SIPA RESOURCES LIMITED ABN 26 009 448 980 ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2022 SIPA RESOURCES LIMITED - 1 - Bankers Bank of Western Australia Ltd 306 Murray Street Perth WA 6000 Share Registry Computershare Level 11, 172 St Georges Terrace Perth WA 6000 Telephone: Facsimile: 1300 850 505 +61 3 9415 4000 Auditor BDO Audit (WA) Pty Ltd Level 9, Mia Yellagonga Tower 2 5 Spring Street Perth WA 6000 CORPORATE DIRECTORY Directors Craig McGown Non-Executive Chairman Pip Darvall John Forwood Non-Executive Director Non-Executive Director Rick Yeates Managing Director Company Secretary Ben Donovan Registered and Principal Office Unit 5, 12-20 Railway Road Subiaco WA 6008 Telephone: Web: (08) 9388 1551 www.sipa.com.au Stock Exchange Listing Australian Securities Exchange ASX Code - SRI CONTENTS Corporate Directory Chairman’s Letter Directors’ Report Auditor’s Independence Declaration Consolidated statement of Profit or Loss and Other Comprehensive Income Consolidated statement of Financial Position Consolidated statement of Changes in Equity Consolidated statement of Cash Flows Notes to and forming part of the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Other Information 2 3 4 25 26 27 28 29 30 60 61 65 SIPA RESOURCES LIMITED - 2 - CHAIRMAN’S LETTER Dear Shareholders. I am pleased to present you with Sipa’s Annual Report for 2022 and to reflect on what has been a particularly active and productive year. Your Managing Director, Pip Darvall, has detailed in his Operations Report your company’s activities in advancing a number of its’ exploration projects through the completion of four separate drilling programs and two additional programs taking place at the time of writing. Building on an aggressive project procurement strategy in the last two years by targeting several of Western Australia’s well-endowed mineral provinces, Sipa can now maintain its accelerated exploration momentum across its projects with drilling planned to continue at a solid pace in the coming 12 months, moving the Company closer to what we hope will be a breakthrough discovery. Notwithstanding the significant issues that have been presented by the COVID-19 pandemic, the corresponding restrictions placed on exploration and an erratic equities market, there is strong interest in companies such as Sipa, which have focussed on field activities and drill testing targets with the aim of making new discoveries. As we all know, discovery success stems from a combination of having quality ground, applying the best possible science and, most importantly, having strong backing, access to sufficient funding and a willingness to be persistent. Over the 2022 financial year there has been a continuing focus on drilling at Murchison in July, at Warralong in August (having been granted the tenements in July), at Skeleton Rocks in February, and at Paterson North in June. This drilling is the consummation of an often time-consuming process to achieve grant of tenure requiring reaching access agreements with various stakeholders, acquiring new data where necessary, interpreting this data, conducting reconnaissance trips to site before finally developing drill targets to test and obtaining the necessary approvals. Looking toward to the coming 12 months, the company now has a pipeline of projects at the initial drill testing or follow- up drill stages. It will be a busy period as we test these projects for new base metals, gold and lithium discoveries, and we look forward to providing regular exploration updates as the year unfolds. I have pleasure in welcoming our new Non-Executive Director, Rick Yeates, who joined the board in July 2022 and brings a wealth of knowledge in the exploration and operating aspects in the junior to mid-cap resources sector. In February, 2022 Tim Kennedy resigned as a Non-executive Director, having been on the Sipa Board since December 2016, and I would like to thank Tim for his contribution to Sipa over the five plus years he was on the Board. I would like to extend sincere thanks to the outstanding and hard-working exploration team at Sipa, led by Pip, whose focus and significant effort has enabled the Company to prosecute an extensive exploration effort across our key projects. Most importantly, once again our people have been kept safe at all times. In closing, I would also like to thank our shareholders for their continued support, and to welcome the new investors who joined our register through the share placement completed in September 2022. Your support and confidence in our projects, our people and our strategic vision for Sipa is greatly appreciated. I would also like to thank all our stakeholders, particularly the traditional owners of the land on which we are working and our joint partners, being Rio Tinto Exploration and Buru Energy. Yours sincerely Craig McGown SIPA RESOURCES LIMITED - 3 - DIRECTORS’ REPORT The Company presents its financial report for the consolidated entity consisting of Sipa Resources Limited (Company, Sipa or SRI) and the entities it controls (Consolidated Entity or Group) at the end of, or during, the year ended 30 June 2022. REVIEW OF OPERATIONS Introduction Sipa Resources Limited is focused on the discovery of gold, base metal and lithium deposits at its portfolio of projects predominantly located in Western Australia. The Company prides itself on taking a technically driven approach to further its projects through a systematic exploration process and has made significant progress over the last year as detailed below. Major achievements for the Company during the Financial Year include: Sipa’s Western Australian Projects • • First pass testing of recently granted projects at Warralong and Skeleton Rocks; Successfully managing and operating Farm In and Joint Venture agreements with Rio Tinto Exploration Pty Ltd (at Paterson North) and Buru Energy Ltd (at Barbwire Terrace); • Operating safely and consistently throughout a period of difficult conditions for most companies; and • Maintaining sound relationships with all stakeholders involved in the Company’s projects. SIPA RESOURCES LIMITED - 4 - DIRECTORS’ REPORT (continued) Warralong Gold Project 100% Sipa Sipa’s 100%-owned Warralong Project is prospective for intrusion hosted gold deposits, a newly recognised gold mineralisation style in the north Pilbara region of Western Australia. The project covers over 50km of strike length of the Lalla Rookh Shear Zone in a “look-alike” geological setting to the Tabba Tabba Shear Zone, which hosts several deposits in the region, including De Grey Mining Ltd’s ‘Hemi’ gold deposit. Since pegging the project Sipa has completed a detailed aeromagnetic survey over its ~1,000km2 tenement package (ASX: SRI 24 September 2020). This data supported a targeting program and, shortly after the first tenements were granted, two drill programs were completed. The programs provided important lithostratigraphic information to build a robust geological model of the basement, which is obscured by shallow sheet wash in this area. An extensive surface sampling program was also completed, along with heritage surveys and detailed analysis of the geochemical results received to date. Further drill targets have been developed and additional drill programs were planned at the time of writing. Warralong represents an exciting opportunity for discovery in an area that has been almost completely unexplored. Sipa’s Warralong Project in relation to nearby mineral deposits along a parallel shear zone SIPA RESOURCES LIMITED - 5 - DIRECTORS’ REPORT (continued) Sipa’s Warralong Project tenements showing the location of drilling completed during the period Wolfe Basin Base Metals Project 100% Sipa The Wolfe Basin project is prospective primarily for Sedimentary Exhalative (Sedex) base metals in a Neo-Proterozoic basin setting, similar to that hosting the large deposits in the African Copper Belt. The first drillholes into the basin were completed by Sipa in November 2020, and returned assay results up to 0.5% Cu and 2.9% Pb (ASX: SRI 5 January 2021). During the year detailed mapping of the target horizon across one portion of the project area was completed, along with a dipole-dipole induced polarisation (DDIP) survey over the Romulus prospect. The DDIP results detailed a distinct, chargeable feature approximately 150-200m below surface immediately to the east, as well as north and south, of Sipa’s previous drilling. Sipa’s previous drilling encountered abundant pyrite-quartz veining in hole WBC004 on the western edge of the IP anomaly, and approximately 200m to the north, the IP anomaly is interpreted to lie just east of hole WBC009 (Figure 3b – 12/08/21) where the best assay results from the 2020 program were returned (2.9% Pb, and 0.45% Cu, ASX: SRI 5 January 2021). Given the proximity of the IP anomaly to known base metals anomalism, this target area was prepared for drilling, but unfortunately COVID restrictions meant it was impossible to drill these holes prior to the wet season. At the time of writing a field crew was completing a soil survey across a large part of the project. SIPA RESOURCES LIMITED - 6 - DIRECTORS’ REPORT (continued) Sipa’s Wolfe Basin Project Paterson North Copper-Gold Project Rio Tinto Earning In Sipa is the manager and operator of the Paterson North Project, where Rio Tinto Exploration Pty Ltd is earning an interest as set out in the announcement of a Farm In and Joint Venture Agreement (ASX: SRI 10 August 2020). A large-scale gradient array IP (GAIP) survey was finalised during the first half of the financial year and underpinned a detailed targeting exercise. Drill testing of several of these targets commenced in the final month of the period and was completed in mid-August 2022. Further geophysical surveys were completed after the end of the period and will underpin further drill targeting and testing in 2023. SIPA RESOURCES LIMITED - 7 - DIRECTORS’ REPORT (continued) Sipa’s Paterson North Project showing where drilling and SkyTEM was completed Barbwire Terrace Zinc-Lead-Silver Project Buru Energy Limited Joint Venture Since September 2020, Sipa has been exploring the Barbwire Terrace Project in joint venture (‘JV’) with ASX listed energy company, Buru Energy Limited (ASX: BRU). This collaboration provides a unique opportunity to unlock the potential along the Barbwire Terrace by combining mineral exploration and petroleum industry technical capabilities. Sipa has partnered with Buru to combine Sipa’s skills in mineral exploration with Buru’s sophisticated basin modelling and data sets developed during years of petroleum exploration and production from the Ungani Oil Field. Sipa believes the application of petroleum exploration models and techniques in conjunction with its own mineral exploration approach across the areas of mutual interest will enable mineralisation at Barbwire Terrace to be more efficiently targeted. The focus will be at much shallower depths than the major nearby zinc deposit of Admiral Bay, which was discovered during oil and gas drilling. The Barbwire Terrace Project covers the south-western margin of the Fitzroy Trough, where historic drilling confirmed the potential for Mississippi Valley Type ‘MVT’ mineralisation similar to the Lennard Shelf deposits (e.g., Pillara and Cadjebut) located approximately 80km to the northeast along the northern margin of the Fitzroy Trough. MVT mineralisation of the type mined on the Lennard Shelf has historically produced high purity concentrates which are sought after by smelters, making this a high value exploration target. SIPA RESOURCES LIMITED - 8 - DIRECTORS’ REPORT (continued) During the year, ground-based gravity surveys were conducted, and the data subsequently modelled to assist in designing the initial round of drilling. Heritage surveys were completed, and drilling commenced shortly after the end of the financial year. Financial support from the Western Australian Government’s Exploration Incentive Scheme has been achieved, with up to $180,000 of funding available to the JV, resulting in a cost-effective program. Murchison Project Sipa 100% (some tenements), 51% (others) Sipa’s Murchison Project covers approximately 470km2 of prospective greenstone lithologies, in close proximity to the mining centre of Meekatharra. Sipa is farming into several tenements and is the 100% owner of other tenements in the project. During the year, five new tenements were granted and a compilation of the available drilling data and reprocessing of geophysics was completed. Several new gold targets were generated, and a heritage survey completed to allow access to the areas of interest for future drill testing. Sipa’s Murchison Project tenements over regional geology showing the location of the three highest priority drill targets SIPA RESOURCES LIMITED - 9 - DIRECTORS’ REPORT (continued) Skeleton Rocks Project 100% Sipa The Skeleton Rocks Project in Western Australia is prospective for gold, lithium and nickel-copper-platinum group element (Ni-Cu-PGE) deposits and covers an area of more than 670km2, immediately west of the Southern Cross greenstone belt in the Goldfields region of WA. Sipa’s Skeleton Rocks Project tenements showing are where drilling was completed and nearby holders and mines The Company completed a detailed aeromagnetic survey across the Skeleton Rocks Project area in late 2020. Analysis of the survey data supported a new interpretation of the basement geology and identification of target areas for follow up work. During the year, two of the key tenements E77/2706 and E77/2708 were granted, allowing drilling to commence testing previously unexplored greenstone belts. A 3,425m aircore drill program was subsequently completed with financial support from the Western Australian Government’s Exploration Incentive Scheme. Encouraging quartz-sulphide veining was intersected, and analysis of the geochemical data led to the identification of some lithium targets for follow up drilling. SIPA RESOURCES LIMITED - 10 - DIRECTORS’ REPORT (continued) Lithium, caesium and rubidium halos identified in Skeleton Rocks assay results defining target areas for follow up drilling Uganda Nickel-Copper Project Sipa 100% During the year, Sipa announced the sale of its Nickel-Copper Project in Uganda to London Stock Exchange listed Blencowe Resources Plc (“Blencowe”, LSE: BRES) (refer ASX release 22 February 2022). Under the terms of the staged option agreement (“the Agreement”), Sipa was to receive US$1.5 million in Blencowe shares staged over four separate milestones, assuming successful advancement through all four stages. An airborne electromagnetic (EM) survey was completed by Blencowe during the year, however Blencowe subsequently announced its intention to withdraw from the Option Agreement and Sipa is currently seeking alternative partners to progress the project. Corporate Capital Raising In September 2021, Sipa completed a $1.5 million Capital Raising, via a well-supported share placement to sophisticated and professional investors, including strong support from existing Sipa shareholders and directors. Approximately 25.4 million shares were issued at a price of $0.059 per share. As at 30 June 2022, the Company had approximately $3.6 million in cash. Board Changes In August 2021, Sipa announced that Craig McGown would resume his role as Independent Non-Executive Chair, replacing Tim Kennedy. Tim Kennedy subsequently resigned from the Board in February 2022. On 26 July 2022 it was announced that, Rick Yeates was appointed to the Board as a Non-Executive Director, effective 1 August 2022. SIPA RESOURCES LIMITED - 11 - DIRECTORS’ REPORT (continued) Rick has 41 years’ continuous experience as an exploration geologist, mine geologist, mining consultant and company director, variously involved in ASX-listed, unlisted public and private company management, executive mentoring, lecturing, exploration management, feasibility studies, technical audits, independent geologist’s reports and technical valuations. Rick has worked in all Australian States and 39 countries on five continents. