Mr. Jean-Sebastien Lavallee reports

CRITICAL ELEMENTS LITHIUM ANNOUNCES NEW POSITIVE FEASIBILITY STUDY FOR THE ROSE LITHIUM PROJECT GENERATING AN AFTER-TAX NPV8% OF US$2.2B AND AN AFTER-TAX IRR OF 65.7%

Critical Elements Lithium Corp. has released the results of a new feasibility study on the Rose lithium-tantalum project in Eeyou Istchee James Bay, Quebec.

The management of Critical Elements, with its new highly qualified technical team led by Yves Perron as vice-president of engineering, construction and operations, brings a deep level of knowledge and expertise to the engineering process (particularly in mining operations, process, environment, design, estimation and project control). This new study replaces the feasibility study announced by the corporation on June 13, 2022. Noteworthy changes include: (i) the increased indexation of industrial construction prices; (ii) the addition of certain process equipment to increase operational reliability; and (iii) the addition of the scope change of the project by incorporating the construction of the company's own 500-worker camp four kilometres from the mine site. The new camp has been added to reduce the execution risk and timeline as this is vital to having the workers' accommodation ready in time as Critical Elements increases the speed of the construction phase. The new 500-room camp includes both temporary and permanent sections (approximately 250 rooms for each section).

Jean-Sebastien Lavallee, chief executive officer of the corporation, said: "We are very pleased to announce the results of the new definitive feasibility study at Rose to provide the updated economics of the project. The study reaffirms the substantial value of Rose -- amongst the backdrop of higher input costs and the decision to build our own 500-worker camp -- to establish Critical Elements as a reliable, high-quality supplier of lithium. Thank you to our engineers, management team and local stakeholders for their diligent efforts and our shareholders for their continuous support."

Highlights

• Expected 17-year mine life;
• Average production year 2 to 17: 157,706 tonnes of chemical-grade 5.56 per cent spodumene concentrate;
• Average production year 2 to 17: 46,059 tonnes of technical-grade 6.16 per cent spodumene concentrate;
• Average production year 2 to 17: 580 tonnes of tantalum concentrate;
• Average operating costs: $81,30 (U.S.) per tonne milled, $587 (U.S.) per tonne of concentrate (all concentrate production combined);
• Estimated initial capital cost: $471-million (U.S.) (before working capital);
• Average gross margin: 78.8 per cent;
• After-tax net present value (8 per cent) of $2,195-million (U.S.), after-tax internal rate of return of 65.7 per cent;
• Anticipated construction time: 21 months to start of production;
• Average price assumptions of $4,699 (U.S.) per tonne technical-grade lithium concentrate, $2,162 (U.S.) per tonne chemical-grade lithium concentrate and $150 (U.S.) per kilogram tantalum pentoxide (Ta2O5).

The Rose lithium-tantalum project is 100 per cent owned by Critical Elements. The corporation's market strategy is to enter the lithium market with a low-risk approach. The completion of the feasibility study on the spodumene plant is the first step to entering the market and establish the corporation as a reliable high-quality lithium supplier. The low-risk approach is characterized by simple open-pit mining and conventional lithium processing technologies.

Critical Elements has consistently sought to advance the wholly owned Rose lithium-tantalum project in a low-risk manner. To this end, the corporation has completed a new feasibility study with a conservative spodumene concentrate price deck, as well as capital and operating cost estimates reflective of current market conditions. The new feasibility study incorporates a standard truck and shovel open-pit mining operation and conventional lithium processing technologies. The project will produce technical-grade spodumene concentrate for the glass and ceramics industry and chemical-grade spodumene concentrate for conversion for use in batteries for e-mobility, as well as a tantalite concentrate.

The mine will excavate a total of 26.3 million tonnes ore grading an average of 0.87 per cent Li2O (lithium oxide) and 138 parts per million Ta2O5 after dilution. The mill will process 1.61 million tonnes of ore per year to produce an annual average of 203,765 tonnes of technical- and chemical-grade spodumene concentrates and 580 tonnes of tantalite concentrates. The ore is contained in several parallel and continuous shallow-dipping pegmatite dikes outcropping on surface. The ore zones are open at depth and a future underground operation is possible.

