Announcement PDF CRITICAL RESOURCES LIMITED ACN 145 184 667 PROSPECTUS This Prospectus is being issued for an offer of up to 129,161,955 Shares at an issue price of C$0.0545 (A$0.06) per Share (Offer). THIS IS A TRANSACTION-SPECIFIC PROSPECTUS ISSUED IN ACCORDANCE WITH SECTION 713 OF THE CORPORATIONS ACT. THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION. IT SHOULD BE READ IN ITS ENTIRETY. IF YOU ARE IN DOUBT ABOUT WHAT TO DO, YOU SHOULD CONSULT YOUR PROFESSIONAL ADVISER WITHOUT DELAY. THE SECURITIES OFFERED IN CONNECTION WITH THIS PROSPECTUS ARE OF A SPECULATIVE NATURE. Important information This Prospectus is dated 31 July 2023 and was lodged with ASIC on that date with the consent of all Directors. Neither ASIC nor ASX nor their respective officers take any responsibility for the contents of this Prospectus. No Shares will be issued on the basis of this Prospectus any later than 13 months after the date of this Prospectus (being the expiry date of this Prospectus). A copy of this Prospectus is available for inspection at the registered office of the Company at Level 50, 108 St Georges Terrace, Perth WA 6000 during normal business hours. The Company will provide a copy of this Prospectus to any person on request. The Company will also provide copies of other documents on request (see Section 4.6). The Shares offered by this Prospectus should be considered speculative. Please refer to Section 3 for details relating to investment risks. This Prospectus will be made available in electronic form. Persons having received a copy of this Prospectus in its electronic form may obtain an additional paper copy of this Prospectus (free of charge) from the Company's principal place of business by contacting the Company. The Offer contemplated by this Prospectus is only available in electronic form to persons receiving an electronic version of this Prospectus within Australia or other eligible jurisdictions. Applications for Shares under the Offer will only be accepted on an Application Form that is attached to, or provided by the Company with, a copy of this Prospectus in either paper or electronic form. The Corporations Act prohibits any person from passing on to another person an Application Form unless it is accompanied by a complete and unaltered copy of this Prospectus. No person is authorised to give any information or to make any representation in connection with the Offer which is not contained in this Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Company in connection with the Offer. No action has been taken to permit the offer of Shares under this Prospectus in any jurisdiction other than Australia and Canada. Unless permitted under securities legislation, no further trades of the Shares through an exchange, or a market, within Canada, or to a person or company in Canada is permitted before the day that is four months and one day from the date on which the Company becomes a reporting issuer in a Canadian jurisdiction. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and therefore persons into whose possession this document comes should seek advice on and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of those laws. This Prospectus does not constitute an offer of the securities in any jurisdiction where, or to any person to whom, it would be unlawful to issue this Prospectus. This Prospectus is a transaction specific prospectus for an offer of continuously quoted securities (as defined in the Corporations Act) and has been prepared in accordance with section 713 of the Corporations Act. It does not contain the same level of disclosure as an initial public offering prospectus. In making representations in this Prospectus regard has been had to the fact that the Company is a disclosing entity for the purposes of the Corporations Act and certain matters may reasonably be expected to be known to investors and professional advisors whom potential investors may consult. This Prospectus is important and should be read in its entirety before deciding to participate in the Offer. This Prospectus does not take into account the investment objectives, financial or taxation, or particular needs of any Applicant. Before making any investment in the Company, each Applicant should consider whether such an investment is appropriate to his/her particular needs, and considering their individual risk profile for speculative investments, investment objectives and individual financial circumstances. Each Applicant should consult his/her stockbroker, solicitor, accountant or other professional adviser without delay. Some of the risk factors that should be considered by potential investors are outlined in Section 3. This Prospectus includes forward looking statements that have been based on current expectations about future acts, events and circumstances. These