Mr. Martin Perez de Solay reports

JAMES BAY LITHIUM PROJECT UPDATE CONFIRMS STRONG PROJECT ECONOMICS

Allkem Ltd. has provided a project update for its wholly owned James Bay lithium project located in Quebec, Canada. This update builds on the recently announced mineral resource update (Aug. 11, 2023) and the prior feasibility study (FS) results released on Dec. 21, 2021.

Highlights:

• Updated feasibility study confirms a robust, high-value hard-rock lithium operation utilizing renewable hydropower;
• Material approximately 108-per-cent increase in pretax net present value (NPV) to $2.9-billion (U.S.) with a strong internal rate of return and short payback period.

Project details:

• Recently announced total mineral resource of 110.2 Mt (million tonnes) at 1.30 per cent Li2O (lithium oxide), including 54.3 Mt at 1.30 per cent Li2O in the indicated category and 55.9 Mt at 1.29 per cent Li2O in the inferred category, with further drilling planned to test possible extensions to mineralization;
• Ore reserve of 37.3 Mt at 1.27 per cent Li2O provides a long-life, low-cost, spodumene operation and remains in line with permitting considerations;
• Average annual production of 311,000 tpa (tonnes per annum) of spodumene concentrate with an 18.8-year mine life;
• Shallow, near-surface mineralization ideal for open-cut mining with a low life-of-mine (LOM) strip ratio of 3.6:1;
• Two Mtpa (million tonnes per annum) process plant design remains unchanged from 2021 FS, producing a 6 per cent Li2O spodumene concentrate with operational flexibility to produce a 5.6 per cent Li2O spodumene concentrate;
• Very similar process design and flowsheet to that already successfully employed at Mt Cattlin;
• Low-cost, sustainable source of hydropower now installed to site;
• Strong relationships with the Cree Nation of Eastmain, Cree Nation government and all stakeholders.

Project financials:

• Increase of the capital cost estimate (capex: capital expenditures) to $381.5-million (U.S.), representing a 33.8-per-cent increase on the December, 2021, FS, in line with inflationary conditions;
• Cash operating costs (FOB (free on board) Montreal) of $407 (U.S.) per tonne of 5.6 per cent Li2O concentrate, also reflecting inflationary conditions;
• Pretax NPV of $2.9-billion (U.S.) at an 8-per-cent discount rate and posttax NPV of $1.7-billion (U.S.), reflecting an increase in lithium price assumptions and market outlook;
• Pretax internal rate of return (IRR) of 62.2 per cent and pretax payback period of 1.4 years;
• Posttax internal rate of return (IRR) of 45.4 per cent and posttax payback period of 1.7 years.

Project execution:

• Detailed engineering and procurement activities progressed at 80 per cent, supporting the updated cost estimate and bringing the project ready for approximately 19 months of construction once provincial authorization is obtained;
• Impact and benefit agreement (IBA) discussions, and provincial environmental and social impact studies review (COMEX) are in final stages;
• Further carbon studies and initiatives under way to align the project to Allkem's target of net-zero emissions by 2035.

Martin Perez de Solay, managing director and chief executive officer, commented:

"The feasibility study update results confirm the exceptional value that will be generated for all stakeholders through the development of this project. Inflationary impacts on operating and capital costs are within expectations and as seen at other projects, however, the project economics remain strong with an increase of more than 100 per cent in the pretax NPV to $2.9-billion (U.S.), reflecting an increase in lithium price assumptions and market outlook.

"Pleasingly, there remains significant potential for this resource to grow as we conduct further drilling to test extensions of the recently upgraded resource of 110 million tonnes."

Project background

The project is located in Northern Quebec, approximately 130 kilometres east of James Bay and the Cree Nation of Eastmain community. The company is proposing to develop a spodumene mine located adjacent to the Billy Diamond Highway (formerly the James Bay Highway), which provides access to key infrastructure in the region.

The company has updated the feasibility study and technical report in accordance with National Instrument 43-101 and S-K 1300 guidelines, in preparation for the proposed merger between the company and Livent.

Geology and mineralization

The project is in the northeastern part of the Superior province and lies within the Lower Eastmain group of the Eastmain greenstone belt. This area predominantly consists of amphibolite grade mafic to felsic metavolcanic rocks, metasedimentary rocks and minor gabbroic intrusions.

