LION SELECTION GROUP LIMITED. - Annual Report 2021

Preliminary Final Report for the year ended 31 July 2021

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KEY POINTS

Sector Themes

M&A continues to build as miners benefit from commodities windfall, with Lion intending to exit its investment in Nusantara which is currently the subject of corporate action.
At this point in the cycle, 11 on the Lion Clock, Lion is traditionally a seller not buyer. Lion has the ambition to set itself up for the next cycle, ideally paying regular dividends on crystallised profits on investments.

Investment Highlights

Pani Joint Venture (Lion 33.3%, Merdeka 66.7%):
Fair value of $62.5 million at 31 July 2021;
Pani currently consists of two Resources [2.37 Moz Au[1] (33.3% Lion/ 66.7% Merdeka) and 2.30Moz Au[2] (100% J Resources)] on two licences which historically have been separately held. An agreement to combine the two Pani tenements into one ownership group was signed in late 2019, but remains incomplete, and is now the subject of arbitration initiated by the Pani Joint Venture;
New geological model provides basis for future modelling and exploration along the Pani trend, including the ‘link’ zone connecting the two existing resources, which extends for over 1.2km and features intersections of gold mineralisation hundreds of metres thick;

	signed in late 2019, but remains incomplete, and is now the subject of arbitration initiated by the Pani Joint Venture;  New geological model provides basis for future modelling and exploration along the Pani trend, including the ‘link’ zone connecting the two existing resources, which extends for over 1.2km and features intersections of gold mineralisation hundreds of metres thick;
	 Material upside is expected for the Pani gold project if the J Resources transaction
	completes, including the impact of drilling highlighting link zone continuity on the
	combined project value.
	Nusantara Resources:
	 To be acquired by Indika via Scheme of Arrangement, 35¢ps cash and Lion has indicated
	its intention to vote for the scheme in the absence of a superior offer;
	 Sale of Lion’s Nusantara holding under the proposed Scheme would add $17.5m to Lion’s
	cash position placing it in a strong position to manage an outcome on Pani.
	Erdene Resource Development:
	 The Bayan Khundii gold project has advanced, representing a near term, low capex, high
	return project with rapid payback;
	 Outstanding near-mine exploration has continued, including new discoveries at Dark
	Horse and Ulaan indicating a possible district scale gold field.
	During the year Lion consolidated its ownership of AFL3 and undertook an in specie distribution
	of AFL3’s investments in Kasbah and Celamin, resulting in a mark-to-market gain of $2.5 million
	(excluding any contingent liability applicable to each investment). The AFL3 acquisition involved
	part cash consideration and Lion agreeing to pay contingent consideration in certain
	circumstances for up to 5 years (see note 15 Commitments and Contingent Liabilities).
	The AFL3 acquisition and previous roll up of Asian Lion simplifies Lion’s structure, refocusing Lion
	towards it core investment strategy including a greater weighting of Australian opportunities.
Tax
	Lion has recognised a deferred tax expense and liability of $3.2M assuming Lion realises its entire
	portfolio as at 31 July 2021. Lion has tax losses carried forward totalling $83.7M that have been
	partially applied to offset tax that would otherwise accrue.

APPENDIX 4E For the year ended 31 July 2021

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Pani Mineral Resource Estimates

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Notes

Refer to One Asia Resources Limited news release 3 December 2014, (https://www.lionselection.com.au/wpcontent/uploads/2018/08/PANI%20JORC%20RESOURCE.pdf). Refer to J Resources 31 December 2018 Annual Report, (http://www.jresources.com/investors/article/final-resources-reserves-compilation2017-to-2018

	Full-Year ended 31 July 2021 2020 % $000's $000's Change Investments Mark to Market (786) 31,834 (102%) Cash Inflows/Outflows Proceeds from investments 390 16,413 (98%) Payments for Investments (2,338) (6,104) (62%)

APPENDIX 4E For the year ended 31 July 2021

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Appendix 4E Preliminary Final Report

1. Company Details

LION SELECTION GROUP LIMITED

ABN or equivalent company reference	Year ended (‘current period’)	Year ended (‘previous period’)
26 077 729 572	31 July 2021	31 July 2020

2. Results for announcement to the market

2.	Results for announcement to the market
					A$’000
2.1	Revenue		Up 15%	to	31
2.2	Profit (loss) for the year		Down 120%	to	(5,865)
2.3	Profit (loss) for the year attributable to members of the parent		Down 120%	to	(5,865)
	Dividends	Current Period		Previous Corresponding Period
2.4	Franking Rate Applicable		N/A		N/A
	Interim Dividend
2.5	Amount per security		Nil		Nil
	Franked amount per security		Nil		Nil

Operating and Financial Review

This financial report is prepared in accordance with Australian Accounting Standards and therefore includes the result of the “mark to market” of the Company’s investment portfolio in both the Statement of Comprehensive Income and the Statement of Financial Position.

The Company’s loss after tax for the year was $5.9 million (2020: gain of $29.9 million).

Economic and operating conditions during 2020 and 2021 have been extremely challenging for many businesses as the fallout from the COVID-19 outbreak impacts the world. Equity markets have been very volatile, as governments and central banks try and respond to deteriorating conditions and control of the virus remains uncertain. Despite this difficulty in business operations for Lion and its investees, Lion’s portfolio has performed relatively well due to its high weighting to gold equities, one of the few beneficiaries in these times of uncertainty and extraordinary injections of liquidity into global economies.

The result for the year reflects a modest mark to market loss of $0.8 million with respect to investments, with key movements in the portfolio value outlined below:

A mark to market decrease of $2.6 million in the valuation of Lion’s investment in Erdene Development Corporation, which has experienced some delay in permitting and financing its Bayan Khundii Gold Project in Mongolia, but has also presented value adding discoveries against the backdrop of a weakening gold price.
A mark to market decrease of $1.4 million in the valuation of Lion’s investment in Sihayo following delays in permitting and financing the Sihayo gold project in Indonesia and disappointing initial drill results at the company’s Hutabargot project.
Increases in the value of Lion’s investments in Kasbah and Celamin totalling $2.5 million following an in specie distribution from African Lion 3 Ltd (AFL3), excluding any contingent liability applicable to each investment. During the year Lion consolidated its ownership of AFL3 and undertook an in specie distribution of AFL3’s investments in Kasbah and Celamin. The AFL3 acquisition involved part cash consideration and Lion agreeing to pay contingent consideration in certain circumstances for up to 5 years (see note 15 Commitments and Contingent Liabilities).

At 31 July 2021 the Company held investments valued at $90.0 million (2020: $89.1 million), and cash of $6.9 million (2020: $10.8 million).

APPENDIX 4E For the year ended 31 July 2021

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In June 2021 one of Lion’s investee companies, Nusantara Resources Limited (Nusantara), announced it will be entering into a Scheme of Arrangement with PT Indika Energy Tbk (Indika) for the acquisition by Indika of all of the issued share capital of Nusantara that it does not already own at an offer price of $0.35 per share. Nusantara and Indika are joint venture partners in the Awak Mas Gold Project through their 75% and 25% respective interests in subsidiary PT Masmindo Dwi Area. Lion holds 49,904,775 Nusantara shares (21.77%) and has signed a Voting Intention Statement in support of the Scheme of Arrangement. The Voting Intention Statement confirms Lion intends to vote in favour of the Scheme:

in the absence of a superior proposal; and
subject to an independent expert concluding (and continuing to conclude) that the Scheme is in the best interests of Nusantara shareholders.

The transaction is anticipated to be put to Nusantara shareholders for approval in mid-to-late September 2021.

3. Net tangible assets per ordinary security

Based on the attached Balance Sheet, the net tangible assets (NTA) per security based on the Net Assets of the Company at 31 July 2021 is $0.647 pre-tax and $0.626 at 31 July 2021 post-tax. This NTA is based on the valuation of investments at fair value, as disclosed in the attached accounts. The NTA per security for the comparative period was $0.665 (post tax).

4. Controlled Entities

During the period the Company held a 100% ownership interest in Asian Lion Limited and Lion Selection Asia Limited, a 99% ownership interest in African Lion 3 Limited, and controls these companies. Lion is an investment entity for the purposes of AASB 10 Consolidated Financial Statements, AASB 127 Separate Financial Statements, and AASB 2013-5 Amendments to Australian Accounting Standards – Investment Entities.

AASB 2013-5 Amendments to Australian Accounting Standards – Investment Entities is effective for annual periods beginning on or after 1 August 2014, exempting ‘Investment entities” from consolidating controlled investees. Investment entities are entities that:

(a) obtain funds from one or more investors for the purpose of providing those investors with investment management services;
(b) commit to their investor(s) that their business purpose is to invest funds solely for returns from capital appreciation, investment income or both, and
(c) measure and evaluate the performance of substantially all of their investments on a fair value basis.

5. Dividends

No dividend was declared or paid during the year (2020: Nil).

6. Dividend/distribution reinvestment plan

Lion does not currently operate a dividend/distribution reinvestment plan.

7. Associates

7. Associates
		Previous
	Current Period	Corresponding Period
Company	% Held	% Held
PT Pani Bersama Jaya	33.3	33.3
African Lion 3 Ltd	99	23.7
Asian Lion Ltd	100	100
Lion Selection Asia Ltd	100	100
Nusantara Resources Limited	21.7	24.1
One Asia Resources Ltd	35.3	35.3

Lion holds more than 20% of the above entities, hence it is considered as investment in associates. Equity accounting method is not applicable for the above investments as Lion is a venture capital organisation that accounts for investments at fair value through profit or loss in accordance with AASB128 paragraph 1 and AASB9.

8. Foreign Accounting Standards

Not Applicable.

9. Audit

The financial statements have been audited by the auditor PricewaterhouseCoopers and it continues as an auditor of the Company.

For more information please refer to the attached Financial Statements.

