Phoenix Copper. Regulatory News (PXC)

25 May 2023

Phoenix Copper Limited

('Phoenix' or the 'Company')

Final audited results for the year ended 31 December 2022

Notice of AGM 

Phoenix Copper Ltd (AIM: PXC, OTCQX: PXCLY), the AIM-quoted USA-focused base and precious metals emerging producer and exploration company is pleased to announce its audited results for the year ended 31 December 2022. All references to $ are United States dollars.

Highlights

Corporate & Financial

- Investment in Empire Mine increased to $33.10 million (2021: $26.12 million)

- Net assets increased to $37.84 million (2021: $37.78 million)

- Group reports loss of $1.57 million (2021: $969,250), after charging a non-cash related foreign exchange loss on sterling denominated assets of $564,353 (2021: foreign exchange gain of $173,358)

- Year-end cash balance of $4.66 million (2021: $13.05 million)

- Company loans to Idaho operating subsidiaries increased to $30.61 million (2021: $21.41 million)

- Group acquisition of third party royalties payable by Empire Mine

- $80 million issue of floating rate, listed, secured, non-convertible, minimum 8.5% copper bonds due 2028-2032 nearing completion

- Inaugural Sustainability Report published and 'A' rating scored on Digbee ESG Platform

Operational

- Completed core drilling at Empire open pit copper mine to support metallurgical recovery and process design using non-toxic ammonium thiosulphate ("ATS")

- Continuity of open pit mineralisation further confirmed, including intercepts of up to 12.8% copper, 269.10 grammes per tonne ("g/t") silver and 0.75 g/t gold

- ATS metallurgical testing underway to support recovery and processing of copper, gold and silver in one process

- Ongoing drilling encounters further mineralisation at Red Star silver-lead deposit

- 60 hole 2023 Navarre Creek gold drilling programme approved by US Forest Service

- Local Community Advisory Team created as part of the Company's ESG Programme

Annual General Meeting

The Company also announces that the Annual General Meeting ("AGM") will be held at The Washington Hotel, 5 Curzon Street, London W1 5HE on 8 June 2023 at 11.00 BST.

The Notice of AGM and Forms of Proxy will be despatched to shareholders on 24 May 2023 and will be available on the Company's website at www.phoenixcopperlimited.com.

The Company's Annual Report and Consolidated Financial Statements for the year ended 31 December 2022 will also be available on the website from 25 May 2023.

CHAIRMAN'S STATEMENT

Dear Shareholders

Reading through my statement in last year's annual report and comparing it with my interim statement, I am struck by the favourable niche that we find ourselves in within the mining sector globally. Although the second half of 2022 brought many challenging head winds, we remain poised to produce metals vital for the global transition to clean energy and we operate in a geopolitically stable and mining friendly jurisdiction. Nevertheless, despite metal prices now recovering nicely, steel, diesel and reagent costs remain elevated, making many mining projects uneconomic. The current copper price is in the region of $8,500 a tonne. Many analysts estimate that a copper price comfortably over $10,000 a tonne will be required for some junior developers to be able to fund new copper mines, particularly with the recent rises in interest rates. I am convinced that this will not be the case with Phoenix at Empire.

I mentioned in my last two statements that we intend to fund first production at the Empire open pit with minimum additional dilution to shareholders. With that in mind, we are in the process of completing an $80 million corporate copper bond issue, which will pay a floating rate linked to the higher of a copper price coupon or an interest rate coupon, but subject to a minimum coupon of 8.5% per annum. The bond will be listed on The International Stock Exchange ("TISE") in the Channel Islands. Although there can be no certainty until the final paperwork is received, we believe that the issue will be fully subscribed, and we hope to update you shortly in this regard.

