1 ANNUAL REPORT ALLUP SILICA Year Ending 30 June 2023
2 ANNUAL REPORT ALLUP SILICA Year Ending 30 June 2023 HIGHLIGHTS Dune Buggy Silica Sand Project Maiden surface sampling and hand auger program completed. Commercial Ag-lime product produced from CaCO3 stream. Cabbage Spot Silica Sand Project Programme of Works approved for Stage 1 exploration program. Programme of Works approved for Stage 2 exploration program. Heritage Notice submitted with Kimberley Land Council (KLC). New Exploration Projects Two tenements prospective for high-purity silica sand (HPSS) applied for and granted. Permitting and approvals underway for new projects. Sparkler Silica Sand Project Updated circuit design beneficiates silica sand to 99.8% SiO2, and an average of 84ppm Fe2O3 below the “Ultra-Clear” specification of <100ppm Fe2O3. Commencement of studies for MLA. Bulk sample sent for metallurgical testwork and process plant design. Heritage surveys completed across all Sparkler tenements, and subsequent approvals have been duly granted. Pink Bark Silica Sand Project Heritage survey completed across target areas and subsequent approvals have been granted. Maiden drilling program complete. Prospective REE anomalies identified on the tenement. Programme of Works submitted and approved for Stage 2 exploration program. Figure 1. Map of Allup Silica Projects
3 ANNUAL REPORT ALLUP SILICA Year Ending 30 June 2023 PROJECT ACTIVITIES SPARKLER SILICA SAND PROJECT Figure 2. Location of Sparkler Silica Sand Project The Sparkler Silica Sand Project is the Company’s most advanced project with some key milestones having been achieved throughout the year. The project is located on cleared farmland, with the silica sand located at near surface. The Company has focused on establishing strong relationships with local landowners, community and heritage groups and has Land Access and Compensation Agreements in place. The Company was recently granted heritage approval to continue more detailed exploration across all three of the Sparkler tenements. The heritage surveys were conducted together with the South-West Aboriginal Land and Sea Council (SWALSC) and the Wagyl Kaip Southern Noongar Aboriginal Corporation, with approvals granted. Programme of Works (PoW) for all the Sparkler tenements has been approved for drilling and more detailed exploration, which is scheduled for November 2023. SPARKLER
4 ANNUAL REPORT ALLUP SILICA Year Ending 30 June 2023 E70/5447 Sparkler A Metallurgical beneficiation of the Sparkler A sands produced a premium low-iron high-grade silica suitable for the “Ultra-Clear” glass used by the photovoltaic industry. The Company’s processing results show the beneficiated silica sand has an average grade of 99.8% SiO2, and most encouragingly 84ppm FeO2, below the “Ultra-Clear” specification of <100 ppm Fe2O3. In Q2 2023, consultants and leading global sand processing specialist, CDE Global were engaged with a bulk sample sent to their Lab in Northern Ireland for process plant design and scaling metallurgical testwork. Consultants Mining Plus have also been engaged to manage and complete the technical and environmental studies, and to draft the mining proposal and mine closure plans required to support the granting of the Mining Lease. E70/5920 Sparkler C The Company completed its maiden drill program, identifying high purity target areas for a follow-up drill campaign subject to approvals, which have now been granted. From the initial 30 auger samples taken across the target area, 21 holes returned results above the 98% cut-off, with the unprocessed raw sand achieving an average SiO2 grade of 96.6% and an average of 2094ppm Fe2O3. ESPERANCE SANDS EXPLORATION PROJECT Figure 10. Location map for Pink Bark and Dune Buggy Projects ROAD RAIL
5 ANNUAL REPORT ALLUP SILICA Year Ending 30 June 2023 E63/2139 Pink Bark During the year the Company continued its focus on establishing strong relationships with the local landowners, community, and heritage groups. The Company has Land Access and Compensation Agreements with the landowners and has received heritage approval from the Esperance Tjaltjraak Native Title Aboriginal Corporation earlier this year, to proceed with exploration and drilling. Reconnaissance and hand auger drilling was conducted to define the high priority target areas, and thereafter a consequent air-core drilling campaign was completed in Q2 2023; a total of 26 holes drilled for 421m. The results of this drilling have indicated that Pink Bark Project is highly prospective for both silica sand and clay-hosted rare earth element (REE) mineralisation. E63/2137 Dune Buggy During the year the Company completed an auger drilling campaign in Q1 2023 and continued to focus on receiving the necessary approvals, with Consent to Explore and a PoW both approved during the year. The Company also worked with the Esperance Tjaltjraak Native Title Aboriginal Corporation (ETNTAC) who has been engaged to conduct a heritage survey across the Dune Buggy Project. The Company continues to investigate the various processing techniques for this type of silica sand, with the aim of developing two viable product streams, one being high-purity silica with the other being high-grade calcium carbonate for use in agriculture. So far, the Company has been able to demonstrate the production of calcium carbonate, a commercial Ag-lime product with moderate grade silica sand co-product. Further work is required. ARGYLE SILICA EXPLORATION PROJECT Figure 16. Location map Argyle Silica Sand Project The Company is continuing to establish strong relationships with the local community and heritage groups, and is planning a reconnaissance trip in Q4 2023 to liaise with local groups and community leaders prior to commencing activities.
