Strategic Minerals Regulatory News (SML)

This Announcement contains inside information for the purposes of the UK version of the market abuse regulation (EU No. 596/2014) as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR").

29 June 2021

STRATEGIC MINERALS PLC

("Strategic Minerals" or the "Company")

Financial Results for the Year Ended 31 December 2020

A full copy of the Company's annual report and accounts (including tables and/or diagrams referred to in this release) is available through the Investor Centre of the Company's website (https://www.strategicminerals.net/investors/reports-and-circulars.html).

Copies of the Annual Report and accounts for the year ended 31 December 2020, will be posted tomorrow to shareholders who have elected to receive a hard copy.

Financial Highlights

· 2020 Group before tax profit was up $1.295m to $0.450m from a before tax loss of $0.845m in 2019.

· Net Cash generated from operating activities for 2020 was up $0.942m to $0.929m from 2019 net cash used in operating activities of $0.013m.

· During 2020, Southern Minerals Group received a $0.046m Covid -19 government grant which was used to partially offset direct payroll costs.

· During 2020, two capital raisings were undertaken producing a total of $2.256m (2019: $1.059m). The first completed in June 2020, raised £1,200,000 which was principally applied to extinguish the loan raised to complete the full acquisition of Cornwall Resources Limited, the holder of the Redmoor Tin and Tungsten project. A second raising of £700,000 was completed in December 2020 with the funds being raised to fund fixed asset acquisition at Cobre and to progress both the Leigh Creek Copper Mine and Redmoor Tin and Tungsten projects.

· Unrestricted cash position of the Group at 31 December 2020 was $0.833m (2019: $0.519m).

Operational Highlights

· Sales at Cobre were maintained during the pandemic and increased by over 20% in 2020 to $3.025m from $2.488m in 2019 (excluding the $0.900m booked as sales to CV Investments LLC ("CVI") reflecting the take up of deposits made in relation to its sales contract).

· Access to the Cobre magnetite stockpile was rolled over for the eighth time in 2020 and has been rolled over again in 2021.

· Southern Minerals Group continues to liaise with the receiver for CVI in relation to its substantial arbitrated award against CVI. Due to the circumstances surrounding CVI and its placement into receivership, the Board continues to take a precautionary view in relation to the timing and amount that may ultimately be received, thus no amounts in relation to the arbitrated award have been recognised.

· Submission of a Program for Environment Protection and Rehabilitation ("PEPR") to the South Australian government was lodged on 10 September 2020 and a response requesting clarification of certain issues was received on 23 December 2020. A reply, providing the requested information to restart full operations at LCCM in 2020, was lodged on 30 March 2021, with a follow up response in June 21. The Board considers that a decision on the PEPR application is expected by the end of July 2021. Accordingly, the Board believes that the project, subject to raising finance of circa $2.2m (AUD $3.2m), should be operational and producing revenue in 2021.

· Despite restrictions arising from the global pandemic, the Cornwall Resources Limited's ("CRL") team pushed on with applications designed to move the Redmoor Tin and Tungsten project forward. Notably, their work with the Deep Digital Cornwall project, led by the University of Exeter's Camborne School of Mines, in which CRL and Cornish Lithium are delivery partners, helped to succeed in the project, in early 2021, being awarded funding by the European Regional Development Fund, through HM Ministry of Housing, Communities and Local Government. This grant will result in CRL's Redmoor exploration licence area being used as a field laboratory for collection of geochemical and geophysical data, which will also provide CRL with information relevant to a number of new prospects within its Mineral Rights. For its part in the project, CRL is to be progressively reimbursed up to £446,063 of grant funding provided it incurs a minimum, expenditure of £557,579.

· The Company's strategy to focus on metals and minerals likely to benefit from expected supply and demand imbalances has been validated in both 2020 and early 2021 as commodity prices, especially for copper and tin show strong growth and have market analysts predicting even stronger future price growth. Accordingly, this has greatly increased underlying project valuations at both LCCM and CRL.

Notes to Editors

Strategic Minerals plc is an AIM-quoted, profitable operating minerals company actively developing projects tailored to materials expected to benefit from strong demand in the future. It has an operation in the United States of America along with development projects in the UK and Australia. The Company is focused on utilising its operating cash flows, along with capital raisings, to develop high quality projects aimed at supplying the metals and minerals likely to be highly demanded in the future.

In September 2011, Strategic Minerals acquired the distribution rights to the Cobre magnetite tailings dam project in New Mexico, USA, a cash-generating asset, which it brought into production in 2012 and which continues to provide a revenue stream for the Company. This operating revenue stream is utilised to cover company overheads and invest in development projects orientated to supplying the burgeoning electric vehicle/battery market.

In May 2016, the Company entered into an agreement with New Age Exploration Limited and, in February 2017, acquired 50% of the Redmoor Tin/Tungsten project in Cornwall, UK. The bulk of the funds from the Company's investment were utilised to complete a drilling programme that year. The drilling programme resulted in a significant upgrade of the resource. This was followed in 2018 with a 12-hole 2018 drilling programme has now been completed and the resource update that resulted was announced in February 2019. In March 2019, the Company entered into arrangements to acquire the balance of the Redmoor Tin/Tungsten project which was settled on 24 July 2019 by way of a vendor loan which was fully repaid on 26 June 2020.

In March 2018, the Company completed the acquisition of the Leigh Creek Copper Mine situated in the copper rich belt of South Australia and brought the project temporarily into production in April 2019. The project currently awaits clearance from the South Australian Government of its lodged Program for Environmental Protection and Rehabilitation (PEPR).

 FORWARD-LOOKING STATEMENT

This Report and Financial Statements for the year ended 31 December 2020 ("Annual Report") contains 'forward-looking information', which may include, but is not limited to, statements with respect to the future financial and operating performance of Strategic Minerals Plc, its subsidiaries, production and exploration operations and affiliated companies, the future price of magnetite/iron ore, the estimation of mineral resources, the realisation of mineral resource estimates, costs of production, capital and exploration expenditures, costs and timing of the development of new deposits, costs and timing of the development of new mines, costs and timing of future exploration, requirements for additional capital, governmental regulation of mining operations and exploration operations, stockpile and tailings dam operations, timing and receipt of approvals, licenses, permits, conversions and ongoing approvals to operate exploration activities, stockpile and tailings dam operations under the United States of America, Australia and other applicable mineral legislation and environmental legislation, environmental risks, title disputes or claims, limitations of insurance coverage and the timing and possible outcome of pending litigation and regulatory matters.

Often, but not always, forward-looking statements can be identified by the use of words such as 'plans', 'expects', 'is expected', 'budget', 'scheduled', 'estimates', 'forecasts', 'intends', 'anticipates' or 'believes', or variations (including negative variations) of such words and phrases, or state that certain actions, events or results 'may', 'could', 'would', 'might' or 'will' be taken, occur or be achieved. Forward- looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of Strategic Minerals Plc and/or its subsidiaries, investment assets and/or its affiliated companies to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

Such factors include, among others, general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; stockpile processing/tailings dam operations; conclusions of economic evaluations and studies; fluctuations in the value of UK pounds sterling relative to the United States Dollar, Australian Dollar and other foreign currencies; changes in project parameters as plans continue to be refined; future prices of magnetite/iron ore; possible variations of ore grade or recovery rates; failure of plant, logistics providers, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; political instability, insurrection or war; the effect of illness on labour force availability and turnover; delays in obtaining governmental approvals or financing or in the completion of development or construction activities. Although Strategic Minerals Plc has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may well be other factors that cause actions, events or results to differ from those currently anticipated, estimated or intended.

Forward-looking statements contained herein are made as of the date of this Annual Report and Strategic Minerals Plc disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty therein.

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2020

I am pleased to present Strategic Minerals Plc's Annual Report for the year ended 31 December 2020.

In 2020, the Group improved comprehensive income by $2.093m having made a 2020 total comprehensive income of $1.090m as compared to a 2019 comprehensive loss of $1.003m, after allowing for a $1.122m impairment loss.

The Group had unrestricted cash of $0.833m as at 31 December 2020 (2019: $0.519m).

In 2016, the Company's board took the decision to invest in the Redmoor Tin and Tungsten project ("Redmoor") as it considered the long-term outlook for commodities, notably tin, was compelling. Initially, the Company owned 50% of Cornwall Resources Limited (CRL), the holder of Redmoor. Subsequently, the Company moved to full ownership of CRL. This reflected contemporaneous market studies highlighting the expected growth in demand for tin and concomitant increases in tin prices.

In 2017, the Board, whilst recognising the longer-term intrinsic value of Redmoor, felt that the Company could strategically benefit from the development of a second near-term cash generating project, bridging the gap between its operating asset and the delivery of Redmoor. The Board's analysis of the market indicated that copper, in particular, appeared to reflect the long-term demand and supply characteristics the Board's strategy revolved around. In line with this focus, the Company began negotiations for the acquisition of a suitably sized copper project likely to generate a second, near-term income stream. Ultimately, this led to the Company, in 2018, acquiring all of Leigh Creek Copper Mine Pty Ltd ("LCCM"). This has strategically set the Company up as follows:

[Diagram to be found on the Company's website at https://www.strategicminerals.net/investors/reports-and-circulars.html ]

The global pandemic made 2020 a difficult year, especially in relation to project development. In light of the pandemic, the Board reviewed its operating procedures to ensure the protection of all stakeholders (employees, Directors, clients, local communities). Through adaption of contactless operating procedures at the Cobre magnetite stockpile, the Company's wholly owned subsidiary, Southern Minerals Group ("SMG"), was able to maintain continuous contactless operations throughout the year and, furthermore, has been able to show more than a 20% increase in underlying sales.

