Ann: Annual Report to shareholders, page-123

Hi JD,

Thanks for your post, it has filled a hole in my understanding of the processes. Have I got it right in thinking you monitor the output product to ensure that the output grade is as required, and that to do that you have flexibility to change numerous variables, such that you can increase grade by adapting the mixtures and energy usage, in effect making your process more efficient relative to the % recovery (say taking 90% recovery to 95%) at the cost of increased input / energy costs?

I have looked at the cobalt ore grade (average 0.07%), and am interested in knowing how that grade is increased to 0.11%, to give SKI their 12000 tons of cobalt sulphate per year. Do you need to mix some higher grade ore with the 0.07% grade to do that. For example, could you have a mixture of about 50% of 0.07% grade and 50% of 0.15% grade to get the required 0.11% grade?

My understanding is that if that is done for the first 7 years of the project, the average grade of the deposit that is left, will only be about 0.054%. Would there be sufficient (say 0.16% grade) left to add to that to provide SKI with the same 12000 tons per year cobalt sulphate for the next 6 years? Whilst there seems to be sufficient Nickel to last 20 years, I am concerned that before then the cobalt will have been depleted to such an extent that we will basically be a Nickel (and possibly Scandium) producer only, and that SKI will have to look elsewhere for Cobalt.

Of course, all this could change if we were to find more substantial deposits of Cobalt.

Please note that I am looking to become a holder, but need answers to my DD questions and notwithstanding, will probably wait for upgrade announcements before getting in. I currently have a large holding in a neighboring venture, and want to diversify my Sc, Co, and Ni holdings.

Any assistance would be much appreciated.