CCZ Castillo Copper Limited

Condensed Consolidated Statement of Cash Flows

for the half-year ended 31 December 2023

The accompanying notes form part of these financial statements.

Notes to the Condensed Consolidated Financial Statements
for the half-year ended 31 December 2023

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Corporate Information

This general purpose financial report of Castillo Copper Limited and its subsidiaries (the Group) for the half-year ended 31 December 2023 was authorised for issue in accordance with a resolution of the directors on 14 March 2024.

Castillo Copper Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange and the London Stock Exchange.

The nature of the operations and principal activities of the Group are described in the Directors' Report.

Basis of Preparation

This financial report for the half-year ended 31 December 2023 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. The Group is a for profit entity for financial reporting purposes under Australian Accounting Standards. Compliance with AASB 134 ensures compliance with IAS 34 Interim Financial Reporting.

These half-year financial statements do not include all notes of the type normally included within the annual financial statements and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the Group as the full financial statements.

It is recommended that the half-year financial statements be read in conjunction with the annual financial statements for the year ended 30 June 2023 and considered together with any public announcements made by Castillo Copper Limited during the half-year ended 31 December 2023 in accordance with the continuous disclosure obligations of the ASX listing rules.

For the purpose of preparing the half-year report, the half-year has been treated as a discrete reporting period. The accounting policies and methods of computation adopted are consistent with those of the previous financial year. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

The consolidated financial statements have been prepared on the basis of historical cost.

Going Concern

This report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal course of business.

Notes to the Condensed Consolidated Financial Statements
for the half-year ended 31 December 2023

The Group incurred a net loss for the period ended 31 December 2023 of $1,197,257 and a net cash outflow from operating activities of $631,750. At 31 December 2023, the Group had a net asset position of $10,869,059 and working capital of $2,084,814. The cash and cash equivalents balance at 31 December 2023 was $1,747,998.

Notwithstanding these results, the Directors believe that the Company will be able to continue as a going concern and as a result the financial statements have been prepared on a going concern basis. The interim financial report has been prepared on the assumption that the Group is a going concern for the following reasons:

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

·      the ability of the Group to scale back parts of its operations and reduce costs if required;

·      the Board is of the opinion that the Group has, or shall have access to, sufficient funds to meet the planned corporate activities and working capital requirements; and

·      as the Group is an ASX-listed entity, the Group has the ability to raise additional funds, if required.

In the event that the Group is unable to achieve the actions noted above, there is a material uncertainty that may cast significant doubt as to the Group's ability to continue as a going concern, and  it may be required to realise its assets at amounts different to those currently recognised, settle liabilities other than in the ordinary course of business and make provisions for other costs which may arise as a result of cessation or curtailment of normal business operations.

The directors have reviewed the Group's financial position and are of the opinion that the use of the going concern basis of accounting is appropriate.

New and amending Accounting Standards and Interpretations

In the half-year ended 31 December 2023, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Group's operations and effective for annual reporting periods beginning on or after 1 July 2023. As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Group and, therefore, no material change is necessary to Group accounting policies.

The Directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the half-year ended 31 December 2023. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on the Group's business and, therefore, no change necessary to the Group accounting policies.

NOTE 2:  SEGMENT REPORTING

Notes to the Condensed Consolidated Financial Statements
for the half-year ended 31 December 2023

Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. The entity has four geographical segments being exploration in Northwest Queensland (NWQ), New South Wales (Cangai), New South Wales (Broken Hill) and Zambia. Revenue attributable to all segments is immaterial. Allocation of asset, liabilities, income and expenses to each segment is shown below:

Notes to the Condensed Consolidated Financial Statements
for the half-year ended 31 December 2023

NOTE 2:  SEGMENT REPORTING (CONTINUED)

NOTE 3: OTHER EXPENSES

Included in other expenses are the following items:

Notes to the Condensed Consolidated Financial Statements
for the half-year ended 31 December 2023

NOTE 4:  DEFERRED EXPLORATION AND EVALUATION EXPENDITURE

The ultimate recoupment of costs carried forward as exploration expenditure is dependent on the successful development and commercial exploitation or sale of the respective areas of interest.