The pegmatites delineated on the property to date are oriented in a generally parallel direction to each other and are separated by barren host rock of sedimentary origin (metamorphosed to amphibolite facies). They form irregular dikes attaining up to 60 metres in width and over 300 metres in length. The pegmatites crosscut the regional foliation at a high angle, striking to the south-southwest and dipping moderately to the west-northwest.

Spodumene mineralization at James Bay is coarse grained, high grade and outcrops along strike, supporting excellent recoveries, low strip ratio and open-cut mining. No significant deleterious lithium mineralization has been identified to date.

In 2023, new pegmatite dikes were discovered to the northwest of known mineralization, which were incorporated into the inferred category of an updated mineral resource announced on Aug. 11, 2023.

Resource and reserve estimate

The mineral resource and ore reserve estimates set out herein have been prepared in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2012 (JORC (Joint Ore Reserve Committee)), the CIM (Canadian Institute of Mining, Metallurgy and Petroleum) definition standards for mineral resources and mineral reserves (2014) and the CIM estimation of mineral resources and mineral reserves best practice guidelines (2019). Mineral resources and ore reserves are classified using the JORC code. The confidence categories assigned under the JORC code were reconciled to the confidence categories in the CIM definition standards. As the confidence category definitions are the same, no modifications to the confidence categories were required.

Although ore reserves are referred to in this announcement, they are analogous to mineral reserves as described in NI 43-101 -- Standards of Disclosure for Mineral Projects. Competent persons (JORC) are analogous to qualified persons (NI 43-101).

Mineral resource estimate

An updated mineral resource estimate was announced on Aug. 11, 2023, and was based on a total of 104,000 metres of drilling and channelling from 655 drill holes, with a drill hole database cut-off date of May 19, 2023. This updated MRE includes an additional 37,500 metres of drilling conducted since the previous feasibility study.

The resource estimation work was completed by SLR Consulting (Canada) Ltd., an independent consulting firm based in Toronto, Canada. The pegmatite dikes have been classified based on a 40 m to 50 m spacing for indicated mineral resources and approximately an 80 m spacing for inferred mineral resources.

The tonnages and grade of the updated mineral resource are shown in the table entitled "James Bay mineral resource estimate -- effective date June 30, 2023."

Ore reserve estimate

The ore reserve of 37.3 Mt at an average grade of 1.27 per cent Li2O was prepared by SLR Consulting and remains virtually unchanged since the previous feasibility study (see the table entitled "James Bay ore reserve -- effective date June 30, 2023").

Mining and processing

Mining

Mine engineering was performed by SLR Consulting and a summary of the key physicals are displayed in the table entitled "Summary of LOM physicals for an estimated 19-year mine life."

The pegmatite deposit will be mined by conventional open-pit methods. All material will require drilling and blasting, and will be removed using mining excavators and haul trucks. The preliminary pit design extends approximately two kilometres northwest/southeast along the strike of the pegmatite mineralization and has an average width of 500 metres. The design is divided into three pits with depths of 160 m, 170 m and 260 m.

Mining is scheduled to achieve low waste stripping in the initial years, with a gradual increase later in the mine life. The average strip ratio for the LOM plan is 3.6:1. Waste rock will be hauled to multiple waste rock and tailings storage facilities (WRTSF), and run of mine (ROM) feed material will be hauled to the ROM pad, located to the northeast of the pits.

The preliminary mine plan/LOM schedule shows the mine plan tonnages by year, with prestrip activities commencing two years prior to first production. Mining covers 19 years of production with 132.7 Mt of waste rock and 37.3 Mt of ROM feed material for a total of 170 Mt of material mined.

In the preproduction period, the ROM material generated will be stockpiled for processing during production years. Site preparation, including tree clearing, grubbing and peat/topsoil removal, will occur during the project construction phase.

Surface mining equipment requirements are based on mining 10 m benches. Conventional excavator and truck fleet will be sized to meet the planned tonnage requirements to feed the concentrator at two Mtpa. Haul trucks are required to transport tailings from the plant to the proposed waste rock and dry stacked tailings stockpile areas.

