Mr. Bryce Crocker reports

JERVOIS GLOBAL LIMITED QUARTERLY ACTIVITIES REPORT TO 30 SEPTEMBER 2023

Jervois Global Ltd. has released a quarterly activities report.

Delivering on business priorities

Following the $25.0-million (U.S.) unsecured convertible notes and accompanying $25.0-million (U.S.) fully underwritten one-for-3.34 accelerated non-renounceable entitlement offer) in July, 2023, Jervois continued to implement a refocused strategy to ensure the business can be financially sustainable and self-financing at historically low cobalt prices caused by People's Republic of China oversupply from the Democratic Republic of the Congo and Indonesia.

Priorities and key milestones delivered in the quarter are as follows:

• Maximize margin and cash flow at Jervois Finland and deliver operational improvements:
  • $8.2-million (U.S.) third quarter operating cash flow at Jervois Finland, building on $33.2-million (U.S.) of operating cash flow delivered in the first half (positive $41.4-million (U.S.) year-to-date 2023);
• Execute U.S. government (Department of Energy) $15.0-million (U.S.) financed ICO drilling program and U.S. cobalt refinery bankable feasibility study:
  • Surface drilling commenced at the Sunshine deposit; a historic resource adjacent to Jervois's ICO processing infrastructure;
  • Finalized engagement terms and study management execution arrangements with AFRY USA LLC to undertake basic engineering and prepare an accompanying BFS for a greenfield U.S. cobalt refinery;
  • BFS is key to support Jervois's existing Department of Energy advanced technology vehicle manufacturing (ATVM) loan application for a domestic American cobalt refinery (see the news release announcement "Jervois submits an ATVM loan application to the U.S. DOE" dated April 24, 2023);
  • Refinery site selection is continuing;
  • Initial funds received from DoD for work completed (programs are 100 per cent reimbursable).
• Advance debt and partner financing process at SMP:
  • Counterparty engagement and due diligence in Brazil advancing;
• Review partnership opportunities across the portfolio to crystallize and demonstrate value:
  • Additional initiatives advancing across all other portfolio assets -- significant third party interest at each asset.

Jervois Finland:

• Quarterly revenue $42.2-million (U.S.) (second quarter 2023: $56.6-million (U.S.));
• Cash flow from operations $8.2-million (U.S.) (Q2 2023: $31.9-million (U.S.));
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) $500,000 (U.S.) (Q2 2023: $2.6-million (U.S.));
• Sales volume 1,216 metric tonnes (Q2 2023: 1,602 metric tonnes);
• Production volume: 1,285 metric tonnes (Q2 2023: 1,367 metric tonnes).

Jervois Finland provided positive adjusted EBITDA and unlocked further operating cash flow in the period, including through the continued release of working capital. Jervois Finland has generated more than $40-million (U.S.) in operating cash flow over the past six months.

Sales and marketing

Jervois Finland produced 1,285 metric tonnes and sold 1,216 metric tonnes of cobalt in the quarter.

The decrease in sales volumes relative to the prior quarter reflected cyclical softness in demand in end-use segments and intrayear variability in shipment and customer order timing. Sales volumes year to date to Sept. 30, 2023, are 4,377 metric tonnes, 10 per cent higher than the corresponding period in 2022. Sales volume guidance for the 2023 calendar year of 5,300 mt to 5,600 mt remains unchanged. Production volumes and product mix remain subject to continuous review and adjustment based on an assessment of end-use demand and taking into account target inventory levels.

The company's sales performance and outlook for key market segments under which Jervois Finland operates are summarized below.

Batteries:

• Destocking continues in battery supply chains, and customer inventory levels today remain above normal levels. Recovery from Jervois's current customers is expected in 2024.
• Interest continues from both European- and United States-based electric vehicle original equipment manufacturers (automakers) for long-term cobalt supply but with volumes starting in 2025 and beyond.
• U.S. Inflation Reduction Act (IRA) continues to drive interest in the United States and the western supply of battery raw materials.

Chemicals, catalysts and ceramics:

• Catalysts: Oil and gas segment (processing/refining) continues to be solid, and outlook remains positive.
• Chemicals: Demand continues to be above last year in the main chemical applications (copper electrowinning, coatings and rubber adhesion).
• Ceramics: Short-term demand in pigments has increased on the back of recent cobalt price increases. Prices remain under pressure though as PRC competition into Europe continues to be robust.

Powder metallurgy:

• Automotive production rates remain variable with lagging issues around semi-conductor supply continuing to affect plant utilization. Jervois customers have expectations of improvement in 2024.
• General engineering, including construction, remains soft.
• In contrast to demand from the petroleum sector as pertains to catalysts (specific to refining), in powder metallurgy, as U.S. oil and gas production (drilling) has fallen, and rig counts are expected to remain down for the balance of 2023, demand remains subdued.
• Aerospace continues to be one of the bright spots as order books remain full due to rising demand from both civilian and military purchasers.

