Notes from a shareholder phone conversation with Leo Lithium's...

Notes from a shareholder phone conversation with Leo Lithium's PR manager.

Transaction & Commercial Structure
Question - Tranche Payment Structure:
The payment structure with a significantdeferred amount (US$171.2 million at SOFR + 2% interest) appears unfavourablecompared to project value and recent share price. Can you help me understand therationale behind this structure, considering the material impact it has on shareholderreturns?

Response:
• It's probably best to start with project valuation.
I know there has been a lot ofcommentary about not being close to project NPV, but there's a couple ofreasons for that. First off, you can compare back to spodumene price when wewere last trading for a few days in September. We're kind of 60% off the lithiumprice. That's an impact across the sector.
• In terms of specific risk here, what happened and biggest impact on value was2023 mining code and looking at detail of mining code and impact on projectvaluation. It pretty much didn’t leave us with much at all.
• Then the question is, how come it makes sense for Ganfeng and not for LeoLithium?
• Part of the reason is that Ganfeng seem to be willing to accept pretty marginalreturns to get to spodumene, because the value they get is from essentiallytaking the product down to their downstream facilities.
• For us (Leo Lithium), based on the fact that we really only had exposure to thespodumene prices, the valuation was really quite harmed by 2023 mining codeto the point where it was just punitive. Probably one of the worst in the world.
• From our perspective, overlayed with sovereign risk and how that was changing,it made it unfavourable for us to stay in there. That impacted value as well andhow others perceived the value of the company.
• From the point of view of structuring the third payment structure, whathappened is because of elevated risk and because of both fiscal (mining code)and sovereign risk, Ganfeng wanted a lot longer timeframe in terms of makingpayments. We wanted it all upfront. To get a deal done we had to both giveground. That resulted in the structure of the deal (two tranches, latest LeoLithium would accept is July 2025)

Question - Second Tranche Payment:
How likely is it that Ganfeng will pay the secondtranche payment before July 2025, considering the accruing interest?

Response:
• I'm not sure they would pay it early, but they have no reason to push backbeyond July 2025. By that time, the project should be well and truly underway,and the transition should be well and truly complete, since we're doing that bythe second half of this year. By mid-next year, there shouldn't be any reason whythat money wouldn't come in.
• For us, the way we structured it is that the money should come from Ganfeng'sHong Kong entity, so we should be okay from that aspect. It's not part of anyMalian entity or anything like that.

Question - Termination of Offtake Rights:
Given the potential value of offtake rights,why was the decision made to terminate the Cooperation Agreement with Ganfeng,especially for a trailing royalty (1.5%)?

Response:
• When the decision was made to exit, the question then became how to extractthe most value out of this. One of the things Ganfeng wanted was the offtake andthey were trying to wrap it all into the existing valuation.
• What we said was, "Well, actually, the offtake in itself has its own value, and wewanted to extract some value from that as well, for shareholders, giving themsome kind of exposure to the lithium price."
• So, what we ended up with is the trailing product sales, which is essentially aroyalty. A way for us to squeeze a little more out from Ganfeng to get more valuefor shareholders. That was the thinking.
• From their perspective, they were going to be buying 100% of this and wantedthe offtake. Their view was that it came with the asset. So, it was a matter ofhaving to meet in the middle once again.
• For us, when you maximize one part of the negotiation regarding price, then youhave to trade off on various angles to get more for other components. That's ourthinking.

Question - Settlement Discrepancy:
Can you explain the significant differencebetween the US$60 million settlement payment Leo Lithium is making to the MaliGovernment and the US$8 million (USD equivalent of A$11.5 million) Firefinch iscontributing?

