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Cadoux : 2024 Annual Report to Shareholders
Cadoux : 2024 Annual Report to
About this update from Cadoux Limited
Corporate Directory DIRECTORS Edmund Babington Non-Executive Chairman David Sargeant Non-Executive Director Sandy Chong Non-Executive Director Roland Hill Managing Director COMPANY SECRETARY Phillip MacLeod REGISTERED OFFICE Units 8-9, 88 Forrest Street Cottesloe WA 6011 PRINCIPAL OFFICE Unit 2, 49 Ord Street West Perth WA 6005 Phone +61 8 9313 3920 Website www.cadoux.com.au ABN 85 061 289 218 SHARE REGISTRY Automic Group Level 5, 126 Phillip Street Sydney NSW 2000 Phone 1300 288 664 +61 2 8072 1400 AUDITOR HLB Mann Judd Level 4, 130 Stirling Street Perth WA 6000 SECURITIES EXCHANGE LISTINGS Home Exchange: ASX Limited, Perth ASX Code: CCM OTC-US Markets Stock Exchange Code: FYIRF Frankfurt Stock Exchange Code: SDL Hamburg Stock Exchange Code: A0RDPF Berlin Stock Exchange Code: SDL CONTENTS Review of Operations 2 Directors' Report 25 Remuneration Report 29 Auditor's Independence Declaration 35 Statement of Comprehensive Income 37 Statement of Financial Position 38 Statement of Changes in Equity 39 Statement of Cash Flows 40 Notes to the Financial Statements 41 Consolidated Entity Disclosure Statement 62 Directors' Declaration 63 Independent Auditor's Report 64 Additional Shareholder Information 68 ANNUAL REPORT 2024 CADOUX LIMITED 1 1 R E V I E W O F O P E R A T I O N S Review of Operations INTRODUCTION Cadoux Limited ( Cadoux or the Company ) is an ASX listed resources company with a focus on the commercial development of critical and strategic minerals projects. Cadoux's mission is to be a key contributor to a sustainable world through innovation and to responsibly contribute to the community by helping to reduce the societal environmental impact for future generations. To achieve this goal, Cadoux is positioning itself to be a significant producer of high-quality critical minerals for use in rapidly developing high-tech applications used in carbon reduction and circular economies. Cadoux's core objective is to develop its innovative high purity alumina ( HPA ) project. HPA is a critical material for many high-tech products due to its unique characteristics and chemical properties that address high specification requirements in applications requiring high-end energy efficiency. Cadoux has complemented its critical mineral objective by entering the rare earths industry with the acquisition of 50% of Minhub Operations Limited ( MOPL ), an emerging rare earth and minerals sands processor which is establishing a processing facility in Darwin, Northern Territory. The long-term drivers for HPA and rare earths production is the bullish outlook for energy generation and transformation to renewables, the consumer electronics market, electric vehicle demand and the static power storage industry where both HPA and rare earths will play a critical role in the electrification and decarbonisation of these industries as to increase functionality and overall safety. During the financial year, Cadoux made significant progress across both our HPA and Minhub project workstreams. The key project summaries are outlined below: PROJECTS High Purity Alumina HPA is defined as alumina (Al 2 O 3 ) with a grade equal or greater than 99.99% purity. HPA is sought-after for its unique properties and desirable characteristics, such as excellent corrosion and scratch resistance, high brightness and its ability to withstand extreme temperatures whilst not being heat conductive. HPA is used as a base material in the manufacture of sapphire substrates for applications such as LEDs, micro-LEDs, in the manufacture of artificial sapphire glass (e.g. mobile phone and television screens) and in certain battery and power storage components, micro-chips for AI, electrical circuits, artificial gemstones and special space, aeronautical and medical applications. The use of HPA in the synthetic sapphire glass market is poised to grow substantially as a result of HPA's unique characteristics and product benefits which make the sapphire glass ideal for consumer electronics products that feature digital displays such as smartphones and tablets. These benefits make sapphire crystal glass the material of choice . These product sectors are all high-end markets that are expected to show continued strong year on year growth. Cadoux's commitment to the development of its innovative HPA refining process is demonstrated through the production of its premium quality and ultra-high purity (99.995% and 99.999%) material. The Company's definitive feasibility study ( DFS ) has validated the process with a clear capital cost ( capex ) and operating expense ( opex ) advantage to traditional and peer group production. The quality of Cadoux's HPA is endorsed by the positive responses received from our customer outreach and collaboration programs. FYI RESOURCES LIMITED ANNUAL REPORT 2023 2 ANNUAL REPORT 2024 CADOUX LIMITED 2 R E V I E W O F O P E R A T I O N S HPA Project Summary Cadoux's primary assets are the technology, intellectual property and expertise accumulated over the R&D development stages engineered specifically for the commercial production of high quality HPA via its innovative process flowsheet design. HPA Project Development