Mt Cattlin Annual Ore Resource and Reserve update at 30 June, 2023

Aug 14, 2023

BRISBANE, Australia, July 31, 2023 (GLOBE NEWSWIRE) -- Allkem Limited (ASX: AKE, “ Allkem ” or the “ Company ”) provides an Ore Reserve update for its Mt Cattlin operation in Western Australia.

KEY POINTS

ORE RESERVE ESTIMATE

The Mt Cattlin Ore Reserve estimate is based on an updated Mineral Resource Estimate released on 17 April 2023 . The Mineral Resource was updated after the completion of a major infill drilling program which successfully upgraded Inferred Mineral Resources.

Allkem has reviewed and updated the Mt Cattlin Ore Reserve (Table 1 below), incorporating infill drilling results from the 2NW deposit, depleted mined material and site stockpiles at 30 June 2023 and material to be mined after this date are presented in accordance with JORC (2012) Ore Reserve Reporting.

Table 1: Mt Cattlin Ore Reserve Update as at 30 June 2023

Notes: Ore Reserves mine designs were conducted on a 0.4% Li 2 O cut-ff grade and Ore Reserves are reported above a marginal cut-off grade of 0.3 % Li 2 O. Estimates have been rounded to a maximum of two significant figures, thus sum of columns may not equal.

A breakdown of the adjustments are shown in Table 2 and corresponding Chart 1 below.

Table 2: Changes (Mt) in Ore Reserve March 2023 to June 2023

Chart 1: Changes (Mt) in Ore Reserve reported March 2023 to June 2023

Reserve Methodology

Pit optimisations have been carried out using a fixed spodumene concentrate sale price of US$1,500/t and an exchange rate of 0.7 USD:AUD. Whittle pit optimisation software has been used to identify the preferred pit shell on which the pit design was based.

The target design shells were selected to provide a logically phased mine life that maintains future optionality to further evaluate the trade-off between the larger second phase cutback compared to, or in conjunction with, underground mining.

The current mine sequence is based on:

The mine plan is shown to be technically and financially feasible with an overall life of mine (LOM) ore: waste strip ratio of 21.5:1. A suitable cashflow positive buffer exists below the assumed product prices to provide confidence that the Ore Reserve estimate will be financially viable within a reasonably expected range of possible product prices.

MINERAL RESOURCES & MINERAL RESOURCES EXCLUSIVE OF ORE RESERVES

Mt Cattlin is an active mine and the new NW pit is the 5th sequential open pit in development and production. The Mineral Resource had been tested against an RPEEE open pit design with a USD 1,500 revenue factor, and reported, (Table 3) depleted of mining, at a cut-off grade of 0.3% lithia. Pegmatite mineralisation is wireframed and modelled at COG > 0.3% lithia. Tonnages and grades reported are depleted for mining completed to 30 June, 2023. In addition, separate Mineral Resource tonnages and grades are reported, exclusive of Ore Reserves, on the same basis (Table 4), below or outside the current pit design.

Table 3: Mt Cattlin Mineral Resource Update as at 30 June 2023, depleted for mining, within a RPEEE shell USD 1,500

Notes: RPEEE optimisations were conducted on a 0.4% Li 2 O cut-ff grade and are reported above a marginal cut-off grade of 0.3 % Li 2 O. Estimates have been rounded to a maximum of two significant figures, thus sum of columns may not equal

Table 4: Mt Cattlin Mineral Resources Update as at 30 June 2023, depleted for mining, exclusive of Ore Reserves

Notes: Mineral Resources, exclusive of Ore Reserves are reported above a marginal cut-off grade of 0.3 % Li 2 O. Estimates have been rounded to a maximum of two significant figures, thus sum of columns may not equal.

UNDERGROUND FEASIBILITY STUDY

The Underground Feasibility Study is underway and will trade off optimised mining methodologies to improve the most beneficial/more economic outcomes. It is expected to be delivered in CY24.

Step out drilling

It was observed that both the USD 1,100 and 1,500 RPEEE Mineral Resource iterations remain limited by a lack of drilling data which will be resolved by further step out drilling planned for later in CY23.

RESOURCE AND RESERVE CONTROLS & GOVERNANCE

Allkem continues to evolve processes to ensure that quoted Mineral Resource and Ore Reserve estimates are subject to internal controls and external review. Mineral Resource and Ore Reserves are estimated and reported in accordance with the 2012 edition of the JORC Code. Further information is available in the Appendices and JORC Table 1.