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR Subsequent to year end: - on 26 July 2022, it was announced that Mr Rick Yeates was appointed to the Board as a Non-Executive Director, effective 1 August 2022. - on 6 September 2022, Sipa advised that Blencowe Resources plc intends to withdraw from the Option Agreement over Sipa’s Uganda Nickel-Copper Project to focus on its graphite project. During the 6 months it held the project under Option, Blencowe has completed a detailed airborne electro-magnetic survey over the Akelikongo prospect. Sipa intends to review this new data and re-commence discussions with other parties who had previously expressed interest in moving the project forward. No other material matters have occurred subsequent to the end of the financial year which requires reporting on other than those which have been noted above or reported to ASX. LIKELY DEVELOPMENTS AND EXPECTED RESULTS In general terms the review of operations of the Group gives an indication of likely developments and the expected results of the operations. In the opinion of the Directors, disclosure of any further information would be likely to result in unreasonable prejudice to the Group. DIRECTORS The following persons were Directors who held office during the year and up to the date of signing this report, unless otherwise stated are: Mr Craig McGown Non-Executive Chair Mr Pip Darvall Managing Director Mr John Forwood Non-Executive Director Mr Rick Yeates Non-Executive Director appointed 1 August 2022 Mr Tim Kennedy Non-Executive Director resigned 28 February 2022 PRINCIPAL ACTIVITIES Sipa is an Australian-based exploration company focused on the discovery of gold and base metal deposits using a combination of technical excellence, commercial acumen and a structured approach to manage risks. The principal activities of the Group during the year were to explore mineral tenements in Australia and Uganda. DIVIDENDS No amounts have been paid or declared by way of dividend by the Company since the end of the previous financial year and the Directors do not recommend the payment of any dividend. FINANCIAL POSITION The Group made a loss from continuing operations of $2,631,679 for the year (30 June 2021: loss of $2,367,751). At 30 June 2022, the Group had net assets of $3,558,334 (30 June 2021: $4,550,073) and cash assets of $3,589,447 (30 June 2021: $3,612,807). SIPA RESOURCES LIMITED - 12 - DIRECTORS’ REPORT (continued) INFORMATION ON DIRECTORS The following information is current as at the date of this report. Mr Craig McGown Qualifications Experience Non-Executive Chair Chair 1 September 2021 to present Independent Non-Executive Director (Appointed 11 March 2015) BComm, FCA, ASIA Mr McGown is an investment banker with over 40 years of experience consulting to companies in Australia and internationally, particularly in relation to fund raising and mergers and acquisitions in the natural resources sector. He holds a Bachelor of Commerce degree, was admitted as a Fellow of the Institute of Chartered Accountants and an Affiliate of the Financial Services Institute of Australasia in 1984. Mr McGown has been an executive director of the corporate advisory business New Holland Capital Pty Ltd since 2008 and prior to that appointment was the chairman of DJ Carmichael Pty Limited. During the past three years Mr McGown has also served as the Non-Executive Chairman of Essential Metals Limited (formerly Pioneer Resources Limited – 13 June 2008 – present), a Non-Executive Director of Qmetco Limited (formerly Realm Resources Limited – 31 May 2018 – present), Develop Limited (formerly Venturex Resources Limited) (8 February 2021 – 8 June 2021) and is the Chairman of the Harry Perkins Institute for Respiratory Health. Equity Interests 1,113,222 ordinary fully paid shares. Directorships held in other ASX listed entities Mr Pip Darvall Qualifications Experience 1,000,000 Options exercisable between $0.102 and $0.15. Current directorships: - Non-Executive Chairman – Essential Metals Limited from June 2008 - Non-Executive Director – Qmetco Limited from May 2018 Former directorship: - Non-Executive Director – Develop Limited (formerly Venturex Resources Limited) from February 2021 to June 2021 No other listed directorships have been held by Mr McGown in the previous three years. Managing Director Appointed 01 February 2020 to present MSc (Geology), MBA, MAIG, MAusIMM Mr Darvall most recently served as Managing Director of ASX-listed explorer Jindalee Resources Limited where he identified and acquired a significant new lithium project in the United States. He was previously Exploration Manager, for Atlas Iron Limited, where he oversaw the rapid growth in Atlas’ resource base between 2010 and 2014, before starting his own consultancy company specializing in resource project evaluation and management. During the past three years Mr Darvall was a director of Jindalee Resources Limited from 28 May 2018 to 31 December 2019. Equity Interests 1,385,957 ordinary fully paid shares. Directorships held in other ASX listed entities 10,459,167 Options exercisable between $0.102 and $0.15. Former directorship: - Director – Jindalee Resources Limited from May 2018 to December 2019 No other listed directorships have been held by Mr Darvall in the previous three years. SIPA RESOURCES LIMITED - 13 - DIRECTORS’ REPORT (continued) Mr John Forwood Qualifications Experience Non-Executive Director Appointed 10 July 2020 to present B.Sc (Hons), LlB (Hons) Mr Forwood is a qualified geologist and lawyer with extensive experience in equity markets and debt finance, with a particular focus on the junior resources sector. He has spent the past 20 years as a specialist resources financier and fund manager. His career in resource finance began with RMB Resources Ltd, (a division of Rand Merchant Bank) in Australia and the UK. At RMB Resources he was a manager of the private Telluride Fund in Melbourne. He is currently Chief Investment Officer of the ASX-listed Lowell Resources Fund. Prior to joining RMB Resources in 1998, Mr Forwood worked as an exploration geologist, including positions with North Flinders Mines in the Northern Territory, East African Gold Mines in Tanzania, and Aberfoyle Limited in Indonesia. Currently, Mr Forwood is a director of one other publicly listed company, Flynn Gold Ltd. He is also a director of a number of unlisted companies including Lowell Resources Funds Management Pty Ltd which is the investment manager of the Lowell Resources Fund, an ASX listed investment trust. Equity Interests 677,543 ordinary fully paid shares. 800,000 Options exercisable between $0.102 and $0.15. Directorships held in other ASX listed entities Current directorship: - Director – Flynn Gold Ltd from September 2020 Mr Rick Yeates Qualifications Experience No other listed directorships have been held by Mr Forwood in the previous three years. Non-Executive Director Appointed 1 August 2022 to present BSc, MAusIMM, GAICD Mr Yeates has 41 years’ continuous experience as an exploration geologist, mine geologist, mining consultant and company director, variously involved in ASX-listed, unlisted public and private company management, executive mentoring, lecturing, exploration management, feasibility studies, technical audits, independent geologist’s reports and technical valuations. Mr Yeates has worked in all Australian States and 39 countries on five continents. Mr Yeates has also served on the boards of several ASX-listed companies in both executive and non-executive capacities, including Western Areas Limited (ASX: WSA), Middle Island Resources Limited (ASX: MDI), Mungana Gold Mines Limited (ASX: MUX) and Atherton Resources Limited (ASX: ATE), as well as two leading mining industry bodies, AAMEG and Austmine, and the Swick Mining Services Limited (ASX: SWK) R&D Advisory Board. Mr Yeates was most recently Non-Executive Director at Western Areas Limited, until the time of its recent takeover by IGO Limited (ASX: IGO). He was also the Managing Director at Middle Island Resources Limited (ASX: MDI), and instrumental in the identification and securing of Middle Island’s exciting Barkly copper-gold project in the Northern Territory. Prior to this, Mr Yeates established and ran the highly regarded geological consultancy group RSG Global for over 20 years, prior to its takeover by Coffey International Limited in 2006. Equity Interests None Directorships held in other ASX listed entities Former directorship: - Non-Executive Director - Western Areas Limited from October 2009 to June 2022 - Managing Director - Middle Island Resources Limited from April 2010 to July 2021 No other listed directorships have been held by Mr Yeates in the previous three years. SIPA RESOURCES LIMITED - 14 - DIRECTORS’ REPORT (continued) Mr Tim Kennedy Qualifications Experience Directorships held in other ASX listed entities Non-Executive Director Appointed 13 December 2016, Chairman 28 August 2018, resigned 28 February 2022 B.App Sc (Geology), MBA, MAusIMM, MGSA Mr Kennedy is a geologist with a successful 30-year career in the mining industry, including extensive involvement in the exploration, feasibility and development of gold, nickel, platinum group elements, base metals, and uranium projects throughout Australia. His most recent executive role was as exploration manager with IGO Limited, which during his 11 years IGO grew from being a junior explorer to a multi commodity mining company. During the past three years Mr Kennedy also served as a director of Millennium Minerals Limited (resigned 20 February 2020) and Helix Resources Limited (director since 16 February 2018). Current directorship: - Non-Executive Deputy - Helix Resources Limited from February 2018 - Non-Executive Chair – Yandal Resources Limited from February 2021 Former directorship: - Millennium Minerals Limited – from May 2016 to February 2020 No other listed directorships have been held by Mr Kennedy in the previous three years. Company Secretary Mr Ben Donovan Appointed 21 January 2021 to present B.Comm (Hons), AGIA, ACIS Mr Donovan is a member of the Governance Institute of Australia and provides corporate advisory, IPO, and consultancy services. Mr Donovan is currently the company secretary of several ASX listed and public unlisted companies with experience across the resources, agritech, biotech, media, and technology industries. He has extensive experience in listing rules compliance and corporate governance, having served as a Senior Adviser at the ASX in Perth for almost three years, where he managed the listing process of close to 100 companies to the ASX. In addition, Mr Donovan has experience in the capital markets having raised capital and assisted numerous companies on achieving an initial listing on the ASX. Additionally, Mr Donovan previously worked as a private client adviser at a boutique stock broking group. SIPA RESOURCES LIMITED - 15 - DIRECTORS’ REPORT (continued) MEETINGS OF DIRECTORS During the financial year ended 30 June 2022, the following director meetings were held: Eligible to Attend Attended P Darvall C McGown John Forwood T Kennedy 8 8 8 5 8 8 8 5 Audit Committee At the date of this report the Company does not have a separately constituted Audit Committee as all matters normally considered by an audit committee are dealt with by the full Board. Remuneration Committee At the date of this report, the Company does not have a separately constituted Remuneration Committee and as such, no separate committee meetings were held during the year. All resolutions made in respect of remuneration matters were dealt with by the full Board. REMUNERATION REPORT (Audited) The remuneration report is set out under the following main headings: A. B. C. D. E. F. G. H. I. Introduction Remuneration governance Key management personnel Remuneration and performance Remuneration structure - Executive Director - Non-Executive Directors Executive service agreements Details of remuneration Share-based compensation Other information This report details the nature and amount of remuneration for each Director of Sipa Resources Limited (Company) and key management personnel. A. Introduction The remuneration policy of the Company has been designed to align Director and management objectives with shareholder and business objectives by providing a fixed remuneration component, and offering specific long-term incentives, based on key performance areas affecting the Group’s financial results. Key performance areas include cash flow management, growth in share price, successful exploration, and subsequent exploitation of the Group’s tenements. The Company believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best management and Directors to run and manage the Group, as well as create goal congruence between Directors, Executives and Shareholders. During the period the Company did not engage remuneration consultants. SIPA RESOURCES LIMITED - 16 - DIRECTORS’ REPORT (continued) REMUNERATION REPORT (Audited) (continued) B. Remuneration governance The Board retains overall responsibility for remuneration policies and practices of the Company. Due to the Company's size and current stage of development, the Board does not have a separate nomination and remuneration committee. This function is performed by the Board. The Board has determined that remuneration at Sipa should achieve the following objectives: - Align and contribute to delivering strategic projects on time and on budget; - Assist Sipa in attracting and retaining the right people to execute the business strategy; - Align the interests of executives with the interest of shareholders; - Be contingent on both individual and Company performance; and - Be simple and easy to administer. There are two components to the Remuneration Policy: Fixed Remuneration and Long-Term Incentives. There are no Short-Term Incentives paid to any Key Management Personnel (KMP). At the 2021 Annual General Meeting, the Company’s remuneration report was passed by the requisite majority of shareholders (93% on a poll). C. Key management personnel The KMP in this report are as follows: Non-Executive Directors - C McGown (Non-Executive Chair) – appointed 11 March 2015 - J Forwood (Non-Executive Director) – appointed 10 July 2020 Executives - P Darvall (Managing Director) – appointed 1 February 2020 Former Non-Executive Directors - T Kennedy (Non-Executive Director) – appointed 13 December 2016 - resigned 28 February 2022 Changes since the end of the reporting period On 26 July 2022, it was announced that, Rick Yeates was appointed to the Board as a Non-Executive Director, effective 1 August 2022. D. Remuneration and performance The following table shows the net losses attributable to members of the Company and share price of the Company at the end of the current and previous four financial years. 