Annual 2022 Report
1 Chairman’s Address 2 Chief Executive Officer’s Letter 4 Operating and Financial Review 4 Health, Safety, Environment and Social Engagement 12 Mt Carbine Operations 22 Exploration Activities 27 Tungsten Market Outlook and Concentrate Production 29 Corporate Activities 33 Tenement Schedule 34 Mineral Resources and Ore Reserves Statement 39 Directors’ Report 50 Consolidated Statement of Profit or Loss and Other Comprehensive Income 51 Consolidated Statement of Financial Position 52 Consolidated Statement of Cash Flows 53 Consolidated Statement of Changes in Equity 54 Notes to the Consolidated Financial Statements 82 Directors’ Declaration 83 Auditor’s Independence Declaration 84 Independent Auditor’s Report 88 Shareholder Information 92 Forward Looking Statements Directors Oliver Kleinhempel Non-executive Director Non-executive Chairman Stephen Layton Non-executive Director Richard Morrow Non-executive Director Zhui Pei Yeo Non-executive Director Company Secretaries Melanie Leydin Patricia Vanni de Oliveira Registered Office Level 4, 100 Albert Road South Melbourne VIC 3205 T +61 (0)7 4094 3072 W www.eqresources.com.au E info@eqresources.com.au Principal Place of Business 6888 Mulligan Highway Mount Carbine QLD 4871 Share Register Automic Pty Ltd Level 5 126 Philip Street Sydney NSW 2000 T (International): +61 (0)2 9698 5414 Auditors Nexia Melbourne Audit Pty Ltd Level 12, 31 Queen Street Melbourne VIC 3000 T +61 (0)3 8613 8888 F +61 (0)3 8613 8800 Stock Exchange Listing Listed on the Australian Securities Exchange (ASX) ASX Code: EQR ACN: 115 009 106 ABN: 77 115 009 106 Corporate Directory Contents
Chairman’s Address EQR has progressed towards being a responsible and industryrecognised producer of tungsten – a critical metal for industrialised nations and with emerging importance in the New Economy. Dear Fellow Shareholders Welcome to the 2022 Annual Report for EQ Resources Limited (EQR or Company). The past 12 months have been defined by continuous progress, primarily on the ground at mighty Mt Carbine, seeing production ramping up and exploration efforts delivering promising results. Secondly as an organisation overall, our Leadership Team has established a strong operational and administration support crew. The Company has further progressed towards being a responsible and industry-recognised producer of tungsten – a critical metal for industrialised nations and with emerging importance in the New Energy Economy. In this year’s address I would like to recognise three important factors for the Company’s recent and upcoming successes. The 3P’s if you like – People, Partners & Potential: OUR PEOPLE The Leadership Teamhas structured and trained a team of hard-working employees coming from the region around Mt Carbine, Queenslanders who understand and have experienced the positive impact the project has had in their communities. Success builds upon people and their individual efforts. We have a resilient organisation which adapted throughout difficult COVID-19 times. We are now proudly looking at a team that ensures a 24/7 operation. We have an advanced health, safety and training system in place, accepted by all employees as a basis for their wellbeing at site. We have recruited a large number of female colleagues who provide diversity around our workplaces. We simply have one of the best teams out there of which we can all be proud, while the workforce can also be proud of the work they do together and the progress they have made breathing new life into Mt Carbine. OUR PARTNERS Our operations would not function without the additional support from a wide range of partners who believe in the potential of the Mt Carbine operations and the Company’s long-term strategy. The Leadership Team continuously engages with regional communities, regional contractors and suppliers and other important stakeholders of the ecosystem around Oliver Kleinhempel Non-Executive Chairman Mt Carbine. We receive positive feedback about our open engagement and transparency. Final product offtakers from Mt Carbine are frequently visiting site to stay engaged with our team, recognising the progress and offering support for the expansion plans. Together with our partners we have grown into a more technology-driven operation, highlighted by our successful XRT Sorting operation and recent developments with Plotlogic a partner which provides sophisticated technology to precisely understand the location and material properties of every rock in our mine, in real-time. Last but not least, the Company has received continuous support from State and Federal Governments and their agencies – our work has been recognised by providing the Company with three grants in the short time that the Company has been in development. OUR POTENTIAL Technology leadership enables the Company to maximise resource recovery at Mt Carbine and any future project the team engages with. As shown with the recent Reserve update, the success around XRT Sorting enabled the Company to extend the open pit mine life – withmore to come! The Company’s approach towards a sustainable mining operation has resulted in and continues to generate significant co-contributions from the sale of quarry products. Recent drilling offers additional potential to extend the open pit even further. The West Extension exploration work will be a main focus for the months to come, with the Geology Team already having identified new drill targets. We have no doubt that our teams are delivering on the Company’s Value Proposition, providing long-lasting positive impact for our communities, the industry overall and for all of us as shareholders! We invite you to continue to support us in our journey to realise the full potential of EQ Resources. EQ Resources Limited Annual Report 2022 1
