FALCON METALS LTD — Interim / Quarterly Report 2021

Dec 19, 2021

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Falcon Metals Ltd ACN 651 893 097

Incorporated 12 July 2021

Financial Report for the period 12 July 2021 to 30 September 2021

Falcon Metals Ltd Directors’ report 30 September 2021

The directors present their report, together with the financial statements, on the Group (referred to hereafter as the ‘Group’) consisting of Falcon Metals Ltd (referred to hereafter as the 'Company' or ‘Parent Entity’) and the entities it controlled at the end of, or during , the period since incorporation on 12 July 2021 to 30 September 2021.

Directors

The following persons were Directors of Falcon Metals Ltd from incorporation up to the date of this report, unless otherwise stated:

Chris MacKinnon Richard Hacker Alex Dorsch

Principal activities

During the period, the Group’s principal activities included pursuing a demerger from its parent company, Chalice Mining Ltd, which includes the acquisition of exploration projects in Western Australia and Victoria and then an initial public offering (IPO) and listing on the Australian Securities Exchange (‘ASX’).

Dividends

No dividends were paid or declared during the financial period. No dividend has been recommended.

Review of operations

The loss for the Group after providing for income tax was $5,000.

On 22 July 2021, in preparation of the demerger transaction, the Company became the parent of Falcon Gold Resources Pty Ltd upon the transfer of one share on issue held by Chalice Mining Limited to Falcon Metals Ltd for the consideration of $1.00.

On 27 July 2021, the Group entered into a Tenement Sale Agreement (the ‘Agreement’) with CGM (WA) Pty Ltd, a subsidiary of its ultimate holding company, Chalice Mining Limited. The Agreement is conditional and subject to conditions precedent including ministerial consent. As part of the Agreement, the Group will acquire the Pyramid Hill project, encompassing ten (10) tenements located in Victoria for total consideration of $10,290,576.53.

As at the end of the period, and as at the date of this report, the conditions precedent are yet to be met.

On 13 August 2021, the Group incorporated Falcon Metals (WA) Pty Ltd as the entity to hold the Western Australian tenements upon the demerger transaction.

As at the end of the period, and as at the date of this report, the Group has not entered into any agreements to transfer the Western Australian tenements to the Group.

On 16 September 2021, ASX in-principle approval was received in connection with the Company’s suitability for admission to the Official List of the ASX as an ASX Listing under ASX Listing Rules 1.1 condition 1 and 1.19.

The Company has approached Mr Mark Bennett to take up the role of Non-Executive Chairman conditional upon the successful Initial Public Offering and he has accepted. Mr Bennett is yet to be formally appointed as a director. The Company has also approached Mr Timothy Markwell to take up the role of Managing Director conditional upon the successful Initial Public Offering and he has accepted. Mr Markwell is yet to be formally appointed as a director.

Significant changes in the state of affairs

Other than disclosed above, there were no significant changes in the state of affairs of the Group during the financial period.

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Falcon Metals Ltd Directors’ report 30 September 2021

Matters subsequent to the end of the period

The impact of the Coronavirus (COVID-19) pandemic is ongoing. It is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.

There have been no other matters or circumstances that have arisen since 30 September 2021 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.

Likely developments and expected results of operations

The Company is currently pursuing a demerger from its parent company which includes the acquisition of exploration projects in Western Australia and Victoria and then an initial public offering and listing on the Australian Securities Exchange (‘ASX’)

Environmental regulation

The Company is not subject to any significant environmental regulation under Australian Commonwealth or State law.

Information on Directors

Name: Chris MacKinnon Title: Managing Director Qualifications, experience B.LLB, GradDipAppFin, ASA and expertise: Chris is a qualified lawyer with over 14 years of legal and finance experience in the resources industry. Chris has acted as Business Development and Legal Manager at Chalice Mining Ltd. Chris has previously worked in senior corporate roles in various mid-tier resources companies. Prior to that, he was an Associate Director at boutique investment bank, Miro Advisors, and was in legal private practice in a major national law firm. Chris holds a Bachelor of Laws from the University of Western Australia, a Graduate Diploma of Applied Finance from Kaplan and is currently an Associate member of CPA Australia. Special responsibilities: None Name: Richard Hacker Title: Non-Executive Director (Independent) Qualifications, experience B.Com, CA, ACIS and expertise: Richard has significant corporate and commercial experience in the energy and resources sector in Australia and the United Kingdom. Richard has previously worked in senior finance roles with global energy companies. Richard is the CFO of Chalice Mining Limited and is a Chartered Accountant and Chartered Secretary. Special responsibilities: None Name: Alex Dorsch Title: Non-Executive Director (Independent) Qualifications, experience BEng (Mechanical) (Honours First Class) and BFin and expertise:

