Australian Mines : Quarterly activities report

Australian Mines Limited

ABN 68 073 914 191

ASX | AUZ

Level 34, 1 Eagle Street,

Brisbane, Queensland 4000

T + 61 7 3184 9184

E [e-mail]

W australianmines.com.au

25 October 2021

Australian Securities Exchange

20 Bridge Street

Sydney NSW 2000

ASX RELEASE

Quarterly Activities Report for period ended 30 September 2021

Australian Mines Limited ("Australian Mines" or "the Company") is pleased to provide its Quarterly Activities Report for the period ending 30 September 2021.

During the reporting period, Australian Mines announced that it had successfully entered into a binding long form offtake agreement with LG Energy Solution for mixed nickel-cobalt hydroxide sourced from Australian Mines' world class, 100%-owned, Sconi Nickel-Cobalt-Scandium Project in North Queensland.

LG Energy Solution, a subsidiary of LG Chem, is one of the world's largest producers of advanced batteries for the electric vehicle industry.1

Key activities & achievements during the quarter include:

• Secured a binding offtake agreement with Korean-based LG Energy Solution for 100% of the projected future nickel and cobalt production from the Sconi Project2
• Continued negotiations with potential project finance partners
• Completed a well-supported Institutional Placement, which raised A$6.5 million3

1. https://www.lgessbattery.com/us/home-battery
2. See Table 1 of this report for the key terms of Australian Mines' offtake agreement with LG Energy Solution
3. before costs

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Australian Mines' primary focus is progressing the development of Sconi and the execution of the offtake agreement with LG Energy Solution is a major milestone in that process.

The offtake quantities covered by the agreement with LG Energy Solution will account for 100% of the projected future production of the Sconi Project over its first six years and be supplied in the form of a mixed nickel-cobalt hydroxide precipitate (MHP).

The agreement has only a single condition precedent, being that Australian Mines is to secure financing for construction of the Sconi Project by 30 June 2022 (or such later date as the parties may agree).

Australian Mines' confidence in meeting this condition is supported by the pricing structure of the offtake agreement and the investment grade credit rating of LG Energy Solution's parent company LG Chem,4 which makes LG Energy Solution a highly credible counterparty.

Long form, binding Sconi offtake agreement

The mixed nickel-cobalt hydroxide to be supplied under the terms of the binding long form offtake agreement with LG Energy Solution is an essential commodity used by electric vehicle battery makers, automotive manufacturers (also called 'OEMs', or original equipment manufacturers) and in the storage and delivery of clean, sustainable energy sources.

LG Energy Solution is a global leader in the production of advanced batteries for the electric vehicle industry.5

During the initial six-year term of the offtake agreement, LG Energy Solution will purchase 71,000 tonnes of nickel and 7,000 tonnes of cobalt in the form of MHP.

The offtake agreement with LG Energy Solution will account for 100% of the projected future production of Sconi over its first six years creating a sound customer

1. LG Energy Solution is a subsidiary of LG Chem (S&P: BBB+/Stable).
2. https://www.lgessbattery.com/us/home-battery/news-view.lg?blcSn=1163&devonTargetRow=1&devonOrderBy=&searchType=all&searchKey=

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foundation to underpin its development (see Table 1 of this report) for an expected mine life in excess of 30 years.

	Key Term		Description
	Quantity		71,000 dry metric tonnes of nickel, plus
		7,000 dry metric tonnes of cobalt
	Term		Six years (initial term), with the potential to extend by
		another five years by mutual agreement
	Commencement		On or before 1 July 2024, with an option to extend by up to 6
		months by mutual agreement
			Pricing is on a US$ basis, and is linked to market prices
	Pricing		quoted on the London Metal Exchange (LME) for nickel and
		published by Fastmarkets MB for cobalt at the time of sale
			via a pricing formula

Table 1: Key terms - LG Energy Solution binding Offtake Agreement

Project financing

The Sconi Project's technical and economic fundamentals provide a strong platform for Australian Mines to continue its discussions with a range of project financiers, including various export credit agencies (both Australian and international), green energy funds, commercial banks, mezzanine financiers, and international banks (for both debt and equity capital).

