Announcement PDF Heavy Rare Earths Limited ABN 35 648 991 039 Annual Report - 30 June 2023 Heavy Rare Earths Limited Corporate directory 30 June 2023 Directors Mr John Bryne (Non-executive Chairman) Mr Richard Brecianini (Executive Technical Director) Mr Ryan Skeen (Non-executive Director) Company secretary Mr Justin Mouchacca Registered office Level 21, 459 Collins Street Melbourne, Victoria 3000 Ph: +61 3 8630 3321 Principal place of business Level 21, 459 Collins Street Melbourne, Victoria, 3000 Share register Boardroom Pty Ltd Level 8, 210 George Street Sydney, NSW, 2000 Ph: 1300 737 760 (within Australia) Ph: +61 2 9290 9600 Auditor William Buck Level 20, 181 William Street Melbourne, Victoria 3000 Stock exchange listing Heavy Rare Earths Limited shares are listed on the Australian Securities Exchange (ASX code: HRE) Website www.hreltd.com.au Corporate Governance Statement The Company's Corporate Governance Statement has been released to ASX on this day and is available on the Company's website at the following link: https://hreltd.com.au/about-us/corporate-governance/ 1 Heavy Rare Earths Limited Contents 30 June 2023 Review of operations Directors' report Auditor's independence declaration Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors' declaration Independent auditor's report to the members of Heavy Rare Earths Limited Shareholder information 2 3 10 20 21 22 23 24 25 37 38 42 Heavy Rare Earths Limited Review of Operations 30 June 2023 OPERATIONS REPORT Heavy Rare Earths Limited’s (“HRE”) focus is on developing rare earth projects in Australia. It currently operates on four 100 per cent-owned projects: Cowalinya, Merino and Perenjori in Western Australia, and Duke in the Northern Territory. Location of HRE’s rare earth projects Cowalinya Rare Earth Project, Western Australia Resource Exploration and Expansion Program Heavy Rare Earths Limited (“HRE”) presented maiden Mineral Resources for its Cowalinya rare earth project on listing in August 2022. These Mineral Resources were delineated by 3,089 metres of air core drilling in 109 vertical holes on approximately 1% of the total area of HRE’s exploration licences E63/1972, E63/2144 and E63/2145, located 110 kilometres north-north-east of Esperance. All tenements are located on unallocated crown land. 3 Heavy Rare Earths Limited Review of Operations 30 June 2023 Cowalinya Mineral Resources as at 11 February 2022 CLASSIFICATION TONNES (Mt) TREO (ppm) Inferred 28 625 TREO-CeO2 MAGNET Sc2O3 (ppm) (ppm) REOs/TREO 435 31 25% TREO = La2O3+CeO2+Pr6O11+Nd2O3+Sm2O3+Eu2O3+Gd2O3+Tb4O7+Dy2O3+Ho2O3+Er2O3+Tm2O3+Yb2O3+Lu2O3+Y2O3 MAGNET REOs = Pr6O11+Nd2O3+Tb4O7+Dy2O3 Reported above a cut-off grade of 300 ppm TREO-CeO2 Rare earth mineralisation at Cowalinya is hosted in clay-rich saprolite, similar in style to the ion-adsorption clay-type (“IACtype”) deposits of southern China and Myanmar, the world’s primary supply source of heavy rare earths (“HREE”). The mineralised horizon is flat-lying, extensive, and occurs at depths of between 5 and 54 metres. During the September and December 2022 quarters, the Company completed a 441-hole, 12,569 metre resource exploration and expansion air core drilling program at Cowalinya. Ninety per cent of this drilling focused on the south-eastern and southcentral parts of E63/1972 with the aim of extending known rare earth resources at the Cowalinya South and North prospects. Drilling for the most part was completed on 200 x 400 metre centres. This part of the program encountered numerous thick and/or high-grade intervals of saprolite-hosted rare earth mineralisation in a number of coherent zones, the most prominent being the 13 km2 Western Zone of mineralisation located immediately west and south-west of the Cowalinya South prospect: • 19 metres @ 3190 ppm TREO from 16 metres (AC225) • 6 metres @ 2597 ppm TREO from 9 metres (AC424) • 10 metres @ 2087 ppm TREO from 17 metres (AC221) • 10 metres @ 1580 ppm TREO from 29 metres (AC279) • 18 metres @ 1344 ppm TREO from 19 metres (AC275) • 12 metres @ 1212 ppm TREO from 22 metres (AC344) • 12 metres @ 1207 ppm TREO from 18 metres (AC302) • 26 metres @ 1201 ppm TREO from 19 metres (AC360) • 7 metres @ 1173 ppm TREO from 20 metres (AC511) • 10 metres @ 1169 ppm TREO from 19 metres (AC354) • 14 metres @ 1164 ppm TREO from 16 metres (AC359) • 14 metres @ 1135 ppm TREO from 10 metres (AC269) • 26 metres @ 1113 ppm TREO from 14 metres (AC274) • 17 metes @ 1069 ppm TREO from 11 metres (AC223) • 14 metres @ 1060 ppm TREO from 28 metres (AC356) • 14 metres @ 1033 ppm TREO from 22 metres (AC212) • 22 metres @ 1018 ppm TREO from 16 metres (AC412) • 16 metres @ 929 ppm TREO