Alex was appointed Managing Director of Chalice Mining Ltd (Chalice) (ASX:CHN) in November 2018, having joined the company in late 2017. Alex has lead Chalice through an exceptional recent growth period and was recognised as New/Emerging Leader of the Year in 2020 in the MiningNews awards. Alex has diverse experience in a variety of leadership roles across the resources sector, as a management consultant, engineer, project manager and corporate advisor.

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Falcon Metals Ltd Directors’ report 30 September 2021

Prior to joining Chalice, he was working as a specialist consultant with the global management consultancy McKinsey & Company. He commenced his engineering career with resources giant BHP in Adelaide, and then spent over six years as an engineer in oil and gas exploration. Special responsibilities: None

Company Secretary

Name: Andrea Betti Title: Company Secretary, Chief Financial Officer (CFO) Qualifications, experience BCom, MBA, GradDip (CGov), GradDip (App Fin) and expertise: Andrea is an accounting and corporate governance professional with over 20 years' experience in accounting, corporate governance, finance and corporate banking. She has acted as CFO and Company Secretary for companies in the private and public listed sectors. Andrea is a member of Chartered Accountants ANZ and an associate member of the Governance Institute of Australia. She is currently a director of a corporate advisory company based in Perth that provides corporate and other advisory services to public listed companies. Special responsibilities: None

Meetings of directors

There were no directors’ meetings held during the financial period. The Company does not have a formally constituted audit committee or remuneration committee as the board considers that the Company’s size and type of operation do currently not warrant such committees.

Shares under option

There were no shares of Falcon Metals Ltd under option at the date of this report.

Shares issued on the exercise of options

There were no ordinary shares of Falcon Metals Ltd that were issued during the financial period and up to the date of this report on the exercise of options granted.

Indemnity and insurance of officers

The Company has indemnified the Directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith.

During the financial period, the Company has not paid a premium in respect of a contract to insure the Directors or executives of the Company or any related entity.

Indemnity and insurance of auditor

The Company has not, during or since the end of the financial period, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor.

During the financial period, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity.

Whilst the Company is a wholly owned subsidiary of Chalice Mining Limited, its Directors, executives and officers are covered under the group insurance policy held by Chalice Mining Limited.

Proceedings on behalf of the Company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

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Falcon Metals Ltd Directors’ report 30 September 2021

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report.

Auditor

HLB Mann Judd were appointed on 12 August 2021 as per section 327A of the Corporations Act 2001 .

Non-audit services

No amounts were paid or payable to the auditor for non-audit services provided during the period ended 30 September 2021.

This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001 .

On behalf of the Directors

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Chris MacKinnon Managing Director 11 October 2021 Perth

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AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the consolidated financial report of Falcon Metals Limited for the period ended 30 September 2021, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• b) any applicable code of professional conduct in relation to the audit.

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Perth, Western Australia 11 October 2021

M R Ohm Partner

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Falcon Metals Ltd Contents 30 September 2021

Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity 10 Consolidated statement of cash flows 11 Notes to the financial statements 12 Directors' declaration 21 Independent auditor's report to the members of Falcon Metals Ltd 22

General information

The financial statements cover Falcon Metals Ltd and the entities it controls. The financial statements are presented in Australian dollars, which is the Group’s functional and presentation currency.

Falcon Metals Ltd is an unlisted public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Level 3 46 Colin Street West Perth WA 6005

A description of the nature of the Group’s operations and its principal activities are included in the directors' report, which is not part of the financial statements.

The financial statements were authorised for issue, in accordance with a resolution of Directors, on 11 October 2021. The Directors have the power to amend and reissue the financial statements.