6 ANNUAL REPORT ALLUP SILICA Year Ending 30 June 2023 E80/5524 Cabbage Spot A PoW has been approved for exploration and drilling and a Heritage Impact Notice has been lodged with the Kimberly Land Council (KLC) in accordance with the Native Title Agreement. A reconnaissance and surface sampling campaign are being scheduled for Q4 2023 and drilling is intended once the heritage survey is conducted and these activities are approved. E80/5652 Big Cecil The Exploration Licence E 80/5652 for Big Cecil Silica Sand Project was granted on the 9th of May 2023 and permissions and permitting required to start exploration are underway. A Native Title Agreement is in place, with a Heritage Impact Notice to be submitted for the proposed exploration activities. RAIL HEAD EXPLORATION PROJECT The Rail Head Silica Sands Project is located approximately 90km by rail from Bunbury Port. Rail Head was granted on the 21st of October 2022 and permissions and Heritage Agreements signed. The Company completed a reconnaissance and surface sampling campaign, which confirmed the presence of silica sand. OTHER EXPLORATION PROJECTS During the period the Company applied for four Exploration Licenses which on initial assessment were considered prospective for high purity silica sand, these being Blue Vein, Trigger Fish, Moby and Dune Buggy B (an extension to the Dune Buggy tenement). Following a more detailed assessment both Trigger Fish and Blue Vein were surrendered. The Moby Exploration Licence has been approved with further permitting and approvals currently underway. Dune Buggy B is still in Application and pending approval. Other Tenements Not Granted (Pending) ELA80/5629 Nearby Post No activity ELA63/2138 Pink Bark B No activity ELA63/2264 Dune Buggy B No activity
7 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2023 ABN 47 163 173 224
8 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 CONTENTS Page Directors’ Report…………………………………..…………………………..………………….………...…..9 Directors’ Declaration…………………………………………………………..…………...…………….…..28 Auditor’s Independence Declaration……………………………………………...……………..………..…29 Statement of Profit or Loss and Other Comprehensive income…………………….……………………..30 Statement of Financial Position……………………………..……………………….…….…….….….…….31 Statement of Changes in Equity……………………………………………………………………..............32 Statement of Cash Flows…………………………………………………………………..…………….……33 Notes to and forming part of the Financial Statements……………………………………..………..……..34 Independent Auditor’s Report………………………………………………………………….……….…….60 Additional Information…………………………………………………………………...…..….…...………..66 CORPORATE DIRECTORY Directors Registered Office (John) Campbell Smyth Level 13 Chairman 191 St Georges Terrace Perth WA 6000 Andrew Haythorpe Phone +61 (8) 6185 1744 Managing Director Gavin Ball Non-Executive Director Share Registry Automic Pty Ltd Level 5 191 St Georges Terrace Perth WA 6000 Company Secretary Phone: 1300 288 664 Benjamin Donovan ASX Code APS Auditors ABN SW Audit 47 163 173 224 Level 25 108 St Georges Terrace, Perth WA 6000 Phone: +61 (8) 6184 5980 Website and Email Website:www.allupsilica.com Email: team@allupsilica.com Principal Place of Business Unit A8 435 Roberts Road Subiaco WA 6008 Phone +61 (8) 6185 1744
9 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Your directors present their report on Allup Silica Limited (“the Company”) for the financial year ended 30 June 2023. The information in the preceding operating review forms part of this directors’ report for the financial year ended 30 June 2023 and is to be read in conjunction with the following information: Directors The names of the directors in office at any time during, or since the end of the year are: (John) Campbell Smyth Andrew John Haythorpe Gavin Neil Ball Nicholas Gerard Revell (resigned 7 March 2023) Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Particulars of each director’s experience and qualifications are set out later in this report. Principal Activities The Company conducts mineral exploration and evaluation activities. Operating Results The after-tax loss of the Company for the financial year amounted to $1,645,916 (2022: Loss $891,140). This included a non-cash expense of $57,723 for share-based payments (2022: $344,582). Review of Operations The Company’s commercial strategy is based upon the investigation of several project areas, each with its own set of logistics and port options. Currently, the Company has multiple projects in proximity to four Western Australian ports, being Wyndham in the north of the State, and Bunbury, Albany and Esperance in the south. The main activities during the period relate to seeking the permits and approvals required for the exploration of the Company’s various silica sand projects. During this period the Company has engaged with many project stakeholders, including government, landowners, and Native Title parties. The Company has focused on advancing its Sparkler Silica Sands Project, with ongoing exploration and updating of its JORC Minerals Resource Estimations. It also sought the approvals required for further exploration of areas at nearby Sparkler B and Sparkler C.
