Lepidico : Quarterly Activities/Appendix 5B Cash Flow Report

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ASX: LPD

QUARTERLY ACTIVITIES REPORT

for the period ending 30 June 2022

(All figures are unaudited and in A$ unless stated otherwise)

Key Points

Development

• Karibib Phase 1 concentrator Front End Engineering and Design (FEED) revisions completed that support both improved operability and a capital efficient doubling in throughput, with inputs established for the Phase 2 Scoping Study
• Phase 1 chemical plant Process Design Criteria (PDC) finalised, which incorporates design improvements based on operating data from demonstration plant pilot campaigns, engineering risk assessments and third-party major mechanical equipment vendor testwork; control estimate well advanced and targeted for mid-August with FEED complete September
• LOH-Max® raw lithium hydroxide and by-product pilot campaigns completed; final stage lithium hydroxide refining to complete imminently
• Non-processinfrastructure development at KIZAD chemical plant site well advanced; architectural design of non-process buildings has started, design of the process buildings to start on completion of FEED
• Major supply and construction contracts, which are not on the critical path are advancing as per schedule; commercial green hydrogen supply now expected in 2025-'26 at KIZAD
• Helikon 4 infill drilling returns broad intercepts of lepidolite mineralisation, including 40 m @ 1.08% Li2O and 20 m @ 1.16% Li2O; weighted average intercept grade of 0.60% Li2O from new drilling versus the Helikon 4 Inferred Resource grade of 0.38% Li2O; revised Mineral Resource estimate due September 2022 to inform Phase 2 Scoping Study
• Further drilling planned at Helikon 2, 3 and 4 to follow up on these excellent results

Products & Marketing

• Commercial negotiations well advanced with Tier 1 consumers for lithium hydroxide supply under the binding Traxys agreement for 100% of annual Phase 1 production for seven years
• Caesium supply negotiations well advanced with growing interest for both sulphate and hydroxide
• LOIs signed with UAE customers for 100% of annual production of all Phase 1 bulk products: amorphous silica, Sulphate of Potash (SOP) and gypsum residue; for zero solid process waste

Corporate and Finance

• Well-fundedwith cash and equivalents as at 30 June 2022 of $8.0 million and no debt
• Executive team expanded with General Manager Sustainability & Country Affairs Namibia starting during the quarter; recruitment of two General Manager Operations, one for Namibia and the other for the UAE, and Project Director completed with all positions due to commence during the September quarter
• Updated Letter of Interest and term sheet from U.S. International Development Finance Corp. (DFC) provided with legal due diligence to commence incorporating commercial lender input

OVERVIEW & OUTLOOK

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Lepidico has a zero-harm track record since health and safety incident reporting began in September 2016. COVID-19 restrictions have been lifted across the Group with local protocols being followed in all jurisdictions. Dedicated commercial offices space is now being sought in Perth and Toronto, with flexible work plans supported in all business locations. Normal business travel has resumed.

Recruitment of three high-calibre Executives during the quarter will see Lepidico's leadership team double in size by September from the beginning of the year. Key functions of General Manager (GM) Sustainability & Country Affairs and GM Operations UAE have been on-boarded.On-boarding of the Project Director has started for full time appointment 1 September 2022. On-boarding of the GM Operations Namibia will start 1 August 2022. Lycopodium Minerals Pty Ltd (Lycopodium) has made considerable progress under the two EPCM contracts for the Namibia concentrator and Abu Dhabi chemical conversion plant, with limited Stage 2 implementation works started for the concentrator and chemical plant FEED close to completion. Lithium chemical supply-demand fundamentals remain strong, with several commentators including U.S. Government Departments1 forecasting demand to exceed 3.0 million tonnes LCE (Lithium Carbonate Equivalent) by 2030. Lithium chemical prices have also remained buoyant at US$60,000-65,000/t.

