Element 25 Quarterly Report - September 2022

Element 25 (ASX:E25) is pleased to present its quarterly report ended in September 2022.

New Daily Record Production Achieved but Wet Weather and Reliability Issues Require Further Improvement

• New daily concentrate production record of 1,251 tonnes of product achieved in August 2022.
• Quarterly production volume increased from June 2022 quarter.
• Unseasonal wet weather continues to disrupt mining and processing operations.
• Operational improvement plan continues to be rolled out.
• Operational costs in line with budget with shipping costs normalising.

Dense media Separation Bulk Trial Confirms Revised Design Focus for Scale Up

• Large scale Dense Media Separation (DMS) trial of Butcherbird manganese ores demonstrates significantly improved grades using a DMS drum circuit vs ore sorters.
• Approximately 280 tonnes of material from the current operational areas transported to existing DMS facility for batch processing to evaluate DMS process effectiveness.
• Results indicate potential product grade improvement of 9-30% above ore sorter product.
• Potential commercial benefits include a reduction in logistic costs and improvements in payability.
• A higher grade product with less waste material achieves a better price with reduced transport costs.
• Butcherbird expansion studies to incorporate a DMS drum (replacing the ore sorters) in the processing circuit design.

High Purity Manganese Feasibility Study on Track for 2022 Delivery

Flowsheet Completion

• Feasibility Study (FS) into the production of battery grade HPMSM from E25 concentrate targeting the expanding lithium-ion battery market progressing on schedule for a 2022 delivery.
• Proprietary process generates battery grade HPMSM with industry endorsement from potential offtake partners.
• Pilot scale test programme being finalised as final confirmation of flowsheet parameters for engineering design.
• E25 Flowsheet provides for “future-proofing” against tightening specifications as battery technologies evolve.

Project Location

• “Design one – build many” (DOBM) to facilitate multiple build sites and minimise localisation requirements.
• Sarawak Malaysia remains an attractive location and is the base case for the current Feasibility Study.
• Inflation Reduction Act (IRA) in the USA has generated strong interest for a USA based facility.
• Inflation Reduction Act provides strong incentives for USA and FTA country supply chains for USA EVs1.

¹ Reference: https://www.dlapiper.com/en/us/insights/publications/2022/08/inflation-reduction-act-seeks-to-jumpstart-electric-vehicle-market/

• Australian sourced HPMSM meets the requirements of the IRA for vehicle manufacturers to attract USA federal subsidies and is creating strong interest from potential customers with a USA EV or EV battery market presence.
• Element 25 currently studying a USA location in parallel with Malaysia.
• Engagement with Louisiana Economic Development, Baton Rouge Area Chamber and local industry confirms local support for a Louisiana site, which is also supported by discussions with potential offtake/finance partners.

Offtake and Marketing

• Discussions ongoing with potential offtake partners to provide long term HPMSM supply and price security for electric vehicle and battery manufacturers.
• Multiple parallel offtake negotiations underway and scheduled for substantial finalisation before year end 2022.

Project Financing

• Element 25 pursuing a combined offtake/financing solution with Original Equipment Manufacturers (OEM) and cathode manufacturers to provide substantial project funding.
• Project offtake and financing strategies scheduled to be finalised in line with FS completion in December 2022.

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