Necessity being the mother of invention, the technical team spent much of the year examining ways of reducing dependence on reagents, which represent over 60% of costs in many mines, and diesel. I draw your attention to the CEO's report in which he describes how we have managed to extract copper, as well as gold and silver, using environmentally friendly ammonium thiosulphate ("ATS"), from bulk samples in the laboratory. If we are able to do this on an industrial basis, our operating costs could be significantly reduced. We hope to submit these adjustments to the Plan of Operations in Q3 this year, to keep the permitting process for the Empire open pit mine on track.

While on the subject of the environment, we also significantly boosted our ESG credentials, producing our first Sustainability Report, which includes much of the material we submitted to the Digbee ESG rating platform. A growing number of miners are signing up to Digbee, which, after detailed specialist questioning, generates an ESG rating; this is then used by an increasing number of investors in their decision making. I am delighted to report that we scored an "A" which, I understand, is the highest score awarded so far. I would like to thank especially Catherine Evans, Chair of our ESG & Sustainability Committee, and Lenie Wilkie, our ESG Program Co-ordinator in Mackay, Idaho, for all their hard work in this field.

Although around 65% of our revenues from the Empire open pit project will come from copper, we also have significant precious metals potential, including our gold and silver projects at Navarre Creek (gold) and Red Star (silver). Although there has been an industry wide shortage of drilling crews and equipment, we have conducted successful drilling programmes at both Red Star and at Empire, which are covered in more detail in the CEO's report, and we are looking forward to a 60 hole drilling programme at Navarre Creek, starting in June, focusing on areas which showed promise in our magnetic survey. Navarre Creek is several times larger than the Empire open pit and surrounding area, and the early geological indications are that it compares favourably with deposits on the Carlin trend in neighbouring Nevada, which went on to become multi-million ounce producing gold mines.

However, in the short-term, copper remains the driving force and creator of initial cash flow for Phoenix. Although the copper price continues to fluctuate, the long-term fundamentals remain strong. Grades of contained metal have been declining steadily over the last 30 years and the new discoveries being put into production are needed to replace existing reserves rather than creating surpluses. The latest giant mine to go into production is Rio Tinto's Oyu Tolgoi or Turquoise Hill in Mongolia, which is forecast to produce 400,000-500,000 tonnes of copper per annum in 2027 (2.5% of current annual global mined copper), and has taken 20 years to develop. Research think-tank Wood Mackenzie estimates that the move to renewable energy will create demand for an additional six million tonnes of copper per annum, or 12 new Oyu Tolgois. Much of the new production expected over the next decade is from existing mines, mainly in the DRC, Chile, Peru, Indonesia, Argentina, and Panama, which will come nowhere near to achieving this target. Accordingly, we are happy to be based in the comparatively safe and stable USA, which is a net importer of copper despite its substantial production, and our strategy of predominantly using our own cashflow from the Empire open pit to prove up a world class copper sulphide deposit underneath remains the same.

Another harbinger of stronger copper prices is the recent uptick in M & A activity: Glencore/Teck Resources, BHP/Oz Minerals, Lundin Mining/Caserones and Newmont/Newcrest. Electric car makers are also showing interest in securing supplies of critical metals such as lithium, cobalt, and copper.

As we edge closer to production as well as adding value to our gold, silver and cobalt properties, I would like to thank the technical team for some outstanding ideas in a challenging environment, our Finance Director for our innovative copper bond, and most importantly, you, the shareholders, for your continued support and patience.

Marcus Edwards-Jones

Executive Chairman

24 May 2023

CHIEF EXECUTIVE OFFICER'S REPORT

Principal activities and review of the business

Driven by a $5.00 per pound ("/lb") copper price and ample cash reserves resulting from an oversubscribed financing in 2021, 2022 was a busy year as the Company executed a well-developed and robust work plan at our Idaho projects. Accomplishments included core and reverse-circulation drilling, geophysics, metallurgical testing, and feasibility engineering. We completed construction of the mine office, operations warehouse and core logging facilities, and the construction of a long-term monitoring well network. In addition to field operations, the Company invested in new employees, including a new General Manager as well as USA and UK PR/IR professionals. We also executed a plan for acquiring a large tract of the Empire Mine mining claims and production royalties, and we continued to advance the Company's ESG program. The work plan dovetailed nicely with the recently announced US Infrastructure Bill and the US Defense Production Act, both of which drive future domestic metal production and provide a domestic market consisting of national defense products, electric vehicles, and the means to transmit and store power generated by renewable energy sources. 

