Ann: Transaction Update, page-133

Graham Arvidson has indicated via presentations that AVL finance discussions are well-advanced. The below is going to show that AVL is nowhere close to finance.

Below is a comparison table I have put together based on the latest information from each company. Clearly shows the economics of each company and the points which are comparable to each. The only assumption made is that the C2 finance costs are the same. at $1.68 per pound which has come from AVLs BFS because it is the latest finance costs indication.



A colored legend is shown to prove where the public information came from.

The following questions need to be answered for TMT holders based on merging with AVL:

1. Based on the above TMT has the optimal mining strategy. Why should TMT holders accept 14.96% less process V205 by merging with AVL. In the merger presentation, it is indicated blending will occur bringing AVLs costs down by blending with TMT ore.


2. Before Mining Credits based on ore separated at the CMB plant. AVL has a 53.14% higher opex than TMT. TMTs ilmenite separates and reports to the non-magnetic circuits and AVLs do not. This is proven by AVL shipping their 900,000 tonne FE / Ti / V205 Concentrate to Geraldton processing facility 454kms away from the mine site. If AVLs titanium separated during the CMB plant they would not have to ship 900,000 tonnes if would be more like TMTs at 96,5000. TMT is shipping 12,500 tonnes of V205 and 96,500 tonnes of ilmenite to the port.

3. Based on the above trucking, AVL has assumed a 0.79 cent Diesel price for 90% more trucking than TMT mining strategy. TMT via their integration study used $1.66 / L of Diesel. Based on this both companies will have some fuel inflation however AVL fuel costs should nearly double to somewhere in the $2.xx region.

Please see below graphic showing AVLs new estimated opex whereby Transport was 34% of the total opex.

AVL's new opex will be approximately $9.15 per pound (USD). AVLs fuel costs will at least double if not more but for the point of the exercise I have doubled their fuel costs to $1.58 / Litre. All other costs associated to trucking should increase with the higher inflationary the mining industry has experienced.

4. AVLs forecast capex is 13.53% higher than TMTs and for that capex, 14% less tonnes is produced impacting final revenue.
- Notes AVL has no contingency either for cost blowouts.

5. When AVL's new opex of $9.15 is plugged in the below happens.


TMT will then have 300% more free cash per year than AVL at $10 per pound V205.

6. TMT is trucking 96,500 TiO2 tonnes + 12,500 V205 tonnes per year vs AVLs 11,200 V205 + 900,000 tonnes of Fe / Ti. which is 90% more trucking by weight than TMT. For AVL's EPA application they will have to supply a path to net zero. Based on emissions assuming gas emissions are similar for both companies AVL will therefore have to offset 90% more emissions via their business strategy.

7. AVL has had their BFS out for 18 months and has not received a binding offtake agreement for their 900,000 Fe / TI co-product which receives a 30% discount to the platts 62% iron ore price. (AVL BFS). So if they want to process their vanadium in Geraldton they will also have to ship the 900,000 tonnes of basically waste product that has not been validated by the market. When the Fe TI Co Product is taken out with their fuel inflation increase their economics are as below at $10 per pound vanadium.


Basically shows AVL is losing money at $10 per pound. AVL indicated optimization testwork in their 2022 BFS to try and separate the iron and titanium. The assumption is it has been unsuccessful to date as their has been no updates to the market.

8. AVL would have to realize an average sales price of $15 per pound V205 for 25 years at 11,2000 tonnes on average. See Below


My comment to the above is I hope that there are no holes in their drilling work which will make the situation worse. Oh that's right they released drilling results approximately 6 months after the release of their 2022 BFS. This would also mean that their BFS would have to be revised to include any improvements of the ore body for those drill results.

Attached are the BFS announcement and the drill results after.

https://www.australianvanadium.com.au/wp-content/uploads/2022/04/AVL-Bankable-Feasibility-Study-final.pdf

https://app.sharelinktechnologies.com/announcement/asx/847699ef138dad08b028b3cab3a2958e

Comments from the drill results:

"Updated Mineral Resource Estimate scheduled for early 2023 which will be used in
updated Mine Schedule targeting highest possible V2O5 recovery in concentrate early
in the mine life."

Final Conclusion:

Here we are asking ourselves why would AVL want to merge with TMT?

Everyone is saying that one company should mine and operate based on being on the same ore body. The above proves that parts of the same orebody can have totally different V205 processing characteristics and therefore have totally different economics as TMT and AVL have proven via their test work.

It is the finance industry driving the merger as it has been argued that AVL has a stronger board of directors. My response is that AVL has overcommitted their board as below based on their project economics provided. See my board comparison based on cost from the annual report. TMT has operated far more efficiently to achieve a better result for its shareholders.



The AVL board of directors and vanadium experience may have got the best result with the rocks they had to work with but it currently does not stack up against TMT rocks. Unless the merged company is going to show significantly better V205 economics under a merged entity then the whole merging idea should not go ahead. If better V205 processing economics was going to happen then both TMT and AVL would have to find a better orebody. My understanding from company presentations is that TMT is to release the latest ore update for Yarrabubba but that should have happened before the merger so TMT holders should realize the value.

If the merged company and another DFS is required it means that both companies are not ready for finance currently and that any finance discussions should be put off for at least 12 months. in AVLs case and both their EPA applications being at stage 2 on the EPA website that timeline could be significantly longer based on how long it took TMT to be in a position to submit its final ERD.

The above is the elephant in the merger which has now been addressed.

@sabine Checkmate.

Cheers,

TDT.