 224.2 230.6 6.4 2.71 0.52 23 8.3 32 99 117.3 85.3 0.82 117.3 18.3 2.56 0.16 9.4 104.5 116 11.5 3.76 0.23 243 247.8 4.8 2.42 0.31 SMD083 DD 642599 5835995 -60/49.5 264 433.1 Assays Pending SMD084 DD 642236 5836364 -60/59.5 264 278.1 43 72 SMD085 DD 642444 5836022 -60/49.5 264 522.3 Incl. Incl. Incl. Incl. 132 157 197 339 357 201 201 201 362 361 358 359 29 69 44 4 23 4 1 0.44 1.00 0.18 1.43 0.26 4.16 0.61 1.07 0.11 4.44 0.26 9.44 0.22 14 81 9 5 8 8.4 30 14 25 5.4 7.3 23 7.9 6.4 2020 Annual Report | Page 34 OPERATIONS REPORT Thursday’s Gossan Prospect – Cayley Lode Intercept Table MGA 94 zone 54 Intercept Hole id Hole Type East North Dip/ Azimuth RL (m) Total Depth (m) From (m) To (m) Width (m) Cu (%) Au Ag (g/t) (g/t) Ni (%) SMD086 DD 642465 5836370 -60/239.5 264 385.9 142 154 12 1.01 0.18 Incl. 149 153 261 262 301 308 318 321 326 140 327 2276 163 187 170 172 4 1 7 3 1 87 24 2 2.33 0.42 2.17 7.06 0.16 0.48 2.6 5.3 7.9 15 0.32 0.49 0.29 3.4 5.90 0.33 1.74 0.57 4.19 1.27 11.75 1.45 47 20 53 66 181.7 183.2 1.5 13.28 2.58 209 185.6 186.4 0.8 24.1 1.16 249 185 187 218 227 226 227 2 9 1 9.95 0.71 107 0.89 4.09 1.83 1.30 10.05 39 48 SMD087 DD 642060 5836522 -60/59.5 264 268.3 Incl. and and and and Incl. and SMD088 DD 642427 5836445 -60/239.5 264 405.5 212.3 242.3 30 1.98 0.23 9.1 SMD089 DD 642502 5836384 -60/239.5 262 Incl. and Incl. and and 502.1 Incl. Incl. Incl. Incl. Incl. 216 226.8 10.8 3.20 0.31 233.2 239 5.8 3.54 0.43 319.5 370 50.5 0.88 0.11 319.5 331.2 11.7 1.42 0.15 342 357.6 15.6 1.26 0.17 365.6 370 4.4 1.61 0.20 87 91 98.8 11.8 1.54 0.42 94 3 3.28 1.09 214 233.9 19.9 2.40 0.35 219 226.1 7.1 4.30 0.52 219 222 3 6.02 0.71 271 280.7 9.7 3.10 0.97 16 14 3.8 4.5 5.0 5.7 14 34 17 35 52 26 88 273 275 273 274 2 1 7.86 2.09 11.05 2.73 131 SMD090 DD 642068 5836563 -60/59.5 262 213.8 SMD091 DD 642374 5836383 -60/59.5 262 191 SMD092 DD 642346 5836411 -60/59.5 262 222 SMS001D Sonic/ DD 642197 5836489 -60/59.5 264 212 Assays Pending Assays Pending Assays Pending No Significant Results 2020 Annual Report | Page 35 OPERATIONS REPORT 1. 2. 3. 4. 5. 6. Excluding 13.9m of core loss Excluding 13.2m of core loss Excluding 10.8m of core loss 1.8m of core loss immediately above this interval 0.4m of core loss included in this interval 0.3m of core loss included in this interval JORC Compliance Statement The information in this report that relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Chris Cairns, a Competent Person who is a Member of the Australian Institute of Geoscientists. Mr Cairns is a full-time employee of the Company. Mr Cairns is the Managing Director of Stavely Minerals Limited, is a substantial shareholder of the Company and is an option holder of the Company. Mr Cairns has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Cairns consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. With respect to reporting of the Mineral Resources at the Mt Ararat VMS copper-gold-zinc deposit and Thursday’s Gossan chalcocite copper deposit, the information is extracted from the report entitled “Mount Ararat 2015 Resource Estimate Report” and “Appendix 1, Reporting of Thursday Gossan Chalcocite Copper Resource against criteria in Table 1 JORC Code 2012” dated 24 August 2015 authored by Mr Duncan Hackman of Hackman and Associates Pty Ltd. Mr Hackman is a Member of the Australian Institute of Geoscientists and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (The JORC Code, 2012 Edition). As there has been no new information generated from the Mineral Resource areas, Mr Cairns has reviewed the underlying assumptions in the 2015 Mineral Resources reports and finds that there have been no material changes and that the underlying assumptions and technical parameters remain valid. There are therefore no changes to the Mineral Resources estimates from this annual review. Stavely Minerals’ policy for Mineral Resources estimates is to have the estimates done by suitably qualified and experienced external consultants and have these estimates reviewed internally by suitably qualified and experienced Stavely Minerals’ personnel. Bibliography Cayley, R.A and Taylor, D.H., 2001, Ararat: 1:100 000 map area geological report. Geological Survey of Victoria Report 115. Crawford, A.J., Cayley, R.A., Taylor, D.H., Morand, V.J., Gray, C.M., Kemp. A.I.S., Wohlt, K.E., Vandenberg, A.H.M., Moore, D.H., Maher, S., Direen, N.G., Edwards, J., Donaghy, A.G., Anderson, J.A., and Black, L.P., 2003, Neoproterozoic and Cambrian continental rifting, continent-arc collision and post-collisional magmatism in Evolution of the Palaeozoic Basement. Geological Society of Australia, Sydney, Australia, pages 73 -93. Schofield, A. (ed) 2018, Regional geology and mineral systems of the Stavely Arc, western Victoria. Record 2018/02. Geoscience Australia, Canberra. 2020 Annual Report | Page 36 DIRECTORS’ REPORT Your Directors present their report for the year ended 30 June 2020. DIRECTORS The names and particulars of the Directors of the Company in office during the financial year and up to the date of this report were as follows. Directors were in office for the entire year unless otherwise stated. Christopher Cairns B.Sc (Hons) Executive Chairman & Managing Director (Appointed 23 May 2006, appointed Chairman 14 September 2018) Mr Christopher Cairns completed a First Class Honours degree in Economic Geology from the University of Canberra in 1992. Mr Cairns has extensive experience having worked for: • BHP Minerals as Exploration Geologist / Supervising Geologist in Queensland and the Philippines • Aurora Gold as Exploration Manager at the Mt Muro Gold Mine in Borneo • • LionOre as Supervising Geologist for the Thunderbox Gold Mine and Emily Anne Nickel Mine drill outs Sino Gold as Geology Manager responsible for the Jinfeng Gold Deposit feasibility drillout and was responsible for the discovery of the stratabound gold mineralisation taking the deposit from 1.5Moz to 3.5Moz in 14 months. Mr Cairns joined Integra Mining Limited in March 2004 and as Managing Director oversaw the discovery of three gold deposits, the funding and construction of a new processing facility east of Kalgoorlie transforming the company from explorer to gold producer with first gold poured in September 2010. In 2008 Integra was awarded the Australian Explorer of the Year by Resources Stocks Magazine and in 2011 was awarded Gold Miner of the Year by Paydirt Magazine and the Gold Mining Journal. In January 2013, Integra was taken over by Silver Lake Resources Limited for $426 million (at time of bid) at which time Mr Cairns resigned along with the whole Integra Board after having successfully recommended shareholders accept the Silver Lake offer. Mr Cairns is a member of the Australian Institute of Geoscientists, a member of the JORC Committee and Chairman of the Australian Prospectors and Miners Hall of Fame. Other directorships of listed companies in the last three years: None. Jennifer Murphy B.Sc(Hons), M.Sc Executive Technical Director (Appointed 8 March 2013) Ms Jennifer Murphy completed a First Class Honours Degree in Geology in 1989, and subsequently a Master of Science Degree in 1993 at the University of Witwatersrand in South Africa. Ms Murphy joined Anglo American Corporation in 1993 as an exploration geologist working in Tanzania and Mali. In 1996, she immigrated to Australia and joined Normandy Mining Limited, working initially as a project geologist in the Eastern Goldfields and Murchison Greenstone Provinces and afterwards was responsible for the development and management of the GIS and administration of the exploration database. Between 2004 and 2007, Ms Murphy provided contract geological services to a range of junior exploration companies. Ms Murphy joined Integra Mining Limited in 2007, initially as an administration geologist, and in 2010 the role was expanded to that of corporate geologist. In 2013 Ms Murphy joined Stavely Minerals as part of the management team to provide technical and geological expertise. Ms Murphy is a member of the Australian Institute of Geoscientists and has a broad range of geological experience ranging from exploration program planning and implementation, GIS and database management, business development, technical and statutory, and ASX reporting, as well as corporate research and analysis and investor liaison. Ms Murphy is a member of the Company’s Audit and Risk Committee. Other directorships of listed companies in the last three years: None. 2020 Annual Report | Page 37 DIRECTORS’ REPORT Peter Ironside B.Com, CA Non Executive Director (Appointed 23 May 2006) Mr Peter Ironside has a Bachelor of Commerce Degree and is a Chartered Accountant and business consultant with over 30 years’ experience in the exploration and mining industry. Mr Ironside has a significant level of accounting, financial compliance and corporate governance experience including corporate initiatives and capital raisings. Mr Ironside has been a Director and/or Company Secretary of several ASX listed companies including Integra Mining Limited and Extract Resources Limited (before $2.18Bn takeover) and is currently a non-executive director of Zamanco Minerals Limited. Mr Ironside is Chair of the Company’s Audit and Risk Committee. Other directorships of listed companies in the last three years: Zamanco Minerals Limited (current) (removed from the Official List of ASX on 26 September 2019). Amanda Sparks B.Bus, CA, F.Fin Non Executive Director (Appointed 14 September 2018) and Company Secretary (Appointed 7 November 2013) Ms Amanda Sparks is a Chartered Accountant and a Fellow of the Financial Services Institute of Australasia. Ms Sparks has over 30 years of resources related financial experience, both with explorers and producers. Amanda brings a range of important skills to the Board with her extensive experience in financial management, corporate governance and compliance for listed companies. Ms Sparks is a member of the Company’s Audit and Risk Committee. Other directorships of listed companies in the last three years: None. MEETINGS OF DIRECTORS During the financial year, 8 meetings of directors were held. The number of meetings attended by each director during the year is as follows: C Cairns J Murphy P Ironside A Sparks Board of Directors Audit and Risk Committee Meetings Held** 8 8 8 8 Meetings Attended 8 8 8 8 Meetings Held** * 2 2 2 Meetings Attended * 2 2 2 * Not a member of the Audit and Risk Committee ** Number of meetings held where the Director was a member of the Board or Committee. In addition to formal Board meetings, the Directors work in the same office and hold discussions on a regular basis. DIRECTORS’ INTERESTS IN SHARES AND OPTIONS The following table sets out each director’s relevant interest in shares and options in shares of the Company as at the date of this report. Name of Director Number of Shares (direct and