Financial performance

Jervois Finland achieved revenue of $42.2-million (U.S.) in the quarter, a decline of 25 per cent relative to the second quarter. The decrease was principally due to lower sales volumes and lower realized pricing. The cyclical weakness in cobalt prices that persisted in the quarter was in part due to market oversupply conditions instigated by the PRC as outlined earlier.

Adjusted EBITDA

Jervois Finland achieved adjusted EBITDA in the third quarter of $500,000 (U.S.), continuing a turnaround that commenced in the second quarter. The result is consistent with Jervois Finland's historical performance, where the business model supports generation of a positive margin in an environment of cyclically weak but stable cobalt prices, albeit high input prices associated with energy and consumables in Europe, due to the Russian invasion of Ukraine, continue to linger. Moving forward, market pricing of key consumables and chemicals such as caustic soda, oxalic acid and soda ash is continuing to steadily reduce in line with expectations.

The decrease in adjusted EBITDA relative to the prior quarter was principally due to lower sales volumes and a modest increase in feed costs realized in the profit and loss account. These factors more than offset the benefits of a reduction in production costs in the quarter.

The plant continued to perform well in the quarter, with internal targets for safety, production efficiency and product quality all met in the quarter. Near-term focus for Jervois Finland remains on operational performance, cash generation and risk management.

Cash flow performance

Cash flow from operations (before interest payments) was $8.2-million (U.S.) in the quarter, bringing cumulative year-to-date cash flow from operations from Jervois Finland to $41.1-million (U.S.). Positive cash flow resulted from the continued stabilization of the Jervois Finland business and working capital reductions. Physical cobalt inventories reduced by $4.1-million (U.S.) from $48.6-million (U.S.) at June 30 to $44.5-million (U.S.) at Sept. 30, 2023. This represented a reduction from approximately 100 days at June 30, 2023, to approximately 81 days at Sept. 30, 2023. Jervois is continuing to execute an inventory management strategy aligned to a near-term target range of at or below 90 to 110 days, in a manner that balances liquidity and risk management objectives.

Jervois made partial repayment of the Mercuria working capital facility in the period in line with the reduction of the underlying collateral value, with $8.6-million (U.S.) paid in July in accordance with the terms of the facility agreement. A further voluntary repayment of $4.8-million (U.S.) was completed in early October, to meet deleveraging objectives and to reduce financing costs. The current loan balance at the date of this report is $44.1-million (U.S.).

Idaho cobalt operations (ICO), United States

Cash flow for ICO in the third quarter included $4.6-million (U.S.) associated with suspension costs.

A further $8.6-million (U.S.) of cash was utilized for residual vendor payments and one-off items for works completed before the construction project was suspended on March 29, 2023, and, thereafter, transitioned to suspension mode in the second quarter. Residual vendor payments at ICO are substantially in line with prior guidance that was included in the capital raising presentation dated June 28, 2023, with the final capital cost falling slightly below the $155-million (U.S.) estimate.

Jervois commenced a surface drilling campaign at the Sunshine deposit adjacent to ICO in September, 2023, following receipt of U.S. Forest Service approval. Sunshine is a historic deposit adjacent to Jervois's 100-per-cent-owned ICO, within a short trucking distance of the recently constructed processing facilities.

Drilling occurred under the U.S. DoD $15.0-million (U.S.) financing agreement. The agreement financing is under the manufacturing capability expansion and investment prioritization office of industrial base policy using the U.S. Defense Production Act Title III authorities and utilizes funds from the Additional Ukraine Supplemental Appropriations Act. The drilling campaign direct expenditure and associated Jervois program supervision and administration are fully refundable under this agreement.

Jervois expects to spend $2.4-million (U.S.) to complete approximately 2,000 metres of drilling from surface, designed to intersect the Sunshine deposit with the results expected to enable the deposit to be upgraded to a modern mineral resource. Sunshine is a unique brownfield exploration opportunity, with a significant historical data set, which has underpinned design of this drilling program.

Planning for an underground exploration program at the RAM deposit within ICO progressed during the quarter.

Jervois's board also approved the appointment of AFRY USA, a United States-based engineering and consulting company, to lead basic engineering and the associated BFS for a new greenfield U.S. cobalt refinery. This facility is expected to be constructed under the framework of the IRA and associated U.S. legislative initiatives, including Jervois's existing DOE ATVM loan application (see announcement dated April 24, 2023). Again, execution of basic engineering and the BFS are fully refundable under the agreement financing.