APPENDIX 4E For the year ended 31 July 2021

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Lion Selection Group Limited ABN: 26 077 729 572

Annual Financial Report for the year ended 31 July 2021

Page

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Directors’ Report ................................................................................................................................................ 1 Auditors Independence Declaration................................................................................................................. 10 Statement of Comprehensive Income for the Year ended 31 July 2021 ......................................................... 11 Statement of Financial Position as at 31 July 2021 .......................................................................................... 12 Statement of Cash Flows for the Year ended 31 July 2021 .............................................................................. 13 Statement of Changes in Equity for the Year ended 31 July 2021 ................................................................... 14 Notes to the Financial Statements for the Year ended 31 July 2021 ............................................................... 15 Directors’ Declaration ....................................................................................................................................... 32 Independent Auditor's Report .......................................................................................................................... 33

Lion Selection Group Limited

Directors’ Report

The Directors of Lion Selection Group Limited (“Lion” or “the Company”) submit their report on the operations of the Company for the financial year ended 31 July 2021.

At the date of this report Lion had 150,141,271 fully paid ordinary shares on issue.

Directors

The following persons were directors of Lion during the financial year and up to the date of this report:

Barry Sullivan (Non-Executive Chairman)
Peter Maloney (Non-Executive Director)
Chris Melloy (Non-Executive Director)
Robin Widdup (Director)

Principal Activities

During the financial year the principal continuing activities of the Company were investment in mining and exploration companies.

Operating and Financial Review

The Company’s loss after tax for the year was $5.9 million (2020: gain of $29.9 million).

The result for the year reflects a modest mark to market loss of $0.8 million with respect to investments, with key movements in the portfolio value outlined below:

A mark to market decrease of $2.6 million in the valuation of Lion’s investment in Erdene Development Corporation, with delays in permitting and financing its Bayan Khundii Gold Project in Mongolia.
A mark to market decrease of $1.4 million in the valuation of Lion’s investment in Sihayo following delays in permitting and financing the Sihayo gold project in Indonesia and disappointing initial drill results at the company’s Hutabargot project.
Increases in the value of Lion’s investments in Kasbah and Celamin totalling $2.5 million following an in specie distribution from African Lion 3 Ltd (AFL3), excluding any contingent liability applicable to each investment. During the year Lion consolidated its ownership of AFL3 and undertook an in specie distribution of AFL3’s investments in Kasbah and Celamin. The AFL3 acquisition involved part cash consideration and Lion agreeing to pay contingent consideration in certain circumstances for up to 5 years (see note 15 Commitments and Contingent Liabilities).

At 31 July 2021 the Company held investments valued at $90.0 million (2020: $89.1 million), and cash of $6.9 million (2020: $10.8 million).

in the absence of a superior proposal; and
subject to an independent expert concluding (and continuing to conclude) that the Scheme is in the best interests of Nusantara shareholders.

The transaction is anticipated to be put to Nusantara shareholders for approval in mid-to-late September 2021.

Lion Selection Group Limited – Financial Report 2021

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Pani Joint Venture

Lion directors advise that the fair value of Lion’s interest in the Pani Joint Venture has been retained at A$62.5M at 31 July 2021. The valuation was previously increased from A$40.7M to A$60.7M at 31 July 2020, with further investment of A$1.8M during the year.

Lion’s accounting policy for determining the fair value of unlisted investments aims to maximise the use of observable market data where it is available and rely as little as possible on unobservable inputs. The determination of fair value at each measurement date takes into account developments in relation to progress of activities for Pani, commodity price movements, other comparable recent transactions along with further investment in the project.

As at 31 July 2021 Lion directors have assessed that there is no indication of a substantial change in fair value based on movements in market conditions and project milestones, noting the following:

Since July 2020, the outlook for long-term gold prices consolidated, with spot gold generally trading between US$1,700/oz and US$1,900/oz. In the same period, the US dollar has weakened from $0.71 to $0.74 relative to the Australian dollar.
Multiples for comparable listed companies have generally increased modestly during the year.
Drilling on the Pani IUP between the two Resources has suggested continuity and some higher-grade intercepts, improving the potential value for the combined project.
Further material upside is expected for the Pani gold project if the J Resources transaction announced to the ASX on 9 December 2019 completes. This upside has not been considered in the fair value for the assessment made at 31 July 2021 as the deal has not yet been completed, and is now the subject of arbitration. There is an ongoing risk that the conditions precedent are not met and the deal is unable to be completed.

The current valuation for Pani is based on trading multiples for junior companies with comparable assets at similar stage of advancement. This methodology implicitly contains a discount for the various risks that exist for single asset pre-production companies. De-risking by way of detailed technical and economic assessment and funding is typically accompanied by a change in valuation multiple, as is evident in the difference in trading multiples between development and production stage gold companies.

The key de-risking objectives for Pani would include:

Completion of the JV deal;
Further drilling;
Feasibility studies.

Pani Drilling Update

As reported previously, the Pani Joint Venture has been drilling a 10,500 metre drill program on the Pani IUP in the area between the Pani IUP Resource and Pani Contract of Work Resource held by J Resources.

Preliminary assays have now been received for 17 holes for a total of 4,544 metres completed in August 2020. All holes have intersected, and most ended in mineralisation, but hole length was limited by the capacity of the man portable drill rigs used. This drilling has suggested the continuous presence of gold mineralisation between the two separate established resources located on the Pani IUP and surrounding Contract of Work and some higher-grade intercepts. Based on all the combined drilling between the IUP and CoW, Pani mineralisation may now span approximately 1.5km (east-west) x 0.8km (north-south).

Mineralisation in the “link” zone (previously described as the “gap” zone) is likely to have a consequence for strip ratio and geometry of mining shapes for the combined Pani project (although there is no guarantee that the combined project will eventuate, given that the transaction is subject to arbitration and outstanding conditions precedent). In addition, the new information from the link zone is expected to have an important bearing for the geological interpretation of Pani. Observations and preliminary results from the link zone suggest that the region is strongly mineralised including higher grade intercepts. An extensive drill campaign is being planned to in-fill the link zone and test the depth and boundaries of the deposit if the J Resources deal closes.

Lion Selection Group Limited – Financial Report 2021

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Figure 1. Pani view looking south showing informal workings

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Figure 2. Pani plan view showing collars and drill traces. Note multiple holes from each collar

Lion Selection Group Limited – Financial Report 2021

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Figure 3. Pani cross section looking north

The Pani Joint Venture has temporarily paused its drilling program given the J Resources agreement to combine the two Pani tenements into one ownership group remains incomplete. This agreement remains subject to the ongoing arbitration and subject to regulatory approvals and approval from J Resources’ secured lenders that are yet to be received. It is anticipated that final assay results of holes that have been drilled will become available after the recommencement of drilling.

If completed, the combination of the two tenements and Pani drilling results are anticipated to materially improve the valuation of Lion’s investment in the Pani Joint Venture.

Arbitration

The Pani Joint Venture (Lion 33%, Merdeka Copper Gold 67%) has initiated arbitration action against J Resources in relation to a claim of non-compliance with the terms of the November 2019 J Resources agreement to combine the two Pani tenements into one ownership group. This agreement remains incomplete due to the lack of regulatory approvals and approval from J Resources’ secured lenders. The Pani Joint Venture is seeking compensation in the range of US$500 – US$600 million or specific performance to complete the transaction.

The arbitration is now in progress.

Neither party has terminated the J Resources Agreement, and Lion remain hopeful that the parties involved can avoid a drawn out arbitration process and close the deal as originally intended.

Further detail of the Singapore International Arbitration Centre action is attached to Lion’s announcement of 4 February 2021.

Pani Mineral Resource Estimates

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Notes

Refer to One Asia Resources Limited news release 3 December 2014, (https://www.lionselection.com.au/wpcontent/uploads/2018/08/PANI%20JORC%20RESOURCE.pdf).
Refer to J Resources 31 December 2018 Annual Report, (http://www.jresources.com/investors/article/final-resourcesreserves-compilation-2017-to-2018)

Lion Selection Group Limited – Financial Report 2021

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Dividends

No dividend was declared or paid during the year (2020: Nil).

Compliance with Environmental Regulations

Lion has a policy that environmental impacts of developments of investees are in line with country/international standards and do not adversely impact local communities.

Lion has not been notified by any investee of any environmental breach by any government or other agency, and is not aware of any such breach.

Significant Changes in the State of Affairs

There were no significant changes in the State of Affairs of the Company.

Significant Events after Balance Date

There has not arisen in the interval between the end of the year and the date of this report, any item, transaction or event of a material or unusual nature which has or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future periods.

Proceedings on Behalf of the Company

No proceedings have been brought or intervened in on behalf of the Company with leave of the court under section 237 of the Corporations Act 2001 .

Likely Developments and Future Results

The Company’s future operating results will depend on the results of its investments. The Company’s ability to sustain profits is dependent on future sales of investments which in turn are dependent on market opportunities and the performance of the Company’s various investments, which are difficult to predict.

There are a wide variety of risks associated with the mining and exploration industry including market conditions, exploration, operational and political risk, tenure of tenements, liquidity and native title issues. Because of the vagaries of the mining and exploration industry and the long term nature of most of Lion’s investments, the directors are unable to predict future results.

In relation to the COVID-19 pandemic, the outlook remains unclear as companies face an extremely difficult operating environment. Recent fiscal and monetary support has provided favourable tailwinds for gold and gold equities, however financial markets remain volatile and, in the case of the broader market, potentially over-valued relative to historical norms as earnings come under pressure.

Corporate Governance Statement

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Lion support the applicable principles of good corporate governance. The Company’s corporate governance statement can be found in the Investor Section of our website www.lionselection.com.au.

Employees

At 31 July 2021 there was 1 full time equivalent employee of the Company (2020: 1 FTE).

Remuneration Report

All disclosures in this remuneration report have been audited. This remuneration report outlines the director and executive remuneration arrangements of the Company as required by section 308 (3C) of the Corporations Act 2001. For the purposes of this report, key management personnel of the Company are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, including any director, and includes the executive employed by the Company considered to meet the definition of key management personnel.

Key Management Personnel Remuneration Framework

Emoluments of individual Board members and other key management personnel are determined on the basis of market conditions and the level of responsibility associated with their position. The emoluments are not specifically related to company performance and there are no long-term or short-term performance-related incentives provided to key management personnel. Remuneration and other terms of employment for key management personnel are formalised in either service agreements or employment contracts.

