Mkango Resources : Management Discussion and Analysis - April 30, 2024

MKANGO RESOURCES LTD.

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the three and twelve months ended 31 December 2023

This Management's Discussion and Analysis ("MD&A") provides a review of the operational performance of Mkango Resources Ltd. ("Mkango", or the "Company"). The report was prepared in accordance with the requirements of National Instrument 51-102 - Continuous Disclosure Obligations, and it should be read in conjunction with the audited consolidated financial statements for the year ended 31 December 2023 (the "Financial Statements"). The Financial Statements and the accompanying notes have been prepared in United States dollars ($) unless otherwise indicated in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") in effect on 1 January 2023. This document is dated 29 April 2024.

The Board of Directors of the Company have reviewed and approved the information contained in this MD&A and the Financial Statements.

Readers are cautioned that this MD&A contains certain forward-looking statements. Please see the section concerning "Forward Looking Statements" below.

Additional information relating to the Company can be found on the SEDARplus website ("SEDARplus") at https://www.sedarplus.ca/landingpage/(Please note these websites do not form part of this MD&A and only contain additional information.) The Company is listed on the TSX Venture Exchange (the "TSX-V") and holds an additional listing on the AIM Market of the London Stock Exchange ("AIM") under the symbol MKA.

FORWARD LOOKING STATEMENTS

Certain disclosures in this MD&A may constitute forward-looking statements concerning anticipated development of the Company's operations in future periods. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "targeted", "anticipate", "believes", "budget", "continue", "could", "estimate", "forecast", "intends", "may", "plan", "predicts", "projects", should", "will" and other similar expressions. All estimates and statements that describe the Company's future, goals, or objectives, including management's assessment of future plans and operations, including statements regarding expected commencement of equipment delivery and production, expected dates relating to feasibility studies, exploration results and budgets, mineral resource estimates, work programs, capital expenditures, timelines, strategic plans, market price of commodities or other statements that are not statement of fact may constitute forward-looking information under securities laws. Forward-looking information is based on reasonable assumptions that have been made by the Company as at the date of such information but, by their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Company's control, including the impact of general economic and political conditions, the availability of scrap and equipment for the recycling and magnet making processes industry conditions, volatility of commodity prices, currency fluctuations, accuracy of drilling and other exploration results, realization of mineral resource estimates, environmental risks, changes in environmental, tax and royalty legislation or other government regulation, the speculative nature of strategic metal exploration and development including the risks of contests over title to properties, the risks associated with obtaining necessary licences or permits, including and not limited to approval of any future mining licence applications and licence extensions, operating or technical difficulties in connection with development activities; personnel relations, competition from other industry participants, lack of availability of qualified personnel or management, availability of drilling equipment and access, stock market volatility and the ability to access sufficient capital from internal and external sources. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues. Readers are cautioned that the assumptions used in the preparation of such information, although considered

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reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Mkango's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. Mkango disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Q4 AND FULL YEAR 2023 HIGHLIGHTS

• Mkango continued to cement its leading position and early mover advantage in rare earth magnet recycling via its 79.4% controlled subsidiary Maginito Limited ("Maginito").
• During 2023, Maginito completed the acquisition of 100% of HyProMag Ltd ("HyProMag") which is targeting commercialising Hydrogen Processing of Magnet Scrap ("HPMS") technology across multiple jurisdictions, including UK (H2 2024), Germany (in 2025) and the United States (in 2026).
• The HPMS technology was developed to provide the solution for liberating NdFeB magnets from end-of-life scrap streams in a cost effective and energy efficient way with the resulting recycled NdFeB powder fed back into multiple points of the rare earth supply chain including (short-loop) magnet manufacturing, to produce magnets with a significantly reduced carbon footprint, and (long-loop) chemical processing to produce rare earth carbonates and oxides.
• The acquisition of HyProMag was supported by a £1.5 million ($1.9m) investment by CoTec Holdings Corp.
  ("CoTec") into Maginito for a 10% interest, and CoTec's interest in Maginito increased to 20.6% through the conversion of a £2m ($2.5m) convertible loan made to Mkango.
• The strategic benefits of HyProMag's HPMS technology and strong potential to contribute to development of responsible critical mineral supply chains was validated when it was selected for support by the Minerals Security Partnership ("MSP"), a collaboration of 14 countries and the European Union to catalyse public and private investment in responsible critical minerals supply chains globally.
• In September 2023, Maginito and CoTec agreed to form a 50/50 joint venture company, HyProMag USA LLC ("HyProMag USA"), which was incorporated on 2 January 2024, to roll-out the HPMS technology into the United States, with CoTec responsible for funding the feasibility study and development costs, subject to the results of the feasibility study.
• HyProMag achieved a major milestone in December 2023, with first production runs of short-loop recycled rare earth magnets completed at the Tyseley Energy Park rare earths hub in Birmingham, UK - the first UK production of sintered rare earth magnets on commercial scale equipment in over 20 years.
• The Tyseley scale-up and United States technology roll-out is underpinned by successful piloting at the University of Birmingham ("UoB") with over 3,000 finished rare earth magnets produced from piloting to date.
• Mkango inaugurated a Board Sustainability Committee in the year and additionally released its first Environmental Social Governance ("ESG") report - which highlighted the low carbon credentials of its recycling business, and the high Corporate Social Responsibility standards of its Songwe Hill Rare Earths project in Malawi, underpinned by the Environmental Social Health Impact Assessment ("ESHIA") (to IFC
  Performance Standards). The ESHIA was approved in January 2023, following completion of the Definitive Feasibility Study in 2022.

