Pilbara Minerals : Quarterly Activities Report

ASX / MEDIA ANNOUNCEMENT

Tuesday, 16 October 2018

SEPTEMBER 2018 QUARTERLY ACTIVITIES REPORT

Pilbara Minerals joins the ranks of global lithium producers with ramp-up of the Stage 1 Pilgangoora project on track and concentrate shipments underway; Stage 2, 5Mtpa DFS and Ore Reserve upgrade underscores Pilbara's position as a major new player in global lithium raw materials supply.

HIGHLIGHTS

Production and Marketing

• • Maiden shipment of concentrate from the Pilgangoora Lithium-Tantalum project departed Port Hedland on 2 October 2018 bound for customers in north Asia, comprising 8,800wmt (wet metric tonnes) of spodumene concentrate grading 6.256% lithia and 0.724% Fe2O3.

• • Strong production throughput for both coarse and fines circuits, with very high product quality achieved.

• • First tantalite primary concentrate delivery of approximately 5,000lb of tantalite product completed to GAM.

• • 205,766 tonnes of direct shipping ore sold to Atlas Iron under the mine gate sale agreement.

• • Second spodumene concentrate shipment targeted to occur in the second half of October 2018.

Project Development

• • Outstanding progress with ramp-up of the Stage 1 concentrator, which has already demonstrated 270tph process run-rates (or higher), representing 100% of the plant's design throughput capacity. The Company continues to optimise the plant operation to achieve the targeted design utilisation and lithia recovery rates.

• • Definitive feasibility study for the Stage 2, 5Mtpa Pilgangoora expansion project delivers exceptional financial outcomes and robust economics, with key highlights including:

  • o Post-tax NPV10% of A$2.160B; LOM project revenue of $A12.2B ($ real); LOM EBITDA of $A6.3B ($ real);

  • o Average annual production of approximately 800-850ktpa of 6% spodumene concentrate and approximately 800,000lbs per annum of tantalite over estimated 17-year mine life;

  • o Competitive cash operating costs of US$233/t CIF for first 5 years following ramp-up; LOM cash operating costs of US$263/t CIF.

• • Stage 2 major long-lead process plant equipment tendered and nearing finalisation for placement of order.

Exploration

• • 35% increase in total Proved and Probable Ore Reserves at the Pilgangoora project to 108.2Mt grading 1.25%

  Li2O, 120ppm Ta2O5 and 1.17% Fe2O3. The updated Ore Reserve contains an estimated 1.36Mt of contained Li2O and 28.5Mlb of Ta2O5, extending the mine life to ~23 years based on the proposed Stage 2, 5Mtpa operation.

• • Inaugural exploration program including reconnaissance RC drilling has been completed at Mt Francisco.

  Drilling has intercepted multiple pegmatites containing tantalum and lithium mineralisation. Whilst drilling to date has only tested a relatively small portion of the project area, geological logging has shown lithium mineralisation to be associated with zinnwaldite and lepidolite, with exploration for major spodumene occurrences continuing.

Corporate

• • US$15 million working capital and foreign exchange hedging facilities secured with globally recognised bank, BNP Paribas, supporting the Pilgangoora Stage 1 ramp-up and continued growth.

• • Northern Australia Infrastructure Facility approves A$19.5 million concessional loan to fund the upgrade of the Pippingarra (public) Road from Pilgangoora to Port Hedland - with facility documentation expected to be entered into shortly.

• • Final draw-down completed under the US$100M senior secured bond issue, following satisfaction of a cost-to-complete test.

• • US$12.2M received from Atlas Iron during the quarter from DSO sales under the mine gate sale agreement.

• • Cash balance as at 30 September 2018 of A$90.6M (30 June 2018: A$120M) following remaining Stage 1 development costs and the commencement of Stage 2 engineering and procurement works.

Ken Brinsden, Pilbara Minerals' Managing Director and CEO, said:

"Pilbara Minerals has now well and truly arrived as a new global lithium producer - and joined the ranks of Australia's mid-tier miners - following an exceptional September quarter which saw the Company achieve one key project milestone after another at Pilgangoora.

