Announcement PDF 30 June 2023 ANNUAL REPORT JINDALEE RESOURCES LIMITED AND CONTROLLED ENTITIES A.B.N. 52 064 121 133 Corporate Directory Board and Management Non-Executive Chair Justin Mannolini Executive Director and Chief Executive Officer (“CEO”) Lindsay Dudfield Non-Executive Director Darren Wates Non-Executive Director Paul Brown Company Secretary Carly Terzanidis Company Secretary Jessamyn Lyons Annual Report 2023 Corporate Directory Registered Office Principal Place of Business Level 3, 88 William Street Perth, WA 6000 Level 2, 9 Havelock Street West Perth, WA 6005 +61 (8) 9321 7550 +61 (8) 9321 7950 enquiry@jindalee.net jindalee.net Auditors Legal Advisors BDO Audit (WA) Pty Ltd Hamilton Locke Level 9, Mia Yellagonga Tower 2, 5 Spring St Perth, WA 6000 Level 48, 152-158 St Georges Terrace Perth, WA 6000 Share Registry Securities Exchange Listing Advanced Share Registry The Company is listed on the Australian Securities Exchange Ltd (“ASX”) Home Exchange: Perth, Western Australia 110 Stirling Hwy Nedlands, WA 6000 +61 (8) 9389 8033 +61 (8) 6370 4203 ASX Code OTCQX JRL JNDAF otcmarkets.com 3 Contents Annual Report 2023 Contents 2 Corporate Directory 6 Chair's Letter 8 Review of Activities 10 Directors' Report 26 Consolidated Statement of Profit or Loss and Other Comprehensive Income 27 Consolidated Statement of Financial Position 28 Consolidated Statement of Cash Flows 29 Consolidated Statement of Changes in Equity 54 Directors' Declaration 55 Auditors' Independence Declaration 56 Independent Auditors' Report 61 Additional Information 5 Chair's Letter Dear Fellow Shareholder I am pleased to present the Chair’s Report for Jindalee Resources Limited for 2023. The 2023 financial year was one of significant change for Jindalee, as we completed the spin-off of our Australian assets into the newly-formed Dynamic Resources Limited (ASX: DYM), which listed on the ASX in January 2023 following a very successful $7 million initial public offering. Jindalee is now focussed on the exploration and development of the 100%-owned McDermitt Lithium Project in Oregon, USA. At a macro level, the 2023 financial year will probably be remembered as the turning point in the equity valuation cycle as central banks showed considerable fortitude in tackling stubborn inflation readings, notwithstanding, in Australia at least, an ongoing cost of living crunch exacerbated by higher borrowing costs. In this environment, it is to be expected that valuations of speculative companies will decline. Jindalee, along with most peers in the early-stage lithium development sector (and several producers), were unfortunately caught up in a wave of adverse sentiment in the second half of the financial year. While Jindalee fared satisfactorily in relative terms, the Board is acutely aware of the decline in our market capitalisation over the past financial year, and is focussed on strategies to restore value. While some global lithium benchmarks and indices are starting to emerge, and there is a greater understanding among the analyst community of key industry drivers, the trajectory of global lithium prices is difficult to predict. In the second half of the 2023 financial year, and into the new one, lithium prices began to trend down towards long-term consensus. However, there is plenty of potential for surprises on the supply side, as we have seen from moves by some Annual Report 2023 South American countries to levy higher taxes on brine production. The uncertainty this creates will only serve to increase the urgency with which both intermediate and endusers of lithium seek to secure long-term supplies. What does seem clear is that there is now no turning back from the massive growth in electric vehicles (EVs) as the “way of the future” for personal transportation. The rate of consumer adoption of EVs continues to increase, including in Australia, in line with increases in product choice, range and affordability. And at this stage at least, lithium ion batteries continue to lie at the heart of the EV revolution, prompting most analysts to predict a market in deficit over the medium to longer term. In Australia, lithium is, remarkably, on track to become our fifth most valuable source of mineral export earnings after iron ore, coal, gold and nickel. It is a typical story of Australian entrepreneurship and a testament to the investment-friendly environment in this country: notwithstanding acknowledged challenges with permitting delays and workforce shortages. Our domestic spodumene industry is ideally positioned to provide raw materials (and some precursor chemicals) to the Asian battery manufacturing sector for decades to come. However, lithium has also emerged as a key “strategic” metal in the global race to decarbonise. In this respect, Jindalee represents a very distinctive value proposition to most of its ASX-listed peers. Ours is not a typical “dig it up in Australia and sell