Interim Results

AIM and ASX listed company Salt Lake Potash Limited ("SO4" or the "Company"), announces its interim results for the half-year ended 31 December 2020.

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

OPERATING AND FINANCIAL REVIEW

The Company's primary focus is the development of its Lake Way Project (the Project) near Wiluna, Western Australia.

On December 31 2020, the total project was 81% complete and the process plant 88% complete on an earned value basis with first SOP production expected in Q4 2021.

The Company's long-term plan is to develop an integrated SOP operation producing from several Western Australian salt lakes.

Achievements during the half year ended 31 December 2020 included:

Process Plant construction significantly advanced

At December 31st, 2020 the Process Plant was 88% complete on an earned value basis with site concrete work (including additional NPI and bagging infrastructure) 94% complete, structural steel 80% complete and tanks/vessels 81% complete.

Major items installed during the period included the SOP and schoenite crystallisers, attritioners, drag feeder, conveyors, lump breaker, various tanks and agitators, chillers, transformers, utilities switch room and various pumps, hoppers and launders. Associated piping, cabling and valves installation now comprise most of the remaining work on an earned value basis.

Work on of the 27km APA gas pipeline that connects with the Goldfields Gas Pipeline commenced in November 2020. At the end of December, the pipeline was 99% welded and 67% placed and backfilled.

Commencement of salt harvesting

Harvesting of potassium rich kainite and schoenite salts from Train 1 commenced with approximately 27kt of salts stockpiled ahead of plant commissioning.

Harvest trials in a section of the cells were successful using an efficient tractor and scraper methodology. Assays from the harvest salt stockpiles have returned grades in-line with the system curve and planning models.

Paleochannel drilling

During the six month period, paleochannel exploration drilling continued at Lake Way, with brine abstraction bores drilled into the Paleochannel Basal Sand at pads 12, 14 and 23 and undergoing test-pumping.

Logistics routes confirmed

A preferred logistics provider was also identified. Throughout 2020 the Company worked with short-listed providers to optimise its logistics and sales/marketing platform, exploring various routes to market and product packaging solutions. As part of this optimisation process the Company has put in place a solution to sell up to 82% of its SOP via Fremantle port in sea containers loaded with product in loose bulk, 1 to 1.5t bulk bags and 25kg bags.

Product exported from Fremantle will be transported to Leonora by road where it will be transferred to rail for the remaining journey to Fremantle. Shipping through Fremantle is expected to provide access to broader global markets at no additional net cost. Bagging and container premiums (verified by Argus) are expected to offset incremental domestic logistics costs. Additional benefits of using Fremantle are a reduction in inventory working capital and a significant reduction in the logistics carbon footprint.

Bulk shipment sales will remain out of Geraldton port.

Executed Syndicated Facility Agreement and Project Financial Close delivered

In August 2020, the Company executed the senior debt facility for US$138m principal with Taurus Mining Finance Fund No. 2 L.P (Taurus) and the Australian Government's Clean Energy Finance Corporation (CEFC) (Taurus US$91m, CEFC US$47m).

As part of the project financing package the Company completed a A$98.5m equity raise in August by way of a Placement and accelerated non-renewable entitlement offer (ANREO) at A$0.50 per share. Under the ANREO, eligible shareholders were invited to apply for 1 New Share for every 3.2 shares held as at the Record Date.

In July 2020, the Company raised A$15m through the placement of unsecured convertible notes. The notes were structured as deferred equity with zero coupon and mandatory conversion into equity at the lower of A$0.45 per share and a 5% discount to any future equity raising of at least A$10m. The Convertible Notes were exercised following completion of the institutional component of the Equity Raising and converted into equity at A$0.45 per share.

Financial Close for the Lake Way Project was achieved in December 2020 with the Company drawing the first US$105m tranche of the US$138m Taurus/CEFC debt facility and using US$45m to repay the Taurus Bridge Facility.

In conjunction with delivering Project Financial Close the Company conducted an equity offering in December which included an A$52m share placement and A$5m Share Purchase Plan (subsequently upsized to A$8m on strong demand), priced at A$0.40 per new share. The equity funds were raised partially to satisfy the remaining conditions precedent in the US$138m debt facility with Taurus and CEFC.

Subsequent to period end, the Company announced the successful syndication of the senior debt facility, with Sequoia Economic Infrastructure Fund (SEQI) and the Commonwealth Bank of Australia (CBA) joining the facility.

Board strengthened

In October Phil Montgomery and Peter Thomas were appointed to the board as Non-Executive Directors. Mark Pearce stepped down from his position as a Non-Executive Director.

