Cauldron Energy : Half Year Report Mar 2022

(ABN 22 102 912 783)

AND CONTROLLED ENTITIES

CONSOLIDATED HALF-YEAR FINANCIAL REPORT

31 DECEMBER 2021

i

CORPORATE DIRECTORY

EXECUTIVE CHAIRMAN

Simon Youds

NON-EXECUTIVE DIRECTORS

Jess Oram

Qiu Derong

Judy Li Chenchong Zhou

COMPANY SECRETARY

Michael Fry

PRINCIPAL & REGISTERED OFFICE Level 1, 1008 Wellington Street West Perth, Western Australia 6005

Telephone: [phone]

Facsimile: [phone] Website:www.cauldronenergy.com.au

AUDITORS

BDO Audit (WA) Pty Ltd Level 9, Mia Yellagonga Tower 2

5 Spring Street

Perth WA 6008

SHARE REGISTRAR Advanced Share Registry

110 Stirling Hwy Nedlands, Western Australia 6009

Telephone: [phone] Facsimile: [phone]

STOCK EXCHANGE LISTING Australian Securities Exchange (Home Exchange: Perth, Western Australia)

Code: CXU

BANKERS

National Australia Bank

100 St Georges Terrace

Perth, Western Australia 6000

1

The directors of Cauldron Energy Limited (Cauldron or Company) submit their report, together with the consolidated financial statements comprising Cauldron and its controlled entities (together the Group) for the half-year ended 31 December 2021.

• 1. DIRECTORS

  The names of Directors who held office during or since the end of the half-year:

  Simon Youds (Executive Chairman)

  Jess Oram (Non-executive Director) Qiu Derong (Non-executive Director) Judy Li (Non-executive Director) Chenchong Zhou (Non-executive Director)

  Directors were in office for this entire period unless otherwise stated.

• 2. OPERATING RESULTS

  The loss after tax of the Group for the half-year ended 31 December 2021 amounted to $374,422 (31 December 2020: $143,249 profit).

• 3. REVIEW OF OPERATIONS

  Cauldron is an Australian exploration company, with a unique and diversified project portfolio that covers three commodities in high demand and all having a favourable outlook in terms of price, being gold, uranium and sand.

  Cauldron holds a 51% joint venture interest in the Blackwood Gold Project located south-east of Daylesford, in the highly prospective Central Victorian Goldfields that surround Ballarat, which it acquired in September 2020.

  From 1864 to 1960 the Blackwood Goldfield produced about 218,000 ounces of gold from orogenic gold sources (199,000 ounces) and from placer sources (19,000 ounces) (Source: Report titled "The Gold Mines of Blackwood" prepared by Erik Norum, Consultant Geologist, August 2018). Gold was won down to a depth of 100 m below surface, with very little mining activity below a depth of 150 m. The Sultan mine is the deepest in the goldfield with production levels at 230 m below ground surface and its shaft reaching 274 m, and still in pay.

  The Blackwood goldfield contains more than 250 historically-excavated underground workings.

  Cauldron plans to target projected down plunge extensions of mineralised shoots in its initial exploration work aided by the Tyrconnel Adit, a ~2 kilometre underground drive, that allows physical access for man and equipment, and is located beneath many of the historical workings in the field.

  In addition, Cauldron holds Cauldron holds uranium prospective tenements covering ~1,270 km2 in the North Carnarvon Basin, located in the north-west of Western Australia (Yanrey Project), one of which secures the Bennet Well Uranium Deposit (Bennet Well). The project is prospective of sandstone-style uranium mineralisation capable of extraction by in-situ recovery mining techniques, proven globally, and domestically, to be the most cost effective and environmentally acceptable method of uranium extraction.

  Bennet Well, and consequently the Yanrey Uranium Project, has been the subject of a significant amount of exploration over the last sixteen years by Cauldron. However, work is currently suspended due to a Western Australian government state ban on uranium mining.

  However, with uranium being at the forefront of the push for low-carbon energy production for what is becoming an increasingly energy hungry world, Cauldron's Yanrey Uranium Project is well positioned to take advantage of the growing demand and improving price of uranium, should the Labor government bow to increasing pressure and overturn its ban on uranium mining in the state of Western Australia.