it to China” story. Instead, we are focussed on demonstrating the potential of McDermitt to play a critical role in the achievement of the United States’ ambition to challenge Chinese dominance of the EV market, which looms as one of the largest industrial battlefields over the next few decades. Chair's Letter The signing of the Biden Administration’s US Inflation Reduction Act 2022 into law is a clear indication of the United States’ determination to win on that and other decarbonisation battlefields. The IRA, as it is known, has had an immediate – and massive – impact on the flow of capital into the US, benefitting several of Jindalee’s peers in the nascent US lithium industry. This augurs well for the eventual financing of large-scale projects such as McDermitt. Over the financial year, Jindalee continued to methodically de-risk McDermitt through further drilling and testwork. In July 2022, Jindalee announced a combined Indicated and Inferred Mineral Resource of 1.82 B tonnes at 1,370ppm Li for total of 13.3 Million tonnes Lithium Carbonate Equivalent (LCE) for McDermitt, at a 1,000 ppm cut-off grade. In February 2023, following the successful conclusion of the 2022 drilling campaign, this was increased to a combined Indicated and Inferred Mineral Resource Inventory of 3.0 B tonnes at 1,340ppm Li for total of 21.5 million tonnes LCE at a 1,000 ppm cut-off grade, making McDermitt the largest lithium deposit in the US by contained lithium in Mineral Resource. In March 2023, following detailed review of historical metallurgical testwork, Jindalee determined that beneficiation followed by acid leaching provided the preferred flowsheet for the processing of McDermitt ore. This insight informed the Company’s decision to appoint global engineering, construction, procurement and maintenance company Fluor Corporation (NYSE: FLR) (Fluor) as lead engineer for the preparation of a Pre-Feasibility Study on McDermitt. All going well, the results of the study are expected within the current financial year and will provide the first opportunity for Jindalee to communicate more detailed physical and financial parameters for the Project to the market. directors, experienced lithium industry executives Darren Wates and Paul Brown, in August and December 2022 respectively. Long-serving company secretary Trish Farr retired and was replaced by joint company secretaries Carly Terzanidis and Jessamyn Lyons. We welcome Carly, Jess and new Chief Financial Officer Alida Bothma and thank Trish for her 20 years of loyal service to Jindalee. Further appointments at both a Board and executive level are expected in the coming financial year. At a corporate level, consistent with our new focus on McDermitt, we intend to seek shareholder approval to change the name of the Company to “Jindalee Lithium Limited” at the forthcoming AGM. This will be accompanied by changes to our branding and website, designed to provide a more modern-looking presence to the virtual world. Notwithstanding somewhat skittish equity markets and continuing geopolitical turmoil, I am confident that a simplified and focussed Jindalee has an exciting future ahead, as we continue to progress our 100%-owned McDermitt Lithium Project towards production. As always, the Board is grateful for the continued support of its shareholders, and we look forward to reporting on further progress during the 2024 financial year. Justin Mannolini Non-Executive Chair Jindalee has continued to grow its executive team with key hires and consultant appointments in the US and Australia. We were also pleased to welcome as new non-executive 7 Review of Activities Jindalee’s strategy is to identify and acquire projects with the potential to transform the Company and this continued to be the Group’s primary focus. During the year efforts were concentrated on Jindalee’s 100% owned McDermitt Lithium Project (US) and included drilling to both infill and extend the Indicated and Inferred mineral resource estimate (“MRE”) announced in July 20221 (Table 1), metallurgical testwork to optimise processing options and baseline studies to further derisk the Project. In November 2022 Jindalee shareholders approved the spinout of the Company’s Australian assets via Dynamic. Dynamic listed on ASX in January 2023 after raising $7M, with the Company now a pure play US lithium explorer and developer focussed on the McDermitt Lithium Project2. McDermitt In October 2022 Jindalee completed a 21 hole drilling program at McDermitt. The program was designed to increase confidence in the mineral resource to allow for conversion of Inferred Mineral Resource to Indicated, as well as extending the deposit to the west 2022 Mineral Resource Significant widths of lithium mineralisation were intersected, with some of the better intercepts from the program3 including: • MDD025: 182.2m @ 1197ppm Li from 21.4m • MDD028: 131.6m @ 1219ppm Li from 21.9m • MDRC024: 