Over the life of mine, the open pit will excavate a total of 182.4 million tonnes of waste rock and 10.9 million tonnes of overburden. The average strip ratio is 7.3 tonnes of waste per tonne of ore.

Property

The Rose property is located in Northern Quebec's administrative region, on the territory of Eeyou Istchee James Bay. It is located on Category III land, on the traditional lands of the Eastmain community, approximately 40 km north of the Cree village of Nemaska. The latter is located approximately 300 km northwest of Chibougamau.

The Rose property is accessible by road via the Route du Nord, usable all year-round from Chibougamau. The mine site can also be reached by Matagami, via Route 109 and Route du Nord. The project is located 80 km south of Goldcorp's Eleonore gold mine, 45 km northwest of Nemaska's Whabouchi lithium project and 20 km south of Hydro Quebec's Eastmain-1 hydroelectricity generating plant. The Nemiscau airport services the region's air travel needs. The Rose property site is located 50 km by road from the Nemiscau airport.

The Rose property comprises 473 claims spread over a 24,654-hectare area. Geologically, the Rose property is located at the northeast end of the Archean Lake Superior province of the Canadian Shield.

A mineral reserve estimate for 17 mineralized zones was prepared during this study. The estimation assumed the production of a chemical-grade spodumene concentrate with a price of $20 (U.S.) per kg Li2O and a tantalite concentrate with a price of $130 (U.S.) per kg of Ta2O5. The recoveries were fixed at 85 per cent and 64 per cent for lithium and tantalum, respectively. The grade-recovery curve used for the resource estimate, which became available after the mineral reserves were evaluated, was verified and found to have little influence on the reserve estimate. The production of a higher-value technical-grade spodumene concentrate was not assumed in the reserve estimate.

Based on compilation status, metal price parameters and metallurgical recovery inputs, the effective date of the estimate is Aug. 1, 2023.

The estimate was prepared in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum's standards and guidelines for reporting mineral resources and reserves.

The attached table displays the results of the mineral reserve estimate for the Rose project at the $44.80 net smelter return/tonne cut-off for the open-pit scenario.

Resource estimate

The current mineral resource estimate (MRE) is primarily based on changes made to the net smelter return (NSR) parameters, supported by new assumptions concerning metal prices and the creation of potentially minable shape to constrain the MRE for the potential underground extraction scenario. No changes to the interpretation and interpolation parameters were deemed necessary. The mineral resource model for the current MRE is based largely upon the model generated for the 2011 preliminary economic assessment.

The effective date of the estimate is Aug. 1, 2023, based on compilation status, metal price parameters, metallurgical recovery inputs and creation of the constraining volume.

Given the density of the processed data, the search ellipse criteria, the drill hole density and the specific interpolation parameters, the qualified persons is of the opinion that the current MRE can be classified as indicated and inferred resources. The estimate was prepared in accordance with CIM's standards and guidelines for reporting mineral resources and reserves.

The attached table displays the results of the MRE for the Rose project using a $31.40 NSR/t cut-off for the open-pit potential extraction scenario and $121.12 NSR cut-off for the underground potential extraction scenario.

Feasibility study

The parameters used for the feasibility study are the following:

• Open-pit mining rate of 1.61 million tonnes per year (tpy) of ore;
• Spodumene process plant with a 4,600-tonne-per-day (tpd) capacity.

Mining operation

The mineralization is hosted within outcropping pegmatite dikes subparallel to surface. The orebody is relatively flat, close to surface and comprises north-oriented stacked lenses. Mineralization recognized to date on the Rose property includes rare elements of lithium-cesium-tantalum or LCT-type pegmatites and molybdenum occurrences.

A conventional truck and shovel open-pit approach was considered to mine the Rose lithium-tantalum project's probable mineral reserves. The dimensions of the engineered pit design are approximately 1,620 metres long by 900 metres wide by 220 metres deep.