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Falcon Metals Ltd Consolidated statement of profit or loss and other comprehensive income For the period ended 30 September 2021

Expenses Other expenses Loss before income tax Income tax expense Loss after income tax expense for the period Other comprehensive income Total comprehensive loss for the period	2021 $ (5,000)
	(5,000) -
	(5,000) -
	(5,000)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes

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Falcon Metals Ltd Consolidated statement of financial position As at 30 September 2021

Notes Assets Current assets Trade and other receivables 2 Total current assets Total assets Liabilities Current liabilities Trade payables and accruals 3 Total current liabilities Total liabilities Net (liabilities) Equity Issued capital 4 Accumulated losses Total (deficiency) in equity	2021 $ 1
	1
	1 5,000
	5,000
	5,000
	(4,999)
	1 (5,000)
	(4,999)

The above consolidated statement of financial position should be read in conjunction with the accompanying notes

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Falcon Metals Ltd Consolidated statement of changes in equity For the period ended 30 September 2021

Notes Balance at 12 July 2021 Loss after income tax expense for the period Other comprehensive income for the period, net of tax Total comprehensive loss for the period, net of tax Contributions of equity 4 Balance at 30 September 2021	Issued capital Accumulated losses Total equity $ $ $ - - - - (5,000) (5,000) - - -
	- (5,000) (5,000) 1 - 1
	1 (5,000) (4,999)

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes

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Falcon Metals Ltd Consolidated statement of cash flows For the period ended 30 September 2021

Notes Cash flow from financing activities Proceeds from issue of shares Net cash received from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the financial period	2021 $ -
	-
	- -
	-

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes

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Falcon Metals Ltd Notes to the financial statements For the period ended 30 September 2021

Note 1. Significant accounting policies

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Reporting entity

The consolidated financial report comprises the financial statements of Falcon Metals Ltd (the ‘Company’ or ‘Parent Entity’) and its subsidiaries (the ‘Group’) for the period ended 30 September 2021. A list of the Group’s subsidiaries is provided at note 13.

Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001 , as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board ('IASB').

Historical cost convention

The financial statements have been prepared under the historical cost convention.

Critical accounting estimates and judgements

The Directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Company.

- Coronavirus (COVID 19) pandemic

Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the Company based on known information. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the Company unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID19) pandemic.

In the opinion of the Directors, there have been no other significant estimates or judgements used in the preparation of this financial report.

Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Falcon Metals Ltd (‘Company' or 'Parent Entity') as at 30 September 2021 and the results of all subsidiaries for the period then ended. Falcon Metals Ltd and its subsidiaries together are referred to in these financial statements as the 'Group'.

Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

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Falcon Metals Ltd Notes to the financial statements For the period ended 30 September 2021

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.

Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the Group. Losses incurred by the Group are attributed to the non-controlling interest in full, even if that results in a deficit balance.

Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.

Comparative figures

There were no comparatives as the Company was incorporated on 12 July 2021.

New or amended Accounting Standards and Interpretations adopted

The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Initial adoption of AASB 2020-04: COVID-19-Related Rent Concessions

AASB 2020-4: Amendments to Australian Accounting Standards – COVID-19-Related Rent Concessions amends AASB 16 by providing a practical expedient that permits lessees to assess whether rent concessions that occur as a direct consequence of the COVID-19 pandemic and, if certain conditions are met, account for those rent concessions as if they were not lease modifications.

Initial adoption of AASB 2018-6: Amendments to Australian Accounting Standards – Definition of a Business

AASB 2018-6 amends and narrows the definition of a business specified in AASB 3: Business Combinations, simplifying the determination of whether a transaction should be accounted for as a business combination or an asset acquisition. Entities may also perform a calculation and elect to treat certain acquisitions as acquisitions of assets.

Initial adoption of AASB 2018-7: Amendments to Australian Accounting Standards – Definition of Material

This amendment principally amends AASB 101 and AASB 108 by refining the definition of material by improving the wording and aligning the definition across the standards issued by the AASB.

Initial adoption of AASB 2019-3: Amendments to Australian Accounting Standards – Interest Rate Benchmark

This amendment amends specific hedge accounting requirements to provide relief from the potential effects of the uncertainty caused by interest rate benchmark reform.

Initial adoption of AASB 2019-1: Amendments to Australian Accounting Standards – References to the Conceptual Framework

This amendment amends Australian Accounting Standards, Interpretations and other pronouncements to reflect the issuance of Conceptual Framework for Financial Reporting by the AASB.

The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group.

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Falcon Metals Ltd Notes to the financial statements For the period ended 30 September 2021

New Accounting Standards and Interpretations not yet mandatory or early adopted

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the reporting period ended 30 September 2021. The Group has not yet assessed the impact of these new or amended Accounting Standards and Interpretations.

Income tax

The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or

• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset.