"The ramp-up of the Pilgangoora concentrator progressed on schedule, with our disciplined approach to investment and project development really paying dividends. We transitioned relatively quickly from commissioning to project ramp-up and the team managed the process of balancing and coordinating the various components of the plant with great professionalism and focus.

"Towards the end of the quarter, we had successfully delivered our first 'on spec' spodumene and tantalite concentrates, enabling us to complete our first concentrate shipment to our offtake partners on 2 October - a huge milestone for our employees, contractors, shareholders and partners.

"In parallel with the ramp-up of Stage 1, we also completed the Definitive Feasibility Study for the Stage 2, 5Mtpa expansion of the Pilgangoora project during the Quarter.

"Based on the strong technical and economic outcomes of this study, we expect the Pilbara Minerals Board to make a Final Investment Decision in the coming weeks, which could see us commence construction before the end of the year. The successful delivery of Stage 2 will underpin Pilbara Minerals' continued rapid growth trajectory to potentially become a top-3 global lithium raw materials producer by 2020."

Figure 1: M.V. Pola Devora being loaded with the first shipment of spodumene concentrate from the Pilgangoora project

1. OVERVIEW

Australian lithium producer, Pilbara Minerals Limited (ASX: PLS) ("Pilbara Minerals" or "the Company"), is pleased to advise that it made further outstanding progress at its 100%-owned Pilgangoora Lithium-Tantalum project in Western Australia ("Project" or "Pilgangoora project") during the September 2018 Quarter ("Quarter"), with the ramp-up of the Stage 1, 2Mtpa operation proceeding on schedule, and the delivery of the definitive feasibility study ("DFS") confirming exceptional financial outcomes and robust economics for the proposed Stage 2, 5Mtpa expansion.

The ramp-up of the Pilgangoora concentrator achieved a number of key milestones over the Quarter, with the first sale of tantalite concentrate completed in September under the mine gate sale agreement with Global Advanced Metals, and the first shipment of spodumene concentrate completed subsequent to the end of the Quarter, cementing Pilbara Minerals' status as the world's newest major lithium producer.

Plant run-rates have increased steadily over the reporting period, with design capacity input (approximately 270 tonnes per hour) achieved over a 24-hour period towards the end of the Quarter through the combined coarse and fines concentrate production circuits. These results demonstrate the effectiveness of Pilbara Minerals' thorough test work, engineering, process flow design and equipment selection.

Production of direct shipping ore ("DSO") also continued throughout the Quarter, with 205,766 sold under the mine gate sale agreement with Atlas Iron.

The completion of a definitive feasibility study for the Stage 2, 5Mtpa ("Stage 2, 5Mtpa DFS") expansion of the Pilgangoora project also marked a significant milestone, indicating competitive forecast cash operating costs, robust operating margins, long life and exceptional economic returns. Based on a proposed 5Mtpa stand-alone mining and processing operation, the Stage 2, 5Mtpa DFS indicates life-of-mine revenue of A$12.2 billion (real) and life-of-mine project EBITDA of A$6.3 billion (real) over an estimated 17-year mine life. A Final Investment Decision (FID) on the Stage 2 expansion is expected in the coming weeks.

The outstanding opportunity to expand production at the Pilgangoora project was further reinforced during the Quarter with the announcement of a 35% increase in Ore Reserves. The updated Ore Reserve contains an estimated 1.36 million tonnes of contained Li2O and 28.5 million pounds of Ta2O5, extending the mine life to approximately 23 years based on the proposed Stage 2, 5Mtpa operation.

2. SAFETY PERFORMANCE

Safety performance for the Quarter was positive, particularly given the increased volume and organisational complexity of construction, commissioning and production activities on site during the September quarter. The Quarter ended with a rolling twelve-month total recordable injury frequency rate (TRIFR) of 3.46, which was a 16% improvement on the previous June 2018 quarter.