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Subsequent Events

• HyProMag USA engaged BBA USA Inc and PegasusTSI to complete the Feasibility Study for the USA recycling operations with targeted completion in H2 2024 BBA and Pegasus successfully completed their onboarding process through visits to key manufacturers in Germany, Poland and the HyProMag Plant in Tyseley, UK. Commercial production in the USA is targeted for H1 2026.
• Mkango completed a fund raising of £750,000 ($955,000) in April 2024, including a £150,000 ($191,000) investment by Mkango CEO, William Dawes, with use of proceeds primarily for the acquisition of additional equipment to underpin HyProMag's transition to first commercial sales of recycled NdFeB at Tyseley Energy
  Park in Birmingham, UK targeted for H2 2024, and orders of long lead time equipment in Germany, unlocking additional grant funding.
• The Group has completed a significant cost-cutting exercise in recent months, whilst streamlining operations to focus on recycling, which has enabled a 35% reduction in the ongoing operating cost requirements for the business.
• Discussions are ongoing with potential strategic investors, project finance providers, grant funding bodies and other sources to finance recycling scale-up opportunities and further technology roll-out. In parallel, Mkango is undertaking a review of strategic options for its advanced stage Songwe Hill Rare Earth Project in Malawi and Pulawy Rare Earth Separation Project in Poland. The Feasibility Study for Songwe Hill and subsequent work identified a number of areas for potential cost optimisation, and the Company continues to evaluate these and other cost reduction opportunities in light of the currently weak rare earth market pricing environment.
• Loss after tax for the year ended 31 December 2023 of $4,179,951 compared to $5,985,963 for the year ended 31 December 2022.

Near-Term Milestones

• Initial commercial sales of NdFeB via HyProMag Ltd's short-loop recycling process at Tyseley Energy Park in the UK targeted for H2 2024.
• Full commissioning of pilot scale long loop (chemical route) recycling process at Tyseley Energy Park to produce rare earth carbonates and oxides targeted for H1 2024.
• HyProMag GmbH ("HyproMag Germany") first commercial production in Germany targeted for 2025.
• Completion of HyProMag USA Feasibility Study targeted in H2 2024. Scope comprises hub and spoke model, with three HPMS spokes and one Texas magnet manufacturing hub.

MKANGO OVERVIEW

Mkango is listed on the AIM and the TSX-V. Mkango's corporate strategy is to become a market leader in the production of recycled rare earth magnets, alloys and oxides, through its interest in Maginito, which is owned 79.4 per cent by Mkango and 20.6 per cent by CoTec, and to develop new sustainable sources of neodymium, praseodymium, dysprosium and terbium to supply accelerating demand from electric vehicles, wind turbines and other clean energy technologies.

Maginito holds a 100 per cent interest in HyProMag and a 90 per cent direct and indirect interest (assuming conversion of Maginito's convertible loan) in HyProMag Germany, focused on short loop rare earth magnet recycling in the UK and Germany, respectively, and a 100 per cent interest in Mkango Rare Earths UK Ltd ("Mkango UK"), focused on long loop rare earth magnet recycling in the UK via a chemical route.