Phil Montgomery is a highly experienced mining industry executive who was most recently Vice President - Projects at BHP, responsible for the development of BHP's Potash business through its Jansen project in Saskatchewan, Canada. Mr Montgomery brings significant experience in project development and operations having held senior project development positions at BHP and Billiton for over 20 years working across several commodities and geographies, including leadership of BHP's Iron Ore growth program (2002-12). He holds a BSc (Mechanical Engineering) from Oxford Brookes University in the UK and completed the Executive Leadership Programme at INSEAD.

Peter Thomas is a senior executive with significant experience in project operations, construction, finance and strategy. Mr Thomas held senior executive positions at Fortescue between 2004-2014 including Project Director in charge of the A$4.7bn T155 port and rail infrastructure investment and Director of Corporate Services. He has previously worked for McKinsey and Lehman Brothers in the USA and more recently held the position of CEO of the Balla Balla Infrastructure Group (Todd Corporation). He is currently CFO of Decmil, the ASX listed construction and engineering group with c.A$500m in revenues. Mr Thomas holds an MBA from Harvard Business School, a BEc (Finance and Actuarial Studies) and a BSc (Mathematics) from Macquarie University and is a graduate of the Australian Institute of Company Directors.

Community contribution recognised

SO4 received the Community Contribution Award at the 2020 Association of Mining and Exploration Company (AMEC) annual awards. The award recognised the Company's efforts to deliver sustainable and long-lasting social and economic benefits to the Wiluna region through strategic partnerships, community investment and opportunities in employment and training.

Approvals

The Company continued the advancement of the remaining permitting required to support full-scale operations.

A revised Environmental Review Document (ERD) was submitted during the quarter ended 31 December 2020, with the EPA confirming acceptance and completing their draft assessment report. SO4 presented the project to the EPA board and the board assessed the project in their December monthly meeting. The board agreed to adopt the draft assessment report and the EPA commenced the final assessment report, to be issued to the Minister.

The EPA has determined that the full project scope requires formal assessment with no public review. In addition to the EPA submission, the Company continues to seek other project approvals as required.

Results of Operations

Net loss after tax for the half year ended 31 December 2020 was $1,760,560 (Restated 31 December 2019: $13,391,500). This result is attributable to the following:

(i) Exploration and evaluation expenses totalling $1,806,608 (31 December 2019: $12,249,743) which is attributable to the Group's accounting policy of expensing exploration and development expenditure incurred by the Group subsequent to the acquisition of the rights to explore and up to the successful completion of bankable feasibility studies (BFS) for each separate area of interest. Majority of this spend relates to meeting exploration commitments on the Company's remaining lake portfolio as investigations on other lake developments progress and a minor amount of expenditure on innovation at Lake Way and community related programmes.

(ii) Corporate and administrative expenses of $2,547,438 (31 December 2019: $2,206,500) attributable to the administration of the Company and its operations, as well as corporate expenses including the Company's dual listing on ASX and AIM together with investor relations activities. The Group's administrative expenses have increased in 2020 to support the rapidly progressing development activities at Lake Way;

(iii) Non-cash share-based payment expenses of $2,276,774 (31 December 2019: $3,563,842) 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 holders become unconditionally entitled to the options and/or rights;

(iv) Business development and commercial expenses of $3,246,326 (31 December 2019: $1,790,686) which are attributable to additional activities required to support the growth and development of the Lake Way Project including indirect project funding costs and offtake activities; and

(v) Unrealised/Realised FX gain of $8,000,923 (Restated 31 December 2019: $397,126) which is largely attributable to the increased AUD strength applied against the Company's USD loan exposure over the period.

Impact of COVID-19

The COVID-19 pandemic has had a significant impact on, individuals, communities, and businesses globally. Employees at all levels of the business were asked to change the way they work, and how they interacted professionally and socially. Together with the various Government health measures, the Company implemented significant controls and requirements at all its sites to protect the health and safety of its workforce, their families, local suppliers, and neighbouring communities while ensuring a safe environment for operations.

No adjustments have been made to the Company's result as at 31 December 2020 for the impacts of COVID-19. However, the scale and duration of possible future Government measures, vaccine rollout, and their impact on the Group's operations and financial situation, necessarily remains uncertain.

Financial Position

At 31 December 2020, the Group had cash reserves of $96,966,372 (30 June 2020: $7,030,418) and net assets of $221,139,736 (Restated 30 June 2020: $60,126,961). In addition, the Syndicated Facility Agreement (SFA) had US$33 million available to draw down as at 31 December 2020. The Group is in a financial position to conduct its current and planned exploration and development activities.