The 2022 core drilling program at the Empire copper deposit was initiated in June for the purpose of collecting samples three-dimensionally representative of the oxide portion of the deposit for copper, gold and silver recovery testing using the non-toxic cyanide alternative, ammonium thiosulfate ("ATS"). The Company completed 3,502 feet (1,067 metres) of drilling through early October. The drilling program was successful and provided the necessary volume of core at the desired copper-gold-silver grade to generate high quality samples for the metallurgical test work.

An abbreviated, late season reverse-circulation ("RC") drilling program was initiated and completed in November. The program consisted of 875 feet (268 metres) of drilling at North Pit/Red Star and targeted magnetic anomalies identified during the 2021 ground magnetics survey. Assay values for copper, silver, lead, and zinc were consistent with previous drilling programs in the area and added significantly to our understanding of the mineralogy and structural regime of the area.

At the Company's Navarre Creek gold project, the proposed drilling plan was approved by the US Forest Service in August. This cleared the way for a 2023 drilling program comprised of up to 60 RC drill holes on 30 drill pads that will target geochemical anomalies identified from previous surface sampling programs, and geophysical anomalies identified in a total field magnetics survey and hyperspectral mineral survey conducted in 2021. The surveys are comprised of 169-line kilometres of ground-based and airborne imaging that identified two distinct intrusive bodies concealed by glacial till, and a 2.3-mile-long by 1-mile-wide zone of strong hydrothermal mineralization typical of large-scale gold and silver deposits found in northern Nevada, USA. It is my opinion that the Navarre Creek project is as fine a grassroots exploration project as any that exists in the western US today. While there is no guarantee that any exploratory drilling program will result in the discovery of a viable ore deposit, the geology, mineralogy, and geochemistry of Navarre Creek fits all the criteria necessary for a potentially significant gold bearing system.

The long-term monitoring well network constructed both cross- and downgradient of the proposed Empire Mine operations was completed and will provide sampling points sufficient for tracking groundwater characteristics throughout the life of mine. Data from these wells will augment data collected in a Controlled Source Audio-frequency Magnetotellurics (CSMAT) survey conducted in late summer and designed to identify geologic structures and rock characteristics that control groundwater movement, providing vital hydrological information for future operations.

A new office building, operations warehouse, and core logging facility were constructed in Mackay, Idaho and will serve all future operations in and around the Empire Mine. The new facilities were constructed with adequate space for future expansion.

The Company also took the opportunity to finalise the acquisition of the Empire Mine patented and unpatented claims formerly owned by Honolulu Copper Company and the associated 2.5% production royalty, as well as acquiring an additional 1.0% production royalty from Mackay LLC. The former Honolulu claim blocks form the northern half of the Empire Mine holdings, including North Pit/Red Star and the deep sulphides, while the Mackay LLC royalty applies to production from the southern portion of the proposed Empire open pit and sulphides underlying the oxide resource. 

The engineering design and environmental permitting process for the Empire open pit mine began in late 2017 with the initiation of environmental baseline studies and the submission of an initial Plan of Operations in 2021. The process design engineering necessary for completing a feasibility study, and ultimately completing the Plan of Operations for approval by the regulatory authority, is in progress and is centered around the current ATS metallurgical test work. The results of that work will provide a final process design for the recovery of copper, gold, silver, and possibly zinc, and will be incorporated with all the drilling, analytical, engineering, and baseline environmental data collected on the project to date. The feasibility study will use the updated polymetallic recovery process to assign mineral reserves based on the calculated capital and operating costs required for the designed process and will hopefully further enhance the project economics through reduced operating costs and the ability to recover copper, gold and silver from the outset, rather than through a phased approach. 