forward looking statements are, however, subject to risks, uncertainties and assumptions that could cause those acts, events and circumstances to differ materially from the expectations described in the forward looking statements. Definitions of certain terms used in this Prospectus are contained in Section 6. All references to time are to AWST, unless otherwise indicated. All references to "$" or "A$" are references to Australian dollars and all references to "C$" are references to Canadian dollars. All references to the A$ equivalent of C$ have been derived using an exchange rate of A$1.00 = C$1.11732. Corporate directory Directors Robert Martin Non-Executive Chairman Alex Cheeseman Managing Director John Markovic Non-Executive Director Company Secretary Harry Spindler Company Secretary Registered and Principal Office Share Registry Level 50, 108 St Georges Terrace Computershare Investor Services Pty Limited Perth WA 6000 Level 11, 172 St Georges Terrace Perth WA 6000 Telephone: (08) 9389 4499 Email: info@criticalresources.com.au Tel (within Aus): 1300 850 505 Website: www.criticalresources.com.au/ Tel (outside Aus): +61 (03) 9415 4000 Auditor* Joint Lead Managers BDO Audit (WA) Pty Ltd Canaccord Genuity (Australia) Limited Level 9, Mia Yellagonga Tower 2 Level 42, 101 Collins Street 5 Spring Street Melbourne VIC 3000 Perth WA 6000 Sixty Two Capital Pty Ltd 108 St George’s Terrace Perth WA 6000 Solicitors Hamilton Locke Pty Ltd ASX Code: CRR Central Park Building Level 48, 152 - 158 St Georges Terrace Perth WA 6000 * These entities are included for information purposes only. They have not been involved in the preparation of this Prospectus. iii Proposed timetable for the Offer Event Date* Lodgement of Prospectus with the ASIC and ASX 31 July 2023 Opening date of the Offer 1 August 2023 Closing Date of the Offer as at 5.00pm (AWST) 3 August 2023 Issue of Shares pursuant to the Offer 3 August 2023 * These dates are indicative only and subject to change. Subject to the Corporations Act and the Listing Rules, the Directors reserve the right to vary these dates, including the Closing Date, without prior notice. iv Table of contents 1. Details of the Offer 11 2. Effect of the Offer 14 3. Risk Factors 19 4. Additional Information 28 5. Directors’ Statement and Consent 37 6. Glossary of Terms 38 v Investment overview This Section is intended to highlight key information for potential investors. It is an overview only and is not intended to replace the Prospectus. Potential investors should read the Prospectus in full before deciding to invest in Shares. Key Information Transaction specific prospectus Further Information Section 4.4 This Prospectus is a transaction specific prospectus for an offer of continuously quoted securities (as defined in the Corporations Act) and has been prepared in accordance with section 713 of the Corporations Act. It does not contain the same level of disclosure as an initial public offering prospectus. In making representations in this Prospectus, regard has been had to the fact that the Company is a disclosing entity for the purposes of the Corporations Act and certain matters may reasonably be expected to be known to investors and professional advisers whom potential investors may consult. Risk factors Section 3 Potential investors should be aware that subscribing for Shares in the Company involves a number of risks. The key risk factors of which investors should be aware are set out in Section 3, including (but not limited to) risks in respect of: (a) Future capital requirements The Company will require further financing in the future, in addition to amounts raised under the Offer. Any additional equity financing may be dilutive to Shareholders, may be undertaken at lower prices than the current market price or may involve restrictive covenants which limit the Company's operations and business strategy. Debt financing, if available, may involve restrictions on financing and operating activities. As an exploration entity, the Company is making a loss, meaning it is reliant on raising funds from investors or lenders in order to continue to fund its operations and to scale growth. Although the Directors believe that additional capital can be obtained, no assurances can be made that appropriate capital or funding, if and when needed, will be available on terms favourable to the Company or at all. If the Company is unable to obtain additional financing as needed, the Company may be required to reduce the scope of its activities, which could have a material adverse effect on the Company's activities and could affect the Company's ability to continue as a going concern. The Company may undertake additional offerings of Shares and of Securities convertible into Shares in the future. The increase in the number of Shares issued and outstanding and the possibility of sales of such Shares may have a depressive effect on the price of Shares. In addition, as a result of such additional Shares, the voting power of the Company's existing Shareholders will be diluted. 