The remuneration policy in relation to directors is determined by the full Board. Remuneration of other key management personnel is determined by the directors of the Company. Directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. As approved by shareholders at the Annual General Meeting held on 1 December 2011, the maximum aggregate amount, including superannuation contribution, that may be paid to directors of the Company as remuneration for their services is $200,000 for any financial year.

Other key management personnel receive a base salary and superannuation contributions in accordance with Australian superannuation guarantee legislation.

Lion Selection Group Limited – Financial Report 2021

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Lion’s only contracted executive, Ms Jane Rose, is employed under an employment contract with no fixed duration. The contractual notice period under this agreement is 3 months with no termination benefit specified in the agreement. The other Key Management Personnel are not subject to any notice period or termination benefit with respect to their positions with the Company.

The remuneration policy of the Company with respect to directors and other key management personnel provides for Director’s & Officer’s (D&O) Insurance cover, but does not provide options, shares, loans or any other non-monetary benefits.

Voting and Comments at the Company’s 2020 Annual General Meeting

The Company received more than 98% of “yes” votes on its Remuneration Report for the previous financial year. The Company did not receive any specific feedback at the Company’s 2020 Annual General Meeting on its remuneration practices.

Details of Remuneration

Details of remuneration paid/payable to directors and the other key management personnel of the Company are detailed in the table below. The benefits provided to Key Management Personnel are fixed with no at-risk components of remuneration.

KEY MANAGEMENT PERSONNEL OF THE COMPANY – REMUNERATION FOR YEAR TO 31 JULY 2021

		SHORT TERM	BENEFITS		POST-
2021		SALARIES/ FEES	CASH BONUS	TERMINATION BENEFITS	EMPLOYMENT SUPERANNUATION	TOTAL
NAME	NOTES	$	$	$	$	$
Directors
B J K Sullivan		47,458	-	-	4,542	52,000
P J Maloney		14,792	-	-	25,208	40,000
C Melloy		14,792	-	-	25,208	40,000
R A Widdup	(a)	-	-	-	-	-
Other Key Management Personnel
C K Smyth	(a)	-	-	-	-	-
J M Rose		68,789	-	-	6,563	75,352
Total		145,831	-	-	61,521	207,352
		SHORT TERM	BENEFITS		POST-
2020		SALARIES/ FEES	CASH BONUS	TERMINATION BENEFITS	EMPLOYMENT SUPERANNUATION	TOTAL
NAME	NOTES	$	$	$	$	$
Directors
B J K Sullivan		47,475	-	-	4,525	52,000
P J Maloney		15,000	-	-	25,000	40,000
C Melloy		15,000	-	-	25,000	40,000
R A Widdup	(a)	-	-	-	-	-
Other Key Management Personnel
C K Smyth	(a)	-	-	-	-	-
J M Rose		74,581	-	-	7,085	81,666
Total		152,056	-	-	61,610	213,666

(a) R A Widdup and C K Smyth are employed by Lion Manager Pty Ltd, and do not receive any remuneration from the Company

Both Mr R A Widdup and Mr C K Smyth are executive directors and beneficial owners of Lion Manager Pty Ltd and have the capacity to significantly influence decision making of that company. Lion Manager provides management and investment services to Lion. These arrangements were approved by shareholders at Lion’s AGM on 5 December 2012, with ongoing management fees of 1.5% p.a. based on the direct investments under management. Management fees of $939,000 plus GST were paid in the current year. There is an incentive applicable which would apply where Lion’s performance outperforms a benchmark. In addition, up to a 12 month termination fee may be applicable should Lion seek to terminate the management agreement. Further details of the Management Agreement are set out in the Notice of Meeting for the 2012 AGM, available on Lion’s website. As at the date of this report no incentive fee had accrued with respect to the Lion Manager contract.

Lion Selection Group Limited – Financial Report 2021

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In addition, from 1 August 2013 Lion has requested Lion Manager provide comprehensive Investor Relations services associated with Lion’s ASX listing for $12,500+ GST per month. These arrangements are reviewed annually and may be terminated without fee.

Key Management Personnel Shareholdings

At the date of this report the direct and indirect interests of the directors and other key management personnel in the ordinary shares and options of Lion are detailed below. No shares or options were issued as remuneration.

SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL OF THE COMPANY

	NAME BALANCE 1 AUGUST 2020 SHARES ISSUED AS REMUNERATION ON-MARKET PURCHASE OF SHARES CLOSING BALANCE 31 JULY 2021
	Directors
	P J Maloney 2,190,389 - - 2,190,389
	C Melloy 5,718,077 - 33,432 5,751,509
	R A Widdup 16,167,277 - 450,000 16,617,277
	B J Sullivan 813,074 - - 813,074
	Other Key Management Personnel
	C K Smyth 1,411,137 20,000 1,431,137
	J M Rose - - - -
	Total 26,299,954 - 503,432 26,803,386
	NAME BALANCE 1 AUGUST 2019 SHARES ISSUED AS REMUNERATION NET CHANGE OTHER CLOSING BALANCE 31 JULY 2020 Directors P J Maloney 2,190,389 - - 2,190,389 C Melloy 5,718,077 - - 5,718,077 R A Widdup 16,167,277 - - 16,167,277 B J Sullivan 813,074 - - 813,074 Other Key Management Personnel C K Smyth 1,411,137 - - 1,411,137 J M Rose - - - - Total 26,299,954 - - 26,299,954

OPTIONS ON ISSUE

There were no options on issue during 2021.

NAME	BALANCE 1 AUGUST 2019	OPTIONS ISSUED AS REMUNERATION	OPTIONS EXPIRED UNEXERCISED	CLOSING BALANCE 31 JULY 2020
Directors
P J Maloney	-	-	-	-
C Melloy	-	-	-	-
R A Widdup	234,572	-	(234,572)	-
B J Sullivan	-	-	-	-
Other Key Management Personnel
C K Smyth	117,251	-	(117,251)	-
J M Rose	-	-	-	-
Total	351,823	-	(351,823)	-

Lion Selection Group Limited – Financial Report 2021

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Information on Directors

Barry Sullivan BSc (Min), ARSM, FAusIMM, MAICD (Chairman)

Barry Sullivan is an experienced and successful mining engineer with a career spanning over 40 years in the mining industry. His initial mining experience was gained in the South African gold mining industry, followed by more than 20 years with Mount Isa Mines. In the final five years of his tenure with MIM, Barry was Executive General Manager responsible for the extensive Mount Isa and Hilton operations.

Barry was previously Non-Executive Chairman for EganStreet Resources, non-executive Director and Chairman of Exco Resources and a non-executive Director of Catalpa Resources, Sedimentary Holdings, Bass Metals and Allegiance Mining. He was also a nonexecutive director of Lion's predecessor company, Lion Selection Limited.

Barry has been a non-executive director of Lion since December 2011, becoming Chairman from 25 February 2016.

Peter Maloney BComm, MBA (Roch) (Non-Executive Director)

Peter Maloney has broad commercial, financial and management expertise and experience. He has been Chief Financial Officer of Lion and an executive director of Lion Manager. Prior to that he held senior executive positions with WMC Resources and a number of other companies.

Peter holds a Bachelor of Commerce from the University of Melbourne and an MBA from University of Rochester. He has also completed the Advanced Management Program at Harvard Business School.

Peter has been a non-executive director of Lion since December 2010, including serving as Chairman between 1 January 2012 and 24 February 2016.

Chris Melloy BE (Mining) (Hons), MEngSc, MAusIMM, F Fin (Non-Executive Director)

Chris Melloy is a mining engineer with some 40 years’ experience in the mining industry in operations, securities analysis and investment. He held senior positions in MIM and JB Were & Son prior to joining Lion.

Chris was an Executive Director of Lion Manager from its inception in 1997 through to 2011, becoming a non-executive director of Lion on 1 November 2012.

Robin Widdup BSc (Hons), MAusIMM (Director)

Robin has over 39 years of industry experience. He graduated from Leeds University in 1975 with an Honours Degree in Geology. From 1986 to 1997 Robin worked as an Analyst and Manager for J B Were & Sons – Resource Research team. Robin founded Lion Selection Group and Lion Manager in 1997.

Robin is Managing Director of Lion Manager Pty Ltd and Chairman of Celamin Holdings Ltd and a non-executive director of Nusantara Resources and One Asia Resources Limited all Lion investees.

Other Key Management Personnel

Craig Smyth BCA (Acctg), M App Fin, CA (Chief Executive Officer)

Craig Smyth graduated from the Victoria University of Wellington with a Bachelor of Commerce and Administration, and has completed his Master of Applied Finance at the University of Melbourne. Craig’s financial background includes Coopers & Lybrand, Credit Suisse First Boston (London) and ANZ Investment Bank. He is currently the CEO of Lion and Executive Director of Lion Manager Pty Limited. Craig is a member of the Institute of Chartered Accountants of Australia and New Zealand.

Craig is a director of PT Pani Bersama Jaya with respect to Lion’s investment in the Pani Joint Venture.

Jane Rose (Investor Relations Manager & Company Secretary)

Jane Rose commenced work in 1983 as a legal administrative assistant. During the following 12 years, Jane held senior administrative positions with Phillips Fox and Corrs Chambers Westgarth in Melbourne and Nabarro Nathanson in London.

On returning to Australia, Jane worked as Executive Assistant to the Managing Director of Acacia Resources Limited and AngloGold Ashanti Limited where she was also responsible for the management of various corporate initiatives, including marketing and coordination of investor relations activities. From 2002 to 2006, Jane worked for several Lion investees, including MPI Mines Ltd, Leviathan Resources and Indophil Resources. Jane worked with Lion in early 2007 to assist with the merger, and she subsequently joined the company in July 2007 as Corporate Relations Manager.

In November 2008 Jane was appointed Company Secretary.

Lion Selection Group Limited – Financial Report 2021

Page 8

Directors’ Meetings

During the year and up until the date of this report, the Company held 21 directors’ meetings. The table below reflects attendances of the directors at meetings of Lion’s Board.

BOARD OF DIRECTORS
	ATTENDED	MAX. POSSIBLE ATTENDED
P J Maloney	21	21
R A Widdup	21	21
B J K Sullivan	21	21
C P Melloy	21	21

Audit Committee Meeting

During the year and up until the date of this report, the Company held two audit committee meetings.