The Company's cobalt holdings at the Redcastle Idaho Cobalt Belt property in Lemhi County were signed to an earn-in agreement with Electra Battery Materials (formerly First Cobalt Corporation), the Toronto-based owner of the Iron Creek cobalt mine, which shares a common border with the Redcastle property, in 2021. The earn-in agreement included an initial payment of cash and Electra shares to Phoenix, followed by two work commitments of $1,500,000 each over a five-year period, thereby earning Electra a 75% interest in the property. Electra's most recent drilling results from the Iron Creek property are encouraging. Our Redcastle property borders Iron Creek on the east and I particularly look forward to the drilling results from the eastern side of Iron Creek, nearest Redcastle.

Empire Mine - Polymetallic Open Pit Oxide Deposit

An updated NI 43-101 compliant resource was completed by Hardrock Consulting in October 2020 and reported for the polymetallic Empire Mine open pit oxide deposit. The updated resource showed a 51% increase in the Measured and Indicated category from the previous year's resource. Including the Inferred resources, the Empire open-pit oxide deposit now contains 129,641 tonnes of copper, 58,440 tonnes of zinc, 10,133,772 ounces of silver and 355,523 ounces of gold.

Empire Underground Sulphides

In July 2021, a core drilling program designed to target the historically mined high grade sulphide vein system below the open-pit copper oxide resource was initiated. The first drill hole of the program that reached the design depth intercepted a 12.6-metre zone of strong to intense sulphide mineralization. Some of the sulphide minerals identified by our geologists included bornite, chalcocite, chalcopyrite, pyrite, galena, and pyrrhotite. Further drilling continued to intercept high grade mineralization across a suite of metals, including 8.38% copper, significant intercepts of gold, silver and zinc, as well as anomalous molybdenum and tungsten mineralization.

Red Star - High-grade Silver

Red Star is a high-angle silver-lead vein system hosted in andradite-magnetite and located 330-metres north-northwest of the Empire oxide pit. Red Star was identified from a 20-metre wide surface outcrop across a skarn structure. Surface mineralization is a mix of copper, iron oxides and sulphides, with strong chrysocolla and bornite showings, exposed in a heavily timbered canyon. In 2018, three RC drill holes were drilled on the target and assay results reported the presence of high-grade lead and silver sulphides including intercepts of 20% lead and 1,111 grammes per tonne ("g/t") silver. In early May 2019, the Company announced a small maiden Inferred sulphide resource of 103,500 tonnes, containing 577,000 ounces of silver, 3,988 tonnes of lead, 957 tonnes of zinc, 338 tonnes of copper, and 2,800 ounces of gold.

Following the estimation of the Inferred resource, a second ten-hole diamond drilling programme was completed in 2020. The assay results from that program confirmed the presence of the high-grade silver and lead veins drilled in 2018, but also confirmed the need for greater understanding of the structural geology in order to direct further exploration. As a result, in 2021 the Company commissioned a ground-based magnetics geophysical survey which identified four high-amplitude areas of interest, including the original discovery outcrop. The size and amplitude of the three new areas of interest appear to be significantly greater than that of the discovery outcrop, whilst further north-northeast magnetic anomalies trending from the outcrop were also identified. In a program designed to test and help delineate the boundaries of the magnetic zones, further exploratory RC holes have been drilled, all of which encountered further mineralization.