SMG continued the work commenced in 2019 to obtain an arbitrated claim against its client, CV Investments, in relation to their unfulfilled sales contract. Whilst an arbitration decision for $21.9m was forthcoming, the fact that CV Investments and associated companies were being investigated by the American Securities and Exchange Commission, who appointed receivers to CV Investments, does further complicate the process and ultimate recovery of funds. However, SMG and the Company's Managing Director continue to follow up on this process in expectation that SMG will receive some funds from the receivership, although the magnitude and timing is unknown, and the Company is not factoring any amount into its budgets.

During 2020, LCCM worked with the South Australian Department of Energy and Mines seeking to obtain a Program of Environmental and Protection and Rehabilitation ("PEPR") approval for its Paltridge North deposit. Initially, a draft was provided to the Department and subsequently, in September 2020, a formal submission of a PEPR application occurred. A response, requesting additional information and clarification, was received late December 2020. This information was formally submitted in late March 2021 and June 21, after further consultation with the Department. A decision on the PEPR application is expected by the end of July 21.

With the global pandemic putting capital markets under pressure, the Company considered that its share price did not fully reflect its underlying asset values and that, in order to progress both the Redmoor and Leigh Creek Copper Mine projects, funding at the asset level was preferable. In this regard, the Company reviewed the economic evaluation of Leigh Creek Copper Mine, updating it for the results of metallurgical testing and an independent review by PPM Global of the capital cost associated with establishing processing capacity at the Lynda/Lorna Doone deposit. The result of this review was published in November 2020 and has been subsequently used to market the project.

In line with the Board's decision to seek a joint venture partner to progress the Redmoor project, the Company employed Wardell Armstrong International to update the project's scoping study and, in October 2020, published their findings which confirmed that changes to the proposed mining schedule can successfully bring forward high-grade production from mineralisation, as defined during CRL's most recent drill programme and mineral resource estimate. This update reported a significant uplift in the project's economic results when compared with 2019 results.

The 2020 year saw the repayment of debt associated with the acquisition of the balance of CRL. The Board remains committed to utilising cash flows from operations to progress its projects and seeks to minimise dilution where possible. As shown in the following diagram, some cash flows expected from LCCM in the near future are expected to be recycled in developing Redmoor

[Diagram to be found on the Company's website at https://www.strategicminerals.net/investors/reports-and-circulars.html ]

At a time when market analysts are highlighting an expected future tin supply shortage, it has been reassuring that the global significance of the deposit at Redmoor (inferred resource of 11.7mt at a tin equivalent (SnEq) of 1.17%) is starting to be understood as shown in the following chart.

[Diagram to be found on the Company's website at https://www.strategicminerals.net/investors/reports-and-circulars.html ]

The extraordinary challenges to world markets in 2020, due to Covid-19, resulted in significant volatility in capital markets and company valuations. The Board's first priority has been to the safety and health of our people and the continued resilience of the Group's operations. Despite these challenges the demand for product from our Cobre operations grew and continues to remain strong, with no impact from the change of Government in the US. The Company believes that, subject to finance, it is in a position to move forward with operations at LCCM and, subsequently, the exploration and development of Redmoor. As confidence returns to the commodity markets, the underlying valuation of the Company's assets continue to build and remain strong. The continued cashflow from our Cobre asset along with the developed nature of our projects, places the Company in a good position to benefit from improved international commodity prices.

I consider that the commencement of a second income stream in 2021 will see a significant improvement in the market's perception of the value of the Company and I look forward to working with my fellow Directors and the staff of the Company to ensure that the 2021 financial year delivers.

Finally, I would like to acknowledge the support of our shareholders, suppliers and other stakeholders and I look forward to your continued support during 2021 and beyond.

Alan Broome AM

Chairman

28 June 2021

STRATEGIC REPORT

FOR THE YEAR ENDED 31 DECEMBER 2020

The Directors of the Company and its subsidiaries (which together comprise the Group) present their Strategic Report on the Group for the year ended 31 December 2020.

Financial Performance

The Company and the Group's reporting currency is US dollars reflecting that, previously, the Group's revenues, expenses, assets and liabilities were predominately in US currency and, currently, the bulk of revenues continue to be sourced in US dollars.

The Group substantially improved profit before tax by $1.295m in the 2020 financial year to $0.450m (2019: loss before tax of $0.845m). After allowing for exchange gains arising on translation of foreign operations, the Group produced a total improvement in comprehensive income of $2.093m to $1.090m (2019: comprehensive loss $1.003m).

Taking into account material non-cash items, profit before tax improved by $0.974m during 2020 as shown in the following table:

Throughout 2020, despite changes in the market environment from the global pandemic, the Company's Cobre operation managed to continue, and in fact grow. The cash flow derived during the first half of 2020 was particularly important to the Company as access to equity funding was temporarily suspended as capital markets initially shut down to assess the impact of the global pandemic. During 2020 SMG received a $0.046m non-refundable Covid 19 related government grant to assist with payroll expenses. Note 7 for further information in relation to this grant.

Group overheads for 2020 were significantly reduced by $0.394m (22%) to $1.872 ($2.266m in 2019). The Board and management continue to closely monitor overheads and administration costs to ensure they are appropriately in line with operations. The lower group overheads reflected both reduced remuneration and reduced activity associated with the global pandemic.

In January 2020,the group earned other income of $0.155m from the sale of a small portion of CRL's mineral rights. The area sold does not feature in CRL's resource statement and, to date, there is no data produced to indicate economically viable material either exists or does not exist there.

SMG incurred a tax expense of $0.236m (2019: $0.385m) for the year. However, the remainder of the Group continues to generate tax losses.

During 2020, project investing activity totalled $0.558m (2019: $2.564m). The significantly lower level of activity reflected the fact that 2019 included the acquisition of the balance of Cornwall Resources Limited and exploration/development activity was significantly curtailed due to the global pandemic. 

In order to finance the development of the Company's projects, the Company undertook two equity raises in 2020. The June 2020 raise had initially been planned for March 2020, after the rollover of access to the Cobre stockpile, However, the onslaught of the global pandemic in March and the effect it had on global capital markets, resulted in the Board deferring the capital raise until June 2020.

Net cash used by financing activities was ($0.060m) (2019: net cash generated from financing activities was $1.253m) reflecting net capital raising of $2.256m (2019: $1.059m) and principally offset by net repayments of borrowings of $2.139m (2019: proceeds from borrowings of $0.194m)

Cash at the end of the year was $0.833m (2019: $0.519m).

PROJECT REVIEW AND ACTIVITIES

Cobre Performance

The 2020 year continued to be a profitable year for domestic sales. A total of 51,518 short wet tons of magnetite were sold resulting in gross sales of $3.025m compared to 2019 when 42,517 short wet tons were sold for $2.488m (excluding the $0.900m of deposits booked to sales as a result of CV Investments forfeiture of deposits).

With the onslaught of the global pandemic, operating practices at Cobre were reviewed and modified to create a contactless workflow. The Board wishes to acknowledge the excellent efforts of the Southern Minerals Group team in maintaining operations, and cashflow, during this critical period in the Company's history. Close monitoring of operations continues to ensure adequate service to customers and safe operating conditions.

This year saw SMG's arbitrated claim for the breach of the contract with CVI Investments finalised for in excess of $21m. However, the US Securities Exchange Commission has had a Receiver appointed to CVI Investments in relation to irregularities associated with the company and its affiliates activities. Accordingly, it is uncertain as to the capacity of CVI Investments to pay any amount deemed appropriate by the independent arbitrator. SMG is in contact with the Receiver and continues to pursue this claim against CV Investments. 

SMG's formal access to the Cobre mine magnetite stockpile has now been extended until March 2022 making this the ninth roll-over to date. The Company is currently unaware of any likelihood that SMG's access to the magnetite stockpile at Cobre will not be rolled over in the future.

SMG continues to have an exemplary safety record and has developed an enviable culture that reinforces the highest of safety standards.

Leigh Creek Copper Mine Pty Ltd ("LCCM")

In 2017, the Company identified a need for a second near-term income stream. In line with its strategy to seek out projects that were exposed to minerals and metals believed to benefit from perceived demand and supply imbalances, the Company identified the LCCM project, a historically mined copper oxide deposit. Since acquiring the project in 2018, the Company has invested in a temporary restart of operations to test existing operating capacity and in preparing and submitting a Programme for Environmental Protection and Rehabilitation ("PEPR") in relation to its Paltridge North deposit. The Company's efforts in this regard have moved the project close to a full restart that is expected in 2021, after the approval of the PEPR and subject to finance.