6 Key Information (b) Further Information Flow-through placement risk The Shares issued pursuant to this Prospectus will qualify as "flow-through shares" as defined in the Income Tax Act (Canada) (ITA). The term "flowthrough share", as defined in the ITA, refers to an ordinary share that will be issued by the Company to an investor under a written agreement with the investor, whereby the Company agrees to incur “Canadian exploration expenses” and to renounce tax deductions associated with those expenditures to the investor. In this regard, the Company has agreed to incur qualifying expenditures in an amount equal to the gross proceeds raised in connection with the Offer by 31 December 2024, and to renounce such qualifying expenditures to the Investors effective no later than 31 December 2023. If the Company and the Investors comply with the rules under the ITA, the Investors will be entitled to deduct the amount renounced in computing income for Canadian income tax purposes and receive additional tax credits for expenditures targeting critical minerals. The right to deduct qualifying expenditures renounced in respect of flow-through shares accrues to the initial purchaser of the shares and is not transferable. The applicable tax treatment may constitute a major factor when considering an investment in flow-through shares. The tax consequences of subscribing for Shares under this Prospectus, including the considerations applicable in connection with the renunciation of qualifying expenditures to Investors, are not described in this Prospectus. Applicants are strongly urged to consult their professional tax advisor in connection with subscribing for Shares under this Prospectus. There is no guarantee that an amount equal to the total proceeds of the sale of the Shares will be expended on qualifying expenditures on or prior to 31 December 2024, or that the renunciation of such expenditures or the expected tax deductions and credits will be accepted by the Canada Revenue Agency. If the Company does not renounce to an Investor, effective on or before 31 December 2023, qualifying expenditures in an amount equal to the aggregate purchase price paid by such Investor for Shares under the Offer, or if there is a reduction in such amount renounced pursuant to the provisions of the ITA, then the Company shall indemnify the Investor for an amount equal to the amount of any tax payable or that may become payable under the ITA (and under any corresponding provincial legislation) by the Investor (or if the Investor is a partnership, the partners thereof) as a consequence of such failure or reduction; however, there is no guarantee that the Company will have the financial resources required to satisfy such indemnity. For certainty, the aforementioned indemnity shall have no force and effect to the extent that such indemnity, recourse or rights of action would otherwise cause the Shares to be "prescribed shares" within the meaning of section 6202.1 of the regulations to the ITA. (c) Future payment obligations In accordance with the terms of the Company’s 100% acquisition of the Mavis Lake Lithium Project, the Company has committed to make two future payments, both of $1,500,000, to the vendors of the Mavis Lake Lithium Project subject to the satisfaction of milestones relating to the definition of mineral resource estimates (Milestone Payments). The first milestone 7 Key Information Further Information payment became payable upon the definition of the Company’s maiden JORC mineral resource as announced on 5 May 2023. There can be no certainty that the Company will have sufficient funds to satisfy the Milestone Payments if and when they become payable. In the event that the Company doesn’t have the available cash to meet the Milestone Payments and isn’t able to raise sufficient funds, it may default on its payment obligations, which may give rise to a potential claim against the Company. There is no guarantee that further capital will be available on terms satisfactory to the Company, or at all, and further equity raisings will dilute the interests of existing Shareholders. (d) Exploration, development and operating risks and costs The prospects of the Company should be considered in light of the risks, opportunities, expenses and difficulties frequently encountered by companies at a similar stage of production and development. The Company's initiatives may not proceed to plan, with potential for delay in the timing of exploration and development activities. There can be no assurance that exploration and development will result