As part of the ongoing Sconi Project financing discussions, it is noteworthy that:

1. The Queensland Government's Prescribed Project status for Sconi6 is still in force and project-related assistance is continuing,

6 Australian Mines Limited, Queensland Government provides Sconi Prescribed Project status (ASX: 25 January 2019).

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1. The Queensland Government's conditional financial package for Sconi through the Jobs and Regional Growth Fund (subject to certain conditions)7 is still active,

1. Due diligence discussions with the Northern Australia Infrastructure Facility (NAIF) for potential Sconi project financing8 are also active and continuing. Australian Mines remains committed to providing the required project information to complete NAIF's due diligence,

1. Global debt and equity finance availability for high-quality nickel projects remains robust,

1. Australian Mines has executed a binding long form offtake agreement with leading battery manufacturer, LG Energy Solution, for 100% of the projected future production from the Sconi Project over its first six years,9

1. The Sconi Project is world class by scale, quality and ESG parameters,

1. Australian Mines owns 100% of the Sconi Nickel-Cobalt-Scandium Project and is fully funded until it secures project financing (on or before 30 June 2022) for construction of the Sconi Project,

1. The spot price of nickel on the London Metal Exchange (LME) is approaching 7-year highs (US$19,860/t) and cobalt is nearing 3-year highs (US$56,070/t)10 driven by surging demand,

1. The long-term demand outlook for ethically sourced nickel and cobalt materials continues to increase as the electric vehicle market rapidly expands and the transition to clean energy storage accelerates, and

1. Australian Mines Limited, Queensland Government offers support to Sconi Project (ASX: 15 July 2020).
2. Australian Mines Limited, Sconi Project in Due Diligence Phase for NAIF funding (ASX: 15 October 2018).
3. Australian Mines Limited, Binding offtake agreement with LG Energy Solution for supply of mixed nickel- cobalt hydroxide from the Sconi Project, Queensland (ASX: 16 August 2021).
4. Spot price of LME nickel and cobalt current as of 15 October 2021 (market close).

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1. The Company has achieved a strong track record of raising equity funds as and when required to further the exploration and evaluation of the Sconi Project.11

Australian Mines is seeking to move swiftly to finalise agreements with a range of project financiers including various export credit agencies (both Australian and international), green energy funds, commercial banks, mezzanine financiers, and international banks (for both debt and equity capital).

These negotiations will be the subject of Non-Disclosure (NDA) or Confidentiality Agreements (CA) as is normal practice. Australia Mines will provide updates to the ASX regarding the project financing, in accordance with the Company's continuous disclosure obligations and its commercial confidentiality restrictions.

Interest in financing the Sconi Project has been maintained since the publication of the Bankable Feasibility Studies in 201812 and 2019,13 and has always been contingent on Australian Mines entering into binding offtake agreement(s) for the supply of nickel and/or cobalt products. The binding offtake agreement with LG Energy Solution now provides a high level of project certainty in our financing negotiations.

Leadership on ESG

Australian Mines is the first mineral resources company to be certified under the Climate Active Program as a Carbon Neutral organisation.14

1. Australian Mines Limited, Successful Institutional Placement Raises A$6.5 Million (ASX: 28 July 2021); Australian Mines Limited, Institutional Placement Raises A$5.2 Million (ASX: 26 August 2020); Australian Mines Limited, Share Placement Raises $1.45 million (ASX: 14 April 2020); Australian Mines Limited, Australian Mines raises $5.8 million via oversubscribed Share Purchase Plan (ASX: 17 July 2019); Australian Mines Limited, Australian Mines secures funds to accelerate cobalt and nickel projects (ASX: 27 February 2019).
2. Australian Mines Limited, Bankable Feasibility Study supports strong commercial case for developing Sconi Cobalt-Nickel Scandium Project, located in North Queensland (ASX: 20 November 2018).
3. Australian Mines Limited, Sconi to generate $5 billion in free cashflow over 30-year mine life (ASX: 13 June 2019).
4. Australian Mines Limited, Australian Mines achieves industry first carbon neutral certification (ASX: 18 August 2020).

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