Australian Strategic Materials : Dubbo Project Optimisation Delivers Strong Financials

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ASX Announcement

Release Date: 7 December 2021

Dubbo Project Optimisation Delivers Strong Financials

Key Points

• Optimisation Work for Dubbo Project confirms a strong expected rate of return with pre-tax NPV of AUD 2,361 million, pre-tax IRR of 23.5%, and annual free cash flow (full ramp up) of AUD 425 million
• Capital cost estimate of AUD 1,678 million consisting of direct capital of AUD 1,307 million, indirect capital of AUD 208 million, and a contingency of AUD 163 million
• Forecast annual operating cost of AUD 287 million
• Forecast based on 20-year life of mine at 1Mtpa plant feed rate based on existing ore reserves. Measured and Inferred mineral resources, which have the potential to extend the mine life, have been excluded for this study
• Oxides of zirconium, hafnium, niobium, didymium (i.e.: neodymium and praseodymium), dysprosium and terbium to be produced
• Inclusion of major infrastructure to optimise environmental, social and governance (ESG) performance and deliver operating cost savings

Australian Strategic Materials Ltd (ASX: ASM or the Company) is pleased to confirm strong financial results as an outcome of the Optimisation Study and Enhanced Project Addendum (Optimisation Work) for the Dubbo Project (Dubbo Project). The Optimisation Study was based on Alkane Resources Ltd's optimisation study released to the market in 2018 (ALK: ASX Release 4 June 18 Dubbo Project Engineering and Financials Update) (2018 ASX Release). A summary of the outcomes of the Optimisation Work is included at the end of this announcement entitled Dubbo Project: Project Summary (Project Summary).

The revised financials are based only on the initial ore reserve of 18.9 Mt. Substantial additional measured and inferred mineral resources beneath the ore reserve are excluded from this study.

The Optimisation Work simplifies the Dubbo Project process flow sheet and incorporates new operating strategies that will reduce operating costs and improve the ESG performance of the Dubbo Project. These strategies now include increasing the brine concentrator capacity (halving water consumption), refurbishment of the railway line (which simplifies project logistics and will provide new categories of local entry level jobs) and development of a chlor-alkali plant (which reduces the cost of reagents and their handling and transportation). These strategies facilitate ESG benefits by reducing water consumption, reducing the handling and quantum of process chemicals, and reducing the number of trucks on local roads, required for the Dubbo Project.

T: [phone]	Level 4, 66 Kings Park Road, West Perth WA 6005	asm-au.com
[e-mail]	PO Box 768, West Perth WA 6872	ABN: 90 168 368 401

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The updated Dubbo Project base case for the 20-year life of mine is expected to achieve a pre-tax NPV of AUD 2,361 million and a pre-tax project internal rate of return of 23.5%. This is a pre-tax IRR improvement of 6.0% compared to the 2018 ASX Release.

The forecast financial outcomes from Optimisation Work are compared with those from the 2018 ASX Release in Table 1 (see Section 11 of the Project Summary for further details on financial information and key assumptions).

Table 1: Forecast Financial Outcomes (in Aud)

Key Outputs	2018 ASX Release	Optimisation Study Go
	(20 Years)	Forward Case
		2021 (20 Years)
Gross Revenue	12,768	15,802
Total undiscounted pre-tax Free	4,656	7,442
Cash Flow
Annual Free Cash Flow (full ramp	323	425
up)
Pre-tax Project IRR %	17.5%	23.5%
Post-tax Project IRR %	Not released	20.1%
Pre-Tax NPV	1,236	2,361
Post-tax NPV	Not released	1,581
	Assumptions unchanged: Exchange	Rate (A$:US$) - 0.75; Discount
	Rate (real, post-tax %p.a.) 8.0%; Corporate Tax Rate (%) - 30%

The capital cost estimate from the Optimisation Work is AUD 1,678 million compared to AUD 1,297 in the 2018 ASX release. Key drivers of the increased capital costs from the 2018 ASX Release include refinements in the design and updating of the pricing of the dehafniated zirconia solvent extraction plant (AUD 87 million), inclusion of a chlor-alkali plant (AUD 65 million), Brine Concentrator capacity upgrade (AUD 30 million), and owners contingency (AUD 163 million). These inclusions have the effect of reducing the forecast annual operating expenditure from AUD 317 million to AUD 287 million (an annual average saving of AUD 40 million) and have improved the ESG performance of the Dubbo Project.