Chief Executive Officer’s Letter Dear Shareholders Since the release of last year’s Annual Report, EQR’s Mt Carbine team have been working tirelessly to execute the Bankable Feasibility Study (“BFS”), define additional resource, drive operational growth and execute the Early Works capital expansion. In this regard, the EQR Team, with the support of its employees, shareholders, and contracting partners have been able to achieve all of the above, delivering on the goals for the year and in doing so, giving confidence to the market on EQR’s ability to deliver a world class tungsten operation which has so often been seen as a significant challenge for companies in Western economies. Some of my key highlights for the year are set out below: 1. We have successfully redefined the Mt Carbine Tungsten Resource resulting in the design of a new open pit that currently allows at least 4-years of open pit mining along with 10 years of Low Grade Stockpile (“LGS”) mining. In this same regard, hole 26 from the Company’s latest drilling sees the ore body extending strongly to the west and at depth. This is very exciting, as we look toward the coming year and planning a drill campaign with the intention of converting additional resource in the Western Extension into Reserves and to better understand the extent of the ore body through the Western Extension as it appears to have the potential to extend the open pit life of mine. Lastly, in regard to the mining, EQR was able to complete a Scoping Study on the Underground Resource at Mt Carbine which gives the team additional confidence to drill out and convert the study to pre-feasibility in the near future. 2. The completion of the BFS has shown the strong fundamentals of the Mt Carbine Tungsten Project and set the foundation for further resource definition, expansion, and positive project economics. In the coming months, the Company is targeting the republication of an updated BFS showing the economics of the new Open Pit from the recent Reserve Upgrade. 3. Since the completion of the BFS, we have been able to upgrade, acquire and install several key pieces of equipment at the Mt Carbine operations that have proven their positive economic impact. The exact upgrades are discussed in detail within the Mt Carbine Expansion section of the Report, however, the past year has seen a second XRT Sorter purchased and commissioned, the crushing and screening capacity increased through the Early Works capital expansion, along with the upgrade of the overhead power lines. Several of these upgrades were part of the BFS capital requirements and therefore reduce future spend requirements for the execution of the BFS. 4. EQR has had strong support from the Government getting behind their Critical Minerals Strategy for Australia. This has been shown through the Company receiving Federal Grants from Advanced Manufacturing Growth Centre (“AMGC”), accelerating the purchase of a second XRT Sorter and the Critical Minerals Accelerator Initiative, which is a grant for $6M focused on the execution of the BFS capital expansion. These grants greatly benefit the development of the Mt Carbine Tungsten Project as it is non-dilutive to long-term shareholders. The past year has once again been a year of strong growth and definitive value addition for the business driving the longterm growth of the Company. 2 EQ Resources Limited Annual Report 2022
EQR has had the opportunity to build on the progress achieved last year, further growing and developing a strong work force and management team for its operations in a sustainable and incremental manner as this project has developed. This has allowed the foundation to be set for continued growth and expansion with minimal disruption as the Company has requisite policies, systems, structures and leadership in place. Coupled with this, EQR continues to have a strong ESG focus, working across all three pillars of Environment, Social and Governance, through the newly established ESG Advisory Group made up of local stakeholders. Mt Carbine is the only primary tungsten producer in Australia at this point, and it has not come without a significant effort from all involved. It is now benefiting from a strong tungsten price, which I personally believe will continue to get stronger as Western supply pressure grows and demand constraints remain. I would like to take this opportunity to once again acknowledge that this growth would not have been possible without the ongoing efforts of the leadership and site teams working together and the healthy interaction of the EQR Board for their strategic input, guidance, and involvement in bringing the Company to where it is today, bolstered by exciting plans for the future. The Company continues to deliver measurable outcomes towards the short, medium and long-term goals, with a diverse, collaborative and highly motivated team. The team at EQR is grateful for the support of all shareholders and partners that see and appreciate the value in what we are doing and how we as a Company continue to deliver on our milestones as we walk the path of sustainable, accretive growth. Kevin MacNeill Chief Executive Officer Mt Carbine Low Grade Stockpile and Quarry Operations EQ Resources Limited Annual Report 2022 3
The 2022 financial year has been a progressive year for EQ Resources Limited (“EQR” or “the Company”) and its flagship project at Mt Carbine in Far North Queensland. Highlights The highlights of this year were: − Positive results from EQR’s Bankable Feasibility Study for the Mt Carbine Expansion Project, were received over the period, with a project NPV of $131.5 million and an IRR of 154%. Subsequent to this, further drilling has been completed, increasing the Mt Carbine Reserves and redefining the open pit mining plan resulting in the processing of addition ore. Revised economics will be completed on the updated Reserve statement in the near future; − Consistent and ongoing production at the Mt Carbine Gravity Plant, operated under an unincorporated joint venture between EQR and CRONIMET Australia Pty Ltd with trial shipments to leading tungsten consumers in Europe, the US and across Asia; − Binding Farm-in and Joint Venture Agreement entered into with Sozo Resources Pty Ltd whereby Sozo can earn up to an 80% interest in EQR’s Panama Hat and Crow Mountain Projects (EL’s 6648 and 8024) by completing expenditure of A$1.6M over 4 years; − Secured $600,000 in co-investment from the Federal Government’s Advanced Manufacturing Growth Centre (AMGC) for the upscaling of the XRT Sorter plant; − The Federal Government’s Critical Minerals Accelerator Initiative (CMAI) supports EQR’s expansion program at Mt Carbine with a $6 million grant; and − The Company achieved a major milestone with the successful financing and completion of the Mt Carbine Early Works Program, construction and commissioning of associated equipment and infrastructure done. A further review of the Company’s operating and financial activities for the 2022 financial year, up until the date of this report, is set out in this section. Health, Safety, Environment and Social Engagement Health & Safety Safety is the Company’s highest priority. The Company is committed to providing a safe, healthy and inclusive workplace for its people and to conduct business safely and responsibly. Our approach is to not only provide training and support to our employees but to also promote self-development through obtainment of new