10 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Review of Operations (continued) The Company conducted further work including chemical analysis and metallurgical studies to assess the potential value of the silica sand on its tenements. This included investigations on novel and/or nonchemical (no acids) processing techniques for the silica sand, with the objective of finding the best commercial pathway to process the raw silica sand to higher purity marketable specifications. Highlights during the Period include: Sparkler Silica Sand Project Metallurgical testwork produced premium high-grade low-iron silica sand. Commencement of studies for MLA. Bulk Sample sent for scaling Metallurgical testwork and Process Plant design. Heritage surveys completed across all Sparkler tenements. Heritage Approval for current Provision-of-Works issued across all Sparkler tenements. Pink Bark Silica Sand Project Heritage Approval issued for current Provision-of-Works. Maiden drilling program complete. Identified prospective REE on the tenement. Heritage survey completed across prospective areas. Provision-of-Works submitted and approved for Stage 2 exploration program. Dune Buggy Silica Sand Project Maiden surface sampling and hand auger program completed. Commercial Ag-lime product produced from the CaCO3 stream with moderate grades achieved on silica sand stream. Various mineralogical testwork and research and development programs are ongoing to investigate potential processing techniques for this type of sand. Cabbage Spot Silica Sand Project Provision-of-Works approved for Stage 1 exploration program. Provision-of-Works approved for Stage 2 exploration program. Heritage Notice submitted to the Kimberley Land Council (KLC).
11 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Review of Operations (continued) As at the date of this report, the Company holds the following tenements: Tenement Project Ownership GRANTED EXPLORATION LICENCE E 70/5447 Sparkler A 100% E 70/5527 Sparkler B 100% E 70/5920 Sparkler C 100% E 80/5524 Cabbage Spot 100% E 63/2137 Dune Buggy A 100% E 63/2139 Pink Bark A 100% E 70/6208 Rail Head 100% E 70/6476 Moby 100% E 80/5652 Big Cecil 100% NOT GRANTED APPLICATION ELA 80/5629 Nearby Post 100% ELA 63/2138 Pink Bark B 100% ELA 63/2264 Dune Buggy B 100% Financial Position The net assets of the Company have decreased by $1,588,184 from $5,732,827 at 30 June 2022 to $4,144,643 at 30 June 2023. This decrease is, in the main, due to funds raised of $5,169,691 (after costs) from the issue of advisor options and ordinary shares, in a pre-IPO raising and the IPO raising, preceding the admission of the Company to the ASX on 28th April 2022. The Company’s working capital, being current assets less current liabilities, has decreased from $5,120,705 in 2022 to $3,130,603 in 2023. During the past three financial years, the Company has invested in strategic tenements, that the Company believes could be prospective for high quality silica sand. In particular, the Company strategy is to achieve more risk mitigation by having multiple projects in different locations, each close by road or rail to ports and infrastructure. The directors believe the Company is in a strong and stable financial position to expand and grow its current exploration activities, metallurgical, chemical and research evaluation, and commence the permitting requirements needed for future commercialisation of its projects.
12 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Significant Changes in the State of Affairs There were no significant changes in the state of affairs of the Company that occurred during the financial year. Events Subsequent to the End of the Reporting Period No matters or circumstances have arisen since the end of the financial year that significantly affect, or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years. Likely Developments and Expected Results of Operations The Company intends to continue mineral exploration activities while considering new project applications, acquisitions and joint venture opportunities. Dividends No dividends were declared or recommended but not paid, during the financial year. Environmental Regulations The Company is required to carry out its activities in accordance with the Mining Laws and Regulations in the areas in which it undertakes its exploration activities. The Company is not aware of any matter which requires disclosure with respect to any significant environmental regulation in respect of its operating activities.
13 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Share Options and Performance Rights The following options over issued shares or interests in the Company were granted during the financial year: ■ On 29 November 2022, the Company has issued 3,000,000 performance rights in accordance with the ASX announcement. These performance rights were issued to key members of the Company, including 1,000,000 to Campbell Smyth, a Non-Executive Director of the Company. Refer to Note 14 for details. At the date of this Report, there were 5,000,000 options to acquire fully paid ordinary shares outstanding, exercisable at $0.25 per share and expiring on 2 November 2025 and 3,000,000 performance rights issued on 29 November 2022 and expiring on 29 November 2027. No shares were issued during or since the end of the year as a result of the exercise of an option over unissued shares or interests. Indemnifying Officers and Auditors The Company has indemnified the directors and executives of the Company for costs incurred in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial period, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not indemnified or agreed to indemnify the auditor of the Company against a liability incurred as the auditor. Proceedings on Behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the Company or 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 any part of those proceedings. The Company was not a party to any such proceedings during the year ended 30 June 2023.
