US$30 Million Prepayment Term Sheet and Offtake Agreement Executed with a Global Commodities Trader

Boab Metals Limited (ASX: BML) (“Boab” or “Company”) is pleased to announce that its wholly owned subsidiary, Sorby Hills Pty Ltd (“SHPL”), has executed a binding offtake agreement (the “Offtake Agreement”) with Trafigura Asia Trading Pte. Ltd. (“Trafigura”) for lead-silver concentrate produced from the Company’s flagship Sorby Hills Lead-Silver-Zinc Project, located in the Kimberley Region of Western Australia (“Sorby Hills” or “the Project”).

In conjunction with the Offtake Agreement, the Company, SHPL and Trafigura have executed a binding term sheet (the “Prepayment Term Sheet”) for a US$30 million prepayment facility (the “Prepayment Facility”) which is subject to the satisfaction of certain conditions precedent.

HIGHLIGHTS OF THE PREPAYMENT AND OFFTAKE TRANSACTIONS

Prepayment Term Sheet

• US$30 million Prepayment Facility from Trafigura to be applied towards the construction and development of the Project.
• Interest Rate of SOFR1 + 5% per annum.
• 5-year Term from first drawdown with an 18-month interest only period.
• To be repaid via equal monthly instalments over 42 months following the 18-month interest only period.
• Financial Close and drawdown of the Prepayment Facility are subject to, amongst other things, the execution of definitive agreements, the finalisation of due diligence to Trafigura’s satisfaction and the Project being fully funded.

Offtake Agreement

• If Financial Close on the Prepayment Facility is achieved, the offtake will be for 75% of lead-silver concentrate produced at Sorby Hills, (minimum 531,000 tonnes, ~7 years based on the FEED Study production schedule).
• If Financial Close on the Prepayment Facility is not achieved, the offtake will be for 25% (or greater, at SHPL’s discretion) of lead-silver concentrate produced at Sorby Hills (minimum 177,000 tonnes) provided that if Boab exercises its option to terminate the Prepayment Term Sheet or obtains alternative financing for development and construction of the Project, the offtake will be for 50% (or greater, at SHPL’s discretion) of lead-silver concentrate produced at Sorby Hills (minimum 354,000 tonnes).

Boab Managing Director and CEO, Simon Noon, stated:

“We are delighted to have secured support in the form of binding offtake and project financing from a party of Trafigura’s calibre. Throughout what has been a highly competitive offtake tender process, Trafigura has demonstrated a willingness to work constructively with the Company to deliver a result that is in the best interests of the Project.

The binding Offtake Agreement and Prepayment Term Sheet with Trafigura represents a cornerstone of our targeted financing plan for Sorby Hills. We now look forward to further progressing discussions with other prospective senior lenders with a view toward reaching a final investment decision on the Project.”

“The opportunity to secure high-quality concentrate from the Sorby Hills project is an exciting prospect for our lead trading book. We look forward to seeing Boab’s management team bring this project into production,” Trafigura’s Global Head of Zinc and Lead has stated.

Background Information

Sorby Hills is located 50km from the regional centre of Kununurra in the East Kimberley of Western Australia and has access to existing sealed roads to transport the concentrate 150km from the site to the facilities at Wyndham Port.

The Project comprises a Mineral Resource of 47.3Mt containing 1.5Mt Pb at 3.1% and 53Moz Sliver at 35g/t (Table 1). The current Sorby Hills mine plan comprises 18.3Mt at 3.4% Pb and 39g/t Ag of which ~83% is classified as an Ore Reserve (Table 2).

On 6 June 2024, Boab released the results of a Front-End Engineering & Design Study (“FEED Study”) on the Project showing strong pre-tax economics including C1 operating costs of US$0.36/lb payable Pb (incl. a net Silver credit of US$0.37/lb payable Pb), NPV8 of A$411M, IRR of 37%, A$778M free cash flow, and an average annualised EBITDA of A$126M. Pre-production capital costs were estimated to be A$264M.

With operating costs covered by revenue generated by a historically non-volatile lead price, the Project free cash flow is exposed to movements in the price of silver.

Sorby Hills is being developed via a joint venture between SHPL (75%) and Yuguang (Australia) Pty Ltd (“Yuguang”, 25%). On 23 September 2024, Boab announced that it had executed an agreement with Yuguang to acquire their interest in the Project subject to reaching a final investment decision on the Project (“JV Acquisition Agreement”).

On 25 October 2024, the Company indicated that it was proactively assessing multiple opportunities to materially reduce the upfront capital expenditure for Sorby Hills (“Capital Cost Reduction Initiatives”). The identification of available second-hand process plants has been one such initiative and the potential purchase of the available DeGrussa plant has been deemed the most technically suitable option for Sorby Hills. Over the coming quarter, Boab will work closely with preferred EPC Contractor GR Engineering Service (“GRES”) to undertake a thorough review of the DeGrussa process plant and assess the technical and economic benefit of its potential incorporation into the Sorby Hills Project.

The Offtake Agreement and Prepayment Term Sheet executed with Trafigura represents another key milestone towards a final investment decision on Sorby Hills and a cornerstone of Boab’s financing solution for the Project. The result follows a very competitive process in which multiple parties including other global traders and smelters expressed strong interest in the Sorby Hills concentrate.

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