3. PRODUCTION AND SALES

3.1 Operations overview

Units	Q2 FY18	Q3 FY18	Q4 FY18	Q1 FY19
Ore Mined	wmt	0	0	344,549	525,559
Waste Mined	wmt	151,812	1,832,205	2,851,161	1,884,335
Total Material Mined	wmt	151,812	1,832,205	3,195,710	2,409,894
Ore Mined - Grade	%	-	-	1.45	1.43
Ore Crushed	wmt	-	-	50,185	177,369
Ore Processed1	wmt	-	-	0	173,667
DSO Sold	wmt	-	-	145,974	205,766
Spodumene Concentrate	dmt	-	-	-	11,814
Produced
Spodumene Concentrate Sold	dmt	-	-	-	0
Tantalite Concentrate Produced	lb	-	-	-	16,891
Tantalite Concentrate Sold	lb	-	-	-	4,974

1 A proportion of processed volumes are off-specification which is typical during ramp-up. These volumes will be reprocessed.

3.2 Mining

Mining activities at the Pilgangoora project for the Quarter included commencement of construction for a new Tails Management Facility (TMF) cell, continued mine development at Central pit and the DSO operation.

Mine production during the Quarter comprised 525,559 ore tonnes grading 1.43% Li, with ore sourced from Central pit to supply the processing plant, and Monster pit for the direct shipping ore program.

3.3 Processing

Mill throughput for the Quarter totalled 173,667 tonnes, in line with the ramp-up schedule, with the Pilgangoora concentrator performing in accordance with expectations in respect of both product throughput and

concentrate quality throughout the Quarter.

Continued optimisation as part of the Company's continuing plant ramp-up plan is expected to contribute to higher production. This optimisation includes continued improvement in Lithia recovery and increased plant utilisation (plant up-time).

3.4 Sales and marketing

During the Quarter, Pilbara Minerals sold a total of 205,766 tonnes of DSO product to Atlas Iron under the terms of a mine gate sale agreement between Atlas Iron and Pilbara Minerals (refer ASX announcement dated 20 December 2017).

The first delivery of tantalite concentrate, comprising approximately 5,000lb under the mine gate sale agreement for primary concentrate sales, was completed in September 2018 to Global Advanced Metals.

The first shipment of spodumene concentrate from the Pilgangoora project was completed subsequent to the end of the Quarter, departing Port Hedland on 2 October 2018 bound for off-take partners in north Asia. The maiden shipment, onboard charter vessel 'M.V. Pola Devora', comprised 8,800wmt (wet metric tonnes) of spodumene concentrate grading approximately 6.26% lithia and 0.72% Fe2O3. The product was a blend of coarse and fines concentrate from the Pilgangoora concentrator.

As previously announced, the Company is planning to load another vessel with spodumene concentrate in the second half of October 2018. Having achieved producer status, Pilbara Minerals now intends to report on production and sales outcomes as part of the Company's regular quarterly reporting.

4. PROJECT DEVELOPMENT

4.1 Project ramp-up

Following the completion of construction for Stage 1 of the Pilgangoora project and start of commissioning (refer ASX announcement dated 30 July 2018), the main focus of activity during the Quarter was completing the transition from commissioning into the ramp-up of fines concentrates production for customer delivery.

Product specifications for both fines spodumene concentrate and primary tantalite concentrates reached levels consistent with saleable specifications during the Quarter, allowing the Company to focus on growing concentrate production for sale via the steady ramp-up of the plant's capacity to total designed throughput and recovery levels.

Spodumene concentrate recovery at the Pilgangoora plant is achieved via dense media separation ("DMS") of the ore to a coarse concentrate, and fines flotation to recover the remaining spodumene.

For the purpose of first concentrate sales to customers, the fines circuit was prioritised initially due to the larger proportion of product supply, with commissioning of the DMS circuit following. By the end of the Quarter, both circuits were load commissioned and contributing to the production of saleable product.

Haulage of the concentrate to Port Hedland commenced in early September 2018.

By Quarter-end, the Pilgangoora Stage 1 concentrator was achieving strong production throughput for both coarse and fines circuits, with combined tonnages averaging above 450t/day in alignment with the planned