qualifications. The Company’s strong focus on constant improvement in safety has led to the development and implementation of an Integrated Management System (“IMS”). Risk planning and management is central to the Company’s activities, EQR’s operations are only conducted when the risk is within acceptable limits and as low as reasonably practicable (ALARP). The risk planning and management processes developed and implemented at the Mt Carbine site aim to provide a logical and systematic method of identifying, analysing, evaluating, treating, monitoring, and communicating risks. The following hierarchy of controls is applied to mitigate risk to a level which is ALARP: − Elimination/Removal; − Substitution; − Engineering/Isolation Control; − Administration; − Personal Protective Equipment; and − Human Behaviour. The hierarchy of controls is used to control hazards identified for all risk management processes. Less reliable control measures (e.g., administrative, PPE or safe behaviour controls) have been implemented as part of a holistic control strategy in addition to controls from the other more effective measures and are also used on their own where the level of current risk is ALARP. Operating and Financial Review 4 EQ Resources Limited Annual Report 2022
In an effort to continuously improve systems at the Mt Carbine site, EQR: − Conducts systematic reviews of the corporate guidelines, standards, systems, and processes to verify the current standards and controls in place; − Conducts audits and assessments at determined frequencies to measure the level of compliance and progress to the standards, and assist in the correction and prevention of any systemic issues; − Reviews performance and accountability processes to indicate progress or deviations for early corrections; and − Ensures procedures for Management Review and Health and Safety Objectives detail the processes to be applied. Employee Training Due to the local workforce having considerable transferable skills but limited experience working within the mining industry, the Company continues to invest in extensive training for its workforce. The Company is committed to being a significant provider of local employment and is committed to the upskilling of its employees to ensure it has a safe and productive workplace focused on continual safety performance improvement. The Company also constantly monitors its safety performance and engages in a proactive, positive reporting culture with Safety Resets, Toolbox Talks, development and improvement of the Safety Management System and increased focus on the quantity and quality of risk management tools such as the Job Safety Analysis and “Take 5” protocols. The Company ensures it is complying with all relevant health and safety legislation, industry codes and guidelines but also conducts studies to measure occupational exposures. The focus is on planning, designing, operating and maintaining facilities to guarantee the safest workplace environment, while protecting its people from illness, potential exposure and psychosocial hazards. See Section 14 of the Bankable Feasibility Study for the Company’s risk management approach. EQR Supervisor, Andrew Uwland (middle) is presented with the first ‘Safety Legend’ Award in QLD by the Hon Stewart, Minister of Resources (left) and Department of Resources Director General, M. Cridland. Mr Uwland, a Supervisor at the Mt Carbine Operations, has been with the Company since November 2021 and is exceptionally passionate and vocal about driving real safety change for the site and the mentality on shift. He is a strong advocate for his crew regarding safety practices and their wellbeing (physical & psychological), placing a focus on training them appropriately and keenly surveiling them in this regard. From pre-start to safety documentation, Mr Uwland places a big emphasis on procedure, training, and safety-first mentality. He has also trained a full crew of new-to-the-industry employees (barring 2 individuals on his crew) and has had no reportable incidents while developing a sense of safety pride within his crew. Mr Uwland has implemented morale-boosting and teambuilding techniques directly leading to minimal staff turn-over in a labour market where it is a very common occurrence. EQ Resources Limited Annual Report 2022 5
Environment The Company is committed to actively identifying and responding to all risks associated with its operational activities that could have an adverse impact on the environment and the local communities in which it operates. The Environmental Programs maintained by EQR are used to establish, implement, control, and maintain processes to meet the requirements of EQR’s IMS and implement the environmental objectives identified by the Company. The environmental data generated is used to identify potential environmental risks that require management and to assess the achievement of the environmental objectives in line with the Company’s strategic development plan. During the year the Company has undertaken extensive environmental studies to both inform the approval process associated with its plans to recommence open cut mining and to de-risk the Project in line with its core values of Treading Lightly to minimise its environmental footprint and deliver positive societal impact. Some of the activities undertaken were: − Noise, Air & Vibration Studies; − Water Management Plan Update; − Waste Rock & Tailings Management; − Enhanced Conceptual Groundwater Model which involved the drilling of 18 additional investigation bores; − Flora and Fauna Studies; and − Water Engineering Works. The recent water engineering studies are focused on not only ensuring adequacy of the Project’s water storage facilities at Mt Carbine but also addressing water security, the mitigation of the effects of extreme weather events (drought and flood) through a reduction in total water demand, increased water reuse, water storage and stormwater, sediment and erosion best practice. Over the period, the Company has continued its sponsorship and involvement with the Mitchell River Watershed Management Group. Together with the Mareeba Shire Council officers, management of invasive species is continuing in the Frogbit Sentinel network. During the quarter ended March 2022, the Company announced that due to the heavy rainfall and flooding experienced through January and February 2022, the water dam at Mt Carbine experienced a controlled release with no harm to the receiving environment. This was supported by the monitoring undertaken during the release and the findings of the Company’s annual Aquatic Ecology Study. The Company worked Operating and Financial Review continued 0.0 20.0 40.0 60.0 Q 1 Q 2 Q 3 Q 4 TRIFR Total Recordable Injury Frequency Rate per million hours worked 2021-2022 -44% Decrease Total Recordable Injury Frequency 2,806 Take 5 Safety Assessments 114 JSEA Job Safety Environment Analysis 24 Toolbox Talks 2 Prestart safety meetings per day 28 Traineeships started +167% Total Man Hour Increase Year on Year 0 Lost Time Injury Frequency Rate 0 Fatalities PROACTIVE SAFETY INDICATORS 6 EQ Resources Limited Annual Report 2022
