Northern Minerals : Annual Report to shareholders

2022

ANNUAL REPORT

CONTENTS

EXECUTIVE CHAIRMAN'S REPORT..........................................................................................................	1
CHIEF EXECUTIVE OFFICER'S REVIEW ..................................................................................................	5
ENVIRONMENT, SOCIAL & GOVERNANCE............................................................................................	9
PEOPLE AND CULTURE ............................................................................................................................	12
COO REPORT ...............................................................................................................................................	15
EXPLORATION & GEOLOGY REPORT...................................................................................................	20
ORE RESERVE AND MINERAL RESOURCE STATEMENT...............................................................	25
ORE RESERVE...................................................................................................................................	26
MINERAL RESOURCE.....................................................................................................................	27
FINANCIAL REPORT ..................................................................................................................................	30
DIRECTORS' REPORT.................................................................................................................................	31
REMUNERATION REPORT........................................................................................................................	39
CORPORATE GOVERNANCE STATEMENT ............................................................................	50
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ............	51
STATEMENT OF FINANCIAL POSITION ..................................................................................	52
STATEMENT OF CHANGES IN EQUITY....................................................................................	53
STATEMENT OF CASH FLOWS...................................................................................................	54
NOTES TO THE FINANCIAL STATEMENTS.............................................................................	55
DIRECTORS DECLARATION........................................................................................................	94
AUDITORS DECLARATION OF INDEPENDENCE .............................................................................	95
INDEPENDENT AUDITORS REPORT......................................................................................................	96
SCHEDULE OF TENEMENTS..................................................................................................................	100
SHAREHOLDER INFORMATION...........................................................................................................	102
CORPORATE DIRECTORY.......................................................................................................................	105

Executive

Chairman's

Report

NORTHERN MINERALSANNUAL REPORT 2022	1

NORTHERN MINERALS _ ANNUAL REPORT 2022

LETTER FROM THE EXECUTIVE CHAIRMAN

Fellow Shareholders,

I have pleasure in presenting the 2022 Annual Report of Northern Minerals Limited.

The past year saw several, significant changes that transformed the Company, positioning it to take important steps towards establishing

a commercial-scale beneficiation plant at Browns Range and to pursue development of the precinct to its fullest potential.

The Company's aspiration is to build its operation into a significant producer of ethically produced rare earth elements and separated products, including the heavy rare earths, dysprosium and terbium.

The neodynium iron-boron magnet (NdFeB) used in clean energy, military and high technology solutions contain the essential ingredients of dysprosium and terbium. Their unique characteristics enhance the performance of magnets at high temperatures and improve their resistance to demagnetisation. This is particularly desirable for magnets used in higher temperature operating conditions, such as large offshore wind turbines, electric vehicle motors, robotics in modern manufacturing, and energy-saving heating, ventilation, and air conditioning systems.

China is responsible for almost 100% of rare earth magnet manufacturing. While only holding some 35% of known rare earth reserves, it represents 55-60% of rare earth mining production, about 85% of midstream separation and metal/ refining capacity, and roughly 90% of NdFeB permanent magnet manufacturing.

Many equipment manufacturers in a wide variety of sectors are seeking to secure access to additional supply chains for strategic minerals, such as

rare earths.

The Australian Government has created the Critical Minerals Facilitation Office while the US has created the Advanced Technology Vehicles Manufacturing Loan Program to provide support, including funding, for the development of critical mineral projects.

I believe Northern Minerals is well placed to take opportunities to participate in programs such as these. As one of only a few companies outside of China to have produced dysprosium and terbium, our Browns Range and other properties certainly qualify for consideration.

The strategic review, carried out by the Board during the year, confirmed that producing and marketing a mixed heavy rare earth concentrate from a commercial-scale beneficiation plant at Browns Range is the preferred near-term strategy, offering earlier access to cash flow and a lower risk profile.

The strategic review identified an opportunity for the Company to expedite production and bring forward cash flow from the high-grade Wolverine deposit at Browns Range. We have initiated steps to put together an experienced team to produce an updated Detailed Feasibility Study (DFS) for a commercial scale beneficiation plant, leveraging work undertaken in the earlier 2015 DFS. Included will be an assessment of the benefits (financial and otherwise) of alternative mining methods, inclusion of an ore sorter to increase product grade and de-risk mining dilution following the pilot plant achieving a 60% improvement in ore sorted product grade.

The Company began producing heavy rare earth carbonate in late 2018 as part of the pilot program. The program was aimed at assessing the economic and technical feasibility of a larger scale development at Browns Range. An ore sorter installed and commissioned during 2021 also tested for its economic and technical feasibility at the front end of the pilot plant. The Company completed the three-year test program on the Pilot Plant at Browns Range during the March 2022 quarter and the plant has been placed on care and maintenance.

Since inception the Company has produced 281 tonnes of carbonate from 1,140 tonnes of rare earth oxide concentrate from the Browns Range pilot plant.

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Browns Range Pilot Plant

Board renewal

I was privileged to be invited to join the Board as Chairman in November 2021 following the resignation of Colin McCavana. Colin was a founding director of the Company and was instrumental in its transition from an explorer to a producer of heavy rare earth elements, and we thank him for his contribution. I was appointed Executive Chairman in June 2022.

Bin Cai was appointed as a Non-Executive Director in July 2021 after acting as an alternate director since 2013. Mr Cai has been involved in the rare earth industry for over 15 years and has assisted the Company with critical financing and other activities over the years. He was appointed an Executive Director in June 2022.

Adam Handley was appointed a Non-Executive Director in December 2021. Adam is a Partner and China Markets Leader for MinterEllison and specialises in advising North Asian investors and their Australian counterparts to build successful business relationships across a range of sectors including Energy & Resources, Mining and Project Development. He is the National Vice President & Director of the Australia China Business Council, a member of the Murdoch University Vice Chancellor's Advisory Board, and a Board member of the World Services Group.

The Board continues to review its composition and we intend to continue the process of Board renewal, recognising the benefits of having directors with a broad range of skills, experience and perspectives.

Financial

During the year, Northern Minerals received total income of $9.3 million, including $3.8 million from sales of rare earth carbonate from the pilot plant and $4.3 million for the R&D refundable tax offset.

The Company retains a strong balance sheet, with net cash of $2.9 million at year end and a net working capital surplus of $5.6 million. In addition, the claim for the refundable R&D tax offset for FY22, estimated at $4.1 million, has been lodged and is expected to be received in the December 2022 quarter.

Test Pit at Banshee

NORTHERN MINERALS _ ANNUAL REPORT 2022

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