Queensland Pacific Metals : Half Year Accounts

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ABN 61 125 368 658

FINANCIAL REPORT

FOR THE HALF‐YEAR ENDED

31 DECEMBER 2021

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CONTENTS

Directors' Report	3
Auditor's Independence Declaration	7
Consolidated Statement of Profit or Loss and Other Comprehensive Income	8
Consolidated Statement of Financial Position	9
Consolidated Statement of Changes in Equity	10
Consolidated Statement of Cash Flows	11
Notes to the Consolidated Financial Statements	12
Directors' Declaration	22
Independent Auditor's Review Report	23

Queensland Pacific Metals Limited - Interim Financial Report 2022

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DIRECTORS' REPORT

The Directors of Queensland Pacific Metals Limited ("QPM" or "the Company") present their report, together with the financial statements on the consolidated entity consisting of Queensland Pacific Metals Limited and its controlled entities for the half‐year ended 31 December 2021 ("the Period").

It is recommended that the Directors' Report be read in conjunction with the annual financial statements for the year ended 30 June 2021 and considered together with any public announcement made by the Company during the Period and up to the date of this report.

1. DIRECTORS

The names of the Company's Directors who held office during the Period and until the date of this report are set out below. The Directors were in office for this entire Period unless otherwise stated.

Director	Position	Duration of Appointment
Stephen Grocott	Managing Director	1 April 2021 (current)
John Downie	Executive Director	17 May 2019 (current)
Eddie King	Non‐ Executive Director	26 March 2018 (current)
		(Non‐Executive Chairman until 24 September 2021)
Cameron Mclean	Non‐ Executive Director	30 November 2018 - 24 September 2021
Jim Simpson	Non‐Executive Director	1 May 2021 (current)
Sharna Glover	Non‐Executive Director	24 September 2021 (current)
John Abbott	Non‐Executive Chairman	24 September 2021 (current)

2. REVIEW OF OPERATIONS AND ACTIVITIES

Townsville Energy Chemicals Hub ("TECH Project")

During the half year, QPM made significant progress on the TECH Project.

Sustainability Life Cycle Assessment

QPM commissioned industry leading consulting group Minviro to undertake an ISO‐compliant Life Cycle Assessment ("LCA") for the TECH Project. The LCA calculates carbon emissions for the TECH Project and adopted a "cradle to gate" approach that is fully compliant with ISO 14040/44 ISO Life Cycle Analysis Standards. This means that Minviro assessed carbon emissions from the point of natural resource extraction through to the customer delivery point of final product.

The key conclusion of the LCA was that the TECH Project would be net carbon negative. Due to QPM's planned waste gas sourcing strategy, at steady state operation the TECH Project would actually reduce Australia's greenhouse gas emissions by a minimum of 238,000 tonnes CO2‐equivalent per annum. This is the same level of emissions generated each year by approximately 52,000 typical passenger vehicles.

The net carbon negative, combined with no requirement for a tailings dam, and zero liquids discharge, will make the TECH Project boast global leading sustainability credentials for critical metal production.

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DIRECTORS' REPORT (CONTINUED)

2. REVIEW OF OPERATIONS AND ACTIVITIES (CONTINUED)

Definitive Feasibility Study ("DFS")

QPM and its lead engineer Hatch progressed the DFS during the Period. The initial focus of the DFS has been to optimise the processing flowsheet with the focus on minimising technical risk, capital expenditure and operating cost. As part of these activities, QPM has identified key vendors for critical sections of the processing plant and started detailed engagement with these vendors (including Joint Development Agreements with some of them). QPM's strategy is to undertake any requisite testwork and detailed engineering with these vendors to minimise scale up risk and ensure the right commercial scale equipment is being selected.

QPM expects the DFS to be completed mid 2022 calendar year.

High Purity Alumina ("HPA") License Heads of Agreement

During the Period, QPM entered into a Heads of Agreement with Lava Blue for use of their proprietary HPA technology at the TECH Project. Lava Blue will play a role with QPM in the HPA section of its DFS. Workstreams include testwork, piloting and direct support to engineers. QPM has also appointed Stantec to undertake the HPA DFS and their work will ultimately feed into the final DFS being undertaken by Hatch.

