DESERT METALS LIMITED

Desert Metals Limited A.C.N. 617 947 172

Interim Financial Statements For the Half Year ended 31 December 2020

FINANCIAL REPORT 31 December 2020

DESERT METALS LIMITED A.C.N. 617 947 172

Corporate directory

Board of Directors Mr Robert Angus Castle Stuart Mr Mark Robert Stewart Mr Antony William Worth

Managing Director Non-Executive Chairman Technical Director

Company Secretary Mr Paul Heatley Mr Johnathon Busing

Company Secretary Company Secretary

Registered and Principal Office Level 2, 41-43 Ord Street West Perth, Western Australia 6005 Tel: +61 8 6458 4200 Facsimile: +61 8 6458 4299

Postal Address PO Box 1253 Dunsborough WA 6281.

Website www.desertmetals.com.au

Auditors Bentleys Audit & Corporate (WA) Pty Ltd London House Level 3, 216 St Georges Terrace Perth, Western Australia 6000

Share Registry Automic Group Level 2, 267 St Georges Terrace Perth, Western Australia 6000 Tel: +61 1300 288 664 Tel: +61 2 9698 5414

Stock Exchange Australian Securities Exchange Level 40, Central Park 152-158 St Georges Terrace Perth, Western Australia 6000

ASX Code DM1

FINANCIAL REPORT 31 December 2020

A.C.N. 617 947 172

Contents
Directors’ Report ……………………………………………………………………………………………………………………………………………….	1
Auditor’s independence declaration ………………………………………………………………………………………………………………….	3
Condensed Statement of profit or loss and other comprehensive income…………………………………………………………..	4
Condensed Statement of financial position ………………………………………………………………………………………………………….	5
Condensed Statement of changes in equity …………………………………………………………………………………………………………	6
Condensed Statement of cash flows …………………………………………………………………………………………………………………….	7
Notes to the financial statements ……………………………………………………………………………………………………………………..	8
Directors’ declaration ………………………………………………………………………………………………………………………………….......	13
Independent auditor’s report …………………………………………………………………………………………………………………………...	14

DESERT METALS LIMITED

FINANCIAL REPORT 31 December 2020

A.C.N. 617 947 172

Directors’ Report

Your directors present their report on Desert Metals Limited (Desert Metals or the Company) for the year ended 31 December 2020.

Directors

The names of the directors who held office during or since the end of the half-year are:

Robert Angus Castle Stuart Managing Director
• Mark Robert Stewart Non-Executive Chairman • Antony William Worth Technical Director

REVIEW OF OPERATIONS

Exploration

On 5 November 2020, the Company was advised that its licences for E52/3741, E52/3665 and E51/1907 had been granted. This brings the total number of granted licences to 9 with none currently under application.

New Resolution Geophysics was contracted to collect helicopter electromagnetic data over licences E09/2303, E09/2330, E09/2351, E09/2331, the Irrida, Innouendy and Opal Bore licences. These data are expected to provide additional targets to those drill ready at Innouendy and Irrida and any anomalies will be followed up with the ground and/or down-hole EM.

There was no material exploration activity to report for E51/1901, E51/1907, E52/3650, E52/3665 or E52/3741.

During the period being reported, the Company also received approval from the WA Department of Mines Industry Regulation and Safety (DMIRS) for its 2021 drilling to be co-funded up to $150,000 via the Exploration Incentive Scheme (EIS) co-funded drilling grant.

Corporate

DM1 Commenced Trading on ASX

The Company commenced trading on the ASX on 18 December 2020 under the ticker code “DM1”.

Capital Raising

On 2 November 2020, the Company successfully raised $1,000,000 via a Placement of 10,000,000 fully paid ordinary shares (“Shares”) at an issue price of $0.10 to sophisticated and professional investors.

On 11 December 2020, the Company raised an additional $5,000,000 via an Introductory Public Offer and Placement of 25,000,000 Shares at an issue price of $0.20.

Both Placements were heavily oversubscribed.

FINANCIAL REPORT 31 December 2020

A.C.N. 617 947 172

DESERT METALS LIMITED

SUBSEQUENT EVENTS

On 22 January 2021, the Company announced the beginning of its field season for Q1.

