Announcement PDF HALF YEAR REPORT DECEMBER 2023 EQ RESOURCES LIMITED ABN 77 115 009 106 DECEMBER 2023 i CORPORATE DIRECTORY Directors Oliver Kleinhempel Non-executive Chairman Stephen Layton Non-executive Director Richard Morrow Non-executive Director Stephen Weir Non-executive Director (Appointed 19-01-24) Zhui Pei Yeo Non-executive Director Company Secretary Melanie Leydin Principal Place of Business 6888 Mulligan Highway Mount Carbine QLD 4871 Share Register Automic Pty Ltd Level 5 126 Philip Street Sydney NSW 2000 T +61 (0)2 9698 5414 Auditors Nexia Melbourne Audit Pty Ltd Level 35, 600 Bourke Street Melbourne VIC 3000 T +61 (0)3 8613 8888 Registered Office F +61 (0)3 8613 8800 Level 4, 100 Albert Road South Melbourne VIC 3205 Stock Exchange Listing T +61 (0)7 4094 3072 Listed on the Australian Securities Exchange (ASX) W www.eqresources.com.au ASX Code: EQR E info@eqresources.com.au ACN: 115 009 106 ABN: 77 115 009 106 1 i CONTENTS OPERATING & FINANCIAL REVIEW ................................................................................... 1 Operating and Financial Review ........................................................................................................................ 1 Corporate Development ..................................................................................................................................... 1 Mt Carbine Operations ....................................................................................................................................... 3 Sustainability .................................................................................................................................................... 11 Exploration ........................................................................................................................................................ 14 Corporate .......................................................................................................................................................... 19 FINANCIALS ......................................................................................................................... 21 DIRECTORS’ REPORT ................................................................................................................................... 22 Directors ........................................................................................................................................................... 22 Operating Results ............................................................................................................................................. 22 Review of Operations ....................................................................................................................................... 22 Auditor’s Independence Declaration ................................................................................................................ 22 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ......... 23 CONSOLIDATED STATEMENT OF FINANCIAL POSITION......................................................................... 24 CONSOLIDATED STATEMENT OF CASH FLOWS ...................................................................................... 25 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ......................................................................... 26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ................................................................... 27 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ......................................................... 27 2. REVENUE AND OTHER INCOME .............................................................................................. 28 3. FAIR VALUE GAIN ON REVALUATION OF FINANCIAL LIABILITIES ...................................... 29 4. INVENTORY ................................................................................................................................ 29 5. FINANCIAL ASSETS ................................................................................................................... 30 6. TRADE & OTHER RECEIVABLES.............................................................................................. 30 7. RECEIVABLES ............................................................................................................................ 31 8. EMPLOYEE BENEFITS .............................................................................................................. 31 9. DEFERRED EXPLORATION AND EVALUATION EXPENDITURE ........................................... 31 10. CONTRIBUTED EQUITY ............................................................................................................ 32 11. CONVERTIBLE NOTES .............................................................................................................. 