Element 25 : Scoping Study - HPMSM Conversion Plant Economics

The future has always been electric...

only								ASX ANNOUNCEMENT 18 JANUARY 2022
	Please note: This announcement must be read in the context of the Cautionary Statement on Page 3,
	the footnotes that accompany this announcement, and the attached Scoping Study Summary Report.
	Study Highlights a Low Operating Cost, Long-LifeHigh Purity Manganese Sulphate
	Project with Compelling Economics
	Element 25 Ltd (Element 25, Company or E25) - ASX:E25, is pleased to announce that
	a Scoping Study (Study) into the construction and operation of a High Purity
	Manganese Sulphate Monohydrate (HPMSM) plant has returned a robust set of
usefinancial metrics over a 20 year project life. The project is strongly leveraged to the
	emerging Electric Vehicle (EV) industry. EV's typically use lithium-ion batteries for energy
	storage and battery cathode materials contain HPMSM1.
	The Company is moving directly into a definitive Feasibility Study (FS) for the development of
	a High Purity Manganese Sulphate project and expects that study to be finalised in the second
	half of 2022.
	Highlights
	•	The Study returned a robust Net Present Value (NPV) with a healthy base case Internal Rate of Return (IRR).
	•	The Study used a life of project average High Purity Manganese Sulphate (HPMSM) price of US $1,950 (A $2,600) per tonne FOB
personal	and Fertiliser Grade Manganese Sulphate (FGMSM) price of US $900 (A $1,200) per tonne FOB.
The Study investigates three stages of development modelled on a southeast Asian site. The second and third stages are
	•
		scheduled for construction after completion of the previous stage.
	1https://www.moorestephens.com.au/MediaLibsAndFiles/media/australia.moorestephens.com/Images/Profile%20Photos%20(Contact%20boxes)%20110w%20x%2011
	0h%20px/Western%20Australia/Manganese-Moore-Stephens-Report.pdf
For
	COMPANY SNAPSHOT
	Market Summary		Board of Directors:		Element 25 Limited is developing the world class Butcherbird
	ASX code:	E25	Seamus Cornelius	Chairman	Manganese Project in Western Australia to produce high
	quality manganese concentrate and high purity manganese
	Shares on issue:	153M	Justin Brown	MD
	products for traditional and new energy markets.
	Share price:	$1.415	John Ribbons	NED

Element 25 Limited	P [phone]
element25.com.au	E [e-mail]

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Modest startup capital cost of approximately US $150M (A $200M) (including US $14M (A $19.0) contingency and US $24M (A $32M) working capital), employing a proprietary leaching and sulphate purification solution developed in-house.

Test work indicates an overall manganese recoveries of at least 85% which is the base-case assumption for the Study.

Life of project operating costs are projected to be approximately US $552/t HPMSM (A $736) or approximately 28% of assumed revenue per tonne HPMSM. Planned process optimisation test work will be conducted during the FS aimed at confirming metallurgical assumptions, improving metal recoveries and reducing energy usage.

The Study is based on manganese ore supplied from the Company's existing Butcherbird Manganese Project, (Project) which is based on a JORC (2012) Proved and Probable Reserve at Butcherbird of 55Mt @ 10.8% Manganese2. Refer the Table of Materials Assumptions.

The results of the Study confirm the Company's view that a HPMSM Project represents a long life, low operating cost opportunity to expand into the down-stream processing of ore from the Project to produce HPMSM, requiring modest capital in a stable jurisdiction with simple logistics and in a growing market.

The HPMSM Project is underpinned by the Company's 100% owned Project having a large upside potential due to the large resource base defined to date, which will support potential future expansions to larger scale operations.

Production cost reduction opportunities, including use of hybrid energy systems and use of alternative export ports, will be further investigated during more detailed studies.

E25 has sufficient funding, supported by forecast revenues from its existing production operations to progress through to a HPMSM Feasibility Study and subject to the outcomes of the studies, finance and develop the project as soon as possible.

The Company envisages a traditional debt-equity funding solution to be completed in 2023 post offtake finalisation. Equity will be sourced via cash reserves, future revenues from operation and/or the issue of new shares to raise further equity.

The plant will be designed with a focus on ESG principles including carbon minimisation, social engagement good corporate stewardship. Energy will be sourced from renewable where available in-line with the Company's' net-zero carbon strategy.

2 Reference: Company ASX release dated 31 September 2021.

Element 25 Limited	P [phone]	Page 2 of 25
element25.com.au	E [e-mail]

Cautionary Statements

onlyThe Scoping Study referred to in this announcement has been undertaken to evaluate the opportunity to expand the E25 manganese business vertically into the HPMSM market. It is a preliminary technical and economic study of the potential viability of the HPMSM Project. It is based on low level technical and economic assessments that are not sufficient to support the estimation of ore reserves. Further evaluation work and appropriate studies are required before E25 will be in a position to provide any assurance of an economic development case.

The production target referred to in this announcement is based on the purchase of manganese ores sourced from the Company's Butcherbird Manganese Project. The Project has a 40-year project life and is capable of supplying sufficient

usemanganese ore for the HPMSM project over a 20 year2 HPMSM project life.

The Scoping Study is based on the material assumptions outlined below. These include assumptions about the availability of funding. While E25 considers all of the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the Scoping Study will be achieved. To achieve the range of outcomes indicated in the Scoping Study, funding of in the order of A$200 million will

likely be required. Investors should note that there is no certainty that E25 will be able to raise that amount of funding personalwhen needed. It is also possible that such funding may only be available on terms that may be dilutive to or otherwise

ffect the value of E25's existing shares. It is also possible that E25 could pursue other 'value realisation' strategies such as a sale, partial sale or joint venture of the project. If it does, this could materially reduce E25's proportionate ownership of the project. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Scoping Study.