The initial work program will consist of drill testing several strong EM conductors identified at its wholly owned Innouendy and irrida Hill prospects.

The conductors lie within mafic and ultramafic intrusive bodies and are coincident with large oval shaped magnetic anomalies. Holes will be followed up with down-hole EM to locate any near-miss off-hole conductors.

The drilling costs will be partly covered by a $150,000 EIS grant from the Western Australian State Government which was approved on 26 November 2020.

The Company commenced a large scale 2,800-line km airborne EM survey with the expectation that this survey would generate additional targets. The survey was completed in February 2021 and the results released via an ASX announcement dated 26 February 2021 following processing of the data by the Company’s geophysics consultant, Fathom Geophysics.

AUDITOR’S INDEPENDENCE DECLARATION

The auditor’s independence declaration under section 307C of the Corporations Act 2001 (Cth) for the half year ended 31 December 2020 is set out on page 3.

This report is made in accordance with a resolution of directors.

On behalf of the directors

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ROBERT STUART Managing Director Dated this 15[th] day of March 2021

To the Board of Directors

Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

As lead audit Partner for the review of the financial statements of Desert Metals Ltd for the half year ended 31 December 2020, I declare that to the best of my knowledge and belief, there have been no contraventions of:

the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
any applicable code of professional conduct in relation to the review.

Yours Faithfully,

For the half year ended 31 December 2020

Note 1 Statement of significant accounting policies

These interim financial statements are general purpose financial statements prepared in accordance with the requirements of the Corporations Act 2001, applicable accounting standards including AASB 134: Interim Financial Reporting, Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board (‘AASB’). Compliance with AASB 134 ensures compliance with IAS 34 ‘Interim Financial Reporting’.

This half-year report does not include full disclosures of the type normally included in an annual financial report. Therefore, it cannot be expected to provide as full understanding of the financial performance, financial position and cash flows of the Company as in the full financial report.

It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 30 June 2020 and any public announcements made during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001 and the ASX

The half-year financial report was authorized for issue by the directors on 15 March 2021.

1.1 Basis of preparation

The interim report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets and financial instruments for which the fair value basis of accounting has been applied. The Company is domiciled in Australia and all amounts are presented in Australian dollars, unless otherwise noted.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the Company’s 2020 annual financial report for the financial year ended 30 June 2020 and the corresponding half-year financial report except for the impact of the new and revised Standards and Interpretations effective 1 July 2020 as outlined below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

For the purpose of preparing the half-year financial report, the half-year has been treated as a discrete reporting period.

1.2 Use of estimates and judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

In preparing this interim report, the significant judgements made by the management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual financial report for the year ended 30 June 2020, except for the impact of the new Standards and Interpretations effective 1 July 2020 as outlined below.

1.4 Adoption of new and revised Standards

The Company has considered the implications of new or amended Accounting Standards which have become applicable for the current annual financial reporting period beginning on or after 1 July 2020. It has been determined by the Company that there is no impact, material or otherwise, of the new or amended Accounting Standards and therefore no changes to Company accounting policies. No retrospective change in accounting policy of material reclassification has occurred during the half year.

FINANCIAL REPORT 31 December 2020

A.C.N. 617 947 172

DESERT METALS LIMITED

2. Segment information

The Company operates in one business segment and one geographical segment, namely the mineral exploration industry in Australia. AASB 8 ‘Operating Segments’ states that similar operating segments can be aggregated to form one reportable segment. Also, based on quantitative thresholds included in AASB 8, there is only one reportable segment, namely the mineral exploration industry. However, none of the operating segments currently meet any of the prescribed quantitative thresholds, and as such do not have to be reported separately. The Company has therefore decided to aggregate all its reporting segments into one reportable operating segment.

The revenue and results of this segment are those of the Company as a whole and are set out in the condensed consolidated statement of profit or loss and other comprehensive income. The segment assets and liabilities are those of the Company and are set out in the condensed consolidated statement of financial position.

3. Dividends

No dividends were paid or declared for the half-year ended 31 December 2020 and the directors have not recommended the payment of a dividend.