Current and non-current classification

Assets and liabilities are presented in the statement of financial position based on current and noncurrent classification.

An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the statement of financial position.

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Falcon Metals Ltd Notes to the financial statements For the period ended 30 September 2021

Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost, using the effective interest method, less any allowances for expected credit losses. Trade and other receivables are generally due for settlement within 120 days.

Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised when some doubt as to collection exists and in any event when the debt is more than 60 days overdue.

Trade and other payables

These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.

Financial instruments

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. For financial assets, this is the date that the Group commits itself to either purchase of sale of assets.

Financial liabilities

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit and loss, loans and borrowings, payable or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

An instrument is a financial liability when an issuer is, or can be required, to deliver either cash or another financial asset (e.g. ordinary shares in the Company) to the holder.

Where the Group has the choice of settling a financial instrument in cash or otherwise is contingent on the outcome of circumstances beyond the control of both the Group and the holder, the Group accounts for the instrument as a financial liability.

All financial liabilities are initially recognised at fair value. The Group’s financial liabilities include trade payables and accruals.

Financial assets

Financial assets are initially recognised at fair value. The Group’s financial assets include trade and other receivables.

Issued capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Going concern

The financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realisation of assets and the discharge of liabilities in the normal course of business.

As disclosed in the financial statements, the Company has not commenced trading and incurred a loss before income tax of $5,000 and had no cash flows from operating activities for the period ended 30 September 2021. As at that date, the Company had net current liabilities of $4,999.

The directors believe that there are reasonable grounds to believe that the Company will continue as a going concern, after consideration of the following factors:

• the Company is pursuing an initial public offering to the Official List of the Australian Securities Exchange (‘ASX’) to raise funding to continue commercialisation of the business;

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Falcon Metals Ltd Notes to the financial statements For the period ended 30 September 2021

• in accordance with the Corporations Act 2001 , the Company has plans to raise further working capital through the issue of equity during the financial year end 30 June 2022;

• the Company continues to keep costs at a minimum ; and

• if the Company is not admitted to the Official List of the ASX, the Company will continue to receive financial support from Chalice Mining Limited for the next 12 months to assist in meeting the Company’s obligations as and when they fall due.

Accordingly, the Directors believe that the Company will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report.

Note 2. Trade and other receivables

Other receivables – Chalice Mining Limited Note 3. Trade payables and accruals Trade payables and accruals Note 4. Issued capital Ordinary shares – fully paid Movements in ordinary share capital At the beginning of the reporting period Shares issued 12 July 2021	No. of shares - 1	2021 Shares 1	2021 $ 1
			1
			2021 $ 5,000
			5,000
			2021 $ 1
		Issue price - $1.00	$ - 1
	1		1

Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital.

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

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Falcon Metals Ltd Notes to the financial statements For the period ended 30 September 2021

Note 5. Remuneration of auditors

During the financial period the following fees were paid or payable for services provided by HLB Mann Judd, the auditor of the Group:

Audit services – HLB Mann Judd Audit or review of the financial statements	2021 $ 5,000

There were no fees paid or payable for the period ended 30 September 2021 for:

• non-audit services provided by the auditor of the Company;

• audit or non-audit services provided by any network firms of the Company’s auditor; or

• audit services provided by any unrelated firms.

Note 6. Key management personnel disclosures

Compensation

The aggregate compensation made to directors and other members of key management personnel of the consolidated entity for the financial period was nil.

Note 7. Contingent assets

There were no contingent assets as at 30 September 2021.

Note 8. Contingent liabilities

There were no contingent liabilities as at 30 September 2021.

Note 9. Commitments

There were no capital or lease commitments as at 30 September 2021.

Note 10. Related party transactions

On 27 July 2021, the Group entered into a Tenement Sale Agreement (the ‘Agreement’) with CGM (WA) Pty Ltd, a subsidiary of its ultimate holding company, Chalice Mining Limited. The Agreement is conditional and subject to conditions precedent including ministerial consent and shareholder approval. As part of the Agreement, the Group will the Pyramid Hill project, encompassing ten (10) tenements located in Western Australia for total consideration of $10,290,576.53.

As at the end of the period, and as at the date of this report, the conditions precedent are yet to be met.

As at 30 September 2021, the Group had an amount receivable of $1 from its ultimate holding company, Chalice Mining Limited.

There were no other transactions with related parties of the Company during the period.

