HCH.V · 2021-12-31

Interim Financial Report for the Half-Year Ended 31 December 2021

Financials

Half-Yearly Report

Hot Chili Limited

and Controlled Entities

ABN: 91 130 955 725

Interim Financial Report for the

Half-Year Ended 31 December 2021

Hot Chili Limited ACN 130 955 725

Contact

First Floor, 768 Canning Highway, Applecross, Western Australia 6153

Mr Christian Easterday PO Box 1725, Applecross, Western Australia 6953 Managing Director P: +61 8 9315 9009 F: +61 8 9315 5004 E: [email protected]

www.hotchili.net.au

CONTENTS

Corporate Particulars ..................................................................................................................................... 3 Directors' Report ............................................................................................................................................ 4 Statement of Profit or Loss and Other Comprehensive Income .................................................................. 19 Statement of Financial Position ................................................................................................................... 20 Statement of Changes in Equity .................................................................................................................. 21 Statement of Cash Flow ............................................................................................................................... 22 Notes to the Financial Statements ............................................................................................................... 23 Directors Declaration ................................................................................................................................... 33 Independent Review Report to the Members of Hot Chili Limited ............................................................ 34

Corporate Particulars Directors

Murray Black (Non-Executive Chairman) Retired 1 March 2022 Christian Easterday (Managing Director)

Dr Allan Trench (Independent Non-Executive Director)

Roberto de Andraca Adriasola (Non-Executive Director)

George Randall Nickson (Independent Non-Executive Director)

Mark Jamieson (Non-Executive Director)

Nicole Adshead- Bell (Independent Non-Executive Chairman from 1 March 2022) Appointed Director 5 January 2022

Company Secretary

Penelope Beattie (Appointed 31 January 2022)

Principal & Registered Office

First Floor 768 Canning Highway Applecross, Western Australia 6153 Telephone +61 8 9315 9009 Facsimile +61 8 9315 5004 Website www.hotchili.net.au

Share Registry Australia Canada

Computershare Investor Services Pty Limited Computershare Investor Services Inc Level 11, 172 St Georges Terrace 100 University Avenue Perth WA 6000 Toronto, Ontario, M5J 2Y1 Telephone: 08 9315 0933 Facsimile:08 9315 2233

Auditors

RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade Perth, Western Australia 6000

Bankers

Westpac Banking Corporation Hannan Street, Kalgoorlie, Western Australia, 6430

Directors' Report

The Directors of Hot Chili Limited present their report on Hot Chili Ltd (“the Company” or “Hot Chili”) and the entities it controlled (“consolidated entity”) at the end of, or during, the half-year ended 31 December 2021.

Directors

The following persons held office as directors of Hot Chili Limited at the date of this report or were directors at any time during the half-year ended 31 December 2021, unless otherwise stated:

Murray Black (Non-Executive Chairman Retired 1 March 2022)

Christian Easterday (Managing Director)

Dr Allan Trench (Independent Non-Executive Director)

Roberto de Andraca Adriasola (Non-Executive Director)

George Randall Nickson (Independent Non- Executive Director)

Mark Jamieson (Non-Executive Director) Appointed 3 September 2021 Melanie Leighton (Alternate for M Black) Resigned 1 October 2021 Nicole Sheri Adshead-Bell (Independent Non- Executive Chairman 1 March 2022) Appointed Director 5 January 2022

Principal Activities

The principal continuing activity of the consolidated entity is mineral exploration.

Significant Changes in the State of Affairs

There were no significant changes in the state of affairs of the consolidated entity during the half-year.

Review of Operations

Operating Results for 31 December 2021

The loss from continuing operations for the half-year after providing for income tax and non-controlling interests amounted to $5,130,488 (2020: $8,140,876).

Exploration assets have increased from the year end from $158,329,683 (June 21) to $193,424,177 (Dec 21). This reflects the final instalment of the option agreement to acquire Cortadera of US$15m (A$20.6m) paid 21 September 2021 and the capitalisation of A$10.3m of drilling costs due to the increase in drilling activities at Cortadera.