in the discovery of further mineral deposits. Even if an apparently viable deposit is identified, there is no guarantee that it can be economically exploited. The future exploration and development activities of the Company and the future development of mining operations at the Company’s Projects (or any future projects that the Company may acquire an interest in) may be affected by a range of factors, including: (i) geological, metallurgical and hydrological conditions; (ii) limitations on activities due to seasonal weather patterns; (iii) lack of availability or shortages of equipment, spare parts and consumables; (iv) access to appropriately skilled labour, competent operation and managerial employees, contractors and consultants; (v) unanticipated operational and technical difficulties, mechanical failure of operating plant and equipment, industrial and environmental accidents; (vi) industrial action, disputes or disruptions; (vii) industrial and environmental accidents; (viii) increases in costs and cost overruns; (ix) financial failure, or default by any future alliance or service provider to the Company which may require the Company to face unplanned expenditure; (x) native title process; (xi) environmental permitting and monitoring; (xii) changing government regulations; and 8 Further Information Key Information (xiii) other factors beyond the control of the Company. In addition, the construction of any proposed development may exceed the expected timeframe or cost for a variety of reasons out of the Company's control. Any delays to project development could adversely affect the Company's operations and financial results and may require the Company to raise further funds to complete the project development and commence operations. Offer Section 1.1 This Prospectus is for an offer of up to 129,161,955 Shares at an issue price of C$0.0545 (A$0.0609) to PearTree as agent for the Investors (Offer). The Prospectus is also being issued to remove any trading restrictions on the sale of the Shares issued pursuant to the Offer. Effect of the Offer Section 2 The Offer will result in the issued capital of the Capital increasing by 129,161,955 Shares. The Offer will not have any effect on the control of the Company. The expenses of the Offer are approximately A$590,000. The expenses of the Offer will be paid out of the Company’s current cash at bank. Therefore, the proceeds of the Offer will be approximately A$7,865,169. Directors’ interests in Securities Section 4.10(b) The relevant interest of each of the Directors in Securities as at the date of this Prospectus is set out in the table below: Shares Voting power (%) Unquoted Options Performance Rights Robert Martin 12,668,390 0.79% Nil Nil Alex Cheeseman 2,280,000 0.14% Nil 14,000,000 John Markovic 86,959,476 5.45% 4,597,701 Nil Director Further details of the Directors' Security holdings are in section 4.10(b). None of the Directors intend to apply for Shares pursuant to the Offer. Forward looking statements This Prospectus contains forward-looking statements which are identified by words such as 'may', 'could', 'believes', 'estimates', 'targets', 'expects', or 'intends' and other similar words that involve risks and uncertainties. Important Information and Section 3 These statements are based on an assessment of present economic and operating conditions, and on a number of assumptions regarding future events and actions that, as at the date of this Prospectus, are considered reasonable. 9 Key Information Further Information Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company, the Directors and the management. The Directors cannot and do not give any assurance that the results, performance or achievements expressed or implied by the forward-looking statements contained in this Prospectus will actually occur and investors are cautioned not to place undue reliance on these forward-looking statements. The Directors have no intention to update or revise forward-looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this Prospectus, except where required by law. These forward looking statements are subject to various risk factors that could cause the Company's actual results to differ materially from the results expressed or anticipated in these statements. These risk factors are set out in Section 3. 10 1. Details of the Offer 1.1 Background On 27 July 2023, the Company announced that it had entered into a Subscription Agreement pursuant to which PearTree Securities Inc. (PearTree), as agent for certain investors (Investors), agreed to subscribe for an aggregate of 129,161,955 Shares at an issue price of C$0.0545 (A$0.0609) per Share to raise approximately C$7,039,327 (A$7,865,169) (before costs). The Investors will then on-sell the Shares to sophisticated and professional investors (Placement Participants) by way of a block trade, facilitated by the Joint Lead Managers and pursuant to a block trade agreement between PearTree and the Joint Lead Managers, at a price per Share of C$0.0403 (A$0.045). 