LCCM has three approved Mining Leases that cover a number of copper oxide deposits, including Lorna Doone, Lynda, Mountain of Light (Rosmann East and Paltridge North) and the Mount Coffin deposit. All the Mineral Resources are contained within the Mining Leases. They contain a total resource of 3.61mt @ 0.69% copper for 24,900 of copper metal forms the base of the project and includes the following Resource category breakdown.

An existing heap leach and Kennecott cone-based copper processing facility is located at the Mountain of Light deposit (adjacent to Rosmann East and nearby Paltridge North) and was successfully operated for a short period in 2019 to test its capacity to resume full time operations.

The region around the project has excellent infrastructure with a modern town (Leigh Creek), sealed airstrip, sealed and all-weather roads, power and water utilities.

In addition to the Mining Leases, two approved Exploration Leases, covering an area of 686km² in the northern Flinders Ranges, are included in the project. These provide excellent opportunities for exploration of new copper oxide resources.

Copper prices have had a stellar performance in late 2020 and early 2021. Given that the acquisition of LCCM was based on a copper price of USD $3-00 lb, the current copper price of over USD $4-00 lb has significantly improved the underlying valuation of LCCM.

In 2020, the Board considered that the global pandemic put capital markets under pressure and that the Company's share price did not fully reflect its underlying asset values. Accordingly, in order to progress the Leigh Creek Copper Mine project, funding at the asset level was preferable.

To prepare to approach potential joint venture partners, the Company updated the economic evaluation of Leigh Creek Copper Mine for the results of metallurgical testing and an independent review by PPM Global of the capital cost associated with establishing processing capacity at the Lynda/Lorna Doone deposit. The result of this review below was published in November 2020 and has formed the basis for discussions with potential joint venture partners.

The November report also included a high-level review, conducted by PPM Global, that confirmed the potential for alternate processing at the Lynda/Lorna Doone deposit, via either a mini-Solvent Extraction Electro Winning (SX-EW) plant or a copper sulphate plant, and identified that either approach could result in a significant increase in project profitability, albeit with a concomitant increase in capital expenditure.

The review indicated that processing using a mini SX-EW plant had the potential to produce London Metal Exchange ("LME") grade copper cathode for direct sale the broader market, and would;

(a) result in an approximate 18% increase in sales revenue and significantly reduce operating costs and 

(b) require significantly higher levels of capital investment, an additional US$7.2m.

Overall, the adoption of processing the Lynda/Lorna Doone deposit using a mini SX-EW plant would result in an increase in project profitability in the order of US$19.6m.

The review also indicated that processing the Lynda/Lorna Doone deposit using a copper sulphate plant, to supply Australian demand, would;

(a) result in an approximate 20% increase in sales revenue and reduced operating costs: and

(b) require higher levels of capital investment, an additional US$4.5m.

Overall, the adoption of processing the Lynda/Lorna Doone deposit using a sulphate plant would result in an increase in project profitability in the order of US$18.5m.

Cornwall Resources Limited - Redmoor Tin and Tungsten Project

In 2019, SML acquired full control of Cornwall Resources Limited ("CRL"), the holder of the Redmoor Tin and Tungsten Project. The move to acquire the balance of CRL was based on the Board's perception of the value of the acquisition and its concern that the then current joint venture partner would not have the resources to continue forward movement with the project in a timely manner.

This 2019 resource update demonstrated that the overall inferred resource had increased from the previously assessed 4.5m tonnes at a tin equivalent ("SnEq") of 1.00% to 11.7m tonnes at 1.17% SnEq. The result was a 200% increase in contained metal, 160% in resource tonnes and 0.17% in the tin equivalent grade over.

Not only has the resource been significantly expanded but, as shown in the diagram following, the mineralisation has been discovered in discrete locations giving rise to the ability to tailor mining and processing to preferred mineralisation at the time of extraction.

[Diagram to be found on the Company's website at https://www.strategicminerals.net/investors/reports-and-circulars.html ]

During 2020, the CRL team continued to develop the world class resource at Redmoor, by building awareness of the project, building/maintaining relationships with stakeholders (including landowners) and generating strategies to obtain the greatest value for the Company's investment. An option is being assessed to complete a limited exploration drilling program aimed at testing the potential to expand the significant resource already defined.

As previously discussed, the Board formulated the view that, in light of the uncertainty in capital markets associated with the global pandemic and its view that the market share price was greatly undervaluing the Company's assets, it should seek a joint venture partner to progress the Redmoor project. In preparation for this, the Company employed Wardell Armstrong International to update the Redmoor project's scoping study and, in October 2020, published their findings which confirmed that changes to the proposed mining schedule can successfully bring forward high-grade production from mineralisation, as defined during CRL's most recent drill programme and mineral resource estimate.

This update reported a significant uplift in the project's economic results when compared with 2019 results. Using the 2019 metal pricing, the project's post-tax IRR increased to 29% (previously 19%) and post-tax NPV @ 8% increased to US$128m (previously US$94m). Sensitivity analysis, using more conservative metal pricing, produced a post-tax IRR of 23.4%, with post-tax NPV of US$91m.

Central Australia Rare Earth Pty Ltd ("CARE") Tenements

During 2020, the Company began the process of releasing its CARE tenements back to the Western Australian State government. This is now complete.

Safety

The Company is pleased to report that, during 2020, there were no safety incidents (2019: nil) across its operations in United States, England, and Australia.

Board and Management Changes

There has been no change to the composition of the Board during 2020 and the current Board does not currently envisage a need for change. Management changes have been made in line with normal operations although all such changes are based around consultancy, rather than direct employment contracts.

Key Risks and Uncertainties

The management of the business and the execution of the Group's strategy are subject to a number of risks. Strategic Minerals regularly reviews the principal risks that face the business and assesses appropriate responses to mitigate and, where possible, eliminate potential adverse impact. There is the possibility that if more than one event occurs, that the overall effect of such events would compound the possible adverse effects on the Group.

Our principal risks and uncertainties are as follows: 

Commodity prices and currency risk

Although the Group's main income stream at Cobre is focused on localised markets, which minimises the impact of global commodity prices, the value of its development projects are subject to changes in global commodity prices. Fluctuations in commodity markets are affected by numerous factors beyond the Group's control, including global demand and supply, international economic trends, currency exchange fluctuations, expectations for inflation, speculative activity, consumption patterns and global or regional political events. In addition, the COVID-19 pandemic has increased price volatility. The aggregate effect of these factors is impossible to predict. Fluctuations in commodity prices, over the long term, may adversely impact the returns of the Group's investments. The Group monitors commodity prices and structures its portfolio of assets with commodities that are likely to appreciate in the medium to long term. During early 2020, the onslaught of the COVID-19 pandemic saw commodity prices hit hard, although its impact on the valuation of projects was partly offset by associated currency movements. Since this time, commodity prices associated with our major development assets have rebounded and are now significantly higher than prior to the commencement of the pandemic.

The Group reports its results in US Dollars, whilst the functional currency of the parent company from which the Group derives the majority of its funding is Pound Sterling. This may result in additions to the Group's reported costs. Fluctuations in exchange rates between currencies in which the Group invest, reports, or derives income may cause fluctuations in its financial results that are not necessarily related to the Group's underlying operations. The Group converts funds to a currency in which funds will be utilised on an as needed basis. The COVID-19 pandemic has seen greater volatility in exchange rates, but these have now reverted to levels used in the Company's financial evaluations.

Funding risk

Strategic Minerals needs funds, both to manage its working capital requirements and fund new projects, as the Company seeks to grow. If the Company is not able to obtain sufficient financial resources, it may not be able to develop new projects. There can be no assurance that such funds will continue to be available on reasonable terms, or at all in the future. The Directors regularly review cash flow expenditure requirements and the cash flow generated from its Cobre operation to ensure the Group can meet financial obligations as and when they fall due. Covid 19 has placed additional risk around the ability of the Group to access capital and debt markets. The first half of 2020, saw the capital markets severally impacted by the COVID-19 pandemic. Unfortunately, this coincided with the Company's need to raise capital to repay the loan associated with the acquisition of the balance of the Redmoor. As a result, the Company deferred a planned early March 2020 equity raise until June 2020.

Reserve and resource risk

The Mineral reserve and resource relating to CRL and LCCM are only estimates and no assurance can be given that the estimated reserves and resources will be recovered or that they will be recovered at the rates estimated. Reserve and resource estimates are based on sampling and, consequently, are uncertain because the samples may not be representative. Reserve and resource estimates may require revision (up or down) based on future actual production experience. The discovery of mineral deposits is dependent upon a number of factors including the technical skill of the exploration personnel involved.

The commercial viability of a mineral deposit, once discovered, is also dependent upon a number of factors, including the size, grade and proximity to infrastructure, metal prices and government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. There can be no guarantee that a mineral deposit will be economically viable. The Group undertakes studies in order to mitigate this risk.

Customer risk

The level of profitability of the Group is currently dependant on the performance of the Company's Cobre operation in the United States. The Cobre operation has a number of major customers and should one or more of these customers choose to not to purchase product it may have a substantial impact on the performance of the Group. The Group continues to look for additional customers at Cobre to address this risk and in addition will develop other projects such as Leigh Creek Copper Mine to reduce the risk of dependence on any one customer.

