MIDDLE ISLAND RESOURCES LIMITED - Annual Report 2021

A N N U A L R E P O R T

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Middle Island RESOURCES LIMITED

Operations OverviewCorporate Directory

ABN 70 142 361 608

SHARE REGISTER

Automic Pty Ltd

DIRECTORS

Peter Thomas (Non-Executive Chairman) Brad Marwood (Executive Director) Bruce Stewart (Non-Executive Director)

Level 2 267 St Georges Terrace Perth WA 6000 Telephone: 1300 288 664 www.automicgroup.com.au

AUDITORS

Elderton Audit Pty Ltd

COMPANY SECRETARY

Dennis Wilkins

Level 2 267 St Georges Terrace Perth WA 6000

REGISTERED OFFICE

Suite 2 11 Ventnor Avenue West Perth WA 6005

EMAIL

[email protected]

INTERNET ADDRESS

PRINCIPAL PLACE OF BUSINESS

Suite 1 2 Richardson Street West Perth WA 6005

POSTAL ADDRESS

www.middleisland.com.au

STOCK EXCHANGE LISTING

Middle Island Resources Limited shares are listed on the Australian Securities Exchange (ASX code: MDI).

PO Box 1017 West Perth WA 6872

SOLICITORS

Williams and Hughes

28 Richardson Street West Perth WA 6005

M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L

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2021

Operations Overview Directors’ Report Corporate Governance Statement Auditors Independence Declaration Consolidated Statement Of Profit Or Loss And Other Comprehensive Income Consolidated Statement Of Financial Position	2 14 23 24 25 26
Consolidated Statement Of Changes In Equity	27
Consolidated Statement Of Cash Flows	28
Notes To The Consolidated Financial Statements	29
Directors’ Declaration	57
Independent Auditors’ Report	58
ASX Additional Information	62

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Operations Overview

CORPORATE

Finance

Middle Island Resources Limited (ASX: MDI, Middle Island or the Company), held aggregated cash and liquid investments of A$3.5m as of 30 June 2021, comprising A$3.2m in cash and A$0.3m in Tajiri Resources Corporation (TSXV: TAJ) ordinary shares. A further 21.6 million options remain to be exercised, 1.3 million options to be exercised before 8 November 2021 and 20.3 million representing further possible proceeds of A$3,642,376 prior to the option exercise date of 31 January 2022.

Capital Structure

As at 30 June 2021 the Capital Structure comprised 122.4 million ordinary shares and 21.6 million unlisted options.

Acuity Controlled Placement Agreement

On 30 September 2020, the Company announced that it had utilised the Controlled Placement Agreement (CPA) with Acuity Capital (refer to ASX Releases dated 31 July 2017, 27 March 2020 & 30 September 2020) to raise A$800,000 (inclusive of costs) by agreeing to issue 38,095,000 ordinary MDI shares to Acuity Capital at an issue price of A$0.021. The issue price represented a 22% premium to the 15-day VWAP of A$0.017 to 30 September 2020 and a 31% premium to the last closing price of A$0.016 on 30 September. Settlement occurred on 2 October 2020 with the shares being issued out of the Company’s LR 7.1 capacity.

The Acuity CPA request was triggered in June 2020, when Middle Island was not aware of the extent to which options would be exercised, to ensure the Company had sufficient working capital to complete the expanded feasibility program and study. Once it became clear that the exercise of options would easily accommodate these anticipated costs, the request was suspended and ultimately closed.

Demerger of Barkly Copper-Gold Assets

As per ASX release of 9 March 2021, the Board resolved to demerge Barkly Operations Pty Ltd ( BOPL ) (Demerger) and ultimately IPO BOPL on the ASX ( IPO ), subject to shareholder approval at a Middle Island Shareholder Meeting. BOPL, a wholly-owned subsidiary of Middle Island, is the holder of the Barkly copper-gold project (Barkly) in the NT (refer below for further details).

Following the disappointing Sandstone gold project feasibility study outcome, the views of various stakeholders were canvassed as to the merits of demerging Barkly. A final decision is yet to be made as to whether to spinout or not. Other options are being considered and each needs to be assessed in the context of all prevailing circumstances. If the spinout is put to shareholders, the intent is that Eligible Shareholders of MDI will receive free shares in BOPL in the same proportion as their respective holdings in Middle Island, as well as a priority entitlement to apply for shares in any Barkly IPO.

No assurance is given in relation to the likelihood of BOPL making application to list or, if made, such application being successful.

Annual General Meeting

At the Company’s AGM held on 26 November 2020, in excess of 96% affirmative votes were received on all resolutions.

Director Appointment

As per ASX release of 21 January 2021 Non-Executive Director, Mr Beau Nicholls, resigned from the Board of Middle Island, effective 31 January 2021. Mr Nicholls continues to provide his expertise to the Company as a Technical Geologist on a casual ‘as needs’ employee basis. As Mr Dennis Wilkins was appointed as an alternate director for Mr Nicholls, his appointment as an alternate director also ceased on 31 January 2021.

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During the quarter to 30 June 2021, the Managing Director, Mr Rick Yeates and the Company entered into discussions about MDI’s need for a Managing Director. The discussions were concluded post end of quarter, with the position of Managing Director (and hence Rick Yeates in that role) being made redundant. Brad Marwood, a Non-Executive Director, agreed to become a temporary part time Executive Director to assist with day-to-day management of the Company, and Mr Bruce Stewart was appointed as a Non-Executive Director.

Strategy

» To increase the value of the Barkly copper-gold project via exploration; and
» To continue to pursue opportunities to realise a return from its Sandstone assets by, inter alia, exploring the project’s potential to deliver new discoveries and seeking to amalgamate proximal holdings and resources though acquisitions and corporate activity

BARKLY COPPER-GOLD PROJECT (100%) – NORTHERN TERRITORY

Middle Island’s 100%-owned Barkly Project comprises 13 Exploration Licences covering an aggregate 5,220km[2] , as shown in Figure 1. The Barkly tenements are focussed on an interpreted eastward extension of the economically prospective Warramunga Formation, referred to as the East Tennant Ridge, under shallow Georgina Basin cover. This model is consistent with major recent mineral discoveries in basement rocks reported from ‘blind’ targets veneered by younger sedimentary cover in WA’s Paterson Province (Winu and Havieron) and extensions of the prolific Victorian gold belts under Murray Basin sedimentary cover (Four Eagles and Tandarra). These regional examples were, at least in part, similarly generated as a result of extensive, collaborative, government research projects.

Significant examples of ‘blind’ IOCG deposits discovered beneath substantial sedimentary cover include BHP’s Olympic Dam and Oak Dam deposits in South Australia, which are respectively overlain by approximately 400m and 900m of post-mineral sedimentary cover.

The Georgina Basin extends east from Tennant Creek across the Queensland border to Mount Isa and is subdivided by several basement highs into smaller sub-basins. The principal basement high, the East Tennant Ridge, runs northeast under the Barkly Project area, where the interpreted depth of cover ranges from 100m to 250m along the ridge axis, increasing to ~800m on the flanks of the ridge.

The East Tennant Ridge is of particular significance in that, aside from phosphate exploration within the overlying Georgina Basin, previous exploration activity within the Proterozoic basement rocks is extremely limited or non-existent.

Figure 1. Middle Island tenure comprising the Barkly copper-gold super-project, NT.

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Crosswinds Copper Prospect

During a reconnaissance site visit in December 2020, Middle Island discovered the Crosswinds copper prospect, located immediately adjacent to the sealed Barkly Highway approximately 13km southeast of Barkly Homestead, within EL32297.

The mineralisation comprises predominantly malachite (copper carbonate), with subordinate chrysocolla (copper silicate) and tenorite (copper oxide), exposed in a table-drain adjacent to the Barkly Highway (Figure 2).

Figure 2. Crosswinds Copper Prospect - Malachite (copper carbonate) mineralisation exposed in table drain.

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Mineralisation is exposed over an interval of 130m along a table drain, as shown in Figure 3.

Figure 3. Crosswinds Copper Prospect – Plan of chip sampling traverse and pXRF results.

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The copper mineralisation is intimately associated with ubiquitous secondary calcrete and silcrete development, reflecting surface weathering of limestones comprising the Cambrian-age Georgina Basin.

Spot pXRF readings taken at the time of discovery range from 24.8% to 76.2% Cu . These results were confirmed by subsequent composite chip samples, collected over continuous 20m to 65m intervals, ranging from 0.63% to 0.93% Cu and aggregating 130m at 0.76% Cu (refer ASX Release dated 23 December 2020).

The Crosswinds prospect is interpreted to represent secondary copper mineralisation that has migrated up growth faults that extend from primary copper-gold mineralisation within the Proterozoic basement rocks , through the otherwise unmineralised Cambrian Georgina Basin sediments to precipitate at surface, as shown diagrammatically in Figure 4.

Figure 4. Crosswinds Copper Prospect – Diagrammatic cross-section of interpreted setting.

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Tenure

Following discovery of the Crosswinds copper prospect in December 2020, application was made for a further two exploration licences (EL32626 & EL32627) to secure tenure immediately to the south of the discovery. Similarly, on release of the initial results from the Government diamond core drilling, application was made for a further exploration licence (EL32680) to secure potential strike extensions of copper mineralisation encountered within diamond core hole NDIBK04. These applications bring the aggregate Barkly Project tenure to 13 exploration licences covering 5,220km[2] .

Planned Exploration

During the June 2021 quarter, Middle Island attended the unveiling of the Minex CRC East Tennant drill core at the AGES conference in the Northern Territory. Ten deep stratigraphic holes (~4,000m), completed by Minex CRC under the National Drilling Initiative ( NDI ), intersected prospective Proterozoic basement rocks at between 80m and 200m depth (Figure 5). Pre-collared diamond hole NDIBK04, situated along strike from Middle Island’s tenure, intersected localised semi-massive copper mineralisation, along with over 300m of disseminated to blebby sulphides to end of hole.

Following the release of pre-competitive government drilling data, Middle Island submitted two NT Government co-funding applications to complete detailed airborne magnetic and ground gravity surveys, along with possible airborne electromagnetic survey, during the 2021 dry season. Middle Island was successful with the airborne magnetic survey application, which will provide a grant of up to A$100,000 towards survey costs. The focus of exploration is to refine existing geophysical (magnetic and gravity) anomalies, consistent with IOCG-style mineralisation, prior to drilling in 2022. Due to geophysical contractor availability and COVID-19 travel restrictions, the surveys have necessarily been deferred until, earliest, December 2021.

Figure 5. East Tennant borehole locations completed by Minex CRC - base layer is gravity coverage, draped over the first vertical derivative magnetic coverage.

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SANDSTONE GOLD PROJECT (100%) – WESTERN AUSTRALIA

The Sandstone gold project is shown in Figure 6.

Figure 6. Sandstone Gold Project

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2020-21 Drilling Campaign

During the March 2021 quarter, the Company completed Phase 3 of the substantial 2020/21 drilling campaign, collectively comprising some 59,000m of exploration, resource definition and sterilisation drilling (see Figure 7) at the Company’s 100%-owned Sandstone gold project in Western Australia.

The drilling campaigns proved extremely successful, defining five new satellite deposits, with better intercepts including:-

» McIntyre: 23m @ 2.08g/t, 24m @ 1.95g/t & 18m @ 2.47g/t Au
» Ridge: 4m @ 99.5g/t, 4m @ 50.5g/t, 9m @ 5.41g/t, 7m @ 6.49g/t & 4m @ 5.32g/t Au
» McClaren: 4m @ 90.6g/t, 8m @ 3.35g/t, 3m @ 29.8g/t, 4m @ 5.82g/ & 11m @ 2.11g/t Au
» Plum Pudding: 11m @ 22.5g/t, 7m @ 24.1g/t, 17m @ 8.16g/t & 7m @ 19.0g/t Au
» Old Town Well: 3m @ 20.6g/t, 14m @ 2.22g/t & 6m @ 3.23g/t Au

As part of the Phase 3 RC drilling campaign, infill and extension resource definition drilling was variously completed at the Ridge, Shillington, Eureka, McIntyre and Goat Farm deposits. The results were consistent with previous data, but the Mineral Resource estimates are yet to be updated.

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Figure 7. Sandstone Gold Project - Open pit gold deposits and targets assessed in 2020/21.
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Resource Estimation

Mineral Resource estimates were completed for all existing and new deposits at Sandstone (refer to ASX Releases variously dated 24 July 2020, 14 August 2020, 2 October 2020, 21 October 2020 and 17 November 2020). The drilling campaigns defined five new satellite gold deposits and deposit extensions (Figure 2). This work resulted in a doubling of the open pit Mineral Resources , matching the anticipated best-case outcome.

As at 30 June 2021, Mineral Resources at the Sandstone Project aggregated 784,300oz gold , as shown in Table 1.

Feasibility and Mill Upgrade Studies

As summarised in the ASX Release of 19 April 2021, Middle Island completed the Feasibility Study (FS) into re-commissioning the Sandstone gold project on a stand-alone basis. At that time, despite every indication otherwise, recommissioning as a stand-alone project could not be justified at a gold price of <A$2,500/oz.

Subsequent analysis indicates the project requires one or more of the following:-

» Longer mine life and larger milling inventory.
» Higher weighted average gold grade.
» Higher plant throughput.
» Higher gold price.
» A reduction in the operating and capital costs.

Post completion of the FS, some enhancements to the project have been secured (see commentary on Troy Royalty below), with others recognised and being actively pursued (refer ASX release dated 1 June 2021).

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Exploration and Resource Definition Plan

There remains significant potential to identify additional mill feed at Sandstone via the following:

» 70% of Sandstone tenure under soil cover with over 10km of strike length to assess.
» Discovery of new deposits.
» Extensions to current Mineral Resources.
» Conversion of Inferred Mineral Resources to Indicated or Measured Mineral Resources.

