Mr. Martin Perez de Solay reports

SAL DE VIDA UPDATE DELIVERS IMPROVED ECONOMICS, RESOURCE AND RESERVE

Allkem Ltd. has provided a project update to its wholly owned Sal de Vida project located in Catamarca province in Argentina. Allkem has reviewed and updated the project mineral resources and ore reserves, project cost and schedule estimates, and project economics from the previous technical report dated March, 2022, technical report released shortly after the merger of Orocobre Ltd. and Galaxy Resources to form Allkem.

Highlights

Stage 1 and 2 (45,000 lithium carbonate equivalent tonnes per year)

Financial metrics:

• A material approximately 82-per-cent increase in pretax net present value (NPV) to $5.51-billion (U.S.) from $3.04-billion (U.S.) in the previous study at a 10-per-cent discount rate; the posttax NPV10 is $3.18-billion (U.S.);
• Operating cost increased from $3,280 (U.S.) per tonne lithium carbonate equivalent (LCE) to $4,003 (U.S.) per tonne LCE due to increases in the price of soda ash, lime and labour costs since the previous study.

Mineral resource and ore reserve:

• Total mineral resource estimate of 7.17 million tonnes lithium carbonate equivalent, a 5-per-cent increase from the previous estimate in 2022, with a 41-per-cent increase in measured mineral resources;
• Total ore reserve estimate of 2.49 Mt LCE supporting a 40-year project life based on ore reserves only, a 43-per-cent increase from the previous statement due to a revised point of reference for ore reserve reporting of brine pumped to the evaporation ponds.

Stage 1 (15,000 lithium carbonate equivalent tonnes per year)

Financial metrics:

• Increase in pretax NPV from $1.23-billion (U.S.) in the previous report to $2.01-billion (U.S.) at a 10-per-cent discount rate, representing an approximately 63-per-cent increase in value, reflecting an increase in lithium price assumptions and market outlook;
• Operating costs increased from $3,612 (U.S.) per tonne LCE increased to $4,529 (U.S.) per tonne LCE due to increases in the price of soda ash, lime, natural gas and labour costs since the previous study.

Project cost and schedule update:

• Increase in the development capital cost estimate (capex) from $271-million (U.S.) in the previous study to $374-million (U.S.), for mechanical completion, representing a 38-per-cent increase, which is in line with inflationary conditions;
• Substantial mechanical completion, precommissioning and commissioning activities are expected in first half calendar year 2025 with first production expected in second half calendar year 2025 and ramp-up expected to take one year.

Stage 2 (30,000 tonnes lithium carbonate equivalent per year)

Project cost and schedule update:

• The prefeasibility study update confirms the Stage 2 expansion will be completed on the same design basis as Stage 1 with a twofold modular replication of the Stage 1 design.
• Capex is estimated at approximately $657-million (U.S.), up from $523-million (U.S.) in the previous study, representing a 25-per-cent increase, with Stage 2 benefiting from Stage 1 detailed engineering, established on-site infrastructure, and established regional construction teams and facilities;
• Stage 2 construction is anticipated to commence upon receipt of applicable permits and substantial mechanical completion of Stage 1 with Stage 2 first production approximately 2.5 to three years thereafter.

Managing director and chief executive officer Martin Perez de Solay commented: "The updated study results clearly demonstrate the exceptional value and robustness of this project and its future expansion. As expected, global inflation has resulted in higher capital and operating costs, but it remains clear that we will deliver material shareholder value through the development of Sal de Vida. Pleasingly, the resource and reserve have continued to grow and will underpin future development."

Project background

Allkem is developing the Sal de Vida project in Catamarca province on the Salar del Hombre Muerto, approximately 1,400 kilometres northwest of Buenos Aires, Argentina. The Sal de Vida deposit lies within the lithium triangle, an area encompassing Chile, Bolivia and Argentina, that contains a significant portion of the world's estimated lithium resources. Catamarca is a proven mining jurisdiction and home to a number of successful mining operations.