Operational risk

Mining operations are subject to hazards normally encountered in exploration, development, and production. These include unexpected geological formations, rock falls, flooding, dam wall failure and other incidents or conditions which could result in damage to plant or equipment, people, or the environment and which could impact any future production throughput. Although it is intended to take adequate precautions to minimise risk, there is a possibility of a material adverse impact on the Group's operations and its financial results. The Group will develop and maintain policies appropriate to the stage of development of its various projects. In 2020, as a safeguard to both our clients and staff, amendments were made to operational procedures to ensure that delivery of material was contactless.

Strategic risk

Significant and increasing competition exists for mineral acquisition opportunities throughout the world. As a result of this competition, the Group may be unable to acquire rights to exploit additional revenue generative assets such as Cobre and attractive mining development properties such as CRL and LCCM on terms it considers acceptable. Accordingly, there can be no assurance that the Group will acquire any interest in additional operations that would yield reserves or result in commercial mining operations. The Group expects to undertake sufficient due diligence to help ensure opportunities are subjected to proper evaluation.

Uninsurable risk

The Group may become subject to liability for accidents, pollution and other hazards against which it cannot insure or against which it may elect not to insure because of prohibitive premium costs or for other reasons, such as amounts which exceed policy limits.

Product risk

The Group has a contract for access to magnetite iron ore at the Cobre operation which automatically renews on the 1 March of each year unless either party terminates the agreement 30 days prior to renewal. There is a risk that the supplier may terminate the agreement in which case the Group would no longer have product to sell. So as to minimise this risk to the Group's management actively engages with its supplier throughout the year to proactively address any concerns that the supplier may raise.

An off-take arrangement is in place for the LCCM project which is subject to minimum product specifications. During 2019 the company was able to produce at specification material in its retreatment of heaps thereby substantially reducing the product specification risk.

Dependence on key personnel risk

The Group and Company are dependent upon the executive and local management teams. Whilst it has entered into contractual agreements with the aim of securing the services of these personnel, the retention of their services cannot be guaranteed. The development and success of the Group depends on the Company's ability to recruit and retain high quality and experienced staff. The loss of the service of key personnel or the inability to attract additional qualified personnel as the Group grows could have an adverse effect on future business and financial conditions. The Group incentivises executives and management with market-based remuneration packages, short term and long-term incentive schemes.

Climate Change Risk

While climate change considerations can seriously impact resource companies, the Company considers that there is little downside risk from these considerations, given the metals and minerals in its portfolio, and that these climate change considerations are likely to impact positively on commodity prices for both copper and tin.

Coronavirus Pandemic Risk

While the implications of the COVID-19 pandemic appear to be mitigating, it remains difficult to predict its future impact given the evolving nature of this issue and the varying reactions of governments around the world. The Board and management are continually reviewing the potential implications and undertakes contingency planning reviewing actions it may take to mitigate the risk. At the Company's Cobre operation, the Company continues to implement a policy whereby drivers of trucks picking up material do not exit the vehicle on site and screens have been put up for the transfer of documents to protect staff. The working at home policy introduced in 2019 continues, at the Company's operations in the United Kingdom and Australia, in line with those country requirements. The company continues to actively talk with advisors and potential partners to move the Company's projects forward, although this is predominately being undertaken remotely.

Key Performance Indicators

The Board monitors the activities and performance of the Group on a regular basis. The principal KPI's monitored by the Company are domestic sales of product from Cobre, the cash position of the Group, the investment in project activities, the share price of the Company and the health, safety and environmental incidents of the Group. 

The sales of domestic product at Cobre have been impacted by the major SMG client not honouring their contract to acquire a minimum monthly purchase (4,000 short wet tons) and has led to SMG seeking compensation for this through arbitration. Despite this, sales in 2020 improved by $0.537m to $3.025m (2019: $2.488m).

The unrestricted cash position of the group as at 31 December 2020 was $0.833m which increased from $0.519m from the previous year, principally as a result of the capital raises during year.

The share price of the Company at year end was 0.40p (2019: 0.68p). Directors have indicated their confidence in the future performance of the Company through on market acquisition of shares.

The group did not have not had any health and safety or environmental incidents during the year.(2019: nil)

Strategy

In early 2016, the Company adopted a strategy emphasising both an operating and investment strategy which is continued today.

The Operating Strategy is centred on maintaining and improving cash flows from the Company's magnetite stockpile at the Cobre mine in New Mexico, USA, whilst also limiting corporate overheads in line with this profitability, thus ensuring operating self-sufficiency.

The Investment Strategy is built around investment in projects that relate to metals expected to increase in demand and price over the medium term.

The Company is well positioned to execute its plans to restart full LCCM production and commence a Pre-Feasibility Study at Redmoor, subject to available funds.

Outlook and Prospects

The Company continues to maintain controls on its overheads, is focused on restarting production at Leigh Creek in 2021, securing and expanding Cobre's profitable domestic sales and developing the Redmoor Tin and Tungsten mine.

The Board is confident that the outlook for the Company is encouraging having weathered testing times in 2020 and has seen a significant improvement in early 2021. The Company is actively pursuing non-dilutive funding approaches, both joint venture and debt style, to progress both LCCM and Redmoor. The low holding cost of these projects, the absence of debt in the Company and the continued strong cash flow stream from Cobre, provides the Company the flexibility, when considering financing options, to extract maximum value from these investments.

Current expectations are that funding for LCCM can be sourced in line with the completion of the PEPR process (a decision on the PEPR application is expected by the end of July 21) and that production can commence in 2021. Regarding the Redmoor project, expected time frames here are longer with the next goal being the preparation of a pre-feasibility study to be followed by a bankable feasibility study. This is expected to take 4 to 5 years to complete both.

The start of 2021 has provided some optimism for the Company with commodity prices for both Copper and Tin performing strongly, significantly improving underlying valuations on the Company's assets. While Covid-19 continues to impact our developmental operations, the Board considers that the impact is likely to dissipate over the second half of 2021. A more detailed analysis of the impact of COVID 19 is include as part of the corporate governance statement.

Directors' section 172 statement

Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests of stakeholders and other matters in their decision making. The Directors continue to have regard to the interests of the Company's employees and other stakeholders, the impact of its activities on the community, the environment and the Company's reputation for good business conduct, when making decisions. In this context, acting in good faith and fairly, the Directors consider what is most likely to promote the success of the Company for its members in the long term. We explain in this annual report, and referenced below, how the Board engages with stakeholders.

Likely consequence of any decision in the long term

The Chairman's Statement, Strategic Report Business Strategy and the Corporate Governance Statement set out the Company's long-term rationale and strategy.

Interests of employees

The Employee section of the Company's Corporate Governance Statement sets out the Company's approach to the interests of its employees.

Foster business relationships with suppliers, customers and others

The Company's approach to business relationships with stakeholders and shareholders are set out in the Company's Corporate Governance Statement.

Community and environment

The Company's approach to the community is set out in the Corporate Governance Statement.

Maintain high standards of business conduct

The Corporate Governance Statement sets out the Board and Committee structures and extensive Board and Committee meetings held during 2020, together with the experience of executive management and the Board and the Company's policies and procedures.

Act fairly between shareholders

The Corporate Governance Statement sets out the process the Company follows to ensure it all shareholder interests are preserved and enhanced.

Principal Decisions made by the Board

We define principal decisions as both those that have long-term strategic impact and are material to the Group, but also those that are significant to our key stakeholder groups. In making the following principal decisions, the Board considered the outcome from its stakeholder engagement, the need to maintain a reputation for high standards of business conduct and the need to act fairly between the members of the Company:

(a) Commitment to creation of a second income stream at Leigh Creek

The Board considers the creation of a second income stream to the Company, particularly where the asset is owned and controlled by the Company, of extremely strategic importance to the Company. However, given the deterioration in the Company's share price through 2020, it has taken the strategic view that the progress of the Leigh Creek Copper Mine into production needs to be funded at the asset level either by debt or equity. Accordingly, the Board and Management have concentrated efforts in sourcing funding in parallel to the PEPR approval process.

(b) Debt reduction

The Board considered the repayment of the vendor finance used for the acquisition of the balance of shares in CRL should be equity funded to reduce risk of insolvency within the Company. This led to the need for an equity issue which was initially planned for March 2020, ahead of the CRL related debt repayment in June 2020. However, the global pandemic resulted in this decision being deferred until June 2020 when market conditions improved. 

(c) Progression of Redmoor Tin and Tungsten Project

After consolidating the acquisition of CRL, the Board focused its attention on securing an appropriately resourced joint venture partner that could assist the Company to progress the Redmoor project to the completion of a bankable feasibility study. In so doing, the Board considered that:

i) The Company should access strategic marketing guidance in securing a suitable joint venture partner. Accordingly, the Company employed NRG Capital to assist in locating and marketing to suitable, potential joint venture partners.

ii) In order to ensure that cash funding requirements were minimised, the Company accepted that it may, ultimately, retain less than a controlling interest in the project.

