Half-year Report

AIM and ASX listed company Salt Lake Potash Limited ("SO4" or the "Company"), announces its interim results for the half-year ended 31 December 2019.

The full version of the Interim Financial Report can be viewed at www.so4.com.au.

OPERATING AND FINANCIAL REVIEW

The Company is focused on rapidly progressing the development of its Lake Way Project (the Project), which is on-track for commissioning in December 2020 and first shipment in the March quarter of 2021. Lake Way's location and logistical advantages make it the ideal location for the Company's first Sulphate of Potash (SOP) operation.

The Company's long-term plan is to develop an integrated SOP operation, producing from several of its nine salt lakes. SO4 will progressively explore each of its lakes with a view to estimating resources and determining development potential. Exploration of the lakes will be prioritised based on likely transport costs, scale, permitting pathway and brine chemistry.

HIGHLIGHTS

Achievements during and subsequent to the half year ended 31 December 2019 included:

Completion of the Bankable Feasibility Study (BFS) for Lake Way

· Study for the development of a 245kt per annum SOP operation at Lake Way over 20 years demonstrated outstanding economic returns

· A (real) NPV8 of A$479m, IRR of 28% (post-tax) and a 3.5 year capital payback period

· Steady state EBITDA of A$111m per annum and after tax Free Cash Flow of A$78m

· First quartile operating costs for global SOP producers with a C1 cash cost estimate of A$302/t (US$205/t)

Debt and equity financing secured

· In August 2019 project financing for the Lake Way Project of up to US$150m was agreed with Taurus Funds Management, staged as follows:

o Stage 1 Facility: Initially US$30m, subsequently extended to US$45m, to finance early construction work

o Project Development Facility: US$150m, upon fulfilment of conditions precedent, which will be used to refinance the Stage 1 Facility and for project development and working capital

· Two equity capital raisings were also completed in the period:

o In August 2019, 10.58 million shares to Fidelity International at A$0.70 each to raise A$7.4 million before costs

o In December 2019, 33.6 million shares to a number of new Australian institutional investors and existing institutional shareholders at A$0.70 each to raise A$23.5 million before costs

Continued rapid project development

· Stage 1 ponds continued to operate in line with expectations, precipitating salts to be harvested in the December 2020 quarter

· Stage 2 pond construction commenced and subsequently completed (in February 2020), taking the total operating pond size to 400ha

· 35km of trenches were completed

· Ground clearing and early civil construction commenced at the process plant and village sites from January 2020

Key marketing agreements signed for 91% of planned production

· The Company has signed binding term sheets for the sale of 224,000t per annum of premium SOP from the Lake Way Project including:

o HELM AG - 50,000t per annum for 10 years in South East Asia and the Middle East

o Unifert - 60,000t per annum for 5 years in the Middle East and Africa

o Indagro - 50,000t per annum for 5 years in North America and Europe

o Fertisur - 60,000t per annum for 5 years in South America

o Mitsui & Co. (Asia Pacific) - 4,000t per annum for 5 years in Asia

Lake Way reserve estimate completed

· High-grade Probable Ore Reserve Estimate of 5.4Mt SOP (2.4Mt contained potassium at an initial grade of 6.8kg/m3 ) underpins a 20-year life of mine

· Increase in the paleochannel basal sands Mineral Resource Estimate of ~57% to 6.0Mt SOP in Total Porosity at 6.1kg/m3 of potassium (2.2Mt in Drainable Porosity) supports additional production bores

High product quality specification confirmed

· Very high-grade potassium (>53% K2O) product confirmed, with a low chloride (95% in one minute

· Premium grade specifications from independent pilot plant test-work supports premium pricing

· CRU estimates water-soluble SOP trades on average at a 20% premium to standard SOP

Acquisition of strategic tenement package from Blackham Resources

· In July 2019, SO4 and Blackham entered into a Sales Agreement whereby SO4 acquired a package of tenements and other key assets for the Lake Way Project

· SO4 has exercised its option under the Sales Agreement to acquire Blackham's southern water borefield infrastructure outright (for $3m), securing long term water supply.

Native Title approval

· In November 2019, the Company executed the Native Title Land Access Agreement (LAA) with Tarlka Matuwa Piarku (Aboriginal Corporation) RNTBC (TMPAC) for the whole of the Lake Way Project.

· The landmark LAA provided for the continuing development of the Lake Way Project and significant benefits to TMPAC and the broader community.

· TMPAC have entered into the LAA with SO4 on behalf of the Wiluna People who are the recognised Native Title Holders of the land covering the Lake Way Project area. The LAA provides tenure and native title approval security to SO4 for the duration of the Project and covers the whole of the Lake Way Project area.

