Neometals : Half Year Report for the half year ended 31 December 2018

Neometals Ltd

A.C.N. 099 116 631

Half-Year Report for the 6 months ended 31 December 2018

The directors of Neometals Ltd ("Company") ("Neometals") submit herewith the financial report of Neometals and its subsidiaries ("Group") ("Consolidated Entity") for the half-year ended 31 December 2018. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

The names of the directors of the company during or since the end of the half year are:

Mr S. Cole	- Appointed 24 July 2008
Mr D. Reed	- Appointed 20 December 2001
Mr C. Reed	- Appointed 20 December 2001
Dr N. Streltsova	- Appointed 14 April 2016
Mr D. Ritchie	- Appointed 14 April 2016
Mr L. Guthrie	- Appointed 27 September 2018
Dr J. Purdie	- Appointed 27 September 2018

REVIEW OF OPERATIONS

LITHIUM BUSINESS UNIT

MT MARION LITHIUM OPERATION

(Neometals Ltd 13.8%, Mineral Resources Limited 43.1% ("MRL"), Ganfeng Lithium Co., Ltd 43.1% ("Ganfeng") through Reed Industrial Minerals Pty Ltd ("RIM"))

Production at the Mt Marion Lithium Operation ("Mt Marion") was stable during the half year, achieving:

•  1,444k wet metric tonnes ("wmt") ore mined;

•  226k wmt concentrates produced; and

•  185k wmt concentrates shipped

During the half year, RIM shipped concentrates to Ganfeng at pricing linked to international lithium carbonate and hydroxide prices imported into China. The realised price for Mt Marion SC6 during the September 2018 quarter was agreed at US$1,070/dry metric tonne ("dmt") CFR China and US$931/dmt CFR China for the December 2018 quarter.

Construction of the additional flotation concentrator circuits to upgrade production to all SC6 concentrate is in progress and on track for completion in the March quarter of 2019. Dry commissioning and water testing of certain circuits has commenced. Steady state operation of the expansion and the achievement of all SC6 product is anticipated in the June quarter of 2019.

In December, the Company entered an agreement to sell its 13.8% shareholding in RIM to Ganfeng Lithium and Mineral Resources (subject to FIRB and Chinese authorities' approvals). Neometals will retain an annual option for life of mine to purchase 57,000t of SC6 concentrates at market-linked prices from February 2020. The transaction is expected to close in early March 2019. Consideration for the transaction is A$103.8M.

LITHIUM HYDROXIDE REFINERY PROJECT (Neometals Ltd 100%)

During the half year, the Company continued pursuing its integrated lithium chemical production goals. Key activities included:

•  Front-End Engineering and Design (''FEED'') Study with M+W Group ("M+W") in relation to a refinery located in Kalgoorlie;

•  Preparation of the application for Works Approval for the refinery;

•  Working with the City of Kalgoorlie Boulder ("CKB"), pursuant to the memorandum of understanding between the parties, to progress fundamental service agreement terms including provision of access roads, reclaimed water pipeline for the proposed Kalgoorlie Lithium Refinery; and

•  Formal offtake/partner selection and funding process with Azure Capital.

The key driver of the refinery is to increase the value of future spodumene concentrates purchased under the Company's Mt Marion Spodumene Concentrate Offtake Option ("Offtake Option"). The annual Offtake Option provides a fixed volume of up to 57,000t of spodumene concentrate for conversion into battery grade lithium hydroxide and lithium carbonate for supply to Lithium Ion Battery ("LiB") cathode and cell makers. The refinery is designed to produce approximately 10,000tpa of lithium hydroxide equivalent and will require a supplementary spodumene concentrate supply in the order of 20,000tpa to be procured to achieve nameplate capacity.

M+W will deliver the FEED Study for the Company's proposed refinery during the March quarter of 2019. The FEED Study will establish project capital and operating costs to an accuracy of +/- 15-20% to form a sufficient basis from which to assess the project's economic viability. Forward work will include the pilot testing of the new SC6 fine spodumene concentrate from the upgraded floatation circuit at Mt Marion, previous design and testwork was based on the coarse SC6 spodumene concentrate.

The Company will continue its approvals processes for the refinery with an application for Works Approval to be submitted during the March quarter of 2019.

LITHIUM ION BATTERY RECYCLING PROJECT

(Neometals Ltd 100%)

During the half year, Neometals made strong progress on its lithium ion battery ("LiB") recycling project. Neometals has broadened its initial focus from consumer electronics batteries cobalt recovery to a multi chemistry flowsheet that can accommodate various types of LiB's. The LiB recycling development follows significant market interaction. The approach that evolved from this interaction aims to recover >90% of contained battery materials (plus to recycle process water and minimise plastic and graphite waste) from both EV and stationary storage batteries (lithium-nickel-manganese-cobalt ("NMC") chemistry cathodes) and cobalt-rich (lithium cobalt oxide chemistry cathodes ("LCO")) batteries.