In 2022, Allkem commenced development of the 15,000-tonne-per-year Sal de Vida Stage 1 project. Construction is expected to be completed in the first half of 2025. Allkem plans a further 30,000 tpy modular (15,000 tpy plus 15,000 tpy) Stage 2 expansion, which is currently at a prefeasibility study phase. The project aims to produce 45,000 tpy in total from the planned staged expansions.

The Stage 1 wellfield, brine distribution, evaporation ponds, waste (wells and ponds) and Stage 1 process plant cost estimates are Association for the Advancement of Cost Engineering (AACE) Class 2 plus or minus 10 per cent. Costs for the 30,000 tpy Stage 2 are AACE Class 4 plus 30 per cent/minus 20 per cent with no escalation of costs.

Lithium production has not commenced at the Sal de Vida site. As of Aug. 31, 2023, Sal de Vida Stage 1 construction was approximately 32 per cent complete. Detailed engineering, quantity estimation, contractor pricing, permitting and social aspects are sufficiently progressed to report to feasibility study level estimate for Stage 1. The layout and development plan for Stage 1 allow for future expansion for subsequent stages. An update to the prefeasibility study has been completed for Sal de Vida Stage 2.

Geology and mineralization

The salar system in the Hombre Muerto basin is considered to be typical of a mature salar. Several salars in the lithium triangle contain relatively high concentrations of lithium brine due to the presence of lithium-bearing rocks and local geothermal waters associated with Andean volcanic activity. Such systems commonly have a large halite core with brine as the main aquifer fluid in at least the centre and lower parts of the aquifer system.

Sal de Vida's brine chemistry has a high lithium grade, and low levels of magnesium, calcium and boron impurities, and readily upgrades to battery-grade lithium carbonate. Long-term hydrological pump testing under operating conditions has demonstrated excellent brine extraction rates to support the production design basis.

Resource and reserve estimates

Production wellfield pumping

The production wellfield drilling program commenced in late 2020 to construct an additional eight wells in the eastern region of the salar for Stage 1 brine production and to explore the resource at depth. The drilling program, which also entailed aquifer and pump testing, reached completion in October, 2021, and was monitored by consultant Montgomery & Associates and Allkem personnel. Since 2022, intermittent pumping has occurred from the Stage 1 eastern wellfield.

Brine mineral resource estimate

Montgomery was engaged to estimate the lithium mineral resources and ore reserves in brine for various areas within the Salar del Hombre Muerto basin in accordance with the 2012 edition of the Joint Ore Reserves Committee Code. Although the JORC 2012 standards do not address lithium brines specifically in the guidance documents, Montgomery followed the National Instrument 43-101 guidelines for lithium brines set forth by the Canadian Institute of Mining, Metallurgy and Petroleum (CIM 2014), which Montgomery considers comply with the intent of the JORC 2012 guidelines with respect to providing reliable and accurate information for the lithium brine deposit in the Salar del Hombre Muerto.

Long-term pumping and production from the Stage 1 eastern wellfield have increased confidence in that area of Allkem's concessions. Thus, the east-central resource polygons have been upgraded from indicated mineral resources to measured mineral resources, leading to an increase in measured mineral resources of 1.03 Mt. Furthermore, a lithium cut-off grade of 300 milligrams per litre was utilized based on a projected LCE price of $20,000 (U.S.) per tonne over the entirety of the LOM, leading to a total resource increase of 0.32 Mt LCE. The total revised mineral resource estimate of 7.17 Mt LCE reflects an approximately 5-per-cent total increase to the prior mineral resource of 6.85 Mt LCE.

The different mineral resource categories were assigned based on available data and confidence in the interpolation and extrapolation possible given reasonable assumptions of both geologic and hydrogeologic conditions.

Brine ore reserve estimate

The revised ore reserve estimate of 2.49 Mt LCE for 40 years reflects a 43-per-cent increase compared with the previous estimate of 1.74 Mt LCE for 40 years. The difference in total tonnage is attributable to the point of reference of the declared reserve, which has been aligned with the method used at Olaroz and other major brine deposits. Process efficiency factors were considered in the previous estimate while the current reserve is reported from a point of reference of brine pumped to the evaporation ponds.