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Maginito and CoTec are also rolling out HyProMag's recycling technology into the United States via the 50/50 owned HyProMag USA joint venture company.

Mkango also owns the advanced stage Songwe Hill rare earths project and an extensive rare earths, uranium, tantalum, niobium, rutile, nickel and cobalt exploration portfolio in Malawi, and the Pulawy rare earths separation project in Poland. Discussions with the Government of Malawi in relation to a Mining Development Agreement for Songwe Hill are ongoing. Mkango is undertaking a review of strategic options relating to these projects in Malawi and Poland.

For more information, please visit www.mkango.ca.

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FOURTH QUARTER PERFORMANCE

Financial

• Cash at 31 December 2023 of $996,782 compared to $493,703 at 31 December 2022.
• Loss after tax for the three months ended 31 December 2023 of $948,282 compared to $663,087 for the three months ended 31 December 2022, mainly as a result of the HyProMag and HyProMag Germany costs being consolidated post the HyProMag Acquisition.

Operations & Corporate Development

• Maginito and CoTec further progressed the roll-out of HPMS technology into the US during the quarter with the following activities:
  o A positive, initial scoping study relating to the roll-out of HyProMag's rare earth magnet recycling technology into the United States was completed in October.
• HyProMag's rare earth magnet recycling technology was selected by the MSP in October for support as one of its key projects.
• First production runs of short-loop recycled rare earth magnets completed at the Tyseley Energy Park
  ("Tyseley") rare earths hub in Birmingham, UK.
• On 13 November 2023, Mkango published its inaugural ESG Report.

Subsequent Events

HyProMag USA engaged BBA USA Inc and PegasusTSI to complete the Feasibility Study for the USA recycling operations with targeted completion prior to year-end 2024. BBA and Pegasus successfully completed their onboarding process through visits to key manufacturers in Germany, Poland and the HyProMag Plant in Tyseley, UK.

On 10 April 2024, Mkango raised gross proceeds of £750,000 (approximately $950,000) via a private placement through the issuance of 15,000,000 common shares ("Subscription Shares") of the Company at a price per share of 5 pence ($0.064). The Company intends to use the net proceeds of the placing to acquire additional equipment to underpin HyProMag's transition to first commercial sales of recycled NdFeB at Tyseley Energy Park in Birmingham and orders of long lead time equipment in Germany, unlocking additional grant funding. In addition to the Subscription Shares, the Company issued an aggregate of 600,000 broker warrants to Jub Capital Management LLP ("Jub Capital"). Each warrant is exercisable for a period of three years with an exercise price of 5p ($0.064) per warrant.

OVERVIEW OF THE BUSINESS - RARE EARTH MAGNET RECYCLING AND MANUFACTURING

Mkango's corporate strategy is to become a market leader in the production of recycled rare earth magnets, alloys and oxides, through its interest in Maginito which is owned 79.4 per cent by Mkango and 20.6 per cent by CoTec and to develop new sustainable sources of neodymium, praseodymium, dysprosium and terbium to supply accelerating demand from electric vehicles, wind turbines and other clean energy technologies.

On 3 August 2023, Maginito completed the acquisition of HyProMag Ltd which is commercialising the HPMS technology across multiple jurisdictions, including the UK (in 2024), Germany (in 2025) and the United States (in 2026). The HPMS technology was developed to provide the solution for liberating NdFeB magnets from end-of-life scrap streams in a cost effective and energy efficient way with the resulting recycled NdFeB powder being fed back into multiple points of the rare earth supply chain including (short-loop) magnet manufacturing, to produce magnets with a significantly reduced carbon footprint, and (long-loop) chemical processing to produce rare earth carbonates and oxides.

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The consideration payable to the selling HyProMag shareholders (the "Vendors") comprised £1,000,000 ($1,271,086 in cash and the issue of 9,742,031 Mkango Shares (the "Consideration Shares") equivalent to £901,138 ($1,145,424) at a price equal per share to 9.25 pence ($0.1176). In addition, up to a further £3m ($3.8m) may be payable to the Vendors in four tranches, either in cash or in Mkango Shares (at Mkango's option), conditional upon the achievement by HyProMag of certain production milestones in the period to 30 June 2026. The Consideration Shares are subject to a one-year lock up and the shares which may be issued on milestones will have a six-month lock up (and a statutory hold period applicable in Canada, which will expire four months plus one day after issuance, if any).