30 June 2022 $ 30 June 2021 $ 30 June 2020 $ 30 June 2019 $ 30 June 2018 $ Net profit/(loss) attributable to members of the Company (2,631,679) (2,367,751) 336,361 (2,833,062) (3,075,066) Share price (1) 0.033 0.051 0.060 0.007 0.010 1 The share price for periods 30 June 2019 and earlier is prior to the 12:1 consolidation approved by shareholders in July 2019. SIPA RESOURCES LIMITED - 17 - DIRECTORS’ REPORT (continued) REMUNERATION REPORT (Audited) (continued) There is no relationship between the financial performance of the Company for the current or previous financial year and the remuneration of the key management personnel. Remuneration is set having regard to market conditions and encouraging the continued services of key management personnel. E. Remuneration structure Executive Director and KMP remuneration structure The Board’s policy for determining the nature and amount of remuneration for Senior Executives of the Group is as follows. The remuneration policy, setting the terms and conditions for Executive Directors and other Senior Executives, was developed and approved by the Board. All Executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits, options, and performance incentives. The Board reviews Executive packages annually by reference to the Group’s performance, executive performance, and comparable information from industry sectors and other listed companies in similar industries. Executives are also entitled to participate in the employee share option and performance rights plans. If an Executive is invited to participate in an employee share option or performance rights plan arrangement, the issue and vesting of any equity securities will be dependent on performance conditions relating to the Executive’s role in the Group and/or a tenure-based milestone. The employees of the Group receive a superannuation guarantee contribution required by the Government, which for the year ended 30 June 2022 is 10%, from 1 July 2022 the rate increased to 10.5%, and do not receive any other retirement benefits. Long Term Incentive Plan Long Term Incentive (LTI) grants are made to Executives periodically to align with typical market practice, and to align Executives’ interests with those of shareholders and the generation of long-term sustainable value. Non-Executive Directors do not participate in the LTI. The LTI grants are delivered through participation in the Sipa Resources Employee Share Option Plan (ESOP), as approved by shareholders at the Annual General Meeting held 15 November 2018. The performance hurdles are a combination of internal hurdles to optimise share performance including exploration discovery and generation, capital management, governance and strategic objectives. The threshold levels are suitably stretched to be consistent with the objectives of the LTI plan. Performance hurdles are measured at the end of the financial year in which the incentives were granted with vesting occurring at the end of 1 year and expiry of the grants at the end of 4 years. During the current year: - 10,600,000 Options exercisable at between $0.093 and $0.214 were issued pursuant to the ESOP. 8,600,000 Options vest on 18 November 2021 and expire on 29 November 2025. 2,000,000 Options vest subject to various performance milestones. During the prior year: - 656,167 Options exercisable at $0.102 were issued pursuant to the ESOP. The Options vest on 19 November 2020 and expire on 18 November 2023. 197,000 options issued, lapsed during the year following KMP resignation. SIPA RESOURCES LIMITED - 18 - DIRECTORS’ REPORT (continued) REMUNERATION REPORT (Audited) (continued) The performance hurdles for KMP in place for reporting period are outlined below. Strategic objectives Performance measure Weight Executive Director Capital Management Cost effective assessment and acquisition of projects meeting strategic thresholds Efficient de-risking of Company projects via cost effective exploration Minimise holding costs and maintain cash reserves while retaining access to upside for projects that may be divested Strategic Development Efficient and effective business operations to support key strategic objectives 30% 10% 30% 30% The plan rules do not provide for automatic vesting in the event of a change of control. The board may in its discretion determine the manner in which the unvested incentives will be dealt with in the event of a change of control. The holder of an Option does not have any rights to dividends, rights to vote or rights to the capital of the Company as a shareholder as a result of holding an Option. Non-Executive Director remuneration structure In line with corporate governance principles, Non-Executive Directors of the Company are remunerated solely by way of fees and statutory superannuation. Fees and payments to Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the Directors and have the objective of ensuring maximum benefit to Sipa by the retention of a high-quality Board with the relevant skills mix to optimise overall performance. Non-Executive Directors’ fees and payments are determined within an aggregate Directors’ fee pool limit, which is periodically recommended by the Nomination and Compensation Committee for approval by shareholders. The pool limit maximum currently stands at $300,000, as approved by shareholders in November 2014. It is at the discretion of the Board to distribute this pool amongst the Non-Executive Directors based on the responsibilities assumed. No performance-based fees are paid to Non-Executive Directors, nor are Non-Executive Directors entitled to participate in the Sipa Resources Employee Share Option Plan. Retirement benefits are limited to statutory superannuation at the rate prescribed under the Superannuation Guarantee legislation, and entitlements earned under the Directors Retirement Scheme prior to 30 June 2008. Base fees (inclusive of Superannuation) Year ended 30 June 2022 Chair Non-Executive Director 76,650 47,933 Fees for Non-Executive Directors are not linked to the performance of the Group. F. Executive service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. The service agreements specify the components of remuneration, benefits, and notice periods. Participation in the share and performance rights plans are subject to the Board's discretion. Other major provisions of the agreements relating to remuneration are set out below. Termination benefits are within the limits set by the Corporations Act 2001 such that they do not require shareholder approval. SIPA RESOURCES LIMITED - 19 - DIRECTORS’ REPORT (continued) REMUNERATION REPORT (Audited) (continued) Contractual arrangement with key management personnel Executives Name P Darvall, Managing Director G. Details of remuneration Effective date Term of agreement Notice period Base per annum $ Termination payments 1-Feb-20 No fixed term 3 months 290,000 3 months Remuneration of KMP for the 2022 financial year is set out below: Short-term benefits Post-employment benefits Salary Superannuation Retirement Benefit Annual/Long Service leave Share-based payments (1) Options Total $ $ $ $ $ $ Non-Executive Directors C McGown (2) J Forwood Executives P Darvall 72,076 43,379 - 4,338 290,000 29,000 Non-Executive Director – Former T Kennedy (3) Total 33,340 438,795 3,334 36,672 - - - - - - - - - - 20,097 16,078 92,174 63,795 145,848 464,848 16,078 198,101 52,752 673,568 1 Options granted as part of remuneration package, AASB 2 – Share-Based Payments requires the fair value at grant date of the performance rights granted to be expensed over the vesting period. 2 C McGown, Non-Executive Director, is a Director of Resource Investment Capital Advisors Pty Ltd, which received Mr McGown’s Director fees during the year. 3 T Kennedy resigned 28 February 2022. The following table sets out each KMP’s relevant interest in fully paid ordinary shares, options and performance rights to acquire shares in the Company, as at 30 June 2022: Name C McGown J Forwood P Darvall Fully paid ordinary shares 1,113,222 677,534 1,385,957 Options 1,000,000 800,000 10,459,167 SIPA RESOURCES LIMITED - 20 - DIRECTORS’ REPORT (continued) REMUNERATION REPORT (Audited) (continued) Remuneration of KMP for the 2021 financial year is set out below: Short-term benefits Post-employment benefits Salary Superannuation Retirement Benefit Annual/Long Service leave Share-based payments (1) Options Total $ $ $ $ $ $ Non-Executive Directors T Kennedy C McGown (2) J Forwood (3) Executives P Darvall 70,179 47,498 42,155 6,667 - 4,005 290,744 27,621 Non-Executive Director – Former - - - - K Field (4) 17,154 1,606 35,000 - - - - - - - - 76,846 47,498 46,160 19,710 338,075 - 53,760 Other KMP – former T Robson (5) Total 110,830 578,560 10,528 50,427 - 35,000 38,633 38,633 4,267 23,977 164,258 726,597 1 Options granted as part of remuneration package, AASB 2 – Share-Based Payments requires the fair value at grant date of the performance rights granted to be expensed over the vesting period. 2 C McGown, Non-Executive Director, is a Director of Resource Investment Capital Advisors Pty Ltd, which received Mr McGown’s Director fees during the year. J Forwood appointed 10 July 2020. 3 4 K Field resigned 19 November 2020. 5 T Robson resigned 21 January 2021. H. Share-based compensation Options During the year ended 30 June 2022, the following options were granted, vested and/or lapsed to KMP: Grant date Grant value (1) $ Number granted Number of vested during the year Number forfeited during the year Expense recognised during the year $ Maximum value yet to expense $ P Darvall – Managing Director 18-Nov-21 160,779 8,000,000 6,000,000 19-Nov-20 25-Nov-19 16,071 23,740 459,167 459,167 2,000,000 - C McGown - Non-Executive Chairman 18-Nov-21 20,097 1,000,000 1,000,000 J Forwood - Non-Executive Director 18-Nov-21 16,078 800,000 800,000 T Kennedy (2) - Non-Executive Director 18-Nov-21 16,078 800,000 800,000 - - - - - - 139,596 6,252 - 20,097 16,078 16,078 21,183 - - - - - 1 The value of options are calculated as the fair value of the options at grant date and allocated to remuneration equally over the period from grant date to expected vesting date. 2 T Kennedy resigned 28 February 2022. SIPA RESOURCES LIMITED - 21 - DIRECTORS’ REPORT (continued) REMUNERATION REPORT (Audited) (continued) Relative proportions of fixed vs variable remuneration expense The following table shows the relative proportions of remuneration that are linked to performance and those that are fixed, based on the amounts disclosed as statutory remuneration expense for the 2022 and 2021 financial years: Fixed remuneration Variable remuneration Fixed remuneration Variable remuneration Options Options 2022 2021 Non-Executive Directors C McGown J Forwood Executives P Darvall Non-Executive Director – Former T Kennedy (1) 1 T Kennedy resigned 28 February 2022. 100% 100% 95% 100% The variable remuneration is based on Board discretion. Reconciliation of equity instruments held by KMP - - 5% - 100% 100% 94% 100% - - 6% - The following table sets out a reconciliation of each KMP’s relevant interest in ordinary shares and options and performance rights to acquire shares in the Company: Balance at the start of the year Granted Acquired (1) Exercised Lapsed Other changes Balance at year/ period end Non-Executive Directors C McGown Fully paid ordinary shares 774,239 - 338,983 Options J Forwood - 1,000,000 - Fully paid ordinary shares 508,043 - 169,491 Options Executives P Darvall - 800,000 - Fully paid ordinary shares 896,466 - 489,491 Options 2,459,167 8,000,000 - Non-Executive Director – Former T Kennedy (2) Fully paid ordinary shares 349,863 - 169,491 Options - 800,000 - - - - - - - - - - - - - - - - - - - - - - - 1,113,222 1,000,000 677,534 800,000 1,385,957 10,459,167 (519,354) (800,000) - - Shares acquired on 29 November 2021, under shareholder approval. 1 2 T Kennedy resigned 28 February 2022. Other changes note balances held on resignation date. SIPA RESOURCES LIMITED - 22 - DIRECTORS’ REPORT (continued) REMUNERATION REPORT (Audited) (continued) I. Other information Loans to key management personnel There were no loans to key management personnel during the year (30 June 2021: none). Payment of fees - Mr Craig McGown, Non-Executive Director, is a Director of Resource Investment Capital Advisors Pty Ltd, which received Mr McGown’s Director fees during the year. At year end the Company had an outstanding payable balance of $6,416 (ex GST) (30 June 2021: $3,958 (ex GST)). There were no loans or other related party transactions during the period. This concludes the Remuneration Report which has been audited. UNISSUED ORDINARY SHARES Unissued ordinary shares under option/right at the date of this report are 14,809,167 and broken-down as follows: Options - - Issued to Directors Issued to Employees, Consultants and Vendors 13,059,167 1,750,000 Options over ordinary shares can be exercised between $0.102 to $0.214. All Sipa’s exploration activities are conducted within a robust framework of internal and external approvals processes that address environmental, native title, and health and safety aspects. Environmental sustainability, heritage considerations, safety and ethical procurement are at the forefront of issues considered by the Board to maintain and enhance our social license to operate in the areas and communities within which we work. SAFETY AND ENVIRONMENTAL REGULATIONS The entity has a responsibility to provide a safe and healthy environment for all of our sites which should exceed expectation of regulations. In the course of its normal mining and exploration activities the consolidated entity promotes an environmentally responsible culture and adheres to environmental regulations of the Department of Mines, Industry Regulation and Safety for Western Australian operations and to the Department of Geological Survey and Minerals for Ugandan operations, particularly those regulations relating to ground disturbance and the protection of rare and endangered flora and fauna. The consolidated entity has complied with all material environmental requirements up to the date of this report. ACCESS TO INDEPENDENT ADVICE Each Director has the right, so long as he is acting reasonably in the interests of the Company and in the discharge of his duties as a Director, to seek independent professional advice and recover the reasonable costs thereof from the Company. The advice shall only be sought after consultation about the matter with the Chair (where it is reasonable that the Chair be consulted) or, if it is the Chair that wishes to seek the advice or it is unreasonable that he be consulted, another Director (if that be reasonable). The advice is to be made immediately available to all Board members other than to a Director against whom privilege is claimed. SIPA RESOURCES LIMITED - 23 - DIRECTORS’ REPORT (continued) INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The Company has entered into agreements indemnifying, to the extent permitted by law, all the Directors and Officers of the Company against all losses or liabilities incurred by each Director and Officer in their capacity as Directors and Officers of the Company. Disclosure of the nature of the liability covered by and the amount of the premium payable for such insurance is subject to a confidentiality clause under the contract of insurance. The Company has not provided any insurance for the external auditor of the Company or a body corporate related to the external auditor. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out in this annual report. NON-AUDIT SERVICES From time to time the Consolidated Entity may decide to employ an external auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Consolidated Entity are important. The Board is satisfied that the provision of non-audit services during the period is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. During the year ended 30 June 2022, no amounts were paid or payable for non-audit services provided to the Group by the auditor. Signed in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act 2001. On behalf of the Directors. Signed in accordance with a resolution of the Directors Pip Darvall Managing Director Perth 28 September 2022 SIPA RESOURCES LIMITED - 24 - Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au Level 9, Mia Yellagonga Tower 2 5 Spring Street Perth WA 6000 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF SIPA RESOURCES LIMITED As lead auditor of Sipa Resources Limited for the year ended 30 June 2022, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Sipa Resources Limited and the entities it controlled during the period. Glyn O’Brien Director BDO Audit (WA) Pty Ltd Perth 28 September 2022 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2022 Other income Interest income Other income Expenses: Exploration and tenement expenses Financial assets gain/(loss) Depreciation expense Share based payments expense Administrative expenses Foreign exchange (loss)/gain Notes 2022 $ 2021 $ 1 1 2 2 15 2 2 207 264,314 14,708 432,232 (1,800,440) (1,183,384) - (239,626) (60,732) (210,604) (68,128) (25,578) (824,060) (1,286,062) (366) (11,913) Profit/(loss) before income tax expense (2,631,679) (2,367,751) Income tax expense 4 - - Profit/(loss) attributable to the owners of the Company (2,631,679) (2,367,751) Other comprehensive income/(loss): Items that may be reclassified to profit or loss Exchange difference on translation of foreign operations Other comprehensive income/(loss) for the year, net of tax (28,069) (28,069) (237) (237) Total comprehensive income/(loss) for year attributable to owners of Sipa Resources Limited (2,659,748) (2,367,988) Basic (loss)/earnings per share (cents per share) Diluted (loss)/earnings per share (cents per share) 19 19 (1.33) (1.33) (1.39) (1.39) The above consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. SIPA RESOURCES LIMITED - 26 - CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2022 Notes 2022 $ 2021 $ Current Assets Cash and cash equivalents Other receivables Total Current Assets Non-Current Assets Exploration and evaluation Other financial assets Plant and equipment Total Non-Current Assets Total Assets Current Liabilities Trade and other payables JV contributions Provisions Lease liability Total Current Liabilities Total Liabilities Net Assets Equity Contributed equity Reserves Accumulated losses 5 6 7 10 9 11 3,589,447 69,845 3,659,292 699,891 2,000 102,527 804,418 3,612,807 498,575 4,111,382 731,038 2,000 94,301 827,339 4,463,710 4,938,721 382,790 439,215 35,387 47,984 905,376 102,863 226,927 25,501 33,357 388,648 905,376 388,648 3,558,334 4,550,073 13(a) 13(c) 13(b) 115,111,999 113,654,594 1,652,575 1,470,040 (113,206,240) (110,574,561) Total Equity 3,558,334 4,550,073 The above consolidated Statement of financial position should be read in conjunction with the accompanying notes. SIPA RESOURCES LIMITED - 27 - CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2022 Issued Capital $ Accumulated Losses $ Equity benefits reserve $ Foreign Currency Translation Reserve $ Total $ Balance at 1 July 2020 111,004,480 (108,206,810) 1,435,596 9,103 4,242,369 Profit for the year Other comprehensive profit/(loss) for the year Total comprehensive profit/(loss) for the year - - - (2,367,751) - (2,367,751) Shares issued Share issue costs 2,740,000 (89,886) Share based payments - - - - - - - - - 25,578 - (2,367,751) (237) (237) (237) (2,367,988) 2,740,000 (89,886) 25,578 - - - - Balance at 30 June 2021 113,654,594 (110,574,561) 1,461,174 8,866 4,550,073 Loss for the year Other comprehensive income/(loss) for the year Total comprehensive income/(loss) for the year - - - (2,631,679) - (2,631,679) Shares issued Share issue costs 1,504,650 (47,245) Share based payments - - - - - - - - - 210,604 - (2,631,679) (28,069) (28,069) (28,069) (2,659,748) - - - - - 1,504,650 (47,245) 210,604 Balance at 30 June 2022 115,111,999 (113,206,240) 1,671,778 (19,203) 3,558,334 The above consolidated Statement of changes in equity should be read in conjunction with the accompanying notes. SIPA RESOURCES LIMITED - 28 - CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2022 Cash flows from operating activities Cash receipts from customers Payments for exploration and evaluation expenditure Receipts from joint ventures Payments to suppliers, consultants and employees Interest received Incentives and subsidies Notes 2022 $ 2021 $ 6,723 11,100 (3,168,542) (2,279,117) 2,497,174 889,269 (823,164) (1,292,592) 207 32,102 14,708 286,154 Net cash provided by/(used in) operating activities 22 (1,455,500) (2,370,478) Cash flows from investing activities Payments for tenements Payments for property, plant, and equipment Cash invested in security deposits Proceeds from the disposal of plant and equipment Proceeds from the sale of investments - (25,265) - - - (50,000) (966) 30,000 1,000 1,135,054 Net cash (used in)/provide by investing activities (25,265) 1,115,088 Cash flows from financing activities Proceeds from new issues of shares Share issue costs Net cash provided by financing activities Net (decrease)/increase in cash held Cash and cash equivalents at the beginning of the financial year Effect of exchange rates on cash holdings in foreign currencies 1,504,650 2,580,000 (47,245) (89,886) 1,457,405 2,490,114 (23,360) 3,612,807 - 1,234,724 2,378,083 - Cash and cash equivalents at the end of the financial year 5 3,589,447 3,612,807 The above consolidated Statement of cash flows should be read in conjunction with the accompanying notes. SIPA RESOURCES LIMITED - 29 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 1 REVENUE AND OTHER INCOME Finance income Interest income Other income Management fee income WA State Exploration Incentive Grant Research & Development Tax incentive Cashflow boost payments (1) Payroll tax grant (2) Other income Total other income Total revenue and other income 2022 $ 2021 $ 207 14,708 217,465 40,127 - - - 6,722 264,314 264,521 133,978 38,150 51,004 179,500 17,500 12,100 432,232 446,940 1 Cash flow boosts payments are delivered as credits in the activity statements and equivalent to the amount withheld from wages paid to employees from March to September 2020. 2 A one-off grant of $17,500 was paid to employers, or groups of employers, whose annual Australian taxable wages for 2018-19 were more than $1 million and less than $4 million. 2 EXPENDITURE Exploration and tenement expenses Australian tenements Less: exploration expenditure funded by JV parties Uganda tenements Total exploration and tenement expenses Notes 2022 $ 2021 $ 3,632,192 1,952,228 (1,904,072) 72,320 (898,414) 129,570 1,800,440 1,183,384 Share-based payments expense Options Total share-based payments expense 15 210,604 210,604 25,578 25,578 SIPA RESOURCES LIMITED - 30 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 2 EXPENDITURE (continued) Administrative expense Corporate costs Marketing costs Office costs Personnel costs (1) Total administrative expense Loss on financial assets Foreign exchange loss (2) Notes 2022 $ 2021 $ 286,465 63,485 42,953 431,157 824,060 - 366 333,228 65,715 58,371 828,748 1,286,062 239,626 11,913 1 A portion of the personnel costs have been included within Exploration and tenement expenditure. 2 Foreign exchange loss was recognised upon cash held and payments of Canadian and United States dollar denominated balances. A reconciliation of employee benefits expense is as follows: Employee benefits expense Wages and salaries Superannuation Provision for leave Other costs Total employee benefits expense Employee benefits included in Exploration and tenement expenses Administrative expenses 2022 $ 2021 $ 766,481 68,550 9,886 56,127 901,044 469,887 431,157 901,044 881,243 66,119 (124,153) 5,539 828,748 457,999 370,749 828,748 3 OPERATING SEGMENTS Management has determined that the Group has two reportable segments, being exploration activities in Australia and exploration activities in Uganda. This determination is based on the internal reports that are reviewed and used by the Board (chief operating decision maker) in assessing performance and determining the allocation of resources. As the Group is focused on exploration, the Board monitors the Group based on actual versus budgeted exploration expenditure incurred by area. This internal reporting framework is the most relevant to assist the Board with making decisions regarding the Group and its ongoing exploration activities, while also taking into consideration the results of exploration work that has been performed to date. SIPA RESOURCES LIMITED - 31 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 3 OPERATING SEGMENTS (continued) For the year ended 30 June 2022 Other income Reportable segment loss Reportable segment assets (1) Reportable segment liabilities For the year ended 30 June 2021 Australia $ Uganda $ Other $ Total $ 217,465 (1,582,975) 236,957 (439,215) - 47,057 264,522 (72,320) 570,306 (6,130) (976,384) (2,631,679) 3,656,447 4,463,710 (460,031) (905,376) Other income 133,978 - 312,962 446,940 Reportable segment loss (1,183,384) (129,570) (1,054,797) (2,367,751) Reportable segment assets (2) Reportable segment liabilities 651,322 (226,927) 630,000 (799) 3,657,399 (160,922) 4,938,721 (388,648) 1 Other corporate activities includes cash held of $3,573,475. 2 Other corporate activities includes cash held of $3,032,928. 4 INCOME TAX EXPENSE The components of tax expense comprise: Current tax Deferred tax asset/liability Reconciliation of income tax to prima facie tax payable Loss before income tax Income tax benefit at 25% (2021: 26%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Adjustment for difference in foreign tax rate Non-(assessable)/deductible items Under/(overprovision) in prior year (Recognised)/Unrecognised deferred tax assets Total income tax benefit 2022 $ 2021 $ - - - - - - (2,631,679) (2,367,751) (657,919) (615,615) (3,616) 52,777 (274,162) 882,920 - 29,769 29,770 (86,151) 642,227 - Unrecognised temporary differences Deferred tax assets and liabilities not recognised relate to the following: Tax losses Net deferred tax assets unrecognised 15,157,140 14,715,570 15,157,140 14,715,570 SIPA RESOURCES LIMITED - 32 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 4 INCOME TAX EXPENSE (continued) Significant accounting judgment Deferred tax assets The Group expects to have carried forward tax losses, which have not been recognised as deferred tax assets, as it is not considered sufficiently probable that these losses will be recouped by means of future profits taxable in the relevant jurisdictions. The utilisation of the tax losses is subject to the Group passing the required Continuity of Ownership and Same Business Test rules at the time the losses are utilised. Net deferred tax assets have not been brought to account as it is not probable within the immediate future that taxable profits will be available against which deductible temporary difference can be utilised. 5 CASH AND CASH EQUIVALENTS (a) Risk exposure Refer to Note 16 for details of the risk exposure and management of the Group’s cash and cash equivalents. (b) Deposits at call Deposits at call are presented as cash equivalents if they have a maturity of three months or less. Refer Note 27(g) for the Group's other accounting policies on cash and cash equivalents. 2022 $ 2021 $ Cash at bank 3,550,014 3,573,374 Short-term deposits 39,433 39,433 3,589,447 3,612,807 6 TRADE AND OTHER RECEIVABLES AND OTHER CURRENT ASSETS An assessment has been made of the recoverability of the current receivables and the Board is comfortable that their carrying amount is the same as their fair value. Other receivables are generally due for settlement within 30 days and are therefore classified as current. Refer to Note 16 for details of the risk exposure and management of the Group’s trade and other receivables. The term deposit has a maturity of more than three months. Trade and other receivables Other receivables JV contributions Prepayments 2022 $ 2021 $ 16,968 21,304 31,573 69,845 32,368 440,000 26,207 498,575 7 EXPLORATION AND EVALUATION ASSETS Opening balance Acquisition of Garden Gully project Foreign exchange movement Closing balance 2022 $ 2021 $ 731,038 - (31,147) 699,891 581,038 150,000 - 731,038 SIPA RESOURCES LIMITED - 33 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 7 EXPLORATION AND EVALUATION ASSETS (continued) During the prior year, 1,694,915 shares were issued to Miramar Resources Limited in part consideration for acquisition of Garden Gully project. In consideration for purchase of a 100% interest in the Garden Gully project, Miramar received a cash payment of $50,000 (ex GST); and $100,000 worth of fully paid ordinary Sipa shares. Significant accounting estimates and assumptions Impairment of capitalised exploration and evaluation expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, costs of drilling and production, production rates, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. The carrying values of items of exploration and evaluation expenditure are reviewed for impairment indicators when reclassified from to mine properties under development or at each reporting date and are subject to impairment testing when events or changes in circumstances indicate that the carrying values may not be recoverable. There is no impairment during for the year ended 30 June 2022. Significant accounting judgement Capitalisation of exploration and evaluation expenditure The Group has capitalised acquisition costs of tenements on the basis that this is expected to be recouped through future successful development (or alternatively sale) of the areas of interest concerned or on the basis that it is not yet possible to assess whether it will be recouped. 8 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS – EQUITY SECURITIES Opening balance Acquisition of shares Sales of shares Revaluation of shares Foreign exchange movements Closing balance 2022 $ - - - - - - 2021 $ 1,374,680 - (1,151,658) (102,753) (120,269) - Significant accounting estimates, assumptions, and judgements Classification of financial assets at fair value through profit or loss Investments are designated at fair value through profit or loss where management have made the election in accordance with AASB 9: Financial Instruments. Fair value for financial assets at fair value through profit or loss Information about the methods and assumptions used in determining fair value is provided in Note 12. SIPA RESOURCES LIMITED - 34 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 9 JOINT VENTURES The Company is or has been party to a number of unincorporated exploration joint ventures. The following is a list of unincorporated exploration joint ventures under which the Company has diluted and may yet dilute its original interest: Name of Joint Venture and Project Earning In at Paterson North Joint Venture at Barbwire Terrace 2022 Interest % 92%- 100% (1) 50% (2) 2021 Interest % 90% - 100% (1) - 1 Rio Tinto earning into the project. Ming Gold diluting out of tenements E45/3599, E45/4697, E45/5335 and E45/5336. 