14 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Information on Directors (John) Campbell Smyth - B.Comm (WA); SFA Aff (UK) Campbell’s professional career has been in the provision of advice to fund management, capital markets and the corporate finance sector. This experience has been with most major markets, primarily the ASX, and listed and unlisted companies in North America and Europe. Campbell was appointed as Non-Executive Chairman on 15 March 2023. Andrew Haythorpe - BSc (Hons); FAUSIMM; MAICD Andrew has been an exploration geologist, global energy and resources analyst, a fund manager and more recently has gained over 20 years’ experience in managing listed companies in Australia and abroad. He has held a number of Chair and Board positions, as well as serving as CEO of several successful listed resources companies and is currently a Non-Executive Director of ASX listed Tempest Minerals Limited. Andrew ceased as Executive Chairman on 15 March 2023 and continues as Managing Director. Gavin Ball Gavin has over 25 years commercial experience and intellectual expertise in the start-up, development, growth and ongoing management of business. Working in numerous executive roles, Gavin has a proven management, financial and accounting skill set with strong commercial and marketing focus. Gavin changed from Executive Director to Non-Executive Director on 7 March 2023. Nicholas (Nick) Revell – B.Applied Sc (Geology) (resigned 7 March 2023) Nick has over 30 years’ experience in mining and exploration. He has held several senior positions in mining, exploration geology and property evaluation, working for ASX and TSX mining companies as Director, Exploration Manager and Mine Geologist across a range of minerals. Directorship of Other Listed Companies Directorships of other listed companies held by Directors in the three years immediately before the end of the year are as follows: Director Name Company Period of Directorship Andrew Haythorpe Tempest Minerals Limited Accelerate Resources Limited 11 October 2019 to present 15 August 2017 to 3 July 2020 Gavin Ball RLF AgTech Ltd 4 October 2017 to present Nick Revell (resigned 7 March 2023) Kingsland Minerals Limited 12 February 2021 to present (John) Campbell Smyth Norseman Silver (TSXV) Nubian Resources (TSXV) Orange Minerals Limited Amani Gold Limited (suspended) Macro Metals Limited 11 October 2017 to present 18 November 2019 to present 6 December 2021 to present 7June 2021 to present 15 August 2022 to present
15 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Directors’ Share and Option Holdings At the date of this report, the direct and indirect interest of the Directors in the shares and options of the Company were: Director Ordinary Shares Options (unlisted) Performance Rights (unlisted) Andrew Haythorpe (i) 11,599,820 Nil Nil Gavin Ball (ii) 12,243,749 Nil Nil (John) Campbell Smyth (iii) 3,614,219 Nil 1,000,000 (i) Andrew Haythorpe holds 11,500,000 shares in the name of Tesha Pty Ltd <Nimrod Trust A/C> in which he is a director and beneficiary and 99,820 shares in Ouro Pty Ltd in which he is a director and shareholder. (ii) Gavin Ball holds all his shares in the name of Vorian Investment (Holdings) Pty Ltd <Vorian Investment Trust A/C> in which he is a director and beneficiary. (iii) Campbell Smyth holds 3,614,219 shares jointly with Ann Novello Hogarth <Smyth Super Fund A/C> in which he is a member and 1,000,000 performance rights in the name of Cornerstone Advisors Pty Ltd, a company in which he is a Director and beneficial shareholder. Company Secretary Benjamin Donovan – B.Comm (Hons); ACG (CS) Ben is the principal of Argus Corporate Partners Pty Ltd, which provides corporate advisory, IPO and consultancy services to a number of companies. Ben is also an associate member of the Governance Institute of Australia. He is currently Company Secretary for several ASX listed and public unlisted companies, with his experiences ranging across the resources, agritech, biotech, media and technology industries. Ben has extensive experience in listing rules compliance and corporate governance, and in addition in capital markets by raising capital and assisting companies achieve an initial listing on the ASX. Directors' Meetings During the financial year, 7 meetings of directors were held. Attendances by each director during the year were as follows: Directors Eligible to Attend Attended Andrew John Haythorpe 7 7 Gavin Ball 7 7 Nick Revell 5 4 (John) Campbell Smyth 7 7 In addition, there were 7 circular resolutions passed by the Board of Directors during the year. As at the date of this report an Audit Committee of the Board of Directors did not exist due to the Directors of the Board having a close involvement in the operations of the Company. There are no other sub-committees of the Board of Directors.
16 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Business Risks Risk Description Mitigation Exploration and Development Risks Mineral exploration, development and mining are high-risk enterprises, only occasionally providing high rewards. In addition to the normal competition for prospective ground, and the high average costs of discovery of an economic deposit, factors such as demand for commodities, stock market fluctuations affecting access to new capital, sovereign risk, environmental issues, labour disruption, project financing difficulties, foreign currency fluctuations and technical problems all affect the ability of a company to profit from any discovery. There is no assurance that exploration of the Company’s mineral interests, or any other projects that may be acquired by the Company in the future, will result in the discovery of an economically viable mineral deposit. Even if an apparently viable mineral deposit is identified, there is no guarantee that it can be profitably exploited. As the Company undertakes exploration and evaluation of its tenements, given the information and data available, it makes continuous assessment to allocate available funds and other resources to activities that potentially may deliver the best prospect of a commercially viable resource, given mineral exploration, development and mining are high-risk enterprises, only occasionally providing high rewards. Land access and compensation There is a substantial level of regulation and restriction on the ability of exploration and mining companies to gain access to land in Australia. Negotiations with both Native Title parties and landowners/occupiers are generally required before the Company can access land for exploration or mining activities. Investors should be aware that any delay in obtaining agreement in respect of compensation due to landholders whose land comprises the Tenements may adversely impact or delay the Company’s ability to carry out exploration or mining activities on its Tenements. A number of the Tenements for its Projects overlay private land and Crown nature reserves both of which require consent prior to access and the conduct of exploration activities on the areas affected. Should such consents not be forthcoming or be withdrawn this may have a materially adverse impact or delay to the Company’s exploration Activities. The Company actively manages compliance with the regulations and laws regarding land access and compensation. In support of the negotiations with stakeholders, the Company engages suitably specialist contractors to liaise and negotiate with relevant stakeholders of its tenements, including Native Title bodies, private landowners and Government Departments and other suitably specialist contractors to ensure it meets all its access and compensation obligations. Operational risk The operations of the Company may be affected by various factors including failure to locate or identify mineral deposits, failure to achieve predicted grades in exploration or mining, operational and technical difficulties encountered in mining, difficulties in commissioning and operating plant and equipment, mechanical failure or plant breakdown, unanticipated metallurgical problems which may affect extraction costs, adverse weather conditions, industrial and environmental accidents, industrial disputes and unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment, fire, explosions and other incidents beyond the control of the Company. The Company engages appropriately qualified and skilled employees and third-party contractors to assist in all aspects of the Company's operations.