Maginito now holds a 100 per cent interest in HyProMag and a 90 per cent direct and indirect interest (assuming conversion of Maginito's convertible loan) in HyProMag Germany, focused on short loop rare earth magnet recycling in the UK and Germany, respectively, and a 100 per cent interest in Mkango UK, focused on long loop rare earth magnet recycling in the UK via a chemical route. Maginito and CoTec are rolling out HyProMag's recycling technology into the United States via the 50/50 owned HyProMag USA joint venture company.

HyProMag Limited

HyProMag was founded in 2018 by the late Professor Emeritus Rex Harris, former Head of The Magnetic Materials Group ("MMG") within the School of Metallurgy and Materials at University of Birmingham ("UoB"), Professor Allan Walton, current Head of the MMG, and two Honorary Fellows, Dr John Speight and Mr David Kennedy, leading world experts in the field of rare earth magnetic materials, alloys and hydrogen technology, with significant industry experience. The HPMS process for extracting and demagnetising NdFeB alloy powders from magnets embedded in scrap and redundant equipment was originally developed within the MMG and subsequently licenced to HyProMag with a royalty of up to 1.5 % payable to UoB. The MMG has been active in the field of rare earth alloys and processing of permanent magnets using hydrogen for over 40 years. Originated by Professor Rex Harris, the hydrogen decrepitation method, which is used to reduce NdFeB alloys to a powder, is now ubiquitously employed in worldwide magnet processing.

HyProMag is establishing short loop recycling facilities for NdFeB magnets at Tyseley Energy Park in Birmingham, UK and other locations using the patented HPMS process to provide a sustainable solution for the supply of NdFeB magnets and alloys for a wide range of markets including, for example, automotive and electronics. Short loop magnet recycling is expected to have a significant environmental benefit, requiring an estimated 88% less energy versus primary mining to separation to metal alloy to magnet production.

HPMS is a radically new recycling technology that preserves the quality of the original magnets for reprocessing; a far cleaner and more energy efficient process than the traditional dismantling, thermal demagnetisation and cleaning processes and lends itself to automated and efficient processing. The resulting recycled magnets are being made to recognised industrial grades.

The plant at Tyseley Energy Park is being developed together with UoB, with a minimum capacity of 100tpa NdFeB (neodymium, iron, boron). This £4.3 m ($5.47 m) project is being funded by "Driving the Electric Revolution", an Industrial Strategy Fund challenge delivered by UK Research and Innovation. HyProMag will be the primary industrial user and operator of the plant and the exclusive licensee for underlying HPMS technology, developed at the University of Birmingham and now being commercialised by HyProMag. Initial commercial production will be based on 20% capacity utilisation, equivalent to a minimum of 25tpa NdFeB. First production runs were completed in Q4 2023, which follows successful piloting at UoB in 2022 as featured on BBC Midlands News: https://youtube/9P- dsNCffWw.(This link does not form part of this MD&A). Initial commercial sales of NdFeB are targeted for H2 2024.

For the initial production runs, the recycled raw material feed was derived from wind turbine magnets, voice coil assemblies from hard disk drives and production scrap which was processed through the existing recycling pilot plant at the University of Birmingham, and then transported for short loop magnet manufacture at Tyseley.

The magnets produced at Tyseley were of commercial grade, featuring a square loop with good coercivity (resistance to demagnetisation) and remanence (magnetic strength), which are key measures of magnetic performance.

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HyProMag is receiving strong interest for recycled magnets from potential customers, underpinning the transition to commercial operations, and for recycling solutions from original equipment manufacturers ("OEMs"), and automotive and recycling companies looking for a low cost and energy efficient circular solution for magnet recycling that does not require dismantling - HyProMag's patented HPMS technology provides the solution.

Apart from providing feed during the commissioning phase of the Tyseley development, the pilot plant at the UoB has enabled the testing of a broad variety of scrap streams and the production of a wide range of products since its commissioning in 2022, generating operating information to support the scale-up and commercialisation of operations. Furthermore, over 3,000 finished rare earth magnets have been produced to date by HyProMag and the UoB from recycled HPMS powder produced for project partners and potential customers from the pilot scale equipment. These magnets are being tested in a wide range of applications including multiple automotive, aerospace, electronics applications, and others planned, providing valuable marketing and technical information to further support the scale- up and commercialisation of operations.