Following a successful capital raising and listing on the TSXV, the Company has a strong cash position (A$37.2m Dec 21) to support ongoing operations.

Operational and Corporate Highlights Hot Chili Completes $40 Million Capital Raising and Ownership of Cortadera in August

Glencore becomes 9.99% strategic shareholder and adds representative to Hot Chili’s Board
Final US$15 million instalment satisfied for 100% ownership of the Cortadera copper-gold discovery

in Chile Cortadera Continues to Expand Ahead of Resource Upgrade

46,000m of resource drilling complete at Cortadera during 2021
Further strong extensional drill results 168m grading 1.0% CuEq (0.8% Cu, 0.3g/t Au) from 682m depth (CRP0088D)

o 82m grading 1.0% CuEq (0.7% Cu, 0.3g/t Au) from 634m depth (CRP0124D)

o 138m grading 0.8% CuEq (0.6% Cu, 0.1g/t Au) from 634m depth (CRP0134D)

Costa Fuego Expands Reach and Readies for New Growth Drilling Phase

Low-cost rope-conveyor transport and handling confirmed in Costa Fuego Pre-Feasibility Study
Advanced Three-Dimensional (3D) Geochemical targeting has been applied for the first time across Hot Chili’s consolidated Costa Fuego landholding - several large targets being prepared for first drilling

Low-altitude, Costa Fuego combined coastal development in relation to Nuevo Union combined development, Chile

Completion of CAD$33.8 Million Capital Raising and Share Consolidation in December

Strong demand underpinned by several international and North American institutional investors,

and some of Hot Chili’s largest shareholders including Glencore

Share consolidation complete and funds secured for 18 months of drilling and development studies

to advance the Company’s Costa Fuego copper-gold development project in Chile Commencement of Trading on Canadian TSX Venture Exchange (TSXV:HCH)

Completion of Initial Public Offering prospectus and commencement of TSXV trading on 4 January
Appointment of experienced Canadian director Dr Nicole Adshead-Bell to the Board of Hot Chili

2022 Work Programme and Development Milestones On-Track

Exploration drilling commenced across Productora Central porphyry target, first of several targets

set for first drill testing in 2022

Commercial negotiations advancing for Glencore Off-take (60% for first 8years) and Puerto Las

Losas Port Access-Service agreements

Cortadera resource up-grade expected in Q1 2022 and Costa Fuego PFS expected in Q3 2022

Existing Las Losas Port, located at Huasco, approximately 50km west of Costa Fuego’s proposed processing plant.

SUMMARY OF OPERATIONAL ACTIVITIES Cortadera Resource Growth Drilling

The Company’s 2021 resource growth drilling programme at the Cortadera copper-gold discovery in Chile continued with three drill rigs completing a total of 74 drill holes for 21,518m during the half year ended 31 December.

Drilling during the period focussed on evaluating remaining open flanks on each of Cortadera’s three porphyries and in-fill drill holes to upgrade the resource classification. Approximately 46,000m of additional drilling has been completed at Cortadera in 2021.

Highlights from Cortadera resource drilling include:

Strong extensional drill results demonstrating continued expansion of high grade resources (+0.8% CuEq) across the northern flank (North Flank) of the main porphyry (Cuerpo 3):

168m grading 1.0% CuEq (0.8% Cu, 0.3g/t Au) from 682m depth (CRP0088D)

o 82m grading 1.0% CuEq (0.7% Cu, 0.3g/t Au) from 634m depth (CRP0124D)

o 138m grading 0.8% CuEq (0.6% Cu, 0.1g/t Au) from 634m depth (CRP0134D)

New drill results from Cuerpo 1 and 2 confirm growth of shallow resources:

156m grading 0.4% CuEq* (0.4% Cu, 0.1g/t Au) from surface (CRP0148), o including 32m grading 0.6%CuEq* (0.5% Cu, 0.2g/t Au) from 90m depth 80m grading 0.4% CuEq* (0.4% Cu, 0.1g/t Au) from 10m depth (CRP0183)

o including 12m grading 0.6%CuEq* (0.6% Cu, 0.1g/t Au) from 44m depth 72m grading 0.4% CuEq* (0.4% copper (Cu), 0.1g/t gold (Au)) from surface (CRP0178)

o including 28m grading 0.7%CuEq* (0.7% Cu, 0.1g/t Au) from surface

Reverse Circulation drilling operations at Cortadera, December 2021

Costa Fuego PFS Advancing

The integrated Pre-Feasibility Study (PFS) on the combined Costa Fuego copper-gold development is progressing on schedule with significant advances on metallurgical testwork programmes, mine scheduling, project right-sizing, geotechnical studies and infrastructure access.

