AVZ Minerals : Quarterly Report

Activities Report for the Quarter

ending 31 March 2020

Highlights

• MOU signed with Congolese Government to create a Special Economic Zone in Manono, Tanganyika Province, DRC
• MOU signed wih Ministry of Hydraulic Resources and Energy to invesigate refurbishing the Mpiana-Mwangahydro-electric power station on Luvua River
• Roche Pit dewatering completed and transport routes determined, with final costs included in the Definitive Feasibility Study
• Completed $A3.6M placement from existing strategic shareholder, Lithium Plus, and other sophisticated and professional investors, including a global institutional investor subsequent to end of March 2020 Quarter
• Senior management visited Yibin Tianyi's lithium chemical plant in China to commence discussions on a binding offtake agreement for Manono lithium products
• Phase 2 metallurgical test work (Dense Media Separation and Flotation) was completed with exceptional lithia recovery achieved and concentrate grades all above the Company's target of 6% Li2O spodumene concentrate ("SC6")
• Positive heavy mineral tin and tantalum was also recovered as part of the Phase 2 flotation test work
• Subsequent to the end of the March 2020 Quarter, AVZ released its Definitive Feasibility Study for its Manono Lithium and Tin Project1 which showed:
  o US$2,348M2 pre-taxNPV10 and US$1,028M2 post-taxNPV10 o Internal Rate of Return of 53% (pre-tax)2 and 33% (post-tax)2
  o Net Profit After Tax - Life of Mine of US$3,779M2
  o Payback period of 1.5 years (pre-tax) and 2.25 years (post tax)

ASX ANNOUNCEMENT

30 April 2020

AVZ Minerals Limited

Level 2, 8 Colin Street,

West Perth WA 6005

Australia

T: + 61 8 6117 9397

F: + 61 8 6118 2106

E: [e-mail] W: www.avzminerals.com

ABN 81 125 176 703

Directors

Non-Executive Chairman: John Clarke

Managing Director: Nigel Ferguson

Technical Director: Graeme Johnston

Non-Executive Director: Rhett Brans

Non-Executive Director: Peter Huljich

Non-Executive Director: Hongliang Chen

Market Cap

$140 M

ASX Code: AVZ

1. The Ore Reserves contains 44.6 Mt of Proved Category and 48.5 Mt of Probable category Ore Reserves

1. Life of Mine beyond 20 years based on a 4.5 Mt/a operation under pinned by the Ore Reseves

1. Conventional open pit minng with low ore waste strip ratio of 1:0.48

1. LOM lithia recoveries of 60% using only conventional DMS

1. CAPEX of US$545.5 M including a contingency of US$49.59 M (10%)

1. US$380 M average EBITDA for LOM

1. Two transport routes solution at US$229 per tonne3 cost to Lobito port and US$275 per tonne3 cost to Dar es Salaam port

1. 20-yearmine life producing 700,000 tonnes per annum high grade of SC6 lithium4 and 43,375 tonnes per annum of Primary Lithium Sulphate

1. Pre-productioncapital expenditure of US$545.5 M includes transport upgrade and rehabilitation of the Mpiana Mwanga Hydroelectric Power Plant

1. Initial project development works already advancing including construction of the initial camp Colline

1. Refer ASX Announcement dated 21 April 2020 "AVZ delivers highly positive Definitive Feasibility Study for Manono Lithium and Tin Project". Please refer to the Cautionary Statement and Forward Looking Statements in relation to the Definitive Feasibility Study results. AVZ confirms that all the material assumptions underpinning the production target, or the forecast financial information derived from a production target, in the initial public report referred to continue to apply and have not materially changed.
2. Based on 100% of project interest. AVZ holds 60% of the project with an option to increase to 65%
3. Based on dry bulk delivery and containerised transport respectively
4. 700 kt/a of SC6 produced, with 153 kt/a used as feed stock for lithium sulphate process plant

AVZ Minerals Limited (ASX: AVZ, "the Company") is pleased to provide the following report on its activities for the Quarter ended 31 March 2020.

AVZ Managing Director, Mr. Nigel Ferguson said: "The March quarter proved an incredibly busy and important three months which culminated with last week's much-anticipatedrelease of the Company's Definitive Feasibility Study for the Manono Lithium and Tin Project ("Manono Project").