with environmental group NRA over this period to ensure full compliance with sampling requirements for reporting were met and completed in a timely matter. A major achievement for the Company during the period was the receipt of approval for the processing of greater than 100,000 tonnes of tungsten bearing feed material each year through its Retreatment Plant. This is a significant step forward in maintaining environmental compliance and meeting planned production targets for the operation. Social, Community and Engagement ESG has grown in prominence thanks to capital investment pressures, heightened consumer and stakeholder expectations, and global regulatory pressures for greater ESG reporting disclosures. Underpinning this is the broad realisation that its relevance is not only about addressing climate change, but also providing organisational longterm performance insights, both operationally and financially. ESG is not a separate business strategy, but the application of shared values and principles that realise commercial benefits whilst achieving positive social and environmental outcomes. EQR appreciates the opportunities that an ESG focus can provide. As a resource-efficient, value-oriented and critical resource mining company of the future, EQR has already aligned its purpose, mission, and values with some high level ESG objectives. The Company aims to contribute to sustainable development and align to the United Nations Sustainable Development Goals, refer to Table 1. Mt Carbine Tailings Dam is clean and toxin-free, remaining host to the area’s diverse wildlife. EQR defines their ESG adoption profile as an ‘early adopter’. Existing ESG environmental initiatives include: − The implementation of a new waste sorting technology; − A review of pollution prevention treatment options; and − Ongoing participation in a pilot greenhouse gas (GHG) emissions tracking scheme in partnership with the University of Queensland. The Company also have several ‘S’ centric employee attraction and retention programs underway centering on improving employee diversity and capability. Additionally, EQR sponsors a range of community programs and events, engaging regularly and collaboratively with the community to develop initiatives that positively impact employees and the local community. The Company is committed to providing career development opportunities in a friendly and inclusive workplace where all employees can express themselves freely, feel valued, included and socially recognised. EQ Resources Limited Annual Report 2022 7
Table 1: EQR ESG Alignment with United Nations Sustainable Development Goals (SDG) ESG Framework SDG Alignment Environment We are committed to embedding and embracing resource efficiency in our operations. As aproducer of aneweconomy critical mineral, we aim to minimize our impacts on the environment and prevent degradation through the optimal extraction of tungsten from a secondary source and through the integration of advanced processing technology. Social Safety is a core value and a strategic priority, and we are committed to promoting and enhancing a safety culture in our operations. Our commitment to society includes promoting workforce diversity and inclusion, empowering local communities through creating employment opportunities, sourcing materials locally where possible and investing in our employees and communities for social development. Governance As a value-oriented resources company, we are committed to acting in a transparent, accountable, and responsible manner in all our business dealings and operations. Through active engagement with local communities, environmental experts, and supply chains, the Company is building solid credentials for the future. Underpinning a philosophy of pragmatism and effectiveness, EQR has taken a multi-process approach including: − Working sessions with the Leadership Team on purpose, core values and key principles; − Revision of the Risk Management Policy; and − The completion of an independent ESG Stakeholder Sentiment Survey and ESG status report. During the period an ESG Stakeholder Sentiment Survey was disseminated to 22 EQR stakeholders, with 19 respondents. Across the EQR Leadership Team and stakeholders surveyed, shared perceptions and aspirational goals were prevalent. The close alignment between stakeholder feedback and current ESG positioning and intentions reinforces EQR’s high degree of confidence in its evolving ESG program. Multiple threads were identified, with five material themes highlighted: − Employee and contractor health, safety, and wellness (Social); − Proactive management of risk and compliance management (Governance); − Creation of meaningful jobs and the creation of local talent pipelines (Social); − Water, energy, and resources management and efficiency (Environmental); and − Commitment to the accelerated transition to a low carbon future (Environmental). Societal Challenges: When applying a societal lens, additional opportunities were uncovered, including: − Reducing site environmental impacts especially noise and dust; − Reducing, recycling or repurposing waste; − Providing local and regional employment especially for disadvantaged and minority groups; − Maximising the opportunity for female participation in non-traditional work areas (currently at 25%); − Stimulating a sustainable local supply chain including accommodation and essential services; and − Supporting community health, wellbeing and resilience through sponsorships and volunteer work. Operating and Financial Review continued 8 EQ Resources Limited Annual Report 2022