4. Compliance costs

ASX Fees ASIC Fees	Half-year ended Half-year ended
	31 Dec 2020 31 Dec 2019 $ $
	92,947 - 4,138 -
	97,085 -

5. Exploration and evaluation expenditure

Geophysics License Fees Geochem Sampling Geological Consulting Tenement Management Tenement Rents Tenement Rates Legal Expenses Consulting & Accounting Travel - National	Half-year ended Half-year ended
	31 Dec 2020 31 Dec 2019 $ $
	402,059 - - 3,848 997 - 7,200 - 3,624 2,850 52,767 - 3,899 3,458 1,000 - 1,850 - 12,784 -
	486,180 10,156

FINANCIAL REPORT

31 December 2020

DESERT METALS LIMITED

A.C.N. 617 947 172

6. Professional fees

Audit Fees Consulting & Accounting Legal fees	Half-year ended Half-year ended
	31 Dec 2020 31 Dec 2019 $ $
	10,750 - 54,916 12,144 99,571 7,286
	165,237 19,430

7. Trade and other receivables

	31 Dec 2020 30 Jun 2020 $ $
	32,018 - 103,024 1,647
	135,042 1,647

	31 Dec 2020 30 Jun 2020 $ $
	29,390 10,041 20,581 4,821
	49,971 14,862

	31 Dec 2020 30 Jun 2020 $ $
	6,102,035 515,000

Half-year ended Year ended
31 Dec 2020 30 Jun 2020 No. $ No. $
20,000,000 515,000 18,750,000 265,000 10,000,000 1,000,000 - - 25,000,000 5,000,000 - - - - 1,250,000 250,000 - (412,965) - -

8. Trade and other payables

9. Issued capital

FINANCIAL REPORT 31 December 2020

DESERT METALS LIMITED

A.C.N. 617 947 172

(i) Issue of fully paid ordinary shares on 02 November 2020 at $0.1000 each pursuant to a placement to sophisticated and institutional investors of the Company.

(ii) Issue of fully paid ordinary shares on 18 November 2020 at $0.2000 each pursuant to a placement via a public IPO. (iii) Issue of fully paid ordinary shares on 08 April 2020 at $0.2000 each pursuant to a placement to sophisticated investor who was an existing shareholder of the Company.

10. Options Reserve

	Half-year ended	Half-year ended		Year ended
Unlisted options	31 Dec 2020			30 Jun 2020
	No.	$	No.		$
Balance at beginning of period	-	-		-		-
Issue of options(i)	7,000,000	364,700		-		-
Issue of options(ii)	2,000,000	104,200
Issue of options(iii)	1,650,000	85,965
Issue of options(iv)	-	165
Issue of options(v)	1,650,000	85,965		-		-
	12,300,000	640,995		-		-

(i) This represents the value attributed to 7,000,000 unlisted options exercisable at $0.300 to Directors of the Company. (ii) This represents the value attributed to 2,000,000 unlisted options exercisable at $0.300 to shareholders of the Company pursuant to options offer letters dated 27 October 2020.

(iii) This represents the value attributed to 1,650,000 unlisted options exercisable at $0.300 issued to various advisers to the IPO for corporate advisory services.

(iv) This represents the cash received in relation to options issued to the advisers to the IPO.

(v) This represents the value attributed to 1,650,000 unlisted options issued to Morgans Corporate Limited pursuant to the lead manager mandate.

The following options arrangements were in existence at the reporting date:

Options Series	Number	Grant Date	Expiry Date	Exercise price	Fair value at grant date	Vesting date
				$	$
DM1EOPT1	10,650,000	07 Oct 2020	07 Oct 2023	$0.3000	$0.0521	07 Oct 2020
DM1EOPT2	1,650,000	07 Oct 2020	07 Oct 2023	$0.3000	$0.0521	07 Oct 2020

The fair value of the equity-settled share options granted is estimated as at the date of grant using the Black-Scholes model taking into account the terms and conditions upon which the options were granted.

	Series DMEOPT1	Series DMEOPT2
Dividendyield(%)	-	-
Expected volatility (%)	120.00%	120.00%
Risk-free interest rate (%)	0.13%	0.13%
Expected life of options (years)	3	3
Exercise price (cents)	0.3000	0.3000
Grant date share price	0.1000	0.1000

FINANCIAL REPORT 31 December 2020

DESERT METALS LIMITED

A.C.N. 617 947 172

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value.