Allkem stores and collects exploration data using industry standard software that contains internal validation checks. Exploration samples from drilling have certified reference material standards introduced to the sample stream at set ratios, typically 1 per 25 samples. These are reported as necessary to the relevant Competent Persons to assess both accuracy and precision of the assay data applied to resource estimates. In resource modelling, block models are validated by checking the input drill hole composites against the block model grades by domain.

Allkem engages independent, qualified experts on a commercial fee for service basis, to undertake Mineral Resource and Ore Reserve audits. Allkem internally reconciles the resource outcomes to validate both the process and the outcome.

The Company has developed its internal systems and controls to maintain JORC compliance in all external reporting, including the preparation of all reported data by Competent Persons who are members of the Australasian Institute of Mining and Metallurgy or a ‘Recognised Professional Organisation’. As set out above, the Mineral Resource and Ore Reserve statements included in this announcement were reviewed by suitably qualified Competent Persons (below) prior to their inclusion, in the form and context announced.

PROJECT ECONOMICS

Operating costs

Operating cash costs for the LOM are estimated at US$969/dmt produced. It incorporates the remainder of the current Stage 3 open pit, Stage 4 open pits, and processing of end-of-life stockpiles from 1 July 2023 to end of mine life.

The table below proves a summary of the estimated LOM annual unitary cost by category.

Table 3: Estimated LOM operating cost by category

Commodity prices

Forecast pricing for benchmark 6.0% Li 2 O spodumene concentrate has been sourced from independent market analyst group Wood Mackenzie 1 and discounted for costs and penalties to give a Realised Price. The final pricing used is effectively net AUD$ FOB.

Tantalite (Ta 2 O 5 ) concentrate is a by-product that contributes meaningful, but not material, revenue to the project. A flat sale price based on existing contracts has been applied to expected production.

A forward USD: AUD exchange rate forecast provided by Allkem has been used for this study, as shown in Table 4.

Table 4: Forward Estimates for Concentrate Price and Foreign Exchange

The cashflow model was also tested at a conservative realised price of US$1,500/dmt Li 2 O in the optimisation, and cashflows remained positive for the overall Ore Reserve, and on each stage.

Economic evaluation

An economic evaluation was conducted by consultants Entech Pty Ltd using financial data sourced from Allkem, independent market analysis, and competitive tender.

The 2023 Ore Reserve Statement is forecast to generate a NPV of A$1.4B (US$0.9B) when evaluated with the prices in Table 4. As an existing operation, Mt Cattlin requires only minor initial capital expenditure to support the Stage 4 expansion, and low total project capital requirements of approximately A$115m (US$80m).

The economic model calculates Net Present Value (NPV) at a discount rate of 10% over the LOM from 30 June 2023. The NPV is based on financial model period cashflows, without allowance for taxation, depreciation, or financing provisions. The summary of this is shown in Table 5.

Table 5: Summary of Mt Cattlin Project Economics

Sensitivity analysis

Sensitivity analysis was conducted on the following variables (+/-20%) and quantified with the NPV outputs:

The results are graphically summarised in Figure 4. The outputs show the expected heightened sensitivity from revenue factors compared to cost factors. The plant recovery and revenue trends mimic each other, and currency exchange rate (FX) is the inverse. The cost sensitivity trends of the mining and processing operating costs mimic each other with mining being somewhat influential on cashflow and NPV due to being a larger overall cost.

Figure 4: NPV Sensitivity to Key Revenue and Cost Factor Variables

This release was authorised by Mr Martin Perez de Solay, CEO and Managing Director of Allkem Limited.

IMPORTANT NOTICES

This investor ASX/TSX release ( Release ) has been prepared by Allkem Limited (ACN 112 589 910) (the Company or Allkem ). It contains general information about the Company as at the date of this Release. The information in this Release should not be considered to be comprehensive or to comprise all of the material which a shareholder or potential investor in the Company may require in order to determine whether to deal in Shares of Allkem. The information in this Release is of a general nature only and does not purport to be complete. It should be read in conjunction with the Company’s periodic and continuous disclosure announcements which are available at allkem.co and with the Australian Securities Exchange ( ASX ) announcements, which are available at www.asx.com.au .

This Release does not take into account the financial situation, investment objectives, tax situation or particular needs of any person and nothing contained in this Release constitutes investment, legal, tax, accounting or other advice, nor does it contain all the information which would be required in a disclosure document or prospectus prepared in accordance with the requirements of the Corporations Act 2001 (Cth) ( Corporations Act ). Readers or recipients of this Release should, before making any decisions in relation to their investment or potential investment in the Company, consider the appropriateness of the information having regard to their own individual investment objectives and financial situation and seek their own professional investment, legal, taxation and accounting advice appropriate to their particular circumstances.