2 Buru earned a 50 per cent interest in Sipa's tenement by funding the first $250,000 of on-ground activities. As at 30 June 2022, the above listed joint ventures are not joint arrangements under the accounting standards as the joint venture partners do not have collective and joint control. The Company therefore accounts for the interest in the joint ventures in accordance with the relevant accounting standards and not under AASB 11 Joint Arrangements. All exploration and evaluation expenditure is expensed to Statement of Profit or Loss and Other Comprehensive Income as incurred. Contributed funds received from other joint venture partners are deducted from exploration expenditure when cash is received or the right to receive payment is established. Joint Venture at Paterson North In September 2020, Sipa announced a Farm in and JV agreement with Rio Tinto Exploration at the Paterson North Copper Gold Project in Western Australia. As at 30 June 2022, no amounts are held as restricted cash, . but are recognised as a current liability under JV contribution. Opening balance Contributions received Joint Venture expenditure Joint Venture at Barbwire Terrace 2022 $ 177,883 1,825,000 (1,563,668) 439,215 2021 $ - 1,204,950 (1,027,067) 177,883 In September 2020, Sipa announced it had entered into an alliance with Buru Energy to progress mineral exploration at the Barbwire Terrace project immediately southeast of Buru’s own Canning Basin oil and gas leases. During the period Buru earned a 50 per cent interest in Sipa’s tenement by funding the first $250,000 of on-ground activities. As at 30 June 2022, $21,304 is recorded as a receivable under JV contributions. Opening balance Contributions received Joint Venture expenditure 2022 $ 2021 $ 49,044 272,174 (342,522) (21,304) - 84,319 (35,275) 49,044 SIPA RESOURCES LIMITED - 35 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 10 TRADE AND OTHER PAYABLES Trade and other payables are normally settled within 30 days from receipt of invoice. All amounts recognised as trade and other payables, but not yet invoiced, are expected to settle within 12 months. The carrying values of trade and other payables are assumed to be the same as their fair value. Refer to Note 16 for details of the risk exposure and management of the Group’s trade and other receivables. Trade payables JV contributions Other payables and accrued expenses 2022 $ 293,162 439,215 2021 $ 42,418 - 89,628 60,445 822,005 102,863 11 LEASE LIABILITIES Current Lease liabilities Maturities of lease liabilities 2022 $ 2021 $ 47,984 47,984 33,357 33,357 The table below shows the Group’s lease liabilities based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Less than 6 months 6 – 12 months 1 – 5 years $ $ $ Over 5 years $ Total contractual cash flows $ Carrying amount of liabilities $ 25,275 25,275 17,417 17,417 - - - - 50,550 47,984 34,834 33,357 At 30 June 2022 Lease liability At 30 June 2021 Lease liability Accounting estimates and judgements Leases The application of AASB 16 requires judgements that affect the valuation of lease liabilities and ROU assets. In addition to the critical judgements and areas of estimation uncertainty discussed below, the following judgements and estimations need to be considered when assessing leases: - determination of stand-alone prices of lease and non-lease components, whether remeasurement or a separate lease is required following a change in lease terms and conditions, and whether variable payments are in- substance fixed or not to be included in the calculation of the lease liability; and - assessments of whether a purchase option will be exercised, or an ROU asset is impaired. SIPA RESOURCES LIMITED - 36 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 11 LEASE LIABILITIES (continued) Identifying a lease Identifying whether a contract is, or contains, a lease involves the exercise of judgement about whether: - - - the contract depends on a specified asset; the Group obtains substantially all of the economic benefits from the use of the asset and has the right to direct the use of the asset; and the contract is perpetual or for a period of time over which the underlying assets are to be used. Determining the lease term The following assessments impact the lease term which may significantly affect the amount of lease liabilities and ROU assets recognised. Extension and termination options The Group applies judgement in determining whether it is reasonably certain to exercise extension or termination options, by considering all relevant factors that could provide an economic incentive to exercise these options. Non-cancellable period In determining the lease term, the assessment of a contract following the contractual non-cancellable period needs to consider the substance of the contract and whether any economic penalties exist which may affect the term of the non- cancellable period. Determining the incremental borrowing rate Where the Group (or Group entity) cannot readily determine the interest rate implicit in the lease, it uses its IBR to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the ROU asset in a similar economic environment. Therefore, as the IBR reflects what the Group would have to pay, estimation is required when no observable rates are available or when observable rates need to be adjusted to reflect the terms and conditions of the lease. 12 FAIR VALUES OF FINANCIAL INSTRUMENTS This note provides an update on the judgements and estimates made by the Group in determining the fair values of the financial instruments since the last annual financial report. Fair value hierarchy To provide an indication about the reliability of the inputs used in determining fair value, the Group classifies its financial instruments into the three levels prescribed under the accounting standards. An explanation of each level follows underneath the table. The group had no financial assets and financial liabilities measured and recognised at fair value on a recurring basis (30 June 2021: none). There were no transfers between levels during the period. The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period. The fair value of financial assets and liabilities held by the Group must be estimated for recognition, measurement and/or disclosure purposes. The Group measures fair values by level, per the following fair value measurement hierarchy: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). SIPA RESOURCES LIMITED - 37 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 12 FAIR VALUES OF FINANCIAL INSTRUMENTS (continued) Valuation techniques used to determine fair values The Group did not have any financial instruments that are recognised in the financial statements where their carrying value differed from the fair value. The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The carrying amounts of cash and short-term trade and other receivables, trade payables and other current liabilities approximate their fair values largely due to the short-term maturities of these payments. Financial assets at fair value through profit or loss – equity securities The fair value of the equity holdings is based on the quoted market prices from the ASX on the last traded price prior or nearest to year-end. 13 ISSUED CAPITAL (a) Issued capital 2022 Shares 2021 Shares 2022 $ 2021 $ Fully paid 205,024,803 179,522,263 115,111,999 113,654,594 Movements in ordinary share capital during the current and prior financial period are as follows: Details Balance at 1 July 2020 Placement Shares issued Share-based payment (Note 15) Share-based payment (Note 15) Less: Share issue costs Balance at 30 June 2021 Placement Placement Less: Share issue costs Balance at 30 June 2022 (b) Accumulated losses Balance at 1 July Net loss for the year Balance at 30 June Date Number of shares Issue price/share $ $ 142,276,581 18-Sep-20 32,361,112 7-Oct-20 8-Oct-20 21-Jun-21 28-Sep-21 29-Nov-21 2,500,000 689,655 1,694,915 179,522,263 24,655,084 847,456 0.072 0.100 0.087 0.059 0.059 0.059 111,004,480 2,330,000 250,000 60,000 100,000 (89,886) 113,654,594 1,454,650 50,000 (47,245) 205,024,803 115,111,999 2022 $ 2021 $ (110,574,561) (108,206,810) (2,631,679) (2,367,751) (113,206,240) (110,574,561) SIPA RESOURCES LIMITED - 38 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 13 ISSUED CAPITAL (continued) (c) Reserves The following table shows a breakdown of the reserves and the movements in these reserves during the year. A description of the nature and purpose of each reserve is provided. Share-based payments reserve Balance at 1 July Issue of options Balance at 30 June Foreign currency translation reserve Balance at 1 July Currency translation differences arising during the year Balance at 30 June Total reserves Share-based payments reserve Note 2022 $ 2021 $ 1,461,174 1,435,596 15(a) 210,604 25,578 1,671,778 1,461,174 8,866 (28,069) (19,203) 9,103 (237) 8,866 1,652,575 1,470,040 The share-based payments reserve is used to recognise: (a) the grant date fair value of options issued but not exercised; (b) the grant date fair value of market-based performance rights granted to Directors, Employees, Consultants and Vendors but not yet vested; and (c) the fair value non-market based performance rights granted to Directors, Employees, Consultants and Vendors but not yet vested. Foreign currency translation reserve Exchange differences arising on translation of the foreign controlled entities are recognised in other comprehensive income as described in Note 27(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. 14 DIVIDENDS No dividends have been declared or paid for the year ended 30 June 2022 (30 June 2021: nil). SIPA RESOURCES LIMITED - 39 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 15 SHARE-BASED PAYMENTS Share-based payment transactions are recognised at fair value in accordance with AASB 2. The total movement arising from share-based payment transactions recognised during the year were as follows: As part of share-based payment reserve: Options issued to directors and advisors 15(a) 210,604 25,578 Note 2022 $ 2021 $ As part of administration expense: Shares issued –Corporate advisory 15(b) As part of exploration and evaluation expenditure: Shares issued – Acquisition of Garden Gully project 15(b) - - 210,604 60,000 100,000 185,578 During the year the Group had the following share-based payments: (a) Share options The Sipa Resources Limited share options are used to reward Executive Directors, Employees, Consultants and Vendors for their performance and to align their remuneration with the creation of shareholder wealth through the performance requirements attached to the options. The Company’s Option Plan was approved and adopted by shareholders on 15 November 2018. Options are granted at the discretion of the Board and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. The options are not listed and carry no dividend or voting right. Upon exercise, each option is convertible into one ordinary share to rank pari passu in all respects with the Company’s existing fully paid ordinary shares. Set out below are summaries of options granted: Opening balance Granted during the period Exercised during the period Forfeited/Lapsed Closing balance Vested and exercisable 2022 2021 Average exercise price per option $0.227 $0.154 - $0.917 $0.149 $0.148 Number of options 4,202,918 11,600,000 - (993,751) 14,809,167 12,309,167 Average exercise price per option $0.243 $0.105 - $0.123 $0.227 $0.262 Number of options 3,793,751 1,156,167 - (747,000) 4,202,918 3,243,751 SIPA RESOURCES LIMITED - 40 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 15 SHARE-BASED PAYMENTS (continued) Grant date Expiry date Exercise price 2022 Number of options 2021 Number of options (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) 1-Sep-16 19-Dec-16 25-Nov-19 25-Nov-19 19-Nov-20 21-Apr-21 18-Nov-21 (1) 18-Jan-22 24-Jan-22 (2) 17-Mar-22 (3) 31-Aug-21 18-Dec-21 24-Nov-23 31-Jan-23 18-Nov-23 19-Apr-24 29-Nov-25 25-Jan-26 25-Jan-26 21-Mar-26 $1.32 $0.72 $0.13 $0.15 $0.102 $0.110 various $0.100 $0.100 $0.100 - - 750,000 2,000,000 459,167 500,000 10,600,000 500,000 - - 162,500 331,251 750,000 2,000,000 459,167 500,000 - - - - 14,809,167 4,202,918 Weighted average remaining contractual life of options outstanding at the end of the year: 2.82 years 1.82 years 1 Options granted to Key Management Personnel on 18 November 2021 were approved at the Company’s Annual General Meeting. 2 250,000 Options granted, were cancelled during the year as a result of the employee ceasing employment with the Company. 3 250,000 Options granted, were cancelled during the year as a result of the employee ceasing employment with the Company. The model inputs for options granted during the year included: Series Exercise price Expiry (years) (vii) (vii) (vii) (vii) (viii) (ix) (x) $0.093 $0.134 $0.174 $0.214 $0.100 $0.100 $0.100 4.0 4.0 4.0 4.0 4.0 4.0 4.0 Options granted 2,650,000 2,650,000 2,650,000 2,650,000 500,000 250,000 250,000 Expected volatility (1) Dividend yield Risk free interest rate (2) Option value 80% 80% 80% 80% 64% 63% 67% 0% 0% 0% 0% 0% 0% 0% 0.97% 0.97% 0.97% 0.97% 1.19% 1.24% 1.84% $0.025 $0.021 $0.018 $0.016 $0.022 $0.022 $0.022 1 The expected price volatility is based on historical volatility (based on the remaining life of the option), adjusted for any expected changes to future volatility due to publicly available information. 2 Risk free rate of securities with comparable terms to maturity. Key service milestones of the options which have been granted on 18 January 2022, 24 January 2022 and 17 March 2022 were as follows: Grant date Exercise price Number Service milestones 18-Jan-22 24-Jan-22 (1) 17-Mar-22 (1) $0.100 $0.100 $0.100 500,000 Options vest 1 year from issue date 250,000 Options vest 1 year from issue date 250,000 Options vest 1 year from issue date Mar 22 – Mar 23 Service period Jan 22 – Jan 23 Jan 22 – Jan 23 1 Options granted, were cancelled during the year as a result of the employee not ceasing employment with the Company. SIPA RESOURCES LIMITED - 41 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 15 SHARE-BASED PAYMENTS (continued) Key performance milestones of the options which have been granted on 18 November 2021 were as follows: Grant date Exercise price Number Performance milestones Performance period 18-Nov-21 $0.093 2,150,000 None - 18-Nov-21 $0.093 500,000 Vest subject to pre-determined performance hurdles (1) Sep 21 – Aug 22 18-Nov-21 $0.134 2,150,000 None - 18-Nov-21 $0.134 500,000 Vest subject to pre-determined performance hurdles (1) Sep 22 – Aug 23 18-Nov-21 $0.174 2,150,000 None - 18-Nov-21 $0.174 500,000 Vest subject to pre-determined performance hurdles (1) Sep 23 – Aug 24 18-Nov-21 $0.214 2,150,000 None - 18-Nov-21 $0.214 500,000 Vest subject to pre-determined performance hurdles (1) Sep 24 – Aug 25 1 The performance hurdles are designed to optimise the Company's performance against its strategic plan, with threshold levels representing meaningful progress against the Company's objectives. The threshold levels are suitably stretched to be consistent with the objectives of the Plan. The performance hurdles for KMP in place for the current period are outlined below. Strategic objectives Performance measure Cost effective assessment and acquisition of projects meeting strategic thresholds Capital Management Efficient de-risking of Company projects via cost effective exploration Minimise holding costs and maintain cash reserves while retaining access to upside for projects that may be divested Business Operations Efficient and Effective business operations and capital raising where required to support Key Strategic Objectives Weight 10% 30% 20% 40% The fair value of option issued is measured by reference to the value of the goods or services received. The fair value of services received in return for share options granted to Directors and Employees and Consultants is measured by reference to the fair value of options granted. The fair value of services received by advisors could not be reliably measured and are therefore measured by reference to the fair value of the equity instruments granted. The estimate of the fair value of the services is measured based on a number of closed and open form models by an independent valuer. The life of the options including early exercise options are built into the option model. The fair value of the options are expensed over the expected vesting period. The total expense arising from options issued during the reporting period as part of share-based payments expense was as follows: Share-based payments expense Options issued to Directors and employees 30 June 2022 $ 30 June 2021 $ 210,604 210,604 25,578 25,578 SIPA RESOURCES LIMITED - 42 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 15 SHARE-BASED PAYMENTS (continued) (b) Share capital to vendors During the prior financial year: - On 7 October 2020, 689,655 shares were issued to Hartley’s Limited in consideration for advisory fees. The fair value of the shares recognised was by direct reference to the fair value of service received. This was determined by the corresponding invoice received which amounted to $60,000. This amount has been recognised in the Statement of Profit or Loss under administration expense. - On 21 June 2021, 1,694,915 shares were issued to Miramar Resources Limited in part consideration for acquisition of Garden Gully project. In consideration for purchase of a 100% interest in the Garden Gully project, Miramar received a cash payment of $50,000 (ex GST); and $100,000 worth of fully paid ordinary Sipa shares. The fair value of the shares recognised was by direct reference to the sales agreement, executed 15 February 2021. An amount of $100,000 has been recognised in the Statement of Financial Position under exploration and evaluation expenditure. Significant accounting estimates, assumptions, and judgements Estimation of fair value of share-based payments 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 for share issued to employees is determined using the Black-Scholes or Monte-Carlo model taking into account the assumptions detailed within this note. The fair value of the shares issued to vendors is recognised was by direct reference to the fair value of service received. Probability of vesting conditions being achieved Inputs to pricing models may require an estimation of reasonable expectations about achievement of future vesting conditions. Vesting conditions must be satisfied for the counterparty to become entitled to receive cash, other assets or equity instruments of the entity, under a share-based payment arrangement. Vesting conditions include service conditions, which require the other party to complete a specified period of service, and performance conditions, which require specified performance targets to be met (such as a specified Increase in the entity's profit over a specified period of time) or completion of performance hurdles. The Company recognises an amount for the goods or services received during the vesting period based on the best available estimate of the number of equity instruments expected to vest and shall revise that estimate, if necessary, if subsequent information Indicates that the number of equity instruments expected to vest differs from previous estimates. On vesting date, the entity shall revise the estimate to equal the number of equity instruments that ultimately vested. The achievement of future vesting conditions are reassessed each reporting period. 