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This profile is part of a investor education campaign. The profile provides detailed information which was sourced and approved by Pilbara Minerals in order to help investors make better investment decisions. The Company’s support of Investing News Network ensures we can continue to bring you unbiased, independent news and information.

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Pilbara Minerals - Emerging Strategic Metals Portfolio

Pilbara Minerals – Emerging Low Cost Lithium Production in Western Australia

Overview

Pilbara Minerals Limited (ASX:PLS) is focused on the world-class, wholly-owned Pilgangoora Lithium-Tantalum Project, located in the Pilbara region of Western Australia, within 120 kilometers of Port Hedland. The advanced Pilgangoora Project is already confirmed as the second largest hard rock lithium (spodumene) deposit in the world, with on-going drilling expected to further increase the project’s resource base.

A March 2016 Pre-Feasibility Study (PFS) for the Pilgangoora Project showed robust economics and confirmed that it is set to become a major low-cost supplier of high-quality lithium concentrates. “Based on these results, Pilgangoora is now firmly established as the world’s leading lithium development project – a premier mid-tier mining asset which is already attracting strong interest from prospective project financiers and cornerstone investors based on its potential to transform Pilbara into a leading player in the rapidly growing lithium industry,” said Ken Brinsden, Pilbara Minerals’ Managing Director and CEO.

A Mineral Resource upgrade is on track for July 2016 and a Definitive Feasibility Study (DFS) is due for completion by August 2016.

Investment Highlights

  • Pilgangoora is the world’s second largest hard rock lithium (spodumene) deposit. The project ranks above average in terms of size, grade, and costs, as well as demonstrating favorable metallurgy to date.
  • Updated Mineral Resource Estimate expected in July 2016, ahead of the DFS in August 2016.
  • PFS shows project Net Present Value (NPV) of A$407 million (post-tax discount rate of 10 percent) and Internal Rate of Return (IRR) of 44 percent.
  • Heavily oversubscribed $100 million capital raising completed in April 2016 to accelerate Pilgangoora Project development.
  • Ability to serve total lithium market including meeting demand for low-iron spodumene.
  • Off-take Memorandums of Understanding (MOUs) in place, accounting for more than 100% of planned annual production output.
  • Lithium demand is forecast to grow between 10 percent and 12 percent annually until 2020. The highest growth segment is lithium-ion batteries with about a 50 percent Compound Annual Growth Rate (CAGR).

Key Properties

Pilbara Minerals’ emerging strategic metals portfolio is on the doorstep of Western Australia’s Port Hedland.

Pilgangoora Lithium-Tantalum Project

The Pilgangoora Project is located in Western Australia’s Pilbara region, with access to existing infrastructure including the downstream port facilities at Port Hedland, 120km to the north.

Pilbara Minerals - Emerging Strategic Metals Portfolio

The project holds a Joint Ore Reserves Committee (JORC)-compliant Indicated and Inferred Resource estimate of 80.2 million tonnes grading 1.26 percent lithium oxide (containing 1 million tonnes of lithium oxide) and 42.3 million tonnes grading 195ppm tantalum oxide (containing 18.2 million pounds of tantalum oxide).

“Up to this point in time, there has been no comparison. Nobody had been able to find a spodumene resource of equivalent scale. Of course that’s all changed now with Pilgangoora because it’s got some serious scale,” Brinsden says.

Pilbara Minerals has significant potential to grow the existing resource base at Pilgangoora by including additional pit inventory not currently included in the PFS Ore Reserve. Brinsden adds, “This is an incredibly strategic asset. It’s going to be viewed by those in the know, and amongst the industry peers, as an incredibly valuable asset… one that’s relevant for the industry for decades to come.”

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Pre-feasibilty Study Results

In March 2016, Pilbara completed a PFS on Pilgangoora, which showed the project has the potential to be a low-cost lithium supplier with excellent cash-flows and returns. The PFS considered a standalone 2 million tonnes per annum mining and on-site processing operation. Metallurgical testwork conducted for the PFS demonstrated lithium recoveries of 77 percent and tantalite at 47 percent.