Cultural Heritage, Regulatory Approvals and Prescribed Project Status

In September 2021, QPM was awarded Prescribed Project status by the Queensland State Government. A Prescribed Project is one which is of significance, particularly economically or socially, to Queensland. Importantly, a Prescribed Project declaration grants the Coordinator‐General the power, if necessary, to intervene in state and local government approval processes to ensure timely decision making.

Key activities undertaken in the Period in order to receive regulatory approvals required to construct the TECH Project included:

• Completion of Cultural Heritage surveys of the TECH Project site at Lansdown with Traditional Owners, the Bindal People;
• Submission of a Development Application required under State legislation; and
• Submission of Environment Protection and Biodiversity Conservation referral document required under Federal legislation.

QPM remains confident of securing approvals ahead of completing the DFS.

Project Funding

QPM appointed KPMG to provide debt advisory services for the TECH Project. Key advancements on securing debt finance were made during the Period include:

• Completing the Strategic Assessment phase of the Northern Australian Infrastructure Facility funding pathway and proceeding through the Due Diligence phase;
• Receiving non‐binding conditional finance support from Export Finance Australia (EFA) to secure up to A$ 250 million of debt funding for the TECH Project; and
• Receiving multiple letters of interest from leading commercial banks and eligibility letters from Development Finance Institutions for the provision of project finance.

QPM will continue the debt funding initiatives in parallel with completion of the DFS.

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DIRECTORS' REPORT (CONTINUED)

2. REVIEW OF OPERATIONS AND ACTIVITIES (CONTINUED)

Corporate

Following the receipt of shareholder approval on 13 July 2021, the Company issued 99,235,899 shares to LG Energy Solutions Ltd and 42,529,667 shares to POSCO GEM 1st Fund on 2 August 2021. A combined investment of USD15 million was received.

On 24 September 2021, John Abbott was appointed as Independent Non‐Executive Chair of QPM and Dr Sharna Glover as an Independent Non‐Executive Director. These two Queensland‐based directors bring extensive domestic and international experience in the design, construction and management of large mining, mineral processing and manufacturing projects including process and design improvement to maximise operating efficiencies.

As part of these appointments, Eddie King transitioned from Non‐Executive Chairman to Independent Non‐ Executive Director and Cameron McLean resigned as an Independent Non‐Executive Director of the Company.

In December 2021, the company raised $30 million (before costs) via a share placement of 187,500,000 million fully paid ordinary shares at an issue price of A$0.16 per share ("Placement").

On 15 December 2021, the Company announced it has received conditional finance support from Export Finance Australia (EFA) to secure up to A$ 250 million of debt funding for the TECH Project planned to be developed in Townsville, Northern Queensland. The next step in obtaining finance involves further due diligence by EFA.

3. FINANCIAL RESULTS

The financial results of the Company for the half‐year ended 31 December 2021 are:

	31‐Dec‐21	30‐Jun‐21
Cash and cash equivalents ($)	47,133,554	17,745,422
Net assets ($)	47,626,974	15,873,456
	31‐Dec‐21	31‐Dec‐20
Net loss after tax ($)	(16,317,086)	(1,382,074)
Loss per share (cents)	(1.22)	(0.18)

4. SUBSEQUENT EVENTS

On 18 January 2022, it was announced on the ASX that the first 4N HPA was produced from QPM's aluminium chloride which in turn was produced from QPM's pilot plant aluminium hydroxide. This provides QPM with the confidence to proceed with further test work and the HPA section of the definitive feasibility study for the TECH Project.

On 1 March 2022, it was announced on the ASX that a binding ore supply agreement was entered into with Societe Le Nickel, a subsidiary of Eramet, Group, for up to 1,000,000 wmt per annum and targeting a typical high grade limonite ore specification of 1.6% Ni and 0.18% Co. The agreement is for a five year term with a five year extension, subject to mutual agreement.

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