Mr. Martin Perez de Solay reports

MT CATTLIN ORE RESERVE UPDATE CONFIRMS MINE LIFE EXTENSION

Allkem Ltd. has provided an ore reserve update for its Mount Cattlin operation in Western Australia.

Highlights:

• Ore reserve tonnage increased 34 per cent to 7.8 million tonnes at 1.20 per cent Li2O and 130 parts per million Ta2O5 at a cut-off grade of 0.4 per cent Li2O.
• The ore reserve and planned mining schedule suggests a projected life of mine for the next four to five years (2027 and 2028) through open-pit mining methods. The ore reserve has increased with higher grade despite mining depletion to support production. The recent category upgrades in the latest mineral resource estimate and substantial increases in revenue pricing for spodumene concentrate have contributed to the increase in ore reserves.
• The next mining stage (Stage 4) consists of two separate cutbacks (Stage 4-1 and 4-2) to optimize ore presentation. A mining proposal for Stage 4 has been submitted to WA regulators and is anticipated to be received by the end of calendar year 2023.
• The board has approved mining of the first cutback (Stage 4-1) of the open pit, which will result in continued spodumene production into 2026.
• In the second cutback (Stage 4-2), the increasing waste/ore strip ratio at depth through open-pit mining methods is being evaluated against an alternative underground mining option. The company sees significant opportunity in transitioning to an underground mine, including the unlocking of greater orebody extension potential and the prolonging of the life of mine.
• An underground feasibility study is expected to be delivered by first quarter calendar year 2024. It will enable a variety of scenarios to be modelled and will ensure an optimized future mining method is selected.

Ore reserve estimate

The Mount Cattlin ore reserve estimate is based on the mineral resource estimate of 12.8 million tonnes at 1.3 per cent Li2O grade and 179 ppm Ta2O5, released on April 17, 2023. The mineral resource was updated after the completion of a major infill drilling program, which upgraded inferred mineral resources with 92 per cent of the total mineral resource tonnage now classified as indicated mineral resources.

Allkem has reviewed and updated the Mount Cattlin ore reserve, incorporating infill drilling results from the 2NW deposit, depleted mined material and site stockpiles at March 31, 2023, and material to be mined after this date, presented in accordance with Joint Ore Reserves Committee (2012) ore reserve reporting.

Reserve methodology

Pit optimizations have been carried out using a fixed spodumene concentrate sale price of $1,500 (U.S.) per tonne and an exchange rate of 70 U.S. cents to $1 (Australian). Whittle pit optimization software has been used to identify the preferred pit shell on which the pit design was based.

The target design shells were selected to provide a logically phased mine life that maintains future optionality to further evaluate the trade-off between the larger second-phase cutback compared with, or in conjunction with, underground mining.

The current mine sequence is based on:

• Continued mining of the current stage (Stage 3) of the 2NW pit to completion;
• Phasing of the next stage (Stage 4) into two separate cutbacks to manage the strip ratio and provide smoother ore supply to the processing plant;
• The timing of a mining proposal that has been lodged in May with WA regulators to extend the current pit and allow for both cutbacks; the associated documentation, including the updated mine closure plan, will be reviewed in due course and is anticipated to be approved by the end of calendar year 2023.

The mine plan is shown to be technically and financially feasible with an overall life-of-mine (LOM) ore: waste strip ratio of 19.8 to 1. A suitable cash flow positive buffer exists below the assumed product prices to provide confidence that the ore reserve estimate will be financially viable within a reasonably expected range of possible product prices.

Prior to the current 2023 ore reserve estimate, the most recent estimate was a depletion by Allkem as of June 30, 2022. The 2023 ore reserve estimate shows the total reserves have increased despite the mining depletion that has occurred since the previous reserve statement. Mineral resource conversion from inferred to indicated and the economic environment around lithium have contributed to the increase in ore reserves.

A description of the major factors that resulted in changes from the 2023 ore reserve to the 2022 ore reserve is as follows:

• An updated 2022 mineral resource estimate with higher grade and increased tonnages in the indicated category;
• Increased pit shell from $650 (U.S.) per tonne to $1,500 (U.S.) per tonne;
• Decrease in ore reserves due to continuing open-pit mining and stockpile processing.

Next steps

Underground feasibility study

The underground feasibility study is under way and will trade off optimized mining methodologies to improve the most beneficial/more economic outcomes. The study is expected to be completed by early calendar year 2024. The approval to proceed as an underground mine will be compared with the existing open-pit feasibility study and also consider the potential for future upside (that is, orebody continuation at depth).

Stepout drilling

It was observed that both the $1,100 (U.S.) and 1,500 RPEEE mineral resource iterations remain limited by a lack of drilling data, which will be resolved by further stepout drilling planned for later in calendar year 2023.

Resource and reserve controls and governance

Allkem ensures that quoted mineral resource and ore reserve estimates are subject to internal controls and external review at both project and corporate levels. Mineral resource and ore reserves are estimated and reported in accordance with the 2012 edition of the Joint Ore Reserves Committee code.