1.2 The Offer This Prospectus invites PearTree or the Investors (or other persons invited by the Company) to apply for up to 129,161,955 Shares, at an issue price of C$0.0545 (A$0.0609) per Share to raise approximately C$7,039,327 (A$7,865,169) (before associated costs) (Offer). The Shares issued pursuant to this Prospectus will qualify as "flow-through shares" as defined in the ITA. If the Company and the Investors comply with the detailed rules under the ITA, the Investors will be entitled to deduct the amount renounced in computing income for Canadian income tax purposes and receive additional tax credits for expenditures targeting critical minerals. The tax benefits associated with the Shares are available only to the Investors (who are Canadian residents) and not to any other person who acquires the Shares through the on-sale or transfer of those Shares. Refer to Section 3.1(b) for the risks associated with the "flow-through shares". The Shares issued pursuant to the Offer will rank equally with the existing Shares on issue. Refer to Section 4.1 for details of the rights and liabilities attaching to Shares. The Company is only extending the Offer to specific Applicants and the Company will only provide Application Forms to these parties. 1.3 Placement On 27 July 2023, the Company announced that it had received firm commitments for a placement of fully paid ordinary Shares to raise approximately $2,300,000 (before costs) by the issue of 51,111,111 Shares (Placement Shares) at $0.045 per Share (Placement). The Placement Shares will be issued to a range of sophisticated and professional investors. The Placement Shares are expected to be issued on or around 7 August 2023. The Placement Shares will be issued without disclosure under Part 6D.2 of the Corporations Act. The Placement Shares will be issued utilising the Company’s existing placement capacity under Listing Rule 7.1 and will rank equally with the Company’s existing Shares on issue. 1.4 Purpose of the Offer The primary purpose of this Prospectus is to make the Offer and enable the on-sale of the Shares issued pursuant to the Offer. 11 1.5 Opening and Closing Dates The Company will accept Application Forms in respect of the Offer from Applicants from the Opening Date until the Closing Date or such other date as the Directors in their absolute discretion shall determine, subject to the Listing Rules. The Company reserves the right, subject to the Corporations Act and the Listing Rules, to extend the Closing Date without prior notice. If the Closing Date is varied, subsequent dates may also be varied accordingly. 1.6 Minimum subscription There is no minimum subscription in relation to the Offer. 1.7 Oversubscriptions The Company will not accept any oversubscriptions in relation to the Offer. 1.8 Effect of the Offer on control of the Company The Offer will have no impact on the control of the Company as no person as a result of the Offer will increase their voting power in the Company: (a) from 20% or below to more than 20% of issued capital of the Company; or (b) from a starting point that is above 20% and below 90% of issued capital of the Company. 1.9 Not underwritten The Offer is not underwritten. 1.10 Applications The Company will separately advise Applicants of the application procedures for the Offer. 1.11 Application Monies held on trust All Application Monies received for the Shares under the Offer will be held on trust in a bank account maintained solely for the purpose of depositing Application Monies received pursuant to this Prospectus until the Shares are issued. All Application Monies will be returned (without interest) if the Shares are not issued. 1.12 ASX quotation Application will be made to ASX no later than seven days after the date of this Prospectus for Official Quotation of the Shares offered under this Prospectus. If ASX does not grant Official Quotation of the Shares within three months after the date of this Prospectus (or such period as the ASX allows), no Shares will be issued. ASX takes no responsibility for the contents of this Prospectus. The fact that ASX may grant Official Quotation is not to be taken in any way as an indication of the merits of the Company or the Shares. 12 1.13 Allotment The Directors will determine the eligible recipients of all the Shares under the Offer. The Company's decision on the number of Shares to be issued to an Applicant under the Offer will be final. 