The Company estimates over 70% of the Sandstone tenure is veneered by transported cover, with historic soil geochemistry having been ineffective in many instances (refer ASX release dated 1 June 2021). A programme of auger geochemical drilling was commenced late in the June quarter to test five (5) new targets, as shown on Figure 8, comprising the following:-

» Sandstone Permits
Hospital Hill Target – approximately 3km north of the processing plant.
Three Mile Target – 3km NE of the plant.
Central Target, immediately east of the plant, including the Mt Klemptz prospect.
» Jew Well Permit
North Target (7km long greenstone succession with previous, limited wide-spaced soil geochemistry).
Central Target (5km of untested greenstone).

The auger drilling programme was completed post quarter’s end and the results will be advised once all assays have been received and compiled.

Figure 8. Sandstone Gold Project - Auger Geochemical Drilling Targets.

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Troy Royalty Termination

Troy Resources Limited ( Troy ) accepted A$250,000 as payment for the cancellation of the legacy 2% royalty on future gold production, which MDI assumed when purchasing the Sandstone Gold Project in 2016.

The Company’s ASX release of 19 April 2021 regarding the Sandstone Feasibility Study stated, “The total quantities for all pit designs are 2,068kt of mill inventory at 1.32g/t Au” and “the weighted average gold recovery is 92.9%”. Based on a potential yield of 89,453oz of gold at the feasibility study assumed gold price of A$2,300/oz (after refining costs), extinguishment of the Troy royalty means the project costs will be reduced and the net return increased by $4.1M .

Further material cost savings are continuing to be assessed.

Third Party Mill Feed

MDI currently has several confidentiality agreements in place with companies that have stranded Mineral Resources within economic trucking distance of the Sandstone mill. However, there is no guarantee that any of these discussions will lead to a mill re-commissioning or other corporate activity.

Tenure

The option to acquire the Wirraminna tenement (P57/1395), which hosts the Wirraminna open pit deposit, was exercised (refer ASX Releases 31 July 2017 & 7 October 2020) via the payment of A$100,000 cash and A$50,000 in MDI shares. In exchange for the significantly reduced exercise price, the vendor will retain the surface prospecting rights over P57/1395 (or any successor tenement), which rights Middle Island agreed to extend for a further four years, subject to certain commercial and environmental conditions protecting Middle Island’s interests.

Once the formal transfer of P57/1395 was completed, a successful application was made to extend the term of P57/1395 until 12 June 2025. The Wirraminna deposit is located 1km northwest of the Company’s 600,000tpa Sandstone gold processing plant and immediately adjoins M57/128 and M57/129.

Project generation objective

MDI’s Sandstone project generation objectives are:

To continue to pursue opportunities to realise a return from its Sandstone assets;
To explore the potential for further discovery under the 70% soil cover at Sandstone;
To acquire holdings with the potential to deliver plant feed to the Sandstone; and
To consolidate assets that provide the project dimension and longevity for sustained operations.

SAFETY, ENVIRONMENTAL & SOCIAL

Health & Safety

No injuries or incidents were recorded at the Company’s projects and premises during the FY2021. Similarly, no COVID-19 infections were recorded amongst staff or contractors.

Environment

No environmental incidents were recorded at the Company’s projects or premises during FY2021.

Rehabilitation at the Sandstone gold project, primarily drill sites and temporary access tracks, is being progressively undertaken in accordance with POW and other environmental requirements.

The Mine Closure Plan (MCP) was deferred for a year with approval of the authorities. The work required was progressing well at the end of the fiscal year and the MCP will be submitted in a timely manner before the November 2021 deadline.

Social

The Company continues to engage with the Shire of Sandstone, pastoralists, prospectors and the local community. This process includes the procurement of labour, materials and services locally, wherever practically possible, and sponsorship of various community events and heritage activities.

A similar approach to community engagement has commenced in the NT.

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SANDSTONE GOLD PROJECT – RESOURCES AND RESERVES STATEMENT (30 JUNE 2021)

Table 1 shows the Mineral Resources applicable to the Sandstone Gold Project as at 30 June 2021, which totals 784,300oz gold. Table 2 shows the increase in Mineral Resources at Sandstone since 30 June 2020.

	Table 1.Sandstone Mineral Resources, 30 June	Table 1.Sandstone Mineral Resources, 30 June	Table 1.Sandstone Mineral Resources, 30 June	Table 1.Sandstone Mineral Resources, 30 June	Table 1.Sandstone Mineral Resources, 30 June	Table 1.Sandstone Mineral Resources, 30 June	2021	2021	2021
Sandstone Open	Pit Deposits – Summary Mineral Resource Estimates (2012						JORC Code) at 0.5g/t cut-off
	Indicated			Inferred			Total
Deposit	Tonnes kt	Au g/t	Au Oz	Tonnes kt	Au g/t	Au Oz	Tonnes kt	Au g/t	Au Oz
Two Mile Hill(1)	1,901	1.1	66,000	178	0.8	5,000	2,078	1.1	71,000
Shillington(3)	1,440	1.2	57,200	830	1.1	29,300	2,270	1.2	86,500
Wirraminna(3)	300	1.3	12,100	280	1.1	9,700	580	1.2	21,800
Old Town Well(5)	282	1.0	8,800	68	0.6	1,400	351	0.9	10,100
Plum Pudding(5)	384	1.1	13,100	35	0.9	1,000	419	1.1	14,100
Eureka	340	0.9	9,700	221	0.9	6,500	561	0.9	16,200
Twin Shafts(4)	149	1.0	4,700	37	0.7	900	186	0.9	5,600
Goat Farm(4)				398	1.0	13,200	398	1.0	13,200
McIntyre(4)	496	1.2	19,400	67	0.9	1,900	562	1.2	21,300
Ridge(6)	173	1.2	6,700	67	1.9	4,000	240	1.4	10,700
McClaren(6)	236	1.4	10,600	60	1.7	3,200	296	1.5	13,800
Open Pit Subtotal	5,701	1.1	208,300	2,241	1.0	76,100	7,941	1.1	284,300
Sandstone Underground Deposits – Summary Mineral Resource Estimates (2012 JORC Code)*
Two Mile Hill(2)				14,000	1.10	480,000	14,000	1.10	480,000
Two Mile Hill – BIF(2)				200	3.10	20,000	200	3.10	20,000
Underground Subtotal				14,200	1.1	500,000	14,200	1.1	500,000
TOTAL	5,701	1.1	208,300	16,220	1.2	569,600	22,141	1.1	784,300

The totals contained in the above table have been rounded to reflect the relative uncertainty of the estimates, which may result in some computational discrepancies.

The Two Mile Hill Tonalite Deeps and BIF Deeps have been reported within optimised wireframes. All wireframes include waste and have an aggregate grade at or above the cut-off of 0.64og/t Au.

This Statement includes information extracted from the Company’s previous ASX announcements, which are available to view on the Company’s website, as follows:

(1) ASX Release dated 14 December 2016.
(2) ASX Release dated 14 April 2020.
(3) ASX Release dated 24 July 2020.
(4) ASX Release dated 2 October 2020.
(5) ASX Release dated 21 October 2020.
(6) ASX Release dated 17 November 2020.

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The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements and that all material assumptions and technical parameters underpinning the estimates in the relevant market announcements continue to apply and have not materially changed. The Company confirms that the form and context in which any Competent Person’s findings are presented have not been materially modified from the original market announcements.

In addition to the Mineral Resources reported above, the residual portion of the Two Mile Hill tonalite deeps Exploration Target, lying between 500m and 700m below surface, is not included in the Mineral Resources estimates and remains to be either quantified as an Exploration Target or, with further drilling, a Mineral Resource.

There are no Ore Reserves currently reported in relation to the Sandstone gold project.

In all cases, Mineral Resources are estimated and reported in accordance with the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (the JORC Code). Information in this release relating to Mineral Resources is based on, and fairly reflects, information and supporting documentation variously prepared by Mr Brett Gossage of EGRM Consulting Pty Ltd, Mr Shaun Searle of Ashmore Advisory Pty Ltd and Ms Lisa Bascombe of Mining Plus Pty Ltd on behalf of Middle Island Resources Limited. The Competent Persons’ are Members of the Australasian Institute of Mining and Metallurgy (AusIMM) or the Australian Institute of Geoscientists (AIG) and qualify as Competent Persons’ as defined in the JORC Code.

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Table 2. Comparative Sandstone Gold Project Mineral Resource Statement.
Contained JORC
Deposit Tonnes Grade (g/t Au) JORC Code
Gold (oz.) Classification
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Table 2.Comparative Sandstone Gold Project Mineral Resource Statement.	Table 2.Comparative Sandstone Gold Project Mineral Resource Statement.	Table 2.Comparative Sandstone Gold Project Mineral Resource Statement.	Table 2.Comparative Sandstone Gold Project Mineral Resource Statement.	Table 2.Comparative Sandstone Gold Project Mineral Resource Statement.	Table 2.Comparative Sandstone Gold Project Mineral Resource Statement.
Deposit	Tonnes	Grade (g/t Au)	Contained Gold (oz.)	JORC Classification	JORC Code

*As at 30 June 2020*
Total Indicated estimate	2,334,000	1.37	101,600	Indicated	2012
Total Inferred estimate	14,829,000	1.09	522,000	Inferred	2012
Total Resource	17,163,000	1.13	623,600	Ind. & Inf.	2012
*As at 30 June 2021*
Total Indicated estimate	5,701,000	1.1	208,300	Indicated	2012
Total Inferred estimate	16,220,000	1.2	569,600	Inferred	2012
Total Resource	22,141,000	1.1	784,300	Ind. & Inf.	2012

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Mining Tenements

Middle Island Resources Limited advises the following information required under ASX Listing Rule 5.3.3 as at 30 June 2021.

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Table 3. Middle Island Resources’ Tenements.
Tenements Mining tenements Mining tenements Mining tenements Tenement
acquired during disposed during held at the end of location
the year the year the year
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Table 3.Middle Island Resources’ Tenements.	Table 3.Middle Island Resources’ Tenements.	Table 3.Middle Island Resources’ Tenements.	Table 3.Middle Island Resources’ Tenements.	Table 3.Middle Island Resources’ Tenements.
Tenements	Mining tenements acquired during the year	Mining tenements disposed during the year	Mining tenements held at the end of the year	Tenement location

M57/128	-	-	100%	Western Australia
M57/129	-	-	100%	Western Australia
P57/1384	-	-	100%	Western Australia
P57/1395	-	-	100%	Western Australia
P57/1442	-	-	100%	Western Australia
E57/1102	-	-	100%	Western Australia
EL 32290	Granted		100%	Northern Territory
EL 32291	Granted		100%	Northern Territory
EL 32292	Granted		100%	Northern Territory
EL 32297	-		100%	Northern Territory
EL 32298	-		100%	Northern Territory
EL 32301	-		100%	Northern Territory
EL 32304	Granted		100%	Northern Territory
EL 32305	Granted		100%	Northern Territory
EL 32308	-		100%	Northern Territory
EL 32309	-		100%	Northern Territory
EL 32626	Application		Pending Grant – 100%	Northern Territory
EL 32627	Application		Pending Grant – 100%	Northern Territory
EL 32680	Application		Pending Grant – 100%	Northern Territory

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Directors’ Report

Your directors submit their report on the consolidated entity (referred to hereafter as the Group) which consists of Middle Island Resources Limited and the entities it controlled at the end of, or during, the year ended 30 June 2021.

DIRECTORS

The names and details of the Company’s directors in office during the year and until the date of this report follow. Each Director was in the office for this entire period unless otherwise stated.

Names, qualifications, experience and special responsibilities

Peter Thomas, (Non-Executive Chairman)

Mr Thomas was a practising solicitor from 1980 until June 2012 specialising in the provision of a wide range of corporate and commercial advice to explorers and miners. His exposure (variously as legal practitioner, corporate advisor and director – both oil & gas and hard rock) has extended to operations in the USA, UAE, NZ, Africa and South America. Since the mid-1980s, he has served on the boards of various listed companies. He was the founding chairman of both copper producer Sandfire Resources NL and mineral sands producer Image Resources NL. He is currently also non-executive director of ASX-listed Image Resources NL and Emu NL.

Bradley Marwood, (Temporary part-time Executive Director from 13 July 2021, Non-Executive Director during the financial

year and thereafter until 13 July 2021)

Mr Marwood is a mining engineer and a highly experienced resources executive with more than 30 years of experience. He was instrumental in bringing into production the copper mines at Kipoi (DRC) and Rapu Rapu (Philippines); completing development of the Svartliden gold mine (Sweden) and has managed numerous Feasibility Studies and advanced stage resource projects in Australia, Africa, North America and Asia.

He has worked in senior roles for groups such as Normandy, Dragon Mining, Lafayette, Moto Goldmines and Perseus Mining before his most recent as Managing Director of Tiger Resources Limited. Mr Marwood’s involvement has seen growth in several companies with a significant increase in their market capitalisation and by protecting investments through restarting suspended mine projects. He is currently the managing director of ASX-listed Consolidated Zinc Limited.

Bruce Stewart, (Non-Executive Director, appointed 13 July 2021)

Mr Stewart has been involved with global capital markets for 30 years, with an emphasis on mining and hard assets. His experience includes co-heading a global hard asset desk in New York City for Jefferies & Co, directorships on London listed mining companies, company reorganisation and sale, and various consultancy assignments from funds, investment banks and public and private companies.

Richard Yeates was managing director during the financial year and thereafter until the position was made redundant on 13 July 2021.

Beau Nicholls was a non-executive drector from the beginning of the financial year until 31 January 2021.

Dennis Wilkins was an alternate director for Beau Nicholls from the beginning of the financial year until 31 January 2021.

COMPANY SECRETARY

Dennis Wilkins, B.Bus, AICD, ACIS

Mr Wilkins is the founder and principal of DWCorporate Pty Ltd, a private corporate advisory firm servicing the natural resources industry.

Since 1994, he has been a director of, and involved in the executive management of, several publicly listed resource companies with operations variously in Australia, PNG, Scandinavia and Africa. From 1995 to 2001, he was the Finance Director of Lynas Corporation Ltd during the period when the Mt Weld Rare Earths project was acquired by the group. He was also an advisor to Atlas Iron Limited at the time of Atlas’ initial public offering in 2006.

