HPAL - lets discuss the elephant in the room

There’s anelephant in the room when it comes to Sunrise, as with other Ni/Co laterite hopefulsand that is HPAL. Nickel industry interviews, articles, investor notes all talkdoom and gloom about HPALs plagued history, cost overruns, poor ramp-up andfailure to meet investor expectations. None of this is factually incorrect thoughfrom my research it’s a generalized perspective as not all HPAL flow sheets andore deposits are created equal. Ultimately, guys like Anthony Milewski will always find a way to defend why their HPAL project is awesome and why you should invest in their nickel sulphide projects in Canada instead. In conclusion: Sunrise, on paper, is much more similar to (and aims to improve upon) thesuccessful HPAL operations (Coral Bay/Taganito) and has little in common with the poor performers (Goro,Murrin-Murrin).

With ahandy 3-day lockdown here in Brisbane I have spent a good part of this week firmingup my knowledge of the history of HPAL, where we stand now and how I feel Sunrisestands out, dodging many issues by design. I am left feeling muchmore confident about SRL and hope to maybe spread some of that comfort.

Here aresome of my highlights:

· Flowsheet Youcan essentially divide HPAL projects into two camps, one successful, one not somuch

1. Cawse-style flowsheets which arehighly complex, highly variable minerology, higher acid consumption (alkaline mineralization).Poor HPAL performance is almost exclusively reserved to the Cawse style operations.Examples: Cawse, Bulong, Ravenshorpe & Goro (all bad)

2. Sheritt flowsheet aims to be ‘simple’,typically produces in a mixed sulphide precipitate. Examples: Moa, Coral Bay,Taganito (Great) Ambatovy (bad) and Murrin-Murrin (bad). Taganito is very muchconsidered the latest (4^th) generation success story of HPAL achievinga fast ramp up, although its ore bodies gets split into two streams.

· SunriseDNA is very much synonymous with the Sheritt approach but its even simpler. Instead of precipitating tointermediate product we stay in-solution, a more direct approach to advanced battery pre-cursor materials.It’s a much more de-risked flow-sheet, more efficient, lower cost &footprint, lower acid consumption - I'll talk about why later
· Ramuis often discussed as a recent 4th gen HPAL “success” having achieved design capacity howeverthe poor ramp-up was due to limitations upstream of the plant, inability tofeed ore to the plant. Source

§ Sunrise plant is basically on flat farmlandright next to the pit. Ramu’s pit is in the mountains quite far away from theplant, hardly analogous to SRL in that respect.

· Ambatovyappears to me to be similar to Sunrise. However, again, the ore consistency is problematic “The processing plant and refinery have struggled with thevariability of mined ore grades and mixed mineralogy” Source

· Oreclassification: Silicate vs Clay (Smectite) vs Oxide

· AlthoughI haven’t seen this stated explicitly, the clay-hosted ore bodies tend to be inthe group which had dramas (Cawse, Bulong & Murrin-Murrin)

· Sunriseore body is in the Oxide category targeting just the limonite. We have athorough understanding of the ore body with 1700+ drill holes and will employ every known strategy under the sun to ensure consistent feed:

· Fromthe SRL DFS 43-101: “The approach to mining the deposit has been stronglyinfluenced by the need to avoid problems experienced by previous nickel/ cobaltprojects, notably inconsistent ore grade, inconsistent ore quality, anddifficult ore handling. The consistency of ore feed quality to the pressureacid leach plant is paramount. The relatively low mining cost compared to theprocessing cost drives a focus on plant unit costs and productivities rather thanon mining efficiencies and mining costs. A tight grade-control process, aselective mining method, and a schedule based on multiple open faces, directtipping, and active ore blending strategies are more important than miningefficiencies.”

· Peercomparisons: Source 1 Source 2 (Note: Source 2 analysis looked at Sunrise PFS and providedreasoned criticism as to how and why the assumptions in that study were inadequate, subsequently resolved in DFS andPEP FEED study)

(Sunrise is much more like Coral Bay and Taganito than it is Bulong/Goro/Ravensthorpe/Murrin)...

SRL PEP Capital intensity much more realistic and firmed up at $61,000 / t Ni Eq

Sunrise will be negative cash cost...

· cRIP - the key technical differentiator essentially replaces counter current decantation and other downstream refiningsteps.

o “counter current decantation have caused operational issues and bottlenecks in earlier laterite flowsheets.” Source

o CCDsare massive & ugly (pictured at GoroSource)

o cRIPtechnology essentially makes Sunrise agnostic to the impurities which plagueother HPAL operators. It also allows flexibility to re-introduce spent cathodesback into the process. A lot of effort went into perfecting the cRIP design, take a look at theSRL DFS 43-101

o Somebackground: Ex-soviet technology we have 99-year lease on. Developed for theMurrin Murrin to replace CCD and later BHP took it on. It has been commerciallyapplied for gold and uranium by CLQ.

· Ramp-upand CAPEX overruns:

o McNulty takes a look at first principles - why major cost over-run or inability toachieve design capacity occurred:

§ insufficient effort was devoted tounderstanding process chemistry

§ insufficient continuous pilot-scaletesting was conducted

§ the plant lacked parallel processstreams and/or in-line spare equipment units

§ the design incorporated sequentialunit operations that either were first-of-a-kind or the largest everbuilt or both

Cawse,Bulong, and Murrin-Murrin HPAL get a notable mention here as they are whatdefined Series 3 and 4 in above curves. Sunrise targets design capacity @ 24months.

In myopinion, Sunrise has differentiated itself from past failures due to favourableore characteristics, extensive planning & studies, and clever engineeringfrom learnings of 4x generations of HPAL. It is implement existing technologieswith some new ones (cRIP) which will invariably result in learning curves howeverwe have done epic amounts of groundwork to de-risk the flowsheet and the ramp up and with the 3 yearconstruction / 2 year ramp-up we should have sufficient buffer for us to meet investor expectations.