Independent Specialist Report on the mineral assets held by Avenira Limited Report Prepared for RSM Corporate Australia Pty Ltd Report Prepared by SRK Consulting (Australasia) Pty Ltd AVE001 August 2019 SRK Consulting Page i Independent Specialist Report on the mineral assets held by Avenira Limited Avenira Limited Suite 19, 100 Hay Street, Subiaco WA 6008 RSM Corporate Australia Pty Ltd Level 32/2, The Esplanade, Perth WA 6000 SRK Consulting (Australasia) Pty Ltd Level 1, 10 Richardson Street, West Perth WA 6005 e-mail: [email protected] website: www.asia-pacific.srk.com Tel: +61 8 9288 2000 Fax: +61 8 9288 2001 SRK Project Number: AVE001 August 2019 Compiled by Peer Reviewed by Jeames McKibben Karen Lloyd Principal Consultant Principal Associate Consultant Email: [email protected] Authors: I Baidoo; L Collin; S McEwing; S Walsh; R Getty; M Davis MCKI/LLOY/wulr AVE001_RSM_Avenira ISR_Rev2 15 August 2019 SRK Consulting Page ii Executive Summary Avenira Limited (Avenira or the Company) has entered into an agreement for the proposed sale of the Baobab Phosphate Project (the Project) in the Republic of Senegal to related parties of the Company (Proposed Transaction). The Wonarah Project in Australia’s Northern Territory is to remain with the Company post transaction. Once the proposed sale is complete, the Company intends to review its holding in the Wonarah Project, including whether to commence a Scoping Study during the December 2019 quarter. RSM Corporate Australia Pty Ltd (RSM) has been appointed by Avenira to provide an Independent Expert Report (IER) in relation to the Proposed Transaction. RSM has subsequently contacted SRK Consulting (Australasia) Pty Ltd (SRK) to provide an Independent Specialist Report (Report) incorporating a technical assessment and valuation of the mineral assets held by Avenira to accompany its IER. Summary of principal objectives The objective of this Report is to provide an independent assessment of the techno-economic assumptions that would likely be considered by the market as part of a potential transaction process involving the Company’s mineral assets. The Report is to be included as an appendix to RSM’s IER, which will provide an opinion on whether the Proposed Transaction is fair and reasonable for Avenira’s shareholders. SRK was provided with the Company’s financial model (the Model) relating to the Project based on the completion of the Baobab Project Phase 1 Feasibility Study (Class 4 estimate, ±20% accuracy) as announced to the Australian Securities Exchange (ASX) on 18 March 2019 (March 2019 Feasibility Study). SRK has completed a technical assessment of all available information pertaining to the Project and selected the most appropriate valuation techniques based on the perceived maturity of the Project and the available information. This Report expresses an opinion regarding the value of the Project as directed in SRK’s mandate from RSM. This Report does not comment on the merits of any transaction between the Avenira and any other parties. This Report has been prepared in accordance with the Australasian Code for Public Reporting of Technical Assessment and Valuation of Mineral Assets – VALMIN Code (2015), which incorporates the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves – JORC Code (2012). Outline of work program SRK’s work program included: • A site inspection of the Baobab Project by SRK’s West Africa–based representative • Compiling a description of Avenira’s mineral assets including ownership status, provisions and encumbrances, project history, geological setting, Resource/ Reserve base, metallurgical testwork and design, status of techno-economic studies and environmental status • A review of the available technical information including the stated Mineral Resource and Ore Reserve estimates prepared in accordance with the JORC Code (2102) and the March 2019 Feasibility Study to determine their reasonableness for valuation purposes • An outline of the valuation methodologies and principal assumptions adopted by SRK in determining the valuation ranges and preferred value, including details of the relevant market factors. MCKI/LLOY/wulr AVE001_RSM_Avenira ISR_Rev2 15 August 2019 SRK Consulting Page iii SRK has not carried out any Mineral Resource or Ore Reserve estimation/ calculation activities for the purposes of its Report. Overview The Baobab Project Avenira’s Baobab Project was previously worked over a short period from 2016. Production comprised contract open pit mining with a basic crushing and wet screening processing plant producing approximately 100,000 t of phosphate rock concentrate from a Small Mining Permit (SMP) area. Following the cessation of mining and processing operations in September 2018, Avenira completed an initial concept study followed by a staged feasibility process designed to optimise and expand the previous processing operation. The results of the Phase 1 Feasibility Study (stated by Avenira as being compliant with AACE Class 4 estimate, ±20% accuracy) were presented to the