The life of mine plan (LOM) proposes to mine 26.3 Mt of ore, 182.4 Mt of waste and 10.9 Mt of overburden for a total of 219.6 Mt of material. The average stripping ratio is 7.3 tonnes of waste per tonne of ore. The nominal production rate is estimated at 4,600 tonnes per day and 350 operating days per year.

The mining operation production rate is set to approximately 15 Mt of material per year. An open-pit mining schedule was planned and resulted in a mine life of 17 years.

Contract mining will be used for the removal of the overburden while Critical Elements will undertake the mining of all hard-rock material with its own equipment fleet and operators.

The main production fleet will consist of one backhoe excavator, one electric front shovel, one wheel loader, eight haul trucks (65 tonnes each), seven haul trucks (135 tonnes each), two rotary drills, one DTH (down-the-hole) drill, two bulldozers, one wheel dozer, two graders, one auxiliary excavator, one auxiliary wheel loader and two water trucks.

The Rose project pit was designed with a 10 m single benching arrangement. A 57-degree interramp angle and an overall pit slope angle of 55 degrees were utilized for the ultimate pit design. A berm width of seven m corresponding to the recommended overall slope angle was used. The pit slopes in overburden have a face ratio of 2.5:1 with a 10 m berm width.

The main in-pit haulage ramp is designed at 30.9 m wide to allow double-lane traffic, except for the last benches at the pit bottom that are designed at 20.4 m wide for single-lane traffic. A two m drainage ditch is included to allow for water drainage and pipe installation. The maximum gradient of the inner curvature of all ramp segments is 10 per cent.

A standard froth flotation process will be utilized to produce technical-grade and chemical-grade lithium concentrates and a tantalum concentrate. The mineral process plant will consist of crushing, beneficiation and dewatering areas. The technical-grade lithium concentrate will grade 6.16 per cent Li2O while the chemical-grade lithium concentrate will grade 5.56 per cent Li2O. The tantalum concentrate will grade 20 per cent Ta2O5.

The beneficiation process includes crushing, grinding, magnetic separation and flotation. The crushing circuit will consist of a jaw crusher and two (secondary and tertiary) cone crushers, and screens. The crushed ore will have a P80 of 13 millimetres and will be stockpiled in a 24-hour live capacity dome. The grinding circuit will consist of a ball mill operating in a closed circuit with a set of cyclones. The tantalum will first be recovered at a grade of 2 per cent Ta2O5 by high-intensity magnetic separation then upgraded further to 20 per cent Ta2O5 by gravity separation. Tantalum concentrate will be thickened, filtered, dried to 1 per cent moisture and bagged for shipment. The lithium flotation circuit will include removal of slimes (particles less than 20 micrometres) after magnetic separation followed by mica flotation, scrubbing and spodumene flotation to the required grades. The spodumene concentrate will then be thickened, pressure filtered with a 5-per-cent moisture content and stored in a dome with a capacity of 24 hours, and then be transported by trucks and trains to the port. The flotation tailings will be thickened, vacuum filtered to 15 per cent moisture or less, and trucked to the waste rock/tailings piles where it will be dry stacked.

The spodumene plant will operate 24 hours per day, seven days per week and 52 weeks per year. The process plant was designed with an operating availability of 90 per cent. The crushing circuit was designed using an operating availability of 50 per cent. The plant has a capacity of 1.61 million tonnes per year or 4,900 dry tonnes per day including availability.

Metallurgy

Bench-scale metallurgical testing was performed at Acme Metallurgical Ltd. in Vancouver in 2011. The results from these tests were used for the PEA study. Three composites, the Rose (main structure), the Rose Sud-Est (southeast structure) and Tantalum (secondary structure with higher tantalum and lower lithium content), were subjected to various metallurgical tests.

SGS Canada Inc. in Lakefield conducted tests from 2013 to 2015 to improve lithium and tantalum recoveries. In 2015, SGS Canada developed a conceptual flowsheet based on a series of bench-scale tests on various samples from the Rose deposit. The proposed flowsheet consists of conventional three-stage crushing and single-stage grinding followed by magnetic separation for the recovery of tantalum, mica flotation and spodumene flotation. This flowsheet was the basis of the process plant design.