33 12. CONTINGENT LIABILITIES ........................................................................................................ 34 13. SUBSEQUENT EVENTS............................................................................................................. 35 14. EQUIPMENT LEASES ................................................................................................................ 36 15. OTHER FINANCIAL LIABILITIES................................................................................................ 36 16. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS ................................................ 37 17. OPERATING SEGMENTS .......................................................................................................... 37 DIRECTORS’ DECLARATION ........................................................................................................................ 38 AUDITOR’S INDEPENDENCE DECLARATION............................................................................................. 39 INDEPENDENT AUDITOR’S REPORT ........................................................................................................... 40 FORWARD LOOKING STATEMENTS ........................................................................................................... 41 1 resourcing the new economy for a better tomorrow Operating and Financial Review Corporate Development OPERATING & FINANCIAL REVIEW 1 resourcing the new economy for a better tomorrow EQR Completes Acquisition of Saloro S.L.U. and $25 Million Placement with Oaktree EQR (“The Company”) and Oaktree Capital Management have satisfied all conditions precedent under all relevant agreements and closed the transaction in January 2024. This transaction included the acquisition of the leading European tungsten producer, Saloro S.L.U., which operates the Barruecopardo Mine in Spain, and a $25 million placement from Oaktree at A$0.09 per share, resulting in a 15% stake in EQR. The transformational acquisition strengthens EQR’s relevance in the global tungsten industry, with the Company becoming the largest independent tungsten concentrate producer outside of China. Oaktree’s investment in EQR enhances the Company’s shareholder register and capital market positioning, supporting the further expansion of both the Mt Carbine and Barruecopardo operations. Production ‘key performance indicators’ at Saloro strongly improved since collaborative work was first established between EQR and Saloro. Since acquisition a further debottlenecking program, including the doubling of XRT sorting capacity, has been undertaken with initial efforts focused on improving the jigging plant, with ongoing enhancements in the spirals and shaking table sections leading to significantly better metal recoveries. Another key area of production expansion involves XRT ore sorting. Saloro's Barruecopardo Mine, with its coarse scheelite, is well-suited for this technology. Following successful trials and results from the first TOMRA XRT Ore Sorter introduced in August 2023, Saloro and EQR have purchased a second unit, that arrived in December 2023. This addition aims to positively impact costs, utility consumption, and overall metal recovery at the Barruecopardo operation. It was also jointly agreed, at closing, to streamline Saloro’s key banking relationships and reduce third-party bank debt by €10 million, compared to €5 million as per the initial terms of the transaction agreements. Refer ASX announcement ‘EQR Completes acquisition of Saloro S.L.U. and $25 Million placement with Oaktree’ dated 18 January 2024 Wolfram Camp Mine Exploration Permit EQR has been selected as the favoured tenderer for resource exploration at the historic Wolfram Camp mine site to determine the feasibility of re-commissioning. This aligns with the Queensland Government's plan to invest A$245 million in the Critical Minerals Strategy, emphasising the re-commercialisation of old mines for economic growth and a sustainable future. The permit encompasses a 477km² RA442 license area, which includes the Wolfram Camp mine and Bamford Hill advanced exploration target. Approximately 5 million tonnes of Low-Grade Stockpile (“LGS”) and Tailings are available for evaluation. Over the next year, EQR aims to undertake a comprehensive regional review. The 5-year program includes drilling over 10,000 meters in the next 3 years and collecting 4,000 soil samples as well as completing a pre-feasibility on selected targets. An XRT Sorter trial will also be undertaken to evaluate its compatibility with the existing Mt Carbine processes. This initiative supports EQR's growth strategy and will further solidify the region's role as a critical mineral hub due to Wolfram Camp being located approximately 60km from the Mt Carbine Mine Site. Refer ASX Announcement ‘EQR Awarded Permit For Historic Wolfram Camp Mine’ dated 27 July 2023. 