In 2022, 875 feet of RC drilling was completed that tested the magnetic anomalies identified during the ground magnetics survey. The assay values for copper, silver, lead, and zinc were consistent with previous drilling programs. Of particular interest are the results from drill hole RS22-02, which tested the western margin of a strong magnetic anomaly, assayed 7.62 metres of 142.7 g/t silver, 2.94% lead, and 1.54% zinc. Additionally, drill hole RS22-04 assayed 9.15 meters of 1.56 g/t gold and 0.32% copper, including 1.52 metres averaging 7.59 g/t gold and 0.58% copper.

Navarre Creek - Volcanic-Hosted Gold Project

The Navarre Creek claim block is located approximately eight kilometres west-northwest of the Empire open pit mine, and was acquired in 2019 as a gold exploration project with surface mineralization similar to volcanic-hosted gold mineralization in northern Nevada, which is home to several multimillion-ounce gold deposits.

During the summer of 2020, the Phoenix exploration team mapped and sampled the Company's Navarre Creek property. 90 rock chip and grab samples were collected in the hydrothermally altered volcanic rocks that make up the Navarre Creek claims and sent to ALS Laboratories in Reno, Nevada for geochemical analysis.

Of the 90 samples, 53 were above the detection limit for gold with a high of 0.569 g/t, and 25 above the detection limit for silver. There was also a strong correlation between elevated gold values and elevated antimony values, typical in Carlin-type epithermal gold systems. With the exception of one sample, all samples with a gold value greater than 0.1 g/t occur within the same alteration type, that being predominantly a jasperoid-hosted quartz stockwork and micro-veining system. During 2021, a total of 169-line kilometres of ground-based field magnetics and airborne hyperspectral imaging were completed for the entirety of the Navarre Creek claim block. Two distinct intrusive bodies were identified, partially concealed below glacial till, showing strong magnetic signatures which complement the existing jasperoid outcrops. A northeast trending corridor of hydrothermal alteration, approximately 2.3 miles long and one mile wide, was also identified, consistent with the gold and silver bearing volcanic systems associated with Carlin-style epithermal deposits.

Markers for Carlin-style gold deposits are the presence of jasperoids, and the association of gold, antimony, silver and zinc. These markers are found at Navarre Creek. The results of these surveys, together with the results of previous exploration, highlight the prospectivity of the claim block. An initial drilling program is planned to commence in summer 2023.

Empire Mine Expansion - Horseshoe, Whiteknob, and Windy Devil

We have made a point of focusing our efforts on our flagship Empire Mine projects. However, we have also increased our land position from time-to-time as our geologists recognize prospective and strategic opportunities. At the time of the Company's IPO in mid-2017, our Empire Mine property consisted of 818 acres. Since then, including the Navarre Creek claim block, we have increased the core Empire claim group to 8,034 acres (32.51 sq kms) by expanding north to the former Horseshoe and Whiteknob Mines and onto Windy Devil. This expansion covers approximately 30 historic adits, shafts and prospects, which exhibit geology and mineralogy similar to Red Star, and which will be the subject of further exploration going forward.

Idaho Cobalt Belt - Redcastle and Bighorn Projects

The Company owns two strategically located properties on the Idaho Cobalt Belt in Lemhi County, Idaho, Redcastle and Bighorn. In May 2021, the Redcastle holding was signed to an earn-in agreement with Electra Battery Materials Corporation (formerly First Cobalt Corporation), the Toronto-based owner of the Iron Creek Cobalt Mine, which shares a common border with the Redcastle property. The earn-in agreement included an initial payment of cash and Electra shares to Phoenix, followed by two work commitments of $1,500,000 each over a five-year period, enabling Electra to earn a 75% interest in the Redcastle property. Redcastle is held by Borah Resources Inc, the Company's 100% owned, Idaho registered subsidiary.

The Bighorn property, located on the northern end of the Idaho Cobalt Belt, is held by Salmon Canyon Resources, another 100% owned, Idaho registered subsidiary. Bighorn is situated east of the historic Salmon Canyon copper cobalt underground mine and shares a common border with New World Resources' Colson cobalt-copper project.