• Select revisions to Karibib concentrator FEED completed in parallel with Board approved limited Stage 2 EPCM works, which includes completion of the HAZOP. Control estimate to be finalised on completion of chemical plant estimate scheduled for mid-August 2022.
• Chemical plant PDC updated to incorporate major equipment vendor testwork results. No further material revisions are expected with the control estimate and schedule now due mid-August. A Final Investment Decision (FID) continues to be targeted for September.
• Letter of support received from the Ministry of Agriculture, Water & Land Reform for ongoing Phase 1 Karibib exploration and development works; formal land lease agreement pending.
• Negotiations well advanced for supply of Phase 1 lithium hydroxide to EV supply-chain end consumers, under the binding Lepidico-Traxys offtake agreement signed in December 2021 for 100% of annual production over the first 7 years. Customers are awaiting demo-plant samples.
• Caesium chemical supply negotiations advancing well with customer demand exceeding annual Phase 1 production, ahead of an envisaged significant supply deficit emerging later this year.
• Offtake LOIs signed with local UAE groups that exceed annual Phase 1 production for amorphous silica, SOP fertilizer and gypsum. Size samples of all products have been provided for customer testing and supply agreement negotiations have commenced. The silica and gypsum products are being evaluated for both construction and agricultural applications.
• Demonstration plant pilot operations continued through the quarter, with bulk by-product manufacture completed in June. Use of a contaminated reagent delayed bulk lithium hydroxide refining which resumed in July, with new samples being manufactured at the time of writing. Raw caesium sulphate production complete. The caesium refining pilot circuit is now being constructed for operation in August. Two of four final campaign reports have been provided to lenders.
• Updated Letter of Interest received from DFC with technical due diligence scheduled to conclude following review of demo-plant pilot reports and control estimates. Engagement with commercial lenders continues with the objective of a September 2022 FID.
• Highly capital efficient expansion of the Karibib concentrator has been identified under the Phase 2 Project Scoping Study, with capital estimate due in August.
• Phase 2 now contemplates lithium mica concentrates sourced from third-party deposits as well as Karibib, following unsolicited inbound enquiry from the operators of four lepidolite rich assets.
• Lepidico working collaboratively with third-parties to fast-track studies via sharing of concentrator design, with the objective of developing a global market for lithium mica concentrates.

1 Benchmark Mineral Intelligence Battery Gigafactory Forum, Washington, 23-24 June 2022

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DEVELOPMENT

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Chemical Conversion Plant (100%), Abu Dhabi

In April, Hans Daniels was appointed as General Manager Operations UAE. He started with Lepidico in early July 2022. Hans brings a great breadth and depth of experience from his plus 30 years working in the chemicals industry, much of it in the UAE, where he has established and developed new chemicals businesses. As GM Operations for the region, Hans will lead the implementation and operation of Lepidico's Phase 1 chemicals process facility - which employs the Company's proprietary process technologies - being developed within the Khalifa Industrial Zone Abu Dhabi (KIZAD),

As previously advised, Lycopodium and Strategic Metallurgy collaborated on the chemical plant flowsheet which was finalised in April 2022 incorporating demonstration plant pilot campaign results and allowing a milestone version of the PDC to be developed. Further refinements were made to the PDC on receipt of critical mechanical equipment vendor development testwork in June, which allowed the specifications of the filters, crystallisers and regrind mill to be finalised. This in turn allowed Lycopodium to start work on the engineering and design for the installation of these units, with the draft control estimate and implementation schedule on track for mid-August 2022. Limited vendor testwork continues that is confirmatory (non-critical) and thereby not on the FEED critical path. The PDC will however, continue to be a live document throughout the detailed design phase and thereby take account of all confirmatory testwork.

The chemical plant site layout was completed last quarter (Figure 1). Subsequently Abu Dhabi Ports (ADP) has approved the pre-development plan, which includes the general site layout, land allocation, connections to utilities and traffic management. All utilities to the KIZAD site are planned to be available in the March 2023 quarter, aside from natural gas which is scheduled for late 2023. Early indications are that commercial green hydrogen will become available at KIZAD by 2026 and possibly as early as late 2024.

Figure 1: KIZAD chemical plant schematic based on latest FEED

Lycopodium is now well advanced in finalising the chemical plant layout detail in collaboration with the non-process infrastructure engineer, Bilfinger Tebodin, in Abu Dhabi. Architectural designs for the six

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non-process buildings are advancing well, with layout and design complete for several structures. Designs for the six process buildings will start once the layout detail is locked down. Design of the gas regulation station is also underway as is the fire safety study, approval of which is on the implementation critical path.

By way of background, the Phase 1 Chemical Conversion Plant is largely permitted with the key environmental approval to construct granted. The Musataha lease agreement was signed in October 2021 with ADP and the final staged deposit was paid during the quarter. The Musataha agreement secures the 57,000m2 site for the Phase 1 chemical plant for an initial term of 25 years. The site is located within KIZAD, a major industrial free zone, which allows full foreign business ownership as well as tax exemptions on imports and exports. Under the Musataha Agreement the off-site infrastructure is being delivered by ADP (the parent company of KIZAD) to the site boundary, which includes natural gas, 11kV power, potable water, sewer services, access roads and drainage. Khalifa Port, the deep-water container terminal where concentrate from Walvis Bay, Namibia will be imported is just 15km by road from the plant site.