Financial Position

At 31 December 2020, the Group had cash reserves of $96,966,372 (30 June 2020: $7,030,418) and net assets of $221,139,736 (Restated 30 June 2020: $60,126,961). In addition, the Syndicated Facility Agreement (SFA) had US$33 million available to draw down as at 31 December 2020. 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 28 January 2021, the Company completed a Share Purchase Plan to raise A$8 million for the intended use as announced in the 11 December 2020 ASX announcement.

On 4 March 2021, the Company has announced the successful syndication of its US$138m Senior Debt Facility. Sequoia Economic Infrastructure Income Fund (SEQI) and the Commonwealth Bank of Australia (CBA) will invest US$39m and US$25m respectively into the facility, complimenting existing investments led and arranged by Taurus Mining Finance Fund No. 2 L.P (Taurus) and the Australian Government's Clean Energy Finance Corporation (CEFC). Following the syndication, the final facility holding will be Taurus US$35m (from US$91m), CEFC US$39m (from US$47m), SEQI US$39m and CBA US$25m.

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

Chief Executive Officer & Managing Director

16 March 2021

Forward Looking Statements

This report includes forward-looking statements. These forward-looking statements are based on the Company'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 the Company, which could cause actual results to differ materially from such statements. Although the Company believes that its forward-looking statements have reasonable grounds, the Company can give no assurance that they will be achieved. They may be affected by a variety of variables and changes in underlying assumptions that are subject to risk factors associated with the nature of the Company's business (including those described in pages 11 to 21 (inclusive) of the Prospectus released to ASX on 11 February 2021), which cause actual results to differ materially from those expressed herein. The Company 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 this 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 8 to 25 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 2020 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

Chief Executive Officer & Managing Director

16 March 2021

CONSOLIDATED STATEMENT OF PROFIT

OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE HALF YEAR ENDED 31 DECEMBER 2020

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 2020

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 2020

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 2020

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 2020 were authorised for issue in accordance with the resolution of the directors on 15 March 2021.

The interim condensed consolidated financial statements for the half year reporting period ended 31 December 2020 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 2020 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.

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 2020, the Consolidated Entity incurred a net loss of $1,760,560 (Restated 31 December 2019: $13,391,500) and experienced net cash outflows from operating and investing activities of $122,002,077 (31 December 2019: $55,515,096). As at 31 December 2020, the Group had cash and cash equivalents of $96,966,372 (30 June 2020: $7,030,418) primarily from the injection of $163,537,263 in capital from shareholder participants and $138,254,889 from debt funding.

The Company continues to construct the Lake Way Project in line with the capex budget of A$264m and expects to have sufficient funds to meet its committed expenditure up to the date of its completion. The Company will shortly commission the Lake Way Project to enable first production of SOP. Due to the uncertain timing of revenue receipts, and in order for the Company to begin investigating bringing additional lakes online, the Company may require additional funds to continue as a going concern. The Company has demonstrated that it can secure funds from multiple sources. In addition, the Directors have been involved in a number of recent successful capital raisings for the Company and for other listed resource companies and are satisfied that they will be able to raise additional capital if and when required to enable the Consolidated Entity to meet its obligations as and when they fall due. Accordingly, the Directors 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.

These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or to the amounts and classification of liabilities that might be necessary should the Consolidated Entity be unable to continue as a going concern.

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 effective from 1 July 2020. The adoption of new and revised standards and amendments has not affected the amounts reported for the current or prior half-year period.

AASB 3 Business Combinations

The amendment to IFRS 3 clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Furthermore, it clarified that a business can exist without including all of the inputs and processes needed to create outputs. These amendments had no impact on the consolidated financial statements of the Group but may impact future periods should the Group enter into any business combinations.

AASB 101 Presentation of Financial Statements and AASB 108 Accounting Polices, Changes in Accounting Estimate and Errors

The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity."

The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the consolidated financial statements of, nor is there expected to be any future impact to the Group.

Conceptual Framework for Financial Reporting

The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist the IASB in developing standards, to help preparers develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand and interpret the standards.

The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. These amendments had no impact on the consolidated financial statements of the Group.

Prior Period Adjustments

Following a review of the mandate letter with Taurus Funds Management ("Taurus") and the terms of the Bridge Facility Agreement ("Bridge Facility") and the Syndicated Facility Agreement ("SFA") relating to the interest bearing loans (see note 11), the Group has adjusted the accounting for royalty rights (see note 13) and options granted as consideration for services rendered by Taurus in establishing each loan facility which had been incorrectly accounted for in prior periods.