Processing

Process plant engineering was performed by Wave International, an Australian-based engineering company with global development experience.

The process design is based on an annual throughput of two Mt of ore to produce a final product grade of 6 per cent Li2O, with operational flexibility to produce a concentrate grade of 5.6 per cent Li2O. The selected process incorporates a similar flowsheet to the Mt Cattlin mine, and is based on crushing and dense medium separation (DMS).

Processing involves a conventional three-stage crushing circuit, followed by a DMS plant. Similar to Mt Cattlin, crystal sizes are coarse and therefore grinding and flotation methods are not necessary, contributing to low operating costs. Other subprocesses include:

• Dewatering and dry stack tailings disposal system (combined with waste rock disposal);
• Water, air and ancillary services;
• Spodumene concentrate stockpile and dispatch system.

The ROM ore will be fed to a three-stage crushing plant consisting of a primary jaw crusher, a secondary crusher and tertiary crusher. Prior to feeding the DMS cyclones, the material will be mixed with a ferrosilicon slurry, which acts as a densifying medium to enhance the gravity separation of the spodumene.

Final product grade

Metallurgical test work was conducted by SGS Canada Inc. and Nagrom to determine optimal plant operating recoveries. For a final spodumene concentrate grading 5.6 per cent Li2O, modelling indicates that a recovery of 69.6 per cent in the early years and 66.9 per cent in later operating years is a reasonable assumption.

In line with this market demand, project economics are based on the production and sale of a 5.6 per cent Li2O final product grade. This product grade yields higher recoveries and revenues associated with higher concentrate production.

James Bay will produce an average of 311,000 tpa of spodumene concentrate for 19 years, and retains ultimate flexibility to produce final product grade consistent with market and customer demand. Allkem's final product specification will ultimately be determined in consultation with its customers.

Infrastructure

Waste rock and tailings storage facility engineering was performed by WSP Ltd., and site infrastructure engineering was performed by G Mining Services Inc.

Mine infrastructure

The site infrastructure will include:

• ROM pad;
• Crushed ore covered stockpile;
• Four waste rock tailings storage facilities;
• Overburden and peat storage area (OPSF);
• Two water management ponds and plant water management pond;
• Contact water ditches and non-contact diversion water ditches;
• Fine and coarse tailing bins;
• Spodumene concentrate warehouse;
• Explosive storage building.

The ROM stockpile and spodumene concentrate warehouse will be located adjacent to the process plant. All storage areas were selected to minimize their environmental impact. A surface drainage network will be built to divert non-contact water from the ROM pad and stockpile, WRTSF, OPSF stockpiles, and process plant. The same strategy will be used to manage the surface water run-off (contact) for all disturbed land.

Supporting infrastructure and logistics

The following infrastructure facilities are planned for the project:

• 69 kV (kilovolt) main substation;
• Laboratory building;
• Accommodation camp;
• Workshop and reagent buildings;
• Storage and communication facilities;
• Distribution facility for heating;
• Potable water and sewage treatment plants;
• Effluent water treatment plant.

The process plant and supporting infrastructure will predominantly be powered by Hydro-Quebec's 69 kV overhead distribution system. An overhead distribution line extension has been built to the plant substation from the 69 kV line (L-614) located 10 km south of the project site. The 69 kV power supply is limited by a capacity of eight MVA (megavolt amperes) due to the sensitivity of the network and distance from the substation.

The project is also accessible all-year-round via the paved Billy Diamond Highway, which allows oversized haul trucking to and from site, including the town of Matagami, located 382 km south of the project. Matagami is connected to a major railway, the Canadian National Railway network, allowing future production to be railed to various locations in North America or any port along the Saint Lawrence River for international shipment.

The Eastmain airport is located 130 km from site and will be used to transport staff and contractors from major centres in Southern Quebec. Discussions are under way with Transport Canada about necessary upgrades required to create more regular aerial services to support future operations. Fuel and accommodation are also available at the "Relais Routier Km 381" truck stop, a sizable facility, located adjacent to the project site.

Financial performance

Capital and operating costs

Capital and operating cost forecasts were completed by SLR, GMS and Wave, incorporating engineering undertaken by other contributors.