Philosophy During the financial year, Cadoux's HPA project development benefitted from detailed design and engineering for the 1,000 tpa small scale development and production plant ( SSP ). This work was undertaken to demonstrate the flowsheet design modifications and improvements, the scale up factors (and risks) from the pilot plant production. This phase of development work resulted in an excellent gaps analysis between the two HPA production formats and provided a clear platform for a staged / modular production expansion model towards the targeted full production rate of 10,000tpa of HPA as outlined in the Company's 2020 DFS. The process and engineering development team increased the flowsheet technologies, engineering advances and improvements in materials of construction and handling for the excellent process chemistry. It is intended that the SSP will demonstrate and validate these improvements as well as provide premium HPA material for ongoing qualification with identified potential customer groups. The basis for a revised capex and opex schedule is to allow for the realignment in the business model strategy of staged scale up production. Engineering Contractor Appointed for Next Major HPA Project Milestone In August 2024, Cadoux announced the completion of Stage 1, Phase 1 of its planned SSP and the commencement of Phase 2 of the project. GR Engineering Services Limited (GRES), a leading contract engineering company renowned for its hydrometallurgical expertise and strong track record of successful project completions, was appointed as the preferred engineering contractor for the Stage 1, Phase 2 of the SSP. Phase 2 is expected to be completed by December 2024. HPA project deliverables for GRES in Phase 2 engineering (FEED) workstreams ahead of FID include: Updated capex estimate Project execution plan Master document register (MDR) HAZOP reports (process safety studies) Specifications and datasheets Final plot plan, general arrangement drawings Piping & Instrumentation Diagrams (P&ID Drawings) Cadoux Key Activity Schedule FYI RESOURCES LIMITED ANNUAL REPORT 2023 3 ANNUAL REPORT 2024 CADOUX LIMITED 3 R E V I E W O F O P E R A T I O N S Project Development HPA project development activities during the financial year included: Focus on development of 1,000tpa SSP and demonstration facility Complete all works, permitting and owners workstreams ahead of FS delivery Change in long-term business model to staged modular production from the single 10,000tpa production scenario Project economics analysis revised HPA production optimisation for the SSP Third-party, engineering service provider and contractor engagement Downstream production and marketing opportunities developed European and Asian HPA product outreach activities continue Detailed permitting and approvals process for Kwinana commenced Multiple R&D programs initiated for alternative markets Engineering During the financial year, engineering workstreams for the HPA SSP continued via the on-going development of process flowsheet engineering packages and basis of design documentation. Progress towards completion of the engineering work programs included: Stage 1, Phase 1 completed in August 2024 Stage 1, Phase 2 EPCM for Phase 2. SSP front-end engineering commenced with the intention to execute project after the Financial Investment Decision Continue Phase 2 works incorporating technology qualification test work, process optimisation of existing process flow diagrams ( PFD ) and Mass Balance Update PFD, Process Design Criteria and Process Control Philosophy Third party critical vendor equipment package reviews for incorporation into Phase 2 engineering continued Conducting technical evaluations for long lead delivery time equipment Alternative process technology components and options established Engineering advances in design of process equipment and control HPA MARKET COMMENTARY HPA is a highly sought after material that is crucial to certain critical minerals applications. The highly refined product has an extremely small particle diameter, high surface area, distinctive crystalline composition, ultra high-purity and a positive surface charge which enables it to impart unique performance characteristics in a spectrum of end uses. The HPA markets are expanding as a result of increasing consumer demand. A recent market study by Technavio Research reveals the suggested grow in demand for HPA has increased from a CAGR of ~19% pa in 2021 to ~34% in 2024. The same report analysed HPA sales suggesting revenues to grow by USD6.8 billion between 2024 and 2028. FYI RESOURCES LIMITED ANNUAL REPORT 2023 4 ANNUAL REPORT 2024 CADOUX LIMITED 4 R E V I E W O F O P E R A T I O N S Minhub Rare Earths In May 2023, Cadoux announced the expansion of its critical minerals project development strategy via the entrance into the rare earths sector, through the acquisition of 50% of Minhub Operations Pty Ltd ( MOPL ). MOPL seeks to establish the Minhub mineral sands processing facility to be located in Darwin, Northern Territory. The Minhub facility is bespoke designed to process third-party mineral sands concentrate to separate the high-graderare-earth minerals xenotime and monazite from other valuable mineral sands products such as zircon and ilmenite. MOPL, in conjunction with Cadoux, will continue