FYI Resources : to Enter High Purity Alumina Sector

8 May, 2017 ASX Release (ASX code: "FYI") FYI to enter High Purity Alumina sector

FYI Resources is pleased to update the market on recent Company developments.

Highlights

• FYI identifies premium integrated mining and processing opportunity

• High purity alumina ("HPA") is used in the manufacture of high tech products

• End-use includes the battery, sapphire glass (smart phones, televisions, watches), light-emitting diodes ("LED") lights, electronic circuitry markets

• HPA is a critical feedstock to high growth new age markets

Background

FYI is fully committed to progress its Southeast Asian potash strategy and in particular continuing the reviews and joint venture negotiations on the Sino-Lao Potash project in Laos.

However, whilst the potash strategy is continuing, FYI proposes to pursue a high purity alumina development opportunity in Western Australia through the purchase of 100% of the shares of Kokardine Kaolin Pty Ltd ("Kokardine").

Kokardine has been evaluating a vertically integrated HPA production strategy through the mining of kaolin from their wholly owned kaolin resource in Western Australia then processing the feedstock directly into high purity alumina (Al2O3). High purity alumina is used in many high-tech markets such as batteries, sapphire glass for phone and television screens, and LED lights.

The preferred processing facility site would be in Western Australia, the location of which is expected to be confirmed in a prefeasibility study to be undertaken by FYI.

HPA Industry Outline

HPA (Al2O3) is a high purity non-metallurgical alumina product with a higher finished aluminium grade than 99.9% (3N). HPA is categorised on the basis of purity level (i.e. 99.99% (4N), 99.999% (5N)) and of its application. The average price received for HPA increases commensurate with the escalation in purity level. HPA has beneficial characteristics especially suited to rapidly developing high tech markets. These qualities include superior hardness, low density, geothermal and electrical conductivity and high corrosion resistance.

High Purity Alumina (Al2O3)

HPA serves as a base material in the manufacture of sapphire substrates which are in turn key in the production of various product applications such as LEDs, scratch-resistant artificial sapphire glass, and single crystal materials for the use in electronic screens such as those found in smart phones, televisions and watches. In addition, important growing markets are to be found in battery technologies, and as anode/cathode separators for the electric-powered vehicle and home power storage markets. These sectors are all high-end markets that are expected to show continued strong year on year growth in the mid to long term.

About Kokardine Kaolin Pty Ltd

Kokardine is the 100% owner of the Cadoux kaolin project situated on Exploration Licence 70/4673, located approximately 220 kilometres North East of Perth, Western Australia.

The project has a current JORC Inferred Resource of 10.5Mt @ 11.25% Al (@ -45microns) and has low deleterious elements with suitable specifications for HPA processing (refer Resource Report section).

The resource's characteristics of elevated aluminium combined with low impurities, expected low strip ratio and proximity to Perth and major infrastructure, highlights this project potential as

a significant asset.

Transaction Outline

Cadoux Kaolin project locality map

FYI has signed a Share Purchase Agreement with the owners of Kokardine to purchase 100% of the shares in the company, subject to completion of due diligence in respect to the size and quality of the kaolin deposit and the tenement

being in good standing. The conditions of the agreement are to be satisfied or waived no later than 31 July 2017. Depending on the completion of due diligence, FYI will be working to achieve completion of the agreement in mid to late June 2017. This allows FYI to gain control of the wholly owned Cadoux project and to collaborate on the development of a significant high technology integrated value chain strategy for HPA.

Transaction Structure

The purchase is by way of shares only and includes milestone payments to Kokardine's current management once key performance related milestones are achieved.

The three payment stages for the Kokardine transaction are:

Tranche 1: the issue of 21,428,571 FYI shares (an equivalent value of $750,000

@ $0.035cps) as payment for the Kokardine shares and securing the HPA project strategy and management team

Tranche 2: the issue of 12,500,000 FYI shares contingent upon:

1. the Company establishing a JORC total Mineral Resource of 12.0Mt inclusive of at least 2.5Mt in the Indicated Resource category of kaolin with an average aluminium grade in excess of 11% and cut- off industry standard specifications for kaolinite of maximum values of 0.7% Fe2O3, 0.5% TiO2 and 2% K2O impurities by September 2017; and

2. the FYI share price achieving $0.06 for a period of 30 consecutive days.

Tranche 3: the issue of 10,000,000 FYI shares contingent upon:

1. a positive prefeasibility study for the Project being completed by 31 March 2018; and

2. the FYI share price achieving $0.10 for a period of 30 consecutive days.

Tranches 2 & 3 will be subject to shareholder approval. The shares issued to the vendors will be voluntarily escrowed for 12 months from the date of issue.

FYI will secure the services of the Kokardine management team, which is considered critical in progressing the project.

FYI may appoint a Kokardine vendor to the FYI Board following successful completion of the key performance milestones or at an earlier time if deemed appropriate.

Development Strategy

Whilst the HPA strategy being developed by Kokardine is already well defined, the development plan will be accelerated using the FYI structure as a platform. FYI will provide the necessary resources to assist in achieving the key milestones.

Next Steps

FYI will undertake a drilling program during May to confirm the size and quality of the deposit with the results expected to be used to determine a JORC indicated resource with suitable characteristics for HPA production. The program includes:

1. A 1,077 m aircore drilling program expected to commence 14th May 2017

2. Laboratory analysis and testing of drilling

3. Resource definition and upgrade

4. Metallurgical test work confirming suitability for HPA production.

FYI will concentrate its efforts towards completing a feasibility study by end of first quarter 2018.

Cadoux Resource Report Geology

The Cadoux kaolin project area lies within easily accessible and flat lying countryside. There is no outcropping, however, recognizable granitoid fragmental rocks are sometimes present just below the surface.

Previous drilling at the project revealed a weathering profile which is common in Western Australia with the granitoid rocks being deeply weathered forming a leached, kaolinized zone under a lateritic crust. Laboratory analysis shows particle size distributions are typical of "primary style" kaolins produced from weathered granites.

The crust of the overburden comprises gravel and sands over reddish to off white clay to an average depth of 5m. White kaolin underlies the overburden averaging approximately 16 m followed by weathered orange to yellow sandy and mottled clays that are partially oxidised and then followed in profile by recognizable rounded fresh granitoid material at depth. The thickness of the kaolin profile varies from less than 1m to a maximum of 22m. Fresh granitoids are found interspersed at depths of between 10 and 30m.

All of the current kaolin resource is within 4 to 11 metres of the surface.

Drilling technique

All drilling was by air core method with vertical (-90) holes to geological basement generating drill chips / cuttings. The drill collars were sighted using GPS. The holes are on a 200m x 200m spacing.

The cuttings from each unit length of hole are brought to the surface which constitute a sample of the geological formation at the interval of depth from which it is derived. The sampled material was composited into two metre sample intervals then logged in detail by the qualified site geologist. This data was later validated and entered into the geological database for the project and rock type codes were added for the ease of display on the sections.

Sampling Techniques

The sampling involved a total of 69 samples being taken from the drill core/ chips of the air core drill for analysis. Only the visually bright white kaolin material was sampled in each hole. Sub Samples were also collected from the composite samples as a check analysis.

Criteria for classification

The Mineral Resource Estimate to JORC 2012 standards is based on previous work carried out in 2013 by Strategic Resources Management Pty Ltd on the Cadoux Kaolin Project. The final Cadoux Kaolin Inferred Resource resulting from the resource estimate process is based on information from 47 aircore drill holes from which 27 bulk samples were taken of the kaolin mineralised intercept, one bulk from each hole. Plus 70, 2m interval sample composites were also taken.