Superior Resources
Annual Report 2020

Plain-text annual report

l y n o e s u l a n o s r e p r o F ANNUAL REPORT 2020 l y n o e s u l a n o s r e p r o F Corporate Directory Directors Peter Henry Hwang Carlos Alberto Fernicola Simon Pooley James Corporate Secretary Carlos Alberto Fernicola Stock Exchange ASX LIMITED ASX Code: SPQ Company SUPERIOR RESOURCES LIMITED ABN 72 112 844 407 Registered Office Unit 8, 61 Holdsworth Street COORPAROO QLD 4151 Principal Office Unit 8, 61 Holdsworth Street COORPAROO QLD 4151 Telephone: 07 3847 2887 Email: manager@superiorresources.com.au Internet Address www.superiorresources.com.au Postal Address PO Box 189 COORPAROO QLD 4151 Share Registry LINK MARKET SERVICES LIMITED Level 21, 10 Eagle Street BRISBANE QLD 4000 Postal Address Locked Bag A14 SYDNEY SOUTH NSW 1235 Telephone: 1300 554 474 Facsimile: 02 9287 0303 Email: registrars@linkmarketservices.com.au Auditor William Buck Level 21 307 Queen BRISBANE QLD 4000 , Street Telephone: 07 Facsimile: 07 3229 5100 3221 6027 ANNUAL REPORT 2020 Contents Chairman’s Review 2020 Strategy Operations Report Directors' Report 1 2 3 33 Auditor's Independence Declaration 45 Corporate Governance Statement Financial Report Directors' Declaration Independent Auditor’s Report Shareholder Information Tenement Schedule Mineral Resources Statement 46 47 77 78 82 84 85 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) CHAIRMAN’S REVIEW Chairman’s Review 2020 Dear Fellow Shareholders, On behalf of the Board of Directors, I take pleasure in presenting the Superior Resources Limited 2020 Annual Report. The past 12 months has been a financially volatile and eventful year that has provided economic challenges and opportunities. Achievements include the completion of an earn in and joint venture relationship with South 32 Group Operations Pty Ltd on the Nicholson Project and the resulting upgrade of several of the project’s McArthur River-sized zinc-lead targets. In moving the Company forward, the board recognised the opportunity presented by the favourable gold market amid the international economic and pandemic situation and rapidly implemented a strategy to advance our Steam Engine Project. The strategy includes the revision of the existing Mineral Resource and commencement of both a scoping study and a resource drilling program. The drilling program recently competed totalled 3,756 meters from 73 drill holes and delivered consistently outstanding gold intercepts. Strong results from the drilling confirmed a northern extension to the Steam Engine Lode which extended the gold mineralisation 150 metres northwards along strike and remains open. A second drilling program was launched on the back of the better than expected results of the first program. Whilst we are very excited about the progress of the Steam Engine Project, we recognise the importance of our portfolio of quality Tier-1 projects, which include the large Bottletree Copper Project, the largely unexplored Big Mag sulphide nickel Project and our Nicholson and Victor zinc-lead-silver projects. At Bottletree, we recognise the potential for the early discovery of a major copper deposit. Exploration drilling conducted in previous years returned nearly 300 metres of copper mineralisation with an average grade of 0.22% copper and an 18.7 metre high-grade zone averaging 1.12% copper. This significant interval of copper mineralisation coincides with a large IP chargeability anomaly that is at least one kilometre in length with increasing size at depth. The Company continues to monitor base metal prices and cycles in order to take advantage of the opportunities available to maximise value for our shareholders. I take this opportunity to sincerely thank all shareholders for their continued support and also the Company’s staff and fellow Directors for their professionalism and dedication during the year. l y n o e s u l a n o s r e p r o Chairman F Carlos Fernicola 1 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT l y n o e s u l a n o s r e p r o F Strategy  TO DEVELOP:  Steam Engine Gold Deposit – Greenvale  Expedite to toll-treatment production  Realise full potential by intense programs of drilling of at least 3 kilometres of historically mapped outcropping gold lode  Wyandotte Copper Deposit – Greenvale  TO DISCOVER:  a large nickel sulphide deposit  a large Mount Isa Style lead-zinc-copper deposit  a large VMS / porphyry copper-gold deposit  A PROJECT PORTFOLIO TO MAXIMISE VALUE GROWTH POTENTIAL:  Tier 1 exploration projects – Nicholson / Victor  Drill-ready targets in Carpentaria Zinc Province  Inlier of Macquarie Arc – Greenvale  World-class porphyry copper-gold region  Remnant of NSW Ordovician porphyry belt (e.g. Cadia, N Parkes)  Underexplored  More than 10 significant targets  SPQ holds most of the Greenvale Ordovician terrane  Battery Metals – Future Focused  Nickel – Cobalt  3 high impact projects  Globally growing markets  ENSURE EXPERIENCED, FOCUSSED BOARD AND MANAGEMENT  TO DELIVER VALUE GROWTH TO SHAREHOLDERS 2 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT Project Portfolio As at October 2020, Superior maintained a portfolio of zinc-lead, copper, gold, nickel and uranium projects (Figure 1). The Company’s current portfolio of projects is as follows:  Greenvale Project • Bottletree • Steam Engine Gold Deposit • Big Mag • Galah Dam • Cockie Creek • Wyandotte Copper • Halls Reward • One Mile/One Mile Dam • Riesling • Lucky Creek  Nicholson Project • 8+ Tier 1 potential EM targets Potential VMS / porphyry (copper-gold) High-grade orogenic lode gold (gold) Potential magmatic Nickel-Copper sulphide (nickel-copper) Potential porphyry / massive sulphide (copper-gold) Potential porphyry (copper-gold) High-grade copper Cyprus style VMS (high-grade copper) VMS / massive sulphide (copper-zinc-gold) Broken Hill Style (zinc-lead-copper) Lateritic Nickel-Cobalt (nickel-cobalt) Mount Isa Style (lead-zinc-silver) • Walford Creek West Mount Isa Style (sulphide copper-lead-zinc-cobalt) • Hedleys Uranium Uranium  Victor Project • Victor Project • Kingfisher Mount Isa Style (lead-zinc-silver) Copper-cobalt 3 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT l y n o e s u l a n o s r e p r o F Figure 1. Location of Superior’s projects. 4 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT Greenvale Project Gold / Porphyry and VMS Copper-Gold / Nickel-Cobalt HIGHLY MINERALISED LUCKY CREEK CORRIDOR, WHICH IS HELD 100% BY THE COMPANY, IS RETURNING SUCCESS AT MULTIPLE LEVELS. FOCUSSED ON THE STEAM ENGINE GOLD DEPOSIT, NICKEL AND SEVERAL LARGE COPPER TARGETS. THE GREENVALE PROJECT COVERS A REGION OF VOLCANIC AND INTRUSIVE ROCKS OF ORDOVICIAN AGE THAT ARE SIMILAR IN TYPE AND AGE TO THE PORPHYRY COPPER BELT IN NEW SOUTH WALES. THE NEW SOUTH WALES BELT OF ROCKS HOST THE LARGE CADIA AND NORTH PARKES PORPHYRY COPPER MINES. THE SEQUENCE OF ROCKS IN THE GREENVALE AREA ARE LIKELY TO BE THE NORTHERN-MOST EXTENSION OF THE REMNANT NEW SOUTH WALES ORDOVICIAN MACQUARIE ARC ROCKS (FIGURE 2). Superior’s Greenvale Project is highly prospective for VMS and porphyry copper, orogenic gold, zinc and silver deposits and contains at least ten mineral prospects (Figures 3 and 4). The project is located within an area of notable economic significance, being proximal to the Kidston, Balcooma, Surveyor and Dry River South deposits. l y n o e s u l a n o s r e p r o F Figure 2. A reconstruction of the Macquarie Arc across eastern Australia showing the development of the Greenvale Province and other provinces including the Charters Towers Province. 5 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT Figure 3. Greenvale Project tenement location map showing locations of key prospects. l y n o e s u l a n o s r e p r o F 6 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT l y n o e s u l a n o s r e p r o F Figure 4. Airborne magnetics (RTP) processed image over the Greenvale Project area and surrounds, showing the key prospects and current tenements. 7 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT Steam Engine Gold Deposit GOLD HIGH-GRADE GOLD ORE SHOOT SYSTEM. MAY 2020 MINERAL RESOURCE UPGRADE BASED ON ONLY 30% OF HISTORICALLY MAPPED LODE OUTCROP. RESOURCE DRILLING PROGRAM AND SCOPING STUDY DURING 2020. MINERALISATION OPEN AT DEPTH AND ALONG STRIKE. The Steam Engine Gold Deposit contains at least two sub-parallel gold-bearing lodes, referred to as the Steam Engine Lode and the Eastern Ridge Lode, which are separated by about 600 metres (Figure 5). A third zone of sub-parallel mineralisation exists a further 900 metres to the east of Eastern Ridge Lode and an area of gold mineralisation comprising multiple lodes (Southern Zone) is located between and to the south of the Steam Engine and Eastern Ridge lodes. l y n o e s u l a n o s r e p r o F Figure 5. Steam Engine Gold Deposit: Interpreted geology, gold-bearing lodes (in red) and recent drill holes (in red). 8 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT The mineralisation is developed within north-north-east trending, west-dipping lodes and are essentially mineralised shear zones comprising pyrite-quartz-muscovite-carbonate schist within amphibolite, metasediment and/or metatonalite. The gold bearing lode zones are located within a shear zone and show strong continuity and a persistent dip to the west (the Steam Engine Lode typically dips around 50° to 60° to the west and the Eastern Ridge Lode typically dips at about 40° to 50° to the west).  Mineral Resource Estimate / Resource Drilling Program During 2020, the Company commenced a program to evaluate the project’s potential to sustain an early stage toll treatment mining operation. This program commenced with a revision of an existing Mineral Resource Estimate followed by a resource drilling program aimed at upgrading the Mineral Resource from Indicated and Inferred (JORC) to Measured and Indicated confidence levels. The resource drilling program also included drill holes targeting potential extensions of the mineralisation along strike and down dip at the Steam Engine and Eastern Ridge lodes. The Steam Engine Gold Deposit’s Mineral Resource Estimate was upgraded by 11 percent prior to commencement of 2020 drilling programs. The revision of the Mineral Resource resulted in a JORC (2012) Indicated and Inferred Mineral Resource of 1.27 million tonnes at 2.3 g/t gold (0.5 g/t cut-off), comprising (refer ASX announcement, 4 May 2020) (Table 1): o o Indicated Resource of 370,000 tonnes @ 2.5 g/t gold; and Inferred Resource of 900,000 tonnes @ 2.2 g/t gold. A plan view of the Mineral Resource wireframe model is shown in Figure 6, along with a 3-D block model in Figure 7. The resource drilling program was completed during September 2020 and a second program aimed at increasing the Mineral Resource was launched in October 2020. Table 1. Steam Engine Gold Deposit Mineral Resource Classification Cut-off Grade Tonnes Grade (g/t) Gold (ounces) Steam Engine (Main Zone) Indicated Inferred SUBTOTAL Steam Engine (Footwall Zone) Inferred Eastern Ridge Inferred 0.5 0.5 0.5 0.5 370,000 420,000 790,000 210,000 270,000 TOTALS FOR STEAM ENGINE AND EASTERN RIDGE ZONES Indicated Inferred TOTAL RESOURCES 370,000 900,000 1,270,000 9 2.5 2.3 2.4 1.6 2.7 2.5 2.2 2.3 30,000 31,000 61,000 11,000 23,000 30,000 64,000 94,000 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT Figure 6. Plan view of Steam Engine and Eastern Ridge lode wireframes. l y n o e s u l a n o s r e p r o F Figure 7. 3D view of Steam Engine Lode Mineral Resource block model (open to the north and at depth). 10 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT  Steam Engine Gold Deposit Potential Each of the Steam Engine Project lode zones demonstrate potential for extending the mineralisation along strike and down dip. SOIL GEOCHMISTRY – EVIDENCE OF A GREATER AREA OF MINERALISATION The Mineral Resource, as it currently stands, has been developed to shallow depths over only 30 percent of the 2.5 kilometre strike length of the historically mapped outcropping gold lodes. Soil geochemical surveys over the project area and nearby surrounds indicate a significantly greater area of potential sub-surface gold mineralisation (Figure 8). Further programs of exploratory drilling are planned to be commenced after delivery of a Scoping Study. l y n o e s u l a n o s r e p r o F Figure 8. Plan showing the locations of the recently drilled holes (in blue) and previously drilled holes (in black) over gold soil anomalies and theoretical high-grade ore shoot corridors. The Steam Engine and Eastern Ridge gold- bearing lodes are shown in red. 11 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT STRIKE EXTENSION OF THE STEAM ENGINE LODE Results from the first drilling program of 2020 demonstrated that high grade gold mineralisation extends at least 150 metres northwards at the northern end of the Steam Engine Lode (Figure 9). A second drilling program aimed at further extending the mineralisation at the Steam Engine and Eastern Ridge lodes is planned to commence during November 2020. A POTENTIAL THIRD LODE ZONE Reconnaissance rock chip sampling of a 1.2 kilometre-length gossanous alteration zone located 1.2 kilometres east of the Eastern Ridge Lode returned up to 7.6 g/t gold. This zone of alteration parallels the Steam Engine and Eastern Ridge lodes and may represent a new, third gold lode zone. This lode zone is referred to as the Dinner Creek Lode (Figure 10). HIGH-GRADE ORE SHOOT SYSTEM The Company has also recognised potential for the existence of an extensive high-grade ore shoot system at depth and related to the mineralised lode structures that are observed at surface. The currently identified surface mineralisation is significant and is an indication of a potentially substantial and extensively developed ore shoot system at depth. The Company is planning to apply seismic and IP geophysical methods to identify potential sizeable zones of mineralisation for follow up with drill testing (Figure 11). Figure 9. Long section of the Steam Engine Lode showing significant intersections. Mineralisation and grade intersections are shown as colour-coded bars. 12 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT l y n o e s u l a n o s r e p r o F Figure 10. Plan showing the location of the Dinner Creek Lode alteration zone relative to the drilled portions of the Steam Engine and Eastern Ridge lodes. Figure 11. Potential high-grade ore shoot targets across the Steam Engine and Eastern Ridge lode zones. 13 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT Big Mag NICKEL-COPPER-COBALT / COPPER-GOLD CHARACTERISED BY A REGIONALLY LARGE HIGH-ORDER MAGNETIC ANOMALY OF APPROXIMATELY 70KM2 IN AREA (FIGURES 12 AND 13). CONSIDERED TO BE RELATED TO THE SAME SERIES OF ROCKS AS THE OLD GREENVALE NICKEL MINE (SCONI). LARGELY UNEXPLORED WITH ONLY MINOR SHALLOW DRILLING ON THE NORTHERN MARGIN. EXISTING DRILLING IDENTIFIED LATERITE AND TERTIARY SEDIMENTS OVERLYING DIFFERENTIATED MAFIC TO ULTRAMAFIC INTRUSIVE ROCKS, INDICATING HIGH POTENTIAL FOR NICKEL-COPPER-COBALT SULPHIDE MINERALISATION. l y n o e s u l a n o s r e p r o F Figure 12. Airborne magnetics (RTP) processed image over the Greenvale Project area and surrounds. Big Mag is shown relative to other Greenvale Project prospects. 14 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT The Big Mag feature is a regionally large and high order magnetic feature that comprises a series of mafic to ultramafic intrusions concentrated over a 70 km2, roughly circular area (Figure 12). Geologically, Big Mag is considered to be located within a domain of rocks that also includes the nearby Old Greenvale Nickel Mine (which produced approximately $6 billion of nickel at current metals prices) (Figure 13). Big Mag is relatively un-explored. Historically, only two closely spaced RC drill holes have been drilled into the north eastern part of the feature. The two RC holes confirmed the existence of layered, magnetite-rich, differentiated mafic to ultramafic magmatic intrusion rocks. Big Mag is considered to be highly prospective for magmatic nickel-copper sulphide deposits. The Company is planning to commence exploration programs including drilling at Big Mag during 2021. l y n o e s u l a n o s r e p r o F Figure 13. Airborne magnetics (RTP 1VD) with the Big Mag feature visible in the southern part of the image. 