Mr. Spencer Huh reports

NEO BATTERY MATERIALS REPORTS ROBUST ECONOMICS AND HIGH-PROFITABILITY WITH INTERNAL FEASIBILITY STUDY OF SOUTH KOREAN SILICON ANODE COMMERCIAL PLANT

Neo Battery Materials Ltd. has recently conducted an internal feasibility study of its silicon anode commercial plant in South Korea. The preliminary assessment has yielded robust economics and high profitability for Neo's cost-transformative silicon anode materials (NBMSiDE), demonstrating the substantial potential for scalability, international plant expansion and mass adoption in electric vehicle (EV) batteries. Neo will appoint a third party engineering firm to validate the projections and figures through an industry-approved feasibility study.

Initial production capacity evaluation of South Korean commercial plant

The internal feasibility study has been conducted with the assumption that the South Korean commercial plant is the only operational, revenue-generating asset of Neo Battery Materials. The study utilizes updated mass-production models generated by the EPC (Engineering, procurement and construction) contractor, preferential bids submitted by construction contractors, cost projections of the optimized NBMSiDE derived from supplier and market quotations, and general macroeconomic conditions of the past fiscal year.

By the first half of 2024, Neo targets to complete the plant construction with an initial commercial capacity of 240 tonnes per annum (tpa). Financial projections integrated an equal proportional production of the two main product lines of NBMSiDE: P-100 and P-200. Each silicon anode material will be supplied to global battery manufacturers and EV automakers at an initial average price of $50,000 (U.S.) per tonne ($50 (U.S.) per kilogram (kg)), resulting in maximum annual revenues of $12-million (U.S.) at 240 tpa and $50-million (U.S.) at 1,000 tpa.

Through Neo's proprietary one-step manufacturing process and the use of a cost-effective raw material, metallurgical-grade silicon, or MG-Si, the company expects to decrease the selling price of NBMSiDE while widening gross and EBIT (earnings before interest and taxes) margins with phase 1 to phase 4 expansion. With mass production and material optimization, the company is projected to achieve a 70-to-80-per-cent cost reduction in the selling price compared with current silicon anode options. Growing demand for lithium-ion batteries and advanced technologies will bolster Neo's cost differentiation strategy to capture a more significant proportion of the global silicon anode market share on a sustaining basis.

Economic assessment of final phase 4 commercial plant capacity

In each phase, Neo targets to double the annual maximum capacity each year to achieve a final production of 5,000 tpa in the next five years. Assuming full-scale NBMSiDE production, the company expects average annual revenues of $235-million (U.S.) to $250-million (U.S.), representing an after-tax net present value (NPV) of $316.2-million (U.S.) discounted at an 8 per cent cost of capital and an after-tax internal rate of return (IRR) of 33.3 per cent.

Without forgoing the long-term selling price reduction strategy, the financial projection integrated constant NBMSiDE selling prices and margins to reflect the study's evaluation methods and current market conditions. Unlike other core battery metal prices traded as standardized commodities, cost projections for NBMSiDE were derived from direct quotations from upstream suppliers, and estimates with long-term supply or forward contracts for metallurgical-grade silicon.

Capex (capital expenditure) and average annual opex (operating expenditure) figures are to be optimized through each phase expansion, occurring through adjustments with contractors and economies of scale with increased silicon anode production. The initial capex outlays for the 240 tpa equipment will not directly reflect the capex for subsequent phase expansions. Instead, with cost-efficiency, the capacity-to-capex is expected to grow at an exponential rate as capex is substantially minimized with each capacity addition. As discussed, Neo will target to partner with downstream battery manufacturers and EV automakers for strategic investments in each expansion phase. Strategic partnerships will expedite commercialization efforts, minimize dilution impact, and enable improved economics and efficiency by transferring and learning of production and management know-how.

Continuing course for third party feasibility study and cautionary statements

To validate the internal feasibility study conducted, Neo Battery Materials will appoint a third party South Korean engineering firm specializing in the battery manufacturing and materials industry. After conducting due diligence and extensive review, the company will select a firm with a proven record.

There can be no assurance that the economic projections upon which this study is founded will be realized. Not limited to the viability of mass production scale up, product optimization, financial considerations, and macroeconomic and environmental factors, several risks and uncertainties are inherently associated with any nascent technology commercialization. The study is intended to be comprehended as a cohesive whole, and individual sections should not be interpreted or relied upon in isolation or without the accompanying context. Readers are duly advised to consider all assumptions, limitations and exclusions that pertain to the information provided in the study.

About Neo Battery Materials Ltd.

Neo Battery Materials is a company focused on electric vehicle lithium-ion battery materials. Neo has a focus on producing silicon anode materials through its proprietary single-step nanocoating process, which provides improvements in capacity and efficiency over lithium-ion batteries using graphite in their anode materials. The company intends to become a silicon anode active materials supplier to the electric vehicle industry.

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