Response:
• So, the USD$60 million was really driven by the Malian government'srequirement for Leo to pay.
• We pitched them strongly that we were two separate companies, but Mali wasn'tinterested in buying it that way. We briefed them in person multiple times, takingthem through the structure where Leo was spun out as a separate listed entity.However, this concept didn't resonate with them at all.
• They wanted something from Leo/Firefinch together. That's where the USD$60million came from.
• The AUD$11.5 million (USD$8 million approximately) came from negotiationswith Firefinch to recoup some money from them. Firefinch wasn't willing to paymore, which is quite short-sighted considering their key asset is Leo Lithium.
• However, from a legal standpoint, they weren't required to contribute. So, thediscussion revolved around what they could contribute since we were frontingall of this.
• We had no way of forcing Firefinch to pay anything at all.

Question - Tax Implications:
Will there be a significant tax liability associated with thesale of Goulamina? If so, can you provide an estimated cost? Is there any insight onhow the chosen transaction structure impacts the overall tax burden for shareholders?

Response:
• Really good question. I just had a meeting with the CFO earlier today about that.Basically, there are separate tax workstreams happening right now. We don'thave clear information yet on the final outcome.
• At a high level, Capital Gains Tax will likely be payable in Mali for the totalamount of USD $347 million. Royalties, on the other hand, would likely bepayable in Australia.
• Please don't quote me on this yet, as the finance team is still working throughthe details. Everything is uncertain until we receive full clarification from our taxadvisors on what deductions are allowed and what aren't.

Question - Equity Analyst Valuation:
Has the Company consulted with equityresearch analysts (e.g. Jarden) to understand their post-transaction valuation of LeoLithium? If so, can you share the key areas of agreement and disagreement in theirassessments (excluding Barrenjoey, the financial advisor for this transaction)?

Response:
• We've spoken to almost all of them (Wilsons, Jarden, Euroz, etc.) and there'sgenerally agreement that this is a kind of "get out of jail free" situation.
• They believe the alternative could have been much worse for Leo shareholders interms of valuation, potentially resulting in arbitration or nothing at all.
• Overall, there's a consensus that this is a positive outcome. Determining theexact value still requires further work.
• Jarden differs in their assessment. They see a 70c exchange rate compared toour announced 65c, which impacts the royalty stream. Additionally, theirprojection includes higher corporate costs. They also rightly haven't factored inthe funds received from Firefinch since it's subject to shareholder approval.

Capital Distribution & Future of the Company:
Question - Capital Distribution Strategy:
With the Goulamina sale, how will theCompany approach shareholder capital distribution? What are the next steps for theCompany's future endeavours? When will a concrete plan be communicated? Whathas feedback received been from major shareholders to date?

Response:
• You are absolutely right on the retail side. Reviewing all the emails coming in,everyone wants their money back. I understand that. There are some who wantto reinvest in other assets as well.
• In terms of our discussions with major institutions, they are pretty pragmaticabout it. I think a lot of them had already written down the value to 0. They arejust happy to get something out of it. They are also happy to say - If you have aplan, ideas to use that capital, come back to us and let us know your thoughts.We'll make a decision then.
• Online, there's a lot of criticism of Rick and Simon. I get that from outside. Itotally understand it looks like a weak management team or giving in to the Maligovernment, but honestly, I don't think any other team could have done anydifferently.
• The institutions recognize that. They recognize it was tough. So, what they aresaying is that – we will back you [Simon and Rick] if you have concrete plans.Come back to us, and we can evaluate and look at supporting you in the future.
• We're in the process of working through the capital distribution strategy. Theremay be a mix of returning capital to shareholders and holding onto some of itwith a plan to move forward.

Question - Company Wind-up:
When will that concrete plan be defined? When willthat line be drawn and when will that be communicated?

Response:
• It will be done by the general meeting when we do the shareholder vote, but itwill be communicated beforehand (just under a month’s time).

Question - Company Wind-up:
Is the Company considering selling the royalty stream,winding up, and distributing all excess cash and sale proceeds?