Strategic Positioning: The outputs from the leadershipworkshops and a sentiment survey provided both insight and foresight. Recognising that ESG is a tightly intertwined series of processes and practices across all business operations, EQR has adopted the following approach: − Be an early adopter of ‘Environmental’ opportunities using technology and robust systems that deliver highly efficient extraction processes, minimising its physical footprint, developing low carbon operations, and minimising waste and consumables such as water, energy, explosives; − Lead across a range of ‘Social’ opportunities especially, supporting sustainable communities and local supply chains, driving diversity and inclusion, preferencing local employment and developing a long-term pipeline of regional talent; and − Deliver transparency and compliance regarding ‘Governance’, reporting and public disclosures, recognising that compliance is the floor not the ceiling of its obligations. An ESG focus affords the Mt Carbine mine with significant opportunities to maximise positive environmental and social impacts both now and into the future. The EQR Leadership Team is committed to advancing its current ESG program with material consideration being given to both immediate opportunities and those longer term. From prospects for employment and industry expansion created within the local community, to the potential for a development of green energy via solar powered farms on rehabilitated stockpile and tailings areas, there are many areas under consideration for future incorporation. Insight into current stakeholder priorities and suggestions will shape the future direction of the EQR ESG program, with a particular focus on further developing a robust ESG framework that delivers environmental and social benefit with a positive and sustainable commercial return. As EQR continues to develop the Mt Carbine project, it is very aware of the immediate and regional community in the area and will strive to continuously have a genuine and positive engagement with these parties. The guiding principles for community and stakeholder engagement are summarised in Table 2. Table 2: EQR Stakeholder Engagement - Guiding Principles We will be Proactive Flexible and inclusive Genuine Respectful Responsive This means We will engage with communities early and often, so that we understand and respond to their interests and concerns. We will offer a range of engagement opportunities that are tailored to the variety of needs and preferences of the community. We will have authentic conversations with the community, clearly explaining what can and can’t be influenced. We understand that not everyone will support our projects. We will create an environment to have professional conversations. We will close the loop, providing feedback to the community on how input has been taken into consideration. EQ Resources Limited Annual Report 2022 9
Operating and Financial Review continued Mt Carbine welcomed indigenous elder, Mr Rodney Riley for talks about opportunities for First Nations employment in the growing project workforce. EQR is committed to creating jobs and opportunity while fostering co-existence through genuine relationships to build sustainable communities. EQR CEO, Kevin MacNeill with Gary Battensby, SSE; Mr Rodney Riley indigenous elder and EQR Chairman, Oliver Kleinhempel. Pictured from left to right. EQR and the operations at Mt Carbine encourage diversity, inclusion and representation throughout the workplace. The Company has focused on upskilling young individuals from the surrounding communities eager to enter the mining industry which has led to a thriving and vibrant young group of people that are making a difference daily in the upliftment of the community, production of Critical Minerals for Australia and growing a sustainable career path. Diversity within the Mt Carbine Operations Team. Ms Nikita Lis, pictured below, is 23 years old and has become an integral part of the Mt Carbine team after joining the company while taking a gap year after completing her bachelor’s degree in Biomedical Science. Since working at Mt Carbine, Ms Lis has been inspired to continue studying part time while staying on roster at Mt Carbine. Ms Lis will now be completing a post graduate degree in Engineering to use within the mining industry. Management will continue to work with Ms Lis to provide career path guidance, mentorship, and support. Growing young people to be value-add proponents of the mining industry while having a long-term future with the Company is something EQR continuously promotes. Nikita Lis, on the path for a great career in the mining industry. EQR has been a participant in AMEC’s “More Resourceful Than Ever” campaign which has a strong environmental focus on clean energy and renewables, recycling and waste minimisation, conservation, and shows Australians the different ways our industry is working to protect and improve the environment. EQR embraces these values and practices in all of its operational activities and supports AMEC in its goal to increase community support for the industry through an understanding of the work being done to dispel the widely held assumption that the mining industry is wasteful. Senior Management inspecting the Mt Carbine Tailings Dam. 10 EQ Resources Limited Annual Report 2022
EQR’s Mt Carbine Operations continues its annual support of the Mt Carbine Bull & Bronc Ride community event and fun day. Established in 2000 by a mix of local residents, employees and businesses, The Mt Carbine Rodeo Association is a voluntary, not-for-profit organisation with the aim to promote local tourism and encourage visitors to the area. The Rodeo raises funds to maintain and upgrade the facilities so other charities can use the grounds for their fundraising activities. In addition to its sponsorship, EQR also provided a hospitality tent for staff and their families to facilitate the development of close relationships, reinforce team spirit and promote the Company as a key stakeholder within the community. Annual Mt Carbine Rodeo. More than 100 people joined together at Mt Carbine recently for a Morning Tea event organised by regional local Karen Pedersen, which raised $3,267 for the Cancer Council. Local resident, Karen Pederson, accepts employee donations from Mt Carbine Foreman, Myles Egan. Our Values Act Safe Feel Safe Dig Deep Embrace Difference Buddy Up Tread Lightly Lead with Integrity Act Safe, Feel Safe – Act safe at work. Care and respect each other. Feel safe to be yourself. Embrace Difference – Diversity of thinking, skills and background creates value and drives innovation. Tread Lightly – Embed resource efficiency to minimise environmental footprint and deliver positive societal impact. Dig Deep – Go one better. Strive to continuously learn and improve. Challenge the status quo. Buddy Up – Collaboration is key to realising shared value. Lead with Integrity – Have courage to do the right thing. Be accountable. EQ Resources Limited Annual Report 2022 11