Exploration at Lake Marmion

· The Company continued to progress its assessment of the other lakes in its portfolio in order to prioritise future potential development.

· During Q4 2019 exploration activities commenced at Lake Marmion with a view to reporting a maiden mineral resource estimate.

· Work at Lake Marmion consisted of drilling, installation of piezometers, slug tests for hydraulic conductivity estimation, digging of trenches, sampling and testing for porosity, hydraulic conductivity and specific yield determination.

LAKE WAY PROJECT

Lake Way is located in the Northern Goldfields Region of Western Australia, less than 15km south of Wiluna. The Lake Way Project tenements comprise approximately 386km2.

SO4 currently holds nine Mining Leases and seven Exploration Licences which cover the whole of the Lake Way surface and key strategic areas off-lake, including the extensive paleochannel and proposed process plant and village area. The Company has secured various Miscellaneous Licenses within the surrounding Lake Way area to support key infrastructure including process water bore fields, gas pipelines and access roads.

The recently completed transaction with Blackham Resources Ltd (Blackham), the owner of the adjacent Matilda-Wiluna Gold Operation, has secured access to process water rights in the Southern Borefield, in addition to key tenement acquisitions.

The October 2019 Bankable Feasibility Study for the commercial scale development of a 245,000t per annum Sulphate of Potash (SOP) operation at Lake Way demonstrates that the Project will generate outstanding returns with low operating costs and capital intensity.

Fast-tracked construction progressing on schedule

The Company has now completed both the Stage 1 and Stage 2 evaporation pond networks, an area totalling 400ha.

In addition to the high-grade brine from Williamson Pit, the ponds have also been filled with brine from 35km of brine abstraction trenches that have been completed to date. Following completion of Stage 2, the construction team shifted focus to the process plant and village where clearing and early civil work has commenced.

The Project remains on-track to commence plant commissioning in December 2020, with first SOP sales in the March quarter of 2021.

Offtake for >91% of output secured

SO4 will initially produce two products from Lake Way:

· A high potassium low-chloride standard powder SOP grading >53% K2O

· A fertigation grade, high potassium low-chloride and water-soluble SOP, used in micro irrigation

During Q4 2019 and moving into Q1 2020 the Company secured binding offtake for 224kt of SOP with five partners who will distribute the product across six continents.

SO4's marketing strategy for the sale and distribution of its premium grade SOP is to work with selected industry leading partners targeting high growth markets and focussing on geographical areas with the highest concentration of crops which benefit from SOP fertilisers. SO4 has been working with each of the offtake counterparties to execute final purchase agreements, based upon the binding terms sheets.

Approvals continue to progress

Lake Way is located in an area with a long history of minerals exploration and associated environmental assessment. SO4 has taken advantage of existing environmental knowledge to support the permitting of its early works programme and focus additional investigations required for permitting of full-scale operations.

Environmental work to date has not identified any social or environmental factors that could constitute fatal flaws or insurmountable obstacles to gaining necessary statutory approvals. The final outstanding approvals for the Lake Way Project are currently being progressed.

The pond and trench construction activities for Stage 2 Project development works commenced in Q4 2019 after receipt of the Project Management Plan approval from Department of Mines, Industry Regulation and Safety (DMIRS). These construction activities were determined by the Environmental Protection Agency (EPA) to not require formal assessment under Part IV of the Environmental Protection Act 1986 and have an approved Mining Proposal from the Department of Mines, Industry Regulation and Safety (DMIRS) and a Works Approval from the Department of Water and Environmental Regulation (DWER).

Further approvals are required for the full scope of the Project with allowance for these approvals included in the Project schedule. The EPA has determined that the full project scope requires formal assessment with no public review. This assessment process is progressing well with a draft scoping document accepted and the commencement of the supplemental studies required. Field work for the supplemental studies have been completed and reports are expected to be finalised in the current quarter.

In respect of the Processing Plant construction, the Company received a Works Approval from the Department of Water and Environmental Regulation, a Mining Proposal approval from Department of Mines, Industry Regulation and Safety and a Native Vegetation Clearing Permit. These approvals have allowed the bulk earthworks and civil works for the plant site to commence.

The Company has continued to obtain Ministerial consent to use the land under section 18 of the Aboriginal Heritage Act 1972, for additional development as needed to meet ongoing project requirements.

SO4 has obtained the necessary water licences to extract process water and for brine extraction from the lake. Final brine extraction licences are being sought. Project approvals for the construction of the initial paleo bores to obtain brine from the paleo channel have been received and drilling has commenced.

