Speciality Metals International Limited Annual Report 2019

Page | 4 REVIEW OF OPERATIONS • Retreatment Operations Unincorporated Joint Venture and Management Agreement – between Cronimet Australia, Mt Carbine Retreatment and Mt Carbine Retreatment Management Pty Ltd (the Manager); Under this agreement, the Company and Cronimet have agreed to establish an unincorporated Joint Venture for the Mt Carbine tailings and stockpile projects. The Joint Venture is held 50% each by: - Mt Carbine Retreatment Pty Ltd, a wholly owned subsidiary of Speciality Metals; and - Cronimet Australia Pty Ltd, a wholly owned subsidiary of Cronimet Asia Pte Ltd. All rights, liabilities and costs of the retreatment operations will be owned / paid by the Joint Venture Parties 50:50. The Joint Venture will be managed by the Manager, an entity held 50% each by the Joint Venture Parties. The Manager will conduct the day to day operations of the Joint Venture. • Agreement to Execute between Speciality Metals, Cronimet, Cronimet Australia and Mt Carbine Retreatment for the entry into the following, immediately following the acquisition of Mt Carbine Quarries: - Retreatment Operations Sub-Lease between Mt Carbine Quarries, Cronimet Australia and Mt Carbine Retreatment; Under the Sub-lease, Mt Carbine Quarries Pty Ltd grants the Joint Venture Parties access and other rights to enable the Joint Venture parties to conduct the Retreatment Operations within the Sub-Lease Area. The Sub-lease contains a licence back to Mt Carbine Quarries Pty Ltd (and otherwise permits Mt Carbine Quarries Pty Ltd) to carry out the quarrying operations on the Sub-lease Area. In consideration for the Sub-lease, the Joint Venture Parties will pay a royalty to Mt Carbine Quarries Pty Ltd of 2.5% of the value of the minerals extracted from the Sub-lease Area, after deduction of certain direct Sub-lease maintenance expenses. - Tenement Mortgage (Limited Recourse) between Mt Carbine Quarries and Cronimet ; and - Cross Security Deed – between Mt Carbine Quarries, Cronimet Australia and Mt Carbine Retreatment , • Retreatment Plant Sale Agreement – between Speciality Metals, Cronimet Australia and Mt Carbine Retreatment; and • Cross Security Deed – between Cronimet, Cronimet Australia and Mt Carbine Retreatment. On 27 June 2019 the Company announced that as the Acquisition of Mt Carbine Quarries Pty Ltd was now unconditional, the unincorporated Joint Venture between Speciality Metals and Cronimet Asia Pte Ltd for the development of the Mt Carbine Tungsten Tailings Retreatment and Stockpile Projects has commenced. The refurbishment of the Retreatment Plant has started with orders placed for specific pieces of equipment with long lead times. Most of this equipment is being sourced from offshore. Upgrades to electrical circuits have largely been completed. Various pumps and motors have been serviced or replaced and additional concrete work is currently being undertaken. A further update was provided on 28 August 2019 advising that the Mt Carbine Retreatment Plant refurbishment was progressing well and on-schedule with all redundant plant and equipment being removed in preparation for the arrival of the newly ordered equipment. Formwork for the maintenance workshop areas has been completed, as shown in the photo below, and further formwork for replacement plant is scheduled to be completed in the coming weeks. Existing plant conveyors are in the process of being refurbished. Electrical maintenance and commissioning works are ongoing and to schedule. The first container of plant equipment has arrived in Australia and further shipments of the following key components of equipment are scheduled to arrive in the coming weeks: - Feed Hopper and Grasshopper Conveyors; - Jig; - Wet Screen; - Roller Crushers; - VSD; - Steel framework for all plant replacements; and - Submersible, Slurry and Water Pumps. Cronimet experts from their South African and Singapore operations assisted with design and procurement support for the refurbishment, while their Process Engineers will be mobilised to commence commissioning later in the year. Plant upgrade and production commissioning is still expected to be completed during the 4th quarter of 2019. The Board would like to welcome the Cronimet team to the Mt Carbine Tungsten Project and welcomes the opportunity to partner with one of the world’s leading mining and raw material supply Company in realising the value of its world- class Mt Carbine Tungsten Project. Completed formwork maintenance area.