2 resourcing the new economy for a better tomorrow Mt Carbine Operations During this first half of 2024 Financial Year, the Mt Carbine Mine successfully transitioned from primarily utilising material from the LGS to processing primarily tungsten-rich open cut ore. Since the commencement of pen cut mining, the operations team have focused on enhancing the recovery rates from the ore processed through the XRT Ore Sorter Plant thus resulting in higher grade feed into the Gravity Plant. A significant increase in production has been seen since the introduction of primary ore from the open cut mining operations. The positive results from the processing of the primary ore have also seen tungsten recovery rates higher than expected which supports strong production trends going forward. t Q2 - FY2024 545,122 Q1 - FY2024 363,000 Jul - Dec FY2024 908,122 Jan - Jun FY2023 - Material extracted t 496,784 273,394 770,178 - Ore t 258,934 212,096 471,030 - Waste t 237,849 61,298 299,147 - Ore Stockpiled t 186,866 92,000 Ore Crushed t 122,839 150,600 273,439 339,390 Ore Sorted t 89,488 130,519 220,007 184,132 Sorter Concentrate Produced t 9,005 11,448 20,453 22,319 Ore Gravity Processed t 56,122 73,568 129,122 169,880 50% Equivalent WO3 Produced t 368.3 422.6 790.9 286.8 Mt Carbine Material blasted - Open Cut Mining Operations Open cut mining operations commenced in June 2023 following the execution of a Mining Services Agreement with Golding Contractors Pty Ltd (“Golding”). A total of 770,178 tonnes of material has been extracted from the open pit between July and December 2023, comprising 471,030 tonnes of ore and 299,147 tonnes of waste. Golding have engaged Orana Drill & Blast (“Orana”) to conduct on-site drilling and blasting activities. During the same period Orana have drilled approximately 4,957 holes for 42,868m of blast hole drilling to load 221 tonnes of emulsion explosives. Regular blasts have been ongoing with Orica Ltd supplying the explosives to site. 3 resourcing the new economy for a better tomorrow Orana drill rigs preparing first blast monitored by Golding’s team. Golding has been extracting material from the pit following the first blast and the ramp up of operations saw the extraction going from 64,107 tonnes in the first month to a record of 246,016 tonnes in November 2023. Commissioning of the Hitachi 1900 Excavator was completed at the start of November 2023 with this machine greatly improving the operational efficiency of the open cut mining operations. An updated production schedule has also been implemented to reflect the repositioning of the pit ramp to achieve maximum ore recovery in the Stage 1 Open Pit. Three CAT 745 Moxy dump trucks were off hired and a fleet of CAT 775F were introduced throughout November 2023 to allow maximum haulage from the pit. An additional CAT D10 Dozer was also mobilised to complete auxiliary works and push material where required to streamline operations. CAT 775 Mining Dump Truck being delivered (Left); Large Hitachi 1900 Excavator (Right); 4 resourcing the new economy for a better tomorrow ROM 1 Stockpile in the first week of Open Cut Mining (Left); ROM 1 Stockpiles end of December 2023 (Right) Grade control measures are now playing a pivotal role in EQR’s mining operations, ensuring consistent ore feed grades entering the crushing plant. EQR’s geology team plays an active role in delineating the ore zones in the open cut and ensuring ore deliveries are received at their designated ore bays prior to processing. The Company is also using drone imaging and aerial surveys to provide a comprehensive view of the mining area, aiding in the identification of key geological features and potential variations in ore grade distribution or zone delineation. This real-time visual data empowers the team to make efficient decisions in regard to daily planning, optimising the extraction process, ensuring that the feed delivered for processing aligns with planning and not to mention providing visibility on the future production. Illustrates the colour coding of the pit face before blast. Geologically, the Johnson veins in Stage 1 305-001 and 002 are consistent with the ore body modelling with the most variation being in the Bluff vein grade which is lower than the model. This could be a function of the original drilling which was 50 meters below this level having higher grade in line with the EQR's Geology team's theory regarding level controls for tungsten deposition in the Mt Carbine deposit. Work is being undertaken to undertake a reconciliation in Q3 FY2024, when all RC holes assays have been returned from the laboratory. 