Xtract Resources : Annual Report for the year ended 31 December 2023

Annual Report

for the year ended 31 December 2023

Contents

1	Highlights	45	Consolidated Statement of Comprehensive Income
3	Chairman's Statement	46	Consolidated and Company Statements of Financial Position
5	Strategic Report	47	Consolidated Statement of Changes in Equity
22	Report of the Directors	48	Company Statement of Changes in Equity
29	Corporate Governance	49	Consolidated and Company Cash Flow Statements
37	Independent Auditor's Report	50	Notes to the Financial Statements
44	Consolidated Income Statement	88	Company Information

Xtract Resources Plc (AIM:XTR) announces its final results for the year ended

31 December 2023. The period was marked by the exciting acquisition of a strong licence position in northwestern Zambia, an area at the forefront of global copper exploration with a focus on the search for world-classhigh-grade deposits of the Kamoa - Kakula type which are found immediately across the border in the neighbouring Democratic Republic of Congo and are associated with the Western Foreland geological formation. Further potential exists for the discovery of Kolwezi-type mineralisation associated with the Zambian fold and thrust belt to the east. Post the period under review, Xtract's 23% profit share in the Manica gold project in Mozambique was sold to a third party providing a steady projected future income which can assist in funding exploration activities in Zambia.

Corporate & Operational highlights

• Acquisition of two copper exploration licenses with a further three joint venture licences acquired via an amended joint venture agreement post year-end, bringing a total combined licence area of 173,586 hectares in the highly prospective Western Foreland region of northwestern Zambia
• Xtract entered a phase of exploration in NW Zambia targeting 500Kt of contained copper either for in- house development or through a strategic joint venture agreement
• Post year-end, the Company announced the acquisition of up to a 70% JV interest in an exploration licence over the Silverking prospect in the prospective Mumbwa district of Zambia, inclusive of two high-grade breccia pipe deposits that are open both along strike, and at depth, with reported drill intercepts including 50m @ 5.47% Cu returned from historical exploration drilling
• Exploration is underway at Silverking with a focus firstly on defining a Mineral Resource centered around the high-gradepipe-like structures and secondly, evaluating the substantial area of licence that has never previously been thoroughly explored
• A revised mining study at the Bushranger copper (gold) project in Australia, completed by Optimal Mining Solutions Pty gave positive results, indicating that the Racecourse deposit could be viably mined at copper prices over $10,000/t and mining rates of over 20mtpa
• The Optimal Mining study recognised that optimisation of the processing plant capacity, capital costs, operating costs and metallurgical recoveries could greatly improve the economic outcomes of the project

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Highlights

CONTINUED

• Post year end, additional ore pre-concentration studies were initiated at the Bushranger Project including pre-screening, gravity separation and coarse particle floatation, with initial coarse particle flotation results conducted by Novacell appearing promising
• Disposal of Xtract's 23% shareholding in the Manica gold mine project, allowing disposal of risk as the mine entered the complex ore mining phase, securing future income to fund exploration activities at the newly acquired copper projects
• Immediate cash payment of US$3.325m from the disposal of Manica gold project and up to a further US$15m to be met via staged payments up until 01 March 2027

Financial highlights

• Cash of £0.63m (2022: £0.19m)
• Net assets of £19.89m (2022: £19.68m)
• Other operating income £1.17m (2022: £0.67m)
• Administrative and operating expenses of £1.05m (2022: £1.35m)

Business Model and Strategy

The board continued to pursue its investment framework to identify and invest in a portfolio of near-term resource assets that:

• Can be brought into production within 2 years;
• Are near or at surface without major upfront capital expenditure;
• Are on the low end of the cash cost curve and have upside growth potential;
• Low entry cost and located in favourable mining jurisdictions.

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Chairman's Statement

Colin Bird

Executive Chairman

Dear Shareholder,

During the period under review and to the time of writing we have been adjusting the portfolio to align the Company with what we believe to be a robust suite of assets in a commodity and jurisdiction best able to return significant shareholder values.

During the year the Manica gold project continued to build up gold production and stabilise. Overall results suggested that the mine could perform at a rate of +60kg of gold per month, with varying forecasts for the life of the oxide resources for which the original plant was designed. Despite a premature and extended rainy season, the operation continued to perform satisfactorily.

A number of exploration and confirmatory programmes were carried out for short- term pit design and end of life mine planning. Concurrently, metallurgical test work was carried out on selected core as a precursor to the design of the eventual sulphide plant.