  Lastly, Cauldron holds a 100% interest in the North-West WA Sands Project, comprising a number of river sand leases located at the mouths of the Carnarvon, Onslow and Derby rivers in Western Australia, collectively covering an area of approximately 286 square kilometre. Sand is by far the largest globally mined commodity, outstripping the shipments of coal, iron ore and grain. The international sand and aggregate market in 2017 was worth an estimated US$4.5 billion. By 2030, its worth is estimated to grow to US$60 billion, representing a growth rate of 5.5 per cent per year.

• 4. CORPORATE

  The following significant transactions and events occurred during the period:

  September Placement

  During September 2021, Cauldron undertook a placement at $0.034 (3.4 cents) raising $1.2m before costs and resulting in the issue of 35,294,118 new fully paid ordinary shares. Participants in the September Placement were also issued a free option on the basis of 1 option for every 2 fully paid shares subscribed for resulting on the issue of 17,647,059 unlisted options having an exercise price of $0.05 and an expiry date of 30 November 2023.

  The Lead Manager, 180 Markets Pty Ltd, received a placement fee of 6% or $72,000; resulting in Cauldron receiving net proceeds of $1.128 million.

• 5. SECURITIES ON ISSUE

  Shares

  As at the date of this report, the Company has 491,293,630 fully paid ordinary shares on issue.

  Options

  As at the date of this report, the Company has a total of 93,668,564 unlisted options on issue comprised as follows:

  Class	ASX Code	Description	Number	Exercise Price	Expiry Date
  ($)
  B	CXUAU	Unlisted Options	16,666,666	$0.03	31 March 2022
  C	CXUAV	Unlisted Options	10,000,000	$0.05	16 September 2022
  D	CXUAW	Unlisted Options	6,000,000	$0.05	16 September 2023
  E	CXUAW	Unlisted Options	61,001,898	$0.05	30 November 2023
  TOTALS	93,668,564

  On 31 December 2021, 6,833,395 Class A Options having an exercise price of $0.03 expired.

  Option holders do not have any rights to participate in any issues of shares or other interests in the company or any other entity. No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

  Performance Rights

  As at 31 December 2021, the Company has a total of 9,000,000 performance rights on issue. The Performance Rights were issued to members of the Company's key management personnel (KMP) pursuant to CXU's Performance Rights

  Plan approved by CXU shareholders at a general meeting of the Company held on 11 August 2020. Each Performance Right is a right to receive one fully paid ordinary share in CXU, subject to meeting performance conditions and the terms of to CXU's Performance Rights Plan.

  The Performance Rights will vest if any one of the following Performance Conditions is achieved:

  • a. The volume weighted average price of the Shares as quoted on ASX exceeds $0.05 each day for a period of not less than 20 consecutive trading days on which the Shares have actually traded;

  • b. Gross Proceeds from Sales exceed $250,000 in any financial year; or

  • c. The discovery of an "Inferred Mineral resource" (as that term is defined in the Code) at the Blackwood Gold

    Project having a contained gold mass of at least 300,000 ounces at a cut-off grade of 2g/t, (each a Performance Condition).

  The Performance Rights will automatically lapse if none of the Performance Milestones are achieved within 3 years of the date of grant, taken to be the date of shareholder approval (i.e. by no later than 10 August 2023). And holders of Performance Rights have a period of 5 years from the date of grant, to exercise the Performance Rights and convert into Shares (i.e. until 10 August 2025).

  The recipients of the performance rights were as follows:

Name of KMP	Name of registered holder	Number of securities
Simon Youds	Capeline Nominees Pty Ltd	3,000,000
Simon Youds	Systematic Nominees Pty Ltd	1,000,000
Jess Oram	Jess Oram	2,000,000
Derong Qiu	Derong Qiu	1,000,000
Judy Li	Jia Li	1,000,000
Chenchong Zhou	Chenchong Zhou	1,000,000
TOTALS	9,000,000

6.

PROJECT INFORMATION

Blackwood Goldfield Project

In September 2020, Cauldron acquired a 51% joint venture interest in the Blackwood Gold Project.

