Pilbara Minerals : Stage 3 Scoping Study Outcomes

ASX / MEDIA ANNOUNCEMENT

26 March 2019

POSITIVE STAGE 3 SCOPING STUDY OUTCOMES SUPPORT PILGANGOORA'S LONG-TERM GROWTH TRAJECTORY

Stage 3 Scoping Study demonstrates the Pilgangoora Project's significant scale, long-life, high-quality products and expected low-cost of operations, supporting its continued expansion pathway and Pilbara Minerals' downstream participation strategy.

HIGHLIGHTS

• • Strong interest from existing and new customers prompts Stage 3 Scoping Study and engineering works to unlock additional production and available offtake.

• • Scoping Study for Stage 3 expansion delivers positive results including:

  • ‐ Exceptional project economics, post-tax NPV10% of A$3.73B, life of mine (LOM), project revenue of A$16.6B (real excluding tantalite) and LOM Project EBITDA of A$10.3B (pre-tax, real), with underlying spodumene pricing developed from revised lithium chemicals' forward price forecasts provided by Roskill for the purpose of the study;

  • ‐ Substantial increase in processing capacity to 7.5Mtpa to deliver average annual production of approximately 1.2Mtpa of SC6.0 spodumene concentrate and approximately 1.1Mlbspa of 30% tantalite concentrate over a mine life of 15 years (based on existing Reserves);

  ‐

  Competitive LOM operating costs of approximately US$291/tonne CIF (real, net of tantalite credits).

• • Proposed Stage 3 expansion supports Pilbara Minerals' further participation in downstream lithium chemicals facilities, including: ‐ As a first priority, the enlarged 40kt LCE downstream joint venture proposed with

POSCO.

‐

Potential participation in a second lithium chemical conversion facility currently under evaluation, with the scoping and location study identifying several Australian and international locations as economically viable.

Australian lithium and tantalum producer Pilbara Minerals Limited (ASX: PLS) ("Pilbara Minerals" or "the Company") is pleased to announce that a Scoping Study considering the Stage 3 expansion (Stage 3 project) at the Pilgangoora Lithium-Tantalum Project (Pilgangoora Project) has delivered exceptionally positive results.

The Study re-affirms the Pilgangoora Project's scale and quality and continues to position Pilbara Minerals to become one of the world's largest, lowest cost hard-rock lithium and tantalum producers.

With an estimated incremental capital cost of A$225.83M (+/- 30%), the proposed Stage 3 project would see the Pilgangoora Project's processing capacity expand to 7.5Mtpa. This would deliver an average of approximately 1.2Mtpa ~6% spodumene concentrate and ~1.1Mlbspa 30% tantalite

concentrate over an estimated 15-year LOM, based on the existing project Reserves. Stage 3 capital is in addition to the previously announced Stage 2 capital expenditure of A$231M.

The Stage 3 Scoping Study, which was based on the current Reserves of 108Mt, has delivered positive economics (for 100% of Stage 1, 2 and 3) including a LOM project revenue of A$16.6B, a post-tax NPV10% A$3.73B and an average annual LOM cash operating cost of US$291/tonne CIF.

Originally announced in January 2019, the proposed Stage 3 project is a reflection of strong customer interest in further product supply and will support Pilbara Minerals' objective for increased participation in downstream lithium chemicals opportunities with POSCO and other possible partners in the future.

With the majority of spodumene concentrate for both Stage 1 and Stage 2 now committed under offtake agreements, the additional production f rom Stage 3 is intended to be used by Pilbara Minerals to supply existing and new customers.

A first priority is the proposed downstream joint venture with POSCO in South Korea, which was recently agreed via a non-binding MoU (ASX announcement: 2 January 2019) to be enlarged to 40kt LCE and therefore requires a further 75kt of spodumene concentrate (beyond the originally agreed 240kt in offtake).

In addition, the Company is considering further spodumene concentrate offtake in support of a second lithium chemical conversion operation in the future.

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

"The Stage 3 Scoping Study has delivered exceptional results which further reinforce the Pilgangoora Project's outstanding quality and scale. The ability to expand the Project to a production rate of well over 1Mtpa of spodumene concentrate, with a minimum mine life of 15 years, underlines our position as a globally significant lithium raw materials producer. At the same time, we believe there is excellent potential to grow the mine life beyond 15 years.