Highlights from the Costa Fuego PFS include:

Execution of a Letter of Intent with Puerto Las Losas SA (PLL) to negotiate a port access and port services agreement for PLL’s facilities located at Huasco, approximately 50km west of Costa Fuego’s proposed processing plant (announced mid-January 2022).

Under the terms of the Letter of Intent, PLL will finance a study for port services using the existing o Puerto Las Losas dock for the shipment of copper concentrates and other materials related to the future construction and operation of Costa Fuego.

PLL have undertaken to present Hot Chili with a binding offer for port services, within the next 12 o weeks or less.

Completion of initial power supplier process – multiple power providers confirm highly competitive, longterm power price environment with indicative quotations.
Metallurgical flowsheet optimisation, as well as sulphide and oxide metallurgical testwork

programmes underway in Australia.

Preliminary mine scheduling and mine optimisations (open pit and cave extraction) complete to test 15Mtpa and 20Mtpa sulphide concentrator scale options is complete.
Re-commencement of Environmental Impact Assessment baseline studies across Costa Fuego with the appointment of leading Chilean environmental consultancy GAC.
Commencement of Hot Chili’s Environmental, Social and Governance (ESG) framework, leveragingoff the company’s strong involvement in local partnerships, social programmes and green credentials.
Development study diamond drilling underway at Cortadera in mid-January to facilitate geotechnical and hydrology modelling.

View across the existing Las Losas port facility (PLL), approximately 50km west of Costa Fuego

Costa Fuego Exploration Drilling Commences

The Company has continued to advance its exploration strategy across its consolidated Costa Fuego landholding during the quarter.

In addition to regional soil sampling and mapping, the company commenced drilling activities across the first of several high impact growth targets, scheduled to be tested in 2022.

Highlights from Exploration across Costa Fuego include:

Exploration drilling commenced across the Productora central porphyry target, immediately adjacent to the Productora Mineral Resource – several large copper-gold targets scheduled for testing in 2022.
Five deep RC holes complete at Productora Central, results pending.
Approximately 889 soil samples were collected across the Cortadera regional area during the quarter.
Systematic mapping and sampling undertaken across the gap zone between Cortadera and Santiago

Z, as well as extensional work to the west of Santiago Z.

Acquisition of advanced remote sensing datasets across the Costa Fuego region.
Regulatory approval for drilling at Santiago Z received in early January, clearing scheduled to commence in February.
Several regulatory applications submitted for drilling across new growth targets at Productora and

Cortadera.

View looking SE across Productora – Drilling underway across a new, large 3D geochemical target identified immediately adjacent to the Productora resource.

Figure 1 Location of Productora and the Cortadera discovery in relation to the coastal range infrastructure of Hot Chili’s combined Costa Fuego copper project, located 600km north of Santiago in Chile

Refer to ASX Announcement “Costa Fuego Becomes a Leading Global Copper Project” (12th October 2020) for JORC Table 1 information related to the Cortadera JORC compliant Mineral Resource estimate by Wood and the Productora re-stated JORC compliant Mineral Resource estimate by AMC Consultants.

Copper Equivalent (CuEq) reported for the resource were calculated using the following formula: CuEq% = ((Cu% × Cu price 1% per tonne

× Cu_recovery) + (Mo ppm × Mo price per g/t × Mo_recovery)+(Au ppm × Au price per g/t × Au_recovery)+ (Ag ppm × Ag price per g/t × Ag_recovery)) / (Cu price 1% per tonne). The Metal Prices applied in the calculation were: Cu=3.00 USD/lb, Au=1,550 USD/oz, Mo=12 USD/lb, and Ag=18 USD/oz. For Cortadera (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=56%, Mo=82%, and Ag=37%. For Productora (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=43% and Mo=42%. For Costa Fuego (Inferred + Indicated), the average Metallurgical Recoveries were: Cu=83%, Au=51%, Mo=67% and Ag=23%.