Since July 2001, Mr Wilkins has been running DWCorporate Pty Ltd, where he advises on the formation of, and capital raising for, emerging companies in the Australian resources sector.

Mr Wilkins is currently a director of ASX-listed Key Petroleum Limited.

14 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Directors’ Report

Interests in the shares and options of the Company and related bodies corporate

As at the date of this report, the relevant interests of the directors in the shares and options of Middle Island Resources Limited were:

	Ordinary Shares	Options over Ordinary Shares
Peter Thomas	1,290,327	1,151,633
Brad Marwood	789,477	-
Bruce Stewart	-	-

PRINCIPAL ACTIVITIES

During the year, at Sandstone, the Group carried out exploration on its tenements and completed a feasibility study with a view to recommissioning the Company’s 100% owned processing plant. To the same end, the Company pursued opportunities to amalgamate resources proximal to the plant.

At Barkly, the Company made applications for further tenure, carried out a field visit and undertook desktop studies whilst considering spinning that asset out via a demerger process but deferred the same in light of the disappointing FS result and certain negative shareholder feedback on the proposal.

The Group reserves the right to follow up leads on a commodity agonistic basis and globally where the Board considers that doing so may add value.

DIVIDENDS

No dividends were paid or declared during the year. No recommendation for payment of dividends has been made.

FINANCIAL REVIEW

During the year, the Company raised $825,000, before costs, from the issue of 44,345,000 (pre-consolidation) fully paid ordinary shares from placements, and a total $4,828,702 from the issue of 26,985,502 (post-consolidation equivalent) fully paid ordinary shares upon the exercise of unlisted options. Revenue from tribute production and gold sales of nil (2020: $14,756) was received, and other income was generated from the sale of mining interests, reimbursement of expenditure on mining interests, sale of property, plant and equipment and rental of accommodation of $366,252 (2020: $98,416). The Group also received government COVID-19 cashflow boost grants of $102,175 (2020: $67,811) during the year.

During the year, total exploration expenditure incurred by the Group amounted to $5,300,921 (2020: $2,352,412). In line with the Group’s accounting policies, all exploration expenditure, other than acquisition costs, were written off as they were incurred. Other expenditure incurred, net of administration related revenue, amounted to $1,988,676 (2020: $1,003,308). This resulted in an operating loss after income tax for the year ended 30 June 2021 of $6,821,170 (2020: $3,174,737).

At 30 June 2021, cash assets available totalled $3,247,637.

Operating Results for the Year

Summarised operating results are as follows:

	2021	2021
	Revenues	Loss
	$	$
Revenue and loss for the year from ordinary activities before income tax expense	473,903	(6,821,170)

Shareholder Returns

	2021	2020
Basic loss per share (cents)	(5.8)	(5.3)

M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Directors’ Report

Risk Management

The board is responsible for ensuring that risks and opportunities, are identified on a timely basis and that activities are aligned with the risks and opportunities identified.

The Group believes that it is crucial for all board members to be a part of this process, and as such, the board has not established a separate risk management committee. Where appropriate, the board enlists the support of other suitably qualified professionals to join board committees.

The board has mechanisms in place to ensure that management’s objectives and activities are aligned with the risks identified by the board. These mechanisms include the following:

Board approval of a strategic plan, which encompasses strategy statements designed to meet stakeholders’ needs and manage business risk.
Implementation of board approved operating plans and budgets and board monitoring of progress against these budgets.
A risk matrix designed to identify and quantify the various risk factors and implement mitigating strategies accordingly.
Regular review of management’s activities and the Company’s circumstances.
Continuing review of capital and resources market sentiment.
Continuing review of economic trends and circumstances.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Other than as disclosed in this Annual Report, no significant changes in the state of affairs of the Group occurred during the financial year.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

During July 2021 the Company announced that the position of Managing Director had become redundant. Mr Rick Yeates ceased serving as a director and employee of the Company on 13 July 2021 when Mr Bruce Stewart was appointed as a non-executive director and, on a temporary part-time basis, Mr Brad Marwood assumed executive duties.

The Group continues to pursue opportunities to realise a return from its Sandstone assets by continuing to explore the project’s potential to deliver new discoveries and seeking to amalgamate proximal holdings and resources though acquisitions and/or corporate activity.

No matters or circumstances, aside from those disclosed above, have arisen since the end of the year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

With the disappointing and marginally economic result reflected by the feasibility study, the Group stepped back from it primary focus being to extend and enhance the proposed gold production profile for the Sandstone Project in order to recommission its processing plant at the earliest opportunity. That said, the Board still has faith in gold and believes the project represents a strategic pillar of the clear case for consolidation of resources within trucking distance of the Company’s mill with capacity to produce bullion within months at low capital cost.

The exciting Barkly Project will be progressed with plans afoot to complete some aerial surveys and drilling this calendar year but no assurance is given that drilling will be possible this year. The Company is cautiously optimistic that its holding in the Barkly Basin will prove the envy of other holders in the region with it already having identified surface expressions of copper which are best explained by there being a primary source within the Company’s holding. Further, access to likely drill targets immediately off the highway leads to the obvious conclusion that the Company’s drilling endeavours will not be beset by the logistical barriers confronting and imposing very significant cost impacts upon the Company’s competitors.

The Company will continue to review projects globally with a view to identifying potential value add mineral asset acquisitions.

16 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Directors’ Report

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Group is subject to significant environmental regulation in respect to its activities.

The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance with all environmental legislation. The directors of the Company are not aware of any breach of environmental legislation for the year under review.

REMUNERATION REPORT

The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.

Principles used to determine the nature and amount of remuneration

Remuneration Policy

The remuneration policy of Middle Island Resources Limited, which in the year under review was sublimated, to significant degree, to constraints imposed by shareholder sentiment, is intended to align key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component and offering, variously, short term and long term securities incentives. The board’s policy is to designed remuneration with a view to attracting and retaining suitable key management personnel to run and manage the Group.

The remuneration policy, setting the terms and conditions for the executive directors and other senior executives (if any), was developed by the board and evolves as circumstances require. All executives receive a base salary (based on factors such as experience), superannuation and, possibly, a package of equity incentives in the Company. The board reviews each executive package as and when it considers it appropriate to do so in accordance with its remuneration policy and by reference to the Group’s fiscal wherewithal, performance, the executive’s performance and comparable information from industry sectors and other listed companies in similar circumstances.

The board may exercise discretion in relation to approving incentives, bonuses and options. The policy is to design remunerative packages that reward executives for performance which results in long term growth in shareholder wealth. The result can be that shareholder sentiment is tested in general meeting or, in deference to expressed and perceived shareholder sentiment, otherwise proposed and preferred remunerative emoluments are not put to shareholders and thus not provided to employees.

The executive director and any other executives receive the superannuation guarantee contribution required by the government of Australia, which was 9.5% for the 2021 financial year but are not entitled to receive other retirement benefits.

All remuneration paid to directors and executives is “valued” at the cost to the Group and expensed. Options are ascribed a “fair value” in accordance with Australian Accounting Standards using a methodology such as Black Scholes. The board does not accept that the “fair value” necessarily represents market or realisable value. Rather, the board uses a commonly accepted methodology purely for the purposes of complying with the Australian Accounting Standards.

The board’s policy is to remunerate non-executive directors at market rates for comparable companies, for time, commitment and responsibilities, albeit it is thought all non-executive directors are currently remunerated below or at the lower end of the market rate range (most certainly that is the case insofar as equity remuneration is concerned with performance rights canvassed with a representative of certain shareholders reflecting an adverse result could be anticipated if shareholder approval of performance rights was sought). The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties, special exertion services and accountability. Independent external advice is sought as and when required. The maximum aggregate amount of fees that can be paid to non-executive directors is, subject to change with the approval of shareholders in general meeting, currently $300,000. Fees for non-executive directors are not linked to the performance of the Group. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the Company and, subject to shareholder approval in general meeting may be offered participation in employee equity arrangements.

Performance based remuneration

The Group policy allows the use of performance-based remuneration, to attract and motivate employees, in the form of options; more recently share plans have been considered. Where utilised, equity remuneration may be issued but not vest until certain hurdles have been met where the hurdles are directed at advancing the Company towards its objectives potentially within prescribed periods.

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Directors’ Report

Company performance, shareholder wealth and key management personnel remuneration

No direct relationship exists between key management personnel remuneration and Group performance (including shareholder wealth).

Use of remuneration consultants

The Group did not employ the services of any remuneration consultants during the financial year ended 30 June 2021.

Voting and comments made at the Company’s 2020 Annual General Meeting

The Company received approximately 99.3% of “yes” votes on its remuneration report for the 2020 financial year.

Details of remuneration

Details of the remuneration of the directors and the key management personnel of the Group are set out in the following table.

Key management personnel of the Group

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Short-Term Post-Employment Share-based Total
Payments [(1)]
Salary Non-Monetary Retirement
Superannuation
& Fees Benefits
Directors $ $ $ $ $ $
Peter Thomas [(1)]
2021 60,230 - 5,722 - - 65,952
2020 40,487 - 3,846 - - 44,333
Richard Yeates
2021 250,000 - 23,750 - - 273,750
2020 216,667 - 20,583 - - 237,250
Brad Marwood [(2)]
2021 40,000 - - - - 40,000
2020 17,504 - 1,663 - - 19,167
Beau Nicholls [(3)] (resigned 31 January 2021)
2021 21,282 - 2,022 - - 23,304
2020 28,919 - 2,747 - - 31,666
Dennis Wilkins [(4) ] (resigned 31 January 2021)
2021 - - - - - -
2020 - - - - - -
Total key management personnel compensation
2021 371,512 - 31,494 - - 403,006
2020 303,577 - 28,839 - - 332,416
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(1) In addition to his director fees disclosed in the table above, Mr Thomas was paid $6,000 (2020: $3,000) for the provision of but some of the special exertion services provided by him to the Group during the year. The amounts paid were at less than usual commercial rates.

(2) Refer note 15(b)(2), $30,000 of Mr Marwood’s director fees were settled by the issue of securities following shareholder approval obtained at the Annual General Meeting of the Company held on 26 November 2020. The balance of fees represents amounts accrued with a view to settling the same via a similar security issue mechanism. The settlement by the issue of securities has resulted in a net loss of $75,000 for accounting purposes as a consequence of the increase in the value of the Company’s shares between the time of Mr Marwood’s appointment and the grant date of the securities.

(3) During the period Mr Nicholls was a member of KMP. In addition to his director fees, disclosed in the table above, he was paid a total of $11,200 (via Sahara Operations (Australia) Pty Ltd ( Sahara ) (2020: $41,440 paid to E2M Ltd), a business controlled or jointly controlled by Mr Nicholls). Sahara (2020: E2M Ltd) provided geological consulting services to the Group during the year. The amounts paid were at usual or below commercial rates with fees charged on an hourly basis.

(4) Mr Wilkins was not remunerated for his role as alternate director, however, a total of $119,015 (2020: $194,716) was paid to DWCorporate Pty Ltd, a business of which Mr Wilkins is principal, during the period Mr Wilkins was an alternate director. DWCorporate Pty Ltd provided company secretarial, corporate advisory and accounting services to the Group during the year. The amounts paid were at usual commercial rates with fees charged on an hourly basis.

18 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Directors’ Report

Service agreements

Richard Yeates, Managing Director:

Term of agreement – commenced 2 March 2010 and continued until terminated when the position of Managing Director was made redundant on 13 July 2021.
Annual salary was initially (2010) $300,000 excluding superannuation; reduced to $200,000 from 1 February 2014, and further reduced to $180,000 on 1 July 2014; increased to $210,000 on 1 July 2018, and further increased to $250,000 from 1 May 2020.
The agreement could be terminated by the Company giving 12 months’ written notice or by Mr Yeates giving 3 month’s written notice (shorter notice periods applied in the event breach of contract by either party). No benefits are payable on termination other than entitlements accrued to the date of termination.

Dennis Wilkins, Alternate Director until 31 January 2021 and Company Secretary:

Term of agreement – Commenced 17 March 2010 and continuing until terminated in writing by either party.
Mr Wilkins’ firm, DWCorporate Pty Ltd, is engaged to provide company secretarial, corporate advisory and accounting services. Fees are charged on an hourly basis, and all amounts are disclosed in the remuneration table above.

None of the other directors had service agreements in place during the year.

Share-based compensation

Options may be issued to key management personnel as part of their remuneration. The Group has a formal policy in relation to the key management personnel limiting their exposure to risk in relation to the securities which actively discourages key management personnel from granting mortgages over securities held in the Group.

No options were granted to and none vested in any key management personnel during the year.

No ordinary shares in the Company were issued as a result of the exercise of remuneration options during the year.

Equity instruments held by key management personnel

Direct and indirect interests in options over ordinary shares

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Balance at Balance at Vested
start of Granted as Other end of the and
the year compensation Exercised changes [(2)] year exercisable Unvested
Directors of Middle Island Resources Limited
Peter Thomas 26,487,500 - - (25,335,867) 1,151,633 1,151,633 -
Richard Yeates 56,232,081 - - (53,787,205) 2,444,876 2,444,876 -
Beau Nicholls 8,078,977 - (8,078,977) - - - -
Brad Marwood 17,025,000 - - (3)(16,013,041) (1) 1,011,959 - -
Dennis Wilkins - - - - (1)- - -
----- End of picture text -----

(1) Balance held at date of resignation, 31 January 2021.

(2) Other changes represent the decrease upon the 23 for 1 consolidation approved by shareholders at the Annual General Meeting held on 26 November 2020 ( 2020 AGM ) with an effective date of 7 December 2020.
(3) Includes the acquisition (pre-consolidation) of 6,250,000 free attaching options (exercise price $0.0079 (adjusted to $0.1771 post consolidation), expiring 31 January 2022) as approved by shareholders at the 2020 AGM.