indirect) C Cairns J Murphy P Ironside A Sparks 8,032,268 5,146,705 31,887,982 2,171,206 Number of Unlisted Options at $1.47, expiry 30/11/2022 750,000 550,000 375,000 375,000 2020 Annual Report | Page 38 DIRECTORS’ REPORT DIVIDENDS No dividends were paid or declared during the year. The Directors do not recommend payment of a dividend. ENVIRONMENTAL REGULATIONS The Group’s environmental obligations are regulated by the laws of Australia. The Group has a policy to either meet or where possible, exceed its environmental obligations. No environmental breaches have been notified by any governmental agency as at the date of this report. The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and energy use. The Directors have assessed that there are no current reporting requirements, but may be required to do so in the future. CORPORATE INFORMATION Corporate Structure Stavely Minerals Limited is a limited liability company that is incorporated and domiciled in Australia. Stavely Minerals Limited has prepared a consolidated financial report incorporating the entities that it controlled during the financial year as follows: Stavely Minerals Limited Ukalunda Pty Ltd Van Diemens Gold Limited (formerly Stavely Tasmania Holdings Pty Ltd) Stavely Tasmania Operations Pty Ltd Stavely Tasmania Pty Ltd - - - - - parent entity 100% owned controlled entity 100% owned controlled entity 100% owned controlled entity 100% owned controlled entity Principal Activity The Group’s principal activity was mineral exploration for the year ended 30 June 2020. There were no significant changes in the nature of the principal activities during the year. Operations review Refer to the Operations Review on pages 4 to 36. Summary of Financial Position, Asset Transactions and Corporate Activities A summary of key financial indicators for the Group, with prior period comparison, is set out in the following table: Year Year 30 June 2020 30 June 2019 $ $ Cash and cash equivalents held at year end 9,424,932 2,875,862 Net loss for the year after tax Included in loss for the year: Exploration costs Equity-based payments (15,306,220) (9,012,511) (12,560,283) (6,700,678) (1,338,930) (1,172,406) Basic loss per share (cents) from continuing operations (7.48) (5.65) Net cash used in operating activities Net cash used in investing activities Net cash from financing activities (11,332,767) (7,336,529) (346,387) (364,225) 18,228,224 4,017,574 During the year: - On 18 October 2019, Stavely issued 19,610,000 shares at $1.00 per share pursuant to a placement to sophisticated and institutional investors. Gross proceeds were $19,610,000. 2020 Annual Report | Page 39 DIRECTORS’ REPORT SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs of the Group during the financial year are detailed on pages 4 to 36 of this report. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The Group anticipates to continue its exploration activities and consider corporate transactions to ensure further development of its tenements. 2020 Annual Report | Page 40 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) The Directors present the 2020 Remuneration Report, outlining key aspects of Stavely’s remuneration policy and framework, together with remuneration awarded this year. The report is structured as follows: A. Key management personnel (KMP) covered in this report B. Remuneration policy, link to performance and elements of remuneration C. Contractual arrangements of KMP remuneration D. Remuneration of key management personnel E. Equity holdings and movements during the year F. Other transactions with key management personnel G. Use of remuneration consultants H. Voting of shareholders at last year’s annual general meeting A. KEY MANAGEMENT PERSONNEL (KMP) COVERED IN THIS REPORT For the purposes of this report key management personnel of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether Executive or otherwise). Key Management Personnel during the Year Non-Executive Directors Peter Ironside Amanda Sparks – – Director (from 23 May 2006) Director (from 14 September 2018) Executive Directors Christopher Cairns Jennifer Murphy – – Executive Chairman and Managing Director (from 23 May 2006, Chairman from 14 September 2018) Technical Director (from 8 March 2013) B. REMUNERATION POLICY, LINK TO PERFORMANCE AND ELEMENTS OF REMUNERATION Remuneration Governance The Board is responsible for ensuring that the Company’s remuneration structures are aligned with the long- term interests of Stavely and its shareholders. Once the Board is of a sufficient size and structure, and the Company’s operations are of a sufficient magnitude, to assist the Board in fulfilling its duties, the Board will establish a Remuneration Committee. Until that time, the Board has taken a view that the full Board will hold special meetings or sessions as required. The Board are confident that this process is stringent and full details of remuneration policies and payments are provided to shareholders in the annual report and on the web. The Board has adopted the following policies for Directors’ and executives’ remuneration. 2020 Annual Report | Page 41 DIRECTORS’ REPORT Remuneration Philosophy The performance of the Group depends upon the quality of its Directors and Executives. To prosper, the Group must attract, motivate and retain highly skilled Directors and Executives. To this end, the Group embodies the following principles in its remuneration framework: • • • provide competitive rewards to attract high calibre Executives; link Executive rewards to shareholder value; and in the future, will establish appropriate, demanding performance hurdles in relation to variable Executive remuneration. In accordance with best practice corporate governance, the structure of non-executive director and executive compensation is separate and distinct. Non-Executive directors’ remuneration Objective The Board seeks to set aggregate remuneration at a level which provides the Group with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Structure Non-executive Directors’ fees are paid within an aggregate limit which is approved by the shareholders from time to time. Retirement payments, if any, are agreed to be determined in accordance with the rules set out in the Corporations Act as at the time of the Director’s retirement or termination. Non-executive Directors’ remuneration may include an incentive portion consisting of options, as considered appropriate by the Board, which may be subject to shareholder approval in accordance with ASX listing rules. The option incentive portion is targeted to add to shareholder value by having a strike price considerably greater than the market price at the time of granting. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. The Board considers the amount of Director fees being paid by comparable companies with similar responsibilities and the experience of the Non-executive Directors when undertaking the annual review process. Executive Director Remuneration Objective The Group aims to reward Executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group and so as to: • • • reward Executives for company, and individual performance; ensure continued availability of experienced and effective management; and ensure total remuneration is competitive by market standards. Structure In determining the level and make-up of Executive remuneration, the Board negotiates a remuneration to reflect the market salary for a position and individual of comparable responsibility and experience. Remuneration is regularly compared with the external market by participation in industry salary surveys and during recruitment activities generally. If required, the Board may engage an external consultant to provide independent advice in the form of a written report detailing market levels of remuneration for comparable Executive roles. Remuneration consists of a fixed remuneration and a long term incentive portion as considered appropriate. Fixed Remuneration - Objective The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually by the Board and the process consists of a review of Group and individual performance, and relevant comparative remuneration in the market. As noted above, the Board may engage an external consultant to provide independent advice. Fixed Remuneration - Structure The fixed remuneration is a base salary or monthly consulting fee. 2020 Annual Report | Page 42 DIRECTORS’ REPORT Variable Pay - Long Term Incentives - Objective The objective of long term incentives is to reward Executives in a manner which aligns this element of remuneration with the creation of shareholder wealth. The incentive portion is payable based upon attainment of objectives related to the Executive’s job responsibilities. The objectives vary, but all are targeted to relate directly to the Group’s business and financial performance and thus to shareholder value. Variable Pay — Long Term Incentives – Structure Long term incentives granted to Executives are delivered in the form of options. The option incentives granted are aimed to motivate Executives to pursue the long term growth and success of the Group within an appropriate control framework and demonstrate a clear relationship between key Executive performance and remuneration. Director options are granted at the discretion of the Board and approved by shareholders. Other key management employees may be granted options. Performance hurdles are not attached to vesting periods; however the Board determines appropriate vesting periods to provide rewards over a period of time to key management personnel. During the year, no performance related cash payments were made. C. CONTRACTUAL ARRANGEMENTS OF KMP REMUNERATION On appointment to the board, all non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the board policies and terms, including compensation, relevant to the office of director. Remuneration and other terms of employment for the executive directors and the other key management personnel are also formalised in service agreements. The major provisions of the agreements relating to remuneration are set out below. Director Name Christopher Cairns Jennifer Murphy Term of agreement Commenced 22/1/2014 (varied effective 1/11/2017 & 31/12/2019) Commenced 22/1/2014 (varied effective 1/11/2017, 15/10/2018 & 31/12/2019) Peter Ironside Ongoing, subject to re-elections Amanda Sparks Ongoing, subject to re-elections Base annual salary exclusive of statutory superannuation at 30/6/2020 Termination benefit $300,000 12 months $220,000 12 months $50,000 $100,000 None None 2020 Annual Report | Page 43 DIRECTORS’ REPORT D. REMUNERATION OF KEY MANAGEMENT PERSONNEL Details of the remuneration of each key management personnel of the Group, including their personally-related entities, during the year were as follows: Cash salary, directors fees, consulting