In addition to copper, cobalt is a critical metal for electric vehicles and global electrification projects. Cobalt deposits are rare, particularly in advanced jurisdictions. The Company's cobalt projects are located in the USA's only prospective cobalt region, the Idaho Cobalt Belt, approximately 100 miles north of the Empire Mine. In 2018, we announced the results of our 2017 reconnaissance program of 46 surface grab samples which gave cobalt values ranging from two parts per million to 0.31% cobalt.

Outlook

2022 was a year of extremes. Copper rose to a high of $5.02/lb, dropped 35% to $3.23/lb, and rebounded to close the year at $3.81/lb, still above the three-year average of $3.67/lb. Gold traded at $2,033 per ounce ("/oz") in Q1, retreated to $1,659/oz, and finished the year at $1,824/oz. As of Q2 2023, gold is back to $2,033/oz, a mere 1.5% from its all-time record high. Similar to the year's metal pricing, the pricing of the goods that we require for construction of the Empire Mine also faced extreme fluctuations. While we will be a primary producer of copper and precious metals, we will also be a primary consumer of diesel fuel, structural and fabricated steel, concrete, and chemical reagents. Metal prices are our primary concern, but those materials and consumables required for construction and operations are of prime importance as they ultimately drive the cost of production and have the greatest impact on our bottom line. Diesel fuel hit an all-time high in 2022, as did structural steel, concrete, lumber, and reagents. The good news is that consumables pricing appears to have peaked mid-year and the metals markets trended the opposite direction. While the costs for structural steel and some fabricated goods remain elevated, they are slowly returning to levels not seen since early 2021. The labor shortages for drilling and laboratory services also remain a concern but seem to be relaxing as government subsidized Covid programs wind down.

I believe that some market volatility will remain until the war in Ukraine reaches a conclusion and fears of economic recession wane, but we are seeing indications of normalization in the mining sector markets and fewer labour shortages in the manufacturing and fabrication sectors. I look forward to the day when Covid is no longer an excuse for market volatility. It appears that may now be the case sooner rather than later.

Despite all of this, the fact remains that copper is in the top three of the most consumed metals in the world, trailing only behind iron and aluminum. The heavy focus on green energy metals for power generation, transmission, and transportation will increase demand, as we are already beginning to realize. Clean energy initiatives in the United States, Canada, and Europe have already begun to drive demand for copper, cobalt, and lithium. As other countries develop similar initiatives, demand will outweigh global supply. Some analysts are estimating copper demand to exceed supply beginning as early as 2024. Should the war in Ukraine begin to resolve, the reconstruction of the country will place an additional demand on metal resources. 

Although the copper price has decreased on the year, it remains significantly higher than in the few years preceding Covid, during which the average price was below $3.00/lb. Compared to those years, the copper market continues to perform well, with prices holding above $3.50/lb and cobalt above $55,000/tonne. I expect to see the metals markets, particularly copper and cobalt, continue to perform well as the EV and "green energy" initiatives continue to grow globally. I also expect that the spending on the 10-year, $1.2 trillion US Infrastructure Bill and the recently introduced U.S. Defense Production Act will increase metal demand and boost pricing in the short term. The roughly $550 billion earmarked for the construction of roads, bridges, ports, power transmission, and large water projects, as well as advancing EV initiatives, will require significant quantities of metal.

Our Idaho projects host both EV metals and precious metals. Our current metallurgical test work, which is focused on the economic recovery of copper, gold, and silver in a single processing circuit, will be designed to deliver crucial metals to the numerous infrastructure and green energy projects in the global pipeline at the lowest cost possible. Our story becomes even stronger with the realization that these resources are all located in known mining districts in the geopolitically stable, pro-mining jurisdiction of Idaho, USA.

I fully anticipate that market conditions and pricing will continue to fluctuate to some extent over the next year. However, the timing of stabilizing trends in the manufacturing and supply sectors, as well as elevated copper and gold prices, should complement our projects as we complete the engineering and environmental permitting processes.