The table below reflects attendances of the audit committee meeting.

AUDIT COMMITTEE
	ATTENDED	MAX. POSSIBLE ATTENDED
P J Maloney	2	2
B J K Sullivan	2	2
C P Melloy	2	2

Directors’ Benefits

Since the end of the preceding financial year, no director has received or become entitled to receive a benefit, other than benefits disclosed in this report as emoluments or the fixed salary of a full time employee of the Company or a related body corporate, by reason of a contract made by the Company or related body corporate with the director or with a firm of which he is a member, or with an entity in which he has a substantial financial interest.

Indemnification of Directors and Officers

An indemnity agreement has been entered into between Lion and each of the Company’s directors named earlier in this report and with the Company Secretary. Under the agreement, the Company has agreed to indemnify those officers against any claim or for any expenses or costs which may arise as a result of work performed in their respective capacities to the extent permitted by law. There is no monetary limit to the extent of this indemnity.

Lion has paid an insurance premium of $85,163 in respect of a contract insuring each of the directors, previous directors of the Company, and other key management personnel, against all liabilities and expenses arising as a result of work performed in their respective capacities, to the extent permitted by law.

Auditor Independence

We have obtained an independence declaration from our auditors, PricewaterhouseCoopers, as required under section 307 of the Corporations Act 2001. A copy can be found on page 10 of this financial report.

Non-Audit Services

No fees for non-audit services were paid/payable to the external auditors during the year ended 31 July 2021. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act.

Rounding of Amounts

The Company is of a kind referred to in ASIC Instrument 2016/191 relating to the 'rounding off' of amounts in the financial report and Directors' report. Amounts in the financial report and Directors' report have been rounded off in accordance with that Instrument to the nearest thousand dollars unless specifically stated to be otherwise.

This report has been made in accordance with a resolution of the directors.

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................................................................................................... …………………………………………........................ B J K Sullivan R A Widdup Chairman Director Melbourne

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Auditor’s Independence Declaration

As lead auditor for the audit of Lion Selection Group Limited for the year ended 31 July 2021, I declare that to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.

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Anthony Hodge Partner PricewaterhouseCoopers

Melbourne 6 September 2021

2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

PricewaterhouseCoopers, ABN 52 780 433 757

Lion Selection Group Limited

Statement of Comprehensive Income for the Year ended 31 July 2021

NOTES Gain/(loss) attributable to movement in fair value 4 Interest income Other income Exchange (loss)/ gain Management fees Employee benefits Other expenses 4 *Profit/(Loss) before income tax* Income tax (expense)/benefit 5 *Net Profit/(Loss) after tax* Other Comprehensive Income *Total Comprehensive Income/(Loss) for the year* Attributable to: Non-controlling interest Members Basic earnings/(loss) per share Diluted earnings/(loss) per share	2021 $’000 2020 $’000 (786) 31,834 22 9 9 18 (182) (305) (1,096) (1,071) (210) (209) (464) (412)
	*(2,707)* *29,864* (3,158) -
	*(5,865)* *29,864*
	- -
	*(5,865)* *29,864*
	- - *(5,865)* *29,864*
	Cents per share Cents per share (3.9) 19.9 (3.9) 19.9

The above statement of comprehensive income should be read in conjunction with the accompanying notes.

Lion Selection Group Limited – Financial Report 2021

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Lion Selection Group Limited

Statement of Financial Position as at 31 July 2021

tatement of Financial Position as at 31 July 2021
NOTES Current Assets Cash and Cash Equivalents 13 Trade Receivables and Other Assets 6 Financial Assets - Current 7 Total Current Assets Non-Current Assets Financial Assets 7 Property Plant & Equipment 8 Total Non-Current Assets *Total Assets* Current Liabilities Trade and Other Payables 9 Total Current Liabilities Non-Current Liabilities Deferred Tax Liabilities 5 (c) Total Non-Current Liabilities *Total Liabilities* *Net Assets* Equity Contributed Equity 11 Reserves 12 (Accumulated Losses) 10 *Total Equity*	2021 $’000 2020 $’000 6,938 10,837 274 11 16,968 -
	*24,180* *10,848*
	73,037 89,075 13 16
	*73,050* *89,091*
	*97,230* *99,939*
	104 106
	*104* *106*
	3,158 -
	*3,158* -
	*3,262* *106*
	*93,968* *99,833*
	126,214 126,214 1,341 1,341 (33,587) (27,722)
	*93,968* 99,833

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

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Lion Selection Group Limited

Statement of Cash Flows for the Year ended 31 July 2021

NOTES Cash flows from operating activities Interest received Other income received Payments to suppliers and employees (including GST) Net operating cash flows 13(b) Cash flows from investing activities Payments for investments Proceeds from investments Net investing cash flows Cash flows from financing activities Proceeds from issue of shares Net financing cash flows *Net increase/(decrease) in cash and cash equivalents held* Exchange rate variations on foreign cash Cash and cash equivalents at beginning of financial year *Cash and cash equivalents at end of financial year*	2021 $’000 2020 $’000 22 9 9 15 (1,800) (1,655)
	*(1,769)* *(1,631)*
	(2,338) (6,104) 390 16,413
	*(1,948)* *10,309*
	- 3
	- 3
	*(3,717)* *8,681* (182) (311) 10,837 2,467
	*6,938* *10,837*

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

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Lion Selection Group Limited

Statement of Changes in Equity for the Year ended 31 July 2021

Balance at 31 July 2020 Total comprehensive income/(loss) Transactions with owners in their capacity as owners Balance at 31 July 2021 Balance at 31 July 2019 Total comprehensive income/(loss) Transactions with owners in their capacity as owners Issue of new shares Balance at 31 July 2020	ISSUED CAPITAL $’000 RESERVES $’000 ACCUMULATED LOSSES $’000 TOTAL $’000 126,214 1,341 (27,722) 99,833 - - (5,865) (5,865) - - - -
	126,214 1,341 (33,587) 93,968
	126,211 1,341 (57,586) 69,966 - - 29,864 29,864 3 - - 3
	126,214 1,341 (27,722) 99,833

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

Lion Selection Group Limited – Financial Report 2021

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Lion Selection Group Limited

Notes to the Financial Statements for the Year ended 31 July 2021

NOTE 1. CORPORATE INFORMATION

The financial report of Lion Selection Group Limited (“Lion” or “the Company”) for the year ended 31 July 2021 was authorised for issue in accordance with a resolution of the directors on 6 September 2021. The directors have the power to amend and reissue the financial report.

Lion is a company limited by shares incorporated in Australia. The nature of the operations and principal activities of the Company are described in the Directors’ Report. The registered address of Lion is Level 2, 175 Flinders Lane, Melbourne.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Comparative information is reclassified where appropriate to enhance comparability.

(a) 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 and the Corporations Act 2001 . Lion is a for-profit entity for the purpose of preparing the financial statements.

The financial report complies with Australian Accounting Standards. The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The financial report has been prepared on a historical cost basis, except for certain financial assets and financial liabilities that have been measured at fair value.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($'000) unless otherwise stated under the option available to Lion under ASIC Instrument 2016/191. Lion is an entity to which the class order applies.

(b) New accounting standards and interpretations

New Standards

There are no new standards that are effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

Accounting Standards Issued But Not Yet Effective

There are no standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

(c) Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have an impact on the carrying amounts of certain assets and liabilities are:

(i) Fair value of investments and other financial assets

The Company carries its investments at fair value with changes in the fair values recognised in profit or loss. The fair value of investments and other financial assets that are not traded in an active market is determined based on either a recent sale price, or where not available, the market value of underlying investments. Determination of market value involves the Company’s judgment to select a variety of methods and in making assumptions that are mainly based on market conditions existing at each balance sheet date. The key assumptions used in this determination are set out in note 2(j).

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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(ii) Income taxes

Lion is subject to income taxes in Australia. Judgment is required in determining the provision for income taxes and deferred taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Lion recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that sufficient future taxable amounts will be available to utilise those temporary differences and losses. This involves judgment regarding the future financial performance and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the level of deferred tax assets recognised which can result in a charge or credit in the period in which the change occurs.

(d) Other Income

Other income is recognised to the extent that it is probable that the economic benefits will flow to Lion and the other income can be reliably measured. The following specific recognition criteria must also be met before other income is recognised:

(i) Interest

Income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the fair value of the financial asset.

(ii) Dividends

Dividend income is recognised when the shareholders’ right to receive the payment is established.

(e) Cash and cash equivalents

For cash flow statement purposes, 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 or that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(f) Trade and other receivables

Trade receivables are generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less loss allowance.

The Company applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. The Company recognises a provision based on historical default rates, debtor analysis and the Company's monitoring of credit risk. Trade and other receivables are written off when there is no reasonable expectation of recovery.

(g) Foreign currency translation

Both the functional and presentation currency of Lion is Australian dollars (AUD).

Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are included in the fair value reserve in equity.

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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(h) Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

when the deferred income tax liability arises from the initial recognition of goodwill or of 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 profit nor taxable profit or loss; or
when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity as part of Other Comprehensive Income.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Tax Consolidated Group

During the year, the Company and its wholly-owned entities have implemented the tax consolidation legislation. The head entity, Lion Selection Group Limited, and the wholly-owned entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right.

In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from wholly-owned entities in the tax consolidated group.

(i) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(j) Investments, Other Financial Assets and Investments in Associates

The Company classifies its financial assets into the following categories:

those to be measured subsequently at fair value (either through OCI or through profit or loss), and
those to be held at amortised cost.
The classification depends on the business model for managing the financial assets and the contractual terms of the cash flows.

Lion is a venture capital organisation, and designates its investments as being fair value through profit or loss. The scope of AASB 128 Investments in Associates allows the Company to elect to measure that investment at fair value through profit or loss in accordance with AASB 9. After initial recognition, investments are measured at fair value, with gains or losses on fair value of investments being recognised in the Statement of Comprehensive Income. The fair value of assets is remeasured at each reporting date. This recognition is more relevant to shareholders and consistent with internal investment evaluation.