fees, insurances and movement in annual leave provisions $ - 95,833 380,334 198,580 271,447 141,519 43,000 28,700 68,000 53,500 762,781 518,132 Year 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 Post Employment Share Based Superannuation and movement in long service leave provisions $ Total Cash and Provisions $ Total including share based payments $ Options (1) $ - 11,057 32,963 19,000 27,253 13,537 4,085 2,726 6,460 2,726 70,761 49,046 - 106,890 413,297 217,580 298,700 155,056 47,085 31,426 74,460 56,226 833,542 567,178 - 112,371 371,925 224,742 272,745 164,811 185,963 112,371 185,963 112,371 - 219,261 785,222 442,322 571,445 319,867 233,048 143,797 260,423 168,597 1,016,596 1,850,138 726,666 1,293,844 Directors W Plyley* C Cairns J Murphy P Ironside A Sparks** TOTAL (1) Equity based payments – options. These represent the amount expensed for options granted and vested in the year with an exercise price of $1.47 (2019: $0.36). * Ceased as a director on 20 November 2018 ** Appointed as director on 14 September 2018. Remuneration includes director and company secretarial fees. There were no performance related payments made during the year. Performance hurdles are not attached to remuneration options; however, the Board determines appropriate vesting periods to provide rewards over a period of time to key management personnel. Share-based Compensation During the year, the following options were granted as equity compensation benefits to Directors and other Key Management Personnel. These options vested at grant date. 2020 Directors C Cairns J Murphy P Ironside A Sparks Number of Options at $1.47, expiry 30/11/2022 Value* per option at grant date $ 750,000 550,000 375,000 375,000 0.4959 0.4959 0.4959 0.4959 These options were granted to recognise the contribution made by the Directors, and to acknowledge that the cash remuneration paid to Directors is low. These options also provide an incentive component in the remuneration package for the Related Parties to motivate and reward the performance of the Related Parties in their respective roles as Directors, which adds value for Shareholders. By offering these incentives in the form of options, rather than cash, the Company can maximise the availability of cash for the Company’s future exploration activities. The options also provide a retention incentive to all Directors. Issue of these Director options were approved by Shareholders at the Company’s Annual General Meeting held on 29 November 2019. * Value at grant date has been calculated in accordance with AASB 2 Share-based Payment. Stavely used 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 the expected volatility of the underlying share, the expected dividend 2020 Annual Report | Page 44 DIRECTORS’ REPORT yield and the risk-free interest rate for the term of the option. Further details are in note 3 of the financial statements. Shares issued to Key Management Personnel on exercise of compensation options On 5 August 2019, 5,225,000 options were exercised by Directors using the cashless exercise mechanism as part of Stavely’s Employee Incentive Plan. On exercise of the options, the Company issued 1,495,391 shares. The number of shares was determined by the value calculated between the market price of the shares (based on a VWAP for the 5 trading days prior to the exercise date) of 29.42 cents and the exercise price of 21 cents in relation to the options. On 15 October 2019, 8,200,000 options were exercised by Directors using the cashless exercise mechanism as part of Stavely’s Employee Incentive Plan. On exercise of the options, the Company issued 5,859,742 shares. The number of shares was determined by the value calculated between the market price of the shares (based on a VWAP for the 5 trading days prior to the exercise date) of $1.2614 and the exercise price of 36 cents in relation to the options. E. EQUITY HOLDINGS AND MOVEMENTS DURING THE YEAR (a) Shareholdings of Key Management Personnel 30 June 2020 Balance at beginning of the year Increase from Exercise of Options Other Net change during the year Balance at end of the year Directors C Cairns J Murphy P Ironside A Sparks 15,672,961 4,259,420 30,730,219 920,428 51,583,028 2,859,307 2,087,285 1,157,763 1,250,778 7,355,133 (9,300,000) (400,000) - - 9,232,268 5,946,705 31,887,982 2,171,206 (9,700,000) 49,238,161 All equity transactions with Key Management Personnel have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arms-length. (b) Option holdings of Key Management Personnel 30 June 2019 Directors C Cairns J Murphy P Ironside A Sparks Balance at beginning of the year Granted as remuneration Exercised during the year Balance at end of the year Exercisable 5,500,000 750,000 (5,500,000) 4,000,000 550,000 (4,000,000) 1,800,000 375,000 (1,800,000) 2,125,000 375,000 (2,125,000) 750,000 550,000 375,000 375,000 750,000 550,000 375,000 375,000 13,425,000 2,050,000 (13,425,000) 2,050,000 2,050,000 F. OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Mr Peter Ironside, Director, is a shareholder and director of Ironside Pty Ltd. Ironside Pty Ltd is a shareholder of the 168 Stirling Highway Syndicate, the entity which owns the premises the Company occupies in Western Australia. During the year an amount of $132,749 (net of GST) was paid/payable for office rental and variable outgoings (2019: $131,250, net of GST). Mr Peter Ironside, Director, is also a shareholder and non-executive director of Zamanco Minerals Limited (“Zamanco”). Zamanco sub-leases office space in the premises the Company occupies. During the year an 2020 Annual Report | Page 45 DIRECTORS’ REPORT amount of $34,151 (net of GST) was paid/payable by Zamanco to the Company for reimbursement of office rental and associated expenses (2019: $37,630, net of GST). G. USE OF REMUNERATION CONSULTANTS No remuneration consultants were engaged by the Company during the year. H. VOTING OF SHAREHOLDERS AT LAST YEAR’S ANNUAL GENERAL MEETING The Company received 95.76% of ‘yes’ votes for its remuneration report for the 2019 financial year and did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. End of Audited Remuneration Report. INDEMNIFICATION AND INSURANCE OF OFFICERS The Company has paid a premium to insure the Directors and Officers of the Company and its controlled entities. Details of the premium are subject to a confidentiality clause under the contract of insurance. The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Company. SHARES UNDER OPTION Unissued ordinary shares of the Company under option at the date of this report are as follows: Unlisted Options Number 2,700,000 Exercise Price $1.47 Expiry Date 30/11/2022 No option holder has any right under the options to participate in any other share issue of the Company or any other related entity. 7,050,000 unlisted employee/consultant options with an exercise price of 21 cents and 15,650,000 unlisted employee/consultant options with an exercise price of 36 cents were exercised during the year. Of the options exercised, 13,425,000 options were exercised by Key Management Personnel. (2019: 9,587,500 unlisted employee/consultant options with an exercise price of 19 cents were exercised. Of the options exercised, 7,075,000 options were exercised by Key Management Personnel). EVENTS OCCURRING AFTER THE REPORTING PERIOD On 22 April 2020, Stavely Minerals reached an agreement to purchase the existing 3% net smelter royalty (NSR) held by New Challenge Resources Pty Ltd on tenement RL 2017, which hosts the Thursday’s Gossan prospect and other key prospects at the Stavely Copper-Gold Project in Victoria. The consideration was a cash payment of $350,000 and the issue of 850,000 Stavely Minerals’ shares at a deemed issued price of 40 cents per share. The cash payment of $350,000 was paid to New Challenge Resources on 1 July 2020 and the shares issued on 9 July 2020. In July 2020, a Letter of Intent (LoI) was executed to divest the Company’s Mathinna/Alberton and Lefroy Goldfields tenements, as well as its Fosterville East tenement in Victoria, to Nubian Resources Ltd (TSX-V: NBR) (‘Nubian’) for A$2.5 million in Nubian shares and cash. The terms of the LoI are as follows: o Nubian to pay a non-refundable deposit of A$100,000 cash; o A 60-day exclusivity period to complete final due diligence and execute a definitive agreement; o Upon execution of the definitive agreement, Nubian will issue to Stavely Minerals a number of Nubian shares equivalent in value to A$2.4 million based on the 5-trading day volume-weighted average price (VWAP) prior to the execution date, subject to a minimum issue of 5,050,000 Nubian shares to Stavely Minerals. 2020 Annual Report | Page 46 DIRECTORS’ REPORT The consideration for the purchase is based on 100% ownership of the tenements. Stavely Minerals is in Joint Venture with Bestlevel Holdings Pty Ltd (Bestlevel), with Stavely Minerals currently holding a 75% interest in the three Mathinna JV tenements. The value of the Bestlevel 25% interest in the three Mathinna JV tenements equates to approximately A$400,000 of Nubian shares to be issued to Bestlevel or its beneficial owners. On 30 July 2020, Stavely issued 28,000,000 shares at an issue price of $0.60 per share pursuant to the first tranche of a placement to sophisticated and institutional investors. Gross proceeds were $16,800,000. The second Tranche of 13.67 million shares will be completed subject to shareholder approval at a general meeting to be held on 31 August 2020. On 14 August 2020, Stavely issued 4,645,000 shares at an issue price of $0.60 per share pursuant to a share purchase plan. Gross proceeds were $2,787,000. COVID-19 The impact of the Coronavirus (COVID-19) pandemic is ongoing and it is not practicable to estimate the potential future impact after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. There are no other matters or circumstances that have arisen since 30 June 2020 that have or may significantly affect the operations, results, or state of affairs of the Group in future financial years. CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Stavely Minerals Limited support and adhere to the principles of corporate governance. Please refer to the Company’s website for details of corporate governance policies: https://www.stavely.com.au/corporate- governance. AUDIT INDEPENDENCE AND NON-AUDIT SERVICES Auditor’s independence - section 307C The Auditor’s Independence Declaration is included on page 48 of this report. Non-Audit Services The following non-audit services were provided by the entity’s auditor, BDO. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. BDO received, or are due to receive, the following amounts for the provision of non-audit services: Taxation services Signed in accordance with a resolution of the Directors. 