Ann: Drill Results Confirm Major Extension Potential at Makuutu, page-31

Following points were put to me through what I’m informed was a mutual contact. Can’t disclose exact background as per individuals request but the crux was someone wanting a jump start on some DD for IXR. Being very late at night and with only access to the phone I of course couldn’t resist a patented SF2TH monologue;

Queries:

“Potentially onto a multi-bagger with IXR at current levels (10x -20x?). Clearly Makuutu is emerging as a globally significant REE deposit, one that could be economically strategic for either China or USA. I note the company has only done SS so far and shortly PFS will be done, but to confirm what your assumptions are (back of envelope of course) for:
1 total resource upside?
2 production run rate mtpa?
3 head grade & recovery eg 500ppm?
4 opex & capex for simple circuit MREC
5 realised con 92% MREC basket price @ USD$37?
6 difference of value adding a separation process - how difficult & expensive?
7 key people - I see the board has appointed a former US diplomat Ms Jill Kelly. What does this say/what dont we know? Amazing CV
8 working capital - equity raise to come?”

My response below;

“Wish I was on the computer…

1) SS was based on 80mT (indicated only), JORC is 315mT likely that the current drilling program moves around 200-250mT to indicated tripling the LOM in the SS. Total resource upside is 600-650mT+

2) will be a staged production model based on several modules. Initial 2.5mtpa throughput ramping up 2.5mtpa every 12months or so to final state of 12.5mtpa. Output is roughly 4000tpa of TREO. Ramp up strategy is to minimise initial capital outlay but ramp up model can be expedited with a larger resource base underpinning it.

3) Head grade in SS was 800ppm (high grade zone) likely that head grade decreases slightly when resource upgrade goes in FS. I expect head grade maybe around 650-700ppm but is a trade off based on cutoff grade. They can increase head grade by increasing cutoff. And vice versa. Current recovery is around 46% of TREO. However the valueable elements recover at 60-70%. Essentially the low value Ce, Le don’t recover well (which is good because they’re worthless). 12.5mtpa at 820ppm produces 4000tpa at 92% concentrate can worked out the mined/t rate from there. In general if not aware, Ionic clays are low grade but are the only deposits which can produce such a high grade product under low capex and opex. So the margin is good.

4) capex for each module is around 60m usd. Initial module needs back end circuit so initial capital will be around 90m usd. More expensive than typical Chinese circuit as ixr employing best practice for water treatment, environmental management (nano filtration, noting the MD was the project lead as CLQ which specialises in water treatment)
Opex quoted at ~$30usd/kg in SS very conservative. (Scandium credit reduce it by 5-10usd)
Initially was looking to be at $20usd but amended for the aforementioned environmental practices and water to ensure they left themselves room for improvement in the BFS. Other ionic clays in China and externally based projects with more detailed PFS with similar circuits are well below 30usd/kg around $10-20kg is the norm.
Ramp up model means higher opex over LOM. Once a 12.5mtpa can be extrapolated to 25Y LOM opex will decrease massively over LOM (economies of scale). Currently only 11y LOM of which only 2 years at 12.5mtpa.

5) current realise price for 92% MREC is 37usd. (No scandium credit considered)
Forecasted 92% MREC concentrate basket in production (2024) quoted as ~75usd/kg moving to over 100usd/kg via roskill and other sources. HREO sources in China are depleting and no current development projects have concentrate baskets with HREO. Most or all are selling Nd Pr biased projects. Competitive market for nd pr will keep a lid on LREO. Ixr has HREO which aren’t economically sourced outside China.

6) For separation (if they build sep plant - see point 6/7) revenue moves to around $50usd/kg. Capex for sep plant maybe around 100m usd for capital. Further DD required don’t trust saltend pricing.
Imo bread crumbs are being left to suggest they are going to JV, MOU or commence a SS to construct one (separation facility) based in the USA. Hence the appointment of a US military negotiator with diplomatic contacts. Hence the dual listed commentary, hence the eu/us/uk seeking separation options. Irrespectively, current mou is with the largest rare earth producer globally in chinalco best in class for ionic clay processing. Expertise can be leveraged in that space also, but ultimately think we will see someone us based jv in the us for seperation facility (nothing formally announced just my opinion)

7) see above

8) fully funded through to BFS completion due September 2022. Is required for project retention to move from 51-60%. Deadline cannot slip which ensure timeline to production.

if new investors wanted a layman’s summary which translates the company update this is pretty much my interpretation.

apologies that I have embedded previous posts with the calculated detail to these points, not going to risk 14 open browsers on safari. If any one has any questions just tag and ask or DM me via Twitter if not comfy asking publicly.

SF2TH