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Falcon Metals Ltd Notes to the financial statements For the period ended 30 September 2021

Note 11. Reconciliation of loss after income tax to net cash from operating activities

Loss after income tax expense for the period Increase in trade payables and accruals Net cash from operating activities	2021 $ (5,000) 5,000
	-

Note 12. Events after the reporting period

The impact of the Coronavirus (COVID-19) pandemic is ongoing. It is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.

No other matters or circumstances have arisen since 30 September 2021 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.

Note 13. Subsidiaries

Falcon Metals Ltd is the ultimate controlling entity of the Group.

The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in accordance with the accounting policy described in note 1.

Name of entity	Principal place of	Class of	Percentage
	business /	shares	ownership
	Country of
	incorporation		2021
			%
Falcon Gold Resources Pty Ltd1	Australia	Ordinary	100
Falcon Metals (WA) Pty Ltd2	Australia	Ordinary	100

1 Falcon Gold Resources Pty Ltd became a subsidiary of the Company on 22 July 2021. 2 Falcon Metals (WA) Pty Ltd was incorporated on 13 August 2021.

The proportion of ownership interest is equal to the proportion of voting power held.

There are no significant restrictions over the Group’s ability to access or use assets and settle liabilities.

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Falcon Metals Ltd Notes to the financial statements For the period ended 30 September 2021

Note 14. Parent entity information

Statement of Profit or Loss Loss after income tax Total Comprehensive Loss Statement of Financial Position Total current assets Total assets Total current liabilities Total liabilities Equity Contributed equity Accumulated losses Total (deficiency) in equity	2021 $ (5,000)
	(327,283)
	1
	1
	5,000
	5,000
	1 (4,999)
	(4,999)

Contingent liabilities

The Parent Entity had no contingent liabilities as at 30 September 2021.

Significant accounting policies

The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 1, except for the following:

• Investments in subsidiaries are accounted for at cost, less any impairment, in the Parent Entity.

Note 15. Financial Risk Management

The Directors provide principles for overall risk management, as well as policies covering specific areas and oversees the Group’s risk profile.

a. Financial risk management objectives

The Directors monitor and manage the financial risk relating to the operations of the Group. The Group’s activities include exposure to liquidity risk only. The overall risk management strategy for the Group focuses on the unpredictability of the finance markets and seeks to minimize the potential adverse effects on the financial performance of the Group. Risk management is carried out under the direction of the Directors.

b. Significant accounting policies

Details of the significant accounting polices and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.

c. Market price risk

The Group is involved in the exploration and development of mining tenements for minerals. Should the Group successfully progress to a producer, revenues associated with mineral sales, and the ability to raise funds through equity and debt, will have some dependence upon commodity prices.

d. Credit risk

The Group is not exposed to changes in credit risk and market interest rates.

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Falcon Metals Ltd Notes to the financial statements For the period ended 30 September 2021

The Group does not presently have customers and consequently does not have credit exposure to outstanding receivables. The Group may in the future be exposed to interest rate risk should it borrow funds for acquisition and development.

e. Fair value of financial instruments

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. All financial assets and financial liabilities of the Group at balance date are recorded at amounts approximating their carrying amount.

f. Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Directors. The Directors have determined an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements.

g.

Cash flow and interest rate risk

The Group’s operation cash flows are not exposed to changes in the market interest rates.

Note 16: Segment Information

The Group has one segment, which is mineral exploration in Australia.

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Falcon Metals Ltd Directors’ declaration 30 September 2021

In the directors’ opinion:

• the attached financial statements and notes comply with the Corporations Act 2001 , the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements;

• the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 September 2021 and of its performance for the financial year ended on that date; and

• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001 .

On behalf of the Directors

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Chris MacKinnon Managing Director 11 October 2021 Perth

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INDEPENDENT AUDITOR’S REPORT

To the members of Falcon Metals Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Falcon Metals Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 30 September 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the period then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001 , including:

• a) giving a true and fair view of the Group’s financial position as at 30 September 2021 and of its financial performance for the period then ended; and

• b) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report.

We are independent of the Group 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 (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Information other than the financial report and auditor’s report thereon

The directors are responsible for the other information. The other information comprises the information included in the Group’s financial report for the period ended 30 September 2021, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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Responsibilities of the directors for the financial report

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

In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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HLB Mann Judd Chartered Accountants

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M R Ohm Partner

Perth, Western Australia 11 October 2021

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