to explore further downstream development options for separated heavy rare earths including dysprosium and terbium. MOPL is well advanced in the engineering for the project and has well-developed existing relationships with the stakeholders, including upstream concentrate suppliers. Rare earth materials are crucial elements in many modern applications and technologies including smart phones, televisions and monitors, hard drives and electric vehicles. The RE industry benefits the global economy with its extensive supply chain and diverse applications. RE materials have also played a pivotal role in the development of state-of-the-art technologies used in the renewable energy industry and is synergistic to many applications used in conjunction with HPA. UK and European Critical Minerals Delegation During the year, Minhub and Cadoux participated in a specialist Critical Minerals trade delegation mission to selected United Kingdom and European rare earth participants, original equipment manufacturers (OEM), recyclers and funding parties. The Minhub strategy was well received, and the company is following up on interested industry contacts. Rare Earths Metal Markets Summary The rare earth market is poised for significant growth in demand. This growth is being driven by the rising need for transitioning to renewable energy and increasing use of rare earth metals in carbon reduction related utilisation of these metals from permanent magnet devices and applications. The current rare earth mineral market is valued at US$6.0 billion (2024). This is projected to reach US$10.9 billion by 2029, growing at 12.6% CAGR from 2024 to 2029 (Rare Earth Metals Market Report: May 2024). FYI RESOURCES LIMITED ANNUAL REPORT 2023 5 ANNUAL REPORT 2024 CADOUX LIMITED 5 R E V I E W O F O P E R A T I O N S CORPORATE Name change to Cadoux Limited Following shareholder approval at the 2023 Annual General Meeting, the Company changed its name from FYI Resources Limited to Cadoux Limited. The name "Cadoux" is derived from the locality and township in rural Western Australia - the genesis of our HPA project. Cadoux is the surname of one of the first families that settled the region. The Cadoux region has a long history of successful wheat and sheep production. As a company, Cadoux has the objective to emulate the achievements of the region through the successful development and commercialisation of our innovative high-quality HPA project, our Minhub rare earths and downstream critical minerals projects. Industry Attraction Fund Grant In July 2023, Cadoux was awarded a $3.0 million grant by the WA Government through its Investment Attraction Fund ( IAF ) following final agreement and sign-off with the WA Director General. The purpose of the funding is to assist the Company in progressing the development of the Company's HPA project. The grant funding schedule is based on staged project milestones and associated cash drawdowns. Cadoux received its initial cash drawdown of $600,000 in the December 2023 quarter. Other cash payments are subject to agreed milestones that will be completed during the development schedule of our HPA project. Cadoux Acquires 50% stake in MOPL In May 2024, Cadoux announced that it had acquired a 50% stake in MOPL through a two-stage Share Purchase Agreement (SPA). This acquisition aligns with the binding Heads of Agreement (HOA) between Cadoux and MOPL, as detailed in the announcement on 9 May 2023, regarding the joint development of the Minhub mineral sands processing facility in Darwin. The proposed future production from this facility is intended to support Australian sovereign supply chain objectives. The first stage of Cadoux's acquisition, which involved purchasing 50% of the issued shares in MOPL, was completed following thorough due diligence and the fulfillment of several key conditions. As consideration for this stage of the acquisition, Cadoux issued 4,000,000 shares. Under the HOA and SPA, Cadoux is working closely with MOPL to achieve the project milestones required for the second stage of the acquisition, which will increase Cadoux's ownership in MOPL to 100%. R&D Tax incentive In November 2023, Cadoux received an R&D tax incentive rebate payment of $1,216,311 for the 2023- 24 financial year. FYI RESOURCES LIMITED ANNUAL REPORT 2023 6 ANNUAL REPORT 2024 CADOUX LIMITED 6 R E V I E W O F O P E R A T I O N S RESOURCES AND RESERVES Ore Reserves The Proven and Probable Ore Reserve estimate ( ORE ) for the project totals 3.2 Mt @ 24.8% Al 2 O 3 as reported in accordance with the JORC Code (2012) and is all contained within the area of the Company owned Mining Lease (M70/1388) and Mining Proposal. Ore Al O Fe O K O TiO Category kt % % % % ₂ ₃ ₂ ₃ ₂ ₂ Proved 290 24.9% 1.1% 0.5% 0.8% Probable 2,914 24.8% 1.1% 0.6% 0.9% Total 3,205 24.8% 1.1% 0.5% 0.9% Table: Ore Reserve as at 30 June 2024 Mineral Resources The combined measured, indicated and inferred Mineral Resource Estimate ( MRE ) totalling 11.3 Mt @ 22.5% Al 2 O 3 as at 30 June 2024 is set out in the table below. Al 2 O 3 Fe 2 O 3 K 2 O Resource Volume Cubic Metric Tonnes Grade Grade Grade Category Metres (Dry) (%) (%) (%) Cadoux Kaolin Measured 292,300 480,500 23.56 1.24 1.18 Indicated 3,501,300 5,742,700 23.36 1.19 1.09 Deposit Inferred 3,111,700 5,045,500 21.45 0.59 0.91 All Categories