2020 $19,766 2019 $19,375 Christopher Cairns Managing Director Dated this 28th day of August 2020 2020 Annual Report | Page 47 AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS 2020 Annual Report | Page 48 DIRECTORS’ DECLARATION 1. In the opinion of the directors: a) The financial statements and notes are in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its performance for the year then ended; and ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations), the Corporations Regulations 2001 and other mandatory professional reporting requirements; and iii) complying with International Financial Reporting Standards (IFRS) as stated in note 1 of the financial statements; and b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2020. This declaration is signed in accordance with a resolution of the Board of Directors. Christopher Cairns Managing Director Dated this 28th day of August 2020 2020 Annual Report | Page 49 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 Revenue and Income Interest revenue Rental sub-lease revenue Profit on sale of fixed assets Government subsidies Expenses Administration and corporate expenses Administration – equity based expenses Exploration expensed Interest expense Total expenses Consolidated Year ended 30 June 2020 Year ended 30 June 2019 Note $ $ 135,366 34,151 10,436 50,000 69,299 37,630 11,951 - 229,953 118,880 2(a) 3 2(b) 2(c) (1,614,475) (1,338,930) (12,560,283) (22,485) (1,258,307) (1,172,406) (6,700,678) - (15,536,173) (9,131,391) Loss before income tax (15,306,220) (9,012,511) Income tax expense Loss after income tax attributable to members of Stavely Minerals Limited 4 - - (15,306,220) (9,012,511) Other comprehensive income/(loss) Items that may be reclassified subsequently to profit or loss: Other Other comprehensive income/(loss) for the year, net of tax - - - - Total comprehensive loss for the year (15,306,220) (9,012,511) Loss per share for the year attributable to the members of Stavely Minerals Limited Basic loss per share 5 Cents Per Share (7.48) Cents Per Share (5.65) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 2020 Annual Report | Page 50 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 ASSETS Current Assets Cash and cash equivalents Other receivables Total Current Assets Non-Current Assets Receivables Right of use assets Property, plant and equipment Deferred exploration expenditure acquisition costs Total Non-Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables Lease liabilities – Right of use assets Provisions Total Current Liabilities Non-Current Liabilities Lease liabilities – Right of use assets Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Consolidated 30 June 2020 $ Note 30 June 2019 $ 6 7 7 8 9 10 11 8 12 8 9,424,932 469,527 9,894,459 139,500 212,956 184,226 4,099,719 4,636,401 2,875,862 2,022,727 4,898,589 72,500 - 157,588 3,006,057 3,236,145 14,530,860 8,134,734 2,090,865 79,239 174,070 2,344,174 182,546 182,546 2,526,720 667,590 - 108,578 776,168 - 776,168 776,168 12,004,140 7,358,566 13 14 50,033,910 6,147,189 (44,176,959) 31,711,470 4,468,259 (28,821,163) 12,004,140 7,358,566 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 2020 Annual Report | Page 51 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 At 1 July 2018 Loss for the year Other comprehensive income/(loss) Total comprehensive loss for the year, net of tax Transactions with owners in their capacity as owners: Issue of share capital Cost of issue of share capital Share based payments Issued Capital $ Reserves $ Accumulated Losses $ Total Equity $ 24,744,232 3,295,853 (19,808,652) 8,231,433 - - - 7,258,183 (290,945) - - - - - - 1,172,406 6,967,238 1,172,406 (9,012,511) (9,012,511) - - (9,012,511) (9,012,511) - - - - 7,258,183 (290,945) 1,172,406 8,139,644 As at 30 June 2019 31,711,470 4,468,259 (28,821,163) 7,358,566 At 1 July 2019 Change in Accounting Policy – refer note 1(c) 31,711,470 4,468,259 (28,821,163) 7,358,566 - - (49,576) (49,576) Restated Equity at the beginning of the year 31,711,470 4,468,259 (28,870,739) 7,308,990 Loss for the year Other comprehensive income/(loss) Total comprehensive loss for the year, net of tax - - - Transactions with owners in their capacity as owners: Issue of share capital Cost of issue of share capital Shares to be issued – refer note 14 Share based payments - - - - - (15,306,220) (15,306,220) - - (15,306,220) (15,306,220) - - - - - 19,610,000 (1,287,560) 340,000 1,338,930 20,001,370 19,610,000 (1,287,560) - - 340,000 1,338,930 18,322,440 1,678,930 As at 30 June 2020 50,033,910 6,147,189 (44,176,959) 12,004,140 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 2020 Annual Report | Page 52 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2020 Consolidated Year ended Year ended 30 June 2020 30 June 2019 Note $ $ Cash flows from operating activities Receipts in the ordinary course of activities (incl. GST) Payments to suppliers and employees Interest received 1,319,805 (12,769,011) 116,439 867,993 (8,280,039) 75,517 Net cash flows used in operating activities 6(i) (11,332,767) (7,336,529) Cash flows from investing activities Payments for plant and equipment Proceeds from disposal of plant and equipment Payment for bonds Payment for exploration acquisitions (capitalised) Other – Beaconsfield Deposit Net cash flows used in investing activities Cash flows from financing activities Proceeds from issue of shares Payment of share issue costs Payment of lease liabilities (right of use assets) Net cash flows from financing activities (241,161) 10,436 (57,000) (158,662) 100,000 (346,387) 19,610,000 (1,287,560) (94,216) 18,228,224 (97,225) 13,000 (30,000) - (250,000) (364,225) 4,308,519 (290,945) 4,017,574 Net (decrease)/increase in cash and cash equivalents held 6,549,070 (3,683,179) Add opening cash and cash equivalents brought forward 2,875,862 6,559,041 Closing cash and cash equivalents carried forward 6 9,424,932 2,875,862 The above consolidated statement of cashflows should be read in conjunction with the accompanying notes. 2020 Annual Report | Page 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Preparation These financial statements are general purpose financial statements, which have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis. The financial report is presented in Australian dollars, which is the Group’s functional and presentation currency. Stavely Minerals Limited is a for-profit entity for the purpose of preparing the financial statements. The annual report of Stavely Minerals Limited for the year ended 30 June 2020 was authorised for issue in accordance with a resolution of the Directors on 28 August 2020. (b) Statement of Compliance These financial statements comply with Australian Accounting Standards and International Financial Reporting Standards (IFRS). (c) Adoption of New and Revised Standards and Change in Accounting Standards Early adoption of accounting standards The Group has not elected to apply any pronouncements before their operative date in the annual reporting year beginning 1 July 2019. New and amended standards adopted by the Group The Group has adopted the following new accounting policy for the current reporting period: • AASB 16 Leases AASB 16 Leases replaces AASB 117 Leases for annual periods beginning on or after 1 January 2019. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model. The Group adopted AASB 16 using the modified retrospective method of adoption with the date of initial application of 1 July 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application. The Group elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short term leases’), and lease contracts for which the underlying asset is low value (‘low-value assets’). The effect of adopting AASB 16 as at 1 July 2019 is as follows: Non-Current Assets Right of use assets Total Assets Current Liabilities Lease liabilities – Right of use assets Non-Current Liabilities Lease liabilities – Right of use assets Total Liabilities The net impact on accumulated losses was a decrease of $49,576. $ 283,940 283,940 71,731 261,785 333,516 2020 Annual Report | Page 54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as at 30 June 2019 as follows: Operating lease commitments as at 30 June 2019 – note 15 of the Annual Financial Report Less: Leases not considered right of use assets Add: Option to extend Nedlands office lease Operating Lease Commitments of Nedlands office premises as at 30 June 2019 Discounted operating lease commitments of Nedlands office premises at 1 July 2019 $ 116,765 (22,553) 292,947 387,159 333,516 Nature of the effect of adoption of AASB 16 The Group has several property lease contracts. Rental contacts for residential premises in Ararat, Victoria are typically for 12 months. The rental contract for office premises in Nedlands, WA was entered into in November 2014 for three years, and has two extension terms of three years each. Before the adoption of AASB 16, the Group classified its property leases as an operating lease as it did not transfer substantially all of the risks and rewards incidental to ownership of the leased asset to the Group. The leased properties were not capitalised and the lease payments were recognised as rent expense in profit or loss on a straight-line basis over the lease term. Upon adoption of AASB 16, the Group applied a single recognition and measurement approach for all leases, except for short-term leases and leases of low- value assets. The Standard provides specific transition requirements and practical expedients, which has been applied by the Group. The Group recognised a right-of-use asset and lease liability for the office property lease previously classified as an operating lease. The right-of-use asset was recognised based on the amount equal to the lease liability at the initial application date. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application. The Group also applied the available practical expedients, where applicable, wherein it: • Recognised lease liabilities based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application; • Relied on its assessment of whether leases are onerous immediately before the date of initial application; • Applied the short-term lease exemptions to leases with a term that ends within 12 months at the date of initial application; • Excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application; and • Used hindsight in determining the lease term where the contract contains options to extend or terminate the lease. 