Mr. William Dawes of Mkango reports

MAGINITO TO ACQUIRE PIONEERING RARE EARTH MAGNET RECYCLER HYPROMAG

Mkango Resources Ltd. has entered into an agreement to increase its ownership in HyProMag Ltd. from 42 per cent to 100 per cent for a cash and share consideration. The transaction is conditional upon the approval of the TSX Venture Exchange and approval pursuant to the United Kingdom's National Security and Investment (NSI) Act. Approval of the latter is expected no later than the third quarter of 2023.

Highlights:

• Maginito (Mkango 90 per cent; Cotec 10 per cent) to increase ownership in HyProMag from 42 per cent to 100 per cent for one million pounds sterling ($1.69-million (Canadian)) in cash and one million pounds sterling ($1.69-million (Canadian)) in Mkango shares, and a further three million pounds sterling ($5.07-million (Canadian)) payable in four tranches of Mkango common shares subject to production and other milestones in the U.K., Germany and United States.
• Cash component to be financed from the recent 1.5-million-pound-sterling ($2.54-million (Canadian)) investment by Cotec into Maginito as announced on March 16, 2023.
• Maginito to hold a 100-per-cent interest in HyProMag and 90-per-cent interest in HyProMag GmbH, postacquisition and conversion of previously announced convertible loan, respectively.
• Targeting first production from the U.K. in 2023 and Germany in 2024, with parallel technology rollout into the U.S.
• Major competitive advantages in rare earths magnet recycling sector, underpinned by approximately $100-million (U.S.) ($135-million (Canadian)) of research and development (R&D) expenditure at the University of Birmingham (UoB) and with associated project partners:
  • Access to highly energy efficient, patented hydrogen processing of magnet scrap (HPMS) technology;
  • Ability to manufacture rare earth magnets with significantly reduced carbon footprint.
• Maginito and Cotec have launched the rollout of HPMS into the U.S.:
  • Evaluating the development of recycling, chemical processing, alloy and magnet manufacturing;
  • Scoping studies and site selection under way ahead of feasibility studies;
  • Cotec and Maginito to form 50/50 joint venture for U.S. developments, with Cotec to finance feasibility study and project development costs;
  • Continuing discussions with U.S. government, potential customers and recycling partners.

The consideration payable to the selling HyProMag shareholders on completion of the transaction will comprise one million pounds sterling ($1.69-million (Canadian)) in cash and the issue of 9,742,031 Mkango common shares equivalent to one million pounds sterling ($1.69-million (Canadian)) at a price equal to 10.2648 pence based on the volume-weighted average price of a Mkango common share on the Alternative Investment Market of the London Stock Exchange (AIM) for the 10 business days ended on the date prior to the date of the share purchase agreement. In addition, up to a further three million pounds sterling ($2.54-million (Canadian)) may be payable to the vendors in four tranches, either in cash or in Mkango common shares (at Mkango's option), conditional upon the achievement by HyProMag of certain production milestones in the period to June 30, 2026. The shares issued on completion will have a one-year lock-up and the shares issued on milestones will have a six-month lock-up.

William Dawes, chief executive officer of Mkango, commented: "Since acquiring our initial interest in HyProMag in 2020, we have seen the company go from strength to strength, derisking and further scaling up the patented HPMS rare earth magnet recycling technology, building the team and developing further industry partnerships, all against the backdrop of growing interest in recycling and sustainable rare earth supply chains. We look forward to working closely with the HyProMag team as we continue to support the growth of the business."

David Kennedy, director of HyProMag, commented: "Building on the legacy of innovation in rare earth permanent magnets and hydrogen technologies pioneered by the late Prof. Rex Harris at the University of Birmingham, we founded HyProMag in 2018 with Rex as a founding shareholder. Our aim was to accelerate the commercialization of the HPMS process, and our collaboration with Mkango has supported the company's growth and enabled the participation in major collaborative projects on rare earth magnet recycling. We look forward to the next phase of growth at Tyseley Energy Park, scaling up the technology and showcasing rejuvenation of Birmingham's industrial heritage, in parallel with the international roll out."