16 FINANCIAL AND CAPITAL RISK MANAGEMENT Overview The financial risks that arise during the normal course of the Group’s operations comprise market risk, credit risk and liquidity risk. In managing financial risk, it is policy to seek a balance between the potential adverse effects of financial risks on financial performance and position, and the "upside" potential made possible by exposure to these risks and by taking into account the costs and expected benefits of the various risk management methods available to manage them. SIPA RESOURCES LIMITED - 43 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 16 FINANCIAL AND CAPITAL RISK MANAGEMENT (continued) General objectives, policies, and processes The Board is responsible for approving policies on risk oversight and management and ensuring management has developed and implemented effective risk management and internal control. The Board receives reports as required from the Managing Director in which they review the effectiveness of the processes implemented and the appropriateness of the objectives and policies it sets. The Board oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced. These disclosures are not, nor are they intended to be an exhaustive list of risks to which the Group is exposed. Financial Instruments The Group has the following financial instruments: Financial assets Cash and cash equivalents Other receivables Security deposits Financial liabilities Trade and other payables (a) Market Risk 2022 $ 2021 $ 3,589,447 3,612,807 38,272 2,000 472,368 2,000 3,629,719 4,087,175 382,790 382,790 42,418 42,418 Market risk can arise from the Group’s use of interest-bearing financial instruments, foreign currency financial instruments and equity security instruments and exposure to commodity prices. It is a risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rate (currency risk), equity securities price risk (price risk) and fluctuations in commodity prices (commodity price risk). (i) Interest rate risk The Board manages the Group's exposure to interest rate risk by regularly assessing exposure, taking into account funding requirements and selecting appropriate instruments to manage its exposure. As at the 30 June 2022, the Group has interest-bearing assets, being cash at bank (30 June 2021: cash at bank). As such, the Group's income and operating cash flows are not highly dependent on material changes in market interest rates. Sensitivity analysis The Group does not consider this to be a material risk/exposure for the Group and have therefore not undertaken any further analysis. As at 30 June 2022 and 30 June 2021 the Group held funds on deposit. (ii) Currency risk The Group maintains a corporate listing in Australia and operates in Australia and Uganda. As a result of various operating locations, the Group is exposed to foreign exchange risk arising from fluctuations, primarily in the US Dollar (USD), and Ugandan Shilling (UGX). SIPA RESOURCES LIMITED - 44 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 16 FINANCIAL AND CAPITAL RISK MANAGEMENT (continued) Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company’s functional currency. The Group manages risk by matching receipts and payments in the same currency and monitoring movements in exchange rates. The exposure to risks is measured using sensitivity analysis and cash flow forecasting. The Group’s exposure to foreign currency risk at year end, expressed in Australian dollars, was as follows: USD $ 2022 CAD $ Financial assets Cash Other receivables Financial assets at FVPL Financial liabilities Trade and other payables Sensitivity analysis - - - - UGX $ USD $ 15,972 37,723 3,140 - 6,130 - - - - - - - 2021 CAD $ - - - - The following table demonstrates the estimated sensitivity to a 10% increase/decrease in the Australian dollar/UGX exchange rate, with all variables held consistent, on post tax profit and equity. The Group does not consider the other currencies to be a material risk/exposure to the Group and have therefore not undertaken any further analysis. These sensitivities should not be used to forecast the future effect of movement in the Australian dollar exchange rate on future cash flows. A hypothetical change of 10% in UGX exchange rates was used to calculate the Group's sensitivity to foreign exchange rate movements as the Company’s estimate of possible rate movements over the coming year taking into account current market conditions and past volatility. During the prior year sensitivity analysis was performed on USD exchange rates a hypothetical change of 10%. Impact on post-tax profits and equity 30 June 2022 AUD/UGX + % AUD/UGX - % 30 June 2021 AUD/USD + % AUD/USD - % % 10 10 10 10 UGX $ 790 7,846 - 799 $ 1,298 (1,298) 3,772 (3,772) SIPA RESOURCES LIMITED - 45 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 16 FINANCIAL AND CAPITAL RISK MANAGEMENT (continued) (iii) Price risk The Group’s did not hold any equity interests during the year. During the prior year the Group’s only equity investments were publicly traded on the TSX. To manage its price risk arising from investments in equity securities, management monitors the price movements of the investment and ensures that the investment risk falls within the Group’s framework for risk management. The Group’s exposure to equity securities price risk arises from investments held by the Group and classified in the statement of financial position as financial assets at fair value (Note 8). Sensitivity analysis The Group does not hold any equity investments at year end and therefore does not consider this to be a material risk/exposure to the Group and have therefore not undertaken any further analysis. (iv) Commodity price risk As the Group has not yet entered into mineral or energy production, the risk exposure to changes in commodity price is not considered significant. (b) Credit risk Credit risk arises from cash and cash equivalents and deposits with financial institutions, as well as trade receivables. Credit risk is managed on a Group basis. For cash balances held with banks or financial institutions, where possible only independently rated parties with a minimum rating of ‘-A’ are accepted. The Board are of the opinion that the credit risk arising as a result of the concentration of the Group's assets is more than offset by the potential benefits gained. The maximum exposure to credit risk at the reporting date is the carrying amount of the assets as summarised net of credit loss provisions and impairments. Exposure to credit risk The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was: Cash and cash equivalents Other receivables Security deposits 2022 $ 2021 $ 3,589,447 3,612,807 38,272 2,000 472,368 2,000 3,629,719 4,087,175 SIPA RESOURCES LIMITED - 46 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 16 FINANCIAL AND CAPITAL RISK MANAGEMENT (continued) The credit quality of financial assets is assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates. The Group has adopted lifetime expected credit loss allowance in estimating expected credit loss. Cash at bank and short-term deposits Held with Australian banks and financial institutions AA- S&P rating A+ S&P rating B S&P rating Unrated Total Other receivables Counterparties with external credit ratings Counterparties without external credit ratings (1) Group 1 Group 2 Group 3 Total 2022 $ 2021 $ - - 3,573,475 3,574,294 15,032 940 37,723 790 3,589,447 3,612,807 - - 38,272 - 467,183 - 7,185 - 38,272 474,368 1 Group 1 — new customers (less than 6 months). Group 2 — existing customers (more than 6 months) with no defaults in the past. Group 3 — existing customers (more than 6 months) with some defaults in the past. All defaults were fully recovered. (c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Through continuous monitoring of forecast and actual cash flows the Group manages liquidity risk by maintaining adequate reserves to meet future cash needs. The decision on how the Group will raise future capital will depend on market conditions existing at that time. Maturities of financial liabilities The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. SIPA RESOURCES LIMITED - 47 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 16 FINANCIAL AND CAPITAL RISK MANAGEMENT (continued) Less than 6 months 6 - 12 months $ $ 1 - 5 years $ Over 5 years $ Total contractual cash flows Carrying amount of liabilities $ $ At 30 June 2022 Trade and other payables 382,790 - Lease liabilities 25,275 25,275 At 30 June 2021 Trade and other payables 42,418 - Lease liabilities 17,417 17,417 - - - - - - - - 382,790 382,790 50,550 47,984 42,418 34,834 42,418 33,357 (d) Capital risk management The Group’s objective when managing capital is to safeguard the ability to continue as a going concern. This is to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Board monitors capital on an ad-hoc basis. No formal targets are in place for return on capital, or gearing ratios, as the Group has not derived any income from operations. 17 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Group's accounting policies. This Note provides an overview of the areas that involved a higher degree of judgement or complexity and items which are more likely to be materially adjusted. Detailed information about each of these estimates and judgements is included in the Notes together with information about the basis of calculation for each affected line item in the financial statements. Significant accounting estimates and judgements The areas involving significant estimates or judgements are: - Recognition of deferred tax asset for carried forward tax losses — Note 4; - Capitalisation of exploration and evaluation expenditure – Note 7 - Impairment of capitalised of exploration and evaluation expenditure - Note 7; - Classification of financial assets through profit or loss – Note 8; - Estimation of fair value of share-based payments – Note 15; - Probability of vesting conditions being achieved– Note 15. Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. There have been no actual adjustments this year as a result of an error and of changes to previous estimates. SIPA RESOURCES LIMITED - 48 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 18 TENEMENT EXPENDITURES CONDITIONS AND LEASING COMMITMENTS The consolidated entity has minimum statutory commitments as conditions of tenure of certain mining tenements. In addition, it has commitments to perform and expend funds towards retaining an interest in formalised agreements with partners. If all existing areas of interest were maintained on the terms in place at 30 June 2022, the Directors estimate the minimum expenditure commitment for the ensuing twelve months to be $2,073,129 (30 June 2021: $1,774,458). However, the Directors consider that the actual commitment is likely to be less as these commitments are reduced continuously by such items as exemption applications to the Department of Geological Survey and Mines, Uganda and the Department of Mines, Industry and Safety, Western Australia, withdrawal from tenements, and other farm-out transactions. In any event these expenditures do not represent genuine commitments as the ground can always be surrendered in lieu of payment of commitments. This estimate may be varied as a result of the granting of applications for exemption. The Company has the ability to diminish its exposure under these commitments through the application of a variety of techniques including applying for exemptions from the regulatory expenditure obligations, surrendering tenements, relinquishing portions of tenements or entering into farm-out agreements whereby third parties bear the burdens of such obligation in whole or in part. Australian Projects The Group has certain obligations to perform minimum exploration work on tenements held. These obligations may vary over time, depending on the Group's exploration programmes and priorities. As at reporting date, total exploration expenditure commitments on tenements held is shown in the above table. These obligations are also subject to variations by farm-out arrangements, dilution with current partners or sale of the relevant tenements. Ugandan Projects The Group has minimum obligations for expenditure under the retention license being 1 years Work Programme. 19 (LOSS)/EARNINGS PER SHARE Basic and diluted (loss)/earnings per share Net (loss)/profit after tax attributable to the members of the Company $ (2,631,679) $ (2,367,751) Weighted average number of ordinary shares 198,592,554 169,909,265 Basic and diluted (loss)/earnings per share (cents) (1.33) (1.39) 2022 2021 Net (loss)/profit after tax attributable to the members of the Company $ (2,631,679) $ (2,367,751) Weighted average number of ordinary shares 198,592,554 169,909,265 Adjustments for calculation of diluted earnings per share Options Weighted average number of ordinary shares and potential ordinary shares - - - - Diluted (loss)/earnings per share (cents) (1.33) (1.39) Nil options (2021: Nil) are considered to be potential ordinary shares and have not been included in the determination of diluted earnings per share as they are anti- dilutive for the periods presented. Details relating to the options are set out in Notes 15. SIPA RESOURCES LIMITED - 49 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 20 CONTINGENT LIABILITIES (a) Contingent liabilities Native Title Tenements are commonly (but not invariably) affected by native title. The Company is not in a position to assess the likely effect of any native title impacting the Company. The existence of native title and heritage issues represent, as a general proposition, a serious threat to explorers and miners, not only in terms of delaying the grant of tenements and the progression of exploration development and mining operations, but also in terms of costs arising consequent upon dealing with aboriginal interest groups, claims for native title and the like. As a general proposition, a tenement holder must obtain the consent of the owner of freehold before conducting operations on the freehold land. Unless it already has secured such rights, there can be no assurance that the Company will secure rights to access those portions (if any) of the Tenements encroaching freehold land but, importantly, native title is extinguished by the grant of freehold so if and whenever the Tenements encroach freehold the Company is in the position of not having to abide by the Native Title Act in respect of the area of encroachment albeit aboriginal heritage matters still be of concern. The Group currently has no contingent liabilities as at 30 June 2022 (30 June 2021: Nil). (b) Contingent assets The Group has no contingent assets as at 30 June 2022 (30 June 2021: Nil). Significant judgments Contingencies & commitments As the Group is subject to various laws and regulations in the jurisdictions in which it operates, significant judgment is required in determining whether any potential contingencies are required to be disclosed and/or whether any capital or operating leases require disclosure. 