Speciality Metals International Limited Annual Report 2019

Page | 18 MINERAL RESOURCES AND ORE RESERVES STATEMENT Metallurgical factors A geometallurgical approach to exploitation of the Mt Carbine tungsten deposit is considered critical to a successful outcome. Following extensive test work that has confirmed the validity of the previous milling process (but with improved recovery to be anticipated), the main components in the metallurgical process will essentially be as follows: 1. Crushing; 2. Ore sorting; 3. Jigging; 4. Spiralling; 5. Tabling; 6. Dry Magnetic Separation. The key parameter from the metallurgical test work and design is recovery of >75% of WO 3 in mill feed. There are no by-product minerals, although the waste will be sold as aggregate or road base (this has not been included in the feasibility assessment of the project). Tests and previous mine practice have shown that the main contaminant, arsenic in arsenopyrite, can be cost effectively removed by flotation and that the products will be very high grade (70% and 72% WO 3 ) wolframite and scheelite concentrates. Previous removal of arsenic (and other minor sulphides) by flotation of small concentrate volumes has had additional environmental benefits in that the existing stockpiles and tailings have been demonstrated to have no acid mine drainage potential. Environmental See Section 3. Infrastructure The Mt Carbine mine is situated adjacent to the Mulligan Highway, has grid power to site and sufficient water on site for if the proposed mining operation proceeds. Costs The quarry operated on site by Mt Carbine Quarries Pty Ltd includes crushing, screening and rock moving equipment used on a campaign basis. Following the 100% acquisition of Mt Carbine Quarries Pty Ltd, Speciality Metals plans to use the crushing, screening and rock moving equipment in the quarry as part of the plant to process the mineralised material from the Low Grade Stockpile. This will result in an estimated capital expenditure saving of $6.5M and if this saving is achieved the capital cost for the remainder of the plant to treat the stockpile is estimated to be AU$8.5M. Otherwise, the capital cost for treatment of Low Grade Stockpile only is estimated to be AU$15M, based on a detailed EPCM exercise carried out in 2016 and revised in August 2018. Operating costs are estimated to be AU$8.50 per tonne, however recent price increases for electricity have not been factored into this estimate. Revenue factors The present price for European Ammonium Paratungstate (APT), which is the benchmark for pricing of the tungsten concentrates that will be the mine product, is in the range of US$210 – US$225 per Metric Tonne Unit (MTU). All mine studies have been based on a price of US$290 per MTU and A$ parity, however as at 29 August 2019 the A$ was at US$0.67418. Market assessment The Joint Venture has an Offtake Agreement in place with Cronimet Asia Pte Ltd. Economic Using the estimates summarised in Costs (above) the treatment of Low Grade Stockpile project has an NPV at 8% discount rate of AU$36M, however this may vary due to Cronimet’s expectation that ore-sorter upgrade will exceed that obtained previously by Speciality Metals. Social The Company has a policy of employing local staff by preference and is already well regarded as a significant employer in the district, based on its past operations Other See Mineral Tenement and Land Tenure Status Section 2. Discussion of relative accuracy/confidence The success for the proposed stockpile treatment is underpinned by the fact that the same ore body was profitably mined for 13 years by the previous operators. The mine only closed in 1987 because of the price collapse caused by oversupply from Chinese producers dumping product on the market, resulting in the closure of most western tungsten producing mines. Prior to the price collapse, the Mt Carbine mine operators and their joint venture partners had carried out detailed plans to extend the mine life and maintain production for a further ten years. The Mt Carbine mine had not run out of ore (there was an estimated 3.5Mt of ore to be extracted from the existing pit before any mine expansion had to be considered). The ore treatment process was well documented, and studies spurred by the collapsing price showed that mill recovery could be significantly increased. This has since been confirmed by test work carried out by Speciality Metals.