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Directors’ Report

Direct and indirect interests in ordinary shares

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----- Start of picture text -----

Balance at Received during the Other Balance at
start of the period on the changes during end of the
period exercise of options the period [(2)] period
Directors of Middle Island Resources Limited
Ordinary shares
Peter Thomas 29,677,500 - (28,387,173) 1,290,327
Richard Yeates 95,196,243 - (91,057,274) 4,138,969
Beau Nicholls 8,078,977 - (3) (7,289,500) 789,477
Brad Marwood 21,075,000 - (4) (19,886,955) (1) 1,188,045
Dennis Wilkins 1,166,667 - (1,115,942) (1) 50,725
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(1) Balance held at date of resignation, 31 January 2021

(2) Other changes represent the decrease upon the 23 for 1 consolidation approved by shareholders at the 2020 AGM with an effective date of 7 December 2020.

(3) Includes the acquisition (pre-consolidation) of 7,500,000 shares pursuant to a resolution that was approved by shareholders at the 2020 AGM to issue 7,500,000 Redeemable Converting Shares ( RC Shares ) to Mr Brad Marwood, a Director of the Company, in lieu of directors’ fees for the period 2 December 2019 to 1 December 2020 to the value (as at the date his conditional entitlement arose) of $30,000. The RC Shares were issued to Mr Marwood on 27 November 2020. On 2 December 2020, the RC Shares converted into fully paid ordinary shares.

(4) Includes the acquisition (pre-consolidation) of 6,250,000 shares pursuant to the placement approved by shareholders at the 2020 AGM.

Loans to key management personnel

There were no loans to key management personnel during the year.

Other transactions with key management personnel

DWCorporate Pty Ltd, a business of which Mr Wilkins is principal, provided company secretarial and corporate advisory services to the Middle Island Group during the year. The amounts paid were on arms’ length commercial terms and are disclosed in the remuneration report in conjunction with Mr Wilkins’ compensation for the period that Mr Wilkins was a member of KMP.

Quenda Investments Pty Ltd (“Quenda”), a company of which Mr Yeates is a director and shareholder, lent securities it held in Middle Island Resources Limited to the provider of a controlled placement facility during the current reporting period for which Quenda was paid a stock borrow fee of $4,500 for the year ended 30 June 2021 (2020: $6,000). The amounts paid were on arms’ length commercial terms. At 30 June 2021 there was nil (2020: $500) owing to Quenda Investments Pty Ltd.

In addition to his director fees, Mr Thomas was paid $6,000 (2020: $3,000) for the provision of some of the special exertion services he provided to the Group during the year. The amounts paid were less that which would have been payable on arms’ length commercial terms and are disclosed in the remuneration report in conjunction with Mr Thomas’ compensation. At 30 June 2021 there was nil (2020: nil) owing to Mr Thomas for the provision of the remaining special exertion services as no invoice for the same was then submitted to the Group.

In relation to Mr Nicholls, addition to his director fees, a total of $11,200 was paid to Sahara (2020: $41,440 paid to E2M Ltd), a business controlled or jointly controlled by Mr Nicholls. Sahara (2020: E2M Ltd) provided geological consulting services to the Group during the year. The amounts paid were on terms more favourable to the Company than arms’ length commercial terms and are disclosed in the remuneration report in conjunction with Mr Nicholls’ compensation for the period that Mr Nicholls was a member of KMP. At 30 June 2021 there was nil owed to Sahara (2020: $6,560 owed to E2M Ltd) for the provision of geological consulting services.

End of audited section

20 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Directors’ Report

DIRECTORS’ MEETINGS

During the year, the Company held ten meetings of directors. The attendance of directors at meetings of the board and committees were:

	Directors Meetings	Directors Meetings	Committee Meetings	Committee Meetings	Committee Meetings	Committee Meetings
			Audit		Remuneration
	A	B	A	B	A	B
Peter Thomas	10	10	1	1	-	-
Richard Yeates	9	10	*	*	-	-
Brad Marwood	10	10	1	1	-	-
Beau Nicholls (resigned 31 January 2021)	7	7	-	1	-	-
Dennis Wilkins (alternate for Beau Nicholls, resigned 31 January 2021)	7	7	1	1	*	*

A – Number of meetings attended.

B – Number of meetings held during the time the director held office during the period.

– Not a member of the relevant committee.

SHARES UNDER OPTION

Unissued ordinary shares of Middle Island Resources Limited under option at the date of this report are as follows:

Date Options Issued	Expiry Date	Exercise Price (cents)	Number of Options
18 November 2018	8 November 2021	68.77	1,304,349
18 January 2019, 26 November 2019 & 14 April 2020	31 January 2022	18.17	9,989,324
19 February 2020, 21 February 2020, 14 April 2020 & 27 November 2020	31 January 2022	17.71	10,317,990
Total number of options outstanding at the date of this report			21,611,663

No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of any other body corporate.

INSURANCE OF DIRECTORS AND OFFICERS

During or since the financial year, in accordance with each director’s Deed of Indemnity, Insurance and Access with Middle Island Resources Limited, the Group has paid premiums insuring all the directors of Middle Island Resources Limited against all liabilities incurred by the director acting directly or indirectly as a director of the Company to the extent permitted by law, including legal costs incurred by the director in defending proceedings, provided that the liabilities for which the director is to be insured do not arise out of conduct involving a wilful breach of the director’s duty to the Company or a contravention of sections 182 or 183 of the Corporations Act 2001 .

The total amount of insurance contract premiums paid is $15,776.

M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Directors’ Report

NON AUDIT SERVICES

The following details any non audit services provided by the entity’s auditor, Elderton Audit Pty Ltd or associated entities. 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 2001 . The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

All non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor;
None of the services undermine the general standard of independence for auditors.

Elderton Audit Pty Ltd received or are due to receive the following amounts for the provision of non audit services:

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----- Start of picture text -----

2021 2020
$ $
Taxation compliance services 4,500 2,900
----- End of picture text -----

PROCEEDINGS ON BEHALF OF THE COMPANY

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

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 .

AUDITOR’S INDEPENDENCE DECLARATION

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 24.

Signed in accordance with a resolution of the directors.

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Brad Marwood Executive Director

Perth, 30 September 2021

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Corporate Governance Statement

The Board of Middle Island Resources Limited (“Board”) is committed to ensuring that the Company’s obligations and responsibilities to its various stakeholders are fulfilled through its corporate governance practices. The directors of the Company (“Directors”, being either “Non-Executive Directors” or Executive Directors”) undertake to perform their duties with honesty, integrity, care and due diligence, to act in good faith in the best interests of the Company in a manner that reflects the highest standards of corporate governance.

The Company’s Board is committed to a high standard of corporate governance practices, ensuring that the Company complies with the Corporations Act 2001 (Cth), ASX Listing Rules, Company Constitution and other applicable laws and regulations.

CORPORATE GOVERNANCE COMPLIANCE

For the year ended 30 June 2021 the Company followed the 4th edition of the ASX Corporate Governance Council’s Principles and Recommendations (“Principles and Recommendations”) where the Board has considered the recommendations to be an appropriate benchmark for its corporate governance practices.

Where, after due consideration, the Company’s corporate governance practices depart from a recommendation, the Board has offered full disclosure and reason for adoption of its own practice, in compliance with the “if not, why not” regime.

This statement was approved by the Board on 30 September 2021 and can be viewed at middleisland.com.au

M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Auditors Independence Declaration

ELDERTON

AUDIT PTY LTD

Auditor's Independence Declaration

To those charged with governance of Middle Island Resources Limited

As auditor for the audit of Middle Island Resources Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been:

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

Elderton Audit Pty Ltd

Rafay Nabeel Audit Director

Perth

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M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Consolidated Statement Of Profit Or Loss And Other Comprehensive Income

	FOR THE YEAR ENDED 30 JUNE 2021 Notes 2021 2020	FOR THE YEAR ENDED 30 JUNE 2021 Notes 2021 2020

		$ $
	REVENUE
	Sale of commodities

	Other income 4(b) 473,903 168,509

	EXPENDITURE
	Administrative expenses (797,243) (603,934)
	Depreciation expense 5 (34,540) (47,311)
	Exploration expenses (5,300,921) (2,352,412)
	Fair value (losses)/gains on financial assets (572,814) 99,995
	Finance costs (1,003) (7,796)
	Loss on settlement of liability (75,000) -
	Salaries and employee benefits expense (513,552) (446,544)
	LOSS BEFORE INCOME TAX (6,821,170) (3,174,737)
	INCOME TAX BENEFIT / (EXPENSE) 6 - -
	LOSS FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF MIDDLE ISLAND RESOURCES LIMITED (6,821,170) (3,174,737)
	OTHER COMPREHENSIVE INCOME
	*Items that may be reclassified to profit or loss*
	Exchange differences on translation of foreign operations (1,986) 10,135
	Other comprehensive income for the period, net of tax (1,986) 10,135
	TOTAL COMPREHENSIVE LOSS FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF MIDDLE ISLAND RESOURCES LIMITED (6,823,156) (3,164,602)
	Basic and diluted loss per share for loss attributable to the ordinary equity holders of the Company (cents per share) 25 (5.8) (5.3)

The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the Notes to the Consolidated Financial Statements.

M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1 25

Consolidated Statement Of Financial Position

AS AT 30 JUNE 2021	Notes 2021	2020
	$	$
CURRENT ASSETS
Cash and cash equivalents	7 3,247,637	4,712,409
Trade and other receivables	8 36,517	62,593
Financial assets	9 315,048	479,745
TOTAL CURRENT ASSETS	3,599,202	5,254,747

NON-CURRENT ASSETS
Plant and equipment	10 2,053,539	2,056,347
Right-of-use assets	11 -	28,545
Tenement acquisition costs	12 1,675,989	1,525,989
TOTAL NON-CURRENT ASSETS	3,729,528	3,610,881
TOTAL ASSETS	7,328,730	8,865,628

CURRENT LIABILITIES
Trade and other payables	13 245,602	717,665
Lease liabilities	11 -	26,517
Borrowings	69,842	70,464
Employee benefit obligations	99,192	79,964
TOTAL CURRENT LIABILITIES	414,636	894,610

NON-CURRENT LIABILITIES
Employee beneft obligations	101	-
Provisions	14 1,384,900	1,384,900
TOTAL NON-CURRENT LIABILITIES	1,385,001	1,384,900
TOTAL LIABILITIES	1,799,637	2,279,510
NET ASSETS	5,529,093	6,586,118

EQUITY
Contributed equity	15 48,611,091	42,737,460
Reserves	16 523,800	633,286
Accumulated losses	(43,605,798)	(36,784,628)
TOTAL EQUITY	5,529,093	6,586,118

The above Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Consolidated Financial Statements.

26 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Consolidated Statement Of Changes In Equity

FOR YEAR ENDED 30 JUNE 2021
			Share-	Foreign
			based	Currency
		Contributed	Payments	Translation	Accumulated
	Notes	Equity	Reserve	Reserve	Losses	Total
		$	$	$	$	$
BALANCE AT 1 JULY 2019		36,305,796	90,000	425,651	(33,609,891)	3,211,556
Loss for the year		-	-	-	(3,174,737)	(3,174,737)
OTHER COMPREHENSIVE INCOME
Exchange differences on translation
of foreign operations		-	-	10,135	-	10,135
TOTAL COMPREHENSIVE INCOME		-	-	10,135	(3,174,737)	(3,164,602)
TRANSACTIONS WITH OWNERS
IN THEIR CAPACITY AS OWNERS
Shares issued during the year	15	7,000,627	-	-	-	7,000,627
Share issue transaction costs	15	(568,963)	107,500	-	-	(461,463)
BALANCE AT 30 JUNE 2020		42,737,460	197,500	435,786	(36,784,628)	6,586,118
Loss for the year		-	-	-	(6,821,170)	(6,821,170)
OTHER COMPREHENSIVE INCOME
Exchange differences on translation of foreign operations		-	-	(1,986)	-	(1,986)
TOTAL COMPREHENSIVE INCOME		-	-	(1,986)	(6,821,170)	(6,823,156)
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS
Shares issued during the year	15	5,873,631	(212,500)	-	-	5,661,131
Share issue transaction costs	15	-	105,000	-	-	105,000
BALANCE AT 30 JUNE 2021		48,611,091	90,000	433,800	43,605,798	5,529,093

The above Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Consolidated Financial Statements.

M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1 27

Consolidated Statement Of Cash Flows

FOR YEAR ENDED 30 JUNE 2021	Notes 2021	2020
	$	$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers	-	14,756
Government COVID-19 cashflow boost grant received	102,175	67,811
Payments to suppliers and employees	(1,272,249)	(991,229)
Expenditure on mining interests	(5,738,144)	(1,784,340)
Reimbursements of expenditure on mining interests	366,252	93,987
Interest received	5,607	2,494
Interest paid	(1,003)	(7,796)
NET CASH OUTFLOW FROM OPERATING ACTIVITIES	24(a) (6,537,362)	(2,604,317)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of mining properties	-	221,490
Payments for tenement acquisition costs	(100,000)	(16,752)
Payments for fnancial assets at fair value through proft or loss	(3,544,777)	-
Proceeds on sale of fnancial assets at fair value through proft or loss	3,136,659	-
Payments for property, plant and equipment	(1,298)	-
NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES	(509,416)	204,738

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of ordinary shares	5,611,131	7,000,627
Payments for share issue transaction costs	-	(461,463)
Principal element of lease payments	(26,517)	(36,614)
Proceeds from borrowings	88,173	88,140
Repayments of borrowings	(88,795)	(49,780)
NET CASH INFLOW FROM FINANCING ACTIVITIES	5,583,992	6,540,910

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS	(1,462,786)	4,141,331
Cash and cash equivalents at the beginning of the financial year	4,712,409	564,618
Effects of exchange rate changes on cash and cash equivalents	(1,986)	6,460
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	7 3,247,637	4,712,409

The above Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Consolidated Financial Statements.

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Notes To The Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the financial statements are set out below. The financial statements are for the consolidated entity consisting of Middle Island Resources Limited and its subsidiaries. The financial statements are presented in Australian currency. Middle Island Resources Limited is a company limited by shares, domiciled and incorporated in Australia. The financial statements were authorised for issue by the directors on 30 September 2021. The directors have the power to amend and reissue the financial statements.