Native Title & Heritage

In November 2019, the Company executed the Native Title Land Access Agreement (LAA) with Tarlka Matuwa Piarku (Aboriginal Corporation) RNTBC (TMPAC) for the whole of the Lake Way Project. The landmark LAA will provide for the continuing development of the Lake Way Project and significant benefits to TMPAC and the broader community.TMPAC have entered into the LAA with SO4 on behalf of the Wiluna People who are the recognised Native Title Holders of the land covering the Lake Way Project area. The LAA provides tenure and native title approval security to SO4 for the duration of the Project and covers the whole of the Lake Way Project area. In line with customary industry standards, TMPAC and the broader

Wiluna Community will receive significant economic, social and environmental benefits, including:

· Royalty payments;

· Community support programs;

· Employment & training;

· Aboriginal business development and contracting opportunities;

· Heritage protection and land management opportunities.

The LAA includes an agreed procedure for the grant of any necessary statutory Aboriginal heritage consents for project operations as well as exclusion zones to protect areas of particular cultural sensitivity, all of which sit outside the footprint of proposed operations.The execution of the LAA is a major milestone for the Lake Way Project and ensures remaining Mining Leases and associated tenure will be granted to support the rapid development of the Lake Way Project.

SO4 has been actively engaging with TMPAC and the broader Wiluna community for over 18 months as part of its commitment to establish early consultation and engagement into the design and implementation of the Lake Way Project.

CORPORATE & FINANCING

In August 2019, SO4 announced that it had mandated Taurus Funds Management (Taurus or the Lenders), to provide up to US$150m project financing for the Lake Way Project. The Stage 1 Facility (Facility) provided initial access to US$30m funding for early construction works for the Lake Way Project and enabled completion of the BFS prior to drawdown of the main Project Development Facility (PDF). The Facility also funded civil works including the second stage of trenches and key evaporation ponds currently under construction, which will provide the initial harvest salts to enable the feed for plant commissioning.In December 2019 the facility was extended by a further US$15m on terms consistent with the original Stage 1 terms. The extended Facility will be refinanced upon drawdown of the PDF. Following completion of the BFS, SO4 has been working with Taurus to complete documentation and satisfy the conditions precedent to the PDF. In addition to the PDF, the Company is assessing a range of alternative and complementary funding options to ensure that it is fully funded in the coming months to complete construction in line with the Project schedule.

In addition to extending the Taurus facility, the Company raised A$30.9 million before costs in two placements during the half year. In August 2019, the Company placed 10.58 million shares to Fidelity International at A$0.70 each to raise A$7.4 million before costs and in December 2019 the Company placed approximately 33.6 million shares to a number of new Australian institutional investors and existing institutional shareholders at A$0.70 each to raise A$23.5 million before costs. The Placements contributed to the continued rapid development of the Lake Way Project, including the acquisition of strategic tenement package from Blackham, construction of Stage 2 on-lake infrastructure and commencement of site works for the process plant in early 2020, along with ongoing exploration of other lakes and general working capital.

EXPLORATION

The Company continued to progress its assessment of the other lakes in its portfolio in order to prioritise future potential development. In the half year to December 2019 exploration activities commenced at Lake Marmion with a view to reporting a maiden mineral resource estimate. Work at Lake Marmion consisted of the following:

· Drilling, completion and development of 37 100mm diameter auger holes as piezometers between 3m and 7m depth;

· Installation of 17 piezometers with pressure transducers to monitor long term water level variations;

· Carrying out of Slug Tests for hydraulic conductivity estimation on 19 piezometers;

· Installation of 20 piezometers at the test trench location to monitor the change in water level due to the trench test pumping;

· Digging of 2 trenches and 5 test pits with an amphibious excavator for test pumping;

· 36 insitu core samples from the piezometers, 20 of which have been sent to a laboratory for porosity, hydraulic conductivity and specific yield determination;

· 21 grab samples for soil analysis;

· 8 Column samples of which 6 were sent to a laboratory to assess the impact of dilution in response to recharge events;

· 62 brine samples for grade analysis, including duplicates, collected from piezometers, pits and hand dug pits. Results from this program are pending and will be reported when available.

HEALTH AND SAFETY

The Company has taken active precautionary measures in response to the novel coronavirus (COVID-19) to protect the health and wellbeing of its people, contractors, visitors and community that it works in. SO4 has adopted all relevant recommendations from the health authorities to help protect against the spread of COVID-19 and is monitoring the situation daily, while at the same time continuing to deliver the construction of the Lake Way Project.