ASX in March 2019. Activities designed to advance the Project to the completion of Phase 2 ‘Bankable’ Feasibility Study (stated by Avenira as being compliant with AACE Class 3 estimate, ±10% accuracy) are ongoing. Based on the Phase1 Feasibility Study the key components of the current Project (100% equity basis) are as follows: • A single granted Exploration Licence, which surrounds a single Exploitation Permit that was granted in September 2018 and covers an area of 75 km2 [this area is an expansion of the SMP area, which was mined at a small scale from 2016 to 2017] • Probable Ore Reserves of 39.3 Mt averaging 18.9% P2O5 containing approximately 7.4 Mt P2O5 • Indicated and Inferred Mineral Resources (inclusive of Ore Reserves) of 362.1 Mt averaging 16.40% P2O5 (at a 10% P2O5 cut-off grade) containing approximately 59.4 Mt P2O5 • A less densely drilled area peripheral to the current Inferred Mineral Resource area is characterised as an Exploration Target with an estimated tonnage of ~30–60 Mt at approximately 16%‒20% P2O5 [the potential quantities and grades are conceptual in nature and there has been insufficient exploration to estimate a Mineral Resource and it is uncertain that future exploration will result in the estimation of Mineral Resources] • Open pit operations mining multiple pits to be mined using conventional strip-mining dozer push and truck and shovel methods with a targeted mine life of approximately 13.4 years commencing in 2022 • A mine schedule targeting annual production of approximately 2.9 Mtpa of Run of Mine (ROM) material annually to the processing plant in order to produce up to 1.0 Mt (after initial 1-year mining production ramp-up) of phosphate rock concentrate at a grade of 36.4% P2O5 • A processing plant designed to process ±2.94 Mtpa of phosphate ore through the separation of clay, silica, iron and other gangue minerals to achieve a phosphate concentrate with a maximum deleterious grade of 8% SiO2 and 1% Fe2O3 • Proposed mine infrastructure including power supply and distribution, bulk water supply and distribution, surface water management facilities, tailings storage and waste handling facilities, access, buildings, communication and information systems • An estimated pre-production capital cost of US$183 M and an estimated average operating cost of US$56/t concentrate. In SRK’s opinion, the Mineral Resource and Ore Reserve estimates for the Project are acceptable as a reasonable representation of global grades and tonnages and are suitable for valuation purposes. SRK has reviewed the proposed mine plan and associated assumptions with respect to mining, processing and cost estimation contained in the Project financial model. MCKI/LLOY/wulr AVE001_RSM_Avenira ISR_Rev2 15 August 2019 SRK Consulting Page iv The Wonarah Project The Wonarah Project comprises four granted exploration licences remotely located in the Barkly Tablelands of Australia’s Northern Territory. The Project involves the proposed development of two phosphate deposits known as Arruwarra and Main Zone to a depth of 35 m below the current surface. The Project has previously been evaluated for mining of a direct shipping ore (DSO) product, as well the use of the Improved Hard Process (IHP) technology, a novel processing flowsheet, which uses lower grade material and hence is able to extract more of the currently defined Mineral Resource. Under the DSO study, it was envisaged that ore would be strip-mined from four open pits and processed via onsite crushing and screening prior to transportation by road to Tennant Creek and then transported by rail to the Port of Darwin. The DSO project was formally assessed under an Environmental Impact Statement (EIS) which concluded in April 2010 and granted approval to mine in September 2010, subject to a security being paid. The Project was subsequently deemed to be uneconomic, with key hurdles being the high transport and logistical costs associated with operating in a remote location. The high silica content of the ore was found to devalue the Wonarah ore bound for wet (sulphuric) acid processing plants, which were the only available processing option at the time. Under the IHP study, the ore would be processed on site using local silica sand and imported petroleum coke to extract a super phosphoric acid (SPA) product. The SPA product would be transported in isotainer road trains to the Port of Darwin. The IHP enables a lower grade of ore to be processed, resulting in a longer mine life and a greater proportion of the defined resource to be extracted. Importantly the processing plant proposed is based on technology that has not previously been trialled at commercial scale and some areas of uncertainty remain. Processing plant emissions are to an extent undefined and unquantified pending completion of the Florida pilot plant exercise and trials using the Wonarah ores. Uncontrolled combustion of petroleum coke is generally associated with the release of high levels of sulphur and potentially toxic contaminants such as lead and mercury.