Neometals has finalised its mixed feed flowsheet and awarded the pilot plant test-work program ("Pilot") to SGS Canada for completion at its Lakefield, Ontario laboratory. The Pilot will demonstrate and showcase Neometals' re-designed and engineered flowsheet and follows on from the historical 'proof of concept' test work.

MT EDWARDS LITHIUM PROJECT

(Neometals Ltd 100% through Mt Edwards Lithium Pty Ltd)

Mt Edwards is located 40km south of Mt Marion and is situated centrally within what is emerging as a highly endowed and globally significant lithium province. The Mt Edwards tenements cover an area of 240 square kilometres and early stage exploration confirms that multiple fertile Lithium-Caesium-Tantalum ("LCT") pegmatites are present. The Mt Edwards Project ("Mt Edwards") was acquired by Neometals in the June quarter of 2018.

Exploration work at Mt Edwards continues to be guided by a CSA Global ("CSA") prospectivity and targeting study. Further pegmatites have been identified, rock chip sampled and submitted for assay.

An 18 hole for 460 metre Air Core drill and sample program was undertaken over Prospecting Licenses P15/5905 & P15/5906 in November 2018. Samples were assayed for Lithium and related elements and gold, no significant results returned.

A 7 RC drill and sample program at Atomic 3 tested for extension to the LCT pegmatites defined and reported in the 2018 September quarter. A total of 620 metres were drilled, confirming that the pegmatites have either been pinched out or are offset by late stage faulting.

A 9-hole RC drill and sample program for 970 metres was conducted on E15/1576 testing stratigraphic targets for gold and nickel. The ultramafic to mafic contact targets were located and tested however no significant results were returned.

ZEOLITE RESEARCH AND DEVELOPMENT PROJECT

(Neometals Ltd 100%)

During the half year, the Company completed further work on its zeolite developments, having proved the concept of synthesizing commercial grade zeolite from spodumene leach residue (lithium hydroxide processing waste) in September 2018. Neometals is pursuing the opportunity to add co-product revenue (and reduce waste disposal) to improve the competitive cost position for the proposed lithium refinery and evaluating the opportunity to fast track as a standalone zeolite operation using third-party feedstock. To this end, Neometals has been working with M+W on an engineering cost study for a zeolite manufacturing facility to be located adjacent to the proposed lithium refinery. Neometals plans to accelerate the development of this opportunity with pilot testing, product testing and a formal feasibility study.

VANADIUM &TITANIUM BUSINESS UNIT

BARRAMBIE VANADIUM & TITANIUM PROJECT (Neometals 100% through Australian Titanium Pty Ltd)

The Barrambie Vanadium and Titanium Project in Western Australia ("Barrambie") is one of the world's largest vanadiferous-titanomagnetite ("VTM") resources (280.1Mt at 9.18% TiO2 and 0.44% V2O5), containing the world's second highest-grade titanium resource (53.6Mt at 21.17% TiO2 and 0.63% V2O5) and high-grade vanadium resource (64.9Mt at 0.82% V2O5 and 16.9% TiO2) subsets.

Neometals is undertaking a dual track evaluation of development alternatives for its 100% owned Barrambie Titanium and Vanadium project in Western Australia. Barrambie is located approximately 80km Northwest of Sandstone in Western Australia, has a granted mining permit and has been the subject of approximately AUD$30 million in exploration and evaluation expenditures by the Company since 2003. Barrambie is one of the world's highest-grade hard rock titanium deposits and one of Australia's highest-grade vanadium resources. Optionality afforded by distinct high-grade zones and co-product streams has driven Neometals to consider a staged development approach. The Company is investigating the recovery of titanium slag from direct shipping ores ("DSO") being concentrated and smelted in China in parallel with the development of an onsite concentrator and traditional salt roast-leach operation to produce vanadium as a primary product.

On 16 November, Neometals announced the commencement of a formal update ("Updated DFS") to the historic Barrambie Vanadium Definitive Feasibility Study ("DFS"), based on the development of an open-pit mining operation, onsite concentration and refining (via a traditional salt roast-leach operation). The Updated DFS will be JORC 2012 compliant based on the latest Neometals 2018 Mineral Resource Estimate for a 11,200tpa Vanadium Pentoxide operation.

In preparation for progressing to the FEED study stage (subject to Board approval), drilling commenced to provide samples for the production of large scale (20t) representative samples of concentrates for vendor roasting testwork to provide detailed design information and price quotation.

Approvals and Permits

Given the long Company history with Barrambie, Neometals is in the privileged position of being able to fast track development by relying on significant historical work already completed.

Neometals received environmental approval to develop an open-cut vanadium mine and processing plant at Barrambie in 2012 via Ministerial Statement 911 (the "Proposal"). During the September quarter 2018, a Section 46 Application was lodged by Neometals requesting an extension of time limit for implementation of the Proposal (i.e. project execution). Ongoing advances were also made during the period on mine planning and tenement management.

