Prairie Mining : December 2020 - Half Year Accounts

Interim Financial Report for the Half-Year Ended

31 December 2020

ABN 23 008 677 852

CORPORATE DIRECTORY

DIRECTORS:

Mr Ian Middlemas

Mr Benjamin Stoikovich Ms Carmel Daniele

Mr Thomas Todd Mr Mark PearceMr Dylan Browne

PRINCIPAL OFFICES: London:

Unit 3C, 38 Jermyn Street London SW1Y 6DN United Kingdom

Tel: [phone]

Chairman Director and CEO Non-Executive Director Non-Executive Director Non-Executive DirectorCompany Secretary

Australia (Registered Office):

Level 9, 28 The Esplanade Perth WA 6000

Tel: [phone] Fax: [phone]

PD Co sp. z. o.o. (Warsaw):

Wiejska 17/11

00-480 Warszawa

Karbonia S.A. (Czerwionka - Leszczyny):

Ul. 3 Maja 44,

44-230 Czerwionka - LeszczynySOLICITORS: Thomson Geer

AUDITOR:

Ernst & Young - Perth

BANKERS:

National Australia Bank Ltd

Australia and New Zealand Banking Group Ltd

SHARE REGISTRIES:

Australia:

Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace

Perth WA 6000

Tel: [phone]

United Kingdom:

Computershare Investor Services PLC The Pavilions, Bridgewater Road Bristol BS99 6ZZ

Tel: [phone]

Poland:

Komisja Nadzoru Finansowego (KNF)

Plac Powstańców Warszawy 1, skr. poczt. 419

00-950 Warszawa

Tel: [phone]

STOCK EXCHANGE LISTINGS: Australia:

Australian Securities Exchange - ASX Code: PDZ

United Kingdom:

London Stock Exchange (Main Board) - LSE Code: PDZ

Poland:

Warsaw Stock Exchange - GPW Code: PDZ

CONTENTS

Page

Directors' Report 1

Directors' Declaration 6

Consolidated Statement of Profit or Loss and other Comprehensive Income 7

Consolidated Statement of Financial Position 8

Consolidated Statement of Changes in Equity 9

Consolidated Statement of Cash Flows 10

Notes to the Consolidated Financial Statements 11

Auditor's Independence Declaration 16

Independent Auditor's Review Report 17

The Directors of Prairie Mining Limited present their report on the Consolidated Entity consisting of Prairie Mining Limited

("Company" or "Prairie") and the entities it controlled during the half-year ended 31 December 2020 ("Consolidated Entity" or "Group").

DIRECTORS

The names and details of the Company's Directors in office at any time during the half-year and until the date of this report are:

Directors:

Mr Ian Middlemas	Chairman
Mr Benjamin Stoikovich	Director and CEO
Ms Carmel Daniele	Non-Executive Director
Mr Thomas Todd	Non-Executive Director
Mr Mark Pearce	Non-Executive Director
Mr Todd Hannigan	Alternate Director (resigned 5 February 2021)

Unless otherwise shown, all Directors were in office from the beginning of the half-year until the date of this report.

OPERATING AND FINANCIAL REVIEW

Operations

Highlights during, and subsequent to, the half-year include:

• • International arbitration claims (Claim) against the Republic of Poland under both the Energy Charter Treaty and the Australia-Poland Bilateral Investment Treaty (Treaties) ongoing during the period with the proceedings having now been constituted and a quantum expert being appointed by the Company.

  • ➢ Prairie alleges that the Republic of Poland has breached its obligations under the Treaties through its actions to block the development of the Company's Jan Karski and Debiensko mines in Poland.

  • ➢ The Republic of Poland's actions have deprived Prairie of the entire value of its investments in Poland.

  • ➢ The Claim for damages may include but is not limited to the value of Prairie's historical expenditure in developing both the Jan Karski and Debiensko mines, lost profits and damages, which is linked to the net present value of both mines, and accrued interest related to any damages.

• • The Company's Claim against the Republic of Poland will be prosecuted through an established and enforceable legal framework with both parties agreeing to apply the United Nations Commission on International Trade Law Rules (UNCITRAL) to the proceedings.