The structure of our agreement with MMP was such that we had little contribution to the design of any future plant and also, underground mine design, which inevitably any future sulphide extension will require. The board of Xtract announced on the 24 January 2024, that they had entered into an agreement to dispose of Xtract's 23% net profit share interest for a consideration of up to US$15million in cash in regular staged payments. At the time of writing the disposal proceeds are being received and the arrangement is proceeding satisfactorily.

The disposal of the Company's interest in Manica, facilitated Xtract's aspirations to commence a small mining campaign together with the key objective of acquiring high potential copper exploration ground. Since the disposal we have acquired a number of licences with a focus on the north-western region of Zambia. Our focus on this area, is based upon the premise that the highly productive Congolese-style copper mineralisation that hosts world class copper deposits and is prevalent in the DRC extends through parts of NW Zambia and continues into neighbouring Angola. The geological architecture necessary for the formation of Kamoa-typehigh-grade copper deposits occurs within the Western Foreland domain in NW Zambia and Xtract is among several companies actively seeking Kamoa-Kakula type mineralisation in the region. The Company is also exploring the Fold and Thrust Belt located immediately east of the projected Western Foreland boundary hosts Kolwezi-type mineralisation, characterised by lower grade bulk tonnage type targets occurring closer to surface or as rafts of mineralisation in a tectonically disturbed terrane. We are currently carrying out fieldwork to determine the optimum site for our first drilling programme, which we expect to commence during the 3rd quarter of 2024.

Our first acquisition was announced on 24 August 2023 and recently on 31 May 2024, we announced that we had entered into an addendum to that agreement, which added a further three exploration licences to the Zambia portfolio.

A further post balance sheet event, announced in early April 2024, was the joint venture agreement with Oval Mining Limited to earn up to a 70% interest in the Silverking copper mine and accompanying exploration licences. Silverking's licence is located immediately adjacent to the Kitumba deposit, which has recently been the subject of M&A activity involving Sinomine Resource Group acquiring a 65% interest in the mine. Historic drilling at Silverking has returned high grade copper intercepts including but not limited to 50m at 5.47% Cu. Two breccia pipes were identified by previous exploration and both structures remain open along strike and at depth. A large part of the exploration licence remains untested to any degree and in addition to evaluating the potential for lower grade stockwork or disseminated mineralisation in the halo around the pipes and the depth and strike extensions, work will be undertaken to test the balance of the area under licence before completing a mineral resource estimate.

On 6 November 2023, we announced the results of the initial Bushranger pit optimisation and financial study on the Racecourse prospect in New South Wales, Australia, which contains 1.1million tonnes of Cu equivalent estimated in accordance with JORC 2012. The study concluded that the project has the potential to be economically mined at a mining rate of 20Mtpa or greater and at copper prices US$10,000 per tonne and above. The study demonstrated quite clearly that ore upgrade has potential and project economics could be improved by further pre-concentration test work.

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Chairman's Statement

CONTINUED

We have commissioned a phase 2 pre concentration test programme, aimed at specific techniques to further assess the benefits and contribution of pre-concentration prior to main plant treatment. This work is currently in progress and the test work results will be released during the third quarter 2024 and if considered appropriate further financial and technical optimisation will be carried out.

The Bushranger project is open-ended in several directions and the Ascot section has yet to be defined. If one takes a global view of copper exploration projects, the Bushranger project is well placed in that it is open ended to further discovery, located in a very favourable jurisdiction. The project economics, whilst currently marginal, have the potential to be favourably rerated if the forecasted Cu price is attained and appears sustainable.

The board took the decision to dispose its interest in a pure gold project to be part of the exciting fundamentals for copper in the coming decade.

We were always convinced that the demand fundamentals were present and that motivated our decision for copper focus. What took us completely by surprise was the supply side fundamentals recent deterioration. The media is reporting on an almost daily basis the failure of existing mines to achieve forecasted results and governmental actions closing down existing capacity. Chile appears to be underperforming in copper production, with a major copper mining company suffering a closure set back in Panama and a general Latin-American disdain for copper mining. This together with a general global lack of new projects and projects under development, suggests a fearful future for copper supply. Analysts are suggesting a 20% shortfall for the supply against demand, which will inevitably derail mankind's third world development together with renewable energy and EV aspirations.