The updated proven and probable ore reserves are displayed herein, and a comparison with the previous brine ore reserve statement is presented herein. Based on the modelled hydrogeological system and results of the numerical modelling, the proven brine ore reserve reflects what is feasible to be pumped to the ponds during the first seven years of operation at each of the wellfields. Compared with the previous estimate, this represents a one-year increase in the proven period, which is mainly due to higher certainty from long-term pumping in the eastern wellfield. Furthermore, pumping optimization was undertaken for the current estimate to extract more brine from wells with higher allowable pumping rates and lithium concentrations.

The model projects that the wellfields will sustain operable pumping for 40 years. The last 33 years of pumping from each wellfield have been categorized as probable brine ore reserves. The proven and probable ore reserve estimate of 2.49 Mt LCE represents approximately 38 per cent of the current measured and indicated brine resource estimate.

An attached table shows the summary of total pumped brine and projected average grade of the current proven and probable ore reserves.

The current numerical model projections suggest that additional brine could be pumped from the basin from the proposed wellfields past a period of 40 years. However, recalibration of the model would be required after start-up pumping of each wellfield to refine the model and support this projection.

Brine extraction and processing

Front-end engineering design (FEED) work for Stage 1's wellfields to process plant and non-process infrastructure has been completed for an initial production capacity of 15,000 tpy, later expanding to 45,000 tpy in Stage 2. A summary of the key physicals is displayed.

The process commences with brine extracted from wells extending to a depth of up to 280 metres in the salar. Brine is pumped to a series of evaporation ponds, where it is evaporated and will be processed at the on-site lithium carbonate plant.

The wellfields are located on the Salar del Hombre Muerto over the salt pan, with minimal infrastructure residing on the surface. The brine distribution systems traverse the salar to where the evaporation ponds are located. The process plant is located adjacent to the evaporation ponds on colluvial sediments. The waste disposal areas will surround the evaporation ponds.

The process plant consists of a lithium carbonate plant with a liming plant and associated plant infrastructure, such as the power station, fuelling and workshops. Process facilities are divided into four main areas, including the wellfield and brine distribution, evaporation ponds, the lithium carbonate plant, and discard stockpiles.

As of June 30, 2023, the construction of the first two strings of ponds reached over 98-per-cent completion with the first nine ponds completed and filled with brine and all ponds lined. The engineering for the third string of ponds has been completed, and earthworks have commenced. The main brine pipeline is complete, and the production wells have been commissioned. Camp expansion activities and procurement of long-lead items have progressed with the arrival on site of a number of items of proprietary equipment. Detailed engineering of the process plant continues, and steady progress has been made on procurement of bulk materials. Process plant construction has also advanced with the mobilization of the engineering, procurement and construction contractor and continuation of civil works, including delivery and installation of precast foundations and associated concrete works.

Wellfield and brine distribution

There are two wellfields considered for production: one in the east and one in the southwest. For Stage 1, only wells from the east wellfield will be used while Stage 2 will utilize the southwest wellfield. The locations of production wells were selected to reduce long-term freshwater drawdown and maintain the highest possible brine grade.

Ten wells have been constructed for Stage 1. All wells will be connected through pipelines to a booster station that is to be situated in a central location to the wellfield. The booster station combines brines from the different wells and acts as a brine pumping station to reach the ponds and provide a buffer for seasonal flow changes. The average flow from the brine wells to the first evaporation ponds will be approximately 159 litres per second for Stage 1.

Evaporation ponds

The solar evaporation pond system consists of a series of halite and muriate (KCl) ponds, which concentrate brine to a lithium concentration suitable for feeding the lithium carbonate plant. The ponds for Stage 1 cover a total area of approximately 450 hectares, and Stage 2 will cover a total of 850 hectares. These areas were calculated based on the expected evaporation rates and the production well flow rates.

Halite ponds for Stage 1 are arranged in three strings, which operate in parallel. Each string contains six cells plus a buffer pond with the flow from one pond to the next in series. Ponds of the same type are connected through weirs, which allow for constant natural flow from one pond to the next, maintaining brine levels in all ponds.