The total initial project development capital expenditure is estimated to be $381.5-million (U.S.). The capex forecast has been prepared to reflect optimized site layouts, mine scheduling, plant and equipment design, supply, and installation. The estimate is detailed in the table entitled "Capital cost estimates and operating cost estimate," and includes processing, mine equipment purchases, infrastructure, contingency, and other direct and indirect costs. Deferred capex is also required during operations for additional equipment purchases, a truck shop bay addition and mine civil works. A preproduction cost of $29.5-million (U.S.) has also been estimated in addition to the initial capex, which comprises costs associated with overburden and waste stripping, and building the initial inventory for commissioning and start-up of operations.

Operating costs (opex) are estimated to be $407 (U.S.) per tonne of concentrate (FOB Montreal). Opex includes mining, processing, general and administrative services, and concentrate transportation, as detailed in the table entitled "Capital cost estimates and operating cost estimate."

Sustaining capex is estimated at $151-million (U.S.) for the life of mine of the project.

Since the release of the feasibility study in 2021, work undertaken has improved the accuracy of the capital and operating costs, particularly in relation to mining, processing and concentrate transport costs. The key observations include:

• Increased labour rates throughout all trades (reflecting market conditions);
• Increased mechanical and electrical equipment costs (based on firm price bid received);
• Increase in Hydro-Quebec powerline costs (reflecting market conditions);
• Increase in accommodation and transport costs (reflecting market conditions);
• Increase in fuel-associated cost (unit cost reflecting market conditions).

Spodumene pricing forecast

Lithium has diverse applications, including ceramic glazes, enamels, lubricating greases and as a catalyst. Demand in traditional sectors grew by approximately 4-per-cent CAGR (compound annual growth rate) from 2020 to 2022. Rechargeable batteries dominate lithium usage, which accounted for 80 per cent of demand in 2022, with 58 per cent attributed to automotive applications. Industry consultant Wood Mackenzie (Woodmac) 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 EV (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, have a fragile surplus in 2025 and a sustained deficit from 2033.

Prices have fluctuated in 2022 to 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 (lithium iron phosphate) 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). Chemical-grade spodumene concentrate prices are expected to align with market imbalances, with a long-term price forecast between $2,000 (U.S.) per tonne and $3,000 (U.S.) per tonne (real-U.S.-dollar 2023 terms).

Allkem has relied on external spodumene concentrate price forecasts provided by Woodmac for this feasibility study update.

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 mining, processing and associated infrastructure.

The basis of forecast spodumene pricing was provided by Woodmac for the period 2023 to 2033, with a longer-term price of $2,107 (U.S.) used from 2033 onward for 6 per cent Li2O. Adjustments were made to these prices to reflect the 5.6-per-cent-Li2O spodumene concentrate to be produced at James Bay based on Allkem experience at Mt Cattlin.

The evaluation was undertaken on a 100-per-cent equity basis. The key assumptions and results of the economic evaluation are listed in the tables entitled "Key assumptions utilized in the project economics" and "Summary of financials over the estimated LOM."

Sensitivity analysis

As displayed in the table entitled "Summary of financials over the estimated LOM," the feasibility study demonstrates strong financial outcomes with a posttax NPV (at an 8-per-cent discount) of $1,687-million and IRR of 45.4 per cent. The NPV of the project is most sensitive to movements in the price of spodumene and foreign exchange fluctuations, followed by operating costs and development capital costs.

Environmental and social impacts

Environmental and permitting work packages were performed by WSP Canada Inc., a global professional services and engineering firm with environmental expertise and significant experience in facilitating project approvals and development projects.

Carbon emissions 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. Each project within the group will contribute to this target in a different, but site-appropriate, manner.

As a greenfield project, James Bay has a unique opportunity to build a low-carbon operation. The location of the project will provide access to hydro power supplied by Hydro Quebec, which delivers a significant advance in the overall decarbonization of the project.

Future studies will focus on opportunities to increase the proportion of sustainable energy available to the project, which will further reduce operational carbon emissions. The primary area to be investigated will be the supply of additional hydro power, which may allow the potential conversion of the mining fleet and all site facilities away from fossil fuels. Allkem will work with project partners to identify and develop further emissions reduction opportunities within the project supply chain, mostly around the availability of battery-power mobile equipment capable of operating in cold-weather conditions. Additional studies are also planned to replace petroleum hydrocarbons used for heating during cold winter weather with renewable sources.