Response:
• There are a lot of questions around selling the royalty stream. All I can say is,think about it as something that has been packaged in a way to facilitate selling.We wouldn't have designed it this way if we hadn't considered this from the start.
• The challenge we face is getting shareholder approval first. Then, we need tofinalize everything by obtaining all the necessary approvals and documentation.Once that's done, the royalty stream will be available for sale.
• The biggest hurdle is securing Chinese government approvals. Until thathappens, it's an agreement in progress, not a finished product. Therefore, wecan't approach royalty firms yet because we don't have a concrete asset to offer.
• In short, we don't have a sellable royalty package yet, but it has been designedwith the intention of being packaged and sold in the future.

Profit Sharing & Ganfeng Partnership:
Question - Profit Sharing During Buydown:
While Leo Lithium retains ownership (untilJuly 2025), will the Company be entitled to a share of profits from Ganfeng's sales ofspodumene concentrate?

Response:
• No. From October when this completes, its 100% Ganfeng’s. The last tranchepayment in July 2025 is just subject to interest.

Question - Future Joint Ventures with Ganfeng:
Given the cancellation of theCooperation Agreement, does this preclude future joint ventures between Leo Lithiumand Ganfeng?

Response:
• No, it's not. What happened is that the cooperation agreement had to beterminated because Ganfeng saw it as associated with the Goulamina JointVenture since there were related ventures, like the downstream joint ventureand exploration projects.
• So, while the agreement is going to be terminated (as it's part of thedocumentation), the relationship itself is still very strong.
• In terms of anything in the future, finding something and having Ganfeng supportus again wouldn't preclude anything.
• If anything, we probably even have a stronger relationship with them through thisprocess, noting that we pushed them quite hard while maintaining our integrity.
• I think from that aspect, we haven't done any damage to our relationship withGanfeng.

Cash Management:
Question - Cash Management:
With the reduced operational requirements, will theCompany consider moving its cash holdings to accounts with higher interest rates tomaximize returns for shareholders?

Response:
• Yes

Question - Sale Proceeds and Outstanding Payment:
The announcement mentions aUS$65 million sale for 5% of Goulamina, but only details a US$60 million payment toLeo Lithium. Can you clarify how the remaining US$5 million will be received by theCompany?

Response:• Absolutely. The USD $5 million will be paid directly to Leo. In terms of those cashholdings, we already have a large portion earning high interest rates. That willcontinue to happen as more cash comes in as the requirements are nowdifferent.
• Before, we were contributing to the JV and often had to carry funds for certainpayments. We then received reimbursement via Ganfeng. Now that Ganfeng aresole funding, from a cash management standpoint, we're now able to put moneyaway earning higher interest rates.

Financial Filings & Operational Changes:
Question - Timeline for Filings and Meetings:
When can shareholders expect thelodged financials and the annual general meeting (AGM)?

Response:
• That’s a good question. Will have to come back to you on that. I know that theFinance team has restarted discussions with the Auditors. Uncertain on timelineto work through but will get back to you.

Question - Contingency for Shareholder Rejection:
Does the Company havecontingency plans in place if shareholders reject the proposed sale of its stake inGoulamina?

Response:
• Support so far has been quite good. Institutional investors are very supportive.
• I think retail investors have been supportive of the outcome but are justfrustrated with it. In general, I think retail investors understand that this is thebest outcome given the alternatives.
• If you consider AVZ as the other option, we could have no outcome or timing onthe arbitration process for the next [five] years. All remaining cash would go intolawyers, and then at the end of it, who knows what we get out of it? That optionwas probably not the best for shareholders.
• Regarding the contingency plan, if for whatever reason the proposal doesn't getvoted across, then Leo Lithium will remain a 40% holder and things will get prettyrough from there as a 40% shareholder...

Question - Operating Model and Cost Implications:
How will this transaction impactthe Company's operating model and cost structure? Can we expect significantreductions in administrative and staff costs moving forward, considering the reducedoperational requirements? Have cost-cutting exercises already begun?