Operating and Financial Review continued Mt Carbine Operations Project Timeline The Company has worked hard implementing the operational and execution strategy for its Mt Carbine assets, this has seen the update of the Company’s Resource Statement which has delivered the information required to publish a Bankable Feasibility Study (“BFS”) for the Company in December 2021. The Company has worked hard to ensure timelines published were adhered to over the past 18-months, with the schedule holding within approximately 3-months of original forecast over the period and through the COVID-19 supply chain delays. The past 12-months have focused on the upgrade of the Resource Statement, publication of the BFS and expansion of processing capacities and plant outputs with the Early Works program. Over this period the Company worked hard to secure the funding for the next phase of expansion at Mt Carbine, which will see the purchase of a new Sandvik crushing and screening plant to increase capacity throughput once more, increasing efficiencies and reducing overall costs of the future operations as the open cut mine comes online. On top of this, the Company was able to continue executing relevant approvals for the reopening of the Open Pit mining operations. The original results from EQR’s BFS for the Mt Carbine Expansion Project were positive and predicted to produce operational pre-tax cash flow of $38 million and $95 million in years 3 and 4 respectively, with an NPV of $131.5 million and an IRR of 154%. However, after the reporting period, the Company completed additional drilling around the defined Open Pit area and toward the Western Extension and is now planning to release an updated BFS with the new information available. The coming 12-months for the Company will focus on the re-opening of the open pit, extraction and processing of primary ore, and additional Resource definition at Mt Carbine to define the further development plan and mining strategy for the Company at its operations. Figure 1: Timeline of the Mt Carbine Development. Mt Carbine Expansion During the second quarter of the financial year, the Leadership Team developed an early works strategy to increase revenues during the period from the completion of the BFS through to the final funding, design, engineering and project execution. This strategy saw minimal capital outlay for the upgrade of specific facilities or equipment to be upgraded for the BFS which would also allow increased production outputs. The Early Works consisted of several upgrades, including not only the Crushing and Screening Plant, but also, in summary the following which are all critical contributors to the accelerated growth and success of the Mt Carbine development: − Installation of a Second TOMRA XRT (partial funding through the Advanced Manufacturing Growth Centre – “AMGC” Grant); − Design, engineering, installation, and integration of a high-volume Sandvik wet screen (170tph) into Mt Carbine’s crushing circuit; − Slurry pipeline from the crushing area to the Gravity Plant for fines pumping (OPEX reduction); 12 EQ Resources Limited Annual Report 2022
− Power supply line and substation installation/upgrade; − Installation of water monitoring bores required prior to submission of Environmental Approval to reopen the open pit; − Office upgrade utilising inhouse personnel to execute an optimised layout making room for the growing Mt Carbine team; − Dewatering screen purchase for installation in the Gravity Plant; and − Purchase of tertiary crushing circuit for the crushing of sorter concentrate. The plant allows for significantly higher throughputs of material targeting a minimum throughput of 170tph. With the plant designed specifically for the application, the operations team will run the crushing and screening on a 24/7 basis to maximise feed production for the TOMRA XRT Processing Circuit and the Gravity Plant. All of the points above were key upgrades for the BFS processing plant. Completing these upgrades early has allowed the Company to increase revenue generation through growing concentrate outputs. The Company now has 1 million ton per annum (Mtpa) processing capacity and is set to achieve a forecast 90 tonnes (“t”) of concentrate produced per month at current rates. The next production step change will come from the processing of significantly higher feed grade material from the open pit operation set to kick-off in 2023. This forecast can be seen in Figure 2. Since the publication of the BFS, the company has achieved several significant milestones toward the execution of the BFS and expansion of the Mt Carbine operation. These points are highlighted in Figure 2. Figure 2: Mt Carbine Tungsten Concentrate Production Forecast. Federal Government Co-Invests in High-Tech Ore-Sorting Process EQR successfully secured $600,000 in co-investment from the Federal Government’s Advanced Manufacturing Growth Centre (“AMGC”) via the $30 million Commercialisation Fund. Combined investment from EQR, its partners and AMGC, totalling $1.97 million, will assist in commercialising industrial-scale operations for advanced minerals processing flowsheet developed for the Mt Carbine Expansion Project. Technologies to be incorporated include the advanced XRT ore sorting technology from TOMRA Sorting Pty Ltd, as well as hyperspectral imaging sensors developed by Plotlogic Pty Ltd. The implementation will further be supported by CRONIMET Australia Pty Ltd and The University of Queensland – Sustainable Minerals Institute. The formal co-funding agreement between AMGC and the Company has been finalised and signed. AMGC is an industry-led, not-for-profit organisation established through the Australian Government’s Industry Growth Centres Initiative. AMGC’s vision is to transform Australian manufacturing to become an internationally competitive, dynamic, and thriving industry with advanced capabilities and skills at its core. EQ Resources Limited Annual Report 2022 13