In addition to the production of finished magnets, the University of Birmingham pilot plant has also produced alloys for remelt testing and chemical processing, maximising the flexibility of the product suite and the ability to process different scrap streams.

HyProMag's rare earth magnet recycling technology has been selected by the Minerals Security Partnership ("MSP") for support as one of its key projects. The technology was selected by the MSP because the MSP determined its strong potential to contribute towards the development of responsible critical mineral supply chains.

The MSP was formed in 2022 by 14 governments and aims to ensure adequate supplies of minerals such as rare earths to meet net zero-carbon goals. It aims to support public and private sector investments building diverse, secure, and responsible global critical minerals supply chains. Partner governments includes the United Kingdom, the United States, Australia, Canada, Finland, France, Germany, Japan, India, the Republic of Korea, Norway, Sweden and the European Union.

The MSP promotes responsible growth across the critical minerals sector via a shared commitment to high ESG standards, sustainability and shared prosperity. The MSP partner governments regard the further development of responsible and resilient supply chains to be critically important for an equitable and sustainable energy transition.

MSP is committed to leveraging the collective financial and diplomatic resources of its 14 partners by deepening collaboration between governments, project developers and investors to drive responsible investment in critical minerals projects.

HyProMag is participating in a number of government grant funded projects detailed below.

On 28 May 2020, the Company announced the launch and provided further details of the Innovate UK grant funded project, "Rare-Earth Recycling for E-Machines" ("RaRE") in which HyProMag is a partner. RaRE will for the first time establish an end-to-end supply chain to incorporate recycled rare earth magnets into electric vehicles, whereby recycled magnets will be built into an ancillary electric motor to ultimately support the development of a commercial ancillary motor suite. In addition to HyProMag and UoB, RaRE features a strong set of partners with complementary expertise, comprising Advanced Electric Machines Research Limited, Bentley Motors Limited, Intelligent Lifecycle Solutions Limited and Unipart Powertrain Applications Limited. The total budget for RaRE was £2.6 m ($3.3 m), of which Innovate UK funded £1.9 m ($2.4 m), with RaRE partners funding the £0.7 m ($0.9m) balance. HyProMag's contribution was fully funded from the £300k ($382k) investment made by Maginito in January 2020.

On 30 November 2020, the Company announced that HyProMag and partners, European Metal Recycling Limited ("EMR") and UoB were awarded a grant from the Industrial Strategy Challenge Fund, delivered by UK Research and Innovation, for a new ground breaking project entitled "Rare-Earth Extraction from Audio Products", which investigated ways of recycling rare earth magnets from speakers used in automotive and consumer electronics applications, which account for approximately 20% of the current market for rare earth magnets, according to Adamas

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Intelligence, and therefore represent a significant opportunity for rare earth magnet recycling. On 30 September 2021, the Company announced the successful completion of the project.

On 14 March 2022, the Company announced that HyProMag and Mkango UK will collaborate with Bowers & Wilkins, EMR, GKN Automotive Innovation Centre, Jaguar Land Rover and UoB in the "Driving the Electric Revolution" challenge at UK Research and Innovation grant funded project, SCREAM.

SCREAM aims to establish a recycled source of rare earth magnets in the UK to provide greater security of supply to UK industry, whilst aiming to achieve a 10% reduction in cost and a significant reduction in environmental impact.

HyProMag will work with UoB to develop a new semi continuous version of the HPMS process and to produce short loop recycled sintered magnets at multiple grades to match the requirements for a range of applications.

HyProMag is collaborating with EMR, the Offshore Renewable Energy (ORE) Catapult, Magnomatics and UoB in a £1.5 m ($1.9m) project, Re-RE Wind, of which £1m ($1.3m) or 67% will be funded by Innovate UK's circular critical materials supply chains (CLIMATES) programme. The budget for HyProMag's portion of the project is circa £350k ($446k) of which 70% will be funded by the grant.

These grant funded projects facilitate the transition to commercial production, enabling product testing across a range of applications whilst broadening potential customer engagement and enhancing financial flexibility.