In making the above principal decisions, the Directors believe that they have considered all relevant stakeholders, potential impact and conflicts, the Company's business model and its long-term strategic objectives, and have acted accordingly to promote the success of the Company for the benefit of its members as a whole.

The Strategic Report was approved and authorised for issue by the Board of Directors and was signed on its behalf by:

John Peters

Managing Director

28 June 2021.

REPORT OF THE DIRECTORS

FOR THE YEAR ENDED 31 DECEMBER 2020

The Directors present their report and the audited financial statements for Strategic Minerals Plc ("the Company") and its wholly owned subsidiaries ("the Group") for the year ended 31 December 2020.

PRINCIPAL ACTIVITIES, BUSINESS REVIEW AND FUTURE DEVELOPMENTS

The Company is a public limited company registered in the UK whose registered office is 27/28 Eastcastle Street, London, W1W 8DH.

The principal activity of the Company is a holding company. The principal activity of the Group is the exploration, development, and operation of mining projects.

A review of the Group's business during the financial year and its likely development is given in the preceding Chairman's Report and Strategic Review.

RESULTS AND DIVIDENDS

The Group recorded a profit after taxation for the year of $214,000 (2019 loss $1,230,000).

The Directors do not propose to recommend any distribution by way of dividend for the period ended 31 December 2020.

DIRECTORS

The Directors who served the Company during the period and prior to the release of this report were as follows:

Current Directors

Alan Broome AM (appointed 2 July 2015)

John Peters (appointed 21 January 2015)

Peter Wale (appointed 12 July 2016)

Jeffrey Harrison (appointed 7 February 2018)

DIRECTORS' INTEREST IN SHARES AND OPTIONS

The persons who held office during the year or at the year-end had the following interests in share capital and options of the Company as detailed below.

The following are the shares held as at the reporting date and as at 31 December 2020 for all Directors and their related parties:

The following are the options held as at the reporting date and as at 31 December 2020 for all Directors:

DIRECTORS' REMUNERATION AND SERVICE CONTRACTS

Under their respective service contracts, the officers of the company received fees as detailed in the Directors' Remuneration table in Note 7.

SUBSTANTIAL SHAREHOLDERS

As at 31 May 2021 shareholdings of 3% or more of the issued share capital notified to the Company were:

Based on the total issued share capital of 1,909,297,949.

POLITICAL CONTRIBUTIONS

There were no political contributions made by the Group during the year ended 31 December 2020 (2019: Nil).

INFORMATION TO SHAREHOLDERS - WEBSITE

The Company has its own website (www.strategicminerals.net) for the purposes of improving information flow to shareholders, as well as to potential investors.

GOING CONCERN

The Directors have given careful consideration to the Group and Parent Company's (together "the Group") ability to continue as a going concern through review of cash flow forecasts prepared by management for the period to 31 December 2022, and a review of the key assumptions on which these are based and sensitivity analysis.

The Group cut costs during 2020 to reduce its overhead expenditure and is maintaining vigilance in preserving cash in response to depressed market conditions due to Covid-19 and its associated impact on commodity prices and capital markets. As at 31 December 2020, the Group had US$0.83m of cash on hand.

The forecasts show that through the Group's operations at Cobre, there are sufficient funds until December 2022 to meet all operational costs, however additional funds will be required to progress the development of the Leigh Creek Copper Mine and Redmoor projects. Management are actively pursuing such funding and envisage that this will be sourced at the asset level.

The Group is reliant on cash being generated from the Cobre asset in line with forecast. Management has performed reverse stress testing which shows that a 6% reduction in forecast sales would result in a cash deficit in November 2021 without management taking mitigating actions within their control. In addition, management has assumed that the annual renewal of the Group's offtake permit will be rolled over in March 2022, as it has since entering into the underlying offtake agreement. 

In the event the Cobre offtake permit rollover is not received or there is a reduction in forecast sales, these conditions indicate a material uncertainty which may cast significant doubt as to the Group and Parent Company's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.

In the event that the further funds are required, the Directors have reasonable expectation that the Group will have access to sufficient resources by way of debt or equity markets. Consequently, the consolidated financial statements have been prepared on a going concern basis.

The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern.

INDEMNITY OF OFFICERS

The Group currently maintains insurance to cover against legal action brought against its directors and officers. It evaluates on the appointment of new directors whether an indemnity from the Company for the actions of previous directors is warranted. However, the Group may purchase and maintain, for any Director or officer, insurance against any liability in the near future pending the evolution and complexity of any further new projects undertaken by the Company. 

FINANCIAL RISK MANAGEMENT

Refer to Note 3 to the financial statements for further details.

EVENTS AFTER THE END OF THE REPORTING PERIOD

Refer to Note 27 to the financial statements for further details.

PUBLICATION OF ACCOUNTS ON COMPANY WEBSITE

Financial statements are published on the Company's website. The maintenance and integrity of the website is the responsibility of the Directors. The Directors' responsibility also extends to the financial statements contained therein.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the Directors, at the time of approval of their report, are aware:

· there is no relevant audit information of which the Group's auditors are unaware; and

· the Directors have taken all steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

AUDITORS

In accordance with section 489 of the Companies Act 2006, a resolution proposing that BDO LLP be reappointed as auditors of the Group will be put to the Annual General Meeting.

By order of the Board

John Peters

Director

28 June 2021.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

FOR THE YEAR ENDED 31 DECEMBER 2020

Directors' responsibilities

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the group and company financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company and of the profit or loss of the group for that period. The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on AIM. 

In preparing these financial statements, the directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, subject to any material departures disclosed and explained in the financial statements;

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication

The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the company's website ( www.strategicminerals.net) in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company's website is the responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

STRATEGIC MINERALS PLC

CORPORATE GOVERNANCE STATEMENT

Board of Directors

The aim of the Board is to function at the head of the Group's management structures, leading and controlling its activities and setting a strategy for enhancing shareholder value. Regular meetings are held to review the Group's forward planning. The Board currently consists of a Non-Executive Chairman, a Managing Director, an Executive Director and a Non-Executive Director.

The Directors recognise the importance of sound corporate governance commensurate with the size and nature of the Company and the interests of its shareholders and, in 2018, formally adopted The QCA Corporate Governance Code (the 'QCAC") after noting that it had, effectively, implemented its content in its previous arrangements.

In addition to the details provided below, governance disclosures can be found at the company's website at www.strategicminerals.net

Principle 1: Establish a strategy and business model which promote long-term value for shareholders

The Board has developed and enunciated a strategy and business model as detailed on the Company's website at https://www.strategicminerals.net/company/strategy.

The Board considers the Company's strategy provides a framework for medium to longer term growth in shareholder value.

The major risks to the Company's overall strategy stem from the potential failure to maintain access to the Cobre magnetite stockpile and over extending its cash requirements. 

With respect to the exposure to operating cash flow only from the Cobre magnetite stockpile, the Board actively embarked on a search for a near term cash flow asset in our preferred mineral suite. With the addition of Leigh Creek Copper Mine, the Board feels it has, to a large extent, mitigated this risk, although it has now developed a new risk associated with the re-commencement of operations at Leigh Creek Copper Mine. Again, Management and the Board have sought to address such concerns through ensuring that sufficient resources are allocated to the project to give it the greatest chance of success.

In relation to cash flow management of the Company, Management and the Board closely monitor existing and expected cash flow resources and plans for committing these to project development and covering of corporate overheads. Additional to this, the Board regularly is in contact with market participants to ensure that sufficient interest is maintained in the market and that the Company can, generally, raise funding as required.

A consideration of broader risks of the Company can also be found at pages 9 to11 of this report and the financial instruments note 3 of these financial statements.

Principle 2: Seek to understand and meet shareholder needs and expectations

Shareholder input and communication has been actively sought by the Board through direct contact with shareholders at both the Annual General Meeting, shareholder information evenings (sometimes combined with the Annual General Meeting), monitoring of social media platforms, regular RNS releases, interviews on both Proactive Investors and Vox Markets (including occasional shareholder Q & A sessions) and direct one on one meetings with larger investors. At all times, due regard is given to the price sensitive nature of comments.

All shareholders are encouraged to attend the Company's Annual General Meeting and investors have access to current information on the Company through its website and via the info@strategicminerals.net email address.

Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success

As the Company is involved in the mining industry, the Board is highly cognisant of its responsibility not only to shareholders but in the broader community. As such, it has adopted a policy to ensure adequate community consultation is undertaken in the areas where we operate. Notably, in New Mexico USA, Cornwall UK and Leigh Creek Australia, communication with local residents and active involvement in the community has been encouraged. Additionally, the Company has a policy to, where possible, employ local residents when undertaking operations. To date, this has proven highly successful with all locations recording either none or extremely low levels of community dissent.

Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation

The management of the business and the execution of the Group's strategy are subject to a number of risks. The Company regularly reviews the principal risks that face the business and assesses appropriate responses to mitigate and, where possible, eliminate potential adverse impact.

The Board is constantly undertaking a review of risk and, as a mining company, has adopted and engendered a safety culture within the Company to ensure that personnel safety is considered above financial reward.