I want to thank all of our Project team - in the DRC, in Perth and all around the globe - who have contributed to the final DFS document.

It proves the Manono Project is robust, with strong financial metrics based on a substantial ore body capable of extending the Life of Mine well past its current 20 years, as modelled.

It also shows we have a robust, workable transport solution for delivery of products to the export ports and a clear plan to work with the community for social development and environmental compliance.

We are disappointed with last week's outcome of Yibin Tianyi's FIRB application process but, can I assure all our shareholders, we will now double down on our efforts and commitment to bring this world-class project into production. Yibin Tinayi are in continued discussions with AVZ about structuring the intended investment and a solution is being worked on.

1. am also confident of securing the necessary short-term funding, as well as the longer-term debt and equity finance that will be required to deliver on the Company's aspirations of being a producer of lithium products from the Manono Project.

I look forward to keeping all our shareholders up-to-date with respect to offtake agreements, financing and a decision to mine."

Special Economic Zone

In February, the Company executed a Memorandum of Understanding ("MOU") with the Ministry of Industry for the development of a Special Economic Zone ("SEZ") in Manono, located in the Tanganyika Province in the Democratic Republic of Congo.

In essence, an SEZ provides for an "investor to enjoy exemptions or reductions, either permanently or temporarily, in a degressive or non-degressive manager, with or without the possibility of renewal or extension, on direct or indirect taxes, domestic duties and taxes, national, provincial and municipal royalties, import or export duties payable in the Democratic Republic of Congo".

As the developer of the SEZ, AVZ would be eligible to additional benefits from the Congolese Government as opposed to being purely an investor in the SEZ. AVZ intends to secure the services of a suitably qualified managed to run the SEZ under contract, which will be a joint venture between the Government, a financier, a manager and AVZ.

Figure 1: Members of AVZ and Dathcom's Management team and Government Officials in Kinshasa, DRC. Left to

Right: Mr Christian Lukusa; Mr Serge Ngandu; Mr Balthazar Tshiseke representing AVZ and Dathcom and then Honourable Mr Julien Paluku, His Excellency the Minister of Industry; Mr Alexy Kayebe, The Infrastructure Presidential Special Advisor; Mr Jean Dieudonné KAVESE, the Chief of Staff of the Ministry of Industry and Mr Auguy Boland a, Chargé de mission of the Special Economic Zone Agency

AVZ Power

In early January, the Company also signed a Memorandum of Understanding with the Democratic Republic of the Congo's Ministry of Hydraulic Resources and Energy to investigate refurbishment of the Mpiana Mwanga hydro-electric power station on the Luvua River and associated power grids in the Manono Territory.

The Mpiana Mwanga hydro-electric power station is located about 85km east-south-east of the proposed Manono mine site. It was originally built in 1933 to service the historic tin mine but closed in 1982 when operations ceased.

At present, power is generated at the Manono town site using diesel generators and a recently commissioned 1.5Mw solar power system, while at AVZ's camp it is powered by a smaller 20Kva solar system with a diesel-poweredback-up generator. Based on a positive outcome of the feasibility studies into re-commissioning the power station, it is AVZ Powers' intention to acquire from the DRC Government a long-term, 100% exclusive lease to rehabilitate the Mpiana Mwanga hydro-electric power station.

It is estimated up to approximately ~54KMw of electricity can be generated from the rehabilitated power station - sufficient to power the Manono town site and AVZ's nearby mining camp, as well as associated infrastructure and any future expansion of the mine site, including a 25Ktpa hydroxide plant. Ultimately, the electricity generated from the power station could be used for operating all AVZ's mining equipment, making the Manono Project a 100% 'green' mine, as well as providing sufficient electricity to power the entire Manono town site and rehabilitate the associated power grids in the Manono Territory.

Figures 2-5: The Mpiana-Mwangahydro-electric power station on the Luvua River

Roche Dure dewatering program

In early February, pit dewatering at Roche Dure was completed which now gives the Company the opportunity to undertake further infill drilling of material underneath the pit that could not be accessed while the pit was flooded.

Figures 6-7: The floor of the Roche Dure pit, post dewatering