HyProMag Germany

In November 2021, HyProMag established an 80%-owned subsidiary in Germany, HyProMag Germany, to rollout commercialisation of HPMS technology into Germany and Europe. HyProMag Germany is 20% owned (10% following conversion of the German Convertible Loan, as defined below) by Professor Carlo Burkhardt of Pforzheim University, coordinator of the €14m ($15.5m) SusMagPro (www.susmagpro.eu) and €13m ($14.4m) REEsilience (www.reesilience.eu) EU funded recycling projects, with approximately 40 partners across the European supply chain.

On 23 November 2022, the Company announced that HyProMag Germany had been awarded grants totaling €3.7m ($4.1m) for a new project, entitled "Innovation Centre for Science & Economy Northern Black Forest IZWW", comprising a €2.5m ($2.8m) grant from the European Regional Development Fund (ERDF) and a €1.2 m ($1.3m) grant from the Ministry of Economic Affairs, Labour and Tourism Baden-Württemberg.

The total cost of the German Recycling Project is expected to be €6.1m ($6.8m), of which approximately 60% will be funded by the grants, on the basis that for each €1 spent on the project by HyProMag Germany, a further €1.50 contribution can be claimed from the grants. The first phase of the project includes development of a production facility in Baden-Württemberg State with a minimum capacity of 100tpa NdFeB comprising recycled rare earth sintered magnets, alloys and powders. This will be the first in Germany using the patented HPMS process, with first production targeted for 2025, and a similar size to the £4.3m ($5.5m) UK Recycling Project being developed by HyProMag and UoB at Tyseley Energy Park in the UK.

Maginito has entered into a convertible loan (the "German Convertible Loan") with HyProMag Germany. Under the terms of the German Convertible Loan, Maginito has granted HyProMag Germany a loan facility for €2.5m (approximately $2.8m) available to be drawn down in accordance with an agreed investment plan and convertible into a 50% interest in HyProMag Germany. This investment by Maginito into HyProMag Germany will contribute to the match funding requirements to unlock the abovementioned grant.

HyProMag Germany is targeting commercial production in 2025.

HyProMag United States

In September 2023, Maginito and CoTec agreed to form a 50/50 joint venture company, HyProMag USA, to roll-out HPMS technology into the United States, with CoTec responsible for funding the feasibility study (the USA Feasibility Study") and development costs, subject to the results of the USA Feasibility Study, which is currently underway. An initial scoping study was completed in October 2023. The proposed operating configuration for the United States operations is a modular, hub and spoke model, with the initial deployment of three HPMS recycling vessels at the

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spokes and a central hub comprising of rare earth (NdFeB) alloy and magnet manufacturing, subject to the outcome of the USA Feasibility Study.

HyProMag USA has engaged BBA USA Inc ("BBA") and PegasusTSI ("Pegasus") to complete the Feasibility Study with targeted completion prior to year-end. BBA and Pegasus have successfully completed their onboarding process through visiting key manufacturers in Germany, Poland and the HyProMag Plant in Tyseley UK. The experience from the UK and Germany demonstration plants will be transferred to the USA Feasibility Study.

Site selection for three Plants in the USA has commenced. This process will be driven by Pegasus, working with environmental consultant Weston Solutions Inc. The current focus is on Fort Worth, Texas for the first recycling spoke and magnet production facility (~500 tonnes of finished Rare Earth permanent magnets per annum). Three recycling spokes are targeted and permitting for the various sites will start once site selection has been completed in Q3. Commercial production is targeted for H1 2026.

Discussions with potential feedstock suppliers and off takers in the USA have commenced, targeting agreements to secure recycled feedstock and long term off take through strategic partners.

Operating scenarios tested through the scoping studies highlighted:

• A range of production scenarios and product suites are potentially viable, including finished magnets, sintered blocks and alloy products, and incorporating up to 100% recycled NdFeB feed;
• Potential for $50 million per year of revenue generation, based on assumed production of 500 tonnes per year of NdFeB magnets and a blended product price of $100/kg, which is within the range of current pricing for the different products evaluated during the scoping studies;
• A target EBITDA margin of 35% to 40% would potentially be achievable under a range of scenarios, with a minimum estimated capital expenditure of $30m; and
• Market conditions and rare earth prices are currently subdued, indicating potential upside versus the current pricing scenario as market conditions recover, in parallel with further optimization of the development scope.