Results of Operations

Net loss after tax for the half year ended 31 December 2019 was $13,325,505 (31 December 2018: $5,809,606). This result is attributable to the following:

(i) Exploration and evaluation expenses totalling $12,249,743 (31 December 2018: $4,696,515). During the six month reporting period, the Company rapidly progressed its Lake Way Project by conducting significant exploration activity, process testwork, completion of a bankable feasibility study (BFS) and obtaining Native Title approval. Under the Group's accounting policy, the Group expenses all exploration and evaluation expenditure subsequent to the acquisition of the rights to explore and up to the successful completion of a bankable feasibility study for each separate area of interest;

(ii) Pre-development expenses of $12,850,219 (31 December 2018: Nil) relating to the construction of the first phase of the commercial scale SOP brine evaporation ponds and dewatering of the Williamson Pit. These pre-development costs have been expensed in accordance with the Group's accounting policy of expensing exploration and pre-development expenditure incurred by the Group up to the successful completion of a BFS.

Following completion of the BFS for the Lake Way Project in October 2019, the Group has recognised a mine development asset and commenced capitalising mine development expenditure with effect from 1 November 2019.

(iii) Share based payments expense of $3,563,842 (31 December 2018: $43,762), which are attributable to the Group's accounting policy of expensing the value (estimated using an option pricing model, and performance rights valued using the underlying share price) of incentive securities issued to key employees and consultants. The value is measured at grant date and recognised over the period during which the option/rights holder become unconditionally entitled to the options and/or rights.

(iv) Business development expenses of $1,790,686 (31 December 2018: $481,343) which are attributable to additional business development activities and investor relations activities required to support the growth and development of the Lake Way Project and the Company's broader portfolio of Lakes.

(v) Income tax benefit of $18,793,903 (31 December 2018: Nil) due to the Group recognising previous tax losses for the first time as the Company is anticipated to make future profits from the Lake Way Project.

Financial Position

At 31 December 2019, the Group had cash reserves of $36.2 million (30 June 2019: $19.3 million) and net assets of $38.6 million (30 June 2019: $14.7 million). In addition, the Taurus Stage 1 Facility had US$15 million available to draw down as at 31 December 2019. The Group is in a financial position to conduct its current and planned exploration and development activities.

SIGNIFICANT POST BALANCE DATE EVENTS

Other than as disclosed below, at the date of this report there were no significant events occurring after balance date requiring disclosure.

On 25 February 2020, the Group announced it had completed Stage 2 of the on-lake construction of its evaporation pond and trench network. This milestone represents the completion of construction of a total 400ha of evaporation ponds and 35km of brine abstraction trenches providing the Group with the platform to provide feed salts to the process plant in 2021.

AUDITOR'S INDEPENDENCE DECLARATION

Section 307C of the Corporations Act 2001 requires our auditors, Ernst & Young, to provide the directors of Salt Lake Potash Limited with an Independence Declaration in relation to the review of the half year financial report. This Independence Declaration is attached to and forms part of this Directors' Report.

Signed in accordance with a resolution of the Directors.

TONY SWIERICZUK

CEO & Managing Director

13 March 2020

Competent Persons Statement

The information in this announcement that relates to Production Targets and Ore Reserves for Lake Way is extracted from the announcement entitled 'Outstanding Bankable Feasibility Results for Lake Way' dated 11 October 2019. This announcement is available to view on www.so4.com.au. The information in the original ASX Announcement that related to Production Targets and Ore Reserves was based on, and fairly represents, information compiled by Mr Ben Jeuken, who is a member of the Australasian Institute of Mining and Metallurgy and a member of the International Association of Hydrogeologists, and Mr Robert Kinnell, who is a member of the Australasian Institute of Mining and Metallurgy and a Fellow of the Geological Society of London. Mr Jeuken is employed by Groundwater Science Pty Ltd, an independent consulting company. Mr Kinnell is a full time employee of Salt Lake Potash Limited. Mr Jeuken and Mr Kinnell have sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity, which they are undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Salt Lake Potash Limited confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement. Salt Lake Potash Limited confirms that the form and context in which the Competent Person's findings are presented have not been materially modified from the original market announcement.

The information in this announcement that relates to Exploration Results and Mineral Resources for Lake Way is extracted from the announcement entitled 'Outstanding Bankable Feasibility Results for Lake Way' dated 11 October 2019. This announcement is available to view on www.so4.com.au. The information in the original ASX Announcement that related to Exploration Results and Mineral Resources was based on, and fairly represents, information compiled by Mr Ben Jeuken, who is a member of the Australasian Institute of Mining and Metallurgy and a member of the International Association of Hydrogeologists. Mr Jeuken is employed by Groundwater Science Pty Ltd, an independent consulting company. Mr Jeuken has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Salt Lake Potash Limited confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement. Salt Lake Potash Limited confirms that the form and context in which the Competent Person's findings are presented have not been materially modified from the original market announcement.

