Aeon Metals : 2022 Full Year Statutory Accounts

Aeon Metals Limited and Controlled Entities

ABN 91 121 964 725

30 June 2022

Annual Report

Contents

Page

Directors' report	3
Auditor's independence declaration	22
Consolidated financial statements
Consolidated Statement of Financial Position	23
Consolidated Statement of Profit or Loss and Other Comprehensive Income	24
Consolidated Statement of Changes in Equity	25
Consolidated Statement of Cash Flows	26
Notes to the consolidated financial statements	27
Directors' declaration	52
Independent auditor's report	53

3

Aeon Metals Limited

Directors' Report

For the year ended 30 June 2022

The directors present their report, together with the financial report of the Group, comprising Aeon Metals Limited (the "Company" or "Aeon") and its controlled entities (together, "the Group") for the year ended 30 June 2022 and the Independent Auditor's report thereon.

Directors

The directors of the Company at any time during or since the end of the reporting period are:

Dr Fred Hess (Managing Director)

Mr Paul Harris (Chairperson, Non-Executive Director)

Mr Ivan Wong (Non-Executive Director)

Mr Andrew Greville (Non-Executive Director)

The directors have been in office since the start of the financial period to the date of this report unless otherwise stated. Information on each person's qualifications, experience and special responsibilities is given later in the Directors' report.

Company Secretary

The Company Secretary at the end of the financial period was Mr David Hwang. On 26 August 2022, the Company announced that Mr Hwang has been replaced with Ms Lucy Rowe.

Details of Ms Rowe's skills and experience are detailed later in this Report.

Principal Activities

The principal activities of the Group during the financial period were:

• The exploration and development of the Walford Creek (100% owned) Copper-Cobalt project ("Walford Creek" or the "Project").

The Group's mineral assets otherwise comprise an extensive tenement holding in Queensland, namely:

• A 100% interest in permits comprising:

• 1. Greater Whitewash Polymetallic Project ("Greater Whitewash"); o Ben Hur Copper Project ("Ben Hur"); and
     o 7B Copper/Gold Project ("7B").
• A 100% interest in the Forsyth Gold Project.
• Various interests in permits of the Isa North base metals EPMs and MDLs.
• Various interests in permits of the Isa West base metals EPMs.
• Various interests in permits of the Isa South copper-gold EPMs.
• Various interests in permits of the Constance Range base metals EPMs.

There were no significant changes in the nature of the Group's principal activities during the financial period.

4

Aeon Metals Limited

Directors' Report

For the year ended 30 June 2022

Operating and financial review

Operating Results

The loss of the Group amounted to $3,454,000 (2021: $6,057,000) including impairment losses of $366,000 (2021: $1,144,000).

Dividends

No dividends were paid or declared, and no dividends have been recommended by the Directors (2021: $Nil).

Review of Operations

Overview

Walford Creek Copper-Cobalt Project hosts one of Australia's highest grade cobalt deposits. The known mineralisation extends over approximately 10 km adjacent to the Fish River Fault (FRF). The extensively drilled ~4 km strike of the Marley and Vardy zones hosts a Mineral Resource Estimate (MRE) of 39.3 Mt, with over 97% in the Measured and Indicated categories. The sparsely drilled Amy zone to the west hosts an Inferred MRE of 5.1 Mt. Drilling over the 10 km of strike extent highlights the consistency of both the stratigraphy and style of mineralisation leading to greater confidence for further exploration success.

The primary metal products that Walford Creek will yield include copper, cobalt, zinc and nickel. These are some of the key metals required to support the move towards Net Zero Carbon Emissions by 2050. As such, the outlook for the development of Walford Creek is very positive with long term demand strong and the prospect of future higher metal prices to incentivise new developments growing.

Aeon started this year with a fresh outlook on the proposed processing route to recover the valuable metals in the Walford Creek polymetallic deposit. The focus for this year was on moving to complete a Pre-Feasibility Study (PFS) on Walford Creek in early 2022, following the successful completion of a Scoping Study in June 2021. The work commenced in the second half of 2021 with a substantial program of metallurgical testwork designed to validate key aspects of the proposed flowsheet.