(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 . Middle Island Resources Limited is a for-profit entity for the purpose of preparing the financial statements.

(i) Compliance with IFRS

The consolidated financial statements of the Middle Island Resources Limited Group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

(ii) New and amended standards adopted by the Group

The Group has adopted all the new, revised or amending Accounting Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards.

(iii) New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2021 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is that they are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

(iv) Historical cost convention

These financial statements have been prepared under the historical cost convention, except for certain financial assets and liabilities measured at fair value.

(b) Principles of consolidation

(i) Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Middle Island Resources Limited (“Company” or “parent entity”) as at 30 June 2021 and the results of all subsidiaries for the year then ended. Middle Island Resources Limited and its subsidiaries together are referred to in these financial statements as the Group or the consolidated entity.

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. A list of controlled entities is disclosed in note 22 to the financial statements.

The acquisition method of accounting is used to account for business combinations by the Group.

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

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of financial position respectively.

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Notes To The Consolidated Financial Statements

(ii) Changes in ownership interests

The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Middle Island Resources Limited.

When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in a jointly controlled entity or associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

(c) Segment reporting

An operating segment is defined as a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

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 operating segments, has been identified as the full Board of Directors.

(d) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Middle Island Resources Limited’s functional and presentation currency.

(ii) 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. They are deferred in equity if they are attributable to part of the net investment in a foreign operation.

(iii) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
income and expenses for each statement of profit or loss and other comprehensive income are translated at average exchange rates (unless that is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income.

30 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Notes To The Consolidated Financial Statements

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

(e) Revenue recognition

Sale of commodities

Revenue from gold concentrate sales is recognised when the Group satisfies its performance obligations under its contract by transferring such goods to the customer’s control. Control is generally determined to be when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good.

Interest

Interest revenue is recognised on a time proportionate basis that considers the effective yield on the financial assets.

Other income

All other income is recognised when the right to receive other income is established.

All revenue is stated net of the amount of goods and services tax.

(f) Government grants

Grants from the government, including exploration incentives and the COVID-19 cashflow boost, are recognised at their fair value where there is a reasonable assurance that the grant will be received, and the Group will comply with all attached conditions. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs it is compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis.

(g) Income tax

The income tax expense or revenue for the year is the tax payable on the current year’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled.

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

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

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Notes To The Consolidated Financial Statements

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. No deferred tax is recognised for the carried forward losses as the Group considers there will be no taxable profit available to offset such brought forward tax losses in the future.

(h) Leases

The Group leased office premises with a three-year term that expired during the year. Upon commencement of the lease the Group recognised a lease liability for this lease, measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate, being 10%.

Where the Group is lessee, the Group recognises a right-of-use asset and a corresponding liability at the date at which the lease asset is available for use by the Group. Each lease payment is allocated between the liability and the finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.

Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payments that are based on an index or a rate;
amounts expected to be payable by the lessee under residual value guarantees;
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

The Group’s expired office lease agreement did not contain any extension options.

Right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before commencement date less any lease incentives received, and any initial direct costs.

Where the terms of a lease require the Group to restore the underlying asset, or the Group has an obligation to dismantle and remove a leased asset, a provision is recognised and measured in accordance with AASB 137. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset.

Where leases have a term of less than 12 months or relate to low value assets the Group may apply exemptions in AASB 16 to not capitalise any such leases and instead recognise the lease payments on a straight-line basis as an expense in profit or loss.

(i) Impairment of non-financial assets

Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets 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 amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting period.

(j) Cash and cash equivalents

For statement of cash flows presentation 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 that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

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Notes To The Consolidated Financial Statements

(k) Investments and other financial assets

(i) Classification

The Group classifies its financial assets in the following measurement categories:

Those to be measured subsequently at fair value (either through OCI or through profit or loss); and
Those to be measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). All of the Group’s financial assets are classified at fair value through profit or loss.

(ii) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

(iii) Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss ( FVPL) , transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:

Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other income or expenses. Impairment losses are presented as a separate line item in the statement of profit or loss.
FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other income or expenses. Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other income or expenses and impairment losses are presented as a separate line item in the statement of profit or loss.
FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other income or expenses in the period in which it arises.

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Notes To The Consolidated Financial Statements

Equity instruments

The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s right to receive payment is established.

Changes in the fair value of financial assets at FVPL are recognised in other income or expenses in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

(iv) Impairment

The Group assesses, on a forward looking basis, the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology depends on whether there has been a significant increase in credit risk.

(l) Plant and equipment

All plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the statement of profit or loss and other comprehensive income during the reporting period in which they are incurred.

Depreciation of plant and equipment is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term. The rates vary between 25% and 40% per annum.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(i)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of profit or loss and other comprehensive income.

(m) Exploration and evaluation costs

It is the Group’s policy to capitalise the cost of acquiring rights to explore areas of interest. All other exploration expenditure is expensed to the statement of profit or loss and other comprehensive income.

The costs of acquisition are carried forward as an asset provided one of the following conditions is met:

Such costs are expected to be recouped through the successful development and exploitation of the area of interest, or alternatively, by its sale; or
Exploration activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in relation to the area are continuing. When the technical feasibility and commercial viability of extracting a mineral resource have been demonstrated then any capitalised exploration and evaluation expenditure is reclassified as capitalised mine development. Prior to reclassification, capitalised exploration and evaluation expenditure is assessed for impairment.

Impairment

The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at the cash generating unit level whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount.

An impairment exists when the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Any impairment losses are recognised in the statement of profit or loss and other comprehensive income.

34 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Notes To The Consolidated Financial Statements

(n) Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to and unpaid at the end of the financial year. The amounts are unsecured, non-interest bearing and are paid on normal commercial terms.

(o) Employee benefits

Wages and salaries and annual leave

Liabilities for wages and salaries, including non-monetary benefits, and annual leave 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 and are measured at the amounts expected to be paid when the liabilities are settled.

Other long-term employee benefit obligations

The group also has liabilities for long service leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. These obligations are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period 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 end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.

The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.

(p) Share-based payments

The Group may provide benefits to employees (including directors) of the Group, and to vendors and suppliers, in the form of share-based payment transactions, whereby employees or service providers render services, or where vendors sell assets to the Group, in exchange for shares or rights over shares (‘equity-settled transactions’), refer to note 26.

The cost of these equity-settled transactions in the case of employees is measured by reference to the “fair value” (not market value) at the date at which they are granted. The “fair value” is determined in accordance with Australian Accounting Standards by an internal valuation using a Black-Scholes (or other industry accepted) option pricing model for options and by reference to market price for ordinary shares. The Directors do not consider the resultant value as determined by the Black-Scholes European Option Pricing Model (or any other model) is necessarily representative of the market value of the share options issued, however, in the absence of a reliable measure of the goods or services received, AASB 2 Share Based Payments prescribes the measurement of the fair value of the equity instruments granted. The Black-Scholes European Option Pricing Model is an industry accepted method of valuing equity instruments.

The cost of remuneration equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which any performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of options that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

No expense is recognised for options that do not ultimately vest, except for options where vesting is conditional upon a market condition.

Where an option is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the option is recognised immediately. However, if a new option is substituted for the cancelled option and designated as a replacement option on the date that it is granted, the cancelled and new option are treated as a modification of the original option.

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Notes To The Consolidated Financial Statements

(q) Provision for rehabilitation

The Group records the estimated cost to rehabilitate operating locations in the period in which the obligation arises on an undiscounted basis. The nature of rehabilitation activities includes the dismantling and removing of structures, rehabilitating mines, dismantling operating facilities, closure of plant and waste sites and restoration, reclamation and revegetation of affected areas.

Typically, the obligation arises when the asset is installed, or the ground/environment is disturbed at the production location. When the liability is initially recorded, the value of the estimated cost of eventual rehabilitation is capitalised by increasing the carrying amount of the related mining assets. Additional disturbances or changes in rehabilitation costs will be recognised as additions or changes to the corresponding asset and rehabilitation liability when incurred.

Costs incurred that relate to an existing condition caused by past operations, and do not have future economic benefit, are expensed as incurred.

(r) Issued capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

(s) Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit or loss attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(t) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

(u) Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

(v) Critical accounting judgements, estimates and assumptions

The preparation of these financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are:

Exploration and evaluation costs

The costs of acquiring rights to explore areas of interest are capitalised, all other exploration and evaluation costs are expensed as incurred.

36 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Notes To The Consolidated Financial Statements

These costs of acquisition are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which: (i) such costs are expected to be recouped through successful development and exploitation or from sale of area; or (ii) exploration and evaluation activities in the area have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active operations in, or relating to, the area are continuing.

When an area of interest is abandoned or the directors decide that it is not commercial, any capitalised acquisition costs in respect of that area are written off in the financial year the decision is made.

Taxation

Balances disclosed in the financial statements and the notes thereto related to taxation are based on the best estimates of the directors. These estimates consider both the financial performance and position of the Group as they pertain to current income taxation legislation, and the directors understanding thereof. No adjustment has been made for pending or future taxation legislation. The current income tax position represents that directors’ best estimate, pending an assessment by the Australian Taxation Office.

Share-based payments

Share-based payment transactions, in the form of options to acquire ordinary shares, are valued using the BlackScholes option pricing model. This model uses assumptions and estimates as inputs.

The Directors do not consider the resultant value as determined by the Black-Scholes European Option Pricing Model is necessarily representative of the market value of the share options issued, however, in the absence of a reliable measure of the goods or services received, AASB 2 Share Based Payments prescribes the measurement of the fair value of the equity instruments granted. The Black-Scholes European Option Pricing Model is an industry accepted method of valuing equity instruments, at the date of grant.

Impairments

The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using the directors’ best estimate of the asset’s fair value, which can incorporate various key assumptions.

Any amounts in excess of the fair value are impaired, in line with accounting policy disclosures in notes 1(i), 1(k) and 1(l).

Provision for rehabilitation

The Group assesses its mine rehabilitation provision half-yearly in accordance with accounting policy note 1(q). Significant judgement is required in determining the provision primarily relating to the estimation of costs in the Mine Closure Plan that is lodged with the Department of Mines, Industry Regulation and Safety.

2. FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk.

Risk management is carried out by the full Board of Directors as the Group believes that it is crucial for all board members to be involved in this process.

(a) Market risk

(i) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the A$, the US dollar and the West African CFA franc.

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 and net investments in foreign operations. The Group has not formalised a foreign currency risk management policy however, it monitors its foreign currency expenditure in light of exchange rate movements.

The functional currency of the Group’s West African based subsidiary company is the West African CFA franc. Given the current scale of the operations in West Africa, the foreign exchange exposure is not considered to be material to the Group.

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Notes To The Consolidated Financial Statements

(ii) Price risk

The Group is exposed to equity securities price risk. This arises from investments held by the Group and classified in the statement of financial position as financial assets at fair value through profit or loss. Given the current level of operations, the Group’s financial statements for the year ended 30 June 2021 are not exposed to commodity price risk.

To minimise the risk, the Group’s investments are of high quality and are publicly traded on reputable international stock exchanges. The investments are managed on a day to day basis so as to pick up any significant adjustments to market prices.

Sensitivity analysis

At 30 June 2021, if the value of the equity instruments had increased by 15% with all other variables held constant, post-tax loss for the Group would have been $47,257 lower, with no changes to other equity balances, as a result of gains on equity securities classified as financial assets at fair value through profit or loss (2020: $71,962 lower).

At 30 June 2021, if the value of the equity instruments had decreased by 15% with all other variables held constant, post-tax loss for the Group would have been $47,257 higher, with no changes to other equity balances, as a result of losses on equity securities classified as financial assets at fair value through profit or loss (2020: $71,962 higher).

(iii) Interest rate risk

The Group is exposed to movements in market interest rates on cash and cash equivalents. The Group policy is to monitor the interest rate yield curve out to six months to ensure a balance is maintained between the liquidity of cash assets and the interest rate return. The entire balance of cash and cash equivalents for the Group $3,247,637 (2020: $4,712,409) is subject to interest rate risk. The weighted average interest rate received on cash and cash equivalents by the Group was 0.12% (2020: 0.22%).

Sensitivity analysis

At 30 June 2021, if interest rates had changed by -10 basis points from the weighted average rate for the year with all other variables held constant, post-tax loss for the Group would have been $4,398 lower (2020: -10 basis points $1,035 lower) as a result of lower or higher interest income from cash and cash equivalents.

At 30 June 2021, if interest rates had changed by +10 basis points from the weighted average rate for the year with all other variables held constant, post-tax loss for the Group would have been $4,398 higher (2020: +10 basis points $1,035 higher) as a result of lower or higher interest income from cash and cash equivalents.

(b) Credit risk

The Group has no significant concentrations of credit risk. The maximum exposure to credit risk at balance date is the carrying amount (net of provision for impairment) of those assets as disclosed in the statement of financial position and notes to the financial statements.

All surplus cash holdings within the Group are currently invested with AA- rated financial institutions.

(c) Liquidity risk

The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and marketable securities are available to meet the current and future commitments of the Group. Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. The Board of Directors constantly monitor the state of equity markets in conjunction with the Group’s current and future funding requirements, with a view to initiating appropriate capital raisings.

The financial liabilities of the Group are confined to trade and other payables as disclosed in the statement of financial position. All trade and other payables are non-interest bearing and due within 12 months of the reporting date.

38 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Notes To The Consolidated Financial Statements

(d) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The equity investments held by the Group are classified at fair value through profit or loss. The market value of all equity investments investments (shares in Tariji) represents the fair value based on quoted prices on active markets (TSX) as at the reporting date without any deduction for transaction costs. These investments are classified as level 1 financial instruments.