21 RELATED PARTY TRANSACTIONS Transactions with related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Key management personnel compensation Short-term employee benefits Post-employment benefits Share-based payments Other long-term benefits 2022 $ 2021 $ 438,795 36,672 198,101 - 578,560 124,060 23,977 - 673,568 726,597 Detailed remuneration disclosures are provided within the remuneration report. Parent entity The ultimate parent entity and ultimate controlling party is Sipa Resources Limited (incorporated in Australia). SIPA RESOURCES LIMITED - 50 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 21 RELATED PARTY TRANSACTIONS (continued) Subsidiaries Interests in subsidiaries are set out in Note 24. Transactions with related parties Payment of fees - Mr Craig McGown, Non-Executive Chair, is a Director of Resource Investment Capital Advisors Pty Ltd, which received Mr McGown’s Director fees during the year. At year end the Company had an outstanding payable balance of $6,416 (ex GST) (30 June 2021: $3,958 (ex GST)). Share-based payments During the year the following options were granted: - Mr Craig McGown was granted 1,000,000 options; - Mr Pip Darvall was granted 8,000,000 options; - Mr Tim Kennedy was granted 800,000 options; - Mr John Forwood was granted 800,000 options. Details of the valuation pertaining to the above-mentioned equity instruments are set out in Note 15. There were no other related party transactions during the period. 22 RECONCILATION OF (LOSS)/PROFIT AFTER INCOME TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Loss for the period Add/(less) non-cash items: Depreciation Leases Share based payments Foreign exchange (loss)/gain Add/ (less) items classified as invested/financing activities: Proceeds from sale of plant and equipment Fair value movement on investments held Movement in deposits Changes in assets and liabilities during the financial year: Decrease/(increase) in trade and other receivables Increase in joint venture contributions (Decrease)/increase in trade and other payables Increase/(decrease) in employee provision 2022 $ 2021 $ (2,631,679) (2,367,751) 64,921 (31,122) 210,604 946 75,192 (29,815) 85,578 360 - - - (1,000) 239,626 (30,000) 486,679 (395,008) 190,985 243,280 226,927 (15,434) 9,886 (159,153) Net cash outflow used in operating activities (1,455,500) (2,370,478) SIPA RESOURCES LIMITED - 51 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 22 RECONCILATION OF LOSS AFTER INCOME TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES (continued) (a) Non-cash investing and financing activities Acquisition of Garden Gully project 23 EVENTS SUBSEQUENT TO REPORTING DATE Subsequent to year end: Note 7 2022 $ 2021 $ - 100,000 - On 26 July 2022, it was announced that Mr Rick Yeates was appointed to the Board as a Non-Executive Director, effective 1 August 2022. - On 6 September 2022, Sipa advised that Blencowe Resources plc intends to withdraw from the Option Agreement over Sipa's Uganda Nickel-Copper Project to focus on its graphite project. During the 6 months it held the project under Option, Blencowe has reported that it completed a detailed airborne electro-magnetic survey over the Akelikongo prospect. Sipa intends to review this new data and re-commence discussions with other parties who had previously expressed interest in moving the project forward. No other material matters have occurred subsequent to the end of the financial year which requires reporting on other than those which have been noted above or reported to ASX. 24 INTEREST IN OTHER ENTITIES (a) Investments in controlled entities The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 27(a): Name of entity Sipa Exploration NL Sipa Management Pty Ltd Sipa East Africa Pty Ltd SiGe East Africa Pty Ltd Sipa Exploration Uganda Limited Sipa Resources Tanzania Limited Country of incorporation 2022 Equity holding 2021 Equity holding Australia Australia Australia Australia Uganda Tanzania 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% SIPA RESOURCES LIMITED - 52 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 25 REMUNERATION OF AUDITORS From time to time the Consolidated Entity may decide to employ an external auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Consolidated Entity are important. These assignments are principally tax advice and due diligence on acquisitions, which are awarded on a competitive basis. It is the Group’s policy to seek competitive tenders for all major consulting projects. No non-audit services have been provided during the period. During the year, the following fees were paid or payable for services provided by the auditor of the parent entity, its related parties and non-related audit firms: (a) BDO Australia Audit and assurance services Audit and review of financial statements Total fees 26 PARENT ENTITY INFORMATION The following information relates to the parent entity, Sipa Resources Limited as at 30 June 2022. The information presented here has been prepared using consistent accounting policies as presented in Note 27. (a) Summary of financial information The individual aggregate financial information for the parent entity is shown in the table. (b) Guarantees entered into by the parent entity The parent entity did not have any guarantees as at 30 June 2022 or 30 June 2021. (c) Contingent liabilities of the parent entity Other than those disclosed in Note 20, the parent entity did not have any contingent liabilities as at 30 June 2022 or 30 June 2021. (d) Contractual commitments for the acquisition of property, plant, and equipment The parent entity did not have any contractual commitments for the acquisition of property, plant and equipment as at 30 June 2022 or 30 June 2021. 2022 $ 2021 $ 42,233 42,233 35,852 35,852 Company 2022 $ 2021 $ Financial position Current assets 2,765,952 3,032,928 Total assets 3,531,534 3,886,123 Current liabilities Total liabilities Equity - - - - Contributed equity 115,111,999 113,654,594 Reserves 1,671,778 1,461,175 Accumulated losses (113,252,243) (111,229,646) Total equity 3,531,534 3,886,123 Financial performance Loss for the year (2,022,597) (2,554,506) Total comprehensive profit/(loss) (2,022,597) (2,554,506) SIPA RESOURCES LIMITED - 53 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 27 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Sipa Resources Limited (Company or Sipa) is a company incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. Sipa Resources Limited is the ultimate parent entity of the Group. The consolidated financial statements of Sipa Resources Limited for the year ended 30 June 2022 comprise the Company and its controlled subsidiaries (together referred to as the Group and individually as Group entities). Statement of compliance These general-purpose financial statements have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Group Interpretations, and the Corporations Act 2001. Sipa Resources Limited is a for- profit entity for the purpose of preparing the financial statements. The consolidated financial statements of the Group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Historical cost convention expected to have a material impact on the entity in the current or future transactions. future reporting periods and on foreseeable Accounting policies In order to assist in the understanding of the financial statements, the following summary explains the principal accounting policies that have been adopted in the preparation of the financial report. These policies have been applied consistently to all of the periods presented, unless otherwise stated. (a) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 June each year. 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) These financial statements have been prepared on an accruals basis and are based on historical costs and do not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets. - - 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. Critical accounting estimates and significant judgments critical accounting estimates. The preparation of financial statements requires the use of certain requires Management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed within Note 17. It also New and amended standards adopted by the Group The Group has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to their operations and effective for the current annual reporting period. Other amendments did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. The adoption of all the new and revised Standards and Interpretations has not resulted in any changes to the Group’s accounting policies and has no effect on the amounts reported for the current or prior years. However, the above standards have affected the disclosures in the notes to the financial statements. New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2022 reporting periods and have not been early adopted by the group. The group's assessment of the impact of these new standards and interpretations is set out below. These standards are not When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: - The contractual arrangement with the other vote holders of the investee - Rights arising from other contractual arrangements, and - The Consolidated Entity’s voting rights and potential voting rights. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, income, and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. liabilities, When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-Group assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. SIPA RESOURCES LIMITED - 54 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 (b) Going concern These financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business. (c) Segment Reporting Operating segments are reported in a manner that is consistent with the internal reporting to the chief operating decision maker, which has been identified by the company as the Board. (d) Foreign Currency Translation Functional and presentation currency Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the Group operates (‘the functional currency). The consolidated financial statements are presented in Australian dollars, which is Sipa Resources Limited’s functional and presentation currency. Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency monetary assets and liabilities at the reporting date are translated at the exchange rate existing at reporting date. Exchange differences are recognised in profit or loss in the period in which they arise. No dividends were paid or proposed during the year. Group companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: - - assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; rates (unless income and expenses for each statement of profit or loss and other comprehensive income are translated at average exchange reasonable this approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and is not a - all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange difference is reclassified to profit or loss, as part of the gain or loss on sale where applicable. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. (e) Revenue and Other Income Revenue from contracts with customers is recognised when a customer obtains control of the promised assets, and the Group satisfies its performance obligations under the contract. Revenue is allocated to each performance obligation. The Group considers the terms of the contract in determining the transaction price. The transaction price is based upon the amount the entity expects to be entitled to in exchange for the transferring of promised goods. Management fee income Sipa was paid a management fee ranging between 10% - 15% of expenditure incurred on behalf of joint venture parties. Revenue from providing services is recognised in the period in which the services are rendered. Interest income Interest income is recognised as the interest accrues (using the effective interest method, which is the method that exactly discounts estimated future cash receipts through the life of the financial asset) to the net carrying amount of the financial asset. (f) Leases The group leases office space and office equipment. Rental contracts can range from a period of month to month or up to-3 years. Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the group is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component. Lease terms are negotiated on an individual basis and contain a lease wide range of different terms and conditions. The agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. Until the 2019 financial year, leases of property, plant and equipment were classified as either finance leases or operating leases, see Note 11 for details. From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: - fixed payments (including in-substance fixed payments), less any lease incentives receivable SIPA RESOURCES LIMITED - 55 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 - - - variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date amounts expected to be payable by the group under residual value guarantees the exercise price of a purchase option if the group is reasonably certain to exercise that option, and - payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. leases The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. in the group, the The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the following: - - - - the amount of the initial measurement of lease liability any lease payments made at or before the commencement date less any lease incentives received any initial direct costs, and restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight- line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. While the group revalues its land and buildings that are presented within property, plant, and equipment, it has chosen not to do so for the right-of-use buildings held by the group. The Group did not have any Right of use assets during the financial year ended 30 June 2022. Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low- value assets comprise minor office equipment. (g) Cash and cash equivalents Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at bank and in hand and short- term deposits with an original maturity of three months or less. For purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above. (h) Term deposits provided as security Term deposits provided as security are classified as other receivables with an original maturity of three to twelve months or less. (i) Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective less provision for doubtful debts. Trade interest method, receivables are generally due for settlement within 30 – 90 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. Collectability of trade receivables is reviewed on an ongoing basis. (j) Derecognition of financial instruments The derecognition of a financial instrument takes place when the Group no longer controls the contractual rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all the cash flows attributable to the instrument are passed through to an independent third party. (k) Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that a non-financial asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to dispose and its value in use and is determined for an individual asset, unless that asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit (CGU) to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash generating unit is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators. SIPA RESOURCES LIMITED - 56 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 last impairment An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. (l) Income tax 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, 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, or interest in joint ventures and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. 