The fair value of financial assets traded in active markets is based on their quoted market prices at the end of the reporting period without any deduction for estimated future selling costs. The quoted market price used for financial assets held by the Company is the current bid price.

The fair value of financial assets that are not traded in an active market are determined using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Valuation techniques used include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs.

All regular purchases and sales of financial assets are recognised on the trade date i.e. the date that the Company commits to purchase the asset. Regular purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace.

Investments in controlled entities

(a) obtain funds from one or more investors for the purpose of providing those investors with investment management services;
(b) commit to their investor(s) that their business purpose is to invest funds solely for returns from capital appreciation, investment income or both, and
(c) measure and evaluate the performance of substantially all of their investments on a fair value basis.
(k) Derecognition of financial assets and financial liabilities
(i) Financial assets

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.

(ii) Financial liabilities

A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

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Page 18

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(l) Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

(m) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Statement of Comprehensive Income over the period of the borrowings using the effective interest method.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless Lion has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(n) Payables

Payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Payables represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

(o) Provisions and Contingencies

Provisions are recognised when Lion has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When Lion expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Comprehensive Income net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as an interest expense.

A contingent liability is disclosed when the Company has a:

(i) possible obligation arising from past events where it has yet to be confirmed whether the entity has a present obligation that could lead to an outflow of resources embodying economic benefits; or
(ii) present obligation that does not meet the recognition criteria of a provision (because either it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or a sufficiently reliable estimate of the amount of the obligation cannot be made).

(p) Employee leave benefits - Wages, salaries, annual leave and long service leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave that are expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

The liability for long service leave for which Lion has an unconditional right to defer settlement for at least 12 months after the balance sheet date is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method.

Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(q) Contributed equity

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.

If the entity reacquires its own equity instruments, for example, as a result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.

(r) Earnings per share

Basic earnings per share is calculated as net profit, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares.

Diluted earnings per share is calculated as net profit, adjusted for:

costs of servicing equity (other than dividends) and preference share dividends;
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(s) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the segments, has been identified as the Board.

Investments have similar characteristics and so segments are determined on a geographical basis. The company invests only in small and medium mining and exploration companies with gold and base metal activities in Australia, Africa, Asia and the Americas.

(t) Restatement of prior year comparatives

In 2021, the Company restated its 2020 disclosure of the loan receivable balance held with Lion Selection Asia Limited. The loan receivable balance was incorrectly disclosed in Note 17 as A$13,652,000, but should have been disclosed as A$19,256,363. The loan receivable balance was correctly stated in the Statement of Financial Position.

NOTE 3 FINANCIAL RISK MANAGEMENT

Lion’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, interest rate risk and price risk), credit risk and liquidity risk. Lion’s overall risk management program is carried out under policies approved by the Board of Directors, and focuses on the unpredictability of the financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. The Board provides written principles for overall risk management, as well as policies covering specific areas. The Board reviews and agrees policies for managing each of these risks and they are summarised below. Lion also monitors the market price risk arising from all financial instruments.

Lion holds the following financial instruments:

Financial assets Cash Investments in securities Trade receivables and other assets Financial liabilities Trade and other creditors	2021 $’000 2020 $’000
	6,938 10,837 90,005 89,075 14 11
	96,957 99,923
	104 106
	104 106

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Page 20

NOTE 3 FINANCIAL RISK MANAGEMENT (continued)

(a) Market risk

(i) Foreign Currency Risk

Lion operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the United States dollar (USD), including with respect to commitments.

Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency. The Company has a US dollar denominated cash account to meet future US dollar denominated obligations, and the trade and other receivables balance is expected to be received in US dollars. To mitigate the Company’s exposure to foreign exchange risk, non-AUD cash flows are closely monitored.

Based on the US dollar cash account at the end of the period, if the value of US dollar/AUD exchange rate had increased by 10%/decreased by 10% with all other variables held constant, the Company’s post-tax profit for the year would have been $393,400 higher/lower as a result of foreign exchange gains/losses (2020: $572,000 higher/lower).

(ii) Price risk

Lion is exposed to equity securities price risk, with many of the Company’s equity investments being publicly traded. This arises from investments held by Lion and classified on the balance sheet as fair value through profit or loss.

To manage its price risk, including exposure to changes in commodity prices arising from investments in equity securities, the Company diversifies its portfolio. Diversification by way of different commodities and locations of the portfolio is done in accordance with the limits set by the Company, however from time to time the Company may seek to increase exposure to particular investments. Lion does not hedge its equities securities price risk. Based on the financial instruments held at the end of the period, if the value of equity securities had increased by 10%/decreased by 10% with all other variables held constant, the Company’s post-tax profit for the year would have been $9,000,500 higher/lower (2020: $8,907,000 higher/lower) as a result of gains/losses on equity securities classified as fair value through profit or loss.

(iii) Interest Rate Risk Exposures

Lion is exposed to interest rate risk through its primary financial assets. The interest rate risk exposures together with the effective interest rate for each class of financial assets and financial liabilities at balance date are summarised below. Most assets and liabilities are current, maturing within one year, with the exception of investments in securities, the value of which will be realised at the discretion of the Company. No decision has been made regarding the timing of this realisation.

	FLOATING	FIXED	NON		TOTAL	AVERAGE	INTEREST RATE
	INTEREST RATE	INTEREST RATE	INTEREST BEARING		$’000	FLOATING %	FIXED %
2021	$’000	$’000	$’000
Financial Assets:
Cash – AUD	3,004	-		-	3,004	0.5	-
Cash – USD	3,934	-		-	3,934	-	-
Bank bills and share sales receivable	-	-		246	246	-	-
Investment in securities	-	-	90,005		90,005	-	-
Financial Liabilities:
Trade and other creditors	-	-		104	104	-	-
2020
Financial Assets:
Cash – AUD	5,113	-		-	5,113	0.2	-
Cash – USD	5,724	-		-	5,724	-	-
Bank bills and deposits receivable	-	-		11	11	-	-
Investment in securities	-	-	89,075		89,075	-	-
Financial Liabilities:
Trade and other creditors	-	-		106	106	-	-

Lion Selection Group Limited – Financial Report 2021

Page 21

NOTE 3 FINANCIAL RISK MANAGEMENT (continued)

(b) Credit risk

Lion is exposed to credit risk. Credit risk arises from cash and cash equivalents and deposits with banks as well as credit exposures to counter parties, including outstanding receivables and committed transactions. Lion has a policy of maintaining its cash and cash equivalents with the “top 4” Australian Banks. For other counter parties, if there is no independent rating, management assesses the credit quality of the party, taking into account its financial position, past experience and other factors. The maximum exposure to credit risk approximates the carrying values as disclosed above.

Based on historical default rates, debtor analysis and the Group's monitoring of credit risk, no impairment allowance is considered necessary in respect of trade receivables not past due.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the ability to close out market positions. Lion manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

(d) Fair value measurements

The Company carries its investments at fair value with changes in value recognised in profit or loss.

AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

(a) quoted priced (unadjusted) in active markets for identical assets or liabilities (level 1);
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2); and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

The fair value of financial instruments traded in active markets (such as publicly traded securities) is based on quoted market prices at the reporting date.

Recognised fair value measurements

The following tables present the Company’s assets and liabilities measured and recognised at fair value for the periods ended 31 July 2021 and 31 July 2020.

ended 31 July 2021 and 31 July 2020.
	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
	$’000	$’000	$’000	$’000
At 31 July 2021
Assets
Financial assets at fair value through profit or loss	25,064	2,339	62,602	90,005
Total Assets	25,064	2,339	62,602	90,005
At 31 July 2020
Assets
Financial assets at fair value through profit or loss	27,461	757	60,857	89,075
Total Assets	27,461	757	60,857	89,075

Valuation techniques used to derive level 2 and level 3 fair values

The fair value of financial instruments that are not traded in an active market (for example, unlisted investments) is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on unobservable inputs. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

Specific valuation techniques used to value financial instruments are applied in accordance with the International Private Equity and Venture Capital Valuation Guidelines, including:

Net assets, looking through to the underlying assets held through interposed investment vehicles.
The fair value of unlisted option contracts is determined using a Black Scholes valuation at the reporting date.
The use of quoted market prices or dealer quotes for similar instruments where available.
Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.

Lion Selection Group Limited – Financial Report 2021

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NOTE 3 FINANCIAL RISK MANAGEMENT (continued)

The price of a recent investment conducted in an orderly transaction between market participants generally represents fair value as of the transaction date. At subsequent measurement dates, the price of a recent investment may be an appropriate reference point for estimating fair value subject to the current facts and circumstances including changes in market conditions or changes in the performance of the investee company that would impact a market participant’s perspective of fair value.

Valuation Processes

The Lion Manager includes a team that performs monthly valuations of the financial instruments required for financial reporting purposes, including level 3 fair values. This team reports directly to the Lion Board. Discussions of valuation processes and results are held between the Lion Manager and the Lion Board at least once every six months in line with Lion’s half-yearly reporting dates, including changes in level 2 and 3 fair values.

The following table presents the changes in level 3 instruments for the years ended 31 July 2020 and 31 July 2021.

Investments – Level 3 Opening Balance Transfers out of Level 3 (to level 1) Transfers out of Level 3 (to level 2) Other increases (purchases) Gain/(Losses) recognised in profit or loss Closing balance	2021 $’000 2020 $’000 60,857 38,921 - - - - 1,784 1,966 (39) 19,970
	62,602 60,857

The Level 3 balance primarily relates to Lion’s investment in the Pani Joint Venture.

Pani Joint Venture

As noted above, Lion valued its 33.3% interest in the Pani Joint Venture at $62.5 million as at 31 July 2021. The valuation was previously increased to A$60.7M at 31 July 2020, with further investment of A$1.8M during the half-year.

Lion’s accounting policy for determining the fair value of unlisted investments aims to maximise the use of observable market data where it is available and rely as little as possible on unobservable inputs. Generally an arms-length transaction represents fair value as of the transaction date, with the last such transaction being Merdeka’s acquisition of its stake in the Pani Joint Venture in November 2018. In accordance with valuation guidelines, this valuation was used to calibrate valuation models based on observable inputs. These valuation models are assessed for changes in market conditions and project milestones at each measurement date. The two market-based valuation models used in assessing in line with industry practice are:

Comparable Value method (Implied value per Resource Oz) as the primary valuation method.
Yardstick (Rule of Thumb) method as an alternative method in order to provide a cross-check.