Allkem stores and collects exploration data using industry standard software that contains internal validation checks. Exploration samples from drilling have certified reference material standards introduced to the sample stream at set ratios, typically one per 25 samples. These are reported as necessary to the relevant competent persons to assess both accuracy and precision of the assay data applied to resource estimates. In resource modelling, block models are validated by checking the input drill hole composites against the block model grades by domain.

Allkem engages independent, qualified experts on a commercial fee for service basis to undertake mineral resource and ore reserve audits. Allkem internally reconciles the resource outcomes to validate both the process and the outcome.

The company has developed its internal systems and controls to maintain JORC compliance in all external reporting, including the preparation of all reported data by competent persons who are members of the Australasian Institute of Mining and Metallurgy or a recognized professional organization. As set out herein, the mineral resource and ore reserve statements included in this announcement were reviewed by suitably qualified competent persons prior to their inclusion in the form and context announced.

Project economics

Project economics for the full Stage 4 expansion are set out herein and will be updated following approval to proceed with Stage 4-2 and/or an underground option.

Operating costs

Operating cash costs for the LOM are estimated at $935 (U.S.) per dry metric tonne produced. It incorporates the rest of the current Stage 3 open pit, Stage 4 open pits and processing of end-of-life stockpiles from April 1, 2023, to the end of mine life.

An attached table proves a summary of the estimated LOM annual unitary cost by category.

Commodity prices

Forecast pricing for benchmark 6.0 per cent Li2O spodumene concentrate has been sourced from independent market analyst group Wood Mackenzie (1) and discounted for costs and penalties to give a realized price. The final pricing used is effectively net Australian-dollar FOB.

Tantalite (Ta2O5) concentrate is a byproduct that contributes meaningful, but not material, revenue to the project. A flat sale price based on existing contracts has been applied to expected production.

A forward U.S.-dollar/Australian-dollar exchange rate forecast provided by Allkem has been used for this study.

The cash flow model was also tested at a conservative realized price of $1,500 (U.S.) per dry metric tonne Li2O in the optimization, and cash flows remained positive for the overall ore reserve and on each stage.

(1) The data and information provided by Wood Mackenzie should not be interpreted as advice, and you should not rely on them for any purpose. You may not copy or use these data and information except as expressly permitted by Wood Mackenzie in writing. To the fullest extent permitted by law, Wood Mackenzie accepts no responsibility for your use of these data and information except as specified in a written agreement you have entered into with Wood Mackenzie for the provision of such of such data and information.

Economic evaluation

An economic evaluation was conducted by consultants Entech Mining using financial data sourced from Allkem, independent market analysis and competitive tender.

Project economics for all of Stage 4 is forecast to generate a net present value of $1.2-billion (U.S.) ($1.7-billion (Australian)) when evaluated with the prices attached. Economics will be updated following approval to proceed with Stage 4-2 or as an underground option.

As an existing operation, Mount Cattlin requires only minor initial capital expenditure to support the Stage 4 expansion and low total project capital requirements of approximately $80-million (U.S.) ($115-million (Australian)). This will be financed from operating cash flow.

The economic model calculates net present value (NPV) at a discount rate of 10 per cent over the LOM from March 31, 2023. The NPV is based on financial model period cash flows, without allowance for taxation, depreciation or financing provisions. The summary of this is shown in an attached table.

Sensitivity analysis

Sensitivity analysis was conducted on the following variables (plus or minus 20 per cent) and quantified with the NPV outputs:

• Revenue factors: spodumene concentrate price, currency exchange rate and plant recovery;
• Cost factors: mining operating costs and processing operating costs.

Competent person statement

The information in this announcement that relates to exploration results and mineral resources is based on information compiled by Albert Thamm, BSc (honour), MSc, FAusIMM (203217), a competent person who is a fellow of the Australasian Institute of Mining and Metallurgy. Mr. Thamm is a full-time employee of Galaxy Resources Pty. Ltd. Mr. Thamm has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity being undertaken to qualify as a competent person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr. Thamm consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.

The information in this announcement that relates to the March 31, 2023, Mount Cattlin ore reserve is based on information compiled by Daniel Donald, BEng (mining), FAusIMM (210032), a competent person who is a member of the Australasian Institute of Mining and Metallurgy. Mr. Donald is an employee working for Entech Mining Pty. Ltd. and has been engaged by Allkem to prepare the documentation for the Mount Cattlin operation on which the ore reserve report is based, for the period ended March 31, 2023, and has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity being undertaken to qualify as a competent person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr. Donald consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.

Technical information relating to the company's Mount Cattlin project contained in this release is derived from, and in some instances is an extract from, the technical report entitled "Mount Cattlin Ore Reserve Estimate, March 31, 2023," which has been reviewed and approved by Albert Thamm, FAusIMM (who is an employee of Galaxy Resources) as it relates to geology, drilling, sampling, exploration, quality assurance/quality control and mineral resources, and Daniel Donald, FAusIMM (an employee of Entech) as it relates to mining methods, ore reserves, site infrastructure, capital cost, operating cost estimates, mining cost, financial modelling and economic analysis in accordance with National Instrument 43-101 (Standards of Disclosure for Mineral Projects). The technical report will be filed within 45 days of this release and will be available for review under the company's profile on SEDAR.

We seek Safe Harbor.