The carrying amounts and estimated fair values of financial assets and financial liabilities are as follows:

==> picture [426 x 237] intentionally omitted <==

----- Start of picture text -----

||||
|---|---|---|
|Consolidated|Consolidated|
|2021|2020|
|$|$|
|Financial Assets|
|Cash and cash equivalents|3,247,637|4,712,409|
|Trade and other receivables|36,517|62,593|
|Financial assets|315,048|479,745|
|Total Financial Assets|3,599,202|5,254,747|
|Financial Liabilities|
|Trade and other payables|245,602|717,665|
|Lease liabilities|-|26,517|
|Borrowings|69,842|70,464|
|Total Financial Liabilities|315,444|814,646|

----- End of picture text -----

The methods and assumptions used to estimate the fair value of financial instruments are outlined below:

Cash

The carrying amount is fair value due to the liquid nature of these assets.

Receivables/Payables/Borrowings

Due to the short-term nature of these financial rights and obligations, their carrying amounts are estimated to represent their fair values.

M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1 39

Notes To The Consolidated Financial Statements

Fair value measurements of financial assets

The carrying values of financial assets and liabilities of the Group approximate their fair values. Fair values of financial assets and liabilities have been determined for measurement and / or disclosure purposes.

Fair value hierarchy

The Group classifies assets and liabilities carried at fair value using a fair value hierarchy that reflects the significance of the inputs used in determining that value. The following table analyses financial instruments carried at fair value by the valuation method. The different levels in the hierarchy have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: 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); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	Level 1	Level 2	Level 3	Total
	$	$	$	$
30 June 2021
Financial assets	315,048	-	-	315,048
Total as at 30 June 2021	315,048	-	-	315,048

30 June 2020
Financial assets	479,745	-	-	479,745
Total as at 30 June 2020	479,745	-	-	479,745

40 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Notes To The Consolidated Financial Statements

3. SEGMENT INFORMATION

For management purposes, the Group has identified two reportable segments, being exploration activities undertaken in (i) Australia and (ii) West Africa. These segments include activities associated with the determination and assessment of the existence of commercial economic reserves from the Group’s mineral assets in these geographic locations.

Segment performance is evaluated based on the operating profit and loss and cash flows and is measured in accordance with the Group’s accounting policies.

	Consolidated Consolidated
	2021 2020
	$ $
Segment revenue – Australia	- 14,756
Segment revenue – West Africa	366,252 93,987
Segment revenue – Total	366,252 108,743
Reconciliation of segment revenue to total revenue and other income:
Interest revenue	5,476 2,282
Other income	102,175 72,240
TOTAL REVENUE AND OTHER INCOME	473,903 183,265

Segment result – Australia	(5,134,586) (2,234,682)
Segment result – West Africa	199,917 (8,988)
Segment result – Total	(4,934,669) (2,243,670)
Reconciliation of segment result to net loss before tax:
- Other income	107,651 74,522
- Fair value (losses)/gains	(572,814) 99,995
- Other corporate and administration	(1,421,338) (1,105,584)
NET LOSS BEFORE TAX	(6,821,170) (3,174,737)

Segment operating assets – Australia	3,729,427 3,581,665
Segment operating assets – West Africa	- -
Segment operating assets – Total	3,729,427 3,581,665
Reconciliation of segment operating assets to total assets:
- Other corporate and administration assets	3,599,303 5,283,963
TOTAL ASSETS	7,328,730 8,865,628

Segment operating liabilities – Australia	1,532,759 2,012,332
Segment operating liabilities – West Africa	78 80
Segment operating liabilities – Total	1,532,837 2,012,412
Reconciliation of segment operating liabilities to total liabilities:
- Other corporate and administration liabilities	266,800 267,098
TOTAL LIABILITIES	1,799,637 2,279,510

M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Notes To The Consolidated Financial Statements

4. REVENUE AND OTHER INCOME

REVENUE AND OTHER INCOME
	Consolidated	Consolidated
	2021	2020
	$	$
(a) Revenue from continuing operations
Sale of commodities
- Tribute production	-	14,756

(b) Other income
Interest revenue	5,476	2,282
Reimbursements of expenditure on mining interests	366,252	93,987
Government COVID-19 cashflow boost grant	102,175	67,811
Net foreign exchange gains	-	4,429
	473,903	168,509
EXPENSES
Loss before income tax includes the following specific expenses:
Defined contribution superannuation expense	60,764	52,567
Minimum lease payments relating to operating leases	10,320	-
Depreciation expenses:
Plant and equipment	5,995	9,285
Right-of-use assets	28,545	38,026
	34,540	47,311

5. EXPENSES

M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Notes To The Consolidated Financial Statements

6.	INCOME TAX
	Consolidated Consolidated
	2021 2020
	$ $
	(a) Income tax expense
	Current tax - -
	Deferred tax - -
	(b) Numerical reconciliation of income tax expense to prima facie tax payable
	Loss from continuing operations before income tax expense (6,821,170) (3,174,737)
	Prima facie tax benefit at the Australian tax rate of 30% (2020: 27.5%) (2,046,351) (873,053)
	Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
	Foreign gains/(losses) – West Africa excluded 59,975 (2,472)
	Loss on settlement of liability 22,500 -
	Other (28,478) (734)
	(1,992,354) (876,259)
	Movements in unrecognised temporary differences 52,305 (83,002)
	Tax effect of current year tax losses for which no deferred tax asset has been recognised 1,940,049 959,261
	Income tax expense - -

	(c) Unrecognised temporary differences
	Deferred Tax Assets (at 30% (2020: 27.5%))
	Capital raising costs 131,153 170,668
	Financial assets 84,103 105,467
	Other temporary differences 48,731 29,307
	Carry forward foreign losses 7,814,947 7,218,679
	Carry forward tax losses 7,356,925 4,881,038
	Deferred Tax Liabilities (at 30% (2020: 27.5%))
	Tenement acquisition costs (502,797) (369,739)
	Net deferred tax assets 14,933,062 12,035,420

Net deferred tax assets have not been brought to account as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised. The Group’s ability to use losses in the future is subject to the Group satisfying the relevant tax authority’s criteria for using these losses.

In April 2017, the Australian Government enacted legislation which reduces the corporate rate for small and medium business (base rate) entities from 30% to 25% over the next decade. For the 2017 financial year the corporate tax rate reduced to 27.5% for small business entities with turnover less than $10 million. This turnover threshold progressively increased until it reached $50 million in the 2020 financial year. For the 2021 financial year, the tax rate has decreased to 26% and then 25% for the 2022 and later financial years. Middle Island Resources Limited satisfied the criteria to be a base rate entity for the 2020 financial year but not for the 2021 financial year.

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Notes To The Consolidated Financial Statements

7. CURRENT ASSETS - CASH AND CASH EQUIVALENTS

	Consolidated	Consolidated
	2021	2020
	$	$
Cash at bank and in hand	3,206,877	4,671,649
Short-term deposits	40,760	40,760
Cash and cash equivalents as shown in the statement of financial position
and the statement of cash flows	3,247,637	4,712,409

Cash and cash equivalents at 30 June 2021 comprise A$3,045,279 (2020: A$4,707,819), with the balance held in West African CFA francs.

Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.

Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group and earn interest at the respective short-term deposit rates.

The Group has provided a bank guarantee of $20,760 for a property lease.

8. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES

Trade Debtors(1)	29,980	58,628
Other	6,537	3,965
	36,517	62,593

(1) The Group assesses, on a forward looking basis, the expected credit losses associated with trade debtors. All amounts recorded at balance date are considered recoverable in full.

9. CURRENT ASSETS – FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Canadian listed equity securities 315,048 479,745

Changes in fair values of financial assets are shown at ‘fair value gains/(losses) on financial assets’ in the statement of profit or loss and other comprehensive income. Refer to note 2 for details of the fair value measurement.

44 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Notes To The Consolidated Financial Statements

10.	NON-CURRENT ASSETS - PLANT AND EQUIPMENT
	Freehold Land Plant and Equipment Total
	$ $ $
	At 1 July 2019
	Cost 126,929 2,277,399 2,404,328
	Accumulated depreciation - (338,696) (338,696)
	Net book amount 126,929 1,938,703 2,065,632

	Year ended 30 June 2020
	Opening net book amount 126,929 1,938,703 2,065,632
	Depreciation charge - (9,285) (9,285)
	Closing net book amount 126,929 1,929,418 2,056,347

	At 30 June 2020
	Cost 126,929 2,234,706 2,361,635
	Accumulated depreciation - (305,288) (305,288)
	Net book amount 126,929 1,929,418 2,056,347

	Year ended 30 June 2021
	Opening net book amount 126,929 1,929,418 2,056,347
	Additions - 3,187 3,187
	Depreciation charge - (5,995) (5,995)
	Closing net book amount 126,929 1,926,610 2,053,539

	At 30 June 2021
	Cost 126,929 2,230,914 2,357,843
	Accumulated depreciation - (304,304) (304,304)
	Net book amount 126,929 1,926,610 2,053,539

Plant and equipment associated with the Sandstone gold project with a net book value at 30 June 2021 of $1,912,170 (2020: $1,912,170) is on care and maintenance. An impairment assessment has been performed as required under the accounting standards with no impairment being recorded. The carrying value of plant and equipment is lower than its net realisable value.

M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1 45

Notes To The Consolidated Financial Statements

11. LEASES

	Notes Consolidated	Consolidated
	2021	1 July 2020
	$	$
(a) Amounts recognised in the statement of financial
position
The statement of financial position shows the following
amounts relating to leases:
Right-of-use assets
Buildings	-	28,545
Lease liabilities
Current	-	26,517

There were no additions to right-of-use assets during the 2021 financial year.

(b) Amounts recognised in the statement of profit or
loss and other comprehensive income
The statement of profit or loss and other comprehensive
income shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Buildings	28,545	38,026
Interest expense (included in fnance cost)	5 1,003	4,666

The total cash outflow for leases in 2021 was $27,520 (2020: $41,280).

(c) The Group’s leasing activities

The Group leased office premises with a two-year term that expired during the year. An extension was negotiated to lease the premises for a further eight months expiring 30 November 2021. This extension has been classified as a short-term lease with the lease payments recognised on a straight-line basis as an expense in profit or loss.

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Notes To The Consolidated Financial Statements

12. NON-CURRENT ASSETS – TENEMENT ACQUISITION COSTS

Consolidated	Consolidated
2021	2020
$	$
Tenement acquisition costs carried forward in respect of mining areas of interest
Opening net book amount 1,525,989	1,327,754
Additions(1) 150,000	16,752
Increase in rehabilitation provision -	181,483
Closing net book amount 1,675,989	1,525,989

(1) During the year the Group exercised the option under the Wirraminna Option Agreement to acquire tenement P57/1395, comprising part of the Sandstone gold project. The exercise price of the option agreement was $150,000 comprising $100,000 in cash and $50,000 in fully paid ordinary shares (refer note 15(b)).

13. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES

Trade payables	40,107 543,410
Other payables and accruals	205,495 174,255
	245,602 717,665

14. NON-CURRENT LIABILITIES - PROVISIONS

NON-CURRENT LIABILITIES - PROVISIONS
Rehabilitation
Carrying amount at start of year	1,384,900	1,203,417
Additional provision charged to tenement acquisition costs	-	181,483
Carrying amount at end of year	1,384,900	1,384,900

The Group records the undiscounted estimated cost to rehabilitate operating locations in the period in which the obligation arises. The nature of rehabilitation activities includes the dismantling and removing of structures, rehabilitating mines, dismantling operating facilities, closure of plant and waste sites and restoration, reclamation and revegetation of affected areas. The provision includes rehabilitation costs associated with the Sandstone Gold Project based on the latest estimated future costs contained in the Mine Closure Plan (MCP) lodged with the Government of Western Australia Department of Mines, Industry Regulation and Safety (DMIRS). An updated MCP was lodged with DMIRS during November 2019 containing an updated estimate of the closure costs, resulting in an increase to the provision during the 2020 financial year. A revised MCP is scheduled to be submitted to DMIRS prior to November 2021.

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Notes To The Consolidated Financial Statements

15. ISSUED CAPITAL

(a) Share capital

(a) Share capital
	2021 2020
Notes	Number of Shares $ Number of Shares	$
Ordinary shares fully paid 15(b), 15(d)	122,418,222 48,611,091 2,139,809,372	42,737,460
Total issued capital	122,418,222 48,611,091 2,139,809,372	42,737,460
(b) Movements in ordinary share capital
Beginning of the financial year	2,139,809,372 42,737,460 1,046,852,156	36,305,796
Issued for cash at 0.4 cents per share	6,250,000 25,000 718,426,078	2,873,704
Issued for cash at 0.77 cents per share
upon exercise of options(1)	367,740,413 2,820,789 9,543,133	84,258
Issued for cash at 0.79 cents per share
upon exercise of options(1)	225,682,326 1,751,132 1,351,641	42,665
Issued for cash at 1.1 cents per share	- - 363,636,364	4,000,000
Issued as consideration for director
fees(2)	7,500,000 105,000 -	-
Issued as consideration for tenement
acquisition at 1.5 cents per share	3,270,533 50,000 -	-
Issued for cash at 2.1 cents per share	38,095,000 800,000 -	-
Adjustment for 1:23 share
consolidation(3)	(2,667,113,935) - -	-
Issued for cash at 17.71 cents per share		-
upon exercise of options	220,874 39,117 -
Issued for cash at 18.17 cents per share
upon exercise of options	963,639 175,093 -	-
Transfer from Share-based Payments
Reserve upon exercise of consultant
options	- 107,500 -	-
Share issue transaction costs	- - -	(568,963)
End of the financial year	122,418,222 48,611,091 2,139,809,372	42,737,460

(1) A total of $42,763 had been received prior to 30 June 2020 for option exercises for which the shares were not issued until July 2020.