The study included a maiden Ore Reserve of 29.5 million tonnes grading 1.31 percent lithium oxide, 134 parts per million tantalum oxide and 1.18 percent iron oxide. Annual production from Pilgangoora is forecast at about 48,000 tonnes per annum of lithium carbonate equivalent and 274,000 pounds per annum of tantalite over an initial mine life of 15 years.

The PFS also demonstrates robust economics for the project including:

  • • Life-of-mine (LOM) operating cash costs of only US$205/tonne of spodumene concentrate (including tantalum by-product credits).
  • Approximately A$120 million per year Earnings before interest, tax, depreciation and amortization (EDITDA) over the first five (5) years of operations.
  • Project payback in approximately two (2) years
  • Project NPV of A$407 million (post-tax, discount rate of 10 percent) and IRR of 44 percent (based on PFS Reserve).
  • Pre-production Capital expenditure (CAPEX) of A$184 million.

“The strong technical fundamentals and excellent financial returns of the project are underpinned by a relatively modest capital cost estimate together with low forecast cash operating costs, which reflects the inclusion of significant tantalite by-product credits,” said Brinsden. “This means that the project will be capable of generating very strong operating margins and cash flows, producing a high-quality product that we expect will be in high demand as evidenced by the very high level of interest already displayed by our customer base.”

Brinsden also said in an interview during a recent Resources Rising Stars Investor Luncheon Presentation: “There’s no doubt in my mind that Pilgangoora is the world’s leading lithium development project. It’s just an amazing discovery”.

Financing of $100 million

In April 2016, Pilbara Minerals announced an oversubscribed $85 million share placement, as well as a Share Purchase Plan for a maximum further amount of $15 million. This financing further strengthened Pilbara Minerals’ balance sheet, boosting its ability to rapidly advance the Pilgangoora Project into production.

Brinsden says: “This is a tremendous outcome for Pilbara which clearly demonstrates the strong appetite amongst global investors to gain exposure to the rapidly emerging opportunity in lithium – and to do so by investing in Tier-1 assets like Pilgangoora”.

DFS Underway, on track for delivery in Q3 2016

Pilbara began working on a DFS for Pilgangoora in January 2016, including a 15,000m drilling campaign focused on four main target areas which is expected to further increase the resource and reserve inventory. This phase of work will also include metallurgical and geotechnical drilling, sterilization drilling for site infrastructure and water bore drilling to gain access to long-term water supplies.

In May 2016, Pilbara reported that DFS drilling had confirmed significant north-western extensions of the Central Pegmatite, well beyond the conceptual pit design outlined in the March 2015 PFS, with intersections including:

  • 58 meters at 1.69 percent lithium oxide from 131 meters (PLS459)
  • 37 meters at 1.85 percent lithium oxide from 106 meters (PLS456) and;
  • 8 meters at 2.11 percent lithium oxide from 119 ppm tantalum pentoxide from 147 meters and;
  • 15 meters at 1.72 percent lithium oxide and 113 ppm tantalum pentoxide from 160 meters.
  • 30 meters at 1.92 percent lithium oxide from 96 meters (PLS453); and • 23 meters at 1.92 percent lithium oxide and 106 ppm tantalum pentoxide from 129 meters; and
  • 8 meters at 1.68 percent lithium oxide from 155 meters.
  • 20 meters at 1.80 percent lithium oxide from 96 meters and 141 ppm tantalum pentoxide from 127 meters (PLS 454).

These findings are expected to significantly increase the scale of the current Central Pit as well as substantially upgrade the Mineral Resource and Ore Reserve to be included in the DFS. The results also have the potential to enhance the economics of the project, expand the future production rate and significantly increase mine life at Pilgangoora.

In June 2016, Pilbara announced two new discoveries outside the main resource area – the first discovery located 300 meters west of the Central Pegmatite and the second located 300 meters south-east of the resource area. Highlights include:

  • 10 meters at 2.02 percent lithium oxide from 10 meters (PLS499)—South Eastern Pegmatite
  • 13 meters at 1.95 percent lithium oxide from 28 meters (PLS500)—South Eastern Pegmatite
  • 10 meters at 1.36 percent lithium oxide and 113 ppm tantalum pentoxide from 98 meters (PLS527)—Western Domain Pegmatite

“The news discoveries to the west and south-east of the main resource area are significant, and they demonstrate just how large and well-mineralized the Pilgangoora Project is,” said Brinsden.