5 resourcing the new economy for a better tomorrow Figure 1 - 305m RL showing blast ore blocks on the bottom level, High grade (305-001& 002 in Pink); Medium Grade (305-005 in yellow); Low grade 305-003 in Blue) with remainder being waste. Johnson veins showing up in the pit – looking at blast 305-002 wall. Individual veins grade looks high by visual inspection with the entire face being 0.28% in this region. Drill rig on the left during RC Control drilling. Crushing Operations The crushing operations have undergone major changes during the first half of financial year with the most significant being the processing of primarily open pit material, transitioning from the historic LGS and tailings. The feed through the Crushing Plant from the open pit averaged just below 0.2% over the last 6 months, in stark contrast to the 0.074% average from the LGS. To accommodate the increased grade, the team had to adapt the plant and crushing operations to the new material being delivered. The firsts blasts produced larger than expected oversize material due to certain drill holes not blasting as expected, and also were having higher dilution than planned bringing a lower grade than 6 resourcing the new economy for a better tomorrow anticipated. Blasting and dilution controls have been implemented with a more predictable grade reaching the stockpile and processing plant as blasting continued month-on-month. A Terex Finlay Mobile Jaw Crusher J1175 was integrated into the production process in July 2023 to reduce the oversized -700mm ore from the open pit blasting to a more manageable -170mm fraction, significantly reducing the amount of oversize material that would have been otherwise rejected by the current Crushing Plant. Newly commissioned Terex Finlay Jaw Crusher J-1175 with a 50 tonnes excavator and a CAT 980M preparing the feed on ROM1 Stockpile for the Crushing Plant During Q2, 2024, the main Sandvik Circular Motion Screen had to be stood down for reconditioning at the site workshop. While the screen was down, a Sandvik Mobile Cone Crusher QH332 was commissioned and took care of the crushing operations to produce feed for the XRT Ore Sorters and Gravity processing plants. Since the refurbishment, the fixed plant is used as priority for crushing, and the mobile equipment used in tandem for increased output and stockpile building for the XRT Ore Sorters and Gravity Plant. New Sandvik QH332 Cone Crusher arriving on site. 7 resourcing the new economy for a better tomorrow Water availability was a constraint during the second quarter with crushing operations converted to dry crushing due to low dam levels. Operational changes in procedures, processes and in the structure of the operational crews and maintenance team were implemented in January 2024 to accommodate the increased operational demand. All yielded positive results with production ramping back up toward the end December 2023 and throughout January 2024. The site was affected by Tropical Cyclone Jasper mid-December 2023 with the operation losing 20 production shifts as floods cut roads, power, fuel deliveries and concentrate pick-up. Tropical Cyclone Jasper significantly affected operations at the Mt Carbine Site mid-December 2023 with damaging winds, floods, power outages, disrupted logistics, causing 10 days of downtime. On the positive side, following the Cyclone, on-site water storage facilities are full with the crushing plant converted back to a wet crushing operation. With the wet season ongoing, the main water storage facility’s walls are being raised in Q2 and Q3, 2024 to increase capacity to improve water security for the wet crushing operations. Despite all these challenges, a total of 273,439 tonnes have been crushed and converted to feed for the XRT Ore Sorter and Gravity Plants with the plants run time peaking toward the end of Q2, 2024. XRT Sorter Plant With the commencement of open pit ore deliveries, the operations have experienced a higher proportion of material in the sortable fraction, which is an overall benefit to the operation due to the low-cost nature of XRT Ore Sorting. Using the experience acquired while operating and sorting the LGS material, processing the primary ore from the Andy White Open Pit has increased mass yields ranging between 15-18%, with stable WO3 recoveries above 95%. The XRT Ore Sorter team have also worked to modify the Sorter program to optimise ejections creating a cleaner sorter concentrate to further reduce downstream crushing. The benefit of this has been seen as a lower yield during the last quarter. Commissioning of the XRT Ore Sorter, Tomra 3, was finalised at the end of August 2023, with newer programming and increased efficiencies, the plant is seeing the benefits of the upgrade, with an increased run time from around 50% from previous months to 74% in September 2023. 8 resourcing the new economy for a better tomorrow Two XRT Sorters in the background with a stockpile of feed in the foreground. Gravity Plant The gravity processing operations successfully transitioned from primarily utilising material from the LGS to processing primarily tungsten-rich open cut ore. Since the beginning of the open pit operations, the shift yielded positive outcomes for the operations team, who focused on enhancing the recovery rates of the ore processed through the XRT Ore Sorter Plant resulting in higher grade feed into the Gravity Plant. A significant increase in concentrate has been seen since the introduction of primary ore from open cut mining. The positive results from the processing of the primary ore have also seen tungsten recovery rates higher than expected which supports strong production trends going forward. Aerial picture of the Gravity Plant with TSF4 Dam in the distance. 