17 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 Risk Description Mitigation Tenement title Interests in tenements in Western Australia are governed by legislation and are evidenced by the granting of licences. Each licence is granted for a specific term and carries with it annual expenditure and reporting commitments, as well as other conditions requiring compliance. Consequently, the Company could lose title to, or its interest in, the Tenement if licence conditions are not met or if insufficient funds are available to meet expenditure commitments as and when they arise. If a tenement is not renewed or granted an exemption from expenditure, the Company may suffer damage through loss of opportunity to develop and discover minerals on that tenement. The Company monitors the status of its tenements to ensure it meets its statutory and contractual obligations and uses a third party tenement mining services management organisation to assist in this process. Environmental risks Exploration and mining is an industry that has become subject to increasing environmental responsibility and liability. The potential for liability is an ever present risk. The operations and proposed activities of the Company are subject to regulations concerning the environment. The Government and other authorities that administer and enforce environmental laws determine these requirements. As with all exploration projects and mining operations, the Company’s activities are expected to have an impact on the environment, particularly if mine development proceeds. The Company intends to conduct its activities in an environmentally responsible manner and in accordance with applicable laws. There can be no assurances that new environmental laws, regulations or stricter enforcement policies, once implemented, will not oblige the Company to incur significant expenses and undertake significant investments in such respect which could have a material adverse effect on the Company's business, financial condition and results of operations. The Company engages third party environmental consultants and specialists to undertake, monitor and report on all environmental matters as required on Company tenements. Resource and reserve estimates Resource and reserve estimates are expressions of judgement which are based on the knowledge and experience of the person in making them. Resource and reserve estimates are valid and current when they are completed but are subject to change, sometimes materially, when updated data and other information becomes known or available through subsequent activities, such as drilling, sampling and analysis. Resource and reserve estimates can be imprecise because they can rely on interpretations that may change or prove to be flawed or inaccurate and based on current information. The Company could be required to modify resource or reserve estimates and as a consequence, the Company may be required to adjust its plans and that these adjustments may adversely affect the Company. The Company uses appropriately qualified Consulting Geologists (with a Competent Person designation) supported by other technical consultants such as assay, metallurgical and geophysical contractors to assist in estimations of resource and reserves.
18 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 Risk Description Mitigation Weather conditions Weather conditions may result in having an effect on the Company’s operations, including failures in not having sufficient stockpiles for the production process which could result in the Company not being unable to satisfy customer requirements during these periods and other costs the Company may occur in this event that this could have a material adverse effect on the Company's business and financial conditions. The Company holds tenements in climatically different locations of Western Australia, in such that weather related access or other restrictions to activities are typically limited to a specific location rather than all locations. The Company plans its exploration and onsite activities to factor in weather related access or other restrictions such as the wet season in the North West and winter rains in the South and South West locations to ensure less impacts and more optimal utilisation of resources. Uncertainty of future revenue and profitability The Company's long term viability is contingent on, amongst other things, the Company's ability to discover and develop a commercially viable resource to deliver revenues to cover the Company's ongoing indirect costs. The Company makes assessments of its operating activities with the intention to deliver the best currently available prospect of achieving a future commercially viable resource and ultimately to deliver revenues and profitability to the Company, given mineral exploration, development and mining are highrisk enterprises, only occasionally does this result in providing high rewards. Sufficiency of funding and additional requirements for capital The Company is currently at an exploration and evaluation stage of its development and is reliant on funding raised in the equity markets to fund that expenditure. There is a risk that future equity funding may not be available to the Company at the level necessary to enable the Company to continue to meet its expenditure obligations on its tenements. As the Company undertakes exploration and evaluation of its tenements it makes continuous assessment to allocate available funds and resources to its activities. Other Risks The Company is exposed to other risks from time to time in the normal course of its operations. These risks may include but are not limited to: Silica and Commodity Prices, Native Title, Aboriginal Heritage, Dependence on Key Personnel and Ability to Recruit Additional Personnel, Agents and Contractors, Royalties, Climate Change and Regulation, Future Capital Needs, New Projects and Acquisitions, Granting of Licences and Permits, Metallurgy, Changes to Demand or Production or Technology or Alternative Products, Change in Purchases by Buyers, Credit Risk of Export Customers, Increasing Logistics Costs for Transport , Port and Shipping, Maintaining Quality Control at the Mining and Processing Operation, Interruptions or Failures in Technology, Shortage of Labour or Labour Disputes, Changes in Laws and Regulations and other General Risks, including items such as, COVID-19 and other Pandemic Risks, Economic Risks, Securities Investments, Share Market Conditions, Liquidity, Changes in Government Policy and Legislation, Litigation, Taxation and others. As the Company undertakes the normal course of its business operations, it is, where best possible, aware of the potential for exposure to other risks from time to time and where possible the actions that might be available to help mitigate these risks.