68.6m @ 1669ppm Li from surface • MDRC025: 50.3m @ 1512ppm Li from surface In February 2023 Jindalee announced an updated MRE at McDermitt4. The 2023 combined Indicated and Inferred Mineral Resource is 21.5Mt Lithium Carbonate Equivalent (“LCE”), making McDermitt the largest lithium deposit in the US by contained lithium in Mineral Resource and a globally significant resource. The 2023 combined Indicated and Inferred Mineral Resource represents an overall increase (from 20221) in tonnage of 65%, with a 2% decrease in grade for a 62% increase in contained lithium. Importantly, the Indicated Mineral Resource increased (by tonnage) by 138% with an overall 131% increase in contained metal (to 11.1Mt LCE) at this higher confidence classification (Table 1). 2023 Mineral Resource % Difference Tonnage (Mt) Li Grade (ppm) LCE (Mt) Tonnage (Mt) Li Grade (ppm) LCE (Mt) Tonnage (Mt) Li Grade (ppm) LCE (Mt) Indicated Resource 620 1,460 4.8 1,470 1,420 11.1 138% -3% 131% Inferred Resource 1,200 1,310 8.4 1,540 1,270 10.4 27% -4% 23% Total 1,820 1,370 13.3 3,000 1,340 21.5 65% -2% 62% Table 1. omparison of 20221 and 20234 McDermitt Mineral Resource Estimates at the reporting cut-off of 1,000ppm. C Note: totals may vary due to rounding The Company confirms that it is not aware of any new information or data that materially affects the information included in this market announcement and that all material assumptions and technical parameters underpinning the estimates of mineral resources referenced in this market announcement continue to apply and have not materially changed. Annual Report 2023 Review of Activities In March 2023 Jindalee announced that global engineering, procurement, construction and maintenance company Fluor Corporation (NYSE: FLR) had reviewed all metallurgical testwork completed at McDermitt5 and determined that acid leaching with beneficiation (to upgrade the leach head grade) delivered the lowest operating costs and best financial outcome for the Project. Fluor recommended that further testwork to refine this preferred flowsheet and support a pre-feasibility study (“PFS”) level study be undertaken. Metallurgical testwork (managed by Fluor) is currently underway utilising samples representative of Indicated resources within conceptual Pit Shell 5 (nominal 20 years). In June 2023 Jindalee announced that it had commenced a PFS on the Project with Fluor appointed as lead engineer6. Fluor has extensive experience with US sediment hosted lithium deposits and has assembled a team of highly credentialled metallurgists and engineers to work on the study. The Company also advised that experienced engineer Michael Elias had been engaged as Jindalee’s Study Manager for the PFS. Results from the PFS are expected to be available mid-2024. In February 2023 Jindalee announced that it had signed a non-binding Memorandum of Understanding (“MOU”) with major Korean conglomerate POSCO Holdings Inc. (“POSCO”) (NYSE: PKX), whereby POSCO and Jindalee agreed to undertake joint research on a large composite sample from McDermitt7. POSCO is a supplier of cathode active materials to major US auto maker General Motors and this testwork is designed to optimise the flowsheet for recovering lithium from McDermitt. Testing of the McDermitt ore at POSCO’s Korean facilities is ongoing. Jindalee continues to de-risk the Project on multiple fronts. In addition to ongoing geological, metallurgical and engineering studies the Company is building on environmental baseline and cultural surveys completed during 2022. In May 2023 the Company announced the US Bureau of Land Management (“BLM”) had advised that the Exploration Plan of Operations (“EPO”) for McDermitt had been deemed complete8. Once approved, the EPO will allow Jindalee to significantly increase on-site activity, including infill drilling and bulk sampling. Plan view of the McDermitt Lithium Project with drill hole collars and 2023 Mineral Resource4 (at 1523mRL) Australia In November 2022 Jindalee shareholders approved the spinout of Jindalee’s Australian assets via Dynamic, with Dynamic listing on ASX in January 2023 after raising $7M (before costs)2. The Dynamic initial public offering included a priority offer to existing Jindalee shareholders, as well as a public offer. Jindalee holds 12.5M Dynamic's shares and is Dynamic's largest shareholder, providing Jindalee shareholders with an indirect interest in Dynamic’s Australian projects. 