9 resourcing the new economy for a better tomorrow The newly set up laboratory has been assaying all the different samples from the open pit and the different processing plants with a quick turnover for results, enabling the team to understand the new material being processed, the different grades and how best to optimise the processing circuits. The XFRT Ore Sorter concentrate processed through the Gravity Plant this quarter increased to 21,739 tonnes, compared to 20,698 tonnes in Q4, 2023. Operational efficiency has shown marked improvements, with 82.3% run time for the Gravity Plant and building throughputs and outputs for each plant. The operations team will continue to focus on short interval wins under an overarching long-term production strategy to continuously improve operations and grow concentrate outputs. WO3 Concentrate Production 50% Equivalent (t) 550.0 500.0 450.0 400.0 350.0 300.0 250.0 200.0 150.0 100.0 50.0 Q3 FY2023 Q4 FY2023 Mar-24 Actual & Forecast Monthly Average (t) Q1 FY2024 Q2 FY2024 Q3 FY2024 50% WO3 Equiv (t)* Linear (Monthly Average (t)) *Wet tonnes 50% Equivalent Figure 2 - Quarterly WO3 Concentrate Production 50% Equivalent. Mt Carbine Expansion The doubling of the Gravity Plant’s capacity is ongoing, whereas the focus during the first half of FY 2024 was on stabilisation of operations with the new incoming open pit ore. A new jig, additional shaking tables and a new dewatering screen will come online in the second half FY2024. New Schenk Dewatering Screen that will be paired with the new roll crusher (Left); The new Jig being prepared for commissioning (Right) − − − − Upgrades completed for service access roads and dump truck roadways early Q1, 2024. Significant earth moving work completed for Golding’s infrastructure needs and stockpile preparations. New inventory warehouse established housing spare parts, consumables and equipment. Electrician’s storage, office and workspace set up and operational. 10 resourcing the new economy for a better tomorrow − − − − New fabrication workshop has been set up during Q1, 2024 and is now fully operational. New Sandvik Crushing Plant detailed design is underway as per the BFS which is set for commissioning in early Q4, 2024. New Schenk Dewatering Screen installed and soon to be complemented by larger roll crushers to double the Plant’s capacity. Post-year financial year end, eight concentrate shaking tables were added, increasing output, with two stacks of four shaking tables planned to optimise mineral separation processes with higher throughputs. The High-Grade Crushing Circuit on the left, vibrating screen and new Jig on the right, the 6mm fines pipeline at the foreground, pumping fines from the crushing plant straight to the screen. Quarry Operations The Mt Carbine Quarry, is expected to be instrumental in the region’s recovery, following Cyclone Jasper, providing top-quality aggregate for the repair of flood-damaged roads and vital structural work. These efforts reflect the Company’s continued commitment to a circular economy, repurposing by-products effectively for reconstruction needs and uploading our environmental and community support values. The Pormpuraaw local roads reseal project, concluded in December 2023, contributed $376,403 (excluding GST) to the Quarry’s total revenues for the first half of the 2024 financial year. Sustainability See EQR’s 2023 Annual Report (pages 18 - 29) for a recent, in-depth sustainability review. EQR reports its safety and ESG development according to its core values outlined in its ESG Program Framework. See: Sustainability Framework and Materiality Assessment. EQR also has a sustainability tab on its website that communicates the Company’s ESG commitments and its ESG initiatives. See: What We Care About and ESG Showcase. Health and Safety Statistics Value: Act Safe. Feel Safe EQR's dedication to a safer workplace is evidenced by the recording of 3,899 positive safety indicators for the first 2 quarters of 2024. The increase in workplace inspections conducted by Area Foremen and Supervisors has significantly improved site safety, ensuring that all areas not only meet but surpass industry standards. This underscores our commitment to ongoing advancements in safety. 