Pegmont Mines : Annual Report - 31 December 2022

PEGMONT MINES LIMITED

Annual Report 2021

For the year ended 31 December 2021

PEGMONT MINES LIMITED ABN 97 003 331 682

CHAIRMAN'S REVIEW

PEGMONT HAS HAD A YEAR OF CHANGE AND CONSOLIDATION.

Reconstitution of the Board

John Armstrong, after serving for many years as Chairman, has retired. During his period as Chairman the company grew through exploration success, that was then sold to others such as Vendetta to carry out the mining which in turn provided the funds for continued exploration.

Peter Read who has been a member of the Board for several years has become the new Chairman.

Hadyn Oriti, a practicing solicitor in Port Macquarie has joined the Board. We welcome his practicable experience in a wide range of commercial matters.

Exploration

We have reduced exploration activities to concentrate on only one tenement namely Canyon.

All other tenements have been relinquished. We sought to interest South 32 in the Templeton and Mingera tenements, but when that did not bear fruit, we relinquished them.

We are looking at the possibility of conducting some small-scale exploration at Canyon but within our financial resources. We intend to do a bit more work on firming up a drill target, and at present we are ahead of expenditure obligations.

We remain highly dependent on the achievements of Austral Resources as an eventual royalty source.

Austral Resources (have reported) Contract mining of the Anthill Project to provide copper oxide ore feed to Mount Kelly. The Anthill Project has been the subject of internal and external studies over the past two years to provide costing data, optimise mining and crushing, agglomeration and stacking methods. The Anthill Project is fully permitted for development and is capable of providing sufficient ore to produce 40,000 tonnes of copper cathode over a four-year period. Mining commenced Q4 of 2021 with the first ore expected to be delivered to the leach pads in Q1 2022.

The Austral tenements are well endowed with copper containing 423Kt JORC compliant Inferred and Indicated Mineral Resource Estimate over 49 prospective copper targets have been defined from historic and recent exploration work, but we are not sure as to how much of this potential, lies within the royalty tenements. A review of sulphide and transitional mineralisation Mineral Resource Estimate of 324kt of contained Cu, not all in the Reefway royalty tenements for its potential to be economically mined and processed. Austral announced on 3 February 2022 an offtake agreement with Glencore (a major copper trading house) and prepayment of $21 million to expedite exploration and development activities through 2022.

Though Austral are currently planning an output of 10k tonnes per annum we view it as highly likely that they will be able to increase this production.

Patient Investing

In the meantime, we are following a policy of Patient Investing.

The market remains volatile with a summary of the top 150 Companies with about 1 in 6 such stocks are trading at 25% or more discount to their last highs. Warren Buffet has regained credibility by continuing to be a value investor. It is this approach that the Investing Committee intends to prevail with a process of Patient Investing, whereby quality stocks are acquired at discounted prices in anticipation of a profitable recovery.

We currently hold three investments at a total cost of $113,375 with a market value of $108,100 as of 24 March 2022. This is a gain of $21,050 on 31 December 2022 market values.

As of 31 December 2021, our total cash was $1,363,730. After expenses cash may decline to $904,000 by December 2022; a balance sufficient to last for three years. We are hopeful that investing opportunities will arise to augment this balance at years end.

Chairman

OUR TEAM

BOARD OF DIRECTORS

Peter J Read

Non-Executive Chairman BEc, FAICD

Mr Read, is a corporate specialist in mining, marketing and business consulting. He was appointed a Director in 2014, and Chairman on 27 May 2021.

Age 82

Malcolm A Mayger

Managing Director BComm, CA, FAICD

Mr Mayger, has over 50 years of experience in exploration and mining investment. He founded the Company in 1987 and then was involved in all tenement acquisitions, including Pegmont, Mount Kelly, Anthill, the Mount Gordon Fault Zone, Templeton, Mingera, Battle Creek and Canyon EPM areas.

Age 82

Hadyn G Oriti

Mr Hadyn was appointed a Non-Executive Director on 27 May 2021.

LLB

Mr Hadyn is a practicing lawyer in Port Macquarie, NSW. Age 59

Richard S Woods

(Alternate for Malcolm A Mayger)

BComm, FCA

Mr Woods is a Chartered Accountant providing corporate advice.

Age 69

The Board has regular meetings to discuss strategy and impact of current issues.

COMPANY SECRETARY

Christopher D Leslie

BComm, FCA

Mr Leslie has 35 years of experience in the mineral and petroleum industries at senior levels.

Age 68

INVESTMENT COMMITTEE

The Investment Committee is comprised of all directors and Mr John M Armstrong who is providing consulting advice on the Company's Patient Investing Strategy.

TECHNICAL AND PROJECT MANAGEMENT

David Hewitt

BSc (University of Queensland), and MSc in Exploration and Mining Geology (James Cook University)

Mr Hewitt has extensive experience in the Mount Isa region, acting as project geologist and drill supervisor for the Company since 1996. He has detailed knowledge of the Mount Kelly and Anthill deposits which are now operated by Austral Resource Limited (ARI).

CONSULTANTS

The Company contracts highly qualified consultants to undertake specific tasks in geologic review, petrological analysis and geophysical targeting, thus the Company benefits from a wide spectrum of experience.

COMPANY'S ACTIVITIES DURING 2021

Copper

Exploration emphasis was maintained on copper in Battle Creek and Canyon EPMs, north and south of Mount Kelly in the Western Succession, Mount Isa region, North-West Queensland.

Mount Kelly Trend

A regional review of historic data on the Mount Kelly Cu (+Au) deposit (operated by Austral), adjacent and north of the Company's prospect at Canyon. Both of which are associated with the McNamara Fault Trend, a prominent north-south structure.

Drilling

927 metres of angled RC holes were drilled immediately north of the McLeod Hill

MLs along the McNamara West Fault in eight holes. Hole PCR 006 was the most significant with broad zones of weak to moderate copper values including 4m @ 2,045ppm Cu.

A subsequent geophysical review indicated that a cluster of magnetic features (anomalies) were located immediately north and east of the drill area and associated with basaltic rocks bordering on the opposite (east) side of the McNamara West Fault. This cluster area over a 700 metre strike and 400 metre width is regarded as a prime drill target.

Cash - $1,363,730

After payments of $200,000 deferred liabilities, exploration $281,838 and administration $304, 624 and net loss on investments of $17,777. Taxation was NIL as carried forward losses were $10.4 million and franking credits balance 30/6/21 was $3.7 million.

Tenements

Templeton, Mingera and Battle Creek have been relinquished as not offering appropriate opportunity for successful exploration.

Only Canyon (EPM 27345) remains directly held by the Company.

Option Agreements

The Reefway Royalty tenements are operated by Austral Resources Limited, recently listed on the ASX. Austral intends to expand current copper production to 10,000 tonnes Cu p.a by mid-2022 on a reserve of 40,000 tonnes.

The Pegmont tenements are controlled by Vendetta Mines Corp, who continue to conduct feasibility studies and enlarge the

Pegmont lead-zinc mineralisation.

Outlook - 2022

The Company has reduced its exposure to exploration in order to conserve cash until the commencement of royalty income, possibly by 2025.