15 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT Bottletree COPPER-GOLD BOTTLETREE IS A LARGE (2KM X 1KM) SOIL COPPER ANOMALY (FIGURE 14), WITH A COINCIDENT LARGE AND HIGH ORDER CHARGEABILITY ANOMALY. RC AND DIAMOND DRILLING DURING 2017 AND 2018 CONFIRMED EXTENSIVE COPPER MINERALISATION EXTENDING TO DEPTHS IN EXCESS OF 300 METRES. DIAMOND DRILLING DURING 2018 DISCOVERED HIGH GRADE COPPER MINERALISATION AT DEPTH. NEW 3D MODELLING INDICATES THAT A LARGE COPPER TARGET LIES AT DEPTH AND IMMEDIATELY SOUTH OF THE 2018 DIAMOND DRILLING. DELINEATION AND DEFINITION DRILLING HAS ONLY JUST COMMENCED. l y n o e s u l a n o s r e p r o F Figure 14. Copper-in-soil processed image showing the large scale Bottletree copper in soil anomaly. 16 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT l y n o e s u l a n o s r e p r o F Figure 15. Bottletree MIMDAS IP survey line locations plotted over soil copper geochemistry, showing drill holes SBTRD005 and SBTRD006. Also shown are cross section line 2400N and long section 3180E. Following on from a four-hole, 528 metre RC drilling program completed during July 2017, the Company completed a MIMDAS IP geophysical survey in 2018 (Figure 15) and the first deep diamond drilling program at Bottletree. Two holes (650 metres and 450 metres) were drilled into a large MIMDAS induced polarisation (IP) chargeability anomaly that is coincident with near surface copper mineralisation. Significant broad intervals of extensive visible coarse-grained chalcopyrite, pyrite and pyrrhotite mineralisation were intersected in hole SBTRD006 with copper grades ranging from less than 0.1% to greater than 1% copper (Figure 18). Assay results returned the following average grades1: • 292m @ 0.22% copper (from 148m to 440m)2; • including 18.7m @ 1.12% copper (from 328m to 346.7m)4. Advanced 3D modelling of the MIMDAS survey results indicate a close correlation between the copper grades and chargeability. A cross section generated along survey line 2400N and a long section along 3180E indicate that the drilling to date has penetrated the edges of the main IP target zone (Figures 16 and 17). Based on the correlation between the IP data and the drill hole assay results, higher grade copper mineralisation is expected to be encountered within the main chargeable target zone, which is located to the south of SBTRD006 and also at deeper levels. The limits to this large copper mineralised system have not yet been delineated and it remains open both laterally and at depth. 1 Refer to ASX announcement 25 October 2018. 2 Cut-off of grade of 0.1% Cu but with some narrow intervals of less than 0.1% Cu included. 2 Cut-off of grade of 0.5% Cu including narrow intervals of less than 0.5% Cu. 17 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT l y n o e s u l a n o s r e p r o F Figure 16. Bottletree long-section 3180E through hole SBTRD006 and other holes showing average copper intersections on a background image of chargeability from 3D modelling of MIMDAS IP survey data. Drill holes 2018 Figure 17. 3D modelling of Bottletree MIMDAS IP survey results presented in wireframe, showing locations of 2018 drill holes SBTRD005 and SBTRD006. 18 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT l y n o e s u l a n o s r e p r o F Figure 18. Bottletree SBTRD006 core: Top and middle photographs showing Trays 37 and 38 containing drill core from down hole depths 337m – 341.5m (approx.) and 341m – 344.5m (approx.) respectively, showing strong chalcopyrite and pyrite mineralisation. Bottom photograph shows close-up view of drill core from 343m (approx.). 19 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT Cockie Creek COPPER-GOLD COCKIE CREEK IS A LARGE POTENTIAL PORPHYRY COPPER-GOLD MINERALISED SYSTEM THAT EXTENDS FOR OVER 1.2 KILOMETRES. TWO LARGE CHARGEABILITY ANOMALIES IDENTIFIED BENEATH THE SHALLOWER COPPER MINERALISATION, ARE YET TO BE DRILL TESTED. At Cockie Creek, disseminated copper mineralisation with some gold and molybdenum occurs associated with a quartz-biotite-hornblende schist unit enclosed within a metamorphosed basic volcanics sequence. The quartz- biotite-hornblende schist unit is interpreted as a metamorphosed altered tonalite intrusive unit. The copper mineralisation, with a true width of up to 60 metres, extends over 1.2 kilometres and dips grid easterly at -80° (Figure 19). Historical drilling comprises a total of 63 drill holes for 6,638 metres. Selected drill hole intersections are shown in Table 2. Hole EastMGA NorthMGA Table 2. Cockie Creek - Selected Drill Hole Intersections. To (m) 68 163 85 80 56 215 141 84 216 104 108 100 40 7904295 7904243 7904283 7904295 7904155 7904226 7904120 7904137 7904183 7904227 7904244 7904345 7904307 CRC002 CRC009 CRC010 CRC011 CRC014 CRC017 CRC023 CRC026 D1 D3 P11 P12 P16 267380 267356 267353 267320 267019 267378 267037 266995 267448 267075 267403 267339 267370 From (m) 0 66 11 1 15 121 53 11 180 56 50 50 0 Length (m) 68 97 74 79 41 94 88 73 36 48 58 50 40 Cu (%) 0.74 0.48 0.42 0.45 0.50 0.53 0.43 0.44 0.57 0.48 0.64 0.44 0.75 Au (g/t) 0.12 0.07 0.08 0.06 0.10 0.08 0.06 0.05 0.10 0.10 0.07 0.07 0.13 Mo (ppm) 92 114 78 76 48 99 49 22 28 94 - - - Also of interest is an intersection of 3m @ 9.0 g/t Au between 80 and 83m in drill hole CRC003(B03) drilled through the central zone of copper mineralisation.  Geophysical modelling Superior completed three-dimensional (3D) computer modelling of existing IP geophysical survey data. The modelling produced at least two pronounced chargeable sources located beneath shallower disseminated copper mineralisation and also indicated potential for the existence of a large porphyry copper mineralised system beneath the near-surface mineralisation (Figures 20 and 21). As a result, the modelling has opened up the potential of the Cockie Creek area to host a significant porphyry copper deposit. 20 l y n o e s u l a n o s r e p r o F 2000 mN 1800 mN 1600 mN 1400 mN 1200 mN SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT E m 0 0 0 2 E m 0 0 2 2 E m 0 0 4 2 9 2 B E m 0 0 6 2 5 1 B 6 1 B 2200 mN Copper Soil Contours (ppm) 2000 1500 1000 500 200 2200 mN 8 P 7 P 0 2 B 4 0 B 4 1 P 5 0 3B 1 P 6 0 B 1 0 B 7 0 B 5 1 P 8 0 B 6 P 2 0 B 0 1 B 9 1 B 8 1 B 7 1 B 1 D 4 D 8 2 B 1 1 B 2 1 B 7 1 P 3 0 B 7 2 B 9 0 B 2 D 1 2 B 2 2 B 0 1 P 3 2 B 1800 mN 1600 mN 5 D Geology Soil and alluvium cover Quartz-biotite-hornblende schist Quartz-amphibole-biotite gneiss Massive and layered amphibolite 2 1 P 5 P 8 1 P 0 2 P 9 1 P 3 D 3 1 B 4 P 1 2 P 2 2 P 4 1 B 6 2 B 4 2 P 3 2 P 5 2 P Central Zone of Copper Mineralisation 2 P 7 2 P 6 2 P 9 2 P 8 2 P 1 1 P 5 2 B 4 2 B 9 P 6 D Quartz vein 1400 mN Gossan Fault Cockie Creek Copper Prospect Geology Mineralisation Drill Holes E m 0 0 0 2 E m 0 0 2 2 E m 0 0 4 2 E m 0 0 6 2 1200 mN 1000 mN Figure 19. Cockie Creek Copper Prospect - Geology showing all drill holes, soil copper geochemistry and the Central Zone of Copper Mineralisation. 21 2000 mN 1800 mN 1600 mN 1400 mN l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT CRC003(B03) 3-74 71m @ 0.29% Cu incl 37-65 28m @ 0.44 % Cu 80-83 3m @ 9.0g/t Au Western Chargeable Source (Untested) Section 1700N 0 2 B CRC020(B20) 0-69 69m @ 0.19% Cu 8 P 7 P 4 0 B 4 1 P 5 0 3B 1 P 6 0 B 9 1 B 8 1 B CRC002(B02) 0-68 68m @ 0.74% Cu 1 D 7 1 B CRC017(B17) 121-215 94m @ 0.53% Cu 9 0 B CRC009(B09) 66-163 97m @ 0.48% Cu 4 D 2 D D2 122-156 34m @ 0.46% Cu 2 1 P 5 P 8 1 P 0 2 P 9 1 P 1 0 B 7 0 B 5 1 P 8 0 B 6 P 2 0 B 0 1 B 8 2 B 1 1 B 2 1 B 7 1 P 3 0 B 7 2 B 1 2 B 2 2 B Eastern Chargeable Source 1800 mN Central Zone of Copper Mineralisation 1600 mN 3 D 3 1 B 4 P 1 2 P 2 2 P 4 1 B 6 2 B 4 2 P 3 2 P 5 2 P 5 D 0 1 P P10 122-200 78m @ 0.28% Cu 3 2 B CRC023(B23) 53-141 88m @ 0.43% Cu CRC026(B26) 11-84 73m @ 0.44% Cu P2 0-40 40m @ 0.15% Cu 2 P 7 2 P 6 2 P P28 0-34 34m @ 0.31% Cu 8 2 P 1 1 9 P P27 2-40 38m @ 0.26% Cu D6 218-286 68m @ 0.23% Cu 6 D 1400 mN Figure 20. Cockie Creek Copper Prospect – Plan section of 3D chargeability model at 450RL (100m below surface) showing the main mineralised area on the eastern side and the untested chargeable source on the western side. Figure 21. Cockie Creek Copper Prospect – Vertical cross section through the 3D chargeability model at 1700N showing the main mineralised area with drill hole copper intersections on the eastern side and the untested chargeable source on the western side. Proposed drill hole 1 is also shown. 22 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT Nicholson Project Mount Isa Style Lead-Zinc-Silver / Copper / Cobalt / Uranium “TIER 1” LEAD-ZINC PROJECT LOCATED WITHIN THE CARPENTARIA ZINC PROVINCE, NORTH WEST QUEENSLAND. AN INDUSTRY-LEADING OPPORTUNITY TO DISCOVER A WORLD-CLASS MOUNT ISA STYLE ZINC-LEAD-COPPER DEPOSIT. THE CARPENTARIA ZINC PROVINCE CONTAINS 20% OF THE WORLD’S ZINC RESOURCE INVENTORY. The Nicholson Project, together with the Victor Project (refer to next section), represents “Tier 1”- potential zinc-lead-silver exploration projects that provide the Company with sector-leading opportunities to discover a world-class Mount Isa Style Zinc-Lead-Copper deposit. The projects are located in the Carpentaria Zinc Province, which contains 20% of the world’s zinc resource inventory (Figure 22). In the region immediately surrounding Mount Isa, rocks prospective for Mount Isa Style deposits are exposed at or close to surface and as a consequence, have been intensely explored. In contrast, the Company’s Nicholson and Victor projects, located about 150 kms and 300 kms northwest of Mount Isa, are located in an equally prospective region that is relatively unexplored. In these regions the prospective rock sequences are covered by varying depths of younger sediments. These are the most likely areas within Queensland to make the next Mount Isa discovery. l y n o e s u l a n o s r e p r o F 23 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT l y n o e s u l a n o s r e p r o F Figure 22. The Carpentaria Zinc Province and the Nicholson and Victor Project tenements in green.  Regional setting The Nicholson Project (EPM15670 and EPM18203), located near the Walford Creek lead-zinc-silver- copper deposit, is considered to have potential to contain sediment-hosted lead-zinc-silver massive sulphide deposits, similar to the Mount Isa and McArthur River deposits. The project is located within a sequence of prospective Proterozoic sediments within the east-northeast trending Hedleys Graben. This graben is bounded by the Fish River Fault on its northern side and the Nicholson River Fault on its southern side (Figure 23). Sediments of the Fickling Group within the Hedleys Graben are equivalent in age to sediments that host large base metal mineral deposits at Mount Isa and Macarthur River. In particular, the Mount Les Siltstone has potential for large stratiform base metal deposits at the Nicholson Project. The Doomadgee Formation which unconformably overlies the Mount Les Siltstone is also thought to be of similar age to the part of the Lawn Hill Formation which contains the large stratiform Century lead-zinc- silver deposit. All of these formations are target horizons in the Nicholson Project area. Exploration work completed to date has identified at least eight large high priority geophysical targets, each of which have potential to be caused by Tier 1-sized stratiform base metal deposits (Figures 23 and 25). In addition, the project area also includes the Walford Creek West Zinc-Lead-Copper-Cobalt Prospect and the Hedleys Uranium Prospect. 24 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT l y n o e s u l a n o s r e p r o F Figure 23. Nicholson Project tenements and key prospect locations overlaid on regional geology.  Drilling program – South32 joint venture The Company entered into an earn-in and joint venture agreement (JVA) with a wholly owned subsidiary of South32 Limited during May 2019 to advance the exploration of the Nicholson Project. The initial exploration program under the JVA included the drilling of up to 11 diamond core holes to systematically test up to eight large high priority geophysical conductivity targets. Drilling commenced during late July 2019 and was fully funded by South32. Under the JVA, South32 was entitled to earn up to a 70% interest in the project by fully funding $6 million within five years. After completion of Stages 1 and 2, South32 was entitled to elect to earn an additional 10% interest by completing a feasibility study. South32 withdrew from the JVA on 4 March 2020.  High priority EM conductivity anomalies An airborne VTEM (Versatile Time Domain EM) survey over 260-line kilometres of part of the Nicholson Project was completed by Geotech Airborne Pty Ltd in 2007. The original data was remodelled during late 2018 and interpreted by geophysical consultants, Aarhus Geophysics. The applied Aarhus method is designed for detection and delineation of subsurface contrasts in conductivity and resistivity. In particular, the responses can be interpreted from the collected data to detect sub-surface accumulations of massive sulphide deposits (Figure 24). Most of the conductivity targets that have been identified are of sufficient size to be similar to a McArthur River or Century-sized deposit. 25 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT l y n o e s u l a n o s r e p r o F Figure 24. VTEM Aarhus modelled conductivity sections on lines 184,000E and 187,000E showing the Nicholson West and Nicholson River conductivity anomalies and interpreted major southwest-trending fault.  2019 drilling program A total of four holes (totalling 3,175.7m) were drilled at three of the target areas (Figure 25). One of the holes drilled at a highest priority target at Nicholson River did not intersect the target horizon and requires follow-up drilling. Due to the northern region monsoon season, only the Nicholson West and Nicholson River targets were drilled. Initial drilling at five other targets is yet to be conducted. At the Nicholson West target area: • two drill holes at Nicholson West (NWDD001 and NWDD002) intersected multiple thin horizons of visible stratiform sulphide mineralisation, including pyrite and sphalerite (zinc sulphide) within thick Mount Les Siltstone; • encouraging levels of zinc and lead mineralisation were returned within interpreted outer edges of a SEDEX system, indicating that a main body of mineralisation may be developed closer to the potential mineralising feeder structure located about 3 kilometres to the south at the Nicholson River Fault Zone. • anomalous lead and zinc values of up to 1840 ppm are scattered but concentrated near the top and base of the Mount Les Siltstone, which is consistent with the visually observed multiple thin bands of visible mineralisation in the core; and • the target area is considered to represent the outer zones of a potentially mineralised apron of a large SEDEX system (Figure 26). At the Nicholson River target area: • large, high order conductivity anomaly located 3.5 kms south of the Nicholson West drill holes and within the Nicholson River Fault Zone (NRFZ) (the first of several highest priority targets planned to be drilled); 26 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT • • the NRFZ is considered to be the likely major fault conduit and the potential source of mineralised fluids for the deposition of zinc-lead-silver SEDEX ore deposits within the area between the NRFZ and the Nicholson West drill holes; and current analysis of drill hole NWDD003 (which targeted the Nicholson River anomaly) together with geophysical data indicates that the anomaly was not intersected. Figure 25. Plan of key Nicholson Project targets, showing 2019 drill hole locations. Interpreted position of Nicholson West holes within a SEDEX system Figure 26. Schematic cross section of a typical northern Australian stratiform zinc-lead-silver deposit showing multiple ore lens horizons at or near the source of hydrothermal mineralising fluids and an apron of diminishing stratiform sulphide mineralisation away from the fluid source zone (Large et al., 2005). The interpreted position of the Nicholson West holes (NWDD001 and NWDD002) relative to the schematic representation of a SEDEX deposit system is also shown. 