A Mining Proposal for an initial 1Mtpa DSO operation was lodged during the half year, that once approved, will be followed by a proposal for a ramp up to a 3.2Mtpa Salt-Roast Leach Operation.

Marketing

Management have been actively advancing discussions with potential partners and offtake parties for supply of ore, concentrates and chemical products, the latter being either vanadium pentoxide flake (99% V2O5) and/or Ferrovanadium ("FeV"). With Updated DFS results to hand, these discussions will ultimately drive the development strategy at Barrambie. Subsequent to the end of the quarter, an advisory firm has been appointed to assist with the preparation of a financing plan for Barrambie.

The average price of vanadium pentoxide (98% min) in 2018 was US$18.00/lb V2O5, the second highest on record. It peaked at an historic high of US$33.88/lb V2O5 in mid-November and dropped back to US$15.00/lb by the end of December.

Notwithstanding gradual price declines for titanium in 2018, leading market analysts are predicting a growing TiO2 supply deficit without the development of new titanium resource projects i.e. supporting firmer prices in the longer term.

NEOMET PROCESSING TECHNOLOGY

(25% Net Profit Interest through Alphamet Management Pty Ltd - 100% Neometals Ltd)

Neometals, via its wholly owned Canadian subsidiary Alphamet Management Pty Ltd, is responsible for managing the commercialisation and development of the "Neomet Process". This patented (USA, Canada, Australia), environmentally friendly process technology has broad application in the recovery of a wide range of metal oxides from chloride leach solutions, including titanium.

During the half year work continued on installation of a bench scale test program for the recovery of zinc and iron from electric arc furnace ("EAF") dust and the regeneration of hydrochloric acid. A high-grade mineral concentrate from Barrambie is already on site at our Montreal facilities and will be the subject of the next test work program pending successful completion of the EAF dust work. Proving the low-cost regeneration of hydrochloric acid at scale could enable the production of a high-grade titanium dioxide chemical from Barrambie Eastern band concentrates or salt roast-leach residues produced from the primary vanadium operation.

CORPORATE

Hannans Limited (ASX:HNR) (Yilgarn Nickel/Lithium/Gold)

As at 31 December 2018 Neometals holds 706,209,483 ordinary fully paid shares (36% of the issued capital) in Hannans on an undiluted basis. At 31 December 2018, Hannans shares closed at 1.2c.

Critical Metals Limited (Unlisted)(Scandinavian Lithium/Cobalt/Base Metals)

Neometals holds 13.5% of unlisted public company Critical Metals Ltd, a company which now houses the Scandinavian mineral assets previously held by Hannans. Neometals will assist Critical Metals to realise lithium, cobalt and carbon opportunities in Scandinavia through a technical assistance arrangement.

Other Investments

The market value of the Company's other investments as at 31 December 2018 totalled $0.8M.

Finances

Cash and term deposits on hand as of 31 December 2018 totalled A$30.3 million, including $4.0 million in restricted use term deposits supporting performance bonds and other contractual obligations. The Company's has net receivables and listed securities totalling approximately $9.9 million.

Issued Capital

During the period the Company granted a total of 2,876,556 Performance Rights to eligible executives, employees and contractors pursuant to their employment and engagement agreements.

The total number of shares on issue at 31 December 2018 was 543,947,221.

Dividends

Dividends issued during the half year period: nil (2017: nil).

MINERAL RESOURCE ESTIMATES

Barrambie Mineral Resource Estimate

Category (JORC 2012)	Tonnage (MT)	TiO2 (%)	V2O5 (%)	Fe2O3 (%)	Al2O3 (%)	SiO2 (%)
Indicated	187.1	9.61	0.44	46.77	9.48	14.95
Inferred	93.0	8.31	0.40	46.51	9.32	15.40
Total	280.1	9.18	0.44	46.70	9.44	15.07

Reporting criteria: ≥ 10% TiO2 or ≥ 0.2% V2O5; small discrepancies may occur due to rounding

Ore Reserve Estimate

Project	Category (JORC 2012)	Tonnage (MT)	V2O5 (%)	Fe2O3 (%)	TiO2 (%)
Barrambie	Probable	10.762	0.60	42.5	25.18

Compliance Statement

The information in this report that relates to Mineral Resource Estimates and Exploration Targets for the Barrambie Vanadium & Titanium Project and the Mt Edwards Project are extracted from the ASX Announcements:

17/04/2018	Updated Barrambie Mineral Resource Estimate
25/06/2018	Mt Edwards Project Mineral Resource Over 120,000 Nickel Tonnes

The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements and that all material assumptions and technical parameters underpinning the estimates in the market announcements continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Persons' findings are presented have not been materially modified form the original market announcements.