DIABLO RESOURCES LIMITED — Share Issue/Capital Change 2021

Oct 7, 2021

DIABLO RESOURCES LIMITED ACN 649 177 677

SUPPLEMENTARY PROSPECTUS

1. IMPORTANT INFORMATION

This is a supplementary prospectus ( Supplementary Prospectus ) intended to be read with the prospectus dated 16 August 2021 ( Prospectus ) issued by Diablo Resources Limited (ACN 649 177 677) ( Company ).

This Supplementary Prospectus is dated 28 September 2021 and was lodged with the Australian Securities and Investments Commission ( ASIC ) on that date. The ASIC, the ASX and their respective officers take no responsibility for the contents of this Supplementary Prospectus.

This Supplementary Prospectus should be read together with the Prospectus. Other than as set out below, all details in relation to the Prospectus remain unchanged. Terms and abbreviations defined in the Prospectus have the same meaning in this Supplementary Prospectus. If there is a conflict between the Prospectus and this Supplementary Prospectus, this Supplementary Prospectus will prevail.

This Supplementary Prospectus will be issued with the Prospectus in hard copy or as an electronic copy and may be accessed on the Company’s website at https://diabloresources.com.au/.

This is an important document and should be read in its entirety. If you do not understand it, you should consult your professional advisers without delay.

2. REASONS FOR THE SUPPLEMENTARY PROSPECTUS

The Supplementary Prospectus has been prepared to provide investors with additional information in relation the Directors’ Performance Rights. The content of this Supplementary Prospectus is not considered by the Company to be materially adverse to investors.

3. AMENDMENTS TO THE PROSPECTUS

The Prospectus is amended as set out below.

• 3.1 Section 6.14 is deleted and replaced with the following:

6.14 Reserves

Performance Rights

The Company has issued a total of 7,400,000 Performance Rights to Directors. A value of $0.20 per right has been attributed to the Performance Rights upon listing. The Performance Rights have the following hurdles:

• (a) the Company achieving a JORC compliant inferred mineral resource estimate of 100,000 ounce gold, copper, silver and or platinum group

This Supplementary Prospectus is intended to be read with the Prospectus dated 16 August 2021 issued by Diablo Resources Limited (ACN 649 177 677).

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elements, with a cut off grade of 0.5g/t, within five years from the date of issue of the Performance Rights;

• (b) the Company achieving a JORC compliant inferred mineral resource estimate of 250,000 ounce gold, copper, silver and or platinum group elements, with a cut off grade of 0.5g/t, within five years from the date of issue of the Performance Rights; and

• (c) the Company achieving a JORC compliant inferred mineral resource estimate of 500,000 ounce gold, copper, silver and or platinum group elements, with a cut off grade of 0.5g/t, within five years from the date of issue of the Performance Rights.

The Directors cannot predict whether the achievement of the above milestones is probable at the date of this Prospectus. As a result, no value has been recorded in the Pro Forma Consolidated Statement of Financial Position. Refer to Section 10.3 for the terms of the Director’s Performance Rights.

3.2 Directors’ Performance Rights

Section 10.3 is deleted and replaced with the following:

10.3 Directors’ Performance Rights

The terms and conditions of the Performance Rights that are proposed to be issued to the Directors of the Company are as follows:

(a) Milestone and Expiry Dates

The Performance Rights shall be subject to the following Milestone and shall have the following Expiry Dates :

Class	Milestone	Expiry Date
Class A	The Company achieving a JORC compliant inferred mineral resource estimate of 100,000 ounce gold, copper, silver and or platinum group elements, with a cut off grade of 0.5g/t, within five years from the date of issue of the Performance Rights.	5 years from the date of issue.
Class B	The Company achieving a JORC compliant inferred mineral resource estimate of 250,000 ounce gold, copper, silver and or platinum group elements, with a cut off grade of 0.5g/t, within five years from the date of issue of the Performance Rights.	5 years from the date of issue.
Class C	The Company achieving a JORC compliant inferred mineral resource estimate of 500,000 ounce gold, copper, silver and or platinum group elements, with a cut off grade of 0.5g/t, within five years from the date of issue of the Performance Rights.	5 years from the date of issue.

Independent Verification

Subject to the achievement of a Milestone, a Performance Right will only be able to be converted into a Share by a holder after the Company’s

This Supplementary Prospectus is intended to be read with the Prospectus dated 16 August 2021 issued by Diablo Resources Limited (ACN 649 177 677).