from 11 metres (AC415) • 21 metres @ 867 ppm TREO from 24 metres (AC387) • 16 metres @ 814 ppm TREO from 25 metres (AC309) • 42 metres @ 790 ppm TREO from 12 metres (AC226) • 20 metres @ 755 ppm TREO from 15 metres (AC411) • 24 metres @ 747 ppm TREO from 11 metres (AC289) • 29 metres @ 701 ppm TREO from 14 metres (AC287). The balance of the air core program targeted new discoveries of rare earths in saprolite along four access tracks in the northern and central parts of E63/1972. Assays returned a number of shallow rare earth-rich intersections in three new areas up to 14 kilometres from the Western Zone, adding an exciting ‘blue-sky’ element to Cowalinya and a future focus for exploration and definition drilling: • • • • • • • • 12 metres @ 1690 ppm TREO from 16 metres (AC487) 7 metres @ 1303 ppm TREO from 7 metres (AC473) 10 metres @ 1286 ppm TREO from 16 metres (AC471) 8 metres @ 1113 ppm TREO from 15 metres (AC494) 20 metres @ 977 ppm TREO from 20 metres (AC446) 30 metres @ 923 ppm TREO from 11 metres (AC468) 19 metres @ 811 ppm TREO from 11 metres (AC472) 31 metres @ 758 ppm TREO from 19 metres (AC467). 4 Heavy Rare Earths Limited Review of Operations 30 June 2023 Cowalinya project tenements showing drill holes with significant intervals of REE mineralisation, metallurgical composites, and location of cross-section A-B-C-D. Background image: Landgate digital elevation model. As at the date of this report, HRE was in the final stages of preparing an updated estimate of Mineral Resources and a maiden Exploration Target for the Cowalinya project. Metallurgical Program HRE commissioned Perth-based Strategic Metallurgy (“Strategic”) to design and undertake a comprehensive metallurgical program for the Cowalinya project, initially involving particle size analysis as the basis for gangue rejection. This work was completed during the December 2022 quarter on 13 four- and five-metre composite samples of rare earth-bearing saprolite from 10 drill holes across the Cowalinya South and North prospects. It showed an average of 78.5% of the rare earths are hosted in the fines (-25µm) fraction which comprises 37.2% of the bulk saprolite feed mass. Furthermore, simple recovery of the fines fraction delivered better than a two-fold increase in rare earth grade. These results enable the design of an upstream process flowsheet for the project that removes gangue from saprolite via simple screening and desliming cyclones. In the March and June 2023 quarters, Strategic undertook diagnostic leaching tests on the rare earths-rich fines fraction from the same 13 composites to determine the efficiency with which rare earths are brought into solution. Tests were conducted with weak solutions of commercially available (32%) hydrochloric acid. The key outcome was that the majority of composites (8 of 13) showed both high leachability of the magnet rare earths and low consumption of acid, with an average of 82.9% and 18.1 kg/t respectively. Summary of sizing and diagnostic leach test work on Cowalinya metallurgical composites. 5 Heavy Rare Earths Limited Review of Operations 30 June 2023 COMPOS ITE HEAD ASSAY (ppm TREO) SM01 1045 2050 2.0 37.8% MAGNET RARE EARTHS RECOVE RY TO FINES 81.1% SM02 750 1270 1.7 51.6% 91.7% 84.5% 3.8 SM03 1383 3674 2.7 27.0% 68.1% 91.3% 13.6 SM04 1280 1575 1.2 59.9% 91.6% 84.5% 12.8 SM06 754 1929 2.6 29.4% 79.5% 83.8% 37.8 SM07 938 1662 1.8 43.6% 87.4% 75.6% 15.8 SM12 1376 2642 1.9 46.6% 86.9% 81.7% 20.0 SM13 1326 2140 1.6 41.1% 67.5% 75.3% 26.0 1.9 42.1% 81.7% 82.9% 18.1 AVERAGE FINES (25µm) UPGRAD ASSAY E (ppm TREO) FINES MASS (% of total mass) MAGNET HYDROC RARE HLORIC EARTHS ACID EXTRAC CONSUM TION TO PTION LEACH (kg/t) 86.3% 15.2 TREO = La2O3+CeO2+Pr6O11+Nd2O3+Sm2O3+Eu2O3+Gd2O3+Tb4O7+Dy2O3+Ho2O3+Er2O3+Tm2O3+Yb2O3+Lu2O3+Y2O3 MAGNERT RARE EARTHS = Pr + Nd + Tb + Dy ACID CONSUMPTION expressed in kilograms of hydrochloric acid per tonne of fines (-25µm) fraction. AVERAGE calculated on composites identified as preferred material types (SM01-SM04, SM06-SM07, SM12-SM13). These 8 composites could represent preferred rare earth-rich material types for potential treatment in a commercial operation. HRE is sufficiently encouraged by Strategic’s progress to date to justify accelerating its test program in the second half of 2023 by: • • Extending the diagnostic leach program by an additional 55 six-metre composites from across the 35 km2 area earmarked for resource expansion under optimised leach conditions. These composites have been identified by HRE using geochemical algorithms aimed at discriminating preferred from non-preferred material types. Undertaking a bench-scale program to develop a flowsheet to a Mixed Rare Earth Carbonate (“MREC”) product which represents the first entry point by clay-hosted projects into the rare earth supply chain. Subject to the success of this program, the Company plans on making MREC samples available to refiners in Europe, Asia, the United States and Australia to determine marketability. 