• • The Company is well funded to pursue the Claim with the US$12.3 million Litigation Funding Agreement (LFA) in place and currently being drawn down to cover legal, tribunal and external expert costs and defined operating expenses associated with the Claim.

• • The Company completed a Share Purchase Plan (SPP) to raise A$4 million (before costs) for working capital requirements and business development opportunities.

• • Prairie continues its efforts to identify and assess other suitable new business opportunities, focused on the resources sector. The Company will make announcements to the market as appropriate.

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(Continued)

OPERATING AND FINANCIAL REVIEW (Continued)

Dispute with Polish Government

The Company's Claim against the Republic of Poland is being prosecuted through an established and enforceable legal framework, with Prairie and Poland agreeing to apply the UNCITRAL rules to the proceedings.

During the half-year, the proceedings for the Claim were constituted while the Company appointed a quantum expert, considered other expert proposals and continued with document collation for the Claim.

Prairie's claim for compensation may include, but will not be limited to:

• • The value of Prairie's historic expenditure in developing both the Jan Karski (Jan Karski) and Debiensko (Debiensko) mines;

• • Lost profits and damages that the Company has suffered as a result of Poland's acts and omissions, which is linked to the considerable Net Present Value of both mines at the time of Poland's international treaty breaches; and

• • Accrued interest related to any damages award and all costs associated with pursuing the Claims to Arbitration.

In March 2017, Prairie released the results of a JORC compliant Scoping Study for Debiensko prepared by independent international mining consultancy Royal HaskoningDHV. The Scoping Study demonstrated the technical viability and robust economics for the fully permitted Debiensko mine to be a large scale, lowest cost and long life premium hard coking coal supplier. Further details of the Scoping Study care contained in the Company's announcement dated 16 March 2017.

In March 2016, Prairie released the results of a JORC compliant Pre-Feasibility Study (PFS) for Jan Karski prepared by independent international mining consultancies Golder Associates and Royal HaskoningDHV. The PFS demonstrated the technical viability and robust economics of Jan Karksi to be developed as a large-scale long life strategic coal supplier. Further details about the PFS are contained in the Company's announcement dated 8 March 2016.

The Company is not able to make any further comment in relation to the potential quantum of any claim for compensation at this point. Please refer to ASX announcements dated 26 April 2018, 28 May 2018, 18 January 2019, 13 February 2019,

4 April 2019 and 31 December 2019 for further details regarding the Company's dispute with the Republic of Poland.

In July 2020, the Company announced it had executed a LFA for US$12.3 million with LCM. The facility is currently being drawn down to cover legal, tribunal and external expert costs and defined operating expenses associated with the Claim.

In September 2020, Prairie announced that it had formally commenced with the Claim by serving the Notices of Arbitration against the Republic of Poland.

Prairie's dispute alleges that the Republic of Poland has breached its obligations under the applicable Treaties through its actions to block the development of the Company's Jan Karski and Debiensko mines in Poland which effectively deprives Prairie of the entire value of its investments in Poland.

In February 2019, Prairie formally notified the Polish Government that there exists an investment dispute between Prairie and the Polish Government. Prairie's notification called for prompt negotiations with the Government to amicably resolve the dispute and indicated Prairie's right to submit the dispute to international arbitration in the event of the dispute not being resolved amicably. The Company remains open to resolving the dispute with the Polish Government amicably. However, as of the date of this report, no amicable resolution of the dispute has occurred, since the Polish Government has declined to participate in discussions related to the dispute and accordingly the Company has formerly submitted its Claim as discussed above.

Prairie's investment dispute with the Republic of Poland is not unique, with international media widely reporting that the political environment and investment climate in Poland has deteriorated since the change in Government in 2015. As a result, there are a significant number of International Arbitration claims being bought against Poland in the natural resources and energy sectors with damages claims ranging from US$120 million to over US$1.3 billion and includes Bluegas NRG Holding (Gas), Lumina Copper (Copper) and InvEnergy (wind farms).

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