Ann: Quarterly Activities Report - June 2018, page-31

Dont want to play the role of the devils advocate, but it should be noted that MZI management has been completely changed over the last 2 years, starting with a new chairman (less than 2 years), then a new Managing Director (less than 1 year). I guess we should give them the benefit of the doubt ! Rome hasent been built in one day, and steering MZI in the right direction takes time, patience and effort, and results cannot be expected to be seen instantaneously.

From my recent conversation with management, the Managing Director Martin Purvis clearly stated that the Leucoxene project was from the beginning a risky "experiment" that has never been done before (MZI operations are the biggest and first Leucoxene focused mining operations in the world). Previous management (and everybody else for that matter) clearly didnt know what they were getting into. Leucoxene 88 recovery turned out to be technically extremely challenging (a new uncharted territory from a mining engineering perspective) and consequently both capex and operating costs turned to be much higher than what has been previously planned in the 2012 feasibility study.

After more than one year and a half of commissioning (october 2015 - Q1 2017) and several upgrades to the plant, it became clear that at the original 4.50 Mtpa production plan, operations were never going to be profitable and the project (experiment ?) was economically unviable. The new 5.25 Mtpa expanded plan was necessary to bring the project to profitability and steer the company in the right direction. As we speak, Management are still doing research studies both at Keysbrook (Wet Concentrator Plant) and at Picton (Mineral Separation Plant) on how to improve/optimize further the recovery rates without the need of more capex.

Management explained to me frankly that these optimization studies/actions can only realistically be successfully realized once the company achieves steady state stable operations. Trying to optimize recoveries while at the same time trying to ncrease production throughput wasent going to work out. So now that finally operations seems to have attained steady state level, we could expect further optimizations of recovery rates and thus reduction in operating costs.