SGS Canada also conducted a pilot plant program in early 2017 on two samples from the Rose project (Rose and Rose South). The main objective of the pilot plant program was to generate spodumene concentrate for testing in a lithium carbonate pilot plant which was conducted by Outotec in Germany and Finland. Secondary objectives were to prove metallurgical performance on a continuous pilot scale and to generate metallurgical and operating data for further studies. The spodumene pilot plant demonstrated the robustness of the design process.

The feasibility study assumes 84.8-per-cent and 87.4-per-cent recovery for technical- and chemical-grade lithium concentrates, respectively, and 54.4-per-cent minimum recovery for the tantalum concentrate.

Process water will be recycled releasing minimal amounts to the retention pond and final effluent treatment plant.

Environmental and social impact assessment

The final environmental impact assessment (EIA) was submitted to the governments of Canada and Quebec in February, 2019. In August, 2021, Critical Elements announced that the Federal Minister of Environment and Climate Change had rendered a favourable decision in respect of the proposed Rose project. In a decision statement, which included the conditions to be complied with by the corporation, the minister confirmed that the project is not likely to cause significant adverse environmental effects when mitigation measures are taken into account.

In September, 2022, the Environmental and Social Impact Review Committee, an independent body composed of members appointed by the governments of Quebec and the Cree Nation responsible for the assessment and review of the environmental and social impacts of the project, recommended that the project be authorized. Consequently, the corporation received the certificate of authorization pursuant to Section 164 of Quebec's Environment Quality Act for the project from the Quebec Minister of the Environment, the Fight against Climate Change, Wildlife and Parcs. Now that the project has been approved by government authorities, the corporation must obtain the various permits required to build and operate the mine. In addition, a new development has been added to the project: the workers' camp, previously planned 25 km to the north, is expected to be set up approximately four km south of the mine site, under CELC's responsibility.

Critical Elements has been working since the beginning with the Eastmain community, on whose traditional lands the project lies. The corporation has also maintained good relations with the Grand Council of the Crees and with the neighbouring Nation of Nemaska. Consultations have been continuing and are planned throughout the life of the project. In 2019, Critical Elements entered into an impact and benefits agreement with the Cree Nation of Eastmain, the Grand Council of the Crees (Eeyou Istchee) and the Cree Nation government called the Pihkuutaau agreement.

The corporation's mine closure and restoration plan was accepted by the Ministry of Energy and Natural Resources of the province of Quebec (MERN) in April, 2022.

Infrastructure

The project infrastructure includes site main access, services and haulage roads, explosive and detonator storage, a spodumene processing plant, a maintenance facility, a warehouse, diesel and gasoline storage, ore stockpile, waste rock and dry tailings co-disposal stockpile, overburden stockpile, main electrical substation and distribution, fresh and potable water supply, sewage, surface water management, final effluent treatment, communication system, gatehouse, and an administrative building. A camp complex will be built near the junction between the site access and Eastmain 1 road.

Waste rock and tailings samples were analyzed, and both were considered to be non-potentially acid-generating. The dry tailings and the waste rock will be stored in the same facility which has sufficient capacity for the life of mine. Rain and snow melt water will be collected in ditches and pumped to the water treatment plant.

The industrial pad has an area of 254,000 square metres and will contain the process plant, the maintenance facility, warehouse, administration building, diesel and gasoline storage tanks, and all associated services. The ore pad will have an area of 105,000 square metres where low-grade material may be stored.

The hydrology study has suggested that water inflow to the open pit is to be expected. To maximize pit slopes, water wells will be constructed around the pit periphery to lower the water table below the pit floor. One of these wells will be used to supply the site with fresh water. Water from the other wells will be directed to sedimentation ponds and treated, if necessary, before being released to the effluent.

Water from the waste rock/dry tailings stockpile, the open pit, the industrial pad, the overburden stockpile and the roads will be collected in an equalization pond and treated before being released as final effluent.

The mine site will have a 2.7 km main access road from the Eastmain 1 road to the industrial pad. Including the service roads, the site will total 16 km of roads.