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 assets 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 or interest in joint venture, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can 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. 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. 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 the income statement. 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 liabilities relate to the same taxable entity and the same taxation authority. (m) Good and Services Tax (GST) 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 are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Consolidated 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. (n) Plant and Equipment Plant and equipment depreciation and any accumulated impairment losses. is carried at cost less accumulated Depreciation is calculated on a straight-line basis over the estimated useful life of the asset which is 2-15 years for plant and lives and equipment. The assets residual values, useful depreciation methods are reviewed, and adjusted if appropriate, at each financial year end. Derecognition An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. SIPA RESOURCES LIMITED - 57 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 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 item) is included in the income statement in the period the item is derecognised. (o) Exploration and Evaluation Exploration and Evaluation expenditure Exploration for and evaluation of mineral resources is the search for mineral resources after the entity has obtained legal rights to explore in a specific area as well as the determination of the technical feasibility and commercial viability of extracting mineral resource. Exploration and evaluation expenditure incurred by or on behalf of the consolidated entity is accumulated separately for each prospect area. Acquisition costs Acquired exploration and evaluation expenditure is carried forward at cost where rights to tenure of the area of interest are current and; - it is expected that expenditure will be recouped through successful development and exploitation of the area of interest or alternatively by its sale and/or; - exploration and evaluation activities are continuing in an area of interest but at reporting date have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. Other costs Exploration and evaluation expenditure are expensed to the profit or loss as incurred except when existence of a commercially viable oil and/or gas reserve has been established and it is anticipated that future economic benefits are more likely than not to be generated as a result of the expenditure. (p) Investments and other financial assets Classification The group classifies measurement categories: its financial assets in the following - Those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss), and - Those to be measured at amortised cost. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in equity instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial recognition to account fair value through other for the equity comprehensive income. investment at Recognition and derecognition Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership. Measurement At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Measurement - Equity instruments The group subsequently measures all equity investments at fair value. Where the group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the group’s right to receive payments is established. Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. Impairment The group assesses on a forward-looking basis the expected credit losses associated with trade receivables. The group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. See Note 8 for further details. (q) 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. (r) 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. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the SIPA RESOURCES LIMITED - 58 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2022 liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. (s) Employee Benefits Provision is made for amounts expected to be paid to employees of the Group in respect of their entitlement to annual leave and long service leave arising from services rendered by employees to the reporting date. Employee benefits due to be settled within one year arising from wage and salaries and annual leave have been measured at the amounts due to be paid when the liabilities are expected to be settled and included in provisions. Long service leave entitlements payable later than one year have been measured at the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date. Under the terms of the Directors’ Retirement Scheme (applicable to non-executive directors only), approved by a meeting of shareholders, provision has been made for the retirement or loss of office of eligible non-executive Directors of Sipa Resources Limited. (t) Share-based payment transactions The Group provides benefits to employees (including executive directors) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’). Equity-settled transactions with employees and directors are administered through the Sipa Resources Employee Share Option Plan which was approved by shareholders. The cost of these equity-settled transactions with participants is measured by reference to the fair value of the equity instruments at the date at which they are granted using an appropriate valuation model, further details of which are given in Note 15. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’). recognised cumulative expense The for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. The income statement charge or credit for a period represents the movement in cumulative expense recognised at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. is recognised for any modification that increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee, as measured at the date of modification. In addition, an expense If an equity-settled award is cancelled (other than for reason of forfeiture), 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. However, if a new award is substituted for the 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. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of loss per share. (u) Contributed Equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (v) Profit/Loss Per Share Basic EPS is calculated as net profit/loss attributable to members, adjusted to exclude costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted EPS is calculated as net profit/loss attributable to members, 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. (w) Government Grants Government grants are recognised only where it is reasonably certain that the Group will comply with conditions attached to the grant. Grants are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis. (x) Dividends No dividends were paid or proposed during the year. (y) Comparatives Comparative figures have been restated to conform with the current year’s presentation. This has had no impact on the financial statements. (z) Parent Entity Financial Information The financial information for the parent entity, Sipa Resources Limited, disclosed in Note 26 has been prepared on the same basis as the consolidated financial statements except as set out below: Investments in subsidiaries Investments in subsidiaries are accounted for at cost and subject to an annual impairment review. SIPA RESOURCES LIMITED - 59 - DIRECTORS’ DECLARATION The Directors of the Group declare that: 1. the accompanying financial statements and notes are in accordance with the Corporations Act 2001 and: (a) comply with Australian Accounting Standards and the Corporations Act 2001; (b) give a true and fair view of the financial position as at 30 June 2022 and performance for the year ended on that date of the Group; and (c) the audited remuneration disclosures set out in the Remuneration Report section of the Directors’ Report for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001; 2. the Chief Financial Officer has declared pursuant to section 295A.(2) of the Corporations Act 2001 that: (a) (b) the financial records of the Group for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; the financial statements and the notes for the financial year comply with Australian Accounting Standards; and (c) the financial statements and notes for the financial year give a true and fair view; 3. 4. in the Directors’ opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable; the Directors have included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards. This declaration is made in accordance with a resolution of the Board of Directors. Pip Darvall Managing Director Perth 28 September 2022 SIPA RESOURCES LIMITED - 60 - Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au Level 9, Mia Yellagonga Tower 2 5 Spring Street Perth WA 6000 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR'S REPORT To the members of Sipa Resources Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Sipa Resources Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Accounting for share-based payments Key audit matter How the matter was addressed in our audit During the financial period ended 30 June 2022, Our procedures included, but were not limited to the the Group issued options to key management following: personnel, which have been accounted for as share-based payments. (cid:127) Reviewing relevant supporting documentation to obtain an understanding of the contractual Refer to Note 15 of the financial report for a nature and terms and conditions of the share- description of the significant estimates and based payment arrangements; judgements applied to these arrangements. Share-based payments are a complex accounting area and due to the complex and judgemental estimates used in determining the fair value of the share-based payments, we consider the Group’s calculation of the share- based payment expense to be a key audit matter. (cid:127) (cid:127) (cid:127) (cid:127) Holding discussions with management to understand the share-based payment transactions in place; Reviewing management’s determination of the fair value of the share-based payments granted, considering the appropriateness of the valuation models used and assessing the valuation inputs; Involving our valuation specialists, to assess the reasonableness of management’s valuation method and inputs, including volatility; and Assessing the reasonableness of the share- based payment expense. We also assessed the adequacy of the related disclosures in Note 15 to the financial statements. Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2022, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 16 to 23 of the directors’ report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Sipa Resources Limited, for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit (WA) Pty Ltd Glyn O’Brien Director Perth 28 September 2022 ADDITIONAL INFORMAITON The following additional information is required by the Australian Securities Exchange Ltd in respect of listed public companies only. Information as at 23 August 2022. Distribution of Shareholders Category (Size of Holding) 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total Number of Holders Fully Paid Ordinary Shares % 1,213 1,087 416 968 258 3,942 551,172 2,776,489 3,154,406 34,341,206 164,201,530 205,024,803 0.27 1.35 1.54 16.75 80.09 100.00 Unmarketable Parcels The number of shareholdings held in less than marketable parcels is 2,770 holders holding 7,054,266 shares. Substantial shareholders: The names of the substantial shareholders listed in the Company's register as at 23 August 2022 Shareholder Name RODIV NSW P/LSANDHURST TRUSTEES LTD Twenty largest shareholders – Quoted fully paid ordinary shares: Shareholder Name RODIV NSW P/L SANDHURST TRUSTEES LTD EQUITY TRUSTEES LIMITED MR GAVIN JEREMY DUNHILL MOGGS CREEK PTY LTD MR JEREMY DOMINIC KALMUND MR ATHUR JOHN CONOMOS RIO TINTO EXPLORATION PTY LIMITED MISS ESTHER LIMANTO SUPERFUZE PTY LTD WIP FUNDS MANAGEMENT PTY LTD SANCOAST PTY LTD MR LINCOLN TOPHAM + MS PAULINE TOPHAM RYTECH PTY LTD 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Number of Shares 30,793,649 17,876,505 % of Issued Share Capital 15.02 8.72 Number of Shares 30,793,649 17,876,505 4,478,432 4,400,000 3,719,144 3,153,120 2,951,000 2,500,000 2,265,114 2,103,034 2,100,000 2,000,000 1,812,618 1,750,000 % of Issued Share Capital 15.02 8.72 2.18 2.15 1.81 1.54 1.44 1.22 1.10 1.03 1.02 0.98 0.88 0.85 SIPA RESOURCES LIMITED - 65 - ADDITIONAL INFORMAITON Shareholder Name EVOLUS PTY LTD MIRAMAR RESOURCES LIMITED EVERBRIGHT ACCOUNTING SERVICES PTY LTD MIXEL PTY LTD CITICORP NOMINEES PTY LIMITED RALLOU PTY LTD 15. 16. 17. 18. 19. 20. Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (Total) 90,916,024 Total Remaining Holders Balance 114,108,779 Unquoted Securities Unquoted Equity Security Holders with Greater than 20% of an Individual Class UNLISTED OPTIONS EXPIRING 19/04/2024 @ $0.11 Rank Name 1 MR DAVID FREEMAN UNLISTED OPTIONS EXPIRING 31/01/2023 @ $0.15 Rank Name 1 ELMIX PTY LTD UNLISTED EMPLOYEE OPTIONS EXPIRNG 18/11/2023 @ $0.102 Rank Name 1 ELMIX PTY LTD UNLISTED OPTIONS EXPIRING 24/11/2023 @ $0.13 Rank Name 1 2 MS TARA ROBSON MR PAUL PARKER UNLISTED OPTIONS EXPIRING 26/11/2025 @ $0.214 Rank Name 1 ELMIX PTY LTD UNLISTED OPTIONS EXPIRING 26/11/2025 @ $0.174 Number of Shares % of Issued Share Capital 1,709,295 1,694,915 1,681,154 1,385,957 1,316,459 1,225,628 Units 500,000 Units 2,000,000 Units 459,167 0.83 0.83 0.82 0.68 0.64 0.60 44.34 55.66 % Units 100.00 % Units 100.00 % Units 100.00 Units % Units 562,500 187,500 75.00 25.00 Units 2,000,000 % Units 75.47 Rank Name 1 ELMIX PTY LTD Units 2,000,000 % Units 75.47 SIPA RESOURCES LIMITED - 66 - ADDITIONAL INFORMAITON UNLISTED OPTIONS EXPIRING 26/11/2025 @ $0.134 Rank Name 1 ELMIX PTY LTD UNLISTED OPTIONS EXPIRING 26/11/2025 @ $0.093 Rank Name 1 ELMIX PTY LTD UNLISTED OPTIONS EXPIRING 25/1/2026 @ $0.10 Rank Name 1 MR DAVID FREEMAN Buy-Back Plans The Company does not have any current on-market buy-back plans. Voting Rights Units 2,000,000 Units 2,000,000 Units 500,000 % Units 75.47 % Units 75.47 % Units 100.00 The voting rights attaching to ordinary shares are governed by the Constitution. On a show of hands every person present who is a Member or representative of a member shall have one vote and on a poll, every member present in person or by proxy or by attorney or duly authorised representative shall have one vote for each fully paid ordinary share held. None of the options have any voting rights. There are no voting rights attached to any class of options or performance rights that are on issue. Restricted Securities There are no restricted securities currently on issue. Corporate Governance Pursuant to the ASX Listing Rules, the Company’s Corporate Governance Statement will be released in conjunction with this report. The Company’s Corporate Governance Statement is available on the Company’s website at: www.sipa.com.au SIPA RESOURCES LIMITED - 67 -