27 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT  Walford South The Walford South target is a coincident VTEM and gravity anomaly with an associated audio- magnetotelluric conductivity anomaly (AMT) (Figure 28). The anomalies are located adjacent to at least two significant fault structures that trend east-west and northwest-southeast. Previous historical drilling of three vertical diamond core holes by Superior intersected well-developed stratiform pyritic shale within the Mount Les Siltstone (Figure 27). Geophysical data sets covering the Walford South prospect area indicates that a high order AMT conductivity anomaly may be associated with the significant northwest-trending fault (Figure 28). Aarhus VTEM and AMT modelling indicates that there has been downwards displacement of stratigraphy on the southwestern side of the fault. Superior’s interpretation is that the northwest trending fault may have been a conduit that was feeding hydrothermal mineralising fluids that formed the stratiform sulphide mineralisation at Walford South. In this scenario, the AMT conductivity anomaly may represent a zone of copper-zinc-lead mineralisation, as occurs at the nearby Walford Creek deposit (held by Aeon Metals Limited), which is developed within and adjacent to the Fish River Fault. The Walford South AMT target is a highest priority target. A diamond drill hole is being planned to test the AMT anomaly and northwest trending fault structure during the next drilling program. Figure 27. Well-developed stratiform pyritic shale intersected within Mount Les Siltstone from historical drilling of the Walford South VTEM anomaly by Superior Resources Limited. 28 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT Walford Creek deposit AMT conductivity anomaly 0 2 Kilometres Walford South gravity anomaly Kingfisher East gravity anomaly Figure 28. Walford South gravity anomaly and AMT anomalies. Significant northwest and east-west trending interpreted fault structures are delineated with dashed blue lines. 29 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT Victor Project Mount Isa Style Lead-Zinc-Silver / Copper SUPERIOR’S “NEXT MOUNT ISA” PROJECT COMPRISING FOUR EXPLORATION PERMITS, COVERING A TOTAL AREA OF 438KM2. “TIER 1” LEAD-ZINC PROJECT LOCATED WITHIN THE CARPENTARIA ZINC PROVINCE, NORTH WEST QUEENSLAND. AN INDUSTRY SECTOR-LEADING OPPORTUNITY TO DISCOVER A WORLD-CLASS MOUNT ISA STYLE ZINC-LEAD-COPPER DEPOSIT. The Victor Project represents the Company’s “Next Mount Isa” project and comprises four exploration permits for minerals (EPM) covering a combined total area of 438 km2. Work conducted by the Company indicates that stratigraphy prospective for the discovery of Mount Isa Style deposits is likely to be present under moderate sedimentary cover within the Victor Project area. This area is relatively un-explored. Superior’s exploration strategy is based on the mechanism of geochemical “leakage” of key metals (lead, zinc and copper) from a deeper Proterozoic mineralised source into the younger sediments overlying the Proterozoic (Figure 29). Figure 29. Diagrammatic representation of the ‘leakage’ concept. Superior believes that ‘leakage’ from Proterozoic deposits into the overlying cover rocks may be one of the best methods of targeting prospective areas for Mount Isa Style deposits under younger sediments.  Geochemical Leakage into Surrounding Rocks and Overlying Cover Superior understands that there are two important types of “leakage”: 1. the formation of major metal deposits is accompanied by “leakage” of metals at the time of formation into the surrounding area resulting in “halo” anomalies/mineralisation. At Mount Isa a 30 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT subtle lead anomaly extends along the faults/stratigraphy well beyond the ore bodies. These anomalies are recognisable in regional geochemical images; and 2. it is apparent that lead and zinc (and probably copper) are remobilized into rocks above deposits, post deposit formation. The lead-zinc within Cambrian cover sediments at Century and Grevillea support this statement. The large lead-zinc anomaly at the Victor Project make this an area potentially hosting large Proterozoic deposits below the Cambrian cover in which the anomaly is developed (Figures 30 and 31). l y n o e s u l a n o s r e p r o F X Figure 30. Imaging of historical stream and soil geochemical values highlight the Victor Project area because of strong lead and zinc anomalies. This image shows that zinc anomalies are associated with other areas of significant mineralisation including Mount Isa, Lady Loretta, Century and Grevillea. The size and intensity of the Victor Project lead and zinc anomaly is similar to that at Mount Isa. 31 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) OPERATIONS REPORT  Historical Airborne Surveys The north-west Queensland area is blessed by almost complete coverage by airborne magnetics and radiometrics (Figure 31). In addition to this coverage there are numerous historical airborne EM surveys available which are largely ignored by explorers. Superior has acquired most of the EM surveys in digital form and processed a number of surveys to produce conductivity sections. Many of the surveys contain anomalies over conductive graphitic sediments which makes interpretation for mineralisation difficult. However, the surveys provide a view of the stratigraphy in covered areas. As mineralisation is often associated with graphitic sediments the location of these conductive units can assist the delineation of prospective areas. Figure 31. Soil lead geochemical anomalies coincident with deeper large basement structures. 32 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT Company Background Superior Resources Limited (Superior or the Company) is a Brisbane based ASX-listed company (ASX code: SPQ) exploring for lead-zinc-silver, copper, gold and nickel sulphide deposits in Australia. Superior currently holds a number of exploration permits and exploration permit applications in northern Queensland. In northwest Queensland, exploration for Mount Isa style deposits has resulted in Superior holding a first- class portfolio of properties for these deposits. Superior has an expanding portfolio of volcanogenic massive sulphide (VMS) and porphyry copper-gold, gold and nickel sulphide properties in the Greenvale area of north eastern Queensland with Mineral Resources defined for two properties. Corporate Philosophy Superior’s aim is to increase shareholder value through the discovery, development and acquisition of significant mineral deposits and the Board maintains a strategy consistent with this aim. Superior targets areas with potential for larger high-grade deposits of copper, lead-zinc-silver, gold and nickel sulphide. These include the large Mount Isa style projects in northwest Queensland and the more moderate but high grade VMS deposits in northeast Queensland. The Company also holds a developing portfolio of gold, nickel and cobalt projects within its north west and north east Queensland properties. More recently, Superior has commenced a program of assessment and development of its 100%-owned Steam Engine Gold Deposit at Greenvale. Superior has adopted a conceptual approach in its search for Mount Isa style deposits which identifies permissive environments for these deposits and then explores these areas. Models, derived from existing large mineral deposits, are an integral part of this approach. Once a permissive environment is identified, Superior uses advanced exploration methods (particularly geophysics) with modern computer modelling of data to identify targets for further testing. While a conceptual approach is also appropriate to a search for Proterozoic gold and VMS copper-gold deposits, Superior has adopted the more traditional approach in its search for these types of deposits by exploring around existing indications of mineralisation. l y n o e s u l a n o s r e p r o F 33 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT Your Directors present their report on the consolidated entity (referred to in this Report as the Group) consisting of Superior Resources Limited and the entities it controlled during the year ended 30 June 2020 (Report). DIRECTORS The following persons were Directors of the Company during the year and up to the date of this Report: Managing Director P H Hwang C A Fernicola Chairman and Company Secretary S J Pooley K J Harvey Non-Executive Director (appointed 28 November 2019) Non-Executive Director (retired 28 November 2019) PRINCIPAL ACTIVITIES During the year the principal activity of the Group was exploration for base metals, copper-gold and nickel-cobalt deposits in northern Queensland, Australia. The Company also commenced evaluation of the Steam Engine Gold Deposit. There were no significant changes in the nature of the Company’s activities during the year and no significant changes in activity are anticipated. DIVIDENDS There were no dividends paid to members during the financial year (2019: $nil). REVIEW OF OPERATIONS The loss after tax for the year was $461,100 (2019: loss of $549,373). Coronavirus (Covid19) Impact The impact of the Coronavirus (COVID-19) pandemic up to 30 June 2020 has been financially positive for the consolidated entity. The Queensland State and Australian Federal Governments have provided financial support by suspending the requirement to pay tenement rental fees and providing cash support (Jobkeeper) for continued employment of staff. Summary The Company’s activities during the full year period were focused on the following: • Nicholson Project (zinc-lead-silver) o the Company as the operator, commenced exploration operations under an Earn-in and Joint Venture Agreement (JVA) with South32; o the JVA terminated on 4 March 2020; • Greenvale Project (VMS and porphyry copper, gold and nickel-cobalt) l y n o e s u l a n o s r e p r o prospect.F Gold Deposit; and o developed a revised Mineral Resource Estimate on the Steam Engine Gold Deposit; o commenced a Scoping Study on the Steam Engine Gold Deposit; o prepared a 3,500m reverse circulation and diamond core drilling program at the Steam Engine o conducted data review and planning for exploration work at the Big Mag nickel-copper-cobalt 34 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT l y n o e s u l a n o s r e p r o F REVIEW OF OPERATIONS – (continued) Steam Engine Gold Project – Greenvale Project The Company commenced an evaluation and development program at the Steam Engine Gold Deposit during January 2020. The Steam Engine Mineral Resource Estimate was revised and upgraded to Indicated and Inferred (JORC 2012), resulting in an approximate 11% increase in the in-situ gold Mineral Resource. The total in-situ mineral resource now stands at:  1.27 million tonnes at 2.3 g/t gold (approximately 94,000 ounces), including: o Indicated Resources: 370,000 tonnes @ 2.5 g/t gold (approx. 33,000 ounces); and o Inferred Resources: 900,000 tonnes @ 2.2 g/t gold (approx. 64,000 ounces)1. A 3,500 metre resource infill and expansion drilling program commenced during late July 2020. A Scoping Study was commenced during the period for the purpose of assessing the viability of a toll treatment operation based on the revised Steam Engine Mineral Resource. North West Queensland – Nicholson Project The Nicholson Project (EPM15670 and EPM18203), located near the Walford Creek lead-zinc-silver- copper deposit, is considered to have the potential to contain sediment-hosted lead-zinc-silver massive sulphide deposits, similar to the Mount Isa and McArthur River deposits. The Company entered into an Earn-in and Joint Venture Agreement (JVA) with South32 Group Operations Pty Ltd on 28 May 2019 (South32) in respect of the Nicholson Project. Under the terms of the JVA, South32 may earn an interest of up to 80% in the Project by satisfying the following requirements: - - - Stage 1: South32 must sole-fund an initial $2,000,000 or 4,000m of drilling (whichever comes first) within the first 12 months of operations; Stage 2: provided South32 completes Stage 1, it will have a right to elect to proceed to Stage 2 to earn a 70% interest in the Project by sole-funding an additional $4,000,000 on exploration within a further four years; and Stage 3: provided South32 completes Stage 2, it will have a right to earn an additional 10% interest in the Project by sole-funding a feasibility study. Superior was the JV operator during Stages 1 and 2 of joint venture operations. Drilling of the first diamond core hole commenced on 27 July 2019. The Stage 1 drilling program targeted up to eight large (Tier-1 size potential) geophysical conductivity anomalies having potential to be caused by large SEDEX (McArthur River style) base metal deposits. Four diamond core holes, totalling 3,175.7m (of a planned eleven-hole program), drilled at three of the targets were completed by late October 2019 (the end of the 2019 field season). Initial drilling at five other targets are yet to be completed. Assay results from selected drill intercepts confirms mineralisation that was visually observed within the core and enables the commencement of an interpretative review of all data sets. This review is incomplete, but ongoing. The drilling confirmed the presence of a SEDEX mineralisation system at Nicholson West, which is developed within a thick (up to 340m) and prospective Mount Les Siltstone rock unit. Interpretation of the data indicates that holes are located at the outer edges of the SEDEX system and that the main body of mineralisation may be developed closer to the potential mineralising feeder structure located about 3 kilometres to the south, at the Nicholson River Fault Zone. On 4 March 2020, South 32 Withdrew from the JVA. 1 Refer ASX announcement dated 4 May 2020 for information relating to the upgraded Mineral Resource Estimate. 35 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT l y n o e s u l a n o s r e p r o F REVIEW OF OPERATIONS – (continued) CORPORATE and COMMERCIAL o The Company raised $459,000 under a placement to sophisticated investors during August 2019. 57,375,000 placement shares were issued at an issue price of $0.008. o The Company completed a capital raising campaign during the second calendar Quarter of 2020 comprising a two-tranche placement and a non-renounceable rights issue to raise up to $1.18 million (before costs). The placement was offered to institutional and sophisticated investors to subscribe for fully paid ordinary shares priced at $0.003 (0.3 cents) per share, with one free attaching option for every three subscribed shares. The options have an exercise price of $0.006 (0.6 cents) and expire on 31 December 2021. The placement was fully subscribed. The rights issue was offered to existing shareholders on a pro-rata basis of one new share for every three ordinary fully paid shares held in the Company on 26 May 2020, at a price of $0.003 (0.3 cents) per new share. Shareholders who subscribed under the rights issue also received one free attaching option for every three entitlement shares issued, with each option having an exercise price of $0.006 (0.6 cents) and expiring on 31 December 2021. The rights issue was oversubscribed. Allotment and issue of all shares and options under the placement and rights issue was completed on 14 July 2020. o Appointment of Mr Simon Pooley as Non-Executive Director Mr Simon Pooley was appointed as a Non-Executive Director of the Company on 28 November 2019. o Retirement of Mr Ken Harvey (Non-Executive Director) Mr Ken Harvey, Non-Executive Director of the Company, retired from the Board at the conclusion of the 2019 Annual General Meeting held on 28 November 2019. CASH CONSERVATION The Company’s Board continues to maintain the current cash conservation measures with respect to the Company’s operations and administration. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There are no significant changes in the state of affairs of the Group during the financial year. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR Since the end of the financial year, the Group raised $366,530 through the issue of 122,176,641 new shares at a value of $0.003 per share. A total of 77,996,452 free attaching options with an exercise price of $0.006 and an expiry date of 31 December 2021 were also issued since the end of the financial year under the capital raising exercise. In addition, 15,000,000 options with an exercise price of $0.006 and an expiry date of 31 December 2021 were issued to the lead manager as part consideration for their role in the above capital raising. Other than the above, no matters or circumstances have arisen since 30 June 2020 that have significantly affected, or may significantly affect: (a) (b) (c) the Group’s operations in future financial years, or the results of those operations in future financial years, or the Group’s state of affairs in future financial years. The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has been financially positive for the consolidated entity up to 30 June 2020, it is not practical to estimate the potential impact, positive or negative, after the reporting date. The situation is continually developing and is subject to measures imposed by the Australian State and Federal Governments, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. 36 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT LIKELY DEVELOPMENTS AND EXPECTED RESULTS FROM OPERATIONS Results from exploration are difficult to predict in advance and are uncertain. ENVIRONMENTAL REGULATION The Group’s operations are subject to significant environmental regulation under the laws of the Commonwealth and the State of Queensland. No matters have arisen in relation to environmental issues up to the date of this Report. INFORMATION ON DIRECTORS Peter Henry Hwang B.Sc.(Hons), LLB, MAIG, MGSA, MQLS Managing director. Age 51 Experience and expertise Mr Hwang has over 10 years’ experience as a gold, base metals and diamond exploration geologist and 18 years’ experience as a solicitor in national and Queensland law firms specialising in resources, commercial and infrastructure and native title law. He has extensive experience in advising on the development of mining and major infrastructure projects, mining transactions as well as resource sector mergers and acquisitions transactions. Other current directorships None. Former directorships in last 3 years None. Special responsibilities Managing Director. Interests in SPQ shares and options 46,796,621 ordinary shares. 3,899,717 options over unissued ordinary shares. Carlos Alberto Fernicola B.Com., FCA, F Fin FCIS FGIA CTA Chairman. Age 58 Graduate Diploma Advanced Accounting, Graduate Diploma Applied Finance and Investments, Graduate Diploma Corporate Governance and Graduate Certificate Financial Planning. Experience and expertise Mr Fernicola is the Principal of Carlos Fernicola & Co., Chartered Accountants. Mr Fernicola is a Fellow of the Institute of Chartered Accountants in Australia, Fellow of the Governance Institute of Australia and Fellow of the Financial Services Institute of Australia. He has over 30 years of experience in accounting, taxation, audit and the financial services industry. Other current directorships None. Former directorships in last 3 years None. Special responsibilities Chairman and Company Secretary. Member of the Audit Committee. Interests in SPQ shares and options 47,999,998 ordinary shares. 3,993,053 options over unissued ordinary shares. 37 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT Simon James Pooley B.Sc., MAIM, GAICD Non-Executive Director. Age 57 Experience and expertise Mr Pooley has 30 years’ experience in mine development, operations and mineral exploration. He has held senior industry positions that have demonstrated leadership and management of base and precious metals exploration and mining operations, development of project assessment types including definitive and bankable feasibility studies and their conversion into mining operations and managed teams undertaking exploration evaluations and valuations, project evaluation, resource estimation and exploration management. Other current directorships None. Former directorships in last 3 years None. Special responsibilities Member of the Audit Committee. Interests in SPQ shares and options 1,250,000 ordinary shares. COMPANY SECRETARY The Company Secretary is Mr Carlos Alberto Fernicola, B.Com, FCA, FFin FCIS FGIA, CTA. Graduate Diploma Advanced Accounting, Graduate Diploma Applied Finance and Investments, Graduate Diploma Corporate Governance and Graduate Certificate Financial Planning. Mr Fernicola was appointed to the position of Company Secretary on 11 November 2010. l y n o e s u l a n o s r e p r o F 38 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT MEETINGS OF DIRECTORS The numbers of meetings of the company’s Board of Directors held during the year ended 30 June 2020, and the numbers of meetings attended by each director were: Board Director PH Hwang CA Fernicola SJ Pooley2 KJ Harvey1 Audit Committee Director CA Fernicola SJ Pooley2 KJ Harvey1 1 Retired 28 November 2019 2 Appointed 28 November 2019 Meetings Eligible to attend 4 4 2 2 Meetings attended 4 4 2 2 Meetings eligible to attend 2 1 1 Meetings attended 2 1 1 l y n o e s u l a n o s r e p r o F 39 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) The Directors are pleased to present your Group’s 2020 remuneration report which sets out remuneration information for Superior Resources Limited’s non-executive Directors, executive Directors, and other key management personnel. The report contains the following sections: (a) Directors and key management personnel disclosed in this Report (b) Remuneration governance (c) Use of remuneration consultants (d) Executive remuneration policy and framework (e) Relationship between remuneration and Superior Resources Limited’s performance (f) Non-executive director remuneration policy (g) Voting and comments made at the company’s 2019 Annual General Meeting (h) Details of remuneration (i) Service agreements (j) Details of share-based compensation and bonuses (k) Equity instruments held by key management personnel (l) Loans to key management personnel (m) Other transactions with key management personnel (a) Directors and key management personnel disclosed in this Report Non-executive and executive Directors P H Hwang C A Fernicola S J Pooley (appointed 28 November 2019) K J Harvey (retired 28 November 2019) Other key management personnel Name C A Fernicola (b) Remuneration governance The Board is responsible for: Position Company Secretary • • the over-arching executive remuneration framework; the operation of any established incentive plans which may apply to the executive team, including key performance indicators and performance hurdles; remuneration levels of executive Directors and other key management personnel; and • • non-executive Directors' fees. The objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term interests of the Group. (c) Use of remuneration consultants The Group has not engaged the services of any remuneration consultants during the current or prior financial years. (d) Executive remuneration policy and framework The combination of base pay and superannuation make up the executive Directors’ total remuneration. Base pay for the executive Directors is reviewed annually to ensure the executives’ pay is competitive with the market. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices: • • • • competitiveness and reasonableness; acceptability to shareholders; transparency; and capital management. 40 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) – (continued) Long-term incentives In the event that the Board of Directors proposes to establish any long-term incentives for executive Directors, the Board will obtain approval at a general meeting of shareholders. Any issue of options to executive Directors is designed to focus executives on delivering long-term shareholder returns. (e) Relationship between remuneration and Superior Resources Limited’s performance There is no direct link between remuneration, company performance and shareholder wealth. The Group’s activities focus on the objective of delivery of long-term shareholder returns. (f) Non-executive director remuneration policy Fees and payments to non-executive Directors reflect the demands which are made on, and the responsibilities of those Directors. Non-executive Directors’ fees and payments are reviewed annually by the Board. Non-executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum total pool currently stands at $250,000 in aggregate plus statutory superannuation. (g) Voting and comments made at the company’s 2019 Annual General Meeting The 2019 remuneration report was passed by a show of hands and had less than 25% proxy votes cast against it. The company did not receive any feedback at the AGM or throughout the year on its remuneration practices. (h) Details of remuneration The following tables show details of the remuneration entitled to be received by the Directors and the key management personnel of the Group for the current and previous financial year. Consistent with the Board’s cash conservation measures, the Directors received between 50% and 65% of their respective remuneration entitlement during the reporting period. l y n o e s u l a n o s r e p r o F 41 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) – (continued) Totals 293,703 23,342 l y n o e s u l a n o s r e p r o F 2020 Name Non-executive Directors C A Fernicola K J Harvey1 S J Pooley2 Other key management personnel C A Fernicola (Company Secretary) Sub-total non-executive Directors and other key management personnel Executive Directors P H Hwang - Managing Director 2019 Name Non-executive Directors C A Fernicola K J Harvey Other key management personnel C A Fernicola (Company Secretary) Sub-total non-executive Directors and other key management personnel Executive Directors P H Hwang - Managing Director Short-term benefits Post- employment benefits Share- based payments Cash salary and fees $ 24,000 21,918 12,785 Superannuation $ Options $ - 2,082 1,215 24,000 - 82,703 3,297 211,000 20,045 Short-term benefits Post- employment benefits Share- based payments Cash salary and fees $ Superannuation $ Options $ 24,000 35,616 - 3,384 24,000 - 83,616 3,384 211,000 20,045 - - - - - - - - - - - - Total $ 24,000 24,000 14,000 24,000 86,000 231,045 317,045 Total $ 24,000 39,000 24,000 87,000 231,045 318,045 Totals 294,616 23,429 1 Retired 28 November 2019 2 Appointed 28 November 2019 42 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) – (continued) (i) Service agreements Remuneration and other terms of employment of the Managing Director are formalised in an agreement. The major provisions of the agreement relating to remuneration are set out below. P H Hwang, Managing Director • • Term of employment agreement – indefinite commencing 22 April 2013. Base salary, inclusive of superannuation, for the year ended 30 June 2020 of $231,045, to be reviewed at least annually by the Board. Payment of a termination benefit on early termination by the Company, other than for gross misconduct, equal to six months remuneration. Agreement may be terminated by employee giving six months’ notice in writing. • • (j) Details of share-based compensation and bonuses There have been no options granted affecting remuneration in the current or a future reporting period. (k) Equity instruments held by key management personnel The tables below show the number of shares and options in the company that were held during the financial year by key management personnel of the Group, including their close family members and entities related to them. Ordinary Shares Name P H Hwang C A Fernicola K J Harvey1 S J Pooley2 Balance at the start of the year 35,097,467 35,624,999 31,193,040 1,250,000 Received on exercising options - - - - Options Over Unissued Ordinary Shares Name P H Hwang C A Fernicola K J Harvey1 S J Pooley2 Balance at the start of the year 3,332,246 3,562,499 3,119,304 - Options Exercised - - - - 1 Retired 28 November 2019 2 Appointed 28 November 2019 3 Options expired during the year All options are vested and exercisable. Net purchased / (sold) 11,699,154 12,374,999 10,397,679 - Other changes Balance at the end of the year 46,796,621 47,999,998 41,590.719 1,250,000 - - - - Net purchased / (sold) 3,899,717 3,993,053 3,465,893 - Other changes Balance at the end of the year 3,899,717 3,993,053 3,465,893 - (3,332,246)3 (3,562,499)3 (3,119,304)3 - (l) Loans to key management personnel There were no loans to key management personnel during the financial period. (m) Other transactions with key management personnel and/or their related parties There were no other transactions with key management personnel or their related parties. End of Remuneration Report 43 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ REPORT SHARES UNDER OPTION During the year ended 30 June 2020, 113,560,925 options that were issued in relation to a capital raising transaction undertaken during January to March 2018, expired on 31 August 2019. 53,127,663 options were issued during the year with an exercise price of $0.006 and an expiry date of 31 December 2021. All remain outstanding at the date of this Report. Since year end and up to the date of this Report, 92,996,452 options with an exercise price of $0.006 and an expiry date of 31 December 2021 were issued. As at the date of this Report, a total of 146,124,115 options are on issue. During the year and since year end, there were no shares issued on the exercise of options granted. INSURANCE OF OFFICERS During the year the Group paid a premium of $34,062 to insure the Directors and Secretary of the Company. The risks insured include pecuniary orders and legal costs that may result from civil or criminal proceedings that may be brought against the officers in their capacity as officers and any other payments arising in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to any 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. No proceedings have been brought or intervened in or on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. NON-AUDIT SERVICES The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company are important. Details of amounts paid or payable to the auditor for audit and non-audit services provided during the year are outlined in Note 23 to the financial statements. 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 on page 45. AUDITOR PKF Brisbane Audit resigned from office and were replaced by William Buck (Qld). This Report is made in accordance with a resolution of the Directors. l y n o e s u l a n o s r e p r o F CA Fernicola Chairman Brisbane, 29th day of September 2020 44 AUDITOR’S INDEPENDENCE DECLARATION AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF SUPERIOR RESOURCES LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2020, there have been: - - no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. William Buck (Qld) ABN 21 559 713 106 Junaide Latif Director Brisbane, 29 September 2020 l y n o e s u l a n o s r e p r o F 45 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) CORPORATE GOVERNANCE Corporate Governance practices that form the basis of a comprehensive system of control and accountability for the administration of the Company have been adopted. The Board is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the Company’s needs. The Company has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. A description of the Company’s current corporate governance practices is set out in the Company’s corporate governance statement. This statement is available on the Company’s website and can be viewed at www.superiorresources.com.au. l y n o e s u l a n o s r e p r o F 46 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2020 Operator fees received Other income Accounting and audit fees Administration expenses Depreciation and amortisation Loss on disposal of Tick Hill tenement Loss on disposal of Carnaby Resources Shares Office rent and outgoings Tenement expenditure written-off Loss before income tax Income tax (expense) / benefit Loss after tax for the year from continuing operations attributable to owners of Superior Resources Limited Earnings (loss) per share Basic earnings (loss) per share Diluted earnings (loss) per share Note 21 8 2020 $ 2019 $ 152,345 42,916 - 712 (27,810) (417,357) (2,352) - (37,802) (15,125) (155,915) (42,980) (293,886) (3,469) (226,282) - (14,076) (10,377) (461,100) - (590,358) 40,985 (461,100) (549,373) Cents (0.06) (0.06) Cents (0.08) (0.08) 14 9 28 28 l y n o e s u l a n o s r e p r o F The accompanying notes form part of these financial statements. 