In addition to the two new discoveries, more thick, high-grade hits (down-hole widths of 20 to 50 meters) continue to extend the mineralization beyond the current resource boundaries.

A completed resource upgrade is slated for July 2016 followed by the completed Definitive Feasibility Study in August 2016, which will allow Pilbara to finalize off-take agreements and project financing. The company has signed eight off-take MOUs with leading chemical and technical grade companies for 100 percent of forecast mine production. Construction is slated to begin in Q1 2017 with first production by Q4 2017.

Management

Tony Kiernan – Non-Executive Chairman

Tony Kiernan is a highly experienced public company director and former solicitor with more than 35 years’ experience in the management and operation of listed public companies. As both a lawyer and general consultant, he has practiced and advised extensively in the fields of resources, media and information technology. Mr Kiernan is currently Chairman of ASX-listed resource companies BC Iron (ASX: BCI), Chalice Gold Mines (ASX: CHN) and Venturex Resources (ASX: VXR).

Ken Brinsden – Managing Director and Chief Executive Officer

Ken Brinsden is a mining engineer with over 20 years’ experience in surface and underground mining operations, including roles in mine management, production, brown-fields and green-fields development roles, across multi-commodities. Most recently, Mr Brinsden was Managing Director at Atlas Iron, contributing to the substantial growth of the company from a junior explorer, to a significant Pilbara iron ore producer.

Neil Biddle – Executive Director

Neil Biddle is a geologist and corporate member of the Australasian Institute of Mining and Metallurgy. He has over 30 years’ professional and management experience in the exploration and mining industry and since 1987 has served on the Board of several ASX listed companies.

Mr Biddle was Managing Director of TNG Ltd from 1998-2007, Border Gold NL from 1994-1998 and Consolidated Victorian Mines 1991-1994.

John Young – Technical Director

John Young is a highly experienced geologist having been engaged on exploration and production projects encompassing gold, uranium and specialty metals. From 2002 to 2006, Mr Young was Exploration Manager for Haddington Resources Limited and was responsible for resource exploration and resource definition for their Bald Hill Tantalum mine. Mr Young’s corporate experience has included appointments as CEO of Marenica Energy Limited, and CEO and Director of Thor Mining PLC.

Robert Adamson – Non-Executive Director and Consultant Geologist

Robert Adamson has most recently served as the company’s consultant geologist and has been managing the exploration program for the Company’s tenements in the West Pilbara, WA. Mr Adamson’s professional career spans some 43 years, the first 25 of which he was employed in a range of technical and managerial positions with international mining houses, and in managerial and board positions with several publically-listed exploration and mining companies. Mr Adamson has been operating as an independent mineral industry consultant since 1993.

John Holmes – Exploration Manager

John Holmes is an accomplished geologist with over 25 years’ experience in the mineral exploration industry ranging from early stage exploration through to resource definition, project acquisition, exploration management and executive roles. Mr Holmes has a wealth of experience in precious metal, base metal, coal and industrial minerals projects throughout Australasia, Canada, and South America. Mr Holmes is a member of the Australian Institute of Geoscientists and a Competent Person under the JORC code.

Alan Boys — Company Secretary

Alan Boys is a chartered accountant with over 30 years’ experience and was previously a partner with PriceWaterhouseCoopers. More recently Mr Boys has been engaged as Company Secretary and Chief Financial Officer for a number of ASX listed companies mainly in the minerals exploration sector.

Brian Lynn – Chief Financial Officer (CFO)

Brian Lynn is a chartered accountant with over 25 years’ experience, having held senior financial positions with companies involved in the mining industry including iron ore, nickel, gold and mineral sands. More recently, Mr Lynn was CFO at Atlas Iron Limited, a significant Pilbara iron ore producer. Prior to joining Atlas, Mr Lynn served as CFO and Company Secretary at nickel miner Mincor Resources NL for 12 years, during which time Mincor saw significant entrepreneurial activity and growth, multiple mine developments and sustained periods of operational discipline.

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