Ann: Annual Report, page-64

To listen to some of the cynical non holders on the forum the LG binding agreement is worthless.

Clearly the market hasn't liked the stronger LG agreement like it did the SKI non binding agreement and the share price has not gone up as it did with SKI. My response to that is that there is different general market sentiment at the moment, the disappointment of the SP performance after the initial rise is a constraint and some legitimate concerns re funding of the project.

LG Chem said it is looking to expand annual production of battery cathodes from the current 40,000 tons to 260,000 tons per year by 2026 and in August it agreed to take over LG Electronics’ battery separator business for KRW525bn (US$444m), as part of a KRW6trn (US$5bn) plan to strengthen its battery supply chain operations by 2025. The company is also set begin construction of a new separator factory in the South Korean city of Gumi at the end of the year with an annual production capacity of 60,000 tons.In the last year the group has signed deals with mining companies around the world, including China’s Great Power Nickel & Cobalt Materials Company, Australian Mines Limited, Chilea’s SQM and the Indonesian government to secure supplies of raw materials for the next ten years.

If LG are looking to expand to the capacity they have stated, they need to lock in supply and clearly would have to be confident after their due diligence that AUZ has some likelihood of funding the mine and getting it up and running in time for their projected requirements.

What are the logical broad options:

(1) They just signed AUZ on the off chance the mine might get up:

• if it has no hope of getting up it doesn't meet the need for a secure supply of nickel to facilitate LG's projected growth. If LG are not very confident it will get up they could end up with a short fall in resource they require to meet their stated growth.
• They are locking up anything that might get up - this could result in a large overcommitment to what they require - why would they risk their reputation doing this and being associated with a failed project supported by a binding agreement. It would not be a great international look for LG to have bankers not support /progress a project supported by an LG binding offtake. This would put into question the value of a binding agreement from LG for all sorts of future companies/mine projects.

(2) They are looking for a qualified supplier of Nickel and they have done their due diligence:

• AUZ has a proven resource
• Available infrastructure such as ports, transport, experienced workforce
• Large resource with attractive financial parameters
• Approvals to mine in place
• Support from State and Federal Government
• Low Sovereign risk

Given the reasonable assumption that LG will have done their homework in terms of evaluating AUZ's ability to fund Sconi with the LG binding agreement , they need the nickel and they would not want to tarnish their reputation in terms of the value of their binding offtake agreements etc (2) is far more logical and sustainable as a evaluation of where LG is at with AUZ.

I get a lot of comfort as an AUZ shareholder that AUZ will get a funding / Capital package on the back of the clear and public support LG has given to AUZ re Sconi.