11. Contingent liabilities and contingent assets

There has been no significant change in contingent liabilities and/or contingent assets since the last annual report. Please refer to the 30 June 2020 annual financial report.

FINANCIAL REPORT 31 December 2020

A.C.N. 617 947 172

DESERT METALS LIMITED

Directors’ Declaration

The Directors declare that:

The financial statements and notes as set out on pages 4 to 12 are in accordance with the Corporations Act 2001, including that they:
(a) comply with Accounting Standards as described in Note 1 to the financial statements, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(b) give a true and fair view of the financial position of the Company as at 31 December 2020 and of its performance for the half-year ended on that date.
In the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by:

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ROBERT STUART Managing Director Dated this 15[th] day of March 2021

Independent Auditor’s Review Report

To the Members of Desert Metals Limited

Conclusion

We have reviewed the accompanying half-year financial report of Desert Metals Limited (“the Company”) which comprises the condensed statement of financial position as at 31 December 2020, the condensed statement of profit or loss and other comprehensive income, condensed statement of changes in equity and condensed statement of cash flows for the half-year ended on that date, a summary of significant accounting policies and other selected explanatory notes, and the directors’ declaration.

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Desert Metals Limited does not comply with the Corporations Act 2001 including:

a. Giving a true and fair view of the Desert Metals Limited financial position as at 31 December 2020 and of its performance for the half-year ended on that date; and
b. Complying with Accounting Standard AASB 134: Interim Financial Reporting and Corporations Regulations 2001 .

Basis for Conclusion

We conducted our review in accordance with ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity. Our responsibilities are further described in the Auditor’s Responsibilities for the Review of the Financial Report section of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants that are relevant to our audit of the annual financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001 which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s review report.

Independent Auditor’s Review Report To the Members of Desert Metals Limited (Continued)

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Responsibility of the Directors for the Financial Report

The directors of the Desert Metals Limited are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such control as the directors determine is necessary to enable the preparation of the half-year financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility for the Review of the Financial Report

Our responsibility is to express a conclusion on the half-year financial report based on our review. ASRE 2410 requires us to conclude whether we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the Company’s financial position as at 31 December 2020 and its performance for the half-year ended on that date, and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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BENTLEYS MARK DELAURENTIS CA Chartered Accountants Partner

Dated at Perth this 15[th] day of March of 2021

AI assistant

DESERT METALS LIMITED — Interim / Quarterly Report 2021

64776_rns_2021-03-14_e3e92d50-c501-446a-9642-dfc2778ee48a.pdf

Corporate directory

DESERT METALS LIMITED

Contents

Directors’ Report

Directors

Exploration

Corporate

DM1 Commenced Trading on ASX

Capital Raising

DESERT METALS LIMITED

AUDITOR’S INDEPENDENCE DECLARATION

Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

DESERT METALS LIMITED

A.C.N. 617 947 172

DESERT METALS LIMITED

Condensed Statement of financial position

DESERT METALS LIMITED

Condensed Statement of changes equity

DESERT METALS LIMITED

Condensed Statement of cash flows

DESERT METALS LIMITED

Notes to the financial statements

Note 1 Statement of significant accounting policies

1.1 Basis of preparation

1.2 Use of estimates and judgements

1.4 Adoption of new and revised Standards

DESERT METALS LIMITED

2. Segment information

3. Dividends

4. Compliance costs

5. Exploration and evaluation expenditure

DESERT METALS LIMITED

A.C.N. 617 947 172

6. Professional fees

7. Trade and other receivables

8. Trade and other payables

9. Issued capital

DESERT METALS LIMITED

A.C.N. 617 947 172

10. Options Reserve

DESERT METALS LIMITED

A.C.N. 617 947 172

11. Contingent liabilities and contingent assets

DESERT METALS LIMITED

Directors’ Declaration

Independent Auditor’s Review Report

To the Members of Desert Metals Limited

Conclusion

Basis for Conclusion

Responsibility of the Directors for the Financial Report

Auditor’s Responsibility for the Review of the Financial Report

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DESERT METALS LIMITED Interim / Quarterly Report 2021