47 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 Note 2020 $ 2019 $ Loss for the year from continuing operations attributable to owners of Superior Resources Limited (461,100) (549,373) Items that will not be reclassified subsequently to profit or loss: Fair value gains / (losses) on financial assets at fair value through other comprehensive income, net of tax (114,497) 135,112 Other comprehensive income for the year, net of tax (114,497) 135,112 Total comprehensive income / (loss) for the year, net of tax, attributable to owners of Superior Resources Limited (575,597) (414,261) l y n o e s u l a n o s r e p r o F The accompanying notes form part of these financial statements. 48 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 l y n o e s u l a n o s r e p r o F ASSETS Current Assets Cash and cash equivalents Trade and other receivables Financial assets Total Current Assets Non-Current Assets Financial assets Plant and equipment Exploration expenditure Other Note 2020 $ 2019 $ 10 11 12 12 13 14 15 1,004,061 36,851 11,485 103,745 85,802 17,929 1,052,397 207,476 - 8,382 4,457,027 32,500 1,280,393 9,330 4,427,456 28,500 Total Non-Current Assets 4,497,909 5,745,679 Total Assets LIABILITIES Current Liabilities Payables 5,550,306 5,953,155 16 532,784 586,842 Total Current Liabilities 532,784 586,842 Non-Current Liabilities Payables Liabilities for restrictions over assets 16 20 44,666 - 44,666 1,000,000 Total Non-Current Liabilities 44,666 1,044,666 Total Liabilities Net Assets Equity Contributed equity Reserves Accumulated losses Total Equity 577,450 1,631,508 4,972,856 4,321,647 17 18 19 12,202,019 (3,210,410) (4,018,753) 10,975,213 (3,095,913) (3,557,653) 4,972,856 4,321,647 The accompanying notes form part of these financial statements. 49 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 Issued capital $ Reserves $ Accumulated losses $ Total $ Balance at 30 June 2019 10,975,213 (3,095,913) (3,557,653) 4,321,647 Loss for the year Other comprehensive income / (loss) Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs - - - - (461,100) (461,100) (114,497) - (114,497) (114,497) (461,100) (575,597) 1,226,806 - - 1,226,806 Balance at 30 June 2020 12,202,019 (3,210,410) (4,018,753) 4,972,856 Balance at 30 June 2018 Loss for the year Other comprehensive income / (loss) Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs 10,975,213 (3,231,025) (3,008,280) 4,735,908 - - - (549,373) (549,373) 135,112 - 135,112 10,975,213 135,112 (549,373) (414,261) - - - - Balance at 30 June 2019 10,975,213 (3,095,913) (3,557,653) 4,321,647 l y n o e s u l a n o s r e p r o F The accompanying notes form part of these financial statements. 50 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2020 Restricted cash Restricted cash is excluded from cash and cash equivalents for the consolidated statement of cash flows. Cash flows from operating activities Receipts from customers (GST inclusive) Receipts from Government Payments to suppliers and employees (GST inclusive) Interest received Net cash inflow (outflow) from operating activities Cash flows from investing activities Proceeds of disposal of investments Proceeds of disposal of plant and equipment Payments for exploration expenditure Payments for plant and equipment Refunds (payments) of security deposits Net cash inflow (outflow) from investing activities Cash flows from financing activities Share application moneys received Proceeds on issue of shares Payment of capital raising costs Net cash inflow (outflow) from financing activities Net increase (decrease) in cash held Cash at beginning of financial year Cash at the end of financial year 10 Note 2020 $ 2019 $ 156,809 42,831 29,878 - (455,339) (173,209) 85 401 27 (255,614) (142,930) 190,683 - (306,480) (1,404) (4,000) 162,042 1,888 (800,918) (2,205) (500) (121,201) (639,693) 50,325 1,272,588 (45,782) 1,277,131 900,316 103,745 1,004,061 - - - - (782,623) 886,368 103,745 l y n o e s u l a n o s r e p r o F The accompanying notes form part of these financial statements. 51 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 l y n o e s u l a n o s r e p r o F 1. General Information Superior Resources Limited (Company) is a company limited by shares, incorporated and domiciled in Australia. The Company’s shares are listed on the Australian Securities Exchange. The registered office and principle place of business of the Company is: Unit 8, 61 Holdsworth Street Coorparoo QLD 4151 Ph 07 3847 2887 The financial statements are for the Group consisting of Superior Resources Limited and its subsidiaries (the consolidated entity or the Group). 2. Significant Accounting Policies (a) Statement of compliance These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standard Board and in compliance with International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. The financial statements were authorised for issue by the Directors on 29 September 2020. (b) Basis of preparation Except for cash flow information, the financial statements have been prepared on an accrual basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. (c) Principles of consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the Parent (Superior Resources Limited) and all of the subsidiaries (including any structured entities). Subsidiaries are entities the Parent controls. The Parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries or controlled operations is provided in Note 29. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. The acquisition method of accounting is used to account for business combinations by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of other comprehensive income, statement of changes in equity and statement of financial position, respectively. 52 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 l y n o e s u l a n o s r e p r o F 2. Significant Accounting Policies (continued) (d) Revenue recognition Revenue is recognised to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. Revenue is recognised when the performance obligations of a contract are satisfied. Interest revenue is recognised using the effective interest rate method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue is recognised when it is received or when the right to receive payment is established. All revenue is stated net of the amount of goods and services tax (GST). Government grants Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. (e) Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the assets and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (f) Cash and cash equivalents For the consolidated statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand and deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Restricted cash Restricted cash represents cash and cash equivalents where the Group operates the bank accounts and holds cash on behalf of external parties. These funds relate specifically to moneys held with banks and registered in the name of the Group. However, these funds are not legal designated trust accounts. Restricted cash is excluded from cash and cash equivalents for the consolidated statement of cash flows presentation. 53 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 2. Significant Accounting Policies (continued) (g) Financial instruments Initial Recognition and Measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets will be recognised on the date that the Group becomes contractually bound to the relevant asset purchase or sale transaction (i.e. trade date accounting is adopted). Financial instruments (except for trade receivables) are initially measured at fair value plus transaction costs, except where the instrument is classified "at fair value through profit or loss", in which case transaction costs are expensed to profit or loss immediately. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Trade receivables are initially measured at the transaction price if the trade receivables do not contain a significant financing component or if the practical expedient was applied as specified in paragraph 63 of AASB 15: Revenue from Contracts with Customers. Classification and Subsequent Measurement Financial assets Financial assets are subsequently measured at: • • • amortised cost; fair value through other comprehensive income; or fair value through profit and loss. Measurement is on the basis of the two primary criteria, being: • • the contractual cash flow characteristics of the financial asset; and the business model for managing the financial assets. A financial asset that meets the following conditions is subsequently measured at amortised cost: • • the financial asset is managed solely to collect contractual cash flows; and the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. A financial asset that meets the following conditions is subsequently measured at fair value through other comprehensive income: • • the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates; and the business model for managing the financial assets comprises both contractual cash flows collection and the selling of the financial asset. By default, all other financial assets that do not meet the measurement conditions of amortised cost and fair value through other comprehensive income are subsequently measured at fair value through profit or loss. l y n o e s u l a n o s r e p r o F 54 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 2. Significant Accounting Policies (continued) Financial liabilities Financial liabilities are subsequently measured at: • • amortised cost; or fair value through profit and loss. A financial liability is measured at fair value through profit and loss if the financial liability is: • • • a contingent consideration of an acquirer in a business combination to which AASB 3 Business Combinations applies; held for trading; or initially designated as at fair value through profit or loss. All other financial liabilities are subsequently measured at amortised cost using the effective interest method. Equity instruments At initial recognition, as long as the equity instrument is not held for trading and not a contingent consideration recognised by an acquirer in a business combination to which AASB 3 applies, the Group made an irrevocable election to measure any subsequent changes in fair value of the equity instruments in other comprehensive income, while the dividend revenue received on underlying equity instruments investment will still be recognised in profit or loss. Regular way purchases and sales of financial assets are recognised and derecognised at settlement date in accordance with the Group’s accounting policy. Derecognition Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of financial position. Derecognition of financial liabilities A liability is derecognised when it is extinguished (i.e. when the obligation in the contract is discharged, cancelled or expires). An exchange of an existing financial liability for a new one with substantially modified terms or a substantial modification to the terms of a financial liability, is treated as an extinguishment of the existing liability and recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. Derecognition of financial assets A financial asset is derecognised when the holder's contractual rights to its cash flows expires, or the asset is transferred in such a way that all the risks and rewards of ownership are substantially transferred. All the following criteria need to be satisfied for derecognition of financial assets: • • • the right to receive cash flows from the asset has expired or been transferred; all risk and rewards of ownership of the asset have been substantially transferred; and the Group no longer controls the asset (i.e. no practical ability to make unilateral decision to sell the asset to a third party). l y n o e s u l a n o s r e p r o F 55 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 l y n o e s u l a n o s r e p r o F 2. Significant Accounting Policies (continued) Impairment The Group recognises a loss allowance for expected credit losses on: • • • • • financial assets that are measured at amortised cost or fair value through other comprehensive income; lease receivables; contract assets (e.g. amount due from customers under construction contracts); loan commitments that are not measured at fair value through profit or loss; and financial guarantee contracts that are not measured at fair value through profit or loss. Loss allowance is not recognised for: • • financial assets measured at fair value through profit or loss; or equity instruments measured at fair value through other comprehensive income. Expected credit losses are the probability-weighted estimate of credit losses over the expected life of a financial instrument. A credit loss is the difference between all contractual cash flows that are due and all cash flows expected to be received, all discounted at the original effective interest rate of the financial instrument. Recognition of expected credit losses in financial statements At each reporting date, the Group recognises the movement in the loss allowance as an impairment gain or loss in the statement of profit or loss. The carrying amount of financial assets measured at amortised cost includes the loss allowance relating to that asset. Assets measured at fair value through other comprehensive income are recognised at fair value, with changes in fair value recognised in other comprehensive income. Amounts in relation to change in credit risk are transferred from other comprehensive income to profit or loss at every reporting period. For financial assets that are unrecognised (e.g. loan commitments yet to be drawn, financial guarantees), a provision for loss allowance is created in the statement of financial position to recognise the loss allowance. (h) Plant and equipment Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives, as follows: Equipment / Software: 3 – 5 years The asset’s residual values and useful lives are reviewed and adjusted if appropriate at each balance date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the consolidated statement of profit or loss. When revalued assets are sold, it is company policy to transfer the amounts included in other reserves in respect of those assets to retained earnings. (i) Trade and other payables These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. 56 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 2. Significant Accounting Policies (continued) (j) Exploration expenditure Expenditure is accumulated separately for each area of interest until such time as the area is abandoned or sold. The realisation of the value of the expenditure carried forward depends on any commercial results that may be obtained through successful development and exploitation of the area of interest or alternatively by its sale. If an area of interest is abandoned or is considered to be of no further commercial interest the accumulated exploration costs relating to the area are written off against income in the year of abandonment. Some exploration expenditure may also be written off where areas of interest are partly relinquished and in cases where uncertainty exists as to the value, provisions for possible diminution in value are established. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to capitalise costs in relation to that area. The Group held restricted cash held as a result of its role as the Operator under the Earn-in and Joint Venture Agreement (JVA) with South32 Group Operations Pty Ltd (South32). As at 30 June 2020, all restricted cash had been expended. In accordance with the first stage of commitment, South32 must sole-fund an initial $2 million or 4,000m of drilling within the first 12 months of operations. As at 30 June 2020, South32 had paid $1.89 million to the Company as the Operator under the JVA to fund the planned exploration operations in accordance with the agreement. This prepaid amount was held solely for the benefit of South32 in meeting their obligations under the JVA and was held as restricted cash as it is not available to finance the Group’s day-to-day operations and therefore has been excluded from cash and cash equivalents for the purposes of the statement of cash flows. All funds held as restricted cash have been cleared at balance date. In the 2019 financial statements these funds were disclosed as a non-current asset. An offsetting liability was recognised representing the obligation of the Company, as the Operator under the JVA to South32, to meet their first stage of exploration commitments. (k) 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. (l) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial year but not distributed at balance date. (m) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Group, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. l y n o e s u l a n o s r e p r o F 57 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 2. Significant Accounting Policies (continued) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (n) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow. (o) Employee benefits Short-term obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave, which are expected to be settled within 12 months after the end of the period in which the employees render the related services, are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables. Other long-term employee benefit obligations The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related services, is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on government bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. (p) Parent entity financial information The financial information for the parent entity, Superior Resources Limited, disclosed in note 30 has been prepared on the same basis as the consolidated financial statements. (q) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. l y n o e s u l a n o s r e p r o F 58 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 l y n o e s u l a n o s r e p r o F 2. Significant Accounting Policies (continued) Where the Group retrospectively applies an accounting policy, makes a retrospective restatement or reclassifies items in its financial statements, an additional (third) statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statements is presented. (r) Fair Value of Assets and Liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. (s) Impairment of Assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or joint ventures deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs of disposal and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (for example in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill, intangible assets with indefinite lives and intangible assets not yet available for use. When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 59 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 2. Significant Accounting Policies (continued) (t) Coronavirus (Covid19) Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the consolidated entity based on known information. This consideration extends to the nature of the activities of the group including services offered, customers, supply chain, staffing and geographic regions in which the consolidated entity operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the consolidated entity unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. 3. New and Amended Accounting Standards The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been adopted. The following Accounting Standards and Interpretations are most relevant to the consolidated entity: AASB 16 Leases The consolidated entity adopted AASB 16 during the current year. AASB 16 does not apply to leases that convey rights to explore for or use minerals, oil, natural gas and similar non-regenerative resources. The Group and specifically, the Company, is a lessee in respect of two properties: • Coorparoo Office (Corporate and Operations); and • Greenvale Residential. Management has assessed the effects of applying the new standard and has concluded that the above leases are “short term leases” as that term is used in AASB 16. On the basis of this classification, the consolidated entity has elected to adopt the recognition exemption as provided under the standard. As a result, the Group will continue to recognise rental expense payments that relate to the leases as expenses in the Consolidated Statement of Profit or Loss. There are no other standards that are not yet effective and that are expected to have a material impact on the consolidated entity in the current or future reporting periods and on foreseeable future transactions. 4. Financial Risk Management The Group’s overall risk management plan seeks to minimise potential risks resulting from the unpredictability of financial markets. The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Group are exposed are credit risk, liquidity risk, market risk and cash flow interest rate risk. l y n o e s u l a n o s r e p r o F 60 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 l y n o e s u l a n o s r e p r o F 4. Financial Risk Management (continued) The Group holds the following financial assets and liabilities: Financial assets Cash and cash equivalents Financial assets – restricted cash Trade and other receivables Financial assets at fair value through other comprehensive income Financial liabilities Trade and other payables 2020 $ 2019 $ 1,004,061 - 36,851 11,485 1,052,397 103,745 943,855 85,802 354,467 1,487,869 577,450 577,450 631,508 631,508 Risk management is carried out by the Group’s finance function under policies and objectives which have been approved by the Board of Directors. The Managing Director has been delegated the authority for designing and implementing processes which follow the objectives and policies. The Board receives monthly reports which provide details of the effectiveness of the processes and policies in place. (a) Credit risk Credit risk is the risk of loss from a counterparty failing to meet its financial obligations to the Company. The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount of those assets, net of any provision for expected credit loss, as disclosed in the consolidated statement of financial position and notes to the financial statements. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions. For bank and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available). Cash at bank and short-term bank deposits Financial assets – restricted cash 2020 $ 2019 $ 1,004,061 - 1,004,061 103,745 943,855 1,047,600 Other than cash and cash equivalents, the most significant financial assets are trade and other receivables. The Group does not have any material credit risk exposure to any single debtor or Group of debtors under financial instruments entered into by the Group. There were no past due debts at balance date requiring consideration of impairment provisions. (b) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities to meet obligations when due. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows. No finance facilities were available to the Group at the end of the reporting period. 61 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 4. Financial Risk Management (continued) Maturities of financial liabilities The table below analyses the Group’s financial liabilities into relevant maturity groupings. Contractual maturities of financial liabilities At 30 June 2020 Trade and other payables At 30 June 2019 Trade and other payables (c) Market risk Less than 6 months $ 6 – 12 months $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Total contractual cash flows $ Carrying amount $ 474,229 58,555 44,666 474,229 58,555 44,666 541,626 45,216 44,666 541,626 45,216 44,666 - - - - - - - - 577,450 577,450 577,450 577,450 631,508 631,508 631,508 631,508 The Group is exposed to equity securities price risk. This arises from securities investments held by the Group in Deep Yellow Limited and Carnaby Resources Limited and classified on the statement of financial position as financial assets. As a result of the disposal of the Carnaby Resources Limited financial asset during the current year, the risk exposure in respect of that asset no longer exists. The Group is not exposed to any commodity price risk. The table below summaries the impact of increases and decreases in the Deep Yellow Limited and Carnaby Resources Limited share price on the Group’s total comprehensive income and loss for the year and on equity. The analysis is based on the assumption that the share price had increased or decreased by 25% (2019: 25%) from balance date fair value with all other variables held constant. Impact on post-tax loss 2019 2020 $ $ Impact on reserves 2020 $ 2019 $ +25% -25% +25% -25% +25% -25% +25% -25% Investment in Deep Yellow Limited Investment in Carnaby Resources Limited - - - 1,233 (1,233) 2,871 (2,871) 3,250 (3,250) - 23,137 (23,137) - - 60,998 (60,998) (d) Cash flow and fair value interest rate risk As the Group has no significant interest-bearing assets or borrowings, the Group’s income and operating cash flows are not materially exposed to changes in market interest rates. (e) Fair value measurements The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The net fair value of financial assets and financial liabilities approximates the respective carrying values as disclosed in the consolidated statement of financial position and the notes to the financial statements. l y n o e s u l a n o s r e p r o F 62 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 5. Critical Accounting Estimates and Judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. (a) Critical judgements in applying the entity’s accounting policies The Group has capitalised non-current exploration expenditure of $4,457,027 (2019: $4,427,456). This amount includes costs directly associated with exploration. These costs are capitalised as an intangible asset until assessment of the permit is complete and the results have been evaluated. These costs include employee remuneration, materials, drilling costs, delay costs, rental payments and payments to contractors. The expenditure is carried forward until such a time as the asset moves into the development phase, is abandoned or sold. Given exploration activities have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of recoverable resources and the difficulty in forecasting cash flows to assess the fair value of exploration expenditure, there is uncertainty as to the carrying value of exploration expenditure. The ultimate recovery of the carrying value of exploration expenditure is dependent upon the successful development and commercial exploitation or, alternatively, sale of the Group’s interest in the tenements. (b) Joint arrangements The Group undertakes business activities through contractual arrangements with other parties. In assessing the classification of these arrangements for accounting purposes, the Group must first assess whether it has gained control, joint control or a significant influence in the arrangement. A joint arrangement is an arrangement over which two or more parties have joint control. Joint control is the contractually agreed sharing of control over an arrangement in circumstances where decisions about the relevant activities (being those that significantly affect the returns of the arrangement) require the unanimous consent of the parties. Judgement is required to determine when the Group has control, which requires an assessment of the relevant activities and when the decisions in relation to those activities require unanimous consent. Judgement is also required to classify a joint arrangement as either a joint operation or a joint venture. Classifying the arrangement requires the Group to assess its rights and obligations arising from the arrangement. This assessment often requires significant judgement. Whether the arrangement is a Joint Operation or a Joint Venture, may materially impact the accounting. The Group previously announced the formation of an Earn-in and Joint Venture Agreement with South32 Group Operations Pty Ltd (JVA) which is structured through an unincorporated arrangement in accordance with the terms of the JVA. In assessing the facts and circumstances relating to this arrangement, the Group assessed that the arrangement is currently in the earn-in stage and as such, a joint venture had not been formed during or after the reporting period. As a result, accounting for the arrangement was on the basis of considering the individual transactions and expenses incurred under the JVA against the terms and operation of the JVA. This has resulted in restricted assets and liabilities for restrictions over assets being recognised in accordance with policy Note 2(f) for the amounts shown in Note 12 and Note 20. l y n o e s u l a n o s r e p r o F 63 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 6. Going Concern Principle Notwithstanding that the Group incurred an operating loss after tax of $461,100 (2019: loss of $549,373) these financial statements have been prepared on a going concern basis which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. The ability of the consolidated entity to continue as a going concern depends on one or more of the following: • • • • achieving sufficient future cash flows from operations to enable its obligations to be met; the success of cost saving initiatives, which include entering into Joint Venture arrangements and reducing tenement areas, so as to reduce the carrying and expenditure costs for tenements; cash flows from the sale of any of the Group’s assets; and obtaining additional funding from capital raising activities. The Directors acknowledge that to continue the exploration and development of the Group’s exploration projects, the budgeted cash flows from operating and investing activities for the future will necessitate further capital raisings. In addition, the Directors have agreed to retain between 35% and 50% of their salary payments in the interests of assisting the consolidated entity’s ability to continue as a going concern. At the date of this Report and having considered the above factors, the Directors consider that the Group will be able to continue as a going concern and will be able to pay its debts as and when they fall due and payable. In the event that the Group is unable to satisfy future funding requirements, a material uncertainty would exist that would cast significant doubt on the Group’s ability to continue as a going concern with the result that the Group may be required to realise its assets at amounts different from those currently recognised, settle liabilities other than in the ordinary course of business and make provisions for costs which may arise as a result of cessation or curtailment of normal business operations. 7. Segment Information The Group operates solely within one segment, being the mineral exploration industry in Australia. 