(2) A resolution was approved by shareholders at the 2020 AGM to issue 7,500,000 Redeemable Converting Shares ( RC Shares ) to Mr Brad Marwood, a Director of the Company, in lieu of directors’ fees for the period 2 December 2019 to 1 December 2020 to the value of $30,000 (calculated by reference to the market value of the Company’s ordinary fully paid securities as at the date Mr Marwood’s entitlement to the shares was established subject to shareholder approval). The issue price of the RC Shares was set at $0.004 being the price at which the Company’s shares were trading when Mr Marwood joined the Board. The RC Shares were issued to Mr Marwood on 27 November 2020. On 2 December 2020, the RC Shares converted into fully paid ordinary shares. The closing price of ordinary fully paid shares in the Company on the date of the Annual General Meeting was $0.014. For accounting purposes, that date was the grant date of the RC Shares, and the fair value at that date of each RC Share was $0.014 for a total fair value of $105,000. The fair value on grant of the RC Shares was initially recorded in the Share-based Payments Reserve and then transferred to Contributed Equity upon conversion into fully paid ordinary shares. The settlement of this liability by the issue of the RC Shares has resulted in a net loss, for accounting purposes, resulting from the increase in the value of the Company’s shares between the time of Mr Marwood’s appointment (being the date he became conditionally entitled to) and the grant date of the RC Shares. This net loss is recognised in the profit or loss for the year of $75,000.

(3) A resolution was approved by shareholders at the 2020 AGM to convert every 23 shares into 1 share. The effective date for the consolidation was 7 December 2020.

48 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Notes To The Consolidated Financial Statements

(c) Movements in options on issue

Number of Options
2021 2020
Beginning of the financial year 1,111,482,023 378,950,719
Issued, exercisable at 0.79 cents, on or before 31 January 2022 - 130,000,000
Issued, exercisable at 0.77 cents, on or before 31 January 2022 6,250,000 613,426,078
Exercised at 0.79 cents, expiring on 31 January 2022 (225,682,326) (1,351,641)
Exercised at 0.77 cents, expiring on 31 January 2022 (367,740,413) (9,543,133)
Adjustment for 1:23 share consolidation (501,513,108) -
Exercised at 18.17 cents, expiring on 31 January 2022 (963,639) -
Exercised at 17.71 cents, expiring on 31 January 2022 (220,874) -
End of the fnancial year 21,611,663 1,111,482,023

Options on issue are comprised of:
Exercisable at $0.6877 (2020: $0.0299), expiring 8 November 2021 1,304,349 30,000,000
Exercisable at $0.1817 (2020: $0.0079), expiring 31 January 2022 9,989,324 477,599,078
Exercisable at $0.1771 (2020: $0.0077), expiring 31 January 2022 10,317,990 603,882,945
21,611,663 1,111,482,023

(d) Ordinary shares

Ordinary fully paid shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of the shares held.

On a show of hands every holder of ordinary fully paid shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll is entitled to one vote for each share held.

Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.

M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1 49

Notes To The Consolidated Financial Statements

(e) Capital risk management

The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it may strive to provide returns for shareholders and benefits for other stakeholders.

Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is the current working capital position against the requirements of the Group to meet exploration programmes and corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Group at 30 June 2021 and 30 June 2020 are as follows:

	Consolidated	Consolidated
	2021	2020
	$	$
Cash and cash equivalents	3,247,637	4,712,409
Trade and other receivables	36,517	62,593
Financial assets	315,048	479,745
Trade and other payables	(245,602)	(717,665)
Lease liabilities	-	(26,517)
Borrowings	(69,842)	(70,464)
Employee benefits obligations - current	(99,192)	(79,964)
Working capital position	3,184,566	4,360,137

16. RESERVES AND ACCUMULATED LOSSES

RESERVES AND ACCUMULATED LOSSES
(a) Reserves
Foreign currency translation reserve	433,800	435,786
Share-based payments reserve (see note 26)	90,000	197,500
	523,800	633,286

(b) Nature and purpose of reserves

(i) Foreign currency translation reserve

Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in note 1(d) and accumulated within a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed.

(ii) Share-based payments reserve

The share-based payments reserve is used to recognise the fair value of options issued.

50 M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Notes To The Consolidated Financial Statements

17. DIVIDENDS

No dividends were paid during the financial year. No recommendation for payment of dividends has been made.

18. REMUNERATION OF AUDITORS

During the year the following fees were paid or payable for services provided by the auditor of the Company, its related practices and non-related audit firms:

Consolidated	Consolidated
2021	2020
$	$
(a) Audit services
Elderton Audit Pty Ltd – audit and review of financial reports 34,208	31,700
Total remuneration for audit services 34,208	31,700
(b) Non-audit services
Elderton Audit Pty Ltd – taxation compliance services 4,500	2,900
Total remuneration for other services 4,500	2,900

19. CONTINGENCIES

The purchase price for the Sandstone Gold Project included a deferred payment of $500,000 payable within 28 days of the receipt of proceeds from the first sale of gold produced from the Sandstone Assets. This payment is contingent on the production and sale of gold from the Sandstone Assets.

The Sandstone tenements were acquired subject to legacy royalties, including a royalty equal to 2% of the net smelter return on all minerals produced from M57/128 and M57/129 and a royalty of A$1 per tonne of ore mined and treated from M57/129. On 1 July 2021 these royalties were terminated in exchange for the Group paying the sum of $250,000.

There may be a further legacy royalty payable in relation to the tenements acquired by the Company. Pursuant to an Agreement (Deed of Sale – Sandstone) dated 27 September 2004 (Sale Deed) a royalty may be payable in relation to a portion of any gold produced from the Sandstone tenements. Royalties payable under the Sale Deed are to be calculated using a complex formula driven by the specific tenements from which gold is produced, the “deemed entitlement to gold” of persons having a 33.3% participating interest in “the Sandstone Joint Venture”, and a royalty rate of $12.50 per ounce of gold. Eighty six tenements are covered by the Sale Deed, only two of which were acquired by the Company. The Company’s understanding is that the Sandstone Joint Venture no longer exists. The royalty only commences when 50,000 ounces of gold have been produced across the eighty six tenements and it ceases when $4 million has been paid in total across the eighty six tenements under the Sale Deed. Accordingly, depending on how much gold has been produced from the other eighty four tenements and the status of the Sandstone Joint Venture, it is possible that a $12.50 royalty per ounce of gold produced is payable on 1/3 of the gold produced from certain portions of the tenements acquired by the Company. The Company will inform the market if and as soon as the status of that potential further royalty has been resolved.

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Notes To The Consolidated Financial Statements

20. COMMITMENTS

Exploration commitments

The Group has certain (contingent) commitments to meet minimum expenditure requirements on the mining exploration assets it has an interest in. Outstanding exploration commitments, which the Group has the right to vary by such methods as applying for exemptions, surrendering tenements, relinquishing portions of tenements or entering farm-out arrangements, are as follows:

	Consolidated	Consolidated
	2021	2020
	$	$
within one year	458,960	233,360
later than one year but not later than five years	1,910,000	895,160
later than five years	1,344,750	1,280,700
	3,713,710	2,409,220

21. RELATED PARTY TRANSACTIONS

(a) Parent entity

The ultimate parent entity within the Group is Middle Island Resources Limited.

(b) Subsidiaries

Interests in subsidiaries are set out in note 22.

(c) Key management personnel compensation

Short-term benefits	368,042	303,577
Post-employment benefits	34,964	28,839
Other long-term benefits	-	-
Termination benefits	-	-
Share-based payments	-	-
	403,006	332,416

Detailed remuneration disclosures are provided in the remuneration report on pages 17 to 20.

(d) Transactions and balances with other related parties

Quenda Investments Pty Ltd (“Quenda”), a company of which Mr Yeates is a director and shareholder, lent securities held in Middle Island Resources Limited to the provider of a controlled placement facility during the current reporting period for which Quenda was paid a stock borrow fee of $4,500 for the year ended 30 June 2021 (2020: $6,000). The amounts paid were on arms’ length commercial terms. At 30 June 2021 there was nil (2020: $500) owing to Quenda Investments Pty Ltd.

In addition to his director fees, Mr Thomas was paid $6,000 (2020: $3,000) for the provision of some of the special exertion services he provided to the Group during the year. The amounts paid were less that arms’ length commercial terms and are disclosed in the remuneration report in conjunction with Mr Thomas’ compensation. At 30 June 2021 there was nil (2020: nil) owing to Mr Thomas for the provision of further special exertion services as no invoice for the same was then submitted to the Group.

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Notes To The Consolidated Financial Statements

In addition to his director fees, a total of $11,200 was paid to Sahara (2020: $41,440 paid to E2M Ltd), a business controlled or jointly controlled by Mr Nicholls. Sahara (2020: E2M Ltd) provided geological consulting services to the Group during the year. The amounts paid were on arms’ length commercial terms and are disclosed in the remuneration report in conjunction with Mr Nicholls’ compensation for the period that Mr Nicholls was a member of KMP. At 30 June 2021 there was nil owed to Sahara (2020: $6,560 owed to E2M Ltd) for the provision of geological consulting services.

(e) Loans to related parties

Middle Island Resources Limited has provided unsecured, interest free loans to each of its wholly owned subsidiaries totalling $28,722,053 at 30 June 2021 (2020: $23,070,723). An impairment assessment is undertaken each financial year by examining the financial position of the subsidiary and the market in which the subsidiary operates to determine whether there is objective evidence that the subsidiary is impaired. When such objective evidence exists, the Company recognises an allowance for the impairment loss. Total provision for impairment against these loans is $26,504,621 at 30 June 2021 (2020: $21,415,420) for a net balance of $2,217,432 at 30 June 2021 (2020: $1,655,303).

22. SUBSIDIARIES

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b):

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----- Start of picture text -----

Country of Class of Equity
Name
Incorporation Shares Holding [(1) ]
2021 2020
% %
Middle Island Resources Limited –
Burkina Faso Ordinary 100 100
Burkina Faso SARL
Middle Island Resources Limited –
Australia Ordinary 100 100
Sandstone Operations Pty Ltd
Middle Island Resources Limited –
Australia Ordinary 100 100
Barkly Operations Pty Ltd
----- End of picture text -----

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

23. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

During July 2021 the Company announced that the position of Managing Director had become redundant. Mr Rick Yeates ceased serving as a director and employee of the Company on 13 July 2021 when Mr Bruce Stewart was appointed as a non-executive director and Mr Brad Marwood assumed executive duties, on a temporary part-time basis.

No other matters or circumstances have arisen since the end of the year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods.

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Notes To The Consolidated Financial Statements

24. STATEMENT OF CASH FLOWS

STATEMENT OF CASH FLOWS
	Consolidated	Consolidated
	2021	2020
	$	$
(a) Reconciliation of net loss after income tax to net cash outflow
from operating activities
Net loss for the year	(6,821,170)	(3,174,737)
Non-cash items
Depreciation of non current assets	34,540	47,311
Loss on settlement of liability	75,000	-
Director fees settled through the issue of securities	30,000	-
Net exchange differences	(1,888)	(4,429)
Change in operating assets and liabilities
Decrease/(increase) in trade and other receivables	26,076	(9,765)
Decrease/(increase) in financial assets at fair value through profit or loss	572,814	(99,995)
(Decrease)/increase in trade and other payables	(472,063)	613,239
Increase in employee benefit obligations	19,329	24,059
Net cash outflow from operating activities	(6,537,362)	(2,604,317)

(b) Non-cash investing and financing activities

Non-cash investing and financing activities disclosed in other notes are:

Acquisition of right-of-use assets – note 11; and
Options issued to employees, contractors and suppliers for no cash consideration – note 26.

25. LOSS PER SHARE

(a) Reconciliation of earnings used in calculating loss per share
Loss attributable to the owners of the Company used in calculating basic
and diluted loss per share	(6,821,170)	(3,174,737)

	Number	of shares
	2021	2020
(b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share(1)	118,480,918	59,827,490

(1) Following the consolidation of every 23 shares into 1 share completed on 7 December 2020, the earnings per share presented for the 2020 financial year has been adjusted retrospectively by amending the weighted average number of ordinary shares.

(c) Information on the classification of options

As the Group has made a loss for the year ended 30 June 2021, all options on issue are considered antidilutive and have not been included in the calculation of diluted earnings per share. These options could potentially dilute basic earnings per share.

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Notes To The Consolidated Financial Statements

26. SHARE-BASED PAYMENTS

(a) Options issued to employees, contractors and suppliers

The Group may provide benefits to employees (including directors), contractors and suppliers of the Group in the form of share-based payment transactions, whereby options to acquire ordinary shares are issued as an incentive to improve employee and shareholder goal congruence. The exercise price of the options granted to employees (including directors), contractors and suppliers of the Group and on issue as at 30 June 2021 is 68.77 cents per option (post-consolidation pricing), with an expiry date of 8 November 2021.

Options granted carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share of the Company with full dividend and voting rights.

Set out below are summaries of the options granted (as 30 June in the stated years):

	Consolidated Consolidated	Consolidated	Consolidated
	2021 2021	2020	2020
	Number of Weighted average	Number of	Weighted average
	options exercise price	options	exercise price
	cents		cents
Outstanding at the beginning
of the financial year	55,000,000 2.0	30,000,000	3.0
Granted	- -	25,000,000	0.8
Forfeited/cancelled	- -	-	-
Exercised	(25,000,000) 0.8	-	-
Expired/lapsed	- -	-	-
Adjustment for 1:23 share
consolidation	(28,695,651) 68.8	-	-
Outstanding at year-end	1,304,349 68.8	55,000,000	2.0
Exercisable at year-end	1,304,349 68.8	55,000,000	2.0

The options granted during 2020 were to the underwriter of the Company’s Entitlements Issue completed in February 2020, with these options exercised during the 2021 year.

The weighted average remaining contractual life of share options outstanding at the end of the financial year was 0.4 years (2020: 1.5 years), and the exercise price is 68.77 cents per option (post-consolidation pricing).

Fair value of options granted

No options were granted during the year. The weighted average “fair value” (not market value) of the options granted during the year 2020 was 0.4 cents per option. The price was calculated by using the Black-Scholes European Option Pricing Model applying the following inputs. The Directors do not consider the resultant value as determined by the Black-Scholes European Option Pricing Model is necessarily representative of the market value of the share options issued.

	2021	2020
Weighted average exercise price (cents)	-	0.8
Weighted average life of the options (years)	-	1.8
Weighted average underlying share price (cents)	-	0.6
Expected share price volatility	-	170.0%
Risk free interest rate	-	0.2%

Historical volatility has been used as the basis for determining expected share price volatility as it assumed that this is indicative of future trends, which may not eventuate. The life of the options is based on historical exercise

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Notes To The Consolidated Financial Statements

patterns, which may not eventuate in the future.