11 resourcing the new economy for a better tomorrow EQR reinforced its commitment to safety by hosting its annual safety reset in line with the Queensland Mining initiative. During 2 hours of complete site down-time, this vital initiative emphasised reinforcing safety protocols, addressed employee concerns, and aided in fostering an environment where the well-being of every individual remains at the forefront of the Company’s operations. Diversity and participation statistics Value: Embrace Difference EQR achieved notable progress in diversity and representation, marked by an increase in women and full-time indigenous employees. Additionally, the rise in permanent, full-time staff and a decrease in monthly new hires signifies improved workforce stability. These developments align with our commitment to inclusivity and sustainable employment practices. Environmental statistics Value: Tread Lightly As EQR works towards future reporting and net-zero readiness, developmental work with Arteh on an emissions tracking dashboard is ongoing with data collection and inputs underway. See: EQ Resources’ Collaboration with Arteh: Advancing ESG Excellence in the mining industry. 12 resourcing the new economy for a better tomorrow Figure 3: Example of ARTEH’s performance dashboard. LOCAL PROCUREMENT, PARTNERING & ENGAGEMENT STATISTICS Value: Buddy Up EQR is currently conducting an updated Stakeholder Sentiment Survey to further understand the environmental and social aspects that matter most to its stakeholders. Building on insights from the 2021 survey and guided by the Turner & Townsend JukesTodd ESG Categorisation framework, this initiative aims to align EQR's ESG program more closely with the evolving needs of its stakeholders. EQR remains dedicated to ongoing enhancement of its ESG policies and practices to reflect the Company's growth and the aspirations of its stakeholders. If you would like to participate in this survey, please contact our ESG Team : Link Stakeholder Sentiment Survey 2024 13 resourcing the new economy for a better tomorrow SUSTAINABILITY STATISTICS Value: Lead with Integrity During Q3, 2023 EQR has significantly advanced its alignment with industry-leading sustainability practices. Following the International Council of Mining and Metals (ICMM) self-assessment facilitated by Turner Townsend Jukes Todd (TTJT), the Company has synthesised its findings into a clear, outward-facing document that delineates its adherence to the ICMM principles. This document includes pertinent links to its internal policies and plans that satisfy the performance criteria, alongside various initiatives that fulfill these benchmarks. Concurrently, EQR’s gap analysis conducted by TTJT has considered the metrics the Company currently gathers for Global Reporting Index (GRI) compliance and pinpointed the additional data needed. This has led to a review of environmental areas where the Company’s data collection will be augmented, as it develops comprehensive environmental management plans. Looking ahead, the Company will coordinate with other EQR members to define the general disclosure prerequisites, aiming to compile a complete set of GRI disclosures in the 2024 Annual Report. This initiative will strategically exclude metrics that do not pertain to EQR, ensuring our reporting is tailored and relevant. Through these actions, EQR is not only bolstering transparency but also positioning itself at the forefront of potential mandatory sustainability reporting standards. Exploration Mt Carbine Exploration Field activities were advanced on several fronts during Q1 and Q2, 2024 with continued focus on the Ruby and Iron Duke areas and onto Mt Carbine Hill through Daisy and True Blue prospects. Field mapping and traverses continued throughout these areas and east to the granite dyke with exploration drilling undertaken at the Ruby Vein (part of the Iron Duke formation) and in the eastern area of the Mt Carbine Deposit. Drill rig operating in the eastern extension. 14 resourcing the new economy for a better tomorrow A total of 36 Reverse Circulation (RC) holes were drilled for a total of 1,817m with all holes reaching 51m in depth. This scout drilling was done on essentially 25m centres to determine any surface vein locations. Figure 1 - Model of the Open Pit with Ruby Vein and Eastern Extension The Ruby vain was observed to be intersected in all drill holes and has now been demonstrated to continue for 450m strike. The Ruby Zone reaches a maximum width of 3m with multiple narrow zones (10 to 50cm) of visible tungsten mineralisation (wolframite & scheelite). In the Eastern exploration work no substantial veins were encountered and it is postulated the eastern extension is offset further to the northwest of the test drilling. Assaying of the RC chips will be completed during Q2, 2024. 15 resourcing the new economy for a better tomorrow Drillholes over Ruby vein prospect. Completed drillholes from the Iron Duke area/ Eastern Extension. A soil sampling campaign was completed on the western side of Mt Carbine Hill while outcrop mapping and sampling were also progressed over the same area. A total of 6 rock chip samples collected from major in situ vein exposures and 248 soil samples have been collected for processing. 16 resourcing the new