9 Directors' Report Directors' Report The Directors present their report on the consolidated entity (referred to hereafter as “the Group”) consisting of Jindalee Resources Limited (referred to hereafter as “Jindalee”, the “Company” or “Parent Entity” or “JRL”) and the entities it controlled at the end of, or during the year ended 30 June 2023. Directors The following persons were directors of Jindalee Resources Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Lindsay Dudfield Justin Mannolini Darren Wates Patricia Farr Paul Brown Operations and financial review appointed on 4 August 2022 resigned on 4 August 2022 appointed on 1 December 2022 Principal activities The principal activity of Jindalee Resources Limited during the year was mineral exploration. During the year there was no change in the nature of this activity. Financial results The consolidated loss of the Group after providing for income tax for the year ended 30 June 2023 was $2,577,276 (2022: loss $1,446,131). Dividends No dividends have been declared since the end of the previous financial year and no dividends have been recommended by the Directors. Significant changes in the state of affairs On 11 January 2023, the Group successfully completed a spin-out of its subsidiary, Dynamic Metals Ltd (“Dynamic”). Annual Report 2023 As a result of the spin-out, the group divested its Western Australian tenements to Dynamic and obtained 12,500,000 ordinary fully paid shares in Dynamic in return. There have been no other significant changes in the state of affairs of the Group. Jindalee’s strategy is to identify and acquire projects with the potential to transform the Company and this continued to be the Group’s primary focus. During the year efforts were concentrated on Jindalee’s 100% owned McDermitt Lithium Project (US) and included drilling to both infill and extend the Indicated and Inferred mineral resource estimate (“MRE”) announced in July 20221 (Table 1), metallurgical testwork to optimise processing options and baseline studies to further derisk the Project. In November 2022 Jindalee shareholders approved the spinout of the Company’s Australian assets via Dynamic. Dynamic listed on ASX in January 2023 after raising $7M, with the Company now a pure play US lithium explorer and developer focussed on the McDermitt Lithium Project2. McDermitt In October 2022 Jindalee completed a 21 hole drilling program at McDermitt. The program was designed to increase confidence in the mineral resource to allow for conversion of Inferred Mineral Resource to Indicated, as well as extending the deposit to the west. Directors' Report Significant widths of lithium mineralisation were intersected, with some of the better intercepts from the program3 including: • MDD025: 182.2m @ 1197ppm Li from 21.4m • MDD028: 131.6m @ 1219ppm Li from 21.9m • MDRC024: 68.6m @ 1669ppm Li from surface • MDRC025: 50.3m @ 1512ppm Li from surface In February 2023 Jindalee announced an updated MRE at McDermitt4. The 2023 combined Indicated and Inferred Mineral Resource is 21.5Mt Lithium Carbonate Equivalent (“LCE”), making McDermitt the largest lithium deposit in the US by contained lithium in Mineral Resource and a globally significant resource. 2022 Mineral Resource The 2023 combined Indicated and Inferred Mineral Resource represents an overall increase (from 20221) in tonnage of 65%, with a 2% decrease in grade for a 62% increase in contained lithium. Importantly, the Indicated Mineral Resource increased (by tonnage) by 138% with an overall 131% increase in contained metal (to 11.1Mt LCE) at this higher confidence classification (Table 1). The Company confirms that it is not aware of any new information or data that materially affects the information included in this market announcement and that all material assumptions and technical parameters underpinning the estimates of mineral resources referenced in this market announcement continue to apply and have not materially changed. 2023 Mineral Resource % Difference Tonnage (Mt) Li Grade (ppm) LCE (Mt) Tonnage (Mt) Li Grade (ppm) LCE (Mt) Tonnage (Mt) Li Grade (ppm) LCE (Mt) Indicated Resource 620 1,460 4.8 1,470 1,420 11.1 138% -3% 131% Inferred Resource 1,200 1,310 8.4 1,540 1,270 10.4 27% -4% 23% Total 1,820 1,370 13.3 3,000 1,340 21.5 65% -2% 62% Table 1. omparison of 20221 and 20234 McDermitt Mineral Resource Estimates at the reporting cut-off of 1,000ppm. C Note: totals may vary due to rounding In March 2023 Jindalee announced that global engineering, procurement, construction and maintenance company Fluor Corporation (NYSE: FLR) had reviewed all metallurgical testwork completed at McDermitt5 and determined that acid leaching with beneficiation (to upgrade the leach head grade) delivered the lowest operating costs and best financial outcome for the Project. Fluor recommended that further testwork to refine this preferred flowsheet and support a pre-feasibility study (“PFS”) level study be undertaken. Metallurgical testwork (managed by Fluor) is currently underway utilising samples representative of Indicated resources within conceptual Pit Shell 5 (nominal 20 years). In June 2023 Jindalee announced that it had commenced a PFS on the Project with Fluor appointed as lead engineer6. Fluor has extensive experience with US sediment hosted lithium deposits and has assembled a team of highly credentialled metallurgists and engineers to work on the study. The