19 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) REMUNERATION POLICY The Company's Remuneration Policy is as follows. 1.1 Non-Executive Director Remuneration Non-Executive Directors are normally remunerated by way of fees, in the form of cash, non-cash benefits, superannuation contributions or salary sacrifice into equity and do not normally participate in schemes designed for the remuneration of executives. Shareholder approval must be obtained in relation to the overall limit set for non-executive Directors’ fees. The maximum aggregate remuneration approved by shareholders for Non-Executive Directors is $500,000 per annum. The Directors set the individual Non-Executive Directors fees within the limit approved by shareholders. Non-Executive Directors are not provided with retirement benefits. 1.2 Executive Remuneration The Company’s remuneration policy is designed to promote superior performance and long term commitment to the Company. Executives and employees receive a base remuneration which is market related and may be entitled to performance-based remuneration which is determined on an annual basis. The Company’s financial performance for the period from commencement of operations has been as follows: June June June 2023 2022 2021 (unlisted) $ $ $ Revenue 93,734 1,308 - Net loss after tax (1,645,916) (891,140) (180,488) Basic and diluted loss per share (cents per share) (1.9476) (1.5104) (1.3462) Net assets 4,144,643 5,732,827 1,003,694 Share price (at balance date) $0.063 $0.084 - As the Company is currently in exploration and evaluation phases, historical earnings are not yet an accurate reflection of Company performance and cannot be used as a long-term incentive measure. Consideration of the Company’s earnings will be more relevant as the Company matures. Overall remuneration policies are subject to the discretion of the Board and can be changed to reflect competitive and business conditions where it is in the interests of the Company and shareholders to do so. Executive remuneration and other terms of employment are reviewed annually by the Board having regard to the performance, relevant comparative information and expert advice.
20 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT The Board’s remuneration policy reflects its obligation to align executive remuneration with shareholder interests and to retain appropriately qualified executive talent for the benefit of the Company. The main principles of the policy are: (a) remuneration reflects the competitive market in which the Company operates; (b) individual remuneration should be linked to performance criteria if appropriate; and (c) executives should be rewarded for both financial and non-financial performance. The total remuneration of executives consists of the following: (a) salary – executives receive a fixed sum payable monthly in cash; (b) cash at risk component – the executives are eligible to participate in a cash bonus plan if deemed appropriate; (c) share and option at risk component – executives may participate in share, performance rights and option schemes generally made in accordance with thresholds set in plans approved by shareholders if deemed appropriate. However, the Board considers it appropriate to retain flexibility to issue shares, performance rights and options to executives outside of approved schemes in exceptional circumstances; and (d) other benefits – executives may, if deemed appropriate by the Board, be provided with a fully expensed mobile phone and other forms of remuneration. The following were Key Management Personnel of the Company during the year: (John) Campbell Smyth (Non-Executive Director / Non-Executive Chairman from 15 March 2023) Andrew Haythorpe (Managing Director / Executive Chairman to 15 March 2023) Gavin Ball (Executive Director to 7 March 2023 / Non-Executive Director from 7 March 2023) Nicholas (Nick) Revell (Executive Director) (resigned 7 March 2023) Mark Lester (Chief Financial Officer) Key Terms of Agreements with Directors, Key Management or Related Parties Andrew Haythorpe – Managing Director - Services Agreement The Company and a related entity to Andrew Haythorpe have entered into an executive services agreement for his role as Executive Chairperson. This agreement commenced upon successful listing on the Official List of the ASX. The principal terms of the agreement are as follows: (a) A base salary of $120,000 per annum (exclusive of GST). Base salary was increased $156,000 (exclusive of GST) on 7 March 2023. (b) The agreement may be terminated: (i) by either party without cause with 6 months' written notice, or in the case of the Company, immediately with payment in lieu of notice; (ii) by the Company with 6 month’s notice, or immediately with payment in lieu of notice if the executive is unable to perform his duties under the agreement for three consecutive months or a period aggregating to three months in a 12 month period; (iii) by either party with 6 months' written notice if the executive's role becomes redundant. If the Company terminates the employment of the executive within 12 months of a Change of Control it will be deemed to be a termination by reason of redundancy. If the Company terminates for reason of redundancy it shall be obliged to pay the executive for any notice period worked. In addition, it will be required to pay any redundancy amount payable under applicable laws, an amount equal to 6 months' base salary (less tax) and any accumulated entitlements;