(b) Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the year were as follows:

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||||
|---|---|---|
|Consolidated|Consolidated|
|2021|2020|
|$|$|
|Options granted to/vesting with suppliers as part of share issue|
|transaction costs|-|107,500|
|Total share-based payments|-|107,500|

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27. PARENT ENTITY INFORMATION

The following information relates to the parent entity, Middle Island Resources Limited, at 30 June 2021. The information presented here has been prepared using accounting policies consistent with those presented in Note 1.

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||||
|---|---|---|
|2021|2020|
|$|$|
|Current assets|266,283|272,400|
|Non-current assets|101|-|
|Total assets|266,384|272,400|
|Current liabilities|
|Non-current liabilities|272,400|165,693|
|Total liabilities|272,400|165,693|
|Contributed equity|48,611,091|42,737,460|
|Share-based payments reserve|90,000|197,500|
|Accumulated losses|(43,371,027)|(36,352,269)|
|Total equity|5,330,064|6,582,691|
|Loss for the year|(7,018,758)|(2,955,357)|
|Total comprehensive loss for the year|(7,018,758)|(2,955,357)|

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M I D D L E I S L A N D R E S O U R C E S L I M I T E D A N N U A L R E P O R T 2 0 2 1

Directors’ Declaration

In the directors’ opinion:

the financial statements and notes set out on pages 25 to 56 are in accordance with the Corporations Act 2001 , including:
(a) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(b) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable; and
a statement that the attached financial statements are in compliance with International Financial Reporting Standards has been included in the notes to the financial statements.

The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the directors.

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Brad Marwood Executive Director

Perth, 30 September 2021

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Independent Auditors’ Report

ELDERTON

AUDIT PTY LTD

Independent Auditors’ Report

To the members of Middle Island Resources Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Middle Island Resources Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration.

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

(i) giving a true and fair view of the Group's financial position as at 30 June 2021 and of its financial performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described as in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

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

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

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 of the current period. These 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. We have determined the matters described below to be key audit matters to be communicated in our report.

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Independent Auditors’ Report

Capitalised Exploration Expenditure

Refer to Note 12, Capitalised Exploration Expenditure ($1,675,989) and accounting policy Notes 1(m).

Key Audit Matter How our audit addressed the matter The Group have a significant amount of capitalised exploration expenditure. As the carrying value of exploration expenditure represents a significant asset of the Group, we considered it necessary to assess whether facts and circumstances existed to suggest the carrying amount of this asset may exceed its recoverable amount. Our audit work included, but was not restricted to, the following: •We obtained evidence that the Group has valid rights to explore in the areas represented by the capitalised exploration by obtaining independent searches of a sample of the Group’s tenement holdings. •We enquired with management and reviewed budgets to ensure that substantive expenditure on further exploration for and evaluation of the mineral resources in the Group’s areas of interest were planned. •We enquired with management, reviewed announcements made and reviewed minutes of directors’ meetings to ensure that the Group had not decided to discontinue activities in any of its areas of interest. •We enquired with management to ensure that the Group had not decided to proceed with development of a specific area of interest, yet the carrying amount of the exploration and evaluation asset was unlikely to be recovered in full from successful development or sale. Property, plant and equipment Refer to Note 10, Plant and equipment ($2,053,539) and accounting policy Notes 1(l).	Key Audit Matter How our audit addressed the matter The Group have a significant amount of capitalised exploration expenditure. As the carrying value of exploration expenditure represents a significant asset of the Group, we considered it necessary to assess whether facts and circumstances existed to suggest the carrying amount of this asset may exceed its recoverable amount. Our audit work included, but was not restricted to, the following: •We obtained evidence that the Group has valid rights to explore in the areas represented by the capitalised exploration by obtaining independent searches of a sample of the Group’s tenement holdings. •We enquired with management and reviewed budgets to ensure that substantive expenditure on further exploration for and evaluation of the mineral resources in the Group’s areas of interest were planned. •We enquired with management, reviewed announcements made and reviewed minutes of directors’ meetings to ensure that the Group had not decided to discontinue activities in any of its areas of interest. •We enquired with management to ensure that the Group had not decided to proceed with development of a specific area of interest, yet the carrying amount of the exploration and evaluation asset was unlikely to be recovered in full from successful development or sale. Property, plant and equipment Refer to Note 10, Plant and equipment ($2,053,539) and accounting policy Notes 1(l).
Key Audit Matter	How our audit addressed the matter
Property, plant and equipment represents a significant balance recorded in the consolidated statement of financial position. Plant and equipment associated with the_Sandstone_gold project with a net book value at 30 June 2021 of $1,912,170 is on care and maintenance. The evaluation of the recoverable amount of these assets requires significant judgement in assessing impairment. Our audit work included, but was not restricted to, the following: •We obtained an understanding and challenged managements assumptions and analysis of their impairment indicators assessment in relation to the property, plant and equipment. •We reviewed the management’s plan for future activities and corroborated with current exploration activities, next year budget and announcements made till date. •We compared net realisable and carrying value with information from independent sources. •We reviewed the adequacy of the disclosure in the financial statements.

Key Audit Matter
How our audit addressed the matter
The Group have a significant amount of
capitalised exploration expenditure. As
the
carrying
value
of
exploration
expenditure represents a significant
asset of the Group, we considered it
necessary to assess whether facts and
circumstances existed to suggest the
carrying amount of this asset may
exceed its recoverable amount.
Our audit work included, but was not restricted to, the
following:
•We obtained evidence that the Group has valid rights to
explore in the areas represented by the capitalised
exploration by obtaining independent searches of a sample
of the Group’s tenement holdings.
•We enquired with management and reviewed budgets to
ensure that substantive expenditure on further exploration
for and evaluation of the mineral resources in the Group’s
areas of interest were planned.
•We enquired with management, reviewed announcements
made and reviewed minutes of directors’ meetings to
ensure that the Group had not decided to discontinue
activities in any of its areas of interest.
•We enquired with management to ensure that the Group
had not decided to proceed with development of a specific
area of interest, yet the carrying amount of the exploration
and evaluation asset was unlikely to be recovered in full
from successful development or sale.
Property, plant and equipment
Refer to Note 10, Plant and equipment ($2,053,539) and accounting policy Notes 1(l).

Key Audit Matter

How our audit addressed the matter

Property, plant and equipment represents
a significant balance recorded in the
consolidated
statement
of
financial
position. Plant and equipment associated
with the_Sandstone_gold project with a net
book value at 30 June 2021 of $1,912,170
is on care and maintenance.
The evaluation of the recoverable amount
of these assets requires significant
judgement in assessing impairment.
Our audit work included, but was not restricted to, the following:
•We
obtained
an
understanding
and
challenged
managements assumptions and analysis of their impairment
indicators assessment in relation to the property, plant and
equipment.
•We reviewed the management’s plan for future activities and
corroborated with current exploration activities, next year
budget and announcements made till date.
•We compared net realisable and carrying value with
information from independent sources.
•We reviewed the adequacy of the disclosure in the financial
statements.

Other Information

The directors are responsible for the other information. The other information comprises the Review of Operations and Directors Report and other information included in the Group’s annual report for the year ended 30 June 2021 but does not include the financial report and our auditor’s report thereon.

The other information obtained at the date of this auditor’s report is included in the annual report, (but does not include the financial report and our auditor’s report thereon).

Our opinion on the financial report does not cover the other information and accordingly we do not express any

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Independent Auditors’ Report

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 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.

Responsibilities of 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 Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Report

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

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

Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used in the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit

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Independent Auditors’ Report

and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included on pages 17 to 20 of the directors' report for the year ended 30 June 2021.

In our opinion, the Remuneration Report of Middle Island Resources Limited, for the year ended 30 June 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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Elderton Audit Pty Ltd

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Rafay Nabeel Audit Director

Perth 30 September 2021

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ASX Additional Information

Additional information required by Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 22 September 2021.

(a) Distribution of equity securities

Analysis of numbers of equity security holders by size of holding:

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Ordinary Shares
Number of Number of
Holders Shares
1 - 1,000 229 108,062
1,001 - 5,000 714 1,922,780
5,001 - 10,000 290 2,183,537
10,001 - 100,000 680 22,585,765
100,001 and above 150 95,618,078
2,063 122,418,222
The number of shareholders holding less than a marketable parcel of shares are: 973 2,185,547
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ASX Additional Information

(b) Twenty largest shareholders

The names of the twenty largest holders of quoted ordinary shares are:

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Listed Ordinary shares
Number of % of Ordinary
Shares Shares
1 TWYNAM INVESTMENTS PTY LTD 8,321,740 6.80
2 CS THIRD NOMINEES PTY LIMITED 6,865,103 5.61
3 MCCUSKER HOLDINGS PTY LTD 6,760,870 5.52
4 JETOSEA PTY LTD 5,100,000 4.17
5 LOMACOTT PTY LTD 4,347,827 3.55
6 EQUITY TRUSTEES LIMITED 3,980,850 3.25
7 QUENDA INVESTMENTS PTY LTD 3,380,436 2.76
8 CITICORP NOMINEES PTY LIMITED 2,532,090 2.07
9 ZERO NOMINEES PTY LTD 2,400,000 1.96
10 MR JASON TANG 2,050,000 1.67
11 BNP PARIBAS NOMINEES PTY LTD 2,012,027 1.64
12 ZW 2 PTY LTD 1,973,953 1.61
13 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED 1,408,091 1.15
14 MISS BELINDA LEES 1,270,000 1.04
15 NORTHERN GRIFFIN PTY LTD 1,115,218 0.91
16 OCEANVIEW ROAD PTY LTD 1,086,957 0.89
17 GECKO RESOURCES PTY LTD 1,000,000 0.82
18
ARC RESOURCES PTY LTD 950,000 0.78
19 MR BEAU NICHOLLS 916,305 0.75
20 GOLDRICH HOLDINGS PTY LTD 869,566 0.71
58,341,033 47.66
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ASX Additional Information

(c) Substantial shareholders

The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:

Number of Shares Disclosed in the Substantial Holding Notice	Number of Shares Disclosed in the Substantial Holding Notice
Regal Funds Management Pty Ltd	7,243,664
Twynam Investments Pty Ltd	(1)161,400,000
Lomacott Pty Ltd	(1)145,000,000
Jetosea Pty Ltd	(1)31,168,322

(1) Shareholdings advised prior to the 1 for 23 security consolidation completed during December 2020.

(d) Voting rights

All ordinary shares carry one vote per share without restriction.

(e) Unquoted Securities

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Holders of 20% or more of the class
Number of Number of Holder Number of
Class
Securities Holders Name Securities
Unlisted $0.6877 Options, 1,304,349 3 Quenda Investments Pty Ltd expiry 8 November 2021 Super Fund A/C>
Northern Griffen Pty Ltd 434,783
Beau Nicholls 434,783
Unlisted $0.1817 cent 9,989,324 126 N/A N/A
Options, expiry 31 January
2022
Unlisted $0.1771 cent 10,317,990 123 N/A N/A
Options, expiring 31 January
2022
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Middle Island RESOURCES LIMITED

Suite 1, 2 Richardson Street WEST PERTH WA 6005 Website: www.middleisland.com.au Email: [email protected] Tel: +61 8 9322 1430 Fax: +61 8 9322 1474

AI assistant

MIDDLE ISLAND RESOURCES LIMITED — Annual Report 2021

65307_rns_2021-10-19_a1720f91-2156-4e30-87bb-b535f3e96daa.pdf

Operations OverviewCorporate Directory

ABN 70 142 361 608

SHARE REGISTER

Automic Pty Ltd

DIRECTORS

AUDITORS

Elderton Audit Pty Ltd

COMPANY SECRETARY

REGISTERED OFFICE

EMAIL

INTERNET ADDRESS

PRINCIPAL PLACE OF BUSINESS

POSTAL ADDRESS

STOCK EXCHANGE LISTING

SOLICITORS

Williams and Hughes

2021

Operations Overview

CORPORATE

Finance

Capital Structure

Acuity Controlled Placement Agreement

Demerger of Barkly Copper-Gold Assets

Annual General Meeting

Director Appointment

Strategy

BARKLY COPPER-GOLD PROJECT (100%) – NORTHERN TERRITORY

Crosswinds Copper Prospect

Tenure

Planned Exploration

SANDSTONE GOLD PROJECT (100%) – WESTERN AUSTRALIA

2020-21 Drilling Campaign

Resource Estimation

Feasibility and Mill Upgrade Studies

Exploration and Resource Definition Plan

Troy Royalty Termination

Third Party Mill Feed

Tenure

Project generation objective

SAFETY, ENVIRONMENTAL & SOCIAL

Health & Safety

Environment

Social

SANDSTONE GOLD PROJECT – RESOURCES AND RESERVES STATEMENT (30 JUNE 2021)

Mining Tenements

DIRECTORS

Names, qualifications, experience and special responsibilities

Peter Thomas, (Non-Executive Chairman)

COMPANY SECRETARY

Dennis Wilkins, B.Bus, AICD, ACIS

Interests in the shares and options of the Company and related bodies corporate

PRINCIPAL ACTIVITIES

DIVIDENDS

FINANCIAL REVIEW

Operating Results for the Year

Shareholder Returns

Directors’ Report

Risk Management

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

ENVIRONMENTAL REGULATION AND PERFORMANCE

REMUNERATION REPORT

Principles used to determine the nature and amount of remuneration

Remuneration Policy

Performance based remuneration

Directors’ Report

Company performance, shareholder wealth and key management personnel remuneration

Use of remuneration consultants

Voting and comments made at the Company’s 2020 Annual General Meeting

Details of remuneration

Key management personnel of the Group

Directors’ Report

Service agreements

Dennis Wilkins, Alternate Director until 31 January 2021 and Company Secretary:

Share-based compensation

Equity instruments held by key management personnel

MIDDLE ISLAND RESOURCES LIMITED Annual Report 2021