Agreement with Sandvik on Binding Terms for Financing of Crushing & Screening Plant In March 2022, EQR agreed with leading mining technology company Sandvik on the binding terms for the delivery and financing of the crushing and screening mechanical and structural equipment for the Company’s expansion program at Mt Carbine (refer ASX Announcement “EQR and Sandvik Agree on Binding Terms for Financing of Crushing & Screening Plant” dated 8 March 2022). The scope of supply comprises the primary, secondary and tertiary crushing stations, as well as a screening station and all related structures. The new crushing and screening plant will have a capacity of 350 metric tonnes per hour, which is 2.5-times the throughput of the crushing and screening plant currently in operation. Figure 3: 3D design for new crushing, screening and XRT sorting plant. As part of the binding terms agreed between EQR and Sandvik, Sandvik Financial Services Pty Ltd (“SFS”) has extended financing terms as following: − The agreed delivery scope amounts to $4.8 million, with the financing facility being subject to a 30% deposit by EQR; − The facility considers (up to) 48 monthly instalments and a fixed interest rate of 5.75% p.a.; and − Industry standard security arrangement agreed, subject to SFS standard documentation, including a first rank priority pledge over the Sandvik supplied equipment Critical Minerals Accelerator Initiative (“CMAI”) CMAI is supporting EQR’s expansion program at Mt Carbine with a $6 million grant (refer ASX Announcements “Federal Government Funding for Mt Carbine Critical Minerals Program” dated 28 April 2022 and “Federal Government Funding for Mt Carbine Reconfirmed” dated 19 September 2022). This funding will be utilised to accelerate the Mt Carbine Expansion Program which focuses on the transformation of historic mine waste into a sustainable source of tungsten along with the commencement of open-cut mining of the Andrew White Open Pit. Specifically, it will be used to fund plant and equipment, drilling and additional studies, as well as expand on innovative technologies to efficiently produce tungsten concentrate from relatively low-grade ore currently stockpiled aboveground and from high-grade resources identified in the accessible Andrew White Open Pit. − Combined investment from EQR, Cronimet and CMAI, totalling approximately $15 million, in line with the Company’s BFS, while considering the Early Works Program as currently being completed. − The formal co-funding agreement will be finalised in the coming weeks. Expansion Funding (BFS Scope) As communicated to the market across various platforms, the Company is working to close out the best possible options of funding arrangements that it has been negotiating over the past several months to ensure the best interests of the Shareholders are upheld. This has led the Company to secure two Government Grant facilities as well as binding financing terms from Sandvik for the provision of their crushing and screening plant. The Company is working to finalise additional finance offers and will announce to the market as finalised. The continued development of the expansion project and restart of the open pit mining operations remains the key focus of the Company. The Board and Management are endeavouring to do this in what they believe is the most beneficial way for shareholders. Operating and Financial Review continued 14 EQ Resources Limited Annual Report 2022
Mt Carbine Process Flow & Beneficial Reuse The material process flow at Mt Carbine focuses on the beneficial reuse of the products available from the LGS and historic tailings. EQ Resources Limited Annual Report 2022 15 1 Mt Carbine : Process Flowsheet The material process flow at Mt Carbine focuses of the beneficial reuse of the products available from the LGS and the historic tailings Oversize stockpiled for Quarry Sale Primary Crush & Screen Final Concentrate Exported Gravity Beneficiation Plant Stockpiled for Quarry Sales XRT Ore Sorter Plant Ore : Low Grade Stock Pile • 6-40mm barren by- product for sale in quarry as aggregate product • Production of 18 environmentally friendly profitgenerating quarry products – beneficial reuse promoting circular economy • -6mm inert manufactured sand for sale in quarry 6- 40mm Sorter feed -6mm tungsten sorter concentrate -6mm Fines feed 6- 40 mm Sorter By-product -6 mm Tailings • Sorter Feed undergoes 10x upgrade utilising X-Ray Technology and is transported to Gravity Plant for tertiary crushing prior to gravity processing Ore : Open Cut Mine • High-capacity Gravity Separation Tables separate heavy valuable tungsten material from the lighter-weight, barren tailings. • Production process has a calculated overall Tungsten recovery of 79.5%, for the crushing/screening/sorting and Gravity Plant • Processing facilities are designed for steady-state production of 1Mtpa • From crushing, materials are fed into dry and wet screeningfacilities currently in operation • 6-40mm ore material is fed into the 2x Tomra XRT sorters for upgrading • -6mm fines are directly pumped in a wet slurry to Gravity Plant for beneficiation. • Accelerated Production Continues • Mt Carbine Produces a premium Ammonium Paratungstate product that contains 50% WO3 • Tungsten concentrate currently produced at site is loaded into bulk bags, sealed and sold ex-gate at Mt Carbine for export. • Existing infrastructure, pit and 430m decline allows cost- and time-efficient start of OC and UG works that will feed high-grade ore into production from day 1. • OC Strip Ratio = 5.11 over LOM • Currently 12 Mt low grade historical stockpile and 2Mt historical tailings resource is feeding production. • Free-dig mining of stockpile material is directly fed to crushing and screening facilities for sizing prior to downstream beneficiation • Oversize, uneconomical rock is stockpiled for beneficial reuse through quarry sales. • Used in the building of regional breakwaters, boat ramps and infrastructure development WO3 Concentrate
Crushing, XRT Sorting & Gravity Plant Activities Due to the technologies used at Mt Carbine, the Company constantly works to achieve a circular economy approach to production and the use of its inert waste materials which can be converted into by-products. With the Company currently mining and processing the historic Low-Grade Stockpile (“LGS”), there is a variety of materials available in this regard. Oversize rock is used for various products such as armour rock, gabion stone or mattress rock. The Process Flow, shown on the previous page, allows the Company to make use of the inert sorter waste material for the production of various aggregate materials and the Gravity Plant tailings are able to be used as a manufactured sand that is then sold as is or mixed into various road bases or blended material combinations for the Company’s quarry business. Through the completion of the Early Works program, the Company is now able to crush and screen material at much higher throughput capacities and pump the fines material directly into the Gravity Plant. This plant was installed to overcome the challenges of the Far North Queensland wet season which has extremely heavy rainfall over a condensed period of time. The new high-volume wet screening application mitigates production challenges surrounding this by pumping tungsten carrying fines and dust to the