2020 Annual Report | Page 55 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Summary of new accounting policies Set out below are the new accounting policies of the Group upon adoption of AASB 16, which have been applied from the date of initial application: • Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, adjusted for any remeasurement of lease liabilities. The cost of right- to-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less and lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment. • Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. • Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases (ie: those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term. • Significant judgement in determining the lease term of contracts with renewal options The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has the option, under its property lease, to lease the property for an additional term of 3 years. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g. a change in business strategy). The Group included the renewal period as part of the lease term for the property lease due to being reasonably certain that the lease property will continue to suit the Group’s occupation needs at time of the extension option is able to be exercised. 2020 Annual Report | Page 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued New Accounting Standards and Interpretations not yet mandatory or early adopted by the Group Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2020. The Group’s assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out below. Conceptual Framework for Financial Reporting (Conceptual Framework) The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and early adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards. Where the Group has relied on the existing framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting Standards, the Group may need to review such policies under the revised framework. At this time, the application of the Conceptual Framework is not expected to have a material impact on the Group's financial statements. There are no other material new or amended standards not yet adopted by the Group. (d) Significant Accounting Estimates and Judgments Significant accounting judgments In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements. Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting year are: Share-based payment transactions The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black-Scholes model. Coronavirus (COVID-19) Pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the Group based on known information. Currently there is no significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the Group unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. Commitments - Exploration The Group has certain minimum exploration commitments to maintain its right of tenure to exploration permits. These commitments require estimates of the cost to perform exploration work required under these permits. Deferred Exploration Expenditure Acquisition Costs The Group capitalises acquisition expenditure relating to exploration and evaluation where it is considered likely to be recoverable or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. While there are certain areas of interest from which no reserves have been extracted, the Directors are of the continued belief that such expenditure should not be written off since exploration activities in such areas have not yet concluded. 2020 Annual Report | Page 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued (e) Basis of Consolidation and Business Combinations The consolidated financial statements comprise the financial statements of Stavely Minerals limited (“Company” or “Parent Entity”) and its subsidiaries as at 30 June each year (the Group). Subsidiaries are all entities over which the group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: - - - Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee), Exposure, or rights, to variable returns from its involvement with the investee, and The ability to use its power over the investee to affect its returns The financial statements of the subsidiaries are prepared for the same period as the parent entity, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit or losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control exists where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The acquisition of subsidiaries has been accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition. Accordingly, the consolidated financial statements include the results of subsidiaries for the period from their acquisition. The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the combination. Where equity instruments are issued in a business combination, the fair value of the instruments is their published market price as at the date of exchange, adjusted for any conditions imposed on those shares. Transaction costs arising on the issue of equity instruments are recognised directly in equity. All identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of the business combination over the net fair value of the Group's share of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less than the Group's share of the net fair value of the identifiable net assets of the subsidiary, the difference is recognised as a gain in the statement of profit or loss and other comprehensive income, but only after a reassessment of the identification and measurement of the net assets acquired. 2020 Annual Report | Page 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 2 - EXPENSES (a) Administration and Corporate Expenses Administration and corporate expenses include: Depreciation - administration Depreciation – right of use assets Office premises expenses Personnel costs – administration and corporate Other administration and corporate expenses Equity based payments expense – refer note 3 (b) Exploration Costs Expensed Exploration costs expensed include: Depreciation - exploration Exploration drilling – non-cash - refer note 13 Other exploration costs expensed Government Co-Funding for exploration (c) Interest Expensed Interest on right of use assets Year ended 30 June 2020 $ Year ended 30 June 2019 $ 23,105 70,984 40,786 1,006,080 473,520 1,614,475 1,338,930 2,953,405 191,418 1,347,550 11,121,315 (100,000) 12,560,283 7,500 - 127,644 703,856 419,307 1,258,307 1,172,406 2,430,713 59,693 1,602,114 5,147,080 (108,209) 6,700,678 22,485 - NOTE 3 – EQUITY-BASED PAYMENTS (Recognised as Remuneration Expenses) Equity settled transactions: The Group provides benefits to executive directors, employees and consultants of the Group in the form of share based payments, whereby those individuals render services in exchange for shares or rights over shares (equity- settled transactions). When provided, the cost of these equity-settled transactions with these individuals is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of options is determined using a Black-Scholes model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Stavely Minerals Limited (market conditions) if applicable. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant individuals become fully entitled to the award (the vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects: (i) (ii) (iii) the grant date fair value of the award; the extent to which the vesting period has expired; and the number of awards that, in the opinion of the Directors of the Company, will ultimately vest taking into account such factors as the likelihood of non-market performance conditions being met. This opinion is formed based on the best available information at reporting date . No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. 2020 Annual Report | Page 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 3 – EQUITY-BASED PAYMENTS (Recognised as Remuneration Expenses) – continued If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. If an equity-settled award is forfeited, any expense previously recognised for the award is reversed. However, if a new award is substituted for a cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. (a) Value of equity based payments in the financial statements Expensed in the profit or loss: Equity-based payments- options 30 June 2020 30 June 2019 $ $ 1,338,930 1,172,406 (b) Summary of equity-based payments granted during the year: Granted to key management personnel and consultants as equity compensation: Grant Date Number of Terms Options 2019/2020 3/12/2019 2,700,000 Expire 30/11/2022 at $1.47 exercise price 2018/2019 6/12/2018 15,650,000 Expire 31/12/2019 at 36c exercise price - 650,000 granted to employees and consultants as incentives. - 2,050,000 granted to Directors as approved by Shareholders at the AGM held on 29/11/2019. - 5,950,000 granted to employees and consultants as incentives. - 9,700,000 granted to Directors as approved by Shareholders at the AGM held on 28/11/2018. The assessed fair values of the options were determined using a Black-Scholes option pricing model, taking into account the exercise price, term of option, the share price at grant date and expected price volatility of the underlying share, expected dividend yield and the risk-free interest rate for the term of the option. The inputs to the model used were: Grant date Option exercise price ($) Expected life of options (years) Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Underlying share price ($) Value of Option ($) Vesting Conditions 3/12/2019 1.47 3.00 - 93.38 0.69 0.99 0.4959 None The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value. 2020 Annual Report | Page 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 3 – EQUITY-BASED PAYMENTS (Recognised as Remuneration Expenses) – continued (c) Weighted average fair value The weighted average fair value of equity-based payment options granted during the year was $0.4959 (2019: $0.0749). (d) Range of exercise price The range of exercise price for options granted as share based payments outstanding at the end of the year was $1.47 (2019: $0.21 to $0.36). (e) Weighted average remaining contractual life The weighted average remaining contractual life of share based payment options that were outstanding as at the end of the year was 3.00 years (2019: 0.81 years). (f) Weighted average exercise price The following table shows the number and weighted average exercise price (“WAEP”) of share options granted as share based payments. 12 Months to 30 June 2020 Number 12 Months to 30 June 2020 WAEP $ 12 Months to 30 June 2019 Number 12 Months to 30 June 2019 WAEP $ Outstanding at the beginning of year 22,700,000 Granted during the year Exercised during the year Lapsed during the year Outstanding at the end of the year Exercisable at year end 2,700,000 (22,700,000) - 2,700,000 2,700,000 0.31 1.47 0.31 - 1.47 1.47 16,637,500 15,650,000 (9,587,500) - 22,700,000 22,700,000 0.20 0.36 0.19 - 0.31 0.31 The weighted average share price for options exercised during the year was $0.31 (2019: $0.19). NOTE 4 - INCOME TAX EXPENSE Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint operations, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. 