Jervois commenced site selection through its 100-per-cent-held subsidiary, Formation Holdings U.S. Inc., as the first stage of the U.S. refinery BFS (see announcement dated Aug. 2, 2023). Jervois expects to spend $300,000 (U.S.) to complete site selection, which is being executed by AFRY USA. The site selection is fully refundable under the agreement financing.

Site selection considers local, state and federal incentives; permitting processes; security of supply chains; logistics; access to work force capacity and capability; and other technical and operational requirements, all to underpin a globally competitive facility. The expected BFS completion schedule will be available upon a final location decision.

Sao Miguel Paulista (SMP) nickel and cobalt refinery, Brazil

Counterparty engagement and due diligence continue to advance at SMP. Jervois's objective remains to conclude a partner financing solution before the end of 2023. SMP's economic potential is strong, based on prevailing market conditions, with market pricing for both nickel metal and mixed hydroxide precipitate intermediate feed trending favourably compared with the BFS assumptions.

The SMP restart project is expected to resume promptly once the partnering process is concluded. Current activities at site are focused on supporting due diligence and review of opportunities to optimize and derisk the restart capital project.

Monthly costs are currently tracking favourably against the approximately $500,000 (U.S.) expected run rate previously communicated to the market.

Nico Young nickel-cobalt project, New South Wales, Australia

Jervois is undertaking a divestment process to sell all or part of its interest in the company's 100-per-cent-owned Nico Young nickel and cobalt project, which continued to progress during the quarter. Jervois has invested greater than $20-million (Australian) in Nico Young. It is a strategic future source of western nickel and cobalt.

Corporate activities

Liquidity

Jervois completed a fully underwritten $50.0-million (U.S.) total capital raising in July, 2023, comprising:

• $25.0-million (U.S.) in notes maturing in July/August, 2028, which are convertible into Jervois ordinary shares; the initial conversion price for the notes is 6.05 U.S. cents, which represented a 40-per-cent premium to the entitlement offer theoretical ex rights price (TERP), and the notes carry a 6.5-per-cent-per-year coupon;
• $25.0-million (U.S.) entitlement offer, undertaken in parallel with the convertible note offer.

On Aug. 31, 2023, Jervois closed the second $5.1-million (U.S.) tranche of the $25.0-million (U.S.) in notes following approval of the company's shareholders at a general meeting held in Melbourne, Australia, on Aug. 28, 2023.

Jervois ended the September, 2023, quarter with $54.9-million (U.S.) in cash, $44.5-million (U.S.) physical cobalt inventories in Jervois Finland and total drawn senior debt of $148.9-million (U.S.). A key strategic objective for Jervois is to derisk the path to establishing a multiasset platform underpinned by a durable capital structure. Jervois intends to pursue initiatives across its asset portfolio to meet this objective.

Environmental, social and governance

Jervois continues to chair the Cobalt Institute's responsible sourcing and sustainability committee and actively engages in related working groups. In the quarter, this included participation of key Jervois personnel in environmental and human right due diligence training and dialogue on industry ESG standards between members of the Cobalt Institute and original equipment manufacturers (car makers), civil society organizations, and standard setters.

Presentations and events

During the quarter, chief executive officer Bryce Crocker presented at the Diggers and Dealers Mining Forum in Kalgoorlie, Western Australia, and at the Canaccord LatAm Natural Resources Conference in Sao Paulo, Brazil.

Results of meeting

At a general meeting of Jervois shareholders on Aug. 28, 2023, both resolutions put to shareholders passed through a poll, being:

• Resolution 1: approval to issue convertible notes;
• Resolution 2: ratification of prior issue of convertible notes.

Exploration and development expenditure

In relation to the DoD funded surface drilling campaign at ICO, $800,000 (U.S.) was incurred during the quarter. No other material cash expenditure on exploration and development was incurred during the quarter.

Insider compensation reporting

During the quarter, $100,000 (U.S.) was paid to non-executive directors, and $100,000 (U.S.) was paid to the chief executive officer (executive director).

Non-core assets

The non-core assets are summarized on the company's website.

Australian Securities Exchange waiver information

On June 6, 2019, the ASX granted a waiver to Jervois in respect of extending the period to Nov. 8, 2023, in which it may issue new Jervois shares to the eCobalt optionholders as part of the eCobalt transaction.

As at Sept. 30, 2023, no Jervois shares were issued in the quarter on exercise of eCobalt options, and 1.98 million eCobalt options remained. These 1.98 million eCobalt options expired on Oct. 1, 2023, and there are no longer any eCobalt options outstanding.

We seek Safe Harbor.