General Discussion, page-1272

Dean has generally laid out the board's plan several months in advance with action to support his statements.

Now we can see as the Mangaroon REE project grows in size, and the potential new targets, with cash to support an accelerated drill program, it's not unreasonable to consider what the future is and how Dreadnought will use the new capital raised this week to support their goals?

It would not surprise me to see DRE spin off Mangaroon into a new company with a goal to move towards a feasibility study 2023/24. In other words the company will grow with new employees and management fully funded to develop the REE project. We have already completed a JORC resource, approx half of HAS in a few months. It took them years to define their resource. Further we are fortunate to ride on their shoulders with respect to the engineering work and studies completed by HAS. We even have their consulting engineer to generate our JORC resource estimates.

With a view to transitioning from an explorer to developing the project, this will challenge the management board to make the best decisions for shareholder value. Since they hold a considerable amount of shares we can be assured our interests are shared with them. Their continued investment of cash into each capital raise, combined with the returns on capital invested on each drilling program adds strong investor reassurance to current and new shareholders.

Financial reporting

When completing a feasibility study, there are many tax considerations to decide. Do you expense or capitalise these costs? Currently there is a divergence of practice within industry. Often the accounting for feasibility studies will follow the accounting for exploration costs. There could be tax advantages by spinning off Mangaroon into a separate company?

Tax Considerations - Deductibility of feasibility expenditure.

There is a specific provision in Tax Law that provides for an outright tax deduction for expenditure on exploration or prospecting. As a company transitions into the development and production phases this provision becomes decreasingly applicable, and it becomes increasingly important forc ompanies to consider the exact nature of mining associated expenditure and its tax treatment.

Although a ‘decision to mine’ such as FID can be an indicator as to whether expenditure is exploration in nature or not, it is not a ‘hard and fast’ rule, and the specific expenditure must be analysed. Feasibility studies in themselves do not have an innate nature (e.g. revenue deductible outright or capital deductible overtime), rather a company must look to what is being specifically studied. The costs are more likely to have a revenue nature where the studies valuate the ongoing process by whicht he business operates to obtain regular returns, such as ‘howto mine’. Alternatively, feasibility studies may take on a more capital nature where the objective of the studies is to establish,or expand the source of those profits (e.g. beneficiation or downstream processing).

These are exciting times to be a DRE shareholder. The company has a demonstrated an ability to discover several projects over a short amount of time. My question is will we stay an explorer, or now develop our own projects? I'm certain companies like HAS and LYC are watching with great interest as the drilling news grows from Mangaroon. DRE has showed an affinity and interest with joint ventures like FQM? Could this happen at Mangaroon? I have no idea but what I do know is the choices and possibilities for 2023 will grow exponentially as the REE resource is tabled by Dean.