Evaporation results from the combination of solar radiation, wind, temperature and relative humidity. Halite salts (primarily sodium chloride) precipitate at the bottom of the pond, are harvested periodically and are stockpiled in accordance with environmental requirements. The muriate ponds will have the same design basis and be located adjacent to the halite ponds. When the brine reaches a lithium concentration of 21 grams per litre, it will be stored in a set of concentrated brine storage ponds, from where the brine will be fed to the lithium carbonate plant.

Liming

The halite ponds will feed evaporated brine to the liming stage to partially remove magnesium. A solution of milk of lime will be added to the brine inside mixing tanks, precipitating magnesium and removing other impurities such as boron and sulphates. The solids will be separated from the brine and pumped to a discard facility. The limed brine will be fed to a series of muriate ponds for further concentration. It will then be stored in the concentrated brine storage ponds to act as buffer ponds before feeding the process plant to accommodate seasonal flow variations and provide consistent feed to the process plant.

Lithium carbonate plant

The lithium carbonate plant is designed to produce 15,000 tpy of lithium carbonate in Stage 1, with Stage 2 enabling the production of an additional 30,000 tpy. The plant design was based on average brine supplies of 26 cubic metres per hour for Stage 1 and an additional 52 cubic metres per hour for Stage 2, respectively. The design includes an average lithium concentration of 21 grams per litre in the softening feed. Plants will operate continuously with a design availability of 91 per cent.

Brine from the concentrated brine storage ponds will re-enter the process plant in the softening stage to further remove magnesium and calcium. Solid contaminants will be sent to a filter cake tank to be repulped with the liming discards before reporting to the discard facility. Softened brine will report to an ion exchange (IX) circuit feed tank to remove the remaining calcium and magnesium ions and meet battery-grade specifications. Lithium-concentrated brine from the IX stage will be combined with sodium carbonate at elevated temperatures to produce lithium carbonate. The lithium carbonate solids will be recovered while the liquor will be recycled back into the process. The lithium carbonate solids will be dried to less-than-1-per cent moisture, before being filtered and cooled. The solids will be micronized, and iron contaminants will be removed magnetically. The micronized product will then be bagged for transport and sale.

Salt waste disposal

During the evaporation phase, the buildup of solid sodium chloride, magnesium, boron and sulphate salts will occur in the ponds. Over time, the solids will build to a level where their removal is required to maintain a working liquid volume within the ponds. All ponds will be harvested on average once per year with the solids placed in storage facilities adjacent to the ponds. The estimated annual total of salt harvested and stockpiled from the halite ponds is 1.4 million tpy, and from the muriate ponds is 79,000 tpy for Stage 1 of the project. For Stage 2, the annual salt harvest will be 2.8 million tpy and 158,000 tpy for halite and muriate ponds, respectively.

The salt disposal facility covers approximately 300 hectares for Stage 1 and 600 hectares for Stage 2, and will consist of halite, muriate and co-disposal stockpiles surrounding the halite ponds. All salt waste is of similar chemistry to the surrounding salar, and no adverse environmental impacts are expected.

Final product

Project economics are based on a production and sales volume mix comprising 80-per-cent battery grade and 20-per-cent technical grade. The operating intention is to maximize the production of battery grade; however, the 20-per-cent allowance for lower-grade products is a prudent approach at this stage of the development.

Site layout and infrastructure

The project's tenements cover 26,253 hectares, and all process facilities will be located in the southeastern sector of the Salar del Hombre Muerto. The east wellfield for Stage 1 is located on the eastern subbasin of the Salar del Hombre Muerto over the salt pan, and the ponds for Stage 1 are located in two areas directly south. Stage 2 will be located southeast of the southwest wellfield.

The brine distribution system traverses the salar toward where the evaporation ponds are located. The location of the ponds has been determined based on a number of factors, including optimal constructability properties and minimizing earthworks, environmental impact and risk of flooding.

The processing plant for all stages is located adjacent to Stage 1's evaporation ponds. A road system, including ramps and causeways, connects the processing facilities and provides access to all working areas.