** Reported on a 100% Basis - combining Cortadera and Productora Mineral Resources using a +0.25% CuEq reporting cut-off grade

Table 1 Significant Drill Results Reported in Half Year Ending Dec 31st 2021

Hole ID _	Coordinates			Azim	Dip	Hole Depth	Intersection		Interval	Copper		Gold		Silver	Molybdenum	Cu Eq
	North	East	RL				From	To	(m)	(% Cu)		(g/t Au)		(ppm Ag)	(ppm Mo)	(% Cu Eq)
CRP0088D	6813365	336621	1060	286	-63	1434	426	912	486	0.5	0.2		0.8		77	0.6
Updated with final assays					or including		682	850	168	0.8	0.3		1.4		109	1
					or including		714	830	116	0.9	0.3		1.5		130	1.1
							718	780	62	1	0.4		1.6		96	1.2
CRP090D	6813872	336253	1060	231	- 64.6	999	310	648	338	0.3	0.1		1.0		128	0.4
CRP0099	6814342	335109	960	201	- 61.1	84	26	85	59	0.4	0.1		1.0		15	0.4
CRP0100D	6814041	335183	965	239	- 69.8	439	184	236	52	0.3	0.1		1.0		76	0.3
CRP0106	6814366	335009	954	343	- 60.3	271	0	58	58	0.3	0.0		1.0		39	0.3
					including		0	12	12	0.5	0.1		1.0		13	0.5
CRP0127D	6813534	336306	1035	98	- 66.6	637	232	290	58	0.3	0.1		0.4		67	0.3
							298	332	34	0.3	0.1		0.3		139	0.4
CRP0126	6813622	336269	1028	32	- 59.2	192	14	30	16	0.2	1.2		0.3		16	0.9
					Including		14	22	8	0.3	2.4		0.4		16	1.5
CRP0108D	6814105	335074	946	227	- 69.9	288	28	80	52	0.3	0.1		0.8		60	0.4
CRP0058D	6814177	335957	1032	223	- 65.9	1163	70	84	14	0.3	0.2		0.8		7	0.4
							570	576	6	0.5	0.0		4.4		5	0.5
							784	810	26	0.4	0.1		0.8		32	0.4
CRP0092D	6814256	335147	972	209	- 74.2	635	4	8	4	0.3	0.1		0.3		10	0.3
							68	136	68	0.2	0.0		0.5		59	0.3
					Including		68	84	16	0.3	0.1		0.5		79	0.4
							112	122	10	0.3	0.0		0.5		36	0.3
							500	506	6	0.4	0.0		0.8		5	0.4
CRP0124D	6813694	336500	1049	239	- 75.0	1020	480	842	362	0.5	0.2		0.9		123	0.61
					including		628	776	148	0.6	0.3		1.3		150	0.84
					or including		628	730	102	0.7	0.3		1.3		195	0.91
					or including		634	716	82	0.7	0.3		1.3		225	0.96
CRP0134D	6813615	336269	1027	96.42	- 75.8	1025	216	826	610	0.4	0.1		0.7		206	0.5
					including		502	568	66	0.6	0.2		0.9		159	0.7
					and including		634	772	138	0.6	0.1		1.4		486	0.8
CRP0132D	6813861	336310	958	170	-76	766	300	766	466	0.2	0.1		0.4		89	0.3

