Ann: Zero-Spin Silicon Project Completes Key Milestone, page-5

1| P a g eSilex Systems Limited | ABN 69 003 372 067LHSTC, New Illawarra Road, Lucas Heights NSW 2234Telephone: +61 2 9704 8888 | Facsimile: +61 2 9704 8851 | Website: www.silex.com.auZero-Spin Silicon Project Completes Key Milestone19January 2021Highlights:•Successfully completedakey milestone to validate commercial synthesisoffeed material for the Zero-Spin Silicon (ZS-Si) laser enrichment process•Represents an important milestone in the second stage of the project involving design, construction and operation of scaled-up prototype equipment for ZS-Si•ZS-Si isakey enabling material for the next generation of processor chips to power silicon quantum computers•Project completion involvesthe commissioning and operation of a ZS-Si pilot production facility by the end of CY2022 •Project supported by collaboration partners SQC and UNSW, withfunding from the Federal Government’s Cooperative Research Centres Projects Silex Systems Limited (Silex) (ASX: SLX) (OTCQX: SILXY) is pleased to announce the successful completion of another key milestonein itsproject to develop a process for the commercial production of high-purity ‘Zero-Spin Silicon’ (ZS-Si),using a variant of the SILEX laser isotope separation (LIS) technology. This project is being undertaken in conjunction with project partnersSilicon Quantum Computing Pty Ltd (SQC) and UNSW Sydney(UNSW).The Silex LIStechnology has the potential to produce ZS-Si efficiently and at scale to provide a secure supply of this key enabling material for theemergingsilicon quantum computingmarket with initial salestargeted in2023. The three-year project is scheduled to be completed at the end of CY2022 with the commissioning of a commercial pilot production plant, from which the initial output will be sold to SQC under a previously announced offtake agreement.Dr Michael Goldsworthy, Silex CEO said: “We launched this project in December 2019, as part of our strategy to commercialise the SILEX technology across multiple markets. We are currently targeting two key global industries with our core SILEX technology, being the nuclear fuel industry and the emerging quantum computing industry.”“This milestonerepresents an important achievement in the ZS-Si project, to develop ascalable and cost-effectivetechnique to synthesize chemically purefeed material for the ZS-Si laser enrichment process.”For personal use only

2| P a g e“There are no reports currently of the feed material being usedin any other field anditis not commercially available, which we anticipate will further strengthenthe project IP,” he added. The work involved optimising the synthesis process for the feed material, to validate that it can be safely scaled-up to meet industrial production levels, while at the same timeensuringchemical purity and acceptable costs. ZS-Si is a unique form of isotopically enriched silicon required for the fabrication of next-generation processor chips which will power silicon-based quantum computers. Quantum computers are expected to be thousands of times more powerful than the most advanced conventional computers in operationtoday, creatingopportunities in severalindustries, including medicine, artificial intelligence, cybersecurity,and financial systems. Many governments around the world and key corporates such as Intel, Google, IBM, and Microsoft are vying for leadership in Quantum Computing development. The three-year, three-stageproject is due for completion at the end of CY2022 with the plannedproduction of initial commercial quantities of ZS-Si from a SILEXpilot production facility.The first stage, completed in June 2020,involveda‘proof-of-concept’ demonstration of the silicon enrichment process using laboratory-scale equipment, and initial optimisation of the process.The second stage of the project,currently underway,involvesthe design, construction,and operation ofscaled-up prototype equipment, including for the feed material synthesisas announced today,with the objective ofvalidating the silicon LIS technology and scalability of the process. The second stage includesseveralmoreseparate milestones due for completion bylate CY2021. The first batches of ZS-Si product will be purchased by SQC under an Offtake Agreement that was executedin December 2019, which includes SQC making three annual payments of $300,000, two of which have been received to date, as an offset against future purchases of ZS-Si produced by Silex. Current methods for production of enriched silicon are very limited and costly (even for lower purity material) with only a few kilograms produced annually, mostly using gas centrifuge technology.Should the ZS-Si project be successful, it would enable Australia to establish itself as the world-leader in ZS-Si production, creating a new value-added export market.The project is also supported by a $3 million Federal Government funding grant from the CRC-P which was awarded in February 2020. The project remains on track to achieve its objective ofutilising the SILEXLIS technologyto produce enriched silicon in the form of ZS-Si with sufficiently high purity, and to establish the manufacturing technology and capability to scale-up production as silicon-based quantum computing gains traction globally duringthe next decade. Silex will retain ownership of the ZS-Si production technology and related Intellectual Propertydeveloped through the project.For personal use only