6 Heavy Rare Earths Limited Review of Operations 30 June 2023 Cross section A-B-C-D along access tracks. 7 Heavy Rare Earths Limited Review of Operations 30 June 2023 Duke Rare Earth Project, Northern Territory The Company’s Duke rare earth project comprises two granted exploration licences EL33101 and EL33194, on a pastoral lease approximately 50 kilometres north-west of Tennant Creek. Exploration in the area of the tenement package has in the past focused on Tennant Creek-style ironstone hosted Cu-Au-Bi and Olympic Dam-type Cu-U-Au deposits, but this is the first time the area is being subjected to systematic exploration for rare earths. The exploration model being investigated by HRE is a Browns Range-style unconformity-related hydrothermal system, where rare earths are expected to be hosted in xenotime, a yttrium phosphate mineral that contains high concentrations of HREE. A secondary target for exploration at Duke is HREE-enriched IAC-type mineralisation hosted in saprolite developed on the extensive but poorly outcropping Warrego Granite. A reconnaissance visit to the project area by HRE during the June 2023 quarter yielded promising rare earth assays of up to 732 ppm TREO in historic drill core samples from the Warrego Granite and in rock chips. Encouraged by these results the Company completed a 420-sample soil grid in the September 2023 quarter over an extensive area of airborne thorium anomalism and a Cu-Au-Bi soil anomaly identified in previous exploration but never drilled. Assay results are expected in the December 2023 quarter. Duke project tenements showing location of soil survey, rock chip samples and historic drilling. Background image: Th channel from historic airborne radiometric survey. Merino and Perenjori Rare Earth Projects, Western Australia During the March 2023 quarter, HRE lodged applications with the Department of Mines, Industry Regulation and Safety (“DMIRS”) for four exploration licences over two project areas in the Mid West region of Western Australia: Merino (E59/2795 and E59/2796; 269 km2) and Perenjori (E70/6397 and E70/6398; 327 km2). Both areas are located within 225 kilometres of the port city of Geraldton and were highlighted in an internal study targeting IAC-type rare earth deposits. Neither area has previously been explored for rare earths and, aside from government water bores, there has only been one exploration hole drilled into the project tenements. The underlying tenure at Perenjori comprises a mixture of pastoral lease and freehold, with only pastoral lease present at Merino. As at the date of this report, both Merino and one of the two Perenjori tenements had been granted by DMIRS. HRE plans to complete a first-pass sweep of both projects, comprising soil, rock and water bore sampling, and passive seismic, during 2024. 8 Heavy Rare Earths Limited Review of Operations 30 June 2023 Competent Persons Statement The Exploration Results contained in this report were compiled by Mr. Richard Brescianini. Mr. Brescianini is a member of the Australian Institute of Geoscientists (AIG). He is a director and full-time employee of Heavy Rare Earths Limited. Mr. Brescianini has more than 35 years’ experience in mineral exploration and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in the 2012 JORC Code. The Mineral Resources contained in this report have been extracted from the Independent Geologist’s Report included in the Company’s Initial Public Offering (IPO) Prospectus, a copy of which was lodged with the Australian Securities and Investments Commission (ASIC) on 5 July 2022. The Company confirms that it is not aware of any new information or data that materially affects the Mineral Resources as contained in the Company’s IPO Prospectus. All material assumptions and technical parameters underpinning the Mineral Resources in the Company’s IPO Prospectus continue to apply and have not materially changed. 