Ann: Becoming a substantial holder, page-635

Hi all - thanks for theresponses to my original back of the envelope SP valuation of WKT – it’s muchappreciated. Whilst debate from both sides of the fence is always healthy, it’simportant that the discussion on this thread going forward is grounded in facts.Having done some digging over the past few days, including reading past announcements,conducting some research on the Tanzanian landscape, as well as listening to the22 June 2021 Shareholder Webinar, I’ve come to some conclusions and ultimately have arrived at a slightly amended but more accurate SP valuation.

Few points first that I’d liketo point out for clarification’s sake so that investors and potential investorscan make more informed decisions on WKT. As always please DYOR – this is notinvestment advice.

(1) TanzanianGov 16% Free Carry Interest (FCI) Agreement:

Firstly, production is notdependent on the final FCI agreement being formalized (refer to extractbelow), and secondly, the signing of the FCI agreement is not aconditions precedent of the US$20m debt facility (refer to ASX announcement13 Apr 2021) or commencement of construction (refer to minute 13 of theWebinar). This suggests that the signing of this agreement will merely beused to formalize how the 16% is delivered back to the TanzanianGovernment. We also know that this only kicks in once the company announcesdividends, which is after the repayment of all debt drawn down (min 13 of Webinar).

Extract fromslide 9 of the June 2021 Corporate Presentation.

(2) TanzanianGov 16% Free Carry Interest (FCI) Impact to NPV:

The 16% Free Carry Interest hasbeen accounted for or modelled within the Definitive Feasibility Study (DFS) bymeans of a post-tax dividend (rather than by adjusting down the 100% projectownership which the DFS is modelled on). This is also reflected in the June2021 Corporate Presentation. Therefore, any WKT SP valuation that is based offthe project NPV of US$197m should be multiplied by 95% (100% less the 5% localownership, noting that the 16% is already accounted for).

Extract from page3 of the Updated DFS released Aug 2017

Extract fromslide 15 of the June 2021 Corporate Presentation.

(3) Materialchanges made to the DFS:

The below puts to bed anydoubts of material revisions to the project NPV of US$197m, includingsubstantial revisions to capex (up until the date of this announcement). Thefact that CRDB Bank of Tanzania have signed the Project Finance Facility Letteris an endorsement as to the material accuracy of the financial forecasts withinthe DFS.

Extract from page2 of the Debt Finance Facility announced April 2021

(4) Offtakeagreements and US$20m debt facility

Extract from page2 of the Debt Finance Facility announced April 2021

WKT has binding offtake termsheets in place for 100% of annual production (page 4 of the Debt FinanceFacility announced April 2021). The provision of signed offtake agreements,which requires the conversion of binding offtake term sheets into final bindingofftake agreements (i.e., contracts) is the sole conditions subsequentof the $US20 debt finance facility (page 4). In other words, this is arequirement sometimes afterwards (rather than being a conditions precedent), meaningthat it won’t hinder formalization of the debt facility of commencement of construction(which utilizes equity financing first).

As noted in the respective termsheets, Graphite pricing is to be determined 6 months before first shipment ofconcentrate – it is noted in the Webinar (min 31) that this is what isholding up the conversion of these term sheets into binding contract agreement.Given that WKT are 9 – 12 months away from first production, negotiation and formalizationof pricing and therefore signing of contracts is likely to occur closer to theend of CY21, assuming the timeline to first production is not materially alteredfrom now.

The key conditions precedentfor the debt facility is the injection of the equity contribution (stage 1 tostage 3. Whilst the issuance of equity has been agreed for all three stages, weknow that this still requires formal shareholder approval (in the next month).

(5) GraphitePricing

DFS uses a basket price ofUS$1,515/t (page 6 below), with current prices being at the low end of WKT’sprice forecasts. Remember this is an average price used across the 24 year LOM,so Graphite prices received today are less relevant given the in-principal debtfinance agreement (bank’s tick of approval based on their own due diligence).The expectation going forward is that the increasing demand for Graphite usedin EV’s would push the price of Graphite up – to what extent is anyone’s guess,but I wouldn’t get caught up on current Graphite prices. WKT’s high grade wouldalso play a part.

Extract fromslide 9 of the June 2021 Corporate Presentation.

SP Valuation

In light of the above, myrevised back of the envelope valuation gives a 6 - 12 month share price targetof 56c (2.2X return). I have assumed the issuance of the US$10 stage 3 equity being raised at 25c (current price), so as to ensure the valuation is done on a more conservative fully dilutive basis. This valuation also assumes that WKT reached first production in 12 months time (until then, we are likely to trade at some discount to the NPV to account for construction execution risk).

See below for calcs andassumptions.

Charting /Technicals

Not a bad looking chart either- appears to be a break-out of the symmetrical triangle with a MACD cross on the weekly,providing a short-term SP target of 42c on technicals, riding the waveof the EV momentum across various minerals / commodities markets. Wouldappreciate other chartists' thoughts, although I’m sure this has been touched on inthe Charting thread.

Looking forward to solidprogress at Lindi Jumbo! For disclosure purposes, I am now a holder.

Cheers,

Lorenzo