The valuation methods used for the Pani joint venture are sensitive to both observable and unobservable inputs. The valuation methods are sensitive to the unobservable interrelationship between the spot gold price, outlook for long term gold prices and the movement in gold equities. In addition, consideration is required of the relative progress of activities for the Pani Joint Venture and peer group companies, particularly taking into account the recent level of movement in those comparables.

The valuation models used rely on a number of related data points from selected comparable companies that are subject to reasonably possible changes. For example, the comparable value method is dependent on gold prices, sentiment to gold equities and declared resources to ultimately determine an implied value per resource ounce.

The Pani Joint Venture fair value at 31 July 2020 was increased to A$60.7M taking into account movements in market comparables, recent developments in relation to progress of activities for Pani, perspectives on long-term commodity price movements and other relevant corporate transactions. Most notably this increase reflected the sustained escalation in gold prices between November 2018 and July 2020 with the share prices of many market peer companies increasing by more than 100% in this period.

As at 31 July 2021 Lion directors have assessed that there is no indication of a substantial change in fair value based on movements in market conditions and project milestones, noting the following:

Since July 2020, the outlook for long-term gold prices consolidated, with spot gold generally trading between US$1,700/oz and US$1,900/oz. In the same period, the US dollar has weakened from $0.71 to $0.74 relative to the Australian dollar.
Multiples for comparable listed companies have generally increased modestly during the year.

Lion Selection Group Limited – Financial Report 2021

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NOTE 3 FINANCIAL RISK MANAGEMENT (continued)

Drilling on the Pani IUP between the two separate established resources located on the Pani IUP and surrounding Contract of Work has suggested continuity and some higher-grade intercepts, improving the potential value for the combined project.
Further material upside is expected for the Pani gold project if the J Resources transaction announced to the ASX on 9 December 2019 completes. This upside has not been considered in the fair value for the assessment made at 31 July 2021 as the deal has not yet been completed, and is now the subject of arbitration. There is an ongoing risk that the conditions precedent are not met and the deal is unable to be completed.

If completed, the combination of the two tenements and Pani drilling results are anticipated to materially improve the valuation of Lion’s investment in the Pani Joint Venture (although there is no guarantee that the combined project will eventuate, given that the transaction is subject to arbitration and outstanding conditions precedent).

A reasonably possible change in the implied value per resource ounce of 10% would increase/decrease the fair value of the Pani investment by $6.3M, with a corresponding gain or loss attributable to movement in fair value.

The Pani Joint Venture represents Lion’s largest investment. Lion’s investment model involves weighting investment towards the best opportunities in the portfolio, which from time-to-time results in concentration of Lion’s portfolio towards specific investments. The Lion board is conscious of the issues of portfolio balance but is of the view that the potential reward from a concentration of the portfolio in the Pani Joint Venture outweighs the risks if the challenges of developing a mine in Indonesia can be overcome.

NOTE 4 INCOME AND EXPENSES

OTE 4 INCOME AND EXPENSES
Gain/(loss) attributable to movement in fair value of investments Mark to Market adjustment for year – investments realised during year Mark to Market adjustment for year – investments held at end of year Gain/(loss) attributable to movement in fair value of investments as recorded in the Statement of Comprehensive Income	2021 $’000 2020 $’000 244 2,284 (1,030) 29,550
	(786) 31,834

Lion is a long term investor and investment performance generally spans a number of financial periods. Measured on historic cost, gross profit/(loss) on investments realised during the year includes mark to market adjustments realised in the current year as well as mark to market adjustments recognised in the Statement of Comprehensive Income in prior years as set out in the table below.

Results of investments realised during year

Proceeds from sale of shares Historical Cost of investment sales Gross profit/(loss) measured at historical cost on investments realised Represented by: Mark to Market recognised in prior periods (including on acquisition) Mark to Market recognised in current year	451 9,598 (731) (6,497)
	(280) 3,101
	(524) 817 244 2,284
	(280) 3,101

The total comprehensive profit/(loss) is after charging the following other expenses

The total comprehensive profit/(loss) is after charging the following other expenses
Investor Relations D & O Insurance Legal Expenses Depreciation Corporate overheads Total other expenses	99 69 57 57 28 29 3 5 277 252
	464 412

Lion Selection Group Limited – Financial Report 2021

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NOTE 5 INCOME TAX EXPENSE

NOTE 5 INCOME TAX EXPENSE
(a) Statement of Comprehensive Income Current income tax Deferred income tax Income tax expense/(benefit) reported in the Statement of Comprehensive Income Reconciliation of income tax expense Profit/(loss) from ordinary activities before income tax Prima facie tax thereon at 30% Tax effect of permanent and temporary differences: Accounting mark to market movement in the fair value of investments Realised gain/(loss) on sale of investments Other non-deductible or non-assessable amounts Previously unrecognised tax losses now recouped to reduce current tax expense Add back tax benefit not recognised for accounting purposes Assessable income brought to revenue account Tax losses utilised – revenue account Total income tax (benefit)/expense	2021 $’000 2020 $’000 - - 3,158 -
	3,158 -
	(2,707) 29,864 (812) 8,959 236 (9,550) (84) 930 (13) (116) - (930) 673 707
	9,877 - (6,719) -
	3,158 -

(b) Deferred Tax Expense and Liability – Change in Accounting Estimate

As set out in Note 2 (c)(ii), Lion assesses the underlying income tax treatment of its transactions about the Company’s income tax liabilities. Lion has recently undertaken a review of its income tax affairs in light of evolving trends in the treatment of tax matters for investment companies. Following the tax review, Lion has concluded it should treat its direct investments on revenue account for tax purposes as opposed to capital account, as Lion has done since it first listed. This represents a change in accounting estimate in the current year.

Lion has a deferred tax liability largely related to the Company’s investment portfolio where the accounting value exceeds the tax cost base. This liability is calculated based on the difference between the fair value of direct investments and their historical cost base.

Lion has tax losses that are available to offset assessable income to the extent allowable, and accordingly the deferred tax liability on unrealised investments has been partially offset by the deferred tax asset associated with these losses. Lion has filed amended tax returns on this basis, including the re-ascertainment of carried forward revenue losses to include historical losses on investments on revenue account. In addition, Lion has elected to enter into tax consolidation with its 100% owned investment in Lion Selection Asia Limited with effect from 1 August 2018. By entering tax consolidation Lion is able to ensure that transactions between these group companies are effectively neutral for income tax purposes and that group tax losses are available to offset group assessable income. In addition to normal rules around tax losses, Lion’s carried forward losses that pre-date tax consolidation can only be partially utilised to offset group income.

A deferred tax expense has been recognised to the extent that the net deferred tax liability has increased.

An actual liability to pay tax will only arise as investments are realised and, as with many tax matters, there is a degree of uncertainty about how the tax authorities will ultimately assess Lion’s position. Lion has an ambition to provide a steady dividend stream of crystallised profits on sale of investments to shareholders. Assuming that Australian tax is payable, Lion intends to frank dividends to the extent possible.

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NOTE 5 INCOME TAX EXPENSE (Continued)

(c) Deferred Tax Liabilities

INCOME TAX EXPENSE (Continued) Deferred Tax Liabilities
The balance compromises temporary differences attributable to: Unrealised investments – revenue account Unrealised foreign exchange gain Set-off of deferred tax assets pursuant to set-off provisions Tax losses available – revenue account Net Deferred Tax Liabilities	2021 $’000 2020 $’000 9,738 - 139 -
	9,877 -
	(6,719) -
	3,158 -

(d) Unrecognised temporary differences

A deferred tax asset has not been recognised in the Statement of Financial Position as the benefits will only be realised if the conditions for deductibility and/or recognition set out in Note 2(h) occur.

Unrecognised temporary differences at 31 July relate to the following:

Tax losses available – revenue account Tax losses available – capital account Temporary Difference – unrealised investments (capital account) Note (i) Accrued Expenses/Other temporary differences Unrecognised tax losses and temporary differences at 31 July Potential Tax Benefit @ 30%	61,283 14,122 - 67,516 26,567 (7,005) 100 137
	87,950 74,770
	26,385 22,431

Note (i) Temporary difference – unrealised investments arose from the difference between the fair value and taxable value of investments. A deferred tax liability was not recognised as at 31 July 2020 as this liability was assessed to be able to be set off against income tax losses in the same entity and same jurisdiction. Refer to Note 5 (b).

In the current period, this temporary difference has not been brought to account, as it was determined that the recognition conditions set out in Note 2(h) had not been met.

NOTE 6 TRADE RECEIVABLES AND OTHER ASSETS Share sales receivable Prepayments Sundry Debtors Total current receivables and other assets, net NOTE 7 FINANCIAL ASSETS Listed investments (at fair value) – Current Listed investments (at fair value) – Non-Current Unlisted investments (at fair value) – Non-Current Total financial assets	232 - 28 - 14 11
	274 11
	16,968 - 8,096 27,461 64,941 61,614
	90,005 89,075

Listed shares are readily saleable with no fixed terms.

Lion holds 49,904,775 Nusantara shares that are classified as current, with the expectation that these shares will be sold prior to 31 July 2022. Lion has signed a Voting Intention Statement in support of a Scheme of Arrangement whereby Indika is seeking to acquire all the shares in Nusantara. The transaction is anticipated to be put to Nusantara shareholders for approval in mid-to-late September 2021. Refer to Note 18 for further information.