Despite the volatile copper prices there is still a push-pull debate among those who make the forecast and those who make the decision for new copper mine capacity. In the face of the stark fundamentals, it is difficult to understand how any logical thinking person can be so negative as to predict falling copper prices.

It is apparent that geopolitical tension is at a 30 year high with potentially more to come and that factor could mitigate world growth and development, but if you believe in a bright new future then copper can only outperform against all other metals.

The recently aborted BHP bid for Anglo-American Corporation would not, had it have been successful, produce any more copper. It would have resulted in new ownership of current assets but no new copper, either in exploration or development. Only the majors have the financing power to develop tomorrow's copper mines and their threshold appears to be 1million tonnes of contained copper for a viable project. In my opinion, they need to lower the bar, since these projects do not currently exist. Over the last three years, I have been known to quote "the day of the small miner is back". I firmly believe that this is the case and modest projects previously challenged by grade, location or financing may have a role to play in the short to midterm future. Hence the reason for your company embarking on the mission to identify smaller projects which can be developed quickly in favourable jurisdictions.

In essence, the Company is pursuing the copper mission aggressively in the knowledge that successful exploration will lead either to a mine which can be developed by ourselves or if big enough will be much sought after by the majors.

The perfect storm is brewing for copper and your company is well placed to take advantage.

I would like to thank my fellow directors and management with their untiring and well-focused efforts during a very active and volatile period, which has refocused and transformed the Company.

Colin Bird

Executive Chairman

26 June 2024

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Strategic Report

Summary of Company Operations

Zambia

Western Foreland Project

On 24 August 2023 Xtract entered into a Joint Venture agreement with Cooperlemon Consultancy Limited in relation to the exploration for copper on large scale exploration licenses 29123-HQ-LEL and 30459-HQ-LEL in Northwest Zambia.

Landscape at the Western Foreland project

Joint Venture Agreement

Under the terms of the Joint Venture, Xtract has agreed a phased investment with Cooperlemon Consultancy Limited ("Cooperlemon"). In Phase 1 the Company will earn a 65% interest in the JV by funding exploration expenditure over an initial 2-year period of not less than US$2m. If the Phase 1 exploration results are successful and prove the continuity of mineralisation at grades suggesting the potential for the future development of a Mineral Resource of not less than 500,000t of contained copper, then Phase 2 will be initiated with a second 2-year exploration period and a budget of US$3m.

Xtract will be the operator of the licences for the 4-year duration. Should a trade, or any other sale, of the licences take place in the initial 2 years, then Xtract will be deemed to have a 55% interest in the Joint Venture. A sale requires the agreement of both Xtract and Cooperlemon.

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Strategic Report

CONTINUED

If either or both of the licences advance to a point where they are commercially viable and suitable for development, then the licences will be moved to a corporate entity to be owned 75% by Xtract and 25% by Cooperlemon. It will be the responsibility of the newly formed corporate entity to raise all capital for mine development and future operations.

Background

The two exploration licences are situated in NW Zambia and cover a combined area of 107,000 ha within the highly prospective Western Foreland geological district. The licences are situated 100km along strike from Ivanhoe's Kamoa- Kakula mine complex, located just over the border in the Democratic Republic of Congo. Kamoa-Kakula represents one of the world's highest-grade copper mines, with deep, high-grade (>5% Cu) copper mineralisation producing almost 400,000 tonnes of copper in concentrate in 2023.

The geology of the Licence areas is dominated by the architectural domains known as the Western Foreland succession (host to high-gradeKamoa-style mineralisation) and the neighbouring Lufilian Fold & Thrust Belt that plays host to lower- grade, bulk tonnage, near-surface mineralisation of the Kolwezi-type. Licence 29123 - HQ - LEL is located to the west of the perceived boundary between the Western Foreland and the Fold Belt, while licence 30459 - HQ - LEL is coincident with the boundary and potentially includes part of the Fold Belt. The Company believe there is scope for the discovery of high-gradeKamoa-style mineralisation at depth and lower grade Kolwezi-type mineralisation at or near-surface on both licences.

With the rise in demand for the discovery of new copper resources, NW Zambia is currently at the forefront of a rapid phase of geological re-modelling and renewed exploration thinking. The area has been highlighted as a prime geological target for prospective high-grade copper mineralisation which has led to intense competition for exploration licences, with many of the world's top tier mining companies dominating the space and pioneering the geological remodeling of the area. The two licences are projected to have continuity with the geology of the DRC, which is home to many top-tier copper mines, and are surrounded by ground under licence to, or within partnerships or joint ventures between local companies and global leaders in the mining industry such as Rio Tinto plc, Anglo American plc, First Quantum Minerals Ltd., and Ivanhoe Mines. The density of Tier 1 mining companies in the region reflects the significant prospectivity of the Joint Venture licences.