The information in this announcement that relates to Process Testwork Results is extracted from the announcement entitled 'Premium Grade Water Soluble Sulphate of Potash Produced from Lake Way Salts' dated 18 September 2019. This announcement is available to view on www.so4.com.au. The information in the original ASX Announcement that related to Process Testwork Results was based on, and fairly represents, information compiled by Mr Bryn Jones, BAppSc (Chem), MEng (Mining) who is a Fellow of the AusIMM. Mr Jones is a Director of Salt Lake Potash Limited. Mr Jones has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Salt Lake Potash Limited confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement. Salt Lake Potash Limited confirms that the form and context in which the Competent Person's findings are presented have not been materially modified from the original market announcement.

The information in this announcement that relates to Processing and the Process Plant is extracted from the announcement entitled 'Outstanding Bankable Feasibility Results for Lake Way' dated 11 October 2019. This announcement is available to view on www.so4.com.au. The information in the original ASX Announcement that related to Processing and the Process Plant was based on, and fairly represents, information provided by Mr Kevin Martina, Professional Engineer, who is a Member of the Association of Professional Engineers and Geoscientists of Saskatchewan (APEGS), a 'Recognised Professional Organisation' (RPO) included in a list promulgated by the ASX from time to time. Mr Martina is employed by Wood Canada Limited, Saskatoon. Wood is engaged as a consultant by Salt Lake Potash Limited. Mr Martina has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Salt Lake Potash Limited confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement. Salt Lake Potash Limited confirms that the form and context in which the Competent Person's findings are presented have not been materially modified from the original market announcement.

Production Target

The Lake Way 245ktpa Production Target stated in this presentation is based on the Company's Bankable Feasibility Study as released to the ASX on 11 October 2019. The information in relation to the Production Target that the Company is required to include in a public report in accordance with ASX Listing Rule 5.16 and 5.17 was included in the Company's ASX Announcement released on 11 October 2019. The Company confirms that the material assumptions underpinning the Production Target referenced in the 11 October 2019 release continue to apply and have not materially changed.

Forward Looking Statements

This announcement may include forward-looking statements. These forward-looking statements are based on Salt Lake Potash Limited's expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Salt Lake Potash Limited, which could cause actual results to differ materially from such statements. Salt Lake Potash Limited makes no undertaking to subsequently update or revise the forward-looking statements made in this announcement, to reflect the circumstances or events after the date of that announcement.

DIRECTORS' DECLARATION

In the opinion of the Directors of Salt Lake Potash Limited:

1. the interim consolidated financial statements comprising the statement of profit or loss and other comprehensive income, statement of financial position, statement of cash flows, statement of changes in equity and notes set out on pages 12 to 29 are in accordance with the Corporations Act 2001 including:

i) giving a true and fair view of the financial position of the consolidated entity as at 31 December 2019 and of its performance and cash flows for the six months ended on that date; and

ii) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001; and

2. Subject to matters stated in Note 1(b) of the interim financial report, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of Directors:

TONY SWIERICZUK

CEO & Managing Director

13 March 2020

CONSOLIDATED STATEMENT OF PROFIT

OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

The above Consolidated Statement of Profit or Loss and other Comprehensive Incomeshould be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of Compliance

The interim condensed consolidated financial statements of the Group for the half year ended 31 December 2019 were authorised for issue in accordance with the resolution of the directors on 12 March 2020.

The interim condensed consolidated financial statements for the half year reporting period ended 31 December 2019 have been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

This half year financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report of Salt Lake Potash Limited for the year ended 30 June 2019 and any public announcements made by Salt Lake Potash Limited and its controlled entities during the half year reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

(b) Basis of Preparation of Half Year Financial Report

The financial statements have been prepared on an accruals basis and are based on historical cost. All amounts are presented in Australian dollars.

The interim condensed consolidated financial statements for the half year have been prepared on a going concern basis which assumes the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business.

For the half year ended 31 December 2019, the Consolidated Entity incurred a net loss of $13,325,505 (31 December 2018: $5,809,606) and experienced net cash outflows from operating and investing activities of $55,515,096 (2018: $5,960,449). As at 31 December 2019, the Group had cash and cash equivalents of $36,235,244 (30 June 2019: $19,304,075) and had received $30,415,500 from shareholder participants. In addition, a further US$15 million was available for drawdown under the Taurus Stage 1 Facility as at 31 December 2019. The Group has net current liabilities of $23,551,073 as at 31 December 2019 due primarily to the Taurus Stage 1 Facility being repayable 2 August 2020 (2019: net current assets of $12,419,123).

