PHOSCONPV : Half-year Financial Report - 31 December 2021

onlyPhosCo Ltd

ABN 82 139 255 771

useHalf-year Financial Report - 31 December 2021 personalFor

PhosCo Ltd

Contents

31 December 2021

Corporate directory

Directors' report

Auditor's independence declaration

Statement of profit or loss and other comprehensive income onlyStatement of financial position

Statement of changes in equity Statement of cash flows Notes to the financial statements Directors' declaration

I dependent auditor's review report to the members of PhosCo Ltd

For usepersonal

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PhosCo Ltd Corporate directory 31 December 2021

Directors

onlyInterim CFO Company secretary

Registered office

Principal place of business

usePerth office

Share register

personalAuditor

Stock exchange listing

W bsite

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Mr Robin Widdup (Chairman)

Mr Simon Eley (Managing Director)

Mr Tarecq Aldaoud (Executive Director)

Mr Craig Smyth

Mr Stefan Ross

Level 4, 100 Albert Road South Melbourne, VIC 3205 Australia

[phone]

Level 4, 100 Albert Road South Melbourne VIC, 3205 Australia

[phone]

Unit 28, 210 Queen Victoria Street North Fremantle, WA 6159 Australia

[phone]

Automic Group

Level 5, 126 Philip Street

Sydney, NSW 2000

1300 288 664 (within Australia)

[phone] (outside Australia)

Grant Thornton Audit Pty Ltd

Collins Square, Tower 5

727 Collins Street

Melbourne VIC 3008

PhosCo Ltd shares are listed on the Australian Securities Exchange (ASX code: PHO)

www.phosco.com.au

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PhosCo Ltd Directors' report 31 December 2021

The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Consolidated Entity') consisting of PhosCo Ltd (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the half-year ended 31 December 2021.

onlyDirectors

The following persons were directors of PhosCo Ltd during the financial half-year and up to the date of this report, unless otherwise stated:

Mr Robin Widdup, Chairman

Mr Simon Eley, Managing Director

Mr Tarecq Aldaoud, Non-Executive Director

Mr Tim Markwell, Alternate Director to Robin Widdup - (resigned 31 October 2021)

Principal activities

useDuring the financial half-year ended 31 December 2021, the principal activities of the Consolidated Entity are the exploration for, development and realisation of mineral resource projects in Tunisia. At 31 December 2021, these projects include the Chaketma Phosphate Project and the Djebba and Zeflana zinc-lead projects. For further information on the developments in re pect of the disputed interest in the Chaketma project, refer to the details outlined below.

Chaketma Project

PhosCo's wholly owned subsidiary, Celamin Limited, has been successful in the arbitration and court processes regarding the dispute with its partner Tunisia Mining Services (TMS). Enforcement of the return of PhosCo's interest and regaining joint control in the Chaketma Phosphate Project via its holding of a 50.99% interest in Chaketma Phosphates S.A. (CPSA) personalw s implemented through an Ordinary General Meeting of shareholders (OGM) held in October 2021, resulting in PhosCo ppointing its representatives to CPSA's Board of Directors, including its President and Director General. Subsequent to the OGM, the Consolidated Entity continues with its ongoing assessment of CPSA's financial position, the results of geological

studies and findings, the renewal of CPSA's license and preparation for the further development of the Chaketma project.

An integral element of the arbitration decision was the award of damages in PhosCo's favour of US$4.9 million plus costs and interest penalties for non-payment amounting to 5% p.a. on the unsettled amount. This award has been affirmed by the C urt of Cassation in Tunisia after initially being awarded by the Swiss Arbitration court and subsequently affirmed by the Swiss Court of Appeal and is therefore enforceable within Tunisia. The Consolidated Entity's entitlement as of 31 December 2021 is A$7 million (US$4.9 million).

Regaining control over its interest in CPSA marks a turning point after which the Consolidated Entity can look positively to the future and focus on the ability to maximise the opportunities which the Chaketma Project inherently presents. Although the Company has recovered the 50.99% interest, the Company notes that various actions related to the enforcement of the arbitration orders remain before the courts, including clarification of the financial state of CPSA, and the status of the CPSA equity. As such the Consolidated Entity has not brought the US$4.9 million to account.