The royalty rights, representing a contractual obligation to make future cash payments, are financial liabilities which should have been recognised on the signing of each facility agreement. In this regard, the royalty rights relating to the Bridge Facility (signed on 5 August 2019) were not recognised by the Group in the prior year. The royalty rights have now been recognised and are measured at fair value on initial recognition and are subsequently carried at amortised cost ($16,378,248 at 31 December 2019 and $16,719,511 at 30 June 2020). The Group has used the forecast cash flows from its latest corporate model as the basis for measuring the royalty obligation.

The options granted to Taurus under these arrangements are an equity settled, share-based payment transaction. The value of the services received should have been recognised as the services were rendered over the mandate period. In prior periods, the options were incorrectly recognised on signing the related facility agreement. The Group has now recognised and measured the services as they are received with reference to the fair value of the equity instruments granted. In this regard, the fair value of the options granted has been recalculated using a Binomial option pricing. The recalculation resulted in a cumulative adjustment to share-based payments of $1,477,895 for the year ended 30 June 2019 and $675,850 for the year ended 30 June 2020.

In advance of the drawdowns under each facility agreement, costs recognised in relation to the associated royalty rights and options granted should have been deferred as a prepayment on the balance sheet. On drawdown of each facility, an appropriate portion of the prepaid transaction costs should have been reclassified such that the loan was recognised net of transaction costs. This has resulted in a cumulative adjustment to recognise prepayments of $1,477,895 at 30 June 2019, $9,870,807 at 31 December 2019 and $1,565,139 at 30 June 2020; and a cumulative adjustment to reduced interest bearing liabilities by $5,784,336 at 31 December 2019 and $7,766,571 at 30 June 2020.

As a result of the restatement of loan balances in the prior period and the recognition of the royalty rights in respect of the Bridge Facility, the Group has retranslated the balances of these financial liabilities at each reporting date using the closing exchange rate.

Due to additional transaction costs being recognised on the drawdowns under the Bridge Facility, the effective interest rate on the loan was recalculated. Additional borrowing costs have been capitalised to mine development costs in accordance with the Group's stated accounting policy. This has resulted in a cumulative adjustment to mine properties of $653,114 at 31 December 2019 and $7,992,413 at 30 June 2020.

The restatements noted above, had no significant current income tax or net deferred tax consequences for each of the periods ended 30 June 2019, 31 December 2019 and 30 June 2020.

The adjustments have been made by restating prior periods. The impact of the adjustments on the financial statements is as follows:

Cumulative impact on the Statements of Financial Position

Impact on Statements of Profit or Loss and Other Comprehensive Income

Impact of basic and diluted earnings per share (cents per share)

The changes did not have any impact on the Statement of Cash Flows.

2. SEGMENT INFORMATION

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 of 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

Notes:

1 Following completion of a Bankable Feasibility Study in October 2019 that demonstrated the economic returns of the Lake Way 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 were recognised for the first time during half-year ended 31 December 2019 for temporary differences and unused tax losses.

4. CASH AND CASH EQUIVALENTS

The Group has assessed the credit risk on cash and cash equivalents using the life time expected credit losses method and concluded that the probability of default is insignificant.

5. SECURITY DEPOSITS

Notes:

 1 Relates to a one month rolling cash backed bank guarantee for the APA gas pipeline at Lake Way.

 2 Relates to the Debt Service Reserve Account for the financing facility with Taurus/CEFC.

6. INVENTORY

Notes:

1 Spares, consumables and other supplies yet to be utilised in the production process or in the rendering of services.

2 The Company has determined the tonnes of Sulphate of Potash equivalent at 31 December 2020 by estimating the tonnes of harvestable salts that could be used for processing at Lake Way.

7. PROPERTY, PLANT AND EQUIPMENT

8. RIGHT OF USE ASSETS

9. EXPLORATION AND EVALUATION ASSETS

Notes:

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 Wiluna Mining Corporation (formerly 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.

10. MINE DEVELOPMENT

Borrowing costs that are directly attributable to the acquisition, construction or production of Mine Development Assets, have been 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 determined that it was 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.

11. INTEREST BEARING LIABILITIES

On 22 December 2020, the Company announced that it drew down the first tranche of the US$138m Syndicated Facility Agreement (SFA) from Taurus Funds Management (Taurus) and the Clean Energy Finance Corporation (CEFC) having achieved project financial close on the Lake Way Project.