Forward Looking Statements

Some of the statements contained in this report are forward looking statements. Forward looking statements include, but are not limited to, statements concerning estimates of tonnages, expected costs, statements relating to the continued advancement of Element 25 Limited's projects and other statements that are not historical facts. When used in this report, and on other published information of Element 25 Limited, the words such as 'aim', 'could', 'estimate', 'expect', 'intend', 'may', 'potential', 'should' and similar expressions are forward looking statements.

Although Element 25 Limited believes that the expectations reflected in the forward-looking statements are reasonable, Forsuch statements involve risks and uncertainties and no assurance can be given that the actual results will be consistent

with these forward-looking statements. Various factors could cause actual results to differ from these forward-looking statements including the potential that Element 25 Limited's Project may experience technical, geological, metallurgical, mechanical problems, changes in manganese price and other risks not anticipated by Element 25 Limited.

Element 25 Limited reports this summary of the study in a fair and balanced way and believes that it has a reasonable basis for making the forward-looking statements in this announcement, including with respect to any mining of material, modifying factors, production targets and operating cost estimates. This announcement has been compiled by Element 25 Limited from the information provided by the various contributors to the announcement.

Element 25 Limited	P [phone]	Page 3 of 25
element25.com.au	E [e-mail]

Scoping Study Summary

onlyElement 25 Limited is pleased to announce that a Scoping Study (Study) into the construction and operation of a High Purity Manganese Sulphate Monohydrate (HPMSM) Plant (HPMSM Project) has returned a robust set of financial metrics over a 20 year project-life. The Project is strongly leveraged to the emerging Electric Vehicle/Battery industry. The Company is moving directly into a definitive Feasibility Study (FS) to further explore the commercial potential of this

pportunity. The Study assumes that the Project will be built in an industrial park located in southeast Asia, leveraging local low cost of power and the local supply of process reagents. A final site has not yet been determined and this will be

usefurther considered in the FS.

The HPMSM Project includes the construction of a HPMSM conversion plant as well as supporting administrative, packaging and laboratory facilities. The site will most likely be located on an industrial park, near a deep sea, bulk cargo port and will most likely have established water, power and communications facilities.

E25 is investigating several such locations in southeast Asia and a final decision on the location has yet to be reached. personalThe Project is 100% owned and E25 will likely establish a local company in the destination country to manage local

ownership. Manganese ore will be sourced from the Project.

The Study examines the macro-economic inputs, operational and capital cost parameters and contemplates the progressive expansion of production at the Project. These inputs include:

• Staging of HPMSM production in 3 x 50,000tpa HPMSM increments;
• Manganese recovery of 85%;
• Exchange rate 0.75 A $/US$;
• Startup Capital expenditure of US $150M
• Local workforce; and
• Operational costs based on local supply of personnel, power, reagents and consumables.

ForThe results confirm that the project exhibits robust economics for a base case 50,000 tpa HPMSM and that the economics are improved by expanding production beyond the base case. Economies of scale result in better equipment and overhead utilisation and minor operating efficiencies which improve project economics.

Element 25 Limited	P [phone]	Page 4 of 25
element25.com.au	E [e-mail]

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Table 1: HPMSM Project Financial Summary
		Key Economic Metrics	Unit	50 ktpa	100 ktpa	150 ktpa
				HPMSM	HPMSM	HPMSM
	Ore Purchased	ktpa	78.4	156.8	235.3
	Operating Manganese Sulphate Trains	Units	1	2	3
use	HPMSM Produced	ktpa	50.0	100.0	150.0
FGMSM Produced	ktpa	16.6	33.2	49.9
HPMSM Price Received	US$/t MnSO4	1,950	1,950	1,950
FGMSM Price Received	US$/t MnSO4	900	900	900
Undiscounted Cashflow	US$M pa	73	141	205
Project Life		Years	20	20	20
NPV8 Real (Pre Tax)		US$M	439	890	1,275
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NPV8 Real (Post tax)		US$M	395	801	1,142
	IRR (Pre-tax)		%	40	45	47
	Simple Payback	Months	26	24	19
	Operating Cost	US$/t MnSO4	573	558	552
	Capital Cost (incremental capital cost)	US$ M	150	+86	+86

Key Outcomes of Base Case

This Study includes estimated production schedules and metallurgical testing relevant to the processing of HPMSM processing and recovery. Capital costs were based on preliminary engineering designs and industry sourced quotations provided by technical experts within E25 and by external consultants. Operating costs were derived from first principals with labour costs sourced from published data for factories in southeast Asia ore haulage and camp facilities, other operational costs were sourced from industry quotations and database costs and are considered to be at a ±30-40% level of estimation. Ore supply is based on the internal sale at cost of manganese ores from the Project.

ForThe study base case for the Study comprises:

• Development of a staged High Purity Manganese Sulphate Monohydrate processing circuit in southeast Asia. Each circuit producing 66,650t MnSO4 per annum (75% HPMSM and 25% FGMSM)
• Manganese lump concentrate purchased from the Project and transported to a Port in southeast Asia, at an average grade of 32% Mn per annum.

Element 25 Limited	P [phone]	Page 5 of 25
element25.com.au	E [e-mail]