Julian Treger, CEO of Cotec, commented: "This transaction is a major step forward for Maginito as it seeks to move into production over the short to medium term in the United Kingdom, Germany and the United States. We look forward to supporting and working with Mkango, Maginito and the HyProMag team to roll out this innovative and highly energy efficient recycling technology, both as a Maginito shareholder and as a partner in the United States."

Rare earth magnets play a key role in clean energy technologies including electric vehicles and wind turbine generators, and they are also a key component in electronic devices including mobile phones, hard disk drives and loudspeakers. The development of domestic sources of recycled rare earths in U.K., Germany, United States and other jurisdictions via HPMS is a significant opportunity to fast-track the development of sustainable and competitive recycled rare earth magnet production.

Mkango CEO Mr. Dawes together with Cotec president and CEO Mr. Treger will be hosting a webinar tomorrow, Wednesday, May 17, 2023, at 4 p.m. BST (8 a.m. PT) to discuss the acquisition of HyProMag as well as an update on the collaboration between Mkango Resources and Cotec.

Maginito

Maginito is focused on developing green technology opportunities in the rare earths supply chain, encompassing neodymium (NdFeB) magnet recycling as well as innovative rare earth alloy, magnet and separation technologies.

Following the transaction, Maginito will hold a 100-per-cent interest in HyProMag focused on short loop rare earth magnet recycling in the U.K., a 90-per-cent direct and indirect interest (assuming conversion of Maginito's recently announced convertible loan) in HyProMag GmbH, a company focused on short loop rare earth magnet recycling in Germany, and a 100-per-cent interest in Mkango Rare Earths U.K. Ltd., a company focused on long loop rare earth magnet recycling in the U.K. via a chemical route. A new U.S. subsidiary, to be jointly owned by Maginito and Cotec, is expected to be formed to develop rare earth recycling opportunities in the United States.

In March, 2023, Cotec invested 1.5 million pounds sterling ($2.54-million (Canadian)) into Maginito, and Maginito and Cotec agreed to collaborate on the commercialization of downstream rare earth technologies in the United States. Mkango U.K. was at the same time transferred to become a subsidiary of Maginito. In connection with Cotec's investment, John Singleton, chief operating officer of Cotec, was appointed to the board of Maginito.

HyProMag

HyProMag was founded in 2018 by the late Prof. Harris, former head of the magnetic materials group (MMG) within the School of Metallurgy and Materials at the University of Birmingham, Prof. Allan Walton, current head of the MMG, and two honorary fellows, Dr. John Speight and David Kennedy, leading world experts in the field of rare earth magnetic materials, alloys and hydrogen technology, with significant industry experience. The HPMS process for extracting and demagnetizing neodymium (NdFeB) alloy powders from magnets embedded in scrap and redundant equipment was originally developed within the MMG and subsequently licensed to HyProMag. The MMG has been active in the field of rare earth alloys and processing of permanent magnets using hydrogen for over 40 years. Originated by Prof. Harris, the hydrogen decrepitation method, which is used to reduce NdFeB alloys to a powder, is now ubiquitously employed in worldwide magnet processing.

Under the terms of the transaction, the founding directors and management of HyProMag will continue to provide support and work closely with Mkango and Maginito to further scale-up and rollout the HPMS technology.

HyProMag is establishing short loop recycling facilities for NdFeB magnets at Tyseley Energy Park in Birmingham, U.K., and other locations using the patented HPMS process to provide a sustainable solution for the supply of NdFeB magnets and alloys for a wide range of markets including, for example, automotive and electronics. Short loop magnet recycling is expected to have a significant environmental benefit, requiring an estimated 88 per cent less energy versus primary mining to separation to metal alloy to magnet production. The plant at Tyseley Energy Park is being developed together with the UoB, with a minimum capacity of 100 tonnes per annum NdFeB (neodymium, iron and boron). This 4.3-million-pound-sterling ($7.27-million (Canadian)) project is being financed by Driving the Electric Revolution, an Industrial Strategy Challenge Fund challenge delivered by U.K. Research and Innovation (UKRI). HyProMag is the primary industrial user and operator of the plant. First production is targeted for late 2023, which follows successful piloting at the UoB in 2022 as featured on BBC Midlands News.

HyProMag's loss for the year ended Dec. 31, 2022, was 151,411 pounds sterling ($155,855 (Canadian)) as a result of research and development expenditures on its recycling projects.