Supporting infrastructure and logistics

The following main facilities are planned for the project:

• Raw water system;
• Power generation and distribution;
• Fuel storage and dispensing;
• Construction camp to accommodate up to 900 people;
• Sewage treatment plant;
• Fire protection system;
• Buildings for the process plant, reagent and product storage;
• Various buildings for administration and site services;
• Site roads, causeways and river crossings;
• Communications and mobile equipment;
• Steam generation, water heating and compressed air system;
• Drainage system.

The main route to the project site is from the city of Catamarca through national route 40 to Belen, then provincial route 43 through Antofagasta de la Sierra to the Salar del Hombre Muerto. The road is mostly paved to Antofagasta de la Sierra and continues unpaved for the last 145 kilometres to Salar del Hombre Muerto. This road is well maintained, and also serves Livent Corp.'s Fenix lithium operations and Galan Lithium Ltd.'s Hombre Muerto project. The project is also serviced by key infrastructure, including major roads, rail, air and multiple seaports in Argentina and Chile.

The Ferrocarril Belgrano railway line is located 100 km to the north of the project, and the use of rail during later project stages is a possibility. A public airstrip is located in Antofagasta de La Sierra, and a private airstrip is located at Livent's Salar del Hombre Muerto operations.

International cargo for Sal de Vida could use a combination of ports in Buenos Aires, Argentina and Chile. The ports of Antofagasta and Angamos consist of deepwater port facilities serving the mining industry in northern Chile. The ports of Rosario, Campana and Buenos Aires consist of large port facilities serving multiple industries in Argentina's main economic hubs.

Financial performance

Development capital and operating costs

Project development capital expenditure (capex) for both stages combined producing 45,000 tpy lithium carbonate is estimated to be $1,031-million (U.S.). Further details are summarized herein.

The Stage 1 project development capex is estimated to be $374-million (U.S.) up to mechanical completion. This represents a 38-per-cent increase from $271-million (U.S.) in the previous study. The estimate includes wellfields to ponds, the lithium carbonate plant, non-process infrastructure and various indirect costs. The increase includes a new foreign goods and services tax (Decree 377/2023) ($11-million (U.S.)), a schedule extension ($29-million (U.S.)), regional inflation and foreign exchange adjustments ($38-million (U.S.)), and a re-estimate of contingency ($21-million (U.S.)) on the rest of the project.

Stage 2 capex is estimated at approximately $657-million (U.S.), up from $523-million (U.S.) in the previous study, representing a 26-per-cent increase. The development capex estimate for Stage 2 is supported by the design basis of Stage 1 with the fundamental approach to replicate Stage 1 twofold in the Stage 2 design with increased wells, pumps, evaporation ponds and plant capacity. The future project will benefit from Stage 1 through detailed engineering, established on-site infrastructure, and established regional construction teams and facilities. Intangible benefits include the continuity of people, systems and processes, engineering efficiencies, and the targeted allocation of contingency.

Operating expenditure (opex) is estimated to be $4,529 (U.S.) per tonne LCE for Stage 1 from $3,612 (U.S.) per tonne LC in the previous study due to material increases in the price of soda ash, lime and labour costs.

Operating cost for all stages is estimated to average $4,003 (U.S.) per tonne LCE, a 12-per-cent decrease compared with Stage 1 on a stand-alone basis.

For SdV Stage 2, operational synergies are expected with labour, reagents and product handling.

Lithium carbonate price forecast

Lithium has diverse applications, including ceramic glazes, enamels and lubricating greases, and as a catalyst. Demand in traditional sectors grew by approximately 4-per-cent compound annual growth rate from 2020 to 2022. Dominating lithium usage is in rechargeable batteries, which accounted for 80 per cent in 2022, with 58 per cent attributed to automotive applications. Industry consultant Wood Mackenzie estimates growth in the lithium market of 11-per-cent CAGR between 2023 and 2033 for total lithium demand, 13 per cent for automotive, and 7 per cent for other applications.

Historical underinvestment and strong electric vehicle demand have created a supply deficit, influencing prices and investment in additional supply. Market balance remains uncertain due to project delays and cost overruns. The market is forecast to be in deficit in 2024, and have a fragile surplus in 2025 and a sustained deficit from 2033.