"From the start our strategy has been quite clear to develop each stage with a focus on the potential to continue to expand the Pilgangoora Project. We remain very focused on the Stage 1 optimisation in progress and have teams dedicated to that task. However, in parallel, we continue to capitalise on the opportunities in the high quality spodumene concentrate and lithium chemicals market.

"The opportunity in front of us has never been more apparent. As the electric vehicle and battery storage sector grows, so does the opportunity for Pilbara Minerals to become a player in the lithium raw materials supply chain. Together these projects diversify our entrance into this growing market and play directly into our downstream value-adding strategy," he added.

The Stage 3 project would build off the current Stage 1 operation and the proposed Stage 2 project, through the construction of a parallel processing train. While the key process steps would remain unchanged, the build would involve the construction of an additional 2.5Mtpa crushing circuit to complement the combined Stage 1 and 2 circuits processing 5Mtpa.

A LOM mining schedule completed as part of the Scoping Study continues to demonstrate a robust mine life of at least 15 years based on the September 2018 Reserve (108Mt), with potential upside to the LOM when considering the inferred material within the current Resource.

In addition, with much of the Pilgangoora Project area remaining under-explored and several recently identified target areas showing potential for further resource growth, Pilbara Minerals is confident it can continue to increase the Resource. The Company recently upgraded its exploration target to 50-90 million tonnes grading 1.0-1.5% Li2O (Lithia) (ASX Announcement: September 2018 Quarterly Activities Report).

The Stage 3 project would involve upgrades to some key infrastructure on site including the power station, water bores, accommodation, buildings, and waste water treatment plant. The logistical operations would remain the same with product transported via road to Port Hedland Port for export.

Given Stage 3 falls largely within the already approved disturbance envelopes of Stages 1 and 2, it is not anticipated that any Federal or State Ministerial approvals are required beyond the standard mining approvals process experienced in the development of Stages 1 and 2 at the Pilgangoora Project.

The Stage 3 project final investment decision and delivery schedule would be determined by the progress of further feasibility studies, market demand analysis, customer requirements, the timing of any associated chemical conversion facility and project funding outcomes. A further consideration is the development timeline of any proposed chemical facilities that may be linked to Stage 3 offtake. Notwithstanding these points, it is currently estimated construction of Stage 3 could commence late in the second quarter of the 2020 calendar year with commissioning commencing early in the second quarter of the 2021 calendar year.

Since announcing Pilbara Minerals' intention to investigate the opportunity for the development of lithium hydroxide facilities outside of China (ASX announcement: 4 July 2016), the Company has continued to assess opportunities to grow its presence downstream. Recently Pilbara Minerals worked with a leading engineering firm to update its 2016 scoping study on the potential for a 30-60ktpa chemical conversion facility. This has identified several Australian and international site locations that could be economically viable.

If developed, this additional new facility would secure Pilbara Minerals' further participation in lithium chemicals facilities for global markets, and in particular lithium hydroxide supply. This would be a separate venture and would not interfere with Pilbara Minerals' f irst priority lithium chemicals development, which is through the proposed joint venture with POSCO for a potential ~40ktpa lithium hydroxide facility in South Korea which recently received 'conditional' Board approval on 18 March 2019 (ASX announcement: 18 March 2019).

SUMMARY OF KEY SCOPING STUDY OUTCOMES

The Scoping Study results (Table 1) demonstrate a long-life, low-cost operation with a strong LOM revenue of A$16.60B and LOM average annual EBITDA of A$684M (real) over an estimated 15-year1 mine life. Spodumene concentrate pricing inputs for the Scoping Study were developed from revised lithium chemicals' forward price forecasts provided by Roskill for the purposes of the study dated 14th March 2019.

Further details on pricing assumptions are outlined in the section "Forecast Pricing" below with further sensitivity analysis on pricing provided in the 'Financial Analysis' section of this announcement.