HyProMag GmbH

In November, 2021, HyProMag established an 80-per-cent-owned subsidiary in Germany, HyProMag GmbH, to roll out commercialization of HPMS technology into Germany and Europe. HyProMag GmbH is 20 per cent owned (10 per cent following conversion of the HyProMag GmbH convertible loan) by Prof. Carlo Burkhardt of Pforzheim University, co-ordinator of the 14-million-euro ($20.58-million (Canadian)) SusMagPro and 13-million-euro ($19.11-million (Canadian)) REEsilience EU-funded recycling projects, with approximately 40 partners across the European supply chain.

HyProMag GmbH is developing a similar-sized plant to that at Tyseley Energy Park. Initial capacity is expected to be a minimum of 100 tpa NdFeB, comprising recycled rare earth sintered magnets and alloys, and will be the first in Germany using the patented HPMS process, with first production targeted for 2024. Maginito has entered into a convertible loan agreement with HyProMag GmbH. Under the terms of the HyProMag GmbH convertible loan, Maginito has granted HyProMag GmbH a loan facility for 2.5 million euros ($3.68-million (Canadian)) available to be drawn down in accordance with an agreed investment plan and convertible into a 50-per-cent equity interest in HyProMag GmbH.

This investment by Maginito will contribute to the matched financing requirements to unlock the 3.7-million-euro ($5.44-million (Canadian)) grants announced by Mkango on Nov. 23, 2022, for development of the production facility in Baden-Wurttemberg state.

Mkango U.K.

Mkango U.K. is establishing a pilot plant at Tyseley Energy Park to chemically process recycled HPMS NdFeB powder and magnet swarf (the powder produced from grinding and finishing magnets) from a range of scrap sources including electronic waste, electric motors and wind turbines, complementing the short loop magnet recycling routes being developed in parallel by HyProMag. The 1.1 million pounds sterling ($1.86-million (Canadian)) pilot plant program is being developed as part of the SCREAM project, for which 70 per cent of the costs are being funded by U.K. Research and Innovation (UKRI) as part of the Driving the Electric Revolution challenge.

About Mkango Resources Ltd.

Mkango's corporate strategy is to develop new sustainable primary and secondary sources of neodymium, praseodymium, dysprosium and terbium to supply accelerating demand from electric vehicles, wind turbines and other clean technologies. This integrated mine, refine, recycle strategy differentiates Mkango from its peers, uniquely positioning the company in the rare earths sector. Mkango is listed on the AIM and the TSX Venture Exchange.

Mkango is developing its flagship Songwe Hill rare earths project in Malawi with a definitive feasibility study completed in July, 2022, and an environmental, social and health impact assessment approved by the government of Malawi in January, 2023. Malawi is known as the warm heart of Africa, a stable democracy with existing road, rail and power infrastructure, and new infrastructure developments under way.

In parallel, Mkango and Grupa Azoty PULAWY, Poland's leading chemical company and the second largest manufacturer of nitrogen and compound fertilizers in the European Union, have agreed to work together toward development of a rare earth separation plant at Pulawy in Poland. The Pulawy separation plant will process the purified mixed rare earth carbonate produced at Songwe Hill.

Through its ownership of Maginito, Mkango is also developing green technology opportunities in the rare earths supply chain, encompassing neodymium (NdFeB) magnet recycling as well as innovative rare earth alloy, magnet and separation technologies.

Mkango also has an extensive exploration portfolio in Malawi, including the Mchinji rutile exploration project, the Thambani uranium-tantalum-niobium-zircon project and Chimimbe nickel-cobalt project.

About Cotec Holdings Corp.

Cotec is a publicly traded investment issuer listed on the TSX-V under the ticker CTH, and the OTCQB under the ticker CTHCF. The company is an environmental-, social- and governance-focused company investing in innovative technologies that have the potential to fundamentally change the way metals and minerals can be extracted and processed for the purpose of applying those technologies to undervalued operating assets and recycling opportunities, in rare earths, low carbon iron ore (green steel) and copper as the company seeks to transition into a mid-tier mineral resource producer. Cotec is committed to supporting the transition to a lower carbon future for the extraction industry, a sector on the cusp of a green revolution as it embraces technology and innovation.

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