A 315-kilovolt electrical transport line (L3176), owned by Hydro-Quebec, runs north-south over the eastern side of the Rose property. It runs over the planned open pit. The portion running over the open pit representing 4.2 km will be rerouted to allow open-pit operation.

Capital costs

The capital and operating costs were estimated in Canadian dollars. An economic analysis was conducted with a discounted cash flow before and after tax. The initial capital cost is estimated at $471 (U.S.) including all infrastructures described earlier with a 10-per-cent contingency. The sustaining capital is estimated at $238-million (U.S.) over the life of mine.

The total payable products are estimated at 2,681,000 tonnes of chemical-grade 5.56 per cent Li2O concentrate, 783,000 tonnes of technical-grade 6.16 per cent Li2O concentrate and 1,971 tonnes of 20 per cent Ta2O5 concentrate.

Operating costs

The operating costs are estimated at $81.30 (U.S.) per tonne of ore processed which include:

• Mining: $27.05 (U.S.) per tonne processed;
• Processing: $20.79 (U.S.) per tonne processed;
• General and administrative: $15.94 (U.S.) per tonne processed;
• Concentrate transportation: $17.52 (U.S.) per tonne processed.

The total operating costs are estimated at $587 (U.S.)/tonne of concentrate after tantalite credit, as summarized herein.

The mine will process 1.61 million tonnes ore per year grading an average of 0.87 per cent Li2O and 138 ppm Ta2O5 over a period of 17 years. Over the life of mine (LOM), the averages for the price assumptions are $2,162 (U.S.)per tonne and $4,699 (U.S.) per tonne of chemical-grade and technical-grade lithium concentrates, respectively (FOB (free on board) port) and $150 (U.S.) per kg Ta2O5 contained in the tantalum concentrate (FOB mine site).

The price deck applied to the current feasibility study is as conservative or more so than the price deck applied to the previous feasibility study. For example, the LOM average chemical-grade lithium concentrate price in the previous feasibility study ($1,852 (U.S.)/t) sat at a 47-per-cent discount relative to the trailing 12-month average of $3,525 (U.S.)/t. This compares with the current feasibility study in which the LOM average chemical-grade lithium concentrate price sits at $2,162 (U.S.)/t, which is a 65-per-cent discount relative to the trailing 12-month average of $6,107 (U.S.)/t.

The pretax and after-tax NPV at various discount rates are presented herein.

Sensitivity analysis

The sensitivity of the NPV to exchange rate and chemical-grade lithium concentrate price is presented herein.

Lithium demand outlook

The future growth of the lithium market will clearly be dominated by e-mobility powered by Li-ion batteries but also, increasingly, energy storage systems (ESS). With the declining cost of Li-cells, targets for one kilowatt-hour being now very close to $150 (U.S.), they are also becoming attractive for use in private installations combined with increasing use of photovoltaic (PV) rooftop electricity generation. For example, in Germany, a new regulation demands that for all PV projects exceeding one-megawatt power generation, an energy storage system has to be installed by 2025. This is intended to avoid peak energy stressing the electricity distribution systems, a phenomenon which already pushes European systems to their limits during the summer months and increasingly so with the continuing addition of new PV systems, be they commercial or private. In the coming years the major driver of the lithium demand growth continues to be the e-mobility. The IHS Markit global production forecasts from December, 2021, assume an electric vehicle penetration rate of 22 per cent in 2025 and 39 per cent in 2030. This mainly in combination with the expected growth of average battery size will result in a strong increase in lithium demand.

Considering about 100 million new cars per year by 2030, and assuming that 40 per cent of them are battery electric vehicle equipped with an average 55 kWh battery, this market segment alone will require in excess of 1.5 million metric tonnes of LCE (lithium carbonate equivalent). In addition, this does not include other transport segments such as two-/three-wheelers, light-duty trucks, heavy-duty trucks, electric stationary storage (ESS) et cetera.