9 Heavy Rare Earths Limited Directors' report 30 June 2023 The directors present their report, together with the financial statements, on the company at the end of, or during, the year ended 30 June 2023. Directors The following persons were directors of the company during the whole of the financial period and up to the date of this report, unless otherwise stated: Mr John Byrne (Non-Executive Chairman) Mr Richard Brescianini (Executive Technical Director) Mr Ryan Skeen (Non-Executive Director) Principal activities The principal activities of the Company during the period consisted of exploration activities for rare earths at the Company’s areas of interest located in Western Australia and the Northern Territory. The Company also listed on ASX during the financial year. Main Business activities include: - Exploring, developing and operating mineral resource projects with a focus on rare earth elements (REEs), including the Cowalinya Project in the Norseman-Esperance region of Western Australia. - Focus on boosting domestic production of REEs which are essential to a wide range of applications such as hybrid and battery electric vehicles, wind energy, smart phones, robotics, power tools, healthcare, military hardware, oil refining etc, whereas global production has been historically dominated by China. - The Company’s primary near term objective is to undertake sufficient exploration on its Project to potentially build on the existing Inferred Mineral Resource estimate. Dividends There were no dividends paid, recommended or declared during the current or previous financial period. Review of operations The loss for the company after providing for income tax amounted to $1,794,211 (30 June 2022: $443,893). Included in the loss for the financial year is a share based payment expense relating to a non-cash issue of unlisted options as part of the Company's initial public offering (IPO) and listing on ASX amounting to $708,709 (2022: nil). The Company also incurred $169,459 (2022: $109,213) worth of costs relating to the IPO. Financial position Net assets of the Company totalled $5,390,235, which was an increase from the previous year amount of $695,708. The increase during the year was attributed by the Company's IPO and increase expenditure on exploration activities during the financial year, along with the increase in cash resources. Cash at the end of the financial year amounted to $2,124,052 (2022: $141,389). Significant changes in the state of affairs On 5 July 2022 the Company lodged a Prospectus with the Australian Securities and Investments Commission for its proposed Initial Public Offering (IPO). On 19 August 2022, the Company successfully raised $6,000,000 and issued 30,000,000 fully paid ordinary shares (Shares) with an issue price of $0.20 (20 cents) per share. On 19 August 2022 the Company exercised its option in relation to the Cowalinya Project and executed a Sale and Purchase Agreement with the vendors. The Company paid $300,000 in cash and issued the vendors 1,000,000 fully paid ordinary shares issued in lieu of payment of $200,000. In accordance with the IPO Prospectus, the Company issued the following options to directors, consultants and the Company’s lead manager on the IPO. On 22 August 2022, the Company was admitted to the ASX official list and commenced trading on 24 August 2022. 10 Heavy Rare Earths Limited Directors' report 30 June 2023 ● ● 7,000,000 Class A Options and 2,500,000 Class B Options to former and existing directors (or their nominees). The Class A Options are exercisable at $0.30 (30 cents) per option and expiring 3 years from the listing date and the Class B Options are exercisable at $0.40 (40 cents) per option and expiring 3 years from the listing date. 2,850,000 Class A Options and 1,850,000 Class B Options to third party advisors including the Lead Manager. There were no other significant changes in the state of affairs of the company during the financial period. Matters subsequent to the end of the financial period No matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the company's operations, the results of those operations, or the company's state of affairs in future financial years. Likely developments and expected results of operations The Company will continue to conduct exploration activities at its project areas and these activities will include sampling, drilling, assay, metallurgical test work and, if warranted, scoping level feasibility. The Company continues to review potential new opportunities. If the Directors are successful in acquiring new projects or entering into a joint venture, it is expected that part of the funding held by the Company may be directed to the purchase of that project and to the exploration and development plan for that project. It may be that additional cash will be required to fund any of these events should they eventuate. In that case the Directors will be required to review the funding options available to the Company. Business risk management The Company is committed to the effective management of risk to reduce