21 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT (iv) by the Company, at any time with written notice and without payment (other than entitlements accrued to the date of termination) as a result of any occurrence which gives the Company a right of summary dismissal at common law; and (v) by the executive immediately, by giving notice, if the Company is in breach of a material term of its agreement with him. The agreement otherwise contains industry-standard provisions for a senior executive of a public company that is seeking a listing on the Official List of the ASX. Nick Revell – Executive Director - Services Agreement (resigned 7 March 2023) The Company and a related entity to Nicholas Revell have entered into an executive services agreement for his role as Executive Director. This agreement commenced upon successful listing on the Official List of the ASX. The principal terms of the agreement are as follows: (a) A base salary of $120,000 per annum (exclusive of GST). (b) The agreement may be terminated: (i) by either party without cause with 6 months' written notice, or in the case of the Company, immediately with payment in lieu of notice; (ii) by the Company with 6 month’s notice, or immediately with payment in lieu of notice if the executive is unable to perform his duties under the agreement for three consecutive months or a period aggregating to three months in a 12 month period; (iii) by either party with 6 months' written notice if the executive's role becomes redundant. If the Company terminates the employment of the executive within 12 months of a Change of Control it will be deemed to be a termination by reason of redundancy. If the Company terminates for reason of redundancy it shall be obliged to pay the executive for any notice period worked. In addition, it will be required to pay any redundancy amount payable under applicable laws, an amount equal to 6 months' base salary (less tax) and any accumulated entitlements; (iv) by the Company, at any time with written notice and without payment (other than entitlements accrued to the date of termination) as a result of any occurrence which gives the Company a right of summary dismissal at common law; and (v) by the executive immediately, by giving notice, if the Company is in breach of a material term of its agreement with him. Gavin Ball – Executive Director/Non-Executive Director - Services Agreement The Company and a related entity to Gavin Ball have entered into an executive services agreement for his role as Executive Director. Gavin ceased to be an Executive Director on 7 March 2023 and was a Non-Executive Director from 7 March 2023. This agreement commenced upon successful listing on the Official List of the ASX. The principal terms of the agreement are as follows: (a) A base salary of $120,000 per annum (exclusive of GST). The base salary was reduced to $60,000 per annum (exclusive of GST) on 7 March 2023, with the change from Executive to Non-Executive Director. (b) The agreement may be terminated: (i) by either party without cause with 6 months' written notice, or in the case of the Company, immediately with payment in lieu of notice; (ii) by the Company with 6 month’s notice, or immediately with payment in lieu of notice if the executive is unable to perform his duties under the agreement for three consecutive months or a period aggregating to three months in a 12 month period;
22 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT (iii) by either party with 6 months' written notice if the executive's role becomes redundant. If the Company terminates the employment of the executive within 12 months of a Change of Control it will be deemed to be a termination by reason of redundancy. If the Company terminates for reason of redundancy it shall be obliged to pay the executive for any notice period worked. In addition, it will be required to pay any redundancy amount payable under applicable laws, an amount equal to 6 months' base salary (less tax) and any accumulated entitlements; (iv) by the Company, at any time with written notice and without payment (other than entitlements accrued to the date of termination) as a result of any occurrence which gives the Company a right of summary dismissal at common law; and (v) by the executive immediately, by giving notice, if the Company is in breach of a material term of its agreement with him. Campbell Smyth – Non-Executive Director – Services Agreement The Company has entered into an agreement with Campbell Smyth in respect of his appointment as a Non-Executive Director of the Company. Campbell Smyth will be paid a fee of $60,000 per annum (exclusive of statutory superannuation) for his services as Non-Executive Director and is also entitled to be reimbursed for all reasonable expenses incurred in performing his duties. The appointment of Campbell Smyth as a Non-Executive Director is otherwise on terms that are customary for an appointment of this nature. Mark Lester – Chief Financial Officer – Employment Agreement The Company has entered into an employment agreement with Mark Lester in respect of his appointment as Chief Financial Officer, with remuneration of $84,000 plus statutory superannuation, per annum. The employment agreement is ongoing and is on terms that are customary for an appointment of this nature. The agreement may be terminated by either party with four weeks’ written notice. Any termination payments will be as required by the relevant applicable employment law.
23 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Details of remuneration provided to Key Management personnel during the year are as follows: Short-term employee benefits Postemployment benefits Sharebased payments Salary & service fees Bonus Superannuation Options/ Rights Total % of total consisting of Options $ $ $ $ $ Andrew Haythorpe 2023 131,323 - - - 131,323 0% 2022 20,000 - - 36,232 56,232 64% Gavin Ball 2023 101,129 - - - 101,129 0% 2022 20,000 - - - 20,000 0% Nicholas (Nick) Revell (i) 2023 82,258 - - - 82,258 0% (resigned 7 March 2023) 2022 51,377 - - - 51,377 0% (John) Campbell Smyth 2023 60,000 - - 18,263 78,263 23% 2022 10,000 - - 154,175 164,175 94% Peter Secker 2023 - - - - - - (resigned 8 December 2021) 2022 - - - 154,175 154,175 100% Mark Lester 2023 84,000 - 8,820 - 92,820 0% 2022 13,846 - 1,389 - 15,235 0% Total 2023 458,710 8,820 18,263 485,793 4% 2022 115,223 - 1,389 344,582 461,194 75% (i) Amounts paid to Nicholas (Nick) Revell include consulting fees of $Nil (2022 $31,377) paid to a related party, during the period up to his resignation on 7 March 2023. There are no contracts to which a Director is a party or under which the Director is entitled to a benefit other than as disclosed in the financial report.