Key Performance Indicators ("KPIs")

To date, the Group has focused on the delivery of the project evaluation work programs to assess the available mineral resources and the extraction methods to apply, each within the available financial budgets. This work will continue until the relevant feasibility studies are completed, and construction commences.

At that stage, the Group will consider and implement appropriate operational performance measures and related KPIs as the objective of recommencing commercial production at the Empire Mine nears fruition.

Conclusion

We continue to perform the steps necessary for Phoenix to become one of the next domestic US producers of metals vital to the transportation, manufacturing, and energy sectors in the US and abroad. Our team of engineers, geoscientists, and industry consultants are poised to move the Empire Mine into production and to properly explore the Navarre Creek, Red Star, and the Empire sulphides projects.

I would like to thank all our professional staff, consultants and advisors, all of whom work tirelessly to accomplish our common goal of metal production. And I would like to thank our community liaisons, shareholders, and directors for their considerable support. I look forward to reporting further positive news as we continue our exploration and development programs during 2023.

Ryan McDermott

Chief Executive Officer

24 May 2023

Significant non-cash transactions:

During the year the Directors capitalised $nil (2021: $79,350) of fees into shares. $143,888 (2021: $517,184) in respect of the charge for share-based payments and $nil (2021: $500,000) in respect of deferred consideration have been capitalised into mining property. Loss before tax includes a foreign exchange loss of $564,353 (2021: gain of $173,358).

Basic earnings per share amounts are calculated by dividing net loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Where the Group has incurred a loss in a year the diluted earnings per share is the same as the basic earnings per share.

The Company has potentially issuable shares of 13,746,457 (2021: 18,602,920) all of which relate to the potential dilution in respect of warrants and share options issued by the Company.

Mining property assets relate to the past producing Empire Mine copper - gold - silver - zinc project in Idaho, USA. The Empire Mine has not yet recommenced production and no depreciation has been charged in the statement of comprehensive income. There has been no impairment charged in any period due to the early stage in the Group's project to reactivate the mine.

Exploration and evaluation expenditure relates to the Bighorn and Redcastle properties on the Idaho Cobalt Belt in Idaho, USA. The Bighorn property is owned by Salmon Canyon Resources Inc. The Redcastle property is owned by Borah Resources Inc. Both companies are wholly owned subsidiaries of KPX Holdings Inc, a wholly owned subsidiary of the parent entity, and each of which are registered and domiciled in Idaho. The Redcastle property is subject to an Earn-In Agreement with First Cobalt Idaho, a wholly owned subsidiary of Electra Battery Materials Corporation of Toronto, Canada.

There were no receivables that were past due or considered to be impaired. There is no significant difference between the fair value of the other receivables and the values stated above. The preliminary bond issue expenses relate to the corporate copper bonds issue currently underway, and will be deducted from the proceeds of the bonds and amortised over the expected life of the bonds.

In May 2021 the Group entered into an earn-in agreement with First Cobalt Idaho, a wholly-owned subsidiary of Toronto-based Electra Battery Materials Corporation ("Electra"), in respect of the Group's Redcastle cobalt property on the Idaho Cobalt Belt. The Group received consideration of $50,000 and 11,111 shares (as consolidated) in Electra valued at $56,340, a total initial consideration of $106,340.

The shares have been valued at market price as at 31 December 2022. A fair value adjustment of $37,777 has been charged to other operating expenses.

In April 2021 the Group entered into an agreement with Mackay LLC to acquire 1% of the 2.5% net smelter royalty payable on mining leases on the Empire Mine in Idaho, USA. Total consideration payable to Mackay LLC was $800,000, of which $300,000 has been paid. $250,000 was paid in January 2023 and one further payment of $250,000 is due on 31 December 2023.

There has been no change to provisions in the year ended 31 December 2022.