Information in relation to the Key Risks and Uncertainties that are relevant to the group are set on page 9-11 of this report.

The Board has established separate sub-committees around audit (chaired by Alan Broome AM) and remuneration within the Company (chaired by Alan Broome AM) shared by the entire Board, excluding the Managing Director. Additionally, a separate safety sub-committee (chaired by Alan Broome AM) operates with both Alan Broome AM and Jeffrey Harrison comprising its membership.

Given the composition of the Board and the size of the Company, it is felt a separate Nomination Committee is not yet warranted. However, as the Company's operations expand, the Board will monitor this aspect of operations and will respond accordingly. The Board collectively undertakes the function of such a committee and where conflicts arise the Directors exclude themselves from voting on such matters.

Further information on the Company's Remuneration, Safety and Audit Committees and their policies are set out under Principle 9 below.

Member details of the sub committees as at the date of this report are:

Principle 5: Maintaining the Board as a well-functioning, balanced team led by the chair

There are currently four (4) Board Directors (two of which are non-executive) and the Board considers that, at this time, this is appropriate to the Company's current level of operations, although this is reviewed formally at least annually. The Board is considered well balanced in that:

- Mr Alan Broome AM, the Non-Executive Independent Chairman, provides a sounding board for corporate strategy, a wealth of mining experience, is a metallurgist by training and is highly experienced in corporate governance. As such Alan is not involved with the day to day operations of the Company and provides guidance at the Board level. It is Management (notably John Peters and Peter Wale) who have the responsibility to formulate overall strategy, propose it to the Board, adjust the strategy for Board feedback and then enact the approved strategy.

- John Peters, the Managing Director, brings in-depth strategic management and investment banking experience. His practical management has helped to focus the Company and its consultants on the overall strategy while managing the hands on, day to day management.

- Peter Wale, the Executive Director, provides an invaluable bridge to shareholders providing insights into shareholder requirements as well as monitoring and handling media aspects. Peter, along with John Peters, manage the Company's interface with shareholders, media and the investment community. Peter has also undertaken an executive role in the management of Cornwall Resources Limited.

- Jeffrey Harrison, the Non-Executive Director, provides practical mining operational skills to ensure appropriate review of development plans and has contributed to the safety culture within the Company and maintains complete independence in reviewing decisions. Jeff performs this role divorced from the running of the Company and, as such, is considered independent when performing his duties as a Director.

All Directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational.

The Board aims to meet at least eight times a year and as required from time to time to consider specific issued required for decision by the board.

The Company held 8 Board meetings and a number of sub-committee meetings during the reporting period and the number of meetings attended by each of the Directors of the Company during the year to 31 December 2020 were:

The directors attended all board meetings and committee meetings that they were eligible and required to attend.

The Company has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board.

The Managing Director is employed by the Group on a full-time basis, whereas Mr Wale (Executive Director) and the Non- Executive Directors are remunerated on fixed fee part time basis and are remunerated for hours over and above their normal duties.

Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities

Biographies for the Directors can be found in the 'Board of Directors and Corporate Management' section of the company website at https://www.strategicminerals.net/company/our-team.html

The Board is not dominated by one person or group of people.

The Board undertakes regular reviews of its capacity to guide the Company in seeking to implement the Company's strategy. The appointment of Jeff Harrison in February 2018 illustrates how the Board, realising the need to increase its collective mining operational experience added a fourth Director with such skills. The Board also reviews periodically the appropriateness and opportunity for continuing professional development whether formal or informal.

All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company's expense. In addition, the Directors have direct access to the advice and services of the Company Secretary, Chief Financial Officer, Company's NOMAD, lawyers and auditors.

The Company's Articles of Association require that one-third of the Directors must stand for re-election by shareholders annually in rotation and that any new Directors appointed during the year must stand for election at the AGM immediately following their appointment.

Principle 7: Evaluate the Board performance based on clear and relevant objectives, seeking continuous improvement

Given the size of the Company and the small but critical nature of the roles of the Directors, board performance measures have not been independently developed. The Company relies upon the market and shareholder feedback to assess the Board's performance.

Principle 8: Promote a culture that is based on ethical values and behaviours

The Directors recognise that their decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board seeks to embody and promote a corporate culture that is based on sound ethical values as it believes the tone and culture set by the Board impacts all aspects of the Company, including the way that employees and other stakeholders behave.

The Company has adopted a code for Directors' and employees' dealings in securities which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation which came into effect in 2016.

The formation of the Safety Committee and the manner in which options are allocated to Directors and key management/consultants has created a team environment in which the running of the company is aligned with medium to longer term shareholder goals.

These measures enable the Company to determine that ethical values and behaviours are recognised and respected.

Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

As a resource development company, the Board considers the crucial governance structures and processes revolve around Safety and Audit.

Safety is a critical matter, particularly given the capacity for harm to employees and consultants. The purpose of the Safety committee is to ensure that our vision, to provide a safe workplace where no harm comes to anyone, is applied at all of the Company's locations and that a culture of Safety purveys throughout the organisation.

The Company believes that all reasonable efforts should be undertaken to ensure incidents are prevented, management have ultimate accountability for health and safety but everyone on site has a responsibility to ensure no one comes to harm and employees have the responsibility to stop any job or activity they believe is unsafe and could cause harm to people.

The Safety Committee attempts to monitor, and report to the full Board, on the achievement of the Company in devoting the necessary resources needed to create a working environment, both physically and supervisorial, in which our people and others under our influence and control can work without sustaining injury or suffering ill health; ensuring no business target takes priority over health and safety; using risk assessments to identify hazards and unsafe behaviours and introduce actions to reduce the risk to acceptable levels; investigating and reporting all accidents and dangerous occurrences and preventing future incidents; setting safety targets with the aim of preventing incidents and accidents and communicate the performance to all employees; ensuring all employees are competent to carry out the tasks assigned to them by providing the relevant information, instruction, training and supervision required; encouraging everyone to contribute to working safely and preventing accidents; designing, constructing, operating and maintaining all equipment, buildings and structures to ensure a safe operation; and comply with all current legislation and codes of practice.

The purpose of the Audit Committee is to provide formal and transparent arrangements for considering how to apply the financial reporting and internal control principles set out in the QCAC and to maintain an appropriate relationship with the Company's auditors. The key terms are as follows: 

- to monitor the integrity of the financial statements of the Company and Group, and any formal announcement relating to the Company's performance.

- to monitor the effectiveness of the external audit process and make recommendations to the Board in relation to the appointment, re-appointment and remuneration of the external auditors;

- to keep under review the relationship with the external auditors including (but not limited to) their independence and objectivity;

- to keep under review the effectiveness of the Company's financial reporting and internal control policies and systems;

- to review key judgements and estimates relating to the impairment assessment of project assets - LCCM, CRL and

- to assess the ability of the group to remain a going concern.

Further details of board committees are given under Principle 5 above.

The Company has adopted a share dealing code for dealings in shares by Directors and senior employees which is compliant with the Market Abuse Regulation (EU) No 596/2014 ("MAR") and appropriate for an AIM company. The Directors will comply with MAR and AIM Rule 21 relating to dealings and will take all reasonable steps to ensure compliance by persons discharging managerial responsibility ("PDMR") and persons closely associated with them.

The Board intends that the Company's governance structures evolve over time in parallel with its objectives, strategy and business model to reflect the development of the Company.

Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Directors believe a healthy dialogue exists between the Board, the Company's shareholders and other stakeholders. The Board regularly has reports on shareholder feedback through summary of social media comments, shareholder information evenings and undertakes site visits and customer visits throughout the year.

In addition, all shareholders are encouraged to attend the Company's Annual General Meeting. The outcomes of all shareholder votes are disclosed in a clear and transparent manner via a regulatory information service, such as RNS of the London Stock Exchange.

The Company includes historical annual reports, notices of general meetings and RNS announcements over the last five years on its website. The Company lists contact details on its website and on all announcements released via RNS, should shareholders wish to communicate with the Board.

The Company will include, when relevant, in its annual report, any matters of note arising from the audit or remuneration committees.

Impact on the Group of Covid-19

The global, social and economic impact of Covid-19 have been significant. Uncertainty remains as to the long-term implications of the pandemic as the Company continues to closely monitor governmental guidance in our various locations.

The Directors recognise that the current macro-economic environment continues to result in limited or more expensive sources of funding. However, as per its adoption of a going concern concept for the financial statements, the Board considers that funding required to maintain operations is available but notes that development capital may need to be deferred.

As per its strategy, the Board has invested in projects that relate to metals expected to increase in demand and price over the medium term. In line with the spread of Covid-19, commodity prices see-sawed during 2020, initially falling then, ultimately, rising to levels much higher than pre-pandemic pricing. This has now provided the impetus for the Company to seek joint venture participants to progress both Leigh Creek and Redmoor. This is especially the case for Leigh Creek as current copper prices are more than US$1lb over the prices used in our feasibility studies. As foreshadowed in last year's annual report, it appears likely that the Board's expectations that the copper price and the Australian exchange rate would demonstrate the attractiveness of the project by the time Leigh Creek is funded and in full operations.