The Company is developing the Lake Way Project and will require additional funds from the second stage Taurus Project Development Facility and complementary or alternative funding sources in order to continue to complete the development and construction of the Project.

In August 2019, the Company mandated Taurus Funds Management (Taurus) to provide US$150m staged project financing for the Lake Way Project. The Stage 1 Facility documentation has been executed and conditions satisfied, which has enabled the Company to draw down the initial facility of US$45m. The Project Development Facility (PDF) for up to US$150m will be used for refinancing the Stage 1 Facility and for project development and working capital associated with the development of the Lake Way Project. The PDF will become available upon completion and satisfaction of conditions precedent. Conditions precedent are customary for a project financing of this nature and include execution of financing agreements, satisfying the equity requirement based upon a Cost to Complete analysis and offtake agreements being finalised.

Negotiations on the PDF are substantially advanced, and Directors are confident that they will be able to agree documentation and satisfy the conditions precedent for initial utilisation to fund the ongoing development of the Lake Way Project in the next month. The Directors expect to repay the Taurus Stage 1 Facility prior to the repayment date from the draw down of the PDF.

In addition to the PDF, the Company is assessing a range of alternative and complementary funding options, including debt, royalty and equity to ensure that it is fully funded in the coming months to complete construction in line with the Project schedule.

The Company has a strong institutional shareholder base and the Directors have been involved in a number of recent successful capital raisings for the Company and for other listed resource companies. Accordingly, they are satisfied that they will be able to raise additional capital when required to enable the Consolidated Entity to meet its obligations as and when they fall due, and consider that it is appropriate to prepare the financial statements on the going concern basis.

In the event that the Consolidated Entity is unable to achieve the matters referred to above, uncertainty would exist that may cast doubt on the ability of the Consolidated Entity to continue as a going concern.

(c) New Standards, Interpretations and amendments adopted by the Group

In the current period, the Group has adopted all of the new and revised standards, interpretations and amendments that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2019. The adoption of new and revised standards and amendments has not affected the amounts reported for the current or prior half-year periods, with the exception of AASB 16 Leases.

AASB 16 Leases

During February 2016, the AASB issued AASB 16, which replaces the leases guidance in AASB 117 Leases and related interpretations. Lessor accounting under AASB 16 is substantially unchanged from AASB 117. Lessors will continue to classify leases as either operating or finance leases using similar principles as in AASB 117. Therefore, AASB 16 did not have an impact for leases where the Group is the lessor.

The Group has applied AASB 16 for the first time on 1 July 2019, using the modified retrospective approach. Thus, no restatement of comparative information. The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying AASB 117 and related interpretations at the date of initial application. The Group also applied the practical expedients wherein it applied the short-term leases exemptions to leases with a lease term that ends within 12 months at the date of initial application. The Group has also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option ('short-term leases'), and lease contracts for which the underlying asset is of low value ('low-value assets').

The Group has lease contracts over office leases and car bays. Before the adoption of AASB 16, the Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease. A lease is classified as a finance lease if it transferred substantially all of the risks and rewards incidental to ownership of the leased asset to the Group otherwise it was classified as an operating lease. Finance leases are capitalised at the commencement of the lease using the inception date fair value of the motor vehicle or, if lower, the present value of the minimum lease payments. Lease payments are apportioned between interest (recognised as finance costs) and reduction of the lease liability. In an operating lease, the leased property was not capitalised and the lease payments were recognised as rent expense in the statement of profit or loss on a straight line basis over the lease term. Any prepaid rent and accrued rent were recognised under prepayments and trade and other payables, respectively.

Upon adoption of AASB 16, the Group applied a single recognition and measurement approach for all leases that it is the lessee, except for short term leases and leases of low value assets. The standard provides specific transition requirements and practical expedients, which has been applied by the Group.

Leases previously classified as finance leases

The Group did not change the initial carrying amounts of recognised assets and liabilities at the date of initial application for leases previously classify as finance leases (i.e. the right-of-use assets and lease liabilities equal the lease assets and liabilities recognised under AASB 117). The requirements of AASB 16 were applied on these leases from 1 July 2019.

Leases previously accounted for as operating leases

The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term leases and leases of low value assets. The Group has elected to present right-of-use assets and lease liabilities separately. On transition, the right-of-use assets were recognised based on an amount equal to the lease liabilities. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application. The discount rate applied was at the range of 3.80% - 3.95%. The Group also applied the available practical expedients wherein it excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application.

