Kibaran Resources : EcoGraf Study Delivers Downstream Development

17 APRIL 2019

Study Delivers Downstream

Development

Global New Supply of Environmentally Sustainable Battery Graphite for

the Lithium-ion Battery and Smart Technologies Markets

Kibaran Resources Limited ("Kibaran" or the "Company") (ASX: KNL), is pleased to announce the successful completion of engineering studies based on the optimised graphite purification flowsheet. The Company plans to fast-track the commercialisation of its proprietary battery (spherical) graphite purification technology.

HIGHLIGHTS

▪Updated 20,000 tonnes per annum ("tpa") engineering study to produce battery (spherical) graphite for the lithium-ion battery market confirms the key aspects to support development and commercialisation:

✓Highly competitive operating costs

✓Environmentally sustainable chemical purification process provides a clear alternative to existing supplies produced with toxic hydrofluoric ("HF") acid

✓consistently delivers high purity battery (spherical) graphite products that achieve stringent customer chemical and physical quality specifications

▪Robust financial metrics for 20,000tpa production plant:

➢Initial investment of US$64m

➢Pre-taxNPV10 of US$194m ($268m) and IRR of 49.8%

➢Annual EBITDA of US$42m ($58m)

▪NPV and annual EBITDA increased by 34% and 38% respectively compared to 2017 estimate

▪Development de-risked through extensive customer product qualification program and staged development to 20,000tpa

▪Long-termdemand for battery (spherical) graphite expected to increase rapidly with Roskill forecasting EV penetration rates increasing from 2% in 2018 to 25% by 2025

▪Demand ex-China expected to break through 100,000 tonnes of battery (spherical) graphite in 2020

▪Increasing focus by electric vehicle and energy storage manufacturers on ensuring ethical raw material supply chain

▪Combined pre-tax net present value of the Company's potential mining and downstream graphite businesses is US$405m ($559m)

Kibaran Resources Limited	ABN: 15 117 330 757	Managing Director	Media: Paul Armstrong
Level 1/18 Richardson Street	E: [e-mail]	Andrew Spinks	Read Corporate	1
West Perth WA 6005	www.kibaranresources.com	T: [phone]	T: [phone]

DOWNSTREAM BATTERY GRAPHITE BUSINESS

Kibaran's development involves initially establishing an Asia-Pacific manufacturing plant close to existing markets, commencing with the production capacity of 5,000 tonnes of battery graphite and increasing to 20,000 tonnes per year (or more) as required to meet customer demand.

Over the last number of months GR Engineering Services Limited ("GR Engineering") has re-designed

the production flowsheet to incorporate the results of the German purification optimisation program and also completed an updated estimate of 20,000tpa capital and operating costs.

The GR Engineering capital cost estimate for 2019 is based on construction of a new production facility in the Asia-Pacific region, using existing sea and land transport infrastructure, water and power supplies. Equipment quotations have been obtained from suppliers in Asia, Europe and Australia.

The update has resulted in a faster ramp-up phase to meet the growing demand requirements of battery anode manufacturers, which also enables the Company to increase the capital efficiency of the new development. The total estimated cost to construct a 20,000tpa facility (including a 10% contingency) is US$64m compared to the 2017 estimate of US$66m (refer announcement 5 December

2017).

Completion of the study is an important milestone in Kibaran's vertically integrated growth and diversification strategy.

CAPITAL AND OPERATING COSTS

Capital Cost

Table 1: Capital estimate based on the staged expansion to 20,000tpa

CAPITAL

Direct Costs

EPC

Commissioning

Other

Owners Costs

Total

Operating Cost

Table 2: Operating estimate

5Ktpa PLANT

$14,836,881

$2,767,848

$213,126

$1,513,921

$654,341

US$19,986,117

15Ktpa EXPANSION

$34,040,558

$5,544,230

$554,750

$2,580,078

$1,650,000

US$44,369,616

OPERATING

Production Nominal (tph)

Days

Availability (%)

Total Cost per purified SPG tonne

20Ktpa PLANT

5.5

365

91.3

US$1,998

2

Figure 1: Operating cost breakdown (%)

KEY FINANCIAL PARAMETERS

Financial Summary

The results of the engineering study have been used to update the financial model, demonstrating a highly attractive return on investment.