2020 Annual Report | Page 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 4 - INCOME TAX EXPENSE - continued Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: • when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint operations, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. (a) Income Tax Expense The reconciliation between tax expense and the product of accounting loss before income tax multiplied by the Group’s applicable income tax rate is as follows: Loss for year Prima facie income tax (benefit) @ 30% (2019: 30%) Tax effect of non-deductible items Net deferred tax assets not brought to account Income tax attributable to operating loss (b) Net deferred tax assets not recognised relate to the following: DTA - Tax losses DTL - Other Timing Differences, net Year ended 30 June 2020 Year ended 30 June 2019 $ $ (15,306,220) (9,012,511) (4,591,866) (2,703,753) 404,513 4,187,353 354,551 2,349,202 - - 11,483,545 (150,534) 7,001,724 (112,992) 11,333,011 6,888,732 2020 Annual Report | Page 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 4 - INCOME TAX EXPENSE - continued These deferred tax assets have not been brought to account as it is not probable that tax profits will be available against which deductible temporary differences can be utilised. Tax Consolidation The Company and its 100% owned subsidiaries have formed a tax consolidated group. Under the tax consolidation regime, all members of a tax consolidated group are jointly and severally liable for the tax consolidated group’s income tax liabilities. The head entity of the tax consolidated group is Stavely Minerals Limited. (c) Franking Credits The franking account balance at year end was $nil (2019: $nil). NOTE 5 - EARNINGS PER SHARE Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: • • • costs of servicing equity (other than dividends); the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. Basic loss per share Year ended 30 June 2020 Year ended 30 June 2019 Cents (7.48) Cents (5.65) $ $ Loss attributable to ordinary equity holders of the Company used in calculating: - basic loss per share (15,306,220) (9,012,511) Weighted average number of ordinary shares outstanding during the year used in the calculation of basic earnings per share 204,547,955 159,399,340 For the year ended 30 June 2020, diluted earnings per share was not disclosed because potential ordinary shares, being options granted, are not dilutive and their conversion to ordinary shares would not demonstrate an inferior view of the earnings performance of the Company. Number of shares Number of shares 2020 Annual Report | Page 63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 6 - CASH AND CASH EQUIVALENTS Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as described above. Cash at bank and on hand (i) Reconciliation of loss for the period to net cash flows used in operating activities Loss after income tax Adjustments to reconcile profit before tax to net operating cash flows: Depreciation Depreciation – Right of Use Assets Gain on disposal of property, plant and equipment Share based payments expensed - options Exploration drilling – non-cash* Change in assets and liabilities: (Increase)/decrease in receivables Increase/(decrease) in payables Increase/(decrease) in provisions Net cash flows used in operating activities Year ended 30 June 2020 $ Year ended 30 June 2019 $ 9,424,932 2,875,862 (15,306,220) (9,012,511) 214,523 70,984 (10,436) 1,338,930 1,347,550 67,193 - (11,951) 1,172,406 1,602,114 124,577 799,348 87,977 (133,166) (1,064,884) 44,270 (11,332,767) (7,336,529) * During the year ended 30 June 2019, 3,026,026 shares ($865,306) were issued pursuant to the Share Subscription Agreement with Titeline Drilling Pty Ltd and Greenstone Property Pty Ltd, 272,123 shares ($84,358) were issued to Titeline Drilling Pty Ltd outside of the Subscription Agreement in payment of the balance of drilling services rendered and 7,692,308 shares were issued to Titeline Drilling Pty Ltd as a prepayment of $2,000,000 for drilling services to be utilised over 12 months to April 2020. As at 30 June 2020, the remaining balance of $1,347,550 had been utilised (30 June 2019: $652,450 utilised). Refer to note 13. (ii) Non-Cash Financing and Investing Activities As a result of adopting AASB 16 effective 1 July 2019, right of use lease asset additions for the year amounted to $283,940 (refer note 1(c)). There were no other non-cash financing and investing activities were undertaken during the year (2019: none). NOTE 7 – TRADE AND OTHER RECEIVABLES Receivables are initially recognised at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Current receivables for GST are due for settlement within 30 days and other current receivables within 12 months. Cash on deposit is not due for settlement until rights of tenure are forfeited or performance obligations are met. Revenues, expenses and assets are recognised net of the amount of GST except: ▪ when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST included. ▪ 2020 Annual Report | Page 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 7 – TRADE AND OTHER RECEIVABLES - continued The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Current GST refundable Bonds – credit card Prepaid drilling services (refer note 13b) Deposit for Beaconsfield Assets Other Total current receivables Non-Current Cash on deposit - security bonds 30 June 2020 $ 30 June 2019 $ 373,983 40,000 - - 55,544 372,330 40,000 1,347,550 250,000 12,847 469,527 2,022,727 139,500 72,500 Fair Value and Risk Exposures – all above excluding the Deposit for Beaconsfield Assets: (i) Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. (ii) The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security. (iii) Details regarding interest rate risk exposure are disclosed in note 19. (iv) Other current receivables generally have repayments between 30 and 90 days. Receivables do not contain past due or impaired assets as at 30 June 2020 (2019: none). NOTE 8 – RIGHT OF USE ASSETS AND LIABILITIES Refer to Note 1(c) for Stavely’s accounting policy for Right of use assets and corresponding lease liabilities. Non-Current Assets Right of use assets - properties Lease Liabilities Current Non-Current 30 June 2020 $ 30 June 2019 $ 212,956 79,239 182,546 261,785 - - - - 2020 Annual Report | Page 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 9 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: Plant and equipment Motor vehicles - 0 to 4 years - 3 to 5 years The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. Disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. Motor vehicles- at cost Less: Accumulated depreciation Plant and equipment - at cost Less: Accumulated depreciation 30 June 2020 30 June 2019 $ 125,888 (113,445) 12,443 532,981 (361,198) 171,783 $ 95,650 (67,721) 27,929 350,330 (220,671) 129,659 Total property, plant and equipment 184,226 157,588 Reconciliation of property, plant and equipment: Motor Vehicles Carrying amount at beginning of year Additions Depreciation Carrying amount at end of year Plant and Equipment Carrying amount at beginning of year Additions Disposals Depreciation Carrying amount at end of year 27,929 58,510 (73,996) 12,443 129,659 182,651 - (140,527) 171,783 48,142 - (20,213) 27,929 80,463 97,225 (1,049) (46,980) 129,659 2020 Annual Report | Page 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 10 - DEFERRED EXPLORATION EXPENDITURE ACQUSITION COSTS Exploration expenditure is expensed to the statement of profit or loss and other comprehensive income as and when it is incurred and included as part of cash flows from operating activities. Exploration costs are only capitalised to the statement of financial position if they result from an acquisition. Costs carried forward in respect of an area of interest which is abandoned are written off in the year in which the abandonment decision is made. Deferred exploration acquisition costs brought forward Capitalised acquisition expenditure incurred during the year* 30 June 2020 $ 3,006,057 1,093,662 30 June 2019 $ 3,006,057 - Deferred exploration acquisition costs carried forward 4,099,719 3,006,057 * Includes $690,000 consideration to be paid for the purchase on 22 April 2020 of the 3% net smelter royalty on tenement RL 2017, which hosts the Thursday’s Gossan prospect and other prospects in Victoria. The consideration is cash of $350,000 and 850,000 Stavely Minerals’ shares at a deemed issue price of 40 cents per share ($340,000). The cash was paid on 1 July 2020 and the shares issued on 9 July 2020. Ultimate recoupment of exploration and evaluation expenditure carried forward is dependent on successful development and commercial exploitation or, alternatively, sale of the respective areas. NOTE 11 - TRADE AND OTHER PAYABLES Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Trade creditors Accruals 30 June 2020 30 June 2019 $ 1,353,702 387,163 1,740,865 $ 488,018 179,572 667,590 Fair Value and Risk Exposures (i) Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value. (ii) Trade and other payables are unsecured and usually paid within 60 days of recognition. NOTE 12 – PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Wages, salaries and, annual leave (i) Liabilities for wages and salaries, including non-monetary benefits and annual leave and expected to be settled wholly within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefit obligations (ii) The liability for long service leave and annual leave not expected to be settled wholly within 12 months of the reporting date are 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 wage and salary levels, experience of employee departures, and period of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities if the Group does not have an unconditional right to defer settlement for at least 12 months of the reporting date, regardless of when actual settlement is expected to occur. 