Table 1: Stage 3 Scoping Study key outcomes

KEY SCOPING STUDY OUTCOMES

Life of mine (based upon reserves)	15 years1
LOM project revenue (real	A$16.6 billion
excluding tantalite)
LOM project EBITDA (pre-tax; real)	A$10.3 billion
Stage 3 pre-production capital (incl	A$225.8million2
contingency)
Post-tax NPV10%	A$3.73 billion3
Average annual LOM cash	US$291/dmt CIF5
operating costs4 (real, net of Ta2O5
credits)

KEY SCOPING STUDY OUTCOMES

Spodumene concentrate price first	US$700/dmt CIF5
five years (average, real)
Spodumene concentrate price (LOM	US$765/dmt CIF5
average, real)
Foreign currency exchange rate	0.75
(AUD: USD)
LOM average annual EBITDA (real)	A$684M
1 Mine life is calculated from 1 July 2019.

2 Stage 3 capital is exclusive of Stage 2 capital of A$231 million as per Pilbara Minerals' Stage 2 Definitive Feasibility Study (3 August 2018).

• 3 Valuation date is 1 July 2019 at an after tax nominal discount rate of 10%.

• 4 Cash operating costs include mining, processing, transport, state and private royalties, native title costs, port, shipping/freight and site based general and administration costs, an allocation of corporate administration/overhead cost and are net of Ta2O5 by-product credits.

5 CIF ("Cost Insurance and Freight") (Incoterm) is a trade term requiring the seller to deliver goods onboard at port of discharge, plus cover the cost of transport and freight insurance to the destination port.

FORECAST PRICING

Pilbara Minerals' offtake agreements include a pricing mechanism for chemical grade spodumene concentrate based on formulae that track the battery grade lithium carbonate and lithium hydroxide prices in the Chinese and Asian markets.

Each customer's pricing mechanism has been reflected in the f inancial model over their respective contract terms for each of the offtake agreements with General Lithium, Ganfeng Lithium, Great Wall Motors and POSCO. Pricing for any uncommitted Stage 3 tonnes has been calculated on a consistent basis to existing offtake arrangements with references to battery grade lithium carbonate and lithium hydroxide prices in the Chinese and Asian markets.

Pilbara Minerals commissioned Roskill to provide updated price forecasts to help determine underlying spodumene concentrate pricing for the purposes of the Scoping Study. Delivered on 14th March 2019, Roskill provided forecasts through to 2032 for each of the four market prices which are referenced in Pilbara Minerals' offtake contracts (including China domestic pricing - see Figure 1 below).

Figure 1: Derived spodumene concentrate price based off forecast carbonate and hydroxide prices

DELIVERY TEAM

In delivering the Stage 3 Scoping Study, Pilbara Minerals utilised the services of its in-house expertise and engaged specialist consultants (Table 2), the majority of which were actively involved in the preceding Stages 1 and 2 developments at the Pilgangoora Project.

Table 2: Stage 3 Scoping Study contributing consultants

AREA	CONSULTANT

Market analysis	Roskill Consulting Group Ltd
Geology and resources	Trepanier Pty Ltd
Mining and mine design	AMC Consultants Pty Ltd
Process plant and infrastructure (incl	DRA
contribution to plant capital and operating
estimates)
Tailings management facility	ATC Williams Pty Ltd
Water Supply	HydroConcept Pty Ltd
MARKET ANALYSIS

Leading battery minerals industry consultant Roskill was engaged by Pilbara Minerals to provide a lithium and tantalum market outlook which has been used to support the Stage 3 Scoping Study.

Demand for lithium raw materials is set to remain strong with forecast growth of 28% per annum between 2018 and 2028 largely driven by the automotive sector. It is estimated that by 2030, around 66% of the world's automotive sales or 56.1 million passenger cars will have a battery as part of their powertrain.

With a solid resource and reserve base, Pilbara Minerals is well placed and will continue to produce chemical grade spodumene concentrate for the growing battery market, with sales into Chinese and South Korean chemical conversion facilities.

The Company also plans to position itself to take advantage of the downstream 'value-adding' market through the vertical integration of the Pilgangoora Project's spodumene concentrate supply with lithium chemicals facilities in which Pilbara Minerals would have an economic interest.

A key objective of the Stage 3 project is to make available spodumene concentrate for current and new customers and potentially to feed into an additional lithium hydroxide facility, beyond the proposed joint venture with POSCO.

This would potentially secure Pilbara Minerals a second position in this high value market and further vertically integrate the Pilgangoora Project's spodumene with key lithium chemicals facilities (Figure 2).