8. Other Income Interest Insurance claim Government grants – Covid: Jobkeeper Cash flow boost 2020 $ 85 - 12,000 30,831 42,916 2019 $ 401 311 - - 712 l y n o e s u l a n o s r e p r o F 64 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 9. Income Tax (a) Numerical reconciliation of income tax expense / (benefit) to prima facie tax payable: Profit (loss) from continuing operations before income tax expense Tax at the Australian tax rate of 27.5% Tax effect of permanent differences Temporary differences not recognised Income tax expense / (benefit) 2020 $ 2019 $ (461,100) (590,358) (126,803) (8,457) (162,348) 26,963 135,260 - 94,400 (40,985) (b) Tax adjustment relating to items of other comprehensive income Financial assets - fair value adjustment - (40,985) (c) Tax losses Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit @ 27.5% 12,424,397 3,416,709 7,612,563 2,093,455 (d) Franking credits Franking credits available for use in subsequent financial year 251,146 251,146 l y n o e s u l a n o s r e p r o F 65 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 l y n o e s u l a n o s r e p r o F 10. Cash and Cash Equivalents Cash at bank and on hand 11. Trade and Other Receivables CURRENT Other receivables Prepayments 12. Financial Assets CURRENT Deep Yellow Limited1 Investments in listed equity securities designated at fair value through other comprehensive income NON-CURRENT Carnaby Resources Limited1 Investments in listed equity securities designated at fair value through other comprehensive income Restricted Cash – Prepaid contributions from earn-in participant2 Total financial assets 1 Listed equity securities 2020 $ 2019 $ 1,004,061 103,745 10,771 26,080 36,851 - 85,802 85,802 11,485 17,929 - - - 11,485 336,538 943,855 1,280,393 1,298,322 The investment in listed equity securities are stated at fair value. AASB 13 Fair Value Measurement requires disclosure of fair value measurements by the level of the following fair value measurement hierarchy: 1) Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities; 2) Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability; 3) Level 3 – Inputs for the asset or liability that are not based on observable market data. The listed equity securities are traded in an active market, being the Australian Securities Exchange, and consequently they are measured as a Level 1 instrument on the fair value hierarchy. The quoted market price, used to determine the value of these securities, is the bid price at balance date. 2 Restricted Cash – Nicholson Project The Group has $0 (2019: $943,855) in restricted cash held as a result of its role as the Operator under the Earn-in and Joint Venture Agreement (JVA) with South32 Group Operations Pty Ltd (South32), dated 28 May 2019, which terminated in February 2020. All transactions under the JVA have been finalised as at 30 June 2020 and the company has earned an operator fee of $152,345. In accordance with the first stage of commitment, South32 was required to sole-fund an initial $2 million or 4,000m of drilling within the first 12 months of operations. As at 30 June 2020, South32 had contributed $1,876,889 to the Company in its capacity as the Operator under the JVA, to fund the planned exploration operations in accordance with South32’s first stage of commitments. This prepaid amount was used solely for the benefit of South32 in meeting its obligations under the JVA, in accordance with the policy described in Note 2(f), and was held as restricted cash as it is not available to finance the Group’s day- to-day operations. These funds have been excluded from cash and cash equivalents for the purposes of the statement of cash flows. The funds have been disclosed as a non-current asset in 2019 with an offsetting liability recognised representing the obligation of the Company, in its capacity as the Operator, to undertake exploration work under the Stage 1 earn-in terms. Refer to Note 21 for further information. 66 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 13. Plant and Equipment NON-CURRENT Equipment / software – at cost Accumulated depreciation Year ended 30 June 2020 Opening net book amount Additions Depreciation charge Closing net book amount Year ended 30 June 2019 Opening net book amount Additions Depreciation charge Closing net book amount 14. Exploration Expenditure 2019 $ 85,337 (76,007) 9,330 2020 $ 86,740 (78,358) 8,382 Equipment / Software $ 9,330 1,403 (2,351) 8,382 12,482 - (3,152) 9,330 Exploration phase property costs Deferred geological, geophysical, drilling and other expenditure – at cost Non-current Total capitalised exploration expenditure The capitalised exploration expenditure carried forward above has been determined as follows: Opening balance Expenditure incurred during the year Disposal of assets classified as held for sale Tenement expenditure written-off Derecognition of South 32 contributions Closing balance 2020 $ 2019 $ 4,457,027 4,457,027 4,427,456 4,427,456 4,427,456 1,910,116 - (155,915) (1,724,630) 4,457,027 3,963,615 921,912 (447,694) (10,377) - 4,427,456 Exploration expenditure incurred during the year includes an amount of $1,603,636 (2019: $120,994) contributed by the Joint Venture participant, South32 Group Operations Pty Ltd in relation to the Nicholson Project under the Earn-in and Joint Venture Agreement, dated 28 May 2019. The agreement was terminated 4 March 2020. Refer to Notes 12, 20 and 21 for further information. 15. Non-Current Assets – Other Security deposits 2020 $ 2019 $ 32,500 28,500 67 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 l y n o e s u l a n o s r e p r o F 16. Payables Current liabilities Trade payables and accrued expenses Other payables – application money Other payables - ATO Other payables – related party (i) Employee entitlements Non-current liabilities Other payables – related party (ii) Total Payables 2020 $ 2019 $ 114,154 50,325 7,547 302,203 58,555 532,784 44,666 44,666 577,450 253,515 - 43,571 244,540 45,216 586,842 44,666 44,666 631,508 (i) These amounts represent the unpaid Directors’ remuneration that may be called within the next 12 months. The liability is unsecured and no decision has been made by the Directors on the timing or nature of the consideration to be provided in settlement. (ii) These amounts represent the unpaid Directors’ remuneration for periods to 30 June 2016. The Directors have agreed that they will not call upon the payment of this balance outstanding for a period of not less than 12 months from the date of this Report. 17. Contributed Equity 2020 $ 2019 $ 1,016,614,718 (2019: 688,043,740) ordinary shares fully paid 12,202,019 10,975,213 (a) Movements in ordinary share capital Date At 30 June 2018 Shares issued At 30 June 2019 31 July 2019 27 May 2020 25 June 2020 At 30 June 2020 (b) Ordinary shares Details Balance Balance Shares issued Shares issued Shares issued Share issue cost Issue price $ 0.008 0.003 0.003 Number of shares 688,043,740 - 688,043,740 57,375,000 111,812,810 159,383,168 1,016,614,718 $ 10,975,213 - 10,975,213 459,000 335,438 478,150 (45,782) 12,202,019 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote and upon a poll, each share is entitled to one vote. 68 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 l y n o e s u l a n o s r e p r o F 17. Contributed Equity (continued) (c) Share options Date Details At 30 June 2018 17 October 2018 30 June 2019 At 30 June 2019 31 August 2019 25 June 2020 At 30 June 2020 Balance Options issued Options expired Balance Options expired Options issued Balance Weighted Average Exercise Price Number of options 140,935,925 10,000,000 (37,375,000) 113,560,925 (113,560,925) 53,127,722 53,127,722 $ 0.02 0.03 0.03 0.03 0.03 0.006 Expiry 31-Aug-19 31-Aug-19 31-Aug-19 31-Dec-21 The lead manager to the share placement and rights issue undertaken in June received 15 million options (post year end), having the same terms as options issued under the placement and rights issue at no consideration. (d) Capital risk management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the Group includes cash and cash equivalents, equity attributable to equity holders comprising of contributed equity, reserves and accumulated losses. In order to maintain or adjust the capital structure, the Group may issue new shares, sell assets to reduce debt or adjust the level of activities undertaken by the Company. The Group monitors capital on the basis of cash flow requirements for corporate overheads, exploration and evaluation expenditure. The Group’s exposure to borrowings as at 30 June 2020 totals $nil (2019: $nil). The Group will continue to access capital markets and joint venture arrangements to satisfy anticipated funding requirements. The Group’s strategy to capital risk management is unchanged from prior years. 18. Reserves 2020 $ 2019 $ Financial assets revaluation reserve (3,210,410) (3,095,913) At beginning of year Realised gains/(losses) on disposals Revaluation increment / decrement Income tax @ 27.5% At end of year (3,095,913) - (114,497) - (3,210,410) (3,231,025) 28,180 147,917 (40,985) (3,095,913) 69 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 l y n o e s u l a n o s r e p r o F 19. Accumulated Losses Accumulated losses At beginning of year Net loss for the year At end of year 2020 $ 2019 $ (4,018,753) (3,557,653) (3,557,653) (461,100) (4,018,753) (3,008,280) (549,373) (3,557,653) 20. Liabilities for Restrictions Over Assets Contribution received from South32 - 1,000,000 Liabilities for restrictions over assets represents contributions in advance from earn-in participant South32, representing part of their first stage commitment under the Earn-in and Joint Venture Agreement (JVA) to sole fund the planned exploration operations in respect of the Nicholson Project. In the event that South32 satisfies the Stage 1 and Stage 2 earn-in requirements under the JVA, the liabilities for restrictions over assets will be settled by the Company with the divestment of 70% of its interest in the Project. An explanation of the JVA and exploration commitments under the JVA are set out below. The JVA was terminated by South32 on 4th March 2020 without satisfaction of the Stage 1 or Stage 2 earn-in requirements. 21. Joint Venture Entities Nicholson Project The Company entered into an earn-in and joint venture agreement (JVA) with South32 Group Operations Pty Ltd on 28 May 2019 (South32) in respect of the Nicholson Project. Under the terms of the JVA, South32 may earn an interest of up to 80% in the Project by satisfying the following requirements: - - - Stage 1: South32 must sole-fund an initial $2,000,000 or 4,000m of drilling (whichever comes first) within the first 12 months of operations; Stage 2: provided South32 completes Stage 1, it will have a right to elect to proceed to Stage 2 to earn a 70% interest in the Project by sole-funding an additional $4,000,000 on exploration within a further four years; and Stage 3: provided South32 completes Stage 2, it will have a right to earn an additional 10% interest in the Project by sole-funding a feasibility study. The Company was the JV operator during Stages 1 and 2 of joint venture operations which commenced with the drilling of the first diamond core hole on 27 July 2019. As Operator, the Company will receive contributions from South32 to fund the exploration commitments under the JVA and a fee equal to 10% of exploration expenditure (total operator fees earned in 2020 was $152,345 (2019: $nil)). Exploration expenditure incurred on behalf of South32 will be capitalised to the Nicholson Project tenements and any unspent funds will be held as Restricted Cash and separated from cash flow from operations of the Company. As at 30 June 2020, the contributions received and spent on exploration of the Nicholson Project tenements and the related liabilities for restrictions over assets are summarised in the table below. The earn-in and JVA was terminated by South 32 on 4 March 2020 without satisfaction of the Stage 1 or Stage 2 earn-in requirements. 70 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 21. Joint Venture Entities (continued) l y n o e s u l a n o s r e p r o F Restricted cash – prepaid contributions from South32 Exploration expenditure by South32 - capitalised JVA creditors Liabilities for restrictions over assets – total contribution from South32 12 22. Key Management Personnel Disclosures (a) Key management personnel compensation Short-term employee benefits Post-employment benefits 2020 $ - - - - 2019 $ 943,855 120,994 (64,849) 1,000,000 2020 $ 293,703 23,342 317,045 2019 $ 294,616 23,429 318,045 Detailed remuneration disclosures are provided in the remuneration report on pages 40 to 43. At 30 June 2020, $346,869 (2019 $289,206) remains payable. (b) Equity instrument disclosures relating to key management personnel (i) Options provided as remuneration and shares issued on exercise of such options There have been no options granted affecting remuneration in the current or a future reporting period. (ii) Option holdings The numbers of options over ordinary shares in the Company held during the financial year by each Director of the Company and other key management personnel of the Group, including their personally related parties, is set out below. Balance at the start of the year Options Exercised Name Directors of Superior Resources Limited P H Hwang C A Fernicola K J Harvey1 S J Pooley2 3,332,346 3,562,499 3,119,304 - - - - - Net purchased / (sold) Other changes Balance at the end of the year 3,899,717 3,993,053 3,465,893 - (3,332,346)3 (3,562,499)3 (3,119,304)3 - 3,899,717 3,993,053 3,465,893 - 1 Retired 28 November 2019 2 Appointed 28 November 2019 3 Options expired during the year All options are vested and exercisable. 71 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 22. Key Management Personnel Disclosures (continued) (iii) Share holdings The number of ordinary shares in the company held during the financial year by each Director of Superior Resources Limited and other key management personnel of the Group, including their personally related parties, is set out below. 2020 Balance at the start of the year Received on exercising options Name Directors of Superior Resources Limited P H Hwang C A Fernicola K J Harvey1 S J Pooley2 35,097,467 35,624,999 31,193,040 1,250,000 Net purchased / (sold) Other changes Balance at the end of the year - - - - 11,699,154 12,374,999 10,397,679 - - - - - 46,796,621 47,999,998 41,509,719 1,250,000 1 Retired 28 November 2019 2 Appointed 28 November 2019 2019 Balance at the start of the year Received on exercising options Name Directors of Superior Resources Limited P H Hwang C A Fernicola K J Harvey 35,097,467 35,624,999 31,193,040 Net purchased / (sold) Other changes Balance at the end of the year - - - - - - - - - 35,097,467 35,624,999 31,193,040 23. Remuneration of Auditors During the year, the following fees were paid or payable for services provided by the auditor, its related practices and non- related audit firms: PKF Brisbane Audit Audit or review of financial report William Buck (Qld) Audit of financial report 2020 $ 2019 $ 17,000 40,500 15,000 32,000 - 40,500 24. Contingencies There are no contingent liabilities affecting the Group as at the date of this Report. 25. Commitments (a) Exploration commitments So as to maintain current rights to tenure of various exploration and mining tenements, the Company is required to outlay amounts in respect of tenement rent to the relevant governing authorities and to meet certain annual exploration expenditure commitments. These outlays (exploration expenditure and rent), which arise in relation to granted tenements, including in relation to tenement applications that were granted after 30 June 2020, are as follows: 72 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 25. Commitments (continued) l y n o e s u l a n o s r e p r o F Exploration expenditure commitments Commitments for payments under exploration permits for minerals in existence at the reporting date but not recognised as liabilities payable is as follows: Payable within one year Payable between one and five years 2020 $ 2019 $ 1,171,269 2,428,696 3,599,965 1,118,970 1,962,518 3,081,488 Outlays may be varied from time to time, subject to approval of the relevant government departments, and may be relieved if a tenement is relinquished or certain contractual arrangements are entered into with third parties (e.g. a farm-in or joint venture arrangement). Cash security bonds totalling $32,500 (2019: $28,500) are currently held by the relevant governing authorities to ensure compliance with granted tenement conditions. 26. Events Occurring After Balance Date Since the end of the financial year, the Group raised $366,530 through the issue of 122,176,641 new shares at a value of $0.003 per share. A total of 77,996,452 free attaching options with an exercise price of $0.006 and an expiry date of 31 December 2021 were also issued since the end of the financial year under the capital raising exercise. In addition, 15,000,000 options with an exercise price of $0.006 and an expiry date of 31 December 2021 were issued to the lead manager as part consideration for their role in the above capital raising. No other matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect the operations of the Group, the results of the operations or the state of affairs of the Group in financial years subsequent to 30 June 2020. 