Under the terms of the joint venture agreement, Cauldron has stepped earn-in rights that enable it to earn a further 14% ownership interest, to take it to 65% ownership, and a further 15% ownership interest, to take it to 80% ownership, both upon achievement of specified milestones.

The Blackwood Goldfield Project secures the most significant portion of the highly prospective Blackwood Goldfield.

From 1864 to 1960 the Blackwood Goldfield produced about 218,000 ounces of gold from orogenic gold sources (199,000 ounces) and from placer sources (19,000 ounces) (Source: Report titled "The Gold Mines of Blackwood" prepared by Erik Norum, Consultant Geologist, August 2018). Gold was won down to a depth of 100 m below surface, with very little mining activity below a depth of 150 m. The Sultan mine is the deepest in the goldfield with production levels at 230 m below ground surface and its shaft reaching 274 m, and still in pay.

The project provides:

• • a sizeable foothold in a largely forgotten but historically significant goldfield that has received only sporadic exploration since the 1920's;

• • potential to fast-track mining production with near-term generation of cash flow;

• • potential for significant expansion of known mineral resource; and

• • exceptional logistics being only 30 minutes easy drive from the outer suburbs of western Melbourne.

Tenure and Location

The Blackwood Gold Project is located south-east of Daylesford, in the highly prospective Central Victorian Goldfields that surround Ballarat in Victoria and comprises Exploration Licence (EL) 5479 covering an area of 24 km2.

The Exploration Licence is granted and is in good standing with a licence expiry date of 23 March 2024.

The Project is centred on the Sultan Mine which historically produced a little over 73,000 ounces of gold at an average grade of 28 g/t. In addition, the project contains in excess of 250 underground workings.

Most mining activity on reef structures in the goldfield halted at shallow depths. Cessation of mining in many cases was not due to depletion of mineralisation but to other factors such as inability to cope with high ground water flows in the underground workings or inability to raise the capital for development work.

Victorian Goldfields - History

Gold was first discovered in Australia in July of 1851 at Clunes by James Esmond on a grazing property located approximately 30 km north of Ballarat. The gold on the property, which would later become known as the Port Phillip mine, became one of the most famous deep lead gold mines in the world at the time, and yielded over 500,000 ounces of gold.

The discovery spurred the Victorian gold rush and resulted in several major goldfields (districts) being identified in Victoria including Ballarat, Bendigo and Castlemaine. It is reported that an estimated 80 million ounces of gold was mined from the Victorian goldfields in the period 1851 to 1900; with twelve Victorian goldfields producing at least one million ounces of gold each. The discovery of Kalgoorlie in the 1890's started the investment decline in the Victorian colony for gold mining, by 1915 most of the major fields had substantially closed.

Although the 1980's saw the greatest gold boom of the 20th century, the Victorian gold province was relatively little explored during this time, with less than 2% of Australia's exploration expenditure spent in Victoria, despite it having produced more than 30% of Australia's gold. Several factors were considered to have contributed to the poor state of gold mining in Victoria: perception of deposit type and size, perception of remaining potential, loss of mining culture, environmental considerations, and level of government support.

Since the 1980's exploration activity in the Victorian goldfields has significantly lagged activity at Australia's other premier gold districts: Yilgarn Craton in Western Australia (with major Archean greenstone-hosted deposits such as

Kalgoorlie, Granny Smith and Boddington), South Australia's Gawler Craton (host to Olympic Dam and Prominent Hill mines), Central Lachlan Oregon of New South Wales (host to Cadia and Northparkes), Tanami Province of Northern Territory (host to Tanami) and the Thompson Orogen of Queensland (host to Mount Leyshon, Kidston, Mount Elliott and Charters Towers mines).

However, in recent years, significant interest has returned to the Victorian goldfields largely as a result of the recent transformation of the Fosterville Mine and thanks to the discovery of extremely large and high-grade extensions deep underground. Its converted Fosterville from a modest-scale operation of less than 100,000 ounces of gold per annum to be the world's richest mine and one of Australia's top five gold producers with a targeted production of between 570,000 and 610,000 ounces for the 2020 financial year.