The cost estimates from the Optimisation Work are compared with those from the 2018 ASX Release in Table 2 (see Section 11 of the Project Summary for further information on capital and operating cost estimates).

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Table 2: Capital and Operating Cost Estimates

		2018 ASX Release (20		Optimisation Study Go
	Description of Cost	Years)		Forward Case
				2021 (20 Years)
		AUD M		AUD M
	Mining, Crushing and grinding	28		44
	Roasting & Leaching	17		34
	Solvent extraction, product refining and	329		342
	finishing
	De-Hafniated Zirconia SX	30		117
	Waste treatment (Incl. SRSF, Filtration,	161		215
	Brine Conc)
	Reagents, Water, SAP, Chlor Alkali	197		250
	Electricity	77		117
	Site Wide Infrastructure	98		116
	Offsite Infrastructure	72		72
	EPCM	90		104
	Temp Construction Facilities	24		27
	Spares & First Fills	26		27
	Owner's costs and provisions	45		50
	Contingency	103		163
	Total Capital Expenditure	1,297		1,678
	Average annual operating expenditure	317		287
	Estimate

An independent review completed by consultants, Mining One Pty Ltd, has confirmed proven Ore Reserves estimate of 18.9 Mt. The Mineral Resource estimate for the Dubbo Project is 75.2 Mt of 42.8 Mt Measured and 32.4 Mt Inferred is unchanged.

The Dubbo Project has been optimised to produce neodymium, praseodymium, zirconium, hafnium, dysprosium, terbium and niobium oxides that can all be refined into high-purity alloys, metals and powders at ASM's metals plants.

ASM Managing Director, David Woodall, said:

"I am delighted with the outcomes of the Optimisation Work which demonstrates the financial strength of the Dubbo Project and ASM's focus on a sustainable future delivering improved performance and ESG outcomes.

The Optimisation Work supports a strong go forward case and is an exciting development for ASM, our partners and shareholders.

The Optimisation Work confirms we have a project that can integrate into our metals business to create an alternate, sustainable, secure and stable long-term supply of critical metals and oxides. This places ASM in an exceptional position in the critical metals value chain, as the vertically integrated owner of a globally significant polymetallic resource in Dubbo, and the capability to produce critical metals from this resource to the highest environmental standards.

These exciting outcomes allow the ASM team to focus on progressing the financing, engineering, and construction strategy, and to secure offtake agreements for the integrated metals business.

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ASM is making good progress on these matters. In particular, with the financing of the Dubbo Project through the conditional Framework Agreement with the consortium of Korean private equity firms and the letter of support from Export Finance Australia."

--- ENDS ---
FOR MORE INFORMATION PLEASE CONTACT:
Investors	Media
David Woodall	Paul Ryan
Managing Director, ASM Ltd	Citadel-MAGNUS
[phone]	[phone]
	[e-mail]

This document has been authorised for release to the market by David Woodall, Managing Director.

ABOUT AUSTRALIAN STRATEGIC MATERIALS - www.asm-au.com

Australian Strategic Materials Ltd (ASM) is an integrated materials business and emerging "mine to metal" producer of critical metals. The company's cornerstone Dubbo Project (100% owned) is a potential long-term resource of rare earths, zirconium, niobium, and hafnium located in central western NSW, Australia. It represents an alternative, sustainable and secure source of these metals, which are critical for a diverse range of advanced and clean technologies.

ASM's metals business is founded on an innovative metallisation process that converts oxides into high-purity metals, alloys, and powders using less energy than conventional methods. The pilot plant in South Korea has proven the commercial scalability of the process and successfully produced a range of high-purity metals and alloys, including titanium, neodymium, praseodymium, dysprosium, and zirconium. Following this success, ASM's first metallisation plant is being constructed in South Korea to initially supply a range of critical metals including rare earths, zirconium, and titanium.

IMPORTANT INFORMATION

Please refer to pages 6 - 8 of the Optimisation Study Report for important information in relation to this announcement.

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Dubbo Project:

Project Summary

Current as of 7 December 2021

T: [phone]	Level 4, 66 Kings Park Road, West Perth WA 6005	asm-au.com
[e-mail]	PO Box 768, West Perth WA 6872	ABN: 90 168 368 401