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NOTE 8 OTHER ASSETS (FIXED) Plant, Property & Equipment – Cost Accumulated Depreciation Total other assets NOTE 9 PAYABLES (CURRENT) Sundry creditors and accruals Total current payables NOTE 10 ACCUMULATED LOSSES Movements in accumulated losses were as follows: (Accumulated losses) at the beginning of the financial year Net profit/(loss) for period (Accumulated losses) at the end of the financial year NOTE 11 CONTRIBUTED EQUITY Issued and paid up capital (fully paid) Opening Balance Shares Issued – Exercise of options Issued and paid up capital (fully paid) Share Capital Issued and paid up capital (fully paid) Opening Balance Shares Issued Issued and paid up capital (fully paid)	2021 $’000 2020 $’000 46 79 (33) (63)
	13 16
	104 106
	104 106
	(27,722) (57,586) (5,865) 29,864
	(33,587) (27,722)
	126,214 126,211 - 3
	126,214 126,214
	2021 SHARES 2020 SHARES 150,141,271 150,134,879 - 6,392
	150,141,271 150,141,271

Capital Risk Management

Lion’s objective when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders. In order to maintain or adjust the capital structure, Lion may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

NOTE 12 OPTION RESERVE Opening Balance Option Reserve Options Opening Balance Options exercised Options expired unexercised Options on Issue	2021 $’000 2020 $’000 1,341 1,341
	1,341 1,341
	2021 OPTIONS 2020 OPTIONS - 15,720,958 - (6,392) - (15,714,566)
	- -

Lion Selection Group Limited – Financial Report 2021

Page 27

NOTE 13 NOTES TO THE STATEMENT OF CASH FLOWS

(a) Reconciliation of cash and cash equivalents

For the purpose of the Statement of Financial Position and Statement of Cash Flows, cash and cash equivalents includes cash on hand and in banks, term deposits, cash managed by third parties and other bank securities which can be liquidated at short notice, net of outstanding bank overdrafts if applicable.

Cash at the end of the year as shown in the Statement of Cash Flows is reconciled to the related item in the Statement of Financial Position as follows:

Cash on hand and at bank (b) Reconciliation of Net Profit/(Loss) after Income Tax to Net Cash Provided by Operating Activities Net profit/(loss) after income tax Adjustments for non-cash income and expense items: Movement in fair value of investments (increase)/decrease in assets Other non-cash (income)/expense Movement in deferred income tax expense Decrease/(Increase) in assets: Other receivables (Decrease)/Increase in liabilities: Payables Net cash flow from operating activities	2021 $’000 2020 $’000
	6,938 10,837
	(5,865) 29,864 786 (31,834) 185 304 3,158 - (31) 2 (2) 33
	(1,769) (1,631)

(c) Non-Cash Transactions

In March 2021, Lion agreed to purchase the shares it did not own in African Lion 3 Ltd (AFL3) to consolidate ownership (with the exception of Lion Manager Pty Ltd who opted to hold its investment). The transaction involved the payment of $392,000 in cash consideration to the other AFL3 Shareholders, with all AFL3 assets to be distributed in specie to Lion and Lion Manager and for the AFL3 fund to be closed. Lion also agreed for contingent consideration to be paid in certain circumstances for up to 5 years. Refer to Note 15 Commitments and Contingent Liabilities for further details.

NOTE 14 EARNINGS PER SHARE

(a) Earnings/(Loss) used in calculating earnings per share – basic and diluted (b) Weighted average number of ordinary shares for basic earnings per share	2021 $’000 2020 $’000 (5,865) 29,864 2021 NUMBER 2020 NUMBER 150,141,271 150,136,922

The calculation of weighted average number for the diluted earnings per share does not include any potential ordinary shares with respect to options as the options on issue are not considered to be dilutive for the current period (2020: Nil).

NOTE 15 COMMITMENTS AND CONTINGENT LIABILITIES

Superannuation Commitments

Lion does not have its own superannuation plan. The only commitment to superannuation is with respect to statutory commitments. At balance date, the Company was contributing to various approved superannuation funds at the choice of employees at a minimum rate of 10% of salaries paid. Employees are able to make additional contributions to their chosen superannuation funds by way of salary sacrifice up to the age based deductible limits for taxation purposes.

Lion Selection Group Limited – Financial Report 2021

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NOTE 15 COMMITMENTS AND CONTINGENT LIABILITIES (continued)

Contingent Liabilities

Lion has a potential liability for contingent consideration that may be payable if Lion sells its investment in either Celamin or Kasbah. This obligation arises following Lion agreeing to purchase the shares it did not own in African Lion 3 Ltd (AFL3) to consolidate ownership (with the exception of Lion Manager Pty Ltd who opted to hold its investment). The transaction involved part cash consideration and Lion agreeing to pay contingent consideration to be paid in certain circumstances for up to 5 years. The value of the contingent consideration depends on the ultimate exit price for Celamin and/or Kasbah, how long Lion holds the investments, and how much additional investment is required. The decision to sell the investments in Celamin and Kasbah is entirely at Lion’s discretion.

Based on a theoretical sale at the carrying value for both investments at 31 July 2021, contingent consideration of $1,990,000 would arise.

NOTE 16 REMUNERATION OF AUDITORS

NOTE 16 REMUNERATION OF AUDITORS
(a) Audit Services Audit and review of financial reports Total remuneration for audit services	2021 $ 2020 $ 135,048 149,429
	135,048 149,429

(b) Non-audit services

No fees for non-audit services were paid/payable to the external auditors during the year ended 31 July 2021 (2020: Nil).

NOTE 17 RELATED PARTY DISCLOSURES

(a) Directors & Key Management Personnel

The directors and key management personnel in office during the financial year and up until the date of this report are as follows:

Barry Sullivan (Non-Executive Chairman) Peter Maloney (Non-Executive Director) Chris Melloy (Non-Executive Director) Robin Widdup (Director) Craig Smyth (Chief Executive Officer) Jane Rose (Company Secretary)

(b) Subsidiaries and Associates

Lion meets the qualifying criteria under AASB 10 of an "investment entity", and entities controlled by Lion (Asian Lion Limited, African Lion 3 Limited and Lion Selection Asia Limited) do not provide investment related services to the Company. Accordingly, the Company has applied the exemption from consolidating these entities and continues to carry these investments at fair value. Similarly, the scope of AASB 128 Investments in Associates allows the Company to elect to measure that investment at fair value through profit or loss in accordance with AASB 9.

Transactions with controlled entities and associates:

Lion Selection Asia Limited (100% ownership interest)

During the year the Company advanced funds in USD to Lion Selection Asia Limited of US$1,334,507 (A$1,788,364) (2020: US$1,336,940 (A$1,966,000)), with a loan balance of US$15,265,733 (A$21,097,419) (2020: US$13,931,226 (A$19,256,363*)). The amount payable by Lion Selection Asia Limited was interest free and payable at call.

*Comparative figures have been restated. Refer to Note 2(t) for more information.

African Lion 3 Limited (99% ownership interest)

In March 2021, Lion agreed to purchase the shares it did not own in African Lion 3 Ltd (AFL3) to consolidate ownership (with the exception of Lion Manager Pty Ltd who opted to hold its investment). The transaction involved the payment of $392,000 in cash consideration to the other AFL3 Shareholders, with all AFL3 investments distributed in specie to Lion and Lion Manager on a pro rata basis. Lion also agreed for contingent consideration to be paid in certain circumstances for up to 5 years. Refer to Note 15 Commitments and Contingent Liabilities for further details.

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NOTE 17 RELATED PARTY DISCLOSURES (continued)

(c) Key Management Personnel Remuneration Short term employee benefits Post-employment benefits	2021 $ 2020 $ 145,831 152,056 61,521 61,610
	207,352 213,666

(d) Lion Manager Pty Ltd Contract

Lion entered into a Management Agreement with Lion Manager Pty Ltd (Lion Manager), under which Lion Manager provides the Company with management and investment services. These arrangements were approved by shareholders at Lion’s AGM on 5 December 2012, with ongoing management fees of 1.5% p.a. based on the direct investments under management. Management fees of $939,000 plus GST were paid in the current year. There is an incentive applicable which would apply where Lion’s performance outperforms a benchmark. In addition, up to a 12 month termination fee may be applicable should Lion seek to terminate the management agreement. Further details of the Management Agreement are set out in the Notice of Meeting for the 2012 AGM, available on Lion’s website. As at the date of this report no incentive fee had accrued with respect to the Lion Manager contract.

In addition, from 1 August 2013 Lion has requested Lion Manager provide comprehensive Investor Relations services associated with Lion’s ASX listing for $12,500 + GST per month. These arrangements are reviewed annually and may be terminated without fee.

NOTE 18 MATERIAL INVESTMENTS

OTE 18 MATERIAL INVESTMENTS
The Company had direct ownership of the following material investments at year end: African Lion 3 Asian Lion Celamin Holdings NL Erdene Resource Development Kasbah Resources Lion Selection Asia Nusantara Resources Pani Joint Venture	CARRYING AMOUNT ENTITY OWNERSHIP
	2021 $’000 2020 $’000 2021 % 2020 %
	- 622 99 24 - 20 100 100 1,949 - 15 - 5,350 7,802 5 6 2,013 - 4 - 28 29 100 100 16,967 16,718 22 24 62,485 60,700 33 33

Each of the above companies is involved in the mining and exploration industry.

in the absence of a superior proposal; and

 subject to an independent expert concluding (and continuing to conclude) that the Scheme is in the best interests of Nusantara shareholders.

The transaction is anticipated to be put to Nusantara shareholders for approval in mid-to-late September 2021.

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NOTE 19 SEGMENT INFORMATION

Management has determined the Company’s segments based on the internal reporting reviewed by the Board to make strategic decisions. The Company provides patient equity capital to carefully selected small and medium mining enterprises. Investments have similar characteristics and so segments are determined on a geographical basis. Lion invests only in mining and exploration companies and projects with gold and base metal activities in Australia, Africa, Asia and the Americas. Information with respect to Geographical Segments is set out below.

