The Offer

Company Overview

The Company was established on 1 April 2022 and since its formation, the Company has mainly concentrated on obtaining seed money to support its operations and investigating prospects to apply for or obtain exploration licenses with the potential to find gold and lithium in the Northern Territory. The Board of Directors and management of the company have extensive expertise and a proven track record of finding ore through greenfield exploration that is both cost-effective and employs cutting-edge exploration techniques and rigorous cash management. The Firm and Tier 1 Targeting Pty Ltd (Tier 1), a private company founded by Dr. Barry Murphy and Paul Roberts to find the new battery and precious metal prospects internationally, have engaged in a Strategic Project Generation Agreement.

Key Highlights

Primary Offering: To raise AUD 8,000,000, the Offer entails the first public offering of 40,000,000 Shares at a price of AUD 0.20 per Share. The Company can accept additional share oversubscriptions of up to 20,000,000 to fund an additional AUD 4,000,000. (Before costs).

Bacchus Tenement Purchase Agreement:

On September 20, 2022, the Company and Bacchus Resources Pty Ltd (Vendor) signed a legally binding terms sheet in which the Company agreed to purchase three awarded exploration licenses (Tenements). 100% of the Vendor's rights, titles, and interests in the Tenements and all related mining data are being sold to the Company, which is also agreeing to buy them. In exchange for the Acquisition, the Company agreed to grant the Vendor 1,600,000 options exercisable at AUD 0.35 on or before the date that is five years from the date of issuing and 4,000,000 fully paid ordinary shares in the capital of the Buyer at a presumed issue price of AUD 0.20 per share.

Lead Manager mandate:

The Company has authorized DealAccess Pty Ltd to support PAC Partners Securities Pty Ltd in its role as lead manager of the Offer by signing a mandate letter. In exchange for its services, the Company agreed to give the Lead Manager 2,300,000 Shares if the minimum Subscription is raised, or 3,500,000 Shares if the maximum Subscription is raised, as well as a fee of 2% of the total funds raised under the Offer and 4% of the funds raised by the Lead Manager under the Offer.

Use of proceeds:

Overview of the Pine Creek Project: The Pine Creek Project is a lithium pegmatite property with potential as well as a gold project with proven gold occurrences. It is situated in the Northern Territory, 8 km north of Pine Creek and about 150 km south of Darwin. The South Alligator and Finniss River Groups, two Proterozoic sedimentary units of the Cosmo Supergroups known to have gold mineralization, are included in the Project. The Pine Creek Project is seen as having potential for orogenic gold mineralization and lithium mineralization hosted by pegmatites. Historical drilling has shown large gold anomalies in surface samples as well as gold mineralization located in hidden Proterozoic basement strata along potential structures. DeSoto Resources has a sizable possibility because there hasn't been much exploration in the Pine Creek area that has concentrated on lithium deposits.

Dividend policy: The Board has the option to decide whether the Company will pay dividends. The Board estimates that considerable expenses will be expended in the review and development of the Company's Project given the stage of growth of the Company. At least the first two years after the Company's Admission is anticipated to be dominated by these operations as well as the potential purchase of an interest in other projects. As a result, following the Company's Admission, no dividends are anticipated to be paid, and the Directors do not currently have any plans to declare and pay a dividend. The level of earnings of the Company, operating results, overall financial condition, future capital requirements, capital management initiatives, general business outlook, and other factors the Directors may deem pertinent at the time of their decision are all things that the Directors will consider when deciding whether to declare future dividends. The future payment of dividends or the number of franking credits attached to dividends cannot and is not guaranteed by the directors.

Financial Highlights (Expressed in AUD):

• Pre-revenue company: Being a pre-revenue company, the company is still to report any sales from its operations, and currently investigating prospects to apply for or obtain exploration licenses with the potential to find gold and lithium in the Northern Territory.
• Operational expenses brief and net loss: The AUD 5,000 in audit and accounting fees for the six months closing June 30, 2022. The major expenses for the company were corporate & administrative expenses and employee benefits expenses amounting to AUD 32,997 and AUD 64,083 for the period ended 30 June 2022. Therefore, due to being a pre-revenue firm, and operational expenses, the company incurred a net loss amounting to AUD 154,609.
• Liquidity & Capital Resources: As of June 30, 2022, the firm had cash of AUD 881,151. For the six months that concluded June 30, 2022, net cash utilized in operating activities was AUD 128,541. This was primarily due to payment to suppliers amounting to AUD 111,168. Lastly, cash provided by financing activities is AUD 1,022,650 due to proceeds from the issue of shares.

Key Management Highlights

Risk Associated (High)

Investment in the IPO of “DES” is exposed to a variety of risks such as:

• Exploration and Operations: The remaining tenements that make up the Project are at varying phases of exploration, while three of the Fenton Tenements are still under the application. Mineral exploration and development are high-risk endeavors, that investors should be aware of. There can be no guarantee that any exploration that may be conducted in the future on the tenements that make up the Project, or on any other tenements that may be purchased in the future, will lead to the finding of an economically viable mineral resource. There is no assurance that a resource can be economically exploited, even if it appears to be feasible.
• Applications and renewals, access, and third-party interests: The multiple tenement petitions that make up the Fenton Tenements have not been denied in any circumstances that the Company is aware of. However, if the applications are rejected for factors without the Company's control, the consequences might be serious. The multiple tenement petitions that make up the Fenton Tenements have not been denied in any circumstances that the Company is aware of. However, if the applications are rejected for factors without the Company's control, the consequences might be serious. The Company has stated that no exploratory operations related to its plans would be carried out in tenement areas that border Crown Lease lands.
• Future capital requirements: The amount of capital the Company needs depends on a variety of variables. In addition to the funds obtained out of the Offer, the Company could need further financing. Shareholdings will be diluted by any new equity funding, and debt financing, if available, may impose limitations on financing and operational operations. If the Company is unable to get the extra funding required, it could be forced to narrow the scope of its activities and, if necessary, scale back its exploratory plans.

Conclusion

DES’s performance over the given financials showed no revenue and net loss for the period ended 30 June 2022, due to being a pre-revenue firm, and incurred operational expenses, the company ended the period with a net loss amounting to AUD 154,609. Currently, DES is investigating prospects to apply for or obtain exploration licenses with the potential to find gold and lithium in the Northern Territory. Although it is anticipated that DES will have opportunities to expand using IPO funds, the success of the company's entire operation is dependent on the outcome of the results of the exploration in the Pine Creek Project, making the offered IPO not so attractive until there are any updates regarding the outcome of its exploration.

Hence, given the financial performance of the company for the period ending June 30, 2022, incurred net losses, and associated risks “DeSoto Resources Limited (DES)” IPO seems “Neutral” at the IPO price.

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