LOYAL METALS LTD — Capital/Financing Update 2021

Jul 1, 2021

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Pro forma statement of financial position

The table below reflects the Company’s pro forma statement of financial position based on the actual amount of funds raised under the Prospectus ($5,000,000).

Table 1 - Pro forma statement of financial position

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The notes for Table 1 are set out below.

The Pro Forma Statement of Financial Position has been derived from the audited historical statement of financial position as at 31 December 2020, after reflecting the Directors’ pro forma adjustments for the following transactions which are proposed to occur following completion of the Offer, as if they had occurred at 31 December 2020:

• 5.6(a) - The issue of 25,000,000 fully paid ordinary shares in the Company at $0.20 each, to raise $5,000,000 before costs pursuant to the Offer;

• 5.6(b) - The payment of cash costs related to the Offer estimated to be $560,000;

• 5.6(c) - The cash repayment of the Loan from Torian, the balance of which stood at $26,785 as at 31 December 2020;

• 5.6(d) - The consideration paid to Torian for an 80% interest in the acquired tenements, comprising the issue of 3,000,000 fully paid ordinary shares in the Company at $0.20 each and the issue

of 3,000,000 unlisted options in the Company with a $0.30 exercise price and 3 year expiry period;

• 5.6(e) - The issue of 5,000,000 unlisted options to the Lead Manager for its role in connection with Offer. These options have a $0.30 exercise price and 3 year expiry period;

• 5.6(f) - The issue of 5,000,000 unlisted options to third parties who assist in procuring successful acceptances under the Offer. These options have a $0.30 exercise price and 3 year expiry period; and

• 5.6(g) - The issue of 5,300,000 unlisted options to directors, officers and consultants of the Company. These options have a $0.30 exercise price and 3 year expiry period.

Notes to Table 1

Note 5.8(a) - Cash and cash equivalents

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Note 5.8(b) - Exploration and evaluation

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Note 5.8(c) - Borrowings

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Note 5.8(d) - Issued capital

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In connection with the Offer, the Company will issue 5,000,000 Options to the Lead Manager and will issue 5,000,000 Options to other third parties who assisted in procuring successful acceptances under the Offer. The Company will also issue 5,300,000 to directors, officers and consultants of the Company. Each Option entitles the holder to subscribe for one Share at an exercise price of $0.30 and expires three years from the date of the Company’s admission to the ASX.

These Options have been valued using a standard trinomial pricing model on the assumption that the Offer Price represents the fair value of a Share as at the grant date, and assuming a risk-free rate of 0.10%, volatility of 100% and a nil dividend yield.

Note 5.8(e) - Reserves

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Note 5.8(f) - Accumulated losses

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