1.14 CHESS The Company participates in the Clearing House Electronic Subregister System, known as CHESS. ASX Settlement Pty Limited, a wholly owned subsidiary of ASX, operates CHESS in accordance with the Listing Rules and the ASX Settlement Operating Rules. The Company will not issue certificates to security holders. Rather, holding statements (similar to bank statements) will be dispatched to security holders as soon as practicable after the issue of Shares under the Offer. Holding statements will be sent either by CHESS (for security holders who elect to hold Securities on the CHESS sub-register) or by the Company’s share registry (for security holders who elect to hold their Securities on the issuer sponsored sub-register). The statements will set out the number of Shares issued under this Prospectus and the Holder Identification Number (for security holders who elect to hold Securities on the CHESS sub register) or Shareholder Reference Number (for security holders who elect to hold their Securities on the issuer sponsored sub-register). Updated holding statements will also be sent to each security holder following the month in which the balance of their security holding changes, and as required by the Listing Rules and the Corporations Act. 1.15 Withdrawal The Directors may at any time decide to withdraw this Prospectus and the Offer, in which case, the Company will return all Application Monies (without interest) (if any) in accordance with the Corporations Act. 1.16 Applicants outside Australia This Prospectus and any accompanying Application Form do not, and are not intended to, constitute an offer of Shares in any place or jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer or to issue this Prospectus or the Shares. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. 1.17 Risks of the Offer An investment in Shares of the Company should be regarded as speculative. In addition to the general risks applicable to all investments in listed securities, there are specific risks associated with an investment in the Company, which are explained in Section 3. 1.18 Taxation implications The Directors do not consider it appropriate to give Applicants advice regarding the taxation consequences of subscribing for Shares under this Prospectus. The Company, its advisors and its officers do not accept any responsibility or liability for any such taxation consequences to Applicants. As a result, Applicants should consult their professional tax advisor in connection with subscribing for Shares under this Prospectus. 13 1.19 Major activities and financial information A summary of the activities and financial information relating to the Company for the financial year ended 31 December 2022 is in the Annual Report which was lodged with ASX on 10 March 2023. The Company's continuous disclosure notices (i.e. ASX announcements) since the lodgement of its Annual Report are listed in Section 4.6. Copies of these documents are available free of charge from the Company. Directors strongly recommend that potential Applicants review these and all other announcements prior to deciding whether or not to participate in the Offer. 1.20 Privacy The Company collects information about each Applicant for the purposes of processing the Acceptance and, if the Acceptance is successful, to administer the Applicant's Shareholding in the Company. By making an Application, each Applicant agrees that the Company may use the information provided by an Applicant for the purposes set out in this privacy disclosure statement and may disclose it for those purposes to the share registry, the Company's related bodies corporate, agents, contractors and third-party service providers, including mailing houses and professional advisers, and to ASX and regulatory authorities. If you do not provide the information required, the Company may not be able to accept or process your Acceptance or Application (as applicable). An Applicant has an entitlement to gain access to the information that the Company holds about that person subject to certain exemptions under law. A fee may be charged for access. Access requests must be made in writing to the Company's registered office. 1.21 Enquiries Enquiries relating to this Prospectus should be directed to the Company by telephone on (08) 9389 4499. 2. Effect of the Offer 2.1 Effect on the Capital Structure The effect of the Offer on the Company's capital structure, assuming the Securities are issued, is set out below. Class Shares Unquoted Options1 Performance Rights2 Securities on issue as at the date of this Prospectus 1,594,754,872 47,352,226 17,000,000 Shares to be issued under the Offer and Placement 180,273,066 - - 14 Total Securities on issue upon completion of the Offer 1,775,027,9383 47,352,226 17,000,000 Notes: 1. 47,352,226 Options exercisable at $0.04 each and expiring on 3 December 2024. 2. Comprising: 3. (a) 14,000,000 Performance Rights subject to various conditions set out in the Company’s Notice of General Meet