Prices have fluctuated in 2022/2023, with factors like plateauing EV sales, Chinese production slowdown and supply chain destocking influencing trends. Woodmac notes that battery-grade carbonate prices are linked to demand growth for LFP cathode batteries and are expected to decline but rebound by 2031. Lithium hydroxide's growth supports a strong demand outlook, with long-term prices between $25,000 (U.S.) and $35,000 (U.S.) per tonne (real U.S.-dollar 2023 terms).

Project economics

An economic analysis was developed using the discounted cash flow method and was based on the data and assumptions for capital and operating costs detailed in this report for brine extraction, processing and associated infrastructure. The evaluation was undertaken on a 100-per-cent equity basis.

The basis of forecast lithium carbonate pricing was provided by Woodmac for the period of 2023 to 2035, with a longer-term price of $28,000 (U.S.) per t and $26,000 (U.S.) per t used for battery-grade and technical-grade lithium carbonate from 2035 onward.

A royalty agreement with the Catamarca provincial government has been executed, confirming a life-of-project royalty rate at 3.5 per cent of net sales revenue (revenue less taxes). This agreement applies to both the SdV Stage 1 and Stage 2 expansion.

The key assumptions and results of the economic evaluation are displayed.

The study update for all stages demonstrates strong financial outcomes with a pretax NPV at a 10-per-cent discount rate of $5.51-billion (U.S.). This represents an approximately 82-per-cent increase from $3.04-billion (U.S.) in the previous study. SdV Stage 1 reflects an increase in pretax NPV from $1.23-billion (U.S.) in the previous report to $2.01-billion (U.S.) at a 10-per-cent discount rate, representing an approximately 63-per-cent increase in value.

Further project economics are summarized herein.

Sensitivity analysis

As displayed herein, the SdV Stage 1 study update demonstrates strong financial outcomes with a posttax NPV at a 10-per-cent discount rate of $1,152-million (U.S.) and a posttax internal rate of return of 32.5 per cent.

Environmental and social impacts

Carbon emission management

Allkem is committed to the transition to net-zero emissions by 2035 and is progressively implementing actions across the group to achieve this target.

Power generation at Sal de Vida is designed to be sourced initially from diesel generators and then from gas generators, whilst maximizing a photovoltaic energy solution. A stand-alone study is being undertaken with the intention of replacing all remaining site-based diesel generated power with natural gas. Allkem is targeting 30 per cent of power generation for Stage 1 production to be sourced from photovoltaic energy generated by a site-based solar farm. The company is currently in a tender process to install this hybrid solution for day 1 of Stage 1 production.

Environment

Allkem is committed to the responsible use of water resources and minimizing environmental impacts. The internally developed process flowsheet was selected partly on the basis it consumed significantly less energy and water than other conventional technologies.

The Sal de Vida project will consume minor amounts of raw water, equivalent to 1 to 2 per cent of the total groundwater recharge to the system. There is no expected loss of water to communities with either their groundwater or surface water usage. Water monitoring takes place at seven different control points alongside nearby rivers in addition to periodic sampling to test flow rates, chemical and physical properties.

An environmental baseline study was performed covering areas such as water, flora, fauna, hydrogeology, hydrology, climate, landscape, ecosystem characterization and socio-economic considerations. This study was used to support the environmental impact assessment, and is being used to monitor any impacts from construction activities and/or operations. Collaborative and community water sampling continues with local communities and provincial regulators.

A physical climate change impact risk study was completed in 2020. Over all, no material climate change risks were identified, and projections will continue to be used to inform project design and operations management.

Community engagement

Allkem is committed to regularly engaging with community stakeholders and providing positive, lasting benefits through employment opportunities, local procurement, and educational and health initiatives. As part of a two-year corporate social responsibility program agreed in 2019, the company financed three projects to support the communities nearest to Sal de Vida. This included the construction of a high school in El Penon village, expansion of a primary school in Antofagasta de la Sierra and construction of a first aid facility in Cienaga La Redonda. A community office was established in Antofagasta de la Sierra in January, 2020. Separately, a social baseline study, including a perception test, returned positive results about the company and the Sal de Vida project.

