Directors’ Report continued ANNUAL Report June 2022 Directors’ Report 9 Operating & Financial review Information on the operations and financial position of the Group and its business strategies and prospects for future financial years is set out earlier in this Annual Report. The auditors have issued an unqualified opinion. Corporate Structure EQ Resources is a limited company that is incorporated and domiciled in Australia. Significant Changes Significant changes in the state of affairs of the Group for the financial year were as follows: (a) 16-hole Resource Drilling Program hits Iron Duke extension and bonanza grades under the Open Pit (refer ASX announcements “EQR Drilling at Mt Carbine Hits Iron Duke Extensions” dated 13 July 2021 and “Mt Carbine Hits Bonanza Grades under Open Pit” dated 5 August 2021). (b) The raising of $6 Million via the issuance of 2-year Convertible Notes with a conversion of 6.5 cents per share at a coupon rate of 7% per annum to fund the commencement of the Early Works Program for the Mt Carbine Tungsten Mine expansion (refer ASX Announcement “Early Works Funding Secured for Mt Carbine Expansion, Well Ahead of BFS Release” dated 13 September 2021. (c) Increase in contributed equity of $2,004,100: Date Shares $ Conversion of 2,000,000 convertible notes plus interest at $0.065 per share to institutional and sophisticated investors (refer ASX announcements “Application for quotation of securities- EQR” dated 28, 29 and 30 September 2021) 30-09-2021 30,832,307 2,004,100 TOTAL 2,004,100 (d) The release of an updated Resource Statement for the Mt Carbine Tungsten Project on 23 September 2021 (Refer ASX Announcement “Mineral Resource Update Drives Mt Carbine BFS Optimization” dated 23 September 2021). (e) The group moved to double its high tech X-ray ore-sorting (XRT) capacity with the acquisition of a second TOMRA XRT sorter (refer ASX Announcement “EQR Moves to Double High-Tech Ore Sorting Capacity” dated 14 October 2021). (f) Farm-In and Joint Venture Agreement (the “Agreement”) executed with Sozo Resources Pty Ltd (“Sozo”) 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 (refer ASX announcement ‘EQR Farms-Out NSW Projects to Focus On Mt Carbine Tungsten Mine’ dated 25 November 2021). (g) Completion of a Bankable Feasibility Study (“BFS”) covering a 12-year operation with the focus on production from its high-grade open pit ore being processed in years 3 and 4 where it is expected to produce operational pre-tax cash flow of $38 million and $95 million respectively along with delivering impressive economics including an NPV8 of $131.5 million and an IRR of 154% (refer ASX announcement ‘Mt Carbine BFS Delivers Low Capex, Strong Early Cash Flow Operation With Significant Development Potential’ dated 13 December 2021). (h) Continued capital work upgrades to plant and equipment (refer ASX announcements “EQR Moves to Double High-Tech Ore Sorting Capacity” dated 14 October 2021 and “Upgraded Power Line Commissioned Leads to Record Production” dated 10 January 2022). (i) Positive results from the Mt Carbine Underground Mine Scoping Study providing conference to proceed with Pre-feasibility Work, with the Underground Mine having potential for a long life, as well as being a technically and economically viable project (at current tungsten price) (refer ASX announcement “Underground Scoping Study gives Confidence to proceed with pre-feasibility work” dated 12 April 2022). 40 EQ Resources Limited Annual Report 2022
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