27. Reconciliation of Loss After Income Tax to Net Cash Flows From Operating Activities 2020 $ 2019 $ Loss for the year after income tax (461,100) (549,373) Depreciation and amortisation Loss on disposal of tenement Tenement expenditure written off Loss on disposal of Carnaby Resources Limited shares Income tax Changes in operating assets and liabilities: (Increase)/decrease in trade and other receivables (Increase) / decrease in prepayments Increase/(decrease) in trade payables Increase/(decrease) in other payables - current Increase/(decrease) in employee entitlements 2,352 - 155,915 37,802 - (10,771) 59,722 (74,512) 21,639 13,339 3,469 226,282 10,377 - (40,985) - (21,877) 77,102 141,403 10,672 Net cash outflow from operating activities (255,614) (142,930) 73 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 28. Earnings (loss) Per Share (a) Basic earnings (loss) per share 2020 Cents 2019 Cents Profit (loss) attributable to the ordinary equity holders of the company (0.06) (0.08) (b) Diluted earnings (loss) per share Profit (loss) attributable to the ordinary equity holders of the company (0.06) (0.08) 2020 $ 2019 $ (c) Reconciliations of earnings (loss) used in calculating earnings per share Basic earnings (loss) per share Profit (loss) attributable to ordinary equity holders of the company used in calculating basic earnings per share (461,100) (549,373) Diluted earnings(loss) per share Profit (loss) attributable to ordinary equity holders of the company used in calculating diluted earnings per share (461,100) (549,373) 2020 Number 2019 Number (d) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings (loss) per share Adjustments for calculation of diluted earnings (loss) per share: Options Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings (loss) per share 753,123,457 688,043,740 - - 753,123,457 688,043,740 Unissued ordinary shares under option are not included in the calculation of diluted earnings per share because they are antidilutive for the years ended 30 June 2020 and 30 June 2019. These shares under option could potentially dilute basic earnings per share in the future. l y n o e s u l a n o s r e p r o F 74 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 29. Related Party Disclosures (a) Parent entity The parent entity within the Group is Superior Resources Limited. (b) Subsidiaries The subsidiaries listed below have share capital consisting solely of ordinary shares which are held directly by the Group. The % ownership interests held equals the voting rights held by the Group.: Country of incorporation Principal Place of Business % ownership interest Held by the Group 2019 2020 Investment 2020 $ 2019 $ Subsidiaries Superior Gold Pty Ltd Australia Australia 100 100 1,000 1,000 (c) Joint Agreement Country of incorporation Principal Place of Business % ownership interest Held by the Group 2019 2020 Investment 2020 $ 2019 $ Hedley’s Joint Venture (Nicholson Project) - Note 21 Unincorporated Australia - 100 - - (d) Key management personnel Disclosures relating to key management personnel are set out in Note 22. l y n o e s u l a n o s r e p r o F 75 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 30. Parent Entity Information (a) Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: Statement of financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Shareholders’ equity Issued capital Reserves Accumulated losses 2020 $ 2019 $ 1,037,845 4,498,909 5,536,754 227,200 4,702,153 4,929,353 511,842 44,666 556,508 556,464 44,666 601,130 4,980,246 4,328,223 12,202,019 (3,210,410) (4,011,363) 10,975,213 (3,095,913) (3,551,077) 4,980,246 4,328,223 Statement of profit or loss and other comprehensive income Loss for the year Other comprehensive income/(loss) net of tax Total comprehensive income/(loss) for the year (460,286) (114,497) (574,783) (548,112) 135,112 (413,000) (b) Contingent liabilities and commitments of the parent entity The parent entity did not have any contingent liabilities as at 30 June 2020 or 30 June 2019. The commitments of the parent entity are as disclosed at Note 25 for the Group. l y n o e s u l a n o s r e p r o F 76 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) DIRECTORS’ DECLARATION In the Directors’ opinion: 1. the financial statements and notes set out on pages 47 to 76, are in accordance with the Corporations Act 2001, including: (a) (b) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its performance for the financial year ended on that date, and 2. having regard to note 6 to the financial statements, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. Note 2(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declarations by the chief executive officer/chief financial officer as required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. CA Fernicola Chairman Brisbane, 29th September 2020 l y n o e s u l a n o s r e p r o F 77 l y n o e s u l a n o s r e p r o F Superior Resources Limited Independent auditor’s report to the members Report on the Audit of the Financial Report Opinion We have audited the financial report of Superior Resources Limited (the Company and its subsidiaries (the Group)), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss, consolidated statement of other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the Directors’ declaration. In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 6 in the financial report, which indicates that the Group incurred a net loss after tax of $461,100 during the year ended 30 June 2020 and had net cash outflows from operations of $255,614. As stated in Note 6, these events or conditions, along with other matters as set forth in Note 6, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. 78 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. CARRYING VALUE OF EXPLORATION COSTS Area of focus Refer also to note 14 Capitalised exploration and evaluation assets represent over 74% of the Group’s total assets. The carrying value of exploration and evaluation assets is impacted by the Group’s ability, and intention, to continue to explore and evaluate these assets. The results of these activities then determine the extent to which it may or may not be commercially viable to develop and extract identified reserves. Due to the significance of this asset and the subjectivity involved in determining its carrying value and recoverable amount, this is a key audit matter. How our audit addressed it Our audit procedures included: — A review of the Directors’ assessment of the criteria for the capitalisation of exploration and evaluation expenditure and their assessment of whether there are any indicators of impairment to capitalised costs; — Considering the Group’s intention and ability to continue activities necessary to support a decision to develop the exploration and evaluation assets, which included an assessment of the Group’s ability to fund such activities and a review of their future budgets; — Performing an assessment of whether any indicators of impairment existed in line with requirements of Australian Accounting Standards, including a review of the integrity of tenement title status and total commitments value; and — We assessed the adequacy of the Group’s disclosures in respect of the carrying value of exploration costs. l y n o e s u l a n o s r e p r o F 79 l y n o e s u l a n o s r e p r o F 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 2020, 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 have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of these financial statements is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our independent auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the Directors’ Report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Superior Resources Limited, for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. 80 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. William Buck (Qld) ABN 21 559 713 106 Junaide Latif Director Brisbane, 29 September 2020 l y n o e s u l a n o s r e p r o F 81 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) SHAREHOLDER INFORMATION Shareholder Information The information set out below was applicable at 21 October 2020. A. DISTRIBUTION OF EQUITY SECURITIES Analysis of numbers of equity security holders by size of holding: Class of security - Ordinary Shares Range 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total Number of Holders 28 19 83 449 705 1,284 The number of holders holding less than a marketable parcel of ordinary shares was 271 and they held 4,358,425 securities. B. EQUITY SECURITY HOLDERS Total of Ordinary Shares on Issue 1,158,029,906. Twenty largest equity security holders Holders of fully paid ordinary shares (ASX:SPQ): Holder YARRAANDOO PTY LTD HBH FAMILY PTY LTD KJ HARVEY & ASSOCIATES PTY LTD MR TERRY TAYLOR & MRS LYNDA LOUISE TAYLOR MR GEOFFREY JAMES HARRIS AIHANMI PTY LTD JORLYN INVESTMENTS PTY LTD HAMILTON HAWKES PTY LTD MR CARLOS ALBERTO FERNICOLA & MRS KERRIE ALISON FERNICOLA BT PORTFOLIO SERVICES LIMITED TERRA SEARCH PTY LTD MR JOHN JOSEPH SCHOLL & MRS PATRICIA JOY SCHOLL GOLDFIRE ENTERPRISES PTY LTD MR JOHN JOSEPH SCHOLL & MRS PATRICIA JOY SCHOLL TENBAGGA RESOURCES FUND PTY LTD MR SIMON DAVID BEAMS & MR RICHARD HUTTON LESH & MR DAVID RANDAL JENKINS CAPITAL FINANCIAL ADVISERS PTY LTD BT PORTFOLIO SERVICES LIMITED TRANQUIL PLUS PTY LTD MR SIMON DAVID BEAMS Ordinary Shares Number 49,900,000 38,722,221 37,424,053 33,000,000 32,850,825 26,000,000 24,286,675 20,232,891 19,101,666 17,812,500 16,397,221 16,289,556 16,003,383 15,783,333 15,000,000 14,194,442 13,481,156 12,968,750 12,928,238 12,666,666 Percent 4.31 3.34 3.23 2.85 2.84 2.25 2.10 1.75 1.65 1.54 1.42 1.41 1.38 1.36 1.30 1.23 1.16 1.12 1.12 1.09 Total 445,043,576 38.43 82 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) SHAREHOLDER INFORMATION Unquoted equity securities Unquoted Options Number on issue Number of Holders Unlisted $0.006 options exercisable on or before 31 December 2021 126,885,568 231 Holders of greater than 20% of the unlisted equity securities There are no holders with greater than 20% of the unlisted equity securities of Superior Resources Limited at the date of this report. C. SUBSTANTIAL HOLDERS Substantial holders of the Company’s ordinary securities are set out below. Holder of Relevant Interest Registered Holder MR GEOFFREY JAMES HARRIS (7.15%) YARRAANDOO PTY LTD MR GEOFFREY JAMES HARRIS Ordinary Shares Number 49,900,000 32,850,825 Percent 4.31 2.84 D. VOTING RIGHTS The voting rights attaching to each class of equity securities are set out below: (a) Ordinary shares On a show of hands each member present at a meeting in person or by proxy shall have one vote and on a poll each share shall have one vote. (b) Options No voting rights. l y n o e s u l a n o s r e p r o F 83 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) SHAREHOLDER INFORMATION Tenement Schedule Current interests in tenements held by the Company and its subsidiaries as at 21 October 2020 are set out below. All tenements are located within Queensland. Exploration Permits for Minerals (EPM) are specified for all minerals other than coal. Tenement Name Project Date of Grant Date of Expiry Area Holder SPQ Interest Northwest Queensland EPM156701 EPM182031 Hedleys 2 Hedleys South Nicholson Nicholson 21 Aug 06 29 May 14 20 Aug 21 28 May 24 186 km2 114 km2 EPM19097 EPM19214 EPM25264 EPM26720 Tots Creek Scrubby Creek Tomahawk Creek Victor Extended Victor Victor Victor Victor 27 Nov 14 27 Nov 14 24 Dec 15 30 Aug 18 26 Nov 21 26 Nov 21 23 Dec 20 29 Aug 23 108 km2 90 km2 180 km2 60 km2 Northeast Queensland Cockie Creek Cassidy Creek Dinner Creek EPM18987 EPM19247 EPM25659 EPM25691 Wyandotte EPM26165 Cockie South Twelve Mile Creek EPM26751 Notes: Greenvale Greenvale Greenvale Greenvale Greenvale 25 Sep 13 28 May 13 21 Apr 15 7 Apr 15 30 Jan 17 24 Sep 23 27 May 23 20 Apr 25 6 Apr 25 29 Jan 22 153 km2 48 km2 192 km2 90 km2 108 km2 Greenvale 28 May 19 27 May 24 258 km2 SPQ SPQ SPQ SPQ SPQ SPQ SPQ SPQ SPQ SPQ SPQ SPQ 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 1. Subject to an Earn-in and Joint Venture Agreement between South32 Group Operations Pty Ltd and Superior Resources Limited in respect of EPM15670 and EPM18203 from 28 May 2019 to 4 March 2020. Abbreviations: SPQ EPM Superior Resources Limited Exploration Permit for Minerals 84 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) SHAREHOLDER INFORMATION l y n o e s u l a n o s r e p r o F Mineral Resources Statement Mineral Resources as at 30 June 2020 Project Resource category Cut-off grade Quantity (tonnes) Average grade Notes Steam Engine Gold Deposit Indicated Inferred Total 0.5g/t Au 0.5g/t Au 0.5g/t Au 370,000 900,000 1,270,000 2.5g/t Au 2.2g/t Au 2.3g/t Au 1, 2 1, 2 1, 2 Notes: 1. Steam Engine Gold Deposit lies south of the Gregory Development Road within EPM26165 “Cockie South”, approximately 210km west northwest of Townsville, Queensland, Australia. 2. Competent person – Mineral Resources, Mr Kevin Richter (MAusIMM). Steam Engine Prospect Information in relation to the Steam Engine Gold Deposit Mineral Resource Estimate and related information were originally reported on the ASX Market Announcements Platform on 4 May 2020 (“Steam Engine Gold Mineral Resource Upgraded 11% Scoping Study Planned Amid Record AUD Gold Prices”) and complies with the guidelines of the 2012 JORC Code. The Company confirms that it is not aware of any new information that materially affects the information as originally reported. All material assumptions and technical parameters on which the Mineral Resource Estimate is based, continue to apply and have not materially changed. Information contained in this report that relates to the Steam Engine Gold Deposit Mineral Resource Estimate is based on information compiled by Mr Kevin Richter, an employee of Superior Resources Limited, who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Richter has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Richter consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. Mineral Resource and Ore Reserve Governance The Mineral Resource Estimates as reported, have been generated by a suitably qualified person using industry standard best practice modelling and estimation methods. Unless stated otherwise, Mineral Resources and Ore Reserves are compiled in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) 2012 Edition. The Mineral Resources Statement included in this report has been reviewed by a suitably qualified Competent Person. Reporting of Exploration Results The reporting of some exploration results in this report reflects information that was originally reported in market announcements as referenced in various parts of this report. The Company confirms that it is not aware of any new information or data that materially affects the information included in the relevant original market announcement. 85 SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) SHAREHOLDER INFORMATION Other information contained in this report that relates to exploration results is based on information compiled by Mr Kevin Richter, an employee of Superior Resources Limited, who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Richter has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Richter consents to the inclusion in this report of the matters based on his information in the form and context in which it appears Information contained in this report that relates to Exploration Activities is based on information evaluated by Mr Peter Hwang, an executive director and shareholder of Superior Resources Limited and a Member of the Australian Institute of Geoscientists. Mr Hwang has sufficient experience which is relevant to this style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person under the 2012 edition of the “Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Hwang consents to the inclusion in this report of the matters based on the information in the form and context in which it appears. l y n o e s u l a n o s r e p r o F 86 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) SHAREHOLDER INFORMATION ( THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ) 87 l y n o e s u l a n o s r e p r o F SUPERIOR RESOURCES LIMITED (ABN 72 112 844 407) SHAREHOLDER INFORMATION ( THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ) 88 l y n o e s u l a n o s r e p r o F l y n o e s u l a n o s r e p r o F Telephone: 07 3847 2887 Email: manager@superiorresources.com.au www.superiorresources.com.au 

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