Operations at Cobre continue to be adjusted to ensure contactless supply to our customers and, as at the end of May 2021, demand remains strong at Cobre's operations.

The Company's early efforts to reduce costs and has enabled the Company to best position itself to manage any longer term impacts of the pandemic although the Company continues to focus on near term fiscal, operational and regulatory matters.

The Group will consequently carefully review any capital asset investment decisions and take further action to reduce costs if necessary. As the pandemic continues, clearly the priority for the Company remains the safety, health and wellbeing of our employees and wider stakeholders.

STRATEGIC MINERALS PLC

AUDIT COMMITTEE REPORT

This report addresses the responsibilities, the membership, and the activities of the Audit Committee in 2020 up to the approval of the 2020 Annual Report and 2020 year-end Financial Statements.

Responsibilities

The main responsibilities of the Audit Committee are the following:

1) monitor the integrity of the annual and interim financial statements;

2) Review the effectiveness of financial and related internal controls and associated risk management;

3) Manage the relationship with our external auditors including plans and findings, independence, and assessment regarding reappointment.

Membership

Members of the Audit Committee are Alan Broome AM, Peter Wale (Chairman) and Jeffrey Harrison.

Activities in 2020

With regard to the 2020 year-end Audit, the committee has reviewed the following key audit matters:

1) Going Concern

The Directors have given careful consideration to the Group and Parent Company's (together "the Group") ability to continue as a going concern through review of cash flow forecasts prepared by management for the period to 31 December 2022, and a review of the key assumptions on which these are based and sensitivity analysis.

The Group cut costs during 2020 to reduce its overhead expenditure and is maintaining vigilance in preserving cash in response to depressed market conditions due to Covid-19 and its associated impact on commodity prices and capital markets. As at 31 December 2020, the Group had US$0.83m of cash on hand.

The forecasts show that through the Group's operations at Cobre, there are sufficient funds until December 2022 to meet all operational costs, however additional funds will be required to progress the development of the Leigh Creek Copper Mine and Redmoor projects. Management are actively pursuing such funding and envisage that this will be sourced at the asset level.

The Group is reliant on cash being generated from the Cobre asset in line with forecast. Management has performed reverse stress testing which shows that a 6% reduction in forecast sales would result in a cash deficit in November 2021, without management taking mitigating actions within their control. In addition, management has assumed that the annual renewal of the Group's offtake permit will be rolled over in March 2022, as it has since entering into the underlying offtake agreement. 

In the event the Cobre offtake permit rollover is not received or there is a reduction in forecast sales, these conditions indicate a material uncertainty which may cast significant doubt as to the Group and Parent Company's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.

In the event that the further funds are required, the Directors have reasonable expectation that the Group will have access to sufficient resources by way of debt or equity markets. Consequently, the consolidated financial statements have been prepared on a going concern basis.

The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern.

1) Impairment Assessments

The Committee has reviewed the judgements surrounding the impairment assessments required under IAS36 for LCCM and IFSR6 for CARE, CRL.

Conclusion

In 2021 and beyond, the Committee will continue to adopt the new reporting and regulatory requirements and ensure that the system of internal controls is both maintained and regularly reviewed for improvement. The Committee will also continue to review group assets for triggers that may indicate impairment and closely monitor the financial risks faced by the business and progress made towards mitigating these.

For and on behalf of the Audit Committee

Alan Broome AM

28th June 2021

Chair of Audit Committee

STRATEGIC MINERALS PLC

REMUNERATION COMMITTEE REPORT

This remuneration report has been prepared by the Remuneration Committee and approved by the Board. The report for 2020 sets out the details of remuneration for the Directors and discloses the amounts paid during the year.

Membership

Members of the of the Remuneration Committee are Alan Broome AM (Chairman) Peter Wale and Jeffrey Harrison. Other Directors are invited to attend as appropriate provided they do not have a conflict of interest. The aim of the Remuneration Committee is to attract, retain and motivate the executive management of the Company and to offer the opportunity for employees to participate in share option schemes to incentivise employees to enhance shareholder value.

Director Remuneration

Compensation for Directors who held office during the year is as follows:

During 2019, Directors took a significant amount of their cash remuneration by applying this to the exercise price of their vested options (J Peters $205,000, A Broome AM $16,000). Additionally, in 2019, P Wale purchased, on market, 3,514,942 shares @ 0.71p and, in early March 2020 J Peters acquired, on market, 3,464,286 at 0.5348p.

During 2020, the Directors purchased the following on market shares at @0.40p.J Peters - 8,200,000, P Wale-18,750,000 and A Broome AM -3,025,000.

J Harrison provides consultancy services for CRL. This expenditure is capitalised as part of Deferred Exploration and Evaluation Expenditure.

Going forward into 2021 and beyond, the Committee and I will remain focused on ensuring that reward at the Company continues to be closely aligned with the delivery of long term shareholder value.

For and on behalf of the Remuneration Committee

Alan Broome AM

INDEPENDENT AUDITOR'S REPORT

FOR THE YEAR ENDED 31 DECEMBER 2020

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF STRATEGIC MINERALS PLC

Opinion on the financial statements

In our opinion:

· the financial statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 December 2020 and of the Group's profit for the year then ended;

· the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006;

· the Parent Company financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and as applied in accordance with the provisions of the Companies Act 2006; and

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Strategic Minerals plc (the 'Parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2020 which comprise of the Consolidated statement of comprehensive income, the Consolidated and Company statement of financial position, the Consolidated and the Company statement of cash flows, the Consolidated and the Company statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the Group and Parent Company financial statements is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006 and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Material uncertainty related to going concern

We draw attention to note 1 to the financial statements which indicates that the group's funding position is reliant on the Cobre offtake permit being rolled over and sales being generated in line with forecast. As stated in note 1, these conditions, along with other matters set out in note 1, indicate a material uncertainty exists that may cast significant doubt on the Group and Parent Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

We identified going concern as a key audit matter based on our assessment of the significance of the risk and the effect on our audit strategy.

Our evaluation of the Directors' assessment of the Group and the Parent Company's ability to continue to adopt the going concern basis of accounting and our audit procedures in response to this key audit matter included the following:

· We assessed the directors' base case cash flow forecasts, including their assessment of potential risks and uncertainties associated with the current and any future trading at the group's only cash generating asset in the US.

· We compared recent sales information to the director's forecast to assess the reasonableness of price and volume assumptions, and we compared forecast operating cost cash flows to current run rates. 

· We reviewed Management's sensitivity analysis and conducted our own sensitivities on the cash flow forecast to consider the available headroom under different reasonably possible scenarios, including assessing the validity of mitigating factors available to the Group.

· We reviewed Management's reverse stress tests to determine the point at which liquidity breaks and considered whether such scenarios were possible.

· We discussed with Management and the Board the Group's strategy to access capital to fund its discretionary development plans.

· We reviewed and considered the adequacy of the disclosure within the financial statements relating to the directors' assessment of the going concern basis of preparation and the disclosure of the material uncertainties.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Overview

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.

In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, our Group audit scope focused on the Group's principal operating locations being Australia (Leigh Creek Copper Mine Pty Ltd, "LCCM"), USA (Strategic Minerals Group LLC, "SMG") and the United Kingdom (Cornwall Resources Limited "CRL" and Strategic Minerals Plc "SML, Parent Company").

LCCM, SMG, CRL and SML were regarded as being significant components of the Group, which were selected, based on their size and risk characteristics and were subject to full scope audits.

The remaining components of the Group were considered non-significant and these components were principally subject to analytical review procedures.

The audits of each component were performed in the United Kingdom and were conducted by the Group engagement team.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter identified in the material uncertainty related to going concern section above we determined that the following were key audit matters.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:

Component materiality

We set materiality for each component of the Group based on a percentage of Group materiality dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from $114,000 to $132,000. In the audit of each component, we further applied performance materiality levels of 75% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.

Reporting threshold

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of $3,000 (2019: $4,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

Other information

The directors are responsible for the other information. The other information comprises the information included in the report and financial statements other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Other Companies Act 2006 reporting

Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.

Responsibilities of Directors

As explained more fully in the Statement of directors' responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group's and the Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

· Holding discussions with management and the audit committee and considering any known or suspected instances of non-compliance with laws and regulations or fraud;

· Gaining an understanding of the laws and regulations relevant to the Group and the industry in which it operates, through discussion with management and our knowledge of the industry. These included the the listing rules, financial reporting framework, UK Companies Law, tax legislation and environmental regulations in the UK, USA and Australia;

· Communicating relevant identified laws and regulations and potential fraud risks to all engagement team members and remaining alert to any indications of fraud or non-compliance with laws and regulations throughout the audit;

· Assessing the susceptibility of the Group's financial statements to material misstatement, including how fraud might occur. In response our procedures included, but were not limited to;

- Agreeing the financial statement disclosures to underlying supporting documentation;

- Addressing the risk of management override of internal controls, including testing journals and evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud;

- Assessing areas of the Financial Statements which include judgement and estimates, as set out in note 2 to the financial statements and in our Key audit matters section above and evaluated whether there was evidence of bias by the directors;

- Made of enquiries of Management as to whether there was any correspondence from regulators in so far as the correspondence related to the Financial Statements;

- Reviewing minutes from board meetings of those charges with governance to identify any instances of non-compliance with laws and regulations

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the Parent Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Peter Acloque (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

London

United Kingdom

28 June 2021

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

STRATEGIC MINERALS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2020

Profit (loss) per share attributable to the ordinary equity holders of the parent:

The accompanying accounting policies and notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

As permitted by Section 408 of the Companies Act 2006, the statement of comprehensive income of the parent Company is not presented as part of these financial statements. The parent Company made a loss for the year of $399,000 (2019: $2,091,000).