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Strategic Report

CONTINUED

Plan Map Showing Xtract Resources Exploration Licences in NW Zambia

in relation to nearby mines and prospective geological domains

Exploration Progress

Exploration on the licences during the reporting period consisted mainly of desktop studies which were designed to fast- track exploration using cost-effective means to highlight priority targets in which to conduct ground investigation works. An application of modern data analysis techniques supported by the Kamoa-Kakula geological model has allowed the identification of high-priority targets on the ground for follow-up work, which is ensuing. Towards the end of the Wet Season, the Company took the opportunity to meet and establish relationships with local tribal leaders and to build its exploration team, bringing on-board local geologists with in-depth knowledge of both the terrain and geology associated with the Western foreland and Fold & Thrust Belt.

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Strategic Report

CONTINUED

Conglomerate sample observed during early reconnaissance exploration at the licences

Outcropping structures observed during early reconnaissance over the licences

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Strategic Report

CONTINUED

Strategy and Prospectivity

The Zambian government has expressed a clear ambition to increase domestic copper production from the present 830K tpa to 3M tpa by the end of the decade. This implies a clear political and strategic national support for the mining industry and the granting of licences to develop opportunities in the clean energy transition and harness production of critical battery metals.

Post Year End

Post year end, on 31 May 2024, the company announced an addendum to the Joint Venture with Cooperlemon Consultancy Limited which included the acquisition of three further licences in the Western Foreland, bringing the total combined area of the 2 pre-existing licences and the 3 new licences to 173,586 hectares. The three additional licences are 30459-HQ- LEL, 21851-HQ-LEL and 21850-HQ-LEL and all licences cover ground in the Western Foreland geological district that hosts Kamoa-Kakula style ineralization and the Central Fold and Thrust Belt which is host to Kolwezi style mineralization in northwest Zambia.

Under the terms of the restated joint venture agreement Xtract will earn an initial 65% interest in the additional licences by funding exploration of not less than US$500,000 on each of the three additional licences over an initial two-year period commencing on the date of the restated agreement. As previously announced, Xtract will earn a 65% interest in the original licences by funding exploration expenditure over an initial two-year period commencing on 23 August 2023 of not less than US$2 million, bringing Xtract's aggregate total commitment under the restated agreement to US$3.5 million.

Silverking Copper Mine Project

Post year-end, on 3 April 2024 Xtract announced that it had entered a joint venture agreement with Oval Mining Limited, who are acting in cooperation with Cooperlemon Consultancy Limited, to earn up to a 70% interest in the Silverking copper mine and accompanying exploration licence 26673-HQ-LEL located west of Lusaka, in the Mumbwa district, Central Province of Zambia.

Silverking is located immediately adjacent to the Kitumba deposit in which the Chinese Sinomine Resource Group announced a major investment to acquire a 65% interest in March 2024.

Joint Venture Agreement

Xtract has an option period of 18 months to earn an initial 51% in the Licence provided expenditure commitments of US$500,000 are met. Xtract has the option to further increase its interest in the licence to 70% upon completion of the earn- in period by committing an expenditure of a further US$1,000,000 over two years, subject to Cooperlemon's right to maintain its interest in the Licence through its option to earn back up to 70% by participating in such ongoing expenditure.

Should an inferred resource in excess of 300,000 tonnes of contained copper be identified, Xtract's beneficial interest shall remain at 70%, or if different, its respective interest at the date of the resource estimate. If an inferred resource of greater than 500,000 tonnes of contained copper is reported, then any subsequent sale of the project to a third-party will result in an equal share of the disposal proceeds between the parties, after costs of disposal but such costs to exclude the actual cost of the resource discovery.

If the exploration programme demonstrates that the Licence cannot support an inferred resource of 300,000 tonnes or more, then the parties by mutual agreement may elect to commence a small mining project. In the event, that a small mining project is developed then Xtract's interest in the project will be 70%. If a small mine is developed, Xtract will be responsible for funding the entire project and will not recover from Cooperlemon any share of costs.

The management and compliance (statutory and regulatory) of the Silverking licence will be the responsibility of Cooperlemon.

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