Gravity Plant, reducing material handling requirements, mobile machinery usage and minimising material build up on conveyors, chutes and throughout all plants, reducing down time for clean up. Newly installed screening and crushing plant. Prior to the Early Works upgrade, crushing and screening was done through mobile processing equipment, the use of all electric equipment for this circuit will increase operational availability going forward and reduce maintenance cost and operating cost through reduced diesel consumption and hauling of -6mm material as it is now pumped through a pipeline. The wet screening application also allows the use of poly panels for the screen media which has a much higher life span in comparison to conventional steel mesh screen decks. The operations team now run the upgraded Crushing and Screening Gravity Plant on a 24/7 basis and as the primary crushing and screening method for the downstream XRT Sorters and Gravity Plant processing operations. During the 2021/22 financial year, the Mt Carbine XRT Sorting and Gravity Plants operated on a continuous basis of ramping up production outputs from Mt Carbine. The operation has progressed from processing primarily historic tailings material with trials of LGS fines and sorter concentrate to currently processing primarily LGS and sorter concentrate. Ongoing plant improvements were completed on the Gravity Plant targeting increased running time capabilities, higher overall tungsten recoveries and higher-grade concentrate product. Over the period, EQR was able to successfully secure a second XRT Sorter for the Mt Carbine operations making use of the AMGC Grant awarded to the Company in January 2022. This allowed the acceleration of the installation of a second XRT Sorter into the operations allowing for doubling of the throughput capacity of the sorting operations. Operating and Financial Review continued 16 EQ Resources Limited Annual Report 2022
- 2,000 4,000 6,000 8,000 10,000 12,000 Q1 FY2022 Q2 FY2022 Q3 FY2022 Q4 FY2022 Q1 FY2023 Estimate Tonnes (t) XRT Sorter Concentrate Production (t) Sorter concentrate September forecast - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 Q1 FY2022 Q2 FY2022 Q3 FY2022 Q4 FY2022 Q1 FY2023 Estimate Kilograms (kg) Gravity Plant WO3 Concentrate Production (kg) 50% WO3 Equivalent (kg) September forecast - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Q1 FY2022 Q2 FY2022 Q3 FY2022 Q4 FY2022 Tonnes (t) Gravity Plant Head Feed Troughput (t) Head Feed Table 3: XRT Sorter Concentrate Production - 10,000 20,000 30,000 4 , 0 50,000 60,000 70,000 80,000 9 100,000 Q1 FY2022 Q2 FY2022 Q3 FY2022 Q4 FY2022 Q1 FY2023 Estimate TTonnes (t) Gravity Plant Head Feed Throughput (t) Head Feed September forecast Table 4: Gravity Plant Feed Materials Processed - 2,000 4,000 6,000 8, 0 10,000 12,000 Q1 FY2022 Q2 FY2022 Q3 FY2022 Q4 FY2022 Q1 FY2023 Estimate Tonnes (t) XRT Sorter Concentrate Production (t) Sorter concentrate September forecast - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 Q1 FY2022 Q2 FY2022 Q3 FY2022 Q4 FY2022 Q1 FY2023 Estimate Kilograms (kg) Gravity Plant WO3 Concentrate Production (kg) 50% WO3 Equivalent (kg) September forecast - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Q1 FY2022 Q2 FY2022 Q3 FY2022 Q4 FY2022 Tonnes (t) Gravity Plant Head Feed Troughput (t) Head Feed Table 5: Gravity Plant Quarterly Concentrate Production The future Phase 2 process plant design as set out in the BFS will also see the current two XRT Sorters fed in parallel. The system is planned to reutilise the two sorters currently in operation to reduce further capital outlay around the XRT Sorters. The two XRT Sorters operate at +/-120tph with a continued +90% tungsten recovery. The results over the past year have further reinforced the early results seen through the bulk testing of the LGS and continue to prove the robustness of the technology and specifically the adaptability of the technology to the Mt Carbine LGS material. The grade of the LGS has been consistent with the bulk test work completed on the LGS, reinforcing the Company’s confidence in this technologically innovative and XRT Sorter Concentrate Production cost-effective method of pre-concentration to reduce downstream processing costs. The Gravity Plant has continued to operate on a 24/7 basis throughout the year. The processingmethodology and capability over the year has stayed fundamentally the same after the 2021 Financial Year saw several changes and continuous improvements throughout. The Gravity Plant has benefitted greatly from the upgrades during 2022, mainly through the simplification of the piping circuit for more direct routes with less pumping combined with rubber lining throughout the various high wear areas in the Gravity Plant. The second XRT Sorter has been installed and commissioned with the benefits of the second XRT Sorter being felt in the operation with over 4,000t of sorter concentrate produced in August 2022. Interfacing of the double XRT Sorter system has also been completed and commissioned which allows for the two units to be run in parallel or individually. With the mining, crushing, and screening capacities now increased, the material processed has moved from primarily historic tailings to primarily LGS material. Some of the benefits of processing the LGS material is that it is much less abrasive on the Gravity Plant, has higher tungsten grades for the -170mm fraction of the LGS being processed and has a much higher portion of recoverable tungsten. Recoveries of the LGS and sorter concentrate feed material sit at 79.5%. A big portion of being able to achieve such high recoveries for a tungsten processing operation is attributed to the use of XRT Sorters early in the process to pre-concentrate feed material for the Gravity Plant in combination with a strong focus on not over griding the plant feed. Due to the extremely friable nature of tungsten, yet the requirement to liberate the tungsten, there is a tendency in the industry to over grind creating losses during the separation of materials and extraction of tungsten. The Mt Carbine operation has been able to eliminate overgrinding through the use of cone crushers and rolls crushers throughout the process flow, giving the operation the ben fit of increased tungsten recoveries on LGS material. Scan this QR code with your phone’s camera to see how EQ Resources is mining for the future by using the Tomra XRT Sorters to deliver an economically-proven, technologically-driven, circular economy. EQ Resources Limited Annual Report 2022 17
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