The effect of adoption AASB 16 as at 1 July 2019 is as follows:

(i) Reconciliation of operating lease commitments

The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as of 30 June 2019 as follows:

(ii) Amounts recognised in the statement of financial position and profit or loss

Set out below are the carrying amounts of the Group's right-of-use assets and lease liabilities and the movements during the period:

(iii) Summary of new accounting policies for leases (applied from 1 July 2019)

Below are the new accounting policies of the Group upon adoption of AASB 16 which have been applied from the date of initial application:

Leases

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identifiable asset for a period of time in exchange for consideration.

Right-of-use Assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

Lease Liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees and do not include non-lease components of a contract. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the substance of fixed lease payments or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low value assets

The Group applies the short term lease recognition exemption to its short term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low value assets recognition exemption to leases of office equipment that are considered of low value (i.e. below $5,000). Lease payments on short term leases and leases of low value assets are recognised as an expense on a straight line basis over the lease term.

Significant judgement in determining the lease term of contracts with renewal options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Group has the option, under some of its leases to lease the assets for additional terms of one to four years. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g. a change in business strategy).

AASB Interpretation 23 Uncertainty over Income tax treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of AASB 112 Income Taxes ("AASB 112"). It does not apply to taxes or levies outside the scope of AASB 112, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:

- Whether an entity considers uncertain tax treatments separately

- The assumptions an entity makes about the examination of tax treatments by taxation authorities;

- How an entity determines taxable profit (tax losses), tax bases, unused tax losses, unused tax credit and tax rates; and

- How an entity considers changes in facts and circumstances.

An entity must determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty needs to be followed.

The Group applies significant judgment in identifying uncertainties over income tax treatments. For the 31 December 2019 period, the Group has used significant judgement over the following areas:

Deferred Tax Asset Recognition

Following completion of the Bankable Feasibility Study for the Lake Way Project that demonstrated the technical feasibility and commercial viability of the Project in October 2019, the Group has determined that it is appropriate for the Company to transfer the Lake Way Project 'Exploration and evaluation assets' to 'Mine Development' with effect from 1 November 2019.

Due to the Group entering the phase of Mine Development, it is has been deemed probable that future profits will be able to be offset against available prior year tax losses and other deferred tax assets. The Group has recognised a deferred tax asset of $19,523,763 and income tax benefit for the 31 December 2019 period totalling $18,793,903.

2. OPERATING SEGMENTS

AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Consolidated Entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

The Consolidated Entity operates in one segment, being Sulphate of Potash exploration and mine development in the Northern Goldfields Region on Western Australia. This is the basis on which internal reports are provided to the Directors for assessing performance and determining the allocation of resources within the Consolidated Entity.

3. INCOME TAX EXPENSE

*Following completion of a Bankable Feasibility Study for the Lake Way Project in October 2019 that demonstrated the economic returns of the Project, the Group has determined that it is now considered probable that sufficient taxable income will be generated in future periods and therefore deferred tax assets have been recognised for the first time during half-year ended 31 December 2019 for temporary differences and unused tax losses.

4. EXPLORATION AND EVALUATION ASSETS

Note:

1 The SOP Projects, including Lake Wells and Lake Ballard, were acquired in 2015. The ultimate recoupment of costs carried forward for exploration and evaluation is dependent on the successful development and commercial exploitation or sale of the respective areas of interest. In accordance with the Group's accounting policy for exploration and evaluation expenditure, the acquisition costs of these tenements remain as an exploration and evaluation asset.

2 The Company completed the acquisition of tenements from Blackham Resources Limited on 8 October 2019. The cost of acquisition was initially recognised as an 'Exploration and evaluation asset' before being transferred to Mine Development assets following completion of a bankable feasibility study for the Lake Way Project with effect from 1 November 2019.

5. MINE DEVELOPMENT

Expenditure is distinguished between 'Exploration and evaluation assets' and 'Mine Development' once the work completed to date supports the future development of the project and such development receives appropriate approvals. Following this point, all subsequent expenditure on the construction, installation or completion of infrastructure facilities is capitalised in 'Mine Development'. Development expenditure is net of proceeds from the sale of ore extracted during the development phase to the extent that it is considered integral to the development of the mine. Any costs incurred in testing the assets to determine if they are functioning as intended, are capitalised, net of any proceeds received from selling any product produced while testing. After production starts, all assets included in the 'Mine Development' are then transferred to 'Producing mines' and amortisation commences.