uncertainty in the Company’s business outcomes and to protect and enhance shareholder value. There are various risks that could have a material impact on the achievement of the Company’s strategic objectives and future prospects. Key risks and mitigation activities associated with the Company's objectives are set out below: Exploration risk The Company has no operating revenue and is unlikely to generate any operating revenue in the foreseeable future. Exploration and development costs and pursuit of its business plan will use funds from the Company's current cash reserves and the amount raised under the IPO. The development of one or more of its projects may require the Company to raise further capital in the future. Any additional equity financing may be dilutive to Shareholders, may be undertaken at lower prices than the then market price (or Offer Price) or may involve restrictive covenants which limit the Company's operations and business strategy. Debt financing, if available, may involve restrictions on financing and operating activities. Although the Directors believe that additional capital can be obtained, no assurances can be made that appropriate capital or funding, if and when needed, will be available on terms favourable to the Company or at all. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its activities and this could have a material adverse effect on the Company's activities and could affect the Company's ability to continue as a going concern. The Company’s funding requirements are reviewed on a regular basis in order to mitigate future funding risk. Regulatory risk The Company’s mining and exploration activities are dependent upon the maintenance (including renewal) of the tenements in which the Company has or acquires an interest. Maintenance of the Company’s tenements is dependent on, among other things, the Company’s ability to meet the licence conditions imposed by relevant authorities. Although the Company has no reason to think that the tenements in which it currently has an interest will not be renewed, there is no assurance that such renewals will be given as a matter of course and there is no assurance that new conditions will not be imposed by the relevant authority or whether the Company will be able to meet the conditions of renewal on commercially reasonable terms, if at all. The Company works with local government and mining departments to ensure it meets the required level of reporting requirements and to reduce any potential for breach of regulatory requirements. 11 Heavy Rare Earths Limited Directors' report 30 June 2023 Future funding risk Exploration and development involve significant financial risk and capital development. The Company may require further capital to achieve its objective of transitioning from explorer to producer. In addition, if the Company acquires any new project it may need to raise further capital to fund the acquisition or exploration at the project once acquired. For the foreseeable future, it is expected that this funding will be obtained from equity financing. Any equity financing undertaken will dilute existing Shareholders. Although the Directors believe that additional capital can be obtained, no assurances can be made that appropriate capital or funding, if and when needed, will be available on terms favourable to the Company or at all. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its activities and this could have a material adverse effect on the Company's activities and could affect the Company's ability to continue as a going concern. The Company’s funding requirements are reviewed on a regular basis in order to mitigate future funding risk. Environmental regulation The Company is now the holds participating interests in a number of exploration tenements. The various authorities granting such tenements require the tenement holder to comply with the terms of the grant of the tenement and all directions given to it under those terms of the tenement. To the best of the Directors' knowledge, the Company has adequate systems in place to ensure compliance with the requirements of all environmental legislation described above and are not aware of any breach of those requirements during the financial period and up to the date of the Directors' report. Information on directors Name: Title: Experience and expertise: Mr John Byrne Non-Executive Chairman Mr Byrne has 40 years’ experience in the natural resource industry as a financial analyst, investor and mine developer. John formed and mentored Cambrian Mining Plc in 2002, which started with net assets of GBP£1.4 million and before being acquired in 2008 had net