Company also advised that experienced engineer Michael Elias had been engaged as Jindalee’s Study Manager for the PFS. Results from the PFS are expected to be available mid-2024. In February 2023 Jindalee announced that it had signed a non-binding Memorandum of Understanding (“MOU”) with major Korean conglomerate POSCO Holdings Inc. (“POSCO”) (NYSE: PKX), whereby POSCO and Jindalee agreed to undertake joint research on a large composite sample from McDermitt7. POSCO is a supplier of cathode active materials to major US auto maker General Motors and this testwork is designed to optimise the flowsheet for recovering lithium from McDermitt. Testing of the McDermitt ore at POSCO’s Korean facilities is ongoing. Jindalee continues to de-risk the Project on multiple fronts. In addition to ongoing geological, metallurgical and engineering studies the Company is building on environmental baseline and cultural surveys completed during 2022. In May 2023 the Company announced the US Bureau of Land Management (“BLM”) had advised that the Exploration Plan of Operations (“EPO”) for McDermitt had been deemed complete8. Once approved, the EPO will allow Jindalee to significantly increase on-site activity, including infill drilling and bulk sampling. 11 Exploration Potential investors should understand that mineral exploration and development are high-risk undertakings. There can be no assurance that exploration of the Company’s projects, or any other projects that may be acquired in the future, will result in the discovery of an economic ore deposit. Even if an apparently viable deposit is identified, there is no guarantee that it can be economically exploited. The success of the Company will also depend upon the Company having access to sufficient development capital, being able to maintain title to its projects and obtaining all required approvals for its activities. In the event that exploration programs prove to be unsuccessful this could lead to a diminution in the value of the tenements, a reduction in the cash reserves of the Company and possible relinquishment of its projects. Climate change Plan view of the McDermitt Lithium Project with drill hole collars and 2023 Mineral Resource4 (at 1523mRL) Australia In November 2022 Jindalee shareholders approved the spinout of Jindalee’s Australian assets via Dynamic, with Dynamic listing on ASX in January 2023 after raising $7M (before costs)2. The Dynamic initial public offering included a priority offer to existing Jindalee shareholders, as well as a public offer. Jindalee holds 12.5M Dynamic's shares and is the largest shareholder, providing Jindalee shareholders with an indirect interest in Dynamic’s Australian projects. Material Business Risks The Company has exposure to a number of material economic, environmental and social sustainability risks, as is typical for a mineral exploration and development company, including but not limited to those set out below. In accordance with the Company’s Board Charter and Risk Management Policy, the Board has oversight of risk management with the assistance of the Risk Management Team. Tenure and access The Company’s exploration tenure in the United States is subject to periodic renewal. The renewal of the term of granted tenure is subject to the discretion of the relevant authority and may be subject to conditions. The imposition of new conditions or the inability to meet those conditions may adversely affect the Company or its prospects. The McDermitt Project overlaps certain third party interests that may limit the Company’s ability to conduct exploration and mining activities. Where the Company's projects overlap private land, exploration activity on the projects may require authorisation or consent from the owners of or other interest holders in that land. Annual Report 2023 The operations and activities of the Company are subject to changes to local or international compliance regulations related to climate change mitigation efforts. While the Company will endeavour to manage these risks and limit any consequential impacts, there can be no guarantee that the Company will not be impacted by these occurrences. Climate change may also cause certain physical and environmental risks that cannot be predicted by the Company, including events such as increased severity of weather patterns, incidence of extreme weather events and longer-term physical risks such as shifting climate patterns. All these risks associated with climate change may significantly change the industry in which the Company operates. Reliance on key personnel The Company’s future depends, in part, on its ability to attract and retain key personnel. It may not be able to hire and retain such personnel at compensation levels consistent with its existing compensation and salary structure. Its future also depends on the continued contributions of its key management and technical personnel, the loss of