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2020

COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2020

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2020

All comprehensive income is attributable to the owners of the parent Company.

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2020

All comprehensive income is attributable to the owners of the parent Company.

CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2020

Share capital is the amount subscribed for shares at nominal value.

Share premium reserve represents the excess of the amount subscribed for share capital over the nominal value of these shares net of share issue expenses.

Merger reserve arises from the 100% acquisition of Ebony Iron Pty Limited in September 2011 and LCCM In April 2018 whereby the excess of the fair value of the issued ordinary share capital issued over the nominal value of these shares is transferred to this reserve, in accordance with section 612 of the Companies Act 2006.

Share option reserve relates to increases in equity for services received in equity-settled share-based payment transactions and on the grant of share options.

Initial restructure reserve consists of an adjustment arising from the Group reorganisation in 2011 being the formation of a new holding Company for Iron Glen Holdings Limited by way of a share for share issue and is the difference between consideration given and net assets of the Company at the date of acquisition.

The group foreign exchange reserve occurs on consolidation of the translation of the subsidiaries balance sheets at the closing rate of exchange and their income statements at the average rate.

The company foreign exchange reserve recognises the exchange differences arising on translating the closing net assets of the Company at the closing rate at the balance sheet date, and the results of Company's operations at average exchange rate for the year.

Warrants reserve represents the value of warrants issued. Warrants reserve is non-distributable and will be transferred to share premium account upon the exercise of warrants. The balance of warrants reserve in relation to the unexercised warrants at the expiry of the warrants period will be transferred to retained earnings.

Retained earnings represent the cumulative loss of the Group attributable to equity shareholders.

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

1. Significant accounting policies

Basis of preparation

In preparing these financial statements the presentational currency is US dollars. As the entire group's revenues and majority of its costs, assets and liabilities are denominated in US dollars it is considered appropriate to report in this currency.

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

These financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in note 2.

The financial statements have been prepared on a historical cost basis, except for the acquisition of LCCM and the valuation of certain investments which have been measured at fair value, not historical cost.

Going concern basis

The Directors have given careful consideration to the Group and Parent Company's (together "the Group") ability to continue as a going concern through review of cash flow forecasts prepared by management for the period to 31 December 2022, and a review of the key assumptions on which these are based and sensitivity analysis.

The Group cut costs during 2020 to reduce its overhead expenditure and is maintaining vigilance in preserving cash in response to depressed market conditions due to Covid-19 and its associated impact on commodity prices and capital markets. As at 31 December 2020, the Group had US$0.83m of cash on hand.

The forecasts show that through the Group's operations at Cobre, there are sufficient funds until December 2022 to meet all operational costs, however additional funds will be required to progress the development of the Leigh Creek Copper Mine and Redmoor projects. Management are actively pursuing such funding and envisage that this will be sourced at the asset level.

The Group is reliant on cash being generated from the Cobre asset in line with forecast. Management has performed reverse stress testing which shows that a 6% reduction in forecast sales would result in a cash deficit in November 2021, without management taking mitigating actions within their control. In addition, management has assumed that the annual renewal of the Group's offtake permit will be rolled over in March 2022, as it has since entering into the underlying offtake agreement.

In the event the Cobre offtake permit rollover is not received or there is a reduction in forecast sales, these conditions indicate a material uncertainty which may cast significant doubt as to the Group and Parent Company's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.

In the event that the further funds are required, the Directors have reasonable expectation that the Group will have access to sufficient resources by way of debt or equity markets. Consequently, the consolidated financial statements have been prepared on a going concern basis.

The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern.

Adoption of standards effective in 2020

A number of new and amended standards became mandatory and are effective for annual periods beginning on or after 1 January 2020. Below is a list of the new standards which impacted the Group, where appropriate these new standards have been incorporated into the Financial Statements:

New standards, interpretations, and amendments effective 01 January 2020:

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective for the period beginning 1 January 2020:

- IAS 1 Presentation of Financial Statements

- IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Definition of Material)

- IFRS 3 Business Combinations (Amendment - Definition of Business)

- Revised Conceptual Framework for Financial Reporting

New standards, interpretations and amendments effective 01 June 2020:

Covid -19- Related Rent Concessions - Amendment to IFRS 16

The group has assessed the impact of these new accounting standards and amendments and they have not had an impact on the financial statements.

New standards, interpretations, and amendments effective 01 January 2021:

The group has currently assessing the impact of these new accounting standards and amendments and does not believe they will have a material impact on the financial statements.

Basis of consolidation

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:

- The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights,

- substantive potential voting rights held by the company and by other parties,

- other contractual arrangements and

- historic patterns in voting attendance.

The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Change in accounting policy

Under the terms of the various agreements in relation to the LCCM, the Company has the following royalties:

· 3.5% royalty to the South Australian state government

· 1.0% royalty on tons of copper sold at LME prices over the life of the project and

· $A100,000 following 3,000 tonnes of copper sales from the project.

At acquisition of LCCM, the Group recognised the estimated fair value of the above mining royalties in the financial statements as a liability. In subsequent reporting periods the liability has been fair valued with any change in fair value being recognised in the income statement. The calculation of the liability is dependent on inherently judgemental estimates over future copper prices, and the timing and volume of copper sold.

During 2020 the Group has opted to retrospectively change the accounting policy so that the royalties are not presented separately as liabilities, but the fair value of the asset on initial recognition is adjusted to factor potential cash outflows from the royalties. This is on the basis that the new policy provides users of the financial statements more relevant and reliable information in which to assess the value of the LCCM asset.

The impact of this change in accounting policy is to reduce 2019 Non-current liabilities and Non-current assets by $433,000. There is no income statement impact.

Investment in joint arrangements

The Group is a party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of the arrangement to the group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries.

The group classifies its interests in joint arrangements as either:

· Joint ventures: where the group has rights to only the net assets of the joint arrangement.

· Joint operations: where the group has both the rights to assets and obligations for the liabilities of the joint arrangement.

In assessing the classification of interests in joint arrangements, the Group considers:

· The structure of the joint arrangement

· The legal form of joint arrangements structured through a separate vehicle

· The contractual terms of the joint arrangement agreement

· Any other facts and circumstances (in any other contractual arrangements).

The Group accounts for its interests in joint ventures initially at cost in the consolidated statement of financial position. Subsequently joint ventures are accounted for using the equity method where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the consolidated statement of profit and loss and other comprehensive income (except for losses in excess of the Group's investment in the associate unless there is an obligation to make good those losses).

Profits and losses arising on transactions between the Group and its joint ventures are recognised only to the extent of unrelated investors' interests in the joint venture. The investor's share in the joint ventures' profits and losses resulting from these transactions is eliminated against the carrying value of the joint venture.

Any premium paid for an investment in a joint venture above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the investment in joint venture. Where there is objective evidence that the investment in a joint venture has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues, and expenses in accordance with its contractually conferred rights and obligations. In accordance with IFRS 11 Joint Arrangements, the Group is required to apply all of the principles of IFRS 3 Business Combinations when it acquires an interest in a joint operation that constitutes a business as defined by IFRS 3.Where there is an increase in the stake of the joint venture entity from an associate to a subsidiary and the acquisition is considered as an asset acquisition and not a business combination in accordance with IFRS3, this step up transaction is accounted for as the purchase of a single asset and the cost of the transaction is allocated in its entirety to that asset with no gain or loss recognised in the income statement. The step-up acquisition of CRL in 2019 has been accounted for as a purchase of a single asset and the cost of the transaction is allocated in its entirety to that balance sheet.

Listed equity investments

Listed equity investments in an active market are usually valued at the mid-price on the valuation date.

Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method under IFRS3 Business Combinations ("IFRS3"). The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group and the Company in exchange for control of the acquiree. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the relevant conditions for recognition are recognised at their fair values at the acquisition date. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the fair value of the consideration paid over the Group's interest in the fair value of the identifiable assets, liabilities and contingent liabilities acquired. If the Group's interest in the fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. Transaction costs incurred directly in connection with business combinations are expensed.

Impairment of non-financial assets (excluding inventories)

Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest Group of assets to which it belongs for which there are separately identifiable cash flows: its cash generating units ('CGUs').

Impairment charges are included in the statement of comprehensive income, except to the extent they reverse gains previously recognised in other comprehensive income.

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised over their useful economic lives.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual or legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below).

An intangible asset was recognised in the acquisition of Leigh Creek Copper Mine Pty Ltd and represents the fair value of the offtake agreement that was in place at acquisition date (Refer note 10).