2021	AUSTRALIA $’000 AFRICA $’000 ASIA $’000 AMERICAS $’000 CORPORATE $’000 TOTAL $’000
Mark to Market adjustment Segment Income Segment Expense Segment Result Before Tax Segment Assets Segment Liabilities Other Segment Information Assets Acquired during the period Cash Flow Information Net Cash flow from operating activities Net Cash flow from investing activities Net cash inflow from financing activities 2020	199 2,501 (3,486) - - (786)
	199 2,501 (3,486) - 31 (755) - - - - (1,952) (1,952)
	199 2,501 (3,486) - (1,921) (2,707)
	- 4,004 86,001 - 7,225 97,230 - - - - 3,262 3,262 - 392 1,946 - - 2,338 - - - - (1,769) (1,769) 199 (235) (1,912) - - (1,948) - - - - - -
	AUSTRALIA $’000 AFRICA $’000 ASIA $’000 AMERICAS $’000 CORPORATE $’000 TOTAL $’000
Mark to Market adjustment Segment Income Segment Expense Segment Result Before Tax Segment Assets Segment Liabilities Other Segment Information Assets Acquired during the period Cash Flow Information Net Cash flow from operating activities Net Cash flow from investing activities Net cash inflow from financing activities	2,247 90 29,844 (347) - 31,834
	2,247 90 29,844 (347) 27 31,861 - - - - (1,997) (1,997)
	2,247 90 29,844 (347) (1,970) 29,864
	- 1,250 87,617 179 10,893 99,939 - - - - 106 106 - 115 5,989 - - 6,104 - - - - (1,631) (1,631) 9,539 6,659 (5,889) - - 10,309 - - - - 3 3

NOTE 20 EVENTS OCCURRING AFTER THE REPORTING PERIOD

Lion Selection Group Limited – Financial Report 2021

Page 31

LION SELECTION GROUP LIMITED

Directors’ Declaration

In accordance with a resolution of the directors of Lion Selection Group Limited, we declare that:

In the opinion of the directors:
(a) the financial statements and notes set out on pages 11 to 31 are in accordance with the Corporations Act 2001 and other mandatory reporting requirements, including:
- (i) complying with the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
- (ii) giving a true and fair view of the financial position of the Company as at 31 July 2021 and its performance for the year ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
Note 2(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.
This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 31 July 2021.
The directors have been given the declaration by the chief executive officer required by section 295A of the Corporations Act 2001.

On behalf of the Board

................................................................................................... B J K Sullivan Chairman

................................................................................................... R A Widdup Director

Melbourne Date: 6 September 2021

Lion Selection Group Limited – Financial Report 2021

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Independent auditor’s report

To the members of Lion Selection Group Limited

Report on the audit of the financial report

Our opinion

In our opinion:

The accompanying financial report of Lion Selection Group Limited (the Company) is in accordance with the Corporations Act 2001 , including:

(a) giving a true and fair view of the Company's financial position as at 31 July 2021 and of its financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

What we have audited

The financial report comprises:

the statement of financial position as at 31 July 2021
the statement of comprehensive income for the year then ended
the statement of changes in equity for the year then ended
the statement of cash flows for the year then ended
the notes to the financial statements, which include significant accounting policies and other explanatory information
the directors’ declaration.

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

Independence

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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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.

2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au

PricewaterhouseCoopers, ABN 52 780 433 757

Liability limited by a scheme approved under Professional Standards Legislation.

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Our audit approach

An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

The principal activities of the Company involve investing in mining and exploration companies and projects through a number of listed and unlisted investments.

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Company, its accounting processes and controls and the industry in which it operates.

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Materiality

For the purpose of our audit we used overall materiality of $939,600, which represents approximately 1% of the Company’s net assets.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole.
We chose net assets, because, in our view the performance of the Company is measured against the net value of investments held and it is a commonly accepted benchmark within the investment industry.
We utilised a 1% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds.

Audit Scope

Our audit focused on where the Company made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events.
The Company’s finance function and corporate office is based in Melbourne, where we predominantly perform our audit procedures.

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Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. We communicated the key audit matters to the Audit Committee.

*Key audit matter*	*How our audit addressed the key audit*
	*matter*

Carrying value of Level 1 & 2 investments (Refer to note 3 (d))

The total carrying value of investments comprises 3 levels in line with AASB 13 Fair Value Measurement:

Level 1 – AU$25.064 million
Level 2 – AU$2.339 million

We obtained the Company’s investment schedule as at 31 July 2021 which includes a listing of each investment held and details the number of shares and options held and value per share or option. We compared the investment schedule to the amounts recorded in the financial statements by the Company as at 31 July 2021.

Level 3 – AU$62.602 million
Total – AU$90.005 million

The fair value applied by the Company to listed and unlisted investments was a key audit matter due to the significant impact any movement in the fair value as at 31 July 2021 could have on the net assets.

The Level 3 investment in the Pani project is described in the following key audit matter.

We assessed whether the listed and unlisted investment valuation techniques used by the Company are in accordance with Australian Accounting Standards.

We performed the following procedures, amongst others, on the fair value of the investments:

For a selection of listed and unlisted equity investments, we compared the number of shares held against evidence such as holding statements or confirmations from investees.
- For a sample of Level 1 listed investments we utilised an auditor’s expert to compare the Company’s fair value to market quoted prices.
For a sample of Level 2 unlisted investments we obtained and assessed observable market data, if available, such as the most recent transacted price made on an arm’s length basis. Where that information was unavailable, we considered other available financial information.

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Key audit matter How our audit addressed the key audit matter
Fair value measurement of the interest in the We performed the following procedures, amongst Pani project others, on the fair value of the investment in the Pani (Refer to note 3 (d)) project: - Considered the Company’s summary of
At 31 July 2021, the Company recognised a fair value developments and milestones through the of its investment in the Pani project of AU$62.5 year to 31 July 2021 relating to the Pani million. project and potential impacts to the fair value of the investment.
Certain valuation techniques were utilised to Utilised an auditor’s valuation expert to determine the fair value of the Company’s investment assess the valuation, including the in the Pani project at 31 July 2021, including: appropriateness of the valuation - the comparable value method – this primary methodology applied by the Company and method involved an assessment of market consideration of the reasonableness of the comparable companies to consider relative selected comparable company data. -
movements in the implied value per resource Tested selected data inputs and ounce during the year; and mathematical accuracy of the calculation
- the yardstick method – a secondary prepared by the Company in determining the valuation method to provide a cross check of fair value of the investment in the Pani the primary technique. project. - Considered external data including economic
This was considered a key audit matter given: factors such as the price of gold and gold - the significance of the Pani project's value as equities during the year to consider potential a proportion of the total investments of the impacts to the fair value of the investment in Company. the Pani project.
- - the judgement involved in estimating the fair Inquired of the Company’s management and value of the investment given it is classified directors as to whether they had identified as Level 3 with unobservable inputs. further matters that would materially impact the fair value of the investment in the Pani project.
- Evaluated whether, in view of the requirements of Australian Accounting Standards, the financial report provided adequate disclosure about the investment in the Pani project and its fair value, including potential impacts from a reasonably possible change.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 31 July 2021, but does not include the financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other

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information we obtained included the Directors’ Report. We expect the remaining other information to be made available to us after the date of this auditor's report.

Our opinion on the financial report does not cover the other information and we do not and will not express an opinion or 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 on the other information that we obtained prior to the date of this auditor’s report, 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.

When we read the other information not yet received, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action to take.

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 Company 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 Company 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 the 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 the financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar2_2020.pdf. This description forms part of our auditor's report.

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Report on the remuneration report

Our opinion on the remuneration report

We have audited the remuneration report included in pages 5 to 7 of the directors’ report for the year ended 31 July 2021.

In our opinion, the remuneration report of Lion Selection Group Limited for the year ended 31 July 2021 complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

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PricewaterhouseCoopers

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Anthony Hodge Partner

Melbourne 6 September 2021

AI assistant

LION SELECTION GROUP LIMITED. — Annual Report 2021

65271_rns_2021-09-05_31455db9-5155-4262-a405-50618f8a1005.pdf

KEY POINTS

Sector Themes

Investment Highlights

Pani Mineral Resource Estimates

Notes

Appendix 4E Preliminary Final Report

1. Company Details

LION SELECTION GROUP LIMITED

2. Results for announcement to the market

Operating and Financial Review

3. Net tangible assets per ordinary security

4. Controlled Entities

5. Dividends

6. Dividend/distribution reinvestment plan

7. Associates

8. Foreign Accounting Standards

Lion Selection Group Limited ABN: 26 077 729 572

CONTENTS

Lion Selection Group Limited

Directors’ Report

Directors

Principal Activities

Operating and Financial Review

Pani Joint Venture

Pani Drilling Update

Arbitration

Pani Mineral Resource Estimates

Dividends

Compliance with Environmental Regulations

Significant Changes in the State of Affairs

Significant Events after Balance Date

Proceedings on Behalf of the Company

Likely Developments and Future Results

Corporate Governance Statement

Employees

Remuneration Report

Key Management Personnel Remuneration Framework

Voting and Comments at the Company’s 2020 Annual General Meeting

Details of Remuneration

KEY MANAGEMENT PERSONNEL OF THE COMPANY – REMUNERATION FOR YEAR TO 31 JULY 2021

Key Management Personnel Shareholdings

SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL OF THE COMPANY

OPTIONS ON ISSUE

Information on Directors

Barry Sullivan BSc (Min), ARSM, FAusIMM, MAICD (Chairman)

Peter Maloney BComm, MBA (Roch) (Non-Executive Director)

Chris Melloy BE (Mining) (Hons), MEngSc, MAusIMM, F Fin (Non-Executive Director)

Robin Widdup BSc (Hons), MAusIMM (Director)

Other Key Management Personnel

Craig Smyth BCA (Acctg), M App Fin, CA (Chief Executive Officer)

Jane Rose (Investor Relations Manager & Company Secretary)

Directors’ Meetings

Audit Committee Meeting

Directors’ Benefits

Indemnification of Directors and Officers

Auditor Independence

Non-Audit Services

Rounding of Amounts

Auditor’s Independence Declaration

Lion Selection Group Limited

Statement of Comprehensive Income for the Year ended 31 July 2021

Lion Selection Group Limited

Statement of Financial Position as at 31 July 2021

Lion Selection Group Limited

Statement of Cash Flows for the Year ended 31 July 2021

Lion Selection Group Limited

Statement of Changes in Equity for the Year ended 31 July 2021

Lion Selection Group Limited

Notes to the Financial Statements for the Year ended 31 July 2021

NOTE 1. CORPORATE INFORMATION

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

(b) New accounting standards and interpretations

New Standards

Accounting Standards Issued But Not Yet Effective

(c) Significant accounting estimates and assumptions

(i) Fair value of investments and other financial assets

LION SELECTION GROUP LIMITED. Annual Report 2021