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auditor verifies the achievement of the Milestone in conjunction with an independent geologist (where required to verify any matters under JORC). The auditor’s verification process will be based on reviewing the market information to determine if the share price hurdle is met and verifying that the relevant announcements in respect of the resource estimate (as the case may be).

(b)

Notification to holder

The Company shall notify the holder in writing when the relevant Milestone has been satisfied.

(c)

Conversion

Subject to paragraph (p), upon satisfaction of the applicable Milestone, each Performance Right will, at the election of the holder by notice to the Company in writing, convert into one Share.

(d)

Conversion on change of control

Subject to paragraph (p) below and notwithstanding the relevant Milestone has not been satisfied, upon the occurrence of either:

• (i) a takeover bid under Chapter 6 of the Corporations Act 2001 (Cth) having been made in respect of the Company having received acceptances for more than 50% of the Company’s Shares on issue and being declared unconditional by the bidder; or

• (ii) a Court granting orders approving a compromise or arrangement for the purposes of or in connection with a scheme of arrangement for the reconstruction of the Company or its amalgamation with any other company or companies,

the Performance Rights shall automatically convert into Shares, provided that if the number of Shares that would be issued upon such conversion is greater than 10% of the Company’s Shares on issue as at the date of conversion, then that number of Performance Rights that is equal to 10% of the Company’s Shares on issue as at the date of conversion under this paragraph will automatically convert into an equivalent number of Shares. The conversion will be completed on a pro rata basis across each class of Performance Rights then on issue as well as on a pro rata basis for each holder of Performance Rights. Performance Rights that are not converted into Shares under this paragraph will continue to be held by the holders on the same terms and conditions.

(e)

Lapse of a Performance Right

Any Performance Right that has not been converted into a Share prior to the Expiry Date specified in paragraph (a) will automatically lapse. For the avoidance of doubt, a Performance Right will not lapse in the event a

This Supplementary Prospectus is intended to be read with the Prospectus dated 16 August 2021 issued by Diablo Resources Limited (ACN 649 177 677).

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relevant Milestone is met before the Expiry Date and the Shares the subject of a conversion are deferred in accordance with paragraph (p) below.

(f)

Fraudulent or dishonest action

If a holder ceases to be an employee or Director of the Company in circumstances where the cessation or termination is specifically referenced to the holder having been found to have acted fraudulently or dishonestly in the performance of his or her duties, then:

• (i) the Board must deem any Performance Rights of the holder to have immediately lapsed and be forfeited; and

• (ii) any Performance Rights that have vested will continue in existence in accordance with their terms of issue only if the relevant Milestone has previously been met, and any Shares issued on satisfaction of the applicable Milestone will remain the property of the holder.

(g) Ceasing to be an employee or Director

If a holder ceases to be an employee or Director of the Company in circumstances where the cessation or termination arises because the holder:

• (i) voluntarily resigns his or her position (other than to take up employment with a subsidiary of the Company);

• (ii) wilfully breaches the terms of the engagement of the holder or any policy of the Company’s published policies regulating the behaviour of holder;

• (iii) is convicted of a criminal offence which, in the reasonable opinion of the Company, might tend to injure the reputation or the business of the Company; or

• (iv) is found guilty of a breach of the Corporations Act and the Board considers that it brings the holder or the Company into disrepute,

then:

• (v) unless the Board decides otherwise in its absolute discretion, will deem any Performance Rights of the holder to have immediately lapsed and be forfeited; and

• (vi) any Performance Rights that have vested will continue in existence in accordance with their terms of issue only if the relevant Milestone has previously been met and any Shares issued on satisfaction of the applicable Milestone will remain the property of the holder.

(h)

Other circumstances

The Performance Rights will not lapse and be forfeited where the holder ceases to be an employee or Director of the Company for one of the following reasons:

This Supplementary Prospectus is intended to be read with the Prospectus dated 16 August 2021 issued by Diablo Resources Limited (ACN 649 177 677).

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• (i) death or total permanent disability (in respect of total permanent disability being that because of a sickness or injury, the holder is unable to work in his or her own or any occupation for which they are suited by training, education, or experience for a period beyond one year);

• (ii) redundancy (being where the holder ceases to be an employee or Director due to the Company no longer requiring the holder’s position to be performed by any person); or

• (iii) any other reason, other than a reason listed in paragraph (f) and (g) (not including (g)(i), in which case the Board may exercise its absolute discretion to allow the resigned to retain their Performance Right), that the Board determines is reasonable to permit the holder to retain his or her Performance Rights,

and in those circumstances the Performance Rights will continue to be subject to the applicable Milestone.