whose services would be difficult to replace. In addition, the inability to continue to attract appropriately qualified personnel could have a material adverse effect on the Company’s business. Environmental The operations and proposed activities of the Company are subject to laws and regulations concerning the environment. Approvals are required for land clearing and for ground disturbing activities. Delays in obtaining such approvals can result in the delay to anticipated exploration programmes or mining activities. As with most exploration projects and mining operations, the Company’s activities are expected to have an impact on the environment, particularly if advanced exploration or mine development proceeds. It is the Company’s intention to conduct its activities to the highest standard of environmental obligation, including compliance with all environmental laws. There is a risk that environmental laws and regulations become more onerous making the Company’s activities more expensive. Directors' Report Economic General economic conditions, introduction of tax reform, new legislation, movements in interest and inflation rates and currency exchange rates may have an adverse effect on the Company, as well as on its ability to fund its operations. Additional requirements for capital The operations of the Company are currently dependent on its ability to obtain financing through debt and equity to meet its business objectives. There is a risk that the Company may not be able to access capital from debt or equity markets for future operations, projects or developments. This could have a material adverse impact on the Company's business and financial condition. Contract and contractor The Company has outsourced certain activities to third party contractors. Such contractors may not be available to perform services for the Company when required or may only be willing to do so on terms that are not acceptable to the Company. Contractor performance may be hampered by capacity constraints and may not comply with applicable provisions, standards or laws in respect of quality, safety, environmental compliance and timeliness, which may be difficult to control. In the event that a contractor underperforms or its services are terminated, the Company may not be able to find a suitable replacement on satisfactory terms within the required timeframe or at all. These circumstances could have a material adverse effect on the Company’s operations. Exchange rates Due to its operations in the United States, the Company is exposed to the fluctuations and volatility of the rate of exchange between the United States dollar and the Australian dollar as determined in international markets. Movements in interest rates may result from changes in economic conditions, monetary and fiscal policies, international and regional political events or other factors beyond the control of the Company, which may adversely affect the financial condition of the Company. Cost inflation Higher than expected inflation rates generally, specific to the mining industry, or specific to the US or Australia, could be expected to increase operating and capital expenditure costs and potentially reduce the value of future project developments. Sovereign risks The Company's exploration and development activities are carried out in the United States. As a result, the Company will be subject to political, social, economic and other uncertainties including, but not limited to, changes in policies or the personnel administering them, foreign exchange restrictions, changes of law affecting foreign ownership, currency fluctuations, local beneficiation requirements, local content laws, expropriation risk, royalties and tax increases in that country. Other potential issues contributing to uncertainty such as repatriation of income, exploration licensing, environmental protection and Government control over mineral properties, changes to political, legal, regulatory, fiscal and exchange control systems and changes in Government may also impact the Company’s projects or operations. Financial The net assets of the Group have decreased by $452,315 from $18,270,359 at 30 June 2022 to $17,818,044 at 30 June 2023. The Directors believe the Group is in a sound financial position to continue its exploration endeavours. Competent Persons Statement The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Lindsay Dudfield and Mr Brett Marsh. Mr Dudfield is a director and shareholder of, and consultant to, the Company and a Member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists (AIG). Mr Marsh is an employee of the Company and an American Institute of Professional Geologists (AIPG) Certified Professional Geologist and a Registered Member of the Society for Mining, Metallurgy & Exploration (SME). Both Mr Dudfield and Mr Marsh have sufficient experience relevant to the styles of mineralisation and types of depo