2020 Annual Report | Page 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 12 – PROVISIONS - continued Current Employee entitlements NOTE 13 – ISSUED CAPITAL 30 June 2020 30 June 2019 $ $ 174,070 108,578 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. (a) Issued Capital 213,799,785 (2019: 181,236,479) ordinary shares fully paid (b) Movements in Ordinary Share Capital 30 June 2020 $ 30 June 2019 $ 50,033,910 31,711,470 149,868,317 Opening balance at 1 July 2018 500,000 1,290,323 3,806,394 Issue of shares – Share Subscription Agreement 19 July 2018 Issue of shares – Share Subscription Agreement 6 September 2018 Issue of shares – Exercise of Unlisted Employee/Consultant Options 20 October 2018 572,271 436,681 498,874 Issue of shares – Share Subscription Agreement 14 November 2018 Issue of shares – Share Subscription Agreement 22 January 2019 Issue of shares – Share Subscription Agreement and additional issue for drilling services 22 March 2019 12,307,767 7,692,308 4,263,544 Issue of shares – Placement 17 April 2019 Issue of shares – Advance payment of drilling services 17 April 2019 Issue of shares – Share Purchase Plan 10 May 2019 Costs of equity issues 181,236,479 Closing Balance at 30 June 2019 181,236,479 Opening balance at 1 July 2019 2,017,701 2,574,755 8,360,850 19,610,000 Issue of shares – Exercise of Unlisted Employee/Consultant Options 5 August 2019 Issue of shares – Exercise of Unlisted Employee/Consultant Options 9 October 2019 Issue of shares – Exercise of Unlisted Employee/Consultant Options 18 October 2019 Issue of shares – Placement 18 October 2019 Costs of equity issues 213,799,785 Closing Balance at 30 June 2020 24,744,232 140,500 400,000 - 154,513 100,000 154,651 3,200,019 2,000,000 1,108,500 (290,945) 31,711,470 31,711,470 - - - 19,610,000 (1,287,560) 50,033,910 Pre-payment of Drilling Services During the previous year, on 17 April 2019, 7,692,308 ordinary shares at 26 cents were issued to Titeline Drilling Pty Ltd and Greenstone Property Pty Ltd as trustee for the Titeline Property Trust as a prepayment of $2,000,000 for drilling services to be utilised over 12 months to April 2020. During the year, 5,182,887 shares ($1,347,550) were released from escrow to pay for drilling services (2019: 2,509,421 shares ($652,450). No shares remained in escrow as at 30 June 2020. Placement On 18 October 2019, Stavely issued 19,610,000 shares at $1.00 per share pursuant to a placement to sophisticated and institutional investors. Gross proceeds were $19,610,000. 2020 Annual Report | Page 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 13 – ISSUED CAPITAL - continued (c) Options on issue at 30 June 2020 Unlisted Options Number 2,700,000 Exercise Price $1.47 Expiry Date 30/11/2022 During the year: (i) (ii) (iii) 2,700,000 unlisted options were granted as share-based payments (2019: 15,650,000); No unlisted options expired (2019: nil); and 7,050,000 unlisted employee/consultant options with an exercise price of 21 cents and 15,650,000 unlisted employee/consultant options with an exercise price of 36 cents were exercised during the year. Of the options exercised, 13,425,000 options were exercised by Key Management Personnel. 12,953,306 shares were issued following the conversion of these unlisted options via the ‘cashless exercise’ mechanism as part of Stavely’s Employee Incentive Plan. On exercise of the options, the Company issued the number of shares equal in value to the difference between the market price of the shares (based on a VWAP for the 5 trading days prior to the exercise date) and the exercise price otherwise payable in relation to the options. (2019: 9,587,500 unlisted employee/consultant options with an exercise price of 19 cents were exercised. Of the options exercised, 7,075,000 options were exercised by Key Management Personnel). (d) Terms and conditions of issued capital Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and creditors are fully entitled to any proceeds of liquidations. (e) Capital management When managing capital, management's objective is to ensure the entity continues as a going concern as well as maintains optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Management may in the future adjust the capital structure to take advantage of favourable costs of capital and issue further shares in the market. Management has no current plans to adjust the capital structure. There are no plans to distribute dividends in the next year. NOTE 14 - RESERVES Share-based payment transactions The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black-Scholes option pricing model. Equity-based payments reserve Balance at the beginning of the year Equity-based payments expense Balance at the end of the year Other reserve Balance at the beginning of the year Shares to be issued – refer note 10 Balance at the end of the year Total Reserves 30 June 2020 $ 30 June 2019 $ 4,468,259 1,338,930 5,807,189 - 340,000 340,000 3,295,853 1,172,406 4,468,259 - - - 6,147,189 4,468,259 2020 Annual Report | Page 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 14 – RESERVES - continued Nature and purpose of the reserves: The Equity-based payments reserve is used to recognise the fair value of options granted. The Other reserve amounts relating to shares to be issued in relation to the agreement to purchase the existing 3% net smelter on tenement RL 2017. Refer to note 10. NOTE 15 – COMMITMENTS AND CONTINGENCIES Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. (a) Operating leases (non-cancellable): Within one year More than one year but not later than five years 30 June 2020 $ 30 June 2019 $ 32,266 - 32,266 114,312 2,453 116,765 These non-cancellable operating leases are primarily for residential premises at site and a ground lease. (b) Exploration Commitments The Group has certain minimum exploration commitments to maintain its right of tenure to exploration permits. These commitments require estimates of the cost to perform exploration work required under these permits. Tenement Expenditure Commitments: The Group is required to maintain current rights of tenure to tenements, which require outlays of expenditure in 2020/2021. Under certain circumstances these commitments are subject to the possibility of adjustment to the amount and/or timing of such obligations, however, they are expected to be fulfilled in the normal course of operations. (c) Contingencies 30 June 2020 $ 30 June 2019 $ 4,871,357 1,108,000 Farm-In Agreement – Mathinna Gold Project, Tasmania Stavely’s wholly owned subsidiary, Stavely Tasmania Pty Ltd (Stavely Tasmania) has a Farm-in agreement with Bestlevel Holdings Pty Ltd (Bestlevel). The main terms of the Farm-in agreement are: Stavely Tasmania is the manager. • • Upon the grant of the tenements, Stavely Tasmania Pty Ltd will have a 51% interest in the tenement(s) • • • and Bestlevel will have a 49% interest. In consideration for a $50,000 payment to Bestlevel, Stavely Tasmania has the right to earn an interest of up to 85% in the tenement(s) in the following stages: o Exploration-related expenditure of $500,000 within a two-year period to earn an additional interest of 24% (to 75%); and o At completion of a Feasibility Study and payment of $200,000 to Bestlevel, Stavely Tasmania may earn an additional 10% interest (to 85%). Subject to Stavely Tasmania having earned its 85% interest, a Joint Venture will be formed and subsequent expenditure will be on a ‘contribute or dilute’ basis. Should Bestlevel’s interest fall below 5%, it will be transferred to Stavely Tasmania in consideration for a 1.5% net smelter return (NSR). 2020 Annual Report | Page 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 15 – COMMITMENTS AND CONTINGENCIES – continued • • Stavely Tasmania retains a right to purchase Bestlevel’s NSR for payment of $250,000 per 0.5% NSR to a maximum of $750,000 to acquire the entire NSR. Should the Joint Venture announce in a JORC-compliant Public Report an Ore Reserve in excess of 500,000oz, Stavely Tasmania will pay Bestlevel $500,000. • Both parties have pre-emptive rights over the other’s interest. Stavely has paid the $50,000 payment referred to above, and has expended the in excess of $500,000, to earn a 75% interest in the Project as at year end. The Group had no other contingent liabilities at year end. NOTE 16 – RELATED PARTIES (a) Compensation of Key Management Personnel Short-term employment benefits Post-employment benefits Equity-based payment 30 June 2020 $ 30 June 2019 $ 762,781 70,761 1,016,596 518,132 49,046 726,666 1,850,138 1,293,844 (b) Other transactions and balances with Key Management Personnel Other Transactions with Key Management Personnel Mr Peter Ironside, Director, is a shareholder and director of Ironside Pty Ltd. Ironside Pty Ltd is a shareholder of the 168 Stirling Highway Syndicate, the entity which owns the premises the Company occupies in Western Australia. During the year an amount of $132,749 (net of GST) was paid/payable for office rental and variable outgoings (2019: $131,250, net of GST). Mr Peter Ironside, Director, is also a shareholder and non-executive director of Zamanco Minerals Limited (“Zamanco”). Zamanco sub-leases office space in the premises the Company occupies. During the year an amount of $34,151 (net of GST) was paid/payable by Zamanco to the Company for reimbursement of office rental and associated expenses (2019: $37,630, net of GST). (c) Transactions with Other Related Parties There were no transactions with other related parties (2019: none). NOTE 17 – AUDITOR’S REMUNERATION 30 June 2020 $ 30 June 2019 $ Amount received or due and receivable by the auditor for: Auditing the financial statements, including audit review - current year audits Other services – taxation and corporate advisory Total remuneration of auditors 40,850 19,766 60,616 34,483 19,375 53,858 2020 Annual Report | Page 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 18 – SEGMENT INFORMATION An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the board of Directors. Operating segments have been identified based on the information provided to the chief operating decision makers – being the executive management team. The Group aggregates two or more operating segments when they have similar economic characteristics, and the segments are similar in each of the following respects: - - - - Nature of the products and services, Type or class of customer for the products and services, Methods used to distribute the products or provide the services, and if applicable Nature of the regulatory environment. Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the Financial Statements. Management has determined the operating segments based on the reports reviewed by the board of directors that are used to make strategic decisions. The Group does not have any material operating segments with discrete financial information. The Group does not have any customers and all its’ assets and liabilities are primarily related to the mining industry and are located within Australia. The Board of Directors review internal management reports on a regular basis that is consistent with the information provided in the statement of profit or loss and other comprehensive income, statement of financial position and statement of cash flows. As a result no reconciliation is required because the information as presented is what is used by the Board to make strategic decisions. 