The actual results of the United States operations could vary materially depending on future pricing of rare earth elements, final product mix, agreed sales pricing for each product, capacity at which the HPMS vessels and magnet manufacturing will be operated, quality and cost of scrap feed material, primary product ratio and other material inputs. These key inputs will be further explored and optimized during the completion of the Feasibility Study.

Mkango Rare Earths UK Limited

Mkango is also developing a pilot plant at Tyseley for long loop recycling via a chemical process. This development complements the short loop recycling routes being developed by HyProMag. Both short loop and long loop recycling routes are underpinned by HPMS.

The HPMS technology was developed to provide a solution for liberating NdFeB magnets from end-of-life scrap streams in a cost effective and energy efficient way with the resulting recycled NdFeB powder being fed back into multiple points of the rare earth supply chain including (short-loop) magnet manufacturing, to produce magnets with a significantly reduced carbon footprint, and (long-loop) chemical processing to produce rare earth carbonates and oxides.

Whilst the short loop recycling route provides the most energy efficient and cost-effective route to produce recycled rare earth magnets, developing the capability for long loop recycling enables the flexibility to process end of life magnets not suitable for short loop recycling, as well as swarf from magnet manufacture. Such material will either be processed in-house by Mkango, or in partnership with third parties.

The pilot plant is being developed as part of SCREAM project with full commissioning at Tyseley Energy Park to produce rare earth carbonates and oxides targeted for H1 2024. The pilot plant is designed for maximum flexibility to enable testing and benchmarking of other chemical process and will underpin scoping studies to determine the optimal strategy for long loop recycling.

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OVERVIEW OF THE BUSINESS - RARE EARTH MINING AND SEPARATION DEVELOPMENT PROJECTS

Mkango also owns the advanced stage Songwe Hill rare earths project and an extensive rare earths, uranium, tantalum, niobium, rutile, nickel and cobalt exploration portfolio in Malawi, and the Pulawy rare earths separation project in Poland.

Discussions with the Government of Malawi in relation to the MDA for Songwe Hill are ongoing.

In March 2024, Mkango launched a review of strategic options for Songwe Hill and the Pulawy Rare Earth Separation Project.

RARE EARTH MINING

Mkango has several properties in the Republic of Malawi, including the Songwe Hill rare earths project and the Nkalonje Hill exploration target, both held within 11 Phalombe retention licences (the "Phalombe Licences"). Mkango is also pursuing mineral exploration opportunities with three additional 100% owned properties in Malawi, the Thambani retention licences ("Thambani Licences"), the Chimimbe Hill exploration licence ("Chimimbe Licence") and the Mchinji exploration licence ("Mchinji Licence").

Mkango holds a 100% interest in Lancaster BVI, which holds a 100% interest in 17 exploration licences, 15 of which are held as 5-year retention exploration licences in southern Malawi, the Phalombe Licences, the Thambani Licence and the Chimimbe Licence. Mkango also holds a 100% interest in MKA Exploration Limited BVI which holds a 100% interest in the Mchinji Licence.

The table below splits out the mineral project expenditure into more detail for the twelve months ending 31 December 2023 and 31 December 2022.

			For the twelve months
			ended 31 December
Licence/Capital Project		Project	2023	2022
Phalombe		Songwe Hill Project
		Metallurgy expenses	(468)	562,216
		Government fees	2,941	7,462
		ESHIA (1)	19,560	185,692
		Technical studies	-	551,823
		Consulting fees	-	219,628
		Malawi office and camp expenses	142,763	115,706
Phalombe total			164,796	1,642,527
Pulawy Separation Plant Pre-feasibility Study		Consulting fees	-	715,450
Thambani, Chimimbe, Mchinji and Nkalonje		Mineral project expenditures	193,746	44,093
Total mineral project and research	and		358,542	2,402,070
development expenses

(1) Environmental Social Health Impact Assessment and Corporate Social Responsibility expenditures.

Exploration and evaluation expenditure is recognised in the consolidated statement of comprehensive loss as mineral project expenditures. Following the completion of the DFS for Songwe Hill on 5 July 2022, exploration and evaluation expenditure for Songwe Hill is being capitalised in accordance with IFRS 6 and the group's accounting policies.

Songwe Hill

Background

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