assets of GBP£149 million. John has been Chairman and CEO of numerous successful resource companies, including Western Coal Corp which was capitalised at less than C$1 million when he joined, and was sold for C$3.3billion in 2010. Currently Mr Byrne is the Chairman of Lions Bay Capital Limited (LBI:TSXV) and Fidelity Minerals Limited (FMN:TSXV), both listed on the Toronto Ventures Exchange. Mr Bryne was previously Chairman of ASX listed Kalina Power Limited (ASX:KPO) and Jervois Global Limited (then Jervois Mining Limited) (ASX:JRV). Other current directorships: Lions Bay Capital Limited (LBI: TSXV) and Fidelity Minerals Limited (FMM: TSXV) Former directorships (last 3 years): Kalina Power Limited (ASX: KPO) - resigned 30 June 2019 Interests in shares: 650,000 fully paid shares Interests in options: 2,000,000 options exercisable at $0.30 expiring on 24 August 2025 Name: Title: Qualifications: Experience and expertise: Mr Richard Brescianini Executive Technical Director B. Sc (Hons) Mr Brescianini is a qualified geoscientist with an Honours degree from the University of Tasmania and is a member of the Australian Institute of Geoscientists and Australian Society of Exploration Geophysicists. Richard commenced his career in mineral exploration with BHP Minerals in 1987 working in teams focused on the discovery of base and precious metal deposits across Australia and North America. Richard’s experience includes working as the Director of the Northern Territory Government’s Geological Survey and working for rare earths developer Arafura Resources for 14 years in its executive management team. Other current directorships: None Former directorships (last 3 years): None Interests in shares: 170,000 fully paid shares Interests in options: 2,000,000 options exercisable at $0.30 expiring on 24 August 2025 12 Heavy Rare Earths Limited Directors' report 30 June 2023 Name: Title: Qualifications: Experience and expertise: Mr Ryan Skeen Non-Executive Director Master Applied Fin. (Dis), B. Buss (Financial Risk Management) Mr Skeen has a deep understanding of financial and economic markets while providing investment and strategic advice in complex situations. He is well versed in various capital raisings including IPO’s, placements and rights issues and is focused on business development and growth. Mr Skeen is the Chief Executive Officer of First Au Limited (ASX:FAU). He holds a Master of Applied Finance (Distinction) and a Bachelor of Business (Financial Risk Management). Other current directorships: First Au Limited (FAU: ASX) Former directorships (last 3 years): None Interests in shares: 90,000 fully paid shares Interests in options: nil Interests in rights: nil 'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Company secretary Mr Justin Mouchacca, CA FGIA Mr Mouchacca is a Chartered Accountant and Fellow of the Governance Institute of Australia with over 16 years' experience in public company responsibilities including statutory, corporate governance and financial reporting requirements. Since July 2019, Mr Mouchacca has been principal of JM Corporate Services and has been appointed Company Secretary and Financial Officer for a number of entities listed on the ASX and unlisted public companies. Meetings of directors The number of meetings of the company's Board of Directors ('the Board') held during the period ended 30 June 2023, and the number of meetings attended by each director were: Full Board Attended Held Mr John Byrne Mr Richard Brescianini Mr Ryan Skeen 6 6 6 6 6 6 Held: represents the number of meetings held during the time the director held office. Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the company, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: ● Principles used to determine the nature and amount of remuneration ● Details of remuneration ● Service agreements ● Share-based compensation ● Additional information ● Additional disclosures relating to key management personnel 13 Heavy Rare Earths Limited Directors' report 30 June 2023 Principles used to determine the nature and amount of remuneration The objective of the company's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices: ● competitiveness and reasonableness ● acceptability to shareholders ● performance linkage / alignment of executive compensation ● transparency The Board is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the company depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it should seek to enhance shareholders' interests by: ● having financial performance as a core component of plan design; ● focusing on sustained growth in shareholder wealth, consisting of dividends and growth in sh