Allkem will also engage with the Quebec government, which has demonstrated a strong commitment for renewable energy with the 2030 Plan for a Green Economy. The goals of this plan are aligned with Allkem's commitment to net zero via the replacement of fossil fuels in transport, buildings and industrial activity. The Quebec government has also committed to develop and consolidate energy networks through the territory, particularly for critical and strategic mineral developments.

Regulations and permitting

The project is subject to a federal and provincial environmental assessment, which must be consistent with the James Bay and Northern Quebec Agreement (JBNQA). In January, 2023, the federal Minister for the Environment and Climate Change issued federal authorization for the project. Allkem is now awaiting the issuance of provincial authorization by the government of Quebec, following completion of the environmental and social impact assessment, and review process by the COMEX. Once the ESIA is approved, auxiliary 4 construction permits will be submitted for approval prior to commencing construction at James Bay.

Community engagement

The Cree Nation community of Eastmain, located 130 km east of the project site, is the nearest major community to the site. The company has a strong working relationship with the Cree Nation of Eastmain, and conducts regular and meaningful engagement and consultation with the Cree Nation.

On March 18, 2019, a preliminary development agreement (PDA) was signed with the Cree Nation of Eastmain, grand council of the Cree and Cree Nation government. The PDA will be replaced by an impact benefit agreement (IBA), which is currently being negotiated, before construction is initiated.

Further engagement with the Cree Nation government and stakeholders, including the communities of Waskaganish and Waswanipi, continue in relation to project updates. The project will create approximately 250 full-time positions in the Eeyou Istchee/James Bay region.

Execution strategy

The project execution strategy has been determined by an integrated team between Allkem, GMS, Wave and selected key contractors. Detailed engineering and procurement activities are 80 per cent complete, providing strong support for the updated cost estimate. It is estimated project construction will take approximately 19 months once authorization is obtained. The majority (more than 80 per cent) of mobile, fixed mechanical and electrical equipment have been procured. Contractor selection commenced after engineering was well advanced (above 60 per cent). Key contractors for all disciplines have been selected and final negotiations are in progress. It is planned to integrate contractors into the final stages of the design and planning the construction work with Allkem.

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;
• Strategic offtake partner(s).

Competent person statement

The information in this announcement that relates to mineral resources is based on information compiled and supervised by Luke Evans, PEng, a competent person who is a member of L'Ordre des Ingenieurs du Quebec (licence No. 105567). Mr. Evans is a full-time employee of SLR Consulting (Canada). Mr. Evans 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. Evans 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 ore reserves is based on information compiled by Normand Lecuyer, PEng, a competent person who is a member of L'Ordre des Ingenieurs du Quebec (licence No. 34914), a recognized professional organization included in a list posted on the Australian Securities Exchange website from time to time. Mr. Lecuyer is an employee of SLR Consulting (Canada). Mr. Lecuyer 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. Lecuyer 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 James Bay project contained in this release is derived from, and in some instances is an extract from, the technical report entitled "James Bay project -- feasibility study update," (technical report) which has been reviewed and approved by: Mr. Evans, PEng (SLR Consulting (Canada)), as it relates to property, geology, drilling, sampling, exploration, quality assurance/quality control (QA/QC) and mineral resources; Joel Lacelle, PEng (G-Mining Services), as it relates to site infrastructure and capital cost estimate; Mr. Lecuyer, PEng (SLR Consulting (Canada)), as it relates to mining methods, mining cost, mining opex, financial modelling and economic analysis; Jeremy Ison, PEng (Wave International), as it relates to mineral processing and related infrastructures; Darrin Johnson, PEng (WSP Canada), as it relates to waste rock and tailings management related infrastructures; Joao Paulo Lutti, Eng (WSP Canada), as it relates to water management infrastructures; and Pierre Groleau, Eng (WSP Canada), as it relates to environmental and permitting in accordance with National Instrument 43-101 -- Standards for Disclosure for Mineral Projects. The technical report will be available for review under the company's profile on SEDAR.

We seek Safe Harbor.