In conjunction with the technical studies program of work, Aeon completed a comprehensive in-fill drilling program at Walford Creek in November 2021. This was focussed on securing sufficient representative core to complete the metallurgical testwork program while further increasing confidence in the MRE classification. It was considered that the combination of both the technical study and in-fill drilling programs would be sufficient to support project development.

As part of the 2021 site field exploration program, high resolution gravity and magnetic surveys were also completed over the Walford tenement package. These surveys were the first region-scale attempt to identify additional opportunities for hosting mineralisation. The survey results highlighted the known mineralisation and also revealed similar geophysical signatures along fault structures both adjacent to the FRF and elsewhere. In addition to the known mineralisation along the 10 km strike adjacent to the FRF, a further 15 km of similar structure was identified as delivering new prospective drill targets.

Progress against the planned PFS activities continued to be hampered by the lingering effects of Covid-19 on workforce availability. In addition, it became apparent in early 2022 that the cumulative effects on the macro-economic environment of Covid-19 related supply chain bottlenecks, rising inflation, rising energy prices and the general fallout from the February Ukrainian invasion had heighted global volatility and uncertainty leading to a dampening in general mining investment economics and enthusiasm. Against this backdrop, the decision was made to pause the PFS and instead focus on the significant upside exploration potential at Walford Creek.

This approach had the primary objective of substantially increasing the scale of the Walford Creek Project through an extension of the known mineral resources along both the FRF and in the newly identified target areas. Project scale is vital to driving improved economic outcomes (e.g. lowering opex and/or longer mine life) and also to attracting project development support. With international markets requiring further time to again become comfortable with project development initiatives through stabilisation of both input costs and revenue streams, leveraging exploration success in the medium term offers the most attractive pathway for Aeon to longer term value creation.

5

Aeon Metals Limited

Directors' Report

For the year ended 30 June 2022

Walford Creek - Fish River Fault Exploration

All of the 2021 drilling was completed within, or adjacent to, the Vardy and Marley zones, while the Amy zone was excluded (see Figure 1). The program commenced with a single, multi-purpose drill rig operating on double shift from 3 June 2021. A second rig was added on 18 September 2021. During the 2021 drilling program, a total of 46 new drill holes were completed in addition to a diamond tail to an historic drill hole. This represents a total of 8,951 metres of drilling that was added to the existing geological dataset used to compile the updated MRE.

Figure 1: Distribution of 2021 drilling in relation to existing mineral resources

Updated Vardy & Marley Zone Mineral Resource Estimates

The Vardy & Marley MRE now contains 39.3 Mt extending over a strike length of 3.6 km. Of this, 97% or 38.1 Mt of the total tonnage is classified as Measured and Indicated.

Copper Mineral Resource

The Vardy & Marley Copper MRE increased to 20.1 Mt @ 1.08% Cu, 0.15% Co, 31 g/t Ag, 1.03% Pb, 0.75% Zn and 0.06% Ni. The corresponding previous Copper Mineral Resource estimate completed in April 2021 was 19.6 Mt @ 1.08% Cu, 0.15% Co, 31 g/t Ag, 1.03% Pb, 0.73% Zn and 0.07% Ni.

	Category			Mt			Cu %			Pb %			Zn %			Ag ppm			Co %			Ni %			Pyrite %			Density
																			t/m3
	Measured	7.3		1.14		1.07		0.89		28.4		0.15		0.06		42.3		3.46
	Indicated	12.1		1.04		1.01		0.66		31.5		0.15		0.07		38.6		3.40
	Inferred	0.7		1.05		1.09		0.70		38.9		0.14		0.06		42.7		3.49
	Total	20.1		1.08		1.03		0.75		30.6		0.15		0.06		40.1		3.43

Table 1: Vardy/Marley Copper Mineral Resource (0.5% Cu cut-off)