This Release does not constitute or form part of any offer, invitation, solicitation or recommendation to acquire, purchase, subscribe for, sell or otherwise dispose of, or issue, any Shares or any other financial product. Further, this Release does not constitute financial product, investment advice (nor tax, accounting or legal advice) or recommendation, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision.

The distribution of this Release in other jurisdictions outside Australia may also be restricted by law and any restrictions should be observed. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

Past performance information given in this Release is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

Forward Looking Statements

Forward-looking statements are based on current expectations and beliefs and, by their nature, are subject to a number of known and unknown risks and uncertainties that could cause the actual results, performances and achievements to differ materially from any expected future results, performances or achievements expressed or implied by such forward-looking statements, including but not limited to, the risk of further changes in government regulations, policies or legislation; the risks associated with the continued implementation of the merger between the Company and Galaxy Resources Ltd, risks that further funding may be required, but unavailable, for the ongoing development of the Company’s projects; fluctuations or decreases in commodity prices; uncertainty in the estimation, economic viability, recoverability and processing of mineral resources; risks associated with development of the Company Projects; unexpected capital or operating cost increases; uncertainty of meeting anticipated program milestones at the Company’s Projects; risks associated with investment in publicly listed companies, such as the Company; and risks associated with general economic conditions.

Subject to any continuing obligation under applicable law or relevant listing rules of the ASX, the Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements in this Release to reflect any change in expectations in relation to any forward-looking statements or any change in events, conditions or circumstances on which any such statements are based. Nothing in this Release shall under any circumstances (including by reason of this Release remaining available and not being superseded or replaced by any other Release or publication with respect to the subject matter of this Release), create an implication that there has been no change in the affairs of the Company since the date of this Release.

Competent Person Statement

The information in this announcement that relates to Exploration Results and Mineral Resources is based on information compiled by Albert Thamm, B.Sc. (Hons)., M.Sc. F.Aus.IMM (203217), a Competent Person who is a Fellow of The Australasian Institute of Mining and Metallurgy. Albert Thamm is a full-time employee of Galaxy Resources Pty. Limited. Albert Thamm has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Albert Thamm consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.

The information in this announcement that relates to the 31 March 2023 Mt Cattlin Ore Reserve is based on information compiled by Daniel Donald, B. Eng. (Mining), F.Aus.IMM (210032), a Competent Person who is a Member of the Australasian Institute of Mining and Metallurgy. Daniel Donald is an employee working for Entech Mining Pty Ltd and has been engaged by Allkem Limited to prepare the documentation for the Mt Cattlin operation on which the Ore Reserve Report is based, for the period ended 31 March 2023, and has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Daniel Donald consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.

Technical information relating to the Company’s Mt Cattlin project contained in this release is derived from, and in some instances is an extract from, the technical report entitled “Mt Cattlin Stage 4 Expansion Project” (Technical Report) which has been reviewed and approved by Albert Thamm, F.Aus.IMM (who is an employee of Galaxy Resources Pty. Ltd) as it relates to geology, drilling, sampling, exploration, QA/QC and mineral resources and Daniel Donald F.Aus.IMM (an employee of Entech Pty Ltd) as it relates to mining methods, Ore Reserves, site infrastructure, capital cost, operating cost estimates, mining cost, financial modelling and economic analysis in accordance with National Instrument 43-101 – Standards for Disclosure for Mineral Projects. The Technical Report will be available for review under the Company’s profile on SEDAR at www.sedar.com.

Not for release or distribution in the United States

This announcement has been prepared for publication in Australia and may not be released to U.S. wire services or distributed in the United States. This announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or any other jurisdiction, and neither this announcement or anything attached to this announcement shall form the basis of any contract or commitment. Any securities described in this announcement have not been, and will not be, registered under the U.S. Securities Act of 1933 and may not be offered or sold in the United States except in transactions registered under the U.S. Securities Act of 1933 or exempt from, or not subject to, the registration of the U.S. Securities Act of 1933 and applicable U.S. state securities laws.

APPENDIX 1 – JORC 2012 TABLE 1 DISCLOSURE

Section 1: Sampling Techniques and Data

Section 2: Reporting of Exploration Results

Section 3: Estimation and Reporting of Mineral Resources – Mt Cattlin

Section 4: Ore Reserves

1 The data and information provided by Wood Mackenzie should not be interpreted as advice and you should not rely on it for any purpose. You may not copy or use this data and information except as expressly permitted by Wood Mackenzie in writing. To the fullest extent permitted by law, Wood Mackenzie accepts no responsibility for your use of this data and information except as specified in a written agreement you have entered into with Wood Mackenzie for the provision of such of such data and information.

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