Borrowing costs that are directly attributable to the acquisition, construction or production of mine development assets, are also capitalised. Capitalisation of borrowing costs ceases once productions starts and assets included in 'Mine Development' are transferred to 'Producing Mines' or are otherwise ready for their intended use or sale.

Following completion of the bankable feasibility study on the Lake Way Project in October 2019, the Group has determined that it is appropriate to transfer the Lake Way Project from 'Exploration and evaluation assets' to 'Mine Development' with effect from 1 November 2019 and for all subsequent expenditure on the construction, installation or completion of infrastructure facilities to be capitalised in 'Mine Development'. This date marks the first month-end post completion of the BFS and the commencement of the second stage of on-lake construction at Lake Way.

5. INTEREST BEARING LIABILITIES

Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Transaction costs that relate to these instruments are included in the calculation of the amortised cost using the effective interest method. Any gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised.

On 5 August 2019, the Company announced that it had secured up to US$150m in project financing for the Lake Way Project from Taurus Funds Management (Taurus) with a staged facility. The first stage for early construction works was extended in December 2019 from US$30m to US$45m at an interest rate of 9.75% per annum (Stage 1 Facility). As at 31 December 2019, the Company had drawn down US$30m of the US$45m facility.

The second stage Project Development Facility (PDF) of up to US$150m at an interest rate of 9.0% per annum will be used to refinance the Stage 1 Facility and fund project development. Following completion of the BFS, SO4 has been working with Taurus to complete documentation and satisfy the conditions precedent to the PDF.

The Stage 1 Facility is repayable on or before 1 August 2020. Taurus have security over the Lake Way assets.

6. PROVISIONS

7. CONTRIBUTED EQUITY

(b) Movement in Share Capital during the past six months

8. RESERVES

(a) Movement in share-based payment reserve during the past six months

9. SHARE-BASED PAYMENTS

For the six months end 31 December 2019, the Group recognised $3,563,842 in share-based payments expenses in the statement of profit or loss (31 December 2018: $43,762) including the issue of shares to employees in lieu of vested performance rights that expired, issue of shares to consultants in lieu of payment of fees totalling $442,827, and expensing the fair value of equity instruments (options and performance rights) over the vesting period totalling $3,283,082. This expense was partially offset by the expiry/cancellation of unvested performance rights and performance shares totalling ($162,067).

(a) Options

During the current period 14,200,000 unlisted options were granted consisting of 1,000,000 granted on 22 July 2019 (Series 1- Series 2), 9,000,000 granted on 2 August 2019 (Series 3), 3,000,000 granted on 16 September (Series 4- Series 5), 200,000 granted on 14 October (Series 6- Series 7), 1,000,000 granted on 11 November 2019 (Series 8). The fair value of the equity-settled incentive options granted is estimated as at the date of grant using the Binomial option valuation model taking into account the terms and conditions upon which the options were granted.

Notes:

1 The dividend yield reflects the assumption that the current dividend payout will remain unchanged.

2 The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome.

3 The expected life of the options is based on the expiry date of the options as there is limited track record of the early exercise of options.

(b) Performance Rights

During the current period 4,890,398 performance rights were granted subject to various milestones. The fair value of performance rights granted is estimated as at the date of grant based on the underlying share price. The table below lists the inputs to the valuation model used for the performance rights granted by the Group:

Notes: 

1 The expected life of the Performance Rights is based on the expiry date of the performance rights as there is limited track record of the early conversion of performance rights.

2 The fair value of Performance Rights granted is estimated as at the date of grant based on the 5 day volume weighted average share price prior to the date of issuance.

11. COMMITMENTS AND CONTINGENCIES

Management have identified the following material commitments for the consolidated group as at 31 December 2019:

12. DIVIDENDS PAID OR PROVIDED FOR

No dividend has been paid or provided for during the half year ended 31 December 2019 (31 December 2018: nil).

13. FINANCIAL INSTRUMENTS

Fair Value Measurement

At 31 December 2019, the Group had no material financial assets and liabilities that are measured at fair value on a recurring basis and at 31 December 2019, the carrying amount of financial assets and financial liabilities for the Group is considered to approximate their fair values.

14. SUBSEQUENT EVENTS AFTER BALANCE DATE

Other than as disclosed below, at the date of this report there were no significant events occurring after balance date requiring disclosure.

On 25 February 2020, the Company announced it had completed Stage 2 of the on-lake construction of its evaporation pond and trench network. This milestone represents the completion of construction of a total 400ha of evaporation ponds and 35km of brine abstraction trenches providing the Company with the platform to provide feed salts to the process plant in 2021.

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