Table 3: Key metrics, assuming a 60% gearing rate, 20,000tpa battery graphite production facility and 20 year operation are as follows:

Battery Graphite		Battery Graphite	Capital	Pre-tax	IRR	Annual
		Pricing1	Cost	NPV10		EBITDA
20,000tpa		US$3,575/t	US$64m	US$194m	49.8%	US$42m
		12019 terms net of CIF costs

The investment has a pay-back period of less than 4 years and capital and operating costs adopted in the engineering study were prepared on the basis of independent quotations submitted by equipment vendors and service providers. Major operating expenditures are power and reagents, with the potential for future savings from the use of renewable energy supplies and processing refinements to optimise chemical usage efficiency.

The updated study has resulted in NPV and annual EBITDA increasing by 34% and 38% respectively compared to the 2017 estimate.

Graphite Pricing and Assumptions

The Company has adopted a conservative long-term pricing model that is based on discussions with anode and battery manufacturers in Asia and an assessment of various global forecasts for energy, electric battery and electric vehicle growth rates over the next 10-20 years.

Table 4: Pricing assumptions (after US$25/t CIF costs)

	Pricing
Purified battery (spherical) graphite	US$3,575/t
Unpurified fines bi-product	US$675/t
Note: Financial model based on current pricing (refer figure 7)

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Cost Comparison to Existing Supply and Purification Methods

Cost competitiveness is a major consideration to securing sales as China is the benchmark for current graphite anode material pricing. The operating cost base for existing supply of battery (spherical) graphite produced using toxic hydrofluoric (HF) purification processes is estimated between US$2,000 - $3,000 per tonne.

U S D $

$3,000

H I G H Q U A L I T Y

L O W Q U A L I T Y

$2,000
				H I G H Q U A L I T Y

US $2,000 - $3,000

US$1,998

$1,000

$0

Existing

Supply

Figure 2: Comparison of cost between 20,0000tpa and existing supply (Source: Roskill and Co.. Reports)

products are expected to be cost effective compared to existing HF supplies and other chemical and thermal purification methods, due to an efficient processing flowsheet, lower energy requirements and use of readily available chemical reagents.

Figure 3: Relative comparison of purification methods and costs to produce battery (spherical) graphite

PROJECT IMPLEMENTATION SCHEDULE

GR Engineering has developed a staged implementation plan for , achieving a production capacity of 20,000tpa in 2.5 years.

MONTHS

DEVELOPMENT

PRODUCTION

Figure 4: Project monthly implementation schedule

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BATTERY GRAPHITE FORECAST DEMAND, SUPPLY AND PRICING

Competitive Positioning for Electric Vehicle and Energy Storage Markets

Feedback from lithium-ion battery anode manufacturers indicates that demand from e-mobility and energy storage markets will continue to grow strongly. By 2021 almost half of global battery graphite material is expected to be sourced from new suppliers in Asia and Europe, reducing the existing dependency on toxic HF purification. Currently all battery (spherical) graphite is produced in China using HF acid. It is estimated that 250kg of HF is required to produce 1,000kg battery (spherical) graphite, creating increasing environmental and safety concerns for regulators.

The focus on ensuring ethical and environmentally sustainable supply chains which is already evident

in cobalt markets, is expected to support the adoption of products which is cost competitive with existing supply and green.

Recent examples of this change include:

•BMW Group adopts new approaches for a more sustainable battery cell supply chain and plans for greater transparency on battery minerals for German battery manufacturers;

•Sonnen selection of lithium-iron phosphate cathode chemistry to avoid cobalt and other toxic heavy metals;

•Volkswagen Group alliance with Swedish battery manufacturer Northvolt to form the European Battery Alliance which supports battery cell manufacturing in Europe given Volkswagen have stated a sustainable value chain is equally important as competitive pricing; and

•Contemporary Amperex Technology Co's sustainable development commitment statement as part of its procurement strategy.

Forecast Demand

The long-term battery (spherical) graphite demand remains positive with Benchmark reporting EV penetration rates increasing from 2% in 2018 to 25% by 2025, requiring approximately 600,000 tonnes of battery (spherical) graphite, more than six times the volume currently produced.

Figure 5: Light vehicle sales with forecast EV penetration rates (Source: Benchmark Mineral Intelligence)

In addition to EV market demand, energy storage is expected to drive new demand, Bloomberg New Energy Finance ("BNEF") reports that battery storage costs have fallen by more than one third over the last 12 months, primarily due to a 35% reduction in the cost of lithium-ion battery storage.

BNEF stated that batteries co-located with solar and/or wind projects are starting to compete in many markets and without subsidy, with coal and gas-fired generation for the provision of 'dispatchable power' that can be delivered on demand to the electricity grid.

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