Directors’ Report continued ANNUAL Report June 2023 Directors’ Report 18 Financial Performance The loss for the consolidated Group for the financial year after tax amounted to $3,716,846 (2022: loss of $6,063,051). This result was primarily brought about by an ~111% increase in revenues and other income with only a ~37% increase in total expenses. The Group has created value for shareholders through: its continued focus on optimising production and recoveries from the Mt Carbine Retreatment and XRT Sorter Plants; ongoing investment in drilling programs to further define the Mt Carbine Tungsten Resource and Reserves; and delivery of strong pre-tax economics from the May 2023 Update of the Bankable Feasibility Study which focused on the high-grade ore from the Company’s 100% owned Andy White Open Pit, supplemented by the Low-Grade Stockpile; and Commencement of open cut mining operations from the Andy White Open Pit following the Mining Contract execution with Golding Contractors Pty Ltd for the restart of open pit operations in late June 2023. The Company also continues to evaluate its NSW Exploration Licences in conjunction with the development and commercialisation of its tungsten assets in Far North Queensland. Financial Position In accordance with the Company’s accounting policy, the recoverability of the carrying amounts of Deferred Exploration and Evaluation Expenditure were reassessed during the 2023 financial year with no impairments recognised, resulting in exploration and evaluation expenses of $3,469,157, before amortisation and R&D Tax Offset, being capitalised for the 2023 financial year. The carrying value of the exploration assets as at 30 June 2023 is $14,273,131 (2022: $12,598,157). At 30 June 2023, the Group had a net working capital deficit of $13,978,417 (2022: $4,090,968 deficit). The deficit in net working capital is predominately due to the Company funding its capital growth initiatives via short-term financing facilities such as equipment leases, offtake advance extension, government grants and trade payables. It should be noted that: - Whilst the offtake advance facility of $4,901,961 is classified as a current liability, due to the Company not having an unconditional right to defer settlement for at least 12 months after reporting date, it is scheduled to be repaid over the life of the joint venture between EQ Resources Limited and Cronimet Australia Pty Ltd rather than within the next 12 months as depicted on the Statement of Financial Position; and - The Convertible Notes are classified as a current liability of $3,494,215 due to their expiry in September 2023 along with the note holders having an option to convert into cash or shares. The Company believes there is a high probability that the holders will convert to shares upon expiry thereby converting this liability into equity. With these two factors taken into consideration the net working capital deficit for the consolidated entity reduces to $4,201,981. During the year, the Company’s issued share capital increased by $5,332,000 (before share issue costs) due to a capital raising in October 2022 and the conversion of 10,000,000 convertible notes in the first 6 months of 2023. 60 EQ Resources Limited Annual Report 2023
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