Ann: Quarterly Activities/Appendix 5B Cash Flow Report, page-2

Here’s a detailed breakdown of the Australian Strategic Materials (ASM) Quarterly Activities Report for the period ending 31 December 2024, covering key projects, financials, market outlook, and corporate developments.

1. Key Highlights

• Dubbo Project: Advancing Rare Earth Options Assessment to identify cost-effective recovery methods.
• Government Grant: Received an initial A$5M grant from the Australian Federal Government’s International Partnerships in Critical Minerals (IPCM) Program.
• Product Deliveries: Supplied NdPr metal and NdFeB alloy to rare earth magnet producers.
• Financials: Maintained strong cash flow control with a closing cash position of A$32.6M.

2. Dubbo Project – Rare Earth Development

ASM's Dubbo Project is central to its mine-to-metals strategy, aiming to supply rare earths and critical minerals.

2.1 Rare Earth Options Assessment

• ASM is exploring alternative processing methods to lower capital expenditure and reduce project implementation time.
• The focus has been on atmospheric leaching techniques to recover light (Nd & Pr) and heavy (Dy & Tb) rare earth elements.
• Leaching test methods:
  • Tank leaching – Direct extraction from ore.
  • Heap leaching – Large-scale processing with lower energy requirements.
• These options would eliminate the need for a high-energy-intensive roaster, reducing both capital and operational costs.

2.2 Testing & Engineering Development

• Initial test results were positive, indicating variable recoveries depending on ore mineralogy.
• Engineering and cost evaluations are being conducted by:
  • DRA Global (DRA) – Assessing capital and operational expenses.
  • ANSTO (Australian Nuclear Science and Technology Organisation) – Conducting bench-scale impurity removal and rare earth precipitation tests.
• A 200kg bulk leach was performed on a composite sample from 137 drill core intervals.
• Future steps include:
  • Pilot plant testing to validate the preferred processing method.
  • Mine plan updates and economic assessments in Q1 2025.

2.3 Project Infrastructure Progress

• Bechtel Engineering finalized non-process infrastructure (NPI) requirements.
• Macquarie Geotechnical completed geotechnical studies for site preparation.
• Stantec finished designing the solid residue storage facility.

3. Korean Metals Plant (KMP) – Metal Production & Expansion

ASM’s Korean Metals Plant (KMP) plays a strategic role in rare earth processing and high-tech metal production.

3.1 Safety Performance

• No reportable safety incidents in Q4 2024.
• Lost Time Injury Frequency Rate (LTIFR) remains at zero.

3.2 Neodymium Iron Boron (NdFeB) Alloy Production

• Delivered 475kg of NdFeB strip alloy to Noveon Magnetics Inc. in December.
• The alloy will undergo product validation testing in Q1 2025.
• Successful testing could lead to long-term supply contracts with Noveon.

3.3 NdPr Metal Production & Sales

• ASM sold 19 tonnes of NdPr metal from initial production batches.
• First 5 tonnes delivered, with the remaining scheduled for Q1 2025.
• Existing Korean customer (KCM, subsidiary of NS World) postponed their NdPr metal orders due to sufficient inventory levels.

3.4 Metallisation & Heavy Rare Earths Expansion

• Installed a larger metallisation furnace to produce Dy (Dysprosium) and Tb (Terbium) metals.
• Cold commissioning completed, with hot commissioning and trial production to follow in 2025.
• Expansion aims to strengthen ASM’s position in the heavy rare earth supply chain.

3.5 Titanium Production

• Installed and commissioned a titanium (Ti) powder electro refiner.
• Produced 5kg of Ti powder, now undergoing post-production testing.
• Copper-Titanium (CuTi) trials postponed due to priority focus on refining technology.

3.6 Customer Engagements

• USA Rare Earth (USARE):
  • Signed a five-year NdFeB alloy supply agreement in August 2023.
  • USARE successfully produced its first batch of sintered permanent magnets in January 2025.
• European Markets:
  • Engaging with potential customers for NdFeB strip alloy.
• Rare Earth Oxide Suppliers:
  • Exploring feedstock supply agreements with suppliers in Europe and the US.

4. Funding & Offtake Agreements

• ASM submitted a third whitepaper to the US Department of Defense (DoD) for funding to establish a second metals plant in the US.
• US Export-Import Bank (US EXIM) and Export Development Canada (EDC) issued letters of interest to finance the Dubbo Project.
• Engaged with Export Finance Australia, Korea Trade Investment Promotion Agency (KOTRA), and Korea Export-Import Bank (KEXIM) for further funding support.
• KCF Energy Co. Ltd (KCF) extended the framework agreement until 30 June 2025.

5. Market & Industry Outlook

• Rare Earth Prices: Declined due to market uncertainty, excess supply in China, and geopolitical factors.
• EV Market Trends:
  • Slow short-term adoption, but mid- to long-term growth remains strong.
  • Hyundai announced a $16.6B investment to expand EV production in South Korea.
• Geopolitical Developments:
  • China imposed export controls on rare earth processing technologies.
  • Restrictions on dual-use minerals like zirconium and hafnium may impact global supply chains.
• Niobium & Hafnium Prices:
  • Niobium remains at multi-year highs due to demand from aerospace and defense industries.
  • Hafnium prices fell slightly but are expected to rise due to supply chain disruptions.

6. ESG & Community Initiatives

• Towards Sustainable Mining (TSM) compliance process continued with support from KPMG.
• Preparing for Morningstar Sustainalytics ESG Assessment in Q1 2025.
• Community Engagement:
  • Participated in the Orana Youth Forum to promote careers in STEM.
  • Continued supporting Macquarie Agricultural Pathways Program (MAPP).
• Government Support:
  • Federal Minister for Resources visited the Dubbo Project to announce A$5M grant funding.

7. Financial Summary

• Cash Position: A$32.6M as of 31 December 2024.
• Quarterly Cash Movements:
  • A$2.6M invested in Dubbo Project.
  • A$2.4M in government grants received.
  • A$2.9M in business costs.
  • A$2.4M in Korean operations expenses.
• Loan Facilities:
  • A$16.6M refinanced loans with Korea Development Bank & Hana Bank.

8. Mining Tenements

• ASM retains 100% ownership of Dubbo Project tenements:
  • EL 5548, EL 7631, ML 1724 (New South Wales, Australia).
• No new tenements were acquired or disposed of.