The provision of $100,000 for decommissioning the Empire Mine is based on the directors' estimate after taking into account appropriate professional advice.

The other provision of $657,702 arises from a business combination in 2017 and comprises potential royalties payable in respect of future production at the Empire Mine. This liability will only be payable if the Empire Mine is successfully restored to production and will be deducted from the royalties payable. The amount of the provision will be reassessed as exploration work continues and also on commencement of commercial production.

The Company does not have an authorised capital and is authorised to issue an unlimited number of no-par value shares of a single class.

In the year the Company issued 5,212,942 ordinary shares at an average issue price of $0.27 per share to raise $1.4 million in respect of warrants exercised. All issued shares were fully paid.

Since the year end the Company has issued a further 50,000 ordinary shares at $0.22 per share from the exercise of warrants. The Company currently has 122,678,622 ordinary shares in issue.

The ordinary shares in the Company have no par value. All ordinary shares have equal voting rights in respect of shareholder meetings. All ordinary shares have equal rights to dividends and the assets of the Company.

The Company has issued warrants to subscribe for additional shares. Each warrant provides the right to the holder to convert one warrant into one ordinary share of no-par value at exercise prices ranging from £0.16 to £0.50. At 31 December 2022 the number of warrants in issue was 7,521,457 (2021: 12,577,920).

The Company has issued options to subscribe for additional shares to the directors and senior employees of the Group. Each option provides the right to the holder to subscribe for one ordinary share of no par-value, subject to the vesting conditions, at exercise prices ranging from £0.17 to £0.50. At 31 December 2022 the number of options in issue was 6,225,000 (2021: 6,025,000).

The Company has issued 7,521,457 (2021: 12,557,920) warrants to subscribe for additional share capital of the Company. Each warrant entitles the holder to subscribe for one ordinary equity share in the Company. The right to convert each warrant is unconditional. 

Additionally, the Company has issued 6,225,000 (2021: 6,025,000) share options to directors and senior employees of the Group. Each share option entitles the holder to subscribe for one ordinary equity share in the Company once the vesting conditions have been satisfied.

In the periods presented the Company has settled remuneration liabilities by the issue of equity in lieu of cash payments for services and has also operated equity-settled share based incentivisation schemes for employees.

Equity-settled share-based payments are measured at fair-value (excluding the effect of non-market-based vesting conditions) as determined through use of the Black-Scholes technique, at the date of issue. The warrants were issued as exercisable from the date they were issued and there are no further vesting conditions applicable.

The total share-based payment charge for all warrants and options in the year was $211,706 of which $67,818 has been charged to profit and loss and $143,888 allocated to Mining Property (2021: $709,040, $191,856 and $517,185 respectively). The share-based payment charge was calculated using the Black-Scholes model. All warrants issued vest immediately on issue. Share options vest up to a 36-month period from the date of issue, or on the achievement of certain vesting milestones.

Volatility for the calculation of the share-based payment charge in respect of both the warrants and the share options issued was determined by reference to movements in the Company's quoted share price on AIM. 

The inputs into the Black-Scholes model for the warrants and share options issued were as follows:

The warrants were all issued on 1 September 2022. The share price at the date of grant was £0.23. The warrant exercise prices at the date of grant were between £0.35 to £0.50. The share options were issued in one placement on 1 September 2022 with weighted average expected lives of 2.0 years. The share price at the date of grant was £0.23 and the exercise price was £0.30. The warrants issued are all exercisable from the date of issue. The number of outstanding share options are exercisable between £0.30 to £0.50.

The volatility for the warrants issued was 60.9%. The fair-values of warrants issued or amended in the year ranged from £0.009 to £0.226. The volatility for the share options was 60.9% and the fair-values of the options issued or amended ranged from £0.055 to £0.092. The expected life of the outstanding warrants and options ranged from 1.00 to 2.00 years.

The share-based payment charge has been simultaneously credited to retained deficit.