(i) Share ranking

All Shares issued upon the conversion of Performance Rights will upon issue rank pari passu in all respects with existing Shares.

(j) Application to ASX

The Performance Rights will not be quoted on ASX.

(k) Timing of issue of Shares on Conversion

Within 10 Business Days after the date that the Company receives notice from the holder in accordance with paragraph 3.1(c), the Company will:

• (i) issue the number of Shares required under these terms and conditions in respect of the number of Performance Rights converted;

• (ii) if required, give ASX a notice that complies with section 708A(5)(e) of the Corporations Act; and

• (iii) if admitted to the official list of ASX at the time, apply for official quotation on ASX of Shares issued pursuant to the conversion of the Performance Rights.

If a notice delivered under (k)(ii) for any reason is not effective to ensure that an offer for sale of the Shares does not require disclosure to investors, the Company must, no later than 20 Business Days after becoming aware of such notice being ineffective, lodge with ASIC a prospectus prepared in accordance with the Corporations Act and do all such things necessary to satisfy section 708A(11) of the Corporations Act to ensure that an offer for sale of the Shares does not require disclosure to investors.

This Supplementary Prospectus is intended to be read with the Prospectus dated 16 August 2021 issued by Diablo Resources Limited (ACN 649 177 677).

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(l) Transfer of Performance Rights

The Performance Rights are not transferable.

(m) Participation in new issues

A Performance Right does not entitle a holder (in their capacity as a holder of a Performance Right) to participate in new issues of capital offered to holders of Shares such as bonus issues and entitlement issues.

(n) Reorganisation of capital

If at any time the issued capital of the Company is reconstructed, all rights of a holder will be changed in a manner consistent with the applicable ASX Listing Rules and the Corporations Act at the time of reorganisation.

(o) Dividend and Voting Rights

The Performance Rights do not confer on the holder an entitlement to vote on any resolutions proposed by the Company (except as otherwise required by law) or receive dividends.

(p) Deferral of conversion if resulting in a prohibited acquisition of Shares

If the conversion of a Performance Right would result in any person being in contravention of section 606(1) of the Corporations Act 2001 (Cth) ( General Prohibition ) then the conversion of that Performance Right shall be deferred until such later time or times that the conversion would not result in a contravention of the General Prohibition. In assessing whether a conversion of a Performance Right would result in a contravention of the General Prohibition:

• (i) holders may give written notification to the Company if they consider that the conversion of a Performance Right may result in the contravention of the General Prohibition. The absence of such written notification from the holder will entitle the Company to assume the conversion of a Performance Right will not result in any person being in contravention of the General Prohibition;

• (ii) the Company may (but is not obliged to) by written notice to a holder request a holder to provide the written notice referred to in paragraph (p)(i) within seven days if the Company considers that the conversion of a Performance Right may result in a contravention of the General Prohibition. The absence of such written notification from the holder will entitle the Company to assume the conversion of a Performance Right will not result in any person being in contravention of the General Prohibition.

(q) No rights to return of capital

A Performance Right does not entitle the holder to a return of capital, whether in a winding up, upon a reduction of capital or otherwise.

This Supplementary Prospectus is intended to be read with the Prospectus dated 16 August 2021 issued by Diablo Resources Limited (ACN 649 177 677).

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(r) Rights on winding up

A Performance Right does not entitle the holder to participate in the surplus profits or assets of the Company upon winding up.

(s) Tax Deferral

For the avoidance of doubt, Subdivision 83A-C of the Income Tax Assessment Act 1997¸ which enables tax deferral on performance rights, applies (subject to the conditions in that Act) to the Performance Rights.

(t) No other rights

A Performance Right gives the holder no rights other than those expressly provided by these terms and those provided at law where such rights at law cannot be excluded by these terms.

(u) ASX Listing Rule compliance

The Board reserves the right to amend any term of the Performance Rights to ensure compliance with the ASX Listing Rules.

4. CONSENTS

The Company confirms that as at the date of this Supplementary Prospectus, each of the parties that have been named as having consented to being named in the Prospectus have not withdrawn that consent.

5. DIRECTORS’ AUTHORISATION

This Supplementary Prospectus is issued by the Company and its issue has been authorised by a resolution of the Directors.

In accordance with section 720 of the Corporations Act, each Director has consented to the lodgement of this Supplementary Prospectus with the ASIC.

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Mr Paul Lloyd Non-executive Chairman For and on behalf of DIABLO RESOURCES LIMITED

This Supplementary Prospectus is intended to be read with the Prospectus dated 16 August 2021 issued by Diablo Resources Limited (ACN 649 177 677).

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