Exploration Risk The success of the Group depends on the delineation of economically mineable reserves and resources, access to required development capital, the price of commodities, securing and maintaining title to the Group’s exploration tenements and obtaining all consents and approvals necessary for the conduct of its exploration activities. Exploration on the Group’s existing tenements may be unsuccessful, resulting in a reduction in the value of those tenements, diminishing the cash reserves of the Group and possible relinquishment of the tenements. Environmental Risk The Group’s environmental compliance is regulated by Ecuadorean legislation and our Environmental Management Plans for the Bramaderos and El Palmar projects, which are approved by the Ministry of Environment, Water and Ecological Transition. The Group remains committed to our environmental performance, which is reflected in our consistently strong environmental compliance. Failure to comply with applicable environmental laws and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory authorities causing operations to cease, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. The Group is unable to predict the effect of additional, or changes to, environmental laws and regulations which may be adopted in the future, including whether any such laws or regulations would materially increase the Group’s cost of doing business or affect its operations in any area. Future Capital Raisings The Group’s ongoing activities may require substantial further financing in the future. Any additional equity financing may be dilutive to shareholders, may be undertaken at lower prices than the current market price and debt financing, if available, may involve restrictive covenants which limit the Group’s operations and business strategy. 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 Group or at all. Capital management is a priority, and the Group retains the flexibility to reduce its cost base while preserving its exploration projects if required. Political and Regulatory Risks The Group’s projects are located in Ecuador, and receive strong support from the local communities, however mineral exploration and mining activities may be affected in varying degrees by political instability, economic conditions, and changes in government regulations such as foreign investment laws, tax laws, business laws, environmental laws and mining laws, affecting the Group’s business in that country. There can be no assurance that laws protecting foreign investments will not be amended or abolished or that existing laws will be enforced or interpreted to provide adequate protection against any or all of the risks described above. Safety Risk Exploration activities involves practices that have potential for risk of workplace injuries which may result in workers’ compensation claims, related common law claims and potential occupational health and safety prosecutions. The Group has, and intends to maintain, a range of workplace practices, procedures and policies which will seek to provide a safe and healthy working environment for its employees, visitors and the community. Climate Change Risk Climate change may cause certain physical and environmental risks that cannot be predicted by the Group, including events such as increased severity of weather patterns, incidence of extreme weather events and longer-term physical risks such as shifting climate patterns. All these risks associated with climate change may significantly change the industry in which the Group operates. The Group recognises the gravity of the risks posed by climate change and we are committed to integrating climate considerations into our operations. We seek to be a part of the solution to climate change by discovering the minerals necessary to facilitate the energy transition. While the Group will endeavour to manage these risks and limit any consequential impacts, there can be no guarantee that the Group will not be impacted by these occurrences. Overview Operating Review continued 13 Sunstone Metals Limited Annual Report 2023
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