Response:
• The way it works is this: Ganfeng will pay us a fixed fee in addition to a variablecomponent based on a cost-plus model. Leo Lithium shareholders won't be outof pocket at all. All of the costs will be recouped with a margin from Ganfeng. So,it's not a bad outcome.
• In terms of the operating model and cost structure, the driver for staffingchanges is more project-driven than anything else. What I mean by that is, as theproject nears commissioning and we move into ramp-up, the nature of the workchanges. We've already had a few people leave the company (from theengineering team) in the last few weeks. We're now transitioning closely to aramp-up model.
• From an admin standpoint, we only have one person, as you know.
• From a management standpoint, we're handing that over to Ganfeng, who will becontracting it back to us. So, we're essentially still managing it for them, they'rejust paying us for it. We're still responsible for transitioning and ensuring itssuccess. Leo Lithium won't bear any costs associated with this at all. If anything,it can be considered purely a profit center.

Question - Director Accountability:
Given the situation has resulted from Firefinchand the material impact on shareholder value, will the Board consider broader changesin leadership with those that have links to Firefinch?

Response:
• It's probably something that would be considered as we progress. In terms ofreceiving shareholder approval and with this project moving to completion, theBoard will naturally think about who is required from a merits perspective. Whobrings the most value to the organization moving forward.
• It's a good point raised. I totally get the value of a clean slate. I think not havingany ties to previous Firefinch would be beneficial, but it's outside of my scope.

Question - Company relisting:
What initial guidance has the ASX provided regardingrelisting the company's shares?

Response:
• Discussions have commenced, but I can't go into details because I believe[board?] will update shareholders soon.
• As you're likely familiar with ASX listing rules, there's a rule regarding thedisposal of major undertakings. The ASX has rightly brought this to our attention,and it could impact our ability to resume trading.
• Meetings are ongoing. We're making our case for resuming trading, and I knowthere are meetings scheduled with them over the next few weeks.

Question - Company relisting:
What else is the company doing to protect shareholderwealth noting the real possibility of this re-trading under cash backed value?

Response:
• We realize there will be some who just want to exit. As you know, when acompany trades post-M&A proposal, depending on the proposal's success, itwill trade relatively close to the implied valuation of the proposal.
• For us, it would be ideal to first get to the point where we can be more openabout the valuation, its components, and what it looks like on a post-mergerbasis. The way the announcement was written, noting a number of lawyersreviewed it, you had to piece it together yourself; it wasn't very clear, and there'sa reason for that, especially considering the fact that there were still questionmarks around settlement.
• Hopefully, we can get to the point where we can clarify the value more, discusswhere the risks are, and get investors comfortable with them so the stock tradescloser to the implied value. That's where we'd like to end up.
• From what we see, pretty much all of the major institutional shareholders arebehind it. I think there will be some shareholder turnover, but it will be moreabout just getting the story out.
• We are now in the process of speaking with institutional investors and takingthem through the proposal, including the merits of it, ahead of the vote.

Question - Company relisting:
I personally believe it would be a huge mistake and adisservice to all shareholders for this company to resume trading without any clarity onits plan. Do you agree?

Response:
• Absolutely. The company won’t consider trading without that. It would onlyhappen post investors knowing what the plan is moving forward

Question – Last call:
Anything else important I should know that I haven’t asked about?

Response:
• Just reinforcing what’s next.
• Many investors are happy to have walked away with something, but they nowwant to understand what's next
• I think the feedback has been that there are a lot of opportunities out there,many of which lack management teams with a history of building assets, andthere are also assets that lack financing.
• The key question from the feedback is: Where do we see potential opportunitiesto leverage our skillset, team, and shareholder backing to pursue somethingnew? This question ties into yours regarding the forward plan.

Question – Last call:
Let's say the process is run and the company faces challengesfinding a suitable opportunity that aligns with the desired set of criteria defined. At whatpoint does the company decide its best course of action is to wind up the company anddistribute everything back to shareholders?

Response:
• That would be a board decision for when that happens, but the logical pointwould be receiving tranche 2 payment.
• General timeline is 12 months to find something else

Anon