Phase 1 represents a unique opportunity globally for production of the strategic metals: caesium and rubidium, for which the United States is 100% reliant on imports. Furthermore, lithium, caesium, and rubidium, the main Phase 1 products, are all on the U.S. Government list of Critical Minerals, making Lepidico's technologies and the Phase 1 chemical plant strategically significant.

Karibib Project (80%), Namibia

In April, Timotheus (Timo) Ipangelwa was appointed as GM Operations Namibia. He will start with Lepidico in early August. Timo has 16 years' experience as a Mining Engineer working at both large and medium scale open pit operations. As GM Operations for Lepidico in Namibia, Timo will lead the re-development of the two open pit mines at Rubicon and Helikon, as well as the implementation and operation of Lepidico's Phase 1 mineral concentrator for the Karibib Project.

A review of major equipment vendors led to a change in supplier being recommended for the flotation cells, which in turn necessitated some redesign works. Some modifications were also introduced into the crusher and concentrate bagging areas (Figure 2). The revised FEED was finalised in June with no material impact to the control estimate but an improved risk position for implementation and operations. The control schedule will be finalised in August along with that for the chemical plant.

Figure 2: Karibib concentrator schematic based on latest FEED

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Limited Stage 2 EPCM detailed design works progressed for most areas of the concentrator, as approved by the Lepidico Board in February.

An Ore Reserve review was completed by AMDAD based on a first principles revision to operating costs for the integrated project, updated physicals that incorporates all process testwork since completion of the Definitive Feasibility Study (DFS) in May 2020 and Benchmark Mineral Intelligence latest lithium hydroxide price forecast. The re-optimisation confirmed the pit stages assumed in the DFS and therefore the pit designs remain in good standing. A modest increase in life of mine ore tonnes at slightly lower grade is implied, subject to further evaluation. This is consistent with the higher lithium price more than offsetting the effect of inflation on operating costs.

Karibib is fully permitted for the re-development of two open pit mines at Rubicon and Helikon 1, which will feed lithium mica ore to a central mineral concentrator adjacent to Rubicon that employs conventional flotation technology. Major awarded Project permits include the Mining Licence (ML204), water extraction permit, Environmental Compliance Certificate (ECC), Accessory Works Permit and a separate ECC awarded for the overhead power transmission line.

Site works at Karibib are scheduled to start once finance is secured. A considerable tonnage of high- grade in-situ lepidolite mineralisation is exposed at surface at Rubicon with minimal requirement for mining of waste. As such ore mining is not on the critical path and will start just ahead of concentrator commissioning.

Sustainability

As previously advised, in April Benedicta Uris joined Lepidico as General Manager Sustainability & Country Affairs Namibia. A comprehensive mapping and gap assessment of IFC, World Bank, DFC and IRMA standards/requirements versus Phase 1 ESIAs and the Karibib ESMP (Environment and Social Management Plan) has been completed. The results have been shared with DFC and policy/standard development is well advanced to meet finance requirements, which includes an Environment and Social Action Plan.

Lepidico Chemicals Namibia is also well advanced on an updated stakeholder engagement plan, which is scheduled for completion in late July along with associated procedures.

Two notable corporate social responsibility initiatives were undertaken during the quarter. A business registration and entrepreneurship workshop for women and youth was held in the town of Otjimbingwe. The workshop was attended by recipients of existing Lepidico micro-finance projects as well as 23 women and youths who showed keen interest in starting micro-businesses. Secondly, supporting information has been received from the Ministry of Health and Social Services for a new maternity space at the Otjimbingwe clinic to allow a funding proposal to be completed, with implementation planned for the 2023 fiscal year.

Fire and water trailers have been acquired for the Karibib Operations to service the site and local farmer community, where there have been instances of scrub fires. In June a scrub fire was started just outside the Mining Lease and EPL area by a grader contracted by Lepidico to develop fire breaks along access roads to site. The fire was brought under control with no injury or impacts to local farmer livestock. The incident has been investigated and revisions to procedures implemented to prevent a recurrence. Scrub fires remain a significant risk during dry seasons that follow higher rainfall wet seasons such as occurred in 2021-'22.

Australian not for profit organisation, ellect2, helps companies achieve diversity, equity and inclusion in their business as part of their ESG goals. ellect has completed gender equality ratings for all ASX listed companies, with Lepidico having a score in the top 5% based on its Board and key management composition.

2 www.ellect.biz

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