Total 6,905,300 11,268,700 22.51 0.92 1.02 There have been no changes to the Ore Reserves and Mineral Resources this financial year. Mineral Resource and Ore Reserve Governance and Internal Controls Cadoux ensures that the MRE and ORE quoted is subject to governance arrangements and internal controls activated at a site level and at the corporate level. Internal and external reviews of MRE and ORE procedures and results are carried out through an independent technical review team which is comprised of competent and qualified professionals. These reviews have not identified any material issues. Cadoux reports its MRE and ORE on an annual basis in accordance with the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves' (the JORC Code) 2012 Edition. Competent Persons named by Cadoux are Members or Fellows of the Australasian Institute of Mining and Metallurgy and/or the Australian Institute of Geoscientists and qualify as Competent Persons as defined in the JORC Code. Potash Project Cadoux has held potash concession applications in Thailand since 2014. As a result of the on-going national moratorium on potash mining and development, Cadoux has surrendered its potash licenses post balance date. FYI RESOURCES LIMITED ANNUAL REPORT 2023 7 ANNUAL REPORT 2024 CADOUX LIMITED 7 R E V I E W O F O P E R A T I O N S CAUTIONARY STATEMENTS Substance of Updated DFS The Updated DFS referred to in this annual report is a study of the potential viability of the production of HPA. The DFS was completed in order to provide a clear understanding of the technical and economic viability of the HPA Project. The Updated DFS is based on a modelled 25-year cashflow model. Probable project life will be longer than the modelled cashflow based on the extent of the extensive Proven and Probable Ore Reserves (100%). The Updated DFS is based on the material assumptions set out in the Cadoux's ASX announcement dated 8 April 2021. The DFS includes assumptions about the availability of funding. While the Company considers all of the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the feasibility studies will be achieved. General and Forward-Looking Statements The contents of this annual report reflect various technical and economic conditions, assumptions and contingencies which are based on interpretations of current market conditions at the time of writing. Given the nature of the resources industry, these conditions can change significantly and without notice over relatively short periods of time. Consequently, actual results may vary from those detailed in this announcement. Some statements in this report regarding estimates or future events are forward-looking statements. They include indications of, and guidance on, future earnings, cash flow, costs and financial performance. Such forward-looking statements are provided as a general guide only and should not be relied on as a guarantee of future performance. When used in this announcement, words such as, but are not limited to, "could", "planned", "estimated", "expect", "intend", "may", "potential", "should", "projected", "scheduled", "anticipates", "believes", "predict", "foresee", "proposed", "aim", "target", "opportunity", "nominal", "conceptual" and similar expressions are forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties, and no assurance can be given that actual results will be consistent with these forward-looking statements. The contents of this report are also subject to significant risks and uncertainties that include but are not limited those inherent in mine development and production, geological, mining, metallurgical and processing technical problems, the inability to obtain and maintain mine licences, permits and other regulatory approvals required in connection with mining and processing operations, competition for among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel, incorrect assessments of the value of projects and acquisitions, changes in commodity prices and exchange rates, currency and interest rate fluctuations and other adverse economic conditions, the potential inability to market and sell products, various events which could disrupt operations and/or the transportation of mineral products, including labour stoppages and severe weather conditions, the demand for and availability of transportation services, environmental, native title, heritage, taxation and other legal problems, the potential inability to secure adequate financing and management's potential inability to anticipate and manage the foregoing factors and risks. All persons should consider seeking appropriate professional legal, financial and taxation advice in reviewing this announcement and all other information with respect to the Company and evaluating the business, financial performance and operations of the Company. Neither the provision of this announcement nor any information contained in this announcement or subsequently communicated to any person in connection with this announcement is, or should be taken as, constituting the giving of investment or financial advice to any person. This announcement does not take into account the individual investment objective, financial or tax situation or particular needs of any person. FYI RESOURCES LIMITED ANNUAL REPORT 2023 8 ANNUAL REPORT 2024 CADOUX LIMITED 8