Review of operations

The profit for the Consolidated Entity after providing for income tax amounted to $10,573,565 (31 December 2020: loss of $580,947), was mainly driven by the gain on recognition of investment in Chaketma Phosphates S.A. of $11.4 million.

ForFinancial Performance

Operating expenses for the half year increased by $63,525 to $655,163 (31 December 2020: $591,638), this primarily due to an increase in share-based payments expense.

The net profit after tax of $10,575,565 for the six months ended 31 December 2021 (1H FY 2022) was primarily impacted by the gain on recognition of the Consolidated Entity's investment in CPSA of $11,350,489. In 2015 impairments were recognised as a result of the impact of the dispute between the Consolidated Entity and its joint venture partner TMS as a result of which the Consolidated Entity's ability to enforce its rights over CPSA were restricted and accordingly the underlying economic benefits attributable to the project were not expected to be able to be realised.

The gain on recognition of the Consolidated Entity's investment has been made on the basis of the recovery of the Consolidated Entity's interest in the joint venture company CPSA in October 2021 and its joint control over CPSA, including the appointment of the Consolidated Entity's representatives on the Board of Directors.

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PhosCo Ltd Directors' report 31 December 2021

Importantly CPSA applied to convert the Chaketma Exploration Permit to a Mining Concession in late 2017, ahead of the

February 2018 deadline. As at the date of this report, the Chaketma mining concession had not been granted, and application remains under consideration by the Tunisian regulatory authorities. The Chaketma Exploration Permit period is extended

and remains valid whilst the application is being considered by the Tunisian regulatory authorities. The Company has made onlyrepresentations to the national government and local authorities to ensure tenure.

Financial Position

The consolidated entity's net asset position was $12,686,613 as at 31 December 2021 (30 June 2020: net asset position of

$50,442). The key driver of this movement was the successful capital raise of $2.2 million from the tranche 1 placement and the gain on recognition of the Consolidated Entity's investment in CPSA of $11.4 million.

Cashflow

The Group's cash outflows from operations over the period ended 31 December 2021 was $548,875 (31 December 2020:

outflow of $536,103). The net increase in cash and cash equivalents during the period ended 31 December 2021 was use$1,513,732 (31 December 2021: net decrease of $536,103). This increase is primarily as a result of the proceeds from the

issue of shares, net of transaction costs, of $2,062,607.

Chaketma Project

The Company's key project is a 50.99% interest in the Chaketma Phosphate Project.

area of 56km2. As announced on 15 March 2022, it hosts a total JORC compliant Resource of 148.5Mt @ 20.6% P₂O₅ with access by road, and proximal to rail and gas pipelines.

Chaketma is a potential large-scale,world-class phosphate development asset, which comprises six prospects over a total

personal				inferred
		Chaketma		JORC 2012	Mt		% P2O5
				Measured	49.1		21.3
		KEL (Kef El Louz)		Indicated	6.4		20.3
			Measured &
				55.5		21.2
				indicated
		GK (Gassaa Kebira) - June 2013		Inferred	93		20.3
				Measured,
		Global Resources		indicated &	148.5		20.6

Chaketma is held by a Tunisian joint venture company, CPSA. The Company has a 50.99% interest in CPSA. CPSA holds the Chaketma Exploration Permit.

On 13 November 2020, the Company announced that it had recovered its interest in CPSA following the transfer by a court appointed expert in accordance with the Final Award returning the Company's interest in Chaketma and payment of damages and costs amongst other matters. In addition, on 11 October 2021, the Company announced that it had assumed operational Forand management control over CPSA. Although the Company has recovered the 50.99% interest, the Company notes that various actions related to the enforcement of the arbitration orders remain before the courts, including clarification of the

financial state of CPSA and the status of the CPSA equity.

Upon completion of the current financial and technical due diligence on Chaketma, the Consolidated Entity anticipates completing a gap analysis and review of any data collected since 2015 in the lead up to commencing bankable feasibility work.

The Consolidated Entity is continuing discussions with international institutional financiers, off-take partners, infrastructure groups and the government of Tunisia given the potential demonstrable local benefits and positive impact of foreign direct investment in Tunisia.

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