Gigante Salmon : QuarterReport Q3 2022

R E P O R T F O R

2022THE THIRD QUARTER OF

TABLE OF CONTENTS

• Highlights

• The journey has begun

• Project implementation

• Operational review

• Financial review

11 Statement by the board and CEO

12 Report for the third quarter of 2022

16 Notes

The report has been prepared in both Norwegian and English.

In case of any discrepancy between the two versions, the Norwegian version shall prevail.

Highlights

THIRD QUARTER OF 2022

• The project is moving forward in accordance with prepared and approved plans and is in line with planned and approved cost limits
• Blasting resumed in September. Heavy construction activity, including blasting, must halted before 28 February 2023

• Establishment of the rockfill in the waters north-east of Lille Indre Rosøy is underway and expected to be completed during Q1 2023

• A contract for the purchase of land-based feeding facilities has been agreed with Aquagroup
• A decision about the landing of the submarine power cable is expected in Q4

Helge E. W. Albertsen

CEO

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The journey has begun

Our first smolt will soon hatch - and we will be one step closer towards their release at the Gigante Salmon Rødøy facility. Benchmark Genetics Salten produced and fertilised the roe and, and on 8 November it arrived at Grytåga Settefisk, where it is now incubating.

Grytåga Settefisk AS is our contractual partner for smolt. Its hatchery in Grytåga in Vefsn council, in Helgeland county, has been producing smolt since 2008.

The roe is being well looked after at the Grytåga facility. Signs of life are already visible inside some of the eggs, and they are expected to hatch early December. The alevins will continue their lives in fresh water taken from the mountains of Vefsn.

In the autumn of 2023, these juvenile salmon will undergo the biological process known as smoltification, which allows them to continue their life at sea. At that point, they will weigh between 80 and 120 grams. They will then be transported aboard a well boat to our facility in Rødøy.

We're looking forward to their arrival!

Timeline towards 20,000 tons of yearly production

2021	2022	2023		2024	2025	2026	2027
CONSTRUCTION
	Project execution phase
PHASE
						Startup production - 1.1 mill smolt

Slaughter 5,300 tons HOG

Startup production - 1.1 mill smolt

Slaughter 5,300 tons HOG

PRODUCTION PHASE 1

Full production - 3.3 mill smolt

Slaugther 16,000

tons HOG

Full production - 3.3 mill smolt

Slaughter

FULL PRODUCTION

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Project implementation

The project is progressing according to plan, and, aside from costs for electricity, energy, electrical equipment and automation, our preliminary forecasts indicate that we are within budget.

Operational review

According to the construction schedule, there is no blasting between 1 March and 1 September, out of consideration for local fauna.

After a break for the summer holiday, construction resumed in mid-August, and blasting resumed on 1 September.

The smolt-release basin is expected to be fully blasted and cleared of rubble in late November.

Three new employees started in Q3: Tore Bakk, technician (1 August), Oda Risvik, fishfarmer (1 Septem- ber) and Marianne Jensen, technician (September). All are employed by Gigante Salmon Rødøy AS.

In February, Gigante Salmon Rødøy AS applied for permission to establish a rockfill in the waters to the north-east of Lille Indre Rosøy. Work is underway and is due to be completed as planned during Q1 2023.

Work with Arva, the regional utility, to establish a submarine cable

There has been a significant increase in costs in the past two or three years for electricity and energy. The pandemic has passed, but we are still dealing with its consequences. The biggest challenge at the current time, however, is the increased cost of equipment and materials, as well as generally longer delivery times for critical equipment and materials, resulting from Russia's on-going war against Ukraine. We have reason to believe that other project deliveries

may also be affected, but there is no indication this will happen.

We continue to work towards completion of the most critical planning activities in order to establish a technical and quality-assured documentation basis for the procurement, implementation and installation phases.

The project is proceeding according to plan. The plan will be revised if market conditions require. The

procurement and construction phase will draw to a close by the end of

Q1 2023, though we expect some activities to extend beyond this timeframe. The installation phase will start in mid-February and will last until mid-July 2023. Completion, system-testing and commissioning before the planned September 2023 start-up of the facility are scheduled to be carried out in Q3 2023.

is on-going. The necessary agreements are expected to be signed in Q4 2022.