24 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Value of Options issued to Key Management Personnel: During the financial year, the following share based payment arrangements were in existence for Key Management Personnel: Options Grant Date Expiry Date Grant Date Fair Value Vesting Date Performance rights issued to Non-Executive Director (John) Campbell Smyth 29/11/2022 29/11/2027 $77,333 29/11/2025 There were 1,000,000 performance rights issued to Key Management Personnel during the year. The Board reviews the remuneration packages of all key management personnel on an annual basis. The maximum remuneration of non-executive Directors is to be determined by Shareholders at a general meeting in accordance with the Constitution, the Corporations Act and the ASX Listing Rules, as applicable. At present the maximum aggregate remuneration of non-executive Directors is $500,000 per annum. The apportionment of non-executive Directors' remuneration within that maximum will be made by the Board having regard to the inputs and value to the Company of the respective contributions by each Director. Remuneration is not linked to a specific service or performance criteria. Remuneration levels, shares and options granted are not dependent upon any performance criteria as the nature of the Company's operations are exploration, and they are not generating profits. The Company did not use a remuneration consultant during the year or prior year.
25 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Key Management Personnel Equity Holdings Fully Paid Ordinary Shares issued by the Company The movement during the year in numbers of ordinary shares in the Company held directly, indirectly or beneficially, by each key management person is as follows: Key Management Personnel Opening balance 1 July 2022 Granted as compensation Received on exercise of options Other movements during the year Closing balance 30 June 2023 Andrew Haythorpe (i) 11,500,000 - - 99,820 11,599,820 Gavin Ball (ii) 12,243,749 - - - 12,243,749 Nick Revell (iii) (resigned 7 March 2023) 11,585,000 - - (211,000) 11,374,000 (John) Campbell Smyth (iv) 3,464,219 - - 150,000 3,614,219 Mark Lester (v) 3,625,000 - - 40,465 3,665,465 (i) Andrew Haythorpe holds 11,500,000 shares in the name of Tesha Pty Ltd <Nimrod Trust A/C> in which he is a director and beneficiary and 99,820 shares in the name of Ouro Pty Ltd, a Company in which he is a Director and beneficial shareholder. (ii) Gavin Ball holds all his shares in the name of Vorian Investment (Holdings) Pty Ltd <Vorian Investment Trust A/C> in which he is a director and beneficiary (iii) Nick Revell holds 11,364,000 shares in the name of Spurs Geological Services Pty Ltd in which he is a director and shareholder and 10,000 shares in Lejns Pty Ltd <The Revell Family A/C> in which he is a director and beneficiary. (iv) Campbell Smyth holds all his shares jointly with Ann Novello Hogarth <Smyth Super Fund A/C> in which he is a member. (v) Mark Lester holds all his shares in the name of MAL Super Fund Pty Ltd <MAL Superannuation Fund A/C> in which he is a director of the trustee company and a member of the Fund. Executive Unlisted Share Options and Performance Rights issued by the Company The movement during the year in numbers of unlisted options over ordinary shares in the Company held directly, indirectly or beneficially, by each key management person is as follows: Director Opening balance 1 July 2022 Granted as compensation Exercised or expired Balance vested at 30 June 2023 Vested but not exercisable Vested and exercisable at 30 June 2023 Andrew Haythorpe - - - - - - Gavin Ball - - - - - - Nick Revell - - - - - - (John) Campbell Smyth - 1,000,000 - - - - Mark Lester - - - - - - There have been no other transactions involving equity instruments apart from those described in the tables above relating to options, rights and shareholding.
26 FINANCIAL REPORT ALLUP SILICA Year Ending 30 June 2023 ALLUP SILICA LIMITED DIRECTORS’ REPORT Other Transactions with KMP and/or their Related Parties Service Arrangement with Magicorp Pty Ltd Gavin Ball has a controlling interest in Magicorp Pty Ltd which provides consumables, equipment, and other digital services to the Company, including website and domain services and other services on an as required basis. The Company is charged Magicorp’s standard fees which amounted to $2,449 (excl. GST) for the year ended 30 June 2023 (2022: $3,835). Fees charged by Magicorp are the recovery of the cost of the services provided plus a commercial margin. These services are not contracted under an agreement because they are only required on an as needed basis. There were no other transactions conducted between the Company and key management personnel or their related parties, apart from those disclosed above relating to equity and compensation, that were conducted other than in accordance with normal employee, customer or supplier relationships on terms no more favourable than those reasonably expected under arm’s length dealings with unrelated persons. END OF REMUNERATION REPORT
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