The first tranche of US$105m was used to repay the Taurus Bridge Facility (Stage 1 Facility) totalling US$45m. The remaining US$33m of the Syndicated Facility Agreement is expected to be drawn in Q2 2021, subject to market conditions. The interest rate on the SFA is 9% per annum, with outstanding debt and principal components repayable from 31 March 2022 to 30 September 2024.

Transaction costs include establishment fees, options issued and royalties granted under the Stage 1 Facility and the SFA.

Taurus and CEFC have security over the Lake Way assets.

12. LEASE LIABILITIES

Notes:

1 The Company had total cash outflows for lease liabilities related to right of use assets of $685,088 (30 June 2020: $411,539).

13. ROYALTY LIABILITIES

As part of the terms of the Stage 1 Facility and the SFA agreements, the Company granted a 2% royalty right based on the net revenue of the Lake Way project on a life of mine basis. The royalty liability has been measured at fair value on initial recognition and is subsequently carried at amortised cost. The fair value on initial recognition was determined based on forecast cash flows discounted at 9%. Royalty payments will commence following the first sale of SOP, which is expected in Q4 2021.

14. PROVISIONS

Notes:

1 SO4 has recognised the need to provide for the costs of rehabilitating the land at Lake Way associated with development up to and including 31 December 2020.

Notes:

1 During the year ended 30 June 2020, there was a reassessment of the disturbed area and cost estimate which resulted in an impact of $410,528 to the statement of profit and loss and other comprehensive income.

15. CONTRIBUTED EQUITY

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

16. RESERVES

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

17. SHARE-BASED PAYMENTS

For the six months ended 31 December 2020, the Group recognised $2,276,774 in share-based payments expenses in the statement of profit or loss (31 December 2019: $3,563,842) and $1,970,752 as part of the debt facility.

Included within the share-based payments expenses in the statement of profit or loss are:

· Expensing of the fair value of equity instruments (options and performance rights) over the vesting period and $185,000 of shares issued to consultants, totalling $2,391,774.

· Reversal of share-based payments expense as a result of unvested performance rights totalling ($115,000).

(a) Options

During the current period 8,500,000 unlisted options were granted consisting of 7,500,000 granted on 23 July 2020 (Series 73) and 1,000,000 granted on 20 November 2020 (Series 74 to Series 77). The options granted to Taurus (Series 73) are an equity settled, share-based payment transaction. The value of the options should have been based on the value of the services received. However, as this cannot be valued, the Company has reverted to valuing the options. The Company has recognised and measured the services as they are received with reference to the fair value of the equity instruments granted. In this regard, the fair value of the options granted has been recalculated using a Binomial option pricing.

The fair value of the equity-settled incentive options (Series 74 to Series 77) 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 This is considered to be the service period for arranging the SFA financing facility.

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.

4 This is considered to be the service period for arranging the SFA financing facility.

(b) Performance Rights

During the current period 948,444 performance rights were granted subject to short term performance 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.

18. COMMITMENTS AND CONTINGENCIES

Management have identified the following material commitments for the consolidated group as at 31 December 2020:

There are no material contingent liabilities or contingent assets as at 31 December 2020.

19. DIVIDENDS PAID OR PROVIDED FOR

No dividend has been paid or provided for during the half year ended 31 December 2020 (31 December 2019: nil).

20. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value Measurement

Royalty rights have now been recognised and are measured at fair value on initial recognition and subsequently carried at amortised cost. The Group has used forecast cash flows from its latest corporate model as the basis for measuring the royalty obligation using a discount rate of 9% with first sale of SOP expected in Q4 2021. Please refer Note 13 for further information.

21. RELATED PARTIES

Balances and transaction between the Company and its subsidiaries, which are related parties to the Company, have been eliminated on consolidation. There have been no other transactions with related parties during the half-year ended 31 December 2020, other than remuneration with Key Management Personnel.

22. 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 28 January 2021, the Company completed a Share Purchase Plan to raise A$8 million for the intended use as announced in the 11 December 2020 ASX announcement.

On 4 March 2021, the Company has announced the successful syndication of its US$138m Senior Debt Facility. Sequoia Economic Infrastructure Income Fund (SEQI) and the Commonwealth Bank of Australia (CBA) will invest US$39m and US$25m respectively into the facility, complimenting existing investments led and arranged by Taurus Mining Finance Fund No. 2 L.P (Taurus) and the Australian Government's Clean Energy Finance Corporation (CEFC). Following the syndication, the final facility holding will be Taurus US$35m (from US$91m), CEFC US$39m (from US$47m), SEQI US$39m and CBA US$25m.

For further information please visit www.so4.com.au or contact:

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 which is part of UK law by virtue of the European Union (withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.