Hole ID _	Coordinates			Azim	Dip	Hole Depth	Intersection		Interval	Copper		Gold		Silver	Molybdenum	Cu Eq
	North	East	RL				From	To	(m)	(% Cu)		(g/t Au)		(ppm Ag)	(ppm Mo)	(% Cu Eq)
					including		540	576	36	0.4	0.1		0.6		169	0.5
							714	764	50	0.3	0.1		0.7		92	0.3
CRP0133	6813977	335692	985	150.2	- 59.9	108	12	108	96	0.2	0.1		0.4		34	0.2
					including		12	54	42	0.3	0.1		0.5		15	0.3
CRP0139	6813981	335446	969	115.3	- 61.1	222	0	222	222	0.2	0.1		0.5		7	0.3
					including		180	222	42	0.4	0.3		0.8		4	0.5
CRP0140	6813975	335695	985	25.05	- 70.1	92	10	62	52	0.2	0.1		0.4		23	0.3
CRP0150	6813982	335427	968	109.5	-54	132	34	96	62	0.2	0.1		0.3		23	0.2
CRP0151	6813865	335540	992	168.8	- 75.5	162	0	30	30	0.3	0.1		0.6		13	0.3
						162	48	118	70	0.3	0.1		0.5		19	0.3
CRP0148	6813870	335545	993	84	-61	252	0	252	252	0.3	0.1		0.6		4	0.4
					including		0	156	156	0.4	0.2		0.8		5	0.4
					or including		90	122	32	0.5	0.2		0.9		2	0.6
CRP0149	6813791	335636	1009	10	-58	266	112	204	92	0.3	0.1		0.4		3	0.3
CRP0151	6813865	335540	992	169	-75	162	0	124	124	0.2	0.1		0.5		15	0.3
CRP0152	6813938	335679	982	180	-60	162	10	158	148	0.2	0.1		0.5		10	0.2
CRP0153	6813959	335619	977	31	-60	102	36	86	50	0.3	0.1		0.5		18	0.3
CRP0154	6813959	335619	977	321	-60	168	8	114	106	0.2	0.1		0.4		17	0.2
CRP0158	6813926	335491	977	200	-60	150	4	66	62	0.4	0.1		0.6		11	0.4
					including		26	44	18	0.6	0.2		1		3	0.7
CRP0176	6814172	334831	953	143	-71	252	0	114	114	0.3	0.1		0.6		47	0.3
					including		0	24	24	0.6	0.1		1.2		8	0.6
CRP0177	6814270	334735	976	10	-60	294	14	34	20	0.3	0.1		0.5		34	0.3
CRP0178	6814171	334834	953	210	-70	312	0	72	72	0.4	0.1		0.8		46	0.4
					including		0	28	28	0.7	0.1		1.5		17	0.7
CRP0183	6814283	334935	960	257	-74	234	10	90	80	0.4	0.1		0.8		8	0.4
					including		44	56	12	0.6	0.1		1.1		12	0.6
					and		192	214	22	0.3	0		0.7		28	0.3
CRP0184	6814328	334814	957	199	-75	150	0	80	80	0.2	0.1		0.3		3	0.2
					and		124	150	26	0.4	0.1		1.2		2	0.4

Significant intercepts are calculated above a nominal cut-off grade of 0.2% Cu. Where appropriate, significant intersections may contain up to 30m down-hole distance of internal dilution (less than 0.2% Cu). Significant intersections are separated where internal dilution is greater than 30m down-hole distance. The selection of 0.2% Cu for significant intersection cut-off grade is aligned with marginal economic cut-off grade for bulk tonnage polymetallic copper deposits of similar grade in Chile and elsewhere in the world.

Down-hole significant intercept widths are estimated to be at or around true-widths of mineralisation

Copper Equivalent (CuEq) reported for the drill holes were calculated using the following formula: CuEq% = ((Cu% × Cu price 1% per tonne × Cu_recovery)+(Mo ppm × Mo price

per g/t × Mo_recovery)+(Au ppm × Au price per g/t × Au_recovery)+ (Ag ppm × Ag price per g/t × Ag_recovery)) / (Cu price 1% per tonne). The Metal Prices applied in the calculation were: Cu=3.00 USD/lb, Au=1,550 USD/oz, Mo=12 USD/lb, and Ag=18 USD/oz. Average Metallurgical Recoveries used were: Cu=83%, Au=56%, Mo=82%, and Ag=37%

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