NOTE 4:  DEFERRED EXPLORATION AND EVALUATION EXPENDITURE (CONTINUED)

¹ At each reporting date, the Group undertakes an assessment of the carrying amount of its exploration and evaluation assets. As at 31 December 2023, the Group identified indicators of impairment on certain exploration and evaluation assets under AASB 6 Exploration and Evaluation of Mineral Resources. As a result of this review, an impairment charge of $315,216 was recognised in the statement of profit or loss and other comprehensive income in relation to areas of interest where no future exploration and evaluation activities are expected.

² On 11 January 2024, the Company announced it had executed a Tenement Purchase Agreement with Rimfire Pacific Mining Limited (ASX: RIM), to sell an unencumbered 100% of the Company's Exploration Licenses 8572 and 8599 which lie adjacent to Rimfire's Bald Hill Cobalt prospect, 30 kilometres west of Broken Hill, NSW. As a result, these assets have been assessed as held for sale and impaired down to fair value less cost to sell at 31 December 2023, resulting in impairment charge of $203,145 recognised in the statement of profit or loss and other comprehensive income.

NOTE 5: ISSUED CAPITAL

Issued and paid up capital

Notes to the Condensed Consolidated Financial Statements
for the half-year ended 31 December 2023

Movements in issued capital

Share options

At 31 December 2023 there were 11,000,000 (30 June 2023: 132,699,971) unlisted options with various exercise prices and expiry dates and 163,439,781 listed options (ASX:CCZOA, CCZOB & CCZOB), with various exercise prices and expiry dates.

The following share-based payment arrangements were in place during the period:

NOTE 5: ISSUED CAPITAL (CONTINUED)

During the half-year 121,699,971 options expired, with various exercise prices and expiry dates.

No options were exercised during the period.

(a) Weighted average fair value

Notes to the Condensed Consolidated Financial Statements
for the half-year ended 31 December 2023

The fair value of the equity-settled unlisted options granted in prior periods was estimated as at the date of grant using the Black and Scholes model taking into account the terms and conditions upon which they were granted, as follows:

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value.

Performance Shares

At 31 December 2023 there were 46,875,000 Class A performance shares and 46,875,000 Class B performance shares on issue in relation to the Zambian tenements held by Zed Copper Pty Ltd.

46,875,000 Class A performance shares

Conditions precedent - converting to an equal number of CCZ shares on delineation of a JORC resource of 200,000 tonnes of contained copper at a minimum grade of 0.5% within 5 years of execution of the Share Sale Agreement.

46,875,000 Class B performance shares

Conditions precedent - converting to an equal number CCZ shares on completion of a preliminary feasibility study demonstrating an internal rate of return greater than 25% within 5 years of execution of the Share Sale Agreement

NOTE 6: CONTINGENT LIABILITIES

There has been no change in contingent liabilities since the last annual reporting date.

Notes to the Condensed Consolidated Financial Statements
for the half-year ended 31 December 2023

NOTE 7: SUBSEQUENT EVENTS

The following significant events occurred after 31 December 2023:

·      On 11 January 2024, the Company announced it had executed a Tenement Purchase Agreement with Rimfire Pacific Mining Limited (ASX: RIM), to sell an unencumbered 100% of the Company's Exploration Licenses 8572 and 8599 which lie adjacent to Rimfire's Bald Hill Cobalt prospect, 30 kilometres west of Broken Hill, NSW.

·      Consideration for the sale comprises $150,000 worth of RIM shares at an issue price of $0.0186 per share, plus an additional $150,000 worth of RIM shares at an issue price of $0.0279 per share, conditional on the RIM 5-day volume weighted average share price being greater than $0.0279 at any time after completion.

·      On 14 March 2024, Mr David Drakeley and Mr Jack Sedgwick resigned as Non-Executive Directors and Mr Joel Logan and Mr Eduardo Robaina were appointed as Non-Executive Directors of the Company.

NOTE 8: FINANCIAL INSTRUMENTS

The Group has a number of financial instruments which are not measured at fair value on a recurring basis. The carrying amount of these financial instruments approximates their fair values.

DIRECTORS' DECLARATION

In accordance with a resolution of the directors of Castillo Copper Limited (the 'Company'), the directors of the Company declare that:

1.         The financial statements and notes are in accordance with the Corporations Act 2001, including:

            a.         complying with Accounting Standard AASB 134: Interim Financial Reporting; the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

            b.         giving a true and fair view of the Group's financial position as at 31 December 2023 and of its performance for the half-year ended on that date.

2.         In the directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Gerrard (Ged) Hall

Non-Executive Chairman

14 March 2024