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Financial review

PROPOSAL FOR NEW TAX RULES FOR THE AQUACULTURE INDUSTRY

On 28 September, the government proposed changes to the tax rule for the aquaculture industry, including the introduction of what is known as base-rate taxation that would take effect in the 2023 tax year.

The rule, as proposed, would not

affect Gigante Salmon, since it would only apply to conventional, at-sea production of salmon for consumpti- on, not land-based production of the sort we will operate.

The proposal is in the public-consultation phase and will come before the Storting in the first half of 2023.

IMPACT OF THE DECISION BY THE TAX APPEALS BOARD

The Tax Appeal Board has ruled in Gigante Salmon AS's favour in a matter relating to the 2009 fiscal year. The ruling, issued on 30 Au- gust, calls for Gigante Salmon to be reimbursed a total of NOK 2,631,994 (equal to NOK 2,576,801 for taxes paid in 2013, with interest, and NOK 55,193 for taxes paid in 2014, with interest).

In addition, Gigante Salmon has increased the amount of negative balance it can carry forward to NOK 11,133,003. This results in a deferred tax benefit of NOK 2,449,261 and an overall increase in profits of NOK 5,081,255.

See the table below for details and calculated effect:

Q3 RESULT

As the group is still in a development phase, Q3 sales revenue was again this year NOK 0m. Other operating income of NOK 0.1m derives from the seconding of staff. Operating costs declined in Q3 from NOK 2.0m in 2021 to NOK 0.7m in 2022, as

consequence of the group's increased activity. Long-term bank financing for development of Gigante Salmon Rødøy has been approved but has yet to be drawn on. This is long- term financing from Sparebanken

The group's liquid assets were NOK 198.5m as of

	Effect on taxes	Effect on interest -	Total effect
	non-taxable
Tax reimbursement (2013)	2 377 033	199 768	2 576 801
Tax reimbursement (2014)	52 087	3 106	55 193
Increased deferred tax benefit	2 449 261	0	2 449 261
Total	4 878 381	202 874	5 081 255

a result of capitalisation related to the group's development project in Rødøy council. Operating profit for the period was NOK -0.6m.

Total cash flow from group operations was NOK 3.4m. The discrepancy with the operating result is mainly due to interest income and increased receivables. The group's total investments in Q3 amounted to NOK 20.8m, of which NOK 18.7m was related to the development

30 September. The group's ability to self-finance investments is assessed as good.

Nord-Norge, and we expect to begin drawing on the construction loan before Q2 2023. The group's financial position is good, and, as of 30 September, the group is able to repay short-term debt using its most liquid

BACKGROUND FOR THE APPEAL

Gigante Salmon AS was founded in 2001, and, until December 2009, it owned Gigante Pechenga OOO and Gigante Pechenga ZAO, which farmed salmon in the Pechenga Fjord, in north-western Russia. On 29 December 2009, the companies were sold to Baltiyskiy Bereg ZAO. The buyer did not want to take over the companies' claims, and Gigante

Salmon therefore registered them as a loss of NOK 19.8m in 2009.

The Tax Appeals Board was asked to settle a disagreement about whether the claims were of a financial or commercial nature. Gigante Salmon successfully argued that they were commercial.

Following the sale of the Russian firms, Gigante Salmon had no ope-

rational activities until 2021. In connection with the listing on Euronext Growth on 5 July 2021, legal and financial due diligence going back 10 years was carried out. There are no other claims or demands related to the company's 2001-2021 activities.

project in Rødøy and the remainder to payment of trade payables for previous investment costs.

As of 30 September, short-term debt amounted to 100% of total group debt, compared with 21% on 30 September 2021. The increase is mainly related to trade payables in connection with construction of the Rødøy facility, which is a natural

funds.

Total capital at the end of Q3 was NOK 286.7m, compared with NOK 274.7m at the end of Q3 2021. Equity as of 30 September was 97%, compared with 99% on 30 Septem- ber 2021.

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