Since 2021, Sal de Vida has been developing a completion of education program that benefits employees of the project, and the communities of Cienaga Redonda and Antofalla. This program is carried out jointly through an agreement signed with Catamarca Education Ministry. Allkem aims to support local communities by maximizing health, well-being, and the procurement of local goods and services whilst upskilling and providing future employment opportunities.

As of June 30, 2023, over 70 per cent of the local employees are from Catamarca, and Stage 1 will create approximately 900 full-time positions in the peak of construction.

Further engagement with the provincial government and stakeholders, including the communities of Antofagasta de La Sierra, continues in relation to project updates.

Regulations and permitting

Sal de Vida Stage 1 (15,000 tpy production capacity) is fully permitted after receiving approval from regulators in December, 2021 (for 10,700 tpy production capacity), and subsequently in December, 2022 (for 15,000 tpy production capacity, which included an additional third string of evaporation ponds, which covers approximately 150 hectares). These permits are being used for construction activities, which commenced in January, 2022, to build the first two strings of ponds, the brine distribution system, additional camp capacity, process plant and non-process infrastructure. In addition, water easements have been issued, and a resolution was issued permitting construction of the solar farm.

Stage 2 will require a new EIA approval that will be submitted once the front-end engineering design and technical studies for this stage are completed. A groundwater permit is also in place, providing sufficient supply of water for all stages of operations.

Execution strategy

Project schedule

SdV Stage 1 pond construction commenced in January, 2022. The project has been divided into a number of work packages, namely: wellfield and brine distribution, evaporation ponds, process plant and utilities, and an energy package.

As of Aug. 31, 2023, construction of the first two string of ponds was completed, and the third string had reached 59 per cent of construction completion. The process plant engineering is at 59 per cent, procurement progress at 63 per cent and construction progress at 9 per cent. Camp construction was also complete with 888 beds available. Long-lead-equipment procurement is well advanced with the majority of equipment forecast for arrival prior to the end of calendar year 2023.

Substantial mechanical completion, precommissioning and commissioning activities are expected by first half 2025 with first production expected in second half 2025 and ramp-up expected to take one year.

The schedule change for SdV relates improved understanding of the current execution plan, the continuing import challenges, and delays experienced in country by Allkem and its contractors and vendors, as well as an improved understanding of regional productivity factors.

The prefeasibility study update for SdV Stage 2 confirms the expansion will be completed on the same design basis as Stage 1 with a twofold modular replication of the Stage 1 design. Stage 2 construction is anticipated to commence upon receipt of applicable permits and substantial mechanical completion of Stage 1 with Stage 2 first production approximately 2.5 to three years thereafter.

Financing

Financing is expected to be provided through one or more of the following:

• Existing corporate cash;
• Existing or new corporate debt or project finance facilities;
• Cash flow from operations.

Offtake strategy

Allkem continues discussions with prospective customers. In line with the project execution schedule, these discussions are expected to advance to negotiations throughout the course of the project. Interest and demand remain strong against the backdrop of a tight market, and Allkem seeks to target high-growth regions and determine the optimal contracting arrangement at the time of product qualification.

Competent person statement

The information in this report that relates to Sal de Vida's exploration results, mineral resources and reserves is based on information compiled by Michael Rosko, MS, PG, and Brandon Schneider, MS, PG, both of whom are competent persons and registered members of the Society for Mining, Metallurgy and Exploration Inc (SME), a recognized professional organization (RPO) included in a list posted on the Australian Securities Exchange website from time to time. Mike Rosko and Brandon Schneider are both employees of Montgomery and Associates, and have 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. Rosko and Mr. Schneider consent to the inclusion in this announcement of the matters based on their information in the form and context in which it appears.

The scientific and technical information contained in this announcement has been reviewed and approved by Michael Rosko, MSc, geology (Montgomery and Associates), and Brandon Schneider, MSc, geological sciences (Montgomery and Associates), as it relates to geology, modelling, and resource and reserve estimates; Michael Gunn, BSc, chemical engineering (Gunn Metals), as it relates to processing, facilities, infrastructure, project economics, and capital and operating cost estimates. The scientific and technical information contained in this release will be supported by a technical report to be prepared in accordance with National Instrument 43-101 (Standards for 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+.

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