2020 Annual Report | Page 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 19 – FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Interest revenue Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset. The Group’s principal financial instrument comprises cash. The main purpose of this financial instrument is to provide working capital for the Group’s operations. The Group has various other financial instruments such as sundry debtors, security bonds and trade creditors, which arise directly from its operations. It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken. The main risk arising from the Group’s financial instruments is interest rate risk. The Board reviews and agrees on policies for managing each of these risks and they are summarised below. Interest rate risk At reporting date the Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s cash and bonds. The Group constantly analyses its exposure to interest rates, with consideration given to potential renewal of existing positions, the mix of fixed and variable interest rates and the period to which deposits may be fixed. At reporting date, the Group had the following financial assets exposed to variable interest rates that are not designated in cash flow hedges: Financial Assets: Cash and cash equivalents - interest bearing Trade and other receivables – bonds & deposits Net exposure 30 June 2020 $ 30 June 2019 $ 9,210,894 83,058 9,293,952 2,797,232 331,320 3,128,552 Sensitivity At 30 June 2020, if interest rates had increased by 0.5% from the year end variable rates with all other variables held constant, post tax profit and equity for the Group would have been $46,455 higher (2019: changes of 0.5% $14,387 higher). The 0.5% (2019: 0.5%) sensitivity is based on reasonably possible changes, over a financial year, using an observed range of historical RBA movements over the last year. Liquidity risk The Group has no significant exposure to liquidity risk as there is effectively no debt. The Group manages liquidity risk by monitoring immediate and forecast cash requirements and ensuring adequate cash reserves are maintained. Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted the policy of dealing with creditworthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group measures credit risk on a fair value basis. Significant cash deposits are with institutions with a minimum credit rating of AA (or equivalent) as determined by a reputable credit rating agency e.g. Standard & Poor. The Group does not have any other significant credit risk exposure to a single counterparty or any group of counterparties having similar characteristics. 2020 Annual Report | Page 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 20 – PARENT ENTITY INFORMATION Statement of Financial Position Information Current assets Non-current assets Current liabilities Non-current liabilities Net Assets Issued capital Reserves Accumulated losses Profit or loss information Loss for the year Comprehensive loss for the year Company 30 June 2020 $ 30 June 2019 $ 9,791,514 3,449,311 (1,739,814) (182,546) 4,877,227 3,179,719 (775,035) - 11,318,465 7,281,911 50,033,910 31,711,470 5,807,189 4,468,259 (44,522,634) 11,318,465 (28,897,818) 7,281,911 (15,575,239) (9,057,033) (15,575,239) (9,057,033) Commitments and contingencies There are no commitments or contingencies, including any guarantees entered into by Stavely Minerals Limited on behalf of its subsidiaries. Subsidiaries Name of Controlled Entity Ukalunda Pty Ltd Van Diemens Gold Limited (formerly Stavely Tasmania Holdings Pty Ltd) Class of Share Ordinary Ordinary Stavely Tasmania Operations Pty Ltd Ordinary Stavely Tasmania Pty Ltd Ordinary Place of Incorporation % Held by Parent Entity 30 June 2020 30 June 2019 Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% NOTE 21 – EVENTS OCCURRING AFTER THE REPORTING PERIOD On 22 April 2020, Stavely Minerals reached an agreement to purchase the existing 3% net smelter royalty (NSR) held by New Challenge Resources Pty Ltd on tenement RL 2017, which hosts the Thursday’s Gossan prospect and other key prospects at the Stavely Copper-Gold Project in Victoria. The consideration was a cash payment of $350,000 and the issue of 850,000 Stavely Minerals’ shares at a deemed issued price of 40 cents per share. The cash payment of $350,000 was paid to New Challenge Resources on 1 July 2020 and the shares issued on 9 July 2020. In July 2020, a Letter of Intent (LoI) was executed to divest the Company’s Mathinna/Alberton and Lefroy Goldfields tenements, as well as its Fosterville East tenement in Victoria, to Nubian Resources Ltd (TSX-V: NBR) (‘Nubian’) for A$2.5 million in Nubian shares and cash. The terms of the LoI are as follows: o Nubian to pay a non-refundable deposit of A$100,000 cash; o A 60-day exclusivity period to complete final due diligence and execute a definitive agreement; o Upon execution of the definitive agreement, Nubian will issue to Stavely Minerals a number of Nubian shares equivalent in value to A$2.4 million based on the 5-trading day volume-weighted average price (VWAP) prior to the execution date, subject to a minimum issue of 5,050,000 Nubian shares to Stavely Minerals. 2020 Annual Report | Page 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 21 – EVENTS OCCURRING AFTER THE REPORTING PERIOD - continued The consideration for the purchase is based on 100% ownership of the tenements. Stavely Minerals is in Joint Venture with Bestlevel Holdings Pty Ltd (Bestlevel), with Stavely Minerals currently holding a 75% interest in the three Mathinna JV tenements. The value of the Bestlevel 25% interest in the three Mathinna JV tenements equates to approximately A$400,000 of Nubian shares to be issued to Bestlevel or its beneficial owners. On 30 July 2020, Stavely issued 28,000,000 shares at an issue price of $0.60 per share pursuant to the first tranche of a placement to sophisticated and institutional investors. Gross proceeds were $16,800,000. The second Tranche of 13.67 million shares will be completed subject to shareholder approval at a general meeting to be held on 31 August 2020. On 14 August 2020, Stavely issued 4,645,000 shares at an issue price of $0.60 per share pursuant to a share purchase plan. Gross proceeds were $2,787,000. COVID-19 The impact of the Coronavirus (COVID-19) pandemic is ongoing and it is not practicable to estimate the potential future impact after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. There are no other matters or circumstances that have arisen since 30 June 2020 that have or may significantly affect the operations, results, or state of affairs of the Group in future financial years. 2020 Annual Report | Page 75 INDEPENDENT AUDIT REPORT 2020 Annual Report | Page 76 INDEPENDENT AUDIT REPORT 2020 Annual Report | Page 77 INDEPENDENT AUDIT REPORT 2020 Annual Report | Page 78 ADDITIONAL SHAREHOLDER INFORMATION Information as at 26 August 2020 a) Substantial Shareholders Name Peter Reynold Ironside Greenstone Property Pty Ltd and Associates Number of Ordinary Shares per Notice given to Stavely Minerals Limited 31,887,982 13,120,974 b) Shareholder Distribution Schedule Size of Holding 1 - 1,001 - 5,001 - 10,001 - 1,000 5,000 10,000 100,000 100,001 and over Total Number of shareholders holding less than a marketable parcel c) Voting Rights Number of Shareholders 345 704 568 1,229 287 3,133 253 (i) at meetings of members entitled to vote each member may vote in person or by proxy or attorney, or in the case of a member which is a body corporate, by representative duly appointed under section 250D; (ii) on a show of hands every member entitled to vote and present in person or by proxy or attorney or representative duly authorised shall have one (1) vote; (iii) on a poll every member entitled to vote and present in person or by proxy or attorney or representative duly authorised shall have one (1) vote for each fully paid share of which he is the holder and in the case of contributing shares until fully paid shall have voting rights pro rata to the amount paid up or credited as paid up on each such share; and (iv) a member shall not be entitled to vote at general meeting or be reckoned in a quorum in respect of any shares upon which any call or other sum presently payable by him is unpaid. 2020 Annual Report | Page 79 ADDITIONAL SHAREHOLDER INFORMATION d) Twenty largest shareholders: Name Chaka Investments Pty Ltd Citicorp Nominees Pty Limited Greenstone Property Pty LtdBNP Paribas Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited National Nominees Limited Ironside Pty Ltd Ironside Pty Ltd BNP Paribas Noms Pty Ltd 1 2 3 4 5 6 7 8 9 10 Ms Jennifer Elaine Murphy 11 Ms Roslyn Theresa Cairns 12 Mr Christopher John Cairns 13 Ms Savannah Sydney Jackson 14 Goldwork Asset Pty Ltd 15 Ms Julie Ann Cairns 16 Mr Harle John Mossman 17 Goldwork Asset Pty Ltd 18 Michelle Maria Skinner 19 Fairall Holdings Pty Limited 20 Mr Daniel Robert Kertcher + Ms Julie Ann Cairns Shares on issue at 26 August 2020 e) Unlisted Options Name Directors: C Cairns J Murphy P Ironside A Sparks Others: H Forgan M Skinner M Agnew S Johnson Q Te Tai M Cairns J Keable J Shelton 30/11/2022 $1.47 750,000 550,000 375,000 375,000 150,000 100,000 120,000 120,000 75,000 45,000 20,000 20,000 2,700,000 Number of Ordinary Shares 19,580,000 17,271,338 11,122,678 8,322,723 7,756,530 7,232,715 6,592,621 5,715,361 5,030,568 5,029,012 4,400,000 3,136,350 3,029,879 2,738,387 2,643,045 2,295,849 2,147,531 2,074,204 2,000,000 1,645,292 % of Issued Capital 7.92 6.98 4.50 3.36 3.14 2.92 2.67 2.31 2.03 2.03 1.78 1.27 1.22 1.11 1.07 0.93 0.87 0.84 0.81 0.67 119,764,083 247,294,785 48.43 2020 Annual Report | Page 80 TENEMENT SCHEDULE AS AT 30 JUNE 2020 Tenement Portfolio - Victoria Tenements held by Stavely Minerals as at 30 June 2020 are as follows: Area Name Tenement Stavely Stavely Ararat Yarram Park Black Range JV* RL 2017 EL 6870 RL 2020 EL 5478 EL 5425 Grant Date/ (Application Date) 8 May 2020 30 October 2018 8 May 2020 26 July 2013 18 December 2012 Size (Km2) 81 1027 28 26 100 * 51% held by Stavely Minerals Limited, 49% by Black Range Metals Pty Ltd, a fully owned subsidiary of Navarre Minerals Limited. Tenements held by Stavely Tasmania Pty Ltd as at 30 June 2020 are as follows: Area Name Tenement Grant Date/ (Application Date) Size (Km2) Myola EL006668 6 March 2018 83 Tenement Portfolio - Queensland Tenements held by Ukalunda Pty Ltd as at 30 June 2020 are as follows: Area Name Tenement Ravenswood West Ravenswood North Dreghorn Kirk North EPM26041 EPM26152 EPM26303 EPM26304 Tenement Portfolio - Tasmania Grant Date/ (Application Date) 24 May 2016 15 September 2016 23 March 2017 23 March 2017 Size (Km2) 145 32 30 18 Tenements held by Stavely Tasmania Pty Ltd as at 30 June 2020 are as follows: Area Name Tenement Grant Date/ (Application Date) Size (Km2) Mathinna Mathinna Mathinna Mathinna Lefroy Lefroy Lefroy EL19/2018 EL4/2019 EL6/2019 EL2/2015 RL1/2011 EL3/2015 ELA6/2020 20 July 2019 22 August 2019 27 January 2020 28 May 2015 23 April 2012 8 January 2015 1 68 40 33 1 27 (30 January 2020) 0.05 2020 Annual Report | Page 81 2020 | Annual Repor t S T A V E L Y M I N E R A L S L I M I T E D A B N 3 3 1 1 9 8 2 6 9 0 7 w w w . s t a v e l y . c o m . a u FINDING THE COPPER THE WORLD NEEDS FOR A LOW CARBON FUTURE