In the past year the lithium market has seen some developments, in particular related to pricing, though neither the overall market development nor the global forecasts indicating that demand continues to outpace the development of raw material supply capacity changed. Several lithium producers as well as the leading market analysts have increased their forecasts.

Spodumene pricing

Based on the actual demand forecast, significant capacity expansions from incumbents as well as newcomers are needed. More stringent sustainability requirements and especially the rising quality requirements, a prerequisite to achieve a high yield in the conversion process, will result in increasing capital expenditures and production costs. Therefore, the spodumene price needed to put new projects into production will continue to rise.

As the market faces a structural supply deficit for the remainder of this decade, prices are expected to exceed minimum price requirements. Benchmark Minerals and Fastmarkets both reported in Q2 2023 contractual prices exceeding $45 (U.S.)/kg for lithium hydroxide as well as about $4,000 (U.S.)/mt for spodumene 6 per cent. Also, suppliers that are able to provide a higher-quality chemical-grade spodumene yielding lower conversion cost will also be able to achieve higher prices.

The market for technical-grade spodumene is a specialty chemicals market, which addresses the specific needs for customers in the glass and ceramics industry. Historically, prices have been reflecting the higher value of iron-free spodumene like in lithium carbonate and specific properties of the crystalline material.

Therefore, pricing for technical-grade spodumene is directly linked to the lithium oxide content in lithium carbonate.

Continuing work

Highlights include:

• The new geotechnical program is being completed.
• Front-end engineering is being conducted and a detailed engineering phase for infrastructure, crushing plant, concentrator, service buildings and power station is under way.
• The detailed design of the co-disposal facility for the stacked tailings and pit waste rock is under way.
• Detailed engineering for the waste rock piles (tailings and waste rock co-disposal, ore and overburden) is progressing well.
• Long-lead equipment is out to tender.
• Production of Global CA conditions is nearing completion.

Report filing

The corporation plans to file a National Instrument 43-101 technical report that summarizes the Rose lithium-tantalum project on SEDAR+ and on the corporation's website within 45 days.

Qualified persons

The feasibility study was prepared in accordance with NI 43-101 by WSP Canada Inc., Bumigeme Inc. and InnovExplo Inc. InnovExplo was responsible for the resource estimate and the mine plan, Bumigeme was responsible for the mineral processing, and WSP was responsible for environmental study, project infrastructure, financial modelling and report integration. Information regarding the outlook for lithium comes from a market study prepared by Gerrit Fuelling on behalf of the corporation. Mr. Fuelling is an independent consultant specializing in the lithium market.

The qualified persons for the study are:

• InnoExplo:
  • Carl Pelletier, PGeo, geologist;
  • Simon Boudreau, PEng, mining engineer.
• Bumigeme:
  • Florent Baril, PEng, metallurgical engineer.
• WSP:
  • Eric Poirier, PEng, PMP, project manager;
  • Paul Gauthier, PEng, mining engineer;
  • Olivier Joyal, PGeo, geologist.

About Critical Elements Lithium Corp.

Critical Elements aspires to become a large, responsible supplier of lithium to the flourishing electric vehicle and energy storage system industries. To this end, Critical Elements is advancing the wholly owned, high-purity Rose lithium project in Quebec, the corporation's first lithium project to be advanced within a land portfolio of over 1,050 square km. On Aug. 29, 2023, the corporation announced results of a new feasibility study on Rose for the production of spodumene concentrate. The after-tax internal rate of return for the project is estimated at 64.8 per cent, with an estimated after-tax net present value of $2.2-billion (U.S.) at an 8-per-cent discount rate. In the corporation's view, Quebec is strategically well positioned for U.S. and European Union markets and boasts good infrastructure, including a low-cost, low-carbon power grid featuring 94 per cent hydroelectricity. The project has received approval from the Federal Minister of Environment and Climate Change on the recommendation of the Joint Assessment Committee, comprising representatives from the Impact Assessment Agency of Canada and the Cree Nation government; it also received the certificate of authorization pursuant to Section 164 of Quebec's Environment Quality Act from the Quebec Minister of the Environment, the Fight against Climate Change, Wildlife and Parks.

We seek Safe Harbor.